GENERAL BANKING LAW OF 2000

(R.A. No. 8791, GBL);

NEW CENTRAL BANK ACT
(R.A. No. 7653, NCBA);
LAW ON SECRECY OF BANK DEPOSITS
(R.A. No. 1405, LSB)
& Related laws

BANKS
- refer to entities engaged in the lending of funds obtained in the form of
deposits. (Sec. 3.1, GBL)

CONDITIONS FOR ORGANIZATION

The Monetary Board may authorize the organization of a bank or quasi-bank
subject to the following conditions:
1. That the entity is a stock corporation;
2. That its funds are obtained from the public, which shall mean 20 or more
persons, and;
3. That the minimum capital requirements prescribed by the Monetary Board
for each category of banks are satisfied. (Sec. 8, GBL)

PROHIBITED ACTS/TRANSACTIONS
1. Bank officials or employees are prohibited to disclose to any unauthorized
person any information relative to the funds or properties in the custody of
the bank belonging to private individuals, corporations, or any other entity,
unless there is an order of a competent court of competent jurisdiction.
2. Banks are prohibited from outsourcing inherent banking functions.
3. No bank shall employ casual or non-regular personnel or too lengthy
probationary personnel in the conduct of its business involving bank
deposits. (Sec. 55, GBL)

QUASI BANK, DEFINED

- shall refer to entities engaged in the borrowing of funds through the
issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes as defined in Sec. 95 of NCBA for purposes of re-lending or purchasing of
receivables and other obligations. (Sec. 4,GBL)

FOREIGN STOCKHOLDINGS
Foreign individuals and non-bank corporations may own or control up to 40%
of the voting stock of a domestic bank. This rule shall apply to Filipinos and
domestic non-bank corporations. (Sec.11, GBL)

GRANDFATHER RULE
The percentage of foreign-owned voting stocks in a bank shall be determined
by the citizenship of the individual stockholders in that bank. The citizenship of the
corporation, which is a stockholder in a bank, shall follow the citizenship of the
controlling stockholders of the corporation, irrespective of the place of
incorporation. (Sec.11, GBL)
FIT AND PROPER RULE
To maintain the quality of bank management and afford better protection to
depositors and the public in general the Monetary Board shall prescribe, pass upon
and review the qualifications and disqualifications of individuals elected or
appointed bank directors or officers and disqualify those found unfit. (Sec. 16, GBL)

PROHIBITION ON PUBLIC OFFICIALS

GENERAL RULE
No appointive or elective public official whether full-time or part-time shall at
the same time serve as officer of any private bank. (Sec. 19, GBL)
EXCEPTIONS
1. when the service of the public official is incident to financial assistance
provided by the government or a government owned or controlled
corporation to the bank;
2. when the law provides otherwise (e.g. Rural banks allow public officials,
elective or appointive, to serve in a rural bank in any capacity, Sec. 5, Rural
Banks Act) (Sec. 19, GBL)

FOREIGN BANKS;
MODES OF ENTRY
1. by acquiring or owning up to 60% of the voting stock of an existing bank;
2. by investing in up to 60% of the voting stock of a new local banking
subsidiary, or;
3. by establishing branches with full banking authority. (Sec. 2, Foreign Banks
Liberalization Act)

NOTE: Acquisition of Voting Stock in a Domestic Bank

The Monetary Board may authorize a foreign bank to acquire up to 100% of
the voting stock of only 1 bank organized under the Philippines laws. However, this
is allowed only within 7 years from the effectivity of GBL, which is on June 13, 2000.
Further, at all times, the control of 70% of the resources or assets of the entire
banking system is held by banks, which are at least majority-owned by Filipinos.
(Sec. 73, GBL)
Sec. 73, GBL effectively repealed the last sentence of Sec. 2, Foreign Banks
Liberalization Act which provides that a foreign bank may own up to 60% of the
voting stock of only 1 domestic bank or a new banking subsidiary. Nonetheless,
after the lapse of the 7-year limit, the 60% limitation shall again apply.

REVOCATION OF LICENSE OF A FOREIGN BANK

The Monetary Board may revoke the license to transact business in the
Philippines of any foreign bank under the following instances:
1. when the foreign bank is insolvent or in imminent danger thereof, or;
2. that its continuance in business will involve probable loss to those
transacting business with it. (Sec. 78, GBL)

SUPERVISION AND EXAMINATION OF BANKS

The operations and activities of banks shall be subject to supervision of the
Bangko Sentral ng Pilipinas.
 It shall also have supervision over the operations of and exercise regulatory
powers over quasi-banks, trust entities and other financial institutions which under
special laws are subject to Bangko Sentral supervision. (Sec. 4, GBL)

PRIMARY RESPONSIBILITY OF BSP

It shall provide policy direction in the areas of money, banking and credit.
(Sec. 5, GBL)
It shall provide policy directions in the areas of money, banking, and credit. It
shall have supervision over the operations of banks and exercise such regulatory
powers over the operations of finance companies and non-bank financial institutions
performing quasi-banking functions, and institutions performing similar functions.
(Sec. 3, NCBA)

PRIMARY OBJECTIVE OF BSP

To maintain price stability conducive to a balanced and sustainable growth of
the economy. It shall also promote and maintain monetary stability and the
convertibility of the peso. (Sec. 3, NCBA)

