Professional Documents
Culture Documents
Commercial law
Prepared by:
b. accumulation
Requisites of Negotiability
Parties:
a. Drawer one who gives the order to pay money
to third party.
b. Payee one to whom the bill is drawn or is
payable
c. Drawee/ acceptor person to whom the bill is
addressed and who is ordered to pay.
C.
Parties:
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Negotiable Instruments
Contains all the requisites
of Sec. 1 of the NIL
Transferred
negotiation
by
Negotiable Instruments
Negotiable Documents
of Title
Does
not
contain
requisites of Sec. 1 of NIL
is
No secondary liability of
intermediate parties
Transferee merely steps
into the shoes of the
transferor
Subject is goods
Instrument is merely
evidence of title; thing of
value are the goods
mentioned
in
the
document
Bill of Exchange
Promissory Note
Unconditional promise
Involves 2 parties
Maker primarily liable
Only 1 presentment - for
payment
Unconditional order
Involves 3 parties
Drawer only secondarily
liable
Generally
2
presentments
for
acceptance
and
for
payment
Check
- Always drawn
upon a bank or
banker
- Always payable on
demand
BOE
- May or may not be drawn against
a bank
PN
- There are two (2) parties,
the maker and the payee
CHECK
- There are three (3) parties,
the drawer, the drawee
bank and the payee
- Always drawn against a
bank
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c. PAYABLE IN MONEY
General Rule: If some other act besides payment of
money is promised or ordered, the instrument
becomes non-negotiable.
Exceptions:
a. Authorizes the sale of collateral securities on
default;
b. Authorizes confession of judgment on default;
c. Waives the benefit of law intended to protect the
debtor;
d. Allows the creditor the option to require
something to be done in lieu of money.
d. PAYABLE ON DEMAND
An instrument is payable on demand:
a. Where it is expressed to be payable on demand,
at sight or on presentation;
b. Where no period of payment is stated;
c. Where the instrument has been issued, accepted
or indorsed after maturity.
e. DETERMINABLE FUTURE TIME
- Future time is determinable in the following cases:
a. At a fixed period after date or sight;
b. On or before a specified fixed or determinable
future time;
c. On or at a fixed period after the occurrence of a
specified event, certain to happen, although the
exact date is not certain.
f. PAYABLE TO ORDER
- The instrument is payable to order where drawn
payable to the order of a specified person, or to him or his
order.
- The payee must be named or otherwise indicated
therein with reasonable certainty.
g. PAYABLE TO BEARER
a. Where it is expressed to be so payable;
b. When payable to a person named therein or
bearer;
c. When payable to the order of a fictitious or nonexisting person, and such fact was known to the
drawer or maker;
d. When the name of the payee is not the name of a
person;
e. When the only and last indorsement is an
indorsement in blank.
An original bearer instrument remains to be a bearer
instrument even if indorsed specially and thus can be
negotiated by mere delivery.
When the payee is vaguely designated, the loss will be
borne by the party who caused it the drawer.
(Equitable Bank v. IAC, 161 SCRA 518).
RULES AS TO DATES
There are several important principles as to dates in
negotiable instruments. These are:
1. Where the instrument, its acceptance, or
indorsement is dated, such date is presumed to be
the corresponding true date; Date is important 2. Where the instrument is payable within a specified
period after date, or after acceptance, in which case
the date of the instrument and the date of maturity of
the instrument; in these cases, the holder may insert
the true date;
a. when the instrument is payable on demand,
the date is necessary to determine whether
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3.
Page 4
4)
5)
6)
7)
RULE ON SIGNATURES
General Rule: A person whose signature does not
appear on the instrument in not liable.
Exception:
a. One who signs in a trade or assumed name (Sec.
18)
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CUT-OFF RULE:
General Rule: Parties prior to the forged signature are
cut-off from the parties after the forgery in the sense that
prior parties cannot be held liable and can raise the
defense of forgery. The holder can only enforce the
instrument against parties who became such after
forgery.
Notes on Section 20
General rule: An agent is not liable on the instrument if
he were duly authorized to sign for or on behalf
of a principal.
Notes on Section 23
Section 23 applies only to forged signatures or
signatures made without authority
Alterations such as to amounts or like fall under
section 124
Forms of forgery are a) fraud in factum b) duress
amounting to fraud c) fraudulent impersonation
Only the signature forged or made without authority
is inoperative, the instrument or other signatures
which are genuine are affected
The instrument can be enforced by holders to whose
title the forged signature is not necessary
drawee bank is conclusively presumed to know the
signature of its drawer
if endorsers signature is forged, loss will be borne by
the forger and parties subsequent thereto
drawee bank is not conclusively presumed to know
the signature of the indorser. The responsibility falls
on the bank which last guaranteed the indorsement
and not the drawee bank.
Where the payees signature is forged, payments
made by the drawee bank to collecting bank is
ineffective.
No debtor/creditor relationship is
created. An agency to collect is created between the
person depositing and the collecting bank. Drawee
bank may recover from collecting bank who may in
turn recover from the person depositing.
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Effects:
Every person whose signature appears thereon
is a party for value
Presumption is disputable
Absence of Consideration:
(1995 and 1996 Bar Exam)
Notes on Section 28
Absence of consideration is where no consideration
was intended to pass.
Failure of consideration implies that consideration
was intended by that it failed to pass
The defense of want of consideration is ineffective
against a holder in due course
A drawee who accepts the bill cannot allege want of
consideration against the drawer
Accommodation
Legal arrangement under which a person called the
accommodation party lends his name and credit to
another called the accommodated party, without
consideration.
Effect: A person to whom the instrument thus executed is
subsequently negotiated, has a right of recourse against
the accommodation party inspite of the formers
Page 7
Notes on Section 31
The paper attached with the indorsement is an
allonge
An allonge must be attached so that it becomes a part
of the instrument, it cannot be simply pinned or
clipped to it.
Kinds of Indorsements:
a.
b.
c.
d.
e.
A.
B.
NEGOTIATION
An instrument is negotiated when:
a.
b.
Modes of Negotiation:
1. If payable to bearer, it is negotiated by delivery.
Negotiation of negotiable instrument may be
effected by the delivery alone of the instrument
to the transferee in those negotiable
instruments which are:
-originally payable to bearer, or
-originally
payable
to
order
instruments
where
the
last
indorsement is an indorsement in
blank.
2. If payable to order, it negotiated by the indorsement of
the holder completed by delivery.
A negotiable instrument payable to the
order of a specified person, or to him or his
order, may be negotiated by the payee by
indorsement followed by delivery of the
instrument to the indorsee. Subsequent
negotiation may be made in this manner if the
holder who indorses acquired the instrument
under a special indorsement.
The payee of the negotiable instrument acquires
no interest with respect thereto until its delivery
to him. (Development Bank of Rizal v. Sima Wei)
3. Another method of transfer is by assignment which
generally refers to ordinary contracts, and by operation
of law, where title to a note or bill passes upon the death
of the holder to his personal representative.
Indorsement to be valid must be:
a. Written
b. On the instrument itself or upon a piece of paper
attached (Sec. 31 NIL)
C.
D.
E.
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1.
2.
3.
4.
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Real Defenses
Alteration
Want of delivery of
incomplete instrument
Duress amounting to
forgery
circumstances amounting
to fraud
11. Mistake
12. Intoxication
13. Ultra vires acts of
corporations
14. Want of authority of
the agent where he has
apparent authority
15. Illegality of contract
where form or
consideration is illegal
16. Insanity where there is
no notice of insanity
LIABILITIES OF PARTIES:
1. A maker is primarily liable:
Effects of making the instrument, the maker:
a. Engages to pay according to tenor of instrument
b. Admits existence of payee and his capacity to
indorse (Sec. 60 NIL)
Notes on Section 60
A makers liability is primarily and unconditional
One who has signed as such is presumed to have acted
with care and to have signed with full knowledge of its
contents, unless fraud is proved
The payees interest is only to see to it that the note is
paid according to its terms
When two or more makers sign jointly, each is
individually liable for the full amount even if one did
not receive the value given
The maker is precluded from setting up the defense of:
a) The payee is fictional,
b) That the payee was insane, a minor or a
corporation acting ultra vires
2. A drawer is secondarily liable
Effects of drawing the instrument, the drawer:
a. Admits the existence of the payee,
b. The capacity of such payee to indorse
c. Engages that on due presentment, the
instrument will be accepted or paid or both
according to its tenor.
If the instrument is dishonored, and the necessary
proceedings on dishonor duly taken
a. The drawer will pay the amount thereof to the
holder
b. Will pay to any subsequent indorser who may be
compelled to pay it. (Sec. 61 NIL)
Notes on Section 61
A drawer may insert an express stipulation to negative
or limit his liability
3. An acceptor is primarily liable
By accepting the instrument, an acceptor:
Engages that he will pay according to the tenor
of his acceptance
Admits the existence of the drawer, the
genuineness of his signature and his capacity
and authority to draw the instrument
The existence of the payee and his then capacity
indorse
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b.
c.
d.
In addition:
Engages that the instrument will be accepted or
paid or both according to its tenor on due
presentment
Engages to pay the amount thereof if it be
dishonored and the necessary proceedings on
dishonor are taken
Notes on Section 66
The indorser under Section 66 warrants the solvency
of a prior party
The indorser warrants that the instrument is valid and
subsisting regardless of whether he is ignorant of that
fact or not.
Warranties extend in favor of a) a HDC b) persons who
derive their title from HDC c) immediate transferees
even if not HDC
The indorser does not warrant the genuineness of the
drawers signature
General indorser is only secondarily liable
Limitations of warranties:
- If by delivery extends only to immediate
transferee
- Warranty of capacity to contract does not apply to
persons negotiating public or corporate
securities (Sec. 65 NIL)
Notes on Section 70
Presentation for payment production of a BOE to the
drawee for his acceptance, or to a drawee or acceptor
for payment. Also presentment of a PN to the party
liable for payment of the same.
a.
b.
c.
d.
Notes on Section 65
A qualified indorser is one who indorses without
recourse or sans recourse
Recourse - resort to a person secondarily liable after
default of person primarily liable
A qualified indorser cannot raise the defense of a)
forgery b) defect of his title or that it is void c) the
incapacity of the maker, drawer or previous indorsers.
A qualified Indorsement makes the indorser mere
assignor of title of instrument, relieves him of general
obligation to pay if instrument is dishonored, but he is
still liable for the warranties arising from instrument
only up to warranties of general indorser
The warranty is to the capacity of prior parties at the
time the instrument was negotiated. Subsequent
incapacity does not breach the warranty.
lack of knowledge of the indorser as to any fact that
would impair the validity or the value of the
instrument must be subsisting all throughout
A person Negotiating by Delivery warrants same as
those of qualified indorser and extends to immediate
transferees only
Proper presentment:
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a.
b.
NOTICE OF DISHONOR
When a negotiable instrument has been
dishonored by non-acceptance non-payment, notice of
dishonor must be given to the drawer and to each
indorsers.
Any drawer or indorser to whom such notice is not given
is discharged.
Exceptions:
a. Waiver (Sec. 109)
b. Notice is dispensed (Sec. 112)
c. Not necessary to Drawer (Sec. 114)
d. Not necessary to Indorser (Sec. 115)
- If notice is delayed, delay may be excused (Sec. 113)
Notice of Dishonor may be given:
a.
b.
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principal debtor;
b. Payment by
in due course by party
accommodated, where the instrument is made
or accepted for accommodation;
c. Intentional cancellation by holder of
instrument;
d. Any other act discharging a simple contract for
the payment of money;
e. When the principal debtor becomes the holder
of the instrument at or after maturity in his
own right.
NOTES ON SECTION 119
Discharge of the instrument discharges all the parties
thereto
Payment must be in due course, and by the principal
debtor or on his behalf
If payment is not made by the principal debtor,
payment only cancels the liability of the payor and
those obligated after him but does not discharge the
instrument.
Payment by an accommodation party does not
discharge the instrument.
Discharge of Secondary Parties:
c.
d.
e.
f.
MATERIAL ALTERATION
General rule: When materially altered, without the
consent of all parties liable, the instrument is
avoided except as against:
a. The party who has made the alteration
b. The party who authorized or assented to the
alteration.
c. Subsequent indorsers
Exception:
If in the hands of a HDC, may be enforced
according to its original tenor
MATERIAL ALTERATION
- Any change in the instrument which affects or
changes the liability of the parties in any way.
There is no distinction between fraudulent and
innocent alteration
The EFFECTS of material alteration:
1. Alteration by a PARTY
Material alteration by the holder discharged the
instrument and all prior parties thereto who did not give
their consent to such alteration.
