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with intent of gain COMMERCIAL LAW – branch of private law which regulates the juridical relations arising from commercial acts CHARACTERISTICS OF COMMERCIAL LAW:
1. 2. 3. 4. 5. 1. 2. 3. 4. 5. universal uniform equitable customary progressive
PORTIONS OF CODE OF COMMERCE STILL APPLICABLE:
1. 2. 3. 4. 5. 6. 7. 1. 2. 3. 4. 5. 6. 7. merchants; book of merchants and general provision of contracts joint account association commercial barter transfers of non-negotiable credits commercial contracts of overland transportation letters of credit maritime commerce
1. 1. 1. 2. 1. 2. 3. 1. 3. 1. 2. 1. 4. 1. 2. 3. 1. a. b. c. 5. Commerce – bringing products from the manufacturers to the consumers Characteristics of Commerce: a. habituality b. rapidity – if period is fixed, debtor in delay without need of demand; if contract does not fix period, 10 days c. intent to join Merchant: a. Individuals – legal capacity, 21 years, or subject to parental authority, habitually engaged in commerce b. Juridical Persons – commercial and industrial company organized in accordance with law, habitually engaged in business General Rule: Minors cannot engage in commerce to continue business of deceased parents through guardian court authorizes guardian to place minor and property in business minor is an alien and his national law allows him to be a merchant Which persons are not allowed to engage in commerce?
1. a. suffering accessory penalty of civil interdiction (reclusion perpetua and reclusion temporal) 2. b. those judicially declared insolvent until they can obtain their discharge 3. c. prohibited by Constitution and special laws 6. Aliens 1. a. capacitated under his national law to engage in business 2. b. engaged in the business in the Philippines not reserved for the Filipinos 3. c. after securing license and BOI certificate 7. Family Code: Either spouse may engage in business; when objected to by the other, court will look into valid grounds, i.e. serious and moral grounds 8. BOI Certificate must be obtained by: 1. a. alien 2. b. foreign firm 9. Meaning of Philippine National 1. a. citizen 2. b. domestic corporation wholly owned and organized by Filipinos in the Philippines 3. c. Filipino corporation where Filipino capital entitled to vote is at least 60% 10. Query: If a corporation is a shareholder of another corporation, how do you determine whether the latter corporation is a Filipino national?
Answer: The following must concur 1. a. At least 60% of the outstanding capital stock and entitled to vote of both corporations are held by citizens of the Philippines 2. b. At least 60% of the Board of Directors of both corporations are Filipinos 1. 11. Tenor of BOI Certificate 1. a. Business or activity to be engaged is consistent with the Investment Priorities Plan 2. b. Business will contribute to the sound and balanced development of the national economy in a self-sustaining basis 3. c. Business will not conflict with the Constitution and local laws 4. d. Business is not adequately exploited by Filipino nationals 5. e. No danger of monopolies/combinations in restraint of trade 1. 12. Basic Principles/Conditions laid down by BOI 1. a. resident agent of foreign firm is a Filipino citizen 2. b. establishment of office in the Philippines 3. c. bringing assets tot he Philippine office as capital 4. d. complete set of accounting records 1. 13. Merger and Consolidation subject to BOI requirements for the issuance of certificate:
When merger and consolidation result in ownership and control of non-Filipino nationals over more than 40% of the capital of a consolidated corporation.
1. 14. SEC License issued upon compliance with the following requirements: 1. a. proof of compliance with principle of reciprocity 2. b. BOI certificate 3. c. Applicant for license gives required information
n articles of incorporation n by-laws n names and addresses of resident agents n principal place of business in the Philippines
1. d. 2. e. proof of solvency deposit acceptable securities to protect future creditors
RETAIL TRADE NATIONALIZATION LAW (Note: Material on the Retail Trade Liberalization Law will not be included in this reviewer. Supplement to follow)
1. 1. Retail Trade – any act, occupation, or calling of habitually selling direct to the general public, merchandise, commodities, or goods for consumption
Jurisprudence has held that the term ―retail‖ should be associated with and limited to goods for personal, family or household use, consumption and utilization. The Retail Trade Nationalization Law refers to ―consumption goods‖ or ―consumer goods‖ which directly satisfy human wants and desires and are needed for home and daily life. Excluded from the law are those goods which are considered generally raw material used in the manufacture of other goods, or if not, as one of the component raw material, or at least as elements utilized in the process of production and manufacturing.
1. 2. Elements of What Constitutes Retail Trade: 1. a. The seller habitually engages in selling; 2. b. The sale is direct to the general public; and 3. c. The object of the sale is limited to merchandise, commodities or goods for consumption. 1. 3. General Rule: After 1964, only Filipinos or corporations whose capital is 100% Filipino may engage in retail trade. 1. 4. Exceptions, that is, instances when aliens may engage in retail trade in the Philippines: 1. a. manufacturer or processor if capital does not exceed P5,000.00; 2. b. farmer or agriculturist when selling his products; 3. c. manufacturer or processor selling to industrial or commercial users or consumers who use the produce to render service to the general public or to produce or manufacture goods which are sold by them to the public; 4. d. hotel owners or keepers of restaurants included or incidental to the hotel business; 5. e. sale by a manufacturer or processor to the Government or its agencies, including government owned and controlled corporations. 1. 5. Query: How to determine citizenship of shares of the corporation when they are not held directly by individuals, but in turn held by another entity?
Answer: apply the GRANDFATHER RULE, to wit:
only 50. the following positions may be held by foreign nationals: n president n treasurer n general manager . 2. for purposes of the law. 1. Thus. 3. Hence. b. Disqualified aliens cannot intervene in the management. 1. of which belong to Filipino citizens. except when: 1.000 shares shall be counted as owned by Filipinos and the other 50. 2. operation. By way of exception. the following may participate in management: 1. the foreign ownership would always render a portion of its holding in the company as foreign equity and would disqualify the corporation to engage in retail trade. only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. alien takes part in technical aspects. but if the percentage of Filipino ownership in the corporation or partnership is less than 60%. Aliens may be elected to the Board of Directors to the extent of their allowable share in the capital of the corporation (in partially nationalized industries). manager. administration or control of the business reserved to Filipinos whether as an officer. if 100. upon the recommendation of the department head concerned.Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality. the capital or ownership of which under the Constitution or other special laws are limited to Filipino citizens only. and 3. Where majority of stocks of a pioneer enterprise is owned by foreign investors. But. ANTI-DUMMY ACT 1. c. 50% of the capital stock belongs to Filipino citizens. 1.000 shares shall be recorded as belonging to aliens. whatever the percentage of Filipino ownership in the owning corporation. it is not qualified to invest in or enter into a joint venture agreement with corporations or partnerships. Criminal sanctions are imposed on the president. employee or laborer. if let’s say. a. and advisory positions for a period of 5 years subject to extension. with express authority from the President. b. technical. However. c. a. 2.000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital respectively. board member or persons in charge of the violating entity and causing the latter to forfeit its privileges. 3. while a corporation with 60% Filipino and 40% foreign equity ownership is considered a Philippine national for purposes of investment. The Act penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved for Filipinos or Filipino corporations. with or without remuneration. rights and franchises. A registered enterprise may employ foreign nationals in supervisory. provided that no Filipino can do such technical work. all of the said shares shall be recorded as owned by Filipinos.
opening offices whether called liaison offices or branches. or for other purposes. to regulate the use of trust receipts TRUST RECEIPTS LAW 1. appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own accounts. 4. mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business. participating in the management or supervision or control of any domestic firm. 8. Trust receipts are denominated in Philippine currency or acceptable and eligible foreign currency. exercise of rights as such investor. or to return the goods if UNSOLD. d. 1. etc. 2. appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the country for a period totaling 180 days or more. The following are NOT doing business: 1. any other act or acts that imply continuity in commercial dealings 1. 6. 3. a. e. 2. entity or corporation in the Philippines.n equivalent positions 1. c. 3. the ENTRUSTER’S security interest cannot be prejudiced by claims of creditors of the ENTRUSTEE. a. What doing business means: 1. 4. Risk of loss is borne by the ENTRUSTEE. 5. 4. A Filipino common-law wife of an alien is not barred from engaging in the retail business provided she uses capital exclusively derived from her paraphernal properties. ENTRUSTER is not liable as principal or vendor under any sale or contract to sell made by the ENTRUSTEE. 1. to encourage use of and to promote transactions based on trust receipts. d. and to sell the goods. 2. When commissioned merchants/investors or commercial brokers act in their own name in selling foreign products. purchases. 3. soliciting orders. c. 1. 1. 7. WITH THE OBLIGATION TO TURN OVER THE PROCEEDS THEREOF TO THE EXTENT OF WHAT IS OWING TO THE ENTRUSTER. documents or instruments tot he possession of the former upon the ENTRUSTEE’S promise to hold said goods in trust for the ENTRUSTER. 1. b. 2. b. 1. the foreign firm manufacturing these products is not doing business in the Philippines. 5. 5. Pending the duration of the trust agreement. When a local corporation or person acts in the name of a foreign firm. . b. having a nominee director or officer to represent interests in such corporation. a. Purpose: 1. the latter is doing business in the Philippines. however. 1. allowing her common-law alien husband to take part in the management of the retail business would be a violation of the law. 6. 1. 2. Definition: A written/printed document signed by the ENTRUSTEE in favor of the ENTRUSTER whereby the latter releases the goods. service contracts. 4.
or public officers. n amount of indebtedness due or owing to each of said creditors . receivers. 1. 1. It exists when a merchant interests himself in the transaction of another merchant. mortgage or assignments of a stock of goods. transferor. non-negotiable. BULK SALES LAW 1. a. merchandise. 3. mortgagor. 2. 1. Joint accounts do not adopt a firm name. It is not subject to any formal requirement for validity. or assignor. Traveler’s Letters of Credit 1. or substantially all. 2. Loss of goods pending the dispossession shall not extinguish the obligation to the ENTRUSTER for the value thereof. mortgage or assignments of all. a. of the business of the vendor. or assignor. 5. The law covers all transactions. Commercial Letters of Credit 2. If the vendor. Sale transfer. and participating in the favorable or unfavorable results thereof in the proportion they may determine. Issued to definite persons and not to order. JOINT ACCOUNTS 1. 3. transferor. The law does not apply to executors. No suit may be maintained – investor and third persons dealing with the merchant conducting business. No protest required in case of dishonor. a. 3. a. of the fixtures and equipment used in the business of the vendor. it may be oral. PRICE TAGS LAW 1. 3. Only creditors at the time of the sale in violation of the law are within the protection of the laws and creditors subsequent to the sale are not covered. 1. whether done in good faith or not. The vendor must deliver to such vendee a written statement of: n names and addresses of all creditors to whom said vendor or mortgagor may be indebted. or whether or not the seller is in a state of insolvency. contributing thereto the amount of capital they may agree upon. or materials otherwise than in the ordinary course of trade. 1. transfer. It requires articles of commerce sold at retail to bear prices. 1. 1. b. thus. 4. or substantially all. 4. or assignment of all. 2. wares.‖ 1. LETTERS OF CREDIT 1. c. administrators. transferor or assignor produces and delivers a written waiver of the provisions of the law from his creditors as shown by verified statements. acting under process. transfer. b. 4. Sale. mortgagor. provisions. mortgagor. 2. Obligations when transaction is a bulk sale: 1. that fall within the description of what is a ―bulk sale. Purpose: meant to protect creditors of businessmen against preferential or fraudulent transfers 1. assignees in insolvency. Even if the transaction falls within the definition of ―bulk sale‖. 6. mortgage. 1. 1. Limited to a fixed account. Sale. b. 1. the following are not deemed covered by the law: 1. 1. 7. Types of transactions which are treated as ―bulk sales‖: 1. 2. Kinds: 1.1. 1.
1. a. 5. and 5. merchandise.. and c are present. at least 10 days before the sale. INSURANCE LAW 1. b. doing or proposing to do any business in the substance equivalent to any of the foregoing in a manner designed to evade the provisions of the Insurance Code. a. Contract of Suretyship – deemed to be an insurance contract within the meaning of the Insurance Code. however. 3. 3. doing reinsurance business. General Principles prevailing on the subject in the US 2. terms and conditions of the sale 1. 2. When 6(b) above is not complied with. risk of loss. the seller will be criminally liable. d. Laws applicable to insurance in the order of priority: 1. of the price. consensual 2. 3. 4. c. as insurer. aleatory – depends upon some contingent event. making or proposing to make as a surety. making or proposing to make. 3. 7. it is not a wagering nor a gambling contract 1. cost price of each article to be included in the sale n notify every creditor at least 10 days before transferring possession of the goods. shall: n make a full detailed inventory of the goods. any contract of suretyship as a vocation and not merely incidental to any other legitimate business or activity of the surety. 1. 6. assumption of risk. 1. Characteristics of an insurance contract: 1. 2. etc. no criminal liability on the seller. When 6(c) is not complied with. The seller. it is not a contract of insurance but a risk shifting device. scheme to distribute losses. 2. 1. existence of an insurable interest. a. . e. any insurance contract. c. b. Contract of Insurance – an agreement whereby one undertakes for a consideration to indemnify another against loss. b. Insurance Code 2. c. a.1. d. damage or liability arising from an unknown contingent event. only if made by a surety who or which. as such. Requisites of Insurance: 1. the sale itself is also void. voluntary 3. seller is also criminally liable. b. the sale is not void. The vendor must apply the purchase money to the pro-rata payment of bona fide claims of the creditors as shown in the verified statement. 1. b. 4. Consequences of Violation of Requirements under #6 above stated: 1. c. payment of premiums Note: If only a. the sale itself is void. a. b. c. When 6(a) above is not complied with. b. 2. Definition of ―doing an insurance business‖: 1. is doing an insurance business 4. Civil Code 3. c.
or in whom he has a pecuniary interest 3. conditional – liability is based on the happening of the event insured against 1. of which death or illness might prevent the performance or delay it 4. 2. executed as to the insured after payment of the premium 5. c. c. which may damnify a person having an insurable interest. b. but need not exist thereafter or when the loss occurs. Interest in Property insured must exist when the insurance takes effect and when the loss occurs. b. or is to receive a certain sum upon the happening of a specified contingency 3. d. 9. Interest in the Life or Health of a Person Insured must exist when the insurance takes effect. 1. b. Parties to a contract of Insurance: 1. e. founded on an existing interest 3. himself. or respecting property or services. whether past or future. of such nature that a contemplated peril might directly damnify the insured. insurer – party who assumes the risk or undertakes to indemnify the insured or to pay a certain sum on the happening of a specified contingency 2. an existing interest 2. 8. or (b) any contingent or unknown event. an inchoate interest. . personal – each party takes into account the character. Insurable Interest in Property may consist of: 1. 7. and who is indemnified against. d. any person on whom he depends wholly or in part for education or support. his spouse and his children 2. a. which may create a liability against the person insured. a. whether past or future.4. Instances when Insurable Interest must exist: 1. insured – person in whose favor the contract is operative. whether real or personal. a. any person upon whose life any estate or any interest vested in him depends 1. 1. executory as to insurer – not executed until payment for a loss 6. g. but need not exist in the meantime. an expectancy. a. any person under a legal obligation to him for the payment of money. coupled with an existing interest out of which the expectancy arises Definition of Insurable Interest in Property: Interest in property. credit and the conduct of the other 7. f. or any relation thereto. b. c. or liability in respect thereof. Every person has an insurable interest in the life and health of: 1. beneficiary – may or may not be the same as the insured What perils may be insured? (a) any contingent or unknown event. 10.
