ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

r
Ba By Atty. Maria Zarah R. Villanueva-Castro
es

INTELLECTUAL PROPERTY
bl

What does Protection of Undisclosed Information mean?

o

r
R

Ba
This means protection of information lawfully held from being disclosed to, acquired by, or used by others without
an

their consent in a manner contrary to honest commercial practices so long as such information: (a) is secret in the
es
sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among
h

or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has
bl
C

commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the
o

person lawfully in control of the information, to keep it secret. (Article 39, TRIPS Agreement)
R

What is a trade secret?

an

Trade Secret is a plan or process, tool, mechanism or compound known only to its owner and those of his employees
h

to whom it is necessary to confide it. The definition also extends to: (a) a secret formula or process not patented,
C

but known only to certain individuals using it in compounding some article of trade having a commercial value; or
(b) any formula, pattern, device, or compilation of information that: (1) is used in one's business; and (2) gives the
employer an opportunity to obtain an advantage over competitors who do not possess the information. (Air
Philippines Corporation vs. Pennwell, Inc., G.R. No. 172835, 13 December 2007)

What does plagiarism mean?

Plagiarism means the theft of another person’s language, thoughts, or ideas. To plagiarize, is to take (ideas, writings,
etc.) from (another) and pass them off as one’s own. The passing off of the work of another as one’s own is thus an
indispensable element of plagiarism. (In the matter of the charges of plagiarism against Associate Justice Mariano
C. Del Castillo, A.M. No. 10-7-17-SC, 12 October 2010)

r
Explain the First to File Rule (Patent).

Ba
If two (2) or more persons have made the invention separately and independently of each other, the right to the
es
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. 29,
bl

IPC)
o

r
Explain the Rule on Right of Priority.
R

Ba
an

An application for patent made by a person who earlier filed the same invention in another country (subject to
es
reciprocity) shall be considered filed here as of the date of filing of the foreign application subject to the following:
h

bl

(a) the local application expressly claims priority;

C

(b) it is filed within twelve (12) months from the date the earliest foreign application was filed; and
o

(c) a certified copy of the foreign application together with an English translation is filed within six (6) months from
R

the date of filing in the Philippines (Sec. 31, IPC)

an

What are the tests of Patent Infringement?

h
C

Page of 16 1

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

Literal Infringement means each and every element recited in a claim has identical correspondence in the

r
allegedly infringing device or process.

Ba
The doctrine of equivalents provides that an infringement also takes place when a device appropriates a prior
invention by incorporating its innovative concept and, although with some modification and change, performs
es
substantially the same function in substantially the same way to achieve substantially the same result. (Smith Kline
bl

Beckman Corporation vs. Court of Appeals, 409 SCRA 33, G.R. No. 126627 August 14, 2003)
o

r
R

Ba
What is the rule on Divisional Applications?
an

The rule on divisional applications come into play when two or more inventions are claimed in a single application
es
h

but are of such a nature that a single patent may not be issued for them. The applicant thus is required “to divide,”
bl

that is, to limit the claims to whichever invention he may elect, whereas those inventions not elected may be made
C

the subject of separate applications which are called “divisional applications”. (Smith Kline Beckman Corporation vs.
o

Court of Appeals, 409 SCRA 33, G.R. No. 126627 August 14, 2003)
R
an

What are the remedies of the true and actual inventor against the patent applicant who has no right to the
invention?
h

If a person, who was deprived of the patent without his consent or through fraud is declared by final court order or
C

decision to be the true and actual inventor, the court shall order for his substitution as patentee, or at the option of
the true inventor, cancel the patent, and award actual and other damages in his favor if warranted by the
circumstances. (Sec. 68, IPC)

Explain the Fair Use Rule (Copyright)

The fair use of a copyrighted work for criticism, comment, news reporting, teaching including limited number of
copies for classroom use, scholarship, research, and similar purposes is not an infringement of copyright. (Sec. 185,
IPC)

In case of a software program, is it necessary to prove that the one who sold the program was also the person
who copied or reproduced it so as to establish probable cause for infringement of copyright?

r
Ba
No. Under the law, copyright shall consist in the exclusive right, among other things, to print, reprint, publish, copy,
distribute, multiply, sell, and make photographs, photo-engravings, and pictorial illustrations of the works.
es
Jurisprudence teaches us that while the word “and” denotes joinder or union of words, literal construction thereof
to copyright would lead to absurdity as the acts enumerated cannot be carried out on all of the classes of works
bl

enumerated.
o

r
The mere sale of the illicit copies of the software programs was enough by itself to show the existence of probable
R

cause for copyright infringement. There was no need for the petitioner to still prove who copied, replicated or
Ba
an

reproduced the software programs. (Microsoft Corporation vs. Manansala, 773 SCRA 345, G.R. No. 166391 October
es
21, 2015)
h

bl
C

AMLA
o
R

Enumerate the cases where the AMLC can inquire into bank deposits even without court order.
an

(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as
h

amended;
C

Page of 16 2

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

(2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive

r
Dangerous Act of 2002;

Ba
(3) Hijacking and other violations under Republic Act No. 6235 (An Act Prohibiting Certain Acts Inimical to Civil
Aviation); destructive arson and murder, as defined under the Revised Penal Code, as amended, including those
es
perpetrated by terrorists against non-combatant persons and similar targets
bl

What are the requisites for the issuance of a freeze order?

o

r
R

Ba
Based on Section 10 of R.A. No. 9160, as amended by R.A. No. 9194, there are two requisites for the issuance of a
an

freeze order: (1) the application ex parte by the Anti-Money Laundering Council, and (2) the determination of
es
probable cause by the Court of Appeals that the account or any monetary instrument or property sought to be frozen
h

is in any way related to said unlawful activity and/or money laundering offense. (Ligot vs. Republic, 692 SCRA 509,
bl

G.R. No. 176944 March 6, 2013)

C

What is a freeze order?

