EXTINGUISHMENT OF SALE Resolutory condition- in which a happening of it will
extinguish the obligation
ARTICLE 1600. SALES ARE EXTINGUISHED BY THE
SAME CAUSES AS ALL OTHER OBLIGATIONS, BY THOSE
STATED IN THE PRECEDING ARTICLES OF THIS TITLE,
AND BY CONVENTIONAL OR LEGAL REDEMPTION.
6 principal modes of extinguishing the obligation
1. Payment or performance
2. Loss of the thing due
3. Condonation or remission
4. Novation
5. Compensation
6. merger of rights
Extra special modes of extinguishing a contract of
sale (conventional or legal redemption)
Conventional redemption – (voluntary or agreed
by the parties).
- Redemption by stipulation or agreement by
the parties voluntary
Legal Redemption- (by law)
- Provided under the law
CONVENTIONAL REDEMPTION
ARTICLE 1601. CONVENTIONAL REDEMPTION SHALL
TAKE PLACE WHEN THE VENDOR RESERVES THE RIGHT
TO REPURCHASE THE THING SOLD. WITH THE
OBLIGATION TO COMPLY WITH THE PROVISIONS OF
ARTICLE 1616 AND OTHER STIPULATIONS WHICH MAY
HAVE BEEN AGREED UPON.
- Nagsabot si buyer and seller, wherein they
agree that the vendor has the right to himself
to reacquire the property sold, provided he
reimburses the vendee of the price, expenses
of the contract and other legitimate payments
therefore, and the necessary and useful
expenses made on the thing sold, and fulfills
other stipulations which may have been
agreed upon.
- Also known as pacto de retro sale ( or sale
with right to repurchase) – conventional
redemption
- If wala naka enter to a sale with right to
repurchase( at first walay agreement), vendee
cannot demand, and also cannot demand for
the price if ever ibaligya sa iya balik.
- Cannot insist na ibalik ug baligya sa imoha
kung walay agreement the right of repurchase
- Applicable to real and personal properties
Art 1602. THE CONTRACT SHALL BE PRESUMED TO BE
AN EQUITABLE MORTGAGE, IN ANY OF THE
FOLLOWING CASES:
1.) WHEN THE PRICE OF A SALE WITH RIGHT TO
REPURCHASE IS UNUSUALLY INADEQUATE.
- If price is grossly inadequate it does not
invalidate the sale, however it can give rise to
a presumption (disputable presumption), that
they enter into, is merely an equitable
mortgage
2.) WHEN THE VENDOR REMAINS IN POSSESSION
AS LESSEE OR OTHERWISE;
3.) WHEN UPON OR AFTER THE EXPIRATION OF
THE RIGHT TO REPURCHASE ANOTHER
INSTRUMENT EXTENDING THE PERIOD OF
REDEMPTION OR GRANTING A NEW PERIOD
IS EXECUTED;
4.) WHEN THE PURCHASER RETAINS FOR
HIMSELF A PART OF THE PURCHASE PRICE;
5.) WHEN VENDOR BINDS HIMSELF TO PAY THE
TAXES ON THE THING SOLD;
6.) IN ANY OTHER CASE WHERE IT MAY BE FAIRLY
INFERRED THAT THE REAL INTENTION OF THE
PARTIES IS THAT THE TRANSACTION SHALL
SECURE THE PAYMENT OF A DEBT OR THE
PERFORMANCE OF ANY OTHER OBLIGATION.
IN ANY OF THE FOREGOING CASES. ANY MONEY.
FRUITS, OR OTHER BENEFIT TO BE RECEIVED BY THE
VENDEE AS RENT OR OTHERWISE SHALL BE
CONSIDERED AS INTEREST WHICH SHALL BE SUBJECT
TO THE USURY LAWS.
- Any instances of 1602 can give rise to
equitable mortgage
- Kahit deed of sale ang gipirmahan, if naa ni
sila na instances then there is no intention to
sell
- Art. 1602- essential is to protect individuals
that can be taken advantage by a creditors
Equitable mortgage (prenda / collateral)
- still a prenda / collateral but it lacks the
formalities of mortgage, theres no mortgage
contract executed but it shows the intentions
of the party to make the property subject of
the contract as a security for the fulfillment of
the obligation.
Remedy: is to sell the property in an auction, and the
halin will be used to pay off the obligation.
the purpose of art. 1602 is in consonance to the
prohibition of what we call Pactum commissorium-
Pactum commissorium- is a stipulation of automatic
appropriation incase the debtor fails to pay the
obligation (bawal)
- considered void!
ARTICLE 1603. IN CASE OF DOUBT, A CONTRACT
PURPORTING TO BE A SALE WITH RIGHT TO
REPURCHASE SHALL BE CONSTRUED AS AN
EQUITABLE MORTGAGE. (N)
ARTICLE 1604. THE PROVISIONS OF ARTICLE 1602
SHALL ALSO APPLY TO A CONTRACT PURPORTING TO
BE AN ABSOLUTE SALE. (N)
ARTICLE 1605. IN THE CASES REFERRED TO IN
ARTICLES 1602 AND 1604, THE APPARENT VENDOR
MAY ASK FOR THE REFORMATION OF THE
INSTRUMENT.
Ex: nay gipirmahan deed of sale pero the intention is
not to sell the property but mortgage only, then they
can ask for reformation
ARTICLE 1606. THE RIGHT REFERRED TO IN ARTICLE
1601, IN THE ABSENCE OF AN EXPRESS AGREEMENT,
SHALL LAST FOUR YEARS FROM THE DATE OF THE
CONTRACT.
SHOULD THERE BE AN AGREEMENT, THE
PERIOD CANNOT EXCEED TEN YEARS.
HOWEVER, THE VENDOR MAY STILL EXERCISE
THE RIGHT TO REPURCHASE WITHIN THIRTY DAYS
FROM THE TIME FINAL JUDGMENT WAS RENDERED IN
A CIVIL ACTION ON THE BASIS THAT THE CONTRACT
WAS A TRUE SALE WITH RIGHT TO REPURCHASE.
- Walay conventional redemption if walay
agreement
- Expressed agreement- means as to the period
- Cannot redeem or cannot repurchase if mag
sobra na
-
ARTICLE 1607. IN CASE OF REAL PROPERTY, THE
CONSOUDATION OF OWNERSHIP IN THE VENDEE BY
VIRTUE OF THE FAILURE OF THE VENDOR TO COMPLY
WITH THE PROVISIONS OF ARTICLE 1616 SHALL NOT
BE RECORDED IN THE REGISTRY OF PROPERTY
WITHOUT A JUDICIAL ORDER, AFTER THE VENDOR
HAS BEEN DULY HEARD.
-
ARTICLE 1608. THE VENDOR MAY BRING HIS ACTION
AGAINST Every POSSESSOR WHOSE RIGHT IS
DERIVED FROM THE VENDEE, EVEN IF IN THE SECOND
CONTRACT NO MENTION SHOULD HAVE BEEN MADE
OF THE RIGHT TO REPURCHASE, WITHOUT PREJUDICE
TO THE PROVISIONS OF THE MORTGAGE LAW AND
THE LAND REGISTRATION LAW WITH RESPECT TO
THIRD PERSONS.
ARTICLE 1609. THE VENDEE IS SUBROGATED TO THE
VENDOR'S RIGHTS AND ACTIONS
- In sale with right to repurchase, essentially
ownership is transferred to the vendee upon
delivery.
ARTICLE 1610. THE CREDITORS OF THE VENDOR
CANNOT MAKE USE OF THE RIGHT OF REDEMPTION
AGAINST THE VENDEE, UNTIL AFTER THEY HAVE
EXHAUSTED THE PROPERTY OF THE VENDOR.
-can redeem within the period
ARTICLE 1611. IN A SALE WITH A RIGHT TO
REPURCHASE, THE VENDEE OF A PART OF AN
UNDIVIDED IMMOVABLE WHO ACQUIRES THE WHOLE
THEREOF IN THE CASE OF ARTICLE 498 (co-ownership)
, MAY COMPEL THE VENDOR TO REDEEM THE
WHOLE PROPERTY, IF THE LATTER WISHES TO MAKE
USE OF THE RIGHT OF REDEMPTION.
- If u want to redeem ur undivided share that
was sold to another person, 1611 tells us that
the person who bought ur property can
compel u or force u to redeem the whole
property, because by virtue of purchasing the
property ….
ARTICLE 1612. IF SEVERAL PERSONS, JOINTLY AND IN
THE SAME CONTRACT, SHOULD SELL AN UNDIVIDED
IMMOVABLE WITH A RIGHT OF REPURCHASE, NONE
OF THEM May EXERCISE THIS RIGHT FOR MORE THAN
HIS RESPECTIVE SHARE.
THE SAME RULE SHAU APPLY IF THE PERSON
WHO SOLD AN IMMOVABLE ALONE HAS LEFT
SEVERAL HEIRS. IN WHICH CASE EACH OF THE LATTER
MAY ONLY REDEEM THE PART WHICH MAY HAVE
ACQUIRED. (1514)
- Ano ang extent to redeem the share
ARTICLE 1613. IN THE CASE OF THE PRECEDING
ARTICLE. THE VENDEE MAY DEMAND OF ALL THE
VENDORS OR CO-Heirs THAT THEY COME TO AN
AGREEMENT UPON THE REPURCHASE OF WHOLE
THING SOLD; AND SHOULD THEY FAIL TO DO SO THE
VENDEE CANOT BE COMPELLED TO CONSENT TO A
PARTIAL REDEMPTION
- The right of choice to redeem the whole
property is upon the vendee a retro.
ARTICLE 1614. EACH ONE OF THE CO-OWNERS OF AN
UNDIVIDED IMMOVABLE WHO MAY HAVE SOLD HIS
SHARE SEPARATELY, MAY INDEPENDENTLY EXERCISE
THE RIGHT OF REPURCHASE AS REGARDS HIS OWN
SHARE, AND THE VENDEE CANNOT COMPEL HIM TO
REDEEM THE WHOLE PROPERTY.
ARTICLE 1615. IF THE VENDEE SHOULD LEAVE
SEVERAL HEIRS, THE ACTION FOR REDEMPTION
CANNOT BE BROUGHT AGAINST EACH OF THEM
EXCEPT FOR HIS OWN SHARE, WHETHER THE THING
BE UNDIVIDED, OR IT HAS BEEN PARTITIONED
AMONG THEM.
BUT IF THE INHERITANCE HAS BEEN DIVIDED,
AND THE THING SOLD HAS BEEN AWARDED TO ONE
OF THE HEIRS THE ACTION FOR REDEMPTION MAY BE
instituted AGAINST HIM FOR THE WHOLE.
ARTICLE 1616. THE VENDOR CANNOT AVAIL HIMSELF
OF THE RIGHT OF REPURCHASE WITHOUT RETURNING
TO THE VENDEE THE PRICE OF THE SALE. AND IN
ADDITION:
1.) THE EXPENSES OF THE CONTRACT. AND ANY
OTHER LEGITIMATE PAYMENTS MADE BY
REASON OF THE SALE;
2.) THE NECESSARY AND USEFUL EXPENSES
MADE ON THE THING SOLD. (1518)
-ulian nimo si vendee
- the vendee cannot insist to increase the price
because it is conventional redemption
ARTICLE 1617. IF AT THE TIME OF THE EXECUTION OF
THE SALE THERE SHOULD BE ON THE LAND, VISIBLE
OR GROWING FRUITS, THERE SHALL BE NO
REIMBURSEMENT FOR OR PRORATING OF THOSE
EXISTING AT THE TIME OF REDEMPTION IF NO
INDEMNITY WAS PAID BY THE PURCHASER WHEN THE
SALE WAS EXECUTED.
SHOULD THERE HAVE BEEN NO FRUITS AT
THE TIME OF THE SALE AND SOME EXIST AT THE TIME
OF REDEMPTION, THEY SHALL BE PRORATED
BETWEEN THE REDEMPTIONER AND THE VENDEE.
GIVING THE LATTER THE PART CORRESPONDING TO
THE TIME HE POSSESSED THE LAND IN THE LAST YEAR,
COUNTED FROM THE ANNIVERSARY OF THE DATE OF
THE SALE
- If meron, maghati sila
ARTICLE 1618. THE VENDOR WHO RECOVERS THE
THING SOLD Shall RECEIVE IT FREE FROM All CHARGES
OR MORTGAGES CONSTITUTED BY THE VENDEE. BUT
HE Shall RESPECT THE LEASES WHICH THE LATTER
MAY HAVE EXECUTED IN GOOD FAITH, AND IN
ACCORDANCE WITH THE CUSTOM OF THE PLACE
WHERE THE LAND IS SITUATED.