TRO/INJUNCTIONS IN EXAMINATION OF BANKS

As a rule courts cannot interfere with, or issue TRO/injunction in the
investigation or examination of banks by the BSP, except only in cases where there
is bad faith and arbitrary actions. (Banco Filipino vs. Central Bank. 204 SCRA
767)

PRIVATE INDIVIDUALS ALLOWED TO PROSECUTE

A private individual can cause the prosecution of violation of banking laws
since it constitutes a public offense and the prosecution is a matter of public
interest. (Perez vs. Monetary Board. 20 SCRA 592)

CONSERVATORSHIP OF BANKS
It is an attempt to save the bank from bankruptcy and ultimate liquidation

CONSERVATOR
- a person appointed, after a bank is placed under conservatorship, to take
over the management of the bank and shall assume exclusive powers to oversee
every aspect of the bank’s operation and affairs. (Central Bank vs. CA. 208
SCRA 652)

LIMITATION ON CONSERVATOR’S POWER

He may not revoke perfected and enforceable contracts. This will be an
infringement of the non-impairment clause guaranteed by the Constitution. (First
Bank vs. CA. 252 SCRA 259)

RECEIVERSHIP AND LIQUIDATION OF BANKS

Receivership is the summary closure of a bank by the BSP without prior
notice and hearing after a finding that the continuance in business would involve
probable loss to its depositors and creditors. (Central Bank vs. Court of Appeals.
220 SCRA 536)
INSTANCES WHEN A BANK/QUASI BANK MAYBE PLACED UNDER
RECEIVERSHIP
 1. is unable to pay its liabilities as they become due in the ordinary course of
business: provided that this shall not include inability to pay caused by
extraordinary demands induced by financial panic in the banking community;
(Sec. 30, NCBA)
2. has insufficient realizable assets, as determined by the Bangko Sentral, to
meet its liabilities; (Sec. 30, NCBA)
3. cannot continue in business without involving probable losses to its
depositors or creditors; (Sec. 30, NCBA)
4. has willfully violated a cease and desist order that has become final, involving
acts or transactions which amount to fraud or a dissipation of the assets of
the institution; in which cases, the Monetary Board may summarily and
without need for prior hearing forbid the institution from doing business in
the Philippines and designate the Philippine Deposit Insurance Corporation as
receiver of the banking institution; (Sec. 30, NCBA)
5. In case it notifies the Bangko Sentral or publicly announces a bank holiday, or
in any manner suspends the payment of its deposit liabilities continuously for
more than 30 days. (this pertains to the insolvency of bank) ( Sec 53, last
par. GBL)

OTHER IMPORTANT DOCTRINES

When a bank is placed under receivership, its officers, including its acting
president, are no longer authorized to transact business in connection with the
bank’s assets and property. (Abacus Real Estate Dev’t Center vs. Manila
Bank. G.R. No. 162270. April 6, 2005)
The appointment of a receiver does not dissolve the bank as a corporation
nor does it interfere with the exercise of corporate rights. Banks under liquidation
retain their corporate personality. The bank can sue and be sued but any case
should be initiated and prosecuted through the liquidator. (Manalo vs. CA.
October 2002)
When a bank is declared insolvent and placed under receivership, the BSP
through the Monetary Board, determines whether to proceed with the liquidation or
reorganization of the financially distressed bank. (Sps. Larrobis, Jr. vs. Phil
Veterans Bank. G.R. No. 135706. October 1, 2004)
The assets of the bank shall be deemed in custodia legis in the hands of the
receiver and shall, from the moment the bank was placed under receivership or
liquidation, be exempt from any order of garnishment, levy, attachment, or
execution. (Phil. Veterans Bank vs. NLRC. G.R. No. 13039. October 26,
1999)
The BSP forbids the bank from doing business. As such the bank cannot
foreclose any mortgage. (Provident Savings Bank vs. CA. 222 SCRA 125)
Pendency of the case did not diminish the authority of the designated
liquidator to administer and to continue the bank’s transactions. (Banco Pilipino
Savings and Mortgage Bank vs. Ybañez. 445 SCRA 482)

DEGREE OF DILIGENCE
A bank should exercise its functions and treat the accounts of their clients not
only with the diligence of a good father of a family but it should do so with the
highest degree of care considering the fiduciary nature of its relationship with its
depositors. (BPI vs. CA. 326 SCRA 641. 2000)
 The banks are under obligation to treat the accounts of its depositors with
meticulous care always having in mind the fiduciary nature of their relationship.
(BPI vs. IAC. 206 SCRA 408.)
However, the higher degree of diligence is not expected to be exerted by
banks in commercial transactions that do not involve their fiduciary relationship
with their depositors. (Reyes vs. CA. G.R. No. 118492. August 15, 2001)
By the very nature of the work of banks, the degree of responsibility, care
and trustworthiness expected of their employees and officials is far greater that
those of ordinary clerks and employees. Banks are expected to exercise the
highest degree of diligence in the selection and supervision of their employees.
(PCI Bank vs. CA. 350 SCRA 446. 2001)

