mercantile law} review notes of prof domondon (may putol) } made 2001} 124 pages

8/12/2019 Mercantile Law} Review Notes of Prof Domondon (May Putol) } Made 2001} 124 Pages

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2001 PRE-WEEK REVIEW NOTES

ERCANTILE LAW1

By

Abelardo T. Domondon2

HOW TO USE THESE NOTES:

These notes n the !orm o! te"t#al materals and re$resentat%e re%e&'#estons &ere s$e(ally $re$ared by Pro!. Domondon !or the e"(l#s%e #se o!

st#dents &ho attended the le(t#res he (ond#(ted !rom 2)-2* A#+#st 2)),s$onsored by PRIMUS ana+ement nlmted Ser%(es/ In(./ held at the AsanSo(al Instt#te/ In(. Other re%e&ees he has $ersonally a#thor0ed may also #sethese Notes. Reviewees attending the 2002 Ateneo Ba Review aea!thoi"ed to !se these Notes#

The $#r$ose o! these Notes s to test the st#dent1s ablty to ans&erhy$othet(al and $re%o#s bar '#estons based on bas( (on(e$ts as &ell as onsele(ted (ases de(ded by the S#$reme o#rt #$ to De(ember/ 2))). The'#estons are re$resentat%e o! $robable '#estons that may be as3ed n the 2)),

Bar E"amnatons n er(antle 4a&. There s an e"$anded treatment o! the$ro%sons o! the Se(#rtes Re+#laton ode 5R.A. No. 67889 &h(h shall bere!erred to as SR/ and the Im$lementn+ R#les and Re+#latons o! theSe(#rtes Re+#laton ode to be re!erred to as SR R#les. Ths s so be(a#sethe $#blshed re%e& materals ha%e not yet n(l#ded ths s#b:e(t. The a#thor

bele%es that there &o#ld only be t&o bas( '#estons as3ed #nder the SR andthe SR R#les.

It s re(ommended that the reader sho#ld (o%er the s#++ested ans&ers&hle readn+ the '#estons. Ths &o#ld !or(e hm or her to re(all the a$$l(able

la& and :#rs$r#den(e. I! reader has tme/ the ans&ers sho#ld be &rtten on a+rade s(hool noteboo3 #sn+ the s+n $en ntended to be #sed d#rn+ the a(t#ale"amnatons. Ea(h '#eston sho#ld be ans&ered only &thn a s$an o! nne 589mn#tes. A!ter&ards/ (he(3 yo#r ans&ers re!errn+ to the s#++ested ans&ers.

DO NOT EORI;E the s#++ested ans&ers. They &ere $#r$oselymade to be len+thy to ser%e as e"$lanatory de%(es. Ths s so be(a#se yo# donot ha%e tme anymore to re!er ba(3 to yo#r re%e& materals. Ta3e tme to readthe notes and (omments as '#estons may be dra&n !rom these areas nstead o!!rom the '#estons sho&n on these notes. I! yo# stll (o#ld not #nderstand the

(on(e$ts a!ter readn+ these notes/ then re!er to yo#r re%e& materals.

The materals are arran+ed n a((ordan(e &th the (o%era+e o! thee"amnatons. The a(t#al bar '#estons may not be arran+ed n ths se'#en(e

I! $ressed !or tme the reader sho#ld read only those &h(h are mar3ed&th tr$le asters3s


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$1% &O'E O( &OMMER&E

$a% Me)hants and &o**e)ia+ Tansa)tions # Ati)+es 1 to ,-#

1# What is *eant ./ the theo/ o *aniestation S>>ESTED ANSWER? A theory n the $er!e(ton o! (ontra(ts &h(h re(o+n0es

that the (ontra(t s $er!e(ted at the tme &hen the a((e$tan(e s made by the o!!eree.

2# Mig!e+ is a.ove twent/one /eas o age3 not s!.4e)t to the a!thoit/ o hisathe o *othe3 and has the ee dis5osition o his 5o5et/# He has a 2001 Me)edesBen"3 a 2000 Po)he and a 2000 (od E65edition# He so+d the Me)edes Ben" to 7eon3

*otgages the Po)he to Mia3 and de+ives the (od E65edition to Maa o sa+e toothe 5esons# $a% Is Mig!e+ a *e)hant $.% Ae the tansa)tions )ivi+ o )o**e)ia+

$)% What 5ati)!+a +aw o 5ovisions wo!+d goven s!)h tansa)tions

S>>ESTED ANSWERS? 5a9 +#el s not a mer(hant. Altho#+h he has le+al(a$a(ty/ there s no sho&n+ that he s habt#ally en+a+ed n (ommer(e. 5Art. ,/ ode o!ommer(e9. Whle t s tr#e that he has had three 5*9 transa(tons/ there s no le+al$res#m$ton yet o! habt#alty. Ths s so be(a#se he has not anno#n(ed hs ntenton toen+a+e n (ommer(e or to o$en an establshment &h(h has !or ts ob:e(t some (ommer(alo$eraton/ thro#+h (r(#lars/ ne&s$a$ers/ handblls/ $osters e"hbted to the $#bl(/ or n anyother manner &hatsoe%er. 5Art. */ ode o! ommer(e9.

5b9/ 5(9 The transa(tons are not (ommer(al n nat#re be(a#se the a(ts are not(ontaned n the $ro%sons o! the ode o! ommer(e b#t those o! the %l ode. The sale s+o%erned by the %l ode $ro%sons on sale/ that o! the (hattel mort+a+e by the $ro%sonso! the %l ode and the hattel ort+a+e 4a& 5A(t ,@)6/ as amended9/ and the del%ery o!

the ord E"$edton !or sale s +o%erned by the %l ode $ro%sons on a+en(y.

-# Pocholo, of legal age and otherwise qualified to engage in business seeks youradvice on the books he should keep should he decide to engage in business. (a) Whatbooks should he keep and what should these books contain ? (b) Supposing thatPocholo, together with others decide to for a corporation which will engage in business.What books should the corporation keep and aintain ?

S>>ESTED ANSWER?5a9 Po(holo sho#ld 3ee$

,9 a boo3 o! n%entores and balan(es/ &h(h sho& all hs assets and labltesn(l#dn+ the d!!eren(e bet&een sad assets and labltes

29 a :o#rnal/ a led+er/*9 a boo3 or boo3s !or (o$es o! letters and tele+rams/ andC9 other boo3s &h(h may be re'#red by s$e(al la&s 5Arts. **/ *7 ode o!

ommer(e9/ l3e those re'#red #nder the Natonal Internal Re%en#e ode/ theor$oraton ode and the Se(#rtes Re+#laton ode.5b9 The (or$oraton/ !ormed by Po(holo &th others/ s re'#red to 3ee$ the same

boo3s as des(rbed abo%e. In addton the (or$oraton s re'#red to 3ee$,9 a boo3 or boo3s o! mn#tes/ n &h(h shall be entered all resol#tons

re!errn+ to the $ro+ress and o$eratons o! the entty/ a$$ro%ed at +eneral meetn+s orat least o! the board o! dre(tors 5Art. **/ ode o! ommer(e9.It s also re'#red to 3ee$

29 a boo3 o! all meetn+s/ as &ell as

*9 a sto(3 and trans!er boo3. 5Se(. 7C/ or$oraton ode9.

$.% 7ettes o &edit !nde the &ode o &o**e)e $Ati)+es 8,9 to8923 in)+!sive%

# What are the three distinct and independent contracts in a letter of credit ?S>>ESTED ANSWER? The three dstn(t and nde$endent (ontra(ts are?a. The (ontra(t o! sale bet&een the b#yer and the sellerb. The (ontra(t o! the b#yer &th the ss#n+ ban3/ and(. The letter o! (redt $ro$er n &h(h the ban3 $romses to $ay the seller $#rs#ant to

the terms and (ondtons stated theren. 5Ken+ #a Pa$er Prod#(ts o./ In(. %. o#rt o!

A$$eals/ et al./ 26 SRA 2@79

2


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NOTES AND OENTS?a. 7ia.i+it/ o a )oni*ing .an; disting!ished o* a noti/ing .an;# A

(on!rmn+ ban3 adds ts (redt to the letter o! (redt and there!ore s lable ! the o$enn+m$orter !als to $ay the e"$orter &hle a not!yn+ ban3 ben+ merely one &ho +%es ad%(e asto the e"sten(e does not n(#r any s#(h lablty.

$i% B!+; Sa+es 7aw $A)t -!ie*ents:

,9 The sale s n#ll and %od

29 The $#r(haser holds the $ro$erty he bo#+ht n tr#st !or theseller*9 The $#r(haser s lable to the seller1s (redtors !or $ro$ertes he

bo#+ht and already ds$osed o! by hm andC9 The $#r(haser has the r+ht to demand !rom the seller the ret#rn o!

the $#r(hase $r(e $l#s dama+es.

,# The shares of stock ofldrin, +nc., engaged in the wholesale of paper products,is owned **/ by 0ustin. %e decided to sell all of his shares of stock to 0aes and0eroe. +s this a sale in bulk sub1ect to the ulk Sales ct ? 23plain briefly.

S>>ESTED ANSWER? No/ be(a#se the transa(ton s a sale o! the shares o! sto(3and not o! the b#sness &h(h &o#ld res#lt to detrment o! the (redtors. The b#sness stll(ontn#es and the (redtors may $ro(eed a+anst the same (or$oraton &h(h o&ed them.There &as merely a (han+e n o&nersh$ o! the b#sness.

$ii% The Waeho!se Re)ei5ts 7aw $A)t 21-9 in e+ation to the ?enea+Bonded Waeho!se A)t3 A)t -@


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&pon failure of 6a. >ESTED ANSWER? Fes. A &areho#seman shall ha%e a len on +oodsde$osted !or all la&!#l (har+es !or stora+e and $reser%aton o! the +oods 5Se(. 27/Wareho#se Re(e$ts 4a&9. A &areho#seman need not del%er #ntl the len s sats!ed 5Se(.*,/ Wareho#se Re(e$ts 4a&9 and n a((ordan(e &th Se(. 28 o! the Wareho#se Re(e$ts4a&/ the &areho#seman loses hs len #$on +oods by s#rrendern+ $ossesson thereo!.

In ths (ase/ GF;1s (lam !or stora+e !ees &as n(om$atble &th ts (lam o!o&nersh$ hen(e t (o#ld not ha%e &a%ed ts r+ht to stora+e !ees. 5Phl$$ne Natonal Ban3/%. H#d+e Se/ Hr./ et al./ >.R. No. ,,82*,/ $rom. A$rl ,6/ ,889

NOTES AND OENTS?a. Waeho!se e)ei5t3 deined# A &areho#se re(e$t s a &rtten a(3no&led+ment

by the &areho#seman that he has re(e%ed +oods !rom the de$ostor and holds the same n

tr#st !or hm.


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I the a.ove ae not 5esent3 then the waeho!se )o!+d +ega++/ e!se to *a;ede+ive/# These ae the deenses a waeho!se*an )o!+d !se to 4!sti/ his RE(USA7 tode+ive#


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b. Cio+ation o T!st Re)ei5ts 7aw is )i*ina+ in )haa)te# Ret#rn o! the +oods! #nsold merely e"tn+#shes the entr#stee1s (rmnal lablty. e s stll (%lly lable !or the#n$ad loan. 5Vntola %. IBAA/ ,@8 SRA ,C)9

$2% NE?OTIAB7E INSTRUMENTS 7AW $A)t No# 20-1%

===10# What are the requisites of a negotiable instruent ?S>>ESTED ANSWER? An nstr#ment to be ne+otable m#st (on!orm to the

!ollo&n+ re'#rements?a. It m#st be n &rtn+ and s+ned by the ma3er or dra&erb. It m#st (ontan an #n(ondtonal $romse or order to $ay a s#m (ertan n money(. It m#st be $ayable to order to bearerd. Where the nstr#ment s addressed to a dra&ee/ he m#st be named or other&se

nd(ated theren &th reasonable (ertanty. 5Se(. ,/ N.I.4.9NOTES AND OENTS?=== ANA7TI&A7 STEPS (OR SO7CIN? PROB7EMS INCO7CIN?

