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on
COMMERCIAL LAW
A Comprehensive Guide
Volume II
NILO T. DIVINA
-
Published & Distributed by
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FOREWORD
Among the different fields of law, commercial law has perhaps the most practical
and utilitarian application in this day and age of incessant innovation,
interconnectedness, and technological breakthroughs. Indeed, we engage in a myriad
of commercial transactions on a daily basis, ranging from the more mundane activities
of booking public transport and having our basic commodities delivered through third-
party couriers, to the more complex pursuits such as business mergers and
consolidations, and even corporate rehabilitation or liquidation. These matters and a
whole lot more are given stability and structure through the different facets of
commercial law, which, for its extensiveness and breadth, has become an indispensable
aspect of today’s society and its ever-evolving future. In a sense, commerce is the
lifeblood of a nation. As such, it is vital that our aptitude and understanding of
commercial law be continuously honed.
Emblematic of the subject, the commercial law qualities of practicality and utility
are likewise reflected in this new undertaking of Dean Nilo T. Divina, whose expertise
and experience in the field are i nsight fully showcased in this compendium of questions.
In particular, Dean Divina craftily weaves various topics and issues in the realm of
insurance, pre-need plans, transportation (including air transportation), partnerships,
and corporate law, into useful hypotheticals that are intelligibly answered in order to
convey the underlying essentials of each subject matter. In the same vein, fundamental
definitions and enumerations for each subject are included, providing the reader an
effective memory aid that is easy to follow. Truly, this book, with its clear, concise, and
simple presentation, but comprehensive scope, will surely serve as an important tool
not only for law practitioners and law students alike, but also to the layman who has a
legitimate desire to familiarize himself with the basic concepts as well as seemingly
intricate workings of commercial law.
I would like to congratulate Dean Divina for this momentous effort well done.
This comprehensive guide should be considered as an important resource in the field of
commercial law that is definitely worthy of praise and commendation.
16 April 2021
ESTELA M^Rl/kS-BERNABE
:reas-bernabe
Senior Associate Justice
Supreme Court of the Philippines
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FOREWORD
Commercial law has never been the cup of tea of a lot of law students,
which most probably accounts for their comparably low ratings on the
subject in bar examinations. In their law course, they plod through
what they perceive, rightly or wrongly, as endless arid landscapes of
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negotiable instruments, insurance, banking, securities, business
organizations, investments ... laws seemingly divested of the human
dimension, all too often absent the flesh and blood facets of, for
example, family law or criminal law.
But as in all Divina law books this work upends this perception. The
dissection of commercial laws is done through a different perspective
and methodology. Aimed at demystifying and decluttering the law, the
treatise is underpinned by an undefinable sense of reaching out to and
connecting with the humaneness of the reader. For the work in its
entirety is understandable: its language intelligent but simple and
clear, not at all opaque nor obsfuscatory which is oftentimes the
hallmark of the intellectually pretentious. In other words, it is shorn of
aoristicism and prolixity, as it adopts a style that is an honest-to-
goodness down-to-earth Q and A, all of which make for readability,
easier comprehension as well as sufficiently good, if not total, recall.
CCCQMlWob
/ ZENA1DA Nl ELEPANO
Commissioner and Officer-in-Charge
Legal Education Board
Manila, Philippines
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FOREWORD
Divina on Commercial Law: A Comprehensive Guide
Atty. Nilo Divina, one of the country's top lawyers, once again publishes an important volume
on commercial law. Divina's opus examines the subject point by point, which is counterpoised
with popular myths and misconceptions regarding commercial law, and analyzes it by providing
important cases as examples which highlight in his discussion binding agreements, standard
rules and rights, interpretations and misinterpretations, exceptions, exemptions and entitlements,
special interests and potential risks, benefits and liabilities, subtleties and severities. The book
"Divina on Commercial Law" provides an in-depth look into the many facets of commercial law
which will surely be the go-to reference book by students of law and law practitioners. The book
is organized in such a way that it facilitates easy reading. The flow of the author's language is
smooth; his grasp of the legal jargon, clear and precise. "Divina on Commercial Law" is a must-
have for every law firm, law school, insurance company, and for anyone who wishes to further
understand the many intricacies of the laws governing business and commerce, as the author
immediately goes into the heart of the matter in a style that is akin to some of the best author
barristers in the world. Indeed, Divina's new book is a major contribution to the field of law.
7^7
REV. HC RICHARD gZ\NG. O-P.
Rec/or
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FOREWORD
Let me start by proudly saying that among the law deans in various law schools, only Dean Nilo T. Divina
of the UST Faculty of Civil Law has produced bar topnotchers. In 2017, UST regained its past gZr/ as the
best law school in the country.
Dean Divina is not only an academician, but also a scholar, a bar topnotcher, a distinguished law
practitioner, a prolific writer, and an Ideal family man. Above all, he is a benefactor. His reasons for writing
this book is not only to lead his readers to the intricate realm of commercial law, but also to grant
scholarships, derived from its proceeds, to academically deserving students and to enable law students to
acquire it at a very reasonable price. When I asked him how he could write this two-volume work despite
the pandemic, Dean Divina laughingly answered, "Because I love students." This statement is a window
to his soul.
Unquestionably, this book is a treasury of knowledge Influenced not only by Dean Divina's brilliance of
mind, but also by his dose to 30 years of law practice and extensive work in the academe. It is said that
genuine knowledge originates directly from a wide range of experience.
Being a clear showcase of the author's ability to capture what is basic and vital in commercial law, the
book in its entirety is thoroughly interesting and instructive. Thus, through a Socratic Q and A style, it
presents a wonderful compact survey of the laws on Insurance, Pre-need Company, Transportation,
Business Organizations, Securities, General Banking, and many other fields of commercial law. It contains
annotations of cited laws usually intertwined with relevant Supreme Court Decisions. Not only that. Dean
Divina's discourse thereon gives the readers a glimpse of his mindset and a chance to appreaate and
assimilate its wisdom. Significantly, he evokes a web of legal and judicial issues, enough to send any
assiduous reader to his or her study.
As the title Indicates, this book is an excellent comprehensive guide to aspiring law students,
academicians, bar reviewers, practitioners, members of the judiciary, and even lay persons as they journey
on the winding road of commercial law. It is the answer to the continuing quest for knowledge of men
and women of law.
What makes this book impressive is its mode of educating its readers.
Preeminent for his legal craftsmanship, Dean Divina's Q and A are well written, indeed "as dear and ludd
as the fabled skies of Greece." Anyone who reads this book will readily grasp and remember what it
imparts. Truly, a must read.
The "Divina on Commercial Law" is a crowning masterpiece and a legacy of a great mind.
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FOREWORD
(Sgd.)
DEAN SEDFREY M. CANDELARIA
Officer-in-Charge, Mandatory Continuing Legal Education Board
Chief of Office, Research, Publication and Linkages,
Philippine Judicial Academy
Former President of Philippine Association of Law School
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FOREWORD
It has not even been a year, but I find myself with yet another Divina
manuscript on a subject matter he can talk about in his sleep. Divina on
Commercial Law - A Comprehensive Guide will hit the stands in the wake of
the bestselling Questions & Answers on the Revised Corporation Code.
Similar to its predecessor, this 2-volume compendium is responsive as
it is instructive. No other commercial law reviewer would include laws such
as Transportation Law, Personal Property Securities, Financial Rehabilitation
and Insolvency, Data Privacy and Philippine Competition, among others, all
in one line-up. The rationalized compilation of laws that are commercial in
nature and application will definitely facilitate cohesion in learning and
appreciation. With the limited text out there on the new laws, this
comprehensive guide will serve well as a beacon for the uninitiated and eager
to leam. It would be of note to point out that these are the only volumes
available that would provide a faithful compilation of all the laws covered by
the mercantile law scope of the current bar examinations.
But more than the novelty of the collection and the content is the
benevolence characteristic of the author that accompanies this latest addition
to our legal archives. This book is another testament to Dean Nilo’s
commitment to make legal education accessible to as many who wish to
embrace it. Making this book affordable is an exercise in compassion that
finds its very core in the heart of a healing world.
The legal academe is once again grateful to Dean Divina for this
outstanding effort to endow students and practitioners alike with this
excellent presentation of existing laws and recent initiatives that enriches our
commercial law framework.
Congratulations!
prL DL ANENIAS
Chair >on and President
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FOREWORD
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Dean Divina has painted for us a detailed anatomy of the laws
governing our mercantile system. Comprehensive in scope, versatile
in form, and uncompromising in content, Divina on Commercial Law:
A Comprehensive Guide is an astute companion for law students,
bar examinees, and legal practitioners alike.
(Sgd.)
DEAN JOAN S. LARGO
Former President of Philippine Association of Law Schools
Assistant Vice President for Academic Affairs,
University of San Carlos
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FOREWORD
Divina on Commercial l^w is an all-encompassing guide to the subject matter that will
prove to be useful to undergraduates, bar reviewees and practitioners alike. I he text covers
a wide variety of subtopics covering the whole gamut of commercial law. The language is
straight to the point and coherent, allowing for a logical transition from one topic to the
next. Situational examples are used to illustrate the principles for a concretized
understanding of the concepts discussed in the text. In this light, the reviewer goes beyond
presenting mere facts.
However, what sets this reviewer apart from the others is its unique writing style: the
question-and-answer format simulates the essence of the test-taking experience, making
the hook an excellent supplementary material for bar reviewees. In the decades 1 have
spent conducting bar reviews, most of the materials I have come across relied solely on the
reviewees’ ability to question their own understanding of the information they absorb.
Divina on Commercial Law attends to that concern— the need to repeatedly question
oneself for the purpose of refining one's understanding of the subject. All in all, this brilliant
work is a thorough and well-constructed educational material that I would highly
recommend to anyone interested in developing their knowledge of commercial law.
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FOREWORD
The review center believes that the use of scientifically written books
will help bar candidates in their pursuit to successfully hurdle the
bar examinations.
Dean Divina’s latest published works — the two-volume Compendium
on Commercial Law - are epitomes of scientific learning. It contains
annotations of laws and decisions of the Supreme Court, which
are organized in accordance with the 2020/2021 Bar Examinations
Syllabus on Commercial Law. Engagingly, it is written in Q-and-A
format, for easy understanding and retention.
This Compendium on Commercial Law is a must-read for every bar
candidate. One can never go wrong with the 30 years of academic
and law practice of our legal luminary, Dean Nilo T. Divina.
(Sgd.)
ATTY. ARGEL JOSEPH T. CABATBAT
Review Director, Legal Edge Experts Review Center, Inc.
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CONTENTS
Forewords
Estela M. Perlas-Bernabe iii
Zenaida N. Elepano v
Rev. Fr. Richard G. Ang, O.P vii
Justice Angelina Sandoval-Gutierrez ix
Dean Sedfrey M. Candelaria xi
Marisol DL Anenias.............................. xiii
Dean Joan S. Largo XV
Alden Francis C. Gonzales xvii
Argel Joseph T. Cabatbat xix
VI. BANKING
The New Central Bank Act 80
State policies 80
Creation of the Bangko Sentral ng Pilipinas .... 81
Corporate powers 82
Operations of the Bangko Sentral ng Pilipinas S3
Authority to obtain data and information 83
Supervision and examination 84
Bank deposits and investments 85
Prohibitions 86
Examinations and fees 87
Monetary Board; powers and functions 8S
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How the Bmigko Sent nil ng Pilipinus handles banka
in distress 89
Conservatorship , 89
Administrative sanctions on supervised entities 105
Rules on bank deposits and invest ments by directors,
officers. stockholders and their related interests 107
Supervision and regulation of bank operations 107
Law on Secrecy of Philippine Currency
Bank Deposits (R.A. No. 1405) 108
Purpose ........................................................................ 108
Written permission of the depositor 111
Order of a competent court 112
Briber.- or dereliction of duty of public officials;
prosecution for unexplained wealth;
prosecution for violation of the Anti-Graft
and Corrupt Practices Act 113
Where the subject matter of litigation is the
money deposited 114
Violation of the anti-money laundering law 116
Authority of BIR 118
Garnishment of bank deposits 118
Unclaimed Balances law 123
Repeal or amendment of the law 125
General Banking Law (R.A. No. 8791) 126
Definition and classification of banks 126
Distinction of banks from quasi-banks and trust
entities 133
Bank powers and liabilities 134
Corporate Powers 134
Banking and incidental powers 138
Diligence required of banks in view of the fiduciary
nature of banking 139
Nature of bank funds and bank deposits 140
Grant of loans and security requirements 141
Ratio of net worth to total risk assets 141
Single borrower’s limit 143
Restrictions on bank exposure to directors,
officers, stockholders and their related
interest 145
Foreclosure of mortgage by banks 149
Floating interest rate and escalation clause 157
Penalties for violations 162
Fine, imprisonment 162
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SiiHpcniiion or removal of director or officer... 162
Dissolution of banka............................................ . 162
Anti-Money Laundering Law
(R.A. No. 9160, as amended) . 163
Policy of the law............................................................ 163
Covered institutions/persons and their obligations 163
Covered and suspicious transactions........................ 166
Money laundering-how committed and unlawful
activities....................................................... 168
Functions of the AMLC............................................... 173
Application for a freeze order..................................... 175
Safe harbor provision................................................... 180
Forfeiture provisions..................................................... 181
Mutual assistance among states................................ 182
Philippine Deposit Insurance Corporation............. 183
Basic Policy..................................................................... 183
Powers and functions of PDIC................................... 184
Concept of insured deposit.......................................... 184
Liability to depositors.................................................. 185
Deposit liabilities required to be insured
with PDIC........................................... 186
Commencement of liability................................ 187
Deposit accounts not entitled to payment..... 187
Extent of liability 187
Determination of insured deposits and
calculation of liability...................... 188
Mode of payment................................................. 191
Effect of payment of insured deposit/
preferred credit................................. 191
Failure of depositor to claim insured
deposits............................................... 192
Examination of banks and deposit accounts. 192
Splitting of deposits............................................ 193
Prohibition against issuances of temporary
restraining order.............................. 194
Concept of bank resolution......................................... 195
Role of PDIC in relation to banks in distress........ 197
Truth in Lending Act (RA No. 3765)........................ 199
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PitYeivnces among copyright. trademarks and
patents............................................................ 206
Definition................................................................ 206
Scope or object....................................................... 207
Term of protection................................................. 208
Modes of acquiring the various rights................ 208
Patents............................................................................ 210
Patentable invention...................................................... 212
Non-patentable invention.............................................. 217
Ownership of a patent................................................... 218
Right to a patent................................................... 218
First-to-file rule..................................................... 220
Invention created pursuant to a commission.... 220
Right of Priority.................................................... 221
Grounds for cancellation of a patent.......................... 222
Remedy of the true and actual inventor.................... 223
Rights conferred by a patent........................................ 224
Limitations of patent rights......................................... 225
Patent infringement...................................................... 231
Tests in patent infringement............................... 233
Civil and criminal action..................................... 235
Prescriptive period............................................... 238
Defenses in action for infringement................... 238
Licensing................................................................ 240
Assignment and transmission of rights............ 247
Trademarks............................................................................. 247
Definition of Marks, Collective Marks,
Trade Names................................................. 247
Acquisition of ownership of mark................................ 250
Acquisition of ownership of trade name.................... . 253
Non-registrable marks.................................................. 253
Immoral, deceptive, scandalous matter or
falsely suggesting a connection with
person, belief, institution or symbol. 255
Name, portrait, signature of living individual 256
Identical mark...................................................... 256
Tests to determine confusing similarity
between marks.................................... 257
Idem sonans.......................................................... 267
Well-known marks................................................ 273
Rights conferred by registration.................................. 285
Trademark Infringement.............................................. 289
Remedies......................................................................... 291
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Registration of nmrku under the Madrid Protocol 300
Coverage ...................................... 303
Rights conferred .............................. 303
Term of protection 305
Copyright............................................................................................. 305
Basic Principles ......... 305
Copyrightable Works 307
Rights of the copyright owner 315
Reproduction 318
Derivative right 320
First public distribution 320
Rental right 322
Right of public display 322
Right of public performance 323
Right of communication to the public 323
Rules on Ownership of Copyright 325
Limitations on Copyright 331
Private Performance of a work 334
Making of quotations 335
Information purposes 337
Under the direction and control of the government 338
Judicial proceedings or professional advice 339
Doctrine of fair use 340
Copyright Infringement 343
XXV
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Return of Goods, Documents or Instruments in
Caso of Non-Salo.................................................. . 568
Liability for Lohh of Goods, Documents or
Instruments..................................................................... 569
Penal Sanctions if Offender is a Corporation.................... 569
Criminal Liability of directors, officers and agents. 569
Directors and officers of the corporation not
civilly liable unless they assume personal
liability.......................................................... 570
Remedies Available................................................................. 571
E-Commerce Law
(Electronic Commerce Act)............................................. 576
Negotiable Instruments Law.......................................... 586
Forms and Interpretation..................................................... 586
Requisites of negotiability............................................. 589
Kinds of negotiable instruments................................. 599
Completion and delivery....................................................... 603
Insertion of Date.............................................................. 607
Incomplete and Undelivered Instruments................. 608
Complete but undelivered instruments..................... 609
Signature.................................................................................. 610
Signing in Trade Name............. ................................. 610
Signature of Agent........................................................ 610
Indorsement by Minor or Corporation..................... 611
Forgery............................................................................ 613
Consideration.......................................................................... 624
Accommodation Party............................................................ 626
Negotiation.............................................................................. 630
Distinguished from Assignment................................ 630
Modes of Negotiation................................................... 631
Kinds of Indorsements................................................. 634
Rights of the Holder.............................................................. 639
Holder in Due Course.................................................. 639
Defenses Against the Holder...................................... 648
Liabilities of Parties.............................................................. 651
Maker.............................................................................. 651
Drawer............................................................................ 651
Acceptor.......................................................................... 651
Indorser........................................................................... 654
Warranties..................................................................... 656
Presentment for Payment.................................................... 658
Necessity of Presentment for Payment................... 658
xxvii
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V. SECURITIES REGULATION CODE
(REPUBLIC ACT NO. 8799)
A. State Policy
‘BAR 1998.
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'I
4. What are the salient features of the SRC that are intended to
protect the investing public?
The following are the salient features of the SRC that are
intended to protect the investing public:
1. Registration of securities prior to any public sale3
2. Rejection and revocation of registration of securities4
3. Regulation of pre-need plans6
4. Protection of shareholder interests6
5. Prohibitions on fraud, manipulations, and insider trading’
6. Regulations of Securities Market Professional8
7. Revocation, refusal, or suspension of registration of
brokers, dealers and salesmen, and associated persons”
8. Restrictions on “over-the-counter” markets10
9. Establishment of trust fund to compensate investors for
extraordinary losses or damage they may suffer11
10. Self-regulation of associations of securities brokers,
dealers, and other securities related organizations12
11. Registration of clearing agencies13
12. Limitations on margin trading14
2BAR 2015.
3Section 8, SRC.
^Section 13, SRC.
5Section 16, SRC.
6Section 19, SRC.
’Sections 24, 25, 26, and 27, SRC.
“Section 28, SRC.
“Section 29, SRC.
‘“Section 32, SRC.
“Section 36.5, SRC.
“Section 39, SRC.
‘“Section 42, SRC.
“Section 49, SRC.
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V. HECURITIEH REGULATION CODE 3
(REPUBLIC ACT NO. 8799)
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■ i
2IBAR 1996.
“Gabionza v. CA, G.R. No. 161057, September 12, 2008.
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V. SECURITIES REGULATION CODE 5
(REPUBLIC ACT NO. 8799)
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V. HECURITIE8 REGULATION CODE 7
(REPUBLIC ACT NO. 8799)
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1
3ISEC v. CJH Development Corporation. G.R. No. 210316, November 28, 2016.
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V. 8ECURITIES REGULATION CODE 9
(REPUBLIC ACT NO. 8799;
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10 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
’’Virata v. Ng Wee, G.R. Nos. 220926, 221058, 221109, 221135, and 221218,
July 5, 2017.
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V. SECURITIES REGULATION CODE 11
(REPUBLIC ACT NO. 8709)
3lTimeshare Realty Corporation v. Cesar Lao, 544 SCRA 254 (2008). The same
provision was retained under the Securities Regulation Code.
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1
“BAR 2009.
“Timeshare Realty v. Lao, G.R. No. 158941, February 11, 2008.
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V. HECIJRITIES REGULATION CODE 13
(REPUBLIC ACT NO. 8799)
37BAR 1982.
38Section 8.1, SRC.
39Section 3.12, SRC.
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"BAK 2012.
"BAR 2016.
“BAR 2010.
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V. SECURITIES REGULATION CODE 15
(REPUBLIC ACT NO. «799)
43BAR 2010.
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V. SECURITIES REGULATION CODE 17
(REPUBLIC ACT NO.
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18 DIVINA ON COMMERCIAL I.AW:
A COMPREHENSIVE GUIDE VOLUME II
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V. 8ECURITIEH REGULATION CODE 19
(REPUBLIC ACT NO. 8799)
"BAR 2015.
48Nestle Philippines v. Court of Appeals & Securities and Exchange Commis
sion, G.R. No. 86738, November 13, 1991.
49BAR 2015.
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20 D1V1NA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
“BAR 1989.
“Section 12, SRC.
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V. SECURITIES REGULATION CODE 21
(REPUBLIC ACT NO. H7!>9)
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22 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
1. CEO Correction
2. COO Listing PSE
3. CFO
4. Controller
5. Principal Accounting Officer
6. Corporate Secretary
7. Expert, if any
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V. SECURITIES REGULATION CODE 23
(REPUBLIC ACT NO. 8799?
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V. SECURITIES REGULATION CODE 25
(REPUBLIC ACT NO. 8799)
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26 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
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V. SECURITIES REGULATION CODE •2.1
(REPUBLIC ACT NO. 8799)
41. A trading contract signed by the parties is a contract for the sale
of products for future delivery, in which either seller or buyer
may elect to make or demand delivery of goods agreed to be
bought and sold, but where no such delivery is actually made.
Is this contract illegal? What is the nature of the transaction
made by the parties?
No. The agreement is not illegal. As a contract in printed form
signed by the parties, the trading contract bears it complies with the
Rules and Regulations on Commodity Future Trading as prescribed
by the SEC. However, when the transaction which was carried out
to implement the written contract deviates from the true import
of the agreement as when no such delivery, actual or constructive,
of the commodity or goods is made, and final settlement is made
by payment receipt of only the difference in prices at the time of
delivery from that prevailing at the time the sale is made, the
dealings in futures become mere speculative contracts in which the
parties merely gamble on the rise or fall in prices.63 This gambling
or wagering on prices within a given time is not buying and selling
and is illegal as against public policy.
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28 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
“BAR 2001.
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V. HECURITIES REGULATION CODE 29
(REPUBLIC ACT NO. 8799)
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30 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
46. A complaint was filed with the SEC against Abacus Securities
Corporation, Sapphire Securities Inc., and several other
persons, including Jose Maximo Cuaycong III and Mark
Angelo Cuaycong. It was alleged that Jose Maximo engaged
in fraudulent and deceitful activities with the complicity of
Abacus, Saphire and the other defendants. The complainants
prayed that all defendants be held jointly and severally liable
for all damages. Meanwhile, the complainants and Jose Maximo
and Mark Angelo entered into a compromise agreement. Can
this compromise agreement absolve Jose Maximo and Mark
Angelo from the civil case?
No. The SRC punishes the persons primarily liable for
fraudulent transactions under Section 58 and their aiders or abettors
under Section 51.5, by making their liability for damages joint
and solidary. Thus, one cannot condone the liability of the person
primarily liable and proceed only against his aiders or abettors
because the liability of the latter is tied up with the former. Liability
attaches to the aider or abettor precisely because of the existence of
the liability of the person primarily liable.66
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V. SECURITIES REGULATION CODE 31
(REPUBLIC ACT NO. 8799;
67BAR 2009.
“BAR 1982.
69BAR 1982.
70BAR 2015.
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32 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
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V. SECURITIES REGULATION CODE 33
(REPUBLIC ACT NO. 8799)
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34 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
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V. SECURITIES REGULATION CODE 35
(REPUBLIC ACT NO. 8700)
“BAR 2004.
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36 D1V1NA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
81 BAE 2008.
“BAR 2012.
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V. SECURITIES REGULATION CODE 37
(REPUBLIC ACT NO. 8799)
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38 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
60. You are a member of the legal staff of a law firm doing corporate
and securities work for Coco Products Inc., a company with
unique products derived from coconuts and whose shares
are traded in the Philippine Stock Exchange. A partner in the
law firm, Atty. Buenexito, to whom you report, is the Corporate
Secretary of Coco Products. You have long been investing in
Coco Products stocks even before you became a lawyer.
While working with Atty. Buenexito on another file, he
accidentally gave you the Coco products file containing the
company's planned corporate financial rehabilitation. While
you knew you had the wrong file, your curiosity prevailed and
you browsed through the file before returning it. Thus, you
learned that a petition for financial rehabilitation is imminent,
as the company could no longer meet its obligations as they
fall due.
Soon after, your mother is rushed to the hospital for an
emergency operation, and you have to raise money for her
hospital bills. An immediate option for you is to sell your Coco
Products shares. The sale would be very timely because the
price of the company's stocks is still high.
Would you sell the shares to raise the needed funds for
your mother's hospitalization? Take into account legal and
ethical considerations.
No, I would not sell the shares. Although, the sale of the shares
does not constitute insider trading under the SRC, it would be
unethical to sell the shares. Even if Atty. Buenixito, as corporate
secretary of Coco products, Inc. was an insider, the information
was not obtained regarding the planned corporate rehabilitation
by a communication from him. The file was just accidentally given.
However, Rule 1.01 of the Code of Professional Responsibility
provides, “A lawyer shall not engage in unlawful, dishonest,
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V. SECURITIES REGULATION CODE 39
(REPUBLIC ACT NO. 8799;
“BAR 2013.
“BAR 2018.
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•10 DIVINA ON COMMERCIAL LAW:
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62. Mr. P, the president of JKL, Inc. whose shares are listed in the
Philippine Stock Exchange, was notified that the corporation
has just been awarded a 5 Billion peso (P5,000,000,000.00)
construction contract by a reputable private company. Before
this information could be disclosed to the public, Mr. P called
his stockbroker to purchase 20,000 shares of JKL, Inc. He also
mentioned the transaction to his brother, Mr. B. Mr. B, who
was not involved at all in the business of JKL, Inc., also bought
50,000 shares of JKL, Inc. because of the tip disclosed to him
by Mr. P.
a. Is the information disclosed by Mr. P to Mr. B considered
as material non-public information for purposes of insider
trading? Explain.87
Yes, the information that the corporation has just been
awarded a P5 Billion construction contract by a reputable
private company is material non-public information. It has
not been generally disclosed to the public and would likely
affect the market price of the security after being disseminated
to the public or would be considered by a reasonable person
important under the circumstances in determining his course
of action whether to buy, sell, or hold the security.88
b. Should Mr. P and Mr. B be held liable for insider trading?
Explain.89
Mr. P is Hable for insider trading because he bought
shares of the company, thru his broker, while in the possession
of material non-public information.
Mr. B is also Hable for insider trading. Mr. B became an
insider after having received by communication a material
non-public information from Mr. P, who as President of JKL
is an actual insider.90 Mr. B is liable because he bought the
shares of JKL while in the possession of material non-public
information.
87BAR 2019.
“Section 27.2, SRC.
“BAR 2019.
“Sections 3.8 and 27, SRC.
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(REPUBLIC ACT NO. 8799)
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65. What are the sale and purchase transactions excepted by the
rule on short swing transaction?
1. Purchase and sale of security that was acquired in good
faith in connection with a debt previously contracted.
“BAR 1984.
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V. SECURITIES REGULATION CODE 43
(REPUBLIC ACT NO. 8799)
67. What are the other prohibited transactions for such beneficial
owner, director, or officer of the issuer?
It shall be unlawful for any such beneficial owner, director, or
officer, directly or indirectly, to sell any equity security of such issuer
if the person selling the principal: (a) does not own the security sold:
or (b) if owning the security, does not deliver not deliver it against
such sale within 20 days thereafter, or does not within five (5) days
after such sale deposit in the mails or the unusual channels of
transportation; but no person shall be deemed to have violated this
subsection if he proves notwithstanding the exercise of good faith
he was unable to make such delivery in such time, or that to do so
would cause undue inconvenience or expense.94
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V. SECURITIES REGULATION CODE 45
(REPUBLIC ACT NO.
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46 PIVINA ON COMMERCIAL LAW:
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“BAR 2016.
97Cemco Holdings v National Life Insurance Company of the Philippines, G.R.
No. 171815, August 7, 2007.
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V. SECURITIES REGULATION CODE 47
(REPUBLIC ACT NO. HTM)
"BAR 2018.
"Cemco Holdings v. National Life Insurance Company, 529 SCRA 2007.
l00BAR 2019.
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48 DIVINA ON COMMERCIAL LAW:
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(REPUBLIC ACT NO. 8799)
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50 DIVINA ON COMMERCIAL I.AW:
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35%
CORP1 PUBLIC
18% 17% 5%
CORP 2 CORP 4
CORP 3
33%
CORP1 PUBLIC
18% 5%
17%
CORP 2 CORP 4
CORP 3
20% 9%
P CORP 2
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V. HECURITIES REGULATION CODE 51
(REPUBLIC ACT NO. 8799)
75. What are the exemptions from the tender offer requirement?
Unless the acquisition of equity securities is intended to
circumvent or defeat the objectives of the tender offer rules, the
mandatory tender offer requirement shall not apply to the following:
a) Any purchase of securities from the unissued capital
stock; Provided, the acquisition will not result to a fifty
percent (50%) or more ownership of securities by the
purchaser or such percentage that is sufficient to gain
control of the board;
b) Any purchase of securities from an increase in authorized
capital stock;
c) Purchase in connection with foreclosure proceedings
involving a duly constituted pledge or security
arrangement where the acquisition is made by the debtor
or creditor;
d) Purchases in connection with a privatization undertaken
by the government of the Philippines;
e) Purchases in connection with corporate rehabilitation
under court supervision;
102BAR 2012.
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52 DIVINA ON COMMERCIAL LAW:
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76. What is the violation for non-compliance with the tender offer
rule?
If equity securities of a public company are purchased at
threshold amounts provided for in Rule 19 of the SRC’s Implementing
Rules without complying with the tender offer requirements under
this Rule, the Commission may, upon complaint, nullify such
purchase and order the conduct of a tender offer, without prejudice
to the imposition of other sanctions under the SRC.104
77. Where should a civil action for violation of the Securities and
Regulation Code (SRC) be filed, with the SEC or the RTC?
Civil suits falling under the SRC (like liability for selling
unregistered securities) are under the exclusive original jurisdiction
of the RTC and hence, need not be first filed before the SEC,
unlike criminal cases wherein the latter body exercises primary
jurisdiction.105
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V. SECURITIES REGULATION CODE 53
(REPUBLIC ACT NO. 8799>
first filed before the SEC unlike criminal cases, wherein the latter
body exercises primary jurisdiction."'7
80. What are the prescriptive periods for any actions that may be
filed under Section 56 or 57 of the SRC?
Under Section 62 of the SRC, no action shall be maintained
to enforce any liability created under Section 56 of the SRC (false
registration statement) and Section 57 (sale of unregistered
security and liabilities arising in connection with prospectus,
communication, and other reports) unless brought within two (2)
years after discovery of the untrue statement or omission or after
the violation upon which it is based, but not more than five (5) years
after the security was bona fide offered to the public or more than
five (5) years after the sale, respectively.
107Pua v. Citibank, G.R. No. 180064, September 16, 2013; Section 63, SRC.
'“Section 63, SRC.
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54 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
a half (U's) centavos per share. On its third year, the company
collapsed and its stocks became totally valueless. What is the
remedy of X?
The remedy of X for damages is lost by prescription. Any suit
therefore must be tiled within two (2) years after the discovery of the
facts constituting the cause of action (but not beyond five [5] years
after such cause of action accrued). Two (2) years having already
elapsed since the time that X had discovered the misrepresentation
in the registration statement of the corporation, the latter’s civil
liability has prescribed. X, however, is not prevented from invoking
SEC’s regulatory powers against the corporation.109
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V. SECURITIES REGULATION CODE 55
(REPUBLIC ACT NO. 8799)
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56 DIVINA ON COMMERCIAL LAW:
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this rule is nonetheless with defined limits. A cease and desist order
may only be issued by the Commission after proper investigation or
verification, and upon showing that the acts sought to be restrained
could result in injury or fraud to the investing public.
In one case, the Court held that the Primasa educational plans
were not registered with the SEC. Thus, a continued sale by the
company would operate as fraud to its investors, and would cause
grave or irreparable injury or prejudice to the investing public,
grounds which could justify the issuance of a cease and desist order
under Section 64 of the SRC.114
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V. SECURITIES REGULATION CODE 57
(REPUBLIC ACT NO. 8799)
(iii) In the case of a violation of Sections 19.2, 20, 24, 26, and
27, disqualification from being an officer, member of the
Board of Directors, or person performing similar functions,
of an issuer required to file reports under Section 17 of the
SRC or any other act, rule or regulation administered by
the Commission;
(iv) In the case of a violation of Section 34, a fine of no more
than three (3) times the profit gained or loss avoided as
result of the purchase, sale, or communication proscribed
by such Section, and
(v) Other penalties within the power of the Commission to
impose.116
The imposition of the foregoing administrative sanctions shall
be without prejudice to the filing of criminal charges against the
individuals responsible for the violation.116
The Commission shall have the power to issue writs of execution
to enforce the provisions of Section 54.3 and to enforce payment of
the fees and other dues collectible under the SRC.11’
If offender is a corporation, partnership or association or other
juridical entity, the penalty shall be imposed upon such juridical
entity and upon the officers responsible for the violation.
If such officer is an alien, in addition to the penalties, shall be
deported without further proceedings after service of sentence.118
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58 DIVINA ON COMMERCIAL LAW:
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V. SECURITIES REGULATION CODE r>9
(REPUBLIC ACT NO. STM)
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VI. BANKING
60
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VI. HANKING 61
3Bank of America Court of Appeals, et al., G.R. No. 105395, December 10,
1993.
■■Prudential Bank v. Intermediate Appellate Court, et al., G.R. No. 74SS6,
December 8, 1992.
6Feati Bank & Trust Company v. Court of Appeals, et al., G.R. No. 94209, April
30, 1991.
6Insular Bank of Asia & America v. Intermediate Appellate Court, et at, G.R.
No. 74834, November 17, 1988.
’Metropolitan Waterworks and Sewerage Systems v. Hon. Reynaldo Daway, et
al., G.R. No. 160732, June 21, 2004.
®Transfield Philippines v. Luzon Hydro Corporation, et al., G.R. No. 146717,
May 19, 2006.
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VI. BANKING 63
10Feati Bank & Trust Company v. Court of Appeals, et al., G.R. No. 94209,
April 30, 1991.
"Hong Kong & Shanghai Banking Corporation v. National Steel Corporation,
G.R. No. 183486, February 24, 2016.
'2Ibid.; BAR 2015.
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w DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
13Charles Lee v. Court of Appeals, et al., G.R. No. 117913, February 1, 2002
■■'Metropolitan Waterworks and Sewerage Systems v. Hon. Reynaldo Daway,
et al., G.R. No. 160732, June 21, 2004.