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ACCEPTANCE
The signification by the drawee of his assent to the order
of the drawer. It is an act by which a person on whom the
Bill of Exchange is drawn assents to the request of the
drawer to pay it.
As a general rule, acceptance, in order to be valid must
be:
1. Written;
2. Signed by the drawee; and
3. Must contain an express or implied to pay in
money.
A holder of a bill has the right:
a. Require that acceptance be written on the bill and
if refused, treat it as if dishonored (Sec. 133)
b. Refuse to accept a qualified acceptance and may
treat it as dishonored
Acceptance may be:
a. Actual
b. Constructive
c. General (Sec. 140)
d. Qualified (Sec. 141)
Kind of acceptance:
A. Constructive Acceptance:
a. Where the drawee to whom the bill has been
delivered destroys it
b. The drawee refuses within 24 hrs after such
delivery or within such time as is given, to
return the bill accepted or not
Notes on Section 137
Drawee becomes primarily liable as an acceptor.
Mere retention is equivalent to acceptance
B. General Acceptance:
An acceptance to pay at a particular place is a
general acceptance unless it is expressly states that the
bill is to be paid there only and not elsewhere.
C. Qualified Acceptance if in express terms varies the
effect of the bill as drawn.
Kinds of Qualified Acceptance:
a. Conditional one which makes
payment by the acceptor dependent on
the fulfillment of a condition therein
stated;
b. Partial an acceptance to pay part only
of the amount for which the bill is
drawn;
c. Local an acceptance to pay only at a
particular place;
d. Qualified as to time
e. The acceptance of some or more
drawees but NOT ALL.
-
Page 14
Page 15
2.
Certificate of deposit
is a written acknowledgment by a bank
of the receipt of money on deposit
which the bank promises to pay to the
depositor, bearer, or to some other
person or order.
It is NOT ipso facto negotiable it must
first comply with the requirements
provided under Section 1, NIL.
Bonds
- A promise, under seal, to pay money.
- The bond certifies that the issuing company is
indebted to the bondholder for the amount
specified on the face of the bond, and contains
an agreement of the company to pay the sum at
a specified time in the future, and meanwhile to
pay a specified interest on the principal amount
at regular intervals, generally six months apart.
They are negotiable if it the requisites in Section
1, NIL are complied with.
Classes of Bonds:
1. Mortgage bonds;
2. Equipment Bonds;
3. Collateral trust bonds;
4. Guaranteed bonds;
5. Debentures; and
6. Income bonds;
7. Convertible bonds;
8. Redeemable Bonds;
9. Registered Bonds; and
- Coupon Bonds those which are attached
a sheet of dated, numbered and similarly
printed coupons which the bondholder may
cut off when due or thereafter. Such
coupons may be served and deposited in a
bank, negotiated before the maturity of the
interest they represent, and transferred just
like any commercial paper. They are
negotiable if it the requisites in Section 1,
NIL are complied with.
10. Bank Notes
- Are promissory notes of the issuing bank
payable to bearer on demand and intended
to circulate as money. They are regarded as
cash and pass from hand to hand without
any evidence of titled in the holder than that
which arises form possession. However,
they are not money.
11. Due Bills
- is an instrument whereby one person
acknowledges his indebtedness to another.
CHECKS - a bill of exchange drawn on a bank payable on
demand. (Sec. 185)
CONCEPTS:
Certification of Checks- An agreement whereby
the bank against whom a check is drawn, undertakes to
pay at any future time when presented for payment.
EFFECTS:
a.
b.
c.
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AS TO FUNCTIONS
a. public government of a portion of the
territory; and
b. private usually for profit-making
3.
AS TO GOVERNING LAW
a. public Special Laws; and
b. private Law on Private Corporations
4.
AS TO LEGAL STATUS
a. De jure corporation organized in accordance
with the requirements of law.
b. De facto corporation organized with a
colorable compliance with the requirements
of a valid law. Its existence cannot be
inquired collaterally. Such inquiry may be
made by the Solicitor General in a quo
warranto proceeding. (Sec. 20)
Requisites:
1. The existence of a valid law under which
it may be incorporated;
2. A bona fide attempt in good faith to
incorporate under such law;
3. Actual use or exercise in good faith of
corporate powers; and
4. Issuance of a certificate of incorporation
by the SEC as a minimum requirement of
continued good faith.
CORPORATION LAW
A. CORPORATION, DEFINED
An artificial being created by operation of law having
the right of succession, and the powers, attributes and
properties expressly authorized by law and incident to
its existence. (Sec. 2). It has a separate and distinct
personality from its incorporators. (2000 Bar
Examination)
Attributes of a Corporation
1. It is an artificial being.
2. It is created by operation of law.
3. It enjoys the right of succession.
4. It has the powers, attributes and properties
expressly authorized by law or incident to its
existence.
Theories on Formation of a Corporation:
1. Concession Theory a corporation is an artificial
creature without any existence until it has received
the imprimatur of the state acting according to law,
5.
Page 17
7.
2.
3.
4.
5.
6.
AS TO PLACE OF INCORPORATION
a. Domestic corporation- a corporation formed,
organized, or existing under Philippine laws.
b. Foreign corporation a corporation formed,
organized, or existing under any laws other
than those of the Philippines. (Sec. 123)
C. NATIONALITY OF CORPORATION
Test to Determine Nationality of Corporations
1. INCORPORATION TEST determined by the
state of incorporation, regardless of the
nationality of the stockholders.
2. DOMICILE TEST determined by the state
where it is domiciled. The domicile of a
corporation is the place fixed by the law
creating or recognizing it; in the absence
thereof, it shall be understood to be the place
where its legal representation is established
or where it exercise its principal functions.
(Art. 51, NCC)
3. CONTROL TEST determined by the
nationality of the controlling stockholders or
members. This test is applied in times of war.
Also known as the WARTIME TEST.
D. CORPORATE JURIDICAL PERSONALITY
I.
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b.
Corporate Term
Fifty (50) years from the date of
incorporation unless sooner dissolved or
unless said period is extended (Sec. 11).
4.
Classification of Shares
i. COMMON SHARES are the basic class of
stock ordinarily and usually issued
without
extraordinary
rights and
privileges. The owners thereof are entitle
to a pro rata share in the profits of the
corporation and in its assets upon
dissolution and, likewise, in the
management of its affairs without
preference or advantage whatsoever.
ii. PREFERRED SHARES are those issued
with par value, and preferences either
with respect to:
a.
assets after dissolution (PREFERRED
SHARES AS TO ASSETS)
b.
distribution of dividends (PREFERRED
SHARES AS TO DIVIDENDS)
c.
or both, and other preferences.
Kinds of Preferred Shares as to Dividends
1. Cumulative preferred shares a share
which entitles the holder thereof not only
the payment of current dividends but also
of dividends in arrears.
2. Non cumulative preferred shares a share
which allows the holder thereof to the
payment of current dividends only without
regards to dividends in arrears.
3. Participating preferred shares a share
which gives the holder the right to
participate with the holders of the common
share in the remaining profits pro rata,
aside from the right to receive the
stipulated dividends at a preferred rate.
4. Non participating preferred shares a
share which allows the holder to receive the
stipulated dividends at a preferred rate
only. The holder shall not share in the
dividends distributed to common shares.
REDEEMABLE SHARES are those which permit the
issuing corporation to redeem or purchase its own
shares.
Limitations:
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c.
SUBSCRIPTION
Refers
to
unissued
shares
Corporation still to be
form or already in
existence
The subscriber can
exercise all his right as a
stockholder even before
full payment of the
subscription
Corporate creditors may
proceed against the
subscriber for his unpaid
subscription in case the
corporate asset are not
sufficient to satisfy their
claims
Subscriber may not be
legally released from the
payment of his unpaid
subscription unless no
creditors
would
be
prejudiced and all the
stockholders
agree
thereto
Subscription may be in
any form, not covered by
the statute of frauds.
PURCHASE OF
SHARES
Refers to issued
shares
The corporation is
already in existence
The purchaser can
only exercise his
right
upon
full
payment of the
purchase price
Corporate creditor
cannot
proceed
against
the
purchaser for the
balance
of
the
purchase
price
because of the lack
of privity of contract
between them
The corporation can
rescind or cancel
the contract in case
of non fulfillment
by the buyer.
Purchase of shares
is covered by the
statute of frauds in
case of purchases
amounting to more
than Php 500.00
Page 20
5.
Consideration of Stocks
Valid considerations in subscription
agreement:
a. Cash actually received;
b. Property, tangible or intangible necessary
or convenient for its use and lawful
purpose;
c. Labor or services actually rendered to the
corporation;
d. Previously
incurred
corporate
indebtedness (Note: the indebtedness
involved must be one that is
acknowledged by the board);
e. Amounts transferred from unrestricted
retained earnings to stated capital;
f. Outstanding shares in exchange for stocks
in the event of reclassification or
conversion.
Articles of Incorporation
i.
Definition: Basic document defining the
charter of the corporation
ii.
Significance: Condition precedent in the
acquisition of corporate existence
iii.
Contractual significance: A contract
between 3 parties: (1) the State and the
corporation, (2) the stockholders and the
State, and (3) the corporation and its
stockholders.
iv.
Effects as to Outsiders: Bind a third person
dealing with the corporation
v.
Requisites for Validity
a. Filed and registered with the SEC
b. Banks, public utilities, insurance
companies:
needs
favorable
recommendation from appropriate
agency that articles are in accordance
with law
c.
SEC shall examine AOI upon filing and
upon satisfaction of all legal
requirements, issue certificate of
incorporation and only then shall
Corporation have a personality
separate and distinct from its
stockholders or members
d. Sworn Statement of the Treasurer
regarding subscription requirement
vi. Basic Content (Sec. 14)
a.
The name of the corporation;
b. The specific purpose or purposes for
which the corporation is being
incorporated;
c.
The place where the principal office
of the corporation is to be located,
which must be within the Philippines;
d. The term for which the corporation is
to exist;
e.
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8.
9.
i.
Adoption of By Laws
Definition: Meant to be an intramural
document to govern the relationship between
and among the members of a corporate family
ii.
Effect as to Outsiders: Does not bind outsiders
iii.
Requisites for Validity
a. By law provisions cannot contravene
law
b. By law provisions cannot contravene
the charter
c. By laws must be reasonable and cannot
discriminate.
iv.
Basic Content (Sec. 47)
a. The time, place and manner of calling and
conducting regular or special meetings of
the directors or trustees;
b. The time and manner of calling and
conducting regular or special meetings of
the stockholders or members;
c. The required quorum in meetings of
stockholders or members and the manner
of voting therein;
d. The form for proxies of stockholders and
members and the manner of voting them;
e. The
qualifications,
duties
and
compensation of directors or trustees,
officers and employees;
f. The time for holding the annual election
of directors or trustees and the mode or
manner of giving notice thereof;
g. The manner of election or appointment
and the term of office of all officers other
than directors or trustees;
h. The penalties for violation of the by
laws;
i. In the case of stock corporations, the
manner of issuing stock certificates; and
j. Such other matters as may be necessary
for the proper or convenient transaction
of its corporate business and affairs.
v.
Amendment
a. Majority vote of BOD / Trustees and
majority vote of outstanding capital
stock / members at a regular or special
meeting duly called for the purpose of
amending or repealing any by laws or
adopting new by laws
b. By delegation of 2/3 outstanding
capital stock or members
G. CORPORATE POWERS
1. GENERAL POWERS, THEORY OF GENERAL
CAPACITY (Sec. 36)
a. To sue and be sued;
b. Of succession;
c. To adopt and use of corporate seal;
d. To amend its Articles of Incorporation;
e. To adopt its by-laws;
f. For stock corporations: issue and sell stocks to
subscribers and treasury stocks; for non-stock
corporations: admit members;
Page 22
Page 23
ILLEGAL ACTS
Unlawful; against law,
morals, public policy,
and public order
Cannot be ratified
Cannot bind the parties
Page 24
RIGHTS OF A STOCKHOLDER
a. Managerial Rights
b. Proprietary Rights
c. Pre emptive Rights
d. Remedial Rights
e. Appraisal Rights
f. Inspection Rights
2.
MANAGERIAL RIGHTS
a. Voting rights; and
b. Right to remove directors
LIMITATIONS on the stockholders RIGHT TO VOTE
a. Where the articles of incorporation provides for
classification of shares pursuant to Sec. 6, non
voting shares are not entitled to vote except as
provided for in the last paragraph of Sec. 6;
b. Preferred or redeemable shares may be
deprived of the right to vote unless otherwise
provided in the Code;
c Fractional shares of stock cannot be voted;
d. Treasury shares have no voting rights as long
as they remain in the treasury;
e. Holders of stock declared delinquent by the
BOD for unpaid subscription are not entitled to
vote or to a representation at any stockholders
meeting; and
f. A transferee of stock cannot vote if his transfer
is not registered in the stock and transfer book
of the coporation.
