mercantile (distinctions)

Reviewer in Mercantile Law(lifted from San Beda Reviewer 2012)

DISTINCTIONS

INTELLECTUAL PROPERTY CODE

Inter PartiesProceedings

Civil Proceedings

KindsPatent

a. Petition to cancel an invention, utility model registration, industrial design registration, or any claim or parts of a claim.

b. Petition for compulsory licensing or a license to exploit a patented invention

Copyright, Patent, Trademark

Action for Infringement

Trademarka. Opposition against the

registration of a mark published for opposition.

b. Petition to cancel the registration of a mark.

Trademark Action for Unfair

Competition

Nature of ProceedingsAdministrative Judicial

JurisdictionIPO (Bureau of Legal Affairs) Regular Courts

JurisdictionSubstantial Evidence Preponderance of Evidence

Patent Copyright When a person, by independent research arrives at the same product or that is already patented, he is restrained by the arm of the law from exploiting such an invention by reason of the patent granted the earlier discoverer.

It may be vested in a work closely similar or even identical to an earlier, or already patented work, provided that the former is truly original, i.e., it owes its existence to its creator.

Non-patentable inventions may be subject of copyright.

Utility Model Industrial Design Any new model of implements or tools of any industrial product even if not possessed of the quality of invention but which is of “practical utility.” (Del Rosario v CA)

Any composition of lines or colors or any three-dimensional form whether or not associated with lines or colors provided that such composition or form gives a special appearance to and can serve as pattern for an industrial product or handicraft (Sec. 112.1)

Patent Utility Model Industrial Design

Requisitesa. Invention –

technical solution of a problem in any field of human activity. (Sec 23)

b. New (novel) – that which does not form part of a prior art (Sec 23)

c. Inventive – An invention involves an inventive step if, having regard to prior act, it is not obvious to a person skilled in the art at the time of the filing date or priority date of the application claiming the invention (Sec. 26)

d. Industrially Patentable – an invention that can be produced and used in any industry (Sec. 27)

a. Newb. Industrially

applicable

New

Has all of the 4 essential requisites

No Inventive Step No Inventive Step and Industrially applicable

Term20 years from the filing date of the application

7 years from the filing date of the application; non-renewable

5 years from the filig date of the application, which is renewable for not more than 2 consecutive periods of 5 years each

Applicable RulesSecs. 20-107 Secs. 108-111 and

provisions on patents applying mutatis mutandis

Secs. 112-120 and certain provisions on patents applying mutatis mutandis

Classes of Patentable Inventions

Non-patentable Inventions

1. Useful machine2. A product3. A process4. Improvement of (1),

(2), (3)5. Micro-organism

1. Discoveries, scientific theories and mathematical method;

2. Schemes, rules and methods of performing mental

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6. Non-biological and microbiological process

acts, playing games or doing businesses, and programs for computers;

3. Methods for treatment of the human or animal body;

4. Plant varieties or animal breeds of essentially biological process for the production of plants or animals;

5. Aesthetic Creations;6. Anything which is

contrary to public order or morality (Sec 22)

Situation Persons Entitled to Patent2 or more persons invented separately and independently

He who first files.

2 or more applications filed for the same invention

Applicant who has the earliest filing date or earliest priority date.

Inventions created pursuant to a commission

Person who commissioned the work, unless agreed otherwise.

Employee makes the invention in the course of employment

Employee: If the invention NOT part of his regular duties even if he uses the time, facilities and materials of the employer;

Employer: If the invention is the result of the performance of his regularly assigned duties unless agreed otherwise. (Sec. 30)

Persons who may file an Application for a Patent in the Philippines

As to Nationality As to the Legal Personality of the Applicant

1. Filipino Nationals;2. Foreign Nationals or

those domiciled or have a real and effective commercial establishment in a country which is bound by treaty (such as the Paris Convention and the TRIPS Agreement) to grant Filipinos the same rights it grants its own nationals;

3. Foreign Nationals whose country also accepts the patent application of Filipinos

1. Inventor or his attorney-in-fact;

2. Assignee of the invetor

Trademark Trade NameSeparate Existence

Has an existence distinct from the existence of the proprietor or juridical person doing business and producing the goods or the services offered by such person or enterprise.

Attached to the natural and juridical person who does business and produces the goods or services

PurposeDesignates the goods or services offered by person or enterprise

Identifies and distinguishes an enterprise

RegistrationMust be registered in order to secure protection for them

No need to register in order to secure protection for them

TransferabilityMay be transferred with or without transfer of the business (Sec. 149.1)

Change of ownership of trade name must be made with transfer of enterprise or part thereof (Sec. 165.4)

Trademark GoodwillRight which protects the interests of producers in their marks and in the goodwill earned.

Reputation and public confidence that a business venture has earned through a period of creditable dealings.

Trademark LabelDesigned to identify the user or origin.

Merely names what is within the container or package; may or may not be trademark.

Declaration of Actual Use or Non-UseUnder Sec. 124-2 Under Sec. 145

When to FileWithin 3 years from the filing date

Within 1 year from the 5th

anniversary of the date of the registration of the mark

Effect of Failure to FileApplication shall be refused of the mark shall be removed from the register by the Director

Mark shall be removed from the Register by the office

What to FileDeclaration of actual use with evidence to that effect

1. Declaration of actual use with evidence to that effect; or

2. Show valid reasons based on the existence of obstacles to such use (declaration of non-use)

Grounds for Cancellation of RegistrationWithin 5 Years from

RegistrationAt Any Time

Belief that the registered mark has damage or will damage the petitioner

1. Becoming the generic name for the goods or services for which it is

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registered;2. Abandonment3. Illegal or fraudulent

registration;4. Use by, or with the

permission of the registrant so as to misrepresent the source of the goods or services in connection with which the mark is used;

5. Non-use for an interrupted period of 3 years without legitimate reason

Confusion of Goods/Services Confusion of Business/OriginExists when the ordinary prudent purchaser would be induced to purchase once product or service because of the similarity of the marks or trade names used on the same kind of product or service.

Exists when one party’s product or service though different from that of another, is such as might reasonably be assumed to originate from the latter and the public would then be deceived into the belief that there is some connection between the parties, which in fact is absent.

Confusingly similar marks are used on the same kinds of goods/services.

Confusingly similar marks are employed in different or non-competing goods/services.

Dominancy Test Holistic/Totality TestFocuses on the similarity of the main, essential, dominant or prevalent features of a mark.

Exact duplication or imitation is not necessary.

This test is incorporated in the intellectual property code and is controlling.

Relies on visual, aural, and connotative comparisons and overall impressions between the two marks. (Societe Des Produits Nestle, SA vs CA)

Mandates that the entirety of the marks in question must be considered in determining confusing similarity.

Relies on visual comparison.

Infringement of Trademark Unfair CompetitionDefinition

Unauthorized use of a trademark

The passing off of one’s goods as those of another

Fraudulent IntentFraudulent intent is unnecessary

Fraudulent intent is essential

RegistrationPrior registration of the trademark is a prerequisites to the action

Registration is not a prerequisite to an action

Scope

Limited scope Wider scopeGoods Involved

Same class of goods or services must be involved

Different classes of goods or services may be involved

Creator To Whom it BelongsSingle Creator Author of the work, his heirs or

assignsJoint Creator If work consists of

UNIDENTIFIABLE parts: Co-authors jointly as co-owners, unless there is agreement to the contrary.

If work consists of IDENTIFIABLE parts: author of each part owns the part that he has created.

Employee’s Creation If the creation is PART of his regular duties: EMPLOYER, unless there is agreement to the contrary

If it is not: EMPLOYEECommissioned Work Work itself: Person

Commissioning

Copyright: Creator, unless there is a written stipulation to the contrary

Cinematographic Works For exhibition purposes: Producer

For all other purposes: Producer, author of the scenario, composer, film director, author or the work

Anonymous and pseudonymous works

Publishers are deemed representative of the author, unless:

i. The contrary appears;

ii. Pseudonyms or adopted name leaves no doubt as to the author’s identity; or author discloses his identity

Collective Works CONTRIBUTOR is deemed to have waived his right, unless he expressly reserves it (Sec. 196)

Letters Writer.However, the court may authorize their publication dissemination if the public good or the interest of justice so requires.

Duration of CopyrightType of Work Duration

Single Creation Lifetime of the creator and for

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50 years after his deathJoint Creation Lifetime of the last surviving

creator and for 50 years after his death

Anonymous or a pseudonymous work

50 years after the date of their first publication;

Except where, before the expiration of said period, the author’s identify is revealed or is no longer in doubt, the 1st

two mentioned rules shall apply; or if unpublished, 50 years from their making

Work applied art, an artistic creation with utilitarian functions or incorporated in a useful article, whether made by hand or produced on an industrial scale

25 years from the date of making

Photographic work, audiovisual work produced by photography or analogous processes

50 years from the publication of the work, or if unpublished, from making the same

Newspaper article Lifetime of the author and 50 years thereafter

Collective Work Joint WorkElements remain unintegrated and disperate

Separate elements merge into a unified whole

Work created by 2 or more persons at the initiative and under direction of another with the understanding that it will be disclosed by the latter under his own name and that contributions of natural persons will not be identified

Work prepared by 2 or more authors with the intention that their contributions be merged into inseparable or interdependent parts of the unitary whole.

Each author shall enjoy copyright to his own contribution

Joint authors shall be co-owners. Co-ownership shall apply

Unless the contributor expressly reserves his right, it is the putative author to whom the work will be attributed

Joint authors shall be entitled both to be acknowledged as authors of the work

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Distinctions on Copyright Patent and MarkCopyright Patent Mark

DefinitionIt is that system of legal protection an author enjoys in the form of expression of ideas. (World Intellectual Property Organization)

An intangible, incorporeal right granted by statute to the author or originator of certain literary or artistic productions, whereby he is invested, for a limited period, with the sole exclusive privilege of multiplying copies of the same and publishing and selling them

An exclusive right acquired over an invention, to sell, use and make the same whether for commerce or industry.

