III. INSURANCE CODE

84/Distinguish the liability of a common carrier for the acts of other passengers or strangers.

* For Acts of its Employees -Required diligence Extraordinary diligence -Nature of liability Tort; however, the employee must be on duty at the time of the act (Maranan v. Perez, G.R No. L- 22272, 26 June 1967). *For Acts of Other Passengers or Strangers -Required Diligence Ordinary diligence -Nature of liability Not absolute ; limited by Art. 1763 of the Civil Code

100/ What is the control test?

100/ The control test states that the nationality of the corporation is determined by the nationality of the majority of the stockholders on whom equity of control is vested based on the theory that they would be able to elect the majority of the Board of Directors (VILLANUEVA, Corporate Law, p. 55).

100/ What is the grandfather rule?

100/ The grandfather rule is the method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other nationalization Laws, is computed, in cases where corporate shareholders are present in the situation, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate shareholders (VILLANUEVA, Corporation Law, p. 63).

100/What is the place of incorporation test?

100/ The place of incorporation teststates that a corporation is national of the country under whose laws it has been organized and registered. In Philippine jurisdiction, this is the principal of nationality of a corporate entity, This is embodied in Section 123 of the Corporation Code (VILLANUEVA, Corporate Law, p. 55).

100/ When is the control test applied?

100/ This test is applied in cases of exploitation of natural resources, owning and operating public utilities, mass media, advertising industry, and in times of war (War-Time Test) (VILLANUEVA, Corporate Law, p 56-62).

101/ Discuss the doctrine of separates juridical personality.

101/ A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it, and those obligations incurred by the corporation, acting through its directors, officers, and employees are its sole liabilities (Pamplona Plantation Co, v, Acosta G.R. No. 153193, December 6, 2006).

101/ When is the corporation liable for torts committed by its officers or agents?

101/ A corporation is liable, whenever a tortuous act is committed by an officer or agent under express direction or authority from the stockholders or members acting as a body, or, generally, from the directors as the governing body (Philippine National Bank v. Court of Appeals, G.R. No. L-27115, May 18, 1978). Note: The corporate officer or officers who caused the tortuous act to be committed in the name of the corporation is also personally liable to the victims as joint-tortfeasors (VILLANUEVA, Corporate Law, p.40).

101/ Can a corporation be held criminally liable?

101/ No. Since a corporation is a mere legal fiction, it he cannot be held liable for a crime committed by its officers since it does not have the essential element of malice, except it by express provision of law (e.g. Anti-Dummy Law and Anti-Money Laundering Act), then corporation is held criminally liable.Moreover, the difficulty, if not the impossibility, of imposing the penal sanction of imprisonment and although there are instances that the law imposes fine as a penalty, which can be imposed on a corporation, would undermine the criminal law system of the country (VILLANUEVA, Corporate Law, p.45-46).

101/ Who shall be held liable for the criminal acts done on behalf of a corporation?

101/ The officers of the corporation may be held liable. It is settled that an officer of a corporation can be held criminally liable for acts or omissions done in behalf of the corporation only where the law directly requires the corporation to do an act in a given manner and the same law makes the persons who fails to perform such act in the prescribed manner criminally liable.Although the performance of an act is an obligation directly imposed on a corporation, the responsible officer who performed the act must be the one to assume criminal liability; otherwise this liability as created by the law would be illusory and the deter the effect of the law (Sia v. People of the Philippines, G.R. No. L-30896, April 28, 1983).

101/What is the limited liability Rule (LLR)?

101/Under the LLR, a stockholder is personally liable for the financial obligations of the corporation only to the extent of his unpaid subcription. While stockholders are generally not liable, the stockholders may be liable if they have not or have not fully paid the subscription price (Halley v. Printwell, Inc, G.R. No. 157549, May 30, 2011).

102-103/ What are the different classifications of piercing the corporate veil cases?

102-103/ The different classifications of piercing the corporate veil cases are: (FADE) 1.Fraud cases- the veil of separate personality may be lifted when such personality is used to defeat public convenience, justify, wrong, protect fraud or defend crime; or used as a shield to confuse the legitimate issues; or when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation. In such cases, the corporation he will be considered as a mere association of persons. The liability will directly attach to the stockholders or to the other corporation (China Banking Corporation v. Dyne-Sem Electronics, G.R. No. 149237, June 11, 2006); 2. Alter ego cases (or conduit Cases)- the corporate entity is being used to defeat public convenience, or mere a farce, since the corporation is merely the alter ego, business conduit or instrumentality of a person or another entity; also known as the instrumentality rule or alter ego doctrine (VILLANUEVA, Corporate Law p. 102) 3. Defeat public convenience cases- the corporate entity is being used to defeat public convenience (VILLANUEVA, Corporate Law p. 102); 4. Equity cases - when piercing the corporate fiction is necessary to achieve justice or equity; has become the "dumping ground" where no fraud or alter ego circumstances can be culled to warrant piercing (VILLANUEVA, Corporate Law p. 103).

102/ Is there an instance when a corporation recovers moral damages?

102/ A juridical person may claim for moral damages arising from libel under Article 2219(7) of the Civil Code, which expressly authorizes the recovery of moral damages in cases of libel, slander, or any other form of defamation, and does not quality whether the plaintiff is a natural or juridical person. Note:The Supreme Court implied that the award of moral damages to corporations is not a hard and fast rule, that although corporations may recover such damages, there must still be proof of the existence of the factual basis of the damage and its causal relation to the defendant's acts (Crystal v. Bank of the Philippine Islands G.R. No. 172428, November 28, 2008).

102/ Can a corporation recover moral damages in a suit?

102/ As a general rule, a corporation is not entitled to recover moral damages since it is an artificial person and cannot experience physical sufferings, mental anguish, fright, seriously anxiety, wounded feelings, moral shock or social humiliation, there would be no basis to grant its recovery (ABS-CBN v. Court of Appeals , G.R. No. 128960, Jan. 21, 1999).

102/ Discuss the doctrine of piercing the corporate veil.

102/ The main doctrine of separate juridical personality is to be tempered by the doctrine of piercing the veil of corporate fiction.Under this doctrine, a corporation is looked upon as a legal entity as a general rule, but when notion of legal entity is used to defeat public convenience, justify wrong or defend crime, the law will regard the corporation as mere association of persons and will be held liable (Uy v. Villanueva, G.R. No. 157851, June 29, 2007).

102/ When is the corporate veil pierced?

102/ When the veil of corporate fiction is used as a shield to: (DJ-ProDe) 1. Defeat public convenience; 2. Justify wrong; 3. Protect fruad; or 4. Defend a crime (Francisco Motors v. Court f Appeals, G.R. No. 100812, June 25, 1999).

102/ Can a corporation file a criminal complaint of libel and claim for moral damages even though it is a juridical person?

102/ Yes, a juridical person such as a corporation can validly complain for libel or other form of defamation and claim for moral damages.The SC had ratiocinated that Art. 2219( 7) does not qualify whether the plaintiff is a natural or a juridical person (Filipinas Broadcasting v. Ago Medical Center -Bicol, et. al., G.R. No. 141994, Jan. 17 2005).

103-104/ How is the veil of corporate existence pierced? (2004 Bar)

103-104/ Upon showing that the grounds exist, the corporate fiction or veil may e lifted through any of the following: 1. By disregarding the separate personality of the corporation; 2. By holding the corporate officer liable for the corporate obligation (Francisco v. Mejia, G.R. No.141617, August 14, 2011); or 3. By regarding the corporation as an association of persons or in case of two corporations , treat them as one (Development v. C.A, G.R. No. 126200, August 16, 2001) and hold them liable as such.

103/Give an instance when the alter Ego Doctrine is applicable.

103/ One of the instances when the alter Ego Doctrine may be invoked is when there is parent company- subsidiary company relationship (AQUINO, Philippine Corporate Law Compedium, 3rd Ed. (2014), p.64). However, the rule is still to the effect that if used for legitimate functions, a subsidiary's separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their perspective business. (MR Holdings, Inc. v. Bajar, G.R. No. 138104, April 11, 2002).

103/ What are the elements to be considered in fraud cases?

103/ The following are the elements:(FPU) 1.There must have been Fraud or evil motive in the affected transaction and the mere proof of control of the corporation by itself would not authorize piercing. 2.The main action should seek for the enforcement of Pecuniary claims pertaining to the corporation against corporate officers of stockholders, or vie-versa; and 3.The corporate entity has been Used in the perpetration of the fraud or in justification of wrong, or to escape personal liability. Note: There is always an element of malice or evil motive in fraud cases (VILLANUEVA, Corporate Law, p. 111).

103/ What are the probative factors considered in alter ego cases?

103/ The probative factors considered are:(OIC-B) 1. Stock Ownership by one or common ownership of both corporations; 2.Identity of directors and officers; 3. Methods of Conducting the business; and 4. The manner of keeping corporate Books and records (Concept Builders, Inc. v. NLRC, G.R. No. 108734, May 1996).

104/ What are instances to which the promoter is personally liable?

104/ A promoter is personally liable in the event the corporation is not duly incorporated (Caram, Jr. v. Court of Appeals, G.R. No. 48627, June 30, 1987). Any benefit derived by a promoter for the corporation should be given to the corporation because promoters sustain a fiduciary relationship to the subscribers, the corporation, and the stockholders and cannot deal unfairly with them or retain any secret profit (AQUINO, Corporate Law, p. 210).

104/When will the corporation be liable to the promoter?

104/ Contracts by the promoter for and in behalf of a proposed corporation generally bind him, subject to and to the extent of his representations, and not the corporation, unless and until after these contracts are ratified, expressly or impliedly, by its board of Directors/Trustees (Cagayan Fishing Development Co., Inc. v. Sandiko, G.R. No. L- 43350 December 23, 1937). Thus the corporation shall only be liable to the promoter after it has incorporated (VILLANUEVA, Corporate Law, p. 147).

104/Are by-laws required to be registered to the SEC?

104/ No. By-laws are not required to be registered in the SEC. What is required by law is that a copy thereof duly certified to by a majority of the directors or trustees and counter-signed by the secretary of the corporation shall be filed with the SEC which shall be attached to the original articles of incorporation ( CORPORATION CODE, Sec. 46).

104/ Who is a promoter?

104/ One who, acting alone or with others, takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefore (SECURITIES REGULATIONS CODE [hereinafter SRC]. sEC. 3.10).

104/ When there is a conflict between the articles of incorporation and the by-laws, which shall prevail?

104/ The articles of incorporation shall prevail for by-laws are subordinate to the former as well as to the Corporation Code and related statutes (Loyola Grand Villas Homeowners Assoc. v. CA, G.R. No. 117188, August 7, 1997).

104/ What are the requisites of valid by-laws?

104/ The following are the requisites: (CAM-O-VCR): 1. It must be consistent with the Corporation Code and other pertinent regulations; 2. It must be consistent with the Articles of incorporation; 3. It must not be contrary to Morals or public policy; 4. It must not disturb Vested rights; 5. It must not impair Contract or property rights of stockholders or members; 6. It must not create Obligations not sanctioned by law (AQUINO, Corporate Law, p.424); and 7. It must be Reasonable and non-discriminatory (VILLANUEVA, Corporate Law, p.217).

104/ What are the test to determine whether the corporate veil should be pierced?

104/ The three test are: 1. Control, not mere majority or complete stock control, but complete dominion, not only for finances but of policy and business in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind,will, or existence of its own; 2. Such control must have been used by the defendant to commit fraud or wrong in contravention of plaintiff's legal rights; and 3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of (Concept Builders Inc. v. NLRC, G. R No. 108734, May 29, 1996).

104/ What are promoter's contract?

104/ Those are the types of contracts entered in behalf of a corporation which is in the process of organization and incorporation, and such fact is acknowledged as an essential ingredient in the process of perfection. It is also known as pre-incorporation contracts (VILLANUEVA, Corporate Law, p. 143).

104/ Discuss the required number of votes for the adoption of by-laws.

104/It depends upon the time when the by-laws were adopted: 1. If it is adopted prior to incorporation - They by-laws must be signed and approved by all the incorporators and filed with the SEC together with the articles of incorporation. 2. If it is adopted and filed after incorporation (which must be within 1 month after receipt of official notice of the issuance of its certificate of incorporation by the SEC)-The affirmative vote of the stockholders representing at least majority of the outstanding capital stock, or of at least a majority of the members shall be necessary;the by-laws shall be signed by the stockholders or members voting for them (CORPORATION CODE, Sec. 46).

105/ What is the corporate term prescribe by the law?

105/ A corporation shall exist for a period not exceeding fifty (50) years from the date of incorporation unless sooner dissolved or unless said period is extended (CORPORATION CODE Sec. 11)

105/ Who is an underwriter?

105/ An underwriter is a person who guarantees on firm commitment and/or declared best effort basin the distribution and sale of securities of any kind by another company (SRC, Sec.3.15).

105/ How many incorporators are required in order to establish a corporation?

105/ Any number of natural persons not less than five (5) but not more than fifteen (15) (CORPORATION CODE, Sec. 10). However, there are exceptions with respect to other of corporations: 1. In non-stock corporation: the incorporators may be more than fifteen (15) in number as may e fixed in their articles of incorporation or by laws (Sec. 92). 2. In close corporations, the articles of incorporation must provide that all the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than as specified number of persons, not exceeding twenty (20) (Sec. 96). 3. In educational institutions, the trustees of educational institutions organized as non-stock corporations shall not less than five (5) nor more than fifteen (15) provided, however, the number of trustees shall be in multiples of five (5) (Sec. 108).

105/ What is the limitation in the use of the corporate name?

105/ No corporate name may be allowed by SEC if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name ( CORPORATION CODE, Sec. 18)

105/ What is the importance of the corporate name?

105/ The name of the corporation is essential to its existence; it cannot change its name except in the manner provided by law and by that name alone it is authorized to transact business. It is by that name that a corporation sue and be sued, and perform all other legal acts (VILLANUEVA, Corporate Law,p. 190).

105/ Enumerate the required qualifications of incorporators.

105/ The required qualifications of incorporators: (LRO) 1. All mus be in Legal age; 2. A majority of whom must be Residents of the Philippines; 3. Each of the incorporators of a stock corporations must Own or be a subscriber to at least one (1) share of the capital stock of the corporations (CORPORATION CODE, Sec. 10).

106/ What are the different contract law doctrines that can be applied in describing the nature of articles of incorporation?

106-107/ The articles of incorporation embody the mutuality of contracts such that there can only be an alteration or amendment of the articles if the stockholders and the State give their consent. It also embodies the obligatory force of contracts wherein the articles is binding and treated as the Law between the parties (VILLANUEVA Corporate Law, p. 171).

106/ What is the required minimum subscribed capital stock?

106/ At least 25% of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation and at least 25% of the total subscription must be paid (CORPORATION CODE, Sec. 13).

106/Define Outstanding Capital Stock.

106/ It is the total shares of stock issued to subscribers or stockholders, whether or not fully or partial paid ( as long as there is a binding subscription agreement), except treasury shares (CORPORATION CODE, Sec. 137).

106/ Define the term "Articles of Incorporation."

106/ The Articles of Incorporation is the basic contract document in corporate law, defining the charter of the corporation and the contractual relations between the state and the corporation, the stockholders and the State, and between the corporation and the stockholders (Government of Philippine Island v. Manila Railroad Company, G.R. No. L-30646, January 30, 1929).

106/ What is the numerical value for the minimum authorized, subscribed and paid-up capital stock?

106/ The following are the numerical values: 1.Paid-up capital stock-P5,000 (CORPORATION CODE, Sec. 13); 2.Subscribed capital stock- P5,000 as the word in SEc. 13, Corporation Code is "at least 25%" Thus , it is valid to pay 100% of the subscribed capital stock of P5,000; and 3.Authorized capital stock- P5,000 as the word "at least 25% is used again. Thus, it implies that it is valid to subscribe to the whole 100% of the authorized capital stock of P5,000.

106/ Can the corporate term be extended? What is the period of extension?

106/ Yes. The corporate term as originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by by an amendment of the articles of corporation , in accordance with this Code; Provided ,That no extension can e made earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an an earlier extension as may be determined by the SEC, e.g. there is influx of foreign investors who wanted to determine the stability of the corporation (CORPORATION CODE, Sec. 11)

107/ What are the special types of corporations that must submit together with its articles of Incorporation a favorable recommendation from the appropriate agencies supervising such corporations?

107/ The corporations that must submit a recommendation from appropriate agencies upon submission of the AOI are (BIBO-PET): 1. Banks; 2.Insurance companies; 3. Building and loan associations; 4. Other special corporations; 5. Public Utilities; 6. Educational institutions; 7. Trust companies (GENERAL BANKING LAW, Sec. 14) [hereinafter referred to as GBL] Note: The list is not exclusive.

107/ What are the contents of the Articles of Incorporation?

107/All corporations organized under this code shall file with the Securities and Exchange Commission articles of incorporation in any of the official languages duly signed and acknowledged by all of the incorporators,containing substantially the following matters, except as otherwise prescribed by this Code or by special law (C-P2 AN4 OT-C): 1. The Place where the principal office of the corporation is to be located, which must be within the Philippines; 2.The specific Purpose or purposes for which the corporation is being incorporated. Where a corporation has more than one stated purpose, the articles of incorporation shall state which is the primary purpose and which is/are the secondary purpose or purposes: Provided that a non-stock corporation may not include a purpose which would change or contradict its nature as such; 3.If it be a stock corporation, the amount of its Authorized capital stock in lawful money of the Philippines, the number of shares into which it is divided, and in case the share are par value shares, the par value of each, the names, nationalities and residences of the original subscribers, and the amount subscribed and paid by each on this subscription, and if some or all of the shares are without par value, such fact must be stated 4.The Number of directors or trustees, which shall not be less than five (5) nor more than fifteen (15); 5.The name of the corporation; 6.The names, nationalities and residences of the incorporators; 7.The names, nationalities and residences of person who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified in accordance with this Code; 8.Such Other matters as are not inconsistent with law and which incorporators may deem necessary and convenient; 9.The Term of which the corporation is to exist; and 10.If it be a non-stock corporation, the amount of its Capital, the names, nationalities and residences of the contributors and the amount contributed by each (CORPORATION CODE, Sec. 14).

108/ What is the Treasures's Affidavit?

108/ The Securities and Exchange Commission shall not accept the articles of incorporation of any stock corporation unless accompanied by a sworn statement of the Treasure elected by the subscribers showing that at least 25% percent of the authorized capital stock of the corporation has been subscribed, and at least 25% of the total subscription has been fully paid to to him in actual cash and /or in property the fair valuation of which is equal to at least 25% percent of the said subscription, such paid-up capital being not less than five thousand (5,000.00) pesos (CORPORATION CODE, Sec. 14).

108/ What are the required documents to be submitted to the SEC in case of an amendment to the Articles of Incorporation?

108/ The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Such articles, as amended shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees stating the fact that said amendment or amendments have been duly approved by the required vote of the stockholders of members, shall be submitted to the SEC (CORPORATION CODE, Sec. 16).

108/ How are the Articles of Incorporation amended?

108/ Unless otherwise prescribed by the Corporation Code or by the special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this code, or the vote or written assent of at least two-thirds (2/3) of the members if it be a non-stock corporation (CORPORATION CODE, Sec. 16).

108/ You have been asked to incorporate a new company to b called FSB Savings & Mortgage Bank, Inc. List the documents that you must submit to the Securities and Exchange Commission (SEC) to obtain a certificate of incorporation for FSB Savings and Mortgage Bank,Inc (Bar 2002)

108/The documents to be submitted to the Securities and Exchange Commission (SEC) are:(ATAV-LLBR) 1. Articles of Incorporation; 2.Treasure's Affidavit; 3.Certificate of Authority from the Monetary Board of he BSP; 4. Verification slip from the records of the SEC whether or not the proposed name has already been adopted by another corporation, partnership 0r association; 5. Letter undertaking to change the proposed name if already adopted by another corporation, partnership or association; 6. Letter authorizing the SEC or Monetary Board or its duly authorized representative to examine the bank records regarding the deposit of the paid-up capital; 7. Bank certificate of deposit concerning the paid-up capital; and 8. Registration Sheet;(Bar Examination Question with suggested answers from Answers to Bar Examination Question by the UP Law Complex and Philippine Association of Law Schools).

109/ When does corporate existence commence?

