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Allied Mercantile Laws - Finals
Allied Mercantile Laws - Finals
MERCANTILE LAWS
1
such
issue,
the
Monetary
Board
may;
through
the
appropriate
supervising
and
examining
department
of
the
Bangko
Sentral,
examine,
inspect
or
investigate
the
books
and
records
of
such
person
or
entity.
Upon
issuance
of
this
authority,
such
person
or
entity
may
commence
to
engage
in
banking
operations
or
quasi-‐banking
function
and
shall
continue
to
do
so
unless
such
authority
is
sooner
surrendered,
revoked,
suspended
or
annulled
by
the
Bangko
Sentral
in
accordance
with
this
Act
or
other
special
laws.
-‐ The
department
head
and
the
examiners
of
the
appropriate
supervising
and
examining
department
are
hereby
authorized
to
administer
oaths
to
any
such
person,
employee,
officer,
or
director
of
any
such
entity
and
to
compel
the
presentation
or
production
of
such
books,
documents,
papers
or
records
that
are
reasonably
necessary
to
ascertain
the
facts
relative
to
the
true
functions
and
operations
of
such
person
or
entity.
Failure
or
refusal
to
comply
with
the
required
presentation
or
production
of
such
books,
documents,
papers
or
records
within
a
reasonable
time
shall
subject
the
persons
responsible
therefore
to
the
penal
sanctions
provided
under
the
New
Central
Bank
Act.
-‐ Persons
or
entities
found
to
be
performing
banking
or
quasi-‐banking
functions
without
authority
from
the
Bangko
Sentral
shall
be
subject
to
appropriate
sanctions
under
the
New
Central
Bank
Act
and
other
applicable
laws.
-‐ Monetary
board
–
the
one
who
will
determine
WON
an
entity
is
engaged
in
quasi
banking
functions
-‐ Authority
to
engage
in
banking
and
quasi
banking
–
no
person
or
entity
shall
engaged
in
banking
operations
or
a
quasi
banking
functions
without
an
authority
from
the
BSP.
-‐ Who
will
determine
if
the
person
or
entity
performing
banking
or
quasi
banking
functions?
It
is
the
monetary
board
of
the
BSP.
-‐ Persons
or
entity
found
to
be
performing
banking
or
quasi
banking
the
authority
from
the
BSP,
shall
be
subject
to
appropriate
sanctions
under
the
NEW
central
bank
act
and
other
applicable
laws
-‐ Sec.8.
Organization.
–
The
Monetary
Board
may
authorize
the
organization
of
a
bank
or
quasi-‐
bank
subject
to
the
following
conditions:
-‐ 8.1
That
the
entity
is
a
stock
corporation;
-‐ 8.2
That
its
funds
are
obtained
from
the
public,
which
shall
mean
twenty
(20)
or
more
persons;
and
-‐ 8.3
That
the
minimum
capital
requirements
prescribed
by
the
Monetary
Board
for
each
category
of
banks
are
satisfied.
-‐ No
new
commercial
bank
shall
be
established
within
three
(3)
years
from
the
effectivity
of
this
Act.
In
the
exercise
of
the
authority
granted
herein,
the
Monetary
Board
shall
take
into
consideration
their
capability
in
terms
of
their
financial
resources
and
technical
expertise
and
integrity.
The
bank
licensing
process
shall
incorporate
an
assessment
of
the
bank’s
ownership
structure,
directors
and
senior
management,
its
operating
plan
and
internal
controls
as
well
as
its
projected
financial
condition
and
capital
base.
-‐ Banks
-‐ 1.
stock
corporation;
all
stocks
must
be
par
value
stock;
-‐ 2.
that
its
funds
are
obtained
from
the
public,
which
shall
mean
20
persons
or
more
-‐ 3.
That
the
min
capital
req
prescribed
by
the
Mb
for
each
category
of
banks
are
satisfied
-‐ How
banks
organize?
-‐ Banks
are
required
to
be
a
stock
corporation.
And
other
than
that
the
general
banking
law
also
requires
that
the
stocks
issued
cannot
be
no
par.
So
all
stocks
of
banks
will
have
to
be
par
value
stocks.
-‐ It
can
be
under
the
regulations
for
banks
there
is
no
prohibition
on
the
kind
of
stocks
that
can
be
issued,
it
can
be
common,
preferred,
preferred
convertible,
etc…
the
only
thing
is
that
it
has
to
be
with
par.
-‐ NEXT,
The
funds
will
have
to
come
from
the
public
which
could
mean
20
or
more
persons
And
that
the
minimum
capital
requirements
prescribe
by
the
monetary
board
for
each
category
are
satisfied.
-‐ Sec.14.
Certificate
of
Authority
to
Register.
–
The
Securities
and
Exchange
Commission
shall
no
register
the
articles
of
incorporation
of
any
bank,
or
any
amendment
thereto,
unless
accompanied
by
a
certificate
of
authority
issued
by
the
Monetary
Board,
under
its
seal.
Such
certificate
shall
not
be
issued
unless
the
Monetary
Board
is
satisfied
from
the
evidence
submitted
to
it:
-‐ 14.1.
That
all
requirements
of
existing
laws
and
regulations
to
engage
in
the
business
for
which
the
applicant
is
proposed
to
be
incorporated
have
been
complied
with;
2
-‐ 14.2.
That
the
public
interest
and
economic
conditions,
both
general
and
local,
justify
the
authorization;
and
-‐ Certificate
issued
by
the
monetary
board
-‐ Sec.11.
Foreign
Stockholdings
–
Foreign
individuals
and
non-‐bank
corporations
may
own
or
control
up
to
forty
percent
(40%)
of
the
voting
stock
of
a
domestic
bank.
This
rule
shall
apply
to
Filipinos
and
domestic
non-‐bank
corporations.
-‐ The
percentage
of
foreign-‐owned
voting
stocks
in
a
bank
shall
be
determined
by
the
citizenship
of
the
individual
stockholders
in
that
bank.
The
citizenship
of
the
corporation
which
is
a
stockholder
in
a
bank
shall
follow
the
citizenship
of
the
controlling
stockholders
of
the
corporation,
irrespective
of
the
place
of
incorporation.
-‐ Foreign
stockholdings
-‐
-‐ 1.The
foreign
ownership
limitation
of
40%
is
aggregate
–
it
must
be
total
ownership
in
one
bank
with
regards
to
voting
stock
-‐ 2.
Whereas
the
Filipino
ownership
is
not
aggregate
–
it
is
actually
an
individual
limit.
-‐ According
to
the
GBL
foreign
individuals
and
non
bank
corporations
may
own
or
control
up
to
40%
of
the
voting
stock
of
domestic
banks.
The
rule
shall
apply
to
Filipinos
and
domestic
non
bank
corporations.
If
you
look
at
the
provision
it
does
not
really
differentiate
between
ownership
of
foreigners
and
Filipinos,
but
if
you
look
at
the
manual
for
regulations
for
banks
there
is
a
difference.
According
to
the
bsp
the
foreign
ownership
limitation
of
40%
is
aggregate,
meaning
it
is
base
on
total
foreign
ownership
it
is
not
single
individual
or
single
corporation.
Whereas
the
limitation
for
Filipinos
is
individual,
meaning
a
single
Filipino
can
own
up
to
40%
of
a
domestic
banks.
-‐ The
percentage
of
foreign
owned
voting
stocks
in
a
bank
shall
be
determined
by
the
citizenship
of
the
individual
stock
holders
in
that
bank.
(GRANDFATHER
RULE)
–
if
you
have
a
corporation
owning
shares
in
a
bank,
to
determine
the
nationality
you
have
to
look
at
the
share
holders
of
that
corporate
stock
holder.
-‐ So
the
citizenship
of
a
corporation
which
is
a
stockholder
in
a
bank
shall
follow
the
citizenship
of
the
controlling
stockholder
of
that
corporation,
irrespective
of
the
place
of
incorporation.
-‐ The
percentage
of
foreign
owned
voting
stocks
in
a
bank
shall
be
determined
by
the
individual
stockholders
-‐ Sec.
15.
Board
of
Directors.
-‐
The
provisions
of
the
Corporation
Code
to
the
contrary
notwithstanding,
there
shall
be
at
least
five
(5),
and
a
maximum
of
fifteen
(15)
members
of
the
board
or
directors
of
a
bank,
two
(2)
of
whom
shall
be
independent
directors.
An
"independent
director"
shall
mean
a
person
other
than
an
officer
or
employee
of
the
bank,
its
subsidiaries
or
affiliates
or
related
interests.
-‐ Non-‐Filipino
citizens
may
become
members
of
the
board
of
directors
of
a
bank
to
the
extent
of
the
foreign
participation
in
the
equity
of
said
bank.
-‐ The
meetings
of
the
board
of
directors
may
be
conducted
through
modern
technologies
such
as,
but
not
limited
to,
teleconferencing
and
video-‐conferencing.
-‐ GR:
5
–
15
-‐ Except:
in
case
of
a
merger,
where
21
directors
are
allowed.
-‐ 2
are
required
to
be
independent
directors
-‐ independent
directors
–
persons
who
are
not
officers
or
directors
of
a
banks
or
any
of
its
subsidiaries.
-‐ Sec.
16.
Fit
and
Proper
Rule.
-‐
To
maintain
the
quality
of
bank
management
and
afford
better
protection
to
depositors
and
the
public
in
general
the
Monetary
Board
shall
prescribe,
pass
upon
and
review
the
qualifications
and
disqualifications
of
individuals
elected
or
appointed
bank
directors
or
officers
and
disqualify
those
found
unfit.
-‐ After
due
notice
to
the
board
of
directors
of
the
bank,
the
Monetary
Board
may
disqualify,
suspend
or
remove
any
bank
director
or
officer
who
commits
or
omits
an
act
which
render
him
unfit
for
the
position.
-‐ In
determining
whether
an
individual
is
fit
and
proper
to
hold
the
position
of
a
director
or
officer
of
a
bank,
regard
shall
be
given
to
his
integrity,
experience,
education,
training,
and
competence.
3
-‐ The
MB
shall
prescribe,
pass
upon
and
review
the
qualifications
and
disquals
of
individuals
elected
or
apointed
bank
directors
or
officers
and
disqualify
those
found
unfit.
-‐ FIT
and
PROPER
Rule
–
means
that
the
monetary
board
can
prescribe,
pass
upon,
and
review
the
qualifications
and
disqualifications
of
individuals
selected
as
bank
directors
and
officers
and
disqualify
those
who
are
found
unfit.
-‐ When
the
bank
elects
its
directors,
they
cannot
qualify
right
away.
Their
bio
data
will
be
sent
to
the
monetary
board
who
will
do
a
character
investigation.
And
only
when
the
board
of
director
qualifies
under
this
rule
that
they
can
assume
their
duties
as
director
of
the
bank.
-‐ Permanent
Disqualifications
by
th
Monetary
Board
(Manual)
-‐ 1)
Persons
who
have
been
convicted
by
final
judgment
of
a
court
for
offenses
involving
dishonesty
or
breach
of
trust
such
as,
but
not
limited
to,
estafa,
embezzlement,
extortion,
forgery,
malversation,
swindling,
theft,
robbery,
falsification,
bribery,
violation
of
B.P.
Blg.
22,
violation
of
Anti-‐Graft
and
Corrupt
Practices
Act
and
prohibited
acts
and
transactions
under
Section
7
of
R.A.
No.6713
(Code
of
Conduct
and
Ethical
Standards
for
Public
Officials
and
Employees);
-‐ (2)
Persons
who
have
been
convicted
by
final
judgment
of
a
court
sentencing
them
to
serve
a
maximum
term
of
imprisonment
of
more
than
six
(6)
years;
-‐ (3)
Persons
who
have
been
convicted
by
final
judgment
of
the
court
for
violation
of
banking
laws,
rules
and
regulations;
-‐ (4)
Persons
who
have
been
judicially
declared
insolvent,
spendthrift
or
incapacitated
to
contract;
-‐ (5)
Directors,
officers
or
employees
of
closed
banks
who
were
found
to
be
culpable
for
such
institution’s
closure
as
determined
by
the
Monetary
Board;
-‐ (6)
Directors
and
officers
of
banks
found
by
the
Monetary
Board
as
administratively
liable
for
violation
of
banking
laws,
rules
and
regulations
where
a
penalty
of
removal
from
office
is
imposed,
and
which
finding
of
the
Monetary
Board
has
become
final
and
executory;
or
-‐ (7)
Directors
and
officers
of
banks
or
any
person
found
by
the
Monetary
Board
to
be
unfit
for
the
position
of
directors
or
officers
because
they
were
found
administratively
liable
by
another
government
agency
for
violation
of
banking
laws,
rules
and
regulations
or
any
offense/violation
involving
dishonesty
or
breach
of
trust,
and
which
finding
of
said
government
agency
has
become
final
and
executory.
-‐ Are
banks
allowed
to
have
treasury
shares?
Under
the
general
banking
laws,
they
can
have
treasury
shares
upon
approval
by
MB
but
must
be
disposed
within
6
months
-‐ Section
20.
Bank
Branch
-‐ Needs
BSP
approval
before
you
can
open
a
branch.
-‐ Universal
or
commercial
banks
may
open
bank
branches
within
or
outside
the
Philippines
with
the
prior
approval
of
the
BSP.
Branching
of
all
other
banks
shall
be
governed
by
pertinent
laws.
-‐ The
number
of
branches
will
depend
on
the
capitalization
of
the
bank,
each
branch
will
have
to
correspond
to
the
banks
(travel
fund).
So
you
cannot
exceed
the
number
of
allowable
branches
based
on
the
travel
fund
as
set
by
the
monetary
board.
-‐ A
bank
authorized
to
establish
branches
or
other
offices
shall
be
responsible
for
all
business
conducted
in
such
branches
or
offices
to
the
same
extent
and
manner
as
though
such
business
have
all
been
conducted
in
the
head
offices.
A
bank
and
its
offices
shall
be
treated
as
one
unit.
-‐ Crossed
sale
–
is
a
transaction
whereby
a
bank
woUld
offer
its
customer
of
its
allied
undertakings
or
allied
transactions
or
investment
houses
(insurance;
credit
cards).
General
rule
is
that
it
is
not
allowed
unless
authorized
by
the
MB.
-‐ Sec.
23.
Powers
of
a
Universal
Bank
-‐
A
universal
bank
shall
have
the
authority
to
exercise,
in
addition
to
the
powers
authorized
for
a
commercial
bank
in
Section
29,
the
powers
of
an
investment
house
as
provided
in
existing
laws
and
the
power
to
invest
in
non-‐allied
enterprises
as
provided
in
this
Act.
-‐ Powers
of
a
Universal
Bank
-‐ 1.
Has
all
the
powers
of
a
commercial
banks
and
more,
also
called
an
expanded
commercial
bank..
-‐ 2.
Power
of
an
investment
house
4
-‐ Investment
house
–
is
an
institution
which
engages
in
the
underwriting
of
securities
issued
by
other
entities.
Normal
banking
function
is
only
deposit
and
lending,
so
when
a
bank
undertakes
to
do
other
activities
such
as
underwriting,
then
that
would
be
considered
as
a
power
of
an
investment
house,
which
a
universal
bank
can
do,
ONLY
A
UNIVERSAL
BANK
not
even
a
commercial
bank..
-‐ 3.
The
power
to
invest
in
non
allied
enterprise
not
exceeding
35%
of
the
total
equity
of
a
single
non-‐allied
enterprise
and
not
exceeding
35%
of
the
voting
stock
of
that
enterprise.
-‐ Allied
enterprise
–
(enumerated)
provided
manual
of
regulations
for
banks
Credit
card
companies
Leasing
companies
Lending
companies
Financing
companies
• Basically
those
engaged
in
financial
activities
or
some
form
of
financing
activity
• take
note
that
allied
activities
can
also
be
classified
into
two:
financial
and
non
financial.
Non
financial
example
are
safety
deposit
companies
–
allied
non
financial
activities
-‐ Non
–
allied
-‐
operations
that
are
totally
different
from
banks,
example
mining,
power
companies…
• Take
note
that
universal
banks
are
allowed
to
invest
in
non
allied
enterprises.
• But
the
investment
is
subject
to
a
limitation,
should
not
exceed
35%
percent
of
the
total
equity
of
a
single
non
allied
enterprise
and
should
not
exceed
35%
of
the
voting
stock
of
that
enterprise.
-‐ 4.
Universal
banks
has
the
power
to
own
100%
of
the
equity
of
non-‐financial
allied
enterprise.
-‐ The
diference
between
the
first
and
the
2nd
one
is
that
the
first
pertains
to
non
allied
enterprise.
2nd
is
allied
but
not
financial.
-‐ 5.
And
in
case
of
publicly
listed
universal
bank
the
power
to
own
up
to
100%
of
withholding
stock
of
only
one
other
universal
bank
or
commercial
bank.
-‐ Sec.
29.
Powers
of
a
Commercial
Bank.
-‐
A
commercial
bank
shall
have,
in
addition
to
the
general
powers
incident
to
corporations,
all
such
powers
as
may
be
necessary
to
carry
on
the
business
of
commercial
banking
such
as:
-‐ (a)
accepting
drafts
and
issuing
letters
of
credit;
-‐ (b)
discounting
and
negotiating
promissory
notes,
drafts,
bills
of
exchange,
and
other
evidences
of
debt;
-‐ (c)
accepting
or
creating
demand
deposits;
-‐ (d)
receiving
other
types
of
deposits
and
deposit
substitutes;
buying
and
selling
foreign
exchange
and
gold
or
silver
bullion;
-‐ (e)
acquiring
marketable
bonds
and
other
debt
securities;
and
-‐ (f)
extending
credit,
subject
to
such
rules
as
the
Monetary
Board
may
promulgate.
-‐ These
rules
may
include
the
determination
of
bonds
and
other
debt
securities
eligible
for
investment,
the
maturities
and
aggregate
amount
of
such
investment.
-‐ Note:
commercial
banks
cannot
engaged
in
non-‐allied
enterprise***
It
can
only
invest
in
the
securities
of
its
allied
enterprise.
-‐ Both
commercial
and
universal
banks
can
engage
in
quasi
banking
functions,
but
with
respect
to
universal
banks
the
monetary
board
may
limit
the
involvement
or
the
equity
participation
of
a
universal
banks
of
40%
of
the
equity
of
a
quasi
bank.
But
that
is
only
subject
to
the
discretion
of
the
monetary
board.