Refers to either the grant of rights, or the instrument (sometimes called letters patent) containing the grant, giving an inventor a monopoly on the inventor’s invention for a limited period.

Any visible sign capable of distinguishing the goods of an enterprise (trademark) of the services of an enterprise (service mark), and includes a stamped or marked container of goods

Purposes1. To stimulate artistic creativity for

the general public good; and2. To promote the progress of science

and useful arts

1. Not only to reward the individual, but the advancement of the arts and sciences;

2. To add to the sum of useful knowledge; and

3. To encourage dissemination of information concerning discoveries and inventions

1. To indicate origin or ownership of articles to which they are attached;

2. To guarantee that those articles come up to a certain kind of quality;

3. To advertise articles they symbolize;

4. To assure the public that they are producing genuine article; and

5. To protect the manufacturer against substitution and sale of an inferior and different article

Requirements1. Originality2. Expression

Any technical solution of a problem in any field of human activity which is:

1. New or novel;2. Inventive; and3. Industrially applicable

1. Upon application:Must be registrable:a. Absolutely non-registrableb. Qualified registrable –

Doctrine of secondary meaning

2. Within 3 years from the application Declaration and evidence of actual

useTerm

See Table on Duration of Copyright 20 years from the filing date of the application

10 years from the filing date of the application, provided the registrant shall file a declaration of actual use within a year from the 5th anniversary of registration date and renewable for another 10 years

How Created/AcquiredFrom the moment of creation First to file system Valid Registration

General Limitations1. Duration/temporal – The owner is limited by the terms of their property rights2. Territorial/geographical – The owner is protected by the law of the country where the violation is committed3. For violations in another country, resort must be made to the law of the other country, subject to the principle of reciprocity

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BULK SALES LAW

Effects of False Statements in the Schedule of CreditorsFalse Statement Effect

Without knowledge of buyer If the statement is fair upon its face, the buyer will be protected. The creditor’s remedy is not against the goods but to prosecute the seller criminally.

With knowledge or imputed knowledge of buyer

The vendee accepts it at his peril. The sale is VALID between the vendor and the vendee but void as against the creditors

With names of certain creditors without notice omitted

The sale is Void as to such creditors, whether that omission was fraudulent or not.

With respect to an innocent purchaser for value from the original

Purchaser shall be protected. However, purchaser will be liable if there is constructive notice.

Effects of Violation of BSLBetween the parties Valid ContractBetween persons Other than the creditors

Valid Contract

As to affected creditors of the seller/mortgagor

Valid Contract

Purchaser acts as a TRUSTEE OR RECEIVER for the benefit of the creditors of the seller.CRIMINAL LIABILITY, if expressly provided.

WAREHOUSE RECEIPT LAW

Negotiable Instrument Negotiable Warehouse ReceiptSubject

Money MerchandiseObject of Value

Instrument itself Goods depositedLiability if Intermediate Parties

Secondary (NIL) None (for failure to deliver the goods)

Effect of Deliberate AlterationNull and void Valid, but enforceable only in

accordance with its original tenor

Conversion from Bearer to OrderOriginally bearer instrument will always be such

Converted to an order WR of specially indorsed

Significance of Holder in Due CourseMay obtain a better title Obtains only the title which the

party negotiating has over the goods.

Negotiable WR Non-negotiable WRMay be acquired through negotiation

May be acquired through transfer or assignment

Rights of the person to whom it is negotiated (holder)

1. Title to the goods of the person negotiating the receipt and title of the person to whose order the goods were to be delivered;

2. Direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him.

Rights of transferee:1. Title of the goods, as

against the transferor;

2. Right to notify the warehouseman of the transferor and acquire the direct obligation of the warehouseman to hold the goods for him.

Negotiation defeats the lien of the seller of the goods.Goods represented cannot be subject to attachment or levy by execution, unless in proper circumstances

Goods represented can be subject to attachment or levy by execution

TRUST RECEIPTS LAW

Rights and Obligations of PartiesEntruster Entrustee

Rights Entitled to the

proceeds from the sale of goods, documents or instruments;

Entitled to the returns of goods, etc. In case of non-sale;

To enforce all other rights conferred on him under the TRL;

Extent of security interest:

As against innocent purchaser for value – not preferred

To cancel the trust, take possession of goods, and to sell the goods in a public sale in case of default;

May purchase at the intended public sale

1. To receive the surplus from the public sale

2. To have possession of the goods as a condition for his liability under the TRL

Obligations1. To give possession of

the goods to the entrustee;

2. To give at least 5 days notice to the entrustee of the

1. To hold the goods or the sale proceeds in trust for the entruster;

2. To comply with his alternative

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intention to sell the goods at an intended public sale

obligation;3. To insure against loss

the goods for their total value;

4. To keep the goods or sale proceeds separate and identifiable

5. To observe all the conditions of the trust receipt not contrary to the provisions of the TRL

LiabilitiesNot liable as principal or vendor and any sale or contract to sell made by the entrustee.

Risk of loss of the goods.

CODE OF COMMERCE

Civil Law Code of CommercePerfection

Theory of Cognition (acceptance made by letter or telegram does not bind the offeror except from the time it came to his knowledge and that the contract is presumed to have been entered into in the place where the offer was made.)

Theory of Manifestation (contracts shall be perfected from the moment an answer is made accepting the offer.)

Designation of PeriodIf the obligation does not fix a period, action would have to be filed with the courts for the fixing of the period.

Obligations which do not have a period previously fixed by the parties shall be demandable ten days (10) after having been contracted if they give rise only to an ordinary action, and on the next day if they involve immediate action.

Concept of Delay and DefaultDepends on the actuations of the oblige or creditor – no demand, no liability, EXCEPT of time is of the essence in the contract.

Every debtor would be in default, without need of a demand

Absolute Incapacity Relative IncapacityExtends throughout the Philippines

Extends only to the territory where the officers exercising his functions

Act is rendered null and void Subject the violator to disciplinary action or punishment

Commercial Partnership Joint AccountCommon Name

A common name can be adopted

No common name can be adopted

Common fundWith a common fund No common fund

Juridical Personality

With a juridical personality No juridical personalityLiability of Partners

All general partners are liable Only the ostensible partner is liable

ManagementAll partners participate in the management, unless they agree to have a managing partner

Managed by ostensible partner alone

Particular Partnership Joint VentureFirm Name

Participating merchants can transact business under their own name

Informed partnership, with no form name

Personality and Individual LiabilityWith a legal personality, but partners can be individually liable therefor if they transact business in their own name

No legal personality, participants are individually liable

Number of transactionsGenerally relates to a continuing of business of various transactions of a certain kind

Usually limited to a single transaction, although the business of pursuing to a successful termination may continue for a number of years

Partnership CorporationCreation

Created by mere agreement o the parties

Created by law or by operation of law

Number of IncorporatorsMay be organized by at least two persons

Requires at least five incorporators (except a corporation sole)

Commencement of Judicial PersonalityAcquires juridical personality from the moment of execution of the contract of partnership

Acquires juridical personality from the date of issuance of the certificate of incorporation by the SEC

PowersPartnership may exercise any power authorized by the partners (provided it is not contrary to law, morals, good customs, public order, public policy)

Corporation can exercise only the powers expressly granted by law or implied from those granted or incident to its exercise

ManagementWhen management is not agreed upon, every partner is an agent of the partnership

The power to do business and manage its affairs is vested in the board of directors or trustees

Effect of ManagementA partner as such can sue a co-partner who mismanages

The suit against a member of the board of directors or trustees who mismanages must be in the name of the corporation

Rights of SuccessionPartnership has no right of succession

Corporation has a right of succession

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Extent of Liability to Third PersonsPartners are liable personally and subsidiarily (sometimes solidarily) for partnership debts to third persons

Stockholders are liable only to the extent of the shares subscribed by them (limited liability feature)

Transferability of InterestPartner cannot transfer his interest in the partnership so as to make the transferee a partner without the unanimous consent of all the existing partners because the partnership is based on the principle of delectus personarum

Stockholder has generally the right to transfer his shares without prior consent of the other stockholders because corporation is not based on this principle

Term of ExistencePartnership may be established for any period of time stipulated by the partners

Corporation may not be formed for a term in excess of 50 years extendible to not more than 50 years in any one instance

Firm nameLimited partnership is required by law to add the word “Ltd.” To its name

Corporation may adopt any name provided it is not the same as or similar to any registered firm name

DissolutionMay be dissolved at any time by any or all of the partners

Can only be dissolved with the consent of the State

Governing LawGoverned by the NCC Governed by the Corporation

Code

Primary SecondaryNature of Franchise

Refers to the franchise of being or existing as a corporation

Refers to the exercise of right or privilege. Ex. Public Utility or telecommunication franchise

To Whom VestedVested in the individuals who compose the corporation

Vested in the corporation after its incorporation and not upon the individuals who compose the corporation

AlienabilityCannot be sold or transferred, in the absence of legislative authority to do so. This is because it is inseparable from the corporation itself.

May be sold or transferred under a general power granted to a corporation to dispose of its properties; may also be subject to sale on execution or levy.

CORPORATION CODE

Public PrivateGovernment Control

Being mere instrumentalities of the State, are subject to Governmental visitation and control

Not subject to visitation, control, or charge by the State, except in the exercise of police power.

