Corporation Law by Atty Villanueva With Complete Case Digests Discussion
Corporation Law by Atty Villanueva With Complete Case Digests Discussion
Corporation Law by Atty Villanueva With Complete Case Digests Discussion
CORPORATION LAW
Article XII: Section 16. The Congress shall not, except by general
law, provide for the formation, organization, or regulation of
private corporations. Government-owned or controlled
corporations may be created or established by special charters in
the interest of the common good and subject to the test of
economic viability. (1987 constitution)
CONSTITUTIONAL LIMITATIONS:
Due process mandates that the state cannot take away its life
without it being afforded hearing; otherwise, the decision may be
questioned.
Section 1: ….. nor shall any person be denied the equal protection
of the laws. (1987 constitution)
ARGUMENT: BP 22
Q: An officer of the corporation signs a check in his capacity as an
officer. The check was not honored. Can he use the separate
personality?
RECOVERY OF DAMAGES:
CASE: Magsaysay-Labrador v. CA
Held: No
Held: Yes
INSTRUMENTALITY RULE
December 1, 2007
Q: Is it a de jure corporation?
A: No.
Q: Is it a de facto?
A: No.
Facts: Lim Tong Lim, Chua and Yao were into commercial fishing.
They have been doing business under the name Ocean Quest.
They entered into a contract with the Philippine Fishing Gear, both
by Chua and Yao. Ocean Quest breached the obligation. Philippine
Fishing Gear filed a case against Lim, Yao and Chua, since there
was no corporation existing. Trial court ruled in favor of PFGI. Lim
appealed to the CA, stating that he was not part of the deal.
Held: Yes
Q: Identical?
A: exactly the same.
CASE: Ang Mga Kaanib sa Iglesio ng Dios Kay Kristo Hesus, Haligi
at Saligan ng Katotohanan sa Bansang Pilipinas (IDKJ-HSK) v.
Iglesia ng Dios kay Cristo Jesus, Haligi at Sungay ng Katotohanan
(IDCJ-HSK)
Held: 1. Yes 2. No
Rationale:
1. Under the reasonable care and observation test, it is similar.
2. A contrary ruling would encourage other corporations to
adopt verbatim and register an exisiting and protected corporate
name, to the detriment of the public.
Held: No
Q: And?
A: For the stockholder, it tells him of the risk of his investment.
For the board, to know their authority to act. And for other people,
to know the general authority of the management.
Q: What action?
A: personal actions ma’am. And lastly, for taxes.
Q: How long may a corporation exist?
A: 50 years.
Q: How?
A: by amending the articles of incorporation.
Ma’am: Class, take note of the time when to file for extension. It is
within 5 years of the expiration of the term. You cannot file before
or after that period.
Sec. 11. Corporate term. - A corporation shall exist for a period
not exceeding fifty (50) years from the date of incorporation
unless sooner dissolved or unless said period is extended. The
corporate term as originally stated in the articles of incorporation
may be extended for periods not exceeding fifty (50) years in any
single instance by an amendment of the articles of incorporation,
in accordance with this Code; Provided, That no extension can be
made earlier than five (5) years prior to the original or subsequent
expiry date(s) unless there are justifiable reasons for an earlier
extension as may be determined by the Securities and Exchange
Commission.
Q: What are those institutions who must issue par value shares?
A: 1. banks
2.trust companies
3. insurance companies
4. public utilities
5. building and loan associations
Example: 50 votes
A = 10 D = 10
B = 10 E=5
C = 10 F=5
A = 20 D=0
B = 30 E=0
C=0 F=0
Corporate officers:
1. law
2. other officers elected by the BOD
3. by laws
Self-dealing Transactions
Another illustration:
Another illustration:
Q: Is there a quorum?
A: Yes.
Q: Do we satisfy?
A: No.
Held: No.
CORPORATE POWERS
Q: Is this enough?
A: No. SEC approval is needed.
TEST:
Illustration:
Investment –
Dividend Declaration
Subscription
AI:
1. external affairs
2. relationship of the corporation with the state and the general
public.
Q: Why?
A: Submission of AI leads to acquiring corporate existence.
Submission of AI is a condition precedent. The submission is
condition subsequent thereof, for the corporation to continue its
existence.
Facts: Mr. Calapacha applied a loan with China Bank to secure his
payment. He pledged his shares with valley golf. There was
default on his part. China Bank was forced to foreclose the
pledge. China Bank became the highest bidder. When the bank
requested for transfer, the secretary of valley golf refused, since
Calapacha still owed them membership dues. It is in their by laws
that they will attach the shares of Calapacha back to Valley Golf.
CORPORATE MEETINGS
Sec. 50. Regular and special meetings of stockholders or
members. - Regular meetings of stockholders or members shall
be held annually on a date fixed in the by-laws, or if not so fixed,
on any date in April of every year as determined by the board of
directors or trustees: Provided, That written notice of regular
meetings shall be sent to all stockholders or members of record at
least two (2) weeks prior to the meeting, unless a different period
is required by the by-laws.
Special meetings of stockholders or members shall be held at any
time deemed necessary or as provided in the by-laws: Provided,
however, That at least one (1) week written notice shall be sent to
all stockholders or members, unless otherwise provided in the by-
laws.
Notice of any meeting may be waived, expressly or impliedly, by
any stockholder or member.