NE?OTIABI7IT O( INSTRUMENTS# NOTE? This aea is one o the *ost 5o5!+aaeas !nde Negotia.+e Inst!*ents 7aw# The .a )andidate sho!+d *aste theana+/ti)a+ ste5s:

a. 7oo; o theDATE:,9 I! dated. The date sprima faciethe tr#e date o! the nstr#ment.

Ne+otablty s not a!!e(ted.29 I! antedated o 5ostdated. Ne+otablty

not a!!e(ted N4ESS ante-dated or $ost-dated !or !ra#d#lent$#r$ose.

*9 No date. Ne+otable (hara(ter not a!!e(ted. C9 I!no date/ tr#e date may be nserted.

a9 I! nstr#ment $ayable at !"ed $erod a!ter

date5,9 Wron+ date s nserted

5a9 No e!!e(t on nstr#ment/ !! holder n d#e (o#rse

5b9 Instr#ment n%ald/ ! not holder n d#e (o#rse

b. 7oo; o SIGNATURE o! ma3er 5PN9 or dra&er 5BE9. ,9 I! no s+nat#re/ not ne+otable.

29 I! s+ned/ ne+otable.(. 7oo; o UNCONDITIONAL PROMISE $PN% or UNCONDITIONAL ORDER

$BE%# I! $resent/ ne+otable

,9 ondtonal and not ne+otable/ ! $romse or orderde$ends #$on?a9 A !#t#re e%ent &h(h may or may not ha$$enb9 A $ast e%ent #n3no&n to the $artes

29 ondtonal and not ne+otable ! $romse or order to $ay o#t o! a $art(#lar !#nd.

E"am$le? Pay B or order P,)/))).)) o#t o! my money n yo#rhands. Not ne+otable be(a#se t s (ondtonal ben+ $ayable o#t o! a$art(#lar !#nd and no other.

*9 n(ondtonal and ne+otable e%en ! nd(ates a $art(#lar!#nd o#t o! &h(h remb#rsement s to be made or $art(#lar a((o#nt tobe debted.

E"am$le? Pay B or order P,)/))).)) and remb#rse yo#rsel! o#t o!my money n yo#r hands. Ne+otable be(a#se there s no (ondton asto so#r(e o! !#nds only &th res$e(t to remb#rsement &h(h o((#rsa!ter the nstr#ment s $ad.

C9 n(ondtonal and ne+otable ! de$endent #$on a !#t#ree%ent &h(h s (ertan to ha$$en e%en ! tme o! ha$$enn+ s not3no&n.

@9 n(ondtonal and ne+otable e%en ! statement o! the transa(ton s +%en.

E"am$le? I $romse to $ay B or order P,/)))/))).)) n $ayment o!the ho#se I bo#+ht !rom hm on ar(h ,7/ ,888.

9 ondtonal and not ne+otable be(a#se '#al!ed.


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E"am$le? I $romse to $ay B or order P,/)))/ ))).)) s#b:e(t to theterms and (ondtons o! the ar(h ,7/ ,888 Deed o! Sale !or the saleo! hs ho#se.

d. Is the s!* CERTAIN IN MONEYL I! so/ ne+otable ,9 Not ne+otable/ ! not n money.

E"am$le? I $romse to $ay B or order the e'#%alent o! P@)/))).))n (arabaos.

29 Ne+otable e%en ! holder has ele(ton re'#re somethn+ to be done n le# o! money.

E"am$le? To ? Pay to B or order P@)/))).)) or @) (a%ans o!r(e at the o$ton o! the holder.

*9 I! at the o$ton o! the dra&er/ not ne+otable be(a#se t s (ondtonal.

e. Is the inst!*ent 5a/a.+e ON DEMAND o AT A I!ED ORDETERMINA"LE UTURE TIME L I! so/ ne+otable.

,9 I! not/ not ne+otable. 29 Not ne+otable/ ! $ayable on (ontn+en(y. a$$enn+

o! the e%ent does not (#re the de!e(t. E"am$le? Pay to B or order P,))/))).))/ t&o 529 days

a!ter he $asses the Bar.Ne+otable?

*9 Payable on demand and ne+otable &hen e"$ressed to be$ayable on demand/ at s+ht or $resentaton/ no tme !or$ayment s e"$ressed on the nstr#ment/ or &hen thenstr#ment s o%erd#e.

C9 Payable at a determnable !#t#re tme and ne+otable !$ayable at a !"ed $erod a!ter date or s+ht/ on or be!orea !"ed or determnable !#t#re tme s$e(!ed theren/ or on or be!ore a

!"ed $erod a!ter o((#rren(e o! a (ertan e%ent tho#+h ha$$enn+ be#n(ertan.

!. Is the inst!*ent 5a/a.+e TO ORDERo "EARER LI! so/ then ne+otable. I! not/ not ne+otable.

+. I the inst!*ent is addessed to a dawee3 is hena*ed o othewise indi)ated on the inst!*ent with easona.+e )etaint/ I! sone+otable. I! not/ not ne+otable.

=== SUMMAR O( CARIOUS SITUATIONS INCO7CIN? NE?OTIAB7EINSTRUMENTS# Another area that the reader sho#ld master? SUMMAR O( SITUATIONS

a. In(om$lete nstr#ment,9 Del%ered

a9 Wth !or+ery and alteratonb9 Wtho#t !or+ery and alteraton

29 Not del%ereda9 Wth !or+ery and alteratonb9 Wtho#t !or+ery and alteraton

a. om$lete nstr#ment,9 Del%ered


29 Not del%ered


=== IN&OMP7ETE INSTRUMENT BUT 'E7ICERE'#a. older hasprima faciea#thorty to !ll #$ blan3s

,9 S+nat#re on blan3 $a$er del%ered by s+natory &th ntenton o! ma3n+ ta ne+otable nstr#ment/prima faciea#thorty to !ll t #$ !or any amo#nt.

29 Party $ror to (om$leton bo#nd ! !lled #$a9 In a((ordan(e &th a#thortyb9 Wthn reasonable tme

b. Irres$e(t%e o! (om$lan(e &th no. 29 abo%e $ror $artes stll bo#nd b#t only to

holder n d#e (o#rse.(. The r#les a$$ly &hether the nstr#ment s a $romssory note or bll

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o! e"(han+e/ &hether $ayable to bearer or order.

=== I77USTRATICE PROB7EMS: IN&OMP7ETE "UT 'E7ICERE'INSTRUMENTS#

10A# 6eg issued a negotiable proissory note to -eon authori@ing -eon to fill upthe aount in blank up to P*,***.**. -eon however, filled it up to P8,***.**.

$ould -eon collect P8,***.** fro 6eg ?S>>ESTED ANSWER? No/ be(a#se the nstr#ment &as not str(tly !lled #$ n

a((ordan(e &th the a#thorty +%en. Supposing in the above proble, -eon negotiated the instruent to 6ara who

knows that 6egAs instructions was for -eon to fill it up to P*,***.** only. $ould 6aracollect P8,***.** fro 6eg ?

S>>ESTED ANSWER? No/ be(a#se ara s not a holder n d#e (o#rse. She 3ne&o! the nstr#mentMs n!rmty &hen the nstr#ment &as ne+otated to her. e+ (o#ld nter$osethe $ersonal de!ense o! &ant o! a#thorty.

Supposing further, in the above proble, that 6ara did not know of the lack of

authority, ay 6ara collect the P8,***.** fro 6eg ?S>>ESTED ANSWER? Fes/ be(a#se ara s a holder n d#e (o#rse/ she not ben+

a&are o! any n!rmty n the nstr#ment at the tme she too3 t. She may th#s en!or(e t as ! thad been !lled #$ str(tly n a((ordan(e &th the a#thorty +%en and &thn a reasonable tme.There s l3e&se (on(l#s%e $res#m$ton o! del%ery.

11# na a very busy businessperson does not have tie to sign checks one by one.So, she signs several checks in blank and instructs eth, her personal assistant, tosafekeep the checks and fill the out when and as required to pay her accounts as theyfall due. eth fills out one of the checks by placing her nae as payee, fills in the aountof P*,***.**, endorses and delivers the check to $arlos who accepts it in good faith as

payent for goods sold to eth. na learns of the dishonesty foisted upon her by eth.na was able to instruct the ank in tie to dishonor the check. When $arlos encashesthe check, it is dishonored.

$an $arlos hold na liable for the P*,***.** value of the check ? 23plainbriefly.

S>>ESTED ANSWER? Fes/ ass#mn+ that the arlos +a%e not(e o! dshonor toAna. Ths s a (ase o! an n(om$lete nstr#ment b#t del%ered as t &as entr#sted to Beth/Ana1s $ersonal assstant. Ths s so be(a#se arlos s a holder n d#e (o#rse &ho does notha%e any 3no&led+e o! the e"tent o! a#thorty +%en to Beth/ that the (he(3 s !or the$ayments o! Ana1s a((o#nt only.

oreo%er #nder the do(trne o! (om$arat%e ne+l+en(e/ as bet&een Ana and arlos/both nno(ent $artes/ t &as the ne+l+en(e o! Ana n entr#stn+ the (he(3 to Beth &h(h sthe $ro"mate (a#se o! the loss.

=== IN&OMP7ETE INSTRUMENTNOT 'E7ICERE'#a. om$leted and del%ered witha#thorty/ %ald.b. om$leted and del%ered witho!ta#thorty

,9 Vald a+anst $arty &hose s+nat#re &as $la(ed atedel%ery l3e ndorser.Reason? Indorser &arrants the nstr#ment s n all res$e(t &hat t $#r$ortsto be.

29 Not %ald a+anst $arty &hose s+nat#re &as $la(ed .eoe del%ery/ ! nota holder n d#e (o#rse. Reason? Del%ery s essental to %aldty. o&e%er/&th res$e(t to a holder n d#e (o#rse/ there sprima facie $res#m$ton o!

del%ery &h(h may be reb#tted.(. R#les a$$ly &hether

,9 Promssory note or bll o! e"(han+e29 Payable to bearer or order*9 Wth or &tho#t !or+ery and materal alteraton.

=== I77USTRATICE PROB7EMS: IN&OMP7ETE NOT 'E7ICERE'INSTRUMENT#

12# Pocholo signed a blank check and kept it in his safe. 7his was stolen by2dwin who filled in the aount and placed a fictitious person as payee signed the nae of

the payee and indorsed the sae to Paolo, Paolo to Patrick, Patrick to Sally, Sally to

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0eddah, 0eddah to ESTED ANSWER? No/ be(a#se there &as no %ald del%ery &h(h s essental

to the %aldty o! the nstr#ment.&nder the sae set of facts, if Pocholo as well as the drawee bank dishonors the

check, ay >ESTED ANSWER? Fes/ be(a#se Heddah as an ndorser &arrants that the

nstr#ment s &hat t $#r$orts to be and ! t s dshonored and ne(essary $ro(eedn+s !ordshonor ta3en/ she shall $ay the holder/ Rha.

&nder the sae set of facts, in case of dishonor by the drawee bank andBorPocholo and the other indorsers, is 2dwin liable ?

S>>ESTED ANSWER? Fes/ be(a#se he &as res$onsble !or the the!t/ the !lln+ #$and s#bse'#ent ne+otaton o! the nstr#ment.

Supposing under the sae set of facts, that the drawee bank upon presentation by>ESTED ANSWER?a. Rha s a holder n d#e (o#rse/ there!ore there s aprima faciesho&n+ o! del%ery

&h(h Po(holo m#st no& reb#t &th $roo! o! non-del%ery.b. Ne+l+en(e on Po(holoMs $art &h(h res#lted n the loss o! the (he(3.(. >ood !ath on the $art o! the ban3. ItMs obl+aton s to del%er on a +en#ne

s+nat#re o! Po(holo. It s not obl+ated to 3no& the s+nat#re o! the $ayee as n ths (ase/ the$ayee dd not en(ash the (he(3/ hen(e no &ay o! dent!yn+.

d. As bet&een t&o nno(ent $artes/ the one &ho made $ossble the loss sho#ld belable. ere Po(holo made $ossble the loss as he s+ned the blan3 (he(3 3no&n+ !#lly &ellthat ! stolen/ t (o#ld be ne+otated. #rthermore/ Po(holo sho#ld ha%e mmedately ad%sedthe ban3 to sto$ $ayment.

e. nder the abo%e $roblem/ ! the n(om$lete (he(3 &as del%ered by Po(holo toEd&n !or sa!e3ee$n+/ there s %ald del%ery.