As
a
general
rule
they
can
invest
up
to
100%.
Single
borrowers
limit
–
the
limit,
the
total
amount
of
loans,
credit,
accomodations,
and
guarantees
that
may
be
extended
by
a
bank
to
any
person,
partnership,
association,
corporation,
or
other
entity
which
at
no
time
shall
receive
25%
of
the
net
worth
of
the
bank.
DOSRI
–
directors
officers
stockholders
and
related
interest.
Take
note
that
the
general
banking
law
has
implemented
ceilings
on
the
loans
or
transactions
between
banks
and
their
dosri.
There
are
actually
3
ceilings
that
you
have
to
take
note
of:
5
1. Aggregate
ceiling
–
15%
of
the
total
loaning
portfolio
of
the
bank
or
100%
of
the
combined
capital
account
whichever
is
lower.
a. Example:
the
total
loan
portfolio
of
the
bank
is
100billion,
of
that
the
limit
for
the
dosri
is
15%
percent
which
is
150million,
so
the
dosri
loans
cannot
exceed
150m
or
the
combined
capital
account
of
those
dosri,
WHICHEVER
IS
LOWER.
So
you
compare
150m
with
the
paid
up
capital
of
those
stockholders,
whichever
id
lower
that
is
your
aggregate
limit.
2. Individual
ceilings
–
thise
pertains
to
individual
dosri.
It
is
limited
to
an
amount
equivalent
to
their
respective
unencumbered
deposits
and
book
value
of
their
paid
in
capital
contribution
in
the
bank.
a. Example:
you
have
a
borrower
who
is
a
dosri,
and
naa
sya
deposit
in
the
bank
of
10m
naa
sya
paid
up
capital
of
10m.
so
the
combined
total
is
20m(individual),
now
when
it
comes
to
the
aggregate,
150m
is
the
aggregate
limit.
How
much
can
that
dosri
borrow?
It
cannot
exceed
20m..
because
that
is
the
amount
of
his
unencumbered
deposit
plus
his
capital.
b. Lets
say
you
have
a
200m
savings
and
a
paid
up
capital
of
50m.
can
you
borrow
250m?
No,
because
you
will
already
exceed
the
aggregate
ceiling
of
150m
3. unsecured
loans
ceiling
–
meaning
this
loans
which
are
not
covered
by
mortgage
or
any
other
forms
of
securities.
For
those
dosri,
the
unsecured
loans
should
not
exceed
30%
of
their
total
loans.
a. Example:
going
back
to
our
example
na
20m
na
loan
of
that
30%
which
is
6m,
kana
ra
ang
pwede
nya
e
borrow
without
securing
it.
The
rest
must
be
covered
by
security.
b. Take
note
that
if
you
are
a
dosri
who
wants
to
borrow
from
a
bank
there
is
a
three-‐fold
requirement
under
Section
36
of
GBL.
i. Compliance
with
the
ceilings
ii. Before
a
dosri
can
borrow,
there
should
be
a
written
approval
from
the
majority
of
all
the
directors
from
the
lending
bank
excluding
the
director
concerned.
iii. Reportorial
requirement.
The
board
resolution
approving
the
loan
shall
be
entered
in
the
records
of
the
bank
and
the
copy
of
the
entry
shall
be
transmitted
forthwith
to
the
BSP.
• ADDITIONAL
REQUIREMENT
:
Waiver
of
secrecy
of
bank
deposits
is
actually
an
additional
requirement
under
the
new
central
bank
act,
but
it
does
not
apply
to
dosri.
It
only
applies
to
directors,
officers,
and
STOCKHOLDERS.
Wlay
apil
ang
related
interest.
-‐ Waiver
of
Secrecy
of
Deposit
–
A
DOS
who
contracts
a
loan
or
any
financial
accommodations
in
his
bank
in
excess
of
5%
of
the
capital
and
surplus
of
the
bank,
or
the
maximum
amount
permitted
by
law,
whichever
is
lower,
is
required
to
waive
the
secrecy
of
deposits
of
whatever
nature
of
all
deposits
in
the
Philippines.
-‐ Secured
loans
limit
–
-‐ SECTION
37.
Loans
and
Other
Credit
Accommodations
Against
Real
Estate.
—
Except
as
the
Monetary
Board
may
otherwise
prescribe,
loans
and
other
credit
accommodations
against
real
estate
shall
not
exceed
seventy-‐five
percent
(75%)
of
the
appraised
value
of
the
respective
real
estate
security,
plus
sixty
percent
(60%)
of
the
appraised
value
of
the
insured
improvements,
and
such
loans
may
be
made
to
the
owner
of
the
real
estate
or
to
his
assignees.
(78a)
-‐ for
example
you
are
going
to
borrow
from
a
bank
and
you
are
going
to
mortgage
a
property
worth
100m,the
total
loan
that
will
be
given
to
you
cannot
exceed
75m.
if
there
are
improvements
plus
60%
of
its
value.
-‐ What
about
if
it
is
not
a
real
estate?
So
you
have
personal
and
intangible
properties?
Same
RULE
sec.
38
-‐ SECTION
38.
Loans
and
Other
Credit
Accommodations
on
Security
of
Chattels
and
Intangible
Properties.
—
Except
as
the
Monetary
Board
may
otherwise
prescribe,
loans
and
other
credit
accommodations
on
security
of
chattels
and
intangible
properties,
such
as,
but
not
limited
to,
patents,
trademarks,
trade
names,
and
copyrights
shall
not
exceed
seventy-‐five
percent
(75%)
of
the
appraised
value
of
the
security,
and
such
loans
and
other
credit
accommodations
may
be
made
to
the
title-‐holder
of
the
chattels
and
intangible
properties
or
his
assignees.
6
-‐ SECTION
45.
Prepayment
of
Loans
and
Other
Credit
Accommodations.
—
A
borrower
may
at
any
time
prior
to
the
agreed
maturity
date
prepay,
in
whole
or
in
part,
the
unpaid
balance
of
any
bank
loan
and
other
credit
accommodation,
subject
to
such
reasonable
terms
and
conditions
as
may
be
agreed
upon
between
the
bank
and
its
borrower.
-‐ Civil
code
differs:
In
the
civil
code
for
obligations
with
a
period,
the
period
is
deemed
to
be
for
the
benefit
of
both
debtor
and
creditor.
Specially
if
there
is
an
interest.
The
debtor
cannot
prepay
and
the
creditor
cannot
compel
the
debtor
to
pay
before
the
expiry
of
the
period.
But
it
appears
from
the
GBL,
the
debtor
has
the
right
to
pre
terminate
the
loan.
Only
subject
to
reasonable
terms
and
conditions
as
may
be
agreed
upon
by
the
bank
and
the
borrower.
(no
case
yet)
-‐ When
a
question
like
this
comes
out
let
us
just
follow
the
general
rule
under
the
civil
code
that
if
debtor
will
pre
terminate
he
will
be
liable
for
the
complete
interest
until
the
expiration
of
the
period.
So
even
if
you
pre
terminate
you
have
to
pay
the
full
amount
of
the
interest.
If
there
is
an
agreement
follow
what
is
agreed
upon.
-‐ SECTION
47.
Foreclosure
of
Real
Estate
Mortgage.
—
In
the
event
of
foreclosure,
whether
judicially
or
extrajudicially,
of
any
mortgage
on
real
estate
which
is
security
for
any
loan
or
other
credit
accommodation
granted,
the
mortgagor
or
debtor
whose
real
property
has
been
sold
for
the
full
or
partial
payment
of
his
obligation
shall
have
the
right
within
one
year
after
the
sale
of
the
real
estate,
to
redeem
the
property
by
paying
the
amount
due
under
the
mortgage
deed,
with
interest
thereon
at
the
ratespecified
in
the
mortgage,
and
all
the
costs
and
expenses
incurred
by
the
bank
or
institution
from
the
sale
and
custody
of
said
property
less
the
income
derived
therefrom.
However,
the
purchaser
at
the
auction
sale
concerned
whether
in
a
judicial
or
extrajudicial
foreclosure
shall
have
the
right
to
enter
upon
and
take
possession
of
such
property
immediately
after
the
date
of
the
confirmation
of
the
auction
sale
and
administer
the
same
in
accordance
with
law.
Any
petition
in
court
to
enjoin
or
restrain
the
conduct
of
foreclosure
proceedings
instituted
pursuant
to
this
provision
shall
be
given
due
course
only
upon
the
filing
by
the
petitioner
of
a
bond
in
an
amount
fixed
by
the
court
conditioned
that
he
will
pay
all
the
damages
which
the
bank
may
suffer
by
the
enjoining
or
the
restraint
of
the
foreclosure
proceeding.
-‐ Notwithstanding
Act
3135,
juridical
persons
whose
property
is
being
sold
pursuant
to
anextrajudicial
foreclosure,
shall
have
the
right
to
redeem
the
property
in
accordance
with
this
provision
until,
but
not
after,
the
registration
of
the
certificate
of
foreclosure
sale
with
the
applicable
Register
of
Deeds
which
in
no
case
shall
be
more
than
three
(3)
months
after
foreclosure,
whichever
is
earlier.
Owners
of
property
that
has
been
sold
in
a
foreclosure
sale
prior
to
the
effectivity
of
this
Act
shall
retain
their
redemption
rights
until
their
expiration.
-‐ This
one
we
really
have
to
take
note
of
because
it
is
different
from
the
civil
code
provisions
on
real
estate
mortgages
and
foreclosure
and
even
on
redemption.
-‐ So
base
on
sec
47
the
redemption
for
natural
persons
whether
judicial
or
extrajudicial
foreclosure
is
1
year
after
the
sale
of
the
real
estate,
this
is
different
from
your
ordinary
foreclosure.
In
3135
and
in
the
rules
of
court…
3135
gives
you
1
year,
but
ROC
only
has
equity
of
redemption.
But
if
the
mortgagee
is
a
bank
and
the
borrower
is
natural
person,
whether
judicial
or
extra
judicial
you
always
have
1
year!
Exception:
in
case
extra
judicial
foreclosure
and
the
borrower
is
a
juridical
person,
according
to
the
GBL
you
only
have
the
right
to
redeem
up
to
registration
of
the
foreclosure
sale
but
not
to
exceed
3
months.
-‐ Redemption
period
-‐ 1.
Natural
persons
–
judicial
or
extrajudicial
foreclosure
–
one
year
after
the
sale
of
real
estate;
-‐ 2.
Judicial
person
–
-‐ a.
judicial
foreclosure
–
one
year
after
the
sale
of
the
real
estate
-‐ b.
extrajudicial
foreclosure
–
until
the
registration
of
the
certificate
of
foreclosure
sale
but
not
exceed
3
months
-‐ Redemption
Price;
elements
if
the
mortgagee
is
a
bank
-‐ 1.
Amount
due
under
the
mortgage
deed
-‐ 2.
Interest
thereon
at
the
rate
specified
in
the
mortgage
-‐ 3.
All
the
costs
and
expenses
incurred
by
the
bank
or
institution
from
the
sale
and
custody
of
said
property
less
income
derived
therefrom.
-‐ The
buyer
in
the
foreclosure
here
in
the
gee
is
bank,
the
buyer
will
now
have
a
right
of
possession
within
the
period
of
redemption.
7
-‐ If
you
file
a
case
to
enjoin
the
foreclosure
of
the
bank,
the
plaintiff
will
have
to
file
a
bond
before
he
can
enjoin
the
foreclosure
sale.
Sec
47.
-‐ Acquisition
of
Real
Properties
-‐ SECTION
51.
Ceiling
on
Investments
in
Certain
Assets.
—
Any
bank
may
acquire
real
estate
as
shall
be
necessary
for
its
own
use
in
the
conduct
of
its
business:
Provided,
however,
That
the
total
investment
in
such
real
estate
and
improvements
thereof,
including
bank
equipment,
shall
not
exceed
fifty
percent
(50%)
of
combined
capital
accounts:
Provided,
further,
That
the
equity
investment
of
a
bank
inanother
corporation
engaged
primarily
in
real
estate
shall
be
considered
as
part
of
the
bank's
total
investment
in
real
estate,
unless
otherwise
provided
by
the
Monetary
Board.
(25a)
-‐ SECTION
52.
Acquisition
of
Real
Estate
by
Way
of
Satisfaction
of
Claims.
—
-‐ Notwithstanding
the
limitations
of
the
preceding
Section,
a
bank
may
acquire,
hold
or
convey
real
property
under
the
following
circumstances:
-‐ 52.1.
Such
as
shall
be
mortgaged
to
it
in
good
faith
by
way
of
security
for
debts;
-‐ 52.2.
Such
as
shall
be
conveyed
to
it
in
satisfaction
of
debts
previously
contracted
in
the
course
of
its
dealings;
or
-‐ 52.3.
Such
as
it
shall
purchase
at
sales
under
judgments,
decrees,
mortgages,
or
trust
deeds
held
by
it
and
such
as
it
shall
purchase
to
secure
debts
due
it.
-‐ Any
real
property
acquired
or
held
under
the
circumstances
enumerated
in
the
above
paragraph
shall
be
disposed
of
by
the
bank
within
a
period
of
five
(5)
years
or
as
may
be
prescribed
by
the
Monetary
Board:
Provided,
however,
That
the
bank
may,
after
said
period,
continue
to
hold
the
property
for
its
own
use,
subject
to
the
limitations
of
the
preceding
Section.
(25a)
-‐ In
sec
51
“the
total
investment
in
such
real
estate
and
improvements
thereof,
including
bank
equipment,
shall
not
exceed
fifty…”,
there
is
a
limit…
however
in
sec
52
“Notwithstanding
the
limitations
of
the
preceding
Section,
a
bank
may
acquire,
hold
or
convey
real
property
under
the
following
circumstances:
-‐ 52.1.
Such
as
shall
be
mortgaged
to
it
in
good
faith
by
way
of
security
for
debts;
-‐ 52.2.
Such
as
shall
be
conveyed
to
it
in
satisfaction
of
debts
previously
contracted
in
the
course
of
its
dealings;
or
-‐ 52.3.
Such
as
it
shall
purchase
at
sales
under
judgments,
decrees,
mortgages,
or
trust
deeds
held
by
it
and
such
as
it
shall
purchase
to
secure
debts
due
it.”
Those
3
will
not
fall
under
the
50%
limit,
however
they
have
to
be
disposed
of
within
5
years.
If
these
properties
will
stay
in
the
bank
in
excess
of
5
years
it
will
now
be
included
in
the
50%
limit.
Kini
3
kay
in
the
performance
of
its
lending
functions.
-‐ Section
53.
Close
now-‐hear
later
doctrine.
-‐ In
case
a
bank
or
quasi-‐bank
notifies
the
Bangko
Sentral
or
publicly
announces
a
bank
holiday,
or
in
any
manner
suspends
the
payment
of
its
deposit
liabilities
continuously
for
more
than
thirty
(30)
days,
the
Monetary
Board
may
summarily
and
without
need
for
prior
hearing
close
such
banking
institution
and
place
it
under
receivership
of
the
Philippine
Deposit
Insurance
Corporation.
-‐ SECTION
54.
Prohibition
to
Act
as
Insurer.
—
A
bank
shall
not
directly
engage
in
insurance
business
as
the
insurer.
(73)
-‐ Can
a
bank
invest
in
an
insurance
company?
YES,
because
it
is
considered
a
financial
allied
undertaking.
-‐ Can
a
bank
sell
the
insurance
products
of
its
financial
allied
undertakings
in
its
branches?
YES,
subject
to
the
approval
of
the
MB.
-‐ But
you
cannot
be
directly
the
insurer!
-‐ SECTION
55.
Prohibited
Transactions.
—
-‐ 55.1.
No
director,
officer,
employee,
or
agent
of
any
bank
shall
—
-‐ (a)
Make
false
entries
in
any
bank
report
or
statement
or
participate
in
any
fraudulent
transaction,
thereby
affecting
the
financial
interest
of,
or
causing
damage
to,
the
bank
or
any
person;
-‐ (b)
Without
order
of
a
court
of
competent
jurisdiction,
disclose
to
any
unauthorized
person
any
information
relative
to
the
funds
or
properties
in
the
custody
of
the
bank
belonging
to
private
individuals,
corporations,
or
any
other
entity:
Provided,
That
with
respect
to
bank
deposits,
the
provisions
of
existing
laws
shall
prevail;
-‐ (c)
Accept
gifts,
fees
or
commissions
or
any
other
form
of
remuneration
in
connection
with
the
approval
of
a
loan
or
other
credit
accommodation
from
said
bank;
8
-‐ (d)
Overvalue
or
aid
in
overvaluing
any
security
for
the
purpose
of
influencing
in
any
way
the
actions
of
the
bank
or
any
bank;
or
-‐ (e)
Outsource
inherent
banking
functions.
-‐ (VERY
IMPORTANT!!!
Loans
and
deposit
functions)
Ex.
they
said
that
in
other
countries,
the
point
of
sales
machines
can
be
used
as
atms.
However,
since
that
basically
is
a
tellering
function
that
cannot
be
done
and
falls
under
this
prohibition..
but
for
example
ang
kanang
management
of
a
bank
can
that
be
outsourced?
YES…
or
kanang
imong
information
system
sa
bank
or
accounting
system,
can
you
outsource
it?YES…
it
is
not
an
inherent
banking
function..
how
about
compilation
of
loan
documents..
can
be
outsourced
as
well
not
inherent.
-‐ 55.2.
No
borrower
of
a
bank
shall
—
-‐ (a)
Fraudulently
overvalue
property
offered
as
security
for
a
loan
or
other
credit
accommodation
from
the
bank;
-‐ (b)
Furnish
false
or
make
misrepresentation
or
suppression
of
material
facts
for
the
purpose
of
obtaining,
renewing,
or
increasing
a
loan
or
other
credit
accommodation
or
extending
the
period
thereof;
-‐ (c)
Attempt
to
defraud
the
said
bank
in
the
event
of
a
court
action
to
recover
a
loan
or
other
credit
accommodation;
or
-‐ (d)
Offer
any
director,
officer,
employee
or
agent
of
a
bank
any
gift,
fee,
commission,
or
any
other
form
of
compensation
in
order
to
influence
such
persons
into
approving
a
loan
or
other
credit
accommodation
application.
-‐ 55.3.
No
examiner,
officer
or
employee
of
the
Bangko
Sentral
or
of
any
department,
bureau,
office,
branch
or
agency
of
the
Government
that
is
assigned
to
supervise,
examine,
assist
or
render
technical
assistance
to
any
bank
shall
commit
any
of
the
acts
enumerated
in
this
Section
or
aid
in
the
commission
of
the
same.