109/ A private corporation formed or organized under this Code commences to have corporate existence and juridical personality and is deemed incorporated from the date the Securities and Exchange Commission issues a certificate of incorporation under its official seal (CORPORATION CODE, Sec. 19)

109/What are BY-laws?

109/ By-Laws are relatively permanent and continuing rules and regulations or private laws enacted by the corporations to regulate,govern,and control its action, affairs, and concerns and of its stockholders or members and directors and officers in relation to the corporation (Loyola Grand Villas Homeowners (South) Association, Inc v. Court of appeals, G.R. No. 117188, August 7, 1997)

109/ What is the contractual significance of By-Laws?

109/ Since By-Laws operate merely as internal laws, they cannot prejudice third persons who deal in good faith with corporation, unless they have knowledge of the same and that strangers are nit bound to know the by-laws (VILLANUEVA, Corporate Law, p. 212).

109/ When shall the amendment take effect?

109/ The amendments shall take effect upon their approval by the SEC or from the date of filing with the said Commissions if not acted upon within in six (6) months from the date of filling for cause not attributable to the corporation (CORPORATION CODE, Sec.16)

109/ What are the non-amendable items in the Articles of Incorporation?

109/ The following are the non-amendable items of the fait accompli items: 1. Names of Incorporators; 2. Names of incorporating directors/trustees; 3. Names of the original subscribers to the capital stock of the corporation and their subscribed and paid-up capital; 4. The Treasurer-in-trust elected by the original subscribers; 5. Members who contributed to the initial capital stock of a non-stock corporation; 6. Witnesses and the acknowledgement thereof (SEC Opinion dated July 10, 1990).

109/ Can a corporation exist despite the lack of By-Laws?

109/ Yes. The mere fact of the existence of power in the corporation to adopt by-laws does not ordinarily and of necessity makes the exercise of such power essential to its corporate life, or to the validity of any of its acts. There cam be no automatic corporate dissolution simply because the incorporators failed to abide by the required filling of by-laws embodied in Sec. 46 of the Corporation Code ( Loyola Grand Villas Homeowners Assoc. v. Court of appeals , G.R. No. 117188, August 7, 1997).

110-111/ At the annual stockholders' meeting of MS Corporation, the stockholders unanimously passed a resolution authorizing the board of Directors to amend the corporate by-laws so as to disqualify any stockholder who is also a director or stockholder of a competing business from being elected to the Board of Directors of MS Corporation. The by-laws were accordingly amended. GK, a stockholder of MS Corporation and a majority stockholder of a competitor, sought election to the Board of Directors of MS Corporation. His nomination was denied on the ground that he was ineligible to run for the position. Seeking a nullification of the offending disqualification provision, GK consults you about its validity under the corporation code of the Phils. What would your legal advise be? (2000 Bar).

110-111/ The disqualification provision is valid. An amendment n the by-laws which renders ineligible, or if elected, subjects to removal, a director if he be also a director in a corporation whose business is in competition with or is antagonistic to the other corporation is valid. This is based upon the principle that where the director is so employed in the service of rival company, he cannot serve both, but must betray one or the other (Gokongwei v. SEC, G.R.No. L-45911, April 11, 1979).

110/ What is the effect of lack of By-Laws ?

110/ At the very least, by its failure to submit its by-laws on time, the corporation may be considered a de facto corporation whose right exercise corporate powers may not be inquired into collaterally in any private suit to which such corporations may be a party (Sawadjaan v. Court of Appeals, G.R. No. 141735, June 8, 2005).

106/ What is the required minimum authorized capital stock?

1106/ Stock corporations incorporated under this Code shall not be required to have an any minimum authorized capital stock except as otherwise specifically provided for by special Law (CORPORATION CODE, Sec. 12), and provided that the paid- up capital cannot be lower P 5,000.00 (CORPORATION CODE, Sec. 13).

111/ Ara third persons absolutely not abound the by corporation's by-laws?1

111/ No, Generally, by-laws have no extra-corporate force and are not in the nature og legislative enactments as far as third persons are concerned. However, a third party will actual notice of the by-laws so that this contract will not be affected; otherwise, he is bound thereby (PMI Colleges v. NLRC, G.R No. 121466, August 15,1997).

111/ What are the bindings effects of the corporation's by-laws?

111/ The bindings effect of are: 1.As to members and shareholders: a.The by-laws have the force of a contract between the numbers themselves. b.There is a conclusive presumption that the members and shareholders know the provisions of the corporate by-laws by the fact of their being such is charged with notice of by-laws. If he remains actually ignorant of the provision, he does so at his peril. 2.As to corporate directors and its officers: a.They are bound by it and must comply with it unless and until they are charged. b.Subordinate employees without actual acknowledge of the by-laws are not bound: 3.As to third persons: a.They are not bound to know the by-laws unless they have notice, actual or constructive (China Banking Corporation v. CA,G.R. No.117604, March 26, 1997).

111/ How are the by-laws amended?

111/By laws are amended by either of the following: 1.The majority of the board of directors or trustees and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a no-stock corporation, at a regular or special meeting dully called for the purpose , may amend or repeal any by-law or adopt new by-laws; or 2.The owners of 2/3 of the outstanding capital stock or 2/3 of the members in a stock corporation may delegate to the board of directors of trustees the power to amend or repeal any by-laws or adopt new by-laws (CORPORATION CODE, Sec. 48).

112/ How is the corporate term extended or shortened?

112. Corporate may be extended or shortened upon compliance with the following(NARS): 1.Approval by a majority vote of the board of directors/trustees; 2.Written Notice of the pruposed action and the time and place of meeting served to each stockholder or member either by mail or personal service; 3.Ratification by the stockholders representing at least 2/3 of the outstanding capital stock corporations and; and 4. A copy of the amended articles of incorporation Submitted to the SEC for approval (CORPORATION CODE, Sec. 37).

112/ What are the general powers of a corporation?

112/ The following are the general powers of a corporation (PIMPS-DO-SCAB) 1. To Purchase, receive, take or grant, hold, convey, sell, lease pledge, mortgage and deal with real and personal property, securities and bonds; 2. For stock corporations: Issue and sell stocks to subscribers and treasury stocks; for non-stocks corporations, admit members; 3. To enter into Merger or consolidation; 4. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; 5.To Sue and be sued 6. To make reasonable Donations for public welfare, hospitals, charitable, cultural, scientific, civic or similar purposes, provided that no donation is given to any (i) political party, (ii) candidate and (iii) partisan political activity; 7. To exercise Other powers essential or necessary to carry out its purposes; 8. Of Succession; 9. To adopt and use of Corporate seal; 10.To amend its Articles of Incorporation; and 11.To adopt its By-laws(CORPORATION CODE, Sec.36).

112/ What are the kinds of corporate powers?

112/ They are the following: 1.Express - those expressly authorized by the Corporation Code, applicable special laws, administrative regulations, and the articles of incorporation; 2.Implied - those essential and necessary to carry out its purpose/s as stated in the articles of incorporation; and 3. Incidental - those that are deemed conferred on the corporation because they are incidental to existence of the corporation (AQUINO, Corporate Law, p. 336-338).

112/ Can the power to amend the by-laws be delegated by the stockholders or members to the board of directors or trustees?

112/ Yes. Owners of 2/3 of the outstanding capital stock or 23 of the members in the non-stock may delegate to the board of directors/trustees the power to amend or repeal any by-laws or adopt new by-law. The delegation shall be considered as revoked whenever stockholders owning or representing a majority of the members in non-stock, shall so vote at a regular or special meeting (CORPORATION CODE, Sec. 48).

113-114/ What is bounded indebtedness?

113-114/ A bounded indebtedness is an obligation to pay a definite sum of money at a future time and at a fixed rate of interest, whether secured or unsecured, evidenced by a written dept instrument called a bond or debenture ( CORPORATION CODE, Sec. 38).

113-114/ What are the requirements in order to increase, decrease, or incur bonded indebtedness?

113-114/ The requirements are the same as in an increase or decrease in capital stock ( CORPORATION CODE, Sec.38).

113/ What is the remedy of the other stockholders who do not want to extend or shorten the term?

113/ A dissenting stockholder may exercise his appraisal right (CORPORATION CODE, Sec. 37). Power to Increase or Decrease Capital Stock or Incur, Create. or Increase Bonded Indebtedness

113/ What are the requirements of the increase or decrease of authorized capital stock?

113/ The requirements for the increase or decrease of authorized capital stock are as follows (BRaNoCeFA-25): 1.Approval by the majority vote of the Board of directors; 2. Ratification by stockholders holding or representing at least 2/3 of the outstanding capital stock at a meeting duly called for the purpose; 3. Prior written Notice of the proposed increase or decrease of the capital stock indicating the time and place of meeting addressed to each stockholder which must me made either by email or personal service; 4. A Certificate in duplicate signed by a majority of the directors of the corporation, countersigned by the chairman and the secretary of the stockholders meeting; 5. In case of increase in capital stock, 25% of such increased capital must be subscribed and that at least 25% of the amount subscribed must be paid either in cash or property; 6 In case of decrease in capital stock, the same must not prejudice the right of the creditors; 7. Filling of the certificate with the SEC; and 8. Approval thereof by the SEC. Note: The required 25% subscription shall be based on the additional amount by which capital stock as increased (CORPORATION CODE, Sec. 38).

113/ What are the ways to increase or decrease authorized capital stock?

113/ These are; 1. By increasing/ decreasing the number of shares and retaining the par value; 2. By increasing/ decreasing the par value of existing shares without increasing/ decreasing the number of shares; or 3. By increasing/ decreasing the number of shares and increasing/ decreasing the par value (AQUINO, Corporate Law, p. 357).

114/ What are requirements in order for a corporation to sell or dispose of its corporate assets?

114-115/ The requirements areas follows (PARDS): 1. Prior written noticed of the proposed increased or decrease of the capital stock indicating the time and place of meeting addressed to each stockholder which must be made either by mail or personal service; 2. Approval by the majority vote of the board of directors; 3. Ratification by the stockholders holding or representing at least 2/3 of the outstanding capital stock at a meeting duly called for that purpose; 4. Any Dissenting stockholder shall have the options to exercise his appraisal right; and 5. The Sale of the assets shall be subject to the provisions of existing laws on illegal combinations and monopolies and Bulk Sales Law (CORPORATE CODE, Sec. 40). Note:The vote of the majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction authorized by Section 40 in case of non-stock corporations where there are no members with voting rights (CORPORATION CODE,Sec.40).

114/ When may the corporation deny the pre-emptive right of its stockholders?

114/ It may do so under the following circumstances:(PREP-DeWN): 1. Shares to be issued to comply with laws requiring stock offering or minimum stock ownership by the Pulic; 2. It does not apply to shares that are being Reoffered by the corporation after they were initially offered together with all the shares; 3. Shares issued in good faith in Exchange for property needed for corporate purposes; 4. Shares issued in Payment of previously contracted debts; 5. In case the right is Denied in the Articles of Incorporation; 6. Waiver of the right by the stockholder, or 7. In case of Non-stock corporations (SEC Opinion dated November 28, 1990).

114/ What is a Pre-emptive right?

114/ Pre-emptive right is the preferential right of shareholders to subscribe to all issues or disposition of shares of any class in proportion to their present shareholdings(AQUINO, Philippine Corporate Law Compendium (2014), p.368)[hereinafter AQUINO, Corporate Law].

114/ What are the requirements in order to increase , decrease, or incur bonded indebtedness?

114/ The requirements are the same as in an increase or decrease in capital stock (CORPORATION CODE, Sec. 38).

114/ What is the purpose of the pre-emtive right?

114/ To enable the shareholder to retain his proportionate control in the corporation and to retain his equity in the surplus. It is aimed to maintain the existing ration of the shareholder's interest and voting power in the corporation (SEC Opinion dated May 16, 1991).

115-116/ What are the conditions before the corporation can acquire its own shares?

115-116/ A corporation can acquire its own shares provided that: 1. The capital is not impaired; 2 A legitimate and proper corporate purpose or objective is advanced; 3. The corporate affairs warrant it; 4. The transaction is designed and carried out in good faith; 5. There is intended and there results no undue advantage to a favored a stockholder at the expense of the remainder; 6.The creditors are not prejudiced; and 7. The corporation acts in good faith and without prejudice to the rights of creditors and stockholders (SEC Opinion No. 10-24 dated August 12 2010).

115/ What are the instances when the corporation can acquire its own shares?

115/ It can acquire its own shares (EC PAREC): 1.To Eliminate fractional shares out stock dividend (CORPORATION CODE, Sec., 41); 2. To Collect or compromise indebtedness to the corporation, arising out or unpaid subscription, in a delinquency sale and to purchase delinquent shares sold during said sale (Sec. 41); 3. To Pay dissenting or withdrawing stockholders ( Sec. 41); 4. To Acquire treasury shares (Sec. 9); 5. Redeemable shares regardless of existence of retained earnings (Sec. 8); 6. To Effect a decrease of capital stock (Sec. 40); and 7. In Close corporations, when there is a deadlock in the management of the business ( Sec. 104).

115/ What are instances when the sale or disposition of corporate assets does not require the ratificatory vote from stockholders?

115/ It is not required: 1.If it is necessary in the usual and regular course of business; 2. If the proceeds of the sale or other disposition of such property and assets be appropriated for the conduct of the remaining business; or 3. If the transaction does not cover all or substantially all of the assets (CORPORATION CODE, Sec. 40).

115/ Is the SEC approval required before there can be a sale or disposition of all or substantially all of the corporate assets?

115/ SEC approval is NOT required because such power really affects the business enterprise level of corporate set-up, an area left by the State to the judgement of management, and does not in any way affect or alter the juridical entity granteed by the State (VILLANUEVA, Corporate Law supra at 263).

115/ When is a sale or disposition considered to cover substantially all the corporate assets?

115/ The corporation would be rendered incapable of: 1. Continuing the business;or 2. Accomplishing the purpose for which it was incorporated (CORPORATION CODE, Sec. 40).

116/ Can a corporation engage in a business not enumerated in its purpose clause?

116/ No. A corporation is not allowed to engage in a business distinct from those enumerated in the articles of incorporation without amending the purpose clause of said article. However, if the investment by the corporation is reasonably necessary to accomplish its primary purpose as stated in AOI no need for stockholders approval (CORPORATION CODE, Sec.42).

116/ What are the rules for the investment of corporate funds in another corporation as imposed by SEC?

116/ The SEC imposes the following rules: 1. That the property is not presently used by the company and the leasing is not made on a regular basis; 2. That by leasing the property, it will make it productive instead of allowing them to remain idle; 3. There is no express restrictions in the articles of incorporation or by-laws; 4. Leasing is not used as a scheme to prejudice corporate creditors or result in the infringement of the Trust Fund Doctrine; and 5. Compliance with the requirements of Sec. 42 ( SEC Opinion dated November 9, 1994).

116/ What are the requirements to invest corporate funds in another corporation under the Corporation Code?

116/ The following are the requirements (R2-MAN): 1. Resolution by the majority of the board of directors or trust trustees; 2. Ratification by the stockholders representing at least 2/3 of the outstanding capital stock or 2/3 of the members in case of non-stock corporation; 3. The ratification must be made at a Meeting duly called for the purposes; 4. Prior written Notice of the proposed investment and the time and place of the meeting shall be made, Addressed to each stockholder or member by mail or by personal service; and 5. Any dissenting stockholder shall have Appraisal right ( CORPORATION CODE, Sec. 42).

116/ Does a corporation have the power to invest corporate funds in another corporation?

116/ Yes. The corporate funds may be invested in another corporation to further its own purpose or for purposes other than its primary purpose. The other purposes for which the funds may be invested must be among those enumerated at secondary purposes and must further comply with the requirements of section 42 of the Corporation Code. Investment of funds includes not only investment of money but also investment of property of the corporation. Lease of the property is included in the term "investment of funds" (VILLAUEVA, Corporate Law supra at 270).

117/ What are dividends?

117/ Dividends are corporate profits set aside, declared, and order to be paid by the directors for distribution among shareholders at a fixed time (Wise Co. v. Meer, G.R. No. 48231, June 30, 1947).

117/ Define unrestricted retained earnings.

117/ It is the amount of accumulated profits and gains realized out of normal operations which is; 1.Not appropriated by the Board for corporate expansion; 2.Not covered by a restriction under a loan agreement; and 3.Not required to be retained under special circumstances (SEC Memorandum Circular 11-09).

117/ Do passive investments investment in another corporation require the ratification of the stockholders ?

117/ No. Section 42 does not cover passive investment in shares. The same may e justified in the general power to purchase securities in other corporations thus, a corporation with idle funds may invest in shares for the purpose of generating income (CORPORATION CODE,Sec.. 36(7)).

117/ What are the requirements for the corporation to declare dividends?

117/ The requirements are as follows (URC): 1.Unrestricted retained earnings; 2.Resolution of the board; and 3.If stock dividends are declared, there must be resolution of the board with concurrence 2/3 of outstanding Capital (CORPORATION CODE, Sec. 43).

117/ What are kinds of dividends?

117/ They are:(BC3LOP2S2): 1. Cash dividends- dividends payable in cash; 2. Property dividends- dividends distributed to the stockholders in the form of property; real, or personal; 3. Stock dividends- dividends payable in unissued or increased or additional shares of the corporation instead of cash or property out of the unrestricted retained earnings of the corporation; Note: While shares of stock may be issued to a non-stockholder, shares of stock coming from stock dividends are payable only to stockholders and not to strangers or non-stockholders because only shareholders are entitled to dividends (Nielsen & Co. v. Lepanto Consolidated Mining Co,. G.R. No.L-21601, December 17,1966). 4. Optional dividends- dividends that give the stockholder an option to receive cash or stock dividend; 5. Composite dividends- dividends which are partly in cash and partly in stocks; 6. Preferred or preferential dividends- dividends which are payable to one class of stockholders in priority to that to be paid to another class; 7. Cumulative dividends- dividends which are contracted to be paid at a certain rate at, stated times; 8. Scrip dividends- dividends in a form of writing or certificate issued to a stockholder intitling him to the payment of money, stock or other benefit at some future time in as much corporation at the time such dividends are declared has profits not in cash or has no sufficient cash; 9. Liquidating dividends- dividends which are actually distribution of the assets of the corporation upon dissolution or winding upp of the same; and 10. Bond dividends- dividends distributed in bonds of the corporation to the stockholders.

118-119/ What are the requirements in order that a management contract be valid?

118-119/ The requirements are as follows: 1. Approval by a majority of the quorum of the board of directors; 2. Ratification by the stockholders owning at least majority of the outstanding and the managed corporations, at a meeting duly called for the purpose; 3. Approval by the stockholders of the managed corporation owning at least 2/3 of the total outstanding capital stock entitled to vote, or by at least 2/3 of the members in the case of a non-stock corporation: a. Where a stockholder/s representing the same interest of both the managing and the managed corporations own or control more than 1/3 of the total outstanding capital stock entitled to vote of the managing corporation; or b. Where a majority of the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation ( CORPORATION CODE, Sec. 44).

118/ What is the period for a management contract?

118/ A management contract must not be longer than five (5) years for any one (1) term except those contracts which relate to the exploration, development, exploitation or utilization f natural resources that may be entered into for such periods as may be provided by pertinent laws or regulations ( CORPORATION CODE, Sec. 44).

118/ What is the Management contract?

118/ It is a contract whereby a corporation undertakes to manage or operate all or substantially all of the business of another corporation, whether such contracts, operating agreements or otherwise ( CORPORATION CODE Sec. 44).

118/ Can a corporation cannot enter into a management contract with a natural person?

118/ No. corporation cannot enter into a "management contract" with a natural person. Such contract under the Corporation Code ( AQUINO, Corporate Law, p. 412).

118/Can the corporation retain surplus without declaring dividends?

118/ Yes. A general rule, surplus profit in excess of 100% of their paid-up capital stock cannot be retained by the corporation without declaration of dividends because to do so would prejudice the shareholders to gain dividends based on the corporate profits. However, the corporations may retain surplus profits: 1. When it can be clearly shown that such retention is necessary under special reserve for probable contigencies. 2. When the corporation is prohibited under any loan agreement with any financial institution or creditor from declaring dividends without its/his consent and such consent has not yet been secured. 3. When justified by definite corporate expansion projects approved by the board of directors (CORPORATION CODE Sec. 43).

119-120/ What are the the effects of an ultra vires act in an executed and executor contracts?

