CODE OF COMMERCE

COMMERCE branch of human activity; purpose is to bring products to

the consumer through operations habitually and with intent of gain
COMMERCIAL LAW branch of private law which regulates the juridical
relations arising from commercial acts
CHARACTERISTICS OF COMMERCIAL LAW:
1. 1. universal
2. 2. uniform
3. 3. equitable
4. 4. customary
. . progressive

!"#$%"&' "( )"*+ "( )",,+#)+ '$%-- .!!-%)./-+0
1. 1. merchants; boo1 of merchants and general provision of
contracts
2. 2. joint account association
3. 3. commercial barter
4. 4. transfers of non2negotiable credits
. . commercial contracts of overland transportation
3. 3. letters of credit
4. 4. maritime commerce
"$5+#'0
1. 1. )ommerce bringing products from the manufacturers to the
consumers
1. 2. )haracteristics of )ommerce0
1. a. habituality
2. b. rapidity if period is fi6ed7 debtor in delay without
need of demand; if contract does not fi6 period7 18 days
3. c. intent to join
1. 3. ,erchant0
1. a. %ndividuals legal capacity7 21 years7 or subject to
parental authority7 habitually engaged in commerce
2. b. 9uridical !ersons commercial and industrial company
organi:ed in accordance with law7 habitually engaged in
business
1. 4. ;eneral #ule0 ,inors cannot engage in commerce
Exceptions:
1. a. to continue business of deceased parents through guardian
2. b. court authori:es guardian to place minor and property in
business
3. c. minor is an alien and his national law allows him to be a
merchant
1. . <hich persons are not allowed to engage in commerce=
1. a. suffering accessory penalty of civil interdiction
>reclusion perpetua and reclusion temporal?
2. b. those judicially declared insolvent until they can
obtain their discharge
3. c. prohibited by )onstitution and special laws
1. 3. .liens
1. a. capacitated under his national law to engage in
business
2. b. engaged in the business in the !hilippines not reserved
for the (ilipinos
3. c. after securing license and /"% certificate
1. 4. (amily )ode0 +ither spouse may engage in business; when
objected to by the other7 court will loo1 into valid grounds7 i.e.
serious and moral grounds
1. @. /"% )ertificate must be obtained by0
1. a. alien
2. b. foreign firm
1. A. ,eaning of !hilippine &ational
1. a. citi:en
2. b. domestic corporation wholly owned and organi:ed by
(ilipinos in the !hilippines
3. c. (ilipino corporation where (ilipino capital entitled to
vote is at least 38B
1. 18. Query0 %f a corporation is a shareholder of another
corporation7 how do you determine whether the latter corporation is
a (ilipino national=
Answer0 $he following must concur 2
1. a. .t least 38B of the outstanding capital stoc1 and entitled to
vote of both corporations are held by citi:ens of the !hilippines
2. b. .t least 38B of the /oard of *irectors of both corporations are
(ilipinos
1. 11. $enor of /"% )ertificate
1. a. /usiness or activity to be engaged is consistent with
the %nvestment !riorities !lan
2. b. /usiness will contribute to the sound and balanced
development of the national economy in a self2sustaining basis
3. c. /usiness will not conflict with the )onstitution and
local laws
4. d. /usiness is not adequately e6ploited by (ilipino
nationals
. e. &o danger of monopoliesCcombinations in restraint of
trade
1. 12. /asic !rinciplesC)onditions laid down by /"%
1. a. resident agent of foreign firm is a (ilipino citi:en
2. b. establishment of office in the !hilippines
3. c. bringing assets tot he !hilippine office as capital
4. d. complete set of accounting records
1. 13. ,erger and )onsolidation subject to /"% requirements for the
issuance of certificate0
<hen merger and consolidation result in ownership and control of non2
(ilipino nationals over more than 48B of the capital of a consolidated
corporation.
1. 14. '+) -icense issued upon compliance with the following
requirements0
1. a. proof of compliance with principle of reciprocity
2. b. /"% certificate
3. c. .pplicant for license gives required information
n articles of incorporation
n by2laws
n names and addresses of resident agents
n principal place of business in the !hilippines
1. d. proof of solvency
2. e. deposit acceptable securities to protect future creditors
RETAIL TRADE NATIONALIZATION LAW
>&ote0 ,aterial on the #etail $rade -iberali:ation -aw will not be
included in this reviewer. 'upplement to follow?
1. 1. #etail $rade any act7 occupation7 or calling of habitually
selling direct to the general public7 merchandise7 commodities7 or
goods for consumption
9urisprudence has held that the term DretailE should be associated with
and limited to goods for personal7 family or household use7 consumption
and utili:ation. $he #etail $rade &ationali:ation -aw refers to
Dconsumption goodsE or Dconsumer goodsE which directly satisfy human
wants and desires and are needed for home and daily life. +6cluded
from the law are those goods which are considered generally raw
material used in the manufacture of other goods7 or if not7 as one of the
component raw material7 or at least as elements utili:ed in the process
of production and manufacturing.
1. 2. +lements of <hat )onstitutes #etail $rade0
1. a. $he seller habitually engages in selling;
2. b. $he sale is direct to the general public; and
3. c. $he object of the sale is limited to merchandise7
commodities or goods for consumption.
1. 3. ;eneral #ule0 .fter 1A347 only (ilipinos or corporations whose
capital is 188B (ilipino may engage in retail trade.
1. 4. +6ceptions7 that is7 instances when aliens may engage in
retail trade in the !hilippines0
1. a. manufacturer or processor if capital does not e6ceed
!7888.88;
2. b. farmer or agriculturist when selling his products;
3. c. manufacturer or processor selling to industrial or
commercial users or consumers who use the produce to render
service to the general public or to produce or manufacture
goods which are sold by them to the public;
4. d. hotel owners or 1eepers of restaurants included or
incidental to the hotel business;
. e. sale by a manufacturer or processor to the
;overnment or its agencies7 including government owned and
controlled corporations.
1. . Query: 5ow to determine citi:enship of shares of the
corporation when they are not held directly by individuals7 but in turn
held by another entity=
Answer0 apply the ;#.&*(.$5+# #F-+7 to wit0
'hares belonging to corporations or partnerships at least 38B of the
capital of which is owned by (ilipino citi:ens shall be considered as
!hilippine nationality7 but if the percentage of (ilipino ownership in the
corporation or partnership is less than 38B7 only the number of shares
corresponding to such percentage shall be counted as of !hilippine
nationality. $hus7 if 1887888 shares are registered in the name of a
corporation or partnership at least 38B of the capital stoc1 or capital
respectively7 of which belong to (ilipino citi:ens7 all of the said shares
shall be recorded as owned by (ilipinos. /ut7 if letGs say7 8B of the
capital stoc1 belongs to (ilipino citi:ens7 only 87888 shares shall be
counted as owned by (ilipinos and the other 87888 shares shall be
recorded as belonging to aliens.
5owever7 while a corporation with 38B (ilipino and 48B foreign equity
ownership is considered a !hilippine national for purposes of
investment7 it is not qualified to invest in or enter into a joint venture
agreement with corporations or partnerships7 the capital or ownership
of which under the )onstitution or other special laws are limited to
(ilipino citi:ens only. 5ence7 for purposes of the law7 whatever the
percentage of (ilipino ownership in the owning corporation7 the foreign
ownership would always render a portion of its holding in the company
as foreign equity and would disqualify the corporation to engage in
retail trade.
ANTI-DUMMY ACT
1. 1. $he .ct penali:es (ilipinos who permit aliens to use them as
nominees or dummies to enjoy privileges reserved for (ilipinos or
(ilipino corporations. )riminal sanctions are imposed on the
president7 manager7 board member or persons in charge of the
violating entity and causing the latter to forfeit its privileges7 rights
and franchises.
1. 2. *isqualified aliens cannot intervene in the management7
operation7 administration or control of the business reserved to
(ilipinos whether as an officer7 employee or laborer7 with or without
remuneration7 e6cept when0
1. a. alien ta1es part in technical aspects;
2. b. provided that no (ilipino can do such technical wor1;
and
3. c. with e6press authority from the !resident7 upon the
recommendation of the department head concerned.
1. 3. /y way of e6ception7 the following may participate in
management0
1. a. .liens may be elected to the /oard of *irectors to the
e6tent of their allowable share in the capital of the corporation
>in partially nationali:ed industries?.
2. b. . registered enterprise may employ foreign nationals
in supervisory7 technical7 and advisory positions for a period of
years subject to e6tension.
3. c. <here majority of stoc1s of a pioneer enterprise is
owned by foreign investors7 the following positions may be held
by foreign nationals0
n president
n treasurer
n general manager
n equivalent positions
1. 4. . (ilipino common2law wife of an alien is not barred from
engaging in the retail business provided she uses capital e6clusively
derived from her paraphernal properties; however7 allowing her
common2law alien husband to ta1e part in the management of the
retail business would be a violation of the law.
1. . <hat doing business means0
1. a. soliciting orders7 purchases7 service contracts;
2. b. opening offices whether called liaison offices or
branches;
3. c. appointing representatives or distributors who are
domiciled in the !hilippines or who in any calendar year stay in
the country for a period totaling 1@8 days or more;
4. d. participating in the management or supervision or
control of any domestic firm7 entity or corporation in the
!hilippines;
. e. any other act or acts that imply continuity in
commercial dealings
1. 3. <hen commissioned merchantsCinvestors or commercial
bro1ers act in their own name in selling foreign products7 the foreign
firm manufacturing these products is not doing business in the
!hilippines.
1. 4. <hen a local corporation or person acts in the name of a
foreign firm7 the latter is doing business in the !hilippines.
1. @. $he following are &"$ doing business0
1. a. mere investment as a shareholder by a foreign entity
in domestic corporations duly registered to do business;
2. b. e6ercise of rights as such investor;
3. c. having a nominee director or officer to represent
interests in such corporation;
4. d. appointing a representative or distributor domiciled in
the !hilippines which transacts business in its own name and for
its own accounts.
2. 1. !urpose0
1. a. to encourage use of and to promote transactions based
on trust receipts;
2. b. to regulate the use of trust receipts
TRUST RECEIPTS LAW
1. 2. *efinition0
. writtenCprinted document signed by the +&$#F'$++ in favor of the
+&$#F'$+# whereby the latter releases the goods7 documents or
instruments tot he possession of the former upon the +&$#F'$++G'
promise to hold said goods in trust for the +&$#F'$+#7 and to sell the
goods7 etc. <%$5 $5+ "/-%;.$%"& $" $F#& "H+# $5+ !#")++*'
$5+#+"( $" $5+ +I$+&$ "( <5.$ %' "<%&; $" $5+ +&$#F'$+#; or to
return the goods if F&'"-*7 or for other purposes.
1. 3. $rust receipts are denominated in !hilippine currency or
acceptable and eligible foreign currency.
1. 4. +&$#F'$+# is not liable as principal or vendor under any sale
or contract to sell made by the +&$#F'$++.
1. . #is1 of loss is borne by the +&$#F'$++.
1. 3. !ending the duration of the trust agreement7 the
+&$#F'$+#G' security interest cannot be prejudiced by claims of
creditors of the +&$#F'$++.
1. 4. -oss of goods pending the dispossession shall not e6tinguish
the obligation to the +&$#F'$+# for the value thereof.
LETTERS OF CREDIT
1. 1. Jinds0
1. a. )ommercial -etters of )redit
2. b. $ravelerGs -etters of )redit
1. 2. &o protest required in case of dishonor.
1. 3. %ssued to definite persons and not to order7 thus7 non2
negotiable.
2. 4. -imited to a fi6ed account.
PRICE TAS LAW
1. 1. %t requires articles of commerce sold at retail to bear prices.
!OINT ACCOUNTS
1. 1. %t e6ists when a merchant interests himself in the transaction
of another merchant7 contributing thereto the amount of capital they
may agree upon7 and participating in the favorable or unfavorable
results thereof in the proportion they may determine.
1. 2. 9oint accounts do not adopt a firm name.
1. 3. &o suit may be maintained investor and third persons
dealing with the merchant conducting business.
1. 4. %t is not subject to any formal requirement for validity; it may
be oral.
"UL# SALES LAW
1. 1. !urpose0 meant to protect creditors of businessmen against
preferential or fraudulent transfers
1. 2. $he law covers all transactions7 whether done in good faith
or not, or whether or not the seller is in a state of insolvency7 that
fall within the description of what is a Dbul1 sale.E
1. 3. $ypes of transactions which are treated as Dbul1 salesE0
1. a. 'ale7 transfer7 mortgage or assignments of a stoc1 of
goods7 wares7 merchandise7 provisions7 or materials otherwise
than in the ordinary course of trade;
2. b. 'ale transfer7 mortgage or assignments of all7 or
substantially all7 of the business of the vendor7 mortgagor7
transferor7 or assignor;
3. c. 'ale7 transfer7 mortgage7 or assignment of all7 or
substantially all7 of the fi6tures and equipment used in the
business of the vendor7 mortgagor7 transferor7 or assignor.
1. 4. "nly creditors at the time of the sale in violation of the law
are within the protection of the laws and creditors subsequent to the
sale are not covered.
1. . +ven if the transaction falls within the definition of Dbul1
saleE7 the following are not deemed covered by the law0
1. a. %f the vendor7 mortgagor7 transferor or assignor
produces and delivers a written waiver of the provisions of the
law from his creditors as shown by verified statements;
2. b. $he law does not apply to e6ecutors7 administrators7
receivers7 assignees in insolvency7 or public officers7 acting
under process.
1. 3. "bligations when transaction is a bul1 sale0
1. a. $he vendor must deliver to such vendee a written
statement of0
n names and addresses of all creditors to whom said vendor or
mortgagor may be indebted;
n amount of indebtedness due or owing to each of said creditors
1. b. $he vendor must apply the purchase money to the pro2rata
payment of bona fide claims of the creditors as shown in the verified
statement.
2. c. $he seller7 at least 18 days before the sale7 shall0
n ma1e a full detailed inventory of the goods7 merchandise7 etc.7 cost
price of each article to be included in the sale
n notify every creditor at least 18 days before transferring possession of
the goods7 of the price7 terms and conditions of the sale
1. 4. )onsequences of Hiolation of #equirements under K3 above
stated0
1. a. <hen 3>a? above is not complied with7 the sale itself is
void; the seller will be criminally liable.
2. b. <hen 3>b? above is not complied with7 the sale itself
is also void; seller is also criminally liable.
3. c. <hen 3>c? is not complied with7 the sale is not void;
no criminal liability on the seller.
INSURANCE LAW
1. 1. -aws applicable to insurance in the order of priority0
1. a. %nsurance )ode
2. b. )ivil )ode
3. c. ;eneral !rinciples prevailing on the subject in the F'
1. 2. )ontract of %nsurance an agreement whereby one
underta1es for a consideration to indemnify another against loss7
damage or liability arising from an un1nown contingent event.
1. 3. )ontract of 'uretyship deemed to be an insurance contract
within the meaning of the %nsurance )ode7 only if made by a surety
who or which7 as such7 is doing an insurance business
1. 4. *efinition of Ddoing an insurance businessE0
1. a. ma1ing or proposing to ma1e7 as insurer7 any insurance
contract;
2. b. ma1ing or proposing to ma1e as a surety7 any contract
of suretyship as a vocation and not merely incidental to any
other legitimate business or activity of the surety;
3. c. doing reinsurance business;
4. d. doing or proposing to do any business in the substance
equivalent to any of the foregoing in a manner designed to
evade the provisions of the %nsurance )ode.
1. . #equisites of %nsurance0
1. a. e6istence of an insurable interest;
2. b. ris1 of loss;
3. c. assumption of ris1;
4. d. scheme to distribute losses; and
. e. payment of premiums
&ote0 %f only a7 b7 and c are present7 it is not a contract of
insurance but a ris1 shifting device.
1. 3. )haracteristics of an insurance contract0
1. a. consensual
2. b. voluntary
3. c. aleatory depends upon some contingent event;
however7 it is not a wagering nor a gambling contract
4. d. e6ecuted as to the insured after payment of the
premium
. e. e6ecutory as to insurer not e6ecuted until payment
for a loss
3. f. personal each party ta1es into account the
character7 credit and the conduct of the other
4. g. conditional liability is based on the happening of the
event insured against
1. 4. !arties to a contract of %nsurance0
1. a. insurer party who assumes the ris1 or underta1es to
indemnify the insured or to pay a certain sum on the
happening of a specified contingency
2. b. insured person in whose favor the contract is
operative7 and who is indemnified against7 or is to receive a
certain sum upon the happening of a specified contingency
3. c. beneficiary may or may not be the same as the
insured

<hat perils may be insured=
>a? any contingent or un1nown event7 whether past or future7 which
may damnify a person having an insurable interest; or
>b? any contingent or un1nown event7 whether past or future7 which
may create a liability against the person insured.
