COMMERCIAL LAW (Ateneo Pre-week)

10/ What are material alterations? (DST-NCM)

10/ They are alterations that change the a. Date b. Sum payable c. Time or place of payment d. Number of relations of parties, Currency in which adds a place of payment where no place of payment is specified, e. OR any change or addition which alters the instrument in any Material respect (NIL, Sec. 125)

11/ What are the classes of Insurance?

11/ a. Marine b. Fire c. Casualty d. Suretyship e. Life f. Compulsory Motor Vehicle Liability Insurance

12/ Which types of losses do NOT hold an insurance company liable? (WC-ER)

12/ a. Loss by Insurer's Willful act or gross negligence; (IC, Sec. 87) b. Loss due to Connivance of the insured; (IC, Sec. 87) c. Loss where an Expected peril is the approximate cause, and (IC, Sec. 84) d. Loss where the peril insured against is a Remote cause. (IC, Sec. 84)

13/ What is double insurance?

13/ Double insurance exists where the same person is insured by several insurer's separately in respect to the same subject and interest. (IC, Sec. 93)

15/ What are the effects of material concealment?

15/ Concealment whether intentional or unintentional entities the injured party to rescind the insurance contract. (IC, Sec. 29) Good faith is NOT a defense in concealment. (Vda. De Canilang v. CA, 1993)

16/ When is the insurer liable in case of death through suicide?

16/ a. Suicide was committed and policy in force for 2 years from date issue or last reinstatement, unless the policy provides a shorter period; b. Suicide committed in a state of insanity (regardless of the date of the commission) (IC, Se. 180-A)

18/ When does prescription of actions to claim indemnity start to be counted?

18/ From the "final rejection" of the claim. (H.H Hollero Construction Inc. vs. GSIS, 2014) The "final rejection" being referred to is the actual rejection by the insurance company (Eagle Star Insurance v. Yu, 1955)

18/ Define Subrogation.

18/ It is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. (Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp., 2011) The right subrogation attaches upon payment by the insurer of the insurance claims of the assured. As subrogee, the insurer steps into the shoes of the assured and may exercise only those rights that the assured may have against the wrongdoer who cause the damage. (Aboitiz Shipping Corp., v. Insurance Company of North America, 2008)

4/ Who bears the risk of loss of the goods under a trust receipt transaction?

4/ The entrustee. (TRL, Sec.10)

6/ What is the effect of a conditional promise or order to pay?

6/ It is not a negotiable instrument as it depends on a contingent event.

7/ Who is considered an accommodation party?

7/ He is one who is signed as maker, drawer, acceptor, or endorser, without receiving value for it and for purpose of lending his name to some other person. (NIL, Sec.29)

9/ What are the rights of a holder who is not a holder in due course? (OPID)

9/ a. May sue in his Own name. b. May receive Payment and if it is in due course, the instrument is discharged. c. Holds the Instrument subject to the same defenses as if it were non-negotiable. d. If he Derives his title through a holder in due course and is not a party to any fraud or illegality thereto, has all the rights of such holder in due course (NIl, Sec. 57&58)

11/ When is a contract of suretyship considered an insurance contract?

11/ A contract of suretyship is also considered an insurance contract, if made by a surety who is doing insurance business.

16/// Exceptions: (LIC2-PIE)

16/// d. A Change in the interest by will or succession on the death of the insured - interest passes to the heirs (IC, Sec. 23) e. A transfer of interest by one of several Partners, joint owners in common who are jointly insured to the others - no new party brought into contract. (Sec. 24) f. When a policy is so framed that it will Inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured (IC, Se. 57) g. When there is an Express prohibitor against alienation in the policy, in case of alienation, the contract of insurance is not merely suspended but is avoided. (New Civil Code, Art 1306)

4/ What is the liability of the president of a corporation who signs a guarantee clause under a trust receipt in his personal capacity?

4/ He is liable personally and solidarily for the obligations of the trust receipt by signing the guarantee clause in his personal capacity. (Ildefonso Crislogo v. People of the Phil.,2012)

4/ Can a "trust receipt" transaction involve goods with the parties know are not returnable to the trustor?

4/ No. When both parties enter into an agreement knowing that the return of the goods subject to the "trust receipt" is not possible, it is NOT a trust receipt transaction. The transaction becomes a mere loan where the supposed "trustee's" only obligation is to return the proceeds of the sale of the goods subject to the "trust receipts" (Sps. Dela Cruz vs. Planters Producers, Inc.,2013)

6/ What is the fictitious-payee rule and who should be liable under it?

6/ As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the negotiable instrument is considered as a bearer instrument. In a fictitious-payee situation, the drawee bank is absolved from liabiliy and the drawer bears the loss. The underlying theory is that one cannot expect a fictitious payee to negotiable the check by placing his endorsement thereon. And since the drawer knew this limitation, he must have intended for the instrument to be negotiated by mere delivery. However, the drawee bank shall also become liable when it acts dishonesty and when it is party to the fraud. (PNB v. Rodriguez, 2008)

7/ What are the effects of forgery?

7/ General Rule: It is inoperative. Hence, no right to retain the instrument, or give a discharge therefor, or enforce payment thereof against any party thereto can be acquired through or under such signature. (NIL, Sec.23)

7/ Who are the persons precluded from setting up the defense of forgery?

7/ a. Those who by their acts, silence, or negligence, are estopped from setting up the defense of forgery. b. Those who warrant or admit the genuineness of the signatures in question (NIL, Sec. 23), namely: (i) Endorsers (NIL, Sec. 68) (ii) Acceptors (NIL, Sec.62) (iii) Persons negotiating by delivery (NIL, Sec. 64)

8/ What constitutes negotiation?

8/ An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder completed by delivery. (NIL, Sec.30)

8/ Are the accommodation party and the Bank both liable when the Bank allowed the withdrawal of the amount of check prior to the end of the clearing period?

8/ No, only the bank is liable since it allowed the proceeds of the check to be withdrawn before the lapse of the standard 15-day clearing period. It assumed at its own risk that the check would be cleared. However, in a situation where the accommodation party acted in bad faith because he knew that the check was cleared before the lapse of the clearing period, the accommodation party is guilty of contributory negligence. (PNB v. Chee Hong, 2012)

9/ What are the rights of a holder in due course?

9/ A holder in due course a. Holds the instrument free from any defect of title of prior parties b. Free from defenses available to prior parties among themselves, and c. May enforce payment of the instrument for the full amount thereof against all parties liable thereon. (NIL, Sec. 57)

9/ Can a payee be a holder in due course?

9/ Yes. Holder means the payee or indorse of the bill or note, who is in possession of it, or the bearer thereof. (NIL, Sec. 191)

52/ Yu bought several golf and country club shares from MADCI. Regrettably, MADCI did not develop the supposed project. Yu then demanded the return of his payment, but MADCI could not return it anymore because all its assets had been transferred. Through the acts of YIL, MADCI sold all its lands to YILPl and, subsequently to YICRI. On one hand, Yu now claims that YICRI inherited the obligations of MADCI. On the other hand, the YICRI counters that it did not assume such liabilities because the transfer of assets was not committed in fraud of the MADCI's creditors. ///

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1/ What are the obligations of the parties in a letter of credit?

1/ 1. DRAWER of the letter of credit - Liable to the person on whom it was issued for the amount paid (Code of Commerce, Art. 569, par1) -In case of revocation, he must inform the bearer and the person to whom it is addressed (Code of Commerce, Art 570) 2. BEARER of a letter of credit - Pay the amount received without delay (Code of Commerce, Art. 571, par1) 3. NOTIFYING BANK -To notify and/or transmit the documentary of credit to the seller-beneficiary -Assumes no liability 4. NEGOTIATING BANK -Buy/discounts a draft under the letter of credit -Liability depends upon the negotiation *Before negotiation, it has no liability with respect to the seller *After negotiation, there is a contractual relationship prevailing between the negotiating and the seller 5. CONFIRMING BANK -Assumes a direct obligation to the seller.

1/ What is a letter of credit?

1/ It is a written instrument whereby the writer (i.e a bank client) requests or authorizes the addressee (i.e., a bank) to pay money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee. (Transfield Philippines, Inc v. Luzon Hydro Corporation,2004)

1/ Can a bank refuse payment if the proper documents have been presented to it?

1/ No. The purpose of a commercial letter of credit is to ensure payment of a definite amount upon presentation of documents. The bank only deals with documents; it has nothing to do with the quality of the merchandise. (Prudential Bank v. IAC, 1992)

1/ What are the three distinct and independent contracts in a letter of credit? (SBL)

1/ a. Sale between the seller and buyer;l b. Contract of buyer with issuing bank; and c. The letter of credit itself, wherein the bank promises to pay pursuant to the terms and conditions of the letters of credit. This assures seller of prompt payment, independent of any breach of the main sales contract. (Ken Hua Paper Products Co., Inc, v. CA, 1998)

1/ What are the rights of the Parties in a letter of credit?

1/ a. The person shall have the right to demand proof of identity of the person in whose favor the letter of credit was issued (Code of Commerce, Art. 569 (3)) b. In case of non-payment, person to whom the letter of credit is addressed may institute an action involving execution (Code of Commerce, Art 571 (2))

10/ What is a check?

10/ A check is a bill of exchange drawn on a bank and payable on demand. (NIL, Sec. 185)

10/ What is a promissory note?

10/ A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where the note is drawn to the maker;s own order, it is not complete until indorsed by him. (NIL, Sec. 184)

10/ What is acceptance and are its requisites?

10/ Acceptance is 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 BOE is drawn assents to the request of the drawer to pay it. (NIL, Sec. 132) It requisites are: (W-SEC) a. In Writing b. Signed by the drawee c. Must no express that the drawee will perform his promise by any other means than payment of money; and d. Communicated or delivered to the holder.

10/ How is a negotiable instrument discharged?

10/ a. By payment in due course by or on behalf of the principal debtor' b. By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; c. By the intentional cancellation thereof by the holder; d. By any other act which will discharge 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. (NIL, Sec. 119)

100/ Exceptions to the mandatory tender offer rule

100/ Purchases of securities a) From the Unissued capital stock; provided, the acquisition will not result to a 50% or more ownership of securities by the purchaser or such percentage that is sufficient to gain control of the board: b) From an increase in authorized capital stock; c) In connection with a Privatization undertaken by the Philippine government; d) In connection with Foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor; e) In connection with corporate Rehabilitation under court supervision; f) In the Open market at the prevailing market price; and g) Merger or consolidation.

100/ When mandatory tender offer required

100/ a) Where the person intends to acquire 35% or more of the equity shares of a public company in one or more transactions within a period of 12 months (creeping acquisition); and b) Acquisition of even less than 35% but would result in ownership of more than 50% of the total outstanding equity securities of a public company.

101/ who is an insider

101/ a) Issuer b) Director or officer of, or person controlling, the issuer; c) Person whose relationship or Former relationship to the issuer gives or gave him access to material information about the issuer or the security that is not generally available to the public; d) Government employee, or director, or Officer of an exchange, clearing agency and/or self-regulatory organization who has access to material information about an issuer or a security that is not generally available to the public; or e) Person who learns such information by communication from any of the foregoing insiders.

101/ Requirements of insider trading

101/ a) The trader is an insider b) The information of the issuer that the insider has is Material non-public — i.e., not disclosed to the public and will either affect the market price once disclosed or would be considered by a reasonable person as important in determining his course of action vis-à-vis the securities. c) The insider buys or sells securities of the issuer while in Possession of such information.

101/ Manipulative and fraudulent practices

101/ a) Wash sales-transactions which does not involve any change in beneficial ownership; b) Matched order -— by entering an order for the purchase or sale of security with the knowledge that a simultaneous order or orders of substantially the same size, time and price for the sale or purchase of any such security, has or will be entered by or for the same or different parties; c) Market gigging or jiggling — performing similar act where there is no change in beneficial ownership, or other acts which tend to create a false appearance of active trading; d) To effect, alone or with others, a series of transactions in securities that: - Raises the price to induce the purchase of a security, - depresses the price to induce the sale, or - Creates Active trading to induce such purchase or sale through Manipulative devices (i.e., marking the close. painting the tape, squeezing the float, hype and ump, improper matched orders, boiler room operations, scalping, daisy chain, flipping); ///

101/ Manipulative and fraudulent practices

101/// e) To Circulate information that the price of any security listed in an exchange will or is likely to rise or fall because of manipulative market operations; f) To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in an exchange; g) To effect whether alone or with others, series of transactions for the purchase and/or sale of any security traded in an exchange for the purpose of Pegging, fixing or Stabilizing the price of such security, unless otherwise allowed by the SRC.

102/ Requisites of an investment contract

102/ Transaction, contract, or scheme whereby a person a) Makes an Investment of money, b) In a Common enterprise, c) With the Expectation of profits. d) To be derived Primarily (i.e., does not have to be solely) from the efforts of others.

102/ Other exceptions to bank secrecy of peso-deposits

102/ a) Inquiry into illegally acquired amounts under the plunder Law b) Upon order of competent court in cases involving unexplained wealth under the anti-Graft and Corrupt Practices Act c) In-camera inspection by the ombudsman under the Ombudsman Act d) Upon court order when there is probable cause that the deposits or investments involved are in any way related to money laundering or an unlawful activity under the AMLA ///

102/ Exceptions to bank secrecy of peso deposits under Bank Secrecy Law

102/ a) Upon written Consent of the depositor b) Impeachment cases c) Court order in cases of bribery or dereliction of duty of public officials d) In cases where the money deposited or invested is the subject matter of the Litigation.

102/ Other exceptions to bank secrecy of peso-deposits

102/// e) BSP and EDIC may inquire may inquire into or examine deposit accounts and all information related thereto in case there is unsafe or unsound banking practice f) Inquiry by the Commissioner of Internal Revenue under certain circumstances g) Upon written order of the Court of Appeals under Sec. 27 of the guman Security Act h) Examination by an independent auditor hired by the bank i) BSP inquiry into or examination of deposits or investments with any bank, when the inquiry or exam is made in the course-of BSP's periodic or special exam of said bank

103/ Requirements for patentability of invention

103/ a) Any Technical solution of a problem in a field of human activity; b) Which involves an inventive step; c) Which is new (novelty); and d) Which is industrially Applicable

103/ Non-patentable inventions

103/ a) Discoveries, Scientific theories and Mathematical methods; b) Schemes, rules and methods of performing mental acts. Playing games or doing business and programs for Computers; c) Anything which is contrary to public order or morality d) Methods for treatment of human or animal body by Surgery or therapy, and diagnostic methods practiced on the human body; BUT products and composition for use in any of these methods are patentable; e) Plant varieties or animal breeds or essentially biological process for the production of plants or animals; BUT micro-organisms and non-biological and microbiological processes are patentable: f) Aesthetic creations

103/ Instances when license to exploit patented invention may be allowed without consent of paten owner

103/ a) National emergency or other circumstances of extreme urgency: b) Public interest, in particular, national security. nutrition, health or development of other vital sectors of national economy as determined by the appropriate agency of the Government, so requires; c) Where a judicial or administrative body has determined that manner of exploitation by patent owner or his licensee is anti-Competitive; or ///

103/ IP Rights which should be registered

103/ a) Trademarks b) Patents c) Copyrights

103/ Exceptions to bank secrecy of foreign deposits

103/ a) Upon the written Consent of the depositor b) BSP inquiry into or examination of deposits or investments with any bank, when the inquiry or exam is made in the course of BSP's periodic or special exam of said bank c) Inquiry by the Commissioner of Internal Revenue under certain circumstances d) Court order in cases of violation of AMLA when it is established that there probable cause that the deposits or investments involved are in any way related to a money laundering offense. Order of competent court is not required in: (i) Kidnapping for ransom (ii) Drug trafficking (iii) Hijacking, destructive arson, and murder e) BSP and PDIC may inquire may inquire into or examine deposit accounts and all information related thereto in case there is unsafe or unsound banking practice

103/ Instances when license to exploit patented invention may be allowed without consent of paten owner

103/// d) In case of public non-Commercial use of patent by patentee, without satisfactory reason; e) If patented invention is not being worked in Philippines on commercial scale, although capable of being worked, without satisfactory reason: Provided that importation of patented article shall constitute working or using the patent. f) Where the Demand for patented drugs and medicines is not being met to inadequate extent and on reasonable terms, as determined by the Secretary of the DOH

104/ Tests to determine the existence of patent infringement

104/ a) LITERAL INFRINGEMENT In using literal infringement as a test, resort must be made to the words of the claim. If the challenged matter clearly falls within the claim, literal infringement exists. To determine whether the challenged matter falls within the literal meaning of the patent claim, the claims of the patent and the challenged matter should be compared within the overall context of the claims and specifications, to determine whether there is exact identity of all material elements b) DOCTRINE OF EQUIVALENTS When a device appropriates a prior invention by incorporating its innovative concept and. albeit with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result.

104/ Limitations on government use invention

104/ a) The scope and duration of the use shall be limited to of the purpose for which it was authorized: b) Such use shall be non-exclusive; c) The right holder shall be Notified as soon as reasonably practicable: d) The right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization; e) All cases arising on such matters shall be cognizable by courts with appropriate jurisdiction, provided that no court, except the Supreme Court, shall issue a TRO or preliminary injunction or such order provisional remedies that will prevent its immediate execution;

104/ Elements of Trademark Infringement

104/ a) Trademark being infringed is registered in the IPO; however, in respect of an infringement of trade name, the same need not be registered; b) Infringing mark or trade name is used in connection with the Sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, and prints. Packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services: ///

104/ Elements of Trademark Infringement

104/// c) Trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; d) Use or application of the infringing mark or trade name is likely to cause Confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services themselves or as origin of such goods or services or the identity of such business (Ong vs. People of the Philippines, G. R. No. 169440, 2011); and a) No Consent of the trademark or trade name owner or the assignee thereof.

105/ Elements of Unfair Competition

105/ a) Confusing similarity in the general appearance of the goods, and b) intent to deceive the public and defraud a competitor.

105/ Tests to determine similarity/ likelihood of confusion

105/ a) HOLISTIC OR TOTALITY TEST Applied in Del Monte Corporation vs. CA (1990) — the trademarks in their entirety as they appear in their respective labels or hang tags must also be considered. 2. b) DOMINACY TEST Applied in Asia Brewery. Inc. vs. CA (1993) — focuses on the similarity of the prevalent features; whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers.

105/ Limitations on patent rights

105/ f) Act is done Privately and on a non-commercial scale or for a non-commercial purpose: Provided, That it does not significantly prejudice the economic interests of the owner of the patent; g) Act consists of making or using exclusively for the purpose of Experiments that relate to the subject matter of the patented invention; h) Act consists of the preparation for individual cases, in a pharmacy or by a medical professional, of a Medicine in accordance with a medical prescription or acts concerning the medicine so prepared; ///

105/ Limitations on patent rights

105/// i) Using a patented product which has been put on the Market in the Philippines by the owner of the product, or with his express consent, insofar as such use is performed after that product has been so put on the said market; j) Invention is used in any §hip, vessel, aircraft, or land vehicle of any other country entering the territory of the Philippines temporarily or accidentally: Provided. That such invention is used exclusively for the needs of the ship, vessel, aircraft, or land vehicle and not used for the manufacturing of anything to be sold within the Philippines.

106/ Copyrightable works

106/ a) Architectural Designs b) Derivative Works c) Original Literary and Artistic Works d) Published Edition of Work

106/ Covered persons

106/ a) Banks, non-banks. quasi—banks, trust entities, foreign exchange dealers, pawnshops, money changers, remittance and transfer companies and other similar entities supervised or regulated by BSP; b) Insurance companies, pre-need companies, and all other persons supervised or regulated by the insurance Commission a) supervised/regulated persons/entities (i) Securities dealers, brokers, salesmen, investment houses, and other entities managing securities or rendering services as investment agents, advisor, or consultants; ///

106/ Elements of Copyright infringement

106/ a) Existence of a valid copyright b) Unauthorized copying, distribution, reproduction, or sale of copyrighted work (i) Direct evidence of actual copying (ii) Indirect evidence 'of access to the original work c

106/ Covered persons

106/// (i) Managing of client money, securities or other assets; (ii) Management of bank, savings or securities accounts; (iii) Organization of contributions for the creation, operation or management of companies: and (iv) Creation, operation or management of juridical persons or arrangements, and buying and selling business entities. h) Casinos, including internet and ship—based casinos. with respect to their casino cash transactions related to their gaming operatives

106/ Covered persons

106/// (ii) Mutual fund, closed—end investment companies, common trust funds, pre-need companies, and other similar entities (iii) Foreign exchange corporations, money changers, money payment, remittance, and transfer companies, and other similar entities; and (iv)Other entities administering / dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary instruments or property d) Jewelry dealers in precious metals for transactions in excess of P1M; e) Jewelry dealers in precious stones for transactions in excess of P1M ///

106/ Covered persons

106/// f) Company service providers which, as a business, provide any of the following services to third parties: (i) Acting as a Formation agent of juridical persons; (ii) Acting as (or arranging for another person to act as) a Director or corporate secretary of a corporation, a partner of a partnership, or a similar position in relation to other juridical persons; (iii) Providing a registered office, business address or Accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement; and (iv) Acting as (or arranging for another person to act as) a Nominee shareholder for another person: Persons who provide any of the following services: ///

107/ Unlawful activities under AMLA

107/ Act or omission or series or combination thereof, involving or having relation to the following: a) Kidnapping for ransom b) Drug-related offenses c) Graft and corrupt practices d) Qualified theft e) Hijacking, Destructive arson and Murder f) jueteng and masiao g) Violations of g-commerce Act of 2000 h) Robbery and extortion i) Plunder j) Piracy on the high seas k) swindling ///

107/ Unlawful activities under AMLA

107/// aa) Malversation of public 'funds bb) Child Abuse cc) Child Pornography dd) bribery ee) National Caves and Cave Resources Management Protection Act ff) Anti-voyeurism gg) Wildlife Resources Conservation and Protection Act related offenses hh) Felonies or offenses of similar nature punishable under the penal laws of other Countries.

107/ Unlawful activities under AMLA

107/// l) smuggling m) Fraudulent practices under the Securities Regulation Code n) Human-Trafficking related offenses o) illegal Recruitment under Migrant Workers and Overseas Filipinos Act p) intellectual Property Code related offenses q) Illegal Firearms related offenses r) car napping s) Terrorism and conspiracy to commit terrorism t) financing terrorism u) Fencing v) frauds and Illegal exactions and transactions w) Forgeries and Counterfeiting x) Forestry Code related offenses y) Fisheries Code related offenses z) Mining related offenses ///

108/ Suspicious transactions

108/ a) Amount involved is not commensurate with the business or financial Capacity of the client; b) No Underlying legal or trade obligation, purpose or economic justification; c) Client's transaction is structured in order to avoid being the subject of reporting requirements under the Act; d) Circumstances relating to the transaction which are observed to deviate from the profile of the client and/or the client's past transactions with the covered institution; e) Client is not properly identified: f)Transaction is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or g) Analogous transactions

108/ Instances when court order not required before AMLC may inquire into bank deposits

108/ a) Kidnapping for ransom b) Drug-related offenses c) Hijacking, Destructive arson and Murder

108/ Who is a Philippine National

108/ a)Filipino Qitizen; b) Domestic Partnership or association wholly owned by Filipino citizens; c) Domestic corporation at least 60% of the capital stock outstanding and entitled to vote is owned and held by Filipino citizens; or d) Foreign corporation registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stock outstanding and entitled to vote is wholly owned by: (iii) Filipinos, or (iv) A trustee of funds for pension or other employee retirement or separation benefits, where trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of Philippine nationals

109/ Kinds of Rehabilitation Proceedings

109/ a) Court supervised b) Out of Court or Informal c) Pre-negotiated

109/ Minimum requirements of an out-of—court Restructuring Agreement Rehabilitation Plan

109/ a) Debtor must Agree to the out-of court or informal restructuring/workout agreement or Rehabilitation Plan; b) Approved by creditors representing at least 67% of the secured obligations of the debtor; c) Approved by creditors representing at least M of the unsecured obligations of the debtor: and d) Approved by creditors holding at least 85% of the total liabilities, secured and unsecured, of the debtor.

109/ Minimum requirements of a rehabilitation receiver

109/ a) Filipino Citizen or has been residing in the Philippines in the 6 months immediately preceding his nomination; b) Good Moral character and with acknowledged integrity, impartiality and independence: c) Possess: (i) The relevant training and/or experience that may be necessary to enable him to property discharge the duties and obligations of a rehabilitation receiver, and (ii) The requisite knowledge of insolvency and other relevant commercial laws, rules and procedures; and a) No Conflict of interest: Provided, that such conflict of interest may be waived, expressly or impliedly, by a party who may be prejudiced thereby.

109/ Effects of a suspension order

109/ a) Suspend all actions or proceedings, in court or otherwise, for the enforcement of Claims against the debtor; b) Suspend all actions to enforce any Judgment, attachment or other provisional remedies against the debtor; c) Prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in the ordinary course of business; and d) Prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided herein.

109/ Effects of commencement order

109/ a) Vest the rehabilitation with all the flowers and functions b) Prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process to seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after commencement date unless otherwise allowed c) Serve as the legal basis for rendering null and void any Setoff d) Serve as the legal basis for rendering null and void the perfection of any Lien e) consolidate the resolution of all legal proceedings by and against the debtor to the court.

11/ What is insurable interest?

11/ A person is deemed to have insurable interest in the subject matter insured, where he has a relation or connection with it, such that he will derive pecuniary benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction, termination or injury by the happening of the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance. (Lalican v. Insular Life Assurance Company Ltd., 2009)

11/ What is a contract of insurance?

11/ An agreement whereby one undertakes for a consideration, to indemnify another against loss, damage or liability, arising from an unknown or contingent event. (Insurance Code, Sec. 2a)

11/ What risks may be insured against?

11/ Any contingent or unknown event, whether past or future, which may Damnity (cause damage to) a person having an insurable interest; or b. Any contingent or unknown event whether past of future, which may create a Liability against the person insured. (Ic. Sec.3)

11/ What are the characteristics and nature of insurance contracts?

11/ a. Consensual - perfected by the meeting of the minds b. Voluntary - Parties may incorporate terms and conditions as they deem convenient. c. Aleatory - Performance depends upon some contingent event. d. Unilateral - Imposing legal duties only on the insurer e. Personal - each party to it, in entering into the insurance contract, takes into account the character, credit and conduct of the other. f. Conditional - Insurer's liability is based on the happening of the event. g. Contract of indemnity - entitled to recover the amount of actual loss sustained and the burden is upon the insured to establish the amount of such loss. Exception: Life and accident insurance where the measure of indemnity is the amount fixed in the policy.

11/ What are the elements of an insurance?

11/ a. Insurable Interest (IC, Sec. 51 (9)) b. Risk of loss (IC, Sec.2) c. Assumption of Risk d.Payments of Premiums e. Scheme to distribute losses (IC, Sec. 77; Phil-am Care Health System, Inc. v. CA, 2002)

110/ Effects of liquidation order

110/ a) Legal title to and control of all the assets of the debtor, except those that may be exempt from execution, shall be deemed vested in the liquidator or, pending his election or appointment, with the court; b) All Contracts of the debtor shalt be deemed terminate and or breached, unless the liquidator, within 90 days from the date of his assumption of office, declares otherwise and the contracting party agrees: c) Juridical debtor shall be deemed Dissolved and its corporate or juridical existence terminated: ///

110/ Effects of liquidation order

110/// d)No separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will be transferred to the Liquidator for him to accept and settle or contest. If the liquidator contests or disputes the claim, the court shall allow, hear and resolve such contest except when the case is already on appeal. In such a case, the suit may proceed to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and allowed in court; and a) No Foreclosure proceeding shall be allowed for a period of 180 days.

12/ What is an irrevocable beneficiary? Effects?

12/ An irrevocable beneficiary is one designated as such in an insurance policy. He cannot be changed without his consent as he has a vested interest in the policy. This is an exception to the general rule where the insured shall have the right to change the beneficiary he designated in the policy. (IC, Sec.11) Effects: The insured may not add other beneficiaries without the consent of the irrevocable beneficiary (Phil-Am Life Ins. v. Pineda, G.R No. 54216, 1989); the beneficiary cannot e deprived of his vested interest by the insured by putting an end to the policy. Should the insured discontinue paying it and be entitled to automatic extend term or paid up insurance options. (Nario vs. Phil-Am Life Ins. Co.,1967)

12/ In life insurance, when is a person said to have insurable interest?

12/ Every person has an insurable interest in the life and health; a. Of himself, of his spouse and of his children; b. Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; c. Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and d. Of any person upon whose life any estate or interest vested in him depends. (IC, Se. 10)

12/ Which types of losses makes an insurance company liable? (PINE)

12/ a. Loss the Proximate cause of which is the peril insured against; (IC, Sec. 84) b. Loss the Immediate cause of which is the peril insured against except where proximate cause is an excepted peril; (IC, Sec. 86) c. Loss arising from the peril insured against when caused by the negligence of insured except where gross negligence amount to a willful act; (IC, Sec. 87) d. Loss caused by Efforts to rescue the thing from peril insured against - if during the course of rescue, the thing is exposed to a peril not the insured of its possession, in whole or in part. (IC, Sec. 85)

13/ What is the difference in insurable interest between life and property insurance?

13/ As to Category: Basis (Life) - May be based on pecuniary interest, affinity, or consanguinity. Basis (Property)- Based on pecuniary interest When Insurable Interest must exist (Life) - At the time the policy takes effect and not exist at the time of loss (IC, Sec. 19) When Insurable Interest must exist (Property)- At the time insurance takes effect and when loss occurs, but need not exist in the meantime. (IC, Sec. 19) Amount of Insurable Interest (Life) - GR: No limit, E: If insurable interest is based on creditor-debtor relationship ( only to the extent of the credit or debt) Amount of Insurable Interest (Property) - Limited to the actual value of damage, injury, or loss. Subrogation (Life) - No right of subrogation Subrogation (Property) - There is a right subrogation. Insurable Interest by Beneficiary (Life) - Beneficiary need not have insurable interest. Insurable Interest by Beneficiary (Property) - Beneficiary must have insurable interest.

13/ What is reinsurance?

13/ It is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. The original contract of insurance and the contract of reinsurance are separate and distinct. (IC, Sec. 95)

13/ If the beneficiaries of a married man are his common law wife and children, will the proceeds automatically go to the children legitimate wife and children?

13/ No. The illegitimate children are entitled to the proceeds of the insurance because they are not among those prohibited from becoming beneficiaries. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose benefit it is made unless otherwise specified in the policy. (IC, Se. 53)

13/ Will the policy be rendered void if the designated beneficiary is disqualified by law to receive the proceeds?

13/ No. The policy remains valid and binding. It is the designation of beneficiary which is rendered void. The proceeds of the policy shall then be given to the estate of the insured if there are no other qualified beneficiaries. (Heirs of Maramag v. De Guzman, 2009)

13/ What is the extent of a mortgagee's insurable interest?

13/ Only up to the extent of the debt. The property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. (Id)

13/ What is the extent of a mortgagor's insurable interest?

13/ The full value of the mortgaged property. As owner, this is true, even though the mortgage debt is not equivalent to the full value of the property. (Id)

13/ What is the rule on separate insurable interest in relation to mortgaged property?

13/ The mortgagor and the mortgagee each have and independent insurable interest and both interests may be in one policy, or each may take out a separate policy covering his interest. (Geagonia v. CA, GR No. 114427, 1995)

14./ What are the rules on payment on installments in insurance contracts?

14/ 1. When partial payment has been made at the time of the loss, the insurer becomes liable but the latter has the right to deduct the amount of unpaid premiums from the insurance proceeds (UCPB General v. Masagana Telamart, 2001) 2. If the CHECK payment for premium was received by the insurer prior to the loss or within the credit period, the insured will be allowed to recover. (South Sea Surety v. CA, 1995) 3. Insurer could no longer claim forfeiture of the insured's rights because it held the check used to pay the premium on a fire insurance policy for an unreasonable time (Malayan insurance Co. v. Arnaldo, 1987)

14/ What are the rules on non-payment of premium?