Consent as to CreationMay be created without the consent of the locality to be

Consent of the incorporators is necessary to the creation

affected

Incorporators CorporatorsNature of Membership

Signatory to the Articles of Incorporation

Stockholder (stock corporation) or member (non-stock corporation)

Contractual CapacityMust have contractual capacity May be such through a

guardianPermanence

Fait accompli, accomplished fact (the AOI cannot be amended to replace them)

They may cease to be such if they subsequently lose their shareholdings

NumberNumber is limited to 5-15 No restriction as to number

Share of Stock Certificate of StockIncorporeal or intangible property

Tangible property

Represents the right or interest of a person in a corporation

Written evidence of that right or interest

May be issued even if the subscription is not fully paid

As a rule, may not be issued unless the subscription is fully paid

Charter FranchiseNature

The INSTRUMENT bestowing upon the corporation the right or privilege of being a corporation

The right and privilege itself of being a corporation

Differences between De jure, De facto and Corporation by Estoppel

De jure De Facto By EstoppelAs to who can question its corporate existence

No one not even the State

Only the State in a direct proceeding

State or any third person who relied in good faith on its representations

As Being Subject to a Direct and Collateral AttackNot subject Direct Both collateral and

directAs to creation

Complied with all mandatory requirements for incorporation

Has not complied with all requirements but has complied sufficiently

Absence of conditions precedent needed for a de facto corporation

As to liabilities of officers and directorsLiable only to the extent of their subscription unless acted in bad faith

Same as de jure All who have knowledge of its lack of authority to act as such are liable as general partners

As to capacity to sue or be suedCan sue and be sued

Can sue and be sued

General Rule: Cannot sue or be sued;

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Exception: by a 3rd

party who relied on its representations in good faith

Stock Corporation Non-Stock corporationPresence During Election

Owners of a majority of the outstanding capital stock, in person or by their authorized representative as such by written proxy, must be present at the election of the directors

A majority of the members entitled to vote, in person or by proxy, if allowed in its AOI or by-laws, must be present in the election.

Manner of VotingCumulative voting is mandatory; a matter of right granted by law to each stockholder with voting rights.

Cumulative voting is not available unless allowed by the articles or by-laws.

Corporate Officer Corporate EmployeeBasis

Position is provided for in the by-laws or under the Corporation Code

Employed by the action of the managing officer of the corporation

JurisdictionRTC has jurisdiction in case of dispute

NLRC has jurisdiction in case of labor disputes

Classification of Powers or AuthorityInherent Express Implied

That authority to act and bind the corporation which the officer has by reason of his office although it may not be sanctioned by express authority

Every power or authority expressly conferred upon him by law and the by-laws of the corporation

Includes all such incidental authority as is necessary, usual, and proper to effectuate the main authority expressly conferred

Apparent or Ostensible Authority By EstoppelWhen in the usual course of the business an officer or agent is held by such corporation or has been permitted to act for it in such way as to justify third persons who deal with him in assuming that he is doing an act or making a contract within the scope of his authority.

When a corporation, by its voluntary act, places an officer or agent in such a position or situation that persons of ordinary prudence are justified an assuming that he has authority to perform the act in question

Section 31, 2nd paragraph Section 34Applicable to directors, trustees and officers

Only applicable to directors

Does not allow ratification of a transaction by a self-dealing directors, trustees or offers

Allows the ratification of a transaction by a self-dealing directors i.e. by the votes of stockholders representing 2/3 of the outstanding capital stock

Covers stock and non-stock corporations

Covers stock corporations only

Express Powers Implied Powers

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Refers to the main business, objects and purposes of the corporation

Refers to the means and methods of attaining those objects and purposes

Determined by the corporate charter and the applicable law

May change according to time, place and surrounding circumstances

The test is whether they are found in the words of the charter of the law

The test is whether they are fairly incidental to the express powers and reasonably necessary to carry them out in furtherance of the corporation’s business

Bonded Indebtedness DebentureSecured by a mortgage on corporate properly

Serial obligations or notes issued on the basis of the general credit of the corporation. Hence, they are not bonded indebtedness

Pre-emptive Right Right of First RefusalMay be exercised even when there is no express provision of law

Arises only by virtue of contractual stipulations but is also granted under the provisions on Close Corporation

Pertains to unsubscribed portion of the authorized capital stock. A right that may be claimed against the corporation.

Exercisable against another stockholder of the corporation of his shares of stock.

Cash Dividends Stock dividendsAuthority to declare

Declared only by the board of directors at its discretion

Declared by the board with the concurrence of the stockholders representing at least 2/3 of the outstanding capital stock at a regular/special meeting

Disbursements of fundsInvolves a disbursement to the stockholders of accumulated earnings

Does not involve any disbursement of funds

Corporate CapitalDoes not increase the corporate capital

Corporate capital is increased

Creation of debtsIts declaration creates a debt from the corporation to each of its stockholders

No debt is created by its declaration

Liability to Corporate CreditorsWhen declared and paid becomes the absolute property of the stockholder and cannot be reached by creditors of the corporation in the absence of fraud

Since it is still part of corporate property, may be reached by corporate creditors

Stock Dividends Stock SplitsThere is capitalization of earnings or profits, together

Merely a dividing up of outstanding shares of a

with a distribution of the added shares which evidence the assets transferred to capital.

corporation into a greater number of units; without disturbing the stockholder’s original proportional participating interest in the corporation

Executive Committee Management ContractCreation

Its creation must be provided for in the by-laws

Express power of a corporation

AuthorityA governing body which functions as the board itself.

Management company must always be subject to the superior power of the board to give specific directions from time to time or to recall the delegation of managerial power.

Ultra Vires Acts Illegal ActsNature

Not necessarily unlawful, but outside the powers of the corporation

Unlawful; against law, morals, public policy, and public order

Susceptibility of RatificationCannot be ratified,

Reason: In Civil Law, ratification is an act of approving a contract entered into by another without authorization. It is required that at the time of the ratification, the cause of nullity has already ceased to exist. An ultra vires act is not within the power of the corporation; hence, the ground for being such cannot cease

Cannot be ratified because they are void ab initio

Binding effectCan bind the parties if wholly or partly executed on the basis of estoppels

Cannot bind the parties

Articles of Incorporation By-LawsNature

Condition precedent in the acquisition of corporate existence

Condition subsequent; its absence merely furnishes a ground for the revocation of the franchise

PurposeConstitutes the charter or fundamental law of the corporation

Merely rules and regulations adopted by the corporation

Time of ExecutionExecuted before incorporation May be executed after

incorporation. Sec. 46 allows the filing of the by-laws

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simultaneously with the AOIAmendment

Amended by a majority of the directors/trustees and stockholders representing 2/3 of the outstanding capital stock, or 2/3 of the members in case of non-stock corporations

May be amended by a majority vote of the BOD and majority vote of outstanding capital stock or a majority of the members in non-stock corporation

Delegation of Power to AmendPower to amend/repeal articles cannot be delegated by the stockholders members to the board of directors/trustees

Power to amend or repeal by-laws or adopt new by-laws may be delegated by the 2/3 of the outstanding capital stock or 2/3 of the members in the case of non-stock corporation

Resolution By-lawsNature and Subject Matter

Merely a declaration of will of the corporation in a given matter and in the nature of a manifested act; applies only to a single act of corporation.

Permanent rule of action of the conduct of corporation affairs.

Rule in case of conflictSubordinate Prevail over resolution

Necessity of approval by SECNo need for approval unless required by law

Subject to the approval of SEC

Stockholders Board of Directors/TrusteesRegular: annually, provided that notice is sent two weeks before the meeting;

Special: at any time, provided that notice is sent one week before meeting

Regular meeting is held monthly unless otherwise provided by the by-laws. Notice must be sent one day prior to the meeting, unless held abroad.

Called upon by any person authorized or upon petition to SEC by any stockholder

Called upon by the President, unless otherwise provided in the by-laws

Notice may be waived Notice may be waivedMust be held in the city or municipality where the principal office is located, if practicable in the principal office

May be held in or out of the Philippines

Petitioner, person chosen by majority stockholders or President may preside at meetings

President presides the meetings

Proxy is allowed Proxy is not alloweds

Voting Trusts ProxyNature

The trustee votes as owner The proxy holder votes as agent

NotarizationThe agreement must be notarized

Proxy need not be notarized

Legal titleTrustee acquires legal title to Proxy has no legal title to the

the shares of the transferring stockholder; only beneficial title remains with the stockholder

shares of the principal

Manner of votingThe trustee may vote in person or by proxy unless the agreement provides otherwise

The proxy must vote in person

Actions allowedTrustee is not limited to act at any particular meeting

Proxy can only act at a specified stockholder’s meeting (of not continuing)

Restrictions on VotingA trustee can vote and exercise all the rights of the stockholder even when the latter is present

A proxy can only vote in the absence of the owners of the stock

PeriodAn agreement must not exceed 5 years at any one time except when the same is made a condition of a loan

A proxy is usually of shorter duration although under Sec. 58 it cannot exceed 5 years at any one time

Separability of Ownership and Voting RightThe voting right is divorced from the ownership of stocks

The right to vote is inherent in or inseparable from the right to ownership of stock

RevocabilityThe agreement is irrevocable Revocable anytime except one

couple with interest

Subscription PurchasePeriod

Can be made before or after incorporation

Can only be made after incorporation

PaymentGenerally, the subscriber need not pay unless there is a call

The purchaser under a deed of assignment or sale shall pay according to agreement

Release from Obligation to PaySubscriber cannot be released from his obligation to pay the subscription price

The stockholders who sells his shares can condone the obligation to pay the purchase price

Statute of FraudsThe Statute of Frauds does not apply to subscription contracts

The State of Frauds applies if the purchase price is not less than P500.00

Underwriting Agreement Stock Subscription AgreementObligation

The signers obligate themselves to purchase the shares of stock which cannot be sold.

The obligation of the signer to the purchasers and to the public is absolute.

CommissionUnderwriters are given commission.

There is no commission.

Becoming a StockholderThe signer can refuse to become a stockholder/member of the company.

He becomes a stockholder of the company and is liable to pay the amount due on the stock.

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Shares of Stock Certificate of StockNature

Unit of interest in a corporation Evidence of the holder’s ownership of the stock and of his right as a shareholder

ClassificationIncorporeal or intangible property

Concrete and tangible

Condition for IssuanceMay be issued by the corporation even if the subscription is not fully paid.