(87-‐Aa)
-‐ The
making
of
false
reports
or
misrepresentation
or
suppression
of
material
facts
by
personnel
of
the
Bangko
Sentral
ng
Pilipinas
shall
constitute
fraud
and
shall
be
subject
to
the
administrative
andcriminal
sanctions
provided
under
the
New
Central
Bank
Act.
-‐ 55.4.
Consistent
with
the
provisions
of
Republic
Act
No.
1405,
otherwise
known
as
the
Banks
Secrecy
Law,
no
bank
shall
employ
casual
or
nonregular
personnel
or
too
lengthy
probationary
personnel
in
the
conduct
of
its
business
involving
bank
deposits.
-‐ Voluntary
liquidation
of
a
bank
–
where
to
file?
MB
-‐ SECTION
68.
Voluntary
Liquidation.
—
In
case
of
the
voluntary
liquidation
of
any
bank
organized
under
the
laws
of
the
Philippines,
or
of
any
branch
or
office
in
the
Philippines
of
a
foreign
bank,
written
notice
of
such
liquidation
shall
be
sent
to
the
Monetary
Board
before
such
liquidation
is
undertaken,
and
the
Monetary
Board
shall
have
the
right
to
intervene
and
take
such
steps
as
may
be
necessary
to
protect
the
interests
of
creditors.
(86)
-‐ SECTION
69.
Receivership
and
Involuntary
Liquidation.
—
The
grounds
and
procedures
for
placing
a
bank
under
receivership
or
liquidation,
as
well
as
the
powers
and
duties
of
the
receiver
or
liquidator
appointed
for
the
bank
shall
be
governed
by
the
provisions
of
Sections
30,
31,
32,
and
33
of
the
New
Central
Bank
Act:
Provided,
That
the
petitioner
or
plaintiff
files
with
the
clerk
or
judge
of
the
court
in
which
the
action
is
pending
a
bond,
executed
in
favor
of
the
Bangko
Sentral,
in
an
amount
to
be
fixed
by
the
court.
This
Section
shall
also
apply
to
the
extent
possible
to
the
receivership
and
liquidation
proceedings
of
quasi-‐banks.
(n)
-‐ What
are
the
grounds
for
involuntary
liquidation
of
a
bank?
New
Central
Bank
Act
Sec.
30
-‐ SEC.
30.
Proceedings
in
Receivership
and
Liquidation.
_Whenever,
upon
report
of
the
head
of
the
supervising
or
examining
department,
the
Monetary
Board
finds
that
a
bank
or
quasi-‐bank:
-‐ (a)
is
unable
to
pay
its
liabilities
as
they
become
due
in
the
ordinary
course
of
business:
Provided,
That
this
shall
not
include
inability
to
pay
caused
by
extraordinary
demands
induced
by
financial
panic
in
the
banking
community
(equity
test);
-‐ (b)
has
insufficient
realizable
assets,
as
determined
by
the
Bangko
Sentral,
to
meet
its
liabilities
(balance
sheet
test);
or
-‐ (c)
cannot
continue
in
business
without
involving
probable
losses
to
its
depositors
or
creditors;
or
-‐ (d)
has
willfully
violated
a
cease
and
desist
order
under
Section
37
that
has
become
final,
involving
acts
or
transactions
which
amount
to
fraud
or
a
dissipation
of
the
assets
of
the
institution;
in
which
cases,
the
Monetary
Board
may
summarily
and
without
need
for
prior
hearing
forbid
the
institution
from
doing
business
in
the
Philippines
and
9
-‐ Cases
-‐ Tan
vs
CA
-‐ Facts:
Tan
who
regularly
commuted
between
Palawan
and
manila.
What
he
would
do
is
that
when
he
travel
he
would
not
bring
cash.
One
time
what
he
did
was
from
Palawan
he
got
a
managers
check
which
he
deposited
in
his
account
in
manila.
The
problem
was
when
he
deposited
the
check,
he
used
the
local
check
deposit
slip.
It
was
an
out
of
town
check
because
it
was
from
Palawan
deposited
in
manila.
After
a
few
days
he
was
thinking
that
the
check
had
already
cleared,
he
now
issued
several
checks
against
his
deposit,
only
to
find
out
that
his
check
bounced,
Because
the
deposit
was
not
credited
to
his
account.
When
the
check
went
to
clearing,
the
bank
noticed
the
wrong
deposit
slip,
so
they
cancelled
the
check.
So
because
he
was
humiliated
that
several
of
his
check
bounced
and
accoding
to
him
his
credibility
as
a
business
man
has
been
impaired,
he
filed
a
case
against
the
bank
for
damages.
The
bank
said
that
it
was
his
fault
for
using
the
wrong
deposit
slip.
-‐ Held:
the
bank
is
liable
for
damages.
-‐ Because
according
to
the
SC,
bank
client
are
suppose
to
rely
on
bank
services
extended
by
the
bank
including
the
assurance
that
their
deposits
will
be
credited
to
their
account
as
soon
as
they
are
made.
Depositors
do
not
pretend
to
be
master
of
banking
technicalities
much
more
of
clearing
procedures.
As
soon
as
their
deposits
are
accepted
by
the
bank
teller,
they
fully
reposed
trust
in
the
bank,
Bank
personnel’s
mastery
of
banking,
their
and
the
banking
sworn
profession
of
diligence
and
meticulousness
in
giving
irreproachable
service.
-‐ So
according
to
the
sc
even
if
there
was
some
negligence
on
the
part
of
the
client,
the
bank
was
still
held
liable.
So
this
one
is
what
we
discuss
before
that
the
duty,
the
fiduciary
nature
and
the
public
interest
nature
of
the
operations
of
banks.
They
are
held
to
the
highest
degree
of
diligence.
-‐ Go.
vs
BSP
-‐ This
one
is
on
section
36
of
the
GBL
which
is
on
the
DOSRI
requirements.
-‐ What
happened
here
is
that
Go
was
one
of
the
directors
of
orient
bank.
He
secured
a
loan
and
he
guaranteed
several
loans
from
the
bank.
So
he
got
loan
at
the
same
time
a
guarantor
of
several
loans
made
from
the
bank,
but
he
did
not
get
the
written
approval
from
the
directors.
According
to
go
he
could
not
be
held
liable
because
he
was
only
missing
one
element,
which
was
the
approval.
He
complied
with
the
reportorial
and
the
ceiling
requirements.
-‐ Held:
That
is
not
a
valid
allegation,
because
each
three
are
subject
to
prosecution
of
different
offenses.
Each
with
its
own
set
of
elements.
In
other
words,
failure
to
comply
with
approval,
even
if
you
complied
with
the
reportorial
and
ceiling,
you
can
still
be
held
liable.
Or
failure
to
comply
with
reportorial
even
if
you
comply
with
approval
and
ceiling
you
can
still
be
held
liable
because
these
are
three
different
offenses.
-‐ Soriano
vs
People
-‐ Facts:
Soriano
was
a
president
of
a
bank.
But
he
got
a
loan
from
a
bank
but
he
used
the
name
of
another
depositor,
because
he
did
not
want
to
comply
with
dosri
requirements.
When
it
was
found
out,
the
BSP
filed
a
case
against
him
under
sec
36
and
also
for
estafa
because
he
used
the
name
of
another
person.
His
defense
was
that
estafa
and
GBL,
the
crimes
there
is
incompatible
and
he
cannot
be
held
for
both.
He
can
only
be
held
liable
for
one
because,
he
said
that
under
the
rules
of
dosri
you
can
only
be
held
liable
if
you
get
a
loan
from
the
bank.
Such
that
it
is
not
compatible
with
estafa
because
if
he
got
the
loan,
he
would
already
own
the
money
so
he
can
do
whatever
he
wants
with
the
money.
-‐ Held:
that
is
not
valid
allegation,
because
the
prohibition
in
sec
36
is
broad
enough
to
cover
various
modes
of
borrowing.
It
covers
loan
by
a
bank
to
its
director
or
officers
directly
or
indirectly,
for
himself
or
as
a
representative
or
agent
of
other
people.
According
to
the
SC
the
requirements
on
dosri
will
apply
even
if
you
are
not
the
direct
debtor
it
will
apply
even
if
you
are
merely
a
guarantor,
endorser,
or
surety
for
someone
else’s
loan
or
in
any
manner
an
obligor
for
money
borrowed
from
the
bank
or
loaned
by
it.
The
covered
transactions
are
prohibited
unless
approval,
reportorial
and
ceiling
requirements
under
sec
36
are
complied
with.
In
other
words
it
is
not
just
direct
borrowing
which
would
require
you
to
follow
sec
36
but
also
indirect
borrowing.
-‐ GC
Dalton
Inc.
vs
EPCI
Bank
-‐ Facts:
EPCI
Bank
lent
money
to
CI
inc.
which
was
secured
by
third
party
mortgage
by
GCB
of
its
real
property.
For
failure
of
CI
inc
to
pay
its
obligation
the
bank
foreclosed
the
mortgage
on
august
3,
2004.
A
certificate
of
sale
was
issued
in
favor
of
the
bank
on
the
same
day
which
certificate
of
sale
was
registered
with
the
ROD
on
September
13,
2004
but
on
September
15,
2004.
So
two
days
10
after
the
registration,
the
owner
of
the
property
informed
the
bank
that
they
are
willing
or
want
to
redeem
the
foreclosed
properties.
-‐ Issue:
can
they
still
redeem?
-‐ Held:
No,
(juridical
person,
extra
judicial
sale..
on
registration
or
not
more
than
3
months.
Check
sec
47..)
because
the
sale
has
already
been
registered
with
the
ROD.
-‐ What
is
the
period
for
redemption?
-‐ Look
at
who
is
the
mortgagor?
Juridical
person.
What
is
manner
of
foreclosure?
Extrajudicial.
-‐-‐-‐
Until
date
of
the
registration
of
the
sale
but
not
later
3
months.***
-‐ Under
Section
47,
of
if
the
mortgagor
is
a
juridical
person,
it
can
exercise
the
right
to
redeem
the
foreclosed
property
until,
but
not
after,
the
registration
of
the
certification
of
the
foreclosure
within
3
months
after
foreclosure
which
ever
is
earlier.
-‐ Asiatrust
Development
Bank
vs.
Tuble;
2012
****
-‐ S
CHT
claimed
that
the
interest
to
be
imposed
is
the
interest
imposed
under
rule
39
of
the
ROC,
that’s
redemption,
the
basis
of
rule
39
is
act
3135,
sec
6
says
that
in
case
of
redemption
the
manner
and
the
amount
of
the
redemption
price
shall
be
that
given
in
sec
28
rule
39
of
the
ROC.
-‐ Q:
Is
his
contention
correct?
-‐ Answer:
the
GBL
will
govern.
So
CHT
was
wrong
it
is
not
rule
39
which
will
govern
but
the
GBL,
because
the
GBL
provides
for
what
the
redemption
price
or
how
it
will
be
computed.
How
is
it
computed?
One
is
that,
the
amount
of
the
mortgage
indebtedness,
and
the
interest
during
the
one
year
redemption
period
will
be
the
interest
stated
in
the
mortgage
instrument,
plus
the
cost
of
sale.
-‐ Q:
Was
the
bank
correct
in
including
the
salary
loan
in
the
redemption
price?
-‐ A:
No,
because
again
we
go
back
to
sec
47,
what
will
make
up
your
redemption
price?
It
is
only
the
mortgage
debt..
and
the
mortgage
debt
is
only
the
one
for
the
property,
real
estate
loan.
That
was
the
only
loan
covered
by
the
mortgage
instrument.
-‐ Q:
What
about
the
dragnet
clause?
-‐ A:
is
actually
a
valid
provision.
What
is
the
effect?
It
has
the
effect
of
including
the
future
obligations
in
your
security,
but
according
to
the
SC
the
dragnet
clause
will
have
to
be
interpreted
strictly
against
the
bank.
And
the
SC
has
set
out
guidelines
of
the
valid
application
of
a
dragnet
clause.
One
of
those
guidelines
is
that
the
subsequent
loan
instrument
must
make
a
references
to
the
mortgage
instrument.
You
cannot
just
say
that
promissory
note
number
2
automatically
covered
by
the
dragnet
clause.
The
promissory
note
must
make
a
reference
that
this
note
is
subject
to
the
mortgage
dated
etc..
etc…
and
the
bank
must
show
that
it
gave
the
second
and
the
subsequent
notes
in
consideration
of
that
security
furnished
by
the
mortgagee.
So
it
is
strictly
construed….
-‐ So,
in
this
case
the
SC
said
that
there
is
no
showing
that
the
real
estate
mortgage
included
the
subsequent
promissory
notes.
In
fact,
when
the
mortgage
was
foreclosed
the
foreclosure
only
pertained
only
to
the
real
estate
loan,
it
did
not
include
the
other
loans.
So
the
dragnet
clause
will
not
apply.
-‐ Q:
Was
th
bank
correct
in
imposing
the
18%
interest?
-‐ A:
no,
because
the
promissory
note
subject
the
mortgage
did
not
stipulate
interest.
-‐ Q:
why
can
we
not
apply
the
legal
interest
of
12%
2209
of
civil
code?
-‐ A:
the
interest
that
we
are
talking
about
here
is
interest
for
the
redemption
price.
That
is
the
interest
for
the
ne
year
period
that
you
have
the
right
to
redeem.
Kanang
legal
interest
will
only
be
imposed
in
case
of
breach.
If
there
is
no
stipulation
as
to
interest
and
there
is
breach…
the
legal
interest
will
be
imposed
in
the
form
of
damages,
but
here
there
was
no
breach;
just
the
interest
of
the
redemption
price
(interest
for
the
use
of
money)
so
you
cannot
impose
the
legal
interest.
NO
BREACH
NO
LEGAL
INTEREST
(art
2209
civil
code.)
-‐ Held:
In
this
case
the
SC
ordered
the
bank
to
refund
to
CHT
the
18%
interest.
According
to
the
supreme
court,
they
cannot
imposed
that
because
the
mortgage
agrrement
did
not
impose
any
interest,
2nd
is
to
refund
also
CHT
of
the
salary
loan,
because
that
should
not
be
included
in
the
redemption
price.
11
Bank
Secrecy
Law;
RA
1405
-‐ General
Rule:
Section
2.
1
All
deposits
of
whatever
nature
with
banks
or
banking
institutions
in
the
Philippines
including
investments
in
bonds
issued
by
the
Government
of
the
Philippines,
its
political
subdivisions
and
its
instrumentalities,
are
hereby
considered
as
of
an
absolutely
confidential
nature
and
may
not
be
examined,
inquired
or
looked
into
by
any
person,
government
official,
bureau
or
office,
except
upon
written
permission
of
the
depositor,
or
in
cases
of
impeachment,
or
upon
order
of
a
competent
court
in
cases
of
bribery
or
dereliction
of
duty
of
public
officials,
or
in
cases
where
the
money
deposited
or
invested
is
the
subject
matter
of
the
litigation.
Exceptions:
-‐ 1.
Written
permission
of
the
depositor
or
investor
-‐ 2.
Impeachment
cases
-‐ 3.
Upon
order
of
a
competent
court
in
cases
of:
Bribery,
Dereliction
of
duty
of
public
official
-‐ 4.
Upon
order
of
a
competent
court
in
cases
where
the
money
deposited
or
investment
is
the
subject
of
litigation.
-‐ 5.
Upon
order
of
the
competent
court
or
tribunal
in
cases
involving
unexplained
wealth
under
the
anti
graft
and
corrupt
practices
act.
-‐ 6.
Upon
inquiry
by
the
CIR
for
purpose
of
determining
the
net
estate
of
the
deceased
depositor.
-‐ Take
note
that
the
BIR
only
has
the
right
to
inquire
on
the
deposit
in
case
for
settlement
of
estate
taxes,
not
in
any
other
case.
-‐ 7.
Upon
the
order
of
a
competent
court
or
in
proper
case
by
the
anti
money
laundering
council
where
there
is
probable
cause
of
money
laundering.
-‐ 8.
Disclosure
to
the
treasurer
of
the
Philippines
of
dormant
deposits.
(10
years)
-‐ 9.
Reports
of
banks
to
the
anti
money
laundering
council
of
covered
or
suspicious
transactions.
-‐ 10.
Upon
order
of
the
court
of
appeals
upon
examination
of
law
enforcement
officers
in
terrorism
cases
under
the
human
security
act.
-‐
-‐ Take
note
that
the
rule
is
different
in
foreign
currency
deposits.
There
was
a
ruling
by
the
SC
that
the
banks
cannot
disclose
its
foreign
currency
deposits,
because
the
exception
under
ra
1405
does
not
apply
to
foreign
currency
deposits.
-‐ Under
the
Foreign
Currency
Deposits
Act,
FCDA,
there
is
only
one
exception.
That
is
the
written
consent
of
the
depositor.
But
it
has
been
interpreted
to
include
the
anti-‐money
laundering
act
and
the
human
security
act
(Section
37
and
28).
12
Letters
of
Credit
-‐ Primarily
governed
by
the
Code
of
Commerce
but
mostly
by
practice.
-‐ Letters
of
Credit
–
invented
to
facilitate
import
and
export
transactions.
From
the
time
when
there
was
no
internet
and
the
banks
were
not
yet
computerized.
So
what
brought
this
on
or
what
made
this
necessary?
Example,
I
have
a
manufacturing
company
and
I
have
a
buyer
from
hongkong.
Now,
if
I
am
the
prospective
sellier
I
will
hesitate
to
send
my
goods
to
HK
without
him
paying
me
first,
because
if
I
sent
my
goods
and
he
does
not
pay
me
what
can
I
do?
I
cannot
go
after
him
in
hongkong.
In
the
same
way
the
buyer
in
HK
will
hesitate
to
pay
you
before
getting
there
goods.
So
that
was
the
problem
before,
and
because
of
that
LC
was
invented.
-‐ How
does
it
work?
-‐ The
buyer
will
just
go
to
a
bank
and
will
tell
the
bank,
I
want
to
open
an
LC
in
favor
of
my
supplier
in
HK.
So
bank
upon
presentation
to
you
by
my
supplier
of
proof
that
he
has
already
transmitted
the
goods
to
me
then
you
can
pay
him.