14/ General Rule: Non-payment of first premium prevents the contract from becoming binding notwithstanding the acceptance the acceptance of the application or the issuance of the policy. Exceptions to General Rule as to payment of premiums: a. In case of life and industrial life whenever the grace period provision applies. Individual Life or Endowment Insurance and Group Life Insurance Grace period of either thirty (30) days or one (1) month within which the payment of any premium after the first may be made. Industrial Life Insurance Grace period is four (4 weeks) and where premiums are payable monthly, either thirty (30) days or one (1) month.

14/ What is the effect of having several insurer's?

14/ In case of over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the things at risk. (IC, Sec. 82) Each insurer is bound , as between himself and the other insurer's, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. (IC, Sec. 94 (e)

14/ What is an over-insurance clause?

14/ It provides that the policy may be avoided if the insured procures additional insurance without the consent of the insurer and the same is not indicated or indorsed in the policy It is a warranty that entities the insurer to rescind in case of breach. (IC, Sec. 82)

14/ In case of double insurance and over-insurance, how much may the insured claim?

14/ Only up to the agreed valuation or up to the insurable value from any, some or all insurers, without prejudice to the insurer ratably apportioning the payments. (IC, Se. 94)

14/ What is the effect/s of payment of premiums by installment?

14/ The policy is binding, if the parties agreed to it OR if acceptance of the payment of premiums by installments in an established practice by the parties. It is binding even if not paid in full, because it reveals an intention on the part of the insurer to honor the policy (Makati Tuscany Condominium Corp. v. CA, 2006)

14/// Exceptions to General Rule as to payment of premiums:

14/// b. Where there is an acknowledgement in the contract or policy of insurance that the premium had already been paid. (IC, Sec. 79) c. There is an agreement allowing the insured to pay the premium in installment and partial payment has been made at the time of loss (Makati Tuscany Condominium v. CA, 1992) d. Where a credit term was agreed upon like the agreement in where the insurer granted a 60-90 day credit term for the payment of the premiums despite full awareness of Section 77 (UCPB General Insurance, Inc. v. Masagana Telemart, 1999) e. Where the parties are barre by estoppel. (Jose Marques, et al. vs. Far East Bank and Trust Company, et al./Far East Bank and Trust Company, et.al vs. Jose Marques, et al. 2011)

15/ What is a cover note and what are its effects?

15/ A cover note or binding slip is a contract issued by the insurer through its duly authorized agent. It is intended to give temporary insurance coverage to the applicant pending the acceptance or rejection of his application for an insurance contract. (DE LEON, The Insurance Code of the Phil. 2014) Effects: The cover note acts as the policy in lieu of the insurance contract, its terms identical to the actual contract. It is effective within 60 days after its issuance. Such period may be extended or renewed beyond 60 days with the written approval of the insurance commissioner. (IC, Se. 52)

15/ What is concealment?

15/ It is a neglect to communicate that which a party knows and ought to communicate (IC, Sec. 26)

15/ When is concealment Material?

15/ Materiality is determined by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquires. (IC, Sec. 31)

15/ Is a binding receipt equivalent to a temporary contract of insurance?

15/ No. A binding receipt is a mere acknowledgement by the insurer that it received the premium and the application subject for processing by the insurance company. It will either approve or reject the same based on whether the applicant is insurable. (Great Pacific Life Assurance Company v. CA, 1979

15/ What can premiums be returned? (ND-F2) NO)

15/ a. When no part of the interest in the thing insured is exposed to an of the perils insured against (IC, Sec. 79 (a) ) b. Where the insurance is made for a Definite period of time and the insured surrenders his policy before the expiration of that period (IC, Se. 79 (b) ) c. When the contract is voidable on account of the Fraud or misrepresentation of the insurer or his agent (IC, Sec. 81) d. When the contract is voidable on account of Facts, the existence of which the insured was ignorant without his fault (IC, Sec. 81); e. When, by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy (IC, Sec. 81) f. In case of Over-insurance (IC, Sec. 82).

16/ What is an incontestability clause?

16/ (DEL CASTILLO) It is a provision in law that after a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of 2 years from the date of its issue or its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the insured or his agent. (Manila Bankers v. Aban, 2013)

16/ What is the legal effect to the change of interest in the thing insured without a change in the insurance?

16/ General Rule : It does not transfer the policy but suspends it until the interest in the thing and the interest in the insurance are vested in the same person. (IC, Se. 20) Exceptions: (LIC2-PIE) a. In case of Life , health and accidental insurance. (IC, Sec. 20) b. When the change in interest results after the occurrence of an injury which results in a loss liability has become fixed (IC, Sec. 21) c. A Change of interest in one or more several distinct things, separately insured by one policy-contracts is divisible (IC, Sec. 22)

16/ What is material misrepresentation?

16/ It is a statements as a fact of something which is untrue, which the insured stated: • With knowledge that is untrue and with an intent to deceive, or • Positively as true without knowing it to be true and which has a tendency to mislead, and • Where such fact in either case is material to the risk This renders the insurance contract voidable (IC, Sec. 45 & 46)

16/ What are the requisites of an incontestability Clause?

16/ a. The insurance is a Life insurance policy. b. It is payable on the Death of the insured. c. It has been in force during the lifetime of the insured for at least 2 years from its date of issue or of its last reinstatement. The period of 2 years may be shortened but it cannot be extended by stipulation. (IC, Sec. 48) Note: In the case of Ten v.CA, 1989, the Court held that "The Insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer life." ///

16/ Under what conditions may an INSURER rescind an insurance policy? (LUCCI)

16/ a. The policy Limits the use or conditions of the thing insured; b. There is an alteration in the Use or condition; c. The alteration is without the Consent of the insurer; d. The alteration is made by means within the Control of the insured; and e. The alteration Increases the risk of loss (Malayan Insurance Company IN. v. PAP Company, Ltd., 2013)

16/// HOWEVER, in the 2016 case of Sun Life of Canada v. Sibya, 2016, the Court citing the obiter in Manila Banker of Life Insurance v. Aban, 2013, adopted a different interpretation of Article 48 and held that the insurer has two years from the date of issuance or last reinstatement of the insurance policy, or up to the date of death of the insured, should the latter die within the two-year period, to contest the policy. This seems to modify the rule that the insurer is entitled to the two-year period, regardless of the death of the insured during said period.

16/// Following the Sibya ruling, the incontestability clause sets in: Whichever is earlier, between: • Within 2 years from the date of issuance or its last reinstatement; or • Upon the insurer's death

17/ What are the REQUISITES for the valid cancellation of non-life policy?

17/ a Prior notice of cancellation to insured; b. Notice must be based on the Occurrence after effective date of the policy of one or more of the grounds mentioned; c. Notice must be in Writing, mailed or delivered to the insured at the address shown in the policy; and d. Notice must state the Grounds relied upon and upon request of insured, to furnish facts on which cancellation is based.

17/ What are the GROUNDS for the valid cancellation of a non-life policy under Sec. 64?

17/ a. Nonpayment of premium; b. Conviction of a crime arising out of acts increasing the hazard insured against; c. Fraud or material representation; d. Willful or reckless acts or omissions increasing the risk insured against; e. Physical changes in the property insured which result in the property becoming uninsurable; and f. Determination by the Insurance Commissioner that the policy would violate the Insurance Code (IC, Sec. 64)

17/ What are the defenses not barred by an Incontestability Clause?

17/ a. Person taking the insurance lacked insurable interest as required by law; (IC, Sec. 18) b. Cause of the death of the insured is expected risk; (IC, Sec. 86) c. Premiums have not been paid; (IC, Sec. 64) d. Conditions of the policy relating to military or naval service have been violated; (IC, Sec. 230) e. The fraud is of a particularly vicious type, wherein: i. The policy was taken in furtherance of a scheme to murder the insured. ii. The insured instituted another person for the medical examination; and, iii. The beneficiary feloniously killed the insured;(People v. Valerio, 1982) f. Beneficiary failed to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened; or (IC, Sec. 89, Civil Code, Art. 1306) g. Action was not brought within the time specified (IC, Sec. 63)

18/ What is constructive loss in marine insurance? Effects?

18/ Constructive total loss or ''technical total loss" is one which gives he insured the right to abandon. - Actual loss or more than ¾ of the value of the object; - Damage reducing value by more than ¾ of the value of the vessel and of cargo; and - Expenses of shipment exceed ¾ of value of cargo. Effects: In case of constructive total loss, insured may abandon the goods or vessel to the vessel to the insurer and claim for whole insured value, or he may, without abandon vessel, claim for partial actual loss. (Code of Commerce, Art 365)

18/ What is the prescriptive period to bring an action for indemnity?

18/ If there is a stipulation in the policy; The stipulation in the policy, if not contrary to Sec. 63, will prevail. (Teal Motor v. Orient Insurance, 1934) If there is no express stipulation in the policy; As the policy is a written contract, the action prescribes in 10 years. (New Civil Code, Art. 1144) Note: Limitation to period to File Claim A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, its void. (Insurance Code, Sec. 231)

18/ When is subrogation not available?

18/ a. Where the insured by his own act releases the wrongdoer or third party liable for the loss or damage; (Aquino, 205) b. In life insurance (Aguino, 2015); c. Where the insurer pays the insured the value of the loss without notifying the carrier who has in good faith settled the insured's claim for loss; d. Where the insurer pays the insured for a loss or risk not covered by the policy; (Pan Malayan Insurance Company v. CA, 1990)

19/ What is the Authorized Driver's Clause?

19/ A stipulation in a motor vehicle insurance which provides that the driver, other the insured owner, must be duly licensed to drive the motor vehicle otherwise the insurer is executed from liability. It limits the use of the insured vehicle to the insured himself or any person who drove on his order or with his permission. Authorized driver refers to: a. The insured; b. Any person driving on the insured's order or with his permission, who is licensed and not disqualified from driving by order of a court of law or any regulation (Villacorta v. Insurance Commissioner, 1980)

19/ Distinguish friendly fire from hostile fire.

19/ FRIENDLY FIRE 1. Fire that burn in a place where it is supposed to burn. 2. Insurer is not liable 3. Fire in a gas stove or fireplace HOSTILE FREE 1. Fire that escapes and burns in a place where it is supposed to be. 2. Fire that started out as a friendly fire but escapes from its original place or it becomes too strong as it becomes out of control 3. Insurer is liable 4. Fire from a stove escaping to a nearby rug. (De Leon, supra 288-289)

19/ VS Corp. agreed to transport Caltex's petroleum cargo through the MT Vector Caltex insured the petroleum with AHA Corp. on December 20 1987, M/T Vector collided with another vessel at sea, leading to the loss of the petroleum cargo. On July 12, 1998, AHA indemnified Caltex for the loss. On March 2, 1992, AHA sued VS to recover the amount the former paid. VS claims that the action is based upon quasi-delict and should have been commenced within 4 years from when the cause of action arose (i.e., the collision); since more than 4 years have elapsed, the action as prescribed. Is Vs Correct?

19/ No. Art 2207 of the Civil Code provides that upon payment of the insurance claim, the insurance company shall be subrogated to the rights of the insured against wrongdoer or the person who violated the contract. Since the subrogation of AHA to the rights of Caltex was by express provision of law, the present action is based upon an obligation created by law w/c has a prescriptive period of 10 years from the time the cause of action accrues, i.e., when AHA actually indemnified Caltex on its insurance claim on July 12, 1988, (Civil Code, Art. 1144) Considering that AHA filed the action on March 2, 1992, which was within 10 year-period stated above, the action against VS has not yet prescribed (Vector Shipping corp. v. American Homes Assurance Co.,2013) THEREFORE: Effect of Subrogation on Prescriptive to Sue the person Causing the loss or Injury. The insurer acquires a fresh 10-years period arising from law. (Vector Shipping corp. v. AHAC, 2013).

19/ What is the Theft Clause included in the motor vehicle insurance?

19/ The risks insured against in the policy may include theft. If the vehicle unlawfully taken, the insurer is liable under the theft clause and the authorized driver clause does not apply. The insured can recover even if the thief has no driver's license. If the exception in the policy is any malicious damage caused by a person in the service of the insured, said insurance policy cover loss due to theft. The theft perpetrated by the driver is not an exception to the coverage of the policy. The exception only refers to malicious damage, or injury to the car (Alpha Insurance and Surety Company v. Castor, 2013)

2/ Distinguish the liabilities of a notifying bank, a negotiating bank and a confirming bank?

2/ A notifying bank undertakes to inform the seller beneficiary that a letter of credit exists. Its obligation is limited to this duty and assumes no liability to pay under the letter of credit. A negotiating bank purchases drafts at a discount from the seller-beneficiary and presents them to the issuing bank payment. Prior to negotiation, a negotiating bank has no obligation. A contractual relationship between the negotiating bank and the seller-beneficiary arises only after the negotiating bank purchases or discounts the drafts. A confirming bank confirms that the letter of credit will be honored by the issuing bank. A conforming bank, by such confirmation, insures that the letter of credit will be paid in accordance with its terms. It therefore assumes a direct obligation to the seller-beneficiary. (HSBC v. National Steel Corp., 2016)

2/ What is the exception to the independence principle in letters of credit transactions?

2/ Fraud Exception Rule - Fraud (fraudulent abuse of the credit, in case of collusion between the corresponding/paying bank and the exporter/seller of the goods) is an exception to the independence principle. That is, the untruthfulness of a certificate accompanying a demand for payment under a letter of credit may qualify as fraud sufficient to support an injunction against payment (Transfield Phil. v. Luzon Hydro Corp., 2004)

2/ What is the independence principle in letters of credit?

2/ It means that in determining if the beneficiary of the letter of credit complied with it, the bank is required to examine only the documents presented. It is precluded from determining whether or not the beneficiary actually complied with the underlying contract. (Bank of America v. CA, 1993.

20/ Who is a common carrier?

20/ A common carrier are persons, corporation's 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. Note: Art. 1732 of the Civil Code does not make any distinction as to whether the carrying of persons or goods is the principal business of the carrier. It also does not make any distinction as to whether the business is offered on a regular basis, or whether it is offered to the general public (Cruz v. Sun Holidays, Inc, 2010)

20/ What is the degree of diligence required of Common Carriers?

20/ Common carriers are required to exercise extraordinary diligence. (Art. 1733 of the NCC)

20/ What are the relevant periods in claims settlement for 3rd party motor vehicle insurance?

20/ Notice of Claim: must be presented within six (6) months from the date of the accident. Otherwise the claim is deemed waived. Bringing an Action or Suit: The action must be filed in court of the insurance Commission within one (1) year from denial of the claim. Prescription starts to run from the denial of the claim by the insurance company (Summit Guaranty and insurance Co. v. Arnald, 1968)

20/ What are the requisites to be a common carrier? (PECC)

20/ a) Engaged in business of carrying or transporting goods or passengers whether as principal or ancillary business and whether on regular or occasional basis. b) Offers its services to the Public whether to the general population or narrow segment of the general population c) For Compensation or fixed price or rate d) Control of operation or cargo (De Guzman v. CA, 1988)

20/ Who is the proper insurer to claim from in compulsory third party motor vehicle insurance?

20/ • In the case of an occupant of a vehicle, claim shall lie against life insurer of the vehicle in which the occupant is riding, mounting or dismounting from. • If not an account, claim shall be lie against the insurer of the directly offending vehicle. (Perla Compania de Seguros v. Ancheta, 1988)

21/ May a brokerage firm be held liable for damage of goods?

21/ A brokerage firm engaged as a customs broker may also be a common carrier. A delivery of goods made in bad condition will give rise to a presumption of negligence. improper packing known to the carrier or apparent upon observation, the carrier accepting the same without protest will not relieve the carrier from liability. (A.F. Sanchez Brokerage v. CA, 2004)

21/ How can a Customs Broker be Common Carrier?

21/ A customs broker who delivers the goods of its customers as part of its service is a common carrier. (Westwind Shipping Corporation v. UCPB General Insurance Company, Inc., 2013) When transportation of goods is an integral part of a business of a customs broker, he is a common carrier. (Calvo v. UCBP Gen. Insurance Co., Inc, 2002)

21/ Is a travel agent a common carrier?

21/ A travel agent is not a common carrier, since he merely makes travel arrangements for other persons. A travel agent is only bound to observe the diligence of a good father of a family. (Crisostomo v. CA,2003)

21/ Compare and contrast a Contract of Towage, Arrastre Service and Stevedoring service.

21/ All three are NOT considered common carriers. Towage • One vessel is hired to bring another vessel to another place. • Diligence: Ordinary diligence (Cargolift Shipping, Inc. v. L. Acuario Marketing Corp., 2006) Arrastre Service • A contract for the unloading of goods from a vessel. • The handling of cargo on the wharf or between the establishment of the consignee or the shipper and the ship's tackle. • Diligence: Extraordinary diligence. (Summa Insurance Corp. v. CA, 1996) o Unlike a common carrier, there is NO presumption of negligence in case of loss. destruction or deterioration of goods. o There must be preponderant evidence to show that the required diligence was not exercised. (Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., 1992) ///

21/ Can a pipeline operator be considered a common carrier?

21/ Yes. An operator who carries petroleum products through pipes is deemed a common carrier because the law does not distinguish as to the means by which transportation is carried out, as long as it is by land. water or air. (First Philippine Industrial Corporation v. Court of Appeals, 1988).

21/// Stevedoring Service

21/// • The handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. {Mindanao Terminal and Brokerage Service. Inc. v. Phoenix Assurance Co. of New York, 2009) • A stevedore mainly provides labor in loading and slowing cargoes and does not transport goods. (Id.) • Diligence: Ordinary diligence (Id.)

21/ What are the differences between a common carrier and a private carrier?

21/COMMON CARRIER *Required to exercise extraordinary diligence *Holds out service to the public *There is presumption of fault or negligence in case of loss, destruction or deterioration of goods or death or injury of passengers. *Stipulations limiting liability are governed by law. PRIVATE CARRIER *Required to exercise ordinary diligence. *Holds our service to a single person or entity. *There is no presumption of fault or negligence. *Stipulations limiting liability are governed by the principle of "autonomy of contracts"

22/ Shipper shipped from Singapore to the Philippines 10 container vans. The shipment was insured against all risks by respondent and consigned with M80. The shipment arrived in the Philippines allegedly in good condition with the safety seals in place and was discharged to the arrastre operator. Upon receipt of the container vans at the consignee's warehouse. the consignee Issued gate passes to the arrastre operation. However. the shipper subsequently discovered substantial shortages. is the arrastre operator liable for the loss?

22/ (DEL CASTILLO) NO. The arrastre operator was given gate passes signed by the consignee's representatives upon delivery of the container vans. The gate passes serve as acknowledgment that: issuance of the gate pass constitutes delivery to and receipt by the consignee of the goods as described above in good order and condition. As held in another case. the signature of the consignee's representative on the gate pass is evidence of receipt of the shipment in good order and condition. (Marina Port Services v. American Home, 2015)

22/ What laws govern overland, sea, and air transportation?

22/ (a) Coastwise Shipping — New Civil Code — Code of Commerce (b) Carriage from foreign ports to Philippine ports — New Civil Code — Code of Commerce — Carriage of Goods by Sea Act (e) Carriage from Philippine ports to foreign ports — Laws of the country to which the goods are (0 be transported (d) Overland Transportation — New Civil Code — Code of Commerce (e) Air Transportation — New Civil Code — Code of Commerce (f) International carriage of persons. luggage, or goods by aircraft —Warsaw Convention.

22/ What is the legal relationship between an arrastre operator and a consignee?

22/ It is akin to that between a warehouseman and a depositor. He acts as the custodian of the goods discharged from a vessel, whose duty is to take good care of the goods and to turn them over to the party entitled to their possession. (Unknown Owner of the Vessel MV China Joy vs. Asian Terminals, 2015)

22/ When can a common carrier become a private carrier?

22/ It must be a bareboat or demise charter where the charterer mans the vessel with his own people. In effect, the charterer becomes the owner for the particular voyage. (Loadstar Shipping Co. V. Pioneer Asia Ins., 2006)

22/ What is the degree of diligence required of a common carrier? When does the presumption of fault of a common carrier arise?

22/ The common carrier is bound by law to observe extraordinary diligence in vigilance over the goods and the safety of passengers. The common carrier is presumed at fault when the passenger dies or is injured. (Victory Liner v. Gammad, 2004)

22/ Is the carrier liable for the damage caused by stevedores in the course of unloading cargoes?

22/ Yes. The responsibility of carriers is to property and carefully discharge the goods carried. The duty of care is non-delegable. The carrier is liable for the acts of stevedores. (Section 3(2) of the COGSA, Westwind Shipping Corporation v UCPB General Insurance,2013)

23/ What are the instances when the Kabit System will not apply?

23/ 1. When neither of the parties to the pernicious kabit system is being held liable for damages; 2. When the case arose from the negligence of another vehicle using the public road to whom no representation or misrepresentation as regards the ownership and operation of passenger jeepney was made; and 3. When the riding public was not bothered or inconvenienced at the very least by the illegal arrangement. (Lim V. CA, 2002)

23/ When does Contract of Carriage of Goods begin?

23/ From the moment goods are delivered by the shipper to the carrier and the carrier agrees to carry them. A bill of lading is not indispensable to the creation of a contract of carriage. (Compania Maritime v. Insurance Company, 1964)

23/Does the Lack of Certificate of Public Convenience Affect a Carrier's Liability?

23/ The absence of a certificate of public convenience will not eliminate the carrier 's liability. (Loadstar Shipping v. CA, GR. No. 131621, 1999)

23/ Who are liable for damages in a Kabit System?

23/ The registered owner and the actual owner. They are solidarily liable for the damage caused to its passengers or third parties. In no case is the actual owner exempted from liability. The actual owner shall reimburse the registered owner for whatever the latter have paid for claims. (R Transport vs. Luisito Yu, GR. No 174161, 2015)

23/ When does a Contract of Carriage of Goods end?

23/ Upon actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. (Macam v. Court of Appeals, GR. No. 125524, 1999)

23/ What are the two aspects of a contract of carriage?

23/ a) Contract to carry at some future time; a consensual contract. b) Contract of carriage or common carriage itself; considered a real contract. (British Airways v. CA, 1993)

23/ What must be proven in an action for breach of contract of carriage?

23/ a) Existence of the contract and b) Non-performance of the carrier of its obligation to carry its passengers safely. (Japan Airlines v. Simangan, GR. No. 170141, 2008) The burden of proof shifts to the carrier upon the prima facie case established by the passenger. (Northwest Airlines. Inc. v. Chiong, 2008) In the event of loss, destruction or deterioration of the goods, common carriers are liable unless it is brought about by natural disasters, in other cases, the presumption of negligence applies, unless there is proof of extraordinary diligence. (Dclsan Transport Lines v. CA, GR. No. 127897, 2001) Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. (Eastern Shipping Lines vs. BPI.,2015).

24/ What are the different kinds of stipulations limiting liability? (NLQ)

24 a) NO LIABILITY —carrier not liable at all for the negligent acts of its crew and employees. INVALID. b) LIMITED LIABILITY — regardless of the declared value of the cargo, the maximum liability of the carrier will be limited to a certain amount, for example, 500 PHP. INVALID. c) QUALIFIED LIABILITY — the carrier in this case fixes a maximum liability in the event the shipper does not declare any value up to a certain amount and pays additional freight. VALID. (Heacock vs. Macondray, 1921)

24/ In what instances is the "Presumption of Negligence of a Common Carrier in Carriage of Goods" not applicable?

24/ The presumption of fault or negligence by the common carrier may be overturned by proof of a) Observance of extraordinary diligence; b) Loss or damage IS caused by natural disaster, act of a public enemy in war. act/omission by shipper or owner of goods, character of goods or defects in packing/containers and order/act of competent public authority. (La Mer Industries, Inc. v. Malayan insurance Co., Inc, 2005)

24/ What are the Defenses Available to the Common Carrier in carriage of goods? (FESCO)

24/ a) flood, Earthquake, Storm, lightning or Other natural disaster or Calamity Conditions to Avail of Defense: 1. Natural disaster was the proximate & only cause 2. Exercise of diligence to prevent or minimize loss before, during and after the occurrence of the natural disaster 3. No delay (Civil Code, Art. 1739,1740) b) Act of the public enemy in war, whether international or civil. Conditions to Avail of Defense: 1. Act was the proximate & only cause 2. Exercise of diligence to prevent or minimize toss before, during and after the act 3. No delay (Civil Code, Art. 1739. 1740) c) Act or omission of the §hipper or owner of the goods. Conditions to Avail of Defense: 1. If proximate cause, exempting 2. If contributory negligence. mitigating 3. Immediate protest by the carrier; otherwise, carrier may be in estoppel (Civil Code, Art. 1741) ///

24/ What are the Defenses Available to the Common Carrier in carriage of goods? (FESCO)

24/// d) The character of the goods or defects in the packing or in the containers. Conditions to Avail of Defense: 1. Exercise of due diligence to forestall or prevent loss 2. Immediate protest by the carrier if the problem with the goods or the packing or containers is visible: otherwise, carrier may be in estoppel (Civil Code, Art. 1742) e) Order or act of competent authority. Conditions to Avail of Defense: the authority must have acted within the scope of his powers when issuing the order. (Ganzon v. CA, 1988) f) Exercise of extraordinary diligence.

24/ What are the void stipulations in a contract of carriage of goods? (R-LORD-TD)

24/// e) That the common carrier shall exercise a Degree of diligence less than that of a good father of a family or a man of ordinary prudence in vigilance over the goods transported: f) That the common carrier 's liability for acts committed by Thieves, or of robbers who do not act with grave or irresistible threat. violence or force, is dispensed with or diminished: g) That the common carrier is not responsible for the loss, destruction or deterioration of goods on account of the effective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. (Civil Code, Art. 1745)

24/ What are the void stipulations in a contract of carriage of goods? (R-LORD-TD)

24/a) That the goods are transported at the Risk of the owner or shipper; b) That the common carrier will not be Liable for any loss, destruction, or deterioration of the goods; c) That the common carrier need not observe any diligence in the custody of the goods; d) That the common carrier shall not be Responsible for the acts or omissions of its employees; ///

25/ Distinguish the liability of an airline for Hand-Carried Baggage and Checked-in Baggage.

25/ HAND-CARRIED *Applicable Rule: Civil Code, Arts. 1998-2000-2003 *Legal Nature of Baggage: Necessary deposits *Diligence by Common Carrier: Diligence of a depositary (ordinary diligence) CHECK-IN *Applicable Rule: Civil Code, Arts. 1733-1753 *Legal Nature of Baggage: Goods *Diligence by Common Carrier: Extraordinary diligence

25/ What is the Liability of Common Carriers in the diligence in the safety of passengers?

25/ In culpa contractual, the common carrier is liable for deaths or injuries to passengers when: a) Employees act negligently or other willful acts of the same; b) Negligence/willful acts of passengers when the employees could have prevented the same through the exercise of due diligence. (Light Rail Transit Authority v, Natividad Brunty, GR. No. 169891, 2006)

25/ What is the effect of failure to file a claim to the right to sue for damages against the carrier?

25/ None. The failure to file a claim against a carrying vessel does not affect the right to sue it for damages. (Asian Terminals, Inc. v. Phi/am insurance Company, Inc.. GR. No. 181163 - 181262, 2013)

25/ Who is liable in a case of multi—carriers?

25When there are several carriers who successively transport goods, or there is a single "through bill of lading" issued by one carrier and honored by other carriers, the following are the rules: 1. Last carrier assumes the obligation of the previous carriers 2. But last carrier, if not directly responsible may proceed against previous carriers. 3. Shipper/consignee has cause of action against carrier who executed the contract or other carriers who received goods without reservation. 4. Carriers who made a reservation may still be liable for their own acts. Note: Carriers with reservations are NOT relieved of responsibilities for their own acts.

26/ In proving diligence in the safety of passengers, what are the defenses available to a common carrier? (FENEM-G)

26/ Defenses that a common carrier may invoke to exempt or mitigate liability: a) Fortuitous event b) Exercise 01 Extraordinary diligence by a common carrier; (Civil Code, Art. 1735) c) Negligent act of the passenger the proximate cause of death and injury, (Civil Code, Alt. 1761) d) Employees could not have prevented by ordinary diligence the willful act or negligence of other passengers or strangers which caused the injury or death: (Civil Code, Art. 1763) e) Liability is Mitigated by the contributory negligence of a passenger or his failure to observe ordinary diligence to avoid injury; (Civil Code, Art. 1761) f) Stipulation to limit liability is valid in gratuitous carriage if no willful act or gross negligence by a common carrier. (Civil Code, Art. 1758)

26/ When does the Contract of Carriage of Passengers start?

26/ From the moment the person presents himself in the proper place and proper manner in be transported, with a bona fide- intention use the facilities of the carrier. (LRTA v. Natividad. GR No. 145804, 2003)

26/ What is the Effect of Contributory Negligence of the Passenger?

26/ It reduces the amount of damages that can be recovered but it is NOT a bar. (Civil Code. Art. 1762)

26/ What is the Liability of a Common Carrier in Injuries Caused by Employees?

26/ They are liable for the death or injury to passengers through the negligence or willful acts of its employees, although the latter acted beyond the scope of his authority or in violation of common carrier's orders. (R Transport Corp. v. Pants, GR. No. 162104, 2009)

26/ When does Contract of Carriage of Passengers end?

26/ When the passenger has reached his destination and has safely alighted from the carrier or has had a reasonable opportunity to leave the carrier's premises. (Aboitiz Shipping v. CA, GR. No. 84458, 1989) The Supreme Court has ruled that a reasonable time to leave and pick up baggage is an hour after arrival (ld.)

26/ What is the Doctrine of "Last Clear Chance"?

26/ Where both parties are negligent but the negligence of one is--appreciably later-than the other, or where it is impossible to determine whose fault or negligence caused the loss. the one who had the last clear chance to avoid the loss but failed is chargeable with the loss. (Phil. National Railways v. Bruniy, GR. No. 169891, 2006) It is applicable in a suit between owners and drivers of colliding vehicles and does not arise in contractual obligations. (Tiu v. Arriesgado, GR. No. 138060, 2004)

26/ May discourteous conduct on the part of a carrier's employees give a passenger a cause of action for damages against the carrier?

26/ Yes. Passengers have the right to be treated with kindness and respect by the common carrier's employees. They are entitled to be protected against personal misconduct, injurious language. indignities and abuses from such employees. (NorthwestAir/ines v. Catapang. GR. No. 174364. 2009)

27/ When should the goods covered by a bill of lading be delivered?

27/ . If there is stipulation as to the period — that period should be followed. Otherwise, liability will arise for the carrier. . If there is no stipulation — delivery must be made within a reasonable time which depends on the expected date of arrival or on the nature of the goods. (Code of Commerce, Art. 358)

27/ Requisites of Maritime or Merchant Vessel?

27/ (NLS) a) got an accessory to another vessel; b) Must be Licensed to engage in the transportation of passengers and/or freight; c) By Sea (not merely in rivers, inlets, lakes, coves or bays) whether in foreign or in coastwise trade.

27/ Can a carrier change the route taken by the vessel?

27/ General Rule: If there is an agreement. The carrier cannot change the route. (Code of Commerce, Alt. 359) Exception: When there is force majeure. In this case, the shipper must pay the carriage any increase in transportation charges, if the carrier changes route without just cause, the carrier shalt be liable for all damages which may be suffered by the goods. Note: It no route was agreed upon, carrier must select the shortest, least expensive and practically passable route.

27/ What is a bill of lading?

27/ It is a written acknowledgment of receipt of goods, their quantity and condition, and an agreement to transport and deliver them to a specific place to a person named or his order. It is signed by the captain and shipper, and furnished to the consignee. (Unsworth Transport international v. CA. GR. No. 166250. 2010)

27/ Corporation A's shipment was covered by a bill of lading naming X as the consignee and indicating that payment was on 3 Freight Collect basis (X is liable for freight and other charges). When payment was demanded, x refused, contending that the bill of lading was prepared without his consent. Is X liable?