3.
PROPRIETARY RIGHTS
a. Right to dividends;
b. Right to issuance of stock certificate for fully
paid shares;
c. Proportionate participation in the distribution
of assets in liquidation;
d. Corporate Books and Records inspection
rights
Limitations:
i. The right must be exercised during
reasonable hours on business days;
ii. The person demanding the right has not
improperly used nay information obtained
through any previous examination of the
books and records of the corporation; and
iii. The demand is made in good faith or for a
legitimate purpose. (Sec. 74)
The right extends, in consonance with equity, good
faith, and fair dealing, to a foreign subsidiary whollyowned by the corporation.
Books required to be kept by the corporation:
1. Book of Minutes
a.
minutes of stockholder or members
meetings; and
b. minutes of board meetings.
2. Book of all business transactions;
3. Stock and transfer book, in case of stock
corporations.
Corporate records required by the SEC to be kept
and/or registered:
1. Books of Account;
2. List of Stockholders or Members; and
3. Financial Records.
e. Appraisal right (2007 Bar Examination) is the
right of a stockholder who dissents from a
fundamental or extraordinary corporate action to
demand payment of the fair value of his shares.
The corporate acts involves fundamental changes
in the corporate structure namely:
1. An amendment to the articles of incorporation
that has the effect of
2. Sale, encumbrance or other dispositions of all
or substantially all of the corporate property
or assets
3. Merger or consolidation
4. Investment of corporate funds in another
corporation or in a purpose other than the
primary purpose (Sec. 42)
GENERAL RULE: A dissenting stockholder who
demands payment of his shares is no longer allowed to
withdraw from his decision EXCEPT when:
1. The corporation consents to the withdrawal
2. The proposed corporate action is abandoned
or rescinded by the corporation
3. The
proposed
corporate
action is
disapproved by the SEC where its approval is
necessary
4. The Commission determines that such
stockholder is not entitled to appraisal right.
f. Right to recover stocks unlawfully sold for
delinquent payment of subscription
g. Preemptive right is the shareholders
preferential right to subscribe to all issues or
dispositions of shares of any class in proportion
to their present stockholdings.
Purpose: to enable the shareholder to retain his
proportionate control in the corporation and to
retain his equity in the surplus.
Extends to treasury shares in case of their reissuance.
Page 25
RIGHT OF FIRST
REFUSAL
Arises only by virtue of
contractual stipulations
but is also granted
under the provisions
on Close Corporation
Exercisable
against
another stockholder of
the corporation of his
shares of stock
REMEDIAL RIGHTS
a. Individual suit a suit instituted by a
shareholder for his own behalf against the
corporation;
b. Representative suit a suit filed by a
shareholder in his behalf and in behalf
likewise of other stockholders similarly
situated and with a common cause against the
corporation; and
c. Derivative suit (2009, 2006, 2005, 2004 Bar
Examination) a suit filed in behalf of the
corporation by its shareholders (not creditors
whose remedies are merely subsidiary such
as accion subrogatoria and accion pauliana)
upon a cause of action belonging to the
corporation, but not duly pursued by it,
6.
LIABILITIES OF STOCKHOLDERS
a. Liability to the corporation for unpaid
subscription
b. Liability to the corporation for interest on
unpaid subscription
c. Liability to creditors of the corporation on the
unpaid subscription
d. Liability for watered stock
e. Liability for dividends unlawfully paid
f. Liability for failure to create corporation
STOCKHOLDERS OR MEMBERS MEETING
WHEN:
1. REGULAR - held on the date fixed in the by-laws
or if not fixed on any date in April; and
2. SPECIAL - held at any time deemed necessary or
as so provided in the by-laws.
WHERE:
WHERE: In the city or municipality where the
principal office of the corporation is located, and if
practicable, in the principal office of the corporation.
However, in the case of non-stock corporations, the
by-laws may provide that meetings may be held at any
place even outside the principal place of the
corporation. (Sec. 93)
I.
Page 26
EXCEPTIONS:
1. In case of an Executive Committee duly
authorized in the by-laws;
2. In case of a contracted manager which may
be an individual, a partnership, or another
corporation. Note: In case the contracted
manager is another corporation, the special
rule in Sec. 44 applies.
3. In case of close corporations, the stockholders
may manage the business of the corporation
instead by a board of directors, if the articles
of incorporation so provide.
The power to purchase real property is vested in the
board of directors or trustees. While a corporation
may appoint agents to negotiate for the purchase of
real property needed by the corporation, the final say
will have to be with the board, whose approval will
finalize the transaction. A corporation can only
exercise its powers and transact its business through
its board of directors and through its officers and
agents when authorized by a board resolution or by its
by-laws. (Spouses Constantine Firme vs. Bukal
Enterprises and Development Corporation, G.R. No.
146608, October, 23, 2003)
LIMITATIONS ON POWERS
DIRECTORS/TRUSTEES
OF
BOARD
2. TENURE,
QUALIFICATIONS
DISQUALIFICATIONS OF DIRECTORS
1.
AND
Qualifications:
For a stock corporation, ownership of at least 1
share capital stock of the corporation in his
own name, and if he ceases to own at least one
share in his own name, he automatically ceases
to be a director. (Sec. 23) For a non-stock
corporation, only members of the corporation
can be elected to seat in the Board of Trustees.
In order to be eligible as a director, what is
material is the legal title to, not beneficial
4.
can
be
elected
5.
6.
Terms of Directors
3.
NATURE
OF
POWERS
OF
BOARD
OF
DIRECTORS/TRUSTEES (The Corporation Code of the
Philippines Annotated, Hector de Leon, 2002 ed.)
OR
2.
Page 27
b.
c.
e.
6. COMPENSATION
Directors are not entitled to compensation as such
directors except that they are allowed reasonable per
diems.
However, directors may be given
compensation when:
Page 28
DUTY OF LOYALTY
To Act according to the corporations best
interest
DOCTRINE OF
CORPORATE
OPPORTUNITY
Cover same subject
which
is
business
opportunity
Applicable to directors,
trustees and officers
Does
not
cover
ratification. Even if
99%
of
the
stockholders affirm the
transactions,
the
remaining stockholders
can still oppose such a
self
dealing
transaction and file a
derivative suit
Applies to both stock
and non stock
corporations
DISLOYALTY OF A
DIRECTOR
Cover same subject
which is business
opportunity
Only applicable to
DIRECTORS and not
to officers
Allows RATIFICATION
of a transaction by a
self dealing director
by the vote of
stockholders
representing 2/3 of
the
outstanding
capital stock.
Applies only to stock
corporations
8.
9.
DUTY OF DILIGENCE
a. Violations of Duty of Diligence
i. Willfully and knowingly vote for or assent
to patently unlawful acts of the
corporation
ii. Guilty of gross negligence or bad faith in
directing the affairs of the corporation
iii. Acquire any personal or pecuniary
interest in conflict with their duty as
director or trustee
iv. He consents to the issuance of watered
stocks or who, having knowledge thereof,
does not forthwith file with the corporate
secretary his written objection thereto;
(Tramat Mercantile Inc. vs CA)
v. He agrees to hold himself personally and
solidarily liable with the corporation; or
(Tramat Mercantile Inc. vs. CA)
b.
Page 29
d.
e.
f.
12. EXECUTIVE COMMITTEE
a. Creation
A body created by the by-laws and
composed of some members of the board
which, subject to the statutory limitations, has
all the authority of the board to the extent
provided in the board resolution or by-laws.
(The Corporation Code of the Philippines
Annotated, Hector de Leon, 2002 ed.)
Must be provided for in the by-laws and composed
of not less than 3 members of the board appointed
by the board.
May act by a majority vote of all of its members
CORPORATE OFFICER
Position is provided for
in the by laws or
under the Corporation
Code
RTC has jurisdiction in
case of LABOR DISPUTE
WHERE:
May be held anywhere in or outside of the Philippines.
CORPORATE OFFICERS, QUORUM
a. Corporate Officers
President must be a director
Treasurer may or may not be a director
Secretary shall be a resident and a citizen
of the Philippines
Other officers provided in the by laws
b. Any 2 or more positions may be held
concurrently except president and secretary or
president and treasurer
c. When elected: Immediately after election of
directors
J.
CORPORATE
EMPLOYEE
Employed by the action
of the managing officer
of the corporation
NLRC has jurisdiction in
case of labor dispute
CAPITAL AFFAIRS
2. CERTIFICATE OF STOCKS
The document evidencing the ownership of shares of
stocks by a stockholder and the full payment of its
issue or subscription price.
a.
Page 30
SHARES OF STOCK
Amount paid in or
secured to be paid in by
the stockholders upon
which the corporation is
to conduct its operation.
It is the property of the
corporation
itself
(monetary value).
SHARES OF STOCK
Unit of interest in a
corporation
Incorporeal
or
intangible property
May be issued by the
corporation even if the
subscription is not fully
paid.
b.
CERTIFICATE OF
STOCK
Evidence
of
the
holders ownership of
the stock and of his
right as a shareholder
Concrete and tangible
May be issued only if
the subscription is fully
paid.
Negotiability
Page 31
WATERED STOCKS
Watered stock is stock issued not in exchange for
its equivalent in cash, property, shares, stock
dividends or services. It includes stock that is
issued (a) without consideration (b) issued as
fully paid when the corporation receives a sum
less than par or issued value (c) issued for a
consideration other than cash, the fair valuation
of which is less than par or issued value (d) stock
dividend without sufficient retained earnings or
surplus.
3. COLLECTION OF UNPAID SUBSCRIPTION
1. Voluntary payment
a. Upon the date specified in the subscription
contract
b. Upon call by the Board of Directors
2. Involuntary payment
a. Extra-judicial
i. Delinquency sale
ii. Application of dividends
b. Judicial action
Note: The prescriptive period in case of subscription
of shares begins to run only from the time the board of
directors declares that the balance are due and
payable. It does not begin to run from the date of the
subscription. (Garcia vs. Suarez, 67 Phil. 441)
4.
1.
2.
A. Effect of Delinquency:
A. Upon the stockholder
1. Accelerates the entire amount of the unpaid
subscription;
2. Subjects the shares to interest, expenses and
costs;
3. Disenfranchises the shares from any right that
inheres to a shareholder, except the right to
dividends (but which shall be applied to any
amount due on said shares or, in the case of
stock dividends, to be withheld by the
corporation until full payment of the
delinquent shares. (Sec. 43)
B. Upon the director owning delinquent shares
1. He can continue serving in that capacity unless and
until said shares are totally bidded away, he continues
to be the owner thereof and in the interim he is not
disqualified.
2. A delinquent stockholder seeking to be elected as
director may not be a candidate for, nor be duly
elected to, the board.
AND
WINDING
UP
1. DISSOLUTION
When the corporation ceases to be a juridical
person
METHODS: (Sec 117)
1. Voluntary
2. Involuntary
A corporation may be dissolved by the SEC
upon filing of a verified complaint and after
proper notice and hearing on the grounds
provided by existing laws, rules and
regulations (Sec. 121)
Page 32
2.
3.
of
is
the
the
of
the
the
the
INVOLUNTARY DISSOLUTION
Grounds:
1. If the corporation does not formally organize and
commence the transaction of its business or the
construction of its works within 2 years from the
date of its incorporation, its corporate power
ceases and the corporation shall be deemed
dissolved.
2. If the corporation has commenced the transaction
of its business; but subsequently becomes
continuously inoperative for a period of at least 5
years, the same shall be a ground for suspension
or revocation of its corporate franchise or
certificate of incorporation.
3. When the corporation fails to adopt and file a code
of by laws in the manner provided for by the
law.
4. When the corporation has offended against a
provision of law for its creation or renewal.
5. When it has committed or omitted an act which
amounts to a surrender of its corporate rights,
privileges, or franchises.
6. When it has misused a right, privilege, or franchise
conferred upon it by law, or when it has exercised
a right, privilege or franchise in contravention of
law, such as commission by the corporation of
ultra vires or illegal acts.