11. until the interest in the thing and the interest in the insurance are vested in the same person. In case of life. e. a change of interest in one or more several distinct things. basis may be based on pecuniary interest. b. d. when interest must exist at the time the policy takes effect and at the time of the loss 3. c. The following donations shall be void: . amount of insurable interest limited to the actual value of damage/injury/loss 1. Beneficiaries of Life Insurance need not have insurable interest in the life of the insured. health. a transfer of interest by one of several partners. a change in the interest by will or succession on the death of the insured (interest passes to the heirs) 4. Revocation of Beneficiaries General Rule: Insurance contracts are revocable. 4. or consanguinity at the time the policy takes effect EXCEPT: life insurance taken by the creditor on the life of the debtor wherein interest must also exist at the time of the loss no limit EXCEPT: if insurable interest is based on creditor-debtor relationship (only to the extent of the credit or debt) based purely on pecuniary interest 2. when the change in interest results after the occurrence of an injury which results in a loss 2. General Rule: A change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance suspends the insurance to an equivalent extent. Beneficiaries of Property Insurance must have insurable interest in the property insured. Insurable Interest in Life Category Insurance Insurable Interest in Property 1.3. separately insured by one policy 3. Exceptions: a. and accident insurance 1. 12. joint owners in common who are jointly insured to the others (even though it has been agreed that the insurance shall seize upon the alienation of the thing insured) 1. d. affinity. Exception: Any person who is forbidden to receive any donation under Article 739 of the Civil Code cannot be named beneficiary of a life insurance policy by the person who cannot make the donation to him. c.
descendants. 3. Suspension – a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the insurance suspends the insurance to an equivalent extent until the interest in the thing and the interest in the insurance are vested in the same person. . those made by persons found guilty of the same criminal offense. even if such designation is irrevocable. 1. those made to a public officer or his wife. Requisites: (a) (b) (c) the party concealing must have knowledge of the facts concealed. b. A concealment. in which event. Exception: a. in consideration thereof. Concealment – a neglect to communicate that which the party knows or ought to communicate General Rule: The insured is not required to communicate the nature (or kind) or the amount of his insurable interest in the life or property insured to the insurer. 2. by reason of his office. 1. accomplice or accessory in willfully bringing about the death of the insured. the innocent spouse may revoke the donations as well as the designation of the latter as a beneficiary in any insurance policy. a. (b) After the finality of the decree of legal separation. even if such designation be stipulated as irrevocable. The action to revoke the donation under this article must be brought within 5 years from the time the decree of legal separation has become final.1. the facts concealed must be material to the risk. entitles the injured party to rescind a contract of insurance. those made between persons who were guilty of adultery or concubinage at the time of the donation. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified. c. insurance policy must specify the interest of the insured in the property insured. 13. ascendants. whether in life or property insurance. if he is not the absolute owner thereof. the party is duty bound to disclose such fact to the other. When the insurer makes inquiry from the insured of the nature or amount of the latter’s insurable interest. (c) The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. Other Pertinent Provisions on Revocation: (a) The termination of a subsequent marriage shall allow the innocent spouse to revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy. 1. whether intentional or not. b. The revocation of or change in the designation shall take effect upon written notification thereof to the insured. 14.
e. in the exercise of ordinary care. because such opinion would add nothing to the appraisal of the application. where they are distinctly implied in other facts which information is communicated Materiality is to be determined not by the events but solely upon the probable and reasonable influence of the facts on the party to whom the communication is due in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. or wholly due to the fault of the agent. general usages of trade. d. c. 4. b. Note: An insured need not die of the very disease he failed to reveal to the insurer. 2. 16. to have made the communication before the making of the insurance contract. despite the good faith of the insured. it was the duty of the agent to acquire and communicate information of the facts in question. a. those which relate to a risk excepted from the policy and which are not otherwise material. 3. will avoid the policy. Note: The insured is under an obligation to disclose not only such material facts as are known to him. entitles the other party to rescind the contract. the other party has no other means of ascertaining the facts concealed. those of which the other knows. but also those known to his agent where: 1. it was possible for the agent. those which prove or tend to prove the existence of the risk excluded by a warranty and which are not otherwise material. 5. Concealment. Neither party is bound to communicate his mere opinion. 1. 2. Neither party to the insurance contract is bound to communicate information on the following matters except in answer to the inquiries of the other: 1. Representation . Waiver of material facts may be: (a) (b) by the terms of the insurance. that which. the other ought to know and of which the former has no reason to suppose his ignorance. b. whether intentional or not. those of which the other waives communication.(d) (e) the party concealing makes no warranty as to the facts concealed. 1. political situation. a. It is sufficient that the non-revelation has misled the insurer in forming his estimate of the disadvantages of the proposed policy or in making his inquiries in order to entitle the insurance company to avoid the contract. even upon inquiry. 15. i. e. in the exercise of reasonable diligence. or by the neglect to make inquiry as to such facts. n Failure on the part of the insured to disclose such facts known to his agent.
will not avoid the contract of insurance. but not afterwards. Right to rescind because of false representation: 1. actual knowledge) The statement of an erroneous opinion. or prior to. 3. b. unless fraudulent. Exceptions: (a) absence of insurable risk (b) (c) (d) (e) (f) 1. (must be susceptible of present. A statement or a promise set forth in the policy or by reference incorporated therein. a. the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. 2. the issuance of the policy. to give information to the insurer and otherwise induce him to enter into the insurance contract. misrepresentation. or of an unfulfilled intention. when before the time for performance of the promissory warranty. gives the right to rescind Incontestable Clause: After a policy of life insurance made payable on the death of the insuredshall have been in force during the lifetime of the insured for a period of 2 years from the date of its issue or of its last reinstatement. whether intentional or not. the issuance of the policy. A representation cannot qualify an express provision in a contract of insurance but it may qualify an implied warranty. c. must be exercised previous to the commencement of an action on the contract (the action referred to is that to collect a claim on the contract) 2. cause of loss is an unexpected risk fraud non-payment of premium violation of conditions relating to naval or military services failure to comply with conditions subsequent to the occurrence of the loss 17. said performance becomes impossible. a loss insured against occurs. Warranties: General Rule: Non-performance of a promissory warranty avoids a contract of insurance. when before the time of the performance of the warranty. or before. the nonfulfillment of which in any respect and without reference to whether the insurer was in fact . the act becomes unlawful. It may be made orally or in writing. b. It may be altered or withdrawn before the insurance is effected. Exceptions: a. A representation as to the future is to be deemed a promise unless it appears that it was merely a statement of belief or an expectation. belief or information.It is a factual statement made by the insured at the time of. 1. It may be made at the time of. when before the time of the performance of the warranty.
Open – the value of the thing insured is not agreed upon. Valued – expresses on its face an agreement that the thing insured shall be valued at a specific sum c. intended to give temporary protection pending the investigation of the risk by the insurer. or until the issuance of a formal policy. renders the policy voidable by the insurer. it is merely a determination of the maximum limit of recovery and not as the value of the policy. 3. 2. Running – contemplates successive insurance which provides that the object of the policy may be from time to time defined especially as to the subject of insurance by additional statements or endorsements n Note: If an amount is written on the face of an open policy. Cover Note: written memorandum of the most important terms of a preliminary contract of insurance. Warranty Representation part of the insurance contract always written on the policy conclusively presumed material must be strictly complied with made by the insured 1. Exception: Where it is merely an acknowledgment on behalf of the company that the latter’s branch office had received from the applicant the insurance premium and accepted the application subject for processing by the insurance company and that the latter will either approve or reject the same.prejudiced by such non-fulfillment. Policy What is a Rider? It is an additional provision in a policy not part of the body of the printed form. whether intentional or not. General Rule: Cover notes bind insurer temporarily pending the issuance of the policy. but is left to be ascertained at the time of the loss b. the insurer is entitled to rescind the contract of insurance. collateral inducement maybe oral or written materiality must be proved requires substantial truth may be made by insurer or insured 1. Kinds of Policies: a. Breach must refer to a material warranty. 18. Note: If there is a breach of warranty. even if the cause of the loss is a different risk. Category Open Policy Valued Policy what needs to be proven in order to be able to claim value of property upon loss value of property is to be ascertained upon loss no need for proof of value of property upon loss value of property upon loss is conclusively stipulated to a specified amount determining value of loss . wholly irrespective of the materiality of such statement or promise.
1. i. the insurer will furnish facts on which the cancellation is based Renewal of the Policies Other than Life: Insurer must mail or deliver to the insured notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages within 45 days before the policy ends. Any condition. when the contract is voidable on account of fraud or misrepresentation of the insurer.. Period for commencing an action against the policy: Within 1 year from the time the cause of action accrues. Exceptions: (a) in case of life or industrial life policy. whenever the grace period applies (b) in case of estoppel Insurer is entitled to payment of premiums as soon as the thing insured is exposed to the perils insured against. or agreement limiting the time to less than 1 year is void. a. . Otherwise.e. from the time of rejection of the claim by the insurer. Grounds for Cancellation of a Policy by the Insurer: For Policies Other than Life: (1) (2) (a) (b) (c) (d) (e) prior notice of the cancellation to insured notice must be based on the ff. Premium General Rule: No policy is binding until the premium thereof has been paid. When insurer entitled to Return of Premiums 1. occurrences after effective date of the policy non-payment of premiums conviction of a crime arising out of acts increasing the hazard insured against discovery of fraud or material misrepresentation discovery of willful or reckless acts or omissions increasing the hazard insured against physical changes in the property insured which results in the property becoming uninsurable (f) determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of the Insurance Code (3) (4) notice must be in writing it must be mailed or delivered to the insured at the address shown in the policy (5) notice must state the ground relied upon and that upon written request of the insured. insured entitled to renew the policy upon payment of the premium due on the effective date of the renewal. stipulation. 19.
existence of several insurers 2. in the course of such rescue. if. c. loss caused by insured’s negligence. e. interest the same 4. Exception: Suicide Clause in Life Insurance: Insurer liable in case insured committed suicide after the policy has been in force for a period of 2 years from the date of its issue or last reinstatement. when by any default of the insured other than actual fraud. where loss is caused by efforts to rescue the thing insured from a peril insured against 4. where the thing insured is rescued from the peril insured against that would otherwise have caused a loss.2. the insurer never incurred any liability under the policy 4. d. in case of over-insurance by several insurers (ratable return of premiums. although a peril not contemplated by the contract may have been the remote cause or even the immediate cause of the loss 2. the existence of which the insured was ignorant without his fault 3. 21. b. e. Double Insurance – exists where the same person is insured by several insurers separately in respect to the same subject and interest Requisites: a. e. the thing is exposed to a peril not insured against. insurer is not exonerated by a loss caused by simple negligence of the insured if the proximate cause of the loss is a peril insured against 5. risk insured against also the same Over Insurance Double Insurance . b. a loss which would not have occurred but for such peril is thereby excepted 3. d. when the insured has become a public enemy and the policy automatically canceled (on the ground of equity) 5. Loss When Insurer is Liable: 1. person insured must be the same 1. where the peril insured against was only a remote cause 2. loss. b. proportioned to the amount by which the aggregate sum insured in all policies exceed the insurable value of the thing at risk) 1. d. where the peril is specifically excepted. a. 20. e. If insured kills himself within a period of 2 years. if it amounts to bad faith General Rule: The insurer is not liable for a loss caused by the willful act of the insured. d. c. Exception to Exception: If suicide is committed in a state of insanity. insurer is not liable. b. which permanently deprives the insured of its possession in whole or in part 3. a. loss caused by the willful act of insured 5. subject matter insured must be the same 3. the insurer is liable. regardless of the time of commission. c. the immediate cause of which is a peril insured against except when the proximate cause is an excepted peril When Insurer Not Liable: 1. where the peril insured against was the proximate cause. 1. loss caused by the connivance of the insured 4. c. when on account of facts.
1.x value of property received = liability of insurer total insurance 1.may be only one insurer insurance covers more than the value of insurable interest must be 2 or more insurers insurance may or may not exceed the value of insurable interest The Code prohibits double insurance without the consent of the insurer. insurer remains the insurer 7. subject matter is the insured risk or liability 3. 2. 4. all the knowledge and information he possesses. b. 4. one who is original insured has no interest in the contract of reinsurance which is independent of the original contract of insurance 6. whether previously or subsequently acquired which are material to the risk Exception: under automatic reinsurance treaties Reinsurance Double Insurance 1. or a manifest intention of the contracting parties to the reinsurance contract to favor the insured. the same interest and risk are insured 9. insured is the party in interest in all contracts . Liability of Insurer: Insurance taken from each insurer ———————————. The original insured cannot recover from this insurance unless there is a specific grant. 5. Reinsurance: A process by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. a. 2. subject matter is property 8. and 2. or assignment of. 5. General Rule: The insurer who obtains reinsurance must communicate: 1. different risks and interests of insured 4. all the representations of the original insured. insurer becomes the insured 2. 3. the reinsurance contract in favor of the insured. there must be consent of original 5. 1. insured has to give his consent 10. 22. 3.
negligent failure of the ship owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions denote nature accidents peculiar to the sea which do not happen by intervention of man nor are to be prevented by human prudence Owner of the Ship has Insurable Interest: 1. . not of the ship Perils of the Sea Perils of the Ship covered by marine insurance not covered by marine insurance damage or losses resulting from: 1. whether it be of the cargo. The goods serve as the principal security. 2. in pursuance of some unlawful or fraudulent purpose. Marine Insurance: insures against perils of the sea. Charter Party: Contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fixed price. a. which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage Charterer has insurable interest in the ship to the extent that he is liable to be damnified by its loss.1. and which are to be sold or exchanged in the course of the voyage. 1. with maritime or extraordinary interest on the account of the maritime risks to be borne by the lender. Loan on Bottomry: Contract in the nature of a mortgage whereby the owner of a ship borrows money for the use. the lender shall resolutely lose his money. Insurable Interest in Marine Insurance: Determined when one will sustain loss from the destruction of the subject matter or derive benefit from its preservation. It has also been defined as a contract by virtue of which the owner or the agent of the vessel for the transportation of goods or persons from one port to another. even when hypothecated by bottomry (only the excess of its value over the amount secured by bottomry) and 2. 23. in the ship even if it has been chartered by one who promises to pay him in value in case of loss (insurer is liable for what insured cannot recover from the charterer). in the freightage. natural and inevitable action of the sea 2. b. or the ship’s furniture or tackle. Barratry: Any willful misconduct on the part of the masters or crew. 3. Loan on Respondentia: Contract akin to that of mortgage made on the goods on board the ship. and pledges the ship as a security for repayment. without the consent of the owners and to the prejudice of the owner’s interest. ordinary wear and tear of a ship. It is stipulated in such a contract that if the ship be lost in the course of the specific voyage or during a specified limited time caused by any of the perils enumerated in the contract. in the hope of saving the rest of the venture. or 3. equipment or repair of the vessel for a definite term. Jettison: Intentional casting overboard of any part of a venture exposed to a peril.