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VI. BANKING 65
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66 DIVINA ON COMMERCIAL LAW:
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a. Applicant
i. The person who is either the importer or buyer in
a commercial letter of credit or the obligor/debtor
in a standby letter of credit. He procures the letter
of credit and agrees to pay the issuing bank the
charges therefor and to reimburse the issuing bank
the amount duly paid to the beneficiary under the
letter of credit.
ii. He has no obligation to reimburse the issuing bank
if the latter pays without the stipulated documents
or if the documents received are different from those
stipulated in the letter of credit.
iii. He has the right to have the marginal deposit
deducted from the principal obligation under the
letter of credit and to have the interest computed
only on the balance and not on the face value
thereof.17
b. The Issuing Bank
i. It undertakes to pay the beneficiary upon the latter’s
submission of stipulated documents/compliance with
the credit despite any breach in the main contract
underlying the letter of credit.
ii. After due payment, the issuing bank is entitled to
reimbursement as a matter of right. Reimbursement
includes debiting the bank account of the applicant, if
any, and applying the deposit against the obligation
of the applicant with the issuing bank.18
1'Ramon Abad v. Court of Appeals, G.R. No. L-42735, January 22, 1990. A
marginal deposit is a collateral security given by the applicant, and is supposed to be
returned to him upon his compliance with his secured obligation. Consequently, the
bank pays no interest on the marginal deposit, unlike ordinary bank deposit which
earns interest in the bank. Therefore, the Supreme Court ruled that it is only fair
then that the importer’s marginal deposit (if one was made, as in this case), should
be set off against his debt, for while the importer earns no interest on his marginal
deposit, the bank, apart from being able to use said deposit for its own purposes, also
earns interest on the money it loaned to the importer. It would be onerous to compute
interest and other charges on the face value of the letter of credit which the bank
issued, without first crediting or setting off the marginal deposit which the importer
paid to the bank.
’“Land Bank of the Philippines V. Monet Export and Manufacturing
Corporation, G.R. No. 161865, March 10, 2005.
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68 DIVINA ON COMMERCIAL LAW:
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-Ibid.
23BAR2018.
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70 DIVINA ON COMMERCIAL LAW:
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12. What are the three (3) distinct relationships arising from a
letter of credit transaction?
A letter of credit transaction is a composite of at least three
(3) distinct but intertwined relationships being concretized in a
contract:
a. One contract relationship links the party applying for the
letter of credit (the account party or buyer or importer)
and the party for whose benefit the letter of credit is
issued (the beneficiary or seller or exporter).
b. A second contract relationship is between the account
party and the issuing bank. Under this contract,
(sometimes called the “Application and Agreement” or
the “Reimbursement Agreement”), the account party
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72 DIVINA ON COMMERCIAL LAW:
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“Bank of the Philippine Islands v. De Reny Fabric Industries, et al., G.R. No.
L-24821, October 16,1970.
^G.R. No. 161865, March 10, 2005.
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74 D1V1NA ON COMMERCIAL LAW:
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16. "B" entered into a contract with *'S" for the purchase of one
container of Johnny Walker whisky. Upon the instance of B,
ABC Bank issued a letter of credit in favor of S, undertaking
to pay the latter upon submission of the shipping documents
showing compliance with S' obligation under the contract of
sale. However, S caused the shipment of container containing
Emperador brandy but, through fraud, was able to submit
the shipping documents required by the letter of credit. As a
consequence, ABC Bank paid S.
Can ABC Bank obtain reimbursement from B, or may B
invoke the breach of contract on the part of S to validly refuse
payment?
ABC Bank may obtain reimbursement from B despite the
breach of contract on the part of S. Under the independence
principle, once the issuing bank pays the beneficiary of the letter
of credit upon the latter’s submission of the stipulated documents,
its right of reimbursement comes as a matter of right. Such right
cannot be impaired by the non-fulfillment of the obligation under
the main contract underlying the letter of credit.
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VI. HANKING 75
Is PNB correct?
No. The obligation of 13 to pay under its agreement with SMC is
distinct and independent from the right of SMC to draw on the letter
of credit. Under the independence principle, the seller or beneficiary
is assured of prompt payment independent of any breach of the main
contract and precludes the issuing bank from determining whether
the main contract is actually fulfilled or not.38
In effect, based on the foregoing case, in a commercial letter of
credit, the beneficiary has two (2) options: either to collect payment
of the purchase price from the buyer, or to draw on the letter of credit
upon presentation of the stipulated documents. If the beneficiary
is fully paid by the buyer, it loses its right of recourse against the
issuer of the letter of credit. If the beneficiary draws on the letter
of credit, it can no longer collect from the buyer as it will result
in unjust enrichment. It is the issuing bank instead which has the
right to obtain reimbursement from the buyer, as applicant of the
letter of credit. Similarly, until the judgment against the buyer is
fully satisfied, the seller, as beneficiary of the letter of credit, can
still collect on the letter of credit.
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VI. HANKING 77
■*°Transfield, ibid.
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80 D1V1NA ON COMMERCIAL LAW:
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<6Bank of Commerce v. Teresita Serrano, G.R. No. 151895, February 16, 2005.
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VI. HANKING Hl
47Section 1, R.A. No. 7653, otherwise known as the New Central Bank.
48Section 2, R.A. No. 7653, as amended by R.A. No. 11211.
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82 DIVINA ON COMMERCIAL LAW:
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28. Does the BSP have the power to prosecute for the violation of
banking laws?
BSP is a government corporation created principally to
administer the monetary and banking system of the Republic,
not a prosecution agency like the fiscal’s office. Being an artificial
person, it is limited to its statutory powers and the nearest power to
which prosecution of violators of banking laws may be attributed is
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VI. BANKING 83
its power to sue and be sued. But this corporate power of litigation
evidently refers to civil cases only.
Mandamus will not lie to compel a prosecuting officer, like
the Secretary of Justice, to prosecute a case in court. Violations of
banking laws, however, constitute a public offense, the prosecution of
which is a matter of public interest and hence, anyone, even private
individuals, can denounce such violations before the prosecuting
authorities.62
d. Operations of the Bangko Sentral ng Pilipinas
i. Authority to obtain data and information
29. State the extent of the authority of BSP to obtain data and
information in relation to the proper discharge of its functions
and responsibilities.
The Bangko Sentral shall have the authority to require
from any person or entity, including government offices and
instrumentalities, or government-owned-or-controlled corporations,
any data, for statistical and policy development purposes in
relation to the proper discharge of its functions and responsibilities:
Provided, that disaggregated data gathered are subject to prevailing
confidentiality laws. The Bangko Sentral through the Governor or in
his absence, a duly authorized representative shall have the power
to issue a subpoena for the production of the books and records
for the aforesaid purpose. Those who refuse the subpoena without
justifiable cause, or who refuse to supply the Bangko Sentral with
data required, shall be subject to punishment for contempt in
accordance with the provisions of the Rules of Court.
The authority of the Bangko Sentral to require data from banks
shall continue to be exercised pursuant to its supervisory powers set
under the law.
Data on individuals and firms, other than banks, gathered
by the Bangko Sentral shall not be made available to any person
or entity outside of the Bangko Sentral whether public or private
except under order of the court or under such conditions as may
be prescribed by the Monetary Board: Provided, however, that the
collective data on firms may be released to interested persons or
entities: Provided, finally, that in the case of data on banks, the
provisions of Section 27 of this Act shall apply.”
“Damaso Perez v. Monetary Board, et al., G.R. No. L-23307, June 30, 1967,
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55Romeo Busuego v. Court of Appeals, et al., G.R. No. 95326, March 11, 1999.
56Ana Maria Koruga v. Teodoro Arcenas, Jr., et al., G.R. No. 168332, June 19,
2009.
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1
34. What are the prohibited acts for the personnel of the BSP?
In addition to the prohibitions found in R.A. Nos. 3019 and
6713, personnel of the BSP are hereby prohibited from:
a. Being an officer, director, lawyer or agent, employee,
consultant or stockholder, directly or indirectly, of any
institution subject to supervision or examination by the
BSP, except non-stock savings and loan associations and
provident funds organized exclusively for employees of
the BSP, and except as otherwise provided by law;
b. Directly or indirectly requesting or receiving any gift,
present or pecuniary or material benefit for himself or
another, from any institution subject to supervision or
examination by the BSP;
c. Revealing in any manner, except under orders of the
court, the Congress or any government office or agency
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I
36. What are the powers and functions of the Monetary Board?
The powers and functions of the BSP are exercised by the BSP
Monetary Board, composed of seven (7) members appointed by the
President of the Philippines for a term of six (6) years.
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90 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
42. When may the Monetary Board of the BSP appoint a receiver?
Whenever, upon report of the head of the supervising or
examining department, the Monetary Board finds that a bank or
quasi-bank:
(a) Has notified the Bangko Sentral or publicly announced a
unilateral closure, or has been dormant for at least sixty
(60) days or in any manner has suspended the payment
of its deposit/deposit substitute liabilities, or is unable
to pay its liabilities as they become due in the ordinary
course of business: Provided, that this shall not include
inability to pay caused by extraordinary demands induced
by financial panic in the banking community;
(b) Has insufficient realizable assets, as determined by the
Bangko Sentral, to meet its liabilities; or
(c) Cannot continue in business without involving probable
losses to its depositors or creditors; or
(d) Has willfully violated a cease and desist order under
Section 37 of the Central Bank Act that has become final,
involving acts or transactions which amount to fraud or
“Central Bank of the Philippines v. Court of Appeals, G.R. No. 88353, May 8,
1992.
“First Philippine International Bank Court of Appeals, G.R. No. 115849,
January 24,1996.
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VI. HANKING 91
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92 DIVINA ON COMMERCIAL LAW:
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44. What are the legal effects when a bank is placed under
receivership?
a. The appointment of a receiver operates to suspend the
authority of the bank and of its directors and officers over
its property and effects, such authority being reposed
in the receiver, and in this respect, the receivership is
equivalent to an injunction to restrain the bank officers
from intermeddling with the property of the bank in any
way. Since the bank officers were no longer authorized
to transact business in connection with the bank’s assets
and property, the exclusive option to purchase granted by
the President of the Bank is unenforceable against the
bank.67
b. The bank shall be forbidden to do business. As such, it is
not Hable to pay interest on deposits. It is however liable
for obligations that accrued before the order forbidding it
to do business.68 It was also held that the period during
which the bank cannot do business due to insolvency
is not a fortuitous event, unless it is shown that the
government’s action to place a bank under receivership or
liquidation proceedings is tainted with arbitrariness, or
that the regulatory body has acted without jurisdiction.69
c. A criminal case for violation of BP 22 against a bank
placed under receivership by the Monetary Board may be
dismissed for the demandability of the obligation to be
performed has been suspended. The filing of a petition for
assistance in liquidation by PDIC as receiver as a result
of the Monetary Board’s order for closure made it legally
impossible for the officer who signed the check to comply
with his obligation with the payee.70
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94 DIVINA ON COMMERCIAL MW;
A COMPREHENSIVE GUIDE VOLUME II
46. Can a bank under a receivership can still grant new loans and
accept new deposits?
No, duringthe receivership, the bank is forbidden to do business.
Its assets and properties shall be gathered and administered by the
receiver for the benefit of the bank’s creditors. Granting new loans
and accepting new deposits would constitute doing business for the
bank in the ordinary course of business which is contrary to the
purpose and nature of a receivership proceeding.72
’’BAR 2007
"Section 30. R.A. No. 7653; BAR 2009
"Section 30(d), R.A. No. 11211.
"Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas,
G.R. No. 200678, June 4, 2018.
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96 DIVINA ON COMMERCIAL LAW:
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53. What do you mean by the "close now hear later" doctrine?
It is the rule that allows BSP to order the closure of the bank
even without prior notice and hearing.”1 BSP may rely on the report
of the head of its supervising and examining department, or of the
conservator, if one is appointed.
Under R.A. No. 7653, the power of the Monetary Board (MB)
over banks, including rural banks, was increased and expanded.
The Court, in several cases, upheld the power of the MB to take over
banks without need for prior hearing. It is not necessary in as much
as the law entrusts to the MB the appreciation and determination
of whether any or all of the statutory grounds for the closure and
receivership of the erring bank are present. The MB, under R.A. No.
7653. has been invested with more power of closure and placement
of a bank under receivership for insolvency or illiquidity, or because
the bank’s continuance in business would probably result in the loss
to depositors or creditors.
The doctrine is founded on practical and legal considerations
to obviate unwarranted dissipation of the bank’s assets and as a
valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public. Swift, adequate and
determined actions must be taken against financially distressed
and mismanaged banks by government agencies lest the public faith
in the banking system deteriorate to the prejudice of the national
economy.’9
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is clear under R.A. No. 7653 that the basis need not arise from an
examination as required in the old law.""
It was likewise held that the bank is not entitled to a copy of
the report of examination that the Supervision and Examination
Department of BSP has prepared nor can the bank be validly entitled
to injunction to restrain BSP from adopting such report.”
The Supreme Court likewise ruled that the Monetary Board is
not required to make its own independent finding that the bank could
no longer be rehabilitated but may rely on the findings of the PDIC
as statutory receiver, in ordering the liquidation of a bank. Once
the receiver determines that rehabilitation is no longer feasible,
the Monetary Board is simply obligated to: (a) notify in writing the
bank>s board of directors of the same; and (b) direct the PDIC to
proceed with liquidation.82 This case should now be construed in
relation to R.A. No. 11211 which, as previously stated, removed the
option of rehabilitation once a bank is placed under receivership.
Nevertheless, it is submitted that a bank may still be
rehabilitated in the course of liquidation as when, for instance, the
assets and shares of the bank are sold to a buyer, which, in turn,
decided to rehabilitate the bank.
What is clear under R.A. No. 11211 is that the receiver does
not have the 90-day period under R.A. No. 7653 to rehabilitate the
bank. After its appointment, PDIC, as the statutory receiver, must
proceed to liquidation but there is nothing in the law that precludes
rehabilitation in the course of the liquidation.
55. What is the rationale of the "close now, hear later" doctrine?
The “close now, hear later” scheme is grounded on practical
and legal considerations to prevent unwarranted dissipation of the
bank’s assets and as a valid exercise of police power to protect the
depositors, creditors, stockholders, and the general public.83 It is
justified as a measure for the protection of the public interest. Swift
“Rural Bank of San Miguel v. Monetary Board, G.R. No. 1508S6, February
16, 2007.
“'Ibid.
82Apex Bancrights Holdings, Inc. v. Bangko Sentral ng Pilipinas, G.R. No.
214866, October 2, 2017.
“BSP Monetary Board v. Hon. Antonio-Valenzuela, G.R. No. 184778, October
2,2009.
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action is calk'd for on the part of the BSP when it finds that a bank
is in dire straits. Due process does not necessarily require a prior
hearing: a hearing or an opportunity to be heard may be subsequent
to the closure. One can just imagine the dire consequences of a
prior hearing: bank runs would be the order of the day, resulting in
panic and hysteria. Swift, adequate, and determined actions must
be taken against financially distressed and mismanaged banks by
government agencies lest the public faith in the banking system
deteriorate to the prejudice of the national economy.84
57. What is the remedy available to the bank to set aside the order
of BSP designating a conservator, appointing a receiver, or
directing the closure and liquidation of the bank?
The remedy available to the bank is to file a petition for
certiorari with the Court of Appeals on the ground that the action
taken by BSP was in excess of jurisdiction or with such grave
abuse of discretion as to amount to lack or excess of jurisdiction.
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58. Cite jurisprudence where the Supreme Court held that the
order of closure was arbitrary or made in bad faith.
a. The arbitrariness and bad faith of Central Bank is evident
from the fact that it pressured the controlling stockholders
into relinquishing the management and control of a bank
to a supposed investor, which did not have any intention
of restoring the bank into its former sound financial
condition but whose interest was merely to recover its
deposits from the bank and thereafter allowing such
investor to mismanage the bank until the bank’s financial
deterioration and subsequent closure. Central Bank acted
whimsically and withdrew its commitment to support the
bank to the detriment of the latter.90
b. When the closure was preceded by Central Bank making
express representations to the controlling stockholders
that it would support the Bank, and avoid its liquidation
if the stockholders would execute (a) the Voting Trust
Agreement turning over the management of the Bank to
the CB or its nominees, and (b) mortgage or assign their
properties to the Central Bank to cover the overdraft
“’Section 30, ibid.; Yuseco v. PDIC, as the statutory liquidator of the Unitrust
Development Bank, G.R. No. 217899, September 28, 2016.
““Central Bank v. Court of Appeals, supra.
ssIbid.
"Central Bank of the Philippines v. Court of Appeals, et al., G.R. No. L-50031,
July 27,1981.
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91Emerito Ramos v. Central Bank of the Philippines, G.R. No. L-29352, October
4, 1971.
“Banco Filipino Savings Bank v. Central Bank, supra.
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No. Once the bank is ordered closed by BSP and a petition for
assistance in liquidation is filed in court, the stockholders of the
closed bank cannot file a separate action to enjoin the liquidation
proceeding but should instead file a comment or opposition to the
petition for liquidation invoking therein as affirmative defenses the
bad faith on the part of BSP. This is necessary to prevent multiplicity
of suits or conflicting resolutions.100
The foregoing Bar examination question was based on the case
of Salud. v. Central Bank of the Philippines.101
In a recent case, however, the Supreme Court ruled that the
RTC, acting as a liquidation court, has no power to overrule the
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65. Are notes and coins withdrawn from circulation still legal
tender?
Notes and coins called in for replacement shall remain legal
tender for a period of one (1) year from date of call. After this period,
they shall cease to be legal tender but during the following year
or such longer period as the Monetary Board may determine, they
may be exchanged at par. After expiration of this latter period, the
notes and coins which have not been exchanged shall cease to be the
liability of the Bangko Sentral ng Pilipinas.
j. Administrative sanctions on supervised entities
66. What are the administrative sanctions that the Monetary Board
may impose?
1O’BAR 2000.
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1. Purpose
68. What are the prohibited acts under R.A. No. 1405?
It shall be unlawful for any official or employee of a banking
institution to disclose or allow the examination or inquiry by any
person, government official, bureau, or office, other than those
excepted by law, any information concerning Philippine currency
bank deposits of whatever nature and kind, as well as investment in
government securities.108
107BAR 2010.
'“Sections 1 and 3 of R.A. No. 1405, otherwise known as the Law on Secrecy
of Bank Deposits.
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81. "D" issued a check drawn against ABC Bank payable to the
order of "P" for P1,000,000.00 who, in turn, deposited the check
in his account with XYZ Bank. XYZ sent the check for clearing
through the Philippine Clearing House Corporation (PCHC) but
XYZ's clearing staff committed a clearing discrepancy when
he erroneously under-encoded the charge slip to P1,000.00.
While XYZ credited the account of "P" for PI,000,000.00, it
only recovered P1,000.00 from ABC. After discovery of the
131BSB Group, Inc. v. Go, G.R. No. 168644, February 16, 2010.
132Mellon Bank v. Hon. Celso Magsino, el al., G.R. No, 71479, October 18,1990.
,330nate v. Abrogar, G.R. No. 107303, February 23,1995.
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83. Does AMLC need a court order to be able to inquire into such
deposits, funds or investments?
Yes, AMLC needs to obtain a bank inquiry order from the
Court of Appeals. The application can be done ex-parte.'x However,
AMLC must establish probable cause that the deposits, funds or
investments relate to unlawful activity under AMLA and the Court
of Appeals, independently of AMLC, must make itself a finding that
such probable cause exists before the bank inquiry order may be
issued.137
Court order shall not be necessary in the following cases:
a. Kidnapping for ransom under Article 267 of Act No. 3815
(RPC);
b. Violations of Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and
16 of R.A. No. 9165 (Comprehensive Dangerous Drugs
Act of 2002);
c. Hijacking and other violations under R.A. No. 6235;
destructive arson and murder, as defined under the RPC,
as amended, including those perpetrated by terrorists
against non-combatant persons and similar targets;
d. Felonies and offenses similar to the foregoing which are
punishable under the penal laws of other countries;
e. Terrorism and conspiracy to commit terrorism as defined
under R.A. No. 9372, as amended.138
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Authority ofBIR
85. When may the Bureau of Internal Revenue (BIR) inquire into
the deposits of a taxpayer?
The BIR may inquire into the deposit and other related
information to determine the gross estate of the deceased taxpayer
for computation of estate tax;140 and if there is an offer of compromise
of tax liability on account of the taxpayer’s financial incapacity.141
Apart from these, the BIR may not inquire into deposits without
violating the right of the taxpayer to secrecy of deposits under
existing laws.142
‘“BAR 2018.
““Section 6(F)(1), Tax Code, as amended.
“'Section 6(F)(2), Tax Code, as amended.
“2BAR 2004.
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"’China Bank v. Ortega, G.R. No. L-34964, January 31,1973; PCIB v. Court of
Appeals, G.R. No. 84526, January 28, 1991.
"’Section 8, R.A. No. 6426, as amended.
"‘Section 8, ibid.
"‘Section 11, R.A. No. 9160, as amended, otherwise known as the Anti-Money
Laundering Law.
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89. May foreign currency deposits be inquired into when the funds
are the subject matter of litigation?
No, R.A. No. 6426 is a special law designed especially for
foreign currency deposits in the Philippines. R.A. No. 1405, which
covers all bank deposits in the Philippines, is the general law
which does not nullify the special law on foreign currency deposits.
Thus, it was held that the surety which issued a bond to secure the
obligation of the principal debtor cannot inquire into the foreign
currency deposits of the debtor even if its purpose is to determine
whether or not the loan proceeds were used for the purpose specified
in the surety agreement. The foreign currency deposits cannot be
examined without the consent of the depositor. The subpoena issued
by the bank should be quashed because foreign currency deposits
are not subject to court order except for violation of the anti-money
laundering law.161
In this case of GSIS u. Court of Appeals, the Supreme Court
held that there are only two permissible cases where foreign currency
deposits may be examined. As enumerated above, there are other
exceptions scattered in various cases. This case, however, may serve
as authority that foreign currency deposits cannot be examined in
case of impeachment. It should also be noted that R.A. No. 1405
lists impeachment as an exception to the rule against unauthorized
examination of bank deposits while R.A. No. 6426 does not.
90. Mayor J has two (2) bank accounts: (1) a Peso savings account
with Bank P, and (2) a U.S. Dollar savings account with Bank D.
In 2018, Mayor J’s former business partner, Mr. K, filed a
civil case for collection of sum of money against him.
160Karen Salvacion v. Central Bank of the Philippines, China Bank, et al., G.R.
No. 94723, August 21, 1997.
,61GSIS v. Court of Appeals, G.R. No. 189206, June 8, 2011.
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152BAR 2019.
‘“China Bank v. Ortega, G.R. No. L-34964, January 31. 1973.
161GSIS v. Court of Appeals, G.R. No. 189206, June 8, 2011.
'“BAR 2015.
’“PCIB v. Court of Appeals, 193 SCRA 452.
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92. What does the term "unclaimed balances" mean in the context
of the Unclaimed Balances Law?
“Unclaimed balances” shall include credits or deposits of
money, bullion, security or other evidence of indebtedness of
any kind, and interest thereon with banks, buildings and loan
associations, and trust corporations, as hereinafter defined, in
favor of any person known to be dead or who has not made further
deposits or withdrawals during the preceding ten years or more.
Such unclaimed balances, together with the increase and proceeds
thereof, shall be deposited with the Treasurer of the Philippines to
the credit of the Government of the Republic of the Philippines.15’
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‘“Section 2, ibid.
‘“Now, Congress of the Philippines.
'“Section 3, Act No. 3936, as amended.
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95. What is the liability of the bank, building and loan association
or trust corporation for failure to file the sworn statement as
required by law?
If the president, cashier or managing officer of the bank,
building and loan association, or trust corporation neglects or refuses
to make and file the sworn statement required by this action, such
bank, building and loan association, or trust corporation shall pay
to the Government the sum of P500.00 a month for each month or
fraction thereof during which such default shall continue.161
161Section 4, ibid.
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162BAR 1991.
‘“BAR 1991.
‘“Section 5, R.A. No. 1405.
‘“Section 10, R.A. No. 6426.
‘“Section 3.1, R.A. No. 8791, otherwise known as the General Banking Law
(GBL).
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the public, which means, 20 or more lenders; and c) the funds are
obtained from the public in the form of deposits. Note that unlike
the old law, these activities need not be performed with habituality.
Thus, when a corporation loans out the money obtained from
almost 60,000 savings account deposits opened by the public with
the said corporation, it is clear that these transactions partake the
nature of banking, as defined by the law.167
However, transactions involving purchase of receivables at
a discount, well within the purview of investing, reinvesting or
trading in securities, which an investment company is authorized
to perform, does not constitute banking. Similarly, if the funds
supposedly lent have not been shown to have been obtained from
the public by way of deposits, it cannot be said that the investment
company was engaged in banking.168
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101. What are the requirements for the grant of a banking license?
The requirements are as follows:
a. The entity must be organized as a stock corporation. As a
stock corporation, it must have not less than five (5) but
more than 15 directors, two of whom shall be independent
directors.1’1 However, in case of merger or consolidation,
the bank may have up to 21 directors;172
b. That its funds are obtained from the public, which shall
mean 20 or more persons; and
c. That the minimum capital requirements prescribed
by the Monetary Board for each category of banks are
satisfied.173
The Securities and Exchange Commission shall not register
the articles of incorporation of any bank, or any amendment thereto,
unless accompanied by a certificate of authority issued by the
Monetary Board, under its seal. Such certificate shall not be issued
unless the Monetary Board is satisfied from the evidence submitted
to it that:
a. All requirements of existing laws and regulations to
engage in the business for which the applicant is proposed
to be incorporated have been complied with;174
b. The public interest and economic conditions, both general
and local, justify the authorization;176 and
c. The amount of capital, the financing, organization,
direction and administration, as well as the integrity
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104. What is the limit on the number of shares a person may own in
a domestic bank?
Foreign individuals and non-bank corporations may own or
control up to 40% of the voting stock of a domestic bank. This rule
shall apply to Filipinos and domestic non-bank corporations.181 Forty
percent (40%) is the aggregate limit for foreign-held stocks while
40% is an individual limit for Filipino natural persons and domestic
non-bank corporations.
The exceptions to the 40% share ownership limit Eire as follows:
a. Foreign banks allowed to operate under the foreign bank
liberalization law through any of the following modes of
entry: i) acquiring, purchasing, or owning up to 100% of
the voting stock of an existing bank; ii) by investing in up
to 100% of the voting stock of a new banking subsidiary
incorporated under the laws of the Philippines; or (iii) by
establishing branches with full banking authority.182
b. A universal bank can own up to 100% of the equity in a
thrift bank, a rural bank or a financial allied enterprise.
A publicly-listed universal or commercial bank may own up to
100% of the voting stock of only one other universal or commercial
bank.183
Note that the 100% ownership on voting stocks must be in
either bank only.181
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111. What are the limitations on the power of a bank to acquire real
property?
a. A domestic bank can only acquire real property in any of
the cases specified in Sections 51 and 52 of the General
Banking Law. Thus, it was held that a real property
cannot be conveyed to the bank in settlement of a civil
liability arising from a criminal offense. Civil liability
is not a debt. The debt which can be satisfied by dation
in payment is that which is incurred or contracted in
‘"BAR 2015.
““Section 27, GBL.
“'Section 24.1, GBL.
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113. Is the above enumeration as to the services that the bank may
render exclusive?
No, the bank may render other services for its customers as
long as they are not incompatible with banking business. A bank,
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for instance, cannot sell sweepstakes or lotto tickets for the PCSO,
because it is not compatible with banking business.
210BAR 2010.
211Sia v. Court of Appeals, G.R. No. 102970, May 13,1993.
“Section 72, R.A. No. 337.
™Ibid.
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218BAR 2010.
219Section 95, R.A. No. 7653.
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120. What are the limitations on the power of the bank to grant
loans?
The limitations on the power of the bank to grant loans are as
follows:
a. Except as the Monetary Board may otherwise prescribe
for reasons of national interest, the total amount of loans,
credit accommodations and guarantees as may be defined
by the Monetary Board that may be extended by a bank to
any person, partnership, association, corporation or other
entity shall at no time exceed 25% of the net worth of
such bank.220 This rule is known as the single borrower’s
limit.221
b. Loans granted to directors, officers, stockholders and their
related interests must conform to certain procedural and
substantive requirements, otherwise, criminal sanctions
may be imposed. These requirements are known as
DOSRI rules and regulations.222
c. Except as the Monetary Board may otherwise prescribe,
loans and other credit accommodations against real
estate shall not exceed 75% of the appraised value of the
respective real estate security, plus 60% of the appraised
value of the insured improvements, and such loans may be
^Section 35, GBL. While the law sets the SBL to 20% of the bank’s net worth,
the Monetary Board has increased the threshold limit to 25%.
“‘BAR 2015.
“Section 36, GBL.
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125. All senior officers of ABC Bank are entitled to obtain a housing
loan. X is an Executive Vice President for Operations of ABC
Bank. She obtained a housing loan with the ABC Bank. Which
statement is most accurate?233
a. The housing loan of X requires a guarantor from somebody
who is not connected with the bank.
b. The housing loan of X requires the approval of the Board
of Directors of the bank.
c. The housing loan of X, being a benefit for employees, does
not require (a) but will require (b).
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128. What are the legal effects of non-compliance with the DOSRI
rules and regulations?
After due notice to the board of directors of the bank, the office
of any bank director or officer who violates the DOSRI rules and
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129. What is the nature of the loan that does not comply with the
rules on DOSRI and/or Single Borrower’s limit?
Loans, assuming that they were of a DOSRI nature or without
the benefit of the required approvals or in excess of the Single
Borrower’s Limit, would not be void for those reasons. Instead,
the banks or the officers responsible for the approval and grant of
DOSRI loan would be subject only to the sanctions under the law.237
In other words, the loan transaction is valid but without
prejudice to criminal prosecution against the erring DOSRI.
130. What are the three different kinds of sale relating to the
property of the debtor/mortgagor?
There are three different kinds of sale under the law, namely:
an ordinary execution sale, a judicial foreclosure sale, and an
extrajudicial foreclosure sale. An ordinary execution sale is governed
by the pertinent provisions of Rule 39 of the Rules of Court. Rule
68 of the Rules of Court applies in case of judicial foreclosure. On
the other hand, Act No. 3135, as amended by Act No. 4118, known
as “An Act to Regulate the Sale of Property under Special Powers
Inserted in or Annexed to Real Estate Mortgages” applies in case of
extrajudicial foreclosure sale. A different set of law applies to each
class of sale mentioned.238
“Ibid.
“’Republic v. Sandiganbayan, G.R. No. 166859, April 12, 2011.
“Quano v. Court of Appeals, 398 SCRA 405.
“Huerta Alba Resort v. Court of Appeals, 339 SCRA 534.
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133. State the rules on the period to exercise the right of redemption
of natural and juridical persons after the bank's foreclosure of
real estate mortgage on their properties.
The rules are as follows:
a. Generally, the period of redemption is one (1) year from
registration of the certificate of foreclosure sale.
b. However, the period to redeem real property is reduced
to three (3) months after foreclosure or the registration
of the certificate of foreclosure sale, whichever comes
earlier, if the following elements are present:
i. The mortgagor is a juridical person;
ii. The mode of foreclosure is extra-judicial, under Act
No. 3135, as amended; and,
iii. The mortgagee is a bank.244
The redemption period may thus be terminated even the day
following the foreclosure sale if the sale is registered. Nevertheless,
if the sale is not registered, the period to redeem shall expire three
(3) months after foreclosure, ipso facto.
c. The period to redeem real property after extra-judicial
foreclosure is one (1) year from date of the sale in the
following cases:
i. The mortgagor is a natural person; and/or
ii. The mortgagee is not a bank; and/or
iii. The mode of foreclosure is judicial; provided that the
mortgagee is a bank.
The date of the sale has been construed to mean, however, the
date of registration of the sale.246 Therefore, unless the foreclosure
sale is registered in any of the foregoing cases, the period to redeem
shall not start to run.
d. As previously stated, in judicial foreclosure of real estate
mortgage when the mortgagee is a bank, the applicable
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134. ABC Corporation obtained a loan from XYZ Bank. The loan
is secured by real estate mortgage on the property of ABC
Corporation. The appraised value of the property is not
sufficient to secure the loan of ABC. Thus, its President, acting
as accommodation mortgagor, also mortgaged his house and
lot to fully secure the loan obligation of ABC. Unfortunately,
ABC Corporation experienced financial difficulties and failed to
settle the loan. XYZ Bank eventually foreclosed the mortgages
on the real estate of ABC and its President, in accordance
with Act No. 3135, as amended. Four (4) months after the
foreclosure sale, both ABC and its President want to redeem
their respective properties. Do ABC and its President have the
right of redemption?
ABC Corporation has lost its right to redeem the property
because its period of redemption has expired. Under Section 47
of the GBL, the period to redeem has been reduced to three (3)
months from date of foreclosure sale or registration of the certificate
of foreclosure sale, if the following elements are present: a) the
mortgagor is a juridical person; b) the mortgagee is a bank; and c)
the mode of foreclosure is extra-judicial. All elements are present in
this case.
However, the President of ABC Corporation may still redeem
the property. The GBL retained the one-year period to redeem the
property if the mortgagor is a natural person.
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24GGolden Way Merchandising v. Equitable PCI Bank, G.R. No. 195540, March
13,2013.
247Section 54, GBL.
™Supra.
249Section 55.1, GBL.
250Banco de Oro-EPCI, Inc. JAPRL Development Corporation, G.R. No.
179901, April 14, 2008.
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a'Supra.
a2Supra.
wInfra.
“‘Section 55.2, GBL.
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full payment of the obligation because that is the law between the
parties.
The Supreme Court thus modified the guidelines on the
imposition of interest in Eastern Shipping Lines, Inc. v. Court of
Appeals■ and Aocar t>. Callery Frames,as follows:
\\ ith regard to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed as follows:
a. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance
of money, goods, credits or judgments, the interest due
shall be that which is stipulated by the parties in writing,
provided it is not excessive and unconscionable, which,
in the absence of a stipulated reckoning date, shall be
computed from default, i.e., from extrajudicial or judicial
demand in accordance with Article 1169 of the Civil
Code, UNTIL FULL PAYMENT, without compounding
any interest unless compounded interest is expressly
stipulated by the parties, by law or regulation. Interest
due on the principal amount accruing as of judicial
demand shall SEPARATELY earn legal interest at the
prevailing rate prescribed by the Bangko Sentral ng
Pilipinas, from the time of judicial demand UNTIL FULL
PAYMENT.
b. In the absence of stipulated interest, in a Ioan or
forbearance of money, goods, credits or judgments, the
rate of interest on the principal amount shall be the
prevailing legal interest prescribed by the Bangko Sentral
ng Pilipinas, which shall be computed from default, i.e.,
from extrajudicial or judicial demand in accordance with
Article 1169 of the Civil Code, UNTIL FULL PAYMENT,
without compounding any interest unless compounded
interest is expressly stipulated by law or regulation.
Interest due on the principal amount accruing as of
judicial demand shall SEPARATELY earn legal interest
at the prevailing rate prescribed by the Bangko Sentral
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162 DIVINA ON COMMERCIAL LAW:
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143. What is the penalty for violation of any of the provisions of the
General Banking Law?