NOTE? The reader sho#ld sol%e the $roblem as ! there s an n(om$lete b#t del%erednstr#ment/

1-#


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5a9 an re(o%er !rom $erson t $ad5@9 Payee (an re(o%er !rom

5a9 Dra&er5b9 olle(tn+ ban35(9 Payee (annot re(o%er !rom dra&ee

59 Dra&er not lable to the (olle(tn+ ban329 Bearer nstr#ments

a9 Bearer $romssory note5,9 Pror $artes lable529 or+ed s+natory not lable to $arty not holder n d#e (o#rse

b9 Bearer bll o! e"(han+e5,9 Dra&ee ban3 lable

=== I77USTRATICE PROB7EM: RI?HTS O( PARTIES IN ORGEDIN'ORSEMENT O( PROMISSIORNOTE PAYA"LE TO ORDER#

1# >ennis akes a proissory note payable to the order of Cay, who indorses it to

6icky. Soehow, Dreddie obtains possession of the note and forging the signature of6icky endorses it to ngelo who then indorses it to ea. State the rights and liabilities ofthe parties.

S>>ESTED ANSWER? (3y &hose ndorsement s !or+ed and the $artes $ror tohm n(l#dn+ the ma3er/ Denns and the $ayee/ Kay (annot be held lable to the holder Bea/&hether or not she s a holder n d#e (o#rse. Reasons?

a. An order note (an be ne+otated only by ndorsement (om$leted by del%ery. A!or+ed ndorsement s &holly no$erat%e and does not trans!er any r+hts.

b. No r+ht to retan the note/ +%e ds(har+e there!ore/ or en!or(e $ayment (o#ld bea('#red #nder a !or+ed ndorsement.

(. Sn(e the $rede(essor o! the holder obtaned the note by !ra#d#lent and #nla&!#l

means/ then there are no r+hts that are trans!erred.d. An+elo s lable to Bea be(a#se o! An+eloMs &arrantes as a +eneral ndorser that the

nstr#ment s &hat t $#r$orts to be and that he shall $ay n (ase o! dshonor.

=== I77USTRATICE PROB7EM: RI?HTS O( PARTIES IN ORGEDIN'ORSEMENT O("ILLO( ED&HAN?E PAAB7E TO ORDER#

18# 7ina issued a check to 9ellie or order as the payee with 2astern ank as thedrawee. Didel fraudulently obtains the check and forges 9ellieAs signature. Didel thendeposits it in >aya ank ($ollecting ank). Western ank indorses the check to 2asternank through the clearing house. Didel then withdraws fro >aya ank, the proceeds ofthe check.

What are the rights of the parties ?S>>ESTED ANSWER?

a. Dra&erMs a((o#nt 5TnaMMs9 (annot be (har+ed 5debted/ ded#(ted/ s#btra(ted orred#(ed9 by the dra&ee 5Eastern Ban39/ !or the amo#nt $ad/ and ! her a((o#nt s (har+ed/Tna (an re(o%er !rom Eastern Ban3.

Reason? The de$ostory 5dra&ee Eastern Ban39 o&es to the de$ostor 5dra&er Tna9/an absol#te and (ontra(t#al d#ty to $ay the (he(3 only to the $erson to &hom made$ayable or #$on hs +en#ne ndorsement.

The dra&er a#thor0es and dre(ts the dra&ee to $ay only to the $ayee or to the ordero! the $ayee not to another.

b. Dra&ee 5Eastern Ban3Ms9 de!enses? Dra&er/ Tna s $re(l#ded !rom rasn+ the

de!ense o! !or+ery d#e to esto$$el on a((o#nt o! ne+l+en(e/ !or e"am$le/ ! the $ayeeNelle ad%sed Tna o! the loss/ b#t she 5Tna9 dd not n!orm Eastern Ban3.

(. Dra&er 5Tna9 has no r+ht to re(o%er !rom the (olle(tn+ ban3 5Daya Ban39.Reasons?

a9 D#ty o! (olle(tn+ ban3 to e"er(se (are n (olle(tn+ s tr#e only to the$#r$orted $ayee.

b9 The dra&er does not s#!!er any dama+e (a#sed by the(olle(tn+ ban3 as he (an re(o%er !rom the dra&ee ban3 &h(h has no r+htto (har+e the dra&erMs a((o#nt.

d9 Dra&ee ban3 5Eastern Ban39 (an re(o%er !rom the (olle(tn+ ban3 5Daya Ban39.Reason? Sn(e the (he(3 $assed thro#+h the (learn+ ho#se/ the (olle(tn+ ban3 5Daya

Ban39 m#st ha%e ndorsed the (he(3 to the dra&ee ban3 5Eastern Ban39/ there!ore t slable on an ndorserMs &arranty o! +en#neness and lablty to $ay n (ase o! dshonor.

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e9 olle(tn+ ban3 5Daya Ban39 bears the loss b#t t (an re(o%er !rom the $erson to&hom t $ad the (he(3/ del.

!9 The $ayee 5Nelle9 (an stll re(o%er !rom the dra&er 5Tna9. Reason? She stllretaned her (lam as t &as not e"tn+#shed.

E"(e$ton? The $ayee 5Nelle9 (annot re(o%er ! the (he(3 &as m$ared thro#+h her!a#lt.

+9 The $ayee 5Nelle9 (an re(o%er !rom the (olle(tn+ ban3 5Daya Ban39.Reason? Possesson o! the !or+ed nstr#ment s #nla&!#l and money (olle(ted s held

n tr#st !or r+ht!#l o&ners. 5Note? Ths s on the ass#m$ton that/ the dra&erMs a((o#nt&as (har+ed by the dra&ee ban3/ other&se the dra&er &o#ld be #n:#stly enr(hed9

h9 The $ayee 5Nelle9 (annot re(o%er !rom the dra&ee ban3 5Eastern Ban39. Reason?There s no $r%ty o! (ontra(t.

. Dra&er 5Tna9 s not lable to the (olle(tn+ ban3 5Daya Ban39. Reason? There sno $r%ty o! (ontra(t bet&een Tna and Daya Ban3.

=== I77USTRATICE PROB7EM: RI?HTS O( PARTIES IN ORGEDIN'ORSEMENT O( PROMISSORNOTEPAAB7E TO"EARER# OR O("EARER

"ILLO( ED&HAN?E#

1,# 9ini akes a proissory note payable to bearer. 7he bearer negotiates thenote to boy by ere delivery thence to ESTED ANSWER? Fes. Reason? or+ed ndorsement s not ne(essary to the

ttle o! the holder/ 4na/ be(a#se the nstr#ment s a bearer nstr#ment that $asses ttle by meredel%ery.

Supposing -ina is not a holder in due course ay prior parties be held liable ?S>>ESTED ANSWER? Fes/ b#t not a+anst Nelle &hose s+nat#re &as !or+ed.

Reason? Esto$$el.

=== &OMP7ETE BUTNOT'E7ICERE' INSTRUMENT#a. Del%ery (om$letes the (ontra(t

,9 Bet&een mmedate and remote $artes29 Del%ery e!!e(t#al

b. I! #nder a#thorty,9 To a holder n d#e (o#rse

a9 Vald del%ery $res#medb9 Pror $artes bo#nd

29 I! del%ery (ondtonala9 Pror $artes not bo#nd

19# . Drancisco evelopent $orporation (D$) represented byits president delia as well as %erby $oercial and $onstruction $orporation (%$$$)represented by its president 0aie entered into a contract with ES+S for the constructionof housing units and land developent. ES+S partially paid on the contract the aountof P**,***.**. 0aie discovered that fro the ES+S payent delia had received andsigned seven checks of various dates and aounts drawn against + and payable to%$$$ for copleted and delivered work under the contract. delia forged 0aie=ssignature without his knowledge or consent, at the dorsal portion of the said checks to

ake it appear that %$$$ had indorsed the checks, and then deposited the checks in her+ savings account. delia now clais that she was authori@ed to sign 0aie=s naeon the check by virtue of a $ertification e3ecuted by 0aie in her favor giving herauthority to collect all the receivables of %$$$ fro ES+S, including the questionedchecks. Will the defense prosper ?

S>>ESTED ANSWER? No. Where any $erson s #nder obl+aton to ndorse n are$resentat%e (a$a(ty/ he may ndorse n s#(h terms as to ne+at%e $ersonal lablty. Ana+ent/ &hen so s+nn+/ sho#ld nd(ate that he s merely s+nn+ n behal! o! the $rn($al andm#st ds(lose the name o! hs $rn($al other&se he shall be held $ersonally lable.

E%en ass#mn+ that Adela &as a#thor0ed by to s+n Hame1s name/ stll/Adela/ dd not ndorse the nstr#ment n a((ordan(e &th la&. Instead o! s+nn+ Hame1s

name/ Adela sho#ld ha%e s+ned her o&n name and e"$ressly nd(ated that she &as s+nn+

,,


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as an a+ent o! . 5ran(s(o %. o#rt o! A$$eals/ et al./ >.R. No. ,,*2)/ $rom.No%ember 28/ ,8889

1@# Fn 0une G, GH, 7riuph -uber $orporation opened a current accountdeposit with Security ank and authori@ed withdrawals on the basis of any of threesignatures of 7riuph=s president, treasurer and general anager appearing on thespecien signature cards.

Fn 6arch 8:, GH;, 7riuph discovered that the door of its office was forcedopen, including that of the filing cabinet where its savings account passbook, checkbooklets and other bank docuents were kept. 7his was not reported to the police, neitherwas Solid ank advised. Fn the sae day of the burglary, 7riuph ade three separatedeposits totaling P:;I,I.*, and iediately after said deposits, three (:) 7riuphchecks totaling P:**,***.** were successively presented to Solid ank for encashent.7hese were given due course following the standard bank procedure for verification ofthe check signatures and regularity of other particulars of the said check.

7riuph now clais that due to Solid ank=s gross and ine3cusable negligence indeterining the forgery of the drawer=s signatures, the three checks which were all drawn

against its current account were encashed by unauthori@ed persons. +t then deandedthat Solid ank credits back its account the value of the checks it claied werewrongfully encashed. >ESTED ANSWER? No. The loss res#lted !rom Tr#m$h1s ne+l+en(e. nderthe abo%e (r(#mstan(es a $r#dent and reasonable man &o#ld ha%e +one o%er the (he(3boo3lets a!ter the b#r+lary and ha%e ds(o%ered that three (he(3s &ere mssn+. The ban3&o#ld ha%e been then mmedately ad%sed. 5Se(#rty Ban3 = Tr#st om$any %. Tr#m$h4#mber and onstr#(ton or$oraton/ >.R. No. ,28/ $rom. Han#ary 2,/ ,8889

NOTES AND OENTS? The abo%e (ted (ase &as de(ded as sho&n abo%e

be(a#se o! Tr#m$h1s !al#re to $ro%e !or+ery. It s the a#thor1s %e& that had Tr#m$h beenable to $ro%e !or+ery/ the ban3 &o#ld ha%e been lable as sho&n by the !ollo&n+ ds(#sson.

a. &he);s with oged indose*ents sho!+d .e dieentiated o* )he);s.eaing oged signat!es o the dawe# 5Asso(ated Ban3 %. o#rt o! A$$eals/ et al./ andts (om$anon (ase Phl$$ne Natonal Ban3 %. o#rt o! A$$eals/ et al./ 2@2 SRA 2)9

b. Ee)t o oged signat!e# When a s+nat#re s !or+ed or made &tho#t a#thortyo! the $erson &hose s+nat#re t $#r$orts to be/ it is who++/ ino5eative3 and no r+ht toretan the nstr#ment/ or to +%e a ds(har+e there!or/ or to en!or(e $ayment a+anst any $artythereto/ (an be a('#red thro#+h or #nder s#(h s+nat#re !n+ess the 5at/ against who* it isso!ght to eno)e s!)h ights $re(l#ded !rom settn+ #$ the !or+ery or &ant o! a#thorty.5Se(. 2*/ Ne+otable Instr#ments 4a&9

Se(. 2* does not a%od the nstr#ment b#t only the !or+ed s+nat#re. Th#s/ a !or+edndorsement does not o$erate as the $ayee1s ndorsement.

