Commerce MA

COMMERCIAL LAW MEMORY AID 2002
ATENEO CENTRAL BAR OPERATIONS
CODE OF COMMERCE
COMMERCE - branch of human activity; purpose is to bring products to the consumer through operations habitually and with intent of gain - bringing products from the manufacturers to the consumers COMMERCIAL LAW - branch of private law which regulates the juridical relations arising from commercial acts CHARACTERISTICS OF COMMERCIAL LAW: 1. universal 2. uniform 3. equitable 4. customary 5. progressive PORTIONS OF CODE OF COMMERCE STILL APPLICABLE: 1. merchants; book of merchants and general provision of contracts 2. joint account association 3. commercial barter 4. transfers of non-negotiable credits 5. commercial contracts of overland transportation 6. letters of credit 7. maritime commerce OTHERS: 1. Characteristics o Co!!erce: a. habituality b. rapidity - if period is fixed, debtor in delay without need of demand; if contract does not fix period, 10 days c. intent to join
3. Mercha"t: a. Individuals - legal capacity, or subject to parental authority, habitually engaged in commerce b. Juridical Persons - commercial and industrial company organi ed in accordance with law, habitually engaged in business 4. #e"era$ R%$e: !inors cannot engage in commerce Exceptions:
a. to continue business of deceased parents through guardian b. court authori es guardian to place minor and property in business c. minor is an alien and his national law allows him to be a merchant
5. Which persons are not allowed to engage in commerce? a. suffering accessory penalty of civil interdiction "reclusion perpetua and reclusion temporal# b. those judicially declared insolvent until they can obtain their discharge c. prohibited by $onstitution and special laws
6. A$ie"s a. capacitated under his national law to engage in business b. engaged in the business in the %hilippines not reserved for the &ilipinos c. after securing license and '() certificate
7. Fa!i$& Co'e: Either spouse may engage in business ; when objected to by the other, court will look into valid grounds, i*e* serious and moral grounds 8. BOI Certi icate must !e o!tained !": a. alien b. foreign firm 9. #eaning o Philippine $ational a. citi en b. domestic corporation wholly owned and organi ed by &ilipinos in the %hilippines c. &ilipino corporation where &ilipino capital entitled to vote is at least +0, 10. %uer": )f a corporation is a shareholder of another corporation, how do you determine whether the latter corporation is a &ilipino national&nswer: The following must concur a. .t least +0, of the outstanding capital stock and entitled to vote of both corporations are held by citi ens of the %hilippines b. .t least +0, of the 'oard of /irectors of both corporations are &ilipinos 11. 'enor o BOI Certi icate a. 'usiness or activity to be engaged is consistent with the )nvestment %riorities %lan b. 'usiness will contribute to the sound and balanced development of the national economy in a self-sustaining basis c. 'usiness will not conflict with the $onstitution and local laws
d. 'usiness is not adequately exploited by &ilipino nationals e. 0o danger of monopolies1combinations in restraint of trade
12. Basic Principles(Conditions laid down !" BOI a. resident agent of foreign firm is a &ilipino citi en b. establishment of office in the %hilippines c. bringing assets tot he %hilippine office as capital
d. complete set of accounting records 13. #erger and Consolidation su!)ect to BOI re*uirements or the issuance o certi icate: 3hen merger and consolidation result in ownership and control of non-&ilipino nationals over more than 40, of the capital of a consolidated corporation* 14. +EC ,icense issued upon compliance with the ollowing re*uirements: a. proof of compliance with principle of reciprocity b. '() certificate c. .pplicant for license gives required information articles of incorporation by-laws names and addresses of resident agents principal place of business in the %hilippines
d. proof of solvency e. deposit acceptable securities to protect future creditors
LETTERS OF CREDIT
1. (i"'s: a. $ommercial 5etters of $redit b. 6raveler7s 5etters of $redit 2. 0o protest required in case of dishonor* 3. )ssued to definite persons and not to order, thus, non-negotiable* 4. 5imited to a fixed account*
B)L( SALES LAW

1. Purpose: meant to protect creditors of businessmen against preferential or fraudulent transfers 2. 6he law covers all transactions, whether done in good faith or not, or whether or not the seller is in a state of insolvency , that fall within the description of what is a 8bulk sale9* 3. '"pes o transactions which are treated as -!ul. sales/: a. :ale, transfer, mortgage or assignments of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade;
b. :ale transfer, mortgage or assignments of all, or substantially all, of the business of the vendor, mortgagor, transferor, or assignor; c. :ale, transfer, mortgage, or assignment of all, or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor, transferor, or assignor*
4. (nly creditors at the time of the sale in violation of the law are within the protection of the laws and creditors subsequent to the sale are not covered* 5. Even i the transaction alls within the de inition o -!ul. sale/0 the ollowing are not deemed covered !" the law: a. )f the vendor, mortgagor, transferor or assignor produces and delivers a written waiver of the provisions of the law from his creditors as shown by verified statements; b. 6he law does not apply to executors, administrators, receivers, assignees in insolvency, or public officers, acting under process* 6. O!ligations when transaction is a !ul. sale: a. The vendor must deliver to such vendee a written statement of: names and addresses of all creditors to whom said vendor or mortgagor may be indebted; amount of indebtedness due or owing to each of said creditors b. The vendor must apply the purchase money to the pro-rata payment of bona fide claims of the creditors as shown in the verified statement. c. The seller, at least 10 days before the sale, shall: make a full detailed inventory of the goods, merchandise, etc*, cost price of each article to be included in the sale notify every creditor at least 10 days before transferring possession of the goods, of the price, terms and conditions of the sale d. The purpose of going through the transaction must not be nominal. 7. Conse*uences o 1iolation o 2e*uirements under 34 a!ove stated: a. b. c. d. hen !"a# above is not complied with , the sale itself is void; the seller will be criminally liable* hen !"b# above is not complied with, the sale itself is also void; seller is also criminally liable* hen !"c# is not complied with , the sale is not void; no criminal and civil consequences on the seller* hen !"d# is not complied with, the transaction itself is void and seller will be criminally liable* 6he transaction is void not here not because of the 'ulk :ales 5aw but of the common law principle that if the price in a sale is nominal, it is not real, making the contract void*
RETAIL TRADE NATIONALI*ATION LAW + RETAIL TRADE LIBERALI*ATION ACT OF 2000 ,R-A- ./021
Note: $ertain doctrines under the <etail 6rade 0ationali ation 5aw are still applicable under the <etail 6rade 5iberali ation .ct*
<*.* =>+2 repealed <*.* 0o* 11=0, or the <etail 6rade 0ationali ation 5aw*
1. Retai$ Tra'e - any act, occupation, or calling of habitually selling direct to the general public, merchandise, commodities, or goods for consumption ?urisprudence has held that the term $retail% should be associated with and limited to goods for personal, family or household use, consumption and utili ation* 6he <etail 6rade 0ationali ation 5aw refers to $consumption goods% or $consumer goods% which directly satisfy human wants and desires and are needed for home and daily life* @xcluded from the law are those goods which are considered generally raw material used in the manufacture of other goods, or if not, as one of the component raw material, or at least as elements utili ed in the process of production and manufacturing* 2. ,i!eral polic" o 25&5 6748: to promote consumer welfare in attracting, promoting and welcoming productive investments that will bring down prices for the &ilipino consumer, create more jobs, promote tourism, assist small manufacturers, stimulate economic growth and enable %hilippine goods and services to become globally competitive through the liberali ation of the retail trade sector; to encourage &ilipino and foreign investors to forge an efficient and competitive retail trade sector n the interest of empowering the &ilipino consumer through lower prices, higher quality goods, better services and wider choices* 2. Elements o What Constitutes 2etail 'rade: a. 6he seller habitually engages in selling; b. 6he sale is direct to the general public; and c. 6he object of the sale is limited to merchandise, commodities or goods for consumption* 3. Consumer goods vs5 non-consumer goods: a* 6he act uses the same phrase 8merchandise, commodities or goods for consumption9 in defining retail trade as found in the old law* 6he $ourt interpreted the old law to exclude from its coverage merchandise and goods which are not 8consumer goods*9 i* $onsumer goods are limited to goods for personal, family or household use, consumption and utili ation* &almaceda v. 'nion (arbide )hilippines, *nc. ii* . manufacturer which sells rubber products to the government, assembly plants, industrial and commercial enterprises engaged in manufacturing and sale of essential commodities is not engaged in retail business, but its sales to its own officers and employees would be considered retail trade* +oodyear Tire and ,ubber (o. v. ,eyes- &... +oodrich v. ,eyes, /r. b. consumer goods therefore did not depend entirely on the nature of the goods, but also re0uired an element the purpose or use for which the goods are bought. c* %roducer goods such as tools and raw materials and intermediate goods are excluded from the coverage* 1arsman 2 (o., *nc. v. .irst (oconut (entral (o., *nc.
4. E2e!3te' Tra"sactio"s- ,estrictions of the 3ct shall not apply to: a* :ales by a manufacturer, processor, laborer, or worker, to the general public the products manufactured, processed or produced by him if his capital does not exceed %100,000*00; b* :ales by a farmer or agriculturist selling the products of his farm, regardless of capital;
c* :ales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital, provided that the restaurant is incidental to the hotel business; d* :ales to the general public, through a single outlet owned by a manufacturer or products manufactured, processed or assembled in the %hilippines, irrespective of capitali ation; e* :ales to industrial and commercial users or consumers who use the products bought by them to render service to the general public and1or produce or manufacture goods which are in turn sold by them; or f* :ales to the government and1or its agencies and government-owned and controlled corporations*
5. 2ights o ormer natural-!orn 9ilipinos: a* . natural-born citi en of the %hilippines who has lost his %hilippine citi enship but who resides in the %hilippines shall be granted the same rights as &ilipino citi ens for purposes of retail trade under the .ct* b* 4atural-born .ilipino citi5ens are those who are citi ens of the %hilippines from birth without having to perform any act to acquire or perfect their citi enship* 6. 9our categories o 2etail 'rade Enterprises0 or purposes o determining who are *uali ied to I$1E+' in retail trade in the Philippines: a* Categor" & B @nterprises with paid-up capital of the equivalent in %hilippine %esos of less than C:D2,A00,000*00; b* Categor" B B @nterprises with a minimum paid-up capital of the equivalent in %hilippine %esos of C:D2,A00,000*00, but less than C:D>,A00,000*00, provided that in no case shall the investments for establishing a store be less than the equivalent in %hilippine %esos of C:D;0,000*00; c* Categor" C B @nterprises with a paid-up capital of the equivalent in %hilippine pesos of C:D>,A00,000*00 or more, provided that in no case shall the investments for establishing a store be less than the equivalent in %hilippine %esos of C:D;0,000*00; and d* Categor" : B @nterprises speciali ing in high-end or luxury products with a paid-up capital of the equivalent in %hilippine %esos of C:D2A0,000*00 per store* i* 6igh-end or lu7ury goods: goods not necessary for life maintenance and whose demand is generated by the higher income groups "e*g*, jewelry, designer clothing, footwear, electronics, sporting goods#* 7. Ho4 A$ie"s !a& i"5est i" retai$ tra'e- 3ct provides for following rules on who may *48E/T or E4+3+E in retail trade enterprises in the )hilippines: a* $iti ens of the %hilippines, natural-born citi ens who have lost their %hilippine citi enship but who reside in the %hilippines, and domestic partnerships, associations, and corporations which are wholly-owned by &ilipino citi ens, may engage directly, or invest wholly in local enterprises that will engage in all forms of retail trade in all categories provided; b* (ther than in exempted transactions, alien individuals, foreign partnerships, associations and corporations and foreign-owned domestic partnerships, associations and corporations may not invest in retail trade enterprises under $ategory . "paid-up capital equivalent in %esos of less than D2*A!# which are reserved exclusively for &ilipino citi ens, natural-born citi ens who have lost
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their %hil citi enship but who reside in %hilippines, and corporations wholly owned by &ilipino citi ens* c* &oreign-owned domestic partnerships, associations and corps may, upon registration with the :@$ and /6), or in case of foreign-owned single proprietorships, with the /6), may invest in retail trade enterprises as followsE i. 'nder (ategory &: 1* limited to not more than +0, of total equity of such retail enterprise within the first 2 years after the effectivity of the .ct "or up to !arch, 2002#; and 2* may wholly own such retail enterprises 2 years after effectivity of .ct "i*e*, beginning .pril 2002#; provided that the investments for establishing a store is less than the equivalent in %hilippine %esos of C:D;0,000*00; ii* 'nder (ategory (: may wholly own, provided that investments for establishing a store is not less than the equivalent in %hilippine %esos of C:D;0,000*00; and iii* 'nder (ategory 9: may wholly own*
8. .or purposes of investment , a mere investor need not organi e a corporation, partnership, or association under %hilippine laws before it may invest* 9. 3pply grandfather rule to determine whether an entity is deemed $foreign-owned% to 0ualify to engage in retail activities under (ategories &, (, and 9. a* .or purposes of investments, /E( rule: shares belonging to corporations or partnerships at least +0, of the capital of which his owned by &ilipino citi ens shall be considered as of %hilippine nationality, but if percentage of &il ownership is less than +0,, only the number of shares corresponding to such percentage shall be counted as of %hilippine nationality* b* 3hile a corp with +0, &ilipino and 40, foreign equity ownership is considered a %hilippine national for purposes of investment, it is not qualified to invest in or enter a joint-venture agreement with corporations or partnerships, the ownership of which under the $onstitution or special laws are limited to &ilipino citi ens only* 10. Forei6" Retai$ers a* Implementing 2ules and 2egulations: an individual who is not a &ilipino citi en, or a corporation, partnership, association or entity that is not whollyowned by &ilipinos, engaged in retail trade* 6his definition seems to include even a domestic partnership or corporation which is not wholly owned by &ilipinos* 3hen owning entity is a corporation, apply grandfather rule* !5 Pre*uali ication re*uirements !e ore oreign retailer ma" engage or invest in a retail store0 all o the must concur: i* !inimum net worth of 1* C:D200,000,000 of the registrant corporation for $ategories ' and $; and 2* C:DA0,000,000 net worth of registrant corp for $ategory /*
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ii* &ive "A# retailing branches or franchises in operation anywhere around the world unless such retailer has at least one "1# store capitali ed at a minimum of C:D2A,000,000; iii* &ive "A# year track record in retailing; and
iv* 0ationals from, or juridical entities formed or incorporated in countries which allow the entity of &ilipino retailers shall be allowed to engage in retail trade in %hils* 11. Promotion o locall" manu actured products: a* &or 10 years after effectivity of .ct, at least ;0, of the aggregate cost of the stock inventory of foreign retailers under $ategory ' and $, and 10, for $ategory / shall be made in the %hilippines* 12. Prohi!ited activities o *uali ied oreign retailers: 0ot allowed to engage in certain retailing activities outside their accredited store through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retail activities* /etailed list of prohibited activities shall be formulated by /6)* 13. &nti-:umm" ,aw applies: &ilipinos may not permit aliens to use them as nominees or dummies to enjoy privileges reserved for &ilipinos or &il corps* /ee below.
ANTI7D)MMY ACT
1. 6he .ct penali es &ilipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved for &ilipinos or &ilipino corporations* $riminal sanctions are imposed on the president, manager, board member or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and franchises* 2. 9is0ualified aliens cannot intervene in the management, operation, administration or control of the business reserved to .ilipinos whether as an officer, employee or laborer, with or without remuneration , e2ce3t 4he": a. alien takes part in technical aspects; b. provided that no &ilipino can do such technical work; and c. with express authority from the %resident, upon the recommendation of the department head concerned*
3. B" wa" o exception0 the ollowing ma" participate in management: a. .liens may be elected to the 'oard of /irectors to the extent of their allowable share in the capital of the corporation "in partially nationali ed industries#* b. . registered enterprise may employ foreign nationals in supervisory, technical, and advisory positions for a period of A years subject to extension* c. 3here majority of stocks of a pioneer enterprise is owned by foreign investors, the following positions may be held by foreign nationalsE president treasurer general manager equivalent positions
4. 3 .ilipino common-law wife of an alien is not barred from engaging in the retail business provided she uses capital e7clusively derived from her paraphernal properties ; however,
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allowing her common-law alien husband to take part in the management of the retail business would be a violation of the law* 5. What doing !usiness means: a. soliciting orders, purchases, service contracts; b. opening offices whether called liaison offices or branches; c. appointing representatives or distributors who are domiciled in the %hilippines or who in any calendar year stay in the country for a period totaling 1=0 days or more;
d. participating in the management or supervision or control of any domestic firm, entity or corporation in the %hilippines; e. any other act or acts that imply continuity in commercial dealings 6. 3hen commissioned merchants1investors or commercial brokers act in their own name in selling foreign products, the foreign firm manufacturing these products is not doing business in the %hilippines* 7. 3hen a local corporation or person acts in the name of a foreign firm, the latter is doing business in the %hilippines* 8. 'he ollowing are $O' doing !usiness: a. mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business; b. exercise of rights as such investor; c. having a nominee director or officer to represent interests in such corporation;
d. appointing a representative or distributor domiciled in the %hilippines which transacts business in its own name and for its own accounts*
TR)ST RECEPTS LAW

1. P%r3ose: a. to encourage use of and to promote transactions based on trust receipts; b. to regulate the use of trust receipts 2. De i"itio": . written1printed document signed by the @06<C:6@@ in favor of the @06<C:6@< whereby the latter releases the goods, documents or instruments to the possession of the former upon the @06<C:6@@7: promise to hold said goods in trust for the @06<C:6@<, and to sell the goods, etc* 3)6F 6F@ ('5)G.6)(0 6( 6C<0 (H@< 6F@ %<($@@/: 6F@<@(& 6( 6F@ @I6@06 (& 3F.6 ): (3)0G 6( 6F@ @06<C:6@<; or to return the goods if C0:(5/, or for other purposes* 3. 6rust receipts are denominated in %hilippine currency or acceptable and eligible foreign currency* 4. @06<C:6@< is not liable as principal or vendor under any sale or contract to sell made by the @06<C:6@@* 5. <isk of loss is borne by the @06<C:6@@* 6. %ending the duration of the trust agreement, the @06<C:6@<7: security interest cannot be prejudiced by claims of creditors of the @06<C:6@@*
7. 5oss of goods pending the dispossession shall not extinguish the obligation to the @06<C:6@< for the value thereof*
NE#OTIABLE INSTR)MENTS LAW

