Professional Documents
Culture Documents
Everything RFBT Posts (May 2018)
Everything RFBT Posts (May 2018)
OBLI0001: TEST OF DILIGENCE: Did the defendant in doing the alleged negligent act use reasonable care and
caution which an ordinarily prudent person would have used in the same situation?
OBLI0004: If any one of the debtors in a joint indivisible obligation should fail to comply with his undertaking, the
obligation is converted into one of indemnity for damages. For example, if A and B promised to give C a car worth
P100,000, and A is willing and ready to perform, but B is not, A shall be liable to pay C P50,000, while B shall be
liable to pay C P50,000 plus damages. A is not liable for damages since he did not commit a breach of obligation.
OBLI0006: One of the requisites for compensation to be proper is that the two debts are due. Hence, if there are two
debts and one is not yet due, no compensation can take place.
OBLI0007: USUAL CAUSES OF CONFUSION (merger of the characters of creditor and debtor in one and same
person by virtue of which the obligation is extinguished:
(1) Succession: where the debtor-heir inherits from the creditor-deceased the credit owed
(2) Donation: where the creditor-donor donates to the debtor-donee the credit owed
(3) Negotiation of a negotiable instrument: where the instrument is indorsed or delivered to the drawer or
maker making himself the payee
OBLI0008: Dation in payment extinguishes the obligation up to the value of the thing delivered UNLESS the parties
agree that the entire obligation is extinguished.
CONTRACTS
CON0003: In a reciprocal contract, the period must be deemed to have been agreed upon for the benefit of both
parties, absent language showing that the term was deliberately set for the benefit of one party alone. The
continuance, effectivity, and fulfillment of a reciprocal contract cannot be made to depend exclusively upon the free
and uncontrolled choice of only one party. Mutuality does not obtain in a reciprocal contract and no equality exists
between the contracting parties since the life of the contract would be dictated solely by just one party.
CON0004: WHAT IS THE ‘PLAIN MEANING RULE’? WHAT IS THE ‘FOUR CORNERS RULE’? HOW
SHOULD COURTS INTERPRET A CONTRACT? The "plain meaning rule" as applied by Pennsylvania courts,
assumes that the intent of the parties to an instrument is "embodied in the writing itself, and when the words are
clear and unambiguous the intent is to be discovered only from the express language of the agreement".
The "four corners rule”, on the other hand, allows courts in some cases to search beneath the semantic surface for
clues to meaning.
A court's purpose in examining a contract is to interpret the intent of the contracting parties, as objectively
manifested by them. The process of interpreting a contract requires the court to make a preliminary inquiry as to
whether the contract before it is ambiguous. A contract provision is ambiguous if it is susceptible of two reasonable
alternative interpretations. Where the written terms of the contract are not ambiguous and can only be read one way,
the court will interpret the contract as a matter of law. If the contract is determined to be ambiguous, then the
interpretation of the contract is left to the court, to resolve the ambiguity in the light of the intrinsic evidence.
(Pioneer Insurance v. APL Co. Pte. Ltd., GR 226345, August 2, 2017 [Per J. Mendoza, Second Division])
SALES
SALES0001: IN CASE OF SALE WITH RIGHT OF REPURCHASE AND THE FOLLOWING PHRASES WERE
STIPULATED AS TO PERIOD, THE PERIOD DURING WHICH TO REDEEM THE PROPERTY SOLD
SHALL BE:
1. “As soon as the business is established”: 4 years
2. “At any time”: 10 years
3. “After 10 years”: void stipulation, hence, 4 years
SALES0002: WHY DOES THE BUYER SUFFER THE RISK OF LOSS AFTER PERFECTION AND BEFORE
DELIVERY? There seems to be a conflict between Article 1480 (buyer's risk) and Article 1504 (seller's risk). As
explained by Hector de Leon in his book on Law on Sales, Article 1480 states the correct rule considering the
following:
1. Article 1504 refers to "goods", while Article 1480 refers to "things". "Goods" only refers to those defined in
Article 1636, while "things" which cannot be called "goods" include real estate. Hence, Article 1480 is the general
rule, while Article 1504 is the exception, in order to harmonize the two conflicting provisions.