119-120/ The effects are: 1. Executed contract- courts will not set aside or interfere with such contracts; 2. Executory - no enforcement even at the suit of either party ( avoid and unenforceable); 3. Partly executed and partly executory- principle of "no unjust enrichment at expense of another" shall apply; and 4. Executory contracts apparently authorized but ultra vires - the principle of estoppel shall apply (Pirovano v. De La Rama, G.R. No. 6817, July 31, 1958).

119/ What is an ultra vires act?

119/ It is an act committed outside the object for which a corporation is created as defined by the law ( Republic v. Acoje Mining Co., Inc., G.R. NO. L-18062, February 28, 1963).

119/ Who may commit ultra vires acts?

119/ It may be committed by: 1. The corporation (CORPORATION CODE, Sec. 45); 2. The Board of Directors ( CORPORATION CODE, Sec. 23); and 3. The corporate officers (CORPORATION CODE, Sec.25).

119/ Can the management contract delegate the entire control over all officers and business of a corporation to another?

119/ No. A management contract cannot delegate the entire supervision and control over the officers and business of a corporation to another as this will contravene Section 23 of the Corporation Code (DE LEON & DE LEON, JR., The corporation Code, [2013], p.426).

119/ What are the types of ultra vires acts?

119/ They are as follows (BIN): 1. Acts done Beyond the powers of the corporation as provided in the law or its articles of incorporation; 2. Acts or contacts entered into in behalf of a corporation by persons who have No corporate authority. However, this is technically ultra vires acts of officers and not of the corporation; and 3. Acts or contracts which are pear se Illegal as being contrary to law ( VILLANUEVA, Corporate Law supra at 182) .

120-121/ What is the consequence when the Board of Directors does not act according to its charter and law?

120-121/ A corporation, through its board of directors, should act in the manner and within the formalities, if any, prescribed by its charter or by the general law. Thus, directors must act as a body in a meeting called pursuant to the law or the corporation's by-laws, otherwise, any action taken therein may e questioned by any objecting director or shareholder ( Lopez Realty v. Fontencha, G.R. No. 76801, August 11, 1995).

120/ What are the powers held by the Board of Directors?

120/ All corporate powers shall be exercised by, and all corporate business shall be conducted through the Board of the Directors of the corporation ( CORPORATION CODE, Sec. 23).

120/ How do shareholders exercise the powers of the corporation?

120/ Although as a general rule, stockholders or members do have the authority to exercise general corporate powers as such is expressly granted to the Board of Directors/ Trustees or its officers (CORPORATION CODE, Sec 23), the consent and approval of the stockholders representing 2/3 of the total outstanding capitalstock or 2/3 of the members of non-stock corporation is mandated in the corporation's exercise of its specific powers(Secs.28,29,40,42,43, and 44).

120/ What is the remedy of stockholders who were not able to vote to authorize the action taken by the board of directors?

120/ Any stockholder who did not vote to authorized the action of the board of directors may, within forty (40) days after the date which such action was authorized, object there to in writing and demand payment for his shares (CORPORATION CODE, Sec. 28).

120/ Is the approval of stockholders required before the Board of Directors issue the unissued portion of the original authorized capital stock?

120/ No. The power to issue shares of stocks in a corporation is lodge in the board of directors and no stockholders meeting is required to consider it because additional issuance of shares of stocks does not need approval of the stockholders (Dee v. SEC, G.R. No. L-60502, July 16, 1991).

120/ What is the remedy of the dissenting stockholders?

120/ With respect to acts affecting the rights of stockholders, sale of all or substantially all corporate assets or investment of corporate funds in another corporation, the dissenting stockholders can exercise their appraisal right (CORPORATION CODE, Sec,.81).

120/ Is it possible that a power of a corporation included in the Articles of Incorporation be considered as an ultra vires act?

120/ Yes. Ultra vires (''beyond powers'')refers to an act outside or beyond corporate powers, including those that may ostensibly be within such powers but are, by general or special laws, either prohibited or declared illegal. Thus, through the Articles of Incorporation grants the corporation a certain power, such cannot be exercise if it is prohibited or declared illegal by law (Yamane v. Lepanto, G.R. No. 154993, October 25, 2005).

121/ Can the corporation delegate its corporate powers to its officers?

121/ Yes. A corporation, like a natural person, may authorized another to do certain acts for and in its behalf, through its board of directors, may be legally delegate some of its functions and powers to its officers, committees or agents appointed by it (Luzviminda Visayan v. NLRC, G.R. No. 69999, April 30, 1991).

121/ Are the actions of the board of directors during a meeting which failed to abide by the requirements of its charter or the law, subject to ratification?

121/ Yes. An action of the board of directors during a meeting, which was illegal due to lack of notice, may be ratified either expressly, by the action of the directors in subsequent legal meeting, or impliedly, by the corporation's subsequent course of conduct (Lopez Realty v. G.R. No. 76801, August 11, 1995).

51/ What is a Continuing Surety?

35/ A surety's liability to the creditor is direct, primary, and absolute, although the contract of surety is secondary only to a valid principal obligation (Stronghold Insurance Co., Inc. v. Tokyu Construction Company, Ltd., G.R. No. 158820-21, June 5, 2009). It is also (a) solidary, (b) limited to the amount of the bond and (c) it is determinded strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee (INS. CODE, Sec. 178).

41/ What is insurance ?

41 It is a risk-distributing device, a mechanism by which all members of a group exposed to a particular risk contribute premiums to an insurer. From these contributory funds are paid whatever losses occur due to exposure to peril insured against (SPS. Tiay, et al, v. CA, et al., G.R. No. 119655, 1996).

41/ What is a contract of insurance ?

41 It is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event (,. Sec. 2).

41/ What is the Principal Object Test?

41 Under the test, if the principal object and purpose is indemnity, the contact constitutes insurance. On the other hand , if it is service, risk transfer and distribution being merely incidental, then the arrangement is not insurance and therefor, not subject to laws regulating insurance (Jordan v. Group of Health Association, 107 F. 2d 239). Moreover, the Insurance code enumerates the acts, which are deemed included in the term doing an insurance business (INSURANCE CODE, Sec.2[b].

42/ Discuss the characteristics of an insurance contract. (RAPE-ACUCU)

42 The characteristics of an insurance contract are: 1. Risk Distributing Device of insurance serves to distribute the risk of economic loss among, as many as possible, those who are subject to the same kind of risk (SUNDIANG AND AQUINO, Reviewer supra at 78). 2. Aleatory - a contract which depends upon the happening of the event which depends the happening of an event which is uncertain or which is to occur at an indeterminate time (CIVIL CODE, Art. 2010). 3. Personal - the law presumes that the insurer considered the personal qualifications of the insured in approving the insurance applications (SUNDIANG AND AQUINO, Reviewer supra at 80). 4. Executory - the contract is executory to the insurer and subject to the conditions, the principal one of which is the happening of the event insured against (AQUINO, Insurance supra at 13). 5. Contract of Adhesion or fine Print Rule - most of the terms of the contract do not result from mutual negotiations between the parties as they are prescribed in printed from to which the insured may adhere if he chooses to but which he cannot change (SUNDIANG AND AQUINO, Reviewer supra at 78) ////////////////////////////

42/ What are the elements of a contract of insurance?

42 The elements are the following (SUNDIANG AND AQUINO, Reviewer supra at 80): (PARIS) 1. Payment of Premium - in order that an insurance policy be valid and binding, actual payment of then premium (consideration) must be made (INS. CODE, Sec. 77); 2. Assumption of risk - the insurer undertakes to indemnify the insured against loss, damage, or liability (Sec. 2); 3. Risk of loss - the happening of designated events, either unknown or contingent, past or future, will subject the insured to some kinds of loss, whether in the form of injury, damage or liability; ///////////////////////////

42/ Who are the parties to a contract of insurance?

42 The following are the parties: 1. Insurer - party who assumes the risk of loss and undertakes for a consideration to indemnify the insured or to pay him a certain sum on the happening of a specified contingency or event (DE LEON, The Insurance Code, [2014], p. 74. Note: Under the code, the business of insurance may be carried now only by corporation, partnerships, and associations. Individuals are deleted from those included in the term insurer (INS. CODE, Sec. 190) 2. Insured - who is indemnified against, or is to receive a certain sum upon the happening of a specified contingency or event. Note: The insured is not, however, always the person to whom the proceeds are paid. This person may be the beneficiary designated in the policy (DE LEON, The Instrument Code, [2014], p. 74.

43/

43/ 4. Onerous- there is valuable consideration called the premium. 5. Risk Distributing Device- insurance serves to distribute the risk of economic loss among as many as many as possible to those who are subject to the same kind of loss (AQUINO, supra at 7). 6. Consensual- it is perfected by the meeting of the minds of the parties; ( CIVIL CODE, Art. 1319); cognition theory applies; the contract is perfected the moment the offeror learns of the acceptance of his offer by the other party (Art. 1319).

44/ What are distinctions between perils of the sea and perils of the ship?

44 Perils of the sea are restricted to such accidents and misfortunes proceed from mere sea-damage that arises from stress of whether, winds and waves, from lighting and tempests. It refer only to fortuitous accidents of seas. On the other hand, perils of the ship are those losses from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions. The insurer undertakes to insure against perils of the sea , not against perils of the ship (La Razon Social v. Union Insurance Society Canton, G.R. 13983, 1919).

44/ What is a marine insurance?

44/ It is an insurance against risks connected with navigation, to which a ship, cargo freightage, profits or other insurable interest in movable property, may be exposed during a certain voyage or a fixed period of time. However, under the present laws, it also covers inland marine insurance (INS. CODE, Sec. 101).

44/ JQ, owner of a condominium unit, insured the same against fire with the XYZ Insurance Co., and made to the loss payable to his brother, MLQ. In case of loss by fire of the said condominium unit, who may recover on the fire insurance policy? State the reason(s) for your answer. (2001 Bar)

44/ JQ can recover on the fire insurance policy for the loss of said condominium unit. He has the insurable interest as owner-insured. As beneficiary in the fire insurance policy,MLQ cannot recover on the fire or property insurance policy. For the beneficiary to recover on the fire insurance policy, it is required that he must have insurable interest in the property insured. In this case, MLQ does not have insurable interest in the condominium unit (Answers to Bar Examination Questions by the UP Law Complex and Philippine Association of Law Schools).

43/ Mendoza Corporation is a family corporation, the stockholders of which are Juan Dela Cruz, Pedro Santos , Julia Mendoza and their children. Prior to Aug. 9, 1979, an agent of X Bank proposed to Mendoza Corp. finally agreed. X Bank sent aninspector to inspect the building and agreed to insure the same for P500,000 for which Mendoza Corp. paid an annual premium of P2,500. On Aug. 9, 1979, X Bank issued to Mendoza Corp. a fire insurance policy, the insured property was totally burned rendering it a total loss. A claim was made by Mendoza Corp. upon X Bank but the latter denied it cotending that the former had no insurable interest over the building constructed on the piece of land in the name of the late Juan Dela Cruz and NOT by Mendoza Corporation. Does Mendoza Corporation have the right over the proceeds of the insurance contract?

44/ Mendoza Corporation has a right to the proceeds. Regardless of the nature of the title of the insured or even if he did not have title to the property insured, the contract of fire insurance should still be upheld if his interest in or his relation to the property is such that he will be benefited by its continued exixtence or suffer a direct pecuniary loss from its destruction or injury. The test in determining insurable benefit or advantage from its preservation, or will suffer pecuniary loss damage from its destruction, termination or injury the happening of the event insured against (Harvardian Colleges v. Country Bankers Insurance Corp., CA CV No. January 6, 1986).

45/ What are the rules on marine protection and indemnity insurance?

45 As to the measure of Indemnity: 1. Valued policy - The parties are bond by the valuation if the insured had some interest at risk and there is no fraud. 2. Open policy - The following rules shall apply in estimating a loss: a. Value of the ship - value at the beginning of the risk; b. Value of the cargo - actual cost when laden on board or market value at the time and place of lading c. Value of freightage - gross freightage exclusive of primage; d. Cost of insurance - in each case, to be added to the estimated value (INS. CODE, Sec. 163).

45/ What are the different kinds of marine insurance?

45 The following are the kind of marine insurance: (OIA) 1. Ocean Marine Insurance; a. Insure over the vessel, craft and other conveyances; b. Insurance for the protection of the carrier against liability to others for loss or damage to the property of another; c. Insurance over cargoes that are being transported; and d. Insurance over freight and income. 2. Inland Marine Insurance; a. Insures policies over goods that are being imported and exported; b. Insurance over means of and infrastructure for transportation and communications; and c. Personal property floaters. 3. Aircraft Hull Policy - a type of aviation Insurance (AQUINO, Insurance supra at 211).

45/ Discuss the Special Marine Insurance Contracts and Clauses.

45/ They are the following: (ABIS-D-PRIM) 1. All-Risk Policy- insurance against all causes of conceivable loss or damage. Except: a. As those otherwise excluded in the policy; or b. As a result of fraud or intentional misconduct on the part of the insured (Choa Tiek Seng v. CA, G.R. No. 84507, March 15, 1990). 2. Barratry Clause- a clause which provides that there can be no recovery on the policy in case of any wilful misconduct on the part of the master or crew in pursuance of some unlawful or fraudulent purpose without consent of owners, and to the prejudice of the owner's interest (Roque v. IAC, G.R. No. L-66935, November11, 1985). 3. Inchmaree Clause - a clause which makes the insurer liable for loss or a. Bursting of the Boiler b. Breaking of Shafts c. Latent defect of Machinery or hull d. Faults and error in the Navigation or management of the vessel e. Negligence of the Captain or engineers (Thames and Mersey Marine Insurance Co v. Hamilton Fraser and Co. 12 AC 484, 1887). //////////////////////////////////

46/

46/ 4. Sue and Labor Clause - A clause under which the insurer may become liable to pay the insured, in addition to the loss actually suffered, such expenses as he may have incurred in his efforts tp protect the property against a peril for which the insurer would have been liable (INS. CODE, Sec. 163). 5. Dealy Clause - exempts the insure from liability if there was delay in the voyage (AQUINO , Insurance, 249). 6. Protection and Indemity Clause- insures the shipower from liability for damages caused by the ship to wharves, piers and other harbor installations (Supra at 249). 7. Running Down Clause - makes insurer liable in collision cases (Supra at 249). 8. Institute War Clause - insurance covered by the FS&S including capture, seizure, arrest, restrain, detainment seizure or detention seizure or detention by civil authorities (Malayan Insurance Co. v. CA, G.R. No. 119599, March 20, 1997). 9. Memorandoum Clause - provides for the list of goods for which the insurer will be liale unless damage exceeds a stated percentage of total value (AQUINO, INSURANCE, p. 249).

46/ When is a ship oe vessel seaworth?

46/ A ship is seawothywhen it it is reasonably fit to perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy (INS. CODE, Sec. 122)

46/ In marine insurance, what does the insured warrant?

46/ In every marine insurance policy the insured impliedly warrants the insurer that the vessel is seaworthy and such warrant is as much a term of the contract as if expressly written on the face of policy. Ot becomes athe obligation of the cargo owner to look for a reliable common carrier that keeps its vessel in a seaworthy condition. He may have no control over the vessel but he has full control in the selection of the commen carrier that will transport his goods. Moreover, he has full discretion in the choice of assuer that will undser write a particular venture (Roque v. IAC, G.R. No. L-66935), November 11, 1985).

46/ What rae implied warranties in a contract of marine insurance?

46/ The warranties are following: (DISNID) 1. That the ship will not Deviate from the agreed voyage unless it is proper (INS. CODE, Sec. 123); 2. That the ship will not engage in illegal venture; 3. That the ship is Seaworthy at the inception of the insurance (Sec. 115); 4. Warranty of Neutrality: That the ship will carry the requisite documents of nationality or neutrality of the ship or cargo where such nationality or neutrality is expressly warranted (Sec. 122). 5. Presence of Insurable interest (Sec. 102); and 6. Warrantty of possession of Documents of neutrality: That will carry the requisite documents of nationality or neutrality of the ship or cargo where such is expressly warranted (Sec. 122).

47/ What constitutes actual total loss?

47/ Actual loss consist of the following (DITO): 1. Damage rending the thing valueless to the owner for the purpose for which he held it; 2. Irretrievable loss by sinking or by being broken up; 3. Total destruction; or 4. Other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured (INS. CODE, Sec. 132).

47/ What constitutes constructive total loss?

47/ Constructive loss consists of the following: (DEA) 1. Damage reducing, by more than 3/4,. the value of the vessel and of cargo; 2. Expense of transshpment exceeds 3/4 of value of cargo; and 3. Actual loss of more than 3/4 of the value of the oject (INS. CODE, Sec. 133, in relation to Sec. 141). Note: In case of constructive total loss, the insured may: 1. Abandon goods or vessel to the insurer and claim for whole insured value (INS. CODE, Sec. 141) or 2. Without abandoning vessel, claim for actual loss (INS. CODE, Sec. 157).

47/ What are kinds of loss in amrine insurance ?

47/ The kinds of loss in marine insurance are: (TP) 1. Total Loss; and 2. Partial Loss

47/ What constitutes total loss?

47/ Total loss may be actual or constructive: 1. Actual Total Loss- if the subject matter is destroyed or so damaged as to cease to be a thing of the kind insured or where the insured is irretivably deprived thereof (AQUINO, supra at 246). 2. Constructive Total Loss -or Commercial Total Loss- when the thing insured has been reduced to such a state or placed in such a position by the perils insured against as to make its total destruction or annihilaton though not inevitable, yet highly imminent or its ultimate arrival under the policy is not hopeless yet exceedingly doubtful (AQUINO supra at 247).

48/ What are the two kinds of averages?

48 The two kinds of averages are:(GP) 1.General Average - also known as gross average,include all the damages and expenses which are deliberately caused in order to save the vessel, its cargo or both ,from real and known risk (CODE OF COMMERCE, Art. 811). 2. Particular average - also known as simple average, are all the expenses and damages caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons interested in the vessel and her cargo (CODE OF COMMERCE, Art. 809).

48/ What are averages?

48/ Averages are all extraordinary or accidental expenses incurred during the voyage in order to preserve the vessel and cargo from the time it is loaded and the voyage commenced until the ends and the cargo unloaded (AQUINO, Insurance supra at 263).

47/ M/V Juan, a passenger and cargo vessel, was insured for P40,000,000.00 against constructive total loss. Due to a typhoon, it sank near Palawan. Luckily, there were no casualties, only injured passengers. The ship owner sent a notice of abandonment of his interest over the vessel to the insurance company which then hired professionals to afloat the vessel for P900,000.00. When re-floated, the vessel needed repairs estimated at P2,000,000.00. The insurance company refused to pay the claim of the ship owner , stating that there was no contructive total loss. Was there constructive total loss to entitle the ship owner to recover from the insurance company? Explain . (2005 Bar)

48/ No, there was no "constructive total loss" because the vessel was refloated and the costs of refloating plus the needed repairs (P 2.9 Million ) will not be more than three-fourths of the value of the vessel. A constructive total loss is one which gives to a person insured a right to abandon. (INS. CODE, Sec. 133) There would have been a constructive total loss had the required three-fourths of its value, i.e., more than P30.0 Million (INS. CODE, Sec. 141; cited in Oriental Assurance v. Court of Appeals and Panama Saw Mill, G.R. No. 94052, August 9, 1991). However, the insurance company shall pay for the total costs of refloating and needed repairs (P2.9 Million) (Answers to Bar Examination Questions by the UP Law Complex and Philippine Association of Law Schools).

48/ What are the requisites of abandonment?

48/ The requisites for validity are the following (PEN FACT): 1. The abandonment must neither be Partial nor conditional (Sec. 142); 2. The notice of abandonment must be Explicit and must specify the particular cause of the abandonment (Sec. 146); 3. It must be made by giving Notice thereof to the insurer which may be done orally or in writing (Sec. 145); 4. It must be Factual (Sec. 144); 5. There must be an Actual relinquishment by the person insured of his interest in the thing insured (Sec. 140); 6. There must be a Constructive total loss (Sec. 140); and 7. It must be made within a reasonable Time after receipt of reliable information of the loss (Sec. 143).

49/ Distinguish hostile fire from friendly fire.

