Atty.

Jimenez Pre-Week Lecture Notes 2011

*We only started taking notes around the 2nd day, so not much notes for the earlier topics. He was going
through the presentation so fast sometimes, so if there are typos or grammatical errors or other mistakes,
sorry in advance!

Letters of credit
Negotiating bank liable with issuing bank

Warehouse receipts
Warehouse receipt is a document of title
When a warehouse receipt is altered, WHman is still liable (Unlike nego)
No warrant that parties had capacity to contract (Unlike nego)
WHMan liable if goods do not match with what was described
Negotiable receipts, WHmans lien is only for storage charges unless other charges are specified
Warehouseman can sell goods, can collect deficiency after sale

Negotiable
Not negotiable
o Treasury warrant (payable out of a particular fund. Condition that there is money in the
fund)
o Postal money order
o Authorization to an addressee to pay (not an order)
Indorsement to the following persons valid
o Minor
o Insane
o Corporation acting ultra vires (de facto corp)
Indorsement NOT VALID IF TO ENEMY ALIEN (During war, commercial transactions between two
hostile countries cease.
Partial indorsement is NOT NEGO. Only assignment
Payee CAN be a holder in due course (Jac follows this view)
Real defenses cannot always be raised against all parties. Forgery isnt available to arties who
became holders in due course after the forgeries.

Insurance
Healthcare maintenance co is not engaged in insurance.
Mere assurance of risk does not make it insurance. There must be system of spreading risk
Perfected when offeror receives notice of acceptance.
Covered by marine insurance: barratry, sue and labor expenses, contribution to general average loss
Not covered by marine insurance: simple negligence, lack of skill, error of judgment
Casualty insurance
o Insurance against liability to third parties: 3rd parties can sue insurer directly
o Insurance against loss: 3rd parties cant sue the insurer directly
o Provision excluding loss caused by authorized representatives: payroll stolen by driver and
security guard from an agency falls under authorized representatives insurer not liable
o Personal accident policy: insurer liable when seaman drowned when he jumped from ship to
save a passenger who fell overboard that is not suicide; in another case, insurer not liable
when a person was killed without any provocation as when he was just sitting down in a bus
Life insurance
 o Mere fact that the designation of beneficiary is not proper (mistress) doesnt mean that the
legal wife can automatically receive the proceeds
o Proceeds be paid to estate if the beneficiary in a life insurance policy predeceased the
insured
o Barred by incontestability period: concealment, misrepresentation, deceit
o Forfeiture of interest of beneficiary for causing death of insured: must be intentional, must
be unlawful death
o If beneficiary forfeited his interest in a life insurance, the proceeds do not just go to anyone
(relatives); debts of estate must be paid first
o Cash surrender value = amount of money the insurer agrees to pay to the insured if he
surrenders it and releases his claims upon it
o Proceeds of life insurance policy are exempt from execution
o Tempering harshness of forfeiture of benefits of life insurance
Grace period
Surrender of policy for cash surrender vaue
Reinstatement of lapsed policy
Granting extended insurance
Automatic loan
DOES NOT INCLUDE: Reformation of insurance contract, condonation of arrears in
premium
CMVLI
o Not a third party:
An employee not in the course of employment
o Amount of coverage for private cars is P100,000
o Third parties can sue the insurer directly
o Policy does not provide indemnity for property damages (it became profitable when it used
to be covered)
o Even if owner does not have license, he will not be liable
o The requirement in the policy that person authorized by driver of motor vehicle to have a
drivers license DOES NOT APPLY to TPL; ONLY applies to property damage insurance
o If the amounts of the liabilities of the insured and the insurer are the same, they should be
jointly and severally liable
Settlement of Claims
o If the insured was required to file a claim with a wrongdoer within a certain time and failed
to do so, the insurer cannot recover from the wrongdoer.
o If insurer paid the market value but the stipulation in the BOL is that insure can only receiver
a certain amount, the insurer cannot be subrogated.

LAW ON TRANSPORTATION
Civil Code
o One who transports goods for a limited clientele is still a common carrier.
o The operator of a bus service for school children is a common carrier.
o A customs broker who brings the goods to his clientele as an ancillary activity to his services
is a common carrier.
o A travel agency is NOT a common carrier. It does not transport passengers.
o Common carrier is exempt from liability: rebellion, strikes or riots, fortuitous event
o Common carrier is STILL liable: delay, owner of payloader underdeclared the weight,
concurring liability, contributory negligence, last clear chance (this is a defense in quasi
delict, not in quasi contract)
o Baggage

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 Checked in carrier liable for extraordinary diligence
Hand carry carrier liable as if its a necessary deposit
o A taxi company is liable if its driver stabbed a passenger.
o A bus company is not liable for damages for injuries to a passenger when a bystander threw
a stone at the bus and the stone hit a passenger
o Liability for injuries
Do NOT include nominal damages
INCLUDES: medical expenses, loss of income, moral damages in case of BF
o Liability for death
Do NOT include liquidated damages
INCLUDES: funeral expenses, medical expenses, loss of earning capacity, moral
damages
o Liable for damages
NOT liable: When a baggage of passenger was transported at a later flight due to
balance and weight restrictions
LIABLE: when airline company did not assist passenger in locating missing luggage,
baggage of passenger sent to wrong destination
Code of Commerce
o BOL
It is a contract, a receipt, a symbol of the goods covered by it. No form needed for
its validity.
If BOL does not undertake to deliver within a particular time, there is still delay if
there was undelivery after a reasonable time
Consignee cannot refuse to take delivery on the ground that they were not in
accordance with the contract of sale. Remedy is to accept the delivery and just sue
the seller.
If steel pipes transported to Davao by inter island vessel arrived in damaged
condition and were transshipped to the consignee in San Francisco by an American
vessel. The period to file a claim (24hrs) should be counted from delivery to San
Francisco.
VALID stipulation in BOL limiting filing of action for damages to 60 days according to
a case.
o Charter Parties
In bareboat charter, the shipowner has NO lien on the cargoes of owners who
contracted the vessel when the charterer does not pay him the stipulated freight.
In bareboat charter if the vessel is a common carrier, it becomes a private carrier.
In bareboat charter, the charterer is NOT liable for dead freight. Dead freight is only
relevant in voyage charter. In latter, the charterer is supposed to make money by
soliciting cargoes. If he doesnt get enough cargoes, thats dead freight. This doesnt
apply to bareboat charter where the charterer leases the entire vessel.
o Liability of Shipowners and Shipping Agents
ShipO and ShipA not liable for obligations by captain in excess of his powers.
NOT liable also for acts of captain in bareboat charter.
Liability for workmens compensation shouldered under Employee Compensation
Commisson
o General Average
Cash invested to redeem a vessel and its cargoes captured by pirates do not
constitute general average
o Collision
Rules of collision governs maritime tort; rules on quasi delict do NOT apply