In
the
same
way
the
bank
will
now
go
to
the
supplier
and
tell
him,
oi
supplier
let
me
know
once
you
shipped
the
goods
and
give
me
the
invoices
and
I
will
pay
you
the
purchase
price.
The
buyer
is
now
assured
that
he
will
get
the
goods
and
the
seller
is
also
assured
that
he
will
get
paid,
because
it
is
all
done
thru
the
bank.
-‐ Basically
a
lc
is
an
engagement
by
a
bank
or
other
person
made
at
a
request
of
a
costumer
that
the
issuer
will
honor
the
drafts
or
other
demands
for
payment
upon
compliance
with
the
conditions
specified.
-‐ So
basically,
the
conditions
will
just
be
presentation
of
your
shipping
documents
or
the
documents
of
title.
-‐ Who
are
the
parties
in
the
LC
(3
indispensable
parties)
1. Buyer
–
procures
the
lc
and
obligates
himself
to
reimburse
the
issuing
bank
upon
receipt
of
the
document
of
title
2. Issuing
bank
–
undertakes
to
pay
the
selling
upon
receipt
of
the
draft
and
proper
documents
of
title,
and
to
surrender
the
documents
to
the
buyer
upon
reimbursement.
3. Seller
–
the
person
who
in
compliance
with
the
contract
of
sale
ships
the
goods
to
the
buyer
and
delivers
the
document
of
title
and
draft
to
the
issuing
bank
to
recover
payment.
There
could
be
other
parties:
1. Advising
or
notifying
bank
–
informs
seller
the
existence
of
the
lc.
Notifying
bank
may
also
be
a
confirming
bank.
2. Confirming
bank
–
is
the
bank,
which
lends
credence
to
the
lc
issued
by
lesser-‐known
issuing
bank.
The
confirming
bank
is
directly
liable
to
pay
the
seller.
3. Paying
bank
–
undertakes
to
encash
the
drafts
for
the
exporter
or
seller.
4. Negotiating
Bank
–
just
in
case
the
seller
will
not
encash
the
draft
with
the
issuing
bank
but
rather
will
go
to
another
bank
and
sell
the
draft.
Ipa
discount.
Take
note
that
base
on
the
3
indispensable
parties
a
lc
transaction
is
made
up
of
3
independent
contracts:
1. contract
of
sale
between
the
buyer
and
the
seller
2. contract
between
the
buyer
and
the
issuing
bank
− in
most
cases
the
contract
between
the
buyer
and
the
issuing
bank
will
give
rise
to
a
trust
receipt.
3. the
LC
proper
–
between
seller
and
the
issuing
bank.
Take
note
that
these
contracts
are
independent
from
each
other,
such
that
a
defect
in
any
one
of
the
contract
or
a
defense
of
anyone
of
the
parties
to
anyone
of
these
contracts
cannot
be
used
as
a
defense
in
the
other
contracts
if
it
is
not
applicable.
So
if
there
is
a
defect
for
example
in
the
goods
that
were
shipped.
Can
the
buyer
refuse
to
pay?
No
he
cannot,
because
the
liability
is
based
in
the
contract
of
sale
and
it
will
not
affect
your
liability
to
the
issuing
bank.
In
fact
the
issuing
bank
does
not
warrant
the
goods.
It
just
deals
in
documents.
13
Trust
Receipts
-‐ What
is
a
trust
receipt
contract?
Any
transaction
by
and
between
a
person
referred
to
as
the
entruster,
the
bank
and
another
person
referred
to
as
the
entrustee
(the
buyer)
whereby
the
entruster
who
ones
or
olds
absolute
title
or
security
interest
over
certain
specified
goods,
documents
or
instruments
releases
the
same
to
the
possession
of
the
entrustee,
but
the
buyer
will
have
to
sign
and
deliver
to
the
entruster
a
document
called
the
trust
receipt.
Wherein
the
entrustee
binds
himself
to
hold
the
designated
goods,
documents,
or
instruments
in
trust
for
the
entruster.
(Take
note
it
includes
documents
or
instruments,
like
warehouse
receipts,
documents
of
title)And
to
sell
or
otherwise
dispose
of
the
goods,
documents,
or
instruments,
with
the
obligation
to
turnover
for
the
entruster
the
proceeds
thereof
to
the
extent
of
the
amount
owing
to
the
entruster
or
as
appears
in
the
trust
receipts
of
the
goods,
documents,
instrument
themselves
if
they
are
unsold
or
not
otherwise
dispose
of
in
accordance
with
the
terms
and
conditions
as
specified
in
the
trust
receipt.
-‐ Is
there
any
required
form?
None.
-‐ 3
elements:
-‐ (1)
a
description
of
the
goods,
documents
or
instruments
subject
of
the
trust
receipt;
-‐ (2)
the
total
invoice
value
of
the
goods
and
the
amount
of
the
draft
to
be
paid
by
the
entrustee;
-‐ (3)
an
undertaking
or
a
commitment
of
the
entrustee
entrustee
-‐ (a)
to
hold
in
trust
for
the
entruster
the
goods,
documents
or
instruments
therein
described;
-‐ (b)
to
dispose
of
them
in
the
manner
provided
for
in
the
trust
receipt;
and
-‐ (c)
to
turn
over
the
proceeds
of
the
sale
of
the
goods,
documents
or
instruments
to
the
entruster
to
the
extent
of
the
amount
owing
to
the
entruster
or
as
appears
in
the
trust
receipt
or
to
return
the
goods,
documents
or
instruments
in
the
event
of
their
non-‐sale
within
the
period
-‐ Section
5.
Form
of
trust
receipts;
contents.
A
trust
receipt
need
not
be
in
any
particular
form,
but
every
such
receipt
must
substantially
contain
(1)
a
description
of
the
goods,
documents
or
instruments
subject
of
the
trust
receipt;
(2)
the
total
invoice
value
of
the
goods
and
the
amount
of
the
draft
to
be
paid
by
the
entrustee;
(3)
an
undertaking
or
a
commitment
of
the
entrustee
(a)
to
hold
in
trust
for
the
entruster
the
goods,
documents
or
instruments
therein
described;
(b)
to
dispose
of
them
in
the
manner
provided
for
in
the
trust
receipt;
and
(c)
to
turn
over
the
proceeds
of
the
sale
of
the
goods,
documents
or
instruments
to
the
entruster
to
the
extent
of
the
amount
owing
to
the
entruster
or
as
appears
in
the
trust
receipt
or
to
return
the
goods,
documents
or
instruments
in
the
event
of
their
non-‐sale
within
the
period
specified
therein.
-‐ The
trust
receipt
may
contain
other
terms
and
conditions
agreed
upon
by
the
parties
in
addition
to
those
hereinabove
enumerated
provided
that
such
terms
and
conditions
shall
not
be
contrary
to
the
provisions
of
this
Decree,
any
existing
laws,
public
policy
or
morals,
public
order
or
good
customs.
-‐ This
one
is
normally
an
offshoot
of
a
letter
of
credit
transaction.
This
time
its
now
between
the
issuing
bank,
the
paying
bank
and
the
buyer.
So
when
the
goods
are
in
the
hands
of
the
issuing
bank,
as
security
to
ensure
that
the
debts
will
be
paid,
the
issuing
bank
will
normally
require
the
buyer
to
issue
a
trust
receipt.
-‐ Regardless
of
that
class
ha
that
the
buyer
is
acting
basically
on
behalf
of
the
entrustor
in
selling
the
goods
because
the
goods
are
really
owned
by
the
entrustor
there
is
no
principal
agency
relationship.
Meaning,
technically
the
bank
owns
the
goods
but
if
there
is
any
defect
in
the
goods
can
the
bank
be
held
for
warranty
against
hidden
defects?
No,
because
the
essence
in
trust
receipt
is
that
even
it
owns
the
goods,
it
holds
legal
right
over
the
goods
its
really
just
a
form
of
SECURITY
INTEREST.
In
essence
it
would
still
be
the
entrustee
who
would
be
liable
for
warranty
of
the
goods.
The
bank
will
not
be
liable
at
all.
-‐ Section
9.
Obligations
of
the
entrustee.
The
entrustee
shall
-‐ (1)
hold
the
goods,
documents
or
instruments
in
trust
for
the
entruster
and
shall
dispose
of
them
strictly
in
accordance
with
the
terms
and
conditions
of
the
trust
receipt;
-‐ (2)
receive
the
proceeds
in
trust
for
the
entruster
and
turn
over
the
same
to
the
entruster
to
the
extent
of
the
amount
owing
to
the
entruster
or
as
appears
on
the
trust
receipt;
-‐ (3)
insure
the
goods
for
their
total
value
against
loss
from
fire,
theft,
pilferage
or
other
casualties;
-‐ (4)
keep
said
goods
or
proceeds
thereof
whether
in
money
or
whatever
form,
separate
and
capable
of
identification
as
property
of
the
entruster;
14
-‐ (5)
return
the
goods,
documents
or
instruments
in
the
event
of
non-‐sale
or
upon
demand
of
the
entruster;
and
-‐ (6)
observe
all
other
terms
and
conditions
of
the
trust
receipt
not
contrary
to
the
provisions
of
this
Decree.
-‐ Regarding
the
5th
obligation:
even
if
the
entrustee
will
return
the
goods
to
the
entruster
then
the
entruster
will
sell
the
goods,
lets
say
the
obligation
under
the
trust
receipt
is
1m
the
entrustee
was
unable
to
sell
the
goods
so
the
entrustor
got
back
the
goods
and
sold
it.
But
the
entruster
was
only
able
to
sell
it
for
700k.
Will
the
entrustee
be
liable
for
the
difference?
YES,
because
as
we
said
the
title
of
the
goods
is
just
for
security
purpose,
the
real
purpose
is
that
the
entruster
will
be
paid
the
amount
stated
in
the
trust
receipt.
15
Securities
and
Regulation
Code
-‐ Primarily
passed
to
protect
the
interest
of
the
public
against
promises
of
income
as
high
as
the
bright
blue
sky,
the
blue
sky
law.
So
in
order
to
prevent
any
instances
of
bogus
corporations
getting
money
from
the
public
and
disappearing,
the
govt
passed
the
SRC.
-‐ The
primary
purpose
of
the
src
is
for
the
requirement
of
registration
of
securities.
Section
8.
Requirement
of
Registration
of
Securities.–
8.1.
Securities
shall
not
be
sold
or
offered
for
sale
or
distribution
within
the
Philippines,
without
a
registration
statement
duly
filed
with
and
approved
by
the
Commission.
Prior
to
such
sale,
information
on
the
securities,
in
such
form
and
with
such
substance
as
the
Commission
may
prescribe,
shall
be
made
available
to
each
prospective
purchaser.
So
really
cannot
just
make
a
corporation
and
start
sharing
your
shares
without
first
registering
your
shares
with
the
sec.
so
you
have
to
register.
A
prospectus
must
be
available
to
the
public…so
this
one
is
really
to
safeguard
the
public
against
scams.
Section
3.
Definition
of
Terms.
-‐
3.1.
"Securities"
are
shares,
participation
or
interests
in
a
corporation
or
in
a
commercial
enterprise
or
profit-‐making
venture
and
evidenced
by
a
certificate,
contract,
instruments,
whether
written
or
electronic
in
character.
It
includes:
(a)
Shares
of
stocks,
bonds,
debentures,
notes
evidences
of
indebtedness,
asset-‐backed
securities;
(b)
Investment
contracts,
certificates
of
interest
or
participation
in
a
profit
sharing
agreement,
certifies
of
deposit
for
a
future
subscription;
(c)
Fractional
undivided
interests
in
oil,
gas
or
other
mineral
rights;
(d)
Derivatives
like
option
and
warrants;
(e)
Certificates
of
assignments,
certificates
of
participation,
trust
certificates,
voting
trust
certificates
or
similar
instruments
(f)
Proprietary
or
nonproprietary
membership
certificates
in
corporations;
and
(g)
Other
instruments
as
may
in
the
future
be
determined
by
the
Commission.
Mock
bar
question:
What
is
an
investment
contract?
Investment
Contract
–
it
is
a
contract
whereby
a
person
will
make
an
investment
in
money
in
a
common
enterprise
with
the
expectation
of
profits
primarily
from
the
forts
of
other
persons.
Elements
of
an
investment
contract?
-‐ Contract
for
the
investment
of
money
-‐ Common
enterprise
-‐ Expectation
of
profit
-‐ Profit
is
derived
from
the
efforts
of
others.
Derivatives
–
are
securities
with
underlying
securities.
So
like
options
and
warrants
Option
–
is
a
right
granted
to
the
holders
or
the
shareholders
to
purchase
shares
at
a
specified
price.
So
you
have
there
an
instrument
that
will
allow
you
to
buy
shares
at
a
specified
price,
it
is
called
a
derivative
because
there
is
an
underlying
security
and
that
is
the
shares
that
you
can
purchase
with
it.
So
you
have
an
option,
a
document,
a
right
to
purchase
shares
at
500
pesos
per
share.
So
that
later
on
when
the
company
will
issue
new
certificates
of
stock,
let
say
700pesos,
your
option
will
entitle
you
to
purchase
those
new
shares
at
500.
It
is
a
derivative
because
it
is
a
security,
which
will
allow
you
access
or
to
purchase
or
to
acquire
an
underlying
security,
which
in
this
case
is
the
shares
of
stock.
So
it
is
a
derivative
of
an
underlying
security.
Interest
–
these
are
as
a
rule,
the
enumeration
of
securities
under
the
src.
So
any
issuance
of
a
corporation
of
these
securities,
general
rule
they
will
have
to
be
registered
with
the
sec.
Securities
that
need
not
be
registered:
Section
9.
Exempt
Securities.
–
9.1.
The
requirement
of
registration
under
Subsection
8.1
shall
not
as
a
general
rule
apply
to
any
of
the
following
classes
of
securities:
(a)
Any
security
issued
or
guaranteed
by
the
Government
of
the
Philippines,
or
by
any
political
subdivision
or
agency
thereof,
or
by
any
person
controlled
or
supervised
by,
and
acting
as
an
instrumentality
of
said
Government.
(b)
Any
security
issued
or
guaranteed
by
the
government
of
any
country
with
which
the
Philippines
maintains
diplomatic
relations,
or
by
any
state,
province
or
political
subdivision
thereof
on
the
basis
of
reciprocity:
Provided,
That
the
Commission
may
require
compliance
with
the
form
and
content
for
disclosures
the
Commission
may
prescribe.
(c)
Certificates
issued
by
a
receiver
or
by
a
trustee
in
bankruptcy
duly
approved
by
the
proper
adjudicatory
body.
16
(d)
Any
security
or
its
derivatives
the
sale
or
transfer
of
which,
by
law,
is
under
the
supervision
and
regulation
of
the
Office
of
the
Insurance
Commission,
Housing
and
Land
Use
Rule
Regulatory
Board,
or
the
Bureau
of
Internal
Revenue.
(e)
Any
security
issued
by
a
bank
except
its
own
shares
of
stock.
Common
trend
among
the
exempt
securities
–
these
are
secure
securities,
they
are
either
issued
by
governments,
by
banks,
approved
by
courts,
so
if
the
securities
are
secured
by
themselves
there
is
no
need
to
register
them,
because
the
purpose
of
the
law
is
just
to
secure
the
public.
Exempt
transactions
–
it
will
apply
if
the
securities
are
not
exempt,
meaning
under
normal
circumstances
those
securities
are
to
be
registered.
But
because
the
nature
of
the
transaction,
or
because
of
the
personality
of
the
contracting
parties
then
the
law
says
that
there
is
no
need
for
protection.
So
these
securities
can
be
sold,
under
these
circumstances
even
without
registration.
Section
10.
Exempt
Transactions.
–
10.1.
The
requirement
of
registration
under
Subsection
8.1
shall
not
apply
to
the
sale
of
any
security
in
any
of
the
following
transactions:
(a)
At
any
judicial
sale,
or
sale
by
an
executor,
administrator,
guardian
or
receiver
or
trustee
in
insolvency
or
bankruptcy.
(b)
By
or
for
the
account
of
a
pledge
holder,
or
mortgagee
or
any
of
a
pledge
lien
holder
selling
of
offering
for
sale
or
delivery
in
the
ordinary
course
of
business
and
not
for
the
purpose
of
avoiding
the
provision
of
this
Code,
to
liquidate
a
bonafide
debt,
a
security
pledged
in
good
faith
as
security
for
such
debt.
(c)
An
isolated
transaction
in
which
any
security
is
sold,
offered
for
sale,
subscription
or
delivery
by
the
owner
therefore,
or
by
his
representative
for
the
owner’s
account,
such
sale
or
offer
for
sale
or
offer
for
sale,
subscription
or
delivery
not
being
made
in
the
course
of
repeated
and
successive
transaction
of
a
like
character
by
such
owner,
or
on
his
account
by
such
representative
and
such
owner
or
representative
not
being
the
underwriter
of
such
security.
-‐ Example
if
I
own
shares
and
I
sell
those
shares
I
don’t
need
to
register
them
because
it
is
an
isolated
transaction,
I
don’t
do
it
regularly.
So
isolated
lang
one
time.
(d)
The
distribution
by
a
corporation
actively
engaged
in
the
business
authorized
by
its
articles
of
incorporation,
of
securities
to
its
stockholders
or
other
security
holders
as
a
stock
dividend
or
other
distribution
out
of
surplus.
-‐ Take
not
STOCK
dividend..
(e)
The
sale
of
capital
stock
of
a
corporation
to
its
own
stockholders
exclusively,
where
no
commission
or
other
remuneration
is
paid
or
given
directly
or
indirectly
in
connection
with
the
sale
of
such
capital
stock.
-‐ Corporation
will
not
sell
to
the
public
but
only
to
its
stockholder.
Stockholder
should
know
the
status
of
its
own
corporation,
no
need
of
protection.
(f)
The
issuance
of
bonds
or
notes
secured
by
mortgage
upon
real
estate
or
tangible
personal
property,
when
the
entire
mortgage
together
with
all
the
bonds
or
notes
secured
thereby
are
sold
to
a
single
purchaser
at
a
single
sale.
-‐ Ordinarily
if
you
sell
bonds
even
if
it
is
backed
by
a
real
estate
or
other
property
that
is
subject
to
registration,
but
if
the
sale
is
only
to
a
single
purchaser
in
a
single
sale
there
is
no
need
to
register.
Because
the
law
presumes
that
that
single
purchaser
will
exercise
due
diligence
in
conducting
the
transaction.