2. Article 1189 is in consonance with Article 1480. Under Article 1189, if the thing is improved or deteriorates
without the fault of the debtor (seller), the improvement or deterioration shall inure or be borne by the creditor
(buyer).
3. Under Article 1537, the fruits shall pertain to the buyer from the perfection of the contract.
4. Under Article 1165(3), if the obligor (seller) delays, or has promised to deliver the same thing to 2 or more
persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected
delivery. By implication, if the seller is not in delay, or has not promised to deliver the same thing to 2 or more
persons, it is the buyer who will be responsible for any fortuitous event before the thing is delivered to the buyer.
5. Under Articles 1262(1) and Article 1269, when the obligation to deliver a determinate thing is lost or destroyed
without the fault of the debtor (seller), the obligation to deliver is extinguished and the creditor (buyer) shall have
the right of action the seller may have against third persons by reason of the loss. Hence, the buyer only gets to sue
the responsible third persons because the buyer suffered a loss which he has paid or which the law requires him to
pay.
Taken altogether, it supports the rule that the buyer bears the risk of loss after perfection and before delivery, as an
exception to the rule of res perit domino.
SALES0003: EXCEPTIONS TO EXCEPTION TO THE RES PERIT DOMINO RULE. In the following cases, the
seller bears the risk of loss after perfection and before delivery:
1. the thing is lost through the fault of the seller (Article 1538 and 1189(2)) or when the seller delays (Article
1165(3) and 1262);
2. the thing lost is a generic thing (Article 1263);
3. the things lost are fungible things sold for a price fixed according to weight, number, or measure (Article
1480(3)); and
4. the thing lost falls under the definition of "goods" (Article 1504 and 1636).
SALES0004: No sale or transfer of large cattle shall be valid unless it is duly registered, and a certificate of transfer
is secured.
SALES0006: There is AUTOMATIC RESCISSION in the interest of the seller, with respect to movable property,
when:
(1) The buyer, upon expiration of the period fixed for the delivery of the thing, should not have appeared to
receive it; OR
(2) The buyer, having appeared, should not have tendered the price at the same time, UNLESS, a longer period
has been stipulated for its payment.
SALES0007: In case of CONVENTIONAL REDEMPTION, when the seller reacquires the property sold, he is
obliged to:
(1) Return:
a. Price of the sale;
b. Expenses of the contract; and
c. Any other legitimate payments made therefor, the necessary and useful expenses made on thing
sold; and
(2) Fulfill other stipulations agreed upon.
NOTE: Interest is not included in those which are required to be returned, BUT it may be included if it’s part of the
“other stipulations” agreed upon and must be fulfilled.
SALES0008: In case of SALE OF REAL PROPERTY FOR A LUMP SUM, there is no increase or decrease of the
price, although the actual area is greater or lesser than what is stated in the contract.
SALES0009: The actions for price reduction or rescission provided under Article 1539 (sale of real estate at the rate
of certain price for a unit of measure) and 1542 (sale of real estate for a lump sum) prescribe in SIX MONTHS,
counted from the DATE OF DELIVERY (not date of sale).
SALES0010: A contract of sale is a consensual contract. It requires no form to be valid. However, the following
must be in writing in order to be enforceable:
(1) Sale of personal property at a PRICE (not value) not less than P500.00
(2) Sale of real property or an interest therein (REGARDLESS OF VALUE OR PRICE)
(3) Sale of property (real or personal) not to be performed within a year from the date thereof
(4) When an applicable statute requires that the contract of sale be in a certain form (example: sale of large
cattle)
CREDIT TRANSACTIONS
CREDIT0005: While the sale of the thing pledged or mortgage under a real estate mortgage must be public, sale of a
thing mortgaged under a chattel mortgage may be public or private. The conduct of a private sale may be made as
long as such is stipulated and agreed upon by the parties in the chattel mortgage contract.