•‘“Villa Crista Monte Realty & Development Corp. v. Equitable PCI Bank, G.R.
No. 208336, November 21,2018.
2UiSee discussion on the Central Bank Act, supra.
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164 P1VINA ON COMMERCIAL LAW:
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™Supra.
271Section 1(a)(8), R.A. No. 9160, as amended by R.A. No. 10927.
272Section 3(a), R.A. No. 9160, as further amended by R.A. No. 11521.
273Section 9(a), R.A. No. 9160.
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-“Section 7(1), R.A. No. 9160, as amended by R.A. No. 10365 and R.A. No.
11521.
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“•BAR 2017.
!
L
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“’Section 7, as amended.
’“BAR 2015.
“’Section 10, R.A. No. 9160, as amended.
“’Philippine Commercial Bank v. Balmaceda, September 12, 2011.
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176 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME 11
■'‘■'Allied Banking Corporation v. Elizabeth Sia, G.R. No. 195341, August 28,
2019.
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VI. BANKING 177
effectivity. The total period of the freeze order issued by the Court
of Appeals under this provision shall not exceed six (6) months.
This is without prejudice to an asset preservation order that the
Regional Trial Court having jurisdiction over the appropriate anti
money laundering case or civil forfeiture case may issue on the same
account depending upon the circumstances of the case, where the
Court of Appeals will remand the case and its records: Provided,
that if there is no case filed against a person whose account has
been frozen within the period determined by the Court of Appeals,
not exceeding six (6) months, the freeze order shall be deemed ipso
facto lifted; Provided further, that this new rule shail not apply to
pending cases in the courts. In any case, the court should act on the
petition to freeze within 24 hours from filing of the petition. If the
application is filed a day before a non-working day, the computation
of the 24-hour period shall exclude the non-working days.
The freeze order or asset preservation order issued under
the law shall be limited only to the amount of cash or monetary
instrument or value of property that the court finds there is probable
cause to be considered as proceeds of a predicate offense and the
freeze order or asset preservation order shall not apply to amounts
in the same account in excess of the amount or value of the proceeds
of the predicate offense.290
WO. May the AMLC examine the bank accounts of the accused
public officials even without seeking a prior court order?
Explain.291
The AMLC cannot examine the bank accounts of the accused
public officials without seeking a prior court order. Under the Anti
Money Laundering law, the AMLC needs to obtain a bank inquiry
order from the Court of Appeals to inquire into funds and deposits
if there is probable cause they relate to unlawful activity under
AMLA. Bank inquiry order is not necessary only if the predicate
crime is any of hijacking, kidnapping, terrorism, murder, arson and
violation of the Dangerous Drugs Law.292 Violation of the Anti-Graft
and Corrupt Practices Act does not fall within the exception.
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161. From his first term in 2007, Congressman Abner has been
endorsing his pork barrel allocations to Twin Rivers in exchange
for a commission of 40% of the face value of the allocation.
Twin Rivers is a non-governmental organization whose
supporting papers, after audit, were found by the Commission
on Audit to be fictitious. Other than to prepare and submit
falsified papers to support the encashment of the pork barrel
checks, Twin Rivers does not appear to have done anything
on the endorsed projects and Congressman Abner likewise
does not appear to have bothered to monitor the progress of
the projects he endorsed. The congressman converted most of
the commissions he generated into US dollars, and deposited
these in a foreign currency account with Banco de Plata (BDP).
Based on amply-supported tips given by a congressman
from another political party, the Anti-Money Laundering
Council (AMLC) sent BDP an order: (1) to confirm Cong.
Abner’s deposits with the bank and to provide details of these
deposits; and (2) to hold all withdrawals and other transactions
involving the congressman's bank accounts.
As counsel for BDP, would you advise the bank to comply
with the order?233
I shall advise BDP not to comply with the order of the AMLC.
Without a bank inquiry order from a competent court, AMLC cannot
inquire bank deposits, regardless of currency, unless there is probable
cause that the predicate crime involved is hijacking, kidnapping for
ransom, violations of the Dangerous Drugs act, hijacking or other
violations of R.A. No. 6235, destructive arson, murder, or terrorism.
Further, the AMLC cannot order BDP to hold all withdrawals
and other transactions involving the accounts of Congressman
Abner. The power to issue freeze order is lodged with the Court of
Appeals which may issue it upon after AMLC establishes and the
Court of Appeals independently determines that the account relates
to unlawful activities under the AMLA.
“BAR 2013.
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VI. BANKING 179
“'BAR 2017.
“'Section 11, R.A. No. 9160, as amended.
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180 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
165. What is the meaning of the safe harbor provision under AMLA?
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
2MSubido Pagente Certeza Mendoza and Binay Law Offices The Court of
Appeals, G.R. No. 216914, En Banc, December 6, 2016.
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VI. BANKING 181
166. Other than obtaining bank inquiry order and freeze orders,
what other remedy should the AMLC pursue if probable cause
exists that any monetary instrument or property is related to
an unlawful activity?
Upon determination by the AMLC that probable cause exists
that any monetary instrument or property is in any way related
to an unlawful activity as defined in Section 3(i) or a money
laundering offense under Section 4 hereof, the AMLC shall file with
the appropriate court through the Office of the Solicitor General, a
verified ex parte petition for forfeiture, and the Rules of Court on
Civil Forfeiture shall apply.
The forfeiture shall include those other monetary instrument
or property having an equivalent value to that of the monetary
instrument or property found to be related in any way to an unlawful
activity or a money laundering offense, when with due diligence,
the former cannot be located, or it has been substantially altered,
destroyed, diminished in value or otherwise rendered worthless by
any act or omission, or it has been concealed, removed, converted,
or otherwise transferred, or it is located outside the Philippines or
has been placed or brought outside the jurisdiction of the court, or it
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
purposes of forfeiture.298
The AMLC, if circumstances warrant, may initiate civil
forfeiture proceedings to preserve the assets and to protect it from
dissipation. No court shall issue a temporary restraining order or
a writ of injunction against the freeze order, except the Court of
Appeals or the Supreme Court.299
In the conduct of its investigation, the AMLC may also apply
for the issuance of search and seizure order with any competent
court.300
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167. May aforeign state and the AMLC request for mutual assistance
in the investigation or prosecution of a money laundering
offense?
Yes. a foreign state and the AMLC request for mutual
assistance in the investigation or prosecution of a money laundering
offense. The principles of mutuality and reciprocity shall, for this
purpose, be at all times recognized.
Thus, the AMLC and concerned foreign state may execute
a request for assistance from each other by: (1) tracking down,
freezing, restraining and seizing assets alleged to be proceeds of
any unlawful activity under the procedures laid down in the Act; (2)
giving information needed by the foreign State within the procedures
laid down in the Act; and (3) applying for an order of forfeiture of
any monetary instrument or property in the court: Provided, that
the court shall not issue such an order unless the application is
iccompanied by an authenticated copy of the order of a court in the
equesting State ordering the forfeiture of said monetary instrument
or property of a person who has been convicted of a money laundering
offense in the requesting State, and a certification or an affidavit of a
competent officer of the requesting State stating that the conviction
and the order of forfeiture are final and that no further appeal lies
in respect of either.301
169. What are the requirements for Requests for Mutual Assistance
from Foreign States?
A request for mutual assistance from a foreign State must
(1) confirm that an investigation or prosecution is being conducted
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1. Basic Policy
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186 DIVINA ON COMMERCIAL LAW:
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VI. BANKING 187
b. Commencement of liability
“Section 21(a) Renumbered from Section 16(a) by R.A. No. 10846, June 11,
2016; As added by R.A. No. 9302, August 12, 2004.
’’’Section 5(g), R.A. No. 3591, as amended.
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188 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
31"BAR 2012.
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VI. HANKING 189
182. "A" has the following accounts with ABC Bank. The Bank was
subsequently closed by BSP for insolvency. How much can "A"
recover from PDIC?
1
P500.000
P500,000
P500.000 ||q Tfbwu jptaiJiKo'l
P500.000
Pl million — Loan
Insurance Coverage — P500.000
Uninsured Portion — P500.000 - Trust Fund
K
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190 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
183. How much can "A" recover from PDIC if he has the following
joint accounts on top of his individual accounts?
P500.000 JI ” i
P500.000 J '
500,000 - | A and/or B
P5oo.ooo ] _________
500,000 - A and/or C
P500.000 500,000 - | A and/or D
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VI. BANKING 191
’“Section 19, renumbered from Section 14, R.A. No. 3591, as amended by R.A.
No. 10846.
’’'Renumbered from Section 15 by R.A. No. 10846, June 11, 2016; as amended
byP.D. No. 1940, June 27, 1984; R.A. No. 7400, April 13,1992; R.A. No. 10846, June
11,2016.
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187. What is the effect of the failure by PDIC to settle the claim of
the insured depositor?
The failure to settle the claim within six (6) months from date
of tiling of the claim for insured deposit whether 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 PDIC responsible for the delay, to imprisonment from six (6)
months to one (1) year; provided that the period shall not apply if the
validity of the claim requires the resolution of issues of facts and/or
law by PDIC or another office, subject further to the remedy of PDIC
to require final determination of a court of competent jurisdiction
if PDIC is not satisfied as to the viability of the claim for insured
deposit.322
h. Failure of depositor to claim insured deposits
188. What is the effect of the failure of the depositor to file his
insurance claim with PDIC?
• u ^^ess otherwise waived by the Corporation, if the depositor
m t e c osed bank shall fail to claim his insured deposits with the
orporation within two (2) years from actual takeover of the closed
bank by the receiver, or does not enforce his claim filed with the
corporation within two (2) years after the two-year period to file a
c ai™ as mentioned hereinabove, all rights of the depositor -against
t e orporation with respect to the insured deposit shall be barred;
owever, all rights of the depositor against the closed bank and its
s areholders or the receivership estate to which the Corporation may
®ve become subrogated, shall thereupon revert to the depositor.
ereafter the Corporation shall be discharged from any liability on
the insured deposit.323
i. Examination of banks and deposit accounts
189. Does PDIC have the power to examine banks and deposit
accounts?
PDIC may conduct examination of banks with prior approval
of the Monetary Board: Provided, that no examination can be
322Section 19, renumbered from Section 14 and amended by R.A. No. 10846,
June 11, 2016.
323Section 21(e) Renumbered from Section 16(e) by R.A. No. 10846, June 11,
2016; as amended by R.A. No. 9302, August 12, 2004.
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VI. BANKING 193
“’Section 9(8), as amended by R.A. No. 9302, August 12, 2004; RA. No. 9576,
June 1,2009.
’“Section 26(f)(1)(e); BAR 2019.
’“Philippine Deposit Insurance Corporation Gidwani, G.R. No. 234616,
June 20,2018.
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194 DIV1NAON COMMERCIAL Ij\W:
A COMPREHENSIVE GUIDE VOLUME II
192. What court may issue an injunction against PDIC for any action
on its part which is tainted with grave abuse of discretion?
No court, except the Court of Appeals, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory
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VI. BANKING 195
injunction against PDIC for any action on its part under the PDIC
charter.™
This prohibition shall apply in all cases, disputes or
controversies instituted by a private party, the insured bank, or any
shareholder of the insured bank.331
The Supreme Court may issue a restraining order or injunction
when the matter is of extreme urgency involving a constitutional
issue, such that unless a temporary restraining order is issued,
grave injustice and irreparable injury will arise. The party applying
for the issuance of a restraining order or injunction shall file a bond
in an amount to be fixed by the Supreme Court, which bond shall
accrue in favor of the Corporation if the court should finally decide
that the applicant was not entitled to the relief sought.332
Any restraining order or injunction issued in violation of the
above rule is void and of no force and effect and any judge who has
issued the same shall suffer the penalty of suspension of at least 60
days without pay.333
5. Concept of bank resolution
“"Section 27, Renumbered from Section 22, R.A. No. 10846, June 11, 2016; As
added by R.A. No. 9302, August 12, 2004.
“'Section 27, as added by R.A. No. 9302, August 12, 2004.
! mIbid.
mIbid.
“'Section 5(s), as added by R.A. No. 10846.
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196 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
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VI. BANKING 197
“’Section 11(f).
“’Supra.
L
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VI. BANKING 199
196. What follows after the order of bank's closure by the BSP?
Whenever a bank is ordered closed by the Monetary Board,
PDIC shall be designated as receiver and it shall proceed with the
takeover and liquidation of the closed bank in accordance with this
Act. For this purpose, banks closed by the Monetary Board shall no
longer be rehabilitated.340
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200 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
200. What are the covered and excluded transactions under the
law?
The law does not apply to transaction on cash basis but only
where there is a credit component. It is also applicable only to a
creditor as defined by law, that is, a 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.345
Credit means any loan, mortgage, deed of trust, advance, or
discount; any conditional sales contract; any contract to sell, or 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, or leasing of
property; any option, demand, lien, pledge, or other claim against,
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VI. BANKING 201
201. What are the legal effects of non-compliance with the obligation
to disclose credit charges?
Even if prior disclosure is not made pursuant to the law, the
contract or the transaction is not rendered void or unenforceable.”’
The creditor can still compel the debtor to perform the principal
obligation and the debtor is obliged to comply with the agreement,
less undisclosed charges.”8 In other words, charges not properly
disclosed need not be paid and if paid, can be recovered. This is,
however, without prejudice to the applicable criminal, civil, and
administrative penalties that may be imposed against the erring
creditor.
The offender is liable to pay a penalty for an amount equal
to twice the finance charge required by such creditor but not to
exceed P2,000.00 on any credit transaction. The action to recover
the penalty should be brought within one (1) year from the date of
the occurrence of the violation.
In case of willful violation of the law, the offender shall be Hable
to pay a fine or imprisonment or both at the option of the court.119
II
’“’Section 3, R.A. No. 3765.
I ’’’Section 6, R.A. No. 3765; Development Bank of the Philippines v. Arcilia,
■ Jr., G.R. No. 161397, June 30, 2005.
’’“New Sampaguita Builders Construction V. Philippine National Bank, G.R.
I No. 148743, July 30, 2004.
i
’’’Section 6, R.A. No. 3765.
=
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202
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204 PIVINAON COMMERCIAL LAW:
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VII. INTELLECTUAL PROPERTY CODE 205
or service mark that may have been invaded, intruded into, or used
without proper authority from the registered owner of the bottles.
Neither does it amount to unfair competition or pertain to mean
fraudulently “passing off’ products or services as those of another
or undertaking any representation or misrepresentation that would
confuse or tend to confuse the goods of one with those of another, or
vice versa.
In this light, hoarding for purposes of destruction is closer to
what another law [R.A. No. 623] covers. The latter makes it unlawful
for any person, without the written consent of the manufacturer,
bottler, or seller who has successfully registered the marks of
ownership in accordance with Section 1 of the said law, to fill such
bottles, boxes, kegs, barrels, or other similar containers so marked
or stamped, for the purpose of sale, or to sell, dispose of, buy, or
traffic in, or wantonly destroy the same, whether filled or not, or to
use the same for drinking vessels or glasses or for any other purpose
than that registered by the manufacturer, bottler or seller.14
"Coca Cola Bottlers Philippines, Inc. Naga Plant v. Quintin Gomez, G.R. No.
154491, November 14, 2008; BAR 2016.
“G.R. No. 172835, December 13, 2007.
=
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208 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
C. Term of protection
A patent is valid for 20 years from filing of the application for
the grant of patent. Copyright is generally valid for 50 years.”
For trademarks, a certificate of registration shall remain in
force for 10 years, provided, that the registrant shall file a declaration
of actual use and evidence to that effect, or shall show valid reasons
based on the existence of obstacles to such use, within one (1) year
from the fifth anniversary of the date of the registration of the mark.
Otherwise, the mark shall be removed from the Register by the
Office.20
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VII. INTELLECTUAL PROPERTY CODE 209
exclusive use of the same for the reason that they are not appropriate
subjects of the said intellectual rights.23
In another case, eye leaf bushing is a useful article but it
has no artistic value. Even though it was covered by a certificate
of registration of copyright coupled with notice of deposit with
the National Library, no copyright is obtained. There can be no
copyright infringement despite sale by another of the same product.
The owner should have obtained instead a patent for utility model.24
It was also held that light boxes which utilize specially printed
posters sandwiched between plastic sheets and illuminated with
backlights are not literary or artistic pieces with could be copyrighted.
What is copyrightable is the pictorial or drawing contained in the
light boxes. The light boxes would have been appropriate for patent,
but because copyright and not patent was obtained, then, the first
manufacturer of the light box could not sue another manufacturer
for patent infringement.26
8, Roberto has been using the name and mark "Lavandera Ko"
in his laundry business since 1994. He has a certificate of
copyright over said name and mark. Overtheyears, his business
expanded with numerous franchise outlets in the Philippines.
Roberto then formed a corporation to handle the said business.
He called it Laundromatic Corporation (Laundromatic) and it
was incorporated in 1997, while "Lavandera Ko" was registered
as a business name in 1998 with the Department of Trade and
Industry (DTI). Later on, Roberto discovered that his brother,
Fernando, was able to register the name and mark "Lavandera
Ko" with the Intellectual Property Office (IPO) in 2010, the
registration of which was filed in 1995. He also discovered that
Fernando had been selling Roberto's franchises. Thus, Roberto
filed a petition for injunction, unfair competition, infringement
of copyright, cancellation of trademark and name before the
RTC. The RTC dismissed the action, finding that neither party
was the originator of the subject mark. The judge ruled that the
mark was created by a certain Santiago Suarez in 1942 in his
musical composition "Lavandera Ko.” Is the RTC correct?
“Kho, supra.
24Jessie G. Ching v. William Salinas, Sr., et al., G.R. No. 161295, June 29,2005.
“Pearl & Dean Phil. v. Shoemart, Inc., G.R. No. 148222, August 15, 2003.
Section 109, IPC, as amended.
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210 DIVINA ON COMMERCIAL LAW:
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B. Patents
“Fernando Juan v. Roberto Juan, G.R. No. 221372, August 23, 2017.
2,BAR 2010.
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VII. INTELLECTUAL PROPERTY CODE 211
“Pearl & Dean (Phil.) Inc. v. Shoemart, Inc., G.R. No. 148222, August 15,
2003.
“Section 109, IPC, as amended.
’"Roberto Del Rosario v. Court of Appeals and Janito Corporation.
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212 DIVINA ON COMMERCIAL LAW:
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31Jessie Ching v. William Salinas, et al., G.R. No. 161295, June 29, 2005.
32Rosario v. Court of Appeals, supra.
“Section 21, IPC, as amended.
“15 Patents that changed the world: Jay Bennett, April 27, 2018.
“G.R. No. L-32160, January 30,1982.
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21. Yosha was able to put together a mechanical water pump in his
garage consisting of suction systems capable of drawing water
from the earth using less human effort than what was then
required by existing models. The water pump system provides
for a new system which has the elements of novelty and
inventive steps. Yosha, while preparing to have his invention
registered with the IPO, had several models of his new system
fabricated and sold in his province.
Is Yosha's invention no longer patentable by virtue of the
fact that he had sold several models to the public before the
formal application for registration of patent was filed with the
IPO?40
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L
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216 DIVINA ON COMMERCIAL LAW:
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45BAR 2019.
46Section 27, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 217
"BAR 2005.
’’Section 22, IPC, as amended.
’’BAR 2006.
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218 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME 11
C. Ownership of a patent
i. Right to a patent
“BAR 1989.
5IBAR 1989.
“Section 28, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 219
“Pearl & Dean (Phil.) v. Shoemart, Inc., G.R. No. 148222, August 15, 2003.
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220 DIVINA ON COMMERCIAL LAW:
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33. What is the "First to File Rule" under the law on patent?
If two (2) or more persons have made the invention separately
and independently of each other, the right to the patent shall belong
to the person who filed an application for such invention, or where
two or more applications are filed for the same invention, it shall
belong to the applicant who has the earliest filing date or, the
earliest priority date.54
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VII. INTELLECTUAL PROPERTY CODE 221
37. Supposing in the same question above, Joab got wind of the
inventions of his employees and also laid claim to the patents,
asserting that Cezar and Francis were using his materials and
company time in making the devices, will his claim prevail over
those of his employees? Explain.
No. The claim of Joab will not prevail over those ofhis employees,
even if they used his materials and company time in making the gas
saving device. The invention of the gas-saving device is not part of
their regular duties as employees of a car manufacturing company.60
"BAR 2005.
“Section 29, IPC, as amended.
“Sections 67 and 68, IPC, as amended.
“Section 30.2, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 223
40. What are the remedies of a person declared by final court order
as having the right to the patent?
If a person referred to in Section 29 [First to File Rule] other
than the applicant, is declared by final court order or decision
as having the right to the patent, such person may, within three
(3) months after the decision has become final: a) prosecute the
application as his own application in place of the applicant; b) file a
new patent application in respect of the same invention; c) request
that the application be refused; or d) seek cancellation of the patent,
if one has already been issued.64
41. What are the remedies of the true and actual inventor deprived
of the patent?
If a person, who was deprived of the patent without his consent
or through fraud, is declared by final court order or decision to be the
true and actual inventor, the court shall order for his substitution
as patentee, or at the option of the true inventor, cancel the patent,
and award actual and other damages in his favor if warranted by
the circumstances.65
Even the true and actual inventor, who is not a patent holder,
cannot file an action for patent infringement. Such remedy is
available only to the patentee or his successors-in-interest.“
The remedy available to the inventor who is not issued the
patent is not to file a petition for cancellation of patent with the IPO
but institute the appropriate court action to be declared the patentee
and only after he has obtained judgment that he can ask the IPO to
cancel the patent of the holder. If the inventor was deprived of patent
through fraud or without his consent, he can ask for the cancellation
of patent of the holder upon finality of the favorable court decision;
whereas, if the patent is issued not to the first filer but no fraud
attended the patent issuance, the inventor must wait for three (3)
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G,BAR 1981.
“Section 71.1, IPC, as amended.
“Section 71.2 IPC, as amended.
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’“Roberto del Rosario v. Court of Appeals, G.R. No. 115106, March 15,1996.
’'Philippine Pharmawealth, Inc. v. Pfizer, Inc., G.R. No. 167715, November
17,2010.
’’Section 72, IPC, as amended
’“Section 72.1, IPC, as amended.
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47. Yosha was able to put together a mechanical water pump in his
garage consisting of suction systems capable of drawing water
from the earth using less human effort than what was then
required by existing models. The water pump system provides
for a new system which has the elements of novelty and
inventive steps. Yosha, while preparing to have his invention
registered with the IPO, had several models of his new system
fabricated and sold in his province.
If Yosha is able to properly register his patent with the
IPO, can he prevent anyone who has possession of the earlier
models from using them?87
Yosha can no longer prevent anyone who has possession of the
earlier models from using them even if Yosha is able to properly
register the patent with the IPO. One of the limitations of patent
rights is the use of the patented product which has been put on the
market in the Philippines by the owner of the product insofar as
such use is performed after the product has been so put on the said
market.88
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h. Patent infringement
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54. How is the literal infringement test used vis-a-vis the doctrine
of equivalents?
In using literal infringement as a test, resort must be had, in
the first instance, to the words of the claim. If accused matter clearly
falls within the claim, infringement is made out and that is the end
of it. The Court must juxtapose the claims of the patent and the
accused product within the context of the claims and specifications
to determine whether there is exact identity of all material elements.
Under the doctrine of equivalents, infringement also occurs when a
device appropriates a prior invention by incorporating its innovative
concept and albeit with some modifications and change, performs
substantially the same function in substantially the same way to
achieve substantially the same result. It requires satisfaction of the
function-means-and-result test.10,1
Applying both tests, the Supreme Court held in one case that
viewed from any perspective or angle, the floating power tiller of
petitioner is identical and similar to that of the turtle power tiller
of defendant in form, configuration, design and appearance. In
operation, the floating power tiller operates also in similar manner
as the turtle power tiller. The patent issued by the Patent Office
referred to a “farm implement but more particularly to a turtle hand
tractor having a vacuumatic housing float on which the engine drive
is held in place, the operating handle, the harrow housing with
its operating handle and the paddy wheel protective covering.” It
appears from the foregoing observation of the trial court that these
claims of the patent and the features of the patented utility model
were copied by petitioner. The Supreme Court is compelled to arrive
at no other conclusion but that there was infringement.105
In applying this test in another case, the Supreme Court ruled
that while both compounds have the effect of neutralizing parasites
101Pascua Godines v. Court of Appeals and SV-Agro Enterprises, Inc., G.R. No.
97343, September 13, 1993; BAR 2015.
105Godines, supra.
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56. What are the remedies of the patent owner in case of patent
infringement?
The remedies of the patentee in case of patent infringement
are as follows:
a. Civil action
Any patentee, or anyone possessing any right, title or interest
in and to the patented invention, whose rights have been infringed,
may bring a civil action before a court of competent jurisdiction, to
recover from the infringer such damages sustained thereby, plus
attorney’s fees and other expenses of litigation, and to secure an
injunction for the protection of his rights.'"9
If the damages are inadequate or cannot be readily ascertained
with reasonable certainty, the court may award by way of damages
a sum equivalent to reasonable royalty."0
The court may, according to the circumstances of the case,
award damages in a sum above the amount found as actual damages
sustained: provided, that the award does not exceed three (3) times
the amount of such actual damages.'"
Anyone who actively induces the infringement of a patent or
provides the infringer with a component of a patented product or
of a product produced because of a patented process knowing it
to be especially adopted for infringing the patented invention and
not suitable for substantial non-infringing use shall be liable as a
contributory infringer and shall be jointly and severally liable with
the infringer."2
'“’Godines, supra.
■“Section 76.2, IPC, as amended.
■‘“Section 76.3, ibid.
'“Section 76.4, ibid.
■“Section 76.6, IPC, as amended.
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b. Criminal action
If infringement is repeated by the infringer or by anyone in
connivance with him after finality of the judgment of the court
against the infringer, the offender shall, without prejudice to the
institution of a civil action for damages, be criminally liable."3
Unlike trademark and copyright infringement, the first act of
patent infringement does not give rise to criminal liability. A person
can only be held criminally liable if he repeats the commission of
the same infringing acts after finality of the court judgment (in
a civil action for infringement) against him. The repeated acts of
infringement will then give rise to both criminal and civil liabilities.
c. Provisional remedies
The patent holder may secure a preliminary injunction to
restrain acts of infringement during the pendency of the action for
patent infringement?"
Relevantly, under the 2020 Rules of Procedure for Intellectual
Property Cases, at any time after the filing of the complaint, a motion
for the disposal and/or destruction of the seized infringing goods, or
materials and implements predominantly used in the infringement,
may be filed by the right-holder before the court?16
There is destruction when the infringing goods are completely
destroyed and are put beyond further use. There is disposal when
the infringing goods are effectively prohibited from re-entry into
the channels of commerce but may be reused for some other lawful
purpose.116
The court may, in its discretion, order that the infringing goods,
materials and implements predominantly used in the infringement
be disposed of outside the channels of commerce or destroyed,
without compensation.11’
Generally, unless restrained by the Supreme Court or the
Court of Appeals, any order issued by the court in cases involving
intellectual property rights is immediately executory except, among
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1MBAR 2010.
131Section 87.4 to 87.15, IPC, as amended.
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‘"“Section 93.5; Sections 34, 34-A, 34-B, R.A. No. 165a, ibid.
‘“Section 93.6, ibid.
'“Section 93-A.2, ibid.
"'Section 193, R.A. No. 8293, as amended.
‘“BAR 2017.
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71. How are rights, title or interest in and to patents and invention
assigned?
Inventions and any right, title or interest in and to patents
and inventions covered thereby, may be assigned or transmitted by
inheritance or bequest or may be the subject of a license contract.'*’
72. What are the formalities prescribed by the IPC for the
assignment of rights over a patent?
The law prescribes the following formalities for the assignment
of rights over a patent and the invention to which the patent relates:
a. The assignment must be in writing, acknowledged before
a notary public or other officer authorized to administer
oath or perform notarial acts, and certified under the
hand and official seal of the notary or such other officer.'*9
b. The IPO shall record assignments, licenses and other
instruments relating to the transmission of any right, title
or interest in and to inventions, and patents or application
for patents or inventions to which they relate.160
c. Such instruments shall be void as against any subsequent
purchaser or mortgagee for valuable consideration and
without notice, unless, it is so recorded in the Office,
within three (3) months from the date of said instrument,
or prior to the subsequent purchase or mortgage.161
C. Trademarks
a. Definition of Marks, Collective Marks, Trade Names
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'“Coffee Partners v. San Francisco Coffee and Roastery, Inc., G.R. No. 169504,
March 3, 2010.
'“63 C.J. Section 5; BAR 1982.
'“Zuneca Pharmaceutical v. Natrapharm, Inc., G.R. No. 211850, September
8,2020.
16163 C.J. Section 12; BAR 1982.
IK63 J.C. Section 12.
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the IPO and after registration, preclude others from adopting the
same trademark for same and similar goods.163
b. Acquisition of ownership of mark
163BAR 1982.
16iSection 152.1, IPC, as amended.
™Ibid.
166These are the cases of: Mattel, Inc. v. Emma Francisco, etal., G.R. No. 166886,
July 30, 2008; E.Y. Industrial Sales v. Shien Dar Electricity and Machinery Co., G.R.
No. 184850, October 20, 2010; Berris Agricultural Co., Inc v. Norvy Abyadang, G.R.
No. 183404, October 13, 2010; Birkenstock Orthopaedia GMBH v. Philippine Shoe
Expo Marketing Corporation, G.R. No. 194307, November 20, 2013; Ecole de Cuisine
Manille v. Renaud Cointreau, G.R. No. 185830, June 5, 2013.
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the rights expressed in the IP Code, the first to file rule nevertheless
prioritizes the first filer of the trademark application and operates
to prevent any subsequent applicant from registering the mark.1,1
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Identical mark
’’’Paris Convention.
1,9Fredco Manufacturing Corporation President and Fellows of Harvard
College, G.R. No. 185917, June 1,2011.
'“Section 123.1(c), IPC, as amended.
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89. Under the first to file rule in trademarks, a mark that nearly
resembles a previously registered mark, such that it is likely
to deceive or cause confusion, cannot be registered. How may
confusion arise?
There are two types of confusion arising from the use of similar
or colorable imitation marks, namely confusion of goods (product
confusion) and confusion of business (source of origin confusion).
Thus, while there is confusion of goods when the products are
competing, confusion of business exists when the products are non
competing but related enough to produce confusion of affiliation.
Thus, while there is confusion of goods when the products are
competing, confusion of business exists when the products are non
competing but related enough to produce confusion of affiliation.'81
In one case,182 the Supreme Court held that confusion of
business or source may also include confusion of reputation. Thus:
“similarity in the general appearance of respondent’s trademark and
that of petitioner would evidently create a likelihood of confusion
among the purchasing public. But even assuming, arguendo, that
the trademark sought to be registered by respondent is distinctively
dissimilar from those of the petitioner, the likelihood of confusion
would still subsist, not on the purchaser’s perception of the goods
but on the origins thereof. By appropriating the word “CONVERSE,”
respondent’s products are likely to be mistaken as having been
produced by petitioner. The risk of damage is not limited to a possible
confusion of goods but also includes confusion of reputation if
the public could reasonably assume that the goods of the parties
originated from the same source.”
'“'McDonald’s Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993,
August 18,2004.
'““Converse Rubber Corporation v. Universal Rubber Products, Inc., G.R. No.
1-27906, January 8, 1987.
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le8UFC Philippines, Inc. (Now Merged with Nutri-Asia, Inc., with Nutri-Asia,
Inc. as the Surviving Entity) v. Fiesta Barrio Manufacturing Corporation, G.R. No.
198889, January 20, 2016; BAR 1996.
1&1Dermaline, Inc. v. Myra Pharmaceuticals, G.R. No. 190065, August 1,2010.
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’“Philippine Nut Industry v. Standard Brands, G.R. No. L-23035, July 31,
1975.
’“Del Monte Corporation and Philippine Packing Corporation Court of
Appeals, G.R. No. L-78325, January 25, 1990.
mSupra.
188Societe Des Produits Nestle, S.A. and Nestle Philippines v. Court of Appeals,
G.R. No. 112012, April 4, 2001, 356 SCRA 207 (2001).
'“Amigo Manufacturing, Inc. v. Cluett Peabody Co., Inc., G.R. No. 139300,
March 14, 2001.
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'“McDonalds’ Corporation v. L.C. Big Mak Burger, G.R. No. 143993, August
18, 2004.
""McDonald’s Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115,
February 2, 2007.
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191Societe Des Produits Nestle, SA v. Dy, G.R. No. 172276, August 8, 2010.
195Berris Agricultural Co., Inc. v. Norvy Abyadang, G.R. No. 183404, October
13,2010.
196Sketchers USA Inc. v. Inter Pacific Industrial Trading, G.R. No. 164321,
March 23, 2011; BAR 2014.
197Mang Inasal Philippines, Inc. v. IFP Manufacturing Corporation, G.R No.
221717, June 19, 2017.
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198Dy v. Koninklijke Philips Electronics, N.V., G.R. No. 186088, March 22,
2017.
199ABS-CBN v. Director of the Bureau of Trademarks, G.R. No. 217916, June
20,2018.
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“‘’Citigroup, Inc. Citystate Savings Bank, Inc., G.R. No. 205409, June 13,
2018.
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Idem sonans
2O7Great White Shark Enterprises v. Caralde, G.R. No. 192294, November 21,
2012.
““CITIGROUP v. Citystate, supra.
““Berris Agricultural Co., Inc. v. Norvy Abyadang, G.R. No. 183404, October
13,2010 involving the trademark D-10 80 WP and NS D-10 PLUS for fungicide; Amigo
Manufacturing, Inc. v. Cluett Peabody Co., Inc., G.R. No. 139300, March 14, 2001
involving the trademark Gold Toe and Gold Top for socks; Prosource International,
Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009
involving the trademarks PYCNOGENOL and PCO-GENOLS for food supplement;
Coffee Partners v. San Francisco Coffee and Roastery, Inc., G.R. No. 169504, March 3,
2010 involving the trademarks SAN FRANCISCO COFFEE and SAN FRANCISCO
COFFEE & ROASTERY for coffee products.
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mSupra.
2"Supra.
2ISUFC Philippines, Inc. (Now Merged with Nutri-Asia, Inc., with Nutri-Asia,
Inc. as the Surviving Entity) v. Fiesta Barrio Manufacturing Corporation, G.R. No.
198889, January 20, 2016.
1,6 Supra.
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not. that the petitioner has supplied the flavorings for respondent’s
product. Either way, the reputation of petitioner would be taken
advantage of and placed at the mercy of respondent.217
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Well-known marks
226Kensonic, supra.
“’Section 123.1(e), IPC.
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102. What are the remedies of the owner of a well-known mark that
is not registered in the Philippines?
Without prejudice to other remedies under the law, the owner
of the well-known mark may:
a. Oppose the application for registration of a mark which
is identical with or confusingly similar or constitutes a
translation of such well-known mark;
b. Petition for cancellation of the registration, if one has
been granted; and,
c. Unfair competition if the goods are being passed off by
another as the goods of the owner of the well-known mark.
103. Is the knowledge of the general public of the mark taken into
account in determining whether it is a well-known mark?
No, in determining whether a mark is well-known, account shall
be taken of the knowledge of the relevant sector of the public, rather
than of the public at large, including knowledge in the Philippines
which has been obtained as a result of the promotion of the mark.