May be issued only if the subscription of fully paid.

Merger ConsolidationA union whereby one or more existing corporations are absorbed by another corporation which survives and continues the combined business.

The union of two or more existing corporations to form a new corporation called the consolidated corporation.

Merger and Consolidation Sales of AssetsActs involved

Sale of assets is always involved

Merger/ consolidation is not always involved

Transfer of titleTitle to the assets are transferred by operation of law

Transfer of title is by virtue of contract

Assumption of LiabilitiesThere is automatic assumption of liabilities

Purchasing corporation is not generally liable for the debts and liabilities of the selling corporation

DissolutionThe constituent corporations are automatically dissolved

The selling corporation is not dissolved by the mere transfer of all its property

LiquidationThere is continuance of the enterprise and of the stockholders

The selling corporation ordinarily contemplates liquidation of the enterprise

Stock Non-stockNature

Has capital stock divided into shares and with authority to distribute dividends to its stockholders

Does not have shares and may not distribute profits to its members

Meeting/Voting of members/StockholdersStockholders and directors must act in a meeting, except where a mere written assent is sufficient or a formal meeting unnecessary

Members may be allowed by the by-laws to vote by mail or other similar means

Manner of votingCumulative voting is available in the election of directors

Cumulative voting not available unless otherwise provided in the articles or by-laws

ProxyStockholders may vote by Members may be deprived of

proxy the right to vote by proxy in the articles or by-laws

Non-transferability of MembershipStockholders may transfer their shares

Members cannot transfer their membership unless allowed by the articles or by-laws

Directors/TrusteesDirectors cannot exceed 15 in number

Trustees may exceed 15 in number

Term of director/trusteeThe term of a director is 1 year The term of a trustee is 3 years;

1/3 of the Board shall be elected annually

Election of OfficersOfficers are elected by the Board of Directors

Officers may be directly elected by the members unless otherwise provided in the articles or by-laws

Place of meeting of StockholdersStockholders’ meetings shall be held in the city or municipality where principal office of corporation is located, and if practicable in the principal office.

Board of Director’s meetings may be held in or outside the Philippines, unless the by-laws otherwise provides

The by-laws may provide that members of a non-stock corporation may hold their meetings at any place within the Philippines.

Trustees’ place of meetings may also be held in or outside the Philippine unless the by-laws otherwise provides

Reason: The provisions governing stock corporation, apply suppletorily to non-stock corporations, except as may be covered by specific provisions of the Code pertaining to non-stock corporations

Ordinary Stock Corporation Close CorporationArticles of Incorporation

Its articles of incorporation need only contain the general matters enumerated in Sec. 14 of the Code

Its articles must contain the special matters prescribed by Sec. 97, aside from the general matters in Sec.14. Failure to do so precludes a de jure close corporation status

Ownership of StocksIts status as an ordinary stock corporation is not affected by the ownership of its voting stock or voting rights

2/3 of its voting stock or voting rights must not be owned or controlled by another corporation which is not a close corporation

Classification of DirectorsIts articles cannot classify its directors

Its articles may classify its directors

Election/appointment of OfficersThe corporate officers and employees are elected by a majority vote of all the members of the board of directors

Its articles may provide that any or all of the corporate officers or employees may be elected or appointed by the stockholders

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Business of the corporation is managed by the board of directors

Business of the corporation may be managed by the stockholders if the articles so provide, but they are liable as directors

Pre-emptive rightThe pre-emptive right is subject to the exceptions found in Sec. 39.

The pre-emptive right is subject to no exceptions unless denied in the articles

Appraisal RightThe appraisal right may be exercised by a stockholder only in the cases provided in Secs. 81 and 42 of the Code.

The appraisal right may be exercised and compelled against the corporation by a stockholder for any reason.

Purchase of its own sharesExcept as regards redeemable shares, the purchase by the corporation of its own stock must always be made from the unrestricted retained earnings.

In case of an arbitration of any intra-corporate deadlock by the SEC, the corporation may be ordered to purchase its own shares from the stockholders regardless of the availability of unrestricted retained earnings

Remedy of ArbitrationArbitration of intra-corporate deadlock by the SEC is not a remedy in case the directors, stockholders are so dividend respecting the management of corporation

Arbitration of intra-corporate deadlock by the SEC is an available remedy in case the director or stockholder are so divided respecting the management of the corporation

Liquidation RehabilitationNature

Connotes a winding up or settling with creditors and debtors

Connotes a reopening or reorganization

Continuity of Corporate LifeWinding up process so that assets may be distributed to those entitled

Contemplates a continuance of corporate life in an effort to restore the corporation to its former successful operation

NEGOTIABLE INSTRUMENTS LAW

Promissory Note Bill of ExchangeNature

Unconditional promise Unconditional orderNumber of Parties

Involves 2 parties Involves 3 partiesLiability of Creator

Maker is primarily liable Drawer is only secondarily liable

PresentmentOnly one presentment: for payment

Generally two (2) presentments: for acceptance and for paymentNote: 2 presentments: only in cases provided in Sec. 143

Right to Limit LiabilityMaker of note may NOT insert an express stipulation limiting

Drawer may insert in the instrument an express

or negativing his own liability to the holder

stipulation limiting or negativing his own liability to the holder

Exchange Check When payable

May be payable on demand or at a fixed or determinable future time

PresentmentMust be presented for acceptance

Need not to be presented, for acceptance, however, if the holder requests and the banker desires, he may accept

Drawn on DepositNeed NOT be drawn on a deposit, hence it is not necessary that the drawer of a bill of exchange should have funds in the hands of the drawee

Is drawn on deposit, otherwise, there would be fraud

When presentment madeMay be presented for payment within reasonable time after its last negotiation.

Must be presented for payment within a reasonable time after its issue.

Effect of acceptance/certificationIf accepted – drawer/indorser remains liable

If certified – drawer/indorers are discharged

Effect drawer’s deathDeath of a drawer of a BOE, with the knowledge of the bank, does not revoke the authority of the drawee to pay.

Death of the drawer of a check, with the knowledge of the bank, revokes the authority of the banker to pay.

Negotiable Instruments Non-negotiable InstrumentsApplicable

Only NI is governed by the NIL Application of the NIL is only by analogy

TransferabilityTransferable by negotiation or by assignment

Transferable only by assignment

TransfereeThe transferee can be a HDC if all the requirements are complied with

The transferee remains to be an assignee and can never be a HDC

DefensesA holder in due course takes the NI free from personal defenses

All defenses available to prior parties may be raised against the last transferee

Nature of titleRequires clean title, one that is free from any infirmities in the instrument and defects of title of prior transferors

Transferee acquires a derivate title onlys

Solvency of the DebtorSolvency of debtor is in the sense guaranteed by the indorsers because they engage that the instrument will be accepted, paid or both and that they will pay if the instrument

Solvency of debtor is not guaranteed under Art. 1628 of the NCC unless expressly stipulated

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is dishonoured.

Fund for Reimbursement Particular Fund for PaymentActs Involved

Drawee pays the payee from his own funds, afterwards the drawee pays himself from the particular fund indicated

There is only one act the drawee pays directly from the particular fund indicated. Payment is subject to the condition that the fund is sufficient

Nature of Fund IndicatedParticular fund indicated is NOT the direct source of payment but only the source of reimbursement

Particular fund indicated is the direct source of payment

EffectUnconditional Conditional

EXAMPLEPay to the order of X P1,000 and reimburse yourself from the rentals of my house.

Sgd. Y

I Promise to pay X or order the sum of P1, 000 out of my salary in KYZ corporation.

Sgd. Y

Instruments payable to order Instruments payable to bearerPayee

The payee must be named or indicated with reasonable certainty

The payee need not be indicated, it is enough that it is expressed to be so payable to bearer

NegotiationThis is negotiated by indorsement coupled by delivery

This is negotiated by delivery

ConversionInstrument originally payable to order can be converted into a bearer instrument through blank indorsement

Instrument originally payable to bearer cannot be converted into order instrument. A bearer is always a bearer and can be negotiated by mere delivery even if especially indorsed

Assignment NegotiationApplicable law

Governed by the Civil Code Governed by the NILType of transaction

Pertains to contracts in general Pertains to NINature of the Transferee

The transferee is a mere assignee

The transferee is a holder who may be a holder in due course

Rights acquiredAssignee steps into the shoes of the assignor and merely acquires whatever rights the assignor may have

Holder in due course may acquire a better right than the right of the transferor

Availability of defensesAssignee takes the instrument subject to the defenses obtaining among the original parties

Holder in due course takes it free from personal defenses available among the parties

As to possibility of becoming holder in due course

The transferee can never be a holder in due course

The transferee can be a holder in due course in proper cases

Holder in due course Not HDCCompliance with Requisites

All the circumstances under Sec. 52 if NIL are present

One or some or all of the requisites or circumstances under Sec. 52 is/are absent

Real DefensesHis rights can be defeated by real defenses

His rights can be defeated by real defenses

Personal DefensesHis right can’t be defeated by personal defenses

His rights can be defeated be personal defenses

RightsHe has right to enforce payment, sue in his own name and negotiate the instrument

He has right to enforce payment, sue in his own name, and negotiable the instrument

Liability WarrantyLiability to pay

Makes the parties liable to pay the sum certain in money stated in the instrument.

Impose no direct obligation to pay in the absence of breach thereof. In case of breach, the person who breached the same may either be liable or barred from asserting a particular defense.

Requisites to enforce liabilityConditioned on presentment and notice of dishonour

Does not require presentment and notice of dishonour

When action must be broughtAction cannot be brought until maturity of instrument

May be brought at any time; the breach may even occur at the time of transfer

Primary Liable Secondary LiableLiability

Who by the terms of the instrument is absolutely required to pay the same

Who by the terms of the instrument is not absolutely required to pay the same

Unconditionally bound to pay Conditionally bound to payWhen to Pay

Absolutely required to pay upon maturity of instrument

Required to pay after conditions have been fulfilled, to wit due presentment for payment or acceptance of primary party, dishonour by such party, and the taking of the proceedings required by law after dishonor.

