CONSUMER PROTECTION ACT [RA 7394] MINIMUM LABELING REQs THAT MAY BE REQUIRED

REQUIREMENTS BY DTI
Purpose:  trade name or brand  whether it is
 To protect the interests of the consumer. name flammable/inflammable
 Promote general welfare.  trademark  direction for use, if necessary
 Establish standards of conduct for business & industry.  business name  warning of toxicity
 address of the  wattage, voltage or amperes
Objectives: manufacturer,  process of manufacture used
 Protection against hazards to health & safety, deceptive, importer, repacker of if necessary
unfair & unconscionable sales acts & practices. the consumer in the
 Provision of information & education to facilitate sound PH
choice & the proper exercise of rights by the consumer;  general make or
adequate rights & means of redress. active ingredients
 Involvement of consumer representatives in the  net quality of contents
formulation of social & economic policies.  country of
manufacture, if
DECEPTIVE SALES UNFAIR/UNCONSCIONABLE SALES imported
ACTS ACT  state if under licensed

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(by fraud, deviation (walang malay si consumer) from a principal
from the truth)

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 Representation of  Producer or the likes took ADDITIONAL LABELING REQUIREMENTS FOR:
something it DOES advantage of the inability of the FOOD COSMETICS CIGARETTES
NOT HAVE or when consumer to protect his  expiration date  expiration date  "WARNING"
in fact IT IS NOT. interest.  semi-processed or  irritants Cigarette

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 An act of the  Consumer transaction was fully-processed or  precautions or Smoking is
producer, entered into when the price ready-to-cook, etc. contra- Dangerous to
manufacturer, grossly exceeded the price.  nutritive value, if any indications Your Health.
supplier or seller,  Consumer was unable to  ingredients used are  other that is  Should be in
thru concealment, receive a substantial benefit natural or synthetic deemed conspicuous

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false from the subject thereof.  other that is deemed necessary place (madaling
representation of  Seller/Supplier was aware that necessary makita).
fraudulent there was NO reasonable
manipulation,
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induces a obligation. peso and cent per unit.
consumer to enter
into a sales or LEMON LAW [RA 10462]
lease transaction
of any consumer Purpose: for consumer protection in the purchase of BRAND
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product or service. NEW MOTOR VEHICLES.

Both of these violate this Act whether it occurs before, during

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Lemon Law rights period: [earliest/shorter]

or after the transactions.
Chain Distribution Plans/Pyramid Sales Schemes: shall
NOT be employed in the sales of consumer products.
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 period ending 12 months after the date of original delivery
 first 20,000 kilometers of operation after such delivery
REQs to invoke Lemon Law Rights:

 Brand new motor vehicles

Home Solicitation Sales:  Purchased in Philippines
 Allowed only if a permit is obtained from DTI.  Within the lemon law rights period
 Only between 9:00 AM to 7:00 PM each WORKING DAY.  Reported by the consumer:
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 Can be done thru phone, online communication. o Non-conformity to:

 Standards
PROHIBITED REPRESENTATIONS:  Specifications
 Buyer is specially selected o Prevents conformity
 Survey, test or research is being conducted o Cannot be repaired
 Seller is making special offer to a few for a limited
period of time. NON-CONFORMITY EXCLUDES:
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 non-compliance of obligations under warranty

REFERRAL SALES:  modifications NOT authorized by the manuf/distributor
GR: Shall not be used in the sale of consumer products.  abuse/neglect of the brand new motor vehicle
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XPN: Written undertaking in favor of the buyer.  damage to the vehicle due to accident of force majeure
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LABELING AND FAIR PACKAGING Procedures:

Purpose: 1. REPAIR ATTEMPTS: 3. FINAL ATTEMPT
 Enforce compulsory labeling, & fair packaging to enable  With lemon law rights Consumer must bring the
consumer to obtain accurate information [nature, quality,  AND after atleast 4 vehicle to the manuf/dist
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quantity of the contents of the product]. separate attempts for a final attempt to
[same complaint, same address the complaint.
PROHIBITED ACTS: manuf/distr]
 To display or distribute in commerce any consumer
product whose package or label does NOT conform to the 2. WRITTEN NOTICE OF 4. FILE A COMPLAINT
provisions hereof. AVAILMENT In case of non-conformity
 Prohibition not applicable to: Wholesale/Retail Notify the M/D, authorized dealer issue remains unresolved:
distributor IF THEY: or retailer for FILE a complaint before the
1. Are engaged in packaging & labeling  unresolved complaint DTI as provided for under
2. Prescribe or specify such products  intention to invoke the this Act.
3. Refuse to disclose mislabeled/mispackaged right within the Lemon
products Law rights period

Non-functionally Slack-Filled: (Tirang space sa package;
bawal)
 deemed non-functionally slack-filled if it is filled to
substantially less than its capacity [GR] for reasons other
than [XPNs]:
1. Protection of the contents of such package.
2. Requirement of machines used for enclosing the
contents in such package.
3. Inherent characteristics of package materials or
construction being used.
If the vehicle is NOT returned for repair within 30 calendar
days from the date of notice of release within lemon law
rights period, the repair is deemed successful.
If non-conformity issue still exists or persists after 30 day
period but still within the lemon law rights period, the
consumer may be allowed to invoke his rights.
 COMPENSATION FOR NON-USE:
While vehicle is under repair, consumer shall be
provided:
 Reasonable daily transportation allowance. LOWER of:
➭ 20% per annum deduction from the price
➭ (Traveled kms × Price) ÷ 100,000 kms
 Any disagreement on this matter shall be resolved by DTI.
REMEDIES FOR DISPUTE RESOLUTION:
 Mediation - all disputes shall be settled within 10
working days.
 Arbitration - proceed to arbitration, shall parties failed
to settle during mediation proceedings.
 Adjudication - shall in NO case exceed 20 working
days.
REMEDIES OF CONSUMER:
 Replacement of the motor vehicle with similar or
comparable to motor vehicle.
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 Accept the return of motor vehicle and pay the
consumer the purchase price plus collateral
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charges.
*the Secretary of DTI shall decide on the
appeal within 30 days from the receipt
thereof.
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DISCLOSURE ON RESALE: (in writing)
 The motor vehicle was returned.
 The nature of the non-conformity which caused the
return.
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 The condition of the motor vehicle at the time of the
transfer to the manufacturer/distributor
 Penalty of non-disclosure: P 100,000 as damages.
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DATA PRIVACY ACT [RA 10173]
National Privacy Commission
Coverage
↳ All types of information
↳ Any natural/juridical person involved in personal information
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processing
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Not covered [Data privacy will not apply]
↳ Government employee/officer
↳ Service contractor for government
↳ Discretionary benefit of a financial nature
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↳ Journalistic, artistic, literary or research purposes
↳ Carrying out the functions of public authorities
↳ Banks and other financial institutions
↳ Resident of foreign jurisdiction
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Extraterritorial Application: applies in and outside PH
 Personal information of Philippine citizen/resident
 Entity has a link with the Philippines Contracts
Juridical entity
Branch, agency
 Other links in PH entity carries on business in PH
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collected or held by entity in PH
Principles
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 Proportionality – adequate, relevant, suitable, necessary &
not excessive. Shall be processed by the company if not
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reasonable to process in other means.
 Legitimate Purpose – compatible with a declared and
specified purpose.
 Transparency – Data subject must be aware of must be
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aware of nature, purpose, and extent of the processing of
his personal data by the company.
Personal Information
 Collected for legitimate purpose  Apparent
 Processed fairly and lawfully  Ascertained by entity
 Accurate, relevant, necessary  Would identify an
 Kept in a form which permits individual
identification of a data subject
Criteria: Lawful Processing of Personal Info (atleast one)
 Consent
 Related to fulfillment of a contract
 For compliance with a legal obligation
 To protect vitally important interest (ex. life and health)
 To respond to national emergency, compliance to public
order or safety, to fulfill functions of public authority
 Purposes of legitimate interest
Privileged Information
 Attorney-client  Marital privilege communication
 Doctor-patient  Priest-confessor
Sensitive Information
 Race, ethnic origin, marital status, age, color, and religious,
philosophical, political affiliation
 Health, education, genetic or sexual life, proceedings for an
offense committed.
 Issued by the gov't agencies (ex. SSS No., health records)
 Specifically established by an executive order
Criteria: Lawful Processing – Sensitive and Privileged
 Consent
 Provided for by existing law and regulation
 Protect life and health of a data subject or another
 To achieve lawful and non-commercial objectives of public
organizations and their associations
 Medical purposes
 Protection of lawful rights of natural or legal persons
*A personal information controller may subcontract the
processing of personal information.
Personal Information Controller: responsible for
 Safeguarding the information
 Confidentiality
 Prevent its use for unauthorized access
 Compliance to Data Privacy Act and other laws
*He may invoke the principle of privileged communication
over privileged information that they lawfully control.
Rights of the Data Subject [IPA-REDO]
 Informed consent  Retract/withhold consent
 Portability of data  Erasure
 Access  Damages
 Object
RIGHTS NOT APPLICABLE
 Scientific and statistical research – req. strict confidentiality
 Criminal or tax liability investigations
Security of Personal Information [SIR M]
 Security policy – nature, risk, size, cost, practices
 Identifying vulnerabilities
 Regular monitoring
 Measures – accidental, unlawful destruction, alteration,
disclosure
Requirements to Access Security
 On-site and online – no employee, unless: security clearance
 Off-site access – not allowed unless: request to transport
Guidelines to request
↳ 2 business days – deadline for approval or disapproval:
deemed disapproved if no action
↳ 1,000 records only: limit
↳ Use the most secured encryption standard
Requirements to Government Contractors
✔ Coverage of 1,000 or more individuals
✔ Employees must register their personal information
processing system.
Data Breach Notification
5 days – submission of full report
72 hours – report to NPC in case of data breach
Atleast 100 data subjects – shall be no delay in notification
Atleast 250 data subjects – personal information controller
and processor - register the system
Atleast 1,000 data individuals – register the system
E-COMMERCE ACT [RA 8792]
Department of Trade and Industry: promulgates IRR
Application: To any kind of electronic document.
Addressee: Who is intended to receive
Legal Recognition
↳ Electronic Data Message (EDM) - Information shall not be
denied validity or enforceability solely on the ground that
it is in the form of EDM.
↳ Electronic Documents (ED) - shall have the legal effect,
validity or enforceability as any other document or legal
writing.
ED has same effect maintain its integrity and reliability
► In writing - provided remain complete and unaltered
► In original form: reliable and capable of being displayed
↳ Electronic Key – Secret code
↳ Electronic Signature (ES) – distinctive mark
 Authenticity
Signature:
► Represents the persons named
► Appropriate method or security adopted with intention of
authenticating
EDM/ED
► Appropriate security adopted for verifying the originator
and detecting error or alteration.
*SC can authenticate using electronic notarization system
Integrity of Information Communication System
► All material times – did not affect integrity
► No grounds to doubt integrity
► Recorded/stored by who is adverse in interest to the user
► Ordinary course – by a person who is not a party and not
under the control of the user
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Still Admissible and has Evidential Weight even if:
► In electronic form
► Not in written form – “best evidence of the agreement and
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transaction”
Considered as Retained in its Original Form
► Remains accessible and useable
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► Retained in a format it was generated
► Originator, addressee, time, date is still identified
EDM is from the Originator:
► Sent by the originator himself
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► Sent by a person who had authority
► Entitled to regard: addressee previously agreed
► Entitled to regard: agent who had access in EDM/ED of the
originator as his own.
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Will not apply:
↳ Addressee received notice – not from the originator
and have reasonable time to act
↳ Addressee knew – it was not from the originator
↳ Transmission resulted in any error
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Acknowledgement of Receipt
 GR: No acknowledgement is necessary
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↳ XPN: (1) Agreement; (2) Originator requested
 Mode when required : GR: Agreement
↳ If no agreement: (1) Communication by addressee
(2) Conduct that indicates the receipt
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No receipt since there was no acknowledgement:
↳ Acknowledgement is conditional upon receipt
↳ Originator gave notice - no acknowledgement received
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Time of Dispatch:
GR – enters information system outside originator’s control
XPN – agreement
Time of Receipt: GR: Agreement
i. Upon entry in the designated information system
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ii. Retrieval by addressee – both participants; or no designation
iii. Upon entry on the system of addressee – if no designation
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Place of Receipt: GR: Agreement
i. Dispatched at originator’s place of business
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ii. Received at addressee’s place of business
*still applies even if originator uses laptop or other device
↳ More than one place – closest relationship to transaction
↳ No transaction – Principal place of business
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↳ No principal place – habitual residence
↳ “Usual residence” – place of incorporation
Government transactions – 2 years from date of effectivity
EASE OF DOING BUSINESS ACT [RA 11032]
Purpose: prevent graft and corruption, reduce red tape
↳ Anti-Red Tape Authority: Implements EDBA
Coverage: All government offices and agencies, w/in or w/out
↳ Business One-Stop Shop – single location or
website/portal for Business Permit and Licensing Unit
(BPLS) of an LGU.
↳ Red Tape – produces slow, suboptimal, undesirable social
outcomes
↳ Citizen’s Charter – information billboards; main entrance,
conspicuous place, or websites
 Requirements' checklist  Process time
 Service procedure  Documents needed
 Responsible personnel for  Fees
each step  Complaint procedures
Application [Step-by-step]
► All officers/employees shall accept written applications
► Preliminary assessment – shall inform for any deficiencies
► Unique ID number – used for subsequent transactions
► Issuance of acknowledgement receipt, including:
↳ Seal of the agency
↳ Name of the officer/employee; unit designation
↳ Date and time of receipt
Actions of Officers
Maximum Processing Time
 Simple transactions – 3 working days from receipt
↳ only ministerial actions; only inconsequential issues
for resolution of officer/employee
 Complex transactions - 7 working days from receipt
↳ Necessitates evaluation in the resolution of
complicated issues
 Highly technical application
↳ SHORTER: 20 working days vs. as determined
↳ Requires use of technical knowledge, specialized skills
and training in the process
↳ Involves danger to public health, public safety, etc.
 Application to Sanggunian – local, municipal, provincial
↳ 45 working days, extendable for 20 working days
↳ Local Sanggunian declines:
► Reason and remedies shall be cited
All: May be extended for same number of days, only once
Force majeure/man-made disaster: days will be adjusted
Automatic Approval or Extension
 Failure to approve or disapprove:
↳ Original application: Deemed approved: complete & paid
↳ Renewal: Deemed extended: listing of apps; posing danger
 Acknowledgement Receipt
Denial of Fully explained in writing + grounds
Application Name of the person making the denial
Signatories
 Maximum of 3, alternate is allowed in case of official leave
 E-signatures or pre-signed may be used
Local Government Unit Procedures
 Single Unified Business Application Form
↳ Processing new business permits/renewals
↳ Shall be made available online
↳ Hard copies – available all the time
 One-stop Business Facilitation Service
↳ aka. Business One-stop Shop [BOSS]
↳ established within city/municipality Negosyo Center
↳ Queueing mechanism
↳ Colocation of offices (treasury, permits, license, BFP, etc)
 Electronic BOSS – automated within 3 years upon effectivity
 Local clearances – issued together with business permit
 Business Permit 1 year valid first month of year
Renewal anniv of issuance
 Brgy Clearance – collected by city/municipality; share is
remitted to baranggay
Fixers: not involved in operations; gains for speedy completion
Philippines’ World Rank in Ease of Doing Business
2020: 95th
2019: 124th
2018: 113rd
2017: 99th
2016: 103rd
PHILIPPINE COMPETITION ACT [RA 10667]
Philippine Competition Commission (PCC)
Not applicable: Facilitating activities under CBA
Prohibited Acts
1. Anti-Competitive Agreements Price
 Prohibited per se Components
↳ Restricting the competition as to Terms
↳ Fixing the price (auction) in any form of bidding
 Object* – substantially restrict/prevent/lessen competition
↳ Setting, limiting, controlling production
↳ Dividing or sharing the market Volume
 Other agreements Territory
↳ NOT a violation if: Types of goods
► Improves production/distribution Buyers/sellers
► Promotes technical and economic progress
► Fair share of benefits to consumers
2. Abuse of Dominant Position - Atleast 50% of market share Invitations to Bid
 Prices below cost – drive out the competition Pre-Procurement Conference
↳ XPN: no such object* ; price – good faith GR: one for each procurement
 Imposing barriers – prevent competition (subject XPN: IRR (optional)
↳ Ex. restrictions to supplies to BAC approval) written request – prospective bidder
► XPN: superior products, legal rights or laws ↳ Assess readiness – certificate of availability of funds
 Making transactions subject to acceptance ↳ Review: all documents; Invitation to Bid; consultant
↳ Additional obligations – unrelated ↳ Additional Invitation
 Discriminating prices – setting other prices or terms ► Brief description, criteria, DTP, Approved Budget
↳ XPN: Permissible price differentials
► Socialized pricing – less fortunate Receipt and Opening of Bids
► Different costs – manufacturing, delivery Eligibility Requirements correctness of statements
► Response to competitors ↳ certified under oath completeness, and;
► Response to market conditions ✓ electronically authenticity of documents
 Restrictions on lease or sale
↳ Ex. Fixing prices, preferential discounts, conditions not *eligible prospective bidders – short list of bidders
to transact with the competitors ↳ evaluated using numerical ratings