The power to determine whether a trademark is well-known
lies in the “competent authority of the country of registration or use.”
This competent authority would be either the registering authority
if it has the power to decide this, or the courts of the country in
question if the issue comes before a court.229
^Supra.
229Sehwani Incorporated v. In-N-Out Burger, Inc., G.R. No. 171053, October
15, 2007; Fredco Manufacturing Corporation v. President and Fellows of Harvard
College, G.R. No. 185917, June 1, 2011.
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generic for the goods or services that they seek to identify. It is clear
from the law itself, therefore, that what is prohibited is not having
a generic mark but having such generic mark being identifiable to
the good or service. In one case, it was held that although SAKURA
refers to the Japanese flowering cherry and is, therefore, of a generic
nature, the manufacturer’s DVD or VCD players and other products
could not be identified with cherry blossoms. Hence, the mark can
be appropriated.-’10
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into the English language, the word is also found in Spanish (liceo)
and in French (lycee). “Lyceum” is in fact as generic in character
as the word “university.” Since “Lyceum” or “Liceo” denotes a
school or institution of learning, it is not unnatural to use this
word to designate an entity which is organized and operating as an
educational institution.214
b) Master (for coffee)
The word MASTER is neither generic nor descriptive and
as such, it cannot be invalidated as a trademark. It is instead a
suggestive term brought about by the advertising scheme of Nestle.
Suggestive terms are those which, in the phraseology of one court,
require “imagination, thought and perception to reach a conclusion
as to the nature of the goods.” Such terms, “which subtly connote
something about the product,” are eligible for protection in the
absence of secondary meaning. While suggestive marks are capable
of shedding “some light” upon certain characteristics of the goods
or services in dispute, they nevertheless involve “an element of
incongruity,” “figurativeness,” or “imaginative effort on the part of
the observer.”
This is evident from the advertising scheme adopted by Nestle
in promoting its coffee products. In this case, Nestle has, over time,
promoted its products as “coffee perfection worthy of masters.”245
c) Marlboro (for cigarette)
The trademark “Marlboro” is not only valid for being neither
generic nor descriptive, but because it is also owned exclusively
by PMPI as evidenced by the certificate of registration issued by
the IPO. It was held that the counterfeit cigarettes seized from
petitioner’s possession were intended to confuse and deceive the
public as to the origin of the cigarettes intended to be sold, as they
not only bore PMPI’s mark, but they were also packaged almost
exactly as PMPI’s products.246
d) Papa (for catsup)
It is not a generic mark. The Merriam-Webster dictionary
defines “Papa” simply as “a person’s father.” True, a person’s father
L
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219Coffee Partners, Inc. v. San Francisco Coffee and Roastery, G.R. No. 169504,
March 3,2010.
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250Societe Des Produits, Nestle, S.A. Puregold Price Club, Inc., G.R. No.
217194, September 6, 2017.
251 Asia Brewery, Inc. v. Court of Appeals and San Miguel Corporation, G.R.
No. 103543, July 5, 1993.
^Sakura, supra.
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the trade and to that branch of the purchasing public, the word or
phrase has come to mean that the article was his produce.250
Thus, a generic or descriptive term which has acquired a
secondary meaning may be appropriated and registered as a
trademark. For instance, Ang Tibay is a descriptive mark. It means
durable in English. But, Ang Tibay had been used so long and the
public had associated the mark with the manufacturer of combat
shoes. Thus, it was held that the descriptive mark can be registered
as trademark for shoes.
However, in another case, the Court considered “Lyceum” as a
generic name but the number alone of institutions using “Lyceum” as
part of their school name suggests strongly that the use of the word
"Lyceum” has not been attended with exclusivity for applicability of
the doctrine of secondary meaning.257
2SGAna Ang v. Toribio Teodoro, 74 Phil. 56, as cited in Lyceum of the Philippines
v. Court of Appeals, 219 SCRA 610 (1993).
“’Lyceum of the Philippines v. Court of Appeals, 219 SCRA 610 (1993).
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not having the owner's consent from using in the course of trade
identical or similar signs or containers for goods or services which
are identical or similar to those in respect of which the trademark is
registered, where such use would result in a likelihood of confusion.
In case of the use of an identical sign for identical goods or services,
a likelihood of confusion shall be presumed.
There shall be no infringement of trademarks or trade names
of imported or sold patented drugs and medicines allowed under the
IPC, as well as imported or sold off-patent drugs and medicines:
provided, hat, said drugs and medicines bear the registered marks
that have not been tampered, unlawfully modified, or infringed
upon.259
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prove actual use of the trademark. In one case, the Supreme Court
ruled that the use of the mark on an interactive website sufficiently
showing an intent towards realizing a within-State commercial
activity or interaction is considered actual use to keep the trademark
registration in force. That W Hotel was able to present proof of
actual booking transactions made by the Philippine residents
though such website proves that the use of its “W” mark through its
interactive website is intended to produce a discernible commercial
effect or activity within the Philippines, or at the very least, seeks
to establish commercial interaction with local consumers. This is
enough to keep it trademark registration in force.264
In the WLand Holdings case, Starwood filed before the IPO an
application for registration of the trademark “W” for use in its hotel
business which was eventually granted. However, W Land applied
for the registration of its own “W” mark which thereby prompted
Starwood to oppose the same. The BLA ruled that W Land’s “W"
mark is confusingly similar with Starwood’s mark, which had an
earlier filing date. Unperturbed, on May 29, 2009, W Land filed
a Petition for Cancellation of Starwood’s mark for non-use under
Section 151.1 of the Intellectual Property Code of the Philippines,
claiming that Starwood has failed to use its mark in the Philippines
because it has no hotel or establishment in the Philippines rendering
the services covered by its registration.
In ruling against the cancellation of Starwood’s “W” mark, the
Supreme Court held:
“Use” as contemplated by law is genuine use - that is, a
bona fide kind of use tending towards a commercial transaction
in the ordinary course of trade. Since the internet creates a
borderless marketplace, it must be shown that the owner has
actually transacted, or at the very least, intentionally targeted
customers of a particular jurisdiction in order to be considered
as having used the trademark in the ordinary course of his
trade in that country. A showing of an actual commercial link
to the country is therefore imperative. The use of the mark
on an interactive website, for instance, may be said to target
local customers when they contain specific details regarding
or pertaining to the target State, sufficiently showing an
intent towards realizing a within-State commercial activity or
26,W Land Holdings, Inc. v. Starwood Hotels and Resorts Worldwide, Inc., G.R.
No. 222366, December 4, 2017.
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VII. INTELLECTUAL PROPERTY CODE 289
2MW Land Holdings, Inc. v. Starwood Hotels and Resorts Worldwide, Inc., G.R.
No. 222366, December 4, 2017, Second Division, Perlas-Bernabe, J.
“’'Section 155, IPC, as amended.
“’Section 155.1, ibid.
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VII. INTELLECTUAL PROPERTY CODE 291
126. What are the remedies of the owner of the registered trademark
if his rights to the trademark are infringed?
He may file a civil action for trademark infringement to recover
damages from any person who infringes his rights, and the measure
of the damages suffered shall be either the reasonable profit which
the complaining party would have made, had the defendant not
infringed his rights, or the profit which the defendant actually made
out of the infringement, or in the event such measure of damages
cannot be readily ascertained with reasonable certainty, then the
court may award as damages a reasonable percentage based upon
the amount of gross sales of the defendant or the value of the services
in connection with which the mark or trade name was used in the
infringement of the rights of the complaining party.272
In cases where actual intent to mislead the public or to defraud
the complainant is shown, in the discretion of the court, the damages
may be doubled.273
™Supra.
^'Pearl & Dean (Phil.), Inc. Shoemart, Inc., G.R. No. 148222, August 15,
2003.
^Section 156.1, IPC, as amended.
^Section 156.3, IPC, as amended.
..
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128. What rules govern the issuance of a search and seizure order
in cases of trademark or trade name infringement?
Court Administrative Matter A.M. No. 02-1-06-SC (TheRuleon
Search and Seizure in Civil Actions for Infringement of Intellectual
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VII. INTELLECTUAL PROPERTY CODE 293
130. What are the other remedies available the owner of the
registered mark to protect his rights to the trademark?
2"Century Chinese Medicine Co., et al. v. People of the Philippines, G.R. No.
188526, November 11, 2013.
2,8Del Rosario, et al. v. Doanto, Jr., et al., G.R. No. 180595, March 4, 2010.
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294 DIVINA ON COMMERCIAL LAW:
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^Conrad and Company v. Court of Appeals, G.R. No. 115115, July 10, 1995;
Shangri-La International Hotel Management v. Court of Appeals, G.R. No. 111580,
June 21, 2001.
■“'Superior Commercial Enterprises, Inc. v. Kunnan Enterprises Ltd. and
Sports Concept & Distributor, Inc., G.R. No. 169974, April 20, 2010.
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VII. INTELLECTUAL PROPERTY CODE 295
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296 DIVINA ON COMMERCIAL LAW:
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2S3Republic Gas Corporation v. Patron Corporation, G.R. No. 194062, June 17,
2013; BAR 2019.
'^Section 168.2, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 297
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298 DIVINA (IN COMMERCIAL LAW:
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288BAR 1988.
“’BAR 2014.
“°Del Monte Corporation Court of Appeals, 181 SCRA 410 (1990); BAR
1996; BAR 2015.
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VII. INTELLECTUAL PROPERTY CODE 299
’’’Republic Gas Corporation v. Petron Corporation, G.R. No. 194062, June 17,
2013.
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300 DIVINA ON COMMERCIAL LAW:
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zwRoberto Co v. Keng Huan, Jerry Yeung and Emma Yeung, G.R. No. 212705,
September 10, 2014.
a3Juno Batistis v. People of the Philippines, G.R. No. 181571, December 16,
2009.
zs’Caterpillar, Inc. v. Manolo P. Samson, G.R. No. 205972 and G.R. No. 164352,
November 9, 2016.
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VIL INTELLECTUAL PROPERTY CODE 301
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2XSupra.
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VII. INTELLECTUAL PROPERTY CODE 303
2'J1Ibid.
“•Summary of the Madrid Agreement Concerning the International
Registration of Marks (1891) and the Protocol Relating to that Agreement (1989) as
prepared by the WIPO.
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146. What are the requirements for registration under the Madrid
Protocol?
An application for international registration must designate
one or more Contracting Parties in which protection is sought.
Further designations can be effected subsequently. A Contracting
Party may be designated only if it is party to the same treaty as
the Contracting Party whose office is the office of origin. The latter
cannot itself be designated in the international application.
The designation of a given Contracting Party is made either
under the Agreement or the Protocol, depending on which treaty is
common to the Contracting Parties concerned. If both Contracting
Parties are party to the Agreement and the Protocol, the designation
will be governed by the Protocol.
International applications can be filed in English, French
or Spanish, irrespective of which treaty or treaties govern the
application, unless the office of origin restricts that choice to one or
two of these languages.
Once the International Bureau receives an international
application, it carries out an examination for compliance with the
requirements of the Protocol and its Regulations. This examination
is restricted to formalities, including the classification and
comprehensibility of the list of goods and/or services. If there are no
irregularities in the application, the International Bureau records
the mark in the International Register, publishes the international
registration in the WIPO Gazette of International Marks and
notifies it to each designated Contracting Party. Any matter of
substance, such as whether the mark qualifies for protection or
whether it is in conflict with a mark registered previously in a
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VII. INTELLECTUAL PROPERTY CODE 305
D. Copyright
1. Basic Principles
mSupra.
mIbid.
“‘Kensonic v. Uni-Line Multi Resources, Inc., supra and Fernando Juan v.
Roberto Juan, G.R. No. 221372, August 23, 2017 both citing Black’s Law Dictionary,
Centennial Edition. 6th ed. West Group, St. Paul Minnesota, USA, 1990, p. 336.
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“Jessie G. Ching v. William M. Salinas, Sr., et al., G.R. No. 161295, June 29,
2005.
-
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VII. INTELLECTUAL PROPERTY CODE 307
2. Copyrightable Works
!
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d. Letters:
e. Dramatic or dramatico-musical compositions; choreo
graphic works or entertainment in dumb shows;
f. Musical compositions, with or without words;
g- Works of drawing, painting, architecture, sculpture,
engraving, lithography or other works of art; models or
designs for works of art;
h. Original ornamental designs or models for articles of
manufacture, whether or not registrable as an industrial
design, and other works of applied art;
i. Illustrations, maps, plans, sketches, charts and three-
dimensional works relative to geography, topography,
architecture or science;
j. Drawings or plastic works of a scientific or technical
character;
k. Photographic works including works produced by a
process analogous to photography; lantern slides;
1. Audiovisual works and cinematographic works and works
produced by a process analogous to cinematography or
any process for making audio-visual recordings;
m. Pictorial illustrations and advertisements;
n. Computer programs; and
o. Other literary, scholarly, scientific, and artistic works.308
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310 DIVINA ON COMMERCIAL LAW:
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3uIbid.
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VII. INTELLECTUAL PROPERTY CODE 311
160. Does a publisher have a right over the published edition of the
copyrighted work?
Yes. In addition to the right to publish granted by the author,
his heirs, or assigns, the publisher shall have a copyright consisting
merely of the right of reproduction of the typographical arrangement
of the published edition of the work.320
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312 DIVINA ON COMMERCIAL LAW:
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321Gepty, ibid., p. 155 citing Carol Tullo, Controller, HMSO Queen’s Printer,
Guidance-Copyright in Typographical Arrangement.
322Section 175, IPC, as amended.
“'‘Section 176.1, IPC, as amended.
324Section 176.2, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 313
’“Francisco Joaquin, Jr. v. Franklin Drilon, et al., G.R. No. 108946, January
28,1999.
“BAR 2011.
“BAR 2011.
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314 DIVINA ON COMMERCIAL LAW:
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VII. INTELLECTUAL PROPERTY CODE 315
166. What then is the effect of registration and deposit with the
National Library?
The certificates of registration and deposit issued by the
National Library serve merely as a notice of recording and
registration of the work but do not confer any right or title upon the
registered copyright owner or automatically put his work under the
protective mantle of the copyright law; it is not a conclusive proof of
copyright ownership. Hence, it was held that when there is sufficient
proof that the copyrighted products are not original creations but
are readily available in the market under various brands, as in one
case, validity and originality will not be presumed.332
’“ABS-CBN Corporation v. Felipe Gozon, el al., G.R. No. 195956, March 11,
2015.
’“Ibid.
““Section 172.1, IPC, as amended.
“'Sison Olano, ibid.
““Manly Sportwear Manufacturing, Inc. v. Dadodette Enterprises and/or
Hermes Sports Center, G.R. No. 165306, September 20, 2005.
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316 DIVINA ON COMMERCIAL LAW:
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It was held that the Intellectual Property Code does not require
registration of the work to fully recover in an infringement suit.333
A copyright certificate nevertheless creates a presumption of
the validity and ownership of the copyright and as such, is useful in
support of the claim of infringement. This presumption, however, is
rebuttable and it cannot be sustained where other evidence in the
record casts doubt on the question of ownership.331
Moreover, the presumption of validity to a certificate of
copyright registration merely orders the burden of proof. The
applicant should not ordinarily be forced, in the first instance,
to prove all the multiple facts that underline the validity of the
copyright unless the respondent, effectively challenging them, shifts
the burden of doing so to the applicant.335
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V1L INTELLECTUAL PROPERTY CODE 317
337BAR 1998.
““Section 177, IPC, as amended.
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318 DIVINA ON COMMERCIAL LAW:
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Reproduction
’’’Pacita, et al. ■ Felicidad Robles and Goodwill Trading Co., Inc., G.R. No.
131522, July 19, 1999.
^“Section 184.1(b), IPC, as amended.
’"Section 184.1(C), as amended.
’"Section 184.1(D), as amended. I
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320 DIVINA ON COMMERCIAL LAW:
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Derivative right
173. How many works are protected if the author, or another person
with the consent of the author, makes a transformation of the
original work?
There are two works protected and covered by copyright, the
original and the derivative work. However, if the transformation of
the original work was done after the term of the copyright, then,
only one copyright subsists—that of the derivative work.
174. Who can carry out derivative work on the original work of the
author?
The author has the exclusive privilege to carry out derivative
work of his original work. During the term of the copyright, the
author may authorize person to carry out the derivative work.
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"’BAR 2014; Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S 319, 213 WL
1104736 (U.S Mar. 19, 2013), cited in Gepty, ibid., p. 179.
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322 DIVINA ON COMMERCIAL LAW:
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Renta! right
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VII. INTELLECTUAL PROPERTY CODE 327
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328 DIVINA ON COMMERCIAL LAW:
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366BAR 2010.
“’BAR 2011.
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VII. INTELLECTUAL PROPERTY CODE 329
191. BR and CT are noted artists whose paintings are highly prized
by collectors. Dr. DL commissioned them to paint a mural at
the main lobby of his new hospital for children. Both agreed to
collaborate on the project for a total fee of two million pesos
to be equally divided between them. It was also agreed that
Dr. DL had to provide all the materials for the painting and pay
for the wages of technicians and laborers needed for the work
on the project. Assume that the project is completed and both
BR and CT are fully paid the amount of P2M as artists' fee by
DL. Under the law on Intellectual Property, who will own the
mural? Who will own the copyright in the mural? Why? Explain.
Under Section 178.4 of the IPC, as amended, in case of
commissioned work, the creator (in the absence of a written
stipulation to the contrary) owns the copyright, but the work itself
belongs to the person who commissioned its creation. Accordingly,
the mural belongs to DL. However, BR and CT own the copyright,
since there is no stipulation to the contrary.368
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330 DIVINA ON COMMERCIAL LAW:
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195. If today a person is granted a copyright for a book, for how long
will the copyright be valid? If said person uses a pseudonym,
how would this affect the length of the copyright?
A copyright endures during the lifetime of the creator and for
50 years after his death. In case he uses a pseudonym, the copyright
shall last until the end of 50 years following the date of the first
publication of the work, unless the author is identified, in which
case, the copyright subsists during his lifetime and for 50 years after
his death.372
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VII. INTELLECTUAL PROPERTY CODE 333
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334 DIVINA ON COMMERCIAL LAW:
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_________
’’’Section 184, IPC, as amended.
’“Section 185, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 335
Making of Quotations
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336 DIVINA ON COMMERCIAL LAW:
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VII. INTELLECTUAL PROPERTY CODE 337
Information purposes
™Pacita Habana, et al. v. Felicidad Robles and Goodwill Trading Co., Inc.,
G.R. No. 131522, July 19, 1999.
^Supra.
186G.R. No. 222702, April 5, 2016.
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3B7GMA Network, Inc. v. Central CATV, Inc., G.R. No. 176694, July 18, 2014.
388ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System,
Inc., G.R. Nos. 175769-70, January 19, 2009.
3ft9GMA Network, supra.
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310 DIVINA ON COMMERCIAL LAW:
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208. May Liza be held criminally liable if she did not attribute the
portion of the work she quoted in her opinion to the labor law
author?
The law does not require attribution when it comes to the use of
the work for judicial proceeding or giving professional advice and as
such. Liza cannot be sued for copyright infringement despite lack of
attribution. However, Liza may be held liable for plagiarism which
is broader in scope than copyright. To plagiarize means to steal and
pass off the ideas or words of another as one’s own. It is basically a
literary theft.392
a. Doctrine of fair use
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342 DIVINA ON COMMERCIAL LAW:
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211. Virtucio was a composer of llocano songs who has been quite
popular in the llocos Region. Pascuala is a professor of music
in a local university with special focus on indigenous music.
When she heard the musical works of Virtucio, she purchased
a CD of his works. She copied the CD and sent the second copy
to her Music class with instructions for the class to listen to
the CD and analyze the works of Virtucio. Did Pascuala thereby
infringe Virtucio's copyright? Explain your answer.
395ABS-CBN, ibid.
396Section 185.1, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 343
212. KLM Printers, Inc. operated a mall outlet located at the ground
floor of university building in Quezon City. It possessed soft
copies of certain textbooks on file, and would print "book-
alikes" of these textbooks (or in other words, reproduced
the entire textbooks) upon order and for a fee. It would even
display samples of such "book-alikes" in its stall for sale to the
public.
Upon learning of KLM Printers, Inc.'s activities, the
authors of the textbooks filed a suit against it for copyright
infringement. In its defense, KLM Printers, Inc. invoked the
doctrine or fair use, contending that the "book-alikes" are
being used for educational purposes by those who avail of
them.
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344 DIVINA ON COMMERCIAL IAW:
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400ABS-CBN, supra.
401NBI-Microsoft Corporation v. Judy Hwang, et al., G.R. No. 147043, June 21,
2005.
402Francisco G. Joaquin, Jr., and BJ Productions, Inc. v. Honorable Franklin
Drilon, et al., G.R. No. 108946, January 28, 1999.
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215. May the author or creator of the work sue for copyright
infringement if he fails to deposit a copy of his work to the
National Library (or the IPO as deputized by the National
Library)?
Yes, he may sue for copyright infringement notwithstanding
the lack of deposit and registration with the National Library.
Artistic and Literary works are now protected by its mere creation
under the new Copyright Law.
Under P.D, No. 49, failure to comply with registration and
deposit does not deprive the copyright owner of the right to sue
for infringement but merely limits the remedies available to him
because the copyright for a work is granted from the moment of
creation. This means that the author whose work was infringed can
only secure an injunction against infringement but cannot sue for
damages.404
However, under the IPC, the copyright owner may not only
obtain an injunction but may also ask for damages and exercise
other remedies provided by the law even though his work is not
deposited and registered with the IPO.
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346 DIVINA ON COMMERCIAL LAW:
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“Republic Gas Corporation v. Petron Corporation, G.R. No. 194062, June 17,
2013, cited in ABS-CBN case.
,tnSupra.
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350 DIVINA ON COMMERCIAL LAW:
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220. Jose Santos has written many poems, some of which have been
published in Panorama Magazine but never registered with the
Copyright Office. Among his published works was the poem
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VII. INTELLECTUAL PROPERTY CODE 351
221. What are the defenses available against an action for copyright
infringement?
The defenses are as follows:
a. The work is not copyrightable;
b. The term of the copyright has expired;
C. The use of the work falls within the limitations on
copyright;
d. The plaintiff/complainant is not the owner of the copyright;
e. Non-participation in the commission of the infringing
activities;
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427The assumption is that the copyright owner did not give his consent to any
of the acts enumerated.
428Microsoft Corporation v. Manansala, G.R. No. 166391, October 21, 2015.
429Section 184. l(j), IPC, as amended.
430Section 187, IPC, as amended.
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VII. INTELLECTUAL PROPERTY CODE 356
n. CD burning.
To “burn” a CD simply means to copy or write information into
a compact disc. There is copyright infringement because distributing
a copy of the copyrighted material (like the music CD) can only be
done with the permission of the copyright holder.
o. Reprinting by a private library of a book that has gone out
of stock.
There is copyright infringement because only a library allowed
by law to receive copies of a printed work is entitled to reproduce
copy of a published work which is necessary for the collection of
the library but which out of stock.-138 A private library has no such
privilege.
P- Legislative bill pirated by another congressman and
introduced as his own.
There is no copyright infringement. Copyright does not subsist
on works of government.-139 A legislative bill is a work of government.
q- Reproduction of a collection of classical books on
literature (those which have been published more than 50
years after death of the authors) by someone other than
the person who made the compilation and arrangement.
There is copyright infringement. While the classical books have
become public dominion in view of the expiration of the term of the
copyright, the collection of the classical books, as a derivative work,
is independently copyrighted from the original works by reason of
the selection or coordination or arrangement of its contents.410
r. Reproducing back-up copies or adaptation of a licensed
computer program for archival purposes.
There is copyright infringement. The law only allows
reproduction of one (1) back-up copy of a computer program for
archival purposes■1■1, except when reproduction of more than one
adaptation is allowed by the terms of the license agreement with
the copyright owner.
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VIII. CREDIT TRANSACTIONS
I. Guaranty
357
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358 DIVINA ON COMMERCIAL LAW:
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(1) The case does not fall Excussion shall not take place:
under any of the instances • If the guarantor has expressly
enumerated in Article renounced it;
2059
• If he has bound himself solidarily with
the debtor;
■ In case of insolvency of the debtor;
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14. What right does a guarantor who pays for a debtor acquire
against the latter?
The guarantor who pays for a debtor must be indemnified by
the latter. The indemnity comprises: (i) the total amount of the debt;
(ii) the legal interests thereon from the time the payment was made
known to the debtor, even though it did not earn interest for the
creditor; (iii) the expenses incurred by the guarantor after having
notified the debtor that payment had been demanded of him; (iv)
damages, if they are due.
Note, however, that if the debt was for a period and the guarantor
paid it before it became due, he cannot demand reimbursement of
the debtor until the expiration of the period unless the payment has
been ratified by the debtor.1'
15. Does the guarantor who pays for a debtor acquire a right to
subrogation?
Yes. The guarantor who pays is subrogated by virtue thereof
to all the rights which the creditor had against the debtor. If the
guarantor has compromised with the creditor, he cannot demand of
the debtor more than what he has really paid.16
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VIII. CREDIT TRANSACTIONS 361
17. What are the instances when the guarantor, even before having
paid, may proceed against the principal debtor?
The guarantor, even before having paid, may proceed against
the principal debtor:
a. when he is sued for the payment;
b. in case of insolvency of the principal debtor;
c. when the debtor has bound himself to relieve him from
the guaranty within a specified period, and this period
has expired;
d. when the debt has become demandable, by reason of the
expiration of the period for payment;
e. after the lapse of 10 years, when the principal obligation
has no fixed period for its maturity, unless it be of such
nature that it cannot be extinguished except within a
period longer than 10 years;
f. if there are reasonable grounds to fear that the principal
debtor intends to abscond;
g. if the principal debtor is in imminent danger of becoming
insolvent.
In all these cases, the action of the guarantor is to obtain
release from the Guaranty, or to demand a security that shall protect
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362 DIVINA ON COMMERCIAL LAW:
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him from any proceedings by the creditor and from the danger of
insolvency of the debtor.”
To illustrate:
Gl, G2, and G3 are D’s guarantors of a P30 Million loan obtained
from C. If D becomes insolvent, guarantors Gl, G2, and G3 loses
the benefit of division as far as C is concerned. C may demand
payment of the entire P30 Million from any of the guarantors.
[Arts. 2065, par.2, 2059(3), Civil Code]
If Gl pays the entire loan of P30 Million, she can later demand
from G2 and G3 PIO Million each.
To illustrate:
Using our previous example, if G2 is insolvent, her share shall be
borne by Gl and G3 proportionately. Thus, Gl can demand P15
Million from G3.
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VIII. CREDIT TRANSACTIONS 363
To illustrate:
Using our previous example, if SG is the guarantor of G3, and
G3 becomes insolvent, SG is liable to G1 for PIO Million, or P15
Million if G2 is also insolvent.
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VIII. CREDIT TRANSACTIONS 365
24. BSB obtained a 10-year credit facility from XYZ Bank in the
amount of PI Billion. ABC Guaranty Inc. issued a guaranty to
secure the obligations of BSB. In year five (5), the loan released
to BSB increased to P1.5 Billion. Can the guaranty issued by
ABC Guaranty Inc. sufficiently secure the obligations of BSB
currently amounting to P1.5 Billion already?
Yes. A guaranty may be given to secure future debts. The
Supreme Court in the case Atok Finance Corp. v. Court of Appeals,
et al.,15 stated, “It is clear to us that the Rizal Commercial Banking
Corporation26 and the NARIC11 cases rejected the distinction which
the Court of Appeals in the case at bar sought to make with respect
to Article 2053, that is, that the ‘future debts’ referred to in that
Article relate to ‘debts already existing at the time of the constitution
of the agreement but the amount [of which] is unknown,’ and not to
debts not yet incurred and existing at that time. Of course, a surety
is not bound under any particular principal obligation until that
principal obligation is born. But there is no theoretical or doctrinal
difficulty inherent in saying that the suretyship agreement itself is
valid and binding even before the principal obligation intended to be
secured thereby is born, any more that there would be in saying that
obligations which are subject to a condition precedent are valid and
binding before the occurrence of the condition precedent.”
21Dino & Uy v. Court of Appeals and Metropolitan Bank & Trust Company,
G.R. No. 89775, November 26, 1992.
“G.R. No. 80078, May 18, 1993.
2«115SCRA 777.
27103 Phil. 1131.
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The Stay Order relied upon by ABC Corp, merely ordered the
staying and suspension of enforcement of all claims and proceedings
against XYZ, Inc. and not against other persons or entities solidarity
liable with the debtor. Section 18(c) of the FRIA explicitly states
that a stay order shall not apply “to the enforcement of claims
against sureties and other persons solidarity liable with the debtor,
and third party or accommodation mortgagors as well as issuers
of letters of credit, x x x”. In addition, under Rule 4, Section 6 of
A.M. No. 00-8-10-SC or the Interim Rules of Procedure on Corporate
Rehabilitation, a stay order has the effect of staying enforcement
only with respect to claims made against the debtor, its guarantors
and persons not solidarity liable with the debtor:
Section 6. Stay Order. - If the court finds the petition to be
sufficient in form and substance, it shall, not later than five (5)
working days from the filing of the petition, issue an order: (a)
appointing a rehabilitation receiver and fixing his bond; (b) staying
enforcement of all claims, whether for money or otherwise and
whether such enforcement is by court action or otherwise, against
the debtor, its guarantors and persons not solidarity Hable with the
debtor x x x.
The Guarantee Agreement, however, shows that ABC, Corp,
waived its right of excussion under Article 2058 of the Civil Code. In
effect, the nature of the guarantee obligation assumed by ABC, Corp,
under the Guarantee Agreement was transformed into a suretyship
thus solidarity binding itself with XYZ, Inc.
Under a normal contract of guarantee, the guarantor binds
himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so. The guarantor who pays for
a debtor, in turn, must be indemnified by the latter. However, the
guarantor cannot be compelled to pay the creditor unless the latter
has exhausted all the property of the debtor and resorted to all the
legal remedies against the debtor. This is what is otherwise known
as the benefit of excussion. Conversely, if this benefit of excussion
is waived, the guarantor can be directly compelled by the creditor
to pay the entire debt even without the exhaustion of the debtor’s
properties.
In other words, a guarantor who engages to directly shoulder
the debt of the debtor, waiving the benefit of excussion and the
requirement of prior presentment, demand, protest, or notice of
any kind, undoubtedly makes himself/herself solidarity Hable to the
creditor.
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II. Surety
27. What is the concept and nature of suretyship?
If a person binds himself solidarily with the principal debtor,
the contract is called a Suretyship.30
A Contract of Suretyship is an agreement whereby a party,
called the surety, guarantees the performance by another party,
called the principal or obligor, of an obligation or undertaking in
favor of another party, called the obligee. Although the Contract of
a Surety is secondary only to a valid principal obligation, the surety
becomes liable for the debt or duty of another although it possesses
no direct or personal interest over the obligations nor does it receive
any benefit therefrom. The surety’s obligation is not an original and
direct one for the performance of his own act, but merely accessory or
collateral to the obligation contracted by the principal. Nevertheless,
although the contract of a surety is in essence secondary only to a
valid principal obligation, his liability to the creditor or promisee
of the principal is said to be direct, primary, and absolute; in other
words, he is directly and equally bound with the principal.31
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“Article 2047, Civil Code; Gateway Electronics Asian Bank, G.R. No.
172041, December 18, 2008.
31Articles 2047,1217, Civil Code; Escano, el al. v. Ortigas, Jr., G.R. No. 151953,
June 29, 2007.
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Thus, the surety’s liability is joint and several with the obligor,
limited to the amount of the bond, and determined strictly by the
terms of the contract of suretyship in relation to the principal
contract between the obligor and the obligee.
Article 1356 of the Civil Code provides that contracts shall
be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.
Thus, an oral agreement which has all the essential requisites for
validity may be guaranteed by a surety contract. To rule otherwise
contravenes the clear import of Article 1356 of the Civil Code.39
34. Can a surety become liable to pay the legal interest thereby
making its liability more than the amount of its issued bonds?
Yes. As early as Tagawa v. Aldanese and Union Guarantee
Co. and reiterated in Plaridel Surety & Insurance Co., Inc. v. P.L.
Galang Machinery Co., Inc., and more recently, in Republic v. Court
of Appeals and R & B Surety and Insurance Company, Inc., the
Supreme Court has sustained the principle that if a surety upon
demand fails to pay, he can be held liable for interest, even if in thus
paying, its liability becomes more than the principal obligation. The
increased liability is not because of the contract but because of the
default and the necessity of judicial collection.
A surety’s liability under the suretyship contract is different
from its liability under the law. There is no question that a surety
should not be made to pay more than its assumed obligation under
the surety bonds. However, a surety’s liability for the payment of
interest is not by reason of the suretyship agreement itself but
because of the delay in the payment of its obligation under the said
agreement.39
“Cellpage International Corp. The Solid Guaranty, Inc., G.R. No. 226731,
June 17, 2020.
“Commonwealth Insurance v. Court of Appeals, G.R. No. 130886, January
29, 2004.
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I
“Article 2126, Civil Code; PNB v. RBL Enterprises, Inc., G.R. No. 149569, May
28, 2004.
"Article 2130, Civil Code.
"Article 2128, Civil Code.
"Article 2085, Civil Code
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42. Is a REM valid if the deed evidencing the same was notarized
without authority and compliance with the prescribed form
under Section 112 of P.D. No. 1529 (Property Registration
Decree).
The defective notarization of a REM agreement merely strips
it of its public character and reduces it to a private document.
Although Article 1358 of the New Civil Code requires that the
form of a contract transmitting or extinguishing real rights over
immovable property should be in a public document, the failure to
observe such required form does not render the transaction invalid.
The necessity of a public document for the said contracts is only
for convenience; it is not essential for its validity or enforceability.
When there is a defect in the notarization of a document, the clear
and convincing evidentiary standard originally attached to a duly-
notarized document is dispensed with, and the measure to test the
validity of such document is preponderance of evidence.49
’’Emphasis supplied.
“Articles 2124, 2125, Civil Code.
“Coca-Cola Bottlers v. Soriano, G.R. No. 211232, April 11, 2018.
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“Corodan v. China Bank Corporation, G.R. No. 210542, February 24, 2016.
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VIII. CREDIT TRANSACTIONS 377
6lSps. Teves v. Integrated Credit and Corporate Services, Inc., G.R. No.
216714, April 4, 2018.
62Luntao v. BAP Credit Guaranty Corporation, G.R. No. 204412, September
20,2017.
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e. Default
f. Deposit-taking institution
g- Equipment
h. Future property
i. Grantor
j- Intangible asset
k. Intermediary
l. Intermediated securities
m. Lien
n. Non-intermediated securities
o. Notice
P- Proceeds
q- Purchase money security interest
Registry
s. Secured creditor
t. Security interest55
Commodity contract - refers to a commodity futures
contract, an option on a commodity futures contract, a commodity
option, or another contract if the contract or option is: (i) traded on
or subject to the rules of a board of trade that has been designated
as a contract market for such a contract; or (ii) traded on a foreign
commodity board of trade, exchange, or market, and is carried on
the books of a commodity intermediary for a commodity customer.
Competing claimant - refers to a creditor of a grantor
or other person with rights in an encumbered asset that may be
in competition with the rights of a secured creditor in the same
encumbered asset.