Secondarily LiableDrawer General Indorser Irregular Indorser

Admits the existence of the payee and his capacity to indorse;

Warrants to all subsequent HDC –

That the instrument is genuine and in all respect what

A person, not otherwise a party to an instrument, places his signature thereon in blank before delivery.

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it purports to be;

He has good title to it;

All prior parties had capacity to contract;

The instrument is, at the time of endorsement, valid and subsisting

If instrument payable to the order of a 3rd

person, he is liable to the payee and subsequent parties.

Engages that the instrument will be accepted or paid by the party primarily liable; and

Engages that the instrument will be accepted or paid, or both, as the case may be according to its tenor, and

If the instrument payable to order of maker or drawer or to bearer, he is liable to all parties subsequent to the maker or drawer

Engages that if the instrument is dishonoured and proper proceedings are brought he will pay to the party entitled to be paid

If the instrument is dishonoured and necessary proceedings on dishonour be duly taken, he will pay to the party entitled to be paid

If he signs for accommodation of the payee, he is liable to all parties subsequent to the payee

Drawer MakerUndertaking

Issues bill of exchange Makes a promissory noteLiability

Secondarily liable Primarily liableLimitation of Liability

Can negative or limit his liability

Can’t limit his liability

Qualified Indorser Person Negotiating By deliveryWarranties

1. Instrument is genuine and in all respects what it purports to be;

2. He has good title to it;

3. All prior parties had capacity to contract;

4. He has no knowledge of any fact which would impair the validity of the instrument or render it valueless

Same warranties

To whom warranties extendLiable to all parties who derive their title through his indorsement

Warranties extend to immediate transferee only

General Indorser Person Negotiating by Mere Delivery or By Qualified

IndorsementNature of Liability

There is secondary liability and warranties

No secondary liability; liable only for breach of warranty

Warranty as to ignorance of Certain FactsWarrants that the instrument is, at the time of his indorsement, valid and subsisting regardless of whether he is ignorant of that fact or not

Warrants that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless

To whom warranties extendTo subsequent holders in due course; subsequent parties deriving their title from holders in due course and his immediate transferee

Person Negotiating by Mere Delivery – to immediate transferee only.

Qualified Indorser – to all parties who derive their title through indorsement

Accommodation Party Regular PartyPurposes for Signing

Signs instrument for the purpose of lending his name or credit some other person

Does not sign for that purpose in which the accommodation party did

Value ReceivedSigns instrument without receiving value therefor

Signs instrument for value

Availability of Parole EvidenceMay always show by parole evidence that he is only such a party

Cannot disclaim or limit his personal liability as appearing on the instrument by parole evidence

Availability of absence or failure of consideration as a defenseCannot avail of the defense of absence or failure of consideration against a holder NOT in due course

Can avail of said defense against a person NOT a holder in due course

Right to SueAfter paying the holder, may sue for reimbursement the accommodation party

May not sue any subsequent party for reimbursement

Real Defenses Personal DefensesNature

Those that attach to the instrument itself and are available against all holders, whether in due course or not, but only by the parties entitled to raise them

Those which are available only against a person not a holder in due course or a subsequent holder who stands in privity with him

Status of ContractVoid Voidable

Availability against HDCAvailable against HDC Not available against HDC

Defenses1. Prescription2. Material Alteration

1. Non-delivery of complete instrument

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3. Illegality – if declared void for any purposes;

4. Duress amounting to forgery;

5. Want of authority of agent;

6. Non-delivery of Incomplete Instrument

7. Forgery8. Insanity where the

insane person has a guardian appointed by the court

9. Minority10. Ultra vires Act of

Corporation11. Discharge in

Insolvency12. Fraud in Factum or

Esse Conctractus or Fraud in Execution

13. Execution of instrument between public enemies

14. Marriage in the case of a wife

Note: An instrument subject to real defense cannot be enforced against the person to whom the defense is available but it can be enforces against those whom such defense is not available such as under Sec. 23

2. Ultra vires acts of corporation where the corporation has the power to issue negotiable paper bu the issuance was not authorized for the particular purpose for which it was issued

3. Negotiation in breach of faith

4. Insertion of wrong date in an instrument

5. Conditional delivery of Complete instrument

6. Filling up blank beyond reasonable time

7. Absence or failure of consideration whether partial of total

8. Illegal consideration9. Filling up blank not

within authority10. Want of authority of

agent where he has apparent authority

11. Fraud in inducement12. Acquisition by force,

duress or fear13. Intoxication14. Mistake15. Insanity where there

is no notice of insanity on the part of the one contracting with the insane person

16. Negotiation under circumstances that amount to fraud

17. Acquisition of the instrument by unlawful means

As Regards Immediate Parties and Remote Parties who are

not HDC

As Regards HDC

Delivery must be coupled with the intention of transferring title to the instrument and made either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be.

Delivery is conclusive if he is in possession of a complete instrument so as to make all prior parties to him liable

It may be shown that:a. There was no deliveryb. Delivery was not

authorizedc. Delivery was

It cannot be shown that there was no delivery, or that delivery was not authorized, or that it was conditional, or delivery was for a special

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conditional; ord. Delivery was for a

purpose only special purpose only

Comparison of Sections 14, 15 and 16 of the NILSec 14 Sec 15 Sec 16

DeliveryDelivered Undelivered Undelivered

Note: Delivery may be conditional or for a special purpose only and not for the purpose of transferring the property in the instrument

CompletenessWaiting in any material particular

Blank paper with signature

Mechanically incomplete Mechanically complete

Authority of person in possessionPrima facie authority to complete it by filling up the blanks therein

Signature operates as a prima facie authority to fill it up as such for any account

No authority to complete and/or negotiate instrument

May negotiate if delivered to him by or under the authority of the party making, indorsing, drawing or accepting, as the case may be

When enforceableIf filled up strictly in accordance with authority given and within a reasonable time

Not enforceable When delivery is made by or under authority of the party making, indorsing, drawing or accepting as the case may be

Kind of DefensesPersonal Real Personal

Rights of Holder1. If HDC, he can enforce the

instrument as completed against parties prior or subsequent to the completion

2. If not HDC, he can enforce the instrument as completed only against parties subsequent to the completion but not against those prior thereto.

None in the hands of any holder. However, the invalidity of the instrument is only with reference to parties whose signatures appear on the instrument after delivery, the instrument is valid

Can enforce the instrument

Note: Where the instrument is on the hands of the HDC, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. Where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery to him is presumed until the contrary is proved.

Absence of Consideration Failure of ConsiderationDefinition

It is the total lack of any valid consideration.

It is the neglect or failure of one of the parties to give, to do or to perform the consideration agreed upon.

Order Instrument Bearer InstrumentMaker’s Signature Forged

Maker is not liable because he never became a party to the instrument

Maker is not liable

Indorsers subsequent to forgery are liable because of their warranties

Indorsers may be made liable to those persons who obtain title through their indorsements

Party who made the forgery liable

Party who made the forgery liale

Payee’s signature forgedMajer and payee not liable Maker is liableIndorsers subsequent to Indorsement is not necessary

forgery are liable to title and the maker engages to pay holder



Indorser’s signature forgedMaker, payee and indorser whose signature was forged is not liable

Maker is liable. Indorsement is not necessary to title and the maker engages to pay the holder

Indorsers subsequent to forgery are liable because of their warranties

Indorser whose signature was forged not liable

Party who made the forgery is liable


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Bills of ExchangeOrder Instrument Bearer Instrument

Drawer’s signature forgedDrawer is not liable because he was never a party to the instrument

Drawer is not liable

Drawee is liable if it paid (no recourse to drawer) because he admitted the genuiness of the drawer’s signature.

Drawee cannot recover from the collecting bank because there is no privity between the collecting bank and the drawer. The latter does not give any warranty regarding the signature if the drawer

Drawee is liable if it paid. Drawee cannot recover from the collecting bank because it is bound to know the drawer’s signature since the latter is its depositor.

The drawee may recover from the drawer when the latter’s negligence is the proximate cause of the loss or contributed thereto.

Indorsers subsequent to forgery liable (such as collecting bank or last endorser)Party who made the forgery is liable


Payee’s signature forgedDrawer, drawee and payee not liable. Cut-off Rule applies

Drawer is liable (his indorsement is not necessary to pass title)Drawee is liable (No privity between drawer and payee because indorsement of payee is not necessary)Payee is not liable

Indorsers subsequent to forgery are liable (such as collecting bank)

But it may recover from the person who forged the indorsement on the check and deposited or encashed the same



Indorser’s signature forgedDrawer, payee and indorser whose signature was forged not liable (Cut off Rule does not apply)

Drawer is liable (indorsement not necessary to title)

Drawee is liable if it paid Drawee is liableIndorsers subsequent to forgery are liable (such as collecting bank)

Indorser whose signature was forged is liable because indorsement is not necessary to title



When Notice of Dishonor is not Required to Be Given toDrawer (Sec 114) Indorser (Sec 115)

Drawer and drawee are the same

Drawee is a fictitious person or does not have the capacity to contract, and indorser was aware of that fact at the time he indorsed the instrument

Drawee is a fictitious person or not having the capacity to contract

Indorser is the person to whom the instrument is presented for payment

Drawer is the person to whom the instrument is presented for payment

Instrument was made or accepted for his accommodation

The drawer has no right to expect or require that the drawee or acceptor will honor the instrumentWhere the drawer has countermanded payment

Enforcement of LiabilityPresentment Notice of Dishonor

Payment AcceptancePromissory NotesBills of ExchangeChecks

Sec. 143 Bill payable

after sight or when it is necessary in order to fix the maturity of the instrument

Bill expressly stipulates

Bill drawn payable elsewhere than at the residence or place of business of the drawee

Promissory NotesBills of ExchangeChecks

By whomHolder/Agent Holder/Agent Secs. 90 & 91

Holder/Agent By or on behalf

or any party who might be compelled to pay it to the holder and who have a right of reimbursement from the party to whom the notice is given

To WhomSecs. 76, 77, 78Person Primarily Liable:

- Maker/ Drawer

- If the debtor is dead, to his personal representative

- If liable as partners, presentment may be made

Sec. 145Drawee/Agent WITH AUTHORITY TO ACCEPT OR REJECT(because acceptance gives rise to a liability on the part of the drawee)- If there are

two or more drawee who are not

Secs. 89 & 97Drawer/indorser or any person secondarily liable or his Agent

Secs. 98-101- If dead, to his

personal representative

- If partners, notice to any one partner is sufficient

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to any one of them

- Any person found at the place of presentment (Substituted Presentment)

partners, presentment must be made to all of them unless one has authority to accept or refuse for all.