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↳ XPN: Permissible
► Franchising, licensing,distributorship, merchandising Submission and Receipt of Bids
Components Technical - process

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► Protecting IP rights, trade secret, confidential info
 Supplies dependent upon purchase of other Financial – pricing (based on ABC)
↳ No direct connection with the main goods (tied-up) RULES: Separate sealed envelopes
 Unfairly low purchase prices – marginalized providers Submitted simultaneously

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Received on such date/time/place
↳ Farmers suppliers, fishers
After deadline: not accepted (urgency)
 Unfair prices to competitors, customers, suppliers
BEFORE DEADLINE:
↳ XPN: market changes, superior products, laws
Bidder may modify his bid - stamped by BAC
 Limiting production, markets, technical development
May withdraw- letter: express intention; not allowed to bid
↳ XPN: market changes, superior products, laws

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Bid Security – guarantee to all bids
↳ Upon Notice of Award
Not a prohibition on having dominant position
↳ Winning bidders shall enter into contract
 Legitimate means (same in other agreements)
R H ↳ Furnish the performance security
3. Prohibited Mergers and Acquisitions:
 Substantially prevent, restrict, lessen competition Bid Validity – bids are valid for a reasonable period of time
↳ XPN: bring gains in inefficiencies, financial failure ↳ Bid evaluation
► Acquired prior to effectivity of the Act ↳ Award of contract
► Acquisition is solely for investment, not rights/control
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Bid Opening – bids are open-public
 Compulsory notification – transaction exceeds P1 Billion
↳ Minutes of the bid – written request; fees paid
↳ Prohibited from consummating the agreement
↳ NOTICE to PCC is required, takes effect after 30 days
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Bid Evaluation
► Failure to notify: Agreement is void, 1%-5% fine
1. Examine technical component: “pass or fail”
 PCC may request further information before expiry of 30 days
2. Open financial component: Upper limit/ceiling price
↳ Will extend prohibition to consummate; plus 60 days
↳ Goods and Infrastructure – Lowest Calculated Bid
↳ 90 days max for PCC to review: inaction; approved
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↳ Consultancy services – Highest Rated Bid

► Short list: ranked using numerical ratings
GOVERNMENT PROCUREMENT [RA 9184] ► Negotiation: if fails, 2nd rank – open
➭ Amounts should not exceed
Ideals of Good Governance to all branches, LGUs, GOCCs
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► Repeated until awarded to bid winner

Governing Policies Process participate to bid
Post-Qualification
 Transparency: Implementation - qualified
Verification/Validation: Requirements and conditions
 Competitiveness: Equal opportunities - eligible
↳ PASS: Lowest Calculated Responsive Bid
Private contracting parties
Highest Rated Responsive Bid
 Streamlined Procurement Process – effective and efficient
↳ FAIL: 2nd rank – post qualified, then so on (repeated)
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↳ Uniform government procurement

↳ Simple and adaptable – advances modern technology
Single Rated/Calculated Bid: considered award
 System of Accountability
↳ Only one bidder: eligible and responsive
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↳ Officials and private entities – investigated: held liable

↳ More than one bidder: but only one is eligible and responsive
 Public Monitoring – process implementation
↳ More than on bidder is eligible: only one submits a bid
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↳ Strictly with accordance to the law specifications

*all instances – most advantageous price
Goods and Infrastructure projects
Failure of Bidding
Scope Consultancy services
 No bids received
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↳ Covered: all branches – regardless of sources of funds

 No qualifies – LCRB, HRRB
↳ XPN: International treaties  LCRB, HRRB – refusal to accept award of contract: without
justifiable reason
Preparation of Bidding Documents
↳ Re-bid – same process
↳ Procuring Entity [PE] *each PE has BAC
↳ Failed: BAC will proceed to negotiated procurement
↳ Bids and Awards Committee [BAC]
Contents: Award, Implementation
➭ Approved Budget for the Contract [ABC]  Recommendation: BAC determines LCRB, HRRB
↳ Adjustments for costs; max threshold amounts  Approved or Disapprove
➭ Instruction to Bidders ↳ 15 days: Head of Procuring Entity (HoPE)
↳ Criteria: eligibility, bid evaluation, post-qualification ► APPROVED: Notice of Award
↳ D/T/P: Price-Bid Conference,Bid Opening/Submission ► 10 days: Winning bidder - formally enter contract
➭ Terms of Reference ↳ 20 days: further approval of higher authority
➭ Eligibility to Requirements ↳ 30 days: GOCCs
➭ Plans/Technical Specifications  7 days: Notice to Proceed – from date of approval
➭ Forms: Bid, price, list of goods, quantities
➭ Delivery time/Completion schedule *inaction: deemed approved
➭ Form and amount of Bid security
➭ Form and amount of Performance security Period of Procurement Process
➭ Form of Contracts and Conditions ✓ characteristics  From Bid Opening to Award of Contract
*Brand names – not allowed ✓ performance ↳ Maximum of 3 months
↳ Other activities: IRR – reasonable period
 Performance Security – before contract signing
↳ a guarantee of faithful performance/compliance
Failure to Enter Contract or Post Performance Security
Justifiable Reason – fails, refuses, unable to enter contract
↳ BAC shall disqualify the winning bidder
↳ Post qualification – next LCB, HRB
↳ If no award: New bidding
Reservation Clause – right to reject bids
 Declare a failure bidding
 Not award a contract; grounds:
↳ Prima facie – collusion (bid rigging)
↳ Failed to follow procurement procedures
↳ Reasonable – benefits ≠ redound to government
Splitting of Government Contracts – not allowed
 Shopping – price quotes - readily available “off the shelf”
↳ Conditions: (1) Unforeseen contingencies + immediate
purchase (2) Ordinary/Regular Supplies (3) max amounts
 Negotiated Procurement – Direct negotiation
↳ Twice failure bidding
↳ Imminent danger – life/property (to prevent loss)
↳ Take-over contracts – terminated + cause
↳ Adjacent/Contagious – on-going infrastructure projects
↳ Procurement Service of the DBM
↳ Scholarly, scientific, artistic, technology/media services
↳ Highly technical consultants – 6-month term; renewable
↳ Defense Cooperation Agreement – materials/eqpt, foreign
↳ Small Value Procurement – not covered by Shopping
↳ Lease of Real Property and Venue
↳ NGO and Community participation
↳ UN, International Organizations
↳ Direct retail purchase – Petroleum, oil, lubricant, airlines

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Dividing smaller quantities/amounts
implementation artificial phases LABOR LAW [RA 6715]

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sub-contracts
Purpose: Evade requirements Competitive bidding
Alternative methods
Normal Work Hours
 Maximum hours: 8 hours on duty/prescribed place
 Hours are considered “Worked” made to “suffer” work

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 Meal period: at least 1 hour [not counted in hours worked]
Infrastructure Projects – clear delineation of each phase
↳ Usable and structurally sound Overtime Premium [25% Regular; 30% Holiday]
Grounds for Termination  Any hours worked beyond the first 8 hours
 Rates are minimum, nothing prohibits ER to provide higher

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 Default – Procuring Entity may terminate:
 Under-time work – shall not be offset by overtime work
↳ GOODS Force majeure – supplier is unable to deliver
 GR: OT not mandatory
↳ atleast 10% of contract price
 XPN: Required by employer:
↳ atleast 60 days after notice – FM ceases
↳ War/national emergency
No force majeure – failure to deliver on-time
R H ↳ atleast 10% of contract price
Non-compliance
↳ Machinery, equipment, installation – urgent or required
↳ Perishable goods
↳ Work necessary to prevent:
↳ INFRASTRUCTURE on-going – atleast 15%
Negative slippage expired – atleast 10% ► loss of life/property
► obstruction to business [work strike]
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Abandon/refuses - comply to instructions
Fails to proceed expeditiously despite notice
Fault of the Does not have minimum equipment  Working day: any 24-hour shift
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Contractor Does not execute the terms of contract  Calendar day: 12:01AM - 12MN
Neglect/refusal remove materials
perform new work Rest Day [30%]
Sub-lets the contract without PE’s approval  Should be provided by ER
 Should be atleast 24 hours for every 6 consecutive days
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↳ SERVICE – (same in goods, but without the 10%)

 Who fixes rest day? GR: Employer
 For Convenience impractical or unnecessary ↳ XPN: CBA, or; Employee – religious grounds
changes in law/policies  Not applicable to: [also in Special Non-Working Holidays]
↳ Government employees
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 Insolvency – Supplier/Contractor/Consultant
↳ COURT – finality – bankruptcy or insolvency
↳ No compensation to S/C/C provided: not prejudicial
► Rights have accrued/will accrue
 Unlawful acts - Supplier/Contractor/Sub-Con/Consultant
↳ Corruption/fraud/collusion/coercive procedures
↳ Forged documents
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↳ Retail/service establishments: less than 10 employees
↳ DH/ personal service of another
↳ Managerial employees
↳ Field personnel: purely commission or output
Special Holiday [30%]

↳ Adulterated materials, means, methods, other acts Jan 1 - New Year Nov 30 – Bonifacio Day
 Termination by the Contractor/Consultant Maundy Thursday Dec 25 – Christmas Day
Good Friday Dec 30 – Rizal Day
↳ INFRASTRUCTURE Failure to deliver
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Apr 9 - Araw ng Kagitingan Other Elections

Materials/supply
June 12 – Independence Day Eid’l Fitr
Fault of the Right-of-way
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National Heroes’ Day (last Monday of August) Eid’e Adha