1. Ne6otia8$e I"str%!e"ts - written contracts for the payment of money; by its form, intended as a substitute for money and intended to pass from hand to hand, to give the holder in due course the right to hold the same and collect the sum due* 2. Characteristics o $egotia!le Instruments: a. negotiability - right of transferee to hold the instrument and collect the sum due b. accumulation of secondary contracts - instrument is negotiated from person to person 3. Di ere"ce 8et4ee" Ne6otia8$e I"str%!e"ts ro! No"7Ne6otia8$e I"str%!e"ts: Ne6otia8$e I"str%!e"ts $ontains all the requisites of :ec* 1 of the 0)5 6ransferred by negotiation Folder in due course may have better rights than transferor %rior parties warrant payment 6ransferee has right of recourse against intermediate parties No"7"e6otia8$e I"str%!e"ts does not contain all the requisites of :ec* 1 of the 0)5 transferred by assignment transferee acquires rights only of his transferor prior parties merely warrant legality of title transferee has no right of recourse
4. Di ere"ce 8et4ee" Ne6otia8$e I"str%!e"ts a"' Ne6otia8$e Doc%!e"ts o Tit$e Ne6otia8$e I"str%!e"ts Fave requisites of :ec* 1 of the 0)5 Fave right of recourse against intermediate parties who are secondarily liable Folder in due course may have rights better than transferor :ubject is money )nstrument itself is property of value Ne6otia8$e Doc%!e"ts o Tit$e does not contain requisites of :ec* 1 of 0)5 no secondary liability of intermediate parties transferee merely steps into the shoes of the transferor subject is goods
instrument is merely evidence of title; thing of value are the goods mentioned in the document 5. Pro!issor& Note 7 unconditional promise to pay in writing made by one person to anther, signed by the maker, engaging to pay on demand or a fixed determinable future time a sum certain in money to order or bearer* 3hen the note is drawn to maker7s own order, it is not complete until indorsed by him* ":ec* 1=4 0)5# Parties: a* maker b* payee 6. Bi$$ o E2cha"6e 7 unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on
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demand or at a fixed or determinable future time a sum certain in money to order or to bearer* ":ec* 12+ 0)5# Parties: a* drawer b* payee c* drawee1 acceptor 7. Chec9 7 bill of exchange drawn on a bank and payable on demand* ":ec* 1=A 0)5# 8. Di ere"ce 8et4ee" Pro!issor& Note a"' Bi$$ o E2cha"6e Pro!issor& Note Cnconditional promise )nvolves 2 parties !aker primarily liable only 1 presentment - for payment Bi$$ o E2cha"6e unconditional order involves ; parties drawer only secondarily liable generally 2 presentments - for acceptance and for payment
9. Disti"ctio"s 8et4ee" a Chec9 a"' Bi$$ o E2cha"6e CHEC( - always drawn upon a bank or banker - always payable on demand - not necessary that it be presented for acceptance - drawn on a deposit - the death of a drawer of a check, with knowledge by the banks, revokes the authority of the banker to pay - must be presented for payment within a reasonable time after its issue "+ months# BOE - may or may not be drawn against a bank - may be payable on demand or at a fixed or determinable future time - necessary acceptance that it be presented for
- not drawn on a deposit - the death of the drawer of the ordinary bill of exchange does not revoke the authority of the banker to pay - may be presented for payment within a reasonable time after its last negotiation*
10. :istinctions !etween a Promissor" $ote and Chec. PN - there are two "2# parties, the maker and the payee - may be drawn against any person, not necessarily a bank - may be payable on demand or at a fixed or determinable future time - a promise to pay CHEC( - there are three ";# parties, the drawer, the drawee bank and the payee - always drawn against a bank -always payable on demand - an order to pay
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11. Other 9orms o $egotia!le Instruments: a. certificates of deposits b. trade acceptances c. bonds in the nature of promissory notes
d. drafts which are bills of exchange drawn by 1 bank to another e. letters of credit 12. Tr%st Recei3t 7 a security transaction intended to aid in the financing of importers and retailers who do not have sufficient funds to finance their transaction and acquire credit except to use as collateral the merchandise imported 13. Re:%isites o a Ne6otia8$e Note ,PN1: ,S)DO1 *t must: a. be in writing signed by the drawer b. contains an %nconditional promise or order to pay a sum certain in money c. be payable on 'emand or at a fixed determinable future time
d. be payable to order or to bearer ":ec* 1 0)5# 14. Re:%isites o a Ne6otia8$e Bi$$ ,BOE1: ,S)DOC1 *t must: a* b* be in writing signed by the drawer contains an %nconditional promise or order to pay a sum certain in money
c* be payable on 'emand or at a fixed determinable future time d* be payable to order or to bearer
e* the drawee must be named or otherwise indicated with reasonable certainty ":ec* 1 0)5# Notes o" Sectio" ;: *n order to be negotiable , there must be a writing of some kind, else there would be nothing to be negotiated or passed from hand to hand* 6he writing may be in ink, print or pencil* )t may be upon parchment, cloth, leather or any other substitute of paper* *t must be signed by the ma:er or drawer. )t may consist of mere initials or even numbers, but the holder must prove that what is written is intended as a signature of the person sought to be charged* 6he 'ill must contain an order, something more than the mere asking of a favor* :um payable must be in money only* )t cannot be made payable in goods, wares, or merchandise or in property* . drawee7s name may be filled in under :ection 14 of the 0)5
15. :etermination o negotia!ilit" a* by the provisions of the 0egotiable )nstrument 5aw, particularly :ection 1 thereof b* by considering the whole instrument
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c* by what appears on the face of the instrument and not elsewhere K*n determining is the instrument is negotiable , only the instrument itself and no other, must be examined and compared with the requirements stated in :ec* 1* )f it appears on the instrument that it lacks one of the requirements, it is not negotiable and the provisions of the 0)5 do not govern the instrument* 6he requirement lacking cannot be supplied by using a separate instrument in which that requirement which is lacking appears* 16. +um is certain even i it is to !e paid with: a. interest b. in installments c. in installments with acceleration clause
d. with exchange e. costs of collection or attorney7s fees ":ec* 2 0)5# 17. ;eneral 2ule: 6he promise or order should not depend on a contingent event* *f it is conditional, it is non-negotiable* Exceptions: a. indication of particular fund from which the acceptor disburses himself after payment b. statement of the transaction which gives rise to the instrument* ":ec* ; 0)5# &ut an order or promise to pay out of a particular fund is not unconditional Notes o" Sectio" < 6he particular fund indicated should not be the direct source of payment, else it becomes unconditional and therefore non-negotiable* 6he fund should only be the source of reimbursement* . statement of the transaction does not destroy the negotiability of the instrument* Exception: 3here the promise to pay or order is made subject to the terms and conditions of the transaction stated*
18. Instrument is pa"a!le upon a determina!le uture time i : a. there is a fixed period after sight1date b. on or before a specified date1fixed determinable future time c. on or at a fixed date after the occurrence of an event certain to happen though the exact date is not certain ":ec* 4 0)5# Notes o" Sectio" = )f the instrument is payable upon a contingency, the happening of the event does not cure the defect "still non-negotiable#
19. #e"era$ R%$e: )f some other act is required other than the payment of money, it is nonnegotiable*
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E2ce3tio"s: a. sale of collateral securities b. confession of judgment c. waives benefit of law
d. gives option to the holder to require something to be done in lieu of money ":ec* A 0)5# Notes o" Sectio" > ;imitation on the provision , it cannot require something illegal* There are two :inds of judgements by confession E a# cognovit actionem b# relicta verificatione (onfessions of judgement in the %hilippines are void as against public policy* )f the choice lies with the debtor, the instrument is rendered non-negotiable*
20. 'he validit" and negotia!ilit" o an instrument is not a ected !" the act that: a* it is not dated b* does not specify the value given or that any had been given c* does not specify the place where it is drawn or payable d* bears a seal e* designates the kind of current money in which payment is to be made ":ec* + 0)5# 21. Instrument is pa"a!le upon demand i : a. it is expressed to be so payable on sight or upon presentation b. no period of payment is stipulated c. issued, accepted, or endorsed after maturity ":ec* > 0)5#
here an instrument is issued, accepted or indorsed when overdue , it is, as regards to the person so issuing, accepting, or indorsing it, payable on demand* Notes o" Sectio" / - if the time for payment is left blank "as opposed to being omitted#, it may properly be considered as an incomplete instrument and fall under the provisions of :ec* 14, 1A, or 1+ depending on how the instrument is delivered* 22. Instrument is pa"a!le to order: where it is drawn payable to the order of a specified person or to a specified person or his order
It ma" !e drawn pa"a!le to the order o : a* a payee who is not a maker, drawer, or drawee b* the drawer or maker c* the drawee
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d* two or more payees jointly e* one or some of several payees f* the holder of an office for the time being ":ec* = 0)5# Notes o" Sectio" . 6he payee must be named or otherwise indicated therein with reasonable certainty* *f there is no payee , there would be no one to indorse the instrument payable to order* 6herefore useless to be considered negotiable* <oint payees in indicated by the conjunction $and% * 6o negotiate, all must indorse* 'eing several payees is indicated by the conjunction 8or9*
23. Instrument is pa"a!le to !earer : a. when it is expressed to be so payable b. when payable to the person named or bearer c. payable to order of fictitious or non-existent person and this fact was known to drawer
d. name of payee not name of any person e. only and last indorsement is an indorsement in blank ":ec* J 0)5# Notes o" Sectio" ? - ictitious person/ is not limited to persons having no legal existence* .n existing person may be considered fictitious depending on the intention of the maker or the drawer* - ictitious person/ means a person who has no right to the instrument because the maker or drawer of it so intended* Fe was not intended to be the payee* where the instrument is drawn, made or prepared by an agent , the knowledge or intent of the signer of the instrument is controlling* 3here the agent has no authority to execute the instrument, the intent of the principal is controlling
24. 'he date ma" !e inserted in an instrument when: a* an instrument expressed to be payable at a fixed period after date is issued undated b* where acceptance of an instrument payable at a fixed period after sight is undated ":ec* 1; 0)5# E ects: any holder may insert the true date of issuance or acceptance the insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course as to the holder in due course, the date inserted "even if it be the wrong date# is regarded as the true date*
25. +u!se*uent <older in :ue Course not a ected !" the ollowing de iciencies:
1A
a. incomplete but delivered instrument ":ec* 14 0)5# b. complete but undelivered ":ec* 1+ 0)5# c. complete and delivered issued without consideration or a consideration consisting of a promise which was not fulfilled ":ec 2= 0)5#
26. <older in :ue Course & ected !" &!normalit"(:e icienc": a. incomplete and undelivered instrument ":ec* 1A 0)5# b. maker1drawer7s signature forged ":ec* 2; 0)5# 27. I"co!3$ete 8%t De$i5ere' I"str%!e"t: 15 Where an instrument is wanting in an" material particular: a. Folder has prima facie authority to fill up the blanks therein* b. )t must be filled up strictly in accordance with the authority given and within a reasonable time* c. )f negotiated to a holder in due course, it is valid and effectual for all purposes as though it was filled up strictly in accordance with the authority given and within reasonable time* ":ec* 14 0)5#
2* Where onl" a signature on a !lan. paper was delivered: a* )t was delivered by the person making it in order that it may be converted into a negotiable instrument b* 6he holder has prima facie authority to fill it up as such for any amount* ":ec* 14 0)5# Notes o" Sectio" ;= if the instrument is wanting in any material particular , mere possession of the instrument is enough to presume prima facie authority to fill it up* material particular may be an omission which will render the instrument non-negotiable "e*g* name of payee#, an omission which will not render the instrument non-negotiable "e*g* date# in the case of the signature in blank, delivery with intent to convert it into a negotiable instrument is required* !ere possession is not enough*
28. Incomplete and =ndelivered Instrument: #e"era$ R%$e: 3here an incomplete instrument has not been delivered, it will not, if completed and negotiated without authority, be a valid contract in the hands of any holder against any person who signed before delivery* ":ec* 1A 0)5# Notes o" Sectio" ;> it is a real defense * )t can be interposed against a holder in due course* delivery is not conclusively presumed where the instrument is incomplete defense of the maker is to prove non-delivery of the incomplete instrument*
29. Co!3$ete 8%t )"'e$i5ere':
1+
#e"era$ R%$e: @very contract on a negotiable instrument is incomplete and revocable until delivery for the purpose of giving effect thereto* * a. )f between immediate parties and remote parties not holders in due course, to be effectual there must be authori ed delivery by the party making, drawing, accepting or indorsing* /elivery may be shown to be conditional or for a special purpose only b. )f the holder is a holder in due course, all prior deliveries are conclusively presumed valid c. )f instrument not in hands of drawer1maker, valid and intentional delivery is presumed until the contrary is proven ":ec* 1+ 0)5# R%$es o" 'e$i5er& o "e6otia8$e i"str%!e"ts: 1# delivery is essential to the validity of any negotiable instrument 2# as between immediate parties or those in like cases, delivery must be with intention of passing title ;# an instrument signed but not completed by the drawer or maker and retained by him is invalid as to him for want of delivery even in the hands of a holder in due course 4# but there is prima facie presumption of delivery of an instrument signed but not completed by the drawer or maker and retained by him if it is in the hands of a holder in due course* 6his may be rebutted by proof of non-delivery* A# an instrument entrusted to another who wrongfully completes it and negotiates it to a holder in due course, delivery to the agent or custodian is sufficient delivery to bind the maker or drawer* +# )f an instrument is completed and is found in the possession of another, there is prima facie evidence of delivery and if it be a holder in due course, there is conclusive presumption of delivery* ># delivery may be conditional or for a special purpose but such do not affect the rights of a holder in due course* 30. #e"era$ r%$e: a person whose signature does not appear on the instrument is not liable* E2ce3tio": a* one who signs in a trade or assumed name ":ec* 1=# b* a duly authori ed agent ":ec* 1J# c* a forger ":ec* 2;# 31. #e"era$ r%$e: an agent is not liable on the instrument if he were duly authori ed to sign for or on behalf of a principal* 2e*uisites: a* he must be duly authori ed b* he must add words to his signature indicating that he signs as an agent c* he must disclose his principal ":ec* 20 0)5# Notes o" Sectio" 20 if an agent does not disclose his principal, the agent is personally liable on the instrument*
1>
32. Per Proc%ratio" 7 operates as notice that the agent has a limited authority to sign* E ects: the principal in only bound if the agent acted within the limits of the authority given the person who takes the instrument is bound to inquire into the extent and nature of the authority given* ":ec* 21 0)5#
33. #e"era$ r%$e: )nfants and corporations incur no liability by their indorsement or assignment of an instrument* ":ec* 22 0)5# E ects: no liability attached to the infant or the corporation the instrument is still valid and the indorsee acquires title
34. #e"era$ r%$e: a signature which is forged or made without authority is wholly inoperative* E ects: a* no right to retain b* no right to give a discharge c* no right to enforce payment can be acquired* ":ec* 2; 0)5# E2ce3tio": the party against whom it is sought to be enforced is precluded from setting up the forgery or want of authority* Notes o" Sectio" 2< :ection 2; applies only to forged signatures or signatures made without authority .lterations such as to amounts or like fall under section 124 9orms o orger" are a# fraud in factum b# duress amounting to fraud c# fraudulent impersonation (nly the signature forged or made without authority is inoperative , the instrument or other signatures which are genuine are affected 6he instrument can be enforced by holders to whose title the forged signature is not necessary Persons who are precluded rom setting up the orger" are a# those who warrant or admit the genuineness of the signature b# those who are estopped* Persons who are precluded !" warranting are a# indorsers
1=
b# persons negotiating by delivery c# acceptors* drawee bank is conclusively presumed to know the signature of its drawer if endorser=s signature is forged , loss will be borne by the forger and parties subsequent thereto drawee ban: is not conclusively presumed to :now the signature of the indorser * 6he responsibility falls on the bank which last guaranteed the indorsement and not the drawee bank* 3here the payee7s signature is forged, payments made by the drawee bank to collecting bank is ineffective* 0o debtor1creditor relationship is created* .n agency to collect is created between the person depositing and the collecting bank* /rawee bank may recover from collecting bank who may in turn recover from the person depositing* R%$es o" $ia8i$ities o 3arties o" a or6e' i"str%!e"t
I" a PN a party whose indorsement is forged on a note payable to order and all parties prior to him including the maker cannot be held liable by any holder a party whose indorsement is forged on a note originally payable to bearer and all parties prior to him including the maker may be held liable by a holder in due course provided that it was mechanically complete before the forgery a maker whose signature was forged cannot be held liable by any holder
I" a BOE the drawer7s account cannot be charged by the drawee where the drawee paid the drawer has no right to recover from the collecting bank the drawee bank can recover from the collecting bank the payee can recover from the drawer the payee can recover from the recipient of the payment, such as the collecting bank the payee cannot collect from the drawee bank the collecting bank bears the loss but can recover from the person to whom it paid if payable to bearer, the rules are the same as in %0* if the drawee has accepted the bill, the drawee bears the loss and his remedy is to go after the forger if the drawee has not accepted the bill but has paid it, the drawee cannot recover from the drawer or the recipient of the proceeds, absent any act of negligence on their part*
35. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration * ":ec* 24 0)5# E ects: every person whose signature appears thereon is a party for value presumption is disputable
1J
36.
here value has at any time been given for the instrument , the holder is deemed a holder for value in respect to all parties who become such prior to that time* ":ec* 2+ 0)5#
37. E ect o want o consideration: a* .bsence or failure of consideration may be set up against a holder not a holder in due course "personal defense# b* %artial failure of consideration is a defense pro tanto ":ec 2= 0)5# Notes o" Sectio" 2. absence of consideration is where no consideration was intended to pass* failure of consideration implies that consideration was intended but that it failed to pass the defense of want of consideration is ineffective against a holder in due course a drawee who accepts the bill cannot allege want of consideration against the drawer
38. .n accommodation part" is one who signs the instrument as maker, drawer, acceptor, or indorser without receiving value therefor and for the purpose of lending his name to some other person* E ects: - an accommodation party is liable to the holder for value notwithstanding that such holder knew that of the accommodation* ":ec* 2= 0)5# Notes o" Sectio" 2. the accommodated party cannot recover from the accommodation party want of consideration cannot be interposed by the accommodation party an accommodation maker may seek reimbursement from a co-maker even in the absence of any provision in the 0)5; the deficiency is supplied by the 0ew $ivil $ode* he may do this even without first proceeding against the debtor provided: a. he paid by virtue of judicial demand b. principal debtor is insolvent 39. &n instrument is negotiated when: a* it is transferred from one person to another b* that the transfer must be in a manner as to constitute the transferee a holder .or a bearer instrument - by delivery .or payable to order - by indorsement and delivery ":ec* ;0 0)5# 40. Indorsement to !e valid must !e: a* written b* on the instrument itself or upon a piece of paper attached ":ec* ;1 0)5# Notes o" Sectio" <; the paper attached with the indorsement is an allonge
20
an allonge must be attached so that it becomes a part of the instrument, it cannot be simply pinned or clipped to it*
41. (i"'s o I"'orse!e"ts: a* +pecial ":ec* ;4# is one which specifies the person to whom or to whose order, the instrument is to be payable and the indorsement of such indorsee is necessary to the further negotiation of the instrument* b* Blan. ":ec* ;A# is one which specifies no indorsee and an instrument so indorsed is payable to bearer and may be negotiated by delivery* c* 2estrictive ":ec* ;+# is one which prohibits further negotiation, constitutes the indorsee the agent of the indorser or vests the title in the indorsee in trust for or to the use of some other persons* d* %uali ied ":ec* ;=# is one which constitutes the indorser a mere assignor of the title to the instrument* e* Conditional ":ec* ;J 0)5# is one where the indorsement is subject to the happening of a contingent event, that is an event that may or may not happen, or a past event unknown to the parties* 42. E ects o indorsing an instrument originall" pa"a!le to !earer: it may further be negotiated by delivery the person indorsing is liable as indorser to such persons as to make title through his indorsement ":ec* 40 0)5# Notes o" Sectio" =0 :ection 40 applies only to instruments originally payable to bearer )t cannot apply where the instrument is payable to bearer because the only or last indorsement is in blank
43. 3 holder may stri:e out any indorsement which is not necessary to his title. E ects: .n indorser whose indorsement is struck out is discharged .ll indorsers subsequent to such indorser who has been discharged are likewise relieved* ":ec* 4= 0)5#
44. E ects o a trans er without endorsement: the transferee acquires such title as the transferor had the transferee acquires the right to have the indorsement of the transferor negotiation takes effect as of the time the indorsement is actually made ":ec* 4J 0)5#
45. Ri6hts o a ho$'er: a holder may sue in his own name a holder may receive payment*
E ects: if in due course it discharges the instrument ":ec* A1 0)5#