LEGAL REDEMPTION
ARTICLE 1619. LEGAL REDEMPTION IS THE RIGHT TO
BE SUBROGATED, UPON THE SAME TERMS AND
CONDITIONS STIPULATED IN THE CONTRACT, IN THE
PLACE OF ONE WHO ACQUIRES A THING BY
PURCHASE OR DATION IN PAYMENT, OR BY ANY
OTHER TRANSACTION WHEREBY OWNERSHIP IS
TRANSMITTED BY ONEROUS TITLE
- Nature of privilege for reason of public policy
and also for benefit and convenience of the
redemptioner.
KINDS OF REDEMPTION:
1. Legal redemption of a co-owner-
ARTICLE 1088. SHOULD ANY OF THE HEIRS SELL HIS
HEREDITARY RIGHTS TO A STRANGER BEFORE THE
PARTITION. ANY OR AU OF THE CO-HEIRS MAY BE
SUBROGATED TO THE RIGHTS OF THE PURCHASER BY
REIMBURSING HIM FOR THE PRICE OF THE SALE,
PROVIDED THEY DO SO WITHIN THE PERIOD OF ONE
MONTH FROM THE TIME THEY WERE NOTIFIED IN
WRITING OF THE SALE BY THE VENDOR.
- Being co-heirs, pwede nila mabaligya ilang
respective share to other persons.
ARTICLE 1620. A CO-OWNER OF A THING MAY
EXERCISE THE RIGHT OF REDEMPTION IN CASE THE
SHARES OF ALL THE OTHER CO-OWNERS OR OF ANY
OF THEM. ARE SOLD TO A THIRD PERSON. IF THE
PRICE OF THE ALIENATION IS GROSSLY EXCESSIVE, THE
REDEMPTIONER SHALL PAY ONLY A REASONABLE
ONE.
SHOULD TWO OR MORE CO-OWNERS DESIRE
TO EXERCISE THE RIGHT OF REDEMPTION, THEY MAY
ONLY DO SO IN PROPORTION TO THE SHARE THEY
MAY RESPECTIVELY HAVE IN THE THING OWNED IN
COMMON.
 - There must be co-ownership
- For it to be exercised, it must be sold to a
third person (stranger to co-ownership)
-
ARTICLE 1621. THE OWNERS OF ADJOINING LANDS
SHALL ALSO HAVE THE RIGHT OF REDEMPTION WHEN
A PIECE OF RURAL LAND, THE AREA OF WHICH DOES
NOT EXCEED ONE HECTARE, IS ALIENATED. UNLESS
THE GRANTEE DOES NOT OWN ANY RURAL LAND.
THIS RIGHT IS NOT APPLICABLE TO ADJACENT
LANDS WHICH ARE SEPARATED BY BROOKS. DRAINS,
RAVINES. ROADS AND OTHER APPARENT SERVITUDES
FOR THE BENEFIT OF OTHER ESTATES
IF TWO OR MORE ADJOINING OWNERS
DESIRE TO EXERCISE THE RIGHT OF REDEMPTION AT
THE SAME TIME, THE OWNER OF THE ADJOINING
LAND OF SMALLER AREA SH ALL BE PREFERRED; AND
SHOULD BOTH LANDS HAVE THE SAME AREA, THE
ONE WHO FIRST REQUESTED THE REDEMPTION.
- Requisites: both land
Art. 1622. Whenever a piece of urban land is so small
and so situated in that a major portion thereof cannot
be used for any practical purpose within a reasonable
time, having been bought merely for speculation, is
about to be re-sold, the owner of any adjoining land
has a right of pre-emption at a reasonable price.
IF THE RESALE HAS BEEN PERFECTED, THE
OWNER OF THE ADJOINNG LAND SHALL HAVE A
RIGHT OF REDEMPTION, ALSO AT A REASONABLE
PRICE
WHEN TWO OR MORE OWNERS OF
ADJOINING LANDS WISH TO EXERCISE THE RIGHT OF
PRE-EMPTION OR REDEMPTION. THE OWNER WHOSE
INTENDED USE OF THE LAND IN Question APPEARS
BEST JUSTIFIED SHAU BE PREFERRED
- IF grossly excessive, it can be reduced
- If equal portion, pillion kung kinsa naka una
mupalit
- Purpose of legal redemption to adjacent
urban land: to discourage speculations in real
estate and the consequent aggravation of the
housing problems in centers of population.
ARTICLE 1634. WHEN A CREDIT OR OTHER
INCORPOREAL RIGHT IN LITIGATION IS SOLD, THE
DEBTOR SHALL HAVE A RIGHT TO EXTINGUISH IT BY
REIMBURSING THE ASSIGNEE FOR THE PRICE THE
LATTER PAID THEREFOR, THE JUDICIAL COSTS
INCURRED BY HIM. AND THE INTEREST ON THE PRICE
FROM THE DAY ON WHICH THE SAME WAS PAID.
A CREDIT OR OTHER INCORPOREAL RIGHT
SHALL BE CONSIDERED IN LITIGATION FROM THE
TIME THE COMPLAINT CONCERNING THE SAME IS
ANSWERED.
THE DEBTOR MAY EXERCISE HIS RIGHT
WITHIN THIRTY DAYS FROM THE DATE THE ASSIGNEE
DEBMNDS PAYMENT FROM HIM.
- Connected to sales
- 30 days
-
Article 1623 provides: The right of legal pre-emption
or redemption shall not be exercised except within
thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may
be. The deed of sale shall not be recorded in the
registry of property, unless accompanied by an
affidavit of the vendor that he has given written notice
therefore to all possible redemptioners.
The right of redemption of co-owners
excludes that of adjoining owners.
- This 30 day period is to discourage the
keeping for a long time the property in a state
of uncertainty
- If no demand for payment, the 30 day will not
start
- In adjacent owners, whether in rural or urban
land, but all the requisites are present, The
right of redemption of co-owners excludes
that of adjoining owners.
Pledge & Mortgage
- This law was already repealed and amended
Article 2085. The following requisites are essential to
the contracts of pledge and mortgage:
1.) That they be constituted to secure the
fulfillment of a principal obligation;
2.) That mortgagor be the absolute owner of the
thing mortgage;
3.) That the persons constituting the mortgage
have the free disposal of their property, and
in the absence thereof, that they be legally
authorized for the purpose.
 Third persons who are not parties to the principal
obligation may secure the latter by pledging or
mortgaging their own property.
- Specifically to real estate mortgage
- These are additional requisite for a valid real
estate mortgage
- This real estate mortgage must be constituted
or entered into to secure the fulfillment of the
principal obligation because we have to
remember, a real estate mortgage is an
assessor contract, it cannot exist of its own.
Its validity and existence depends upon the
principal obligation
Article 2086. The provisions of article 2052 are
applicable to a pledge or mortgage
Article 2052. A guaranty cannot exist without a valid
obligation.
Nevertheless, a guaranty may be constituted
to guarantee the performance of a voidable or an
unenforceable contract. It may also guarantee a
natural obligation.
Guaranty – is a promise of a person
- Also an accessory contract, it is a security
contract depends upon the promise of the
guarantor.
- If the principal obligation is void, then the
accessory contract is also void.
- But if the mortgage is void, bec. The
mortgagor is not the absolute owner thereof,
it is only the accessory contract of mortgage
that is void but not the principal obligation.
Article 2087. It is also of the essence of these
contracts that when the principal obligation becomes
due, the things in which the pledge or mortgage
consists may be alienated for the payment to the
creditor.
- If there’s a mortgage and the debtor defaults,
then the property will be foreclosed, sold in a
foreclosure sale to the highest bidder and the
proceeds will be used to pay the creditor.
PACTUM COMMISSORIUM
Article 2088. The creditor cannot appropriate the
things given by way of mortgage, or dispose of them.
Any stipulation to the contrary is null and void.
PACTUM COMMISSORIUM
(PACTO COMISORIO)
The automatic appropriation by the creditor
of the thing pledged or mortgaged upon failure of the
debtor to pay his debt within the period agreed upon
by virtue of authority or right previously given to the
creditor
Elements of Pactum Commissorium
1. There should be a or mortgage or antichresis
of property by way of security for the
payment of the principal obligation
Antichresis- a form of security but theres no transfer
of ownership but the use of property to the creditor.
2. There should be stipulation for an automatic
appropriation by the creditor of the property
in the event of non-payment of the obligation
PACTUM Dacion en pago
COMMISSORIUM
-There is the original There is a simple
contract of pledge. obligation of a loan
mortgage or - No automatic
antichresis transfer
-Upon non-payment,
property is deemed
automatically
transferred to the
creditor
QUIZ 2
ARTICLE 2089. A mortgage is indivisible, Even though
the debt may be divided among the successors in
interest Of the debtor Or Of the creditor.
Therefore, the debtor's heir who has paid a
part of the debt cannot ask for the proportionate
extinguishment of the mortgage as long as the debt is
not completely satisfied.
May cont pa!!
Article 2091. The contract of pledge or mortgage may
secure all kinds of obligations, be they pure or subject
to a suspensive or resolutory condition.
- Whats important is the principle contract is
valid
-
ARTICLE 2092. A promise to constitute a pledge or
mortgage gives rise only to a personal action between
the contracting parties, without prejudice to the
criminal responsibility incurred by him who defrauds
another, by offering in pledge or mortgage as
unencumbered, things which he knew were subject to
some burden, or by misrepresenting himself to be the
owner of the same
- You promise nan aa kay property na ibenta,
but u did not deliver it. In a contract of
pledge, delivery is required for its validity and
in mortgage, there must be the execution of
the real estate mortgage contract.
Personal Right- is a right that u can raise against to a
specific person, as the arrangement of the promise is
bidding up upon the parties
Real right- a right that isa bidding against the whole
world
- 2092 also refers to criminal responsibility.
Under revised penal code (basic law sa
criminal law) person can be liable for estafa, if
he pretended to be the owner of real
property that would be subject to a mortgage
or knowing na giprenda nya na sa lain then he
disposes or sells it na clean title
unencumbered (walay burden), so that
misrepresentation.
REAL ESTATE MORTGAGE
A contract whereby the debtor secures to the
creditor the fulfillment of a principal obligation,
specially subjecting to such security immovable
property or real rights over immovable property
which obligation shall be satisfied with the proceeds
of the sale of said property or rights in case said
obligation is not complied with at the time stipulated
- It emphasized that the real estate mortgage,
just like chattel mortgage is an accessory
contract. It cannot exist without a valid and
existing principal obligation
- Its consideration (to validly exist) : it must
have the essential element of consent, object
and consideration.
- Consideration of accessory contracts of
mortgages: the same as the principal contract
Art. 2124. Only the following property may be the
object of a contract of mortgage:
I) IMMOVABLES- real properties
II) Alienable real rights in accordance with
the laws, imposed upon immovables –
rights attached to a real property
Ex: usufruct – it is a right over an immovable property,
wherein the usufructuary is given the right to use the
real property. That could be also subject to real estate
mortgage. (not that common)
Nevertheless, movables may be the object of
a chattel mortgage.
Subject Matter:
 Immovables
 Alienable real rights in accordance with the
laws imposed upon immovables
 Includes natural accessions, improvements,
growing fruits, rents or income not yet
received when the obligation becomes due
Accessions- (art.1166)
Kinds of Real Estate Mortgage
1. VOLUNTARY — one which is agreed between
the parties or constituted by will of the owner
of the property
2. EQUITABLE — one which, although it lacks the
formalities of a mortgage shows the intention
of the parties to make the property as security
for the debt
3. LEGAL — one required by law to be executed
in favor of certain persons
Art. 2125. In addition to the requisites stated in
Article 2085, it is indispensable, in order that a
mortgage may be validly constituted, that the
document in which it appears be recorded in the
Registry of Property. If the instrument is not recorded,
the mortgage is nevertheless binding between the
parties.
- Indispensable- it is required, necessary
- With regard to real estate mortgage contract,
the parties would execute a real estate
mortgage contract, if it is not recorded in
ROD, wala na annotate sa title, it is still valid
between the parties however, to bind third
persons, it must be annotated and registered
with the registry of deeds. And it is considered
a constructive notice to the whole world that
this property is subject to an encumbrance.
- With 2125, we reiterate again the
requirements; essential requirements of
object, consent and consideration. Plus 3 req
under 2085.
1. That it must be constituted to secure a
principal obligation
 2. That the mortgagor must be the absolute
owner thereof
3. He has the free disposal of the said
property or legally authorized to do so.