Procuring Entity Others
(Atleast 60 days) Disruption – adverse
Not entitled to Holiday Pays: If absent without pay:
peace and order situations
DAYS
La

Disclosure of Relations Before RH ABSENT HOLIDAY

Sworn Affidavit HoPE – unrelated with bidder
1
Successive ABSENT HOLIDAY HOLIDAY
Failure: automatic disqualification Prior to RD ABSENT Rest day HOLIDAY
Worked in a day HOLIDAY HOLIDAY
ABSENT
Alternative Methods of Procurement of successive HD Worked2 (entitled)
1
Example: Maundy Thursday and Good Friday
Prior approval: HoPE + Justified by the Act
2
Not entitled for a holiday pay. Only to the following day
*No need to go through competitive bidding
Special Holiday vs. Regular Holiday
 Limited Source/Selective Bidding Requires work to be compensable Compensable even not worked
↳ Pre-selected: known experience; proven capability Not exclusive
↳ Direct invitation to bid The Congress and President can Limited as provided by law
► Conditions Highly specialized goods/service declare a special holiday
Major plant components - advantageous Allowed for local National in nature
 Direct Contracting/Single Source
↳ Asked to submit price quotation/pro-forma, conditions Night Shift Differential - Worked between 10PM to 6AM
► Conditions:
 Goods – proprietary nature [patent/copyright,etc] Leave
 Critical components – contractor, guaranty  Non-cumulative
 Exclusive dealer / distributor  Service Incentive Leave – entitled if worked atleast 1 year
 Repeat Order – previous supplier ↳ Not: allowed for rest days; enjoy the same benefits
↳ Conditions: (1) Price: same/lower; (2) Quantity: not enjoying vacation leave atleast 5 days w/ pay
exceed 25% of previous; (3) 6 months of notice  For all these, SIL is the only convertible to cash
  Labor Code Service Incentive Leave - 5 days Dependent’s Pension – HIGHER: 10% of monthly pension
↳ Must have worked atleast 1 year  Not gainfully employed P250
 Special Laws Paternity Leave - 7 days  Less than 21 years old, not married
↳ Legit spouse + cohability  Max 5 children (Legit or illegitimate)
VAWC Leave - 10 days ↳ Preference to younger and legitimate
For the ↳ For legal and medical purposes
first 4 Special Leave - 2 months Retirement Benefits
deliveries Lifetime paid atleast 120 monthly contributions
↳ For women
and provided: 60 y/o – separated from employment
Maternity Leave - 105 days continuous
miscarriage 65 y/o – employed or not
+ 15 days for solo parents
+ 30 days without pay *If does lumpsum = contributions paid
+ 60 days due to miscarriage not qualify: 60 y/o – separated from employment

Service Incentive Leave vs. Vacation Leave Re-employment – Monthly pension: Suspended
Mandated by law Discretion by employer ↳ If less than 65 years old – subject to monthly contributions
Economic For rest purposes
Not subject to waiver Can be waived Death
 Retired member: primary beneficiaries – entitled to

s
Convertible to cash It depends
monthly pension upon death
13th Month Pay – 1/12 of total basic salary ↳ Secondary beneficiaries - if no primary beneficiaries

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 Applicable to all Rank and File employees ► lumpsum = balance of 5-year guarantee
 Should be given not later than December 24 ► excluding dependent’s pension
Primary – dependent spouse, legitimate, adopted, illegitimate
↳ IL – only 50% of legit, adopted/legitimated

LE cu
Rates
Night differential - +10% ↳ 100% if no legitimate/adopted
Overtime Regular - 125% Secondary – dependent parents
Holiday - 130% Rest + Special ↳ Absence: designated by the member
Rest Day - 130% 150% combined ↳ If no secondary: becomes part of the estate

SA er
Special Holiday - 130%
Regular Holiday Worked - 200% + OT = 260% Death Benefits
Not - 100% Has paid atleast 36 monthly contributions
Double Holiday Worked - 300% + OT = 390% ↳ Primary beneficiaries – entitled to monthly pension
Not - 200% ↳ Dependents: entitled to dependent’s pension
R H
SOCIAL SECURITY LAW [RA 11199]
*if no primary: Secondary: lumpsum = 36x monthly pension
*if not paid 36 months: # months paid x monthly pension
(Filtered) HIGHER 12 x monthly pension (the minimum)
“Work, save, invest and prosper”
Re-employment/resumed self-employment
y
Protection/benefits – death, old age, sickness, disability
↳ Malamang yung beneficiary: not earlier than 1 year
Compulsory Coverage ↳ Subject to compulsory coverage: new member
FO b

↳ All employees not over 60 years old

↳ Their employers Permanent Disability
↳ Self-employed  Paid atleast 36 mos - Monthly pension
↳ OFWs  Less than 36 mos – HIGHER MP x No. of contributions
T te

(lump-sum) MP x 12 months
Effective Date
↳ Employer – first day of operation Partial Disability: paid 36 mos – subject to period limit
↳ Employee – day of employment ↳ Lumpsum – if payable for less than 12 months
N inu

↳ Self-employed – registration to SSS ↳ Retirement/death: Disability Pension – cease

Separation form Employment
 EE and ER’s obligation to pay ceases at end of month of
separation
 EE – credited all contributions he paid + benefits
↳ May continue to pay to maintain full benefits
M
*if not paid 36 mos: will determine degree of disability
Suspension of Disability Pension
 Re-employment/resumed self-employment (same rules)
 Recovery
 Failure to present himself for examination atleast once a year

 Existing private benefits – not discontinued, reduced

Death (same rules above)
 Changes/adjustments – subject to agreement
O

Other rules:
Interruption of Business/Professional Income
 Supplemental allowance: P500
 No income in a month – not required to pay for that month
st

 No retroactive payment allowed ↳ Not applicable: if receiving lumpsum (less than 36 mos)
↳ + Additional Monthly Pension: P1,000
OFWs  13th Month Pension: compensatory period – atleast 12 mos
 Manning Agency – responsible for benefits (sea-based EE)  Funeral Benefit: P 12,000
La

 Land-based – same as self-employed, XPN: Treaty: ER-EE

LEAVES
Voluntary Coverage Sickness Benefit: paid atleast 3 monthly contributions
 Spouses – full time – household XPN: employed ↳ Confined: > 3 days; hospital, elsewhere (approved by SSC)
► Each day compensable/fraction: by employer
MONTHLY PENSION ► Member is unemployed: SSS = 90% Ave Daily Salary Cr.
Highest P 300 plus ↳ Max 120 days per calendar year; cannot be carried forward
A) SUM 20% Ave. Monthly Salary Credit ↳ Total max of 240 days
2% AMSC each year in excess of 10 years ↳ Notice to employer: 5 calendar days (SSS if unemployed)
B) 40% of AMSC ► XPN (not required): injured w/in premises/while working
C) P 1,000
*Must be paid: amount of at least 60 months (5yrs) Maternity Leave (rates on Labor Law)
 Postnatal leave shall be not less than 60 days
Minimum Monthly Pension  Availed before or after delivery, not exceeding 150 days
Retirement: If Credited Years of Service is:  Benefit: paid atleast 3 months
↳ Atleast 10 years – P1,200  Notice: Public Sector – in writing – atleast 45 days before
↳ Atleast 20 years – P2,400 ↳ Subsequent notice: for medical emergency
Permanent Disability: If Credited Years of Service is:  Notice: Private Sector: expected date of delivery
↳ Less than 10 years – P1,000  Still granted
↳ Atleast 10 years – P1,200 ↳ Termination: if pregnancy occurs not more than 15
↳ Atleast 20 years – P2,400 days after termination (given in cash)
↳ Even if she has a pending administrative case
Additional Benefit Allowance – P1,000 [by Commission]
 Allocation of Maternity Leave Suspension of Payments Rehabilitation
 Female workers: 7 days to the father For individuals only Also for business organization
 Death, absence, incapacity of the female worker Technically insolvent* Debtor is insolvent
↳ Alternative caregiver – 4th degree Secured DRs – not affected Affected by stay order
↳ Current partner of the female worker Filed by debtor Creditors may also file
 Death of the female worker No minimum amount of claim Atleast 1M or 25% subs CS (↑)
*
↳ Accrue to the father or caregiver Has sufficient assets, but not liquid enough to pay short-term liabilities
Suspension of Payments
Unemployment Insurance or Involuntary Separation DR ⇢ motion ⇢ court ⇢ suspension order ⇢ CR × sue or collect
 50% of AMSC – Max of 2 months XPN: may collect
↳ Member is not yet 60+ years old Secured CRs
↳ 36 monthly contributions and claims for: Personal labor
► 12 months of which → within 18-month period Maintenance
 Only once every 3 years Expenses of last illness/funeral (wife & child)
 Concur with other benefits: HIGHEST
Sell, transfer, properties
Non-Transferability of Benefits Debtors can’t XPN: ordinary course
PAYMENT → person entitled Payment of outside liabilities

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→ Minor SSS: appoint representative
(can’t administer his own) XPN: Parent Suspension Order – 3 mos expiry if no arrangements from CRs

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Foreign Nationals: GR: Reciprocity Creditors’ Meeting (15-40 days after Order)
XPN: SSS – interest – best served ↳ Quorum – CR holding atleast 3/5 of debtor’s liabilites
Death: If no beneficiaries → Legal heirs “law on succession” ↳ Approval – double majority

LE cu
► 2/3 of the creditors voting
Tax Exemption: should be expressly stated by law ► Claims of majority ⇢ atleast 3/5 of liabilities
 Entire SSS, assets, properties ✖ Not entitled to vote – claims 90 days before petition
 Contributions and its accruals, income, earnings ↳ Disapproval Proceedings – terminated
 Documents, papers [doc stamps] Creditors – enforce their rights

SA er
 Benefit payments
Rehabilitation
Contributions and Monthly Salary Credits (restoration of successful operation and solvency)
SHARE MSC Voluntary – filed by debtor Sole - Owner
YEAR
2021-22
R HRATE
13%
ER
8.5%
EE
4.5%
MIN
3,000
MAX
25,000
↳ Showing he is insolvent
↳ Viable for rehab
Pship – Maj of partners
Corpo – Maj and 2/3 of OC
2023-24 14% 9.5% 4.5% 4,000 30,000
2025 15% 10% 5% 5,000 35,000 Involuntary – by creditors or group of creditors
↳ No fact or law for the claims
y
Kasambahay → receiving lower than minimum ↳ No payments for due debts for at least 60 days
↳ Contributions: Actual salary ↳ CR other than petitioners initiated foreclosure
FO b

Self-employed → Monthly earnings = basis of MSC Filed by creditors Atleast 1M

↳ Amount to pay: both EE and ER contribution with aggregate claims 25% of subscribed CS
HIGHER or partnership contrbtn
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Remittance of Contributions
ER: monthly – 10th day of the following month Commencement/Stay Order – by court, 5 days after petition
↳ Interest of 2% until fully paid [FAQ]
Self-employed – quarterly Suspend actions claims against debtor
or proceedings to enforce judgements or remedies
N inu

Advanced Payment: advisable

↳ Semester/quarterly Sell, transfer, properties
↳ EE’s resignation/termination Prohibit DR to XPN: ordinary course
↳ Credit or Refund Payment of outside liabilities*
*outstanding liabs - retroact from issuance of order to date of petition
ER’s Refusal/Neglect
case already filed in SC/other courts
M

↳ collected same manner as taxes – NIRC (civil)

XPN: claims against sureties
↳ action by EE: 20 years
Stay order claim - security market participants
O

NO EFFECT broker – action to sell DR’s pledge

Default
settlement of financial transactions
↳ court action or by issuing a warrant → sheriff
DR criminal act, not affected by FRIA
st

FINANCIAL REHABILITATION AND Court actions [upon petition for rehab]

INSOLVENCY ACT [RA 10142] Give Due Course Deny Petition Convert to
(sige i-rehab na) (if any are present) Liquidation
La

Purpose Resolve, adjust claims through rehabilitation  DR is insolvent  Not insolvent  No substantial
Speedy and orderly liquidation  Viable for rehab  Petition is likelihood of
intended to delay successful
In rem – against the whole world enforcement rehabilitation
Proceedings Jurisdiction upon publication  Rehab plan is false
Summary and non-adversarial or misleading
 DR in fraud of CR
Sole proprietorship - DTI
Partnership - SEC Who will manage debtor’s business during proceeding?
Debtors Corporation - Philippine Laws  Existing board/management Rehabilitation Receiver
Individual debtors - natural, resident citizen  Upon motion, court appoints Management Committee
GROUNDS
Group of Financially related corps (Par,Sub,affiliates) ↳ Actual/eminent danger of loss – debtor’s properties
Debtors Partnerships (>50% is owned by same tao) ↳ Paralyzation of business operations
Single proprietor ↳ DR’s mismanagement, fraud, willful violation of FRIA

Banks No-conflict of interest

Excluded Insurance companies Rehabilitation Receiver Cit & Resident atleast
(BIG P) Government agencies/units ↳ Preserve value of assets 6 mos prior nomination
Pre-need companies ↳ Determine viability of rehab Knowledge of insolvency
(governed by its respective laws) ↳ Prepare rehab plan and commercial laws
↳ Implement the approved rehab plan
Creditors – natural/juridical; secured or unsecured
 Management Committee – take place of the management, Liquidation
assume rights and responsibilities of the debtor Claims are filed ⇢ Assets are disposed ⇢ Proceeds are divided