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 Vessel which was pursuing a wrong course and the 2nd vessel which did not take
evasive action at an early stage and did so only when collision was near are BOTH
liable.
Principle of comparative fault do NOT apply
COGSA
o Failure to file notice of loss does NOT bar action against the common carrier
o A written demand does NOT interrupt the running of the prescriptive period under the
COGSA. Because public policy demands that maritime claims must be decided expeditiously.
o An action under COGSA must be filed within one year. ONLY applies to nondelivery or
damage. If delay, apply the Civil Code 10 years, based on written contract.
o The one year period under COGSA is not interpreted by a proposal for arbitration.
o Parties can agree to extend the 1 year period.
o The 1 yr period does NOT apply to a customs broker who delivered the goods to the
consignee.
o The parties can actually stipulate that the liability of the carrier for loss or damage to the
goods be less than $500 per package. The liability of $500 under COGSA does not apply to
loss of goods due to collision caused by the fault or negligence of the carrier.
Warsaw Convention
o There has to be 2 states involved.
o If theres an agreed stopping place which is not part of Convention, but the place of
departure and destination are in a country which is part of the Convention, that falls under
Warsaw.
o Warsaw Convention: applies to all international transportation by aircraft FOR HIRE or
GRATUITOUSLY by air transportation for hire
o Per passenger: 125,000 francs
o Per checked baggage: 250 francs per kg
o Per hand carried baggage:
o Any provision fixing a lower limit than what is in the Convention is NOT valid.
o Carrier cannot avail of limitation of liability when the damage is caused by its willful conduct.
o If no claim stub was issued, the provision on limited liability cannot apply and be invoked by
the carrier.
Public Service Act
o A shipyard is NOT a public utility. Petron is NOT a public utility when it refines oil. Because to
be a public utility, you must be refining oil for SOMEONE ELSE.
o Public utility: you must actually render service to the public.
o A legislative franchise is required for telecommunications companies, radio and tv stations,
and power companies. But it is NOT required for: commercial aviation, tollway operators.
o That the proposed public service will not result in a monopoly, is NOT a requirement to be
issued a CPC, but it is a matter of DEFENSE.
o The prior operator rule cannot be applied if it will result in a monopoly. The purpose of prior
operator rule is to prevent ruinous competition. Mere reduction of earnings of prior
operator is NOT ruinous competition in the absence of showing that it will not get a fair
return on its investment.
o A reasonable return is 12% on the rate base.
o Prior operator rule does not apply even if there will be partial overlapping
o The income tax paid by public utility should not be included in its operating expenses bcause
it is not an expense to produce profits.
o Kabit system/Boundary
Boundary system is illegal lease agreement

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 The actual owner of the motor vehicle registered n the name of the owner of a CPC

can sue him to recover the motor vehicles
The registered operator and the actual operator of the MV under the kabit system
should be held jointly and severally liable to 3rd parties who were injured by the
operation of the MV.
Registered operator adjudged to pay damages may recover from the actual
operator the amount.
Since the arrangement is illegal, pari delicto. Actual owner cant run after the
operator.
o Sale, Encumbrance, Lease
Must first be approved by the proper regulatory agency
Before approval of sale, creditor of seller can still levy upon properties sold

CORPORATION CODE
Concept
o If stockH of a corp consist of several tiers of corp, the nationality of stockH can be traced
through the tiers but cant be traced INDEFINITELY.
o On the basis of control test, the nationality of a corporation is determined by the nationality
of the majority of its outstanding capital stock.
o A corporaton can be awarded damages for besmirched rep.
o Under grandf rule, if a corp is engaged in a nationalized area of business, and its stockH
consist of holding corps, the percentages of the Fil stockH of the holding corps shall be
computed to determine if the corp meets the required minimum Fil ownership of its capital
stock.
o Under FIA, if a corp and its foreign stockH own shares in a Phil corp, at least 60% of the
capital stock entitled to vote in each of the two corp must be owned by the Fil and at least
60% of members of board of directors of both corp must be Fil citizens for the owned corp
to be considered a Fil national. In short for FIA, DONT apply grandfather rule. If youre 60%
here in FIA, youre considered 100% Filipino.
o A corporation CAN be held liable for a quasi delict for negligence in the selection and
supervision of its employees and for the acts of its officers, BUT a corporation CANNOT be
held liable for quasi delict committed by its officers if it had no relation to its business.
o A corporation CAN be held criminally liable, just that its penalty will be a fine or dissolution.
o A holding corp which exercises control over the mgt and operation of a subsidiary corp, its
separate juridical personality CANNOT be disregarded just for that. In addition, must be
shown that it is using that power of control to commit fraud. Mere control is NOT sufficient.
o The separate juridical personality is invoked if someone is a majority stockH, NOT if he is a
minority stockH.
o A corporation CANNOT invoke the doctrine of piercing the veil of corp fiction in its favor.
Incorporation and Organization
o May be deprived of voting rights: ONLY preferred shares and redeemable shares
o CANNOT have No-par value shares: banks, trust companies, insurance companies, public
utilities, and building and loan associations
o Before incorp, a promoter is NOT personally liable if it is understood that the other party will
hold only the future corp liable.
o After incorp, if a promoter bound himself personally, he remains liable even if the corp
became liable.
o NOT valid consideration for shares: PNs and future services
Corp Name