Whenever, for any cause, there is no person authorized to call a
meeting, the Secretaries and Exchange Commission, upon
petition of a stockholder or member on a showing of good cause
therefor, may issue an order to the petitioning stockholder or
member directing him to call a meeting of the corporation by
giving proper notice required by this Code or by the by-laws. The
petitioning stockholder or member shall preside thereat until at
least a majority of the stockholders or members present have
been chosen one of their number as presiding officer. (24, 26)
Sec. 51. Place and time of meetings of stockholders or members. -
Stockholders' or members' meetings, whether regular or special,
shall be held in the city or municipality where the principal office
of the corporation is located, and if practicable in the principal
office of the corporation: Provided, That Metro Manila shall, for
purposes of this section, be considered a city or municipality.
Notice of meetings shall be in writing, and the time and place
thereof stated therein.
All proceedings had and any business transacted at any meeting
of the stockholders or members, if within the powers or authority
of the corporation, shall be valid even if the meeting be
improperly held or called, provided all the stockholders or
members of the corporation are present or duly represented at
the meeting place of meeting is the city or municipality where the
principal office is located.
Q: Can the by laws provide for another place?
A: No.
CASE: Dee v. CA
Subscription:
1. pre-incorporation – before existence.
2. post incorporation – after existence.
1. one of record
2. ?
3. not a harassment
4. appraisal right is not an available remedy.
MERGER AND CONSOLIDATION
Procedure: Sec. 77
1. Board – majority
2. 2/3 of the OCS SH
3. approval of the SEC
APPRAISAL RIGHT
Q: Where?
A: Sec. 93 – special laws for non stock corporations.
Q: How do we reconcile?
A: 89 is applicable to nonstick. If the by laws is silent, apply the
general rule which is sec. 58.
Q: Enumerate
A:
1. creditors
2. assets subject to return
3. assets subject to use
4. remainder distribution to members.
Q: Again!
A:
1. creditors
2. donated properties
a. return to the donor
b. turn over to similar institutions.
3. all other properties members.
• this pre supposes that the corporation has already been
dissolved.
Sec. 94. Rules of distribution. - In case dissolution of a non-stock
corporation in accordance with the provisions of this Code, its
assets shall be applied and distributed as follows:
1. All liabilities and obligations of the corporation shall be paid,
satisfied and discharged, or adequate provision shall be made
therefore;
2. Assets held by the corporation upon a condition requiring
return, transfer or conveyance, and which condition occurs by
reason of the dissolution, shall be returned, transferred or
conveyed in accordance with such requirements;
3. Assets received and held by the corporation subject to
limitations permitting their use only for charitable, religious,
benevolent, educational or similar purposes, but not held upon a
condition requiring return, transfer or conveyance by reason of
the dissolution, shall be transferred or conveyed to one or more
corporations, societies or organizations engaged in activities in
the Philippines substantially similar to those of the dissolving
corporation according to a plan of distribution adopted pursuant
to this Chapter;
4. Assets other than those mentioned in the preceding
paragraphs, if any, shall be distributed in accordance with the
provisions of the articles of incorporation or the by-laws, to the
extent that the articles of incorporation or the by-laws, determine
the distributive rights of members, or any class or classes of
members, or provide for distribution; and
5. In any other case, assets may be distributed to such persons,
societies, organizations or corporations, whether or not organized
for profit, as may be specified in a plan of distribution adopted
pursuant to this Chapter.
CLOSE CORPORATIONS
CORPORATE DISSOLUTION/LIQUIDATION
- extinguishment of franchise
- cessation of existence
1. voluntary
2. involuntary
• it is only the state that could give its life and only the state
can take it away.
Winding Up
- mandatory for the protection of the creditors.
- Co ownership of assets according to its stocks.
Concept of trustee
- interpreted in its generic sense.
- Either in writing or expressly.
PD 902-A
Grounds:
1. imminent danger
2. wastage of assets
3. paralization of business prejudicial to the interest of the SH.
4. ?
FOREIGN CORPORATIONS
Eg.
A---------- B------- C
Principal
Obligor
Eg.
A-B-C-D-E
Principal
Obligor
Assignment:
No meeting this Saturday. We will meet on Wednesday 4-9pm.
Please read Negotiable instruments Law and memorize sec. 60 by
heart.
written instrument
– tangible evidence
– for negotiability
signature
- best evidence for their accountability.
STATED:
1. amount of each installment.
2. maturity date of each installment.
Determine whether the following instruments are negotiable:
Acceleration clause:
- provision which renders the instrument due and demandable
when default is incurred.
- It does not destroy the negotiability.
Attorney’s fees:
- it does not render the instrument non-negotiable.
Notes:
1. fixed period
2. fixed time.
Eg.
(c) waives the benefit of any law intended for the advantage or
protection of the obligor; or
ABCDEF
Maker
NEGOTIATION:
1. payable to order:
payee
A ------------ B ------- C ---- D
maker Indorsement
Plus delivery
1. special or blank
2. conditional or unconditional
3. general, qualified or unqualified
4. restrictive or unrestrictive
1. Special
This makes it special
2. Blank
1. Unconditional
2. Conditional
Q: Does it affect the promise of A to pay B because of the
condition?
A: No. Because A remains obligated and it does not affect B’s
claim over A.
1. Qualified
(b) That the instrument is, at the time of his indorsement, valid
and subsisting;
And, in addition, he engages that, on due presentment, it 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.
• additional paragraph is called secondary liability.
1. Restrictive:
2. Payable to bearer:
(d) When the name of the payee does not purport to be the name
of any
person; or
(e) When the only or last indorsement is an indorsement in blank.
payee
A ------------ B ------- C
maker delivery
Q: Did C acquire title?
A: Yes. But only as assignee and not by negotiation.
A ------------ B ------- C
Sec. 48. Striking out indorsement. - The holder may at any time
strike out any indorsement which is not necessary to his title. The
indorser whose indorsement is struck out, and all indorsers
subsequent to him, are thereby relieved from liability on the
instrument.
