Arellano University School of Law

Center for Legal Education and Research

2020/21 BAR OPERATIONS COMMISSION

LAST MINUTE TIPS
THE LAW PERTAINING TO PRIVATE
PERSONAL & COMMERCIAL RELATIONS

A. CIVIL LAW

I. LEGAL PERSONALITY, CAPACITY TO ACT

1. Distinguish Juridical Capacity and Capacity to Act.

JURIDICAL CAPACITY CAPACITY TO ACT

Fitness to be subject of legal relations.
Inherent.
Lost only through death.
Can exist without capacity to act.
No restrictions
Power to do acts with legal effect.
Through fulfilment of specific legal activities.
Through death and other causes.
Cannot exist without juridical capacity.
Restrictions: Minority, insanity or imbecility, state of being deaf-
mute, prodigality, and civil interdiction.

Limitation: Age, insanity, imbecility, state of being deaf-mute,

penalty, prodigality, family relations, alienage, absence, insolvency,
and trusteeship, among others.
(Art. 38-39, Civil Code)

2. When is a child considered born for civil purposes?

The fetus is considered born if it is alive at the time it is completely delivered from the mother’s womb.
However, If the fetus had an intra-uterine life of less than seven months, it is not deemed born if it
dies within twenty-four hours after its complete delivery from the maternal womb. (Art. 41, Civil Code)

3. What is the presumption on survivorship?

If there is a doubt, as between two or more persons who are called to succeed each other, as to
which of them died first, whoever alleges the death of one prior to the other, shall prove the same; in
the absence of proof, it is presumed that they died at the same time and there shall be no
transmission of rights from one to the other. (Art. 43, Civil Code)

II. MARITAL RELATIONSHIPS

4. State and explain briefly the applicable Property Regime in the following instances:

MARRIAGE PROPERTY REGIME

A void marriage by reason of psychological
incapacity.
Second marriage contracted by the surviving spouse
during the effectivity of the Family Code without a
marriage settlement after the prior marriage was
terminated by reason of death but the surviving
spouse failed to liquidate the conjugal partnership of
said prior marriage.
Second marriage celebrated during the subsistence
of a prior voidable marriage.
When after the issuance of the decree of legal
separation, the spouses reconciled and obtained a
decree of reconciliation from the court.
Article 147 of the Family Code.
Complete separation of property. The Family Code
provides that if the conjugal partnership or the absolute
community of the prior marriage was terminated by
reason of death and the surviving spouse failed to
liquidate the property regime within one year from the
death of the deceased spouse, the subsequent
marriage shall be mandatorily governed by complete
separation.
Property regime provided in Art. 148 of the Family
Code because the marriage is void for being a
bigamous marriage under Art. 35(4).
Complete separation of property. While a decree of
reconciliation sets aside the decree of legal separation,
the separation of property subsists, however, unless
the spouses have agreed to revive their former
property regime.

5. What are the properties included and excluded in the Absolute Community of Property?

ACQUIRED PRIOR TO THE MARRIAGE ACQUIRED DURING THE MARRIAGE

GENERAL RULE
Included in the Absolute Community of Property (“ACP”)
EXCLUDED
a. Those excluded in the marriage settlement; a. Those acquired through gratuitous title, including
b. Those for personal and exclusive use; and fruits and income unless expressly provided by

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 c. Those acquired by either spouse who has the grantor that they shall form part of the ACP;
legitimate descendants by a former marriage, and
including fruits and income. b. Those for personal and exclusive use.
(Arts. 91-92, Family Code)

6. Discuss the property regimes of unions without marriage under Articles 147 and 148 of the
Family Code.

ARTICLE 147 ARTICLE 148

1. Capacitated to marry each other.
2. Living exclusively as husband and wife without
the benefit of marriage or under a void marriage.
Salaries and wages are owned in equal shares.
Property acquired is presumed to be owned by both.
Governed by the rules on co-ownership when the
presumption of joint acquisition and equal sharing
applies.
There is presumption of joint acquisition and equal
sharing as to property acquired while they live
together.
Contribution need not be actual. It can be
maintenance of household or taking care of family.
1. With legal impediment to marry; or
2. Not living exclusively as husband and wife.
Salaries and wages are separately owned.
Property acquired belongs to such party.
Owned by them in common in proportion to their
respective contributions.
No presumption of joint acquisition. When there is
evidence of joint acquisition but none as to the extent
of actual contribution, there is a presumption of equal
sharing.
Contribution is required to be actual in the form of
money, industry, or property.

7. Is a marriage nullified if there is an absence of a real intention to establish a conjugal and

family life? Why or why not?

No. So long as all the essential and formal requisites prescribed by law are present, it shall be
declared valid. Having no real intention to establish a life together is insufficient to nullify a marriage
freely entered into in accordance with law. (Republic vs. Albios, G.R. No. 198780, October 16, 2013)

8. What are the instances when the requirement of a marriage license be dispensed with?

a. Marriage in Articulo Mortis (at the point of death) even if the ailing party subsequently survives;
b. If the residence of either party is so located that there is no means of transportation to enable
such party to personally appear before the local civil registrar;
c. Marriage among Muslims or among members of the ethnic cultural communities, provided they
are solemnized in accordance with their customs, rites, or practices;
d. Cohabitation between a man and a woman who have lived together continuously as husband and
wife for at least five years and without impediment to marry each other during said cohabitation;
and
e. Marriages celebrated abroad and in accordance with the laws of the place of celebration which do
not require a valid marriage license.
(Arts. 27, 38, 33, 34, Family Code)

9. Distinguish bigamous marriage under Art. 40 of the Family Code from bigamous marriage
under Article 35(4) of the Family Code.

Art. 40 Art. 35 (4)

Void but a party thereto did not secure a judicial
declaration of nullity of the prior marriage before
contracting a subsequent marriage.
Property regime following a void marriage.
Void for failure to comply with the requisites.
Valid, or at least voidable, and a party thereto
contracts another marriage prior to its termination.
Property regime is governed by Art. 148.
Void for being bigamous.

10. May a person unilaterally declare his marriage void?

No. The Family Code provides that a judicial declaration of nullity is indispensable for the purposes of
remarriage. (De Guzman vs. People, G.R. No. 224742, August 07, 2019)

11. May a divorce decree obtained abroad by a Filipino citizen married to a foreigner be
recognized as valid in the Philippines pursuant to Article 26 (2) of the Family Code?

Yes. The provision only requires that there be a divorce validly obtained abroad pursuant to the
national law of the foreigner spouse, capacitating him or her to remarry. It does not matter whether
the Filipino spouse is the petitioner or the respondent in the foreign divorce proceeding. (Republic vs.
Manalo, G.R. No. 221029, April 24, 2018)

12. What are the Rules on Proof of Filiation of Legitimate and Illegitimate Children?

LEGITIMATE ILLEGITIMATE
Art. 172 (1): (a) The record of birth appearing in the civil register or a final judgment; or (b) An admission of
legitimate filiation in a public document or a private handwritten instrument and signed by the parent
concerned.

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 Art. 172 (2): (a) The open and continuous possession of
means allowed by the Rules of Court and special laws.
The action may be brought by the child during his lifetime
and shall be transmitted to the heirs should the child die
during minority or in a state of insanity.
the status of a legitimate child; or (b) Any other
If based on Art. 172 (1): The action must be
brought within the same period specified in Art.
173.