The persons in whose favor the law
establishes a mortgage have no other right than to
demand the execution and the recording of the
document in which the mortgage is formalized.
- If u are the creditor mortgagee , make sure u
have the copy of mortgage contract.
What if nagsabot mo na prenda pero wala mo
nagpirmahay, or it was in a private instrument / not
notarized, u can demand the mortgagor to have it
notarized.
Notarization is not required for the validity of
the mortgage, but its required so that it can be
recorded sa registry of property / ROD, because the
registry of deeds will not accept a private document
na mortgage contract
- If notarized, it needs a personal apprearance
Essential Requisites:
Constituted to secure the fulfillment of a principal
obligation
The mortgagor is the absolute owner of the thing
mortgaged
That the persons constituting the mortgage have
the free disposal of the property or are legally
authorized to do so
Must be in a public document
Effects of an Invalid Mortgage
 The principal obligation subsists
- If the mortgage is not valid bec. One of the
following is present, it will not affect the
principal obligation, as long as it is valid, it is
lawful, the principal obligation subsist
 The right to foreclose the subject property is
not available
- Foreclosure is only in connection to a valid
contract of mortgage
 The mortgage deed remains as evidence of
personal obligation of the debtor
 If mortgage is in a public document but is not
recorded - mortgage is nonetheless binding
on the parties
 If the mortgage is in a private document, the
mortgagee may demand reduction of
mortgage in a public instrument
- But if it is recorded, it is valid bet. Parties and
as well as 3rd persons
Effect of Non-Registration:
Registration only operates as notice of the
mortgage to others but does NOT add to the validity
of the mortgage or convert an invalid mortgage into a
valid one.
Take note: there would be instances na ang mortgage
contract was executed by a person who is not the
absolute owner thereof tapos na register ang
mortgage, it can be proven na nakaregister na owner
is not the lawfull owner then the mortgage is not valid
even if naka annotate
REAL ESTATE MORTGAGE
 Constituted on immovable or real properties
 Delivery is NOT required
 It is not valid against third persons unless it is
registered
PLEDGE
 Constituted on movable personal properties
 Delivery to the pledgee or a third person, by
common agreement, is REQUIRED
 It is not valid as to third persons unless a
description of the thing pledged and the date
of pledge appear in a public instrument
Art. 2126. The mortgage directly a immediately
subjects the property upon which it is imposed,
whoever the possessor may be, to the fulfillment of
the obligation for whose security it was constituted.
- Once the real estate mortgage is annotated, it
creates a real right (a right that is bidding the
whole world).
Doctrine of the mortgagee in good faith- this is base
in the rule, that all persons dealing with property
covered with a torrent certificate of title on the face
the buyers or mortgagees , they are not required to
go beyond what appears on the face of the title.
- That mean that the face of the title, the title
recorded in the registry of property/deeds
Effects of Mortgage:
 It creates a real right until the obligation is
discharged
 - When the obligation is extinguished
- If u are mortgagor, u get the copy of
cancellation and present it in the registry of
deeds para macancel and contract
 It follows the property wherever it goes and
subsists notwithstanding change of ownership.
- U can still sell it to other persons but if the
mortgage was annotated/ registered bet. The
purchaser/buyer and the mortgagee, the
mortgagee will have the better right
 If the mortgagor sells the property , the subject
matter remains subject to the fulfillment of the
obligation secured by it
Art. 2127. The mortgage extends to natural
accessions, to the improvement growing fruits, and
the rents or income not yet received when the
obligation becomes due, and to the amount of the
indemnity granted or owing to the proprietor from
the Insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations,
amplifications and limitations established by law,
whether the estate remains in the possession of the
mortgagor, or it passes into the hands of a third
person
- Section I. When a sale/mortgage is made under the
Art. 2128. The mortgage credit may be alienated or
assigned to a third person, in whole or in part, with
the formalities required by law.
- U can assign to 3rd party, either naa koy utang
sa imuha instead of paying my obligation , so
pwede ikaw nlng mag habol
- By assigning it to other, u can now forecloce
the property and have it sold incase the
debtor fails to pay when the obligation
becomes due and demandable
- The assignment does not require to be in a
registry of deeds
Art. 2129. The creditor may claim from a third person
in possession of the mortgaged property, the payment
of the part of the credit secured by the property
which said third person possesses, in the terms and
with the formalities which the law establishes.
- The fact that the mortgagor has transfer the
property, may be sold, donated it to a 3rd
person , take note it will not relive the
mortgagor to pay the debt to the creditor.
Bec. Principal obli still exist
- So, the mortgage credit being the real right
follows the property wherever it goes and
therefore the creditor may demand from the
processor of such property, payment but he
cannot force.
Art. 2130. A stipulation forbidding the owner from
alienating the immovable mortgaged shall be void
- U cannot prevent the owner/mortgagor from
alienating, selling, donating the property to
other persons kahit pa magsabot kayo
- But Still respects the mortgage
Art. 2131. The form, extent are consequences of a
mortgage, both as to its constitution, modification and
extinguishment, and as to other matters not included
in this Chapter, shall be governed by the provisions of
the Mortgage Law and Of the Land Registration Law.
May Special Law!
Act no. 3135
- Is a special law governing extrajudicial
foreclosure of mortgages
- Extrajudicial – walay hiring, dli na need mag
adto sa court but u need to file a petition
special power inserted in or attached to any real-
estate mortgage hereafter made as security for the
payment of money or the fulfillment of any other
obligation, the provisions of the following election
shall govern as to the manner in which the sale and
redemption shall be effected, whether or not
provision for the same is made in the power.
- Make sure sa mortgage contract may
nakalagay na “in case debtor defaults or fails
to pay the obligation, the mortgagee is hereby
authorized to foreclose the property”
- If wala ang authority, it can still be foreclosed
pero judicial foreclosure na. under rules of
court/ mas dugay
Sec. 2. Said sale (refers to foreclosure sale) cannot be
made legally outside of the province in which the
property sold is situated; and in case the place within
said province in which the sale is to be made is subject
to stipulation, such sale shall be made in said place or
in the municipal building of the municipality in which
the property or part thereof is situated.
Foreclosure- is the remedy available to the
creditor /mortgagee by which he subjects the
mortgage property to the satisfaction of the
obligation to secure which the mortgage was given
through sale of that property in a public auction, and
again apply the proceeds to the payment of the
principal obligation
- Section 2 discloses, saan magtake place ang
foreclosure sale, it is where the property
situated.
Sec. 3. Notice shall be given by posting notices of the
sale for not less than twenty days in at least three
public places of the municipality or city where and if
such the property is situated, property is worth more
than four hundred pesos, such notice shall also be
published once a week for at least three consecutive
weeks in a newspaper of general circulation in the
municipality or City.
- Notice of sale
General rule: An action to foreclose mortgage must
be limited to the amount mentioned in the mortgage.
- If I borrowed 1m with u, and executed a
mortgage contract pag iforclose nimo dapat
up to that 1m only
Exception: But the amounts named as consideration
in a contract of mortgage do not limit the amount for
which the mortgage may stand as long as the
intention is to secure future loans or advancements
and other indebtedness
- Need to understand it or refer it to a lawyer
so that u would be able to understand the
contract. Because it may happen it would
have an exception where in that property
would also secure other future obligations
that u would procure from the same creditor .
which is called:
DRAGNET CLAUSE / blanket mortgage clause
A clause which subsumes debts of past or
future origin. By virtue of this clause, the mortgage
secures future loans or advancements.
Question:
X obtained a Php 10 Million loan from Banking
Corporation. The loan is secured by Real Estate
Mortgage on his vacation house in Tagaytay City. The
original Deed of Real Estate Mortgage for the Php 10
Million was duly registered. The Deed of Real Estate
Mortgage also provides that "The mortgagor also
agrees that this mortgage will secure the payment of
additional loans or credit accommodations that may
be granted by the mortgagee „. " Subsequently,
because he needed more funds, he obtained another
Php 5 Million loan. On due dates Of both loans, X
failed to pay the Php5Million but fully paid the Php 10
Million. BBB Banking Corporation instituted
extrajudicial foreclosure proceedings.
Bar Question:
a. Will the extrajudicial foreclosure prosper
considering that the additional Php5Million
was not covered by the registration?
- It is actually covered
- The foreclosure will prosper bec. Of the clause
“will secure the payment of additional loans
or credit accommodations that may be
granted by the mortgagee”
-
b. What is the meaning of a "dragnet clause" in a
Deed of Real Estate Mortgage? Under what
circumstances will the "dragnet clause" be
applicable?
- A clause which subsumes debts of past or
future origin. By virtue of this clause, the
mortgage secures future loans or
advancements
If the debtor defaults:
 Mortgagee chooses between filing a collection
case or foreclosing the mortgage
 Foreclosure may either be extrajudicial or judicial
EXTRAJUDICIAL Foreclosure
1. File an application/petition for foreclosure
through Clerk of Court
2. Posting of notice of sale and publication of sale
3. Clerk of court issues receipt and application is
raffled
4. Public auction takes place. Sale must have at least
2 bidders. If less than 2 on the first sale, a second
sale is scheduled. If none, lone bidder declared as
winning bid.
5. Certificate of sale is issued then registered
Sec. 6. In all cases in which extrajudicial sale is made
under the special power hereinbefore referred to, the
debtor, his successors in interest or any judicial
creditor or judgment creditor of said debtor, or any
person having a lien on the property subsequent to
the mortgage or deed of trust under which the
property is sold, may redeem the same at any time
within the term of one year from and after the date
of the sale; xxx
 - The one year redemption period here is one
yr from the time of the registration of the
sale
EQUITY OF Redemption
Right of the mortgagor redeem the property
after his default in the performance of the conditions
of the mortgage BUT before the confirmation of the
auction sale of the mortgaged property
- After he failed to pay
General Rule: Available only in judicial foreclosure; 90
to 120 days from receipt of judgment in favor Of the
creditor OR before the confirmation of the sale at the
discretion of the court
Exception: In extrajudicial foreclosure where the
mortgagor is a juridical entity, until but not after the
registration of certificate of foreclosure sale which
shall not be more than 3 months after foreclosure,
WHICHEVER IS EARLIER (Republic Act 8791)
- Ex; corporation
The basis here is the republic act 8791 – the general
banking Law
Section 47 of Republic act 8791
SECTION 47. Foreclosure Of Real Estate
Mortgage.
xxx
Notwithstanding Act 3135, juridical persons
whose property is being sold pursuant to an
extrajudicial 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 right until their expiration.
General rule sa extrajudicial foreclosure is the right of
redemption.
RIGHT OF REDEMPTION- The right of the mortgagor
to redeem the mortgaged property within a certain
period AFTER it was sold for the satisfaction of the
debt
General Rule: Extrajudicial foreclosure within one
year from registration of certificate of sale
Exception: In judicial foreclosure where the
mortgagee is a banking institution, within one year
from registration of the foreclosure sale (Republic Act
8791)
- Dli na iapil ang judicial forclose sa exam!
Section 47 of Republic Act 8791
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 rate specified 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. Xxx
- As long as the mortgagee is bank, whether
judicial or extrajudicial one yr from the date of
sale of the real estate mortgage except if
juridical person, then 3 months or
registration of the sale which ever comes
earlier.
Who can redeem?
- Mortgagor or one who is in privity of title with
mortgagor
- Successor-in-interest (pagmamatay)
Sec. 7. In any sale made under the provision of this
Act, the purchaser may petition the Court of First
Instance of the province or place where the property
or any part thereof is situated, to give him possession
thereof during the redemption period, furnishing
bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify
the debtor in case it be shown that the sale was made
without violating the mortgage or without complying
with the requirements of this Act. Xxx
- Pwede ma possess ni highest bidder the
property that he purchased but there is a
requirement
In case of deficiency, the creditor- mortgagee can
demand it from the debtor
In case of excess, the debtor- mortgagor is
entitled to it

PERSONAL PROPERTY SECURITY ACT
(Republic Act 11057)
- This is in connection to pledge and chattel
mortgages
CHAPTER 1: DEFINITIONS AND SCOPE
Section 3. Definition of Terms
c. Control agreement — an agreement in
writing between the grantor and the secured
creditor which perfects the security interests
over intangible asset (IRR)
- in terms of Personal property security act it has
the same purpose with pledge and mortgage,
wherein a personal property is used to secure the
performance of an obligation. But this time, walay
distinction na kung pledge or chattel mortgage
sya. Under PPSA we do not those terms pledgor or
mortgagor, what we have is a grantor. In the part
of the creditor, wala narin pledgee or mortgagee,
but we have a security creditor.
