Professional Documents
Culture Documents
Com Law Tuazon 2011
Com Law Tuazon 2011
TABLE OF CONTENTS:
3.
4.
5.
6.
7.
1.
2.
To show consent
o N.B. But for all, there must be delivery
What are the basic principles of the NIL?
o 1. Bad faith
drawer
4. The law will only protect you from personal defenses if you
Good faith
With value
o
o
each other
An overdue instrument is shouting to the high
fine
Creates a NEW obligation to pay, not a mere
or possessor
5. Where the instrument is addressed to a drawee, he must be
named or otherwise indicated with reasonable certainty
rates
When does the interest become 12% by default?
1. Unconscionable interest
No.
Does reimburse yourself from X
Yes.
demandable.
Is it valid to stipulate payment in foreign currency?
subject
to
the
formers
terms
and
conditions
Does mention of a CM securing the original obligation
make it non-negotiable?
one.
Is I will pay reasonable attorneys fees in case there is
such fund.
What is the rule on how the original obligation came
instrument
of a particular fund.
When does reference to a particular fund not
about?
destroy negotiability?
affect
unconditionality?
No.
What is the test?
fund
payment,
and
there
is
an
money.
Other view: negotiable the undertaking to
put up a security is merely an accessory
obligation.
Differentiate:
Why?
o It benefits everyone because all
other
secondary
contracts
o
o
are
discharged.
When the holder may absolutely choose to have the
obligation due, it is not negotiable.
Why?
o Everybody becomes
collateral securities
2. Authorizes confession of judgment if instrument not
What if
stipulation
3. Waiver of benefit of law
4. Waiver of notice of dishonor
5. Waiver of venue
6. Waiver of exemption from execution
the holder has the option to require something
secondarily
1. To bearer
checks.
cash)
In this example, it is not complete until Jose indorses
parties to a contract)
3. Drawee
4. Two or more payees jointly
Santos
5. One or some of several payees
bearer.
HELD: it is payable to
partnership.
but not A or B
6. Holder of an office for the time being
certainty?
It is not negotiable.
When it is payable to bearer?
instrument.
So the
HELD:
Rodriguez
instrument.
Whenever the SLA lends to members, it issues postdated checks. But most of the time, the SLA does not
But what if the one who put the wrong date presented it for
is true as to him.
If Y inserted the wrong date instead and did not
instrument.
Ex. X went abroad and left signed checks for payment of
What happens?
enforceable?
P60000 from X?
given to him
a HIDC
Ex. You cannot sue if you hold checks that were not delivered
to you. You never acquired a right over them.
personal defense
BPI Family Savings: BPI issued a check payable to City
Treasurer of Iloilo to pay for local taxes. They did not deliver it
The
it as either
6. Ambiguous role of signature deemed an indorser
o Because the indorser has the least liability among all
Somehow,
the checks fell into the hands of someone else, who indorsed it
solidarily liable
seller was wondering why she wasnt being paid. [If you are
legalistic, the RTW seller must sue the shopping malls, etc.,
Signature
shopping malls, etc. must sue the drawee banks, and then the
drawee banks sue Associated Bank why it cleared the checks.
HELD:
Rules of interpretation
characters in a NI
7. If I promise to pay note is signed by two or more persons deemed
The words
prevailed.
2. Payment of interest
o Runs from date from instrument
o Or if none, date of issue
o
o
Forgery
instrument)
B. Bearer instrument: A (signature forged by B)-B-C-D-E
negotiable instrument
3. Duress amounting to forgery
signature is forged)
estopped
2. An acceptor who pays on a BOE cannot recover the money
drawer
3. A Holder in Due Course acquires good title if forged
from him
If E is a holder in due course, he may collect
forgery].
He can run after D, because by indorsing the
instrument (even if bearer), he warranted it.
(due to warranties)
No. No consent.
signatures.
Can E run after A, B, or C?
Yes, he forged.
F. BOE issued by A payable to B or bearer C (signature
Cs signature.
Can X get money back from E?
is genuine.
What is Xs remedy?
o Sue B, the forger.
instrument
indorsers.
D. Bearer instrument, but an indorsers signature was forged
10
but Triumph did not report it to the bank. Robbers were able to
cash checks.
is a personal defense)
What are the exceptions to these general rules?
o 1. When there is estoppel (ex. father saying that his sons
o
theft.
Sued bank, which refused to reinstate the amounts. Bank argued Casa
An external auditor is not an employee.
loss
for
his
HELD:
the
bear
It is an
forge the signatures of the officers of Casa Montessori over a long time.
was negligent.
o HELD:
The
Province issues
11
warranty.
X, employee of Ford, was tasked to pay sales tax (P18M), made a check
honored it. X collected from Bank of America. Ford had to pay BIR
again. They sued.
o HELD: Citibank must return the money to Ford, because Ford
liability.
o Check: G.R. 121413 29 Jan. 2001
Rules on clearing
o Checks are brought to a clearing house and are run through a
o
o
o
o
worthless check was deposited. X stole the real check, and Citibank
the drawer.
This 24 hour rule SHOULD NOT apply when it is the
payees or indorsees signature that is forged,
12
sacks of rice.
wrong for asking the agency to prove the value of the ticket
Accommodation party
The
payee.
[Same facts] X accepted. Can X refuse to pay on account
The seller
Surety
13
obligation.
May a corporation be an accommodation party?
o As a general rule: a corporation cannot be an accommodation
Negotiation
working capital. The bank required two other signors. The firm got the
spouses are accommodation parties. The court held that PNB is not a
holder in due course, because it knew that the spouses did not receive
cannot claim PNB was in bad faith when it released the money
make it cumbersome.
1. Prohibited to indorse to 2 or more indorsees severally.
indorsement.
Where must the indorsement appear?
o On the instrument itself or to a paper attached to it
What must be indorsed?
o The entire instrument. Indorsing only part of the amount will
BF.
agreed to release part of the security money to help the project. But the
Prudencio spouses who issued checks. The project was failing. PNB
installments)
Types of indorsements:
o Special specified person to whom it is being indorsed
o Blank does not name any person
14
Ex.
named
trustee)
Pay to Jose
Cruz only
To
Jose
Cruz,
for
collection
only
(as
agent only)
To
Jose
Cruz,
as
trustee for
Glenn
Tuazon
(indorsee
Negotiabilit
y
Passing of
title
Consideration
presumed
Defense
available
Yes
Yes
X, because
indorsee is
a
HIDC,
defenses
against
indorser
cannot
apply to him
Yes,
defenses
against
indorser can
be
raised
against
indorsee
because he
is just an
agent
X, because
title
transfers
Yes,
but
subject
to
same
restriction
that he only
holds it for
collection
Yes,
but
subject
to
same trust
X, because
the
indorsee is
a
mere
agent of the
indorser
Yes
X,
because
there is no
transfer of title
Yes, because
there
is
transfer of title
as
still negotiable
This can be done if the instrument will fall due for a long time
(ex. 5 years), and the indorser does not want to be insecure for
Yes.
Because he warranted that the
instrument is genuine as to what it purports
to be.
If D turned out to have forged Cs indorsement to
him, can E collect from D?
15
E.
What is the effect of a conditional indorsement?
o 1. The maker (or acceptor) may disregard the condition
fulfilled
3. If the maker pays, but the conditioned turned out to be
The conditional
solvent.
What is the effect of an indorser signing of an instrument payable
to bearer?
o It can still be indorsed through mere delivery
o But the special indorser is only liable to those who can make
o
o
name
What if there is date attached to the negotiation?
o The date is presumed to be correct, but rebuttable.
o If there is no date, the negotiation is presumed to have been
done before it was overdue
instrument.
ABCDE. E cancels the indorsement of C to D. He
loses the right to run after C. D is also discharged, because D
represents
What is the effect if the name is misspelled?
o Must indorse the instrument according to the misspelled name,
because other parties will not know that there was a mistake
made
16
Status on payment
Knowledge
Effect
Holder is aware
HDC as to installments
not due on the face of
the instrument
Not a HDC
HIDC
Indorsement to a prior indorser:
o Ex. A-B-C-D-E-B
o Can B run after C, D, and E?
This elaborates #3
When is there defect in the title of the indorser?
HDC as to installments
not due on the face of
the instrument
HDC as to installments
not due on the face of
the instrument
Not a HDC
circumstances?
X issued a crossed check to Y, in order to buy a car from Z. However, Y
took the check and paid it to ABC hospital, and the value of the check
was greater than his bill to ABC hospital (which gave change).
stopped payment.
Holder is aware
ABC sued X.
17
o
o
X told Y to just pay him P80K right away because X could not
deposited it in DEF (her bank). Y told DEF not to present the check for
wait for the maturity of the check. Y has only paid P40K so far.
payment right away, even if it was already due, and to let Y to draw the
Then Y found out that the check was issued for a fake ring.
but Y asked DEF not to present it for payment yet. And DEF
yet.
The claimant received a check that was not indorsed to it by the payee,
and the check had a notice of prior dishonor due to DAIF (drawn against
insufficient funds).
o HELD: Claimant is not a HIDC.
In two cases, there was lack or failure of consideration between the
maker/drawer and payee of the NI. In one case, it was merely issued as
security, and in the other, the car delivered had the wrong chassis
the check.
What are the rights of a HIDC?
o 1. Sue in own name and receive payment
o 2. Free from personal defenses
o 3. May enforce payment against all parties liable thereon
o Exception: when he cannot recover full payment
number. But in both cases, the payee already indorsed the check to
another person.
o HELD: Those persons are HIDCs and the defense of
38?
54 notice before full amount is paid
124 when materially altered, a HDC may still
enforce against the maker/drawee according to the
holder, too.
What about negotiation of an instrument payable on demand after
indorse it
But not everyone can invoke real defenses against a HDC. For
instance, an indorser warrants an instrument is genuine in all
respects it purports to be.
facts
What about a transferee who receives notice of infirmity before he
Personal defenses
has paid the full amount agreed upon as consideration for the
Theres
instrument?
18
contract
Real defenses
with
some
Void contract
Ex; material alteration (so the
consent is not anymore to this
instrument); undelivered incomplete
instrument (no consent); forgery (no
consent); minority (lack of capacity)
Applicable to HDC
mean the non-HDC cannot collect. It just means that personal defenses
title occurred.
Fossum:
o X issued a check to Y, but there was failure of consideration. Y
negotiated to Z, who was not a HIDC (he was aware of the
failure of consideration between X and Y). Z sued X to collect.
D who was aware of the fraud but not a party to it. What is the
effect?
holder anymore.
Liabilities of parties
Obligations
Warranties
Maker
Drawer
If
dishonored,
and
process of dishonor
1. Existence of payee
2. Capacity of payee to
indorse
1. Existence of payee
2. Capacity of payee to
19
completed:
1. He will pay the
amount to holder,
2. Or to a subsequent
indorser who pays for it
indorse
3. On due presentment,
it will be accepted/paid
according to its tenor
Acceptor
<But
drawer
may
express
stipulation
limiting his liability>
Pay according to tenor
of acceptance
Qualified indorser or
indorser by delivery
General indorser
Either:
1.