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 o If a proposed corp name is similar or confusingly similar to an earlier corp and they are
engaged in same line of business (2 factors: similarity and same line of business), that corp
cannot be allowed to adopt that name.
De Facto and Corp by Estoppel
o A corp formed to practice a profession CANNOT qualify as a de facto corp. There is no law
authorizing a corp to practice a profession!
o Without a cert of reg from SEC, a corp cannot be a de facto corp. There must also be
assumption of powers
o Failure to execute articles of incorp will PRECLUDE a de facto corp, since you wont be able to
get the cert from SEC
o Exercise of corp powers: Does NOT include mere signing of articles of incorp
o A de facto corp has same powers and liab as a de jure corp. Cannot be attacked collaterally.
A private party cannot directly attack; only SolGen under quo warranto
o A person who knows that the company he represents is not incorp CANNOT claim that the
other party who sued him is in estoppel.
o A person who represented an unicorp organization in contracting w/another person cannot
invoke the defense of corp by estoppels if the other party sues him.
By Laws
o Effective: Upon approval of SEC, not agreement of parties
o If did not file by laws on time, considered as de facto
Corporate Powers
o An express power can also be an incidental power of corp. Like the power to sue or be sued,
to contract loan
o Implied power = the power to carry out an express power; like borrowing money executing
PNs or checks, purchasing property of debtors at an execution sale, hiring entertainers at
hotel
o Pre Emptive Right
There is pre emptive right UNLESS otherwise stipulated otherwise. General rule is
that pre emptive right always exists.
Right of pre emption does not apply when shares of delinquent stockholder will be
sold at public auction, or issued in exchange of shares as payment of contracted
debt, or if shares issued in good faith with approval of 2/3 for exchange with
property needed for corporation
Right of pre emption applies to ALL issuance of shares
o Sell or Dispose Corp Assets
All or substantially all = needs 2/3 votes of stockH
Will no longer be able to accomplish its business for which purpose it was
incorporated
If the only property it had left is right of redemption, even sale of that needs
stockholder approval
Approval applies even in the case of a nonS corporation. Even if the corporation is
just being funded from donations, the sale of all or its sole stock is still subject to
approval.
o Can Acquire Shares
Can acquire its redeemable shares, to acquire fractional shares, to collect or
compromise indebtedness
These cases when it can acquire shares is NOT exclusive
o Invest Funds
Investing in secondary purpose must be with approval of 2/3 stockH

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 San Miguel can buy brewery in HK without stockH approval because in line with its

business
o Power to Declare Dividends
Must have retained earnings; creditors can sue the officers who declared and the
stockH who got the dividends if they were declared without retained earnings
Paid in surplus CANNOT be declared as dividends if there is cash or stock; dividends
can only be declared from earnings from operations, NOT from capital
Treasury shares can be declared as dividends, BUT ONLY as property dividends.
Stock dividends are declared from authorized but unissued shares. Treasury shares
are already issued shares, so they should only be declared as property dividends.
The difference is related to tax consequences.
General rule: Directors can declare cash or property dividends without need of
stockH approval. Stock dividends need stockH approval. Stock dividends cannot be
granted to a company who is not a stockH but has a mgt contract with the corp as
part of its compensation
Approval for declaration of cash dividends CAN be revoked BEFORE it is announced.
After announcement, CANT revoke, for purpose of manipulating market.
The approval of stock D can be revoked EVEN AFTER its announcement to public but
BEFORE issuance of the stock certificate.
A stockH who has not fully paid his shares, so long as he is not delinquent, can
receive dividends.
If retained surplus has been invested in govt bonds, NOT an excuse for retention of
100% of paid up capital.
o Mgt Contracts
A management contract CAN be renewed indefinitely, provided the renewal does
not exceed 5 years.
The max period of a mgt K is 5 years
o Ultra Vires Acts
A corp engaged n business as lending investor cannot engage as pawnbroker.
Mining corp cant engage in real estate business.
StockH may ratify an ultra vires K, but not if contrary to law, public order, public
morals, public policy
If the ultra vires K of a corp is illegal, neither party may sue to enforce it
If fully or partially performed, either party may sue for what it has paid (not sure
bout this)
If NOT ILLEGAL and NOT PERFORMED by either party on either side, neither party
can sue to enforce
Minority stockH cant file derivative suit on ground of ultra vires K
o Exercise of Powers
The board of directors is responsible for the corp policies and general mgt of the
business office. The officers implement these policies, but they also have latitude in
running the business operations. The stockH have residua powers over fundamental
corp changes (exercise of voting powers).
The board can delegate some of its functions
StockH and Members
o Subscriptions
They are indivisible.
But a stockH who has paid in full may transfer part of his subscription.
Trust fund: the capital stock, the properties, the assets
o Rights of stockH

