Commrev Dugs Class Notes

JANUARY 9, 2017 8.
Lipat vs Pacific Banking Corp

MEETING #2 - Alter Ego Doctrine
- BET and BEC are one and the same and BEC is a conduit of and merely
succeeded BET
1. Circumstances when parent corporation can be held liable for obligations of its - BEC was established precisely to avoid paying the obligations of BET
subsidiary (p.189) - Where a corp is merely an instrumentality or adjunct of another, the
2. MR Holdings vs Bajar fiction of the corporate entity of the “instrumentality” may be disregarded
- What must be present in order to PCV in case of parent-subsidary corp? - Bela’s Export Corp (BEC) was a mere continuation of Bela’s Export
o Ownership alone of the all or substantially all of the stocks would Trading (BET)
not justify piercing the veil of corporation. There must be other o Both are managed by Teresita
circumstances that would justify the piercing of the veil of the corp o Both engaged in garment business
- Control Test o Same office
o Complete domination not only of the finances but also the policy o Family corp
and business practices of the corporation o Corporate funds
3. Assuming 1 stockholder hold 99.9% of the stocks of a stock corporation, would o BOD
that justify the PCV? o Full control
- NO! Mere ownership by a single stockholder or by another corporation o Benefitted from loans
of all or nearly all of the CS of the corp does not justify the application of o Estrelita & Alfredo = majority SH of BET and BEC
the doctrine. There must be other circumstances that must be present. o Business operations merged
- So what should be present in order for the doctrine of PVCF will be - ✓ PIERCE VOCF
applied? 9. Concession Theory
o o p.192
4. Francisco vs CA 10. Franchises of Corporation
- The doctrine of PCVOF cannot be applied to make the corp liable for the o p.193
personal obligations of the directors, officers or SH. The doctrine is 11. How are corporations created?
normally invoked to make the directors, officers and shareholders liable o p.193
for the obligation. What the lawyer sought was the reverse. o Is it possible for a private corporation to be created by Special Laws?
5. Ground to apply doctrine of PVCF (memorize!) § YES, GOCCs. Provided they comply with the constitutional
1. Veil of corp is used as a shield to perpetrate fraud requirement which requires that it should be owned and
2. Defeat public convenience controlled by the government.
3. Justify wrong 12. De Jure vs De Facto Corp
4. Defend a crime o p.199
5. Made as a shield to confuse legitimate issues - Requisites of DF corp (p.195)
6. Corporation is the mere alter ego or business conduit of a person 1. Existence of a valid law under which it may be incorporation
7. Where the corp is so organized and controlled and its affairs are so conducted 2. An attempt in GF to incorporate
as to make it merely an instrumentality, agency, conduit or adjunct of another 3. Use of corporate powers
corp 4. Issuance of certificate of incorp by the SEC
6. Francisco vs Mejia - What does an attempt to incorporate in GF mean?
- Only Francisco and Cardale Corp are solidarily liable o Issuance of certificate of incorp by the SEC is a minimum
- X PVCOF requirement of continued good faith
7. Alter Ego Doctrine 13. Corporation by estoppel (p.195)
- Elements to PVCOF because of the alter ego doctrine: - Group of persons which holds itself out as a corp and enters into a
rd
1. Control – not mere stock control but complete domination, not only contract with a 3 person on the strength of such appearance cannot be
of the finances, but of policy and business practice permitted to deny its existence in an action under said contract
2. Such control must have been used by the defendant to commit - What is the extent of their liability?
FRAUD or WRONG to perpetuate the violation of a statutory or o Those who KNOWINGLY assume to act = liable as general
other positive legal breach of duty partners (up to their personal properties
3. The said control and breach of duty must have PROXIMATELY o Now aware = liable only up to their investiment
CAUSED the injury or unjust loss complained of
© Michelle Duguil 1
(Note: Blue means sir said it in class; Red arrow means indorsement; purple means not sure, => (means stole), / (means cut off)}
)
- As long as you BENEFITTED from the transaction, even if you did not - X violate religious freedom because the SEC merely compelled petitioner to
participate, you can still be liable as a general partner (Lim vs Phil. abide by one of the SEC guidelines in the approval of partnership and
Fishing Gear Industries case) corporate names, namely its undertaking to manifest its willingness to change
14. Corporation by prescription (p.196) its corp name in the even another person, firm or entity has acquired a prior
- A corporation that was not fomally organized as such but has been fully right to the use of the said firm name or one deceptively or confusingly similar
recognized by immemorial usage as a corporation with rights and duties à so they are already ESTOPPED from questioning the authority of the SEC
maintainable at law 20. SECT. 6 of the Corp Code
- Example: Roman Catholic Church 21. Capital Stock
15. 2 major classes of Corporation under the corp code (p.197) - An amount fixed or stated in the AOI
1. Stock Corp - Ex. Assuming you are 5 persons, you wanted to put up a corporation. Each
2. Non-Stock Corp of you contributed 1M each. You have now a total of 5M. The 5M = Capital
16. Eleemosynary Corporation (possible BQ) Stock.
- One formed for charity 22. Authorized Capital Stock
17. Components of a Corporation (p. 201) - The amount fixed in the AOI to be subscribed and paid by the SH of the corp
- Q: Is a director a corporate officer? - Ex. You have 5M capital stock. If you divide that into 5M shares for P1 each,
o No, a director is different from a corporate officer. that is your ACS.
o Q: How would you distinguish one from the other? 23. Subscribed CS
- Q: Requirements to be an incorporator? - That portion of the ACS that is covered by the subscription agreements
1. Natural persons whether fully paid or not
2. At least 5 but not more than 15 - Ex. The 5M shares. You subscribed 10k shares. You haven’t paid for it. You
3. Legal age acquire a share and you COMMIT to pay for it. You have not paid for it
4. Majority must be residents of the PH because once you’ve paid for it, it is the paid up capital.
5. Each must own or subscribe to at least 1 share 24. Paid Up Capital
- GR: X need to be a Filipino to be an incorporator - The portion of the ACS which has been subscribed and ACTUALLY PAID.
o E: for nationalized corporations 25. Outstanding Capital
- Q: Is it possible for a domestic corporation to have all foreigner - The total shares of stock issued to subscribers or SH, whether or not fully
stockholders? paid (E: treasury shares) so long as there is a binding subscription agreement
o Yes, except in fully or partly nationalized corporations - In cases of voting shares, we always apply OCS
o Example: A manufacturer that exports all its products can be 26. Shares of Stock
wholly-ownd by foreigners - It represents your interest in the corporation.
18. Articles of Incorporation 27. Basic rights of a SH? (not in the book)
- Now you just need to buy a form and download it from its website and 1. Right to dividends
fill it up 2. Right to vote
- 25%-25% requirement 3. Right to assets of the corporation upon resolution
o 25% of the total authorized capital stocks has been 4. Right to inspect the books of the corp
subscribed and at least 25% of such have been fully paid in 28. When can the SEC suspend or cancel certificate of registration? (p.211)
cash or property or services and shall not be less than 5k 1. Fraud in procuring registration
- Corporate Name Requirements 2. Serious misrepresentation as to objective of corp
o What names cannot be used? – p. 207 3. Refusal to comply with lawful order of the SEC
1. Names which are 4. Continuous inoperation for at least 5 years
§ Identical 5. Failure to file by-laws within required period
§ Deceptively or confusingly similar to that of any 6. Failure to file reports
existing corp including international known foreign 7. Other similar grounds
corp though not used in the PH o Ex. Failure to formally organize within 2 years from incorporation
2. Name already protected by law § Formally organize means - Elect the directors and
3. Name which is contrary to law, morals or public policy corporate officers
o Must include “corp.” “corporation” or “inc.” 29. Requirements as to amendment of the AOI (p.210)
19. Ang mga Kaanib sa Iglesia vs Iglesia ng Dios
- Name should be changed NEXT MEETING: POWERS OF CORP TO CERTIFICATE OF STOCK
)
JANUARY 16, 2017 - In some cases, corporate officers like the President can also bind the
MEETING #3 corporation. (p.218)
7. INTERASIA INVESTMENT INC VS CA
- What is being questioned here is the act of the president in negotiating the
deficiency/short fall
- Apparent authority is derived not merely from practice. Its existence may be
1. Powers of a corporation ascertained through
- Kinds (Distinguish) 1. the general manner in which the corporation holds out an
o Express officer or agent as having the power to act or, in other words
§ Examples of general powers (p.214) the apparent authority to act in general, with which it clothes
§ Examples of specific powers (p. 215) him; or
o Implied 2. the acquiescence in his acts of a particular nature, with actual
§ Sir: Express – acquire/sell/mortgage/lease/pledge/etc. or constructive knowledge thereof, within or beyond the scope
personal/real property of his ordinary powers. It requires presentation of evidence of
• Implied – Enter into a contract since you similar acts executed either in its favor or in favor of other
cannot own a property unless you enter into a parties. It is not the quantity of similar acts which establishes
contract of sale apparent authority, but the vesting of a corporate officer with
o Incidental the power to bind the corporation."
2. Ultra Vires Acts (p.215) - An officer of a corporation who is authorized to purchase the stock of another
- Differentiate UV act from Illegal Act corporation has the implied power to perform all other obligations arising
- Effects of UV acts therefrom, such as payment of the shares of stock. By allowing its president
3. Unauthorized Acts to sign the Agreement on its behalf, Inter-Asia clothed him with apparent
4. AF REALTY VS DIESELMAN FREIGHT SERVICES capacity to perform all acts which are expressly, impliedly and inherently
- X Valid sale stated therein.
- The act may be within the powers of the corporation but not within the powers - When he is authorized to sell something, all acts related to it are deemed
of a particular officer. The latter is not an ultra vires act of the corporation but granted likewise. Hence, if there is a shortfall, definitely the president also has
is sometimes referred to as an ultra vires act of the officer. The law on agency the power to negotiate whatever shortfall/deficiency arising from the
applies. For instance, the authority of the agent must be in writing under Art. transaction
1874 of the NCC, otherwise the sale shall be void. Hence, if there is no written 8. Instances when concurrence of the stockholders necessary for the exercise
authority from the BOD to sell land in the form of a Resolution, the sale of the of the powers of the corporation (p.220-221)
realty by an officer shall be void. - Sir: Why is it that only in the declaration of stock dividends that requires 2/3
- Sir: Twist the facts a little bit. Assuming Manuel Cruz Jr. was duly authorized of the OCS? Why is the requirement very strict unlike in cash or property
to sell the property. Do you think that the ruling would be different? dividends?
o No, the sale would still be void. o Because if you are a stockholder, you would rather have cash
o Elements of a contract of sale: dividends
§ Consent – Manuel Cruz was authorized o When stock dividends are issued, it would increase your interest in
§ Consideration – despite the fact that there was down the corporation. For example, you have 10% interest in the
payment already, there was no meeting of the minds as corporation and you were given additional stock, then your stock
to the manner of payment of the balance of the percentage would definitely increase. This would definitely change
consideration your power of control in the corporation.
§ Object – parcel of land 9. Instances when the corporation may acquire its own shares (p. 222)
o Hence, since there was no meeting of the minds with respect to the - Sir: What are fractional shares?
consideration, the contract is still void o A fractional share is a share of equity that is less than 1 full share
o There was merely a down payment of 300k but the manner of o How would a fractional share arise?
paying the balance was not agreed upon § For example, you have 10 shares. But because of the act
o There must be a definite agreement as to the manner of payment of a corporation, you got 10.9 or 10.6…
5. Who may exercise the powers of the corporation (p. 217) § Example: Share which is not sufficient for the number of
6. Can the president bind the corporation even without express authority heirs
coming from the corp? § Example: There are 10 stocks available for distribution
- Inter-Asia Case – doctrine of apparent authority but there are 20 SH. Hence, you divide it, .5, .5, .5. So,
)
when there is declaration of stock dividends and the corporation has, after such redemption, assets in its books to cover
shares are not sufficient to cover all shareholders debts and liabilities inclusive of capital
- Sir: Aside from the 3 legitimate purposes listed in the book, what are other - Declaration of dividends is discretionary upon the board. Dividends are
legitimate purpose? payable only when there are profits earned by the corporation and as a
o Treasury Shares general rule, even if there are existing profits, the BOD has the discretion to
o Redeemable Shares determine whether or not the dividend are declared.
o Effect of decrease in the CS of a corp 14. Wasting Assets Corporation
o Deadlock in a close corp - GR: Dividends cannot be declared out of the capital
- Sir: What are URE? o E: Wasting Assets Corp
o Retained earnings = assets – liabilities and legal capital - Wasting Assets Corp – corporations solely or principally engaged in the
§ Excess of the profits = retained earnings exploitation of “wasting assets” to distribute the net proceeds derived from
§ Negative balance = Deficit exploitation of their holdings such as mines, oil wells, patents and leaseholds,
o Other term: Surplus profits without allowances or deduction or depletion
o Unrestricted = items which are not set aside or earmarked for some 15. What can be included in URE? (p. 224 to 227)
purpose; free to be distributed 16. What items cannot be used for dividend distribution?
o Includes only actual or real profits arising from the operation of the 17. Can a gain from sale of real property be considered part of URE?
business of the corp 18. Can treasury shares be distributed by way of dividends
10. What are dividends? - GR: No
- Dividends - that part or portion of the profits of a corp set aside, declared - Why?
and ordered by the directors to be paid ratably to the SH on demand or at a o Because the corporation cannot be a SH to itself
fixed time - E: Property dividends
11. Who may declare dividends? (p.223) - TREASURY SHARES
12. Can the board be compelled to declare dividends every year? (p.223) o Shares that are reacquired by the corporation by purchase,
- GR: No donation, redemption or any other lawful means. These are issued
o E: Stock corporations are prohibited from retaining surplus profits shares already to the SH, but the corporation reacquired it.
in excess of 100% of their paid-in capital o Sir: DOES IT HAVE THE RIGHT TO VOTE?
§ E to E: § NO. Because they are not formally cancelled and are
1. Corporate expansion therefore, subject to reissue by the corp at some future
2. Prohibited under any loan agreement time
3. Retention is necessary under special § The only right the corp has over the TS is to reissue the
circumstances same for a valuable consideration
13. REPUBLIC PLANTERS BANK VS AGANA § The corporation cannot declare dividends to itself
- Preferred shares 19. Other rules concerning dividends
o Shares which are given preference ahead of common shares - Sir: What do you mean by transfer? How is ownership transferred?
o Advantage o Actual/Constructive Delivery
§ Paid ahead of the dividend in the distribution of assets
upon liquidation
o Disadvantage of preferred shares
§ Only preferred shares and redeemable shares CAN BE
DEPRIVED OF THE RIGHT TO VOTE by authority of the
BLs
§ You cannot deprive a common shareholder the right to
vote
- Redeemable Shares
o Shares, usually preferred, which by their terms are redeemable at
a fixed date or at the option of either issuing corporation, or the
stockholder, or both at a certain redemption price.
o However, while redeemable shares may be redeemed regardless
of the existence of URE, this is subject to the condition that the
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o SH may cumulate his shares by multiplying also the number of his
JANUARY 17, 2017 shares by the # of directors to be elected and distribute the same
MEETING #3 among as many candidates as he shall see fit
7. What does election should be AT LARGE in stock corp? (p.232)
- Election of directors should be by the SH constituting a quorum
1. Sale of all or substantially all properties (p.228) - All SH should be present
- What does “sale of all or substantially all” mean? - There can be no voting by district/region
o If the corporation would be rendered incapable of continuing the 8. How about in non-stock
business or accomplishing the purpose for which it it was - There can be election by region because the right to vote in a NS corp may
incorporated be limited, broaded or denied in the AOI
- Would the buyer corporation which bought the assets of the other corporation 9. REV. AO-AS ET AL VS CA
be held liable for the debts of the seller corporation? - There can be election by region in a non-stock corporation because the right
o GR: X liable to vote in a non-stock corp may be limited, broadened or denied in the AOI or
§ E: BLs
1. Express assumption of liabilities - Sir: Why is the voting requirement different in stock and non-stock corp?
2. Consolidation/Merger o Under the provisions of Sect. 89 of a NS corp, the right to vote can
3. Purchase was in fraud of creditors be limited, broadened or denied
4. Purchaser becomes a continuation of the seller 10. Requisites for removal in the board (p.233)
- Give example – p. 229 - Sir: Can the director be removed without cause?
2. What are the ways of increasing/decreasing of capital (p. 230) o GR: Yes, the director may be removed with or without cause as
3. Qualifications of directors (p. 230) long as the requisites for removal are present
4. Business Judgment Rule (p.231) § E: Unless he was elected by the minority, in which case,
5. MONTELIBANO VS BACOLOD MURCIA MILLING it is required that there is cause for removal
- BUSINESS JUDGMENT RULE 11. Filling of vacancies in the board (p.233)
o Questions of policy or management are left solely to the honest 12. Replacement of Hold-Over Directors
decision of the officers and directors of a corporation and the courts - Sir: Even if the remaining BOD remains a quorum, they cannot fill in the
are without authority to substitute their judgment for the judgment vacancy of a hold-over director
of the BOD; the board is the business manager of the corporation - Why?
and so long as it acts in good faith, its orders are not reviewable by o Because technically, the term of the hold-over director has already
the courts of the SEC. The directors are also not liable to the SH in expired and he is only holding the position temporarily
performing such acts. o In reality, the cause of the removal is expiration
- How was the business judgment rule applied? 13. VALLE VERDE COUNTRY CLUB (VVCC) VS AFRICA
o It doesn’t matter if the resolution results in the loss of the - Holdover Director
corporation, it is not for the courts to interfere. - Directors must be replaced by the SH or members in an election when their
o Whether the business of a corporation should be operated at a loss term of office expires. The loss of right of directors is automatic upon the
during depression, or close down at a smaller loss, is a purely expiration of their term
business and economic problem to be determined by the directors - However, if the election is not held, the directors whose term expires can
of the corporation and not by the court. continue to function in a holdover capacity.
6. Methods of voting - If one of the holdover director resigns, the remaining holdover directors
1. Straight Voting CANNOT replace him even if they constitute a quorum.
o Every SH may vote such number of shares for as many persons as - The power of the remaining members of the board to fill in vacancy applies
there are directors only if the director resigns before the expiration of his term. With respect to
o Ex. the board authority to replace, Sect 29 contemplates a vacancy occurring
2. Cumulative Voting for 1 candidate within the director’s term of office
o SH is allowed to concentrate his votes and “give one candidate as - Term
many votes as the # of directors to be elected multipled by the o is the time during which the officer may claim to hold the office as
number of his shares shall equal” of right. It is not affected by the holdover. The holdover period is
3. Cumulative voting by distribution NOT part of the original one-year term of office of a member of
BOD. It is not a new term. It constitutes as part of his tenure
- Tenure
)
o is the term during which the incumbent actually holds office - Corporate Officers
14. Doctrine of Corporate Opportunity (p.234) - General manager = X included in the BLs = X corporate officer = X intracorp
- Sir: What is not the consequence if the director seizes the corporate dispute = LA of DOLE has jurisdiction not the RTC commercial courts
opportunity? - A position must be expressly mentioned in the BLs in order to be considered
o He must account all the profits by refunding the same to the corp as a corporate officer
§ E: Unless the act has been ratified by vote of the SH - Thus, the creation of an office by the Board pursuant to or under a BL
owning/representing at least 2/3 of the OCS enabling provision is not enough to make a position a corporate office
15. Interlocking director (p. 235) - Sir: Test to determine whether a particular person is a corporate officer
16. Are corporate agents such as directors, trustees or officers of a corp o Position must be expressly stated in the BLS
solidarily liable with the corp? (p. 236) 20. Rule on service of summons
- Sir: When a director has knowledge of the issuance of water stocks, what - Exclusive list: PMGCTC
must he do? 21. Voting Trust Agreement
o He must file his written objection to the secretary - Who may exercise the right to vote when there is a voting trust
17. Self-dealing director/trustees/officers. Rules. (p. 237) agreement?
- GR: The contract is voidable o A trustee under a voting trust agreement becomes registered as a
o E: SH in the corporate books and as such becomes the LEGAL TITLE
1. The presence of the D/T in the board meeting is not necessary holder or owner of the shares of stock transferred
for constituting a quorum for such meeting 22. Who can appoint or remove the corp officers?
2. The vote of such D/T in the board meeting approving the - BOD
contract was not necessary for the approval of the contract o E: Unless the bylaws specifies other officers who can appoint (ex.
3. The contract is fair and reasonable under the circumstances BLs may authorize the president to appoint)
4. In the case of an officer, there was previous authorization by 23. NECTARINA S. RANIEL VS JOCHICO
the board of D/T - BOD CAN REMOVE CORPORATE OFFICERS - The directors may appoint
- Assuming these requisites are absent, can it still be considered valid? officers and agents and as incident to this power of appointment, they may
o Yes, it may be ratified by a vote of the SH representing 2/3 OCS or discharge those appointed
by the vote of the SH or 2/3 members in a meeting called for the - ONLY SHs CAN REMOVE DIRECTORS - Only stockholders or members
purpose have the power to remove the directors or trustees elected by them, as laid
- Sir: 2 ways to validate a contract between a self-dealing director down in Section 28 of the Corporation Code, to wit: Any director or trustee of
1. Presence of the 4 requisites (exceptions) a corporation may be removed from office by a vote of the stockholders
2. As long as they are ratified by the SH representing 2/3 of the OCS holding or representing at least two-thirds (2/3) of the outstanding capital
provided stock,
o Full disclosure of the adverse interest of the D/T involved is made 24. Meetings of the Board (p.239)
on such meeting - Teleconference/Video Conference
o The contract is fair and reasonable under the circumstances o Board meeting thru teleconference or video conference is allowed
- ♥ Sir: Assuming the requisites are absent and there is no ratification, is (SEC MC No. 15 dated Nov 20, 2011)
it still possible for the contract to push thru? o Sir: How about SH meeting? Can it be done?
o Yes, because the nature of a voidable contract is that it is valid until § GR: No, because the requirement is that the meeting of
annulled. SH should be in the city or municipality of principal office
o Hence, if the corporation does not have it annulled, then the and if practicable, the principal place of business
contract will still be valid • E: The video conference/teleconference is
18. Who are the corporate officers of a corp? held within the city/municipality of the principal
1. President office
2. Treasurer § But with the board members, the code allows them to
3. Secretary hold their meeting anywhere hence they can hold video
4. Other officers provided in the BL conference/teleconference validly
- Sir: What is the importance of this? 25. Trust Fund Doctrine
o To know where you will file the case 26. Distribution of Assets and the Trust Fund Doctrine
§ If you are an employee – LA of DOLE - Procedure for the distribution of capital assets, embodied in the corporation
§ If you are an officer – Commercial Courts of the RTC code, which allows distribution of corporate capital assets only in 3 instances:
19. MARC II MARKETING, INC. and LUCILA V. JOSON VS ALFREDO M. JOSON 1. Amendment of the AOI to reduce the ACS
)
2. Purchase of redeemable shares by the corporation, regardless of the 40. Non-voting shares
existence of URE/RE - GR: X vote
3. Dissolution and eventual liquidation of the corporation o E: p. 251
27. ONG YONG VS TIU 41. No par value shares (p.251)
- Rescission is not the proper remedy for distribution of capital assets and 42. Doctrine of Equality of Shares (p.252)
property of the corporation since the rescission will violate the Trust fund 43. Watered stocks
doctrine and the procedures for valid distribution of assets and properties 44. Certificate of stock
under the corporation code - Sir: Why considered a genuine stock certificate merely a prima facie
- Subscription contract - any contract for the acquisition of unissued stock evidence, not conclusive evidence?
in an existing corporation or a corp still to be formed shall be deemed a o Because it is possible that although the stock certificate is in your
subscription name, in reality you are not the real owner.
