CORPORATION is an artificial being created by operation of law, having the right of succession and the powers,

attributes, and properties expressly authorized by law or incident to its existence

Kinds of Corporation:

1. De Jure is a corporation organized in accordance with requirements of law;

2. De Facto is a corporation where there exists a flaw in its incorporation. Its requisites are: (1) The existence
of a valid law under which it may be incorporated; (2) An attempt in good faith to incorporate; and (3) Use of
corporate powers
3. Foreign corporation is a corporation formed, organized or existing under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporation to do business in its own country or state;
4. 1 person Corporation is a corporation with a single stockholder, who can only be a natural person, trust or
estate. This is a radical shift from the current corporate law requiring at least five incorporators, who must be
natural persons; a trust or estate cannot be an incorporator
5. Close Corporation
6. Special Corporation
7. Educational Corporation
8. Religious Corporation

Corporation vs Partnership

As to manner of creation: Partnership is created by mere agreement while the existence of the corporation
commences only from the issuance of a Certificate of Incorporation by the SEC or in proper cases, passage of a
special law

As to the number of organizers: even 2 persons may form a partnership while a corporation needs at least 5
incorporators

As to powers: a corporation is more restricted in its powers because of its limited personality while a partnership is
subject only to what may be agreed upon by the partners

Authority of those who compose: there is mutual agency in partnership and each general partner can represent and
bind the partnership while stockholders are not agents of the corporation in the absence of express authority

Transfer of interest: corporate shares are freely transferable without the consent of other stockholders while interest
in the partnership cannot be transferred without the consent of other partners

Succession: there is no right of succession in partnership as death of a general partner dissolves the partnership

One Man Corporation is a corporation wherein all or substantially all of the stocks is held directly or indirectly by
one person. However, it should still follow the formal requirements of a corporation (e.g. number of incorporators,
board of directors composed of stockholders owning shares in a nominal capacity) in order to validly enjoy the
attributes of the corporation, so as to avoid the application of the doctrine of piercing the veil of corporate entity.

Different Kinds of Shares

1. Redeemable shares are those which permit the issuing corporation to redeem or purchase its own shares;
2. Common shares represent the residual ownership interest in the corporation. It is a basic class of stock
ordinarily and usually issued without extraordinary rights or privileges and entitles the shareholder to a pro
rata division of profits
3. Treasury shares are shares of stock which have been issued as fully paid and have thereafter been acquired
by the corporation by purchase, donation, redemption, or through some lawful means
4. Watered shares stocks of a corporation issued for less than their par or issued value or in any other form
other than cash valued in excess of its fair value
5. Par value and no par value shares have a nominal value in the certificate of stock while no par value share
are those which do not have nominal value
6. Founders shares classified as such in the Articles of Incorporation which may be given certain rights and
privileges not enjoyed by others. However, if the right is the exclusive right to vote ad voted for as director, it
must be for a period not exceeding 5 years counted rom the approval of the SEC
7. Escrow shares are shares subjected to an agreement by virtue of which the shares are deposited by the
grantor or his agent with a third person to be held by the latter until the performance of a certain condition

Components of a Corporation

1. Corporators – those who compose a corporation, whether as stockholders or members 


 2. Incorporators - those mentioned in the Articles of Incorporation as originally forming and composing the
corporation, having signed the Articles and acknowledged the same before a notary public. They have no
powers beyond those vested in them by the statute
3. Stockholders – owners of shares of stock in a stock 
 corporation 

4. Members – corporators of a corporation which has no 
 capital stock
5. Promoter - A person who, acting alone or with others, takes initiative in founding and organizing the
business or enterprise of the issuer and receives consideration therefor (Sec. 3, R.A. 8799)
6. Subscriber – A person who has agreed to take and pay for original and unissued shares of a corporation
formed or to be formed
7. Underwriter – A person who guarantees on a firm commitment and/ or declared best effort basis the
distribution and sale of securities of any kind by another company (Sec. 3, R.A. 8799)

How is a corporation composed?

STEPS IN THE CREATION OF CORPORATION

1. Promotion – A promoter is a person who, acting alone or with others, takes initiative in founding and organizing
the business or enterprise of the issuer and
receives consideration therefor (Sec. 3.10, SRC)

2. Incorporation
Steps:
a. Drafting and execution of Articles of Incorporation by the incorporators and other documents required for
registration of the corporation
b. Filing with the SEC of the articles of incorporation
c. Payment of filing and publication fees

d. Issuance by the SEC of the certificate of incorporation

3. Formal Organization and Commencement of the Transaction of Business

These are conditions subsequent, which may be satisfied by substantial compliance in order that a corporation may
legally continue as such.

Formal organization:
a. Adoption of By-Laws and filing of the same with the SEC; 

b. Election of board of directors/trustees, and officers; 

c. Establishment of principal office; 

d. Providing for subscription and payment of capital 
 stock. 