A 5eson *a/ .e .o!nd !nde a oged signat!e. t he s $re(l#ded !rom settn+#$ the !or+ery or &ant o! a#thorty. Partes &ho &arrant or admt the +en#neness o! thes+nat#re n '#eston and those &ho/ by ther a(ts/ slen(e or ne+l+en(e are esto$$ed !romsettn+ #$ the de!ense o! !or+ery are $re(l#ded !rom #sn+ ths de!ense. Indorsers/ $ersonsne+otatn+ by del%er and a((e$tors are &arrantors o! the +en#neness o! the s+nat#res onthe nstr#ment.

In bearer nstr#ments/ the s+nat#re o! the $ayee or holder s not ne(essary to $ass ttleto the nstr#ment. en(e/ &hen the ndorsement s a !or+ery/ only the $erson &hose s+nat#res !or+ed (an rased the de!ense o! !or+ery e%en a+anst a holder n d#e (o#rse. 5Asso(atedBan3 %. o#rt o! A$$eals/ et al./s$pra9

(. Ee)ts o a oged indose*ent on an inst!*ent 5a/a.+e to ode#,9 Where the nstr#ment s $ayable to order at the tme o! the !or+ery/ the

s+nat#re o! the r+ht!#l holder s essental to trans!er ttle to the same nstr#ment.When the holder1s ndorsement s !or+ed all $artes $ror to the !or+ery may rase thereal de!ense o! !or+ery a+anst all $artes s#bse'#ent thereto.

29 An ndorser o! an order nstr#ment &arrants that the nstr#ment s +en#neand n all res$e(ts &hat t $#r$orts to be that he has +ood ttle to t that all $ror$artes had (a$a(ty to (ontra(t and that the nstr#ment s at the tme o! hsndorsement %ald and s#bsstn+.J e (annot nter$ose the de!ense that s+nat#res$ror to hm are !or+ed.

*9 A (olle(tn+ ban3 &here a (he(3 s de$osted and &h(h ndorses the (he(3

#$on $resentment &th the dra&ee ban3 s a +narl ndorser &h(h &arrants the+en#neness o! the nstr#ment. So/ e%en ! the ndorsement on the (he(3 de$osted by

,2


13/63

the ban31s (lent s !or+ed/ the (olle(tn+ ban3 s bo#nd by ts &arrantes as an ndorserand (annot set #$ the de!ense o! !or+ery as a+anst the dra&ee ban3.

Sn(e a !or+ed ndorsement s no$erat%e/ the (olle(tn+ ban3 had no r+ht tobe $ad by the dra&ee ban3. The (olle(tn+ ban3 m#st ne(essarly ret#rn the money tothe dra&ee ban3 be(a#se t &as $ad &ron+!#lly.

Ths lablty s(heme o$erates &tho#t re+ard to !a#lt on the $art o! the(olle(tn+$resentn+ ban3. E%en ! t &as not ne+l+ent/ t &o#ld stll be lable to thedra&ee ban3 be(a#se o! hs ndorsement.

C9 The (olle(tn+ ban3 or last endorser +enerally s#!!ers the loss be(a#se t hasthe d#ty to as(ertan the +en#neness o! all $ror endorsements (onsdern+ that the a(to! $resentn+ the (he(3 !or $ayment to the dra&ee s an asserton that the $artyma3n+ the $resentment had done ts d#ty to as(ertan the +en#neness o! theendorsements.

@9 oreo%er/ the (olle(tn+ ban3 s made lable be(a#se t s $r%y to thede$ostor &ho ne+otated the (he(3. The ban3 3no&s hm/ hs address and hstorybe(a#se he s a (lent. It has ta3en a rs3 on the de$ost. The ban3 s also n a better$oston to dete(t !or+ery/ !ra#d or rre+#larty n the endorsement.

9 The dra&ee ban3 s not smlarly st#ated as the (olle(tn+ ban3 be(a#se thedra&ee ban3 ma3es no &arranty as to the +en#neness o! the endorsements. Thedra&ee ban31s d#ty s b#t to %er!y the +en#neness o! the dra&er1s s+nat#re and noto! the endorsement be(a#se the dra&er s ts (lent.

The dra&ee ban3 s #nder str(t lablty to $ay the (he(3 to the order o! the$ayee. The dra&er1s nstr#(tons are re!le(ted on the !a(e and by the terms o! the(he(3.

Payment #nder a !or+ed endorsement s not to the dra&er1s order. When thedra&ee ban3 $ays a $erson other than the $ayee/ t does not (om$ly &th the terms o!the (he(3 and %olates ts d#ty to (har+e ts (#stomer1s 5the dra&er1s9 a((o#nt only !or$ro$erly $ayable tems.

Where the dra&ee ban3 dd not $ay a holder or other $erson enttled to re(e%e$ayment/ t has no r+ht to remb#rsement !rom the dra&er.

The +eneral r#le then s that the dra&ee ban3 may not debt the dra&er1sa((o#nt and s not enttled to ndemn!(aton !rom the dra&er. The rs3 o! loss m#st$er!or(e !all on the dra&ee ban3.

79 The (han o! lablty does not end &th the dra&ee ban3. Whle the dra&eeban3 may not debt the dra&er1s a((o#nt/ t may +enerally $ass lablty ba(3 thro#+hthe (olle(ton (han to the $arty &ho too3 !rom the !or+er and. o! (o#rse/ to the !or+erhmsel!/ ! a%alable.

The dra&ee ban3 (an see3 remb#rsement or a ret#rn o! the amo#nt t $ad!rom the $resentor(olle(tn+ ban3 or $erson. E%ent#ally/ the loss !alls on the $arty&ho too3 the (he(3 !rom the !or+er 5the (olle(tn+ ban39/ or on the !or+er hmsel!.en(e/ the dra&ee ban3 (an re(o%er the amo#nt $ad on the (he(3 bearn+ the !or+edendorsement !rom the (olle(tn+ ban3.

69 A dra&ee ban3 has the d#ty to $rom$tly n!orm the $resentor(olle(tn+ban3 o! the !or+ery #$on ds(o%ery. I! the dra&ee ban3 delays n n!ormn+ the$resentor(olle(tn+ ban3 o! the !or+ery/ thereby de$r%n+ sad $resentor(olle(tn+ban3 o! the r+ht to re(o%er !rom the !or+er/ the dra&ee ban3 s deemed ne+l+ent and(an no lon+er re(o%er !rom the $resentor(olle(tn+ ban3.

89 I! the dra&ee ban3 (an $ro%e a !al#re by the (#stomerdra&er to e"er(seordnary (are that s#bstantally (ontrb#ted to the ma3n+ o! the !or+ed s+nat#re/ thedra&er s $re(l#ded !rom assertn+ the !or+ery as a de!ense.

I! at the same tme the dra&ee ban3 &as also ne+l+ent to the $ont o!

s#bstantally (ontrb#tn+ to the loss/ then s#(h loss !rom the !or+ery (an bea$$ortoned bet&een the ne+l+ent dra&er and the ne+l+ent ban3. 5Asso(ated Ban3/s$pra9d. 2ho! !+e de+eted sin)e 1


14/63

to re(redt the amo#nt o! the (he(3 to the amo#nt o! the dra&er. The lablty (han ends &ththe dra&ee ban3 &hose res$onsblty t s to 3no& the dra&er1s s+nat#re sn(e the latter s ts(#stomer. 5Asso(ated Ban3/s$pra9

12 ankhowever returned the check to K4K ank.

K>ESTED ANSWER? e s an a((omodaton $arty and he s lable on thenstr#ment.

NOTES AND OENTS?=== a. A))o*odation 5at/# One &ho has s+ned the nstr#ment as ma3er/ dra&er/

a((e$tor/ or ndorser/ &tho#t re(e%n+ %al#e there!or/ and !or the $#r$ose o! lendn+ hsname to some other $erson. S#(h a $erson s lable on the nstr#ment to a holder !or %al#e/not&thstandn+ s#(h holder/ at the tme o! ta3n+ the nstr#ment 3ne& hm to be only ana((omodaton $arty. 5Se(. 28/ N.I.4.9

b. A*.ig!o!s negotia.+e inst!*ents# Where a ne+otable nstr#ment s soamb+#o#s that there s do#bt &hether t s a bll or a note/ the holder may treat t ether as abll o! e"(han+e or a $romssory note at hs ele(ton.

21# Fn various occasions


15/63

dishonored because the drawerA= account was already closed. oth rturo and ESTED ANSWER? Fes. Where a s+nat#re s so $la(ed #$on a ne+otablenstr#ment that t s not (lear n &hat (a$a(ty the $erson ma3n+ the same ntended to s+n/she s deemed to be an ndorser.

Th#s/ as an ndorser/ Remedos en+a+es that #$on d#e $resentment/ the (he(3s are tobe a((e$ted or $ad/ or both/ as the (ase may be and ! dshonored and the ne(essary$ro(eedn+s are ta3en/ she &ll $ay the amo#nt thereo! to the holder onr(o art. 5Sa$era%. o#rt o! A$$eals/ et al./ >.R. No. ,26827/ $rom. Se$tember ,C/ ,8889

NOTES AND OENTS?a. &he);# A bll o! e"(han+e dra&n on a ban3 $ayable on demand. 5Bataan +ar

and +arette a(tory/ In(. %s. o#rt o! A$$eals/ et al. 2*) SRA C* oran %s. o#rt o!A$$eals/ et al./ 2*) SRA 7889

===b. &he); %isti*+$ishe% from .i++ o e6)hange # A (he(3/ as dstn+#shed !rom anordnary bll o! e"(han+e/ s s#$$osed to be dra&n a+anst a $re%o#s de$ost o! !#nds !or t sordnarly ntended !or mmedate $ayment. A ban3 s #nder no obl+aton to ma3e $art$ayment on a (he(3 #$ to only the amo#nt o! the dra&er1s !#nd. 5oran/ s#$ra9

There s an element o! (ertanty or ass#ran(e n an ordnary (he(3 that t &ll be $ad#$on $resentaton that s &hy t s $er(e%ed as a s#bstt#te !or (#rren(y n (ommer(al and!nan(al transa(tons. 5Tan %s. o#rt o! A$$eals/ et al./ 2*8 SRA *,)9

22# Fn 0uly :, GGG, 7ocino Products $orporation (7P$), a fir engaged in theanufacture of longganisa, engaged one of its suppliers 6r. . . oy, to deliver ,***kilos of carabeef, starting Fctober GGG. 7P$ issued two (8) crossed postdated checksboth dated 6arch 8, 8***. $heck no. 8:I in the aount of P8**,***.** and checkno. HG* in the aount of P8*,***.**, in payent of the ,*** kilos of carabeef.

eceber GGG, 7P$ agreed to purchase an additional ;,*** kilos of

carabeef despite 6r. oy=s failure to deliver. gain 7P$ issued two (8) postdated crossedchecks, check no. IJ;HG aounting to PI:*,***.** payable on 6arch , 8***, andcheck no. *8 aounting to PI:*,***.** payable on 6arch ;, 8***.

6r. oy sold all the four checks at a discount to +ndian Dore3, +nc. s a result of6r. oy=s failure to deliver the eat, 7P$ issued stop order payents on all the fourchecks on 6arch , 8***.

$ould +ndian Dore3, +nc. recover fro 7P$, the value of the four checks ? Why ?S>>ESTED ANSWER? No/ be(a#se Indan ore"/ In(. s not a holder n d#e

(o#rse. The (rossn+ o! the (he(3s sho#ld ha%e $#t Indan on n'#ry and #$on t de%ol%esthe d#ty to as(ertan r. Boy1s ttle to the (he(3 or hs $ossesson. aln+ n ths res$e(t/Indan s +#lty o! +ross ne+l+en(e and as s#(h s not a holder n d#e (o#rse.