- No material/substantial breach hence rescission is not the proper remedy o It is merely considered prima facie meaning it can be rebuttable.
- Sir: What could have been the remedy of the party? 45. Formality of stock certificate
o Specific performance - Signed – President/VP
28. Subscription Contract (p.245) - Countersigned – Corporate Sec/Asst. Secretary
29. How does one become a shareholder in a corporation 46. When can a certificate of stock be issued?
1. Enters into a subscription contract with an existing corporation - Full payment of his subscription + interest and expenses (in case of
2. Purchase treasury shares from the corporation delinquent shares) if due has been paid
3. Acquires shares from existing shareholders by sale or any other contract
4. By operation of law like succession NEXT MEETING: UNTIL SOLE CORP
30. Kinds of subscription contract
31. Valid considerations for subscription contract
32. Doctrine of indivisibility and individuality of subscription
33. Underwriting agreement (p. 246)
34. Shares of Stock
35. Certificate of Stock
- Sir: Is it possible for you to own shares but have no stock certificate?
o
36. Shares of stock vs Certificate of Stock
37. Escrow Shares (p.250)
38. Classifications of Shares
39. Sir: What is the difference between Redeemable Shares vs Treasury Shares
Redeemable Shares Treasury Shares

Has right to vote No right to vote
Why?
- Because they are not formally
cancelled and are therefore,
subject to reissue by the corp
at some future time
- The only right the corp has
over the TS is to reissue the
same for a valuable
consideration
- The corporation cannot
declare dividends to itself
Benefit/Advantage of Treasury Shares
- The corporation can reissue it
and sell it at a higher price
)
JANUARY 23, 2017 - Under Sec. 63 of the Corporation Code, a transfer of shares of stock not
MEETING #4 recorded in the stock and transfer book of the corporation is non-existent as
far as the corporation is concerned.
- It is only the SH who has the right to demand the issuance of a stock
1. Transfer of shares certificate and the recording of the transaction in the books
a. Requirements if covered by certificate of stock - Mandamus will not lie because he is not considered a SH under the books
1. Delivery of the certificate therefore he cannot compel the secretary to record.
2. Indorsement by the owner or his agent - Sir: Assuming the shares are covered by a Stock Certificate and it was
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3. To be valid to 3 parties, the transfer must be recorded in the books delivered to him duly endorsed. If you are Ponce, what would you do for the
of the corp secretary to issue the stock certificate and record it in the books?
b. Requirements if not covered by certificate of stock o Ask for a SPA from the SH so that in case the SH goes abroad or
1. Deed of assignment and goes away, you will have the right to have the transaction
2. Duly recorded in the books of the corp registered and demand the issuance of the stock certificate
2. RURAL BANK OF LIPA VS CA 6. Rights of shareholders (p.257)
- DEED OF ASSIGNMENT OF SHARES OF VILLANUEVAS TO THE BANK 7. Obligations of a stockholder
= X SUFFICIENT àNO ENDORSEMENT & DELIVERY - Sir: Why is failure to create a corporation a liability?
- Sir: What practical lesson do we learn in this case? o J’xel
o It is wise to buy shares that are covered by Stock Certificate so that 8. Suits by Stockholders/Members
you have something to hold on as proof of ownership 9. Requisites for derivative actions
o See to it that it is recorded in the books of the corp 10. Pre-emptive right (p.258)
- If represented by a certificate, the following must be strictly complied with: (1) - Example:
delivery of the certificate; (2) indorsement by the owner or his agent; (3) to be o The ACS of a corp is 100k. Out of 100k shares, SH A subscribed
valid to third parties, the transfer must be recorded in the books of the to 25% (25k). The corporation then increases the capital stock to
corporation 200k. That additional 100k will not be available for issuance. So,
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- before the corporation can issue it to 3 persons, the corp must
3. Sir: Can a corporate secretary be compelled to record the sale in the books issue it first to the existing SH in proportion to his present
of the corp? stockholdings. So, SH A can subscribe to 25% of the additional
- Yes, The STOCKHOLDER (SELLER) has the right to demand the corporate 100k to the CS to retain his proportionate control in the corporation
secretary to record the sale not the buyer because technically the buyer is not and to retain his equity in the surplus. It is only when SH A declines
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yet recorded in the books as a stockholder of the corporation to avail of their pre-emptive right can the corp offered to 3 persons
4. CHEMPHIL EXPORT VS CA - Sir: Can another SH purchase the corresponding shares of the
- Is the attachment or mortgage of shares of stock required to be registered in shareholder who declined to exercise his pre-emptive right?
the corp’s stock and transfer book? – NO! o GR: NO.
- An attachment or mortgage of shares of stock need not be registered in the § E: But if nobody purchase the same and later on the
corporation’s stock and transfer books. board re-issued the shares, the pre-emptive right applies
o Reason: a chattel mortgage over shares of stock does not involve 11. Right to vote – Stockholder’s meeting (p. 259)
a “transfer of shares” a. Quorum of meeting of SH and members
- Only absolute transfers of shares of stock are required to be recorded in the b. Excluded from the computation of quorum
corporation’s stock and transfer book in order to have “force and effect as c. Who will call for special meeting of SH
against third persons d. Place of meeting
- Sir: What about the issue on subrogation? Was there subrogation? 12. Proxy
o None. CEIC was not able to comply with all the requirements of Art. 13. Voting trust
1303 (2) hence was not subrogated to the rights of SBTC against 14. Limitations on right to vote of a SH
Antonio Garcia and did not acquire SBTC's attachment lien over 15. Appraisal Right
the disputed shares which, in turn, had already been lifted or - What is fair value?
discharged upon satisfaction by Garcia, through FCI, of his debt to - How is the right of appraisal extinguished?
the said bank. 16. Rules for exercise of appraisal right
5. PONCE VS ALSONS
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JANUARY 24, 2017 8. Merger vs consolidation
MEETING #5 - Merger
o Absorbing Corp = surviving corporation
o Dissolved Corp = Absorbed corporation
1. Collection of unpaid subscription (p.264) - Consolidation
2. Call o New Corporation = consolidated corporation
- Demand by the directors that unpaid subscriptions be paid o Consolidating Corps = constitutent corp
3. Procedure for collection and Delinquency Sale - Approval of the SEC is required
- Highest Bidder – person offering to pay the full amount of the balance on the 9. Effects of merger or consolidation
subscription and other amount that are due for the SMALLEST number of 10. BPI VS BPI
shares or FRACTION of a share - Human beings are never embraced in the term “assets and liabilities”
o Illustration: - Effect of merger or consolidation:
§ X bought 5 shares. P100/share = P500 o GR: EEs of an absorbed corporation are not absorbed by the
300 = paid amount surviving corporation, unlike in assets and liabilities.
______ § EXPN: Absorption of the EEs may be provided in a
P200 = unpaid amount Merger Plan. It is only in this case can a corporation be
50 = cost of suit judicially compelled to absorb the EEs of a non-surviving
______ corporation
P250 = total - For purposes of applying the Union Shop Clause in the CBA between the
amount demandable surviving corporation and the certified union:
§ Bidders: o The absorbed EEs of the non-surviving corporation are considered
• A = 250 for 2 shares à HIGHEST BIDDER new employees of the surviving corporation,
• B = 250 for 3 shares o Hence, the Union Shop Agreement applies to the absorbed
• C = 250 for 4 shares employees
§ What if: - Note: 2011 decision
• A = 200 for 2 shares o There is automatic absorption when there is a complete takeover
• B = 250 for 3 shares of one corp of another corp and there is a silence as to the fate of
• C = 250 for 5 shares à HIGHEST BIDDER the former employees in the articles of merger or merger plan,
(Full amount) upholding the security of tenure of the employees affected by
4. Effects of stock delinquency mergers. In any case, the employees are considered as new
5. Books employees which are still covered under the Union Security Clause.
6. Entries in Stock and Transfer Book 11. Procedure for merger or consolidation
- Contents of stock and transfer book 12. Non-use of corporate charter
- Who is authorized to make entries in the S&T Books? 13. Dissolution
o Corporate Secretary - Modes of dissolution (VISE)
- Probative value of the stock and transfer book - Voluntary dissolution depends on w/n
7. Rights of the SH to inspect books o There are NO creditors affected
- Requirements for the exercise of right of inspection: o There are creditors affected
1. Must be exercised at reasonable hours on business days - Sir: Difference between when there are NO creditors and when there are
2. SH has not improperly used any information he secured thru any o When there are NO creditors, no need for publication
previous examination - Dissolution by shortening corporate term
3. Demand is made in good faith and for LEGITIMATE PURPOSE o Sir: Is there appraisal right?
o Sir: Give instances of legitimate purpose (MIDTERM EXAM § Yes, Sect 81
QUESTION) - Involuntary dissolution
§ Mikee corpo notes: A legitimate purpose could be to - Effects of dissolution
determine whether the fund used to distribute dividends 14. Liquidation after 3 years
really come from URE, otherwise the trxust fund 15. REBURIANO VS CA
doctrine will be violated - Amended AOI to shorten its term pending collection case against Reburiano
for unpaid pepsi cola bottles
)
- If full liquidation can only be effected after the 3-year period and there is no § A foreign company that merely imports goods from a
trustee, the directors may be permitted to complete the liquidation by PH exporter without opening an office or appointing an
continuing as trustees by implication agent in the PH is NOT doing business in the PH
- Counsel of dissolved corporation = considered trustee for purposes of o STEEL CASE INC VS DESIGN INTERNATIONAL SELECTIONS
winding up INCS
16. Liquidation § Office furniture exported to the PH (buy and sell
17. Modes of Liquidation agreement)
18. Foreign Corporation § Appointment of distributor in the PH = X doing business
- Doctrine of reciprocity – laws of the country of the foreign company allows in the PH
Filipino citizens and corporations to do business in its own country or state § GR: The appointment of a distributor in the PH is not
19. Power to sue and be sued sufficient to constitute “doing business in the PH”
20. What constitutes doing business in the PH • E: UNLESS it is under the full control of the
- Twin Characterization Test foreign corporation. On the other hand, if the
o Continuity Test distributor is an independent entity which buys
o Substance Test and distributes products, other than those of
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- 3 Test? the foreign corporation, for its own name and
o Contract Test of doing business its own account, the latter cannot be
21. Rule on isolated transaction considered to be doing business in the PH
- If single/causal transaction only = X doing business § One who has dealt with a corporation of foreign origin as
o Ex. Foreign mining company bought condo unit in the PH for its a corporate entity is ESTOPPED to deny its corporate
directors so that they have a place to stay whenever they come to existence and capacity
the PH 23. Doing business under the foreign investment act of 1991 (p.277)
- If X single/causal transaction only = doing business - Instances of not doing business
o Ex. Foreign mining company appointed an agent to buy condo units 24. Requisites for obtaining license to do business
in the PH so that said units can be sold/rented 25. Effects of estoppel and subsequent compliance
22. Contract Test of Doing Business 26. Close corporation
- CASES: - Requirements of a Close Corp (20-R-L/P)
o B. VAN ZUIDEN VS GVTL MANUFACTURING INDUSTRIES 1. AOI must state that the number of SH shall not exceed 20
§ Lace Products exported by foreign country to the PH 2. The AOI must contain restrictions on the transfer of issued stocks (which
§ X DOING BUSINESS must appear in the AOI, BL, and Certificate of Stock)
§ An essential condition to be considered as "doing o Restriction on the transfer must not be more onerous than granting
business" in the Philippines is the actual performance the existing SH or corporation the option to purchase the shares
of specific commercial acts within the territory of the § Sir: What does “option to purchase the shares”
Philippines for the plain reason that the Philippines has mean?
no jurisdiction over commercial acts performed in foreign • Same as right of first refusal (the existing SH
rd
territories must refuse first before it is offered to 3
§ A foreign country that exports products to the PH without persons
doing any specific commercial act is NOT doing business § Example of more onerous?
in the PH • Before you can sell your shares, you must ask
§ Transaction must actually happen in the PH. In this case, for the consent of the corporation
the transaction of Van Zuiden was concluded in HK, not 3. The stocks cannot be listed in the stock exchange nor be publicly offered
in the PH - Sir: A family corp is not necessarily a closed corp
o CARGILL VS INTRA STRATA ASSURANCE - What corps cannot be closed corps? (MOSBI-UEP)
§ Molasses imported to foreign country - Pre-emptive right in closed corp
§ X DOING BUSINESS - Deadlocks
§ Activities within the PH jurisdiction that do not create - Characteristics
earnings or profits to the foreign corporation do not 27. Non-Stock Corp
constitute doing business in the PH - Purposes of Non-stock Corp (CCCREP-FLSS-CIA)
28. Rights of Members (VT)
- GR: X transfer membership
)
o E: AOI and BLs may provide otherwise - For termination of membership to be valid, there should be reasonable notice
-Right to Vote to the member concerned and he must be given fair opportunity to be heard
o GR: a member is entitled to 1 vote in his defense.
§ E: However, such right may be BROADENED, LIMITED - The corporation was in BF because despite that fact that they knew that the
OR DENIED in the AOI or BLs PO Box of Clemente was already closed, they still continued to send the
o Sir: Give examples of the following notice of sale/delinquency to said PO Box
§ BROADENED - If the BLs provide that for every 5k - Section 69 does not apply since this refers to unpaid shares and not to
pesos contributed, a member shall be entitled to 1 vote. unpaid membership dues. Hence, the prescriptive period to assail the public
Thus, if he contributes 10k pesos, he shall be entitled to sale/auction of the shares is not 6 months. Art 1140 of the NCC applies
2 votes (prescription for recovery of movable property), which is 8 years. Hence, the
§ LIMITED – If the BLs provide that regardless of action has not yet prescribed.
contribution, each member shall only be entitled to 4 32. Conversion
votes. 33. Order of Distribution of Assets
§ DENIED – members must maintain good standing to be 34. Religious Corporation
entitled to vote. He is not in good standing if he commits - Corporation Sole
infractions, does not pay association dues, etc. - Religious Societies
o Sir: Difference between the right to vote in Stock Corp and 35. Corporation Sole
Non-Stock Corp? - Nationality
§ GR: In a stock corp, the right to vote cannot be denied - Effect of Separation of Member
• E: Preferred and redeemable shares can be - Conversion to Corporation Aggregate
denied the right to vote - Dissolution
§ In a non-stock corporation, the right to vote may be
limited, broaded or denied *Note: Sir deemed as discussed starting Calatagan Case. Early dismissal.
29. Termination of membership
30. VALLEY GOLF AND COUNTRY CLUB VS CARAM
- Failure to pay monthly club dues is not the same as failure to pay unpaid SRC – QUIZ ONLY
subscription
- In this case, he was already able to fully pay his shares hence Section 67 of
the Corporation Code does not apply
- The corporation was in BF since despite the fact that they knew that Caram
was already dead, they still sent the notice of sale/delinquency to him and
not to estate
- A non-stock corporation is authorized to terminate the membership in
accordance with the standards fixed in the AOI or the BLs. When loss of
property rights is involved, the manner of deprivation of such property right
should also be in accordance with the provisions of the NCC including Articles
19, 20, and 21.
- Sir: If you fail to pay your membership dues, you can be denied the right to
vote
31. CALATAGAN GOLF AND COUNTRY CLUB VS CARAM
- Nonpayment of dues may be a ground for termination or suspension of
membership. The AOI or BLs of a non-stock corp may provide that unpaid
dues shall constitute a lien on the member’s share. However, Sect 68 of the
Corp Code does not apply if the membership shares are sold under the
provisions that provide for the constitution of lien.
- The shares may be sold by virtue of a lien. In such sale by virtue of lien, the
member had already fully paid for the share and no longer had any
outstanding obligation to deprive him of full title to his share.
)
NEGOTIABLE INSTRUMENTS LAW 10. Memorize Sect 1 -9
11. Kinds of NI
JANUARY 31, 2017 1. Bill of exchange
MEETING #6 – EXCUSED 2. Promissory note
12. Kinds of BOE [DIF-TTS-BC]
- Draft – another term for BOE
- Sir: Why is it that there is a FIXED DATE in a check but we cannot see
1. What is a negotiable instrument the word “demand”? Why do you need to wait for the date before
2. Requisites of negotiability [WUDOD] depositing the check?
- MEMORIZE VERBATIM! o The date refers to the date of issuance of the instrument, not the
3. Negotiation date when it is payable.
- Transfer of an instrument from one person to another in such a manner as to 13. Kinds of promissory note [CBD]
constitute the transferee a holder thereof - Sir: What is the difference between a Certificate of deposit and Bonds?
- HOLDER – payee or indorsee of a bill or note who is in possession of it or the o COD = issued by the bank; generally short-term
bearer thereof (MEMORIZE!) o Bonds = issued by a company or government body; long-term basis
4. How is negotiability of an instrument determined? - Debenture – there is a corporation guaranteeing the indebtedness
5. CALTEX PHILS VS CA 14. Sir: Is it possible that there is a doubt as to whether the instrument is a bill
- In determining the negotiability of an instrument, consider the instrument in or a note? For example, in a BOE, if there is an unconditional promise but
its entirety and only what appears on its face. It must comply with the there is a drawee.
requirements under Sect 1 of the NIL. - GR: You can treat it as either
- CTDS = negotiable because it conforms with Sect 1 of NIL and it is payable o E: If the doubt as to whether it is a bill or a note is so ambiguous,
to bearer as indicated on the face of the instrument then it shall be construed as a note
- Security bank has better right over the CTD because the CTD were not validly 15. When can a BOE be treated as a PN
negotiated because the intention of Angela Dela Cruz is only to give the 16. Negotiable PN vs Negotiable BOE
instrument as a pledge to Caltex – date and description of thing pledged = X 17. Bill of exchange vs Check
shown on public instrument while Security Bank was able to show through 18. Are the following commercial papers NI under the NIL?
proof that a deed of assignment was signed by both parties 1. Crossed check = X
- Sir: What about the issue on pledge? So was there a proper pledge? 2. Trade acceptance = /
o Security bank has better right over the CTD because the CTD were 3. Money Order = X
not validly negotiated and the intention of Angela is only to give the 4. Warehouse receipt = X
instrument as a pledge to Caltex 5. Pawn ticket = X
o If the debt continues to exist and is not discharged by the transfer, 6. Treasury Warrant = X
it shall be treated as a pledge - What is the meaning of a cross check?
o According to Art 2096, a pledge shall not take effect against a third 1. the check may not be encashed but only deposited in the bank;
person if a description of the thing pledged and the date of the 2. the check may be negotiated only once — to one who has an account
pledge do not appear in a public instrument. Hence, the mere with a bank;
delivery of the CTDs did not legally vest in petitioner any right 3. and the act of crossing the check serves as warning to the holder that
effective against and binding upon the respondent bank. the check has been issued for a definite purpose so that he must inquire
- Sir: Assuming there was a valid pledge, which is better, pledge or if he has received the check pursuant to that purpose, otherwise, he is
negotiation? not a holder in due course.
o Negotiation is better. - How do you cross a check?
6. Functions of NI o 2 parallel diagonal lines on the left top portion of the checks
7. Not legal tender - Kinds:
8. Coins as legal tender o Special - Name of the bank or a business institution is written
9. 2 important features of a NI between the 2 parallel lines, which means that the drawee should
1. Negotiability pay only with the intervention of that company
2. Accumulation of secondary contracts o General – where the words written between the 2 parallel lines are
- Sir: How is accumulation of secondary contracts done? “And Co.” or “for payee’s account only
o Every time you negotiate, there is a separate contract. Hence,
additional separate contracts are negotiated along the way
)
- Are Postal Money orders negotiable? • “equal installments” = x determinable
o No. Not negotiable because postal rules are inconsistent with - Payable on demand or at a fixed determinable future time
negotiability o Payable on demand [DSP-NO]
rd
19. Persons Involved § Sir: Example of 3 kind of payable on demand?
- Sir: Do you need to indicate the referee’s name? Why do we need to • Where an instrument is issued, accepted or
identify the referee’s name? indorsed when overdue, it is, as regards the
o Yes. So that the parties will know who will settle the dispute if one person so issuing, accepting or indorsing it,
arises payable on demand
20. Distinction between negotiable instrument and non-negotiable instrument o Payable at a determinable future time [AFO]
21. Negotiation vs assignability § Sir: What if 10 days reaching the age of majority?
Negotiation Assignability • Not certain.
Negotiable Instrument Contracts o Acceleration clause
Free from personal defenses Subject to defenses obtaining among o Insecurity clause – X negotiable
available among parties original parties o Extension clauses
§ If extension is at the option of the holder?
22. Requisites of Negotiability [WUDOD] • Allowed
- Promise or order to pay must be unconditional § At the option of the maker/acceptor?
o Sir: What if there is an order or promise to PAY out of a • Allowed as long as extension to a further
particular fund? definite time
§ It is CONDITIONAL hence not negotiable • Definite means? Fixed/determinable
§ We do not now if the account has funds - Payable to order or bearer
§ But if only for reimbursement, it is still unconditional o When payable to bearer [EB-F/N-NB]
hence, negotiable o Order instruments [P-D/M-D-2-1-H]
- Payable in a sum certain in money 23. PHILIPPINE EDUCATION COMPANY INC VS MAURICIO SORIANO
o If the obligor like the maker is given the option to deliver something - Postal money orders = x negotiable instruments
in lieu of money, the instrument is NOT negotiable. - Postal money orders are not negotiable instruments. 2 reasons why:
§ Example: A note where the maker promises to deliver 1. Government is not engaging in commercial transactions but merely
P1k or a sack of rice” at HIS OPTION governmental function à negates the nature of NI that it should be
o Sir: What if there is a mention of an option to do something in commercial in character
lieu of of money, what is the rule? 2. X conform to section 1 of NIL à postal laws and regulations limit
§ If the option is given to the maker = instrument not negotiability of PMO because it only allows 1 indorsement; X circulate
negotiable anymore 24. CONSOLIDATED PLYWOODS CASE
§ If the option is given to the holder = instrument is still - Promissory note = x negotiable instrument
negotiable - X holder in due course
o The sum payable is a sum certain within the meaning of this act - The note is not negotiable because it is not payable to order or bearer. It is
although it is to be paid: [ISA-ECA] payable to a specified person.*
1. With interest 25. Identification of the drawee
2. By stated installments or 26. ANG TEK LIAN CASE
3. By stated installments, with a provision, that upon default - Estafa; rubber check
in payment of any installment or of interest, the whole - Check payable to order of “cash” = x need indorsement
shall become due (acceleration clause) - Section 9 (d). - When the name of the payee does not purport to be the name
o Sir: With interest or with stated installments. What does this mean? of any person, its is payable to bearer
Illustrate. - A check payable to cash is a bearer instrument. Being a bearer instrument,
§ Date = each installment must be fixed or at least there is no need for indorsement. Mere delivery is enough. Hence, Ang Tek
determinable Lien’s defense that he cannot be held liable for estafa because he did not
§ Amount paid for each installment = must be stated indorse it and so he did not have any intent is untenable.
§ You must state the date of installment and amount - Hence, the drawee bank may pay it to the person presenting it for payment
corresponding to it without the drawer’s indorsement. A check is payable to bearer is authority
§ Example: for payment to holder. Where a check is in the ordinary form and is payable
• “Quarterly” – x determinable to bearer, so that no indorsement is required, a bank, to which it is presented
)
for payment, need not have the holder identified and is not negligent in failing
to do so.