(g)
The
issue
and
delivery
of
any
security
in
exchange
for
any
other
security
of
the
same
issuer
pursuant
to
a
right
of
conversion
entitling
the
holder
of
the
security
surrendered
in
exchange
to
make
such
conversion:
Provided,
That
the
security
so
surrendered
has
been
registered
under
this
Code
or
was,
when
sold,
exempt
from
the
provision
of
this
Code,
and
that
the
security
issued
and
delivered
in
exchange,
if
sold
at
the
conversion
price,
would
at
the
time
of
such
conversion
fall
within
the
class
of
securities
entitled
to
registration
under
this
Code.
Upon
such
conversion
the
par
value
of
the
security
surrendered
in
such
exchange
shall
be
deemed
the
price
at
which
the
securities
issued
and
delivered
in
such
exchange
are
sold.
-‐ Basically
class
this
is
your
convertible
shares.
If
you
have
preferred
shares
and
you
want
to
convert
it
to
common
shares
under
the
right
granted
by
the
AOI
there
is
as
a
general
rule
no
need
to
register
the
transfer
or
the
issuance
of
the
common
shares,
provided
that
the
preferred
shares
that
you
surrendered
has
been
registered
or
at
the
time
of
its
issuance
it
was
also
exempt
from
registration.
(h)
Broker’s
transaction,
executed
upon
customer’s
orders,
on
any
registered
Exchange
or
other
trading
market.
17
(i)
Subscriptions
for
shares
of
the
capitals
stocks
of
a
corporation
prior
to
the
incorporation
thereof
or
in
pursuance
of
an
increase
in
its
authorized
capital
stocks
under
the
Corporation
Code,
when
no
expense
is
incurred,
or
no
commission,
compensation
or
remuneration
is
paid
or
given
in
connection
with
the
sale
or
disposition
of
such
securities,
and
only
when
the
purpose
for
soliciting,
giving
or
taking
of
such
subscription
is
to
comply
with
the
requirements
of
such
law
as
to
the
percentage
of
the
capital
stock
of
a
corporation
which
should
be
subscribed
before
it
can
be
registered
and
duly
incorporated,
or
its
authorized,
capital
increase.
-‐ So
two
instances,
one
is
before
you
incorporate,
if
for
example
before
you
incorporate,
what’s
the
rule
on
incorporation
how
much
capital
stock
should
be
subscribed?
25%
and
25%
of
that
should
also
be
paid
up.
If
you
increase
your
capital
stock
how
much
should
be
subscribed?
25%
gihapon.
25%
paid
up.
According
to
this
rule,
incase
of
incorporation
or
increase
in
the
authorized
capital
stock,
as
long
as
the
subscription
is
keeping
within
the
25%,
that
is
an
exempt
transaction.
But
if
the
subscription
goes
beyond
the
25%
it
is
no
longer
exempt.
(j)
The
exchange
of
securities
by
the
issuer
with
the
existing
security
holders
exclusively,
where
no
commission
or
other
remuneration
is
paid
or
given
directly
or
indirectly
for
soliciting
such
exchange.
-‐ This
is
different
from
conversion,
because
in
conversion
there
is
a
right
to
convert
but
this
one
is
simply,
like
for
example
you
amend
your
articles
and
you
have
all
common
shares,
then
you
amend
it
to
change
some
common
to
preferred
shares,
then
you
required
your
shareholders
to
surrender
some
portion
of
your
common
shares
and
in
exchange
you
will
get
preferred
shares,
so
it
is
an
exchange
not
conversion,
and
it
is
still
exempt.
(k)
The
sale
of
securities
by
an
issuer
to
fewer
than
twenty
(20)
persons
in
the
Philippines
during
any
twelve-‐month
period.
(l)
The
sale
of
securities
to
any
number
of
the
following
qualified
buyers:
(i)
Bank;
(ii)
Registered
investment
house;
(iii)
Insurance
company;
(iv)
Pension
fund
or
retirement
plan
maintained
by
the
Government
of
the
Philippines
or
any
political
subdivision
thereof
or
manage
by
a
bank
or
other
persons
authorized
by
the
Bangko
Sentral
to
engage
in
trust
functions;
(v)
Investment
company
or;
(vi)
Such
other
person
as
the
Commission
may
rule
by
determine
as
qualified
buyers,
on
the
basis
of
such
factors
as
financial
sophistication,
net
worth,
knowledge,
and
experience
in
financial
and
business
matters,
or
amount
of
assets
under
management.
-‐ Kani
sya
that’s
by
reason
of
the
know
how
of
the
buyer
or
the
experience
of
the
buyer,
there
is
no
need
to
protect
him.
He
is
considered
to
know
what
he
is
doing.
Unlike
the
general
public
lang
na
transaction.
Tender
offer
–
it
is
a
publicly
announced
intention
by
any
person
or
group
of
persons
acting
in
concert
to
acquire
equity
securities
of
a
public
company.
-‐ Sa
tender
offer
if
a
person
intends
to
buy
the
shares
from
a
shareholder.
Ang
tender
offer
ha
you
buy
murag
sya
secondary
market,
you
don’t
buy
directly
from
a
corporation.
You
buy
from
the
shareholders
of
the
corporation.
In
this
case
you
are
required
to
announce
to
all
the
shareholders
of
the
company
that
you
are
buying
the
shares
at
this
price
and
anyone
who
wants
to
sell
their
shares
should
go
to
you
and
sell
their
shares
to
you.
Public
company
–
2
kinds
1. if
your
shares
are
listed
in
an
exchange
(the
stocks
exchange);
or
2. not
listed
but
-‐
corporation
with
assets
of
at
least
fifty
million
pesos
(50,000,000.00)
and
having
two
hundred(200)
or
more
stockholders
at
least
one
hundred
shares
each.
When
is
tender
offer
required?
Requirements
is
not
in
the
src
but
in
the
implementing
rules…
Any
person
or
group
of
persons
acting
in
concert
who
intends
to
acquire
35%
or
more
of
equity
shares
of
a
public
company
in
one
or
more
transaction
within
a
period
of
12
months.
The
35%
can
be
one
time
or
it
can
be
staggered
for
a
period
of
12
months.
If
any
acquisition
will
result
in
ownership
of
over
51%
of
the
total
outstanding
equity
securities
of
a
public
company.
-‐ So
lets
just
say
you
bought
1%
but
you
already
have
50%,
should
you
make
a
tender
offer?
Yes,
because
the
resulting
effect
of
that
transaction
is
that
you
would
own
more
than
51%.
18
Section
19.
Tender
Offers.
–
Any
person
or
group
of
persons
acting
in
concert
who
intends
to
acquire
at
least
15%
of
any
class
of
any
equity
security
of
a
listed
corporation
of
any
class
of
any
equity
security
of
a
corporation
with
assets
of
at
least
fifty
million
pesos
(50,000,000.00)
and
having
two
hundred(200)
or
more
stockholders
at
least
one
hundred
shares
each
or
who
intends
to
acquire
at
least
thirty
percent(30%)
of
such
equity
over
a
period
of
twelve
months(12)
shall
make
a
tender
offer
to
stockholders
by
filling
with
the
Commission
a
declaration
to
that
effect;
and
furnish
the
issuer,
a
statement
containing
such
of
the
information
required
in
Section
17
of
this
Code
as
the
Commission
may
prescribe.
Such
person
or
group
of
persons
shall
publish
all
request
or
invitations
or
tender
offer
or
requesting
such
tender
offers
subsequent
to
the
initial
solicitation
or
request
shall
contain
such
information
as
the
Commission
may
prescribe,
and
shall
be
filed
with
the
Commission
and
sent
to
the
issuer
not
alter
than
the
time
copies
of
such
materials
are
first
published
or
sent
or
given
to
security
holders.
(a)
Any
solicitation
or
recommendation
to
the
holders
of
such
a
security
to
accept
or
reject
a
tender
offer
or
request
or
invitation
for
tenders
shall
be
made
in
accordance
with
such
rules
and
regulations
as
may
be
prescribe.
(b)
Securities
deposited
pursuant
to
a
tender
offer
or
request
or
invitation
for
tenders
may
be
withdrawn
by
or
on
behalf
of
the
depositor
at
any
time
throughout
the
period
that
tender
offer
remains
open
and
if
the
securities
deposited
have
not
been
previously
accepted
for
payment,
and
at
any
time
after
sixty
(60)
days
from
the
date
of
the
original
tender
offer
to
request
or
invitation,
except
as
the
Commission
may
otherwise
prescribe.
(c)
Where
the
securities
offered
exceed
that
which
person
or
group
of
persons
is
bound
or
willing
to
take
up
and
pay
for,
the
securities
that
are
subject
of
the
tender
offers
shall
be
taken
up
us
nearly
as
may
be
pro
data,
disregarding
fractions,
according
to
the
number
of
securities
deposited
to
each
depositor.
The
provision
of
this
subject
shall
also
apply
to
securities
deposited
within
ten
(10)
days
after
notice
of
increase
in
the
consideration
offered
to
security
holders,
as
described
in
paragraph
(e)
of
this
subsection,
is
first
published
or
sent
or
given
to
security
holders.
(d)
Where
any
person
varies
the
terms
of
a
tender
offer
or
request
or
invitation
for
tenders
before
the
expiration
thereof
by
increasing
the
consideration
offered
to
holders
of
such
securities,
such
person
shall
pay
the
increased
consideration
to
each
security
holder
whose
securities
are
taken
up
and
paid
for
whether
or
not
such
securities
have
been
taken
up
by
such
person
before
the
variation
of
the
tender
offer
or
request
or
invitation.
When
not
required?
1. If
the
purchase
of
shares
is
from
the
unissued
capital
stock,
provided
that
the
acquisition
will
not
result
to
ownership
of
the
purchaser
of
50%(?)
or
more
of
the
shares.
2. Any
purchase
of
shares
from
an
increase
in
authorized
capital
stock
3. Purchase
by
debtor
or
creditor
in
connection
with
foreclosure
proceedings
involving
pledge
or
other
security
arrangement.
4. Purchase
in
connection
with
privatization
with
th
govt
of
the
phils
5. Purchase
in
connection
with
corporate
rehabilitation
under
court
supervision.
6. Purchases
at
an
open
market
at
prevailing
market
price;
and
7. In
cases
of
mergers
or
consolidation.
March
2,
2013
-‐ SEC.
24.
Manipulation
of
Security
Prices;
Devices
and
Practices.
-‐
24.1
It
shall
be
unlawful
for
any
person
acting
for
himself
or
through
a
dealer
or
broker,
directly
or
indirectly:
-‐ (a)
To
create
a
false
or
misleading
appearance
of
active
trading
in
any
listed
security
traded
in
an
Exchange
or
any
other
trading
market
(hereafter
referred
to
purposes
of
this
Chapter
as
“Exchange”):
-‐ (i)
By
effecting
any
transaction
in
such
security
which
involves
no
change
in
the
beneficial
ownership
thereof
(Wash
Sale);
-‐ (ii)
By
entering
an
order
or
orders
for
the
purchase
or
sale
of
such
security
with
the
knowledge
that
a
simultaneous
order
or
orders
of
substantially
the
same
size,
time
and
price,
for
the
sale
or
purchase
of
any
such
security,
has
or
will
be
entered
by
or
for
the
same
or
different
parties
(Matched
Orders);
or
-‐ (iii)
By
performing
similar
act
where
there
is
no
change
in
beneficial
ownership
(Market
Rigging
or
Jiggling).
-‐ (b)
To
effect,
alone
or
with
others,
a
series
of
transactions
in
securities
that:
-‐ (i)
Raises
their
price
to
induce
the
purchase
of
a
security,
whether
of
the
same
or
a
different
class
of
the
same
issuer
or
of
a
controlling,
controlled,
or
commonly
controlled
company
by
others;
19
-‐ (ii)
Depresses
their
price
to
induce
the
sale
of
a
security,
whether
of
the
same
or
a
different
class,
of
the
same
issuer
or
of
a
controlling,
controlled,
or
commonly
controlled
company
by
others;
or
-‐ (iii)
Creates
active
trading
to
induce
such
a
purchase
or
sale
through
manipulative
devices
such
as
marking
the
close,
painting
the
tape,
squeezing
the
float,
hype
and
dump,
boiler
room
operations
and
such
other
similar
devices.
-‐ (c)
To
circulate
or
disseminate
information
that
the
price
of
any
security
listed
in
an
Exchange
will
or
is
likely
to
rise
or
fall
because
of
manipulative
market
operations
of
any
one
or
more
persons
conducted
for
the
purpose
of
raising
or
depressing
the
price
of
the
security
for
the
purpose
of
inducing
the
purchase
or
sale
of
such
security.
-‐ (d)
To
make
false
or
misleading
statement
with
respect
to
any
material
fact,
which
he
knew
or
had
reasonable
ground
to
believe
was
so
false
or
misleading,
for
the
purpose
of
inducing
the
purchase
or
sale
of
any
security
listed
or
traded
in
an
Exchange.
-‐ (e)
To
effect,
either
alone
or
others,
any
series
of
transactions
for
the
purchase
and/or
sale
of
any
security
traded
in
an
Exchange
for
the
purpose
of
pegging,
fixing
or
stabilizing
the
price
of
such
security,
unless
otherwise
allowed
by
this
Code
or
by
rules
of
the
Commission.
-‐ Note:
Any
type
of
fictitious
transaction,
which
is
intended
to
affect
the
prices
(increase
or
decrease).
This
only
applies
to
traded
securities.
-‐ SEC.
25.
Regulation
of
Option
Trading.
–
No
member
of
an
Exchange
shall,
directly
or
indirectly
endorse
or
guarantee
the
performance
of
any
put,
call,
straddle,
option
or
privilege
in
relation
to
any
security
registered
on
a
securities
exchange.
-‐ The
terms
“put”,
“call”,
“straddle”,
“option”,
or
“privilege”
shall
not
include
any
registered
warrant,
right
or
convertible
security.
-‐ Put
–
transferable
option
or
offer
to
deliver
a
given
number
of
shares
of
stock
at
a
stated
price
at
any
given
time
during
a
stated
period
-‐ Call
–
transferable
option
to
buy
a
specified
number
of
shares
at
a
stated
price
-‐ Straddle
–
combination
of
put
and
call.
-‐ Tag-‐along
clause
–
a
right
given
to
the
minority
SHs
that
when
the
they
sell
they
have
the
right
to
sell
the
majority
shares.
-‐ Drag-‐along
clause
–
a
right
given
to
a
majority
SH
in
that
if
he
sell
shares
he
has
the
right
to
drag
along/sell
the
minority
SHs
shares.
This
applies
in
joint
ventures.
-‐ SEC.
26.
Fraudulent
Transactions.
-‐
It
shall
be
unlawful
for
any
person,
directly
or
indirectly,
in
connection
with
the
purchase
or
sale
of
any
securities
to:
-‐ 26.1.
Employ
any
device,
scheme,
or
artifice
to
defraud;
-‐ 26.2.
Obtain
money
or
property
by
means
of
any
untrue
statement
of
a
material
fact
of
any
omission
to
state
a
material
fact
necessary
in
order
to
make
the
statements
made,
in
the
light
of
the
circumstances
under
which
they
were
made,
not
misleading;
or
-‐ 26.3.
Engage
in
any
act,
transaction,
practice
or
course
of
business
which
operates
or
would
operate
as
a
fraud
or
deceit
upon
any
person.
-‐ Here,
there
is
an
actual
purchase
of
securities.
-‐ SEC.
27.
Insider’s
Duty
to
Disclose
When
Trading.
-‐
27.1.
It
shall
be
unlawful
for
an
insider
to
sell
or
buy
a
security
of
the
issuer,
while
in
possession
of
material
information
with
respect
to
the
issuer
or
the
security
that
is
not
generally
available
to
the
public,
UNLESS:
-‐ (a)
The
insider
proves
that
the
information
was
not
gained
from
such
relationship;
or
-‐ (b)
If
the
other
party
selling
to
or
buying
from
the
insider
(or
his
agent)
is
identified,
the
insider
proves:
-‐ (i)
that
he
disclosed
the
information
to
the
other
party,
or
-‐ (ii)
that
he
had
reason
to
believe
that
the
other
party
otherwise
is
also
in
possession
of
the
information.
-‐ 27.3.
It
shall
be
unlawful
for
any
insider
to
communicate
material
non-‐public
information
about
the
issuer
or
the
security
to
any
person
who,
by
virtue
of
the
communication,
BECOMES
AN
INSIDER
as
defined
in
Subsection
3.8,
where
the
insider
communicating
the
information
knows
or
has
reason
to
believe
that
such
person
will
likely
buy
or
sell
a
security
of
the
issuer
while
in
possession
of
such
information.
20
-‐ Insider
–
1. the
issuer,
2. director
or
officer,
or
3. a
person
controlling
the
issue
or
a
person
whose
relationship
or
former
relation
to
the
issuer
gives
of
gave
him
access
to
material
information
about
the
issuer
or
the
security
that
is
not
generally
available
to
the
public,
4. a
government
ee
or
director
or
officer
of
an
exchange,
clearing
agency
and
or
self-‐regulatory
organization
who
has
access
to
material
information
about
an
issuer
or
a
security
that
is
not
generally
available
to
the
public;
and
5. a
person
who
learns
such
information
by
communication
from
any
of
the
foregoing
insiders.
-‐ Information
is
“material
non-‐public”
if:
-‐ (a)
It
has
not
been
generally
disclosed
to
the
public
and
would
likely
affect
the
market
price
of
the
security
after
being
disseminated
to
the
public
and
the
lapse
of
a
reasonable
time
for
the
market
to
absorb
the
information;
or
-‐ (b)
would
be
considered
by
a
reasonable
person
important
under
the
circumstances
in
determining
his
course
of
action
whether
to
buy,
sell
or
hold
a
security.
-‐ Phil.
Vet
Bank
vs
Callangan;
GR
191995
-‐ Shares
of
the
bank
here
are
sold
to
a
limited
number
of
persons.
-‐ Issued:
Is
the
bank
a
public
company?
-‐ SC:
public
company
because
it
has
assets
more
than
50m
in
assets
and
shareholders
numbered
up
to
200
with
100
shares
each.
-‐ Public
company
–
any
corporation:
-‐ (1)
with
a
class
of
equity
securities
listed
in
an
exchange
or
-‐ (2)
with
assets
in
excess
of
50m
and
having
200
or
more
share
holders,
at
least
200
of
which
are
holding
at
least
100
shares
of
a
class
of
its
equity
securities
-‐ SEC
vs
Prosperity.Com
Inc.
