MERCANTILE LAW

2013 BAR EXAMINATIONS

COVERAGE

Black 2013 SYLLABUS Green GREEN NOTES WITH YELLOW HIGHLIGHT NOT INCLUDED IN THE GREEN NOTES WITH RED HIGLIGHT EXCLUDED
I. Letters of Credit A. Definition and Nature of Letter of Credit B. Parties to a Letter of Credit 1. Rights and Obligations of Parties C. Basic Principles of Letter of Credit 1. Doctrine of Independence 2. Fraud Exception Principle 3. Doctrine of Strict Compliance

II. Trust Receipts Law A. Definition/Concept of a Trust Receipt Transaction 1. Loan/Security Feature 2. Ownership of the Goods, Documents and Instruments under a Trust Receipt B. Rights of the Entruster 1. Validity of the Security Interest as Against the Creditors of the Entrustee/Innocent Purchasers for Value C. Obligation and Liability of the Entrustee 1. Payment/Delivery of Proceeds of Sale or Disposition of Goods, Documents or Instruments 2. Return of Goods, Documents or Instruments in Case of Sale 3. Liability for Loss of Goods, Documents or Instruments 4. Penal Sanction if Offender is a Corporation D. Remedies Available C. Warehousemans Lien

III. Negotiable Instruments Law A. Forms and Interpretation 1. Requisites of Negotiability 2. Kinds of Negotiable Instruments

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B. Completion and Delivery What is meant by delivery under the Negotiable Instruments Law? Delivery as the term is used in Section 12 of the Negotiable Instruments Law means that the party delivering did so for the purpose of giving effect thereto. San Miguel Corporation vs. Puzon, Jr., 631 SCRA 48 (Page 5 of the GREEN NOTES) 1. Insertion of Date 2. Completion of Blanks 3. Incomplete and Undelivered Instruments 4. Complete but Undelivered Instruments C. Signature 1. Signing in Trade Name 2. Signature of Agent 3. Indorsement by Minor or Corporation Who must indorse the instrument if it is payable to the order of two or more payees or indorsees who are not partners? Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others. The payment of an instrument over a missing indorsement is the equivalent of payment of a forged indorsement or an unauthorized indorsement in itself in the case of joint payees. One who credits the proceeds of a check to the account of the indorsing payee is liable in conversion to the non-indorsing payee for the entire amount of the check. Metropolitan Bank and Trust Company vs. BA Finance Corporation, 607 SCRA 620 (Page 4 of the GREEN NOTES) 4. Forgery D. Consideration E. Accommodation Party F. Negotiation 1. Distinguished from Assignment

2. Modes of Negotiation 3. Kinds of Indorsements G. Rights of the Holder 1. Holder in Due Course 2. Defenses Against the Holder H. Liabilities of Parties 1. Maker 2. Drawer 3. Acceptor 4. Indorser 5. Warranties I. Presentment for Payment 1. Necessity of Presentment for Payment 2. Parties to Whom Presentment for Payment Should Be Made 3. Dispensation with Presentment for Payment 4. Dishonor by Non-Payment J. Notice of Dishonor 1. Parties to Be Notified 2. Parties Who May Give Notice and Dishonor

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3. Effect of Notice 4. Form of Notice 5. Waiver 6. Dispensation with Notice 7. Effect of Failure to Give Notice K. Discharge of Negotiable Instrument 1. Discharge of Negotiable Instrument 2. Discharge of Parties Secondarily Liable 3. Right of Party Who Discharged Instrument 4. Renunciation by Holder L. Material Alteration 1. Concept 2. Effect of Material Alteration M. Acceptance 1. Definition 2. Manner 3. Time for Acceptance 4. Rules Governing Acceptance N. Presentment for Acceptance 1. Time/Place/Manner of Presentment 2. Effect of Failure to Make Presentment 3. Dishonor by Non-Acceptance O. Promissory Notes P. Checks 1. Definition 2. Kinds 3. Presentment for Payment a. Time b. Effect of Delay