27. Omissions and provisions that do not affect negotiability [DVP-SCJ]
28. When date may be inserted by the holder [DS]
29. Additional provisions
30. PNB vs MANILA OIL REFINING CASE
- The negotiability of the instrument is not affected by the stipulations. Although
MORB is correct in stating that the stipulations are void, it is still negotiable if
all other requirements of Sect 1 are present. They are in the nature of
stipulations authorizing confession of judgment which is considered void for
being against public policy in this jurisdiction. However, Sect 5 of the NIL
provides that the negotiable character of an instrument otherwise negotiable
is not affected by a provision which authorizes confession of judgment if the
instrument be not paid at maturity. In other words, only the stipulation is
avoided.
31. Sir: Can you put 2 or more persons as drawees?
- Yes. As long their liability is JOINT. Example: Pay to the order of A and B
jointly
- Why not “or”? Why not alternatively?
o Because the last requisite will not be complied with
o When the instrument is addressed to a drawee, he must be named
or otherwise indicated therein with reasonable certainty
32. Sir: What do you understand by confession of judgment?
- Confession of judgment is not allowed because it deprives the party a day in
court since it authorizes judgment without trial.
*What happens if you accept a stale check?
)
FEBRUARY 6, 2017 10. Indorsement must be of the ENTIRE instrument
MEETING #7 11. Negotiation to 2 or more indorsees severally NOT allowed
- Sir: What do you think is the reason for that?
o Because you are delivered the entire instrument to one person.
1. Transfer and negotiation You cannot cut it into 2 and deliver it to 2 persons
2. Negotiation vs assignment 12. Kinds of indorsement [BSQ-RC]
3. Assignment 1. Blank indorsement
4. SALAS VS CA o Sir: What particular words will you put at the back of the
- If the instrument is merely assigned, the transferee does not become a holder instrument?
and he merely steps into the shoes of the transferor. Any defense available § You just sign the back of the instrument
against the transferor is available against the transferee. o Sir: Consequence if it is a blank instrument?
- Requisites of Negotiable Instrument [WUDOD] § Converts the instrument to a bearer instrument
1. it is in writing and signed by the maker Juanita Salas; 2. Special indorsement
2. it contains an unconditional promise to pay the amount of P58,138.20; o “Pay to X” and then sign your name
3. it is payable at a fixed or determinable future time which is "P1,614.95 3. Qualified indorsement
monthly for 36 months due and payable on the 21 st day of each month o “Without recourse”
starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" § Recourse – resort to a person who is secondarily liable
4. it is payable to Violago Motor Sales Corporation, or order and as such, after default of a person primarily liable
5. the drawee is named or indicated with certainty. § So, without recourse means that you cannot resort to
- HOLDER IN DUE COURSE – Filinvest is a HDC having taken the a person secondarily liable after default of the person
instrument under the ff conditions: [CROW-GVN] primarily liable
1. it is complete and regular upon its face; o “San recourse”, “At indorsee’s own risk”, “indorser not holder”
2. it became the holder thereof before it was overdue, and without notice 4. Conditional indorsement
that it had previously been dishonored; o The party required to pay the instrument may disregard the
3. it took the same in good faith and for value; and condition and make payment to the indorsee or his transferee
4. when it was negotiated to Filinvest, the latter had no notice of any whether the condition has been fulfilled or not
infirmity in the instrument or defect in the title of VMS Corporation. o Sir: What do you see at the back of the instrument?
5. Issuance § MàPàA
6. Difference between issuance and negotiation § “Pay to A on completion of the construction of my
- Issuance – FIRST delivery of the instrument complete in form to a peron house
who takes it as a holder (sgd) P
- Negotiation – SUBSEQUENT transfer from one person to another in such § If A x finish house = M may refuse to pay A
a manner as to constitute the transferee the holder thereof § Even if A x finish house = M may pay A
7. Bearer instrument always a bearer instrument § If M pay without condition fulfilled = A holder money in
- Instrument payable to bearer is indorsed specially, it may nevertheless be trust for A
further negotiated by delivery § If A never finishes house = A must turn over money to P
- Sir: Can you convert an order instrument to a bearer instrument? 5. Restrictive Indorsement – MCQ QUESTION!
o YES. When the only and last indorsement is in blank, it becomes o [PAT]
payable to bearer and may be negotiated by delivery o Rights of Restrictive Indorsee: [RAT]
- Sir: Order instrument merely delivered, not indorsed. What is the 13. Holder
effect? - The payee or indorsee of a bill or note who is in possession of it or the
o It becomes merely an assignment hence the transferee merely bearer thereof
steps into the shoes of the transferor which means that he is 14. Holder in due course (HDC)
subject to defenses available to prior parties (he cannot be a - Requisites [CROW-GVN]
HDC) - Sir: What does infirmity in the instrument mean?
o Transferee is given the right to compel indorsement o This means that there is really something wrong with the
8. Indorsement instrument itself
9. Allonge o Alteration which is apparent (amount from 100 became 1k)
- Separate piece of paper attached to the instrument where indorsement is o Forgery in the maker or drawer’s signature
placed
)
- Sir: What does defect in the title of the person negotiating mean? o General – where the words written between the 2 parallel lines are
o The person negotiating has no authority to negotiate it “And Co.” or “for payee’s account only”
o A title of a prior party is defective when he obtained the 19. Rights of HDC – MCQ!!! [DDF]
instrument or any signature thereto by: 1. Free from any defect in the title of prior parties
§ Fraud, duress, force and fear or other unlawful means o Sir: What does this mean?
§ For an illegal consideration § Meaning the HDC could still recover from the prior
§ When he negotiates it in breach of faith or parties although there is defect in the title of prior parties
§ Under such circumstances which would amount to provided he must not be aware that there was a defect
fraud in the title
§ You stole the check or PN 2. Free from PERSONAL defenses available to prior parties among themselves
- Sir: He took it in GF and for value. What does this mean? o Sir: What does this mean?
o Good faith – Honesty in fact in the transaction concerned § Prior parties cannot set up personal defenses against the
§ Sir: “There must be an honest to goodness transaction” HDC
o Holder for value – one who has given a valuable consideration § The HDC can still recover despite the personal defenses
for the instrument negotiated or issued to him of the prior parties
15. Rule when a prior party reacquires the instrument (REACQUIRER) 3. May enforcement payment of the instrument for the full amount thereof
- He may: against all parties liable thereon
1. Reissue and further negotiate the same 20. PERSONAL DEFENSES [MAFFIII- PUV- W]
2. Strike out the intervening indorsement that are not necessary for his - MIDTERMS – Enumerate at least 10
title 21. REAL DEFENSES [CCIA-FB-D/ITT- MA/P-D]
- Sir: M à P or order à A à B à C à D à A - MIDTERMS – Enumerate at least 10
o Which indorsements can A strike out?
§ B C and D
o Can he collect from BCD, assuming that he did not strike them
out?
§ NO. Because he is liable to them because of his initial
indorsement
16. DE OCAMPO CASE
- SC enumerated 4 circumstances why de ocampo is NOT a HDC
1. It was cross-checked (only for deposit) but was used as payment by
Gonzales;
2. The drawer in the check (Gatchalian) has no liability with De Ocampo
3. It was not the exact amount of the hospital bill; not commensurate
4. Check was not payable to Gonzales or bearer
- These circumstances should have put De ocampo on guard
17. BATAAN CIGAR AND CIGARETTE FACTORY VS CA
18. Crossed Check
4. the check may not be encashed but only deposited in the bank;
5. the check may be negotiated only once — to one who has an account
with a bank;
6. and the act of crossing the check serves as warning to the holder that
the check has been issued for a definite purpose so that he must inquire
if he has received the check pursuant to that purpose, otherwise, he is
not a holder in due course.
- How do you cross a check?
o 2 parallel diagonal lines on the left top portion of the checks
- Kinds:
o Special - Name of the bank or a business institution is written
between the 2 parallel lines, which means that the drawee should
pay only with the intervention of that company
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FEBRUARY 8, 2017 3. RULES ON INCOMPLETE BUT DELIVERED INSTRUMENT (Sect 14)
MEETING #8 – EXCUSED - 2 requisites before you can fill up a blank paper for any amount: [SI]
1. Filled up strictly in accordance with the authority given and within
reasonable time
2. Intention to convert it to a NI (only sir said this second requisites)
NOTES FROM MIKEE - Example: M à P à A à B à C
o M issued a PN in blank with signature. He instructed B to put the
1. RULES ON FORGERY amount of 1k on the instrument. He then delivered the instrument
- Memorize Sect 23 to B, but instead of putting 1k, B placed 5k.
- When a NI is forged, is it rendered not a negotiable? o C (X HDC)
o NO! Only the signature is wholly inoperative; not the whole NI. o Can C run after M for the PN of 5K?
- Hence, since the instrument is not wholly inoperative, rights could arise from § No. 2 requisites not complied with [SI]
a forged instrument • The first requisite (filled up strictly in
o Based on the last paragraph of Sect 23, “unless the party against accordance with authority given) was not
whom it sought to enforce such right is precluded from setting up complied with hence C cannot recover from
the forgery or want of authority” à this means that there are M.
persons who cannot invoke forgery/want of authority o What if C is a HDC, will you answer be the same?
- Who are these persons who are precluded from setting up forgery/want of § NO. A HDC may enforce the instrument as if it has
authority? [WRN] been filled up strictly in accordance with the authority
o Those who warrants like the acceptors, indorsers given.
o Those who ratifies (express/implied) § Remember: Personal defenses
o Those who are negligent • Filling up of blanks X within authority
- Example of those who ratify expressly/impliedly? • Filling up of blanks beyond reasonable time
o M à P or order à A / => B à C 4. RULES ON INCOMPLETE AND UNDELIVERED (SECT 15)
§ => (means stole) - M => P à A à B à C
§ / (means cut off) - Name of payee is in blank. He kept in it in his drawer. P stole the note.
§ B stole instrument and made it appear that A indorsed t - C is a HDC. Can he collect from M?
to B by forging A’s signature. o NO. It is a real defense available against ANY HOLDER.
§ C is now the holder. Can he run after M? - Does this mean that C cannot collect from anybody?
• No. He cannot recover from all persons prior o C can collect from P, A and B since as indorsers, they warrant
to A. C can only run after B. that the instrument is genuine and in all respects what it purports
§ But if C runs after A whose signature was forged and A to be. Hence, rights can still arise from a forged instrument.
still paid for it. He ignored the forgery. A is ESTOPPED 5. QUIRINO GONZALES LOGGING CONCESSIONAIRE VS CA
from raising the defense of forgery. - It is no defense in an action enforce a negotiable PN that it was signed in
- Example of those who warrant? black as Sect 14 of the IL concedes prima facie authority of the person in
o In the above problem, C can collect from B under his warranty. possession of the NI to fill in the blanks.
When B indorsed it, he warranted that the instrument is genuine - Sir: Issuance of a blank check is allowed as long as the filling up thereof
and in all respects what it purports to be. He is thus precluded complies with Sect 15.
from setting up forgry. 6. COMPLETE BUT UNDELIVERED (SECT 16)
2. ILLUSORIO VS CA - M => P à A à B à C
- GR: When a signature is forged or made without the authority of the person - Payable to P or order. Instead of delivering it, he kept it in his drawer. P
whose signature it purports to be, the check is wholly inoperative stole it.
o E: Unless the party against whom it is sought to enforce such right - If C is not a HDC, can he collect from M?
is precluded from setting up forgery or want of authority. o NO. Sect 15 is not enforceable until it is delivered.
- Since the PC of the loss is Illusorio’s own negligence in entrusting to his - Can C recover from P?
secretary his credit card, checkbooks, and he also failed to verify his o YES. Because P is the thief/culprit
statement of accounts and did not submit his signature for comparison, he is - How about from A &B?
precluded from setting up the defense of forgery o YES. They warrant that the instrument is genuine and in all
respects what it purports to be.
- If C is a HDC, can he now collect from M?
)
o YES. It is conclusively presumed that there is delivery. - Illegality
- Section 16 is a PERSONAL DEFENSE. o GR: personal defense
- Examine the bar Q&A in the book. § E: If the statute declares the instrument void for any
7. What is material alteration? purpose = real defense
- Any alteration which changes the: 10. Minority
o Date - Real defense, personally invokable by minors
o Sum payable 11. Incapacity
o Time or place of payment - Real defense
o Number or relation of parties 12. CRISOLOGO VS CA
o Medium or currency of payment or - Section 29 does not apply to corporations because the issue or indorsement
o Adds a place of payment where none is specified which alters the of a negotiable paper by a corporation without consideration and for
effect of the instrument in any respect accommodation of another is ULTRA VIRES à hence, the signatories thereof
- Effect of material alteration? shall be personally liable therefore, as well as the consequences arising from
o Avoids the instrument their acts in connection therewith
§ E: except as against the party who: o E: if the president or officer is authorized to do such acts
• Made, authorized or assented to the - In this case, the VP and P of the corporation are personally liable for their own
alteration and acts
• Subsequent indorsers - Can you run against the drawee bank?
o HDC can enforce it according to its original tenor o GR: Drawee bank is not liable at all
- Example: M à P => A à B à C § E: Unless it certifies or accepts it
o Instrument is for 1k. But A ALTERED the amount to 5k with the - Is the president liable?
consent of P. C is not a HDC. o Yes. He is the signatory.
o Can C collect the 1k from M? 13. Prescription
§ No. He cannot collect from M. The material alteration - Real defense
avoided the instrument. - Prescription is a real defense that even a HDC can raise.
o Can C collect from P? - 10 years from the time the cause of action accrued.
§ YES. Because P assented or authorized the alteration - In the case of checks, the action of the depositor against the drawee bank
o What if C is a HDC, can he collect from M? commences to run from the time he is given notice of payment.
§ YES. But only as to the original tenor of the instrument - Why 10 years?
which is 1k, not 5k. o Under the NCC, an action to enforce a written contract prescribes
- Is alteration of a serial number actionable or a material alteration? in 10 years
o NO. It is not included in the enumeration of 124/125. It will not 14. PHILIPPINE COMMERCIAL INTERNATIONAL BANK VS CA
change anything. It is merely for identification purposes. (PNB vs - As to prescription, it should start from the NOTICE OF PAYMENT and 10
CA) years thereafter. In the case at bar, it has not yet prescribed since it is only
th
8. Fraud on its 10 year.
- Is Fraud a personal defense? - In the case of checks, the action of the depositor against the drawee bank
o Fraud means there is an element of deceit commences to run from the time he is given notice of payment.
o Fraud may be a personal defense or real defense depending on: - Sir Lesson: You must always monitor your banking transactions especially if
§ If fraud in factum/ fraud in esse contractus à REAL you issue a check. If you are the injured party, you must vindicate your claim
DEFENSE within a reasonable time.
• Ex. Blind person who is made to sign a piece 15. MYRO PAPA VS AU VALENCIA
of paper he believes to be a credit application - After more than ten (10) years from the payment in part by cash and in part
although it is really a PN by check, the presumption is that the check had been encashed. In this case,
§ If fraud in inducement à PERSONAL DEFENSE granting that check was never encashed, Papa’s failure to do so for more
• Ex. Where a person is induced to sign a note than ten (10) years undoubtedly resulted in the impairment of the check
for the price of a worthless stock which was through his unreasonable and unexplained delay. The Court held that
fraudulently represented by the payee as to acceptance of a check implies an undertaking of due diligence in
its value presenting it for payment, and if he from whom it is received sustains loss
9. Failure, absence or illicit consideration by want of such diligence, it will be held to operate as actual payment of the
- Personal defense debt or obligation for which it is given.
)
- If you have a check and you do not encash it for an unreasonable length of certificate is equivalent to acceptance and if procured by the holder, the
time, this is equivalent to payment. Hence, the sale was upheld. drawer and all indorsers are discharged from liability. (Sec 188 and 189)
16. What is reasonable time? o E: However, exceptionally, a payee may sue the drawee based
- NI in general – case to case basis on Art 19 of the NCC if there was dishonor despite the
- Check – 6 months or 180d, otherwise it will become STALE instructions of the drawer to pay. (this case
17. Liabilities of the MAKER, DRAWER, ACCEPTOR 19. Accommodation party
- Maker – primary - Who is an accommodation party?
o Why is the maker primarily liable? o An accommodation party is one who has signed the instrument as
§ Because he engages to pay according to the tenor of maker, drawer, acceptor or indorser, without receiving value
the instrument and admits the existence of the payee therefor and for the purpose of lending his name to some other
and his capacity to indorse person
o What does primary liability mean? - What is his liability?
§ His liability is unconditional and absolute o Liable to HFV regardless of w/n he received value
- Drawer – secondarily liable - What is the nature of their relationship?
o Why is he secondarily liable? o SURETY.
§ He only engages that the instrument will be o Principal – accommodated party
accepted/paid by the party primarily liable o Surety – Accommodation party
§ Meaning he does not become liable right away. The = jointly and severally liable
following conditions must be present before he can 20. When can a secondarily liable person be held liable?
become liable: - It depends.
1. Presentment o If PN à needs:
2. Dishonor 1. Presentment for payment within reasonable time
3. Notice of dishonor 2. Dishonor
- Acceptor – primary 3. Notice of dishonor
o Why is he primarily liable? o If BOE à needs:
§ He is a drawee who certifies and accepts the check 1. Presentment for acceptance or negotiation within a
o Q: What is the significance that of the acceptor’s reasonable time
admission/warranty of 2. If dishonor by non-acceptance
§ Signature of drawer 1. Notice of dishonor should be given the indorsers and
§ Capacity of drawer drawers
§ Existence of drawer? 2. If the bill is a foreign bill à there must be protest for
o A: dishonor by non-acceptance
§ He cannot set up the defense that the signature is 21. Primarily liable
forged - Presentment is NOT required
§ He cannot say that the drawer is fictitious - Formalities NOT required
§ He cannot say that there are no funds - Reason: Upon making, he warrants genuineness etc…
§ HE IS ESTOPPED 22. Protest
18. HSBC VS CATALAN - Who makes?
- If you are a holder of a bounced check, can you sue the drawee bank? o The notary public
o GR: Drawee bank is not liable at all - Basically it is a notice of dishonor by a notary public in foreign bill
§ E: Until it accepts and certifies the check 23. Presentment
- In this case, the court allowed the drawee bank to be sued based on abuse - When necessary?
of right under Art 19 of the NCC. There was already an order to pay by the o To charge persons secondarily liable
drawer but the drawee bank still refused to pay. § E: (see page 60)
- GR: The payee or holder of a check has no cause of action against the - Requisites for presentment (Page 60)
drawee bank if the latter dishonors the check. The bank is not liable to the
holder unless and until it accepts or certifies the check. The remedy of the
holder is against the drawer, provided notice of dishonor is given to him on
the basis of the transaction that gave rise to the issuance of the check. Once
the bank certifies the check, the bank become liable thereon because
)
FINALS o A financial lease is one where a financing company would, in
effect, initially purchase a mobile equipment and turn around to
lease it to a client who gets, in addition, an option to purchase the
MEETING #1 property at the expiry of the lease period.
March 13, 2017 - Sir: How can there be double recovery?
o The seller gets the property and at the same time, he also gets the
1. RECTO LAW unpaid rentals – this is the evil being prevented by law
- Sir: What do you mean by exact fulfillment? 3. Remedies alternative, not cumulative
o Specific performance - The exercise of one bar the exercise of another
o What case do you file? o E: Unless it was not fully exercised
§ Collection of sum of money - As to replevin:
o Can you recover deficiency if this is the remedy you choose? o Sir: Replevin as a PREPARATORY act does not bar the exercise
§ Yes. Not stated in the law that you cannot recover of another remedy
deficiency in this choice § E: if the after replevin, there is actual foreclosure of the
- How about in cancellation of sale? property
o When does it apply? 4. Effect of foreclosure on deficiency
§ When the buyer fails to pay 2 or more installments - X recover deficiency
o Can you the seller recover deficiency in this case since it is not - According to Dean Sundiang:
stated in the law that the seller cannot recover deficiency? o If there is a Rem over another property, the foreclosure thereof will
§ No. Because there is mutual restitution of the money paid not bar recovery of any deficiency because he is in effect availing
to the buyer and the property bought to the seller. of the remedy of exacting fulfillment of the obligation rather than
§ Hence, since there is mutual restitution, collection of foreclosure
deficiency is inconsistent with the nature of cancellation\ - According to Sir:
- How about in Foreclosure of the chattel mortgage? o Assuming the debtor bought a brand new car. To secure the loan,
o When does it apply? the debtor executed 3 mortgages – a chattel mortgage on the new
§ When the buyer fails to pay 2 or more installments car, chattel mortgage on an old car and real estate mortgage on his
o Can you recover deficiency? land. The debtor failed to pay. Hence, creditor initiated foreclosure
§ No. The law states that you cannot proceedings on the CM over the OLD CAR. Public auction. There
2. PCI LEASING VS GIRAFFE-X CREATIVE INC is deficiency.
- The law applies to contracts that to contracts that are in substance, sale of § Can the creditor recovery deficiency?
personal property in installments. Thus, it applies to “financial lease” or § Can he foreclose the mortgage on the brand new car
“financial leasing”, where a financing company, would in effect, initially after foreclosing the mortgage on the old car?
purchase a mobile equipment and turn around to lease it to a client who gets, § Can he foreclose the REM on the land?
in addition, an option to purchase the property at the expiry of the lease § Can he still claim for deficiency after all these?
period. The Recto Law applies where the supposed lessee will retain the thing o According to sir, if we follow what Dean Sundiang said in the book,
if he fully paid the obligation. the credit can do so. Because the law provides. “Foreclose the
- ART. 1484. In a contract of sale of personal property the price of which is chattel mortgage on the thing sold, if one has been constituted,
payable in installments, the vendor may exercise any of the following should the vendee's failure to pay cover two or more installments.
remedies: In this case, he shall have no further action against the purchaser
(1) Exact fulfillment of the obligation, should the vendee fail to pay; to recover any unpaid balance of the price. Any agreement to the
(2) Cancel the sale, should the vendee's failure to pay cover two or more contrary shall be void.”
installments; o But if take a look at the intent of the law, it would in effect be
(3) Foreclose the chattel mortgage on the thing sold, if one has been circumvention of the Recto law because such would amount to
constituted, should the vendee's failure to pay cover two or more installments. UNJUST ENRICHMENT which is the evil trying to be avoided by
In this case, he shall have no further action against the purchaser to recover the law
any unpaid balance of the price. Any agreement to the contrary shall be void. o What if the other party appealed and argued, “if the law is clear,
- ART. 1485. The preceding article shall be applied to contracts purporting to then we should follow the law.” What would be your counter-
be leases of personal property with option to buy, when the lessor has argument?
deprived the lessee of the possession or enjoyment of the thing. § Not answered.