21
46. Re:%isites or a Ho$'er i" D%e Co%rse ,HDC1: a. receives the instrument complete and regular on its face b. became a holder before it was overdue and had no notice that it had been previously dishonored if such was the fact c. takes the instrument for value and in good faith
d. at time he took the instrument, no notice of infirmity in instrument or defect in the title of the person negotiating it ":ec* A2 0)5# Notes o" Sectio" >2 every holder is presumed to be a 69( ":ec* AJ# the person who questions such has the burden of proof to prove otherwise if one of the requisites are lacking, the holder is not F/$ an instrument is considered complete and regular on its ace i a# the omission is immaterial b# the alteration on the instrument was not apparent on its face an instrument is overdue after the date of maturity* on the date of maturity, the instrument is not overdue and the holder is a F/$ acquisition of the transferee or indorsee must be in good faith good faith means lack of knowledge or notice of defect or infirmity
47. 3 holder is not a 69( where an instrument payable on demand is negotiated at an unreasonable length of time after its issue ":ec* A; 0)5# 48. Ri6hts o a HDC: holds the instrument free from any defect of title of prior parties free from defenses available to prior parties among themselves "personal1 equitable defenses# may enforce payment of the instrument for the full amount against all parties liable":ec* A> 0)5# Notes o" Sectio" >/ %ersonal or equitable defenses are those which grow out of the agreement or conduct of a particular person in regard to the instrument which renders it inequitable for him through legal title to enforce it* $an be set up against holders not F/$ 5egal or real defenses are those which attach to the instrument itself and can be set up against the whole world, including a F/$* Perso"a$ De e"ses 1* absence or failure of consideration 3. want of instrument delivery of complete .lteration 3ant of delivery of incomplete instrument Rea$ De e"ses
22
4. insertion of wrong date where payable at a fixed period after date and issued undated; or at a fixed period after sight and acceptance is undated 5. filling up the blanks authority given or reasonable time 6. fraud in inducement 7. acquisition of the instrument by force, duress or fear 8. acquisition of the unlawful means instrument by contrary to not within
/uress amounting to forgery
&raud in factum or in esse contractus
!inority !arriage in case of a wife )nsanity where the insane person has a guardian appointed by the court Cltra vires acts of a corporation where its charter or by statue, it is prohibited from issuing commercial paper 3ant of authority of agent @xecution of instrument enemies between public
=* acquisition of the instrument for an illegal consideration J* negotiation in breach of faith 10* negotiation under circumstances amounting to fraud 11* !istake 12* intoxication 12* ultra vires acts of corporations 1;* want of authority of the agent where he has apparent authority 14* illegality of contract where form or consideration is illegal 1A* insanity where there is no notice of insanity
)llegality of contract made by statue &orgery
49. 3 instrument not in the hands of a 69( is subject to the same defenses as if it were nonnegotiable. Exception: - 6older ac0uiring from holder in due course Fe derived his title from a holder in due course Fe himself was not a party to any fraud or illegality affecting the instrument <eal defenses can be interposed against him "he is safe only from personal defenses# ":ec* A= 0)5#
Ri6hts o a ho$'er "ot a HDC may sue in his own name may receive payment and if it is in due course, the instrument is discharged holds the instrument subject to the same defenses as if it were non-negotiable
2;
if he derives his title through a F/$ and is not a party to any fraud or illegality thereto, has all the rights of such F/$
50. #e"era$ r%$e: every holder is deemed prima facie to be a holder in due course* E2ce3tio": where it is shown that the title of any person who has negotiated the instrument is defective, the burden is on the holder to prove that he is a F/$ or that a person under whom he claims is a F/$ ":ec* AJ 0)5#
51. A !a9er is 3ri!ari$& $ia8$e: E ects o ma.ing the instrument0 the ma.er: a. engages to pay according to tenor of instrument b. admits existence of payee and his capacity to indorse ":ec* +0 0)5# Notes o" Sectio" 00 a maker7s liability is primarily and unconditional one who has signed as such is presumed to have acted with care and to have signed with full knowledge of its contents, unless fraud is proved the payee7s interest is only to see to it that the note is paid according to its terms when two or more ma:ers sign jointly , each is individually liable for the full amount even if one did not receive the value given the ma.er is precluded rom setting up the de ense that a# the payee is fictional, b# that the payee was insane, a minor or a corporation acting ultra vires
52. A 'ra4er is seco"'ari$& $ia8$e E ects o drawing the instrument0 the drawer: a* admits the existence of the payee, b* the capacity of such payee to indorse c* engages that on due presentment, the instrument will be accepted or paid or both according to its tenor* I the instrument is dishonored0 and the necessar" proceedings on dishonor dul" ta.en a* the drawer will pay the amount thereof to the holder b* will pay to any subsequent indorser who may be compelled to pay it* ":ec* +1 0)5# Notes o" Sectio" 0; a drawer may insert an express stipulation to negative or limit his liability
53. A" acce3tor is 3ri!ari$& $ia8$e B" accepting the instrument0 an acceptor: engages that he will pay according to the tenor of his acceptance
24
admits the existence of the drawer, the genuineness of his signature and his capacity and authority to draw the instrument the existence of the payee and his then capacity indorse
54. Irre6%$ar I"'orser 7 a person not otherwise a party to an instrument places his signature in blan: before delivery is liable as an indorser in the following manner: a* if payable to order of a third person B liable to the payee and to all subsequent parties b* if payable to order of the ma:er or drawer B liable to all parties subsequent to the maker or drawer c* if payable to bearer B liable to all parties subsequent to the maker or drawer d* if signs for an accommodation party B liable to all parties subsequent to the payee ":ec* +4 0)5# 55. Warranties where negotiating !" deliver" or *uali ied endorsement: a* the instrument is genuine and in all respect what it purports to be b* the indorser has good title to it c* all prior parties had the capacity to contract d* indorser has no knowledge of any fact that would impair the validity or the value of the instrument* ,imitations o warranties: -if by delivery B extends only to immediate transferee -warranty of capacity to contract does not apply to persons negotiating public or corporate securities ":ec* +A 0)5# Notes o" Sectio" 0> a qualified indorser is one who indorses without recourse or sans recourse recourse - resort to a person secondarily liable after default of person primarily liable a *uali ied indorser cannot raise the de ense o a# forgery b# defect of his title or that it is void c# the incapacity of the maker, drawer or previous indorsers* a *uali ied Indorsement makes the indorser mere assignor of title of instrument, relieves him of general obligation to pay if instrument is dishonored, but he is still liable for the warranties arising from instrument only up to warranties of general indorser the warranty is to the capacity of prior parties at the time the instrument was negotiated* :ubsequent incapacity does not breach the warranty* lack of knowledge of the indorser as to any fact that would impair the validity or the value of the instrument must be subsisting all throughout* a person 0egotiating by /elivery warrants same as those of qualified indorser and extends to immediate transferees only
2A
56. Warra"ties o a 6e"era$ i"'orser: a* the instrument is genuine and in all respect what it purports to be
b* the he has good title to it c* all prior parties had the capacity to contract d* that the instrument at the time of his indorsement was valid and subsisting ":ec* ++ 0)5# In addition: engages that the instrument will be accepted or paid or both according to its tenor on due presentment engages to pay the amount thereof if it be dishonored and the necessary proceedings on dishonor are taken Notes o" Sectio" 00 the indorser under :ection ++ warrants the solvency of a prior party the indorser warrants that the instrument is valid and subsisting regardless of whether he is ignorant of that fact or not* warranties extend in avor o a# a F/$ b# persons who derive their title from F/$ c# immediate transferees even if not F/$ the indorser does not warrant the genuineness of the drawer7s signature general indorser is only secondarily liable
57. #e"era$ r%$e: )resentment for payment is not necessary to charge persons primarily liable on the instrument. %resentment for payment is necessary to charge the drawer and indorsers* ":ec >0 0)5# Notes o" Sectio" /0 presentation or pa"ment B production of a '(@ to the drawee for his acceptance, or to a drawee or acceptor for payment* .lso presentment of a %0 to the party liable for payment of the same* consists o a# a personal demand for payment at a proper place b# the bill or note must be ready to be exhibited if required and surrendered upon payment* parties primaril" lia!le B persons by the terms of the instrument are absolutely required to pay the same* @*g maker and acceptors* 6hey can be sued directly* if payable at the special place, and the person liable is willing to pay there at maturity, such willingness and ability is equivalent to tender of payment*
2+
presentment is necessary to charge persons secondarily liable otherwise they are discharged Acts "ee'e' to char6e 3erso"s seco"'ari$& $ia8$e: a# presentment for payment1acceptance b# dishonor by non-payment1non-acceptance c# notice of dishonor to secondary parties .cts needed to charge persons secondarily liable in other casesE a# %rotest for nonpayment by the drawee b# protest for non-payment by the acceptor for honor
58. Pro3er 3rese"t!e"t: a* by the holder or an authori ed person b* at a reasonable hour on a business day c* at a proper place d* to the person primarily liable or if absent to any person found at the place where presentment is made "sec* >2 0)5# Notes o" Sectio" /2 only the holder or one authori ed by him has the right to make presentment for payment presentment cannot be made on a :unday or holiday presentment for payment is made to the maker, or acceptor* 0ot to the person secondarily liable* i the instrument is pa"a!le on demand B a# if it is a note B presentment must be made within reasonable time after issue b# if it is a bill - presentment must be made within reasonable time after last negotiation*
59. Presentment not re*uired to charge the drawer: a* he has no right to expect b* he has no right to require that the drawee or acceptor will pay ":ec >J 0)5# 60. Presentment not re*uired to charge the indorser where: a* the instrument was made or accepted for his accommodation b* he has no reason to expect that the instrument will be paid if presented ":ec* =0 0)5# 61. #e"era$ r%$e: %resentment for payment necessary to charge persons secondarily liable otherwise they are dischargedE E2ce3tio": :ection >J and =0
2>
Notes o" Sectio" /? a"' .0 only the drawer or indorser are not discharged* .ll other parties secondarily liable are discharged*
62. Prese"t!e"t or 3a&!e"t e2c%se' i : a. after due diligence, presentment cannot be made b. presentment is waived c. the drawee is a fictitious person ":ec =2 0)5# Notes o" Sectio" .2 what is e7cused is the failure to ma:e presentment * 6here is no need to make any presentment versus under section =1 "delay in presentment# presentment for payment is still required after the cause of delay has ceased*
63. S%!!ar& o r%$es as to 3rese"t!e"t or 3a&!e"t: a* presentment not necessary to charge persons primarily liable b* necessary to charge persons secondarily liable e7cept: the drawer under :ec* >J the indorser under :ec* =0 when excused under :ec* =2 when the instrument has been dishonored by non-acceptance under :ec* =;
64. <ow dishonored !" non-acceptance: the instrument was duly presented but payment is refused or cannot be obtained presentment is excused and the instrument is overdue and unpaid ":ec* =; 0)5#
65. E ects o dishonor !" non-pa"ment: an immediate right of recourse to all parties secondarily liable accrues to the holder* ":ec* =4 0)5# Notes o" Sectio" .= parties cease to be secondarily liable and become principal debtors* 5iability becomes the same as that of the original obligors*
66. Re:%isites or 3a&!e"t i" '%e co%rse: a* made at or after the maturity of the instrument b* to the holder c* in good faith d* without notice of any defect in the holder7s title "sec* == 0)5#
2=
Notes o" Sectio" .. payment must be made to the possessor of the instrument possession of the note by the maker is presumptive evidence that it has been paid
67. Notice o Disho"or !a& 8e 6i5e": a* by or on behalf or the holder b* by or on behalf of any party whoE is a party to the instrument and might be compelled to pay the instrument to a holder who having taken it up would have a right of reimbursement from the party to whom notice is given* ":ec* J0 0)5#
68. Notice: a* may be written or oral ":ec* J+# b* written notice need not be signed or may be supplemented by verbal communication ":ec* JA# c* may be by personal delivery or by mail ":ec* J+# 69. $otice ma" !e waived either expressl" or implied: a* before the time of giving notice has arrived
b* after the omission to give due notice ":ec* 10J 0)5# 70. Protest !a& 8e 4ai5e': E ects: deemed a waiver of presentment and notice of dishonor as well ":ec* 111 0)5# Notes o" Sectio" ;;; 3here notice is waived, presentment is not waived 3here presentment is waived, notice is also waived 3here protest is waived, notice and presentment is waived
71. Notice o Disho"or - given by the holder to the parties secondarily liable, drawer and each indorser, that the instrument was dishonored by non-acceptance or non-payment by the drawee1maker #e"era$ r%$e: .ny drawer or indorser to whom such notice is not given is discharged* E2ce3tio"s: a* 3aiver ":ec* 10J# b* 0otice is dispensed ":ec* 112# c* 0ot necessary to /rawer ":ec* 114# d* 0ot necessary to )ndorser ":ec* 11A# - if notice is delayed, delay may be e7cused ":ec* 11;#
2J
72. Instances when $otice o :ishonor $ot $ecessar" to :rawer a. drawer and drawee same person b. drawee is a fictitious1incapacitated person c. drawer is the person to whom presentment for payment is made
d. drawer has no right to expect that the drawee will accept1pay the instrument ":ec* 114 0)5# 73. Instances when $otice $ot 2e*uired to Indorser a. drawee was a fictitious1incapacitated person and the indorser was aware of such at the time of indorsement b. indorser is the person to whom instrument was presented for payment c. instrument made1accepted for his accommodation ":ec* 11A 0)5#
74. (mission to give notice of dishonor by non-acceptance does not prejudice a F/$ ":ec* 11> 0)5# 75. %rotest only necessary for a foreign bill of exchange* instruments is optional* ":ec* 11= 0)5# 76. Ca%ses o Dischar6e o the I"str%!e"t a. payment by the debtor b. payment by accommodated party c. intentional cancellation by holder of instrument %rotest for other negotiable
d. any other act discharging a simple monetary obligation e. debtor becomes holder of the instrument at1after maturity in his own right " :ec 11J 0)5# Notes o" Sectio" ;;? discharge of the instrument discharges all the parties thereto payment must be in due course, and by the principal debtor or on his behalf if payment is not made by the principal debtor, payment only cancels the liability of the payor and those obligated after him but does not discharge the instrument* payment by an accommodation party does not discharge the instrument*
77. Dischar6e o Seco"'ar& Parties: a. any act discharging the instrument b. cancellation of indorser7s signature by indorsers c. discharge of prior party
d. tender of payment by prior party e. release of principal debtor
;0
f.
extension of payment by the holder1postponement of right to enforce without assent of secondary parties and without reservation of right of recourse against secondary parties ":ec 120 0)5#
78. Ri6hts o a 3art& seco"'ari$& $ia8$e 4ho 3a&s: the instrument is not discharged the party is remitted to his former rights as to all prior parties the party may strike out his own and all subsequent indorsements the party may negotiate the instrument again
E2ce3tio": an instrument cannot be renegotiated where it is payable to order of a ; rd person and has been paid by the drawer and instrument cannot be renegotiated where is was made or accepted for accommodation and it has been paid by the party accommodated*
>=* Re"%"ciatio" 8& a ho$'er 'ischar6es a" i"str%!e"t 4he": a* it is absolute and unconditional b* made in favor of a person primarily liable c* made at or after maturity of the instrument d* in writing or the instrument is delivered up to the person primarily liable ":ec* 122 0)5# Notes o" Sectio" ;22 if renounced in favor of a party secondarily liable, only he is exonerated from liability and all parties subsequent to him discharge by novation is allowed
79. #e"era$ r%$e: hen materially altered, without the consent of all parties liable, the instrument is avoided e7cept as against: a* the party who has made the alteration b* the party who authori ed or assented to the alteration* c* subsequent indorsers E2ce3tio": if in the hands of a F/$, may be enforced according to its original tenor Notes o" Sectio" ;2= there is no distinction between fraudulent and innocent alteration
80. Materia$ A$teratio" B an alternation is said to be material if it alters the effect of the instrument* =nder +ection >8? the ollowing changes are considered material alterations:
;1
a* dates b* the sum payable c* time and place of payment d* number or relations of the parties e* medium or currency for payment f* adding a place of payment where no place is specified
g* any other which alters the affect of the instrument 81. I"sta"ces 4here a BOE !a& 8e treate' as a PN: a* where the drawer and the drawee are one and the same
b* where the drawee is a fictitious person c* where the drawee has no capacity to contract ":ec* 1;0 0)5# The holder has the option to treat it as a &>E or a )4 82. 3cceptance is the signification by the drawee of his assent to the order of the drawer * )t is an act by which a person on whom the '(@ is drawn assents to the request of the drawer to pay it* ":ec* 1;2 0)5# &cceptance ma" !e: a* actual b* constructive c* general ":ec* 140# d* qualified ":ec* 141# 2e*uisites o actual acceptance: in writing signed by the drawee must not express that the drawee will perform his promise by any other means than payment of money communicated or delivered to the holder
./- A ho$'er has the ri6ht: a* require that acceptance be written on the bill and if refused, treat it as if dishonored ":ec* 1;;# b* refuse to accept a qualified acceptance and may treat it as dishonored ":ec* 142# ..- Co"str%cti5e Acce3ta"ce: a* where the drawee to whom the bill has been delivered destroys it b* the drawee refuses within 24 hrs after such delivery or within such time as is given, to return the bill accepted or not* ":ec* 1;> 0)5#
;2
Notes o" Sectio" ;</ drawee becomes primarily liable as an acceptor* mere retention is equivalent to acceptance
6@5 When presentment or acceptance is necessar": a* if necessary to fix the maturity of the bill b* if it is expressly stipulated that it shall be presented for acceptance c* if the bill is drawn payable elsewhere than the residence or place of business of the drawee ":ec* 14; 0)5# Notes o" Sectio" ;=< %resentment is the production of a '(@ to the drawee for his acceptance presentment is necessary to make parties liable*
J0* S%!!ar& o" 3rese"t!e"t or acce3ta"ce o Bi$$s o E2cha"6e: a. to make the drawee primarily liable and for the accrual of secondary liability ":ec* 144# b. necessary to fix maturity date, where bill expressly stipulates presentment, bill payable other than place of drawee ":ec* 14;# c. when presentment is excused: drawee is dead, hides, is fictitious, incapacitated person, after due diligence presentment cannot be made, presentment is refused on another ground although presentment is irregular ":ec* 14=#
J1* #e"era$ r%$e: %rotest is required only for foreign bills E2ce3tio": inland bills and notes may also be protested if desired
Protest is re*uired: a* where the foreign bill is dishonored by non acceptance b* where the foreign bill is dishonored by non-payment c* where the bill has been accepted for honor, it must be protested for non-payment before it is presented for payment to the acceptor for honor d* where the bill contains a referee in case of need, it must be protested for non payment before presentment for payment to the referee in case of need ":ec* 1A2# Notes o" Sectio" ;>2 Protest - formal statement in writing made by a notary under his seal of office at the request of the holder, in which it is declared that the same was presented for payment or acceptance "as the case may be# and such was refused* it means all steps or acts accompanying the dishonor of a bill or note necessary to charge an indorser required when the instrument is a foreign bill of exchange*
;;
it must be made on the same date of dishonor, by a notary1respectable citi en of the place in the presence of 2 credible witnesses so recourse to secondary parties
J2* Acce3ta"ce or Ho"or ":ec* 1+1 0)5#B an acceptance of a bill made by a stranger to it before maturirty, where the drawee of the bill has: a* refused to accept it
b* and the bill has been protested for non-acceptance c* or where the bill has been protested for better security Re:%isites or acce3ta"ce or ho"or: the bill must have been previously protested a# for non-acceptance b# or for better security the bill is not overdue at the time of the acceptance for honor the acceptor for honor must be a stranger to the bill the holder must give his consent Notes o" Acce3ta"ce or Ho"or Purpose: to save the credit of the parties to the instrument or some party to it as the drawer, drawee, or indorser or somebody else* .cceptor for honor is liable to the holder and to all the parties to the bill subsequent to the party for whose honor he has accepted ":ec* 1+4#
@A5 <ow acceptance or honor is made: a* in writing and indicated that it is an acceptance for honor b* signed by the person making the acceptance ":ec* 1+2 0)5# J4* Pa&!e"t or Ho"or 7 payment made through a notarial act of honor of a party liable1stranger to the bill after bill has been dishonored by non-payment by the acceptor and protested for non-payment by the holder 2e*uisites: a. protest for non-payment b. any person may pay supra protest 9orm or pa"ment o honor: a. payment must be attested by notarial act appended to the protest, or form an extension to it*
b. notarial act of honor must be based on a declaration by the payer for honor JA* Bi$$s i" Set - bill of exchange drawn in several parts, each part of the set being numbered and containing a reference to the other parts, the whole of the parts just constituting one bill ":ec 1>= 0)5#
INS)RANCE LAW
1. ,aws applica!le to insurance in the order o priorit":
;4
a. )nsurance $ode b. $ivil $ode c. General %rinciples prevailing on the subject in the C:
2. Co"tract o I"s%ra"ce 7 an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown contingent event 3. Co"tract o S%ret&shi3 7 deemed to be an insurance contract within the meaning of the )nsurance $ode, only if made by a surety who or which, as such, is doing an insurance business 4. De i"itio" o @'oi"6 a" i"s%ra"ce 8%si"essA: a. making or proposing to make, as insurer, any insurance contract; b. making or proposing to make as a surety, any contract of suretyship as a vocation and not merely incidental to any other legitimate business or activity of the surety; c. doing reinsurance business;
d. doing or proposing to do any business in the substance equivalent to any of the foregoing in a manner designed to evade the provisions of the )nsurance $ode* 5. Re:%isites o I"s%ra"ce: a. existence of an insurable interest; b. risk of loss; c. assumption of risk;
d. scheme to distribute losses; and e. payment of premiums Note: )f only a, b, and c are present, it is not a contract of insurance but a risk shifting device*
6. Characteristics o a" i"s%ra"ce co"tract: a. consensual b. voluntary c. aleatory - depends upon some contingent event; however, it is not a wagering nor a gambling contract
d. e7ecuted as to the insured after payment of the premium e. e7ecutory as to insurer - not executed until payment for a loss f. personal - each party takes into account the character, credit and the conduct of the other
g. conditional - liability is based on the happening of the event insured against 7. Parties to a co"tract o I"s%ra"ce: a. insurer - party who assumes the risk or undertakes to indemnify the insured or to pay a certain sum on the happening of a specified contingency
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b. insured - person in whose favor the contract is operative, and who is indemnified against, or is to receive a certain sum upon the happening of a specified contingency c. !ene iciar" - may or may not be the same as the insured
What perils ma" !e insured? (a) any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest; or (b) any contingent or unknown event, whether past or future, which may create a liability against the person insured*
8. Ever" person has an insura!le interest in the li e and health o : a. himself, his spouse and his children b. any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest c. any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might prevent the performance or delay it
d. any person upon whose life any estate or any interest vested in him depends 9. Insura!le Interest in Propert" ma" consist o : a. an existing interest b. an inchoate interest, founded on an existing interest c. an expectancy, coupled with an existing interest out of which the expectancy arises 9efinition of *nsurable *nterest in )roperty: )nterest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured*
10. I"sta"ces 4he" I"s%ra8$e I"terest !%st e2ist: a. *nterest in )roperty insured must exist when the insurance takes effect and when the loss occurs, but need not exist in the meantime* b. *nterest in the ;ife or 6ealth of a )erson *nsured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs* c. &eneficiaries of ;ife *nsurance need not have insurable interest in the life of the insured*
d. &eneficiaries of )roperty *nsurance must have insurable interest in the property insured* Cate6or& >5 !asis I"s%ra8$e I"terest i" Li e I"s%ra8$e I"terest i" I"s%ra"ce Pro3ert& may be based on pecuniary based purely on pecuniary interest, affinity, or interest consanguinity at the time the policy takes effect @I$@%6E life insurance taken by the at the time the policy takes effect and at the time of the loss
85 when interest must exist
;+
creditor on the life of the debtor wherein interest must also exist at the time of the loss A5 amount o interest insura!le no limit @I$@%6E if insurable limited to the actual value of interest is based on creditor- damage1injury1loss debtor relationship "only to the extent of the credit or debt#
11. #e"era$ R%$e: . change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person* E2ce3tio"s: a* )n case of life, health, and accident insurance b. when the change in interest results after the occurrence of an injury which results in a loss c. a change of interest in one or more several distinct things, separately insured by one policy
d. a change in the interest by will or succession on the death of the insured "interest passes to the heirs# e. a transfer of interest by one of several partners, joint owners in common who are jointly insured to the others "even though it has been agreed that the insurance shall sei e upon the alienation of the thing insured# 12. Re5ocatio" o Be"e iciaries #e"era$ R%$e: )nsurance contracts are revocable* E2ce3tio": .ny person who is forbidden to receive any donation under .rticle >;J of the $ivil $ode cannot be named beneficiary of a life insurance policy by the person who cannot make the donation to him* 'he ollowing donations shall !e void: a. those made between persons who were guilty of adultery or concubinage at the time of the donation; b. those made by persons found guilty of the same criminal offense, in consideration thereof; c. those made to a public officer or his wife, descendants, ascendants, by reason of his office* Other Perti"e"t Pro5isio"s o" Re5ocatio": (a) 6he termination of a subsequent marriage shall allow the innocent spouse to revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable* (b) .fter the finality of the decree of legal separation, the innocent spouse may revoke the donations as well as the designation of the latter as a beneficiary in any insurance policy, even if such designation is irrevocable* 6he revocation of or change in the designation shall take effect upon written notification thereof to the
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insured* 6he action to revoke the donation under this article must be brought within A years from the time the decree of legal separation has become final* (c) 6he interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice or accessory in willfully bringing about the death of the insured, in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified* 13. Co"cea$!e"t 7 a neglect to communicate that which the party knows or ought to communicate #e"era$ R%$e: 6he insured is not required to communicate the nature "or kind# or the amount of his insurable interest in the life or property insured to the insurer* E2ce3tio": a* 3hen the insurer makes inquiry from the insured of the nature or amount of the latter7s insurable interest, whether in life or property insurance; b* insurance policy must specify the interest of the insured in the property insured, if he is not the absolute owner thereof* 3 concealment, whether intentional or not, entitles the injured party to rescind a contract of insurance. 2e*uisites: (a) the party concealing must have knowledge of the facts concealed; (b) the facts concealed must be material to the risk; (c) the party is duty bound to disclose such fact to the other; (d) the party concealing makes no warranty as to the facts concealed; (e) the other party has no other means of ascertaining the facts concealed* Note: 3n insured need not die of the very disease he failed to reveal to the insurer * )t is sufficient that the non-revelation has misled the insurer in forming his estimate of the disadvantages of the proposed policy or in making his inquiries in order to entitle the insurance company to avoid the contract* Note: The insured is under an obligation to disclose not only such material facts as are :nown to him, but also those :nown to his agent where: a. it was the duty of the agent to acquire and communicate information of the facts in question; b. it was possible for the agent, in the exercise of reasonable diligence, to have made the communication before the making of the insurance contract* .ailure on the part of the insured to disclose such facts :nown to his agent, or wholly due to the fault of the agent, will avoid the policy, despite the good faith of the insured * 14. $either part" to the insurance contract is !ound to communicate in ormation on the ollowing matters except in answer to the in*uiries o the other: a. those of which the other knows; b. that which, in the exercise of ordinary care, the other ought to know and of which the former has no reason to suppose his ignorance, i*e* political situation, general usages of trade;
;=
c.
those of which the other waives communication;
d. those which prove or tend to prove the existence of the risk excluded by a warranty and which are not otherwise material; e. those which relate to a risk excepted from the policy and which are not otherwise material* 0either party is bound to communicate his mere opinion, even upon inquiry, because such opinion would add nothing to the appraisal of the application* Waiver o material acts ma" !e: (a) by the terms of the insurance; or (b) by the neglect to make inquiry as to such facts, where they are distinctly implied in other facts which information is communicated 1ateriality is to be determined not by the events but solely upon the probable and reasonable influence of the facts on the party to whom the communication is due in forming his estimate of the disadvantages of the proposed contract or in making his inquiries* $oncealment, whether intentional or not, entitles the other party to rescind the contract*
15. Re3rese"tatio" )t is a factual statement made by the insured at the time of, or prior to, the issuance of the policy, to give information to the insurer and otherwise induce him to enter into the insurance contract* )t may be made orally or in writing* )t may be made at the time of, or before, the issuance of the policy* )t may be altered or withdrawn before the insurance is effected, but not afterwards* . representation cannot qualify an express provision in a contract of insurance but it may qualify an implied warranty* . representation as to the future is to be deemed a promise unless it appears that it was merely a statement of belief or an expectation* "must be susceptible of present, actual knowledge# 6he statement of an erroneous opinion, belief or information, or of an unfulfilled intention, will not avoid the contract of insurance, unless fraudulent* 2ight to rescind !ecause o alse representation: a. must be exercised previous to the commencement of an action on the contract "the action referred to is that to collect a claim on the contract# b. misrepresentation, whether intentional or not, gives the right to rescind I"co"testa8$e C$a%se: .fter a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of ? years from the date of its issue or of its last reinstatement , the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent*
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E2ce3tio"s: "a# absence of insurable risk (b) cause of loss is an unexpected risk (c) fraud (d) non-payment of premium (e) violation of conditions relating to naval or military services (f) failure to comply with conditions subsequent to the occurrence of the loss
16. Warra"ties: #e"era$ R%$e: insurance* E2ce3tio"s: a. when before the time for performance of the promissory warranty, a loss insured against occurs; b. when before the time of the performance of the warranty, the act becomes unlawful; c. when before the time of the performance of the warranty, said performance becomes impossible* . statement or a promise set forth in the policy or by reference incorporated therein, the non-fulfillment of which in any respect and without reference to whether the insurer was in fact prejudiced by such non-fulfillment, renders the policy voidable by the insurer, wholly irrespective of the materiality of such statement or promise* Warra"t& part of the insurance contract always written on the policy conclusively presumed material must be strictly complied with made by the insured Re3rese"tatio" collateral inducement maybe oral or written materiality must be proved requires substantial truth may be made by insurer or insured 0on-performance of a promissory warranty avoids a contract of
Note: *f there is a breach of warranty , even if the cause of the loss is a different risk, the insurer is entitled to rescind the contract of insurance* 'reach must refer to a material warranty, whether intentional or not*
17. Po$ic& What is a 2ider? )t is an additional provision in a policy not part of the body of the printed form* . rider, clause, warranty or endorsement to be binding must be pasted or attached to the policy and its descriptive titles or name must be mentioned and written on the policy7s blank spaces )f the rider is pasted or attached at the time the policy is issued the signature of the insured is not necessary to make it binding*
40
)f the rider is executed after the original policy was issued, it must be countersigned by the insured to be binding unless the rider was applied for by the insured himself* 6he form of the application, rider, clause, warranty or endorsement must be approved by the )nsurance $ommissioner* )n case of inconsistency, the rider prevails over the printed clause it covers*
Co5er Note: written memorandum of the most important terms of a preliminary contract of insurance, intended to give temporary protection pending the investigation of the risk by the insurer, or until the issuance of a formal policy* #e"era$ R%$e: $over notes bind insurer temporarily pending the issuance of the policy* E2ce3tio": 3here it is merely an acknowledgment on behalf of the company that the latter7s branch office had received from the applicant the insurance premium and accepted the application subject for processing by the insurance company and that the latter will either approve or reject the same* (i"'s o Po$icies: a. Open - the value of the thing insured is not agreed upon, but is left to be ascertained at the time of the loss b. 1alued - expresses on its face an agreement that the thing insured shall be valued at a specific sum c. 2unning - contemplates successive insurance which provides that the object of the policy may be from time to time defined especially as to the subject of insurance by additional statements or endorsements Note: *f an amount is written on the face of an open policy , it is merely a determination of the maximum limit of recovery and not as the value of the policy* Cate6or& O3e" Po$ic& value of property upon loss value of property is to be ascertained upon loss Ba$%e' Po$ic& no need for proof of value of property upon loss value of property upon loss is conclusively stipulated to a specified amount
what needs to be proven in order to be able to claim determining value of loss
Period or commencing an action against the polic": 3ithin 1 year from the time the cause of action accrues, i*e*, from the time of rejection of the claim by the insurer* .ny condition, stipulation, or agreement limiting the time to less than 1 year is void* #ro%"'s or Ca"ce$$atio" o a Po$ic& 8& the I"s%rer: 9or Policies Other than ,i e: (1) prior notice of the cancellation to insured (2) notice must be based on the ff* occurrences after effective date of the policy (a) non-payment of premiums
41
(b) conviction of a crime arising out of acts increasing the ha ard insured against (c) discovery of fraud or material misrepresentation (d) discovery of willful or reckless acts or omissions increasing the ha ard insured against (e) physical changes in the property insured which results in the property becoming uninsurable (f) determination by the $ommissioner that the continuation of the policy would violate or would place the insurer in violation of the )nsurance $ode (3) notice must be in writing (4) it must be mailed or delivered to the insured at the address shown in the policy (5) notice must state the ground relied upon and that upon written request of the insured, the insurer will furnish facts on which the cancellation is based Re"e4a$ o the Po$icies Other tha" Li e:
)nsurer must mail or deliver to the insured notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages within 4A days before the policy ends* >therwise, insured entitled to renew the policy upon payment of the premium due on the effective date of the renewal * 18. Pre!i%! #e"era$ R%$e: 0o policy is binding until the premium thereof has been paid* E2ce3tio"s: "a# in case of life or industrial life policy, whenever the grace period applies (b) in case of estoppel )nsurer is entitled to payment of premiums as soon as the thing insured is exposed to the perils insured against* Whe" i"s%rer e"tit$e' to Ret%r" o Pre!i%!s a. when the contract is voidable on account of fraud or misrepresentation of the insurer; b. when on account of facts, the existence of which the insured was ignorant without his fault c. when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy d. when the insured has become a public enemy and the policy automatically canceled "on the ground of equity# e. in case of over-insurance by several insurers "ratable return of premiums, proportioned to the amount by which the aggregate sum insured in all policies exceed the insurable value of the thing at risk# 19. Loss
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Whe" I"s%rer is Lia8$e: a. where the peril insured against was the proximate cause, although a peril not contemplated by the contract may have been the remote cause or even the immediate cause of the loss b. where the thing insured is rescued from the peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession in whole or in part c. where loss is caused by efforts to rescue the thing insured from a peril insured against d. insurer is not exonerated by a loss caused by simple negligence of the insured if the proximate cause of the loss is a peril insured against e. loss, the immediate cause of which is a peril insured against except when the proximate cause is an excepted peril
Whe" I"s%rer Not Lia8$e: a. where the peril insured against was only a remote cause b. where the peril is specifically excepted, a loss which would not have occurred but for such peril is thereby excepted c. loss caused by the connivance of the insured
d. loss caused by the willful act of insured e. loss caused by insured7s negligence, if it amounts to bad faith #e"era$ R%$e: insured* 6he insurer is not liable for a loss caused by the willful act of the
E2ce3tio": /uicide (lause in ;ife *nsurance: )nsurer liable in case insured committed suicide after the policy has been in force for a period of 2 years from the date of its issue or last reinstatement* )f insured kills himself within a period of 2 years, insurer is not liable* E2ce3tio" to E2ce3tio": )f suicide is committed in a state of insanity, regardless of the time of commission, the insurer is liable*
20. Do%8$e I"s%ra"ce 7 exists where the same person is insured by several insurers separately in respect to the same subject and interest Re:%isites: a* person insured must be the same
b. existence of several insurers c. subject matter insured must be the same d. interest the same e. risk insured against also the same
4;
O5er I"s%ra"ce may be only one insurer insurance covers more than the value of insurable interest
Do%8$e I"s%ra"ce must be 2 or more insurers insurance may or may not exceed the value of insurable interest
The (ode prohibits double insurance without the consent of the insurer. ,ia!ilit" o Insurer:
)nsurance taken from each insurer ---------------------------------total insurance
value of property received
L liability of insurer
21. Rei"s%ra"ce: . process by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance* 6he original insured cannot recover from this insurance unless there is a specific grant, or assignment of, the reinsurance contract in favor of the insured, or a manifest intention of the contracting parties to the reinsurance contract to favor the insured* #e"era$ R%$e: The insurer who obtains reinsurance must communicate: a. all the representations of the original insured; and b. all the knowledge and information he possesses, whether previously or subsequently acquired which are material to the risk E2ce3tio": under automatic reinsurance treaties when two or more insurance companies agree in advance that each will reinsure a part of any line of insurance taken by the other* "in this instance, the contract is self-executing and the obligation attaches automatically on acceptance of a risk by the reinsured*# Rei"s%ra"ce 1. insurer becomes the insured 2. subject matter is the insured risk or liability 3. different risks and interests of insured 4. there must be consent of original 5. one who is original insured has no interest in the contract of reinsurance which is independent of the original contract of insurance Do%8$e I"s%ra"ce 1. insurer remains the insurer 2. subject matter is property 3. the same interest and risk are insured 4. insured has to give his consent 5. insured is the party in interest in all contracts
22. Mari"e I"s%ra"ce: insures against perils of the sea, not of the ship Peri$s o the Sea covered by marine insurance denote nature accidents peculiar to the sea which do not happen by intervention of man Peri$s o the Shi3 not covered by marine insurance damage or losses resulting fromE
44
nor are to be prevented by human prudence
1. natural and inevitable action of the sea 2. ordinary wear and tear of a ship, or 3. negligent failure of the ship owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions
O4"er o the Shi3 has I"s%ra8$e I"terest: a. in the ship even if it has been chartered by one who promises to pay him in value in case of loss "insurer is liable for what insured cannot recover from the charterer#, even when hypothecated by bottomry "only the excess of its value over the amount secured by bottomry# and b. in the freightage, which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage
(harterer has insurable interest in the ship to the extent that he is liable to be damnified by its loss* Barratr&: .ny willful misconduct on the part of the masters or crew, in pursuance of some unlawful or fraudulent purpose, without the consent of the owners and to the prejudice of the owner7s interest* Cettiso": )ntentional casting overboard of any part of a venture exposed to a peril, whether it be of the cargo, or the ship7s furniture or tackle, in the hope of saving the rest of the venture* Insura!le Interest in #arine Insurance: /etermined when one will sustain loss from the destruction of the subject matter or derive benefit from its preservation* Charter Part&: $ontract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fixed price* )t has also been defined as a contract by virtue of which the owner or the agent of the vessel for the transportation of goods or persons from one port to another* Loa" o" Botto!r&: $ontract in the nature of a mortgage whereby the owner of a ship borrows money for the use, equipment or repair of the vessel for a definite term, and pledges the ship as a security for repayment, with maritime or extraordinary interest on the account of the maritime risks to be borne by the lender* )t is stipulated in such a contract that if the ship be lost in the course of the specific voyage or during a specified limited time caused by any of the perils enumerated in the contract, the lender shall resolutely lose his money* Loa" o" Res3o"'e"tia: $ontract akin to that of mortgage made on the goods on board the ship, and which are to be sold or exchanged in the course of the voyage* 6he goods serve as the principal security*
4A
Frei6hta6e: :ignifies all the benefits derived by the owner, carriage of his own goods, or those of others* (oncealment: *n marine insurance, information or the belief or e7pectation of a @ rd person, in reference to a material fact is material.
(oncealment of the following merely e7onerates the insurer from the resulting loss therefrom: a. national character of the insured b. liability of the thing insured to capture and detention c. liability to sei ure from breach of foreign laws of trade d. want of necessary documents e. use of false and simulated papers I!3$ie' Warra"ties: a. that the ship is seaworthy - complied with if the ship is seaworthy at the time of commencement of risk, e7cept: "a# insurance for a specified length of time - at the commencement of every voyage it undertakes during that time; "b# cargo to be transshipped at indeterminate port - each vessel upon which cargo is shipped is seaworthy at the commencement of each particular voyage b. that the vessel shall not engage in illegal venture c. that the vessel shall not deviate from the course of the voyage insured d. where the nationality or neutrality of a ship or cargo is e7pressly warranted , it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which may cast reasonable suspicion thereon +eaworthiness depends on: a. nature of the ship b. nature of the voyage c. nature of the service /eaworthiness of the vessel is re0uired only at the commencement of the ris: Exceptions: a. in a Time )olicy - commencement of every voyage that must be undertaken b. in a (argo )olicy - commencement of each particular voyage c. in a 8oyage )olicy - commencement of each portion of the voyage
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De5iatio" a. a departure from the course of the voyage insured b. unreasonable delay in pursuing the voyage c. commencement of an entirely different voyage
When is :eviation proper? a. when caused by circumstances over which neither the master not the owner of the ship has any control b. when necessary to comply with a warranty or to avoid a peril whether it is insured against or not c. when made in good faith for the purpose of saving human life or relieving another vessel in distress d. when made in good faith and upon reasonable grounds of belief in its necessity to avoid a peril Loss a. Act%a$ Tota$ Loss a total destruction of the thing insured the irretrievable loss of the thing by sinking or by being broken up any damage to the thing which renders it valueless tot he owner for which he held it any other event which effectively deprives the owner of possession, at the port of destination, of the thing insured a. Co"str%cti5e Tota$ Loss - gives to the person insured the right to abandon &verage - any extraordinary or additional expense incurred during the voyage for the preservation of the vessel, cargo, or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded ;eneral &verage - an expense or damage suffered deliberately in order to save the vessel, its cargo, or both from the real or known risk &!andonment - act of the insured by which, after a constructive total loss, he declares the relinquishment to the insured of his interest in the thing insured "where the cause of loss is a peril insured against# (a) more than M thereof in value is actually lost or would have been expended to recover it from the peril (b) it is injured to such an extent as to reduce its value by more than M (c) if the thing insured is the ship and the voyage cannot be lawfully performed without incurring an expense of more than M of the whole, or a risk which a prudent man would not undertake under the circumstances
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(d) if the thing insured is cargo or freightage, and the voyage cannot be performed on another ship procured by the master within a reasonable time and with reasonable diligence to forward the cargo without incurring an expense or a risk as stated above .reightage cannot be abandoned unless ship is also abandoned* Re:%isites o a Ba$i' A8a"'o"!e"t: a. must be total and conditional b. made within a reasonable time c. explicit notice d. coupled with actual abandonment Re:%isites or Ba$i' Ba$%atio" i" the Ba$%e' Mari"e Po$ic&: a. insured must have interest at risk b. there must be no fraud on the insured7s part Notice o A8a"'o"!e"t: a. may be oral or in writing "if oral, written notice must be submitted within > days from oral notice# b. must be explicit c. must specify the particular cause for abandonment d. need not be accompanied by proof of interest or loss Acce3ta"ce o A8a"'o"!e"t a. may be express or implied "i*e* silence for unreasonable length of time# b. conclusive upon the parties and admits the loss and sufficiency of abandonment c. irrevocable, unless the ground on which it is made is proved to be unfounded *f insurer refuses to accept a valid abandonment - liable as upon actual total loss =pon actual a!andonment a. freightage earned before loss - belongs to the insurer of freightage b. freightage earned after loss - belongs to insurer of ship Co7i"s%ra"ce: form of insurance in which the person who insures his property for less than the entire value is understood to be his own insurer for the difference which exists between the true value of the property and the amount of insurance Co-insurance applies onl" where the: a. insurance taken is less than the actual value of the thing insured b. loss is partial
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Primage - increase in freightage 23. Fire I"s%ra"ce )nsurer is liable for loss or damage caused by hostile fire "fire that escapes from the place where it was intended to burn and ought to be in# and not that caused by friendly fire "fire which burns in a place where it is intended to burn#* Sco3e o Fire I"s%ra"ce: a. fire b. lightning c. windstorms d. tornado e. earthquake f. other allied risks
When does alteration in the use or condition entitle the insurer to rescind the contract? a. such alteration violates a provision in the policy b. it was made without the insurer7s consent c. it is done within the insured7s control, and it increases the risk of loss or damage R%$es: a. policy shall not protect the insured from injury consequent upon his negligent use or management of fire, so long as it is confined to the place where it ought to be b. if it escapes, even though the insured was negligent, the insurer is liable c. even though a fire may remain in its proper place, it may become hostile if it by accident, becomes so extensive as to be beyond control Options o the Insurer a. purchase the property at appraised valuation b. restore the property damaged - contract of insurance is discharged and parties enter into a new contract of insurance 24. Cas%a$t& I"s%ra"ce: .ny injury that is intended, unexpected and unusual, even though it results from an act or even which was intelligently done* Insurer is ,ia!le or death(in)ur" to insured: a. by his own hand while insane b. by taking poison by mistake c. by overdoes of drugs administered or taken by mistake, by ignorance or material pathological conditions
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d. by unexpected bacterial infection consequent upon doing acts, even though such acts were intentionally done e. by unprovoked violence of others Co!3%$sor& Motor Behic$e Lia8i$it& I"s%ra"ce
Perso"s s%8Dect to CMBLI: a. motor vehicle owner or one who is the actual legal owner of a motor vehicle in whose name such vehicle is registered with the 56( b. land transport operator or one who is the owner of a motor vehicle or vehicles being used for conveying passengers for compensation "including school buses# No Fa%$t I"'e!"it& C$a%se:
6he insurance company shall pay any claim for death or bodily injuries sustained by a passenger or ;rd party without the necessity of proving fault or negligence of any kind subject to certain conditions* 6his does not apply to property damage* )t is in the nature of preliminary indemnity pending final determination as to which party is at fault or negligent* 'he ollowing are the rules on claims under the said provisions: "1# claim shall be made upon the insurer of the vehicle on which he is riding, embarking or disembarking; "2# if claimant is not a passenger, he shall claim for the person who is directly at fault; ";# this is subject to final determination as to the party who is negligent or who is at fault; "4# payment is subject to reimbursement from the party at fault or negligent* 25. S%ret&shi3 7 an agreement whereby the surety guarantees the performance of the principal or obligor of an obligation or undertaking in favor of a ; rd party called the obligee 26. Li e I"s%ra"ce: an insurance in human life and insurance appertaining thereto or connected therewith may be payable: a. on the death of the insured b. on his surviving a specified period c. otherwise, contingently on the continuance or cessation of life
"b and c refer to endowment or annuities# )ses a"' Co!!o" (i"'s o Li e I"s%ra"ce: a. Whole ,i e or Ordinar" Policies - here, the insured agrees to pay annual, semiannual or quarterly premiums while he lives* 6he insurer agrees to pay the face value of the policy upon the death of the insured* b. ,imited Pa"ment ,i e Polic" - premiums paid only for a specified period of years* c. 'erm Polic" - insurer7s liability arises only upon the death of the insured within the agreed term as period* )f the latter survives the period, the contract terminates and the insurer is not liable
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d. Endowment Polic" - insurer agrees to pay a certain sum to the insured if the latter outlives a designated period; if he dies before that time, the proceeds are paid to the beneficiary e. ,i e &nnuit" - debtor binds himself to pay an annual pension or income during the life of one or more persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him with the burden of income
27. The B%si"ess o I"s%ra"ce a. Li e or E"'o4!e"t Po$icies ;race Period - ;0 days for the payment of any premium due after the first premium has been paid Period o Incontesta!ilit" - after the lapse of 2 years from the date of issue or date of approval of last reinstatement 2einstatement o Polic" - within @ years from the date of default of premium, upon: a. production of evidence of insurability, and b. payment of all overdue premiums and any indebtedness to the company upon said policy Exceptions: a. if cash surrender value has been paid b. if period of extension has expired b. C$ai!s Sett$e!e"t =n air Claims +ettlement Practices: (a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue (b) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies (c) failing to adopt or implement reasonable standards for the prompt investigation of claims arising under its policies (d) no attempt in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear (e) compelling policy holders to institute suits to recover the amount due under its policies by offering with no justifiable reason an amount substantially less than that ultimately recovered in suits brought by them Proceeds o ,i e Insurance - payable within +0 days afterE (a) presentation of claims, and (b) filing of proof of death "upon failure to pay interest, at the rate of 2 times the ceiling prescribed by the !onetary 'oard unless based on the ground that the rate is fraudulent# Procee's o Po$icies other tha" Li e - payable:
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(a) upon proof of loss (b) upon ascertainment of loss or damage "if not made within +0 days of proof of loss, payable in J0 days# c. Po4er o Co!!issio"er to S%s3e"'ERe5o9e Lice"se (a) if insurance contract is in unsound condition (b) if it has failed to comply with the provisions of law or regulations obligatory upon it (c) its conditions or methods of business is such as to render its proceedings ha ardous to the public or to its policy holders (d) that its paid up capital stock, or its available cash assets, or its security deposits, as the case may be, is impaired or deficient (e) that the margin of solvency required of each company is deficient I"s%ra"ce A6e"t - any person who for compensation solicits or obtains insurance on behalf of any insurance company or transacts for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in negotiating of such insurance* Fe must be first licensed as such before doing any acts as insurance agent* I"s%ra"ce Bro9er - any person for any compensation, commission or any other thing of value, acts, or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself* . license is required*
PHILIPPINE DEPOSIT INS)RANCE CORPORATION