1. @. +very person has an insurable interest in the life and health
of0
1. a. himself7 his spouse and his children
2. b. any person on whom he depends wholly or in part for
education or support7 or in whom he has a pecuniary interest
3. c. any person under a legal obligation to him for the
payment of money7 or respecting property or services7 of which
death or illness might prevent the performance or delay it
4. d. any person upon whose life any estate or any interest
vested in him depends
1. A. %nsurable %nterest in !roperty may consist of0
1. a. an e6isting interest
2. b. an inchoate interest7 founded on an e6isting interest
3. c. an e6pectancy7 coupled with an e6isting interest out of
which the e6pectancy arises
*efinition of %nsurable %nterest in !roperty0 %nterest in property7
whether real or personal7 or any relation thereto7 or liability in
respect thereof7 of such nature that a contemplated peril might
directly damnify the insured.

1. 18. %nstances when %nsurable %nterest must e6ist0
1. a. %nterest in !roperty insured must e6ist when the
insurance ta1es effect and when the loss occurs7 but need not
e6ist in the meantime.
2. b. %nterest in the -ife or 5ealth of a !erson %nsured must
e6ist when the insurance ta1es effect7 but need not e6ist
thereafter or when the loss occurs.
3. c. /eneficiaries of -ife %nsurance need not have insurable
interest in the life of the insured.
4. d. /eneficiaries of !roperty %nsurance must have
insurable interest in the property insured.
C$te%o&'
Ins(&$)*e Inte&est in
Li+e Ins(&$nce
Ins(&$)*e Inte&est in
P&ope&t'
1. basis
may be based on
pecuniary interest7
affinity7 or consanguinity
based purely on pecuniary
interest
2. when interest
must e6ist
at the time the policy
ta1es effect +I)+!$0 life
insurance ta1en by the
creditor on the life of the
debtor wherein interest
must also e6ist at the
time of the loss
at the time the policy ta1es
effect and at the time of the
loss
3. amount of
insurable interest
no limit +I)+!$0 if
insurable interest is based
on creditor2debtor
relationship >only to the
e6tent of the credit or
debt?
limited to the actual value
of damageCinjuryCloss
1. 11. ene&$* R(*e: . change of interest in any part of a thing
insured unaccompanied by a corresponding change in interest in the
insurance suspends the insurance to an equivalent e6tent7 until the
interest in the thing and the interest in the insurance are vested in
the same person.
Exceptions0 a. %n case of life7 health7 and accident insurance
1. b. when the change in interest results after the occurrence of an
injury which results in a loss
2. c. a change of interest in one or more several distinct things7
separately insured by one policy
3. d. a change in the interest by will or succession on the death of
the insured >interest passes to the heirs?
4. e. a transfer of interest by one of several partners7 joint owners
in common who are jointly insured to the others >even though it has
been agreed that the insurance shall sei:e upon the alienation of the
thing insured?
,- ,.- Re/oc$tion o+ "ene+ici$&ies
ene&$* R(*e: %nsurance contracts are revocable.
Exception: .ny person who is forbidden to receive any donation
under .rticle 43A of the )ivil )ode cannot be named beneficiary of a
life insurance policy by the person who cannot ma1e the donation to
him.
$he following donations shall be void0
1. a. those made between persons who were guilty of adultery or
concubinage at the time of the donation;
2. b. those made by persons found guilty of the same criminal
offense7 in consideration thereof;
3. c. those made to a public officer or his wife7 descendants7
ascendants7 by reason of his office.
"ther !ertinent !rovisions on #evocation0
>a? $he termination of a subsequent marriage shall allow the innocent
spouse to revo1e the designation of the other spouse who acted in bad
faith as beneficiary in any insurance policy7 even if such designation be
stipulated as irrevocable.
>b? .fter the finality of the decree of legal separation7 the innocent
spouse may revo1e the donations as well as the designation of the latter
as a beneficiary in any insurance policy7 even if such designation is
irrevocable. $he revocation of or change in the designation shall ta1e
effect upon written notification thereof to the insured. $he action to
revo1e the donation under this article must be brought within years
from the time the decree of legal separation has become final.
>c? $he interest of a beneficiary in a life insurance policy shall be
forfeited when the beneficiary is the principal7 accomplice or accessory
in willfully bringing about the death of the insured7 in which event7 the
nearest relative of the insured shall receive the proceeds of said
insurance if not otherwise disqualified.
1. 13. 'uspension a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the
insurance suspends the insurance to an equivalent e6tent until the
interest in the thing and the interest in the insurance are vested in
the same person.
1. 14. )oncealment a neglect to communicate that which the party
1nows or ought to communicate
;eneral #ule0 $he insured is not required to communicate the
nature >or 1ind? or the amount of his insurable interest in the life or
property insured to the insurer.
+6ception0 a. <hen the insurer ma1es inquiry from the insured of
the nature or amount of the latterGs insurable interest7 whether in
life or property insurance;
1. b. insurance policy must specify the interest of the insured in
the property insured7 if he is not the absolute owner thereof.
. concealment7 whether intentional or not7 entitles the injured
party to rescind a contract of insurance.
#equisites0
>a? the party concealing must have 1nowledge of the facts concealed;
>b? the facts concealed must be material to the ris1;
>c? the party is duty bound to disclose such fact to the other;
>d? the party concealing ma1es no warranty as to the facts concealed;
>e? the other party has no other means of ascertaining the facts
concealed.
&ote0 .n insured need not die of the very disease he failed to reveal
to the insurer. %t is sufficient that the non2revelation has misled the
insurer in forming his estimate of the disadvantages of the proposed
policy or in ma1ing his inquiries in order to entitle the insurance
company to avoid the contract.
&ote0 $he insured is under an obligation to disclose not only such
material facts as are 1nown to him7 but also those 1nown to his agent
where0
1. a. it was the duty of the agent to acquire and communicate
information of the facts in question;
2. b. it was possible for the agent7 in the e6ercise of reasonable
diligence7 to have made the communication before the ma1ing of the
insurance contract.
n (ailure on the part of the insured to disclose such facts 1nown to his
agent7 or wholly due to the fault of the agent7 will avoid the policy7
despite the good faith of the insured.
1. 1. &either party to the insurance contract is bound to
communicate information on the following matters e6cept in answer
to the inquiries of the other0
1. a. those of which the other 1nows;
2. b. that which7 in the e6ercise of ordinary care7 the other
ought to 1now and of which the former has no reason to
suppose his ignorance7 i.e. political situation7 general usages of
trade;
3. c. those of which the other waives communication;
4. d. those which prove or tend to prove the e6istence of
the ris1 e6cluded by a warranty and which are not otherwise
material;
. e. those which relate to a ris1 e6cepted from the policy
and which are not otherwise material.
&either party is bound to communicate his mere opinion7 even upon
inquiry7 because such opinion would add nothing to the appraisal of
the application.
<aiver of material facts may be0
>a? by the terms of the insurance; or
>b? by the neglect to ma1e inquiry as to such facts7 where they are
distinctly implied in other facts which information is communicated
,ateriality is to be determined not by the events but solely upon the
probable and reasonable influence of the facts on the party to whom
the communication is due in forming his estimate of the
disadvantages of the proposed contract or in ma1ing his inquiries.
)oncealment7 whether intentional or not7 entitles the other party to
rescind the contract.
1. 13. #epresentation
%t is a factual statement made by the insured at the time of7 or prior to7
the issuance of the policy7 to give information to the insurer and
otherwise induce him to enter into the insurance contract.
%t may be made orally or in writing.
%t may be made at the time of7 or before7 the issuance of the policy.
%t may be altered or withdrawn before the insurance is effected7 but
not afterwards.
. representation cannot qualify an e6press provision in a contract of
insurance but it may qualify an implied warranty.
. representation as to the future is to be deemed a promise unless it
appears that it was merely a statement of belief or an e6pectation.
>must be susceptible of present7 actual 1nowledge?
$he statement of an erroneous opinion7 belief or information7 or of
an unfulfilled intention7 will not avoid the contract of insurance7
unless fraudulent.
#ight to rescind because of false representation0
1. a. must be e6ercised previous to the commencement of an
action on the contract >the action referred to is that to collect a
claim on the contract?
2. b. misrepresentation7 whether intentional or not7 gives the right
to rescind
%ncontestable )lause0 .fter a policy of life insurance made payable
on the death of the insuredshall have been in force during the
lifetime of the insured for a period of 2 years from the date of its
issue or of its last reinstatement7 the insurer cannot prove that the
policy is void ab initio or is rescindable by reason of the fraudulent
concealment or misrepresentation of the insured or his agent.
+6ceptions0 >a? absence of insurable ris1
>b? cause of loss is an une6pected ris1
>c? fraud
>d? non2payment of premium
>e? violation of conditions relating to naval or military services
>f? failure to comply with conditions subsequent to the occurrence of
the loss
1. 14. <arranties0
;eneral #ule0 &on2performance of a promissory warranty avoids a
contract of insurance.
+6ceptions0
1. a. when before the time for performance of the promissory
warranty7 a loss insured against occurs;
2. b. when before the time of the performance of the warranty7
the act becomes unlawful;
3. c. when before the time of the performance of the warranty7
said performance becomes impossible.
. statement or a promise set forth in the policy or by reference
incorporated therein7 the non2fulfillment of which in any respect and
without reference to whether the insurer was in fact prejudiced by
such non2fulfillment7 renders the policy voidable by the insurer7
wholly irrespective of the materiality of such statement or promise.
W$&&$nt' Rep&esent$tion
part of the insurance contract collateral inducement
always written on the policy maybe oral or written
conclusively presumed material materiality must be proved
must be strictly complied with requires substantial truth
made by the insured may be made by insurer or insured
&ote0 %f there is a breach of warranty7 even if the cause of the loss
is a different ris17 the insurer is entitled to rescind the contract of
insurance.
/reach must refer to a material warranty7 whether intentional or
not.
1. 1@. !olicy
<hat is a #ider= %t is an additional provision in a policy not part of
the body of the printed form.
)over &ote0 written memorandum of the most important terms of a
preliminary contract of insurance7 intended to give temporary
protection pending the investigation of the ris1 by the insurer7 or until
the issuance of a formal policy.
;eneral #ule0 )over notes bind insurer temporarily pending the
issuance of the policy.
+6ception0 <here it is merely an ac1nowledgment on behalf of the
company that the latterGs branch office had received from the
applicant the insurance premium and accepted the application
subject for processing by the insurance company and that the latter
will either approve or reject the same.
Jinds of !olicies0
1. a. "pen the value of the thing insured is not agreed upon7 but
is left to be ascertained at the time of the loss
2. b. Halued e6presses on its face an agreement that the thing
insured shall be valued at a specific sum
3. c. #unning contemplates successive insurance which provides
that the object of the policy may be from time to time defined
especially as to the subject of insurance by additional statements or
endorsements
n &ote0 %f an amount is written on the face of an open policy7 it is
merely a determination of the ma6imum limit of recovery and not as the
value of the policy.
C$te%o&' Open Po*ic' 0$*(e1 Po*ic'
what needs to be
proven in order to be
able to claim
value of property upon
loss
no need for proof of value
of property upon loss
determining value of
loss
value of property is to be
ascertained upon loss
value of property upon
loss is conclusively
stipulated to a specified
amount
!eriod for commencing an action against the policy0 <ithin 1 year
from the time the cause of action accrues7 i.e.7 from the time of
rejection of the claim by the insurer. .ny condition7 stipulation7 or
agreement limiting the time to less than 1 year is void.
;rounds for )ancellation of a !olicy by the %nsurer0
For Policies Other than Life:
>1? prior notice of the cancellation to insured
>2? notice must be based on the ff. occurrences after effective date of
the policy
>a? non2payment of premiums
>b? conviction of a crime arising out of acts increasing the ha:ard
insured against
>c? discovery of fraud or material misrepresentation
>d? discovery of willful or rec1less acts or omissions increasing the
ha:ard insured against
>e? physical changes in the property insured which results in the
property becoming uninsurable
>f? determination by the )ommissioner that the continuation of the
policy would violate or would place the insurer in violation of the
%nsurance )ode
>3? notice must be in writing
>4? it must be mailed or delivered to the insured at the address shown
in the policy
>? notice must state the ground relied upon and that upon written
request of the insured7 the insurer will furnish facts on which the
cancellation is based
#enewal of the !olicies "ther than -ife0
%nsurer must mail or deliver to the insured notice of its intention not to
renew the policy or to condition its renewal upon reduction of limits or
elimination of coverages within 4 days before the policy ends.
"therwise7 insured entitled to renew the policy upon payment of the
premium due on the effective date of the renewal.
1. 1A. !remium
;eneral #ule0 &o policy is binding until the premium thereof has
been paid.
+6ceptions0 >a? in case of life or industrial life policy7 whenever the
grace period applies
>b? in case of estoppel
%nsurer is entitled to payment of premiums as soon as the thing
insured is e6posed to the perils insured against.
<hen insurer entitled to #eturn of !remiums
1. a. when the contract is voidable on account of fraud or
misrepresentation of the insurer;
2. b. when on account of facts7 the e6istence of which the insured
was ignorant without his fault
3. c. when by any default of the insured other than actual fraud7
the insurer never incurred any liability under the policy
4. d. when the insured has become a public enemy and the policy
automatically canceled >on the ground of equity?
. e. in case of over2insurance by several insurers >ratable return
of premiums7 proportioned to the amount by which the aggregate
sum insured in all policies e6ceed the insurable value of the thing at
ris1?
1. 28. -oss
<hen %nsurer is -iable0
1. a. where the peril insured against was the pro6imate cause7
although a peril not contemplated by the contract may have been the
remote cause or even the immediate cause of the loss
2. b. where the thing insured is rescued from the peril insured
against that would otherwise have caused a loss7 if7 in the course of
such rescue7 the thing is e6posed to a peril not insured against7 which
permanently deprives the insured of its possession in whole or in part
3. c. where loss is caused by efforts to rescue the thing insured
from a peril insured against
4. d. insurer is not e6onerated by a loss caused by simple
negligence of the insured if the pro6imate cause of the loss is a peril
insured against
. e. loss7 the immediate cause of which is a peril insured against
e6cept when the pro6imate cause is an e6cepted peril
<hen %nsurer &ot -iable0
1. a. where the peril insured against was only a remote cause
2. b. where the peril is specifically e6cepted7 a loss which would
not have occurred but for such peril is thereby e6cepted
3. c. loss caused by the connivance of the insured
4. d. loss caused by the willful act of insured
. e. loss caused by insuredGs negligence7 if it amounts to bad faith
;eneral #ule0 $he insurer is not liable for a loss caused by the willful
act of the insured.
+6ception0 'uicide )lause in -ife %nsurance0 %nsurer liable in case
insured committed suicide after the policy has been in force for a
period of 2 years from the date of its issue or last reinstatement. %f
insured 1ills himself within a period of 2 years7 insurer is not liable.
+6ception to +6ception0 %f suicide is committed in a state of
insanity7 regardless of the time of commission7 the insurer is liable.
1. 21. *ouble %nsurance e6ists where the same person is insured by
several insurers separately in respect to the same subject and
interest
#equisites0 a. person insured must be the same
1. b. e6istence of several insurers
2. c. subject matter insured must be the same
3. d. interest the same
4. e. ris1 insured against also the same
O/e& Ins(&$nce Do()*e Ins(&$nce
may be only one insurer must be 2 or more insurers
insurance covers more than the
value of insurable interest
insurance may or may not e6ceed the
value of insurable interest
$he )ode prohibits double insurance without the consent of the
insurer.
-iability of %nsurer0
%nsurance ta1en
from each insurer
LLLLLLLLLLL2 6 value of property received M liability of
insurer total insurance
1. 22. #einsurance0 . process by which an insurer procures a third
person to insure him against loss or liability by reason of such original
insurance.
$he original insured cannot recover from this insurance unless there is a
specific grant7 or assignment of7 the reinsurance contract in favor of the
insured7 or a manifest intention of the contracting parties to the
reinsurance contract to favor the insured.
;eneral #ule0 $he insurer who obtains reinsurance must
communicate0
1. a. all the representations of the original insured; and
2. b. all the 1nowledge and information he possesses7 whether
previously or subsequently acquired which are material to the ris1
+6ception0 under automatic reinsurance treaties
Reins(&$nce Do()*e Ins(&$nce
1. 1. insurer becomes the
insured
2. 2. subject matter is the
insured ris1 or liability
3. 3. different ris1s and
interests of insured
4. 4. there must be consent
of original
. . one who is original
insured has no interest in the
contract of reinsurance which
is independent of the original
contract of insurance
3. 1. insurer remains the
insurer
4. 2. subject matter is
property
@. 3. the same interest and
ris1 are insured
A. 4. insured has to give his
consent
18. . insured is the party in
interest in all contracts
1. 23. ,arine %nsurance0 insures against perils of the sea7 not of the
ship
Pe&i*s o+ t2e Se$ Pe&i*s o+ t2e S2ip
covered by marine insurance not covered by marine insurance
denote nature accidents peculiar to
the sea which do not happen by
intervention of man nor are to be
prevented by human prudence
damage or losses resulting from0
1. 1. natural and inevitable
action of the sea
2. 2. ordinary wear and tear of
a ship7 or
3. 3. negligent failure of the
ship owner to provide the vessel
with proper equipment to convey
the cargo under ordinary
conditions
"wner of the 'hip has %nsurable %nterest0
1. a. in the ship even if it has been chartered by one who promises
to pay him in value in case of loss >insurer is liable for what insured
cannot recover from the charterer?7 even when hypothecated by
bottomry >only the e6cess of its value over the amount secured by
bottomry? and
2. b. in the freightage7 which according to the ordinary and
probable course of things he would have earned but for the
intervention of a peril insured against or other peril incident to the
voyage
)harterer has insurable interest in the ship to the e6tent that he is
liable to be damnified by its loss.