- If drawee is dead, presentment must be made to his personal representative

- If adjudged bankrupt or insolvent or has made an assignment, presentment must be made to him, his trustee or assignee

- IF jointly liable, notice must be given to each of them unless one has authority to receive notice for the others

- If adjudged bankrupt or insolvent or an assignment was made, notice must be given to him, his trustee or assignee.

How MadeSec. 74By exhibiting the instrument

By producing the bill (because the bill will be stamped ACCEPTEC)

Either VERBALLY or in WRITING; must describe the instrument and state the fact of presentment and the fact of dishonor.

When MadeSecs. 72 & 85If instrument is payable on a future determinable time, must be presented on DUE DATE, except when it falls due on a Saturday, Sunday or a holiday, in which case, presentment must be made on the NEXT BUSINESS DAY.

Sec. 85/194If instrument is payable on demand, it must be made with REASONABLE TIME

Note – after issueBill – from the last negotiationChecks – 6 months after issue including Saturday up to 12

- If payable on a future determinable time, it must be presented BEFORE IT IS OVERDUE or AT MATURITY

- If payable on demand, the bill must be presented with a REASONABLE TIME FROM LAST NEGOTIATION including Saturdays up to 12 nn.

- If living in the SAME AREA, notice must be given within 24 HRS FROM DISHONOR

- If living in DIFFERENT AREA, the DROPPING OF LETTE IN A MAILBOX is sufficient compliance

noonWhere Made

Sec. 73- Place

designated by the parties

- If none, at the address of the maker/ acceptor as stated in the instrument

- If none, at his residence or office

- If none, any place where he is found

NO REQUIREMENT because it is immaterial. What is important is that the bill was accepted

- Address of party indicated/ added in his instrument

- If none, at his residence or office

- If none, where he is sojourning

Secs. 79-82When the drawer has no right to expect or require that the drawee or acceptor will pay the instrument.

Where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid of presented.

When the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence.

Even after the exercise of due diligence, presentment cannot be made.

Drawee is a fictitious person.

Waiver, express or implied.

Sec. 148Drawee is dead, adbsconded, a fictitious person or a person not having the capacity to contract by bill.

After the exercise of due diligence, presentment cannot be made.

Although presentment was irregular, acceptance has been refused on some other ground.

Secs. 122-114 (DRAWER)After the exercise of due diligence, it cannot be given to or does not reach the parties sought to be charged.

Delay is caused by circumstances beyond the control of the holder and nor imputable to his default, misconduct or negligence.

Drawer and drawee is the same person.

Drawee is a fictitious person or a person not having the capacity to contract.

Drawer is the person to whom the instrument is presented for payment.

Drawer has no right to expect or require that the drawee or acceptor will honor the instrument.

Drawer has countermanded payment.

Sec. 115 ( INDORSER)

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When the draween is a fictitious person or a person not having the capacity to contract and the indorser was aware of that fact at the time he indorsed the instrument.

Indorser is the person to whom the instrument was presented for payment

When the instrument was made or accepted for his accommodation

Inland BE Foreign BEA bill which or on its face purports to be both drawn and payable WITHIN the Philippines.

One which is or on its face purports to be drawn or payable OUTSIDE the Philippines.

Notice of Dishonor ProtestWhen Required

Required in inland bill Required in foreign billForm

May be oral or written Always writtenBy Whom Made

May be made by a party or agent

Made by a notary public or a respectable resident in the presence of witness

Where MadeMade id residence of parties Made in the place of dishonor

Ordinary Acceptance Acceptance for HonorNecessity of Protest

Previous protest is not required Previous protest is requiredConsent of Holder

Implied RequiredLiability of Acceptor

Primary SecondaryBy whom Accepted

Drawee is acceptor Acceptor must be stranger to the bill

Number of AcceptorsNo acceptors in the alternative or in succession

There may be several acceptors for honor for different parties in the bill

For whose benefitBenefits the holder and all prior parties

Benefits parties subsequent to party for whose honor the bill is accepted

Effect of paymentInstrument is discharged upon Bill is not discharged upon

payment by the acceptor payment by acceptor for honor

Acceptance For Honor Payment for HonorBill

Bill must be overdue Bill may be overduePrevious Protest

Previously protested for non-acceptance or for better security

Previously protested for non-payment

Consent of HolderConsent of the holder is necessary

Consent of the holder is not necessary

LiabilityAcceptor is secondarily liable Acceptor is primarily liable

By whom MadeMade by a stranger or party not liable on the bill

Made by any person whether a party or stranger to the bill

Notarial ActNotarial act of honor not necessary

Notarial act of honor necessary

EffectsSecs. 164, 165 Secs. 175, 177

Payment by Person Primarily Liable

Payment for Honor

Necessity of ProtestNo need to protest for non-payment or non-acceptance

Need to protest for non-payment

Party LiableA party – the maker or the drawee-accceptor

May ne a stranger or may be a party

In whose favour payment is madeIn favour of specific parties In favour od a specified person

and the law requires that there is a statement of the person for whose honor payment is made

Notarial ActNot necessary Necessary

Payment in Due CourseDischarges the instrument Cannot be payment in due

course and payment discharges only the parties after the party in whose favor payment for honor is mades

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INSURANCE CODE

Wagering Contract Contract of InsuranceThe parties contemplate gain through mere chance.

The parties seek to distribute the possible loss by reason of mischance.

Gambler courts misfortune Insured seeks to avoid misfortune

Tends to increase the inequality of fortune

Tends to equalize fortune

Essence of gambling is that whatever one wins from a wager is lost by the other wagering party.

The gains of the one insured are not at the expense of another insured.

As soon as the party makes a wager, he creates a risk of loss to himself where no such risk existed previously.

The purchase of insurance does not create a new and non-existing risk of loss to the purchaser.

Insurable Interest in Property Insurable Interest in LifeExtend

Insurable interest is limited to the actual value of the interest thereon

Insurable interest in life is unlimited (save in life insurance effected by a creditor on the life of the debtor)

Existence of Insurable InterestMust exist when the insurance takes effect and when the loss occurs, but need not exist in the meantime.

It is enough that interest exist at the time the policy takes effect and need not exist at the time of the loss.

Basis of expectationThere must be legal basis Expectation of the benefit

derived need not have legal basis

Insurable InterestThe beneficiary must have an insurable interest in the thing insured.

If the insured secured the policy, the beneficiary need not have insurable interest over the life of the insured; if secured by the beneficiary, the latter must have insurable interest on the life of the insured.

Standard or Union Mortgage Clause

Open or Loss Payable Mortgage Clause

Subsequent acts of the mortgagor CANNOT affect the rights of the assignee.

Reason: It is as if the insurer made a new and independent contract with the mortgage.

Acts of the mortgagor affect the mortgagee.

Reason: Mortgagor does not cease to be a party to the contract (Secs. 8 & 9, Insurance Code)

Concealment MisrepresentationAct Involved

The insured withholds information of material facts from the insurer.

The insured makes erroneous statements of facts with the intent of inducing the insurer

to enter into the insurance contract.

MaterialitySame rules apply to determine materiality

EffectSame effect and gives the insurer the right to rescind the contract, whether the concealment or misrepresentation be intentional or not.

Warranty RepresentationNature

Part of the contract Mere collateral inducementForm

Written on the policy, actually or by referene

May be written in the policy or may be oral

MaterialityPresumed material Must be proved to be material

ComplianceMust be strictly complied with Requires only substantial truth

and complianceEffect of falsity/non-fulfillment

Falsity or non-fulfillment operates as a breach of contract

Falsity renders the policy void on the ground of fraud

Condition WarrantyEffects

Limitation to the attachment of the risk

Does not have that effect

Non-performance of which, although in form executed by the parties and delivered, does not spring into life.

Does not suspend or defeat the operation of the contract

The occurrence of breach temporarily renders the entire contract voidable.

Over-insurance Double InsuranceAmount of Insurance

When the amount of the insurance is beyond the value of the insured’s insurable interest

There may be no over-insurance as when the sum total of the amounts of the policies issued does not exceed the insurable interest of the insured

Number of InsurersThere may only be one insurer involved

There are always several insurers

Double Insurance ReinsuranceInterest

Involves the same interest Involves different interestSubject

Subject of insurance is property Subject of insurance is the original insurer’s risk

InsurerInsurer remains in such capacity

Insurer becomes the insured in relation to the insurer

InsuredInsured is the party in interest in the 2 contracts

Original insured has no interest in the reinsurance contract

Insured’s consent

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Insured had to give his consent Insured’s consent not necessary

Notice of LossIn Fire Insurance In other types of Insurance

Required Not requiredEffect of failure to furnish

Failure to give notice will defeat the right of the insurer to recover

Failure to give notice will not exonerate the insurer, unless there is a stipulation in the policy requiring the insured to do so.