- Sir: What is a financial lease? § FINALS QUESTION
)
5. Rationale behind Recto Law 18. PAL VS SPOUSES KURONGKING
- Not answered in class - STAY ORDER - The Commencement Order and consequently, the Stay
- I think: It was added in the civil code to prevent abuses in foreclosure of CM, Order shall be effective for the entire duration of the rehabilitation proceeding
such as when the mortgagee-creditors foreclosed the mortgaged property - SUSPENDED CLAIMS - The claim of passengers against a common carrier
bought them at a very low price (on purpose) then prosecuted the mortgagor- (airline) for missing luggage is a money claim or financial demand that the
debtors to recover the deficiencies. law requires to be suspended pending the rehabilitation proceedings
6. Financial rehabilitation and insolvency act of 2010 (RA 10142) and - Rationale of Suspension of Claims:
Concurrence and Preference of Credits (Art 2241-2244) o To enable the rehabilitation receiver to effectively exercise its/his
- Sir: Purpose of FRIA in your own words? powers free from or unburdened by any juidicial or EJ interference
o There are two purposes: REHABILITATION AND LIQUIDATION that might unduly hinder or prevent the “rescue” of the debtor
§ REHABILITATION company (time, resources, and effort will be used to litigate) and
• Shall refer to the restoration of the debtor to a o To enable to management committee or rehabilitation receiver to
condition of successful operation and substitute the defendant in any pending action against It before any
solvency, if it is shown that its continuance of court, tribunal or body
operations is economically feasible and its - Meaning of Claims
creditors can recovery by way of the present o Shall refer to all claims or demands of whatever nature of character
value of payments projected in the plan, more against the debtor or its property, whether for money or otherwise,
if the debtor continues as a going concern than liquidated or unliquidated, fixed or contingent, matured or
if it is immediately liquidated unmatured, disputed or undisputed
§ LIQUIDATION 19. RUBBERWORLD VS NLRC
• This is the proceeding where - SUSPENDED CLAIMS – the suspension also covers employees’ claims
o claims are filed and - Sir: What could be the danger that would arise if we do not cover labor
o the assets of the insolvent debtor claims?
are disposed and o The remaining assets might be dissipated and it might not be
o The proceeds are divided among sufficient to cover other creditors
the creditors
7. Key definitions
- Kinds of debtors
o Individual debtor
o Group of debtors
- Insolvent
- Ordinary course of business
- Kinds of creditors
o Secured
o Unsecured
8. Proceedings covered by FRIA and persons who will file and/or approve
9. Excluded debtors
- [BPI – G]
- Who governs them?
o Banks – Central Bank Act
o Pre-need companies – Pre-need Code
o Insurance Companies – insurance code
10. Grounds for rehab of sole proprietorship, partnership and corporation
11. Involuntary rehab
12. Rehabilitation Plan
13. Cram Down Rule
14. Stay Order
15. Suspended Claim
16. Meaning of Claim
17. Examples of Claims
)
nd
2 meeting § It is subject to the discretion of the court if the specialized
March 14, 2017 agency can render a determination of the claim quickly,
fairly and efficiently
§ It could be covered depending on the circumstances of
1. SPS SOBREJUANITE VS ASB DEV CORP each case
- SUSPENDED CLAIMS – cases for revocation of a contract of sale and - Sir: Does that mean that even if the seller of those stocks is involved
restitution of the price filed before the HLURB. Under the Interim Rules (AM in the stay order, they can still claim? Is that the concept there?
No. 00-8-10), the claim is suspended even if the case involves claim that is o Yes. As long as it is done in the ordinary course of business
not purely for money. - When you say broker and dealer, they are running after their commission?
- Sir: When should the suspension be made effective? o Is it only as to their pledged securities?
o § NOT ANSWERED
2. Sir: What’s the difference between a STAY ORDER and STANDSTILL? - Sir: What could be an illustration when the transaction goes thru a
clearing agency?
o For example, when you encash a check
7. Who will manage
3. Secured vs Unsecured claims - GR: The existing management and/board of the debtor shall continue
Secured Unsecured o E: The management can be replaced by the rehabilitation
Secured by a lien Not secured by a lien receiver or a management committee
Both are covered by stay order § Requirements: [DLWD-P-MFV]
• Sir: How can a business operation be
4. RCBC VS IAC paralyzed?
- Stay order covers all creditors, whether secured or unsecured o An example is when the employees
- The preferred status of secured credits over unsecured creditors relative to of the corporation goes on a
the mortgage liens is retained, but the enforcement of such preference is massive strike
suspended 8. Court action for petition for rehabilitation
- Sir: In this case, the stay order happened after the foreclosure, hence they 1. Due course
were no longer covered. Had it happened before, they would have been - Requirements: [IS]
covered (?) 2. Dismiss
5. METROBANK VS ASB HOLDINGS INC - Grounds: [N-S-F/M-M/F]
- SUSPENSION ORDER = X PREJUDICE SECURED CREDITOR à MERE 3. Convert
SUSPENSION OF ACTIONS ONLY - Grounds: [IN]
- The preferred status of secured credits over unsecured creditors relative to - Sir: What do you think is an indication that a business cannot be
the mortgage liens is retained, but the enforcement of such preference is rehabilitated and that it should be converted to liquidation proceedings
suspended already?
- The dacion en pago was merely a proposal, it was not mandatory or o Example: All the assets of the corporation are already gone
compulsory for them to have dacion en pago because of some FE
- There is no impairment of contract because the lien over the property is still o Not merely insolvent but close to bankruptcy also
there, it is merely suspended. o When you say bankrupt, you basically have no more assets
6. Exceptions to the stay or suspension order 9. Out of Court Rehabilitation
- Sir: What do you mean by commencement date - X necessarily court supervised
o Refers to the date on which the court issues the commencement - What are the minimum requirements: [D-S (67%)- U (75%) – T (85%)]
order, which shall be retroactive to the date of filing of the petition o All in all, it must be 85%, whether secured or unsecured
for voluntary or involuntary proceedings o Requirement is more strict, it required more than majority
- Sir: To what does specialized court or quasi-judicial agency refer? 10. Standstill period
o Ex. HLURB - Requirements: [A-NP-120d]
o Why is it in that case of Sps Sobrejuanite, the case was filed - When will the cram down rule take effect?
with the HLURB but it was deemed covered by the suspension o Upon publication of notice of the out-of-court rehabilitation plan
order? 11. Suspension of payments
- Applies only to individual debtor
- It does not apply to sole proprietorship/partnership/corp
)
- The debtor must be SOLVENT; he must have sufficient properties to pay his - Ex. If you are from Pasay, you file a petition for liquidation, it will be raffled to
obligation but he foresees the impossibility of meeting his debts when they Judge Wagan’s court
respectively fall due 22. Effects of Liquidation Order [D-TC-CSF]
Purpose: To suspend or delay the payment of debts 23. Rights of Secured Creditors
- Amount of indebtedness is not affected (not reduced/discharged) 24. Distribution of Assets – [TPF-E]
- Number of creditors if immaterial 25. CORDOVA VS REYES
12. Suspension of Payment vs Liquidation [SOWIL-CP] - SHARES OF STOCK COMMINGLED WITH OTHER ASSETS OF THE
13. Suspension of Payment vs Rehabilitation [W-SSJA] CORP = MONEY = GENERIC = X APPLY PREFERENCE OF CREDITS
- REMEMBER ACC TO SIR: When it comes to suspension of payment, it - DISTRIBUTION OF ASSETS – if there is excess after satisfying the claims
does not cover secured creditors while in rehabilitation, it covers both or liens under Art. 2244, all other common credits shall be satisfied PRO
secured and unsecured RATA (Art. 2251, NCC)
14. Suspension Order - Sir: Rules on payment of interest
- It suspends any pending execution against the individual debtor o There is 12%, there is 6%
- Properties held by secured creditors shall NOT be the subject of such o 12% is imposed when there is loan or forbearance of money
suspension order o 6% is imposed only when there is delay in the payment of money
- It shall lapse when 3 months shall have passed without the proposed o When do you reckon the computation of the interest: From the
agreement being accepted by the creditor or as soon as such agreement is date of final judgment
denied 26. Cross Border Insolvency
- GR: No creditor shall sue or institute proceedings to collect his claim from the
debtor from the time of the filing of the petition for suspension of payment and
for as long as proceedings remain pending
o E:
1. LMEF
2. Secured creditors
15. Prohibited Acts [SED-P]
16. Creditor’s Meeting
- Sir: What does double majority mean?
o This is necessary for the approval of proposed agreement with
creditors, to wit:
1. 2/3 of the creditors voting unite upon the same proposition;
and
2. The claims represented by said majority vote amount to at
least 3/5 of the total liabilities of the debtor mentioned in the
petition
- Sir: How big is 3/5? Is it bigger than ¼?
o 3/5 = 0.6
o ¼ = 0.25
17. Liquidation of Individual debtors
- Difference and similarities between VOLUNTARY and INVOLUNTARY
liquidation - [SP-BITAA]
o Sir: Why is it that in involuntary liquidation, insolvency should
be alleged?
§ Because it is the creditors who are filing the involuntary
liquidation
18. Involuntary Liquidation of Individual Debtor vs Involuntary Liquidation of
Business Organization – [CABI]
19. Liquidation Process
20. Liquidation Order [ILD-PL]
21. Sir: Which court has jurisdiction over liquidation or rehabilitation?
- Commercial Courts of the RTC has jurisdiction
)
3rd meeting
March 20, 2017 - Sir: What is a charter party?
o A charter party is a contract by which with the entire ship or some
principal part thereof is let by the owner to another person for a
specified period of time
1. Define common carrier - Sir: What is a charter by demise or bareboat?
- Art 1732 - "common carrier" as o The whole vessel is let to the charterer which transfers to him its
o any person, corporation, firm or association entire command and possession and consequent control over its
o engaged in the business of carrying or transporting passengers or navigation, including the master and crew who are pro hac vice of
goods or both, the vessel
o by land, water, or air, for compensation, o In this case, a common carrier becomes a private carrier
o offering their services to the public - Sir: What is a contract of affreightment?
2. Test to determine w/n common carrier of goods o Involves the use of shipping space leased by the owner in part or
1. He must be engaged in the business of carrying goods for others as a public as a whole, to carry goods for others
employment, and must hold himself out as ready to engage in the o 2 kinds
transportation of goods for person generally as a business and not as a § Time charter – leased for a fixed period of time
casual occupation; § Voyage – single voyage
2. He must undertake to carry goods of the kind to which his business is 5. CALTEX PHILS VS SULPICIO LINERS
confined; - CALTEX (VOYAGE CHARTERER) = X LIABLE FOR DAMAGES
3. He must undertake to carry by the method by which his business is - A charter party may transform a common carrier into a private carrier.
conducted and over his established roads; and However, it must be a bareboat or demise charter where the charterer mans
4. The transportation must be for hire. the vessel with his own people and becomes, in effect, the owner for the
3. FIRST PHILIPPINE INDUSTRIAL CORP VS CA voyage or service stipulated.
- PIPELINE OPERATORS = COMMON CARRIER - In this case, it was merely a voyage charter hence, the common carrier was
- Exempt from tax not converted into a private carrier. Therefore, the charterer is not liable for
- The SC ruled that pipeline operators are common carriers. The SC ruled that damages from the collision between the chartered vessel and a passenger
a corporation that is engaged in the business of transporting oil and other ship
petroleum products through its pipes can be considered a common carrier. - Sir: What do you understand by voyage charter?
The law does not distinguish as to the means of transportation, as long as it o Single voyage
is by and, water or air. It does not provide that the transportation of the o Carrier is leased for a particular voyage
passengers or goods should be by motor vehicle. - Sir: How do you distinguish it from a time charter?
- Test to determine w/n common carrier of goods o Leased for a fixed period of time
1. He must be engaged in the business of carrying goods for others as - Sir: Why will it not convert into a private carrier in case of voyage
a public employment, and must hold himself out as ready to engage charter?
in the transportation of goods for person generally as a business o Because it is only leased for a specific voyage and not the whole
and not as a casual occupation; complement or vessel is leased
2. He must undertake to carry goods of the kind to which his business - Sir: Why is it important for us to know whether a particular carrier is a
is confined; private carrier or a common carrier?
3. He must undertake to carry by the method by which his business is o Common carrier –
conducted and over his established roads; and § Required to exercise EO diligence
4. The transportation must be for hire. o Private Carrier
- Sir: How did the SC arrive at the conclusion that pipeline operators are § Required to exercise DGFOAF
common carriers? - Sir: What is higher? EO diligence or utmost diligence?
o The SC applied the test to determine w/n it is a common carrier of o According to student, EO diligence.
goods (as seen above) 6. VIRGINES CALVO VS UCPB GENERAL INSURANCE CO
o Cited the Petroleum Act of the PH which states that pipeline - CUSTOMS BROKER AND WAREHOUSEMAN = COMMON CARRIER
concessionaire as common carrier - FAILED TO PROVE EXTRAORDINARY DILIGENCE = LIABLE FOR
4. Charter party DAMAGES
- Contract of affreightment does not convert it the common carrier to a private - The petitioner, a customs broker and warehouseman, was declared to be a
carrier common carrier in one case although she does not indiscriminately hold her
)
services out to the public but offers the same to select parties with whom she and that it has exercised due diligence before, during and after the
may contract in the conduct of her business. occurrence of the typhoon to prevent/minimize the loss.
- In the said case, petitioner entered into a contract with SMC to transfer paper o The evidence show that, even before the towing bits of the barge
and kraft board from the Port Area in Manila to SMC’s warehouse in Ermita, broke, it had already previously sustained damage when it hit a
Manila. As a common carrier, she is bound to exercise extraordinary diligence sunken object while docked at the Engineering Island. It even
in transporting the goods and is presumed to be negligent when she failed to suffered a hole. Clearly, this could not be solely attributed to the
deliver the same. typhoon. Thus, when petitioner persisted to proceed with the
- Sir: Why was Calvo held to be a common carrier when its main business voyage, it recklessly exposed the cargo to further damage.
is actually customs broker and warehouseman? o Moreover, petitioner still headed to the consignee’s wharf despite
o Contract entered into with SMC promised to deliver the goods – knowledge of an incoming typhoon. During the time that the barge
hence by the language of the contract alone and by his action, she was heading towards the consignee’s wharf on September 5, 1990,
is precluded from saying that she is not a common carrier typhoon “Loleng” has already entered the Philippine area of
- Sir: How did the SC define EO diligence? responsibility
o The extraordinary diligence in the vigilance over the goods - Sir: What are the 2 requisites before a typhoon or FE can be invoked as
tendered for shipment requires the common carrier to know and to exempting circumstance?
follow the required precaution for avoiding damage to, or 1. It is the proximate and only cause of the loss
destruction of the goods entrusted to it for sale, carriage and 2. Common carrier must exercise due diligence to prevent or
delivery. It requires common carriers to render service with the minimize the loss before, during, and after the occurrence of
greatest skill and foresight and to use all reasonable means to the flood, storm or other natural disaster
ascertain the nature and characteristic of goods tendered for - Sir: In this case, they failed to prove that they exercised EO diligence. The
shipment, and to exercise due care in the handling and stowage, contract and damage was there. The burden to prove was shifted to the
including such methods as their nature requires. common carrier, but they were not able to prove EO diligence.
7. Asia Lighterage and Shipping Inc vs CA 8. Aside from requirement as to EO diligence, what are the other important
- Asia Lighterage = Common Carrier matter to determine w/n the carrier can be considered a common carrier?
- Typhoon
- X Exercise EO diligence = liable for damages Common carrier Private Carrier
- The same conclusion was reached in another case involving a company that Holds himself out in common, that is, Agrees in some special case with
also transports goods through barges. The petitioner argued that it is a private to all persons who choose to employ some private individual to carry for hire
carrier allegedly because it has no fixed and publicly known route, maintains him, ready to carry for hire
no terminals and issues no tickets. It points out that it is not obligated to carry Bound to carry for all who offer such X bound to carry for any reason
indiscriminately for any person. goods as it is accustomed to carry - E: Unless it enters into a
- The SC rejected the argument of the petitioner pointing out that the principal and tender reasonable compensation special agreement to do so
business of the petitioner is that of lighterage and drayage and it offers its for carrying them
barges to the public for carrying or transporting by water for compensation. Subject to regulation as it is a public X
Petitioner was considered a common carrier whether its carrying of goods is service
done on an irregular basis rather than a scheduled manner and with a limited Bound to exercise EO diligence DGFOAF
clientele. A common carrier need not have a fixed and publicly known route Cannot stipulate that it is exempt from May validly enter into such stipulation
nor does it have to maintain terminals or issue tickets liability for the negligence of its
- Fortuitous event to be a valid defense, must be established to be the agents or employees. Such
proximate cause of the loss. stipulation is void as it is against
- Sir: One of the defenses here is that there was a typhoon that caused public policy
the damage of the goods. So how did the SC resolve that argument?
o Fortuitous event to be a valid defense, must be established to be 9. Sir: What is the presumption that is given to us by law when there is loss,
the proximate cause of the loss. destruction or deterioration of goods or someone is injured or died in case
o In the case at bar, the barge completely sank after its towing bits of common carrier?
broke, resulting in the total loss of its cargo. Petitioner claims that - They are presumed to be AT FAULT OR NEGLIGENT
this was caused by a typhoon, hence, it should not be held liable - Sir: What is the significance of that presumption?
for the loss of the cargo. However, petitioner failed to prove that the o The victim does not have to prove negligence on the part of the
typhoon is the proximate and only cause of the loss of the goods, carrier
)
All the victim has to prove is the contract of carriage and
o 13. Define again common carrier
damage - Common carriers are persons, corporations, firms or associations engaged
o Unlike when we took up torts and damages, we need to prove in the business of carrying or transporting passengers or goods or both, by
whose negligence is the PROXIMATE CAUSE of the loss à in land, water, or air for compensation, offering their services to the public.
case of common carriers, we do not have to prove negligence 14. Sir Hypo: Assuming you are a call center agent and you own a 10-seater van.
anymore You would use your van going to work. Every night, when you go back home,
o The burden is shifted to the common carrier that it exercised EO you would put a sign in front, “Baclaran” and you would invite passengers
diligence to ride your van. You would also ask for P30 to ride your van. Can you be
10. What are the exempting circumstances? considered a common carrier?
- Common carriers are responsible for loss, destruction or deterioration of - YES.
goods, unless it is due to any of the following causes: - Art. 1732. Common carriers are persons, corporations, firms or associations
1. Flood, storm, earthquake, lighting or other natural disaster or calamity engaged in the business of carrying or transporting passengers or goods or
2. Acts of the public enemy in war, whether international or civil both, by land, water, or air for compensation, offering their services to the
3. Act or omission of the shipper or owner of the goods public.
4. The character of the goods or defects in the packing or in the containers - Art 1732 makes no distinction between one who principal business activity is
5. Order or act of competent public authority carrying of persons or goods or both and one who does such carrying only as
- Sir: If these are present, the presumption will not attach. These are basically an ancillary activity
the defenses of the common carrier. - Does not make any distinction between a person or enterprise offering
11. Sir: Again, what are the 2 requisites before a typhoon or FE can be invoked transportation service on a regular basis or scheduled basis and one offering
as exempting circumstance? such service on an occasional, episodic or unscheduled basis
1. It is the proximate and only cause of the loss 15. Sir: How about school buses? Are they considered common carriers?
o What does this mean? - Are they bound to carry the public? Can they refuse to admit people as
§ There should be no human intervention at all passengers? As long as there is space, are they bound to carry anybody who
2. Common carrier must exercise due diligence to prevent or minimize the loss would want to obtain your services?
before, during, and after the occurrence of the flood, storm or other natural - They could choose which students they will carry. You have to enter into a
disaster contract with the school bus operator. If the school bus operator does not
12. SPOUSES CRUZ VS SUN HOLIDAYS agree, you cannot be considered as one of those so-called passengers.
- FERRY BOAT SERVICES OF RESORT = COMMON CARRIER - FINAL ANSWER OF SCHOOL ON RULE ON SCHOOL BUSES
- TYPHOON - PARAS, AGBAYANI AND OTHER OLD AUTHORS – School
- CAPSIZED BOAT buses are not common carriers because they only cater to
- The operator of a beach resort that accepts clients by virtue of tour-package students who
contracts that included transportation to and from the Resort and the point of - However, with the advent of new jurisprudence, the SC made
departure in Batangas is considered a common carrier. a decision in 2012 that school bus operators are considered
- Its ferry services are so intertwined with its main business as to be properly common carriers. Especially so becaue they are carrying
considered ancillary thereto. minors. With more reason that they should execise EO
- The constancy of respondent’s ferry services in its resort operations is diligence. (Spouses Perena vs Spouses Zarata, GR 197157,
underscored by its having its own boat. The tour packages it offers, which August 29, 2012).
include the ferry services, may be availed of by anyone who can afford to pay 16. PLANTERS PRODUCTS, INC. V. CA, WET. AL.
the same. These services are thus available to the public - UREA TO BE SHIPPED à TIME CHARTER-PARTY WAS ENTERED à
- Sir: In this case, the SC also gave the liabilities for death caused by SHORTAGE AND CONTAMINATION OF UREA à STILL A PUBLIC
negligence of a common carrier. What are those liabilities? CARRIER BASTA CHARTER IS LIMITED TO THE VESSEL
o Liability for death – fixed at 50k - Common carrier is defined under Art. 1732 of the Civil Code. Its definition
o Loss of income – compute loss of income vis-à-vis the life extends to carriers either by land, air, or water which hold themselves out as
expectancy of the victim (in this case, it was 8M) ready to engage in carrying goods or transporting passengers or both for
o Moral damages compensation as public employment and not as casual occupation
- Sir: One of the defenses here is that they are not really engaged in - Vs. a Private or Special Carrier – lies in the character of the business, such
transportation. In fact, they are only offering their services to those who that if the undertaking is a single transaction, not a part of a general business
avail their tour packages. Their main business is beach resort. Why did or occupation, although involving the carriage of the goods for a fee, the
the SC consider them still as a common carrier? person or corporation offering such service is a private carrier
- It is an INTEGRAL PART of their business
)
- Charter by Demise or Bareboat – by the terms of which the whole vessel is - Yes. They are common carrier as of 2012 SC decision.
let to the charterer which transfers to him its entire command and possession 20. Sir: You said that if it is only a single transaction, it is not a common carrier.
and consequent control over its navigation, including the master and crew What does single transaction mean?
who are his servants - It is only done specific transaction or special case only
- The charterer is treated as owner pro hac vice of the vessel. In such case, a - What does special case mean?
common carrier becomes a private carrier - It is not part of their main business. Sometimes, it is merely a favor.
- Sir: Was the carrier held liable here?
- No. Because it exercised EO diligence
- The carrier has sufficiently overcome, by clear and convincing
proof, the prima facie presumption of negligence. The hatches
remained close and tightly sealed while the ship was in transit as
the weight of the steel covers made it impossible for a person to
open without the use of the ship's boom.
- On the other hand, no proof was adduced by the petitioner showing
that the carrier was remiss in the exercise of due diligence in order
to minimize the loss or damage to the goods it carried.
- Sir: How did they prove that they exercised EO diligence?
- They outlined how they handled and protected the goods from
contamination and damage as soon as it was received from the
shipper
- The damage only occurred after ….
17. Sir: EO diligence requires the ship to be SEAWORTHY. If the shipowner is
able to present a certificate that it is shipworthy, does it mean to say that it
has already proved EO diligence?
- NO.
- DELSAN TRANSPORT CASE
18. DELSAN TRANSPORT VS CA
- COTRACT OF AFFREIGHTMENT
- VESSEL SANK
- X SEAWORTHY
- Extra-ordinary diligence requires that the ship which will transport the goods
is seaworthy. Ensuring the seaworthiness of the vessel is the first step in
exercising the required vigilance. However, presentation of certificates of
seaworthiness is not sufficient to over the presumption of negligence.
- Reason: seaworthiness is determined from the time the ship is set
for voyage
19. Sir: Are pedicab drivers considered common carriers?
- What are the tests against to determine w/n common carrier of goods?
1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in
the transportation of goods for person generally as a business and not
as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is
confined;
3. He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4. The transportation must be for hire.
- Applying the test to pedicab drivers, would it comply with the test?
- Yes.
- Will this test apply to school bus drivers?
)
4th meeting inside the bus but the common carrier was NOT held liable for not
March 27, 2017 installing grills in the window. Reason: The throwing of stones
CANNOT BE FORESEEN OR IS NOT FORESEEABLE. Thus, the
FROM MIKEE E. J common carrier could not have prevented it. This is sort of saying
the SC invoked F.E. as an exempting circumstance. Although
1. Enumerate again the 5 exempting circumstances to exculpate a common F.E. is not one of the enumerated exempting circumstances, the
carrier. SC held that the common carrier is not liable.