/arratry0 .ny willful misconduct on the part of the masters or crew7
in pursuance of some unlawful or fraudulent purpose7 without the
consent of the owners and to the prejudice of the ownerGs interest.
9ettison0 %ntentional casting overboard of any part of a venture
e6posed to a peril7 whether it be of the cargo7 or the shipGs furniture
or tac1le7 in the hope of saving the rest of the venture.
%nsurable %nterest in ,arine %nsurance0 *etermined when one will
sustain loss from the destruction of the subject matter or derive
benefit from its preservation.
)harter !arty0 )ontract by virtue of which the owner or the agent
of a vessel binds himself to transport merchandise or persons for a
fi6ed price. %t has also been defined as a contract by virtue of which
the owner or the agent of the vessel for the transportation of goods
or persons from one port to another.
-oan on /ottomry0 )ontract in the nature of a mortgage whereby
the owner of a ship borrows money for the use7 equipment or repair
of the vessel for a definite term7 and pledges the ship as a security
for repayment7 with maritime or e6traordinary interest on the
account of the maritime ris1s to be borne by the lender. %t is
stipulated in such a contract that if the ship be lost in the course of
the specific voyage or during a specified limited time caused by any
of the perils enumerated in the contract7 the lender shall resolutely
lose his money.
-oan on #espondentia0 )ontract a1in to that of mortgage made on
the goods on board the ship7 and which are to be sold or e6changed in
the course of the voyage. $he goods serve as the principal security.
(reightage0 'ignifies all the benefits derived by the owner7 carriage
of his own goods7 or those of others.
)oncealment0 %n marine insurance7 information or the belief or
e6pectation of a 3
rd
person7 in reference to a material fact is
material.
n )oncealment of the following merely e6onerates the insurer from the
resulting loss therefrom0
1. a. national character of the insured
2. b. liability of the thing insured to capture and detention
3. c. liability to sei:ure from breach of foreign laws of trade
4. d. want of necessary documents
. e. use of false and simulated papers
%mplied <arranties0
1. a. that the ship is seaworthy complied with if the ship is
seaworthy at the time of commencement of ris17 e6cept0 >a?
insurance for a specified length of time at the commencement of
every voyage it underta1es during that time; >b? cargo to be
transshipped at indeterminate port each vessel upon which cargo is
shipped is seaworthy at the commencement of each particular voyage
2. b. that the vessel shall not engage in illegal venture
3. c. that the vessel shall not deviate from the course of the
voyage insured
4. d. where the nationality or neutrality of a ship or cargo is
e6pressly warranted7 it is implied that the ship will carry the
requisite documents to show such nationality or neutrality and that it
will not carry any documents which may cast reasonable suspicion
thereon
'eaworthiness depends on0
1. a. nature of the ship
2. b. nature of the voyage
3. c. nature of the service
n 'eaworthiness of the vessel is required only at the commencement of
the ris1
n +6ceptions0
1. a. in a $ime !olicy commencement of every voyage that must
be underta1en
2. b. in a )argo !olicy commencement of each particular voyage
3. c. in a Hoyage !olicy commencement of each portion of the
voyage
*eviation
1. a. a departure from the course of the voyage insured
2. b. unreasonable delay in pursuing the voyage
3. c. commencement of an entirely different voyage
<hen is *eviation proper=
1. a. when caused by circumstances over which neither the master
not the owner of the ship has any control
2. b. when necessary to comply with a warranty or to avoid a peril
whether it is insured against or not
3. c. when made in good faith for the purpose of saving human life
or relieving another vessel in distress
4. d. when made in good faith and upon reasonable grounds of
belief in its necessity to avoid a peril
-oss
1. a. .ctual $otal -oss
n a total destruction of the thing insured
n the irretrievable loss of the thing by sin1ing or by being bro1en up
n any damage to the thing which renders it valueless tot he owner for
which he held it
n any other event which effectively deprives the owner of possession7
at the port of destination7 of the thing insured
1. b. )onstructive $otal -oss gives to the person insured the right
to abandon
.verage any e6traordinary or additional e6pense incurred during
the voyage for the preservation of the vessel7 cargo7 or both and all
damages to the vessel and cargo from the time it is loaded and the
voyage commenced until it ends and the cargo unloaded
;eneral .verage an e6pense or damage suffered deliberately in
order to save the vessel7 its cargo7 or both from the real or 1nown
ris1
.bandonment act of the insured by which7 after a constructive
total loss7 he declares the relinquishment to the insured of his
interest in the thing insured >where the cause of loss is a peril insured
against?
>a? more than N thereof in value is actually lost or would have been
e6pended to recover it from the peril
>b? it is injured to such an e6tent as to reduce its value by more than
N
>c? if the thing insured is the ship and the voyage cannot be lawfully
performed without incurring an e6pense of more than N of the whole7
or a ris1 which a prudent man would not underta1e under the
circumstances
>d? if the thing insured is cargo or freightage7 and the voyage cannot
be performed on another ship procured by the master within a
reasonable time and with reasonable diligence to forward the cargo
without incurring an e6pense or a ris1 as stated above
(reightage cannot be abandoned unless ship is also abandoned.
#equisites of a Halid .bandonment0
1. a. must be total and conditional
2. b. made within a reasonable time
3. c. e6plicit notice
4. d. coupled with actual abandonment
#equisites for Halid Haluation in the Halued ,arine !olicy0
1. a. insured must have interest at ris1
2. b. there must be no fraud on the insuredGs part
&otice of .bandonment0
1. a. may be oral or in writing >if oral7 written notice must be
submitted within 4 days from oral notice?
2. b. must be e6plicit
3. c. must specify the particular cause for abandonment
4. d. need not be accompanied by proof of interest or loss
.cceptance of .bandonment
1. a. may be e6press or implied >i.e. silence for unreasonable
length of time?
2. b. conclusive upon the parties and admits the loss and
sufficiency of abandonment
3. c. irrevocable7 unless the ground on which it is made is proved
to be unfounded
%f insurer refuses to accept a valid abandonment liable as upon
actual total loss
Fpon actual abandonment
1. a. freightage earned before loss belongs to the insurer of
freightage
2. b. freightage earned after loss belongs to insurer of ship
)o2insurance0 form of insurance in which the person who insures his
property for less than the entire value is understood to be his own
insurer for the difference which e6ists between the true value of the
property and the amount of insurance
)o2insurance applies only where the0
1. a. insurance ta1en is less than the actual value of the thing
insured
2. b. loss is partial
!rimage increase in freightage
1. 24. (ire %nsurance
%nsurer is liable for loss or damage caused by hostile fire >fire that
escapes from the place where it was intended to burn and ought to be
in? and not that caused by friendly fire >fire which burns in a place
where it is intended to burn?.
'cope of (ire %nsurance0
1. a. fire
2. b. lightning
3. c. windstorms
4. d. tornado
. e. earthqua1e
3. f. other allied ris1s
<hen does alteration in the use or condition entitle the insurer to
rescind the contract=
1. a. such alteration violates a provision in the policy
2. b. it was made without the insurerGs consent
3. c. it is done within the insuredGs control7 and it increases the
ris1 of loss or damage
#ules0
1. a. policy shall not protect the insured from injury consequent
upon his negligent use or management of fire7 so long as it is confined
to the place where it ought to be
2. b. if it escapes7 even though the insured was negligent7 the
insurer is liable
3. c. even though a fire may remain in its proper place7 it may
become hostile if it by accident7 becomes so e6tensive as to be
beyond control
"ptions of the %nsurer
1. a. purchase the property at appraised valuation
2. b. restore the property damaged contract of insurance is
discharged and parties enter into a new contract of insurance
1. 2. )asualty %nsurance0 .ny injury that is intended7 une6pected
and unusual7 even though it results from an act or even which was
intelligently done.
%nsurer is -iable for deathCinjury to insured0
1. a. by his own hand while insane
2. b. by ta1ing poison by mista1e
3. c. by overdoes of drugs administered or ta1en by mista1e7 by
ignorance or material pathological conditions
4. d. by une6pected bacterial infection consequent upon doing
acts7 even though such acts were intentionally done
. e. by unprovo1ed violence of others
)ompulsory ,otor Hehicle -iability %nsurance
!ersons subject to ),H-%0
1. a. motor vehicle owner or one who is the actual legal owner of a
motor vehicle in whose name such vehicle is registered with the -$"
2. b. land transport operator or one who is the owner of a motor
vehicle or vehicles being used for conveying passengers for
compensation >including school buses?
&o (ault %ndemnity )lause0 $he insurance company shall pay any
claim for death or bodily injuries sustained by a passenger or 3
rd
party
without the necessity of proving fault or negligence of any 1ind
subject to certain conditions. $his does not apply to property
damage.
1. 23. 'uretyship an agreement whereby the surety guarantees the
performance of the principal or obligor of an obligation or
underta1ing in favor of a 3
rd
party called the obligee
1. 24. -ife %nsurance0 an insurance in human life and insurance
appertaining thereto or connected therewith may be payable0
1. a. on the death of the insured
2. b. on his surviving a specified period
3. c. otherwise7 contingently on the continuance or
cessation of life
>b and c refer to endowment or annuities?
Fses and )ommon Jinds of -ife %nsurance0
1. a. <hole -ife or "rdinary !olicies here7 the insured agrees to
pay annual7 semi2annual or quarterly premiums while he lives. $he
insurer agrees to pay the face value of the policy upon the death of
the insured.
2. b. -imited !ayment -ife !olicy premiums paid only for a
specified period of years.
3. c. $erm !olicy insurerGs liability arises only upon the death of
the insured within the agreed term as period. %f the latter survives
the period7 the contract terminates and the insurer is not liable
4. d. +ndowment !olicy insurer agrees to pay a certain sum to the
insured if the latter outlives a designated period; if he dies before
that time7 the proceeds are paid to the beneficiary
. e. -ife .nnuity debtor binds himself to pay an annual pension
or income during the life of one or more persons in consideration of a
capital consisting of money or other property7 whose ownership is
transferred to him with the burden of income
1. 2@. $he /usiness of %nsurance
1. a. -ife or +ndowment !olicies
;race !eriod 38 days for the payment of any premium due after the
first premium has been paid
!eriod of %ncontestability after the lapse of 2 years from the date of
issue or date of approval of last reinstatement
#einstatement of !olicy within 3 years from the date of default of
premium7 upon0
1. a. production of evidence of insurability7 and
2. b. payment of all overdue premiums and any indebtedness to
the company upon said policy
+6ceptions0
1. a. if cash surrender value has been paid
2. b. if period of e6tension has e6pired
1. b. )laims 'ettlement
Fnfair )laims 'ettlement !ractices0
>a? 1nowingly misrepresenting to claimants pertinent facts or policy
provisions relating to coverage at issue
>b? failing to ac1nowledge with reasonable promptness pertinent
communications with respect to claims arising under its policies
>c? failing to adopt or implement reasonable standards for the prompt
investigation of claims arising under its policies
>d? no attempt in good faith to effectuate prompt7 fair and equitable
settlement of claims submitted in which liability has become reasonably
clear
>e? compelling policy holders to institute suits to recover the amount
due under its policies by offering with no justifiable reason an amount
substantially less than that ultimately recovered in suits brought by
them
!roceeds of -ife %nsurance payable within 38 days after0
>a? presentation of claims7 and
>b? filing of proof of death >upon failure to pay interest7 at the rate of
2 times the ceiling prescribed by the ,onetary /oard unless based on
the ground that the rate is fraudulent?
!roceeds of !olicies other than -ife payable0
>a? upon proof of loss
>b? upon ascertainment of loss or damage >if not made within 38 days
of proof of loss7 payable in A8 days?
1. c. !ower of )ommissioner to 'uspendC#evo1e -icense
>a? if insurance contract is in unsound condition
>b? if it has failed to comply with the provisions of law or regulations
obligatory upon it
>c? its conditions or methods of business s such as to render its
proceedings ha:ardous to the public or to its policy holders
>d? that its paid up capital stoc17 or its available cash assets7 or its
security deposits7 as the case may be7 is impaired or deficient
>e? that the margin of solvency required of each company is deficient
%nsurance .gent any person who for compensation solicits or obtains
insurance on behalf of any insurance company or transacts for a person
other than himself an application for a policy or contract of insurance to
or from such company or offers or assumes to act in negotiating of such
insurance. 5e must be first licensed as such before doing any acts as
insurance agent.
%nsurance /ro1er any person for any compensation7 commission or any
other thing of value7 acts7 or aids in any manner in soliciting7
negotiating or procuring the ma1ing of any insurance contract or in
placing ris1 or ta1ing out insurance7 on behalf of an insured other than
himself. . license is required.
WAREHOUSE RECEIPTS LAW
1. 1. <arehouse a building or place where goods are deposited
and stored for profit.
1. 2. <arehouseman person lawfully engaged in the business of
storing goods for profit.
"nly a warehouseman may issue warehouse receipts.
1. 3. <arehouse #eceipt written ac1nowledgment by a
warehouseman that he has received and holds certain goods therein
described in store for the person to whom it is issued.
1. 4. &on2negotiable #eceipt receipt deliverable to a specified
person.
1. . &egotiable #eceipt receipt deliverable to order or to bearer.
1. 3. +ssential $erms which ,F'$ be embodied in a <arehouse
#eceipt0
1. a. location of the warehouse
2. b. date of the issue of the receipt
3. c. consecutive number of the receipt
4. d. statement whether the goods received will be
delivered to bearer7 or a specified person7 or his order
. e. rate of storage charges
3. f. description of the goods or pac1ages containing them
for identification purposes
4. g. signature of the warehouseman
@. h. statement of the amount of advances made and of
liabilities incurred for which the warehouseman claims as lien
1. 4. +ffect of omission of any of the essential terms0
1. a. $he validity of the warehouse receipt is not affected.
2. b. $he warehouseman shall be held liable for damages to
those injured by his omission.
3. c. $he negotiability of the warehouse receipt is not
affected.
4. d. $he issuance of a warehouse receipt in the form
provided by the law is merely permissive and directory and not
mandatory in the sense that if the requirements are not
observed7 then the goods delivered for storage become ordinary
deposits.
1. @. $erms which may be inserted in a <arehouse #eceipt0 .ny
other terms e6cept >a? those contrary to the provisions of this .ct; >b?
those that would impair a warehousemanGs obligation to e6ercise that
degree of care in the safe1eeping of the goods entrusted to him
1. A. ,ar1s to be made on a warehouse receipt0
1. a. . non2negotiable receipt must be clearly mar1ed non2
negotiable or not negotiable7 otherwise7 the holder of the
receipt who purchased it for value and who supposed it to be
negotiable7 may treat it as negotiable.
2. b. *uplicate receipts must be so mar1ed7 otherwise7 the
warehouseman is held liable for all damages suffered by a
holder believing the same to be the original.
1. 18. <arranties of a warehouseman as to duplicate receipts0
1. a. $he duplicate is an accurate copy of the original
receipt.
2. b. 'uch original receipt is uncancelled at the date of the
issue of the duplicate.
1. 11. +ffects of alteration on the liability of the warehouseman0
1. a. %f the alteration is %,,.$+#%.- >the tenor of the
receipt is not changed?7 whether fraudulent or not7 authori:ed
or not7 the warehouseman is liable on the altered receipt
according to its original tenor.
2. b. %f the alteration is ,.$+#%.- but .F$5"#%O+*7 the
warehouseman is liable according to the terms of the altered
receipt.
3. c. %f the alteration is ,.$+#%.-7 F&.F$5"#%O+* but
%&&")+&$-P ,.*+7 the warehouseman is liable on the altered
receipt according to its original tenor.
4. d. %f the alteration is ,.$+#%.- and (#.F*F-+&$-P
,.*+7 the warehouseman is liable0
>1? to the purchaser of the receipt for value and without notice of the
alteration according to the tenor of the altered receipt
>2? to the alterer7 according to the terms of the original receipt
>3? to subsequent purchasers with notice of the alteration7 according
to the terms of the original receipt
1. 12. +ffects of misdescription of goods0
1. a. . warehouseman is under the obligation to deliver the
identical property stored with him and if he fails to do so7 he is
liable directly to the owner.
2. b. .s against a bona fide purchaser of a warehouse
receipt7 the warehouseman is estopped from denying that he
has received the goods described in the receipt.