Time for Payment of ClaimsLife Policies Non-life Policies

A. Maturing upon the expiration of the term – the proceeds are immediately payable to the insured, except if proceeds are payable in instalments or annuities, which shall be paid as they become due

B. Maturing at the death of the insured, occurring prior to the expiration of the term stipulated – The proceeds are payable to the beneficiaries within 60 days after: presentation of claim and filing of proof of death

The proceeds shall be paid within 30 days after the receipt by the insurer of proof of loss, and ascertainment of the loss or damage by agreement of the parties or by arbitration but not later than 90 days from such receipt of proof of loss, whether or not ascertainment is had or made

Perils of the Sea Perils of the ShipIncludes only those casualties due to the:

1. Unusual violence; or2. Extraordinary action

of wind and wave; or3. Other extraordinary

causes connected with navigation

A loss which in the ordinary course of events, results from the:

1. Natural and inevitable action of the sea;

2. Ordinary wear and tear of the ship; or

3. Negligent failure of the ship’s owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions

Marine Insurance Other Property InsuranceInformation of 3rd persons

The information or the belief or expectation of 3rd persons in reference to a material fact is material and must be communicated

The information or belief of a 3rd party is not material and need not be communicated, unless it proceeds from an agent of the insured whose

duty is to give informationEffects of concealment

The concealment of any fact in relation to any of the matters stated in Sec. 110 does not vitiate the entire contract but merely exonerates the insurer from a risk resulting from the fact concealed.

Concealment of any material fact will vitiate the entire contract, whether or not the loss results from the risk concealed.s

General Average Particular AverageTo whom inures

Has inured to the common benefit and profit of all persons interested in the vessel and cargo

Has not inured to the common benefit and profit of all persons interested in the vessel and her cargo

By whom borneTo be borne equally by all of the interests concerned in the venture

To be borne alone by the owner of the cargo or the vessel, as the case may be

RequisitesRequisites for the right to claim contribution:

1. Common danger to the vessel or cargo;

2. Part of the vessel or cargo was sacrificed deliberately;

3. Sacrifice must be for the common safety or for the benefit of all;

4. Sacrifice must be made by the master or upon his authority;

5. It must not be caused by any fault of the party asking the contribution;

6. It must be successful ie. Resulted in the saving of the vessel

7. It must be necessary

Co-Insurance ReinsuranceThe insured procure insurance at less than the value of the insured property and is deemed to be co-insurer as to the deficiency. In case of loss, the insured and insures shares the same pro rata.

The insurer procures a 3rd

person to insure him against loss for liability by reason of such original insurance. In case of loss, the reinsurer will pay the insurer for the risk reinsured

Hostile Fire Friendly FireOne that escapes from the place where it was intended to burn and ought to be.

One that burns in a place where it was intended to burn and ought to be

Insurer is liable Insurer is not liable

Suretyship Property InsuranceClassification

Accessory Contract Principal Contract of 28

Number of Parties3 parties; surety, obligor and oblige

2 parties; insurer and insured

NatureCredit accommodation Contract of indemnity

RecoverySurety can recover from principal

Insurer has no such right; only right of subrogation

CancellationBond can be cancelled only with consent of oblige, Commissioner or court

May be cancelled unilaterally either by insured or insurer on grounds provided by law

AcceptanceRequires acceptance of oblige to be valid

No need of acceptance by any 3rd party

SchemeRisk-shifting device; premium paid being in the nature of a service fee

Risk-distributing device; premium paid as a ratable contribution to a common fund

TRANSPORTATION LAWS

Common Carrier Private CarrierGoverning Law

Law on Common Carriers Law on obligations and Contract

State RegulationSubject to State Regulation Not subject to state regulation

AvailabilityHolds himself out for all people independently

Contracts with particular individuals or groups only

DiligenceExtraordinary diligence is required

Ordinary diligence is required

Presumption of NegligenceThere is a presumption of fault or negligence

No presumption of fault or negligence

Exempting CircumstanceProve extraordinary diligence and Art. 1734, NCC

Caso fortuito, Art. 1174, NCC

Stipulation limiting liabilityParties may not agree on limiting the carrier’s liability except when provided by law

Parties may limit the carrier’s liability, provided it is not contrary to law, morals or good customs

Time of DeliveryStipulated in Contract/ Bill of

LadingNo stipulation

Carrier is bound to fulfil the contract and is liable for any delay; no matter from what cause it may have arisen.

Ratio: Because it is presumed that the carrier might have provided a contingency for such delay

a. Within a reasonable time which shall depend on the expected date of arrival in the bill of lading or on the nature of goods;

b. Carrier is bound to forward them in the 1st

shipment of the same or similar goods which he may make to the point of delivery

Duty to Take Care of the Passenger’s Bags

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In the Custody of the Passengers (Hand-Carried)

In the Custody of the Common Carrier (Checked-in)

Applicable RulesArts. 1998 and 2000-2003 of the NCC

Arts. 1733-1753 of the NCC

Legal Nature of the BaggageNecessary deposit Considered as “goods”

Required diligence by the Common CarrierDiligence of a Depositary (ordinary diligence)

Extraordinary diligence

For Acts of its Employees For Acts of Other Passengers or Strangers

Required DiligenceExtraordinary diligence Ordinary Diligence

Nature of LiabilityTort; however the employee must be on duty at the time of the act

Not absolute; limited by Art. 1763 of the NCC

Cargo Manifest Bill of LadingDeclaration of entire cargo Declaration of specific part of

the cargo, is a matter of business convenience based on a contract

Purpose is to furnish Customs officers with a list of goods carried

Purpose is to protect the importer or consignee

Breach of Contract Under Code of Commerce and COGSAART 366 COGSA Sec. 3 (6)

Applicability1. Domestic/Inter-island/

coastwise transportation2. Land, water, air

transportation3. Carriage of goods

1. International/overseas/ foreign (from foreign country to Phils.)

Note: Subject to the rule on Paramount Clause

2. Water/maritime transportation

3. Carriage of goodsNotice of Damage

1. Not a condition precedent2. 3-day period from delivery

for claiming latent damage3. If the damage is apparent,

the claim should be filed immediately upon discharge of the goods

Prescriptive PeriodIf none provided; Civil Code applies5 years – no bill of lading10 years – with issued bill of lading

One year from the date of delivery (delivered but damaged goods), or date when the vessel left port or from the date of delivery to the arrastre (non-delivery or loss) which shall run from delivery to the arrastre operator and not to the consignee.

The insurer who is exercising its

right of subrogation is also bound by the one (1) yr prescriptive period.

However, it does not apply to the claim against the insurer for the insurance proceeds. The claim against the insurer is based on contract that expires in ten (10) years.

CoverageDamage, not misdelivery nor delay

Loss or damage, not delay, misdelivery or conversion

Effect of extrajudicial demandToll the prescriptive period (must be written)

Does not toll the prescriptive period

Stipulation as to shorter periodParties can stipulate shorter period

The 1-year period cannot be shortened

Order of Preference in Case of Sale of VesselRA 6160 PD 1521

Effectivity Date1969 1978

ApplicabilityOverseas shipping only Both domestic and overseas

shippingKind of Sale

Judicial Judicial and extrajudicialOrder of Preference

A preferred, mortgage shall have priority over all claims against the vessel, except the following preferences in the order stated:

1. Judicial costs of the proceedings;

2. Taxes due the Philippines Government;

3. Salaries and wages of the Captain and Crew of the vessel during its last voyage;

4. General average or salvage including contract salvage, bottomry loans and indemnity due shippers for the value of goods transported but which were not delivered to the consignee;

5. Costs of repair and equipment of the vessel, and provisioning of foods, supplies and fuel during its last voyage; and

6. Preferred mortgages

The preferred mortgage lien shall have priority over all claims against the vessel, except the following preferences in the order stated:

1. Expenses and fees allowed and costs taxed due to the Government;

2. Crew’s wages;3. General average;4. Salvage, including

contract salvage;5. Maritime liens arising

prior in time to the recording of the preferred mortgage;

6. Damages arising out of tort; and

7. Preferred mortgage registered prior in time.

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registered prior in time.

Right of AbandonmentShipowner or Ship Agent Consignee

What may be abandonedVessel Goods shipped

InstancesIn case of civil liability from indemnities to 3rd persons.

Sec. 138, Insurance Code

In case of leakage of at least ¾ of the contents of cargo containing liquids.

Partial non-delivery, where the goods are useless without the others.

Goods are rendered useless for sale or consumption for the purposes for which they are properly destined; and

In case of delay through the fault of the carrier.

EffectsTransfer of ownership of the vessel from the shipowner to the shippers or insurer.

In case of (2), the insurer must pay the insured must pay the insured as if there was actual total loss of the vessel.

Transfer of ownership on the goods from the shipper to the carrier.

Carrier should pay the shipper the market value of the goods at the point of destination.

Lease Charter PartyIf for a definite period, lessee cannot give up the lease by paying a portion of the amount agreed upon.

Charterer may rescind charter party by paying half of the freightage agreed upon.

If the leased property is sold to one who knows of the existence of the lease, the new owner must respect the lease.

The new owner is not compelled to respect the charter party so long as he can load the vessel with his own cargo.

Civil law concept Commercial law concept

Bareboat AffreightmentLiability

Charterer becomes liable to others caused by its negligence.

Owner remains liable as carrier and must answer for any breach of duty.

Charterer as OwnerCharterer regarded as owner pro hac vice for the voyage.

Charterer is not regarded as owner.

Possession & Command of VesselOwner of vessel relinquishes possession, command and navigation to charterer.

The vessel owner retains possession, command and navigation of the ship.

ConversionCommon carrier is converted to private carrier.

Common carrier is not converted to a private carrier.

Sublease SubcharterA lessee may generally sublease its property in the absence of express prohibition.

The charterer shall have the right to subcharter the vessel to a third person only if the is

Civil Natureauthorized by the ship owner. Otherwise, he shall be liable to the shipowner for any damages caused to the latter by virtue of the subcharter.