IV. Insurance Code A. Concept of Insurance B. Elements of an Insurance Contract

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C. Characteristics/Nature of Insurance Contracts D. Classes 1. Marine 2. Fire 3. Casualty 4. Suretyship 5. Life 6. Compulsory Motor Vehicle Liability Insurance E. Insurable Interest 1. In Life/Health 2. In Property 3. Double Insurance and Over Insurance 4. Multiple or Several Interests on Same Property F. Perfection of the Contract of Insurance 1. Offer and Acceptance/Consensual a. Delay in Acceptance b. Delivery of Policy 2. Premium Payment 3. Non-Default Options in Life Insurance 4. Reinstatement of a Lapsed Policy of Life Insurance 5. Refund of Premiums G. Rescission of Insurance Contracts 1. Concealment 2. Misrepresentation/Omissions 3. Breach of Warranties H. Claims Settlement and Subrogation 1. Notice and Proof of Loss 2. Guidelines on Claims Settlement a. Unfair Claims Settlement; Sanctions b. Prescription of Action

c. Subrogation What is the basis of subrogation? The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract-it accrues simply upon payment by the insurance company of the insurance claim. Keppel Cebu Shipyard, Inc. vs. Pioneer Insurance and Surety Corporation. 601 SCRA 96 (Page 5 of the GREEN NOTES)

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V. Transportation Laws A. Common Carriers 1. Diligence Required of Common Carriers 2. Liabilities of Common Carriers May brothers and sisters of a deceased passenger recover moral damages from a common carrier? The omission from Article 2206(3) of the brothers and sisters of the deceased passenger reveals the legislative intent to exclude them from the recovery of moral damages for mental anguish by reason of the death of the deceasedthe solemn power and the duty of the courts to interpret and apply the law do not include the power to correct the law by reading into it was is not written therein. Sulpicio Lines, Inc. vs. Curso, 615 SCRA 575. (Page 5 of the GREEN NOTES) B. Vigilance over Goods 1. Exempting Causes a. Requirement of Absence of Negligence b. Absence of Delay c. Due Diligence to Prevent or Lessen the Loss 2. Contributory Negligence How is contributory negligence defined? Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. Sealoader Shipping Corporation vs. Grand Cement Manufacturing Corporation, 638 SCRA 488. (Page 6 of the GREEN NOTES) 3. Duration of Liability a. Delivery of Goods to Common Carrier b. Actual or Constructive Delivery c. Temporary Unloading or Storage 4. Stipulation for Limitation of Liability a. Void Stipulations b. Limitation of Liability to Fixed Amount c. Limitation of Liability in Absence of Declaration of Greater Value

5. Liability for Baggage of Passengers a. Checked-In Baggage b. Baggage in Possession of Passengers C. Safety of Passengers 1. Void Stipulations 2. Duration of Liability a. Waiting for Carrier or Boarding of Carrier b. Arrival at Destination 3. Liability for Acts of Others a. Employees b. Other Passengers and Strangers 4. Extent of Liability for Damages D. Bill of Lading 1. Three-Fold Character 2. Delivery of Goods

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a. Period of Delivery b. Delivery Without Surrender of Bill of Lading c. Refusal of Consignee to Take Delivery 3. Period for Filing Claims 4. Period for Filing Actions E. Maritime Commerce 1. Charter Parties a. Bareboat/Demise Charter b. Time Charter c. Voyage/Trip Charter 2. Liability of Ship Owners and Shipping Agents a. Liability for Acts of Captain b. Exceptions to Limited Liability 3. Accidents and Damages in Maritime Commerce a. General Average b. Collisions 4. Carriage of Goods by Sea Act a. Application b. Notice of Loss or Damage c. Period of Prescription

d. Limitation of Liability Who is the person who could avail of the Limited Liability Rule? With respect to petitioners position that the Limited Liability Rule under the Code of Commerce should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real and hypothecary doctrine in maritime law where the shipowner or ship agents liability is held as merely co extensive with his interest in the vessel such that a total loss thereof results in its extinction. In this jurisdiction, this rule is provided in three articles of the Code of Commerce. These are: Art. 587. The ship agent shall also be civilly liable for the indemnities in favour of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage.---Art. 590. The co-owners of the vessel shall be civilly liable in the proporation of their interests in the common fund for the results of the acts of the captain referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.---Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage. Article 837 specifically applies to cases involving collision which is necessary consequence of the right to abandon the vessel given to the shipowner or ship agent under the first provisionArticle 587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned by several persons. Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule, and these are theindemnities in favour of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel. Thus, what is contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the character in case of demise or bareboat charter. The only person who could avail of this is the shipowner, Concepcion. He is the very person whom the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke this as a defense. Dela Torre vs. Court of Appeals, 653 SCRA 714 What is the effect of the failure of a ship owner to overcome the presumption of liability on the application of the doctrine of limited liability? Where the ship owner has failed to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. Aboitiz Shipping Corporation vs. New India Assurance Company, Ltd. 531 SCRA 134 (Page 5 of the GREEN NOTES)