1* 2* 6he %/)$ is tasked to insure the deposits of all banks which are entitled to the benefits of insurance under <. ;AJ1* 6he 'oard of /irectors is composed of the governor of the $entral 'ank and two appointees of the %resident who must be &ilipino citi ens and must be confirmed by the $ommission on .ppointments* 6he members of the 'oard of /irectors shall be ineligible during the time they are in office and for a period of two years thereafter to hold any office, position or employment in any insured bank, except that this restriction shall not apply to any member who has served the full term for which he was appointed* 0o member of the 'oard of /irectors shall be an officer or director of any insured bank; and before entering upon his duties as member of the 'oard of /irectors he shall certify under oath that he has complied with this requirement and such certification shall be filed with the :ecretary of the 'oard of /irectors* .ny vacancy in the 'oard created by the death, resignation, or removal of an appointive member shall be filled by the appointment of new member to complete the unexpired period of the term of the member concerned* Powers o the Board: a* 6o prepare and issue rules and regulations as it considers necessary for the effective discharge of its responsibilities;
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b* of the $orporation; c* d* >*
6o direct the management, operations and administration 6o appoint, fix the remunerations and remove all officers and employees of the $orporation, subject to the $ivil :ervice 5aw; and 6o authori e such expenditures by the $orporation as are in the interest of the effective administration and operation of the $orporation*
.ny obligation of a bank which is payable at the office of the bank located outside of the %hilippines shall not be a deposit for any of the purposes of this .ct or included as part of the total deposits or of the insured deposit* .ny insured bank which is incorporated under the laws of the %hilippines which maintains a branch outside the %hilippines may elect to include for insurance its deposit obligation payable only at such branch* .ny bank or banking institution which is engaged in the business of receiving deposits may insure its deposit liabilities with the $orporation* The factors to be considered by the &oard of 9irectors for the approval of the application: a* b* c* d* e* served by the 'ank and f* the purposes of the .ct* whether or not its corporate powers are consistent with the financial history and condition of the 'ank, the adequacy of its capital structure, its future earning prospects, the general character of its management, the convenience and needs of the community to be
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6he 'oard of /irectors must also determine that the bank7s assets in excess of its capital requirements are adequate to enable it to meet all its liabilities to depositors and other creditors as shown by the books of the bank* 6he assessment rate shall be determined by the 'oard of /irectors but shall not exceed one-twelfth of one per centum per annum* 6he semiannual assessment for each insured bank shall be in the amount of the product of one-half "112# the assessment rate multiplied by the assessment base* .lthough the assessment base shall be the amount of the liability of the bank for deposits, without any deduction for indebtedness of depositors, the bank may "1# deduct "i# from the deposit balance due to an insured bank the deposit balance due from such insured bank "other than trust funds deposited by it in such bank# which is subject to an immediate withdrawal; and cash items as determined by either of the following methods, at the option of the bankE "a# by multiplying by 2 the total of the cash items forwarded for collection on the assessment base days "being the days on which the average deposits are computed# and cash items held for clearings at the close of business on said days, which are in the
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process of collection and which the bank has paid in the regular course of business or credited to deposit accounts; or "b# by deducting the total of cash items forwarded for collection on the assessment base days and cash items held for clearing at the close of business on said days, which are in the process of collection and which the bank has paid in the regular course of business or credited to deposit accounts, plus such uncollected items paid or credited on preceding days which are in the process of collectionE %rovided, 6hat the 'oard of /irectors may define the terms Ncash itemsN, Nprocess of collectionN, and Nuncollected itemsN and shall fix the maximum period for which any such item may be deducted; and
"2# may exclude from its assessment base "i# drafts drawn by it on deposit accounts in other banks which are issued in the regular course of business; and the amount of devices or authori ations issued by it for cash letters received, directing that its deposit account in the sending bank be charged with the amount thereof; and cash funds which are received and held solely for the purpose of securing a liability to the bank but not in an amount in excess of such liability, and which are not subject to withdrawal by the obligor and are carried in a special non-interest bearing account designated to properly show their purpose*
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14*
@ach insured bank, as a condition to the right to make any such deduction or exclusion in determining its assessment base, shall maintain such records as will readily permit verification of the correctness thereof* The insured ban: must file a certified statement: i* on or before the 1Ath of ?uly of each year, showing for the + months ending on the preceding ?une ;0 the amount of the assessment base and the amount of the semiannual assessment due to the $orporation for the period ending on the following /ecember thirty-one and pay to the $orporation the amount of the semiannual assessment it is required to certify* on or before the 1Ath day of ?anuary of each year, each insured bank shall file a similar certified statement for the six months ending on the preceding /ecember thirty-one and shall pay to the $orporation the amount of the semiannual assessment for the period ending on the following ?une thirty which it is required to certify*
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.ny insured bank which fails to file any certified statement required to be filed by it in connection with determining the amount of any assessment payable by the bank to the %/)$ may be compelled to file such statement by mandatory injunction or other appropriate remedy in a suit brought for such purpose by the %/)$ against the bank and any officer or officers thereof in any court of the %hilippines of competent jurisdiction in which such bank is located* 6he %/)$, in a suit brought in any court of competent jurisdiction, shall be entitled to recover from any insured bank the amount of any unpaid assessment lawfully payable by such insured bank to the %/)$, whether or not such bank shall have filed any such certified statement and whether or not suit shall have been brought to compel the bank to file any such statement* 0o action or proceeding shall be brought for recovery of any assessment due to the %/)$ or for the recovering of any amount paid to the %/)$ in excess of the amount due to it, unless such action or proceeding shall have been brought within five years after the right accrued for which the claim is made, except where the insured bank has made or filed with the %/)$ a false or fraudulent certified statement with the intent of evade, in a whole or in part, the payment of assessment, in which case the
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claim shall not have been deemed to have accrued until the discovery by the %/)$ that the certified statement is false fraudulent* 1J* :hould any insured bank fail or refuse to pay any assessment required to be paid and should the bank not correct such failure or refusal within thirty days after written notice has been given by the %/)$ to an officer of the bank, stating that the bank has failed or refused to pay as required by law the insured status of such bank shall be terminated by the 'oard of /irectors* 6he remedies provided in this subsection and in the two preceding subsections shall not be construed as limiting any other remedies against an insured bank but shall be in addition thereto* 'ermination o +tatus as an insured !an.: "a# .ny insured bank may, upon not less than ninety days, written notice to the $orporation, and to the /evelopment 'ank of the %hilippines if it owns or holds as pledges any preferred stock, capital notes, or debentures of such bank, terminate its status as an insured bank* 'y the %/)$E 3hen the 'oard finds that an insured bank or its directors or trustees have o o continued unsafe or unsound practices in conducting the business of the bank have knowingly or negligently permitted any of its officers or agents to violate any provisions of any law or regulation to which the insured bank is subject,
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6he 'oard shall first give to the $entral 'ank a statement with respect to such practices or violations for the purpose of securing the correction thereof and shall give a copy thereof to the bank* Cnless such correction shall be made within 120 days or such shorter period of time as the $entral 'ank shall require, the 'oard, if it shall determine to proceed further, shall give to the bank not less than ;0 daysO written notice of intention to determine the status of the bank as an insured bank, and shall fix a time and place for a hearing before the 'oard or before a person designated by it to conduct such hearing, at which evidence may be produced, and upon such evidence the 'oard shall make written findings which shall be conclusive* Cnless the bank shall appear at the hearing, it shall be deemed to have consented to the termination of its status as an insured bank* )f the 'oard shall find that any unsafe or unsound practice or violation specified in such notice has been established and has not been corrected within the time above prescribed in which to make such correction, the 'oard may order that the insured status of the bank be terminated* 6he $orporation may publish notice of such termination and the bank shall give notice of such termination to each of the depositors at his last address of record on the books of the bank* .fter the termination of the insured status of any bank, the insured deposits of each depositor in the bank on the date of such termination, less all subsequent withdrawals from any deposits of such depositor, shall continue for a period of two years to be insured, and the bank shall continue to pay to the $orporation assessments as in the case of an insured bank during such period*
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6he %/)$, upon the payment of any depositor shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment, but such depositor shall retain his claim for any uninsured portion of his deposit*
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6he %/)$ may withhold payment of the insured deposit in a closed bank as may be required to provide for the payment of any liability of the depositor as a stockholder of the closed bank, or of any liability of the depositor to the closed bank or its receiver, which is not offset against the claim due from such bank, pending the determination and payment of such liability by such depositor or any other person liable therefor* .fter the %/)$ has given at least ; months notice to the depositor, he must claim his insured deposit from the %/)$ within 1= months after the $entral 'ank or proper court shall have ordered the conversion of the assets of the closed bank into money* (therwise, all rights of the depositor against the %/)$ with respect to the insured deposit shall be barred, and all rights of the depositor against the closed bank and its shareholders or the receivership estate to which the %/)$ may have become subrogated, shall thereupon revert to the depositor* .ll notes, debentures, bonds, or such obligations issued by the $orporation shall be exempt from taxation* &cts !" the insured !an. which need consent rom the P:IC: "1# "2# ";# merge or consolidate with any noninsured bank or institution or convert into a noninsured bank or institution assume liability to pay any deposits made in, or similar liabilities of, any noninsured bank or institution transfer assets to any noninsured bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank*
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2A* 845
TRANSPORTATION LAW
1. Co"tract o Tra"s3ortatio" - contract whereby a certain person or association of persons obligate themselves to transport persons, things, news, from one place to another for a fixed price 2. Parties to the Co"tract o Tra"s3ortatio": a. +hipper - one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported, or to present his own person or those of other or others in the case of transportation of passengers b. Carrier(Conductor - one who binds himself to transport persons, things, or news, as the case may be, or one employed in or engaged in the business of carrying goods for others for hire c. Consignee B the party to whom the carrier is to deliver the things being transported; one to whom the carrier may lawfully make delivery in accordance with its contract of carriage "shipper and consignee may be the same person#
3. Co!!o" Carrier - person, corporation, firm, association engaged in the business of carrying or transporting passengers, goods or both, by land, water, air, for compensation, offering services to the public; must e7ercise e7traordinary diligence Pri5ate Carrier - not engaged in the business of carrying; no public employment; undertakes to deliver goods1passengers for compensation; re0uires only ordinary diligence 3 common carrier is ),E/'1E9 negligent when there is a breach of its contract. *t has to prove it e7ercised E>9 in order to escape liability.
4* Re:%isites o Caso Fort%ito
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a. event independent of human will b. occurrence makes it impossible for debtor to perform in normal manner c. debtor free from aggravation1participation
d. impossible to foresee or avoid 5. (ontributory negligence does not entitle passengers to recover moral1exemplary damages* 6. Bi$$ o La'i"6 - written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named or his carrier )t is not indispensable to the creation of a contract of carriage* 6he contract itself arises from the moment goods are delivered by shipper to carrier and the carrier agrees to carry them* 6he unction o the Bill o ,adingE the legal basis of the contract between the shipper and carrier shall be the bills of lading, by the contents of which all disputes which may arise with regard to their execution and fulfillment shall be decided, no exceptions being admissible other than forgery or material errors in the drafting thereof* CarrierBs responsi!ilit" starts from the moment he receives unconditionally the merchandise personally or through an agent and lasts until he delivers them actually or constructively to the consignee or his agent* 1ere delay in the delivery of goods to consignee does not give right to refuse goods only breach of contract, ergo damages* *f delay is unreasonable , then he may refuse to accept and make carrier liable for conversion* 7. Besse$s - those engaged in navigation, whether coastwise or on the high seas, including floating docks, pontoons, dredges, scows and any other floating apparatus destined for the services of the industry or maritime commerce 8. Perso"s Partici3ati"6 i" Mariti!e Co!!erce: a. ship owner and1or ship agent b. captain or master c. other officers of the vessel
d. supercargo "a person designated by the owner of goods to accompany the goods on the vessel where the goods are loaded* Fe is 0(6 an employee of the carrier nor a part of the crew but is a passenger*# 9. Lia8i$it& o Shi3 o4"ers a"' Shi3 a6e"ts: a. civil liability for the acts of the captain b. civil liability for contracts entered into by the captain to repair, equip and provision the vessel, provided that the amount claimed was invested for the benefit of the vessel c. civil liability for indemnities in favor of ; rd persons which may arise from the conduct of the captain in the care of the goods which the vessel carried, as well as for the safety of the passengers transported :hip owner1ship agent not liable for the obligations contracted by the captain if the latter exceeds his powers and privileges inherent in his position of those which may have been conferred upon him by the former* Fowever, if the amount claimed were made use of for the benefit of the vessel, the ship owner or ship agent is liable*
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10. Doctri"e o Li!ite' Lia8i$it& - liability of shipowners is limited to amount of interest in said vessel because of the real and hypothecary nature of maritime law such that where the vessel is entirely lost, the obligation is extinguished* E2ce3tio"s: "1# vessel is not abandoned (2) claims under workmen7s compensation (3) injury1damage due to shipowner7s fault (4) vessel is insured 6he doctrine also applies for claims due to death or injuries to passengers, aside from claims for goods* *n abandoning the vessel, there is no procedure to be followed. 6here is neither a prescriptive period within which the ship owner can make the abandonment* Fe may do so for so long as he is not estopped from invoking the same or do acts inconsistent with abandonment*
11. Ro$es o the Ca3tai": a. general agent of the ship owner b. technical director of the vessels c. represents the government of the country under whose flag he navigates
12. ,oan on Bottomr" - made by shipowner1ship agent guaranteed by vessel itself, repayable upon arrival at destination 13. ,oan In 2espondentia - taken on security of the cargo repayable upon the safe arrival at cargo destination 14. Acci'e"ts a"' Da!a6es i" Mariti!e Co!!erce: a. .verages b. .rrivals Cnder :tress c. $ollisions d. :hipwrecks 15. A5era6e: a. all extraordinary or accidental expenses which may be incurred during the voyage for the preservation of the vessel or cargo or both b. all damages or deterioration which the vessel may suffer from the time it puts to sea at the port of departure until it casts anchor at the port of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment 16. +imple &verage - expenses1damages caused to the vessel1cargo not inured to common benefit and profit of all the persons interested in the vessel and her cargo; borne by respective owners 17. ;eneral &verage - expenses1damages deliberately caused in order to save the vessel, its cargo or both from a real and known risk
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Re:%isites: a. deliberately incurred b. intended to save vessel and cargo or both c. from real and known risk
d. there is success 18. For!a$ities or I"c%rri"6 #ross A5era6e: a. there must be an assembly of the sailing mate and other officers with the captain including those with interests in the cargo b. there must be a resolution of the captain c. the resolution shall be entered in the log book, with the reasons and motives and the votes for and against the resolution
d. the minutes shall be signed by the parties e. within 24 hours upon arrival at the first port the captain makes, he shall deliver one copy of these minutes to the maritime judicial authority thereat 19. Arri5a$s %"'er Stress - arrival of the vessel at a port not of destination on account of "a# "b# "c# lack of provisions; well-founded fear of sei ure; by reason of accident of the sea disabling it to navigate
When $ot ,aw ul: a. lack of provisions due to negligence to carry according to usage and customs b. risk of enemy not well known or manifest c. defect of vessel due to improper repair
d. malice, negligence, lack of foresight or skill of captain 20. Co$$isio" 7 impact of 2 vessels both of which are moving 21. A$$isio" 7 striking of a moving vessel against one that is stationary 22. Cases o Co$$isio": a. due to the fault, negligence or lac: of s:ill of the captain, sailing mate or the complement of the vessel - ship owner liable for the losses and damages "(ulpable .ault# b. due to fortuitous event or force majeure - each vessel and its cargo shall bear its own damages ".ortuitous# c. it cannot be determined which of the ? vessels caused the collision - each vessel shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes "*nscrutable .ault#
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23. Error i" E2tre!is - sudden movement made by a faultless vessel during the ; rd one of collision with another vessel which is at fault, even if the said movement is wrong, no responsibility will fall on said vessel 24. Shi34rec9 - denotes all types of loss1 wreck of a vessel at sea either by being swallowed up by the waves, by running against another vessel or thing at sea or on coast where the vessel is rendered incapable of navigation 25. Sa$5a6e - the compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from an impending peril, or such property recovered from actual peril or loss, in cases of shipwrecks, derelict or recapture; a service which one person renders to the owner of a ship or goods by his own labor, preserving the goods or ship which the owner or those entrusted with the care of them either abandoned in distress at sea or are unable to protect and secure; a permit is required to engage in the salvage business 26. Dere$ict 7 a ship or cargo which is abandoned and deserted at sea by those who are in charge of it, without any hope of recovering it, or without any intention of returning it 27. E$e!e"ts o a Ba$i' Sa$5a6e: a. a marine peril b. service voluntarily rendered when not required as an existing duty or from special contract c. success, in whole or in part, or that the services rendered contributed to such success 28. Co"tract o To4a6e - contract whereby a vessel usually motori ed pulls another from one place to another for compensation* )t is a contract of services* 29. :i erence !etween 'owage and +alvage: Sa$5a6e crew of salvaging ship is entitled to salvage, and can look to the salvaged vessel for its share salvor takes possession and may retain possession until he is paid court has power to reduce the amount of remuneration if unconscionable To4a6e crew of the towing ship does not have any interest or rights with the remuneration pursuant to the contract 6ower has no possessory lien; only an action for recovery of sum of money $ourt has no power to change amount in towage even if unconscionable
CARRIA#E OF #OODS BY SEA ACT

