TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 NEGOTIABLE INSTRUMENTS LAW NEGOTIABLE INSTRUMENTS LAW....... = om : f 1 Negotiable Insrumont Requistes Governing Laws Monet Legal Tender Impairment Clause Features KINDS OF NEGOTIABLE INSTRUMENTS. Promissory Note Billo Exenange : Promissory Note v. Bi of Exchange Bil of Exchange v. Check Other partes to a Negotiable Insiument Incidents i the Lie of @ Negotiable Instrument NON-NEGOTIABLE INSTRUMENTS. eo Non-negatabe instrument : Effect of Estopoe! Negotiate losrumentsv, Non Negotiable Instuments Examples of Non-Negolablelnttuments NEGOTIABILITY ee : 5 Factors that Atect the Determination of Negoiably of insruments| Requisiles of Negotaty 1. Wmust bin Wilting and signed by the maker or amor. 2. _Itmust contain an Uncondtianal promise a erer to pay @ sum cariain in money. Fund for Rembursement y. Patclar Fund for Payment Test Fond for Rembursement v. Partclar Fun for Payment ‘Subject to another transaction (non-negatiale) Reference fo another raneacton (Negotabe) 3. must be Payable on demand or ala fixed of determinable future tine. ’. When Payable on Demand 3. * Payable a a Fixed or Dstorminable Future Time _ ‘ezelraion Clause Ineecurty Clause Extension Cauee . Payment on instatiments 4. ltmust be Payable to Order o° Bearer 3. Payable to Oréer Payable fo Bearer Fieilous Payoo Rule How may the crawee bank invoke as defense the Fictilous Payee Rule Payable to Order v. Payabo to Bearer Provisions and Omissions thal OO NOT Ale! the Negotabilty of instruments INTERPRETATION OF NEGOTIABLE INSTRUMENTS ... Rules TRANSFER. 7 12 1 Nogotaion é 2. Assigament Nogoliation v.Aasigament '3. By Operation of Law NEGOTIATION... Negotiation How negoiaton takes place Incomplete negoiaton of order instrument Egulable Assignment INDORSEMENT «snes eee renee 13 Indorsement Howindorsements are made Indorsement asa cont Contract of incorsement vs. Contract of Guaranty 2018 SAN BEDA CENTRALIZED BAR OPERATIONS'|TABLE OF CONTENTS MEMORY SAW BEDA Kinds of indarsement FAS to the methods of negotiation (speciabenk) Rules on Special ndorsamen Ruts on Bank Indoreement [As lo presence or absence of lations (absoteleontionl) [AS to he kins of We wanstrred Restctvo Inforeemant Effects of Rosine Indoreement 4. Aste scope of baby af iorser Etfets of valid ncorsement 5. Ghar kings of indoreement Ginuinagular) Labi of regular Incase Rules on Indorserment Prasumplione at Time and Place of indorsement ‘A sto Time a indorsement 8, Asto Place of Indorsemert ‘Negotiation by api party UUnwtations on Renegetaton ‘Striking oct af Indossemert ‘Wren older may ake on ndorsement HOLDER. Hower 2rasees of Holders Imortance ofthe Classification ye folder in Bue Course Righta of «Helder n Oue Coures 1 Holder Nota Due Course Rights of» Holder Not n Due Course oie in Due Course v. Holder Notin Due Course Bis n Set Right of hoders where difecent ats are negotated seperately Bois ‘Obtgations of heer who indarses two (2) or ore pars of re Blin Sot to ferent persons i. Holders fe Value Paria Petommance LIABILITIES OF PARTIES ACCORDING TO NATURE ‘Warantoe: Effect of reach of warranties Unsities of pares 1. Engapoment io Pay Primary. Secondary Liabity 1 Panties Prmarly Liable 2. Paris Secondary Litle Indorsrls who are not secondly able {raer of Labi of Indoreers When 9 person signing an instrument isnot deemed as an incerser {aby of an Agent Signature by Procuration Lista the nar ACCOMMODATION PARTY. ‘ocoeodtion Accemmadation Paty Lbity ofan Aecomsmodaton Party Corporation as an Accommogation Party SpectiaRughts of Aszommodation Party ules on Saldary Accommedaton Paros LUsbity ofan Accommodates Party ‘Accommodation Party. Regula Party DETENSES. Real w Personal Datonsos DSelenses ang Warranties Breached Entec of Certain Defenses FORGERY ects CULO Rule Persons presided trom seting up defense of forgery ‘uinan Grae Paya a Check win the Forged Signature of he Drawer noc of Forged Signature 1 2018 SAN BEDA CENTRALIZED BAR OPERATIONS 18 2 28 23TABLE OF CONTENTS SAN EDA MEM@RY AID 2018 Contibutoy Negigence and Doctrine of Last Clear Chance 2esour Cleaning Rule Rules 09 Forgery Rules on Forgery a to Promissory Notes Rules on Forgery asf Bil of Exchange ENFORCEMENT OF LIABILITY...... fr ea ee 37 Prmary Gaby ‘Secondary Lily Slope 9 Promsary Note Stops i Bit of Exchange Slap n order to charge persons secondary lable in athor eases PRESENTMENT.. Preseniment Present! for Payment Reausis for sufctency of presentmant When Presoniment Shou be Mage How Computes Time of Maturity Proper Placa of Presentment ToWhom Prosented Exiiton Winen Exovsed iter Delay in Making Presentment or of Giving Notice is Excused Presentment or Acceptance When Requed 7 Howhtade Winen Excused When Delay is Excused ules on Prosenimont in cata nstances ACCEPTANCE. 40 eceptance Payment Acceptance: Form keds i DISHONOR emnnnnsnnnnenninnnnsnnnnnnnnne 4 ‘ishonor by Non Payment ‘isnonar by Non-Acceptance 5 Nets of Dishonor By wom given ‘Towose bene does noice of dishonor inure Tewnom given nar Rules How given Ware aven Erect ack of notice of eishonor on Negotable Instrument wich s payable in installments ‘When Notice of Dishonor is Excused Foreign Bil of Exchange PROTEST ee 69 Protest Roquisies Purposes toot of Non-pratost Protests Necessary Wren tage Winere Made Prolst v, Notice of Cishoner Protest or Better Secunly ACCEPTANCE AND PAYMENT FOR HONOR en et omer 44 ‘Acceptance for Honor (Acoeplance Supra Protest) Requistes, Discharge of NogotiableInstument Payment for HonoPayment Supra Protest Roqusies Right of Payor for Honor Creinary Acceptance v. Acceptance for Honor [Rceeplance lor Honoev. Payment for Honor Payment by Person Pratl Liable v. Payinant for Honor 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | iTABLE OF CONTENTS SAN A MEMORY AID 2018 DISCHARGE. on 46 How a Negolabieinsrument s Oucharged 1" Paymentin Due Course I. Payment by Accommadatod Party 4, Caneatttion TV. By any ather Act which Discharges the instant \._Pincpal debtor becomes the holger Surrender ofthe Instument Digenarge of Persons Secondary Liable Instances when the agreement to extend theme of pyment does not discharge = party secondary able Efcis of Payment by Parties Secondary able Renunciation oy Hoder Requsies tosis Etc of Payment by Thiré Persons CHECKS hack Bio Exchange v. Check “yes. ‘Cashier's Caeok 2. Nenapees Cresk ‘Manager's or Cashier's Chock May be Treated as Promissory Note Izsuance of Managers or Gatier's Check 's Not an Aulomatie Transfer of Funds 3. Gontted Check Certieation Etects ron Clas Rute ‘Checks that cannot be Payabie to Bearoe Memorancum Check revelers Check Crossed Check Kinds ot rossed Check Etfcts of Crossing of Chocks Presentment for Payment of Checks Callecion of Checks Clearing of cracks Reusat of Orawoe Bank to Pay a Check (Caves When Drawee Bank May Refuse Payment Grimes invalving Checks COMPARATIVE CHART OF SECTIONS 14, 15 AND 16 . 52. COMPARATIVE CHART FOR ENFORCEMENT OF LIABILITY .sccssnsm . 52 INSURANCE LAW ‘THE INSURANCE CODE (R.A. NO. 10607). Governing Laws Pemary Suppitory 55. INSURANCE. 55 inctons of insurance Characteristics of insurance Noture a insure ora vale Classes af Insurance Contact Carina Prncpies in Insurance ‘R Contato Inerniy 1, Principe of Utmost Gos fath(Uberra oe Fisae) ©. Contact of Adhesion (Fina Paint Ra 0. Subrogation Fight of Subrogation Purposes of Subogation FRoguiies ofthe Right of Subrogation ‘Wen Subrogation © Not Avalatie 'y [2018 SAN BEDA CENTRALIZED BAR OPERATIONSTABLE OF CONTENTS SAN BEDA MEMORY AID 2018 CONTRACT OF INSURANCE Contacto nsuance FRequiites ofan Insurance Contract . ‘Test to Determine Whether a Contracts an Insurance Contract Perfection of he Contact of nourance ‘fer and Acceptance Insurance Contact tough Correspondence Delay mn Acceptance Consirction of Insurance Contract 58 PARTIES, 1. inser Insurance Corporation Requisite Foreign Inaurance Corporation 2. ineures Capacity of te Panty insured Pubic Enemy Effect of War on Existing Insurance Contracts Rule on Minors Rule on Mares Women Etc! of Death of Gomer of Policy ‘ SUBJECT MATTER Subject Matter of an Insurance Gonvact Latery Elements of Lottry ‘Wagering Contract. Conract of insurance 62 INSURABLE INTEREST Insurabie interest Necessity of nsurabie Interest Ingorable interest in Life and Disabty Insurance Persona in whose Life and Hoalh the ineured has an insurable Interest “Two General Classes of Life Poles 1 Insurance Upon One's Life (Insured United Ineurabie Interest '8,_Inaurabie Interest inthe Life of Another (Insured = Beneficiary) ‘Thee General Catagories of ingurable Interest nthe Life of Another. ‘A. Relations by Blood and Mariage i Rule of Mum on insurable Infrest based on Relationship and the revisions on Support 8, Businase Rolalonshine Business Associate or Employer of Insured ©. cradiors ©: Ingorabe Interest inthe Life of « Person upon which an Estate or Interest Deponds Congentf the Cost que vie ‘ime of Existence Life Ineuranes Policy v. Chl Donation Insuable interest in Property Insurance Ettct of Absence of insurable Inerest in Property Insured ‘Measure of insurable Interest in Property ‘Time of Existence insurable terest of anafiiany insurable Intorest in Property v nsurance Interest in Life Ineorable Interest of Carer or Depository Ineurable interest of Heir over Inverianice Insurable interest of Owe over Levied Property Insurable interest of Lesseo over Leased Property Inurable Interest of Mortgagor and Morigagee Instances the mosages may be made the Beni payee Slandaré o Union Morigage Clause v. Open ar Simple Lots Payable Mortgage Clause Erecs of Loss Payable Clause Mortgage Redemption Insurance ‘A. Change of Interest 8, Transler of Ply Effect of Polis Transfer Without the Consent ofthe Insurer ‘Transfer of Gaim 62 est que we) DEVICES IN ASCERTAINING AND CONTROLLING RISK AND LOSS . 6 Risk Pet Hazacd Foor Primary Concerns ofthe Parts o an insurance Contract 2018 SAN BEDA CENTRALIZED BAR OPERATIONS |vTABLE OF CONTENTS. SAN BEDA MEMORY AID 2018 Devices used for Ascertining and Contling Risks and Loss it “Concealment “eet of Moteritly = Materalty in Ordinary Ingurancev.Materiaity in Marne Insurance Effet of Conceament ‘Burson of Proc’ Good Fat Not 2 Defense Mater that Nood Not Be Disciosed inthe Absence af Inquires Matters that Need Not be Dissosed Even in Answer to foquias Nattere that must be Dseloeed Even n the Absence of Inquiry Proof of Frau in Coneesiment 8, - Representation Kinds of Representation Time ta whien Represontaton Refers ‘eration oF Withdrawal of Rapresertaton CConstracton of Reprosentatons Erect on Poicy af Expressions of Option o« Expectation Elect where formation was abtaines rom Ths Persons Requisies ofa False Representation (Merepresenation kinds of Miscepresentation Representation Ordinary Ineurance v Representation in Marne insurance Effct of Misromosentaton CCharacterstie of Misrepresenttion Goncealment. Marepresantation G Warranty Kinds of Repeesentaton “Time to whicn Representation Refors ‘Aortion or Withdrawal of Represen aon Construction of Representations Effoct on Potcy of Expressions of pcion or Expectation Effect whore information was obtained fom Third Persons Requisites of 2 eave Rearesentaion Misrepresetaion} Kinds of Mésoprosentation Representation n Ordinary surance v Representation in Warne Insurance Erect of Msrepresentation Characteristic of Mirepreseatation Concealment. Wisropreseniaton kings of Warranties {ime fa wich Warranty Rates Efects of Breach of Warranty ‘reach of Wavrany by Insured Wartaniyv. Representation 1. Excaption / Excision E. Gonditen Kings of Concitons Condon waranty RESCISSION - Grounds Reseission in Non Life Poi Rescission in Life Paes Requisites of \Wnen the incontostabie clause cannot be invoke Eftact when Posey Yoconas Ineamestabe Dotontes Nol Barred by Inontesibiity Cause POLICY OF INSURANCE oe Policy of Insurance Promo Stnuntione nam insurance Policy Kings ot nauranes Poses Innpertance of Datwery of Pacy ‘Sbeenea of Beery Ett of Davee of Pokey Papers Altace tothe Posey Countersignatura othe insured ona Rider, Endorsement, Clause or Warranty Lackeaf Beserpion Binding Receot Rules on Cover Notes Requisioe or vai Insurance by Parner Part Owner \vi1 2018 SAN BEDA CENTRALIZED BAR OPERATIONS, 76I | TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 Val of Agreement Limiting Tie for Commencing Action Cancalstion CCancaliation of Non-Lile Policy Reausies Grounas Renewal of Non-Lite Policies PREMIUM. Insurance Premium Assessment ‘General ue: “Cash and Cary Rue” Payment of Premiom as a Dedt or Obigaton [Effects of Non-Payment of Prem ‘efonses Availabe for Non-Paynent Effet of exnowedgment of Recap of Premium in Potcy Effect of Aczoptance af Premio Payment or Future Premiums Payment ofthe Pramium by Post-Datod Chock Eniitoment of Insured to Ratu of Premiums Pad Devices Used to Prevent the Forture of @Lfe Insurance ater the Payment of the Fist Premium Loss Loss in insurance FRoguicias for Recover Incase of Lose Wien insures Liable for Lose \Winen the Insurer ie Not Proxmate Cause Imada Cause Roma Cause Burden of root Notice of Lose Purposes “Tne of Ging Noto Proof of Laas, Form of Notice oF Proof of Loes Purposes : \Whon Delay in Presstation of Noce or Proof of Loss is Deemed Waived Fale to Furnish Notice or Proof of Lase Defects in the Notice or Proof of Loss are Waived when the Ineurer ‘Tost o Determine wheter a This Perso may Dec Sue te inure of the Wrongdoar PERSONS ENTITLED TO RECOVER.. Benet Kinds of Senefciay Limations nthe Appeiment of Benetry ‘ght to Chango Benetciry Ett of revocsbe Bonet, Changing the Designaton of he Senta em revocable to Revocable Foreture othe Fights of Benfica {en he Beet Dos Belov ensured rior of Profronee of Persone Sted to Recover in Beha of « Minor DOUBLE INSURANCE Double nsurance Roguistes Overinsurance Overinsurance v. Double Insurance verinsurance by Dovble Insurance ‘Adatonal or Other Insurance Cause Purpose ‘Stipulation against Double Insurance Pneiple af Contribution o¢ Coniston Clause Rules for Payment where there Over insurance by Double Insurance Formula for Determining Insura’s Conibuton 86 REINSURANCE. . Reinsurance Reinsurance Cessian ares toa Reinsurance Contact Retocession (Reinsurance of Reinsurance) Reinsurance Treaty Reinsurance Treaty v. Reinsurance Policy ‘Nature of Conrat of Reinsurance Funcllons of Reinsurance 87 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | itTABLE OF CONTENTS SAN MEMORY AID 2018 Insportance of Reinsu Value of Reineurance Limit of Single ask Double Insurance v Reinsurance Duty of Reinsured Yo Decose Facte Methods of Ceaing Remsurance Rensurers Lsbity ‘SPECIAL KINDS OF INSURANCE MARINE INSURANCE Transporation inswance Major Divisions of Transportation surance Scope of Marne insur Fisk Insured Against Penis ofthe Sea Pris of the Ship ‘Special Matine Insurance Contracts and Clauses Insuraieinorest in Marne Insurance Freighlage Sources of Freightoge Conceaimentin Marne insurance \Winen Conceaiment Does Not Vitae Entre Contract Distinctions on Conceaiment Representation in Marne Insurance Effect of False Repraseataion by Insured Eflet ot Fale of Representaon se 1 Exoectation \Warrany in Marne Insurance Implied Warranties Seaworiness| Test of Seaworthiness Coverage othe Warranty of Seaworthiness limpuea Warranty of Seaworthiness Applied to Cargo Owner ind of Deviation ose in Mine insurance Right ofthe ingured fo Payment ‘Abandonment Reauiiler for Vatisty Elect of Faure to Abandon Ettetsof Abandonment . Accoptance Etfets of Accoptance i Fights ot Insurer Wha Pays Paral Loss As Actual Tot! Li insur’ Labilly for Rtusal of Abandonment Measure of Indernaiy Loss of Profits Separately insured Formula in Deering ihe Amount af Rezovery Presumption of Los of Profits Averane Kinde of Averages Genera: Average v. Parteular Average Fequsites to te Right to Claim General Average Coribution Formula in Detarmiting the Share and Contanaton of Each of ne Paries Right ofthe Insured in General Average Option ofthe insured