1.) With respect to securities, means an agreement in
writing among the issuer or the intermediary, the
grantor and the secured creditor, according to which
the issuer or the intermediary agrees to follow
instructions from the secured creditor with respect to
the security, without further consent from the
grantor;
- Securities- these are intangible assets.
- So, a control agreement with the executed, if the
securities is the subject matter of such personal
property security.
2.) With respect to rights to deposit account (money
in bank is a PP), means an agreement in writing
among the deposit-taking institution, the grantor and
the secured creditor, according to which the deposit-
taking institution agrees to follow instructions from
the secured creditor with respect to the payment of
funds credited to the deposit account without further
consent from the grantor;
3.) With respect to commodity (goods covered)
contracts, means an agreement in writing among the
grantor, secured creditor, and intermediary, according
to which the commodity intermediary will apply any
value distributed on account of the commodity
contract as directed by the creditor without further
consent the commodity
c. Grantor —
1.) The person who grants a security interest in
collateral to secure its own obligation or that of
another person;
-
same sa civil code that a 3rd person can have his own
property secure the performance of the obligation of
another person
2.) A buyer or other transferee of a collateral that
acquires its right subject to a security interest;
3.) A transferor in an outright transfer of an accounts
receivable; or
4.) A lessee of goods;
g. Purchase money security interest –
a security interest in goods taken by the seller
to secure the price or by a person who gives value to
enable the grantor to acquire the goods to the extent
that the credit is used for that purpose
h. Registry —
the centralized and nationwide electronic
registry established in the Land Registration Authority
(LRA) where notice of a security interest and a lien in
personal property may be registered
- very important requirement here is the security
agreement, the control agreement must be registered
with the land registration authority.
i. Secured creditor — a person that has a security
interest (over personal properties). For the purposes
of registration and priority only, it includes a buyer of
account receivable and a lessor of goods under an
operating lease for not less than one (1) year
j. Security interest — a property right in collateral
that secures payment or other performance of an
obligation, regardless of whether the parties have
denominated it as a security interest, and regardless
of the type of asset, the status of the grantor or
secured creditor, or the nature of the secured
obligation; including the right of a buyer of accounts
receivable and a lessor under an operating lease for
not less than one (1) year
k. Writing — for the purpose of this Act includes
electronic records
CHAPTER 2: CREATION OF SECURITY Interest
Section 5. Creation of a Security Interest.—
a.) A security interest shall be created by a
security agreement,
b.) A security agreement may provide for the
creation of a security interest in a future
property, but the security interest in that
property is created only when the grantor
acquires rights in it or the power to encumber
it.
- So the security agreement here if the contract
itself, wherein the parties agreed that these
personal property will secure the
performance of these specific obligation.
- Take note! The parties could also execute a
security agreement, creating a security
interest over a personal property and the
obligation is yet to exist.
- When it comes to pledge and chattel
mortgage, hindi pwede ang future property
because in pledge u have to deliver PP for
perfection while in chattel mortgage, because
u have to specify.
- But the security interest itself, is only created
when the grantor acquires rights in it when it
exist sya na tag iya or has the power to
encumber it
Section 6. Security Agreement.—
A security agreement must be contained in a
written contract signed by the parties. It may consist
of one or more writings that, taken together, establish
the intent Of the parties to create a security interest.
The security agreement shall likewise provide
for the language to be used in agreements and
notices. The grantor shall be given the option to have
the agreement and notices in Filipino. The
Department of Finance (DOF) shall prepare model
agreements in plain English and Filipino.
Section 7. Description of Collateral.—
A description of collateral shall be considered
sufficient, whether it is specific or general, if it
reasonably identifies the collateral. A description such
as "all personal property", "all equipment" "all
inventory", or "all personal property within a generic
category" of the grantor shall be sufficient.
CHAPTER 3: PERFECTION OF SECURITY INTEREST
Section 11. Perfection of Security Interest.—
A.) A security interest shall be perfected when it
has been created and the secured creditor has
taken one of the actions in accordance with
Section 12.
B.) On perfection, a security interest becomes
effective against third parties.
- Sec 11 appears that walang separate
requirement to bind 3rd parties. So direct na!
Section 12. Means of Perfection — a security interest
may be perfected by:
a.) Registration of a notice with the Registry;
b.) Possession of the collateral by the secured
creditor; and
c.) Control of investment property and deposit
account
- Any of the following, pwede hindi lahat
existing
Section 13. Perfection by Control.— (under letter c)
a.) A security interest in a deposit account or
investment property may be perfected by
control through:
 1. The creation of the security interest in
favor of the deposit- taking institution or
the intermediary;
2. The conclusion of a control agreement; or
3. For an investment property that is an
electronic security not held with an
intermediary, the notation of the security
interest in the books maintained by or on
behalf of the issuer for the purpose of
recording the name of the holder of the
securities.
b.) Nothing in this Act shall require a deposit-taking
institution or an intermediary to enter into a
control agreement, even if the grantor so
requests. A deposit-taking institution or an
intermediary that has entered into such an
agreement shall not be required to confirm the
existence of agreement to another person
unless requested to do so by the grantor.
CHAPTER 4: PRIORITY OF SECURITY INTEREST
Section 21. Transferee Exceptions.
Any party who obtains, in the ordinary course
of business, any movable property containing a
security interest shall take the same free of such
security interest provided he was in good faith. No
such good faith shall exist if the security interest in the
movable property was registered prior to his
obtaining the property.
- If the personal property is transferred, given
or sold to u then u have a better right over the
security creditor if u are in good faith
- When it comes to personal property, and
PPSA is already in effect, if u would accept
that personal property as the security of the
performance of the principal obligation, u
have to check the registry of deeds whether
that personal property is subject to a security.
Because once registered, it means it has
notice to the whole world.
- If nay giprenda sa imo then it turns out that
na kadto na car is already used as a security
by other, then the secured creditor whose
right is registered will have the better right
over the property . mao icheck jud! Eme
Chapter 5- REGISTRATION - REGISTRY
Section 26. Establishment of Electronic Registry.—
a.) The Registry shall be established in and
administered by the LRA.
b.) The Registry shall provide electronic means
for registration and searching of notices.
- At present wala pa na establish
Section 27. Public Record.—
a.) Information contained in a registered notice
shall be considered as a public record.
b.) Any person may search notices registered in
the Registry.
c.) The electronic records of the Registry shall be
the official records.
CHAPTER 6: ENFORCEMENT OF SECURITY INTERES
SECURED CREDITOR'S RIGHTS
Section 45. Right of Redemption.—
a.) Any person who is entitled to receive a
notification of disposition in accordance with this
Chapter is entitled to redeem the collateral by
paying or otherwise performing the secured
obligation in full, including the reasonable cost of
enforcement.
- In pledge and chattel mortgage, when sold
walay right of redemption, pero u can offer to
highest bidder that u want to purchase the
property but u cannot demand/force!
- In sec. 45- the right of redemption here is
exercise prior from the sale
-
b.) The right of redemption may be exercised, unless:
1. The person entitled to redeem has not, after
the default, waived in writing the right to
redeem;
- Pag he waived his right to redeem in writing,
he obviously cannot redeem anymore bec.
Waiver is an abandonment of your right
provided under the law.
2. The collateral is sold or otherwise disposed of,
acquired or collected by the secured creditor
or until the conclusion of an agreement by the
secured creditor for that purpose; and
- Once sold or disposed there no right to
redeem
3. The secured creditor has retained the
collateral.
- These 3 walay right of redemption
Section 52. Application of Proceeds.—
a.) The proceeds Of disposition Shall be applied in the
following Order:
 1.) The reasonable expenses of taking, holding,
preparing for disposition, and disposing Of the
collateral, including reasonable attorneys' fees
and legal expenses incurred by the secured
creditor;
2.) The satisfaction of the obligation secured by
the security interest of the enforcing secured
creditor, and
3.) The satisfaction of obligations secured by any
subordinate security interest or when in the
collateral if a written demand and proof of the
interest are received before distribution of
the proceeds is completed.
b.) The secured creditor shall account to the grantor
for any surplus, and, unless otherwise agreed, the
debtor is liable for any deficiency.
- The rule here is similar to chattel mortgage
wherein pagsobra the grantor is entitled to
the excess, for deficiency the debtor will be
liable unless otherwise agreed.
Section 54. Retention of Collateral by Secured
Creditor.—
a.) After default, the secured creditor may propose to
the debtor and grantor to take all or part of the
collateral in total or partial satisfaction of the
secured obligation, and shall send a proposal to:
- There is default when there is a demand,
whether judicial or extrajudicial demand,
wherein despite such demand the debtor fails
to pay his obligation.
1.) The debtor and the grantor;
2.) Any other secured creditor or lien holder who,
five (5) days before the proposal is sent to the
debtor and the grantor, perfected its security
interest or lien by registration; and
3.) Any other person with an interest in the
collateral who has given a written notification
to the secured creditor before the proposal is
sent to the debtor and the grantor.
- Sec 54 upholds the right of the secured
creditor to retain the personal property (the
collateral).
- Hindi sya pactum commissorium because
there is no automatic appropriation. Here not
automatic because he is required to send
proposal to the debtor etc
b.) The secured creditor may retain the collateral in
the case of:
1.) A proposal for the acquisition of the collateral
in full satisfaction of the secured obligation,
unless the secured creditor receives an
objection in writing from any person entitled
to receive such a proposal within twenty (20)
days after the proposal is sent to that person;
or
- Pwede ma retain, in the case of proposal,
where the acquisition in full satisfaction of
the obligation or
2.) A proposal for the acquisition Of the collateral
in partial satisfaction of the secured
obligation, only if the secured creditor
receives the affirmative consent of each
addressee of the proposal in writing within
twenty (20) days after the proposal is sent to
that person.
- If naglampas 20 days (under no.1) , the
secured creditors given the right to retain
- But if there is objection within 20 days, hindi
maretain ni creditor.
- If partial lang, it requires consent of each
adresee within 10 days after the proposal is
sent
CHAPTER 7: TRANSITIONAL PROVISIONS
Section 56. Creation of Prior Interest.—
a.) Creation of prior interest shall be determined
by prior laws.
b.) A prior interest remains effective between the
parties notwithstanding its creation did not
comply with the creation requirements of this
Act.
Section 57. Perfection of Prior Interest.— —
a.) A prior interest that was perfected under prior
law continues to be perfected under this Act until
the earlier of:
1.) The time the prior interest would cease to be
perfected under prior law; and
2.) The expiration of the transitional period.
Transitional period- from the time this law was
enacted until the effectivity based on the
implementation or establishment of a registry for
purposes of PPSA
b.) If the perfection requirements of this Act are
satisfied before the perfection of a prior interest
ceases in accordance with subsection (a) of this
section, the prior interest continues to be
perfected under this Act from the time when it
was perfected under the prior law.
c.) If the perfection requirements of this Act are not
satisfied before — the perfection of a prior
interest ceases in accordance with subsection (a)
 Of this section, the prior interest is perfected only
from the time it is perfected under this Act.
- Not perfected prior to the effectivity of PPSA,
it must comply with the requirements of PPSA
for its purpose of perfection.
d.) A written agreement between a grantor and a
secured creditor creating a prior interest is
sufficient to constitute authorization by the
grantor of the registration of a notice covering
assets described in that agreement under this Act.
e.) If a prior interest referred to in subsection (b) of
this section was perfected by the registration of a
notice under prior law, the time of registration
under the prior law shall be the time to be used
for purposes of applying the priority rules of this
Act.
CHAPTER 8: CONGRESSIONAL OVERSIGHT AND
MISCELLANEOUS PROVISIONS
Section 68. Implementation.—
Notwithstanding the entry into force of this
Act under Section 67, the implementation of the Act
shall be conditioned upon the Registry being
established and operational
QUIZ 3
THE CONSUMER ACT OF THE PHILIPPINES
Republic Act No. 7394
Chapter I – Consumer Product Quality and Safety
ARTICLE 5.             Declaration of Policy. — It shall be
the duty of the State:
A. to develop and provide safety and quality
standards for consumer products, including
performance or use-oriented standards, codes
of practice and methods of tests;
B. to assist the consumer in evaluating the
quality, including safety, performance and
comparative utility of consumer products;
C. to protect the public against unreasonable
risks of injury associated with consumer
products;
D. to undertake research on quality
improvement of products and investigation
into causes and prevention of product related
deaths, illness and injuries;
E. to assure the public of the consistency of
standardized products.
ARTICLE 6.             Implementing Agencies. — The
provisions of this Article and its implementing rules
and regulations shall be enforced by:
A. the Department of Health with respect to
food, drugs, cosmetics, devices and
substances;
B. the Department of Agriculture with respect to
products related to agriculture, and;
C. the Department of Trade and Industry with
respect to other consumer products not
specified above.