1. Flood, storm, earthquake, lighting or other natural disaster or calamity - Sir: Can we not raise the presumption of fault of the carrier?
2. Acts of the public enemy in war, whether international or civil o Not answered
3. Act or omission of the shipper or owner of the goods - Sir: what are the requisites of F.E.?
4. The character of the goods or defects in the packing or in the containers o See p. 453
5. Order or act of competent public authority - DOCTRINES:
- Sir: is this enumeration exclusive or is there any other exempting 1. GR: Common carrier is presumed liable
circumstances? o E: Carrier raises any of the exempting circumstances provided that
o No. It is not a closed list. This is shown in the case of Belgian if it discovers that damage is cause, it must prove that it did acts to
Chartering. prevent further damage
2. BELGIAN CHARTERING VS FIRST PHIL INSURANCE CO 2. The 5 exempting circumstances under Art. 1734 are NOT EXCLUSIVE.
- 242 METAL COILS à BOL: CONTAINER IS RUSTY & DENTED à UPON It is not a closed list.
ARRIVAL, GOODS WERE FOUND WET AND DAMAGED 3. Sir: If carrier is solidarily liable for acts of company, and the company uses the
- Defense of carrier: one of the exempting circ. = #4. The character of the defense of DUE DILIGENCE in the selection and engagement of employee, is it
goods or defects in the packing or in the containers exculpated from liability?
- Proof of the defense: Bill of Lading. Specifically, "metal envelopes rust - NO! Basis of liability of carrier is NOT quasi-delict for which the said defense
stained and slightly dented" were noted on the Bill of Lading. This serves as above is available. The basis of liability of carrier is culpa contractual.
proof of the defense because there was a description of the condition of the 4. Sir How about hijacking, is it an exempting circumstances?
coils. The Bill of Lading says that at the time of receipt of the goods, there - NO! It is outside of the enumeration.
were defects in the coils; there that the metal envelopes were rusty and 5. FORTUNE EXPRESS VS CA
stained; and there was a slight dent. - SEIZURE OF A BUS BY ARMED MARANAOS WHO WANTED TO TAKE
- SC: notwithstanding such finding in the BOL, the Court still found the Carrier REVENGE AGAINST BUS COMPANY AND SHOT PASSENGERS = X F.E.
respondent company liable. It is NOT enough that there is a defect in the - BUS IS LIABLE FOR DEATH
packing to exculpate the carrier from liability - SC: The common carrier must be held liable. Fortune Express, although
- Sir: Is it not enough that there is a defect in the packing? Why, what else already being informed by the military that the Maranaos were planning to
must the carrier do to be free from liability? take revenge on the petitioner by burning some of its buses, the carrier did
o The carrier must have exerted due diligence to forestall or lessen not take necessary precautions (i.e. frisking and inspecting the passengers
the loss. The common carrier, knowing that the container was boarding the bus). Defense of F.E. was not tenable because not all of the
already rusty, dented, and stained they could have monitored the requisites were present
cargo. When they saw that water could enter they should have 6. EDGAR COKALIONG SHIPPING LINES V. UCPB GENERAL INSURANCE
done something so that water will not enter. Here, they did not do - CHRISTMAS DÉCOR & TOYS WERE SHIPPED
anything to lessen the damage after - ENGINE CAUGHT FIRE = X FORCE MAJEURE / FE
- The Court held that the petitioners failed to rebut the prima facie presumption - NOT FE because there was a crack in the engine and despite the continuous
of negligence check-ups by the crew, the crew failed to fix the crack. The crew failed to
- Sir: If the carrier cannot find defense in the exempting circumstance iit should exercise utmost diligence.
rebut the presumption of negligence by proving that it exerted extraordinary - DECLARED VALUE is the basis of the obligation of the carrier. Reason: it is
diligence for the protection of the carrier from fraud by the shipper (Note: there was a
- Sir: So there can be no other circumstance? Is it a closed list? stipulation in the bill of lading that the liability of the carrier shall be limited to
o Jurisprudence provides for other exempting circumstances such the value declared by the shipper)
as: - Sir: Was there contributory negligence on the part of the owner of the
o EXTRAORDINARY DILIGENCE. This is a good defense aside goods or the shipper?
from the 5 o No
o FORTUITOUS EVENT. There is one case mentioned in the book
but was not assigned: PILAPIL CASE: someone threw stones
)
oAssuming that there was non-declaration of value by the shipper, number and character of the conveyances used in the activity, but
this is NOT contributory negligence. The effect of non-declaration whether the undertaking is a part of the activity engaged in by the
of value is not contributory negligence carrier that he has held out to the general public as his business or
o Assuming that there was failure to declare true value, this is BAD occupation. If the undertaking is a single transaction, not a part of
FAITH, not negligence the general business or occupation engaged in, as advertised and
- Cokialiong was held liable for the amount AS STATED IN BILL OF LADING held out to the general public, the individual or the entity rendering
- Sir: Is contributory negligence a defense of the carrier? such service is a private, not a common, carrier. The question must
o No. The carrier is presumed negligent. Besides, if it is present in a be determined by the character of the business actually carried on
case, it will not totally exculpate the liability of the carrier but its by the carrier, not by any secret intention or mental reservation it
liability will only be lessened or mitigated may entertain or assert when charged with the duties and
- Sir: What is a good example of contributory negligence of the shipper obligations that the law imposes
or owner of goods? (We are talking about contributory negligence that o Applying these considerations to the case before us, there is no
caused the loss, ha) question that the Pereñas as the operators of a school bus service
o NOT ANSWERED. Might get asked in the finals. were:
o Based on research: From the case of Tabacalera Insurance Co. 1. engaged in transporting passengers generally as a business,
Vs North Front Shipping Services - We find the consignee not just as a casual occupation;
Republic Flour Mills Corporation guilty of contributory negligence. 2. undertaking to carry passengers over established roads by
It was seasonably notified of the arrival of the barge but did not the method by which the business was conducted; and
immediately start the unloading operations. No explanation was 3. transporting students for a fee.
proffered by the consignee as to why there was a delay of six (6) o Despite catering to a limited clientèle, the Pereñas operated as a
days. Had the unloading been commenced immediately the loss common carrier because they held themselves out as a ready
could have been completely avoided or at least minimized. As transportation indiscriminately to the students of a particular
testified to by the chemist who analyzed the corn samples, the mold school living within or near where they operated the service and
growth was only at its incipient stage and could still be arrested by for a fee.
drying. The corn grains were not yet toxic or unfit for consumption. o Hence, it is required to exercise EXTRAORDINARY DILIGENCE
For its contributory negligence, Republic Flour Mills Corporation - Agbayani – School bus is a private carrier primarily because he only caters
should share at least 40% of the loss to some specific or privileged individuals, and his operation is neither open to
o Must prove that there was NEGLIGENCE and such negligence the indefinite public nor for public use, the exact nature of the operation of a
must be the PROXIMATE CAUSE of the loss school us has not been finally settled. This is the occasion lay the matter to
- Sir: delivery of goods that are damaged without informing carrier is bad faith, rest.
not contributory negligence - FINAL ANSWER SIR ON RULE ON SCHOOL BUSES
- Sir: defect in packing is an exempting circumstance, not contributory o PARAS, AGBAYANI AND OTHER OLD AUTHORS – School
negligence buses are not common carriers because they only cater to
7. Sir: do you think a school bus is a common carrier? Are they bound to carry a students who
specific class of persons? Ex: San Beda bus. If you flag it down, will it give you a o However, with the advent of new jurisprudence, the SC made
ride? a decision in 2012 that school bus operators are considered
- If you read PARAS, school buses are only for a privileged class. You need to common carriers. Especially so becaue they are carrying
enter a special contract in order to avail of the services of the Bus. minors. With more reason that they should execise EO
- I might ask that in the finals diligence. (Spouses Perena vs Spouses Zarata, GR 197157,
- READ PARAS! READ AGBAYANI! Look for the answer. August 29, 2012).
- Spouses Teodoro vs Spouses Nicolas and PNR (Justice 8. DURATION OF EXERCISE OF EXTRAORDINARY DILIGENCE
Bersamin;2012) – The operator of a school bus is a common carrier in the - With respect to GOODS:
eyes of the law. He is presumed to be negligent when death occurs to a o Start: from time the goods are UNCONDITIONALLY (don’t forget
passenger. His liability may include indemnity for loss of earning capacity unconditionally!) placed in possession and received by the carrier
even if the deceased passenger may only be an unemployed high school for transportation
student at the time of the accident. o End: until the goods are delivered, actually or constructively, by the
o Don Bosco student passenger of the school bus died due to carrier to the person who has the right to receive them
collision of the school bus with PNR train. - With respect to PASSENGERS:
o As all the foregoing indicate, the true test for a common carrier is
not the quantity or extent of the business actually transacted, or the
)
oStart: the moment the person who purchases the ticket from the o The bus has signs: no smoking. Or the employer even ordered the
carrier presents himself at the proper place and in a proper manner driver not to smoke. The driver still smoked. The bus caught fire
to be transported and was burned. Carrier is still liable
o End: until the passenger has, after reaching his destination, safely - Sir: It appears that the rule that the carrier is liable is ABSOLUTE. Even if
alighted from the carrier’s conveyance or has had a reasonable they act beyond direct authority of the carrier, as long as he is an EMPLOYEE,
opportunity to leave the carrier’s premises even DOAGFOAF is not a defense on the part of the carrier. It would appear
- Sir: If you buy a ticket ONLINE in CebuPac. Will the contract start? that the rule absolute.
o No. The passenger must present himself at the proper place and in - Sir: What is the only limitation?
a proper manner to be transported. He should have been at the o HE MUST BE ACTING IN THE LINE OF DUTY. If he is off-duty,
airport boarding area, with intention to use its facilities. the common carrier is NOT LIABLE.
- Sir: How about a jeepney? When you waive your hand to flag the jeep o Ex: The EE already checked out and the incident happened outside
and the jeep stops, and you touch or hold the bar at the back of the jeep office hours. Carrier not liable.
and you are about to go in, are you a passenger? - Sir: Could there be a possibility that EE is OFF-DUTY but the common
o (Student: Yes. A common carrier must stop for a reasonable time carrier is still liable for the willful acts of the EE? How?
to allow passengers to enter) o Yes. In cases where the injury is caused by a STRANGER or CO-
- Sir: So does it mean that the moment you touch the bar and say “AY! PASSENGER
AYOKO NA PALA! MAS MAGANDA YUNG ISANG JEEP.” Tapos, - Sir: What is the condition for the carrier to be liable?
sasabihin ng driver, “AY! TOUCH MOVE KA NA! Perfected na yung o Common carrier could have avoided such act
contract! Magbayad ka na!”, the contract is perfected already? So when - Sir: Illustration?
is the contract perfected, once jeep stops, or once the passenger holds o Fortune Express case. Carrier could have prevented the incident
the bar? by frisking and inspecting the bags/baggage because there was
o STOPPING = the jeep or bus merely makes an offer NOT AN already a warning from the military. It did not. Thus, it is liable
ACCEPTANCE 11. Sir: Can we stipulate the diligence required to reduce the liability?
o Therefore, until and unless there is a manifestation of acceptance - Yes, provided that the following REQUISITES are present:
by the passenger, say by RIDING ON ITS PLATFORM and 1. The stipulation must be in writing and signed by both parties
SITTING DOWN, the contract is not yet perfected. Before that, the 2. The stipulation must be supported by a valuable consideration other
passenger can change his mind because bus is merely making than the service rendered by the common carrier
offer 3. That the stipulation must be just and reasonable and not contrary to law
- Sir: With respect to LRT, when is the contract perfected? 12. Name at least 5 VALID Stipulations relative to liability of common carriers (p.
o When the passenger buys a ticket and steps on the platform 460)
9. LA MALLORCA CORPORATION V. CA - Sir: What if there is a discount on the fair?
- Mariano Beltran and his family rode the bus of La Mallorca. It arrived in o It will NOT justify the limitation of liability
Mexico Pampanga. They went down to shaded area but Mariano forgot - Sir: What if the fair is gratuitous?
his bayong. His daughter followed him. Mariano placed his foot on step o it could justify valid stipulation
board, but the bus started to move. Mariano immediately alighted. But 13. Sir: Assuming you are a taxi driver (Si Princess Bacay yung nagrerecite) and
the bus hit daughter, caused her death a crush of yours flagged you down. Of course you stopped. He wanted you to
- Defense of common carrier: It exercised extraordinary diligence and that carry him to tagaytay. You said to him that you are waiving the entire fair. Before
when the family went down, THE CONTRACT OF CARRIAGE WAS you went down, a stranger was able to injure him while inside the taxi cab. Do
ALREADY TERMINATED you think waiving of the fair could limit your liability because you waived the fair?
- SC: THE CONTRACT OF CARRIAGE WAS NOT YET TERMINATED. Can your liability be lessened? Oh, you are a Princess, right? He is your Prince.
Reason: the common carrier still had the obligation of exercising Did you watch Beauty and the Beast?
extraordinary diligence. The carrier should give reasonable opportunity and a - NO! There should be an agreement first with a stipulation limiting liability. In
reasonable delay for the passengers to alight and collect their baggage. By the example, there was no previously contracted agreement between the
accelerating without the conductor’s signal, and also by not turning off the passenger and the carrier. In the absence of stipulation, it will NOT limit the
engine when it stopped, the driver ran over the child who was still considered carrier’s liability. (Poor Princess L)
a passenger at the time. 14. Name at least 5 INVALID STIPULATIONS (p. 461)
10. Sir: Is the carrier liable for the willful acts of the EEs? - Sir: sige na nga 3 nalang.
- YES! Willful acts and acts beyond the authority of the employee, as well as 15. Sir: What do you understand by COGSA?
gross negligence on the part of the employee, will make the carrier liable - Carriage of Goods by Sea Act. It is an international law on transportation on
- Sir: how will you illustrate the employee acted beyond his authority? the sea.
)
- Primary law: Civil Code. - Sir: Another issue is that the driver is the employee of the seller. The
- Suppletory law: COGSA seller contends that the driver is not his own employee. What did the SC
- Sir: Give an illustration wherein COGSA will apply suppletorily. say?
o When goods are shipped from another country to a PH port. o SC: by law, the registered owner should be deemed the employer
Shipper provides liability in BOL for $400. COGSA provides: of the driver
liability is $500 dollars per package unless there is a higher value. o Still, the seller’s name appeared in the registration. He is deemed
The shipper did not declare a higher value ($400 lang eh). the employer of the driver. Thus, he is liable.
o There is no stipulation limiting the liability in BOL, though there is 19. LOSS OF PASSENGER’S BAGGAGE
an amount in BOL. - Sir: For example. You are the passenger in airline company. You have
hand-carry and check in luggage. They were both lost. Will the carrier
- Sir: So which will prevail, amount in BOL or COGSA? be liable for both?
o We apply COGSA. o Yes
o Amount of BOL will apply only if there is a STIPULATION limiting - Sir: What if you did NOT declare your hand-carry luggage?
liability. Otherwise, COGSA applies o The airline will not be held liable.
16. Meaning of PACKAGE - RULE:
- Belgian case again. o If the baggage is in the custody of carrier à apply the Civil Code.
- Sir: There were 4 coils. Should the award be for $500 only because there The carrier is liable.
was only one container? o If the baggage is in the custody of passenger à treated as a
o NO. $500 individually per coil. Thus, a total of $2000 NECESSARY DEPOSIT. The carrier will only be liable if:
o Package is not per container but PER UNIT § The common carrier is INFORMED or given NOTICE;
17. REGISTERED OWNER RULE (ROR) and
- Sir: what if the vehicle is already sold? § The passenger must take the necessary precautions
o Person who appears to be owner in the registration is liable given by the common carrier
- Sir: Although the registered owner had nothing to do with injury or loss? - Sir: What if the baggage in passenger’s possession is taken by a thief?
o Yes o It depends. If the thief used grave or irresistible force, threat,
18. EQUITABLE LEASING CORPORATION V. LUCITA SUYON, ET. AL. violence, or intimidation à Carrier is not liable
- TRACTOR RAMMED TO A HOUSE-CUM-STORE à PEOPLE WERE o (Student: if the baggage was stolen thru theft, carrier not liable. If
PINNED DEAD stolen thru robbery, liable. Theft is forseeable. Robbery is not
- REGISTERED OWNER IS LIABLE foreseeable)
- The rule in this jurisdiction is that the person who is the registered owner of a - Sir: How is theft foreseeable? For instance, a thief pickpocketed you. Is
vehicle is liable for any damages cause by the negligent operation of the that foreseeable?
vehicle although the same was already sold or conveyed to another person o NOT ANSWERED
at the time of the accident. 20. RULE ON SUCCESSIVE CARRIER
- The registered owner is liable to the injured party subject to his right of - Sir: what is the rule with respect to Maritime law? (See p. 466)
recourse against the transferee or the buyer - Sir: what is the rule with respect Air transportation where there are
- Sir: what lesson do we learn from here? connecting flights (2 or more airlines)?
o If you are the seller, you must see to it that the transfer is registered o The one who issues the ticket
in the name of the buyer. Sale should be properly registered always 21. ARRASTRE OPERATOR
- Sir: Don’t you think that the ROR is unfair? Is that not unfair, you make - Sir: What’s the relationship between the arrastre and a consignee?
the registered owner - a person who has nothing to do at all with the o DEPOSITOR AND WAREHOUSEMAN
incident - liable? Would that not deprive him of his right to due process? - Sir: What is the role of an arrastre operator in the transportation of
I.e. the buyer of a car killed a person thru reckless imprudence and the goods
seller is held liable just because he is the registered owner o When the goods arrive in the port of goods, unloader of goods is
o No. Anyway, the seller can ask for reimbursement from buyer called arrastre.
rd
o The ROR is intended to protect innocent 3 persons who rely on - Sir: What kind of diligence should the arrastre exercise?
the registration. o NOT ANSWERED. This could be asked in finals
o It is the responsibility of seller to properly register the sale. Research: Extraordinary diligence. An arrastre operator should
Otherwise he must face consequences observe the same degree of diligence as the required of a common
carrier and a warehouse man. (Asian Terminals Inc vs Allied
Guarantee Insurance Co. Inc)
)
In the performance of its obligations, an arrastre operator should
o
observe the same degree of diligence as that required of a common
carrier and a warehouseman as enunciated under Article 1733 of
the Civil Code and Section 3(8) of the Warehouse Receipts Law,
respectively. Being the custodian of the goods discharged from a
vessel, an arrastre operator's duty is to take good care of the goods
and to turn them over to the party entitled to their possession
(Summa Insurance Corp vs CA).
- Sir: Is arrastre a common carrier?
o Arrastre should exercise the same diligence of common carrier
- Sir: How about a warehouseman? Does it have to exercise extraordinary
diligence
o EO diligence
o The relationship between the consignee and the arrastre operator
is akin to that existing between the consignee and/or the owner of
the shipped goods and the common carrier, or that between a
depositor and a warehouseman. Hence, in the performance of its
obligations, an arrastre operator should observe the same degree
of diligence as that required of a common carrier and a
warehouseman. Being the custodian of the goods discharged from
a vessel, an arrastre operator’s duty is to take good care of the
goods and to turn them over to the party entitled to their
possession. (Asian Terminals vs First Lepanto-Taisho Insurance
Corp)
21. Sir: Is there any diligence higher than extraordinary diligence? Or is it
highest?
- Extraordinary diligence is not the highest form of diligence. UTMOST
DILIGENCE is higher.
- Sir: Why?
o Based on Dugs’ Palabrica Notes: MEANING OF
EXTRAORDINARY DILEGENCE
§ ON CARRIAGE OF GOODS – The EOD in the vigilance
over the goods tendered for shipment requires the
common carrier to know and to follow the required
precaution for avoiding damage to or destruction of the
goods entrusted to it for sale, carriage and delivery. It
requires the common carrier to render service with the
greatest skill and foresight and to use all reasonable
means to ascertain the nature and characteristics of the
goods tendered for shipment and to exercise due care in
the handling and stowage, including such methods as
their nature requires
th
§ IN CARRIAGE OF PASSENGERS – A CC is bound to 5 meeting
carry passengers safely as far as human care and March 28, 2017
foresight can provide, using the utmost diligence of a
very cautious person with due regard for all FROM MIKEE E. J
circumstances
1. REGISTERED OWNER RULE
2. DUAVIT VS. CA
)
- JEEP WAS BUMPED AT THE BACK BY ANOTHER JEEP WHICH WAS - Sir: Why would a shipowner abandon his ship?
STOLEN o If he abandons, he will be exempt
- DUAVIT, REGISTERED OWNER, IS NOT LIABLE o In a nutshell, LLR = NO VESSEL, NO LIABILITY
- Defense of Duavit: the driver is not his employee. The driver stole the - Sir: What is the effect of abandonment of the vessel of the shipowner?
jeepney. He was not authorized o The shipowner or ship agent may exempt themselves from liability
- SC: An owner of a vehicle cannot be held liable for an accident involving the by abandoning the vessel with all her equipment and the freight it
said vehicle if the same was driven without his consent or knowledge and by may have earned during the voyage.
a person not employed by him. o If there is insurance over the vessel, abandonment covers the
- DOCTRINE: the ROR will not apply to stolen or carnapped vehicle. insurance proceeds while the vessel itself be abandoned in favor
- Stolen vehicles. The registered owner is not liable if the vehicle was taken of the insurer
from his garage without his knowledge and consent - Sir: Who may invoke LLR?