HOW ARE THEY CREATED?

1. General law – private corporations are generally created under the provisions of the corporation code. This
is done by filing the appropriate Articles of Incorporation with the SEC; the life of the corporation starts form
the issuance of the Certificate of Incorporation;
2. Special Law – public corporations are generally created through special laws. Private corporations cannot be
created by special laws. EXC: GOCCS which are actually private corporations

Corporate Officers are officers who are designated or specified as such or given that character in the law, the
Articles of Incorporation, and the By-Laws of the corporation. They can be elected by the majority of all the members
of the Board of Directors or trustees and not merely by the majority of those who are present during the meeting.
Sec. 25 names only three officers, namely: (1) The President; (2) The Treasurer; and (3) The Secretary

Stockholders are persons who hold or own shares in a stock corporation

Members are those who compose the non-stock corporation

Promoters are self-constituted organizer who finds an enterprise or venture and helps to attract investors, forms a
corporation and launches it in business, all with a view to promotion profits

Board of Directors is the governing body in a stock corporation and the one who will exercise the powers of the
corporation while Board of Trustees is the governing body in a non-stock corporation

Powers of the Corporation

GENERAL POWERS:

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the
 certificate of incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in
accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to
sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation
if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with
such real and personal property, including securities and bonds of other corporations, as the transaction of
the lawful business of the corporation may reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution;
8. To enter into merger or consolidation with other corporations as provided in this Code;
9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural,
scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations
in aid of any political party or candidate or for purposes of partisan political activity;
10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and
employees; and
11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as
stated in the articles of incorporation.

SPECIAL POWERS

1. Power to extend or shorten corporate term;

2. Increase/Decrease Corporate stock;
3. Incur or create Bonded Indebtedness;
4. Deny pre-emptive right;
5. Sell, dispose, lease, encumber all or substantially all of corporate assets;
6. Purchase or acquire own shares;
7. Invest in another corporation, business other than the primary purpose;
8. Declare dividends;
9. Enter into management contract;
10. Amend the articles of incorporation

Removal of Directors – The law does not specify cases for removal of a director or trustee nor even require that
removal should be for sufficient cause or reason. However, the incumbent directors or trustees cannot be removed
merely by replacing a new set of directors or trustees.

Requisites:

1. The removal should take place at a regular or special 
 meeting duly called for the purpose;
2. The director or trustee can only be removed by at least 
 2/3 of the outstanding capital stock or of the
members 
 entitled to vote;
3. There must be a previous notice to stockholders or 
 members of the corporation of the intention to propose

 such removal at the meeting.
4. The removal without cause may not be used to deprive 
 minority stockholders or members of the right to
representation to which they may be entitled under Sec. 24 of the Code. 


Stocks and Stockholders

Subscription contract is any contract for the acquisition of unissued stock in an existing corporation or a
corporation still to be formed. It is considered as such notwithstanding the fact that the parties refer to it as purchase
or some other contract

A person becomes a shareholder the moment he: (1) Enters into a subscription contract with an existing corporation;
(2) purchases treasury shares from the corporation; or (3) acquires shares form existing shareholders by sale or any
other contract, or acquires shares by operations of law like succession

Shares of stock is an interest or right which an owner has in the management of the corporation, and its surplus
profits, and, on dissolution, in all of its assets remaining after the payment of its debt. The stockholder may own the
share even if he is not holding a certificate of stock

Delinquent stock, effect: No delinquent stock shall be voted for be entitled to vote or to representation at any
stockholder's meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to
dividends in accordance with the provisions of this Code, until and unless he pays the amount due on his
subscription with accrued interest, and the costs and expenses of advertisement, if any

Corporate books are the books that are required to be maintained by the corporation under Sec. 74 are the
following: (1) Book of minutes of stockholders meetings; (2) Book of minutes of board meetings; (3) Record or Book
of all business transactions; and (4) Stock and transfer book

Stockholder’s right to inspect – a stockholder can inspect the books of the corporation. This right is part of the
right of shareholders to information. It is a right that is personal to each stockholder. Hence, it can be granted only
upon demand by a shareholder

Requisites:

(1) It must be exercised at reasonable hours on business days;

(2) The stockholder has not improperly used any information he secured through any previous examination; and
(3) Demand is made in good faith or for a legitimate purpose

EXC: Acting in bad faith and not in the normal working hours

Belo Medical Group vs Santos and Velo

A.M. No. 01-2-04-SC, or the Interim Rules of Procedure Governing Intra-Corporate Controversies, enumerates the
cases where the rules will apply:

Section 1. (a) Cases Covered - These Rules shall govern the procedure to be observed in civil cases involving the
following:

1. Devices or schemes employed by, or any act of, the board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, or members of any corporation, partnership, or association;
2. Controversies arising out of intra-corporate, partnership, or association relations, between and among
stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates, respectively;
3. Controversies in the election or appointment of directors, trustees, officers, or managers of corporations,
partnerships, or associations;
4. Derivative suits; and
5. Inspection of corporate books.