1. Whe" A33$ica8$e: a. b. c. d. contracts for the carriage of goods by sea to and from %hilippine ports in foreign trade
2. 0otice of 5oss or damage must be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery* )f the loss or damage is not apparent, the notice must be given within ; days of delivery* Fowever, the carrier shall be discharged from all liability in respect of loss or damage of goods
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unless suit is brought within 1 year after delivery of the goods or the date when the goods should have been delivered* 0otice of loss, if not given, that fact shall not affect or prejudice the right of the shipper to bring suit within the 1 year prescriptive period*
WARSAW CONBENTION
1. Whe" A33$ica8$e: a. international transport by air b. transport of persons, baggage, or goods 2. ,ia!ilities under the Convention: a. damage sustained in the event of the death or wounding of a passenger taking place on board the aircraft or in the course of any of the operations of embarking or disembarking b. loss or damage to any check baggage or goods sustained during the transport by air c. delay in the transport by air of passengers, baggage, or goods
Enumeration of causes of action as above stated is not an e7clusive list * "0orthwest .irlines vs* $ancer#
3. #eaning o 'ransport !" &ir - period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or in the case of landing outside an airport, in any place whatsoever 4. &ction or damages must !e !rought at the option o the plainti 0 either: a. before the court of the domicile of the carrier; b. court of principal place of business of carrier; c. court where he has a place of business through which the contract has been made;
d. before the court at the place of destination 5. Co"5e"tio" 3ro5i'es or a $i!itatio" o $ia8i$it&: a. for each passenger - limited to 12A,000 francs b. for goods and chec:ed in baggage - limited to 2A0 francs per kilogram c. for hand carry - limited to A,000 francs per passenger When can "ou not avail o this limitation? (1) willful misconduct (2) default amounting to willful misconduct (3) accepting passengers without ticket (4) accepting goods without airway bill or baggage without baggage check
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6. 6he right to damages shall be extinguished if an action is not brought within 2 years from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped* 7. Notice re:%ire!e"t: damage to baggage E within ; days from receipt damage to goods E within > days from receipt delayE within 21 days from receipt .ailure to file written notice , no action shall lie against the carrier, save in the case of fraud on his part*
8. Notice Re:%ire!e"ts: CO#SA loss(damage apparent loss(damage apparent not protest at time receipt of goods of Co'e o Co!!erce %rotest at time receipt of goods of Warsa4 Co"5e"tio"
protest within ; days from delivery
%rotest within 24 hours after receipt protest within ; days from receipt within > days from receipt within 21 days from receipt
damage o !aggage damage o goods dela"
P)BLIC SERBICE ACT

1. @very person that may own, operate, manage, control in the %hilippines, for hire1compensation with general1limited clientele whether permanent, occasional, accidental, and done for a general business purpose any common carrier, shipyard, electric light, heat and power and public utility* 2. P%8$ic )ti$it& - business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service* 3. Prior O3erator R%$e - before permitting a new operator to invade the territory of another already established, the prior operator must be given an opportunity to extend its service to meet the public needs in the matter of transportation* 4. Prior A33$ica"t R%$e - presupposes a situation where two interested persons apply for a $%$ in the same community over which no person has yet been granted a $%$ to operate* )f both applicants equal, then the applicant who applied first will be given the $%$*
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5. Disti"ctio"s 8et4ee" CPCs a"' CPCNs Certi icate o P%8$ic Co"5e"ie"ce any authori ation to operate a public service issued by the appropriate government agency an authori ation issued by the proper government agency for the operation of public services for which no franchise, either municipal or legislative is required by law Certi icate o P%8$ic Co"5e"ie"ce a"' Necessit& )ssued by the appropriate government agency to a public service to which any political subdivision has granted a franchise an authori ation issued by the proper government agency for the operation of public services for which a franchise is required by law
KFowever, %.5 v* $.' "G*<* 0o* 11JA2=, !arch 2+, 1JJ># blurred the distinction between the $%$ and $%$0* 6he $ourt ruled that convenience and necessity must be construed together* &urther, it is the law which determines the requisites for issuance of such certification and not the title indicating the certificate* 6. Re:%ire!e"ts o CPC a"' ra"chise: a. &ilipino citi enship b. financial capacity c. public convenience
CORPORATION LAW
1. Doctri"e o Cor3orate O33ort%"it& - a director is made to account to his corporation, gains and profits from transactions entered into by him1another competing corporation in which he has substantial interest, which should have been a transaction undertaken by the corporation* This is a breach of fiduciary relationship. 2. Doctri"e o Se3arate C%ri'ica$ Perso"a$it& B a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and in general, from the people comprising it; and that obligations incurred by the corporation, acting through its directors, officers and employees are its sole liabilities* 3. Doctri"e o Pierci"6 the Bei$ o Cor3orate E"tit& - it is to disregard for justifiable reasons by the state the fiction of juridical personality of the corporation separate and distinct from the persons composing it 4. De C%re Cor3oratio" - corporation formed with all the requirements of law 5. De Facto Cor3oratio"
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- corporation defectively formed from a bona fide attempt to incorporate under the existing law and exercises corporate powers
6. Cor3oratio" 8& Esto33e$ - a group of persons which holds itself out as a corporation and enters into a contract with ; rd persons on the strength of such appearance cannot be permitted to deny its existence in an action under said contract 7. Cor3oratio" 8& Prescri3tio" - body not lawfully organi ed as a corporation but has been recogni ed by immemorial usage as a corporation with rights and duties maintainable by law "ex* <oman $atholic# 8. Tr%st F%"' Doctri"e - the subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the creditors have the right to look up to satisfy their credits* $orporations may not dissipate this and the creditors may sue the stockholders directly for their unpaid subscriptions 9. Boti"6 Shares a. 9ounders +hares - given rights and privileges not enjoyed by owners of other stocks; right to vote1be voted in the election of directors shall not exceed A years No"7Boti"6 Shares a. Pre erred +hares - issued only with par value; given preference in distribution of assets in liquidation and in payment of dividends and other preferences stated in the articles of incorporation b. 2edeema!le +hares - expressly provided in articles; have to be purchased1taken up upon expiration of period of said shares purchased whether or not there is unrestricted retained earnings c. 'reasur" +toc.s
- stocks previously issued and fully paid for and reacquired by the corporation through lawful means "purchase, donation, etc*# 10. Exceptions where holders o non-voting shares ma" vote: a. amendments of articles of incorporation b. adoption1amendment of by-laws c. increase1decrease of bonded indebtedness
d. increase1decrease of capital stock e. sale1disposition of all1substantially all corporate property f. merger1consolidation of corporation
g. investment of funds in another corporation1another business purpose

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h. corporate dissolution 11. Pre erre' C%!%$ati5e Partici3ati"6 Share o Stoc9 - share entitling its holder to preference in the payment of dividends ahead of common stockholders and to be paid the dividends ahead of common stockholders and to be paid the dividends due for prior years and to participate further with common stockholders in dividend declarations 12. Pro!otio" Stoc9 or Ser5ices Re"'ere' Prior to I"cor3oratio" Escro4 Stoc9 - stock deposited with a ; rd person to be delivered to stockholder1assignor after complying with certain conditions - usually payment of full subscription price 13. O5er7iss%e' Stoc9 - stock issued in excess of authori ed capital stock; null and void Watere' Stoc9 - stock issued gratuitously, money1property less than par value, services less than par value, dividends where no surplus profits exist 14. Certi icate o Stoc9 written acknowledgment by the corporation of the stockholder7s interest in the corporation* )t is the personal property and may be mortgaged1pledged* 6ransfer binds the corporation when it is recorded in the corporate books* . stockholder who does not pay his subscription is not entitled to the issue of a stock certificate* 6he total par value of the stocks subscribed by him should first be paid*
15. (hattel mortgage of shares registered with the ,egistrar of 9eeds need not be registered in corporate boo:s to bind third parties because corporate boo:s only cover absolute transfers* 'ut the pledgee1mortgagee may not have voting rights unless stated in the contract and registered in the corporate name* 16. #ethods o Collection o =npaid +u!scription a. call, delinquency and sale at public auction of delinquent shares b. ordinary civil action c. collection from cash dividends and other amounts due to stockholders if allowed by bylaws1agreed to by him
17. A cor3oratio" ca" reac:%ire stoc9s i" the o$$o4i"6 cases: a. eliminate fractional shares b. corporate indebtedness arising from unpaid subscriptions c. purchase delinquent shares
d. exercise of appraisal right
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18. Ri6ht o A33raisa$ a. amending articles, changing, restricting, enlarging stockholder7s rights1extending, shortening corporate life b. sale1disposition of all1substantially all of corporate assets c. merger and consolidation
d. investment of funds in another corporation1for a different purpose 19. #ro%"'s or ReDectio" o Re6istratio" a. not in prescribed form b. purpose illegal, inimical c. treasurer7s affidavit false
d. non-compliance with required &ilipino stock ownership 20. Corporation must organiCe within 8 "ears incorporation5 <ow to organiCe? a. adoption of by-laws b. election of 'oard of /irectors c. election of officers rom issuance o certi icate o
&ut from issuance of certificate, it ac0uires juridical personality 22. Mer6er - one corporation absorbs the other and remains in existence while the other is dissolved 23. Co"so$i'atio" - a new corporation is created and the consolidating corporations are extinguished 24. Theor& o #e"era$ Ca3acit& - a corporation is said to hold such powers as are not prohibited1withheld from it by general law 25. Theor& o S3ecia$ Ca3acit& - the corporation cannot exercise powers except those expressly1impliedly given 26. Co"cessio" Theor& - a group of persons wanting to create a corporation will have to execute documents and comply with requirements set by the state before being given corporate personality; merely a privilege; state may provide causes for which the privilege may be withdrawn
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27. Botes re:%ire' i" 'i ere"t tra"sactio"s:

Pro5isio" 1+ 24 2= 2J S%8Dect Matter 3mendment of 3o* Election of 9irectors or Trustees ,emoval of directors or trustees .illing up vacancy in &o9 not due to removal +ranting of compensation to directors ,atify dealings or disloyalty of director E7tend or /horten (orporate Term *ncreaseB9ecrease (apital /toc:, *ncrease &onded *ndebtedness /ale or 9isposition of 3ssets *nvest funds in another corporation 9eclaration of /toc: 9ividends 9eclaration of (ash dividends Enter into management contract Botes re:%ire' !ajority 'o/, 21; stockholders !ajority stockholders 21; stockholders !ajority 'o/ Writte" Notice Re:%ire'F 0o, written assent sufficient Pes Pes )f no 'o/ quorum, majority of stockholders Pes Pes :ilent for ;4 Pes Pes A33raisa$ Ri6htF Pes
;0 ;2, ;4 ;> ;=
!ajority stockholders 21; stockholders !ajority 'o/, 21; stockholders !ajority 'o/, 21; stockholders
Pes B extension 0o B shortening Pes
40 42 4; 4; 44
!ajority 'o/, 21; stockholders !ajority 'o/, 21; stockholders !ajority 'o/, 21; stockholders !ajority 'o/ !ajority 'o/ :tockholders7 required vote "21; or majority# depends on certain conditions !ajority stockholders 21; stockholders
Pes Pes Pes Pes Pes
Pes Pes
4+ 4=
3doption of &y-;aws 9elegate to &o9 power to amend repeal or adopt bylaws ,evocation of )ower to amendBrepeal or adopt by-laws 3mendment of &y;aws 1erger or consolidation "approval or amendment of plan# )lan of distribution of assets for 4/(s 8oluntary dissolution
4=
!ajority stockholders !ajority 'o/1stockholders !ajority of 'o/ of each $orporation, 21; stockholders !ajority 'o/, 21; members !ajority 'o/, 2*; stockholders Pes Pes Pes Pes
4= >>
JA 11=, 11J
Pes Pes
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28.
here similar acts have been approved by the directors as a matter of general practice, custom and policy, the general manager may bind the company even without formal authori ation of the board of directors
29. Po4ers o stoc9ho$'ers: a. a direct participation in management - where his vote is needed to approve certain corporate actions b. indirect participation in management to vote or remove directors c. proprietary rights
d. remedial rights 30. Boti"6 Tr%st A6ree!e"t - an agreement between a group of stockholders and trustee for a term not exceeding A years in which control over the stocks is lodged in the trustee* 6he purpose is for controlling the voting* a. in writing, notari ed and filed with the :@$ and the corporation b. period not exceeding A years c. cannot be entered into to circumvent the laws against monopolies, illegal combinations in restraint of trade in fraud
31. C%!%$ati5e Boti"6 the number of votes that a shareholder7s number of shares multiplied by the number of directors may give all said votes to one candidate or he may distribute them as he may deem fit* $umulative voting is a matter of right in a stock corporation* )n a non-stock corporation, it cannot be utili ed unless allowed by the by-laws1articles
32. The power of removal of directors that may be e7ercised with or without cause cannot apply to the director representing the minority shareholders * Fe may only be removed with cause* 33. #e"era$ R%$e: *f surplus profits e7ceed the re0uirements the corporation shall declare dividends. 6his is compulsory if the surplus is equal1or more than the paid-up capital* E2ce3tio"s: a. justified by approved expansion projects b. prohibited by creditor to declare dividends c. retention is necessary under existing circumstances 34. B%si"ess C%'6!e"t R%$e - decisions made by a corporation7s management body shall not be interfered with even by the courts unless such acts are oppressive1unconscionable as to violate the rights of the minority 35. I"'i5i'%a$ S%it - one brought to assert a right of a stockholder peculiar to himself 36. Re3rese"tati5e S%it
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- brought by the stockholder in his own behalf and in behalf of other stockholders similarly situated, having common cause against the corporation 37. Deri5ati5e S%it - brought by a stockholder for and in behalf of the corporation to protect1vindicate corporate rights after he has exhausted intra-corporate remedies 2e*uisites: a. cause of action in favor of the corporation b. refusal of corporation to sue c. injury to the corporation
3lthough corporations dissolved have @ years to wind up, they can convey their properties to a trustee who can continue the suit beyond the @ year period * 6he lawyer who handled the case in the trial court may be considered as trustee for the dissolved corporation with respect to the matter in litigation only even if no appointment was extended to him* ":elano vs* $.# *n a case filed before dissolution, it may continue even beyond the @ year period until final determination of litigation * (therwise, the corporation in liquidation would lose what justly belongs to them1be exempt from payment of obligations because of a technicality*
38. Forei6" Cor3oratio"s a. :oing Business0 generall" - continuity of commercial dealings incident to prosecution of purpose and object of the organi ation* )solated, occasional or casual transactions do not amount to engaging in business* 'ut where the isolated act is not incidental1casual but indicates the foreign corporation7s intention to do other business, said single act constitutes engaging in business in the %hilippines* b. -:oing !usiness/ includes D9oreign Investment &ct o >@@>E: 1* :oliciting orders, service contracts, opening offices, whether called 8liaison9 offices or branches; 2* .ppointing representatives or distributors domiciled in the %hilippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty "1=0# days or more; ;* %articipating in the management, supervision or control of any domestic business, firm, entity or corporation in the %hilippines; and 4* .ny other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose or object of the business organi ation* !5 -:oing !usiness/ does $O' include: 1* !ere investment as a shareholder by a foreign entity in a domestic corporation duly registered to do business, and1or the exercise of rights as such investor; 2* Faving a nominee director or officer to represent its interests in such corporation; and
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;* .ppointing a representative or distributor domiciled in the %hilippines which transacts business in its own name and for its own account; 4* 6he publication of a general advertisement through any print or broadcast media; A* !aintaining a stock of goods in the %hilippines solely for the purpose of having the same processed by another entity in the %hilippines; +* $onsignment by a foreign entity of equipment with a local company to be used in the processing of products for export; >* $ollecting information in the %hilippines; and =* %erforming services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the %hilippines machinery it has manufactured or exported to the %hilippines, servicing the same, training domestic workers to operate it, and similar incidental services* c. Instances when unlicensed oreign corporations can sue: (1) isolated transactions (2) action to protect good name, goodwill, and reputation of a foreign corporation (3) contracts provide that %hil* $ourts will be venue to controversies (4) license subsequently granted enables foreign corporation to sue on contracts executed before the grant of the license (5) recovery of misdelivered property (6) where the unlicensed foreign corporation has a domestic corporation 39. Re$i6io%s Cor3oratio"s a. Cor3oratio" So$e - special form of corporation; associated with the clergy and consists of 1 person only and his successors; incorporated by law giving them legal capacity and advantage b. C$ose Cor3oratio"s - one whose articles provide that its shares shall not be held by more than 20 persons; its issued stock shall be subject to one or more restrictions on transfer and shall not be listed in any stock exchange1make public offering c. No"7stoc9 Cor3oratio"
- one where no part of its income is distributable to its members and shall be used in furtherance of the purpose of which it was organi ed 40. SEC C%ris'ictio" a. original and exclusive )urisdiction (1) fraudulent devices and schemes employed by directors detrimental to public interest (2) intra-corporate disputes and with the state in relation to their franchise and right to exist as such (3) controversies in the election, appointment of directors, trustees, etc*
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(4) petition to be declared in a state of suspension of payments b. ;rounds or +uspension(2evocation o Certi icate o 2egistration (1) fraud in procuring registration (2) serious misrepresentation as to objectives of corporation (3) refusal to comply with lawful order of :@$ (4) continuous inoperation for at least A years (5) failure to file by-laws within the required period (6) failure to file reports (7) other similar grounds
REBISED SEC)RITIES ACT