3. c. %f the description consists merely of mar1s or label
upon the goods or upon the pac1ages containing them7 the
warehouseman is not liable even if the goods are not of the
1ind as indicated in the mar1s or labels.
1. 13. !rincipal "bligations of a <arehouseman0
1. a. $o ta1e care of the goods entrusted to his safe1eeping
;eneral #ule0 . warehouseman is required to e6ercise such degree
of care which a reasonable careful owner would e6ercise over similar
goods of his own. 5e shall be liable for any loss or injury to the goods
caused by his failure to e6ercise such care.
+6ception0 5e shall not be liable for any loss or injury which could
not have been avoided by the e6ercise of such care.
+6ception to the +6ception0 5e may limit his liability to an agreed
value of the property received in case of loss. 5e cannot stipulate
that he will not be responsible for any loss caused by his negligence.
1. b. $o deliver the goods to the holder of the receipt or the
depositor upon demand7 provided demand is accompanied with0
>1? an offer to satisfy the warehousemanGs lien;
>2? an offer to surrender the negotiable receipt properly endorsed. %f
the receipt is non2negotiable7 any person lawfully entitled to the
possession of the goods may be entitled to delivery without surrender of
the receipt.
>3? a readiness and willingness to sign an ac1nowledgment that the
goods have been delivered if such is requested by the warehouseman.
1. 14. !ersons to whom goods must be delivered0
1. .. !ersons lawfully entitled to the possession of the goods
or his agent0
a. persons to whom a competent court has ordered the delivery of the
goods
>1? where a negotiable instrument has been lost or destroyed7 the
court may order delivery to a person upon satisfactory proof of such loss
or destruction and upon proper posting of a bond to protect the
warehouseman from any liability or e6pense which he may incur by
reason of the original receipt remaining outstanding.
>2? where more than one person claims title or possession of the goods
the warehouseman may require all claimants to interplead. $he court
will then order delivery to the person having a better right.
1. b. an attaching creditor ;oods7 while in the possession of the
warehouseman and covered by a negotiable receipt7 cannot be
attached or levied upon under an e6ecution unless0
>%? the negotiable receipt is first surrendered to the warehouseman7
or
>ii? its negotiation is enjoined7 or
>iii? the receipt is impounded by the court
c. to the purchaser in case of sale of the goods by the warehouseman to
enforce his lien
1. d. to the purchaser where perishable or ha:ardous goods are
sold at private or public sale
1. /. %f goods are covered by a non2negotiable receipt0
1. a. a person entitled to the delivery by the terms of the
receipt7 or
2. b. one who has written authority from letter a
1. ). %f goods are covered by a negotiable receipt7 a person in
possession of the receipt7 the terms of which the goods are
deliverable0
1. a. to him or order
2. b. to bearer
3. c. indorsed to him
4. d. indorsed in blan1 by the person whom delivery was
promised
1. 1. <hen is there ,isdelivery=
<hen the warehouseman delivers the goods to a person who is not in
fact lawfully entitled to the possession of the goods because0
1. a. the person does not fall under letter / or ) above; or
2. b. the person falls under letter / or ) but prior to delivery7 the
warehouseman had either0
>1? been requested by the person lawfully entitled to the delivery not
to ma1e such delivery7 or
>2? had information that the delivery about to be made was to one not
lawfully entitled to the possession of the goods
1. 13. +ffects of ,isdelivery0
$he warehouseman shall be liable for conversion to all having a right to
property or possession of the goods.
1. 14. <hat happens if there is proper delivery or partial delivery but
the warehouseman fails to cancel the receipt or record on the receipt
of such partial delivery=
1. a. %f goods covered by a negotiable warehouse receipt
are delivered by a warehouseman but he fails to ta1e the
receipt and cancel it7 then he is still liable to one who
purchases for value and in good faith such receipt.
2. b. %f he ma1es partial delivery of the goods but fails to
record the partial delivery on the receipt then he may still be
held liable for the entire receipt to one who purchases for
value and in good faith such receipt.
1. 1@. -awful e6cuses for refusal to deliver goods0
1. a. $he warehouseman can refuse to deliver the goods if
he has acquired title or right to the possession of the goods0
>1? directly or indirectly from a transfer made by the depositor at the
time of the deposit for storage or subsequent thereto; or
>2? from the warehousemanGs lien
1. b. %f someone other than the depositor or person claiming under
the depositor has a claim to the title or possession of the goods and
the warehouseman has information of such claim7 the warehouseman
shall be e6cused from liability for refusing to deliver the goods either
to the depositor or person claiming under him until he has had a
reasonable time to ascertain the validity of the adverse claim or to
bring legal proceedings to compel all claimants to interplead.
1. c. $he warehouseman will not be required to deliver the goods if
such had been lost. /ut this is without prejudice to liabilities which
may be incurred by him due to such loss.
1. d. $he warehouseman having a valid lien against the person
demanding the goods may refuse to deliver the goods to him until the
lien is satisfied.
1. e. %f goods have been lawfully sold or disposed of because of
their perishable or ha:ardous nature7 the warehouseman shall not be
liable for failure to deliver the goods.
1. 1A. . warehouseman cannot refuse to deliver goods to the
depositor or to a person claiming under him on the ground that
adverse title to the goods belongs to a third person.
1. 28. #ules as regards )o2mingling of *eposited ;oods0
;eneral #ule0 . warehouseman may not co2mingle goods belonging
to different depositors or belonging to the same depositor for which
separate receipts had been issued.
+6ception0 . warehouseman may co2mingle fungible goods of the
same 1ind and grade provided he is authori:ed by agreement or by
custom.
1. 21. +ffect of )o2mingling of ;oods0
1. a. $he different owners become co2owners of the whole
mass.
2. b. $he warehouseman shall be severally liable to each
depositor for the care and redelivery of his share of such mass
to the same e6tent and under the same circumstances as if the
goods had been 1ept separate.
1. 22. #emedies of a )reditor0 >the debtor being the owner of the
negotiable receipt?
)reditors of the depositors7 before negotiation7 may protect themselves
by obtaining a writ of preliminary injunction and serve the same on the
depositor before he has a chance to negotiate the receipt. "nce
enjoined7 there will be no longer a danger that a 3
rd
person will be
prejudiced so the goods may now be attached7 levied upon7 or that the
vendorGs lien or the right of stoppage in transit be e6ercised.
1. 23. <arehousemanGs -ien
+6tent of <arehousemanGs -ien0
. warehouseman shall have a lien on goods deposited or on the proceeds
thereof in his hands for0
1. a. all lawful charges for storage and preservation of the goods
2. b. all lawful claims for money advances7 interest7 insurance7
transportation7 labor7 weighing7 cooperating and other charges and
e6penses in relation to such goods
3. c. all reasonable charges and e6penses for notice and
advertisements of sale and for sale of the goods where default has
been made in satisfying the warehouse lien
;oods 'ubject to lien0
1. a. goods belonging to the depositor who is liable to the
warehouseman as debtor whenever such goods are deposited and
2. b. goods belonging to other persons stored by the depositor who
is liable to the warehouseman as debtor with authority to ma1e a
valid pledge
5ow is a lien enforced=
1. a. by refusing to deliver the goods until the lien is satisfied
2. b. by causing the e6trajudicial sale of the property and applying
the proceeds to the value of the lien
3. c. by filing a civil action for unpaid charges or by way of
counterclaim in an action to recover the property from him
5ow is a lien lost=
1. a. when the warehouseman voluntarily surrenders possession of
the goods without requiring payment of his lien; or
2. b. when the warehouseman wrongfully refuses to deliver the
goods when a demand is made with which he is bound to comply
1. 24. &egotiation and $ransfer of #eceipts
5ow do we negotiate a receipt deliverable to order=
1. a. by indorsing it in blan1 thereby ma1ing it deliverable to
bearer or
2. b. by special indorsement which would require further
indorsements for further negotiations.
%n both cases7 the indorsements must be coupled with delivery.
5ow do we negotiate a receipt deliverable to bearer=
$here is no need to indorse for negotiation. !hysical delivery of the
instrument will suffice. /ut if the instrument is indorsed specially7 the
bearer character of the receipt is destroyed and for further negotiation7
there will be a need for indorsement.
<ho may negotiate warehouse receipts=
1. a. the owner of the receipt7 or
2. b. the person to whom possession of the receipt was entrusted
to by the owner
#ights acquired by a person to whom the receipt has been
negotiated0
1. a. the title of the person negotiating the receipt over the goods
covered by the receipt
2. b. the title of the person >depositor or owner? to whose order by
the terms of the receipt the goods were to be delivered
3. c. the direct obligation of the warehouseman to hold possession
of the goods for him7 as if the warehouseman directly contracted
with him
,ay non negotiable receipts be negotiated=
&o7 even if the receipt is indorsed7 the transferee acquires no additional
right. $hat is why they are called non negotiable receipts. /ut they
may be transferred or assigned by delivery.
#ights of a person to whom a non negotiable receipt has been
transferred0
1. a. the title to the goods as against the transferor
2. b. the right to notify the warehouseman of the transfer thereof
and
3. c. the right thereafter to acquire the obligation of the
warehouseman to hold the goods for him
*istinction between a non negotiable receipt from a negotiable
receipt with regard to attachment or e6ecution upon goods0
Non-ne%oti$)*e Receipt Ne%oti$)*e Receipt
!rior to notification of the
warehouseman by the transferor or
transferee7 the warehouseman is
not bound to the transferee whose
right may be defeated by a levy of
an attachment or e6ecution upon
the goods by the creditor of the
transferor or by a notification to
such warehouseman of the
subsequent sale of the goods.
$he goods cannot be attached or levied
under an e6ecution unless the receipt
be first surrendered to the
warehouseman or its negotiation
enjoined.
#ights of a person to whom a negotiable receipt has been
transferred7 not indorsed0
1. a. the right to the goods as against the transferor
2. b. the right to compel the transferor to indorse the receipt. /ut
if the intention of the parties is that the receipt should merely be
transferred7 the transferee has no right to require the transferor to
indorse the receipt.
&ote0 &egotiation ta1es effect as of the time when the indorsement is
actually made.
<arranties of a person negotiating or transferring a receipt0
1. a. the receipt is genuine
2. b. he has a legal right to negotiate or transfer it
3. c. he has 1nowledge that would impair the validity or worth of
the receipt and
4. d. he has a right to transfer the title to the goods and that the
goods are merchantable
. holder for security of a receipt >mortgagee or pledgee? who in
good faith accepts payment of the debt from a person does not
warrant the genuineness of the receipt not the quality or quantity of
the goods therein described.
%t is the duty of the purchaser7 mortgagee or pledgee of goods for
which a negotiable receipt has been issued to require the negotiation
of the receipt to him7 otherwise his failure will have the same effect
as an e6press authori:ation on his part to the seller7 mortgagor7 or
pledgor in possession of such receipt to ma1e any subsequent
negotiation. $he subsequent purchaser must have ta1en the receipt
in good faith and for value.
. bona fide purchaser of a negotiable warehouse receipt acquires
title to the goods where he purchases from the ownerGs agent within
the actual or apparent scope of his authority. %n sum7 negotiation is
valid despite having been made in breach of trust.
*istinctions between a negotiable instrument and a negotiable
warehouse receipt0
Ne%oti$)*e Inst&(3ent Ne%oti$)*e W$&e2o(se Receipt
<hen a negotiable instrument is
altered deliberately7 it becomes
null and void.
<hen a warehouse receipt is altered7 it
is still valid but it may be enforced only
in accordance with its original tenor.
%f a negotiable instrument is
originally payable to bearer7 it will
always remain so payable
regardless of the way it is indorsed7
whether specially or in blan1.
%f a warehouse receipt7 payable to
bearer7 is indorsed specially7 it will be
converted into a receipt deliverable to
order and can only be negotiated
further by indorsement and delivery.
. holder in due course may be able
to obtain a title better than that
which the party who negotiated the
instrument to him had.
.n indorsee even if a holder in due
course obtains only such title as the
person negotiating has over the goods.
$he indorsement of a negotiable
instrument has a double effect. %t
is at the same time a conveyance
of the instrument and a contract
the indorser has with the indorsee
that on certain conditions7 the
indorser will pay the instrument if
the party primarily liable fails to do
so.
$he indorsement of a warehouse receipt
amounts merely to a conveyance by the
indorser. .ccordingly7 an indorser of a
receipt shall not be liable to the holder
if7 for e6ample7 the warehouseman fails
to deliver the goods because they were
lost due to his fault or negligence.
ENERAL "ONDED WAREHOUSE LAW
.ny warehouseman receiving commodities for >a? storage; >b?
milling; >c? co2mingling must0
1. a. obtain prior license from the /ureau of )ommerce
2. b. file a bond in an amount equivalent to 33 1C3 B of the
capacity of the warehouse against which bond depositors may sue
directly
3. c. open to the public7 no discrimination allowed
4. d. liable for double mar1et value should he accept goods in
e6cess of the capacity of warehouse if goods are damaged or
destroyed
&ote0 for palay and corn license7 a bond with the &ational ;rains
.uthority is required; also an insurance cover is required.
Uni+o&3 C(&&enc' L$4
1. 1. "bligations &ull and Hoid
1. a. obligations payable in goldCforeign currency
2. b. obligations payable in !hilippine currency but
measured in goldCforeign currency
1. 2. +6empt $ransactions
1. a. government to government transactions or with
international ban1ing institutions
2. b. transactions affecting high priority economic projects
3. c. forward e6change transactions between ban1s
4. d. import and e6port and other international ban1ing7
financial7 investment and industrial transactions
1. 3. ,erchants and )ommercial $ransactions
)lasses of %nvestments0
1. a. !ermitted one allowed without need of prior authority from
the !hilippine ;overnment. %f registered status7 invest up to e6tent
as not to affect its registered status. %f enterprise not registered7
investment not to e6ceed 48B.
2. b. !ermissible invest in e6cess of 48B in unregistered
enterprise but with prior approval of /"%
3. c. !ioneer .rea >a? involves manufacturing7 processing7
production of product not produced at allCproduced in non2
commercial scale; >b? uses a design7 scheme7 formula that is new
and untried in the !hils.; >c? agricultural activitiesCservices essential
to the attainment of food sufficiency; >d? produces non2conventional
fuelsCutili:es non2conventional sources of energy >all others are non2
pioneer?
1. 4. .bsolutely *isqualified to become ,erchants
1. a. serving penalty of civil interdiction
2. b. insolvent
3. c. absolutely disqualified by special laws
1. . #elatively *isqualified
1. a. judicial and prosecuting officials in active service
2. b. administrative7 economic7 military chiefs
3. c. government collection agents and custodian of funds
4. d. stoc1 and commercial bro1ers
. e. by special laws cannot trade in specified territories
1. 3. /oo1s a ,erchant must 1eep
1. a. boo1 of inventories and balances7 statement of assets7
liabilities and capital
2. b. journal of day to day operations
3. c. ledger for classifying accounts
4. d. copying boo1 for letters and telegrams; if juridical
person7 include boo1 of minutes and stoc1 and transfer boo1
1. 4. !robative Halue of ,erchantGs /oo1
1. a. evidence against merchants themselves
2. b. in case of conflicts between 2 boo1s that which s
properly 1ept prevails
3. c. if one 1eeps boo1s and the other does not and cannot
e6plain why7 the former prevails
4. d. if both boo1s are properly 1ept and there is a conflict7
other proofs can be resorted to
1. @. )ommercial )ontracts by )orrespondence are perfected from
the moment the offeree accepts the offer7 even before 1nowledge of
said acceptance by the offeror. $his does not apply to deposit7
guaranty7 sales7 loan7 agency7 partnership.
1. A. 9oint .ccount !artnership business arrangement whereby 2
or more persons interest themselves in the business of another by
ma1ing contributions thereto and participating in the results thereof
1. a. only one member is ostensible7 others are silent
2. b. no common name
3. c. only ostensible partners can sueCbe sued
4. d. no juridical personality
T&$nspo&t$tion L$4
1. 1. )ontract of $ransportation contract whereby a certain
person or association of persons obligate themselves to transport
persons7 things7 news7 from one place to another for a fi6ed price
1. 2. !arties to the )ontract of $ransportation0
1. a. 'hipper one who gives rise to the contract of
transportation by agreeing to deliver the things or news to be
transported7 or to present his own person or those of other or
others in the case of transportation of passengers
2. b. )arrierC)onductor one who binds himself to
transport persons7 things7 or news7 as the case may be7 or one
employed in or engaged in the business of carrying goods for
others for hire
1. 3. )ommon )arrier person7 corporation7 firm7 association
engaged in the business of carrying or transporting passengers7 goods
or both7 by land7 water7 air7 for compensation7 offering services to the
public; must e6ercise e6traordinary diligence
!rivate )arrier not engaged in the business of carrying; no public
employment; underta1es to deliver goodsCpassengers for compensation;
requires only ordinary diligence
4. #equisites of )aso (ortuito
1. a. event independent of human will
2. b. occurrence ma1es it impossible for debtor to perform in
normal manner
3. c. debtor free from aggravationCparticipation
4. d. impossible to foresee or avoid
1. . )ontributory negligence does not entitle passengers to
recover moralCe6emplary damages.