It (o#ld re(o%er !rom r. Boy/ ts mmedate ndorser.NOTES AND OENTS?a. Finds o )he);s# There are d!!erent 3nds o! (he(3s amon+ &h(h are?

emorand#m (he(3/ (asher1s (he(3/ tra%eller1s (he(3 and (rossed (he(3.===b. &ossed )he);# A (he(3 s a bll o! e"(han+e dra&n on a ban3 $ayable on

demand..rossed (he(3 s one &here t&o $arallel lnes are dra&n a(ross ts !a(e or a(ross a

(orner thereo!. It may be (rossed +enerally or s$e(ally. a (he(3 s (rossed s$e(ally &hen thename o! a $art(#lar ban3er or a (om$any s &rtten bet&een the $arallel lnes dra&n. It s(rossed +enerally &hen only the &ords and (om$anyJ are &rtten or nothn+ s &rttenbet&een the $arallel lnes. It may be ss#ed so that $resentment (an be made only by a ban3.

=== (. Ee)ts o )ossing a )he);:

,9 The (he(3 may *otbe en(ashed b#t only de$osted n the ban329 The (he(3 may be ne+otated o*&( o*ce - to one &ho has an

a((o#nt &th a ban3 and*9 The a(t o! (rossn+ the (he(3 ser%es as a )ar*i*+to the holder that

the (he(3 has been ss#edfor a %efi*ite p$rpose/ other&se stated the holder snot a holder n d#e (o#rse. 5Bataan +ar and +arette a(tory/ In(. %s.o#rt o! A$$eals/ et al./ 2*) SRA C*9

=== d. Ho+de in d!e )o!se# Se(. @2 o! the Ne+otable Instr#ments 4a& states that aholder n d#e (o#rse s a holder &ho has ta3en the nstr#ment #nder the !ollo&n+ (ondtons?

,9 That t s (om$lete and re+#lar #$on ts !a(e29 That he be(ame a holder o! t be!ore t &as o%erd#e/ and &tho#t

not(e that t had been $re%o#sly dshonored ! s#(h &as the !a(t

,@


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*9 That he too3 t n +ood !ath and !or %al#e d9 That at the tme t &asne+otated to hm he had no not(e o! any n!rmty n the nstr#ment or de!e(tn the ttle o! the $erson ne+otatn+ t

Se(. @8 o! the same la& !#rther states that e%ery holder s deemed prima facie aholder n d#e (o#rse. o&e%er/ &hen t s sho&n that the ttle o! any $erson &ho hasne+otated the nstr#ment &as de!e(t%e/ the b#rden s on the holder to $ro%e that he or someother $erson #nder &hom he (lams/ a('#red the ttle as holder n d#e (o#rse.

The dsad%anta+e o! a holder &ho s not a holder n d#e (o#rse s that the nstr#ment ss#b:e(t to de!enses as ! t &ere non-ne+otable. 5Bataan +ar and +arette a(tory/ In(. %s.o#rt o! A$$eals/ et al./ 2*) SRA C*9

e. &ashies )he);# It s a $rmary obl+aton o! the ss#n+ ban3 and a((e$ted nad%an(e by ts mere ss#an(e and/ by ts $e(#lar (hara(ter and +eneral #se n the (ommer(al&orld s re+arded s#bstantally to be as +ood as the money &h(h t re$resents. 5Tan %s.o#rt o! A$$eals/ et al./ 2*8 SRA *,)9

2-# Fn pril 8, GG, Licente invested in $+D$, a quasibanking institutionengaged in oney arket operations, the aount of P**,***.** to ature after one

onth with interest at the rate of 8*./ for :8 days. &pon aturity $+D$ issued a checkof PI,:G*.GI in favor of Licente representing the proceeds of his atured investentplus interest. When the check was deposited, P+ dishonored it with the annotations!Sub1ect to +nvestigation,# and took custody of the check pending investigation of severalcounterfeit checks drawn against $+D$=s checking account to trace the perpetrators of theforgery.

$+D$ now asserts that since P+ accepted the check, it becoes priarily liablefor its payent. $onsequently, when P+ offset the value of the check against its lossesfro the forged checks the check was deeed paid. Durtherore $+D$ anchors itsarguents of payent on Sc. :; of the 9egotiable +nstruents -aw which states that,!Where a drawee to who a bill is delivered for acceptance destroys the sae, or refuses

within twentyfour hours after such delivery or such other period as the holder ay allow,to return the bill accepted or nonaccepted to the holder, he will be deeed to haveaccepted the sae.# Was there effective payent to Licente ?

S>>ESTED ANSWER? No. It s (lear that a money mar3et transa(ton s one o!loan/ &h(h sho#ld ha%e been $ad !or n (ash. The del%ery o! a (he(3 $rod#(es only$ayment &hen t has been en(ashed or &hen thro#+h the !a#lt o! the (redtor t has beenm$ared. A (he(3 s merely a s#bstt#te !or money. 5eb# Internatonal nan(e or$oraton%. o#rt o! A$$eals/ et al./ >.R. No. ,2*)*,/ $rom. O(tober ,2/ ,8889

2# When is notice of dishonor *ot re-$ire% to be given to drawer ?S>>ESTED ANSWER?a. Where the dra&er and the dra&ee are the same $ersonb. When the dra&ee s a !(tto#s $erson or a $erson not ha%n+ (a$a(ty to (ontra(t(. When the dra&er s the $erson to &hom the nstr#ment s $resented !or $aymentd. Where the dra&er has no r+ht to e"$e(t or re'#re that the dra&ee or a((e$tor &ll

honor the nstr#mente. Where the dra&er has (o#ntermanded $ayment. 5Se(. ,,C/ N.I.4.9

$-% Ins!an)e &ode $P#'# 1,0%

===28# 0ereiah was a ost valued eployee of Dortune 6anufacturing$orporation for the past twenty years. %e was insured by his eployer with itself as the

beneficiary. copany owned house at >asarinas Lillage was furnished for his usewhich was insured with the owner as the beneficiary. oth of the policies were up to>eceber :, 8**.

Fn 0une , 8** 0ereiah retired fro the copany. s part of his retireentpackage, the title of the house at >asarinas Lillage was transferred to 0ereiahAs nae.Fn 0uly I, 8**, the house was burned resulting to 0ereiahAs death.

Who could recover on the insurance policies ? 23plain.S>>ESTED ANSWER? Nobody (o#ld re(o%er on the ns#ran(e $ol(y (o%ern+ the

ho#se. ort#ne (o#ld not re(o%er on the $ol(y (o%ern+ the ho#se be(a#se t dd not ha%e anyns#rable nterest at the tme o! the loss on H#ly C/2)),. Ths s so be(a#se the o&nersh$ &asalready trans!erred to Heremah. o&e%er there s no sho&n+ n the $roblem o! any (han+e nthe ns#ran(e n Heremah1s !a%or so hs hers (o#ld not also re(o%er on the $ol(y.

,


17/63

ort#ne (o#ld re(o%er on the $ol(y (o%ern+ HeremahMs l!e be(a#se ns#rable ntereston l!e need not e"st at the tme o! the death.

NOTES AND OENTS?a. Ins!a.+e inteest s re'#red !or a $erson &ho ns#res the l!e o! another# E%ery

$erson has an ns#rable nterest n the l!e and health?,9 O! hmsel!/ o! hs s$o#se and o! hs (hldren29 O! any $erson on &hom he de$ends &holly or n $art !or ed#(aton or

s#$$ort/ or n &hom he has a $e(#nary nterest*9 O! any $erson #nder a le+al obl+aton to hm !or he $ayment o! money/ or

res$e(tn+ $ro$erty or ser%(e/ o! &h(h death or llness m+ht delay or $re%ent the$er!orman(e and

C9 O! any $erson #$on &hose l!e any estate or nterest %ested n hm de$ends.5Se(. ,)/ Ins#ran(e ode9b. P!5ose o e>!ie*ent o ins!a.+e inteest in +ie# To remo%e the tem$taton

o! ns#rn+ a $ersonMs l!e and then 3lln+ hm to re(o%er the ns#ran(e $ro(eeds.>ESTED ANSWER? No. Sn(e the $ol(y s t&o years old/ the n(ontestablty(la#se has already set n &h(h de!eats the (on(ealment.

NOTES AND OENTS?=== a. In)ontesta.i+it/ )+a!se# A!ter a $ol(y o! l!e ns#ran(e made $ayable on the

death o! the ns#red shall ha%e been n !or(e d#rn+ the l!etme o! the ns#red !or a $erod o!

t&o years !rom the date o! ts ss#e or ts last renstatement/ the ns#rer (annot $ro%e that the

,7


18/63

$ol(y s %od a. i*itio or s res(ndable by reason o! the !ra#d#lent (on(ealment ormsre$resentatons o! the ns#red or hs a+ent. 52nd $ar./ Se(. C6/ Ins#ran(e ode9

Wo!+d it *a;e an/ dieen)e in /o! answes to the a.ove i Maion was*aied to (an)is What a.o!t i it was ee/ who was *aied to 'anie+a

S>>ESTED ANSWER? nder the abo%e (r(#mstan(es ! aron and He!!rey &eremarred to $ersons other than themsel%es/ then there (o#ld be no re(o%ery on the ns#ran(e$ol(y o! aron. He!!rey (o#ld not be a donee be(a#se o! the ll(t relatonsh$ hen(e (annotbe a bene!(ary n l!e ns#ran(e.

NOTES AND OENTS?&on)ea+*ent deined# A ne+le(t to (omm#n(ate that &h(h a $arty 3no&s and

o#+ht to (omm#n(ate. 5Se(. 2/ Ins#ran(e ode9Note that ! the $arty does not 3no& he s s(3/ there s no (on(ealment.

29# EF4& applied for credit facilities and accoodations with


19/63

or other ns#ran(eJJ (la#se and has been #$held as %ald and as a &arranty that no otherns#ran(e e"sts.

b. Ee)t o nondis)+os!e# The non-ds(los#re o! the t&o ns#ran(es &o#ld not be!atal to re(o%ery. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29 Ths same e!!e(talso a$$les to the (on(e$t o! do#ble ns#ran(e.

(. The ationa+e .ehind the in)+!sion o Gothe ins!an)e )+a!se in ie 5o+i)iess to $re%ent o%er-ns#ran(e and th#s a%ert the $er$etraton o! !ra#d. When a $ro$erty o&nerobtans ns#ran(e $ol(es !rom t&o or more ns#rers n a total amo#nt that e"(eeds the$ro$erty1s %al#e/ the ns#red may ha%e an nd#(ement to destroy the $ro$erty !or the $#r$oseo! (olle(tn+ the ns#ran(e. The $#bl( as &ell as the ns#rer s nterested n $re%entn+ asst#aton n &h(h a !re &o#ld be $ro!table to the ns#red.

d. Ee)t o vio+ation# The %olaton o! the other ns#ran(eJ (la#se &o#ld a%od the$ol(y. E6)e5tion: The other ns#ran(e m#st be #$on the same s#b:e(t matter/ the samenterest theren/ and the same rs3. There s no %olaton &here the mort+a+or and themort+a+ee too3 se$arate ns#ran(es/ n %olaton o! the other ns#ran(e (la#seJ be(a#se therns#rable nterest s d!!erent. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29

e. 'o!.+e ins!an)e# A do#ble ns#ran(e e"sts &here the same $erson s ns#red by

se%eral ns#rers se$arately n res$e(t o! the same s#b:e(t and nterest. The ns#rable nterestso! a mort+a+or and a mort+a+ee on the mort+a+ed $ol(y are se$arate and dstn(t hen(e theres no do#ble ns#ran(e ! the mort+a+or and the mort+a+ee ta3e o#t se$arate ns#ran(es.

!. Ee)t o nondis)+os!e# The non-ds(los#re o! the t&o ns#ran(es &o#ld not be!atal to re(o%ery. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29 Ths e!!e(t alsoa$$les to the (on(e$t o! the other ns#ran(e $rohbton.