Concealment: In marine insurance. in a Time Policy – commencement of every voyage that must be undertaken b. 3. 1. 3. in a Voyage Policy – commencement of each portion of the voyage Deviation a. b. a departure from the course of the voyage insured b. want of necessary documents e. that the vessel shall not engage in illegal venture c. 1. carriage of his own goods. (b) cargo to be transshipped at indeterminate port – each vessel upon which cargo is shipped is seaworthy at the commencement of each particular voyage b. n Concealment of the following merely exonerates the insurer from the resulting loss therefrom: 1. a. 4. that the ship is seaworthy – complied with if the ship is seaworthy at the time of commencement of risk. 2. 3. nature of the ship b. 2. 5. commencement of an entirely different voyage When is Deviation proper? a. that the vessel shall not deviate from the course of the voyage insured d. where the nationality or neutrality of a ship or cargo is expressly warranted. 3. nature of the service 2. unreasonable delay in pursuing the voyage c. 4. 1. liability to seizure from breach of foreign laws of trade d. 1. or those of others. in a Cargo Policy – commencement of each particular voyage c. 2. it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which may cast reasonable suspicion thereon Seaworthiness depends on: a. nature of the voyage c. when caused by circumstances over which neither the master not the owner of the ship has any control 2. national character of the insured b. except: (a) insurance for a specified length of time – at the commencement of every voyage it undertakes during that time. a. when necessary to comply with a warranty or to avoid a peril whether it is insured against or not . 3. use of false and simulated papers Implied Warranties: a. liability of the thing insured to capture and detention c. in reference to a material fact is material. information or the belief or expectation of a 3 rd person. n Seaworthiness of the vessel is required only at the commencement of the risk n Exceptions: 1. Freightage: Signifies all the benefits derived by the owner. 2.
or a risk which a prudent man would not undertake under the circumstances (d) if the thing insured is cargo or freightage. or both from the real or known risk Abandonment – act of the insured by which. must be total and conditional b. explicit notice d. 2. its cargo. d. 3. Requisites of a Valid Abandonment: a. coupled with actual abandonment . when made in good faith and upon reasonable grounds of belief in its necessity to avoid a peril Loss 1. he declares the relinquishment to the insured of his interest in the thing insured (where the cause of loss is a peril insured against) (a) more than ¾ thereof in value is actually lost or would have been expended to recover it from the peril (b) it is injured to such an extent as to reduce its value by more than ¾ (c) if the thing insured is the ship and the voyage cannot be lawfully performed without incurring an expense of more than ¾ of the whole. Freightage cannot be abandoned unless ship is also abandoned. cargo. after a constructive total loss. b. 4. made within a reasonable time c. and the voyage cannot be performed on another ship procured by the master within a reasonable time and with reasonable diligence to forward the cargo without incurring an expense or a risk as stated above 1. at the port of destination. a. or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded General Average – an expense or damage suffered deliberately in order to save the vessel.3. Constructive Total Loss – gives to the person insured the right to abandon Average – any extraordinary or additional expense incurred during the voyage for the preservation of the vessel. c. Actual Total Loss n a total destruction of the thing insured n the irretrievable loss of the thing by sinking or by being broken up n any damage to the thing which renders it valueless tot he owner for which he held it n any other event which effectively deprives the owner of possession. of the thing insured 1. when made in good faith for the purpose of saving human life or relieving another vessel in distress 4.
2. silence for unreasonable length of time) b. 2. 1. tornado e. it is done within the insured’s control. 1. there must be no fraud on the insured’s part Notice of Abandonment: a. 2. so long as it is confined to the place where it ought to be 2. 5. 6. Fire Insurance Insurer is liable for loss or damage caused by hostile fire (fire that escapes from the place where it was intended to burn and ought to be in) and not that caused by friendly fire (fire which burns in a place where it is intended to burn). and it increases the risk of loss or damage Rules: a. must be explicit c. policy shall not protect the insured from injury consequent upon his negligent use or management of fire. 2. insured must have interest at risk b. Scope of Fire Insurance: a. 1. 3. 3. 4. earthquake f. other allied risks When does alteration in the use or condition entitle the insurer to rescind the contract? a. irrevocable. 1. if it escapes. must specify the particular cause for abandonment d.e. lightning c. need not be accompanied by proof of interest or loss Acceptance of Abandonment a. 2. 1. 2. b. conclusive upon the parties and admits the loss and sufficiency of abandonment c. unless the ground on which it is made is proved to be unfounded If insurer refuses to accept a valid abandonment – liable as upon actual total loss Upon actual abandonment a. fire b. it was made without the insurer’s consent c. 4. freightage earned before loss – belongs to the insurer of freightage b. 2. 1. 3. written notice must be submitted within 7 days from oral notice) b. loss is partial Primage – increase in freightage 24. freightage earned after loss – belongs to insurer of ship Co-insurance: form of insurance in which the person who insures his property for less than the entire value is understood to be his own insurer for the difference which exists between the true value of the property and the amount of insurance Co-insurance applies only where the: a. may be express or implied (i. 3. such alteration violates a provision in the policy b. Requisites for Valid Valuation in the Valued Marine Policy: a. windstorms d. may be oral or in writing (if oral. 1. the insurer is liable . 1. insurance taken is less than the actual value of the thing insured b. 1. even though the insured was negligent.
26. Suretyship – an agreement whereby the surety guarantees the performance of the principal or obligor of an obligation or undertaking in favor of a 3 rd party called the obligee 1. on his surviving a specified period 3. even though it results from an act or even which was intelligently done. by his own hand while insane 2. Limited Payment Life Policy – premiums paid only for a specified period of years. a. b. 2. c. Life Insurance: an insurance in human life and insurance appertaining thereto or connected therewith may be payable: 1. a. a. otherwise. 27. restore the property damaged – contract of insurance is discharged and parties enter into a new contract of insurance 1. contingently on the continuance or cessation of life (b and c refer to endowment or annuities) Uses and Common Kinds of Life Insurance: 1. by unprovoked violence of others Compulsory Motor Vehicle Liability Insurance Persons subject to CMVLI: 1. This does not apply to property damage. by taking poison by mistake 3. b. a. Term Policy – insurer’s liability arises only upon the death of the insured within the agreed term as period. b. unexpected and unusual. Whole Life or Ordinary Policies – here. d. even though such acts were intentionally done 5. the insured agrees to pay annual. even though a fire may remain in its proper place. it may become hostile if it by accident. If the latter survives the period. becomes so extensive as to be beyond control Options of the Insurer 1. semi-annual or quarterly premiums while he lives. the contract terminates and the insurer is not liable . c. e. c. land transport operator or one who is the owner of a motor vehicle or vehicles being used for conveying passengers for compensation (including school buses) No Fault Indemnity Clause: The insurance company shall pay any claim for death or bodily injuries sustained by a passenger or 3rd party without the necessity of proving fault or negligence of any kind subject to certain conditions. The insurer agrees to pay the face value of the policy upon the death of the insured. by ignorance or material pathological conditions 4. Insurer is Liable for death/injury to insured: 1. b.3. by overdoes of drugs administered or taken by mistake. b. c. 25. purchase the property at appraised valuation 2. a. on the death of the insured 2. Casualty Insurance: Any injury that is intended. by unexpected bacterial infection consequent upon doing acts. 1. 3. motor vehicle owner or one who is the actual legal owner of a motor vehicle in whose name such vehicle is registered with the LTO 2.
a. if he dies before that time.4. upon: 1. d. fair and equitable settlement of claims submitted in which liability has become reasonably clear (e) compelling policy holders to institute suits to recover the amount due under its policies by offering with no justifiable reason an amount substantially less than that ultimately recovered in suits brought by them Proceeds of Life Insurance – payable within 60 days after: . a. a. 2. production of evidence of insurability. 28. Life or Endowment Policies Grace Period – 30 days for the payment of any premium due after the first premium has been paid Period of Incontestability – after the lapse of 2 years from the date of issue or date of approval of last reinstatement Reinstatement of Policy – within 3 years from the date of default of premium. 1. The Business of Insurance 1. e. whose ownership is transferred to him with the burden of income 1. and payment of all overdue premiums and any indebtedness to the company upon said policy Exceptions: 1. Life Annuity – debtor binds himself to pay an annual pension or income during the life of one or more persons in consideration of a capital consisting of money or other property. b. Endowment Policy – insurer agrees to pay a certain sum to the insured if the latter outlives a designated period. b. b. the proceeds are paid to the beneficiary 5. if cash surrender value has been paid if period of extension has expired Claims Settlement Unfair Claims Settlement Practices: (a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue (b) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies (c) failing to adopt or implement reasonable standards for the prompt investigation of claims arising under its policies (d) no attempt in good faith to effectuate prompt. 2.
acts. Warehouse Receipt – written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued. 3. on behalf of an insured other than himself. Non-negotiable Receipt – receipt deliverable to a specified person. 1. 1. 1. commission or any other thing of value. and (b) filing of proof of death (upon failure to pay interest. Essential Terms which MUST be embodied in a Warehouse Receipt: . WAREHOUSE RECEIPTS LAW 1. or its available cash assets. Only a warehouseman may issue warehouse receipts. or aids in any manner in soliciting. payable in 90 days) 1. Warehouseman – person lawfully engaged in the business of storing goods for profit. 6. 1. A license is required. 4. is impaired or deficient (e) that the margin of solvency required of each company is deficient Insurance Agent – any person who for compensation solicits or obtains insurance on behalf of any insurance company or transacts for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in negotiating of such insurance. 2. 1. negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance. c. Power of Commissioner to Suspend/Revoke License (a) (b) if insurance contract is in unsound condition if it has failed to comply with the provisions of law or regulations obligatory upon it (c) its conditions or methods of business s such as to render its proceedings hazardous to the public or to its policy holders (d) that its paid up capital stock. Warehouse – a building or place where goods are deposited and stored for profit. 5. or its security deposits.(a) presentation of claims. Negotiable Receipt – receipt deliverable to order or to bearer. Insurance Broker – any person for any compensation. at the rate of 2 times the ceiling prescribed by the Monetary Board unless based on the ground that the rate is fraudulent) Proceeds of Policies other than Life – payable: (a) upon proof of loss (b) upon ascertainment of loss or damage (if not made within 60 days of proof of loss. 1. as the case may be. He must be first licensed as such before doing any acts as insurance agent.
Terms which may be inserted in a Warehouse Receipt: Any other terms except (a) those contrary to the provisions of this Act. location of the warehouse b. the warehouseman is liable on the altered receipt according to its original tenor. 1. The validity of the warehouse receipt is not affected. 8. then the goods delivered for storage become ordinary deposits. otherwise. 4. Duplicate receipts must be so marked. b. g. rate of storage charges 6. Effects of alteration on the liability of the warehouseman: 1. Effect of omission of any of the essential terms: 1. the warehouseman is liable: 1. If the alteration is IMMATERIAL (the tenor of the receipt is not changed). h. b. c. 2. A non-negotiable receipt must be clearly marked non-negotiable or not negotiable. Marks to be made on a warehouse receipt: 1. the warehouseman is liable according to the terms of the altered receipt. date of the issue of the receipt c. 1. The issuance of a warehouse receipt in the form provided by the law is merely permissive and directory and not mandatory in the sense that if the requirements are not observed. a. the warehouseman is held liable for all damages suffered by a holder believing the same to be the original. signature of the warehouseman 8. a. a. 1. the warehouseman is liable on the altered receipt according to its original tenor. may treat it as negotiable. e. b. Such original receipt is uncancelled at the date of the issue of the duplicate. 3. f. (1) to the purchaser of the receipt for value and without notice of the alteration according to the tenor of the altered receipt (2) to the alterer. statement whether the goods received will be delivered to bearer. UNAUTHORIZED but INNOCENTLY MADE. 4. If the alteration is MATERIAL. 2.1. statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien 7. The duplicate is an accurate copy of the original receipt. whether fraudulent or not. (b) those that would impair a warehouseman’s obligation to exercise that degree of care in the safekeeping of the goods entrusted to him 9. or a specified person. The warehouseman shall be held liable for damages to those injured by his omission. or his order 5. Warranties of a warehouseman as to duplicate receipts: 1. a. If the alteration is MATERIAL but AUTHORIZED. description of the goods or packages containing them for identification purposes 7. 2. 1. The negotiability of the warehouse receipt is not affected. otherwise. d. d. consecutive number of the receipt d. c. 3. authorized or not. a. 10. 2. 2. 3. 11. 4. the holder of the receipt who purchased it for value and who supposed it to be negotiable. b. according to the terms of the original receipt . If the alteration is MATERIAL and FRAUDULENTLY MADE.