1. 3. /ill of -ading written ac1nowledgment of receipt of goods
and agreement to transport them to a specific place to a person
named or his carrier
%t is not indispensable to the creation of a contract of carriage. $he
contract itself arises from the moment goods are delivered by shipper to
carrier and the carrier agrees to carry them.
$he function of the /ill of -ading0 the legal basis of the contract
between the shipper and carrier shall be the bills of lading7 by the
contents of which all disputes which may arise with regard to their
e6ecution and fulfillment shall be decided7 no e6ceptions being
admissible other than forgery or material errors in the drafting thereof.
)arrierGs responsibility starts from the moment he receives
unconditionally the merchandise personally or through an agent and
lasts until he delivers them actually or constructively to the consignee
or his agent.
,ere delay in the delivery of goods to consignee does not give right to
refuse goods only breach of contract7 ergo damages. %f delay is
unreasonable7 then he may refuse to accept and ma1e carrier liable for
conversion.
1. 4. Hessels those engaged in navigation7 whether coastwise or
on the high seas7 including floating doc1s7 pontoons7 dredges7 scows
and any other floating apparatus destined for the services of the
industry or maritime commerce
1. @. !ersons !articipating in ,aritime )ommerce0
1. a. ship owner andCor ship agent
2. b. captain or master
3. c. other officers of the vessel
4. d. supercargo
1. A. -iability of 'hip owners and 'hip agents0
1. a. civil liability for the acts of the captain
2. b. civil liability for contracts entered into by the captain
to repair7 equip and provision the vessel7 provided that the
amount claimed was invested for the benefit of the vessel
3. c. civil liability for indemnities in favor of 3
rd
persons
which may arise from the conduct of the captain in the care of
the goods which the vessel carried7 as well as for the safety of
the passengers transported
'hip ownerCship agent not liable for the obligations contracted by
the captain if the latter e6ceeds his powers and privileges inherent in
his position of those which may have been conferred upon him by the
former. 5owever7 if the amount claimed were made use of for the
benefit of the vessel7 the ship owner or ship agent is liable.
1. 18. *octrine of -imited -iability liability of shipowners is limited
to amount of interest in said vessel because of the real and
hypothecary nature of maritime law such that where the vessel is
entirely lost7 the obligation is e6tinguished.
+6ceptions0 >1? vessel is not abandoned
>2? claims under wor1menGs compensation
>3? injuryCdamage due to shipownerGs fault
>4? vessel is insured
$he doctrine also applies for claims due to death or injuries to
passengers7 aside from claims for goods.
%n abandoning the vessel7 there is no procedure to be followed.
$here is neither a prescriptive period within which the ship owner can
ma1e the abandonment. 5e may do so for so long as he is not
estopped from invo1ing the same or do acts inconsistent with
abandonment.
1. 11. #oles of the )aptain0
1. a. general agent of the ship owner
2. b. technical director of the vessels
3. c. represents the government of the country under whose
flag he navigates
1. 12. -oan on /ottomry made by shipownerCship agent guaranteed
by vessel itself7 repayable upon arrival at destination
1. 13. -oan %n #espondentia ta1en on security of the cargo repayable
upon the safe arrival at cargo destination
1. 14. .ccidents and *amages in ,aritime )ommerce0
1. a. .verages
2. b. .rrivals Fnder 'tress
3. c. )ollisions
4. d. 'hipwrec1s
1. 1. .verage0
1. a. all e6traordinary or accidental e6penses which may be
incurred during the voyage for the preservation of the vessel or
cargo or both
2. b. all damages or deterioration which the vessel may
suffer from the time it puts to sea at the port of departure
until it casts anchor at the port of destination7 and those
suffered by the merchandise from the time they are loaded in
the port of shipment until they are unloaded in the port of their
consignment
1. 13. 'imple .verage e6pensesCdamages caused to the vesselCcargo
not inured to common benefit and profit of all the persons interested
in the vessel and her cargo; borne by respective owners
1. 14. ;eneral .verage e6pensesCdamages deliberately caused in
order to save the vessel7 its cargo or both from a real and 1nown ris1
#equisites0
1. a. deliberately incurred
2. b. intended to save vessel and cargo or both
3. c. from real and 1nown ris1
4. d. there is success
1. 1@. (ormalities for %ncurring ;ross .verage0
1. a. there must be an assembly of the sailing mate and
other officers with the captain including those with interests in
the cargo
2. b. there must be a resolution of the captain
3. c. the resolution shall be entered in the log boo17 with
the reasons and motives and the votes for and against the
resolution
4. d. the minutes shall be signed by the parties
. e. within 24 hours upon arrival at the first port the
captain ma1es7 he shall deliver one copy of these minutes to
the maritime judicial authority thereat
1. 1A. .rrivals under 'tress arrival of the vessel at a port not of
destination on account of >a? lac1 of provisions; >b? well2founded fear
of sei:ure; >c? by reason of accident of the sea disabling it to navigate
<hen &ot -awful0
1. a. lac1 of provisions due to negligence to carry according to
usage and customs
2. b. ris1 of enemy not well 1nown or manifest
3. c. defect of vessel due to improper repair
4. d. malice7 negligence7 lac1 of foresight or s1ill of captain
1. 28. )ollision impact of 2 vessels both of which are moving
1. 21. .llision stri1ing of a moving vessel against one that is
stationary
1. 22. )ases of )ollision0
1. a. due to the fault7 negligence or lac1 of s1ill of the
captain7 sailing mate or the complement of the vessel ship
owner liable for the losses and damages >)ulpable (ault?
2. b. due to fortuitous event or force majeure each vessel
and its cargo shall bear its own damages >(ortuitous?
3. c. it cannot be determined which of the 2 vessels caused
the collision each vessel shall suffer its own damages7 and
both shall be solidarily responsible for the losses and damages
occasioned to their cargoes >%nscrutable (ault?
1. 23. +rror in +6tremis sudden movement made by a faultless vessel
during the 3
rd
:one of collision with another vessel which is at fault7
even if the said movement is wrong7 no responsibility will fall on said
vessel
1. 24. 'hipwrec1 denotes all types of lossC wrec1 of a vessel at sea
either by being swallowed up by the waves7 by running against
another vessel or thing at sea or on coast where the vessel is
rendered incapable of navigation
1. 2. 'alvage the compensation allowed to persons by whose
voluntary assistance a ship at sea or her cargo or both have been
saved in whole or in part from an impending peril7 or such property
recovered from actual peril or loss7 in cases of shipwrec1s7 derelict or
recapture; a service which one person renders to the owner of a ship
or goods by his own labor7 preserving the goods or ship which the
owner or those entrusted with the care of them either abandoned in
distress at sea or are unable to protect and secure; a permit is
required to engage in the salvage business
1. 23. *erelict a ship or cargo which is abandoned and deserted at
sea by those who are in charge of it7 without any hope of recovering
it7 or without any intention of returning it
1. 24. +lements of a Halid 'alvage0
1. a. a marine peril
2. b. service voluntarily rendered when not required as an
e6isting duty or from special contract
3. c. success7 in whole or in part7 or that the services
rendered contributed to such success
1. 2@. )ontract of $owage contract whereby a vessel usually
motori:ed pulls another from one place to another for compensation.
%t is a contract of services.
,- .5- Di++e&ence )et4een To4$%e $n1 S$*/$%e:
S$*/$%e To4$%e
crew of salvaging ship is entitled to
salvage7 and can loo1 to the
salvaged vessel for its share
crew of the towing ship does not have
any interest or rights with the
remuneration pursuant to the contract
salvor ta1es possession and may
retain possession until he is paid
tower has no possessory lien; only an
action for recovery of sum of money
court has power to reduce the
amount of remuneration if
unconscionable
court has no power to change amount in
towage even if unconscionable
C$&&i$%e o+ oo1s )' Se$ Act
1. 1. <hen .pplicable0
1. a. contracts for the carriage of goods
2. b. by sea
3. c. to and from !hilippine ports
4. d. in foreign trade
1. 2. &otice of -oss or damage must be given in writing to the
carrier or his agent at the port of discharge or at the time of the
removal of the goods into the custody of the person entitled to
delivery. %f the loss or damage is not apparent7 the notice must be
given within 3 days of delivery. 5owever7 the carrier shall be
discharged from all liability in respect of loss or damage of goods
unless suit is brought within 1 year after delivery of the goods or the
date when the goods should have been delivered. &otice of loss7 if
not given7 that fact shall not affect or prejudice the right of the
shipper to bring suit within the 1 year prescriptive period.
W$&s$4 Con/ention
1. 1. <hen .pplicable0
1. a. international transport by air
2. b. transport of persons7 baggage7 or goods
1. 2. -iabilities under the )onvention0
1. a. damage sustained in the event of the death or
wounding of a passenger ta1ing place on board the aircraft or in
the course of any of the operations of embar1ing or
disembar1ing
2. b. loss or damage to any chec1 baggage or goods
sustained during the transport by air
3. c. delay in the transport by air of passengers7 baggage7
or goods
+numeration of causes of action as above stated is not an e6clusive
list. >&orthwest .irlines vs. )ancer?
1. 3. ,eaning of $ransport by .ir period during which the baggage
or goods are in charge of the carrier7 whether in an airport or on
board an aircraft7 or in the case of landing outside an airport7 in any
place whatsoever
1. 4. .ction for damages must be brought at the option of the
plaintiff7 either0
1. a. before the court of the domicile of the carrier;
2. b. court of principal place of business of carrier;
3. c. court where he has a place of business through which
the contract has been made;
4. d. before the court at the place of destination
1. . )onvention provides for a limitation of liability0
1. a. for each passenger limited to 127888 francs
2. b. for goods and chec1ed in baggage limited to 28
francs per 1ilogram
3. c. for hand carry limited to 7888 francs per passenger
<hen can you not avail of this limitation=
>1? willful misconduct
>2? default amounting to willful misconduct
>3? accepting passengers without tic1et
>4? accepting goods without airway bill or baggage without baggage
chec
1. 3. $he right to damages shall be e6tinguished if an action is not
brought within 2 years from the date of arrival at the destination7 or
from the date on which the aircraft ought to have arrived7 or from
the date on which the transportation stopped.
1. 4. &otice requirement0 damage to baggage 0 within 3 days from
receipt
damage to goods0 within 4 days from receipt
delay0 within 21 days from receipt
(ailure to file written notice7 no action shall lie against the carrier7
save in the case of fraud on his part.
1. @. Notice Re6(i&e3ents:
COSA
Co1e o+
Co33e&ce
W$&s$4
Con/ention
lossCdamage
apparent
protest at time of
receipt of goods
protest at time of
receipt of goods
lossCdamage not
apparent
protest within 3
days from delivery
protest within 24
hours after receipt
damage of
baggage
protest within 3
days from receipt
damage of goods
within 4 days from
receipt
delay
within 21 days from
receipt
P()*ic Se&/ice Act
1. 1. +very person that may own7 operate7 manage7 control in the
!hilippines7 for hireCcompensation with generalClimited clientele
whether permanent7 occasional7 accidental7 and done for a general
business purpose any common carrier7 shipyard7 electric light7 heat
and power and public utility.
1. 2. !ublic Ftility business or service engaged in regularly
supplying the public with some commodity or service of public
consequence such as electricity7 gas7 water7 transportation7 telephone
or telegraph service.
1. 3. !rior "perator #ule before permitting a new operator to
invade the territory of another already established7 the prior operator
must be given an opportunity to e6tend its service to meet the public
needs in the matter of transportation.
1. 4. !rior .pplicant #ule presupposes a situation where two
interested persons apply for a )!) in the same community over which
no person has yet been granted a )!) to operate. %f both applicants
equal7 then the applicant who applied first will be given the )!).
1. . Distinctions )et4een CPCs $n1 CPCNs
Ce&ti+ic$te o+ P()*ic
Con/enience
Ce&ti+ic$te o+ P()*ic Con/enience
$n1 Necessit'
any authori:ation to operate a
public service issued by the
appropriate government agency
issued by the appropriate government
agency to a public service to which any
political subdivision has granted a
franchise
an authori:ation issued by the
proper government agency for the
operation of public services for
which no franchise7 either
municipal or legislative is required
by law
an authori:ation issued by the proper
government agency for the operation of
public services for which a franchise is
required by law
1. 3. Re6(i&e3ents o+ CPC $n1 +&$nc2ise:
1. a. (ilipino citi:enship
2. b. financial capacity
3. c. public convenience
Co&po&$tion L$4
1. 1. *octrine of )orporate "pportunity a director is made to
account to his corporation7 gains and profits from transactions
entered into by himCanother competing corporation in which he has
substantial interest7 which should have been a transaction
underta1en by the corporation. $his s a breach of fiduciary
relationship.
1. 2. *octrine of !iercing the Heil of )orporate +ntity it is to
disregard for justifiable reasons by the state the fiction of juridical
personality of the corporation separate and distinct from the persons
composing it
1. 3. *e 9ure )orporation corporation formed with all the
requirements of law
1. 4. *e (acto )orporation corporation defectively formed from a
bona fide attempt to incorporate under the e6isting law and e6ercises
corporate powers
1. . )orporation by +stoppel a group of persons which holds
itself out as a corporation and enters into a contract with 3
rd
persons
on the strength of such appearance cannot be permitted to deny its
e6istence in an action under said contract
1. 3. )orporation by !rescription body not lawfully organi:ed as a
corporation but has been recogni:ed by immemorial usage as a
corporation with rights and duties maintainable by law >e6. #oman
)atholic?
1. 4. $rust (und *octrine the subscribed capital stoc1 of the
corporation is a trust fund for the payment of debts of the
corporation which the creditors have the right to loo1 up to satisfy
their credits. )orporations may not dissipate this and the creditors
may sue the stoc1holders directly for their unpaid subscriptions
1. @. Hoting 'hares
1. a. (ounders 'hares given rights and privileges not
enjoyed by owners of other stoc1s; right to voteCbe voted in
the election of directors shall not e6ceed years
Non-0otin% S2$&es
1. a. !referred 'hares issued only with par value; given
preference in distribution of assets in liquidation and in payment of
dividends and other preferences stated in the articles of
incorporation
2. b. #edeemable 'hares e6pressly provided in articles; have to
be purchasedCta1en up upon e6piration of period of said shares
purchased whether or not there is unrestricted retained earnings
3. c. $reasury 'toc1s stoc1s previously issued and fully paid for
and reacquired by the corporation through lawful means >purchase7
donation7 etc.?
1. A. +6ceptions where holders of non2voting shares may vote0
1. a. amendments of articles of incorporation
2. b. adoptionCamendment of by2laws
3. c. increaseCdecrease of bonded indebtedness
4. d. increaseCdecrease of capital stoc1
. e. saleCdisposition of allCsubstantially all corporate
property
3. f. mergerCconsolidation of corporation
4. g. investment of funds in another corporationCanother
business purpose
@. h. corporate dissolution
1. 18. !referred )umulative !articipating 'hare of 'toc1 share
entitling its holder to preference in the payment of dividends ahead
of common stoc1holders and to be paid the dividends ahead of
common stoc1holders and to be paid the dividends due for prior years
and to participate further with common stoc1holders in dividend
declarations
1. 11. !romotion 'toc1 for 'ervices #endered !rior to %ncorporation
+scrow 'toc1 stoc1 deposited with a 3
rd
person to be delivered to
stoc1holderCassignor after complying with certain conditions usually
payment of full subscription price
1. 12. "ver2issued 'toc1 stoc1 issued in e6cess of authori:ed capital
stoc1; null and void
1. 13. <atered 'toc1 stoc1 issued gratuitously7 moneyCproperty less
than par value7 services less than par value7 dividends where no
surplus profits e6ist
1. 14. )ertificate of 'toc1 written ac1nowledgment by the
corporation of the stoc1holderGs interest in the corporation. %t is the
personal property and may be mortgagedCpledged. $ransfer binds
the corporation when it is recorded in the corporate boo1s. .
stoc1holder who does not pay his subscription is not entitled to the
issue of a stoc1 certificate. $he total par value of the stoc1s
subscribed by him should first be paid.
1. 1. )hattel mortgage of shares registered with the #egistrar of
*eeds need not be registered in corporate boo1s to bind third parties
because corporate boo1s only cover absolute transfers. /ut the
pledgeeCmortgagee may not have voting rights unless stated in the
contract and registered in the corporate name.