Regusies of Co-nsurance Rules an Ca-lesuance Format Determine insucer’s Liability New for Old Rule Corineivance v. Reinsurance FIRE INSURANCE Nature of Fre insuranes 2018 SAN BEDA CENTRALIZED BAR OPERATIONS 88 90TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 Hoste Fire v. Friend Fre ‘Aled Rake Risks Covered Business Inteupton Insurance Rent Insurance Extra Expense Insuance Kinds of fndroct Loeses (Ocean Marine Poly v Fire Policy Impotence ofthe istiction Measure of Ingemnety Insure’s Liab in Valued Policy ‘Coinsurance clause ‘Aeration ‘hare Increase of Risks caused by Accident ‘Where Increase of Risks caused by insured's Tenant FatofBulding Clause Opton to Rebus Cause NonAlonation Clause CASUALTY INSURANCE... Cosuatiy/Accidont Insurance Coverage ‘General Divions of Casually Insurance Insurabe interest n Liability Isuranes Fight of jure to Sue insurer of Party at Fault ‘Tests Basi'ang Extent of Insurer's Liablty Ful 25 to Death o Inky Resuling fom Accidental Means "Intentonal "Accidental ° No Acton Clause LIFE INSURANCE... Life ineurance Le insurance v. Accent and Health Insurance . Nature of Life Insurance Portes na Life Incurence Patcy Direct Pecuniary Loss Not Reqared ‘Accidental Death Benefit Clause Ettoctviy of Accdontal Deal Bonoft Ciavso, Kinds of Life Insurance ‘Scope of Life Insurance “Trancter of Posey Right of insured fo Assign Life insurance Policy Neceseiy of Consent of Bonen to Assigoment Notice to ingurer of Teanster Insurer's Consent Measure of Indemnity LUsbity of Insurer in Certain Causes of Death of Insured Premiums Pasd ram Conjugal Funds . Cash Surrendee Value Mandatory Heath Care Services Irsplementaton Enoreing Agencies 102 ‘SURETYSHIP eee eee 105 Surlyship 2 Undertakings within the Scope of Suratyship Lbity af Surety ale of Liab of Suoty “Types of Surely Bonde Corpaate Suretysnip Contain Surly Premiurt Rules on Payment of Premiums: Reimbursement Sureyehip v. Proporty insurance Suretyenp v. Guaranty COMPULSORY MOTOR VEHICLE INSURANCE. G7 Meter Vehicle Lisi insurance Persons Subject oth CMVLI Requirement ‘Substtea fora GMVL! Pokey 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | ixTABLE OF CONTENTS SAN BEDA MEMORY AID Scope of Coverage Reauired Payment af Premiums Registration of Motor Vehicos No Fav indommiy Clim “No Fault Cause” Proof ot Lose ‘aims Settementin CMVL "Passenger 2 Third Party rope insurer om hich to Cm Fight lo Recover rom Metor Vahicle Owner Finding of Fault Spocial Causes Notice af Cia Important Periods on Claims Sottoment Running of Presetotwe Pero Payment of Cains Cancallaton of CMVLI Effets'of Cancolation Change of Ownersin MICROINSURANCE, Miroinsurance Features of Mieroinsurance Product Raquremenis Performance Stancords Financial Reporting Framework CLAIMS SETTLEMENT... isin {aims Setiement “nia aim Setement Practices Kings of inguranee Lastee Time for Payment of Cis Eft of Refusal or Faire lo Pay the Csim within tho Time Prescribed Unreasonable Desay Presumption of Unressonable Oslay FReferance to Arbiraton min! Liabiy for FrauulentClins PRESCRIPTIVE PERIOD. ules on Prescristion BUSINESS OF INSURANCE "Doing an insurance Business" Requrstes Pro to Operation Requlttes for Conlnusnoe n Business INSURANCE COMMISSIONER. insuranne Commission TRANSPORTATION LAW Governing Laws CONSTITUTIONAL PROVISIONS CONTRACT OF CARRIAGE FOR TRANSPORTATION Contract of Tenspoctation Classieations of 8 Cantract of Carage Paes toa Contact of Transporation Perfection of Contract of Transportation rere Bases, Jagpneys, and Strat Core CHARACTERISTICS OF A COMMON CARRIER, Characteristics Test for Determining whotner 2 Party i & Comman Cartier | 2018 SAN BEDA CENTRALIZED BAR OPERATIONS eis 110 110 113 13 18 116 118TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 ‘Common Cartier by Operation of Low Private Carer Common Carr v, Private Carioe Conversion of 8 Gomman Carr into a Private Carior Charter Pay Instances where the Court held a Person, Partnership, Fem or Corporation as Corman ator Instances where tne Court held a Person, Parnership, Fm or Corporation as Prvato Cai: {Common Carrie Distingushed fom Travel Agency, Towage, Arasire and Stevedorng “wo Types of Cargo Operation Applicable Law garding international Casage REGISTERED OWNER RULE, Fogistered Owner Rule Registation of Vericle Uspity of the Registered Owner Loaee ofthe Venice Lease not Registored Kae System Ubi against Thi Persons Instances wher the Kabit System wil nt apply . Relalonehip between the OwneriOperator andthe Over . 122 OBLIGATIONS OF A COMMON CARRIER IN THE CARRIAGE OF GOODS .....sesnnninnnsesnne 123 Pray Obit of» Caney Caren a Cariago of Goode Duy to Deliver the Goods Tie of Deivery Effcis of Daly 1. Butyto Accept tne Goods Factor to Consider 19 Determine whether Discrimination ls Necessary or Reasonato Instances When the Carer may Vaily Refuse io Accept ine Goods Hazardous and Dangerous Substances: ML. Duty to Exerase Exraoranary Dilgance Durston of ati Prohibit Stipulation in @ Contract of Cariage of Goods ‘Spulations Fang tho Limit of Recovery Requites DEFENSES OF A COMMON CARRIER IN THE CARRIAGE OF GOODS...... Defenses (FANCOE) Caso FortiterForce Majeure i Fre ‘Tie Biow-out Heavy Rains Hiecting| ‘Ais of Public Enemny 1. Nagligenes ofthe shipper cr Owner Ii, Charter ef he Goods or Defects In the Packaging orn the Container (Otder or het of Pubic Authority Iv, Exerise of Extoordinary Oligence ‘nvales Detencos “ Baeatry 2. Worms and Rate 3. Explosion 4 water Damage 128 OBLIGATIONS OF A COMMON CARRIER IN THE CARRIAGE OF PASSENGERS... penne 127 Primary Obligatons of @ Common Carrier inthe Caiage of Passengers 1. "Duly to Observe Limos Dilgence to Passengers uration ef iss Gratuitous o& Rectces Fare 1. Duty to Bring Passengers in Tei Destination without Delay Ii Duy to Take Care ofthe Passengers’ Baggage ‘Kinds of Baggoge Distinctions betwen Hand-caried Baggage and Chacked-n Baggage ‘Reguiile for Common Cariors ably for Hand-Carid Baggage or Necessary Depost Instances when Common Carrer f nt Responsible for ti Lose ad Injury to Passenger’s Hand Carted Baggave Limit of Liabity i Intemational A Transportaton Passengers Chocked-in baggage or cargo Goods to be Shipped ‘Reon for Damages 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | xiTABLE OF CONIENIS SAN BEDA MEMORY AID 2018 DEFENSES OF A COMMON CARRIER IN THE CARRIAGE OF PASSENGERS... sv 129 Dilgance inthe Selection and Supenision of Empioyeas Sistnctions Betwoen the Libiy of a Conon Carer for Desh or Injures to Passengors Du to Acs of ls Employees and Due to Acts of Other Passengers Stangers Reasons for te Carrier's Liatlty on the Acts of ts Employees Docinne of Lat Clear Chance aes are Not lasurers af the Lives of Their Passengers OBLIGATIONS OF SHIPPER, CONSISNEE AND PASSENGER.. 131 Obigatons of Shipper, Consignge and Passenger Decline af Avodable Consequences Assumption of Rsk EXTRAORDINARY DILIGENCE. 7 o 131 Diligence Required ofa Common Carer Betintona of Exraarcinary Oligence Duty to Tae Persona coverage Prosumplion of Negigance Stpuiaton initagiResucing the Care’ Listy 1 Goods {i Passengers Gratuitous Passengers [Acuommadation Passengers Fes Ips Loqutur Reausites Exvaotdnary Dilgence in Cactage by Sea Seawortines®| Warranty of Seawortiness of Ship Unseawerthiness Cargaworhiness Ne Overloading, Devraion Transshioment . Exvaorainay Diligence in Carsage by Land Contin of Vehicle Violation of Yate Rue ‘AnieOcunk an Deugged Orvng Law of 2013 (RA No. 10586) Deputaton of Law Entorcement Offeers Reasonable Grounds lo Establish Probable Cause Procedure Effect of Fetal fo Subset Onesel to Mandatory Tetts mbit ef Owner andlor Opsrater Exraoroinary Diigence 9 Ai Transportation Passengers Denies Soaring DOTE-OTT Joint Adin. Order No. 1s. 2012 or the Air Passenger Bil of Rights Bil of Rights ofan A Passenger Instances When 3 Common Carer Fale to Exercise Exrsordinary Oiigance BILL OF LADING fe menar Billo Lading| “Tnree-Fold Function ofa Bl of Lacing Rules Governing Bil Laing Kings of Bil of Lagi iting Stputons (Carag Manvest vB of Laaing MARITIME LAW (ARTS. 573-869 OF THE CODE OF COMMERCE) . oe 198 CCharactratcs of Martine Transaction Merchant Vases! Order of Prelerence in Case of Sale of Vessel Dotnet tet innit ypatheesry Rl) (Caees where aopcabio Persons who may invoke the Lied Liabiity Rule Right of Abendoament PARTIES IN MARITIME COMMERCE oe oe ae ie 14 Parts in Matlime Canunatce Shower (Propet) vil] 2018 SAN BEDA CENTRALIZED BAR OPERATIONSTABLE OF CONTENTS SAN BEDA MEM@RY AID 2018 Ship agent (Naviro) Husbanding Agent - Powore and Functions of Ship Agent Duty of Shp Agent ta Discharge the Captain and Members of the Grow Captains and Masters Nature of Posiion (Theee-Folé Character ‘Quatfeatons Inerent Powers Duties ‘tices and Crow Saling MataFrst Mate Second Mate Engineers Grew Purser ust Causes for he Discharge ofa Seaman wile Contact Subsats Rules in Case of Death ofa Seamen Complement ef he Vessel Supercargoes Past Compulsory Potage Gaby of ot ‘Special Contracts of Martime Commerce CHARTER PARTY (Charter Party in General Kinds of Charter Parties Effet of Charter an Character of Carer Towage snot a charger party Loaev, Charter Paty Distinctions between Bareboat Charter and Contacto Areighiment Right io Sublease or Subchartor FRoquises of 2 Vaid Chartor Paty Permisibe Ciusos n'a Charter Party Rights and Obigatons of Paros Resctasion ofa Chater Party Teims to Remember Usual Forme of Consummating Contacts : ‘Traneshipment of Goods 144 LOAN ON BOTTOMRY AND RESPONDENTIA .. Boitomey ospondeniia Loan on Battomeyv. Loan ot Respondents Distnetions botwaon a Lean of Botomry & Respondenta anda Simple Lean ‘When Loan on Bottomry or Respondent is rogarced as Simple Loan Hypothecary Nature of Batomry or Respondents ‘Concurtence of Marte Insurance and Loan on Botlemey/Respondentia. ao 146 ACCIDENTS IN MARITIME COMMERCE .. AVERAGE ‘average Clacsication (Gross or General Average ‘Goods not Covered by Gonoral Average oven f Seciicad setison ‘Order of goods to be cast averboara : York Antwerp (YA) Rules on Determining Lisbilly for Averages wih Regard to Deck Cargo Distnetons betweon Domestic and international Sspping 148 ARRIVAL UNDER STRESS..... ‘iva under Sess Uabity ofthe Shipowner or Ship Agent . 149 COLLISIONS...... Colisions ‘Navical Rules to determine Negigence ‘Nautical Rules a5 to Saling Vessal and Steamship Port and Starboard Zones of Time inthe Colson of Vessels Enrorin Extreme 150 2018 SAN BEDA CENTRALIZED BAR OPERATIONS I xiTABLE OF CONIENIS SAN BED H@RY AID Cases covered by Calision an Alison Maritime Protest Excuses for Nat Fling Protest Cases Aspiable Shipwreck SALVAGE LAW (ACT NO. 2646) Two Concepts of Salvage Reguists lor a Vaid Salvage Claim Sublets of Savage Persons who have NO Right lo a Rewatdfor Salvage erect Salvage v.Towage Rules on Salvage Roware CContaineraation’Sao. Cont “Shippers Load and Count” System CARRIAGE OF GOODS BY SEA ACT (COGSA) Applcabity Panes Duties ofa Cartier ‘Amount of Caries Uabiy [Natce of Damage Proserpine Period CORPORATION LAW INTRODUCTION [Basic Types of Business Organizations Paanership v. Corporation [Sloncal Bacronind 9# Piinpine Corparate Law CONCEPT AND ATTRIBUTES OF A CORPORATION. Corporation ‘Theodes on Formation of Corporation ‘Tritowel Existence inthe Corporate Seting ‘Advantages of Corporate Meum ‘ibutes of @ Corporation Right of Succession Creature of Law Franchises of Corpration Btimery . Secondary Franchise Consegences Residence and Nationality Tests to Determine the Natonaity of Corporations Pippine Nationa Dovbie 8% Rule Granafabr Rule Constivional Rights Corporate ually ‘Goetie of Piereing the Vel of Corporate Entity Noture of Plereang fhe Corporate Vel Doctrine Gusdeines in Bering the Coeporse Ven Classieaton of Piercing tw Corporate Vel Cases Fraud Cases ‘Mer Fagg Cases (oe Conduit Cases) Probate Factors in Pireng the Corpérate Vell Instrumentaty Rule ‘Mer Eye Rule v-lasvumontatty Rul Frweeoronged Teo o Gelermine t io Bece dhe Val of Corporate Fiction Effects of Piercing the Corporate Vel Cases on Paring the Corporate Ved Creature of United Powers Doctrine of Lites Capacities (Theory of Special Capacies) ‘Theory of General Capaciios Gorporaen ae a Parner ihre vies Goetrine tra Vis Act Etec of Uta Vires Act ‘pes of ula Ves Act = Apaication f ier ge Thacry xov| 2018 SAN BEDA CENTRALIZED BAR OPERATIONS, ore 182 155i TABLE OF CONTENTS ‘ SAN BEDA MEMORY ALD 2018 Lira Vite v egal Acts Test on Whether o° Nola Corporation May Perform an Act Remedios incace of Ura Vies Acta Classieation of Corporations 1 Aso stock 2, eto omanizers 3 Aso purpose ‘Governmont as @ Member ofa Corporation Rights, Powers. or Pivieges Jotedcton of SEC © 4 ‘AS to manner of ereaton: ‘Corporations Croated by Special Laws or Charters | Publev. Prato Corporations | 5. As to legal ight to corporate existnco Basso! De Facto Doctrine | Roquistes ofa be Facto Corporation Instances when tere no de facto corporation due to iva law [Example of Detect that wil Precluce the Creation ofa De facto Coporation Instances when tore a de facia corporation ‘De dre Corporation v. Oe Facto Gorporation v. Corporation by Estoppel 6. Asie lawe of incorporation [Reo whether they ate opon tothe public or not 8. Aso relaionship of management and conta! {slo number of persons wno compose them 710. As to whether they are for religious purposes or not 11. As to whether they are fr charitable purposes or not > Concept of Going Pubic and Going Private ‘One:Aan Corporation f FORMATION AND ORGANIZATION OF A PRIVATE CORPORATION... ‘Creation ofa Corporation Documents requ bythe SEC for incorporation: ‘Atcles of Incorporation (AO!) ‘Three Fold Nature Contents of AO! Corporate Name ‘Staltory Lmatons onthe Use of Corporate Name (ther Limitations Doetina of Secondary Meaning Remedies of Corporation whose Name has been Adopted by Another hang ot Cocporate Name "Purpose Clause Significance of Purpose Clause Stretching tra Purpose Clause 2. Principal Offee Purpose 3. Termot Existence Doctrine of Relations or Relating Back Doctrine i Incorporates Components of a Corporation ‘Numbor and Qualifications of Incorporators . Incomoratrsv. Corporators s Other Components “Types of Underwing Contracts Oectore and Trustees 4 Capitatizaton Capital Stock or Legal Stock or Stated Capital ‘Authorized Capital Stock Subscribed Capital Stock { ‘Outstancng Capilal Stock . Paid-up capita. UUnissued Capital Stock Legal Capi Stated Capital Capital Stock Requirement Pro.inoxporation Misimum Subscription and Paid-up Capital Requirements Matters Requited 0 be Stated in te AOI of Stock Corporation oters Rogure 1 be State nthe Ato Nant ompoaton ‘Shares of Stock Doone of Equality of Shares Giosses of Shares ‘Advantages and Disadvantages of Par Value Shares No par valuo shares ‘Advantages and Disadvantages of No Par Value Shares Prefered shares 171 2018 SAN BEDA CENTRALIZED BAR OPERATIONS |vTABLE OF CONTENTS SAN BEDA MEMORY AID Kinds of Preorred Shares Other Classes 2. Redeemable shares “ust Fund Doctrine Treasury shares Founders shares Share n Escrow Oversssved stock Spurious stock \Wiateres stoce Converte share Fractonal sare Promotion share Sorplesschares 7. Treasurers Atioaut Other Provisions ‘Acknowledgoment, Signature. and Verication Commencement of Corpocate Existence Ceniteate of Incorporation \Whare the Iseuanee of Cartfeat of Incorporation Not Reauires ‘Amendment of Atlas of Incorporation Procedure in Amending AO! ‘Approval by Inaction ‘Rejecton or Disepproval of Amenaent in thé AO! Motori Duty Effects on Non-use of Corporate Charor and Continuous Inoperation ofa Corporation ‘Acs eonsttting Ferma! Organization and Corrmencoment of Corporate Business ‘Aca canstutng Commencement of Business ‘CONTROL AND MANAGEMENT OF A CORPORATION... e Gels of Corporate Contr! ‘A. Board of Decors and Tasstees General Powers ature of Pow Spacal Facte or Spec Business Judgment Rule Two Branches of the Business Judgment Rule Guateations of Orectors/Truions Independent Ovector Sloek Owrarshp Requirements Disqualification