FRIA
FRIA0001: WHAT IS CORPORATE REHABILITATION? Case law has defined corporate rehabilitation as an
attempt to conserve and administer the assets of an insolvent corporation in the hope of its eventual return from
financial stress to solvency. It contemplates the continuance of corporate life and activities in an effort to restore and
reinstate the corporation to its former position of successful operation and liquidity. (BIR v. Lepanto Ceramics, Inc.,
GR 224764, April 24, 2017 [Per J. Perlas-Bernabe, First Division])
FRIA0002: DOES A STAY ORDER SUSPEND BIR’S AUDIT AND ASSESSMENT OF A TAXPAYER
UNDERGOING REHABILITATION? Yes. The acts of sending a notice of informal conference and a Formal
Letter of Demand are part and parcel of the entire process for the assessment and collection of deficiency taxes from
a delinquent taxpayer—an action or proceeding for the enforcement of a claim which should have been suspended
pursuant to the Commencement Order, which includes a Stay Order. (BIR v. Lepanto Ceramics, Inc., GR 224764,
April 24, 2017 [Per J. Perlas-Bernabe, First Division])
NEGOTIABLE INSTRUMENTS
NEGO0002: ANDRES EXECUTED A PROMISSORY NOTE IN FAVOR OF BERTO OR ORDER BUT LEFT
THE AMOUNT BLANK AND KEPT THE INSTRUMENT IN HIS CABINET. BERTO STOLE THE NOTE,
ENTERED THE SUM OF P50,000 AND NEGOTIATED THE INSTRUMENT TO CARDING; CARDING TO
DIEGO; DIEGO TO ERNESTO, THE LAST HOLDER. CAN ERNESTO GO AGAINST ANDRES? Ernesto
cannot go against Andres, even if Ernesto is a holder in due course because the law says that the instrument is not a
valid contract in the hands of any holder as against Andres whose signature was placed thereon prior to its delivery.
However, Ernesto can go against Berto (who must face the consequences of his wrongdoing), and Carding and
Diego whose signatures were placed on the instrument after its delivery, because as general indorsers they warrant
that the instrument is valid and subsisting and, as such, therefore they are estopped to deny the validity of the
instrument.
NEGO0004: WHAT ARE THE EFFECTS OF CROSSING A CHECK? Jurisprudence dictates that the effects of
crossing a check are:
(1) that the check may not be encashed but only deposited in the bank;
(2) that the check may be negotiated only once - to one who has an account with a bank; and
(3) that the act of crossing the check serves as a warning to the holder that the check has been issued for a definite
purpose so that he must inquire if he has received the check pursuant to that purpose.
The effects of crossing a check, thus, relate to the mode of payment, meaning that the drawer had intended the check
for deposit only by the rightful person, i.e., the payee named therein.
NEGO0005: A holder for value is not always a holder in due course, but a holder in due course is always a holder
for value.
NEGO0006: WHO ARE PRECLUDED FROM SETTING UP THE DEFENSE OF FORGERY?
(1) Indorsers of order instruments: as general indorsers, they warrant that the instrument is genuine, and that the
instrument is valid and subsisting
(2) Indorsers of bearer instrument: since forged indorsement is not necessary to the title of the holder as bearer
instruments are negotiable by mere delivery
(3) Acceptor in a bill of exchange: as acceptor, he/she warrants the genuineness of the signature
(4) Forger: as he/she is deemed to have signed in an assumed name and therefore, has the same warranties as a
general indorser
(5) Those under estoppel: one who has acknowledged the forged signature as valid cannot later deny it.
NEGO0007: ANDREW (DRAWER) SIGNED A CHECK PAYABLE TO BRENT (PAYEE), DRAWN AGAINST
RCBC BANK, AS DRAWEE BANK. CHARLIE FRAUDULENTLY OBTAINED SAID CHECK AND FORGED
THE BRENT'S SIGNATURE AS INDORSER TO HIMSELF (CHARLIE). CHARLIE THEN PERSONALLY
SIGNS THE CHECK AND DEPOSITS THE CHECK TO HIS BDO ACCOUNT. BDO THEN INDORSED THE
CHECK TO RCBC WHICH PAID THE AMOUNT AND CONSEQUENTLY CHARGED THE ANDREW'S
ACCOUNT.
(1) RCBC cannot charge Andrew's account, because as a depositary bank, RCBC has contractual obligation to
Andrew to pay only the person designated by the drawer as payee or his order and no other.
(2) Since Andrew's account cannot be charged, Andrew's obligation to Brent is still subsisting.