- To hold the registered owner liable would be absurd as it would be holding o Only the ship owner. Not charterer.
liable the owner of a stolen vehicle for an accident caused by the person who 8. DE LA TORRE V. CA
stole such vehicle - DE LA TORRE CHARTERED THE VESSEL AND SUB-CHARTERED
3. KABIT SYSTEM REPEATEDLY TO OTHER PARTIES
- IS THIS ALLOWED? SOMEONE USED THE LICENSE OF ANOTHER? - SHIP GOT STUCK ON THE SHORE SHORE. PARTIES ARE RUNNING
o NO AFTER DE LA TORRE
- ASSUMING SOMEONE GOT HURT BECAUSE OF THE OPERATION, - DE LA TORRE (CHARTERER) RAISED LLR
WHO IS LIABLE? - SC: Only shipowner can invoke the LLR, not the charterer
o REGISTERED OWNER - Sir: What could be the rationale or purpose of the law in granting such
4. MARITIME LAW privilege to the shipowner?
5. Definition of VESSEL under Maritime Law o To encourage persons to invest in maritime industry especially in
- Sir: Assuming Noah is alive today, is his arc considered a vessel within the purchase of these vessel since it will benefit our maritime
the definition of Maritime Law? industry
o Not necessarily o Otherwise, persons will be discouraged to invest
o The vessel must be used or capable of being used as a means of - Sir: How are claims under LLR settled?
water transport for the carriage of passengers or cargo or both o Collated first before claims settlement
- Sir: Does it need to be registered with the MARINA to be considered a - Sir: What does that mean? What is the implication of that? For example
vessel? the ship sank. Shipowner is at fault. The passengers and cargo owners
o No. Vessels, any interest thereto as well as conveyances or all claim
transfer or mortgages thereof are registered with the MARINA o Before making settlement, must collate all claim
o Any unregistered transfer shall not affect third persons but is o NO ONE CAN INVOKE PREFERENCE OF PAYMENT
considered binding on the parties o Even if there is a court decision in favor of one claimaint, it shall be
6. LIMITED LIABILITY RULE (LLR) SUSPENDED
- Liability of shipowner is limited to vessel, earned freightage, and proceeds of o Equally or Pro Rata
the insurance, if any 9. PROTEST
- Sir: What is the meaning of freightage? - Sir: When is protest required?
o Transportation fees of vessel conveying passengers or cargo 1. Arrival under stress
- When is the limited liability rule applicable? 2. Shipwreck
1. Civil liability of indemnities arising out of the conduct of the conduct in 3. Where the vessel has gone through a hurricane or the captain believes
the care of the goods that the cargo has suffered damages or averages
2. Civil liability arising from collision 4. Maritime collisions
3. Unpaid wages of captain and the crew if the vessel and its cargo are - Sir: In Negotiable Instruments, there is also protest. If asked in the bar, what
totally lost by reason of capture of shipwreck is ‘protest’, first determine if Nego or Maritime Law. If you cannot determine,
- EXPNs: Cases when the Rule will not apply must make a distinction. Just like in my case, the first question was ‘What is
1. Injury or death of a passenger due to fault of shipowner, or concurring joint account?’. Sinagot nila, banking. Sinagot ko, Cuentas en participacion.
negligence of the shipowner and the captain So determine first the intention of the examiner
2. If the vessel is insured (to the extent of the insurance proceeds) and 10. COLLISION
3. In Workmen’s Compensation claims - Sir: Are the 2 vessels moving side-by-side? Parallel from each other
7. ABANDONMENT - 6 Rules on Collision (p. 471)
)
o RULE 1: Vessel at fault is liable for loss or damage o If the vessel is in a stationary place, it is not necessarily moored
rd
o RULE 2: Bear their own damages, but with respect to 3 persons, o Dictionary: make fast (a boat) by attaching it by cable or rope to the
they are solidarily liable shore or to an anchor
o RULE 3: If cause of loss or damages is FE, they will bear their own 11. DOCTRINE OF INSCRUTABLE FAULT
damages - Where fault is established but it cannot be determined which of the 2 vessels
rd rd
o RULE 4: If fault with a 3 vessel, 3 vessel is liable were at fault, both shall be deemed at fault
o RULE 5: A vessel which is properly anchored and moored may 12. DOCTRINE ERROR IN EXTREMIS
collide with those nearby by reason of storm or other cause of force - 3 Zones:
majeure à the vessel run into shall suffer its own damage or o First Zone: Time up to the moment when the risk of collision begins
expense o Second Zone: Time between moment when risk begins up to the
moment it becomes practical certainty
From Dugs’ Palabrica Notes o Third Zone:
RULES IN CASE OF COLLISION - Sir: Where is the error there?
rd
Who at fault Who is liable o In the 3 zone. If the vessel in the Right of Way changes direction
If one vessel if at fault Vessel at fault is liable for damages because of the fault of another vessel, and collision
Both are at fault • Vessel – Each will bear their own loss o Even if it is a wrong decision to change the direction, vessel in the
• Cargo – solidary liability (one solidary debtor can right of way
rd
pay for the whole obligation subject to o Must prove that it is in the 3 zone
reimbursement from the other solidary debtors) - From Dugs’ Palabrica Notes:
• Example: 1. Zone 1 – All the time up to the moment when the risk of collision
o Vessel A = 2M (damage) begins
o Vessel B = 2M 2. Zone 2 – Risk of collision begins until risk is certain
o Cargo: o One who committed error is liable
X – 3M (damage) 3. Zone 3 – Risk is certain until collision happens
rd
Y – 2M o If there is collision in the 3 zone, the one who caused the
W – 15M privileged vessel to cause the error or swerving is liable
Z – 20M (ERROR IN EXTREMIS)
If it cannot be DOCTRINE OF INSCRUTABLE FAULT 13. ARRIVAL UNDER STRESS
determined who is 1. Lack of provisions
• Vessel – Each will bear their own loss
liable 2. Well founded fear of seizure, privateers, or pirates
• Cargo – solidary liability
3. By reason of accident of the sea disabling it to continue its navigation
Proximate Cause and • X APPLY IN MARITIME LAW = both considered at 14. PERSONS INVOLVED
Contributory Cause fault 1. Ship owner and ship agent
• Vessel – Each will bear their own loss 2. Captain and master of the vessel
• Cargo – solidary liability 3. Officers and crew of the vessel
• Example: 4. Supercargoes
o A = Proximate cause - Sir: Who is a ship agent?
o B = Contributory cause o Function: provisioning and representing the vessel
Last Clear Chance • X APPLY IN MARITIME LAW = both considered at o Liability: solidarily liable with owner
fault - Sir: What are the triple roles of the Captains?
• Vessel – Each will bear their own loss 1. General agent
• Cargo – solidary liability 2. Commander or Technical Director
Force Majeure • Vessel – Each will bear their own loss 3. Government representative of the country under whose flag he
• Cargo – Each will bear their own loss navigates
If due to act of third • Third person will be liable o Sir: If you are ship captain of British vessel, you represent British
person gov’t. You represent the nationality of the vessel, even if you are
Filipino
- Sir: We know what anchored means. What does ‘moored mean? - Grounds for removal of Ship Captain
Important to know because if vessel is moored so that we know if the 1. Insubordination in serious matters
rules apply 2. Robbery or Theft
)
3.
Habitual drunkenness and o It is a Commercial document = Negotiable. It could be
4.
Damage caused to the vessel or to its cargo through malice transferred from one person to another
or manifest or proven negligence o It is a Receipt.
o Sir: Ship captain can drink. As long as it is not habitual - Sir: Do you consider a BOL a Negotiable Instrument?
- Sir: Who are supercargoes? o No. It does not comply with all the requisites of Sec. 1 of NIL
o They discharge admin functions as delegated by shipowner or ship (enumerate all requisites)
agent o Paragraph (b) Must contain an unconditional promise or order to
o A person who discharges administrative duties assigned to him by pay a sum certain in money à NOT Complied with
ship agent or shippers, keeping an account and record of o Sir: a BOL does not represent money. Nowhere can you find the
transaction as required in the accounting book of the captain word money there. It represents goods. Although t is not a N.I., but
- Sir: What do you mean by desertion? it could be a Negotiable Document
o When a seaman abandons or deserts a ship before the expiration - Kinds:
of his term of duty and without leave and without intention to return 1. “On Board” BOL: goods received on the specified vessel
15. GENERAL AVERAGE VS. PARTICULAR 2. “Received Shipment” BOL: goods are received but the vessel is not
General Average Particular Average specified
Purpose To save vessel or cargo or Damages or expenses
both from a known and real not inured to the benefit 18. LOANS ON BOTTOMRY AND RESPONDENTIA
risk of all persons interested Bottomry Respondentia
in the vessel and cargo As to who obtains Loan obtained by the ship Loan obtained by the
Requisites 1. There is a common owner or agent owner of cargo
danger – common W/N there is a security Guaranteed by vessel
means danger to the When payable Payable upon arrival of Payable upon safe arrival
vessel as well as to the vessel at destination of cargo
cargo
2. For common safety, - Difference between Ordinary loan vs. Loans on Bottomry and
part of the vessel or Respondentia
cargo must be - Sir: can the law on usury be applied?
sacrificed o No. BSP suspended, not repealed. So the parties can agree on
3. There is success after whatever stipulated interest, provided it is not unconscionable
4. Damages or expense 19. SHIP MORTGAGE DECREE (SMD)
should’ve been - Sir: Basically it talks about the shipowner mortgaging his vessel. Talks
incurred after taking about mortgaging your vessel. Obtaining a loan from any financial
legal steps institution or bank, and then mortgaging the vessel. What is so special
Give at least 3 about the SMD as to the Civil Code or special laws? What is the benefit
examples. granted to the shipowner?
o Mortgage is considered a preferred mortgage and has preferred
16. CHARTER PARTY status over other liens over the vessel
- Contract of Affreightment - Formal Requisites
o Time Charter o Only after compliance of these Formal Requisites will the mortgage
o Voyage Charter have a preferred status
- Charter by Demise or Bareboat o Sir: What must the affidavit contain?
- Sir: Which kind will convert common carrier to private carrier? o Sir: What is the waiver all about?
o Charter by Demise of Bareboat as held in Planters Products case - Arrest and Foreclosure
- Sir: Why will it convert? o Failure to pay obligation
o Ship owner has no control. The whole ship is let to the charterer. o Court issues arrest = take vessel for purposes of foreclosure over
He will be the one to assign crew and above all other claims over the vessel
17. BILL OF LADING (BOL) 20. SALVAGE
- Functions - Sir: When you say salvage, you rescue a vessel when the crew has no more
o It is a Contract. control or abandons it
- Sir: Who saves the vessel or cargo?
)
o The Salvor. Not salvagor. o 60% à Filipino owned
- Requirements for Compensation o Not longer than 50 years
- Factors considered in fixing the amount of compensation o Cannot give an entity franchise which is exclusive in character
o Sir: When you say zeal, what does it refer to? - Sir: Does it mean now that the foreign entity cannot involve himself in a
§ The conduct or attitude of the salvor public utility? In fact foreigners cannot be appointed as administrative
§ Zeal is not the sea creature officers
- Sir: Who is entitled to compensation? o Not necessary, as long as the 60-40 percent is complied with.
o Salvor o The participation of foreigners is limited to their shareholdings.
- Sir: Who must give? Is it wholly borne by ship owner or owner of the They could be a SH of a corp in public utility but cannot be
cargo? administrative officers and they cannot be given themselves the
o There is a division: authority to operate a franchise.
½ à shouldered by ship owner - Sir: Can they own coaches, rail tracks in LRT, or the cellsite of
¼ à captain telecommunications company, an airplane, these ar public utilities?
¼ à crew They do not operate, but they own them. Is that covered in the
- If there are 2 or more salvors: prohibition?
o Depends upon the proportion of their service o Limited to OPERATION, not ownership. As long as Filipino
o If cannot be determined, should be borne equally operated, its ok
21. PUBLIC SERVICE ACT
- Is the Public Service Commission still existing?
- No. There are government agencies that replaced the PSC. EXTRA NOTES FROM DUGS’ PALABRICA NOTES:
- LTFRB
- MARINA ORDINARY AND NECESSARY AVERAGE
- NTC EXPENSE
- ERC Art 807 Art 806
- NWRC To determine who bears the loss
- CAA Loss/ injury is borne by the ship owner Depends on what type of average is
- TRB involved:
22. CERTIFICATE OF PUBLIC CONVENIENCE 1. General Average – borne by
- Requisites of CPC all persons having interest in
- How is CPC different from CPCN? the vessel and the cargo
o CPC à issued by government agencies should contribute to satisfy
o CPCN à granted by legislature the average
- Prior or old operator rule 2. Particular/ Simple Average
o The first operator still has the authority to continue its operations – borne by respective owners
23. PUBLIC UTILITY Petty expense which must be
- Example of utilities? shouldered by the ship owner
o Water, electricity Examples:
24. METROPOLITAN CEBU WATER DISTRICT V. ADALA 1. Pilotage (pilot fees)
- ADALA APPLIED FOR CPC TO OPERATE WATERWORKS à MCWD 2. Anchorage – terminal fee,
SAID THAT ITS BOD DID NOT CONSENT TO ITS ISSUANCE UNDER PD etc.
198 3. Lighterage fee – small barge
- PD 198 = UNCONSTITUTIONAL where cargoes are unloaded
- Sir: PD 198 gave MCWD the exclusive authority to supply water in the and the lighterage brings the
specific place. How did the SC rule? cargoes to the port
o SC: Declared as unconstitutional PD 198. Under the Constitution, 4. Quarantine Fee
Art. 14, Sec. 5 no franchise to operate public utility shall be granted 5. Health and Sanitation Fee
which is exclusive in character. Cannot give an entity franchise 6. Inspection Fee
which is exclusive in charater
- Sir: What are now the limitations under the constitution in the issuance
Particular Average General Average
of franchise?
)
• Expense or damage which does • Expense or damage deliberately Vessel is completely incapable of Vessel can still move because it can
not inure to the common interest done to save the V/C/Both moving still go to the nearest port
• Particular only to the person who • Inures to the common benefit of Swallowing by the waves, or grounding Grounds: well founded fear of seizure,
owns the thing the ship owner and cargo owner or stranding or running against an privateer, piracy, accident which will
object in the sea rendering the vessel disable to common carrier to navigate
• Only the particular person (ship • Borne by all persons having an incapable to navigate
owner/ cargo owner) who caused interest in the vessel and the
the expense or suffered the cargo therein at the time of Shouldered individually by the ship Shouldered by the ship owner/CC
damage shall bear the expense occurrence of the average shall owner and cargo owner
• X reimbursement contribute to satisfy the average • E: Malice, lack of foresight
• ✓ Reimbursement and skill by the captain à
Example (808): captain will shoulder the
1. Inherent defect of cargo expenses
• Ex.: Guimaras mangoes
exported to HK (owner knows WHY? – Grounds is caused by FM
that lifespan of mango 5
days) + voyage for 10 days = TOWING SALVAGE
mangoes deteriorated Towing fee – will go to the owner of the Salvage reward – distributed among
2. Force majeure togboat owner owner of the vessel (50%), captain
3. Damage to the haul, vessel, (25%) and crew (25% in proportion to
equipment their salaries
4. Wages, victuals of the crew of the
vessel BOTTOMRY/ RESPONDENTIA SIMPLE LOAN
• If fixed voyage = Collateral = vessel (bottomry) If collateral is lost =
particular average principal will still exist
• If monthly basis = If lost = obligation to pay is
general average extinguished
Example: Collateral = cargo (respondentia)
• Ship owned by Germany
agricultural machinery owned by If lost = obligation extinguished
America to be delivered to Russia MARINE RISK Marine risk is necessary X necessary
à War between Russia and FORM AND Form and manner prescribed by the Formal requisites of
Germany à If vessel continues MANNER code of commerce ordinary contract
voyage to Germany, vessel will be REGISTRY OF Must be recorded in the registry of X need
captured à vessel went to VESSELS vessels to be binding to third
Philippines instead. Who will pay persons
for the salary of the crew? PREFERENCE Last lender First lender
o Particular Average –
Ship owner will pay
LOAN ON BOTTOMRY LOAN ON RESPONDENTIA
o The reason for deviating
DEFINITION Loan made by the Loan taken on security of the
is not because the
shipowner or ship agent cargo laden on vessel and
machinery is a
guaranteed by vessel itself repayable upon safe arrival of
contraband, but to save
and repayable upon arrival cargo at destination
the ship because of war
of vessel at destination
between Russia and
Germany
Note: No LOB may be
made in any case on the
SHIPWRECK AUS salaries of the crew, nor
)
the profits which may be
expected
WHO MAY Shipowner or ship agent Only the owner of the cargo
CONTRACT
Inside/ Outside (depends)
the residence of the
owners – the captain
COMMON 1. Exposure of security to marine peril
ELEMENTS 2. Obligation of the debtor conditions only upon safe
arrival of the security at the point of destination
FORMS 1. Public instrument
2. Policy signed by contracting parties and the
broker taking part therein
3. Private instrument
Assignment: extend to first 50 pages of insurance. Same 5 cases
)
th
6 meeting § Sir: When the insurer evaluates the insurance
April 3, 2017 application, he solely relies on the information given
by the insured. He has no time nor means to verify
1. Contract of insurance those items placed by the insured. That is why the law
- An agreement whereby one undertakes for a consideration to indemnify mandates the parties to act in GF especially when filling
another against loss, liability or damage arising from an unknown or up the application for the insurance contract.
contingent event 7. Personal Contract
2. Contract of suretyship 6. Elements of a contract of insurance [ERAPS]
- Is it a contract of insurance? 1. EXISTENCE of an insurable interest
o Yes. If the surety is doing an insurance business 2. RISK of loss
- What does doing an insurance business mean? 3. ASSUMPTION of risks
o Making or proposing to make as an insurer, any insurance contract 4. PAYMENT of premiums
o Making or proposing to make, as surety, any contract of suretyship 5. SCHEME to distribute losses
as a vocation, not as a mere incident to any other legitimate 7. PHILIPPINE HEALTH CARE PROVIDERS VS CIR
business of suretyship - HMO = X CONSIDERED INSURANCE BUSINESS
o Doing any insurance business like reinsurance and similar acts - X LIABLE FOR DEFICIENCY DST
o Doing or proposing to do any business equivalent to the above - Not all the necessary elements of a contract of insurance are present in
3. Bancassurance - calculated on the basis of assumptions made relative to the insured.
- Sir: So, it is not the bank that is doing insurance? - Sir: What are the various justifications why the SC said that an HMO is
o NO. It is just done within the head office of the bank with the not an insurance business? The SC enumerated the reasons why vis-à-
permission of the insurance commission vis the elements of a contract of insurance
rd
4. Mutual insurance companies o HMOs do NOT indemnify 3 persons à they are simply the ones
- An entity owned by the policyholders that caters only to the insurance needs paying the physicians, clinic, etc. whenever their clients undergo
of the same policy holders/members is still engaged in insurance business medical services
5. Characteristic of Insurance Contract o There must be a LOSS, LIABILITY OR DAMAGE à in case of
1. Risk distributing device HMOs, no need for such LLD. The client can avail of the medical
2. Contract of Adhesion or Fine Print Rule services without LLD.
o Sir: So, what is the implication if it is a contract of adhesion? o It is the DOH that is the governing body of an HMO. It is the
§ Any ambiguity shall be strictly construed against the insurance commission.
insurer - Who is the supervisory of an HMO?
3. Aleatory o It is not the insurance commission. It is the Department of Health.
o The obligation of the insurer to pay the proceeds arises only upon 8. PHILAMCARE VS. HEALTH SYSTEMS INC VS CA AND JULITA TRIOS
the happening of an event which is UNCERTAIN or which is to - ERNANI SUFFERED HEART ATTACK; PHILAMCARE DENIED CLAIM;
occur at an INDETERMINATE TIME SAID THAT THERE WAS CONCEALMENT
4. Commutative - ONLY OPINION; NO CONCEALMENT; TEST OF MATERIALITY
o There is still exchange of equivalents – the amount paid by the - The answers of the applicant who is not a doctor, regarding the medical
insured is deemed the equivalent of the protection given by the history of his wife largely depends on opinion rather than fact.
insurer based on insurance contract - Where matters of opinion or judgment are called for, answers made in good
5. Contract of indemnity faith and without intent to deceive will not avoid the policy even though they
o The insured who has an insurable interest over a property is only are untrue.
entitled to recover the amount of actual loss sustained and the - In this case, the insured answered “NO” to the following question, but no
burden is upon him to establish the amount of such loss à but concealment was ascribed: “Have you or any of your family members ever
applicable only to property insurance consulted or been treated for high blood pressure, heart trouble, diabetes,
o Life insurance is NOT a contract of indemnity peptic ulcer, cancer, liver disease, or asthma?”
6. Ubberimae Fides - ANOTHER ISSUE: W/N IT IS AN INSURANCE CONTRACT – YES. NON-
o Not only of the insured but also the insurer, since the dominant LIFE INSURANCE CONTRACT. The insurable interest of Ernani is his life
bargaining position of the insurer carries with it stricter itself.
responsibility o In the case at bar, the insurable interest of respondent’s husband
o Sir: Why does it require utmost good faith? in obtaining the health care agreement was his own health. The
health care agreement was in the nature of non-life insurance,
)
which is primarily a contract of indemnity. Once the member incurs § The instrument is already filled up and there is no
hospital, medical or any other expense arising from sickness, injury space for indorsement; you attach a paper where you
or other stipulated contingent, the health care provider must pay for put you indorsement. It becomes a part of the NI.
the same to the extent agreed upon under the contract. o Rider – In case of a rider, if you attach it to the insurance contract,
9. Perfection it also becomes part of the insurance contract.
- It is perfected by mere consent. 15. Cancellation of NON-LIFE POLICY grounds – pp. 89
- As long as there is meeting of the minds between the parties, there is a - [NC-F/M-W/R-POV]
perfected contract of sale. 16. Requisites for cancellation
- “Cognition Theory” 1. Prior NOTICE of cancellation to insured
- Delivery of policy = X necessary for its perfection 2. Notice must be based on the OCCURRENCE after effective date of the policy
10. GREAT PACIFIC LIFE ASSURANCE CORP VS CA one or more of the grounds mentioned
- MONGOLOID 3. Notice must be in WRITING, MAILED AND DELIVERED to
- NGO HING CONCEALED FACT THAT HELEN IS MONGOLOID = X a. the named insured at the address shown in the policy or
UBBERIMA FIDES = GROUND FOR RESCISSION OF CONTRACT OF b. to the broker, provided the broker is authorized in writing by the
INSURANCE policy owner to receive notice of cancellation on his behalf
- AS TO PERFECTION OF CONTRACT - Mere submission of the application 17. Kinds of policies
without the corresponding approval of the policy does not result in the 1. Open
perfection of the contract of insurance o Value of thig insured is not agreed upon, but left to be ascertained
- UBBERIMAE FIDES - The contract of insurance is one of perfect good faith at the time of loss. The amount of insurance erely represents the
(uberrima fides meaning good faith; absolute and perfect candor or openness insurer’s maximum liability.
and honestly; the absence of any concealment or deception, however slight 2. Valued
not for the insured alone but equally so for the insurer o Definite valuation is agreed by both parties, and written on the face
11. Cover notes of the policy
- Persons who wish to be insured may get protection BEFORE the perfection 3. Running
of the insurance contract – notice of approval of the application – by securing o Contemplates successive insurances provided that the subject of
a cover note the policy may from time to time be defined
- Deemed an insurance contract 18. Sir: Assuming you are the insured, which would you prefer, open or valued?
- Sir: What is the purpose of securing a cover note? - Student: Valued policy. Because you can agree with the insurer as to the
o While awaiting for the approval of your application, a cover note value of the property insured.
would secure the insured. 19. Reinstatement of the policy
o How will the insured be secured? - The stipulation in a life insurance giving the insured the privilege to reinstate
§ The insured will be indemnified for any damages upon written application does not give the insured the insured absolute right
incurred during the period covered by the cover note. to such reinstatement by the mere filing of an application. The insurer has the
- Sir: What is the difference between a cover note and policy? right to deny reinstatement.
o Cover note – protection before the perfection of the insurance - Pertains to lapsed policies
contract 20. LALICAN VS THE INSULAR LIFE ASSURANCE CO
o Policy - Written instruments where the terms and conditions of the - X ENTITLED TO REINSTATEMENT INSURANCE BUT PWEDE REFUND
contract of insurance are set forth OF PREMIUMS PAID NA LANG; INSURED DIED ALREADY
12. Policy of insurance - DOCTRINE IN SO FAR AS REINSTATEMENT OF LAPSED POLICY
- Written instruments where the terms and conditions of the contract of - The stipulation in a life insurance policy giving the insured the privilege to
insurance are set forth reinstate it upon written application does not give the insured absolute
13. Contents of a policy right to such reinstatement by the mere filing of an application. The
14. Rider insurer has the right to deny reinstatement.
- It needs to be countersigned by the insured or owner - After the death of the insured, the insurance company cannot be compelled
o E: Unless he was the one who applied for the rider, clause, to entertain an application for reinstatement of the policy because the
warranty, etc conditions precedent to reinstatement can no longer be determined and
- Sir: In negotiable instrument, there is a term called “ALLONGE”. How is satisfied.
that different from a ride in a contract of insurance? - Sir: The reinstatement is always subject to approval again of the insurer. It
o Allonge - Separate piece of paper attached to the instrument does not matter if you have already paid, it is always subject to the approval
where indorsement is placed of the insurer. The problem here is that he died prior to his receipt of the
)
approval of the reinstatement; hence there is no perfected contract of § NO.
reinsurance o Sir: If you are the wife, can you insure the life of the husband
21. Types of Insurance under the ICP appointing yourself as the beneficiary? You are the one paying
1. Life insurance the premiums. Even without the consent of your husband?
a. Individual Life § My answer: YES. Because a wife has an insurable
b. Group Life interest over the life of her husband.
c. Industrial Life § (NOT ANSWERED IN CLASS)
§ Premium - X more than 500 times that of the current 3. Beneficiary
SMW in Manila o Person designated to receive proceeds of policy when risk attaches
§ “Industrial” printed upon the policy as a descriptive o INSURES OWN LIFE
matter § GR: He may designate ANY person as beneficiary,
2. Non-Life insurance whether or not the beneficiary has an insurable interest
a. Marine in the life of the insured
b. Fire Casualty - E: Persons specified in Art 739 of the NCC cannot be
3. Contract of Suretyship designated
4. Microinsurance 1. Those made between persons who were guilty of
o Premium – X more than 7.5% of SMW of Non-agri workers in MM adultery or concubinage at the time of donation
o Maximum sum guaranteed benefits – X more than 1000 times the à conviction is not necessary
current SMW of Non-agri workers in MM 2. Those made between persons found guilty of the
22. Parties to insurance contract same criminal offense, in consideration thereof
1. Insurer 3. Those made to a public officer or his wife,
o He is the one who undertakes to indemnify another descendants or ascendants by reason of his
o Partnership, association or corporations office.
o Sir: How about a sole proprietor? o GROUNDS FOR FORFEITURE OF INTEREST OF BENEFICIARY
§ NO. Under RA 10607, an individual can no longer be an § When the beneficiary is the principal, accomplice or accessory
insurer ‘ in willfully bringing about the DEATH of the insured
o Sir: What is the document that every insurance company § To whom shall the proceeds go now assuming that the
should get? interest was forfeited already?