1. 13. ,ethods of )ollection of Fnpaid 'ubscription
1. a. call7 delinquency and sale at public auction of
delinquent shares
2. b. ordinary civil action
3. c. collection from cash dividends and other amounts due
to stoc1holders if allowed by by2lawsCagreed to by him
1. 14. . corporation can reacquire stoc1s in the following cases0
1. a. eliminate fractional shares
2. b. corporate indebtedness arising from unpaid
subscriptions
3. c. purchase delinquent shares
4. d. e6ercise of appraisal right
1. 1@. #ight of .ppraisal
1. a. amending articles7 changing7 restricting7 enlarging
stoc1holderGs rightsCe6tending7 shortening corporate life
2. b. saleCdisposition of allCsubstantially all of corporate
assets
3. c. merger and consolidation
4. d. investment of funds in another corporationCfor a
different purpose
1. 1A. ;rounds for #ejection of #egistration
1. a. not in prescribed form
2. b. purpose illegal7 inimical
3. c. treasurerGs affidavit false
4. d. non2compliance with required (ilipino stoc1 ownership
1. 28. )orporation must organi:e within 2 years from issuance of
certificate of incorporation.
Ho4 to o&%$ni7e8
1. a. adoption of by2laws
2. b. election of /oard of *irectors
3. c. election of officers
/ut from issuance of certificate7 it acquires juridical personality
1. 21. ,erger one corporation absorbs the other and remains in
e6istence while the other is dissolved
1. 22. )onsolidation a new corporation is created and the
consolidating corporations are e6tinguished
1. 23. $heory of ;eneral )apacity a corporation is said to hold such
powers as are not prohibitedCwithheld from it by general law
1. 24. $heory of 'pecial )apacity the corporation cannot e6ercise
powers e6cept those e6presslyCimpliedly given
1. 2. )oncession $heory a group of persons wanting to create a
corporation will have to e6ecute documents and comply with
requirements set by the state before being given corporate
personality; merely a privilege; state may provide causes for which
the privilege may be withdrawn
1. 23. .cts requiring majority vote of stoc1holder0
1. a. filing of issue value of no par value share
2. b. adoption7 amendment7 repeal of by2laws
3. c. compensation and other per diems for directors
1. 24. <here similar acts have been approved by the directors as a
matter of general practice7 custom and policy7 the general manager
may bind the company even without formal authori:ation of the
board of directors
1. 2@. !owers of stoc1holders0
1. a. a direct participation in management where his vote
is needed to approve certain corporate actions
2. b. indirect participation in management to vote or
remove directors
3. c. proprietary rights
4. d. remedial rights
1. 2A. Hoting $rust .greement an agreement between a group of
stoc1holders and trustee for a term not e6ceeding years in which
control over the stoc1s is lodged in the trustee. $he purpose is for
controlling the voting.
1. a. in writing7 notari:ed and filed with the '+) and the
corporation
2. b. period not e6ceeding years
3. c. cannot be entered into to circumvent the laws against
monopolies7 illegal combinations in restraint of trade in fraud
1. 38. )umulative Hoting the number of votes that a shareholderGs
number of shares multiplied by the number of directors may give all
said votes to one candidate or he may distribute them as he may
deem fit. )umulative voting is a matter of right in a stoc1
corporation. %n a non2stoc1 corporation7 it cannot be utili:ed unless
allowed by the by2lawsCarticles
1. 31. $he power of removal of directors that may be e6ercised with
or without cause cannot apply to the director representing the
minority shareholders. 5e may only be removed with cause.
1. 32. ;eneral #ule0 %f surplus profits e6ceed the requirements the
corporation shall declare dividends. $his is compulsory if the surplus
is equalCor more than the paid2up capital.
+6ceptions0
1. a. justified by approved e6pansion projects
2. b. prohibited by creditor to declare dividends
3. c. retention is necessary under e6isting circumstances
1. 33. /usiness 9udgment #ule decisions made by a corporationGs
management body shall not be interfered with even by the courts
unless such acts are oppressiveCunconscionable as to violate the
rights of the minority
1. 34. %ndividual 'uit one brought to assert a right of a stoc1holder
peculiar to himself
1. 3. #epresentative 'uit brought by the stoc1holder in his own
behalf and in behalf of other stoc1holders similarly situated7 having
common cause against the corporation
1. 33. *erivative 'uit brought by a stoc1holder for and in behalf of
the corporation to protectCvindicate corporate rights after he has
e6hausted intra2corporate remedies
#equisites0
1. a. cause of action in favor of the corporation
2. b. refusal of corporation to sue
3. c. injury to the corporation
.lthough corporations dissolved have 3 years to wind up7 they can
convey their properties to a trustee who can continue the suit beyond
the 3 year period. $he lawyer who handled the case in the trial court
may be considered as trustee for the dissolved corporation with
respect to the matter in litigation only even if no appointment was
e6tended to him. >'elano vs. ).?
%n a case filed before dissolution7 it may continue even beyond the 3
year period until final determination of litigation. "therwise7 the
corporation in liquidation would lose what justly belongs to themCbe
e6empt from payment of obligations because of a technicality.
1. 34. (oreign )orporations
1. a. *oing /usiness continuity of commercial dealings
incident to prosecution of purpose and object of the
organi:ation. %solated7 occasional or casual transactions do not
amount to engaging in business. /ut where the isolated act is
not incidentalCcasual but indicates the foreign corporationGs
intention to do other business7 said single act constitutes
engaging in business in the !hilippines
2. b. %nstances when unlicensed foreign corporations can
sue0
>1? isolated transactions
>2? action to protect good name7 goodwill7 and reputation of a foreign
corporation
>3? contracts provide that !hil. )ourts will be venue to controversies
>4? license subsequently granted enables foreign corporation to sue on
contracts e6ecuted before the grant of the license
>? recovery of misdelivered property
>3? where the unlicensed foreign corporation has a domestic
corporation
1. 3@. #eligious )orporations
1. a. )orporation 'ole special form of corporation;
associated with the clergy and consists of 1 person only and his
successors; incorporated by law giving them legal capacity and
advantage
2. b. )lose )orporations one whose articles provide that
its shares shall not be held by more than 28 persons; its issued
stoc1 shall be subject to one or more restrictions on transfer
and shall not be listed in any stoc1 e6changeCma1e public
offering
3. c. &on2stoc1 )orporation one where no part of its
income is distributable to its members and shall be used in
furtherance of the purpose of which it was organi:ed
1. 3A. '+) 9urisdiction
1. a. original and e6clusive jurisdiction
>1? fraudulent devices and schemes employed by directors detrimental
to public interest
>2? intra2corporate disputes and with the state in relation to their
franchise and right to e6ist as such
>3? controversies in the election7 appointment of directors7 trustees7
etc.
>4? petition to be declared in a state of suspension of payments
1. b. ;rounds for 'uspensionC#evocation of )ertificate of
#egistration
>1? fraud in procuring registration
>2? serious misrepresentation as to objectives of corporation
>3? refusal to comply with lawful order of '+)
>4? continuous inoperation for at least years
>? failure to file by2laws within the required period
>3? failure to file reports
>4? other similar grounds
Re/ise1 Sec(&ities Act
>,aterial on the 'ecurities #egulation )ode of 2888 to follow?
1. 1. ;eneral #ule0 .ll securities before being offered for
saleCactual sale to the public must first be registered and have the
proper permit.
+6ception0
1. a. e6empt securities
2. b. securities emanating from e6empt transactions
1. 2. +6empt 'ecurities
1. a. issued by the government
subdivisionsCinstrumentalities
2. b. issued by foreign government which the !hilippines
has diplomatic relations
3. c. issued by receiverCtrustee of an insolvent approved by
the court
4. d. issued by building and loan association
. e. issued by receiverCtrustee of an insolvent approved by
the court
3. f. policy of insurance issued by insurance corporation
supervised by the insurance commission
4. g. securityCrightCinterest in real property including
subdivision lotCcondominium supervised by the ,inistry of
5uman 'ettlements
@. h. pension plans regulated by /%#C%nsurance )ommission
1. 3. +6empt $ransactions
1. a. judicial sale by e6ecution7 etc. in insolvency
2. b. sale of pledged propertyCforeclosed property to
liquidate an obligation
3. c. isolated transactions on securities done by
ownerCagent
4. d. stoc1 transfers emanating from mergers and
consolidations
. e. pre2incorporation subscription
3. f. securities issued by public service operator to
broaden equity base
1. 4. ;rounds for #ejection of #egistration
1. a. application incompleteCuntruthfulComits to state a
material fact
2. b. issuerCregistrant insolvent7 violated codeC '+) rules7
engages in fraudulent transactions
3. c. issuerGs business not sound
4. d. officer7 director7 stoc1holders of issuers is disqualified
. e. issue would prejudice the public
1. . ;rounds for #evocation
1. a. issuer insolvent
2. b. violated of )odeC'+) rules
3. c. fraudulent transaction
4. d. dishonesty by issuerCmisrepresented prospectus
. e. does not conduct business in accordance with law
1. 3. .cts !rohibited
1. a. manipulation of security prices
2. b. manipulation of deceptive devices
3. c. artificial measures of price control
4. d. fraudulent transactions
. e. insider trading
3. f. false prospectus7 communications7 reports
Sec&ec' i+ "$c9 Deposits
1. 1. *eposits in ban1s7 including government ban1s7 may not be
inquired into by any person7 e6cept0
1. a. if depositor agrees in writing
2. b. impeachment cases
3. c. by court order in cases of bribery and dereliction of
duty against public officials
4. d. deposit is subject of litigation
. e. anti2graft cases
3. f. general and special e6amination of ban1 order of the
,onetary /oard of ban1 fraud or serious irregularity
4. g. re2e6amination made by an independent auditor hired
by a ban1 to conduct its regular trust
L$4s on Inte**ect($* C&e$tion
Cop'&i%2t
1. 1. <hat <or1s are not !rotected0
1. a. any idea7 procedure7 system7 method or operation7
concept7 principle7 discovery7 or mere data as such7 even if
they are e6pressed7 e6plained7 illustrated or embodied in a
wor1; news of the day or other miscellaneous facts7 having the
character of mere items of press information7 or any official
te6t of a legislative7 administrative or legal nature as well as
any official translation thereof
2. b. wor1s of the government
3. c. statutes7 rules7 and regulations of government
agencies and offices
4. d. speeches7 lectures7 sermons7 addresses and
dissertations7 pronounced or rendered in courts of justices or
nay administrative agencies in deliberative assemblies and
meetings of public character
1. 2. (air Fse of a )opyrighted <or1 is not %nfringement
1. a. for criticism7 comment7 news reporting7 teaching7
research7 scholarship7 and similar purposes
2. b. decompilation0 the reproduction of the code and
translation of the forms of the computer program with other
programs
1. 3. (actors to )onsider in *etermining (air Fse0
1. a. purpose and character of the use7 including whether
such use is of a commercial nature or for no profit or
educational purposes
2. b. nature of the copyrighted wor1
3. c. amount and substantiality of the portion used in
relation to the copyrighted wor1 as a whole
4. d. effect of use upon the potential mar1et for a value of
the copyrighted wor1
1. 4. $erms of the !rotection
1. a. copyrighted wor10 lifetime of creator plus 8 years
after death >to be computed on the 1
st
day of 9anuary of the
year following the death?
2. b. performances not incorporated in recordings0 8 years
from end of year in which the performance too1 place
3. c. sound or image and sound recordings and
performances incorporated therein0 8 years from end of the
year in which the recording too1 place
4. d. broadcasts0 28 years from the date the broadcast too1
place
1. . #emedies for %nfringement
1. a. injunction
2. b. actual damages7 including legal costs and other
e6penses7 as he may have incurred due to the infringement as
well as the profits the infringer may have made due to such
infringement
3. c. impounding of articles during pendency of the action
4. d. destruction of all infringing copies andCor devices
. e. moral and e6emplary damages
1. 3. )riminal !enalties
1. a. imprisonment of 1 to 3 years plus fine of !87888 to
!187888 for the first offense
2. b. imprisonment of 3 years and 1 day to 3 years plus fine
ranging from !187888 to !887888 for the 2
nd
offense
3. c. imprisonment of 3 years and 1 day to A years plus fine
of !887888 to !178887888 for the 3
rd
Csubsequent offenses
%& .-- ).'+'7 subsidiary imprisonment in cases of insolvency
1. 4. !resumptions0
1. a. !resumption of copyright in the wor1 of other subject
matter to which the action related
2. b. !laintiff is presumed to be the owner of the copyright
3. c. $he natural person whose name is indicated on a wor1
in the usual manner as the author shall7 in the absence of proof
to the contrary7 be presumed to be the author of the wor1.
$his is applicable even if the name is a pseudonym7 where the
pseudonym leaves no doubt as to the identity of the author.
1. @. !rescription0 &o damages may be recovered after 4 years
from time the cause of action arose.
P$tents
1. 1. !atentable %nventions any technical solution of a problem in
any field o human activity that is new7 involve an inventive step and
is industrially applicable shall be patentable. %t may be or may relate
to as product7 or process or an improvement of any of the foregoing.
1. 2. &on2!atentable %nventions
1. a. discoveries7 scientific theories and mathematical
methods
2. b. schemes7 rules and methods of performing mental
acts7 playing games or doing business7 and programs for
computers
3. c. methods for treatment of the human or animal body
by surgery or therapy and diagnostic methods practiced on the
human or animal body
+6ception0 products and composition for use in any of these methods
1. d. plant varieties or animal breeds or essentially biological
process for the production of plants and animals
+6ception0 micro2organisms and non2biological and micro2biological
processes
1. e. aesthetic creations
2. f. contrary to public order or morality
1. 3. #equisites of !atentability
1. a. new7 novelty
2. b. involves an inventive step;
3. c. is industrially applicable
1. 4. &ovelty
$he novelty requirement in the )ode is absolute. $hus7 an invention is
not considered new if it forms part of a prior art. . prior art consists of0
1. a. anything which has been made available to the public
anywhere in the world before the filing date or the priority date of
the application7 or
2. b. the whole contents of an application for a patent7 utility
model7 or industrial design registration7 published in the %!" ga:ette7
filed or effective in the !hilippines7 with a filing or priority date that
is earlier than the filing or priority date of the application7 provided
that the application which has validly claimed the filing date of an
earlier application >priority date? is prior art with effect as of the
filing date of such earlier application7 and provided further7 that the
applicant and the inventor identified in both applications are not one
and the same
1. . %nventive 'tep an invention involves an inventive step7 if
having regard to the prior art7 it is not obvious to a person s1illed in
the art at the time of the filing date of priority date of the
application claiming the invention
1. 3. %ndustrial .pplicability an invention is considered industrially
applicable if it can be produced and used in the industry
1. 4. $he (irst2to2(ile 'ystem if 2 or more persons have made the
invention separately and independently of each other7 the right to the
patent belongs to the person who filed an application for such
invention7 or where 2 or more applications are filed for the same
invention7 the right of the patent belongs to the person who has the
earliest filing date or the earliest priority date
Fnder this system7 the patent is granted to the inventor who filed his
patent application earlier than others thus simplifying the determination
of who is entitled to own the patent.
$he (irst2to2(ile 'ystem increases the rights of the inventor by0
1. a. guaranteeing the confidentiality of the application prior to its
publication
2. b. giving the inventor inchoate rights against an infringer after
the publication of the application and before the grant of the patent
and
3. c. e6panding the rights of the inventor to institute cancellation
proceedings for the duration of the term of the patent. )ancellation
proceedings may be filed at any time during the term of the patent.
Fnder this system7 the applicant declared by final court order as having
the right to the patent may0
1. a. prosecute the application as his own application in place of
the original applicant
2. b. file a new patent application in respect of the same invention
3. c. request that the application be refused or
4. d. see1 the cancellation of the patent7 if one has already been
issued
1. @. <hat is the difference between novelty in patents and
originality in copyright=
&ovelty in !atents even if you do not 1now of any previous creation7 as
long as a patent on the same creation has already been published
anywhere in the world7 you cannot claim novelty. &o access tot he
other creation is no defense.
"riginality in )opyright even if there is same creation7 as long as you
do not copy your own creation7 it is still considered an original
creation. &o access to the previous creation is a defense.