To determine whether an intra-corporate dispute exists and whether this case requires the application of these rules
of procedure, this Court evaluated the relationship of the parties. The types of intra-corporate relationships were
reviewed in Union Glass & Container Corporation v. Securities and Exchange Commission:

[a] between the corporation, partnership or association and the public; [b] between the corporation, partnership or
association and its stockholders, partners, members, or officers; [c] between the corporation, partnership or
association and the state in so far as its franchise, permit or license to operate is concerned; and [d] among the
stockholders, partners or associates themselves.

For as long as any of these intra-corporate relationships exist between the parties, the controversy would be
characterized as intra-corporate. This is known as the "relationship test."

Applying the relationship test, this Court notes that both Belo and Santos are named shareholders in Belo Medical
Group's Articles of Incorporation94 and General Information Sheet for 2007. The conflict is clearly intra-corporate as it
involves two (2) shareholders although the ownership of stocks of one stockholder is questioned. Unless Santos is
adjudged as a stranger to the corporation because he holds his shares only in trust for Belo, then both he and Belo,
based on official records, are stockholders of the corporation. Belo Medical Group argues that the case should not
have been characterized as intra-corporate because it is not between two shareholders as only Santos or Belo can
be the rightful stockholder of the 25 shares of stock. This may be true. But this finding can only be made after trial
where ownership of the shares of stock is decided.

The trial court cannot classify the case based on potentialities. The two defendants in that case are both
stockholders on record. They continue to be stockholders until a decision is rendered on the true ownership of the 25
shares of stock in Santos' name. If Santos' subscription is declared fictitious and he still insists on inspecting
corporate books and exercising rights incidental to being a stockholder, then, and only then, shall the case cease to
be intra-corporate.

Applying the nature of the controversy test, this is still an intra-corporate dispute. The Complaint for interpleader
seeks a determination of the true owner of the shares of stock registered in Santos' name. Ultimately, however, the
goal is to stop Santos from inspecting corporate books. This goal is so apparent that, even if Santos is declared the
true owner of the shares of stock upon completion of the interpleader case, Belo Medical Group still seeks his
disqualification from inspecting the corporate books based on bad faith. Therefore, the controversy shifts from a
mere question of ownership over movable property to the exercise of a registered stockholder's proprietary right to
inspect corporate books.
Foreign Corporation is a corporation formed, organized or existing under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporation to do business in its own country or state

All the stockholders in a corporation be foreigners except in fully or partly nationalized corporations. The following
are the fully or partly nationalized corporations, to wit:

1. Where no foreign stockholder is allowed:

a. Mass media except recording;
b. Retail trade enterprises with paid-up capital of less than US$ 2.5M
c. Private security agencies;
d. Small-scale mining;
e. Utilization of natural resources;
f. Cockpits;
g. Manufacture, repair, stockpiling, and/or distribution of nuclear weapons;
h. Manufacture of firecrackers and other pyrotechnic devices
2. Up to 20% foreign equity. Private communications network
3. Up to 25% foreign equity:
a. Private recruitment, whether for local or overseas, employment;
b. Construction and repair of locally funded works;
c. Construction of defense-related structures
4. Up to 40% foreign equity
a. Exploration, development and utilization of natural resources;
b. Realty companies and other corporations that own private lands;
c. Operation and management of public utilities;
d. Culture, production, milling, processing, trading, except retail of rice and corn and by-products;
e. Adjustment companies
f. Sauna and steam bath houses, massage clinics, and similar activities
g. Domestic market enterprises with paid-in capital stock of less than US$200,000. However, the
threshold paid-in capital is US$100,000.00 if enterprise involves advanced technology or they
employ at least 50 direct employees.
5. Up to 60% foreign equity
a. Financing companies;
b. Investment houses

Doctrine of Piercing the Veil of Corporate Fiction is a principle that a corporation has a separate personality
distinct form its stockholders and from other corporations to which it may be connected. However, under this
doctrine, the corporation’s separate juridical personality may be disregarded when there is an abuse of the corporate
form. For example, the corporate identity is used to defeat public convenience, justify wrong, protect fraud, or defend
crime. Also, where the corporation is a mere alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation.

Grandfather Rule is the method of attributing the shareholdings of a given corporate shareholder to the second or
even the subsequent tier of ownership to determine the ultimate ownership in a corporation.