(3) BDO, as collecting bank, is liable as an indorser to RCBC.
(4) BDO's remedy is to go against Charlie, the forger.
(5) Andrew cannot go against BDO since there is no privity of contract between them.
NEGO0008: DANIEL STOLE A BPI CHECK OF EDWIN. DANIEL THEN PLACED HIS NAME ON THE
CHECK AS PAYEE AND THEREAFTER SIGNED AS DANIEL. AFTER PERSONALLY SIGNING HIS NAME
AT THE BACK OF THE CHECK, DANIEL ENCASHED THE CHECK AT BPI WHICH PAID AND CHARGED
THE AMOUNT TO EDWIN'S ACCOUNT. WAS BPI CORRECT IN CHARGING EDWIN'S ACCOUNT?
BPI cannot charge Edwin's account, since BPI is bound to know the signatures of its customers. If it pays a forged
check, it must be considered as making the payment out of its funds, and cannot ordinarily charge the amount so
paid to the account of the depositor whose name was forged.
NEGO0009: ANNA ISSUED A PROMISSORY NOTE TO BEN OR ORDER AS A BIRTHDAY GIFT. BEN
NEGOTIATED IT FOR VALUE TO CARLA; CARLA TO DENNIS; DENNIS TO EDITH, HOLDER.
(1) If Edith is a HNIDC, Anna can put up the defense of want of consideration and Edith cannot enforce the
instrument against Anna.
(2) If Edith is a HIDC, Edith can go against Anna because want or absence of consideration is only a personal
defense which cannot be put up against a HIDC.
NEGO0010: IN A BEARER INSTRUMENT WHERE THE MAKER DELIVERED IT TO AMY, THEN AMY
NEGOTIATED TO BEA; BEA TO CARLO; CARLO TO DARIO, HOLDER, ALL MY SPECIAL
INDORSEMENTS COMPLETED BY DELIVERY. Here, Dario (holder) can go against Carlo, Bea, and Amy
because he can trace his title to all of them through an unbroken chain of indorsements.
ON THE OTHER HAND, IF AMY NEGOTIATED THE SAME BEARER INSTRUMENT TO BEA BY
SPECIAL INDORSEMENT COMPLETED BY DELIVERY, AND BEA NEGOTIATED TO CARLO ONLY BY
DELIVERY; CARLO TO DARIO BY SPECIAL INDORSEMENT COMPLETED BY DELIVERY:
(1) Dario can go against Carlo since he can trace his title to Carlo through an unbroken chain of indorsements.
(2) Dario cannot go against Amy because Dario cannot trace his title to Amy through an unbroken chain of
indorsements, since Bea did not indorse to Carlo, the chain has been broken.
(3) Dario cannot go against Bea since Bea negotiated the instrument by mere delivery and her warranties extends
only to her immediate transferee Carlo.
(4) Carlo is the only one who can make Bea liable on the instrument.
*Take note that Dario can go against the maker, who is the one primarily liable, whether there is an unbroken chain
of indorsements or not.
NEGO00011: KINDS OF INDORSEMENTS:
(1) Special or specific: one where the indorser identifies the person to whom the instrument is transferred as holder
thereof
(2) Blank: one where the indorser merely signs his name without identifying the person to whom the instrument is
transferred as holder thereof
(3) Restrictive: one where the transferee of the instrument does not acquire the full rights of the owner of the
instrument as holder thereof
(4) Qualified: by merely adding the following words to the indorser's signature: "without recourse" or "sans
recourse" or words of similar import like "at your own risk".
(5) Conditional: one which is dependent upon a contingent event that may or may not happen
BANKING
PARNTERSHIP
PARTNERSHIP0001: A professional partnership is NOT a business undertaking nor an enterprise for profit, but a
joint pursuit and mutual help.
PARTNERSHIP0002: A partnership acquires juridical personality at the moment of creation, UNLESS otherwise
stipulated.
PARTNERSHIP0003: Partnerships can form partnerships, since there is no prohibition of such. But, corporations
cannot be a partner in a partnership, since it is against public policy.
PARTNERSHIP0004: In case of unlawful partnerships (which do not have legal personality), when dissolved by
judicial decree, the court shall order the confiscation of the PROFITS in favor of the State. However, the
CONTRIBUTIONS must be returned to the partners.