27/ NO. X has consistently denied that it authorized the shipment or that it was an agent of Corporation A. A consignee can be bound by the stipulations of the bill of lading when a) there is a relation of agency between the shipper/consignor and the consignee or b) when the consignee demands fulfillment of the stipulation of the bill of lading drawn up in its favor. (MOF Company v. Shin Yang Brokerage, GR. No. 172822, December 18, 2009)

27/ What is the Liability of a Common Carrier As to Injuries Caused by Other Passengers?

27/ They are only liable if its employees could have prevented by ordinary diligence the willful act or negligence of other passengers or strangers. (Civil Code, Art. 1759) Note: Simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggage's, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board can be done. Thus, in Gacal v. Philippine Air Lines, Inc., a common carrier can be liable for failing to prevent a hijacking by frisking passengers and inspecting their baggage's. (Fortune Express v. CA, GR. No. 119756. 1999)

27/ What is the three-fold character of the bill of lading? (ROS)

27/ a) It is a Receipt for the goods shipped b) It is a Contract between the parties; and c) It is a Symbolic representation of the goods, i.e., it is a document of title. (Saludo v. CA, GR. No. 95536. 1992)

28/ What is covered by the civil liability of the ship owner and/or ship agent?

28/ a) Civil liability for acts of the captain (Code of Commerce, Art. 586) b) Civil liability for contracts entered into by the captain to repair, equip and provision the vessel: provided, the latter were used for the benefit of the vessel (Code of Commerce, Art. 586) c) Civil liability for indemnities in favor of 3'"persons arising from the conduct of the captain in the care of goods and/or safety of passengers (Code of Commerce, Art. 587) d) Damages in case of collision by reason of fault, negligence or lack of skill of the captain or crew. (Code of Commerce, Art. 826) NOTE: The ship owner and ship agent are not liable for obligations contracted by the captain if the latter exceeded his powers unless the amount was used to benefit the vessel. (Code of Commerce, Art. 586)

28/ What is a charter party?

28/ A charter party is a contract by which an entire ship or some principal part thereof is leased by the ship owner to another person for a specified time or voyage. (Caltex v Sulpicio Lines. GR. No. 131166. 1999)

28/ Who is a ship owner? Who is a ship agent?

28/ Ship owner — he has possession, control and management of the vessel and the consequent right to direct her navigation and receive the freight earned and paid while his possession continues. (National Development Company v. Court of Appeals. GR. No. L-49407— 49469, 1988) Ship agent — he is in charge of the provisioning and representing the vessel in the port in which it may be found. He is solidarily liable with the ship-owner for loss and damage subject to his right to claim reimbursement from the ship-owner. (Id.)

28/ What is the limited liability rule?

28/ The liability of the ship owner is limited to the value of the vessel, its equipment and freight. Thus, if the vessel sinks, generally the liability of the owner is extinguished, although he may have other properties. The rule is "no vessel, no liability." (Code of Commerce, Art 587; Govt. Insular Maritime Co. vs. The Insular Maritime, GR. No. L-21495, 1924) Exceptions: a) Vessel is not abandoned (when the ship owner does acts inconsistent with abandonment e.g. salvage) b) Ship owner agent/agent allows his vessel to embark in an unseaworthy condition. c) Claims under workmen's compensation ///

28/ What are the different types of charter party?(BTV)

28/ a) A Bareboat charter, in which the ship owner turns over the possession of the vessel to the charterer, who undertakes to procure a crew, materials, supplies, and fuel for the vessel during the term of the charter; b) A Time charter, which is a contract vessel use of a vessel for a specified period of time; c) A Voyage charter, which is a contract for the carriage of goods from one or more ports of loading to one or more ports of loading, on one or a series of voyages. (Litonjua Shipping Co., Inc. v. National Seamen's Board, GR. No.51910, 1989)

28/ What is the limited liability rule?

28/// d) Injury/Damage due to ship owner's fault e) Vessel is lnsured f) In case the voyage is not maritime but only in giver or gulf g) In case of the expenses for Equipping, repairing or provisioning the vessel before the loss of the ship. (Chua Hek Yong v IAC, GR No. 74811, 1988) NOTE: The limited liability rule also applies for claims due to death or injuries to passengers, aside from claims for goods. (Aboitiz Shipping Corporation v. General Accident Fire, GR No.100446. 1993)

29/ What is included in average?

29/ a) All extraordinary or accidental expenses which may be incurred during the voyage for the preservation of the vessel or cargo or both b) All damages or deterioration which the vessel may suffer from the time it puts to sea at the port of departure until it casts anchor at the port of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unleaded in the port of their consignment. (Code of Commerce, Sec. 806)

29/ What are the requisites for an expense to be considered General Average? (CAPS')

29/ a) Common danger present b) Arising from Accidents of sea, disposition of authority, or faults of men c) Peril imminent and ascertained d) Part of vessel or cargo deliberately sacrificed e) Intended to Save vessel and cargo or both f) Successful Saving of vessel or cargo g) Proper formalities and legal Steps (A. Magsaysay. Inc. vs. Agan, GR. No. L-6393, Jan, 1955)

29/ When is deviation proper? (OCGz)

29/ a) If caused by circumstances Outside the control of the master or ship owner. b) If done to Comply with a warranty or to avoid a peril, whether or not the peril is insured against: c) If made in good faith, and upon reasonable ground of belief in its necessity to avoid a peril; d) It made in good faith, for the purpose of saving human life or relieving another distressed vessel. ([0, Sec. 116)

29/ What is a loan on bottomry? How is it different from the loan on respondentia?

29/ Loan on Bottomry is an ordinary loan secured by the vessel while a Loan on Respondentia is an ordinary loan secured by the cargo. (Code of Commerce, Art. 719)

29/ Differentiate Simple and General Average.

29/ PARTICULAR/SIMPLE *DEFINITION -Damages or expenses caused to the vessel or cargo that did not inure to the common benefit, and borne by respective, and borne by respective owners (809) *LIABILITY -The owner of the goods which gave rise to the expense or suffered the damage shall bear this average. *NUMBER OF INTEREST INVOLVED -One interest *SHARE IN THE DAMGE OR EXPENSES -100% share *RIGHT TO RECOVER -No reimbursement ///

29/ What ate the formalities needed to incur gross average? (AREM-24)

29/ a) There must be an Assembly of the sailing mate and other officers with the captain including those with interests in the cargo. b) There must be a Resolution of the captain. c) The resolution shall be Entered in the log book, with the reasons and motives and the votes for and against the resolution. d) The Minutes shall be signed by the parties. e) Within a hours upon arrival at the first port the captain shall deliver one copy of these minutes to the maritime judicial authority. (Code of Commerce, Art. 813-814)

29/ Differentiate Simple and General Average.

29/// *DEFINITION -Damages or expenses deliberately caused in order to save the vessel, its cargo, or both from real and known risk. *LIABILITY -All the persons having an interest in the vessel and the cargo herein at the time of the occurrence of the average shall contribute to satisfy this average. -The insurers and lenders on bottomry and respondentia shall likewise contribute *NUMBER OF INTEREST INVOLVED -Several interests *SHARE IN THE DAMAGE OR EXPENSES -In proportion to the value of the owner's property saved. *RIGHT TO RECOVER -There may be reimbursement

3/ What are the rights of the entruster?

3/ 1. Entitled to the proceeds from the sale of goods, documents or instruments. 2. Entitled to the return of the goods, etc. In case of non sale. 3. To enforce all other rights conferred to him undre TRL. 4. To cancel the trust, take possession of the goods or instruments or of proceeds realized therefrom upon the default of the entrustee. 5. To sell the goods in a public or private sale upon notice to the entrustee in case of default. 6. May purchase at the intended public sale (TRL Sec. 7) 7. Extent of security interest: - As against innocent purchaser for value; not preferred (TRL, Sec. 11) -As against creditors of the entrustee: preferred (TRL, sec. 12)

3/ Bank XYZ granted credit accommodations to X. Bank XYZ filed a case against X due to his failure to pay his obligations despite receipt of a written demand. X alleged that Bank XYZ's claim is unsubstantiated. Bank XYZ on the other hand submits that it has presented sufficient evidence to support is pecuniary claim. It claims that the Statement of Account properly reflected the respondents's obligation. Is the Statement of Accounts sent to X sufficient evidence of respondent's obligation?

3/ Corporations extending credit accommodations must adduce sufficient evidence such as credit history and loan transactions to be able to show the court, a party not privy to the transactions, its claim. While XYZ's claim may be well-founded, it is not enough as to allow judgment in its favor on the basis of extant evidence. It must prove the validity of its claim; this it may do by amending its Complaint and adducing additional evidence of respondent's credit history and proving the loan transactions between them. Credit card arrangements are simple loan requirements between the card issuer and the card holder. (Bankard v. Alarte, 2017)

3/ What is a trust receipt transaction?

3/ It is a transaction by and between and the entruster and the entrustee, where the entruster, who owns and holds absolute title to or security interest over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster and the trust receipt (Trust Receipts Law, P.D No. 115, Sec 4) The nature of a trust receipt transaction is inconsistent with that of an assignment of credit as the latter necessarily involves an absolute conveyance of title (BSP v. Libo-ob, 2015)

30/ State the rules on notice of claim and prescriptive period in overland transportation of goods and international carriage of goods by sea.

30/ a) Inter-island — in case the goods arrived in damaged condition the claim should be filed: (i) Immediately after delivery - if the damage is apparent; or (ii) Within 24 hours from receipt of merchandise — if the damage is not apparent. (Code of Commerce. Art. 366) (iii) Claim is a condition precedent to right of action (suit). (iv) Suit must be filed 1 year from delivery of goods or denial of claim. ///

30/ What are the rules on collision of vessels?

30/ Collision refer to the contact of two moving vessels. If one vessel is moving and the other is stationary,the contact is known as allision. (Far Eastern Shipping v Ca, GR. No. 130068, 1998) The vessel at fault shall indemnify the damages sustained or losses incurred. (Code of Commerce. Art. 826) If both vessels are at fault, each shall suffer its own damages and both shall be solidarily liable for losses or damages to the cargoes. (Code of Commerce, Art. 827-828)

30/What is a Maritime Protest?

30/ It is a written statement made under oath by the captain of a vessel after the occurrence of an accident or disaster in which the vessel or cargo is lost or damaged, with respect to the circumstances attending such occurrence, for the purpose of recovering losses and damages. (Code of Commerce. Art. 835) Note: It is a condition precedent or prerequisite to recovery of damages arising from collisions and other maritime accidents (Ids)

30/ What are the effects of an improper deviation?

30/ It releases the insurer of a marine vessel from liability. (IC. Sec. 126)

30/ What is the Doctrine of Inscrutable Fault?

30/ When a collision is imminent through no fault of the vessel and. due to the confusion and excitement of the situation, something is done which contributed to the collision or there is an omission to do something that could have avoided the collision. the act or omission is a valid defense against liability since it was done during an extreme situation. (Code of Commerce, Art. 828)

30/ State the rules on notice of claim and prescriptive period in overland transportation of goods and international carriage of goods by sea.

30/// b) Overseas — where goods arrived in a damaged condition from a foreign port to a Philippine port of entry. the claim should be filed: (i) Upon the discharge of goods — If the damage is apparent: or (ii) Within 3 days from delivery — if the damage is not apparent. (COGSA, Sec. 3(6)) (iii) The notice or writing need not be given if the state of the goods at the time of their receipt has been the subject of Joint Survey Inspection. (COGSA, Sec. 3161) (iv) Under COGSA. the filing of a notice of claim is NOT a condition precedent to filing a suit (UCPB v. Aboitiz Shipping GR. No. 168433. 2009) Suit: Must be filed 1 year from delivery of goods or denial of claim.

31/ Where should an action for damages under the Warsaw Convention be brought?

31/ An action for damages must be brought, at the option of the plaintiff, before the Court: (DPCDR) a) Domicile of the carrier; b) Principal place of business of carrier: c) Place where the contract has been made; d) Place of destination (Warsaw Convention. art.28) e) Residence of plaintiff (added by Montreal Convention)

31/ What law shall be applicable in a Contract of Carriage of Cargo?

31/ Art. 1753 provides that "the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration." (Philippine Charter Insurance Corp. v. Neptune Orient Lines/Overseas Agency Services Inc. GR. No. 145044. 2008) NOTE: The "ultimate destination" and not "an agreed stopping place" determines the laws of the country applicable in a suit against international carrier. (Santos III v. Northwest Orient Airlines GR. No. 101538, 1992) Philippine laws will still apply even when the collision actually occurred in foreign waters, so long as the port of destination was in the Philippines. (National Development Company vs. Court of Appeals No. L 49407 - 49469., 1988)

31/ Is Air Transportation covered by law?

31/ Art. 349 of the Code of Commerce only mentions land and sea transport. But jurisprudence provides that it also covers air transportation. (Mendoza v. PAL, No. L-3678, 1952)

31/ Who is liable when carriage is to be performed by several successive air carriers?

31/ Carriage to be performed by several successive air carriers is deemed to be one undivided carriage if it has been regarded by the parties as a single operation, whether it had been agreed upon under a single contract or a series of contracts and it does not lose its international character. The carrier issuing the passenger's ticket is considered the principal patty and the other carriers merely as subcontractors or agents. Hence, the principal may be liable for damages even when breach of contract had occurred not on its Own flight.

31/ When does the contract of carriage arise in an Airline Business?

31/ When an airline issues a ticket undertaking to carry a passenger on a particular flight on a specific date, a contract of carriage arises. (Singapore Airlines Ltd. v. Fernandez, GR. No. 142305, 2003)

31/ When may a salvage claim or compensation be awarded to the salvof? (M-SSS)

31/ a) There must be a Marine peril: b) The vessel is §shipwrecked beyond the control of the crew or shall have been abandoned; c) The Service of picking up and conveying the vessel or the cargo to a safe place is voluntarily rendered; and d) The service must have been Successful in whole or in part or that the service rendered contributed to such success. (Sec. 1, Salvage Law: Barrios vs. Go Thong, 7 SCRA 535)

32/ What is the notice requirement under the Warsaw Convention?

32/ - Damage to baggage within 3 days from receipt -Damage to goods: within 7 days from receipt -Delay: within 21 days from receipt Note: The notice requirement constitutes a condition precedent. Failure to comply with a condition precedent constitutes failure to state a cause of action as a ground for a motion to dismiss. (Federal Express Corp. v. American Home Insurance Co., GR No. 150094, 2004)

32/ P took R's flight from London, UK to Rome, Italy. P allegedly requested H. a flight attendant, to assist her in placing her hand- carried luggage in the overhead bin. H allegedly refused and even sarcastically remarked "if I were to help all 300 passengers in this flight. i would have a broken back!" K, another flight attendant, singled P out from among all the passengers in business class to lecture on plane safety. K made her to other passengers to be ignorant, uneducated. Stupid and in need of lecturing on safety rules and regulations. P assured she knew being a frequent traveler. Upon arrival, P complained to R's ground manager and demanded an apology but the latter declared that H and K were "only doing their job." P filed a complaint for damages in the Philippine courts. R filed a Motion to Dismiss on the ground of lack of jurisdiction over the case and person, only London and Italy had jurisdiction over the complaint pursuant to Article 28(1) of the Warsaw Convention. W/N the Philippine courts have jurisdiction to entertain the suit?

32/ No. Jurisdiction under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before - 1. the court where the carrier is domiciled; 2. the court where the carrier has its principal place of business; 3 the court where the carrier has an establishment by which the contract has been made; or 4. the court of the place of destination. Only London (R's domicile and place of business) and Italy (where ticket was bought or contract executed and destination). (Edna Diago Lhuiller M British Airways, GR. No. 171092, March 15, 2010)

32/ When must the claim for damages be brought?

32/ The right to damages shall be extinguished if an action is not brought within 2 years counted from date of arrival at the place of destination or from date on which the aircraft ought to have arrived or from date on which the transportation stopped. (Warsaw, A11. 29) NOTE: The 2—year period does not apply where the plaintiff was forestalled from filing an action because of the defendant airline's delaying tactics (United Airlines v. Uy. GR. No. 127768, 1999)

32/ When are limitations on liability not applicable? (WDWW)

32/ a) willful misconduct b) Default amounting to willful misconduct c) Accepting passengers without ticket d) Accepting goods without airway bill or baggage without baggage check.

33/ What are the three tests in determining the nationality of the corporation?

33/ (1) Place of Incorporation Test — determined by the country under whose laws it has been organized and registered. This IS the principal doctrine on the test of the nationality of a corporate identity in the Philippines. (CC, Sec. 123) (2) Control Test -determined by the nationality of the controlling stockholders, on the theory that they would be able to elect the majority of the Board of Directors. (Heirs of Wilson Gamboa v. Teves, GR No. 176579, 2012) ///

33/ What is the definition of a Corporation?

33/ It is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. (Corporation Code {"CC']. Sec. 2)

33/ Can Congress enact a law creating a private corporation with a special charter?

33/ No. such legislation would be unconstitutional since private corporations may exist only under a general law. Since private corporations cannot have a special charter. it follows that Congress can create corporations with special charters only if such corporations are government-owned or controlled. (Feliciano vs. Commission on Audit, GR. No. 147402, 2004)

33/ What are the three tests in determining the nationality of the corporation?

33/// General Rule: The Control Test cannot overcome the Place of Incorporation Test. Exception: A corporation organized abroad and registered as doing business in the Philippines under the Corporation Code, 100% of the capital outstanding stock and entitled to vote is wholly owned by Filipinos. (FIA, Sec. 3(a)) For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals. (Roy III v. Herbosa. Et al. GR. No. 207246, 2016) (3) Grandfather Rule - Where shareholders are present. the percentage of the Filipino equity in corporations is computed by attributing the nationality of the second or subsequent tier of ownership to determine the nationality of the corporate shareholder.

33/ What are the three tests in determining the nationality of the corporation?

33/// This test applies in the following instances: (1) War - (Filipinas Compañia de Seguros v. Christern, GR. No. 2294. 1951) (2) Exploitation of national resources - only a Filipino corporation. where at least 60% of its capital stock is owned by Filipinos, may exploit national resources; (Constitution, Article XII, Sec. 2) (3) Public Utilities — only a Filipino corporation, where at least 60% of its capital stock is owned by Filipinos, may be granted a franchise or certificate to operate public utilities; (Constitution, Article XII, Sec. 11 ) Advertising Industry - only Filipino citizens or corporations or associations at least 70% of the capital of which is owned by such citizens shall be allowed to engage in the advertising agency (Constitution. Article XVI, Sec. 11) Investment purposes — a Philippine national or corporation is one whereby at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines. (Foreign Investments Act of 1991) ///

33/ What are the attributes of a corporation? (AOS-P)

33/a) Artificial being with separate and distinct personality; (Vasquez v Borja. GR. No. L- 48930, 1944) b) Created by Operation of law; (CC. Sec.2) c) Has the right of Succession; (Id.) d) Has the flowers and attributes conferred by law or incident to its existence. (Id.)

34/ What does "capital" mean?

34/ Capital refers only to shares of stock entitled to vote in the election of directors, and thus only to common shares. and not to the total outstanding capital stock (common and non-voting preferred shares). (Gamboa v. Teves, GR. No. 176579, 201 1) Capital shall be applied to BOTH (a) the total number of shares entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not entitled to vote. (Roy HI v. Herbosa, GR. No. 207246, November 22, 2016)

34/ May a corporation be held liable for tort? Liable for a crime?

34/ For Tort: The corporation can be held civilly liable when the act was committed by the officer or agent under the express authority of the Board of Directors or Stockholders. (PNB v. CA, GR. No. L-27155. 1978) For Crime: General Rule: Corporations cannot commit felonies under the RFC for it is incapable of the requisite intent to commit these crimes. It also cannot commit crimes that are punishable under Special laws because crimes are personal in nature requiring personal performance of overt acts. Thus, a corporation can neither be arrested nor imprisoned. ///

34/ What is the "doctrine "limited liability;

34/ Stockholders in a stock corporation are personally liable for corporate debts and liabilities only to the extent of what they have invested (paid- up capital) and what they have promised to invest in the corporation (unpaid subscriptions). (San Juan Structural and Steel Fabricators, Inc. v. CA, GR. No. 1294591998)

34/ What is the prevailing rule in determining the nationality of a corporation—the control test or the grandfather rule?

34/ The Control test is still the prevailing mode of determining whether or not a corporation is a Filipino corporation. But when there is doubt based on attendant facts and circumstances, in the 6040 Filipino equity ownership in the corporation, then it may apply the grandfather rule. (Narra Nickel Mining and Development Corp. v. Redmont Consolidated Mines Corp, GR. No. 195580. 2014)

34/ Application of "doctrine of separate juridical personality": If A Inc. buys the share of B Inc.. which later becomes insolvent, will A Inc. be answerable for the debts of 8 Inc.?

34/ Where the corporation buys all the shares of another corporation, this will not operate to dissolve the bought corporation and the two corporations still maintain their separate corporate entities. Consequently, a corporation which buys all the shares of another corporation which becomes insolvent will not be liable for the latter's debts. {PNB v. Hydro Resources Contractors Corp, GR No. 167530, 2013)

34/ May a corporation be held liable for tort? Liable for a crime?

34/// Exceptions: If a crime is committed by a corporation pursuant to a statute that imposes criminal liability on a corporation, the directors, officers, employees or other officers thereof responsible for the offense shall be charged and penalized for the crime, precisely because of the nature of the crime and the penalty therefore. However, corporation may be charged and prosecuted for a crime if the imposable penalty is fine (Ching v. Secretary of Justice, GR. No.164317, 2006).

35/ What are the instances where the doctrine of piercing the veil of corporate fiction may be applied?

35/ a) Fraud cases b) Alter ego cases c) Equity cases (PNB v. Hydro Resources Contractors Corp, GR. No. 167530, 167561, 167603, 2013)

35/ May corporations ever have a cause of actions for moral damages?

35/ General rule: A corporation, being an artificial person and having existence only in legal contemplation cannot recover moral damages as it cannot suffer physical suffering and mental anguish (Prime White Cement v IAC, GR. No. L- 68555, 1993). Exception: A corporation with a good reputation, if besmirched, is allowed to recover moral damages upon proof of existence of factual basis of damage (actual injury) and its causal relation (Crystal v. BPI, GR. No. 172428, 2008).

35/ is mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stocks of a corporation sufficient reason for disregarding the fiction of separate corporate personalities and do alter ego piercing?

35/ It is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities. Moreover, to disregard the separate juridical personality of a corporation, the wrongdoing cannot be presumed, but must be clearly and convincingly established. (Mayor v. Tiu, GR. No. 203770, 2016) (DEL CASTILLO) Piercing the veil of corporate fiction is allowed, and responsible persons may be impleaded, and be held solidarily liable even after final judgment and on execution, provided that such persons deliberately used the corporate vehicle to unjustly evade the judgment obligation, or resorted to fraud, bad faith, or malice in evading their obligation. (Dutch Movers v. Lequin, et al., GR. No. 210032, Apn'125, 2017)

35/ Are violations of Sections 31 and 34 of the Corporation Code, which discusses disloyalty of directors, subject to criminal liability under Section 144 of the Corp. Code on violations applicable to Sec. 31 and such that criminal liability attaches to the violations of Sections 31 and 34 same code?

35/ No. Considering the object and policy of the Corporation Code to encourage the use of the corporate entity as a vehicle for economic growth, we cannot espouse a strict construction of Sections 31 and 34 as penal offenses in relation to Sec. 144 in the absence of unambiguous statutory language and the legislative intent to that effect. Had the Legislature intended to attach penal sanctions to said sections, it could have expressly stated such intent in the same manner it did for Section 74 of the same Code that the violation thereof is likewise considered an offense under Section 144. (lent v. TuI/et, Inc.. GR. No. 189158, 2016)

35/ Will an officer who signs a contract on behalf of a corporation be liable for the obligations of the corporation under such contract?

35/ The mere execution of a contract by an officer acting on behalf of the corporation is not sufficient basis for the veil of corporate fiction to be pierced in order to hold the officer liable. (Saverio v. Puyat, GR. No. 186433, 2013)

36/ When does a corporation acquire corporate existence?

36/ From the date the SEC issues a Certificate of incorporation under its official seal. (CC, Sec. 19)

36/ Who is a promoter?

36/ He/she is a person who, acting alone or with others, takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefor. {Securities Regulation Code, Sec. 3.10)

36/ Distinguish Incorporators from Corporators.

36/ INCORPORATORS -Those mentioned in the articles of incorporation as originally forming and composing the corporation -Always considered an incorporator even if he/she is no longer a stockholder. -Must be of legal age and must have legal capacity to enter into a contract. -There can only be 5 to 15 incorporators. ///

36/ FICCPI was registered on Nov. 24, 1951 with the SEC. Without applying for an extension of its corporation term, FICCPI's term expired on Nob. 24, 2001. On Jan. 20, 2005, Mr. M reserved the corporate name FICCPI with SEC. With that, the defunct FICCPI (now known as ICCPI) opposed Mr. M's name reservation. Can Mr. M use FICCPI given that the defunct FICCPI failed to extend its term?

36/ Yes. When the term of existence of the defunct FICCPI expired on November 24, 2001, its corporate name could not be used by other corporations within three years from that date, or until November 24, 2004. FICCPI reserved the name "Filipino Indian Chamber of Commerce in the Philippines, Inc." on January 20, 2005, or beyond the three-year period. Thus, the SEC was correct when it allowed Mr. 7M to use the reserved corporate name of FICCPI. (Indian Chamber of Commerce Phils, Inc. v. Filipino Indian Chamber of Commerce in the Philippines, inc, GR. No. 184008, 2016)

36/ What must be established in alter-ego cases?(CUP)

36/ a) Control by the stockholders—not mere stock control but complete domination of finances, policy and business practice in relation to the transaction assailed; b) Use of such control to commit fraud or wrong; c) Injury is proximately caused by the control and breach of duty. (Philippine National Bank v. Hydro Resources Contractors Corporation, GR. No. 16760, 2013)

36/ When may the SEC deny a proposed corporate name? (IPC)

36/ a) Names which are identical, deceptively or confusingly similar to that of any existing corporation including internationally known foreign corporation through not used in the Philippines; b) Names already protected by law; c) Names which are contrary to law, morals or public policy. (CC. Sec 18) A corporation has the power to change its name by following the procedure laid down by law. However, such change would not result in its dissolution. (Philippine First Insurance Co. v. Hartigan. GR. No. L-26370, 1970)

36/ Distinguish Incorporators from Corporators.

36/// CORPORATORS -Those that compose a corporation, whether as stockholder (Stock Corporation) or member (Non-stock Corporation) -A corporator ceases to be such if he/she is no longer a stockholder or member. -A person may be a corporator and act through the guardian -No restriction as to the number of corporators.

37/ Under what circumstances may a corporation declare dividends?

37/ - A corporation may only declare dividends from unrestricted retained earnings appearing on its books. -Dividends must be paid in amounts proportional to all stockholders on the basis of outstanding stock held by them. -Cash or property dividends, can be declared from unrestricted retained earnings by a proper resolution of the Board of Directors. - Stock dividends, however, must be declared by a proper resolution of the Board of Directors from existing unrestricted retained earnings and ratified by stockholders representing at least 2/3 of the outstanding capital stock of the corporation, obtained in a meeting duly called for the purpose. (CC, Sec. 43)

37/ What are the minimum capital stock and subscription requirements?

37/ At the time of incorporation: a) At least 25% of the Authorized Capital Stock as stated in Articles of Incorporation must be subscribed b) At least 25% of the total subscription must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the board of directors. Provided, however, that in no case shall the paid-up capital be less than five Thousand (135,000.00) pesos. (CC, Sec. 13)

37/ For how long may a corporation exist?

37/ General Rule: Term specified in the AOI. Except for some limitations. -A corporation can exist for a period not more than 50 years from date of incorporation -It can be extended for periods not exceeding 50 years per extension unless sooner dissolved or extended. -Extension cannot be made earlier than 5 years prior to the expiration date. (CC, Sec. 11)

37/ May cash and stock dividends be sourced from capital stock?

37/ No. All cash and stock dividends are always paid out of the unrestricted retained earnings (also called Surplus profit) of the corporation. If the corporation has no unrestricted retained earnings, the dividends would have to be sourced from the capital stock. This is illegal; It violates the Trust Fund Doctrine, which provides that the capital stock of the corporation is a trust fund to be kept intact during the life of the corporation for the benefit of the creditors of the corporation. (CIR v. CA, GR. No. 108576, 1999)

37/ May a stock corporation purchase or acquire its own shares? (FDA)

37/ Yes. For legitimate corporate purposes including but not limited to: a) Eliminating Fractional shares (arising out of stock dividend declaration); b) Purchasing Delinquent shares arising from delinquency of shares proceedings; c) Paying dissenting stockholders under Appraisal right Corporation must have unrestricted retained earnings to cover stocks purchased or acquired (CC, Sec. 41)

37/ Under the same facts stated above, is ICCPI confusingly similar to FICCPI?

37/ Yes. ICCPI's corporate name is deceptively or confusingly similar to that of FICCPI. It is settled that to determine the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person, using ordinary care and discrimination. Proof of actual confusion need not be shown. It suffices that confusion is probably or likely to occur. (Id.)

38/ What is the Doctrine of Apparent Authority?

38/ It a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public possessing the power to so do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such Agent, be estopped from denying the agent's authority. (Francisco v. GSIS, GR. No. b18287,1963)

38/ When can a corporation legally choose not to declare dividends? (ELN)

38/ Stock corporations are prohibited from retaining surplus profits in excess of 100% percent of their paid-in capital stock. except: a) When justified by definite corporate Expansion projects or programs approved by the board of directors; b} When the corporation is prohibited under any Loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; c) When it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is need for special reserve for probable contingencies. (CC, Sec. 43)

38/ What is required to ratify an ultra vires act?

38/ The corporation may ratify the unauthorized acts of its corporate officer. The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ratification can be made either expressly or impliedly like silence or acquiescence and acceptance of benefits (Yasuma v. Heirs of Cecilio De Villa, GR No. 150350, 2006). Illegal acts cannot be ratified.

38/ What Is the Trust Fund Doctrine?

38/ The subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the creditors have the right to look up to satisfy their credits. Corporations may not dissipate this, and the creditors may sue the stockholders directly for their unpaid subscriptions. (Phil. Trust Co. v. Rivera, GR. No. 18058,1923)

38/ What is a corporation by estoppel?

38/ There is a corporation by estoppel when persons assume to act as a corporation knowing it to be without authority to do so. Such as when an ostensible corporation represents itself to the public to be a corporation in its editorial box despite it not being incorporated. (Macasaet v. Co. Jr. GR. No. 156759, 2013)

38/ What are ultra vires acts?

38/ These are acts done by a corporation outside of those conferred by the corporation's By-laws. AOI and those that are not implied or necessary or incidental to the exercise of the powers so conferred. (CC, Sec. 45)

38/ Can an officer of a corporation be a third person In contract with the said corporation and thus, be allowed to invoke Doctrine of Apparent Authority?

38/ Yes. While it is true that the doctrine cannot be invoked by one who is not a third party, an officer of a corporation can actually be a third person in contract with the corporation. (People's Aircargo v. Court of Appeals, GR. No. 117847, 1998)

39/ What is the scope of the Trust Fund Doctrine?

39/ Generally, it encompasses the subscribed capital stock of the corporation. When the corporation is insolvent, it encompasses not only the capital stock but also their properties and assets generally regarded in equity as a trust fund for the payment of the corporate debts (HaIIey v. Printwell, GR. No. 157549, 2011)

39/ What is the "Business Judgment Rule"?