of Oxoctors, Trastoes or Ofcore ‘Grounds Nol Exclusive Elocion of Oretors of Tustons Electon les an Stock and Non-Stock Corporations Methods of Ving Formas: (Gasser iterative Procedure Hone! Remainders Tate vantages and Dicadvaniages of Cumulative Voting {Lintation on the Seton of Director! Trustees Time of Annual Elections LUitlons an tne Stockholder’ Right to Vote Report of Eacion of Oxectors,Trutoos, and Officers ‘Term of Offes Hoover Panola Quorum Requirement n Beard Mewtings Prony Not Allowed Disquatied Decioe Removal of Board Members Roqusios for Removal Cal for Reting fo Ose Purpose of Removal Resignation ‘Anandonmnt of Ofer a Faint Aton Mating Vacancies in he Board Lumtaton on Compensation 8. Corporate Uhoers Mandatory Corporate Otros: Corporate Offeer athe By-Laws Director or Trustee v. Corperate Offcor Corporate Cffee x. Corporate Employes allay and Binding Efet of Acte of Corporate if Source of Authority Exot of Posters or Auoity {laseieaton of Powers or Authority Doctrine of Apparent Authority ieeunstancas Doctrine si 2018 SAN BEDA CENTRALIZED BAR OPERATIONS 2018 an 187- TABLE OF CONTENTS SAN 3EDA MEMORY AID 2016 Cases where the Doctrine of Apparent Authority was Applied C-Liabiyof vectors, Tustees, and Offcars ‘Thee: Fold Disios of Drectors Oisoyaly Personal Lady of Decors Gases where Diectos or Corporate Officers are Made Liable iscondut of Co-Dirctors Remade in Cae0 of Mimanagement(O-RID) obit fr Watered Stock Sell-Dealing Orecioss, Trusts, and Offcars Interlocking Dxeetors fet of inerocking Orecteship Contacts Invaving ntrecking Directorship Valdty of Contracts Docrne of Corporate Opportunity ‘Applcabily ‘When Corporate Oppodunly Coases Execulve Commitee Bury ‘Quorum n Executive Commitee peal Limitations on the Powers ofthe Executive Committee CORPORATE POWERS in ennnnnntnnnninnnnnaninnne Classes of Carpoate Powers . DDocrne of Necessary Implleation Express v. imped Powers General Powers and Capacity Specie Powers Extending or Shortening of Coporate Term Requirements . Nalute ofthe Power Increasing oF Decreasing Capital Stock Ways of inerasing/Decreasing Authorized Capital Stock Umtations Reasons for lnroasing Capital Sock Incuting, reaing. or Increasing Bonded indebtedness Nature of the Power Corporate Bona Bonded Indebtedness Deventure Sale, Dispsion, Lease, or Encumbrance of Alor Substantial Alla Assets Feauirements “Substantally Ar t Nel Doctine. ‘Wien Raicatary Vote of Stockholder/Members Not Requced ‘Acquistion of Corporate Shares instances ‘Candions forthe Exercise ofthe Power Investment ef Corporate Funds ‘Avaiabilty of Appraisal Fight Decaration of Ovidend Relined Earnings Unrestricted Retained Eamings Requrements for Declaration of Ohidends Classes of Dvidencs {Gash Dividend v. Stock Dividend Stock Dividend v. Stock Splits Divkendsv. Profits! Earning Distribution of vgends Management Contract Executive Corvnitieev. Management Contract ‘Adoption ang Amendeent of By-aWs By.Lawe By-Laws in Relation to tices of Incorporation [Aricles ofIncorperation v. By-laws osolwion v. By-Laws ‘Adoption of By-Laws i Etectity Elec of Noling win the Required Period Contents of By awe Val ofthe By-laws 7 “Amendment of By-Laws Biaing Effects of By-laws Merger and Consolation i BOIS SAN SEDA CENTRALIZED BAR OPERATIONS |x 202TABLE OF CONTENTS SAN SE0A MEMORY AID Morgorv. Consolation Combination Merger of Partnership and 2 Gorporaion (Common Forms of Comprate Camaeatons “Types of Acquisitions Merger anc Consolidation v Sale of Assos Procedure lor Merger and Consolation RIGHTS OF SHAREHOLDERS OR MEMBERS 0. ocsssronn ight to Attend Meetings kings of Meetings | ‘Sckholders Mestings v. Board of Divector/Trustees Meetings Persons aumorzed o as a meating ‘Quorum af Maatngs of Sharcholdors or Members horn, Rule on Teleconferencing o Video-Confeencing . Advantages and Disadvantages of Teleconferencing Rulo'on abstention Recora Date Fight to Vote Manner of Ving Rulos on Moating'Voting Appicabe Wo Cetin Kinds of Staves Right to Aopoint Proxy equlremonts for Vaity Kinds of Proxy Purposes and Use of Proxies ‘Tne ight te vote by proxy may be exercised in any ofthe folowing instancos Rules on Proxy Revocation of Proxies Revocation may be made trough Rules on Revocation Fight t Execute Voting Trust Agroomonts Voting Trust Agreement Purposes of Voting Trust Agreement Status of the Voting Trustee ‘Status ofthe Transteing Stoexholser \oing Taust Agreement v. Proxy Poware or Rights of Voting Trustees Right of nepecton CCorpvate Racords Required by the SEC te be Kept andlor Registered Gantonts of Stock and Transfer Book Contents of ook of Minutes Fight to Inspect Corporate Books Perzone Gin the Right to inspeet Corporate Books Right of Stocknaiders to Corporate Books and Records ‘Basis ofthe Fight to Inspection Exton ofthe Right of spection Limntatons on the Right of Inspeion Remedies inspection Denied LUspity for Real to Inepect Requistes o Avail Rotel Pro-Emolive Right Instances wen Pre-empive Rights NOT Avalabie ‘asitona Issues of Originally Auhorzed Shares Pro-Empive Right, Right of First Refusa AAppraizal Fog, Inelanees wien Appraisal Right may be Exerc {Conditone for Pxercin of Appraisal Right ‘ainen Right Peynane Notation on Certificates}: igh’ of Transeree Effects o Tranter of Dissenting Shares Elst of Demand and Teninaion of Right Derivative Sut {clone by Stockholders or Members Derivative Sut Stockholder Nominal Paty Fights and Remeais of Stocolaers Rights ar fa Conta! and Management Proprelay Rights Remecal Rights vil | 2018 SAN BEDA CENTRALIZED BAR OPERATIONS 2018 216TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 abies of Stockholders ‘Summary of corporate ats and voting requirements Corporate acts which eequire majority vote of he bod alone Corporate acts wren require majority vate of he bad and voto of stockholders representing 2/8 of the ocs| Corporate acts wich require majriy vote ofthe stockholders representing majrty of tne ocs lone Corporate acl wich require majoray vote ofthe stockhalers representing 23 of to os atone Corporate sels which equie mecting of he baat only (Corporate acts which require meeting of he shim ‘SUBSCRIPTION CONTRACT... ‘Ways o Become a Stockholder ofa Corporation ‘Subscription Contract Nature of Subscriptions Contacts Trust Fand Doce ‘Applicaton ofthe TFD ‘Subserpton v.Pucnese Kinds of Subseription Contract Underwiing Agreement v. Stock Subscripfon Agreement Underwniing Agreement ‘Vaid Conedoratone in Subecripon Agreements Protbited Consideration ‘Arpount of Consideration Deposit an Stock Subscription Remedios to Enforce Payment of Subserpton Delinquent Shares, - Procedure for Delinquency Sale: ‘Winning Bidder in 9 Delinquency Sale ‘When Sale may be Questioned Interest on Unpaid Subscriptions Payment of Balance of Subscription CCalection of Unpaid Subscription Efoct of Faire to Pay Subserion cal FRequisies for a Vaid Cll Payment Without Ct Effects of Delinquency Content of Stock Doctine finality of Subseption Contact Guat Negotiable Cartieate of Stack ee ‘Steet Centeste equates forte Iguance of Ceteate of Stock ‘Shares of Stock v. Crtficteof Stock i ‘Where the cerieate of stock refects a greater volume of shares than the actial number of shares issued oo Be saved, the flowing ‘ules may be considered Remedios whore corporation retuses to issue ceriiate Modes of Stock Tranter Requirements for Vat of Stock Transfer fois of Unregistered Transl of Shares Unpaid Ciaims Procedure for lsuance of Naw Cerificate of Stock In Kou of Lost, Stolon or Destroyed Cestieates 1, 237 NON-STOCK CORPORATION... Protiited Consideration ‘Amount of Gsideration Dapasi on Stock Subscription Remedios o Enforce Payment of Subscription Delinquent Shares Procedure for Deinquency Sale: ‘Wining Biddorin a Delinquency Sale ‘When Sale may be Questioned Interest on Unpaid Subserptons Payment of Balance of Subsainton CColecton of Unpald Subserotion Efoct of Failure to Pay Subscription cal Roquisies for Valid Cal Payment rout Cl Etec of Dainquency Conical of Stock Dactine of Indvstaliy of Subscription Contract Quast Negotiable Conca of Stock 7 Street Coriieate Requslies for the Issuance of Cerificate of Stock ‘Shares of Stock ¥. Cortieate of Stack 2018 SAN BEDAVCENTRALIZED BAR OPERATIONS | xiTABLE OF CONTENTS SAN BEOA MEMORY AID ‘ihere the cetfcae of stock reflects grater volume of shares than the actual number af shares issued o tobe Issued, te flowing ‘ules may be considered Remedies where corporation refuses to ive certicate Mages of Stack Transfer Fequiremonts fr Vaiiy of Stock Transfe: Etats of Urvegitared Tanster of Shares Unpaia Claims Procedure fo issuance of New Certfeate of Stock in ey of at, Stolen or Destroyed Certicates CLOSE CORPORATIONS Close Carparation Close v. Closed v. Closely Held Corporation Gharastorstica of Case Corporations (Ordinary Stock Compratonv. Close Corporation ‘Agrooments by Siocialders Effects Where Stocknoiders Are Managers \Wnen @oard Wasting i Unnecessary 2 Impropery Hels Amendment of 0 Deadiockn a Cose Corporation ‘Austnony of the SEC to Arbvate Remedies of Stockholders Permissive Provisions inthe Artes of Incorporation of @ Close Corporation Condition forthe Vadty of Restctons onthe Right to Transfer Shares Nature of Restiction on Transfer Efecto issuance or Transfer of Slock in Brea, of Qualifying Conditions ‘Good Fahy Not a Defense ‘SPECIAL CORPORATIONS |. Educalional Corporations Constitutional Provisions Related to Educational Corporations 8. Reigious Corporations ings 1 Corporation Sole 2 Ralelous Societes/Corporate Agsrasato 5 Ordinary Non-Stock Reigious Comporaon CORPORATE DISSOLUTION AND LIQUIDATION, Sissoluion Nature of Dissolution ‘Two Lega Steps in Corporate Dissoluton Modes of Dieealton ‘Voluntary Carprate Dissolution Involuntary Corporate Dissolution Dissolution By Shortening Corporat Term Expiraon of Corporate Term Revocation of Cereal of Incorporation By Sec Effcts of Dissolution Corporate Liquidation Tunsditon Etfcts of iquidatng Orter Methods of Liquidation or Winding Up Serious Suaton Test Jussaeton Diferences Among Extension of Corporate Life, Rewsl and incorporation \Gailaton v-Rehabitlaion Rehabiltaton : ‘it of Rehabtation Suspension of Gime panded Concept of “aim” Covered by Stay Order (Clam Mae Outed! The Renabitalon Praceeding Sige brrnrings Suspantod FOREIGN CORPORATIONS. Applicaton for a Lconse bqelstes fr issuance ofa sence (CALFS) Resident Agent ‘Doing Business Jrspracentiat Teste ets constituting “Doing Business” «| 2018 SAN 3EDA CENTRALIZED BAR OPERATIONS 249 253 255TABLE OF CONTENTS SAN SEDA MEMORY AID 2018 ‘Acs NOT conettuing “Doing Business’ Dootine of iolated Transactions InPa Dect Rls Esioppel Rule DDoctine of GuasiEstoppet @y Accoptance of Benefits . Effects of Lack of Leenee on Suis fect of Subsequent Asquitlon of Lense (Going Businoss Without Lcanse ‘Summary af Res instances when a Foreign Corporation May Sue inthe Philippines whether or not Licensed To Do Business Revocation of License Wircrama SECURITIES AND EXCHANGE COMMISSION REORGANIZATION ACT (P.D. NO. 902-A) encom 265 TC's Original and Exctsive Jurisdiction Inire-Corporate Dspute ‘Grounds for Suspension or Cancetation of Cerificate of Registration INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTROVERSIES (AM. NO. 01-2-04-SC) Inta-corporate Contoverses Cases Covered Election Contest Nuance and Harassment Suis 266 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (A.M. NO. 00-B-10-SC) wi... 267 Corporate Renabitiaion Spec! Proceeding Appkcataty Exectlry Nature of Orders - Stops Prosedue fo Vaid Stay Odor Powers and Functions of Management Commits of Rehabilitation Receiver Efecto the Renaoitation Pa : GOCC GOVERNANCE ACT (R.A. NO. 10149). Government: Owned o Controle Corporation Chorered Non Chanered COC Governanes Commision for OCs (6C8) Board of Deco or Trusts Aopeintve Deector Chit Executive Oto (CEO) 7 Fiand Proper Rue ‘Term of Oftoo Friday Outs of te Boar'and OFtcors Spec Att 272 ‘SECURITIES REGULATION CODE (R.A. NO: 8799) oon State Policy Features Intendes to Protect vesting Pubic Secu Kinds of Secures Foxbie Principe t (Considered 9 secures Secunty Market Professionals : Powers and Functions ofthe See. - ‘SEC Jureacton ove ihe Vat for Prexes in clan to Eicon Controversies General, Administrative and Regulatory Powore Coase and Desist Orser (C00), Essential Requitements that must be complied by the SEC Rogitaion Of Securities Policy of Full Matesal Disclosure Prospectus Registration Statement Material formation Exempt Seourties Reason for Exorption of Securities Exompl Transactions Procedure fo Registration ‘Grounds for Rejecton or Revocation of Registration of Secures Sato of Unregistered Secures Would Necessary Operates Fraud on Investors 273 2018 SAN BEDA CENTRALIZED BAR OPERATIONS |xTABLE OF CONTENTS SAN BEDA MEMORY AID 2018 Report! Requirements Reauled Pesiodic and Other Report: ‘Tender Ofer Pubie Company Mandatory Tender Offer Rule Exemptions from Mandatory Tender Offer Requirements How tender Oters Mase Prohibted Transactions Guring Tender Ofer ain Tender Ofer Proxy Soietaion Rules on Proves in Publicly Listed Corporations SEC's investigatory Power'in Regulation a Proxies Proxy Sobetaton ¥ Proxy Valsaton Insiaer and Insider Trading| Insicer Trading Allowod Transactions : ‘Concept of Materiaty Information fs Maternal Non-Public i Shot Sale Pronibted Transactions in Sort Sales Mandatory Ciose-Out Fue Prahites Conducts in Secures Transactons FrausulentTransaetons Satabily Rute ‘raneactons & Responsibly of Brokers & Dealers Independent Director "Number of Independent Directors MARGIN TRADING agin Civic UABILITY DDEFINTION OF TERMS COMPARATIVE CHART. 286 BANKING LAW Governing Laws ive Parana Prmanly Interested in the Business of Banking GENERAL BANKING LAW (RA. NO. 8781) ..