§ Certificate of Authority • The other beneficiary, unless otherwise
§ Expires on the last day of December, 3 years following disqualified
its date of issuance and shall be renewable every 3 years • In the absence of other beneficiaries, the proceeds
o Sir: Can a FC be an insurer? shall be paid in accordance with the policy of the
§ YES. Provided the following requirements are present: contract or
1. Appt of a resident of PH as a general agent • If the policy is silent, the proceeds shall be paid to
2. Paid up unimpaired assets or capital and reserve not the estate of the insured
less than 1B pesos 23. INSULAR LIFE ASSURANCE CO VS EBRADO
3. It must deposit for the benefit and security of policy - COMMON LAW WIFE = CANNOT BE BENEFICIARY IN INSURANCE
holders, securities satisfactory to the Commission POLICY; HUSBAND DIED – HIT BY FALLING TREE BRANCH
4. Its investment should not exceed 20% the net worth of § GR: He may designate ANY person as beneficiary, whether or not the
the foreign corporation or 20% of the capital of the beneficiary has an insurable interest in the life of the insured
registered enterprise - E: Persons specified in Art 739 of the NCC cannot be designated
2. Insured 1. Those made between persons who were guilty of adultery or
o The person with capacity to contract have an insurable interest in concubinage at the time of donation à conviction is not necessary
the life or property of the insured 2. Those made between persons found guilty of the same criminal offense,
o Who are disqualified from being a insured? in consideration thereof
1. Minors – voidable contract 3. Those made to a public officer or his wife, descendants or ascendants
2. Public enemy – nation, including its citizens or subjects, with by reason of his office.
whom the Philippines is at WAR - The reason for the application of Art 739 is that in essence, a life insurance
o Sir: How about the rule in cases of Spouses. Do you need to policy is no different from a donation insofar as the beneficiary is concerned.
get the consent of your spouse? Both are founded on liberality. A beneficiary is like a donee because from the
)
premiums of the policy which the insured pays out of liberality, the beneficiary - Hence, pecuniary interest over the property is always necessary.
will receive the proceeds of the insurance. - Although delivery is a mode of transferring ownership in a contract of sale, it
- Sir: The legal wife, in effect, is entitled to the proceeds as an heir since the does not mean that the buyer had no existing insurable interest over the
proceeds of the insurance will go to the estate of the deceased. goods that he purchased. A purchaser of goods under a perfected contract of
- Sir: Is the whole policy avoided by such designation? - NO sale already acquires interest on the property pending delivery. Hence, Pablo
o Only the designation of the beneficiary is void had insurable interest over the machinery even before actual receipt of the
o The policy will remain valid goods
24. Rules on assignment of policy - Sir: even if the property has not been delivered to him, although he has
- It depends. The insured CANNOT assign the policy if the designation of the not yet received the thing, he has insurable interest already. What is the
beneficiary is IRREVOCABLE. The irrevocable beneficiary has a vested right. basis of the SC for saying so?
- Sir: Assuming you got a life insurance policy on your life. You had 3 o There is already a perfected contract of sale. If you are a buyer,
beneficiaries. You assigned your policy to another. Is the assignee you already a right
bound to honor your beneficiaries even though he does not know any 28. How about the depository, does he have interest over the goods deposited?
of the beneficiary you placed there? What would be the effect of that to - Yes. He could be held liable for any goods that are destroyed
your designated beneficiary? 29. How about an heir, does he have insurable interest?
o Once you assign your policy, your designated beneficiaries there - No. Must be based on an actual or existing right. Must not be a purely
shall be deemed REVOKED provided that your beneficiaries are inchoate right
REVOCABLE IN NATURE 30. Difference between insurable interest in property and insurable interest in
o If you put there that the beneficiary is IRREVOCABLE, you cannot life
assign your policy.
25. Insurable interest - Life insurance LIFE PROPERTY
- Every person has an insurable interest in the life and health: AS TO EXTENT Unlimited Limited to actual value
1. Of himself, his spouse or his children - E: Save on life of the interest thereon
2. Any person on whom he depends wholly or in part for insurance effected by
education or support OR in whom he has pecuniary interest creditor on the life of
3. Of any person under a legal obligation to him for the payment the debtor
of money or respecting property or services, of which death or AS TO TIME Insurable interest exists at the It is necessary the the II
illness might delay or prevent the performance; and WHEN time the policy TAKES EFFECT exists when the
4. of any person upon whose life any estate or interest vested in INSURABLE - X need to exist at the insurances TAKES
him depends INTEREST time of loss EFFECT AND when
- What if you minor children are already of age and married already, can MUST EXIST the LOSS OCCURS
you still have insurable interest over them? - But X need
o YES. to exist in the
- What about your spouse? meantime
o Yes. Spouse has insurable interest over life of the spouse whether AS TO The expectation of the benefit to There must be legal
or not there is decree of legal separation because the marriage EXPECTATION be derived need not have any basis
bond is still there OF BENEFIT legal basis
- What if there is annulment of marriage? DERIVED
o No. Because the marriage bond has been severed. (???????) AS TO The beneficiary need not have The beneficiary must
26. Insurable Interest – property BENEFICIARY’S insurable interest over the life of have insurable interest
- See enumeration in the book – pp. 101
INTEREST the insured if the insured over the thing insured
- Sir: What is the test if you have insurable interest over the property? himself secured the policy in the property
o TEST: The insured is concerned in the PRESERVATION of the - E: However, if the life insurance
property instead of it being lost/destroyed
insurance was
-
obtained by the
27. FILIPINO MERCHANTS INSURANCE CO. VS CA
- ALL RISK CLAUSE; HAS INSURABLE INTEREST; SHIPPING OF FISHMEAL beneficiary, the latter
- In general, a person has an insurable interest in the property, if he derives must have an
pecuniary benefit or advantage from its preservation or would suffer insurable interest
pecuniary loss, damage or prejudice by its destruction, whether he has or has over the life of the
no title in, or lien upon, or possession of the property. insured
)
31. MORTGAGOR AND MORTGAGEE
- Both of them have insurable interest in the property
- Mortgagor
o The mortgagor of property, as owner, has an insurable interest to
the extent of its value, even though the mortgage debt equals such
value.
o The reason is that the loss or destruction of the property insured
will not extinguish the mortgage debt.
- Mortgagee
o The mortgagee as such has an insurable interest in the mortgaged
property to the extent of the debt secured, such interest continues
until the mortgage debt is extinguished.
32. ARMANDO GEOGONIA VS CA
- NO DOUBLE INSURANCE; INTEREST OF MORTGAGEE DIFFERENT FROM
MORTGAGOR
- The mortgagor has an insurable interest to the extent of its value, even though
the mortgage debt equals such value.
- The mortgagee as such has an insurable interest in the mortgaged property
to the extent of the debt secured, such interest continues until the mortgage
debt is extinguished.
- There is no double insurance when the 2 policies do not cover the same interest
because as to a mortgaged property, the mortgagor and the mortgagee have each an
independent insurable interest therein and both interests may be one policy, or each may
take out a separate policy covering his interest, either at the same or at separate times.
)
th
7 meeting - SC said there was no concealment. Grepalife should be held liable because
April 4, 2017 it failed to establish there was concealment made by the insured, hence it
cannot refuse payment of the claim.
1. Principle of Subrogation 4. Insurable interest of beneficiary and assignee of the policy
- Is a normal incident of indemnity property insurance as a legal effect of 1. Property Insurance
payment 2. Life Insurance
- It inures to the insurer without any formal assignment or express stipulation o GR: If the insured takes the insurance on his own life, he can
to that effect in the policy designate anybody who does not have insurable interest
rd
- Said right is not dependent upon nor does it grow out of any privity of contract § E: If a 3 person takes the policy, the beneficiary must
- Payment to the insured makes the insurer an assignee in equity have insurable interest
2. What does “when interest retained by mortgage” mean? o In case of assignment, the assignee need not have insurable
- Case of Grepalife interest
3. GREAT PACIFIC LIFE INSURANCE CORP VS CA 5. CHA VS CA
- INSURANCE POLICY; MORTGAGEE TO RECEIVE PROCEEDS - LEASE CONTRACT; AUTOMATIC ASSIGNMENT OF THE POLICY
- MORTGAGEE = X THE INSURED, NOT REAL PARTY IN INTEREST - STIPULATION THAT policy is deemed assigned and transferred to the lessor
- Sect 8 of insurance code - “Unless the policy provides, where a mortgagor for its own beneficiary if the stipulation is violates = OF VOID AGAINST
of property effects insurance in his own name providing that the loss shall be PUBLIC POLICY
payable to the mortgagee, or assigns a policy of insurance to a mortgagee, - LESSOR = X HAVE INSURABLE INTEREST OVER GOODS OF THE
the insurance is deemed to be upon the interest of the mortgagor, who SPOUSES CHA
does not cease to be a party to the original contract, and any act of his, - Property Insurance – the beneficiary and the assignee must have insurable
prior to the loss, which would otherwise avoid the insurance, will have the interest. Consent of the insurer must be secured before the assignment
same effect, although the property is in the hands of the mortgagee, but - CKS cannot demand payment of the insurance proceeds from the insurer.
any act which, under the contract of insurance, is to be performed by the CKS cannot be validly a beneficiary of the fire insurance policy because he
mortgagor, may be performed by the mortgagee therein named, with the did not have insurable interest over the goods. The automatic assignment of
same effect as if it had been performed by the mortgagor.” the policy to CKS under the provision of the lease contract is void for being
- How will the mortgage redemption insurance benefit the mortgagor and contrary to law and/or public policy
the mortgagee? - Sir: This is a case where the assignee needs to have insurable interest in the
o It is for the benefit of both of mortgagor and the mortgagee goods of the assignor. In this case, the lessor did not have insurable interest
o Mortgagor’s benefit: Since there was death already of the insured over the goods spouses Cha.
(mortgagor), the debt of the mortgagor will be deemed extinguished 6. HOMOSEXUAL PROBLEM: The creditor can recover the whole 1 million.
since Grepalife will be paying the DBP (mortgagee) out of the Because in a life insurance, if you take out insurance on your own life, you can
insurance of the deceased mortgagor designate any person even though he/she does not have any insurable interest in
o Mortgagee’s benefit: DBP (mortgagee) does not anymore have the life of the creditor.
to collect anymore of the debt, since Grepalife will pay the - E: If it is the debtor who takes out the insurance on the life of his creditor, he
mortgagee may only get the amout owed to him (p. 111)
- Sir: Why is the it that despite the purpose of the mortgage redemption 7. Effect of change of interest in thing insured unaccompanied by a change of
insurance is for the benefit of DBP (mortgagee), why were the proceeds interest in insurance
given to estate and eventually to the heirs (wife) and not to DBP? - GR: A change of interest in any part of a thing insured unaccompanied by a
o As a rule, a mortgage redemption insurance is for the benefit of the corresponding change of interest in the insurance SUSPENDS the insurance
creditor-mortgagee. to an equivalent extent UNTIL THE INTEREST IN THE THING AND THE
o However, in this case, it was given to the wife because DBP already INTEREST IN THE INSURANCE ARE VESTED IN THE SAME PERSON
collected the full amount of the obligation since DBP opted to - Sir: Can you give an example of this?
FORECLOSE instead of getting the insurance. Remember, an o Not answered
insurance contract is an indemnity contract. And since DBP was - E:
already paid in full, DBP can no longer collect the proceeds from o In life, health, and accident insurance
the insurance anymore. Moreover, since the mortgagor remains a o Change of interest in the insured happened AFTER the occurrence
party to the contract, the proceeds will then be given to his estate of an injury which results in a loss
which will eventually be given to the heirs. o A change of interest in one or more of several distinct, separately
by one policy
)
A change of interest by will or succession on the death of the
o 11. What is the effect of the payment of the premium by a post-dated check?
insured - The payment of a premium by a post-dated check at a stated maturity
o A transfer of interest by one of several partners, joint owners, or subsequent to the loss is isnsufficient to put the insurance into effect
owners in common who are jointly insured to the others - Sir: What is important here is that you give a post-dated check and the
o When a policy is so framed that it will inure to the benefit of check’s date was before the expiration of the period of payment and the
whomsoever, during the continuance of the risk, may become the insurer accepts it even if he has not yet encashed it
owner of the interest insured 12. When the insured is entitled to return of premiums paid
8. Risk insured against - See enumeration page 116
- The risk insured against may be any CONTINGENCY OR UNKNOWN
EVENT the happening of which will damnify a person having an insurable
interest or will create liability against him. REMAINDER OF INSURANCE = DEEMED COVERED
- Fortioutous events
- GR: A future event is the only event that can be covered by an insurance
contract
o E: A past event may be covered by a MARINE INSURANCE – if
the loss of the vessel in the past could not have been known by
ordinary means of communication
9. Premium
- Consideration paid to an insurer for undertaking to indemnify the insured
against a specified peril
- GR: No insurance policy issued or renewed is valid and binding UNTIL
ACTUAL PAYMENT of the premium. Any agreement to the contrary is void.
o E: UCBP Case
10. UCPB GENERAL INSURANCE CO INC VS MASAGANA TELEMART INC
- 4 EXPNS TO GR THAT NO INSURANCE IS POLICY IS VALID UNTIL
PAYMENT OF PREMIUM
- GR: No insurance policy issued or renewed is valid and binding until actual
payment of the premium. Any agreement to the contrary is void
- E: (In these instances, the Insurance Policy is valid and binding even if no
premium payments have yet been paid)
1. In case of life and industrial life whenever the grace period provision
applies
2. Where there is an acknowledgement in the contract or policy of
insurance that the premium had already been paid
3. The rule laid down in Makati Tuscany Country Club vs. CA to the effect
that Sec. 77 may not apply if the parties have agreed to the payment of
the premium in installments and partial payment has been made at the
time of the loss
4. Where a credit term was agreed upon like the agreement in UCPB vs.
Masagana Telamart (case at bar) where the insurer granted a 60-90 day
credit term for the payment of the premiums despite full awareness of
Sec. 77
5. Where the parties are barred by estoppel
- Sir: What could be a good example of when the parties are barred by
estoppel?
o Since UCBP accepted the premiums from Masagana despite the
fact that the period for payment and the grace period has already
expired, they are estopped from saying that the claim is void. They
cannot unjustly enrich by collecting the premium and thereafter
dening the claim.
)
th
8 meeting - A bank may be held liable for damages by reason of its unjustified dishonor
April 17, 2017 of a check, which caused damage to its client’s credit standing. The bank
must record every single transaction accurately, down to the last centavo, and
as promptly as possible. This has to be done if the account is to reflect at any
BANKING given time the amount of money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to whomever he directs. The
1. Definition of Banks bank is a fiduciary of the depositor’s money.
- Entities engaged in the lending of funds obtained in the form of deposits from - A corporation is not as a rule entitled to moral damages because, not being a
the public natural person, it cannot experience physical suffering or such sentiments as
- Banks are STOCK corporations and its funds are obtained from the PUBLIC wounded feelings, serious anxiety, mental anguish and moral shock. The
2. Definition of Public only exception to this rule is where the corporation has a good
- Deposits of 20 or more persons reputation that is debased, resulting in its social humiliation
3. Sir: Can San Beda amend its AOI and put as its secondary purpose that it - Sir: One of the arguments of the bank was that the checks were
will engage in banking business? Is that allowed under the law? eventually cleared, so there was essentially no damage to Simex. But
- NO. San Beda is a NON-STOCK, NON-PROFIT CORPORATION. why did the court still award moral damages?
- Only a stock corporation can engage in the banking business o Because the bank failed to exercise utmost diligence
4. Quasi-banks - Sir: So what should have been done by the bank to avoid being sued for
- Entities engaged in the borrowing of funds through the issuance, damages?
endorsement or assignment with recourse or acceptance of deposit o They should have credited right away the sum to the account of
substitutes for purposes of relending or purchasing of receivables and other Simex
obligations 10. Classification of Banks [U-CR-TICO]
- Sir: How does this work? 1. Universal Bank
o 2. Commercial Bank
5. Deposit substitutes 3. Rural Bank
- Alternative forms of obtaining funds from the public, other than deposits, 4. Thrift bank
through the issuance, endorsement or acceptance of debt instruments for the 5. Islamic Bank
borrower’s own account, for the purpose of relending or purchasing of 6. Cooperative bank
receivables and other obligations 7. Other classification of banks as determined by the MB of the BSP
6. Nature of business 11. Sir: Differentiate Universal Bank from Commercial Bank
- Fiduciary in nature Universal Bank Commercial Bank
- Utmost diligence is required Banks that have authority to exercise, Banks that are given all such power
7. Consequences of nature of business of banking in addition to the powers and necessary to engage in commercial
- Heavy and close supervision/ regulation by the BSP functions of banking in addition to general
- Utmost diligence - commercial banks corporate powers including
- Special rules on strikes and lockouts - powers of an investment - Accept drafts
o If S/L is unsettled after 7d à shall be reported by the BSP to the house - Issue letters of credit
Sec of Labor who has 2 options: - power to invest in non- - Discounting and
1. Assume jurisdiction over and decide the dispute allied enterprises negotiation of negotiable
2. Certify the same to the NLRC for compulsory arbitration instruments
o The law allows the President of the PH to, at any time, intervene - Evidence of debt
and assume jurisdiction over such labor dispute in order to settle or - Accept and create demand
terminate the same deposits and the like
8. Sir: Which is higher, utmost diligence or EO diligence? Ex. BDO Ex. RCBC
- Can act as investment house X
9. SIMEX INTERNATIONAL (MANILA) INC VS CA
- BANK = NEGLIGENT = LIABLE FOR DAMAGES 12. Sir: Difference between Commercial Bank and Thrift bank
- UNJUSTIFIED DISHONOR OF CHECKS
- NATURE OF BUSINESS: It is required to exercise utmost diligence in the Commercial Bank Thrift Bank
handling of deposits Banks that are given all such power Offer savings, deposits and mortgage
necessary to engage in commercial only
)
banking in addition to general corporate - The relationship between the private respondent and the Nation Savings and
powers including Loan Association is that of creditor and debtor; consequently, the ownership
- Accept drafts of the amount deposited was transmitted to the Bank upon the perfection of
- Issue letters of credit the contract and it can make use of the amount deposited for its banking
- Discounting and negotiation of operations, such as to pay interests on deposits and to pay withdrawals.
negotiable instruments While the Bank has the obligation to return the amount deposited, it has,
- Evidence of debt however, no obligation to return or deliver the same money that was
- Accept and create demand deposited. And, the failure of the Bank to return the amount deposited will not
deposits and the like constitute estafa through misappropriation punishable under of the
Revised Penal Code, but it will only give rise to civil liability over which the
13. Sir: How about Islamic Banks? Is it a bank only for Muslims? What is the public respondents have no- jurisdiction.
special feature of Islamic banks that make it different from other banks? - Sir: If you are a depositor and the bank refuses to return the money to
- NO. you, what is your remedy if you cannot file an estafa case?
- Banks that are based on Islam Laws o Civil case for specific performance
- Under Islamic laws, they are prohibited from charging interest when they o Simple loan – debtor becomes the owner. Bank does not need to
lend money return the very same thing; only return equivalent amount
- They do not eat pork. Hence, if you are to borrow money to engage in pork 19. Sir: What does the bank has the right to compensation mean as a mode of
business, it would be denied by the bank. extinguishing obligation? How does this work?
- So, how do they earn proceeds? - The bank can set off the deposits with the indebtedness of the depositor that
o They have profit-sharing are due and demandable
o They lend money for you to put up a business and then the bank 20. Sir: Rural Bank vs Cooperative Bank
has a certain percentage over the profit of the business
14. Basic Functions Rural Bank Cooperative
- Deposit Banks that are created to make Primarily provide financial, banking
- Loan needed credit available and readily and credit services to cooperative
15. Other functions (p. 313) accessible in the rural areas for the organizations and their members
- [RF-CP-AAAC-B] purpose of promoting comprehensive
16. Prohibited Acts rural development
- Engaging in insurance business GR applies- only natural persons can E - A cooperative can be an
- Outsourcing functions be incorporators incorporator of a banking institution
17. Deposit Function
E- Public officers can be directors GR applies – public officers cannot be
- Debtor-creditor relationship
directors
o Debtor = bank
o Creditor = depositor
- Fixed, savings and current deposit = Simple loan 21. Rules as to minors as depositors [7-RW-DI-ST]
- The bank can make use as its own the money deposited 22. Kinds of deposits
-
rd
3 persons who may have a right to the money deposited cannot hold the 1. Demand
bank responsible 2. Savings
o E: Unless there is a court order or garnishment 3. NOW Accounts
- The officers of the bank cannot be held liable for estafa if they authorized the 4. Time deposits
use of the money deposited by the depositor 23. NOW Accounts
- The bank has the right to compensation - Negotiable Order of Withdrawal Accounts
18. GUINGONA VS CITY FISCAL OF MANILA 24. Demand deposits
- X ESTAFA; NOVATION; CREDITOR-DEBTOR RELATIONSHIP - All those liabilities of banks which are denominated in the PH currency and
- SIMPLE LOAN are subject to payment in legal tender upon demand by presentation of check
- CIVIL IN NATURE subject to the following rules
- The officers of the bank cannot be held liable for estafa if they authorized the - There should be a NEGOTIABLE INSTRUMENT
use of the money deposited by the depositor. There would be no liability for - Sir: How does this work?
estafa under Article 315(1)(b) of the RPC even if the bank failed to return the o In savings deposit, you can withdraw any time. You can even
amount deposited withdrawing using an ATM.