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 CANT exercise appraisal in the amendment of by laws or in approval by majority

stockH of renewal of a mgt K (because this does not involve a fundamental act)
A stockH CANNOT invoke his appraisal right if the corp has no retained earnings.
This violates trust fund doctrine. But in close corp, a stockH can ask that he can be
bought out ANYTIME even if no retained earnings
The right of inspection applies also to the corps wholly owned subsidiary. This is in
keeping with protecting rights of stockH.
Person responsible for refusal of inspection has burden of proof to show that
stockH is not entitled to the right.
Right of inspection may be invoked when stockH asking for list of stockH for
purpose of proxy right against mgt and when the inspection is being requested for a
derivative suit.
Valid defenses against right of inspection: if stockholder is not yet record stockH, if
exercising in BF, if bought only one share to be able to pry into transactions entered
before he became a stockH, if not acting for a legitimate purpose
Derivative suit: an action brought by a minority stockH in name of corp to redress
wrongs committed against corp for which directors refuse to sue
The creation of several corp positions and the reasonable increase in the
emoluments of corp officers may NOT be the subject of a derivative suit. This falls
within scope of BUSINESS JUDGMENT.
The appropriation by an officer of corp funds for his own benefit can be the subject
of a derivative suit
Derivative suit (cause of acton belonging to the corp) v. individual suit (cause of
action is violation of individual stockholders own private rights) v. representative
suit (filed by group of stockH for a wrong to them as a group like the violation of
right to preference of preferred stockH)
Denial of pre emptive right of a stockH CANNOT be the subject of a derivative suit
since thats his own right
Heirs of a stockH whose shares were fraudulently transferred to some of heirs and
some did not get what they claimed was their inheritance rights CANNOT file a
derivative suit. They is their own right.
A stockholder whose number of shares is merely minimal can file a derivative suit.
A minority stockH can JOIN as plaintiff in a derivative suit against corp officers, if his
personal rights were also injured. Here there are two causes of action.
1st requisite: there is a cause of action that belongs to the corporation. Therefore
when damages are awarded, these belong to the corporation.
2nd requisite: The stockH MUST be a stockH at the time the acts complained of
occurred unless they continued after he became a stockH.
3rd requisite: exhaustion of intracorporate remedies unless to do so is excused, like
if the directors themselves committed the fraud and appeal to them is useless. No
use also appealing to all the stockH by having to call a special stockH meeting to
reverse what the board approved.
4th requisite: case must be filed in the name of corp and not in the name of the
stockH
5th requisite: no appraisal rights are available for the acts complained of
One who is merely holding in trust the shares of stock in his name CANNOT file a
derivative suit.
If a minority stockH has already filed a derivative suit, another minority stockH
cannot file anymore a second derivative suit.
o Meetings of Stockholders and Members

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 Notice of mtg may be waived
Written notice is required for regular or special mtgs
A majority of the OCS of the members shall constitute a quorum; but if the Corp
Code or by laws provide for diff number of quorum, such provision shall control
Once a quorum is already present when mtg is called to order, the mtg CAN
continue to transact business even if some stockH or members leave so that the
number left do not constitute a quorum
If mtg was improperly held or called, all proceedings if within the powers of the corp
shall be valid provided all stockH or members are present or duly represented
Board of Directors and Trustees
o Not all directors should be residents of the Phil; only majority only is required
o Directors are entitled to hold over until their successors are elected and qualified
o So long as director appears in the books as to own a share, he is qualified, even if legal title
is in the name of someone else.
o By laws MAY require that its not enough for director to only own one share but must own a
certain number of shares.
o MUST be a stockH at the time of the election, not just when he assumes office, because of
the wording of our law. The director should be elected among the stockholders. The
candidate for directorship must already be a stockH.
o By laws may impose additional disquafications for directors. The by laws may also disqualify
a stockH from being elected director if he is a director of competitor business. The by laws
however MAY NOT provide that all directors of corp engaged in line of business which is
partly nationalized must be Fil citizens. Because foreigners who are stockH in partially
nationalized business are entitled to have representation in the board.
o By laws CANNOT prohibit proxy voting and cumulative voting, since these are both allowed.
o Voting by viva voce or show of hands is valid.
o Proposal to remove a director MUST be stated in the notice to be given to stockH
o As a rule, director can be removed with or without cause. But if minority representative,
may only be removed for cause
o General rule: Any vacancy may be filled up by remaining directors if they constitute quorum.
EXCEPTION: removal of director, no longer constitute quorum
o In case of resignation of a hold over director, the vacancy shall be filled up by election of
stockH. Remaining directors may only elect replacement if vacancy is part of original term,
not the hold over term.
o Additional compensation for directors: may be in by laws, or granted by bote of stockH
representing majority of OCS. Cannot exceed 10% of corporate net income before income
tax in a year. But directors may receive in excess of 10% of the corp income tax if they are
holding other positions also
o Directors are NOT personally liable for unlawful dismissal of an employee of the corp, unless
proven that they acted in BF.
o Director is personally liable: gross negligence, he bound himself solidarily liable
o Acquisition of business opportunity for himself
Director must turn over all profits to the corp
Rule applies even if director risked his own funds
StockH owning 2/3 of OCS can ratify the K
o Directors and officers who consented to issuance of watered stock and who having
knowledge did not file written objections are jointly and severally liabe for diff bet value
received and par value
o A K between 2 corp with interlocking directors may be ratified by stockH.
o Meetings of Directors

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 In a regular mtg, it is not required to indicate what will be taken up, unless it is one
of those which law requires should be in notice
Special mtg, must only take up what is in the notice, unless there is express or
implied waiver
Meetings may be held anywhere in Phil or abroad. But for banks, they are
prohibited from holding meetings abroad.
Board mtgs can be held by teleconference or video conference
Proxy voting is NOT valid in board meetings. ONLY allowed in stockH meetings.
An abstention during a voting is counted as a vote with the majority.
President is the one who presides at board meetings. But by laws can provide that
the chairman presides.
Capital Stock
o Stock Cert
It is quasi negotiable, because the shares covered by it can be transferred by
indorsing and delivering the cert; however, unlike negotiable instruments, a buyer
in GF and for value cannot acquire title to the shares if the indorsement is forged
Mere indorsement and delivery suffices to justify transfer, without need of a deed
of sale. But if not indorsed and delivered but instead is notarized, that is sufficient
to transfer title also, applying the Civil Code (tradition is one of ways of transferring
ownership)
Partial payment by stockH for his subscription MAY NOT be applied as full payment
for the number of shares corresponding to it; stock cert cannot be issued for those
number of shares paid.
Corp secretary is custodian of records and make entries in stock and transfer book,
NOT the majority of stockH
Unpaid claims which will prevent transfer of shares in the books of a corp is limited
only to the unpaid subscription and does not include other debts outside of the
subscription K, even if the corp has a lien over these debts.
Situs of shares of stock for purposes of attachment, garnishment, and execution and
for purpose of registration of chattel mortgage on them and for purpose of liability
of estate tax is the principal office of the corp.
Articles of Incorp prevails in case of conflict bet AIC and the stock and transfer book
as to identities of the stockH and the number of outstanding shares
o Payment of Balance of Subscription
Balance becomes due:
When board makes call
Corp is insolvent
If subscription K provides when it will be paid
A call for payment must be uniform.
Failure to pay unpaid subscription on date specified in K or call
Renders entire balance due and payable
Make stockH liable for interest based on rate in by laws or legal rate
If within 30 days from date payment was due and no payment made, the
shares shall become delinquent and subject to sale
Rights of delinquent stockH are suspended, except for the right to get
excess of sale of the shares. Cash dividends will be applied to unpaid
subscription. Stock cert will be withheld
Dodge method of bidding (not sure if I heard right): Shares sold to bidder offering to
pay the full amount due for the least number of shares. If there is no bidder, the