SECRECY OF BANK DEPOSITS

GENERAL RULE
All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, are hereby considered
as absolutely confidential in nature and may not be examined, inquired, or looked
into by any person, government official, bureau or office. (Sec. 2, LSB)
EXCEPTIONS
1. When there is written permission of the depositor or investor; (Sec. 2, LSB)
2. Impeachment cases; (Sec. 2, LCB)
3. Upon the order of a competent court in cases of bribery or dereliction of
duty of public officials; (Sec. 2,LSB)
4. Upon the order of a competent court in cases where the money deposited
or invested is the subject of litigation; (Sec. 2, LSB)
5. In case of prosecution of unexplained wealth; (BF vs. Purisima. 161 SCRA
576; R.A. No. 301)
6. In case of inquiry of the BIR of bank accounts of a decedent for estate tax
purposes or in case of a tax compromise; (Sec. 6F, NIRC of 1997)
7. Upon order of a competent court in cases of violation of the AMLA; (R.A. No.
9160, as amended)
8. Incidental disclosures of unclaimed balances Unclaimed Balances Law. (R.A.
No. 3696)

PERSONS BANNED FROM LOOKING INTO BANK DEPOSIT

Any person, government official, bureau or office.

GARNISHMENT OF BANK DEPOSITS

The foreign currency deposit shall be exempt from attachment, garnishment
or any other order or process of any court, legislative body, government agency or
any administrative body whatsoever. (Sec 8. R.A. 6426, FCDA) Except when it has
been established that there is probable cause that the deposits involved are in any
way related to money laundering. (Sec. 11, AMLA)
The provision of R.A. No. 6426, FCDA, which prohibits garnishment of foreign
currency deposits, is inapplicable to a foreign transient. Attachment of the foreign
currency deposits of an American tourist is allowed who kidnapped and raped a
twelve-year old Filipino child. The FCDA applies to accounts of lenders and
investors. (Salvacion vs. Central Bank of the Philippines and China Bank.
278 SCRA 27. 1997)
 LETTERS OF CREDIT

LETTER OF CREDIT, DEFINED

A letter of credit is an engagement by a bank or other persons made at the
request of a customer that the issuer will honor drafts or other demands for
payment upon compliance with the conditions specified in the credit. (Bank of
Commerce vs. Serrano. 451 SCRA 484. February 16, 2005)

PURPOSE OF THE LAW

To substitute for the agreement of the buyer-importer to pay money under a
contract or arrangement.

NATURE OF LETTER OF CREDIT (3 distinct and independent contracts)

1. Contract of sale between the buyer and the seller;
2. Contract of the buyer with the issuing bank, and;
3. Letter of credit proper in which the bank promises to pay the seller
pursuant to the terms and conditions stated therein. (Keng Hua Paper Products
Co., Inc. vs. CA. 286 SCRA 257)

PERFECTION
- perfected from the time the correspondent bank makes payment to persons
in whose favor the letter of credit has been opened.

PARTIES
1. Buyer;
2. Issuing bank;
3. Seller.

COMMERCIAL CREDITS AND STANDBY CREDITS DISTINGUISHED

Commercial credits involve the payment of money under the contract of sale.
Such credits become payable upon the presentation by the seller-beneficiary of the
documents that show he has taken affirmative steps to comply with the sales
agreement. In the standby type, the credit is payable upon certification of a party’s
nonperformance of the agreement. The documents that accompany the
beneficiary’s draft tend to show the applicant has not performed. The beneficiary of
a commercial credit must demonstrate by documents that he has performed his
contract. The beneficiary of the standby credit must certify that his obligor has not
performed the contract. Transfield Philippines Inc vs. Luzon Hydro
Corporation. 443 SCRA 307. November 22, 2004)

BULK SALES LAW

(Act No. 3952)

WHAT CONSTITUTES BULK SALES:

 1. Any sale, transfer, mortgage, or assignment of a stock of goods, wares,
merchandise, provisions, or materials otherwise than in the ordinary course of trade
and the regular prosecution of the business of the vendor;
2. Any sale, transfer, mortgage, or assignment of all or substantially all of
the business or trade conducted by the seller, mortgagor, transferor, or assignor,
and;
3. Any sale, transfer, mortgage, or assignment of all or substantially all, of
the fixtures and equipment used in and about the business of the seller, mortgagor,
transferor, or assignor.
(Sec. 2)
PURPOSE OF THE LAW
- To prevent secret or fraudulent sale of the business, which could lead to its
closure, to the detriment of the creditors.

WHEN BULK SALES LAW DOES NOT APPLY:

1. When the sale, transfer, or disposition is made in the ordinary course of
business;
2. When there is a waiver of all the creditors, and;
3. When the sale, transfer, or disposition is by virtue of judicial order.

FORMALITIES
1. Execution of an affidavit, listing the names and addresses of all creditors,
the nature and the amount of obligation;
2. Preparation of inventory of the stocks to be sold;
3. Notification of all the creditors at least 10 days before the projected sale in
bulk, and;
4. Registration of the foregoing documents with the Bureau of Domestic
Trade. (Sec. 3-4)

EFFECTS OF FAILURE TO OBSERVE THE FORMALITIES

1. Sale is null and void;
2. Purchaser holds the property in trust for the seller;
3. Purchaser is liable to the seller’s creditors for properties he bought, and
already disposed of by him, and;
4. Purchaser has the right to demand from the seller the return of the
purchase price plus damages.