The heirs shall have five (5) years within which to If based on Art. 172 (2): The action must be
institute the action. Action already commenced by the brought within the same period specified in Art.
child shall survive notwithstanding the death of either or 173, but during the lifetime of the alleged parent.
both of the parties. (Art. 173, Civil Code) (Art. 175, Civil Code)

13. State whether the following sufficiently establishes filiation.

a. SSS Form E-1 subscribed and made under oath
by the putative father, bearing his signature and
thumb marks and indicates that the child is his
son and dependent.
b. Entries in a private handwritten instrument.
Yes. Said document constitutes an “admission of
legitimate filiation in a public document or a private
handwritten instrument and signed by the parent
concerned.
1. No. If it is the lone piece of evidence submitted to
prove filiation, there should be strict compliance
with the requirement that the same must be signed
by the acknowledging parent.

2. Yes. If it is accompanied by other relevant and

c. A birth certificate not signed by the putative
father.
d. A birth certificate not signed by the putative
father but the latter appears to have caused the
registration of the birth of the alleged child.
e. A notarial agreement to support a child whose
filiation is admitted by the putative parent.
f. Delayed registration of birth, made after the
death of the putative parent.
g. A baptismal certificate.
(Aguilar vs. Siasat, G.R. No. 200169, January 28, 2015, Salas vs. Matusalem, G.R. No. 180284, September 11, 2013, Arado
vs. Alcoran, G.R. No. 163362, July 8, 2015, Ara vs. Pizzaro, GR. No. 187273, February 15, 2017)
competent evidence, it suffices that the claim of
filiation therein be shown to have been made and
handwritten by the acknowledging parent as it is
merely corroborative of such other evidence.
No. A certificate of live birth purportedly identifying the
putative father is not competent evidence of paternity
when there is no showing that the putative father had a
hand in the preparation of the certificate.
Yes. Because the putative father had a direct hand in
the preparation of the birth certificate, reliance on the
birth certificate of the child as evidence of his paternity
is fully warranted, although the same be unsigned.
Yes. The agreement is an admission of filiation in a
public document.
No. A delayed registration of birth, made after the
death of the putative parent, is tenuous proof of
filiation. It cannot be accorded the same evidentiary
weight as regular birth certificates. To be a competent
proof of filiation, it must be shown that the putative
father had a direct hand in the preparation of the birth
certificate.
No. While it may be considered a public document, it
can only serve as evidence of the administration of the
sacrament on the date specified but not the veracity of
the entries with respect to the child’s paternity.

14. Does mere reappearance of a party previously declared presumptively dead automatically
terminate the subsequent marriage contracted after securing a judicial declaration of
presumptive death of the absent spouse?

No, mere reappearance does not terminate the subsequent marriage contracted after securing a
judicial declaration of presumptive death of the absent spouse. The subsequent marriage referred
hereto shall be automatically terminated by the recording of the affidavit of reappearance of the
absent spouse. (Art. 42, Family Code)

15. In presumptive death, how will the requirement of “well-founded belief” be established?

The well-founded belief in the absentee's death requires the present spouse to prove that his/her
belief was the result of diligent and reasonable efforts to locate the absent spouse and that based on
these efforts and inquiries, he/she believes that under the circumstances, the absent spouse is
already dead. It necessitates exertion of active effort. (Republic vs. Catubag, G.R. No. 210580, April 18, 2018)

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 III. PROPERTY

16. What are the two concepts of a builder in good faith?

LIMITED CONCEPT EXPANDED CONCEPT

It is essential that a person asserts title to the land on which he In cases wherein the builder has
builds, i.e., that he be a possessor in the concept of owner, and constructed improvements on the land of
that he be unaware that there exists in his title or mode of another with the knowledge and consent
acquisition any flaw which invalidates it. of the owner.
(DepEd vs. Casibang, G.R. No. 192268, January 27, 2016)

17. The builders are informal settlers and are aware that they are not the owners of the land.
However, there was a person who gave express permission for them to construct their houses
in the said property. The person who gave express permission turned out not to be the owner
of the land. Does the expanded definition of a Builder in Good Faith applicable?

No. The one who gave permission was a total stranger. In the absence of that special relationship,
that should have alerted the builders and should have made inquiries. It cannot be a basis of good
faith. (Padilla v. Malicsi, G.R. No. 201354, September 21, 2016, J. Leonen)

18. Can a co-owner be prevented by another co-owner from alienating his/her share in the co-
ownership?

No. A co-owner is an owner of the whole and over the whole he exercises the right of dominion, but
he is at the same time the owner of a portion which is truly abstract. Hence, his co-owners have no
right to enjoin a co-owner who intends to alienate or substitute his abstract portion or substitute a third
person in its enjoyment. (Torres v. Lapinid, G.R. No. 187987, November 26, 2014)

19. What are the requisites of compulsory grant of right of way?

a. Isolation of the property;

b. Isolation must not be to the fault of the dominant estate;
c. Payment of proper indemnity;
d. Easement must be established at that point which is least prejudicial to the servient estate. (Reyes
v. Spouses Valentin, G.R. No. 194448, February 11, 2015, J. Leonen)

20. Distinguish Negative Easement from Positive Easement.

NEGATIVE EASEMENT POSITIVE EASEMENT

Prohibits the owner of the servient estate from doing
something which he could lawfully do if the easement
did not exist.
In acquisition by prescription, prescriptive period
commences from the day on which the owner of the
dominant estate forbade, by an instrument
acknowledged before a notary public, the owner of the
servient estate, from executing an act which would be
lawful without the easement.
Imposes upon the owner of the servient estate the
obligation of allowing something to be done or of
doing it himself.
In acquisition by prescription, prescriptive
period commences from the day on which the
owner of the dominant estate, or the person who
may have made use of the easement, commenced
to exercise it upon the servient estate. (Sps. Garcia
vs. Santos, G.R. No. 228334, June 17, 2019)

21. Distinguish Nuisance Per Accidens from Nuisance Per Se.

NUISANCE PER ACCIDENS NUISANCE PER SE

Depends upon certain conditions and circumstances, and its existence Affects the immediate safety of
being a question of fact. persons and property.
Cannot be abated without due hearing thereon in a tribunal authorized May be summarily abated under the
to decide whether such a thing does in law constitute a nuisance. undefined law of necessity.
(Rana vs. Wong, G. R. No. 192861, June 30, 2014)

22. Distinguish Alluvium from Avulsion?

Alluvium Avulsion
The deposit of the soil here is gradual and Sudden or abrupt; may be seen.
imprescriptible.
Soil cannot be identified. Soil is identifiable verifiable
Belongs to owner of the property to which it is Belongs to the owner from whose property it was
attached. detached.
Merely an attachment. Detachment followed by attachment.
The deposit of the soil here is gradual and Sudden or abrupt; may be seen.
imprescriptible.
(Rabuya, Property, 2008, p. 244)

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 IV. OBLIGATIONS

23. What are the three (3) types of mora or delay?

a. Mora Solvendi (Debtor’s Default) – a delay in the fulfillment of an obligation, by reason of a cause
imputable to the debtor.
b. Mora Accipiendi (Creditor’s Default) – a delay on the part of the obligee in accepting the
performance of the obligation by the obligor.
c. Compensatio Morae – default on the part of both parties because neither has completed their part
in their reciprocal obligation. (Cortes vs. CA, G.R. No. 126083, July 12, 2006)

24. Enumerate are the requisites of a Fortuitous Event.

a. The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will;
b. It must be impossible to foresee the event which constitutes the “caso fortuito,” or if it can be
foreseen, it must be impossible to avoid;
c. The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and
d. The obligor must be free from any participation in the aggravation of the injury resulting to the
creditor. (Metro Concast Steel vs. Allied Bank Corporation, G.R. No. 177921, December 4, 2013)