49 A hostile fire is one that burns in a place where it is not supposed to be. It may also refer to a fire that started out a a friendly fire but escapes from its original place or it becomes too strong and out of control. On the other hand , a friendly fire is that fire which burns in a place where it is supposed to burn (SUNDIANG AND AQUINO, Reviewer supra at 151).

49/ What is the fire insurance ?

49 It is a contract by which the insurer for a consideration agrees to indemnify the insured against loss of, or damage to, property by hostile fire, including loss by lighting, windstorm , tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies (INS. Code, Sec. 169) General rule: The insurer is liable to pay for loss arising from direct physical damage to the property. Exception: The insurer may only be liable to pay for the indirect or consequential losses arising out of the loss of use of the property, if covered by extension to such fire policies or insured under a separate policy (SUNDIANG AND AQUINO, Reviewer supra qt 151).

49/ What are the measures of indemnity in fire assurance?

49 The measures of indemnity are the following: 1. Open policy - in the absence of expenses valuation, the insured is only entitled to recover the amount of actual loss sustained. The liability of the insurer shall in no event exceed what it would cost the insured to repair, or replace the thing insured with materials of like kind and quality with proper reduction for depreciation considering the age or condition of the thing before the loss (DE LEON, Insurance, p. 411). 2. Valued policy - the valuation fixed in the policy shall be conclusive between the parties provided there is no fraud or mistake, otherwise a fraudulent valuation entitles the insurer to rescind the contract (Sections 173&158).

49/ What are the risks covered by the fire insurance?

49 The risks covered by the following: 1. Financial losses due to direct physical damage to the property (General Rule) 2. Indirect or Consequential losses from the losses from the loss of the use of the property (only if covered by an extension or separate policy)such as: (EERI) a. Extraordinary expenses to avoid interruption in service; b. Loss of Earnings; and c. Loss of Rental Income (AQUINO, INSURANCE SUPRA AT 278).

49/ What is "Free from Particular Average" (FPA) Clause?

49 This clause limits liability in case of partial loss. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free from particular average, a marine insurer is not liable for any particular average , a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured (INS. CODE, Sec. 138).

50/ What may be included in casualty insurance?

50 Casualty insurance includes the following (TM-POPE): 1. Theft and Burglary Insurance - usually excludes those persons in the insured's service and employment. 2. Motor Vehicle Liability Insurance - may be compulsory wherein insurer becomes liable for the damage or injury caused in the operation of the motor vehicles. 3. Plate Glass Insurance - insurance against breakage or damage cause by chemicals accidentally or maliciously applied. 4. Other Substantially Similar Kinds - includes pollution liability insurance, garage insurance, medical malpractice insurance, pharmacist liability insurance. 5. Personal Accident and Health Insurance y Non-Life Insurance Companies - insurance against specified perils , which may affect the person and/or property of the insured. 6. Employer's Liability Insurance - cavers injuries sustained by their employees, which arise out of and in the course of the insured employee's employment (AQUINO, Insurance supra at 311).

50/ What are the classifications of casualty insurance?

50 Casualty insurance is classified as follows: (Act) 1. Accident or health insurance - insurance against specified perils which may affect the person and/or property of the insured. Examples: personal accident, robbery/theft insurance. 2.Third party liability insurance - insurance against specified perils which may give rise to liability on the t]part of the insured for claims for injuries to or damage to property of others (INS. CODE, Sec. 176).

50/ What is the fall-or-building Clause?

50 It is a clause in the fire insurance policy that if the building or any part thereof falls, except as a result of fire, the policy shall immediately cease (Herrera v. National Union Fire Insurance Co, 57 OG 42765).

50/ What are the Option to Rebuild Clause?

50 It is a stipulation made by the parties that the insurer may cause the repair, rebuilding, or replacement of the buildings or structures wholly or partially destroyed or damaged (INS. CODE, Sec. 174)

50/ What is casualty insurance ?

50 It is an insurance covering loss or liability arising from accident or mishap, excluding those falling under other types of insurance such as fire or marine (INS. CODE, Sec. 176)

50/ What are the requisites in order that an insurer may rescind the contract on the ground of alteration?

50 The requisites are the following (CALVIM): 1. The alteration is made without the Consent of the insurer; 2. The user or condition as limited by the policy is Altered; 3. The use or condition of the thing is specially Limited or stipulated in the policy; 4. There must e a Violation of the policy provision (INS. CODE, Sec. 170) 5. The alteration Increases the risk (INS. CODE, Sec. 168); and 6. The alteration is made by Means within the control of the insured.

51/ What is the nature liability of surety?

51 A surety's liable to the creditor is direct, primary, and absolute, although the contract of surety is secondary only to a valid principal obligation (Stronghold Insurance Co., Inc. v. Tokyu Construction Company, Ltd., G.R. No. 158820-21, 2009). It is also (a) solidary, (b) limited to the amount of the bond and (c) it is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee (INS. CODE, Sec. 178).

51/ Distinguish Intentional from Accidental as used in Insurance Policies.

51 Intentional implies the exercise of the reasoning faculties, consciousness, and volition. Where a provision of the policy is to exclude intentional injury, it is the intention of a person inflicting the injury that is controlling (Biagtan v. Insular Life Assurance Co. Ltd, G.R. L- 25579. 1972). On the other hand , accidental implies that which happens by chance or fortuitously, without intention or design, one that is unexpected, unusual or unforeseen (De la Cruz v. The Capital Insurance, G.R. No. L- 21574, 1966.

51/ What is the "No Action" Clause?

51 It is a requirement in a policy of a liability insurance which provides that the suit and final judgement be first obtained against the insured and only thereafter can the person injured recover on the policy (Guingon v. Del Monte, G.R. No. 78848, 1998).

51/ What is a contract of suretyship?

51 It is an agreement whereby a surety guarantees the performance y the principal or obligor of an obligation or undertaking in favor of an obligee (INS. CODE, Sec. 177). It is the making or proposing to make, as surety , any contract of suretyship as a vocation and not as merely incidental to any other legitimate business of acting as surety, then that person or entity is engaged in insurance business (INS. CODE Sec. 2b).

51/ What is a contract of life insurance?

51/ It is an insurance on human lives and insurance appertaining thereto or connected therewith (INS. CODE, Sec. 181). It includes a contract or pledge for the payment of endowments or annuities (SUNDIANG AND AQUINO, Reviewer supra at 160). It may be payable on the death of the person or on his surviving a specified (Sec. 182).

51/ What is a Continuing Surety?

51/ It is when the principal executes an agreement that places itself in a position to enter into the projected series of transactions with its creditor. There would be no need to execute a seperate surety contract for each credit accomdation extended to the principal debtor (Atok Finance Co v. CA, G.R. No. 80078). Unless a specific period is fixed in the contract or the bond, the obligation of the surety subsists so long as the principal obligation subsists. (AQUINO, Insurance supra at 339).

52/

52/ 4. Limited Payment Policy - insured pays a premium for a limited period. If dies within the period, his beneficiary is paid; if he outlives the period, he does not get anything (Supra at 160). 5. Endownment Policy- insured pays premium for specified period; if he outlives the period , the face value of the policy is paid to him; if not, his beneficiaries receive the benefit (AQUINO, Insurancesupra at 285). 6. Term Insurance - the insured pays the premium only once, and he is then insured for a specified period; should he die within the period, his beneficiaries get the benefits but if he outlives the period, no one shall benefit from the insurance (SUNDIANG AND AQUINO, Reviewersupra at 160).

52/ What is the nature of life insurance?

52/ A life policy is not a mere contract of indemnity, but is more accuately characterized as a form of investment. It is a contract to pay the beneficiary a certain sum of money to meet the financial crisis in loss of earning power provided certain conditions are performed by the insured (Victor v. Louise Cotton Mills, 61 S.E. 648).

52/ What is the liability of the insurer in case the insured commits suicide?

52/ The insurer is liable in the following cases: 1. If commited two (2) years after the date of the policy's issue or its last reinstatement; Note: Any stipulation extending the 2-year period is null and void. 2. If committed after a shoter period provided for in the policy; or 3. If committed in a state of insanity regardless of the date of the commission unless suicide is an axcepted peril (INS. CODE, Sec. 183).

52/ What are thekinds of life insurance?

52/ The kinds of life insurance are(VIOLET): 1. Variable Contract - policy or contract on either group/ individual basis issued by an insurance company providing for benefits or other contractual payments or values thereunder to vary so as to reflect investment results of any segregated portfolio of investment (MIRAVITE, Bar Review Materials in Commercial Law(2007)). 2. Industrial Life- life insurance entitling the insured to pay premiums weekly, or where premiums are payable monthly or oftener (but not less than weekly), if the face value is P2,000 or less, and the words "industrial policy" printed upon the policy (SUNDIANG AND AQUINO, Reviewer supra at 161). 3. Ordinary Life, General Life or Old Line Policy - insured pays a fixed premium every year until he dies. The insured is entitled to surrender value after 3 years (Supra at 160). /////////////////////////////////

53/ Define accident as used in life insurance policies?

53 An accident is an event that takes place without one's foresight or expectations, an event that proceeds from an unknown cause or is an unusual effect of a known case but not excepted (Sun Insurance Office, Ltd. V. CA and Lim, G.R. No.92382, 1992)

53/ What is the cash surrender value as applied to a life insurance policy?

53 It is a provision specifying the options to which the policy holder is entitled to in the event of default in a premium payment after three (3) full annual premiums shall have been paid. Such option shall consist of: 1. A cash surrender value payable upon surrender of the policy which shall not be less than the reserve of the policy, the basis of which shall be indicated, for the then current policy year and any dividend additions thereto, reduced by a surrender charge which shall not be more than one-fifth (1/5) of the entire reserve or two and one half percent (2 1/2%) of the amount insured and any dividend additions thereto; and 2. One or more paid-up benefits on a plan or plans specified in the policy of such value as may be purchased by the cash surrender value (INS. CODE, Sec. 233[f]).

53/ What is compulsory Motor Vehicle Liability Insurance?

53 It provides for protection coverage that will answer for legal liability for losses and damages due to bodily injuries and/or damage to property of a third party or passenger arising from the use and operation of motor vehicle by its owner (DE LEON, Insurance. p. 745)

53/ What is the :Accidental Health Benefit" Clause?

53 This clause gives the beneficiaries additional benefits if the death of the insured is through accidental means (AQUINO, Insurance supra at 288).

53/ Who shall receive the life insurance proceeds when the beneficiary is the principal, accomplice or accessory in willfully bringing about the death of the insured?(INS. Code., Sec.12).

53/ The exceptions are as the follows: (ISA) 1. Insanity of the beneficiary at the time he killed the insured; 2. Self-defense; or 3. By Accident.

53/ Is the insurer liable in case the death was sanctioned by law (e.g. by legal execution)?

53/ Yes, it is one of the risks assumed by the insurer under a life insurance policy, unless there is a valid policy exception (DE LEON), The Insurance Code of the Philippines (2002), p. 572, citing VANCE). Note: Miravite opines that the beneficiary of an insured who is executed for a crime he commited cannot recover from the insurer for two (2) reasons: (1) his death is caused through his connivance, and (2) any stipulation to render the insurer liable under these circumstances would be contrary to public policy (MIRAVITE, Bar Review Materials in Commercial Law [2007].

54/ Who is a passenger?

54 A passenger is any fare-paying person being transported and conveyed an and by a motor vehicle for transportation of passengers of compensation, including persons expressly authorized by law or by the vehicle's operator or his agents to ride without fare (INS. CODE, Sec. 386[b]).

54/ Who is third party?

54 A third party is any person other than the passenger, excluding a member of the household or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, or his employee in respect of death or bodily injury arising out of and in the course of employment (INS. CODE, Sec. 386[c]).

54/ What is the "No Fault Clause" ?

54 It is a clause that gives the victim (injured person or heirs of the deceased) an option to file a claim for death or injury without the necessity of proving fault or negligence of any kind. The total indemnity in respect of any person shall not be less than fifteen thousand pesos (P15,000). Moreover, each insurer is bound, as between himself and other insurers to contribute ratably to the loss in proportion to the amount for which he is liable under his contract (INS. CODE, Sec. 391).

54/ What is the purpose of CMVLI?

54 It is to assure that victims and/or their dependents of immediate financial assistance, regardless of the financial capacity of the motor vehicle owners (Shafer v. Judge, RTC of Ologapo City, G.R. No. 78848, 1988).

54/ What are the different special clauses under CMVLI?

54 The special clauses are the following:(CAT) 1. Cooperation Clause - a clause which provides in essence that the insured shall give all such information and assistance as the insurer may require, usually requiring attendance at trials or hearings. 2. Authorized Driver Clauses - a clause which aims to indemnify the insured owner against loss or damage to the car, but limits the use of insured vehicle to the insured himself of any person who drives on his order or with his permission (Villacorta v. Insurance Commissioner, G.R. No. 54171, 1980). 3. Theft Clause - a clause which includes theft a among the risks insured against and authorized driver clause does not apply (Perla Compania de Seguros, Inc, v. CA, G.R. No. 96452, 1992)

54/ Rick de la Cruz insured his passenger jeepney with Asiatic Insurer's Inc. The policy provided that the authorized driver of the vehicle should have a valid and existing driver's license. The passenger jeepney of Rick de la Cruz which was at the time driven by Jay Cruz, figured in an accident resulting in the death of a passenger. At the time of the accident, Jay Cruz was licensed to drive but it was confiscated by an LTO agent who issued him a Traffic Violation Report (TVR) just minuites before the accident. Could Asiatic Insurers, Inc., be made liable under its policy? Why? (2003 Bar)

54 Yes, Asiatic Insurers Inc. should be made liable under the policy. The fact that the driver was merely holding a TVR does not violate the condition that the driver should have a valid and existing driver's license. Besides, such a condition should be disregarded because what is involved is a passenger jeepney, and what is involved here is not own damage insurance but third party not privy to the contract of insurance (Answers to Bar Examinations by the UP Law Complex and Philippine Association of Law Schools).

55/ What is insurable interest?

55 It is an interest arising from the relation of the party obtaining the insurance as will justify a reasonable expectation of advantage or benefit from the continuance of his life (Warnock v. Davis, 104 U.S. 775, 1882)

55/ What is the consequence of non-compliance with CMVLI?

55 The Land Transportation Office (LTO) shall not allow the registration or renewal of registration of any motor vehicle without presenting and filling the documentation in a form approved by the Commissioner evidencing that the policy insurance or guaranty in cash or surety bond require is in effect (INS. CODE,Sec. 398)

55/ What is the effect of change of ownership of the motor vehicle or engine of an insured vehicle?

55 The change of ownership does not suspend the policy, provided that the following requisites are present: (CIF) 1. The insurance company shall agree to Continue such policy; 2.The change of ownership or of the engine shall be Indicated in an endorsement by the insurer; and 3. A signed duplicate of the endorsement must be Filed with the LTO (INS. CODE, Sec. 395).

55/ Distinguish insurable interest in property and insurable interest in life.

55 The distinctions are the following: (AQUINO, Insurance, pp. 65-66) Insurable Interest in Property/Extent Insurable interest is limited to the actual value of the interest thereon. Insurable Interest in Life Insurable interest in life is unlimited (save in life insurance affected by a creditor on the life of the debtor) Insurable Interest in Property/Existence of Insurable interest It must exist when the insurance takes effect AND when the loss occurs, but need not exist in the meantime. Insurable Interest in Life/Existence of insurable interest It is enough that interest exist at the time the policy takes effect and need not exist at the time of the loss. Exceptions: 1. When taken by the creditor on the life of the debtor; and 2. When the insurance is taken by the employer on the life of the employee. //////////////////////////////

55/ What is the status of the insurance contract when the insured has no insurable interest over the life or property he insures?

55 The insurance contract is considered unenforceable (INS. CODE Sec. 18).Moreover, if it can be established that the contract is really a wager, the same can be considered void for being against public policy (Sec. 25).

56/ What are the special cases with respect to insurable interest?

56 The following are the special cases: (CML) 1. In case of a Carrier or depository - a carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof (INS. CODE,Sec. 15) 2. In case of a Mortgage property - the mortgagor and mortgagee may each have an insurable interest in the property mortgaged and this interest is separate and distinct from the other. Therefore, insurance taken by one in his name only and his favor alone does not inure to the benefit of the other. a. Mortgagor - As, owner, has an insurable interest therein to the extent of its value, even though the mortgage debt equals such value, except Loan on Bottomry or Respondentia. ///////////////////////////

57/ Discuss the insurable interest of a person in life and health.

57 An insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against (DE LEON, Insurance [2002], p. 85). Specificially, every person has an insurable interest in the life and health: (HELE) 1. Of Himself, of his spouse and of his children; 2. Of any person on whom he depends wholly or in part for Education or support, or in whom he has a pecuniary interest; 3. 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 4. Of any person upon whose life any Estate or interest vested in him depends(INS. CODE, Sec. 10). //////////////////////////////

57/ What is Mortgage Redemption Insurance

57 It is a group life insurance for the protection of the both the mortgagee and mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness (Serrano vs. CA, G.R. No L-35529, July 16, 1984).

57/ What are the kinds of insurable interest in property? (EIE)

57/ The kinds of insurable interest in property are the following: 1. An Existing interest; 2. An Inchoate interest founded on an existing (e.g sharaholder on the properties of the corporation); or 3. An Expectancy, coupled with an existing interest in that out of which the expectancy arises (INS. CODE, Sec. 14).

57/ What is the test in determining insurable interest in property?

57/ The presence of insurable interest in property can be determined by asking whether one will derive pecunairy loss or damage from its destruction, termination, injury by the happening of the event insured against (Harrison v. Fortlege, 161 U.S 57).

58/ What is the double insurance?

58 Double insurance exists when the same person/property is insured by several insurers separately, in respect to the same subject and interest (INS. CODE, Sec. 95).

58/ Is there a prohibition against double insurance under the Insurance Code?

58 None. By way of exception RA No. 10607 modified Sec 64[f] of the Insurance Code by providing that the insurance coverage that makes the total insurance in excess of the value of the property insured. This is not prohibited provided that the total insurance is not in excess of the value of the property insured (AQUINO, Insurance, p. 214)

58/What is over-insurance?

58 Over-Insurance exists when the insured takes out an insurance over the property insured in an amount which is in excess of the value of his insurable interest (AQUINO, Insurance, p. 219).

58/ What are the requisites of double insurance?

58 The requisites are the following: (TIRIS) 1. Two or more insurers insuring separately: 2. Same Insured person; 3. Same Risk or peril insured against 4. Same Interest insured; and 5. Same Subject matter (INS. CODE, Sec. 95).

58/ What is the Additional or other Insurance Clause?

58 This is a stipulation prohibiting the taking of another insurance policy over the same property (Supra). However, this cannot be invoked if the order insurance is only an additional insurance to cover the remaining value of the goods (Gonzalez La'O v. Yek Tong Lin Fire and Marine Insurance Co., Ltd., G.R. No. 33131, December 30, 1930). This is lawful because a policy may declare that the a violation of a specified provision thereof shall avoid it (INS. CODE, Sec. 75).

58/ What happens when the mortgagee independently insures his interest in the mortgaged property?

58/ Upon destruction of the property, the insurance paid to the mortgagee will not inure to the benefit of the mortgator, and the amount due under the mortgage debt remains unchange. The mortgagee, however, is not allowed to retain his claim against the mortgator, but passes by subrogation to the insurer, to the extent of the insurance money paid (Palileo v. Cosio, G.R. No. L-7667, November 28, 1955).

58/ Does a vendee or buyer have an insurale interest over the goods still in transit?

58/ Yes. His interest over the goods in based on the perfected contract of sale, which vested in him an equitable title even before the delivery or before he performed the conditions of the sale. Also, it is immaterial whether the contract of shipment is under "F.OB.," "C.I.F.," or "C&F". There is an existing interest over the goods sufficient to be the subject of insurance (Filipino Merchants Insurance Co. Inc v. CA, G.R. No. 85141, November 8, 1989).

59/ Distinguish Over-Insurance from Double Insurance?

59 The distinction are as follows: Over-Insurance/Amount of Insurance When the amount of the insurance is beyond the value of the insured's insurable interest. Double Insurance/Amount of Insurance There may be no over-insurance as when the sum total of the amounts of the policies issued does not exceed the insurable interest of the insured. Over-Insurance/Number of Insurers There may only be one insurer involved. Double Insurance/Number of Insurers There are always several insurers.