WAREHOUSE RECEIPTS LAW

(Act No. 2137, as amended)

PURPOSES OF THE LAW

1. To regulate the status, rights and liabilities of the parties in a warehousing
contract;
2. To protect those who, in good faith and for value, acquire negotiable
warehouse receipts by negotiation;
 3. To render the title to, and right of possession of property stored in
warehouses more easily convertible;
4. To place a much greater responsibility on the warehouseman.

WAREHOUSE RECEIPT, DEFINED

- a written acknowledgment by the warehouseman that he has received
goods from the depositor and holds the same in trust for him.

KINDS OF RECEIPT
1. NEGOTIABLE WAREHOUSE
RECEIPT
- a receipt in which it is stated that the goods received will be delivered to the
bearer or to the order of any person named in such receipt. (Sec. 5)
2. NON-NEGOTIABLE WAREHOUSE RECEIPT
- a receipt in which it is stated that the goods received will be delivered to the
depositor or to any other person. (Sec. 4)
- a non-negotiable receipt shall place upon its face by the issuing
warehouseman, non-negotiable or not negotiable.
- upon failure to do so, a holder who purchased it for value supposing it to be
negotiable, may, at his option treat such receipt as imposing upon the
warehouseman the same liabilities he would have incurred had the receipt been
negotiable. (Sec. 7)

INSTANCES WHERE WAREHOUSEMAN BOUND TO DELIVER

A warehouseman, in the absence of some lawful excuse provided by Act No.
2137 is bound to deliver the goods upon a demand made either by the holder of a
receipt for the goods or by the depositor, if such demand is accompanied with:
a. offer to satisfy warehouseman’s lien;
b. offer to surrender receipt, if negotiable, with such indorsements as would be
necessary for the negotiation of the receipt, and;
c. readiness and willingness to sign, an acknowledgment when the goods are
delivered, of such signature is requested by the warehouseman. (Sec. 8)

PERSON TO WHOM GOODS MUST BE DELIVERED

1. person lawfully entitled to the possession of the goods, or his agent;
2. person who is either himself entitled to delivery by the terms of the
non-negotiable receipt issued for the goods, or who has written authority from the
person so entitled either indorsed upon the receipt or written upon another paper,
or;
3. person in possession of a negotiable receipt by the terms of which the
goods are deliverable to him or order, or to the bearer, or which has been indorsed
to him or in blank by the person to whom delivery was promised by the terms of the
receipt or by his immediate indorser. (Sec. 9)

INSTANCES WHEN WAREHOUSEMAN MAY LEGALLY REFUSE TO DELIVER

GOODS
1. When the holder of the receipt does not satisfy the conditions prescribed in
Sec. 8 of Act No. 2137, as amended.
2. When the warehouseman has legal title in himself on the goods, such title or
right being derived directly or indirectly from the transfer made by the
 depositor at the time or subsequent to the deposit for storage, or from the
warehouseman’s lien. (Sec. 16)
3. If he had been requested by a person lawfully entitled to a right of property
or possession in the goods not to make delivery to any person. (Sec.10)
4. If he had information that the delivery to be made was to one not lawfully
entitled to the possession of the goods. (Sec.10)
5. Where the goods have already been lawfully sold to third persons to satisfy
the warehouseman’s lien or disposed of because of their perishable nature.
(Sec. 36)
6. In case of adverse claimants. (Secs. 17&18)
7. In the valid exercise of the warehouseman’s lien. (Sec. 31)

INSTANCES WHERE WAREHOUSEMAN LIABLE FOR CONVERSION EVEN WITH

AUTHORITY
The warehouseman is also liable even with indorsement or with authority, he
is likewise liable, if prior to delivery he had either:
1. been requested, by or on behalf of the person lawfully entitled to a right of
property or possession in the goods, not to make such delivery, or;
2. had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods. (Sec. 10)

DUTY OF WAREHOUSEMAN WHERE SEVERAL CLAIM THE GOODS

1. determine within reasonable time the validity of the conflicting claim;
(Sec.18)
2. bring a complaint in interpleader; (Sec.1, Rule 62 of the Rules of Court)
3. require claimant to litigate among themselves (Sec.17).

TRUST RECEIPTS LAW

(P.D. No. 115)

TRUST RECEIPT, DEFINED

A trust receipt is one where the entruster, who holds an absolute title or
security interests over certain goods, documents or instruments, released the same
to the entrustee, who executes a trust receipt binding himself to hold the goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose
of the goods, documents and instruments with the obligation to turn over to the
entruster the proceeds thereof to the extent of the amount owing to the entruster,
or a s appears in the trust receipt, or return the goods, documents or instruments
themselves if they are unsold, or not otherwise disposed of, in accordance with the
terms and conditions specified in the trust receipt. (Bank of Commerce vs.
Serrano. 451 SCRA 484. February 16, 2005)

PURPOSE OF THE LAW

To punish dishonesty and abuse of confidence in the handling of money or
goods to the prejudice of public order. (Ong vs. CA. G.R. No. 119858. April 29,
2003)

NATURE OF TRUST RECEIPT

A trust receipt partakes of the nature of a security transaction. It could never
be a mere additional or side document. Otherwise, a party to a trust receipt
agreement could easily renege on its obligation thereunder, undermining the
importance and defeating with impunity the purpose of such an indispensable tool
in commercial transactions. (Ong vs. CA. G.R. No. 119858. April 29, 2003)