-.sce Desertion of Stato Policy, Purpose, ‘S2ope of Apalicaton General Concopte Granary Corporation v, Banking Comporation Gves-banka Financ intermesares CCharnrtvnts of aie Deposits ‘Nature of Banking Business {abit foe Acts af Offears and Employees. Unity for Meal Damages Ciassfeation of Banks Unverel Bank y. Commercial Bank ‘Unversa & Commerc Bank v, Othor Barks ‘emand Deposits Nonestock Savings and Loan Associations (Organization, Management, Ané Operation OF Banks Stocmoidings ‘Alea Enterpises Nonstied Enorpees eto Risk-Bas0d apts fect of Non-compianc wits he Prose Minn Ratio FFunetons OF Banks {oan Function Requiement or Grant of Loans Classications of Loans ‘a0 Debts Rese for Bad Debts {Graton Loans, Credit Accommodations and Guarantees ‘Single Borrowers Lint ‘Jont ane Solery Signature (JSS) Practice encine 202 ‘oi | 2018 SAN BEDA CENTRALIZED BAR OPERATIONS:TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 Restictions on Bank Exposure to Directors, Oficers, Stockholders, and thelr Related Interests (OOSRI) Accounts ‘Who are Covered ‘Transactions Covered Rectiions unde the GBL and NCBA Effect of Viiaton of DOSRI Rules Rules on Amount of Secured Loans Interests and Penalties epost Functon Deposits Kinds of Deposits ‘Trust account Deposit. Deposit Substitute ‘Types of Deposit Accounts Survivorship agreement ‘Anonymous Aecouns ‘Special Rules on Depostors ‘Sospension of Payment oa ks Depost Lisbiltes : , Other Functions ofa Bank Sefaly Dopost Box Prohibited Traneacions ‘Outsourcing of erent Barking Functions ‘Managing Outsourcing Relates Risk Flos on Forecosure ofa RealEstate Mortgage by a Morigagee-bank Judicial v.Exrajudial Foreclosure Exercise of Right to Repurchase Cig on vestments Cartan Assets ‘rectors And Oficors Filand Proper Rule Composton ef Board of Directors Independent Director Meetings Prohibition on Pubs Oicils “rast Entities Trost Entity Roguierent for Trust Enos Powers of Trot Eniiee ‘Sikes and Lockauts Penales for Vlation ofthe GEL, NEW CENTRAL BANK ACT (R.A. NO. 7653) wxsnssnssnneen Dectartion of Poticy t Bangko Senta ng Pilipinas Prenary Objectives of BP: i Responsbies and Functions of BSP: Corporate Powars ofthe BSP Supervisory Powers of the BSP (REO ‘Money Function Powers regarding money functon Power to Prosecute Subsidiary ‘Atte MONETARY BOARD (Ma) Composition Vacancies Gualfeations ‘Disqualfeations (CED2ES) Responsity of Members of the MS . Removal of Members af the MB Meetings Powers ofthe Monetary Board How Bap Handies Banks in Distress 5. Coneervatorship 2 Reocoivership/ Closure conservatory Receiver “Chose Now, Hear Later Scheme Curent and Compete Examination Not Necessary Ettect of Filiig Petition for Review “Mandatory Requirements for Bank Chosure °. "‘Liguidaton Involuntary Dissolution and Liquidation rinary Corporation v. Banking Corporation ‘Uguidation by tie POIG {Uguldation of a Closes Bank Elects of Receivership and Liquidation 313 2018 SAN BEDA CENTRALIZED BAR OPERATIONS [oxTABLE OF CONIENIS SAN BEDA MEMORY AID 2018 Lega Etfects When a Bank s Placed Under Liquidation Gefanse Available to a Racever Notice of Closure Toxeover Actives Purchase of Assets Diatbuton of Assets Sleps Undertaken in Conventional Liquidation Guideine inthe Management andie Conversion of Assets bythe Recotver owors and Duties of he Receiver nthe Ma Pettion fo: Assistance nthe Liqueation ofa Closed tank ‘Guidaton Court Dues ofa Liuidation Court ‘Steps Undertaken inthe Petton for Assistance in he Liquidation Curenay. Naretary Stabsaston And Functions OF The Bp Sureney, Legal Tender Power Considered as Lega! Tendor ‘Checks Replacement of Curency Unf for Circulation Retirement of Os Notes and Coins Demonetzaton of Currency Domestic Monetary Stabilization Tnee Importan: Tool to Achiave Price Stability ‘Action when Abnowml Movements occur in tha Monotary Aggregates, Codi, or Price Level Intemational Monetary Stabilzaton Internaional Reserves ‘When ileralionl stabil of Peso ie theaatened (Operations in Gold and Foreign Exchange Foreign Asset Poston ofthe Bangko Sentral Emergency Restietons on Evenenge Operations Purposes Emergency Loans and Advancos . {emits or Emergency Laen Prohibions onthe BS? SECRECY OF BANK DEPOSITS LAW (R.A. NO. 1405) Purposes Coverage Prohibitod Acts onal for Viltion of R.A No, 1405, Gamnment PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT (R.A. NO. 3581) Purposes Fovers of PDIC 38a Coprate Boa Composition of Bardo Brectors Statiatone Functone ofthe POIC INSURANCE Specie Fisk hauredAgsnet, Deposte Excusions Payment o ures Dopo Proot ot Sains Payment o! insured Depos as Prefered Cin ner AR. 224 of he NCC Recognition of Owner Paymentar insured Gepost Bepost iia hw Depostor of is insures Dspost ‘Syatomic Risk \Gauidation of Closed Banks Prohibition Against Spilag of Deposis or Creaton of Fietious Loan or Deposit Droniblion aganst issuance of TROs, ete UNCLAIMED BALANCES LAW (ACT NO. 3936) Elements of Unclaimed Saiances Logal Consequence sv | 2018 SAN BEDA CENTRALIZED 8AR OPERATIONS jemant andor Conversion of the Assets of «Closed Bank . 332 336TABLE OF CONTENTS |: SAN BEDA MEMORY AID 2018 FOREIGN CURRENCY DEPOSITS ACT (R.A. NO. 6428) 336 Date of Efectity Peso Deposit v. Foreign Currency Deposit Other Features ‘ahora dopes foreign curencies ‘Authority of Banks to accept Foreign Currency Dsposis RURAL BANKS ACT OF 1992 (R.A.'NO. 7353). 337 Date of Eiectty Rules Features ofa rural bank ‘uaiieaton of Board of Oxectors : Pronittons Powers ef Rural Bane {Loans in favor of Rural Bank Premary Purpose of Loans| PRIVATE DEVELOPMENT BANKS ACT (R.A. NO. 4093)... Date of effectivity Declaration of Poy Organization Features wots of Private Development Bank (CAR) ‘Alcation of Ten Mion Pesos Extension of Loan ‘SAVINGS AND LOAN ASSOCIATION ACT (R.A. NO. 3779) Date of ety : Declaration of Policy Elements to Consider ina Savings and Loan Association Pronibiion Againet Examination, Inquiry and Discosure of Deposits Conditions for Granting @ Loan Using the Word "Bank" Limitations on investment ‘Autry of Monetary Board 340 THRIFT BANKS ACT (R.A. NO. 7906) ee oa 344 Date etectivty Det | . Declaration of Pley Powers of Tit Banks | Limitations on Lening Authority Indebtedness Investment in Aled Undertakings Investment in Aled Undertaking { LAW ON INTELLECTUAL PROPERTY. INTELLECTUAL PROPERTY CODE (R.A. NO. 8293) a Corey peed etal Prey Cate : INTELLECTUAL PROPERTY sin Intetecival Propery \ ‘State Policies Inflloctual Property Rights Copyright UUnstecosed information Industial Design| ' “Tracemark/Service Mark Ptentable vention Intograted Cit Layout-Design (Topography) Geographic Indiation, Technology Transfer Arrangements Intellectual Creavon Under The Chil Coge Book Different Modes of Acquiring Owhership 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 2007TABLE OF CONTENTS SAN BEDA MEMORY AID 2018 “io I-ntatectua! Creation INTERNATIONAL LAW RELATED DOCTRINES. . 346 Principle of Reciprocity Rules when = Foreign Corporation Sues Prneipie of Reverse Reciprocity Nationa Treatment Pinte Most Favored Nation Panple INTELLECTUAL PROPERTY OFFICE... : : ae 346. 'ne draweé to pay a sum certain in money (SUNDIANG & AQUINO, supra at 13); and 8Drawee ~ the person to whom the order to pay is jy addressed in a BOE. He becomes the acceptor Ulfen he aecepis the order to pay made by the "rawer. [tig only when he becomes. an acceptor “that he becomes primarily liable (i), ‘Thus, prior to the acceptance of a BOE, there is ‘no party. primarily liable. Legal Basis: A bill of itself does not operate as ‘an, assignment of the funds in the hands of the -drawee available for payment thereof, and the LAw SAN BE A MEMORY AID-2018 person (DE LEON, The Philippine Negotiable Instruments Law (and alliod laws) Annotated (2013), p 23 {hereinafter DE LEON, Negotiable Instruments Law). i | seiees UICC at inds (ST?-BC*DIF) Sight or demand draft payable when the holder presents it for payment (SUNDIANG & AQUINO, supra at 9. ‘Time draft = payable ata fixed date, (id) Trade acceptance - the seller (as drawer) orders the buyer (as drawee) to pay a sum certain tothe same seller (payee) Ia) Banker's acceptance ~ a time draft across the face of which the drawee bank has written the word “accepted.” The bank is normally an ‘accommodation payor that lends its credit to the buyer, who in. return, will pay the bank commissions and other charges (I) Jnland bill Aill which is, oron its face purports jo be, both drawn and payable within the Philippines (Id) reign bill— Any bill ther than an inland Bil Glean BOE — no document is attached wi resentment for payment or acceptances (AGBAYANI, supra at 408). {Check ~ itis the most common form of BOE"Itis ‘a BOE drawn on a bank payable on demand (NIL, See. 185); and Documentary BOE - documents is/are attached’ ‘when presented for payment or acceptance; (AQuiNo, supra at However, 2 drawee is not a party until he accepts the bil Drawee-acceptor is, primarily lable. Drawer is only secondarily involve resentments: 41) For acceptance (in cases provided in Sec, 443); and ‘Only 1 presentment: for | payment, Orawer may insert inthe Maker of nole may not | inset an express stipulation fimiting or insttument an express. Stipulation limiting oF negating his own liability | negating his own abit To the holder (NIL, Sec. [to the hoWer (NIL, Sec: 51), 64) (AQUING, supra at 17-18) Instances when a Bill of. Exchange may be ‘Treated as a Promissory Note at the election of the Holder: (CAFS) 4. Drawee does not have the Capacity to contract, (NIL, Sec. 130); 2, Where the bill is Ambiguous that there is doubt whether itis a bill or note (NIL, Sec. 17(e)); 3. Drawee is a Fictitious person (NIL, Sec. 130); or 4. The drawer and the drawee are the Same person (NIL, Sec. 130). Bill of Exchange BU OF Excharige When Payable Check ae Jay be payable on | Aways payable on ‘emand or at a fixed or | demand (NIL, Sec. determinable future | 185). ‘Need not be presented for acceptance: However, # the. holder requests’ and the | banker desires, banker | may aces Drawn, on deposit, otherwise, there would be fraud (SUNDIANG & AQUINO, supra at 11) drawee | (SUNDIANG &| LAQUINO, supra at. 11 lay be presented for payment within reasonable time afterits last negotiation (NIL, Soc. 71) Must be presented for Payment. within a reasonable time after its Issuance (NIL, 186). tf ‘accepted, Grawerfindorser drawerlindorsers are remains liable. discharged, Effect ofiDrawereDeath Death of a drawer of a] Death of the drawer ofa BOE, with. the | check,” with the knowledge of the bank, | knowiedge of the bank, ‘does not revoke the | revokes the authority of if ‘certified, authority of the drawee | the banker to pay to pay (SUNDIANG & | (SUNDIANG & AQUINO, supra at 11)__| AQUINO, supra at 11) ther patios to's Negotiable Incrumeat (¥D - HARA) 4. Bearer ~ the person in possession of a bill or note which is payable to bearer (NIL, Sec. 191) 2018 SAN BEDA CENTRALIZED BA OPERATIONS | 3FeV ADL E INDI RKUMENTS LAW EDA MEMORY AID 2018 2. Indorser ~ 2 person who transfers or negotiates aan instrument by indorsement completed by dalivery (AQUINO, supra at 192) 3. Indorsee — (in the case of instrumant payable to order) person in whose favor an jndorsement is. made. (DE LEON, supra at 21) 4. Persons negotiating by mere Delivery (NIL, See 30) 5. Holder ~ payee or indorsee of a bill or note who is in possession of it, or the bearer thereof (NIL, Sec. 191). 6. Acceptor ~ a drawee who accepts the order to ay made by the drawer. Its only when a drawee becomes an acceptor that he is primarily liable (SUNDIANG & AQUINO, supra at p 13). Referee — in case of need (NIL, Sec.131) a Person who may be designated in the instrument as the person who may be resorted to by the parties in case of dispute in case the bill is dishonored by non-acceptance or non-payment (SUNDIANG & AQUINO, supra at p. 13) 8, Accommodation Party — one who has signed Ite. instrument as maker, drawer, acceptor. or indorser, without receiving value therefore, and {or the purpose of lending his name to some other person (Nil, Sec, 29). Incidents in the Life of a Negotiable Instrument (PIN-PAD-PND-PD) 1. Breparation and signing, complete-with all the requisites provided for in Section-1 of the NIL; 2. Issuance - first delivery of the instrument to the payee, complete in form to a person who takes it as a holder. (NIL, Sec. 191), 3. Negotiation - transfer from one perso to arither | 50 as fo constitute the transferee a holder (Nl, See. 30) Presentment for acceptance, in certaln:kirds of BOE (Ni, Sec. 143); 5. Acceptance - written signification by the drawee Ofhis assent tothe order of the drawer (NIL, Sec. 132) 6. Dishonor by non-acceptance - refusal to accept by the drawee (NIL, Sec. 149); 7. resentment tor payment ~ the instrument is Shown to the maker or draweelaccepto: for him topay; & Notice of dishonor — notice . to persons secondarily liable that the maker or the drawee/accontor refused to pay or to accept the instrument, (Mit, Soc. 89) 8, Dishonor b¥ non-aayment ~refusal to pay by the maker oF draweelacceptos, Brotost (in some cases, e.g, foreign BOE) (NIL, See. 182); and 11. Discharge (AQUINO, supra at 22-23), 10, CENTRALIZED BAR OPERATIONS NON-NEGOTIABLE INSTRUMENTS, Non-negotiable Instrument That which does not meet the requirements laid down to qualify an instrument as a negotiable one (DE LEON, supra at 17) It is merely a simple contract in writing and is ‘evidence of such intangible rights as may have been created by the assent of the parties (Garcia v. Lamas, G.R. No, 154127. December 8, 2003). Validity is an issue independent of the issue of negotiabiliy. Verily, the contract represented by or ‘out of which the negotiable instrument arose may be invalid, voidable or rescissible or unenforceable but the instrument may remain negotiable (AQUINO, supra at 21) Effect of Estoppel The, doctrine of estoppel may convert a non- ‘negotiable instrurhent into a negotiable one. ‘Thé cGllecting bank, having stariped is guarantee of “all prior endorsements andlor lack of endorsements" 's now estopped from claiming that the checks under {cotisideration are not negotiable instruments. By such deliberate and positive attitude of the petitioner, it-has for all legal intents and purposes treated the said ‘checks as negotiable instruments and accordingly assumed the warranty. of the endorser When it stamped its guarantee of prior endorsements atthe back of the checks (BDO v. Equitable Banking Corp., G.R. No. 74917, January 20, 1988). ‘Negotiable Instruments v. Non-Negotiable Instruments Soe Ce? by | Transferable only oy by | essiznment can be a The transferee remains | fal | to be an assignee and | the requirements under | can never be a holder | Se 82 are complied | in due course, ov, ‘A holder in due course ‘All defenses avaliable fakes the negotiable instrument to prior parties may be raised against the last free from i transferee,NEGOTIABLE INSTRUMENTS LAW. SAN BEDA MEMORY AID 2018 | (a Examples of Non-Negotiable Instruments; 1 personal defenses and efeci i [Requires clean tile, one | that is tree from’ any “Transfores acquires. @ derivative ttle only. infirmities inthe ingtrument and defects of tile of prior a ‘Solvency of debtor is, not guaranteed under Art, 1628 of the CC unless expressly stipulated, Solvency of debtor in a sense guaranteed by the indorsers because they engage that. the instrument will be accepted, paid or both and that they will pay if the instrument is dishonored, ‘| INO, supra af 21-22). ‘ig Treasury Warrant — it is. payable outuoe paticular fund of the ~fiational “treasun [Metrobank v. CA, GR. No. A8566, Fob 1991); = Postal Money Orders a. Regulations or restrictions are imposedon postal money orders, which are inconsistent with the character of an NIL.” ‘The les provide for not more than one indors 8nd that payment may be withheld tnd verely of circumstances; and ._ Inestablshing and operating a postal mi order system, the government engaging. in commercial transactions ‘but merely exercises @ governmental po the public benefit (Philippine Education Co,, Ine. Sian, GR. No 122406, une 3, 1971) Letters of Credit ~ it does not contain en unconcitional promise or order to pay because payment or advancement made by the entty (bank) requested to pay should be made only if the thd” person’ (seller) presents certain documents. In addition, it is payable to a specified person and not to order (AQUINO, supra at 42); ‘rust Receipt ~ tis not negotiable under the NiL because itis an evidence of ownership of goods, not money (SUNDIANG & AQUINO, supra at 712) Negotiable Document of Title, Bill of Lading and Warehouse Receipt ~ itis not a negotiable instrument because it represents “goods, not money (AQUINO, supra at 42-43); Contiticate of Stocks — i is not negotiable because there is no order or promise to pay. It is a writen evidence of shareholdings of a person in a corporation, hence, does not represent an obligation to pay a sum certain in money (Id. supra at 42): forth 7. Cash Disbursement Voucher — it is not a negotiable instrument because its nothing more than a receipt evidencing payment by borrowers ‘of the loans previously extended to them (id. supra at 33); 8. Negotiable Order of Withdrawal - it is not negotiable because itis payable to a specified person (AQUINO, supra at 55, citing Soc. X225 ‘and Appendix 11 ofthe Manual of Regulations for Banks); 9. Withdrawal Slip ~ its not negotiable because the essence of negotiabilty which characterizes ‘a negotiable paper as a credit instrument lies in lis freedom to circulate freely as a substitute for money is lacking (Firestone Tire & Rubber Co. v. CA, GR. No. 113236, March 5, 2001): 10. Electronic Messages. elecironis messages, such 5 instructions given through” electronic messages giving authority to debit a certain account, are not negotiable instruments as they sg,| 60 not comply withthe requisites of negotiabilty ‘BYonda Sec, al and ofthe (S80 v. Cie Bu 166018, June 4, 2014); and 1k Baurtichet Cror-nogetabie because i docs ECE not representmoney but the pawned articles (SUNBIANG & AQUINO, supra at p. 12) __sNegotiability of Instruments (WAR) 2.1 The Wl ofthe nstment sal be considered: 25 Only wivat Appears on the face of the instrument ¥ shallbe-considered; and 13.” Requisites enumerated in Sec. 1 of the NIC (AQUINO, supra at 25) ‘Note: The instrument feed not follow the language of the NIL, buf any terms are sufficient which clearly indicate an intention to conform to the requirements. hereof (NIL, Sec. 10). ‘The duty of the court in such case is to ascertain, not what the parties may have secretly. intended as contradistinguished from whet their words express, but what is the meaning of the words they have used. What the parties meant must be determined by what they said. (Caltex (Philippines), Inc. v, CA, G:R. No. 97753 August 10, 1992). Requisites of Negotiability (WU-POA) 1. it must be in Writing and signed by the maker or drawer, 2. It must contain an Unconditional promise or ‘order to pay a sum certain in money; 3. It must be payable on demand or at a fixed or determinable future Time; 14. Itmust be Payable to Order or Bearer; and 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 5NEGOTIABLE INSTRUMENTS LAW N BED Where the instrument is addressed to Grawee, he must be Named o” otherwise indicated therein with reasonable certainty (NIL, Sec.) 4. It must be in Writing and signed by the maker or drawer. a. Writing Section 1 of the NIL does not specify the ‘materials that should be used in writing the instrument nor the material on which the ‘writing should be made. Hence, the writing ‘may be printed, in ink or in pencil, and it may be writen on any material that’ substitutes paper. Section 191 of the NIL provides that the word ‘written’ includes printed, and the “writing” includes print (AQUINO, ‘supra at 30), b. Signature May be in one’s own handwriting, or it may be printed, engraved, lithographed or photographed, so long:as. the signature is affixed by the one signing with the intent to authenticate the writing (I) A signature is prima facie evidence of his intention to be bound as either maker or person, or to him or his order. It may be Sip (drawn payable to the order of 155 payee who is not the maker, drawer of drawse; The payee must be named or otherwise indicated therein with reasonable certainty (NL, Sec. 8) Irthere is no payee in an instrument that is payable to order, no one could indorse the instrument (DE LEON, supra at 56) Subject to the rules in Secs. 14, 15, and 16.on incomplete instruments, leaving the payee blank may make the instrument non-negotiable because an le to order may he by indorsement AND negotiated delivery (NIL, Sec. 30) i. The drawer or maker; Anote payable to the order of the maker Is not complete until indorsed by him (NIL, ‘Sec. 184), ‘Where the instrument is payable to the order of the drawer and it is . .SAN NEGOTIABLE INSTRUMENTS LAW DA MEMORY AID 2oTe accepted by the drawee, the instrument is equivalent _ toa : promissory note made by the acceptor in favor of the drawer (AGBAYANI, Commercial Laws of 1 the Philippines, (1992), p. 167 hereinafter AGBAYANI, Commercial Laws)). ii, The drawee; ‘Two or more payees jointly: Vv." One or some of several payees; or Vi The holder of an office for a time being . Payable to Bearer (NIL, Sec: 9) An instrument payable to bearer may be transferred by delivery without indorsement land payment to. any person in possession thereof in good faith and without notice that . his tile is defective, at or after maturity, ‘ischarges the instrument. Delivery alone is enough to effect negotiation vote’ fretrument. Whoever possesses tig tis amare bearer. For added security, the holder may, fe require indorsement of the’ instrument-(DEY BE. LEON supra at 57) ALLEG ‘A nogotiabe instrument is payable to beater won: (EPF-NO} ee 1" When it is Expressed to.be'so payabl or es When its payable to a Berson therein orto bearer: 3 When the decumenis_provise that amounts deposted shall be repayable tothe Gopositor, such. instrument. ie” negotible Decause ifs payable tothe "bearer" (Caltex Philippines v. CA, G.R. No. 97753, Aligdst™es 10, 1992). a ~ The instruments @ bearer instrument ifithad drawn in the alternative, e.9 a) “tothe order of A orto bearer”; b) “fo the order of John Doe or to Beare: ©) ‘to the order of Marget A, Bitzer (or bearer)"; oF 4) “to order of bearer (AQUINO, supra at 63), : Ti When Jit is payable to the order of a Fictitious or non-existing person, and Such fact was known to the person making it so payable. ‘Anname Is fictitious when itis feigned or pretended, and @ nonexistent person is ‘one who does not exist in the sense that he was not intended to be the payee by the drawer (Commonwealth v. Globe i 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | $ Indemnity Company, 185 4. 796, April 29,1936) Fictitious Payee Rule ‘An actual, existing, and living payee may also be “fictitious” if the maker of the check did not intend for the payee to in fact receive the proceeds of the check: This usually occurs when the maker places a flame of an existing payee on the check for convenience or to over up an illegal activity “(PNB v. Rodriguez, G.R. No, 170525, September 26, 2008). In ficttious-payee situation, the drawee bank is absolved from liability and the . For Value Demand Instruments Where an instrument payable on demand is Value negotiated on an unreasonable length of time after Its any consideration sufficient to support 2 its issue, the holder is not deemed a HOC (NIL, simple contract. An. antecedent or pre- Sec, 53). existing debt’ constitutes value, and is deemed such whether the instrument is What can be considered as “unreasonable”. is payable on demand of at a future time (NIL, relative. In determining what is “reasonable time” Sec. 25) or an “unreasonable te,” regard sto bea the: (FUN) i. The Facts of the partcular-cas li, Usage of trade or business respect to such instruments; ahd ii. Nature of the instrument (iL, Seo""193)""~" (Bier negpablinsrumentis deemed prima Taso tote been ound fora vabable copsteglin. Every pereon whose signature See teieon is" prenumnod ts have party thereto for value (NIL, Sec. b. Without notice of dishonor “ i A Gchonored “intumont Tay “sl be! negotiated and the holder without: notice can ba holder n due course (OE LEQM, Si 208). Es = Underthe NIL, itis presumed that every party TEEN to an instrument acquires the same for a | consideration or for value. It devolved upon / thee party who claims that there is no Ccotjsideration to present convincing evidence {ojoverthrow the presumption and prove that the”checks were in fact issued without @. Good faith : _Naluable consideration (Cayenan v._ North Holder in good faith means a holder without 22 Star Intemational Travel, Inc., G.R. No. knowiedge or notice of equities of any s6et 172964, October 5, 2011). which could be set up against a prior holder ofthe instrument (AGBAYANI, supra at 247). Consideration. is. not relevant tothe negotibilty of an instrument buts significant Good faith refers to the indorsee or on the question of whether or not one is a transferee, not to the indorser or transferor holder in due course (AGBAYANI, supra at ofthe instrument (DE LEON, supre at 208) 227), ‘Aithough good faith on the part ofthe holder Note: It is: not necessary thatthe is presumed, such presumption is destroyed consideration ‘should be adequate (CIVIL if the payee or the indorsee acquired CODE, Art. 1355). While consideration for a Possession of the instrument under simple. contract is considered "value" under Circumstances that should have-put him to the NIL, the concept of value under the said inquiry 98 10 the tile of the holder who law i different from that under the Civil Code negotiated the instrument. The burden now is (AQUINO, supra, 143-144). For instance, on the part of the holder to show that love. and’ affection do not constitute value notwithstanding, the——_—suspicious, within the meaning of the NIL (AQUINO, circumstances, acquired the check in actual supra at 130). {good faith (De Ocampo v. Gatchalian, G.R. ‘No. L-15126, November 30, 1961). A holder is a! holder for value only to the extent that the consideration agreed upon hhas bean paid, delivered or performed. it 2B SAN EEDA CENTRAMITED BAR OPERSTIONS IBNEGOTIABLE INSTRUMENTS LAW SAN eFDA MEMO Py 210° 2016 should be emphasized, however, that value need be full and a holder willbe one for value even if he gave less than the face value of the bill or note so long as the intention of the transferor is to transmit the full amount represented by the _instrument (VILLANUEVA-CASTRO, supra at 314), Lien on the Instrument If an-instrument is given as collateral for debt, the holder has @ iien on the instrument (VILLANUEVA-CASTRO, Recap supra at 318). That al the time it was negotiated to him, ne had no notice of any Infirmity in the instrument ‘or defect in the tile of the person negotiating it (NIL, Sec. 52; BPI v. Roxas, G.R. No, 187833, October 48, 2007). Infirmity It pertains to any irregularity in the instrument (1 at 140), we deemed a holder in due course only to the extent (of the amount therefor paid by him (NIL, Sec. 64) Illustration: if the holder took the instrument on the strength of his promise to deliver P300,000 but, he had only delivered 200,000, he is 2 holder in due course only up to 200,000 if he receives notice of infirmity before he can fully pay the consideration, Burden of Proof Every holder is deemed prima facie to be a HOC; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the halder to prove that he or ‘some person under whom he claims acquired the title as HDC. But the last-mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title (NL, Sec. 59) Jote: A payee can be a HDG so Iong as he ‘Sores with the requirements of Sec. 52 of the ne NIE was explained that See. 191 of the NIL When Title is Defective ‘The title of @ person who negétistes ‘the: instrument is cefective when he obtained" the" instrument or any signature thereto by: (F*UBIC) Fraud: Eorce, duress or fear; Other Uniawiul means; Breach of faith; eS For an Illegal consideration; or» Under such Circumstances that- amount te fraud (NIL, Sec. 55). e What Constitutes Notice of infirmity of Defe' To constitute notice of an infirmity in."the instrument or defect in the title of the persons" negotiating the same, the person to whom itis. negotiated must have had actual or chargeable” knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith (iViL, Sec. 56) Nevertheless, knowledge and bad faith may be established by circumstantial evidence (AGBAYANI, supra at 289), Effects of notice of defect 2 It destroys the status of ’b. The holder is open to all defenses and not merely those relating to defect of which he hhad notice (NIL, Sec. 56). Notice Before Full Amount is Paid Where the transferee receives notice of infirmity in the instrument or defect in the ttle of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be 20 | 2018 SAN BEOA CENTRALIZED BAR OPERATIONS ‘OFE gggggatierest. Hence, the word: “holder” ED Aetngs olde a the payee or indorseo of ell GARG, wines in peccenton of or the Dower in ho tat Pao i See. 22 and nthe sovend eursecten aiereot may be replaced by the definition in Sec. "Unabveod'n possession ce" (AQUING,supro at 148). “Rights of'a HDC (SP*F) tb May-Sue on the instrument in his own name “(ever when he holds the instrument merely in a fepfésentative capacity such as a holder for SU sbfleetion only or a pledges of a note) (NIL, Sec. 51); “2:, May receive Payment and if payment is in due course, the instrument is discharged (NIL, Sec. 51); 3, May enforce Payment of the instrument for the ful amount thereof against all parties lable thereon (NIL, Sec. 57); and 4, Holds the instrument Evee from any defect of tite OF prior parties and free irom personal defenses available to parties among themselves (NIL, See: 57). Exceptions to the i 2. Whon the holder is a holder for value only tothe extent of his lien - HDC only to that extent (NIL, Sec. 2) . When the hoider acquired notice of any infirmity in the Instrument or defect in the tile of the Berson negotiating tho same Before he has pals tho fll amount agreed to be pa therefor ~ HDC only tothe extent of the amount paid (NIL, Sec 54);NEGOTIABLE INSTRUMENTS LAW ©. In case of alteration as to amount ~ HDC may. enforce payment only according to its original tenor (NIL, Sec, 124) 4, Holder Not in Due Course He is one who became a holder of an instrument without any, some, or all of the requisites under Sec. 82 of the NIL. ‘The holder who is not a holder in due course is not free from all types of defenses whether real or personal (Sps. Violago v. BA Finance Corporation, et al, GR. No, 158262, July 21, 2008). General Rule: If a holder is not a holder in due course, he is subject to the same defenses as if it were non-negotiable. In other words, a holder not in due course is subject to both real and personal defenses available to parties primarily or secondarily liable (AQUINO, supra at 152). Exception Shelter Rule ~ if the holder’ (1) dorives his. Party to any fraud or illegality affecting the instrument:=" he has all the rights of such former holder if respect” of al partes prie to tho latter (NIL, Sec 58) Mustration: A issued a negotiable promissory rote to B and authorized the latter to fil up the arnaugt in. blank in the sum of P500. B put P5,000 in violation the instruction. B negotiated the note to.C wio) knowledge of the infirmity. C then negotiated if for value and who had no knowledge of the inf D endorsed said note to € for value-bul) E hass knowledge of the infirmity. In this situations. E. can! enforce the note against A. £ is not a holder intdue.. course since when he took the instrument, he"had knowledge of the breach of trust committed byB. against A. However, E has all the rights of a holder in ‘due course because he took the instrument from D who is a holder in due course and he did not participate in the breach of trust committed by B. against A. Exception to the Exception: The shslter rule does not apply ifthe holder was a previous holder not in due course who had subsequently repurchase the , instrument either personally or through an agent (AQUINO, supra at 152) Reason: A holder who is not a holder in due course cannot improve his situation by reacquiring the instrument (Fossum v. Femandez, G.R. No. L-19461, ‘March 28, 1923). lMlustration: Suppose that C, who was not a previous holder in due course since he took the instrument wth, knowledge of the infirmity, reacquired the same from OA MEMORY gi: i through @ holder in due course and'(2) it he is vot 3 AID 2018 D, a holder in due course. In this case, the shelter rule will not apply: C will not have the rights of holder in due. course although he acquired the same fram D, holder in due course. Rights of a Holder NOT in Due Course: (SPaDeS) He may Sue on the instrument in his own name «Wil, $00.54); 2, He may receive Payment andi the payment i in due course, the instrument is-discharged (NIL, Sec. 51); 3. He holds the instrument subject to the same Defenses as if It were non-negotiable (NIL, Sec 58); > Thus, prior parties can avail against tim any ‘defense available among these prior parties and prevent the said holder from collecting in whole Cr in part the amount stated in the instrument. 4. Shelter Rule is applicable (NIL, Sec. 58). HDC v. Not HOC. Toa One, oF some, of all of the | requisites. or conditions under Sec. 52 is/are absent, (SE ¢ rights can be defeated by real (Aquino, Porsonal Defehses He/ngnig-cannot be [His ghis can be featedby personal | defeated by personal fefenses (ld, Gefenses (i, ce Ethas right to enforce | He has right to enforce Lbayment, sue in his own | payment, sue in his own name, and negotiate | name, and negotiate the instrument’ (DE | the instrument (DE LEON, supraat 227). | LEON, supra at 295) Bills in Set ‘One composed of several parts, each part of the set being numbered and containing a reference to the ‘other parts, the whole of the parts constitutes one bill (NIL, See. 178). Purpose: Mainly to” facilitate international transactions. It is usually availed of in cases where a bill had to be sent to a distant place through some conveyance. If each partis sent by different means of conveyances, the chance that at least one part of the set would reach its destination would be greater (DE LEON, supra at 395). 