7. When on the basis of findings and
recommendations
of
a
duly
appointed
REHABILITATION
Connotes a reopening or
reorganization
Page 33
Contemplates
a
continuance of corporate
life in an effort to restore
the corporation to its
former
successful
operation
OTHER COPORATIONS
1. CLOSE CORPORATION
A special kind of stock corporation:
1. whose articles of incorporation should provide
that:
a. the number of stockholders shall not exceed
20;
b. issued stocks are subject to transfer
restrictions, with a right of preemption in
favor of the stockholders or the corporation;
and
c. the corporation shall not be listed in the
stock exchange or its stocks should not be
publicly offered; AND
2. Whose at least 2/3 of the voting stocks or voting
rights should not be owned or controlled by
another corporation which is not a close
corporation. (Sec. 96)
Characteristics:
1. Stockholders may act as directors without
need of election and therefore are liable as
directors;
2. Stockholders who are involved in the
management of the corporation are liable in
the same manner as directors are.
3. Quorum may be greater than mere majority;
4. Transfers of stocks to others, which would
increase the number of stockholders to more
than the maximum are invalid;
5. Corporate actuations may be binding even
without a formal board meeting, if the
stockholder had knowledge or ratified the
informal action of the others;
6. Preemptive right extends to all stock issues;
7. Deadlocks in board are settled by the SEC, on
the written petition by any stockholder; and
8. Stockholder may withdraw and avail of his
right of appraisal.
Note: Special rules are provided for close corporations
because it is essentially an incorporated partnership.
(The Corporation Code of the Philippines Annotated,
Hector de Leon, 2002 ed.)
The following cannot be a close corporation:
a. mining companies;
b. oil companies;
c. stock exchanges;
d. banks;
e. insurance companies;
f. public utilities;
g. education institutions;
h. other corporations declared to be vested with
public interest. (Sec. 96)
ORDINARY STOCK
CORPORATION
Its
articles
of
incorporation need
only contain the
general
matters
enumerated in Sec.
14 of the Code.
Its status as an
ordinary
stock
corporation is not
affected
by
the
ownership of its
voting stock or voting
rights.
Its articles cannot
classify its directors.
Business
of
the
corporation
is
managed by the
board of directors.
The
corporate
officers
and
employees
are
elected by a majority
vote of all the
members
of
the
board of directors.
The
pre-emptive
right is subject to the
exceptions found in
Sec. 39.
The appraisal right
may be exercised by a
stockholder only in
the cases provided in
Secs. 81 and 42 of the
Code.
Except as regards
redeemable shares,
the purchase by the
corporation of its
own
stock
must
always be made from
the
unrestricted
retained earnings.
Arbitration of intracorporate deadlock
by the SEC is not a
remedy in case the
directors
or
stockholders are so
divided
respecting
the management of
the corporation.
CLOSE CORPORATION
Its articles must contain
the special matters
prescribed by Sec. 97,
aside from the general
matters in Sec. 14.
Failure
to
do
so
precludes a de jure close
corporation status.
2/3 of its voting stock or
voting rights must not
be owned or controlled
by another corporation
which is not a close
corporation.
Its articles may classify
its directors.
Business
of
the
corporation may be
managed
by
the
stockholders
if
the
articles so provide, but
they are liable as
directors.
Its articles may provide
that any or all of the
corporate officers or
employees
may
be
elected or appointed by
the stockholders.
The pre-emptive right is
subject to no exceptions
unless denied in the
articles
The appraisal right may
be
exercised
and
compelled against the
corporation
by
a
stockholder for any
reason.
In case of an arbitration
of an intra-corporate
deadlock by the SEC, the
corporation may be
ordered to purchase its
own shares from the
stockholders regardless
of the availability of
unrestricted
retained
earnings.
Arbitration of intracorporate deadlock by
the SEC is an available
remedy in case the
directors
or
stockholders are so
divided respecting the
management of the
corporation.
Page 34
5.
6.
7.
2.
NON STOCK CORPORATIONS
A corporation organized for an eleemosynary purpose,
and no part of whose income is, during its existence,
distributable as dividends to its members, trustees, or
officers, subject to the provisions of the Corporation
Code on dissolution. (Sec. 87)
Any profit which it may obtain as an incident to its
operations shall, whenever necessary or proper, be
used for the furtherance of the purpose or purposes
for which it was organized.
Eleemosynary purposes: charitable, religious,
educational, professional, cultural, recreational,
fraternal, literary, scientific, social, civic service, or
similar purposes, like trade, industry, agricultural.
(Sec. 88)
They are governed by the same rules established for
stock corporations, whenever pertinent, subject,
however, to a number of special features.
RULES ON CONVERSION (SEC Opinion)
1. Stock to non-stock corporation
Conversion may be made by mere amendment of the
articles of incorporation.
2. Non-stock to stock corporation
The corporation must first be dissolved; mere
amendment of the articles of incorporation would not
suffice because the conversion would change the
corporate nature from non-profit to monetary gain.
The conversion without dissolving it first would be
tantamount to distribution of its assets or income to
its members inasmuch as after its conversion, the
asset of the non-stock corporation would now be
treated as payment to the subscriptions of the
members who will now become stockholders of the
corporation.
RIGHTS OF MEMBERS
1.
2.
3.
4.
STOCK
Has capital stock
divided into shares
and with authority to
distribute dividends
NON-STOCK
Does not have shares
and may not distribute
profits to its members
to its stockholders
Stockholders
may
transfer their shares
Cumulative voting is
available
in
the
election of directors
Directors
cannot
exceed 15 in number
The term of a director
is 1 year
Stockholders
vote by proxy
may
Stockholders
and
directors must act in a
meeting,
except
where a mere written
assent is sufficient or
a formal meeting
unnecessary
Members
cannot
transfer
their
membership
unless
allowed by the articles
or by-laws
Cumulative voting not
available
unless
otherwise provided in
the articles or by-laws
Trustees may exceed
15 in number
The term of a trustee is
3 years; 1/3 of the
Board shall be elected
annually
Members
may be
deprived of the right to
vote by proxy in the
articles or by-laws
Officers
may
be
directly elected by the
members
unless
otherwise provided in
the articles or by-laws
Members
may be
allowed by the by-laws
to vote by mail or
other similar means
Page 35
EDUCATIONAL
CORPORATION
A special corporation
which may a stock or
non-stock
Governed by special
laws and by the general
provisions
of
the
Corporation Code
The number of the
board of trustees should
not be less than 5 but
not more than 15.
The term of office of the
board of trustees shall
be 5 years
2. RELIGIOUS CORPORATION
A corporation composed entirely of spiritual persons
and which is organized for the furtherance of a
religion or for perpetuating the rights of the church or
for the administration of church or religious work or
property. It is different from an ordinary non-stock
corporation organized for religious purposes.
Kinds:
a) CORPORATION SOLE
- A special form of corporation, usually
associated with the clergy, consisting of one person
only and his successors, who is incorporated by law
to give some legal capacities and advantages; and
b) RELIGIOUS SOCIETIES
- A non-stock corporation governed by a
board but with religious purposes. It is incorporated
by an aggregate of persons, e.g. religious order,
diocese, synod, sect, etc.
4. FOREIGN CORPORATION
A corporation formed, organized or existing under any
law other than those of the Philippines, and whose
laws allow Filipino citizens and corporations to do
business in its own country or state. (Sec. 123)
The definition espouses the incorporation test and the
reciprocity rule and is significant for licensing purposes.
It is not permitted to transact or do business in the
Philippines until it has secured a license for that
purpose from the SEC and a certificate of authority
from the appropriate government agency.
RESIDENT AGENT
An individual, who must be of good moral character
and of sound financial standing, residing in the
Philippines, or a domestic corporation lawfully
Page 36
CONSOLIDATION
Union of 2 or more
corporations to form a
new corporation called
a
consolidated
corporation (A + B = C)
Same
Absorbing corporation
acquires all assets and
assumes liabilities of the
absorbed
corporation
regardless
WON
creditors consented
Stockholders of absorbed
corporation
becomes
stockholders
of
absorbing corporation
All
constituent
corporation
are
dissolved
without
liquidation of assets;
consolidated
corporation survives
Consolidated
corporation acquires all
assets and assumes
liabilities f constituent
corporations regardless
of
WON
creditors
consented
Stockholders
of
constituent
corporations becomes
stockholders
of
consolidated
corporation
PROCEDURE:
a. The board of directors or trustees of each
corporation shall approve a plan of merger or
consolidation
b. The plan shall be submitted for approval by the
stockholders or members of each of such
corporation at separate corporate meetings duly
called for the purpose
c. The articles of merger or consolidation shall be
executed by each of the constituent corporations
d. Submission to the SEC for approval
e. The SEC may or may not conduct a hearing
f. Issuance of certificate of merger or consolidation
by the SEC
EFFECTS OF MERGER OR CONSOLIDATION (Sec. 80)
1. The constituent corporations shall become a single
corporation which, in case of merger shall be the
surviving corporation and, in the case of consolidation,
shall be the consolidated corporation;
2. The separate existence of the constituent
corporation shall cease, except that of the surviving
corporation;
3. The surviving or consolidated corporation shall
possess all rights, privileges, immunities and powers
and subject to all the duties and liabilities of a
corporation;
4. The surviving or consolidated corporation shall
thereafter possess all the rights, privileges, immunities
and franchises of each of the constituent corporations;
5. All property, real or personal, and all receivables
due to, and all other interest of each constituent
There is continuance of
the enterprise and of the
stockholders
SALE OF ASSETS
Merger/consolidatio
n is not always
involved
Purchasing
corporation is not
generally liable for
the
debts
and
liabilities
of
the
selling corporation
The
selling
corporation
ordinarily
contemplates
a
liquidation of the
enterprise
Transfer of title is by
virtue of contract
The
selling
corporation is not
dissolved by the
mere transfer of all
its property
Page 37
INSURANCE
CONTRACT OF INSURANCE
Agreement whereby one undertakes for a
consideration to indemnify another against
loss, damage, or liability arising from an
unknown or contingent event. (Sec. 2, par. 2)
A contract of suretyship shall also be deemed
an insurance contract if made by a surety who
or which is doing an insurance business.
NATURE AND CHARACTERISTICS OF A
CONTRACT OF INSURANCE:
Page 38
An existing interest
An inchoate interest founded on an
existing interest
An expectancy coupled with an existing
interest in that out of which the
expectancy arises;
Note:
Expectancy must be founded on an actual right
to the thing or a valid contract for it;
A carrier or depository of any kind has insurable
interest in the thing held by him such to the
extent of his liability but not to exceed the value
thereof (Sec. 13, 14, and 15).
-
INSURABLE
INTEREST IN
PROPERTY
Must exist at the
time the policy takes
effect and when the
loss occurs
Limited to actual
value of interest in
property insured.
An expectation of a
benefit to be derived
from the continued
existence of the
property
insured
must have a legal
basis.
Page 39
(3)
(4)
(5)
(6)
(7)
CONTINUATION OF ELEMENTS:
1. Insurable interest;
2. The insured is subject to risk of loss through
the destruction or impairment of that interest
by the happening of the designated risk;
3. The insurer assumes the risk of loss;
4. Such assertion is part of a general scheme to
distribute actual loss among a large group of
persons bearing somewhat similar risk;
5. As a consideration for the insurers promise,
the insured makes a ratable contribution
called a premium to the general insurance
fund;
WHAT MAY BE INSURED AGAINST
Any unknown or contingent event, whether
past or future, which may damnify a person having
2.
Page 40
Page 41
A
prior
conviction
for
adultery/concubinage is not required, it
can be proven by preponderance of evidence
in the same action nullifying the designation.
Note the cases of Insular Life vs. Ebrado, 80
SCRA 181, where a common law wife of the
insured who is married could not be named as
a beneficiary and SSS vs. Davac, 17 SCRA 863,
where the insured designated his second wife
as a beneficiary was upheld as the latter was
not aware of the first marriage.
Page 42
CONCEALMENT
Neglect to communicate that which a party
knows and ought to communicate (Sec. 26).
EFFECT OF CONCEALMENT
Whether intentional or not, it entitles the
injured party to rescind the contract of insurance (Sec.
27).
Page 43
REPRESENTATION
(b)
(5)
(6)
(7)
non-payment of premiums;
lack of insurable interest;
that the cause of death was excepted or
not covered by the terms of the policy;
that the fraud was of a particular vicious
type such as:
a. policy was taken in furtherance of a
scheme to murder the insured;
b. where the insured substituted
another for the medical examination;
c. where the beneficiary feloniously
killed the insured;
violation of a condition in the policy
relating to military or naval service in
time of war;
the necessary notice or proof of death
was not given;
action is not brought within time
specified in the policy, which in no case
should be less than 1 year as per Sec. 63.
Page 44
AND
REPRESENTATION
1.