Upon
due
presentment he will
accept/pay according to
tenor
2. Or if dishonored, he
4. The instrument is
valid and subsisting at
the
time
of
his
indorsement
Liability of Maker:
o X issued a PN to Y. Y collected, by X failed to pay. He lodged
the defense that he used the money to pay for his sick
daughters expenses, and his daughter is a beneficiary of a
1. Existence of drawer,
2.
Genuineness
of
drawers signature
3. Drawers capacity
and authority to draw
4. Existence of payee
and capacity to indorse
1.
Instrument
is
genuine and is what it
purports to be
2. He has good title
3. All prior parties had
capacity to contract
4. Has no knowledge of
any fact that would
impair the instrument
<IF BY DELIVERY
warranties only extend
to
immediate
transferee>
1.
Instrument
is
genuine and is what it
purports to be
2. He has good title
3. All prior parties had
capacity to contract
trust administered by Y.
He made an unconditional
dishonored.
However, P was
E accepted it.
20
such. Examples:
drawer to draw.
Acceptor admits existence and capacity of payee to indorse,
there.
there first.
What is his liability?
check)
A (X irregular indorser) B C D E:
X is liable to B, C, D and E.
dealt with
What is the liability of a general indorser?
o 1. Same as first 3 warranties of qualified indorser
o 2. Last warranty he warrants that the instrument is valid and
o
subsisting
If maker is insolvent, even if the indorser was not aware, he is
liable.
X deposited (through indorsement) a check with ABC bank,
It only
original tenor
Acceptor admits existence of drawer because without the
21
An employee X, received a
reimburse drawee?
party
In a BOE:
payment)
2. Notice of dishonor is given to the secondarily liable
to prove otherwise.
Ex. A B C, C can prove that while Bs signature appears
22
and drawer
B. (If foreign bill, protest for dishonor by non-
acceptance)
3. If the bill is accepted:
of
dishonor
to
those
secondarily liable
B. (If foreign bill, protest for dishonor by non-
payment)
When is presentment for payment necessary?
o For primary persons never necessary
o For secondary persons, generally
needed
to
make
presentment except:
costs of collection.
When is a bill required to be presented for acceptance?
o [See enumeration above payable after sight etc., expressly
required, payable elsewhere]
o Note that a check does not fall under this enumeration
When is presentment for acceptance excused or dispensed with?
o 1. DELAY EXCUSED for bill payable elsewhere than place of
business or residence of drawee and the holder failed to
C) waiver or presentment
acceptance
2. Drawee is dead, has absconded, is fictitious, or has no
capacity to contract
3. Presentment cannot be made even after exercise of
reasonable diligence
4. Although presentment has been irregular, acceptance
23
as dishonored by non-acceptance
What if it is written on another paper?
value
What is the rule on future bills?
dishonors:
Same example:
acceptance
Who should give notice of dishonor?
o 1. The holder
o 2. His agent or representative
24
next day
3. If sent by mail, deposited in post office in time to
was made
3. Instrument was made or accepted for his accommodation
Drawer
o
o
Drawer countermanded
payment
Indorser
Yes.
o Who is affected by a waiver in an instrument?
would be dishonor.
When is notice of DH not needed to be given to indorser?
o 1. Drawee is fictitious person or has no capacity to contract
C indorsed the
25
Discharge
Material Alteration
o
o
o
o
o
instrument
secondarily liable
right
How those secondarily liable are discharged:
o 1. Discharge of instrument
o 2. Intentional cancellation of his signature by the holder
o 3. Discharge of a prior party
o 4. Valid tender of payment by prior party
o 5. Release of principal debtor, unless holders right of recourse
o
26
Yes.
computers are offline, so the bank accepted it. Bank found out after and
chased after the payee to recover.
o HELD: By accepting, the bank admitted authority of drawer to
draw.
Customer bought a managers check and asked that his account be
debited to purchase it.
payment immediately
Rules on BOE apply to checks too, such as the 24 hour
accepted
What are cashiers and managers checks?
o Drawer and drawee is the same
What are memorandum checks?
o Its just usually used as evidence of credit, by a drawer who
HIDC.
Certified checks:
o Banks usually do not do this anymore
Check must be presented for payment within reasonable amount of time
o Banking practice: 6 months, or else stale
o What happens when the check goes stale?
because the account was actually closed. The customer already used
money.
Sito: When the payee delays in presenting a check for payment, the
indorsers are discharged, because they have an interest to discharge
27
MERCANTILE INSTRUMENTS
Cannot do this!
It is not an
Letters of credit
Dupont will not collect directly from PBC. Dupont will issue a
the goods can be used to pay PBC if ABC does not pay.
28
an agreement
Show proof that the applicant has not performed his
exactly
Who are the parties to a letter of credit (essential) and their
obligations?
o 1. Buyer (applicant)
procures LOC
contract
3. Confirmed LOC
documents title
2. Issuing bank
reimbursement
Obligation is solidary with the buyer. It is a primary
is negotiated
When is it considered a consummated contract?
o When the bank pays the creditor (seller-exporter), and not
when the debtor-buyer pays the bank because the bank can
the obligor)
3. Seller (beneficiary)
customs.
2. Code of Commerce, Art. 568:
not to order
29
seller-exporter
4. Negotiating bank
the buyer that the goods delivered were the proper goods. The
discounted
There are 3 underlying contracts in a LOC:
o 1. Application of customer for LOC
that
he
will
discrepancy, then the bank pays. If the buyer does not waive,
documents
o
All that is
pay
3. Misspellings If the LOC requires noodles but the
document says woodles the Bank may refuse to pay who
30
refused. The bank did not pay. Later, the buyer just paid 1M to
Cojac.
Red clause
o A clause, usually written in red ink, where the beneficiary/seller
may
get payment
from a third party producer that does not accept anything but
a stand-by LOC?
o 1) Proof of fraud is strong, 2) fraud must involve abuse of
too.
CASE: The depositor/applicant owed the bank for a LOC, but
if the
which will pay the surety firm if the company is held liable. This
LOC will most likely contain an evergreen clause, to keep
to
meet
failure
Trust receipts
anytime
o Usually its irrevocable, for certainty of payment
Revolving letter of credit
o Automatically replenishes, whether per month, when the
31
By fiction of law,
purchased. HELD: This is invalid. The bank did not have any
them yet.
Allied Banking: X imported goods, and opened a LOC with ABC bank.
When the equipment arrived, X took the goods from ABC and issued a
trust receipt in ABCs favor. X installed the goods in his factory. X failed
ABC was the real owner of the shells and X just held it in trust.
to pay. ABC sued X for violation of PD 115. X claimed the goods were
not covered because he did not sell nor manufacture/process them.
ABC bank
Another case: X could not sell the goods covered by the TR.
company
For estafa, there has to be misappropriation
o Meralco/steel towers case: X fabricated steel towers (hired
The bank then returns the excess or runs after the deficiency.
Rights and liabilities of parties:
o 1. Entruster not liable in any sale or contract entered into by the
entrustee. He merely has a security interest.
misappropriation.
32
the transferee
3. The transferee can compel the transferor to
rights than the indorser, unlike under the NIL] and title
liable?
o No.
title
that it is non-negotiable?
over
the
goods,
so
the
him
Who can negotiate a WHR?
1. Owner thereof
instruments:
receipt:
negotiable.
For negotiable WHR, it cannot be converted into a
been entrusted, or
2. If at the time of the entrusting, the receipt
is in such form that it may be negotiated by
indorsed?
33
mere delivery
Can a thief negotiate a WHR?
the transferor
2. Right to notify the WHM of the transfer and acquire the direct
What are the conditions before the WHM delivers the goods?
o 1. Holder pays the WHMs liens
o 2. If the WHR is negotiable, to surrender the receipt
o 3. Readiness and willingness to sign an acknowledgment of
receipt of the goods
To whom must the WHM deliver the goods to discharge his
liability?
o 1. Person lawfully entitled to the goods or his agent
o 2. Person entitled to delivery under non-negotiable WHR or
o
o
transfer?
right.
What are the obligations of the WHM?
o 1. Safeguard the goods
o 2. Deliver the goods
To deliver
be found on a WHR?
o It does not invalidate the WHR. WHRs are liberally construed
goods
2. The holder of a WHR informs the WHM prior to
34
also has to post a bond, in case the WHR falls in the hands of
a person who took it in GF and for value. The latter goes
during auction
What if the WHM delivers the goods without asking for surrender
deliver.
The WHM in general, as a bailee, cannot claim ownership over the
of the WHR?
o He is liable for damages to any person who takes the WHR in
Failure
to
show
willingness
to
sign
an
document is impounded
35
No. The vendors lien does not affect the transfer of title to the
Z who purchased it for value and for good faith. Who has
injunction or otherwise
What if the receipt is non-negotiable?
To safeguard
It is stipulated
It is customary to do so
What are the rules on commingled goods?
o Each depositor gets a pro rata portion of the common mass
enjoined
What can the creditor do?
upon claim
What happens if there is partial loss?
36
Negotiable Instrument
Negotiable WHR
void
If payable to bearer, always remain
so payable regardless of the way it
was endorsed, whether specially or
in blank
HDC may obtain a title better than
the negotiating party
and
expenses
for
notice,
lost
upon
Elements:
o 1. Insured possesses interest susceptible of pecuniary
estimation
o 2. Insured is subject to risk of loss
o 3. As consideration, the insured pays premium
Someone organized a jeepney association. They give membership fees
and if a driver gets into an accident, the association pays indemnity.
Sued by Insurance Commission for not having license to do Insurance
claims
2. All goods belonging to others which have been deposited by
Business.
o Held: Was conducting insurance business without license. All
the person who is liable for the claims if the person has been
entrusted with possession of the goods, such that a pledge by
was
In general
which
INSURANCE
bailment,
surrender.
o 2. Refusing to deliver the goods when he should have complied
How is the lien enforced?
o 1. Valid refusal to deliver the goods until the lien is satisfied
o 2. Causing EJ sale of the property and applying the proceeds
o
WHMs lien
him of the goods at the time of deposit would have been valid
When is the lien lost?
o 1. Surrendering possession of the goods
requisites concurred.
Contra Maxicare: Even if all elements are present, but if
primary purpose of contract is to provide services, then it is not
an insurance contract.
37
medical services. But here, even if you did not get injured or
indemnity.
2. Personal
cars.
The buyer of a car, for instance, will only be insured if
prevent performance
4. Any person upon whose life any estate or interest vested in
him depends
Insurable interest
Parties
pay.
2. If the mortgagor performs an act that prejudices, the
38
categories.
When is there insurable interest over property?
o 1. Existing interest
o
o
o
interest
What is the value of insurable interest over property?
o The insurance cannot go beyond the value of the property
o Whereas in life, you cannot put value over life of a person
consent
o Contra: Assignment of a life insurance policy
o
o
o
to completion.
3. Mortgagor and Mortgagee both have insurable interest
4. Lessor and lessee both have insurable interest
5. Mere possessor.
39
Then
clause)
3. Independent contract between mortgagor and
action.