R
an

A freeze order is an extraordinary and interim relief issued by the Court of Appeals to prevent the dissipation,
removal, or disposal of properties that are suspected to be the proceeds of, or related to, unlawful activities as
h

defined in the AMLA.

C

The primary objective of a freeze order is to temporarily preserve monetary instruments or property that are in any
way related to an unlawful activity or money laundering, by preventing the owner from utilizing them during the
duration of the freeze order. (Ligot vs. Republic, 692 SCRA 509, G.R. No. 176944 March 6, 2013)

What is the probable cause required to justify issuance of a freeze order?

The probable cause required for the issuance of a freeze order refers to “such facts and circumstances which would
lead a reasonably discreet, prudent or cautious man to believe that an unlawful activity and/or a money laundering
offense is about to be, is being or has been committed and that the account or any monetary instrument or
property subject thereof sought to be frozen is in any way related to said unlawful activity and/or money
laundering offense.” (Ligot vs. Republic, 692 SCRA 509, G.R. No. 176944 March 6, 2013)

r
Ba
What is the duration of the freeze order?

The freeze order shall be for a period of twenty (20) days unless extended by the court. (Sec. 10, AMLA). The
es
effectivity of a freeze order (20 days) may be extended by the CA for a period not exceeding six months.
bl
o

r
BANKING
R

Ba
an

What are quasi-banks?

es
They are entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse
h

bl

or acceptance of deposit substitutes for purposes of relending or purchasing of receivables and other obligations
C

(GBL, Sec. 4).

o
R

What is a trust entity? Who can legally act as trustee?

an

It is one that acts as a fiduciary, agent or trustee on behalf of a person or business entity for the purpose of
administration, management and the eventual transfer of assets to a beneficial party.
h
C

Page of 16 3

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

Only a stock corporation or a person duly authorized by the Monetary Board shall act as a trustee or administer any

r
trust or hold property in trust or on deposit for the use, benefit, or behalf of others – trust entity (GBL , Sec. 79).

Ba
What is the relationship between the depositor and the bank with respect to the money deposited by the former
with the latter?
es
bl

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan.
There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor
o

r
is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The
R

Ba
savings deposit agreement between the bank and the depositor is the contract that determines the rights and
an

obligations of the parties. (BPI vs. First Metro, G.R. No. 132390. December 8, 2004)
es
h

Failure of the Bank to honor the time deposit is failure to pay its obligation as a debtor and not a breach of trust
bl

arising from a depository's failure to return the subject matter of the deposit. Thus, the relationship being
C

contractual, mandamus is not an available remedy since mandamus does not lie to enforce the performance of
o

contractual obligations. (Lucman vs. Malawi, et al., G.R. No. 158794, December 19, 2006)
R
an

What remedies can the BSP take for banks in distress and what are the grounds therefor?
h

1. Conservatorship: Whenever, on the basis of a report submitted by the appropriate supervising or examining
C

department, the Monetary Board finds that a bank or a quasi-bank is: (a) In a state of continuing inability; or (b)
unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and
creditors.

2. Closure:
(a) Bank is unable to pay its liabilities as they become due in the ordinary course of business;
(b) Bank has insufficient realizable assets to meet its liabilities;
(c) Bank cannot continue without involving probable losses to its depositors or creditors;
(d) Bank has willfully violated a cease and desist order from the Monetary Board that has become final, involving
acts or transactions which amount to fraud or dissipation of the assets of the institution;

(e) Bank notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends the

r
Ba
payment of its deposit liabilities continuously for more than 30 days.
es

3. Receivership:
bl

(a) Inability to pay liabilities as they become due in the ordinary course of business;
o

r
(b) Insufficiency of realizable assets to meet its liabilities;
R

Ba
(c) Inability to continue business without involving probable losses to its depositors or creditors;
an

(d) Willful violation of a cease and desist order under Sec. 37 of the NCBA that has become final.
es
h

4. Liquidation:
bl
C

(a) The condition of the bank is one of insolvency or that its continuance would involve probable loss to its
o

depositors and creditors;

R
an

(b) A determination by the MB that the bank cannot be rehabilitated.

h

Explain the Close Now, Hear Later Scheme.

C

Page of 16 4

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

Under the law, the sanction of closure could be imposed upon a bank by the Bangko Sentral ng Pilipinas (BSP) even

r
without notice and hearing — this “close now, hear later” scheme is grounded on practical and legal considerations

Ba
to prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police power to protect the
depositors, creditors, stockholders, and the general public. (Bangko Sentral ng Pilipinas Monetary Board vs. Antonio-
Valenzuela, 602 SCRA 698, G.R. No. 184778 October 2, 2009)
es
bl

Explain the BSP’s role as Lender of Last Resort.

o

r
R

Ba
The BSP can extend discounts, loans and advances to banking institutions for liquidity purposes.
an

es
What is the Single Borrower’s Limit Rule?
h

bl
C

The total amount of loans, credit accommodations and guarantees that may be extended by a bank to any person,
partnership, association, corporation or other entity shall at no time exceed 25% of the net worth of such bank (GBL,
o

Sec. 34(1)).
R
an

What is the legal basis of the (DOSRI) Restriction?

h


Subsection X326.1 Definitions. For purposes of these regulations, the following definitions shall apply: xxx
C

Related Interest shall refer to any of the following:

(1) Spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, of a director, officer or stockholder
of the bank;

(2) Partnership of which a director, officer, or stockholder of a bank or his spouse or relative within the first degree of consanguinity or
affinity, or relative by legal adoption, is a general partner;