1. #e"era$ R%$e: 3ll securities before being offered for saleBactual sale to the public must first be registered and have the proper permit. @xceptionE a. exempt securities b. securities emanating from exempt transactions 2. Exempt +ecurities a. issued by the government subdivisions1instrumentalities b. issued by foreign government which the %hilippines has diplomatic relations c. issued by receiver1trustee of an insolvent approved by the court
d. issued by building and loan association e. issued by receiver1trustee of an insolvent approved by the court f. policy of insurance issued by insurance corporation supervised by the insurance commission
g. security1right1interest in real property including subdivision lot1condominium supervised by the !inistry of Fuman :ettlements h. pension plans regulated by ')<1)nsurance $ommission 3. Exempt 'ransactions a. judicial sale by execution, etc* in insolvency b. sale of pledged property1foreclosed property to liquidate an obligation c. isolated transactions on securities done by owner1agent d. stock transfers emanating from mergers and consolidations e. pre-incorporation subscription f. securities issued by public service operator to broaden equity base
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4. #ro%"'s or ReDectio" o Re6istratio" a. application incomplete1untruthful1omits to state a material fact b. issuer1registrant insolvent, violated code1 :@$ rules, engages in fraudulent transactions c. issuer7s business not sound
d. officer, director, stockholders of issuers is disqualified e. issue would prejudice the public 5. #ro%"'s or Re5ocatio" a. issuer insolvent b. violated of $ode1:@$ rules c. fraudulent transaction
d. dishonesty by issuer1misrepresented prospectus e. does not conduct business in accordance with law 6. Acts Prohi8ite' a. manipulation of security prices b. manipulation of deceptive devices c. artificial measures of price control d. fraudulent transactions e. insider trading f. false prospectus, communications, reports
SEC)RITIES RE#)LATION CODE OF 2000

,For a !e!or& ai' o the IRR o the Sec%rities Re6%$atio" Co'eG see A33e"'i2 A 1
1* P%r3ose o the $a4: encourage the widest participation of ownership in enterprises; protect investors, ensure full and fair disclosure about securities; minimi e, if not totally eliminate, insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market*
2* Po4ers a"' F%"ctio"s o the SEC ,Sec >1: Fave jurisdiction and supervision over all entities who are the grantees of primary franchises and1or a license or permit issued by the Government; &ormulate, amend, or repeal policies and recommendations concerning the securities market; advise $ongress and other government agencies and propose legislation and amendments;
>2
Fandle registration statements, and registration and licensing applications; :upervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other :<(s; )mpose sanctions for the violation of laws and )<<; /eputi e any and all enforcement agencies of the Government, civil or military as well as any private institutions, )ssue cease and desist orders to prevent fraud or injury to the investing public; %unish for contempt, both direct and indirect; $ompel the officers of any registered corporation or association to call meetings of stockholders or members; )ssue subpoena duces tecum and summon witnesses to appear in any proceedings, order the examination, search and sei ure of all documents, :uspend, or revoke , after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations;
3. <owever, the /E(=s jurisdiction over all cases enumerated under /ection A of )9 4o. C0?-3 "intracorporate disputes# has been transferred to the (ourts of general jurisdiction or the appropriate ,egional Trial (ourt. 4. De i"itio"s a- Sec%rities: i* are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture ii* evidenced by a certificate, contract, instrument, whether written or electronic in character* b* .n @iss%erA is an originator, maker, obligor, or creator of the security* c* . @8ro9erA is a person engaged in the business of buying and selling securities for the account of others*
d* . @re6istratio" state!e"tA is the application for the registration of securities required to be filed with the :@$* e* . @Pros3ect%sA is the document made by or on behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through a registration statement filed with the :@$* f* .n @)"'er4riterA is a person who guarantees on a firm commitment and1or declared best effort basis the distribution and sale of securities of any kind by another company* g* . @'ea$erA means any person who buys and sells securities for his1her own account in the ordinary course of business* 5. 3ll securities must first have a registration statement duly filed with the /E( before they may be sold or offered for sale or distribution within the )hilippines * %rior to any sale, information on the securities shall be made available to each prospective purchaser* 6. +ecurities exempt rom registration D+ec5 @E:
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a* 6hose issued or guaranteed by the Government of the %hilippines, or by any political subdivision, agency, or instrumentality; b* 6hose issued or guaranteed by the government of any country with which the %hilippines maintains diplomatic relations "on the basis of reciprocity#; c* $ertificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body; d* 6he sale of any security, or its derivatives, which, by law, is under the supervision and regulation of the (ffice of the )nsurance $ommission, Fousing and 5and Cse <egulatory 'oard, or the 'ureau of )nternal <evenue; e* .ny security issued by a bank "except its own shares of stock#* 7. <ow does one parta.e o an exemption? .pply for an exemption by filing with the :@$ a notice identifying the exemption; pay to the :@$ a fee equivalent to one-tenth "1110# of one percent "1,# of the maximum aggregate price or issued value of the securities*
=* Re6istratio" o Sec%ritiesHProce'%re ,Sec- ;21: 9iling: The issuer must file in the main office of the /E(, 1* a sworn registration statement with respect to such securities, 2* the registration statement must include any prospectus which may be required +ignature: 6he registration statement shall be signed by the issuer7s executive officer, its principal operating officer, its principal financial officer, its comptroller, principal accounting officer, its corporate secretary or persons performing similar functions accompanied by a duly verified resolution of the board of directors of the issuer corporation* 9ees: Cpon filing, the issuer shall pay a fee of not more than 1110 of 1, of the maximum aggregate price at which such securities are proposed to be offered* Pu!lication: 0otice of the filing of the registration statement shall be immediately published by the issuer, at its own expense, in two "2# newspapers of general circulation in the %hilippines, once a week for two "2# consecutive weeks, recitingE that a registration statement for the sale of such security has been filed, that the aforesaid registration statement, as well as the papers attached thereto are open to inspection; copies, photostatic or otherwise, shall be furnished to interested parties at such reasonable charge as the :@$ may prescribe* Order: 3ithin forty-five "4A# days after the date of filing, the :@$ shall declare the registration statement effective or rejected, Entr" o Order: to be* 6he :@$ will enter an order declaring the registration statement
Oath !" the issuer: Cpon effectivity of the registration statement, the issuer shall state under oath in every prospectus that all registration requirements have been met and that all information are true and correct as represented by the issuer or the one making the statement*
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J* . registration statement may be withdrawn by the issuer only with the consent of the :@$* ;0- S%s3e"sio" o Re6istratio" ,Sec- ;>1: 6he :@$ may suspend registration if the issuer refuses to furnish information required by the :@$ in order to enable it to ascertain whether the registration of such security should be revoked if it finds thatE a* the information contained in the registration statement filed is or has become misleading, incorrect, inadequate or incomplete in any material respect, b* or the sale or offering for sale of the security registered may work or tend to work a fraud* 6he :@$ may also suspend the right to sell and offer for sale such security pending further investigation* .ny sale of the security when the registration is suspended shall be void* Cpon issuance of an order of suspension, the :@$ shall conduct a hearing* )f it determines that the sale of any security should be revoked, it shall issue an order prohibiting the sale of such security*
11- Re6%$atio" o Pre7Nee' P$a"s ,Sec- ;01: a* -Pre-$eed Plans/ are contracts which 1* provide for the performance of future services or the payment of future monetary considerations at the time of actual need, 2* for which planholders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, interment, and other plans which the :@$ may from time to time approve* b. &efore any pre-need plan is sold or offered for sale to the public, they must: be registered; persons involved in the sale of pre-need plans must be licensed; there must be disclosures to prospective plan holders; provide for uniform accounting system, reports and record keeping with respect to such plans, impose capital, bonding and other financial responsibility; and establish trust funds for the payment of benefits under such plans*
12* 2eportorial 2e*uirementsF Periodic and Other 2eports o Issuers D+ec5 >7E: Every issuer shall file with the /E(: 3ithin 1;A days, after the end of the issuer7s fiscal year, an annual report which shall include, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year, certified by an independent certified public accountant, and a management discussion and analysis of results of operations; and (ther periodical reports for interim fiscal periods and current reports on significant developments of the issuer
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12. Protectio" o Shareho$'er I"terestsI a5 Prox" +olicitations D+ec5 8GE: i* must be in writing, ii* signed by the stockholder or his duly authori ed representative, iii* filed before the scheduled meeting with the corporate secretary* 6he proxy shall be valid only for the meeting for which it is intended* 0o proxy shall be valid and effective for a period longer than A years at one time*
b*
'ransactions o :irectors0 O icers and Principal +toc.holders D+ec5 8AE: @very person who is directly or indirectly the beneficial owner of more than 10, of any class of any equity security, or who is a director or an officer of the issuer of such security, shall fileE i* statement with the :@$ and, if such security is listed for trading on an @xchange, also with the @xchange, of the amount of all equity securities of such issuer of which he is the beneficial owner, ii* and within 10 days after the close of each calendar month, if there is a change in ownership during such month, a statement indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month*
c. *t shall be unlawful for any such beneficial owner, director, or officer, directly or indirectly, to sell any e0uity security of such issuer if the person selling the security or his principal: i* /oes not own the security sold; or ii* )f owning the security, does not deliver it against such sale within 20 days, or does not within A days after such sale, deposit it in the mails or other usual channels of transportation* 13. Prohi8itio"s o" Fra%'G Ma"i3%$atio" a"' I"si'er Tra'i"6 a* .n @I"si'erA meansE i* the issuer; ii* a director or officer "or person performing similar functions# of, or a person controlling the issuer; iii* a person whose relationship or former relationship to the issuer gives or gave him access to material information about the issuer or the security that is not generally available to the public; iv* a government employee, or director, or officer of an exchange, clearing agency and1or self-regulatory organi ation who has access to material information about an issuer or a security that is not generally available to the public; or v*a person who learns such information by a communication from any of the foregoing insiders* 14. Ma"i3%$atio" o Sec%rit& PricesI De5ices a"' Practices ,Sec- 2=1: a5 It shall !e unlaw ul or an" person0 directl" or indirectl":
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i* 6o create a false or misleading appearance of active trading in any listed security traded in an @xchange or any other trading marketE ii. To effect, alone or with others, a series of transactions in securities that: 1* <aises their price to induce the purchase of a security, 2* /epresses their price to induce the sale of a security, ;* $reates active trading to induce such a purchase or sale through manipulative devices iii* 6o circulate or disseminate information that the price of any security listed in an @xchange will or is likely to rise or fall because of manipulative market operations iv* 6o make false or misleading statements with respect to any material fact, which he knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in an @xchange* v*6o effect any series of transactions for the purchase and1or sale of any security traded in an @xchange for the purpose of pegging, fixing or stabili ing the price of such security, unless otherwise allowed by this $ode* 15. Fra%'%$e"t Tra"sactio"s ,Sec- 201: a5 It shall !e unlaw ul or an" person0 directl" or indirectl"0 in connection with the purchase or sale o an" securities to: i* (btain money or property by means of any untrue statement of a material fact ii* @ngage in any act, transaction, practice or course of business, which operates as a fraud or deceit upon any person* !5 InsiderBs :ut" to :isclose When 'rading D+ec5 87E: i* )t shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public, unless: ii* 6he insider proves that the information was not gained from such relationship; or iii. *f the other party selling to or buying from the insider "or his agent# is identified, and the insider proves: 1* that he disclosed the information to the other party, or 2* that he had reason to believe that the other party otherwise is also in possession of the information* c* )t shall be unlawful for any insider to communicate material non-public information about the issuer or the security to any person who, by virtue of the communication, becomes an insider, where the insider communicating the information knows or has reason to believe that such person will likely buy or sell a security of the issuer while in possession of such information* )nformation is 8material non-public9 ifE i* )t has not been generally disclosed to the public and would likely affect the market price of the security; or ii* would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security* 16. Re6%$atio" o Sec%rities Mar9et Pro essio"a$s
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a* .n -associated person o a !ro.er or dealer/ is an employee who, directly exercises control of supervisory authority, but does not include a salesman, or an agent or a person whose functions are solely clerical or ministerial* b* . -+alesman/ is a natural person, employed as such or as an agent, by a dealer, issuer or broker to buy and sell securities* 17. Re6istratio" o Bro9ersG Dea$ersG Sa$es!e" a"' Associate' Perso"s ,Sec- 2.1: 0o person shall engage in the business of buying or selling securities in the %hilippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the :@$*
18. 'he *uali ications o Bro.ers0 :ealers0 +alesmen and &ssociated Persons Dhereina ter0 the applicant or registrationE are the ollowing: a* *f a natural person, the applicant must satisfactorily pass a written examination; b* *n the case of a bro:er or dealer, the applicant satisfy a minimum net capital as prescribed by the :@$, and provide a bond or other security c* *f located outside of the )hilippines , the applicant must file a written consent to service of process upon the :@$* 19. Tra"sactio"s a"' Res3o"si8i$it& o Bro9ers a"' Dea$ers ,Sec- <01: 4o bro:er or dealer shall deal in or otherwise buy or sell, for its own account or for the account of customers, when: a# 6he securities listed on the @xchange and dealt, are issued by a corporation, b# 3hen such corporation7s stockholder, director, associated person or salesman is at the time holding office in said issuer corporation as a director, president, vicepresident, manager, treasurer, comptroller, secretary or any office of trust and responsibility, or is a controlling person of the issuer* 20. E2cha"6es a"' Other Sec%rities Tra'i"6 Mar9ets a* +egregation and ,imitation o 9unctions o #em!ers0 Bro.ers and :ealers D+ec5 AHE: )t shall be unlawful for any member-broker of an @xchange to effect any transaction on such @xchange for its own account, the account of an associated person, or an account with respect to which it or an associated person exercises investment discretion* 6owever, the following shall not be unlawful: i* .ny transaction by a member-broker acting in the capacity of a market maker; ii* .ny transaction reasonably necessary to carry on an odd-lot transactions; iii* iv* .ny transaction to offset a transaction made in error; and .ny other transaction of a similar nature as may be defined by the :@$*
b* Po4ers 4ith Res3ect to E2cha"6es a"' Other Tra'i"6 Mar9et ,Sec- <01: 'he +EC is authoriCed Dprovided there is notice and an opportunit" or hearingE: i* 6o summarily suspend trading in any listed security on any @xchange or other trading market for a period not exceeding thirty ";0# days or,
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ii* with the approval of the %resident of the %hilippines, summarily to suspend all trading on any securities @xchange or other trading market for a period of more than thirty ";0# but not exceeding ninety "J0# days; iii* to determine the number, si e and location of stock @xchanges, other trading markets and commodity @xchanges and other similar organi ations iv* to establish or facilitate the establishment of trust funds which shall be contributed by @xchanges, brokers, dealers, underwriters, transfer agents, salesmen and other persons transacting in securities, for the purpose of compensating investors for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the persons with whom they transact, v*take custody and management of the fund itself as well as investments in and disbursements from the funds
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21. Re6istratio"G Res3o"si8i$ities a"' O5ersi6ht o Se$ 7Re6%$ator& Or6a"iJatio"s ,Sec=01: i* 6he :@$, after making an appropriate request in writing to a self-regulatory organi ation, to effect specified changes in its rules and practices only after due notice and hearing that such changes are necessary* ii* 6he :@$, after due notice and hearing, is authori ed, in the public interest and to protect investors if it finds that a self-regulatory organi ation has willfully violated or is unable to comply with any provision of this $ode to suspend, impose limitations, expel any member, or to remove a member from office* 22. Ac:%isitio" a"' Tra"s er o Sec%rities a"' Sett$e!e"t o Tra"sactio"s i" Sec%rities a- . -Clearing &genc"/ is any person who acts as intermediary in making deliveries upon payment to effect settlement in securities transactions* 8- -Exchange/ is an organi ed marketplace or facility that brings together buyers and sellers and executes trades of securities and1or commodities* 23. )"certi icate' Sec%rities ,Sec- =<1: 3 corporation whose securities are registered pursuant to this (ode or listed on a securities E7change may: a* )f approved by a 'oard resolution and agreed by a shareholder, investor or securities intermediary, issue shares to, or record the transfer of some or all of its shares in the form of uncertificated securities* b* )f so provided in its articles of incorporation and by-laws, issue all of the shares of a particular class in the form of uncertificated securities and subject to a condition that investors may not require the corporation to issue a certificate in respect of any shares recorded in their name* 24. E5i'e"tiar& Ba$%e o C$eari"6 A6e"c& Recor' ,Sec- ==-1: a* 6he official records and book entries of a clearing agency shall constitute the best evidence of such transactions between the clearing agency and its participants and members* b* 'ut this is without prejudice to the right of participants7 or members7 clients to prove their rights, title and entitlement with respect to the book-entry security holdings of the participants or members held on behalf of the clients* 25. Restrictio"s o" Borro4i"6s 8& Me!8ersG Bro9ersG a"' Dea$ers ,Sec- =?1: It shall !e unlaw ul or an" registered !ro.er or dealer0 or mem!er o an Exchange0 directl" or indirectl": a* 6o permit an aggregate indebtedness to exceed the percentage of the net capital "exclusive of fixed assets and value of @xchange membership# employed in the business, but not exceeding 2,000,* b* 6o encumber or arrange to encumber any security carried for the account of any customer under circumstancesE c* that will permit the commingling of his securities, without his written consent, with the securities of any customer; d* that will permit such securities to be commingled with the securities of any person other than a bona fide customer; or
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e* that will permit such securities to be encumbered, or subjected to any lien or claim for a sum in excess of the aggregate indebtedness of such customers in respect of such securities* f* 6o lend or arrange for the lending of any security carried for the account of any customer without the written consent of such customer or in contravention of the :@$7s )<<s*
26. #e"era$ Pro5isio"s a5 Civil ,ia!ilities b* ":ec* A+# ":ec* A># &or &raud in $onnection 3ith :ecurities 6ransactions ":ec* A=# &or !anipulation of :ecurity %rices ":ec* AJ# 3ith <espect to $ommodity &utures $ontracts and %re-need %lans ":ec* +0# (n .ccount of )nsider 6rading ":ec* +1#
,imitation o &ctions D+ec5 48E:
9or actions which arise i* (n .ccount of &alse <egistration :tatement ii* .rising in $onnection 3ith %rospectus, $ommunications and <eports /uch action must be brought within two "?# years after the discovery of the untrue statement or the omission c5 &ctions arising rom an" other provision o this Code must !e !rought: within two "2# years after the discovery of the facts constituting the cause of action and within five "A# years after such cause of action accrued*
'- Cease a"' Desist Or'ers 8& the SECi* #e"era$ r%$e: 3henever it shall appear that any person has engaged or is about to engage in any act or practice which would violate this $ode, the :@$ may issue an order to such person to desist from committing such act or practice* ii* E2ce3tio": 6he :@$ cannot charge any person with a violation of the rules of an @xchange or other self regulatory organi ation unless it appears to the :@$ that such @xchange or other self-regulatory organi ation is unable or unwilling to take action against such person* iii* E2ce3tio" to the e2ce3tio": )f the :@$ makes a finding that there is a reasonable likelihood of continuing, further or future violations by such person, then an ex-parte cease and desist order for a maximum period of ten "10# days can be issued, enjoining the violation and compelling compliance with such provision* e- Sett$e!e"t O ers ,Sec- >>1: Procedure: i* %arties being investigated and1or charged may propose in writing an offer of settlement with the :@$*
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ii* Cpon receipt of such offer of settlement, the :@$ may consider the offer based on timing, the nature of the investigation or proceeding, and the public interest* 5 Power o the +EC with regard to +pecial &ccounting 2ules D+ec5 46E: i* the authority to make, amend, and rescind such accounting rules and regulations as may be necessary to carry out the provisions of this $ode, ii* prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and income statement, and the methods to be followed in the preparation of accounts, appraisal or valuation of assets and liabilities, g* C%'icia$ Re5ie4 o SEC Or'ers ,Sec- /01: .ny person aggrieved by an order of the :@$ may appeal the order to the $ourt of .ppeals by petition for review in accordance with the pertinent provisions of the <ules of $ourt* h- Ba$i'it& o Co"tracts ,Sec- /;1: i* .ny condition, stipulation, provision which binds any person to waive compliance with any provision of this $ode or )<<, as well as the waiver itself, shall be void* ii* @very contract made in violation of any provision of this $ode or )<<, the performance of which involves the violation of, or the continuance of any violation of, any provision of this $ode r )<<, shall be void
#ENERAL BAN(IN# LAW OF 2000

;- C$assi icatio"s o Ba"9s: "d# "e# "f# i* ii* iii* "g# "h# "i# "j# Cniversal banks; $ommercial banks; 6hrift banks, composed ofE :avings and mortgage banks, :tock savings and loan associations, and %rivate development banks, as defined in the <epublic .ct 0o* >J0+ "hereafter the 86hrift 'anks .ct9#;
<ural banks, as defined in <epublic .ct 0o* >;:; "hereafter the N<ural 'anks .ctN#; $ooperative banks, as defined in <epublic .ct 0o +J;= "hereafter the N$ooperative $odeN#; )slamic banks as defined in <epublic .ct 0o* +=4=, otherwise known as the 8$harter of .l .manah )slamic )nvestment 'ank of the %hilippines9; and (ther classifications of banks as determined by the !onetary 'oard of the 'angko :entral ng %ilipinas
2- A%thorit& o the Ce"tra$ Ba"9
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a* 6he issuance of rules of, conduct or the establishment standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied; b* 6he conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the !onetary 'oard; c* (verseeing to ascertain that laws and regulations are complied with; d* <egular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basisE )rovided, 6hat the deficiencies1irregularities found by or discovered by an audit shall be immediately addressed; e* )nquiring into the solvency and liquidity of the institution "2-/#; or f* @nforcing prompt corrective action*
;* &oreign individuals and non-bank corporations may own or control up to 40, of the voting stock of a domestic bank* 6his rule shall apply to &ilipinos and domestic non-bank corporations* 4* E7cept as otherwise provided in the ,ural &an:s 3ct , no appointive or elective public official whether full-time or part-time shall at the same time serve as officer of any private bank, save in cases where such service is incident to financial assistance provided by the government or a government owned or controlled corporation to the bank or unless otherwise provided under existing laws* A* 6he banking industry is hereby declared as indispensable to the national interest and any strike or lockout involving banks, if unsettled after seven "># calendar days shall be reported by the 'angko :entral to the secretary of 5abor who may assume jurisdiction over the dispute or decide it or certify the same to the 0ational 5abor <elations $ommission for compulsory arbitration* Fowever, the %resident of the %hilippines may at any time intervene and assume jurisdiction over such labor dispute in order to settle or terminate the same* 0- Po4ers o a )"i5ersa$ Ba"9 a* @xercise powers of an investment bank b* )nvest in equities of allied "financial or non-financial# and non-allied enterprises c* $an own up to 100, of the equity in a thrift bank, a rural bank or a financial allied or non-allied enterprise d. )owers as may be necessary to carry on the business of commercial ban:ing such as i* .ccepting drafts and negotiating promissory notes ii* /iscounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt iii* iv* .ccepting or creating demand deposits <eceiving other types of deposits and deposit substitutes
v*'uying and selling foreign exchange and gold or silver bullion vi* .cquiring marketable bonds and other debt securities
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vii*
@xtending credit
>* 6he !onetary 'oard shall prescribe the minimum ratio which the net worth of a bank must bear to its total risk assets, which may include contingent accounts* =* 5imit on 5oans, $redit .ccommodations and GuaranteesE not exceed 20, of the net worth of the bank* 'ut may be increased by an additional 10, provided the additional liabilities of any borrower are adequately secured by trust receipts, shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable, non-perishable goods, fully covered by insurance* J* 5oans and other credit accommodations against real estate shall not exceed >A, of the appraised value of the appraised value of the respective real estate security, plus +0, of the appraised value of the insured improvements and such loans may be made to the owners of the real estate and his assignees "same rule for security of chattels and intangible properties# 10* . borrower may at any time prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan and other credit accommodation, subject to such reasonable terms and conditions as maybe agreed upon between the bank and its borrower* 11* . bank shall not directly engage in insurance business as the insurer* >85 Prohi!ited transactions o a director0 o er0 emplo"ee or agent o the !an.: "a# !ake false entries in any bank report or statement or participate in any fraudulent transaction, thereby affecting the financial interest of, or causing damage to, the bank or any person; "b# 3ithout order of a court of competent jurisdiction, disclose to any unauthori ed person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entityE )rovided, 6hat with respect to bank deposits, the provisions of existing laws shall prevail; "c# .ccept gifts, fees, or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank; "d# (vervalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank; or "e# (utsource inherent banking functions* >A5 Prohi!ited transactions o a !orrower: &raudulently overvalue property offered as security for a loan or other credit accommodation from the bank; &urnish false or make misrepresentation or suppression of material facts for the purpose of obtaining, renewing, or increasing a loan or other credit accommodation or extending the period thereof; .ttempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation; or (ffer any director, officer, employee or agent of a bank any gift, fee, commission, or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application*
14* 6he 'angko :entral shall have full authority to regulate the use of electronic devices, such as computers, and processes for recording, storing and transmitting information or data in
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connection with the operations of a bank; quasi-bank or trust entity, including the delivery of services and products to customers by such entity* 1A* @very bank, quasi-bank or trust entity shall submit to the appropriate supervising and examining department of the 'angko :entral financial statements in such form and frequency as maybe prescribed by the ':%* 1+* 6he financial statements must be published in @nglish or &ilipino at least once every quarter in a newspaper of general circulation in the city or province of the principal office "if none, in a newspaper published in !etro !anila or in the nearest city or province#* 1>* 0o person, association, or corporation unless duly authori ed to engage in the business of a bank, quasi-bank, trust entity, or savings and loan association as defined in this .ct, or other banking laws, shall advertise or hold itself out as being engaged in the business of such bank, quasi-bank, trust entity, or association, or use in connection with its business title, the word or words $ban:,% $ban:ing,% $ban:er,% $0uasi-ban:,% $0uasi-ban:ing,% $0uasiban:er,% $savings and loan association,% $trust corporation,% $trust company% or words of similar import or transact in any manner the business of any such bank, corporation or association* ;.- Cessatio" o Ba"9i"6 B%si"ess a* 1oluntar" ,i*uidation B written notice sent to !onetary 'oard who has right to intervene before liquidation is undertaken to protect interests of creditors* b* 2eceivership and involuntar" li*uidation B grounds and procedure under 0ew $entral 'ank .ct but petitioner is required to post a bond in favor of 'angko :entral 1J* $onduct of offshore banking is governed by %/ 10;4 "(ffshore 'anking :ystem /ecree# 20* 3ithin > years from effectivity of .ct "year 200>#, a foreign bank may acquire up to 100, of the voting stock of only 1 bank organi ed under %hilippine laws* 21* (nly a stock corporation or a person duly authori ed by the !onetary 'oard to engage in trust business shall act as a trustee or administer any trust or hold property in trust or on deposit for the use, benefit, or behoof of others* &or purposes of this .ct, such a corporation shall be referred to as a trust entity* 22- Po4ers o a Tr%st E"tit&: .ct as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic and to accept and execute any trust consistent with law; .ct under the order or appointment of any court as guardian, receiver, trustee, or depositary of the estate of any minor or other incompetent person, and as receiver and depositary of any moneys paid into court by parties to any legal proceedings and of property of any kind which may be brought under the jurisdiction of the court; .ct as the executor of any will when it is named the executor thereof; .ct as administrator of the estate of any deceased person, with the will annexed, or as administrator of the estate of any deceased person when there is no will; .ccept and execute any trust for the holding, management, and administration of any estate, real or personal, and the rents, issues and profits thereof; and @stablish and manage common trust funds, subject to such rules and regulations as may be prescribed by the !onetary 'oard*
2;* 'efore transacting trust business, trust entity is required to deposit security of at least A00,000 pesos*
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24* 3ithin ; years from effectivity of this .ct "200;#, ':% shall pahse out and transfer its supervising and regulatory powers over building and loan associations to the Fome )nsurance an Guaranty $orporation*
THE NEW CENTRAL BAN( ACT