39/ It provides that questions of policy or management are left solely to the honest decision of officers and directors of a corporation and the courts are without authority to substitute their judgment for the judgment of the board of directors: so long as it acts in good faith its orders are not reviewable by the courts or the SEC. (PSE v. CA, GR. No. 125469, 1997) The rule has two consequences: a) The resolution, contracts and transactions of the Board, cannot be overturned or set aside by the stockholders, members or the courts; and b) Directors and duly authorized officers cannot be held personally liable for acts or contracts done with the exercise of their business judgment. (VILLANUEVA, PHILIPPINE CORPORATE LAw316 (2013))

39/ What is the doctrine of "Centralized Management"?

39/ The corporate powers of corporations shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks. or where there is no stock, from among the members of the corporation (CC, Sec. 23). One of the rights of a stockholder is the right to participate in the control or management of the corporation. This is exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation. (Gamboa v. Teves. GR. No. 176579, 2011)

39/ What are the qualifications of the members of the board of directors?

39/ a) Every director must own at least 1 share of the capital stock of the corporation of which he is a director. Any director who ceases to be the owner of at least 1 share of the capital stock of the corporation of which he is a director shall cease to be a director. b) A majority of the directors must be residents of the Philippines. (CC, Sec. 23)

39/ What are the qualifications of the members of the board of trustees?

39/ a) Trustees of non-stock corporations must be members thereof. b) A majority of the directors or trustees must be residents of the Philippines. (CC, Sec. 23)

39/ What are the exceptions to the Business Judgment Rule? (EFC)

39/ a) When the Corporation Code Expressly provides otherwise; b) When the directors or officers acted with fraud, gross negligence or In bad faith; and c) When the directors or officers act against the corporation in Conflict of interest situation. (CC, Sec. 31)

4/ Does the repossession of the goods under the trust receipt suffice to satisfy the principal loan obligation.

4/ No. The entrustee remains liable for the deficiency after the proceeds of the sale have been applied to the payment of expenses and debt (Landi & Company, et al v. MBTC, 2004)

4/ What are the liabilities of the entruster in any sale or contract made by the entrustee/

4/ The entruster is not responsible as principal or as vendor under any sale or contract to sell made by the entrustee by virtue of such interest or having given the entrustee the liberty to sell or instruments under the terms of the trust receipt transaction.

4/ G applied for and was granted by PPI a regular credit line with trust receipts as collateral's. G submitted a list of their assets in support of her credit application for participation in the Special Credit Scheme (SCS) of PPI,. G signed a Trust Receipt/SCS, indicating the invoice number, quantity, value and names of the agricultural inputs she received "upon the trust" of PPI. When G failed to pay the obligation,PPI brought against G a complaint for the recovery of a sum of money. Did the two transaction documents signed by G express the intent of the parties to establish a creditor-debtor relationship between G and PPI?

4/ Yes. The contract established a debtor-creditor relationship; the trust receipt was just collateral for the credit line. G signed the application for credit facilities indicating that a trust receipt would serve as collateral for the credit line. G , as the dealer signed the list of their assets that they tendered to PPI" to support our credit application in connection with our participation to your Special Credit Scheme."G further signed the Trust Receipt/SCS deocuments defining her obligations under the agreement, and also the invoice pursuant to the agreement with PPI, indication her having received PPI products on various dates. The contract, its label notwithstanding, thus was not a within the purview of the Trust Receipts Law (Sps. Dela Cruz v. Planters Products, 2013).

4/ What acts or omissions of the entrustee would constitute estafa? (MAD)

4/ a. Misappropriation of the proceeds of the goods involved (Lee v. Rodil, 1989) b. Non-payment of the amount involved c. Failure to deliver proceeds of sale or to return the goods not sold (Ong v. CA, 2003)

40/ How are vacancies in the Board, other than by removal or expiration of term, filled up?

40/ - If the Board still constitutes a quorum — by a majority of the remaining members - If the Board does not constitute a quorum - filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only or the unexpired term of his predecessor in office. Any directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shalt be filled only by an election at a regular or at a special meeting of stockholders or members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting. (CC, Sec. 29)

40/ Who is a corporate officer?

40/ Corporate officers are those officers of the corporation who are given that character by (1 ) the Corporation Code [i.e., President. Corporate Secretary, or Corporate Treasurer] or (2) by the corporation's charter or by-laws. (Wesleyan University v. Maglaya, 811, GR. No. 212774, 2016) Under the second type, in order for an individual to be considered a corporate officer, as against an ordinary employee, two things must occur: (a) the reaction of a position under the corporation's charter or by-laws, and (b) the election is by the directors or stockholders. (Id.)

40/ is it valid to amend By-Laws in order to place additional qualifications for members of the Board of Directors?

40/ It is valid to amend By—Laws to place more qualifications for members of the Board of Directors other than those required in the Corporation Code. The law only provides for minimum qualifications that corporations are free to expand. As held in Gokongwei v. SEC (GR. No. L-45911, 1979), every corporation has the inherent power to adopt by-laws for internal government and to regulate the conduct and relationships of its members even in the absence of enabling specific provisions in the charter.

40/ Can Aliens be members of the Board of Directors?

40/ Yes. The Corporation Code only requires that majority of the directors or trustees be residents of the Philippines (CC, Sec. 23)

40/ What are the requisites for the removal of a Director? (MN-2I3-C)

40/ a) Regular meeting or special Meeting of the stockholders or members called for the purpose: b) Previous notice to the stockholders or members of the intention to remove; c) Removal must be by a vote of the stockholders representing at least Q of the outstanding capital stock or at least 2/3 of the members. As the case may be; d) Director may be removed with or without cause, unless he was elected by the minority, in which case. it is required that there is cause for removal. (CC, Sec. 28)

41/ X. a manager of Corporation A, filed a complaint for illegal dismissal against the corporation stating that he was neither notified of the Board Meeting during which said board resolution removing him as Manager was passed, nor formally charged with any infraction. He just received from Corporation A a letter stating that he has been terminated from service for his continuous absences, loss of trust and confidence, and for the corporation to cut down operational expenses. The corporation insists that X who is undisputedly a stockholder is likewise a corporate officer and that his action against them is an intra-corporate dispute beyond the jurisdiction of the labor tribunals. Is the termination of X as a manager of the corporation an intra-corporate dispute within the jurisdiction of the RTC?

41/ (DEL CASTILLO) No. The present controversy does not relate to an intra—corporate dispute. "Corporate officers" in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporation's by-Iaws' X's status as a stockholder and director is not disputed. However, X is not a corporate officer as his appointment was not made pursuant to the By- Laws, nor was there a copy of a board resolution appointing him as manager or any other document showing that he was appointed to said position by action of the board was submitted by the corporation. Moreover, the corporation's reasons for dismissing X have something to do with his being a manager and nothing with his being a director or stockholder. Before the Labor Arbiter, Corporation A did not see such acts to be disloyal acts of a director and stockholder but rather, as constituting willful breach of the trust reposed upon a manager. The relationship test and the nature of the controversy test have not been satisfied. {Real v. Sangu, GR. No. 168757, January 19, 2011)

41/ The employees of a Company P filed complaints for illegal dismissal and money claims against the plywood company with NLRC. They alleged that they were regular employees of the company but the company had reduced their wages and later dismissed them without cause and due process. They also alleged that the plywood company's two branches (two corporations- corporation A and B) were the same business, located in the same compound, owned by the same person had the same resident manager, administrative department, and personnel and finance sections. Whether or not the doctrine of piercing the veil of corporate fiction is applicable in making the plywood company liable for illegal dismissal. despite some of the employees being under one of its branches.

41/ (DEL CASTILLO) Yes. The Company P failed to refute the arguments regarding the two corporations having the same owner and management. All respondents were even employed by the same plant manager, who signed identification cards for both Company A and Company 8. Where it appears that business enterprises are owned. conducted and controlled by the same parties, law and equity will disregard the legal fiction that these corporations are distinct entities and shall treat them as one. This is in order to protect the rights of third persons, as in this case, to safeguard the rights of respondents. (Vicmar Development Corporation v. Elarcosa, GR. No. 202215. December 9, 2015)

41/ In what instance does a claim of "illegal dismissal" become an intra—corporate dispute?

41/ It is only when the officer claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the RTC. A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation, and the nature is not altered by the reason or wisdom with which the Board may have in taking such action. The issue of the alleged termination involving a corporate officer, not a mere employee, is not a simple labor problem but a matter that comes within the area of corporate affairs and management and is a corporate controversy in contemplation of the Corporation Coder (Id.)

42/ When will a contract entered into between corporations having interlocking director become valid?

42/ A contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone. if: a) There is no fraud b) The contract is fair and reasonable under the circumstances When the interest of the interlocking director in one corporation is substantial (more than 20% of the outstanding capital stock) and nominal (less than 20%) in another corporation, the contract is valid provided: (QVF)

42/ What is the doctrine of corporate opportunity?

42/ A director or corporate officer who, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, is guilty of disloyalty and should. Therefore, account to the latter for all such profits by refunding the same, notwithstanding that he risked his funds in the venture. (CC, Secs. 31 & 34; Gokongwei, Jr. v. SEC, GR. No. L-45911. 1979)

42/ What is the rule on liability of Directors, Trustees and Officers?

42/ General Rule: Corporate personality is a shield against personal liability of corporate officers. (Consolidated Bank v. Court oprpea/s, GR No. 141767. 2001) HOWEVER, personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly attach, as a rule, only when: (ABC-WAL) ///

42/ What are the requisites for the Doctrine of Corporate Opportunity to apply? (ANI)

42/ a) Corporation is financially Able to undertake the business opportunity. b) From the nature of the business opportunity, it is in line With corporation's business and is of practical advantage to the corporation. c) Corporation has an interest or a reasonable expectancy, by embracing the opportunity. (Id)

42/ What is the rule on liability of Directors, Trustees and Officers?

42/// a) He Assents to a patently unlawful act of the corporation (CC, Sec. 31) b) Bad faith or gross negligence in directing its affairs (CC. Sec. 31) c) Conflict of interest resulting in damage to the corporation, its stockholders or other persons (60, Secs. 31 a 34} d) He consents to the issuance of Watered stocks or, having knowledge thereof, he does not forthwith file with the corporate secretary his written objection thereto (CC, 890.65); e) He Agrees to hold himself personally and solidarily liable with the corporation: f) He is made personally liable by a specific provision of law. (CC, Sec. 144: Tramat Mercantile v. Court of Appeals, GR. No. 111008, 1994.)

42/ When will a contract entered into between corporations having interlocking director become valid?

42/// a) Presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a Quorum for such meeting: b) Vote of such director or trustee was not necessary for the approval of the contract; c) Contract is Fair and reasonable under the circumstances. (CC, Sec. 33)

43/ What constitutes a quorum in board meetings?

43/ A majority of the number of directors or trustees as fixed in AOl shall constitute a quorum unless the AOI or by-laws provide for a greater majority. Directors or trustees cannot attend or vote by proxy at board meetings. (CC, Sec. 52)

43/ Under what circumstances may a stockholder be denied his right to examine corporate records?

43/ If such stockholder has improperly used any information through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand. (CC, Sec. 74) But if the right is to be denied, the burden of proof is upon the corporation to show that the purpose of the shareholder is improper, by way of defense. (Terelay Investment and Development Corporation v. Yulo, G.R. No. 160924. 2015).

43/ What matters may the Executive Committee act upon?

43/ The Executive Committee may act, by majority vote, on matters within the competence of the Board, as may be delegated by (1 ) the by—Iaws, or (2) the majority vote of the Board, (CC, Sec. 35) The Executive Committee may not act on any of the following matters: (DAVA') a) Distribution of cash dividends to the shareholders b) Approval of any action for which shareholders' approval is also required c) Filing of vacancies in the board d) Amendment or repeal of any resolution of the board which by its express terms is not so amendable or repeatable e) Amendment or repeal of by-laws f) Adoption of new by-laws (CC, Sec. 35)

43/ Can the stockholder inspect corporate records while the corporation is in the process of liquidation?

43/ Yes. Sees 122 and 145 of the CC explicitly provide for the continuation of the body corporate for 3 years after dissolution. The rights and remedies against, or liabilities of, the officers shall not be removed or impaired by reason of dissolution of the corporation. As such, a stockholder's right to inspect corporate records subsists during the period of liquidation. Hence, a stockholder has a right to demand for inspection of records. (Chua, et al. v. People, GR. No. 216146, 2016)

43/ May the 1-week period to send the written notice of a special stockholders' meeting be modified?

43/ Yes. The Corporation Code states that special meeting of stockholders or members shall be held at any time deemed necessary or as provided in the by-laws: Provided, that at least 1 week written notice shall be sent to all stockholders or members, unless otherwise provided in the by- laws. As such, the Corporation Code itself permits the shortening and lengthening of the period. (Guy v. Guy, G.R. No. 184086. 2016)

43/ What matters are non-voting shares allowed to vote in? (AZBZCD-IM)

43/ a) Amendment of Articles b) Sale, lease, exchange, mortgage, pledge or disposition of All or substantially all of corporate property c) Adoption/Amendment of by- Laws d) Incur, create, increase bonded indebtedness e) Increase, decrease capital stock f) Dissolution of corporation g) Investment of funds in another corporation h) Merger/consolidation with another corporation (CC, Sec. 6)

44/ What is a pre-emptive right?

44/ It is the shareholders' right to subscribe to all issues or dispositions of shares of any class in proportion to his present stockholdings, the purpose being to enable the shareholder to retain his proportionate control in the corporation. (CC, Sec. 39)

44/ What is the "right of first refusal?

44/ It provides that a stockholder who may wish to sell or assign his shares must first offer the shares to the corporation or to the existing stockholders of the corporation. Only when the corporation or the other stockholders do not or fail to exercise their option, is the offering stockholder at liberty to dispose of his shares to third parties. (VILLANUEVA,PHILIPPINE CORPORATE LAW 422-23 (2013))

44/ P held shares of stock of R, a domestic corporation. R decided to amend its articles of incorporation to remove stockholders pre-emptive rights to newly issued shares of stock but the petitioners voted against it and demanded payment of their shares at P2/share based on book value. However, R found that the fair value was unacceptable and insisted it should only be P0.41/share considering it had no unrestricted retained earnings to cover the amount. Due to the disagreement, an appraisal committee was constituted. The committee reported its valuation of P2.5/share and so P demanded payment based on that. Still, R refused to pay the dissenting stockholders. Can payment be made to any dissenting stockholder in case the R has no available unrestricted retained earnings?

44/ No. As a general rule, a stockholder who dissents from a certain corporate action has the right to demand payment of the fair value of his or her shares and that is known as right of appraisal. (CC, Sec. 81) Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its books to cover the payment. In case the corporation has no available unrestricted retained earnings in its books, Sec. 83 of the CC provides that if the dissenting stockholder is not paid the value of his shares within 30 days after the award, his voting and dividend rights shall immediately be restored. ///

44/ When are appraisal rights extinguished? (WA-SEC)

44/ a) Dissenting stockholder withdraw the demand with the corporation's consent: b) Proposed action previously dissented is Abandoned: c) S_E_C disapproves the dissented action. (CC. Sec. 84)

44/ What is the right of appraisal and when can one exercise such right's?

44/ it is the right of any dissenting stockholder to have his shares bought back by the corporation at fair value, it may be exercised in the following cases: (TRISM) a) Extension or reduction of corporate Term; b) Change in the flights of stockholders, authorize preferences superior to those stockholders, or restrict the right of any stockholder: c) Investing of corporate funds in another business or purpose: d) Sale or disposition all or substantially all assets of corporation; e) Merger or consolidation. (CC, Sec. 81)

44/ How is the pre-emptive right exercised?

44/ it must be exercised in accordance with the AOI or the By-Laws. if the Articles of Incorporation and the By-Laws are silent, the BOD may fix a reasonable time within which the stockholders may exercise the right.

44/ Can payment be made to any dissenting stockholder in case the R has no available unrestricted retained earnings?

44/// The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the payment of the shares of stocks of the withdrawing stockholders. The creditors of a corporation have the right to assume that the board of directors will not use the assets of the corporation to purchase its own stock for as long as the corporation has outstanding debts and liabilities. There can be no distribution of assets among the stockholders without first paying corporate debts. Thus, any disposition of corporate funds and assets to the prejudice of creditors is null and void. {Turner v. Lorenzo Shipping Corporation, G.R. No. 157479, November 24, 2010)

45/ Is a family close corporation exempt from the requirements of a derivative suit?

45/ A family/close corporation is not exempt from complying with the clear requirements and formalities of the rules for filing a derivative suit. There is nothing in the pertinent laws or rules which state that there is a distinction between family corporations and other types of corporations in the institution by a stockholder of a derivative suit. (Ang v. Ang, GR. No. 201675, 2013)

45/ Are derivative suits of the same nature as class suits?

45/ No. A derivative suit filed on behalf of a corporation by its stockholders is not synonymous and should not be confused with a class suit under the Rules of Court. (Ching v. Subic Bay Goff and Country Club. Inc., 174353. 2014)

45/ What are the requirements of a derivative suit? (SEAN)

45/a) Plaintiff was stockholder/member at the time the questioned act/transaction subject to the action occurred, as well as at the time the action was filed and remains as such during the pendency of the action; b) Plaintiff exercised all reasonable efforts and alleges with particularity in the complaint, to exhaust all remedies available, under the articles of incorporation, by-laws or rules governing the corporation; c) No Appraisal right available for the acts complained of; and d) Suit is not a nuisance/harassment suit (Interim Rules of Procedure for Intra- Corporate Controversies, Rule 8. Sec. 1).

45/ K entered into an agreement with R. whereby the latter agreed to develop P, a country club. M purchased 2 Class "A" shares and applied membership to P. Due to delayed construction, M wrote 2 demand letters to Board of Directors (BOD) of P against R but the BOD of P refused to initiate legal action. M, in a derivative capacity on behalf of P, filed with RTC a Complaint against R. R argued that the action is not a proper derivative suit as P failed to exhaust all remedies available under the articles of incorporation and by-Iaws; and that P falled to implead its BOD as indispensable parties. P filed a Reply arguing that the case does not involve an intra-corporate controversy and that the exhaustion of intra- corporate remedies was futile and useless as the BOD of P also own R. WIN P's ordinary civil suit for specific performance with damages against R vis-à-vis the latter's obligation under the project agreement to fully complete and develop P is cognizable by the lower court as a regular court or by the RTC as a special commercial court for intra—corporate controversies.

46/ (DEL CASTILLO) "A derivative action is a suit by a shareholder to enforce a corporate cause of action . . . on behalf of the corporation in order to protect or vindicate [its] rights [when its] officials refuse to sue, or are the ones to be sued, or hold control of [it]." Upon the enactment of the [SRC]. jurisdiction over such action now lies with the special commercial courts designated pursuant to AM. No. 00—11—03-SC promulgated on November 21, 2000. (Forest Hills Forest Hills Golf and Country Club, Inc. v. Fr'I-Estate Properties, Inc. GR No. 206649, July 20, 2016)

46/ There was a difference in the list of Directors and Subscribers in the Articles of Incorporation and the General Information Sheet subsequently filed with the SEC after an alleged stockholder's meeting without X being notified. Thus, x filed a complaint asking for an injunction with the SEC. The respondents prayed for an annulment of the proceedings for the Certificate of Registration of the corporation was already revoked by the SEC because X failed to comply with reportorial requirements. Does the SEC 'have jurisdiction over an intra-corporate dispute despite involving a dissolved corporation?

46/ (DEL CASTILLO) Yes. lntra-corporate disputes remain even when the corporation is dissolved. An existing intra-corporate dispute, which does not constitute a continuation of corporate business, is not affected by the subsequent dissolution of the corporation. (Aguirre II v. FQB+ 7. GR. No. 170770, January 9, 2013.)

46/ What is a subscription agreement?

46/ Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase or some other contract. (CC. Sec 60)

46/ X is a subscriber of shares of stock who fails to fully pay the value for such shares. If X decides to assign these to a third person, who becomes liable for the unpaid duos?

46/ The third person becomes liable to the corporation for the unpaid dues. in the case of Interport, the assignment of the subscription agreements was considered a form of novation by substitution of a new debtor and which required the consent of or notice to the creditor. The change of debtor took place when the original subscriber. R.C. Lee, assigned the lnterport shares under the subscription agreements to a third person SSI so that the latter became obliged to settle the 75% unpaid balance on the subscription. lnterport was duly notified of the assignment and, as such, could no longer refuse to recognize the, transfer of the subscription agreements to SSl. ///

46/ What are watered stocks and what is the liability arising from its issuance?

46/ They are stocks issued for a consideration less than its par or issued value. These include: a) Stocks issued without consideration (bonus share) b) Stocks issued as fully paid when the corporation has received a sum of money less than its par or issued value (discounted share) c) Stocks issued for consideration other than actual cash (i.e., property or services), the fair valuation of which is less than its par or issued value d) Stocks issued as stock dividend when there are no sufficient retained earnings or surplus to justify it. (CC, Sec. 65, VILLANUEVA, PHILIPPINE CORPORATE LAW 515-516 (2013)] The officer or director who had knowledge of such issuance and does not express objection is solidarily liable with the stockholder for the difference in value. (CC, Sec. 65)

46/ How are shares of stock transferred? (IDR)

46/ a) Indorsement by the owner or his attorney-in- fact or other person legally authorized to make the transfer b) Delivery of the certificate of stock (CC. Sec. 63) c) To be valid against third parties, it must be recorded in the books of the corporation (Razon vs. IAC, G.R. 74306, 1992) No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (CC, Sec. 63)

46/ X is a subscriber of shares of stock who fails to fully pay the value for such shares. If X decides to assign these to a third person, who becomes liable for the unpaid duos?

46/// This extinguished the obligation of RC. Lee to Interport. As such, lnterport was no longer obliged to accept any payment from RC, Lee because the latter had ceased to be privy to the subscription agreements. It was now legally bound to accept SSI's tender of payment as the new debtor. (Interport Resources Corporation v. Security Specialist. Inc., G.R. No. 154069, 2016)

47/ X filed a complaint against Y Corp. praying that he be allowed to inspect Y Corp.'s corporate books and records, minutes of meetings, and financial statements. X claimed to be a bona fide stockholder of Y Corp., and attached copies of stock certificates indorsed in his favor on the dorsal portion of the original holders. Y Corp. claimed that X was not a stockholder. To verify X's stock ownership, the RTC asked X to produce his stock certificates. After X failed to produce his stock certificates, the RTC dismissed the complaint. Is the presentation of a stock certificate 3 condition sine qua non for proving one's shareholding in a corporation?

47/ No. Although a stock certificate is prima facie evidence that the holder is a shareholder of the corporation, the possession of the certificate is not the sole determining factor of one's stock ownership. A stock certificate is merely the paper representative or tangible evidence of the stock itself and of the various interests therein. The certificate is not stock in the corporation but is merely evidence of the holder's interest and status in the corporation, his ownership of the share represented thereby, but is not in law the equivalent of such ownership, it expresses the contract between the corporation and the stockholder, but it is not essential to the existence of a share in stock or the creation of the relation of shareholder to the corporation. There are other competent means of establishing one's shareholdings in a corporation, such as official receipts of payments for subscriptions of shares, copies duly certified by the SEC stating that the corporation had issued shares in favor of the complainant, and the General Information Sheet. (Insigne v. Abra Valley Colleges, G.R. No.204089, 2015)

47/ What types of transfers of shares of stock are required to be recorded in the corporate books?

47/ Only absolute transfers of shares of stock are required to be recorded in the corporation's stock and transfer book in order to have force and effect as against third persons. Attachments of shares are not "transfer" and need not be recorded in the corporation's stock and transfer book. (Ferro Chemicals v. Garcia, et al., G.R. 168134, 2016)

47/ Who may make valid entries in the stock and transfer books?

47/ The corporate secretary. Entries made on the stock and transfer book by any person other than the Corporate Secretary. such as those made by the President and Chairman cannot be given any valid effect (Torres v. CA, G.R. No. 120138, 1997).

47/ A shareholder—seller refuses to register in the corporate books a transfer of shares of stock even after the purchaser has paid for it in full value. Can the purchaser use the remedy of mandamus?

47/ Yes, the petition of mandamus can prosper. Registration, in this case, is a ministerial duty on the part of the corporation. This remedy is available upon the instance of a bona fide transferee who is able to establish a clear legal right to the registration of the transfer. (Andaya v. Rural Bank of Cabadbaran, Inc, G.R. No. 188769, 2016) NOTE: The doctrine under the mentioned case is that the buyer of shares can compel a corporate secretary to register the transfer BUT the entitlement in this case was duly supported by documents such as a notarized sale or shares of stock and the documentary stamp tax return. ///

47/ A shareholder—seller refuses to register in the corporate books a transfer of shares of stock even after the purchaser has paid for it in full value. Can the purchaser use the remedy of mandamus?

47/// In the old case of Hager v. Bryan (G. R. No. L-6230, 1911), the Supreme Court found that the remedy of mandamus was unavailable under the facts of the case. The Hager case stated that are two possible cases before the secretary may be compelled to make the recording in the stock and transfer book: (1) either there are express instructions by the registered owner to make such transfer to the indorsee, or (2) there is a power of attorney authorizing such transfer.

48/ What are the consequences of failure to pay the unpaid subscription on time?

48/ Failure to pay on such date will render the entire balance due and payable and will make the stockholder liable for interest at the legal rate on such balance, unless a different rate of interest is provided in the by—laws, computed from such date unfit full payment. If within 30 days from the said date no payment is made, all stocks covered by said subscription shall become delinquent and shall be subject to delinquency sale, unless the Board orders otherwise. (CC, Sec. 67)

48/ ls the existence of a corporation automatically extinguished by the dissolution?

48/ No. it continues as a body corporate for 3 years after its dissolution. for the purpose of winding up its affairs but not for the purpose of continuing the business for which it is established. (CC. Soc. 122) (DEL CASTILLO) The directors of a corporation that has been dissolved may continue acting as trustees even beyond the 3-year period for the purpose of liquidating the corporation. (Aguirre v. FQB+7, Inc., G.R. No. 170770, 2013)

48/ When should the payment for the unpaid subscription be collected?

48/ Payment of any unpaid subscription: and the accrued interest, if any, must be made on the date specified in the contract of subscription or on the date stated in the call made by the Board. (CC. Sec 67)

48/ May a corporation whose certificate of registration was revoked by the SEC still be held liable for claims of illegal dismissal?

48/ Yes. Sec 145 of the CC provides that any liability incurred by a corporation is not impaired by its dissolution. (Vigilla v. Philippine College of Criminology, Inc.. G.R. No. 200094. 2013)

48/ What are the remedies of a corporation to enforce payment of stocks? (DJC)

48/ a) Delinquent sale (CC. Sec. 68) b) Judicial action (CC, Sec. 70) c) Collection from cash dividends and Withholding of stock-dividends (CC, Sec. 43)

48/ What are the modes of dissolution? (VISE)

48/ a) Voluntary (CC. Sec. 117) b) involuntary (CC, Sec. 121) c) Shortening corporate term (CC, Sec. 120) d) Expiration of the term (Majority Stockholders of Ruby Industrial Corp. v. Lim, G.R. No. 165887, 2011)

48/ What are the effects of the Winding Up of Affairs?

48/ a. Continues as a corporate body for 3 years to prosecute and defend suits against it, close its affairs, dispose and convey its property and distribute assets b. Cannot continue business for which it was established c. Can convey property to trustee's tor the benefit of the stockholders members, creditors and other persons in interest i. Legal interest vests in business ii. Beneficial interest remains with stockholders members, creditors ///

48/ What are the effects of the Winding Up of Affairs?

48/// d. Assets distributable to unknown creditors, stockholders/ members, persons in interest or those who cannot be found shall be escheated to the city or municipality where the assets are located. e. Distribution of assets only upon lawful dissolution and payment of all debts and liabilities. Exceptions: a. Decrease of capital stock b. As otherwise allowed in the Corporation Code

49/ While being on a receivership, A Corporation filed a suit against C alleging that the latter was an errant lessee who deprived the former of its property. C however alleged that A Corporation, being on receivership, cannot file a suit independently of its rehabilitation receiver citing the Interim Rules and the cases of Villanueva, Yam and Abacus Real Estate. Did A Corporation have the right to sue? Furthermore, granting that it has the right to sue, C claims that the case would not hold since under Artlcle 1687 of the New Clvil Code, the period for rent payments determines the lease period; hence, the lease period should be annual because of the annual rent payments. Who is correct?

49/ (DEL CASTILLO) A Corporation is correct. The intention of the law in placing a losing corporation in receivership is to effect a feasible and viable rehabilitation by preserving a floundering business as a going concern, because the assets of a business are often more valuable when so maintained than they would be when liquidated (the concept of "debtor—in-possession or debtor-in- place"). The Corporation remains in control of its business and properties, subject only to the monitoring of the appointed rehabilitation receiver; hence, it still has the right to sue. The jurisprudence cited by A are inapplicable because they involve all banking and financial institutions that are governed by the Central Bank Act. C can be immediately ejected since Article 1675 of the Civil Code states that a lessee who commits any of the grounds for ejectment cited in Article 1673, including non—payment of lease rentals, cannot avail of the periods established in Article 1687. (Umale v ASB Realty, G.R. No. 181126, June 15, 2011)

49/ What are some of the important differences between a stock and a non-stock corporation?

49/ STOCK - Free transferability - Incorporators must be natural persons - Non-voting stocks may still vote on certain matters - Proxy representation cannot be denied - Delinquency of stock automatically suspends the right to vote or be voted upon - Quorum is determined by the number of outstanding voting stocks - Only cumulative voting -5-15 Board of Directors - Board appoints the officers - Dissolution - corporation can no longer carry on its business enterprise ///

49/ What are some of the important differences between a stock and a non-stock corporation?

49/// (VILLANUEVA, PHILIPPINE CORPORATE LAW 883-900 (2013) NOTE: A stock corporation may be converted into a non-stock corporation by mere amendment of the articles of incorporation. On the other hand, a non-stock corporation must be dissolved first and thereafter, the members may organize the stock corporation. (See VILLANUEVA, PHILIPPINE CORPORATE LAW 901-902 (2013)

49/ What are some of the important differences between a stock and a non-stock corporation?

49/// NON-STOCK -Membership and all of stocks rights arising therefrom are purely personal and non—transferable (unless otherwise provided in the articles of incorporation) -Juridical persons may be members of a non-stock corporation, provided that they have a representative for the purposes of qualifying them as incorporators -Members may be denied— entirely of their voting rights in the articles of incorporation or by-Iaws -Proxy representation may be denied in articles of incorporation or by- laws -"Right to vote or be voted upon is suspended only when the delinquent stockholder is disenfranchised under the articles of incorporation or by-laws -Quorum is determined by the number of actual living members with voting rights -GR: straight voting EX: cumulative voting, only if in articles of incorporation or by-laws -Board of Trustees may exceed 15 -Board appoints the officers. Members may also directly elect officers, unless otherwise provided in the articles of incorporation of by-Iaws -Dissolution = corporation can no longer carry on its operations as a corporation, If it does, it will only be deemed an ordinary association without juridical personality ///

5/ What is a ware houseman's lien?

5/ It is lien over the goods deposited with him is his security for the payment of the charges, money advanced, and other expenses owed to the ware houseman. Clearly, the lien exists for the benefit of the ware houseman. (Warehouseman Receipts Law, Sec. 27)

5/ What are the remedies of a warehouseman having a valid lien against a person demanding the goods?