According to Ma’am: Bayaran mo muna ako bago ko strike out
and indorsement para secured ang obligation.
CONCEPT OF HOLDERS:
Holder
Assignment:
Memorize by heart: secs. 52, 60, 61, 62, 65, 66; Holders up to
defense.
Mr. Quitain!
Eg.
infirmity
A ---- B ------- C ---- D --- E
HIDC
Q: What?
A: He cannot provide a shelter rule for E.
LIABILITIES OF PARTIES
(b) The existence of the payee and his then capacity to indorse.
Sec. 65. Warranty where negotiation by delivery and so forth. —
Every person negotiating an instrument by delivery or by a
qualified indorsement warrants:
(a) That the instrument is genuine and in all respects what it
purports to be;
(d) That he has no knowledge of any fact which would impair the
validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty
extends in favor of no holder other than the immediate
transferee.
(b) That the instrument is, at the time of his indorsement, valid
and subsisting;
And, in addition, he engages that, on due presentment, it 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.
Q: Qualified indorsers?
A: (a) That the instrument is genuine and in all respects what it
purports to be;
Q: General Indorsers?
A: (a) The matters and things mentioned in subdivisions (a), (b),
and (c) of the next preceding section; and
(b) That the instrument is, at the time of his indorsement, valid
and subsisting;
And, in addition, he engages that, on due presentment, it 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.
Q: Drawer?
A: The drawer by drawing the instrument admits the existence of
the payee and his then capacity to indorse; and engages that, on
due presentment, the instrument will be accepted or paid, or
both, 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. But the drawer may insert in the
instrument an express stipulation negativing or limiting his own
liability to the holder.
Q: Acceptor?
A: (a) The existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the instrument;
and
(b) The existence of the payee and his then capacity to indorse.
DEFENSES:
Personal defense
– weak defense
– absence of due course holding on the part of the creditor.
– Equitable defense.
Eg.
Q: Can E go after B, C, D?
A: Yes. Because they warrant that all parties have capacity to
contract.
Q: If it is bearer instrument?
A: The same thing. D is liable to E.C is liable to D. B is liable to C.
Q: eg.
Assignment:
2. Finish reading:
a. Negotiable Instruments
b. Warehouse receipts Law
c. Letters of Credit.
d. Trust receipts.
Lecture
February 10,2008
2:30 pm
FORGERY:
Promissory Note
Cut-off rule:
- parties prior to the forged indorsement; their liability is cut-
off.
- Applies only if the forged instrument is necessary to the
vesting of title.
Bill of Exchange:
X (drawee/acceptor)
(b) The existence of the payee and his then capacity to indorse
forged
A ---- B ----- C ----D ---E F
drawer
(genuine)
X (drawee/acceptor)
Q: Can X use the defense of forgery?
A: Yes. Sec. 62. He doesn’t admit the signature of the payee.
- by accepting the instrument, the acceptor is not precluded
from raising forgery of the payee’s signature as a defense.
Case: Gempesaw v. CA
Illustration:
MATERIAL ALTERATION:
Eg.
100k 200k(altered)
A ---- B ----- C ----D ---E
Q: What if E is a HIDC?
A: He could invoke but still he’ll be liable partially. Up to the
original tenor.
Liability:
PN maker (primary)
General Indorser (secondary)
BEX acceptor (primary)
Drawer (secondary)
General Indorser (secondary)
QI
PNBD no warranties
Q: If the holder is going after an indorser who breached his
warranty is the holder here bound by the laws of presentment and
dishonor?
A: No. Only necessary for secondary liability.
(d) That he has no knowledge of any fact which would impair the
validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty
extends in favor of no holder other than the immediate
transferee.
BEX
X (drawee/acceptor)
Purpose of presentment:
(b) The existence of the payee and his then capacity to indorse
(b) That the instrument is, at the time of his indorsement, valid
and subsisting;
And, in addition, he engages that, on due presentment, it 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.
DISCHARGE:
(f) By any agreement binding upon the holder to extend the time
of payment or to postpone the holder's right to enforce the
instrument unless made with the assent of the party secondarily
liable or unless the right of recourse against such party is
expressly reserved.
CHECKS:
Kinds:
1. Cashier
2. Certified check
3. crossed check
- good as cash
- the bank itself is both the drawer and the drawee
- the bank effectively commits its property, assets…etc..
- operates as an assignment of funds.
b. certified checks
- it bears upon its face that bank will pay it upon presentment.
- Certification is equivalent to acceptance.
- Liability of acceptance arises.
- The drawer cannot issue stop payment order. (sec. 188)
- Operates as an assignment of funds to the credit of the
drawer (sec. 189)
- It allows persons not well acquainted with each other to
transact business.
c. crossed check
Assignment:
Non negotiable
W----D----A
If delivered:
1. negotiates (I + D; D)
2. assigns/ transfers (DOA; DOT)
WAREHOUSEMAN’S LIEN
LETTERS OF CREDIT
3 Relationships:
TRANSPORTATION LAW
CASE: De Guzman v. CA
CASE: It Sian
Held: Yes
Rationale: Only requirement in that it may only be operated by
Filipino nationals.
ZVC: Mr Quitain!
Common
Carrier
Private Carriers
1. holds himself
out for all people
indiscriminately
1. contracts with
particular
individuals or
groups only
2. extraordinary
diligence is
required
2. ordinary
diligence is
required
3. subject to State
regulation
3. not subject to
State regulation
4. parties may not
agree on limiting
the carrier’s
liability except
when provided by
law
4. parties may
limit the carrier’s
liability provided
it is not contrary
to law, morals or
good customs
5. exempting
circumstance;
prove
extraordinary
diligence and Art.