F. The Warsaw Convention May a cause of action based on tortuous conduct defeat the jurisdictional requirements of the Warsaw Convention? Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages beforethe court where the carrier is domiciled; (2) the court where the carrier has its principal place of business; (3) the court where the carrier has an establishment by which the contract has been made; or (4) the court of the place of destination. We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus: A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages must be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to regulate in a uniform manner the conditions of international transportation by air. Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase rules as to jurisdiction used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as jurisdictions, which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred. Edna Diago Lhuilier vs. British Airways, 615 SCRA 380 (Pages 5-6 of the GREEN NOTES) 1. Applicability 2. Limitation of Liability a. Liability to Passengers b. Liability for Checked Baggage c. Liability for Hand-Carried Baggage 3. Willful Misconduct

VI. The Corporation Code A. Corporation 1. Definition 2. Attributes of the Corporation

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B. Classes of Corporations C. Nationality of Corporations 1. Place of Incorporation Test 2. Control Test 2. Grandfather Rule D. Corporate Juridical Personality 1. Doctrine of Separate Juridical Personality a. Liability for Torts and Crimes When a statute provides that criminal liability shall attach to an officer charged with the management of its business affairs, does criminal liability attach to the members of the board? Members of the board are excluded. This stands to reason for the board of directors of a corporation is generally a policy making body. Even if corporate powers of a corporation are reposed in the board of directors under the first paragraph of Section 23 of the Corporation Code, it is of common knowledge and practice that the board of directors is not directly engaged or charged with the running of the recurring business affairs of the corporation. Depending on the powers granted by them by the Articles of Incorporation, the members of the board generally do not concern themselves with the day-to-day affairs of the corporation, except those corporate officers who are charged with running the business of the corporation and are concomitantly members of the board, like the President. Section 25 of the Corporation Code requires the president of a corporation to be also a member of the board of directors. TY vs. De Jemil, 638 SCRA 671 (Page 2 of the GREEN NOTES) b. Recovery of Moral Damages Would a labor organization be entitled to the payment of moral damages? On the matter of the damages prayed for by the petitioners, we have held that as a general rule, a corporation cannot suffer nor be entitled to moral damages. A corporation, and by analogy a labor organization, being an artificial being and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life-all of which cannot be suffered by an artificial, juridical person. A fortiori, the prayer for exemplary damages must also be denied. Employees Union of Bayer Phils. vs. Bayer Philippines, Inc. 636 SCRA 473 (Page 1 of the GREEN NOTES)

2. Doctrine of Piercing the Corporate Veil How does a court look at the corporation when the doctrine of piercing the veil of corporate fiction applies? Under the doctrine of piercing the veil of corporate fiction, the court looks at the corporation as a mere collection of individuals or an aggregation of persons undertaking a business as a group, disregarding the separate juridical personality of the corporation unifying the group. Kukan International Corporation vs. Reyes, 631 SCRA 596 (Page 1 of the Green Notes)

a. Grounds for Application of Doctrine b. Test in Determining Applicability E. Incorporation and Organization 1. Promoter a. Liability of Promoter b. Liability of Corporation for Promoters Contracts 2. Number and Qualifications of Incorporators 3. Corporate NameLimitations on Use of Corporate Name 4. Corporate Term 5. Minimum Capital Stock and Subscription Requirements What is the meaning of capital in Section 11, Article XII of the Constitution in relation to corporations or associations who may be granted a franchise, certificate, or any other form of authorization for the operation of a public utility? Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term capital in Section 11, Article XII of the Constitution refers only to common shares. However, if preferred shares also have the right to vote in the election of directors, then the term capital shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. In short, the term capital in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors. Gamboa vs. Teves, 652 SCRA 690. (Page 1 of the GREEN NOTES) 6. Articles of Incorporation a. Nature and Function of Articles b.