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 21NEGOTIABLE INSTRUMENTS LAW SANSEE MeMd Rights of holders where different parts are ~ negotiated separately IF both are HDC, th der whose title first accrues is considered the true owner ofthe bill But the person who accepts or pays in due course shall not be prejuciced (NIL, Sec. 179) Obligations of holder who indorses two (2) or more parts of the bill set to different persons: 1. The holder of a set is liable-on every such part and 2. Every indorser subsequent to him is liable on the part he has himself indorsed, as if such parts were separate bills (ML, Sec. 180) UM, Holders for Value Value is any consideration sufficient to support 2 simple contract. (NIL, Sec. 25) A holder is a holder for value only to the extent that the consideration agreed upon has been;paid, delivered or performed. It should be emphasized, © however, that value need be full'and.a holder will be one for value oven if he gave less than the face Value of the bill or note so long as the intention of: thes transferor is to transmit the full amount represented” by the instrument ((c). Antecedent debis and a lien on the instrument are, examples of value. Hence, a holder is a holder for valve if the instrument was indorsed t0 him by his immediate transferor to pay for a leh that! was ‘extended to the latter (AQUINO, supra at 143). Partial Performance ‘With respect to holders, the holder is. a-holder' for value only to the extent that the consideration agreed upon has been paid, delivered or performed: Non- performance of the obligation will give rise to partial or full defense of failure of consideration (Id. at 144) LIABILITIES OF PARTIES ACCORDING TO NATURE 1. Warranties: oF Il. Engagement to Pay 4. Primary liability: oF {Warranties These are affirmations of fact on the part of the parties that impose no direct obligation to pay in the ‘absence of breach thereof (AQUINO, supra at 183). Breach of Warranty — when the facts which the parties represent to be true are actually false. 22 | AUIS SAN BEDA CENTRALIZED BAR OPERATIONS AID 201g Liability for breach of warranty is not conditioned on ‘presentment and notice of dishonor. Action for breach | ‘of warranty, occurring as it does at the time of the transfer, may be brought at any time (AQUINO, supra at 183) Effect of breach of warranties The party who committed the breach may be: 1 Held liable; or 2. Barred from asserting a particular defense (Id). Liabilities of parties [ 4 Person negotiating an Maker (PEC) (NIL, Sec. 60) 1a, Engages to Pay according to the tenor of the instrument; b. Admits the Existence of the payee; and the c. The payee’s Capacity to indorse. Drawer (PDAC) (WIL, Sec. 61) a. Engages, that on due Presentment, the instrument will be paid accepted or paid or both according to its tenor by the party primarily Table; and Engages that i the instrument is Dishonored ‘and necessary proceedings are brought, he will pay to the party entitled to be paid; io: “Admits the Existence of the payee; and ‘ds The payee's Capacity to indorse, Acceptor (PAG-CEC) (NIL, Sec. 62) ‘a. Engages'to Pay according to the tenor of his ‘acceptance; | Admits existence of the drawer; ‘Genuineness of the drawer's signature; Drawer’s, Capacity and authority to draw the instrument; Existence of the payee; and Payee's Capacity to indorse. Payment which Includes acceptance Payment of a negotiable instrument includes acceptance. The drawee bank's actual payment of the amount in the check implies ot only his assent to'the order of the drawer ‘and a recognition of his corresponding ‘obiigation to pay the sum stated in the check, but 2iso, his clear compliance with thal obligation. Actual payment by the drawee fs ‘greater than his acceptance, which is merely 22 promise in writing to pay (Far East Bank and Trust Company v. Gold.Palace Jewelry Company, G.R. No. 168274, August 20, 8). Indorsers instrument _by delivery or a qualified indorser (Wil, Sec. 85) or a person indorsing a bearer instrument (GTCI): ‘a. That the instrument is Genuine and in all respects what it purports to be; 'b. Thathe has good Tile to tt. NEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMORY AID 2018 c. That all prior parties had Capacity to contract; and 4. That he'hes no knowledge of any fact which would Impair the validity of the instrument or fender It valueless. ‘To whom warranty extends 2. Qualified indorsement - to all parties who derive their tile through his indorsement; b. Person negotiating by delivery — immediate transferees only (DE LEON, ‘supra at 259). b. General indorser (TCV) (NIL, Sec. 66) a. That the instrument is Genuine and in all respects what it purports to be; That he has good Tie to it; ©. That all prior parties had’ Capacity to contract; and d._ That the instrument is, atthe time of his. indorsement, Vali and subsist Against the Payee-Depositor, ‘When the payee-depositor deposits the'check’t se a the collecting bank, the latter becomes the agent™ a of tees oe oon i Ho the check because the said ince is only for collection which is a restrictive indorSehiBnts! under Sec. 36 of NIL unless when negligence is x altbuted 10 the payee-depositr, Oe Expross Savings ‘Bank, GR. No.1 September 10, 2014, cling Far East Be TrustCo. v. Gold Palace Jewellery Co, 168274, August 20, 2008). Engagement to Pay Makes the parties liable to pay the sum certain in money stated in the instrument conditioned upon presentment and notice of dishonor (AQUINO, supra, at 183). ‘Such action cannot be brought until’ maturity of instrument. (Id) “The person who, by the terms of the instrument, absolutely required to | pay the same (WIL, Sec. | 192) “The person who, by the terms of the instrument is not absolutely required to pay the ‘same (DE LEON, supra at. 242). Unconditionally bound to pay (DE LEON, supra at 235). Conditionally bound to ay as when the person primarily liable refuses a 1. Parties Primarily Liable ‘a. Maker in case of Promissory Note (NIL, Sec. v0) ‘The maker engages to pay according to the tenor of the instrument. The liabilty of the maker is primary anid unconditional. He-promises to pay not only the payee but also any subsequent holder who is legally ented to'the instrument (OE LEON, supra at 242-243) He cannot shift his liability to any person without the. payee’s consent (Araneta v. Perez, G.R. Nos. L-20789-88, June 29, ee 909) “De proséhitnent or payment and due notice 9f dishonor are not necessary for the urposé-of charging the maker with liablty. These are necessary, however, to fix the any ‘drawer or indorser (DE se Inbjloe in case of Bill of Exchange (NL, 1 Sec) 62) itis" only from the moment the drawee accepts the bill or certifies the check that the _drawee becomes primarily liable to the holder by his unconditional acceptance (Westminter Bank v. Torres & Nasoor Inc., G.R. No. L- ‘38139, October 27, 1932). This istrue even ifthe drawee did not receive any. consideration from the drawer. Such absence of consideration is only an issue between the drawer and the acceptor (AQUINO, supra at 186) ‘Acceptor engages to pay according to the tenor of his acceptance, which’ may not be the same as the tenor of the bill itself because the acceptance may be qualified (DE LEON, supra at.248). Like the maker of ‘a promissory note, neither presentment for payment nor notice of dishonor is necessary to charge him with liablity except where he is ‘an acceptor for honor (1d). 2. Parties Secondarily Liable a. Drawer (NIL, Sec. 61) | He engages to pay after the following conditions are'met: 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 23.NEGOTIABLE INSTRUMENTS LAW SAN 6 The billis presented for acceptance (NIL, ‘Sec. 143) or for payment (NIL, Sec. 70) as the case maybe to the drawee; ‘The billis dishonored by nen-acceptance or non-payment, as the case may de; and ‘The necessary proceedings of dishonor are duly taken: 1) Notice of dishonor is given to the drawer (NIL, Sec. 244); oF 2) In case of foreign bills, protest is made (NIL, Sec. 152) The drawer is secondarily liable to the holder or to any subsequent indorser (intervening indorsers) who may be compelled to pay. (DE LEON, supra at 256). This allows the drawer to’ limit his. liabiity by express stipulation (NIL, Sec. 64). Usually, there is a contractual relation between the drawer and the. draweé (AQUINO, supra at 184). f ‘A drawer may not unilaterally discharge himself from liability on checks issued by him 23s security and not for value and negotiated to @ holder, in due course by the. mere expediency of withdrawing his funds from the drawee bank (State Investment Fiouse Inc. v CA, G.R No. 101163, January 11, 1993) General Indorser/Unqual (Wil, Sec. 66) 1d Indorser A general indorser is one who indorses the instrument without any qualification (unlike a qualified indorsement or conditional indorsement). He is secondarily iable to the": holder or to any subsequent indorser who may be compollad to pay (AQUINO, supra at 199). He engages that on due presentment, it shall be accepted or paid, or both, as the case may bbe, according to its tenor (NIL, Sec. 66) He ‘engages io pay after the following conditions are met: 1 Due presentment for payment or acceptance must be made: and IP dishonored, the sishonor are duly taken (IIL, Sec. 66) By indorsing the instrument, the indorser enters into a contract with certain fixed and definite terms, which may not be varied or MEMORY AID 2 Oral testimony is not admissible to establish that an unqualified indorsement is. in fact qualified (Velasco v. Tan Livan, G.R. No. L- 17230, March 17, 1922). Irregular Indorser (NIL, Sec. 64) ‘An indorser is considered an_ irregular indorser when the following conditions are present |. A person must not be 2 parly to the instrument; li, He must have signed the instrument in blank; and i, He must have signed before detivery. Note: Where @ person puts his signature after delivery, Sec. 64 does not spply Sec.17(9 and Sec. 63 shall apply. The party is called an “irregular” or an "anomalous" indorser because he indorses in 2A unusual, singular or peculiar manner. His 1@ appears where we would naturally ‘expect another name (AQUINO, supra at 209). oe faatthéuahr the law does not state that all cifreguiar indorsers are accommodation [Sparties, they are usually accommodation Jabilily of trregular indorser J a8An irregular indorser is liable as ¥ general indorser because he indorses FEortneut qualileation, However, 25 between themselves, the regular “indorser together with other indorser are able prima facie in the order in which they indorse (AQUINO, supra at 210); and b. He is liable as indorser, in accordance withthe folowing rules Wf the instrument is payable 9 the order ofa third person, he's lable to the payee and to ail subsequent partes; ii, iFthe instrument is payable to the order of the maker oF drawer, or payable to bearer, he is able to a parties subsequent to the maker o° Brawer, an Ti. If he signs for the accommodation of the payee, he is lable to al parties subsequent to the payee (NIL, Soc 64), contradicted by parole evidence (Routior v. _Indorser/s who are not secondarily liable Wiliams, 52 N.D. 793, 204, N.W. 678 1. Qualified Indorser (AQUINO, supra at 197), (1925). 2. Person Negoliating by Delivery (AQUINO, supra at 202); and 24 | BOMB SAN SEDA CENTRAUZED BAR OPERATIONSNEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMORY AID 2018 3. Indorser of Bearer Instrument (NIL, Sec. 40). Note: These indorsers, however, are liable for breach of warranties as stated above. However, an indorser ‘of a bearer instrument may incur all the liablify of an indorser (NiL, Sec. 67) but only with respect to parties: who acquire title from his indorsement (AQUINO, supra at 199). Order of Liability of Indorsers ‘The holder is free to choose to recover from any indorser in case of dishonor of the instrument. There is no order of iabllty among the indorsers as against the holder (AQUINO supra at 196) Joint payees or joint indorsees who indorsed are ‘deemed to indorse jointly and severally with respect to each other (id) ‘As respect one another, indorsers are liable prima facie in the order in which they indorse unless, tradence'e produced to thew that as be sae amongthem, they have agreed otherwise (Mi 68) deemed as an indorser ‘The person” who. signed the instrument, clearly indicated by appropriate’, words intention tbe bounin seme cher eapaety (NIE, Sec. 63) 2. A person signs for the purpose of ident person only and not for the purposé ok any liability (American Bank v. Macohdray’é GR. No. 1808, August 23, 1905); and 3. A person only guarantees prior eridérsemer (PNB v. CA, GR. No. 126001, Octaber 292. 1968) Liability of an Agent ‘A maker, drawer, acceptor or indorser may act through an agent. However, he must do the following acts £0 avoid personal liablity 4. Disclose the name of his principal (NIL, Sec. 69); 2. Disclose the fact that he Is acting ofly as an agent (NIL, Sec. 69); and 3. Actin accordance with the authority given to him, Mere addition of words describing him as an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability (NIL, Sec. 20). Signature by Procuration It operates as notice that the agent has but a'limited authority to sign. and the principal is bound only in case the agent in s0 signing, acted within the actual limits of his authority (NIL, Sec. 21). 