Creditor’s Committee – Un/secured, suppliers, employees Suspension of Payments Liquidation

↳ Assist RR, primary liaison between RR and creditors For individuals only Also for business organization
↳ Cannot exercise or waive rights, give consent on behalf of Technically insolvent* Debtor is insolvent
creditors, unless specifically authorized. Obligation is stayed Obligation is discharged
Filed by debtor Creditors may also file
2x value (property) No minimum amount of claim Debt at least P500,000
Acts of DRs subject to liability (higher) 2x value (transaction) Hatdog Preference of credit applies
↳ Dispose any property other than ordinary course
↳ Concealment, embezzlement, misappropriation from creditor Voluntary Involuntary
↳ Approve transaction in fraud of CR - grossly disadvantageous -No need- CR - prove acts of insolvency2
Filed by debtor Creditors or group
Debt forgiveness/rescheduling Debtor is present malamang Still applies even DR is absent
Reorganizing or quasi-reorganizing -No need- Posting of bond required
Rehab Plan Dacion en pago Liqui Order issued without trial Issued only after trial
Debt-equity conversion MORE than P 500,000 AT LEAST P500,000

s
(not limited to)
Sale of business (or parts) – going concern
Setting up new business entity *
Acts of Insolvency

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↳ About to, or has departed PH to defraud CR (abscond)
APPROVAL - Rehab Plan complies to FRIA ↳ Conceals himself to avoid legal process defraud creditors
↳ CR > 50% of claims - RR recommends rehab plan ↳ Conceal/remove properties delay liquidation
↳ Court (without - Owners [SH] of DR losses ↳ Attach properties in for 3 days – delay and defraud

LE cu
CR approval) contr int due to rehab plan ↳ Allowed judgement in favor of any CR – delay and defraud
- objecting CR wants 1 but RP gives 2 (NPV > liquidation) ↳ Procured his property – preference to one or more CR – D&D
↳ Assign, gift, transfer properties bla bla – delay and defraud
Submission of Rehab Plan ↳ As merchant – defaulted payment of current liabs (30 days)
1. RR submits RP to court for confirmation

SA er
↳ As fiduciary – failed to pay deposited money (30 days)
2. W/in 5 days – notify creditors about confirmation ↳ Has no sufficient property upon execution of final judgment
3. W/in 20 days - creditors may object upon receipt
CR induced by fraud Conversion into Liquidation
False/misleading data
► No substantial likelihood to rehabilitate
R H
Not voted for by CRs
► No Rehab Plan confirmed in 1 year after petition
► Failure to rehab; dismissal of petition – technical grounds
Confirmation of Rehab Plan - 1 year from petition)
1. No objections w/in relevant period ► DR’s motion during pendency of court/pre-nego rehab
2. Objections – lack of merit if no confirmation w/in period,
y
3. Basis of objection – cured court - motu proprio (its own)
FOR JURIDICAL DEBTORS
4. DR complied to cure objection converts to liquidation
Voluntary – debtor files
↳ Assets, including receivables, and liabilities
FO b

Cram-Down Effect Debtor participated or not ↳ Names of atleast 3 nominees as liquidators

Approved RP is binding CR whether opposed or not
claims - scheduled/not Involuntary – 3 or more CRs with (higher) 1M or 25% of SCS
↳ No fact or law for the claims
T te

Pre-Negotiation ↳ No payments for due debts for at least 180 days

Pre-Negotiated Rehab Plan – may be approved by court ↳ CR other than petitioners initiated foreclosure
Endorsed by Creditors 2/3 of total liabilities
Atleast 50% of claims (S/US) COMMON TO BOTH INDIVIDUAL AND JURIDICAL
N inu

Issuance of Order – 5 days (sufficient form and substance) Liquidation order – sheriff takes possession and control of
↳ Debtor, principal place and activities properties; declaration of insolvency and liquidation
↳ Declaration – debtor is under rehab first pub: 7 days
↳ Summary of grounds to file petition from issuance COURT HEARING – 30-45 days after 2nd Publication
↳ General circulation once a week every 2 cons wks ⤴
Rights of a Secured Creditor
M

↳ Personal delivery (3 days) copy of petition to non-petitioners

↳ “Copy and Rehab Plan - available for exam of interested party ↳ Enforce or waive his right to security or lien
↳ Objections – not later than 20 days after 2nd publication ↳ Maintain right under lien in which the value of the property:
O

↳ Appointment of RR – if provided ► Less than claim – property conveyed, then balance – liqui
↳ Suspension or Stay Order ► More than claim - property conveyed, waive the excess
↳ Liquidator will sell, then proceeds for the entire claim of CR
st

10 days from 2nd publication

Approval of RP court – approve if no objection ↳ Enforce the lien and foreclose the property under laws.
w/in 8 days from 2nd publication
CR – verified objection of RP Liquidator
La

↳ Allegations/attachment – false, misleading
↳ RP – not supported by majority
↳ RP – not accurate claims
↳ Support is induced by fraud
Deemed approved: Inaction after 120 days from petition
COURT HEARING: 20-30 days after 2nd Publication
(30-45 days for liquidation) see liquidation
↳ SECURED CREDITORS may vote to elect a liquidator if he:
► Waives his security or lien
► Has lien in the property, and admitted to liquidation
↳ COURT APPOINTS a liquidator when:
► Creditors are did not attend the election
► Failure or refusal to elect – for those who attended
► Elected liquidator fails to qualify
► Vacancy occurs, court may set other date for election
Rehab Receiver may also be a Liquidator - same qualifications

Out-of-Court Rehabilitation Determining Claims – 20 days from assumption of office

 Debtor must agree (out-of-court or informal rehab) Unsecured CR – who waived his right; admitted for his balance
 Creditors must approve atleast 67% - secured Right of Set-off – CR and DR are mutually CR and DR
atleast 75% - unsecured
atleast 85% - un/secured Liquidation Plan – all assets, schedule of liquidation, payment
Sale of Assets – GR: Public auction
Standstill Period – agreed upon – finalize the rehab plan XPN: Perishable; private is for best interest
⇣ Approved by 50% of total liab
Also effective Notice – once a week - 2 cons wks Exempted – real, personal, homestead (10 day notice)
to other CR if: SP is max of 120 days
Completion of Liquidation (issuance of a court order)
Notice of Rehab Plan - once a week for 3 consecutive weeks ↳ To the SEC to remove DR from registry of legal entities
RP Effective – after 15 days from last publication ↳ Termination of the proceedings
 LAW ON INSURANCE (RA 10607) LIFE PROPERTY
Limitation
Parties: GR: No limit Up to actual
 Insurer - it assumes the risk of loss and undertakes for a XPN: Interest of value of interest
consideration to indemnify the insured upon the happening creditor
of the designated peril [risk]. Insurable
 Insured - the person whose loss is the occasion for the
Interest:
payment of the insurance proceeds by the insurer.
↳ Time the contract ✔ ✔
Elements: entered
 The insurer has an insurable interest.
 The insurer assumes the risk. ↳ Time of loss × ✔
 The insured is subject to a risk of loss by the happening of
the designated peril. Beneficiary No insurable Must have
 In consideration of the insurer's promise, the insured pays interest needed insurable interest
the premium.
if himself is
 Such assumption of risk is part of a general scheme to
insured (anyone

s
distribute losses among a large group of persons bearing
a similar risk. [risk distribution] may be
designated as

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Characteristics: beneficiary)
1. Risk-distributing XPN: Donation
2. A contract of adhesion – ready-made
3. Aleatory – no equivalent

LE cu
Perfection of the Insurance Contract
Premiums ≠ Recovery GR: If no premiums, not binding.
4. A contract of indemnity (property) XPN: Binding:
Recovery ≤ Loss  Grace period provision applies
5. Requires utmost good faith  Credit extension granted as an agreement
There is a requirement of full disclosure

SA er
 Parties intended payment in installment
6. Personal – non-transmissible  Insurer granted a credit term for paying premiums
7. Reciprocal/Bilateral  Parties are barred by estoppel
8. Conditional
The liability of the insurance rises upon happening of the
→ recovery on
R H
risk/peril
9. Voluntary Loss occured credit term policy: ALLOWED
10. Executory before

Classes/Kinds: Cancellation/Rescission of Insurance [by insurer]

y
 LIFE  CASUALTY  For PROPERTY
 Individual  accidents/mishaps ! Nonpayment of the premium
! Conviction of a crime
FO b

 Group  Employer’s liability

 Industrial  Motor vehicles ! Discovery of fraud of material misrepresentation
 Plate glass ! Discovery of willful or reckless acts or omissions
 MARINE  Burglary/theft ! Physical changes, then becomes uninsurable
 Even INLAND is marine  Personal accidents ! Discovery of other insurance coverage
T te

 Precious metals  Health insurance (Insurance > Value of the property insured)
 Facilities – bridges [if not life insurance] ! Commissioner decision

 FIRE  MICRO-INSURANCE  Other grounds [information must be material]

N inu

 Fire  For the poor ! Concealment – neglect to communicate

 Windstorm  Premiums cannot exceed 7.5% ! Misrepresentation – oral/written
 Earthquake of daily SMW ! Breach of warranty – past/future
 Lightning  Max sum of guaranteed
 Tornado benefits: Claims Settlement
 Others ≤1000 × SMW  LIFE INSURANCE upon maturity → IMMEDIATE
death → 60 days after → proof
M

 VARIABLE INSURANCE
 SURETYSHIP - obligation  With separate portfolios
 Debtor is solidarily liable comprised of various  PROPERTY INSURANCE
O

 Doing business instruments and investment

 Issues bonds funds 30 days PROOF PAYMENT
to ascertain loss not ascertained
st

Insurable Interest
Pecuniary interest – right, property RECEIPT 60 days 90 days
↳ Contingent event/risk
La

In case of delay:
TEST Positive - benefit → preservation  Interest 2x of market rate [6%], so 12%
Negative – loss → destruction/death  Attorney’s fees
Who has insurable interest?  Damages
 LIFE
 Himself, spouse, children !!! NO PARENTS Prescriptive period: Stipulated: Atleast 1 year
 Any who depends on him for education/support Not stipulated: 10 years
 Any who are under legal obligation to him
 Any whose estate/interest vested in him depends Subrogation: automatic, enures to the insurer.

Change of Interest No right of subrogation:

 INSURED – waived the person liable [quitclaim]
GR: Suspends the insurance to an equivalent extent  INSURER – pays the insured sa loss (not covered) na hindi
↳ Prohibition is VOID [against alienation of policy] naman covered ng policy
XPN: Can still be recovered [LAW OPS]  LIFE INSURANCE
 Life, health, accident insurance  EXCESS PAYMENTS – outside the coverage
 After occurrence of the injury w/c results in a loss
 Will or succession on the death of the insured
 One or several partners, joint owners or owners in common
who are jointly insured, to the others.
 Policy is so framed that it will inure to the benefit of
whomsoever
 Several distinct things, separately insured by one policy
 BANKING LAWS BANK SECRECY LAW (RA 1405)

ANTI-MONEY LAUNDERING ACT (RA 9160) Prohibits disclosure, inquiry, examination of deposits.

Purpose: Purpose:
 To protect and preserve the integrity and confidentiality  Encourage to deposit in banks
of bank accounts.  Discourage hoarding money [tago sa baul]
 To insure that the Philippines shall not be used as a money  Assist economic development
laundering site for the proceeds of unlawful acts.
Coverage:
Stages in Money Laundering [Frequently asked] GR: absolute confidentiality of bank deposits & bonds [govt]
I. Placement → to financial institution
! risk is highest in this stage XPN: Non-confidential [WIObmu CARO TEA]
II. Layering → undergoes transactions  Written permission/waiver by the depositor*
! hiding the source [becomes untraceable]  Impeachment cases
III. Integration → money enters the economy as clean  Order of court [bribery, money deposit under litigation,
unexplained wealth]
Unlawful activities  Commissioner of BIR – determining net estate of depositor

s
 Kidnapping for ransom  AMLA - GR: requires court order*
 Bribery – by public official only  Reports – of unclaimed balances to DoTreasurer; AMLA

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 Piracy – literal na pirata (outside ecozone)
 Robbery – intimidation & destruction of property [theft if none]
 Fencing – gain form robbery (anti-fencing law)
 Violation of Strategic Tax Management Act (STMA)
 Ombudsman – subpoena requirement
 Terrorism case – order of Court of Appeals*
 Examinations (Audit) – BSP, PDIC, COA, PCGG*
 Audit – independent CPAs

LE cu
 Tax evasion – atleast P 25,000,000 [not if collected by BIR]
*WATE - Applicable to foreign currency deposits
Covered Persons:
1. Regulated by BSP, Insurance Commission, SEC, AMLC Garnishment:
2. Dealers of securities  Order to prevent their debtor from paying.

SA er
3. Mutual funds and foreign exchange  Not violative of bank secrecy.
4. Jewelry dealers, casinos, real estate dealers/brokers XPN: Foreign currency deposits: not subject to
5. Offshore Gaming Operators [POGOs] garnishment
6. Company service providers – organizational works
R H XPN2: Court order [for transient foreigners] (subject)
7. Person providing services – funds, accounts
TRUTH IN LENDING ACT (RA 3765)
Lawyers and CPAs acting under independent profession
are not covered unless involved in inside matters of the entity. Protects the citizen from a lack of awareness of the true cost
Responsibilities: of credit. Prevents ununiformed use of credit to the detriment
y
 Customer identification – true identity [KYC] of the national economy.
 Record-keeping of transactions – 5 years
 Safe Harbor – performance of duties in good faith Transparent Pricing: [the objective]
FO b

 Reporting transactions: Make the rates more understandable, comparable, known.