25. What are the kinds of obligations which are not subject to legal compensation?

a. Debts arising from contracts of deposit

b. Debts arising from contracts of commodatum (gratuitous loan of a thing)
c. Claims for support due to gratuitous title
d. Obligations arising from criminal offenses
e. Certain obligations in favor of the government, such as taxes, fees, duties, and others of a similar
nature. (Arts. 1287-1288, Civil Code)

26. What are the requisites of a stipulation pour atrui?

a. There is a stipulation in favor of a third person;

b. The stipulation is a part, not the whole, of the contract;
c. The contracting parties clearly and deliberately conferred a favor to the third person―the favor is
not merely incidental;
d. The favor is unconditional and uncompensated;
e. The third person communicated his or her acceptance of the favor before its revocation; and
f. The contracting parties do not represent, or are not authorized, by the third party
(Art. 1311, Civil Code)

V. CONTRACTS

27. Distinguish the following Special Contracts.

CONTRACT DEFFINITIONNATURE SUBJECT NATURE

Commodatum One of the parties delivers to another, either something not Non- Real;
consumable so that the latter may use the same for a certain consumable principal
time and return it. contract
Mutuum One of the parties delivers to another, either money or other Consumable Real;
consumable thing, upon the condition that the same amount of accessory
the same kind and quality shall be paid. contract
Pledge The debtor or a third person delivers to the creditor or to a third Movable Real;
person movable property as security for the performance of the property accessory
principal obligation, upon the fulfillment of which the thing contract
pledged, with all its accessions and accessories, shall be
returned to the debtor or to the third person.
Real Estate Secures the fulfillment of a principal obligation by the Real Consensual;
Mortgage mortgagor who is the absolute owner of a real property, or by a property accessory
third person pledging his own real property called an contract
accommodation/third-party, who has the free disposal of his
property, or in the absence thereof, when legally authorized for
the purpose.
Chattel Personal property is recorded in the Chattel Mortgage Register Personal Consensual;
Mortgage as a security for the performance of an obligation. If the property accessory
movable, instead of being recorded, is delivered to the creditor contract
or a third person, the contract is a pledge and not a chattel
mortgage.

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28. Discuss the following concepts briefly.

a. Forbearance in the concept of the Usury Law. – Described as a contractual obligation of a

lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to
repay the loan or debt then due and payable.
b. Mortgagee in Good Faith. – It based on the rule that all persons dealing with property covered
by a Torrens Certificate of Title are not required to go beyond what appears on the face of the
title. This is in respect to the public interest in upholding the indefeasibility of a certificate of title
as evidence of lawful ownership of the land or of any encumbrance thereon. In the case of banks
and other financial institutions, however, greater care and due diligence are required since they
are imbued with public interest, failing which renders the mortgagees in bad faith.
c. Contract of Adhesion. – A contract of adhesion is one wherein one party imposes a ready-made
form of contract on the other. It is a contract whereby almost all of its provisions are drafted by
one party, with the participation of the other party being limited to affixing his or her signature or
“adhesion” to the contract. Contracts of adhesion are not invalid per se as they are binding as
ordinary contracts.
d. Accommodation Mortgagor. – A third person who is not a debtor to a principal obligation but
merely secures it by mortgaging his or her own property.
e. Pactum Commissorium. – Prohibits the creditor from appropriating the things given by way of
pledge or mortgage, or from disposing of them; any stipulation to the contrary is null and void. It
exists when (i) there is a pledge or mortgage wherein property is pledged or mortgaged by way of
security for the payment of the principal obligation; and (ii) there is a stipulation for an automatic
appropriation by the creditor of the thing pledged or mortgaged in the event of non-payment of the
principal obligation within the stipulated period. (Sps. Pen vs. Sps. Julian, G.R. No. 160408, January 11, 2016,
WT Construction v. Cebu, G. R. No. 208984, September 16, 2015, PBC v. Dy, G.R. No. 183774, November 14, 2012)

29. Differentiate Mutuum from Commodatum.

COMMODATUM MUTUUM
Delivery of something not consumable so that Delivery of money or other consumable thing,
the bailee may use the same for a certain time upon the condition that the same amount of the
and return it. same kind and quality shall be paid.
Movable or immovable thing, which is ordinarily Money or other consumable things.
non-consumable.
Essentially gratuitous. May be gratuitous or with stipulation for interest.
Bailor retains the ownership of the thing loaned Ownership passes to the Bailee.
(Spouses Abella v. Romeo , GR 195166, July 08, 2015, Leonen, J.)

VI. TORTS AND QUASI-DELICTS, AND DAMAGES

30. Define the following terms in Torts and Damages:

a. Res Ipsa Loquitur The fact of the occurrence of an injury, taken with the surrounding
circumstances, may permit an inference or raise a presumption of
negligence, or make out a plaintiff’s prima facie case, and present a question
of fact for defendant to meet with an explanation.
b. Doctrine of Last Clear It provides that the antecedent negligence of a person does not preclude
Chance or Supervening recovery of damages caused by the supervening negligence of the latter, who
Negligence had the last fair chance to prevent the impending harm by the exercise of due
diligence.
c. Damnum Absque Injuria Sustains actual damage to his person or property, without sustaining any
legal injury.
d. Principle of Abuse of A person must, in the exercise of legal right or duty, act in good faith. He
Rights would be liable if he instead acted in bad faith, with intent to prejudice
another.
e. Acts Contra Bonos Mores Any person who wilfully causes loss or injury to another in manner that is
contrary to morals, good customs or public policy shall compensate the latter
for the damage.
f. Proximate Cause It is that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result
would not have occurred.
g. Doctrine of Contributory Negligent conduct on the part of the injured party, contributing as a legal
Negligence cause to the harm he has suffered, which falls below the standard which he is
required to conform for his own protection.
h. Doctrine of Respondeat The liability is strictly imputed, that is the employer is liable not because of his
Superior act or omission but because of the act or omission of the employee. What is
material is not whether the employer exercised due care but the conduct of
the employee. Consequently, the employer cannot escape liability by claiming
that he exercised due diligence in the selection or supervision of the
employee
(Tan vs. Jam Transit, G.R. No. 183198, November 25, 2009, Philippine National Railways vs. Vizcara, G.R. No. 190022,
February 15, 2012, The City of Bacolod vs. Phuture Visions Co., Inc., G.R. No. 190289, January 17, 2018)

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 VII. DAMAGES

31. Define the following terms in Damages

Actual and Compensatory Actual or compensatory damages are those awarded in satisfaction of, or in
Damages recompense for, loss or injury sustained. They proceed from a sense of natural
justice and are designed to repair the wrong that has been done, to compensate
for the injury inflicted and not to impose a penalty. In actions based on torts or
quasi-delicts, actual damages include all the natural and probable
consequences of the act or omission complained of (Art. 2199, NCC).
Moral Damages Designed to compensate the claimants for actual injury and is not meant to
enrich the complainant at the expense of the defendant. Though incapable of
pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant‘s wrongful act for omission. (Art. 2217, NCC)
Nominal Damages Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the plaintiff for any loss suffered by him.
(Art. 2221, NCC). The court may award nominal damages in every obligation
arising from any source enumerated in Article 1157, or in every case where any
property right has been invaded (Art. 2222, NCC). Award of nominal damages is
in lieu of actual, moral, temperate or liquidated damages.
Temperate or Moderate These are damages, which are more than nominal but less than compensatory,
Damages and may be recovered when the court finds that some pecuniary loss has been
suffered, but its amount cannot be proved with certainty (Art. 2224, NCC).
These are damages the amount of which is left to the sound discretion of the
court (Pineda, Torts and Damages, 2004, p. 224).
Liquidated Damages Liquidated damages are those agreed upon by the parties to a contract, to be
paid in case of breach thereof (Art. 2226, NCC). It cannot co-exist with actual
damages (Art. 2226, NCC)