2. He 3: Liability to the Instrument General Rule: A person whose signature does not ‘appear on the instrument is not liable (NIL, Sec. 18). Exceptions: (PITACA-DF) 1. Persons whose signatures were forged but who are Precluded from setting up the defense of forgery (Nil, Sec. 23) 2. Incapacitared persons who sign through their legal guardians (DE LEON, supra at 96); 3. One who signs in a Trade or assumed name (NIL, Sec. 18); 4. One whe signs through an Agent or authorized representative (NIL, Sec. 19); 6. In case of Constructive acceptance (NIL; Sec. 137); 6. Indorsers who sign on a separate piece of paper -{Allonge) (NIL, Sec. 31); 7. Persons who negotiate by meré Delivery. They are liable for breach of warranty although they did not sign (NIL, Sec. 65); and 'Eorgers of signatures (NIL, Sec. 23). sal atfangement under which a person called migdation party lends his neme an credit i eregaaien pay lds nae a 7 eeptfaton QUIN, soa 27 dest & detommodation Party “HAS (He muStbe a party to the instrument, signing as stnot receive value therefor and ema fob pupane tenn hs name ‘An, accommodation party, the one. who lends his name to enable the accommodated party to obtain credit or raise inoney, is lable on the instrument to a holder for value even if he receives no part of the ‘consideration. He assumes the obligation to the other party.and binds himself to pay the note on its due date (Ang v. Associated Bank; G. R. No. 146511, September 5, 2007). “without receiving value therefor” means “without receiving value by virtue of the instrument” an¢ not as ‘it apparently is supposed to mean, “without teceving value for lending his name" | (Clark v. Soliner, G.R. No, L-16477, November 22, 1921). In accommodation transactions recognized by the NIL, an accommodating party lends his credit to the accommodated party by issuing or indorsing a check which is held by @ payee or indorsee as a holder in due course, who gave full value therefor to the 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 25.NEGOTIABLE INSTRUMENTS LAW SAN BE MEM@RY AID cis ‘accommodated party. The later, in other words, receives or “an accommodation maker may demand from the principal debtor reimbursement for the amount ahatfhe paid to the payee; and { (Ajoint and several accommodation maker who “pays on-the, said promissory note may directly ‘Gemand. reimbursement from his co- ‘agcommodetion maker without first directing, his ‘ection against the principal debtor provided th: a. He made the payment by virtue of a judicial demand or b. The principal debtor is insolvent (Sadaya v. ‘Savill, G.R. No. L-17845, April 27, 1967). bility of an Accommodated Party The accommodated -party must reimburse the ‘accommodation party if the latter is held liable by the holder for value (AQUINO, supra at 209), By lending his name, the accommodation party is in effect a surety ofthe accommodated party. Thus, the accommodation party cannot make the holder recover directly from the accommodated party. His only recourse is to seck reimbursement from the accommodated party. It should be noted, however, that while he isin effect a -suroly of the ecommodated arty. tho accommodation party is fot oxactly a surety at respects, Unike Ina contract of sureyship. the libilty of the accommodation party remains not only primary but also unconditional to @ holder for value” (Pople v. Maniégo, G.R. No. L-20010, February 27, 1987)NEGOTIABLE INSTRUMENTS LAW . SAN BEDA MEMORY AID 2018 Signs the instrument for some other person (NIL, | dig. Seo. 29) without receiving value | for value. therefor. March 47,1922) Eee PAL ea Raita at Cannot failure of consideration | person not a hol due course (DE LEON, Vaiter paying the holder, | May not sue. reimbursement the | reimbursement 1925) DEFENSES the purpose of Jending | purpose in which the his name or credit to | accommodation party Signs the instrument | Signs. the instrument May always show by | Cannot disclaim or parole evidence that he | limit his personal is only an | liability as appearing accommodation party. | on the instrument by parole evidence (Mauini v. Serrano, GR No | Lba4s Docomber 16) -18fa ess Velasco v. Tan-Livan, GR. No. 17230) avail of the | Can aval. of sald, | defense of absence or | defense against ja against @ holder not in | due course (td) may. sue for | subsequent party’ for, accommodated party. | National Bank Maza, G.R. No. L- 24224, November 3, ‘The right of the holder to enforce payment of a: negotiable instrument may be defeated by the defenses that may be raised by the person primarily co secondarily liable (AQUINO, supra at 225). ‘The defenses that may be raised are either real or personal, Real defenses may be raised against all holders even against a holder in due course. Personal or equitable defenses may be raised only against holders who are not holders in due course (ia) These defenses should be distinguished from equities of ownership which are raised by persons who may have legal claim over the instrument Although they are similar, they are-invoked for different purposes. Defenses are invoked to resist a claim for payment, while equities of ownership are Invoked to claim the instrument (i). Real v. Personal Defenses Cc es ae Rete i ‘Absolute defenses | Equitable defenses Those that attach tothe | Those which are instrument itself and are | available only against a available against all | person not a holder in holders, whether in due | due course or a course’ or not | subsequent holder who (SUNDIANG & | stands in privity with him (i, AQUINO, supra at 37) i ‘Statuis of Contract: Voidable. Available against}HOC. 1A Not available against, HDC, Micu) ‘.Non-delivery of ‘Complete instrument (NIL, Sec. 16); 2.Ultra vires acts of Corporations - where the corporation has the power to issue / any purpose; negotiable paper: but 4, (Duress ania | the ania was ok to-tore authorized” for the [si Want of authoriy of | particular purpose for .. ‘agent; which it was issued; 6. INon-dativery of | S.Negotiation in Breach ‘incomplete: of faith (NIL, Sec. 58); ‘instrument’ (NIL, | 4.Insertion of wrong ‘Sec. 15); date in an instrument 7. Borgery (NIL, Sec.|_ (NIL, Sec. 13); 23); 5.Conditional Delivery 8. Insanity where the | of Complete insane person has a | instrument; guardian appointed | 6.Filing up blank. beyond Reasonable time (NIL, Seo. 14); | 7.Absence or failure of 7 | consideration, 11,Discharge in| ” whether partial or total insolvency; (NIL, Sec. 28); 12.Fraud in Eactum or | 8.llegal_ consideration ‘Fraud Esse | (NIL, Sec. 55); |Contractus or Fraud | 8.Filing up blank Not | in Execution; within. authority (NIL, : Sec. 14); 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 27NEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMORY AID zo1e Execution of instrument between | public Enemies; and | 14.Marriage in the case | 11 of a wife, | 10. Want of authorty oF) agent where he has } apparent authority; Fraud in| Inducement; 12. Acquisition’ by Force, duress of Tear (NIL, Sec. 58); Intoxication Mistake; Insanity where: Note: An instrument subject to eal defense Gano be" enforced | 13 against the person to | 14 Shom the deterse fo | 18 valable but Ucan be | there sno noice of tnforced against those | insanity onthe part strom such Selense =| oh te one | Mat'avaleie such’ as | contracting wih the | onder Seo. 22 | __ ineane person; | 16. Negotiation "une | Croumstances that mount to. feud (NIL, Sec. 55); and. 17. Aequision of the instrument ‘Unlawful ‘means. (ML, Seo. 68). | Defenses and Warranties Breached’ UP cers Gen a ‘Antedating | Post- Dating =) Insertion of Wong Date Filling up blanks beyond the scope of authori SLCC Want of Delivery of. Complete Instrument ‘Conditional Delivery oF Complete instrument _ Fraud in inducement Forgery Borsa SRR Menino cutest ee ri legality Failure or Absence of ae Consideration | Besseiption “legal Consideration Fraud in Faciurm | Filling up blanks beyond reasonable | seatratiete | in | Duress Tntimidation 26 | 2018 SAN BEDA CENTRALIZED BAR OPERATIONS, Transfer Breach of] Faith Effects of Certain Defenses 1 2 Minority and Other Causes of Incapacity A minor is not incapactated to pass property through indorsement of assignment ofthe instrument. However, from want of capaci, the corporation or infant may ineurnolabilytherecn (Nil, Sec. 22). Minority isa real defense. However, such defense is personal tothe minor and cannot be invoked by other parties (DE LEON, supra at 91). Furthermore, under Secs.-60, 61, and 62, the maker, drawer, and acceptor, by making, drawing and accepting the instrument, admit the capacity of the payee to indorse (AGBAYANI, supra at 318) ‘The minor shall be'liable under the following ireumstance: | THe minor actively misrepresents his age and it @ppears-that he is physicslly of such age . festonbel 'b/\A nor may be held bound by his signature =7%8 an instrument where he is guilty of actual fraud committed by specifically stating that he is of age when, in fact he is not (Mercado |v. Egpintu, G.R. No. L-11872, December 1, 1917);.and ‘The minor kept the fruits or benefits (CIVIL CODE, Art. 1399) ‘The payee of a negotiable instrument acquires no interest witnit until its delivery to him. Delivery of an-instrument means transfer of possession, actual or constructive, from one person 10 another. Without the delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. The delivery must also be intended to give effect to the isirument (Development Bank of Rizal v. Sima Wei, C.R. No. 85479, March 9, 1993). Other incapacitated Persons Refers to insane, demented persons and deaf- mutes who do not know how to write or those persons who have no capacity lo give consent (CIVIL CODE. Art. 1327). Their capacity is 2 real dofonse as far as such person is concerned. Itic available against a HDC (DE LEON, supra at 92). Ultra Vires Act Itis one committed outside the object for which a corporation is created as defined By the law ofits organization and therefore beyond the power conferred upon it by law. It is merely voidable which may be enforced by performance, ralification, “or estoppel (Atrium Management. NEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMO Corporation v. CA, G.R. No. 109491, February 28, 2001). Uttea Vires as distinguished from an illegal act is. that the latter is void and cannot be validated (AQUINO, supra at 227). The negotiation by a corporation may pass ttle to the instrument. However, a corporation may raise want of authority as’ @ REAL DEFENSE {AQUINO, supra at 227) Filling up Blanks Beyond Authority This applies to incomplete ‘but delivered negotiable instruments and is classified as a. personal defense (NIL, Sec. 14). & Prima Facie Authority to Complete the Instrument i. Possession thereof by a person; and i Want of a material particular In the instrument; a Material particular 4. Requisites under See. of Nt ~ 2. Mallers stated underSeck4 NIL; and 3. Any important detai th “That such person had authority the blank 1 Strictly authority given; and 2. Within a reasonable so, b. Prima Facie Authority to Fill It Up for-Any. Amount i. Signature on a blank paper; ii, Person signing in blank delivers # to another: and ii, Delivery was for the purpose of converting it into @ negotiable instrument (AQUINO, supra at 237 in sexsi ol ite Note: The authority is only to complete the instrument. Hence, there is no authority to insert a special agreement not essential to the completeness of instrument (AQUINO, supra at 238) ‘Although the first sentence of Sec. 14 of the NIL may give the impression that only the authority to complete is presumed, in realty, itis also presumed that the instrument was completed in accordance with the authority that was given (Id. at 239). N BED SSeS iE OF ENG Pr LON Ry AID 2018 If the holder of the instrument, after it was filed up, is 2 holder in due course, the holder may enforce the instrument as if i has. been filled up strictly in accordance with the authority given and within a reasonable time (NIL, Sec. 14). Under Sec. 14 of the NIL, if the drawer delivers a pre-signed blank paper to another person for the purpose of converting it to negotiable instrument, he is deemed to have prima facie authority to fil it up and must be ‘strictly in accordance with the authority given, ‘Otherwise, maker can set this up as personal defense: and avoid liability (Patrimonio. v. Gutierrez, G.R. No, 187769, June 4, 2014). 4, Incomplete and Undelivered Negotiable Instrument ‘Where an incomplete instrument has not been + delivered, it will nt, if completed and negotiated Ragyaut authorty bea ald contract inthe hands holder, as against any person whose scatature was“placed thereon before delivery tis @.teal defense which belongs to the wer (or parties, if any, prior to the delivery of ee 3) 4 holder in due course and one who is der in due course (1d). 1 Untier Section 15 of the NIL, there is no prima j-facle authority to fill up the incomplete instrument jiPbscause there was no delivery (1d). “>! Where an incomplete and undelivered instrument, isin the hands of a holder in due course, there is ' prima facie presumption of delivery which the maker may rebut by proof of non-delivery (AGBAYANI, supra at 176) 5. Complete but Undelivered Instrument Every contract. on a negotiable’ instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto (Nit, Sec. 16) As ‘between immediate parties, and remote parties who are not holders in due course, it may be established that: a. The delivery is conditional or for a special purpose and not for the purpose of Iransferting ttle; b. That there was no delivery: at all-of the complete instrument; or Negotiable 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 25)NEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMORY AID. 2018 cc. That the delivery is not authorized (NIL, Sec. 16). Immediate parties ‘These are persons who are familiar with the circumstances regarding the transfer (AQUINO, supra at 234), When the instrument is in the hands of a holder in due course, a valid delivery thereof by all the parties prior to him so as to make them liable to him is conclusively presumed (NIL, Sec. 16) When the instrument is no longer in possession of the party whose signature appears thereon, @ valid and intentional delivery by hin is presumed ‘until the contrary is proved (NIL, Sec. 16). 6 Absence or Failure of Consideration ‘Absence or failure of consideration is 2 personal defense. tis a valid defense between the drawer ‘and payee (NIL, Sec. 28). : Partial failure of consideration is.a defense pro, tanto, whether the failure 's an ascertained and liquidated amount or otherwise (NIL, Sec. 28). Defense pro tanto ~ not totaly exonerated from liability; liable up to the amount the party benefited (AQUINO, supra at 261) Absence v. Failure of Consideration No consideration is | Itis the neglect or failure given or the | of one of the parties to consideration is illegal, |.give or to do or to i perform the Consideration agreed ‘upon. : ET ae Implies that ihe giving of valuable consideration | was contemplated but | that failed to pass (DE =) at 144). Embraces transactions where no consideration was intended to pass. Non-availability of the Defense to a Draweo The drawee, by accepting unconditionally the Dil becomes liable to the holder, and therefore cannot allege want of consideration between him and the drawer (PNB v. Bartolome, G.R. No, L- 18571, September 26, 1922) Reason: The holder is a stranger as regards the transaction between the drawer and the drawee, and if the holder has given value to the drawer ‘and has no knowledge of any equity between the Grawer and the drawee, he is in the same 10 | 2018 SAN BEDA CENTRALIZED BAR OPERATIONS situation as an indorsee in good faith (PNB v. Bartolome, supra). 7. Prescription Refers to extinctive prescription and may be raised even against @ holder in due course. Under the Civil Code, the prescriptive period of an action based on a written contract is 10 years (DE LEON, supra at 267) In case of checks, the statute of limitations begins to run when the bank gives the depositor notice of the payment, which is ordinarily when the check is returned to the alleged drawer as 2 voucher with a statement of his account, and an action upon a check is ordinarily governed by the statutory period applicable to instruments in writing (Phifppine Commercial Intemational Bank v. CA, G.R. No. 121413, January 29, 2001) The failure of the payés to oncash a check for fiore.than 10 years “undoubtedly resulted inthe “fiBaifment of. the check through his Lunreasonabie and unexplained delay" (Papa v. A V.. Valencia; G.R. No. 105188, January 23, ‘1998) «Note: The delivery of promissory notes payable © 0 order;‘or bills of exchange or drafts or other “mjetcantile document shall produce the effect of “payment only when realized, or when by the fault ‘of the creditor, the privileges inherent in their negotiable character have been impaired (WAMARCO'v. FUND. GR. No. L-22578, January 31, 1973), The delivery of promissory notes payable to -order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired (CIVIL CODE, Art. 1249). The clause of Article 1249 is applicable only to instruments executed by third persons and delivered by the debtor to the creditor, and does not apply to instruments executed by the debtor himself and delivered to the creditor. ‘The contractual obligation remains even if the check is not presented fur payinent (Intemational Comporate Bank v. Sps. Guaco, C.R. No, 141968, February 12, 2007). 8 Fraud a, Fraud in Execution or Fraud jn Factum or Fraud Esse Contractus - REAL DEFENSE This is present when the person is induced to sign an instrument not knowing its. character a a note or bill (AQUINO, supra at 242).NEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMORY AID 2018 Factors in determining the presence of reasonable opportunity i. Age and sex of the obligor; ji, His intelligence, education, and business experience; ii, His ability to read and understand the language used; 'v. The representations made to him and his reason to rely on the of to have confidence in the person making them: v. The presence or absence of any third person who might read: or explain the instrument to him, or - any. other information; and Vi. The apparent necessity, or lack of it, for acting without delay (Id. at 243). ‘An essential element is that the maker or indorser must have exercised ordinary dligence and in no manner contributed negligently to the Imposition (OF LEON, supra at 227) = b. Fraud id inducement: - PERSONAL DEFENSE When the person whe signs the “stument intends to sign the same 25a negotiable instrument but was induced.to'do so only by fraud; his consent to issué.'