5/ The following are the remedies available to a warehouseman having a valid lien againts the person demanding the goods: (REO2) a. To refuse to deliver the goods until the lien is satisfied (Warehouse Receipts Law, Sec. 31); b. To cause the Extrajudicial sale of the goods and apply the proceeds to the value of the lien (Id., Secs. 33 &34); and c. By Other means allowed by law to a creditor against his debtor, for the collection from the depositor of all the charges which the depositor of all the charges which the depositor has bound himself to pay (Id., Sec. 32); d. or Other remedies allowed by law for the enforcement of lien against personal property (Id., Sec. 35)

50/ When are foreign corporations deemed to be doing business? (CAPsz-BRA)

50/ a) Any act or acts that imply a Continuity of commercial dealings or arrangements, and contemplate to some extent the performance of acts or works or the exercise of some functions normally incident to and in progressive prosecution of, the purpose and object at its organization. b) Appointing representatives, distributors domiciled in the Philippines or who stay for a period or periods totaling 180 days or more; c) Participating in the management, supervision or control of any domestic business, firm. entity, or corporation in the Philippines; d) Soliciting orders, Service contracts, opening finches or liaison offices (Foreign Investments Act ["FIA"], Sec. 3(d))

50/ Under the FIA. what are some instances where foreign corporations are not deemed to be doing business? (NIO)

50/ a) Having a nominee director or officer to represent its interests in such corporation; b) Mere investment as a share-holder by a foreign entity in a domestic corporation duly registered to do business and/or the exercise of rights as such investor, and c) Appointing a representative or distributor domiciled in the Philippines which transacts business in its an name and for its own account. (FIA, Sec. 3(d))

50/ What are two tests used In order to determine whether a foreign corporation is doing business in the Philippines?

50/ a) Isolated Transaction Test Single or isolated acts. contracts, or transactions of foreign corporations are not regarded as carrying on of business. (MR Holdings, Ltd. v. Bajar, G.R. No. 138104. 2002) A foreign corporation needs no license to sue before Philippine courts on an isolated transaction. Even a series of transactions which are occasional, incidental, and casual—not of a character to indicate a purpose to engage in business—do not constitute the doing or engaging in business as contemplated by law. (Lorenzo Shipping v. Chubb and Sons, G.R. No. 147724. 2004) NOTE: Where a single act or transaction, however, is not merely incidental or casual but indicates the foreign corporation's intent to do other business in the Philippines, said single act or transaction constitutes doing business. (Far East International v. Nankai Kogyo, G.R. No. b13525, 1962) ///

50/ What are two tests used In order to determine whether a foreign corporation is doing business in the Philippines?

50/// b) Twin Characterization Test The twin characterization test to determine whether a foreign corporation is engaged in business in the Philippines: a) First, whether a foreign corporation is maintaining or continuing in the Philippines "the body or SUBSTANCE of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another." b) Second, "doing business" is defined to necessarily imply "a CONTINUITY of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization." (Mentholatum Co v Mangaliman, G.R. No. L47701, 1941)

51/ What is the difference between merger and consolidation?

51/ MERGER -Occurs when one or more corporations are absorbed by another corporation which remains in existence while the others are dissolved (i.e., A + B = A) CONSOLIDATION Occurs when two or more existing corporations are combined to form a new corporation (i.e., A + B = C)

51/ What are the rules regarding the right of a foreign corporation to bring a suit in PH courts?

51/ The principles regarding the right of a foreign corporation to bring suit in Philippine courts may be condensed in four statements: a) If a foreign corporation does business in the Philippines without a license = cannot sue before the Philippine courts: b) It a foreign corporation does business in the Philippines without a license, a Philippine citizen or entity which has contracted with said corporation may be estopped from challenging the foreign corporation's corporate personality in a suit brought before Philippine courts; ///

51/ Q: Mr. A was an employee of Zeta Corp., which was subsequently, renamed Zuellig. According to him, he was informed by Zeta that the latter will cease operations, and that all affected employees, including him, will be terminated. He was then summarily terminated. The Labor Arbiter found that Zeta illegally dismissed Mr. A, since Zeta did not actually close its business, but merely changed its business name and primary purpose, and increased its authorized capital stock. The NLRC affirmed the ruling of the Labor Arbiter, adding that the closure of business operation was not validly made, with the Amended Articles of incorporation showing that Zuellig is actually the former Zeta. Was Mr. A illegally dismissed?

51/ Yes. The mere change in the corporate name is not considered under the law as the creation of a new corporation; hence. the renamed corporation remains liable for the illegal dismissal of its employee separated under that guise. A change in the corporate name does not make a new corporation, whether effected by a special act or under a general law. It has no effect on the identity of the corporation, or on its property, rights, or liabilities. The corporation, upon the change in its name, is in no sense a new corporation, or the successor of the original corporation. It is the same corporation with a different name. and its character is in no respect changed. In short, Zeta and Zuellig remained one and the same corporation. The change of name did not give Zuellig the license to terminate employees of Zeta like Mr. A without just or authorized cause. (Zuellig Freight and Cargo Systems vs. National Labor Relations Commission, GR. No. 157900, 2013)

51/ What are the rules regarding the right of a foreign corporation to bring a suit in PH courts?

51/// c) If a foreign corporation is not doing business in the Philippines = it needs no license to sue before Philippine courts on an isolated transaction or on a cause of action entirely independent of any business transaction; d) It a foreign corporation does business in the Philippines with the required license= can sue before Philippine courts on any transaction. (Agilent Technologies Singapore v. Integrated Silicon Technology, G.R. No. 154618, 2004)

52/ What is the effect of a business-enterprise transfer on the liabilities of the transferor?

52/ As a general rule, contracts, including the rights and obligations arising therefrom, are valid and binding only between the contracting parties and their successors—in-interest Under the Nell Doctrine, since the transferee corporations are not in privity with the contracts between the transferor corporation and its creditors, the transfer of all the assets of a corporation to another shalt not render the transferee liable for the transferor's liabilities, except: a) Where the transferee expressly or impliedly agrees to assume such debts; b) Where the transaction amounts to a consolidation or merger of the corporations; c) Where the transferee corporation is merely a continuation of the transferor corporation: and d) Where the transaction is entered into fraudulently in order to escape liability for such debts. ///

52/ What is the relationship between the sale of all or substantially all of a corporation's assets under Sec. 40 of the Corp. Code and the business-enterprise transfer doctrine?

52/ Sec. 40 refers to the sale, lease, exchange or disposition of all or substantially all of the corporation's assets, including its goodwill. The sale under this provision does not contemplate an ordinary sale of all corporate assets; the transfer must be of such degree that the transferor corporation is rendered incapable of continuing its business or its corporate purpose. ///

52/// What is a business-enterprise transfer?

52/// A business-enterprise transfer is one where the transferee corporation's interest goes beyond the assets and properties of the transferor and their desire to acquire the latter's business enterprise, including its goodwill. The transferee purchases not only the assets of the translator, but also its business. As a result of the sale, the transferor is merely left with its juridical existence, devoid of its industry and earning capacity. (Y-I Leisure Phi/s., lnc. v. Yu, G.R. No. 207161, 2015)

52/ What is the relationship between the sale of all or substantially all of a corporation's assets under Sec. 40 of the Corp. Code and the business-enterprise transfer doctrine?

52/// Clearly. Sec. 40 suitably reflects the business- enterprise transfer doctrine whereby the transferee corporation necessarily continued the business of the transferor corporation. As such, the transfer of all or substantially all the proper from one corporation to another under Sec. 40 necessarily entails the assumption of the transferor's liabilities, notwithstanding the absence of any agreement on the assumption of obligations. The transfer of all its business, properties and assets without the consent of its creditors must certainly include the liabilities: or else, the assignment will place the assignor's assets beyond the reach of its creditors. (Id.) ///

52/ What is the relationship between the sale of all or substantially all of a corporation's assets under Sec. 40 of the Corp. Code and the business-enterprise transfer doctrine?

52/// NOTE: Not every transfer of the entire corporate assets would qualify under Section 40. It does not apply (1) if the sale of the entire property and assets is necessary in the usual and regular course of business of corporation, or (2) if the proceeds of the sale or other disposition of such property and assets will be appropriated for the conduct of its remaining business. Thus, the litmus test to determine the applicability of Sec. 40 would be the capacity of the transferor corporation to continue its business after the sale of all or substantially all its assets. (1d. )

52/ What is the effect of a business-enterprise transfer on the liabilities of the transferor?

52/// The business-transfer doctrine falls under the third exception stated above. In a business- enterprise transfer, the transferee is liable for the debts and liabilities of his transferor arising from the business enterprise conveyed. Under a business—enterprise transfer, the purchasing or Transferee Corporation necessarily continues the business of the selling or transferor corporation. Given that the transferee corporation acquired not only the assets but also the business at the transferor corporation. then the liabilities of the latter are inevitably assigned to the former. (id)

53/ What are the elements of an investment contract? (ICE-P)

53/ According to the Turner Test, an investment contract is a transaction, contract, or scheme whereby a person a) Makes an investment of money. b) In a Common enterprise. c) With the Expectation of profits. d) To be derived primarily (i.e., does not have to be solely) from the efforts of others. (Power Homes Unlimited Corporation v. SEC, G.R. No. 164182, 2008)

53/ Is fraud necessary before the transferee can be held liable?

53/ No. The business-enterprise transfer doctrine is designed to protect the creditors of the transferor corporation and does not depend on deceit of the transferee. As such, fraud is not an essential element for the application of the doctrine. (Id.)

53/ What are securities?

53/ Securities are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture evidenced by a certificate, contract, instrument, whether written or electronic in character. The definition includes investment contracts. (Securities Regulation Code {"SRC'], Sec. 3)

53/ What test is used to determine whether the security being offered takes the form of an investment contract?

53/ The Howey Test. Under this test the following must concur: a) A contract, transaction or scheme: b) An investment of money; c) Investment is made in a common enterprise; d) Expectation of profits; e) Profits arising primarily from the efforts of others. (Virata v. Wee, G.R. No 220926. 2017)

53/ Which securities are exempt from registration? (GOFOB-IHB-B)

53/ a) Securities issued by the Government, subdivisions/ instrumentalities; b) Securities issued by Foreign government with which the Philippines has diplomatic relations; c) Securities issued by receiver/ trustee in bankruptcy approved by the proper adjudicatory body; d) Securities under the supervision and regulation of the insurance Commission, HLURB, or the QIR; e) Securities issued by a Bank except its own shares of stock f) Any other class of security which the SEC may add through its rules and regulations (SRO. Sec. 9)

54/ Which securities transactions are exempt from registration? (JPlD-CSC-BEPAZO-BPPO)

54/ A) Judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy: b) By or on account of a Pledge holder or mortgagee or any other similar lien holder; c) Isolated transactions; d) Distribution of stock dividend or other distribution out of surplus; e) Sale of capital stock of a corporation to its own stockholders exclusively - stock which has already been issued; f) Issuance of bonds or notes secured by mortgage upon real estate or tangible personal property; g) Issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion, provided the security so surrendered has been registered or was, when sold, exempt from registration: ///

54/ Should all securities offered for sale to the public in the Philippines be registered with the SEC?

54/ GR: Yes, all securities before being offered for sale or distribution within the Philippines must first be registered with SEC, and information on the securities shall be made available to a prospective purchaser. (SRO, Sec. 8) . EX: Exempt securities and exempt transactions

54/ What are the requirements for prohibited insider trading? (IMP)

54/ a) The trader is an insider b) The information of the issuer that the insider has is Material non-public information c) The insider buys or sells securities of the issuer while in Possession of such information. (SRC, Sec. 27)

54/ Who is an Insider? (IDF-GDO-L)

54/ a) issuer; b) Director or officer of, or person controlling, the issuer; c) Person whose relationship or former relationship to the issuer gives or gave him access to material information about the issuer or the security that is not generally available to the public; d) Government employee, or Director, or officer of an exchange, clearing agency and/or self- regulatory organization who has access to material information about an issuer or a security that is not generally available to the public; or e) Person who learns such information by communication from any of the foregoing insiders. (SRC, Sec. 3.8)

57/ X Co., a private property company owned by X and Y, has assets worth more than Php200 million and plans to sell commercial papers worth Php 50 million to 10 banks and 11 insurance companies. Is X Co. subject to any disclosure requirement under the Securities Regulation Code?

54/// X Co. does not fall under any of the categories listed above. First, it did not have to file a registration statement, as sale of commercial papers to the banks and insurance companies is an exempt transaction. Second, X Co. is a private company, and is not listed on an Exchange. Third, while X Co. has assets amounting to P200m. It is owned by only 2 people, namely, X and Y. While an exemption from filing of a registration statement does not necessarily imply an exemption from disclosure requirements under the SRC, X Co. is not subject to such requirements because it does not fall under any of the three types of issuers stated above.

54/ Which securities transactions are exempt from registration? (JPlD-CSC-BEPAZO-BPPO)

54/// h) Broker's transactions i) Exchange of securities by issuer with its existing security holders exclusively, wherein the securities exchanged are not from the same issuer; j) Share subscriptions Prior to the incorporation or pursuant to an increase in Authorized capital stock: k) Sale by issuer to fewer than Q persons during any 12-month period; I) Sale to qualified buyers: (i) Banks, (ii) Investment house. (iii) Investment company. (iv) Insurance company. (v) Pension fund/ retirement plan maintained by the Government, (vi) Other person determined by the SEC as qualified buyers; m) Other transactions exempt by the SFC (SRO. Sec. 10)

55/ What is short swing profit?

55/ - It is a regulation which requires certain persons (owner of more than 10% of shares of a company, a director or officer of such corp., to return any profits made from the purchase and sale of company stock if both transactions occur within a 6-month period. - XPN: Unless the security was acquired in good faith in connection with a debt previously contracted. (SRC, Sec. 23.2)

55/ When does a presumption of insider trading arise?

55/ A purchase or sale of a security made by an insider, or such insider's spouse or relatives by affinity or consanguinity within the 2"" degree (legitimate or common law) shall be presumed to be insider trading if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for the market to absorb such information. (SRC, Sec. 27.1)

55/ How is the presumption rebutted?

55/ This presumption shall be rebutted upon a showing by the purchaser or seller that he was not aware of the material non-public information at the time of the purchase or sale. (SRC. Sec. 27.1)

55/ Is mere communication by the insider of material non-public Information punishable?

55/ Yes. It shall be unlawful for any insider to communicate material non-public information about the issuer or the security to any person who, by virtue of the communication, becomes an insider, where the insider believe that such person will likely buy or sell a security of the issuer communicating the information knows or has reason to while in possession of such information. (SRC, Sec 27.3)

55/ What are the other devices or practices on manipulation of security of prices? (WMR- SRDM-CFP)

55/ a) Wash sales - by effecting transactions which do not involve any change in beneficial ownership; b) Improper Matched orders - by entering an order for the purchase or sale of security with the knowledge that a simultaneous order or orders of substantially the same size, time and price for the sale or purchase of any such security, has or will be entered by or for the same or different parties; c) Market gigging or jiggling — performing similar act where there is no change in beneficial ownership, or other acts which tend to create a false appearance of active trading; ///

55/ What is material non-public information?

55/ information not generally disclosed to the public and would (a) likely affect the market price once disseminated to the public and after the lapse of a reasonable time for the market to absorb the information or (b) be considered by a reasonable person as important in determining his course of action vis-a-vis the securities. (SRO, Sec. 27.2)

56/ Under what circumstances is a tender offer mandatory?

55/// NOTE: Under the first instance. if the tender offer is oversubscribed, the aggregate amount of securities to be acquired at the close of the tender offer shall be proportionately distributed across shareholders who wish to tender their shares. Under the second instance, the acquirer is required to accept all securities tendered, even if the tender offer is oversubscribed. (2015 SRC Rules, Rule 19.2)

55/ What are the other devices or practices on manipulation of security of prices? (WMR- SRDM-CFP)

55/// d) To effect, alone or with others, a series of transactions in securities that: - Raises the price to induce the purchase of a security, -Depresses the price to induce the sale, or - Creates Active trading to induce such purchase or sale through Manipulative devices (i.e., marking the close. Painting the tape, squeezing the float, hype and ump, improper matched orders, boiler room operations, scalping, daisy chain, flipping); e) To circulate information that the price of any security listed in an exchange will or is likely to rise or fall because of manipulative market operations: f) To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in an exchange; g) To effect whether alone or with others, series of transactions for the purchase and/or sale of any security traded in an exchange for the purpose of Begging, fixing or stabilizing the price of such security, unless otherwise allowed by the SRC. (SRC, Sec. 24.1)

56/ Under what circumstances is a tender offer mandatory?

56/ A person is required under the following circumstances to make a tender offer for equity shares of a Public company in an amount equal to the number of shares that the person intends to acquire: a) Where the person intends to acquire 35% or more of the equity shares of a public company in one or more transactions within a period of 12 months (creeping acquisition); and b) Acquisition of even less than 35% but would result in ownership of more than 50% of the total outstanding equity securities of a public company {2015 SRC Rules, Rule 19. 2) ///

56/ What is a Short Sale?

56/ It means any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of the seller with the commitment of the seller or securities borrower to return or deliver said securities or their equivalent to the lender on a determined or determinable future date. {2015 SRC Rules, Rule 24. 2-2)

56/ What are the exceptions to the mandatory offer rule? (U-lP-FROM)

56/ Unless the acquisition of equity securities is intended to circumvent or defeat the objectives of the tender offer rules, the mandatory tender offer requirement shall not apply to the following purchases of securities: a) From the Unissued capital stock; provided, the acquisition will not result to a 50% or more ownership of securities by the purchaser or such percentage that is sufficient to gain control of the board; ///

56/ What is a tender offer?

56/ it is a publicly announced intention by a person acting alone or in concert with other persons to acquire equity securities of a public company. (SRC, Sec. 19). NOTE: A public company under the SRC refers to: a) Any corporation with a securities listed on an Exchange, or b) Any corporation with assets exceeding P50M and has 200 or more holders each holding at least 100 shares of a class of its equity securities (2015 SRC Rules, Rule 3.1.16)

56/ What are the exceptions to the mandatory offer rule? (U-lP-FROM)

56/// b) From an increase in authorized capital stock; c) In connection with a Privatization undertaken by the Philippine government; d) In connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor; e) In connection with corporate Rehabilitation under court supervision; f) In the Open market at the prevailing market price: and g) Merger or consolidation.

57/ UCC is a publicly listed corporation and has two principal stockholders. The principal stockholders and their percentage of stock ownership are as follows: UCHC — 60.51% Cemco — 17.03% On the other hand, majority of UCHC's stocks (amounting to 51%) were owned by BCI And ACC in the following proportions: BCI — 21.31% ACC - 29.69% Cemco owned 9% of UCHC Subsequently, BCI and ACC disclosed that they would sell their shares in UCHC to Cemco. This sale would mean that Cemco would acquire a total of 53% of UCC through direct and indirect ownership. Is this subject to the mandatory tender offer rule?

57 Yes. Under the SRC, when a person seeks to acquire at least 35% of a listed corporation or if less than 35%, the acquisition would amount to ownership of more than 50% of the corporation, he is required to make a mandatory tender offer. This applies even though ownership was acquired indirectly. (Cemco Holdings Inc. v. National Life Insurance, G.R. No. 171815, 2007)

57/ X Co., a private property company owned by X and Y, has assets worth more than Php200 million and plans to sell commercial papers worth Php 50 million to 10 banks and 11 insurance companies. Is X Co. subject to any disclosure requirement under the Securities Regulation Code?

57/ No. Section 17.2 of the SRC provides that the reportorial requirements under the Code apply only to three types of issuers: a) An issuer which has sold a class of its securities pursuant to a registration statement, b) An issuer with a class of securities listed for trading on an Exchange, and c) An issuer with assets of at least P50m and having 200 or more holders, each holding at least 100 shares of a class of its equity securities. ///

57/ In addition to the three types of issuers stated under Sec. 17.2 of the SRC, who are required to make disclosures?

57/ Where an issuer is covered by the Disclosure Rule (i.e., one that falls under any of the three types under Sec. 17.2), any person who directly or indirectly acquires the beneficial ownership of 5% or more of any class of equity securities of said issuer must file a sworn statement within 5 business days after such acquisition to the issuer, to the Exchange where the security is traded (if listed), and to the SEC. (SRO, Sec. 18: 2015 SRC Rules, Rule 18.1.1) NOTE: Sec. 18 says "more than 5%" but the IRR Rule 18.1.1 requires a minimum of 5% only.

57/ In addition to the three types of issuers stated under Sec. 17.2 of the SRC, who are required to make disclosures?

57/// Where an issuer is covered by the Disclosure Rule, the following individuals are also covered by the same: a) Principal stockholder (e.i., one who is, directly or indirectly, the beneficial owner of 10% or more of any class of any security of the issuer), and b) Director or officer of the issuer (SRC, Sec. 23; 2015 SRC Rules. Rule 23.1) Those listed under Sec. 23 must file two kinds of statements with the SEC and Exchange where the security is traded (it listed): a) Within 10 days after becoming a principal stockholder, director, or officer, they must file a statement indicating the amount of securities of such issuer of which he is the beneficial Owner, and ///

57/ In addition to the three types of issuers stated under Sec. 17.2 of the SRC, who are required to make disclosures?

57/// b) Within 10 days after the close of each calendar month, if there has been any change in the person's ownership during the month, the person must file a statement indicating his ownership at the end of the month, and the changes that have occurred over the month. (SRC, 2015 SEC Rules, Rule 23.1.1) NOTE: Sec. 23 says "more than 10%" but Rule 23.1 requires minimum of 5% only.

58/ What is conservatorship?

58/ Conservatorship involves the appointment of a conservator to preserve the assets of the bank when the latter is illiquid, and take measures. (NCBA, Sec. 29)

58/ Explain the rule on treble damages suits under the SRC.

58/ In all suits to recover damages pursuant to Secs. 56-61 of the SRC; the RTC may award damages in an amount not exceeding triple the amount of the transaction, in addition to actual damages, exemplary damages, and attorney's fees not exceeding 30% of the award. (SRO, Sec. 63. 1)

58/ What is the prescriptive period for criminal liability incurred under the Securities Regulation Code?

58/ The SRC provides for a prescriptive period. But only insofar as civil liability is concerned. (see SRC. Sec. 62) It does not provide for a prescriptive period for the enforcement of criminal liability in case of violations of the SRC. Hence, the provisions of Act No. 3326 apply such that offenses punishable by imprisonment for six years or more prescribe after 12 years. (Citibank v. Tanco-Gaba/don. G.R. No. 198444, 2013)

58/ What are deposit substitutes?

58/ These are alternative forms of obtaining funds from the public. other than deposits, through the issuance, endorsement or acceptance of debt instruments for the purpose of relending or purchasing of receivables and other obligation. (New Central Bank Act, See. 95)

58/ What is the effect of the new PDIC Charter on receivership?

58/ Under the new PDIC Charter, banks closed by the Monetary Board shall no longer be rehabilitated. The PDIC, as receiver, shall immediately proceed with the takeover and liquidation. (New PDIC Charter, Sec. 12[a])

58/ When is conservatorship available?

58/ Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or quasi-bank is: a. In a state of continuing inability; or b. Unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors (NCBA, Sec. 29): The Monetary Board May: a. Appoint a conservator to take charge, for a period not exceeding 1 year. of the assets, liabilities. and the management thereof; ///

58/ When is conservatorship available?

58/// b. Reorganize the management; c. Collect all monies and debts due said bank: and d. Exercise all powers necessary to restore its viability, with power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi—bank A bank conservator appointed by the BSP has no power to unilaterally rescind contracts entered into by the previous management, such as a CBA, on the mere assertion that such contracts are highly disadvantageous to the bank. (Producers Bank v. NLRC, G.R. No. 118069, 1998). The power to revoke or rescind contracts pertains to the courts.

59/ What are the grounds for resolution of a bank?

59/ Grounds under the New PDIC Charter (New PDIC Charter, Sec. 11): The PDIC, in coordination with the BSP, may commence the resolution of a bank upon — (FR) a. Failure of prompt corrective action as declared by the Monetary Board; or (new PDIC Charter, Sec. 11[a}[1]) b. Request by a bank to be placed under resolution. (New PDIC Charter, Sec. 11[a][2]) The PDIC shall inform the bank of its eligibility for entry into resolution. Within a period of 180 days from a bank's entry into resolution, the PDIC, through the affirmative vote of at least 5 members of the board, shall determine whether the bank may be resolved through the purchase of all its assets and assumption of all its liabilities, or merger or consolidation with. or its acquisition, by a qualified investor. {New PDIC Charter, Sec. 11{e]) ///

59/ What is the effect when the Monetary Board orders the closure of a bank?

59/ Whenever a bank is ordered closed by the Monetary Board, the PDIC shall be designated as receiver and it shall proceed with the takeover and liquidation of the closed bank in accordance with RA. No. 3591. (RA. No. 3591, Sec. 12(3), as amended by RA. No. 10846 [hereinafter New PDIC Charter) Receivership is the stage within which the PDIC manages the affairs of the closed bank and preserves its assets for the benefit of creditors (RA. No. 9302, Sec. 10[a][b])

59/ What are the grounds for resolution of a bank?

59/// Grounds under the General Banking Law (hereinafter GBL): (NSP) a. If the bank or quasi-bank notifies the BSP or publicly announces a bank holiday (GBL. Sec. 53): or b. If the bank or quasi-bank in any manner suspends the payment of its deposit liabilities continuously for more than 30 days (GBL, Sec.53): or c. If a bank persists in conducting its business in an unsafe or unsound manner GBL, Sec. 56) and the receiver determines that the bank cannot be rehabilitated or permitted to resume business.

59/ What are the grounds for resolution of a bank?

59/// Upon a determination by the PDIC that the bank may not be resolved, the Monetary Board may act in accordance with Section 30 of the NCBA. Grounds under the New Central Bank Act (NCBA) Whenever the Monetary Board finds that a bank or quasi-bank — (UIPV) a. Is enable to pay its liabilities as they become due in the ordinary course of business (cash flow test) (NCBA, Sec. 30[a]); Exception: Inability to pay caused by extraordinary demands induced by financial panic in the banking community (bank run) b. Has insufficient realizable assets to meet its liabilities (balance sheet test) (NCBA, Sec. 30[b]); c. Continue in business without involving probable losses to its depositors and creditors (NCBA. Sec. 30[c]): or d. Has willfully violated a cease—and desist order under NCBA, Sec. 37 (Administrative Sanctions) that has become final and involves acts or transactions which amount to fraud or a dissipation of assets (NCBA. Sec. 30[d]) ///

6/ What are the rules on delivery of negotiable instruments?

6/ - Delivery is essential to the validity of any negotiable instrument - As between immediate parties or those in like cases, delivery must be with the intention of passing title. -An instrument signed but not completed by the drawer or maker and retained by him is invalid as to him for want of delivery even in the hands of a holder in due course. -But there is prima facie resumption or delivery of an instrument signed but not completed by the drawer or maker and retained by him if it is in the hands of a holder in due course. This may be rebutted by proof of non-delivery. -An instrument entrusted to another who wrongfully completes it and negotiates it to a holder in due course, delivery to the agent or custodian is sufficient delivery to bind the maker or drawer. -If an instrument is completed and is found in the possession of another, there is prima facie evidence of delivery and if it be a holder in due course, there is conclusive presumption of delivery. -Delivery may be conditional or for a special purpose but such do not affect the rights of a holder in due course.

6/ What happens when any of the formal requisites are lacking?

6/ It is not negotiable and the provisions of the Negotiable Instruments Law do not apply. The requirement that is lacking cannot be supplied by using a separate instrument in which that requirement appears (El Blanco Espanol-Filipino v. Mickay, 1914)

6/ What is the effect if no date of maturity is specified in the instrument?

6/ It shall be payable upon demand.

6/ What are the essential formal requisites of a negotiable instrument? (WS-UDON)

6/ a. In Wring; b. Signed by the maker or drawer; c. Contains an Unconditional promise or order to pay a sum certain in money; d. Payable on Demand, or at a fixed or determinable future time; e. Payable to Order or to bearer; and, f. Where is it a bill of exchange, the drawee must be Named or otherwise indicated therein with reasonable certainty. Note: Electronic messages, (e.g. instructions given through electronic messages giving authority to debit a certain account), are not negotiable instruments as they do not comply with the requisites of negotiability under Sec. 1 of the NIL (HSBC v. CIR, 2014)

6/ What are the effects of a crossed check?

6/ a. The check cannot be Encashed but can only be deposited in the bank; b. It may be Negotiated only once - to one who has a bank account; c. It serves as a warning that the check was issued for a definite purpose and the holder is not a holder in due course unless he inquired if he received it pursuant to that purpose. (Bataan Cigar and Cigarette Factory, Inc. v. CA, 1994)

60/ What are the effects of placing a bank under liquidation?

60/ The officers. employees, deputies. Assistants and agents of the receiver shall have no liability and shall not be subject to any action, claim or demand in connection with any act done or omitted to be done by them in good faith in connection with the exercise of their powers and functions under the PDIC charter and other applicable laws, or other actions duly approved by the court. (New PDIC Charter, Sec. 13[d}) The placement of a bank under liquidation shall have the following effects:

60/ what happens to banks which are closed by the Monetary Board?

60/ Under the new PDIC Charter, banks closed by the Monetary Board shall no longer be rehabilitated. The PDIC. as receiver, shall immediately proceed with the takeover and liquidation. (New PDIC Charter. Sec. 12(a1)

60/ a. On the CORPORATE FRANCHISE or existence (New PDIC Charter, Sec. 15[e][1j)

60/ Upon placement by the Monetary Board of a bank under liquidation, it shall continue as a body corporate until the termination of the winding up period Note: Winding up period is 6 months from the date of publication of notice of the approval by the court of the final Asset distribution plan of the closed bank. (New PDIC Charter, Sec. 16[c]) Such continuation as a body corporate shall only be for the purpose of liquidating. settling and closing its assets Receiver shall represent the closed bank in all cases by or against the closed bank and prosecute and defend suits by or against it Note: in no case shall the bank be reopened and permitted to resume baking business after being placed under liquidation.

60/ What are the modes of liquidation under the New PDIC Charter?

60/ a. Conventional Liquidation Charter, Sec. 16) The assets gathered by the receiver shall be evaluated and verified as to their existence, ownership, condition, and other factors to determine their realizable value. b. Purchase of Assets and/or Assumption of Liabilities (New PDIC Charter, Sec. 15) The receiver shall have the authority to facilitate and implement the purchase of the assets of the closed bank and the assumption of its liabilities by another insured bank, without need for approval of the liquidation court. The exercise of this authority shall be in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws, subject to such terms and conditions as the PDIC may prescribe. The disposition of the branch licenses and other bank licenses of the closed bank shall be subject to the approval of the BSP.

60/ On the POWERS AND FUNCTIONS of its directors. officers and stockholders (DOS) (New PDIC Charter, Sec. 15[e][2])

60/The powers, voting rights, functions and duties, as well as the allowances, remuneration and perquisites of the DOS of such bank are TERMINATED upon its closure. DOS shall be BARRED from interfering in any way with the assets, records, and affairs of the bank Note: The receiver shall exercise all authorities as may be required to facilitate the liquidation of the closed bank for the benefit of all its creditors.

61/ On FINAL DECISIONS against the closed bank (New PDIC Charter, Sec. 15[e][10})

61/ Execution and enforcement of a final decision of a court other than the liquidation court against the assets of a closed bank shall be STAYED Prevailing party shall file the final decision as a claim with the liquidation court and settled in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws

61/ On Liability for penalties and surcharges for later payment and nonpayment of TAXES (New PDIC Charter, Sec. 15[e][7])

61/ From the time of closure. the closed bank shall not be liable for the payment of penalties and surcharges arising from the late payment or non- payment of real property tax. capital gains tax, transfer tax and similar charges

61/ On ACTIONS PENDING for or against the closed bank (New PDIC Charter, Sec. 15[e][91)

61/ General Rule: Actions pending for or against the closed bank in any court or quasi-judicial body shall, upon motion of the receiver, be suspended for a period not exceeding 180 days and referred to mandatory mediation Exception: Actions pending before the Supreme Court

61/ On CONTRACTUAL OBLIGATlONS (New PDIC Charter, Sec. 15[e][5j)

61/ Receiver may cancel, Terminate, rescind or repudiate any contract of the closed bank that is not necessary for the orderly liquidation of the bank, or is grossly disadvantageous to the closed bank, or for any ground provided by law

61/ On BANK CHARGES AND FEES on services (New PDIC Charter, Sec. 15[e][8j)

61/ Receiver may impose charges and fees for services rendered after bank closure such as the execution of pertinent deeds and certifications

61/ On LABOR RELATIONS (New PDIC Charter, Sec. 15[e][41)

61/ The employer—employee relationship between the closed bank and its employees shall be deemed terminated upon service of the notice of closure of the bank Payment of separation pay or benefits provided for by law shall be made from available assets of the bank in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws

61/ On INTEREST PAYMENTS (New PDIC Charter, Sec. 15[e][6])

61/ The liability of a bank to pay interest on deposits and all other obligations as of closure shall cease upon its closure without prejudice to NCBA, Sec. 85 Provided: The receiver shall have the authority, without need for approval of the liquidation court, to assign, as payment to secured creditors, the bank assets serving as collaterals to their respective loans up to the extent of the outstanding obligations including interests as of date of closure (valuation based on the prevailing market value of the collaterals) Note: The BSP shall collect interest and other appropriate charges on all loans and advances it extends, the closure, receivership or liquidation of the debtor—institution notwithstanding. (NCBA. Sec. 85)

62/ What is the scope of confidentiality of bank deposits?