Liquidated damages, whether intended as an indemnity or a penalty, shall be

equitably reduced if they are iniquitous or unconscionable. (Art 2227, NCC) It is
necessary that there be a contract the violation of which gives rise to the
liquidated damages stipulated upon (Pineda, Torts and Damages, 2004, p. 232 )
Exemplary or Corrective Imposed by way of example of correction for public good in addition to the
Damages moral, temperate, liquidated or compensatory damages. (Art. 2229, NCC)

Exemplary damages are required by public policy, for wanton acts must be
suppressed. They are mere additions to actual, moral, temperate and liquidated
damages which may or may not be granted at all depending upon the necessity
of setting an example for the public good as a form of deterrent to the repetition
of the same act by any one (Pineda, Torts and Damages, 2004, p. 234).

32. Who has the burden of proving vicarious liability of the employer?

The burden of proving the existence of an employer-employee relationship and that the employee
was acting within the scope of his or her assigned tasks rests with the plaintiff. Therefore, it is not
incumbent on the employer to prove that the employee was not acting within the scope of his
assigned tasks. (Raul S. Imperial v. Heirs of Bayaban, G.R. No. 197626, dated October 03, 2018)

33. When can Attorney’s Fees and Expenses of Litigation be recovered?

In the absence of stipulation, attorney‘s fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:

a. When exemplary damages are awarded;

b. When the defendant‘s act or omission has compelled the plaintiff to litigate with third persons or
to incur expenses to protect his interest;
c. In criminal cases of malicious prosecution against the plaintiff;
d. In case of a clearly unfounded civil action or proceeding against the plaintiff;
e. Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff‘s
plainly valid, just and demandable claim;
f. In actions for legal support;
g. In actions for the recovery of wages of household helpers, laborers and skilled workers;
h. In actions for indemnity under workmen‘s compensation and employer‘s liability laws;
i. In a separate civil action to recover civil liability arising from a crime;
j. When at least double judicial costs are awarded;
k. In any other case where the court deems it just and equitable that attorney‘s fees and expenses
fees is proper if the parties stipulate it. (Art. 2208, Civil Code)

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34. What damages can be recovered in case of death?

a. Civil indemnity: When someone dies due to someone’s fault or negligence, there is civil liability
arising from the criminal offense
b. Loss of earning capacity: When someone dies, his/her heirs are deprived of the deceased’s
income
c. Actual or temperate damages: When someone dies, there are medical, funeral, and burial
expenses.
d. Moral damages: When someone dies, his/her loved ones suffer emotionally
e. Exemplary damages: To correct a public wrong
f. Attorney’s fees: If just and equitable
g. Cost of suit: As ordinarily adjudged by the courts
h. Legal Interest: On the monetary judgment once it has become final and until it is fully paid
(People v. Tolentino, G.R. No. 176385, February 26, 2008)

B. COMMERCIAL LAW

I. CORPORATIONS

38. What is the Business Judgment Rule?

Under the Business Judgment Rule, questions of policy or of management are left solely to the
honest decision of officers and directors of a corporation, and the court is without authority to
substitute its judgment of the board of directors; the board is the business manager of the
corporation, and so long as it acts in good faith its orders are not reviewable by the courts.
(Montelibano vs. Bacolod-Murcia Milling Co., Inc., G.R. No. L-15092, May 18, 1962)

39. What is the Doctrine of Limited Capacity?

The doctrine provides that no corporation shall possess or exercise any corporate powers other
than those conferred by the Corporation Code or by its articles of incorporation and except such
as are necessary or incidental to the exercise of the powers so conferred. (Sec. 44, Revised
Corporation Code)

40. When does the juridical personality of a corporation sole commence?

From and after filing with the Securities and Exchange Commission of the articles of
incorporation, verified by affidavit or affirmation, and accompanied by the copy of the commission,
certificate of election or letter of appointment duly certified to be correct by any notary public, the
chief archbishop, bishop, priest, minister, rabbi, or presiding officer shall become a corporation
sole. (Sec. 110, Revised Corporation Code)

41. What is a One Person Corporation? Who may incorporate, and who may not?

A One Person Corporation is a corporation with a single stockholder. Only a natural person, trust,
or an estate may form a One Person Corporation. The following may not incorporate as a One
Person Corporation: (a) banks and quasi-banks, pre-need, trust, insurance, public and publicly-
listed companies, and non-chartered government-owned and -controlled corporations; and (b) a
natural person who is licensed to exercise a profession may not organize as a One Person
Corporation for the purpose of exercising such profession except as otherwise provided under
special laws. (Sec. 116, Revised Corporation Code)

42. What is the composition of the Board of Directors or Trustees? What are the qualifications
and the term of a member of the Board?

Corporation Composition of Board Qualification of Term

Director/Trustee
Stock Not more than fifteen (15) Director must be a holder One (1) year; shall
Corporation directors. For corporations of at least one (1) share hold office until the
vested with public interest, of stock registered in the successor is elected
there must be an books. and qualified.
independent director,
constituting at least 20% of
the Board.
Non-stock May or may not be more than Trustee must be a Not exceeding three
Corporation fifteen (15) trustees. For member of the (3) years; shall hold
corporations vested with corporation. office until the
public interest, there must be successor is elected
an independent director, and qualified.
constituting at least 20% of
the Board.

arellano C|L|E|A|R 8
 Corporation Composition of Board Qualification of Term
Director/Trustee
Close Stockholders shall be Director must be a holder If without Board, the
Corporation deemed directors when the of at least one (1) share term shall be that
articles of incorporation of stock registered in the stipulated in the
provide that the business of books articles of
the corporation shall be incorporation.
managed by the stockholders Otherwise, provision
rather than by a board. on stock corporations
Otherwise, provision on stock applies.
corporations applies.
Educational Not more than fifteen (15) Organized as stock One (1) year; shall
Corporation directors, corporation: Director hold office until the
Organized as must be a holder of at successor is elected
Stock least one (1) share of and qualified.
Corporation stock registered in the
books. Members of the
Board must be all Filipino
citizens.
Educational Trustees shall not be less Organized as non-stock Not exceeding three
Corporation than five (5) nor more than corporation: Trustee (3) years; shall hold
Organized as fifteen (15); Provided, that must be a member of the office until the
Non-stock the number of trustees shall corporation. Members of successor is elected
Corporation be in multiples of five (5). the Board must be all and qualified.
Filipino citizens.

One-Person Single stockholder. May only be a natural While director is living

Corporation person, trust, or an and capacitated, with
estate. nominee and alternate
nominee in case of
death or incapacity.