Change in interest in one or more listed things:
mortgagee
4. Acquired by the mortgagor under a contract duty to
insure the mortgagees benefit (in which case the
mortgagee acquires an equitable lien on proceeds
X died and
can collect.
What if the children bought the house from the
40
Test:
to the contract
D had a loan of 3M from C. To secure it, D mortgaged his house
different
Concealment in life insurance:
HELD: concealment
There is a law prohibiting insurance companies from
worth 5M in favor of C.
o Who has insurable interest over the house?
D 5M (value of house)
C 3M (extent of loan)
o Will insurance procured by D in his own name and for his
own benefit inure to benefit of C?
Concealment
41
o
o
The
inspectors.
2. Matters of public knowledge/insurer should have known
destruction
What if the insured dies from another reason apart from the fact
concealed?
o Insurer still not liable because it wouldnt have issued a policy.
Can there be waiver?
o Yes. Either express (in the terms of insurance) or implied (as
inducement.
o But it may qualify as an implied warranty
As a rule, parole evidence is not allowed to vary the terms and
It is
imposed by law.
When is a representation presumed to refer to?
o A representation is presumed to refer to the date on which the
policy goes into effect.
If somebody applied to insure his vessel.
already communicated).
Is there need to disclose nature or amount of ones interest?
o No. EXCEPT if one is not the absolute owner of the insured
Representations
property.
1. Untrue statement
2. With knowledge and intent to deceive; or stated as true
there is no misrepresentation.
What if the insured has no personal knowledge of a fact?
o He may repeat the information he has on the subject which he
o
believes to be true
Ex. There is a question in life insurance about medical history
of the family. If one thinks his father died as a soldier, in action,
when he actually died of AIDS, and he says the former.
contract
What is a misrepresentation?
42
But if the info came from the insureds agent, and exercise of
due diligence was possible, he is liable for the truth of the
statement
Ex. There is no misrepresentation because he relied on what
HELD: No misrepresentation.
Do you take alcoholic beverages? Applicant said no. But he
is no misrepresentation.
Insured filled up the application form. The insurance company
house in 10 days.
HELD: the insurer is liable.
no misrepresentation.
Test of materiality?
o SAME AS CONCEALMENT.
o If the other party would not have entered into the contract, or
Warranties
inducements
May relate to:
o Past ex. warranty that insured was never confined
o Present ex. warranty that insured is in good health
o Future ex. warranty in fire insurance that owner of property
said that they will only accept if the applicant is not more than
insurer.
Can the insured argue that it is not material?
Express or implied:
o Express found in terms and conditions
43
material.
If there is a breach of warranty, and loss occurs EVEN IF not related to
the breach of warranty, the insurer is not liable.
o Ex. cannot bring explosive materials into his house.
brought fireworks inside.
o
o
premium
X was issued an ordinary drivers license. Can only drive 4 wheeled
vehicles. He drove a 10 wheeler. Vehicle involved in accident.
o HELD: Insurer not liable because X is not authorized to drive
He
For
Or
second insurance.
authorized third party with a license that must drive the vehicle.
Is the expiration of ones license a violation of the
On Sept
On December 31 he stored
Different interests
44
Warranty
Representation
Collateral inducement
Need not be written
Must be established to be material
but
period
it
cannot
be
shortened
by
be
lengthened
by
If a life insurance policy has been in force for at least 2 years since first
effect or last reinstatement insurer is BARRED from questioning it or
alleging misrepresentation or concealment, or deceit/fraud
o N.B. Really, what you are barring are defenses against
year
stipulation.
What if the policy lapsed but was reinstated?
deemed a rescission
the
agreement?
Yes,
Can
another person
6. If insured is riding in a plane and it is not a commercial flight
else
Requisites for incontestability clause:
o 1. Life insurance
o 2. Payable proceeds upon death
o 3. In force for 2 years since issuance or reinstatement
45
common interest
Rules on interpretation:
o If the provision is clear, there is no room to interpret
o Tantoco Terminal: had two mills. Old mill was insured. When
the new mill was finished it was insured. The policy however
mentioned the old mill. Burned. Insurer refused.
Before you issue a new policy, the terms and conditions have
otherwise.
Fortune: Security guard and driver of armored van had
original?
o Must be countersigned by the insured or owner
o N.B. No need for signature of insured for earlier riders and
Insurance
additional clauses
When must a policy be issued upon issue of cover note?
o Within 60 days, the policy must be issued.
two.
What is an Open policy?
o There must be a maximum amount mentioned.
o
46
It is a
Successive insurances
insured against
3. Discovery of fraud/material misrepresentation
4. Discovery of willful or reckless acts increasing
uninsurable
6. Determination by Commissioner that continuation
period is valid
But if the period fixed is less than one year from the time cause
issue up to 20M).
Notice of cancellation:
o 1. Must be in writing
o 2. State ground for cancellation
o 3. State that if the insured asks for the facts as basis, the
matter of right
Policy written for term longer than 1 year, it will be treated as written for
successive terms of 1 year
o Ex. construction contract requires policy covering the building
1. Non-payment of premium
47
Premiums
against
What is the effect of payment of premium to the liability of the
payment yet
But this does not estop the insurer from recovering the
payments afterwards
2. Payment in installments
o
o
arrears
What are the rules on refund of premium?
o Insured entitled to a refund of the premium if no part of the
Thus, here,
losses
What the exception to partial refund rule?
how much insurance it can buy until the end of the policy.
Can the insured apply for reinstatement at the end of the
policy?
insurer?
o Notwithstanding any agreement to the contrary, no policy is
48
It is not
divisible.
What if the contract is avoided due to fault of the insurer?
No return.
Ex. told someone to steal his car, sell parts, and claim
not.
Can there be return of the premium due to over insurance?
o Yes. The insured gets a ratable return of the premium.
o Ex. a house worth 10M is insured for 10M with X, 5M with Y,
o
o
from Z.
Agreement not to transfer the policy after loss has occurred is void,
broke into the store and stole the stocks in trade. Fire
When will the occurrence of the peril insured against make the
Everyone congregated.
insurer liable?
o 1. If it is the immediate cause.
insurance
2. Loss from unlawful act not liable
49
opportunity is gone
Usually policies have a provision that claims must be
settlement.
o
Requisites:
o 1. Insured must be the same
procure it
liability
2. Insurer mistakenly paid for an excepted risk
3. Life insurance
4. Recovery of loss in excess of insurance coverage
Double insurance
insurance
5. Risk is the same
same
What is the consequence of double insurance?
o Usually there is a clause in insurance policies that will release
50
based
on
5M with Z:
the house
If owner recovered 10M from X, X can ask for 2.5M
reinsurers will pay too. They will rise and fall with the fortunes of the
said proportions.
In car insurance policies, there is a usual clause that for over-
covering a car worth P500K can only be liable for P250K each,
and nothing more.
What is reinsurance?
o Insurer obtains another insurance to cover for loss for liability
due to the original insurance
o The reinsurer is a liability insurer
o What is retrocession?
51
original insurer.
Can the insured sue the reinsurer directly?
o No. There is no privity of contract between them.
What is the exception?
o The cut-through clause
Marine insurance
Reinsurance
pay.
Most of the time, there is a clause that says that the original reinsurance
need not litigate with every reinsurer. If the original insurer paid, the
case of loss.
Ex. the ship is worth 10M. The charterer agreed to pay 5M in
because the fact concealed was not the cause of the loss.
What is the different rule as to belief of a third person as to marine
insurance?
o Marine insurance belief of a third person as regards what is
be insured.
What is the insurable interest of the charterer?
the loss:
material
Ex. surveyor saying that the ship is not seaworthy MUST BE
DISCLOSED it is material
What is the rule on misrepresentation as to expectation?
o If there is no fraud, misrepresentation as to expectation does
o
safely.
C can only collect 100K because that is the profit
52
Ordinary insurance
Marine insurance
Concealment
Five
exceptional
grounds apply
Must be disclosed;
material
If there is no fraud,
cannot rescind
Four implied warranties
automatically apply
insurer is discharged.
What must the voyage route follow?
o Usual maritime usage
o If none, then the most natural, direct, and advantageous
Deviation
seaworthiness?
warranted
When is a ship seaworthy?
o If it can perform the services and encounter the peril of the
o
voyage contemplated.
Warranty of seaworthiness extends from the hull also that it
deviated
o 4. Made in GF, to save human life or another ship
Once the vessel deviates, even if it returns to the original route, the
insurer is exonerated.
has control
Loss
etc.) is fit
When must a ship be seaworthy?
o At the start of the voyage
o If there are different portions of the voyage, it must be
53
1. Total destruction
o Ex. the ship burned
making it irretrievable
3. Damage to thing rendering it valueless for
abandonment
Acts done in good faith by the agents of the insured after
abandonment is for the risk/benefit of the insurer (ex. effort to
repair the ship is for the risk/benefit of the insurer. So the
insurer pays for it, and if the ship gets repaired, benefits.)
Insurer is liable for those acts of insured in good faith
o Ex. salvors fee, repairs in GF
Acceptance:
o If abandonment is proper but insurer refuses unjustly, it does
is the effect?
o The marine policy on the cargo remains
o The insurer is liable for expenses for transfer, discharge,
loss
5. Must be factual
total loss
B. Constructive total loss
destination
o Ex. Ship was ordered seized
Is there need for abandonment for actual total
loss?
o
o
o
seedlings
Ex. a race horse broke its legs, so it
54
abandonment?
The insured can sell the vessel and earn scrap value.
freightage
Freightage earned after the loss to the insurer of the ship
1. Loss is partial
Fire insurance
expected profit.
Is a marine insurer liable for expenses attendant upon damage and
subsequent repairs?
o Yes, the insurance is liable pursuant to sue and labor
Measure of indemnity
60M in profits)
Not separately insured: Sugar being shipped is worth 100M
and has expected profit of 120M. 50M worth of sugar was
freightage?
o Freightage earned before the loss to the insurer of the
o
profit.
55
burn
the insurer.
of
depreciating,
the
value
of
construction
So SMC is trying to
But the
SMC said that it was not, based on the old prices. What
The insured
pulled the trigger. There was a bullet. He died. Can the heirs
negligence?
o Yes. This is still accidental. What is not covered is intentional
Casualty insurance
the policy.
If there is no such provision, the contracts are separate, so the
happens?
collect?
o HELD: Yes, because it was accidental.
o JJs viewpoint: No, because he was stupid.
the person.
It is the intention of the person inflicting the injury that controls.
56
Sometimes, there is a clause where the insurer will defend the case on
behalf of the insured in court. In a case, the insured sued the insurer
not because of the liability clause (because the insured was not yet
Life insurance
made liable) but because the insurer was negligent in defending the
case.
Suretyship
Kinds:
o
misconduct
Fidelity guaranty insurance for consideration, one agrees to
o
flying commercial
5. Industrial life
paid.
But not entitled to return of taxes paid (ex. DST) and other
the policy has been in force for a period of two years from date
If he
What is suretyship?
o Agreement where surety guarantees the performance by
One that will last until the end of the case. The company is
returned.
What is a continuing bond?
57
criminally liable
Rebate of premiums is also prohibited.