1. any person lawfully entitled to the possession of the goods may be entitled to delivery without surrender of the receipt. (2) an offer to surrender the negotiable receipt properly endorsed. Persons lawfully entitled to the possession of the goods or his agent: a. (3) a readiness and willingness to sign an acknowledgment that the goods have been delivered if such is requested by the warehouseman. b. provided demand is accompanied with: (1) an offer to satisfy the warehouseman’s lien. the court may order delivery to a person upon satisfactory proof of such loss or destruction and upon proper posting of a bond to protect the warehouseman from any liability or expense which he may incur by reason of the original receipt remaining outstanding. c. Exception: He shall not be liable for any loss or injury which could not have been avoided by the exercise of such care. . A warehouseman is under the obligation to deliver the identical property stored with him and if he fails to do so. 1. Persons to whom goods must be delivered: 1. persons to whom a competent court has ordered the delivery of the goods (1) where a negotiable instrument has been lost or destroyed. a. A. 13. he is liable directly to the owner. the warehouseman is estopped from denying that he has received the goods described in the receipt. Effects of misdescription of goods: 1. If the receipt is nonnegotiable. 12. He shall be liable for any loss or injury to the goods caused by his failure to exercise such care. Exception to the Exception: He may limit his liability to an agreed value of the property received in case of loss. the warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels. Principal Obligations of a Warehouseman: 1. 1. As against a bona fide purchaser of a warehouse receipt. If the description consists merely of marks or label upon the goods or upon the packages containing them. To take care of the goods entrusted to his safekeeping General Rule: A warehouseman is required to exercise such degree of care which a reasonable careful owner would exercise over similar goods of his own. To deliver the goods to the holder of the receipt or the depositor upon demand. 14. a. 2. He cannot stipulate that he will not be responsible for any loss caused by his negligence. according to the terms of the original receipt 1. 3. b.(3) to subsequent purchasers with notice of the alteration.
while in the possession of the warehouseman and covered by a negotiable receipt. to bearer 3. b. 17. 2. B. 1. indorsed in blank by the person whom delivery was promised 1.(2) where more than one person claims title or possession of the goods the warehouseman may require all claimants to interplead. b. c. 1. The court will then order delivery to the person having a better right. a. to the purchaser in case of sale of the goods by the warehouseman to enforce his lien 1. to the purchaser where perishable or hazardous goods are sold at private or public sale If goods are covered by a non-negotiable receipt: 1. the person does not fall under letter B or C above. or 2. 15. d. or its negotiation is enjoined. an attaching creditor – Goods. a. 16. If goods are covered by a negotiable receipt. cannot be attached or levied upon under an execution unless: (I) (ii) the negotiable receipt is first surrendered to the warehouseman. a. C. one who has written authority from letter a 1. to him or order 2. 1. Effects of Misdelivery: The warehouseman shall be liable for conversion to all having a right to property or possession of the goods. or (iii) the receipt is impounded by the court c. or the person falls under letter B or C but prior to delivery. b. b. a person entitled to the delivery by the terms of the receipt. a person in possession of the receipt. When is there Misdelivery? When the warehouseman delivers the goods to a person who is not in fact lawfully entitled to the possession of the goods because: 1. d. the warehouseman had either: (1) been requested by the person lawfully entitled to the delivery not to make such delivery. indorsed to him 4. or (2) had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods 1. the terms of which the goods are deliverable: 1. What happens if there is proper delivery or partial delivery but the warehouseman fails to cancel the receipt or record on the receipt of such partial delivery? .
The different owners become co-owners of the whole mass.1. 1. 1. may protect themselves by obtaining a writ of preliminary injunction and serve the same on the depositor before he has a chance to negotiate the receipt. A warehouseman cannot refuse to deliver goods to the depositor or to a person claiming under him on the ground that adverse title to the goods belongs to a third person. If he makes partial delivery of the goods but fails to record the partial delivery on the receipt then he may still be held liable for the entire receipt to one who purchases for value and in good faith such receipt. The warehouseman having a valid lien against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. Remedies of a Creditor: (the debtor being the owner of the negotiable receipt) Creditors of the depositors. Lawful excuses for refusal to deliver goods: 1. 19. a. d. If goods covered by a negotiable warehouse receipt are delivered by a warehouseman but he fails to take the receipt and cancel it. 2. The warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances as if the goods had been kept separate. 1. c. Effect of Co-mingling of Goods: 1. b. 1. 1. Warehouseman’s Lien . before negotiation. The warehouseman can refuse to deliver the goods if he has acquired title or right to the possession of the goods: (1) directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto. there will be no longer a danger that a 3rd person will be prejudiced so the goods may now be attached. 21. 22. Rules as regards Co-mingling of Deposited Goods: General Rule: A warehouseman may not co-mingle goods belonging to different depositors or belonging to the same depositor for which separate receipts had been issued. 2. The warehouseman will not be required to deliver the goods if such had been lost. Exception: A warehouseman may co-mingle fungible goods of the same kind and grade provided he is authorized by agreement or by custom. 1. b. 23. 20. 1. or (2) from the warehouseman’s lien 1. e. or that the vendor’s lien or the right of stoppage in transit be exercised. a. If someone other than the depositor or person claiming under the depositor has a claim to the title or possession of the goods and the warehouseman has information of such claim. a. Once enjoined. then he is still liable to one who purchases for value and in good faith such receipt. 1. levied upon. But this is without prejudice to liabilities which may be incurred by him due to such loss. If goods have been lawfully sold or disposed of because of their perishable or hazardous nature. 1. the warehouseman shall be excused from liability for refusing to deliver the goods either to the depositor or person claiming under him until he has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead. the warehouseman shall not be liable for failure to deliver the goods. 18. b.
c. Who may negotiate warehouse receipts? a. a. c. insurance. all reasonable charges and expenses for notice and advertisements of sale and for sale of the goods where default has been made in satisfying the warehouse lien Goods Subject to lien: 1. by indorsing it in blank thereby making it deliverable to bearer or 2. there will be a need for indorsement. cooperating and other charges and expenses in relation to such goods 3. the person to whom possession of the receipt was entrusted to by the owner Rights acquired by a person to whom the receipt has been negotiated: a. b. b. all lawful charges for storage and preservation of the goods 2. by filing a civil action for unpaid charges or by way of counterclaim in an action to recover the property from him How is a lien lost? 1. Negotiation and Transfer of Receipts How do we negotiate a receipt deliverable to order? 1. or 2. labor. or b. by refusing to deliver the goods until the lien is satisfied 2. a. b. by special indorsement – which would require further indorsements for further negotiations. the bearer character of the receipt is destroyed and for further negotiation. goods belonging to other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge How is a lien enforced? 1. a. 2. a. 24. But if the instrument is indorsed specially. by causing the extrajudicial sale of the property and applying the proceeds to the value of the lien 3. when the warehouseman wrongfully refuses to deliver the goods when a demand is made with which he is bound to comply 1. all lawful claims for money advances. a. 1. 1. transportation. when the warehouseman voluntarily surrenders possession of the goods without requiring payment of his lien. How do we negotiate a receipt deliverable to bearer? There is no need to indorse for negotiation. the indorsements must be coupled with delivery. In both cases. b. weighing. the owner of the receipt. the title of the person negotiating the receipt over the goods covered by the receipt . interest. b. Extent of Warehouseman’s Lien: A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands for: 1. goods belonging to the depositor who is liable to the warehouseman as debtor whenever such goods are deposited and 2. Physical delivery of the instrument will suffice.
the transferee acquires no additional right. mortgagee or pledgee of goods for which a negotiable receipt has been issued to require the negotiation of the receipt to him. c. he has a right to transfer the title to the goods and that the goods are merchantable A holder for security of a receipt (mortgagee or pledgee) who in good faith accepts payment of the debt from a person does not warrant the genuineness of the receipt not the quality or quantity of the goods therein described. 2. as if the warehouseman directly contracted with him May non negotiable receipts be negotiated? No. 1. he has knowledge that would impair the validity or worth of the receipt and d. not indorsed: 1. even if the receipt is indorsed. b. Rights of a person to whom a non negotiable receipt has been transferred: a. the right to notify the warehouseman of the transfer thereof and c. But if the intention of the parties is that the receipt should merely be transferred. 4. It is the duty of the purchaser. Note: Negotiation takes effect as of the time when the indorsement is actually made. the receipt is genuine b. b. he has a legal right to negotiate or transfer it c. Warranties of a person negotiating or transferring a receipt: a. the warehouseman is not bound to the transferee whose right may be defeated by a levy of an attachment or execution upon the goods by the creditor of the transferor or by a notification to such warehouseman of the subsequent sale of the goods. the right thereafter to acquire the obligation of the warehouseman to hold the goods for him Distinction between a non negotiable receipt from a negotiable receipt with regard to attachment or execution upon goods: Non-negotiable Receipt Negotiable Receipt Prior to notification of the warehouseman by the transferor or transferee. 3. That is why they are called non negotiable receipts. the right to the goods as against the transferor 2. the right to compel the transferor to indorse the receipt. the title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered 3. Rights of a person to whom a negotiable receipt has been transferred. 1.2. a. 2. the title to the goods as against the transferor b. But they may be transferred or assigned by delivery. 3. The goods cannot be attached or levied under an execution unless the receipt be first surrendered to the warehouseman or its negotiation enjoined. the direct obligation of the warehouseman to hold possession of the goods for him. otherwise his failure will have the . the transferee has no right to require the transferor to indorse the receipt.
The indorsement of a warehouse receipt amounts merely to a conveyance by the indorser. The indorsement of a negotiable instrument has a double effect. mortgagor. a bond with the National Grains Authority is required. 1. GENERAL BONDED WAREHOUSE LAW Any warehouseman receiving commodities for (a) storage. for example. The subsequent purchaser must have taken the receipt in good faith and for value. it will always remain so payable regardless of the way it is indorsed. (c) co-mingling must: 1. 2. b. A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he purchases from the owner’s agent within the actual or apparent scope of his authority. an indorser of a receipt shall not be liable to the holder if. a. also an insurance cover is required. c. In sum. If a negotiable instrument is originally payable to bearer. An indorsee even if a holder in due course obtains only such title as the person negotiating has over the goods. When a warehouse receipt is altered. a. Obligations Null and Void 1. payable to bearer. or pledgor in possession of such receipt to make any subsequent negotiation. negotiation is valid despite having been made in breach of trust. obligations payable in gold/foreign currency 2. It is at the same time a conveyance of the instrument and a contract the indorser has with the indorsee that on certain conditions. Exempt Transactions . is indorsed specially. A holder in due course may be able to obtain a title better than that which the party who negotiated the instrument to him had. obtain prior license from the Bureau of Commerce 2. If a warehouse receipt. the warehouseman fails to deliver the goods because they were lost due to his fault or negligence. open to the public. no discrimination allowed 4. liable for double market value should he accept goods in excess of the capacity of warehouse if goods are damaged or destroyed Note: for palay and corn license. Uniform Currency Law 1. (b) milling. Accordingly. it is still valid but it may be enforced only in accordance with its original tenor. same effect as an express authorization on his part to the seller. whether specially or in blank. Distinctions between a negotiable instrument and a negotiable warehouse receipt: Negotiable Instrument Negotiable Warehouse Receipt When a negotiable instrument is altered deliberately. it will be converted into a receipt deliverable to order and can only be negotiated further by indorsement and delivery. the indorser will pay the instrument if the party primarily liable fails to do so. b. file a bond in an amount equivalent to 33 1/3 % of the capacity of the warehouse against which bond depositors may sue directly 3. it becomes null and void. obligations payable in Philippine currency but measured in gold/foreign currency 1. d.
If enterprise not registered. b. a. Permissible – invest in excess of 40% in unregistered enterprise but with prior approval of BOI c. sales. 1. ledger for classifying accounts 4. Absolutely Disqualified to become Merchants 1. c. if one keeps books and the other does not and cannot explain why. guaranty. c. serving penalty of civil interdiction 2. partnership. government to government transactions or with international banking institutions b. This does not apply to deposit. (b) uses a design. b. investment and industrial transactions 3. b. Permitted – one allowed without need of prior authority from the Philippine Government. stock and commercial brokers 5. import and export and other international banking. include book of minutes and stock and transfer book 7. 3. . 1. invest up to extent as not to affect its registered status. in case of conflicts between 2 books – that which s properly kept prevails 3. Pioneer Area – (a) involves manufacturing. administrative. if juridical person. If registered status. c. (d) produces non-conventional fuels/utilizes non-conventional sources of energy (all others are non-pioneer) 4. statement of assets. journal of day to day operations 3. military chiefs 3. Commercial Contracts by Correspondence are perfected from the moment the offeree accepts the offer. agency. production of product not produced at all/produced in non-commercial scale. Probative Value of Merchant’s Book 1. a. e. b. 1. Books a Merchant must keep 1. a. 4. financial. c. a. 3. book of inventories and balances. scheme. 1. investment not to exceed 40%. 2. economic. loan. absolutely disqualified by special laws 5. processing. transactions affecting high priority economic projects c. evidence against merchants themselves 2. liabilities and capital 2. b. insolvent 3. 1. formula that is new and untried in the Phils. 1. (c) agricultural activities/services essential to the attainment of food sufficiency. even before knowledge of said acceptance by the offeror. other proofs can be resorted to 8..1. if both books are properly kept and there is a conflict. d. Relatively Disqualified 1. 2. judicial and prosecuting officials in active service 2. 1. the former prevails 4. forward exchange transactions between banks d. Merchants and Commercial Transactions Classes of Investments: a. government collection agents and custodian of funds 4. copying book for letters and telegrams. a. by special laws cannot trade in specified territories 6. d. d.
firm. must exercise extraordinary diligence Private Carrier – not engaged in the business of carrying. association engaged in the business of carrying or transporting passengers. no common name 3. 9. a. Parties to the Contract of Transportation: 1. water. by the contents of which all disputes which may arise with regard to their execution and fulfillment shall be decided. only one member is ostensible. 4. no exceptions being admissible other than forgery or material errors in the drafting thereof. Carrier/Conductor – one who binds himself to transport persons. things. Common Carrier – person. c. Contributory negligence does not entitle passengers to recover moral/exemplary damages. b. Bill of Lading – written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named or his carrier It is not indispensable to the creation of a contract of carriage. Contract of Transportation – contract whereby a certain person or association of persons obligate themselves to transport persons. a. by land. 3. no juridical personality Transportation Law 1. or to present his own person or those of other or others in the case of transportation of passengers 2. d. event independent of human will b. Joint Account Partnership – business arrangement whereby 2 or more persons interest themselves in the business of another by making contributions thereto and participating in the results thereof 1. 3. requires only ordinary diligence 4. occurrence makes it impossible for debtor to perform in normal manner c. The contract itself arises from the moment goods are delivered by shipper to carrier and the carrier agrees to carry them. or one employed in or engaged in the business of carrying goods for others for hire 1. from one place to another for a fixed price 1. or news. corporation. 1. no public employment. others are silent 2. Requisites of Caso Fortuito 1. 1. things. undertakes to deliver goods/passengers for compensation. Shipper – one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported. . only ostensible partners can sue/be sued 4. b. for compensation. 2. air. 6. goods or both. The function of the Bill of Lading: the legal basis of the contract between the shipper and carrier shall be the bills of lading. debtor free from aggravation/participation d. 1.1. 2. news. impossible to foresee or avoid 5. offering services to the public. as the case may be. a.