43. How is the vacancy in the Board filled?

a. If vacancy was by reason other than removal or term expiration and there is still quorum in the
board – the vacancy may be filled by the vote of at least a majority of the remaining directors
or trustees.
b. If vacancy is due to term expiration – the election of a new director shall be held no later than
the day of such expiration at a stockholders’ or members’ meeting called for that purpose.
c. If vacancy is due to removal by the stockholders or members – the election may be held on
the same day of the meeting authorizing the removal.
d. In all other cases - the election must be held no later than 45 days from the time the vacancy
arose.
e. If vacancy prevents the remaining directors from constituting a quorum and emergency action
– the vacancy may be temporarily filled from among the officers of the coroporation by
unanimous vote of the remaining directors or trustees. (Sec. 28, Revised Corporation Code)

44. Who are corporate officers?

The following are corporate officers: (a) a president, who must be a director; (b) a treasurer, who
must be a resident of the Philippines; and (d) such other officers as may be provided in the
bylaws. If the corporation is vested with public interest, the board shall also elect compliance
officer. The same person may hold two (2) or more positions concurrently, except that no one
shall act as president and secretary or as president and treasurer at the same time, unless
otherwise allowed in this Code. (Section 24, Revised Corporation Code)

45. What acts are not delegable to the Executive Committee?

a. Approval of any action which requires stockholders’ approval;

b. Filling of vacancies in the board;
c. Amendment or repeal of by-laws or the adoption of new by-laws;
d. Amendment or repeal of any resolution of the board which by its express terms is not
amendable or repealable; and
e. Distribution of cash dividends to the shareholders. (Sec. 34, Revised Corporation Code)

46. What is the Doctrine of Apparent Authority?

The doctrine of apparent authority provides that even if no actual authority has been conferred on
an agent, his or her acts, as long as they are within his or her apparent scope of authority, bind
the principal. If a corporation intentionally or negligently clothes its officers or agents with
apparent authority to perform acts for it, the corporation will be estopped to deny that such

arellano C|L|E|A|R 9
 apparent authority is real, as to innocent third persons dealing in good faith with such officers or
agents. (Calubad vs. Ricarden Development Co., G.R. No. 202364, August 30, 2017)

47. What is the Doctrine of Corporate Opportunity?

Under this doctrine, a director is prohibited from competing with the business in which his
corporation is engaged in. Otherwise, he would be guilty of disloyalty where profits that he may
realize will have to go to the corporate funds except if the disloyal act is ratified. (James Ient vs. Tullett
Prebon (Phils), G.R. No. 189158 and 189530, January 11, 2017)

48. Are the disputed shares of stocks included in the determination of the presence of quorum
in a meeting?

No. For stock corporations, the quorum is based on the number of outstanding voting stocks. The
distinction of undisputed or disputed shares of stocks is not provided for in the law or
jurisprudence. (Villongco vs. Yabut, G.R. No. 225022, February 5, 2018)

49. Is a transfer of share reflected in the General Information Sheet (GIS) but not in the Stock
and Transfer Book of the corporation conclusive as to the identities of the registered
stockholders of the corporation?

No. All transfers of shares of stock must be registered in the corporate books in order to be
binding on the corporation. The owner of shares of stock cannot be accorded the rights pertaining
to a stockholder if his ownership of such shares is not recorded in the books. (FS Velasco vs. Madrid,
G.R. No. 208844, November 10, 2015)

50. Does deposit on stock subscription entitle a person to the rights of a stockholder?

No. Deposit on stock subscription is merely an amount of money received by a corporation with a
view of applying the same as payment for additional issuance of shares in the future, an event
which may or may not happen. (CIR vs. First Express Pawnshop, G.R. No. 172045, June 16, 2009)

51. Summarize the voting requirements in the exercise of a corporation of its corporate
powers.

POWERS OF BOARD OF DIRECTORS OUTSTANDING CAPITAL STOCK OR

CORPORATION MEMBERS
Sec. 15 – Amendment of At least majority of the board. Vote or written assent of at least 2/3 of
articles of incorporation the outstanding capital stock or
members.
Sec. 23 – Election of - At least majority of the outstanding
directors capital stock or members.
Sec. 24 – Appointment of At least majority of the board. -
corporate officers
Removal of corporate At least majority of the board. -
officers
Sec. 27 – Removal of - At least 2/3 of the outstanding capital
directors/trustees stock or members
Sec. 28 – Filling vacancy in If the ground is not expiration If the ground is: Expiration of term,
the board of the term, removal, increase removal, increase in number of
in number of board seats and directors; or Not expiration, removal,
the remaining directors increase in number of board seats but
constitute a quorum – at least the remaining directors do not
majority of the remaining constitute a quorum – at least majority
directors/trustees of the outstanding capital stock or
members.
Sec. 29 – Payment of Directors/trustees - without At least majority of the outstanding
compensation of directors participation. capital stock or members.
Sec. 34 – Appointment of Majority of the quorum. -
the members of the
executive committee
Sec. 34 – Creation of Majority of the quorum. -
special committees
Sec. 36 – At least majority of the board. At least 2/3 of the outstanding capital
Extension/shortening of the stock or members.
term
Sec. 37 – Incurring, At least majority of the board. At least 2/3 of the outstanding capital
creating or increasing stock.
bonded indebtedness;
Increasing or decreasing
capital stock
Incurring debt in the Majority of the quorum. -
ordinary course of business

arellano C|L|E|A|R 10
 POWERS OF
CORPORATION
Sec. 39 – Sale or other
disposition of assets
Sec. 41 – Investing funds
for its primary purpose
Sec. 41 – Investing funds
for incidental purpose for
which corporation is
created
Invest the funds for a
secondary purpose or in
another business
Sec. 42 – Declaration of
cash dividends
Sec. 42 – Declaration of
stock dividends
Sec. 43 – Entering into a
management contract
BOARD OF DIRECTORS OUTSTANDING CAPITAL STOCK OR
MEMBERS
In the ordinary course of -
business – majority of the
quorum.
All or substantially all of At least 2/3 of the outstanding capital
corporate assets – At least stock or members.
majority of the board.
Majority of the quorum. -
Majority of the quorum. -
At least majority of the board. At least 2/3 of the outstanding capital
stock or members
Majority of the quorum. -
Majority of the quorum. At least 2/3 of the outstanding capital
stock.
Majority of the quorum for both At least majority of the outstanding
managed and managing capital stock or members of each
corporation. managed and managing corporation.

In case of corporations with interlocking

directors/trustees or
stockholders/members – at least 2/3 of
the outstanding capital stock or
members from the managed
corporation
Sec. 45 – Adoption of by- - Majority of the outstanding capital stock
laws or members.
Sec. 47 – Amendment of At least majority of the board. At least majority of the outstanding
by-laws capital stock or members;

If authority to amend will be delegated

by stockholders to the board - at least
2/3 of the outstanding capital stock or
members

Revocation of the delegation made to

the board – At least majority of the
outstanding capital stock or members
Sec. 61 – Fixing the issued Majority of the quorum At least majority of the outstanding
value of no par value pursuant to authority conferred capital stock.
shares by the AOI or the by-laws.
Sec. 76 – Merger or At least majority of the board. At least 2/3 of the outstanding capital
consolidation stock or members.
Sec. 102 – Amendment of At least majority of the board. At least 2/3 of the outstanding capital
the Articles of a close stock, with or without voting rights or of
corporation such greater proportion of shares as
provided in the Articles.
Sec. 134 – Voluntary At least majority of the board. At least majority of the outstanding
dissolution where no capital stock or members.
creditors are affected
Sec. 135 – Voluntary At least majority of the board. At least 2/3 of the outstanding capital
dissolution where creditors stock or members.
are affected
(Divina, Divina on Commercial Law Volume I, 2021, pp. 483-486)

52. When may non-voting share be entitled to vote?

a. Amendment of the articles of incorporation;

b. Adoption and amendment of bylaws;
c. Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the
corporate property;
d. Incurring, creating, or increasing bonded indebtedness;
e. Increase or decrease of authorized capital stock;
f. Merger or consolidation;
g. Investment of corporate funds in another corporation or business for a purpose other than its
primary purpose; and
h. Dissolution of the corporation. (Sec. 6, Revised Corporation Code)

arellano C|L|E|A|R 11
53. Distinguish Proxy Voting from Voting Trust.