The Grandfather Rule applies if: (1) the Filipino equity is less than 60% of the outstanding capital of a corporation
that owns shares in a partly nationalized enterprise – at least 60% must be owned by Philippine nationals; or
(2) There is an attempt to circumvent the nationalization requirement or when there is doubt as to the real owners, as
in the case where there is layering

NEGOTIABLE INSTRUMENTS

FORMALITIES OF A NEGOTIABLE INSTRUMENT

Section 1. Form of negotiable instruments. - An instrument to be negotiable must conform to the following
requirements:chanroblesvirtuallawlibrary
(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.

AMBIGUITY OF THE INSTRUMENTS

Sec. 17. Construction where instrument is ambiguous. - Where the language of the instrument is ambiguous or there
are omissions therein, the following rules of construction apply:chanroblesvirtuallawlibrary
(a) Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two,
the sum denoted by the words is the sum payable; but if the words are ambiguous or uncertain, reference may be
had to the figures to fix the amount;

(b) Where the instrument provides for the payment of interest, without specifying the date from which interest is to
run, the interest runs from the date of the instrument, and if the instrument is undated, from the issue thereof;

(c) Where the instrument is not dated, it will be considered to be dated as of the time it was issued;

(d) Where there is a conflict between the written and printed provisions of the instrument, the written provisions
prevail;

(e) Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as
either at his election;

(f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the
same intended to sign, he is to be deemed an indorser;

(g) Where an instrument containing the word "I promise to pay" is signed by two or more persons, they are deemed
to be jointly and severally liable thereon.

INCOMPLETE AND UNDELIVERED (Secs. 14, 15, 16)

(1) Incomplete but delivered instrument

Where the instrument is wanting in any material particular the person in possession thereof, is prima facie
presumed authorized to complete it.

 a signature on a blank paper delivered by the person making the signature in order that it may be
converted into a negotiable instrument operates as prima facie authority to fill it up as such for any
amount
 In both cases, however, the instrument must be filled up strictly with the authority given and within the
reasonable time in order that it may be enforced against my person who became a party thereto prior to
its completion. However, persons negotiating after its completion are liable because of their warranties
 A holder in due course may enforce the instrument as if it had been filled up strict in accordance with the
authority given and within a reasonable time (Sec. 14 NIL)
 Hence, it is no defense in an action to enforce a negotiable promissory note that it was signed in blank
as Sec 14 of the NIL concedes prima facie authority of the person in possession of negotiable
instruments to fill in the blanks

(2) Delivery is essential to the validity of any negotiable instrument. As between immediate parties and those who
are similarly situated, delivery must be coupled with the intention of transferring title to the instrument.

 However, if the instrument is in the hands of a holder in due course, valid delivery to him is conclusively
presumed
 The defense of want of delivery or conditional delivery or delivery for a special purpose only of a
complete instrument is only a personal defense (Sec. 16 NIL)

(3) Non-delivery of an incomplete instrument is a real defense (Sec. 15 NIL)

FORGERY (Sec. 23)

Sec. 23. Forged signature; effect of. - When a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature,
unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of
authority.

 Only the forged signature is wholly inoperative, not the instrument itself, and not the genuine signatures;
 In case of forgery of an indorsement of an instrument payable to order, it is not only the person whose
signature was forged who would not be liable, but also the parties prior to such person. Payment under a
forged indorsement is not to the drawer’s order
 Parties who shall be precluded from setting up forgery or want of authority: (1) those who warrants like the
acceptors, indorsers; (2) those who ratified the forgery impliedly or expressly; and (3) those who were
negligent
  In case of forgery of the indorsement of the payee of the check, the drawee bank cannot debit the drawer’s
account and that loss shall be borne by the drawee bank. The depositary or collecting bank is liable to the
drawee in case of forged indorsement because it guarantees all prior indorsement.
 If the signature of the drawer in a check is forged, the drawee cannot charge the account of the drawer and
the drawee cannot recover from the collecting bank

INSURANCE LAW

Insurance Contract is an agreement by which one party for a consideration paid by the other party promises to pay
money or its equivalent or to do some act valuable to the latter upon the happening of a loss, damage, liability or
disability arising from an unknown or contingent event.

Characteristics

(1) Insurance as a risk-distributing device – by paying a pre-determined amount into a general fund out of which
payment will be made for an economic loss of a defined type, each member contributes to a small degree
toward compensation for losses suffered by any member of the group
(2) Contract of Adhesion or Fine Print Rule – contract of adhesion considering that most of the terms of the
contract do not result from mutual negotiations between the parties as they prescribed by the insurer in
printed form to which the insured may adhere if he chooses but which he cannot change
(3) Aleatory – the obligation of the insurer to pay the proceeds of the insurance arises only upon the happening
of an event which is uncertain, or which is to occur at an indeterminate
(4) Contract of Indemnity – that the insured, who has insurable interest over a property, is only entitled to
recover the amount of actual loss sustained and the burden is upon him to establish the amount of such loss
(5) Uberrimae Fidae – it requires the parties to the contract of insurance to disclose conditions affecting the risk
of which he is aware, or material fact, which the applicant knows, and those, which he ought to know
(6) Personal contract – the law presumes that the insurer considered the personal qualifications of the insured in
approving the insurance application
(7) Consensual
(8) Voluntary
(9) Executory
(10) Condtional

Reinsurance is a contract by which the insurer procures a third person to insure him against loss or liability by
reason of an original insurance. An insurance of an insurance. A reinsurance cannot exist without an original
insurance coverage. In every reinsurance, the original contract of insurance and the contract of reinsurance are
covered by separate policies.