ARTICLE 10.          Injurious, Dangerous and Unsafe
Products. —
Whenever the departments find, by their
own initiative or by petition of a consumer, that a
consumer product is found to be injurious, unsafe or
dangerous, it shall, after due notice and hearing, make
the appropriate order for its recall, prohibition or
seizure from public sale or distribution: Provided,
That, in the sound discretion of the department it may
declare a consumer product to be imminently
injurious, unsafe or dangerous, and order is
immediate recall, ban or seizure from public sale or
distribution, in which case, the seller, distributor,
manufacturer or producer thereof shall be afforded a
hearing within forty-eight (48) hours from such order.
The ban on the sale and distribution of a
consumer product adjudged injurious, unsafe or
dangerous, or imminently injurious, unsafe or
dangerous under the preceding paragraph shall stay in
force until such time that its safety can be assured or
measures to ensure its safety have been established.
ARTICLE 14.          Certification of Conformity to
Consumer Product Standards. —
The concerned department shall aim at having
consumer product standards established for every
consumer product so that consumer products shall be
distributed in commerce only after inspection and
certification of its quality and safety standards by the
department. The manufacturer shall avail of the
Philippine Standard Certification Mark which the
department shall grant after determining the
product’s compliance with the relevant standard in
accordance with the implementing rules and
regulations.
ARTICLE 15.          Imported Products. —
a) Any consumer product offered for importation into
the customs of the Philippine territory shall be refused
admission if such product:
1. fails to comply with an applicable consumer
product quality and safety standard or rule;
2. is or has been determined to be injurious,
unsafe and dangerous;
3. is substandard; or
4. has material defect.
B) Xxx
Any consumer product, the sale or use of
which has been banned or withdrawn in the country
of manufacture, shall not be imported into the
country.
ARTICLE 18.          Prohibited Acts. — It shall be
unlawful for any person to:
A. manufacture for sale, offer for sale, distribute
in commerce, or import into the Philippines
any consumer product which is not in
conformity with an applicable consumer
product quality or safety standard
promulgated in this Act;
B. manufacture for sale, offer for sale, distribute
in commerce, or import into the Philippines
any consumer product which has been
declared as banned consumer product by a
rule in this Act;
C. refuse access to or copying of pertinent
records or fail or refuse to permit entry of or
inspection by authorized officers or
employees of the department;
D. fail to comply with an order issued under
Article 11 relating to notifications of
substantial product hazards and to recall,
repair, replacement or refund of unsafe
products;
E. fail to comply with the rule prohibiting
stockpiling.
ARTICLE 19.          Penalties.
— a) Any person who shall violate any provision of
Article 18 shall upon conviction, be subject to a fine of
not less than One thousand pesos (P1,000.00) but not
more than Ten thousand pesos (P10,000.00) or
imprisonment of not less than two (2) months but not
more than one (1) year, or both upon the discretion of
the court. If the offender is an alien, he shall be
deported after service of sentence and payment of
fine without further deportation proceedings.
TITLE III – Protection Against Deceptive, Unfair and
Unconscionable Sales Acts or Practices
Chapter I - Deceptive, Unfair and Unconscionable
Sales Acts or Practices
ARTICLE 50.          Prohibition Against Deceptive Sales
Acts or Practices. — A deceptive act or practice by a
seller or supplier in connection with a consumer
transaction violates this Act whether it occurs before,
during or after the transaction. An act or practice shall
be deemed deceptive whenever the producer,
manufacturer, supplier or seller, through
concealment, false representation or fraudulent
manipulation, induces a consumer to enter into a
sales or lease transaction of any consumer product or
service.
ARTICLE 50.      Without limiting the scope of the
above paragraph, the act or practice of a seller or
supplier is deceptive when it represents that:
 A. a consumer product or service has the
sponsorship, approval, performance,
characteristics, ingredients, accessories, uses,
or benefits it does not have;
B. a consumer product or service is of a
particular standard, quality, grade, style, or
model when in fact it is not;
C. a consumer product is new, original or
unused, when in fact, it is in a deteriorated,
altered, reconditioned, reclaimed or second-
hand state;
D. a consumer product or service is available to
the consumer for a reason that is different
from the fact;
E. a consumer product or service has been
supplied in accordance with the previous
representation when in fact it is not;
F. a consumer product or service can be
supplied in a quantity greater than the
supplier intends;
G. a service, or repair of a consumer product is
needed when in fact it is not;
H. a specific price advantage of a consumer
product exists when in fact it does not;
I. the sales act or practice involves or does not
involve a warranty, a disclaimer of warranties,
particular warranty terms or other rights,
remedies or obligations if the indication is
false; and
J. the seller or supplier has a sponsorship,
approval, or affiliation he does not have.
ARTICLE 52.          Unfair or Unconscionable Sales Act
or Practice.
— An unfair or unconscionable sales act or
practice by a seller or supplier in connection with a
consumer transaction violates this Chapter whether it
occurs before, during or after the consumer
transaction. An act or practice shall be deemed unfair
or unconscionable whenever the producer,
manufacturer, distributor, supplier or seller, by taking
advantage of the consumer’s physical or mental
infirmity, ignorance, illiteracy, lack of time or the
general conditions of the environment or
surroundings, induces the consumer to enter into a
sales or lease transaction grossly inimical to the
interests of the consumer or grossly one-sided in favor
of the producer, manufacturer, distributor, supplier or
seller.
In determining whether an act or practice is unfair
and unconscionable, the following circumstances shall
be considered:
a)              that the producer, manufacturer,
distributor, supplier or seller took advantage of the
inability of the consumer to reasonably protect his
interest because of his inability to understand the
language of an agreement, or similar factors;
b)              that when the consumer transaction was
entered into, the price grossly exceeded the price at
which similar products or services were readily
obtainable in similar transaction by like consumers;
c)              that when the consumer transaction was
entered into, the consumer was unable to receive a
substantial benefit from the subject of the
transaction;
d)              that when the consumer transaction was
entered into, the seller or supplier was aware that
there was no reasonable probability or payment of
the obligation in full by the consumer; and
e)              that the transaction that the seller or
supplier induced the consumer to enter into was
excessively one-sided in favor of the seller or supplier.
ARTICLE 53.          Chain Distribution Plans or Pyramid
Sales Schemes.
— Chain distribution plans or pyramid sales
schemes shall not be employed in the sale of
consumer products.
ARTICLE 54.          Home Solicitation Sales.
— No business entity shall conduct any home
solicitation sale of any consumer product or service
without first obtaining a permit from the Department.
Such permit may be denied suspended or revoked
upon cause as provided in the rules and regulations
promulgated by the Department, after due notice and
hearing.
ARTICLE 60.          Penalties. —
a.) Any person who shall violate the provisions of
Title III, Chapter I, shall upon conviction, be
subject to a fine of not less than Five Hundred
Pesos (P500.00) but not more than Ten Thousand
Pesos (P10,000.00) or imprisonment of not less
than five (5) months but not more than one (1)
year or both, upon the discretion of the court.

Chapter iii – consumer product & service warranties
ARTICLE 66.          Implementing Agency. —
The Department of Trade and Industry shall
strictly enforce the provision of this Chapter and its
implementing rules and regulations.
Article 67. applicable law on warranties – THE
PROVISIONS OF THE CIVIL CODE ON CONDITIONS AND
WARRANTIES SHALL GOVERN ALL CONTRACTS OF
SALE WITH CONDITIONS AND WARRANTIES
The following shall be stated in an express warranty:
1. the terms of warranty, written in clear and readily
understandable language;
2. the warrantor’s identity;
3. the party’s identity to whom the warranty is
extended;
4. the products or parts covered;
5. the warrantor’s action plan in the event of a
defect, malfunction or failure to conform to the
written warranty;
6. the directive to the consumer to avail of the right
which accrue to the warranty;
7. the period within which, after notice of defect,
malfunction, or failure to conform to the
warranty, the warrantor will perform any
obligation under the warranty.
a. Full Warranty - if the warranty conforms with
the minimum standards for warranties.
REQUISITES:
1. there should be a remedy or relief offered
to a consumer within the reasonable time and
without charge in case of defect, malfunction, or
failure to conform with such written warranty.
2. the warranty should give the consumer an
option to either ask for a refund or replacement
without charge of such product or part, as the case
may be, where after reasonable number of attempts
to remedy the defect or malfunction, the product
continues to have the defect or to malfunction.
b. Limited Warranty - when the written warranty
does not meet the abovementioned minimum
requirements.
In case of breach OF EXPRESS WARRANTY:
1. the consumer may elect to have the goods
repaired. Warranty work must be made within
30 days. Such period may be extended by
conditions beyond the control of the
warrantor or his representatives.
2. the product or its parts may be replaced.
3. the consumer may ask for a refund from the
warrantor. The amount directly attributable to
the use of consumer prior to the discovery of
the non-conformity shall be deducted.
In case of breach OF IMPLIED WARRANTY:
The consumer may retain the goods and recover
damages, or reject the goods, cancel the contract, and
Recover FROM THE SELLER SO MUCH OF THE
PURCHASE PRICE AS HAS BEEN PAID, including
damages.
ARTICLE 70.          Professional Services. —
The provisions of this Act on warranty shall not
apply to professional services of certified public
accountants, architects, engineers, lawyers,
veterinarians, optometrists, pharmacists, nurses,
nutritionists, dietitians, physical therapists, salesmen,
medical and dental practitioners and other
professionals engaged in their respective professional
endeavors.
ARTICLE 71.          Guaranty of Service Firms. —
Service firms shall guarantee workmanship and
replacement of spare parts for a period not less than
ninety (90) days which shall be indicated in the
pertinent invoices.
ARTICLE 72.          Prohibited Acts. — The following
acts are prohibited:
A. refusal without any valid legal cause by the
total manufacturer or any person obligated
under the warranty or guarantee to honor a
warranty or guarantee issued;
B. unreasonable delay by the local manufacturer
or any person obligated under the warranty or
guarantee in honoring the warranty;
C. removal by any person of a product’s
warranty card for the purpose of evading said
warranty obligation;
 D. any false representation in an advertisement
as to the existence of a warranty or
guarantee.
ARTICLE 73.          Penalties. —
a.) Any person who shall violate the provisions of
Article 67 shall be subject to fine of not less than
Five hundred pesos (P500.00) but not more than
Five thousand pesos (P5,000.00) or an
imprisonment of not less than three (3) months
but not more than two (2) years or both upon the
discretion of the court. A second conviction under
this paragraph shall also carry with it the penalty
or revocation of his business permit and license.
b.) Any person, natural or juridical, committing any of
the illegal acts provided for in Chapter III, except
with respect to Article 67, shall be liable for a fine
of not less than One thousand pesos (P1,000.00)
but not more than Fifty thousand pesos
(P50,000.00) or imprisonment for a period of at
least one (1) year but not more than five (5) years,
or both, at the discretion of the court.
Chapter IV – LABELING & FAIR PACKAGING
ARTICLE 76.          Prohibited Acts on Labeling and
Packaging. — It shall be unlawful for any person,
either as principal or agent, engaged in the labeling or
packaging of any consumer product, to display or
distribute or to cause to be displayed or distributed in
commerce any consumer product whose package or
label does not conform to the provisions of this
Chapter.
The prohibition in this Chapter shall not apply to
persons engaged in the business of wholesale or retail
distributors of consumer products except to the
extent that such persons:
A. are engaged in the packaging or labeling of
such products;
B. prescribe or specify by any means the manner
in which such products are packaged or
labeled; or
C. having knowledge, refuse to disclose the
source of the mislabeled or mispackaged
products.
• Republic act no. 7394
the consumer act of the Philippines
Chapter iV – LABELING & FAIR PACKAGING
ARTICLE 77.          Minimum Labeling Requirements
for Consumer Products. — All consumer products
domestically sold whether manufactured locally or
imported shall indicate the following in their
respective labels of packaging:
a. its correct and registered trade name or brand
name;
b. its duly registered trademark;
c. its duly registered business name;
d. the address of the manufacturer, importer,
repacker of the consumer product in the
Philippines;
e. its general make or active ingredients;
f. the net quality of contents, in terms of
weight, measure or numerical count rounded
of to at least the nearest tenths in the metric
system;
g. country of manufacture, if imported; and
h. if a consumer product is manufactured,
refilled or repacked under license from a
principal, the label shall so state the fact.