(3) Co-owner with the director, officer, stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative
by legal adoption, of the property or interest or right mortgaged, pledged or assigned to secure the loans or other credit accommodations,
except when the mortgage, pledge or assignment covers only said co-owner's undivided interest;

r
Ba
(4) Corporation, association, or firm of which a director or officer of the bank, or his spouse is also a director or officer of such corporation,
association or firm, except (a) where the securities of such corporation, association or firm are listed and traded in the big board or
es
commercial and industrial board of domestic stock exchanges and less than fifty percent (50%) of the voting stock thereof is owned by any
one person or by persons related to each other within the first degree of consanguinity or affinity; or (b) where the director, officer or
bl

stockholder of the bank sits as a representative of the bank in the board of directors of such corporation: Provided, That the bank
representative shall not have any equity interest in the borrower corporation except for the minimum shares required by law, rules and
o

r
regulations, or by the by-laws of the corporation: Provided, further, that the borrowing corporation is not among those mentioned in items
R

Ba
e(5), e(6), e(7) and e(8) of this Section;
an

(5) Corporation, association or firm of which any or a group of directors, officers, stockholders of the lending bank and/or their spouses
es
h

or relatives within the first degree of consanguinity or affinity, or relative by legal adoption, hold or own at least twenty percent (20%) of
bl

the subscribed capital of such corporation, or of the equity of such association or firm;
C

(6) Corporation, association or firm wholly or majority-owned or controlled by any related entity or a group of related entities mentioned
R

in Items e(2), e(4) and e(5) of this Section.

an

(7) Corporation, association or firm which owns or controls directly or indirectly whether singly or as part of a group of related interest
h

at least twenty percent (20%) of the subscribed capital of a substantial stockholder of the lending bank or which controls majority interest
of the bank pursuant to Subsection X303.1 of the MOR.
C

Page of 16 5

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

No director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of others,

r
borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such bank to others, or

Ba
in any manner be an obligor or incur any contractual liability to the bank except with the written approval of the
majority of all the directors of the bank, excluding the director concerned: Provided, That such written approval shall
not be required for loans, other credit accommodations and advances granted to officers under a fringe benefit plan
es
approved by the Bangko Sentral. The required approval shall be entered upon the records of the bank and a copy of
bl

such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Bangko
Sentral.
o

r
R

Ba
Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be upon terms
an

not less favorable to the bank than those offered to others. (Arms Length) (Sec. 36, GBL)
es
h

Who has the authority to determine whether a bank is performing in an unsafe or unsound manner?
bl
C

The authority to determine whether a bank is conducting business in an unsafe or unsound manner is also vested in
o

the Monetary Board. (Koruga vs. Arcenas, Jr., 590 SCRA 49, G.R. No. 168332 June 19, 2009)
R
an

Respondents, as directors and officers of a bank, were accused of engaging in unsafe, unsound, and fraudulent
banking practices, more particularly, acts that violate the prohibition on self-dealing. In question was the manner
h

with which the directors have handled the affairs of the bank, in particular, the fraudulent loans and dacion en
C

pago authorized by the directors in favor of several dummy corporations known to have close ties and are
indirectly controlled by the directors. Decide whether the case is within the jurisdiction of the BSP or regular court.

The allegations call for the examination of the allegedly questionable loans. Whether these loans are covered by the
prohibition on self-dealing is a matter for the BSP to determine. These are not ordinary intra-corporate matters;
rather, they involve banking activities which are, by law, regulated and supervised by the BSP. (Koruga vs. Arcenas,
Jr., 590 SCRA 49, G.R. No. 168332 June 19, 2009)

Explain the power of the Monetary Board to prescribe the ratio of the bank’s net worth to its total risk assets.

Section 34 of the General Banking Law of 2000 gives the Monetary Board the authority to prescribe the minimum
ratio which the net worth of a bank must bear to its total risk assets, which may include contingent accounts. The

r
Monetary Board may require that such ratio be determined on the basis of the net worth and risk assets of a bank
and its subsidiaries, financial or otherwise, as well as prescribe the composition and the manner of determining the
net worth and total risk assets of banks and their subsidiaries. Ba
es
The books of the respondent banks were examined by the PDIC which revealed that both received from their
bl

foreign head office and foreign branches deposits in dollars. PDIC claimed these deposit liabilities that were subject
to assessment for insurance. Is this correct?
o

r
R

Ba
No. There are various manners by which a foreign corporation can establish its presence in the Philippines. It may
an

choose to incorporate its own subsidiary as a domestic corporation, in which case such subsidiary would have its
own separate and independent legal personality to conduct business in the country. In the alternative, it may create
es
h

bl

(8) Corporation, association or firm in which the lending bank and/or its parent/subsidiary holds or owns at least twenty percent (20%)
C

of the subscribed capital of such corporation, or in the equity of such association or firm, or has an existing management contract or any
o

similar arrangement with the lending bank or its parent/subsidiary.

R
an

Subsidiary shall refer to a corporation or firm more than fifty percent (50%) of the outstanding voting stock of which is directly or indirectly
owned, controlled or held with power to vote by its parent corporation.
h
C

Page of 16 6

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

a branch in the Philippines, which would not be a legally independent unit, and simply obtain a license to do business

r
in the Philippines.

Ba
In the case of the Respondents, it is apparent that they both did not incorporate a separate domestic corporation to
represent its business interests in the Philippines. Their Philippine branches are, as the name implies, merely
es
branches, without a separate legal personality from their parent companies. Thus, being one and the same entity,
bl

the funds placed by the Respondents in their respective branches in the Philippines should not be treated as deposits
made by third parties subject to deposit insurance under the PDIC Charter. (Philippine Deposit Insurance Corporation
o

r
v. Citibank, N.A. and Bank of America, S.T. and N.A., G.R. No. 170290, April 11, 2012)
R

Ba
an

LETTERS OF CREDIT
es
h

bl

Distinguish between Commercial Letter of Credit and Stand-by Letter of Credit.