Double Insurance Reinsurance

Interest Involves the same Involves different
interest interest
Subject Subject of insurance is Subject of insurance is
property the original insurer’s risk
Insurer Insurer remains in such Insurer becomes the
capacity insured in relation to the
reinsurer
Insured Insured is the party in Original insured has no
interest in the two interest in the
insurance contracts reinsurance contract
Insured’s consent Insured has to give his Insured’s consent is not
consent necessary

Over-insurance exists when the insured insures the same property for an amount greater than the value of the
property.

Over-insurance Double insurance

Amount When the amount of the There may be no over-
insurance is beyond the insurance as when the
value of the insured’s sum/total of the
insurable interest amounts of the policies
issued does not exceed
the insurable interest of
the insured.
Number of insurers There may be one or more There are always more
insurers involved than one insurers
involved
Double Insurance exists where the same person is insured by several insurer separately, in respect to the same
subject and interest.

Requisites (TIRIS):
1. TWO or more insurers insuring separately;
2. Same INSURED person;
3. Same RISK or peril insured against;
4. Same INTEREST insured;
5. Same SUBJECT MATTER.

Double insurance is not prohibited by law. The reasons why it may be required that its existence be disclosed are:
1. To prevent an increase in the moral hazard;
2. To prevent over-insurance and fraud and thus avert the perpetration of fraud.

KINDS OF POLICY

Policy is the written instrument in which a contract of insurance is set forth. It is the written document embodying the
terms and stipulations of the contract of insurance between the insured and the insurer

KINDS OF POLICY

1. Open policy – one in which the value of the thing insured is not agreed upon and the amount of the
insurance merely represents the insurer’s maximum liability. The value of such thing insured shall be
ascertained at the time of the loss.
2. Valued Policy – one in which expresses on its face (an) agreement that the thing insured shall be valued at
a specified sum.
3. Running Policy – one which contemplates successive insurances and which provides that the object of the
policy may be from time to time defined, especially as to the subjects of insurance by additional statements
of endorsements.

Cover Notes are concise and temporary written contracts issued by the insurer through its duly authorized agent
embodying the principal terms of an expected policy of insurance.

Purpose: It is intended to give temporary insurance protection coverage to the applicant pending the acceptance or
rejection of his application.

Validity: 60 days, after which the policy must be issued. The period may be extended or renewed beyond the 60
days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not
for the purpose of violating any provisions of the Code.

Rider is an attachment to an insurance policy that modifies the conditions of the policy by expanding or restricting its
benefits or excluding certain conditions from coverage

In case there is conflict between rider and the printed stipulations of the policy: The rider prevails as being a more
deliberate expression of the agreement of the contracting parties.

INCONTESTABILITY CLAUSE is when after a policy of life insurance made payable on the death of the insured
shall have been in force during the lifetime of the insured for a period of 2 years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of fraudulent
concealment or misrepresentation of the insured or his agent

Marine Insurance includes policies that covers risks connected with navigation, to which a ship, cargo, freightage,
profits, or other insurable interest in movable property, may be exposed during a certain voyage or a fixed period of
time

Voyage Deviation is the departure of the vessel from the course of voyage, or unreasonable delay in pursuing the
voyage or the commencement of an entirely different voyage.
If the deviation is proper, the contract remains valid. If improper, the insurer is not liable.

A deviation is proper in the following cases:

1. If due to circumstances outside of the control of the captain or shipowner
2. If done to comply with warranty
3. If made in good faith to avoid a peril
4. If made to save human life or another distressed vessel

LOSS

Actual Total Loss:

 1. Total destruction;
2. Loss by sinking;
3. Damage rendering the thing valueless; or
4. Total deprivation of owner of possession of thing insured

Constructive Total Loss:

1. Actual loss of more than 3/4 of the value of the object;

2. Damage reducing value by more than 3/4 of the value of the vessel and of cargo; and
3. Expenses of shipment exceed 3/4 of value of cargo

In case of constructive total loss, insured may abandon the goods or vessel to the insurer and claim for whole
insured value, or he may, without abandoning vessel, claim for partial actual loss