(4)
(5)
(6)
(7)
COVER NOTES
It is a written memorandum of the most
important terms of a preliminary contract of
insurance intended to give protection pending
investigation by the insurer of the risk or until
the insurance of the formal policy (Sec. 52). It
is also known as binding slip or receipt or
binder.
EFFECTIVITY OF A COVER NOTE
The effectivity of a cover note is 60 days as
within such period, a policy shall be issued including
in its terms the identical assurance found under the
cover rate and the premium therefore. It may
however, be extended beyond 60 days and with the
written approval of the Insurance Commissioner if he
determines that it does not violate the Insurance Code.
NOTE THE FOLLOWING RULES
PROMULGATED
BY
THE
COMMISSIONER:
HAVE BEEN
INSURANCE
(1)
(2)
(3)
(4)
Page 45
(3)
OPEN POLICY
Parties
have
conclusively stipulated
that
the
property
insured is valued at a
specified sum.
CAN
THERE
BE
AGREEMENTS
AS
TO
PRESCRIPTION OF AN ACTION OR LIMITATIONS
ON THE PERIOD OF TIME TO BRING AN ACTION
Yes, provided the period agreed upon should
not be less than one year (Section 63). If less than
one year, the agreement is void. The period so agreed
shall be considered as having commenced from the
time the cause of action accrues. Usually, the cause of
action accrues from the date of the insurers rejection
of the claim of the beneficiary or of the insured since
before rejection there is no necessity to bring suit.
When no period is stipulated or if the stipulation is
void, the period is within 10 years under article 1144,
Page 46
(1)
(2)
(3)
Courts;
Insurance Commissioner, who has
concurrent jurisdiction with courts for
claims not exceeding Php100,000.00;
(3)
POEA/DOLE have the power to compel a
surety to make good on a solidary
undertaking in the same proceeding
where the liability of the principal obligor
is determined.
Note that the claim becomes action upon filing with
the court.
CANCELLATION OF THE POLICY
If policy other than life shall be cancelled by the
insurer except upon prior notice thereof to the
insured. No notice of cancellation shall be effective
if not based on the occurrence, after effective date
of one or more grounds: (Section 64)
(1)
(2)
(3)
(4)
(5)
(6)
WARRANTIES
KINDS OF WARRANTIES
Page 47
Merely a collateral
inducement thereto
Presumed material
Must be shown to be so
Breach of warranty is a
breach of the contract
itself
Misrepresentation is a
ground to rescind the
contract
Must be substantially
true
PREMIUM
The agreed price for assuming and carrying
the risk.
WHEN IS THE INSURER ENTITLED TO A PREMIUM?
The insurer is entitled to the payment of a
premium as soon as the thing insured is exposed to the
peril insured against. Notwithstanding any agreement
to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding
unless and until the premium is paid except in:
(2)
(3)
3.
REPRESENTATION
(1)
2.
4.
5.
When
the
insurer
makes
a
written
acknowledgment of the receipt premium; (Sec.
78)
Section 77 may not apply if the parties have
agreed to the payment of the premium in
installments and partial payment has been made
at the time of the loss; (Makati Tuscany
Condominium Corp. v. CA, 215 SCRA 462)
If the insurer granted the insured a credit term
for the payment of the premium and loss occurs
before the expiration of the term, recovery
should be allowed even the premium is paid after
the loss but within the credit term;
Where the parties are barred by estoppel.
(2)
(3)
(4)
(5)
Page 48
(2)
(3)
Page 49
2.
Page 50
REINSURANCE
Occurs when an insurer procures a 3RD person
to insure him against loss or liability by reason of such
original insurance (Sec. 95).
WHEN IS REINSURANCE COMPULSORY?
1. When a non-life insurer insured in any one
risk or hazard an amount exceeding 20% of its
net worth, the insurer needs reinsurance of
the excess over such limit (Sec. 215 (1)).
2. When a foreign insurance company
withdraws from the Philippines, it should
cause its primary liabilities under policies
insuring residents of the Philippines to be
reinsured by another company authorized to
transact an insurance business in the
Philippines.
DOUBLE INSURANCE VS. REINSURANCE
DOUBLE INSURANCE
REINSURANCE
Insurer remains an insurer Insurer becomes the
insured
Subject matter is property
Subject matter is the
insurers risk or liability
Same interest and risk is Different interest and
insured with another
risk are insured
WHAT KIND OF CONTRACT IS REINSURANCE?
It is presumed to be a contract of indemnity
against liability, and merely against
damage (Sec. 97).
As a RULE, the reinsurer is not liable to the
reinsured for a loss under an original policy if
the reinsured is not liable to the original
policyholder.
EXTENT OF LIABILITY OF THE REINSURER?
Page 51
(a)
(b)
(c)
MARINE INSURANCE
Page 52
2.
3.
MARINE INSURANCE
Belief or expectation of
3RD person in reference
to a material fact is
material and has to be
communicated;
A causal connection
between
the
fact
concealed and cause of
loss is not necessary for
the insurer to rescind;
Page 53
(b)
(c)
be
seaworthy
at
the
commencement of every voyage
it undertakes at that time.
when the insurance is upon
cargo, which by the terms of the
policy description of the voyage,
or established custom of trade, it
is required to be transshipped at
an immediate port in which case
each vessel upon which the
cargo is shipped or transshipped
must be seaworthy at the
commencement
of
each
particular voyage (Sec. 115).
where different portions of the
voyage contemplated in the
policy differ in respect to the
things requisite to make the ship
seaworthy, I which case it must
be
seaworthy
at
the
commencement of each portion
(Sec. 117).
3.
DEVIATION:
It is a departure from the course of the voyage as
defined by Section 121 and 122 or an unreasonable
delay in pursuing the voyage or the commencement of
an entirely different voyage. (Sec. 123)
WHEN IS DEVIATION PROPER (2005 BAR)
A vessel can properly proceed to a port other than its
port of destination in the following cases:
1. When caused by circumstances over
which neither the master or the owner of the
ship has any control;
2. When necessary to comply with a
warranty, or to avoid a peril, whether or not
the peril is insured against;
3. When made in good faith, and upon
reasonable grounds of belief In the necessity
to avoid peril;
4. When made in good faith for the
purpose of saving human life or relieving
another vessel in distress. (Sec. 124)
2005 BAR EXAM (N0. XIV -1 - a)
Q: On a clear weather, M/V Sundo, carrying
insured cargo, left the port of Manila bound for
Cebu. While at sea, the vessel encountered a strong
typhoon forcing the captain to steer the vessel to
the nearest island where it stayed for seven days.
The vessel ran out of provisions for its passengers.
Consequently, the vessel proceeded to Leyte to
replenish its supplies.
a) Assuming that the cargo was
damaged because of such deviation, who
between the insurance company and the
owner of the cargo bears the loss? Explain.
A: The Insurance company should bear
the loss. Since the deviation was cured by a
strong typhoon, it was caused by
circumstances beyond the control of the
captain, and also to avoid a peril whether or
not insured against. Deviation is therefore
proper. (Sec. 145(a))
CONSEQUENCE OF IMPROPER DEVIATION
Insurer is not liable for any loss happening to the thing
insured subsequent to an improper deviation (Sec.
126).
4.
Page 54
Page 55
(b)
EFFECTIVITY OF ABANDONMENT:
Abandonment becomes effective upon the
acceptance of the insurer. If it is not accepted despite
validity, the insured may nevertheless claim an actual
total loss.
(a)
Page 56
(b)
(c)
(d)
ALTERATION DEFINED
(2)
(3)
CASUALTY INSURANCE
Generally, it is one that covers loss or
liability arising from an accident or
mishap excluding those that fall exclusively
within other types of insurance like fire or
marine. It includes employers liability,
workmens compensation, public liability,
motor vehicle liability, plate glass liability,
burglary and theft, personal accident and
health insurance as written by non-life
companies and other
1993 and 1994 BAR EXAMS:
Sun Insurance Office vs. CA July 17, 1992
X was issued a personal accident insurance for
P200,000. Two months later, he died of a bullet
wound in his head. He was playing with his hand gun
from which he removed the magazine. He pointed his
gun to his temple and fired. The insurance company
refused to pay the beneficiary. Was there suicide or
accident?
SC:
FIRE DEFINED
Page 57
2.
SURETYSHIP
An agreement whereby a party called the
surety guarantees the performance by
another party called the principal or obligor
of an obligation or undertaking in favor of
a 3RD party called the obligee (Sec. 175).
Includes official recognizances, bonds or
undertakings issued by any company under
Act No. 536, as amended by act no. 2206
(Government transactions by authorized
companies)
LIABILITY OF THE SURETY
It is joint and several (solidary) with the
obligor but limited to the amount of the bond and
determined strictly by the terms of the contract in
relation to the principal contract between obligor
obligee (Sec. 176).
IS A SURETYSHIP CONTRACT VALID AND BINDING
WHERE THE PREMIUM HAS NOT YET BEEN PAID?
Generally, payment of the premium is a
condition precedent. Hence the bond is not valid. An
exception is when it is issued and accepted by the
obligor, it is valid despite non payment of the premium
(Sec. 177).
SURETY vs. GUARANTY
SURETY
GUARANTY
Assumes liability as a
regular party to the
agreement.
Guarantors
liability
depends
on
an
independent agreement
to pay if primary debtor
fails to pay
Primarily liable.
Secondarily liable.
Not
entitled
exhaustion.
to
COMMON KINDS:
WHOLE LIFE/ORDINARY LIFE/STRAIGHT LIFE:
premiums are payable for life and the insurer
agrees to pay the face value upon the death of the
insured.
LIMITED PAYMENT LIFE: insured pays
premiums for a limited period after which he
stops with a guarantee by the insurer that upon
death the face amount is to be paid if death
occurs while payment is not complete
beneficiary acts face amount.
TERM POLICY: insurer is liable only upon death
of the insured within the agreed term or period. If
insured survives the insurer is not liable.
ENDOWMENT : protection is for a limited period,
if the insured is still alive at the end of the period,
the value of the policy is paid to him. If he dies
before the end period, it is paid to the
beneficiaries.
ANNUITY: where the insured or a named
person/s is paid a sum or sums periodically
during life or a certain period (note that contracts
for the payment of endowment or annuities are
considered as life insurance contracts).
DISTINGUISHING
LIFE
PAYMENT OF ANNUITY
(1)
(2)
(3)
Entitled to exhaustion.
INSURANCE
FROM
(1)
(2)
Page 58
(c)
BUSINESS INSURANCE
REQUIREMENTS FOR
AUTHORITY
FROM
COMMISSION:
CERTIFICATE OF
THE
INSURANCE
(b)
(b)
PAYMENT OF CLAIMS
A claim for payment must be filed without any
unnecessary delay, within 6 month from the date of
accident by giving written notice setting forth the
nature, extent and duration of the injuries as certified
by a duly licensed physician (Sec. 384).
WHAT IS NO FAULT INDEMNITY?
A no fault indemnity claim is a claim for payment for
death or injury to a passenger of third party without
necessity of proving fault or negligence. This is
payable by the insurer provided:
(a)
indemnity in respect of one
person
shall
not
exceed
Php5,000.00;
(b)
the necessary proof of loss under
oath to substantiate the claim is
submitted
AGAINST WHOM IS THE PAYMENT CLAIMED
A claim under the no fault indemnity clause may be
made against one motor vehicle insurer only as
follows:
(a)
in case of an occupant of a vehicle
against the insurer of the vehicle in
which the occupant is riding,
mounting or dismounting from;
(b)
in any other case, from the insurer of
the directly offending vehicle;
(c)
in all cases, the right of the party
paying the claim to recover against
Page 59
(3)
(4)
(5)
VEHICLE
INSURANCE
TRANSPORTATION LAWS
COMMON CARRIERS
(Arts. 1732-1766, New Civil Code)
Common Carriers are persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services
to the public.
Transportation defined. a contract of transportation
is one whereby a certain person or association of
persons obligate themselves to transport persons,
things, or news from one place to another for a fixed
price
Classification:
1. As to object: (1) things; (2) persons; (3) news
2. As to place of travel: (1) land; (2) water; (3) air
Parties to contract of transportation:
(1) shipper or consignor.
(2) carrier or conductor.
(3) consignee
Common Carrier
Private Carrier
As to Availability
Page 60
Contracts
particular
individuals
groups only
with
or
As to require Diligence
Extraordinary Diligence Ordinary Diligence
As to regulation
Subject
to
state Not subject to state
regulation
regulation
Stipulation limiting liability
Parties may agree on Parties may limit the
limiting the carriers carriers
liability,
liability except when provided it is not
provided by law
contrary to morals or
good customs
Exempting circumstances
Prove
extraordinary Caso forfuito, Art.
diligence
and 1174 NCC
Art.1734,NCC
Presumption of Negligence
There is a presumption
No presumption of
of fault or negligence
fault or Negligence
Governing law
Law
on
Common Law on obligations
Carriers
and contracts
Page 61
3.