C

First, commercial credits involve the payment of money under a contract of sale. Such credits become payable upon
R

the presentation by the seller-beneficiary of documents that show he has taken affirmative steps to comply with the
an

sales agreement. In the standby type, the credit is payable upon certification of a party’s nonperformance of the
agreement. The documents that accompany the beneficiary’s draft tend to show that the applicant has not
h

performed. The beneficiary of a commercial credit must demonstrate by documents that he has performed his
contract. The beneficiary of the standby credit must certify that his obligor has not performed the contract.
C

(Transfield Philippines, Inc. vs. Luzon Hydro Corporation, 443 SCRA 307, G.R. No. 146717 November 22, 2004)

Explain the Independence Principle.

The so-called “independence principle” assures the seller or the beneficiary of prompt payment independent of any
breach of the main contract and precludes the issuing bank from determining whether the main contract is actually
accomplished or not. Under this principle, banks assume no liability or responsibility for the form, sufficiency,
accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions
stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the
description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by
any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor,
the carriers, or the insurers of the goods, or any other person whomsoever. (Transfield Philippines, Inc. vs. Luzon

r
Hydro Corporation, 443 SCRA 307, G.R. No. 146717 November 22, 2004)

Explain the Fraud Exception Principle.

Ba
es

“Fraud exception” exists when the beneficiary, for the purpose of drawing on the credit, fraudulently presents to
bl

the confirming bank, documents that contain, expressly or by implication, material representations of fact that to
o

his knowledge are untrue. (Transfield Philippines, Inc. vs. Luzon Hydro Corporation, 443 SCRA 307, G.R. No. 146717

r
R

November 22, 2004)

Ba
an

Explain the Strict Compliance Rule.

es
h

The documents tendered by the seller/beneficiary must strictly conform to the terms of the letter of credit. The
bl
C

tender of documents must include all documents required by the letter. Thus, a correspondent bank which departs
o

from what has been stipulated under the letter of credit acts on its own risk and may not thereafter be able to
R

recover from the buyer or the issuing bank, as the case may be, the money thus paid to the beneficiary. (Feati Bank
and Trust Company v. CA, G.R. No. 940209, Apr. 30, 1991)
an
h

TRUST RECEIPTS
C

Page of 16 7

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

What is a trust receipt?

r
Ba
A trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of the
sale, or if the merchandise is not sold, to return the merchandise to the entruster. (Hur Tin Yang vs. People, 703 SCRA
606, G.R. No. 195117 August 14, 2013)
es
bl

The entruster knew even before the execution of the alleged trust receipt agreement that the covered construction
materials were never intended by the entrustee for resale or for the manufacture of items to be sold. Can this be
o

r
considered a trust receipt transaction?
R

Ba
an

No. When both parties enter into an agreement knowing fully well that the return of the goods subject of the trust
receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt transaction penalized
es
h

under Sec. 13 of PD 115 in relation to Art. 315, paragraph 1(b) of the Revised Penal Code, as the only obligation
bl

actually agreed upon by the parties would be the return of the proceeds of the sale transaction. This transaction
C

becomes a mere loan, where the borrower is obligated to pay the bank the amount spent for the purchase of the
o

goods. (Hur Tin Yang vs. People, 703 SCRA 606, G.R. No. 195117 August 14, 2013)
R
an

Can the entruster pursue the purchaser of the goods in case the entrustee fails to apply the proceeds of the sale
to his obligation to the entruster?
h

Any purchaser of goods from an entrustee with right to sell, or of documents or instruments through their customary
C

form of transfer, who buys the goods, documents, or instruments for value and in good faith from the entrustee,
acquires said goods, documents or instruments free from the entruster's security interest (Sec. 11, TRL).

TRANSPORTATION

What is a common carrier? How is a common carrier different from a private carrier?

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public
carrier. A private carrier is one who, without making the activity a vocation, or without holding himself or itself out
to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular

r
instance only, to transport goods or persons from one place to another either gratuitously or for hire. The provisions
Ba
on ordinary contracts of the Civil Code govern the contract of private carriage. The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person,
es
corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public. Contracts of common carriage are
bl

governed by the provisions on common carriers of the Civil Code, the Public Service Act, and other special laws
o

relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be

r
R

at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers. (Pereña vs. Zarate, 679 SCRA 208, G.R. No. 157917 August 29, 2012) Ba
an

es
Heirs of the victim sued the carrier breach of contract of carrier. At the same time, they sued PNR, likewise involved
h

in the incident, for quasi-delict. Can the court hold them jointly and severally liable? Why?
bl
C

Yes. The Court held in a case that although the basis of the right to relief of the Zarates (i.e., breach of contract of
R

carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against the Philippine National
Railways (PNR) (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally
an

liable by virtue of their respective negligence combining to cause the death of Aaron. (Pereña vs. Zarate, 679 SCRA
208, G.R. No. 157917 August 29, 2012)
h
C

Page of 16 8

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

Respondent provides ferry services for its resort. Its boats (called coco beach boats) ferry resort guests and crew

r
members only and respondent does not charge a separate fee for this. Is the respondent a common carrier?