Abandonment is the act of the insured by which, after a constructive total loss, he declares the relinquishment to the
insurer of his interest in the thing insured

REQUISITES:

1. There must be an actual relinquishment by the person insured of his interest in the thing insured;
2. There must be constructive total loss;
3. The abandonment be neither partial nor conditional;
4. It must be made within a reasonable time after receipt of reliable information of the loss;
5. It must be factual;
6. It must be made by giving notice thereof to the insurer which may be done orally or in writing;
7. The notice of abandonment must be explicit and must specify the particular cause of the abandonment

TRANSPORTATION LAW

Article 1732: Common Carriers are persons, corporations, firms, or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services
to the public

Difference between Common Carriers vs Private Carriers

(a) The common carrier holds himself out in common, that is, to all persons who choose to employ him, ready to
carry for hire while the private carrier agrees in some special case with some private individual to carry for
hire;
(b) A private carrier is not bound to carry for any reason, unless it enters a special agreement to do so. A
common carrier is bound to carry for all who offer such goods as it is accustomed to carry and tender
reasonable compensation for carrying them;
(c) A common carrier is subject to regulation since it is a public service while a private carrier is not;
(d) The common carrier is bound to exercise extraordinary diligence while private carrier owes only diligence of
a good father of a family;
(e) A common carrier cannot stipulate that it is exempt from liability for the negligence of its agents or
employees because such stipulation is against public policy while a private carrier may validly enter into
such stipulation

CULPA CONTRACTUAL VS CULPA AQUILIANA VS CULPA CRIMINAL

CULPA CONTRACTUAL CULPA AQUILIANA CULPA CRIMINAL

(a) Negligence is merely incidental, incident to the (a) Negligence here
 is direct, (a) Negligence here is
performance of an obligation already existing substantive, and independent. direct, substantive, and
because of a contract. independent of a contract.

(b) There is a pre- existing obligation (a contract, (b) No pre-existing obligation (b) No pre-existing
either express or implied). (except of course the duty to obligation (except the duty
be careful in all human never to harm others).
actuations).

(c) Proof needed — preponderance of evidence. (c) Proof needed — (c) Proof needed in a crime
preponderance of evidence. — proof of guilt beyond
reasonable doubt.

(d) Defense of “good father of a family” in the (d) Defense of “good father, (d) This is not a proper
selection and supervision of employees is not a etc,” is a proper and complete defense in culpa criminal.
proper complete defense in culpa contractual defense (insofar as employers Here the employee’s guilt is
(though this may MITIGATE dam- ages). Here we or guardians are concerned) in automatically the
follow the rule of RESPONDEAT SUPERIOR or culpa acquiliana. employer’s civil guilt, if the
COMMAND RESPONSIBILITY or the MASTER former is insolvent.
AND SERVANT RULE)

(e) As long as it is proved that there was a contract (e) Ordinarily, the victim has to
and that it was not carried out, it is presumed that prove the negligence of the
the debtor is at fault, and it is his duty to prove that defendant. This is because his
there was no negligence in carrying out the terms of action is based on alleged
the contract. negligence on the part of the
defendant.
(e) Accused is presumed
innocent until the contrary
is proved, so prosecution
has the burden of proving
the negligence of the
accused.

Fortuitous Event is an unforeseen occurrence, not caused by either of the parties, nor such as they could prevent.
The following are the requisites of fortuitous event:

(1) The cause of the unforseen and unexpected occurrence, or of the failure of the debtor to comply with his
obligation, must be independent of human will;
(2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must
be impossible to avoid;
(3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal
manner; and
(4) The obligor (debtor) must be free from any participation in or the aggravation of the injury resulting to the
creditor.

Extraordinary Diligence is the extreme care and caution which very prudent and thoughtful persons use in securing
and preserving their own property

Doctrine of Last Clear Chance is where both parties are negligent, but the negligent act of one is appreciably later
in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to
the incident, the one who had the last clear opportunity to avoid the impending harm and failed to do so is
chargeable with the consequence thereof.

This doctrine is not applicable to collisions of vessels at Sea under the Code of Commerce.

Contributory Negligence is where the plaintiff contributes to the proximate and immediate cause of his injury that is
due to the defendant’s lack of due care, the plaintiff may recover damages but the court shall mitigate the damages
to be awarded.

This is not a defense that will excuse the carrier from liability, it will only mitigate such liability.

Doctrine of Error in Extremis is the sudden movement made by a faultless vessel during the third zone of collision
with another vessel which is at fault under the second zone. Even if sudden movement is wrong, no responsibility will
fall on the faultless vessel.