PARTNERSHIP0005: If the partners did not reduce into writing their agreement that they are entering into a
universal partnership of ALL PRESENT PROPERTY, they may ask for reformation of their contract to indicate
such kind of universal partnership.
Take note that there is universal partnership of PROFITS under the following scenarios ONLY:
(1) When specifically agreed upon by the partners;or
(2) When partners agreed to enter into a universal partnership but did not specify what kind of universal partnership.
If the agreement does not concur with what was reduced into writing, the agreement shall prevail and the contract
must be reformed.
PARTNERSHIP0006: When a partnership WITH A FIXED TERM is dissolved due to expiration of the term and
continues the partnership without liquidating the partnership, it becomes a partnership AT WILL.
PARTNERSHIP0008: As an exception to Article 1792 of the New Civil Code, a managing partner may apply a
debtor’s payment in full to his credit, if the DEBTOR CHOOSES to pay the managing partner in full whose credit is
more onerous (i.e. solidary liability, secured, or with interest) to the debtor.
PARTNERSHIP0009: While it is required under Articles 1789 and 1808 that industrial and capitalist partners need
EXPRESS AUTHORITY to engage in prohibited businesses, if ALL OTHER PARTNERS IMPLIEDLY
AUTHORIZED such engagement, it will have the same effect as express authority under the principle of estoppel.
PARTNERSHIP0010: If a partner buys a property using partnership funds, the property acquired shall be owned by
the partnership, and the partner who bought the property shall be regarded as a mere trustee.
PARTNERSHIP0011: When a managing partner was designated by agreement in the Articles of Partnership, he
may be removed:
(1) with cause by a vote of partner/s having controlling interest; or
(2) without cause by unanimous vote of partners since it amounts to a change of will of the partners.
PARTNERSHIP0012: In case no managing partner is designated to manage the partnership, ALL the partners shall
be considered agents of the partnership and may act for the partnership alone without consent of the other partners,
EXCEPT when it involves an alteration of IMMOVABLE PROPERTY of the partnership where UNANIMITY is
required.
If alteration refers to MOVABLE property, unanimity is NOT required.
COOPERATIVES
COOP0001: A single-purpose cooperative may transform into a MULTI-PURPOSE cooperative or may create
SUBSIDIARIES only AFTER TWO (2) YEARS of operations.
COOP0002: The minimum subscription shall be 25% of the authorized share capital and shall only apply to
CAPITAL SHARE ONLY (excluding preferred share capital).
Note: In corporations, the authorized capital stock includes capital allocated for issuance of preferred shares.
COOP0003: A cooperative may only issue preferred shares if provided for in the bylaws, and if ever allowed, it shall
not exceed 25% of the total authorized share capital.
Note: In corporations, issuance of preferred shares must be provided for in the articles of incorporation without any
limitation as to how much of the authorized capital stock can be allocated to preferred shares.
COOP0004: While the minimum paid-up share capital in terms of value is P15,000, the minimum paid up share
capital when it comes to multi-purpose cooperatives is P100,000. Nevertheless, both amounts must be at least 25%
of the subscribed share capital.
Note: In corporations, the minimum paid-up capital is 25% of the subscribed capital which must not be lower than
P5,000.
COOP0005: The Cooperative Development Authority shall periodically assess the required paid-up share capital
and may INCREASE (never "decrease") it every FIVE (5) YEARS when necessary upon consultation with the
cooperative sector and NEDA.
CORPORATIONS
CORP0001: A corporation is said to be have a STRONG JURIDICAL PERSONALITY because of its inherent
attribute that it has the RIGHT OF SUCCESSION. This means it continues to exist despite the death of its
stockholders or members. Its personality is separate and distinct from that of its individual stockholders and
members; and remains even if there has been a change in its stockholders and members.
CORP0002: The doctrine of piercing the corporate veil applies only in 3 basic areas, namely:
(1) "Defeat of public convenience", as when the corporate fiction is used as a vehicle for the evasion of an existing
obligation (EQUITY PIERCING);
(2) "Fraud cases", as when the corporation is used to justify a wrong, protect fraud, or defend a crime (FRAUD
PIERCING); or
(3) "Alter ego cases", where a corporation is merely a farce since it is a mere alter ego or business conduit of a
person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely
an instrumentality, agency, conduit, or adjunct of another corporation (ALTER EGO PIERCING or the
INSTRUMENTALITY TEST).