ship owner and/or ship agent 2. a. 1. Persons Participating in Maritime Commerce: 1. Liability of Ship owners and Ship agents: 1. pontoons. ergo damages. the ship owner or ship agent is liable. b. a. then he may refuse to accept and make carrier liable for conversion.Carrier’s responsibility starts from the moment he receives unconditionally the merchandise personally or through an agent and lasts until he delivers them actually or constructively to the consignee or his agent. 1. However. There is neither a prescriptive period within which the ship owner can make the abandonment. the obligation is extinguished. whether coastwise or on the high seas. Mere delay in the delivery of goods to consignee does not give right to refuse goods – only breach of contract. If delay is unreasonable. In abandoning the vessel. 7. captain or master 3. civil liability for indemnities in favor of 3 rd persons which may arise from the conduct of the captain in the care of the goods which the vessel carried. Vessels – those engaged in navigation. b. civil liability for contracts entered into by the captain to repair. if the amount claimed were made use of for the benefit of the vessel. Doctrine of Limited Liability – liability of shipowners is limited to amount of interest in said vessel because of the real and hypothecary nature of maritime law such that where the vessel is entirely lost. as well as for the safety of the passengers transported Ship owner/ship agent not liable for the obligations contracted by the captain if the latter exceeds his powers and privileges inherent in his position of those which may have been conferred upon him by the former. 10. there is no procedure to be followed. Exceptions: (1) vessel is not abandoned (2) (3) (4) claims under workmen’s compensation injury/damage due to shipowner’s fault vessel is insured The doctrine also applies for claims due to death or injuries to passengers. c. civil liability for the acts of the captain 2. aside from claims for goods. 9. other officers of the vessel 4. d. He may do so for so long as he is not estopped from invoking the same or do acts inconsistent with abandonment. dredges. equip and provision the vessel. including floating docks. 8. . scows and any other floating apparatus destined for the services of the industry or maritime commerce 1. supercargo 1. provided that the amount claimed was invested for the benefit of the vessel 3. c.
deliberately incurred b. c. Accidents and Damages in Maritime Commerce: 1. a. (b) well-founded fear of seizure. Formalities for Incurring Gross Average: 1. Averages 2. 16. b. there must be a resolution of the captain 3. 17. b. a. c. Arrivals Under Stress 3. there is success 18. 13. b.1. general agent of the ship owner 2. repayable upon arrival at destination 1. 1. 14. Shipwrecks 1. Loan on Bottomry – made by shipowner/ship agent guaranteed by vessel itself. d. a. technical director of the vessels 3. Average: 1. 12. all damages or deterioration which the vessel may suffer from the time it puts to sea at the port of departure until it casts anchor at the port of destination. a. General Average – expenses/damages deliberately caused in order to save the vessel. e. within 24 hours upon arrival at the first port the captain makes. there must be an assembly of the sailing mate and other officers with the captain including those with interests in the cargo 2. 2. with the reasons and motives and the votes for and against the resolution 4. 19. 15. d. (c) by reason of accident of the sea disabling it to navigate . he shall deliver one copy of these minutes to the maritime judicial authority thereat 1. from real and known risk d. Arrivals under Stress – arrival of the vessel at a port not of destination on account of (a) lack of provisions. represents the government of the country under whose flag he navigates 1. 3. 4. all extraordinary or accidental expenses which may be incurred during the voyage for the preservation of the vessel or cargo or both 2. a. 11. b. Loan In Respondentia – taken on security of the cargo repayable upon the safe arrival at cargo destination 1. intended to save vessel and cargo or both c. and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment 1. Roles of the Captain: 1. its cargo or both from a real and known risk Requisites: 1. Simple Average – expenses/damages caused to the vessel/cargo not inured to common benefit and profit of all the persons interested in the vessel and her cargo. Collisions 4. the minutes shall be signed by the parties 5. borne by respective owners 1. the resolution shall be entered in the log book. c.
c. Collision – impact of 2 vessels both of which are moving 21. or such property recovered from actual peril or loss. sailing mate or the complement of the vessel – ship owner liable for the losses and damages (Culpable Fault) 2. c. Allision – striking of a moving vessel against one that is stationary 22. a. 2. without any hope of recovering it. b. 1. 1. a service which one person renders to the owner of a ship or goods by his own labor. 4. 1.When Not Lawful: 1. derelict or recapture. in whole or in part. a marine peril 2. and both shall be solidarily responsible for the losses and damages occasioned to their cargoes (Inscrutable Fault) 23. a permit is required to engage in the salvage business 26. in cases of shipwrecks. success. by running against another vessel or thing at sea or on coast where the vessel is rendered incapable of navigation 25. even if the said movement is wrong. Contract of Towage – contract whereby a vessel usually motorized pulls another from one place to another for compensation. and can look to the salvaged vessel for its crew of the towing ship does not have any interest or rights with the remuneration . risk of enemy not well known or manifest c. defect of vessel due to improper repair d. Cases of Collision: 1. 1. or without any intention of returning it 27. lack of provisions due to negligence to carry according to usage and customs b. 29. a. Derelict – a ship or cargo which is abandoned and deserted at sea by those who are in charge of it. 1. malice. due to the fault. negligence or lack of skill of the captain. Shipwreck – denotes all types of loss/ wreck of a vessel at sea either by being swallowed up by the waves. 1. a. lack of foresight or skill of captain 20. it cannot be determined which of the 2 vessels caused the collision – each vessel shall suffer its own damages. Error in Extremis – sudden movement made by a faultless vessel during the 3 rd zone of collision with another vessel which is at fault. or that the services rendered contributed to such success 28. service voluntarily rendered when not required as an existing duty or from special contract 3. 1. due to fortuitous event or force majeure – each vessel and its cargo shall bear its own damages (Fortuitous) 3. 1. It is a contract of services. b. preserving the goods or ship which the owner or those entrusted with the care of them either abandoned in distress at sea or are unable to protect and secure. 3. Difference between Towage and Salvage: 1. negligence. Salvage Towage crew of salvaging ship is entitled to salvage. no responsibility will fall on said vessel 24. 1. Elements of a Valid Salvage: 1. Salvage – the compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from an impending peril.
Notice of loss. pursuant to the contract tower has no possessory lien. 4. a. contracts for the carriage of goods b. before the court of the domicile of the carrier. the notice must be given within 3 days of delivery. baggage. the carrier shall be discharged from all liability in respect of loss or damage of goods unless suit is brought within 1 year after delivery of the goods or the date when the goods should have been delivered. 3. court where he has a place of business through which the contract has been made. 2. When Applicable: 1. for each passenger – limited to 125. Cancer) 3. Action for damages must be brought at the option of the plaintiff. b.000 francs 2. 1. by sea c. international transport by air 2. or in the case of landing outside an airport. Meaning of Transport by Air – period during which the baggage or goods are in charge of the carrier. c. damage sustained in the event of the death or wounding of a passenger taking place on board the aircraft or in the course of any of the operations of embarking or disembarking 2. court of principal place of business of carrier. or goods Enumeration of causes of action as above stated is not an exclusive list. only an action for recovery of sum of money court has no power to change amount in towage even if unconscionable When Applicable: a. 3. baggage. If the loss or damage is not apparent. a. Warsaw Convention 1. 2. for goods and checked in baggage – limited to 250 francs per kilogram 3. c. 4. for hand carry – limited to 5. 1. (Northwest Airlines vs. loss or damage to any check baggage or goods sustained during the transport by air 3. 1. 2. 1. delay in the transport by air of passengers. Liabilities under the Convention: 1. b. Convention provides for a limitation of liability: 1. a. b. a.000 francs per passenger When can you not avail of this limitation? 1. Notice of Loss or damage must be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery.share salvor takes possession and may retain possession until he is paid court has power to reduce the amount of remuneration if unconscionable Carriage of Goods by Sea Act 1. b. transport of persons. that fact shall not affect or prejudice the right of the shipper to bring suit within the 1 year prescriptive period. d. whether in an airport or on board an aircraft. c. before the court at the place of destination 5. 1. in any place whatsoever 4. 1. . to and from Philippine ports d. if not given. However. either: 1. in foreign trade 1. or goods 2.
The right to damages shall be extinguished if an action is not brought within 2 years from the date of arrival at the destination. control in the Philippines. water. Every person that may own. heat and power and public utility. 1. no action shall lie against the carrier. Public Utility – business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity. transportation. Notice requirement: damage to baggage : within 3 days from receipt damage to goods: within 7 days from receipt delay: within 21 days from receipt Failure to file written notice. shipyard. Notice Requirements: COGSA Code of Commerce Warsaw Convention loss/damage apparent loss/damage not apparent damage of baggage damage of goods delay Public Service Act protest at time of receipt of goods protest within 3 days from delivery protest at time of receipt of goods protest within 24 hours after receipt protest within 3 days from receipt within 7 days from receipt within 21 days from receipt 1. 8. 1. 2. manage. or from the date on which the aircraft ought to have arrived. 6. or from the date on which the transportation stopped. 1. accidental. . for hire/compensation with general/limited clientele whether permanent. 1. telephone or telegraph service.(1) (2) (3) (4) willful misconduct default amounting to willful misconduct accepting passengers without ticket accepting goods without airway bill or baggage without baggage chec 1. and done for a general business purpose any common carrier. gas. 7. save in the case of fraud on his part. operate. electric light. occasional.
De Jure Corporation – corporation formed with all the requirements of law 1. Doctrine of Piercing the Veil of Corporate Entity – it is to disregard for justifiable reasons by the state the fiction of juridical personality of the corporation separate and distinct from the persons composing it 1. 5. 8. Filipino citizenship 2. Corporation by Estoppel – a group of persons which holds itself out as a corporation and enters into a contract with 3rd persons on the strength of such appearance cannot be permitted to deny its existence in an action under said contract 1.1. 5. Distinctions between CPCs and CPCNs Certificate of Public Convenience Certificate of Public Convenience and Necessity any authorization to operate a public service issued by the appropriate government agency an authorization issued by the proper government agency for the operation of public services for which no franchise. 4. Prior Operator Rule – before permitting a new operator to invade the territory of another already established. a. 1. This s a breach of fiduciary relationship. which should have been a transaction undertaken by the corporation. Trust Fund Doctrine – the subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the creditors have the right to look up to satisfy their credits. Requirements of CPC and franchise: 1. If both applicants equal. Doctrine of Corporate Opportunity – a director is made to account to his corporation. 4. De Facto Corporation – corporation defectively formed from a bona fide attempt to incorporate under the existing law and exercises corporate powers 1. public convenience issued by the appropriate government agency to a public service to which any political subdivision has granted a franchise an authorization issued by the proper government agency for the operation of public services for which a franchise is required by law Corporation Law 1. 1. Corporation by Prescription – body not lawfully organized as a corporation but has been recognized by immemorial usage as a corporation with rights and duties maintainable by law (ex. the prior operator must be given an opportunity to extend its service to meet the public needs in the matter of transportation. Prior Applicant Rule – presupposes a situation where two interested persons apply for a CPC in the same community over which no person has yet been granted a CPC to operate. 3. 6. Corporations may not dissipate this and the creditors may sue the stockholders directly for their unpaid subscriptions 1. either municipal or legislative is required by law 1. 7. Voting Shares . c. 3. 2. Roman Catholic) 1. 6. then the applicant who applied first will be given the CPC. b. 1. financial capacity 3. 1. gains and profits from transactions entered into by him/another competing corporation in which he has substantial interest.
13. 9. Exceptions where holders of non-voting shares may vote: 1. But the pledgee/mortgagee may not have voting rights unless stated in the contract and registered in the corporate name. c. The total par value of the stocks subscribed by him should first be paid. Redeemable Shares – expressly provided in articles. b. a. c.) 1. 10. A stockholder who does not pay his subscription is not entitled to the issue of a stock certificate. 15. call. Preferred Cumulative Participating Share of Stock – share entitling its holder to preference in the payment of dividends ahead of common stockholders and to be paid the dividends ahead of common stockholders and to be paid the dividends due for prior years and to participate further with common stockholders in dividend declarations 1. b. Over-issued Stock – stock issued in excess of authorized capital stock. Promotion Stock for Services Rendered Prior to Incorporation Escrow Stock – stock deposited with a 3rd person to be delivered to stockholder/assignor after complying with certain conditions – usually payment of full subscription price 1. A corporation can reacquire stocks in the following cases: . ordinary civil action 3. Chattel mortgage of shares registered with the Registrar of Deeds need not be registered in corporate books to bind third parties because corporate books only cover absolute transfers. 14. c. donation. b. 1. investment of funds in another corporation/another business purpose 8. e. sale/disposition of all/substantially all corporate property 6. 12. etc. d. h. increase/decrease of bonded indebtedness 4. services less than par value. Watered Stock – stock issued gratuitously. dividends where no surplus profits exist 1. Methods of Collection of Unpaid Subscription 1. It is the personal property and may be mortgaged/pledged. delinquency and sale at public auction of delinquent shares 2. money/property less than par value. adoption/amendment of by-laws 3. f. a. collection from cash dividends and other amounts due to stockholders if allowed by by-laws/agreed to by him 1. Founders Shares – given rights and privileges not enjoyed by owners of other stocks. right to vote/be voted in the election of directors shall not exceed 5 years Non-Voting Shares 1. have to be purchased/taken up upon expiration of period of said shares purchased whether or not there is unrestricted retained earnings 3. g. corporate dissolution 1. amendments of articles of incorporation 2. 1. 16. merger/consolidation of corporation 7. Certificate of Stock – written acknowledgment by the corporation of the stockholder’s interest in the corporation. 17. null and void 1. a. a. Preferred Shares – issued only with par value. increase/decrease of capital stock 5.1. given preference in distribution of assets in liquidation and in payment of dividends and other preferences stated in the articles of incorporation 2. 11. Transfer binds the corporation when it is recorded in the corporate books. Treasury Stocks – stocks previously issued and fully paid for and reacquired by the corporation through lawful means (purchase.
exercise of appraisal right 1. d. a. amending articles. state may provide causes for which the privilege may be withdrawn 1.1. purchase delinquent shares 4. treasurer’s affidavit false 4. b. How to organize? 1. Right of Appraisal 1. eliminate fractional shares 2. it acquires juridical personality 1. Acts requiring majority vote of stockholder: 1. b. 21. a. a. a. 25. 20. merger and consolidation 4. amendment. not in prescribed form 2. purpose illegal. enlarging stockholder’s rights/extending. inimical 3. 26. 3. Merger – one corporation absorbs the other and remains in existence while the other is dissolved 1. c. 2. changing. a. c. 24. restricting. 28. non-compliance with required Filipino stock ownership 1. investment of funds in another corporation/for a different purpose 1. merely a privilege. Theory of Special Capacity – the corporation cannot exercise powers except those expressly/impliedly given 1. adoption of by-laws election of Board of Directors election of officers But from issuance of certificate. shortening corporate life 2. a direct participation in management – where his vote is needed to approve certain corporate actions . 18. Concession Theory – a group of persons wanting to create a corporation will have to execute documents and comply with requirements set by the state before being given corporate personality. a. custom and policy. sale/disposition of all/substantially all of corporate assets 3. d. Consolidation – a new corporation is created and the consolidating corporations are extinguished 1. repeal of by-laws 3. Powers of stockholders: 1. d. 23. compensation and other per diems for directors 1. Where similar acts have been approved by the directors as a matter of general practice. b. adoption. b. Theory of General Capacity – a corporation is said to hold such powers as are not prohibited/withheld from it by general law 1. Corporation must organize within 2 years from issuance of certificate of incorporation. c. 19. 27. 22. filing of issue value of no par value share 2. Grounds for Rejection of Registration 1. corporate indebtedness arising from unpaid subscriptions 3. b. c. c. the general manager may bind the company even without formal authorization of the board of directors 1.