The following may be required by the
concerned department in accordance with the
rules and regulations they will promulgate under
authority of this Act:
A. whether it is flammable or inflammable;
B. directions for use, if necessary;
C. warning of toxicity;
D. wattage, voltage or amperes; or
E. process of manufacture used if necessary.
ARTICLE 81.          Price Tag Requirement. —
It shall be unlawful to offer any consumer
product for retail sale to the public without an
appropriate price tag, label or marking publicly
displayed to indicate the price of each article and said
products shall not be sold at a price higher than that
stated therein and without discrimination to all
buyers: Provided, That lumber sold, displayed or
offered for sale to the public shall be tagged or
labeled by indicating thereon the price and the
corresponding official name of the wood: Provided,
further, That if consumer products for sale are too
small or the nature of which makes it impractical to
place a price tag thereon price list placed at the
nearest point where the products are displayed
indicating the retail price of the same may suffice.
ARTICLE 82.          Manner of Placing Price Tags. —
Price tags, labels or markings must be written
clearly, indicating the price of the consumer product
per unit in pesos and centavos.
ARTICLE 83.          Regulations for Price Tag
Placement. — The concerned department shall
prescribe rules and regulations for the visible
placement of price tags for specific consumer
products and services. There shall be no erasures or
alterations of any sort of price tags, labels or
markings.
ARTICLE 84.          Additional Labeling Requirements
for Food. — The following additional labeling
requirements shall be imposed by the concerned
department for food:
A. expiry or expiration date, where applicable;
B. whether the consumer product is semi-
processed, fully processed, ready-to-cook,
ready-to-eat, prepared food or just plain
mixture;
C. nutritive value, if any;
D. whether the ingredients use are natural or
synthetic, as the case may be;
E. such other labeling requirements as the
concerned department may deem necessary
and reasonable.
ARTICLE 95.          Penalties. —
A.) Any person who shall violate the provisions of
Title III, Chapter IV of this Act, or its
implementing rules and regulations, except
Articles 81 to 83 of the same Chapter, shall be
subject to a fine of not less than Five hundred
pesos (P500.00) but not more than Twenty
thousand pesos (P20,000.00) or imprisonment
of not less than three (3) months but not more
than two (2) years or both, at the discretion of
the court: Provided, That, if the consumer
product is one which is not a food, cosmetic,
drug, device or hazardous substance, the
penalty shall be a fine of not less than Two
hundred pesos (P200.00) but not more than Five
thousand pesos (P5,000.00) or imprisonment of
not less than one (1) month but not more than
one (1) year or both, at the discretion of the
court.
LAW ON SALES
Philippine lemon law
Republic act no. 10642
Section 2. Declaration of Policy. –  It is hereby
declared the policy of the State to promote full
protection to the rights of consumers in the sale of
motor vehicles against business and trade practices
which are deceptive, unfair or otherwise inimical to
consumers and the public interest.
The State recognizes that a motor vehicle is a
major consumer purchase or investment. Hence, the
rights of consumers should be clearly defined,
including the means for redress for violations thereof.
Section 3. Definition of Terms.
(b) Collateral charges  refer to the fees paid’ to the
Land Transportation Office (LTO) for the registration
of a brand new motor vehicle and other incidental
expenses such as, but not limited to, the cost of
insurance pertaining to the vehicle, chattel mortgage
fees and interest expenses if applicable
(h) Lemon Law rights period  refers to the period
ending twelve (12) months after the date of the
original delivery of a brand new motor vehicle to a
consumer or the first twenty thousand (20,000)
kilometers of operation after such delivery, whichever
comes first. This shall be the period during which the
consumer can report any nonconformity, as defined in
paragraph (k) herein, to the standards and
specifications of the manufacturer, authorized
distributor, authorized dealer or retailer, and pursue
any right as provided for under this Act;
(k) Nonconformity  refers to any defect or condition
that substantially impairs the use, value or safety of a
brand new motor vehicle which prevents it from
conforming to the manufacturer’s or distributor’s
standards or specifications, which cannot be repaired,
but excluding conditions resulting from
noncompliance by the consumer of his or her
obligations under the warranty, modifications not
authorized by the manufacturer or distributor, abuse
or neglect, and damage due to accident or force
majeure;
Section 4. Coverage. –  This Act shall cover brand new
motor vehicles purchased in the Philippines reported
by a consumer to be in nonconformity with the
vehicle’s manufacturer or distributor’s standards or
specifications within twelve (12) months from the
date of .original delivery to the consumer, or up to
twenty thousand (20,000) kilometers of operation
after such delivery, whichever comes first. The
following causes of nonconformity shall be excluded:
a.) Noncompliance by the consumer of the
obligations under the warranty;
b.) Modifications not authorized by the
manufacturer, distributor, authorized dealer
or retailer;
c.) Abuse or neglect of the brand new motor
vehicle; and
d.) Damage to the vehicle due to accident
or force majeure.
Section 5. Repair Attempts. –  At any time within the
Lemon Law rights period, and after at least four (4)
separate repair attempts by the same manufacturer,
distributor, authorized dealer or retailer for the same
complaint, and the nonconformity issue remains
unresolved, the consumer may invoke his or her rights
under this Act.
The repair may include replacement of parts
components, or assemblies.
Section 6. Notice of Availment of Lemon Law Rights.
–  Before availing of any remedy under this Act and
subject to compliance with the provisions of Section 5
hereof, the consumer shall, in writing, notify the
manufacturer, distributor, authorized dealer or
retailer of the unresolved complaint, and the
consumer’s intention to invoke his or her rights under
this Act within the Lemon Law rights period.
The warranty booklet issued by the
manufacturer, distributor, authorized dealer or
retailer shall clearly state the manner and form of
such notice to constitute a valid and legal notice to
the manufacturer, distributor, authorized dealer or
retailer. It shall also clearly state the responsibility of
the consumer under this section.
Section 7. Availment of Lemon Law Rights. Xxx
In case the nonconformity issue remains
unresolved despite the manufacturer, distributor,
authorized dealer or retailer’s efforts to repair the
vehicle, pursuant to the consumer’s availment of his
or her Lemon Law rights, the consumer may file a
complaint before the DTI as provided for under this
Act: Provided, however,  That if the vehicle is not
returned for repair, based on the same complaint,
within thirty (30) calendar days from the date of
notice of release of the motor vehicle to the consumer
following this repair attempt within the Lemon Law
rights period, the repair is deemed
successful: Provided, finally,  That, in the event that
the nonconformity issue still exists or persists after
the thirty (30)-day period but still within the Lemon
Law rights period, the consumer may be allowed to
avail of the same remedies under Sections 5 and 6
hereof.
To compensate for the non-usage of the
vehicle while under repair and during the period of
availment of the Lemon Law rights, the consumer
shall be provided a reasonable daily transportation
allowance, an amount which covers the
transportation of the consumer from his or her
residence to his or her regular workplace or
destination and vice versa, equivalent to air-
conditioned taxi fare, as evidenced by official receipt,
or in such amount to be agreed upon by the parties,
or a service vehicle at the option of the manufacturer,
distributor, authorized dealer or retailer. Any
disagreement on this matter shall be resolved by the
DTI.
Nothing herein shall be construed to limit or
impair the rights and remedies of a consumer under
any other law.
Section 8. Remedies for Dispute Resolution. 
A. Mediation
B. Arbitration
C. Adjudication
(i) Replace the motor vehicle with a similar or
comparable motor vehicle in terms of specifications
and values, subject to availability; or
(ii) Accept the return of the motor vehicle and
pay the consumer the purchase price plus the
collateral charges.
Section 11. Penalty.  – The manufacturer, distributor,
authorized dealer or retailer adjudged to have
violated the provisions requiring disclosure as
mentioned in the preceding section shall be liable to
pay a minimum amount of One hundred thousand
pesos (P100,000.00) as damages to the aggrieved
party without prejudice to any civil or criminal liability
they and/or the responsible officer may incur under
existing laws.

BOUNCING CHECKS LAW
BATAS PAMBANSA BLG 22
Bouncing Checks Law
 The gravamen of the offense punished by BP
22 is the act Of making and issuing a
worthless check or a check that is dishonored
upon its presentation for payment
 Non-payment of the obligation is not
punished
 The law is not intended or designed to coerce
a debtor to pay his debt
 The law aims to prohibit the making of
worthless checks and putting them in
circulation
CHECK- It is a bill of exchange drawn on a bank and
payable on demand
DRAWER- DRAWEE BANK- PAYEE
Section I. Checks without sufficient funds. -
Any person who makes or draws and issues
any check to apply on account or for value knowing at
the time of issue that he does not have sufficient
funds in or credit with the drawee bank for the
payment of such check in full upon its presentment
which check is subsequently dishonored by the
drawee bank for insufficiency Of funds or credit or
would have been dishonored for the same reason had
not the drawer, without any valid reason, ordered the
bank to stop payment, shall be punished by
imprisonment of not less than thirty days but not
more than one (1) year or by a fine Of not less than
but not more than double the amount Of the check
which fine shall in no case exceed Two Hundred
Thousand pesos, or both such fine and imprisonment
at the discretion of the court.
- CRIMINAL LIABILITY
The same penalty shall be imposed upon any
person who, having sufficient funds in or credit with
the drawee bank when he makes or draws and issues
a check, shall fail to keep sufficient funds or to
maintain a credit to cover the full amount of the check
if presented within a period of ninety (90) days from
the date appearing thereon, for which reason it is
dishonored by the drawee bank.
Where the check is drawn by a corporation,
company or entity, the person or persons who
actually signed the check in behalf of such drawer
shall be liable under this Act.
Essential elements for one to be penalized under BP
22
1. The making, drawing and issuance of any
check to apply to account or for value;
2. The knowledge of the maker, drawer, or
issuer that at the time of issue, he does not
have sufficient funds or credit with the
drawee bank for the payment of such check in
full upon its presentation; and
3. Subsequent dishonor of the check by the
drawee bank for insufficiency Of fund Or
credit or dishonor for the same reason had
not the drawer, without any valid cause,
ordered the bank to stop payment.
- All of these must be present
PENALTIES
1. Imprisonment of not less than 30 days, but
not more than I year; OR
2. Fine of not less or more than the double the
amount of the check, and shall in no case
exceed P200,OOO; or
3. Both such fine and imprisonment
The judges concerned may , in the exercise of
sound discretion, and taking into consideration the
peculiar circumstances of each case, determine
whether the imposition Of fine alone would best serve
the interest Of justice or whether forbearing to
impose imprisonment would depreciate the
seriousness Of the offense, work violence on the
social order, or otherwise be contrary to the
imperatives of justice
Should only a fine be imposed and the accused be
unable to pay the fine, there is no legal obstacle to the
application of subsidiary imprisonment
Sec. 2. Evidence of knowledge of insufficient funds. -
The making, drawing and issuance of a check
payment of which is refused by the drawee because
Of insufficient funds in or credit with such bank, when
presented within ninety (90) days from the date of the
check, shall be prima facie evidence of knowledge of
such insufficiency of funds or credit unless such maker
or drawer pays the holder thereof the amount due
thereon, or makes arrangements for payment in full
by the drawee of such check within (5) banking days
after receiving notice that such check has not been
paid by the drawee.
Presumption of knowledge arises only after it
is proved that the issuer RECEIVED A NOTICE OF
DISHONOR and that, WITHIN 5 DAYS FROM RECEIPT
THEREOF, he failed to pay the amount of the check or
to make arrangements for its payment
If there is no proof as to when such notice of
dishonor was received by the drawer, then the prima
facie presumption as provided in Section 2 of BP 22
cannot arise, wince there would be no way of
reckoning the 5-day period.
Sec. 3. Duty of drawee; rules of evidence. -
It shall be the duty Of the drawee Of any
check when refusing to pay the same to the holder
thereof' upon presentment, to cause to be written,
printed, or stamped in plain language thereon, or
attached thereto, the reason for drawee's dishonor or
refusal to pay the same: provided, That where there
are no sufficient funds in or credit with such drawee
bank, such fact shall always be explicitly stated in the
notice of dishonor or refusal. In all prosecutions under
this Act the introduction in evidence of any unpaid
and dishonored check, having the drawee's refusal to
pay stamped or written thereon or attached thereto,
with the reason therefor as aforesaid, shall be prima
facie evidence of the making or issuance of said check,
and the due presentment to the drawee for payment
and the dishonor thereof, and that the same was
properly dishonored for the reason written, stamped
or attached by the drawee on such dishonored check.
Notwithstanding receipt of an order to stop
payment, the drawee shall state in the notice that
there were no sufficient funds in or credit with such
bank for the payment in full of such check, if such be
the fact.