Can agreements regarding kickbacks be enforced?
license
What if the car is unlawfully taken and driven by a person
who is not authorized?
fault.
The insurer cannot ask the insured to waive the rest of the
liability attaches?
o Its a void provision. If you have to wait until final judgment, it
the ff conditions:
1. Indemnity shall not exceed P15,000
clause
Ex. a repairman took the car out for a joyride
58
In general
One creator
Joint creators, where individual parts
are not identifiable
Joint creators, if the joint authorship
consists of separate and identifiable
parts
Commissioned work
A. It is a secret
keep it a secret
Differentiate between copyrights, trademarks, and patents:
o Copyright: literary and artistic works which are original
o
59
Copyright
prepared
over
the
parts
they
Audio-visual work
Anonymous
applicable
What are technology transfer agreements?
container of goods
Patent: technical solution of a problem in any field of human
activity which is new, involves an inventive step, and industrially
Copyright
duties
be used.
For DVDs?
The producer,
music
composer,
director
of
building
Are derivative works also covered by copyright?
o Yes, but you have to get the consent of the original creator.
a work
2. News of the day or miscellaneous facts amounting to press
information
3. Official text of legislative, administrative, or legal nature, and
Madame Butterfly)
What about compilations?
No.
How long is the copyright?
o Lifetime of author + 50 years
o What if there are several authors?
their translations
4. Works of the government
years
What if its work of applied art (artistic creation with
utilitarian functions or incorporated in a useful article)?
60
25 years from making
What about broadcast?
o
o
the work.
Ex. The character Charlie Brown is copyrighted. So
requirement
There must be copying for there to be infringement. How do you
Within 4 years
establish this?
o Through circumstantial evidence
o Ex. a book has a missing page 23. Another book that is similar
an entire book)
2. Derivative works
3. Public distribution or exhibition
plagiarism is infringement.
Plagiarism is passing off the work of another as ones own. It
61
So
o
o
dances
4. Used for judicial proceedings or giving advice
court
5. Fair use
For criticism.
work.
For
it
to
work,
the
substantial.
Libraries can make photocopies (ex. the book is
fragile already ex. Maximo Kalaws The Malolos
Congress or Apolinario Mabinis books). If you only
need isolated portions of the work for a thesis or
research; instead of photocopying the whole book,
Yes.
If one is citing portions to use for an anthology, is
But this
Patents
62
product,
Example of process:
patent non-prejudicial?
of
microorganisms
What cannot be patented?
o 1. Discoveries
Ex. parachutes
o 2. Mathematical methods, scientific formulae, schemes, forms,
o
gun
2. An improvement on current machines
directly/indirectly
the world
o Ex. a plow
2. Prior filed or effective patent, utility model,
the
from
inventor
2. Involves an inventive step
flash of genius
3. Industrially applicable
or industrial design
63
on jockey briefs.
How long is the term of protection for ID?
o Term of protection for industrial design is 5 years, renewable
compulsory licensing
What is the term of a patent?
o 20 years from date of filing of application
What is infringement?
o Infringement is the making, using, or importing of the patent of
o
Otherwise,
protected.
What is an industrial design?
o Any composition, lines, colors, etc. which form a pattern for
world
Compare patents and industrial design:
o Limitations of the right of owners of industrial design are the
industrial design.
Someone registered as industrial design the Y design
64
If you
equivalence
What is contributory infringement?
o Aside from the infringer, anyone who induces the infringer or
same thing.
N.B. Having the same effect, but not proving that it
achieves it through the same means does not prove
specially adapted for infringing and not for any other use is an
o
1. Damages
infringer too.
Betamax case: the VCR was alleged as being used to pirate,
the
infringer
for
repeated
effective.
Can a foreign corporation not doing business here sue for
infringement?
o Yes, as long as its country gives Filipinos reciprocal right to do
this.
Defenses against infringement?
o 1. Prescription
65
omitted.
Prohibited provisions in licensing agreements:
o
o
[Anti-competitive measures]
1. That the licensee must get goods, products, raw materials
o
o
o
o
(purchase option)
8. Obligates licensee to transfer for free to the licensor the
technology
9. Exempting the licensor from obligations under the
provisions?
o If there is substantial benefit for the country:
Generate jobs
What if the agreement does not comply with the prohibited or
used
11. Restricting use of the technology even after expiration of
o
o
the patent
12. Require payment of patents after expiration of agreement
[Anti-adaptation]
mandatory provisions?
o It is unenforceable
What is the right of the licensor and licensee?
o The licensor is not prohibited from entering into licensing
agreement with a third person or exploiting the subject matter
66
himself
the product
2. For patented processes: restrain, prohibit, and prevent
unauthorized
persons
from
using
the
process
or
Supreme Court
8. Invention is used in a ship, vessel, craft, or land vehicle of
another country entering Philippine territory temporarily or
able to use the product. So the old rule that you can
o
o
o
(Of
accidentally
purposes
5. Used for educational/scientific purposes
another.
The right of the prior user may only be transferred along with
67
national economy
3. Judicial or administrative determination that the exploitation
reason
6. Where the demand for patented medicine is not being met,
o
o
o
o
1. Immoral
2. Public order or morality
[same or misleading]
1. Identical with a registered mark
the patent, or three years from the date the patent, whichever
o
o
o
o
o
o
Trademarks
What is a trademark?
o Visible sign capable of distinguishing goods/services/enterprise
o
o
o
o
o
o
meaning
What cannot be registered?
o [public policy]
68
related goods?
o The prior trademark will be protected.
o Examples of closely related goods (INVALID):
similar?
o 1. Dominance test
likely result
Deception need not be actually proved
Ex. Both Paddocks and Dockers jeans had the words
it
targeted
Lorenz
registered
Passage of time will not bar action to protect that international
trademark
What is the rule on secondary meanings?
o Trademarks which originally may not be registrable may be
registered if it already obtained a second meaning.
products)
to
69
o
o
If you did not use it, you must file an affidavit of non-
o
o
Force majeure
oppositor
2. Petition to cancel the registration of mark
B. Any time
Grounds:
o 1. Mark became generic (aspirin
generic,
became
goods
N.B. compare this with periods for actions under copyright and
3. Misrepresentation of source of
infringement.
Copying, counterfeiting, making colorable imitations of TMs
cellophane,
Thermos bottle)
2. Abandonment failure to use for
uninterrupted period of 3 years
70
public
Yes.
What is the status of standing crops?
Chattel Mortgage
be chattel mortgaged.
Property which may be real property under
the NCC may be personal property under
special law.
The parties considered the house as personal
property, and subjected it to CM.
mortgaged
treated as personal.
5. Mortgage must be registered
places
disposal
4. Must be personal property
Does it bind
registered in both.
Register with appropriate specialized agency:
71
third persons.
6. Affidavit of GF
ownership.
The sale is valid, but he can be liable under the RPC for selling
third party.
Can the CM extend to improvements and future property?
o No.
o Contra: In REM, the mortgage extends to improvements
The
You can amend the CM over the first loan to cover the
sell it.
Is a private sale of the property to foreclose valid?
o Yes.
To foreclose, what is needed?
o 1. Publication in the newspaper is not needed,
o 2. Notice must be posted in two or more public places, where
the mortgagee resides or where the property is located at least
o
o
a new CM.
Because here, the parties have to swear that they constituted it
collected money from Insurance, and bought a new car, does the
The creditor must respect the CM. He can only garnish on the
property?
o No. This is pactum commissorium which is invalid.
o Can the mortgagee take the property?
Not forcibly. He can file for replevin to get it, and then
be sold?
It must be followed
What if the proceeds of the foreclosure exceed the amount owed?
o Return to the mortgagor.
o If there is deficiency, the E can run after mortgagor for it.
o Exception?
72
foreclose it extra-judicially.
If a loan is overdue, what will not preclude foreclosure of the REM?
o 1. Allegations that the mortgagee did not furnish the mortgagor
located
Is personal notice to the mortgagor needed? What if there
is failure to do so?
No need. No effect.
What if there was no posting but there was publishing?
It is sufficient.
What if the sale is postponed?
1. Sale not finished that day and will continue the next
day
2. Waiver (see below What if mortgagor talks to the
bank)
What if there are clerical errors in spelling the name of the
mortgagor?
Wednesday or Friday.
2. It must be posted in 3 public places where the property is
Not
73
buy the property will be prejudiced since they did not know, this
provided?
o If the mortgagor is a natural person, he has one year to
sum.
What happens to the excess or deficiency after foreclosure?
o Excess goes to mortgagor
o Mortgagee can sue for payment of deficiency
Is there a right to redemption?
o Yes.
How do you redeem?
o 1. Tender the correct redemption price, or
o 2. File a case to compel delivery of property for redemption
is not valid.
What can the buyer of the foreclosed property do?
o He can ask for a writ of possession. Granting this is ministerial
and non-litigious. This is ex parte and there is no need to
o
If the redemption
property.
Can the foreclosure be done by a Notary Public and not a sheriff?
o Yes, although the courts now require the payment of filing fees
that the sheriff must sell the properties one by one and stop as
period.
Does the rule in Rule 39 where enforcement of decision is
74
on the property?
N.B. for other aspects of CM Law and REM Law, see Civil Law and
Remedial Law notes.
75
economy
What is the basic obligation of the lender?
o The debtor must be informed how much it is costing him to
borrow money the charges he has to pay
Which creditors are covered?
installment basis;
3. Lease purchase contract with financing company
4. Hire, bailment, lease of property
5. Option, demand, lien, pledge, or claim against property or
money
6. Purchase, acquisition of, or any credit upon the security of
prosecuted criminally
Manual of regulation for banks
o If a bank lends more than P500,000, it can charge a handling
o
Truth in Lending Act, the bank cannot charge the handling fee
The statement given did not mention that the bank can increase
a penalty?
o No.
interest
o Total amount to be financed + finance charges
activity
2. He who knows that the money came from an illegal source,
but performs acts to facilitate the transaction
fee.
If that was not disclosed in the statement to comply with the
the penalty in case of default. Can the bank charge this increase in
information. But this law is not limited to financial institutions. This law
4. The creditor who did not comply with the law may be
charges (not less than 100 pesos, not more than 2,000 pesos)
3. When the debtor sues the creditor for payment of finance
law
Who are covered?
o 1. Banks
o 2. Quasi-banks
o 3. Financing institutions (ex. financing companies, pawnshops,
investment houses, trust companies, institutions supervised by
Central
76
securities dealers,
day
Automatically, these have to be reported although
legitimate
2. Suspicious transactions
justification.
Ex. the transaction is structured to avoid reporting (for
77
bank deposits
The officers who make the reports in GF are given immunity
from prosecution.
Petition for ex-parte order to freeze an account:
o Filed with the CA
o The freeze order is valid for 20 days.
probable cause.
o When is court order not required to inquire?
PDIC.
o 3. Deposits from unsafe/unsound bank practices
o 4. Proceeds from money laundering
o 5. Contents of safety deposit box
What is the maximum coverage?
o P500,000
What is the period to claim?
o Within 2 years from actual takeover by the receiver
Somebody has a current account, saving accounts, time deposits,
and if you add it all up, the value exceeds P500000. If the bank
the order.
capacity rule)
X has a separate account and a joint account (X and/or Y).