Voting Trust Agreement – an agreement between a group of stockholders and trustee for a term not exceeding 5 years in which control over the stocks is lodged in the trustee. The power of removal of directors that may be exercised with or without cause cannot apply to the director representing the minority shareholders. Derivative Suit – brought by a stockholder for and in behalf of the corporation to protect/vindicate corporate rights after he has exhausted intra-corporate remedies Requisites: 1. a. illegal combinations in restraint of trade in fraud 30. b. 1. period not exceeding 5 years 3. d. in writing. This is compulsory if the surplus is equal/or more than the paid-up capital. proprietary rights 4. CA) . The purpose is for controlling the voting. justified by approved expansion projects b. having common cause against the corporation 1.1. 1. prohibited by creditor to declare dividends c. The lawyer who handled the case in the trial court may be considered as trustee for the dissolved corporation with respect to the matter in litigation only even if no appointment was extended to him. cannot be entered into to circumvent the laws against monopolies. b. 1. 35. Individual Suit – one brought to assert a right of a stockholder peculiar to himself 1. 2. 34. c. a. (Selano vs. 36. refusal of corporation to sue c. c. Exceptions: 1. 3. Cumulative voting is a matter of right in a stock corporation. 1. indirect participation in management to vote or remove directors 3. notarized and filed with the SEC and the corporation 2. they can convey their properties to a trustee who can continue the suit beyond the 3 year period. injury to the corporation Although corporations dissolved have 3 years to wind up. Representative Suit – brought by the stockholder in his own behalf and in behalf of other stockholders similarly situated. Cumulative Voting – the number of votes that a shareholder’s number of shares multiplied by the number of directors may give all said votes to one candidate or he may distribute them as he may deem fit. General Rule: If surplus profits exceed the requirements the corporation shall declare dividends. cause of action in favor of the corporation b. it cannot be utilized unless allowed by the by-laws/articles 31. remedial rights 29. He may only be removed with cause. a. retention is necessary under existing circumstances 33. Business Judgment Rule – decisions made by a corporation’s management body shall not be interfered with even by the courts unless such acts are oppressive/unconscionable as to violate the rights of the minority 1. 2. 32. 3. 2. 1. In a non-stock corporation.
trustees. . b. a. incorporated by law giving them legal capacity and advantage 2. b. Close Corporations – one whose articles provide that its shares shall not be held by more than 20 persons. a. In a case filed before dissolution. goodwill. Otherwise. 39. associated with the clergy and consists of 1 person only and his successors. But where the isolated act is not incidental/casual but indicates the foreign corporation’s intention to do other business. a. b. 38. Foreign Corporations 1. 37. c. Isolated. and reputation of a foreign corporation contracts provide that Phil. petition to be declared in a state of suspension of payments Grounds for Suspension/Revocation of Certificate of Registration 1. appointment of directors. the corporation in liquidation would lose what justly belongs to them/be exempt from payment of obligations because of a technicality. Religious Corporations 1. original and exclusive jurisdiction (1) fraudulent devices and schemes employed by directors detrimental to public interest (2) intra-corporate disputes and with the state in relation to their franchise and right to exist as such (3) (4) controversies in the election. Corporation Sole – special form of corporation. Instances when unlicensed foreign corporations can sue: (1) (2) (3) isolated transactions action to protect good name. occasional or casual transactions do not amount to engaging in business. Courts will be venue to controversies (4) license subsequently granted enables foreign corporation to sue on contracts executed before the grant of the license (5) (6) recovery of misdelivered property where the unlicensed foreign corporation has a domestic corporation 1. Non-stock Corporation – one where no part of its income is distributable to its members and shall be used in furtherance of the purpose of which it was organized 1. etc. said single act constitutes engaging in business in the Philippines 2. Doing Business – continuity of commercial dealings incident to prosecution of purpose and object of the organization. SEC Jurisdiction 1. 1. its issued stock shall be subject to one or more restrictions on transfer and shall not be listed in any stock exchange/make public offering 3. it may continue even beyond the 3 year period until final determination of litigation.
General Rule: All securities before being offered for sale/actual sale to the public must first be registered and have the proper permit. 2. 1. violated code/ SEC rules. exempt securities securities emanating from exempt transactions Exempt Securities a. 2. 3. engages in fraudulent transactions . judicial sale by execution. 3. sale of pledged property/foreclosed property to liquidate an obligation c. b. issuer/registrant insolvent. 4. a. 1. 7. 6. issued by building and loan association e. stock transfers emanating from mergers and consolidations e. 1. 1. issued by the government subdivisions/instrumentalities b. pension plans regulated by BIR/Insurance Commission Exempt Transactions a. pre-incorporation subscription f. 1. 4. 2. securities issued by public service operator to broaden equity base Grounds for Rejection of Registration a. Exception: 1. issued by receiver/trustee of an insolvent approved by the court d. application incomplete/untruthful/omits to state a material fact b. etc. 2. issued by foreign government which the Philippines has diplomatic relations c. in insolvency b. policy of insurance issued by insurance corporation supervised by the insurance commission g. 1. 2. issued by receiver/trustee of an insolvent approved by the court f. 6. isolated transactions on securities done by owner/agent d. 1. 8. security/right/interest in real property including subdivision lot/condominium supervised by the Ministry of Human Settlements h. 5. 4. 3. 5.(1) (2) (3) (4) (5) (6) (7) fraud in procuring registration serious misrepresentation as to objectives of corporation refusal to comply with lawful order of SEC continuous inoperation for at least 5 years failure to file by-laws within the required period failure to file reports other similar grounds Revised Securities Act (Material on the Securities Regulation Code of 2000 to follow) 1.
addresses and dissertations. any idea. . c. e. works of the government c. fraudulent transaction 4. d. news reporting. dishonesty by issuer/misrepresented prospectus 5. violated of Code/SEC rules 3. f. e. artificial measures of price control 4. b. teaching. or mere data as such. sermons. 3. stockholders of issuers is disqualified 5. e. issue would prejudice the public 1. 2. a. administrative or legal nature as well as any official translation thereof b. d. a. illustrated or embodied in a work. rules. pronounced or rendered in courts of justices or nay administrative agencies in deliberative assemblies and meetings of public character Fair Use of a Copyrighted Work is not Infringement a. b. discovery. reports Secrecy if Back Deposits 1. d. d. system. anti-graft cases 6. and similar purposes 2. may not be inquired into by any person. even if they are expressed. comment. a. officer. for criticism. concept. 1. deposit is subject of litigation 5. g. insider trading 6. except: 1. lectures.3. explained. 6. general and special examination of bank order of the Monetary Board of bank fraud or serious irregularity 7. 4. principle. does not conduct business in accordance with law 1. 1. fraudulent transactions 5. research. 1. What Works are not Protected: a. procedure. b. c. if depositor agrees in writing 2. news of the day or other miscellaneous facts. and regulations of government agencies and offices d. Grounds for Revocation 1. by court order in cases of bribery and dereliction of duty against public officials 4. impeachment cases 3. c. Acts Prohibited 1. c. f. communications. issuer insolvent 2. e. false prospectus. method or operation. speeches. issuer’s business not sound 4. re-examination made by an independent auditor hired by a bank to conduct its regular trust Laws on Intellectual Creation Copyright 1. statutes. 1. including government banks. manipulation of security prices 2. having the character of mere items of press information. or any official text of a legislative. Deposits in banks. manipulation of deceptive devices 3. director. scholarship. 5. 1.
b. 1. including legal costs and other expenses. b. a. subsidiary imprisonment in cases of insolvency 1. as he may have incurred due to the infringement as well as the profits the infringer may have made due to such infringement 3. in the absence of proof to the contrary. actual damages. Presumption of copyright in the work of other subject matter to which the action related 2. 5.000 to P1. d. Prescription: No damages may be recovered after 4 years from time the cause of action arose. a. performances not incorporated in recordings: 50 years from end of year in which the performance took place 3. d.000 for the first offense 2. imprisonment of 6 years and 1 day to 9 years plus fine of P500. b. 4. This is applicable even if the name is a pseudonym. 1. effect of use upon the potential market for a value of the copyrighted work Terms of the Protection 1. b. b. d. destruction of all infringing copies and/or devices 5. Plaintiff is presumed to be the owner of the copyright 3. imprisonment of 3 years and 1 day to 6 years plus fine ranging from P150. 6. nature of the copyrighted work 3. including whether such use is of a commercial nature or for no profit or educational purposes 2. a. c. Patents . a. The natural person whose name is indicated on a work in the usual manner as the author shall. purpose and character of the use.000 to P500.000 for the 2nd offense 3. Presumptions: 1. injunction 2. be presumed to be the author of the work. decompilation: the reproduction of the code and translation of the forms of the computer program with other programs Factors to Consider in Determining Fair Use: 1. moral and exemplary damages Criminal Penalties 1. c.000 to P150. 7.1. 8. c. c. 3. broadcasts: 20 years from the date the broadcast took place Remedies for Infringement 1. a. 1. 2. imprisonment of 1 to 3 years plus fine of P50. sound or image and sound recordings and performances incorporated therein: 50 years from end of the year in which the recording took place 4.000 for the 3rd/subsequent offenses IN ALL CASES. e.000. copyrighted work: lifetime of creator plus 50 years after death (to be computed on st the 1 day of January of the year following the death) 2. b. c. where the pseudonym leaves no doubt as to the identity of the author. 1. impounding of articles during pendency of the action 4. amount and substantiality of the portion used in relation to the copyrighted work as a whole 4.
or 2. aesthetic creations contrary to public order or morality Requisites of Patentability 1. 7. that the applicant and the inventor identified in both applications are not one and the same 1. 6. it is not obvious to a person skilled in the art at the time of the filing date of priority date of the application claiming the invention 1. d. the right of the patent belongs to the person who has the earliest filing date or the earliest priority date . 1. f. and programs for computers 3. an invention is not considered new if it forms part of a prior art. anything which has been made available to the public anywhere in the world before the filing date or the priority date of the application. the whole contents of an application for a patent. or where 2 or more applications are filed for the same invention. b. involves an inventive step. Non-Patentable Inventions 1. the right to the patent belongs to the person who filed an application for such invention. Novelty The novelty requirement in the Code is absolute.1. A prior art consists of: 1. 2. is industrially applicable 1. plant varieties or animal breeds or essentially biological process for the production of plants and animals Exception: micro-organisms and non-biological and micro-biological processes 1. new. 2. discoveries. involve an inventive step and is industrially applicable shall be patentable. Industrial Applicability – an invention is considered industrially applicable if it can be produced and used in the industry 1. c. 4. if having regard to the prior art. 1. provided that the application which has validly claimed the filing date of an earlier application (priority date) is prior art with effect as of the filing date of such earlier application. b. a. 3. Inventive Step – an invention involves an inventive step. a. Thus. novelty 2. methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal body Exception: products and composition for use in any of these methods 1. 3. playing games or doing business. a. schemes. b. The First-to-File System – if 2 or more persons have made the invention separately and independently of each other. e. or process or an improvement of any of the foregoing. with a filing or priority date that is earlier than the filing or priority date of the application. 5. utility model. c. and provided further. Patentable Inventions – any technical solution of a problem in any field o human activity that is new. published in the IPO gazette. rules and methods of performing mental acts. scientific theories and mathematical methods 2. or industrial design registration. It may be or may relate to as product. filed or effective in the Philippines. 1.
as long as a patent on the same creation has already been published anywhere in the world. c. b. a. prosecute the application as his own application in place of the original applicant file a new patent application in respect of the same invention request that the application be refused or seek the cancellation of the patent. as long as you do not copy your own creation. Cancellation proceedings may be filed at any time during the term of the patent. Non-Prejudicial Disclosure The disclosure of information contained in the application during the 12 months preceding the filing date or the priority date of the application shall not prejudice the applicant on the ground of lack of novelty if such disclosure was made by (a) inventor. 3. expanding the rights of the inventor to institute cancellation proceedings for the duration of the term of the patent. 9. Originality in Copyright – even if there is same creation. where public interest. 4. a. Term of Patent – 20 years from the filing date of the application 1. d. the patent is granted to the inventor who filed his patent application earlier than others thus simplifying the determination of who is entitled to own the patent. No access to the previous creation is a defense. health or the development of other vital sectors of the national economy as determined by the appropriate agency of the government so requires 3. 2. (b) a patent office and the information was contained 1. you cannot claim novelty. 1. c. 11. giving the inventor inchoate rights against an infringer after the publication of the application and before the grant of the patent and 3. The First-to-File System increases the rights of the inventor by: 1. b. No access tot he other creation is no defense. national security. a. national emergency or other circumstances of extreme urgency 2. if one has already been issued What is the difference between novelty in patents and originality in copyright? Novelty in Patents – even if you do not know of any previous creation. Under this system. 1.Under this system. Grounds for Compulsory Licensing: 1. b. it is still considered an original creation. the applicant declared by final court order as having the right to the patent may: 1. guaranteeing the confidentiality of the application prior to its publication 2. 10. where a judicial or administrative body has determined that the manner of exploitation by the owner of the patent or his licensee is anti-competitive . c. 8.