Contents c. Amendment d. Non-Amenable Items 7. Registration and Issuance of Certificate of Incorporation 8. Adoption of By-Laws a. Nature and Functions of By-Laws b. Requisites of Valid By-Laws c. Binding Effects d. Amendment or Revision F. Corporate Powers 1. General Powers, Theory of General Capacity

2. Specific Powers, Theory of Specific Capacity a. Power to Extend or Shorten Corporate Term b. Power to Increase or Decrease Capital Stock or Incur, Create, Increase Bonded Indebtedness c. Power to Deny Pre-Emptive Rights d. Power to Sell or Dispose of Corporate Assets e. Power to Acquire Own Shares f. Power to Invest Corporate Funds in Another Corporation or Business g. Power to Declare Dividends h. Power to Enter Into Management Contract i.

Ultra Vires Acts

i. Applicability of Ultra Vires Doctrine ii. Consequences of Ultra Vires Acts 3. How Exercised a. By the Shareholders b. By the Board of Directors c. By the Officers 4. Trust Fund Doctrine May a corporate creditor satisfy his claim from unpaid subscriptions based on the trust fund doctrine? We clarify that the trust fund doctrine is not limited to reaching the stockholders unpaid subscriptions. The scope of the doctrine when the corporation is insolvent encompasses not only the capital stock, but also other property and assets generally regarded in equity as a trust fund for the payment of corporate debts. All assets and property belonging to the corporation held in trust for the benefit of creditors that were distributed or in the possession of the stockholders, regardless of full payment of their subscriptions, may be reached by the creditor in satisfaction of its claim. Also, under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber to its capital stock from the obligation of paying for his shares, in whole or in part, without a valuable consideration, or fraudulently, to the prejudice of creditors. The creditor is allowed to maintain an action upon any unpaid subscriptions and thereby steps into the shoes of the corporation for the satisfaction of its debt. To make out a prima facie case in a suit against stockholders of an insolvent corporation to compel them to contribute to the payment of its debts by making good unpaid balances upon their subscriptions, it is only necessary to establish that the stockholders have not in good faith paid the par value of the stocks of the corporation. Halley vs. Printwell, Inc., 649 SCRA 116 (Page 1 of the GREEN NOTES)

G. Board of Directors and Trustees 1. Doctrine of Centralized Management 2. Business Judgment Rule 3. Tenure, Qualifications and Disqualifications of Directors or Trustees 4. Elections a. Cumulative Voting/Straight Voting b. Quorum 5. Removal 6. Filling of Vacancies 7. Compensation 8. Fiduciaries Duties and Liability Rules 9. Responsibility for Crimes 10. Inside Information 12. Contracts a. By Self-Dealing Directors with the Corporation b. Between Corporations with Interlocking Directors

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c. Management Contracts 16. Executive Committee 17. Meetings What are the distinctions between a resolution and minutes of the meeting? A board resolution is a formal action by a corporate board of directors or other corporate body authorizing a particular act, transaction, or appointment, while, on the other hand, minutes are a brief statement not only of what transpired at a meeting, usually of stockholders/members or directors/trustees, but also at a meeting of an executive committee. The signing of the minutes by all the members of the board is not requiredthere is no provision in the Corporation Code of the Philippines that requires that the minutes of the meeting should be signed by all the members of the board. The signature of the corporate secretary gives the minutes of the meeting probative value and credibility. People vs. Dumlao, 580 SCRA 409 (Page 2 of the GREEN NOTES)

A. Regular or Special i. ii. c. Quorum d. Rule on Abstention H. Stockholders and Members 1. Rights of a Stockholder and Members a. Doctrine of Equality of Shares 2. Participation in Management a. Proxy b. Voting Trust c. Cases When Stockholders Action is Required i. By a Majority Vote When and Where ii. Notice b. Who Presides

ii. By a Two-Thirds Vote iii. By Cumulative Voting 3. Proprietary Rights a. Right to Dividends b. Right of Appraisal What remedy is available to stockholders when the effect of an amendment of the articles would be prejudicial to their rights? The right of appraisal may be exercised when there is a fundamental change in the charter or articles of incorporation substantially prejudicing the rights of the stockholders. Turner vs. Lorenzo Shipping Corporation, 636 SCRA 13 (Page 3 of the GREEN NOTES) c. Right to Inspect d. Pre-Emptive Right e. Right to Vote f. Right to Dividends g. Right of First Refusal 4. Remedial Rights a. Individual Suit b. Representative Suit c. Derivative Suit What are the requisites for the bringing of a derivative suit? A stockholder or member may bring an action in the name of the corporation or association, as the case may be, provided, that: (1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action was filed; (2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires; (3) No appraisal rights are available for the act or acts complained of; and (4) The suit is not a nuisance or harassment suit. Cua, Jr. vs. Tan, 607 SCRA 645 (Page 3 of the GREEN NOTES)