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 corp may bid for the shares. If the corp bids, the total amount due shall be deemed
paid in FULL.
Instead of auctioning shares, corp can actually choose instead to file a collection
case.
o Alienation of Shares
Allowable restrictions/Stipulations
Right of pre emption
That a corp has right of first option to buy shares at a fixed price
That a share given to officer must sell it back to corp upon termination
A stockH cannot sell the shares if only partly paid, UNLESS with consent of
corporation, because it involves novation by substitution of debtors.
A buyer of shares, even if fully paid and covered by stock cert in name of seller
cannot compel corp to issue stock cert to his name, if he has not yet been registered
in stock and transfer book as stockH.
Chattel M over the shares need not be registered in STB since it is not an alienation
Attachment on shares registered in STB revails over their sale which has not been
recorded in the STB.
Dissolution
o Voluntary Dissolution
Approved by majority of Board and 2/3 of stockH
Approved by SEC (not ministerial for SEC to approve)
o Involuntary Dissolution
Expiration of term
Failure to organize and commence within 2 ys from date of incorp
Continuous non operation for at least 5 yrs
Violation of provisions of Corp Code
Violations of Sec 6(e) of PD No. 902-a
Deadlocks in close corporation
Petition of a minority stockH for illegal acts and gross mismanagement by the
directors and officers
o Liquidation
For voluntary dissolution, 3 yr period is counted from approval of SEC
Liquidation can be through: board, board-appointed trustee, appointment of
receiver
Close Corporations
Non Stock Corp
Religious Corp
o Corporation sole as NO nationality. In determining however if a parcel of land can be
registered in its name, the nationality of the constituents of the diocese that should be
considered
o A corp sole does NOT own the temporalities he is administering
Foreign Corp
o If it is doing business in Phil but has no license:
Cannot sue
Cannot intervene in a case
Mergers and Consolidation
o Merger- one corp absorbs the other or others
o Consolidation form a new consolidation. Orig corps cease to exist
o There must be a plan approved by majority board and 2/3 of stockH

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 o The surviving bank in case of merger must pay the promissory note payable to the absorbed
bank even if it was signed after the merger.
o The rights of creditors and any lien upon the property of any constituent corporation shall
not be extinguished; like pledge or mortgage on one of the absorbed corporation

SECURITIES AND REGULATION CODE
Definition
o Covers trading both inside and outside the trading market
o The English common law believed in caveat emptor; when the stock market crashed,
Congress passed the Securities Act to regulate operations of stock exchange
o What are securities: shares of stock, bonds, debentures, evidence, asset backed securities,
investment contracts, fractional undivided interest in oil, derivatives (it is a financial
instrument whose value depends on the fluctuation of another financial instrument),
proprietary or non proprietary membership certificates in corporation
o What are not securities: letter of credit, trust receipt
Registration
o Exempt from registration: Central Bank bills, shares sold by receiver in bankruptcy,
derivatives issued by banks, any other securities added by SEC
o NOT exempt from registration: time shares (shares in lets say Baguio Country Club where
you dont use it the entire year but just specific periods of time in a year), securities issued
by a GOCC organized under Corp Code
o Securities exempt from registration: Generally are securities issued by Govt or those
regulated by another agency
o Exempt transactions: judicial sales, foreclosure sales, sale as per right of conversion, brokers
transactions, subscription prior to incorporation or increasing capital stock
o NOT exempt transaction: sale to employees of a corporation, sale to relatives of stockH, sale
to distributors of a manufacturer
o Transactions exempt: Generally, those regulated by court
Grounds for Rejection
o Issuer judicially declared insolvent, issued violated SEC rules, engaged in fraudulent
transactions
o NOT a ground for rejection: issued involved in litigation, issue or any officer or underwriter
has been convicted of an offense
Manipulation and Insider Trading
o Valid defenses for an insider: information not gained from insider relationship, he disclosed
information to the other party, had reason to believe that the other party was in possession
of the information
o NOT a valid defense for an insider: that the one who traded in the security was his spouse or
relative by consanguinity or affinity within the 2nd degree
o NOT an insider : a mere minority stockH, employee of the issuer who retired before the
material information came into existence
o NOT a material information: the finance manager told the board of directors if corp that sells
bakery products that he expects the price of flour to increase because of shortage of wheat
worldwide
o Material information: labor served a notice of strike upon the mgt
Protection of Investors
o Tender Offer
Publicly announced intention to acquire equity securities of a public company
If the tender offer is oversubscribed the total of the equity securities to be acquired
shall be proportionately distributed among the selling stockH