REQUISITES for act of public enemy 1. The act of public enemy must have been the
proximate of the loss
2. It must have been the only cause of the loss
3. The common carrier must have exercised due
diligence to prevent or minimize before ,
during and after the act of public enemy in
war.
4.
REQUSITE FOR act or omission of Shipper 1. That the act or omission of the shipper
/owner of the goods must have been the
proximate cause of the loss
2. That it must have been the only cause of the
loss.
REQUSITES for character of goods , fault in
packing or containers1. That the loss , destruction or deterioration
was caused by the character of the goods ; or the
faulty nature of the packing /containers
2. That the common carrier had exercised due
diligence to forestall or lessen the loss.
REQUISTES for the act of public authority
1. The common carrier must prove that the public
authority had the power to issue the order for the
destruction / seizure of the goods.
B.) Another defensive strategy to escape liability is
to invoke that it exercised extraordinary diligence to
prevent or minimize the loss at the time the accident
occurred.
Negligence is the failure to observe due diligence with
respect to the circumstances at hand.
Contributory Negligence is the failure to observe due
diligence that an ordinary or prudent man undertakes
in relation to the negligence of another.
When does the carriers responsibility over the
goods arise?
The carrier shall be liable the moment the goods
arrive in his possession whether actual or
constructive, until such time that the carrier delivers
the same to the consignee OR the consignee has been
informed of the arrival of the goods and the consignee
had reasonable time to remove the same.
Under maritime laws, the responsibility of the carrier
ends when the goods were transmitted by the carrier
to the customs arrastre operator. Recall that before
the goods are delivered to the consignee, the state has
the responsibility to ensure that the goods being
brought in are in accordance with the law.
EFFECT: The carrier would no longer be liable. The
succeeding relationship would be between the
consignee and the arrastre operator, the
relationship governing them would be akin to a
contract of Deposit.
Page 62
7.
Page 63
Page 64
3.
Page 65
AIR TRANSPORTATION
The nature of an airlines contract of carriage partakes
of two types, namely: a contract to deliver a cargo or
merchandise to its destination, and a contract to
transport passengers to their destination.( British
Airways vs. CA, 285 SCRA 450)
Page 66
Page 67
Page 68
judicial
voluntary
Page 69
5.
6.
7.
8.
DUTIES:
1. provide himself with maps, and charts with
astronomical tables necessary for the
discharge of his duties
2. keep the Binnacle book
3. Change the course of the voyage on
consultation with captain and the officers of
the boat, following the decision of the captain
in case of disagreements.
4. Responsible for all the damages caused to the
vessel or to the cargo by reason of his
negligence
2.
-
Second mate
takes command of the vessel in case of the
inability or disqualification of the captain and the
sailing mate, assuming in such case their powers
and responsibilities and duties
DUTIES:
1. preserve the hull and rigging of the vessel
2. arrange well the cargo
3. discipline the crew
4. assign work to crew members
5. Inventory the rigging and equipment of the
vessel, if laid up.
3.
-
Engineers
Officers of the vessel but have no authority
EXCEPT in matters to motor apparatus. When 2 or
more are hired, one of them should be the Chief
Engineer
DUTIES:
1. in charge of motor apparatus, spare parts, and
other instruments pertaining to the engines
2. keep the engines and boilers in good
condition
3. not to change or repair the engine without
authority of the captain
4. inform the captain of any damage to the
motor apparatus
5. keep an Engine book
6. supervise all personnel maintaining the
engine
4. Members of the Crew
Hired by the ship agent. Where he is present and in his
absence, the captain hires them preferring Filipinos,
and in their absence, he ,ay take in foreigners but not
exceeding 1/5 of the crew.
Page 70
2.
3.
Embargo
- a proclamation or order of the State usually issued
in time of war/ threatened hostilities prohibiting
the departure ships/ goods from some or all the
ports of such State until further order
Blockade
- a sort of circumvallation of place by all foreign
connections and correspondence is as far as
human power can affect it to be cut-off
SUPERCARGOES
- person who discharge administrative duties
assigned to him by ship agent or shippers, keeping
an account and record of transaction as required
in the accounting book of the captain
B.CHARTER PARTY
- Contract by virtue of which the owner or agent
binds himself to transport merchandise or
persons of a fixed price. It may either be contract
of affreightment (time and Voyage Charter) and
bareboat or demise charter.
CLASSES OF CHARTER PARTY
1.
2.
As to time
a. until a fixed day/ for a determined number of
days and months
b. for a voyage(outgoing/return/roundtrip)
3.
As to freightage
a. for a fixed amount for the whole cargo
b. for a fixed amount per ton
c. for an amount per month
a.
b.
Page 71
drawn in duplicate
signed by the parties
contain stipulation
not all requisites are essential for the validity of
charter party
Primage
- belongs to owner/ freighters;
- increase of the freight rate
- considered gratuity to master if is stipulated
- a bonus to be paid to a captain after a successful
voyage
Demurrage
- Sum which is fixed by the contract of carriage, or
which is allowed, as remuneration to the owner of
a ship for the detention of his vessel beyond the
number of days allowed by the charter party for
loading/unloading/sailing.
"Lay days"
-days allowed to charter parties for loading and
unlading
- period when vessel will be delayed in port for
loading and unloading.
"Extra Lay Days"
- days which followed after lay days have elapsed
Deadfreight
A cargo not loaded is considered as deadfreight,
which covers the amount paid by or recoverable from
the charterer for the portion of the ships capacity the
latter contracted for but failed to occupy.
GOODS TRANSFERRED MAY BE:
1. sold by captain to necessary repairs
2. jettisoned for the common safety
3. loss by reason of shipwreck/stranding
4. seized by pirates/enemies
5. suffer deterioration/diminutions
6. increase by natural cause and weight or size
RIGHTS AND OBLIGATIONS OF CHARTER PARTY:
A. Of the ship owner or ship agent
1. If the vessel is chartered wholly not to accept
cargo from others;
2. To observe represented capacity;
3. To unload cargo clandestinely placed;
4. To substitute another vessel if load is less
than 3/5 of capacity;
5. To leave the port if the charter does not bring
the cargo within the lay days and extra lay
days allowed;
6. To place in a vessel in a good condition to
navigate;
7. To bring cargo to nearest neutral port in case
of war or blockade.
B. Of the charterer
1. to pay the agreed charter price
2. to pay freightage or unboarded cargoes
3. to pay losses to others for loading
uncontracted cargo and illicit cargo
4. to wait if the vessel needs repair
5. to pay expenses for deviation
RESCISSION OF CHARTER PARTY
A. At charterer's request
1. by abandoning the charter and paying half of
the freightage
2.
3.
Page 72
Page 73
Page 74
Page 75
III. PROCEDURE:
Page 76
Page 77
Page 78
xxxx
> Mass
media
and
commercial
telecommunications shall be:
- 100% Filipino Capital, and
- 100% Filipino management
2. ARTICLE XII, SEC 17:
In times of national emergency, when the
public interest so requires, the State may
during the emergency and under reasonable
CONSTITUTIONAL BASIS:
1. ARTICLE XII, SECTION 11:
> A franchise, certificate, or any other
form of authorization for the operation of
public utility shall be granted to:
-
Filipino Citizens
Corporations or associations
organized under Philippine
Laws where at least 60% of
the capital is owned by
Filipino Citizens.
100% Filipino Management
Page 79
2.
3.
4.
5.
6.
JURISDICTION
General Rule: Over persons engaged in public
utilities, or over a public utility, which holds a
Certificate of Public Convenience.
Exemption: violators of a valid regulation
promulgated under the law
Page 80
2.
3.
4.
5.
6.
7.
8.
Page 81
2.
Page 82
c.
A certificate of
Certificate of Public
Convenience and Necessity is issued where
the public service would require in its
operation the use of government property,
such as the installation of electric and
telephone posts and lines along public streets
requiring a previous franchise therefore
No certificate is necessary where the service
of utility is owned, operated and managed for
a private use or where the owner is not
engaged in public service.
2.
The primary purpose of a letter of credit is to
substitute for, and therefore support, the agreement of
the buyer-importer to pay money under a contract or
other arrangement.This instrument is basically a
credit security through availment of credit facilities of
the participating banks.
3.
The parties to a letter of credit are: (a) The
Buyer- he is the one who procures the letter of credit
and obliges himself to reimburse the issuing bank
upon receipt of the documents of title (b) The Issuing
Bank- is the bank from whom the letter of credit is
procured and which undertakes to pay the seller upon
receipt of the draft and proper documents of titles and
to surrender the documents to the buyer upon
reimbursement, and (c) The seller- who in compliance
with the contract of sale ships the goods to the buyer
and deliver the documents of title and draft to the
issuing bank to recover payment.
3.1.
In an international credit transaction carried
through a letter of credit, the parties are: (a) The
Customer- who is the party who applies to a bank in
one country for the opening of a letter of credit in
favor of the seller in another country (b) The Issuing
Bank- is the bank in the country of the customer to
which the customer applies for the issuance of a letter
of credit (c) The Beneficiary- who is the party in
another country who is the creditor of the customer.
Usually, he is the one selling goods to the customer (d)
The Advising Bank is the bank in the country of the
beneficiary which communicates to the beneficiary the
notice of the credit issued by the issuing bank (e) The
Confirming/Correspondent Bank- is the bank that
undertakes that the letter of credit will be fully paid.
Usually the confirming bank is also the advising bank,
otherwise it is utilized to lend credence to the letter of
credit issued by a lesser known issuing bank and is
directly liable to the beneficiary.
3.2
The relationships of the parties are to be
governed as follows: (a)Issuing bank and
applicant/buyer/importer Their relationship is
governed by the terms of the application and
agreement for the issuance of the letter of credit by
the bank. Unless the contrary is provided for, the
liability of the issuing bank is solidary with the buyer
(b) Issuing bank and beneficiary/seller/exporter
Their relationship is governed by the terms of the
letter of credit issued by the bank, and (c) Applicant
and beneficiary Their relationship is governed by the
sales contract.
3.3
It is clearly settled in law that there are thus
three contracts which make up the letter of credit
transaction: The contract between buyer and seller,
buyer and issuing bank, and the letter of credit proper.
These transactions are to be maintained in a state of
perpetual separation.
4.
The essential conditions of a letter of credit
are: (a) That it be issued in favor of a definite person
and not to order; and (b) That it be limited to a fixed
and specified amount, or to one or more undetermined
amounts, but within a maximum the limits of which
has to be stated exactly.
Page 83
6.
Page 84
Page 85
2.
The purpose of the General Bonded
Warehouse Act is to regulate the business of receiving
commodities for storage in order to protect persons
who may want to avail themselves of warehouse
facilities and to encourage the establishment of more
warehouses.
2.1
Distinguishing between the 2 laws, the
Warehouse Receipts Law refers to the rights and
obligations of parties in a warehousing contract, while
the General Bonded Warehouse Act refers to state
regulation and supervision of warehouses
3.
A warehouse receipt is a written
acknowledgment by a warehouseman that he holds
certain goods in store for the person to whom the
document is issued.
This is also known as
warehouse-keepers receipt or storage receipt.
3.1
While no particular form is required, it should
however include the necessary terms stating: (a)
Location of the warehouse (b) Date of issue (c)
Number of receipt (d) Description of the goods (e)
Advances made (f) Rate of charges (g) Ownership of
the goods by language indicating if the warehouseman
is an owner, solely or jointly with others, of the goods
deposited (h) Signature of the warehouseman, and (i)
Person to whom goods should be delivered by
language indicating whether the receipt is negotiable
or non-negotiable, that is whether the goods received
will be delivered to the bearer, to a specified person,
or to a specified person or his order
3.2
A negotiable warehouse receipt is not a
negotiable instrument as the same does not comply
with the requisites of Section 1, Act 2031. However,
ownership thereof may be transferred by delivery if it
states that it is deliverable to bearer or a named
person or bearer. If it is deliverable to a named person
or order, ownership may be transferred by special
endorsement and delivery. The endorsement can be to
bearer or to a specified person.
3.3
A negotiable warehouse receipt is not
convertible to a non-negotiable receipt. The insertion
of a provision making it non-negotiable is void. To
make a warehouse receipt non-negotiable, it must be
written out as such and to prevent any person from
supposing it to be negotiable, the words nonnegotiable should be placed plainly on its face. A nonnegotiable receipt may only be assigned.
