COMMERCIAL LAW REVIEW FEBRUARY 13, 2018

DISCHARGE
1. By payment in due course by or on behalf of the principal debtor
2. By payment in due course by the party accommodated, where the instrument is made or accepted for his
accommodation
3. By the intentional cancellation thereof by the holder
4. By any other act which will discharge a simple contract for the payment of money

EXTINGUISHMENT OF CONTRACT OF LOAN OR OBLIGATION

4.1 Novation
- Original contract has been replaced by a new contract
To be valid:
 Existing contract
 New obligation is valid
 First obligation extinguished the new obligation

Types of Novation:
a. Objective – changing the testation
o From a contract of loan of 10,000, they agreed what will be paid is a car.
o Promissory note to cellphone

 Kelan may dacion en pago? – law on sale

 Kelan may novation? – law on obligation
o Will depend upon the agreement. When you agreed before the maturity date, that is novation (no warranty).
If agreement happened on or after the maturity date, that is dacion en pago ( debtor become a seller and
shall be liable for warranty and hidden defect and encumbrances)

b. Passive – changing the debtor or creditor

i. Expromision – who make the initiative to change the debtor? The creditor or 3rd person and can be
done without the knowledge or will of the debtor. 3rd person will replace the debtor. But will the debtor
will still be liable for the obligation? No. napalitan na nga eh.
i. If the 3rd person became insolvent, will the debtor become liable? GR: No. because there is
already novation without the knowledge of the original debtor or against his will
1. Exception: If the debtor gives his consent for novation

ii. Delegacion - the original debtor (delegante) make the initiative. Creditor – delegatario. 3rd person –
delegado. Is the debtor still liable after delegacion? No because may novation na eh.
i. If the 3rd person became insolvent, may the creditor go after the delegante? GR: No kasi may
novation na eh
1. Exceptions:
a. If the debtor acted in bad faith, he has knowledge that the third person is
insolvent when he delegated it
b. When the insolvency of the third person is of public knowledge

iii. Subrogation – changing of creditor

i. Legal – by operation of law
1. When a person interested in the payment of obligation pays it without the knowledge
of the debtor
 Is A legally subrogated? Yes because he is secondarily liable by guarantor for the
insolvency of the maker. May A collect from M if became insolvent? Yes because
the person legally subrogated obtain all the rights of person.

1
  If the contract of loan is P8,000 but payment made is P10,000. May 3rd person
collect from M? Yes.P8,000 because there is no legal subrogation because 3rd
person is not legally interested for the payment of loan = voluntary payment of 3rd
person. If without knowledge of debtor, may 3rd person recover? Only insofar is
beneficial – P8,000. If M is already insolvent, may 3rd person collect from P? No.
 If you voluntary pays the obligation without the knowledge of or against the will of
the debtor, you may only recover insofar the payment is beneficial. There is no
legal subrogation
 Nakakatakot if payagan kasi if meron may utang sa bangko, ako magbabayad para
ako makakuha ng REM, unfair. Ako makakaforeclose.
ii. Conventional- agreement of parties

c. Implied – when the 2 obligations are incompatible with each other that they cannot exist together

From 3 years ginawang 5 years: no novation, they can exist together

- Extending is not novation. Sabi ng SC: yung 3 daw kasya sa loob ng 5

From 10 years to 2 years: there is novation, clearly incompatible with each other
- Shortening is novation. Yung 10 daw di kasya sa 2

4.2 Compensation
- When the debtor and creditor are reciprocally liable to each other but they must be principally laible

Types of compensation:
i. Legal – by operation of law
i. Requisites:
1. When both debts of debtor and creditor are due and demandable
2. They must be principally liable
3. Both debts are consist of sum of money or if consumable should be of the same kind
and quality
4. Both liquidated
5. No controversy existing or file by the 3rd person

Problema: Si H may utang din loan payable P10,000 to A. And A to H ng P10,000. Is the obligation extinguished by legal
compensation? Sino ba may utang, si M o H? M gumawa ng PN endorse kay P then kay A then kay H. Di natin alam na si H
holder may utang din kay A. No legal compensation because they are not principally debtor and creditor of each other. What
extinguished is the contract of guaranty ni A to H. Yung principal contract of loan at accessory contract ni B kay A eh hindi
ma-extinguish.

Are all debts allowed to be legally compensated? Are there debts not allowed to be subject to legal compensation? Yes
 Taxes
 Contract or obligations arising from bailee or commodatum
 Arising from deposit
 Arising from crime, access, future support

Ex. if yung narape nanalo sa case and sabi bayaran pero may utang din pala sya sa rapist. NO legal compensation
ii. Conventional – agreement of the parties
iii. Judicial – by declaration of court in case of counterclaim
iv. Facultative – when only one of the parties may claim the compensation – Only the victim may claim

4.3 Merger / Confusion

- Because the characteristic of the debtor and creditor fall on the same person

2
 - Pag dumating ang P1,000 dumating sa Bangko Sentral, is there confusion? Will the BSP be confused? Yes.
Tingnan mo ang pera nakalagay – Ang salaping ito ay bayarin ng BSP. Pagdating sa kanila anong mangyayari,
may utang sila sa sarili nila, mababaliw ba sya? YES

H endorsed back the PN to M, is the obligation extinguished? Yes by confusion or merger

4.4 Remission/Donation/ Renunciation/ Condonation

- Essentially gratuitous TF there is acceptance by the maker/debtor
- Formality required for P5,000 or less : simultaneous delivery or acceptance
- Formality required for more than P5,000: in writing
- If involving immovable or real property: In public document