1. A. &on2!rejudicial *isclosure
$he disclosure of information contained in the application during the 12
months preceding the filing date or the priority date of the application
shall not prejudice the applicant on the ground of lac1 of novelty if such
disclosure was made by >a? inventor; >b? a patent office and the
information was contained
1. 18. $erm of !atent 28 years from the filing date of the application
1. 11. ;rounds for )ompulsory -icensing0
1. a. national emergency or other circumstances of e6treme
urgency
2. b. where public interest7 national security7 health or the
development of other vital sectors of the national economy as
determined by the appropriate agency of the government so
requires
3. c. where a judicial or administrative body has
determined that the manner of e6ploitation by the owner of
the patent or his licensee is anti2competitive
4. d. in case of public non2commercial use of the patent by
the patentee7 without satisfactory reason
. e. if not being wor1ed in the !hilippines on a commercial
scale
1. 12. %n case of )ompulsory -icensing of !atents involving 'emi2
conductor $echnology7 the license may be granted only in case of
public non2commercial use or to remedy a practice determined after
judicial or administrative process to be anti2competitive
1. 13. Ftility ,odels an invention qualifies for registration as a
utility model if it is new and industrially applicable
2 no inventive step required for registration
2 no search and e6amination required
1. 14. $erm !rotection 4 years after the filing date of application
without possibility of renewal
1. 1. %ndustrial *esign any composition of lines or colors or any 3
dimensional form7 whether or not associated with lines or colors
%ndustrial *esigns essentially dictated by technical or functional
considerations to obtain a technical result or those that are contrary to
public order7 health or morals shall not be protected
1. 13. $erm of !rotection years from filing date of application7
renewable for not more than 2 consecutive periods of years each
Inso*/enc' L$4
1. 1. Distin%(is2 S(spension o+ P$'3ent $n1 Inso*/enc'
S(spension o+ P$'3ent Inso*/enc'
debtor has enough assets to meet
liabilities but cannot meet them as
they fall due debtor has more liabilities than assets
always initiated by debtor
initiated by creditorsCother persons if
involuntary; initiated by debtor if
voluntary
1. 2. (raudulent !reference any act of insolvent which gives
riseChas tendency to give preference to a creditor to the assets of the
insolvent prejudicial to the right of other creditors of said insolvent
1. 3. +ffect on .ctions Fpon .djudication of %nsolvency
1. a. suits pending in court
>1? secured obligations suspended until assignee appointed
>2? unsecured obligations terminated e6cept to fi6 amount of
obligation
>3? foreclosure suits pending continue
1. b. suit not yet filed cannot be filed anymore7 but claims may
be presented to assignee
1. 4. *ebts and "bligations not .ffected by *ischarge of %nsolvent
1. a. assessments due to national and local government
2. b. debts due to fraudCembe::lement
3. c. debts in which he is bound solidarily
4. d. alimony
. e. corporate debts
3. f. debts not included in the schedule submitted by
debtor
C2$tte* Mo&t%$%e L$4
1. 1. $he law primarily governs chattel mortgage. !rovisions on
pledge of &)) in so far as not in conflict with ),- also govern chattel
mortgages.
1. 2. )hattel ,ortgage may be rescinded for being in fraud of
creditors.
1. 3. ;rowing fruits are covered by chattel mortgage but they may
not be pledged.
1. 4. ,achinery placed on plant or building owned by another can
be the object of chattel mortgage.
1. . ;eneral #ule0 )hattel ,ortgage cannot cover debts
subsequently contracted.
1. 3. #ules0 )hattel ,ortgage cannot cover debts subsequently
contracted
1. a. registered in place where mortgagor resides and
where property >chattel? is located. %f mortgagor resides
abroad7 register in place where property is located.
2. b. ,otor Hehicles0 register also in -and $ransportation
"ffice
3. c. 'hares of 'toc10 place of domicile of corporation and
shareholder. &o need for notation in boo1s of corporation
4. d. Hessels0 !hil. )oastguard
1. 4. $o be valid against 3
rd
persons0
1. a. affidavit of good faith
2. b. contract must be registered
1. @. ene&$* R(*e: %n )hattel ,ortgage7 there is recovery of
deficiency judgment.
Exception: when #ecto -aw applies
1. A. Re6(isites o+ CML:
1. a. constituted to secure the fulfillment of principal
obligation
2. b. mortgagor is absolute owner of the thing mortgaged
3. c. persons constituting the mortgage have the free
disposal of the property and in the absence thereof7 they be
legally authori:ed for the purpose
4. d. recorded to bind 3
rd
persons
1. 18. Fo&3$* Re6(isites o+ CM:
1. a. substantial compliance with form in 'ec. of ),-
2. b. signed by at least 2 witnesses
3. c. must contain an affidavit of good faith
4. d. certificate of oath >notarial ac1nowledgment?
1. 11. .ffidavit of ;ood (aith where the parties severally swear that
the mortgage is made for the purpose of securing the obligation
specified and for no other purpose and that the same is a just and
valid obligation and not one entered into for fraud
2 property given in ), must be described to enable the parties or any
other person after reasonable inquiry and investigation to identify it
1. 12. (uture property may not be covered by ), but when such
property is a0
1. a. renewal of7 or in substitution for goods on hand when
the mortgage was e6ecuted7 or
2. b. purchased with proceeds >not of your own money? of
said goods7 said property may be covered by ),
1. 13. )riminal .cts removal of chattel to another city or province
without written consent of mortgagee7 selling property already
pledged7 or mortgaged without written consent of mortgagee
1. 14. . chattel mortgage may be foreclosed judicially or e6tra2
judicially7 in the latter case7 before a notary or sheriff7 or creditor or
mortgagee when stipulated7 even without need of notice >when
mortgagee forecloses?
1. !actum )ommissorium applies to )hattel ,ortgage.
ADDENDUM TO SECTRANS
PRO0ISIONS COMMON TO PLEDE AND MORTAE :A&t .;<=-.,.>?
PLEDE :1e+inition? . contract by virtue of which the debtor delivers
to the creditor or to a third person a movable or document evidencing
incorporeal rights for the purpose of securing the fulfillment of a
principal obligation with the understanding that when the obligation is
fulfilled7 the thing delivered shall be returned with all its fruits and
accessions.
Essenti$* Re6(isites to Cont&$cts o+ P*e1%e $n1 Mo&t%$%e
1. constituted to secure the fulfillment of a principal obligation
2. pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged
3. the persons constituting the pledge or mortgage have the free
disposal of their property7 and in the absence thereof7 that they be
legally authori:ed for the purpose
4. cannot e6ist without a valid obligation
. when the principal obligation becomes due7 the thing in which the
pledge or mortgage consists may be alienated for the payment to the
creditor.
third persons not parties to the principal obligation may
secure the latter by pledging or mortgaging their own property
but may be constituted to secure fulfillment of a voidable or
unenforceable or natural obligation
in case of pledge7 the thing pledged must be delivered to the
creditor or to a third person by common agreement
in case of mortgage7 as a general rule7 the mortgagor retains
he possession of the property mortgaged
#in1s o+ P*e1%e:
1. Holuntary or conventional created by agreement of the parties
2. -egal 2 created by operation of law
C2$&$cte&istics o+ P*e1%e:
1. real perfected by delivery
2. accessory has no independent e6istence of its own
3. unilateral creates obligation solely on the part of the creditor to
return the thing subject upon the fulfillment of the principal
obligation
4. subsidiary obligation incurred does not arise until the fulfillment of
the principal obligation
C$(se o& Consi1e&$tion in P*e1%e
1. principal obligation in so far as the pledgor is concerned
2. compensation stipulated for the pledge or mere liberality of the
pledgor if pledgor is not the debtor
I3po&t$nt Points:
1. future property cannot be pledged or mortgaged
2. pledge or mortgage e6ecuted by one who is not the owner of the
property pledged or mortgaged is without legal e6istence and
registration cannot validate it.
3. mortgage of a conjugal property by one of the spouses is valid only
as to Q of the entire property
4. in case of property covered by $orrens title a mortgagee has the
right to rely upon what appears in the certificate of title and does not
have to inquire further.
. pledgor or mortgagor has free disposal of property
3. thing pledged or mortgaged may be alienated.
4. creditor not required to sue to enforce his credit
@. pledgor or mortgagor may be third person
PLEDE MORTAE
)onstituted on movables )onstituted on immovables
!roperty is delivered to the
pledgee7 or by common consent to
a 3
rd
person *elivery not necessay
&ot valid against 3
rd
persons unless
a description of the thing pledged
and the date of the pledge appear
in a public instrument
&ot valid against 3
rd
persons if not
registered
Ri%2t o+ C&e1ito& 42e&e De)to& +$i*s to Co3p*' 4it2 2is O)*i%$tion
1. creditor is merely entitled to move for the sale of the thing pledged
or mortgaged with the formalities required by law in order to collect
2. creditor cannot appropriate to himself the thing nor can he dispose
of the same as owner.
P&o2i)ition $%$inst pactum commissorium
1. stipulation is null and void 2 stipulation where thing or mortgaged
shall automatically become the property of the creditor in the event
of nonpayment of the debt within the term fi6ed
2. e!uisites of pactum commissorium:
1. there should be a pledge or mortgage
2. there should be a stipulation for an automatic appropriation
by the creditor of the property in the event of nonpayment
"# $ffect on %ecurity &ontract
2nullity of the stipulation does not affect validity and efficacy of the
principal contract.
Pe&3issi)*e Stip(*$tions 4it2 &e%$&1 to pactum commissorium:
1. subsequent modification of original contract by agreement of parties
2. subsequent voluntary act of the debtor ma1ing cession of property in
payment of the debt
3. promise to assign or sell said property in payment of the obligation
if7 upon its maturity7 it is not paid
4. authori:ing the mortgagee to ta1e possession of the mortgaged
premises upon the foreclosure of a mortgage
. if after the first and second auctions7 the thing is not sold
I3po&t$nt Points:
1. debtor2owner bears the ris1 of loss of the property
2. pledge or mortgage is indivisible0
1. every portion of the property is answerable for the whole
obligation
2. when several things are pledged or mortgaged7 all of them
are liable for the totality of the debt. )reditor does not have to
divide his action by distributing the debt7 among the various things
pledged or mortgaged
3. the debtorGs heir who has paid a part of the debt cannot as1
for the proportionate e6tinction of the pledge or mortgage nor can
the creditorGs heir who has received his share of the debt return the
pledge or cancel the mortgages if the debt is not yet completely
satisfied
4. +I)+!$%"&' to the rule of %&*%H%'%/%-%$P0
1. where each one of several things guarantees determinate portion of
credit
2. where only portion of loan was released
3. where there was failure of consideration
3. rule that real property7 consisting of several lots should be sold
separately7 applies to sales in e6ecution7 and not to foreclosure of
mortgages
4. the mere embodiment of a real estate mortgage and a chattel
mortgage in one document does not have the effect of fusing both
securities into an indivisible whole
. contract of pledge or mortgage may secure all 1inds of obligation7
be they pure or subject to a suspensive or resolutory condition
3. a promise to constitute pledge or mortgage creates no real right7
only a personal right biding upon the parties7 only right of action to
compel the fulfillment of the promise but there is no pledge or
mortgage yet
4. under #!)7 estafa is committed by a person who7 pretending to be
the owner of any real property7 shall convey7 sell7 encumber or
mortgage the same 1nowing that the real property is encumbered
shall dispose of the same as unencumbered. %t is essential that fraud
or deceit be practiced upon the vendee at the time of the sale.
P&o/isions App*ic$)*e On*' to P*e1%e
1. transfer of possession to the creditor or to third person by common
agreement is essential in pledge
2 .)$F.- *+-%H+#P is important
2 )"&'$#F)$%H+ delivery or symbolic delivery of the 1ey to the
warehouse is sufficient to show that the depositary appointed by
common consent of the parties was legally placed in possession.
2. all movables within commerce of men may be pledged as long as
susceptible of possession
3. incorporeal right7 evidenced by0
1. negotiable instruments;
2. bills of lading;
3. shares of stoc1;
4. bonds;
. warehouse receipts ;and
3. similar documents
may be pledged. $he instruments pledged shall be delivered to the
creditor and if negotiable7 must be indorsed.
4. pledge shall ta1e effect against 3
rd
persons only if the ff appears in a
public instrument0
1. description of the thing pledged
2. date of the pledge
3. shall ta1e care of the thing pledged with the diligence of a good
father of a family.
4. has the right to the reimbursement of the e6penses made for its
preservation is liable for its loss or deterioration by reason of fraud7
negligence7 delay or violation of the terms of the contract7 and not
due to fortuitous event
. may bring the actions which pertain to the owner of the thing in
order to recover it from7 or defend it against a 3
rd
person
3. cannot use the thing without the authority of the owner7 and if he
should do so7 or misuse the thing7 the owner may as1 that it be
judicially or e6tra2judicially deposited.
4. may use the thing if it is necessary for the preservation of the thing
@. may either claim another thing in pledge or demand immediate
payment of the principal obligation if he is deceived on the substance
or quality of the thing.
A. cannot deposit the thing pledged with a third person7 unless there is
a stipulation authori:ing him to do so
18. is responsible for the acts of his agents or employees with respect to
the thing pledged.
11. has no right to use the thing or to appropriate the fruits without the
authority of the owner can apply the fruits7 income 7 dividends or
interest earned or produced by the thing pledged to the payment of
the interest7 and thereafter to the principal of his credit. Fnless
there is stipulation to the contrary7 the interest and earnings of the
right pledged and in case of animals7 their offsprings are included in
the pledge.
12. may cause public sale of the thing pledged if7 without fault on his
part7 there is danger of destruction7 impairment or diminution in
value of the thing. $he proceeds of the auction shall be a security for
the principal obligation.
13. has the responsibility for flaws of the thing pledged.
14. cannot as1 for the return of the thing against the will of the
creditor7 unless and until he has paid the debt and its interest7 with
e6penses in a proper case
1. is allowed to substitute the thing which is in danger of destruction
or impairment without any fault on the part of the pledgee7 with
another thing of the same 1ind and quality
13. may require that the thing be deposited with a 3
rd
person if through
the negligence or willful act of the pledgee the thing is in danger of
being lost or impaired
. thing pledged may be alienated by the pledgor or owner only if with
the consent of the pledgee. "wnership of the thing pledged is
transmitted to the vendee or transferee as soon as the pledgee
consents to the alienation7 butt he latter shall continue in possession
3. contract of pledge gives right to the creditor to retain the thing in
his possession or in that of a third person to whim it has been
delivered7 until the debt is paid
7. creditor :
8. pledgee:
9. pledgor :
Extin%(is23ent o+ P*e1%e
%f the thing pledged is returned by the pledgee to the pledgor or
owner7 pledge is e6tinguished
. statement in writing by the pledgee that he renounces or
abandons the pledge is sufficient to e6tinguish. (or t his purpose7
neither the acceptance by the pledgor o owner7 nor the return of the
thing pledged is necessary7 the pledgee becoming a depositary.
%f subsequent to the perfection of the pledge7 the thing is in the
possession of the pledgor or owner7 there is prima facie presumption
that the thing has been returned by the pledgee
%f the thing is in the possession of 3
rd
person who has received it from
the pledgor or owner after the constitution of the pledge7 there
is prima facie presumption that the thing has been returned by the
pledgee.
Fo&3$*ities &e6(i&e1 S$*e )' $ C&e1ito& i+ c&e1it not p$i1 in 1(e ti3e:
1. the debt is due and unpaid
2. the sale must be at a public auction
3. there must be notice to the pledgor and owner7 stating the amount
due7 and
4. the sale must be made with the intervention of a notary public the
th
$he pledgee may appropriate the thing if after the first and
second auctions7 the thing is not sold.
.t the public auction7 the pledgor or owner may bid.
!ledgor or owner shall have a better right if he should offer
the same terms as the highest bidder
!ledgee may also bid7 but his offer shall not be valid if he is
the only bidder. .ll bids at the public auction shall ofer to pay the
purchase price at once. /%*' ,F'$ /+ ("# ).'5. %f any other bid is
accepted7 the pledgee is deemed to have received the purchase
price7 as far as the pledgor or owner is concerned.
E++ect o+ t2e S$*e o+ t2e T2in% P*e1%e1
1. e6tinguishes the principal obligation whether the price of the sale is
more or less than the amount due
2. if the price is more than amount due7 the debtor is not entitled to
the e6cess unless the contrary is provided
3. if the price of the sale is less7 neither is the creditor entitled to
recover the deficiency. )ontrary stipulation is void.
.fter public auction7 the pledgee shall promptly advise the pledgor
or owner of the result.
.ny third person who has any right in the thing may satisfy the
principal obligation as soon as the latter becomes due and
demandable.
$he right of choice given to the pledgee as to which of the things
pledged he shall cause to be sold is limited only by stipulation. .fter
sufficient property has been sold to satisfy the obligation plus
interest and e6penses7 no more shall be sold.
. 3
rd
person who is not a party to the principal obligation may secure
the latter by pledging his own property. 5e has the same as a
guarantor and he cannot be prejudiced by any waiver of defense by
the principal obligor
Le%$* P*e1%es:
1. &ecessary e6penses shall be refunded to every possessor7 but only
possessor in good faith may retain the thing until he has been
reimbursed.
Fseful e6penses shall be refunded only to the possessor % n good faith
with the same right of retention7 the person who has defeated him in
the possession having the option of refunding the amount of the
e6penses or of paying the increase in value which the thing may have
acquired and by reason thereof >art 43?
1. 5e who has e6ecuted wor1 upon a movable has a right to retain it by
way of pledge until he is paid. >art 1431?
2. $he agent may retain the things which are the objects of agency
until the principal effects the reimbursement and pays the indemnity.
>art 1A14?
3. $he laborerGs wages shall be a lien on the goods manufactured or
the wor1 done >art 1484?.
'pecial -aws apply to pawnshops and establishment which are engaged
in ma1ing loans secured by pledges. !rovisions of the )ivil )ode shall
apply subsidiarily.