4. d. in case of public non-commercial use of the patent by the patentee, without satisfactory reason 5. e. if not being worked in the Philippines on a commercial scale 1. 12. In case of Compulsory Licensing of Patents involving Semi-conductor Technology, the license may be granted only in case of public non-commercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive 1. 13. Utility Models – an invention qualifies for registration as a utility model if it is new and industrially applicable
- no inventive step required for registration - no search and examination required
1. 14. Term Protection – 7 years after the filing date of application without possibility of renewal 1. 15. Industrial Design – any composition of lines or colors or any 3 dimensional form, whether or not associated with lines or colors
Industrial Designs essentially dictated by technical or functional considerations to obtain a technical result or those that are contrary to public order, health or morals shall not be protected
1. 16. Term of Protection – 5 years from filing date of application, renewable for not more than 2 consecutive periods of 5 years each
1. 1. Distinguish Suspension of Payment and Insolvency
Suspension of Payment
debtor has enough assets to meet liabilities but cannot meet them as they fall due always initiated by debtor
debtor has more liabilities than assets initiated by creditors/other persons if involuntary; initiated by debtor if voluntary
1. 2. Fraudulent Preference – any act of insolvent which gives rise/has tendency to give preference to a creditor to the assets of the insolvent prejudicial to the right of other creditors of said insolvent 1. 3. Effect on Actions Upon Adjudication of Insolvency 1. a. suits pending in court
(1) (2) (3)
secured obligations suspended until assignee appointed unsecured obligations terminated except to fix amount of obligation foreclosure suits pending continue
suit not yet filed – cannot be filed anymore, but claims may be presented to assignee Debts and Obligations not Affected by Discharge of Insolvent
1. b. 1. 4.
1. 2. 3. 4. 5. 6.
a. b. c. d. e. f.
assessments due to national and local government debts due to fraud/embezzlement debts in which he is bound solidarily alimony corporate debts debts not included in the schedule submitted by debtor
Chattel Mortgage Law
1. 1. The law primarily governs chattel mortgage. Provisions on pledge of NCC in so far as not in conflict with CML also govern chattel mortgages. 1. 2. Chattel Mortgage may be rescinded for being in fraud of creditors. 1. 3. Growing fruits are covered by chattel mortgage but they may not be pledged. 1. 4. Machinery placed on plant or building owned by another can be the object of chattel mortgage. 1. 5. General Rule: Chattel Mortgage cannot cover debts subsequently contracted. 1. 6. Rules: Chattel Mortgage cannot cover debts subsequently contracted 1. a. registered in place where mortgagor resides and where property (chattel) is located. If mortgagor resides abroad, register in place where property is located. 2. b. Motor Vehicles: register also in Land Transportation Office 3. c. Shares of Stock: place of domicile of corporation and shareholder. No need for notation in books of corporation 4. d. Vessels: Phil. Coastguard 1. 7. To be valid against 3rdpersons: 1. a. affidavit of good faith 2. b. contract must be registered 1. 8. General Rule: In Chattel Mortgage, there is recovery of deficiency judgment.
Exception: when Recto Law applies
1. 9. Requisites of CML: 1. a. constituted to secure the fulfillment of principal obligation 2. b. mortgagor is absolute owner of the thing mortgaged 3. c. persons constituting the mortgage have the free disposal of the property and in the absence thereof, they be legally authorized for the purpose 4. d. recorded to bind 3rd persons 1. 10. Formal Requisites of CM: 1. a. substantial compliance with form in Sec. 5 of CML 2. b. signed by at least 2 witnesses 3. c. must contain an affidavit of good faith 4. d. certificate of oath (notarial acknowledgment) 1. 11. Affidavit of Good Faith – where the parties severally swear that the mortgage is made for the purpose of securing the obligation specified and for no other purpose and that the same is a just and valid obligation and not one entered into for fraud
- property given in CM must be described to enable the parties or any other person after reasonable inquiry and investigation to identify it
1. 12. Future property may not be covered by CM but when such property is a:
1. a. renewal of, or in substitution for goods on hand when the mortgage was executed, or 2. b. purchased with proceeds (not of your own money) of said goods, said property may be covered by CM 1. 13. Criminal Acts – removal of chattel to another city or province without written consent of mortgagee, selling property already pledged, or mortgaged without written consent of mortgagee 1. 14. A chattel mortgage may be foreclosed judicially or extra-judicially, in the latter case, before a notary or sheriff, or creditor or mortgagee when stipulated, even without need of notice (when mortgagee forecloses)
15. Pactum Commissorium applies to Chattel Mortgage.
Reference: Commercial Law Memory Aid Ateneo Central Bar Operations 2001
Posted in Commercial Law Leave a Comment Tags: Commercial Law Reviewer - Ateneo
Addendum to Sectrans
DEC 19 Posted by Magz
ADDENDUM TO SECTRANS PROVISIONS COMMON TO PLEDGE AND MORTGAGE (Art 2085-2123) PLEDGE (definition) – A contract by virtue of which the debtor delivers to the creditor or to a third person a movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions. Essential Requisites to Contracts of Pledge and Mortgage
1. constituted to secure the fulfillment of a principal obligation 2. pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged 3. the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose 4. cannot exist without a valid obligation 5. when the principal obligation becomes due, the thing in which the pledge or mortgage consists may be alienated for the payment to the creditor. third persons not parties to the principal obligation may secure the latter by pledging or mortgaging their own property but may be constituted to secure fulfillment of a voidable or unenforceable or natural obligation
5. thing pledged or mortgaged may be alienated. as a general rule. creditor not required to sue to enforce his credit 8. subsidiary – obligation incurred does not arise until the fulfillment of the principal obligation Cause or Consideration in Pledge 1. 3. creditor cannot appropriate to himself the thing nor can he dispose of the same as owner. creditor is merely entitled to move for the sale of the thing pledged or mortgaged with the formalities required by law in order to collect 2. mortgage of a conjugal property by one of the spouses is valid only as to ½ of the entire property 4. compensation stipulated for the pledge or mere liberality of the pledgor – if pledgor is not the debtor Important Points: 1. the thing pledged must be delivered to the creditor or to a third person by common agreement in case of mortgage. in case of property covered by Torrens title a mortgagee has the right to rely upon what appears in the certificate of title and does not have to inquire further. . Legal . real – perfected by delivery 2. 7.created by operation of law Characteristics of Pledge: 1. or by common consent to a 3rd person Not valid against 3rd persons unless a description of the thing pledged and the date of the pledge appear in a public instrument Constituted on immovables Delivery not necessay Not valid against 3rd persons if not registered Right of Creditor where Debtor fails to Comply with his Obligation 1. the mortgagor retains he possession of the property mortgaged Kinds of Pledge: 1. pledgor or mortgagor has free disposal of property 6. unilateral – creates obligation solely on the part of the creditor to return the thing subject upon the fulfillment of the principal obligation 4. principal obligation – in so far as the pledgor is concerned 2. pledge or mortgage executed by one who is not the owner of the property pledged or mortgaged is without legal existence and registration cannot validate it. accessory – has no independent existence of its own 3. future property cannot be pledged or mortgaged 2. in case of pledge. Voluntary or conventional – created by agreement of the parties 2. pledgor or mortgagor may be third person PLEDGE MORTGAGE Constituted on movables Property is delivered to the pledgee.
6. there should be a stipulation for an automatic appropriation by the creditor of the property in the event of nonpayment 3. promise to assign or sell said property in payment of the obligation if. subsequent voluntary act of the debtor making cession of property in payment of the debt 3. there should be a pledge or mortgage 2. estafa is committed by a person who. 3. authorizing the mortgagee to take possession of the mortgaged premises upon the foreclosure of a mortgage 5. 3.stipulation where thing or mortgaged shall automatically become the property of the creditor in the event of nonpayment of the debt within the term fixed 2. be they pure or subject to a suspensive or resolutory condition a promise to constitute pledge or mortgage creates no real right. . sell. Creditor does not have to divide his action by distributing the debt. 2. debtor-owner bears the risk of loss of the property pledge or mortgage is indivisible: every portion of the property is answerable for the whole obligation when several things are pledged or mortgaged. subsequent modification of original contract by agreement of parties 2. if after the first and second auctions. all of them are liable for the totality of the debt. the thing is not sold Important Points: 1. upon its maturity. stipulation is null and void . 4. among the various things pledged or mortgaged the debtor’s heir who has paid a part of the debt cannot ask for the proportionate extinction of the pledge or mortgage nor can the creditor’s heir who has received his share of the debt return the pledge or cancel the mortgages if the debt is not yet completely satisfied EXCEPTIONS to the rule of INDIVISIBILITY: where each one of several things guarantees determinate portion of credit where only portion of loan was released where there was failure of consideration rule that real property. and not to foreclosure of mortgages the mere embodiment of a real estate mortgage and a chattel mortgage in one document does not have the effect of fusing both securities into an indivisible whole contract of pledge or mortgage may secure all kinds of obligation. applies to sales in execution. Requisites of pactum commissorium: 1. 7. consisting of several lots should be sold separately.Prohibition against pactum commissorium 1. shall convey. Effect on Security Contract -nullity of the stipulation does not affect validity and efficacy of the principal contract. 1. Permissible Stipulations with regard to pactum commissorium: 1. encumber or mortgage the same knowing that the real property is 3. 1. 2. it is not paid 4. 4. pretending to be the owner of any real property. 5. only a personal right biding upon the parties. 2. only right of action to compel the fulfillment of the promise but there is no pledge or mortgage yet under RPC.
transfer of possession to the creditor or to third person by common agreement is essential in pledge . 4. or misuse the thing. may use the thing if it is necessary for the preservation of the thing may either claim another thing in pledge or demand immediate payment of the principal obligation if he is deceived on the substance or quality of the thing. dividends or interest earned or produced by the thing pledged to the payment of the interest. delay or violation of the terms of the contract. 3. or defend it against a 3rd person cannot use the thing without the authority of the owner. 1. all movables within commerce of men may be pledged as long as susceptible of possession incorporeal right. warehouse receipts . 6. 2.and similar documents may be pledged. cannot deposit the thing pledged with a third person. 9. bills of lading. 11. The instruments pledged shall be delivered to the creditor and if negotiable. 3.encumbered shall dispose of the same as unencumbered. must be indorsed. 2. the owner may ask that it be judicially or extra-judicially deposited. 10. 1.ACTUAL DELIVERY is important . their offsprings are included in the pledge. 5. and not due to fortuitous event may bring the actions which pertain to the owner of the thing in order to recover it from. negligence. 4. income . evidenced by: negotiable instruments. and if he should do so. 7. and thereafter to the principal of his credit. . shares of stock. pledge shall take effect against 3rd persons only if the ff appears in a public instrument: description of the thing pledged date of the pledge shall take care of the thing pledged with the diligence of a good father of a family. Provisions Applicable Only to Pledge 1. Unless there is stipulation to the contrary. 8. 6. has no right to use the thing or to appropriate the fruits without the authority of the owner can apply the fruits. 4.CONSTRUCTIVE delivery or symbolic delivery of the key to the warehouse is sufficient to show that the depositary appointed by common consent of the parties was legally placed in possession. 5. 2. unless there is a stipulation authorizing him to do so is responsible for the acts of his agents or employees with respect to the thing pledged. It is essential that fraud or deceit be practiced upon the vendee at the time of the sale. has the right to the reimbursement of the expenses made for its preservation is liable for its loss or deterioration by reason of fraud. 3. bonds. the interest and earnings of the right pledged and in case of animals.
the debt is due and unpaid the sale must be at a public auction there must be notice to the pledgor and owner. pledgor : Extinguishment of Pledge If the thing pledged is returned by the pledgee to the pledgor or owner. contract of pledge gives right to the creditor to retain the thing in his possession or in that of a third person to whim it has been delivered. and the sale must be made with the intervention of a notary public the th The pledgee may appropriate the thing if after the first and second auctions. pledgee: 9. without fault on his part. as far as the pledgor or owner is concerned. is allowed to substitute the thing which is in danger of destruction or impairment without any fault on the part of the pledgee. until the debt is paid 7. the pledgor or owner may bid. Effect of the Sale of the Thing Pledged 1. Pledgor or owner shall have a better right if he should offer the same terms as the highest bidder Pledgee may also bid. butt he latter shall continue in possession 6. BIDS MUST BE FOR CASH. All bids at the public auction shall ofer to pay the purchase price at once. 13. there is prima facie presumption that the thing has been returned by the pledgee If the thing is in the possession of 3rd person who has received it from the pledgor or owner after the constitution of the pledge.12. stating the amount due. pledge is extinguished A statement in writing by the pledgee that he renounces or abandons the pledge is sufficient to extinguish. the thing is not sold. unless and until he has paid the debt and its interest. 14. extinguishes the principal obligation whether the price of the sale is more or less than the amount due . the thing is in the possession of the pledgor or owner. may require that the thing be deposited with a 3rd person if through the negligence or willful act of the pledgee the thing is in danger of being lost or impaired 5. creditor : 8. the pledgee becoming a depositary. neither the acceptance by the pledgor o owner. The proceeds of the auction shall be a security for the principal obligation. cannot ask for the return of the thing against the will of the creditor. the pledgee is deemed to have received the purchase price. there is danger of destruction. with another thing of the same kind and quality 16. nor the return of the thing pledged is necessary. If any other bid is accepted. 4. 3. At the public auction. impairment or diminution in value of the thing. Formalities required Sale by a Creditor if credit not paid in due time: 1. with expenses in a proper case 15. may cause public sale of the thing pledged if. has the responsibility for flaws of the thing pledged. there is prima facie presumption that the thing has been returned by the pledgee. but his offer shall not be valid if he is the only bidder. thing pledged may be alienated by the pledgor or owner only if with the consent of the pledgee. For t his purpose. 2. Ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation. If subsequent to the perfection of the pledge.
the debtor is not entitled to the excess unless the contrary is provided 3. REAL MORTGAGE (Arts. Objects of Real Mortgage 1. Useful expenses shall be refunded only to the possessor I n good faith with the same right of retention. but only possessor in good faith may retain the thing until he has been reimbursed. Any third person who has any right in the thing may satisfy the principal obligation as soon as the latter becomes due and demandable. (art 1914) 3. no more shall be sold. Provisions of the Civil Code shall apply subsidiarily. neither is the creditor entitled to recover the deficiency. Special Laws apply to pawnshops and establishment which are engaged in making loans secured by pledges. The right of choice given to the pledgee as to which of the things pledged he shall cause to be sold is limited only by stipulation. specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated. He has the same as a guarantor and he cannot be prejudiced by any waiver of defense by the principal obligor Legal Pledges: 1. imposed upon immovables * future property cannot be object of mortgage. Important Points: 1. the mortgagor retains possession of the property he may deliver said property to the mortgagee without altering the nature of the contract of mortgage. the pledgee shall promptly advise the pledgor or owner of the result. if the price of the sale is less. After public auction. As a general rule. After sufficient property has been sold to satisfy the obligation plus interest and expenses. alienable real rights in accordance with the laws. (art 1731) 2. the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired and by reason thereof (art 546) 1.2. . He who has executed work upon a movable has a right to retain it by way of pledge until he is paid. Necessary expenses shall be refunded to every possessor. immovables 2. if the price is more than amount due. The agent may retain the things which are the objects of agency until the principal effects the reimbursement and pays the indemnity. 2124-2131) – It is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation. A 3rd person who is not a party to the principal obligation may secure the latter by pledging his own property. Contrary stipulation is void. The laborer’s wages shall be a lien on the goods manufactured or the work done (art 1707).