59/ What are the effects of over-insurance by double insurance?

59 The following are the effects: 1. The insured, unless the policy otherwise provides, may Claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts; 2. Where the policy under which the insured claims is a Valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the value of the subject matter insured; 3. Where the policy under which the insured claims is an Unvalued policy, he must hold such sum in trust for the insurers, according to their right of contribution among themselves; and 5. Each insurer is bound , as between himself and the other insurers, to contribute Ratably to the loss in proportion to the amount for which he is liable under his contract (INS. CODE, Sec. 96). ////////////////////////////

59/ What is the nature of the liability of the several insurers in double insurance? Explain. (2005 Bar Question)

59/The nature of the liability of the several insurers in case of double insurance is that each insurer is bound to contribute ratably to the loss in proportion to the amount for which he is liable under his contract (INS. CODE, Sec. 96). The ratably contribution of each insurer is determined using this formula: LIABILITY OF THE INSURER= AMOUNT OF POLICY divided by TOTAL INSURANCE TAKEN multiplied by LOSS [Ll=(AP/TIT)*L] Note: Otherwise known as the Principle of Contribution or Contribution Clause. ALTERNATE ANSWER: Each insurer is bound, as between himself and other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract (Answers to Bar Examinations Questions by the UP Law Comlex and Philippine Association of Law Schools). Multiple or Several Interest on the Same Property

60/ Distinguish Standard or Union Mortgage Clause from Open or Loss Payable Mortgage Clause.

60 The distinguish are as follows: Standard or Union Mortgage Clause Subsequent acts of the mortgagor cannot affect the rights of the assignee. Reason: It is as if the insurer made a new and independent contract with the mortgagee. Open or Loss Payable Mortgage Clause Acts of the mortgagor affect the mortgagee. Reason: Mortgagor does not cease to be a party to the contract (INS. CODE, Sec. 8&9).

60/ What are the effects of loss payable clause?

60 The effects are the following (I-LARA): 1. The contract is deemed to be upon the Interest of the mortgagor; hence, he does not cease to be a party to the contract; 2. In case of Loss, the mortgagee is entitled to the proceeds to the extent of his to the loss credit; 3.Any act of the mortgagor prior to the loss, which would otherwise Avoidthe insurance affects the mortgagee even if the property is in the hands of the mortgagee; 4. Upon Recovery by the mortgagee to the extent of his credit, the debt is extinguished; and 5. Any Act, which under the contract of insurance is to be performed by the mortgagor, may be performed by the mortgagee with the same effect; Note: The rule on subrogation by the insurer to the right of the mortgagee does not apply in this case because premium payment has been paid by the mortgagor and not by the mortgagee.

60 What is the measure of insurable interest in property?

60 The measure of insurable interest in property is the EXTENT to which the insured might be damnified by the loss or injury thereof (INS. CODE, Sec. 17). Insurable interest in property does not necessarily imply a property interest in, or a lein upon, or possession of, the subject matter of the insurance, and neither title nor a beneficial interest is requisites to the existence thereof. It is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured. Anyone has an insurable interest in property when derives a benefit from its existence or would suffer loss from its destruction (Gaisano Cagayan, Inc. v. Insurance of North America, G.R. No. 147839, June 8, 2006).

61/ What is the effect in case there is a delay in acceptance?

61 An insurance contract is not perfected in case there is only an offer to enter into an insurance contract in the form of an insurance application; mere delay by the insurer, although unreasonable, in acting upon the application raises no implication of acceptance. It does not estop the insurer from denying the existence of the contrct. However, implied acceptance of an offer can be established only if there are other circumstances that will indicate such acceptance other than inaction or delay (AQUINO, Insurance, p.20).

61/ What is Cognition Theory?

61 Cognition theory provides that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge (Enriquez v. Sun Life Assurance Co. of Canada, G.R. No. L-15774, November 29, 1920) Insurance contracts through correspondence follow this theory.

61/ What is Mortgagee Redemption Insurance?

61 It is a life insurance taken pursuant to a group mortgagee redemption scheme by the leander of money on the life of a mortgagor, who mortgages the house constructed to the extent of the mortgage indebtedness, such that if the mortgagor dies, the proceeds of his insurance will be used to pay for his indebtedness and the deceased's heirs will thereby be relieved from paying the unpaid balnce of the loan (Great Pacific Life Assurance Corp. v. CA, G.R. No. 113899, October 13, 199)

61/ Is the absence of policy fatal of the perfection of an insurance contract ?

61 No, absence of a policy does not bar the contract from coming into existence. An insurance contract is a consensual contract. It is perfected by mere consent and no formality is required for its perfection (AQUINO, Insurance, p. 104). However, as mandated by law, the policy must be in printed form (INS. CODE, Sec. 50). Note: The policy may be in electronic from subject to the pertinent provisions of RA No. 8792, otherwise known as the Electronic Commerce Act (Sec. 50).

61/ How is an insurance contract perfected?

61 Since it is consensual, an insurance contract is perfected by the meeting of the minds of the parties with respect to the object and consideration of the contract (CIVIL CODE, Art. 1319).

61/ What is the insurable interest of the carrier and depositary in a contract of carriage?

61 The carrier may be damnified by the loss of the good because he may be obligated to pay the shipper any damage to the property . On the other hand, a depositary is obligated to take care of the thing deposited and he can be made liable if the thing deposited is damage (AQUINO, Insurance, p. 69)

62/ Why is the delivery of the policy important?

62 It is an evidence of the making of the contract and of its terms and as communication of the insurer's acceptance of the insured's offer. Also, the delivery may effect the term of the coverage (DE LEON, Insurance, p. 179) Note: The contract may be completed prior to the delivery of the policy or even without the delivery of the policy depending on the intention of the parties, which may shown by their acts or words (Supra at 180).

62/ What are the effects of delivery of policy?

62 It would depend on the following circumstances: 1. Where delivery is unconditional - non-performance of the condition precedent prevents the contract from taking effect (Argente v. West Coast Life Ins. Co,. 51 Phil. 732, 1928) 2. Where delivery is unconditional - it ordinarily consummates the contract and the policy as delivered becomes the final contract between the parties (44 C.J.S. 1069) 3. Where premium still unpaid after unconditional delivery - the policy will lapse if the premium is not paid, at the time and in the manner specified in the policy. The insurer cannot be presumed to have extended the credit in the absence of any clear agreement granting credit extension (Phil. Phoenix Surety and Insurance Co., Inc v. Woodworks, Inc. G.R. No. L-25317, August 6, 1979).

62/ Why is acceptance necessary for the perfection of the contract?

62 The reason is that there can be no contract of insurance unless the minds of the parties have meet in agreement. A contract of insurance, like other contract, must be assented to by both parties either in person or by their agents. So lang as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to e binding from the date of application, must have been a completed contract, one that leaves nothing to be done, nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect (Perez v. CA. G.R. No. 11239, January 28 2000).

62/ When is the insurer entitled to the payment of premium?

62/ As soon as the thing insured is exposed to the peril insured against (INS. CODE, Sec. 77). Note: Employees of the Republic of the Philippines, including its political subdivisions and instrumentalities, and government-owned or controlled corporations may pay their insurance premiums and loan obligations through salary deductations (INS. CODE, Sec. 78).

63/ What is the rule on payment of premium ?

63 As a general rule, no insurance policy issued or renewed is valid and binding until actual payment of the premium. Any agreement to the contrary is void (INS. CODE, Sec. 77). This is known as the Cash and Carry Rule.

63/ What are the exceptions to the Cash and Carry Rule?

63 The exceptions are the following (LACIE): 1. In case of Life and industrial life whenever the grace period provision applies (INS. CODE, Sec. 77). 2. Where there is an Acknowledge in the contract or policy of insurance that the premium had been paid (INS. CODE, Sec. 79) 3. Where a Credit term was agreed upon (UCPB General Insurance, Inc. v. Masagana Telemart, G.R. No. 13717, A pril 4, 2001). 4. If the parties have agreed to the payment of the premium in Installments and partial payment has been made at the time of the loss (Makati Tuscanay Condominium v. Court of Appeals, G.R. No. 95546, November 6, 1992). 5. Where the parties are barred by Estoppel. Note: Sec. 77 merely precludes the parties from stipulating that the policy is valid even if the premiums are not paid (Makati Tuscany Condominium v. Court of Appeals, G.R. No.95546 ,November 6, 1992).

63/ What is the effect of acknowledgement of receipt of premium in a policy?

63/ It is conclusive evidence of its payment , in so far as to make the policy binding ,notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid (INS. CODE,Sec. 79). The conclusive presumption extends only to the premium itself is concerned, the acknowledgement is only a prima facie evidence of the fact of such payment.

63/ Give examples of devices being used to prevent the forfeiture of a life insurance after the payment of the first premium.

63/ The devices are the following:(GRACE- P) 1. Grace period - after the payment of the first premium , the insured is entitled to a grace period of thirty (30) days within which pay the succeeding premiums. 2. Reinstatement - the holder of the policy shall be entitled to a reinstatement of the contract at any time within three(3) years from the date of default in the payment of premium, unless the cash surrender value has been paid, or the extension period expired, upon production of evidence of insurability satisfactory to the company and the payment of all overdue premiums and any indebtedness to the company upon said policy 3. Automatic Loan Clause- a stipulation in the policy providing that upon default in payment of premium, the same shall be paid from the loan value of the policy until that value is consumed. In such a case, the policy is continued in force as fully and effectively as though the premiums had been paid by the insured from funds derived from other sources. 4. Cash Surrender Value - the amount the insurer agrees to pay to the holder of the policy if he surrender it and releases his claim upon it. 5. Extended Insurance- where the insurance originally contracted for is continued for such period as the amount available therefore will pay when such is terminated. In such case, the insurance will be for the same amount as the original policy but for a period shorter than the period in the original contract. 6. Paid Up Insurance - no more payments are required,and consist of insurance for life in such an amount,as the sum available therefore, considered as a final premium . It results to a reduction of the original amount of insurance, but for the same period originally stipulated ( PEREZ ,Reviewer on Insurance, Insolvency and Code of Commerce[2000]). Note: The purpose of these devices is to prevent the insured from losing the entire amount already paid to the insurer in life insurance by reason of insured's inability to pay the succeeding premiums ( PEREZ , The Insurance Code,[2014],p.161).

63/Is credit extension allowed under the Insurance Code?

63/ Yes. A ninety (90) - day credit extension may be given under the broker and agency agreements with duly licensed intermediaries. The requisites are as follow; 1. The credit extension may be provided for the under broker and agency agreements; and 2. The credit extension to a duly licensed intermediary should not exceed ninety(90) days (Sec. 77).

64-65/When can the insured receive whole or pro rata refund of premiums paid?

64-65/The insured is entitled to: 1.Whole (NV-VDR) a. If the thing insured was Never exposed to the risks insured against (INS.CODE,Sec,80); b.If contract is Voidable due to fraud or misrepresentation of the insurer or his agents (Sec.82). c.If contract is Voidable because of the existence of facts of which the insured was ignorant without his fault(Sec.82); d.When by any Default of the insured other than actual fraud, the insurer never incurred liability (Sec.82);and e.When rescission is granted due to the insurer's breach of contract (Sec.74). 2.Pro rata (DODS) a.When the insurance is for the Definite period and the insured surrenders his policy before the termination thereof; Except: i.If policy is not made for a definite period of time; ii.A short period rate is agreed upon; iii.It involves a life insurance policy b.When there is Over insurance c.In case of over insurance by Double insurance ,the insurer is not liable for the total amount of the insurance taken;his liability being limited to the property insured.Hence, the insurer is not entitled to that portion of the premium corresponding to the excess of the insurance over the insurable interest of the insured. d.In case of over-insurance by Several insurers;the insured is entit.led 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 thing at risk(INS.CODE,Sec.83). Note: A person insured is not entitled to a return of premium if the policy is annulled, rescinded or if a claim is denied by reason of fraud (INS.CODE,Sec.82.2).

64/ Discuss the concept of reinstatement of a lapsed policy of life insurance.

64/ The holder ot the policy shall be entitled to reinstate the contract at any time within three (3) years from the date of default in the payment of premium,(unless the cash surrender value has been paid,or the extension period expired) upon production of evidence of insurability satisfactory to the company and the payment of all overdue premiums and any indebtedness to the company upon said policy (PEREZ,Reviewer on Insurance,Insolvency and Code of Commerce(2000)).

64/Does the insured have an absolute right to reinstatement?

64/No.Mere filing of an application does not give him an absolute right.The insurer may deny the application for reinstatement if it is not satisfied as to the insurability of the insured and if the insured does not pay the overdue premium (Andres v. The Crown Life Insurance Company,G.R. No.L-10874,January 28,1958).

65-66/What is the Incontestability Clause?

65-66/This is clause applies to life insurance policies wherein the policy shall be incontestable after a stated period. The grounds for rescission are only available ;during the first two (2) years of a life insurance policy (INS. CODE, Sec. 48; DE LEON, The insurance Code of the Philippines, [2014], p. 172).Incontestability means that after the requisites are shown to exist, the insurer shall be estopped from contesting the policy or setting up any defense, except as allowed, on the ground of policy. Note: The period of two (2) years for contesting a life insurance policy by the insurer may be shortened but it cannot be extended by stipulation (Tan v.CA,G.R No. 48049, June 28, 1989).

65/What are the grounds for rescission of an insurance contract?

65/The grounds are the ff: 1.Non-payment of premium; 2.Confesion of a crime arising out of acts or omissions increasing the hazard insured against; 3.Discovery of Fraud or materials Misrepresentation; 4.Discovery of Willfull reckless acts or omssions increasing the hazard insured against; 5.Physical changes in the property insured which result in the property becoming uninsurable 6.Discovery of other insurance coverage thats makes the total insurance an excess of the property insured;or 7.Determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code (INS.CODE,Sec.64) 8.There is a breach of material Warranty (Sec.74): 9.There is a breach of a Condition subsequent;and 10.When there is Concealment (Sec 27).

66-67/What are the matters that need not be disclosed?

66-67/Except in answer to inquires of the other, parties to a contract of insurance is not bound to communicate information of the following matters:(OWKEE) 1.Those which, in the excercise of ordinary care, the other Ought to know and of which ,the former has no reason to suppose him ignorant; 2.Those of which the other Waives the communication; 3.Those which the other alrready Knows; 4.Those which prove or tend to prove the existence of a risk Excluded by a warrantly, and which are not otherwise material; and 5.Those which relate to a risk Excepted from the policy and which are not otherwise material (INS.CODE,Sec.30). Note: Neither party is bound to communicate even upon inquiry, information of his own judgement (Sec. 35).

66/What is concealment?

66/It is aneglect to communicate that which a party knows and ought to communicate (INS. CODE, Sec. 26).A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance (Sec. 27).

66/When must the insurer exercise the right to rescind the contract in a non-life policy?

66/The insurer must exercise the right to rescind the contract (INS.CODE, Sec.77). Note: A defense to an action to recover insurance that the policy was obtained through false representation, fraud and deceit is not in the nature of an action to rescind and therefore not barred by the provision (Tan Chay v. West Coast Life, 1927).

66/When is there a concealment?

66/There is concealment when the following are present:(N-DNA) 1.A party knows a material fact which he Neglects to communicate or disclose to the other party; 2.Such party concealing is Duty bound to disclose such facts to the other party; 3.Such party concealing is No warranty as to the fact concealed;and 4.The other party has no means of Ascertaining the fact (Florendino v. Philiam Plans,Inc,G.R.No. 186983,February 22,2012). Note:Test of Materiality: Determined not by the event,but solely by the probable and reasonable influenced of the facts upon the party to whom the communication is due in forming his estimate of the advantages of the proposed contract,or in making inquires(Sec.31).It is sufficient if the knowledge of it would influence the parties in making the contract.(DE LEON,Insurance, p. 142).

67-68/When threre is misrepresentation?

67-68/There is misrepresentation when the insured makes erroneous statement of facts with the intent of inducing the insurer to inter into the insurance contract. The following are the requisites:(UKM) 1.The insured stated a fact within is untrue; 2.Such facts was stated with Knowledge that is u untrue without knowing ot to be true and which has a tendency to mislead; and 3. Such fact in either case is Material to the risk (43 Am. Jur. 2d 1019).

76/ What is the Oft- Repeated rule regarding a carriers liability for delay?

67/ In the absence of the special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered to its destination within a reasonable time \, in the absence of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver properly within a specified time, its abound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen (Saludo Jr. v. CA.G.R. No. 95536, March 23,1992).

67/ What is representaion?

67/ Representation is a statement by made the insured at the time of, or prior to, the issuance of the policy (INS.CODE,Sec.37) as to an existing or past fact or state facts, or corcerning a future happening , to give information to the insurer and otherwise induce him to enter the insurance contract (DE LEON ,Insurance,p.154);and 3.Oral or Written (INS.CODE,Sec.36).

67/What are the kinds of representation?

67/The kinds of representations are the following:(APO) 1. Affirmative - an affirmation of fact existing when the contract begins (INSURANCE CODE, Sec.39); 2.Promissory- any promise to be fulfilled after the contract has come into existence (DE LEON, Insurance,p. 154);and 3.Oral or Written (INS. CODE,Sec. 36).

67/What are the matters that must be disclosed even the absence of inquiry?

67/The matters to be disclosed despite the absence of an inquiry are: (NoMAD) 1.Those which the other has No means of ascertaining (INS. CODE, Sec.30, 32, 33); 2.Those Material to the contract (Sec. 31, 34, 35);and 3.Those as to which the party with the Duty to communicate makes nowarranty (Sec.67-76)

67/What are the rules on concealment?

67/the The rules are the following: 1.If there is concealment under Sec. 27, the remedy of the insurer is Rescission (INS. CODE, Sec. 29); 2.The party claiming the existence of concealment must prove that there was knowledge of the favt concealed on the part of the party charged with concealment; 3.Good faith is not a defense in concealment. Concealment, whether intentional or unintentional entitles the injured party to rescind the contract of insurance (Sec. 27); 4.The matter concealed need not be the cause of the loss; 5.To be guilty of concealment, a party must have knowledge of the fact concealed at the time of the effectivity of the policy; and 6.Failure to communicate information acquired after the effectivity of the policy will not be a ground to rescind the contract.

68/What is warranty?

68/A warranty is an affirmation of fact or a promise that forms part of the term and conditions of the policy.It is a statement or promise set forth in the policy, or by reference incorporated therein,the untruth or non fulfillment,renders the policy voidable by the insurer (Prudential Guarantee and Assurance,Inc.v. Trans-Asio Shipping Lines , G.R. No. 151890, June 20,2006)

68/Enumerate the characteristics of misrepresentation.

68/The characteristics of misrepresentation are:(DAMON) 1. Refers to the Date the contract goes into effect . 2.Alteration or withdrawal of a representation was made before the insurance is effected but not afterwards; 3.Made at the time of, or before issuing the policy and not after; 4.Oral or written; and 5.Not a part of the contract but merely a collateral inducement;

68/What are the effects of breach of warranty?

68/The effects are the following: 1.Material a.General Rule :Violation of material warranty or of a material provision of a policy on the part of either party entitles the other to rescind the contract (INS.CODE ,Sec.74). b.Exceptions: i.Loss occurs before the time for the performance of the warranty; ii.The performance becomes unlawful at the place of the contract;and iii.Performance becomes impossible (INS.CODE,Sec.73). 2.Immaterial (e.g. Other insurance clause) a.General Rule: It will not avoid the policy. b.Exception: When the policy expressly provides or declares that a violation thereof will avoid it (INS.CODE ,Sec.75).

68/What are the effects of misrepresentation?

68/The effects are the following:(RWaN) 1.The injured party is entitled to Rescind the contract from the time when the representation becomes false (INS.CODE, Sec.45). 2.When the insurer accepted the payment of premium with the knowledge of the ground for rescission, there is a Waiver or such right. 3.There is no waiver of the right of rescission if the insurer had No knowledge of the ground therefor at the time of acceptance of premium payment (Strokes v. Malayan Insurance Co.,Ins. G.R No.L-34768,February 24, 1984).

69-70/Discuss the guidelines on claims settlement.