The three (3) zones in collision are:

(1) First zone – time up to the moment when risk of collision begins;
(2) Second zone – time between moment when risk of collision begins up to the moment it becomes practical
certainty; and
(3) Third zone – time when collision is certain up to the time of impact

Doctrine of Inscrutable Fault is where fault is established but it cannot be determined which of the two vessels
were at fault, both shall be deemed to have been at fault

SPECIAL COMMERCIAL LAWS

ANTI-MONEY LAUNDERING ACT

Composition. – The members of the Anti-Money Laundering Council (AMLC) created under the AMLA shall be the
Governor of the BSP as Chairperson, and the Commissioner of the IC and the Chairperson of the SEC, as Members.

Source of money laundering:

1. “Kidnapping for Ransom” under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code,
as amended;
2. Sections 4, 5, 6, 8, 9, 10, 11, 12,13, 14, 15 and 16 of Republic Act No. 9165, otherwise known as the
“Comprehensive Dangerous Drugs Act of 2002”;

3. Section 3 paragraphs b, c, e, g, h and i of Republic Act No. 3019, as amended, otherwise known as the
“Anti-Graft and Corrupt Practices Act”;

4. “Plunder” under Republic Act No. 7080, as amended;

5. “Robbery” and “Extortion” under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal
Code, as amended;

6. “Jueteng” and “Masiao” punished as illegal gambling under Presidential Decree No. 1602;

7. “Piracy on the High Seas” under the Revised Penal Code, as amended, and Presidential Decree No.
532:

8. “Qualified Theft” under Article 310 of the Revised Penal Code, as amended;

9. “Swindling” under Article 315 and “Other Forms of Swindling” under Article 316 of the Revised Penal
Code, as amended:

10. “Smuggling” under Republic Act No. 455, and Republic Act No. 1937, as amended, otherwise known
as the “Tariff and Customs Code of the Philippines”;

11. Violations under Republic Act No. 8792, otherwise known as the “Electronic Commerce Act of 2000”;

12. “Hijacking” and other violations under Republic Act No. 6235, otherwise known as the “Anti-Hijacking
Law”; “Destructive Arson”; and “Murder”, as defined under the Revised Penal Code, as amended;

13. “Terrorism” and “Conspiracy to Commit Terrorism” as defined and penalized under Sections 3 and 4 of
Republic Act No. 9372;

14. “Financing of Terrorism” under Section 4 and offenses punishable under Sections 5, 6, 7 and 8 of
Republic Act No. 10168, otherwise known as the “Terrorism Financing Prevention and Suppression Act of
2012”;

15. “Bribery” under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and “Corruption
of Public Officers” under Article 212 of the Revised Penal Code, as amended;

16. “Frauds and Illegal Exactions and Transactions” under Articles 213, 214, 215 and 216 of the Revised
Penal Code, as amended;

17. “Malversation of Public Funds and Property” under Articles 217 and 222 of the Revised Penal Code,
as amended;

18. “Forgeries” and “Counterfeiting” under Articles 163, 166, 167, 168, 169 and 176 of the Revised Penal
Code, as amended;

19. Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the “Anti-Trafficking in
Persons Act of 2003, as amended”;

20. Violations of Sections 78 to 79 of Chapter IV of Presidential Decree No. 705, otherwise known as the
“Revised Forestry Code of the Philippines, as amended”;

21. Violations of Sections 86 to 106 of Chapter IV of Republic Act No. 8550, otherwise known as the
“Philippine Fisheries Code of 1998”;

22. Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the
“Philippine Mining Act of 1995”;

23. Violations of Section 27(c), (e), (f), (g) and (i) of Republic Act No. 9147, otherwise known as the
“Wildlife Resources Conservation and Protection Act”;

24. Violations of Section 7(b) of Republic Act No. 9072, otherwise known as the “National Caves and Cave
Resources Management Protection Act”;

25. Violation of Republic Act No. 6539, otherwise known as the “Anti-Carnapping Act of 2002, as
amended”;
 26. Violation of Sections 1, 3, and 5 of Presidential Decree No. 1866, as amended, otherwise known as the
decree “Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or
Disposition of Firearms, Ammunition or Explosives”;

27. Violation of Presidential Decree No. 1612, otherwise known as the “Anti-Fencing Law”;

28. Violation of Section 6 of Republic Act No. 8042, otherwise known as the “Migrant Workers and
Overseas Filipinos Act of 1995, as amended”;

29. Violation of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the
Philippines, as amended”;

30. Violation of Section 4 of Republic Act No. 9995, otherwise known as the “Anti-Photo and Video
Voyeurism Act of 2009”;

31. Violation of Section 4 of Republic Act No. 9775, otherwise known as the “Anti-Child Pornography Act of
2009”;

32. Violations of Sections 5, 7, 8, 9, 10 (c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610, otherwise
known as the “Special Protection of Children Against Abuse, Exploitation and Discrimination”;

33. Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the
“Securities Regulation Code of 2000”;

34. Felonies or offenses of a nature similar to the aforementioned unlawful activities that are punishable
under the penal laws of other countries.