 COVERED: 5 working days not exceeding 15 days
 More than P 500,000 - Bank/cash transactions Required information:
 More than P 1,000,000 - Jewelry dealers RA 3765 BSP Circular No. 755, s2012
T te

 More than P 5,000,000 - Casino !!! Clear statement in WRITING  Net proceeds
 More than P 7,500,000 - Real estate dealers  Cash price  Amount to be financed
 Down payment/trade-in  Finance charge
 SUSPICIOUS: next working day from occurrence  Difference of cash price and  % (SIR or EIR )
N inu

 No legal/economic justification down payment

 Client not properly identified  Charges *interest is based on outstanding
 Not commensurate to financial capacity of the entity  Amount to be financed balance at BEGINNING of the
 Structured to avoid reporting  Finance charge interest period
 Deviates from client profile  % of finance charge (SIR)
 Money is related to unlawful activities
 Similar to any mentioned above Credit Granting Entities: shall provide copies of a disclosure
M

statement to the borrowers prior to transaction.

If it is both covered and suspicious, the transaction should be
reported as suspicious. Encouraged to register to:
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1. Ensure compliance with the requirements of the Act

Anti-Money Laundering Council 2. Demonstrate commitment to corporate social
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Chairman: BSP Governor responsibilities and adherence to law

Members: Insurance Commissioner and SEC Chairperson 3. Gain greater advantage in promoting & declaring its
competitive edge
FUNCTIONS: 4. Build long-term brand value, accountability,
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 Administrative, quasi-judicial, prosecutorial/investigative transparency

JURISDICTION: STEP 1: STEP 2:

 Regional Trial Court – all money laundering cases Registration & Issuance of → Valid for 3 years
 Sandiganbayan – public officers and those with conspiracy payment with BSP Acknowledge of and renewable every
Registration (AoR) anniversary month
PROSECUTION:
 Independent Requirements:
 Separate and distinct elements  Business name
 Knowledge (direct or circumstantial)  Directors, key officers, and substantial stockholders
 Principal place of business and contact details
Freeze Order – Court of Appeals - upon probable cause  Notarized Deed of Undertaking
↳ AMLC – ex parte [can act on its own]  Other required by BSP
↳ Effective 20 days [CA can extend to 6 months]
↳ Petition within 24 hours from filing Penalties:*
A. CGE who fails to disclose required information.
Bank Inquiry HIGHER P 100 *max of P2,000
With court order – with probable cause 2x of finance charge
Without court order – if in cases of: Prescriptive period: 1 year
 Kidnapping B. Willful violation: P1,000 to P5,000; 6 months to 1 year
 Drug-related
 Hijacking/arson/murder *not applicable to PH Government or any political subdivision.
Terrorism (including conspiracy)
 PHILIPPINE DEPOSIT INSURANCE CORPORATION
[PDIC ACT] (RA 3591)
- All banks
- An agency of Department of Finance
Functions:
 Deposit insurer – only for bank closure
 Co-regulator of banks – examine and investigate banks
 Receiver/Liquidator of closed banks
LAW ON CORPORATION [RA 11232]
(Filtered based on FAQs)
WHAT’S NEW?
 Now may enter into a partnership and joint venture
↳ So incorporators now may be natural and juridical
 Perpetual existence (unless provided in AOI)
 Extension of term is not earlier than 3 years
 Repealed the 25%-25% rule
 Domestic corporations can now donate to political parties

Coverage: P500,000 maximum [deposits only] Creation

1. Per bank – 1 person per bank  Corporations are created under general laws [RCC]
2. Per person – beneficial owner  Special laws – public corporations [GOCCs]
3. Joint accounts max of P500,000 per account ↳ Private corporations – cannot be made thru special laws
co-depositor - max P500,000
*all joint accounts are aggregated Piercing the veil of corporate fiction – used when court
finds out that corporate fiction is used for fraud.
Division: [natural and juridical persons]

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 NP & NP: Equally Cannot be held criminally liable
 JP & JP : Equally Artificial Being Not entitled to moral damages

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 NP & JP: JP Cannot self-incriminate
Adjusting the Maximum Deposit Insurance: To sue and be sued
 Threats to bank’s financial stability Express Use of corporate seal

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 Unanimous vote of BOD Issue or sell stocks
 Approval of the President Merger or consolidation
Not Covered: [SHA OU2I] POWERS Implied Issue checks/notes
1. Splitting of Deposits: [a crime] Advertise

SA er
- breaking/dividing amounts (by transfer)
- within 120 days on or before bank holidays Right of succession
- PURPOSE: maximize deposit insurance Inherent To have corporate name
- 6-12 years or P50k to 10M or both
R H Make by-laws
2. Head office of foreign bank branch [only one entity] Acquire properties
3. AMLA – proceeds from unlawful acts under AMLA Introduction
4. Outside the Philippines [branch outside]  Cannot satisfy debt of another corporation even majority is
5. Unfunded accounts – fictitious/fraudulent same stockholders – separate personality
6. Unsound/unsafe banking practice  Non-stock corporations can issue shares, but no dividends
y
7. Investment products [bonds, securities, trusts, etc.]
Incorporation
Procedures of the PDIC:
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 Minors cannot be incorporators

1. Determination of amounts due
↳ Natural and juridical (partnerships, joint venture)
2. Notice to depositors
↳ Must own or subscribe atleast 1 share
3. Publish the notice once a week for atleast 3
↳ Majority – resident of the Philippines
consecutive weeks in a newspaper.
T te

 OPC – kelangan 1 lang upon incorporation

Periods: 2 years to file (upon bank closure) ↳ If from 5 down to 1, it is not an OPC
2 years to enforce (upon filing)  Promoter – engaged in organizing
↳ Liable to the contract BEFORE incorporation XPN: ratified
 Principal Place – stated in AoI; NOT the actual operations
N inu

↳ PDIC subrogates the right of the depositor [preferred]

↳ PDIC to settle w/in 6 months. Delay? 6mos-1 year kulong  Corporations vested in public interest
XPN: walang kulong; issues of facts/laws ↳ Securities are registered/listed to SEC
↳ Assets are atleast P50 Million
ANTI-BOUNCING CHECKS LAW [BP 22] ↳ Shareholders atleast 200; holding atleast 100 shares
Elements of Criminal Violation
 Issuance of worthless checks BOARD OF DIRECTORS
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↳ Maker/Issuer/Drawer applies on account for value  Minimum independent directors – required

↳ M/I/D has knowledge of insufficiency of funds ↳ 20% - if vested in public interest (SEC can increase)
↳ Check is subsequently dishonored  BOD can create other offices or committees except
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 Failure to maintain sufficient balance on issued check executive or corporate office w/c should be under by-laws
↳ There was sufficient funds at time of making/issuance  Term – right to hold office
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↳ Failure to keep sufficient funds within 90 days
↳ Check was dishonored by the drawee bank
↳ Failure to pay w/in 5 banking days after receipt of notice
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 Tenure – actual period na nanungkulan
↳ Hold-over period – acting as director pa rin kahit tapos
na ‘yung term; or kahit hindi pa start

Removal – only shareholders can remove a director

Penalty: IMP: 30 days to 1 yr;
Fine: 1x to 2x of amount; max P200,000; or both ↳ Not minority – even without cause Sp/G Meeting
↳ Minority interest – needs causes SH 2/3
The DRAWEE bank should: Write, print, stamped in plain Notice
language – the reason of bank’s dishonor or refusal to pay NEW: SEC can order removal – motu proprio

Written Notice of Dishonor or Refusal Vacancies – SH will fill vacancy [REI]

↳ Should explicitly state the insufficiency of funds or credit Removal Expiration Increase of seats
 BOD can fill up when:
↳ Failure to establish that it is received by the maker or
drawer is a ground for acquittal [not guilty] ↳ Other grounds than REI, still have quorum (death, resign)
↳ If no quorum: other officers can fill (unexpired term only)
⇢ unanimous vote of remaining BOD
BP 22 – Bouncing Check Estafa
Mala prohibita [evil as prohibited] Mala in se [evil in nature] BOD Compensation: GR: NO
Against public interest Against property ↳ XPN: By-laws; per diems
Requires deceit/fraud ↳ Granted by SH (Majority)
Requires damages ↳ Rendered other services
↳ LIMIT: Not exceeding 10% of NIBT
Worthless check - mandatory
Good faith can be a defense Duties ng BOD dahil kayo ay:
Notice of Dishonor - required Loyalty – no conflict of interest
Only about the account/value Involves fraud Obedience – do corporation’s purpose
Diligence – ordinary or good father bla bla
 Self-Dealing Directors and Officers Subscription Indivisible (no issuance until fully paid)
↳ Has transaction to his own corporation Consensual and not covered by SoF
↳ VOIDABLE – at corporation’s option
↳ VALID if: Subscriber – entitled to all rights as a shareholder
 Presence not necessary for quorum Except: certificate of stocks
 His vote is not needed for approval of contract appraisal rights are exercised
 Contract is fair and reasonable if shares are delinquent
↳ If presence and vote is X, SH needs to ratify Delinquent
↳ If SDD owns all/subst all, determine reasonableness ↳ If no payment within date fixed in the contract
within date of ‘call’ of BoD
Interlocking Directors
↳ Director between 2 or more corporations ↳ EFFECT losses right to vote or be voted
↳ VALID unless fraud can still receive dividends
↳ No lugi, no lamang dapat applied to unpaid balance :CASH
withheld until fully paid :STOCK
↳ Interest to BOTH corporation should be:
 EITHER Substantial - more than 20%
Highest bidder – least number of shares
Nominal - 20% or less
↳ SALE Remaining – goes to delinquent subscriber

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 VOIDABLE – if 1 is substantial and 1 is Nominal
Corporation – if no bidder at public auction
Remedies against erring Directors/Officers

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 Individual Suit (SH vs Corporation) SHAREHOLDERS
↳ Suit for his name – violation of contractual rights
Rights of a Stockholder
 Representative Suit (SH as a class vs Corporation)
 Vote and be voted – participation in management of

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↳ On behalf of class of SH where he belongs
corporate affairs
 Derivative Suit (1 or more SHs vs BoD)
 Receive dividends – if no excess RE, no dividends allowed
↳ On behalf of the corporation vs BoD
↳ When officials refuse to sue, or the ones being sued Declaring Dividends
Cash/Property - BoD (Majority)

SA er
Executive Committee – must be in by-laws Shares - BoD (Majority) + SH (2/3)
↳ Atleast 3 Directors from the Board (appointed)
↳ Same powers of BOD, but they can’t 😠 BoD may be compelled to declare
✖ Approve in which SH should also approve
R H 😭 May refuse in cases of corporate expansion
✖ Filling BOD vacancies :( prohibited - loan agreement
✖ Amend or repeal by-laws retention is necessary
✖ Distribute CASH Dividends to SHs
↳ Malaya sila sa PROPERTY dividends kasi: May be declared even Liquidating dividends
► CASH – bawal eh no retained earnings Investment in wasting assets
y
► Stock – need ng 2/3 of SH
► So okay lang sa PROPERTY :) Trust fund doctrine – assets are reserved for payment of
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corporate creditors
Corporate Officers (Appointed by BOD)
↳ Monitor compliance to RCC  Pre-emptive Right – purchase to retain control/equity %
↳ Issue certification of compliance – every January 30 Law requires minimum shares
↳ Appear to Commission when summoned Not applicable when Issued for corporate purposes
T te

SH/Dir PH Cit PH Res Compliance Officer: For payment of debt

Pres NEED Need for corporations Denied in AoI :(
Sec NEED NEED → with public interest *no restrictions for closed corporations
Treas NEED (SH,R,Cit – no need) SH1: *ayaw mag-exercise*
N inu

SH2: akin na lang, bilhin ko (to purchase the declined right)

SHARES OF STOCK RCC: bawal!
Management BoD: *ni-reissue yung shares*
Rights to Assets (liquidation) RCC: ayan pwede na magpre-emptive right :)
Surplus/profits (after liabilities)
 Appraisal Right – for ALL shareholders when he loses a vote
↳ to demand payment of fair value of his shares
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Deprivation of PS and Redeemable to vote

AoI (may rights if not indicated)
Preference as to dividends When allowed? Changing or restricting rights of any SH
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(equal to other shares if not indicated) AMENDMENTS Authorizing ‘superior’ PS

Extending or shortening corporate term
Founder’s Share – an OS, with exclusive right to
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↳ Vote or be voted – right expires after 5 years When not applicable? Sale/lease/disposition of all or
↳ Right – not allowed in violation of Anti-Dummy Law AMENDMENTS substantially all properties
Foreign Invts Act Merger and consolidation
Investment of funds for other purpose
La