+. S!.ogation# I! the $lant!!1s $ro$erty has been ns#red/ and he has re(e%edndemnty !rom the ns#ran(e (om$any !or the n:#ry or loss arsn+ o#r o! the &ron+ orbrea(h o! (ontra(t (om$laned o!/ the ns#ran(e (om$any shall be s#bro+ated to the r+hts o!the ns#red a+anst the &ron+doer or the $erson &ho %olated he (ontra(t. 5Art(le 22)7/%l ode9

The r+ht o! s#bro+aton s not de$endent #$on/ nor does t +ro& o#t o!/ any $r%ty o!(ontra(t or #$on &rtten ass+nment o! (lam. It a((r#es sm$ly #$on $ayment o! thens#ran(e (lam by the ns#rer. 5oast&se 4+htera+e or$oraton %s. o#rt o! A$$eals/ etal./ 2C@ SRA 789

2P entered into a contract of group life insurance withErepalife agreeing to insure the lives of eligible housing loan ortgagors of >P. Fn9oveber , GH:, >r. -euterio, a housing debtor of >P, applied for ebership inthe group life insurance plan. +n his application. >r. -euterio stated that he never hadhigh blood pressure, cancer, etc., and that to the best of his knowledge, he was in goodhealth.

7hus, on 9oveber , GH:, Erepalife issued the certificate on >r. -euterio=sinsurance coverage to the e3tent of his >P ortage indebtedness of PHJ,8**.**. 7hepolicy state that upon receipt of proof of debtor=s death during the ters of the insurance,a death benefit in the aount of PHJ,***.** shall be paid. +n the event of the debtor=sdeath before his indebtedness with the creditor shall have been fully paid, an aount topay the outstanding indebtedness shall first be paid to the $reditor and the balance of thesu assured, if there is any shall then be paid to the beneficiaryBies designated by thedebtor. +n ugust J, GHI, >r. -euterio died due to #assive cerebral heorrhage.# >Psubitted a clai, on the !ortgage redeption insurance# but it was denied byErepalife on the ground of nondisclosure that >r. -euterio was suffering frohypertension, the cause of his death.

s a result of the nonpayent insurance clai, which would have resulted to a

full payent of the ortgage debt to >P, >P then foreclosed on the property.&pon being sued by >r. -euterio=s heirs for the insurance proceeds Erepalife now

raises, the defense of concealent of >r. -euterio=s being hypertensive, and no showingof the e3act aount of >r. -euterio=s outstanding indebtedness to >P at the tie of hisdeath.

$ould >r. -euterio=s heirs recover ? State your reasons.S>>ESTED ANSWER? Fes. on(ealment o! the state o! health o! the ns#red

mort+a+or as bass !or re!#sn+ $ayment o! ns#ran(e (lams sho#ld be establshed by s#!!(ent$roo! o! the real state o! health o! the ns#red.

The ns#ran(e ta3en &as a l!e ns#ran(e $ol(y &h(h s a %al#ed $ol(y. nless thenterest o! the $erson ns#red s s#s(e$tble o! e"a(t $e(#nary estmaton/ the meas#re o!

ndemnty #nder a $ol(y o! ns#ran(e #$on l!e or health s the s#m !"ed n the $ol(y/ n ths(ase P6/2)).)).

,8


20/63

Sn(e DBP has already !ore(losed on the resdental lot n sats!a(ton o! Dr. 4e#tero1so#tstandn+ loan/ the ns#ran(e $ro(eeds shall n#re to the bene!t o! the hers o! Dr. 4e#tero.DBP sho#ld not #n:#stly enr(h tsel! by (olle(tn+ the ns#ran(e $ro(eeds a!ter t has!ore(losed the $ro$erty. 5>reat Pa(!( 4!e Ass#ran(e or$oraton %. o#rt o! A$$eals/ etal./ >.R. No. ,,*688/ $rom. O(tober ,*/ ,8889

NOTES AND OENTS?a. Ins!a.+e inteest in *otgaged 5o5eties in G*otgage ede*5tion

ins!an)e# The ratonale o! a +ro#$ ns#ran(e $ol(y o! mort+a+ors/ other&se 3no&n asthe mort+a+e redem$ton ns#ran(e/J s a de%(e !or the $rote(ton o! both the mort+a+eeand the mort+a+or.

On the $art o! the mort+a+ee/ t has to enter nto s#(h !orm o! (ontra(t so that n thee%ent o! the #ne"$e(ted demse o! the mort+a+or d#rn+ the s#bssten(e o! the mort+a+e debt/the $ro(eeds !rom s#(h ns#ran(e &ll be a$$led to the $ayment o! the mort+a+e debt/ therebyrele%n+ the hers o! the mort+a+or !rom $ayn+ the obl+aton.

In a smlar %en/ am$le $rote(ton s +%en to the mort+a+or so that n the e%ent o! hsdeath/ the mort+a+e obl+aton &ll be e"tn+#shed by the a$$l(aton o! the ns#ran(e$ro(eeds to the mort+a+e ndebtedness.

onse'#ently/ &here the mort+a+or $ays the ns#ran(e $rem#m #nder the +ro#$ns#ran(e $ol(y/ ma3n+ the loss $ayable to the mort+a+ee/ the ns#ran(e s on themort+a+or1s nterest/ and the mort+a+or (ontn#es to be a $arty to the (ontra(t. In ths ty$eo! ns#ran(e/ the mort+a+ee s sm$ly an a$$ontee o! the ns#ran(e !#nd/ s#(h loss $ayable(la#se does not ma3e the mort+a+ee a $arty to the (ontra(t.

Ths (o#ld be seen !rom the $ro%sons o! Se(ton 6 o! the Ins#ran(e ode/ &h(hreads? nless the $ol(y $ro%des/ &here a mort+a+or o! $ro$erty e!!e(ts ns#ran(e n hso&n name $ro%dn+ that the loss shall be $ayable to the mort+a+ee/ or ass+ns a $ol(y o!ns#ran(e to a mort+a+ee/ the ns#ran(e s deemed to be #$on the nterest o! the mort+a+or/&ho does not (ease to be a $arty to the or+nal (ontra(t/ and any a(t o! hs/ $ror to the loss/&h(h &o#ld other&se a%od the ns#ran(e/ &ll ha%e the same e!!e(t/ altho#+h the $ro$erty s

In the hands o! the mort+a+ee/ b#t any a(t &h(h/ #nder the (ontra(t o! ns#ran(e/ s to be$er!ormed by the mort+a+or/ may be $er!ormed by the mort+a+ee theren named/ &th thesame e!!e(t as ! t had been $er!ormed by the mort+a+or.J 5>reat Pa(!( 4!e Ass#ran(eor$oraton %. o#rt o! A$$eals/ et al./ >.R. No. ,,*688/ $rom. O(tober ,*/ ,888

ea+ona%s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29

ESTED ANSWER? Re(o%ery (o#ld be made only ! the dama+e &as (a#sed by

$erls o! the sea not ./ $erls o! the sh$. De!e(ts o! the sh$ are $erls o! the sh$.

-1# What is eant by actual total loss in arine insurance ?S>>ESTED ANSWER? An a(t#al total loss !or ns#ran(e $#r$oses s (a#sed by?a. A total destr#(ton o! the thn+ ns#redb. The rretre%able loss o! thn+ by sn3n+ or by ben+ bro3en #$

(. Any dama+e to the thn+ &h(h renders t %al#eless to the o&ner !or the $#r$ose !or&h(h he held t or

2)


21/63

d. Any other e%ent &h(h e!!e(t%ely de$r%es the o&ner o! the $ossesson/ at the $orto! destnaton/ o! the thn+ ns#red. 5Se(. ,*)/ Ins#ran(e ode9

NOTES AND OENTS?a. &onst!)tive tota+ +oss in *aine ins!an)e# One &h(h +%es to a $erson a r+ht

to abandon. 5Se(. ,*,/ Ins#ran(e ode9b. Instan)es whee thee is a )onst!)tive tota+ +oss o the thing ins!ed whi)h

wo!+d entit+e an ins!ed to a.andon in *aine ins!an)e:,9 I! more than three-!o#rths o! ts %al#e s a(t#ally lost or &o#ld ha%e to be

e"$ended to re(o%er t !rom the $erl29 I! t s n:#red to s#(h an e"tent as to red#(e ts %al#e more than three-

!o#rths*9 I! the thn+ ns#red/ s a sh$ and the (ontem$lated %oya+e (annot be

la&!#lly $er!ormed &tho#t n(#rrn+ ether an e"$ense to the ns#red o! more thanthree-!o#rths the %al#e o! the thn+ abandoned or a rs3 &h(h a $r#dent man &o#ldnot ta3e #nder the (r(#mstan(es or

C9 I! the thn+ ns#red/ ben+ (ar+o or !re+hta+e/ and the %oya+e (annot be$er!ormed nor another sh$ $ro(#red by the master/ &thn a reasonable tme and &th

reasonable dl+en(e/ to !or&ard the (ar+o/ &tho#t n(#rrn+ the l3e e"$ense or rs3.B#t !re+hta+e (annot n any (ase be abandoned #nless the sh$ s also abandoned.5Se(. ,*8/ Ins#ran(e ode9

-2# Fn pril , GG, &$P Eeneral +nsurance $o., +nc. issued five ()insurance policies covering 6asagana 7eleart, +nc.=s various properties against fire, forthe period 6ay 88, GG to 6ay 88, GG8. +n 6arch &$P decided not to renew thepolicies after its e3piration on 6ay 88, GG8, and infored 6asagana=s broker, 5uellig+nsurance rokers, +nc. Fn pril J, GG8, &$P gave written notice to 6asagana of thenonrenewal of the policies at the address stated in the policies. Fn 0une :, GG8, firera@ed 6asagana=s property covered by the three insurance policies issued by &$P.

Fn 0uly :, GG8, 6asagana presented to &$P=s cashier five () anager=schecks representing preiu for the renewal of the policies fro 6ay 88, GG8 to 6ay88, GG:. Fn 0uly I, GG8 6asagana filed with &$P its foral clai forindenification of the insured property ra@ed by fire. 9o notice of loss was filed by6asagana under the policies prior to 0uly I, GG8.

Fn the sae day, 0uly I, GG8, &$P returned to 6asagana the five ()anager=s checks that it tendered, and at the sae tie re1ected 6asagana=s clai for thereasons (a) that the policies have e3pired, and (b) that the fire occurred on 0une :, GG8before 6asagana=s tender of preiu payent.

$ould 6asagana recover ?S>>ESTED ANSWER? No. The ns#ran(e la& $ro%des that/ no non-l!e

ns#ran(e s %ald #nless the $rem#ms are a(t#ally $ad. Any a+reement to the (ontrary s%od. The $artes may not a+ree e"$ressly or m$ledly on the e"tenson o! (redt or tme to$ay the $rem#m and (onsder the $ol(y bndn+ be!ore a(t#al $ayment. 5PB >eneralIns#ran(e o./ %. asa+ana Telamart/ In(./ >.R. No. ,*7,72/ $rom. H#ne ,@/ ,8889

NOTES AND OENTS? Not&thstandn+ any a+reement to the (ontrary/ no$ol(y or (ontra(t o! ns#ran(e ss#ed by an ns#ran(e (om$any s %ald and bndn+ #nless and#ntl the $rem#m thereo! has been $ad/ e"(e$t n the (ase o! a l!e or an nd#stral l!e $ol(y&hene%er the +ra(e $erod $ro%son a$$les. 52ndsenten(e/ Se(. 77/ Ins#ran(e ode9

Please (om$are no. *2 ABOVE/ the PB (ase &th the (ase o! Amer(an omeAss#ran(e/ no. **/ BE4OW.

--# +n GG* ntonio obtained a fire insurance fro erican %oe ssurance

$opany the stock in trade of his business, 6oonlight 2nterprises. 7he insurance wasdue to e3pire on 8 6arch GG*. Fn pril GG*, ntonio issued a check in the aountof P8,GH:.* to erican=s agent 0aes as payent for the renewal of the policy. +nturn, 0aes delivered to ntonio oestic. erican denied the clai raising

2,


22/63

the issue that there was no e3isting insurance contract as a result of nonpayent of thepreiu. +t also contends that assuing the e3istence of a contract, that ntonioviolated several provisions of the contract, aong others, failure to notify erican ofany insurance already effected to cover the insured goods.