PROXY VOTING TRUST AGREEMENT

Proxies shall be in writing, signed by the
stockholder or member and filed before the
scheduled meeting with the corporate
secretary. Unless required by the by-laws,
proxies need not be notarized nor is it
required to be filed with the SEC.
Legal title to the shares remains with the
beneficial owner.
(1) A proxy votes merely as an agent
(2) A proxy must vote in person
(3) No right to inspect is granted, unless
separately authorized for that purpose.
(4) A proxy cannot be voted and cannot
qualify as director of a corporation unless
he is a stockholder in his own right.
Unless otherwise provided in the proxy, it
shall be valid only for the meeting for which
it is intended. No proxy shall be valid and
effective for a period longer than five (5)
years at any one time.
Revocable anytime unless coupled with an
interest.
A voting trust agreement must be in writing and notarized,
and shall specify the terms and conditions thereof. A
certified copy of such agreement shall be filed with the
corporation and with the Securities and Exchange
Commission; otherwise, said agreement is ineffective and
unenforceable.
A trustee is vested legal title to the shares and the
beneficial owner of the shares ceased to be stockholder of
record of the corporation.
(1) A trustee votes as owner of the shares
(2) A Trustee may vote in person or by proxy
(3) Right to inspect is granted. All rights of a stockholder
may be exercised by trustees except proprietary rights.
(4) A trustee is qualified to be elected as director or
trustee.
Duration may exceed five (5) years, in case a voting trust
is specifically required as a condition in a loan agreement
but shall automatically expire upon full payment of the
loan.
Irrevocable.

54. Is there a requirement on the count of shares to inspect corporate records?

No. The Corporation Code has granted the right to inspect the corporate books and records to all
stockholders. It did not require any specific amount of interest for the exercise of the right to
inspect. (Terelay Investment and Development Corp. vs. Yulo, G.R. No. 160924, August 5, 2015)

55. Can the board be compelled to declare dividends every year despite having unrestricted
retained earnings which exceed 100% of its paid-in capital stock?

No, under the following circumstances.

i. When such retention is justified by definite corporate expansion projects or programs
approved by the board of directors; or
ii. When the corporation is prohibited under any loan agreement with any financial institution or
creditor, whether local or foreign, from declaring dividends without their consent, and such
consent has not yet been secured; or
iii. When it can be clearly shown that such retention is necessary under special circumstances
obtaining in the corporation. (Sec. 42, Revised Corporation Code)

56. What is pre-emptive right? When is it not available?

It is the right of stockholders to subscribe to all issues or disposition of shares of any class, in
proportion to their respective shareholdings. It is not available when:
a. The right is denied by the articles of incorporation;
b. The shares are issued to comply with legal requirement on m
c. minimum public ownership; and
d. The shares are issued in good faith with approval of the stockholders representing 2/3 of the
outstanding capital stock in exchange for property needed for corporate purposes or in
payment of a previously contracted debt. (Sec. 38, Revised Corporation Code)

57. What is appraisal right? When can it be exercised?

It refers to the right of the stockholder to dissent and demand payment of the fair value of his
shares, after dissenting from a proposed corporate action involving a fundamental change in the
charter or articles of incorporation in the instance provided for under the Code. No payment shall
be made to any dissenting stockholder unless the corporation has unrestricted retained earnings.
(Turner vs. Lorenzo Shipping Corporation, G.R. No. 157479, November 24, 2010)

58. Is the surrender of the certificate of stocks by the transferee a requisite before the
registration of the transfer may be made in the corporate books?

No. However, such surrender of original stock certificate is required to issue a new stock
certificate to the transferee. (Teng vs. SEC, G.R. No. 184332, February 17, 2016).

arellano C|L|E|A|R 12
59. What are the remedial rights available to stockholders and members, in case of a wrongful
or fraudulent acts of a director, officer or agent?

INDIVIDUAL SUIT CLASS SUIT DERIVATIVE SUIT

Involves direct injury to One or more An action based on injury to the corporation –
the rights of members of a class to enforce a corporate right – wherein the
stockholders and sue for themselves corporation itself is joined as a necessary
members, such as as a class or for all to party, and recovery is in favor of and for the
denial of his right to whom the right was corporation. It is a suit granted to any
inspect corporate books denied, either as an stockholder to institute a case to remedy a
and records or individual action or a wrong done directly to the corporation and
preemptive rights. derivative suit. indirectly to stockholders.

II. INTRA-CORPORATE DISPUTE

60. What is an intra-corporate dispute?

It is one which arises between a stockholder and the corporation or among the stockholders
involving internal affairs of the corporation. (San Jose vs. Ozamiz, G.R. No. 190590, July 12, 2017)

61. What are the tests in determining whether a case involves an intra-corporate dispute?

The two tests are the relationship test and the nature of the controversy test. Under the nature of
the controversy test, an intra-corporate controversy arises when the controversy is not only
rooted in the existence of an intra-corporate relationship, but also in the enforcement of the
parties’ correlative rights and obligations under the Corporation Code and the internal and intra-
corporate regulatory rules of the corporation.

On the other hand, the relationship test, there is an intra-corporate controversy when the conflict
is: (a) Between the corporation, partnership, or association and the public; (b) Between the
corporation, partnership, or association and the State insofar as its franchise, permit, or license to
operate is concerned; (c) Between the corporation, partnership, or association and its
stockholders, partners, members, or officers; and (d) Among the stockholders, partners, or
associates themselves. (San Jose vs. Ozamiz, G.R. No. 190590, July 12, 2017)

III. INTELLECTUAL PROPERTY LAW

62. Distinguish Patents, Copyright, and Trademarks.

PATENT COPYRIGHT TRADEMARK

Any technical solution of a
problem in any field of human
activity, which is new, involves an
inventive step and is industrially
applicable
Term of protection is 20 years
from the filing of application,
nonrenewable.
IP rights vest upon issuance of
letter of patents.
Confined to literary and artistic
works which are original
intellectual creations in the literary
and artistic domain protected from
the moment of their creation.
Generally, term of protection is
during the author’s lifetime and 50
years after his death
IP rights vest from the moment of
creation.
Any visible sign capable of
distinguishing the goods
(trademark) or services (service
mark) of an enterprise and shall
include a stamped or marked
container of good
Term of protection is 10 years and
may be renewed
IP rights vest upon registration
(Except well-known marks under
the Paris Convention)

63. What are the moral rights of a copyright holder?

a. Right of attribution: To require that the authorship of the works be attributed to him, in
particular, the right that his name, as far as practicable, be indicated in a prominent way on
the copies, and in connection with the public use of his work;
b. To make any alterations of his work prior to, or to withhold it from publication;
c. Right of integrity: To object to any distortion, mutilation, or other modification of, or other
derogatory action in relation, his work which would be prejudicial to his honor or reputation;
and
d. Right against false attribution: To restrain the use of his name with respect to any work not of
his own creation or in a distorted version of his work. (Sec. 193, Intellectual Property Code, as
amended)

arellano C|L|E|A|R 13
64. May an author be compelled to perform his contract to create a work or to publish his
work already in existence?