What is the rule?
But the domestic bank may ask the PDIC to insure the
different agreement.
What if the account is held jointly by a juridical entity and
one or more natural persons?
78
just officers.
If you have a person with several joint accounts, then what is the
Corporation, defined
depositor
What is the right of PDIC after payment?
o There is subrogation, so in liquidation of the bank, the PDIC
can represent the depositor.
What if there is monetary or financial instability in the banking
reputation.
It has the right of succession. What is this?
o Stockholders may come and go but its personality remains the
same
Cannot perform an act unless authorized by law.
o As opposed to natural persons who can do anything as long as
the bank.
Can a person split his deposits or create fictitious accounts?
o No. It is illegal to create fictitious deposit accounts or split
deposits to circumvent the maximum liability in case of closure
o
system?
o If established by the Monetary Board, the PDIC directors may
Corporation Law
Nationality of corporations
of the bank.
Ex. He has 1M so he transfers P500K to the name of his
relative.
79
Primary test:
the
o
private
change it?
o XYZ and ABC both own 50% of the corporation. ABC is 50%
corporation,
or
95% of his wife, for a very cheap price, and the wifes
against
government
creates a device like the corporate vehicle, and it is abused, the law will
The SHs
controlling SH.
Here, no fraudulent intent but there is systemic
disregard for separate juridical personality, and so
80
The
the act
Who is this proved?
The
Capital Structure
the case.
If the officers were sued in their official capacity, there is no
problem. When the corporation however has ceased to exist
81
public
utilities,
insurance
companies, etc.
For all, at least 25% of the authorized shares must be
subscribed
At least 25% of those must be paid.
A. Preferred
B. Redeemable
o 2. Banks, trust companies, insurance companies, etc. are not
applicable.
Distinguish:
o Corporators: those who compose the corporation
o Incorporators: sign the AOI
o SHs: for stock corporation
o Members: for NS
What is the 25-25 rule?
o At least 25% of the authorized capital stock must be
o
liquidation
What are preferred shares as to dividends?
No,
because
this
violates
Trust
Fund
Doctrine.
Ex. You are liquidating a corporation. You
82
requirements.
AOI.
What happens in redemption?
rests
entirely
upon
the
refused.
No.
stock.
corporation
redeem
No need for unrestricted retained earnings
before shares are redeemed but there must
be sufficient assets to pay creditors/answer
for operations, or else there can be no
83
property dividends.
Can cash dividends be declared from the shares?
1. AOI amendment
property
[Changes in the corporation]
1. Merger/consolidation
the secretary
Liability is the difference in value
Who is a promoter?
o Promoter one who, acting alone or with others, takes initiative
exist yet
Contracts entered into with defective corporations (de facto or
incorporation expenses.
Subscription:
o Subscription, not payment, grants rights to stockholders, even
if not fully paid for. Holders of non-delinquent shares have all
formed
Who are personally liable for the promoters contracts?
(contract theory)
When is revocation disallowed already?
retained earnings/surplus
Who is liable?
3. Corporate dissolution
What are watered stocks?
o 1. Issued without consideration
o 2. Discounted shares
o 3. Issued as stock dividend when there are no sufficient
o
84
Ignore the
condition.
What is valid consideration for issuance of shares?
o 1. Actual cash
o
o
o
for
o
o
o
Appraised by SEC
3. Labor actually performed
4. Previously incurred indebtedness
5. Amounts transferred from unrestricted retained earnings to
stated capital
6. Outstanding shares exchanged for stocks in event of
consideration void.
The subscriber has outstanding payable consideration in cash,
incorporators
What is required for amendment?
o Must be authorized by 2/3 of the SHs and majority of the
directors
When does it take effect?
CHED, etc.)
What is the requirement as to the name?
o Required to submit undertaking that you will change the
corporate name if it is the same or confusingly similar.
What must be considered?
and number
4. Term for which it will exist
reclassification/conversion
What if the consideration is unlawful?
o It would violate the TFD if the subscription is deemed void. So
The SEC now requires that you put even the street
85
o
o
No.
Acevedo: It is not engaged in the practice of optometry. It
include it.
When does a de facto corporation exist?
o 1. Valid law under which it was organized
o 2. Attempt in good faith to form a corporation
existence.
When it applies:
o Someone must deal with the association like a corporation and
claim to be a corporation.
o 3. User of corporate powers
What is the scope of the de facto corporation doctrine?
o Situations where the defective enterprise contracts with an
agreed to merge. One president got majority votes. The other guy
refused to recognize the others win and continued to collect dues.
o HELD: There was no intra-corporate dispute because there
was no valid merger; there were no articles of merger. There is
no corporation by estoppel because both presidents knew they
behind it.
Can its existence be attacked collaterally?
o No. Just directly, through quo warranto, and only by the Sol-
corporation?
o No. There is no law allowing that.
What is a corporation by estoppel?
Gen.
What is the nature of its acts?
o Valid, like that of a de jure corporation.
o Even the acts of the officers are valid, although they also have
liabilities of valid officers.
Can a corporation to practice a profession be a de facto
86
ground
to
automatically
dissolve
the
stock
2. 2/3 of outstanding capital stock may delegate to the
appointment
6. Manner of issuance of stock certificates
Citibank: By-laws allowed country managers to sue and
because the shares were delinquent. Valley Golf claimed its bylaws
o
o
Not a
number of shares)
5. When annual election of officers is done, and manner of
87
of corporate term)
B. Power to increase or decrease capital stock:
o Majority of BOD + 2/3 of OCS
property:
o Majority of BOD + 2/3 of OCS
o What is the test of substantially all?
paid-up
For decrease it must not prejudice corporate
creditors
Until approval, the funds are just held by the corporation in trust
No
C. Power to create, incur, or increase bonded indebtedness:
o Majority of BOD + 2/3 of OCS
o What is a bonded indebtedness?
need SH approval.
Is there a right of appraisal?
Yes
F. Power to purchase own shares:
o What is required?
No
D. Power to deny preemptive rights:
o Where is there a right of preemption by SHs?
earnings
Exception?
dividends
2. To collect indebtedness out of an unpaid
subscription
3. To pay dissenting or withdrawing stockholders
enumeration)
What happens to the shares?
business:
o When do you need SH approval?
88
purpose
Mau Sugar Central buying a company manufacturing
approval
above
implies
war,
illegally obtained
In what forms?
o
o
continue
the
unexpired
SH approval
to
wanted
Nielsen
some
requires
premium surplus?
deducted
Stock corporations are prohibited from retaining surplus profits
in excess of 100% of paid-in capital stock.
Exceptions?
89
approval
5 years for any one term. You can keep renewing it.
Does the principle that a principal can terminate an agent
Power
Requirements
Nonvoting
stocks
vote?
Appraisal
right?
Increase or decrease
corporate term
Increase or decrease
capital stock
Create,
incur,
increase
bonded
indebtedness
Denying pre-emptive
rights
Yes
Yes
Yes
Yes
Yes
No
1. Provided in AOI
2. Comply with public
offering law
3. For property
4. Debt for equity
Majority of BOD + 2/3 of
OCS
1. Eliminate fractions
No
No
Yes
Yes
No
No
special expertise.
Requirement?
Approval by BOD
Substantially all of
property
Purchase
own
90
shares
Invest
corporate
funds in another
business
Declare dividends
2.Pay
subscription
indebtedness
3. Pay appraising SH
4. Decrease cost of
business
5. Other similar
Majority of BOD + 2/3 of
OCS
Yes
No
Yes
(if
going into
another
line
of
business)
No
without authority
Enter
management
contracts
into
Yes
No
o
business.
First type of ultra vires: void and does not bind the
1. Performance
2. Ratification
3. Estoppel
Second type: no authority so unenforceable contract
91
can be invoked
Can a corporation guarantee the debt of another?
o No, because it might prejudice the claims of its creditors and it
o
of the subsidiary
2. Will result in increased business
3. Will enhance the chances of collecting
from
the
party
whose
obligation
is
may
sue
SHs
directly
for
unpaid
is constituted an agent
o Pledgor or mortgagor still votes for his shares.
Take note of instances when even non-voting shares can vote
(fundamental changes in the corporation)
What are the kinds of meetings of SHs?
o Meetings may be regular or special.
o Provision on meetings applies only if there is no provision in
the bylaws or articles to the contrary.
What matters can be taken up?
o General meeting: anything can be taken up
o Special meeting: only matters previously indicated can be
taken up
subscription.
Examples of when the TFD is violated:
credits).
Creditors
guaranteed
What is the Trust Fund Doctrine?
o Capital stock, property, and other assets of the corporation are
unpaid subscription.
2. Payment of dividends without URE.
3. Properties transferred in fraud of creditors.
4. Properties disposed or undue preference given to
92
tantamount to waiver
But if some were absent and those present waived,
guardians?
o Can vote the shares of stocks they administer without need for
proxy
What if there are two or more owners of shares?
o They must go together, but if and/or, either can vote
o If both attend and cannot agree on how to vote, the vote is not
o
instance, 10 years.
Is it revocable for a period of time?
an interest
BUT he must show up to vote. If he doesnt vote, it
93
Yes. It will remain until the loan has been paid; for
interest
Can the voting trust agreement be coterminous with a
loan?
shares together
What are required for a valid proxy agreement?
o 1. In writing
o 2. Signed by the SH
o 3. Filed with corporate secretary before the meeting
o How long is a proxy valid?
and SEC
What is the maximum duration?
5 years
What are the powers of the trustee?
counted
There are different devices how to get votes. How?
o 1. Proxy solicitation
o 2. Voting trusts
o 3. Pooling agreement, where several SHs agree to vote their
Unless excused
o
o
This is futile.
o 5. No right of appraisal for the rights complained of
Contrast with other kinds of suits?
o Individual suit brought by the SH in his own name against the
o
as a group
Nature of right to inspection?
o 1. SHs: to protect themselves
o
o
But
Mandamus
Criminal case
Damages
Grounds to deny inspection?
3. No good faith
4. No valid purpose
o
o
Must have voted against the action, not for the action.
When can the SH exercise right?
of the shares.
What if they cannot decide on the value of the
shares within 60 days from the time the action
was taken?
owned subsidiaries?
of the subsidiary
6. Merger/consolidation
Appraisal rights:
94
o
o
Exception?
payment
When will his right to be paid cease?
When martial law was declared, the members of the Board fled
to the Middle East. A corrupt member of the board sold the
land to Iglesia. HELD: Invalid, because it was not the board
o
corporation, or
2. Act he is protesting against is reversed or
disapproved by SEC, or
board authorization.