1733, NCC
5. general
exempting
circumstance;
caso fortuito, Art.
1174 NCC
6. there is
presumption of
fault or negligence
6. no presumption
of fault or
negligence
Art. 1747. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual
route, the contract limiting the common carrier's liability cannot
be availed of in case of the loss, destruction, or deterioration of
the goods.
• as common carriers, you cannot discriminate goods as long
as you can carry it; only for legitimate excuses.
Facts: Navidad bought a token and was waiting for the arrival of
the train. Navidad had an altercation with the security guard, as a
result, Navidad fell on the rails as the train was coming. Navidad
died.
Issue: Whether or not LRT is liable since the victim did not yet
board the train.
Held: Yes
Rationale: 1759. The passenger or the victim already presented
himself within the premises of the carrier.
Art. 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or wilful acts of the
former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of
the common carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
CASE: La Mallorca v. CA
Article 1750 – carriers are liable although they may have acted
beyond the scope of their duties.
Held: Yes
Rationale: Art. 1759. Common carriers are liable for the death of
or injuries to passengers through the negligence or wilful acts of
the former's employees, although such employees may have
acted beyond the scope of their authority or in violation of the
orders of the common carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
Conduct of 3rd persons:
Art. 1763 – the carrier is answerable for the conduct of 3rd parties
only if his own employees and agents exercise ordinary diligence.
Art. 1763. A common carrier is responsible for injuries suffered by
a passenger on account of the wilful acts or negligence of other
passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.
Held: NO
Rationale: It was still within the control of the employee of the
carrier.
CASE: Pilapil v. CA
Held: NO
Rationale: It is beyond the control of the carrier. Carrier is not an
insurer of all the risks.
NOTE:
Q: Why is it ED?
A: due to public interest
Sea worthiness
Roadworthiness
1. properly maintained
2. observe traffic regulations.
Airworthiness
RA 775
PERIODS
Conduct of carrier:
proper defendant
- carrier alone
Payment of freight:
“The consignee to whom shipments was made, may not defer the
payment of the expenses and transportation charges of the goods
they received after the lapse of 24 hours following their delivery,
and in case of delay in this payment, the carrier may demand the
judicial sale of the goods transported in an amount necessary to
cover the cost of transportation and the expenses incurred.” (374
code of commerce)
“the goods transported shall be especially found to answer for the
cost of transportation and for the expenses and fees incurred for
them during their conveyance and until moment of their delivery.”
(375 code of commerce)
Liability of demurrage:
- compensation for the detention of the vessel beyond the
time agreed for the loading and unloading of the goods.
- Compensated because of delay.
(c) Make the holds, refrigerating and cooling chambers, and all
other parts of the ship in which goods are carried, fit and safe for
their reception, carriage, and preservation.
(2) The carrier shall properly and carefully load, handle, stow,
carry, keep, care for,and discharge the goods carried. (COGSA)
Delsan Transport
- mere certificate of seaworthiness is not sufficient to negate
the presumption of negligence.
- Seaworthiness is a question of fact.
Held: The airline has no duty to inquire into the veracity of the
details the petitioner entered into their travel papers. Power to
admit or not an alien is a sovereign act which cannot be interfered
with even by the airlines. It is beyond the ambit of the contract of
carriage.
Airworthiness:
Bill of lading
- a written acknowledgment of receipt of goods and
agreement to transport them to a specific place to a person
named or to his order.
1. “On board”
- states that the goods have been received on board the
specified vessel that will carry them.
2. “Received Shipment”
- states that the goods have been received for shipment with
or without specifying the vessel on which they are to be shipped.
“The legal evidence of the contract between the shipper and the
carrier shall be the bills of lading.”
- of which disputes may arise regarding their execution and
performance shall be guided, no exceptions being admissible
other than those of falsity and material error in the drafting.
- After the contract has been complied with, it shall be
returned to the carrier and by virtue of the exchange of this title
with the thing transported the respective actions and obligations
shall be considered cancelled, unless the same act the claim
which the parties may wish to reserve be reduced to writing.
- In case the consignee, upon receiving the goods cannot
return the bill of ladings, because of its loss or any other cause,
he must give the latter a receipt for the goods delivered, this
receipt producing the same effects as the return of the bill of
lading.
709 CC:
Bill of lading
3 important factors:
1. As a contract:
350 CC:
707 CC:
708 CC:
710 CC
711 CC
712 CC
- Captain cannot himself change the destination of merchandise.
Q: Why?
A: he immediately acquires the obligation from carrier to hold the
goods and take care of it as if he directly contracted with the
common carrier.
If only assigned:
713 CC
714 CC
716 CC
717 CC
718 CC
Sec. 4(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per
package of lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but
shall not be conclusive on the carrier.(COGSA)
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in
the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence
less than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts
or omission of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment
used in the contract of carriage.
2. As a document of title:
MARITIME LAW
Liability contemplated:
Q: Why?
A: origin dates back to the medieval times because of the
attendant risks.
Exceptions:
4. Ship captain
– service for 25 years- retirement.
– Possession only as employee of the ship owner.
1. ship owner
2. ship agent
3. ship captain
- subject to qualification in code of commerce:
a. Filipino
b. Capacity to contract
c. Qualified under existing maritime and navigation laws and
regulations.
d. Not suffer from any disqualifications.
e. Officer/executive officer as far as the complainant is
concerned.
Article 658 – the validity of the charter party is not affected when
the ship captain did not follow the instructions of the owner.