5. Obligation of a Stockholder

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6. Meetings a. Regular or Special i. When and Where ii. Notice b. Who Calls the Meetings c. Quorum d. Minutes of the Meetings I. Capital Structure 1. Subscription Agreements 2. Consideration for Stocks 3. Shares of Stock a. Nature of Stock b. Subscription Agreements c. Consideration for Shares of Stock d. Watered Stock i. Definition ii. Liability of Directors for Watered Stocks iii. Trust Fund Doctrine for Liability for Watered Stocks e.

Situs of the Shares of Stock

f. Classes of Shares of Stock 4. Payment of Balance of Subscription a. Call by Board of Directors b. Notice Requirement c. Sale of Delinquent Shares i. Effect of Delinquency ii. Call by Resolution of the Board of Directors iii. Notice of Sale iv. Auction Sale and the Highest Bidder 5. Certificate of Stock a. Nature of the Certificate b. Uncertificated Shares

c. Negotiability i. Requirements for Valid Transfer of Stocks

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d. Issuance i. Full Payment ii. Payment Pro-Rata e. Lost or Destroyed Certificates 6. Stock and Transfer Book a. Contents b. Who May Make Valid Entries 7. Disposition and Encumbrance of Shares a. Allowable Restrictions on the Sale of Shares b. Sale of Partially Paid Shares c. Sale of a Portion of Shares Not Fully Paid d. Sale of All of Shares Not Fully Paid e. Sale of Fully Paid Shares f. Requisites of a Valid Transfer g. Involuntary Dealings with Shares J. Dissolution and Liquidation 1. Modes of Dissolution a. Voluntary i. Where No Creditors Are Affected ii. Where Creditors Are Affected iii. By Shortening of Corporate Term b. Involuntary i. By Expiration of Corporate Term ii. Failure to Organize and Commence Business Within 2 Years from Incorporation iii. Legislative Dissolution iv. Dissolution by the SEC on Grounds under Existing Laws 2. Methods of Liquidation a. By the Corporation Itself b. Conveyance to a Trustee within a 3-Year Period

c. By Management Committee or Rehabilitation Receiver What is corporate rehabilitation and what effect does the appointment of an interim rehabilitation receiver have on the exercise of corporate powers by the board and its officers? Corporate rehabilitation is defined as the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan more if the corporation continues as a going concern that if it is immediately liquidated. The interim rehabilitation receiver of the debtor corporation does not take over the control and management of the debtor corporation. Likewise, the rehabilitation receiver that will replace the interim receiver is tasked only to monitor the successful implementation of the rehabilitation plan. There is nothing in the concept of corporation rehabilitation that would ipso facto deprive the Board of Directors and corporate officers of a debtor corporation, such as ASB Realty, of control that it can no longer enforce its rights to recover its property from an errant lessee. Umale vs. ASB Realty Corporation (Page 3 of the GREEN NOTES)

d. Liquidation after Three Years

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K. Other Corporations 1. Close Corporations a. Characteristics of a Close Corporation b. Validity of Restrictions on Transfer of Shares c. Issuance or Transfer of Stock in Breach of Qualifying Conditions d. When Board Meeting is Unnecessary or Improperly Held e. Pre-Emptive Right f. Amendment of Articles of Incorporation g. Deadlocks 2. Non-Stock Corporations a. Definition b. Purposes c. Treatment of Profits d. Distribution of Assets upon Dissolution 3. Religious Corporations - Exclude 4. Foreign Corporations a. Bases of Authority over Foreign Corporations i. Consent ii. Doctrine of Doing Business (relate to definition under the Foreign Investments Act, R.A. No. 7042) Is the importation by a foreign company of goods from a Philippine exporter considered as doing business in the Philippines? A foreign company that merely imports goods from a Philippine exporter without opening an office or appointing an agent in the Philippines is not doing business in the Philippines. Cargill, inc. vs. Intra Strata Assurance Corp., 615 SCRA 304 (Page 3 of the GREEN NOTES b. Necessity of a License to Do Business i. ii. Requisites for Issuance of a License Resident Agent c. Personality to Sue

d. Suability of Foreign Corporations e. Instances When Unlicensed Foreign Corporations May Be Allowed to Sue Isolated Transactions f. Grounds for Revocation of License L. Mergers and Consolidations 1. Definition and Concept 2. Constituent vs. Consolidated Corporation 3. Plan of Merger or Consolidation 4. Articles of Merger or Consolidation 5. Procedure