69-70/The guidelines are: 1.Life Insurance (INS. CODE,Sec, 248). a.The proceeds shall be paid immediately upon the muturity of the policy if there is a maturity date. b. If the policy matures by the death of the insured, within sixty (60) days after presenetation of the claim and filling of the proof of the death of the insured. 2.Property Insurance (Sec.249). a.Proceeds shall be paid within thirty (30) days after proof of loss is recieved by the insurer and ascertainment of the loos of damage is made either by agreement or by arbitration. Note: If no ascertainment is made within sixty (60) days after receipt of proof of loss, the shall be paid within ninety (90) days after such receipt.

69/When is notice of loss and proof of required?

69/ Notice and proof of loss is not required, unless the parties agree on stipulation in the policy yhet notice should be given within a certain period from the time of the loss (AQUINO, Insurance, pp. 184-185). However, with respect to fire insurance, notice of loss is mandatory because failure to give such will defeat the right of the insured to recover (INS. CODE, Sec.90)

69/What is the kind of proof of loss required by law to be presented in case such is required by a policy?

69/All that the law requires is for the insured to give the best evidence which he has in his power to submit at that time. Preponderance or substantial evidence is not required (AQUINO, Insurance, p. 186).

69/When the policy provides that "immediate notice" is required, what does it mean?

69/It is construed to mean "only within reasonable time" (E.M. Bachrach v. British American Assurance Co., G.R. No. L-5715, December 20, 1910).

69/ What Claim settlement?

69/It is the indemnification of the suffered by the insured.The claimant may be the insured or reinsured, the insurer who is entitled to subrogation, or third party who has a claim against the insured (DE LEON, Insurance, p. 565).

69/In case of an unreasonable delay/denial in the payment of the insured's claim by the insurer, what can the insured recover?

69/The insured can recover: 1.Attorney's fees; 2.Expenses incurred by reason of the unreasonable withholding; 3.Interest at double the legal interest rate fixed by the monetary board; and 4.Amount of the claim (Zenith Insurance Corp. v. CA, G.R. No. 85296, May 14, 1990).

69/What are the purposes of the notice and proof of loss required?

69/The purposes are the following: (DDC) 1.To give the insurer information by which he may Determine the extent of his liability; 2.To afford the insurer a means of Detecting any fraud that may have been practice upon him; and 3.To operate as a Check upon extravagant claims (DE LEON, Insurance, p. 293)

70-71/When will the insured or any person incur criminal liability during settlement of claims?

70-71/When the insured: 1.Present or cause to be presented any fraudulent claim for the payment of a loss under a contract of insurance;and 2.Fraudulently prepare, make or subscribe any writing with intent to present or use the name, or use the same, or to allow it to be presented in support of any such claim (INS. CODE, Sec.251.b).

70/What constitute unfair claims settlement practices?

70/Any of the following acts by an insurance company, if committed without just cause and performed within such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices:(FaCISS) 1. Knowingly misrepresenting to claimants pertinent Facts or policy provissions relating to coverage at issue; 2.Falling to acknowledge with reasonable promptness pertinent Communications with respect to claims arising under its policies; 3.Falling to adopt and implement reasonable standards for the prompt Investigation of claims arising under its policies; 4.Not attempting ingood faithto effectuate prompt, fair and equitable Settlement of claims submitted in which liabilty has become reasonably clear;or 5.Compelling policyholders to institute Suits to recover amounts due under its policies by offering without justifiable reason substantially less than the amounts ultimately recoverded in suits brought by them (INS. CODE Sec. 247[a]). Note:If it is found, after notice and an oppurtunity to be heard, that an insurance company has committed any of the foregoing, each instance of non-compliance may be treated as a separate violatoion and shall be considered sufficient cause for the suspension or revocation of the company's certificate of authority (Sec.247[c]).

70/What is the penalty for the unjustified refusal of an insurance company to settle claims?

70/In addition to the administrative sanctions provided elsewhere in the insurance Code, the I Insurance Commissioner is authorized,at his discretion,to impose the following: 1.Fine not less than Five thousand pesos (P5,000.00) and not more than Two hundred thousand pesos (P200,000.00);and 2.Suspension,or after due hearing,removal of directors and/or officers and/or agents (INS.CODE,Sec.248).

70/To whom will the Insurance Commissioner impose the penalty mentioned above?

70/The Insurance Commissioner impose the sanction upon insurance companies, their directors and/or officers and/or agents (INS. CODE,Sec.248).

71-72/What is subrogation?

71-72/It is the process of legal substitution where the insurer steps into the shoes of the insured, when he pays the indemnity for the injury or loss, and he avails of the latter's rights against the wrongdoer. Note:If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the causing the loss or injury (CIVIL CODE,Article 2207). The principal of subrogation is a normal incident of indemnity insurance as a legal effect of payment;it inures to the insurer without any formal assignment or any express stipulation to that effect in the policy.Said right is not dependent upon nor does it grow out of any private contract.Payment to the insured makes the insurer a subrogee in equity (Malayan Insurance Co.,Inc.v. CA,G.R. No. L-36413, September 26,1988).

71/What is the penalty for the presentation of fraudulent claims?

71/Any person who violates this shall be punished by a fine not exceeding twice the amount claimed or imprisoned of two (2) years or both, at the discretion of the court (INS. CODE, Sec, 251.b).

71/What are rules on prescription of action?

71/The rules are the following: 1.The stipulated prescriptive period shall begin to run from the date of the insure's rejection of the claim filed by the insured or beneficiary and not from the time of the loss? 2.In case the was denied by the insurer but the insured filed a petition for reconsideration, the prescriptive period should be counted from the date the was denied at the first instance and not from the denial of the reconsideration (Sun Life Office, Ltd. v. Court of appeals, G.R. No. 89741, March 13, 1991) Note: If there is no stipulation or the stipulation is avoid, the insured may bring the action within 10 years In case the contract is written (CIVIL CODE, Art. 1144). The suit for damages, either with the proper court or with the Insurance Commissioner, should be filed within 1 year from the date of the denial of the claim by the insurer; otherwise, claimant's right of action shall prescribe (INS. CODE, Sec. 397) In CMVLI, the written notice of claim must be filed within 6 months from the date of the accident; otherwise, the claim is deemed waived even if the same is brought within one year from its rejection Vda. De Gabriel v. CA, G.R. No. 103883, November 14, 1996).

71/What is the exception to the general rule that there is no prescriptive period provided under the Insurance Code for the filling of a complaint for the recovery of the proceeds?

71/There is a one (1) year period rule in the case of Compulsory Third Party Liability Insurance (INS. CODE, Sec. 397).

71/May the parties stipulate a prescriptive period in the policy?

71/Yes,provided that such period should not be less than one (1) year from the time when the cause of action accrues. Otherwise, such stipulation is avoid (INS. CODE, Sec. 63).

72/What is a common career ?

72/A common career is a person,corporation,firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water,air, forcompensation, offering their services to the public (CIVIL CODE, Art. 1732).

72/When will subrogation take place?

72/The following requisites must concur:(CLIP) 1.The indemnity is Covered by the face value of the policy 2.There is a Loss arising from the risk insured against; 3.The insured received Indemnity from the insurer for the loss;and 4.The insurance involved is Property insurance (AQUINO, Insurance, p.205).

72/What are the limitations to the exercise of the insured's right of subrogation?

72/The limitations are the following: 1.If the amount recoverable by the insured from the person who caused the loss is more than the face value of the policy, the insurer can only recover from the person who caused the loss the amount that is actually paid to the insured (AQUINO.Insurance.p. 207). 2.If the claim of the insured is subject to a prescriptive period,the claim of the insurer by virtue of its right of subrogation is also subject to the same prescriptive period (Federal Express Co. v American Home Assurance Co,et al., G.R. No.150094, August 18,2004).

72/What are the instances when subrogation will not take place?

72/There is no subrogation the following instances: 1.Where the insured by his own act RELEASES the wrongdoer or third party liable for the loss or damage(Danzas Co, et al.v. CA, G.R. No.141462,December 15,2005); 2.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; 3.Where the insurer pays the insured for a loss or risk not covered by the policy (Pan Malayan Insurance Company v. CA,G.R.No.77397,April 3,1990). 4.When life insurance is involved (CIVIL CODE,Art.2207).

73/What is the diligence required of a common carriers?

73/ By the nature of their business and by reason of public policy, common carriersare bound to observed extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumtances of each case (CIVIL CODE,Art. 1733).

73/ Generally, what is extraordinary diligence?

73/ Extraordinary diligence is the rendition of service with the greatest skill and atmost foresight (Davao Stevedore Co. v. Fernandez, 54 O. G.No. 5, 1957).

73/ M/V Neo arrived in Manila carrying 3,000 tons of steel. The cargo was transferred to ABS Shipping Co. JM, the consignee contracted ABS Shipping Co. to deliver the cargo to his warehouse in Marikina City. The cargo sustained damages while being transported by the barges. JM filled an action for damages contending that ABS Shipping Co.,as a common career should have exercised extraordinary diligence. ABS Shipping Co. contends that is not a common career because its services are not available to the public. Is ABS Shipping Co. correct?

73/ No. ABS Shippiong Co. is a common career whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. The test to determine a common carrier is "whether the given undertaking is a part of a business engaged in by the career which we has held out to the general public as his occupation rather than the quantity or extent of the business transacted" (Asia Lighterage Shipping Co. v. CA, et al., G. R. No. 147246, August 19, 2003).

73/ A is a carrier of pharmaceutical products of b supplier. A undertook to deliver the goods to the philippines. However, upon arrival, the goods were damaged. B sued A for damages as it did not exercices extraordinary diligence. A defended that is private carrier as it is only undertaking a single transaction.

73/ Yes, it is aprivate carrier. A distinction between a common carrier and a private carrier lies in the character of the business, such that if the undertaking is a SINGLE TRASACTION,not a part of the general business or corporation, although involving the carriage of goods for a fee, the person or corporation offering such service is a PRIVATE CARRIER (Planters Products Inc. v. CA, G.R. No. 102503, September 15,1993).

73/ABS Co, is a grantee of pipeline concession. It transports petroleum products from Batangas refineries to Sucat and Pandacan Terminals. Sometime in 1998,the City Treasurer of Batangas assesed ABS Co. business taxes amounting to P240,000. ABS Co. paid under protest,contending that it is common career and hence it is exempted from the payment of such taxes under the Local Government Code. The City Treasurer assert that pipelines are not included in the term common career.Is the contention of ABC Co. correct?

73/ Yes, the definition of "common careers" in the Civil Code makes no distinction as to the means of transforting , as long as it is by land,water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle (First Philippine Industrial Corporation v. CA, G.R. No. 125948, December 29, 1998)

74/How is extraordinary diligence applied in the carriage of passenger?

74/ A common carrier is bound to carry passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances (CIVIL CODE, Art. 1755).

74/How is extraordinary diligence applied in the in carriage of goods?

74/The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires' (Calvo v. UCPB, G.R. No. 148496, March 19,2002 ).

74/What are the obligations of a common carrier in the carriage of goods?

74/The following are the obligations of a common carrier in the carriage of goods:(PASTE) 1.Duty to deliver the goods to the Proper person ; 2.Duty to Accept the goods; 3.Duty to Seasonably deliver the goods to the destination; 4.Duty to Transport the goods safely to the agreed destination; and 5.Duty to exercise Extraordinary diligence. (AQUINO AND HERNANDO, Essentials of transportation and Public Utilities Law (2011) p. 44).

74/What are the principles governing the liabilities of a common carrier?

74/The principles governing the liability of a common carrier; 1.The liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according to all circumstances of each case; 2.The carrier is obliged to carry its passenger with the utmost diligence of a very cautious persons, having due regard for all the circumstances; 3.The carrier is presumed to be at fault or to have acted negligently in case of death of, injury to, passengers, it being its duty to prove that it exercise extraordinary diligence; and 4.The carrier is not an insurer against all risk of travel. (Isaac v. A.L. Ammen Transportation, G.R. No. L-9671, August 23, 1957).

74/Are common carriers also required to exercise extraordinary diligence for the benefit of third persons?

74/Yes, for if the common carriers carefully observed the statutory standard of extraordinary diligence in respect of their own passengers, cannot help but simultaneously benefit pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and convenient use of our rods and highways (Cancgo v. Manila Road Company, G.R. No. L-12191, October 14, 1918).

75/What is the responsibility of a common carrier with respect to carriage of goods?

75/Common carriers are responsible for the loss,destruction,or deterioration of the goods,UNLESS the same is due to any of the following causes;(CAP-FCR) 1.The Character of the goods or defects in the packaging or in the containers 2.Act or omission of the shipper or owner of the goods; 3.Act of the Public enemy in war, whether international or civil; 4.Flood,storm, earthquake, lightning, or other natural disaster or calamity 5.Character of the goods (CIVIL CODE,Art. 1734)and 6.Goods are lost as a result of a Robbery which is attended by grave or irresistible threat,violence or force (De Guzman v. CA,G.R. No. L-47822 ,December 22,1998). Note: This note is exclusive. In all cases other than those mentioned in Article 1734 of the Civil Code,if the goods are lost,destroyed or deteriorated , common carriers are presumed to have been at fault or to have acted negligently ,unless they prove that they observed extraordinary diligence as required in Art.1733 (CIVIL CODE ,Art. 1735).

75/What are the obligations of a common carrier in the carriage of passengers?

75/The following are the obligations of the common carrier in the carriage of passengers:(U-STAB) 1.Duty to observe Utmost diligence to passengers; 2.Duty to Seasonably bring the passenger to the destination; 3.Duty to Transport the passenger safely to the agreed the destination; 4.Duty to Accept passengers without discrimination;and 5.Duty to take care of the passengers' Baggage (AQUINO AND HERNANDO,supra at 44)

75/What are the valid grounds for non-acceptance of goods for transportation?

75/The instances when the carrier may validly refuse to accept goods include the following:(D2UO-CITES) 1.The goods are dangerous objects,or substances including dynamities and other explosives; 2.The goods will be exposed to untoward Danger like flood,capture by enemies and the like; 3.The goods are Unfit for transportation; 4.Acceptance would result Overloading; 5.The goods are considered Contrabands or illegal goods; 6.The goods are Injurious to health; 7.Failure to tender goods on Time; 8.The goods like livestock will be Exposed to diseases;and 9.Strike (AQUINO AND HERNANDO,supra at47).

76/ What are the consequences of delay in carriage of goods?

76/ The following are the consequences of delay: 1.In case of excusable delay: a. Excusable delay inn carriage merely suspends but generally does not terminate the contract of carriage.When the caused is removed, the master must proceed with the voyage and make delivery. b.During the detention or delay, the vessel continues to be liable as a common carrier, not warehouse man,. and remains duty abound to exercise extraordinary diligence (70 Am. Jur. 2d 939). 2.In case of inexcusable delay: a. The carrier remains duty bound to exercise extraordinary diligence; b.The carrier is still liable even if a natural disaster causes the damage (CIVIL CODE, Art. 1740); c..The stipulation limiting the liability of the common carrier cannot be availed of in case of loss or deteriolation of goods (CIVIL CODE, Art. 1747). d.The carrier is liable for the damages caused by the delay (CODE OF COMMERCE, Art. 358; Saludo Jr. v. Honorable Court of Appeals, G.R. No.95536, March 23, 1992); and e.The consignee may exercise his right to abandon (CODE OF COMMERCE, Art, 371 (AQUINO AND HERNANDO, supra at52).

76/77 When can a common carrier raise the defense of fortuitous event to escape liability?

76/77 In order to be a valid defense, it must be established that the fortuitous event be the proximate cause of the loss (Asia Lighterage and Shipping, I nc. v. Court of appeals, et. al., G. R. No. 147246, August 19, 2003). Furthermore, the following requisites must be represent before fortuitous events can be properly invoked as a defense by a carrier:(IF-F) 1.The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation must be Independent of the humanwill; 2.The occurrence must be such as to render it impossible for a debtor to fulfill his obligation on a normal manner; 3.It must be Impossible to foresee the event which constitutes the caso fortuito or if it can be foreseen, it must be impossible to avoid; and 4.The debtor must be Free from any participation in or the aggravation of the injury resulting to the creditor (Servando v. Philippine Steam Navigation, G.R. No. L-36481- 2, October 23, 1982).

76/ What is the basis of determining whether the delivery is made within a reasonable time?

76/In order to determine whether the delivery of the goods is made whithin a reasonable time,the expected date of arrival reflected in the bill of lading may be considered. It may also depend upon the nature of goods, whether it is perishable or not (Maersk Line v. CA. G.R. No. 94761, May 17,1993).

77/What is the effect of negligently incurring delay?

77/If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility (CIVIL CODE, Art. 1740). Moreover, if delay is without just cause, the contract limiting the common carriers liability cannot be availed of in case of loss or deterioration of the goods (Art. 1747).

77/What is the effect of absence of delay?

77/If there is an absence of delay, the limiting the liability of the common carrier can be invoked (CIVIL CODE, Art. 1747).

77/When can a common carrier raise the defense of natural disaster to escape liability in case of loss, destruction, or deterioration of goods?

77/In order that the common carrier may be exempted from liability; 1.The natural disaster must have been the Proximate and only cause of the loss, destruction, or deterioration; and 2.The common carrier must exercise Due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods (CIVIL CODE, Art. 1739).

77/What is effect of contributory negligence of the shipper or owner of the goods?

77/The liability for damages of the common carrier shall be equitably reduced. (CIVIL CODE, Art. 1741). It will not excuse the carrier from liability.

77/Should the common carrier still exercise due diligence to prevent or minimize loss even if there is a fortuitous event?

77/Yes. The common carrier must exercise due diligence to prevent or minimize loss before, during and after occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy (CIVIL CODE, Art. 1739).

77/Should the common carrier still exercise due diligence to prevent or lessen loss even if the loss of the goods is caused by the character of the goods?

77/Yes.Even if the loss, destruction , or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss (CIVIL CODE, Art, 1742).

78/When does the duty to exercise extraordinary diligence in the carriage of goods start?

78/In carriage of goods, the extraordinary responsibility of the common carrier starts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation (CIVIL CODE, Art. 1736).

78/Does the duty of the common carrier cease upon temporary unloading or storage?

78/No. The common carriers duty to observed extraordinary diligence over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu(CIVIL CODE, Art. 1737).

78/When does the duty to exercise extraordinary diligence in the carriage of goods end?

78/The duty to exercise extraordinary diligence in the carriage of goods ends at the time the goods are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to received them (CIVIL CODE, Art. 1736)

78/When is there delivery of goods to the carrier?

78/The goods are deemed delivered to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. When such delivery has thus been accepted by the carrier, the liability of the carrier commences eo instanti(Saludo v. CA. G.R. No.95536, March 23, 1992).

78/When is there constructive delivery of goods shipped to the consignee?

78/There is constructive delivery when there has been a notice of the arrival of the goods and the consignee fails to claim the same after the lapse of a reasonable period.

78/When is there delivery of goods to the consignee?

78/There is delivery when there has been actual or constructive delivery of the cargoes to the (1) consignee or (2) to the person has a right to received them (Macam v. CA, G.R. No. 125524, August 25, 1999).

78/What are the instances when the common carrier should not be made liable?

78/When carrier is able to prove that it exercised extraordinary diligence in handling the goods or in transporting the passenger and that the only cause of the loss of the goods is any of the following acts of the shipper: (DML) 1.Failure of the shipper to Disclose the nature of the goods; 2.Improper Marking or direction as to destination; and 3.Improper Loading when he assumed such responsibility (AQUINO AND HERNANDO, supra, [2011], p. 141).

79/What are the void stipulations limiting the liability of the common carrier?

79-80/Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:(GRL-TEDD) 1.That the common carrier shall exercise a degree of diligence less than that of a Good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; 2.That the goods are transported at the Risks of the owner or shipper; 3.That the common carrier will not be liable for any Loss, destruction, or deterioration of the goods; 4.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; 5.Thar the common carrier shall not be responsible for the acts or omissions of his or its employees; 6.That the common carrier need not observed any Diligence in the custody of the goods; 7.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 (CIVIL CODE, Art. 1745).

79/ When is a stipulation limiting the liability of the common carrier considered valid?

79/A stipulation between the common carrier and shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of there goods to a degree less than extraordinary diligence shall be valid, provide it be:(WCoRe) 1.In Writing, signed by the shipper or owner; 2.Supported by the valuable Consideration other than the service rendered by the common carrier; and 3.Reasonable, just and not contrary to public policy (CIVIL CODE, Art. 1744) Note: An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid (CIVIL CODE, Art. 1744).