4.5 Payment
4.6 Loss – applicable only to specific things
- Not to generic – because it never perishes
4.7 Prescription
- Written – 10 yrs ( Negotin)
- Oral – 6
- Quasi delict – 4
- Quasi contract – 6
- Other provision of law - 5
4.8 Rescission
4.9 Fulfillment of resolutory period or condition
4.10Annulment of voidable contract

5. When the principal debtor becomes the holder of the instrument at or after maturity in his own right

PERSON SECONDARILY LIABLE DISCHARGED

1. By the act which discharges the instrument
If endorsed back to M, will P, A and B be discharged? Yes because accessory follows the principal

2. By the intentional cancellation of his signature by the holder – striking out

Which endorsement will be stiken out? The holder may strike out the endorsement which is not necessary to his
title.
Order instrument – cannot strike out
Bearer instrument – can strike out any – indosement can be made by mere delivery

What happens when you strike out the endorsement of a general endorser? The person who will be discharged are
the parties who are stricken out and because of the discharge of a prior party will discharge the subsequent.

If you are lawyer of H, will you allow strike out? NO! eh ang dami mong masisingil? P,A,B,C,D.

Blank indorsement – strike out special indorsement after blank

B BI+D to C. so pwede kay C and D
B became bearer na

3. By the discharge of a prior party

4. By a valid tender or payment made by a prior party
5. By a release of the principal debtor unless the holder’s right of recourse against the party secondarily liable is
expressly reserved

3
 6. By any agreement binding upon the holder to extend the time of payment or to postpone the holder’s right to enforce
the instrument unless made with the assent of the party secondarily liable or unless the right of recourse against such
party is expressly reserved

CORPORATION CODE

Nomenclature: BP 68 enacted Pres. Marcos – valid? In the 1970s the executive and the legislative powers belong to the
President

ATTRIBUTES
1. An artificial being
- Intangible, not a natural person
- Implication: Is it entitled to moral damages (awarded for sleepless nights, wounded feelings, physical
suffering)? GR: No. Exception: Defamation/Libel – As per RPC, victim is entitled to moral damages – walang
sinabi kung juridical or natural.
- May a corporation be criminally liable? GR: No. Exception: For fines only but not for imprisonment
o Imprisoned: The officers who signed (for BP 22) unless authorized by brother
- Constitutional right not applicable to corporation: Right against self-incrimination. Purpose of RASI: so the
person will not be subjected to unreasonable treatment, tipo takutin mo na magsalita. Di makakapagsalita ang
DLSL at di makakaramdam ng pressure.

GR: Doctrine of Juridical and Separate Personality

- Corporation has personality distinct and separate from officers, stockholder, directors, holding companies,
sister company, parent company
- Purpose of Marcos: To encourage Filipino and foreign investors
- Pinaglaban nya ditto ang DLSL at DLSU Manila
- Supported by Doctrine of Limited Liability Rule
o Stockholders are liable only up to the extent of the capital contribution only

SM Holdings pagmamay-ari ang SM Prime (90%) which owned 70% of BDO which owned 80% SMDC. They are
residing in the same building, SM Holding. They have the same set of BOD. BDO became bankrupt. May the
depositor of BDO may go after SM Prime, SMDC and SM Holdings? BOD is the Sy Family and Chairman of the
Board ng lahat ay si Henry Sy.
- Depositor cannot go the other companies because they have personality separate and distinct from each other

Exception: Piercing the Veil

- Discouraged because will affect the economy
- When may court:
o Perpetuate fraud cases
 Corporate fiction is used to commit fraud, you should show facts that the corporators or
stockholders or directors.
 Lahat ng utang 3 eh BDO ang nagbabayad kasi iisa lang set of directors
 It is mere alter ego (Alter Ego Doctrine)
 Not sufficient because it needs to be connected to fraud cases that the corporation is
mere instrumentality for the business of stockholder
 Eg if the personal expenses of the Ayalas is charged to Ayala Corporation
o Corporation is used to justify wrong
 Bro. Pres. committed sexual harassment. Judge subpoena CCTV of La Salle. May La Salle
refused to comply?
 GR will apply. It is not La Salle being sued but the Pres. if they have separate
personality
o Defeat public convenience

4
  Security guard and janitors not paid 13th month pay by the agency. May they go after DLSL?
Labor Code the indirect employer is subsidiarily liable. No need to pierce, Labor Code na
nagsasabi pero if wala, papasok pa din sa equity cases na to defeat public convenience.
Kawawa ang mga Pilipino.
o Commit tax evasion
 Personal expenses of Ayalas charged to Allowable Deductions in the ITR of Ayala Corp
- Supported by the Principle of Trust Fund Doctrine
o If wala kawawa ang creditors
o The assets of the corporation are considered to be trust fund for the payment of creditor
 Who shall have the priority: Creditor

2. Created by Law / Operation of Law

2.1 By Law – Public
- By legislative eg LBP – RA3844 (By Netzkee sosyal di ba)
2.2 Operation of Law – Private provided by 1987 Constitution – Only public corporation be created by operation of Law
but all private corporations must be created by the general corporation law which is now the Corporation Code of
the Philippines
- To prevent violation of substantive due process of law Art 3. Sec 1. No person shall deprived of right to
property and life without due process of law. Due process is violated when the law is enacted for private
purpose. Every law should be created for public.
- Created by BP 68 and operated by filing Articles of Incorporation to SEC
- Implication: the corporation must abide with all the laws issued by the state. If will not follow, may the state
dissolve a private corporation?
o Yes. OSG in behalf of the Republic shall file for Petition for Quo Warranto. It is a direct attack. SC
you cannot question the personality through collateral attack, must be a direct attack.

(1:46:00)