Threshold: Covered transactions – a transaction in cash or other equivalent monetary instrument involving a total
amount in excess of Php 500,000.00 within 1 banking day

Expanded to:

1. Coins or currency of legal tender of the Philippines, or of any other country;

2. Credit instruments, including bank deposits, financial interest, royalties, commissions, and other intangible
property;
3. Drafts, checks, and notes;
4. Stocks or shares, participation or interest in a corporation or in a commercial enterprise or profit-making
venture and evidenced by a certificate, contract, instrument, whether written or electronic in character,
including those enumerated in Section 3 of the Securities Regulation Code;
5. A participation or interest in any non-stock, non-profit corporation;
6. Securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates,
custodial receipts, or deposit substitute instruments, trading orders, transaction tickets, and confirmations of
sale or investments and money market instruments;
7. Contracts or policies of insurance, life or non-life, contracts of suretyship, pre-need plans, and member
certificates issued by mutual benefit association; and
8. Other similar instruments where title thereto passes to another by endorsement, assignment, or delivery.
9. Casino – covered transaction/threshold: a single casino cash transaction involving an amount in excess of
Five Million Pesos (P5,000,000.00) or its equivalent in any other currency.

BANK SECRECY LAW

MARQUEZ VS DESIERTO

FACTS: Petitioner Lourdes Marquez received an Order from respondent Ombudsman Aniano Desierto to produce
several bank documents for purposes of inspection in camera relative to various accounts maintained at the bank
where petitioner is the branch manager. The accounts to be inspected are involved in a case pending with the
Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado Lagdameo. It appears that a certain
George Trivinio purchased trail managers check and deposited some of it to an account maintained at petitioner’s
branch. Petitioner after meeting with the FFIB Panel to ensure the veracity of the checks agreed to the in camera
inspection. Petitioner being unable to readily identify the accounts in question, the Ombudsman issued an order
directing petitioner to produce the bank documents. Thus, petitioner sought a declaration of her rights from the court
due to the clear conflict between RA 6770 and RA 1405. Meanwhile, FFIB moved to cite petitioner in contempt
before the Ombudsman. ISSUE: W/N the order of Ombudsman to have an in camera inspection of the accounts is
an allowable exception of R.A. No. 1405.

RULING: NO.
The order of the Ombudsman to produce for in camera inspection the subject accounts with the Union Bank of the
Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the Ombudsman against
Amado Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement
between the Public Estates Authority and AMARI.

We rule that before an in camera inspection may be allowed, there must be a pending case before a court of
competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of
the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be
notified to be present during the inspection, and such inspection may cover only the account identified in the pending
case.

In the case at bar, there is yet no pending litigation before any court of competent authority. What is existing is an
investigation by the Office of the Ombudsman. In short, what the office of the ombudsman would wish to do is to fish
for additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no
pending case in court which would warrant the opening of the bank account for inspection.

INTELLECTUAL PROPERTY CODE

Patent is a grant made by the government to an inventor conveying and securing to him the exclusive right to make
use of his invention for a given limited period.

Requisites of patent:

1. A technical solution of a problem in any field of human activity;

2. It must be a novel invention; and
3. Industrially applicable

Copyright is a right over literary and artistic works which are original intellectual creations in literary and artistic
domain protected from the moment of creation

When rights over copyrights are conferred? Rights over copyrights are conferred rom the moment of creation

Duration of copyright:

1. Literary artistic works and derivative works – during the lifetime of the creator and 50 years after his death;
2. Joint creation – the economic rights shall be protected during the life of the last surviving author and for 50
years after the death of the last surviving author;
3. Anonymous or pseudonymous work – till the end of 50 years following the date of their first publication;
4. Work of applied art – 25 years from the date of making;
5. Photographic works – 50 years from the publication of the work or from making if unpublished;
6. Broadcast – 20 years from the date of broadcast.

Trademarks are anything which is adapted and used to identify source or origin of goods, and which is capable of
distinguishing them from goods emanating from a competitor

Trade Name is the name or designation identifying or distinguishing an enterprise

Infringement is the use one's invention w/o the inventor's authority. Infringement cases falls in the jurisdiction of
RTC. 


Remedies:

1. Infringement; 

2. Damages 

3. Secure an injunction 

4. Receive royalty 

5. To have the goods, materials 
 destroyed 

6. To hold the contributory infringer 
 jointly and severally liable

7. Or after final judgment, file a criminal action for repeated 
 infringement. 


Unfair Competition involves employing deception or any other means contrary to good faith by which a person
passes off his goods or business or services for those of one who has already established goodwill thereto.

REQUISITES:

1. Confusing similarity in the general appearance of the goods; and

2. Fraud or intent to deceive the public and defraud a competitor.