726 – where the amount of loan is larger than the value of the
object, due to the fraud employed by the borrower liability
survives as to the surplus. Surplus will be repaid as if it were a
simple loan.
727 – If the proceeds of the loan have not been used for the
purpose to which the loan was contracted.
AVERAGE:
Kinds:
Requisites:
COLLISION:
- where parties are equally negligent, but one them has the
last clear chance or opportunity to prevent the impending danger,
he, who failed to do so, shall suffer the consequential damages.
3 zones:
a. lack of provisions
b. well-founded fear of seizure, privateers or pirates and
c. by reason of any accident of the sea disabling it to navigate.
INSURANCE
Principle of subrogation
- when the insurer pays the insured, the insurer steps in the
shoes of the insured.
- Operation of law
Cognition principle
- the moment the acknowledgment is communicated to the
offeror.
Parties:
Property Life
Must exist at the time of the happening of the lost. Must exist at
the time the policy is taken.
Exception: creditor insures the life of the debtor .
Exception to the exception: the debt must not yet be
extinguished.
Extent of the damage to the property. Incapable of pecuniary
estimation.
Exception: creditor limit is the amount of the obligation.
Anyone who has insurable interest in the property. Anyone may
be a beneficiary subject to Art. 2012 of the civil code; another life
is insured.
Art. 2012. Any person who is forbidden from receiving any
donation under Article 739 cannot be named beneficiary of a life
insurance policy by the person who cannot make any donation to
him, according to said article. Civil code
Property Insurance:
ABfire policy (1yr repurchase)
L_____________________________I
Policy was event of loss
Taken
Exceptions:
1. life insurance
2. the transfer to a co-owner of an undivided interest
a. if stranger – fire policy is partially suspended.
b. If co-owner – no suspension
4. divisible in character.
5. sec. 57
Sec. 57. A policy may be so framed that it will inure to the benefit
of whomsoever, during the continuance of the risk, may become
the owner of the interest insured.
Mortgage:
A- mortgagor – 2M
B- mortgagee – 1M
Separate and distinct policies.
Exception: if mortgagor procures a policy then designates a
mortgagee a beneficiary.
If at the time of the loss, the obligation has been paid, B cannot
recover because he has no insurable interest.
Q: Who gets the proceeds?
A: Mortgagee – because he did not cease to become a party to
the contract.
Relativity principle:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law. The heir is not liable beyond
the value of the property he received from the decedent.
1. concealment – consent
2. representation – consent
3. warranty
4. exclusions/exceptions – excluded from the coverage.
5. conditions – usually procedural measures.
Remedies:
Warranties:
Policy:
There is no requisite that it be put into writing.
Cover notes:
Premium:
Exceptions:
1. life and industrial life whenever the grace period applies and
at the time of loss, the grace period is not yet over.
2. Sec. 78 – whenever in the policy itself there is an express
acknowledgment by the insurer in the policy that premiums have
already been paid.
3. Makati Tuscany case – installment.
4. CASE: UCPB v. Masagana
- Masagana used to insure from UCPB fire insurance policies.
When the deadline of the payment came, the premium was not
paid. A fire broke out.
- SC ruled on sec. 77
- Masagana file MR
- SC ruled that the 60-90 day credit term is already a practice.
The fire occurred during the 60-90 days. Masagana relied in good
faith. The SC reversed due to estoppel.
Sec. 80. If a peril insured against has existed, and the insurer has
been liable for any period, however short, the insured is not
entitled to return of premiums, so far as that particular risk is
concerned.
Beneficiaries:
Sec. 10. Every person has an insurable interest in the life and
health:
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary interest;
(c) Of any person under a legal obligation to him for the payment
of money, or respecting property or services, of which death or
illness might delay or prevent the performance; and
(d) Of any person upon whose life any estate or interest vested in
him depends.
Q: Whenever a beneficiary is designated, may it be revoked?
A: Gen. rule: Yes, except if it is expressly stated that it is
irrevocable.
(4) The innocent spouse may revoke the designation of the other
spouse who acted in bad faith as beneficiary in any insurance
policy, even if such designation be stipulated as irrevocable; and
Whoever pays for another may demand from the debtor what he
has paid, except that if he paid without the knowledge or against
the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor. (1158a)
March 1, 2008
Q: Is there a risk?
A: Yes. The insurer becomes the insured by another insurer;
therefore the new insurer has liability.
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law. The heir is not liable beyond
the value of the property he received from the decedent. If a
contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation.
M/V Quitain
General Rule:
- the seaworthiness starts from the commencement of the
voyage or the commencement of the risk.
Exceptions:
Deviation:
Q: When proper?
A: Sec. 124
Sec. 124. A deviation is proper:
(a) When caused by circumstances over which neither the master
nor the owner of the ship has any control;
(b) When necessary to comply with a warranty, or to avoid a peril,
whether or not the peril is insured against;
(c) When made in good faith, and upon reasonable grounds of
belief in its necessity to avoid a peril; or
(d) When made in good faith, for the purpose of saving human life
or relieving another vessel in distress.
General Average:
Requisites:
1. shipowner
2. charterer
3. other cargo owners
4. lenders in respondentia and bottomry (732)
5. Insurer
Partial Average:
Sec. 157. A marine insurer is liable upon a partial loss, only for
such proportion of the amount insured by him as the loss bears to
the value of the whole interest of the insured in the property
insured.
Fire Insurance:
Warranty: Alteration
Co – insurance:
Requirements:
1. under insured
2. partial loss was suffered
= 180,000
Q: What about the 120,000?
A: bahala na!
Life insurance:
- valued policy
Q: suicide?