62/ All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities are considered as an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office. (Bank Secrecy Law, Sec.2)

62/ Docket and other COURT FEES (New PDIC Charter, Sec. 15[e][1r1j)

62/ Payment of docket and other court fees relating to all cases or actions filed by the receiver with any judicial or quasi—judicial bodies shall be deferred until the action is terminated with finality Any such fees shall constitute as a first lien on any judgment in favor of the closed bank or in case of unfavorable judgment, such fees shall be paid in liquidation costs and expenses during the distribution of the assets. All assets, records, and documents in the possession of the closed bank at the time of its closure are presumed held by the bank in the concept of an owner. (New PDIC Charter, Sec.15[e][121) ///

62/ What are the exceptions to the rule on bank secrecy? (ClCL)

62/ a) Upon written consent of the depositor b) Impeachment cases c) Court order in cases of bribery or dereliction of duty of public official's d) In cases where the money deposited or invested is the subject matter of the Litigation. (Bank Secrecy Law, Sec. 2) NOTE: Other exceptions provided under special laws (PLANG-A 1LAP-CHtB) ///

62/ Docket and other COURT FEES (New PDIC Charter, Sec. 15[e][1r1j)

62/// The exercise of authority, functions, and duties by the receiver shall be presumed to have been performed in the regular course of business. (New PDIC Charter, Sec. 15[e][13j) Assets and documents of the closed bank shall retain their private nature even if administered by the receiver. (New PDIC Charter, Sec. 15[e][14J) Note: Matters relating to the exercise by the receiver of the functions shall be subject to visitorial audit only by the COA.

62/ What are the exceptions to the rule on bank secrecy? (ClCL)

62/// a) Inquiry into illegally acquired amounts under the Plunder Law {RA 7080) b) Upon order of competent court in cases involving unexplained wealth under the Anti- Graft and Corrupt Practices Act (RA 3019) c) In-camera inspection by the ombudsman under the Ombudsman Act {RA 6770, Sec. 15(8)) d) Upon court order when there is probable cause that the deposits or investments involved are in any way related to money laundering or an unlawful activity under the AMLA (AMLA. Sec. 11) ///

62/ What are the exceptions to the rule on bank secrecy? (ClCL)

62/// e) ESP and EDIC may inquire into or examine deposit accounts and all information related thereto in case there is unsafe or unsound banking practice (PDIC Charter, as amended. Sec. 8) f) Inquiry by the commissioner of Internal Revenue under certain circumstances (National Internal Revenue Code, Sec. 6(f) g) Upon written order of the Court of Appeals under Sec. 27 of the human Security Act h) Examination by an independent auditor hired by the bank (DOJ Opinion No. 243, Series of 1957; Marquez v. Desierto, G.R. No. 135882, 2001) i) ESP inquiry into or examination of deposits or investments with any bank, when the inquiry or exam is made in the course of BSP's periodic or special exam of said bank (AMLA, Sec. 11)

63/ What is the nature and coverage of secrecy of foreign deposits under the Foreign Currency Deposits Act?

63/ All foreign currency deposits are considered of an absolutely confidential nature and shall be exempt from attachment. Garnishment, or any other order or process of any court, legislative body, government agency, or any administrative body whatsoever. (Foreign Currency Deposit Act ["FCDA'j. Sec. 8)

63/ What is the rule on in-camera inspection by the Ombudsman of a bank deposit?

63/ Before an in-camera inspection may be allowed: 1. There must be a pending case before a court of competent jurisdiction. 2. The account must be clearly identified. The inspection limited to the subject matter of the pending case. 3. The bank personnel and the account holder must be notified to be present during the inspection 4. Such inspection may cover only the account identified in the pending case. (Marquez v. Desierto, G.R. No. 135882, 2001)

63/ What is the effect of the AMLA on the secrecy of bank deposits?

63/ It adds another exception to the rule of secrecy of bank deposits. Thus, the AMLC may inquire into or examine any deposit or investment with any banking institution or non-bank financial institution upon order of competent court in cases of violation of AMLA when it is established that there is probable cause that the deposits or investments involved are in any way related to: ///

63/ Does garnishment of bank accounts violate the Law on Secrecy of Bank Deposits?

63/ No. Bank accounts may be garnished by the creditors of the depositor. There is no violation of the Law on Secrecy of Bank Deposits if the accounts are garnished. It was not the intention of the legislature to place bank deposits beyond the reach of execution to satisfy a final judgment. Its purpose is merely to secure information as to the name of the depositor and whether or not the defendant had a deposit in said bank, only for purposes of garnishment. Any disclosure is purely incidental to the execution process. (China Banking v. Ortega, G.R. No L—34964, 1973)

63/ What are the exceptions to the secrecy of foreign currency deposits? (CBC-AMLAP)

63/ a) Upon the written Consent of the depositor (FCDA, Sec. 8) b) BSP inquiry into or examination of deposits or investments with any bank, when the inquiry or exam is made in the course of BSP's periodic or special exam of said bank (AMLA, Sec. 11) c) Inquiry by the Commissioner of Internal Revenue under certain circumstances (National Internal Revenue Code, Sec. 6(0) ///

63/ What is the effect of the AMLA on the secrecy of bank deposits?

63/// a) A money laundering offense under Sec. 4 of the AMLA or b) An unlawful activity as defined under Sec. 3(i) of the AMLA. NOTE: No court order is necessary in cases involving: a) Kidnapping for ransom b) Drug-related offenses under Secs. 4.5.6. and 8-16. RA. 9165 c) Hijacking, destructive arson, and murder (AMLA, as amended, Sec. 11)

63/ What are the exceptions to the secrecy of foreign currency deposits? (CBC-AMLAP)

63/// d) Court order in cases of violation of AMLA when it is established that there probable cause that the deposits or investments involved are in any way related to a money laundering offense (AMLA, Sec. 11) Order of competent court is not required in: (i) Kidnapping for ransom (ii) Drug trafficking (iii) Hijacking, destructive arson, and murder e) BSP and EDIC may inquire may inquire into or examine deposit accounts and all information related thereto in case there is unsafe or unsound banking practice (PDIC Charter, as amended. Sec. 8) NOTE: Impeachment constitutes an exception to the Bank Secrecy Law for peso deposits, but not the foreign currency deposits.

64/ Distinguish deposits in peso from that in foreign currency insofar as the Secrecy of Bank Deposits Law is concerned.

64/ PESO DEPOSIT -May be garnished because the amount is actually not disclosed Exceptions: No validation of Secrecy Law in the following cases: a) inquiry into illegally acquired amounts under the plunder Law (RA 7080) b) Upon order of competent court in cases involving unexplained wealth under the anti-Graft and Corrupt Practices Act (RA 3019) c) In-camera inspection by the ombudsman under the Ombudsman Act {RA 6770. Soc.15(8)) d) Upon court order when there is probable cause that the deposits or investments involved are in any way related to money laundering or an unlawful activity under the AMLA (AMLA, Sec 11) ////

64/ Distinguish deposits in peso from that in foreign currency insofar as the Secrecy of Bank Deposits Law is concerned.

64/// FOREIGN CURRENCY -May not be garnished, attached or be subject to any court process Exceptions: No violation of Secrecy Law in the following cases: a) Upon the written Consent of the depositor (FCDA, Sec. 8) b) BSP inquiry into or examination of deposits or investments with any bank, when the inquiry or exam is made in the course of BSP's periodic or special exam of said bank (AMLA. Sec. 11) c) Inquiry by the 90mmissioner of Internal Revenue under certain Circumstances (National Internal Revenue Code. Sec. 6(f)

64/ Distinguish deposits in peso from that in foreign currency insofar as the Secrecy of Bank Deposits Law is concerned.

64/// d) Court order in cases of Violation of AMLA when it is established that there probable cause that the deposits or investments involved are in any way related to a money laundering offense (AMLA, Sec. 11) Order of competent court is not required in: (iv) Kidnapping for ransom (v) Drug trafficking (vi) Hijacking, destructive murder e) BSP and EDIC may inquire may inquire into or examine deposit accounts and all information related thereto in case there is unsafe or unsound banking practice (PDIC Charter, as amended, Sec. 8) NOTE: In Salvacion v. Central Bank (G.R. No. 94723, 1997), an American tourist found guilty of repeatedly raping a 12 year old child was held civilly liable to pay PHP 1,000,000. The Court allowed the foreign deposits to be examined, garnished and then released to the rape victim.

64/ Distinguish deposits in peso from that in foreign currency insofar as the Secrecy of Bank Deposits Law is concerned.

64/// e) BSP and EDIC may inquire into or examine deposit accounts and all information related thereto in case there is unsafe or unsound banking practice (PDIC Charter, as amended. Sec. 8) f) Inquiry by the commissioner of internal Revenue under certain circumstances (National Internal Revenue Code, Sec. 6(0) g) Upon written order of the Court of Appeals under-Sec. 27 of the human Security Act Examination by an independent auditor hired by the bank (DOJ Opinion No. 243, Series of 1957: Marquez v. Desierto, G.R. No. 135882. 2001) I) BSP inquiry into or examination of deposits or investments with any bank, when the inquiry or exam is made in the course of BSP's periodic or special exam of said bank (AMLA. Sec. 11) ///

65/ R maintained 7 trust accounts with P, a government financial institution. P demanded payment from R the return of P4M it claimed to have been inadvertently deposited to R's trust account which actually represented the total amount of checks issued to P by its corporate borrowers for their pre-terminated loans. P unilaterally applied the outstanding balances in all of R's trust accounts, which resulted in the latter's indebtedness. R maintained that all the funds in his accounts came from legitimate sources and he was unaware of or had nothing to do with the alleged "miscrediting." RTC and CA agreed that R was entitled to the unaccounted withdrawals. WIN R is entitled to the award of representing the alleged undocumented withdrawals debited from his trust accounts

65/ (DEL CASTILLO) Yes. P failed to prove that the 'miscredited" funds came from the proceeds of the pre-terminated loans of its corporate borrowers. P is guilty of negligence while R (at least insofar as over withdrawals are concerned) is not. Had P maintained an accurate record, it would have readily detected and prevented over withdrawals. The depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo and as promptly as possible. This has to be done it the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs... The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligations to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. (Land Bank of the Philippines v. Oñate. GR No. 192371, January 15, 2014)

65/ What is the distinction of banks from quasi- banks and trust entities?

65/ Banks are entities engaged in: a) Obtaining funds in the form of deposits, i.e., savings, demand or current, time or fixed deposits; b) From the public, i.e. 20 or more lenders at any one time (GBL, Sect 8.2.); c) For purposes of lending (GBL, Sec. 3.1) Quasi-banks are entities engaged in: a) Borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes b) For purposes of relending or purchasing of receivables and other obligations (GBL, Sec.4) Trust entities are any bank or non-bank financial institution, that performs trust functions through a specifically designated business unit, and a trust corporation, authorized by the BSP to engage in trust or other fiduciary business. (BSP Circular 767, Series of 2012)

65/ What is a bank?

65/ Banks shall refer to entities engaged in the lending of funds obtained in the form of deposits (General Banking Law of 2000 ["GBL '7, Sec. 3. 1)

65/ What is the nature of the banking business?

65/ The banking business is fiduciary in nature and requires high standards of integrity and performance. (GBL, Sec. 2) Thus, banks are under the obligation to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship. (Metropolitan Bank v. Marinas, G.R. No. 179105, 2010) The due diligence required of banks extend even to persons or institutions regularly engaged in the business of lending money secured by real estate mortgage. such as the GSIS. (6818 v. Santiago, G.R. No. 155206, 2003) But the same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. (Reyes vs. Court of Appeals, G.R. No. 118492, 2001)

66/ R and H were former registered owners of a residential lot in Bulacan. On Feb 1994, they entered into an Agreement with P to secure a loan of P30,000 with an interest rate of 5% per month. Mortgage debt was payable until August 1994 but R failed to pay so she offered to pay P30,000 plus portion of interest. P refused-and demanded payment of P349,000. P caused extrajudicial foreclosure of real estate and emerged as the only bidder. Period of redemption expired without R redeeming the property, R filed a complaint. RTC and CA found the interest rate iniquitous or unconscionable. WIN the CA grossly erred in nullifying the interest rate expressly stipulated in the contract of mortgage entered into between R and P.

66/ No, While parties to a loan agreement have wide latitude to stipulate on any interest rate in view of the Central Bank Circular No. 905 s. 1982, which suspended the Usury Law ceiling on interest effective January 1, 1983, it is also worth stressing that interest rates whenever unconscionable may still be declared illegal. There is certainly nothing in said circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. (Sps Castro v. Tan, G.R. No. 168940, January 15, 2014)

66/ Can pawnshops be classified as a bank?

66/ No. Pawnshops are non-banks/banking institutions. Moreover, the nature of their business activities partakes that of a financial intermediary in that its principal function is lending. Note, however, that pawnshops are still under the regulatory supervision of the BSP (First Planters Pawnshop v. BIR, G.R. No, 174134. 2008)

66/ When can a director or officer borrow from a bank, or become a guarantor, indorser or surety for loans from such bank to others?

66/ Only upon written approval of the majority 01 all directors of the bank, excluding the directors concerned. (GBL, Sec. 36, Ramoso v. CA, G.R. No. 117416, 2000)

66/ What is the Single Borrower's Limit?

66/ The total amount of loans. Credit accommodations and guarantees that may be extended by a bank to any person. partnership, association, corporation or other entity, shall not exceed 25% 0f the Bank net worth. (GBL, Sec 35.1 as increased by BSP Circular 425 (2004)]

66/ Distinguish between a commercial and universal bank

66/ UNIVERSAL BANK - Exercise those powers incidental to corporations - Has all the powers—to—carry on (1) the business of commercial banking as well as {2) other related banking services. (GBL, Sec. 53) -Can exercise powers of an investment house - Can also invest in non-allied enterprises (in addition to financial allied and non- financial allied services) COMMERCIAL BANK - Exercise those powers incidental to corporations - Has all the powers—to—carry on (1) the business of commercial banking as well as {2) other related banking services. (GBL, Sec. 53) - cannot exercise powers or an investment house - Cannot invest in non-allied enterprises (only in financial allied and non-financial allied services)

66/ What are the limitations on floating rates and escalation clauses?

66/ While it may be acceptable for banks to stipulate that interest rates on a loan not to be fixed and instead be made dependent upon prevailing market conditions, there should always be reference rate upon which to peg such variable interest rates. (Consolidated Bank v, Court of Appeals, GR. No. 114286. 2001 ) Any increase in the rate of interest made pursuant to an escalation clause must bathe result of agreement between the bank and borrower. (PNB v. Court of appeals G.R. No. 108052, 1996)

67/ What intellectual rights should be registered? (TPC)

67/ a) Trademarks b) Patents c) copyrights (See generally Intellectual Property Code ['IP Code '7)

67/ Differentiate Trademark, Copyright and Patent.

67/ AS TO SUBJECT MATTER *PATENT - A product, process or any improvement of the foregoing which a technical solution of a problem. *COPYRIGHT- A literary or artistic work *TRADEMARK-Any sign to distinguish the goods or services of an enterprise. AS TO ELEMENTS *PATENT- 1. Any technical solution of a problem in a field of human activity 2. Has patentable subject; 3. the invention must be new (novelty); 4. involves an inventive step; (non-obvious) and 5. Which is industrially applicable *COPYRIGHT-1. Literary or artistic work 2. Independently created 3. Has a minimum of creativity *TRADEMARK 1. Any visible sign 2. Capable of distinguishing the goods or services of an enterprise 3. Must not be excluded by the laws ///

67/ A president of a rural bank was investigated for allegedly acquiring a loan from the said bank. The first information filed against him was for estate and the second information filed against him was for violation of Section 83 of the DORSI law. The president is now questioning whether a loan transaction within the ambit of the DORSI law could also be subject of Estafa under the RFC?

67/ YES. The bank money which came to the possession of the president was money held in trust or administration by him for the bank in his fiduciary capacity as president of the said bank. It is not accurate to say that the president became the owner of the money because it was the proceeds of a loan. According to the first information for estata, the loan was supposed to be for someone else. The president made it appear that it was for someone else when it was really for him. Thus, the president remained the bank's fiduciary with respect to that money, which makes it capable of misappropriation. Furthermore, the prohibition in the DORSI law is broad enough to cover various modes of borrowing — direct and indirect borrowing. Indirect borrowing applies in this case. {Soriano v. People G.R. No. 162336, February 1. 2010.)

67/ Differentiate Trademark, Copyright and Patent.

67/// HOW TO REGISTER *PATENT- Intellectual Property Office *COPYRIGHT-the National Library *TRADEMARK-Intellectually Property Office WHEN PROTECTION STARTS *PATENT- upon issuance of letters of patent by the intellectual property office *COPYRIGHT-upon creation *TRADEMARK- upon issuance of the trademark certificate TERM OF PROTECTION *PATENT-20 years *COPYRIGHT-generally up to 50 years after the death of the author *TRADEMARK-10years

68/ What are non-patentable inventions? (DSM- MPCZ-SURGE-BIO-AES)

68/ a) Discoveries, scientific theories and Mathematical methods; b) Schemes, rules and methods of performing mental acts, playing games or doing business, and programs for Computers: c) Anything which is Contrary to public order or morality d) Methods for treatment of human or animal body by Surgery or therapy, and diagnostic methods practiced on the human body; BUT products and composition for use in any of these methods are patentable; e) Plant varieties or animal breeds or essentially biological process for the production of plants or animals; BUT micro-organisms and non-biological and microbiological processes are patentable; f) Aesthetic creations (IP Code, Sec. 22)

68/ What is a patent?

68/ A patent is a grant issued by the government through the intellectual Property Office of the Philippines (lPO). it is an exclusive right granted for a product, process or an improvement of a product or process which is new, inventive and useful given to its inventor the right to exclude others from making, using, or selling the product of his invention during the life of the patent.

68/ What are the requirements for the patentability of an invention? (TINA)

68/ An inventor may register a) Any Technical solution of a problem in a field of human activity; b) Which involves an inventive step; c) Which is new (novelty); and d) Which is industrially Applicable (IP Code, Sec. 21 )

68/ What are the elements of a patent?

68/ Element of Novelty -An invention is novel if it does not form part of the prior art. (IP Code. Sec. 23). Element of Inventive Step - An invention involves an inventive step if, having regard Element of to prior art, it is not obvious to a Inventive person skilled in the art at the Step time of filing date or priority date of application claiming the invention (IP Code. Sec. 23). Element of Industrial Applicability- An invention that can be produced and used in any industry shall be industrially applicable. (IP Code, Sec. 27)

68/ What is Franchising?

68/ Franchising is a business method of expansion that allows an individual or group of individuals to market a product or a service and to use of the patent, trademark, trade name and the systems prescribed by the owner. (Tesoro v. Metro Manila Retreaders. Inc. (Bandag), GR No. 171482. 2014.)

68/ As regards employees and employers. To whom does a right to a patent belong?

68/ In case the employee made the invention in the course of his employment contract, the patent shall belong to: a) The employee, if the inventive activity is not a part of his regular duties even if the employee uses the time, facilities and materials of the employer. b) The employer, if the invention is the result of the performance of his regularly—assigned duties, unless there is an agreement, express or implied, to the contrary. (IP Code. Sec. 30.2)

68/ To whom does a right to a patent belong?

68/ To the inventor. heirs, or assigns. When 2 or more persons jointly made an invention, the right to a patent shall belong to them jointly. (IP Code, Sec. 28)

69/ What are the limitations on patent rights? (PEMZS)

69/ No patent infringement arises in the following circumstances: a) Act is done privately and on a non-commercial scale or for a non-commercial purpose: Provided, that it does not significantly prejudice the economic interests of the owner of the patent; b) Act consists of making or using exclusively for the purpose of Experiments that relate to the subject matter of the patented invention; c) Act consists of the preparation for individual cases, in a pharmacy or by a medical professional, of a Medicine in accordance with a medical prescription or acts concerning the medicine so prepared; ///

69/ What is the term of a patent?

69/ Term of Patent shall be 20 years from the filing date of the application. (IP Code, Sec. 54)

69/ What is the First to File Rule?

69/ When two or more persons have made the invention separately and independently of each other, the right to the patent shall belong to the person who filed an application for such an invention, or the applicant who has the earliest filing or priority date (IP Code. Sec. 29).

69/ May the Director of Legal Affairs grant license to exploit patented invention even without agreement of the patent owner? (EMPUB-COMP-CWD)

69/ Yes, but under the following circumstances — a) National emergency or other circumstances of extreme urgency; b) Public interest, in particular, national security, nutrition, health or development of other vital sectors of national economy as determined by the appropriate agency of the Government, so requires; c) Where a judicial or administrative body has determined that manner of exploitation by patent owner or his licensee is anti- Competitive; or d) In case of public non-Commercial use of patent by patentee, without satisfactory reason; ///

69/ What are the limitations on patent rights? (PEMZS)

69/// d) Using a patented product which has been put on the Market in the Philippines by the owner of the product, or with his express consent, insofar as such use is performed after that product has been so put on the said market; d) Invention is used in any §hip, vessel, aircraft, or land vehicle of any other country entering the territory of the Philippines temporarily or accidentally: Provided, that such invention is used exclusively for the needs of the ship, vessel, aircraft, or land vehicle and not used for the manufacturing of anything to be sold within the Philippines. (IP Code, Sec. 72)

69/ May the Director of Legal Affairs grant license to exploit patented invention even without agreement of the patent owner? (EMPUB-COMP-CWD)

69/// e) if patented invention is not being worked in Philippines on commercial scale, although capable of being worked, without satisfactory reason: Provided that importation of patented article shall constitute working or using the patent. f) Where the Demand for patented drugs and medicines is not being met to an adequate extent and on reasonable terms, as determined by the Secretary of the DOH (IP Code, Sec. 93, as amended)

/7 What is the rule on the liability of signatories?

7/ General Rule: Only persons whose signatures appear on an instrument are liable thereon. A person whose signature does not appear on the instrument is not liable. Exceptions: a. Where a duly authorized Agent signs for a person, the latter is liable. (NIL, Sec. 10) b. A forger is liable even if his signature does not appear thereon. (NIL, Sec. 23) c. A person who is precluded from setting up forgery as a defense. (NIL, Sec. 23) d. Acceptance of a bill of exchange is written on a piece of paper, other than the bill itself. (NIL, Sec. 134) e. Unconditional promise in advance to accept a bill of exchange before it is drawn; which acceptance must be in writing. (NIL, Sec. 135)

7/ What are the legal consequences when a drawee bank honors a forged check?

7/ In the case of a forged check, the drawee bank is considered as paying out of its own funds and cannot charge the amount so paid to the depositor. The drawee bank, however, can go against the collecting bank if the collecting bank endorses a check bearing a forged endorsement and presents it to the drawee bank. In this case, it is the collecting bank that guarantees all prior endorsements including the forged endorsement itself. Therefore, the collecting bank is the one held ultimately liable. (Trader Royal Bank vs. Radio Philippine Network, Inc, 2002)

70/ What are the tests used to determine if there was patent infringement? (LE)

70/ In determining infringement of patent, two tests have been established: ///

70/ What is patent infringement?

70/ It constitutes the (a) making, using. offering for sale, selling or importing patented product or obtained from patented processes or (b) use of patented processes without authorization of patentee. (IP Code, Sec. 76.1)

70/ Distinguish patents, utility models, and industrial design.

70/ PATENTS are any technical solution of a problem in any field of human activity which is a) New, b) Involves an inventive step and, c) Is industrially applicable shall be patentable. (1P Code, Sec. 21) UTILITY MODELS vary from an invention, for which a patent for invention is, likewise available, on at least 3 aspects: ///

70/ b) DOCTRINE OF EQUIVALENTS

70/ When a device appropriates a prior invention by incorporating its innovative concept and, albeit with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result, (Smith Kline Beckman Corp v. CA, G.R. No. 126627, 2003).

70/ What are the limitations on the use of invention by the government? (SENR-TRO)

70/ a) The Scope and duration of the use shall be limited to the purpose for which it was authorized; b) Such use shall be non-exclusive: (IP Code. Sec. 74.2) c) The right holder shall be Notified as soon as reasonably practicable; (IP Code, Sec. 74.2) d) The right holder shall be paid adequate Remuneration in the circumstances of each case, taking into account the economic value of the authorization; (IP Code. Sec. 74.2) e) All cases arising on such matters shall be cognizable by courts with appropriate jurisdiction, provided that no court, except the Supreme Court, shall issue a 139 0r preliminary injunction or such order provisional remedies that will prevent its immediate execution; (IP Code, Sec. 74. 3) NOTE: There shall be no patent infringement in cases of use of invention by government (IP Code. Sec. 76)

70/ Distinguish patents, utility models, and industrial design.

70/// a) The requisite of "inventive step" in a patent for invention is not required. b) The _maximum term of protection is only 7 years, compared to a patent which is 20 years, both reckoned from the date of the application, c) The provisions on utility model dispense with its substantive examination and prefer for a less complicated system. (Ching v. Salinas. G.R. No. 161295, 2005) INDUSTRIAL DESIGNS are any composition of lines or colors or any three-dimensional form, whether or not associated-with lines or colors: Provided that such composition or form gives a special appearance to and can serve as pattern for an industrial product or handicraft. (IP Code, Sec. 112) Term of protection IS 5 years, renewable for not more than 2 consecutive times. (15 years) (IP Code, Sec. 118)

71/ When is it a colorable imitation?

71/ The following factors shall be used in determining whether the goods are related: a) Classification of goods b) Nature of the goods c) Descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and d) Style of distribution and marketing of the goods, including how the goods are displayed and sold. (Societe Des Produits Nestlé, S.A. v. Dy, Jr., G.R. No. 172276, 2010)

71/ What is the Doctrine of Secondary Use?

71/ The registration of a common name or a geographical location may be permitted under the doctrine of secondary meaning which is applied where it is proven that: a) This common term has been in use for many years: and b) The public has associated the products of applicant with this common term. (De la Rama Steamship v. NDC. No. L-26966. 1970)

71/ What is trademark dilution?

71/ Trademark dilution is the lessening of the capacity of a famous mark to identify and distinguish goods or services. To be eligible for the protection from dilution, there has to be a finding that: a) The trademark sought to be protected is famous and distinctive; b) The use by another began after the owner's mark became famous; and c) Such subsequent use defames the owner's mark. (Levi Strauss & Co v. Clinton Apparelle. G.R. No. 138900. 2005)

71/ What are the tests to determine similarity and likelihood of confusion in trademark resemblance? (HOL-DOM)

71/ a) HOLISTIC OR TOTALITY TEST Applied in Del Monte Corporation vs. CA (1990) — the trademarks in their entirety as they appear in their respective labels or hang tags must also be considered. b) DOMMINANCY TEST Applied in Asia Brewery, Inc. vs. CA (1993) — focuses on the similarity of the essential or dominant features; whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers. ///

71/ What are the elements of trademark infringement? (RSCa)

71/ a) Trademark being infringed is registered in the IPO: however, in infringement of trade name, the same need not be registered; b) Infringing mark or trade name is used in connection with the §ale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services; ///

71/ What are the tests to determine similarity and likelihood of confusion in trademark resemblance? (HOL-DOM)

71/// NOTE: in Emerald v. CA (G.R. No. 100098, 1995), the Court emphasized that the key factor to examine is the likelihood of confusion among "ordinary purchasers" who are acquainted with the product (i.e.. those who usually buy the product as opposed to those who have never bought the product). Against this premise, the Court seemed to make a distinction between expensive and inexpensive goods, as follows: - Expensive goods the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. The two products cannot be compared piece-meal. They have to be compared as a whole. Holistic Test applies. - Inexpensive goods -Buyers are not as cautious. Dominancy Test applies.

71/ What are the elements of trademark infringement? (RSCa)

71/// c) Trademark or trade name is reproduced. Counterfeited, copied, or colorably imitated by the infringer; d) Use or application of the infringing mark or trade name is likely to cause Confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services themselves or as origin of such goods or services or the identity of such business; and e) No Consent of the trademark or trade name owner or the assignee thereof. (IP Code, Sec. 155; Prosource International v. Horphag Research Management SA, G.R. No. 180073, 2009)

72/ Must a trademark always be registered before it can be protected?

72/ No. A mark that is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered here, is protected. (Fredco Manufacturing v. President and Fellows of Harvard College, G.R. No 185917, 2011) A "well-known mark" cannot be registered by another in the Philippines. (IP Code, Sec. 123.1(9))

72/ Must a trade name be registered before an infringement suit may be filed by its owner?

72/ No. A trade name need not be registered with the lPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines. (Coffee Partners, Inc, v San Francisco Coffee & Roastery, Inc, G.R. No. 169504, 2010)

72/ LEVI's filed a criminal complaint against VD for infringement of Its registered trademarks particularly the LEVI's "501" jeans. LEVI's claimed that VD sold the alleged counterfeit jeans at his tailoring shops. VD admitted being the owner of the shops searched, but countered that he did not manufacture LEVI's jeans, and that he used the label "LS Jeans Tailoring" in the jeans that he made and sold which was also registered with the Intellectual Property Office. The jeans he produced were easily recognizable because of such label, the names of the customers were placed inside the pockets, and each of the jeans had an "LSJT" red tab; that "L8" stood for "Latest Style;" and that the leather patch on his jeans had two buffaloes, not the two horses of LEVI's. Is VD liable for trademark infringement under the Intellectual Property Code?

72/ No. There are two tests to determine likelihood of confusion of trademarks: namely: the dominancy test (similarity of the main, prevalent, or essential features of the competing trademarks) and the holistic test (the entirety of the marks, including labels and packaging, are considered in determining confusing similarity). The Supreme Court used the holistic test, following the case of Emerald Garment v. CA. GR. No. 100098, 1995, which also involved infringement of jeans, ///

72/ Did the SC abandon the Holistic Test?

72/ The holistic test was abandoned by the Supreme Court in the cases of McDonald's Corporation v. LC. Big Mak Burger, Inc. (2004) and Societe des Produits Nestle. 3.4. v. CA (2001). However, it came back and was used in Diaz v. People (2013) and in at least 2 more cases after McDonalds and Nestle.

72/// In this case. the maong pants or jeans made and sold by LEVI's, which included "501," were very popular in the Philippines. The consuming public knew that the original "501" jeans were under a foreign brand and quite expensive. Such jeans could be purchased only in malls or boutiques as ready-to-wear items, and were not available in tailoring shops like those of VD's. Neither can the "501" be acquired on a 'made-to-order" basis. Under the circumstances, the consuming public could easily discern if the jeans were original or fake "501," or were manufactured by other brands of jeans.

72/// Moreover, based on the certificate issued by the Intellectual Property Office. "LS JEANS TAILORlNG" was a registered trademark of VD. He had registered his trademark prior to the filing of the present cases. The Intellectual Property Office would certainly not have allowed the registration had VD's trademark been confusingly similar with the registered trademark for LEVI'S 501 jeans. (Victoria P. Diaz v. People and Levi Strauss [Phifs] Inc, G.R. No. 180677, 2013)

73/ Can there be trademark infringement without unfair competition?