Consumer goods - refer to goods that are used or acquired for
use primarily for personal, family, or household purposes.
Control agreement - an agreement in writing between
the grantor and the secured creditor which perfects the security
interests over an intangible asset.
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VIII. CREDIT TRANSACTIONS 385
61. Who are the parties to, and what are the form and contents of
a Control Agreement?
A Control Agreement shall:
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VIII. CREDIT TRANSACTIONS 387
68. What are the rules with respect to priority of security interest?
The priority of security interests and hens in the same collateral
shall be determined according to the time of registration of a notice
or perfection by other means, without regard to the order of creation
of the security interests and liens or to the mode of perfection, except
as provided below:
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69. How can the secured creditor enforce its security interest?
The secured creditor may enforce its security interest whether
through a judicial process or through an extrajudicial process,
including the sale of the secured assets through either a public or
private disposition.
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VIII. CREDIT TRANSACTIONS 393
provides for a security interest; and (ii) the secured party’s affidavit
stating that a default has occurred, and that the secured party is
entitled to enforce the security interest non-judicially.7'
72. Does the secured creditor have a right to sell or dispose of the
collateral?
Yes. After default, a secured creditor may sell or otherwise
dispose of the collateral, publicly or privately, in its present condition
or following any commercially reasonable preparation or processing.
A disposition is commercially reasonable if the secured creditor
disposes of the collateral in conformity with commercial practices
among dealers in that type of property.77
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78. What are the rules on security interest created or provided for
by an agreement or other transaction that was made or entered
into before the effectivity of the PPSA and that had not been
terminated before the effectivity of the PPSA (Prior Interest)?
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ii. It was not perfected under prior law when the PPSA
took effect, and was only perfected under the PPSA.
c. The enforcement of all existing security interests during
the transitional period™ shall be governed by the PPSA.M
Concurrence and Preference of Credit
“The transitional period shall begin on February 9, 2019, which is the date of
effectivity of the PPSA.
“Sections 8.01-8.04, IRR of R.A. No. 11057.
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80. During the pendency of the civil case with the RTC of Pasig
City, Fil-Agro was placed under the receivership of the PDIC
pursuant to Resolution No. 1486 of the Monetary Board of the
BSP. Thereafter, the RTC of Malolos City was constituted as the
liquidation court tasked to adjudicate disputed claims against
Fil-Agro and assist the PDIC in undertaking its liquidation.
Antonio, however, insists that his claim against Fil-Agro is not
a disputed claim within the purview of Section 30 of R.A. No.
7653 because ownership of the mortgaged property has not
yet vested on Fil-Agro. He maintains that the Court’s ruling in
Vda. de Ballesteros cannot be applied here where foreclosure
of the subject properties was not made by the insolvent bank.
Decide.
Jurisprudentially, it has long been resolved that “disputed
claims” covers all claims whether they be against the assets of
the insolvent bank, for specific performance, breach of contract,
damages, or whatever. The term is defined in an all-encompassing
and broad manner so as to include any cause of action against the
insolvent bank, regardless of its nature or character, irrespective
of whether the relief sought would directly affect the property of
the bank under liquidation. In fact, Section 30(2) of R.A. No. 7653
authorizes the receiver to defend any action against the insolvent
bank.
Section 30 of R.A. No. 7653 reads:
SEC. 30. Proceedings in Receivership and
Liquidation. - Whenever, upon report of the head of the
supervising or examining department, the Monetary
Board finds that a bank or quasi-bank:
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”Fil-Agro Rural Bank, Inc. v. Villasenor, Jr., G.R. Nos. 226761 and 226889,
July 28,2020.
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IX. SPECIAL LAWS
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY
REPUBLIC ACT NO. 8179
A. Policy of Law
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2Amen<iing the Foreign Investment Act of 1991 (R.A. No. 7042), R.A. No. 8179,
March 28,1996.
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
3Suarez and Reyes Law Offices, SEC-OGC Opinion No. 05-07, April 26, 2007.
^Amendments to the Implementing Rules and Regulations of R.A. No. 7042,
IRRof R.A. No. 7042.
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
mind of the Court there is doubt, based on the attendant facts and
circumstances of the case, in the 60-40 Filipino-equity ownership in
the corporation, then it may apply the “grandfather rule.”6
'Supra.
''Ibid.
8Unchuan v. Lozada, G.R. No. 172671, April 16, 2009.
I
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B. Definition of Terms
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
12. What are the two (2) general tests to determine whether a
foreign corporation is considered as "doing business" in the
Philippines?
a. Substance test — The true test for doing business,
however, seems to be whether the foreign corporation
is continuing the body of the business or enterprise for
which it was organized or whether it has substantially
retired from it and turned it over to another.
b. Continuity test — The term doing business implies a
I continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or
works or the exercise of some of the functions normally
incident to, and in the progressive prosecution of, the
purpose and object of its organization.12
"Implementing Rules and Regulations of R.A. No. 7042, (IRR of R-A. No.
7042), July 9,1996.
l2Mentholatum Co., Inc. v. Mangaliman, G.R. No. 47701, June 27,1941.
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
regular corporate income tax applicable for resident foreign
corporation.
Is the BIR correct in classifying Air Canada as a resident
foreign corporation for taxation purposes?
Yes, the BIR is correct considering that Air Canada is
doing business in the Philippines. R.A. No. 7042 or the Foreign
Investments Act of 1991 provides guidance with its definition of
“doing business” with regard to foreign corporations. Section 3(d) of
the law enumerates the activities that constitute doing business, to
wit:
d. the phrase “doing business” shall include soliciting
orders, service contracts, opening offices, whether called
“liaison” offices or branches; appointing representatives
or distributors domiciled in the Philippines or who in
any calendar year stay in the country for a period or
periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control
of any domestic business, firm, entity or corporation in
the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions
normally incident to, and in progressive prosecution
of, commercial gain or of the purpose and object of the
business organization: Provided, however, That the
phrase “doing business” shall not be deemed to include
mere investment as a shareholder by a foreign entity
in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor; nor having
a nominee director or officer to represent its interests
in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts
business in its own name and for its own account.
While Section 3(d) above states that “appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account” is
not considered as “doing business,” the Implementing Rules and
Regulations of R.A. No. 7042 clarifies that “doing business” includes
“appointing representatives or distributors, operating under full
control of the foreign corporation, domiciled in the Philippines or
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who in any calendar year stay in the country for a period or periods
totaling one hundred eighty (180) days or more.”
An offline carrier is “any foreign air carrier not certificated by
the Civil Aeronautics Board, but who maintains office or who has
designated or appointed agents or employees in the Philippines, who
sells or offers for sale any air transportation in behalf of said foreign
air carrier and/or others, or negotiate for, or holds itself out by
solicitation, advertisement, or otherwise sells, provides, furnishes,
contracts, or arranges for such transportation.”
Aerotel performs acts or works or exercises functions that
are incidental and beneficial to the purpose of Air Canada’s
business. The activities of Aerotel bring direct receipts or profits to
Air Canada. Aerotel does not solicit orders alone and for its own
account. Aerotel cannot enter into any contract on behalf of Air
Canada without the express written consent of the latter, and it
must perform its functions according to the standards required by
Air Canada. Through Aerotel, Air Canada is able to engage in an
economic activity in the Philippines.14
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IX. SPECIAL LAWS 413
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
Does the setting up of these servers constitute "doing
business" in the Philippines, thereby requiring Genibrain to
obtain a license?
In Mentholatum Co., Inc. v. Anacleto Mangaliman, the Supreme
Court laid down the jurisprudential test of what constitutes “doing
business” in the Philippines for foreign corporations known as the
"Twin Characterization Test.” Under this test, a foreign corporation
is considered to be “doing business” in the Philippines when:
a. The foreign corporation is maintaining or continuing in
the Philippines “the body or substance of the business
or enterprise for which it was organized or whether it
has substantially retired from it and turned it over to
another.”
b. The foreign corporation is engaged in activities which
necessarily imply “a continuity of commercial dealings
and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of
the functions normally incidental to, and in progressive
prosecution of, the purpose and object of its organization.”
Anent the first requisite, the setting up of game servers in the
Philippines by Genibrain may be considered as “maintaining or
continuing” in the Philippines the body or substance of the business
or enterprise. From understanding how game servers work, it can
be deduced that setting up servers is necessary and indispensable
in the pursuit of the business of which Genibrain is engaged in.
Thus, it may be deemed as the “body or substance” of the business,
as contemplated in the first requisite. Although the setting up of
servers does not involve the physical acts or transactions beyond
the mere leasing of a specific portion of space in the Philippines
to accommodate these servers, these servers shall act as memory
storage where the e-game software and related data are stored. In
effect, Genibrain will use the servers to store various data relative to
the games that it will advertise online, making it a vital component
of Genibrain’s online business.
With regard to the second requisite, one must not only consider
the mere act of setting up servers but also its continued presence
in the Philippines. In reality, these servers will be in continuous
operation while being physically present in the Philippines. Thus,
the continued presence of these servers in the Philippines may be
construed to mean that Genibrain is “engaged in activities which
L
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
Steelcase countered that it was not doing business in
the Philippines when it entered into a dealership agreement
with DISI where the latter, acting as the former’s appointed
local distributor, transacted business in its own name and for
its own account. Specifically, Steelcase contends that it was
DISI that sold Steelcase's furniture directly to the end-users
or customers who, in turn, directly paid DISI for the furniture
they bought. Steelcase further claims that DISI, as a non
exclusive dealer in the Philippines, had the right to market, sell,
distribute, and service Steelcase products in its own name and
for its own account.
Does Steelcase have the capacity to sue DISI?
An unlicensed foreign corporation not doing business in the
Philippine has the legal capacity to sue before the local courts.
The appointment of a distributor in the Philippines is not
sufficient to constitute “doing business” unless it is under the full
control of the foreign corporation. On the other hand, if the distributor
is an independent entity which buys and distributes products, other
than those of the foreign corporation, for its own name and its own
account, the latter cannot be considered to be doing business in the
Philippines. It should be kept in mind that the determination of
whether a foreign corporation is doing business in the Philippines
must be judged in light of the attendant circumstances.
Here, DISI was not a mere conduit through which Steelcase
conducted its business in the country. DISI was an independent
contractor, distributing various products of Steelcase and of other
companies, acting in its own name and for its own account. As a
result, Steelcase cannot be considered to be doing business in the
Philippines by its act of appointing a distributor as it falls under one
of the exceptions under R.A. No. 7042.19
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
21Pioneer International, Ltd. v. Guadiz, Jr., G.R. No. 156848, October 11,2007.
£
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22B. Van Zuiden Bros., Ltd. v. GTVL Manufacturing Industries, Inc., G.R. No.
147905, May 28, 2007.
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
2,MR Holdings, Ltd. v. Bajar, G.R. No. 138104, April 11, 2002.
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1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
“Eriks Pte. Ltd. v. Court of Appeals, G.R. No. 118843, February 6,1997.
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“Columbia Pictures, Inc. v. Court of Appeals, G.R. No. 110318, August 28,
1996.
27Section 3(e), R.A. No. 7042.
“Section 3(f), R.A. No. 7042.
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IX. SPECIAL LAWS 429
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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C. Registration of Investments
of Non-Philippine Nationals
30. To what regulatory bodies should foreign investments be
registered?
Under Section 5 of the FIA, as amended, a non-Philippine
national, not otherwise disqualified by law, and upon registration
with the SEC, or with the Department of Trade and Industry
(“DTI”) in the case of single proprietorships, is allowed to do
business or invest in a domestic enterprise up to 100% of its capital,
unless participation of non-Philippine nationals in the enterprise is
prohibited or limited under the Foreign Investments Negative List.
In this regard, Section 3(c) of the same law, defines “foreign
investment” as equity investment made by a non-Philippine
national in the form of foreign exchange and/or other assets actually
transferred to the Philippines and duly registered with the Bangko
Sentral ng Pilipinas (“BSP”) which shall assess and appraise the
value of such assets other than foreign exchange.
Foreign investments registered with the BSP are entitled to
full repatriation of capital and remittance of dividends/profits using
foreign exchange sourced/purchased from authorized agent banks
and/or their subsidiary/affiliate foreign exchange corporations. All
applications for registration of foreign direct investments shall
be filed with the BSP within one (1) year from the date of inward
remittance/actual transfer of assets to the Philippines.31
D. Foreign Investments
in Export Enterprises
31. Is 100% foreign investment in export enterprises allowed under
the FIA?
Foreign equity participation in export enterprises shall be
allowed up to 100% provided that the products and services of such
enterprises do not fall within Lists A and B of the Foreign Investment
Negative List.32
31Section 36, Chapter II, Part Two of the BSP’s FX Manual, as amended.
“Section 6, R.A. No. 7042.
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IX. SPECIAL LAWS 431
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
E. Foreign Investments in
Domestic Market Enterprises
’’The FIA was amended in 1996 by R.A. No. 8179 to further liberalize foreign
investments in the Philippines.
3,R.A. No. 8179 deleted List C provided under the FIA which contains
investment areas already adequately served by existing enterprises and in which
foreign investments need not be encouraged further. Deletion of this list is expected
to open further the market to foreign investments and keep existing firms efficient
and responsive to the needs of consumers.
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JX. SPECIAL LAWS 433
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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IX. SPECIAL LAWS 435
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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IX. SPECIAL LAWS m
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
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438 DIVINA ON COMMERCIAL LAW:
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IX. SPECIAL LAWS 439
1. FOREIGN INVESTMENT ACT OF 1991
REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179
a. Infrastructure/deve-
lopment projects cove
red in R.A. No. 7718
b. Projects which are
foreign funded or as
sisted and required to
undergo international
competitive bidding.
Private radio communi Up to 20% Up to 40%
cations network.
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2. FINANCIAL REHABILITATION AND
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
'Section 4(k).
"Section m(o).
"Section 4(p), R.A. No. 10142.
440
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2. FINANCIAL REHABILITATION AND 441
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA")
Prior to FRIA, only a technically insolvent debtor may file a
petition for rehabilitation. An actually insolvent debtor could not file
a petition for rehabilitation but should file a petition for insolvency,
instead.
FRIA covers both technical and actual insolvency. An
actually insolvent debtor may file a petition for rehabilitation and
the court will give it due course if the court believes that there is
substantial likelihood that the debtor may be rehabilitated through
a viable Rehabilitation Plan.4 Otherwise, the court may convert the
rehabilitation proceedings into one of liquidation.5
In one case,6 the Supreme Court ruled that a corporation left
without assets could not file a petition for rehabilitation, and the
fact that there are pending actions to nullify the foreclosure of its
assets does not change such conclusion. Given the expanded concept
of insolvency under FRIA, it appears that such debtor without assets
can now file a petition for rehabilitation under FRIA.
The term debtor does not include banks, insurance companies,
pre-need companies, and national and local government agencies
or units. The rehabilitation of distressed banks and insurance
companies are governed by other special laws.7
Government financial institutions other than banks and
government-owned or -controlled corporations are covered by FRIA
unless their specific charter provides otherwise.8
b. Suspension of Payments
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442 DIVINA ON COMMERCIAL LAW:
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4. What order will the court issue if it finds the petition for
suspension of payments to be sufficient in form and
substance?
If the court finds the petition sufficient in form and substance,
it shall, within five (5) working days from the filing of the petition,
issue an Order:
a. calling a meeting of all the creditors named in the schedule
of debts and liabilities at such time not less than 15 days
nor more than 40 days from the date of such Order and
designating the date, time and place of the meeting;
b. directing such creditors to prepare and present written
evidence of their claims before the scheduled creditors’
meeting;
c. directing the publication of the said order in a newspaper
of general circulation published in the province or city
in which the petition is filed once a week for two (2)
consecutive weeks, with the first publication to be made
within seven (7) days from the time of the issuance of the
Order;
d. directing the clerk of court to cause the sending of a copy
of the Order by registered mail, postage prepaid, to all
creditors named in the schedule of debts and liabilities;
e. forbidding the individual debtor from selling, transferring,
encumbering or disposing in any manner of his property,
9Section 94.
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2. FINANCIAL REHABILITATION AND 443
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
‘“Section 95.
“Section 96.
12Section 96.
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444 DIVINA ON COMMERCIAL LAW:
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7. What are the conditions for the approval of the petition for
suspension of payments?
The presence of creditors holding claims amounting to at least
three-fifths (3/5) of the liabilities shall be necessary for holding a
meeting. The commissioner appointed by the court shall preside
over the meeting and the clerk of court shall act as the secretary
thereof, subject to the following rules:
a. The clerk shall record the creditors present and amount
of their respective claims;
b. The commissioner shall examine the written evidence of
the claims. If the creditors present hold at least three-
fifths (3/5) of the liabilities of the individual debtor, the
commissioner shall declare the meeting open for business;
c. The creditors and individual debtor shall discuss the
propositions in the proposed agreement and put them to
a vote;
d. To form a majority, it is necessary:
i. that two-thirds (2/3) of the creditors voting unite
upon the same proposition; and
ii. that the claims represented by said majority vote
amount to at least three-fifths (3/5) of the total
liabilities of the debtor mentioned in the petition;
and
e. After the result of the voting has been announced, all
protests made against the majority vote shall be drawn
up, and the commissioner and the individual debtor
together with all creditors taking part in the voting shall
sign the affirmed propositions.
No creditor who incurred his credit within 90 days prior
to the filing of the petition shall be entitled to vote.13
8. What is the double majority rule in petition for suspension of
payments?
It means that the proposed agreement for suspension of
payments should be approved by 2/3 of number of creditors and such
number of creditors must represent at least 3/5 of total liabilities.
Otherwise, the court should deny the petition.
“Section 97.
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2. FINANCIAL REHABILITATION AND 445
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA”)
10. What are the effects of the approval of the proposed Suspension
of Payments agreement?
If the decision of the majority of the creditors to approve the
proposed agreement or any amendment thereof made during the
creditors’ meeting is upheld by the court, or when no opposition or
objection to said decision has been presented, the court shall order
that the agreement be carried out and all parties bound thereby to
comply with its terms.
The court may also issue all orders which may be necessary
or proper to enforce the agreement on motion of any affected party.
The Order confirming the approval of the proposed agreement on
any amendment thereof made during the creditors’ meeting shall be
binding upon all creditors whose claims are included in the schedule
of debts and liabilities submitted by the individual debtor and who
were properly summoned, but not upon: (a) those creditors having
claims for personal labor, maintenance, expenses of last illness
and funeral of the wife or children of the debtor incurred in the 60
days immediately prior to the filing of the petition, and (b) secured
creditors who failed to attend the meeting o[r] refrained from voting
therein.14
11. What claims are not covered by the filing of the petition for
suspension of payments and/or the court order approving the
petition for suspension of payments?
HSection 101.
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446 DIVINA ON COMMERCIAL LAW:
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13. When may the creditors enforce their claims against the debtor
who filed the petition for suspension of payment?
The creditors may enforce their claims against the debtor in
the following cases:
a. If the proposed agreement is rejected for lack of quorum
or failure to obtain the approval of the double majorities
required by law.
b. If the individual debtor fails, wholly or in part, to perform
the agreement decided upon at the meeting of the
creditors, all the rights which the creditors had against
the individual debtor before the agreement shall revest
in them.16 In this particular case, the individual debtor
may be made subject to the insolvency proceedings in the
manner established by FRIA.
c. If their claims are those not covered by the rules on
suspension of payments.
16Section 99.
16Section 102.
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2. FINANCIAL REHABILITATION AND 447
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(R.A. NO. 10142) (“FRIA'’)
inherited from his parents who had both come from landed
families in Laguna. His main creditor was Puresilver Company
(Puresilver), the principal supplier of the merchandise sold
in his store. To secure his credit with Puresilver, he executed
a real estate mortgage with a dragnet clause involving his
family's assets worth several millions of pesos.
Nonetheless, Hortencio, while generally in the black,
now faces a situation where he is unable to pay his liabilities as
they fall due in the ordinary course of business. What will you
advise him to do to resolve his dire financial condition? Explain
your answer.
If Hortencio is doing business as a registered sole proprietorship,
he can file a petition for rehabilitation. Under the FRIA, a sole
proprietorship can now file a petition for rehabilitation. The remedy
may be availed of in case of actual or technical insolvency. In the
petition, he can pray for the issuance of a commencement order
which includes a stay order. The stay order, once issued, has the
effect of enjoining the enforcement of claims against Hortencio.
If Hortencio is not registered as a sole proprietorship, he can
file a petition for suspension of payments in the city or province in
which he has resided for six (6) months prior to the filing of the
petition, a remedy available for an individual debtor who has more
assets than liabilities but foresees the impossibility of paying his
debts when they respectively fall due.17
C. Rehabilitation
■’Section 94 of FRIA.
■’Section 4(gg).
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■148 DIVINA ON COMMERCIAL LAW:
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17. How may the objective of restoring the debtor to its/his former
state of successful operations be attained?
The objective of restoring the debtor to its/his former state
of successful operation and solvency may be attained through the
following:
a. Adoption of an economically feasible Rehabilitation Plan;
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INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA")
i. Types
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450 DIVINA ON COMMERCIAL LAW:
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“Section 12.
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2. FINANCIAL REHABILITATION AND 451
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
is higher, may initiate involuntary proceedings against the debtor
by filing a petition for rehabilitation with the court if:
a. there is no genuine issue of fact or law on the claim/s of the
petitioner/s, and that the due and demandable payments
thereon have not been made for at least 60 days or that
the debtor has failed generally to meet its liabilities as
they fall due; or
b. a creditor, other than the petitioner/s, has initiated
foreclosure proceedings against the debtor that will
prevent the debtor from paying its debts as they become
due or will render it insolvent.23
The creditor/s’ petition for rehabilitation shall be verified
to establish the substantial likelihood that the debtor may be
rehabilitated, and include:
a. identification of the debtor, its principal activities and its
address;
b. the circumstances sufficient to support a petition to
initiate involuntary rehabilitation proceedings under
Section 13 of FRIA; .
C. the specific relief sought under FRIA;
d. a Rehabilitation Plan;
e. the names of at least three (3) nominees to the position of
Rehabilitation Receiver;
f. other information that may be required under this Act
depending on the form of relief requested; and
g- other documents required to be filed with the petition
pursuant to FRIA and the rules of procedure as may be
promulgated by the Supreme Court.24
“Section 13.
“Section 14.
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452 DIVINA ON COMMERCIAL LAW:
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“Section 76.
“Section 82.
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2. FINANCIAL REHABILITATION AND 463
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
24. What are the requirements for an Out-of-Court or Informal
restructuring agreement or Rehabilitation Plan?
a. The debtor must agree to the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan;
b. It must be approved by creditors representing at least
67% of the secured obligations of the debtor;
c. It must be approved by creditors representing at least
75% of the unsecured obligations of the debtor; and
d. It must be approved by creditors holding at least 85% of
the total liabilities, secured and unsecured, of the debtor.27
It means that among the secured and unsecured creditors
and total number of creditors, there is a threshold percentage of
liabilities. The approval is based on the amount of liabilities and not
based on number of creditors.
“Section 84.
“Section 85.
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454 DIVINA ON COMMERCIAL LAW:
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2sSection 86.
“Allied Banking Corporation v. In the Matter of the Petition to Have Steel
Corporation of the Philippines Placed under Corporate Rehabilitation, G.R. No.
191939, March 14, 2018,
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2. FINANCIAL REHABILITATION AND 455
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
holding at least ten percent (10%) of the total liabilities of
the debtor as determined from the schedule attached to
the petition within five (5) days; if the petitioner/s is/are
creditor/s, direct the service by personal delivery of a copy
of the petition on the debtor within five (5) days;
h. appoint a Rehabilitation Receiver who may or may not
be from among the nominees of the petitioner/s, and who
shall exercise such powers and duties defined in FRIA as
well as the procedural rules that the Supreme Court will
promulgate;
i. summarize the requirements and deadlines for creditors
to establish their claims against the debtor and direct all
creditors to file their claims with the court at least five (5)
days before the initial hearing;
j. direct the Bureau of Internal Revenue (“BIR”) to file
and serve on the debtor its comment on or opposition to
the petition or its claim/s against the debtor under such
procedures as the Supreme Court may hereafter provide;
k. prohibit the debtor’s suppliers of goods or services from
withholding the supply of goods and services in the
ordinary course of business for as long as the debtor
makes payments for the services or goods supplied after
the issuance of the Commencement Order;
1. authorize the payment of administrative expenses as they
become due;
m. set the case for initial hearing, which shall not be more
than 40 days from the date of filing of the petition for
the purpose of determining whether there is substantial
likelihood for the debtor to be rehabilitated;
n. make available copies of the petition and Rehabilitation
Plan for examination and copying by any interested party;
o. indicate the location or locations at which documents
regarding the debtor and the proceedings under FRIA
may be reviewed and copied;
P- state that any creditor or debtor, who is not the petitioner,
may submit the name or nominate any other qualified
person to the position of Rehabilitation Receiver at least
five (5) days before the initial hearing;
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456 DIVINA ON COMMERCIAL LAW:
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31Section 16.
“Section 3.
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r
“Section 17.
“Section 19.
“Section 21.
“Allied Banking Corporation v. In the Matter of the Petition to Have Steel
Corporation of the Philippines Placed under Corporate Rehabilitation, ibid.; Section
1(d), FRIA.
“Situs Dev. Corporation, et al. AsiaTrust Bank, et al., G.R. No. 180036,
January 16, 2013.
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458 DIVINA ON COMMERCIAL LAW:
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2. FINANCIAL REHABILITATION AND 459
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA")
’’Section 16.
"Negros Navigation Company v. Court of Appeals, G.R. Nos. 163156 and
166845, December 10, 2008, reiterated in Abrera v. Hon. Barza, supra.
41BAR 2006; 2008.
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460 DIVINA ON COMMERCIAL LAW:
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42Section 4(c).
43BAR 2014.
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INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA")
37. Cite examples of claims that were enjoined as a result of the
issuance of a Stay Order.
a. The claim of a passenger against an airline company for
missing luggage is a money claim or a financial demand
that the law requires to be suspended upon issuance of a
Stay Order.44
b. Unpaid security services.46
C. Claim under a pre-need educational plan.46
d. Claims against the distressed corporation whether for
damages founded on a breach of contract of carriage,
collection suits or any other claims of a pecuniary nature.47
e. Labor claims of employees48 except when filed with the
NLRC, which is a quasi-judicial agency, which upon
determination by the court, is capable of resolving
the claim more quickly, fairly and efficiently than the
court: Provided, that any final and executory judgment
of such agency shall be referred to the court and shall be
treated as a non-disputed claim;49
f. Loan secured by mortgages.
38, Does the suspension of actions and/or claims cover only cases
pending in court?
No, the suspension of all actions and/or claims against a
corporation under rehabilitation does not only cover cases which are
pending in court. The automatic suspension of an action for claims
embraces all phases of the suit, that is, the entire proceedings of an
action or suit and not just the payment of the claims.“ This Supreme
Court ruling should now be qualified to exclude appeals pending
with the Supreme Court as of commencement date.”
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462 DIVINA ON COMMERCIAL LAW:
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“Advent Capital and Medical Corporation v. Young, G.R. No. 183018, August
3, 2011.
“Steel Corporation v. Mapfre Insular Insurance Corporation, G.R. No. 201199,
October 16, 2013.
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2. FINANCIAL REHABILITATION AND 463
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
appointment of a Rehabilitation Receiver and the issuance of the
Stay Order, all the actions taken with respect to the foreclosed
mortgage property which were subsequent to the issuance of the
Stay Order were not affected by the Stay Order. Thus, after the
redemption period expired without the mortgagor redeeming the
foreclosed property, the mortgagee becomes the absolute owner of
the property and it was within its right to ask for the consolidation of
title and the issuance of new title in its favor. The writ of possession
procured by the mortgagee despite the subsequent issuance of a stay
order in the rehabilitation proceedings instituted is also vahd.54
However, if the foreclosure of the mortgage or attachment of the
property of the debtor or any enforcement of claim is done between
the filing of the petition and the issuance of the commencement
order, such action on the part of the creditors will be set aside, in
view of the retroactive effect of the commencement order.55
40. Does the issuance of the Commencement Order and the Stay
Order diminish or impair the security or lien of a secured
creditor?
The issuance of the Commencement Order and the Suspension
or Stay Order, and any other provision of this Act, shall not be
deemed in any way to diminish or impair the security or lien of a
secured creditor, or the value of his Hen or security, except that his
right to enforce said security or lien may be suspended during the
term of the Stay Order.56
The court, upon motion or recommendation of the Rehabilitation
Receiver, may allow a secured creditor to enforce his security or hen,
or foreclose upon property of the debtor securing his/its claim, if the
said property is not necessary for the rehabilitation of the debtor.
The secured creditor and/or the other lien holders shall be admitted
to the rehabilitation proceedings only for the balance of his claim,
if any.57
1
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464 DIVINA ON COMMERCIAL LAW:
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41. Are the effects of the commencement order and the stay
order on the suspension of rights to foreclose or otherwise
pursue legal remedies applicable to government financial
institutions?
58Section 20.
“Section 18(a).
“Section 18(b).
61Section 18(c).
“Trade and Investment Development Corporation v. Philippine Veterans
Bank, G.R. No. 233850, July 1, 2019.
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INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FR1A")
d. to any form of action of customers or clients of a securities
market participant to recover or otherwise claim moneys
and securities entrusted to the latter in the ordinary
course of the latter’s business as well as any action of
such securities market participant or the appropriate
regulatory agency or self-regulatory organization to pay
or settle such claims or liabilities;63
e. to the actions of a licensed broker or dealer to sell pledged
securities of a debtor pursuant to a securities pledge
or margin agreement for the settlement of securities
transactions in accordance with the provisions of the
Securities Regulation Code and its implementing rules
and regulations;131
f. the clearing and settlement of financial transactions
through the facilities of a clearing agency or similar
entities duly authorized, registered and/or recognized
by the appropriate regulatory agency like the Bangko
Sentral ng Pilipinas (BSP) and the SEC as well as any
form of actions of such agencies or entities to reimburse
themselves for any transactions settled for the debtor;66
and
g- any criminal action against the individual debtor or
owner, partner, director or officer of a debtor shall not be
affected by any proceeding commenced under FRIA.K
It was held that the suspension of claims in corporate
rehabilitation does not extend to criminal actions against
the distressed corporations or its directors and officers.
It would be absurd for one who has engaged in criminal
conduct to escape punishment simply because the
corporation of which he is director or officer filed a petition
for rehabilitation. The prosecution of the officers of the
corporation has no bearing on the pending rehabilitation
of the corporation.67
“Section 18(d).
“Section 18(e).
“Section 18(f).
“Section 18(g).
“Panlilio v. Regional Trial Court, Branch 51, City of Manila, G.R. No. 17384G,
February 2, 2011.
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43. ABC Company filed a Petition for Rehabilitation with the Court.
An Order was issued by the Court, (1) staying enforcement of all
claims, whether money or otherwise against ABC Company, its
guarantors and sureties not solidarily liable with the company;
and (2) prohibiting ABC Company from making payments of its
liabilities, outstanding as of the date of the filing of the Petition.
XYC Company is a holder of an irrevocable Standby Letter
of Credit which was previously procured by ABC Company
in favor of XYC Company to secure performance of certain
obligations. In the light of the Order issued by the Court, can
XYC Company still be able to draw on their irrevocable Standby
Letter of Credit when due? Explain your answer.
Yes, as an exception to a Stay or Suspension Order included
in a Commencement Order issued pursuant to the FRIA”. Under
Section 18(c) of FRIA, a Stay or Suspension Order shall not apply
“to the enforcement of claims against sureties and other persons
solidarily liable with the debtor, and third party or accommodation
mortgagors as well as issuers of letters of credit x x x.” Similarly,
assuming that it has not been superseded by the FRIA, Section 7(b) of
the Supreme Court Rules of Procedure on Corporate Rehabilitation
provides that a stay order shall not cover claims against letters of
credit and similar security arrangements issued by a third party to
secure the payment of the debtor’s obligations.
44. What are the administrative expenses not covered by the Stay
Order?
Administrative expenses shall refer to those reasonable and
necessary expenses:
a. incurred or arising from the filing of a petition under the
provisions of FRIA;
“Section 16(1).
“MWSS v. Hon. Daway, 432 SCRA 559.
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b. arising from, or in connection with, the conduct of the
proceedings under FRIA, including those incurred for the
rehabilitation or liquidation of the debtor;
C. incurred in the ordinary course of business of the debtor
after the commencement date;
d. for the payment of new obligations obtained after the
commencement date to finance the rehabilitation of the
debtor;
e. incurred for the fees of the Rehabilitation Receiver or
liquidator and of the professionals engaged by them; and
f. that are otherwise authorized or mandated under this Act
or such other expenses as may be allowed by the Supreme
Court in its rules.70
I ’’Section 4(a).
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468 DMNA ON COMMERCIAL LAW:
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’’Section 4(n).
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INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
party or accommodation mortgagors as well as issuers of
letter of credit, unless the property subject of the third
party or accommodation mortgage is necessary for the
rehabilitation of the debtor as determined by the court
upon the recommendation of the Rehabilitation Receiver.
Whether or not the suspension order then will stay the
foreclosure of the Second Bank will depend on whether the
mortgaged properties are needed for the rehabilitation of
the Debtor Corporation.
d. For the same reason as in (c), the Order of Suspension
of Payments does not cover the suit filed by Third Bank
against the principal stockholders.
e. To preserve the assets of the Debtor Corporation, the
receiver may take custody of, and control over, all the
existing assets and property of the corporation; evaluate
existing assets and liabilities, earnings and operations of
the corporation; and determine the best way to salvage
and protect the interest of the investors and creditors.72
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’’Section 4(hh).
’^Section 28.
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INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
’'Section 31.
i
i
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(R.A. NO. 10142) (“FRIA”)
and the governing body of the debtor and assume their rights and
responsibilities.
The specific powers and duties of the management committee,
whose members shall be considered as officers of the court, shall be
prescribed by the procedural rules.79
53, Does the act of the corporation in waiving its option to lease a
property without receiving any consideration therefor resulting
in lost income constitute a valid ground for the appointment of
a Receiver or a Management Committee?
Applicants for the appointment of a Receiver or Management
Committee need to establish the confluence of these two requisites.
This is because appointed Receivers and Management Committees
will immediately take over the management of the corporation and
will have the management powers specified in law. This may have a
negative effect on the operations and affairs of the corporation with
third parties, as persons who are more familiar with its operations
are necessarily dislodged from their positions in favor of appointees
who are strangers to the corporation’s operations and affairs.
The act of the corporation in waiving its option to lease a
property without receiving any consideration therefor resulting in
lost income in the form of goodwill money and rental payments is
enough to constitute loss or dissipation of assets.
ivuoyvnuviiv, however, icinuu
Respondent, iv show
failed to LliULC was
uiLdb there
oiiv/vv that YYao an
an
imminent danger of paralysis of the corporation’s business
operations. He, therefore, failed to show at least one of the requisites
for appointment of a Receiver or Management Committee.80
vi. Rehabilitation Plan
79Section 37.
“Alfredo Villamor, Jr. v. John Umale, G.R. Nos. 172834 and 172881, September
24,2014.
!
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“‘Section 4(ii).