GR
164197
-‐ An
investment
contract
is
a
contract,
transaction,
or
scheme
where
a
person
invests
his
money
in
a
common
enterprise
and
is
led
to
expect
profits
primarily
from
the
efforts
of
others.
-‐ Rule:
if
it
is
investment
contract
–
it
needs
to
be
registered
because
they
are
considered
as
securities.
Otherwise,
there
is
no
need
to
register.
-‐ Howey
Test:
an
investment
contract
exists
if
the
following
elements
concur:
-‐ 1.
Contract,
transaction
or
scheme
-‐ 2.
Investment
in
money
-‐ 3.
Investment
is
made
in
a
common
enterprise
-‐ 4.
Expectation
of
profits
-‐ 5.
Profits
arising
primarily
from
the
efforts
of
others.
-‐ If
you
just
bought
a
product
–
there
is
no
investment.
-‐ PCI
is
engaged
in
network
marketing
not
an
investment
contract.
The
last
element
is
lacking.
-‐ An
example
that
comes
to
mind
would
be
the
long-‐term
commercial
papers
that
large
companies,
like
San
Miguel
Corporation
(SMC),
offer
to
the
public
for
raising
funds
that
it
needs
for
expansion.
When
an
investor
buys
these
papers
or
securities,
he
invests
his
money,
together
with
others,
in
SMC
with
an
expectation
of
profits
arising
from
the
efforts
of
those
who
manage
and
operate
that
company.
SMC
has
to
register
these
commercial
papers
with
the
SEC
before
offering
them
to
investors.
-‐ Here,
PCI’s
clients
do
not
make
such
investments.
They
buy
a
product
of
some
value
to
them:
an
Internet
website
of
a
15-‐MB
capacity.
The
client
can
use
this
website
to
enable
people
to
have
internet
access
to
what
he
has
to
offer
to
them,
say,
some
skin
cream.
The
buyers
of
the
website
do
not
invest
money
in
PCI
that
it
could
use
for
running
some
business
that
would
generate
profits
for
the
investors.
The
price
of
US$234.00
is
what
the
buyer
pays
for
the
use
of
the
website,
a
tangible
asset
that
PCI
creates,
using
its
computer
facilities
and
technical
skills.
-‐ Actually,
PCI
appears
to
be
engaged
in
network
marketing,
a
scheme
adopted
by
companies
for
getting
people
to
buy
their
products
outside
the
usual
retail
system
where
products
are
bought
from
the
store’s
shelf.
Under
this
scheme,
adopted
by
most
health
product
distributors,
the
buyer
can
become
a
down-‐line
seller.
The
latter
earns
commissions
from
purchases
made
by
new
buyers
whom
he
refers
to
the
person
who
sold
the
product
to
him.
The
network
goes
down
the
line
where
the
orders
to
buy
come.
-‐ Cemco
Holdings
Inc.
vs
National
Life
Insurance
(GR
No.
171815)
21
-‐ Tender
offer
is
a
publicly
announced
intention
by
a
person
acting
alone
or
in
concert
with
other
persons
to
acquire
equity
securities
of
a
public
company.
-‐ A
public
company
is
defined
as
a
corporation
which
is
listed
on
an
exchange,
or
a
corporation
with
assets
exceeding
P50,000,000.00
and
with
200
or
more
stockholders,
at
least
200
of
them
holding
not
less
than
100
shares
of
such
company.
Stated
differently,
a
tender
offer
is
an
offer
by
the
acquiring
person
to
stockholders
of
a
public
company
for
them
to
tender
their
shares
therein
on
the
terms
specified
in
the
offer.
Tender
offer
is
in
place
to
protect
minority
shareholders
against
any
scheme
that
dilutes
the
share
value
of
their
investments.
It
gives
the
minority
shareholders
the
chance
to
exit
the
company
under
reasonable
terms,
giving
them
the
opportunity
to
sell
their
shares
at
the
same
price
as
those
of
the
majority
shareholders.
-‐ The
SEC
and
the
Court
of
Appeals
accurately
pointed
out
that
the
coverage
of
the
mandatory
tender
offer
rule
covers
not
only
direct
acquisition
but
also
indirect
acquisition
or
“any
type
of
acquisition.”
-‐ What
is
decisive
is
the
determination
of
the
power
of
control.
The
legislative
intent
behind
the
tender
offer
rule
makes
clear
that
the
type
of
activity
intended
to
be
regulated
is
the
acquisition
of
control
of
the
listed
company
through
the
purchase
of
shares.
Control
may
[be]
effected
through
a
direct
and
indirect
acquisition
of
stock,
and
when
this
takes
place,
irrespective
of
the
means,
a
tender
offer
must
occur.
The
bottomline
of
the
law
is
to
give
the
shareholder
of
the
listed
company
the
opportunity
to
decide
whether
or
not
to
sell
in
connection
with
a
transfer
of
control.
-‐ In
the
PSE
Circular
for
Brokers
No.
3146-‐2004
dated
8
July
2004,
it
was
stated
that
as
a
result
of
petitioner
Cemco’s
acquisition
of
BCI
and
ACC’s
shares
in
UCHC,
petitioner’s
total
beneficial
ownership,
direct
and
indirect,
in
UCC
has
increased
by
36%
and
amounted
to
at
least
53%
of
the
shares
of
UCC,
to
wit:
Particulars
Percentage
Existing
shares
of
Cemco
in
UCHC
9%
Acquisition
by
Cemco
of
BCI’s
and
ACC’s
shares
in
UCHC
51%
Total
stocks
of
Cemco
in
UCHC
60%
Percentage
of
UCHC
ownership
in
UCC
60%
Indirect
ownership
of
Cemco
in
UCC
36%
Direct
ownership
of
Cemco
in
UCC
17%
Total
ownership
of
Cemco
in
UCC
53%
-‐ When
is
tender
offer
mandatory?
-‐ A.
Any
person
or
group
of
persons
acting
in
concert,
who
intends
to
acquire
thirty-‐five
percent
(35%)
or
more
of
equity
shares
in
a
public
company
shall
disclose
such
intention
and
contemporaneously
make
a
tender
offer
for
the
percent
sought
to
all
holders
of
such
class,
subject
to
paragraph
(9)(E)
of
this
Rule.
-‐ In
the
event
that
the
tender
offer
is
oversubscribed,
the
aggregate
amount
of
securities
to
be
acquired
at
the
close
of
such
tender
offer
shall
be
proportionately
distributed
across
both
selling
shareholder
with
whom
the
acquirer
may
have
been
in
private
negotiations
and
minority
shareholders.
-‐ B.
Any
person
or
group
of
persons
acting
in
concert,
who
intends
to
acquire
thirty-‐five
percent
(35%)
or
more
of
equity
shares
in
a
public
company
in
one
or
more
transactions
within
a
period
of
twelve
(12)
months,
shall
be
required
to
make
a
tender
offer
to
all
holders
of
such
class
for
the
number
of
shares
so
acquired
within
the
said
period.
-‐ C.
If
any
acquisition
of
even
less
than
thirty-‐five
percent
(35%)
would
result
in
ownership
of
OVER
fifty-‐one
percent
(51%)
of
the
total
outstanding
equity
securities
of
a
public
company,
the
acquirer
shall
be
required
to
make
a
tender
offer
under
this
Rule
for
all
the
outstanding
equity
securities
to
all
remaining
stockholders
of
the
said
company
at
a
price
supported
by
a
fairness
opinion
provided
by
an
independent
financial
advisor
or
equivalent
third
party.
The
acquirer
in
such
a
tender
offer
shall
be
required
to
accept
any
and
all
securities
thus
tendered.
-‐ SEC
vs
IRC;
GR
135808
-‐ Reason
why
insider
trading
is
illegal:
-‐ The
provision
explains
in
simple
terms
that
the
insider's
misuse
of
nonpublic
and
undisclosed
information
is
the
gravamen
of
illegal
conduct.
The
intent
of
the
law
is
the
protection
of
investors
against
fraud,
committed
when
an
insider,
using
secret
information,
takes
advantage
of
an
uninformed
investor.
Insiders
are
obligated
to
disclose
material
information
to
the
other
party
or
abstain
from
trading
the
shares
of
his
corporation.
This
duty
to
disclose
or
abstain
is
based
on
two
factors:
first,
the
existence
of
a
relationship
giving
access,
directly
or
indirectly,
to
information
22
intended
to
be
available
only
for
a
corporate
purpose
and
not
for
the
personal
benefit
of
anyone;
and
second,
the
inherent
unfairness
involved
when
a
party
takes
advantage
of
such
information
knowing
it
is
unavailable
to
those
with
whom
he
is
dealing.
-‐ Insiders
have
the
duty
to
disclose
material
facts
which
are
known
to
them
by
virtue
of
their
position
but
which
are
not
known
to
persons
with
whom
they
deal
and
which,
if
known,
would
affect
their
investment
judgment.
In
some
cases,
however,
there
may
be
valid
corporate
reasons
for
the
nondisclosure
of
material
information.
Where
such
reasons
exist,
an
issuer’s
decision
not
to
make
any
public
disclosures
is
not
ordinarily
considered
as
a
violation
of
insider
trading.
At
the
same
time,
the
undisclosed
information
should
not
be
improperly
used
for
non-‐corporate
purposes,
particularly
to
disadvantage
other
persons
with
whom
an
insider
might
transact,
and
therefore
the
insider
must
abstain
from
entering
into
transactions
involving
such
securities.
-‐ Sections
30
and
36
of
the
Revised
Securities
Act
were
enacted
to
promote
full
disclosure
in
the
securities
market
and
prevent
unscrupulous
individuals,
who
by
their
positions
obtain
non-‐public
information,
from
taking
advantage
of
an
uninformed
public.
No
individual
would
invest
in
a
market
which
can
be
manipulated
by
a
limited
number
of
corporate
insiders.
Such
reaction
would
stifle,
if
not
stunt,
the
growth
of
the
securities
market.
To
avert
the
occurrence
of
such
an
event,
Section
30
of
the
Revised
Securities
Act
prevented
the
unfair
use
of
non-‐public
information
in
securities
transactions,
while
Section
36
allowed
the
SEC
to
monitor
the
transactions
entered
into
by
corporate
officers
and
directors
as
regards
the
securities
of
their
companies.
23
Foreign
Investment
Act
-‐ SEC.
3.
Definitions.
-‐
As
used
in
this
Act:
-‐ The
term
"Philippine
national"
shall
mean
-‐ (a)
a
citizen
of
the
Philippines;
-‐ (b)
or
a
domestic
partnership
or
association
wholly
owned
by
citizens
of
the
Philippines;
-‐ (c)
or
a
corporation
organized
under
the
laws
of
the
Philippines
of
which
at
least
sixty
percent
(60%)
of
the
capital
stock
outstanding
and
entitled
to
vote
is
owned
and
held
by
citizens
of
the
Philippines;
-‐ (d)
or
a
corporation
organized
abroad
and
registered
as
doing
business
in
the
Philippines
under
the
Corporation
Code
of
which
one
hundred
percent
(100%)
of
the
capital
stock
outstanding
and
entitled
to
vote
is
wholly
owned
by
Filipinos
or
a
trustee
of
funds
for
pension
or
other
employee
retirement
or
separation
benefits,
where
the
trustee
is
a
Philippine
national
and
at
least
sixty
percent
(60%)
of
the
fund
will
accrue
to
the
benefit
of
Philippine
nationals:
Provided,
That
where
a
corporation
and
its
non-‐Filipino
stockholders
own
stocks
in
a
Securities
and
Exchange
Commission
(SEC)
registered
enterprise,
at
least
sixty
percent
(60%)
of
the
capital
stock
outstanding
and
entitled
to
vote
of
each
of
both
corporations
must
be
owned
and
held
by
citizens
of
the
Philippines
and
at
least
sixty
percent
(60%)
of
the
members
of
the
Board
of
Directors
of
each
of
both
corporations
must
be
citizens
of
the
Philippines,
in
order
that
the
corporation,
shall
be
considered
a
"Philippine
national."
-‐ This
important
vis-‐a-‐vis
constitutional
mandates
on:
-‐ 1.
EDU
(exploration,
development
and
utilization)
mineral
resources/mining
-‐ 2.
Ownership
of
lands
-‐ 3.
Engagement
in
public
utilities.
-‐ In
the
grandfather
rule,
if
a
corporation
has
corporate
stockholder,
that
stockholder
must
meet
the
percentage
requirement
in
FIA.
-‐ The
phrase
"doing
business"
shall
include
soliciting
orders,
service
contracts,
opening
offices,
whether
called
"liaison"
offices
or
branches;
appointing
representatives
or
distributors
domiciled
in
the
Philippines
or
who
in
any
calendar
year
stay
in
the
country
for
a
period
or
periods
totaling
one
hundred
eighty
[180]
days
or
more;
participating
in
the
management,
supervision
or
control
of
any
domestic
business,
firm,
entity
or
corporation
in
the
Philippines;
and
any
other
act
or
acts
that
imply
a
continuity
of
commercial
dealings
or
arrangements
and
contemplate
to
that
extent
the
performance
of
acts
or
works,
or
the
exercise
of
some
of
the
functions
normally
incident
to,
and
in
progressive
prosecution
of
commercial
gain
or
of
the
purpose
and
object
of
the
business
organization:
-‐ Provided,
however,
That
the
phrase
"doing
business"
shall
-‐ (a)
not
be
deemed
to
include
mere
investment
as
a
shareholder
by
a
foreign
entity
in
domestic
corporations
duly
registered
to
do
business,
and/or
the
exercise
of
rights
as
such
investor;
-‐ (b)
nor
having
a
nominee
director
or
officer
to
represent
its
interests
in
such
corporation;
-‐ (c)
nor
appointing
a
representative
or
distributor
domiciled
in
the
Philippines
which
transacts
business
in
its
own
name
and
for
its
own
account;
-‐ CASES
-‐ Steelcase
vs
DISI;
GR
171995
-‐ Here,
the
foreign
corporation
entered
into
a
dealership
or
distributor
agreement.
-‐ Held:
Steelcase
is
not
doing
business
in
the
Philippines.
-‐ The
following
acts
shall
not
be
deemed
“doing
business”
in
the
Philippines:
-‐ 1.
Mere
investment
as
a
shareholder
by
a
foreign
entity
in
domestic
corporations
duly
registered
to
do
business,
and/or
the
exercise
of
rights
as
such
investor;
-‐ 2.
Having
a
nominee
director
or
officer
to
represent
its
interest
in
such
corporation;
-‐ 3.
Appointing
a
representative
or
distributor
domiciled
in
the
Philippines
which
transacts
business
in
the
representative's
or
distributor's
own
name
and
account;
-‐ 4.
The
publication
of
a
general
advertisement
through
any
print
or
broadcast
media;
5.
Maintaining
a
stock
of
goods
in
the
Philippines
solely
for
the
purpose
of
having
the
same
processed
by
another
entity
in
the
Philippines;
-‐ 6.
Consignment
by
a
foreign
entity
of
equipment
with
a
local
company
to
be
used
in
the
processing
of
products
for
export;
-‐ 7.
Collecting
information
in
the
Philippines;
and
-‐ 8.
Performing
services
auxiliary
to
an
existing
isolated
contract
of
sale
which
are
not
on
a
continuing
basis,
such
as
installing
in
the
Philippines
machinery
it
has
manufactured
or
exported
24
to
the
Philippines,
servicing
the
same,
training
domestic
workers
to
operate
it,
and
similar
incidental
services
-‐ From
the
preceding
citations,
the
appointment
of
a
distributor
in
the
Philippines
is
not
sufficient
to
constitute
“doing
business”
unless
it
is
under
the
full
control
of
the
foreign
corporation.
On
the
other
hand,
if
the
distributor
is
an
independent
entity
which
buys
and
distributes
products,
other
than
those
of
the
foreign
corporation,
for
its
own
name
and
its
own
account,
the
latter
cannot
be
considered
to
be
doing
business
in
the
Philippines.
It
should
be
kept
in
mind
that
the
determination
of
whether
a
foreign
corporation
is
doing
business
in
the
Philippines
must
be
judged
in
light
of
the
attendant
circumstances.
-‐ Wilson
Gamboa
vs
Margarito
Teves;
GR
176579
(2011)
-‐ To
repeat,
-‐ (1)
foreigners
own
64.27%
of
the
common
shares
of
PLDT,
which
class
of
shares
exercises
the
sole
right
to
vote
in
the
election
of
directors,
and
thus
exercise
control
over
PLDT;
-‐ (2)
Filipinos
own
only
35.73%
of
PLDT’s
common
shares,
constituting
a
minority
of
the
voting
stock,
and
thus
do
not
exercise
control
over
PLDT;
-‐ (3)
preferred
shares,
99.44%
owned
by
Filipinos,
have
no
voting
rights;
-‐ (4)
preferred
shares
earn
only
1/70
of
the
dividends
that
common
shares
earn;
-‐ (5)
preferred
shares
have
twice
the
par
value
of
common
shares;
and
-‐ (6)
preferred
shares
constitute
77.85%
of
the
authorized
capital
stock
of
PLDT
and
common
shares
only
22.15%.
-‐ This
kind
of
ownership
and
control
of
a
public
utility
is
a
mockery
of
the
Constitution.
-‐
-‐ Section
11
of
1987
Constitution.
No
franchise,
certificate,
or
any
other
form
of
authorization
for
the
operation
of
a
public
utility
shall
be
granted
except
to
citizens
of
the
Philippines
or
to
corporations
or
associations
organized
under
the
laws
of
the
Philippines,
at
least
sixty
per
centum
of
whose
capital
is
owned
by
such
citizens;
nor
shall
such
franchise,
certificate,
or
authorization
be
exclusive
in
character
or
for
a
longer
period
than
fifty
years.
Neither
shall
any
such
franchise
or
right
be
granted
except
under
the
condition
that
it
shall
be
subject
to
amendment,
alteration,
or
repeal
by
the
Congress
when
the
common
good
so
requires.
The
State
shall
encourage
equity
participation
in
public
utilities
by
the
general
public.
The
participation
of
foreign
investors
in
the
governing
body
of
any
public
utility
enterprise
shall
be
limited
to
their
proportionate
share
in
its
capital,
and
all
the
executive
and
managing
officers
of
such
corporation
or
association
must
be
citizens
of
the
Philippines.