Ba
Respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly
considered ancillary thereto. The constancy of respondent’s ferry services in its resort operations is underscored by
es
its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be
bl

availed of by anyone who can afford to pay the same. These services are thus available to the public. That
Respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to
o

r
suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering
R

Ba
tour packages to factor the transportation fee in arriving at the tour package price. (Spouses Dante Cruz and
an

Leonora Cruz v. Sun Holidays, Inc., G.R. No. 186312, June 29, 2012)
es
h

Are collateral relatives, such as brothers and sisters of the passenger, entitled to demand moral damages for the
bl

latter’s death?
C

The omission from Article 2206(3) of the brothers and sisters of the deceased passenger reveals the legislative intent
R

to exclude them from the recovery of moral damages for mental anguish by reason of the death of the deceased.
an

(Sulpicio Lines, Inc. vs. Curso, 615 SCRA 575, G.R. No. 157009 March 17, 2010)
h

Can the passenger recover from the third party defendant brought into the suit by the common carrier?
C

Yes. In an action for breach of contract of carriage commenced by a passenger against his common carrier, the
plaintiff can recover damages from a third party defendant brought into the suit by the common carrier upon a claim
based on tort or quasi-delict. The liability of the third party defendant is independent from the liability of the
common carrier to the passenger. (Philtranco vs. Paras, G.R. No. 161909, April 25, 2012)

PRIVATE CORPORATION

Explain the Nell Doctrine in Corporation Law.

The Nell Doctrine states the general rule that the transfer of all the assets of a corporation to another shall not

r
render the latter liable to the liabilities of the transferor.

In a business-enterprise transfer agreement, is the buyer liable for the debts of the selling corporation?
Ba
es

Yes. Under the business-enterprise transfer, the transferee purchases not only the assets of the transferor, but also
bl

its business. Thus, the transferee is liable for the debts and liabilities of his transferor arising from the business
o

enterprise conveyed. The purpose of the business-enterprise transfer is to protect the creditors of the business by

r
allowing them a remedy against the new owner of the assets and business enterprise. (Y-I Leisure Philippines, Inc.
R

vs. Yu, 770 SCRA 56, G.R. No. 207161 September 8, 2015)
Ba
an

es
Explain the Doctrine of Piercing the Veil of Corporate Fiction.
h

bl
C

The corporate personality may be disregarded, and the individuals composing the corporation will be treated as
o

individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong;
as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. (Halley vs. Printwell, Inc.,
R

649 SCRA 116, G.R. No. 157549 May 30, 2011)

an

Thus, where the main purpose in forming the corporation was to evade one’s subsidiary liability for damages in a
h

criminal case, the corporation may not be heard to say that it has a personality separate and distinct from its
C

members, because to allow it to do so would be to sanction the use of fiction of corporate entity as a shield to further

Page of 16 9

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

an end subversive of justice. (Gold Line Tours, Inc. vs. Heirs of Maria Concepcion Lacsa, 673 SCRA 399, G.R. No.

r
159108 June 18, 2012 citing La Campana Coffee Factory, et al. v. Kaisahan ng mga Manggagawa, etc., et al., L-5677,

Ba
May 25, 1953)
es
bl

How should courts treat piercing the veil?

o

r
Any application of the doctrine of piercing the corporate veil should be done with caution. A court should be mindful
R

Ba
of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an extent
an

that injustice, fraud, or crime was committed against another, in disregard of its rights. The wrongdoing must be
clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may
es
h

result from an erroneous application. (Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729
bl

September 29, 2010)

C

Would mere ownership by a single stockholder of a substantial count of shares justify piercing the veil of corporate
R

fiction?
an

Mere ownership by a single stockholder or by another corporation of a substantial block of shares of a corporation
h

does not, standing alone, provide sufficient justification for disregarding the separate corporate personality. For this
ground to hold sway in this case, there must be proof that one had control or complete dominion of the company’s
C

finances, policies, and business practices; he used such control to commit fraud; and the control was the proximate
cause of the financial loss complained of. The absence of any of the elements prevents the piercing of the corporate
veil. (Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729 September 29, 2010)

Can the court apply piercing the veil against a company that was never impleaded in the complaint? When should
piercing be raised?

(1) No. The court must first acquire jurisdiction over the corporation or corporations involved before its or their
separate personalities are disregarded. Otherwise, due process is violated.
(2) The doctrine of piercing the veil of corporate entity can only be raised during a full-blown trial over a cause of
action duly commenced involving parties duly brought under the authority of the court by way of service of summons
or what passes as such service. (Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729

r
September 29, 2010)
Ba
The company only had paid-up capital of Php5,000 but it entered into a Php3.3 million contract. May this be
es
considered as badge of fraud for purposes of applying the doctrine of piercing the veil of corporate fiction?
bl

The fact that Kukan, Inc. entered into a PhP 3.3 million contract when it only had a paid-up capital of PhP 5,000 is
o

not an indication of the intent on the part of its management to defraud creditors. Paid-up capital is merely seed

r
R

money to start a corporation or a business entity. As in this case, it merely represented the capitalization upon
incorporation in 1997 of Kukan, Inc. Paid-up capitalization of PhP 5,000 is not and should not be taken as a reflection Ba
an

of the firm’s capacity to meet its recurrent and long-term obligations. It must be borne in mind that the equity
es
portion cannot be equated to the viability of a business concern, for the best test is the working capital which consists
h

of the liquid assets of a given business relating to the nature of the business concern. (Kukan International
bl
C

Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729 September 29, 2010)
o
R

Can the corporation validly release a subscriber from his obligation under a subscription contract without any
consideration?
an

No. Under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber to its capital
h

stock from the obligation of paying for his shares, in whole or in part, without a valuable consideration, or
C

fraudulently, to the prejudice of creditors. (Halley vs. Printwell, Inc., 649 SCRA 116, G.R. No. 157549 May 30, 2011)

Page of 16 10

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

r
Ba
Under what circumstance can a creditor of the corporation pursue its stockholder?