)
o In demand deposit, there must be a check presented before you 30. Survivorship Agreement
can get money - Joint accounts may be the subject of a survivorship agreement whereby the
o You present the check to the bank teller. There is no prohibition, co-depositors agree to permit either of them to withdraw the whole deposit
but you should not indorse it. during their lifetime and transferring the balance to the survivor upon the
- Rules: death of one of them
o There should be funds in the account 31. VITUG VS CA
o Should undergo clearing procedure - JOINT ACCOUNTS; SURVIVORSHIP AGREEMENT; ALEATORY
o Only a Universal Bank or Commercial bank can accept or create CONTRACT; VALID
demand deposits - ü SELL SHARES OF STOCK FOR REIMBURSEMENT OF ADVANCE
o A bank, other than a UB or CB cannot accept demand deposits MADE BY ROMARICO
§ E: Upon prior approval of the MB - Joint accounts may be the subject of survivorship agreement whereby the
o Temporary overdrawing against the current accounts shall not be co-depositors agree to permit either of them to withdraw the whole deposit
allowed during their lifetime and transferring the balance to the survivor upon the
§ E: Unless caused by the normal bank charges and other death of one of them.
fees incidental to handling such accounts - Sir: So in cases of survivorship agreement, whatever is remaining in the
o Drawings against uncollected deposits (i.e. uncleared checks) are account shall belong exclusively to the other depositor in the joint
generally prohibited account
- Sir: Can a thrift bank accept demand deposits? - Sir: How did the SC resolve the contention that the survivorship
o NO. Only a UB or CB can accept or create demand deposits agreement is the nature of a donation mortis causa?
§ E: Upon prior approval of the MB o Such contracts are permitted under Article 2012 on aleatory
- Sir: Basically, these are current or checking accounts. Only a UB or CB contracts. When Dolores predeceased her husband, the latter
can open a current or checking account. acquired upon her death a vested right over the funds in the
25. Savings Account account. The conveyance is therefore not mortis causa.
- There should be a passbook 32. Secrecy of Bank Deposits
- A bank is prohibited from allowing withdrawal without the presentation of a - GR: All deposits of WHATEVER NATURE are considered absolutely
passbook and duly accomplished withdrawal slip confidential
o E: Banks authorized by the BSP to adopt the no passbook - E: pp. 318 [PILA-BD-UN-DT-C/S]
withdrawal system 33. Sir: In the case of Senator De Lima, she is being investigated for violated of
§ Ex. ATM accounts the CDDA. Can her accounts be examined?
26. NOW Accounts - YES.
- Negotiable Order of Withdrawal Accounts (NOW) - Sir: Under what exception?
- Interest-bearing deposit accounts that combine o NOT ANSWERED.
o the payable on demand feature of checks and 34. EJERCITO VS SANDIGANBAYAN
o investment feature of savings accounts - RA 1405
- Sir: In other words, it is simply a checking account that earns interest - TRUST ACCOUNT = COVERED BY TERM DEPOSIT
27. Time deposit - CASE X PROTECTED BY RA 1405
- PLUNDER = BRIBERY
- An account with a fixed term - X FRUIT OF THE POISONOUS TREE
- You can withdraw it before the fixed term. You can pre-terminate the fixed - R.A. 1405 is broad enough to cover Trust Account No. 858. However, the protection
term. If you pre-terminate it, you cannot get the full amount of interest agreed afforded by the law is not absolute. There being recognized exceptions thereto, as
upon. above-quoted Section 2 provides.
o Ex. 10k will become 15k after that term. If you pre-terminate it, you - In the present case, two exceptions apply, to wit:
cannot get the full 5k agreed upon. o (1) the examination of bank accounts is upon order of a competent court in
28. Joint Accounts cases of bribery or dereliction of duty of public officials, and
o (2) the money deposited or invested is the subject matter of the litigation.
- “And/or” – Only one depositor is sufficient to withdraw Ejercito contends that since plunder is neither bribery nor dereliction of duty,
- “And” – Both depositors must sign the withdrawal slip his accounts are not excepted from the protection of R.A. 1405.
- Sir: If the examiner asks about joint accounts, remember to determine - Undoubtedly, cases for plunder involve unexplained wealth. The crime of bribery
whether it is joint accounts in banking or joint accounts in a partnership and the overt acts constitutive of plunder are crimes committed by public officers, noble
29. Anonymous Account idea that “a public office is a public trust and any person who enters upon its discharge
- GR: X allowed does so with the full knowledge that his life, so far as relevant to his duty, is open to
o E: Foreign currency deposits which may be a “numbered account” public scrutiny” applies with equal force.
)
- Sir: Plunder is similar to bribery and dereliction of duty. It is event worse than
these crimes.
- Sir: What about the contention of Estrada that his account is a trust account and
therefore not covered?
o The phrase "of whatever nature" proscribes any restrictive interpretation of
"deposits." Moreover, it is clear from the immediately quoted provision that,
generally, the law applies not only to money which is deposited but also to
those which are invested. This further shows that the law was not intended
to apply only to "deposits" in the strict sense of the word. Otherwise, there
would have been no need to add the phrase "or invested." Clearly, therefore,
R.A. 1405 is broad enough to cover Trust Account No. 858.
35. BSB GROUP INC VS SALLY GO
- THEFT OF CASH BY CASHIER
- VIOLATED RA 1405
- This case is covered by the law on secrecy of bank deposits. It is not among
the exceptions.
- The inquiry into bank deposits allowable under RA 1405 must be premised
on the fact that the money deposited in the account is itself the subject
of the action.
- The SC ruled that there is VIOLATION OF THE LAW ON SECRECY OF
BANK DEPOSITS. The high court explained that the admission of testimonial
and documentary evidence relative to respondent’s Security Bank Account
serves no other purpose than to establish the existence of such account, its
nature and the amount kept in it. It constitutes an attempt by the prosecution
at an impermissible inquiry into a bank deposit account the privacy and
confidentiality of which is protected by law.
- In other words, in pursuing a case for the offense of Estafa, the prosecution
may establish its cause by the presentation of the checks involved. These
checks would then constitute the best evidence to establish their contents and
to prove the elemental act of conversion in support of the proposition that the
offender has indeed indorsed the same in his own name.
- Theft, however, is not of such character. Thus, for our purposes, as the
Information in this case accuses respondent of having stolen cash, proof
tending to establish that respondent has actualized her criminal intent by
indorsing the checks and depositing the proceeds thereof in her personal
account, becomes not only irrelevant but also immaterial and, on that score,
inadmissible in evidence.
- Sir: Deposit of money is not one of the elements of qualified theft. Hence, the
money in the bank is not actually the subject of litigation. Therefore, it does
not fall under the exceptions to the Bank Secrecy Law. Thus, it is covered by
the law on secrecy of bank deposits.
)
th
9 meeting - This is a criminal act and the deposits are not entitled to any insurance
April 18, 2017 payment.
- Sir: So, if done outside the 120d, the splitting is valid
6. When can you recover the insurance proceeds? When should payment of
1. Foreign Currency Deposits the proceeds be made
- Exceptions to Secrecy of Foreign Currency Deposit - Sir: For example, BPI due to losses, decided to close down all its
1. Written Consent of depositor branches. Will that entitle you to recover the proceeds?
2. AMLA o NO. The reason for the closure should be INSOLVENCY, not just
3. Human Security Act because a bank wants to close its business
- Sir: Are they subject to garnishment? - The proceeds of the insurance shall be paid within months to the depositor
o GR: NO. whenever the insured bank is closed on account of insolvency.
§ E: Foreign currency deposit of an American Tourist who - An insured bank shall be deemed closed on account of insolvency when
was found guilty of repeatedly raping a 12 yr old child ordered closed by the MB.
2. SALVACION VS CENTRAL BANK OF THE PHILIPPINES - Sir: Is there a need for a closure order from the MB?
- 12 YEAR OLD GIRL REPEATEDLY RAPED BY AMERICAN o NOT ANSWERED
- FOREIGN CURRENCY DEPOSIT IN THIS CASE IS SUBJECT TO 7. When should you make the claim?
GARNISHMENT - Within 2 years from actual takeover by the receiver
- GR: Deposits that are exempt from garnishment: Foreign currency deposits - Sir: Once a receiver has already been appointed, that’s the time you reckon
o E: By way of exception, foreign currency deposits of an American the 2 year period
tourist who was found guilt of repeatedly raping a 12 year old child 8. PHILIPPINES DEPOSIT INSURANCE CORP VS CA
is subject to garnishment - GOLDEN TIME DEPOSITS
3. What does it mean when your book says that deposits are insured? - RESOLUTION OF RECEIVERSHIP WAS ISSUED
- Deposits are insured up to P500k - BANK HAD NO NOTICE. THUS, TRANSACTIONS ARE NOT NULLIFIED
- If you have a deposit in the bank and the bank was closed, - PDIC did not validly reject the claim. MB Bank and its client should be given
- Can this maximum amount be adjusted? the benefit of the doubt that they were not aware that the Monetary Board
o YES. Provided the 3 requirements are present: Resolution had been passed. Mere conjectures that MB Bank had actual
1. MB has determined that there is a condition that threatens knowledge of its impending closure do not suffice. The Resolution could not
the monetary and financial stability of the banking system that thus have nullified the transactions that were entered into prior to the receipt
may have systemic consequences of the Resolution by MB bank
2. Adjustment is approved by unanimous vote of the BOD of - Sir: The contention of the PDIC is that within the definition of splitting of
PDIC in a meeting called for the purpose and chaired by the deposits. That’s the reason why they denied the claim. So, what was the
SF justification of the SC about that?
3. The adjustments are approved by the Pres. of the PH o Splitting of deposits is based on the fact that the depositor already
- “Banking system” knows that the bank will close. But in this case, the depositor did
o Does not refer to a particular bank; it pertains to the banking system not know that the bank will close, since he was notified of such fact.
as a whole The SC applied the presumption of GF on the part of the depositor
- Sir: Before, it was only 300k. It was recently increased to 500k. It is wise to – the PDIC failed to prove BF on the part of the depositor that he
put your money in one bank only until 500k and then the excess, put it in a split the deposit to receive more insurance proceeds.
different bank 9. Rule on unclaimed balances
4. Deposits not covered by Insurance - Deposits that have become dormant for a period of 10 years may be
- Pp. 323 escheated in favor of the government
5. Splitting of Deposits - Initially, there should be notice to the depositor of the unclaimed balance
- This occurs whenever a deposit account with an outstanding balance of more - Thereafter, the bank is required to report (sworn statement) to the Treasurer
than 500k under the name of persons is broken down and transferred to 2 or of the PH the existence of such deposits
more accounts in the name of persons or entities who have no beneficial - The treasurer will in turn inform the Solicitor General who will initiate the
ownership in the transferred deposits in their names within 120d proper escheat proceedings
immediately preceding or during a bank declared holiday or - Pp. 328
immediately preceding a closure order issued by the MB for purpose of 10. RCBC VS HI-TRI DEV CORP
availing the maximum deposit insurance coverage. - UNCLAIMED BALANCES à NOTICE REQUIREMENT TO DEPOSITORS
- X PROPER ESCHEAT
)
- MANAGER’S CHECK 15. Aggregate Ceiling
- Sir: There was no valid negotiation because there should be delivery for the - The aggregate is
negotiation to be complete – in this case, there was no delivery because it o 15% of the total loan portfolio of the bank or
was still in possession of the one who procured the manager’s check o 100% of the combined capital accounts whichever is lower
- Sir: The notice here was substantially complied with because there was 16. Individual Ceiling
publication and such is constructive notice to the whole world 17. Value of Collaterals
- Sir: It cannot be the subject of escheat proceedings because it should - 75% AV of RP
be shown or established that the account was abandoned or unclaimed. - 60% AV of improvement
But in this case, it was not abandoned nor unclaimed, hence it cannot - 75% AV of chattel
be the subject of escheat proceedings. 18. Foreclosure of mortgage
- It is undisputed that there was no effective delivery of the check, rendering - Sir: You applied for a loan. You used as collateral your property (1M). REM
the instrument incomplete. In addition, we have already settled that on your property. You were given 750k (75% of 1M). Assuming the property
respondents retained ownership of the funds. As it is obvious from their is foreclosed, will you be entitled to the difference of 250k?
foregoing actions that they have not abandoned their claim over the fund, o ASK MIKEE
we rule that the allocated deposit, subject of the Managers Check, should 19. Redemption period
be EXCLUDED from the escheat proceedings. We reiterate our - For Natural Persons
pronouncement that the objective of escheat proceedings is state forfeiture o Within 1yr after the sale of the real estate
of unclaimed balances. o Counted from the date of registration of the certificate of sale
11. Single Borrower’s Limit with the RD
- GR: Ceiling – shall not exceed 25% of the net worth of such bank - For juridical persons
- E: May be increased by an additional 10% of the net worth of such bank o Shall have the right to redeem the property but not after registration
provided that the additional liabilities of any borrower are adequately secured of the certificate of foreclosure sale with the property RD which in
12. DOSRI Accounts no case shall be more than 3 months after foreclosure,
- Director, Officer, Stockholder, Related Interested whichever is earlier
- There is no prohibition, there are only RESTRICTIONS on borrowing and 20. Foreign ownership in a domestic bank
security arrangement by the DOSRI - Foreign Individuals and non-banks
- Requisites of DOSRI o Foreign individuals and non-bank corps may own or control up to
o Borrower = DOSRI 40% of the voting stock a domestic bank
o He contracts a loan or any form of financial accommodation o The percentage of foreign-owned voting stocks in a bank shall be
o His Bank; Bank that is a subsidiary of a bank; Bank in which a determined by the citizenship of the individual stockholders in that
controlling proportion of the shares is owned by the same interest bank
that owns a controlling proportion of the shares of his bank - Foreign Banks
o The loan or financial acommodation of the DOSRI, singly or with o Foreign banks are not subject to the 40% limitation
that of his RI, o The law allows 100% foreign bank equity
§ is in excess of 5% of the capital and surplus of the o Foreign banks may acquire 100% of the voting stocks of an existing
lending ban bank or invest in up to 100% of the voting stocks of a new
§ or in the maximum amount permitted by law, subsidiary
whichever is lower 21. Filipino Stockholdings
13. Restrictions with respect to DOSRI accounts - The rule limiting ownership and control of voting stocks to 40% of voting
1. Written approval of majority of the directors of the lending bank (excluding the stock shall apply to Filipinos and domestic non-bank corps
director concerned) - The restriction on foreigners refer to the total equity participation
2. Arms Length Rule - The restriction on Filipino and domestic non bank corps refer to individual
3. Aggregate Ceilings equity participation
4. Individual Ceilings 22. Composition of Board
14. Arms Length Rule - 5-15
- The account should be upon terms not less favorable to the bank than those o 2 of whom should be independent directors
offered to other borrowers who are not DOSRI - In merged or consolidated banks – max of 21
- Independent director – a person other than an officer or employee of the
bank, its subsidiaries or affiliates or related interests à this person is not
connected with the banking corporation
)
o Sir: This is an exception to the rule that we learned in corporation o The assets shall be deemed in custodia legis in the hands of the
law that a director needs to own at least 1 share in the corporation receiver
23. Meetings o Possession and control shall be in the hands of the receiver
- Can be conducted thru teleconferencing and video conferencing o It shall be exempt from any order of garnishment, levy, attachment
24. Fit and proper rule or execution
- The MB is authorized to pass rules providing for the qualifications and o There will be no preference even if the claimant-depositor obtained
disqualifications of individual elected or appointed bank directors or officers a writ of preliminary attachment à they will not be given priority. All
and to disqualify those found unfit after due notice claims shall be gathered and then they will be settled at the same
- In determining whether they are fit and proper the following shall be taken into time
account: o After the declaration of insolvency, the remedy of the depositors is
o Training to intervene in the liquidation proceedings
o Integrity 32. MANALO VS CA
o Experience - A BANK WHICH IS CLOSED RETAINS ITS PERSONALITY TO SUE AND
o Education BE SUED THRU LIQUIDATOR
o Competence - Other effects of receivership and liquidation - The appointment of a
25. Conservatorship receiver does not dissolve the corporation nor does it interfere with the
- When the MB finds that a bank or a quasi-bank is in a state of continuing exercise of corporate rights. Banks under liquidation retain their legal
inability or unwillingness to maintain a condition of liquidity deemed adequate personality. The bank can sue but any case should be initiated and
to protect the interest of depositors and creditors prosecuted through the liquidator
- The MB may appoint a conservator with such powers as the MB shall deem - It can sue and be sued but only through the liquidator
necessary 33. Philippine Deposit Insurance Corporation
- The conservatorship shall not exceed 1 years - 3 primary functions:
26. Powers of a conservator 1. Deposit insurer
1. Take charge of the assets, liabilities and the management thereof 2. Regulator of banks
2. Reorganize the management of the subject bank 3. Receiver and liquidator of closed banks
3. Collect all monies and debts due said institution 34. What does “regulator of banks” mean?
4. Exercise all powers necessary to restore its viability - PDIC has the power to INVESTIGATE and EXAMINE banks
27. Sir: What’s the purpose of placing a bank under conservatorship? 35. Examine vs Investigate
- Examine Investigate
28. Sir: What does “liquidity problem” in a bank mean? Evaluation of the current status of a - Based on specific findings
- They have assets but they have difficulty in converting the assets into cash bank of certain acts or omissions
- So in short, they have cash problems - Zeroes in on specific acts
- This is what happened in Banco Filipino. Because they put all their and omissions
investments/assets in subdivisions and most of the buyers were not able to
Needs prior consent of the MB X need prior consent MB
pay the amortization.
29. Sir: What is the difference between receivership and conservatorship?
36. Reasons why investigation does not need prior consent of the MB
- Receivership – bank is unable to pay its liabilities as they become due in the
ordinary course of business - Time is always of the essence
- It is based on reports of examination
o Basically, the ASSETS ARE INSUFFICIENT to cover the debts and
- Lengthy process
liabilities
- Conservatorship – there are assets but there is difficulty in converting the 37. “Receiver”
- The MB has the power to appoint the PDIC as receiver of banks which have
assets to cash
problems with liquidity
30. Close now- hear later scheme
- No prior hearing is necessary in appointing a receiver and in closing the bank - It shall control, manage and administer the affairs of the closed bank
38. Money Laundering
- Reason: Time is of the essence
- Sir: In simple terms, proceeds coming from unlawful activities and you
o In order to prevent further dissipation of the assets
o If you hear them, it will take time and they might do something to transact those proceeds to make to appear that they came from legitimate
sources
dissipate the assets of the bank
- Sir: Important: “Aids, abets, assists in or counsels the commission of money
31. Effects of receivership and liquidation
- Garnishment, Levy, Attachment or Execution laundering”
)
o So, as a lawyer in the future, you should be very careful not to give transparency. So that the borrower will not be surprised as to the amortization
advise to a syndicate group because you can be held liable for he has to pay.
money laundering when you aid or counsel them in committing - Pp. 362
money laundering
39. Covered Transactions
- In excess of 500k within 1 banking day
40. Covered Entities
- Banks, non-banks, quasi-banks, trust entities, foreign exchange dealers,
money changers, etc. supervised by the BSP
- Insurance companies, pre-need companies, jewelry dealers in precious
metals/stones
- In excess of 1M
41. Suspicious Transactions
- Give at least 3
o No underlying legal trade or obligation, purpose or economic
justification
§ Ex. You sell your house for 2M. You deposit it in the
bank. You show the bank officer the deed of sale. If you
do not do that, that is a suspicious transaction and you
can be reported to the AMLAC.
o Client is not properly identified
o Amount involved is not commensurate with the business or
financial capacity of the client
42. One of the exceptions in the Bank Secrecy law is that the AMLAC can
examine the deposits upon court order or even without court order
- Court order required
o Unlawful Activity
o Money laundering offense
o Related accounts
- No Court order required
o Kidnapping for random
o CDDA
o Hijacking
o Destructive Arson
o Murder
o Terrorism and conspiracy to commit terrorism
43. Sir: Can the AMLAC look into the deposits of De Lima even without court
order?
- FINAL EXAM QUESTION
44. REPUBLIC VS EUGENIO
- NAIA CORRUPTION CASE
- AMLA – NO NEED PRE-EXISTING CRIMINAL CASE
- Authority of AMLC to inquire into and examine bank deposits - Inquiry
into deposits under Sec. 11 does not require a pre-existing criminal case
45. TRUTH IN LENDING ACT
- The law assured full disclosure by requiring the lender to give the borrower
all the details regarding the transaction
- Sir: All the details of the loan transaction. More importantly, the amount to be
paid by the borrower in order to avoid hidden charges. There should be
)
th
10 meeting (LAST MEETING!) 4. What is the difference between copyright, trademark, patent?
April 24, 2017
COPYRIGHT TRADEMARK PATENT
Confined to literary and Any visible sign capable Refer to any technical
artistic works which are of distinguishing the solution of a problem in
1. What does the term IP consist of? original intellectual goods (trademark) or any field of human
1. Copy rights and related rights creations in the literary services (service mark) activity which is new,
2. Trademarks and service marks and artistic domain of an enterprise and involves an inventive
3. Patents protected from the shall include a stamped step and is industrially
4. Geographical Indications moment of creation or marked container of applicable
5. Layout designs (topographies) of integrated circuits goods
6. Protection of Undisclosed Information
7. Industrial Design 5. KHO VS CA
2. Geographic Indications - CHIN CHUN SU PRODUCTS
- Indications which identify a good as originating in the territory or a region or - X INJUNCTION
locality in that territory, where a given quality, reputation or other - REGISTERED UNDER COPYRIGHT à SHOULD HAVE BEEN
characteristics of the goods is essentially attributed to its geographical origin TRADEMARK
- Ex. Indications which identify wine as coming from a specific region in France - KHO = X HAVE EXCLUSIVE RIGHT TO THE NAME AND ITS CONTAINER
- Sir: What about local example? - A trade name and container of a medicated cream is the proper subject
o Student’s answer: Durian from Mindanao of trademark. Hence, copyright and patent registration of the name and
o Sir: What about Pancit Malabon? container would not guarantee the registrant the right to exclusive use of the
§ NOT ANSWERED same not the proper subjects thereof.
3. Protection of Undisclosed Information - Kho’s copyright and patent registration of the name and container would not
- Protection of the information guarantee her the right to the exclusive use of the same for the reason that
- Preventing information lawfully within their control from being disclosed to, they are not appropriate subjects of the said intellectual rights.
acquired by or used by others without their consent in manner contrary to - Sir: Why did the SC say that it is not the proper subject of copyright and
honest commercial practices so long as the information: patent?
1. Is a SECRET in the sense that it is not, as a body or in the precise o Because copyright is only limited to artistic and literary works
configuration and assembly of its components, generally known among o On the other hand, patents involve technical solution in any field of
or readily accessible to persons within the circles that normally deal with human activity
the kind of info in question - Sir: So, under what type of protection should the beauty product fall?
2. Has COMMERCIAL VALUE because it is secret o Trademark or trade name on the assumption that it complies with
3. Has ben subject to REASONABLE STEPS under the circumstances, by the requirement on registration
the person lawfully in control of the information, to keep it a secret - A trademark is any visible sign capable of distinguishing the goods (trademark) or
- Sir: What is the benefit of protection of said information? services (service mark) of an enterprise and shall include a stamped or marked container
o The information is protected from being disclosed. Hence, persons of goods. In relation thereto, a trade name means the name or designation identifying
who are in control of the information cannot disclose this or distinguishing an enterprise.
- Meanwhile, the scope of a copyright is confined to literary and artistic works which are
information. Otherwise, the persons who disclose it will be liable for
original intellectual creations in the literary and artistic domain protected from the
damages. moment of their creation.
- Sir: Give an example - Patentable inventions, on the other hand, refer to any technical solution of a problem
o Sir’s example: Formula in making coke. There is only one person in any field of human activity which is new, involves an inventive step and is industrially
who is in possession of this formula. applicable
COVERAGE OF FINALS
st
- 2 or 3 questions from the 1 half
nd
- The rest will be 2 half (FOCUS)
nd
- 2 half cases only
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