-‐ Issue:
What
is
the
meaning
of
capital
in
the
constitution?
-‐ The
term
“capital”
in
Section
11,
Article
XII
of
the
Constitution
refers
only
to
shares
of
stock
entitled
to
vote
in
the
election
of
directors,
and
thus
in
the
present
case
only
to
common
shares,41
and
not
to
the
total
outstanding
capital
stock
comprising
both
common
and
non-‐voting
preferred
shares.
-‐
-‐ Wilson
Gamboa
vs
Margarito
Teves;
GR
176579
(2012)
-‐ SEC
en
banc
ruling
conforms
to
our
28
June
2011
Decision
that
the
60-‐40
ownership
requirement
in
favor
of
Filipino
citizens
in
the
Constitution
to
engage
in
certain
economic
activities
applies
not
only
to
voting
control
of
the
corporation,
but
also
to
the
beneficial
ownership
of
the
corporation.
Thus,
in
our
28
June
2011
Decision
we
stated:
-‐ Mere
legal
title
is
insufficient
to
meet
the
60
percent
Filipino-‐
owned
“capital”
required
in
the
Constitution.
Full
beneficial
ownership
of
60
percent
of
the
outstanding
capital
stock,
coupled
with
60
percent
of
the
voting
rights,
is
required.
The
legal
and
beneficial
ownership
of
60
percent
of
the
outstanding
capital
stock
must
rest
in
the
hands
of
Filipino
nationals
in
accordance
with
the
constitutional
mandate.
Otherwise,
the
corporation
is
“considered
as
non-‐Philippine
national[s].”
(Emphasis
supplied)
-‐ BOTH
the
Voting
Control
Test
AND
the
Beneficial
Ownership
Test
must
be
applied
to
determine
whether
a
corporation
is
a
“Philippine
national.”
-‐ SEC.
3.
Definitions.
-‐
As
used
in
this
Act:
-‐ a.
The
term
“Philippine
national”
shall
mean
a
citizen
of
the
Philippines;
or
a
domestic
partnership
or
association
wholly
owned
by
citizens
of
the
Philippines;
or
a
corporation
organized
under
the
laws
of
the
Philippines
of
which
at
least
sixty
percent
(60%)
of
the
capital
stock
outstanding
and
entitled
to
vote
is
owned
and
held
by
citizens
of
the
Philippines;
or
a
corporation
organized
abroad
and
registered
as
doing
business
in
the
Philippines
under
the
Corporation
Code
of
which
one
hundred
percent
(100%)
of
the
capital
stock
outstanding
and
25
entitled
to
vote
is
wholly
owned
by
Filipinos
or
a
trustee
of
funds
for
pension
or
other
employee
retirement
or
separation
benefits,
where
the
trustee
is
a
Philippine
national
and
at
least
sixty
percent
(60%)
of
the
fund
will
accrue
to
the
benefit
of
Philippine
nationals:
Provided,
That
where
a
corporation
and
its
non-‐Filipino
stockholders
own
stocks
in
a
Securities
and
Exchange
Commission
(SEC)
registered
enterprise,
at
least
sixty
percent
(60%)
of
the
capital
stock
outstanding
and
entitled
to
vote
of
each
of
both
corporations
must
be
owned
and
held
by
citizens
of
the
Philippines
and
at
least
sixty
percent
(60%)
of
the
members
of
the
Board
of
Directors
of
each
of
both
corporations
must
be
citizens
of
the
Philippines,
in
order
that
the
corporation,
shall
be
considered
a
“Philippine
national.”
(Boldfacing,
italicization
and
underscoring
supplied)
-‐ Thus,
the
FIA
clearly
and
unequivocally
defines
a
“Philippine
national”
as
a
Philippine
citizen,
or
a
domestic
corporation
at
least
“60%
of
the
capital
stock
outstanding
and
entitled
to
vote”
is
owned
by
Philippine
citizens.
-‐ The
Corporation
Code
allows
denial
of
the
right
to
vote
to
preferred
and
redeemable
shares,
but
disallows
denial
of
the
right
to
vote
in
specific
corporate
matters.
Thus,
common
shares
have
the
right
to
vote
in
the
election
of
directors,
while
preferred
shares
may
be
denied
such
right.
Nonetheless,
preferred
shares,
even
if
denied
the
right
to
vote
in
the
election
of
directors,
are
entitled
to
vote
on
the
following
corporate
matters:
(1)
amendment
of
articles
of
incorporation;
(2)
increase
and
decrease
of
capital
stock;
(3)
incurring,
creating
or
increasing
bonded
indebtedness;
(4)
sale,
lease,
mortgage
or
other
disposition
of
substantially
all
corporate
assets;
(5)
investment
of
funds
in
another
business
or
corporation
or
for
a
purpose
other
than
the
primary
purpose
for
which
the
corporation
was
organized;
(6)
adoption,
amendment
and
repeal
of
by-‐laws;
(7)
merger
and
consolidation;
and
(8)
dissolution
of
corporation.
-‐ Since
a
specific
class
of
shares
may
have
rights
and
privileges
or
restrictions
different
from
the
rest
of
the
shares
in
a
corporation,
the
60-‐40
ownership
requirement
in
favor
of
Filipino
citizens
in
Section
11,
Article
XII
of
the
Constitution
must
apply
not
only
to
shares
with
voting
rights
but
also
to
shares
without
voting
rights.
Preferred
shares,
denied
the
right
to
vote
in
the
election
of
directors,
are
anyway
still
entitled
to
vote
on
the
eight
specific
corporate
matters
mentioned
above.
Thus,
if
a
corporation,
engaged
in
a
partially
nationalized
industry,
issues
a
mixture
of
common
and
preferred
non-‐voting
shares,
at
least
60
percent
of
the
common
shares
and
at
least
60
percent
of
the
preferred
non-‐voting
shares
must
be
owned
by
Filipinos.
Of
course,
if
a
corporation
issues
only
a
single
class
of
shares,
at
least
60
percent
of
such
shares
must
necessarily
be
owned
by
Filipinos.
In
short,
the
60-‐40
ownership
requirement
in
favor
of
Filipino
citizens
must
apply
separately
to
each
class
of
shares,
whether
common,
preferred
non-‐voting,
preferred
voting
or
any
other
class
of
shares.
-‐ Tests;
summary:
-‐ 1.
Voting
control
test:
60%
of
voting
shares
-‐ 2.
Beneficial
Ownership
Test
:
60%
of
OCS
even
if
without
voting
rights
-‐ 3.
Cannot
be
less
than
60%
of
OCS
-‐ Section
11
of
Consti,
to
be
considered
a
Filipino:
-‐ At
least
60%
of
ALL
types
of
shares
must
be
owned
by
Filipinos
-‐ At
least
60%
of
ALL
outstanding
shares
must
be
owned
by
Filipinos.
-‐ ***60-40
all
the
way.
26
Intellectual
Property
Code
-‐ Sec.
3.
International
Conventions
and
Reciprocity.
-‐
Any
person
who
is
a
national
or
who
is
domiciled
or
has
a
real
and
effective
industrial
establishment
in
a
country
which
is
a
party
to
any
convention,
treaty
or
agreement
relating
to
intellectual
property
rights
or
the
repression
of
unfair
competition,
to
which
the
Philippines
is
also
a
party,
or
extends
reciprocal
rights
to
nationals
of
the
Philippines
by
law,
shall
be
entitled
to
benefits
to
the
extent
necessary
to
give
effect
to
any
provision
of
such
convention,
treaty
or
reciprocal
law,
in
addition
to
the
rights
to
which
any
owner
of
an
intellectual
property
right
is
otherwise
entitled
by
this
Act.
-‐ Sec.
231.
Reverse
Reciprocity
of
Foreign
Laws.
-‐
Any
condition,
restriction,
limitation,
diminution,
requirement,
penalty
or
any
similar
burden
imposed
by
the
law
of
a
foreign
country
on
a
Philippine
national
seeking
protection
of
intellectual
property
rights
in
that
country,
shall
reciprocally
be
enforceable
upon
nationals
of
said
country,
within
Philippine
jurisdiction.
-‐ Whatever
burden
given
by
foreign
countries
to
-‐ Most
Favored
Nation
Treatment
-‐ With
regard
to
the
protection
of
IP
any
advantage,
favor
or
privilege
or
immunity
granted
to
a
member
to
the
national
of
any
other
country
shall
be
accorder
immediately
and
unconditionally
to
the
national
of
all
other
members
of
WTO’s
Trade
Related
Aspects
of
Intellectual
Property
code
-‐ IP
RIGHTS
-‐ 4.1.
The
term
"intellectual
property
rights"
consists
of:
-‐
[a]
Copyright
and
Related
Rights;
-‐
[b]
Trademarks
and
Service
Marks;
-‐
[c]
Geographic
Indications;
-‐
[d]
Industrial
Designs;
-‐
[e]
Patents;
-‐
[f]
Layout-‐Designs
(Topographies)
of
Integrated
Circuits;
and
-‐
[g]
Protection
of
Undisclosed
Information
-‐ Patent
-‐ Sec.
21.
Patentable
Inventions.
-‐
Any
technical
solution
of
a
problem
in
any
field
of
human
activity
which
is
new,
involves
an
inventive
step
and
is
industrially
applicable
shall
be
patentable.
It
may
be,
or
may
relate
to,
a
product,
or
process,
or
an
improvement
of
any
of
the
foregoing.
-‐ Sec.
23.
Novelty.
-‐
An
invention
shall
not
be
considered
new
if
it
forms
part
of
a
prior
art.
(Sec.
9,
R.
A.
No.
165a)
-‐ Sec.
24.
Prior
Art.
-‐
Prior
art
shall
consist
of:
-‐ 24.1.
Everything
which
has
been
made
available
to
the
public
anywhere
in
the
world,
before
the
filing
date
or
the
priority
date
of
the
application
claiming
the
invention;
and
-‐ 24.2.
The
whole
contents
of
an
application
for
a
patent,
utility
model,
or
industrial
design
registration,
published
in
accordance
with
this
Act,
filed
or
effective
in
the
Philippines,
with
a
filing
or
priority
date
that
is
earlier
than
the
filing
or
priority
date
of
the
application:
Provided,
That
the
application
which
has
validly
claimed
the
filing
date
of
an
earlier
application
under
Section
31
of
this
Act,
shall
be
prior
art
with
effect
as
of
the
filing
date
of
such
earlier
application:
Provided
further,
That
the
applicant
or
the
inventor
identified
in
both
applications
are
not
one
and
the
same.
-‐ Sec.
26.
Inventive
Step.
-‐
An
invention
involves
an
inventive
step
if,
having
regard
to
prior
art,
it
is
not
obvious
to
a
person
skilled
in
the
art
at
the
time
of
the
filing
date
or
priority
date
of
the
application
claiming
the
invention.
(n)
-‐ Sec.
27.
Industrial
Applicability.
-‐
An
invention
that
can
be
produced
and
used
in
any
industry
shall
be
industrially
applicable.
-‐ Sec.
22.
Non-Patentable
Inventions.
-‐
The
following
shall
be
excluded
from
patent
protection:
-‐ 22.1.
Discoveries,
scientific
theories
and
mathematical
methods;
-‐ 22.2.
Schemes,
rules
and
methods
of
performing
mental
acts,
playing
games
or
doing
business,
and
programs
for
computers;
-‐ 22.3
Methods
for
treatment
of
the
human
or
animal
body
by
surgery
or
therapy
and
diagnostic
methods
practiced
on
the
human
or
animal
body.
This
provision
shall
not
apply
to
products
and
composition
for
use
in
any
of
these
methods;
27
-‐ 22.4.
Plant
varieties
or
animal
breeds
or
essentially
biological
process
for
the
production
of
plants
or
animals.
This
provision
shall
not
apply
to
micro-organisms
and
non-biological
and
microbiological
processes.
-‐ Provisions
under
this
subsection
shall
not
preclude
Congress
to
consider
the
enactment
of
a
law
providing
sui
generis
protection
of
plant
varieties
and
animal
breeds
and
a
system
of
community
intellectual
rights
protection;
-‐ 22.5.
Aesthetic
creations;
and
-‐ 22.6.
Anything
which
is
contrary
to
public
order
or
morality.
-‐ Sec.
28.
Right
to
a
Patent.
-‐
The
right
to
a
patent
belongs
to
the
inventor,
his
heirs,
or
assigns.
When
two
(2)
or
more
persons
have
jointly
made
an
invention,
the
right
to
a
patent
shall
belong
to
them
jointly.
-‐ Sec.
30.
Inventions
Created
Pursuant
to
a
Commission.
-‐
-‐ 30.1.
The
person
who
commissions
the
work
shall
own
the
patent,
unless
otherwise
provided
in
the
contract.
-‐ 30.2.
In
case
the
employee
made
the
invention
in
the
course
of
his
employment
contract,
the
patent
shall
belong
to:
-‐ (a)
The
employee,
if
the
inventive
activity
is
not
a
part
of
his
regular
duties
even
if
the
employee
uses
the
time,
facilities
and
materials
of
the
employer.
-‐ (b)
The
employer,
if
the
invention
is
the
result
of
the
performance
of
his
regularly-‐assigned
duties,
unless
there
is
an
agreement,
express
or
implied,
to
the
contrary.
-‐ Sec.
29.
First
to
File
Rule.
-‐
If
two
(2)
or
more
persons
have
made
the
invention
separately
and
independently
of
each
other,
the
right
to
the
patent
shall
belong
to
the
person
who
filed
an
application
for
such
invention,
or
where
two
or
more
applications
are
filed
for
the
same
invention,
to
the
applicant
who
has
the
earliest
filing
date
or,
the
earliest
priority
date.
-‐ Sec.
31.
Right
of
Priority.
-‐
An
application
for
patent
filed
by
any
person
who
has
previously
applied
for
the
same
invention
in
another
country
which
by
treaty,
convention,
or
law
affords
similar
privileges
to
Filipino
citizens,
shall
be
considered
as
filed
as
of
the
date
of
filing
the
foreign
application:
-‐ Provided,
That:
-‐ (a)
the
local
application
expressly
claims
priority;
-‐ (b)
it
is
filed
within
twelve
(12)
months
from
the
date
the
earliest
foreign
application
was
filed;
and
-‐ (c)
a
certified
copy
of
the
foreign
application
together
with
an
English
translation
is
filed
within
six
(6)
months
from
the
date
of
filing
in
the
Philippines.
-‐
-‐ Sec.
46.
Rights
Conferred
by
a
Patent
Application
After
Publication.
-‐
The
applicant
shall
have
all
the
rights
of
a
patentee
under
Section
76
against
any
person
who,
without
his
authorization,
exercised
any
of
the
rights
conferred
under
Section
71
of
this
Act
in
relation
to
the
invention
claimed
in
the
published
patent
application,
as
if
a
patent
had
been
granted
for
that
invention:
-‐ Provided,
That
the
said
person
had:
-‐ 46.1.
Actual
knowledge
that
the
invention
that
he
was
using
was
the
subject
matter
of
a
published
application;
or
-‐ 46.2.
Received
written
notice
that
the
invention
that
he
was
using
was
the
subject
matter
of
a
published
application
being
identified
in
the
said
notice
by
its
serial
number:
Provided,
That
the
action
may
not
be
filed
until
after
the
grant
of
a
patent
on
the
published
application
and
within
four
(4)
years
from
the
commission
of
the
acts
complained
of.
-‐ Application
was
published
on
Jan
1,
2013.
Granted
on
August
1
2013.
Infringement
sometime
on
March.
Can
you
sue
for
infringement?
Yes,
but
only
after
the
patent
has
been
approved/granted
(August
1,
2013).
-‐ Sec.
71.
Rights
Conferred
by
Patent.
-‐
-‐ 71.1.
A
patent
shall
confer
on
its
owner
the
following
exclusive
rights:
-‐ (a)
Where
the
subject
matter
of
a
patent
is
a
product,
to
restrain,
prohibit
and
prevent
any
unauthorized
person
or
entity
from
making,
using,
offering
for
sale,
selling
or
importing
that
product;
-‐ (b)
Where
the
subject
matter
of
a
patent
is
a
process,
to
restrain,
prevent
or
prohibit
any
unauthorized
person
or
entity
from
using
the
process,
and
from
manufacturing,
dealing
in,
using,
selling
or
offering
for
sale,
or
importing
any
product
obtained
directly
or
indirectly
from
such
process.
28
-‐ 71.2.
Patent
owners
shall
also
have
the
right
to
assign,
or
transfer
by
succession
the
patent,
and
to
conclude
licensing
contracts
for
the
same.
-‐ Sec.
73.
Prior
User.
-
-‐ 73.1.
Notwithstanding
Section
72
hereof,
any
prior
user,
who,
in
good
faith
was
using
the
invention
or
has
undertaken
serious
preparations
to
use
the
invention
in
his
enterprise
or
business,
before
the
filing
date
or
priority
date
of
the
application
on
which
a
patent
is
granted,
shall
have
the
right
to
continue
the
use
thereof
as
envisaged
in
such
preparations
within
the
territory
where
the
patent
produces
its
effect.
-‐ 73.2.
The
right
of
the
prior
user
may
only
be
transferred
or
assigned
TOGETHER
with
his
enterprise
or
business,
or
with
that
part
of
his
enterprise
or
business
in
which
the
use
or
preparations
for
use
have
been
made.
-‐ Sec.
76.
Civil
Action
for
Infringement.
-
-‐ 76.1.
The
making,
using,
offering
for
sale,
selling,
or
importing
a
patented
product
or
a
product
obtained
directly
or
indirectly
from
a
patented
process,
or
the
use
of
a
patented
process
without
the
authorization
of
the
patentee
constitutes
patent
infringement.
-‐ How
to
determine
infringement?
-‐ 1.
Literal
Infringement
–
-‐ a.
exactness
rule
–
the
item
is
exactly
similar
to
the
patent
claim
-‐ b.
addition
rule
–
the
item
contains
all
the
elements
of
the
patent
claim
plus
other
elements
-‐ Doctrine
of
Equivalents
–
there
is
infringement
when
a
device
appropriates
a
prior
invention
by
incorporating
its
innovative
concept
and,
although
with
some
modifications
and
change,
performs
substantially
same
function
in
substantially
the
same
way
to
achieve
substantially
the
same
result
(functions
means
result
test).
-‐ Sec.
77.
Infringement
Action
by
a
Foreign
National.