1* The BSP 6he central monetary authority "the 'angko :entral ng %ilipinas# established under this .ct, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy* Res3o"si8i$it& o the BSP: a# provide policy directions in the areas of money, banking, and credit* b# supervision over the operations of banks c# exercise such regulatory powers as provided in this .ct and other pertinent laws Pri!ar& o8Decti5e: a# maintain price stability conducive to a balanced and sustainable growth of the economy b# promote and maintain monetary stability and the convertibility of the peso* 2* The Mo"etar& Boar' 6he powers and functions of the 'angko :entral shall be exercised by the 'angko :entral !onetary 'oard, hereafter referred to as the !onetary 'oard which is composed of seven "># members appointed by the %resident of the %hilippines for a term of six "+# years* The seven "D# members are: the Governor of the 'angko :entral, a member of the $abinet to be designated by the %resident of the %hilippines and five "A# members who shall come from the private sector* 0o member of the !onetary 'oard may be reappointed more than once* .ny vacancy in the !onetary 'oard shall be filled by the appointment of a new member to complete the unexpired period of the term of the member concerned* 'he President ma" remove an" mem!er o the #onetar" Board or an" o the ollowing reasons: a# the member falls under the enumeration of disqualifications b# if he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and such incapacity has lasted for more than + months c# the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to the aims and interests of the ':% d# the member no longer possesses the qualifications specified in this .ct* ;* O3eratio"s o the Ba"69o Se"tra$
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6he 'angko :entral shall have the authority to request from government offices and instrumentalities, or government-owned or controlled corporations, any data which it may require for the proper discharge of its functions and responsibilities* 6he 'angko :entral through the Governor or in his absence, a duly authori ed representative shall have the power to issue a subpoena for the production of the books and records for the aforesaid purpose* A33oi"t!e"t o Co"ser5ator: a# 3henever, the !onetary 'oard finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, b# 6he conservator shall report and be responsible to the !onetary 'oard and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank* c# 6he conservator should be competent and knowledgeable in bank operations and management* 6he conservatorship shall not exceed one "1# year* d# 6he conservator shall receive; the !onetary 'oard may appoint a conservator connected with the 'angko :entral, in which case he shall not be entitled to receive any remuneration or emolument; the expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned* eE 'he #onetar" Board shall terminate the conservatorship: 1# when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary 2# when it is determined that the continuance in business of the institution would involve probable loss to its depositors or creditors
)n these cases, the !onetary 'oard may summarily and without need for prior hearing forbid the institution from doing business in the %hilippines and designate the %hilippine /eposit )nsurance $orporation as receiver of the banking institutionE "a# is unable to pay its liabilities as they become due in the ordinary course of business %rovided, 6hat this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;
"b# has insufficient reali able assets, as determined by the 'angko :entral, to meet its liabilities; or "c# cannot continue in business without involving probable losses to its depositors or creditors; or "d# has willfully violated a cease and desist order that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; 6he actions of the !onetary 'oard regarding rehabilitation and liquidation shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction* 6he petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten "10# days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship* 6he 'angko :entral shall publish a general balance sheet showing the volume and composition of its assets and liabilities as of the last working day of the month within sixty
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"+0# days after the end of each month except for the month of /ecember, which shall be submitted within ninety "J0# days after the end hereof* 4- The A%'itor 6he $hairman of the $ommission on .udit shall act as the ex officio auditor of the 'angko :entral and, as such, he is empowered and authori ed to appoint a representative who shall be the auditor of the 'angko :entral*
A* C%rre"c& 6he unit of monetary value in the %hilippines is the Npeso,N which is represented by the sign N%*N 6he 'angko :entral shall have the sole power and authority to issue currency, within the territory of the %hilippines* 6he 'angko :entral shall have the authority to investigate, make arrests, conduct searches and sei ures in accordance with law, for the purpose of maintaining the integrity of the currency* 0otes and coins issued by the 'angko :entral shall be liabilities of the 'angko :entral and may be issued only against, and in amounts not exceeding, the assets of the 'angko :entral* :aid notes and coins shall be a first and paramount lien on all assets of the 'angko :entral* 6he 'angko :entralOs holdings of its own notes and coins shall not be considered as part of its currency issue and, accordingly, shall not form part of the assets or liabilities of the 'angko :entral* .ll notes and coins issued by the 'angko :entral shall be fully guaranteed by the Government of the <epublic of the %hilippines and shall be legal tender in the %hilippines for all debts, both public and private Cnless otherwise fixed by the !onetary 'oard, coins shall be legal tender in amounts not exceeding &ifty pesos "%A0*00# for denominations of 6wenty-five centavos and above, and in amounts not exceeding 6wenty pesos "%20*00# for denominations of 6en centavos or less* R%$es o" Retire!e"t o O$' Notes a"' Coi"s: a# 6he 'angko :entral may call in for replacement notes of any series or denomination which are more than five "A# years old and coins which are more than "10# years old* b# 0otes and coins called in for replacement in accordance with this provision shall remain legal tender for a period of one "1# year from the date of call* c# .fter this period, they shall cease to be legal tender but during the following year, or for such longer period as the !onetary 'oard may determine, they may be exchanged at par and without charge in the 'angko :entral and by agents duly authori ed by the 'angko :entral for this purpose* d# .fter the expiration of this latter period, the notes and coins which have not been exchanged shall cease to be a liability of the 'angko :entral and shall be demoneti ed* e# 6he 'angko :entral shall also demoneti e all notes and coins which have been called in and replaced* +* De!a"' De3osits
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6he term Idemand depositsI means all those liabilities of the 'angko :entral and of other banks which are denominated in %hilippine currency and are subject to payment in legal tender upon demand by the presentation of checks* (nly banks duly authori ed to do so may accept funds or create liabilities payable in pesos upon demand by the presentation of checks, and such operations shall be subject to the control of the !onetary 'oard in accordance with the powers granted it with respect thereto under this .ct* $hecks representing demand deposits do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditorE
%rovided, however, 6hat a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account* >* #%i'i"6 Pri"ci3$es o Mo"etar& A'!i"istratio" 8& the Ba"69o Se"tra$ &ction When &!normal #ovements Occur in the #onetar" &ggregates0 Credit0 or Price ,evel:
"a# take such remedial measures as are appropriate and within the powers granted to the !onetary 'oard and the 'angko :entral under the provisions of this .ct; and "b# submit to the %resident of the %hilippines and the $ongress, and make public, a detailed report which shall include, as a minimum, a description and analysis ofE "1# the causes of the rise or fall of the monetary aggregates, of credit or of prices; "2# the extent to which the changes in the monetary aggregates, in credit, or in prices have been reflected in changes in the level of domestic output, employment, wages and economic activity in general, and the nature and significance of any such changes; and ";# the measures which the !onetary 'oard has taken and the other monetary, fiscal or administrative measures which it recommends to be adopted* *n order to maintain the international stability and convertibility of the )hilippine peso , the 'angko :entral shall maintain international reserves adequate to meet any foreseeable net demands on the 'angko :entral for foreign currencies* 'he ollowing are situations which are considered threats to the sta!ilit" o the Peso: a# whenever the international reserve of the 'angko :entral falls to a level which the !onetary 'oard considers inadequate to meet prospective net demands on the 'angko :entral for foreign currencies, or b# whenever the international reserve appears to be in imminent danger of falling to such a level, or c# whenever the international reserve is falling as a result of payments or remittances abroad which, in the opinion of the !onetary 'oard, are contrary to the national welfare, &ction When the International +ta!ilit" o the Peso Is 'hreatened "a# take such remedial measures as are appropriate and within the powers granted to the !onetary 'oard and the 'angko :entral under the provisions of this .ct; and "b# submit to the %resident of the %hilippines and to $ongress a detailed report of the circumstances of the situation
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*f the resultant actions fails, the !onetary 'oard shall propose to the %resident, with appropriate notice of the $ongress, such additional action as it deems necessary to restore equilibrium in the international balance of payments of the %hilippines*
=* R%$es o" Forei6" E2cha"6e Ho$'i"6s o the Ba"9s: a# the !onetary 'oard may require the banks to sell to the 'angko :entral or to other banks all or part of their surplus holdings of foreign exchange* b# such transfers may be required for all foreign currencies or for only certain of such currencies, according to the decision of the !onetary 'oard c# the transfers shall be made at the rates established under the provisions of this .ct NOTE: The 1onetary &oard may, whenever warranted, determine the net assets and net liabilities of ban:s =* R%$es o" Iss%e a"' Ne6otiatio" o Ba"69o Se"tra$ O8$i6atio"s: 1# )ssuance of such certificates of indebtedness shall be made only in cases of extraordinary movement in price levels* 2# :aid evidences of indebtedness may be issued directly against the international reserve of the 'angko :entral or against the securities which it has acquired or may be issued without relation to specific types of assets of the 'angko :entral* ;# 6he !onetary 'oard shall determine the interest rates, maturities and other characteristics of said obligations of the 'angko :entral, and may, if it deems it advisable, denominate the obligations in gold or foreign currencies* 4# 6he evidences of indebtedness of the 'angko :entral may be acquired by the 'angko :entral before their maturity, either through purchases in the open market or through redemptions at par and by lot if the 'angko :entral has reserved the right to make such redemptions* A# 6he evidences of indebtedness acquired or redeemed by the 'angko :entral shall not be included among its assets, and shall be immediately retired and cancelled* J* Ba"9 Reser5es .ll banks operating in the %hilippines shall be required to maintain reserves against their deposit liabilitiesE
%rovided, 6hat the !onetary 'oard may, at its discretion, also require all banks and1or quasibanks to maintain reserves against funds held in trust and liabilities for deposit substitutes* 6he !onetary 'oard may exempt from reserve requirements deposits and deposit substitutes with remaining maturities of two "2# years or more, as well as interbank borrowings* :ince the requirement to maintain bank reserves is imposed primarily to control the volume of money, the 'angko :entral shall not pay interest on the reserves maintained with it unless the !onetary 'oard decides otherwise as warranted by circumstances*
10* BSP as the Ba"9er o the #o5er"!e"t 9unctions o the Bang.o +entral:
a# shall act as a banker of the Government, its political subdivisions and instrumentalities* b# shall represent the Government in all dealings, negotiations and transactions with the )nternational !onetary &und
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c# may be authori ed by the Government to represent it in dealings with other foreign or international financial institutions d# shall be the official depository of the Government e# shall open a general cash account for 6reasurer of the %hilippines, in which liquid funds of the Government shall be deposited; transfers of funds from this account to other accounts shall be made only upon order of 6reasurer of the %hilippines 6he 'angko :entral may engage the services of other government-owned and controlled banks and of other domestic banks for operations in localities at home or abroad in which the 'angko :entral does not have offices or agencies adequately equipped to perform said operationsE
%rovided, however, 6hat for fiscal operations in foreign countries, the 'angko :entral may engage the services of foreign banking and financial institutions* 6he issue of securities representing obligations of the Government, its political subdivisions or instrumentalities, may be made through the 'angko :entral
%rovided, however, 6hat the 'angko :entral shall not guarantee the placement of said securities, and shall not subscribe to their issue except to replace its maturing holdings of securities with the same type as the maturing securities*
11* BSP as the Fi"a"cia$ A'5isor o the #o5er"!e"t The +overnment, through the /ecretary of .inance, shall re0uest the opinion, in writing, of the 1onetary &oard on the monetary implications of the following actions: a# 'efore undertaking any credit operation abroad b# 'efore any credit operation abroad is undertaken by all political subdivisions and instrumentalities of the Government* c# 3henever the Government, or any of its political subdivisions or instrumentalities, contemplates borrowing within the %hilippines 12* Pri5i$e6es a"' Prohi8itio"s 6he 'angko :entral shall be exempt for a period of five "A# years from the approval of this .ct from all national, provincial, municipal and city taxes, fees, charges and assessments* The e7emption authori5ed in the preceding paragraph shall apply: a# to all property of the 'angko :entral, b# to the resources, receipts, expenditures, profits and income of the 'angko :entral, c# to all contracts, deeds, documents and transactions related to the conduct of the business of the 'angko :entral :aid exemptions shall apply only to such taxes, fees, charges and assessments for which the 'angko :entral itself would otherwise be liable, and shall not apply to taxes, fees, charges, or assessments payable by persons or other entities doing business with the 'angko :entral
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&oreign loans and other obligations of the 'angko :entral shall be exempt, both as to principal and interest, from any and all taxes if the payment of such taxes has been assumed by the 'angko :entral* 6he importation and exportation by the 'angko :entral of notes and coins, and of gold and other metals to be used for purposes authori ed under this .ct, and the importation of all equipment needed for bank note production, minting of coins, metal refining and other security printing operations shall be fully exempt from all customs duties and consular fees and from all other taxes, assessments and charges related to such importation or exportation* .ppointments in the 'angko :entral, except as to those which are policy-determining, primarily confidential or highly technical in nature, shall be made only according to the $ivil :ervice 5aw and regulations (fficers and employees of the 'angko :entral, including all members of the !onetary 'oard, shall not engage directly or indirectly in partisan activities or take part in any election except to vote* 6he 'angko :entral shall not acquire shares of any kind or accept them as collateral, and shall not participate in the ownership or management of any enterprise, either directly or indirectly* 6he 'angko :entral shall not engage in development banking or financingE %rovided, however, 6hat outstanding loans obtained or extended for development financing shall not be affected by the prohibition
1;* Tra"sitor& Pro5isio"s 3ithin a period of three ";# years but in no case longer than five "A# years from the approval of this .ct, the 'angko :entral shall phase out all fiscal agency functions transfer the same to the /epartment of &inance* 6he 'angko :entral shall, within a period of five "A# years from the effectivity of this .ct, phase out its regulatory powers over finance companies without quasi-banking functions and other institutions performing similar functions as provided in existing laws, the same to be assumed by the :ecurities and @xchange $ommission* * 0o preferential or priority right shall be given to or enjoyed by any personnel for appointment to any position in the new staffing pattern, nor shall any personnel be considered as having prior or vested rights with respect to retention in the 'angko :entral or in any position which may be created in the new staffing pattern, even if he should be the incumbent of a similar position prior to organi ation* .ll powers, duties and functions vested by law in the $entral 'ank of the %hilippines not inconsistent with the provisions of this .ct shall be deemed transferred to the 'angko :entral ng %ilipinas* .ll references to the $entral 'ank of the %hilippines in any law or special charters shall be deemed to refer to the 'angko :entral*
SECRECY OF BAN( DEPOSITS

1. :eposits in !an.s0 including government !an.s0 ma" not !e in*uired into !" an" person0 except: a. if depositor agrees in writing b. impeachment cases
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c.
by court order in cases of bribery and dereliction of duty against public officials
d. deposit is subject of litigation e. anti-graft cases f. general and special examination of bank order of the !onetary 'oard of bank fraud or serious irregularity
g. re-examination made by an independent auditor hired by a bank to conduct its regular trust
)NIFORM C)RRENCY LAW

1. O8$i6atio"s N%$$ a"' Boi' a. obligations payable in gold1foreign currency b. obligations payable in %hilippine currency but measured in gold1foreign currency 2. E2e!3t Tra"sactio"s a. government to government transactions or with international banking institutions b. transactions affecting high priority economic projects c. forward exchange transactions between banks
d. import and export and other international banking, financial, investment and industrial transactions 3. Mercha"ts a"' Co!!ercia$ Tra"sactio"s C$asses o I"5est!e"ts: a. Permitted - one allowed without need of prior authority from the %hilippine Government* *f registered status, invest up to extent as not to affect its registered status* *f enterprise not registered , investment not to exceed 40,* b. Permissi!le - invest in excess of 40, in unregistered enterprise but with prior approval of '() c. Pioneer &rea J "a# "b# "c# "d# involves manufacturing, processing, production of product not produced at all1produced in non-commercial scale; uses a design, scheme, formula that is new and untried in the %hils*; agricultural activities1services essential to the attainment of food sufficiency; produces non-conventional fuels1utili es non-conventional sources of energy "all others are non-pioneer#
4. A8so$%te$& Dis:%a$i ie' to 8eco!e Mercha"ts a. serving penalty of civil interdiction b. insolvent
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c.
absolutely disqualified by special laws
5. Re$ati5e$& Dis:%a$i ie' a. judicial and prosecuting officials in active service b. administrative, economic, military chiefs c. government collection agents and custodian of funds
d. stock and commercial brokers e. by special laws cannot trade in specified territories 6. Boo9s a Mercha"t !%st 9ee3 a. book of inventories and balances, statement of assets, liabilities and capital b. journal of day to day operations c. ledger for classifying accounts
d. copying book for letters and telegrams; if juridical person, include book of minutes and stock and transfer book 7. Pro8ati5e Ba$%e o Mercha"tKs Boo9 a. evidence against merchants themselves b. in case of conflicts between 2 books - that which s properly kept prevails c. if one keeps books and the other does not and cannot explain why, the former prevails
d. if both books are properly kept and there is a conflict, other proofs can be resorted to 8. $ommercial $ontracts by $orrespondence are perfected from the moment the offeree accepts the offer, even before knowledge of said acceptance by the offeror* 6his does not apply to deposit, guaranty, sales, loan, agency, partnership* 9. Coi"t Acco%"t Part"ershi3 - business arrangement whereby 2 or more persons interest themselves in the business of another by making contributions thereto and participating in the results thereof a. only one member is ostensible, others are silent b. no common name c. only ostensible partners can sue1be sued
d. no juridical personality
INSOLBENCY LAW
1. Disti"6%ish S%s3e"sio" o Pa&!e"t a"' I"so$5e"c& S%s3e"sio" o Pa&!e"t debtor has enough assets to meet liabilities but cannot meet them as they fall due I"so$5e"c& /ebtor has more liabilities than assets
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always initiated by debtor
)nitiated by creditors1other persons involuntary; initiated by debtor if voluntary
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2. Fra%'%$e"t Pre ere"ce - any act of insolvent which gives rise1has tendency to give preference to a creditor to the assets of the insolvent prejudicial to the right of other creditors of said insolvent 3. E ect o" Actio"s )3o" A'D%'icatio" o I"so$5e"c& a. suits pending in court (1) secured obligations suspended until assignee appointed (2) unsecured obligations terminated except to fix amount of obligation (3) foreclosure suits pending continue b. suit not "et iled - cannot be filed anymore, but claims may be presented to assignee 4. :e!ts and O!ligations not & ected !" :ischarge o Insolvent a. assessments due to national and local government b. debts due to fraud1embe c. lement
debts in which he is bound solidarily
d. alimony e. corporate debts f. debts not included in the schedule submitted by debtor
TR)TH IN LENDIN# ACT ,R-A- No- </0>1

1* 6his is an act to require the disclosure of finance charges in connection with extensions of credit* 2* 6he policy of the :tate is to protect its citi ens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy* A5 'he creditor is re*uired to urnish to the de!tor a clear statement in writing setting orth the ollowing in ormation: "1# "2# ";# "4# "A# "+# "># the cash price or delivered price of the property or service to be acquired; the amounts, if any, to be credited as down payment and1or trade-in; the difference between the amounts set forth under clauses "1# and "2#; the charges, individually itemi ed, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; the total amount to be financed; the finance charge expressed in terms of pesos and centavos; and the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation*
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. final judgment rendered in any criminal proceeding under this .ct to the effect that a defendant has wilfully violated this .ct shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this .ct as to all matters respecting which said judgment would be an estoppel as between the parties thereto*
PRICE TA#S LAW

1. )t requires articles of commerce sold at retail to bear prices*
COINT ACCO)NTS
1. )t exists when a merchant interests himself in the transaction of another merchant, contributing thereto the amount of capital they may agree upon, and participating in the favorable or unfavorable results thereof in the proportion they may determine* 2. ?oint accounts do not adopt a firm name* 3. 0o suit may be maintained - investor and third persons dealing with the merchant conducting business* 4. )t is not subject to any formal requirement for validity; it may be oral*
WAREHO)SE RECEIPTS LAW