73/ There can be trademark infringement without unfair competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. (MacDonald's Corp v. L.C. Big Mak Burger, G.R. No. 143993, 2004)

73/ Correlate trademark infringement with unfair competition.

73/ Unfair competition is broader than trademark infringement. It includes passing off goods with or without trademark infringement. Trademark Infringement is a form of unfair competition. It constitutes unfair competition when there is actual or probable deception of the public because of the general appearance of the goods. There can be trademark infringement without unfair competition when the infringer discloses on the labels that he is the manufacturer of the goods and thus prevents the public from being deceived that the goods originated from the trademark owner. (MacDonald's Corp v. LC. Big Mak Burger. G.R. No. 143993, 2004) There is unfair competition when there is a passing off (or palming oft) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. (Pilipinas Shell v. Romars International. G.R. No. 189669, 2015)

73/ What are the essential elements for Unfair Competition? (CONF-iNT)

73/ a) Confusing similarity in the general appearance of the goods, and b) Merit to deceive the public and defraud a competitor. (McDonald's Corp. v. L.C. Big Mak Burger. Inc., G.R. No. 143993, 2004) The confusing similarity may or may not result from similarity in the marks. but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown. Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. (MacDonald's Corp v. LC. Big Mak Burger, G.R. No. 143993, 2004)

74/ What are the differences between trademark infringement and unfair competition?

74/ TRADEMARK INFRINGEMENT - Essence - Unauthorized use of a mark -Intent- Not necessary that there be bad faith -Registration-Prior registration of mark alleged to be infringed is required UNFAIR COMPETITION - Essence - Passing off one's goods as that of another -Intent- Intent to deceive or bad faith is present -Registration-Registration is not necessary

74/ What is the duration of certificate or registration?

74/ 10 years. Provided that the registrant, shall within 1 year from 5'" anniversary of registration date, file a declaration of actual use and evidence to that effect, or shall show valid reasons based on the existence of obstacles to such use. Otherwise, mark shall be removed from lPO Register. (IP Code. Sec. 145)

74/ When is non-use of a mark excused?

74/ By circumstances arising independently of the will of the trademark owner, thus: a) Lack of funds shall not excuse non-use of mark. Use of a mark in a form different from registered term, which does not alter its distinctive character, shall not be ground for cancellation or removal of the mark and shall not diminish the protection granted to the mark. (IP Code, Sec. 152.2) b) Use of mark in connection with one or more of the goods or services belonging to the class in respect of which the mark is registered shall prevent its cancellation or removal in respect of all other goods or services of the same class. (IP Code, Sec. 152.3) ///

74/ What are the rights of the licensor and the licensee?

74/ RIGHTS OF LICENSOR -Absent a contrary provision in technology transfer arrangement, the grant of a license shall not prevent the licensor from granting further license to third person nor from exploiting the subject matter of the technology transfer arrangement himself (IP Code, Sec. 89) RIGHTS OF LICENSEE -Licensee entitled to exploit the subject matter of the technology transfer arrangement during the whole term of agreement. (IP Code, Sec. 90)

74/ What are the amendments under RA 9502 to the rights conferred to an owner of a registered mark provided in the 1P Code?

74/ The owner of a registered mark shall have no right to prevent the use in the course of trade of identical or similar signs or containers and there shall be no infringement of trademarks or trade names when it comes to cases of importation of drugs and medicines allowed under the act. (RA 9502. Sec. 14 and 15)

74/ When is non-use of a mark excused?

74/// c) Use of mark by a company related with the registrant or applicant shall inure to the latter's benefit, and such use shall not affect the validity of such mark or of its registration (IP Code, Sec. 152.4) d) if use of a mark by a person is controlled by the registrant or applicant with respect to the nature and quality of the goods or services, such use shall inure to the benefit of the registrant or applicant. (IP Code, Sec. 152.4)

75/ What works can be protected by a copyright?

75/ (ADOP) a) Architectural Designs b) Derivative Works (IP Code, Sec 173) c) Original Literary and Artistic Works (IP Code. Sec. 172) d) Published Edition of Work (IP Code. Sec. 174)

75/ What are the terms of protection for a copyright?

75/ TYPE OF WORK / TERM -Sole Authorship = Life of the author, plus 50 years after his death (IP Code, Sec. 213.1) -Joint Authorship= Life of the last surviving author, plus 50 years after his death (IP Code, Sec. 213.2) -Anonymous or Pseudonymous = 50 years from publication or 50 years from making it -Work= unpublished: Provided that if the authors identity is revealed prior to the expiration of such period, protection in sole authorship (IP Code, Sec. 213.3) -Works of Applied Art=25 years from the date of making (IP Code, Sec. 213.4) -Photographic or Audio-visual work=50 years from publication or from date of making it unpublished (IP Code, Secs. 213.5 & 213.5

75/ If the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright?

75/ The copyright protection extended only to the technical drawings and not to the light box itself because the latter was not at all in the category of "prints, pictorial illustrations, advertising copies, labels, tags and box wraps It could not have possibly stretched out to include the underlying light box. Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are 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 (he works falling within the statutory enumeration or description. (Pearl & Dean (Phil), Inc. vs. Shoemart, Inc. G.R. No. 148222, 2003)

75/ What is the essence of copyright infringement?

75/ The essence of copyright infringement under Sec. 5 of PD. 49 is not merely the unauthorized "manufacturing" of intellectual works but rather the unauthorized performance of any of the acts covered by Sec. 5, to copy, distribute, multiply and sell intellectual works. (NBl-Microsoft Corp. v. Hwang, G.R. No. 147043, 2005.)

75/ What are the elements of Copyright infringement? (VAL-U)

75/ a) Existence of a valid copyright b) Unauthorized copying, distribution, reproduction. or sale of copyrighted work (NBI-Microsoft Com. v. Hwang, G.R. No. 147043, 2005) (i) Direct evidence of actual copying (ii) Indirect evidence of access to the original work

76/ What is the fair use doctrine?

76/ It is the fair use of copyrighted work for criticism, news reporting, teaching (including multiple copies for classroom use), research, and similar purposes and is not an infringement of copyright. (IP Code, Sec. 185.1) It is a valid defense in infringement cases. (ABS—CBN v. Gozon, GR. No. 195956, 2015) Factors to determine fair use: a) Purpose and Character of the use b) Nature of the Copyrighted work c) Amount and Substantiality of the portion used in relation to the whole thing as a whole d) Effect of the use on the potential market or the value of the copyrighted work (IP Code, Sec.185.1) Decompilation = Fair Use a) Reproduction/translation of code b) To achieve interoperability of an independently created computer program (IP Code. Sec. 185.1)

76/ Private respondent, without authority from petitioner, was engaged in distributing and selling petitioner's computer software programs. A private investigator accompanied by an NBI agent, was able to purchase 6 CD- ROMS containing the various programs belonging to petitioner. A search warrant was served on private respondent's premises and yielded several illegal copies of the programs. Did the mere selling of pirated computer software constitute copyright Infringement?

76/ The gravamen of copyright infringement is not merely the authorized manufacturing of intellectual works but rather the unauthorized performance of any acts covered by Sec. 5 of PD 49. Accordingly, the commission of such acts without copyright owner's consent constituted actionable copyright infringement. PD 49 already acknowledged the existence of computer programs as works or creations protected by copyright. To hold that the legislative intent was to require that the computer programs be first photographed, photoengraved, or pictorially illustrated as a condition for the commission of infringement invites ridicule. In this case, the mere sale of the illicit copies of the software programs was enough to show the existence of probable cause for copyright infringement. There was no need to prove who copied, replicated or reproduced the software programs. (Microsoft Corporation v. Rolando Manansala, G.R. No. 166391, October 21, 2015)

76/ What is the essence of intellectual piracy?

76/ infringement of copyright, or piracy, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. A copy of a piracy is an infringement of the original, and it is no defense that the pirate. In such cases, did not know what works he was indirectly copying. or did not know whether or not he was infringing any copyright: he at least knew that what he was copying was not his, and he copied at his peril, in determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement. it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another. that is sufficient in point of law to constitute a piracy. (Columbia Pictures, Inc. v. Court of Appeals, G.R. No. 110318. 1996)

77/ What are the covered persons under the AMLA? (BISECJZ-FDAN-MMOJ-CAS)

77/ Banks, non-banks, quasi—banks. trust entities, foreign exchange dealers, pawnshops. Money changers, remittance and transfer companies and other similar entities supervised or regulated by BSP: 2. insurance companies. pre-need companies, and all other persons supervised or regulated by the Insurance Commission 3. SEC supervised regulated persons/entities (i) Securities dealers, brokers, salesmen, investment houses, and other entities managing securities or rendering services as investment agents, advisor, or consultants: (ii) Mutual fund, closed-end investment companies, common trust funds, pre-need companies, and other similar entities; ///

77/ When is money laundering committed?

77/ Money laundering is committed when the proceeds of an unlawful activity are transacted thereby making them appear to have originated from legitimate sources. (AMLA, as amended, Sec. 4) It is committed by any person who, knowing that any monetary instrument or property represents, involves, or relates to the proceeds of any unlawful activity: a) Transacts said monetary instrument or property; b) Converts, transfers. disposes of, moves, acquires, possesses or uses said monetary instrument or property; c) Conceals or disguises the true nature. Source, location, disposition, movement or ownership of or rights with respect to said monetary instrument or property; d) Attempts or conspires to commit money laundering offenses referred to in paragraphs (a). (b) or (C); ///

77/ What are the covered persons under the AMLA? (BISECJZ-FDAN-MMOJ-CAS)

77/// (i) Acting as a formation agent of juridical persons; (ii) Acting as (or arranging for another person to act as) a Director or corporate secretary of a corporation, a partner of a partnership, or a similar position in relation to other juridical persons; (iii) Providing a registered office, business address or Accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement: and (iv) Acting as (or arranging for another person to act as) a nominee shareholder for another person; ///

77/ What are the covered persons under the AMLA? (BISECJZ-FDAN-MMOJ-CAS)

77/// (iii) Foreign exchange corporations, money changers. money payment, remittance, and transfer companies, and other similar entities; and (iv) Other entities administering] dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary instruments or property 4. jewelry dealers in precious metals for transactions in excess of P1M; 5. Jewelry dealers in precious stones for transactions in excess of P1M; 6. Company service providers which, as a business, provide any of the following services to third parties: ///

77/ What are the covered persons under the AMLA? (BISECJZ-FDAN-MMOJ-CAS)

77/// 7. Persons who provide any of the following services: (i) Managing of client money, Securities or other assets; (ii) Management of bank, savings or securities accounts: (iii) Organization of contributions for the creation, operation or management of companies; and (iv) Creation, operation or management of juridical persons or arrangements, and buying and selling business entities. 8. Casinos, including internet and ship- based casinos, with respect to- their casino cash transactions related to their gaming operations. Casinos are businesses "authorized by the appropriate government agency to engage in gaming operations." (AMLA, as amended, Sec. 3) ///

77/ What are the covered persons under the AMLA? (BISECJZ-FDAN-MMOJ-CAS)

77/// NOTE: "Covered persons" shall exclude lawyers and accountants acting as independent legal professionals in relation to information concerning their clients or where disclosure of information would compromise client confidences or the attorney-client relationship: Provided. That these lawyers and accountants are authorized to practice in the Philippines and shall continue to be subject to the provisions of their respective codes of conduct and/or professional responsibility or any of its amendments. (Id.)

77/ When is money laundering committed?

77/// e) Aids, abets, assists in or counsels the commission of the money laundering offenses referred to in paragraphs (a). (b) or (c) above; and f) Performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraphs (a), (b) or (c) above. (AMLA, as amended, Sec. 4) Money laundering is also committed by any covered person who, knowing that a covered or suspicious transaction is required under the AMLA to be reported to the Anti-Money Laundering Council (AMLC), fails to do so. (AMLA, as amended, Sec. 4)

78/ What are the "unlawful activities" under the AMLA? (KDGQ-HDM-JERPZS3-TRI-FIRECART- Fs-MZAP-BCVWS)

78/ Act or omission or series or combination thereof, involving or having relation to the following: a) Kidnapping for ransom b) Drug-related offenses c) graft and corrupt practices d) Qualified theft e) hijacking, Destructive arson and Murder f) Jueteng and masiao g) Violations of E-commerce Act of 2000 h) Robbery and extortion i) Plunder j) piracy on the high seas k) Swindling l) Smuggling ///

78/ What are covered transactions?

78/ Transactions in cash or other equivalent monetary instrument involving a total amount in excess of Php500,000.00 within 1 banking day (AMLA, as amended. Sec. 3(b))

78/ What are deemed "suspicious" transactions? (CUSP-IUA)

78/ Transactions with "covered institutions" regardless of the amount involved, where any of the following circumstances exist: a) Amount involved is not commensurate with the business or financial capacity of the client: b) No Underlying legal or trade obligation, purpose or economic justification; c) Client's transaction is structured in order to avoid being the subject of reporting requirements under the Act; d) Circumstances relating to the transaction which are observed to deviate from the Profile of the client and/or the client's past transactions with the covered institution; e) Client is not properly identified; f) Transaction is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed: or g) Analogous transactions (AMLA, as amended, Sec. 3(b-1))

78/ What are the "unlawful activities" under the AMLA? (KDGQ-HDM-JERPZS3-TRI-FIRECART- Fs-MZAP-BCVWS)

78/// aa) Malversation of public funds bb) Child Abuse cc) Child Pornography dd) Bribery ee) National Caves and Cave Management Protection Act ff) Anti-Voyeurism gg) Wildlife Resources Conservation and Protection Act related offenses hh) Felonies or offenses of similar nature punishable under the penal laws of other countries. (AMLA, as amended, Sec. 3(I))

78/ What are the "unlawful activities" under the AMLA? (KDGQ-HDM-JERPZS3-TRI-FIRECART- Fs-MZAP-BCVWS)

78/// m) Fraudulent practices under the securities Regulation Code n) Human-Trafficking related offenses o) Illegal recruitment under Migrant Workers and Overseas Filipinos Act p) intellectual Property Code related offenses q) Illegal FlREarms related offenses r) Kidnapping s) Terrorism and conspiracy to commit terrorism t) financing terrorism u) Fencing v) Frauds and illegal exactions and transactions w) Forgeries and Counterfeiting x) Forestry Code related offenses y) fisheries Code related offenses z) Mining related offenses

79/ What is the remedy of a person whose account has been frozen?

79/ He may file a motion to lift the freeze order and the court must resolve this motion before the expiration of the freeze order. No court shall issue a temporary restraining order or a writ of injunction against any freeze order, except the Supreme Court. (AMLA, as amended, Sec. 10)

79/ State the rule on freezing of a monetary instrument or property under AMLA.

79/ The CA may issue a freeze order effective immediately for a period not exceeding 6 months a) Upon application ex parte by the AMLC b) After determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity. If no case has been filed against a person whose account has been frozen within the period determined by the court, the freeze order shall be deemed ipso facto lifted. (AMLA, as amended, Sec. 10)

79/ Can there be a separate conviction for money laundering and the unlawful activity constituting it?

79/ Yes, the prosecution of relating to money laundering offenses shall proceed independently of any proceeding relating to the unlawful activity. (AMLA, as amended, Sec. 6)

79/ Who is a Philippine National under the Foreign Investment Act? (CP-DOMFOR)

79/ a) Filipino Citizen: b) Domestic Partnership or association wholly owned by Filipino citizens; c) Domestic corporation at least 60% of the capital stock outstanding and entitled to vote is owned and held by Filipino citizens; or d) foreign corporation registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stock outstanding and entitled to vote is wholly owned by: ///

79/ Who is a Philippine National under the Foreign Investment Act? (CP-DOMFOR)

79/// (i) Filipinos, or (ii) A trustee of funds for pension or other employee retirement or separation benefits, where trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of Philippine nationals; Provided, where a corporation and its non- Filipino stockholders own stocks in 3 SEC- registered enterprise a) At least 60% of the capital stock outstanding and entitled to vote of each both corporations must be owned and held by Filipino citizens; and b) At least 60% of the members of the BOD of each of both corporations must be Filipino citizens (Foreign Investments Act ["FlA'), as amended, Sec. 3(a))

8/ What constitutes an indorsement in instruments payable to order?

8./ It must be an indorsement of the entire instrument. A partial indorsement or one which transfers the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. However, where the instrument has been paid in part, it may be indorsed as to the residue (NIL, Sec. 32)

8/ What are the modes of negotiation of a negotiable instrument? (DI)

8/ 1. Negotiation by Delivery If the instrument is payable to bearer (NIL, Sec.9), then the instrument is negotiated by mere delivery. Any person in possession of an instrument payable to bearer is always the bearer thereof, even if he has no legal right to it. 2. Negotiation by Indorsement If the instrument is payable to order (NIL, Sec 8) two steps are needed to effect negotiation (ID) a. Indorsement by the payee of the present holder; and b. The delivery to the next holder.

8/ What is the nature of the liability of an accommodation party to the holder for value?

8/ It is primary and unconditional (Fedeliza Aglibot v. Ingersol Santia, 2012) He is liable to a holder for value, even if the holder at the time of taking the instrument knew that the former was only an accommodation party. (NIL, Sec. 29)

8/ Who is a holder in due course?

8/ One who has taken the instrument under the following conditions: a. Instrument is Complete and regular upon its face; b. He became the holder of it before it was Overdue, and without notice that it had been previously dishonored, if such was the fact; c. He took it in Good faith and for value; d. At the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. (NIL, Sec. 52) Note: Every holder is deemed prima facie to be a holder in due course. However, when it is shown that the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the the title as holder in due course. This last-mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of the defective title (NIL, Sec. 59)

80/ What is a foreign investment?

80/ Equity investment made by non-Philippine national in the form of foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign exchange. (FIA, as amended, Sec. 3(a))

80/ What is the prevailing rule in determining the nationality of a corporation—the control test or the grandfather rule?

80/ The control test is still the prevailing mode of determining whether or not a corporation is a Filipino corporation within the ambit of the natural resources provisions of the Constitution. But when in the mind of the court there is doubt based on attendant facts and circumstances, in the 60—40 Filipino equity ownership in the corporation, then it may apply the grandfather rule. (Narra Nickel Mining and Development Corp. v. Redmont Consolidated Mines Corp., G.R. No. 195580, 2014) For stocks to be deemed owned and held by Philippine Citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential.

80/ Is a foreign company which regularly buys goods from a Philippine corporation considered to be doing business in the Philippines?

80/ To constitute doing business. the activity undertaken in the Philippines should involve profit— making. A foreign company that merely imports goods from a Philippine exporter, without opening an office or appointing an agent in the Philippines, is not doing business in the Philippines. (Cargill Inc. vs. Intra Strata Assurance Corporation, G.R. No. 168266, 2014)

80/ When are foreign corporations considered "doing business" in the Philippines? (CAPSz- BRA)

80/ a) CONTINUITY TEST: Any act that implies a continuity of commercial dealings or arrangements and contemplate to some extent the performance of acts or works or the exercise of some functions normally incident to and in progressive prosecution of, the purpose and object of its organization. b) Appointing representatives, distributors domiciled in the Philippines or who stays for a period totaling 180 days or more: c) Participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines; d) soliciting orders, service contracts e) opening branches or liaison offices (FIA, Sec. 3(d))

80/ Under the FIA, what acts are NOT included in the term 'doing business' in the Philippines?

80/ a. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; b. Having a nominee director or officer to represent its interests in such corporation; c. Appointing a representative or distributor domiciled in the Philippines which transects business in its own name and for its own account; d. The publication of a general advertisement through any print or broadcast media; ///

80/ Under the FIA, what acts are NOT included in the term 'doing business' in the Philippines?

80/// e. Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines; f. Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export; g. Collecting information in the Philippines; and h. Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis. such as installing in the Philippine machinery it has manufactured or exported to the Philippines. servicing the same, training domestic workers to operate it, and Similar incidental services. (FIA IRR)

81/ What is an export enterprise?

81/ An enterprise wherein a manufacturer, processor, or service (including tourism) enterprise exports 60% or more of its output, or wherein a trader purchases products domestically and exports 60% or more of such purchases (FIA, as amended. Sec. 3(e))

81/ What is a domestic market enterprise?

81/ An enterprise which produces goods for sale, or renders services to the domestic market entirely or if exporting a portion of its output fails to consistently export at least 60% thereof. (FIA, as amended, Sec. 3(1))

81/ What is an electronic data message?

81/ Electronic data message refers to information generated, sent, received or stored by electronic, optical or similar means. (RA. No. 8792, Sec. 5(0)) Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the data message purporting to give rise to such legal effect, or that it is merely referred to in that electronic data message. (RA. No. 8792. Sec. 6) A facsimile transmission cannot be considered as electronic evidence. It is not the functional equivalent of an original under the Best Evidence Rule and is not admissible as electronic evidence. (MCC V. Ssangyong, G.R. No. 170633, 2007)

81/ What is an electronic document?

81/ Electronic document refers to information or the representation of information, data, figures, symbols or other modes of written expression, described or however represented, by which a right is established or an obligation extinguished, or by which a fact may be prove and affirmed, which is receive, recorded, transmitted, stored, processed, retrieved or produced electronically. (RA. No. 8792, Sec. 5[t]) ///

81/ May aliens own an export enterprise in the Philippines?

81/ Yes. Foreign investment in export enterprises whose products and services do not fail within Lists A and B of the Foreign Investment Negative List (under Sec. 8) is allowed up to 100% ownership. (FIA. as amended, Sec. 6)

81/ May aliens own a domestic market enterprise?

81/ Yes. Non-Philippine nationals may own up to 100% of domestic market enterprises, unless foreign ownership therein is prohibited or limited by the Constitution existing law or the Foreign Investment Negative List (under Sec. 8). (FIA, as amended, Sec. 7)

81/ What is an electronic document?

81/// For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under existing laws. (RA. No. 8792, Sec. 7) It includes digitally signed documents and any print-out or output, readable by sight or other means, which accurately reflects the electronic data message or electronic document. (REE, Rule 2, Sec. 1(h))

82/ Q: What are the rules relating to Transport Documents under the E-Commerce Act?

82/ (1 ) Where the law requires that any action referred to contract of carriage of goods be carried out in writing or by using a paper document, that requirement is met if the action is carried out by using one or more data messages or electronic documents. (2) Paragraph (1) applies whether the requirement there in is in the form of an obligation or whether the law simply provides consequences for failing either to carry out the action in writing or to use a paper document. (3) if a right is to be granted to, or an obligation is it be acquired by, one person and no person, and if the law requires that, in order to effect this, the right or obligation must be conveyed to that person by the transfer, or use of, a paper document, that requirement is met if the right or obligation is conveyed by using one or more electronic data messages or electronic documents unique: ///

82/ What is an electronic signature?

82/ Electronic signature refers to any distinctive mark, characteristic and/or sound in electronic Form, representing the identity of a person and attached to or logically associated with the electronic data message or electronic document or any methodology or procedures employed or adopted by a person and executed or adopted by such person with the intention of authenticating or approving an electronic data message or electronic document. (RA. No. 8792. Sec. 5(a))

82/ When may the E-Commerce Act apply in actions related to contracts of carriage of goods?

82/ in the following actions: (a) (i) furnishing the marks, number, quantity or weight of goods; (ii) stating or declaring the nature or value of goods; (iii) issuing a receipt for goods; (iv) confirming that goods have been loaded: (b) (i) notifying a person of terms and conditions of the contract; (ii) giving instructions to a carrier; (c) (i) claiming delivery of goods; (ii) authorizing release of goods; (iii) giving, notice of loss of, or damage to goods; 82///

82/ Q: What are the rules relating to Transport Documents under the E-Commerce Act?

82/// (4) For the purposes of paragraph (3), the standard of reliability required shall be assessed in the light of the purpose for which the right or obligation was conveyed and in the light of all the circumstances. including any relevant agreement. (5) Where one or more data messages are used to effect any action in subparagraphs (f) and (g) of Section 25, no paper document used to effect any such action is valid unless the use of electronic data message or electronic document has been terminated and replaced by the used of paper documents. A paper document issued in these circumstances shall contain a statement of such termination. The replacement of the electronic data messages or electronic documents by paper documents shall not affect the rights or obligation oi the parties involved. ///

82/ Q: What are the rules relating to Transport Documents under the E-Commerce Act?

82/// (6) If a rule of laws is compulsorily applicable to a contract of carriage of goods which is in, or is evidenced by, a paper document, that rule shall not be inapplicable to such a contract of carriage of goods which is evidenced by one or more electronic data messages or electronic documents by reason of the fact that the contract is evidenced by such electronic data messages or electronic documents instead of by a paper document. (RA. No. 8792. Sec. 26)

82/ When may the E-Commerce Act apply in actions related to contracts of carriage of goods?

82/// (d) giving any other notice or statement in connection with the performance of the contract; (e) undertaking to deliver goods to a named person or a person authorized to claim delivery; (f) granting, acquiring, renouncing, surrendering, transferring or negotiating rights in goods; (g) acquiring or transferring rights and obligations under the contract. (RA. No. 8792, Sec. 25)

83/ When is an electronic document admissible as evidence?

83/ An electronic document is admissible in evidence it: 1. It complies with the rules on admissibility prescribed by the Rules of Court and related laws; and 2. It is authenticated in the manner prescribed by these Rules. (REE. Rule 3. Sec. 2)

83/ When Is an ephemeral electronic communication admissible as evidence?

83/ Audio, photographic and video evidence of events, acts or transactions shall be admissible provided: (REE, Rule 11, Sec. 1) 1. It shall be shown. presented or displayed to the court; and 2. It shall be identified, explained or authenticated by the person who made the recording (a party to the ephemeral evidence or has personal knowledge thereof) or by some other person competent to testify on the accuracy thereof.

83/ What are the rules on authentication under the REE? Private Electronic Documents

83/ Before any private electronic document offered as authentic is received in evidence, its authenticity must be proved by any of the following means: (REE. Rule 5, Sec. 2) 1. By evidence that it had been digitally signed by the person purported to have signed the same: 2. By evidence that other appropriate security procedures or devices as may be authorized by the Supreme Court or by law for authentication of electronic documents were applied to the document; or ///

83/ What is an ephemeral electronic communication?

83/ Ephemeral electronic communication refers to telephone conversations, text messages, chatroom sessions, streaming audio, streaming video, and other electronic forms of communication the evidence of which is not recorded or retained. (REE, Rule 2, Sec. 1(k)

83/ What is the scope and coverage of the Rules?

83/ These Rules shall apply to all civil actions and proceedings, as well as quasi-judicial and administrative cases. (RFF. Rule 1 Sec. 2) The REE also applies to criminal actions. As to the admissibility of the text messages, the RTC admitted them in conformity with the Court's earlier Resolution applying the Rules on Electronic Evidence to criminal actions. (People v. Ency'as, G.R. No. 204894. 2014)

83/ What are the rules on authentication under the REE? Private Electronic Documents

83/// 3. By other evidence showing its integrity and reliability to the satisfaction of the Judge. NOTE: A document electronically notarized in accordance with the rules promulgated by the Supreme Court shall be considered as a public document and proved as a notarial document under the Rules of Court. (REE, Rule 5, Sec. 3) An electronic signature may be authenticated in any of the following manner: (REE, Rule 6, Sec. 2) 1. By evidence that a method or process was utilized to establish a digital signature and verify the same; 2. By any other means provided by law; or; 3. By any other means satisfactory to the judge as establishing the genuineness of the electronic signature.

84/ What is the legal effect of the approval of a pre-negotiated plan?

84/ Approval of a pre-negotiated plan shall have the same legal effect as confirmation of a judicially supervised plan. (FRIA, Sec. 82)

84/ What is rehabilitation?

84/ It is the restoration of the debtor to a condition of successful operation and solvency, if it is shown that 1. its continuance of operation is economically feasible and 2. its creditors can recover by way of the present value of payments projected in the plan, more if the debtor continues as a going concern than if it is immediately liquidated (FRIA. Sec.4(gg)

84/ Who may initiate court supervised proceedings?

84/ VOLUNTARY *WHO a. Owner of a sole proprietorship b. Majority of partners of a partnership c. Majority vote of the Board of Directors/Trustees, and authorized by the vote of stockholders representing at least 2/3 of the capital stock or 2/3 of members, in case of a corporation d. Insolvent debtor may initiate by filling a petition for rehabilitation based on the grounds provided e. A group of debtors may file a joint petition based on grounds provided. *GROUNDS a. One or more of its members foresee the impossibility of meeting debts when they respectively fall due, and b. the financial distress would likely adversely affect the financial condition and/or operations of the other members of the group is essential under the terms and conditions of the proposed Rehabilitation Plan. ///

84/ What are the three main types of rehabilitation proceedings? (COP)

84/ a) Court supervised b) Out of Court or Informal c) Pre-negotiated (See generally FRIA)

84/ Who may initiate court supervised proceedings?

84/// INVOLUNTARY *WHO Any creditor or groups with a claim of, or the aggregate of whose claims is: a. At least Php 1,000,000 or, b. At least 25% of the subscribed capital stock or partner's contributions, whichever is higher may initiate involuntary proceedings against the debtor *GROUNDS 1. No genuine issue of fact or law on the claim/s of the petitioner/s, and that the due and demandable payments thereon have not been made for at least 60 days, 2. Debtor has failed generally to meet his liabilities as they fall due, or 3. At least one creditor, other than petitioner/s has initiated foreclosure proceedings against the debtor that will prevent the debtor from paying its debts as they become due as they become due or will render it insolvent.

85/ What is a rehabilitation plan?

85/ A plan by which the financial well-being and viability of an insolvent debtor can be restored using various means including, but not limited to, debt forgiveness, debt rescheduling, reorganization or quasi- reorganization, dacion en pago, debt-equity conversion and sale of the business (or parts of it) as a going concern, or setting—up of new business entity, or other similar arrangements as may be approved by the court or creditors. (FRIA, Sec. 4(ii))

85/ What is the role of a management committee?

85/ It takes the place of the management and the governing body of the debtor and assumes their rights and responsibilities. (FRIA, Sec. 37)

85/ What are the minimum requirements of a pre-negotiated rehabilitation plan?

85/ The pre—negotiated rehabilitation plan, before being approved by the court. must be endorsed or approved by creditors holding at least 213 of the total liabilities of the debtor, including secured creditors holding more than 50% of the total secured claims of the debtor and unsecured creditors holding more than 50% of the total unsecured claims of the debtor. (FRIA. Sec. 76)

85/ What are the minimum requirements of an out-of-court or informal restructuring agreements and rehabilitation plans? (A- 67SEC-75UNSEC-85ALL)

85/ a) Debtor must Agree to the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan; b) Approved by creditors representing at least 67% of the secured obligations oi the debtor; c) Approved by creditors representing at least 75% of the Unsecured obligations of the debtor; and d) Approved by creditors holding at least 85% of all liabilities, secured and unsecured, of the debtor. (FRIA, Sec. 84)

85/ What are the minimum qualifications of a rehabilitation receiver? (CR-MIKE-CONF)

85/ a) Filipino citizen or has been residing in the Philippines in the 6 months immediately preceding his nomination; b) Good Moral character and with acknowledged integrity, impartiality and independence; c) Possess: (i) The relevant training and/or Experience that may be necessary to enable him to property discharge the duties and obligations of a rehabilitation receiver, and (ii) The requisite knowledge of insolvency and other relevant commercial laws. rules and procedures; and d) No Conflict of interest: Provided. That such conflict of interest may be waived, expressly or impliedly, by a party who may be prejudiced thereby. (FRIA, Sec. 29)

85/ What are the effects of Commencement Order? (P'SLC)

85/ a) Vest the rehabilitation with all the flowers and functions b) Prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process to seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after commencement date unless otherwise allowed c) Serve as the legal basis for rendering null and void any Setoff d) Serve as the legal basis for rendering null and void the perfection of any Lien e) Consolidate the resolution of all legal proceedings by and against the debtor to the court. (FRIA, Sec. 17)

86/ What is a liquidator?