Consideration in Acquisition
Required for securities traded in market: Reasonable hours/business days
issued with uncertificated and scripless form  Inspect books Not improperly used
⇣ Good faith, legitimate purpose
Deemed fully paid once issued If corporation denies – report to SEC within 5 days
No-Par Value Shares Minimum P5 stated value
Cannot be issued as PS  Furnished by most recent FS [NEW] 10 days
↳ Certification – according to RCC and SEC rules
Watered Stocks – [prohibited] issued less than par or ↳ Alternative certification – TA or TL less than P600,000
equivalent price, no sufficient RE ► under oath by President and Treasurer
↳ BOD or Officer is solidarily liable to difference
 Voting Trust Agreement – both not exceeding 5 years
Issuance of Certificate of Stocks Voting Trust Agreement Proxy
 Signed by Pres/VP, then countersigned by Sec/Assistant Vote as owner Vote as agent
 Corporate seal Writing, notarized Writing, signed by SH,
 Entire value + Interest or Expense are paid filed to secretary filed to secretary
Valid as effective Only for the meeting
Pre-incorporation Subscription There is transfer of title No transfer
↳ Deemed irrevocable after submitting AoI to SEC Can be elected to BoD Cannot be elected
atleast 6 months; unless Irrevocable Revocable
► ALL subscribers consent revocation  First Refusal – alukin muna si SH or Corp if magsesell the
► Incorporation fails to materialize w/in period stipulated interest, before sa third party
 Kinds of Corporations MEMORY AID

Non-Stock Management contracts – legal agreement that grants

Stock
Ordinary Educational Sole/OPC operational control
# of BoD Max 15 Min 5 5, 10, or 15 hulaan mo ↳ Without interlocking directors – Major-Major [BOTH]
Term 1 year 3 years 5 years - ↳ With Interlocking
► Managing corporation – MAJ - MAJ
As to Holders: ► Managed corporation – MAJ – 2/3
 Publicly Held – kapag hindi closely held :) (listed)
 OPC – natural person, must contain “OPC” Meetings
REGULAR SPECIAL WHERE?
Closely Held – max 20 persons By-laws muna ✔ ✔ ✔
Cannot be an Close Corporation [I COME BSP] Kung wala:
✖ Insurance company BoD Monthly Call of Pres
✖ Corporation vested with public interest Ket saan
(bawal proxy) (2 days) (2 days)
✖ Oiling companies
Shareholder3 Annually1 Ket kelan Principal
✖ Mining companies (proxy pwede) (21 days) (1 week) office2

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✖ Educational institution 1
Fixed in by-laws, if no, any date after April 15
✖ Banks 2
City/Municipality if not practicable (NCR is a whole municipality)
✖ Stock exchange

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3
Other amendments for SH meetings:
✖ Public utilities ↳ Still VALID even improperly held if: ALL SH are present
✖ NOT if the purpose is to object a transaction
Quasi-Public – special laws/purpose (water districts) ↳ Stock transaction book/Membership book closed before meeting

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► Regular meeting – atleast 20 days
One-Person Corporation – single stockholder ► Special meeting – atleast 7 days
Not applicable to OPC [MAMBy] ↳ Postponement: VALID – 2 weeks notice
✖ Minimum Capital Stock
Voting Requirements
✖ Authorized Capital Stock
When Non-Voting Shares:

SA er
✖ Minutes of Meetings of BoD ⇢ Minutes book ✔ May Vote [I3 AM SAD] Not Allowed to Vote [CR READ]
✖ By-laws  Increase or decrease of capital stock ✖ Compensation of directors
 Incur, increase bond indebtedness ✖ Removal of directors
 Investment of corporate funds in another ✖ Ratification of disloyal directors
Cannot be an OPC [PuNaNoBIT] corporation for other purpose ✖ Election of directors
R H
✖ Publicly listed
✖ Natural person – profession
 Amend Articles of Incorporation
 Merger or consolidation
 SLEMPD all or subs all corporate assets
✖ Approve management contract
✖ Distribution of stock dividends
✖ Non-chartered GOCC  Adoption or Amendment of by-laws TS and delinquent shares
✖ Banks, quasi-banks, pre-needed companies  Dissolution, rehabilitation, liquidation don’t have voting rights
✖ Insurance company
y
✖ Trusts Pwede kung may: For Voting Shares:
- writing Majority BOD ONLY [VETDD]
Maj-BOD + 2/3-SH
[I3 AM SDDDE]
FO b

P ≠ T or S Bawal - bond
Vacancies in BoD (ReDAD) Increase or decrease of capital stock
T=S Pwede - undertaking Election of officers in executive committee Incur, create, increase bond
Power to acquire own shares (Treasury) indebtedness
Foreign Corporations Declare CASH or PROPERTY dividends Investment of corporate funds in
Delegated power to amend or repeal another corporation for other purpose
Doing business w/o license: NOT ALLOWED for court actions
T te

by-laws to the BoD Amend Articles of Incorporation

Isolated transactions Merger or consolidation
Suit to protect TM, TN, Corpo name, goodwill Majority SH ONLY [CANPER]
SLEMPD all or subs all corporate assets
Dissolution, rehabilitation, liquidation1
XPN: In violation of Revised Penal Code Adoption plan of Distribution of assets
Compensation of directors
Defending in suit against it Adoption Articles of Incorporation of non-stock corporation
N inu

Estopped to challenge a personality of a corp Fixing issue price of No-Par value shares Distribution of stock dividends
Election of Board of Directors Extension or shortening corporate term
Revocation of delegated power to BoD
Ownership Control Test – if 60% or more is P, All are P 1
CR affected: 2/3 Not affected: Maj SH
(P = Pinoy) Lolo rule - if ex.50% is P, then 50% is P 2/3 SH [PDeRRS] MAJ-MAJ [NPAA]
Denial of Pre-emptive right Fixing issue price of No-Par value shs
DISSOLUTION AND LIQUIDATION Delegation of power to amend or repeal (if BoD is delegated in AoI and BL)
by-laws to the BoD Amend or repeal by laws
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Removal of directors/trustees (is SILENT: means no delegation)

 Expiration of Term Ratification of disloyal directors Approve management contract
↳ Effective – if last day na ngayon, effective na bukas Ratification of act of Self-dealing director2 (but no interlocking this time)
2
Amended: Maj – Independent Director
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↳ Extension - before expiration, not earlier than 3 years 2/3 – Entire board
 Voluntary dissolution Vacancies
Fill up by BoD [ReDAD] Fill up by SH [REI]
↳ 20 day notice before meeting
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Resignation Removal
↳ Publication (once every 3 weeks) Death Expiration of term
↳ Request for dissolution Abandonment Increase in seats
 Involuntary [Revocation of Franchise] Disqualification* ReDAD here if BoD have no quorum
↳ Serious misinterpretation, prejudice to general public *Disqualification of a Director
La

↳ Refusal to comply; violation of franchise ↳ Permanent – convicted of final judgement by court or order of SEC
↳ Continuous inoperation [ground for suspension] ↳ Temporary (becomes permanent after 60 days for failure of remedial)
► If court judgement or commission orders are not yet final
► Refusal to disclose SEC and IRR requirements
Delinquency
► Absence in more than 50% of board meetings
5 years inoperative 2 years to comply
 XPN: Illness, serious accident, death of immediate family

Corporations that Nationality Powers that cannot be

incorporation delinquent revoked
cannot issue No-Par Requirements delegated by BoD to ExeCom
[POBBIT] [MAPEMO] [FAAD]
Deemed Revoked [non-use of corporate charter] Public utilities Mass media 100% Filling up of BoD vacancy
5 years failure to commence Other corporations with Advertising 70% Adoption/amendment of BL
access of public funds Pub Utility 60% Approval of corporate acts
Building, loan assocs Educ Inst 60% requiring SH appr/ratif
incorporation revoked Banks Mining 60% Distribution - cash dividend
Insurance companies Owner of land 60%
Trust companies

SECURITIES REGULATION CODE

Filing of General Information Sheet: 30 days from (1) Stock/Non-stock: date of annual meeting (2) Foreign: anniversary issuance of SEC license
XPT Securities: Government, Receiver, Insurance Commission, Banks XPT Trans: Broker, Isolated, Stock, Conversion, Exclusive, Bonafide, Insolvency
Filing of Annual FS: CALENDAR (1) depending on last numerical digit of license number (2) on or before first day stated in coding schedule
FISCAL GR: 120 days from end of fiscal year XPN: (1) Broker/dealer: 110 calendar days (2) Listed/Public: 105 days
Insider Trading: Material non-public information [D GIRL] Director of the issuer; Government EE; Issuer; with Relationship to issuer; who Learns info
Mandatory Tender Offer: to SHs to tender their shares for purchase – intends to acquire at least 35% over 12 months; or will acquire 50% ownership
(1) Listed (2) Asset atleast P50M and atleast 200 SH with atleast 100 shares. XPT: Rehab, Open market, Merger, Privatization, ACS increase, Unissued
 LAW ON COOPERATIVES [RA 9520]
“To improve life of members”
Principles
► Voluntary and Open Membership – no discrimination
► Democrative Member Control – one member, one vote
► Member Economic Participation – should contribute to capital
► Autonomy and Independence – self-help; member-controlled
► Education, Training and Information
► Cooperation Among Cooperatives
► Concern for Community
Registration
Primary Cooperative – group of natural persons
 Filipino citizens – minimum of 15 persons (MAX for corpo)
 Legal age, have common bond of interest
 Actually residing in the intended area of operation
Membership
 Regular – entitled to rights; complied with requirements
 Associate – no voting rights, may be considered regular if:
↳ Meets minimum requirements, patronize for 2 years
↳ Signifies intention to remain as a member
Government Officers and Employees
↳ CDA officer or employee – disqualified to any position
 XPN: Cooperatives organized by CDA
↳ Elective officials – ineligible, XPN: party-list as a member
↳ Attendance in GA or Coop activities
 Allowed to use official hours provided, not affects office
Termination
 Withdrawal – 60 day-notice to BoT
 Death or Insanity – primary cooperative members
 Insolvency or Dissolution – only for secondary or tertiary

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Multi-purpose Cooperative – conversion from primary coop  Vote by Majority of ALL Members:
↳ Not patronized any services for unreasonable period

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 May transform only after 2 years of operations
 Minimum paid-up: P100,000 or as to feasib study (HIGHER) ↳ Continuously failed to comply obligations
↳ XPN: agricultural or agrarian cooperatives ↳ Violation of by-laws and rules, act or omission - prejudice

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Secondary Cooperatives – group of primary coops (juridical) General Assembly
Minimum Members Minimum Paid-up Highest policy-making body
Federation 10 Primary P 500,000  ¾ vote of all present members constituting quorum
Union 15 Primary -  Delegated with powers to a smaller body of cooperative
Cannot be delegated:

SA er
Tertiary Cooperatives – group of secondary coops (juridical) ✖ Amend Articles of Cooperation and By-laws
Minimum Members Minimum Paid-up ✖ Elect or appoint, remove members of BoT
Federation 10 Secondary P 500,000 vs feasibility ✖ Approve developmental plans
Union 15 Secondary -
Board of Directors/Trustees
R H
Fee – paid by proposed federation (which is HIGHER)
5 to 15 members
↳ 1/10 of 1% of authorized share capital
Term: Max 2 years (1 year for corporations)
↳ Amount prescribed in CDA schedule of fees Prohibitions:
✖ Shall not hold positions directy involved day-to-day
y
Certificate of Registration – conclusive evidence upon filing
✖ Engaged in similar activities – conflict of interest
Merger/Conso – effective upon issuance of CoMC by the CDA
Special Director – appointed, no powers or rights. Only to
FO b

provide technical assistance as required.

Types of Cooperative
[FAQ]
Audit and Right to Examine
Definitive
 Advocacy – promotes and advocates cooperativism
T te

Financial Audit – conducted by external independent CPA

 Dairy – production of fresh milk
Social Audit – conducted by independent social auditor – CDA
 Fishermen – marginalized fishermen in localities
Performance Audit – efficiency and effectiveness
 Multi-purpose – combines one or more business activities
 Workers – including self-employed; business & employment
Limitation: Not more than 5 years. Allowed after 2-year gap
N inu

Right to Examine Records: not including:

Closely-Related
 Subsidiary ledgers and records other than personal.
 Agriculture – raising or culture of plants, animals, fungi, etc.
 Agrarian Reform – land tenure,conso/devt; marginal farmer
Capital, Property and Funds
 Consumers – procure and distribute commodities
Limit: Maximum 10% of share capital
 Marketing – supply inputs and markets their products
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Par value: P100 to P1,000

 Producers – undertakes production and processing into
 Prohibited from issuing multiple types at different par values
 Prohibited from increase/decreasing par thru change in AoC
 Cooperative Bank – wide range of financial services
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↳ Clients: Cooperatives and members

Memory Aid
 Credit – Savings and lending
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↳ Clients: Members Administration – ¾ [DeRaReVoD] Termination or Withdrawal

 Financial Service – Savings, credit and other services Delegation of powers by GA to BoD Withdrawal 60 day notice
↳ Combines both Bank and Credit (wider scope) Ratification – Self-dealing director Termination BOD member
↳ Clients: not specified Removal of elected officer/director - appeal by GA w/in 30 days
La

Voluntary dissolution – no CR affected - grievance com w/in 30 days

Division or Merger of Cooperative Failure to act: in favor of member
 Service – medical, dental, electric light and power,
transportation, hospitalization professional, labor
↳ Electric – power generation, renewable energy Meetings
REGULAR SPECIAL QUORUM
↳ Health Services – medical and dental
In by-laws:
↳ Housing – benefit of regular members BoD Ket kelan 2
Ordinary: 50% + 1 or By-Laws
Monthly1
↳ Insurance – life and property (bawal proxy) (1 week) Coop Bank: 50% + 1
↳ Transport – land, sea (small vessels) GA Annually Ordinary: 25%
Ket kelan2
 Education – owning and operating licensed educational insti (proxy allowed (or 90 days Electric Coop: 5%
(1 week)
XPN: primary) after year-end) Coop Bank: 50% + 1
 Water – water systems, potable water 1
In case of primary cooperatives.
2
Upon call of Majority of the BoD. Other ways are:
Categories
↳ Written request - at least 10% of ALL voting members (1 month)
 Members – Primary, secondary, tertiary ↳ Authority upon petition - at least 10% of ALL voting members
 Group (1) Union: all types; may sposor studies, assist N&LGU when BoD fails to call meetings. (good cause shown)
(2) Federation: Same type of bussns; may enter joint ventures ↳ Authority – report examination or investigating cooperative affairs
 Territory – according to areas of operations ↳ 90 days upon approval of newly approved cooperative