A: If committed 2 years after the policy, the insurer is liable.
No fault clause:
Sec. 378. Any claim for death or injury to any passenger or third
party pursuant to the provisions of this chapter shall be paid
without the necessity of proving fault or negligence of any kind;
Provided, That for purposes of this section:
(i) The total indemnity in respect of any person shall not exceed
five thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall
be sufficient evidence to substantiate the claim:
(iii) Claim may be made against one motor vehicle only. In the
case of an occupant of a vehicle, claim shall lie against the insurer
of the vehicle in which the occupant is riding, mounting or
dismounting from. In any other case, claim shall lie against the
insurer of the directly offending vehicle. In all cases, the right of
the party paying the claim to recover against the owner of the
vehicle responsible for the accident shall be maintained.
Periods:
Sec. 241. (1) No insurance company doing business in the
Philippines shall refuse, without just cause, to pay or settle claims
arising under coverages provided by its policies, nor shall any
such company engage in unfair claim settlement practices. Any of
the following acts by an insurance company, if committed without
just cause and performed with such frequency as to indicate a
general business practice, shall constitute unfair claim settlement
practices:
(a) knowingly misrepresenting to claimants pertinent facts or
policy provisions relating to coverage at issue;
(b) failing to acknowledge with reasonable promptness pertinent
communications with respect to claims arising under its policies;
(c) failing to adopt and implement reasonable standards for the
prompt investigation of claims arising under its policies;
(d) not attempting in good faith to effectuate prompt, fair and
equitable settlement of claims submitted in which liability has
become reasonably clear; or
(e) compelling policyholders to institute suits to recover amounts
due under its policies by offering without justifiable reason
substantially less than the amounts ultimately recovered in suits
brought by them.
(2) Evidence as to numbers and types of valid and justifiable
complaints to the Commissioner against an insurance company,
and the Commissioner's complaint experience with other
insurance companies writing similar lines of insurance shall be
admissible in evidence in an administrative or judicial proceeding
brought under this section.
(3) If it is found, after notice and an opportunity to be heard, that
an insurance company has violated this section, each instance of
non-compliance with paragraph (1) may be treated as a separate
violation of this section and shall be considered sufficient cause
for the suspension or revocation of the company's certificate of
authority.
Sec. 242. The proceeds of a life insurance policy shall be paid
immediately upon maturity of the policy, unless such proceeds
are made payable in installments or as an annuity, in which case
the installments, or annuities shall be paid as they become due:
Provided, however, That in the case of a policy maturing by the
death of the insured, the proceeds thereof shall be paid within
sixty days after presentation of the claim and filing of the proof of
the death of the insured. Refusal or failure to pay the claim within
the time prescribed herein will entitle the beneficiary to collect
interest on the proceeds of the policy for the duration of the delay
at the rate of twice the ceiling prescribed by the Monetary Board,
unless such failure or refusal to pay is based on the ground that
the claim is fraudulent.
The proceeds of the policy maturing by the death of the insured
payable to the beneficiary shall include the discounted value of all
premiums paid in advance of their due dates, but are not due and
payable at maturity.
Sec. 243. The amount of any loss or damage for which an insurer
may be liable, under any policy other than life insurance policy,
shall be paid within thirty days after proof loss is received by the
insurer and ascertainment of the loss or damage is made either
by agreement between the insured and the insurer or by
arbitration; but if such ascertainment is not had or made within
sixty days after such receipt by the insurer of the proof of loss,
then the loss or damage shall be paid within ninety days after
such receipt. Refusal or failure to pay the loss or damage within
the time prescribed herein will entitle the assured to collect
interest on the proceeds of the policy for the duration of the delay
at the rate of twice the ceiling prescribed by the Monetary Board,
unless such failure or refusal to pay is based on the ground that
the claim is fraudulent.
Sec. 244. In case of any litigation for the enforcement of any
policy or contract of insurance, it shall be the duty of the
Commissioner or the Court, as the case may be, to make a finding
as to whether the payment of the claim of the insured has been
unreasonably denied or withheld; and in the affirmative case, the
insurance company shall be adjudged to pay damages which shall
consist of attorney's fees and other expenses incurred by the
insured person by reason of such unreasonable denial or
withholding of payment plus interest of twice the ceiling
prescribed by the Monetary Board of the amount of the claim due
the insured, from the date following the time prescribed in section
two hundred forty-two or in section two hundred forty-three, as
the case may be, until the claim is fully satisfied; Provided, That
the failure to pay any such claim within the time prescribed in
said sections shall be considered prima facie evidence of
unreasonable delay in payment.
Assignment:
1. Banking Laws
2. Truth in Lending act
3. PDIC
4. Anti money laundering
5. Secrecy
6. FCDA
7. DOSRI
March 8, 2008
BANKING LAWS
Banks
Sec. 64 GBL
Different classifications:
As to capitalization:
1. Universal Banks
- broader powers
- investment house selling securities
- underwriting guaranteeing securities.
- Engaged in non allied activities:
a. productive activities in agriculture.
b. Mining, quarrying
c. Manufacturing
d. Other activities which may be allowed by the Monetary
Board.
2. Commercial Banks
3. Cooperative Banks
RA 6938 for an entity to be considered a cooperative bank,
majority of the shares may be owned or controlled by
cooperatives.
(2) To receive financial aid or loans from the Government and the
Central Bank of the Philippines for and in behalf of the
cooperative banks and primary cooperatives and their federations
engaged in business and to supervise the lending and collection
of loans;
4. Rural Banks:
5. Thrift Banks
1. deposit
2. loan
I. Deposit
Corporations
– minimum capitalization requirements.