The creditor is allowed to maintain an action upon any unpaid subscriptions and thereby steps into the shoes of the
es
corporation for the satisfaction of its debt.
bl

The prevailing rule is that a stockholder is personally liable for the financial obligations of the corporation to the
extent of his unpaid subscription. (Halley vs. Printwell, Inc., 649 SCRA 116, G.R. No. 157549 May 30, 2011)
o

r
R

Ba
Explain the right of appraisal. When may it be exercised?
an

The right of appraisal refers to the right of a stockholder who dissents from certain corporate actions to demand
es
h

payment of the fair value of his or her shares. (Turner vs. Lorenzo Shipping Corporation, 636 SCRA 13, G.R. No.
bl

157479 November 24, 2010)

C

The right of appraisal may be exercised when there is a fundamental change in the charter or articles of incorporation
R

substantially prejudicing the rights of the stockholders. It does not vest unless objectionable corporate action is
an

taken. It serves the purpose of enabling the dissenting stockholder to have his interests purchased and to retire from
the corporation. (Turner vs. Lorenzo Shipping Corporation, 636 SCRA 13, G.R. No. 157479 November 24, 2010)
h

Enumerate the instances when the right of appraisal is available.

C

1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any
stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares
of any class, or of extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the
corporate property and assets as provided in the Code; and

3. In case of merger or consolidation. (Sec. 81, CC)

4. In case of investment of funds in another corporation or business or for any other purpose (Sec. 42, CC)

r
Ba
Can stockholders demand appraisal right if the corporation has no unrestricted retained earnings? Would it matter
if after the complaint therefor was filed, the corporation already had unrestricted retained earnings?
es

No. Although dissenting stockholders have the right of appraisal, the law no payment shall be made to any dissenting
bl

stockholder unless the corporation has unrestricted retained earnings in its books to cover the payment. In case the
o

corporation has no available unrestricted retained earnings in its books, Section 83 of the Corporation Code provides

r
that if the dissenting stockholder is not paid the value of his shares within 30 days after the award, his voting and
R

dividend rights shall immediately be restored. (Turner vs. Lorenzo Shipping Corporation, 636 SCRA 13, G.R. No.
Ba
an

157479 November 24, 2010)

es
h

bl

Neither did the subsequent existence of unrestricted retained earnings after the filing of the complaint cure the lack
C

of cause of action against the company on appraisal right. Thus, it would not matter if subsequent to the filing of the
o

complaint for appraisal right, the corporation was able to earn unrestricted retained earnings. (Turner vs. Lorenzo
R

Shipping Corporation, 636 SCRA 13, G.R. No. 157479 November 24, 2010)
an

What are the requisites to hold a director or officer personally liable for corporate obligations?
h
C

Page of 16 11

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

To hold a director or officer personally liable for corporate obligations, two requisites must concur, to wit: (1) the

r
complaint must allege that the director or officer assented to the patently unlawful acts of the corporation, or that

Ba
the director or officer was guilty of gross negligence or bad faith; and (2) there must be proof that the director or
officer acted in bad faith. (Lozada vs. Mendoza, GR. 196134, October 12, 2016)
es
bl

The Complaint alleged that FQB+7 was established in 1985 and that except for the death of two of its directors,
o

r
there has been no other change in the list of its stockholders. The Complaint further alleged that the FQB’s General
R

Ba
Information Sheet (GIS) reflected erroneous changes in the composition of the FQB+7’s board members (which
an

included the Respondents) and that despite complainant’s previous demand upon the “real” board members to
rectify this, his request was just ignored. Complainant thus prayed for the nullification of all previous actions made
es
h

by the Respondents, including the GIS they had filed with the SEC and that the rightful members of the board be
bl

declared by the court. While this case was pending, FQB+7’s existence was revoked.
C

Should the case now be dismissed following the revocation of FQB+7’s existence?
o
R

No. The Corporation Code (Sec. 122) allows a dissolved corporation to wind up its affairs within 3 years from its
an

dissolution. A corporation’s board of directors is not rendered functus officio by its dissolution. Since the Corporation
Code allows a corporation to continue its existence for a limited purpose, necessarily, there must be a board that
h

will continue acting for and on behalf of the dissolved corporation for that purpose.
C

Here, the Complaint did not pray to continue the corporate business of FQB+7. The Complaint does not seek to enter
into contracts, issue new stocks, acquire properties, execute business transactions, etc. Its aim is to determine who
the rightful directors are and a corporation’s right to remove usurpers and strangers from its affairs. Resolution of
these issues do not involve continuation of business of FQB+7. Also, the determination of which group is the bona
fide or rightful board of the FQB+7 will still provide practical relief to the parties involved. (Aguirre II vs. FQB+7, Inc.,
688 SCRA 242, G.R. No. 170770 January 9, 2013)

Explain the concept of doing business under the Foreign Investment Act?

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 totalling one hundred eighty (180) days or more;

r
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 Ba
contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally
es
incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization.
bl
o

What are excluded from “doing business”?

r
R

Doing business shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic Ba
an

corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee
es
director or officer to represent its interests in such corporation; nor appointing a representative or distributor
h

domiciled in the Philippines which transacts business in its own name and for its own account. (Sec. 3, RA 7042)
bl
C

What does foreign investment mean?

R

The term “foreign investment” shall mean an equity investment made by a non-Philippine national in the form of
an

foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Central
Bank which shall assess and appraise the value of such assets other than foreign exchange. (Sec. 3, RA 7042)
h
C

Page of 16 12

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

FRIA

r
Ba
Explain the cram-down clause.