86/ A natural person or juridical entity appointed as such by the court and entrusted with such powers and duties. If the liquidator is a juridical entity, It must designate a natural person who possesses all the qualifications and none of the disqualifications as its representative, it being understood that the juridical entity and the representative are solidarity liable for all obligations and responsibilities of the liquidator. (FRIA. Sec. 4(w))

86/ Who may file petition for suspension of payments?

86/ An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in the state of suspension of payments by the court of the province or city in which he has resides for 6 months prior to the filing of his petition. (FRIA, Sec. 94)

86/ What should be enumerated in the liquidation plan?

86/ As a minimum, all the assets of the debtor and a schedule of liquidation of the assets and payment of the claims. (FRIA, Sec. 129)

86/ What is a Cram Down Effect?

86/ The power of the rehabilitation court to approve and implement a rehabilitation plan notwithstanding the objection of the majority of creditors. The "cram-down" clause is necessary to curb the majority creditors natural tendency to dictate their own terms and conditions to the rehabilitation, absent due regard to the greater tong-term benefit of all stakeholders. Otherwise stated, it forces the creditors to accept the terms and conditions of the rehabilitation plan, preferring Iong-term viability over immediate but incomplete recovery. (Victorio—Aquino v. Pacific Plans, Inc., G.R. No. 193108, 2014)

86/ Who may file for liquidation of debts?

86/ Voluntary - An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts exceeding Php500.000.00, may apply to be discharged from his debts and liabilities by filing a verified petition with the court of the province or city in which he has resided for 6 months prior to the filing of such petition. (FRIA, Sec. 103) Involuntary - Any creditor or group of creditors with a claim of, or with claims aggregating at least Php500.000.00 may file a verified petition for liquidation with the court of the province or city in which the individual debtor resides. (FRIA, Sec. 105)

86/ While undergoing rehabilitation proceedings, may a juridical debtor or a creditor opt to undergo liquidation Instead?

86/ Voluntary - An insolvent juridical debtor may apply for liquidation by filing a petition for liquidation with the court. (FRIA. Sec. 90) Involuntary - At any time during the pendency of or after court-supervised or pre-negotiated rehabilitation proceedings, creditors may compel a debtor who is undergoing rehabilitation to liquidate instead. (FRIA, Sec. 91)

86/ What are the effects of stay or suspension order (CJDP)

86/ a) Suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor; b) Suspend all actions to enforce any Judgment, attachment or other provisional remedies against the debtor; c) Prohibit the debtor from selling, encumbering, transferring or Disposing in any manner any of its properties except in the ordinary course of business; and d) Prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided herein. (FRIA, Sec. 16(q))

87/ What rule should be followed as regards the order of preference of credits?

87/ The Liquidation Plan and its Implementation shall ensure that the concurrence and preference of credits as enumerated in the Civil Code and other relevant laws shall be observed, unless a preferred creditor voluntarily waives his preferred right, For purposes of this chapter, credits for services rendered by employees or laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code, unless the claims constitute legal liens under Article 2241 and 2242 thereof. (FRIA, Sec. 133)

87/ Upon completion of the liquidation, what should the court do?

87/ The court shall issue an Order approving the report and ordering the SEC to remove the debtor from the registry of legal entities. (FRIA. Sec. 134)

87/ When is the liquidation proceeding deemed terminated?

87/ Upon receipt of evidence showing that the debtor has been removed from the registry of legal entities at the SEC. The court shall issue an Order terminating the proceedings. (FRIA, Sec. 135)

87/ What are the effects of a liquidation order? (VCD-SF)

87// a) Legal title to and control of all the assets of the debtor, except those that may be exempt from execution, shall be deemed vested in the liquidator or, pending his election or appointment, with the court; b) All Contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within 90 days from the date of his assumption of office, declares otherwise and the contracting party agrees; c) Juridical debtor shall be deemed Dissolved and its corporate or juridical existence terminated: ///

87/ What are the effects of a liquidation order? (VCD-SF)

87/// d) No separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will be transferred to the Liquidator for him to accept and settle or contest, If the liquidator contests or disputes the claim, the court shall allow, hear and resolve such contest except when the case is already on appeal, in such a case, the suit may proceed to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and allowed in court; and e) No Foreclosure proceeding shall be allowed for a period of 180 days. (FRIA, Sec. 113)

88/ Characteristics of Negotiable Instruments

88/ a) Negotiability- Allows the transfer from one person to another so as to constitute the transferee Instrument as a holder in due course that is free from personal defenses. b) ACCUMULATION OF SECONDARY CONTRACTS - The instrument is negotiated from person to person resulting to secondary liability, making more and more persons liable to the holder

88/ Kinds of Negotiable Instruments

88/ a) Promissory Note - An unconditional promise in instruments writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where the note is drawn to the makers own order, it is not complete until indorsed by him. b) Bill of Exchange - An unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. c) Check - It is a bill of exchange drawn on a bank and payable on demand.

88/ Acts or omissions of the entrustee are penalized under the Trust Receipts Law.

88/ a. Misappropriation of the proceeds of the goods involved constitutes estafa b. Non-payment of the Amount involved also constitute estafa c. Failure to Deliver proceeds of sale or to return the goods not sold shall make one liable for estafa

88/ Three distinct and independent contracts in a letter of credit

88/ a. Sale between the seller and the buyer b. Contract of buyer with issuing bank; and c. The letter of credit itself, wherein the bank promises to pay pursuant to the terms and conditions of the letters of credit. This assures seller of prompt payment, independent of any breach of the main sales contract.

88/ Remedies of a warehouseman having a valid lien against a person demanding the goods.

88/ a. To refuse to deliver the goods until the lien is satisfied b. To cause the Extrajudicial sale of goods and apply the proceeds to the value of the lien; and c. By other means allowed by law to a creditor against his debtor, for the collection from depositor of all the charges with the depositor has bound himself to pay. d. Or other remedies allowed by law for the enforcement of lien against personal property.

89/ What constitutes a Holder in Due Course

89/ a) Instrument is Complete and regular upon its face; b) He became the holder of it before it was Overdue, and without notice that it had been previously dishonored, if such was the fact; c) He took it in good faith and for value: d) At the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

89/ Rights of a Holder who is not a Holder in Due Course

89/ a) May sue in his Own name. b) May receive payment and if it is in due course, the instrument is discharged. c) Holds the instrument subject to the same defenses as if it were non-negotiable. d) If he Derives his title through a holder in due course and is not a party to any fraud or illegality thereto, has all the rights of such holder in due course.

89/ Modes of negotiation

89/ a) Negotiation by Delivery b) Negotiation by indorsement

89/ Effects of a Crossed Check

89/ a) The check cannot be encashed but can only be deposited in the bank; b) it may be negotiated only once - to one who has a bank account; c) It serves as a warning that the check was issued for a definite purpose, and the holder is not a holder in due course unless he inquired if he received it pursuant to that purpose.

89/ Exception to the rule on the liability of signatoriesc

89/ a) Where a duly authorized Agent signs for a person, the latter is liable. b) A Forger is liable even if his signature does not appear thereon. c) A person who is Precluded from setting up forgery as a defense. d) Acceptance of a bill of exchange is written on a piece of paper, other than the bill itself. e) Unconditional promise in advance to accept a bill of exchange before it is drawn; which acceptance must be in writing.

89/ Requisites of a Negotiable instrument

89/ a) in writing; b) Signed by the maker or drawer; c) Contains an unconditional promise or order to pay a sum certain in money: d) Payable on Demand, or at a fixed or determinable future time: e) Payable to Order or to bearer; and, f) Where it is a bill of exchange, the drawee must be flamed or otherwise indicated therein with

89/ Negotiation through lndorsement

89/ a) indorsement by the payee of the present holder; and b) The Delivery to the next holder.

9/ To whom must a notice of dishonor be given?

9/ General Rule: A notice of dishonor due to non-acceptance or non-payment must be given to the (1) drawer and (2) each indorser otherwise they will be discharged from ability. (NIL, Sec. 89) Exceptions: a. Waiver of notice of dishonor (NIL, Sec. 109) b. Notice of dishonor id Dispensed with (NIL, Sec. 112) c. Notice of dishonor need not be given to the Drawer (i) Drawer and drawee are the same person; (ii) Drawee is a fictitious person or a person not having capacity to contract; (iii) Drawer is the person to whom the instrument is presented for payment; (iv) Drawer has no right to expect or require that the drawee or acceptor will honor the instrument; (v) Drawer has counter countermanded payment. (NIL, Sec. 114) ///

9/ When is the presentment of payment required to be made? When is it not required?

9/ Presentment for payment is not necessary to charge persons primarily liable. It is required only to charge persons secondarily liable, except: a. As to the drawer, where he has no right to expect or require that the drawee or acceptor will pay the instrument. b. As to indorser, where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented. (NIL, Sec. 80)

9/ Who are secondarily liable? (IDI)

9/ a. In a promissory note: 1. Indoser b. In a bill of exhange: 1. Drawer 2. Indorser (NIL, Sec. 192)

9/ Who are primarily liable in a negotiable instrument? (MA) (NIL, Sec. 192)

9/ a. Maker - in a promissory note b. Acceptor - in a bill of exchange

9/ When may presentment of payment be dispensed with? (RFWD)

9/ a. Where, after the exercise of Reasonable diligence, presentment cannot be made; b. Where the drawee is a Fictitious person; c. By Waiver of presentment, express or implied; d. When the instrument has been Dishonored by non-acceptance under Sec. 83 (NIL, Sec. 82)

9/// d. Not of dishonor need not be given to the indorser

9/// (i) Drawee is a fictitious person or person not having capacity to contract, and the indorser is aware of the fact at the time he indorsed the instrument; (ii) Indorser is the person to whom the instrument is presented for payment; (iii) Instrument was made or accepted for indorser's accommodation. (NIL, Sec. 115) e. When Due notice of dishonor by non-payment need not be given (NIL, Sec. 116) f. When omission to give a notice of dishonor by non-acceptance does not Prejudice the rights of a holder in due course subsequent to the omission (NIL, Sec. 117) Note: The drawee is not liable until he accepts the bill. (NIL, Sec. 127)

90/ Material Alterations Change

90/ ) Date, b) Sum payable c) Time or place of payment, d) Number of relations of parties. e) Currency in which payment is to be made or one which adds a place of payment where no place of payment is specified, or f) Any change or addition which alters the instrument in any Material respect.

90/ Presentment of payment be dispensed with

90/ a) *****, after the exercise of Reasonable diligence, presentment cannot be made; b) Where the drawee is a fictitious person; c) By Waiver of presentment, express or implied; d) When the instrument has been dishonored by non-V acceptance under Sec. 83.

90/ Secondarily Liable in a Negotiable Instrument

90/ a) In a promissory note: 1. indorser b) In a bill of exchange: 1. Drawer 2. Indorser

90/ Primarily liable

90/ a) Maker - in a promissory note b) Acceptor — in a bill of exchange

90/ Exceptions to the giving of Notice of Dishonor

90/ a) waiver of notice of dishonor b) Notice of dishonor is Dispensed with c) Notice of dishonor need not be given to the Drawer: (i) Drawer and drawee are the same person: (ii) Drawee is a fictitious person or a person not having capacity to contract; (iii) Drawer is the person to whom the instrument is presented for payment; (iv) Drawer has no right to expect or require that the drawee or acceptor will honor the instrument; (v) Drawer has countermanded payment. ///

90/ Exceptions to the giving of Notice of Dishonor

90/// d) Notice of dishonor need not be given to the indorser: (i) Drawee is a fictitious person or person not having capacity to contract, and the indorser is aware of that fact at the time he indorsed the instrument; (ii) indorser is the person to whom the instrument is presented for payment: (iii) Instrument was made or accepted for indorsers accommodation. e) When Due notice of dishonor by none—acceptance has previously been given. a subsequent notice of dishonor by non-payment need not be given f) When omission to give a notice of dishonor by non- acceptance does not prejudice the rights of a holder in due course subsequent to the omission.

91/ Risks that may be insured

91/ a) Any contingent or unknown event, whether pester" future, which may Damnify (cause damage to) a person having an insurable interest; or a) Any contingent or unknown event whether past or future, which may create a liability against the person insured.

91/ Requisites of Acceptance

91/ a) In Writing: b) Signed by the drawee; c) Must not Express that the drawee will perform his promise by any other means than payment of money: and d) Communicated or delivered to the holder

91/ Elements of an insurance Contract

91/ a) Insurable interest b) Risk of Loss c) Assumption of Risk d) Payment of Premiums e) Scheme to distribute losses

91/ Types of losses that will NOT make an insurance company liable

91/ a) Loss by insured's willful act or gross negligence; b) Loss due to Connivance of the insured; c) Loss where an excepted peril is the proximate cause, and d) Loss where the peril insured against is a Remote cause.

91/ Types of losses that make an insurance company liable

91/ a) Loss the Proximate cause of which is the path insured against; b) Loss the immediate cause of which is the peril insured against except where proximate cause is an excepted peril; c) Loss arising from the peril insured against when caused by the Negligence of insured except where gross negligence amount to a willful act; d) Loss caused by efforts to rescue the thing from peril insured against - if during the course of rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part.

91/ Limitation to the capacity of the insured to choose beneficiaries

91/ a) Persons in illicit relations — adultery or concubinage (no need for conviction); b) Persons found guilty of the same crime, in consideration thereof; c) Public officer or his wife, descendants or ascendants, by reason of his office.

91/ Conditions where an insurer may rescind an insurance contract

91/ a) The policy Limits the use or conditions of the thing insured; b) There is an alteration in the Use or condition; c) The alteration is without the consent of the insurer; d) The alteration is made by means within the Control of the insured; and e) The alteration increases the risk of loss.

92/ Exceptions to the rule that change of interest suspends the insurance policy

92/ a) 7 In case of Life, health and accident insurance. (IC, Sec. 20) b) When the change in interest results after the occurrence of an injury which results in a loss —liability has become fixed (IC. Sec. 21) c) A change of interest in one or more several distinct things, separately insured by one policy - contract is divisible (IC, Sec. 22) d) A change in the interest by will or succession on the death of the insured — interest passes to the heirs (IC, Sec. 23) ///

92/ incontestability Clause Requisites

92/ a) The insurance is a Life insurance policy. b) It is payable on the Death of the insured. c) It has been in force during the lifetime of the insured for at least 2 years from its date of issue or of its last reinstatement. The period of 2 years may be shortened but it cannot be extended by stipulation.

92/ Conditions where an INSURER rescind an insurance policy

92/ a) The policy limits the use or conditions of the thing insured; b) There is an alteration in the gee or-condition; c) The alteration is without the Consent of the insurer; d) The alteration is made by means within the Control of the insured; and e) The alteration increases the risk of loss.

92/ Premiums are returnable when

92/ a) When no part of the interest in the thing insured is exposed to any of the perils insured against; b) Where the insurance is made for a definite period of time and the insured surrenders his policy before the expiration of that period; c) When the contract is voidable on account of the fraud or misrepresentation of the insurer or his agent d) When the contract is voidable on account of facts, the existence of which the insured was ignorant without his fault; e) When, by any default of the insured other than actual fraud, the insurer never incurred ay liability under the policy; f) In case of Over-insurance

92/ Exceptions to the rule that change of interest suspends the insurance policy

92/// e) A transfer of interest by one of several Banners, joint owners in common who are jointly insured to the others — no new party brought into contract (Sec. 24) f) When a policy is so framed that it will inure to the benefit of whomsoever, during the continuance of the risk may become the owner of the interest insured (IC, Sec. 57) g) When there is an Express prohibition against alienation in the policy, in case of alienation, the contract of insurance is not merely suspended but is avoided.

93/ Test to determine whether one is a common carrier of goods

93/ a) Engagement in the business of carrying goods for others as a Public employment, holding himself to engage in the transport of goods as a business and not as a casual endeavor; b) Undertakes to carry goods of the kind which his business supports; c) Undertakes to carry the goods by an Established method and route; and d) Transportation is for hire. A pipeline network for hire, carrying petroleum, is a common carrier.

93/ Requisites for the valid cancellation of the non-life policy

93/ a) Prior notice of cancellation to insured; b) Notice must be based on the Occurrence after effective date of the policy of one or more of the grounds mentioned; c) Notice must be in flitting, mailed or delivered to the insured at the address shown in the policy; and d) Notice must state the grounds relied upon and upon request of insured, to furnish facts on which cancellation is based

93/ Void stipulations in a contract for carriage of goods

93/ a) That the goods are transported at the Bisk of the contract for carriage TD owner or shipper; of goods b) That the common carrier will not be Liable for any loss, destruction, or deterioration of the goods; c) That the common carrier need not Observe any diligence in the custody of the goods; d) That the common carrier shall not be Responsible for the acts or omissions of its employees; ///

93/ Grounds for the valid cancellation of a non-life policy

93/ a) non-payment of premium; b) Conviction of a crime arising out of acts increasing the hazard insured against; c) Fraud or material representation; d) Willful or reckless acts or omissions increasing the risk insured against; e) Physical changes in the property insured which result in the property becoming uninsurable; and f) Determination by the Insurance Commissioner that the policy would violate the insurance Code.

93/ Void stipulations in a contract for carriage of goods

93/// e) That the common carrier shall exercise a Degree of diligence less than that of a good father of a family, or a man of ordinary prudence in vigilance over the goods transported: f) That the common carrier's liability for acts committed by Thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; g) That the common carrier is not responsible for the loss, destruction or deterioration of goods on account of the Defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.

94/ Stipulations that Limit Liability

94/ No LIABILITY — the center will not be liable at all for the negligent acts of its crew and employees. This is void for being contrary to public policy. b) LIMITED LIABILITY — regardless of the declared value 01 the cargo. the maximum liability of the carrier will be limited to a certain amount, for example, 500 PHP. This is void for being contrary to public policy. c)QUALIFIED LIABILITY — the carrier in this case fixes a maximum liability in the event the shipper does not declare any value up to a certain amount and pays additional freight. This is the only 'stipulation in a bill of-lading which can validly limit liability.

94/ How can a common carrier be held liable

94/ a) CULPA CONTRACTUAL — a breach of contract of carriage exists when the passenger is not brought safely to the destination. The contract is between the carrier and the passenger, and the driver is not privy to the same. b) CULPA AQUILANA - damage caused to another clue to negligence, where the defendants are the carrier and the driver solidarily liable as pint tortfeasors. c) CULPA QRIMINAL —the driver's act can amount to a crime, and the suit shall involve the driver and the passenger, not the carrier. But when the driver is insolvent, the carrier may be held subsidiarily liable.

94/ Circumstances which may mitigate common carrier liability

94/ a) Exercise of Extraordinary diligence by a common carrier; b) Negligent act of the passenger the proximate cause of death and injury; c) Employees could not have prevented by ordinary diligence the willful act or negligence of other passengers or strangers which caused the injury or death; d) Liability is Mitigated by the contributory negligence of a passenger or his failure to observe ordinary diligence to avoid injury; e) Stipulation to limit liability is valid in gratuitous carriage if no willful act or gross negligence by a common carrier.

94/ Defenses available to a Common Carrier

94/ a) Flood, Earthquake, Storm, lightning or other natural disaster or Calamity b) Act of the public Enemy in war, whether international or civil. c) Act or omission of the §hipper or owner of the goods. d) The character of the goods or defects in the packing or in the containers. e) Order or ad of competent authority.

94/ Three-fold character of a bill of lading

94/ a) It is a Receipt for the goods shipped b) It is a contract between the parties; and c) it is a symbolic representation of the goods i.e., it is a document of title.

94/ Requisites of a Fortuitous Event

94/ a) impossible to foresee: or if foreseeable impossible to prevent b) Failure to comply with the obligation is independent of human will; c) Occurrence renders it impossible to fulfill the Obligation in a normal manner; d) Obligor is free from participation in Aggravation of the injury

95/ Just Causes for the Revocation of Voyage

95/ a) Declaration of war b) Embargo c) Blockade d)Prohibition to receive cargo at the port of destination

95/ Formalities to Incur General Average

95/ a) There must be an Assembly of the sailing mate and other officers with the captain including those with interests in the cargo. b) There must be a resolution of the captain. c) The resolution shall be Entered in the log book, with the reasons and motives and the votes for and against the resolution. d) The Minutes shall be signed by the parties. e) Within a hours upon arrival at the first port the captain shall deliver one copy of these minutes to the maritime judicial authority.

95/ Exception to the Doctrine of Limited Liability

95/ a) Vessel is not Abandoned (when the ship owner does acts inconsistent with abandonment e.g. salvage) b) Ship owner agent/agent allows his vessel to embark in an unseaworthy condition. c) Claims under workmen's compensation d) injury/Damage due to ship owner's fault e) Vessel is insured f) In case the voyage is not maritime but only in giver or gulf g) In case of the expenses for Equipping, repairing or provisioning the vessel before the loss of the ship.

95/ Different Types of Charter Party

95/ a) bareboat charter, in which the ship owner turns over the possession of the vessel to the charterer, who undertakes to procure a crew, materials, supplies, and fuel for the vessel during the term of the charter, b) Time charter, which is a contract for the use of a vessel for a specified period of time; c) Voyage charter, which is a contract for the carriage of goods from one or more ports of loading to one or more ports of loading, on one or a series of voyages.

95/ Roles of the Captain

95/ a) the general Agent of the ship owner b) The commander and technical director of the vessel c) The representative of the country under whose flag he navigates

95/ Requisites for General Average

95/a) common danger present b) Arising from Accidents of sea, disposition of authority c) Peril imminent and ascertained d) Part of vessel or cargo deliberately sacrificed e) Intended to save vessel and cargo or both f) Successful saving of vessel or cargo g) Proper legal steps and authority taken.

96/ Attributes of a corporation

96/ a) Artificial being with separate and distinct personality; b) Created by Operation of law; c) Has the right of succession; d) Has the flowers and attributes conferred by law or incident to its existence.

96/ Alter Ego Piercing: What must be established

96/ a) Control by the stockholders—not mere stock control but complete domination of finances, policy and business practice in relation to the transaction assailed; b.) Use of such control to commit fraud or wrong; c) Injury is Proximately caused by the control and breach of duty

96/ Where should an action under the Warsaw Convention be brought

96/ a) Having jurisdiction where the carrier is a Resident b) Where carrier's principal place of business is located; c) Where the Contract was made: or d) Having jurisdiction at the place of Destination.

96/ When deviation is proper

96/ a) If caused by circumstances outside the control of the master or ship owner; b) If done to Comply with a warranty or to avoid a peril, whether or not the peril is insured against; c) if made in good faith, and upon reasonable ground of belief in its necessity to avoid a peril: d) If made in good faith, for the purpose of saving human life or relieving another distressed vessel.

96/ When may the SEC deny a corporate name

96/ a) Names which are identical, deceptively or confusingly similar to that of any existing corporation including internationally known foreign corporation through not used in the Philippines; b) Names already Protected by law; c) Names which are contrary to law, morals or public policy.

96/ When may salvage claim or compensation be awarded to the savior

96/ a) There must be a Marine peril; b) The vessel must be shipwrecked beyond the control of the crew or shall have been abandoned; c) The service of picking up and conveying the vessel of the cargo to a safe place is voluntarily rendered; and d) The service must have been successful in whole or in part or that the service rendered contributed to such success.

96/ Exceptions to the Business Judgment Rule

96/ a) When the Corporation Code expressly provides otherwise; b) When the directors or officers acted with fraud, gross negligence or in bad faith; and c) When the directors or officers act against the corporation in conflict of interest situation. (Corp. Code, Sec. 31)

97/ Instances where a director, trustee, or officer may be personally liable

97/ a) Assents to a patently unlawful act of the corporation (Corp. Code, Sec. 31) b) Bad faith or gross negligence in directing its affairs (Corp. Code. Sec. 31) c) Conflict of interest resulting in damage to the corporation, its stockholders or other persons (Corp. Code, Secs. 31 & 34) d) Consents to the issuance of watered stocks or, having knowledge thereof, he does not forthwith tile with the corporate secretary his written objection thereto (Corp. Code, Sec.65); e) Agrees to hold himself personally and solidarity liable with the corporation; f) Made personally liable by a specific provision of Law.

97/ Matters which cannot be acted upon by an Executive Committee

97/ a) Distribution of cash dividends to the shareholders b) Approval of any action for which shareholders' approval is also required c) Filing of vacancies in the board d) Amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable k) Amendment or repeal of by-laws i) Adoption of new by-laws

97/ Instances when corporation may purchase its own stock

97/ a) Eliminating Emotional shares (arising out of stock dividend declaration): b) Purchasing Delinquent shares arising from delinquency of shares proceedings; c) Paying dissenting stockholders under Appraisal right

97/ Some instances when a stock corporation may choose not to declare dividends even it surplus profits are in excess of 100% of the paid- in capital stock

97/ a) Justified by definite corporate Expansion projects or programs approved by the board of directors; b) Corporation is prohibited under any Loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; c) Retention is necessary under special circumstances obtaining in the corporation, such as when there is need for special reserve for probable contingencies.

97/ Requisites of a valid contract entered into between corporations having interlocking directors

97/ a) Presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a Quorum for such meeting; b) Vote of such director or trustee was not necessary for the approval of the contract; c) Contract is fair and reasonable under the circumstances

97/ Requisites to remove a director

97/ a) Regular meeting or special Meeting of the stockholders or members called for the purpose; b) Previous notice to the stockholders or members of the intention to remove; c) Vote of the stockholders representing at least & of the outstanding capital stock or at least 2/3 of the members, as the case may be; d) Director may be removed with or without Cause, unless he was elected by the minority, in which case, it is required that there is cause for removal.

98/ instances when non-voting shares are allowed to vote

98/ a) Amendment of Articles b) Sale, lease, exchange, mortgage, pledge or disposition of All or substantially all of corporate property c) Adoption/Amendment of by- Laws d) Incur, create, increase bonded indebtedness e) Increase or decrease capital stock f) Dissolution of corporation g) Investment of funds in another corporation h) Merger/consolidation with another corporation

98/ Foreign corporations deemed "doing business"

98/ a) Any act that Implies a continuity of commercial dealings or arrangements, and contemplate to some extent the performance of acts or works or the exercise of some functions normally incident to and in progressive prosecution of, the purpose and object of its organization. b) Appointing representatives, distributors domiciled in the Philippines or who stay for a period or periods totaling 180 days or more; c) Participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines: d) Soliciting orders, Service contracts, opening finches or liaison offices

98/ Requisites of Doctrine of Corporate Opportunity

98/ a) Corporation is financially Able to undertake the business opportunity. b) From the nature of the business opportunity, it is in line with corporation's business and is of practical advantage to the corporation. c) Corporation has an interest or a reasonable expectancy, by embracing the opportunity.

98/ Remedies of a corporation to enforce payment of stocks

98/ a) Delinquent sale b) Judicial action c) Collection from cash dividends and withholding of stock dividends

98/ Instances when appraisal rights are extinguished

98/ a) Dissenting stockholder withdraws the demand with the corporation's consent; b) Proposed action previously dissented is Abandoned; c) SEC disapproves the dissented action.

98/ instances when right to appraisal may be exercised

98/ a) Extension or reduction of corporate Term; b) Change in the flights of stockholders, authorize preferences superior to those stockholders, or restrict the right of any stockholder; c) Investing of corporate funds in another business or purpose; d) Sale or disposition all or substantially all assets of corporation; e) Merger or consolidation.

98/ How shares are transferred

98/a) indorsement by the owner or his attorney-in-fact or other person legally authorized to make the transfer b) Delivery of the certificate of stock c) To be valid against third parties, it must be Recorded in the books of the corporation

99/ Foreign corporations not deemed "doing business"

99/ a) Having a Nominee director or officer to represent its interests in such corporation; b) Mere investment as a share-holder by a foreign entity in a domestic corporation duly registered to do business and/or the exercise of rights as such investor; and c) Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

99/ Exempt transactions

99/ a) Judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or Bankruptcy; b) By or on account of a Pledge holder or mortgagee or any other similar lien holder; c) Isolated transactions: d) Distribution by corporation to its stockholders as stock dividend or other distribution out of surplus; e) Sale of Capital stock of a corporation to its own stockholders exclusively stock which has already been issued: f) Issuance of bonds or notes secured by mortgage upon real estate or tangible personal property: ///

99/ Requirements of a derivative suit

99/ a) Plaintiff was stockholder/member at the time the questioned act/transaction subject to the action occurred, as well as at the time the action was filed and remains as such during the pendency of the action; b) Plaintiff exercised all reasonable efforts and alleges with particularity in the complaint, to Exhaust alt remedies available, under the articles of incorporation, by-laws, or rules governing the corporation; c) No Appraisal right available for the acts complained of; and d) Suit is not a Nuisance/harassment suit.

99/ Exempt securities

99/ a) Securities issued by the Government, subdivisions/instrumentalities; b) Securities issued by foreign government with which the Philippines has diplomatic relations; c) Securities issued by receiver/ trustee in Bankruptcy approved by the proper adjudicatory body; d) Securities under the supervision and regulation of the insurance Commission, HLURB or the BIR; e) Securities issued by a Bank except its own shares of stock

99/ Modes to dissolve a corporation

99/ a) Voluntary b) Involuntary c) Shortening corporate term d)Expiration of the term

99/ Two tests to determine whether business is deemed "doing business"

99/ a) isolated Transaction Test b) Twin Characterization Test

99/ Exempt transactions

99/// g) Issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion provided the security so surrendered has been registered or was, when sold, exempt from registration; h) Broker's transactions i) Exchange of securities by issuer with its existing security holders exclusively, wherein the securities exchanged are not from the same issuer; j) Share subscriptions Prior to the incorporation or pursuant to an increase in Authorized capital stock; k) Sale by issuer to fewer than a persons during any 12—month period: l) Sale to qualified buyers: (vii) flanks, (viii) Investment house. (ix) investment-company. (x) Insurance company, (xi) Pension fund/ retirement plan maintained by the Government. (xii) Other person determined by the SEC as qualified buyers: m) Other transactions exempt by the SEC.

/// 70/ a) LITERAL INFRINGEMENT

In using literal infringement as a test, resort must be made to the words of the claim. If the challenged matter clearly falls within the claim, literal infringement exists. To determine whether the challenged matter falls within the literal meaning of the patent claim, the claims of the patent and the challenged matter should be compared within the overall context of the claims and specifications. to determine whether there IS exact identity of all material elements.

60/On the ASSETS (New PDIC Charter, Sec. 15[e][3l)

Upon service of closure, all the assets of the closed bank shall be deemed in custodia Iegis in the hands of the receiver, and as such, these assets may not be subject to attachment, garnishment, execution, levy or any other court processes A judge, officer of the court or any person who shall issue, order, process or cause the issuance or implementation of the garnishment order, Levy, attachment or execution. shall be liable Provided: collaterals securing the loans and advances granted by the BSP shall not be included in the assets of the closed bank for distribution to other creditors Provided, further: the proceeds in excess of the amount secured shall be returned by the BSP to the receiver Note: Any preliminary attachment or garnishment on any of the assets of the closed bank existing at the time of closure shall not give any preference to the attaching or garnishing party. Upon motion of the receiver, the preliminary attachment or garnishment shall be lifted and/or discharged.

12/ What Is the limitation to the capacity of the insured to choose the beneficiaries? (ISP) Why?

a. Persons in Illicit relations - adultery or concubinage (no need for conviction); b. Persons found guilty of the Same crime, in consideration thereof; c. Public officer or his wife, descendants or ascendants, by reason of his office (Civil Code, Art. 739) Reason for prohibition: Life insurance is similar to donation because it is also founded in liberality. As a consequence, the prohibition under Art. 739 of the Civil Code should equally operate in life insurance contracts. (The Insular Life Assurance Co, v. Ebrado, 1977)