$ould ntonio recover ?S>>ESTED ANSWER? Fes. There &as $ayment. The rene&al (ert!(ate ss#ed

to Antono (ontaned the a(3no&led+ment that the $rem#m had been $ad. The (he(3 dra&nby Antono n Amer(an1s !a%or and del%ered to ts a+ent &as honored &hen $resented andAmer(an !orth&th ss#ed ts o!!(al re(e$t. Se(ton *) o! the Ins#ran(e ode $ro%desthat any ns#ran(e (om$any &h(h del%ers a $ol(y or (ontra(t o! ns#ran(e to an ns#ran(ea+ent or bro3er shall be deemed to ha%e a#thor0ed s#(h a+ent or bro3er to re(e%e on tsbehal! $ayments o! $rem#ms.

Se(. 76 o! the same ode e"$l(tly $ro%des/ An a(3no&led+ment n a $ol(y or(ontra(t o! ns#ran(e o! the re(e$t o! $rem#m s (on(l#s%e e%den(e o! ts $ayment/ so !ar asto ma3e the $ol(y bndn+/ not&thstandn+ any st$#laton theren that t shall not be bndn+#ntl the $rem#m s a(t#ally $ad.J

Se(ton. 76 establshes a le+al !(ton o! $ayment and sho#ld be nter$reted as an

e"(e$ton to Se(ton 77. 5Amer(an ome Ass#ran(e om$any %. h#a/ >.R. No. ,*)CC2,/$rom. H#ne 26/ ,8889

===-# +n GH*, Priitivo was insured with D -ifean +nsurance $orporationfor P8*,***.**. Fn Fctober 8*, GH;, he applied for an additional insurance coverage ofP*,***.**. %is wife paid P8,*;.** as preius to the agent who issued a receiptindicating that the aount was erely a !deposit#. 7he application for was lost, soPriitivo accoplished another one. Fn 9oveber , GH;, he underwent a physicale3aination which he passed.

s is the procedure, all of Priitivo=s papers were then sent to the 6anila office ofD -ifean +nsurance $orporation which received the papers on 9oveber 8;, GH;. Fn

>eceber 8, GH;, the insurer then approved the policy and issued the correspondingpolicy not knowing that in the eantie, Priitivo drowned and died on 9oveber 8,GH;.

7he insurer now disclais liability on the additional P*,***.** coverage becauseof failure to coply with the following requisites stated in the application for for theperfection of the contract of insuranceM !7here shall be no contract of insurance unlessand until a policy is issued on this application and that the said policy shall not take effectuntil the preiu has been paid and the policy delivered to and accepted by eBus inperson while +BWe, aBare in good health.#

+s Priitivo=s beneficiary entitled to the proceeds additional P*,***.** additionalinsurance which aounts to P*,***.** in view of a triple indenity rider on the policy?23plain briefly.

S>>ESTED ANSWER. Prmt%o1s bene!(ary s not enttled to the ns#ran(e$ro(eeds !or the !ollo&n+ reasons?

a. The !ln+ o! the ns#ran(e a$$l(aton/ $ayment o! the $rem#m/ and s#bmsson tothe ns#rer/ &ere all s#b:e(t to the a((e$tan(e o! the ns#rer. There &as no a((e$tan(e by thens#ran(e as o! the date &hen Prmt%o ded on No%ember 2@/ ,867.

The (ondtons m$osed by the ns#rer !or the $rote(ton o! the (ontra(t s not a$otestat%e or !a(#ltat%e (ondton/ b#t s a s#s$ens%e one &hereby the a('#ston o! r+htsde$ends #$on the ha$$enn+ o! an e%ent &h(h (onstt#tes the (ondton. In ths (ase/ thes#s$ens%e (ondton &as the $ol(y m#st ha%e been del%ered and a((e$ted by the a$$l(ant&hle he s n +ood health. There &as non-!#l!llment o! the (ondton/ ho&e%er/ nasm#(h asthe a$$l(ant &as already dead at the tme the $ol(y &as ss#ed. en(e/ the non-!#l!llment o!

the (ondton res#lted n the non-$er!e(ton o! the (ontra(t.b9 A (ontra(t o! ns#ran(e/ l3e other (ontra(ts/ m#st be assented to by both $artes

ether n $erson or by ther a+ents. So lon+ as an a$$l(aton !or ns#ran(e has not been ethera((e$ted or re:e(ted/ t s merely an o!!er or $ro$osal to ma3e a (ontra(t. The (ontra(t/ to bebndn+ !rom the date o! a$$l(aton/ m#st ha%e been a (om$leted (ontra(t/ one that lea%esnothn+ to be done/ nothn+ to be (om$leted/ nothn+ to be $assed #$on/ or determned/be!ore t shall ta3e e!!e(t. There (an be no (ontra(t o! ns#ran(e #nless the mnds o! the$artes ha%e net n a+reement.

(9 The ns#rer (annot be held !or +ross ne+l+en(e. It sho#ld be noted that ana$$l(aton s a mere o!!er &h(h re'#res the o%ert a(t o! the ns#rer !or t to r$en nto a(ontra(t. Delay n a(tn+ on the a$$l(aton does not (onstt#te a((e$tan(e e%en tho#+h the

ns#red has !or&arded hs !rst $rem#m &th hs a$$l(aton. The (or$oraton may not be

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$enal0ed !or the delay n the $ro(essn+ o! the a$$l(aton $a$ers. 5Pere0 %. o#rt o!A$$eals/ et al./ >.R. No. ,,2*8/ $rom. Han#ary 26/ 2)))9

NOTES AND OENTSa. When ins!an)e )onta)t 5ee)ted# ontra(t o! ns#ran(e s $er!e(ted &here

there s an o!!er to be (o%ered and the ns#ran(e has a((e$ted the o!!er absol#tely.b. Re>!isites o a )onta)t o ins!an)e# Ins#ran(e s a (ontra(t &hereby/ !or a

st$#lated (onsderaton/ one $arty #nderta3es to (om$ensate the other !or loss on a s$e(!eds#b:e(t by s$e(!ed $erls.

A (ontra(t/ on the other hand/ s a meetn+ o! the mnds bet&een t&o $ersons &herebyone bnds hmsel!/ &th res$e(t to the other to +%e somethn+ or to render some ser%(e.

nder Art(le ,*,6 o! the %l ode/ there s no (ontra(t #nless the !ollo&n+re'#stes (on(#r?

5,9 onsent o! the (ontra(tn+ $artes529 Ob:e(t (ertan &h(h s the s#b:e(t matter o! the (ontra(t5*9 a#se o! the obl+aton &h(h s establshed.

onsent m#st be man!ested by the meetn+ o! the o!!er and the a((e$tan(e #$on the thn+ andthe (a#se &h(h are to (onstt#te the (ontra(t. The o!!er m#st be (ertan and the a((e$tan(e

absol#te. 5Pere0 %. o#rt o! A$$eals/ et al./ >.R. No. ,,2*8/ $rom. Han#ary 26/ 2)))9

-8# collision between a truck driven by Euillero owned by the 9ational Dooduthority (9D) and a public utility 7aaraw D" owned and operated by Lictor resultedto the death of five persons and in1ury to ten others, all of who were passengers of theD". Several cases were filed against Euillero, 9D and ES+S, 9D=s insurer of thetruck for death and in1uries, Lictor as well as his insurer. +t was found that Euillero=snegligence was he pro3iate cause of the accident. 9D, Euillero, ES+S and theinsurer of the D" were required to pay 1ointly and severally the heirs of the deceasedpassengers.

6ay the insurer be ipleaded directly by the victis or their heirs ? +f so, could

they be held solidarily liable ? 23plain your answers. S>>ESTED ANSWER? Fes. It s no& establshed that the n:#red or the hers o!the %(tms o! a %eh(#lar a((dent may s#e dre(tly the ns#rer o! the %eh(le. Ths s sobe(a#se (ommon (arrers are re'#red to se(#re the om$#lsory otor Veh(le 4abltyIns#ran(e 5V4I9.

Altho#+h the %(tms or ther hers may $ro(eed dre(tly a+anst the ns#rer !orndemnty/ the thrd $arty lablty s only #$ to the e"tent o! the ns#ran(e $ol(y and thosere'#red by la&.

Whle t s tr#e that &here the ns#ran(e (ontra(t $ro%des !or ndemnty a+anstlablty to thrd $ersons/ and s#(h thrd $ersons (an dre(tly s#e the ns#rer/ the dre(t labltyo! the ndemnty (ontra(ts a+anst thrd $arty lablty does not mean that the ns#rer (an beheld lable i* so&i%$m&th the ns#red andor the other $artes !o#nd at !a#lt.

Ths s so be(a#se the lablty o! the ns#rer s based on (ontra(t that o! the ns#red(arrer or %eh(le o&ner s based #$on tort. The lablty o! the ns#rer there!ore/ ben+$rmary/ s not de$endent on the re(o%ery o! :#d+ment !rom the :#d+ment ns#red.5>o%ernment Ser%(e Ins#ran(e System %. o#rt o! A$$eals/ et al./ >.R. No. ,),C*8/ $rom.H#ne 2,/ ,8889

-,# What is no fault insurance and what is the proof required in these cases ?S>>ESED ANSWER? No need to $ro%e !a#lt or ne+l+en(e o! any 3nd n order o!

re(o%er. Proo!s o! loss shall be s#!!(ent to s#bstantate the (lam/ amon+ &h(h n(l#dea. Pol(e re$ort o! a((dentb. Death (ert!(ate and e%den(e s#!!(ent to establsh the $ro$er $ayee or med(al

re$ort and e%den(e o! med(al or hos$tal dsb#rsement n res$e(t o! &h(h re!#nd s (lamed.5Se(. *76/ Ins#ran(e ode9

NOTES AND OENTS?a. &onditions o avai+*ent?

,9 Only !or (lams !or death or n:#ry o! any $assen+er or thrd $arty. It doesnot n(l#de $ro$erty dama+e

29 Total ndemnty n res$e(t o! one $erson shall not e"(eed P@/))).))*9 lam may be made a+anst one motor %eh(le only. In the (ase o! an

o((#$ant ! a %eh(le/ (lam shall le a+anst the ns#rer o! the %eh(le n &h(h theo((#$ant s rdn+/ mo#ntn+ or dsmo#ntn+ !rom. In any other (ase/ (lam shall bea+anst the ns#rer o! the dre(tly o!!endn+ %eh(le. In all (ases/ the r+ht o! the $arty

$ayn+ the (lam to re(o%er a+anst the o&ner o! the %eh(le res$onsble !or thea((dent shall be mantaned. 5Se(. *76/ Ins#ran(e ode9

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-9# Pes)i5tive 5eiod o one $1% /ea o* e4e)tion o )+ai* stated in 5o+i)/o i+ing s!it not s!s5ended ./ e>!est o e)onsideation o )+ai* denia+# 5S#nIns#ran(e %. o#rt o! A$$eals/ et al./ ,8@ SRA ,8*9

-@# 0oseph $hua bought and iported fro 7aipei * etric tons of >icalciuPhospate, Deed Erade. 7hese were contained in ,8* bags shipped to the Philippines andinsured by Dirst +nsurance $o., against all risks at the port of origin under a 6arinePolicy with the notation, !$lai, if any, payable in &.S. $urrency at 6anila,# andstaped at the lower left side of the policy as !$lai gent,# Sith, ell and $o.

s a result of daages suffered, 0oseph brought suit against Sith, ell as a resultof its refusal to pay claiing to be a ere settling or clai agent because it has not eventaken part in the contract of insurance. 6ay Sith, ell be held liable ? 23plain.

S>>ESTED ANSWER? No. As a settln+ a+ent a(tn+ &thn the s(o$e o! tsa#thorty/ Smth/ Bell (annot be held $ersonally lable andor soldarly lable !or theobl+atons o! ts ds(losed $rn($al merely be(a#se there s alle+edly a need !or a s$eedysettlement o! the (lam.

Smth/ Bell (o#ld not be held lable be(a#se there s no $r%ty o! (ontra(t bet&een tand Hose$h/ the ns#red.

There s soldary lablty only &hen the obl+aton e"$ressly so states or &hen the la&or the nat#re o! the obl+aton re'#res soldarty. #rthermore/ Se(. ,8) o! the Ins#ran(eode (lar!es the role o! the resdent a+ent o! a !ore+n ns#ran(e (om$any to be merely there$resentat%e tas3ed to re(e%e le+al $ro(esses on behal! o! ts $rn($al and not to ans&er$ersonally !or any ns#ran(e (lams. 5Smth/ Bell = o./ In(. %. o#rt o! A$$eals/ et al./ 27SRA @*)9

-istinguish one fro the otherM concealent, representation and warranty asused in insurance.