ACTS AND OMISSIONS PENALIZED

The law is violated whenever the entrustee fails to:
1. return the goods covered by the trust receipts, or;
2. return the proceeds of the sale of said goods. (Metropolitan Bank vs.
Tonda. 338 SCRA 256. 2000)

INTELLECTUAL PROPERTY CODE

(R.A. NO. 8293)

STATE POLICY
The State recognizes that an effective intellectual and industrial property
system is vital to the development of domestic and creative activity, facilitates
transfer of technology, attracts foreign investments, and ensures market access for
our products. It shall protect and secure the exclusive rights of scientists, inventors,
artists and other gifted citizens to their intellectual property and creations,
particularly when beneficial to the people, for such periods as provided in this Act.
The use of intellectual property bears a social function. To this end, the State
shall promote the diffusion of knowledge and information for the promotion of
national development and progress and the common good.
It is also the policy of the State to streamline administrative procedures of
registering patents, trademarks and copyright, to liberalize the registration on the
transfer of technology, and to enhance the enforcement of intellectual property
rights in the Philippines. (Sec. 2)

EFFECT ON INTERNATIONAL CONVENTIONS AND ON PRINCIPLE OF

RECIPROCITY
Any person who is a national or who is domiciled or has a real and effective
industrial establishment in a country which is a party to any convention, treaty or
agreement relating to intellectual property rights or the repression of unfair
competition, to which the Philippines is also a party, or extends reciprocal rights to
nationals of the Philippines by law, shall be entitled to benefits to the extent
necessary to give effect to any provision of such convention, treaty or reciprocal
law, in addition to the rights to which any owner of an intellectual property right is
otherwise entitled by this Act. (Sec. 3)

SIGNIFICANT FEATURES OF THE LAW

1. A shift was made from the "first-to-invent system" under R.A. No. 165 [old
law] to "first-to-file system" under the new law.
2. In the case of inventions, the period of the grant was increased from 17 years
from grant under the old law to 20 years from date of filing under the new
law.
3. In the case of utility models, the previous grant of 5 years plus renewals of 5
years each under the old law was changed to 7 years without renewal under
the new law.
 4. In the case of industrial designs, the previous grant of 5 years plus renewals
of 5 years each was maintained.
5. Under the old law, there was no opposition proceedings and the examination
is mandatory; under the new law, the examination is made only upon request
possibly with or without examination.
6. Under the old law, publication is made after the grant; under the new law,
publication is effected after 18 months from filing date or priority date.
7. Under the old law, the penalties for repetition of infringement are: P10,000
and/or 5 years of imprisonment and the offense prescribes in 2 years; under
the present law, the penalties range from P100,000 to P300,000 and/or 6
months to 3 years of imprisonment and the offense prescribes in 3 years.

GOVERNMENT AGENCIES
The agency of the government in charge of the implementation of the
Intellectual Property Code is the Intellectual Property Office, which replaced the
Bureau of Patents, Trademarks and Technology Transfer. It is divided into 6
Bureaus, namely:
1. Bureau of Patents;
2. Bureau of Trademarks;
3. Bureau of Legal Affairs;
4. Documentation, Information and Technology Transfer Bureau;
5. Management Information System and EDP Bureau, and;
6. Administrative, Financial and Personnel Services Bureau. (Sec.6)

INTELLECTUAL PROPERY RIGHTS

1. Copyright and Related Rights
2. Trademarks and Service Marks;
3. Geographic Indications;
4. Industrial Designs;
5. Patents;
6. Layout-Designs (Topographies) of Integrated Circuits, and;
7. Protection of undisclosed information. (Sec. 4)

PATENT
- an exclusive right acquired over an invention, to sell, use, and make the
same whether for commerce or trade.
- it may relate to product, process, or an improvement of any of the
foregoing.

PATENTABLE INVENTIONS
Any technical solution of a problem in any field of human activity which is
new, involves an inventive step and is industrially applicable shall be patentable. It
may be, or may relate to, a product, or process, or an improvement of any of the
foregoing. (Sec. 21)

NON-PATENTABLE INVENTIONS
1. Discoveries, scientific theories and mathematical methods;
 2. Schemes, rules and methods of performing mental acts, playing games or
doing business, and programs for computers;
3. Methods for treatment of the human or animal body by surgery or therapy
and diagnostic methods practiced on the human or animal body. This
provision shall not apply to products and composition for use in any of these
methods;
4. Plant varieties or animal breeds or essentially biological process for the
production of plants or animals;
5. Aesthetic creations, and;
6. Anything which is contrary to public order or morality. (Sec.22)

ELEMENTS:
a) Novelty and prior art; (Sec. 23&24)
The element of novelty is an essential requisite of the patentability of an
invention or discovery. If a device or process has been known or used by others
prior to its application or discovery by the applicant, an application for a patent
therefore should be denied, and if the application has been granted, the court, in a
judicial proceeding in which the validity of the patent is drawn in question, will hold
it void and ineffective. It has been repeatedly held that an invention must possess
the essential elements of novelty, originality and precedence, and for the patentee
to be entitled to the protection the invention must be new to the world. (Manzano
vs. CA. GR No.113388. September 5, 1997)
b) Inventive Step
An invention involves an inventive step if, having regard to prior art, it is
obvious to a person skilled in the art at the time of the filing date or priority date of
the application claiming the invention. (Sec 26)
c) Industrial Applicability
An invention that can be produced and used in any industry shall be
industrially applicable. (Sec. 27)