Requirements to be a director?
o 1.Must own at least 1 share of stock in his name in the STB
He is still qualified.
o
o
required by by-laws
3. Liability to creditors of corporation for unpaid subscription
4. Liability for watered stock
95
not delinquent
2. Cumulative voting
Cannot be taken up
Who are the directors that cannot be removed without cause?
o 1. Director representing minority of SHs
o 2. Independent directors (as required by law either 2
election by SHs
o What is the term of the replacement?
of interest
96
wins out?
o The ones mentioned in the General Information Sheet win out
negligence
Courts will not second guess the wisdom of the officers even if
CANNOT be waived/ratified
Officer Y by virtue of his office acquires a business
o
o
corporation
Which can be waived or ratified?
justify retrenchment
1c. Gross negligence
1d. Conflict of interest
SHs
Business opportunity can be ratified by 2/3 of the
97
quorum
2. His vote was not be needed to approve the contract
3. The contract was fair and reasonable
BOD
What is the effect of the first two defects?
3. Amending/repealing by-laws
disclosure.
What about contracts between corporations with interlocking
directors?
o They are not per se prohibited.
o But if a director has substantial interest in one and minimal in
quorum
2. His vote was not needed to approve the contract
N.B. these are the same first two requirements as in
act.
What is the general scope of powers of the officers of a
corporation?
o Can operate without authorization on the usual course of
self-dealing directors
What is an executive committee?
o By laws can provide for it, composed of at least 3 members of
the BOD.
Capital affairs
98
o
o
o
transferred
What are the remedies of the SH when the corporation refuses to
issue a COS?
o 1. Specific performance
o 2. Damages if specific performance not granted
o 3. Mandamus to compel issuance of COS
o 4. Rescind the subscription contract
What is the nature of the duty to issue a COS?
o It is ministerial , so even if there is a case filed, the buyer must
balance.
What is the nature of shares of stock?
o Quasi-negotiable. Just like N.I., endorse at the back and
deliver. All transfer of shares are valid just between the parties
o
convenience.
Who may post in the STB?
o The president cannot post the entries, it must be the Secretary.
o If the secretary refuses, compel performance, but one cannot
be given a certificate
What are the unpaid claims contemplated by the law?
o Payment for subscription, not unpaid claims for monthly dues
When is the COS issued?
o No certificate will be issued until full amount paid
What is the nature of a subscription contract?
o It is indivisible.
o If somebody has not yet paid full subscription, he cannot assign
o
99
down stocks and those who know about it and didnt give their
objections:
o Solidarily liable with the non-paying SH
If someone only paid part of the stocks, when must the rest be
paid?
o
o
o
o
o
1. By provision
2. Upon call by the directors
What is the nature of the call?
persons.
When is there interest payable?
the shares?
o Sue the SH in a collection case.
What is the remedy for a lost COS?
o 1. Owner submits affidavit of loss
o 2. Corporation verifies the affidavit and publishes notice in
o
o
prerequisites?
on unpaid subscriptions.
B. If the corporation is insolvent, the SHs can
etc.)
How is the bidding for the shares done?
100
to the pledgee/mortgagee
registry
C. Mortgagee/pledgee v. buyer/assignee
consecutive weeks
was attached
recover taxes)
Involuntary dissolution:
o 1. Based on grounds provided in the Corp. Code (see above)
o 2. Violations of PD 902-A (SEC reorganization act see above
for some acts)
o 3. Quo Warranto
What are the specific grounds?
o 1. Does not commence business within 2 years from its
o
o
o
o
registration
2. Suspended transactions for 5 years
3. Failure to adopt and file BLs within required time
4. Offended provision of law for creation (or renewal)
5. Commission or omission of act deemed as surrender of
o
o
o
o
corporate rights
6. Misuse or right or privilege granted by law
7. Receiver recommended against continuation of business
8. Serious misrepresentation to public
9. Refusal to comply with SEC order leading to grave abuse of
franchise
o 10. Failure to file reports with SEC within prescribed period
What if the corporation claims that the economy was depressed
and there was no demand for its goods; thus, there was no
business?
o Even so, it has to file an ITR and the general information sheet,
101
Is dissolution automatic?
o No, the SEC determines the cause first.
Can a minority stockholder file a dissolution case?
o Yes.
o For what grounds?
will
acquire
legal
title
over
properties
of
2. Receivership (option 3)
dissolution?
Yes.
N.B. You do not dissolve a corporation for every single minor infraction.
option is chosen
o 3. Receiver appointed
What is the effect of dissolution on existing rights and obligations?
o It does not impair its rights and obligations
o Ex. Even if a corporation has been dissolved, it must still be
paid
How long must winding up be?
102
condition of dissolution
3. Transfer assets received by the corporation subject to
commerce
What is the rule on the right to vote?
o By default, each member may vote
o Unless limited, broadened, or denied in the AOI or BLs
o For stock corporations, even non-voting shares vote for
limitations
o
He has to be
o
o
to
plan of distribution
Can a NSNP corporation be converted to a stock corporation
purposes
eleemosynary
Close corporations
for
Example:
usage
members.
of
corporation itself
3. Prohibition on listing shares in the stock market
4. Articles may provide for classification of shares
o
o
103
of directors
Which corporations are not allowed to be close corporations?
o Those vested with public interest.
o Specifically:
3. Public utilities
4. Schools
How can the restrictions on transfers bind third parties?
o 1. Must appear in AOI, and
o 2. Must also appear in BLs, and
o 3. Must also appear at the back of the COS
Whats the effect of pre-incorporation agreements?
o They remain binding even after incorporation
o Ex. a pre-agreement that the president comes from Family A,
equity.
What is required for amendment of AOI?
o If the amendment seeks to delete any provision required by the
Close
Corporations
or
reduce
o
o
Religious corporations
on
elections of trustees?
Yes.
title
Educational corporations
quorum/voting
104
corporation sole
A. Inventory
Foreign corporations
What is a foreign corporation?
o 1. One formed, organized, existing under laws other than those
o
of the Philippines
2. AND whose laws allow Philippine corporations to do
business there
What is the effect of a foreign corporation having no license and
doing business?
o It cannot sue.
o If its not doing business, and has no license: can sue.
What is required to do business here:
o Must appoint resident agent to receive summonses for the
standing
What else must it do?
corporation
purpose
3. Contract consummated in the Philippines
105
Domiciled here
o
o
o
1. Soliciting orders
corporations BOD
here
What doing business under FIA does not include:
o 1. Mere investment of a foreign entity in a local entity or
setting forth:
own name
What are the grounds to revoke a license?
o 1. Failure to file annual report or pay fees
o 2. Failure to appoint or maintain a resident agent
o 3. Failure to submit to SEC notice of change of resident agent
o
or address
4. Failure to submit to SEC notice of amendment of AOI or by-
o
o
o
o
cease to exist
2. Acquire rights, portfolio of business, and assume liabilities of
the absorbed corporations
Is it bound to absorb the employees?
here
106
o
o
dereliction of duty
5. When the money/bank account is the subject matter of the
litigation
Proceedings)
Contra: X sold treasury bills to Y for a sum of money.
Y sued for specific
account of X.
matter of litigation.
6. Under the AMLA, the AMLC can inquire into deposits where
there is probable case of money laundering (some requiring
court order, some not see discussion of AMLA), or if there
banking institutions
2. Investments in bonds issued by the Philippine Government,
performance.
persons.
What deposits are covered?
o 1. ALL DEPOSITS OF WHATEVER NATURE, with banks or
o
defendant
Ex. in a case, the money was transferred from
commission of terrorism/conspiracy
8. Under the NIRC, the CIR can examine bank deposits if:
107
years
Gangcaico: The OMB Law provides that the OMB can inquire into bank
deposits during investigation. This was the old doctrine. But in this
Types, definition
garnished?
o No, there is none. Bank accounts can still be garnished. The
1. PDIC
2. AMLC
1. AMLA exceptions
2. HSA exceptions
3. NIRC exceptions
deposits
Receives money from the public and lends it out to them
What is required?
108
depositors
How are banks classified?
o 1. Universal banks
o 2. Commercial banks
o 3. Thrift banks (RA 7906 primary)
services to cooperatives
What are quasi-banks?
o Entities engaged in borrowing through deposit substitutes for
obligations
o (Ex. money market placements)
What are trust entities?
o Trust entities are those authorized by the MB to act as trustee
or administrator of any trust, or hold property in trust or on
evidences of debt
o 3. Accepting and creating demand deposits (checks and drafts)
o [Deposit, credit]
o 4. Receiving other types of deposits and deposit substitutes
o 5. Extending credit
o [Foreign exchange, securities]
o 6. Buying and selling foreign exchange, gold, and silver bullion
o 7. Acquiring marketable bonds and debt securities
What are thrift banks?
o Those that provide short-term working capital, medium-to-long
controlling interest
Nobody can engage in banking or quasi-banking without
Monetary Board authorization.
Shares, etc
powers?
o [Instruments]
o 1. Accepting and issuing LOC
o 2. Discounting and negotiating PNs, drafts, BOEs, and
109
Unlike the former law, the GBL does not impose a limit on the
related interest.
Rules on family groups and related interests
owned
or
banks
in
financial
allied
Type of shareholder
Limitation on shares
Commercial bank
equity
universal
of
investments
enterprises:
o Universal bank can own up to 100% equity of a thrift bank,
Equity
What are the three modes of entry for foreign banks in the
Philippines?
o 1. Acquiring up to 60% of an existing domestic bank
o 2. Investing up to 60% of a new banking subsidiary
place of incorporation
Filipino individuals and domestic non-bank corporations can
only own up to 40% of the voting stock of a local bank.
o
o
immediately below)
110
Need MB approval
What is the extent of their powers?
Requirements on directors?
o 5-15
o At least 2 must be independent not connected with the bank,
Universal banks:
o Universal banks may act as an investment house
o But universal banks HAVE TO list shares in the stock market
What is the nature of deposits?
o They are in the nature of simple loans. Thus, the bank is the
o
the boards)
How can meetings be conducted?
o Can conduct meetings by teleconference or video conference.
Rule on banks and their branches:
o Universal and commercial banks may open branches in the
o
quasi-banking.
Can automatically accept opening of current accounts
set-off.
What is the degree of diligence required to be exercised by banks?
o Extraordinary diligence in the handling of deposits
o What about deposit substitutes (ex. money market
Powers of banks
The debtor-
placements)?
property mortgaged
2. Check both duplicate original title of the property
MB approval.
111
Single Borrowers Limit (SBL) the law limits this to 20% of net worth
the government
2. Loans covered
by
assignment
of
partnership/association
What is not included?
bank
4. The loan or financial accommodation is in excess of
5% of capital and surplus of the lending bank or in the
deposits
Philippines
3. Loans under LOC to extent covered by the margin
book
of
their
paid-in
capital
Related Interests)
o What are requisites to be covered under the DOSRI rule?
value
related interest
2. He contracts a loan or any form of financial
accommodation
3. The loan or accommodation is from:
a) his bank,
bank to officers
2. Loans by cooperative banks to
members
3. Secured by collateral which MB
accommodations
extended
to
enterprises.
112
the obligation.
Stipulation that a bank is not liable for delay in wire-transfer is
similarly void.