No. An author cannot be compelled to perform his contract to create a work or for publication of
his work already in existence. However, he may be held liable for damages for breach of such
contract. (Sec. 194, Intellectual Property Code, as amended)

65. How is copyright infringement committed?

a. Directly commits an infringement;

b. Benefits from the infringing activity of another person who commits an infringement if the
person benefiting has been given notice of the infringing activity and has the right and ability
to control the activities of the other person;
c. With knowledge of infringing activity, induces, causes or materially contributes to the
infringing conduct of another. (Sec. 216, Intellectual Property Code, as amended)

66. What is the doctrine of fair use?

Under this doctrine, the fair use of a copyrighted work for criticism, comment, news reporting,
teaching including limited number of copies for classroom use, scholarship, research, and similar
purposes is not an infringement of copyright. (Sec. 185, Intellectual Property Code, as amended)

67. Is news expressed as in a video footage entitled to copyright protection?

Yes. News as expressed in a video footage is entitled to copyright protection. Broadcasting

organizations have not only copyright on but also neighboring rights over their broadcasts. (ABS-
CBN Corp vs. Felipe Gozon, G.R. No. 195956, March 11, 2015, J. Leonen)

IV. INSURANCE LAW

68. What is the concept of Mortgage Redemption Insurance?

It is a device for the protection of both the mortgagee and the mortgagor. The mortgagee enters
into such form of contract so that in the event of the unexpected demise of the mortgagor during
the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the
payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the
obligation. In a similar vein, ample protection is given to the mortgagor such that in the event of
death, the mortgage obligation will be extinguished by the application of the insurance proceeds
to the mortgage indebtedness. (Great Pacific Life Assurance Corporation vs. Court of Appeals, G.R. No. 113899,
October 13, 1999)

69. What is the effect of non-payment of premium?

General Rule: The obligation of the insurer will not become valid and binding if the first premium
has not been paid. Notwithstanding any agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium
thereof has been paid (Sec. 77, Insurance Code).

Exceptions:
a. When the grace period applies in case of life and industrial life policy (Sec. 77, Insurance Code);
b. When under the broker and agency agreements with duly licensed intermediaries, a 90-day
credit extension is given (Sec. 77, Insurance Code);
c. When there is an acknowledgment in the policy or receipt that the premium has been paid
(Sec. 79, Insurance Code);
d. When there is an agreement that the premium shall be payable on installments and partial
payment has been made at the time of the loss (Makati Tuscany Condominium Corporation vs. Court of
Appeals, G.R. No. 95546, November 6, 1992);
e. When the equitable doctrine of estoppel applies (UCPB General Insurance Co., Inc. vs. Masagana
Telemart, Inc., G.R. No. 137172, April 4, 2001); and
f. If a cover note is issued to temporarily bind the insurance pending issuance of the policy (Sec.
52, Insurance Code).

70. Is the insurer liable if the loss occurred while the check it received from the insured
representing premium payment remained unencashed? What if the check was dishonored
due to insufficiency of funds?

Yes, the insurer is liable because the acceptance of the check is tantamount to extension of
credit. However, if the check was dishonored due to insufficiency of funds, the insurer is not liable
because the dishonor of the check is tantamount to non-payment of premium which prevented

arellano C|L|E|A|R 14
 the effectivity of the insurance contract, unless the insurer granted a credit extension and the loss
occurred during such period. (Capital Insurance & Surety Co., Inc. vs. Plastic Era Co., Inc. et. al, G.R. No. L-
22375, July 28, 1975)

71. What is insurable interest?

An insurable interest is that interest which a person is deemed to have in the subject matter
insured, where he has a relation or connection with or concern in it, such that the person will
derive pecuniary benefit or advantage from the preservation of the subject matter insured and will
suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of
the event insured against. (Lalican vs. The Insular Life Assurance Company Limited, G.R. No. 183526, August 25,
2009)

72. What does insurable interest in property consist of?

An insurable interest in property may consist in:

a. An existing interest;
b. An inchoate interest founded on an existing interest; or
c. An expectancy, coupled with an existing interest in that out of which the expectancy arises.
(Sec. 14, Insurance Code)

73. Does a seller retain an insurable interest over a property sold where he has a vendor’s
lien?

Yes. A seller retains an insurable interest in the property sold so long as he has any interest
therein as he would suffer by its destruction. (Gaisano Cagayan, Inc. vs. Insurance Company of North
America, G.R. No. 147839, June 8, 2006)

74. What is the extent of the insurable interest of a ship owner and a charterer in marine
insurance?

a. Insurable Interest of a Ship Owner:

i. Insurable interest in the ship, even when it has been chartered and the charterer agrees
to pay him its value in case of loss, in which case the insurer shall be liable only for that
part of the loss which the insured (ship owner) cannot recover from the charter. (Sec. 102,
Insurance Code)
ii. In case of a ship hypothecated by bottomry – insurable interest only on the excess of the
value of the ship over the amount secured by bottomry (Sec. 103, Insurance Code)
iii. Insurable interest in expected freightage which according to the ordinary and probable
course of things he would have earned but for the intervention of a peril insured against
or other peril incident to the voyage (Sec. 105, Insurance Code)

b. Insurable Interest of Charterer:

i. Insurable interest in the ship to the extent that he is liable to be damnified by its loss (Sec.
108, Insurance Code)

75. Differentiate insurable interest in life insurance and insurable interest in property
insurance.

LIFE INSURANCE PROPERTY INSURANCE

Unlimited, except if secured by the creditor Limited to the value of the property

At the time of the perfection of the insurance At the time of perfection of the contract and
contract at the time of the loss

If the insured took out an insurance on his own Beneficiary must have insurable interest.
life, beneficiary’s insurable interest is not
necessary.

If the insured took out an in insurance on the life

of another, beneficiary must have insurable
interest.

76. What is the effect of a change of interest in any part of a thing insured unaccompanied by
a corresponding change of interest in the insurance?

General Rule: It suspends the insurance to an equivalent extent, until the interest in the thing
and the interest in the insurance are vested in the same person. (Sec. 20, Insurance Code)

arellano C|L|E|A|R 15
 Exceptions:
The insurance is not suspended despite the change of interest in a thing insured in the following
cases:
a. A change of interest in a thing insured after the occurrence of an injury which results in a loss
(Sec. 21, Insurance Code);
b. A change of interest in one or more several distinct things, separately insured by one policy,
as to the others (Sec. 22, Insurance Code);
c. A change of interest, by will or succession, on the death of the insured in which case the
interest of the insured passes to the person taking his interest in the thing insured (Sec. 23,
Insurance Code);
d. A transfer of interest by one of several partners, joint owners, or owners in common, who are
jointly insured, as to the others, even though it has been agreed that the insurance shall
cease upon an alienation of the thing insured (Sec. 24, Insurance Code); and
e. In cases of life, health, and accident insurance because for these types of insurance, it is
enough that insurable interest exists at the time the insurance takes effect (Sec. 19, Insurance
Code).

77. Should the fact/s concealed be the proximate cause of the loss in order to constitute
concealment?

No. The test is whether the matters concealed would have definitely affected the insurer’s action
on the application of the insured, either by approving it with the corresponding adjustment for a
higher premium or rejecting the same. (Sunlife Assurance Company of Canada vs. Court of Appeals, G.R. No.
105135, June 22, 1995)

78. What is the incontestability clause?

Under the incontestability clause, after a policy of life insurance made payable on the death of the
insured shall have been in force during the lifetime of the insured for a period of two years from
the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the
insured or his agent. (Sec. 48, Insurance Code)

79. May the beneficiaries of an insured, who died within the contestability period, be entitled
to the proceeds despite the existence of concealment?