12 BAUTISTA, Gerald
ANG, Kira
 If a person will acquire a block of shares of stock in a holding company to qualify the
acquisition for a tender offer, a stockH of a subsidiary of the holding company is
entitled to ask that the tender offer be extended to him. Court said to implement
the intention to the law, it should apply not just to actual stock but also to the
subsidiary stockH
o Proxy Solicitation
Valid up to 5 years
A stock broker cannot give a proxy for any security carried for the account of a
customer without the express written authorization of customer
o Disclosure
Issuer must file annual report, and current reports on significant developments and
must report if it is obtaining a new loan and is mortgaging all its properties to secure
its payment
o Civil liability
False registration statement: the issuer and every person who signed the
registration statement, every director, every auditor who certified the financial
statements used in connection with the respective statement
NOT liable for the false registration statement: the selling stockH
Liable for damages: insider, one who engages in any fraudulent transaction or
regulation, one who willfully participated in the manipulation o security prices
NOT liable for damages: the customer who bought the shares by insider trading

NEW CENTRAL BANK ACT
The BSP has regulatory power even over non bank financial institutions: investment houses
Main Role of BSP: maintain stability of price
Banks in Distress:
o Conservator
The bank is not insolvent. Its assets exceed its liabilities, but the problem is with its
liquidity
Conservator cant revoke perfectly valid contract
Lasts up to 1 year. Within 1 year the MB should decide if bank now can reopen.
o Receivership
The bank is insolvent. It is not required that it should have first been placed under
conservatorship
Even if the examination of the supervising and examining dept of the BSP has not
yet been completed, a receiver may STILL be designated by the MB
Designating receiver: MB decides summarily and without prior hearing
A bank is not entitled to be given a copy of the report of the examination of the
bank before its submission to the MB for its possible closure
A receiver can file cases to effect payment of loans. This is pursuant to powers of
administration over the bank. Receiver cant dispose of property because this is an
act of ownership.
A bank is not liable for the payment of interest accruing on the deposits of its
customers from the time of its closure until reopening.
Receivership cannot be longer than 90 days
o Liquidation
The NLRC has jurisdiction over the labor claims of an employee of the bank, not the
liquidation court. Once an employee obtains final judgment, thats when he files his
claim with the liquidation court.

13 BAUTISTA, Gerald
ANG, Kira
 The liquidation of a bank which incurred overdrafts in its current account with the
BSP and experienced heavy withdrawals, because it extended unlimited financial
support to a related company is valid.
The insolvency court does not have jurisdiction over an action filed by a borrower of
the bank for annulment of the mortgage executed to secure the payment of his
loan.
A final judgment by payment of damages awarded against a bank cannot be
enforced by levying and executing upon its properties.
Legal Tender
o Only BSP can issue currency. All notes issued by BSP are legal tender
o P100 5c, 10c and 25c
o P1000 P1, P5, P10
Monetary Policies
o MB may rely on its moral influence to recommend that instead of lending money to
businesses, to instead buy bonds from govt
o BSP may buy and sell foreign notes and coins; may impose emergency restrictions with vote
of 5 members of MB and approval of President
o May subject all transactions in gold and forex to license
o MB may NOT restrict withdrawal of foreign currency deposits; but foreign exchange deposits
can be subject to reserve requirements
o MB my require banks to sell their surplus holdings of forex
o All banks are required to maintain reserves against their deposit liabilities

LAW ON SECRECY OF BANKING TRANSACTIONS
RA 1405
o Prohibition applies to govt bonds and trust accounts
o NOT an exception to the secrecy of bank deposits: examination is made by an independent
auditor hired by the bank to conduct a regular audit, a buyer of T-bills who sued the seller
for specific performance can examine the bank account in which the payment was
deposited, garnishment of the bank account to satisfy a judgment against the depositor
Foreign Currency Deposit Act
o Exempt from attachment, garnishment, or any other process of court or admin agency
o The heirs of a deceased who opened a foreign currency deposit can look into the deposit,
because they are now the owners.
o All foreign currency deposits are absolutely confidential
o Where the funds deposited in a joint account belonged exclusively to one of the depositors
but the other depositor closed the account and transferred the funds to his own personal
account, the owner of the funds can have withdrawals from the account enjoined.

GENERAL BANKING LAWS
Disclosure of information relative to funds or properties (safety deposit) in the custody of the bank
belonging to private individual cannot be done
Common exceptions to confidentiality of banking transaction
o CIR can examine bank accounts of deceased in order to determine gross estate, etc
o The PDIC or the BSP may examine deposit accounts if there is a finding of unsafe or unsound
banking practice

GENERAL BANKING ACT
A bank cannot engage in warehousing.

14 BAUTISTA, Gerald
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 While Civil Code says renting safety deposit box is lease. This is still, under the General Banking Act,
one of fiduciary character. The relationship between the customer who rented out the safety deposit
box and a bank is that of depositor and depository. It is void to limit liability of banks over safety
deposit box to ordinary diligence.
An interest of 3% per month or higher in a month on bank loan is unconscionable.
Rate of interest is an important consideration in a loan. Escalation clause is not per se valid, but there
must be a stipulated reference rate agreed upon by the parties, for the clause not to violate the
mutuality of contracts. A provision giving bank authority to increase interest solely on its own
determination is void.
Single Borrowers Limit: 25%
o Loans fully guaranteed by the Phil Govt are excluded in computing the total amount of loan
and loans to the extent that they are covered by marginal deposits
DOSRI Loans
o Procedurial Reqts: (1) approved by majority of directors, excluding the directors concerned,
(2) approval entered upon records of the bank, (3) copy of entry shall be submitted to BSP
o Substantive Reqts: (1) terms given are same terms given to 3rd parties, (2) amount loaned
limited to unencumbered deposits and paid-in capital stock, (3) loans considered as non risk
by the MB shall be excluded from the limit
o Mere act of president of a bank of obtaining loan from bank without the approval of
majority of directors constitutes a violaton of the law. Mere failure to comply with one of
the reqts constitutes a violation.
o President who obtained loan from a bank and falsely made it appear that somebody else
applied for the loan is liable for estafa thru falsification of a commercial document.