Commercial in nature.

Rights and Obligations of PartiesShipowner or Ship Agent Charterer

1. If the vessel is chartered wholly, not to accept cargo from others;

2. To observe represented capacity;

3. To unload cargo clandestinely placed

4. To substitute another vessel if load is less than 3/5 of capacity’

5. To leave the port if the charterer does not bring the cargo within the lay days and extra lay days allowed:

6. To place vessel in a condition to navigate;

7. To bring cargo to nearest neutral port in case of war or blockade.

1. To pay the agreed charter price;

2. To pay freightage on unboarded cargo;

3. To pay losses to others for loading uncontracted cargo and illicit cargo;

4. To wait if the vessel needs repair;

5. To pay expenses for deviation

Rescission of a Charter PartyAt charterer’s

request (Art. 688)At shipowner’s

request (Art. 689)Fortuitous Causes

(Art. 690)1. By abandoning

the charter and paying half of the freightage;

2. Error in tonnage or flag;

3. Failure to place the vessel at the charterer’s disposal;

4. Return of the vessel due to pirates, enemies or bad weather;

5. Arrival at a port for repairs.

1. If the extra lay days terminate without the cargo being placed alongside the vessel;

2. Sale by the owner of the vessel before loading by the charterer

1. War or interdiction of commerce;

2. Blockade;3. Prohibition to

receive cargo;4. Embargo;5. Inability of the

vessel to navigate.s

Loan on Bottomry Loan on RespondentiaDefinition

Loan made by shipowner or Loan take on security of the

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ship agent guaranteed by vessel itself and repayable upon arrival of vessel at destination.

Note: No loan on bottomry may however be made, in any case, on the salaries of the crew, nor or the profits which may be expected.

cargo laden on a vessel, and repayable upon sale arrival of cargo at destination.

Who may contractShipowner or ship agent. Outside of the residence of the owners – the captain.

Only the owner of the cargo.

Common elements1. Exposure of security to marine peril;2. Obligation of the debtor conditioned only upon safe

arrival of the security at the point of destination.Forms

1. Public Instrument2. Policy signed by the contracting parties and the broker

taking part therein3. Private instrument

Bottomry & Respondentia Simple LoanMarine Risk

Duly established existence of a marine risk is necessary.

Marine risk is not necessary.

Form and MannerMust be executed in accordance with the form and manner prescribed by the code of commerce.

Formal requisites of an ordinary contract will suffice.

Registry of VesselsMust be recorded in the registry of vessels to be binding to third persons.

No such registration is required.

PreferencePreference is extended to the last lender.

Preference is extended to the first lender.

Marine Insurance Loan on Bottomry or Respondentia

Indemnity is paid after the loss has occurred.

Indemnity is paid in advance by way of a loan.

In case of loss of the vessel due to a risk insured against, the obligation of the insurer becomes absolute.

In case of loss of the vessel due to a marine peril, the obligation of the borrower to pay is extinguished.

Consensual contract Real contract

Particular or Simple Average Gross or General AverageDefinition

Damages or expenses caused to the vessel or cargo that did not inure to the common benefit and borne by respective owner.

Damages or expenses deliberately caused in order to save the vessel, its cargo or both from real and known risk.

LiabilityThe owner of the goods which gave rise to the expense or

All the persons having an interest in the vessel and the

suffered the damage shall bear this average.

cargo therein at the time of the average shall contribute to satisfy this average.

The insurers and lenders on bottomry and respondentia shall likewise contribute.

Number of interests involvedOnly one interest involved. Several interests involved

Share in the damage or expense100% share In proportion to the value of

the owner’s property saved.Right to recover

No reimbursement There may be reimbursementKinds (Not exclusive)

Art. 809 Art. 811

Domestic InternationalDeck cargo is allowed Deck cargo is not allowed

With shipper’s consentGeneral average Particular average

Without shipper’s consentCaptain is liable Captain is liable

Arrival Under Stress (Arribada)When Lawful When Unlawful Who Bears

ExpensesThe inability to continue voyage is due to lack of provisions, well-founded fear of seizure, privateers, pirates, or accidents of the sea disabling it to navigate.

1. Lac of provisions due to negligence to carry according to usage and customs;

2. Risk of enemy not well known or manifest

3. Defect of vessel due to improper repair; and

4. Malice, negligence, lack of foresight or skill of captain.

The shipowner or ship agent is liable in case of unlawful arrival under stress. But they shall not be liable for the damages caused by reason of a lawful arrival.

Salvage TowageGoverned by special law Governed by NCC on contract

of leaseRequires success, otherwise no payment

Success is not required

Must be done with the consent of the captain/crewmen

Only the consent of the tugboat owner is needed

Vessel must be involved in an accident

Vessel need not be involved in an accident

Fees distributed among crewmen

Fees belong to the tugboat owner

BANKING LAWS

Ordinary Corporation Banking CorporationClassification

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May be a stock or non-stock corporation

Must generally be a stock corporation

Stocks issuedMay issue par value or no par value stocks.

Shall issue par value stocks only

RegistrationMay be registered with the SEC without any certificate of authority issued by a government agency.

Must secure a certificate of authority from the Monetary Board before it can register with SEC.

Acquisition of SharesMay purchase/acquire its own shares for a legitimate corporate purpose; provided that, it has unrestricted retained earnings in its books to cover the shares to be purchased/acquired.

May not purchase/acquire its shares or accept them as security for a loan.

Except: when authorized by the Monetary Board. But the bank must sell or dispose of said shares within 6 months from the time of their acquisition.

Number of DirectorsMust be of 5 to 15 directors, each of whom shall own at least one (1) share of the capital stock of the corporation.

Also composed of 5 to 15 directors. In case of merger or consolidation, the number of directors shall not exceed 21.

Declaration of DividendsMay declare dividends provided it has unrestricted retained earnings.

May declare dividends, in the absence of the conditions set forth under sec. 57 (GBL)

DissolutionRequires a certificate of tax clearance as prior requirement for the approval of the dissolution by the SEC

Does not require a certificate for BSP to approve dissolution

Universal Bank Commercial BankAdditional Powers

Authority to exercise additional powers other than those authorized for commercial banks.

No such additional powers

Type of InvestmentsMay invest in the equities of allied, whether financial or non-financial, and non-allied enterprises.

May only invest in equities of allied enterprises, whether financial or non-financial

Powers1. The powers authorized for

a commercial bank;2. The powers of an

investment house; and3. The power to invest in

non-allied enterprises

1. General powers incident to corporations

2. Such powers as may be necessary to carry on the business of commercial banking:i. Accepting drafts and

issuing letter of credits;

ii. Discounting and negotiating promissory notes, drafts, bills of exchange and other

evidence or debt;iii. Accepting or creating

demand deposits, receiving other types of deposits and deposit substitutes;

iv. Buying and selling foreign exchange and other debt securities;

v. Extending credit

Universal & Commercial Bank Other BanksQuasi-banking Functions

Authorized to engage in quasi-banking functions without need for approval

Not so authorized

Demand DepositsMay accept or create demand deposits without need for approval

Demand deposits – Liabilities of the BSP and of other banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentation of checks.

Must seek approval of Monetary Board before accepting or creating demand deposits

Universal Bank Commercial BankTotal Investment in Allied Enterprises

50% of net worth 35% of net worthTotal Investment in Non-allied Enterprises

50% of net worth N/AEquity Investment in any One Enterprise

25% of net worth 25% of net worth (Allied only)Equity Investment of Financial Allied Enterprise

100% of equity

A publicly-listed bank may own up to 100% of the voting stock of only one other UB/CB

100% of equity of a thrift or rural bank

In other financial allied enterprises including another commercial bank, investment shall remain a minority holding

Equity Investment in Non-financial Allied Enterprises100% of equity 100% of equity

Equity Investment in a Single Non-Allied EnterpriseShall not exceed 35% of the total equity in that enterprise nor shall it exceed 35% of the voting stock in that enterprise

N/A

Equity Investment in Quasi-Banks40% 40%

Unclassified Loans Classified LoansThose that do not have a greater-than-normal risk and the borrower has apparent ability to satisfy it in full and no loss in ultimate collection is anticipated.

Those that have extraordinary risks of loss in collection due to some defects such as bad debts or those under litigation.

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Deposit Deposit SubstituteNo security given to guarantee repayment; the depositor relies on the stability and reputation of the bank.

Guaranteed by certificates and other instruments.

Judicial Foreclosure Extrajudicial ForeclosureRight of Redemption

Within 1 yr from registration of the foreclosure sale (Exception to Rule 68)

1. Mortgagor is a natural person - Within one year after the registration of sale with the Register of Deeds

2. Mortgagor is a judicial person – At any time before the registration of the certificate of foreclosure sale which in no case shall be more than 3 months after foreclosure, whichever is earlier

Redemption PriceAmount due under the mortgage deed + interest + all the costs and expenses incurred by the bank or institution from the sale and custody of the property less the derived income therefrom.

PossessionPurchaser has the right to enter upon and take possession of the property immediately after the date of the confirmation of the auction sale and to administer the same in accordance with law.

Injunction and BondAny petition in court to enjoin or restrain the conduct of foreclosure proceedings shall be given due course only upon filinf by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or restraint of the foreclosure proceedings.

Receivership of a Bank or Quasi-bank/ClosureUnder NCBA Under GBL

GroundsInability to pay liabilities as they become due in the ordinary course of business, but not including inability to pay those caused by extraordinary demands induced by financial panic in the banking community;

Notification to the BSP or public announcement of a bank holiday

Insufficiency of realizable assets to meet its liabilities;

Suspension of payment of deposit liabilities continuously for more than 30 days

Inability to continue business without involving probable losses to its depositors or creditors; or

Persistence in conducting business in an unsafe or unsound manner

Willful violation of a cease and desist order under Sec. 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution

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mercantile (distinctions)

Documents