-‐
Any
foreign
national
or
juridical
entity
who
meets
the
requirements
of
Section
3
and
not
engaged
in
business
in
the
Philippines,
to
which
a
patent
has
been
granted
or
assigned
under
this
Act,
may
bring
an
action
for
infringement
of
patent,
whether
or
not
it
is
licensed
to
do
business
in
the
Philippines
under
existing
law.
-‐ Compulsory
Licensing
-‐ Sec.
93.
Grounds
for
Compulsory
Licensing.
-‐
The
Director
of
Legal
Affairs
may
grant
a
license
to
exploit
a
patented
invention,
even
without
the
agreement
of
the
patent
owner,
in
favor
of
any
person
who
has
shown
his
capability
to
exploit
the
invention,
under
any
of
the
following
circumstances:
-‐ 93.1.
National
emergency
or
other
circumstances
of
extreme
urgency;
-‐ 93.2.
Where
the
public
interest,
in
particular,
national
security,
nutrition,
health
or
the
development
of
other
vital
sectors
of
the
national
economy
as
determined
by
the
appropriate
agency
of
the
Government,
so
requires;
or
-‐ 93.3.
Where
a
judicial
or
administrative
body
has
determined
that
the
manner
of
exploitation
by
the
owner
of
the
patent
or
his
licensee
is
anti-‐competitive;
or
-‐ 93.4.
In
case
of
public
non-‐commercial
use
of
the
patent
by
the
patentee,
without
satisfactory
reason;
-‐ 93.5.
If
the
patented
invention
is
not
being
worked
in
the
Philippines
on
a
commercial
scale,
although
capable
of
being
worked,
without
satisfactory
reason:
Provided,
That
the
importation
of
the
patented
article
shall
constitute
working
or
using
the
patent.
-‐ Sec.
54.
Term
of
Patent.
-‐
The
term
of
a
patent
shall
be
twenty
(20)
years
from
the
filing
date
of
the
application.
-‐ Trademarks
-‐ 121.1.
"Mark"
means
any
visible
sign
capable
of
distinguishing
the
goods
(trademark)
or
services
(service
mark)
of
an
enterprise
and
shall
include
a
stamped
or
marked
container
of
goods;
-‐ 121.3.
"Trade
name"
means
the
name
or
designation
identifying
or
distinguishing
an
enterprise;
-‐ Sec.
131.
Priority
Right.
-‐
-‐ 131.1.
An
application
for
registration
of
a
mark
filed
in
the
Philippines
by
a
person
referred
to
in
Section
3,
and
who
previously
duly
filed
an
application
for
registration
of
the
same
mark
in
one
of
29
those
countries,
shall
be
considered
as
filed
as
of
the
day
the
application
was
first
filed
in
the
foreign
country.
-‐ 131.2.
No
registration
of
a
mark
in
the
Philippines
by
a
person
described
in
this
section
shall
be
granted
until
such
mark
has
been
registered
in
the
country
of
origin
of
the
applicant.
-‐ 131.3.
Nothing
in
this
section
shall
entitle
the
owner
of
a
registration
granted
under
this
section
to
sue
for
acts
committed
prior
to
the
date
on
which
his
mark
was
registered
in
this
country:
Provided,
That,
notwithstanding
the
foregoing,
the
owner
of
a
well-known
mark
as
defined
in
Section
123.1(e)
of
this
Act,
that
is
not
registered
in
the
Philippines,
may,
against
an
identical
or
confusingly
similar
mark,
oppose
its
registration,
or
petition
the
cancellation
of
its
registration
or
sue
for
unfair
competition,
without
prejudice
to
availing
himself
of
other
remedies
provided
for
under
the
law.**
-‐ 123.1.
A
mark
cannot
be
registered
if
it:
-‐ (a)
Consists
of
immoral,
deceptive
or
scandalous
matter,
or
matter
which
may
disparage
or
falsely
suggest
a
connection
with
persons,
living
or
dead,
institutions,
beliefs,
or
national
symbols,
or
bring
them
into
contempt
or
disrepute;
-‐ (b)
Consists
of
the
flag
or
coat
of
arms
or
other
insignia
of
the
Philippines
or
any
of
its
political
subdivisions,
or
of
any
foreign
nation,
or
any
simulation
thereof;
-‐ (c)
Consists
of
a
name,
portrait
or
signature
identifying
a
particular
living
individual
except
by
his
written
consent,
or
the
name,
signature,
or
portrait
of
a
deceased
President
of
the
Philippines,
during
the
life
of
his
widow,
if
any,
except
by
written
consent
of
the
widow;
-‐ (d)
Is
identical
with
a
registered
mark
belonging
to
a
different
proprietor
or
a
mark
with
an
earlier
filing
or
priority
date,
in
respect
of:
-‐
(i)
The
same
goods
or
services,
or
-‐
(ii)
Closely
related
goods
or
services,
or
-‐
(iii)
If
it
nearly
resembles
such
a
mark
as
to
be
likely
to
deceive
or
cause
confusion;
-‐ (e)
Is
identical
with,
or
confusingly
similar
to,
or
constitutes
a
translation
of
a
mark
which
is
considered
by
the
competent
authority
of
the
Philippines
to
be
well-‐known
internationally
and
in
the
Philippines,
whether
or
not
it
is
registered
here,
as
being
already
the
mark
of
a
person
other
than
the
applicant
for
registration,
and
used
for
identical
or
similar
goods
or
services:
Provided,
That
in
determining
whether
a
mark
is
well-‐known,
account
shall
be
taken
of
the
knowledge
of
the
relevant
sector
of
the
public,
rather
than
of
the
public
at
large,
including
knowledge
in
the
Philippines
which
has
been
obtained
as
a
result
of
the
promotion
of
the
mark;
-‐ (f)
Is
identical
with,
or
confusingly
similar
to,
or
constitutes
a
translation
of
a
mark
considered
well-‐known
in
accordance
with
the
preceding
paragraph,
which
is
registered
in
the
Philippines
with
respect
to
goods
or
services
which
are
not
similar
to
those
with
respect
to
which
registration
is
applied
for:
Provided,
That
use
of
the
mark
in
relation
to
those
goods
or
services
would
indicate
a
connection
between
those
goods
or
services,
and
the
owner
of
the
registered
mark:
Provided
further,
That
the
interests
of
the
owner
of
the
registered
mark
are
likely
to
be
damaged
by
such
use;
-‐ (g)
Is
likely
to
mislead
the
public,
particularly
as
to
the
nature,
quality,
characteristics
or
geographical
origin
of
the
goods
or
services;
-‐ (h)
Consists
exclusively
of
signs
that
are
generic
for
the
goods
or
services
that
they
seek
to
identify;
-‐ (i)
Consists
exclusively
of
signs
or
of
indications
that
have
become
customary
or
usual
to
designate
the
goods
or
services
in
everyday
language
or
in
bona
fide
and
established
trade
practice;
-‐ (j)
Consists
exclusively
of
signs
or
of
indications
that
may
serve
in
trade
to
designate
the
kind,
quality,
quantity,
intended
purpose,
value,
geographical
origin,
time
or
production
of
the
goods
or
rendering
of
the
services,
or
other
characteristics
of
the
goods
or
services;
-‐ (k)
Consists
of
shapes
that
may
be
necessitated
by
technical
factors
or
by
the
nature
of
the
goods
themselves
or
factors
that
affect
their
intrinsic
value;
-‐ (l)
Consists
of
color
alone,
unless
defined
by
a
given
form;
or
-‐ (m)
Is
contrary
to
public
order
or
morality.
-‐ Par
Jkl
–
subject
to
secondary
meaning.
Such
that
if
the
user
of
the
mark
is
able
to
distinguish
the
mark
-‐ Doctrine
of
Secondary
meaning
–
a
generic
or
descriptive
mark
may
later
acquire
the
characteristic
of
distinctiveness
an
can
later
on
acquire
a
meaning
which
is
diff
from
its
ordinary
connotation;
requires
exclusive
and
continuous
commercial
use
for
a
period
of
at
least
5
years.
-‐ Sec.
147.
Rights
Conferred.
-‐
30
-‐ 147.1.
The
owner
of
a
registered
mark
shall
have
the
exclusive
right
to
prevent
all
third
parties
not
having
the
owner’s
consent
from
using
in
the
course
of
trade
identical
or
similar
signs
or
containers
for
goods
or
services
which
are
identical
or
similar
to
those
in
respect
of
which
the
trademark
is
registered
where
such
use
would
result
in
a
likelihood
of
confusion.
In
case
of
the
use,
of
an
identical
sign
for
identical
goods
or
services,
a
likelihood
of
confusion
shall
be
presumed.
-‐ 147.2.
The
exclusive
right
of
the
owner
of
a
well-‐known
mark
defined
in
Subsection
123.1(e)
which
is
registered
in
the
Philippines,
shall
extend
to
goods
and
services
which
are
not
similar
to
those
in
respect
of
which
the
mark
is
registered:
Provided,
That
use
of
that
mark
in
relation
to
those
goods
or
services
would
indicate
a
connection
between
those
goods
or
services
and
the
owner
of
the
registered
mark:
Provided,
further,
That
the
interests
of
the
owner
of
the
registered
mark
are
likely
to
be
damaged
by
such
use.
-‐ Sec.
165.
Trade
Names
or
Business
Names.
-‐
-‐ 165.1.
A
name
or
designation
may
not
be
used
as
a
trade
name
if
by
its
nature
or
the
use
to
which
such
name
or
designation
may
be
put,
it
is
contrary
to
public
order
or
morals
and
if,
in
particular,
it
is
liable
to
deceive
trade
circles
or
the
public
as
to
the
nature
of
the
enterprise
identified
by
that
name.
-‐ 165.2.
(a)
Notwithstanding
any
laws
or
regulations
providing
for
any
obligation
to
register
trade
names,
such
names
shall
be
protected,
even
prior
to
or
without
registration,
against
any
unlawful
act
committed
by
third
parties.
-‐ TradeNAME
is
protected
even
when
not
registered;
-‐ (b)
In
particular,
any
subsequent
use
of
the
trade
name
by
a
third
party,
whether
as
a
trade
name
or
a
mark
or
collective
mark,
or
any
such
use
of
a
similar
trade
name
or
mark,
likely
to
mislead
the
public,
shall
be
deemed
unlawful.
-‐ Sec.
155.
Remedies;
Infringement.
-‐
Any
person
who
shall,
without
the
consent
of
the
owner
of
the
registered
mark:
-‐ 155.1.
Use
in
commerce
any
reproduction,
counterfeit,
copy,
or
colorable
imitation
of
a
registered
mark
or
the
same
container
or
a
dominant
feature
thereof
in
connection
with
the
sale,
offering
for
sale,
distribution,
advertising
of
any
goods
or
services
including
other
preparatory
steps
necessary
to
carry
out
the
sale
of
any
goods
or
services
on
or
in
connection
with
which
such
use
is
likely
to
cause
confusion,
or
to
cause
mistake,
or
to
deceive;
or
-‐ 155.2.
Reproduce,
counterfeit,
copy
or
colorably
imitate
a
registered
mark
or
a
dominant
feature
thereof
and
apply
such
reproduction,
counterfeit,
copy
or
colorable
imitation
to
labels,
signs,
prints,
packages,
wrappers,
receptacles
or
advertisements
intended
to
be
used
in
commerce
upon
or
in
connection
with
the
sale,
offering
for
sale,
distribution,
or
advertising
of
goods
or
services
on
or
in
connection
with
which
such
use
is
likely
to
cause
confusion,
or
to
cause
mistake,
or
to
deceive,
shall
be
liable
in
a
civil
action
for
infringement
by
the
registrant
for
the
remedies
hereinafter
set
forth:
Provided,
That
the
infringement
takes
place
at
the
moment
any
of
the
acts
stated
in
Subsection
-‐ 155.1
or
this
subsection
are
committed
regardless
of
whether
there
is
actual
sale
of
goods
or
services
using
the
infringing
material.
-‐ Elements
-‐ 1.
The
mark
must
be
registered
with
the
IPO
(NOT
necessary
for
tradeNAME)
-‐ 2.
THE
MARK
OR
NAME
is
reproduced,
counterfeiter,
copied
or
colorably
imitated
-‐ 3.
The
infringing
mark
or
name
is
used
commercially
-‐ 4.
The
use
of
the
infringing
mark
or
name
is
likely
to
cause
confusion
or
deceive
purchasers
-‐ 5.
The
use
is
without
the
consent
of
the
owner
of
the
trademark
or
name
-‐ Sec.
159.
Limitations
to
Actions
for
Infringement.
-‐
Notwithstanding
any
other
provision
of
this
Act,
the
remedies
given
to
the
owner
of
a
right
infringed
under
this
Act
shall
be
limited
as
follows:
-‐ 159.1
Notwithstanding
the
provisions
of
Section
155
hereof,
a
registered
mark
shall
have
no
effect
against
any
person
who,
in
good
faith,
before
the
filing
date
or
the
priority
date,
was
using
the
mark
for
the
purposes
of
his
business
or
enterprise:
Provided,
That
his
right
may
only
be
transferred
or
assigned
together
with
his
enterprise
or
business
or
with
that
part
of
his
enterprise
or
business
in
which
the
mark
is
used.
-‐ Sec.
168.
Unfair
Competition,
Rights,
Regulation
and
Remedies.
-‐
-‐ 168.1.
A
person
who
has
identified
in
the
mind
of
the
public
the
goods
he
manufactures
or
deals
in,
his
business
or
services
from
those
of
others,
whether
or
not
a
registered
mark
is
employed,
31
has
a
property
right
in
the
goodwill
of
the
said
goods,
business
or
services
so
identified,
which
will
be
protected
in
the
same
manner
as
other
property
rights.
-‐ 168.3.
In
particular,
and
without
in
any
way
limiting
the
scope
of
protection
against
unfair
competition,
the
following
shall
be
deemed
guilty
of
unfair
competition:
-‐ (a)
Any
person,
who
is
selling
his
goods
and
gives
them
the
general
appearance
of
goods
of
another
manufacturer
or
dealer,
either
as
to
the
goods
themselves
or
in
the
wrapping
of
the
packages
in
which
they
are
contained,
or
the
devices
or
words
thereon,
or
in
any
other
feature
of
their
appearance,
which
would
be
likely
to
influence
purchasers
to
believe
that
the
goods
offered
are
those
of
a
manufacturer
or
dealer,
other
than
the
actual
manufacturer
or
dealer,
or
who
otherwise
clothes
the
goods
with
such
appearance
as
shall
deceive
the
public
and
defraud
another
of
his
legitimate
trade,
or
any
subsequent
vendor
of
such
goods
or
any
agent
of
any
vendor
engaged
in
selling
such
goods
with
a
like
purpose;
-‐ (b)
Any
person
who
by
any
artifice,
or
device,
or
who
employs
any
other
means
calculated
to
induce
the
false
belief
that
such
person
is
offering
the
services
of
another
who
has
identified
such
services
in
the
mind
of
the
public;
or
-‐ (c)
Any
person
who
shall
make
any
false
statement
in
the
course
of
trade
or
who
shall
commit
any
other
act
contrary
to
good
faith
of
a
nature
calculated
to
discredit
the
goods,
business
or
services
of
another.
-‐ Sec.
169.
False
Designations
of
Origin;
False
Description
or
Representation.
–
-‐ 169.1.
Any
person
who,
on
or
in
connection
with
any
goods
or
services,
or
any
container
for
goods,
uses
in
commerce
any
word,
term,
name,
symbol,
or
device,
or
any
combination
thereof,
or
any
false
designation
of
origin,
false
or
misleading
description
of
fact,
or
false
or
misleading
representation
of
fact,
which:
-‐ (a)
is
likely
to
cause
confusion,
or
to
cause
mistake,
or
to
deceive
as
to
the
affiliation,
connection,
or
association
of
such
person
with
another
person,
or
as
to
the
origin,
sponsorship,
or
approval
of
his
or
her
goods,
services,
or
commercial
activities
by
another
person;
or
-‐ (b)
in
commercial
advertising
or
promotion,
misrepresents
the
nature,
characteristics,
qualities,
or
geographic
origin
of
his
or
her
or
another
person’s
goods,
services,
or
commercial
activities,
shall
be
liable
to
a
civil
action
for
damages
and
injunction
provided
in
Sections
156
and
157
of
this
Act
by
any
person
who
believes
that
he
or
she
is
or
likely
to
be
damaged
by
such
act.
-‐ Sec.
160.
Right
of
Foreign
Corporation
to
Sue
in
Trademark
or
Service
Mark
Enforcement
Action.-‐
Any
foreign
national
or
juridical
person
who
meets
the
requirements
of
Section
3
of
this
Act
and
does
not
engage
in
business
in
the
Philippines
may
bring
a
civil
or
administrative
action
hereunder
for
opposition,
cancellation,
infringement,
unfair
competition,
or
false
designation
of
origin
and
false
description,
whether
or
not
it
is
licensed
to
do
business
in
the
Philippines
under
existing
laws.
-‐ What
may
be
subject
to
copyright?
-‐ 1.
Original
works
-‐ 2.
Derivative
works
-‐ (a)
Dramatizations,
translations,
adaptations,
abridgments,
arrangements,
and
other
alterations
of
literary
or
artistic
works;
and
-‐ (b)
Collections
of
literary,
scholarly
or
artistic
works,
and
compilations
of
data
and
other
materials
which
are
original
by
reason
of
the
selection
or
coordination
or
arrangement
of
their
contents.
-‐ 172.2.
Works
are
protected
by
the
sole
fact
of
their
creation,
irrespective
of
their
mode
or
form
of
expression,
as
well
as
of
their
content,
quality
and
purpose.
-‐ Who
owns
the
copyright?
-‐ GR:
the
author
of
the
works,
his
heirs
or
assigns
-‐ Work
created
in
the
course
of
the
employment
-‐ A.
ee
-‐
if
creation
is
not
part
of
regular
duties
-‐ B.
er
–
if
creation
is
part
of
regular
duties,
unless
there
is
a
agreement
to
the
contrary.
-‐ Commissioned
work:
-‐ A.
belongs
to
the
commissioner
-‐ B.
copyright
belongs
to
the
artist
unless
there
is
a
written
stipulation
to
the
contrary.
32
-‐ How
long
is
the
protection?
-‐ 1.
Trademark
–
10
years
-‐ 2.
Copyright
–
50
years
-‐ Double
100%
Rule
-‐
100%
graduation
and100%
2013Bar
passing
rate,
no
exception
whatsoever.
God
bless.
33