Yes. If the insured dies within the two-year contestability period, the insurer is bound to make
good its obligation under the policy, regardless of the presence or lack of concealment or
misrepresentation. (Sun Life of Canada (Philippines), Inc. vs. Sibya, G.R. No. 211212, June 8, 2016)

80. What are the defenses not barred by the incontestability clause?

a. Lack of insurable interest;

b. Premium was not paid;
c. The death was due to excepted risk;
d. The insured employed vicious fraud;
e. Failure to comply with conditions imposed by the insurer; and
f. Time specified in the contract to make claims is not complied with.

81. What is a life insurance, and its principal types?

It is insurance on human lives and insurance appertaining thereto or connected therewith. Every
contract or undertaking for the payment of annuities including contracts for the payment of lump
sums under a retirement program where a life insurance company manages or acts as a trustee
for such retirement program shall be considered a life insurance contract for purposes of the
Insurance Code. Its principal types are the following:

a. Term Insurance It pays only if the death occurs during the term of the
policy.
b. Whole Life or Permanent Insurance It pays a death benefit whenever the insured dies.
c. Annuity It is a contract with the insurer where individuals
agree to pay the company a certain amount of
money, in a lump sum or in installments, which
entitles them to receive payment annually from the
insurer, but which obligation ends upon death of the
annuitant.
d. Endowment It is a life insurance that doubles as an investment or
a savings account. It pays a lump sum to the insured
after a specified number of years but if he dies
before the agreed period, the beneficiary gets the

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 proceeds of the policy.
e. Industrial Life Premiums are payable weekly or monthly or oftener.
The face value of the insurance is not more than 500
times that of the current statutory daily wage in
Manila and the words “Industrial Policy” are printed
on the policy.
(Sec. 181, Insurance Code)

82. Who are disqualified to be a beneficiary of the insured?

Those disqualified to receive donation under Article 739 of the Civil Code are disqualified to be a
beneficiary. The persons specified in the said provision are as follows:
a. Persons in illicit relations – adultery or concubinage (no need for conviction);
b. Persons found guilty of the same criminal offense, in consideration thereof; and
c. Public officer or his wife, descendants, or ascendants. (Art. 2012, Civil Code)

83. When is the insurer in a life insurance contract liable in case of suicide by the insured?

The insurer in a life insurance contract shall be liable in case of suicide only when it is committed
after the policy has been in force for a period of two (2) years from the date of its issue or of its
last reinstatement. By way of exception, the insurer is liable in case of suicide even before the
two-year period lapses when: (a) a shorter period is provided for in the policy; or (b) the suicide
was committed in the state of insanity. (Sec. 183, Insurance Code)

84. What is the consequence of refusal or failure to pay the claim of life insurance policy
proceeds within the time prescribed by law?

It will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or
refusal to pay is based on the ground that the claim is fraudulent. (Sec. 248, Insurance Code)

85. What is the “no fault indemnity” clause?

It provides that any claim for death or injury to a passenger or to a third party should be paid
without the necessity of proving fault or negligence of any kind. (Sec. 391, Insurance Code)

86. When is the insurer subrogated to the rights of the insured?

The right of subrogation accrues upon payment by the insurance company of the insurance claim.
The payment by the insurer to the insured operates as an equitable assignment to the insurer of
all the remedies which the insured may have against the third party whose negligence or wrongful
act caused the loss (Keihin-Everett Forwarding Co., Inc. vs. Tokio Marine Malayan Insurance Co., Inc. and
Sunfreight Forwarders & Customs Brokerage, G.R. No. 212107, January 28, 2019).

V. REPUBLIC ACT NO. 10173 (DATA PRIVACY ACT OF 2012)

87. What is the scope of the Data Privacy Act?

It applies to the processing of all types of personal information and to any natural and juridical
person involved in personal information processing including those personal information
controllers and processors who, although not found or established in the Philippines, use
equipment that are located in the Philippines, or those who maintain an office, branch or agency
in the Philippines. (Sec. 4, Data Privacy Act)

88. What is the extraterritorial application of the Data Privacy Act?

a. The act, practice or processing relates to personal information about a Philippine citizen or a
resident;
b. The entity has a link with the Philippines, and the entity is processing personal information in
the Philippines or even if the processing is outside the Philippines as long as it is about
Philippine citizens or residents such as, but not limited to, the following:
i. A contract is entered in the Philippines;
ii. A juridical entity unincorporated in the Philippines but has central management and
control in the country; and
iii. An entity that has a branch, agency, office or subsidiary in the Philippines and the
parent or affiliate of the Philippine entity has access to personal information; and
c. The entity has other links in the Philippines such as, but not limited to:
i. The entity carries on business in the Philippines; and
ii. The personal information was collected or held by an entity in the Philippines.
(Sec. 6, Data Privacy Act)

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89. What is personal information?

It refers to any information, whether recorded in a material form or not, from which the identity of
an individual is apparent or can be reasonably and directly ascertained by the entity holding the
information, or when put together with other information would directly and certainly identify an
individual (Sec. 3(g), Data Privacy Act).

90. What is “sensitive personal information”?

The term “sensitive personal information” refers to personal information:

a. About an individual’s race, ethnic origin, marital status, age, color, and religious,
philosophical or political affiliations;
b. About an individual’s health, education, genetic or sexual life of a person, or to any
proceeding for any offense committed or alleged to have been committed by such person,
the disposal of such proceedings, or the sentence of any court in such proceedings;
c. Issued by government agencies peculiar to an individual which includes, but not limited to,
social security numbers, previous or current health records, licenses or its denials,
suspension or revocation, and tax returns; and
d. Specifically established by an executive order or an act of Congress to be kept classified.
(Sec. 1(l), Data Privacy Act)

91. What are the main differences between personal information (PI) and sensitive personal
information (SPI)?

PERSONAL INFORMATION SENSITIVE PERSONAL INFORMATION

Processing Processing of PI is allowed if not
otherwise prohibited by law, and
when at least one ground for lawful
processing exists.
Penalty There are penalties for unlawful
acts involving PI.
Processing of SPI is prohibited unless at
least one ground for lawful processing
exists.
Penalties for unlawful acts involving SPI
are more severe.

92. Differentiate outsourcing or subcontracting and data sharing.

OUTSOURCING / SUBCONTRACTING DATA SHARING

Parties The parties have to be at least one All parties to a data sharing
personal information controller and one agreement are considered personal
personal information processor. information controllers.
Objective A personal information processor has no Each party has its own purpose for
other reason for processing the personal processing the personal data
data other than that as instructed by the involved.
personal information controller.

93. What are the general data privacy principles that govern the processing of personal
information?

a. Transparency. The data subject must be aware of the nature, purpose, and extent of the
processing of his or her personal data, including the risks and safeguards involved, the
identity of personal information controller, his or her rights as a data subject, and how these
can be exercised. Any information and communication relating to the processing of personal
data should be easy to access and understand, using clear and plain language.
b. Legitimate purpose. The processing of information shall be compatible with a declared and
specified purpose which must not be contrary to law, morals, or public policy.
c. Proportionality. The processing of information shall be adequate, relevant, suitable,
necessary, and not excessive in relation to a declared and specified purpose. Personal data
shall be processed only if the purpose of the processing could not reasonably be fulfilled by
other means. (Sec. 18, Rule IV, IRR of the Data Privacy Act)

94. What are the limitations to the rights of a data subject?

a. if the processed personal data are used only for the needs of scientific and statistical
research and
b. the processing of personal data gathered for the purpose of investigations in relation to any
criminal, administrative, or tax liabilities of a data subject. (Sec. 37, Data Privacy Act)

HAIL TO THE CHIEFS!

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