79/What is the purpose of limiting stipulations?

79/It is for the protection of the common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of goods. Unscrupulous shippers may undervalue the goods in order to avail the lower rate of freight at the expense of the carrier and claim the real value of the goods if this goods if these goods are damages (Edgar Cokaliong Shipping Lines, Inc. v. UCPB General Insurance Co. G.R. No. 146018, June 25, 2003).

79/Does the duty of the common carrier cease upon storage of the goods in a warehouse of the carrier at the place of destination?

79/No. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advise of the arrival of the goods and has had reasonable opportunity thereafter to removed them or otherwise dispose of them (CIVIL CODE, Art. 1738).

80/Which provision shall govern the responsibility of a common carrier with respect to the checked-in baggage of a passenger?

80/Articles 1733, 1734 and 1736 (CIVIL CODE) shall apply.Baggage that are checked-in or delivered to the carrier are governed by the rules requiring extraordinary diligence (Sarkies Tours Philippines Inc. v. CA, et al., G.R.No. 108897, October 2, 1997).

80/When does a stipulation limiting the liability of the common carrier to a fixed amount valid?

80/If it is reasonable and just under the circumstances, and has been fairly and freely agreed upon a contract. (CIVIL CODE, Art. 1750).

80/Does the limitation on the liability of the common carrier remove the disputable presumption of negligence on its part?

80/No. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction, or deterioration CIVIL CODE, Art. 1752).

80/What happens when the common carrier refused to carry the goods of the shipper?

80/The agreement limiting the common carriers liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed such stipulation (CIVIL CODE,Art .1746).

80/Which provision shall govern the responsibility of a common carrier with respect to the baggage in the possession of a passenger?

80/The rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable.(CIVIL CODE ).Thus, hand-carried baggage is not considered as goods but as necessary deposit.

80/Is it valid for the common carrier to limit its liability to the value of the goods appearing in the bill of lading?

80/Yes. A stipulation that the common carrier's liability is limited to the value of the goods appearing to the bill of lading, unless the shipper or owner declares a greater value, is valid and binding (CIVIL CODE, Art.1749).

80/Suppose the common carrier has no competitor along the line or route, may such fact be considered in determining whether the limitation of the liability is reasonable?

80/Yes. The fact that the common carrier has no competitor along the line or route, or a part thereof , to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier's liability is reasonable, just and in consonance with public policy(CIVIL CODE, Art. 1751).

81/What is the responsibility of a common carrier with respect to carriage of passengers?

81/A common carrier is bound to carry the passengers safely as far as human care and foresight can provide ,using the utmost diligence of very cautious persons, with a due regard for all the circumstance (CIVIL CODE , Art. 1755).

81/What is the presumption of negligence of common carriers in the carriage of passengers?

81/In case of death of or injuries to passengers ,common carriers are presumed to have been at fault or to have acted negligently ,unless they prove that they observed extraordinary diligence as prescribed in Art. 1733 and 1755 (CIVIL CODE, Art. 1756).

81/In the carriage of passengers, can there be a stipulation lessening the diligence required from the common carrier?

81/No. The responsibility of a common carrier for the safely of the passengers as required in Art. 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices ,by statements on tickets , or otherwise (CIVIL CODE,Art .1757).

81/What are the differences between the responsibility of a common carrier with respect to Hand-carried Baggage and Checked-in Baggage?

81/The difference between the responsibility of a common carrier with respect to hand-carried baggage and checked-in baggage are as follows: 1.As to the Rules that the applicable, the first is govern by Arts.1998 and 2000-2003 of the Civil Code; 2.As to the legal Nature of the baggage, the first is considered as a necessary deposit,while the second is considered as "goods"; and 3.As to the Diligence required from the common carrier ,the first requires the diligence of a depositary (ordinary diligence ) while the second requires the exercise of extraordinary diligence.

81/When does the duty in the carriage of passenger begin?

81/The duty exist from the moment the person who purchased the ticket or token presents himself at the proper place and in a proper manner to be transported, having the bona fide intention to use the facilities of the carrier (Jesusa Vda de Nueca, et al, v. The Manila Railroad Company, CA-G.R. No.31731, January 30,1968).

81/Can a common carrier limit its liability for negligence to passengers carried gratuitously?

81/Yes.When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid,but not for wilful acts or gross negligence.The reduction of fare does not justify any limitation of the common carrier's liability.(CIVIL CODE, Art.1758).

82/When does the duty to exercise utmost diligence in carriage of passengers begin?

82/The duty to exercise the common carriers duty begins: 1. With respect to carriage of passengers by Train: The extraordinary responsibility of common carriers commences from the moment the person who (1) purchases the ticket from the carrier (2) presents himself at the proper place and in a proper manner to be transported with a (3) bona fide intent to ride the coach( Jesusa Vda de Nueca, et al, v. The Manila Railroad Company, CA-G.R. No. 31731, January 30, 1968). 2. With respect to carriage of passengers by Sea; The duty to exercise extraordinary diligence commences as soon as a person with bona fide intention of taking passage places himself in the care of the carrier or its employees and is accepted as a passenger (AQUINO AND HERNANDEZ, supra at 75). 3.With respect to carriage of passengers by Land : Passengers jeepneys and buses are duty bound to stop their conveyances for a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they do so. The rule is that once a public utility vehicle stops, it is making a continuous offer to riding public (Dangwa Transportation Co., Inc. v. CA, G.R. No. 95582, 580, 1991).

82/Are common carriers liable for the negligence or wilful acts of their employees?

82/Yes. Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers (CIVIL CODE, Art. 1759).

82/Does the duty in the carriage of passengers continue even after reaching the destination?

82/Yes. The duty continues until the passengers has, after reaching his destination, safely alighted from the carriers conveyance or has had a reasonable opportunity to leave the carrier's premises and to look after his baggage and prepare for his departure (Aboitiz Shipping v. CA, G.R. No. 84458, November 6, 1989).

82/Does the duty in the carriage of passenger already exist when the passenger is in the premises of the carrier?

82/Yes. The duty of a common carrier to provide safely to its passengers so obligates it is not only during the course of the trip, but for so long as the passengers are within this premises and where they ought to be in pursuance to the contract of carriage (LRTA v. Navidad, G.R. No. 145804, February 6, 2003).

83/ Can common carriers raise as a defense diligence of a good father of a family in the section and supervision of employees?

83/ No. This liability of the common carrriers does not cease upon proof that they exercised all the diligence of a good father of a family in the section and supervision of their employees (CIVIL CODE, Art. 1759).

83/What is the recourse of the common carrier which paid damages due to the negligence or wilful acts of employees?

83/ The carrier's only recourse is to recover what it has paid from its neglegent employee (Philtranco v. CA, G.R. No.120553, June 17, 1997 ).

82-83/AA bought first class roundtrip ticket from Manila to Japan. While on board, he was forced by BB, an employee of the airline to vacate the first class seat because there was a "white man" who has better right to the seat. This caused embarasment and inconvenience on the part of AA.The latter filed for damages.Is the airline, as a common carrier, liable for the acts of BB?

83/ Yes, Neglect or malfeasance of the carrier's employees, naturally, could give around for an action for damages. Passengers entitled to be protected against personal misconduct, injurious language, indignities and abuses from some employees towards a passenger gives the latter an action for damages against the carrier (Air France v. Carrascoso, G. R. No. :-2148, September 28, 1996).

83/ Are common carriers responsible for the wilful acts or negligence of other passengers or strangers?

83/ Yes. A common carriers is responsible for injuries suffered by a passengers on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could be prevented or stopped the act or omission (CIVIL CODE, Art. 1763).

83/ BBC is a bus company in Northern Mindanao. BBC's bus figured an accedent with a jeepney killing several passengers, including two (2) Maranaos. During the investigation of the accident, it was found that the owner of the jeepney was a Maranao and that certain Maranaos were planning to take revenge on BBC by burning some of its buses. Thereafter, 3 armed Maranaos pretended to be passengers and seized on of the buses of BBC. Mark, a passenger of the said bus was shot. Then the armed men set the bus on fire. Mark was rushed to the hospital but died while undergoing operation. Mark's widow brought a suit for breach of contract of carriage. Can she claim for damages?

83/ Yes. Despite the warning by the Philippine Constabulary, BBC did nothing to protect the safety of its passengers. Had BBC and its employees been vigilant, they would not have failed to see that the malefactors had a large quantity of gasoline with them. /////////

84-85/X rode the bus of Y driven by Z. During the course of the trip, the bus collided with the jeep of A, driven by B. X suffered injuries. Against whom should X file a complaint for damages?

84-85/Either or both of the carriers. In the case of injury to a passenger due to the negligence to the driver of a bus in which the passenger was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly severally liable for damages. It should make any difference that the liability of the bus owner springs from a contract while that of the driver springs from quasi-delict (Tiu v. Arriesgado, G.R. No. L-138060 September 1, 2004).

84/Jose is in board a bus when he was hit above his eye by a stone hurled by an unindentified bystander. The bus company's personnel lost no time in bringing him to the hospital. Sadly, he lost his left eye's vision and sustained a scar. He filed an action for damages against the bus company carrier. Can he recover ?

84/No. A common carrier does not give its consent to become insurer of any and all risks to passengers and goods. A tort committed by a stranger which causes injury to a passenger does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the carrier employees to prevent the tort from being committed when the same could have been foreseen and prevented by them. In the instant case, the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of good father of a family (Pilapil v. CA, G.R. No. 521159, December 22, 1989).

84/What is the extent of the liability of the carrier and the driver?

84/The carrier and driver are solidarily liable as joint tortfeasors (CIVIL CODE, Art. 2180)

84/Can the act that breaches the contract be likewise considered a tort or quasi-delict ?

84/Yes. Although the relation of passenger and carrier is contractual both in origin and nature, nevertheless, the act that breaks the contract may also be a tort. Passenger do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration(Air France v. Carrasscoso, G.R. No. L-21428 September 28, 1966).

85-86/ What happens when the period of delivery is stated in the contract or bill of lading?

85-86/Carrier is abound to fulfill the contract and is liable for any delay; no matter from what cause it may have arisen. RATIO: It is presumed that the carrier might have provided a contingency for such delay (Saludo, Jr. v. CA, G.R. No. 95536, March 23, 1992).

85/ What is a bill of loading?

85/ A bill of loading is a written acknowledgement, sign by the master of a vessel of other authorized agent of the carrier, that he has received the described goods from the shipper, to be transported on the expressed terms, to the described place of destination, and to be delivered there to the designated consignee or parties (70 Am. Jur. 2d. 924).

85/ What is the three-fold character of a bill of loading?

85/ A bill of loading operates as a: (REvco) 1.Receipt for the goods shipped; 2.Evidence of the contract between the parties since its contents shall decides all desputes which may arise in regard their execution and fulfilment (CODE OF COMMERCE, Art. 353) 3.Contract, by which three parties namely the shipper, the carrier and the consignee undertake specific responsibilities and assume stipulated obligations; (Keng Hua Paper Products Co., Inc. v. CA G.R. No. 116863 February 12, 1998). Note: In case however of charter of the entire vessel, the bill of lading issued by the master to the character, as shipper, is in fact and in legal contemplation merely a receipt and a document of titled, not a contract, for the contract is the charter party (Home Insurance Co., v. American Steamship Agencies Inc., G.R. No. L-25599, April 4, 1968).

85/ What is the period of delivery?

85/ It could depend on whether (1) there has been a stipulation in the contract or bill of lading or (2) there has no stipulation.

85/ Does contributory negligence of the passenger bar his recovery of damages of the carrier?

85/ No. The contributory negligence of the passenger does nor bar recovery of damages for his death or injuries if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced (CIVIL CODE, Art. 1762).

85/ If the carrier is made liable for the injuries suffered by its passenger due to the negligence of its driver, what it is recourse?

85/ Since the employer's (owner) liabity is primary, direct and solidary, its only recourse is to recover what it has paid from its negligent employee (driver) (Philtranco v.CA, G.R. No. 120553 June 17, 1997).

86/Who is consignee?

86/Consignee may be a shipper or any 3rd person, natural or juridical, to whom the goods are to be delivered (AQUINO AND HERNANDO,Notes and Case on the Law on Transportation and Public Utilities (2004)).

86/What is the liability of the legitimate holder of the bill of lading if he fails to present it to the captain of the vessel?

86/He shall be responsible for the expenses of warehousing and other expenses arising therefrom 9CODE OF COMMERCE,Art. 711).

86/When can a consignee be deemed to have accepted the stipulations in the bill of lading?

86/Once the bill of lading is received by the consignee and he does not objects to any terms or stipulations contained therein ,its constitute as an acceptance of the contract and of all of its term and conditions, of which the acceptor has actual or constructive notice (Keng Hua Paper Products Co., Inc. v. Court of Appeals, G. R. No. 116863, February 12, 1998).

86/When is the consignee bound by the agreement between the shipper and the carrier?

86/The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention of the consignee. However, the latter can be bound by the stipulations of the bill of lading when: 1.There is relation of agency between the shipper or consignor and the consignee ; or 2.When the consignee demands fulfillment of the stipulation of the bill of lading which was drawn up in its favor(MOF Company v. Shing Yang Brokerage, G.R. No.172822,December 18, 2009).

86/Why is a consignee, although not a signatory to the contract of carriage between the shipper and carrier becomes a party to the contract?

86/The consignee becomes a party by reason pf either: 1.The relationship of Agency between the consignee and the shipper/consignor; 2.The Unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge of its contents; or 3.Availment of the stipulation Pour autrui, i.e., when the consignee, a third person, demands before the carrier the fulfillment of the stipulation made by the consignor/shipper in the consignee's favor, specifically the delivery of the goods/cargoes shipped (MOF Co. Inc v. Shin Yang Brokerage, G.R. No. 172822, December 18, 2009).

86/What is the period of delivery when there has been NO stipulation in the contract or bill of lading?

86/The delivery must be made within reasonable which shall depend on the expected date of arrival in the bill of lading or in the nature of goods.Carrier is bound to forward them in the first shipment of the same or similar goods which he may make to the point of delivery ( CODE OF COMMERCE, Art.358).

87/What is the effect of the refusal of the consignee to take delivery?

87/If there has been notice of the arrival and the consignee fails to claim the goods after the lapse of a reasonable period, there will be constructive deliver. If the consignee still fails to take delivery, from that point on, the contract between the carrier and the consignee will no longer be a contract of carriage but a contract of deposit.

87/What is the applicable law on the period for filing claim?

87/It depends whethe (1) the Code of commerce or (2) the carriage of Goods by Sea act is applicable.

87/When is the carriage of goods by Sea Act (COGSA) applicable?

87/The COGSA is applicable on the following carriage: 1.International/overseas/foreign (from foreign country to phil.); and 2.Water/maritime transportation. *See farther discussion on the topic COGSA

87/When is the Code of Commerce applicable?

87/The Code of Commerce is applicable on the following: 1.Domestic/inter-island/ coastwise transportation; and 2.Land, water, air transportation.

87/ What is the effect of failure to file claims within the period prescribed?

87/Under the Code of Commerce, after the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. (CODE OF COMMERCE, Art. 366).

87/What is the period of filing claims by the consignee against the carrier?

87/Under the Code of Commerce, it depends whether the damage is apparent or latent: 1.Apparent damage- if the damage can be ascertained from the outside part of such package, in which case the claim shall be admitted only at the time of receipt (CODE OF COMMERCE, Art.366). 2.Latent damage- within the twenty four hours following the receipt merchandise, the claim against the carrier for damage or average be found therein upon opening the packages, may be made, PROVIDED that the indications of damage of average which gives rise to the claim cannot be ascertained from the outside part of such packages.

87/Under the Code of Commerce, is the filing of a claim considered as a condition precedent in bringing a suit against the carrier under the Code of Commerce?

87/Yes, the 24-hour claim requirement as a condition precedent to the to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. Otherwise, no right of action against the carrier can accrue in favor of the farmer (Philippine Charter Insurance Corporation v. Chemoil Litherage Corporation, G.R. No. 136888, June 29, 2005).

88/ What is a charter party?

88/ A "charter-party"is defined as a contract by which an entire ship, or some principal par thereof, is let by the ship owner to another person (called the charterer) for a specified time for use. Charter parties are of two types: (a) contract of affreightment or (b) a charter by demise or bareboat charter (Planters Products Inc. v. CA, G.R. No. 101503, September 15, 1993).

88/ What is a bareboat or demise charter?

88/ A bareboat or demise charter is a contract by which the ship owner lesses of the charterer to whole vessel, transferring to the latter the entire command, possession and consequent control over the vessel's navigation, including the master and the crew, who thereby becomes the charterer's "servants " (Planters Products Inc. v. CA, G.R. No. 101503,September 15, 1993).

88/ What is Maritime or Admiralty Law?

88/ Maritime or Admiralty Law is the system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and navigation, and so maritime conveyance of persons and property (AQUINO AND HERNANDO, citing Francisco, supra. p. 254).

88/ What are the implication of a bareboat charter?

88/ The charterer becomes the owner pro hac vice. Thus, the charterer is liable for damages arising from negligence. The master of the vessel becomes the agent of the charterer and the character of a common carrier is converted into a private carrier. The charterer is also liable for the expenses of the voyage including the wages of the seamen. The ship owner is not liable for any loss that may occur during the voyage (Planters Products Inc. v. CA, G.R. No. 101503, September 15, 1993).

88/ Can the parties stipulate to shorter prescriptive period under Code of Commerce?

88/ Under the Code of Commerce, the parties could do so, as the provision of the Civil Code shall apply.

88/ What is the prescriptive period in bringing a suit against the carrier?

88/ Under the code of Commerce, the provision of the Civil Code shall apply. If there is a bill of lading, it shall be a 10 year prescriptive period. If there is no bill of lading, it shall be a 6 year prescriptive period.

88/ Does extrajudicial demand toll the prescriptive period in bringing a suit against the carrier?

88/ Under the code of commerce, yes provided that it must be a written extrajudicial demand (CIVIL CODE, Art. 1155)

89-90/ What is the liability of the ship agent with respect to the acts of the captain?

89-90/ The agents shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried, but he may exempt himself there from by abandoning the vessel with all her equipment and the freight he may have earned during the trip ( CODE OF COMMERCE ,Art. 587).

89/ What is a contract of affreightment?

89/ A contract of affreightment is one whereby the owner of a vessel leases part of all of its space to haul goods for others (PPI v. CA, G.R No.101503, September 15, 1993).

89/ What are the implications of a contract of affreightment?

89/ In a contract of affreightment, the chartere hires the vessel only and the master crew remain in the employ of the ship owner. The ship owner remains the owner of a vessel. Thus the ship owner shall be liable for the expenses of the voyage and also for any loss or injury during the voyage (Supra).

89/ What is a Voyage or Trip Charter?

89/ It is when the vessel is leased for one or series of voyages usually for purposes of transporting goods for charterer (PPI v. CA, G.R. No.101503, September 15, 1993).

89/ What are the kinds of contract of affreightment?

89/ The following are the kinds of affreightment: 1. Time charter an 2.Voyage or trip charter (AQUINO AND HERNANDO, supra at 13).

89/ What are the liabilities of a charterer?

89/ The following are the liabilities of a charterer:(F-CLoWD) 1. To pay Freightage on unborded cargo; 2. To pay the agreed Charter price; 3. To pay Losses to others for loading uncontracted cargo and illicit cargo; 4.To Wait if the vessel needs repair; 5. To pay expenses for Deviation (CODE OF COMMERCE, Arts.679-678).

89/ What are the liabilities of a ship owner or ship agent?

89/ The following are the liabilities of a ship owner or ship agent:(SON UPLB) 1. To Substitute another vessel if load is less than 3/5 of capacity; 2.To Observe represented capacity; 3. If the vessel is chartered wholly, Not to accept cargo from others; 4. To Unload cargo clandestinely placed; 5. To Place in a vessel in a condition to navigate; 6. To Leave the port if the charterer does not bring the cargo within the lay days and extra lay days allowed; and 7. To Bring cargo to nearest neutral port in case of war or blockade (CODE OF COMMERCE, Arts. 669-678).

90/What are the exemptions to the limited liability rule?