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2. FINANCIAL REHABILITATION AND 475
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
i. ensure that the payments made under the plan follow
the priority established under the provisions of the Civil
Code on concurrence and preference of credits and other
applicable laws;
j- maintain the security interest of secured creditors and
preserve the liquidation value of the security unless such
has been waived or modified voluntarily;
k. disclose all payments to creditors for pre-commencement
debts made during the proceedings and the justifications
thereof;
1. describe the disputed claims and the provisioning of funds
to account for appropriate payments should the claim be
ruled valid or its amount adjusted;
m. identify the debtor’s role in the implementation of the
Plan;
n. state any rehabilitation covenants of the debtor, the
breach of which shall be considered a material breach of
the Plan;
o. identify those responsible for the future management
of the debtor and the supervision and implementation
of the Plan, their affiliation with the debtor and their
remuneration;
P- address the treatment of claims arising after the
confirmation of the Rehabilitation Plan;
q- require the debtor and its counter-parties to adhere to
the terms of all contracts that the debtor has chosen to
confirm;
r. arrange for the payment of all outstanding administrative
expenses as a condition to the Plan’s approval unless such
condition has been waived in writing by the creditors
concerned;
s. arrange for the payment of all outstanding taxes and
assessments, or an adjusted amount pursuant to a
compromise settlement with the BIR or other applicable
tax authorities;
t. include a certified copy of a certificate of tax clearance or
evidence of a compromise settlement with the BIR;
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“Section 62.
“Viva Shipping Lines, Inc. v. Keppel Philippines Mining, Inc., G.R. No. 177382,
February 17,2016.
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2. FINANCIAL REHABILITATION AND 477
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA")
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“BPI Family Savings Bank v. St. Michael Medical Center, Inc., G.R. No. 205469,
March 25, 2015.
87Philippine Asset Growth Two v. Fastech Synergy Philippines, G.R. No. 206528,
June 28,2016.
“BPI Family Savings Bank v. St. Michael Medical Center, G.R. No. 205469,
March 25, 2015.
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2. FINANCIAL REHABILITATION AND 479
INSOLVENCY ACT OF 2010
(R.A. NO, 10142) (“FRIA”)
which said working capital would be sourced had already
been written-off and a claim that has been written-off is
considered a bad debt or a worthless asset, and cannot be
deemed a material financial commitment for purposes of
rehabilitation.89
d. A proposal to enter into the dacion. en. pago to create a
source of “fresh capital” is also not feasible because the
object thereof would not be its own property but one
belonging to its affiliate, a corporation also undergoing
rehabilitation.80
e. At Rehabilitation Plan which is heavily, if not completely
predicated on speculative business proposals as well as
the contingent entry of the potential foreign investor lacks
the requirement of material financial commitment.91
59, What are the effects of the confirmation by the court of the
Rehabilitation Plan?
The confirmation of the Rehabilitation Plan by the court shall
result in the following:
a. The Rehabilitation Plan and its provisions shall be
binding upon the debtor and all persons who may be
affected by it, including the creditors, whether or not such
persons have participated in the proceedings or opposed
the Rehabilitation Plan or whether or not their claims
have been scheduled;
b. The debtor shall comply with the provisions of the
Rehabilitation Plan and shall take all actions necessary
to carry out the Plan;
c. Payments shall be made to the creditors in accordance
with the provisions of the Rehabilitation Plan;
d. Contracts and other arrangements between the debtor
and its creditors shall be interpreted as continuing to
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“Section 69.
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2. FINANCIAL REHABILITATION AND 481
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA")
“Section 74.
“Section 75.
“Bank of the Philippine Islands v. Sarabia Manor Hotel Corporation, G.R.
No. 175844, July 29, 2013.
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“Puerto Azul Land v. Pacific Wide Realty Development Corporation, G.R. No.
184000, September 17, 2014.
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2. FINANCIAL REHABILITATION AND 485
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA”)
The required amount of debt for the debtor to file the petition
for voluntary liquidation should exceed P500,000 whereas in
involuntary liquidation, the creditor/s claims should be at least
P500,000.
A
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“Section 90.
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2. FINANCIAL REHABILITATION AND 487
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA”)
If the petition or motion is sufficient in form and substance, the
court shall issue an Order:
a. directing the publication of the petition or motion in a
newspaper of general circulation once a week for two (2)
consecutive weeks; and
b. directing the debtor and all creditors who are not the
petitioners to file their comment on the petition or motion
within 15 days from the date of last publication.
If, after considering the comments filed, the court determines
that the petition or motion is meritorious, it shall issue the
Liquidation Order."
"Section 91.
100BAR 1991.
I01Section 92.
1
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'“Section 25.
'“Section 72.
""Section 75.
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2. FINANCIAL REHABILITATION AND 489
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA")
enforcement of any of the rights of the creditors, which
is rendered obvious by: (a) the absence of a sound and
workable business plan; (b) baseless and unexplained
assumptions, targets, and goals; and (c) speculative
capital infusion or complete lack thereof for the execution
of the business plan.106
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108BAR 1988.
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2. FINANCIAL REHABILITATION AND 491
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRlA’j
h. That he has suffered or procured his property to be taken
on legal process with intent to give a preference to one
or more of his creditors and thereby hinder or delay the
liquidation or defraud any one of his creditors;
i. That he has made any assignment, gift, sale, conveyance
or transfer of his estate, property, rights or credits with
intent to hinder or delay the liquidation or defraud his
creditors;
'“Section 105.
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““BAR 1998.
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2. FINANCIAL REHABILITATION AND 493
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA”)
j. set the case for hearing for the election and appointment
of the liquidator, which date shall not be less than 30
days nor more than 45 days from the date of the last
publication.111
79. What are the effects of the issuance of the Liquidation Order?
Upon the issuance of the Liquidation Order:
a. the juridical debtor shall be deemed dissolved and its
corporate or juridical existence terminated;
b. legal title to and control of all the assets of the debtor,
except those that may be exempt from execution, shall be
deemed vested in the liquidator or, pending his election or
appointment, with the court;
c. all contracts of the debtor shall be deemed terminated and/
or breached, unless the liquidator, within 90 days from
the date of his assumption of office, declares otherwise
and the contracting party agrees;
d. no separate action for the collection of an unsecured claim
shall be allowed. Such actions already pending will be
transferred to the Liquidator for him to accept and settle
or contest. If the liquidator contests or disputes the claim,
the court shall allow, hear and resolve such contest except
when the case is already on appeal. In such a case, the suit
may proceed to judgment, and any final and executory
judgment therein for a claim against the debtor shall be
filed and allowed in court; and
e. no foreclosure proceeding shall be allowed for a period of
180 days.112
iv. Rights of secured creditors
i “■Section 112.
‘“Section 113.
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113Section 114.
"‘Metropolitan Bank and Trust Company S.F. Naguiat Enterprises, G.R.
No. 178407, March 18, 2015
116Yngson, Jr. (in his capacity as Liquidator of Arcam & Company, Inc.) v.
Philippine National Bank, G.R. No. 171132, August 15, 2012.
116RCBC v. IAC, 320 SCRA 279.
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2. FINANCIAL REHABILITATION AND 495
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA")
'■’Section 115.
'"Article 116.
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"’Section 119.
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2. FINANCIAL REHABILITATION AND 497
INSOLVENCY ACT OF 2010
(R.A. NO. 10142) (“FRIA")
84. How does the Liquidator determine the claims against the
insolvent debtor?
Within 20 days from his assumption into office, the liquidator
shall prepare a preliminary registry of claims of secured and
unsecured creditors. Secured creditors who have waived their
security or lien, or have fixed the value of the property subject of their
security or lien by agreement with the Liquidator and is admitted
as a creditor for the balance, shall be considered as unsecured
creditors. The Liquidator shall make the registry available for public
inspection and provide publication notice to creditors, individual
debtors, owner/s of the sole proprietorship-debtor, the partners of the
partnership-debtor and shareholders or members of the corporation
debtor, on where and when they may inspect it. All claims must be
duly proven before being paid.120
Within 30 days from the expiration of the period for filing
of applications for recognition of claims, creditors, individual
debtors, owner/s of the sole proprietorship-debtor, partners of the
partnership-debtor and shareholders or members of the corporation
debtor and other interested parties may submit a challenge to a
claim or claims to the court, serving a certified copy on the liquidator
and the creditor holding the challenged claim. Upon the expiration
of the 30-day period, the Rehabilitation Receiver shall submit to the
court the registry of claims containing the undisputed claims that
have not been subject to challenge. Such claims shall become final
upon the filing of the register and may be subsequently set aside
only on grounds of fraud, accident, mistake or inexcusable neglect.121
If the debtor and a creditor are mutually debtor and creditor of
each other, one debt shall be set off against the other, and only the
balance, if any, shall be allowed in the liquidation proceedings.122
The Liquidator shall resolve disputed claims and submit his
findings thereon to the court for final approval. The liquidator may
disallow claims.123
'“Section 123.
“‘Section 125.
‘“Section 124.
‘“Section 126.
1
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85. What will guide the Liquidator in settling the claims againstthe
insolvent debtor?
Within three (3) months from his assumption into office,
the Liquidator shall submit a Liquidation Plan to the court. The
Liquidation Plan shall, as a minimum, enumerate all the assets
of the debtor, all the claims against the debtor and a schedule of
liquidation of the assets and payment of the claims.124
The Liquidator shall implement the Liquidation Plan as
approved by the court. Payments shall be made to the creditors only
in accordance with the provisions of the Plan.125
The Liquidation Plan and its implementation shall ensure that
the concurrence and preference of credits as enumerated in the Civil
Code of the Philippines and other relevant laws shall be observed,
unless a preferred creditor voluntarily waives his preferred right. For
purposes of this chapter, credits for services rendered by employees
or laborers to the debtor shall enjoy first preference under Article
2244 of the Civil Code, unless the claims constitute legal liens under
Articles 2241 and 2242 thereof.128
‘"'Section 129.
•“Section 132.
‘“Section 133.
,27Marilyn Victorio-Aquino v. Pacific Plans, supra.
‘“Sections 1 and 3 of Rule 5 of the FRIA Implementing Rules (A.M. No. 15-
04-06-SC).
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INSOLVENCY ACT OF 2010
(R.A. NO. 10142) ("FRIA”)
No relief can be extended to the party aggrieved by the
court’s order on the motion through a special civil action
for certiorari under Rule 65 of the Rules of Court.125
C. The court’s dismissal of the Petition for Suspension of
Payments on the ground of insufficiency in form and
substance resulting in the non-issuance of the Suspension
Order and its order confirming or disapproving the
proposed suspension of payment agreement, as well
as the Liquidation Order and the order approving or
disapproving the liquidation plan can only be reviewed
through a petition for certiorari to the Court of Appeals
under Rule 65 of the Rules of Court within 15 days from
notice of the decision or order.130
I
wIbid.
■“Sections 2 and 4, Rule 5.
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3. DATA PRIVACY ACT OF 2012
REPUBLIC ACT NO. 10173
SALIENT FEATURES
Introduction
A Time magazine article commented that data is now more
valuable than gold. Data can be utilized to determine customer
preference, analyze market behavior, monitor acts of competitors,
appeal to voters during elections, create false news, alter behavioral
patterns and for a variety of other purposes, from noble to sinister.
Our personal data are like cherished possessions. We hold on
to them tightly and only share with persons who enjoy our trust and
confidence. We thus lament and complain if our personal data are
collected, altered, removed, blocked, or simply used for unintended
purposes. Our Philippine Constitution guarantees, no less, the
citizens’ right to privacy. Special laws have been passed to further
strengthen such right. One of them, and the most recent, is the Data
Privacy Act of 2012.
500
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personal information included in the disclosure. Such disclosure,
however, will violate the lawyer-client confidentiality rule.
4, Who are the parties required to comply with the rules on data
processing under the DPA?
a. Personal Information Controllers (“PIC”) refer to a
person or organization who control the collection, holding,
processing or use of personal information, including a
person or organization who instructs another person or
organization to collect, hold, process, use, transfer, or
disclose personal information on his or her behalf.4
Examples are schools, offices, whether government or
private, law firms, hospitals, HMOs, search engines like
Google, or social media platforms like Facebook and
Twitter.
The following are EXCLUDED from the above definition:
i. A per son or organization who performs such functions
as instructed by another person or organization; and
ii. An individual who collects, holds, processes, or
uses personal information in connection with the
individual’s personal, family, or household affairs.5
’Section 7, DPA.
’Section 3(c), DPA.
’Section 3(h), DPA.
’Section 3(h), DPA.
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5. What is processing?
Processing refers to any operation or any set of operations
performed upon personal information including, but not limited
to, the collection, recording, organization, storage, updating or
modification, retrieval, consultation, use, consolidation, blocking,
erasure, or destruction of data.7
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’’See National Privacy Commission, NPC Advisory Opinion No. 2019-036 (July
3, 2019).
'aSee National Privacy Commission, NPC Advisory Opinion Nos. 2017-008
(January 9, 2017) and 2019-036 (July 3, 2019).
’’Sections 18 and 19, DPA IRR.
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3. DATA PRIVACY ACT OF 2012 505
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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.20
Thus, the image of a person recorded by a camera constitutes
personal data.21
Examples: The plate number of a car owner or the telephone
number of a person.
12, What are the matters outside the scope of application of the
DPA?
a. Information about a former or current public officer or
employee in relation to the position or functions of the
individual.26
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21See https://www.privacy.gov.ph/2017/09/npc-statement-saln-data-privacy/.
“Section 4, DPA.
“Section 4, DPA.
“Section 4, DPA.
’’Section 4, DPA.
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3. DATA PRIVACY ACT OF 2012 Wl
REPUBLIC ACT NO. 10173
SALIENT FEATURES
corporations vested with public interest may be processed
by the Bangko Sentral ng Pilipinas (“BSP”) and the
Securities and Exchange Commission (“SEC").
Nothing in the DPA shall be construed as to have amended
or repealed R.A. No. 1405, otherwise known as the Secrecy
of Bank Deposits Act; R.A. No. 6426, otherwise known as
the Foreign Currency Deposit Act; and R.A. No. 9510,
otherwise known as the Credit Information System Act
(“CISA”).32
Thus, the bank may disclose information about deposits
in the cases allowed by law.
f. Publishers, editors or duly accredited reporters of any
newspaper, magazine or periodical of general circulation
cannot be compelled to reveal the source of any news
report or information appearing in said publication which
was related in any confidence to such publisher, editor, or
reporter.33
g. Information necessary for banks and other financial
institutions under the jurisdiction of the BSP to comply
with CISA, and R.A. No. 9160 (Anti-Money Laundering
Act) and other applicable laws.31
Banks may disclose covered and suspicious transactions
to the Anti-Money Laundering Council (“AMLC”) without
violating the DPA.
h. Personal information originally collected from residents
of foreign jurisdictions in accordance with the laws of
those foreign jurisdictions, which is being processed in
the Philippines.35
Note that the burden of proving that the DPA and its IRR are
not applicable to a particular information falls on those involved
in the processing of personal data or the party claiming the non
applicability.36
“Section 4, DPA.
“Section 5, DPA.
“Section 4, DPA.
“Section 4, DPA.
“Section 6, DPA IRR.
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508 DI VINA ON COMMERCIAL LAW:
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37Section 6, DPA.
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3. DATA PRIVACY ACT OF 2012 509
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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. Those specifically established by an executive order or an
act of Congress to be kept classified.38
PI__________ SPI, 1
As to Processing Processing of PI is al Processing of SPI is pro
lowed if not otherwise hibited unless at least
prohibited by law, and one ground for lawful pro
when at least one ground cessing exists.
for lawful processing ex
ists (e.g., consent of data
subject).
16. What are the general data privacy principles that govern the
processing of personal information?
The processing of personal information shall be allowed,
subject to compliance with the requirements of the DPA and other
laws allowing disclosure of information to the public, and adherence
to the following principles:
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former employees in perpetuity in contemplation of a
possible future use to be determined.
f. Kept in a form which permits identification of data subjects
for no longer than is necessary for the purposes for which
the data were collected and processed: provided, that
personal information collected for other purposes may lie
processed for historical, statistical or scientific purposes,
and in cases laid down in law may be stored for longer
periods: provided, further, That adequate safeguards are
guaranteed by said laws authorizing their processing.
The personal information controller must ensure
implementation of personal information processing
principles set out herein.'12
17. What are the criteria for the lawful processing of personal
information?
The processing of personal information shall be permitted only
if not otherwise prohibited by law, and when at least one of the
following conditions exists:
a. The data subject has given his or her consent;
b. The processing of personal information is necessary and
is related to the fulfillment of a contract with the data
subject or in order to take steps at the request of the data
subject prior to entering into a contract;
Example: An employer may process the personal
information of a job applicant preparatory to the execution
of an employment contract.
c. The processing is necessary for compliance with a legal
obligation to which the personal information controller is
subject;
Example: Dormant bank accounts may be reported to the
national treasurer for the purpose of initiating escheat
proceedings.
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514 D1V1NA ON COMMERCIAL LAW:
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confirm that I have read the Terms and Conditions of the General
and Special Provisions on Deposits and have fully understood and
agreed to be governed by the provisions thereof, as well as the rules
and regulations of the Bank, Bangko Sentral ng Pilipinas, Anti
Money Laundering Council, Bankers Association of the Philippines
and the Bureau of Internal Revenue with respect to taxes imposed
on interests on deposits and bank commission/charges relative to
the establishment of operations of the account/s opened. I hereby
grant consent to ABC, Inc. and its subsidiaries, affiliates, otherwise
known as ABC Group, on the general use and sharing of my personal
data within the ABC Group, obtained from me in the course of my
transaction /s, business or other form of contractual or commercial
relationship. I acknowledge, understand, and agree that ABC and/
or its agents may process, obtain, collect, record, organize, store,
update, modify, use, access, share and/or disclose to any member
of the ABC Group my personal data for regular business use such
as but not limited to relationship management, marketing products
or services including cross-selling and direct marketing, profiling,
automated decision making, researching, survey, internal policy,
legal and regulatory compliance. I likewise acknowledge to have
read and understood ABC’s Data Privacy Statement which was
made available to me upon account opening and posted in the ABC’s
website www.abc.com.ph.
"Section 3, DPA.
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From the definition provided above, it is clear that consent may
be evidenced by written, electronic, or recorded means. Any of the
three (3) formats provided may be adopted by a personal information
controller relative to the collection and processing of personal data.
The NPC currently does not maintain any preference among the
three. Nonetheless, it is worth emphasizing that, regardless of the
format of the consent given by the data subject, it must be freely
given, specific, and informed.
It is evident that the consent contemplated by the law is an
express consent wherein the data subject voluntarily assents to the
collection and processing of personal information, rather than an
implied or inferred consent. Likewise, consent should be specific.
The limitation emphasizes that consent cannot be overly broad for
this would undermine the very concept of consent.
With respect to the above Conforms, it can be seen that:
1. ABC requires the consent of the members for the following:
a. General use and sharing of the personal data within
the ABC Group;
b. Regular business use such as, but not limited to,
relationship management, marketing products
or services including cross-selling and direct
marketing, profiling, automated decision making,
researching, survey, internal policy, and legal and
regulatory compliance.
2. The ABC Group is identified as the group of entities which
may process the personal data of the data subjects.
3. The types of processing involved are enumerated.
4. The purposes of processing are indicated.
Thus, the requirement of the law that the consent be freely
given, specific, and informed has been satisfied.
Note that in some cases, to enhance the adherence of the
consent form to the spirit of the general principles of data privacy,
a tick box for each item of processing is indicated to ensure that the
data subject explicitly consented to each processing, with the distinct
purposes therefor being separated and not bundled together. This
will give the data subject a genuine choice as he or she will not be
bound to sign off on the entire provision in toto.
i
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f. The processing concerns such personal information as is
necessary for the protection of lawful rights and interests
of natural or legal persons in court proceedings, or the
establishment, exercise or defense of legal claims, or
when provided to government or public authority.4’
Note: A person subpoenaed as a witness may testify as to what
he knows about a criminal offense committed by the accused.
4
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24. What are the five pillars of data privacy accountability and
compliance?
a. Appoint a Data Protection Officer (“DPO”); (Note: The
DPO shall be accountable for ensuring the compliance
by the PIC or PIP with the DPA, the DPA IRR, issuances
by the NPC, and other applicable laws and regulations
relating to privacy and data protection.)
b. Conduct a privacy risk assessment;
c. Establish a privacy management program and codify it
into a privacy manual;
d. Implement privacy and data protection measures; and
e. Exercise breach reporting procedures.
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a. Right to be informed.60
i. The data subject has a right to be informed whether
personal data pertaining to him or her shall be, are
being, or have been processed, including the existence
of automated decision-making and profiling.
ii. . The data subject shall be notified and furnished with
information indicated hereunder before the entry of
his or her personal data into the processing system
of the personal information controller, or at the next
practical opportunity:
(a) Description of the personal data to be entered
into the system;
(b) Purposes for which they are being or will be
processed, including processing for direct
marketing, profiling or historical, statistical or
scientific purpose;
(c) Basis of processing, when processing is not
based on the consent of the data subject;
(d) Scope and method of the personal data
processing;
(e) The recipients or classes of recipients to whom
I
the personal data are or may be disclosed;
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61See https://www.privacy.gov.ph/know-your-rightsWtopic7_part2.
“Section 34(b), DPA Rules.
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performance of or in relation to a contract or
service to which the data subject is a party, or when
necessary or desirable in the context of an employer
employee relationship between the collector and the
data subject; or
iii. The information is being collected and processed as
a result of a legal obligation.
The right to object is most specifically applicable when
organizations or personal information controllers are processing
data without consent of the data subject for the following purposes:53
i. Direct marketing purposes. When business
organizations give sales materials about products and
services, they must explicitly inform or remind the data
subject of his right to object. If the data subject feels
uncomfortable to being target of a direct marketing
campaign, he must be able to easily invoke his right to
object.
ii. Profiling purposes. Businesses customarily resort to
profiling, or the creation of profiles of individual customers
and clients without their consent. This is done either
for marketing or customer care purposes. The cross
referencing of customer information to product marketing
brings about practical advantages to both the buyer and
seller in any potential business transaction. Under DPA,
however, profiling of this requires consent of the data
subject as customer, or else the data subject is justified
in invoking his right to object. The right of state agents to
do profiling for law enforcement purposes, however, may
override the right to object.
iii. Automated processing purposes. In technology-driven
industries, such as banking and finance, many decisions
affecting individuals are arrived at electronically via
automatic data processing systems based on personal
information stored in computerized data files. This
reduces the business transaction process down to a few
seconds and facilitates a speedy exchange of economic
value. Potentially, however, it may also inadvertently
“See https://www.privacy.gov.ph/know-your-rights/#topic7_part2 .
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“See https://www.privacy.gov.ph/know-your-rights/#topic7_part2 .
^Melvin v. Reid, 112 Cal. App. 285, 297 P. 91 (Cal. Ct. App. 1931) as cited in
https://www.privacy.gov.ph/know-your-rights/#topic7_part2.
“Section 34(f), DPA IRR.
81Section 4, Rules of Procedure of NPC.
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concerned entity of the privacy violation or personal
data breach to allow for appropriate action on the
same; AND
ii. The personal information controller or concerned
entity did not take timely or appropriate action
on the claimed privacy violation or personal data
breach, or there is no response from the personal
information controller within 15 days from receipt
of information from the complaint; AND
iii. The complaint is filed within six (6) months from
the occurrence of the claimed privacy violation
or personal data breach, or 30 days from the
last communique with the personal information
controller or concerned entity, whichever is earlier.
h. Right to data portability.62
This right gives data subjects the mechanism to obtain
their personal data in an electronic or structured format
from personal information controllers if such personal
data is being processed through electronic means, and
enables the further use of such personal data by the data
subjects.
Note: Congress recently enacted the Mobile Number
Portability Act (RA 11202) which allows a mobile or
prepaid subscriber of mobile phone services to retain
their existing mobile number even if they move from
one service provider to another and even if they change
their subscription from postpaid to prepaid, or vice
versa, provided the subscriber has no existing financial
obligations to his/her current service provider.
i. Transmissibility of Rights of the Data Subject.63
The lawful heirs and assigns of the data subject may
invoke the rights of the data subject to which he or she is
an heir or an assignee, at any time after the death of the
data subject, or when the data subject is incapacitated or
incapable of exercising the rights as enumerated in the
immediately preceding section.
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28. What are the obligations of PIC or PIP under the DPA?
a. Security of Personal Information.
The personal information controller must implement
reasonable and appropriate organizational, physical
and technical measures intended for the protection of
personal information against any accidental or unlawful
destruction, alteration and disclosure, as well as against
any other unlawful processing.65
b. Accountability for Transfer of Personal Data.
A personal information controller shall be responsible for
any personal data under its control or custody, including
information that have been outsourced or transferred
to a personal information processor or a third party for
processing, whether domestically or internationally,
subject to cross-border arrangement and cooperation.
A personal information controller shall be accountable
for complying with the requirements of the DPA, the
DPA IRR, and other issuances of the NPC. It shall use
contractual or other reasonable means to provide a
comparable level of protection to the personal data while
it is being processed by a personal information processor
or third party.66
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In relation thereto, a personal information controller
may subcontract or outsource the processing of personal
data: Provided, that the personal information controller
shall use contractual or other reasonable means to
ensure that proper safeguards are in place, to ensure
the confidentiality, integrity and availability of the
personal data processed, prevent its use for unauthorized
purposes, and generally, comply with the requirements of
the DPA, DPA Rules, other applicable laws for processing
of personal data, and other issuances of the NPC.67
C. Data Breach Notification.
The NPC and affected data subjects shall be notified by
the personal information controller within 72 hours upon
knowledge of, or when there is reasonable belief by the
personal information controller or personal information
processor that, a personal data breach requiring
notification has occurred.
Notification of personal data breach shall be required
when sensitive personal information or any other
information that may, under the circumstances, be
used to enable identity fraud are reasonably believed to
have been acquired by an unauthorized person, and the
personal information controller or the NPC believes that
such unauthorized acquisition is likely to give rise to a
real risk of serious harm to any affected data subject.63
Note: In case a lawyer inadvertently shares the case details
containing personal and sensitive personal information to
an unauthorized person, the breach should be reported to
the NPC.
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SALIENT FEATURES
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4. PHILIPPINE COMPETITION ACT
REPUBLIC ACT NO. 10667
SALIENT FEATURES
1. What is the state policy for the enactment of R.A. No. 10667,
otherwise known as the "Philippine Competition Act" ("PCA")?
The efficiency of market competition as a mechanism for
allocating goods and services is a generally accepted precept. The
State recognizes that past measures undertaken to liberalize key
sectors in the economy need to be reinforced by measures that
safeguard competitive conditions. The State also recognizes that
the provision of equal opportunities to all promotes entrepreneurial
spirit, encourages private investments, facilitates technology
development and transfer, and enhances resource productivity.
Unencumbered market competition also serves the interest of
consumers by allowing them to exercise their right of choice over
goods and services offered in the market.
Pursuant to the constitutional goals for the national economy
to attain a more equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods and services
produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially
the underprivileged, and the constitutional mandate that the State
shall regulate or prohibit monopolies when the public interest so
requires and that no combinations in restraint of trade or unfair
competition shall be allowed, the State shall:
a. Enhance economic efficiency and promote free and
fair competition in trade, industry and all commercial
economic activities, as well as establish a National
Competition Policy to be implemented by the Government
of the Republic of the Philippines and all of its political
agencies as a whole;
b. Prevent economic concentration which will control the
production, distribution, trade, or industry that will
530
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4. PHILIPPINE COMPETITION ACT 531
REPUBLIC ACT NO. 10667
SALIENT FEATURES
‘Section 2, PCA.
1
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^ttps://phcc.gov.ph/about-us/phcc-mission/
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4. PHILIPPINE COMPETITION ACT 533
REPUBLIC ACT NO. 10667
SALIENT FEATURES
“Section 6, PCA.
‘Section 7, PCA.
‘Section 10, PCA.
‘Sections 12 and 32, PCA.
’Section 38, PCA.
‘Section 12(f), PCA.
’Section 29, PCA.
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10. Does the PCC have the authority to institute court proceedings
for violation of competition laws?
The PCC has the power to institute the appropriate civil or
criminal proceedings for violation of the PCA and other existing
competition laws.13
Note that any other person who suffers direct injury by reason
of any violation of the PCA may also institute a separate and
independent civil action after the PCC has completed its preliminary
inquiry.14
11. Does the Regional Trial Court ("RTC") have jurisdiction for
violations of the PCA?
The RTC of the city or province where the entity or any of the
entities whose business act or conduct constitutes the subject matter
of a case, conducts its principal place of business, shall have original
and exclusive jurisdiction, regardless of the penalties and fines
herein imposed, of all criminal and civil cases involving violations
of the PCC and other competition-related laws. If the defendant or
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4. PHILIPPINE COMPETITION ACT 535
REPUBLIC ACT NO. 10667
SALIENT FEATURES
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4. PHILIPPINE COMPETITION ACT 537
REPUBLIC ACT NO. 10667
SALIENT FEATURES
agree on the prices of goods or services, rather than independently
setting their respective prices.24
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538 DIVINA ON COMMERCIAL LAW:
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aIbid.
50An Introduction to Competition Law, Philippine Competitions Commission.
’’Section 4(g), PCA.
’’Section 27, PCA.
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4. PHILIPPINE COMPETITION ACT 541
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SALIENT FEATURES
*
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542 DIVINA ON COMMERCIAL LAW:
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4. PHILIPPINE COMPETITION ACT 543
REPUBLIC ACT NO. 10607
SALIENT FEATURES
28. Who are the notifying entities to the PCC for compulsory
notification?
a. Parties to a merger or acquisition that satisfy the
compulsory notification thresholds are required to notify
the PCC before the execution of the definitive agreements
relating to the transaction.
b. If notice to the PCC is required for a merger or acquisition,
then all acquiring and acquired pre-acquisition ultimate
parent entities or any entity authorized by the ultimate
parent entity to file notification on its behalf must each
submit a Notification Form and comply with the procedure
for notification with the PCC under the PCA Rules. The
parties shall not consummate the transaction before the
expiration of the relevant periods provided in the PCC
Rules.
c. In the formation of a joint venture (other than in connection
with a merger or consolidation), the contributing entities
shall be deemed acquiring entities, and the joint venture
shall be deemed the acquired entity.38
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544 DI VINA ON COMMERCIAL LAW:
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I
•!
No negative impact on
I
No PCC decision after Request for additional
competition: 30 days: information and/or statement
PCC appoves Deemed approved of concerns about potential
for harm to competition in the
4' relevant market;
PCC posts decision Parties are informed that
on website a comprehensive review is
warranted
4 ~
PCC posts abstract of
transaction after phase 1
review moving into phase
2 review
* I
Phase 2 review
(60 days)
I
4 4 I
PCC disapproves PCC approves No PCC decision
after 60 days:
Deemed approved
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4. PHILIPPINE COMPETITION ACT M5
REPUBLIC ACT NO. 10667
SALIENT FEATURES
30. How much is the filing fee for the notification and review of
M&A by the PCC?
The following fees'10 shall apply:
a. Upon filing of the Notification Form: P250,000.00.
b. Commencement of Phase 2 Review: 1% of the 1% of the
value of the transaction which shall not be less than Pl
billion nor exceed P5 billion.
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4. PHILIPPINE COMPETITION ACT 547
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SALIENT FEATURES
42In the Matter of Acquisition by Grab Holdings, Inc. and MyTaxci.PH Inc., of
Assets of Uber B.V. and Uber Systems, In., PCC Case No. M-2018-001, April 6,2018.
“Ibid.
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548 DIVINA ON COMMERCIAL LAW:
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"In the Matter of Acquisition by Grab Holdings, Inc. and MyTaxi.PH Inc., of
Assets of Uber B.V. and Uber Systems, Inc., PCC Case No. M-2018-001, October 11,
2018.
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4. PHILIPPINE COMPETITION ACT 549
REPUBLIC ACT NO. 10667
SALIENT FEATURES
35. How did the PCA define relevant market and how is it
determined?
Relevant market refers to the market in which a particular
good or service is sold and which is a combination of the relevant
product market and the relevant geographic market, defined as
follows:
a. A relevant product market comprises all those goods and/
or services which are regarded as interchangeable or
substitutable by the consumer or the customer, by reason
of the goods and/or services’ characteristics, their prices
and their intended use; and
b. The relevant geographic market comprises the area in
which the entity concerned is involved in the supply and
demand of goods and services, in which the conditions of
competition are sufficiently homogenous and which can
be distinguished from neighboring areas because the
conditions of competition are different in those areas.46
For purposes of determining the relevant market, the following
factors, among others, affecting the substitutability among goods
or services constituting such market and the geographic area
delineating the boundaries of the market shall be considered:
a. The possibilities of substituting the goods or services
in question, with others of domestic or foreign origin,
4
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SALIENT FEATURES
C. There is power to appoint or remove the majority of the
members of the board of directors or equivalent governing
body;
d. There is power to cast the majority votes at meetings of
the board of directors or equivalent governing body;
e. There exists ownership over or the right to use all or a
significant part of the assets of the entity; or
f. There exist rights or contracts which confer decisive
influence on the decisions of the entity.”
1
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552 DIVINA ON COMMERCIAL LAW:
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38. How does the PCC determine whether an entity has a market
dominant position?
In determining whether an entity has market dominant
position, the PCC shall consider the following:
a. The share of the entity in the relevant market and
whether it is able to fix prices unilaterally or to restrict
supply in the relevant market;
b. The existence of barriers to entry and the elements which
could foreseeably alter both said barriers and the supply
from competitors;
c. The existence and power of its competitors;
d. The possibility of access by its competitors or other
entities to its sources of inputs;
e. The power of its customers to switch to other goods or
services;
f. Its recent conducts; and
g- Other criteria established by the regulations of the PCA.
There shall be a rebuttable presumption of market dominant
position if the market share of an entity in the relevant market is
at least 50%, unless a new market share threshold is determined by
the PCC for that particular sector.
The PCC shall not consider the acquiring, maintaining
and increasing of market share through legitimate means not
substantially preventing, restricting, or lessening competition in the
market such as but not limited to having superior skills, rendering
superior service, producing or distributing quality products, having
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5. TRUST RECEIPTS LAW
PRESIDENTIAL DECREE NO. 115
’Section 4, Trust Receipts Law (P.D. No. 115), January 29, 1973.
554
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5. TRUST RECEIPTS LAW 555
PRESIDENTIAL DECREE NO. 115
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556 DIVINA ON COMMERCIAL LAW:
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6Ibid.
’Section 9, P.D. No. 115
8Section 13, P.D. No. 115.
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5. TRUST RECEIPTS LAW 557
PRESIDENTIAL DECREE NO. 115
A mere failure to deliver the proceeds of the sale or the goods if not
sold, constitutes a criminal offense that causes prejudice not only to
another, but more to the public interest. The enactment of P.D. No.
115 is a valid exercise of the police power of the State and is, thus,
constitutional.9
In another case, it was held that the failure of the entrustee
to turn over the proceeds of the sale of the goods covered by a trust
receipt to the entruster or to return the goods, if they were not
disposed of, shall constitute the crime of estafa. However, what is
being punished by law is the dishonesty and abuse of confidence
in the handling of money or goods to the prejudice of another
regardless of whether the latter is the owner. No dishonesty nor
abuse of confidence can be attributed to the entrustee if the latter
failed to comply with its obligation upon maturity of the trust receipt
due to serious liquidity problems and after it was placed under the
control of the management committee created by SEC10 which took
custody of the entrustee’s assets, including lumbers subject of the
trust receipt. Clearly, it was the management committee which
could settle the entrustee’s obligations. The mala prohibita nature
of the offense notwithstanding, the entrustee’s intent to misuse or
misappropriate the goods or their proceeds has not been established
based on the circumstances.11
8. What are the legal effects of the loan and security features of a
trust receipt transaction?