PDIC
deposits do not include safety deposit box
Not included from coverage: investment products, deposit accounts that are unfunded
P500,000 per depositor is the maximum coverage
In determining such amount, all deposits in the same right and capacity for the benefit of the
depositor in his own name or in the name of others shall be added together
But joint accounts treated separately from individual account
Holding an account in trust for another corporation, that is not included in balance of his own
deposit
The aggregate of the interests of each co owner over several joint accounts, whether owned by the
same or diff combinations of individual or juridical entities shall be subject to the max coverage
If you owe bank something, that will be deducted from the maximum coverage
If depositor fails to file claim within 2 year from actual takeover of closed bank or does not enforce
his claim within 2 years after the 2 year period to file a claim, all his rights against the PDIC are
barred. Can still go against the bank, just not PDIC anymore.
The determination of the PDIC as to the insurance coverage shall be final and executory unless set
aside by court on certiorari filed within 30 days from notice of denial of the claim
Once PDIC pays, it will be subrogated to rights of depositor. Payments made to insured depositor
shall be treated as preferred credit, and shall be treated as liability for tax under the provisions on
concurrence and preference of credits.

CHATTEL MORTGAGE
Property is not delivered to mortgagee
If the proceeds of the loan whose payment is being secured by chattel M were not released, the
chattel M is unenforceable.

15 BAUTISTA, Gerald
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 An unemancipated minor cannot mortgage property he owns. He does not have capacity, no free
disposal of property
A deaf mute who can write can mortgage property.
Goods covered by a trust receipt cannot be the subject of a chattel mortgage
Chattel M over: Aircraft must be registered with CAAP and ROD; trademark must be registered in IPO
and ROD; copyright must be registered with National Lib and ROD
A chattel M cannot secure a credit line granted by a bank
Foreclosure: Mortgagor and mortgagee may stipulate on the place where the sale will be held
A junior mortgagee has equity of redemption in foreclosure of chattel M
Even if the property covered by a chattel is actually real property, the foreclosure sale should be
conducted in accordance with Act No. 3135

FORECLOSURE OF REAL ESTATE MORTGAGE
A petition for extraJ foreclosure of the REM should be filed still with the Executive Judge even if you
will ask a notary public and not a sheriff to foreclose.
If the stipulated rate of interest is unconscionable, the foreclosure is premature and void, because
the mortgagor had no obligation to pay the unconscionable interest
Unconscionable interest = more than 3% per month
Notice should be published once a week for 3 consecutive weeks
Even if posting is not done, publication is sufficient
The publication of a notice of sale is not valid if the newspaper is not circulated in the place of sale
If it is stipulated that the mortgagor must be given personal notice, then that must be followed
Typographical errors in the name of the mortgagor and the technical description of the property in
the notice of sale will NOT nullify the sale.
If several parcels of land were mortgaged, they are not required to be sold separately one at a time.
They may be sold as a whole.
Second sale is not required if there is only one bidder in the sale. This is only in pledge
Void to stipulate that mortgagor waives his right to redemption
The filing of action for redemption within the redemption period is not sufficient unless the
redemption price is tendered as soon as it is determined
The mortgagor and mortgagee can agree to extend the redemption price.
Acceptance of tendered price beyond redemption period is considered as waiver on part of
mortgagee
If a REM secured payment of two loans which was already due when the bank filed application for
extraJ foreclosure on only the 1st loan, the payment for the 2nd loan should not be included in the
redemption price
Writ of possession is ministerial. It is enough to verify the pleading, no need to submit evidence.
Right to file petition for a writ of possession is not prescriptible
The buyer at the sale cannot ask for writ of P if the buyer leased the property to the mortgagor and
the mortgagor defaulted to pay rent, because the rights of the parties are governed by lease. File an
ejectment case instead.
Writ of P can be enforced against 3rd parties whose rights are dependent upon the rights of the
mortgagor. If the3rd party is enforcing rights ADVERSE to the mortgagor, the writ of P cant be
enforced against him.

TRUTH IN LENDING ACT
The creditor cannot charge handling charges for loans or increase the penalty if no disclosure was
made to the debtor

16 BAUTISTA, Gerald
ANG, Kira
 Law does not apply only to banks and non banking financial institutions but also to private
individuals engaged in the business of granting loans (mga Bombay na nagccharge ng interest sa
palengke)
Contract remains valid and enforceable and debtor still pays.

ANTI MONEY LAUNDERING ACT
Does not cover real estate dealers (Thats why some crooked politicians are buying lots.)
Car dealers are also not covered
Covered institutions do not have to automatically furnish the AMLC records of suspicious
transactions.
NOT suspicious transactions: client is rushing the transactions, a document is lacking
AMLC cannot order the closure of any establishment engaged in money laundering or to conduct an
administrative investigation of any public officer for violation of the AMLA

FOREIGN INVESTMENTS ACT
Who is a Philippine national?
o Citizen of Phil or domestic partnership wholly owned by citizens of the Phil
o Trustee of funds or pension of employees where the trustee is a Phil national and at least
60% of funds will accrue to the benefit of the Phil nationals
o Corporation 60% of capital stock outstanding and entitled to vote
General rule: foreigners can invest in any sector of economy
o Except for those under List A and B
List A reserved only to Filipinos under the Constitution
List B regulated areas of business (manufacturer of bullets, ammunition) or those
with implication on public health and morals (massage parlors, sauna baths)
o Outside of businesses in List A and B, a foreigner should put up a business with at least
$200,000 capital. Leave small and medium-sized domestic market enterprises with paid in
equity capital less than $200,000 alone, which are reserved to Phil nationals. Except if at
least $100,000 paid in capital, with 50 employees, and involving introduction of
technological advancements

INTELLECTUAL PROPERTY CODE
Patents
o NOT patentable: theory of relativity, mere discovery of new forms or properties in medicines
o Durability is not a condition of patentability
o Patents belong to the inventor. Two persons who jointly make an invention belong to them
jointly. The person who commissioned the work will own the patent; however, if the
contract provides otherwise, the person who was commissioned a work will own the patent.
o The employer does not own the patent for an invention which his employee made as a
result of the performance of his regularly assigned duties if there was an agreement to the
contrary.
o Earliest filing time on the basis of days. If you both filed on the same day, you will both own
the patent. This is the first-to-file rule. The earlies filing time is not on the basis of minutes.
This is not the same as registration in Torrens System where seconds can make a difference
as to who registered first.
o A patent can be cancelled if it includes matters outside the scope of the disclosure in the
application.
o A patent inventor does not have the right to have the invention attributed to him. That is a
moral right in copyrights.
o A government agency or any private third party has the right to import drugs and medicines.