A rehabilitation plan may be approved even over the opposition of the creditors holding a majority of the
es
corporation’s total liabilities if there is a showing that rehabilitation is feasible and the opposition of the creditors is
bl

manifestly unreasonable. Also known as the “cram-down” clause, this provision, which is currently incorporated in
the FRIA, is necessary to curb the majority creditors’ natural tendency to dictate their own terms and conditions to
o

r
the rehabilitation, absent due regard to the greater long-term benefit of all stakeholders. Otherwise stated, it forces
R

Ba
the creditors to accept the terms and conditions of the rehabilitation plan, preferring long-term viability over
an

immediate but incomplete recovery. (Bank of the Philippine Islands vs. Sarabia Manor Hotel Corporation, 702 SCRA
432, G.R. No. 175844 July 29, 2013)
es
h

bl

State the rule on pre-negotiated rehabilitation.

C

An insolvent debtor, by itself or jointly with any of its creditors, may file a verified petition with the court for the
R

approval of a pre-negotiated Rehabilitation Plan which has been endorsed or approved by creditors holding at least
an

two-thirds (2/3) of the total liabilities of the debtor, including secured creditors holding more than fifty percent
(50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the
h

total unsecured claims of the debtor. (Sec. 76, FRIA)

C

Explain the Standstill Period.

It is the period agreed upon by the debtor and its creditors to enable them to negotiate and enter into an out-of-
court or informal restructuring/workout agreement or Rehabilitation Plan pursuant to Rule 4 of these Rules. The
standstill agreement may include provisions identical with or similar to the legal effects of a commencement order
under Section 9, Rule 2 of these Rules (A.M. 12-12-11-SC, Rule 1, Section 5 (q)).

It may be agreed upon by the parties and shall be effective not only to the contracting parties but also against the
other creditors provided that it complies with the following conditions:
1. Approval of the agreement by creditors representing more than fifty percent (50%) of the total liabilities of the
creditor;
2. Publication of the notice of the agreement in a newspaper of general circulation in the Philippines, once a week

r
for two (2) consecutive weeks; and
Ba
3. The standstill period shall not exceed one hundred twenty (120) days from the date of its effectivity (A.M. 12-
12-11-SC, Rule 4, Sec. 2).
es

NEGOTIABLE INSTRUMENTS
bl
o

What are cashier’s and manager’s checks?

r
R

These are bills of exchange drawn by the bank’s manager or cashier, in the name of the bank, against the bank itself. Ba
an

Typically, a manager’s or a cashier’s check is procured from the bank by allocating a particular amount of funds to
es
be debited from the depositor’s account or by directly paying or depositing to the bank the value of the check to be
h

drawn. (Rizal Commercial Banking Corporation vs. Hi-Tri Development Corporation, 672 SCRA 514, G.R. No. 192413
bl
C

June 13, 2012)

o
R

Would acceptance of manager’s and cashier’s check amount to clearing thereof by the bank?
an

While indeed, it cannot be said that manager’s and cashier’s checks are precleared, clearing should not be confused
with acceptance. Manager’s and cashier’s checks are still the subject of clearing to ensure that the same have not
h

been materially altered or otherwise completely counterfeited. However, manager’s and cashier’s checks are pre-
C

accepted by the mere issuance thereof by the bank, which is both its drawer and drawee. Thus, while manager’s and

Page of 16 13

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

cashier’s checks are still subject to clearing, they cannot be countermanded for being drawn against a closed account,

r
for being drawn against insufficient funds, or for similar reasons such as a condition not appearing on the face of the

Ba
check. Long-standing and accepted banking practices do not countenance the countermanding of manager’s and
cashier’s checks on the basis of a mere allegation of failure of the payee to comply with its obligations towards the
purchaser. On the contrary, the accepted banking practice is that such checks are as good as cash. (Metropolitan
es
Bank and Trust Company vs. Chiok, 742 SCRA 435, G.R. No. 175394 November 26, 2014)
bl

The drawee paid a materially altered check. Can it charge the payment made to the account of the drawer?
o

r
R

Ba
When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge
an

its client’s account only for bona fide disbursements he had made. If the drawee did not pay according to the original
tenor of the instrument, as directed by the drawer, then it has no right to claim reimbursement from the drawer,
es
h

much less, the right to deduct the erroneous payment it made from the drawer’s account which it was expected to
bl

treat with utmost fidelity. The drawee, however, still has recourse to recover its loss. It may pass the liability back to
C

the collecting bank xxx. (Areza vs. Express Savings Bank, Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014)
o
R

Discuss the liability of a collecting bank on altered checks.

an

A depositary/collecting bank where a check is deposited, and which endorses the check upon presentment with the
h

drawee bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants “that the
instrument is genuine and in all respects what it purports to be; that he has good title to it; that all prior parties had
C

capacity to contract; and that the instrument is at the time of his endorsement valid and subsisting.” It has been
repeatedly held that in check transactions, the depositary/collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting
the check for payment to the drawee is an assertion that the party making the presentment has done its duty to
ascertain the genuineness of the endorsements. If any of the warranties made by the depositary/collecting bank
turns out to be false, then the drawee bank may recover from it up to the amount of the check. (Areza vs. Express
Savings Bank, Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014)

Explain the 24-hour clearing rule.