The legal effects of the loan and security features of a trust
receipt transaction are as follows:
a. The return of the goods to the entruster does not relieve
the entrustee of the obligation to pay the loan because
the entruster is not the factual owner of the goods and
merely holds them as owner in the artificial concept for
the purpose of giving stronger security for the loan. It
does, however, result in the acquittal of the accused in
the estafa case. Although the surrender of the goods to
the entruster results in the acquittal of the accused in the
estafa case, it is not a bar to the institution of a civil action
Metropolitan Bank & Trust Company v. Tonda, G.R. No. 134436, August 16,
2000.
■“Now, the Regional Trial Court under the SRC and FRIA.
"Pilipinas Bank v. Ong, G.R. No. 133176, August 8,2002.
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558 DIVINA ON COMMERCIAL LAW:
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I2Vintola v. Insular Bank of Asia and America, G.R. No. 73271, May 29,1987
13Lee v. Court of Appeals, G.R. No. 117913, February 1, 2002.
’’Vintola v. Insular Bank of Asia and America, G.R. No. 73271, May 29,1987.
16Section 10, P.D. No. 115, Rosario Textile Mills Corp v. Home Bankers Savings
and Trust Company, G.R. No. 137232, June 29, 2005 (BAR 2015).
16Philippine National Bankv. Pineda, G.R. No. L-46658, May 13,1991
’’Philippine National Bank v. Pineda, G.R. No. L-46658, May 13,1991.
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5. TRUST RECEIPTS LAW 559
PRESIDENTIAL DECREE NO. 115
1
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5. TRUST RECEIPTS LAW 561
PRESIDENTIAL DECREE NO. 115
21Hur Tin Yang v. People, G.R. No. 195117, August 14, 2013.
“Anthony L. Ng v. People of the Philippines, G.R. No. 173905, April 23,2010
“Allied Banking v. Ordonez, G.R. No. 82495, December 10,1990.
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the goods subject of the transaction were used in the operation of the
equipment and machineries of the corporation.
This ruling should be deemed superseded by the subsequent
cases of Ng t>. People, Hur Ting Yang v. People and Land Bank i>.
Perez.2*
10. Maine Den, Inc. opened an irrevocable letter of credit with Fair
Bank, in connection with Maine Den, Inc.'s importation of spare
parts for its textile mills. The imported parts were released to
Maine Den, Inc. after it executed a trust receipt in favor of Fair
Bank. When Maine Den, Inc. was unable to pay its obligation
under the trust receipt. Fair Bank sued Maine Den, Inc. for
estafa under the Trust Receipts Law. The court, how dismissed
the suit. Was the dismissal justified? Why or why not?
The dismissal of the complaint for estafa is justified. Under
recent jurisprudence, the Supreme Court held that transactions
referred to in relation to trust receipts mainly involved sales and
if the entruster knew even before the execution of the alleged trust
receipt agreement that the goods subject of the trust receipt were
never intended by the entrustee for resale or for the manufacture
of items to be sold, the agreement is not a trust receipt transaction
but a simple loan, notwithstanding the label. In this case, the object
of the trust receipt, spare parts for textile mills, were for the use of
the entrustee and never intended for sale. As such, the transaction
is a simple loan.26
3) Sale of goods by a person in the business of selling goods,
for profit, who at the outset of the transaction has as
against the buyer general property rights in such goods
and the seller agrees to hold the proceeds of the sale of
such goods to his creditor under a supposed trust receipt
transaction.
Abel was engaged as a distributor and trader of fruits and
vegetables in his province. Jasmine Farms is his main supplier
of these fruits and vegetables Abel executed trust receipts
2*Land Bank of the Philippines v. Perez, G.R. No. 166884, June 13, 2012.
“Ng v. People of the Philippines, G.R. No. 173905, April 23, 2010; Land
Bank v. Perez, G.R. No. 166884, June 13, 2012; and Hur Ting Yang v. People of the
Philippines, G.R. No. 195117, August 14, 2013 (BAR 2015).
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5. TRUST RECEIPTS LAW m
PRESIDENTIAL DECREE NO. 115
“Spouses Dela Cruz v. Planter’s Products, Inc., G.R. No. 158649, February
18,2013.
!7d.
“Ramos v. Court of Appeals, G.R. No. L-49218, August 27,1987.
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5. TRUST RECEIPTS LAW 565
PRESIDENTIAL DECREE NO. 115
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5. TRUST RECEIPTS LAW 567
PRESIDENTIAL DECREE NO. 115
13. Who has a better right over the goods subject of the trust
receipt, the creditors of the entrustee or the entruster?
The entruster’s security interest in the goods under trust
receipt shall be valid as against all creditors of the entrustee for the
duration of the trust receipt agreement.36 Thus, the security interest
of the entruster over the goods under trust receipt is superior than
the claims of the entrustee’s creditors.
14. What about between the entruster and the innocent purchaser
for value?
The innocent purchaser for value of the goods has a better
right than the entruster. He acquires title to the goods free from the
security interest of the entruster.37
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5. TRUST RECEIPTS LAW 569
PRESIDENTIAL DECREE NO. 115
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5. TRUST RECEIPTS IZW 571
PRESIDENTIAL DECREE NO. 115
H. Remedies Available
48BDO Unibank v. Antonio Choa, G.R. No. 237533, July 10,2019, (J. Leonen).
"People v. Nitafan, G.R. No. 81559-60, April 6,1992 (BAR 1980).
“7d.
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23. May a civil action for the collection of the loan be instituted
independently of the criminal action for violation of the trust
receipts law or after the acquittal by entrustee in the criminal
action due to his surrender of the goods to the entruster?
Yes, because the loan feature of a trust receipt is distinct from
its security features. What the entrustee does with the goods, as
security for the loan, determines his criminal liability. For instance,
the return of the goods may extinguish his criminal liability but
until the loan is paid, his civil obligation remains. The civil action
of the entrustee is based on ex contractu while the criminal action is
based on ex delictu. The two actions may proceed independently of
each other despite the failure of the entruster to make reservation
in the criminal action.
Note: A breach of obligation, such as failure to comply with
the stipulations in the trust receipt, is separate and distinct from
any criminal liability for misuse and/or misappropriation of goods or
proceeds realized from the sale of goods, documents or instruments
released under trust receipts, punishable under Section 13 of the
Trust Receipts Law (P.D. No. 115) in relation to Article 315(1), (b) of
the Revised Penal Code. Being based on an obligation ex contractu
and not ex delicto, the civil action may proceed independently of the
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“Sarmiento, Jr. v. Court of Appeals, G.R. No. 122502, December 27, 2002.
62Philippine National Bank v. Pineda, G.R. No. L-46658, May 13,1991.
i3Id.; (BAR 1992).
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5. TRUST RECEIPTS LAW r,75
PRESIDENTIAL DECREE NO. 115
66W.
“Land & Company (Phil.) v. Metropolitan Bank & Trust Co., G.R. No. 159622,
July 30, 2004.
1
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6. E-COMMERCE LAW
(ELECTRONIC COMMERCE ACT)
’Section 3, Electronic Commerce Act (R.A. No. 8792), June 14, 2000.
2Section 4, R.A. No. 8792.
3Section 29, R.A. No. 8792.
576
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11. What are the rules on the admissibility and evidentiary weight
of an Electronic Data Message or Electronic Document?
In any legal proceedings, the admissibility of an electronic data
message or electronic document in evidence cannot be denied:
a. On the sole ground that it is in electronic form; or
b. On the ground that it is not in the standard written
form and electronic data message or electronic document
meeting and complying with the requirements under
Section 6 or 7 hereof shall be the best evidence of the
agreement and transaction contained therein.
In assessing the evidential weight of an electronic data message
or electronic document, the reliability of the manner in which it was
generated, stored or communicated, the reliability of the manner in
which its originator was identified, and other relevant factors shall
be given due regard.17
1
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13. Jean and Annie are opposing candidates for the 1st District of
Palawan. Annie lost to Jean by a thin margin of 800 votes. Annie
filed an electoral protest before the House of Representatives
Electoral Tribunal (HRET), assailing the results in several
precincts. Annie moved for printing of the picture images of
the ballots of the questioned precincts stored in the PCOS
machines, as there were irregularities in the condition of the
ballot boxes. The HRET directed the copying of the picture
image files relative to the protest. Jean argues that the picture
images of the ballots cannot be considered as the "official
ballots" or the equivalent of the original paper ballots which
the voters filled out. Jean maintains that, since the automated
election system used was paper-based, the "official ballot" is
only the paper ballot. Is Jean correct?
18MCC Industrial Sales Corp. Ssangyong Corp., G.R. No. 170633, October
17, 2007.
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(ELECTRONIC COMMERCE ACT)
1
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6. E-COMMERCE LAW 585
(ELECTRONIC COMMERCE ACT)
17. What are the prohibited acts under the Electronic Commerce
Act?
1. Hacking or crackling: unauthorized access into or
interference in a computer system/server or information
and communication system; or any access in order to
corrupt, alter, steal, or destroy using a computer or other
similar information and communication devices, without
the knowledge and consent of the owner of the computer
or information and communications system, including the
introduction of computer viruses and the like, resulting
in the corruption, destruction, alteration, theft or loss of
electronic data messages or electronic documents.
2. Piracy or the unauthorized copying, reproduction,
dissemination, or distribution, importation, use, removal,
alteration, substitution, modification, storage, uploading,
downloading, communication, making available to the
public, or broadcasting of protected material, electronic
signature or copyrighted works including legally protected
sound recordings or phonograms or information material
on protected works, through the use of telecommunication
networks, such as, but not limited to, the internet, in a
manner that infringes intellectual property rights.
3. Violations of the Consumer Act of Republic Act No. 7394
and other relevant to pertinent laws through transaction
covered by or using electronic data messages or electronic
documents.
4. Other violations of the provisions of the Act.26
uId.
“Section 32, R.A. No. 8792.
“Section 33, R.A. No. 8792.
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586
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promissory note with the bank as a maker. The checks become the
primary obligation of the bank which issues them and constitutes
the bank's written promise to pay upon demand. The mere issuance
of this type of check is considered as acceptance thereof. They are
good as cash.’
’International Corporate Bank v. Gueco, G.R. No. 141968, February 12, 2001,
RCBC Savings Bank v. Noel M. Odrada, G.R. No. 219037, October 19, 2016.
“Section 60, R.A. No. 7653, otherwise known as “The New Central Bank Act."
“Article 1249, Civil Code.
10New Pacific Timber v. Seneris, G.R. No. L-41764, December 19, 1980; Tanv.
Court of Appeals, G.R. No. 108555, December 20, 1994.
"Tibajia v. Court of Appeals, G.R. No. 100290, June 4, 1993; Roman Catholic
Bishop of Malolos v. Intermediate Appellate Court, G.R. No. 72110, November 16,
1990.
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16See the case of Salas v. Court of Appeals, G.R. No. 96160, June 17,1992.
16Section 191, NIL.
'’Section 18, Act No. 2031.
'“Section 18, ibid.
‘“Section 19, ibid.
wIbid.
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21Section 3, NIL.
^Section 2, NIL.
^Section 7, NIL.
24Section 4, NIL.
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“Juanita Salas v. Hon. Court of Appeals and First Finance & Leasing
Corporation, G.R. No. 76788, January 22, 1990.
“Section 8, NIL.
27Section 9, NIL.
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“People of the Philippines v. Gilbert Reyes Wagas, G.R. No. 157943, September
I, 2013.
“Section 128, NIL.
“Equitable Banking Corporation v. Intermediate Appellate Court and Edward
J. Nell Co., G.R. No. 74451, May 25, 1988.
31 Ibid.
L
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13. What are the omissions and provisions that do not affect
negotiability?
The validity and negotiable character of an instrument are not
affected by the fact that:36
a. It is not dated; or
b. Does not specify the value given, or that any value has
been given therefor; or
c. Does not specify the place where it is drawn or the place
where it is payable; or
d. Bears a seal; or
e. Designates a particular kind of current money in which
payment is to be made.
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7. NEGOTIABLE INSTRUMENTS LAW 597
“Caltex (Philippines), Inc. v. Court of Appeals and Security Bank and Trust
Company, G.R. No. 97753, August 10, 1992.
39BAR 2011.
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"BAR 2002.
"BAR 1997.
L
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“Philippine Education Co., Inc. v. Mauricio A. Soriano, et al., G.R. No. L-22405,
June 30, 1971.
“Metropolitan Bank & Trust Company v. Court of Appeals, G.R. No. 88866,
February 18, 1991.
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7. NEGOTIABLE INSTRUMENTS UAW 601
“Firestone Tire & Rubber Company of the Philippines v. Court of Appeals and
Luzon Development Bank, G.R. No. 113236, March 5, 2001.
“Prudential Bank v. Commissioner of Internal Revenue (CIR), G.R. No.
180390, July 27, 2011.
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^'Traders Royal Bank v. Court of Appeals, G.R. No. 93397, March 3, 1997.
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21. Is there valid delivery if the instrument was given to the payee
only to guarantee certain obligation?
The delivery should be for the purpose of giving effect to the
instrument, otherwise, the payee does not acquire any title thereto.
In one case, it was held that if the post-dated check (PDC) was
given to the payee in payment of an obligation, the purpose of giving
effect to the instrument is evident, thus title or ownership of the
check was transferred to the payee. However, if the PDC was not
given as payment, but only as a guarantee for payment, and in the
meantime, the drawer was to pay for the transaction by some other
means other than the PDC, it is clear that there was no intent to
give effect to the instrument and ownership was not transferred.
This being so, title to the check did not transfer to the payee; it
remained with the drawer. Thus, even if the drawer retrieved the
check, there is no probable cause for theft because the element of
taking was not established.62
In another case, a bank depositor delivered to Caltex certificates
of deposit issued by Security Bank to guarantee the depositor’s
purchase of fuel products. Subsequently, the depositor obtained new
CTDs after representing with the Bank that he lost the original
certificates. The depositor then obtained a loan from Security Bank
secured by assignment of the new CTDs. When Caltex tried to
pre-terminate the CTDs, the Bank refused. When the loan of the
depositor matured, the Bank applied the time deposits in question
to pay the matured loan. As a result, Caltex filed a complaint for
collection of the aggregated value of the CTDs against Security
Bank. The Supreme Court held that there was no negotiation in
the sense of a transfer of legal title to the CTDs in favor of Caltex.
The delivery thereof is only as a security for the purchase of the fuel
products. Caltex at most can only be a holder for value. Accordingly,
a negotiation for such purpose cannot be effected by mere delivery
of the instrument since, necessarily, the terms thereof and the
subsequent disposition of such security, in the event of non-payment
of the principal obligation, must be contractually provided for.
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Aside from the fact that the CTDs were only delivered but
not indorsed, Caltex failed to produce any document evidencing
any contract of pledge or guarantee agreement between it and its
depositor. Consequently, the mere delivery of the CTDs did not
legally vest in Caltex any right effective against and binding upon
Security Bank.
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was proven that the instrument had not been filled up strictly in
accordance with the authority given and within a reasonable time,
the maker can set this up as a personal defense and avoid liability.
However, if the holder is a holder in due course, there is a conclusive
presumption that authority to fill it up had been given and that the
same was not in excess of authority.64
In another case, the maker of the promissory notes sought to
avoid liability by claiming that the notes were in blank; that they
had not received the value of said notes; and that the credit line
thereon was unnecessary in view of their money deposits with the
payee-bank. The Supreme Court ruled that because the promissory
notes were negotiable, then it is presumed that they have been
issued for a valuable consideration. In any case, it is no defense
that the promissory notes were signed in blank as Section 14 of the
Negotiable Instruments Law concedes the prima facie authority
of the person in possession of negotiable instruments to fill in the
blanks.55
61 Alvin Patrimonio v. Napoleon Gutierrez and Octavio Marasigan III, G.R. No.
187769, June 4, 2014.
65Quirino Gonzales Logging Concessionaire, Quirino Gonzales and Eufemia
Gonzales v. the Court of Appeals (CA) and Republic Planters Bank, G.R. No. 126568,
April 30, 2003.
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24. When can a holder insert the true date of issue or acceptance
of an instrument?
Where an instrument expressed to be payable at a fixed
period after date is issued undated, or where the acceptance of an
instrument payable at a fixed period after sight is undated, any
holder may insert therein the true date of issue or acceptance
and the instrument shall be payable accordingly. The insertio,
of a wrong date does not avoid the instrument in the hands of i
subsequent holder in due course; but as to him, the date so inserted
is to be regarded as the true date.56
However, where the instrument or an acceptance or any
indorsement thereon is dated, such date is deemed prima facie to be
the true date of the making, drawing, acceptance, or indorsement,
as the case may be.67
In one case, a drawer issued a postdated check in favor of the
payee, who knew that the account would not be funded. They agreed
that the check would only be used as evidence of a loan transaction.
The payee, however, deposited the check and sued the drawer
for estafa after the check was dishonored. The payee argued that
the check could not have been a simple evidence of indebtedness,
otherwise, the date of the check would have been indicated. In
rejecting the argument of the payee, the Supreme Court ruled the
payee need not even ask the drawer to place a date on the check,
because as holder of the check, he could have inserted the date
pursuant to Section 13 of the Negotiable Instruments Law (NIL).
1
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27. Jose Reyes signed a blank check, and in his haste to attend a
party, left the check on top of his executive desk in his office.
Later, Nazareno forced open the door to Reyes' office and stole
the blank check. Nazareno immediately filled in the amount
of P50,000 and a fictitious name as payee on the said check.
Nazareno then endorsed the check in the payee’s name and
passed it to Roldan. Thereafter, Roldan endorsed the check to
Dantes.
a) Can Dantes enforce the check against Jose Reyes?
Explain.
b) If Dantes is a holder in due course, will your answer to
question a) be the same? Explain.
c) Can Dantes enforce the check against Roldan? Explain.
Answer:
a) Dantes cannot enforce the check against Jose Reyes, who
can raise the defense that the check as incomplete and
not delivered, when only stolen and filled up by Nazareno.
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1
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C. Signature
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7. NEGOTIABLE INSTRUMENTS LAW 611
31. What are the liabilities of an agent who signs the instrument?
Where the instrument contains or a person adds to his signature
words indicating that he signs for or on behalf of a principal, or in a
representative capacity, he is not liable on the instrument if he was
duly authorized; but the mere addition of words describing him as
an agent, or as filling a representative character, without disclosing
his principal, does not exempt him from personal liability.66
It was held that where a person adds to his signature words
indicating that he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the instrument if he
was duly authorized; but the mere addition of words describing
him as an agent or as filling a representative character, without
disclosing his principal, does not exempt him from personal liability.
Thus, if the drafts accepted by the defendant shows that nowhere
has he disclosed that he was signing as a representative of thf
drawee corporation, such failure to disclose his principal makes hin
personally liable for the drafts he accepted.67
i
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d. It is an invalid indorsement.
Answer:
a) It is an ultra vires act.
b) It is a valid indorsement.71
Note that where a broker or agent negotiates an instrument
without indorsement, he incurs all liabilities in Section 65 of the
Negotiable Instruments Law, unless he discloses the name of
principal and the fact that he is only acting as an agent.72
4. Forgery
"BAR 2012.
72Section 69, NIL.
73Bank of the Philippine Islands v. Casa Montessori Internationale and
Leonardo T. Yabut, G.R. No. 149454, May 28, 2004.
4
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7. NEGOTIABLE INSTRUMENTS LAW 615
In case the forger deposits the forged check with his bank, such
bank, called presenting/collecting bank, shall present the check to
the drawee bank through the facilities of the Philippine Clearing
House Corporation. The drawee bank compares the signature
of the drawer against his specimen signature with the bank. The
drawee bank is thus expected to return the check in case of forgery.
If the check is accordingly returned, the drawer’s account will not
be deducted. The drawee bank has 24 hours from presentment
to return the check to the collecting bank, otherwise, its clearing
account will be debited and the clearing account of the collecting
bank will be credited. The drawee bank shall then debit the account
of the drawer and the collecting bank shall then credit the account
of the depositor/forger. Thus, for failure to detect the forgery of the
drawer’s signature, the drawee bank generally bears the loss.
It was held that if a bank pays a forged check, it must be
considered as paying out of its funds and cannot charge the amount
so paid to the account of the depositor. A bank is liable, irrespective
of its good faith, in paying a forged check.76
In another case, it was held that pursuant to its duty to
ascertain the genuineness of the signature of the drawer or depositor
on the check being encashed, a bank is expected to use reasonabh
business prudence in accepting and cashing a check presented to it
When a check was stolen by a classmate and friend of the drawer
who thereafter forged the latter’s signature, the drawee bank should
return the amount debited from the account of the drawer, because
the drawee was guilty of negligence in paying the check despite the
forged signature, and the drawer, under the circumstances, could
not be considered negligent.77
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’“BAR 1990.
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forged, all parties prior to the forgery may raise the real defense of
forgery against all parties subsequent thereto.70
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43. Who are the parties barred from invoking the defense of
forgery?
a. Those who by their action or omission are barred from
invoking the defense of forgery;
b. Those who warrant the genuineness of signatures like the
indorsers,86 and the acceptor87;
c. Those who invoke forgery when it is not necessary to the
title of the holder of the instrument.
44. Cite jurisprudence where the Supreme Court ruled that the
drawer of a check is precluded from invoking forgery.
a. A drawer who discovered the loss of his checkbook but did
not notify the drawee bank of such loss should bear the
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“Philippine National Bank FF Cruz and Company, G.R. No. 173259, July
25, 2011.
“'Manila Lighter Transportation, Inc. V. Court of Appeals, G.R. No. 50373,
February 15, 1990.
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46. Cite jurisprudence where the Supreme Court ruled that both
the drawee and collecting bank are liable.
1. A bank which allowed the pre-termination of a money
market placement without making verification with
the client and comparing the signature in the letter
pre-terminating the money market placement with the
specimen signature of the client on file and without
requiring the surrender of the promissory note evidencing
the money market placement is considered negligent,
more so in this case, where the instruction was made by
a swindler who impersonated the client with a money
"BDO Unibank, Inc. v. Engr. Selwyn Lao Doing Business under the Name and
Style “Selwyn F. Lao Construction”, G.R. No. 227005, June 19, 2017; Associated Bank
and Conrado Cruz v. Hon. Court of Appeals, G.R. No. 89802, May 7, 1992; Westmont
Bank v. Ong, G.R. No. 132560, January 30, 2002.
"Development Bank of Rizal v. Sima Wei, G.R. No. 85419, March 9,1993.
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D. Consideration
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mIbid.
‘‘“Ting Ting Pua v. Spouses Benito, G.R. No. 198660, October 23, 2013.
‘"Bank of the Philippine Islands v. Court of Appeals, G.R. No. 136202, January
25,2007.
‘“Section 26, NIL.
‘“Section 26, NIL.
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E. Accommodation Party
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"°BAR 2005.
"''Ibid.
118AngTiong v. Lorenzo Ting, doing business under the name & style of Prunes
Preserves MFG. & Felipe Ang, G.R. No. L-26767, February 22, 1968.
119Crisologo Jose v. Court of Appeals, G.R. No. 80599, September 15, 1989.
120GSIS v. Court of Appeals, G.R. No. L-40824, February 23, 1989.
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121Ang Tiong v. Ting, G.R. No. L-26767, February 22, 1968; (BAR 1976).
122Henry dela Rama Co v. Admiral United Savings Bank, G.R. No. 154740,
April 16, 2008.
123Caneda v. Court of Appeals, G.R. No. 81322, February 5, 1990.
‘“Town Saving and Loan Bank, Inc. v. Court of Appeals, G.R. No. 106011,
June 17, 1993.
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F. Negotiation
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7. NEGOTIABLE INSTRUMENTS LAW 633
66. If Anna did not pay, to whom are Bing, Carmen, Dong and
Emma liable?
Bing, not being an indorser, may only be held liable for breach
of warranty of a party negotiating by delivery but the facts in the
problem do not disclose any such breach. Her warranties likewise
extend only to the immediate transferee.
Carmen, under her special indorsement, may be belt
secondarily liable by Dong and Emma since the latter (Dong an
Emma) derived title under Carmen’s special indorsement. Carm<
is not secondarily liable to Fe since the latter obtained it by mei
delivery from Emma and therefore did not obtain title through
Carmen’s special indorsement.
Dong holds himself secondarily liable to Emma since the latter
derived title under Dong’s special indorsement but not to Fe who
acquired the instrument only by delivery.
Emma, not being an indorser, is only liable to Fe in case of
breach of warranties of party negotiating by mere delivery, but the
facts in the problem do not disclose any such breach.
A party negotiating by delivery like Bing and Emma do not
warrant the solvency of the principal debtor, Anna in this case.
67. What if Emma also indorsed the instrument to Fe, what will be
Fe's cause of action?
Fe can then proceed against anyone of Carmen, Dong and
Emma after giving the appropriate notices of dishonor. Because of
the successive chain of unbroken special indorsements, it can now
be said that Fe derived her title from those indorsements.
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7. NEGOTIABLE INSTRUMENTS LAW 637
In one case, it was held that a bank which paid the monetary
value of a foreign check as a special accommodation to its employee
on the basis of the latter’s indorsement, is considered an irregular
indorser, if one of the bank’s officers who approved the bills purchase
indicated at the back of the check “up to a certain amount only.”
Where the drawee bank refused to honor the check because of the
irregular indorsement, the collecting bank cannot pass the liability
to its employee despite the indorsement. A subsequent party which
caused the defect in the instrument cannot have any recourse
against any of the prior indorsers in good faith. Section 66 of the
Negotiable Instruments Law which states that the general indorser
additionally engages that, on due presentment, the instrument shall
be accepted or paid, or both, as the case may be, according to its
tenor, and that if it be dishonored and the necessary proceedings
on dishonor be duly taken, he will pay the amount thereof to the
holder, or to any subsequent indorser who may be compelled to
pay it, must be read in the light of the rule in equity requiring that
those who come to court should come with clean hands. The holder
or subsequent indorser who tries to claim under the instrument
which had been dishonored for “irregular indorsement” must not
be the irregular indorser himself who gave cause for the dishonor
Otherwise, a clear injustice results when any subsequent party t
the instrument may simply make the instrument defective and late:
claim from prior indorser who has no knowledge or participation in
causing or introducing said defect to the instrument, which thereby
caused its dishonor.143
vi. Joint
Where an instrument is in the name of two (2) or more payees
who are not partners, both or all must indorse, unless the person
indorsing has authority to indorse for the others.144
C. As to authority of holder
i. Restrictive
A restrictive indorsement impairs the negotiability of the
instrument subsequent to such indorsement.
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ii. Facultative
A facultative indorsement is where the indorser expressly gives
up some of his rights such as when he waives notice of dishonor,147 or
presentment and protest.148
l
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negotiating the same before he has paid the full amount agreed to
be paid therefor, he will be deemed a holder in due course only to the
extent of the amount theretofore paid by him.166
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76. A certain Anita Gatchalian, who was looking for a car, issued
a crossed check to Manuel Gonzales, upon the latter's
representation that (1) he is selling a car owned by Ocampo
Clinic and that (2) the issued check will be for safekeeping
(as a sign of the buyer's good faith) but to be returned the
following day. Vicente R. De Ocampo & Co. was not aware of
the said transaction between Anita and Manuel. Manuel failed
to appear the next day, and instead delivered the check to
Ocampo Clinic as payment for the hospitalization of his wife
Matilde Gonzales. Ocampo Clinic accepted the check without
previous inquiry from Anita. Thereafter, Vicente R. De Ocampo
& Co. sought to collect the value of the check against Anita.
Is Vicente R. De Ocampo & Co a holder in due course?
Vicente R. De Ocampo & Co. is not a holder in due course. T
be a holder in due course, he must have no notice of any infirmity ii
the instrument or defect in the title of the person negotiating it at
the time the instrument is negotiated to him. He must also take the
instrument in good faith and for value. To be disqualified from being
a holder in due course, actual notice of the defect is not required. It
is sufficient that the payee acquired possession of the instrument
under circumstances that should have put it to inquiry as to the title
of the holder who negotiated the check to it. Failure to inquire upon
a suspicious title constitutes bad faith in the commercial sense.
Although it was not aware of the circumstances surrounding
the issuance of the check to Manuel, the circumstances show that
the holder’s title was defective or suspicious to say the least. The
instrument issued was a crossed check. Anita had no account with
Vicente R. De Ocampo & Co., etc. The failure to find out the nature of
title and possession of Manuel Gonzales amounted to gross neglect.
It should be noted that in both Ocampo and Yang cases, the
payee did not acquire the instrument directly from the drawer but
1B7Vicente R. De Ocampo & Co. v. Anita Gatchalian, et al., G.R. No. L-15126,
November 30, 1961.
I
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to make FFLC a holder in due course. Thus, FFLC may enforce the
instrument despite the failure of consideration.164
Similarly, when a holder rediscounted a check and gave money
to the payee after the latter endorsed it, the fact that the check
was not funded did not affect the right of the holder to enforce the
instrument. Under Section 28 of the Negotiable Instruments Law
(NIL), absence or failure of consideration is a matter of defense only
as against any person not a holder in due course.165
164Juanita Salas v. Hon. Court of Appeals, G.R. No. 76788, January 22, 1990.
166Bayani v. People of the Philippines, G.R. No. 154947, August 11, 2004.
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646 DIVINA ON COMMERCIAL LAW:
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79. R issued a check for PI M which he used to pay S for killing his
political enemy.
a) Can the check be considered a negotiable instrument?
b) If S negotiated the check to T, who accepted it in good
faith and for value, may R be held secondarily liable by T?
Reason briefly.
a) Yes, the check can be considered a negotiable instrument
even if it was issued to pay S to kill his political enemy. The
validity of the consideration is not one of the requisites of
a negotiable instrument.167 It merely constitutes a defect
of title.168
b) Yes, R may be held secondarily liable by T who took the
check in good faith and for value. T is a holder in due
course. R cannot raise the defense of illegality of the
consideration, because T acquired title the check free
from the defect of title or personal defenses of R and S.169
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1,0BAR 2012.
171RCBC Savings Bank v. Noel M. Odrada, G.R. No. 219037, October 19, 2016,
172Bataan Cigar and Cigarette Factory, Inc. v. the Court of Appeals and State
Investment House, Inc., G.R. No. 93048, March 3, 1994.
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that the checks were strictly endorsed for payee’s account only and
not to be further negotiated, the party in whose favor the checks
were negotiated could not qualify as a holder in due course.173
However, it does not follow as a legal proposition that simply
because the holder was not a holder in due course for having taken
the checks with notice that the same were for deposit only to the
account of another that it was altogether precluded from recovering
on the instrument. The Negotiable Instruments Law does not provide
that a holder not in due course cannot recover on the instrument.
The disadvantage of the holder in not being a holder in due course is
that the instrument is subject to defense as if it were nonnegotiable.
One such defense is absence or failure of consideration, the defense
raised by the drawer since the checks had no consideration and were
issued merely as a form of financial assistance to the payee.17'1
2. Defenses Against the Holder
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fraud or illegality affecting the instrument, has all the rights of such
a holder in due course in respect of all parties prior to the latter.185
This is based on Section 58 of NIL which provides that in the
hands of any holder other than a holder in due course, a negotiable
instrument is subject to the same defenses as if it were nonnegotiable.
But a holder who derives his title through a holder in due course,
and who is not himself a party to any fraud or illegality affecting the
instrument, has all the rights of such former holder in respect of all
parties prior to the latter.
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7. NEGOTIABLE INSTRUMENTS LAW 651
H. Liabilities of Parties
1. Maker
3. Acceptor
■
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4. Indorser
93. Cite jurisprudence where the Supreme Court ruled that the
indorser is liable.
a. — - -------- 1 indorser
A general ------ of a check engages that if it be
dishonored and the necessary proceeding for dishonor
duly be taken, he will pay the amount thereof to the
holder. However, a notice of dishonor is necessary in order
to change an indorser and the right of action against him
does not accrue until the notice is given.197
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198Ang Tiong v. Lorenzo Ting, doing business under the name & style of Prunes
Preserves MFG., G.R. No. L-26767, February 22, 1968.
‘"Sapiera v. Court of Appeals, G.R. No. 128927, September 14, 1999.
^Supra, see discussion on forgery.
“‘BAR 2011.
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7. NEGOTIABLE INSTRUMENTS LAW 655
has no knowledge of any fact which would impair the validity of the
instrument or render it valueless.202 But when the negotiation is by
delivery only, the warranty extends in favor of no holder other than
the immediate transferee.203
Party Liability
Maker 1. To pay according to the tenor of the
instrument he made;
2. Maker is primarily liable.
Acceptor 1. To pay according to the tenor of his
acceptance;
2. Acceptor is primarily liable upon
acceptance.
Drawer 1. Engages that on due presentment
the instrument will be accepted or
paid, or both, according to its tenor;
2. If instrument is dishonored, the
necessary proceedings on dishonor
will be duly taken, and he will pay
the amount thereof to the holder,
or to any subsequent indorser who
may be compelled to pay it.
3. Drawer is secondarily liable.
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5. Warranties
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authorized to sign the name of the corporation, since she did not
sign her own name and failed to indicate that she was signing as
agent of the corporation.-’11
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210Id.
217Section 71, NIL.
218Section 193, NIL.
219Section 85, NIL.
22aId.
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c
110. Who are the parties to whom presentment for payment should
be made?
As a general rule, presentment for payment must be made
to the person primarily liable on the instrument or he is absent or
inaccessible, to any person found at the place where presentment is
made.““ f-
Where the person primarily liable is dead, presentment for
payment must be made to his personal representative, if such there
be, and if with the exercise of reasonable diligence he can be found.223
Where the persons primarily liable are partners, presentment
for payment may be made to any one of them, even though there has
been a dissolution of the firm.22’
Where the persons primarily liable are several persons, not
partners (joint debtors), presentment for payment must be made to
them all.““s
3. Dispensation with Presentment for Payment
111. What are the instances where presentment for payment may
be dispensed?
The following ar# instances where presentment is excused:
a. Presentment for payment is not required in order to charge
the drawer where he has no right to expect or require that
the drawee or acceptor will pay the instrument;220
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7. NEGOTIABLE INSTRUMENTS LAW 663
J. Notice of Dishonor
1. Parties to be Notified
117. Who are the parties who may give notice of dishonor?
The notice may be given by or on behalf of the holder, or by or
on behalf of any party to the instrument who might be compelled to
pay it to the holder, and who, upon taking it up, would have a right
to reimbursement from the party to whom the notice is given.240
Notice of dishonor may be given by an agent either in his own
name or in the name of any party entitled to give notice, whether
that party be his principal or not.241
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121. What is/are the effect/s of a notice given by the party entitled
thereto?