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6. Effectivity 7. Limitations 8. Effects Would employees of the non-surviving corporation be required by the Corporation Code to be absorbed by the surviving corporation in case of a merger? In legal parlance, human beings are never embraced in the term assets and liabilities; the Corporation Code does not mandate the absorption of the employees of the non-surviving corporation by the surviving corporation in the case of a merger. Bank of the Philippine Islands vs. BPI Employees Union-Davao ChapterFederation of Unions in BPI Unibank, 627 SCRA 590. (Page 3 of the GREEN NOTES)

VII. Securities Regulation Code (R.A. No. 8799) A. State Policy, Purpose B. Securities Required to Be Registered 1. Exempt Securities 2. Exempt Transactions C. Procedure for Registration of Securities D. Prohibitions on Fraud, Manipulation and Insider Trading 1. Manipulation of Security Prices 2. Short Sales 3. Fraudulent Transactions 4. Insider Trading E. Protection of Investors 1. Tender Offer Rule 2. Rules on Proxy Solicitation What is the difference between proxy solicitation and proxy validation? Proxy solicitation involves the securing and submission of proxies, while proxy validation concerns the validation of such secured and submitted proxies. Government Service Insurance System vs. Court of Appeals, 585 SCRA 679 (Page 4 of the GREEN NOTES)

3. Disclosure Rule F. Civil Liability VIII. Banking Laws A. The New Central Bank Act (R.A. No. 7653) 1. State Policies 2. Creation of the Bangko Sentral ng Pilipinas (BSP) 3. Responsibility and Primary Objective 4. Monetary BoardPowers and Functions 5. How the BSP Handles Banks in Distress a. Conservatorship b. Closure c. Receivership d. Liquidation 6. How the BSP Handles Exchange Crisis

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a. Legal Tender Power b. Rate of Exchange B. Law on Secrecy of Bank Deposits (R.A. No. 1405, as amended) 1. Purpose 2. Prohibited Acts 3. Deposits Covered 4. Exceptions 5. Garnishment of Deposits, Including Foreign Deposits C. General Banking Law of 2000 (R.A. No. 8791) 1. Definition and Classification of Banks 2. Distinction of Banks from Quasi-Banks and Trust Entities 3. Bank Powers and Liabilities a. Corporate Powers b. Banking and Incidental Powers 4. Diligence Required of Banks Relevant Jurisprudence 5. Nature of Bank Funds and Bank Deposits 6. Stipulation on Interests 7. Grant of Loans and Security Requirements a. Ratio of Net Worth to Total Risk Assets b. Single Borrowers Limit c. Restrictions on Bank Exposure to DOSRI (Directors, Officers, Stockholders and their Related Interests)

IX. Intellectual Property Code (Exclude Implementing Rules & Regulations) A. Intellectual Property Rights in General 1. Intellectual Property Rights 2. Differences between Copyrights, Trademarks and Patent 3. Technology Transfer Arrangements B. Patents 1. Patentable Inventions 2. Non-Patentable Inventions

3. Ownership of a Patent a. Right to a Patent

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b. First-to-File Rule What is the significance of proof of actual use? RA 8293 espouses the first-to-file rule as stated under Sec. 123.1 (d) which states: Section 123. Registrability.123.1. A mark cannot be registered if it: x x x x (d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of: (i) The same goods or services, or (ii) Closely related goods or services, or (iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion. Under this provision, the registration of a mark is prevented with the filing of an earlier application for registration. This must not, however, be interpreted to mean that ownership should be based upon an earlier filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing an application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of a mark. Such ownership constitutes sufficient evidence to oppose the registration of a mark. E.Y. Industrial Sales, Inc. vs. Shen Dar Electricity and Machinery Co., Ltd., 634 SCRA 363 (Page 8 of the GREEN NOTES) c. Inventions Created Pursuant to a Commission d. Right of Priority 4. Grounds for Cancellation of a Patent 5. Remedy of the True and Actual Inventor 6. Rights Conferred by a Patent 7. Limitations of Patent Rights a. Prior User b. Use by the Government 8. Patent Infringement a. Tests in Patent Infringement i. Literal Infringement ii. Doctrine of Equivalents b. Defenses in Action for Infringement 9. Licensing a. Voluntary b. Compulsory 10. Assignment and Transmission of Rights