Can a bank engage in insurance?
o No.
o But the bank can sell insurance policies if the insurance
o
o
o
immediate payment
Foreclosure:
o Check special laws on banks foreclosure [already know this]
secured by the REM, and the 2nd loan became due during
bank:
o 1. Cannot exceed 50% of capital
o 2. If it acquires real property it must be disposed within 5 years
Is it valid to stipulate that the bank will not be liable for losses of
113
of the bank
2. Disclosing bank deposits to unauthorized persons without
prior court authorization
3. Overvaluing securities
4. Accept gifts or fees to approve a loan
5. Outsourcing inherent bank functions
institution
B. same, to depositors, creditors, investors, SH, public
in general
C. undue injury or unwarranted benefits through
commercial papers of Camella homes. But Ayala did not push through
lost money. The customer sued the bank. HELD: The customer bears
with the JV. The long term papers plunged in value, so the customer
the risks because she gave the instructions to the bank. She cannot
blame the bank for her bad investment decision.
made a finding that Banco Filipino (BF) must be closed. The sc issued
Judge Ynares. Ynares said BF was solvent and had 1B in assets. The
closure violated due process because the bank was closed before the
investigation was finished. The law was then changed saying that a
credit.
2. Supervise operations of banks
3. Exercise regulatory powers over finance companies and
cannot claim the money back from the store. This the analogy
autonomy.
Creation of the Bangko Sentral ng Pilipinas (BSP):
o It is the central monetary authority mentioned above
What is the responsibility and primary objective of the BSP?
o 1. Provide policy directions in areas of money, banking, and
o
o
There were talks that Ayala will start a joint venture with
A customer asked to invest her funds in the long term
114
o
o
decision
within 72 hours
What steps can the MB take when the bank is under distress?
o 1. Place it under conservatorship
part)
2. Receivership
No.
management thereof
2. Reorganize the management of the bank
3. Collect all monies and debts due the bank
4. Exercise all powers necessary to restore
impeachment trial
2. Insufficient realizable assets to meet
viability
5. Can overrule the decisions of the bank
liabilities
3. Cannot continue without probable loss to
depositors or creditors
4. Willfully violated cease and desist order
after
No.
This will impair
freedom of contracts
How long can conservatorship last?
can survive
When is conservatorship terminated?
as receiver is summary
Who is the statutory receiver?
necessary
2. Continuance of business will involve
115
creditors
2. General powers of receiver in ROC
rehabilitated it.
assets
for
administrative expenditures
3. May deposit or place funds of the
UNLESS
it
is
acts of administration.
What must the receiver decide within 90 days
from taking over?
1. Whether
the
institution
may
credits
Effect of receivership or liquidation?
be
the receiver
2. No preference even if the claimantattachment
o Remedy is to join in liquidation
proceedings.
3. Appointment of receiver does not dissolve
corporation.
but
in
of resumption
2. Otherwise, proceed to liquidation
3. Liquidation
deemed
116
all
actions
pass
through
receiver/liquidator.
Can the BSP forbid the bank to do business?
the
legal currency:
o Coins, denominations of 25c, 10c, and 5c are legal tender up
to 100 pesos.
Denominations of 1, 5, and 10 are legal tender up to 1000
operating.
But interests on loans extended by the BSP
pesos.
N.B. The old rates were 25 and 50 pesos, but they have been
Only the CB can issue currency and all notes issued by the CB are
The
Yes.
What is its powers regarding money function?
of BSP notes
Investigate, make arrests, conduct search and seizure
in accordance with law to maintain integrity of
currency
What is the responsibility and primary objective of the BSP?
o Maintain price stability conducive to a balanced
sustainable growth of the economy.
and
becomes final
CB.
3. Require exchange obtained by anyone to be sold to the
bank.
117
Code?
o 1. Protect public investors from fraudulent schemes
o 2. Encourage public investments by regulating sale and
The MB can:
o 1. Determine exchange policy,
o 2. Require banks to sell excess foreign exchange,
o 3. Buy and sell credit instruments from banks (Discount
policy)
disposition of securities
3. Establish a socially conscious free market that self-
Government)
7. Reserve requirements can increase this (to decrease the
amount available for loans by the banks) vis--vis deposit
liabilities
118
o
o
o
o
o
o
o
o
public
4. Punish for contempt according to ROC
5. Suspend or revoke the franchises or certificates of
o
o
o
Particularly fraudulent
employed
by
directors
registration
o 6. Exercise necessary or incidental powers
Which cases have been transferred to RTC jurisdiction from the
SEC?
o
2. In a common enterprise
and
evidenced
by
devices
and
detrimental
interest/other firms
schemes
to
public
of
corporations,
appointment
or
date
directors or trustees
4. Petitions for suspension of payment corporate rehabilitation
Registration of securities
venture,
5.
certificates
of
investment
119
membership
6.
Proprietary
or
non-proprietary
entity.
What are specific examples of securities?
o A foreign exchange trading transaction is an investment
o
participation rights
Derivatives limitless (depends on creativity of the human
mind)
o
o
in
bankruptcy
proceedings,
lots,
condominiums,
issued
contract
Pyramiding scheme is an investment contract
SEC right?
investment.
(deemed isolated)
[B. with existing underlying relationships]
1. Stock dividends (to existing SHs)
2. Sale of shares to existing SHs
3. Issue and delivery of security in exchange for any other
security of the same issuer pursuant to right of conversion
the MB.
Rules on registration?
120
o
o
o
[violations]
2. Violation of SRC
3. Engaged in fraudulent transactions or about to engage in
o
o
o
o
o
such
4. Issuing officer/SH convicted of moral turpitude or fraud
[misinformation or lack thereof]
5. False or misleading annotations as to material facts
6. Failed to comply with conditions for registration
7. Registration is inaccurate or incomplete
o
o
o
Protection of investors
system.
o
o
This is exempt.
[D. sophisticated transactions]
1. Judicial sale or any extra-judicial sale/execution sale by
Grounds
for
registration.
What is a tender offer?
o Publicly announced intention by a person or group of persons
to acquire equity securities of a public company (a type of
takeover bid).
Bank
Insurance company
corporation.
It is an offer for them to tender their shares on the
of
securities?
o 1. If corporation is insolvent
121
period of 12 months
NOTE: in the codal this was 15% and 30% but the SEC rules
will be sold
What are not covered by the tender offer rule?
o [New stocks]
o 1. Purchase from unissued capital
o 2. Purchase of shares from increase in ACS
o [In relation to proceedings]
o 1. Purchases in connection with privatization undertaken by the
o
government
2. Purchases in connection with corporate rehabilitation under
o
o
o
o
court supervision
3. Merger or consolidation
[Public sales]
1. Purchases through open market at prevailing market price
2. Purchase in connection with foreclosure proceedings
What
if
the
prescribe
securities offered
exceeded
what
the
acquiring control
disregarding fractions
This rule also covers: securities deposited within 10
of the customer
A broker or dealer who holds or acquires proxy for at least 10%
of the shares must identify who the beneficial owner is, within
1. SEC,
securities deposited?
open, and
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Matched orders
securities that:
manipulative devices
3. Series of transactions for purchase/sale of security to peg,
o
o
from the public, at a lower price, the same number and type of
o
o
third person, hoping the price will drop. He then buys back
shares he borrowed from the broker and returns them, profiting
o
operations
2. Make false/misleading statement with respect to material
facts, which he knew or had ground to believe was
to the securities-issuer
What transactions are exempted from forfeiture of profits?
1. Issuer
2. Officer of issuer
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of the violation
persons
Transportation Law
security
Civil liabilities:
o Any person acquiring a security may sue if the registration or
o
who
signed
the
registration statement
2. [See enumeration in the Code] prospectus,
fraudulent transactions, insider trading, etc.
Time sharing:
o Can offer staying in cottages, clubs, etc. to non-members
because sometimes they are empty. These are securities that
must be registered.
What is the effect of contracts made in violation of the SRC?
o 1. Void as regards the rights of any person who, in violation of
Common carrier
Private carrier
public employment.
it is void.
2. Void as regards a non-party to the contract who was aware
compel payment
N.B. It is unilaterally void only as for the violator. So
124
o
o
o
defense?
to liability of passengers.
What about diligence in selection and supervision of
employees?
Held?
transportation contract.
What about defects in the parts, even if brand new?
invoked?
presumed?
extraordinary diligence
When does responsibility of the carrier begin?
o From the time the goods were placed in its possession until the
o
under-declared.
5. Order of competent public authority
6. Exercise of extraordinary diligence
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carrier noticing, and the oil placed in the tanks spilled into the
guard who assaulted him. X fell onto the tracks and got hit by
the train. Is LRT liable?
LRT.
After alighting a bus, but waiting to pick up luggage, the same
the goods
Given reasonable opportunity to remove
depositor
Maritime law does not apply to govern the arrastre operators
responsibility
When is a stipulation limiting carrier liability valid?
o It must be reasonable to be valid.
o What are unreasonable?
1. No liability at all
employees
What is valid:
126
countries?
o The law of the country wherein the goods will be shipped
o
governs.
Ex. If there are two carriers (A and B) with a transshipment
liability?
o It becomes valid
o But not for willful acts and gross negligence
Contributory negligence of passenger will not exculpate carrier but
minimize liability
o Ex. Passenger left his elbow hanging out the bus window, got
hit and severed. His contributory negligence reduced the
Medical expenses
carriers liability.
claim
If the driver was negligent, you cannot impose
exemplary damages on the employer unless there is
127
Exceptions:
o Obligor acted in bad faith or fraud
o Gross negligence tantamount to
Warsaw Convention
indemnity
What bout injuries caused by acts or omissions of employees of
orders,
o
or
beyond
scope
of
the
employees
defense.
What if the passenger was caused by co-passenger or stranger?
o If the act of the stranger could have been prevented or stopped
o
authority
(Respondeat superior)
Must be in the course of his employment
bad faith
2. Passenger died
Medical expenses
Funeral expenses
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airway bill.
The carrier will be liable to shipper for misdelivery.
Also liable to real person with lawful right over the goods who
happens?
o The shipper resumes right over the goods and can exercise
4. Point of destination
In a roundtrip flight (ex. SF ML SF), can you sue in
o
o
ML?
(airway bill)?
o 1. Goods not delivered before expiry of 7 days from the time
the carrier?
129
of carriage
When must claim notice be given to the carrier?
o Baggage loss: 3 days from receipt of baggage
o Goods loss: 7 days from receipt of goods
o Delay in delivery of baggage or goods: 14 days from delivery
o What if the consignee does not give such claim notice to
occurred
embarkation, or disembarkation
What is the period of responsibility for the air carrier?
o As soon as the carrier has possession and custody over the
o
o
humiliation)
o No.
When a passenger is downgraded, can he recover damages?
o Yes.
How much are airlines allowed to overbook?
o Up to 10%.
o If everybody shows up, then the airline company asks for
volunteers to be transferred to the next flight.
If no one wants to be transferred, the last ones to check in will
be left behind.
o N.B. But our SC does not accept this reasoning.
X and his wife went to HK with another couple, with their friends. When
they were returning, X was informed that he was being transferred to
misconduct
the upgrade.
X was a soprano who was scheduled to perform in KL. X booked with
Sing Air a flight from Frankfurt to ML, and then ML to KL. Because of
the bad weather, Sing Air wasnt able to fly her to ML on time to reach
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KL. So X just flew directly to KL with another flight and wasnt able to
considerations
o HELD: not liable
JAL was unable to land in MLA for two weeks because Pinatubo erupted
o
o
the costs.