creates real rights. legal 3. equitable – one which. 1454. mortgage deed remains as evidence of a personal obligation Effect of Mortgage: 1. Mortgagee entitled to registration of mortgage as a matter of right Proceedings for registration do not determine validity of mortgage or its effect Registration is without prejudice to better right of third parties Mortgage deed once duly registered forms part of the records for the registration of the property mortgaged 5. pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged 3. . 1450. appears in a public document duly recorded in the Registry of Property to be validly constituted *legal mortgage – the persons in whose favor the law establishes a mortgage have on other right than to demand the execution and the recording of the document in which the mortgage is formalized. 1602. 6. creates merely an encumbrance Extent of Mortgage a. cannot exist without a valid obligation 5. 1603. and in the absence thereof. the persons constituting the pledge or mortgage have the free disposal of their property. or that the interest as compensation for the use of the principal and the enjoyment of its fruits be in the form of a certain percent thereof. 2. a lien inseparable from the property mortgaged. that they be legally authorized for the purpose 4. voluntary 2. Mortgage by surviving spouse of his/her undivided share of conjugal property can be registered. Essential Requisites of Mortgage 1. principal obligation remains valid 2. constituted to secure the fulfillment of a principal obligation 2. 1604 and 1607). when the principal obligation becomes due. Effect of Invalidity of Mortgage on principal obligation: 1. the thing in which the pledge or mortgage consists may be alienated for the payment to the creditor. Incidents of Registration of Mortgage 1. It is not an essential requisite that the principal of the credit bears interest. Kinds of Mortgage: 1. the natural accessions b.to the improvements. although it lacks the proper formalities of a mortgage shows the intention of the parties to make the property as a security for a debt (provisions governing equitable mortgage – arts 1365.2. enforceable against the whole world 2. 4. 3.
2. May be availed of by bringing an action in the proper court which has jurisdiction over the area wherein the real property involved or apportion thereof is situated 2. extrajudicial both should be distinguished from execution sale which is governed by Rule 39 of the Rules of Court Judicial Foreclosure (governed by Rule 68 of Rules of Court) 1. 1. Stipulation is necessary for mortgage to secure future advancements Mortgage is a continuing security until the full amount of advances are paid. 5. e. Alienation or assignment is valid even if not registered. Registration is necessary only to affect 3rd persons. the court.It is the remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given. in whole or in part. New Civil Code PD 1952 Revised Administrative Code RA 4882 . f. . 2. Kinds of Foreclosure 1. the rents or income not yet received when the obligation becomes due. judicial 2. Laws governing Mortgage: 1. Stipulation forbidding the owner from alienating the immovable mortgaged shall be void. c. a. 4. Mortgage credit may be alienated or assigned to a third person. in virtue of expropriation for public use. whether the estate remains in the possession of the mortgagor. shall order the property to be sold to the highest bidder at a public auction. growing fruits 2. 3.1. If the mortgagor fails to pay at time directed. Important Points: 1. If the court finds the complaint to be well-founded. to the amount of the indemnity granted or owing to the proprietor from the insurers of the property. upon motion. as regards aliens becoming mortgages Foreclosure of Mortgage . 4. Stipulation in mortgage contract including after-acquired properties is valid. amplifications and limitations established by law. Creditor may claim from a 3rd person in possession of the property the payment of the part of the credit secured by the property 6. with the formalities required by law. with the declarations. 3. or it passes into the hands of a third person. Attachment of lien is retroactive 3. it shall order the mortgagor to pay the amount due with interest and other charges within a period of not less than 90 days nor more than 120 days from the entry of judgment.
and 2. The proceeds of the sale shall be applied to the payment of the: a. 4. survives death of mortgagor Extrajudicial Foreclosure (governed by Act No. 6. 1. Right of Mortgage to Recover Deficiency 1. . Where there is right to redeem a. Action to recover prescribes after 10 years from the time the right of action accrues. foreclosure is only the result or incident of the failure to pay debt 3. express authority to sell is given to the mortgagee. as amended) 1. 2. Costs of the sale. if any shall be paid to the mortgagor 7. Property may be sold for less than its fair market value upon the theory that the lesser the price the easier for the owner to redeem.Amount due the mortgagee.4. Before the confirmation. 4. also upon motion. an ancillary stipulation 3. the court retains control of the proceedings. a prerogative of the mortgagee Note: Stipulation of upset price in mortgage contract is void. Nature of Power of Foreclosure by Extrajudicial Sale 1. Mortgagee is entitled to recover deficiency If the deficiency is embodied in a judgment. authority is not extinguished by death of mortgagor or mortgagee public sale should be made after proper notice surplus proceeds of foreclosure sale belong to the mortgagor debtor has the right to redeem the property sold within 1 year from and after the date of sale remedy of party aggrieved by foreclosure is a petition to set aside sale and cancellation of writ of possession. b. conferred for mortgagee’s protection 2. 2. 3. Sheriff’s certificate is executed. it is referred to as deficiency judgment. Claims of junior encumbrancers or persons holding subsequent mortgages in the order of their priority. 3135. it shall operates to divest the rights of all parties to the action and to vest their rights to the purchaser subject to such rights of redemption as may be allowed by law 5. Effect of Inadequacy of Price in Foreclosure Sale 1. Action for recovery of deficiency may be filed even during redemption period. 3. 5. Upon confirmation of the sale by the court.EXCEPTION: the price is so inadequate as to shock the conscience of the court taking into consideration the peculiar circumstances 2. acknowledged and recorded to complete the foreclosure Nature of Judicial Foreclosure Proceedings: 1. GR: Inadequacy of price is immaterial because the judgment debtor may redeem the property b. quasi in rem action 2. the balance. 6. c.
right of the mortgagor to redeem the property within a certain period after it was sold for the satisfaction of the debt. Right of Redemption 1. buyer was not validly substituted as a debtor thus has no right to redeem 6.right of the mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before the sale of the mortgaged property or confirmation of sale 2. 2. second mortgagee acquires only the equity of redemption vested in the mortgagor 3. Waiver of Security by Creditor 1. 4. CHATTEL MORTGAGE (Arts. it is pledge and not chattel mortgage. The value of the mortgaged property has no bearing on the bid price at the public auction. 2140-2141) – It is a contract by virtue of which a personal property is recorded in the Chattel Mortgage Register as security for the performance of an obligation. Mortgagee cannot have both remedies Note: Foreclosure retroacts to the date of registration of mortgage Redemption – It is a transaction by which the mortgagor reacquires the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created. use and enjoy the same during said period.3. taking physical possession not necessary for levy can be levied upon by means of writ of execution. effect of seasonable redemption is not to recover ownership which was never lost but the elimination from his title the lien created by the levy or attachment. Mortgagee may waive right to foreclose his mortgage and maintain a personal action for recovery of theindebetness. 2. if extrajudicial foreclosure if effected with fraud. remedy of mortgagee to obtain possession is to bring a civil action either to recover possession as a preliminary step to the sale or to obtain judicial foreclosure. it is null nad void ab initio. 5. if sale to a 3rd person is not registered and made without the consent of the mortagee. the purchaser has the absolute right to a writ of possession which is the final process to consummate extrajudicial foreclosure 3. instead of being recorded is delivered to the creditor. if no redemption is made within prescribed period. right of redemption . may be exercised within 1 year from and after the date of registration of the certificate of sale with the appropriate Registry of Deeds. Note: If the movable. sale by the mortgagor to a 3rd person during redemption period transfers only the right to redeem the property and the right to possess. provided that the public auction was regularly and honestly conducted. Kinds of Redemption 1. 4. . exercised before confirmation of sale 2. equity of redemption . Equity of Redemption 1.
as amended Civil Code Revised Administrative Code Revised Penal Code Ship Mortgage Decree of 1978 (PD 1521) governs mortgage of vessels of domestic ownership Important points: The provisions of Civil Code on pledge shall be applicable to chattel mortgage only insofar as they are not in conflict with the Chattel Mortgage Law Subject matter of Chattel mortgage must be described and identified. 4. when the condition of a chattel mortgage is broken. as amended PLEDGE Involves movable property Delivery of the personal property is necessary Registration is NOT necessary for validity Procedure: Art 2112 of Civil Code If the property is sold. the ff may redeem: a. Extent of Chattel Mortgage – It is deemed to cover only the property described and not like or substituted property thereafter acquired by the mortgagor and placed in the same depositary as the property originally mortgaged. adds nothing to mortgage Note: Registration of assignment of mortgage is not required Right of Redemption 1.CHATTEL MORTGAGE Involves movable property Delivery of the personal property is NOT necessary Registration is necessary for validity Procedure : Sec 14 of Act no 1508. 1508. 3. anything in the mortgage to the contrary notwithstanding. . Act No. creates real rights 2. Chattel Mortgage Law. the excess over the amount due goes to the debtor Creditor is entitled to deficiency from the debtor EXCEPT if it is a security for the purchase of personal property in installments Laws governing Chattel Mortgage: 1. the debtor is not entitled to the to the excess UNLESS it is otherwise agreed or in case of legal pledge Creditor is not entitled to recover deficiency notwithstanding any stipulation to the contrary If the property is foreclosed. 2. Effect of Registration 1. mortgagor. 5.
c. an attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the mortgage in the same manner that the mortgagee could foreclose it 3. place. . 2236-2251) – Concurrence of credit – It implies possession by two or more creditors of equal right or privileges over the same property or all of the property of a debtor.b. and purpose of such sale. or person holding under him. public sale 2. subsequent attaching creditor. 4. costs and expenses of keeping and sale payment of the obligation claims of persons holding subsequent mortgages in their order balance. mortgage lien deemed abandoned by obtaining a personal judgment Right of Mortgage to Recover Deficiency 1. the right of redemption is no longer available to the mortgagor. The 30-day period is the minimum period after violation of the mortgage condition for the creditor to cause the sale at public auction with at least 10 days notice to the mortgagor and posting of public notice of time. CONCURRENCE AND PREFERENCE OF CREDITS (Arts. 3. 2. After the sale at public auction. 3. if any. and is a period of grace for the mortgagor. Application of Proceeds of Sale 1.Mortgagee is entitle to deficiency judgment in an action for specific performance. Foreclosure of Chattel Mortgage 1. where mortgage foreclosed . where mortgage constituted as security for purchase of personal property payable in installments . the redemption is made by paying or delivering o the mortgagee the amount due on such mortgage and the costs and expenses incurred by such breach of condition before the sale. 2. Civil Action to Recover Credit 1. shall be paid to the mortgagor. 2. After 30 days from the time of the condition is broken 2.person holding a subsequent mortgage. where mortgaged property subsequently attached and sold . Period to Foreclosure 1. Reason is chattel mortgage is only given as a security and not as payment of the debt. immoral or against public order in an agreement for the private sale of the personal properties covered by chattel mortgage. private sale – there is nothing illegal. 1.No deficiency judgment can be asked and any agreement to the contrary shall be void 3. independent action not required 2. to discharge the obligation.Creditor may maintain action for deficiency although Chattel Mortgage Law is silent on this point.
taxes due to the State shall first be satisfied 2. Rule 39. considered as mortgages or pledges of real or personal property or liens within the purview of legal provisions governing insolvency b. his undivided share or interest in the property shall be possessed by the assignee in insolvency proceedings because it is part of his assets 5. is not liable for the unsatisfied claims of his creditors with said property (Secs. property held by the insolvent debtor as a trustee of an express or implied trust. and one of the co-owners is the insolvent debtor. Ordinary preferred credits (Art 2244) . 1956. Insolvency Law. for the fulfillment of his obligations. Exemption of conjugal property or absolute community or property provided that: a. present and future. 1956 1. the debtor is liable with all his property. if there is co-ownership. Partnership or community subsists b. as amended) 3.a debtor who obtains a discharge from his debts on account of insolvency.( CA No. as amended) 1. the public Land Act. 153 & 155. NCC) 4. Act No. 68 & 69. NCC) 3. Rules of Court 5. Sec 13. right to receive support as well as money or property obtained by such support shall not be levied upon on attachment or execution (Art 205. future property . Classification of Credits 1. family home (Arts 152. insolvency shall be governed by the Insolvency Lae (Act No.preferred in the order given by law . shall be excluded from the insolvency proceedings. subjects to exemptions provided by law - exempt property: 1. Special preferred credits (Arts 2241 & 2242 of NCC) a. General Provisions: 1.Preference of Credit – It is the right held by a creditor to be preferred in the payment of his claim above other out of the debtor’s assets.Obligations of the insolvent spouse have not redounded to the benefit of the family 4. 141. present property 2. property in custodia legis and of public dominion 2. Sec 118.
Order of Preference of Credit 1. If there are 2 or more credits with respect to the same specific real property or real rights. 6. if any.common credits referred to in Art 2245 shall be paid pro rata regardless of dates. The excess. Reference: Security Transactions Memory Aid Ateneo Central Bar Operations 2001 Posted in Commercial Law . as to the amount not paid. they shall be satisfied pro rata. exclude all others to the extent of the value of the personal property to which the preference refers. Those credits which enjoy preference in relation to specific real property or real rights. taxes and fees due the State or any subdivision thereof 3. after the payment of duties. 5. Credits which enjoy preference with respect to specific movables. Common credits (Art 2245) .credits of any other kind or class. after the payment of the credits which enjoy preference with respect to specific property. shall be added to the free property which the debtor may have. If there are 2 or more credits with respect to the same specific movable property. Those credits which do not enjoy any preference with respect to specific property.3. or by any other right or title not comprised in Arts 2241-2244 shall enjoy no preference. 4. they shall be satisfied pro rata. and those which enjoy preference. exclude all others to the extent of the value of the immovable or real right to which the preference refers. 2. real or personal. after the payment of the taxes and assessment of the taxes and assessments upon the immovable property or real right. shall be satisfied according to the following rules: - order established by Art 2244 . for the payment of other credits.
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