Sec. 4. Credit construed. -
The word "credit" as used herein shall be
construed to mean an arrangement or understanding
with the bank for the payment of such check.
Bouncing Checks Law
 Even if check is issued in payment of a pre-
existing obligation, violation ofBP22 may be
committed. So issuance of check before or
after the obligation has been incurred may
lead to violation of bp 22
 Upon notice of dishonor from the drawee
bank, the drawer is given 5 banking days to
pay or make arrangements for the payment of
the check.
Estafa by issuing a check
 Has no pre-existing debt. The check is issued
prior to or simultaneous to the commission of
a fraud and the said check was dishonored
due to insufficiency of funds.
 Upon notice of dishonor by the drawee bank,
the drawer Of the check is given 3 banking
days to pay the check or make arrangements
for its payment.
ANTI-MONEY LAUNDERING ACT
REPUBLIC ACT NO. 10365
AN ACT FURTHER STRENGTHENING THE ANTI-MONEY
LAUNDERING LAW, AMENDING FOR THE PURPOSE
REPUBLIC ACT NO. 9160
Policy of the State
 To protect and preserve the integrity and
confidentiality of bank accounts
 To ensure that the Philippines shall not be
used as a money laundering site for the
proceeds of any unlawful activity
MONEY LAUNDERING
- Is committed by any person who, knowing
that any monetary instrument or property
represents, involves, or relates to the
proceeds of any unlawful activity:
a.) transacts said monetary instrument or
property;
b.) converts, transfers, disposes of, moves,
acquires, possesses or uses said monetary
instrument or property;
c.) conceals or disguises the true nature, source,
location, disposition, movement or ownership
of or rights with respect to said monetary
instrument or property;
d.) attempts or conspires to commit money
laundering offenses referred to in paragraphs
a), (b) or (c);
e.) aids, abets, assists in or counsels the
commission of the money laundering offenses
referred to in paragraphs (a), (b) or (c) above;
and
f.) performs or fails to perform any act as a result
of which he facilitates the offense of money
 laundering referred to in paragraphs (a), (b) or 26. Violations of the Laws on Illegal/unlawful
(c) above. Possession, Manufacture, Dealing In,
Acquisition or Disposition of
Money laundering is also committed by any
27. Firearms, Ammunition or Explosives;
covered person who, knowing a covered or suspicious
transaction is required under this Act to be reported Violation of the Anti-Fencing Law;
to the Anti-Money Laundering Council (AMLC), fails to
Violation of the Migrant Workers and Overseas
do so."
Filipinos Act of 1995;
UNLAWFUL ACTIVITIES
Violation of the Intellectual Property Code of the
- refers to any act or omission or series or Philippines;
combination thereof involving or having direct
Violation of the Anti•Photo and Video Voyeurism Act
relation to the following:
of 2009;
1. Kidnapping for ransom Violation of the Anti-Child Pornography Act of 2009;
2. Violation of the Comprehensive Dangerous
Drugs Act of 2002 Violations of the Special Protection of Children Against
3. Violation of the Anti-Graft and Corrupt Abuse, Exploitation and Discrimination;
Practices Act Fraudulent practices and other violations under the
4. Plunder under Republic Act No. 7080 Securities Regulation Code of 2000; and
5. Robbery and extortion
6. Jueteng and Masiao punished as illegal Felonies or offenses of a similar nature that are
gambling punishable under the penal laws of other countries.
7. Piracy on the high seas
8. Qualified theft
9. Swindling COVERED PERSONS
10. Smuggling
1. Banks, non-banks, quasi-banks, trust entities,
11. Violations of Republic Act No. 8792, otherwise
foreign exchange dealers, pawnshops money
known as the Electronic Commerce Ac 2000;
changers, remittance and transfer companies and
12. Hijacking; destructive arson and murder;
other similar entities an} all other persons and
13. Terrorism and conspiracy to commit;
their subsidiaries and affiliates supervised or
14. Financing of terrorism;
regulated by the Bangko Sentral ng Pilipinas (BSP);
15. Bribery;
2. Insurance companies, pre-need companies and all
16. Frauds and Illegal Exactions;
other persons supervised or regulated by the
17. Malversation of Public Funds and Property;
Insurance Commission (IC);
18. Forgeries and Counterfeiting;
3. (i) securities dealers, brokers, salesmen,
19. Violations of Sections 4 to 6 of Republic Act
investment houses and other similar persons
No. 9208, otherwise known as the Anti-
managing securities or rendering services as
Trafficking in Persons Act of 2003;
investment agent, advisor, or consultant
20. Violations of the Revised Forestry Code of the
Philippines;
(ii) mutual funds, close-end investment
21. Violations of the Philippine Fisheries Code of
companies, common trust funds, and other similar
1998;
persons, and
22. Violations of the Philippine Mining Act of
1995;
(iii) other entities administering or otherwise
23. Violations of the Wildlife Resources
dealing in currency, commodities or financial
Conservation and Protection Act;
derivatives based thereon, valuable objects, cash
24. Violation of the National Caves and Cave
substitutes and other similar monetary
Resources Management Protection Act;
instruments or property supervised or regulated
25. Violation of Republic Act No. 6539, otherwise
by the Securities and Exchange Commission (SEC);
known as the Anti-Carnapping Act of 2002, as
amended;
4. jewelry dealers in precious metals, who, as a
business, trade in excess of One million pesos
(1,000,000)
5. jewelry dealers in precious stones, who, as a
business, trade in precious stones for transactions
in excess of One million pesos (1,000,000)
6. Company service providers which, as a business,
provide any of the following services to third
parties: (i) acting as a formation agent of juridical
persons; (ii) acting as (or arranging for another
person to act as) a director or corporate secretary
of a company, a partner of a partnership, or a
similar position in relation to other juridical
persons; (iii) providing a registered office,
business address or accommodation,
correspondence or administrative address for a
company, a partnership or any other legal person
or arrangement; and (iv) acting as (or arranging
for another person to act as) a nominee
shareholder for another person; and
7. Persons who provide any of the following
services:
i. managing of client money, securities or other
assets;
ii. management of bank, savings or
securities accounts;
iii. organization of contributions for the
creation, operation or management of
companies; and
iv. creation, operation or management of
juridical persons or arrangements, and
buying and selling business entities.
8. Casinos, including internet and ship-based
casinos, with respect to their casino cash
transactions related to their gaming operations
EXCLUDED
Lawyers and accountants acting as
independent legal professionals in relation to
information concerning their clients or where
disclosure of information would compromise client
confidences or the attorney-client relationship:
Provided, That these lawyers and accountants
are authorized to practice in the Philippines and shall
continue to be subject to the provisions of their
respective codes of conduct and/or professional
responsibility or any of its amendments
COVERED TRANSACTIONS
 Any transaction in cash or other equivalent
monetary instrument involving a total amount
in excess of P500,000.00 within one banking
day
 Jewelry dealers in precious stones, who, as a
business, trade in precious stones, for
transactions in excess of PI , 000,000; and
 The Land Registration Authority and all its
Registries of Deeds to submit to the AMLC,
reports on all real estate transactions
involving an amount in excess of P500,OOO
within 15 days from the date of registrations
of the transaction
 A single casino transaction involving an
amount in excess of 5m or its equivalent in
any other currency
SUSPICIOUS TRANSACTIONS
These are transactions With covered
institutions, regardless of the amounts involved,
where any of the following circumstances exist:
1. There is no underlying legal or trade
obligation, purpose or economic justification;
2. The client is not properly identified
3. The amount involved is not commensurate
with the business or financial capacity of the
client
4. Taking into account all known circumstances,
it may be perceived that the client’s
transaction is structured in order to avoid
being the subject of reporting requirements
under the act
5. Any circumstances relating to the transaction
which is observed to deviate from the profile
of the client and/or the client’s past
transactions with the covered institution
6. The transactions are in a way related to an
unlawful activity or offense under this act that
is about to be, is being or has been
committed; or
7. Any transactions that is similar or analogous
to any of the foregoing
POLITICALLY EXPOSED PERSONS
 Refers to an individual who is has been
entrusted with prominent public position in
a.) the Philippines with substantial authority
over policy, operations or the use or
allocation of government-owned resources; b)
a foreign state; or c) an international
organization.
 The term PEP shall include immediate family
members, and close relationships and associates
that are reputedly known to have:
1. Joint beneficial ownership of a legal entity or
legal arrangement with the main/principal
PEP; or
2. Sole beneficial ownership of a legal entity or
legal arrangement that is known to exist for
the benefit of the main / principal PEP.
BENEFICIAL OWNER
- refers to any natural person who:
1. Ultimately owns or controls the customer and/or on
whose behalf a transaction or activity is being
conducted; or
2. Has ultimate effective control over a legal person or
arrangement.
Covered persons shall report to the AMLC all
covered transactions and suspicious transactions
within five (5) working days from occurrence thereof,
unless the AMLC prescribes a different period not
exceeding fifteen (15) working days.
ANTI-MONEY LAUNDERING COUNCIL
 To require and received covered transaction
reports from covered institutions;
 To use orders addresses to the appropriate
supervising authority or the covered
institution to determine the true identity of
the owner of any monetary instrument or
property subject of a covered transaction
report or request for assistance from foreign
state, or believed by the council, on the basis
of substantial evidence, to be, in whole or in
part, wherever located, representing,
involving, or related to, directly or indirectly,
in any manner or by any means, the proceeds
of an unlawful activity;
 To institute civil fortune proceedings and all
other remedial proceedings through the office
of the solicitor general;
 To cause the filling of complaints with the
department of justice or the ombudsman for
the prosecution of money laundering
offences;
 To initiate investigations of covered
transactions, money laundering activities and
other violations of this act;
 To apply before the court of appeals, ex parte,
or the freezing of any monetary instrument or
property alleged to be laundered, proceeds
from, or instrumentalities used in or intended
for use in any unlawful activity
 To implement such measures as may be
necessary and justified under this act to
counteract money laundering;
 To received and take action in respect of, any
request from foreign states for assistance in
their own anti-money laundering operations
provided in this act
 To develop educational programs on the
pernicious effects of money laundering, the
methods and techniques used in money
laundering, the viable means of preventing
money laundering and the effective ways of
prosecuting and punishing offenders; and
 To exist the assistance of any branch,
department, bureau, office, agency or
instrumentality of the government, including
government -owned and controlled
corporations, in undertaking any and all anti-
money laundering operations, which may
include the use of its personnel, facilities and
resources for the more resolute prevention,
detection and investigation of money
laundering offenses and prosecution of
offenders.
 To require the Land Registration Authority
and all its registries of Deeds to submit to the
AMLC, reports on all real estate transactions
involving an amount in excess of five hundred
pesos 500,000 within fifteen 15 days from the
date of registration of the transaction, in a
form to be prescribed by the AMLC. The ALMC
may also require the Land Registration
Authority and all its registries of Deeds to
submit copies of relevant documents of all
real estate transactions.
Section 11
Authority to Inquire into Bank Deposits.
Notwithstanding the provisions of Republic Act No.
1405. as amended; Republic Act No. 6426, as
amended; Republic Act No. 8791. and other laws, the
AMLC may inquire into or examine any particular
deposit or investment with any banking institution or
non-bank financial institution upon order of any
competent court in cases Of violation Of this Act when
it has been established that there is probable cause
that the deposits or investments are related to an
unlawful activity as defined in Section 3 (i) hereof or a
money laundering offense under Section 4 hereof,
except that no court order shall be required in cases
involving unlawful activities defined in Sections 3(i) 1,
and (12). Customer Due Diligence
CUSTOMER DUE DILIGENCE
 Covered persons shall establish and record
the true identity of their clients based official
documents. They shall maintain a system of
verifying the true identity of their clients
based on reliable, independent source,
documents, data, or information. In case of
corporate clients. Covered persons are
required to maintain a system of verifying
their legal existence and organizational
structure, as well as the authority and
identification of all persons purporting to act
on their behalf. Covered persons shall
establish appropriate systems and methods,
and adequate internal controls, compliant
with the AMLA, this RIRR, other AMLC
issuances, the guidelines issued by the
Supervising Authorities, internationally
accepted anti-money laundering standards,
for verifying and recording the true and full
identity of their customers.
1. Customer identification
a. Contact
b. Minimum Customer Information and
Identification Documents
c. Third-Party Reliance
d. Outsourcing the Conduct Of Customer
Identification
e. Identification and Verification Of a
Beneficial Owner, Trustee, Nominee or
agent
A. Reduced Diligence. - Where lower risks of money
laundering and terrorist financing have been
identified. through an adequate analysis of risk by
the covered persons. reduced due diligence
procedures may be applied. The reduced due
diligence procedures should be commensurate
with the lower risk factors, but are not acceptable
whenever there is suspicion of money laundering
or terrorist financing, or specific higher risk
scenarios apply.