FIRST-TO-FILE RULE
1. if two or more persons have made the invention separately and
independently of each other- right to patent belongs to the person who filed an
application for such invention;
2. if two or more applications are filed for the same invention- to the
applicant who has the earliest filing date or, the earliest filing date. (Sec. 29)

GROUNDS FOR COMPULSORY LICENSING

The Director of Legal Affairs may grant a license to exploit a patented
invention, even without the agreement of the patent owner, in favor of any person
who has shown his capability to exploit the invention, under any of the following
circumstances:
1. National emergency or other circumstances of extreme urgency;
2. Where the public interest, in particular, national security, nutrition, health or
the development of other vital sectors of the national economy as
determined by the appropriate agency of the Government, so requires;
3. 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;
4. In case of public non-commercial use of the patent by the patentee, without
satisfactory reason;
 5. If the patented invention is not being worked in the Philippines on a
commercial scale, although capable of being worked, without satisfactory
reason. (Sec. 93)

RIGHT TO A PATENT
1. to the inventor, his heirs, or assigns
2. when two or more persons have jointly made an invention - to them jointly
3. if two or more persons have made the invention separately and
independently of each other - to the person who filed an application for such
invention
4. when two or more applications are filed for the same invention - to the
applicant who has the earliest filing date or the earliest priority date.

INFRINGEMENT
The making, using, offering for sale, selling, or importing a patented product
or a product obtained directly or indirectly from a patented process, or the use of a
patented process without the authorization of the patentee.
1. Civil action for infringement
a. to recover from the infringer damages as the court may award provided
that it shall not exceed 3 times the amount of the actual damages sustained plus
attorney’s fees and other expenses of litigation;
b. action for injunction;
c. to receive reasonable royalty, if damages are inadequate;
d. to have the infringing goods, materials, and implements used in the
infringement disposed of outside the channels of commerce or destroyed;
e. to hold contributory infringer jointly and severally liable with the infringer.
2. Criminal action for repetition of infringement

TRADEMARKS/SERVICEMARK
- any visible sign capable of distinguishing the goods (trademark) or services
(service mark) of an enterprise and shall include a stamped or marked container of
goods. (Sec. 121.1)

TRADENAME
- name or designation identifying or distinguishing an enterprise. (Sec. 121.3)

HOW MARKS ACQUIRED

The rights in a mark shall be acquired through registration made validly in
accordance with the provisions of this law. (Sec. 122)

DOCTRINE OF SECONDARY
MEANING
- a long time exclusive and continuous use of a mark or name which is
unregistrable for being geographical , descriptive or a surname, such that the mark
or name has lost its secondary meaning and it becomes associated in the public
mind with particular goods.

REMEDIES OF THE OWNER OF THE REGISTERED MARK

1. Civil action
- damages
 - impounding of sales invoices
- injunction
- destruction of goods found to be infringing
2. Criminal Action

A certificate of registration gives rise a presumption of its validity and the

right to the exclusive use of the trademarks.
While an administrative cancellation of a registered trademark, on any of the
grounds under Sec. 17 of R.A. No. 166, is within the ambit of the BPTTT, an action
for infringement or other incidental remedy sought is within the jurisdiction of the
ordinary courts.
An action for infringement or unfair competition, including the available
remedies of injunction and damages, in the regular courts can proceed
independently or simultaneously with an action for the administrative cancellation
of a registered trademark in the BPTTT. (Levi Stauss (Phils.) Inc. vs. Vogue
Traders Clothing Company. 462 SCRA 52. June 29, 2005)

The infringement case can and should proceed independently from the
cancellation case with the Bureau so as to afford the owner of certificates of
registration redress and injunctive writs. In the same light, so must the cancellation
case with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office)
continue independently from the infringement case so as to determine whether a
registered mark may ultimately be cancelled. (Shangri-la International Hotel
Management Ltd. vs. CA. G.R. No. 111580. June 21, 2001)

A certificate of registration of a mark or trade-name shall be prima facie

evidence of the validity of the registration, the registrant's ownership of the mark or
trade-name, and of the registrant's exclusive right to use the same in connection
with the goods, business or services specified in the certificate, subject to any
conditions and limitations stated therein.
In determining whether colorable imitation exists, there are two kinds of tests
– the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals and other
cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals
and its proponent cases.
The test of dominancy focuses on the similarity of the prevalent features of
the competing trademarks, which might cause confusion or deception and thus
constitutes infringement. The question at issue in cases of infringement of
trademarks is whether the use of the marks involved would be likely to cause
confusion or mistakes in the mind of the public or deceive purchasers.
The holistic test mandates that the entirety of the marks in question must be
considered in determining confusing similarity.”
Duly registered trademarks are protected by law as intellectual properties
and cannot be appropriated by others without violating the due process clause. An
infringement of intellectual rights is no less vicious and condemnable as theft of
material property, whether personal or real.
(Amigo Manufacturing, Inc. vs. Cluett Peabody Co., Inc. G.R. No. 139300.
March 14, 2001)
COPYRIGHT
- right over literary and artistic works which are original intellectual creations
in the literary and artistic domain protected from the moment of creation. (Kho vs
CA. G.R. No. 115758. March 11, 2002)