3.4
The advantages of a negotiable warehouse
receipt over one which is non-negotiable are: (a)
goods cannot be garnished or levied upon
under execution unless receipt is surrendered, or
impounded or its negotiation enjoined (Section 25,
Warehouse Receipts Law) (b)
In
case
of
negotiation, holder acquires the direct obligation of
the warehouseman to hold possession of the goods for
him (Section 41, Warehouse Receipts Law), and (c)
Goods are not subject to vendors lien or stoppage in
transitu (Section 49, Warehouse Receipts Law)
3.5
Other terms may be included in a warehouse
receipt, except: (a) terms that are contrary to the
Page 86
5.3
A misdelivery or conversion occurs when (a)
delivery is made to one not lawfully entitled to it, or
(b) even if delivery is made to a person holding a nonnegotiable or negotiable receipt, if prior to delivery, he
had either been requested not to make delivery by the
person lawfully entitled to a right of property or
possession in the goods or had information that
delivery about to be made was to one not lawfully
entitled to possession of the goods.
5.4
A warehouseman can protect against a
misdelivery by: (a) availing of a the reasonable time
that he is entitled to within which to ascertain the
validity of an adverse claim or to bring legal
proceedings to force the claimants to interplead or
may actually require the claimants to interplead.
5.5
A warehouseman cannot commingle as he is
bound to keep the goods of a depositor separate from
the goods of other depositors or from the goods of the
same depositor for which a separate receipt has been
issued. The purpose of the prohibition is to permit
inspection and redelivery at all times. Exceptions are:
(a) the goods are fungible, as when any unit of the
good is from its nature or mercantile usage, treated as
an equivalent of any other unit (Section 58,
Warehouse Receipts Law) or (b) it is authorized by
agreement or custom.
6.
For failure to take up and cancel a negotiable
receipt, or one the negotiation of which would transfer
the right to the possession of the goods when goods
are delivered (Section 11, Warehouse Receipts Law)
or for the failure to take up and cancel a negotiable
receipt or to place upon it a statement of what goods
have been delivered, when goods are partly delivered
(Section 12, Warehouse Receipts Law). The
warehouseman shall be liable for failure to deliver the
goods to anyone who purchases for value in good faith
such receipt whether such purchaser acquired title to
the receipt before or after the delivery of the goods by
warehouseman
6.1
Exception: The warehouseman shall not be
liable for failure to deliver the goods covered by the
receipt or be guilty of a crime where the goods (a)
have been lawfully sold to satisfy the warehousemans
lien, or (b) have been lawfully sold or disposed of
because of their perishable or hazardous nature
(Section 36, Warehouse Receipts Law)
7.
An alteration in a warehouse receipt is said to
be:(a) Immaterial if it does not change the tenor of the
warehouse receipt (b)Material if it substantially
changes the tenor of the receipt (c)
Authorized
if it is made with the authority of the holder and the
warehouseman (d)Unauthorized if it is made without
the authority of the holder and warehouseman. This
may be material or immaterial (e) Fraudulent if it is
made with malice or bad faith by the holder with
intent to defraud subsequent holders (f) Without
fraudulent intent if its is made without malice or bad
faith
7.1
The effects of an alteration in a warehouse
receipt are: (a)Where the alteration is immaterial, the
Page 87
Page 88
Page 89
Page 90
2.4
Note the probable constitutional challenges
that may be brought against the quoted provision of
RA 8791 on the basis of the equal protection clause as
there is no substantive distinction between a
corporate and individual debtor or between a bank or
non-bank lender.
5.1
If this rate of interest is unilaterally fixed by
the bank for each interest period without the written
conformity of the borrower, the interest may be
declared null and void for being potestative and for
lack of mutuality based on essential equality between
the parties
2.5
Further, the application of the law should be
prospective as a corporate mortgagor has acquired as
vested right to the one year redemption period if his
mortgage was executed prior to RA 8791 as the
controlling consideration is the law on redemption at
the time of the execution of the mortgage.
5.2
Its being a potestative condition (one within
the sole power of the one obligated to perform),
consequently null and void finds basis in Article 1308
of the Civil Code that provides that the fulfillment of a
condition cannot be left to the sole will of one of the
contracting parties
2.6
The purchaser of foreclosed property is not
automatically entitled to the possession thereof during
the redemption period as he must petition the
Regional Trial Court of the province or city where the
property is situated to give him possession thereof
during the redemption period. He must also put up a
bond equivalent in value to the use of the property for
a period of 12 months to indemnify the debtor in case
it is shown that the sale was made without complying
with the requirements of Act No. 3135 or that there
was no violation of the mortgage deed.
5.3
As held by the Supreme Court in Almeda v.
Court of Appeals and PNB,256 SCRA 293: The binding
effect of any agreement between the parties to
contract is premised on two settled principles: (1) that
any obligation arising from contract has the force of
law between the parties; and (2) that there must be
mutuality between the parties based on their essential
equality. Any contract which appears to be heavily
weighted in favor of one of the parties so as to lead to
an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract
which is left solely to the will of one of the parties is
likewise invalid.
3.
In general, formal and substantive defects in
the real estate mortgage and the foreclosure
proceedings provide the legal and equitable grounds
to enjoin or eventually nullify foreclosure proceedings,
if not the real estate mortgage itself.
3.1
The general basis would be Article 5, Civil
Code, which provides: Acts executed against the
provisions of mandatory or prohibitory laws shall be
void, except, when the law authorizes their validity
4.
Disputes in the amount of the obligation may
cause the foreclosure to be enjoined as a bank may
legally proceed with foreclosure only when the exact
amount
of the obligation of the mortgagor is
determined in a trial on the merits and the mortgagor
cannot meet the obligation following that
determination.
4.1
Where the debtor is not given an opportunity
to settle the debt at the correct amount and without
iniquitous interest imposed, no foreclosure
proceedings can be instituted.
4.2
The total amount due on the mortgage is also
undetermined if some of the properties are subject to
the coverage of the CARP, in which case a portion of
the mortgage indebtedness will be assumed by the
government up to the amount equivalent to the
landowners compensation. Hence, until the final
valuation of the lands subject to CARP is determined,
the amount of the mortgage debt is unliquidated
5.
Issue of the legality of the Floating Rate of
Interest, which refers to the rate of interest
5.4
The floating rate of interest being unilaterally
fixed and determined by the bank also violates the
provision of CB Circular No. 1191 that the interest rate
for each re-pricing period is subject to mutual
agreement between the Borrower and the Bank.
5.5
Under Article 1956 of the Civil Code, no
interest is due unless it has been expressly stipulated
in writing. The floating rate being unilaterally fixed by
the Bank without the written mutual agreement of the
Borrower for each re-pricing of interest is null and
void under Art. 1956 of the Civil Code, and for
violation of CB Circular No. 1191 that the interest rate
for each re-pricing period under the floating rate of
interest in subject to mutual agreement.
5.6
Consequently, if the interest is declared null
and void, the foreclosure sale for a higher amount than
what is legally due is likewise null and void because
under the Civil Code, a mortgage may be foreclosed
only to enforce the fulfillment of the obligation for
whose security it was constituted.
5.7
In fact, because there is a dispute on the
amount of the interest legally due, the Bank may
legally proceed with foreclosure or consolidation only
when the exact amount of the obligations of the
Mortgagor is determined after trial on the merit and
the mortgagor cannot meet the obligation following
that determination.
6.
Issue of the mortgage as security for future
loans. The rule is unless a continuing real estate
mortgage is involved, a real estate mortgage is not a
Page 91
8.3
As a limitation on the right to possession, a
writ of possession may be legally issued only if the
debtor is in possession and no third person has
intervened.
8.4
Order granting a writ of possession under Act
3135 is a final order. Hence, it is appealable. In
expropriation, it is interlocutory.
9.
Grounds for the proper annulment of the
foreclosure sale are the following: (a) there was fraud,
collusion, accident, mutual mistake, breach of trust or
misconduct by the purchaser (b) the sale was not
fairly and regularly conducted (c) price was
inadequate and the inadequacy was so great as to
shock the conscience of the court.
Central Bank Act
1.
The law was enacted on June 14, 1993 and has
for its policy the maintenance of a central monetary
authority with the power: (a) function and operate as
an independent and accountable body in the discharge
of its responsibilities concerning money, banking and
credit (b) enjoy fiscal and administrative autonomy.
1.1
A central bank is a bank that holds the cash
reserves of a countrys commercial banks, performs
monetary services for the government, issues bank
notes, and makes funds available to commercial banks
Conservatorship
1.
The appointintment by the Monetary Board of
a conservator takes place whenever a bank or quasibank is in a state of continuing inability or
unwillingness to maintain a condition of liquidity
deemed adequate to protect the interest of depositors
and creditors.
1.1
It is an attempt to save the bank from
bankruptcy and ultimate liquidation.
1.2
The appointed conservator is to take charge of
the assets, liabilities, and the management thereof for
a period not exceeding one (1) year
2.
A conservator may take over a bank or quasibank without the need of first declaring the bank
insolvent (P.D. 1937, June 27, 1984). Nonetheless, the
designation of a conservator is not a precondition to
the designation of a receiver (Section 30)
2.1
A conservator is the person appointed to take
over the management of a bank and shall assume
exclusive powers to oversee every aspect of the banks
operation and affairs.1
3.
Page 92
Page 93
Selected Issues
Liquidation:
and
2.
Banks are entities engaged in the lending of
funds obtained in the form of deposits.
1.
If the Central Bank (now Bangko Sentral)
through its Monetary Board has promised to
rehabilitate the distressed bank, and the stockholders
on said assurance proceeded to mortgage their real
properties to guarantee CB promised loan advances to
said bank, CB cannot renege on said promise, under
the doctrine of promissory estoppel, and cannot insist
in its liquidation (Ramos vs. CB, 41 SCRA 565)
2.1
The definition under Section 2 of the old
General Banking Law:2 banks are entities duly
authorized by the Monetary Board to engage in the
business of regularly lending funds obtained regularly
from the public through the receipt of deposits of any
kind. Thus, entities which lend funds obtained from
the public but not as deposits but rather as debts for
their own account, whether done regularly or not, and
those which regularly lend funds obtained through the
occasional receipt of deposits, would not be
considered as banks.
involving
Receivership
2.
Where the Central Bank, in the course of the
rehabilitation of a commercial bank, extended loans
and advances, but subsequently the bank was forced
by CB to close, and subsequently allowed to reopen,
interest due on said loans and advances, cannot be
collected because it should be deemed read into every
contract of deposit with a bank that the obligation to
pay interest on a deposit ceases from the moment the
operation of the bank is completely suspended by the
duly constituted authority the Central Bank (Ibid,;
Overseas Bank vs. CA, 105 SCRA 49)
3.
The prescriptive period to institute the
foreclosure proceeding was legally interrupted when
the mortgagee-bank was placed under receivership
with express prohibition from transacting business, a
circumstance considered as force majeure (Provident
vs. CA, 222 SCRA 125)
4.
While the closure and liquidation of a bank
may be considered an exercise of police power, the
validity of its exercise is subject to judicial
determination, and could be set aside, if it is
capricious, discriminatory, whimsical, arbitrary, unjust
or a denial of the due process and equal protection
clauses of the Constitution (CB vs. CA, 106 SCRA 143)
5.
A deposit in a distressed bank already
forbidden by CB to do business does not become a
preferred credit simply because some depositors went
to court and were able to secure judgments against the
bank (CB vs. Morfe, 63 SCRA 114)
6.
Where in the course of banks distressed
condition, the Central Bank gave financial assistance to
restore the banks viability, but that inspite of these
moves, the bank was closed by CB on August 1968,
and allowed to reopen on January 8, 1981, under a
new name, Commercial Bank of Manila, the obligation
by the bank to pay interest on the CB advances
remained suspended during the whole period of its
closure, following the ruling in OBM vs. CA and Tapia
(105 SCRA 49). Hence, the interest obligation starts to
run from the date of the reopening of the bank on
January 8, 1981 (Ramos vs. CB, 137 SCRA 685)
2.2
An entity that is engaged in the business of
buying accounts receivables and is funding their
business from bonds sold to the public from time to
time is not a bank as it does not accept deposits,
instead it buys receivables.
Classification of Banks:
1.
Banks are classified under the General
Banking Law as follows:
(a)
Universal banks- these are those that used to
be called expanded commercial banks and whose
operations are now primarily governed by the GBL.
They can exercise the powers of an investment house
and invest in non-allied enterprises. They have the
highest capitalization requirement.
An investment house is a company that earns income
solely or primarily by holding and investing in
securities issued by other companies or by
government agencies.