CORP0003: The doctrine of piercing the corporate veil is an equitable doctrine developed to address situations
where the separate corporate personality of a corporation is abused or used for wrongful purposes. Hence:
(1) It is a remedy of last resort, and is not available when other remedies are still available (e.g. annulment of
contract based on vitiation of consent);
(2) The wrongdoing must be proven clearly and convincingly;
(3) The burden is on the party who seeks its application; and
(4) It must be done with caution.
CORP0004: The test in determining the applicability of the doctrine of piercing the veil of corporate fiction are as
follows:
(1) CONTROL, not mere majority or complete stock control, but COMPLETE DOMINATION, not only of finances
but of policy and business practice in respect to the transaction attacked;
(2) Such control must been USED by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust acts; and
(3) Such control and breach of duty is the PROXIMATE CAUSE of the injury or unjust loss complained of.
CORP0006: WHAT ARE THE SUB-TESTS UNDER THE CONTROL TEST IN DETERMINING A
CORPORATION'S NATIONALITY?
(1) DOJ-SEC Control Test: Shares belonging to corporations at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality.
(2) Grandfather Rule: If the percentage of Filipino ownership in the corporation is less than 60%, only the number of
shares corresponding to such percentage shall be counted as of Philippine nationality.
(3) FIA Test of Philippine National: For purposes of investment, a "Philippine national" as a corporation organized
under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned
and held by citizens of the Philippines, or a trustee of funds for pension or other employee retirement or separation
benefits.
(4) SEC Control Test: In observance of the constitutional or statutory requirement, the required percentage of
Filipino ownership shall be applied to both (a) the total number of outstanding shares of stock entitled to vote in the
election of directors, and (b) the total of number of outstanding shares of stock, whether or not entitled to vote in the
election of directors.
CORP0008: CAN A CORPORATION PRACTICE A PROFESSION? Corporate practice of any profession is not
sanctioned based on the policy that the ethics of any profession is based upon the individual responsibility, personal
accountability, and independence, which are all lost where one acts as a mere agent, or alter ego, of unlicensed
persons or corporations. However, under RA 9266, architectural professional corporations are allowed to be
registered.
CORP0010: WHAT ARE THE WAYS TO DETERMINE THE VALUE OF NO-PAR VALUE SHARES?
(1) By majority vote of the outstanding shares in a meeting called for that purpose;
(2) By Board of Directors pursuant to authority conferred upon it by the articles of incorporation; or
(3) By amendment of articles of incorporation
CORP0011: ESCROW SHARES are those specifically segregated and to be issued subject to a condition.
CORP0012: When the seats in the board are increased, the additional director/s or trustee/s can ONLY be elected by
the stockholders or members in a regular or special meeting called for the purpose, or in the same meeting
authorizing the increase, if so stated in the notice of the meeting.
CORP0015: DOCTRINE OF APPARENT AUTHORITY: If a corporation knowingly permits one of its officers, or
any other agent, to act within the scope of apparent authority, it holds him out to the public as possessing the power
to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such
agent, be estopped from denying the agent’s authority.
CORP0018: Holders of delinquent stocks are entitled to cash and property dividends, but it would be applied to the
unpaid balance on the subscription plus cost and expenses. They are likewise entitled to stock dividends, but its
issuance will be withheld from the delinquent holder until the latter pays his unpaid subscription.
CORP0022: DOCTRINE OF EQUALITY OF SHARES: All stocks issued by the corporation are presumed equal
with the same privileges and liabilities, provided that the articles of incorporation is silent on such differences.
CORP0023: ADVANCES FOR FUTURE SUBSCRIPTION are not covered within the ambits of the trust fund
doctrine. It is not the payment of shares that constitutes one a stockholder, but rather the act of subscribing to shares
of stock which may only be done when the certificate of increase is issued by SEC. Prior to said issuance, those who
paid in advance are not yet stockholders of the corporation and may still withdraw the money they advanced.