Under the 24-hour clearing rule, any check which should be refused by the drawee bank in accordance with long
standing and accepted banking practices shall be returned through the PCHC/local clearing office, as the case may

r
be, not later than the next regular clearing (24-hour). Else, the drawee bank will not be able to recover from the
collecting bank. Ba
es
Does the 24-hour clearing rule apply to checks subject of material alteration or which bears forged endorsement?
bl

No. The rule has been modified in that items which have been the subject of material alteration or bearing forged
o

endorsement may be returned even beyond 24 hours so long that the same is returned within the prescriptive period

r
R

fixed by law.
Ba
an

The consensus among lawyers is that the prescriptive period is ten (10) years because a check or the endorsement
es
thereon is a written contract. Moreover, the item need not be returned through the clearing house but by direct
h

presentation to the presenting bank. (Areza vs. Express Savings Bank, Inc., 734 SCRA 588, G.R. No. 176697 September
bl
C

10, 2014)
o
R

INSURANCE
an

What are the elements of insurance?

h
C

The following are the elements of insurance:

Page of 16 14

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

1. The insured has an insurable interest;

r
2. The insured is subject to a risk of loss by the happening of the designated peril;

Ba
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons
bearing a similar risk; and
es
5. In consideration of the insurer’s promise, the insured pays a premium. (Philamcare Health Systems, Inc. vs. Court
bl

of Appeals, 379 SCRA 356, G.R. No. 125678 March 18, 2002)
o

r
As a rule, a change of insurable interest without a corresponding transfer of the policy, suspends the insurance.
R

Ba
What are the exceptions?
an

es
The exceptions are:
h

1. A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does
bl
C

not affect the right of the insured to indemnity for the loss. (Sec. 21, IC)
o

2. A change of interest in one or more several distinct things, separately insured by one policy, does not
R

avoid the insurance as to the others. (Sec. 22, IC)

an

3. A change of interest, by will or succession, on the death of the insured, does not avoid an insurance;
h

and his interest in the insurance passes to the person taking his interest in the thing insured. (Sec. 23,
C

IC)

4. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly
insured, to the others, does not avoid an insurance even though it has been agreed that the insurance
shall cease upon an alienation of the thing insured. (Sec. 24, IC)

5. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of
the risk, may become the owner of the interest insured. (Sec. 57, IC)

What is a marine insurance?

It is an insurance that covers risks connected with navigation, to which a ship, cargo, freightage, profits or other

r
insurable interest in movable property, may be exposed during a certain voyage or a fixed period of time.

What are the non-default options in life insurance? Ba

es

In the case of individual life or endowment insurance, the policy shall contain in substance the following conditions,
bl

among other things:

o

r
A provision specifying the options to which the policyholder is entitled to in the event of default in a premium
R

payment after three (3) full annual premiums shall have been paid. Such option shall consist of:
Ba
an

es
(1) A cash surrender value payable upon surrender of the policy which shall not be less than the reserve on the
h

policy, the basis of which shall be indicated, for the then current policy year and any dividend additions thereto,
bl
C

reduced by a surrender charge which shall not be more than one-fifth (1/5) of the entire reserve or two and
o

one-half percent (2½%) of the amount insured and any dividend additions thereto; and
R
an

(2) One or more paid-up benefits on a plan or plans specified in the policy of such value as may be purchased by
the cash surrender value. (Sec. 233[f], IC)
h

Explain the incontestability rule on life insurance.

C

Page of 16 15

www.chanroblesbar.com : www.chanroblesbar.com.ph
 ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

r
For a life insurance policy to be incontestable, the requisites are: (a) The insurance is a life insurance policy payable

Ba
on the death of the insured; and (b) It has been in force during the lifetime of the insured for at least two (2) years
from its date of issue or of its last reinstatement. The period of two (2) years may be shortened but it cannot be
es
extended by stipulation. If the insured dies after the two (2) year period, the insurer cannot rescind the contract due
to his misrepresentation or concealment. (Sec. 48, IC)
bl
o

r
What are the types of insurance policy?
R

Ba
an

1. Open Policy - An open policy is one in which the value of the thing insured is not agreed upon, and the
es
amount of insurance merely represents the insurer’s maximum liability. The value of such thing insured
h

shall be ascertained at the time of loss.”(Sec. 60, IC)

bl
C

2. Valued Policy - A valued policy is one which expresses on its face an agreement that the thing insured shall
o

be valued at a specific sum. (Sec. 61, IC) It is one in which the parties expressly agree on the value of the
R

subject matter of insurance (44 C.J.S. 496) thereby avoiding the trouble of ascertaining the actual amount
an

of loss when it happens.

3. Running Policy - A running policy is one which contemplates successive insurances, and which provides that
h

the object of the policy may be from time to time defined, especially as to the subjects of insurance, by
C

additional statements or indorsements. (Sec. 62, IC)

What is a Mortgage Redemption Insurance?

A “Mortgage Redemption Insurance” is a group insurance policy of mortgagors which is intended as a device for the
protection of both the mortgagee and the mortgagor.

On the part of the mortgagee, it has to enter into such contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the
payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar
vein, ample protection is given to the mortgagor such that in the event of death, the mortgage obligation will be
extinguished by the application of the insurance proceeds to the mortgage indebtedness. Consequently, where the

r
mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the mortgagee,

Ba
the insurance is on the mortgagor's interest, and the mortgagor continues to be a party to the contract. In this type
of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not
es
make the mortgagee a party to the contract. (Great Pacific Life Assurance Corp. vs. Court of Appeals, 316 SCRA 677)
bl

What is a friendly fire? When is it a hostile fire?

o

r
Friendly fire is one that burns in a place where it was intended and ought to burn. Fire is hostile when it occurs
R

outside of the usual confines or begins as a friendly fire and becomes hostile by escaping from the place where it
Ba
an

should be or one that becomes uncontrollable or breaks out from where it was intended to be. The general rule is
es
that the insurer will only be liable in cases of hostile fire. The policy should not be so construed to the insured form
h

injury consequent upon his negligent use or management of fire, so long as it is confined to the place where it ought
bl
C

to be (American Towing Co. vs. German Fire Ins. Co., 21 A. 553)

o

Explain the test of Materiality.

R
an

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts
upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed
h

contract, or in making his inquiries.(Sec. 31, IC)

C

Page of 16 16

www.chanroblesbar.com : www.chanroblesbar.com.ph