(b)
Commercial banks- these are ordinary or
regular commercial banks, as distinguished from a
universal bank. They have a lower capitalization
requirement than universal banks and cannot exercise
the powers of an investment house and invest in nonallied enterprises.
(c)
Thrift banks-these are savings and mortgage
banks, stock savings and loan associations, and private
development banks which are governed primarily by
the Thrift Banks Act.3
(d)
Rural banks-these are mandated to make
needed credit available and readily accessible in the
rural areas on reasonable terms and which are
governed primarily by the Rural Banks Act of 1992.4
(e)
Cooperative banks-these are banks organized
primarily to make financial and credit services
RA 337
RA 7906
4 RA 7353
2
3
Page 94
1.
The principle that since a bank is a juridical
person that its powers are to be exercised, its business
is to be conducted, and that its properties are to be
held by a board as provided for by Section 23 of the
Corporation Code obtains.
2.
However, an independent director, who is a
person other than an officer or employee of the bank,
its subsidiaries or affiliates or related interests must
be elected to the board. Note that the term
independent director is also used in the Securities
Regulation Code7 to refer to a person other than an
officer or employee of the corporation, its parent or
subsidiaries, or any other individual having a
relationship with the corporation, which would
interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
3.
There must also be adherence to the fit and
proper rule8 which provides that to maintain the
quality of bank management and afford better
protection to depositors and the public in general, the
Monetary Board shall:
3.1
prescribe, pass upon and review the
qualifications and disqualifications of individuals
elected or appointed bank directors or officers and
disqualify those found unfit; or
3.2
After due notice to the board of directors of
the bank, the Monetary Board may disqualify, suspend
or remove any bank director or officer who commits
or omits an act which render him unfit for the
position.
3.3
In determining whether an individual is fit
and proper to hold the position of a director or officer
of a bank, regard shall be given to his integrity,
experience, education, training, and competence.
4.
An elective or appointive public official cannot
serve as an officer of a private bank , whether full-time
or part-time shall at the same time serve as officer of
any private bank, save in cases where such service is
incident to financial assistance provided by the
government or a government-owned or controlled
corporation to the bank or unless otherwise provided
under existing laws.
4.1
The Rural Banks Act9, allows an elected or
appointive public official to serve as director, officer,
consultant or in any other capacity in a rural bank.
5.
A bank is required to have a board composed
of 5 no more than 15 directors, two of whom must be
independent directors.10
5.1
In case of a merger or consolidation between
banks, the number of directors shall not exceed 21. 11
5
6
RA 6938
Section 25, NCBA
Page 95
12
13
16
17
Page 96
3.
A bank should exercise its functions and treat
the accounts of their clients not only with the diligence
of a good father of a family but it should do so with the
highest degree of care considering the fiduciary nature
of their relationships with their depositors.26
3.1
The depositor expects the bank to treat his
account with utmost fidelity, whether such account
consists only of a few hundred pesos or millions. This
is especially true since the bank is engaged in business
impressed with public interest and it is its duty to
protect in return many clients, and depositors who
transact business with it.27
1.
As to nature, all kinds of deposits whether
fixed or current are to be treated as loans and are to be
covered by the law on loan.18
3.2
The bank is under obligation to treat the
accounts of its depositors with meticulous care always
having in mind the fiduciary nature of their
relationship.
2.8
Loans, credit accommodations or guarantees
extended by a bank to DOSRI are also termed as
Insider Lending.
1.1
They are also considered in the nature of
irregular deposits, they are really loans because they
earn interest.19 Considering a deposit involves the
delivery of a thing for safekeeping with the obligation
to return the very same thing upon demand20 and a
loan is a contract whereby one of the parties delivers
to another money or other consumable thing upon the
condition that the same amount of the same kind and
quality shall be paid.21
1.2
Banks may use the money deposited with
them as money deposited in banks, whether fixed,
savings and current, are really loans to a bank because
the bank can use the same for its ordinary transactions
and for banking business in which it is engaged.22
1.3
In fact banks are not obligated to return
exactly the money deposited in the same
denomination as it was deposited. While the banks
have the obligation to return the amount deposited,
they have no obligation to return or deliver the same
money deposited. Thus, estafa will not prosper.23
1.4
A banks failure to honor a deposit is failure to
pay its obligation as debtor and not a breach of trust
arising from a depositorys failure to return the
subject matter of deposit
2.
The relation created between the bank and
depositor is that of a creditor and debtor with the
bank as debtor and the depositor as creditor.24
2.1
The relationship is fiduciary in nature.25 The
bank assumes to act as an agent for another and the
other reposes confidence in him, although there is no
written contract or nor contract at all.
3.3
However, the highest degree of diligence is
not expected to be exerted by banks in commercial
transactions that do not involve their fiduciary
relationship with their depositors.28
3.4
In case of negligence in handling the deposit
of its clients on account of a bank officers gross
negligence which causes inconvenience, humiliation
and embarrassment to a depositor entitles the latter to
an award of damages.29 This notwithstanding the
absence of malice and bad faith as if the negligence,
nevertheless caused serious anxiety, embarrassment
and humiliation to the depositors.30 As long as the
bank has committed a serious mistake and the banks
negligence was a result of lack of due care and caution
required of managers and employees of a firm
engaged in so sensitive and demanding business as
banking, it is liable for moral damages.31
3.5
In view of the fiduciary nature of the
relationship of banks and its clients and because
banking is imbued with public interest, a bank was
also made liable for damages in the following
instances: (a) Failure to honor/pay a check of a
merchant/trader when the deposit is sufficient.32
Conversely, a bank is not liable for its refusal to pay a
check
on
account
of
insufficient
funds,
notwithstanding the fact that a deposit may be made
later in the day. Before a depositor may maintain a
suit to recover a specific amount from his bank, he
must first show that he had on deposit sufficient
deposits to meet his demand. (b) When a bank teller
validates an incomplete duplicate deposit slip that
lacks the name of the account holder.33 (c) When the
deposit of PPH 31,500.00 to cover six postdated
checks was not credited to the account of the
depositor because of the omission of one zero in the
account number.34 (d) The bank allowed an impostor
BPI vs. Court of Appeals, 326 SCRA 641
Citytrust Banking vs. IAC, 232 SCRA 559
28 Reyes vs. Court of Appeals, GR No. 118492, August 15,
2001
29 Go vs. IAC, 197 SCRA 22
30 BPI vs. IAC, 206 SCRA 408
31 Prudential Bank vs. Court of Appeals, 328 SCRA 264
32 Moran vs. Court of Appeals, 230 SCRA 799
33 Philbank vs. Court of Appeals, 269 SCRA 695
34 Citytrust vs. IAC, 232 SCRA 559
26
27
Page 97
3.2
Deposits that are covered are savings
accounts, current account, time deposits and deposits
in acceptable foreign currencies pursuant to Foreign
Currency Deposit Act.
3.3
Exempted though from the coverage of the
law are trust funds as it was was expressly excluded
from the term deposit under R.A. 7400 and money
market placement as it is not included in the term
deposit
DETERMINATION OF THE AMOUNT DUE THE
DEPOSITOR
1.
Insured deposits under the law means the net
amount due the depositor for any deposits in the
insured bank after deducting any offsets but should
not exceed PHP 500,000.00.
2.
Hence, if a depositor has two or more
accounts maintained in the same right and capacity,
the coverage of PHP 500,000.00 shall be held to apply
to the sum of all such accounts.
3.
A joint account (whether and/or, or, and
shall be insured separately from any individual-owned
account. If held by a juridical person or entity with a
natural person, the account shall be presumed to
belong to the juridical person.
3.1
Accounts under joint ownership is considered
equally shared among co-depositors unless otherwise
indicated in the deposit document.
TRUTH IN LENDING
PDIC
1.
The Philippine Deposit Insurance Corporation
Act created the Philippine Deposit Insurance
Corporation which is a government corporation
promoting and safeguarding the interests of the
depositing public by providing permanent and
continuing insurance coverage on all insured deposits.
2.
It insures the deposit liability of all banks to a
maximum deposit insurance coverage (MDIC) of
P500,000 per depositor in consideration of a premium
paid by the bank to the said corporation.(As per RA
9576)
3.
bank.
3.1.
The nature of the coverage is compulsory as
the law provides that the deposit liabilities of any bank
or banking institution which is engaged in the
business of receiving deposits or which thereafter may
1.
The law, which is to be implemented by the
Monetary Board of the Bangko Sentral ng Pilipinas
declares that it is the policy of the state to protect its
citizens from a lack of awareness of the true cost of
credit to the user by assuring a full disclosure of such
cost with a view of preventing the uninformed use of
credit to the detriment of the national economy.
2.
Specifically, it: (a) aims to protect a debtor
from the effects of misrepresentation or concealment
(b) permits him to fully appreciate and evaluate the
real cost of his borrowing (c) avoid the circumvention
of usury laws
Coverage of the Law
1.
As used in the law, the term credit means:
(a)
loan, mortgage, deed of trust; advance or
discount (b)
conditional sales contract (c)contract
to sell or contract of sale of property or services
(d)rental-purchase contract (e)contract for hire,
bailment or leasing of property (f) option, demand,
lien, pledge or other claim against or for the delivery
of property or money (g)purchase of acquisition of any
credit upon security of any obligation arising out of
Page 98
4.2
The failure to comply does not render the
principal contract invalid or unenforceable, but would
entitle the debtor to recover any interest payment
made.
4.3
A violation of the law may subject the violator
to: (a) a civil action brought within one year to recover
from the seller/lender an amount of P100.00 or
double the finance charge imposed, whichever is
greater, but not to exceed P2,000.00, plus attorneys
fees and costs, and (b) a criminal action against the
seller/lender who if convicted may be imposed a fine
ranging from P1,000 to P5,000 or imprisoned from 6
months to 1 year or both. Note that a final judgment
that may be rendered in any criminal proceeding to
the effect that the defendant has willfully violated the
act shall be prima facie evidence against such
defendant in an action or proceeding brought by any
other party against such defendant under the Act as to
all matters respecting which said judgment would be
estoppel as between the parties thereto.
39
40
Sec. 1, RA 1405.
Sec. 2, RA 1405.
Page 99
Sec. 1, RA 9160.
RA 3936.
50 Onate vs. Abrogar, 230 SCRA 181
51 China Banking Corp. vs Court of Appeals, 193 SCRA 454
48
49
Page 100
Page 101
Page 102
Page 103
Page 104
d.) Injunction
e.) Destruction of goods found to be infringing,
and all paraphernalia.
While the Constitution does not encourage the
unlimited entry of foreign goods, services and
investments into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of
equality and reciprocity, frowning only on foreign
competition that is unfair.
GATT itself has provided built-in protection from
unfair foreign competition and trade practices
including anti-dumping measures, countervailing
measures
and
safeguards
against
import
surges. Where local businesses are jeopardized by
unfair foreign competition, the Philippines can avail of
these measures. There is hardly therefore any basis
for the statement that under the WTO, local industries
and enterprises will all be wiped out and that Filipinos
will be deprived of control of the economy (Taada vs.
Angara GR No. 118295)
LAW ON COPYRIGHT
COPYRIGHT system of legal protection an author
enjoys
in
the
form
of
expression
of
ideas(2004,2006,2007,2009 bar exams)
Works are protected by the sole fact of their
creation, irrespective of their mode or form of
expression, as well as their content, quality or
purpose (Sec. 172.2)
Protection extends only to the expression of the
idea, not to the idea itself or to any procedure,
system, method or operation, concept or
principle, discovery or mere data.
The copyright is distinct from property in the
material object subject to it.
Copyright, in the strict sense, is purely statutory
right. Being mere statutory right, it is limited to
what the statute confers. It may be obtained and
enjoyed only with respect to the subjects and by
the persons, and on terms and conditions
specified in the statute. Accordingly, it can cover
only works falling within the statutory
enumeration or description (Pearl & Dean Vs
Shoemart GR 148222 August 15, 2003).
CREATION OF A WORK
A copyright work is created when the two (2)
requirements are met:
1) Originality does not mean novelty or
ingenuity, neither uniqueness nor creativity. It
simply means that the work owes its origin to the
author
2) Expression there must be fixation. To be
fixed, a work must be embodied in a medium
sufficiently permanent or stable, to permit it to be
perceived,
reproduced,
or
otherwise
communicated for a period of more than
transitory duration.
-if it is not required that the medium be
visible as long as there is a possibility of retrieval,
then there is fixation
-it is fixation that defines the time from when
copyright subsists. Before fixation, there can be no
infringement.
WORKS PROTECTED BY COPYRIGHT
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6.
7.
8.
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