Where notice is given by or on behalf of a party entitled to
give notice, it inures for the benefit of the holder and all parties
subsequent to the party to whom notice is given.216
4. Form of Notice
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134. Salazar was asked by Calleja and Kallos if she knew a supplier
of rice. Salazar then accompanied the two to J.Y. Brothers
Marketing Corporation. Calleja and Kallos, with Salazar,
procured cavans of rice. The payment was made through a
Prudential Bank check. Upon presentment, the check was
dishonored as the account had been closed. J.Y. Bros, then
informed Salazar, Calleja and Kallos of the check dishonor
They issued a replacement crossed check drawn against SoliJ
Bank but the same likewise bounced due to insufficient funds.
Despite the demand letter issued by J.Y. Bros, Salazar could not
settle the amount due. J.Y. Bros, charged Salazar and others
with the crime of estafa before the RTC. The RTC acquitted
Salazar of the crime she was charged but held her liable for the
payment of the rice. Aggrieved, she appealed to the Supreme
Court which granted her prayer to reconsider the civil aspect
of the case and allowed her to present evidence.
Was there novation? Was the Prudential Bank check
validly discharged?
There was no novation and the Prudential Bank check was not
discharged. While Section 119 of the Negotiable Instrument Law
in relation to Article 1231 of the Civil Code provides that one of the
modes of discharging a negotiable instrument is by any other act
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135. Will merger or confusion in the context of the Civil Code also
result in the discharge of a negotiable instrument?
Yes, in fact, this is expressly provided as a ground to discharge
the instrument, as when the principal debtor becomes the holder of
the instrument at or after maturity in his own right.
The merger of the creditor and debtor in the same person in
their own right should take place at or after maturity otherwise, it
will not discharge the instrument.
2. Discharge of Parties Secondarily Liable
137. What is/are the right/s of the party who discharged the
instrument?
Where the instrument is paid by a party secondarily liable
thereon, it is not discharged; but the party so paying it is remitted
to his former rights as regard all prior parties, and he may strike
out his own and all subsequent indorsements, and again negotiate
the instrument, except (a) where it is payable to the order of a third
person, and has been paid by the drawer; and (b) where it was made
or accepted for accommodation, and has been paid by the party
accommodated.270
4. Renunciation by Holder
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138. When may a holder expressly renounce his rights against any
party to the instrument?
The holder may expressly renounce his rights against any party
to the instrument before, at, or after its maturity. An absolute and
unconditional renunciation of his rights against the principal debtor
made at or after the maturity of the instrument discharges the
instrument. But a renunciation does not affect the rights of a holder
in due course without notice. A renunciation must be in writing,
unless the instrument is delivered up to the person primarily liable
thereon.271
L. Material Alteration
1. Concept
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part of the drawee bank, it is liable only to the extent of the check
prior to alteration despite the tenor of its acceptance.
280Cesar V. Areza and Lolita B. Areza v. Express Savings Bank, Inc., ibid.
™Ibid.
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7. NEGOTIABLE INSTRUMENTS LAW 675
M. Acceptance
145. What is presentment for acceptance?
Presentment for acceptance is defined as the production of a
bill of exchange to a drawee for acceptance.282
1. Definition
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d. Qualified as to time;
e. The acceptance of some one or more of the drawees, but
not of all.291
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« No-
mId.
m2Id.
™Id.
“’Section 137, NIL.
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3"Id.
3l2Id.
313Section 146, NIL.
3i,Id.
315Section 147, NIL.
310Section 148, NIL.
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7. NEGOTIABLE INSTRUMENTS LAW 681
167. What is the duty of the holder where bill is not accepted?
Where a bill is duly presented for acceptance and is not accepted
within the prescribed time, the person presenting it must treat the
bill as dishonored by nonacceptance or he loses the right of recourse
against the drawer and indorsers.319
168. What is the right of the holder where bill is not accepted?
When a bill is dishonored by nonacceptance, an immediatf
right of recourse against the drawer and indorsers accrues to the
holder and no presentment for payment is necessary.320
Example: Delta Corporation, an importer of goods, drew a
draft against ABC Bank, payable to the order of Phi Corporation,
as seller. The draft is payable 90 days after sight. Because the draft
is payable after sight, the instrument requires presentment for
acceptance in order to fix its maturity. Phi Corporation, as payee of
the draft, has two options. It may either negotiate the instrument or
present it for the acceptance of ABC Bank, as drawee. Assume that
Phi Corporation negotiated the draft to Charlie Corporation. Charlie
Corporation has the same options, to present the instrument for the
acceptance of ABC Bank or to negotiate.
If Charlie presents the instrument for acceptance, ABC may
either accept or dishonor the instrument.
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O. Promissory Notes
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7. NEGOTIABLE INSTRUMENTS LAW 683
P. Checks
1. Definition
171. How is a check defined under the Negotiable instruments
Law?
A check is a bill of exchange drawn on a bank payable on
demand.330
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177. Cite other jurisprudence where the Supreme Court ruled that
the drawee bank is liable relating to the handling of a check.
a. The bank is liable for damages where a check issued by
a depositor was dishonored for being drawn against an
uncollected deposit because the bank failed to send for
clearing the check deposit to fund that check, even though
the check was deposited before the cutoff clearing time.310
b. A bank which erroneously dishonored for insufficiency of
funds checks drawn by a depositor is liable for damages to
the depositor.341
c. A bank cannot exculpate itself from liability for thr
consequence of the use of wrong deposit slip resulting i
the misrouting of a regional check to the Central Bank
The teller should not have accepted the local deposit slip
with the cashier’s check that on its face was clearly a
regional check without calling the depositor’s attention
for the mistake at the very moment it was presented
to her. The bank is not expected to be infallible, but it
must bear the blame for not discovering the mistake of
its teller despite the established procedure requiring the
papers and bank books to pass through a battery of bank
personnel whose duty it is to check and countercheck
them for possible errors.342
d. A bank manager forged the signature of the authorized
signatories of the client in the application for manager’s
339RCBC Savings Bank v. Noel M. Odrada, G.R. No. 219037, October 19, 2016.
340BPI v. LAC, G.R. No. 74678, March 8, 1993.
3,1Metrobank v. Court of Appeals, G.R. No. 112576, October 26,1994.
312Tan v. Court of Appeals, G.R. No. 108555, December 20, 1994.
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178. Cite other jurisprudence where the Supreme Court ruled that
the drawee bank is not liable for handling a bank check.
a. A bank which dishonored checks issued by a depositor for
insufficiency of funds cannot be held liable for damages
even if the depositor had sufficient funds in her savings
accounts to cover the checks drawn against the current
account maintained with the same bank where there was
no evidence that the depositor had an arrangement with
bank for the automatic transfer of funds.344
b. A bank which dishonored a check issued by a depositor
because at the time the checks were processed for clearing
the depositor had no sufficient funds in the account after
the processing of the checks is not liable for damages. A
check, as distinguished from an ordinary bill of exchange,
is supposed to be drawn against a previous deposit of
funds for it is ordinarily intended for immediate payment.
The depositor must personally keep track of his available
balance in the bank and not rely on the bank to notify
him of the necessity to fund certain checks he previously
issued. A bank is under no obligation to make part
payment on a check, up to the amount of the drawer’s
funds.346
3. Presentment for Payment
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and theory behind the use of check points to its immediate use and
payability,351’ By business practice, reasonable time is six (6) months
from issuance.
b. Effect of Delay
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7. NEGOTIABLE INSTRUMENTS LAW 691
362Myron C. Papa v. A.U. Valencia & Co., Inc., et al., G.R. No. 10518S, January
23,1998.
^Benjamin Evangelista v. Screenex, Inc., represented by Alexander G. Yu,
G.R. No. 211564, November 20, 2017.
354 Supra.
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CASE INDEX
A
Abacus Real Estate Development v. Manila Banking Corporation,
G.R. No. 162270, April 6, 2005, 92, 93
Abrera v. Hon. Romeo Barza, G.R. No. 171881, September 11, 2009,
459, 461
ABS-CBN Broadcasting Corporation v. Philippine Multi-Media
System, Inc., G.R. Nos. 175769-70, January 19, 2009, 338, 339
ABS-CBN Corporation v. Felipe Gozon, et al., G.R. No. 195956,
March 11, 2015, 315, 316
ABS-CBN, supra, 347
ABS-CBN v. Director of the Bureau of Trademarks, G.R. No. 217916,
June 20, 2018, 263
Acoje Mining Co., Inc. v. Director of Patents, 38 SCRA 480, 271
Acquisition by Grab Holdings, Inc. and MyTaxi.PH, Inc. of Assts of
Uber B.V. and Uber Systems, Inc., Commission Decision No.
26-M-12/2018, August 10, 2018, 548
Advent Capital and Medical Corporation v. Young, G.R. No. 183018,
August 3, 2011, 462
Agilent Technologies Singapore v. Integrated Silicon Technology
Phil. Corp., G.R. No. 154618, April 14, 2004, 410, 423
Aguas v. De Leon, G.R. No. L-32160, January 30, 1982, 212
Air Canada v. Commissioner of Internal Revenue, G.R. No. 169507,
January 11, 2016, 412
Air Philippines v. Pennswell, G.R. No. 172835, December 13, 2007,
205
Alfredo Ching v. the Secretary of Justice, et al., G.R. No. 164317,
February 6, 2006, 569
Alfredo Vivas v. Monetary Board of the Bangko Sentral ng Pilipinas,
et al., G.R. No. 191424, August 7, 2013, 96
Allied Banking Corporation v. Bank of the Philippine Islands, G.R.
No. 188363, February 27, 2013, 623
694
J9JC9B0M
CASE INDEX 695
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696 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
B
B. Van Zuiden Bros., Ltd. v. GTVL Manufacturing Industries, Inc.,
G.R. No. 147905, May 28, 2007, 422
Banco de Oro-EPCI, Inc. v. JAPRL Development Corporation, G.R.
No. 179901, April 14, 2008, 154
Banco de Oro v. Equitable Banking Corporation, G.R. No. L-74917,
January 20, 1988, 621
Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng
Pilipinas, G.R. No. 200678, June 4, 2018, 94, 402
Banco Filipino Savings Bank v. Central Bank, supra, 100
Banco Filipino Savings Bank v. Hon. Fidel Purisima, G.R. No.
L-56429, May 28, 1988, 114
Bank of America, NT and SA v. Associated Citizens Bank, G.R. No.
141001, May 21, 2009, 621
Bank of America v. Court of Appeals, et al., G.R. No. 105395,
December 10, 1993, 61, 67
Bank of Commerce v. Teresita Serrano, G.R. No. 151895, February
16, 2005, 80
Bank of the Philippine Islands v. Casa Montessori Internationale
and Leonardo T. Yabut, G.R. No. 149454, May 28, 2004, 613
Bank of the Philippine Islands v. Casa Montessori Internationale
and Leonardo T. Yabut, ibid., 614
J9JC9B0M
CASE INDEX 697
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698 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
BSB Group, Inc. v. Go, G.R. No. 168644, February 16, 2010, 115
BSP Monetary Board v. Hon. Antonio-Valenzuela, G.R. No. 184778,
October 2, 2009, 97
c
Caltex (Philippines), Inc. v. Court of Appeals and Security Bank and
Trust Company, G.R. No. 97753, August 10, 1992, 597
Caneda v. Court of Appeals, G.R. No. 81322, February 5, 1990, 628
Canon Kabushiki Kaisha v. Court of Appeals, G.R. No. 120900, July
20, 2004, 271
Cargill, Inc. v. Intra Strata Assurance Corp., G.R. No. 168266,
March 15, 2010, 419
Carlito Linsangan v. Philippine Deposit Insurance Corporation,
G.R. No. 228807, February 11, 2019, 194
Caterpillar, Inc. v. Manolo P. Samson, G.R. No. 205972 and G.R. No.
164352, November 9, 2016, 300
Cayanan v. North Star International Travel, Inc., G.R. No. 172954,
October 5, 2011, 624
Cebu International Corporation v. Court of Appeals, G.R. No.
123031, October 12, 1999, 587
Cellpage International Corp. v. The Solid Guaranty, Inc., G.R. No.
226731, June 17, 2020, 372
Cemco Holdings, Inc. v. National Life Insurance Company of the
Philippines, Inc., G.R. No. 171815, August 7, 2007, 48
Cemco Holdings v. National Life Insurance Company, 529 SCRA
2007, 47
Central Bank of the Philippines v. Court of Appeals, et al., G.R. No.
L-50031, July 27, 1981, 99
Central Bank of the Philippines v. Court of Appeals, G.R. No. 88353,
May 8, 1992, 90, 99
Century Chinese Medicine Co., et al. v. People of the Philippines,
G.R. No. 188526, November 11, 2013, 293
Cesar V. Areza and Lolita B. Areza v. Express Savings Bank, Inc.,
G.R. No. 176697, September 10, 2014, 673, 674
Charles Lee v. Court of Appeals, et al., G.R. No. 117913, February
1, 2002, 64, 69
Chato v. House of Representatives Electoral Tribunal, G.R. No.
199149, January 22, 2013, 583
J9JC9B0M
CASE INDEX 699
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D
Damaso Perez v. Monetary Board, et al., G.R. No. L-23307, June 30,
1967, 83
De la Paz v. L & J Development Co., G.R. No. 183360, September 8,
2014, 158
De La Salle Montessori International of Malolos v. De La Salle
Brothers, et al., G.R. No. 205548, February 7, 2018, 277
Del Monte Corporation and Philippine Packing Corporation v. Court
of Appeals, G.R. No. L-78325, January 25, 1990, 259
Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990),
298
Del Rosario, et al. v. Doanto, Jr., et al., G.R. No. 180595, March 4,
2010, 293
Del Rosario v. Court of Appeals, supra, 234
Denicola Test in Brandir International, Inc. v. Cascade Pacific
Lumber Co 834 F.2d 1142, 1988 Copr.L.Dec., 311
Dermaline, Inc. v. Myra Pharmaceuticals, G.R. No. 190065, August
1, 2010, 258, 261
Development Bank of Rizal v. Sima Wei, G.R. No. 85419, March 9,
1993, 603, 622
Development Bank of the Philippines v. Arcilla, Jr., G.R. No. 161397,
June 30, 2005, 201
Development Bank of the Philippines v. Guarina Agricultural and
Realty Development Corporation, G.R. No. 160758, January
15, 2014, 140
Development Bank of the Philippines v. Prudential Bank, G.R. No.
143772, November 22, 2005, 566
Diaz v. People of the Philippines and Levi Strauss (Phil.), G.R. No.
180677, February 18, 2013, 265, 290
J9JC9B0M
CASE INDEX 701
E
Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412,
July 12, 1994, 160
Ecole De Cuisine Manille (Cordon Bleu of the Philippines), Inc. v.
Renaud Cointreau & Cie and Le Cordon Bleu Int’l, B.V., G.R.
No. 185830, June 5, 2013, 250, 275
Edward C. Ong v. the Court of Appeals and the People of the
Philippines, G.R. No. 119858, April 29, 2003, 569
E.I. Dupont De Nemours and Co. v. Director Emma C. Francisco, ei
al., G.R. No. 174379, August 31, 2016, 222
Ejercito v. Sandiganbayan, G.R. No. 157294-95, November 30, 2006,
109, 110, 155
Elidad C. Kho, doing business under the name and style of KEC
Cosmetics Laboratory v. Court of Appeals, Summerville
General Merchandising and Company, and Ang Tiam Chay,
G.R. No. 115758, March 19, 2002, 208, 307
Emerald Garment Manufacturing Corporation v. Court of Appeals,
G.R. No. 100098, December 29, 1995, 265
Emerito Ramos v. Central Bank of the Philippines, G.R. No. L-29352,
October 4, 1971, 100
Equitable Banking Corporation v. Intermediate Appellate Court
and Edward J. Nell Co., G.R. No. 74451, May 25, 1988, 593
Equitable Banking Corporation v. Special Steel Products, G.R. No.
175350, June 13, 2012, 603
J9JC9B0M
702 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
F
Faberge, Inc. v. Intermediate Appellate Court, 215 SCRA 316 (1992),
270
Far East Bank v. Querimit, G.R. No. 148582, January 16, 2002, 658
Far East Int’l Import and Export Corp. v. Nankai Kogyo Co., Ltd.,
425
Far East Realty Investment, Inc. v. Court of Appeals, G.R. No.
L-36549, October 5, 1988, 658
Feati Bank & Trust Company v. Court of Appeals, et al., G.R. No.
94209, April 30, 1991, 61, 63, 79
FEBTC v. Gold Palace, G.R. No. 168274, August 20, 2008, 678
Federal Express Corporation v. Luwalhati Antonino, et al., G.R. No.
199455, June 27, 2018, 587
Fernando Juan v. Roberto Juan, G.R. No. 221372, August 23, 2017,
207, 210, 305
Fil-Agro Rural Bank, Inc. v. Villasenor, Jr., G.R. Nos. 226761 and
226889, July 28, 2020, 400
Filipinas Mills v. Dayrit, 135
Firestone Tire & Rubber Company of the Philippines v. Court of
Appeals and Luzon Development Bank, G.R. No. 113236,
March 5, 2001, 601
First Philippine International Bank v. Court of Appeals, G.R. No.
115849, January 24, 1996, 90
Francisco G. Joaquin, Jr., and BJ Productions, Inc. v. Honorable
Franklin Drilon, et al., G.R. No. 108946, January 28, 1999, 344
Francisco Joaquin, Jr. v. Franklin Drilon, et al., G.R. No. 108946,
January 28, 1999, 313
Francisco v. Court of Appeals, G.R. No. 116320, November 29,1999,
658
J9JC9B0M
r
G
Gabionza v. CA, G.R. No. 161057, September 12, 2008, 4, 9
Garcillano v. House of Representatives, G.R. No. 170338, December
23, 2008, 580
Gateway Electronics v. Asian Bank, G.R. No. 172041, December 18,
2008, 369
Gempesaw v. Court of Appeals, G.R. No. 92244, February 9, 1993,
619
GMA Network, Inc. v. Central CATV, Inc., G.R. No. 176694, July
18, 2014, 338
GMA Network v. Central CATV, supra, 338
Golden Way Merchandising v. Equitable PCI Bank, G.R. No. 195540,
March 13, 2013, 154
Gonzales v. Philippine Commercial and International Bank, G.R
No. 180257, February 23, 2011, 630
Gonzales v. Rizal Commercial Banking Corporation, G.R. No.
156294, November 29, 2006, 637
Google Spain SL, Google Inc. v. Agencia Espanola de Protection de
Datos (AEPD), Mario Costeja Gonzalez, 2014, 529
Go v. BSP, October 23, 2009, 147
Government Service Insurance System v. Court of Appeals, G.R. No.
183805, April 16, 2009, 59
Great Asian Sales Center Corporation and Tan Chong Lin v. the
Court of Appeals, G.R. No. 105774, April 25, 2002, 666
Great White Shark Enterprises v. Caralde, G.R. No. 192294,
November 21, 2012, 267
Gregorio Reyes v. Court of Appeals, G.R. No. 118492, August 15,
2001, 140
GSIS v. Court of Appeals, 121
GSIS v. Court of Appeals, G.R. No. 189206, June 8, 2011,121,122
GSIS v. Court of Appeals, G.R. No. L-40824, February 23,1989, 627
Gullas v. Phil. National Bank, 62 Phil. 519, 653, 693
i
J9JC9B0M
704 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
H
Habana v. Robles. 369 Phil. 764 (1999), 340, 347
Heirs of Estelita Burgos-Lipat v. Heirs of Eugenio Trinidad, et al.,
G.R. No. 185644, March 2, 2010, 151
Henry dela Rama Co v. Admiral United Savings Bank, G.R. No.
154740, April 16, 2008, 628
Hickok Manufacturing, Co., Inc. v. Court of Appeals, G.R. No.
L-44707, August 31, 1982, 271
Hongkong and Shanghai Banking Corp. v. Commissioner on Internal
Revenue, G.R. No. 166018, June 4, 2014, 584
Hong Kong & Shanghai Banking Corporation v. National Steel
Corporation, G.R. No. 183486, February 24, 2016, 63
Huerta Alba Resort v. Court of Appeals, 339 SCRA 534, 149
Hur Ting Yang v. People of the Philippines, G.R. No. 195117, August
14, 2013, 561, 562
I
Ilusorio v. Court of Appeals, G.R. No. 139130, November 27, 2002,
619
Insular Bank of Asia & America v. Intermediate Appellate Court, et
al., G.R. No. 74834, November 17, 1988, 61, 65
Intellectual Property Association of the Philippines v. Hon. Paquito
Ochoa, In His capacity as Executive Secretary, et al., G.R. No.
204605, July 19, 2016, 301
International Corporate Bank v. Gueco, G.R. No. 141968, February
12, 2001, 588, 658, 691
International Corporate Bank v. Gueco, supra, 689
In the Matter of Acquisition by Grab Holdings, Inc. and MyTaxi.PH
Inc., of Assets of Uber B.V. and Uber Systems, Inc., PCC Case
No. M-2018- 001, April 6, 2018, 548
Iowa St. Univ. Research Found., Inc. v. Am. Broad. Cos., 621 F.2d
57, 60 (2d Cir. 1980), 340
J
Jai-Alai Corporation v. Bank of the Philippine Islands, G.R. No.
L-29432, August 6,1975, 621
Jaime Dico v. Hon. Court of Appeals and People of the Philippines,
G.R. No. 141669, February 28, 2005, 663
J9JC9B0M
CASE INDEX 705
K
Karen Salvation v. Central Bank of the Philippines, China Bank, et
al., G.R. No. 94723, August 21, 1997,121
Kensonic, Inc. v. Uni-Line Multi-Resources, Inc., G.R. Nos. 211820-
21 and 211834-35, June 6, 2018, 270, 278
Kensonic v. Uni-Line Multi Resources, Inc., supra, 207, 305
Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S 319, 213 WL 1104736
(U.S Mar. 19, 2013), 321
L
Land Bank v. Monet’s Export and Manufacturing Corporation, G.R.
No. 161865, March 10, 2005, 72
Land Bank v. Perez, G.R. No. 166884, June 13, 2012, 560, 562
Land & Company (Phil.) v. Metropolitan Bank & Trust Co., G.R. No.
159622, July 30, 2004, 575
Lara’s Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R.
No. 225433, August 28, 2019, 159
Lee v. Court of Appeals, G.R. No. 117913, February 1, 2002, 555,558
Leticia Medel v. Court of Appeals, G.R. No. 131622, November 27,
1998, 158
Leticia Miranda v. Philippine Deposit Insurance Corporation, et al.,
G.R. No. 169334, September 8, 2006,102
Leung Yee v. Strong Machinery Co., 37 Phil. 644, 373
Levi Strauss & Co v. Clinton Apparelle, G.R. No. 138900, September
20, 2005, 277
Lim v. Security Bank Corporation, G.R. No. 188539, March 12,
2014, 368
Lolita B. Areza v. Express Savings Bank, Inc., G.R. No. 176697,
September 10, 2014, 673
Lolita B. Areza v. Express Savings Bank, Inc., ibid., 674
J9JC9B0M
706 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
M
Maliksi v. COMELEC, G.R. No. 203302, April 11, 2013, 583
Mang Inasal Philippines, Inc. v. IFP Manufacturing Corporation,
G.R. No. 221717, June 19, 2017, 262, 269, 270
Manila Lighter Transportation, Inc. v. Court of Appeals, G.R. No.
50373, February 15, 1990, 620
Manly Sportwear Manufacturing, Inc. v. Dadodette Enterprises
and/or Hermes Sports Center, G.R. No. 165306, September 20,
2005, 307, 315
Manzano v. Court of Appeals, G.R. No. 113388, September 5, 1997,
240
Maria Tuazon v. Heirs of Bartolome Ramos, G.R. No. 156262, July
14, 2005, 662
Marilyn Victorio-Aquino v. Pacific Plans, Inc. and Mamerto A.
Marcelo, Jr. (Court-Appointed Rehabilitation Receiver of
Pacific Plans, Inc.), G.R. No. 193108, December 10, 2014, 484
Marilyn Victorio-Aquino v. Pacific Plans, supra, 498
Marphil Export Corporation v. Allied Banking Corporation,
Substituted by Philippine National Bank, Respondent, G.R.
No. 187922, September 21, 2016, 70
Marquez v. Desierto G.R. No. 135882, June 27, 2001, 110, 113, 114
Mattel, Inc. v. Emma Francisco, et al., G.R. No. 166886, July 30,
2008, 250, 252
MCC Industrial Sales Corp. v. Ssangyong Corp., G.R. No. 170633,
October 17, 2007, 582
McCullough v. Veloso, 46 Phil. 1, 373
McDonald’s Corporation v. L.C. Big Mak Burger, Inc., G.R. No.
143993, August 18, 2004, 257, 260
J9JC9B0M
CASE INDEX 707
J9JC9B0M
708 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
Myron C. Papa v. A.U. Valencia & Co., Inc., et al., G.R. No. 105188,
January 23, 1998, 691
N
Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 160
Narra Nickel Mining & Development Corp. v. Redmont Consolidated
Mines Corp., G.R. No. 195580, April 21, 2014, 406
NBI-Microsoft Corporation v. Judy Hwang, et al., G.R. No. 147043,
June 21, 2005, 344
Negros Navigation Company v. Court of Appeals, G.R. Nos. 163156
and 166845, December 10, 2008, 459
Nestle Philippines v. Court of Appeals & Securities and Exchange
Commission, G.R. No. 86738, November 13, 1991, 19
New Frontier Sugar Corporation v. Regional Trial Court, Branch 39,
Iloilo City, G.R. No. 165001, January 31, 2007, 441
New Pacific Timber v. Seneris, G.R. No. L-41764, December 19,
1980, 588
New Pacific Timber v. Seneris, 101 SCRA 686, 692
New Sampaguita Builders Construction v. Philippine National
Bank, G.R. No. 148743, July 30, 2004, 201
Ng v. People of the Philippines, G.R. No. 173905, April 23, 2010, 562
O
Ofelia Marigomen v. People of the Philippines, G.R. No. 153451,
May 26, 2005, 663
Onapal Philippines Commodities, Inc. Court of Appeals, G.R. No.
90707, February 1, 1993, 27
Onate v. Abrogar, G.R. No. 107303, February 23, 1995, 115
Ong v. Court of Appeals, G.R. No. L-58476, September 2, 1983, 564,
570
Ong v. People of the Philippines, G.R. No. 169440, November 23,
2011, 279
Overseas Bank of Manila v. Court of Appeals, et al., G.R. No.
L-45866, April 19, 1989, 92
P
Pabugais v. Sahijwani, G.R. No. 156846, February 24, 2004, 589
Pacheco v. Court of Appeals, G.R. No. 126670, December 2, 1999,
589, 608
J9JC9B0M
CASE INDEX 709
Pacita, et al. v. Felicidad Robles and Goodwill Trading Co., Inc., G.R.
No. 131522, July 19, 1999, 318, 337
Panacan Lumber Co. v. Solidbank Corporation, G.R. No. 226272,
September 16, 2020, 378
Panlilio v. Regional Trial Court, Branch 51, City of Manila, G.R. No.
173846, February 2, 2011, 465
Pascua Godines v. Court of Appeals and SV-Agro Enterprises, Inc.,
G.R. No. 97343, September 13, 1993, 233
PCIB v. Court of Appeals, G.R. No. 84526, January 28,1991,119
PCIB v. Court of Appeals, 193 SCRA 452, 122
PDIC v. Citibank, G.R. No. 170290, April 11, 2012,186
PDIC v. Court of Appeals, 283 SCRA 462, 185
Pearl & Dean (Phil.), Inc. v. Shoemart, Inc., G.R. No. 148222, August
15, 2003, 209, 211, 219, 231, 291
Pearl & Dean Phil. v. Shoemart, 409 SCRA 231 (2003), 307
People of the Philippines v. Gilbert Reyes Wagas, G.R. No. 157943,
September 4, 2013, 593
People of the Philippines v. Gilbert Wagas, G.R. No. 157943,
September 4, 2013, 631
People’s Trans-East Asia Insurance Corporation, a.k.a. People’s
General Insurance Corporation v. Doctors of New Millennium
Holdings, Inc., G.R. No. 172404, August 13, 2014, 371
People v. Nitafan, G.R. No. 81559-60, April 6,1992 (BAR 1980), 571
People v. Nitafan, 215 SCRA 79, 685
Perla Compania De Seguros v. Court of Appeals, G.R. No. 96452,
May 7, 1992, 682
Petition for Assistance in the Liquidation of the Rural Bank of Bokod
(Benguet) v. Bureau of Internal Revenue, G.R. No. 158261,
December 18, 2006,101
Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589,
June 27, 2006, 266
Philippine Airlines v. Court of Appeals, G.R. No. 49188, January 30,
1990, 587
Philippine Airlines v. Court of Appeals, 389 SCRA 589, 461
Philippine Asset Growth Two, Inc. and Planters Development Bank
v. Fastech Synergy Philippines, Inc., et al., G.R. No. 206528,
June 28, 2016, 448, 472
Philippine Asset Growth Two v. Fastech Synergy Philippines, G.R.
No. 206528, June 28, 2016, 477, 478, 489
c
J9JC9B0M
710 DI VINA ON COMMERCIAL MW:
A COMPREHENSIVE GUIDE VOLUME II
J9JC9B0M
CASE INDEX 711
J9JC9B0M
712 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
Q
Quano v. Court of Appeals, 398 SCRA 405, 149
Quirino Gonzales Logging Concessionaire, Quirino Gonzales and
Eufemia Gonzales v. the Court of Appeals (CA) and Republic
Planters Bank, G.R. No. 126568, April 30, 2003, 606
R
Ramon Abad v. Court of Appeals, G.R. No. L-42735, January 22,
1990, 66
Ramos v. Court of Appeals, G.R. No. L-49218, August 27, 1987, 563
Rappier, Inc. v. Andres Bautista, G.R. No. 222702, April 5, 2016, 337
Raul Sesbreno v. Hon. Court of Appeals, Delta Motors Corporation
and Pilipinas Bank, G.R. No. 89252, May 24, 1993, 631
Raymundo Crystal v. Court of Appeals, G.R. No. L-35767, June 18,
1976, 689
RCBC Savings Bank v. Noel M. Odrada, G.R. No. 219037, October
19, 2016, 588, 647, 687
RCBC v. IAC, 320 SCRA 279, 494
Register of Deeds of Manila v. China Banking Corporation, 4 SCRA
1145 (1962), 137
Reliance Commodities v. Daewoo Industrial Co., G.R. No. L-100831,
December 17, 1993, 71
Remigio S. Ong v. People of the Philippines and Court of Appeals,
G.R. No. 139006, November 27, 2000, 624
Republic Bank v. Court of Appeals, G.R. No. 42725, April 22, 1991,
617
Republic Gas Corporation v. Petron Corporation, G.R. No. 194062,
June 17, 2013, 296, 299, 346
Republic of the Philippines v. Security Credit and Acceptance
Corporation, G.R. No. L-20583, January 23, 1967, 127, 128
Republic Planters Bank v. Court of Appeals, G.R. No. 93073,
December 21, 1992, 651
J9JC9B0M
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S
Salas v. Court of Appeals, G.R. No. 96160, June 17, 1992, 590
Salazar v. J.Y Brothers Marketing Corporation, G.R. No. 171998,
October 20, 2010, 670
Salud v. Central Bank of the Philippines, G.R. No. L-17620, August
19, 1986, 103
Samsung Construction Company Philippines, Inc. v. Far East Bank
and Trust Company and Court of Appeals, G.R. No. 129015,
August 13, 2004, 615
San Miguel Corporation v. Puzon, Jr., G.R. No. 167567, September
22, 2010, 604
Sanrio Company Ltd. v. Lim, G.R. No. 168662, February 19, 2008,
347
Sapiera v. Court of Appeals, G.R. No. 128927, September 14, 1999,
654
J9JC9B0M
714 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
J9JC9B0M
CASE INDEX 715
J9JC9B0M
716 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
T
Tagawa v. Aldanese and Union Guarantee Co., 372
Taiwan Kolin Corporation, LTD. v. Kolin Electronics Co., Inc., G.R.
No. 209843, March 15, 2015, 272
Tan v. Court of Appeals, G.R. No. 108555, December 20, 1994, 588,
684, 687
Teodoro Banas v. Asia Pacific Finance Corporation, G.R. No. 128703,
October 18, 2000, 127
The Hongkong and Shanghai Banking Corporation Limited-
Philippine Branches v. Commissioner of Internal Revenue,
G.R. Nos. 166018 and 167728, June 4, 2014, 603
The Hongkong & Shanghai Banking Corporation, Limited v.
National Steel Corporation, et al., G.R. No. 183486, February
24, 2016, 73, 78
The Honorable Monetary Board v. Philippine Veterans Bank, G.R.
No. 189571, January 21, 2015, 101
The International Corporate Bank, Inc. v. Court of Appeals and
Philippine National Bank, G.R. No. 129910, September 5,
2006, 673
The Philippine Bank of Commerce v. Jose M. Aruego, G.R. Nos.
L-25836-37, January 31, 1981, 611
Tibajia v. Court of Appeals, G.R. No. 100290, June 4, 1993, 588
Timeshare Realty Corporation v. Cesar Lao, 544 SCRA 254 (2008),
J9JC9B0M
CASE INDEX 717
U
UFC Philippines, Inc. (Now Merged with Nutri-Asia, Inc., with
Nutri-Asia, Inc. as the Surviving Entity) v. Fiesta Barrio
Manufacturing Corporation, G.R. No. 198889, January
2016, 258, 269, 280
Unchuan v. Lozada, G.R. No. 172671, April 16, 2009, 407
Union Bank of the Philippines v. Court of Appeals, G.R. No. 134699,
December 23,1999,116
Union Bank of the Philippines v. Securities and Exchange
Commission, G.R. No. 138949, June 6, 2001,16
United Coconut Planters Bank v. Spouses Beluso, G.R. No. 15991
August 17, 2007, 199
United Features v. Munsingwear Creation, 179 SCRA 260 (198
309
V
an Twest v. Hon. Salvador de Guzman, G.R. No. 106253, February
10, 1994, 120
Veterans Philippine Scout Security Agency, Inc. v. First Dominion
Prime Holdings, Inc., G.R. No. 190907, August 23, 2012, 461
icente R. De Ocampo & Co. v. Anita Gatchalian, et al., G.R. No.
L-15126, November 30, 1961, 643
Villa Crista Monte Realty & Development Corp. v. Equitable PCI
Bank, G.R. No. 208336, November 21, 2018,162
Villanueva v. Nite, G.R. No. 148211, July 25, 2006, 652
Vintola v. Insular Bank of Asia and America, G.R. No. 73271, May
29, 1987, 558
J9JC9B0M
718 DIVINA ON COMMERCIAL LAW:
A COMPREHENSIVE GUIDE VOLUME II
w
Westmont Bank v. Ong, G.R. No. 132560, January 30, 2002, 622
William C. Louh, Jr. and Irene L. Louh v. Bank of the Philippine
Islands, G.R. No. 225562, March 8, 2017, 158
W Land Holdings, Inc. v. Starwood Hotels and Resorts Worldwide,
Inc., G.R. No. 222366, December 4, 2017, 288, 289
Y
Yang v. Court of Appeals, G.R. No. 138074, August 15, 2003, 642
Yngson, Jr. (in his capacity as Liquidator of Arcam & Company,
2012 V494iliPPine National Bank, GR- No- 171132, August 15,
Z
Zuneca Pharmaceutical v. I" /
Natrapharm, Inc., G.R. No. 211850,
September 8, 2020, 208, 249, 250
J9JC9B0M
r
J9JC9B0M