 Laboratory – controlled by minors (training ground) Vacancies

↳ Should have an affiliate Guardian cooperative Cause Who will fill-up
↳ CoR does not bestow upon its juridical personality Expiration of Term GA – in a general/special meeting
↳ Dissolution of Guardian = revocation of CoR Other causes BoD if still constitute quorum
↳ Terminated upon reaching majority (18 years old)
 Distribution of Net Surplus Dissolution
FUND PURPOSE AMOUNT Mutual agency is terminated – not binding anymore
Stability First 5 years – At least 50% ↳ Caused by Acts, Insolvency, Death – NOTICE needed
Reserve fund
To meet losses After – 10% ↳ Other causes – immediately terminated even no notice
Half for  Extrajudicial causes – no court intervention
education ↳ No violations to agreement
Education and
and training Maximum of 10% ► Termination of term or specific undertaking
Training Fund
Half for union ► Express will of ANY or ALL partners in good faith
or federation ► Expulsion of a partner through powers conferred
Community Benefit of the ↳ In contravention of the agreement – no express will
Minimum 3%
Development community ► Who causes the dissolution will be liable for damages
Optional Fund Land & building Maximum 7% ↳ By operation of law – partnership becomes unlawful
Interest in ► Specific thing perishes before delivery
Remaining Maximum of the rate of return
share capital ➭ XPN: if ownership is transferred AFTER loss occurs
All other excess: Credit to Reserve Fund ► Death, insolvency, civil interdiction of any partner
 Judicial causes – decreed by courts (trial is necessary)
Voting Requirements
↳ Partner has been declared insane or of unsound mind
Majority BOD ONLY 3/4 of Regular Members ONLY

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[SuRe2DVA] [MeDeDi RaRaRe] ↳ Partner becomes incapable of performing his part
Suspension of officer Merger or Consolidation ↳ Guilty of a conduct prejudicial to the partnership

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Removal of member – valid cause
Recommendation to remove officer
Delegation of power to ExeCom
Vacancy in ExeCom
Allocation of interest
Delegation of powers by GA to BoD
Division of Cooperatives
Ratification – Self-dealing directors
Ratification – disloyal director
Removal of officer – recommend by BoD
↳ Willfully or persistently commits a breach of agreement
↳ Going concern – can only be carried on at a loss
↳ Any circumstance that renders dissolution as equitable

LE cu
Maj-BOD + 3/4 - Members
Voluntary Dissolution
- No creditors affected: GA ratification
- Affected: Petition + notice + hearing
Primary – one vote only
2/3 of Regular Members ONLY
Amendment of Articles of Cooperation
Amendment of By-Laws
Secondary and Tertiary – max 5 votes
STILL BINDING even after dissolution:
 Acts for winding-up the partnership affairs
 Acts to complete unfinished transactions
 Acts that would be binding had the dissolution not taken place
 Contracts to creditors who had no notice of the dissolution

SA er
Other Requirements
BoD Members
Filling up BoD vacancy – expiration - Majority Limited Partnership
Filling up BoD vacancy – other Majority Majority  Should have at least one general partner
Deferment of interest payment
R H Majority (reco) Majority (approve)  Limited partner – cannot be an INDUSTRIAL partner
↳ Can only contribute money or property
LAW ON PARTNERSHIPS ↳ Cannot take part of the management
(Filtered) ↳ Surname should not appear in partnership name, XPN:
Principal (independent of other contract); Preparatory ► Also a general partner’s surname
► Surname already carried out before admission
y
GR: No form required ↳ If he negates above: liable as general
XPN: VOID if immovable property as inventory is not
FO b

attached to the public instrument Liquidation of a LIMITED Partnership

 Distribution of Assets (in order)
Kinds of Partnerships ↳ External creditors
 Universal – If silent: Universal Partnership of Profits ↳ LIMITED PARTNER (1) Credit (2) Profits (3) Capital
↳ ALL PROFITS – Only usufruct of properties are
T te

↳ GENERAL PARTNER (2) Credit (2) Profits* (3) Capital*

common. Naked ownership remains to partner
► ALL profits acquired by industry or work – COMMON
↳ ALL PRESENT PROPERTY – all are common
► Only profits from contributions are common
N inu
General Partnership: Capital comes first before profits
Miscellaneous Concepts
 Capital exceeds P3,000 – contract should be in public

► Other sources can be stipulated as common
➭ XPN: Subsequent inheritance (but its fruits can be)
↳ NOT ALLOWED: Spouses, adultery/concubinage
 Particular – objects are determinate (use or fruits)
↳ Specific undertaking
↳ Profession or occupation
M
instrument. Still VALID if not, but for enforceability only
 Liability of a New/Incoming Partner to debts incurred:
↳ Before admission: up to his contribution XPN: stipulation
↳ After admission: up to personal assets
 Industrial partner NOT liable to losses – XPN: stipulated
 Termination – partnership affairs are wound up

 Right to demand accounting – 4 years upon dissolution

Obligations of a Partner when final accounting is done
 Contribution – GR: equal shares, provided in contract  Continue operation under the same name – (1) same
O

↳ Failure to contribute money: No demand necessary creditors (2) if partnership becomes sole – max 2 years
↳ Loss borne by partnership
st

► Fungible, deteriorating, not stipulated that the

partner will borne the loss
↳ Additional contribution in case of imminent losses
► XPN: industrial (except if HE stipulated)
La

 Prohibition to engage in other business

↳ INDUSTRIAL – any other business XPN: allowed by CP
► Non-compliance: Capitalist Partners may:
➭ Exclude him from firm
➭ Avail themselves from the benefits obtained
↳ CAPITALIST – only if same industry XPN: stipulation
► Non-compliance: personally liable for all losses
➭ Bring all profits illegally obtained
➭ Ousted for loss of trust and confidence
 Payment of Credit to Managing Partner
↳ In the name of partnership – PARTNERSHIP
↳ In his name – Proportionate XPN: to HIM if more onerous

Management
 One Managing Partner – Removed either by (1) just or
lawful cause; (2) vote of partners with controlling interest
 Multiple – other’s consent is needed
↳ In case of TIE: controlling interest of ALL partners prevail
 No Managing Partner – concurrence of ALL is necessary
↳ XPN: imminent danger/irreparable injury to partnership
 No Agreement – ALL are agents, XPN: alteration in
immovable properties. XPN2: refusal is prejudicial
 OBLIGATIONS and CONTRACTS
Sources of Obligations
 Law – pay taxes, duty of support
 Contracts – should be complied in good faith
 Quasi-contracts – X enriched at the expense of another
↳ Negotiorum Gestio – voluntarily takes charge
► Obliged to continue until termination
► Entitled only for expense, not remuneration
► Property is abandoned; and no authorization
↳ Solutio Indebiti – no right to demand; mistake
 Delicts – criminal liability also involves civil liability
 Quasi-delicts – solidary in nature
Term or period
 Ex die – suspensive effect (gives rise)
 In diem – resolutory (extinguishes)
Nature and Effect
 Accessories – better use, perfection, enjoyment (ex. keys)
Stages of a Contract
 Negotiation/Preparation – offers, terms, conditions
 Perfection/Birth – Agreement, all essentials are present
 Consummation/Death/Termination – already performed
Elements of a Contract
 Essential – contract cannot exist without which
↳ Consent – certain offer, absolute acceptance
► Cognition Theory – acceptance takes effect when the
offeror knew of the acceptance (PH abides this)
► Manifestation – when manifested
► Absolute simulation – VOID – no intent to be bound
► Relative simulation – VALID – conceals true intention
↳ Object – within commerce, transmissible, not impossible
► Future inheritance – not a subject for valid contracts
↳ Cause – Onerous,gratuitous,remuneratory(past service)
↳ Other essential elements

s
 Accessions – additions/improvements ► Real contracts – perfected by delivery
Remedies for Breach ➭ Deposit, pledge, loan commodatum, simple loan
 Kinds of Damages: [MENTAL]

le
↳ Moral – mental and physical anguish
↳ Exemplary – to correct/ set an example
↳ Nominal – vindicate a right (disrespected right)
► Formal contracts – execution of formality is required
 Natural – exists as part even if not stipulated
 Accidental – requires stipulation
Forms of Contract GR: No forms required

LE cu
↳ Temperate – cannot be determined (court fixes) When required:
↳ Actual – requires proof  For Validity – public instrument or writing
↳ Liquidated – predetermined (penalty-like) ↳ Donations of real property (also partnership contribution)
↳ Donations on personal property when exceeds P5,000
Circumstances ↳ Stipulation to pay loan interests, and sale of large cattle

SA er
 Fraud [Dolo] – waiver of future fraud is void
↳ Dolo causante – in obtaining consent
► VOIDABLE – annulment
↳ Dolo incidente – during performance
R H
► Does not affect validity – damages only
 Negligence [Culpa] – omission of diligence
↳ Culpa Contractual – breach of contract
↳ Culpa Aquiliana – civil negligence or quasi-delict
↳ Culpa Criminal – crime or delict
y
 Delay – [Mora] GR: default upon demand
↳ Mora solvendi – part of DEBTOR
FO b
 For Enforceability – Statute of Frauds: must be in writing
↳ Not to be performed within 1 year (also long-term lease)
↳ Special promise to answer for another’s debt or default
↳ Marriage agreements (other than promise to marry)
↳ Sale of goods/chattel minimum of P500
↳ Representation as to credit of a third person
 For Convenience – may compel to be in public instrument
↳ Real rights over an immovable property
↳ Cession, repudiation or renunciation of hereditary rights
↳ Power to administer properties

► Ex re – real obligations (to give + delivery)
► Ex persona – personal (to do, act or omission)
↳ Mora accipiendi – part of CREDITOR
↳ Compensatio Morae – Both
T te
Reformation – to express true intention (written instruments)
↳ Mutual mistake – either party may ask for reformation
↳ One’s mistake – but other knew, injured party may ask
✖ Not allowed: Simple donations (no conditions); Wills;

 Volatio – “Any manner contravene the tenor”
↳ Fortuitous event - excuse for non-compliance
► GR: No one should be responsible (unforeseen)
► XPN: Stipulation, assumption of risk, bad faith,
delay, negligence or fraud concurred
N inu
real agreement is void; estoppel; already enforced
Fundamental Principles
 Consensuality – in case of ambiguity, interpretation is
against the one who caused the obscurity

 Autonomy (Liberality or Freedom) – contrary to law, etc.

Modes of Extinguishment ↳ Pactum Leonina – excludes partner/s from P/L
 Payment or performance ↳ Pactum Commissorium – CR appropriates a pledge/mort
↳ Cannot make valid payments ↳ Pactum de Non Aliendo – forbidding to sell an immovable
► Minors (no capacity)  Mutuality – must bind both, not left to will of one of them
► Suffering penalty of civil interdiction (no free-disposal)  Obligatory force – should be complied with good faith
M

► Legal tender – can be compelled to accept  Relativity – contract affects only between the parties
➭ Coins – max P1,000 (NEW: P2,000) ↳ Third parties – GR: not bound, XPN:
➭ Cents – max P100 (NEW: P200) ► Real rights of a third person
O

➭ Bills – unlimited ► Actions of a creditor in case of intended fraud to him:

 Special Forms ➭ Accion Pauliana – action rescind
st

↳ Dacion en Pago – GR: only to the extent of value
► XPN: if parties considered as equivalent
 Application of Payments – only one debtor
↳ Creditor cannot be compelled to accept partial payment
La
➭ Accion Directa – sue the debtor for recovery
► Malicious interference or benefited from the contract
Interpretation in Case of Ambiguity