1. Wareho%se - a building or place where goods are deposited and stored for profit* 2. Wareho%se!a" - person lawfully engaged in the business of storing goods for profit* >nly a warehouseman may issue warehouse receipts.
3. Wareho%se Recei3t - written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued* 4. No"7"e6otia8$e Recei3t - receipt deliverable to a specified person* 5. Ne6otia8$e Recei3t - receipt deliverable to order or to bearer* 6. Essential 'erms which #=+' !e em!odied in a Warehouse 2eceipt: a. location of the warehouse b. date of the issue of the receipt c. consecutive number of the receipt
d. statement whether the goods received will be delivered to bearer, or a specified person, or his order e. rate of storage charges f. description of the goods or packages containing them for identification purposes
g. signature of the warehouseman h. statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien 7. E ect o o!issio" o a"& o the esse"tia$ ter!s: a. 6he validity of the warehouse receipt is not affected*
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b. 6he warehouseman shall be held liable for damages to those injured by his omission* c. 6he negotiability of the warehouse receipt is not affected*
d. 6he issuance of a warehouse receipt in the form provided by the law is merely permissive and directory and not mandatory in the sense that if the requirements are not observed, then the goods delivered for storage become ordinary deposits* 8. 'erms which ma" !e inserted in a Warehouse 2eceipt: 3ny other terms e7cept "a# those contrary to the provisions of this .ct; "b# those that would impair a warehouseman7s obligation to exercise that degree of care in the safekeeping of the goods entrusted to him* 9. #ar.s to !e made on a warehouse receipt: a. . non-negotiable receipt must be clearly marked non-negotiable or not negotiable, otherwise, the holder of the receipt who purchased it for value and who supposed it to be negotiable, may treat it as negotiable* b. /uplicate receipts must be so marked, otherwise, the warehouseman is held liable for all damages suffered by a holder believing the same to be the original* 10. Warra"ties o a 4areho%se!a" as to '%3$icate recei3ts: a. 6he duplicate is an accurate copy of the original receipt* b. :uch original receipt is uncancelled at the date of the issue of the duplicate* 11. E ects o a$teratio" o" the $ia8i$it& o the 4areho%se!a": a. *f the alteration is *113TE,*3; "the tenor of the receipt is not changed#, whether fraudulent or not, authori ed or not, the warehouseman is liable on the altered receipt according to its original tenor* b. *f the alteration is 13TE,*3; but 3'T6>,*EE9 , the warehouseman is liable according to the terms of the altered receipt* c. *f the alteration is 13TE,*3;, '43'T6>,*EE9 but *44>(E4T;F 139E , the warehouseman is liable on the altered receipt according to its original tenor*
d. *f the alteration is 13TE,*3; and .,3'9';E4T;F 139E , the warehouseman is liableE (1) to the purchaser of the receipt for value and without notice of the alteration according to the tenor of the altered receipt (2) to the alterer, according to the terms of the original receipt (3) to subsequent purchasers with notice of the alteration, according to the terms of the original receipt 12. E ects o !is'escri3tio" o 6oo's: a. . warehouseman is under the obligation to deliver the identical property stored with him and if he fails to do so, he is liable directly to the owner* b. .s against a bona fide purchaser of a warehouse receipt, the warehouseman is estopped from denying that he has received the goods described in the receipt* c. )f the description consists merely of marks or label upon the goods or upon the packages containing them, the warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels*
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13. Pri"ci3a$ O8$i6atio"s o a Wareho%se!a": a. 'o ta.e care o the goods entrusted to his sa e.eeping #e"era$ R%$e: . warehouseman is required to exercise such degree of care which a reasonable careful owner would exercise over similar goods of his own* Fe shall be liable for any loss or injury to the goods caused by his failure to exercise such care* E2ce3tio": Fe shall not be liable for any loss or injury which could not have been avoided by the exercise of such care* E2ce3tio" to the E2ce3tio": Fe may limit his liability to an agreed value of the property received in case of loss* Fe cannot stipulate that he will not be responsible for any loss caused by his negligence*
a. 'o deliver the goods to the holder o the receipt or the depositor upon demand0 provided demand is accompanied with: (1) an offer to satisfy the warehouseman7s lien; (2) an offer to surrender the negotiable receipt properly endorsed* )f the receipt is nonnegotiable, any person lawfully entitled to the possession of the goods may be entitled to delivery without surrender of the receipt* (3) a readiness and willingness to sign an acknowledgment that the goods have been delivered if such is requested by the warehouseman* 14. Perso"s to 4ho! 6oo's !%st 8e 'e$i5ere': A. Persons law ull" entitled to the possession o the goods or his agent: a* persons to whom a competent court has ordered the delivery of the goods (1) where a negotiable instrument has been lost or destroyed, the court may order delivery to a person upon satisfactory proof of such loss or destruction and upon proper posting of a bond to protect the warehouseman from any liability or expense which he may incur by reason of the original receipt remaining outstanding* (2) where more than one person claims title or possession of the goods the warehouseman may require all claimants to interplead* 6he court will then order delivery to the person having a better right* b. an attaching creditor - Goods, while in the possession of the warehouseman and covered by a negotiable receipt, cannot be attached or levied upon under an execution unlessE (I) the negotiable receipt is first surrendered to the warehouseman, or (ii) its negotiation is enjoined, or (iii) the receipt is impounded by the court c* to the purchaser in case of sale of the goods by the warehouseman to enforce his lien d. to the purchaser where perishable or ha ardous goods are sold at private or public sale B. I goods are covered !" a non-negotia!le receipt:
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a. a person entitled to the delivery by the terms of the receipt, or b. one who has written authority from letter a C. I goods are covered !" a negotia!le receipt0 a person in possession o the receipt0 the terms o which the goods are delivera!le: a. to him or order b. to bearer c. indorsed to him
d. indorsed in blank by the person whom delivery was promised 15. When is there #isdeliver"? hen the warehouseman delivers the goods to a person who is not in fact lawfully entitled to the possession of the goods because: a. the person does not fall under letter ' or $ above; or b. the person falls under letter ' or $ but prior to delivery, the warehouseman had eitherE (1) been requested by the person lawfully entitled to the delivery not to make such delivery, or (2) had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods 16. E ects o #isdeliver": 6he warehouseman shall be liable for conversion to all having a right to property or possession of the goods* 17. What happens i there is proper deliver" or partial deliver" !ut the warehouseman ails to cancel the receipt or record on the receipt o such partial deliver"? a. *f goods covered by a negotiable warehouse receipt are delivered by a warehouseman but he fails to ta:e the receipt and cancel it , then he is still liable to one who purchases for value and in good faith such receipt* b. *f he ma:es partial delivery of the goods but fails to record the partial delivery on the receipt then he may still be held liable for the entire receipt to one who purchases for value and in good faith such receipt* 18. La4 %$ e2c%ses or re %sa$ to 'e$i5er 6oo's: a. The warehouseman can refuse to deliver the goods if he has ac0uired title or right to the possession of the goods: (1) directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto; or (2) from the warehouseman7s lien b. *f someone other than the depositor or person claiming under the depositor has a claim to the title or possession of the goods and the warehouseman has information of such claim, the warehouseman shall be excused from liability for refusing to deliver the goods either to the depositor or person claiming under him until he has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead*
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c.
The warehouseman will not be re0uired to deliver the goods if such had been lost * 'ut this is without prejudice to liabilities which may be incurred by him due to such loss*
d. The warehouseman having a valid lien against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. e. *f goods have been lawfully sold or disposed of because of their perishable or ha5ardous nature, the warehouseman shall not be liable for failure to deliver the goods* 19. . warehouseman cannot refuse to deliver goods to the depositor or to a person claiming under him on the ground that adverse title to the goods belongs to a third person* 20. R%$es as re6ar's Co7!i"6$i"6 o De3osite' #oo's: #e"era$ R%$e: . warehouseman may not co-mingle goods belonging to different depositors or belonging to the same depositor for which separate receipts had been issued*
E2ce3tio": . warehouseman may co-mingle fungible goods of the same kind and grade provided he is authori ed by agreement or by custom* 21. E ect o Co7!i"6$i"6 o #oo's: a. 6he different owners become co-owners of the whole mass* b. 6he warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances as if the goods had been kept separate* 22. Re!e'ies o a Cre'itor: "the debtor being the owner of the negotiable receipt# $reditors of the depositors, before negotiation, may protect themselves by obtaining a writ of preliminary injunction and serve the same on the depositor before he has a chance to negotiate the receipt* (nce enjoined, there will be no longer a danger that a ; rd person will be prejudiced so the goods may now be attached, levied upon, or that the vendor7s lien or the right of stoppage in transit be exercised* 23. Wareho%se!a"Ks Lie" Extent o WarehousemanBs ,ien:
3 warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands for: a. all lawful charges for storage and preservation of the goods b. all lawful claims for money advances, interest, insurance, transportation, labor, weighing, cooperating and other charges and expenses in relation to such goods c. all reasonable charges and expenses for notice and advertisements of sale and for sale of the goods where default has been made in satisfying the warehouse lien #oo's S%8Dect to $ie": a. goods belonging to the depositor who is liable to the warehouseman as debtor whenever such goods are deposited and b. goods belonging to other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge Ho4 is a $ie" e" orce'F
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a. by refusing to deliver the goods until the lien is satisfied b. by causing the extrajudicial sale of the property and applying the proceeds to the value of the lien c. by filing a civil action for unpaid charges or by way of counterclaim in an action to recover the property from him
Ho4 is a $ie" $ostF a. when the warehouseman voluntarily surrenders possession of the goods without requiring payment of his lien; or b. when the warehouseman wrongfully refuses to deliver the goods when a demand is made with which he is bound to comply
24. Ne6otiatio" a"' Tra"s er o Recei3ts <ow do we negotiate a receipt delivera!le to order? a. by indorsing it in blank thereby making it deliverable to bearer or b. by special indorsement - which would require further indorsements for further negotiations* *n both cases, the indorsements must be coupled with delivery. <ow do we negotiate a receipt delivera!le to !earer? There is no need to indorse for negotiation * %hysical delivery of the instrument will suffice* &ut if the instrument is indorsed specially , the bearer character of the receipt is destroyed and for further negotiation, there will be a need for indorsement* Who !a& "e6otiate 4areho%se recei3tsF a. the owner of the receipt, or b. the person to whom possession of the receipt was entrusted to by the owner Ri6hts ac:%ire' 8& a 3erso" to 4ho! the recei3t has 8ee" "e6otiate': a. the title of the person negotiating the receipt over the goods covered by the receipt b. the title of the person "depositor or owner# to whose order by the terms of the receipt the goods were to be delivered c. the direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him
#a" non negotia!le receipts !e negotiated? 0o, even if the receipt is indorsed, the transferee acquires no additional right* 6hat is why they are called non negotiable receipts* 'ut they may be transferred or assigned by delivery* Ri6hts o a 3erso" to 4ho! a "o" "e6otia8$e recei3t has 8ee" tra"s erre': a. the title to the goods as against the transferor
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b. the right to notify the warehouseman of the transfer thereof and c. the right thereafter to acquire the obligation of the warehouseman to hold the goods for him
:istinction !etween a non negotia!le receipt rom a negotia!le receipt with regard to attachment or execution upon goods: No"7"e6otia8$e Recei3t Ne6otia8$e Recei3t
%rior to notification of the warehouseman by 6he goods cannot be attached or levied under the transferor or transferee, the an execution unless the receipt be first warehouseman is not bound to the transferee surrendered to the warehouseman or its whose right may be defeated by a levy of an negotiation enjoined* attachment or execution upon the goods by the creditor of the transferor or by a notification to such warehouseman of the subsequent sale of the goods* Ri6hts o a 3erso" to 4ho! a "e6otia8$e recei3t has 8ee" tra"s erre'G "ot i"'orse': a. the right to the goods as against the transferor b. the right to compel the transferor to indorse the receipt . &ut if the intention of the parties is that the receipt should merely be transferred, the transferee has no right to require the transferor to indorse the receipt* Note: 0egotiation takes effect as of the time when the indorsement is actually made* Warranties o a person negotiating or trans erring a receipt: a. the receipt is genuine b. he has a legal right to negotiate or transfer it c. he has knowledge that would impair the validity or worth of the receipt and
d. he has a right to transfer the title to the goods and that the goods are merchantable . holder for security of a receipt "mortgagee or pledgee# who in good faith accepts payment of the debt from a person does not warrant the genuineness of the receipt not the quality or quantity of the goods therein described* )t is the duty of the purchaser, mortgagee or pledgee of goods for which a negotiable receipt has been issued to require the negotiation of the receipt to him, otherwise his failure will have the same effect as an express authori ation on his part to the seller, mortgagor, or pledgor in possession of such receipt to make any subsequent negotiation* 6he subsequent purchaser must have taken the receipt in good faith and for value* . bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he purchases from the owner7s agent within the actual or apparent scope of his authority* )n sum, negotiation is valid despite having been made in breach of trust* Disti"ctio"s 8et4ee" a "e6otia8$e i"str%!e"t a"' a "e6otia8$e 4areho%se recei3t: Ne6otia8$e I"str%!e"t 3hen a negotiable instrument is altered deliberately, it becomes null and void* Ne6otia8$e Wareho%se Recei3t 3hen a warehouse receipt is altered, it is still valid but it may be enforced only in accordance with its original tenor*
102
)f a negotiable instrument is originally payable to bearer, it will always remain so payable regardless of the way it is indorsed, whether specially or in blank* . holder in due course may be able to obtain a title better than that which the party who negotiated the instrument to him had* 6he indorsement of a negotiable instrument has a double effect* )t is at the same time a conveyance of the instrument and a contract the indorser has with the indorsee that on certain conditions, the indorser will pay the instrument if the party primarily liable fails to do so*
)f a warehouse receipt, payable to bearer, is indorsed specially, it will be converted into a receipt deliverable to order and can only be negotiated further by indorsement and delivery* .n indorsee even if a holder in due course obtains only such title as the person negotiating has over the goods* 6he indorsement of a warehouse receipt amounts merely to a conveyance by the indorser* .ccordingly, an indorser of a receipt shall not be liable to the holder if, for example, the warehouseman fails to deliver the goods because they were lost due to his fault or negligence*
#ENERAL BONDED WAREHO)SE LAW

&n" warehouseman receiving commodities or DaE mingling must: a. obtain prior license from the 'ureau of $ommerce b. file a bond in an amount equivalent to ;; 11; , of the capacity of the warehouse against which bond depositors may sue directly c. open to the public, no discrimination allowed storageF D!E millingF DcE co-
d. liable for double market value should he accept goods in excess of the capacity of warehouse if goods are damaged or destroyed Note: for palay and corn license, a bond with the 0ational Grains .uthority is required; also an insurance cover is required*
LAWS ON INTELLECT)AL CREATION Co3&ri6ht

1. What Wor9s are "ot Protecte': a. any idea, procedure, system, method or operation, concept, principle, discovery, or mere data as such, even if they are expressed, explained, illustrated or embodied in a work; news of the day or other miscellaneous facts, having the character of mere items of press information, or any official text of a legislative, administrative or legal nature as well as any official translation thereof b. works of the government c. statutes, rules, and regulations of government agencies and offices
d. speeches, lectures, sermons, addresses and dissertations, pronounced or rendered in courts of justices or nay administrative agencies in deliberative assemblies and meetings of public character 2. 9air =se o a Cop"righted Wor. is not In ringement a. for criticism, comment, news reporting, teaching, research, scholarship, and similar purposes
10;
b. decompilation: the reproduction of the code and translation of the forms of the computer program with other programs 3. 9actors to Consider in :etermining 9air =se: a. purpose and character of the use, including whether such nature or for no profit or educational purposes b. nature of the copyrighted work c. amount and substantiality of the portion used in relation to the copyrighted work as a whole use is of a commercial
d. effect of use upon the potential market for a value of the copyrighted work
4. Ter!s o the Protectio" a. cop"righted wor.: lifetime of creator plus A0 years after death "to be computed on the 1 st day of ?anuary of the year following the death# b. per ormances not incorporated in recordings: A0 years from end of year in which the performance took place c. sound or image and sound recordings and per ormances incorporated therein:
A0 years from end of the year in which the recording took place d. !roadcasts: 20 years from the date the broadcast took place 5. Re!e'ies or I" ri"6e!e"t a. injunction b. actual damages, including legal costs and other expenses, as he may have incurred due to the infringement as well as the profits the infringer may have made due to such infringement c. impounding of articles during pendency of the action d. destruction of all infringing copies and1or devices e. moral and exemplary damages 6. Cri!i"a$ Pe"a$ties a. imprisonment of 1 to ; years plus fine of %A0,000 to %1A0,000 for the first offense b. imprisonment of ; years and 1 day to + years plus fine ranging from %1A0,000 to %A00,000 for the 2nd offense c. imprisonment of + years and 1 day to J years plus fine of %A00,000 to %1,000,000 for the ;rd1subsequent offenses
*4 3;; (3/E/, subsidiary imprisonment in cases of insolvency
104
7. Pres%!3tio"s: a. %resumption of copyright in the work of other subject matter to which the action related b. %laintiff is presumed to be the owner of the copyright c. 6he natural person whose name is indicated on a work in the usual manner as the author shall, in the absence of proof to the contrary, be presumed to be the author of the work* 6his is applicable even if the name is a pseudonym, where the pseudonym leaves no doubt as to the identity of the author*
8. Prescri3tio": 0o damages may be recovered after 4 years from time the cause of action arose*
Pate"ts
1. Pate"ta8$e I"5e"tio"s - any technical solution of a problem in any field o human activity that is new, involve an inventive step and is industrially applicable shall be patentable* )t may be or may relate to as product, or process or an improvement of any of the foregoing* 2. No"7Pate"ta8$e I"5e"tio"s a. discoveries, scientific theories and mathematical methods b. schemes, rules and methods of performing mental acts, playing games or doing business, and programs for computers c. methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal body Exception: products and composition for use in any of these methods d. plant varieties or animal breeds or essentially biological process for the production of plants and animals Exception: micro-organisms and non-biological and micro-biological processes e. aesthetic creations f. contrary to public order or morality
3. Re:%isites o Pate"ta8i$it& a. new, novelty b. involves an inventive step; c. is industrially applicable
4. No5e$t& The novelty re0uirement in the (ode is absolute * 6hus, an invention is not considered new if it forms part of a prior art* & prior art consists o : a. anything which has been made available to the public anywhere in the world before the filing date or the priority date of the application, or b. the whole contents of an application for a patent, utility model, or industrial design registration, published in the )%( ga ette, filed or effective in the %hilippines, with a filing or
10A
priority date that is earlier than the filing or priority date of the application, provided that the application which has validly claimed the filing date of an earlier application "priority date# is prior art with effect as of the filing date of such earlier application, and provided further, that the applicant and the inventor identified in both applications are not one and the same 5. I"5e"ti5e Ste3 - an invention involves an inventive step, if having regard to the prior art, it is not obvious to a person skilled in the art at the time of the filing date of priority date of the application claiming the invention 6. I"'%stria$ A33$ica8i$it& - an invention is considered industrially applicable if it can be produced and used in the industry 7. The First7to7Fi$e S&ste! - if 2 or more persons have made the invention separately and independently of each other, the right to the patent belongs to the person who filed an application for such invention, or where 2 or more applications are filed for the same invention, the right of the patent belongs to the person who has the earliest filing date or the earliest priority date 'nder this system, the patent is granted to the inventor who filed his patent application earlier than others thus simplifying the determination of who is entitled to own the patent* The .irst-to-.ile /ystem increases the rights of the inventor by: a. guaranteeing the confidentiality of the application prior to its publication b. giving the inventor inchoate rights against an infringer after the publication of the application and before the grant of the patent and c. expanding the rights of the inventor to institute cancellation proceedings for the duration of the term of the patent* $ancellation proceedings may be filed at any time during the term of the patent*
Cnder this system, the applicant declared by final court order as having the right to the patent may: a. prosecute the application as his own application in place of the original applicant b. file a new patent application in respect of the same invention c. request that the application be refused or d. seek the cancellation of the patent, if one has already been issued 8. What is the di erence !etween novelt" in patents and originalit" in cop"right? No5e$t& i" Pate"ts - even if you do not know of any previous creation, as long as a patent on the same creation has already been published anywhere in the world, you cannot claim novelty* 0o access tot he other creation is no defense* Ori6i"a$it& i" Co3&ri6ht - even if there is same creation, as long as you do not copy your own creation, it is still considered an original creation* 0o access to the previous creation is a defense* 9. No"7PreD%'icia$ Disc$os%re 6he disclosure of information contained in the application during the 12 months preceding the filing date or the priority date of the application shall not prejudice the applicant on the ground
10+
of lack of novelty if such disclosure was made by "a# inventor; "b# a patent office and the information was contained 10. Ter! o Pate"t - 20 years from the filing date of the application 11. #ro%"'s or Co!3%$sor& Lice"si"6: a. national emergency or other circumstances of extreme urgency b. where public interest, national security, health or the development of other vital sectors of the national economy as determined by the appropriate agency of the government so requires c. where a judicial or administrative body has determined that the manner of exploitation by the owner of the patent or his licensee is anti-competitive
d. in case of public non-commercial use of the patent by the patentee, without satisfactory reason e. if not being worked in the %hilippines on a commercial scale 12. *n case of (ompulsory ;icensing of )atents involving /emi-conductor Technology , the license may be granted only in case of public non-commercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive 13. )ti$it& Mo'e$s - an invention qualifies for registration as a utility model if it is new and industrially applicable - no inventive step required for registration - no search and examination required 14. 'erm Protection - > years after the filing date of application without possibility of renewal 15. I"'%stria$ Desi6" - any composition of lines or colors or any ; dimensional form, whether or not associated with lines or colors )ndustrial /esigns essentially dictated by technical or functional considerations to obtain a technical result or those that are contrary to public order, health or morals shall not be protected 16. Ter! o Protectio" - A years from filing date of application, renewable for not more than 2 consecutive periods of A years each
Chatte$ Mort6a6e La4

1. 6he law primarily governs chattel mortgage* %rovisions on pledge of 0$$ in so far as not in conflict with $!5 also govern chattel mortgages* 2. $hattel !ortgage may be rescinded for being in fraud of creditors* 3. Growing fruits are covered by chattel mortgage but they may not be pledged* 4. !achinery placed on plant or building owned by another can be the object of chattel mortgage* 5. #e"era$ R%$e: $hattel !ortgage cannot cover debts subsequently contracted*
10>
6. R%$es: Chattel #ortgage cannot cover de!ts su!se*uentl" contracted a. registered in place where mortgagor resides and where property "chattel# is located* )f mortgagor resides abroad, register in place where property is located* b. !otor HehiclesE register also in 5and 6ransportation (ffice c. :hares of :tockE place of domicile of corporation and shareholder* notation in books of corporation 0o need for
d. HesselsE %hil* $oastguard 7. To 8e 5a$i' a6ai"st <r' 3erso"s: a. affidavit of good faith b. contract must be registered 8. #e"era$ R%$e: )n $hattel !ortgage, there is recovery of deficiency judgment* E2ce3tio": when <ecto 5aw applies 9. Re:%isites o CML: a. constituted to secure the fulfillment of principal obligation b. mortgagor is absolute owner of the thing mortgaged c. persons constituting the mortgage have the free disposal of the property and in the absence thereof, they be legally authori ed for the purpose
d. recorded to bind ;rd persons 10. For!a$ Re:%isites o CM: a. substantial compliance with form in :ec* A of $!5 b. signed by at least 2 witnesses c. must contain an affidavit of good faith
d. certificate of oath "notarial acknowledgment# 11. A i'a5it o #oo' Faith - where the parties severally swear that the mortgage is made for the purpose of securing the obligation specified and for no other purpose and that the same is a just and valid obligation and not one entered into for fraud - property given in $! must be described to enable the parties or any other person after reasonable inquiry and investigation to identify it 12. F%t%re 3ro3ert& !a& "ot 8e co5ere' 8& CM 8%t 4he" s%ch 3ro3ert& is a: a. renewal of, or in substitution for goods on hand when the mortgage was executed, or b. purchased with proceeds "not of your own money# of said goods, said property may be covered by $!
10=
13. Cri!i"a$ Acts - removal of chattel to another city or province without written consent of mortgagee, selling property already pledged, or mortgaged without written consent of mortgagee 14. . chattel mortgage may be foreclosed judicially or extra-judicially, in the latter case, before a notary or sheriff, or creditor or mortgagee when stipulated, even without need of notice "when mortgagee forecloses# 1A* %actum $ommissorium applies to $hattel !ortgage*
10J

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COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

d. proof of solvency e. deposit acceptable securities to protect future creditors

B)L( SALES LAW

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

TR)ST RECEPTS LAW

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

NE#OTIABLE INSTR)MENTS LAW

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

c* be payable on 'emand or at a fixed determinable future time d* be payable to order or to bearer

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

E2ce3tio"s: a. sale of collateral securities b. confession of judgment c. waives benefit of law

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

29. Co!3$ete 8%t )"'e$i5ere':

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

E ects: if in due course it discharges the instrument ":ec* A1 0)5#

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

COMMERCIAL LAW MEMORY AID 2002

ATENEO CENTRAL BAR OPERATIONS

/uress amounting to forgery

&raud in factum or in esse contractus

)llegality of contract made by statue &orgery

COMMERCIAL LAW MEMORY AID 2002