17 BAUTISTA, Gerald
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 There can be no infringement of patent if no patent has been granted or the patent has
o
expired. In literal infringement, the challenged matter falls within the literal meaning of the
patent claims. In doctrine of equivalents, if the device still performs substantially the same
function and substantially the same way to come out with substantially the same product,
even if something was changed, there is still infringement.
o Civil action for infringement can be filed even if there is a pending petition for its
cancellation.
o A foreign national may bring an action for infringement of patent, despite lack of icense to
do business in Phil, IF its country is a party to a convention or treaty to which the Phil is also
a party.
o A licensee of the infringer is NOT liable unless the license is voluntary and he colluded with
the infringer.
o Contributory infringement the product must be such that it is not capable of any other usel
except for the purpose of infringement. If the device can be used for legitimate purposes,
there is no infringement.
o DEFENSES to infringement action:
No damages can be recovered if the infringement was committed more than 4 years
before the filing of the civil action.
Patent is contrary to public morals
Not described sufficiently in the application
It is not new or patentable
o A compulsory license can still be granted even if a voluntary license has been granted.
Competition is encouraged to bring down the price. The grounds for granting compulsory
license need not all exist concurrently.
o If ground is not being worked in commercial scale may only be granted after 4 years
from date of filing or 3 years from date of registration, whichever is later
Trademark
o Use in trade or commerce is required to acquire ownership of a trade name. But if it is a
trademark, use is no longer required to acquire ownership. It is valid registration which vests
ownership, even if you have not used it. However, if you dont use it for 3 years, your
registration will be cancelled. Every 5 years you submit an affidavit of use.
o A trademark consisting exclusively of a generic sign CANNOT be registered. Pale pilsen is
generic. It is a type of beer that came from Pilsen. Ginebra San Miguel cannot Lucio Tan from
using Ginebra de Manila. Ginebra is Spanish word for gin, that is generic. The suffix
tussin when used as part of cough syrup is merely generic. The word Isabela cannot be
registered as a trademark for cigars.
o Trademark consisting exclusively of signs customary to designate the goods or services in
everyday language cannot be registered. Color alone cannot be registered as a trademark,
uness it is defined by a given form.
o Two Tests:
Holistic Test consider trademark in its entirety to determine if trademarks are
similar
Dominancy Test if questioned trademark contains the main features of another
trademark by reason of which deception is likely to result, infringement of
trademark takes place
o Dominancy Test is what should be used. This is already in our IP Code.
o Likelihood of confusion: great, if the goods are cheap commodities; remote, if expensive
articles are being purchased or medicines cannot be bought without a prescription
o It is not required that the two products should be placed side and side and compared before
they can be determined to be confusingly similar

18 BAUTISTA, Gerald
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 oTwo types of confusion:
Confusion of goods the products are the same
Confusion of origin the products are different, but public is misled to believe that
the product belongs to the same manufacturer as another product
o Internationally well-known trademarks need not be registered in the Phil to be protected
o Elements of infringement of trademark: (1) validity of trademark of plaintiff, (2) ownership
of trademark of the plaintiff, (3) likelihood of confusion as a result of the use of the
trademark or its colorable imitation by the defendant
o Infringement of trademark takes place even if there is no actual sale of the goods using the
infringing trademark (like if a raid was conducted while the defendant was in the course of
manufacturing the goods with the infringing trademark)
o Defenses to Infringement: (1) plaintiff not entitled to the registration of the TM, (2) no
damages may be recovered after 4 years from the time the cause of action accrues, (3)
laches, estoppel, acquiescence
o Pending action for cancellation of the TM is not a defense.
o Damages = profits plaintiff would have made if defendant had not infringed his TM; or the
earnings of the defendant
o Elements of Unfair Competition: (1) confusing similarity in general appearance of the goods,
and (2) intent to deceive the public and defraud a competitor
o Registration is only prima facie evidence of ownership. Fraudulent intent is not required to
be proven in trademark infringement, only in unfair competition.
Copyright
o Literary and artistic works are protected from the moment of creation, without need of
registration.
o Requirement to give 2 copies to National Library and to SC Library is not for protection of
your rights but only to complete their libraries.
o For the work to be protected, it must be original. It must be an independent creation of the
author and was not copied totally or substantially from another.
o Trademarks cannot be copyrighted because these are not artistic works. Blank forms for
recording information is not an artistic work.
o Aside from original works, derivative works are also protected.
o Even if employee used the time, facilities, and materials of the employer, if the creation of
the work is not part of the regular duties of the employee, the latter still owns the copyright.
But if part of regular duties, employer owns the copyright.
o Doctrine of Fair Use: (1) for criticism and comment, (2) for news reporting, (3) for teaching,
scholarship, research purposes. A satirical version of a song is fair use of the original song.
o Four Factors to determine if there is fair use: (1) Purpose of use for commercial profit or
charitable purpose, (2) Nature of copyrighted work, (3) Amount or portion used
infringement requires substantial copying, (4) Effect upon the market
o Defenses to copyright infringement: fair use, the copyright is just a concept, the action is
barred by prescription of 4 years
o NOT a defense: defendant had no intention to infringe the copyright
o An injunction may be issued to restrain the infringement. Defendant may be liable to pay
actual damages, as well as moral and exemplary damages.


Good luck!

- END -

19 BAUTISTA, Gerald
ANG, Kira