90/ The following are the exemptions to the limited liability rule: (NICE-W) 1.When there is No total loss and vessel is not abandoned; 2.When the vessel is Insured (Vasquuez v. CA, L-42926 September 13, 1985). 3.When there is injury or damage due to ship owner or to the Concurring negligence of the ship owner and the captain; 4.When there are expenses for repair and provisioning of the ship before its loss (AQUINO AND HERNANDO, supra at 431); and 5.When there are claims under Workmen's Compensation (Abueg v. San Diego, G.R. No. L-773, December 17, 1946).

90/ What is the extent of the interest of the ship owner or ship agent with respect to the limited liability?

90/ The interest of the ship owner and ship agent extends to:(FIVE) 1.Freightage; 2.Insurance proceeds 3.The Vessel itself; and 4.Equipment (Chua v. IAC, G.R. No. L-74811, September 30, 1988).

90/ What is the liability of the part owners of the vessel with respect to the acts of the captain?

90/ The part owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund, for the results of the acts of the captain referred to in Art. 587. Each owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him (CODE OF COMMERCE, Art. 590)

90/ What is included in an coverage?

90/Average includes all extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel, the cargo or both. It also includes any damage or deterioration which the vessel may suffer from the time it puts to sea from the port of departure until its casts anchor in the port of their of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment( CODE OF COMMERCE, Art. 806). It can either be a general Average (or Gross Average) or Simple Average ( or Particular Average).

90/ What is the extent of the liability of the shipowner and shipagent under the "No Vessel No Liability" rule?

90/The liability of ship owner and ship agent is limited to the amount of interest in said vessel such that where vessel is entirely lost, the obligation is extinguished(Luzon Stevedoring v. Escano G.R. No. L-58897, December 3, 1987). Thus, if the vessell, equipment or freightage were completely lost or destroyed, the ship owner shall not be liable anymore.

91-92/ What is a particular average?

91-92/ Particular average refers to the expenses and damages caused to the vessel or to her cargo which have not inured to the common benefit and profit for all the persons interested in the vessel and her cargo (CODE OF COMMERCE, Art. 809).If only the vessel or only the cargo is saved. It is particular average.

91/ What is a general average?

91/ A general average refers to all the damage and expenses which are deliberately caused in order to save the vessel, its cargo or both at the same time, from real and known risk (CODE OF COMMERCE, Art. 811). Where both vessel and cargo are saved, it is general average. The persons whose property has been saved must contributes to reimburse the damage caused or expense incurred if the situation constitutes general average.

91/ What are consequences of having a general average?

91/ All the persons having interest in the vessel and cargo therein at the time of the occurrence the average shall contribute to satisfy the general average. (CODE OF COMMERCE, Art. 812). Thus, those whose cargoes were safe must contribute to the general average in proportion to the of the owners property saved. The ensurers (CODE OF COMMERCE, Art. 859) and lenders on bottomry and respondentia shall likewise contribute(CODE OF COMMERCE, Art. 732).

91/ What are the requisites of a General Average?

91/ The following are the requisites of a general average: (CoDe-PS) 1. Common danger a. That both the ship and the cargo, after the goods have been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading. b. That the danger arises from the accidents of the sea, disposition of the authority or faults of men, provided that the circumstances producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent (AQUINO AND HERNANDO, supra at ). 2. Deliberate Sacrifice a. General Rule: Sacrifice is made through the jettison of the cargo or part of the ship is thrown overboard during the voyage b. Exceptions: i. Where the sinking of a vessel is necessary to extinguish a fire in a port, roadsteads, creek or bay. ii. Where cargo is transferred to lighten the ship on account of a storm to facilitate entry into a port (CODE OF COMMERCE, Arts. 816, 817 & 818. 3.Proper Formalities and legal steps a. Procedure of recovery; b. Assembly and deliberation; c. Resolution of the captain; d. Entry of the resolution in the logbook; e. Detailed minutes; f. Delivery of the minutes to the maritime judicial authority of the first port, within 24 hours from arrival, and g. Ratification by the captain under oath. (CODE OF COMMERCE, Arts. 813 & 814). 4. Success Purpose: To be able to demand general contribution (AQUINO AND HERNANDO, supra at 605)

92-93/ What are the cases covered by the rules on collision and alllision?

92-93/The following are the cases covered by collision and allision: 1.One vessel at fault- Vessel at fault is liable for damage caused to innocent vessel as well as damages suffered by the owners of cargo of both vessel (CODE OF COMMERCE,Art. 826). 2.Both vessels at fault- Each vessel must bear its own loss, but the shippers of both vessels may against the ship owner who will be solidarily liable (CODE OF COMMERCE, Art. 827). 3.Vessel at fault Not known- Each vessel must bear its own loss, but the shippers of both vessels may go against the ship owners who will be solidarily liable (CODE OF COMMERCE, Art. 828). 4.Third vessel of fault- The third vessel will be liable for losses and damages (CODE OF COMMERCE, Art. 831). 5.Fortuitous event/force majeure- No liability. Each bears its own loss (CODE OF COMMERCE, Art. 830) subject to provisions of the Civil Code on fortuitous event, duty toexercise due diligence before, during and after the collision, provided that there is no delay.

92/What is an Error in Extremis?

92/ An Error in Extremis is a sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at fault during the 2nd zone. Even if such sudden movement is wrong, no responsibility will fall on said faultless vessel (Urrutia and Co. v. Baco River Plantation Co., G.R. No. 7675, March 25, 1913).

92/What is a collision?

92/ Collision is an impact or sudden contact of a vessel with another whether both are in motion,or one is stationary. Note:If one vessel is moving while the other is stationary, the same is called allison ( AQUINO AND HERNANDE, supra at 493).

92/What are the different zones of time in collision of vessels?

92/ The following are the different zones of times: 1.First zone- Covers all the time up to the moment when risk of collision maybe said to have begun.Each is free to direct its course as it deems best without reference to the movements of the other vesssel. 2.Second zone- Covers the time between the moment when the risk of collision begins and the moment when it has become a practical certainty. It is in this zone that vessels must strictly observes neutical rules, unless the departure therefrom becomes necessary to avoid imminent danger. 3. Third zone- An error in this zone would no longer be legally consequential (A. Urrutia &Co. v. Baco River Plantatium, Co. G.R. No. 7675, March 25, 1913).

92/Are expenses incurred to refloat a vessel, which a accidently ran aground, considered as general average?

92/No. Expenses incurred to refloat a vessel which accidentally ran aground, in order to continue its voyage, do not constitute general average. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of the property, and not the voyage, which constitute the true foundation of general average ( A. Magsaysay, Inc. v. Agan, G.R. No. L-6393, January 31, 1955).

92/What are the consequences of having a particular average?

92/The owner of the goods which gave rise to the expense or suffered the damage shall bear this average (CODE OF COMMERCE, Art. 810). Thus , the owner of the goods whose cargoes were lost or destroyed due to the particular average shall bear the expense of their own. They shall not receive any reimbursement from the other owners of goods whose cargoes were not affected by the particular average.

93-94/ Under COGSA, is the filing of a claim considered as a condition precedent in bringing a suit against the carrier?

93-94/ No, it is not a condition precedent in order to bring a suit against the carrier. If a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one (1) year after the delivery of the goods or the date when the goods should have been delivered. In case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods (COGSA,Sec. 3 (6).

93/What is the effect of failure to file claims within the period prescribed under the COGSA?

93/Failure to file a claim within the period shall be a prima facie evidence that the goods have beend delivered by the carrier as described in the bill of lading, UNLESS notice of loss or damage and general nature of loss in writing has been given to the carrier or his agent (COGSA,Sec. 3(6).

93/What is the period for filing claims by the consignee against the carrier under the COGSA?

93/Similar to the Code of Commerce, it also depends whether the loss or damage is apparent or not: 1.Apparent damage- if the loss is apparent, notice of loss or damage an the general nature of such loss or damage is given in writing to the carrier or his agent (1) at the port of discharge or (2) at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage. 2.Latent damage - if the loss or damage is not apparent (or latent ), the notice must be given within three (3)days from the time of the delivery (COGSA, Sec. 3(6).

93/When is the carriage of Goods by Sea Act (COGSA) applicable?

93/The COGSA is applicable when the following are presen: 1.Water /maritime transportation; 2.For the carriage of goods; and 3. Overseas/internationa/foreign (from foreign port).l Note: COGSA does not apply to misdelivery and delay delivery. It only applies to non-delivery and damages goods.

94/ Can the parties, by stipulation, shorten the prescriptive period provided under the COGSA?

94/ No, The 1-year period cannot be shortened (Dole Philippines v. Maritime Co, G.R. No. L-61352 February 27, 1997)

94/ Does extrajudicial demand toll the prescriptive period in bringing a suit against the carrier under COGSA?

94/ No, The extrajudicial demand does not toll the prescriptive period. (Dole Phil. v. Maritime Co., G.R. No. L-61352 February 27, 1997). The one-year period shall run from delivery of the last package.

94/ Who has a burden of proof with respect to due diligence when a loss or damage resulted from unseaworthiness?

94/ The carrier or other person claiming exception has the burden of proving the exercie of due diligence whenever loss or damage has resulted from unseaworthiness (COGSA, Sec.4).

94/ What are the acts that suspend the one year prescriptive period?

94/ The liability is limited to the vessel, its freight and insurance. The limited liability doctrine is premised on the condition that the death or injury to the passenger occurred by reason of the fault or negligence of the captain only. If such death or injury is due to owners fault or negligence, the doctrine does not apply, and abandonment of the vessel will not absolve him of liability (Manila Steamship Co. Inc. V. Abdulhanan, et al, G.R. No. L-9534, September 29, 1956).

94/ What is the prescriptive period in bringing a suit against the carrier under the COGSA?

94/ The suit must be brought within one (1) year after delivery of goods or the date when the goods should have been delivered. Otherwise, carrier and the ship shall be discharged from all liability in respect of loss or damage (COGSA, Sec. 3 (6)).

95-96/Under COGSA, what is the value of limited liability of the carrier?

95-96/Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package in lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipped before shipment and inserted in the bill of lading. Note:This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier (COGSA, Sec. 4(5).

95/What is the rule on attempts to save life or property at sea under COGSA?

95/Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an infringement or breach of the COGSA or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom. However, that if the deviation is for the purpose of loading cargo or passengers it sahllprima facie be regarded as unreasonable (COGSA, Sec. 4).

95/ Under what instances is the carrier not liable for the loss or damage of goods under COGSA?

95/Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: (FEAR-QPANG-MSSSWWW) 1.Fire, unless caused by the actual fault or privity of the carrier; 2.Act of public enemies; 3.Arrest or restraint of princes, rules, or people, or seizure under legal process; 4.Riots and civil commotions; 5.Quarantine restrictions; 6.Insufficiency or packing; 7. Act or omission of the shipper or owner of the goods, his agent or repesentative; 8.Latent defects Not discoverable by due diligence; 9.Act of God; 10.Act Neglect, or default of the Master, mariner, pilot, or the servants of the carrier of he navigation or in the management of the ship; 11.Insufficiency or inadequacy of Marks; 12.Perils, dangers and accidents of the Sea or other navigable water; 13.Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, that nothing herein contained shall e construed to relieve a carrier from responsibility for the carriers own acts; 14.Saving or attempting to save life or property at Sea; 15.Act of War; 16.Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; 17.Any other cause arising Without the actual fault and privity of the carrier and without the fault or of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage (COGSA, Sec. 4).

95/What is the limitation on the liability of the shipper under COGSA?

95/The shipper shall not be held accountable to the loss or damage sustained by the carrier resulting from any cause without the act, o neglect of the shipper, his or servants (COGSA, Sec. 4)

96-97/ What are the other instances where the Warsaw Convention is applicable??

96-97/ The WC shall also apply to fortuitous events affecting transportation by aircraft performed by an air transportation enterprise. The Convention is likewise applicable to air transportation by legal entities constituted under public law of the High Contracting Parties.

96/How are goods of inflammable, explosive or dangerous nature treated under COGSA?

96/ Goods of an inflammable, explosive or dangerous nature to the shipment whereof, the carrier, master of agent of the carrier has not consented with knowledge of their nature and character, may at any time before discharge, be landed at any place or destroyed or rendered innocuous by the carrier without compensation. If any such goods shipped with such knowledge and consent shall become a dander to the ship or cargo, they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average if any (COGSA, Sec. 4(6)).

96/ What is the Warsaw Convention (WC)?

96/ The Warsaw Convention is an agreement among sovereign countries concerning the regulation in a uniform manner of the conditions of international transportation by air in respect of the documents used for such transportation and the liability of the carrier. It was signed on October 12, 1929 in Warsaw, Poland.

96/What are the instances where the Warsaw Convention is applicable??

96/ The Warsaw Convention shall be applied in: 1. International transportation; 2. Air transportation; and 3. Carriage of passengers, baggage or goods.

96/Under COGSA, can the maximum value of limited liability of the carrier e fixed by the parties?

96/ Yes. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount then that mentioned in this paragraph may be fixed: Provided, that such maximum shall NOT BE LESS $500 per package or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. In no event shall the carrier be liable for more than the amount of damage actually sustained. Neither the carrier nor the ship shall be responsible in any event for loss damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading (COGSA, Sec. 4(5)).

97/ Can the carrier limit its liability if the damage is caused by the any willful misconduct by any agent of the carrier?

97/ No.The Warsaw Convention denies to the carrier "availment of the provision which exclude or limit his liability, if the damage is caused by his willful misconduct or by such default on his part as, in accordance with the law of the court seized of the case, is considered to be equivalent to willful misconduct or if the damage is (similarly) caused by any agent of the carrier acting within the scope of his employment "(SUNDIANG AND AQUINO, supra at 452-453).

97/ What is the limitation on the amount of the carrier against goods to be shipped under the Warsaw Convention?

97/ The general rule is $20 per kilogram. However, an exception is when there is a special declaration of value and payment of a supplementary sum by consignor. In such a case, the carrier is liable to pay not more than the declared sum, unless it proves the sum is greater than the actual value.

97/ What is the limitation on the amount of liability of the carrier against passengers under the Warsaw Convention?

97/ The general rule is 125,000 francs per passenger. However, an exception is when there has been an agreement to increase the liability of the carrier (WARSAW CONVENTION, Sec.22(1)).

97/ What is the limitation on the amount of liability of the carrier against checked-in baggage under the Warsaw Convention?

97/ The general rule is 250 francs per kilogram. However, an exception is when there is a special declaration of value and payment of a supplementary sum by the consignor. In such a case, the carrier is liable to pay not more than the declared sum, unless it proves the sum is greater than the actual value (WARSAW CONVENTION, Sec. 22(2)).

97/ What is the limitation on the amount of liability of the carrier with respect to hand-carried baggage under the Warsaw Convention?

97/ The limitation of the liability of the carrier against hand-carried baggage is 5,000 francs per passenger (WARSAW CONVENTION, Sec. 22(3)).

98-99/What are the other classification of corporation?

98-99/The following are other classifications: 1. As to organizers: a.Public-by the State alone b.Private-by private persons alone or with the State 2.As to purpose: a.Public-organized for the government or a portion of the State for the general good and welfare b.Private-formed for some private purpose, benefit or end i. Government-owned or Controlled Corporation-created by the government or of which the government is the majority stockholder,(e.g.,GSIS, NAPOCOR,PNR,PNB) ii.Quasi-public Corporation-private corporations which have accepted from the State the grant of franchise or involving the performance of public duties but which are organized for profits (e.g., electric, water, transportation companies). 3.As to governing Law: a.Public-Special Laws and Local Government Code b.Private-Law on private Corporations 4.As to legal right to corporation existence: a.De Jure Corporation- corporation created in strict or substantial conformity with the mandatory statutory requirements for incorporation and the right of which to exist as a corporation cannot be successfully attacked or questioned by any party even in a direct proceeding for that purpose by state; or b. De Facto Corporation-organized with a colorable compliance with the requirements of a valid law and its existence cannot be inquired collaterally but such inquiry may be made by the solicitor General in a quo warranto proceeding (VILLANUEVA, Corporate Law, p. 78) c. Corporation by Estoppel- group of persons that assumes to act as a corporation knowing it to be without authority to do so, and enters into a transaction with a third person on the strength of such appearance. Such cannot cannot be permitted to deny its existence in an action under said transaction (CORPORATION CODE, Sec. 21) d. Corporation by prescription- one that has exercised corporate the sovereign power (e.g. Roman Catholic Church) 5.As to Laws of incorporation: a.Domestic Corp[oration- corporation formed, organized or existing under Philippine Laws; b. Foreign Corporation - a corporation formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state 6.As to whether they are open to the public or not: a. Open- one which is open to any person who may wish to become a stockholder or member thereto b. Close- those whose shares of stock are held by limited number of persons like the family or other closely-knit group (CORPORATION CODE, Sec. 96) 7. As to relationship of management and control: a. Holding corporation - one which controls another as a subsidiary by the power to elect management and hold stocks in other companies to purposes of control rather than mere investment b. Subsidiary- one that is so related to another corporation that such other corporation could elect the majority of its directors either directly or indirectly. It is always controlled c.Affiliate- one that directly or indirectly, through o one or more intermediaries, is controlled by, or is under the common control of another corporation (R.A. 9160, Sec. 4(b)) d.Parent and subsidiary- when the corporation has a controlling financial interest in one or more corporations, the one having control is the apparent corporation, and the others are the subsidiary corporations (VILLANUEVA, Corporate Law, pp. 81-82) 8.As to number of persons who compose them: a. Aggregate Corporation- a corporation consisting of more than one person or number b. Corporation Sole- a corporation consisting of only person or member (CORPORATION CODE, Sec. 110); 9.As to whether they are for religious purposes or not: a. Ecclesiastical Corporation- one organized for religious purposes b.Lay Corporation- one organized for purpose other than for religion 10.As to whether they for charitable purposes or not: a. Eleemosynary Corporation - one established for or devoted to charitable purposes or those supported by charity b.Civil Corporation - one established for business or profit

98/What is a non-stock Corporation?

98/A Non-stock Corporation is a one where no part of its income is distributable as dividends to its members, trustees of officers (CORPORATION CODE, Sec. 87). Note: Any profit which a non-stock corporation may obtained as incident to its operation shall, whenever necessary or proper, be used for the furtherance of the purposes for which the corporation was organized (CORPORATION CODE, Sec. 87).

98/ What is a corporation?

98/A corporation 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, Sec.2).

98/What is a stock corporation?

98/A stock is one which has capital stock divided into shares and is authorized to distribute to the holders of such shares, dividends or allotments of the surplus profits of the basis of the shares held (CORPORATION CODE, Sec.3). Note: If the by-laws do not authorized to distribute dividends, but the corporation is a stock- corporation, it may still distribute dividends to its shareholders as such power is expressly granted under Section 43 of the Corporation Code (VILLANUEVA, Corporate Law, p. 79).

98/What are the classifications of corporations under the Corporation Code?

98/Corporation are classified as: 1.Stock corporation; and 2.Non-stock Corporation (CORPORATION CODE, Sec. 3).

98/ What are the attributes of a corporation?

98/The attributes of the corporation are: (ALEE) 1.It is an artificial being. 2.It is a creature of a law. 3.Enjoys the right of succession. 4.It is a creature of Enumerated powers, attributes, and Properties (VILLANUEVA, Philppine Corporate Law (2013), pp. 19-22)[hereinafter VILLANUEVA, Corporate law[.

47/ Should the insured prove that its vessel is seaworthy?

No. Where the policy stipulates that the seaworthiness of the vessel as between the insured and the insurer is admitted, the question of seaworthiness cannot be raised by the latter without showing concealment or misrepresentation by the former (Philippine American General Insurance v. CA, G.R. No. 116940, June 11, 1997).

43/ Discuss the nature of an insurance contract. (VAPOR-C)

e43 They are the following: 1. Voluntary - the parties may incorporate such terms or conditions as they may deem convinient, provided they are not contrary to law morals, good customs, public order, or public policy (CIVIL CODE, Art. 1306). 2. Aleatory - the liability of the insurer is dependent on the happening of an event, which is uncertain, or which is to occur at an indeterminate time (Art. 2010). 3. Property- since an insurance policy is a contract, as such , it is property in legal contemplation. ////////////////////////////////////

94/ Does deliver of the good to the arrastre-operator commence the running of the prescriptive period under COGSA?

s. 94/ Yes. The prescriptive period shall run from delivery to the arrastre-operator and not to the consignee (Union Carbide (Phil) Inc. v. Manila Railroad Co., G.R. No. 27798 June 15, 19977).