When rights over copyrights are conferred

- from the moment of creation (Sec. 172.1)

The format of a show is not copyrightable. The copyright does not extend to
the general concept or format of its dating game show.
Copyright does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it is
described, explained, illustrated or embodied in such work.
(Joaquin, Jr. vs. Drilon. January 28, 1999)

Copyright infringement and unfair competition are not limited to the act of
selling counterfeit goods. They cover the whole range of acts, from copying,
assembling, packaging to marketing, including the mere offering for sale of the
counterfeit goods. (Microsoft Corporation vs. Maxicorp., Incorporated. 438
SCRA 224)

Copyright shall be presumed to subsist in the work or other subject matter to

which the action relates if the defendant does not put in issue the question whether
copyright subsist in the work or subject matter; and
Where the subsistence of the copyright is established, the plaintiff shall be
presumed to be the owner of the copyright and the defendant does not put in issue
the question of his ownership. (Bayanihan Music Philippines, Inc. vs. BMG
Records (Pilipinas), Et Al. G.R. No. 166337. March 7, 200)

CHATTEL MORTGAGE LAW

(Act No. 1508 in relation to Arts. 1484, 1485, 2140 and 2141 of the New
Civil Code)
REAL ESTATE MORTGAGE
(Act 3135, as amended by R.A. NO. 4118)

CHATTEL MORTGAGE, DEFINED

By a chattel mortgage, personal property is recorded in the Chattel Mortgage
Register as a security for the performance of an obligation. If the movable instead
of being recorded, is delivered to the creditor or a third person, the contract is a
pledge and not a chattel mortgage. (Sec. 2140, NCC)

FORMALITIES
1. Registration
 It must be registered in the Chattel Mortgage Register of the Register of
Deeds where the mortgagor resides or if he resides in the Philippines in the place
where the property is situated. (Sec. 4, Act No. 1508)
2. Affidavit of Good Faith
It is a subscribed statement in contract of chatted mortgage wherein the
parties severally swear that the mortgage is made for the purpose of securing the
obligation specified in conditions thereof, and for no other purpose and that the
same is just and valid obligation and one not entered into for the purpose of fraud.
(Sec. 5, Act No. 1508)

DEFIENCY AFTER FORECLOSURE

When the proceeds of the sale are insufficient to cover the debts in an
extrajudicial foreclosure of chattel mortgage, the mortgagee is entitled to claim the
deficiency from the debtor. (State Investment House, Inc. vs. CA. 217 SCRA
32, 1993)

EQUITY OF REDEMPTION VS. RIGHT OF REDEMPTION

The right of redemption in relation to a mortgage exists only in the case of
the extrajudicial foreclosure of the mortgage. No such right is recognized in a
judicial foreclosure except only where the mortgage is a bank or banking institution.
The period to exercise the right of redemption is within one year from the
registration of the sheriff’s certificate of foreclosure sale.
Where no right of redemption exists in case of a judicial foreclosure because
the mortgagee is not a bank or a banking institution, the foreclosure sale when
confirmed by an order of the court shall operate to divest the rights of all parties to
the action and to vest their rights in the purchaser. There then exists only what is
simply known as the equity of redemption. This is simply the right of the defendant
mortgagor to extinguish the mortgage and retain ownership of the property by
paying the secured debt within the 90-day period after the judgment becomes final,
in accordance with Rule 68 of the Rules of Court, or even after the foreclosure sale,
but prior to confirmation. (Huerta Alba Resort, Inc. vs. CA. September 1,
2000. G.R. No. 128567)

OTHER IMPORTANT DOCTRINES

No mortgage on any unit or lot shall be made by the owner or developer
without prior written approval of the Housing and Land Use Regulatory Board
(HLURB).
A mortgagee’s want of knowledge due to its negligence takes the place of
registration – it is presumed to know the rights of others over the lot – and the
conversion of its status as mortgageee to buyer-owner will not lessen the
importance of such knowledge.
Under the Art. 2085 of the Civil Code, the essential requisites of a contract of
mortgage are: (a) that it be constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute owner of the thing mortgaged;
and (c) that the persons constituting the mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the
purpose. (Home Bankers Savings & Trust Co. vs. Court of Appeals. 457
SCRA 167. April 26, 2005)

Under Art. 2085 of the Civil Code, one of the essential requisites of the
contract of mortgage is that the mortgagor should be the absolute owner of the
property to be mortgaged; otherwise, the mortgage is considered null and void – an
exception to this rule is the doctrine of “mortgage in good faith.” (Llanto vs.
Alzona. 450 SCRA 288. January 31, 2005)

The right of redemption should be exercised within the specified time limit,
which is one year from the date of registration of the certificate of sale.
In case of disagreement over the redemption price, the redemptioner may
preserve his right of redemption through judicial action which in every case must be
filed within the one-year period of redemption.
The general rule in redemption is that it is not sufficient that a person
offering to redeem manifests his desire to do so – the statement of intention must
be accompanied by an actual and simultaneous tender of payment. (Banco
Filipino Savings and Mortgage Bank vs. CA. 463 SCRA 64. July 28, 2005)

A foreclosure sale buyer, having accepted payment from persons claiming

right to redeem foreclosed property, has the obligation to account for such
payment, to return the excess, if any, to allow redemption. (Rural Bank of
Calinog (Iloilo), Inc. vs. CA. 463 SCRA 79. July 28, 2005)