S>>ESTED ANSWER?a. In(l#son n (ontra(t? The !a(ts (on(ealed are not $art o! the (ontra(t

re$resentatons are mere (ollateral nd#(ements to the (ontra(t those &arranted are $art o!the (ontra(t.

b. Nat#re o! statements? on(ealment s ne+le(t to (omm#n(ate re$resentatons oralor &rtten statement &arrantes may be e"$ress or m$led.

(. E"tent? The !a(ts (on(ealed m#st be materal so also &th re$resentatons/ &hle&arrantes are (on(l#s%ely $res#med materal.

d. onse'#en(es? on(ealment %tates the (ontra(t and enttles the ns#rer tores(nd/ e%en ! the death or loss &as de to a (a#se not at all related to the (on(ealed matter! the re$resentaton s !alse on a materal $ont/ the n:#red $arty s enttled to res(nd !romthe tme &hen the re$resentaton be(omes !alse #$on brea(h o! a &arranty the ns#rer has ther+ht to res(nd.

0# Fn 6arch :, GH*, ESTED ANSWER? No. R0al s lable !or the dama+e (a#sed on the t&o-

storey b#ldn+.The t&o storey-b#ldn+ &as already e"stn+ &hen the !res ns#ran(e $ol(y (ontra(t

&as entered nto. R0al sho#ld ha%e s$e(!(ally e"(l#ded sad t&o-storey b#ldn+ !rom the(o%era+e o! the !re ns#ran(e ! mnded to e"(l#de the same/ b#t t dd not. It &ent on to$ro%de s#(h !re ns#ran(e $ol(y &h(h (o%ers the $rod#(ts/ ra& materals and s#$$lesstored n the $remsesJ o! Trans&orld &h(h &as an nte+ral $art o! the !o#r-s$an b#ldn+.

5R0al S#rety = Ins#ran(e om$any %. o#rt o! A$$eals/ et al./ $rom. H#ly ,6/ 2)))9NOTES AND OENTS?

2C


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a. Inte5etation o ins!an)e )onta)ts# A st$#laton as to the (o%era+e o! the !rens#ran(e $ol(y &h(h has (reated do#bt sho#ld be resol%ed a+anst the ns#rer &hose la&yeror mana+ers &o#ld ha%e dra!ted the !re ns#ran(e $ol(y. Ths s n a((ord &th the$ro%sons o! Art(le ,*77 o! the Ne& %l ode &h(h $ro%des that/ The nter$retaton o!obs(#re &ords or st$#latons n a (ontra(t shall not !a%or the $arty &ho (a#sed theobs(#rty.J 5R0al S#rety = Ins#ran(e om$any %. o#rt o! A$$eals/ et al./ $rom. H#ly ,6/2)))9

Phi+i55ine 'e5osit Ins!an)e &o5oation A)t $R#A# -8>ESTED ANSWER? Fes. The st$#laton s %ald/ hen(e the sh$$n+ (om$any

s not lable.The $rohbton a+anst e"em$tn+ a (arrer !rom lablty as a res#lt o! the a(ts or

omssons o! ts em$loyees s a$$l(able only to (ommon (arrers. A (ommon (arrer#nderta3n+ to (arry a s$e(al (ar+o or (hartered to a s$e(al $erson be(omes a $r%ate (arrerhen(e not s#b:e(t to the abo%e $rohbton. 5ome Ins#ran(e o./ %. Amer(an Steamsh$A+en(es/ 2* SRA 2C9

-# -oadstar received, fro a single consignee, on board its 6BL $herokeelawanit hardwood, tile wood asseblies and apitong ouldings with a total value ofPJ,*J;,;H.**, and insured for the sae aount with 6+$ against various risks,including !total loss by total loss of the vessel.# +t likewise carried passengers. 7he vessel,

in turn was insured by PE+ for PI illion. Fn 8* 9oveber GHI, the vessel sank off-iasawa +sland, allegedly as a result of a typhoon, resulting to total loss of the vesseland the cargo. 2vidence shows that the wind condition in the area where the vessel sankwas oderate. 7he consignee ade a clai with -oadstar which was ignored. 6+$ thenpaid the consignee and the latter signed a subrogation receipt.

6+$ then filed suit against both -oadstar and PE+. -oadstar raises the defensethat it is not a coon carrier because it does not have a $P$9, that there was only oneshipper consignee for a special cargo.

+t likewise posits the application of the !liited liability# theory, and that the claiwas barred by prescription. >ESTED ANSWER? 4oadstar s a (ommon (arrer. t s not ne(essary that the

(arrer be ss#ed a (ert!(ate o! $#bl( (on%enen(e/ and ths $#bl( (hara(ter s not altered by

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the !a(t that the (arra+e o! the +oods n '#eston &as $erod(/ o((asonal/ e$sod( or#ns(hed#led. The re(ords do not ds(lose that V hero3ee on the date n '#eston/ #ndertoo3 to(arry a s$e(al (ar+o or &as (hartered to a s$e(al $erson only. There &as no (harter $arty.#rther/ the bare !a(t that the %essel &as (arryn+ a $art(#lar ty$e o! (ar+o !or one sh$$er/&h(h a$$ears to be $#rely (on(dental/ s not reason eno#+h to (on%ert the %essel !rom a(ommon (arrer to a $r%ate (arrer/ es$e(ally &here/ as n ths (ase/ t &as sho&n that the%essel &as also (arryn+ $assen+ers.

The do(trne o! lmted lablty does not a$$ly &here there &as ne+l+en(e on the $arto! the %essel o&ner or a+ent. 4oadstar &as at !a#lt or ne+l+ent n not mantann+ asea&orthy %essel and n ha%n+ allo&ed ts %essel to sal des$te 3no&led+e o! an a$$roa(hn+ty$hoon. In any e%ent/ t dd not sn3 be(a#se o! any storm that may be deemed as forcema0e$re/ nasm#(h as the &nd (ondton n the area &here t san3 &as determned to bemoderate.

Pres(r$ton has not yet set n. Nether the %l ode nor the ode o! ommer(estates a s$e(!( $erod on the matter/ hen(e the O>SA &h(h $ro%des !or a one-year $erodo! lmtaton on (lams !or loss o!/ or dama+e to/ (ar+oes s#staned d#rn+ transt/ may be

a$$led s#$$letorly to the (ase at bar. 54oadstar Sh$$n+ o./ In(. %. o#rt o! A$$eals/ etal./ >.R. No. ,*,2,/ $rom. Se$tember 26/ ,8889

NOTES AND OENTS?

.R. No. ,*,2,/ $rom. Se$tember 26/ ,8889

(. &o**on )aie )eases to .e )o**on )aie! (hartered and be(omes a $r%ate(arrer.

d. Bi++ o +ading deined# A &rtten a(3no&led+ment o! the re(e$t o! +oods and an

a+reement to trans$ort and to del%er them at a s$e(!ed $la(e to a $erson named theren oron hs order.=== e. Twoo+d )haa)te o .i++ o +ading#

,9 It s a re(e$t o! the +oods sh$$ed and29 It s a (ontra(t by &h(h three $artes/ namely/ the sh$$er/ the

(arrer and the (ons+nee #nderta3e s$e(!( res$onsbltes and ass#mest$#lated obl+atons. 5Ken+ #a Pa$er Prod#(ts o./ In(. %. o#rt o!A$$eals/ et al./ 26 SRA 2@79

On(e del%ered and a((e$ted t (onstt#tes a (ontra(t o! (arra+e e%en tho#+h nots+ned. REASON? There s a(t#al and (onstr#(t%e not(e o! the (ontents +%n+ rse to the$res#m$ton that the same &as a $er!e(ted and bndn+ (ontra(t.


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29 That the (ommon (arrer &ll not be lable !or any loss/ destr#(ton/ ordeteroratoJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

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JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJlly de(lared on the !a(e o! the bll o! ladn+ e%en ! no h+her!re+ht $ayment &as made.

(. Whee ti*e+/ i+ing o o*a+ )+ai* dis5ensed with# Where the !al#re to !le the!ormal (lam &thn the $res(r$t%e $erod (ontem$lated n the ar &aybll &as lar+ely d#e tothe (arrer1s o&n don+/ the (onse'#en(e o! &h(h (annot / n all !arness/ be attrb#ted to the$assen+er/ the same s to be ds$ensed &th. Th#s/ t &as not the $assen+er1s !a#lt that theletter o! demand !or dama+es (o#ld only be !led/ a!ter months o! e"as$eratn+ !ollo&-#$ o!the (lam. I! there &as any !al#re to !le the !ormal (lam &thn the $res(r$t%e $erod/ ths&as lar+ely be(a#se o! the (arrer1s o&n don+/ the (onse'#en(es o! &h(h (annot/ n all!arness/ be attrb#ted to the $assen+er.

E%en ! the (lam !or dama+es &as (ondtoned on the tmely !ln+ o! a !ormal (lam/#nder Art(le ,,6 o! the %l ode 5The (ondton shall be deemed !#l!lled &hen the obl+or%ol#ntarly $re%ents ts !#l!llment.9/ that (ondton &as deemed !#l!lled (onsdern+ that the(olle(t%e a(ton o! the (arrer1s $ersonnel n tossn+ aro#nd the (lam and lea%n+ t#nresol%ed !or an nde!nte $erod o! tme &as tantamo#nt to %ol#ntarly $re%entn+ ts!#l!llment.J On +ro#nds o! e'#ty/ the !ln+ o! the ba++a+e !re+ht (lam/ &h(h s#!!(entlyn!ormed the (arrer o! the dama+e s#staned by the (ar+o/ (onstt#ted s#bstantal (om$lan(e

&th the re'#rement o! the (ontra(t !or the !ln+ o! a !ormal (lam. 5Phl$$ne Arlnes/ In(./%. o#rt o! A$$eals/ et al./ 2@@ SRA C69 d. &aies +ia.i+it/ o a)t!a+3 *oa+ and e6e*5+a/ da*ages and attone/sees# The #ne"$laned (a#se o! dama+e to the (ar+o (onstt#tes +ross (arelessness orne+l+en(e &h(h by tsel! :#st!es the a&ard o! dama+es. The #n$ro!essonal nd!!eren(e o!the (arrer1s $ersonnel des$te !#ll and a(t#al 3no&led+e o! the dama+e to the (ar+o/ :#st to bee"(#l$ated !rom lablty on $#re te(hn(alty and b#rea#(rat( s#bter!#+e/ sma(3s o! &ll!#lms(ond#(t and nsenst%ty to ther (#stomer1s $l+ht tantamo#nt to bad !ath and renders#n'#estonable the (arrer1s lablty !or dama+es. 5Phl$$ne Arlnes/ In(. %. o#rt o!A$$eals/ et al./ 2@@ SRA C69

80# Pasahero, a paying passenger, boarded a Lictory -iner bus bound forFlongapo. %e chose a seat at the front near the bus driver. Pasahero told the bus driver

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that he had valuable ites in his bag which was placed near his feet. Since he had notslept 8I hours, he requested the driver to keep an eye on the bag should be do@e off duringthe trip.

a. While Pasahero was asleep, another passenger took the bag away and alightedat Euagua, Papanga. is Lictory -iner liable to Pasahero ? 23plain.

b. Supposing that two ared en staged a holdup while the bus was speedingalong the 9orth 23pressway. Fne of the pointed a gun a Pasahero and stole not onlyhis bag, but his wallet as well. +s Lictory -iner liable to Pasahero ? 23plain.

c. 7here have been incidents of unknown persons throwing stones at passingvehicles fro the overpasses in the 9orth 23pressway. While the bus was traversing thesuperhighway, a stone hurled fro the Sto. >oingo overpass sashed the frontwindshield and hit Pasahero in the face. Pasahero lost an eye and suffered other in1uries.$an Pasahero hold the bus copany liable for daages ? 23plain# 5Bar? ,88*9

S>>ESTED ANSWERS?a

mercantile law} review notes of prof domondon (may putol) } made 2001} 124 pages

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