@ negotiable instrument was viated by fraud. This type includes fraud committed inthe pertermance of a colateral obligation (le. at 242), ‘An alteration is said to be material fit alters the’ effect of the instrument, It “means an‘) Unauthorized -change in an instrument. that purports to modify in any respect the obligation of a party of an unauthorized addition of words oF numbers or other change. to an incomplete instrument relating to the obligation of a party. In ‘other words, a material alteration is one which changes the lems which are required to be stated under Section 1 of the NIL (PNB v. CA, GR. No, 107507, Apri 25, 1996) Reproduced hereunder are some examples of material alterations: ‘A. Material Alterations i. Substituting the words “or bearer” for li, Writing “protest waived” above blank indorsements; {i A.change in the date from which interest is. torun; v. A check was originally drawn as follows: “con Gounty Bank, Crystal Falls, Mich., ‘Aug. 5, 1901. Pay to G.L. or order $9 fity cents CTR." The insertion of the figure 5 before the figure 9, the instrument being ‘otherwise unchanged; v. Adding the words ‘with interest” with or without a fixed rate; vi. An alteration in the maturity of & note, whether the time for payment is thereby curtailed or extended; vil. An instrument was payable to the “First Natl Bank” the plaintiff added the word “Marion.” vill, Plaintif, without consent of the defendant, struck out the name of the defendant as payee and inserted the name of the maker Of the original note; ix Striking out:the name of the payee and substituting that of the person who actually discounted the note x. Substituting the address of the maker for the name of the co-maker 8 Immaterial Alterations. ‘"isChanging “| promise to pay" to "We promise I tagy wher thre are wo maker: ni. Adding the! word “annuaf" after the interest ‘Felause: Se. Lr Adaitglthe date of maturity as a marginal 4 enotation?s > “1 Flng ithe date of the sctual delivery where theimakeds of a note gave it with the date in “blank: ‘An alteration of the marginal figures of a note Wherelttie sum stated in words in the body “emairjed unchanged: j. The insertion of the legal rate of interest where tie note had a provision for “interest at “ percent", iC A printed form of promissory note had on the ‘margin the printed words, "Extended to ..” The ‘holder on or after maturity wrote in the blank space the wordsi"May 1, 1913," as a reference memorandum of a promise made by him to the principal maker at the time the words were ‘written to extend the time of payment; vi, Where there was a blank for the place of payment, filing in the blank with the place esiod; ix. Adding to an indorsee's name the abbreviation ‘Cash" when it had been agreed that the draft should be discounted by the trust company of which the indorsee was cansier; X. The indorsementin the note by a stranger after its delvery to the payee at the time the note was negotiated tothe paint i.An extension of time given’ by a holder of note to the principal maker, without the consent of the surely co-maker (PNB V. CA, supra). Note: The alteration must be material before it can be considered as a defense. Ifthe atteration | is not material, it is neither a personal nor a real defense (AQUINO, supra at 244). 2018 SAN BEDA CENTRALIZED BAR OPERATIGNS | 31NEGOTIABLE INSTRUMENTS LAW SANE A MEMORY AID Material alteration is a “PARTIAL” REAL DEFENSE because a holder in due course can enforce it according to its original tenor (id). It refers to any alteration which changes the: (DST-NMAC) Date; ‘Sum payable, either for principal or interest; ‘Time or place of payment; ‘Number or relations of the parties; Medium or currency in which. 2ayment is to be made; ‘That which Adds a place of rayment where no place of payment is specified; and g. Any other Change or addition which alters the effect of the instrument in any respect (NIL, Sec. 125; Bank of America NT & SA v. Priopine Racing Club, G.R. No, 150228, July 30, 2009) Innocent Alteration ” Ireters to chenges on tems ther ndbted required under See. 1 of thé NIL, end spaliation, which refers to alterations done by a stranger, wil not avoid the instrument but. the. holder- may enforce it only according tots original tenor (PANE veCA, supra). Mlustration: The check was altered go:that the amount was increased from 1,000.00 to P91,000.00 and the date was changed: tronic November 24, 1994 to November 14, Apparently, since the entries altered were a those enumerated under Section t- and '125;! namely, the sum of money payable arid the 4 of the check, the instant controversy therefore squarely falls within the purview of material Alteration (Metrobank v. “Cabiizo, G.R-NO™ 154469, December 6, 2006). Payment made under materially altered instrument is not payment done in accordance with the instruction of the drawer. When the drawee bank pays a materially aliered check, i Violates the terms of the check, as well as its duty to charge its cliont’s account only for bona fide Gisbursements he had made. Since the drawee bank did not pay according ta the original tenor of the instrument, as directed by the drawer, then it ‘has no right {o ciaim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the drawer's account which it was expected to treat with utmost fidelity (Metrobank v. Cabilzo, supra) Exception: When the drawer was the one who ‘made or authorized the alteration or when he failed to exercise reasonable diligence to avoid it (Metrobank v. Cabilzo, supra) 2 | 2018 SAN BEDA CENTRALIZED BAR OPERATIONS ee Note: A seriai number is ‘not an essential requisite for negotiabilty under Sec. 1 of the NIL. and does not affect the rights of the parties, hence, its alteration is not material (International Corporate Bank v. CA, G.R. No. 129910, ‘September 5, 2006) {An alteration of the date of the check constitutes ‘a material alteration in accordance with Sec.125 of the NIL, The bank, given the fiduciary nature of its relationship with'the depositor, should have exerted every effort to safeguard and protect her ‘money which was deposited and entrusted with it (Westmont Bank v. Dela Rosa-Ramos, G.R. No. 160260, October 24, 2012) Effects a. Alteration by a party ~ voids the instrument ‘except as against the party who (1) made, (2) ‘authorized, or (3) assented to the alteration, gg (6) subsequent indorsrs, However fan tered instrument is negotiated to a holder in ide course, he may enforce payment thereof accorsitig to its original tenor regardless of ‘whether -the alteration was. innocent or sumeplafraudulent (NIL, Sec. 124) ince fio distinction Is made, ft does not fmatter whether itis favorable or unfavorable eto tne party making the alteration. The intent "of the law is to preserve the integrity of the Negotiable instruments (DE LEON, supra at 327). Alteration by a stranger (spoliation) ~ the / deffect is the same as where the alteration is “made by a party in which case a holder in due ‘course can recover on the original tenor of the instrument (DE LEON, supra at 328). Liabilities of Parties in case of Material Alteration {As between the drawee bank and the collecting bank, it is the collecting bank: that shall be responsible for the loss in case of alteration, The collecting bank's right of recourse is against the depositor-payee (holder) (Metrobank v. Cabilzo, supra), Liability of Drawee Bank in Case of Altered Checks Despite the tenor of the acceptance, the drawee bank is iable only to the extent of the BOE prior to alteration. Since it paid the altered amount of the checks. it may pass liability to collecting bank andlor prior indorsers but nol to the drawer absent any showing of negligence on their part (Areza v. Express Savings Bank, supra)NEGOTIABLE INSTRUMENTS LAW SAN BEDA MEMORY AID 2018 10. 1" 12, When Alteration of Promissory Notes Does When an iistrument orany signature thereto was Not Effectively Extinguish Liability obtained by fraud, duress, or force and fear o: When the drawer's indebtedness. and liability ‘other unlawful means," or for an illegal based on the contract of loan has been consideration, or when he negotiates it in breach established, even with the tampered promissory of faith, or under such circumstances as to note, the drawer can stil be held liable for the amount’ to fraud, the title of such person is unpaid loan (Bognot v. RR! Lending Corporation, defective (NIL, Sec. 55) GR, No, 180144, September 24, 2014). Duress is relative, hence, threats to a feeble and Ante-dating or Post-dating ‘ld person might be duress to one while it may The instrument isnot invalid for the reason that it not be so to another (AQUINO, supra at 266) is ante-dated or post-dated, provided this is not done for an legal or fraudulent purpose (NIL, 13. legality See. 12). llegality as a Personal Defense The illegaity of the transaction that gave rise toa If the post-dating or ante-dating is for an legal or particular transaction (AQUINO, supra at 266). fraudulent purpose, a personal. defense is available against the holder (AQUINO, supra at legality as a Real Defense 25), When the law which declares the transaction ilegal likewise declares -that the negotiable Ante-dating — when a date earlier than the date instrument or document issued in connection of issuance is placed on the instrument ge vt aint any party). LEON, supra at 65) : Postating — when a date leer then the gaid of issuance is placed on the instrument (ld)?! Insertion of a wrong date ie Any holder may insert in the instrument tie ft dale of issue or acceptance and the instrument shall be payable accordingly, inthe following instances: a. Where an instrument expressed payable ot fixed period ater te ey undated; or S b. Where the acceptance of ai instru payable. at a fixed period after ‘sight Undated (NIL, Sec. 13). sn ites’ signature on a negotiable instrument sievforged Isjdeemed to nave never become a party I Sy thefeto aftd:to have never consented to the contract sl alogodi-gave roe oe Tho coutariting of eny ‘wating, consisting in the signing of another's name ScaL_with intent’ to defraud, is forgery (BPI. v. Casa Mobtéssori, G.R. No. 149454, May 28, 2004). ‘The insertion of a wrong date does not avoidthé. Since his signature does not appear “in the instrumentin the hands of subsequent holder in’. nstrument, he cannot be held liable thereon by due course; but as to him, the date so inserted is. anyone, not’ even by a holder in due course tobe regarded as the true date (IVIL, Sec. 13). (Gompesaw v. CA, GR. No, 92244, Febriary 9, Duress and Intimidation Duress as a Personal Defense : It is basic, however, that whoever alleges forgery When there's an actual or threatened exercise or ‘St prove such fact. Forgery cannot be presumed, power possessed by the party benelited thereby, ‘it Must be duly established (MM/S v.. CA, G.R. No. for the purpose of obtaining the note (or bil), such. L-62943, July 14, 1986) a8 to deprive the maker of that quality of mind essential to making of a contract (AQUINO, supra Effects at 266) 1. When a signature is forged or made without the ‘authority of the person whose signature it Duress as a Real Defense ‘purports to be, that signature (not the instrument When duress is vicious or fit is what is referred iiself and the genuine signatures) is wholly to as “duress amounting to forgery,” wherein the inoperative (NIL, Sec. 23). Person who exerted the same is practically : writing the note itself by holding the hands of Cut-off Rule another (Id), General Rule: Parties prior to the forgéd signature areicut-offrom the parties after the forgery in the 2018 SAN BEDA CENTRALIZED BAR OPERATIONS | 33,NEGOTIABLE INSTRUMENTS LAW SAN BEDA Mend eo1s sense that prior parties cannot be held liable and can raise the defense of forgery. The holder can only enforce the instrument against parties who became such after the forgery (AQUINO, supra at 269) Exception: When the prior parties are precluded from setting up the defense of forgery either because of their warranties, representation or negligence (ia) Mustrati os | ¢ forged B's signature then indorsed to D | ct: | ™ Aan B~ A and B can raise the defense of forgery for being parties prior tc the forgery as against C, D, € and H unless precluded from setting up the forgery. H can enforce the instrument only against C, the forger, D, E, and M, the maker of the promissory nnote, ‘unless precluded from setting up the forgery oe 2. No fight to retain the instrument, or to. give discharge therefor, or to enforce payment thereof against any party thereto, can bie acquired. (NiL, Sec. 23). Section 23 does not avoid the instrument arid only the forged signature is inoperative, Hence; ‘according to what is known as the “Cut-off Rule”, the partes prior to the forged signature are. cut! of from the parties after the forgery in the sense that prior parties cannot be held liable and can raise the defense of forgery. The holder can enforce the instrument against parties who became such after the forgery (Aquino; supra at 269), Exception: Uniess the party against whom itis. sought to enforce such right is precluded from setting up the forgery or want of authority (NIL, See. 23) A purchaser of @ manager's check can assert forgery when the proximate cause of the lass is the negligence of the bank (Land Bank of the Philippines vs. Kho, G.R, No. 205839 & G.R. No. 205840, Judy 7, 2016). Persons precluded from setting up defense of forgery 1. Persons who warrant or admit the genuineness of the signature in question. (AQUINO, supra at 271) Werrantors of genuineness include a. Indorsers; 2a 208 SAN BEDA. CENTRALIZED BAR OPERATIONS. Note: It is only the negotiation based on the forged or unauthorized signature which is inoperative, The indorsers can be held liable because of their breach of warranty that the instrument is genuine and in all respect what it_ purports to be (Ropublic Bank v. Ebrads, G.R. No. L-40796, July 31, 1975); 'b. Persons negotiating by mere delivery; and &. Accaptors (AQUINO, supra at 271). ‘Those who by their acts, silence, or negligence, ‘are estopped from setting up the defense of forgery (AQUINO, supra at 271). These include acts or omission that amounts to ratification, express or implied, Ratification by the pary whose signature was forged likewise precludes the said party from raising the defense (i) Persons who are grossly negligent ‘Where a depositor (drawer) Is using its own pefsonalized checks, its failure to provide adequate Security measures to prevent forgeries of checks, constitutes gross negligence and bars it from setting up the defense of forgery “(MWSS v. CA, G.R. No, L-62943, July 14, 1986). However, the mere fact that 2 check had been emoved and stolen in a checkbook without the knowledge’ and consent of the owner cannot be considered negligence (PNB v. Quimpo, G.R. No, L-53194, March 14, 1988) Note: If there was no negligence on part of the drawer, the drawee bank bears the risk of loss in case of forged check. Drawee bank should have known that the signature was forged considering that the signature appearing on the check was feven compared with the specimen signature of the authorized signatory of the corporation (Samsung Construction Co. Phil. v. Far Est Bank and Irust Company, GR. No, 129015, August 13, 2004) But if there is a collecting bank, the collecting bank bears the loss. (Banco De Oro Savings and Mortgage Bank .v. Equitable Banking Corporation, G.R. No. 74917, January 2 ‘The collecting bank, as the last indorser of the instrument, generally suffers the loss because i has the duty to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the ‘genuineness of the indorsements (id,)