A recorded real estate mortgage is a right in rem, a lien on the property

whoever its owner may be. Mortgage follows the property until discharged.
Debtor in extrajudicial foreclosures under Act No. 3135 or his successor-in-
interest has one year from the date of registration of the Certificate of Sale with the
Registry of Deeds a right to redeem the foreclosed mortgage.
The buyer in a foreclosure sale becomes the absolute owner of the property
purchased if it is not redeemed during the period of one year after the registration
of the sale. (Paredes vs. CA. 463 SCRA 505. July 15, 2005)

INSOLVENCY LAW
(Act No. 1956)

INSOLVENCY DISTINGUISHED FROM SUSPENSION OF PAYMENTS

1. In insolvency, the liabilities of the debtor are more than his assets while in
suspension of payments the assets of the debtor are more than his liabilities.
2. In insolvency, the purpose is to obtain discharge from all debts and liability
while in suspension of payments the purpose is to delay payment of debts
which remain unaffected although a postponement of payments is declared.
3. In insolvency, the assets of the debtor are to be converted into cash for
distribution among his creditors, while in suspension of payments the debtor
is asking for time within which to convert his properties into cash with which
to pay his creditors as the obligations fall due.
INVOLUNTARY INSOLVENCY DISTINGUISHED FROM VOLUNTARY
INSOLVENCY
1. In involuntary, three or more creditors are required while in voluntary one
creditor may be sufficient.
2. In involuntary, the creditors must be residents of the Philippines whose
credits or demand accrued in the Philippines and none of the creditors has
become a creditor by assignment within 30 days prior to the filing of the
petition while no such requirements exist for voluntary insolvency.
3. In involuntary, the amount of indebtedness must be less than P1,000 while
for voluntary, it must exceed P1,000.
4. In involuntary, the petition must be accompanied by a bond, while voluntary
does not require a bond.

TRUTH IN LENDING ACT

(R.A. No. 3765, as amended by the Consumer Act of 1992)

DISCLOSURE REQUIREMENT:
Any creditor shall furnish to each person to whom credit is extended, prior to
the consummation of the transaction, a clear statement in writing setting forth, to
the extent applicable in accordance with rules and regulations prescribed by the
Monetary Board of the BSP, the following information:
1. the cash price or delivered price of the property or service to be acquired;
2. the amounts, if any, to be credited as down payment and/or trade-in;
3. the difference between the amounts set forth under clauses 1 and 2;
4. the charges, individually itemized, which are paid or to be paid by such
person in connection with the transaction but which are not incident to the
extension of credit;
5. the total amount to be financed;
6. the finance charge expressed in terms of pesos and centavos;
7. the percentage that the finance charge bears to the total amount to be
financed expressed as a simple annual rate on the outstanding unpaid
balance of the obligation;
8. the effective interest rate;
9. the repayment program;
10.the default or delinquency charges on late payments.
(Sec.4)

Excessive interests, penalties and other charges not revealed in disclosure

statements issued by banks even if stipulated in the promissory notes, cannot be
given effect under Truth un Lending Act. (New Sampaguita Builders
Construction, Inc. vs. Philippine National Bank. G.R. No. 148753. July 30,
2004)

ANTI- MONEY LAUNDERING LAW

(R.A. No. 9160, as amended by R.A. No. 9194)

MONEY LAUNDERING, DEFINED

- is a crime whereby the proceeds of an unlawful activity are transacted,
thereby making them appear to have originated from legitimate sources. (Sec. 4)
How is the offense money laundering committed?
1. Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property.
2. Any person knowing that any monetary instrument or property involves the
proceeds of any unlawful activity performs or fails to perform any acts as a
result of which he facilitates the offense of money laundering referred to in
paragraph 1 above.
3. Any person knowing that any monetary instrument or property is required
under this Act to be disclosed and filed with the AMLA Council fails to do so.

UNLAWFUL ACTIVITIES UNDER AMLA:

Any act or omission or series or combination thereof involving or having
direct relation to the following:
1. Kidnapping for ransom under Art. 267 of the Revised Penal Code, as
amended.
2. Secs. 4, 5, 7, 8, 9, 10, 12, 13, 14, 15 and 16 of the Comprehensive Dangerous
Drugs Act of 2002.
3. Section 3, paragraphs B, C, E, G, H and I of Anti-Graft and Corrupt Practices
Act.
4. Plunder under RA 7080, as amended.
5. Robbery and extortion under Arts. 294, 295, 296, 299, 300, 301 and 302 of
the RPC, as amended.
6. Jueting and masiao punished as illegal gambling under PD 1602.
7. Piracy on the high seas under the RPC, as amended and PD 532.
8. Qualified theft under Art. 310 of the RPC, as amended.
9. Swindling under Art. 315 of the RPC, as amended.
10.Smuggling under RA 455 and 1937.
11.Violations under Electronic Commerce Act of 2000.
12.Hijacking and other violations under RA 6235, destructive arson and murder,
as defined under the RPC, as amended, including those perpetrated by
terrorists against non-combatant persons and similar targets.
13.Fraudulent practices and other violations under Securities Regulation Code of
2000.
14.Felonies or offenses of a similar nature that are punishable under the penal
laws of other countries.