B. Enhanced Due Diligence. - Covered persons shall
examine the background and purpose of all
complex, unusually large transactions, all unusual
patterns of transactions. which have no apparent
economic or lawful purpose. and other that may
be considered suspicious.
PROHIBITED ACCOUNTS
The following accounts shall be prohibited
and may be the subject of the Supervising Authorities'
annual testing for the sole purpose of determining the
existence and true Identity of their owners:
a.) Anonymous Accounts and Accounts under
Fictitious Names. – Covered persons shall
maintain customers account only in the true
and full name of the account owner or holder.
Anonymous accounts, accounts under
fictitious names, and all other similar accounts
shall be absolutely prohibited.
b.) Numbered Accounts. -Numbered accounts.
except non-checking numbered accounts,
shall not be allowed.
Covered and suspicious transaction reports
involving non-checking numbered accounts shall
contain the true name of the account holder.
RECORD KEEPING
Covered person shall maintain and safety for
five 5 years from the dates Of transactions all records
of customer identification and transaction documents.
1. Retention Of records Where the account is
the subject of a Case. - If a has been filed in
court involving the account, records must be
retained and safety kept beyond five year
period, until it is Officially confirmed by the
AMLC Secretariat that the case has been
resolved, decided or terminated with finality.
2. Closed Accounts. - Covered persons shall
maintain and safely store for at least five
years from the dates the accounts were
closed, all records of customer identification
and transaction documents
3. Form of records- covered persons shall retain
all records as originals or in such forms as are
admissible in court.
Covered persons shall, likewise, keep the
electronic copies of all covered and suspicious
transaction reports for, at least, five years from the
dates of submission to the AMLC.
For low risk customers, it is sufficient that covered
persons shall maintain and store, in whatever form, a
record of customer information and transactions.
SAFE HARBOR PROVISION
No administrative, criminal or civil
proceedings shall lie against any person for having
made a covered transaction or suspicious transaction
report in the regular performance of his duties and in
good faith, whether or not such reporting results in
any criminal prosecution under the AMLA or any other
Philippine law.
ASSET FORFRITURE
Civil Forfeiture- upon determination that probable
cause exists that any monetary instrument or
property is in any way related to an unlawful activity
or a money laundering offense, the AMLC shall file
with the regional trial court, through the office of the
Solicitor General, a verified petition for civil forfeiture.
1. Equal Value Assets- the petition for civil forfeiture
shall include other monetary instrument or
property of equal value in cases where the
monetary instrument or property that should be
subject of forfeiture:
a. cannot be located despite due diligence.
b. Has been substantially altered, destroyed,
diminished in value or otherwise rendered
worthless by any act or omission;
c. Has been concealed, removed, converted or
otherwise transferred;
d. Is located outside the Philippines or has been
placed or brought outside the jurisdiction of
the court; or
e. Has been commingled with other monetary
instrument or property belonging to either
the offender himself or a third person or
entity, thereby rendering the same difficult to
identify or be segregated for purpose of
forfeiture.
ASSET FORFEITURE
Asset Forfeiture in Money Laundering Cases.
- Where there is conviction for money
laundering, the court shall issue a judgment of
forfeiture in favor of the Government of the
Philippines with respect to the monetary
instrument or property found to be proceeds
of an unlawful activity.
TRUTH IN LEDING ACT
Republic Act 3765
Section 2. Declaration of Policy
It is hereby declared to be the policy of the State to protect
its citizens from a lack of awareness of the true cost of
credit to the user by assuring a full disclosure of such cost
with a view of preventing the uninformed use of credit to
the detriment of the national economy.
Section 3
(2) “Credit” means any loan, mortgage, deed of trust,
advance, or discount; any conditional sales contract: any
contract to sell, sale or contract of sale of property or
services, either for present or future delivery, under which
part or all of the price is payable Subsequent to the making
of such sale or contract: any rental purchase contract; any
contract or arrangement for the hire, bailment, of leasing of
property: any option, demand, ten, pledge, or other claim
against, or for the delivery of, property or money: any
purchase, of other acquisition of, of any credit upon the
security of, any obligation of claim arising out of any of the
foregoing: and any transaction or series of transactions
having a similar purpose or effect.
(3) “Finance charge" includes interest, fees, service charges,
discounts, and such other charges incident to the extension
of credit as the Board may be regulation prescribe.
The law covers any creditor, which is defined as
any person engaged in the business of extending credit
(including any person who as a regular business practice
make loans or sells or rents property or services on a time,
credit, or installment basis, either as principal or as agent)
who requires as an incident to the extension of credit, the
payment of a finance charge.
Section 4.
Any creditor shall furnish to each to whom credit is
extended, prior to the consummation of the transaction, a
clear statement in writing setting forth, to the extent
applicable and in accordance with rules and regulations
prescribed’ by the Board, the following information:
(1) the cash price or delivered price of the property or
service to be acquired;
(2) the amounts, if any, to be credited as down payment
and/or trade-in;
(3) the difference between the amounts set forth under
clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to
be paid by such person in connection with the transaction
but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and
centavos; and
(7) the percentage that the finance bears to the total
amount to be financed expressed as a simple annual rate
on the outstanding unpaid balance of the obligation.
The information enumerated above must be
disclosed to the debtor or borrower prior to the
consummation of the transaction. The information must be
clearly stated in writing.
Consequences of Non-Compliance:
1. The contract or transaction remains valid or enforceable
2 Penalties:
1. Any creditor who violates the law is liable in the
amount of P100 or in an amount equal to twice the
finance charged required by such creditor in connection
with such transaction, whichever is the greater, except
that such liability shall not exceed P2,000 on any credit
transaction. The action must be brought within one year
from the date of occurrence of the violation.
2. The creditor is also liable for reasonable attorney's fees
and court costs as determined by the court.
3. Any person who willfully violates any provision of this
law or any regulation issued thereunder shall be fined
by not less than P1,00 or more than P5,000 or
imprisonment of not less than 6 months, nor more than
one year or both.
However, no punishment or penalty under this law shall
apply to the Philippine Government or any agency or any
political subdivision thereof.
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC)
LAW
REPUBLE ACT 3591
Philippine Deposit Insurance Corporation (PDIC)
 Shall insure the deposits of all banks which are
entitled to the benefits of insurance under this Act,
and which shall have the powers hereinafter
granted.
 Protects the depositing public in the event of bank
closure.
 Acts as deposit insurer, as a co-regulator of banks,
and as receiver and liquidator of closed banks.
Deposit
(g) The term deposit means the unpaid balance of money or
its equivalent received by a bank in the usual course of
business and for which it has given or is obliged to give
credit to a commercial, checking, savings, time or thrift
account, evidenced by a passbook, certificate of deposit, or
other evidence of deposit issued in accordance with Bangko
Sentral ng Pilipinas rules and regulations and other
applicable laws, together with such other obligations of a
bank, which, consistent with banking usage and practices,
the Board of Directors shall determine and prescribe by
regulations to be deposit liabilities of the bank: Provided,
That any obligation of a bank which is payable at the office
of the bank located outside of the Philippines shall not be a
deposit for any of the purposes of this Act or included as
part of the total deposits or of insured deposit: Provided,
further, That subject to the approval of the Board of
Directors, any insured bank which is incorporated under the
laws of the Philippines _ which maintains a branch outside
the Philippines may elect to include for insurance its
deposit obligations payable only at such branch.
The Corporation shall not pay deposit insurance for the
following accounts or transactions:
(1) Investment products such as bonds and securities, trust
accounts, and other similar instruments;
(2) Deposit accounts or transactions which are fictitious or
fraudulent as determined by the Corporation;
(3) Deposit accounts or transactions constituting, and/or
emanating from, unsafe and unsound banking practice/s, as
determined by the Corporation, in consultation with the
Bangko Sentral ng Pilipinas, after due notice and hearing,
and publication of a directive to cease and desist issued by
the Corporation against such deposit accounts, transactions
or practices; and
(4) Deposits that are determined to be the proceeds of an
unlawful activity as defined under Republic Act No. 9160, as
amended.
INSURED DEPOSIT
 The amount due to any bonafide depositor for
legitimate deposits in an insured bank as of the
date of closure but not to exceed Five Hundred
Thousand Pesos (P500,000.00).
 In determining such amount due to any depositor,
there shall be added together all deposits in the
bank maintained in the same right and capacity for
his or her benefit either in his or her own name or
in the name of others.
JOINT ACCOUNT
Regardless of whether the conjunction “and”, “or, “and/or”
is used, shall be insured separately from any individually-
owned deposit account, provided that:
1. If the account is held jointly by two or more natural
persons, or by two or more juridical persons or entities, the
maximum insured deposit shall be divided into as many
equal shares as there are individuals, juridical persons or
entities, unless a differing sharing is stipulated in the
document of deposit; and
2. If the account is held by a juridical person or entity jointly
with one or more natural persons, the maximum insured
deposit shall be presumed to belong entirely to such
juridical person or entity.
Whenever an insured bank shall have been closed
on account of insolvency, payment of the insured deposits
in such bank shall be made by the Corporation as soon as
possible either (1) by cash or (2) by making available to
each depositor a transferred deposit in another insured
bank in an amount equal to the insured deposit of such
depositor: Provided, That the Corporation, in its discretion,
may require proof of claims to be filed before paying the
insured deposit, and that in any case where the
Corporation is not satisfied as to the validity of a claim for
an insured deposit, it may require the final determination
of a court of, competent jurisdiction before paying such
claim.
PAYMENT OF INSURED DEPOSITS
SEC. 19. Whenever an insured bank shall have been closed
by the Monetary Board pursuant to Section 30 of Republic
Act No. 7653, or upon expiration or revocation of a bank’s
corporate term, payment of the insured deposits on such
closed bank shall be made by the Corporation as soon as
possible either (1) by cash or (2) by making available to
each depositor a transferred deposit in another insured
bank in an amount equal to insured of such depositor:
Provided, however, That the Corporation, in its discretion,
may require proof of claims to be filed before paying the
insured deposits, and that in any case where the
Corporation is not satisfied as to the validity of a claim for
an insured deposit, it may require final determination of a
court of competent jurisdiction before paying such claim:
Provided, further, That failure to settle the claim, within six
(6) months from the date of filing of claim for insured
deposit, where such failure was due to grave abuse of
discretion, gross negligence, bad faith, or malice, shall,
upon conviction, subject the directors, officers or
employees of the Corporation ‘responsible for the delay, to
imprisonment from six (6) months to one (1) year:
Provided, furthermore, That the period shall not apply if the
validity of the claim requires the resolution of issues of
facts and or law by another office, body or agency including
the case mentioned in the first proviso or by the
Corporation together with such other office, body or
agency.”
BANK SECRECY ACT (REPUBLIC ACT NO. 1405)
AN ACT PRONIBITING DESCLOSURE OF OR INQUIRY INTO,
DEPOSITS WITH ANY BANKING INSTITUTION AND PROVIDING
PENALTY THEREFORE
Section 1. It is hereby declared to be the policy of the
Government to give encouragement to the people to
deposit their money in banking institutions and to
discourage private hoarding so that the same may be
properly utilized by banks in authorized loans to assist in
the economic development of the country.
Section 2. 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,
xxx except when the examination is made in the
course of a special or general examination of a bank and is
specifically authorized by the Monetary Board after being
satisfied that there is reasonable ground to believe that a
bank fraud or serious irregularity has been or is being
committed and that it is necessary to look into the deposit
to establish such fraud or irregularity, or when the
examination is made by an independent
auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only
and the results thereof shall be for the exclusive use of the
bank, or 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.
GENERAL RULE: Bank Deposit are absolutely confidential.
EXCEPTIONS:
1. in cases of examination authorized by the Monetary
Board
2. In cases of examination made by an independent auditor
hired by the bank and results thereat shall be for the
exclusive use of the bank
3.Written permission of the depositor, or
4. In cases of impeachment, or
5. Upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or
6. In cases where the money deposited or invested is the
subject matter of the litigation.
7. In cases of violation of the Anti-Money Laundering Act,
the Anti-Money Laundering Council may inquire into a Bank
account upon order of any competent court.
Section 3. It shall be unlawful for any official or employee of
a banking institution to disclose to any person other than
those mentioned in Section two hereof any information
concerning said deposits.
Section 5. Any violation of this law will subject offender
upon conviction, to an imprisonment of not more than five
years or a fine of not more than twenty thousand pesos or
both, in the discretion of the court.