C. Trademarks 1. Definition of Marks, Collective Marks, Trade Names 2. Acquisition of Ownership of Mark 3. Acquisition of Ownership of Trade Name Is there a need for a trade name to be registered before an infringement suit can be filed? A trade name need not be registered with the Intellectual Property Office (IPO) before an infringement suit may be filed by its owner against the owner of an infringing trademark; All that is required is that the trade name is previously used in trade or commerce in the Philippines. Coffee Partners, Inc., vs. San Francisco Coffee & Roastery, Inc., 614 SCRA 113. (Page 8 of the GREEN NOTES) 4. Non-Registrable Marks 5. Prior Use of Mark as a Requirement 6. Tests to Determine Confusing Similarity between Marks a. Dominancy Test b. Holistic Test 7. Well-Known Marks 8. Rights Conferred by Registration 9. Use by Third Parties of Names, etc. Similar to Registered Mark 10. Infringement and Remedies a. Trademark Infringement How is trademark infringement determined? The element of likelihood of confusion is the gravamen of trademark infringement; Two types of confusion in trademark infringement: confusion of goods and confusion of business; two types of confusion distinguished. Factors in determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold. Societe Des Produits Nestle, S.A. vs. Dy, Jr., 627 SCRA 223. (Page 8 of the GREEN NOTES)

b. Damages

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c. Requirement of Notice 11. Unfair Competition 12. Trade Names or Business Names 13. Collective Marks D. Copyrights 1. Basic Principles, Sections 172.2, 175 and 181 2. Copyrightable Works a. Original Works b. Derivative Works 3. Non-Copyrightable Works 4. Rights of Copyright Owner 5. Rules on Ownership of Copyright 6. Limitations on Copyright a. Doctrine of Fair Use b. Copyright Infringement

X. Special Laws A. The Chattel Mortgage Law and Real Estate Mortgage Law (Excluded and made a part of Civil Law coverage) B. Anti-Money Laundering Act (R.A. No. 9160, as amended by R.A. No. 9194) 1. Policy of the Law 2. Covered Institutions 3. Obligations of Covered Institutions 4. Covered Transactions 5. Suspicious Transactions 6. When Is Money Laundering Committed 7. Unlawful Activities or Predicate Crimes 8. Anti-Money Laundering Council 9. Functions 10. Freezing of Monetary Instrument or Property 11. Authority to Inquire Into Bank Deposits

2013 Bar Examination Coverage

17

Mercantile Law

C. Foreign Investments Act (R.A. No. 7042) 1. Policy of the Law 2. Definition of Terms a. Foreign Investment b. Doing Business in the Philippines c. Export Enterprise d. Domestic Market Enterprise 3. Registration of Investments on Non-Philippine Nationals 4. Foreign Investments in Export Enterprise 5. Foreign Investments in Domestic Market Enterprise 6. Foreign Investment Negative List IMPORTANT NOTES: 1. This listing of covered topics is not intended and should not be used by the law schools as a course outline. This was drawn up for the limited purpose of ensuring that Bar candidates are guided on the coverage of the 2013 Bar Examinations. Listings whose subject matters run across several Bar Subjects shall be deemed to include only the subject matters specific to the given Bar Subject. For example, Impeachment is generally a topic under Political Law but is listed also under Legal and Judicial Ethics for the ethical components of this Bar Subject. Note that there may be specific identification of the covering Bar Subject where a topic may be common to several Bar Subjects. For example, Independent Civil Actions mentioned in the Civil Code shall be included as a topic in Remedial Law rather than in Civil Law. Note also that many special laws, rules or specific topics, otherwise covered by the different examinable Bar Subjects, have been omitted or are expressly excluded from the coverage of the 2013 Bar Examinations. 2. The appreciation of the fact situations in, and the answers to, some questions in every Bar Subject may require the consideration of underlying ethical rules and values. 3. All Supreme Court decisions - pertinent to a given Bar subject and its listed topics, and promulgated up to January 31, 2013 - are examinable materials within the coverage of the 2013 Bar Examinations.