↳ Cannot apply payment to principal if interest is not paid  Primordial Consideration – intent rather than the words
↳ Not designated: Onerous (if different); pro-rata (if same) ↳ When impossible to settle doubts (only incidental)
 Payment by Cession or Assignment ► Gratuitous contracts – least transmission of rights
↳ Voluntary – agency to sell by the creditor ► Onerous – in favor of greatest reciprocity of interest
► Extinguishes only to the extent of the proceeds ↳ Doubts to principal object – contract is null and void
↳ Involuntary – by court under FRIA
Defective Contracts (least to most defective)
► Extinguishes the whole debt/obligation
Rescissible Voidable Unenforceable Void
 Loss of the Thing Due or Impossibility of Performance VALID until VALID until VALID but not No effect
↳ GR: presumption of fault: if lost in possession of debtor Nature rescinded annulled enforceable :) Inexistent
 Condonation or Remission – gratuitous in nature Lesion or Lack of authority Illegal object
Defect economic Consent Form not observed Absent element
↳ Express or Implied damage BOTH - incapable Law declares
 Confusion or Merger of Rights Kinds GACTS VIIMMFU USB madami
↳ Heir ⇢ Decedent. Dies = extinguished Resolution Ratification
(lesion not (by guardian)
 Compensation – two debts are due, reciprocal CR and DR
required) Declaration of
 Novation - Extinguishes old, if NEW is void, OLD subsists. Remedy Rescisscion Annulment1
Ratification
Nullity
↳ Active (subrogation) – New creditor (return - render (by injured
inefficacious) party only)
↳ Passive (substitution) – New debtor Ratification X (prescription) YES YES Cannot be
► Expromision – no knowledge or consent of debtor Prescription 4 years 4 years - Imprescriptible
➭ Partial reimbursement – no longer liable Question by Parties + 3P Parties only Parties only Parties + 3P
► Delegacion – with consent 1
No annulment for (1) Creditors of the injured party (2) Minor
➭ Full reimbursement – old debtor may still be liable misrepresents his age (made to believe other party: estopped)
↳ Change of object or principal condition
 Voidable [VIIMMFU] Rescissible [GACTS] Void Stipulations
Violence  Guardians: wards whom they represent
Intimidation, Incapacity (if only one)
✖ Interest, damages, penalty during grace period
suffer lesion by more than 1/4 of the
Mistake, Minority value of the object ✖ Forfeiture clause – because of CSV requirement
Fraud  Absentees suffer lesion more than 1/4 ✖ Automatic cancellation or rescission upon default
Undue influence  Creditors cannot collect (in fraud of CR) Obligations of the Seller
Unenforceable [USB]  Things under litigation entered by the
Unauthorized contracts defendant without knowledge of litigant
 To take care of the thing – before delivery
Statute of Fraud (see SoF)  Specially declared – subject to rescission ↳ Risk of loss – GR: res perit domino (with the owner)
Both parties are incapable - consent
► XPN: Stipulation, Security title, Delay (who caused)
↳ Loss in pending delivery
SALES ► Entirely lost – contract shall be no effect
(Filtered) ► Lost in part only – buyer: Withdraw or Demand
Principal, Onerous, Bilateral, Nominate, Commutative ► Perished without seller’s knowledge – the buyer may:
➭ (1) Treat as avoided (2) Valid: good units (divisible)
Distinction with other Transactions  Transfer ownership – passed to the buyer when:
SALES Others ↳ He signifies approval or acceptance
Ordinary course Piece of work – not ordinary; a service ↳ Retain the goods without notice of rejection
Pre-existing not needed Dacion en pago – needed ↳ SELLER NEED NOT TO BE THE OWNER:

s
Creates obligation Cession – extinguishes (CR not owner) ► Authorized capacity as liquidator, executor or admin
Covered with SoF Barter – not covered (value of given ↳ GR: Buyer acquires no better title than the seller had

le
(movable atleast P500) exceeds monetary value or it equivalent) ↳ XPN: Buyer acquires GOOD title:
Transfers ownership Contract to Sell – no transfer (agency) ► Seller is authorized; estoppel in pais (owner); deed
Risk: buyer after delivery Risk remains w/ principal, not the agent ► Apparent ownership (no knowledge of defects)
Essential Elements ► Purchased from market or merchant store

LE cu
 Consent ➭ Recover stolen thing – reimburse: public sale, GF
↳ Absolute Incapacity – VOIDABLE or VOID  To deliver including fruits, accessions and accessories
► Minors – Except necessaries – sustenance, etc. ↳ Actual – physical transfer
↳ Relative Incapacity – specific transactions ↳ Constructive
► Husband and wife XPN: agreed in marriage settlement ► Traditio Longa Manu – by pointing

SA er
► VOID SALES even at public or judicial auction
➭ Guardian – ward’s property
➭ Agents – principal’s property XPN: consented
➭ Exec and Admin – estate
R H ➭ Public officers, EE, judge, experts – State’s property
➭ Justices, judge, clerk, attorneys – under litigation
➭ Aliens – land XPN: succession, loss of citizenship
 Cause – contracts is inefficacious if not determined
↳ Price is certain, left to judgement of third person
y
 Object – must be licit, within commerce of men, determinate
↳ Buyer becomes owner in common of such mass
FO b
► Tradition Brevi Manu – buyer is already in possession
► Tradition Symbolica – delivery of keys
► Constitutum Possessorium – seller still possesses SLB
► By formality – by execution of a public instrument
↳ Time and Place: Stipulation, or reasonable time, trade
↳ Delivery of less – Buyer may reject or accept (fair value)
↳ Delivery of more – Reject the rest or accept and pay
► Real estate – delivered less than agreed:
➭ Specific performance, demand delivery of shortage
➭ Accion quanti minoris – reduction of price
➭ Rescission – lacking for atleast 1/10

↳ Becomes owner of the whole mass – mass is less than  Pay taxes and incidents of sale – XPN: stipulation
► Seller – bound to make good of the deficiency  To warrant the thing
↳ THERE IS A CONTRACT OF SALE OF GOODS: ↳ Express – affirmation of fact, opinion is not a warranty
► Emptio rei speratae – future thing, must come into ↳ Implied – 60 days to 1 year
T te

existence; otherwise, not effective ► Eviction – seller: right to sell, buyer: right to enjoy
► Emptio spei – sale of hope, valid even hope does not ► Hidden defects – vendor is not liable if the buyer:
come into existence (ex. lotto ticket) ➭ (1) knows the defect (2) the defect is visible
► VOID – Vain hope; Future inheritance ► Non-apparent encumbrance – rescission, damages
N inu

↳ Sole owner of undivided interest – may sell

↳ Subject to a resolutory condition – may be the object Rights of an Unpaid Seller
 Possessory lien – retain and withhold delivery
Perfection of Contract of Sale ↳ Sold without credit stipulation, or expired credit term
GR: no form required XPN: Statute of Frauds ↳ Buyer becomes insolvent
 Transfer of ownership – GR: after delivery XPNs: ↳ Loss of Lien: Delivered without reservation or waiver
↳ (1) Agreement: fully paid (2) Auction: fall of the hammer
M

 Stoppage in Transitu – stop the goods while in transit

 Option Money – binding if distinct from consideration ↳ (1) By taking actual possession (2) notice to carrier
 Earnest Money – part of purchase price (proof of perfection)  Resale – (1) perishable (2) Expressly reserved (3) default
O

 Rescind – seller should have lien (possessory or stoppage)

Recto Law
 Does not apply to sales on credit Obligations of a Buyer
st

 Sale or lease & purchase - personal property in installments
Remedies of the Seller – alternative: choose only one
1. Exact fulfilment - only remedy if only ONE unpaid installmnt
La
 Pay the price – at the time and place (including interests)
 Accept delivery – not bound to accept delivery in installment
Double Sale

2. Cancel the sale – rescission, mutual restitution  Movable – better right for who is a possessor in good faith
↳ Allowed to retain paid price – if there is forfeiture clause ↳ Regardless of first sale, if other buyer took possession GF
3. Foreclose chattel mortgage - seller is not entitled to  Immovable – better right (in order)
recover in case of deficiency (PROPERTY ITSELF)
↳ First register in good faith (GF:no knowledge of first sale)
↳ If another security is foreclosed, seller may collect
↳ First to take possession in good faith
2 and 3 is available only for TWO or more unpaid installments
↳ One with oldest title
Maceda Law
 Sale of residential property in installments (not for credit) Extinguishment
 Not applies to industrial, commercial, agricultural properties  Cancellation or rescission
 Conventional Redemption – repurchase (pacto de retro)
Remedies of the Buyer ↳ Subject to resolutory condition (not absolute)
1. Has paid installments at least 2 years ↳ Visible fruits at sale and redemption – reimburse if paid
↳ Grace Period – pay without interest within 60 days ↳ No fruits at sale but in redemption – pro-rated
! Applicable only once every 5 years ↳ Equitable Mortgage – presumed if:
↳ Sell or assign his interest, or pay the entire balance ► Price is unusually inadequate
2. Additional rights after paying 2 years’ worth ► Seller remains in possession as lessee
↳ Additional 1 month grace period every year ► Purchaser retains part of price, seller pays the taxes
↳ Seller rescinds*: Give the cash surrender value first  Legal Redemption – right to be subrogated
! Minimum of 50% of all payments (including down) ↳ Co-owners - Right to redeem if sold to third parties
! Plus 5% a year after 5 years (max of 90%) Ex. A may redeem price: only reasonable
*Takes effect only after 30 days, after (1) Notice of intention (2) CSV B may redeem
C sold to Z
 CREDIT TRANSACTIONS

PLEDGE REAL ESTATE MORTAGE CHATTLE MORTGAGE

Personal (movable) property susceptible Real property but extends to the natural Personal property subject thereof
of possession including incorporeal rights accessions, improvements, growing fruits,
and the rents or income not yet received
when the obligation becomes due, and to
Object the amount of indemnity from insurance or
from expropriation

And may include after acquired properties

as per stipulation.
Delivery Consensual but covered by the statute of Formal
frauds
Public instrument required to bind third Affidavit of Good Faith registered in the
parties Public instrument that is registered in the Chattel Mortgage Registry in the Registry of
Registry of deeds is required to bind third Deeds required to bind third parties.
Perfection
parties
For vessels – registration is with the

s
MARINA

For motor vehicles - + report to the LTO

le
Transferred to the pledgee Retained by the mortgagor Retained by the mortgagor
(should be the user of the object)
Possession Return of the thing pledged by the pledgee
to the pledgor shall result in

LE cu
extinguishment of the contract of pledge.
That which is existing at the time of the GR: Only that which is stated in the deed Those indicated in the Affidavit of Good
Principal pledge even if less than the amount of loan. Faith unless there is stipulation as to
obligation increase in coverage which will be binding
covered XPN: if there is stipulation to cover future but the security itself arises only after
advancements. (dragnet clause) amending the old contract.

SA er
Sale of the VALID as long as with consent1 of the VALID – any stipulation to the contrary is Mortgagor-owner cannot sell the property
thing during creditor/pledgee who shall continue in void. mortgaged otherwise he can be criminally
pendency of possession2 even if the ownership3 is Completely allowed liable under Art. 319 of the RPC: Removal
the contract transferred to the buyer. (pactum de non-aliendo) of Mortgaged Property.
Sale of thing Done by notary public – public auction – Extrajudicial (Act No. 3135) or Extrajudicial (Act No. 1508)
R H
to answer for
the debt
always extrajudicial – no intervention of
the courts.
Judicial (Rule 68)

Required – stating the amount due Extrajudicial – not required, unless Required 10 days prior to sale
stipulated.
NOTICE of
In a legal pledge, a demand for the Posting in two or more public places 10
sale to the
y
amount is required and foreclosure must be Judicial - Posting in 3 public places at days before auction
mortgagor or
made within 1 month from such demand. least 20 days prior to sale and publication
pledgor
of the notice of sale in a newspaper of
FO b

general circulation
Right to The creditor is entitled to the excess Creditor is not entitled to the excess Creditor is not entitled to the excess
excess of Always the mortgagor for the excess
selling price EXCEPT:
over unpaid 1. There is stipulation to the contrary; and
T te

obligation 2. In case of legal pledges

Creditor’s right The creditor is NOT entitled to recover
to recover any deficiency
deficiency XPN: Legal Pledge – creditor may recover
N inu
Creditor can recover deficiency Creditor can recover deficiency unless
XPN: Mortgagor is a third party (unless covered by the RECTO LAW (i.e., sale of
stipulation makes him liable) personal property on installment)
EXTRAJUDICIAL FORECLOSURE: 1 year

from date of foreclosure, except:

1. Creditor is a bank
2. Debtor is a juridical person
No right of redemption after foreclosure
Redemption No right of redemption In which case the redemption period is until
sale.
the registration of the foreclosure sale, not
exceeding 3 months.
M

JUDICIAL FORECLOSURE: 90-120 days or

until the court confirms the sale
O

MORE ABOUT PLEDGE

 Cannot be deposited to a third party, EXCEPT: (1) In danger – pledgee’s (creditor) negligence or willful act (2) Pledgee uses or misuses the thing
st

 Alienation or Sale of the thing pledged: allowed with creditor’s consent

 Creditor is deceived – may claim another thing or demand immediate payment
 Use of the thing – creditor is allowed to use if (1) authorized by the owner-mortgagor (2) the preservation requires use of the thing
 Extinguished if: returned to the pledgor. Prima facie evidence if in possession of pledgor
 Renounced or Abandoned: statement in writing (sufficient to extinguish the pledge) – no need for pledgor to accept; for pledgee to return
La

 Foreclosure – pledgor is allowed to bid

 Creditor’s right of appropriation: if still not sold in its second auction
 Legal pledge – debtor is entitled to excess, but creditor may recover
 Conventional pledge – debtor is not entitled to excess; creditor cannot recover (stipulation to recover is VOID)

SIMILARITIES BETWEEN PLEDGE AND MORTGAGE

Requisites
 Constituted to secure the fulfillment of a principal obligation GR: Indivisible even debt may be divided among successors
 Pledgor or mortgagor must be the absolute owner of the thing Pledge Pledge Pledge
 That person must have free disposal or is legally authorized = INDIVISIBLE
Obligation even not solidary
Accessory Contract – exist dependently to a principal contract
XPN: Each several things guarantee only a determinate portion
Third Persons may secure the obligation using their own Pledge Obligation
property (there is still absolute ownership) Pledge Obligation = Indivisibility
Pledge Obligation not applicable
PACTUM COMMISSORIUM is VOID – automatic appropriation

Certified Public Accountant 2023