– Upon SEC approval of AI
Exception:
Joint accounts
– survivorship agreement
– joint depositors permit each other to withdraw the full
amount during their lifetime; upon the death of the other, the
survivor gets the whole amount.
CASE: Vitug v. CA
1. written permission
2. AMLA
Transaction in cash
Conclusion:
Eg.
X – Bank
A- depositor
A and B = 500k
• only 250k will be covered by the PDIC
A = 125k B = 125k
Q: What if B is a corporation?
A: Presumption is the corporation.
DOSRI
Requisites:
Related interests
– sec. 36 GBL
– the power to define Related interests rest with the Monetary
Board.
– Circular no. 423-2004 of the Central Bank.
After due notice to the board of directors of the bank, the office of
any bank director or officer who violates the provisions of this
Section may be declared vacant and the director or officer shall
be subject to the penal provisions of the New Central Bank Act.
If real property
– 75%
– In addition, 60% for improvements made.
If chattel
- 75%
Sec. 37. Loans and Other Credit Accommodations Against Real
Estate. – Except as the Monetary Board may otherwise prescribe,
loans and other credit accommodations against real estate shall
not exceed seventy-five percent (75%) of the appraised value of
the respective real estate security, plus sixty percent (60%) of the
appraised value of the insured improvements, and such loans
may be made to the owner of the real estate or to his assignees.
Sec. 38. Loans And Other Credit Accommodations on Security of
Chattels and Intangible Properties. - Except as the Monetary
Board may otherwise prescribe, loans and other credit
accommodations on security of chattels and intangible properties
such as, but not limited to, patents, trademarks, trade names,
and copyrights shall not exceed seventy-five percent (75%) of the
appraised value of the security, an such loans and other credit
accommodation may be made to the title-holder of the chattels
and intangible properties.
Gen. rule: the total amount should not exceed 20% of the net
worth of the bank – threshold is now 25%.
Exception: Emergency for the general public.
Bank regulations:
Liquidity Problems:
1. Granting the bank concern an emergency loan – not
exceeding 50% (sec. 50 NCBA)
2. Conservatorship (Sec. 29 NCBA) – period is 1 year.
a. reorganization of management
b. collect all monies and debts
c. all act is necessary to restore its viability.
d. Previous management acts are note yet perfected.
Q: When terminated?
A: When the monetary board does it proper upon report of the
conservator.
- if conservatorship is a failure.
- It attempts to make the bank viable again.
- There is no requirement to undergo conservatorship first.
- The statutory receiver is the PDIC.
Consequences of closure:
1. stoppage of business
2. exemption of assets from garnishment, levy or attachment.
- Sec. 30 of the new central bank act provides that the assets
of an institution under receivership or liguidation shall be deemed
in custodia legis in the hands of the receiver and shall, from the
moment the institution was placed under such receivership or
liquidation, be exempt from any order of garnishment, levy
attachment or execution.
CENTRAL BANK:
- not only insolvency but also the status of its directors. (fit
and proper rule – they may disqualify those who are unfit)
- Police power – public interest
- Government officers – disqualification takes place whether
you are full time or part time.
- Teleconferencing now allowed. – submit to guidelines of the
SEC.
- Independent director – not an officer of the bank or its
affiliates or subsidiaries.
- In subsidiary – up to 50%
- In equity – 40%
Eg.
Eg.
200k – foreign
800k – Filipino (400k ang kay Dax “the pogi” Maliwat and 400k sa
Y corp where Dax owns 50% of the stocks.)
Assignment:
Schedule:
1. Special class: March 17, Monday (6-9pm)
2. Final exam: March 25, 6pm
2 important points:
2. Joint accounts
CHATTEL MORTGAGE
- accessory contract
- cannot stand by itself without a principal obligation.
- Payment of a loan; security of an obligation.
- Movable property.
Pledge Chattel Mortgage
Real contract – not perfected until delivery Accessory contract
The property is taken by the pledge. The property is retained
by the mortgagor.
In case of death, the pledge closes the pledge and no deficiency
is recovered. Deficiency recovery is permitted. Exception is
RECTO LAW.
Art. 1484. In a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of
the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to
pay;
(2) Cancel the sale, should the vendee's failure to pay cover two
or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or
more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void. (1454-A-a)
Q: What if the mortgage was not registered but 3rd party knows
about it? May he honor the mortgage?
A: He should. Because the purpose of registration is to make him
aware.
Transactions covered:
1. sales
2. transfer
3. all or substantially all of the equipments in a business.
4. mortgage
5. chattels which merchants use
6. assignments
COPYRIGHTS
Q: Pag namatay?
A: Heirs and assignees.
Commissioned work:
Eg. Painting
Scripts:
Private communications
1. economic
2. moral
I. Economic rights
Rental:
TRADEMARKS
- product or service
- any visible sign that is capable of distinguishing the goods or
services of an enterprise.
- Visible – 121.1 no trademark which is sound and odor.
Collective mark
– use to indicate the origin or quality of goods or services of an
enterprise with a common mark.
Basic functions:
1. distinguishing function
2. origin or source
3. advertising
Rationale: The wine had additional trees while the cigarette has a
large rooster. The packaging is also different.
Dominancy Test:
Note: for injunction purposes, the petitioner need not prove that
there is confusion.
Doctrine of Dilution:
Infringement
Remedies:
1. injunction
2. criminal action
3. throw the goods
Assignment:
PATENTS
Requirements:
Sec. 32 IPC
- code does not strictly require that if the invention is a
machine, you don’t need to bring it to the IPO. Description is
sufficient.