REAL MORTAE :A&ts- .,.@-.,>,? %t is a contract whereby the
debtor secures to the creditor the fulfillment of a principal obligation7
specially subjecting to such security immovable property or real rights
over immovable property in case the principal obligation is not complied
with at the time stipulated.
O)Aects o+ Re$* Mo&t%$%e
1. immovables
2. alienable real rights in accordance with the laws7 imposed upon
immovables
* future property cannot be object of mortgage.
I3po&t$nt Points:
1. .s a general rule7 the mortgagor retains possession of the property
he may deliver said property to the mortgagee without altering the
nature of the contract of mortgage.
2. %t is not an essential requisite that the principal of the credit bears
interest7 or that the interest as compensation for the use of the
principal and the enjoyment of its fruits be in the form of a certain
percent thereof.
#in1s o+ Mo&t%$%e:
1. voluntary
2. legal
3. equitable one which7 although it lac1s the proper formalities of a
mortgage shows the intention of the parties to ma1e the property as
a security for a debt
>provisions governing equitable mortgage arts 1337 1487 1447 13827
13837 1384 and 1384?.
Essenti$* Re6(isites o+ Mo&t%$%e
1. constituted to secure the fulfillment of a principal obligation
2. pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged
3. the persons constituting the pledge or mortgage have the free
disposal of their property7 and in the absence thereof7 that they be
legally authori:ed for the purpose
4. cannot e6ist without a valid obligation
. when the principal obligation becomes due7 the thing in which the
pledge or mortgage consists may be alienated for the payment to the
creditor.
3. appears in a public document duly recorded in the #egistry of
!roperty to be validly constituted
Rlegal mortgage the persons in whose favor the law establishes a
mortgage have on other right than to demand the e6ecution and the
recording of the document in which the mortgage is formali:ed.
Inci1ents o+ Re%ist&$tion o+ Mo&t%$%e
1. ,ortgagee entitled to registration of mortgage as a matter of right
2. !roceedings for registration do not determine validity of mortgage
or its effect
3. #egistration is without prejudice to better right of third parties
4. ,ortgage deed once duly registered forms part of the records for the
registration of the property mortgaged
. ,ortgage by surviving spouse of hisCher undivided share of conjugal
property can be registered.
E++ect o+ In/$*i1it' o+ Mo&t%$%e on p&incip$* o)*i%$tion:
1. principal obligation remains valid
2. mortgage deed remains as evidence of a personal obligation
E++ect o+ Mo&t%$%e:
1. creates real rights7 a lien inseparable from the property mortgaged7
enforceable against the whole world
2. creates merely an encumbrance
Extent o+ Mo&t%$%e
a. the natural accessions
b.to the improvements7
1. c. growing fruits
2. the rents or income not yet received when the obligation becomes
due7
e. to the amount of the indemnity granted or owing to the proprietor
from the insurers of the property7
1. f. in virtue of e6propriation for public use7 with the declarations7
amplifications and limitations established by law7 whether the estate
remains in the possession of the mortgagor7 or it passes into the hands
of a third person.
I3po&t$nt Points:
1. 'tipulation in mortgage contract including after2acquired properties
is valid.
2. .ttachment of lien is retroactive
3. 'tipulation is necessary for mortgage to secure future advancements
,ortgage is a continuing security until the full amount of advances are
paid.
4. ,ortgage credit may be alienated or assigned to a third person7 in
whole or in part7 with the formalities required by law.
a. .lienation or assignment is valid even if not registered. #egistration is
necessary only to affect 3
rd
persons.
. )reditor may claim from a 3
rd
person in possession of the property
the payment of the part of the credit secured by the property
3. 'tipulation forbidding the owner from alienating the immovable
mortgaged shall be void.
L$4s %o/e&nin% Mo&t%$%e:
1. &ew )ivil )ode
2. !* 1A2
3. #evised .dministrative )ode
4. #. 4@@2 7 as regards aliens becoming mortgages
Fo&ec*os(&e o+ Mo&t%$%e 2 %t is the remedy available to the mortgagee
by which he subjects the mortgaged property to the satisfaction of the
obligation to secure which the mortgage was given.
#in1s o+ Fo&ec*os(&e
1. judicial
2. e6trajudicial
both should be distinguished from e6ecution sale which is governed
by #ule 3A of the #ules of )ourt
!(1ici$* Fo&ec*os(&e :%o/e&ne1 )' R(*e B< o+ R(*es o+ Co(&t?
1. ,ay be availed of by bringing an action in the proper court which
has jurisdiction over the area wherein the real property involved or
apportion thereof is situated
2. %f the court finds the complaint to be well2founded7 it shall order
the mortgagor to pay the amount due with interest and other charges
within a period of not less than A8 days nor more than 128 days from
the entry of judgment.
3. %f the mortgagor fails to pay at time directed7 the court7 upon
motion7 shall order the property to be sold to the highest bidder at a
public auction.
4. Fpon confirmation of the sale by the court7 also upon motion7 it
shall operates to divest the rights of all parties to the action and to
vest their rights to the purchaser subject to such rights of redemption
as may be allowed by law
. /efore the confirmation7 the court retains control of the
proceedings.
3. $he proceeds of the sale shall be applied to the payment of the0
a. )osts of the sale;
b..mount due the mortgagee;
1. c. )laims of junior encumbrancers or persons holding subsequent
mortgages in the order of their priority; and
2. the balance7 if any shall be paid to the mortgagor
4. 'heriffGs certificate is e6ecuted7 ac1nowledged and recorded to
complete the foreclosure
N$t(&e o+ !(1ici$* Fo&ec*os(&e P&ocee1in%s:
1. quasi in rem action
2. foreclosure is only the result or incident of the failure to pay debt
3. survives death of mortgagor
Ext&$A(1ici$* Fo&ec*os(&e :%o/e&ne1 )' Act NoC >,>=C $s $3en1e1?
1. e6press authority to sell is given to the mortgagee.
2. authority is not e6tinguished by death of mortgagor or mortgagee
3. public sale should be made after proper notice
4. surplus proceeds of foreclosure sale belong to the mortgagor
. debtor has the right to redeem the property sold within 1 year from
and after the date of sale
3. remedy of party aggrieved by foreclosure is a petition to set aside
sale and cancellation of writ of possession.
Ri%2t o+ Mo&t%$%e to Reco/e& De+icienc'
1. ,ortgagee is entitled to recover deficiency
2. %f the deficiency is embodied in a judgment7 it is referred to
as deficiency 'udgment#
3. .ction for recovery of deficiency may be filed even during
redemption period.
4. .ction to recover prescribes after 18 years from the time the right
of action accrues.
N$t(&e o+ Po4e& o+ Fo&ec*os(&e )' Ext&$A(1ici$* S$*e
1. conferred for mortgageeGs protection
2. an ancillary stipulation
3. a prerogative of the mortgagee
&ote0 'tipulation of upset price in mortgage
contract is void.
E++ect o+ In$1e6($c' o+ P&ice in Fo&ec*os(&e S$*e
1. <here there is right to redeem
a. (0 %nadequacy of price is immaterial because the judgment debtor
may redeem the property
b.$)&$P*+O,0 the price is so inadequate as to shoc1 the conscience of
the court ta1ing into consideration the peculiar circumstances
2. !roperty may be sold for less than its fair mar1et value upon the
theory that the lesser the price the easier for the owner to redeem.
3. $he value of the mortgaged property has no bearing on the bid price
at the public auction7 provided that the public auction was regularly
and honestly conducted.
W$i/e& o+ Sec(&it' )' C&e1ito&
1. ,ortgagee may waive right to foreclose his mortgage and maintain a
personal action for recovery of theindebetness.
2. ,ortgagee cannot have both remedies
&ote0 (oreclosure retroacts to the date of
registration of mortgage
Re1e3ption %t is a transaction by which the mortgagor reacquires the
property which may have passed under the mortgage or divests the
property of the lien which the mortgage may have created.
#in1s o+ Re1e3ption
,- e6(it' o+ &e1e3ption
2 right of the mortgagor to redeem the mortgaged property after his
default in the performance of the conditions of the mortgage but before
the sale of the mortgaged property or confirmation of sale
.- &i%2t o+ &e1e3ption
2 right of the mortgagor to redeem the property within a certain
period after it was sold for the satisfaction of the debt.
E6(it' o+ Re1e3ption
1. e6ercised before confirmation of sale
2. second mortgagee acquires only the equity of redemption vested in
the mortgagor
3. ta1ing physical possession not necessary for levy
can be levied upon by means of writ of e6ecution.
4. remedy of mortgagee to obtain possession is to bring a civil action
either to recover possession as a preliminary step to the sale or to
obtain judicial foreclosure.
Ri%2t o+ Re1e3ption
1. may be e6ercised within 1 year from and after the date of
registration of the certificate of sale with the appropriate #egistry of
*eeds.
2. if no redemption is made within prescribed period7 the purchaser
has the absolute right to a writ of possession which is the final
process to consummate e6trajudicial foreclosure
3. effect of seasonable redemption is not to recover ownership which
was never lost but the elimination from his title the lien created by
the levy or attachment.
4. sale by the mortgagor to a 3
rd
person during redemption period
transfers only the right to redeem the property and the right to
possess7 use and enjoy the same during said period.
. if sale to a 3
rd
person is not registered and made without the consent
of the mortagee7 buyer was not validly substituted as a debtor thus
has no right to redeem
3. if e6trajudicial foreclosure if effected with fraud7 it is null nad
void ab initio#
CHATTEL MORTAE >.rts. 214822141? %t is a contract by virtue of
which a personal property is recorded in the )hattel ,ortgage #egister
as security for the performance of an obligation.
Note: I+ t2e 3o/$)*eC inste$1 o+ )ein% &eco&1e1 is 1e*i/e&e1 to t2e
c&e1ito&C it is p*e1%e $n1 not c2$tte* 3o&t%$%e-
CHATTEL MORTAE PLEDE
%nvolves movable property %nvolves movable property
*elivery of the personal property is
&"$ necessary
*elivery of the personal property is
necessary
#egistration is necessary for
validity
#egistration is &"$ necessary for
validity
!rocedure 0 'ec 14 of .ct no 18@7
as amended !rocedure0 .rt 2112 of )ivil )ode
%f the property is foreclosed7 the
e6cess over the amount due goes to
the debtor
%f the property is sold7 the debtor is not
entitled to the to the e6cess F&-+'' it
is otherwise agreed or in case of legal
pledge
)reditor is entitled to deficiency
from the debtor +I)+!$ if it is a
security for the purchase of
personal property in installments
)reditor is not entitled to recover
deficiency notwithstanding any
stipulation to the contrary
L$4s %o/e&nin% C2$tte* Mo&t%$%e:
1. )hattel ,ortgage -aw7 .ct &o. 18@7 as amended
2. )ivil )ode
3. #evised .dministrative )ode
4. #evised !enal )ode
. 'hip ,ortgage *ecree of 1A4@ >!* 121? governs mortgage of vessels
of domestic ownership
I3po&t$nt points:
The provisions of Civil Code on pledge shall be applicable to chattel
mortgage only insofar as they are not in conflict with the Chattel
ortgage !aw

"ubject matter of Chattel mortgage must be described and
identified.
#$tent of Chattel ortgage % +t is deemed to cover only the property
described and not li-e or substituted property thereafter ac!uired by
the mortgagor and placed in the same depositary as the property
originally mortgaged, anything in the mortgage to the contrary
notwithstanding#
E++ect o+ Re%ist&$tion
1. creates real rights
2. adds nothing to mortgage
&ote0 #egistration of assignment of mortgage is not
required
Ri%2t o+ Re1e3ption
1. when the condition of a chattel mortgage is bro1en7 the ff may
redeem0
a. mortgagor;
b.person holding a subsequent mortgage;
1. c. subsequent attaching creditor.
2. an attaching creditor who so redeems shall be subrogated to the
rights of the mortgagee and entitled to foreclose the mortgage in the
same manner that the mortgagee could foreclose it
3. the redemption is made by paying or delivering o the mortgagee the
amount due on such mortgage and the costs and e6penses incurred by
such breach of condition before the sale.
Fo&ec*os(&e o+ C2$tte* Mo&t%$%e
1. public sale
2. private sale there is nothing illegal7 immoral or against public
order in an agreement for the private sale of the personal properties
covered by chattel mortgage.
Pe&io1 to Fo&ec*os(&e
1. .fter 38 days from the time of the condition is bro1en
2. $he 382day period is the minimum period after violation of the
mortgage condition for the creditor to cause the sale at public
auction with at least 18 days notice to the mortgagor and posting of
public notice of time7 place7 and purpose of such sale7 and is a period
of grace for the mortgagor7 to discharge the obligation.
3. .fter the sale at public auction7 the right of redemption is no longer
available to the mortgagor.
Ci/i* Action to Reco/e& C&e1it
1. independent action not required
2. mortgage lien deemed abandoned by obtaining a personal judgment
Ri%2t o+ Mo&t%$%e to Reco/e& De+icienc'
1. where mortgage foreclosed
2 )reditor may maintain action for deficiency although )hattel ,ortgage
-aw is silent on this point. #eason is chattel mortgage is only given as a
security and not as payment of the debt.
2. where mortgage constituted as security for purchase of personal
property payable in installments
2 &o deficiency judgment can be as1ed and any agreement to the
contrary shall be void
3. where mortgaged property subsequently attached and sold
2 ,ortgagee is entitle to deficiency judgment in an action for specific
performance.
App*ic$tion o+ P&ocee1s o+ S$*e
1. costs and e6penses of 1eeping and sale
2. payment of the obligation
3. claims of persons holding subsequent mortgages in their order
4. balance7 if any7 shall be paid to the mortgagor7 or person holding
under him.
CONCURRENCE AND PREFERENCE OF CREDITS :A&ts- ..>B-..=,? D
Conc(&&ence o+ c&e1it %t implies possession by two or more creditors
of equal right or privileges over the same property or all of the property
of a debtor.
P&e+e&ence o+ C&e1it %t is the right held by a creditor to be preferred
in the payment of his claim above other out of the debtorGs assets.
ene&$* P&o/isions:
1. the debtor is liable with all his property7 present and future7 for the
fulfillment of his obligations7 subjects to e6emptions provided by law
2 e6empt property0
1. present property
2. family home >.rts 127 13 S 17 &))?
3. right to receive support as well as money or property obtained by
such support shall not be levied upon on attachment or e6ecution
>.rt 287 &))?
4. 'ec 137 #ule 3A7 #ules of )ourt
. 'ec 11@7 the public -and .ct7> ). &o. 1417 as amended?
1. future property
2 a debtor who obtains a discharge from his debts on account of
insolvency7 is not liable for the unsatisfied claims of his creditors with
said property >'ecs. 3@ S 3A7 %nsolvency -aw7 .ct &o. 1A3
1. property in custodia legis and of public dominion
2. insolvency shall be governed by the %nsolvency -ae >.ct &o. 1A37 as
amended?
3. +6emption of conjugal property or absolute community or property
provided that0
a. !artnership or community subsists
b."bligations of the insolvent spouse have not redounded to the benefit
of the family
4. if there is co2ownership7 and one of the co2owners is the insolvent
debtor7 his undivided share or interest in the property shall be
possessed by the assignee in insolvency proceedings because it is part
of his assets
. property held by the insolvent debtor as a trustee of an e6press or
implied trust7 shall be e6cluded from the insolvency proceedings.
C*$ssi+ic$tion o+ C&e1its
1. 'pecial preferred credits >.rts 2241 S 2242 of &))?
a. considered as mortgages or pledges of real or personal property or
liens within the purview of legal provisions governing insolvency
b.ta6es due to the 'tate shall first be satisfied
2. "rdinary preferred credits >.rt 2244?
2 preferred in the order given by law
3. )ommon credits >.rt 224?
2 credits of any other 1ind or class7 or by any other right or title not
comprised in .rts 224122244 shall enjoy no preference.
O&1e& o+ P&e+e&ence o+ C&e1it
1. )redits which enjoy preference with respect to specific movables7
e6clude all others to the e6tent of the value of the personal property
to which the preference refers.
2. %f there are 2 or more credits with respect to the same specific
movable property7 they shall be satisfied pro rata7 after the payment
of duties7 ta6es and fees due the 'tate or any subdivision thereof
3. $hose credits which enjoy preference in relation to specific real
property or real rights7 e6clude all others to the e6tent of the value
of the immovable or real right to which the preference refers.
4. %f there are 2 or more credits with respect to the same specific real
property or real rights7 they shall be satisfied pro rata7 after the
payment of the ta6es and assessment of the ta6es and assessments
upon the immovable property or real right.
. $he e6cess7 if any7 after the payment of the credits which enjoy
preference with respect to specific property7 real or personal7 shall
be added to the free property which the debtor may have7 for the
payment of other credits.
3. $hose credits which do not enjoy any preference with respect to
specific property7 and those which enjoy preference7 as to the
amount not paid7 shall be satisfied according to the following rules0
2 order established by .rt 2244
2 common credits referred to in .rt 224 shall be paid pro
rata regardless of dates.