When can the consignee of the goods refuse to take delivery of the
goods and just claim damages?
o 1. When the partial loss makes the entire thing useless
o 2. When the damage makes the goods useless for the purpose
passport/travel documents.
o HELD: This is not the airlines fault.
applies
If goods are transshipped, who is liable?
o The ultimate carrier
o What if the goods were actually damaged during the first
Maritime law
leg?
when it received them. The clean BOL shows that they were in
reservation
When does a reservation have no effect in
relieving responsibility?
131
is responsible
When must the consignee pay for freight and expenses?
the vessel
3. For indemnities due to third persons due to conduct in the
o
o
employees
o 5. Collision due to the fault of the captain
Real and hypothecary nature of maritime commerce:
o If liability is incurred, it is not the owner that incurs the liability
attaches to the thing. So if the vessel sinks, the liability is
extinguished.
so the buyer refused to receive the goods. The carriage piled up.
Who is liable?
o The consignee. The contract of sale and the contract of
Davao.
Registration of vessels with the Maritime Industry Authority
o Where the sale was not registered, the sale does not bind third
persons
Goods arrived at the pier. Then the vessel hired a harbor pilot,
from liability.
What are the exceptions (usually asked)?
seaworthy)
which crashed and damaged the goods. Claim was against the
vessel. Vessel claimed it was not liable because the harbor pilot
When he saw that the harbor pilot was about to crash the ship,
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1. Bareboat charter
is not exhaustive.
voyage
What is owner pro hac vice?
o Owner for this occasion
o If it is a public carrier, it temporarily
becomes a private carrier (diligence
becomes GFF)
2. Time charter
unloading
What is the nature of the time/vessel charter?
General averages
Particular averages
None
Accidental damage
133
o
o
o
o
vessel
3. Loss suffered in value of goods sold at arrivals under stress
o
o
o
to lighten load
[Emo solutions]
1. Cables or masts cut or anchors and chains abandoned
2. Damages suffered by goods through opening made in vessel
o
o
o
o
stipulation that the owner will not be liable for damages due to
o
o
vessels
If you cannot tell which one is at fault:
overboard
What are the requisites of general averages?
o 1. There is common danger
is made
begins
Second when risk of collision begins until the
impact
Thus, even when a ship with right of way suddenly changes its
course during third zone, in an effort to avoid collision due to
the other vessels fault, the act is in extremis and cannot
reason)
What are the rules on apportionment of liability in collisions?
(Maritime tort)
o The provisions on civil tort do not apply
its a useless effort, the ship with right of way must not be
134
COGSA applies
Even if the cargo owner did not file a claim, it can still sue. Filing a claim
Count the one year from the last day delivery was made (if
here anyway:
from recovery.
When does the one year prescription not apply?
goods.
$500/carton limit
o BUT if the nature and value of the goods are stated in the bill of
lading and the BOL indicates this greater amount, the ship
owner is liable for that greater amount
apparent
Prescription for court claim
transportation charge
Prescription for court claim
COGSA:
will step into his shoes and will find himself barred
o
to another document
Compare the prescriptive periods:
o Code of commerce:
135
them.
In case of tricycles, it is now the municipalities/cities who issue
agency
Can foreigners own public utility properties?
o Mere ownership of the properties used by public utilities does
not make one a public utility. So a foreign entity can own the
public convenience.
So: if the legislative grants a franchise, its a CNPC. If no
legislative franchise is needed and what is just needed is
the authority
o 2. Holder is just a dummy
o 3. Holder ceases operations or abandons services
Requirements to get a Certificate of Public convenience?
o 1. Applicant must be Filipino or corp/association organized in
authorized
2. Operator denies there is a need to expand his
service
3. The old operator did not apply until a new applicant
emerged
4. Service of the prior operator must be deficient
5. Prior operator given a chance to expand but failed
to do so
competition
hearing.
2. Construct, maintain, operate new units to extend facilities
136
o
o
o
approval valid?
persons.
What is the standard that should be used when an admin body
particulars.
If a customer claims that his service of electricity was improperly
disconnected, where does he file?
o With the ERC, which has the power to direct the power
2. Rate base
Same file with the court if you want to question how Meralco
rate-fixing.
137
o
o
to national development
Constitution
In general, no restrictions on foreign investments, except for
own name
Define export enterprise:
o Enterprise where the manufacturer, processor, or service
(including tourism) enterprise exports at least 60% of its output
o Or purchase-and-export of at least 60% of the products
Define domestic market enterprise:
o Enterprise which produces goods for sale or renders service to
reach at least 60% of its output
Is there need for prior approval before a non-Philippine enterprise
may invest or do business in the Philippines?
o None. The enterprise just has to register with the SEC or the
and socio-economic
days or more
5. Participating in management of domestic business
6. Any other act that implies continuity of business dealings for
negative lists.
138
enterprises?
o Can be up to 100%, if not on the negative lists
o If the export-oriented enterprise is not a Philippine national,
register with BOI, which will check compliance with the 60%
export requirement, and require reduction of domestic sales if
municipalities or cities
by the SEC/BTRCP.
What is the rule on foreign investments in domestic market
enterprises?
o Can be up to 100%, if not prohibited or limited in the
liable person
Defense
2. Activities which impact public health and morals
But
if
it
involves
highly-advanced
When is it not
necessary?
o Presentment for payment not necessary to charge the primarily
reasons
139
of
demanded
So he can check genuineness
This is why telephone as demand is not allowed
First Pacific (?) Check negotiated by car dealer to financing
company. When the instrument not paid, company sued maker
and indorser. Indorser said he was discharged because there
was no proper presentment for payment.
HELD:
Letter of
not
business/residence
Sec 74
o NI must be exhibited to the person from whom payment is
o
o
o
paid
Sec 71
o Instrument not payable on demand
liable
So, the bottomline: the instrument must be
banks
Sec 72 when presentment is sufficient
o REQUISITES:
indorsement is discharged.
Failure excused on two grounds:
140
Sec 75
o Presentment where instrument payable at bank must be
made during banking hours. Law assumes that the bank will
o
cannot be obtained
o 2. Presentment is excused and it is overdue and unpaid
What is the effect of dishonor by non-payment?
o Under the law, the moment it is dishonored, there is
immediately a right of recourse against those secondarily
the funds will not come from the bank, as long as it falls on the
date of maturity.
Sec 76-78
o Applies when principal debtors is:
Dead
Liable as partners
diligence
o If partners, to any of the partners
payment
INDORSER when instrument was made/accepted for
Sec 86
o Time exclude first day, include last day
Sec 87 when instrument is payable at a bank
o Implied: that it is an order to the bank to pay for account of the
o
principal debtor
First National bank: PN payable at FNB. Maker had sufficient
funds. But holder did not show up at day of maturity. Dillydallied then the maker became insolvent. Had he shown up
by then, he would have been paid.
141
HELD:
No.
The fact
should pay.
N.B. Remember, failure to make proper presentment only
discharges those secondarily liable.
person is still liable, although the holder may not claim interest
Notice of dishonor
Sec 89 dishonor
o Give notice of dishonor
o Any party may be compelled to pay it to the holder with right of
o
o
reimbursement
ABCDE
o
o
notice against
o Notice may be given by holder himself or agent of the holder.
Sec 90 Who can give notice of dishonor
o 1. Holder
o 2. Agent of holder
o 3. Party to the instrument who may be compelled to pay the
prior parties that have right of recourse against the one given
Sec 91
o Notice may be given by a party or an agent
o Agent need not be authorized by the party
A) notify principal
On Tuesday
defective
reimbursement from
4. Agent of such party
What about strangers?
142
verbal/oral communication
Rule as to jointly liable parties:
o If partners?
Yes.
Who is affected by a waiver in an instrument?
o If written on the instrument all the parties
o If written over a signature just that person
Waiver of protest
o Includes presentment and notice of dishonor (steps to hold a
o
office
N.B. This same time is counted again, after a party receives
not there.
antecedent parties
What is the effect of miscarriage in mails?
o Sec 105 if notice was duly addressed and deposited in the
to receiving letters
2. To place of business or residence
3. Place where he is sojourning
If notice is actually received, although not according to
o
o
It is still valid
When can there be waiver of notice of dishonor?
o 1. Before actual time for giving it comes
o 2. Or after failure to give it
would be dishonor.
When is notice of DH not needed to be given to indorser?
o 1. Drawee is fictitious person or has no capacity to contract
and the indorser is aware of this fact upon indorsement
143
was made
3. Instrument was made or accepted for his accommodation
Drawer
non-payment?
o No.
o What is the exception?
pursuant to a LOC)
o Cannot be other than payment of money
Must accept within 24 hours from presentment
o Acceptance deemed done on date of presentment
o When is a bill deemed accepted?
C indorsed the
Acceptance
thereof
NB: this applies for bills that do not exist yet
when the promise is made (Ex. BOE
time of acceptance
What if there is a promise to accept in writing?
Drawer countermanded
Indorser
accept pa rin?
3. When it is overdue
144
payment
What is the special rule if the bill was dishonored
Kinds of acceptance:
o 1. General
is needed?
o Delay caused by prior presentment for acceptance is excused
place
o 2. Qualified
Conditional
Partial
As to time
guide
on
presentment
for
acceptance,
dishonor,
payment]
of drawee
What about other cases?
[Step-by-step
of instrument
2. Bill expressly requires acceptance
3. Bill is payable elsewhere than residence or place of business
discharged
145
business of drawee
OTHER OPTION May choose to negotiate it within a reasonable time
Consequence: will discharge drawer and all other indorsers
EXCEPTIONS no need to present if/or treated as dishonored if:
Protest
to contract
2. Presentment cannot be made even after reasonable
diligence
3. Although presentment is irregular, acceptance was refused
bill
Made by Notary Public or respectable resident + two or more credible
persons
o EXCEPT,
no
need to
give
notice: if
instrument
was
anytime
needed
Except
the
presented
2. Delay
instrument
is
excused
will
be
for
paid
if
circumstances
Except: will not prejudice rights of HIDC after omission
to protest
Step 3: Give notice of dishonor by non-payment to secondarily liable
fortuitous
Where?
o Place of DH
o Except when expressly payable at the residence/business of
witnesses
When must it be done?
o Day of DH
o If bill is noted in the notarial register, protest may be made
matures
Is this mandatory?
Nope
What is the purpose?
after
Bills in set
reasonable diligence
3. Waiver of presentment, express or implied
146
Main Principle: each part of the bill, numbered and referring to the other
parts, the whole of the parts constitute one bill
o [usually, it is done to ensure that bills can be collected from
o
sent separately]
What if different parts are negotiated to different HIDCs?
o The one whose title accrues first is the true owner
o But the one who gets acceptance or payment first is the one
who will be able to collect
Indorser of two different parts is liable on every such part
How should the drawee accept?
o Accept on any part, and on one part ONLY. If he accepts on
o
liable
Discharge of one part is discharge of all
147