- The patent is with the inventor;
- if he dies, his heirs, or his assignees may secure patent
protection.
Sec. 29
Sec. 29. First to File Rule. - 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, to the applicant who has the
earliest filing date or, the earliest priority date. (3rd Sentence,
Sec. 10, R. A. No. 165a.)
Sec. 54. Term of Patent. - The term of a patent shall be twenty
(20) years from the filing date of the application. (Sec. 21, R. A.
No. 165a)
1. Novelty
Rights
Sec. 46
Sec. 72
Sec. 22
Doctrine of equivalents
Requisites:
Compulsory:
1. national emergency
2. public interest
3. anti competitive
4. non commercial use is not satisfied.
Period of foreclosure
- the mortgagor may bid in the foreclosure unless he is
restricted.
- the fact that the price is inadequate would not be valid to its
validity.
1. Suspension of payments
2. Insolvency proceedings
• RTC where the natural person has resided for the past 6
months.
• RTC where the juridical person is located.
• Action in Rem – publication is mandatory.
• Inventory of assets and property.
Suspension of payments
- If the court may find that there is sufficiency court may
issue a stay order.
- Vote necessary for the debtor’s proposal schedule 2/3 of
the creditors who represent 3/5 of the liabilities.
• Petitions of this nature may be filed with the RTC where the
juridical person is located.
Insolvency proceedings
Voluntary Involuntary
1. debtor applies 1. creditor applies
2. number of creditors does not matter. 2. number of creditors –
at least 3
3. acts of insolvency is not necessary. 3. acts of insolvency is
necessary to preserve the property.
Acts of insolvency:
1. concealing
2. absconding
3. absence
4. selling property
Discharge:
- certain cases where discharge is not applicable sec. 68
and sec. 59
- additional: corporate debts
3.4 “Dealer” means any person who buys and sells securities for
his/her own account in the ordinary course of business.
3.8. “Insider” means: (a) the issuer; (b) a director or officer (or
person performing similar functions) of, or a person controlling
the issuer; (c) a person whose relationship or former relationship
to the issuer gives or gave him access to material information
about the issuer or the security that is not generally available to
the public; (d) a government employee, or director, or officer of
an exchange, clearing agency and/or self-regulatory organization
who has access to material information about an issuer or a
security that is not generally available to the public; or (e) a
person who learns such information by a communication from any
of the foregoing insiders.
Transfer of jurisdiction:
(f) Impose sanctions for the violation of laws and the rules,
regulations and orders issued pursuant thereto;
(h) Enlist the aid and support of and/or deputize any and all
enforcement agencies of the Government, civil or military as well
as any private institution, corporation, firm, association or person
in the implementation of its powers and functions under this
Code;
(i) Issue cease and desist orders to prevent fraud or injury to the
investing public;
(j) Punish for contempt of the Commission, both direct and
indirect, in accordance with the pertinent provisions of and
penalties prescribed by the Rules of Court;
(e) Any security issued by a bank except its own shares of stock.
9.2. The Commission may, by rule or regulation after public
hearing, add to the foregoing any class of securities if it finds that
the enforcement of this Code with respect to such securities is not
necessary in the public interest and for the protection of
investors.
(g) The issue and delivery of any security in exchange for any
other security of the same issuer pursuant to a right of conversion
entitling the holder of the security surrendered in exchange to
make such conversion: Provided, That the security so surrendered
has been registered under this Code or was, when sold, exempt
from the provisions of this Code, and that the security issued and
delivered in exchange, if sold at the conversion price, would at
the time of such conversion fall within the class of securities
entitled to registration under this Code. Upon such conversion
the par value of the security surrendered in such exchange shall
be deemed the price at which the securities issued and delivered
in such exchange are sold.
Q: What is an insider?
A:
3.8. “Insider” means: (a) the issuer; (b) a director or officer (or
person performing similar functions) of, or a person controlling
the issuer; (c) a person whose relationship or former relationship
to the issuer gives or gave him access to material information
about the issuer or the security that is not generally available to
the public; (d) a government employee, or director, or officer of
an exchange, clearing agency and/or self-regulatory organization
who has access to material information about an issuer or a
security that is not generally available to the public; or (e) a
person who learns such information by a communication from any
of the foregoing insiders.
Tender offer:
SEC. 19. Tender Offers. –19.1. (a) Any person or group of persons
acting in concert who intends to acquire at least fifteen per cent
(15%) of any class of any equity security of a listed corporation or
of any class of any equity security of a corporation with assets of
at least Fifty Million Pesos (P50,000,000.00) and having two
hundred (200) or more stockholders with at least one hundred
(100) shares each or who intends to acquire at least thirty per
cent (30%) of such equity over a period of twelve (12) months
shall make a tender offer to stockholders by filing with the
Commission a declaration to that effect; and furnish the issuer, a
statement containing such of the information required in Section
17 of this Code as the Commission may prescribe. Such person or
group of persons shall publish all requests or invitations for
tender, or materials making a tender offer or requesting or
inviting letters of such a security. Copies of any additional
material soliciting or requesting such tender offers subsequent to
the initial solicitation or request shall contain such information as
the Commission may prescribe, and shall be filed with the
Commission and sent to the issuer not later than the time copies
of such materials are first published or sent or given to security
holders.
Facts: UCC controls both UCHC and CEMCO. CEMCO bought the
two controlling shares of UCHC. As a result, CEMCO is now the
lone shareholder of UCC.
Held: Yes
Rationale: MTO regulates activities of unlisted companies
whatever methods for a public company may be obtained, either
directly or indirectly, MTO applies.
Coverage for final exams (March 25, 2008, 6-9pm): Checks SRC