Albano SL - Commercial Law
Albano SL - Commercial Law
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Glltr1MltD R~IENNEN'r'018COMMERCIAL
BAR EXAM REMINDERS
LAW
By: Atty. Maria Zarah R. Villanueva-Castro
INTELLECTU4LPROPERTY
Literal Infringement means each and every element "ecitecl in a claim has identical correspondence in the
allegedly infringing device or process.
The doctrine of equivalents provides that an infringement al, o takes place when a device appropriates a prior
invention by incorporating its innovative concept and, .1lthou~h with some modification and change, performs
substantially the same function in substantially the same way to achieve substantially the same result. (Smith Kline
Beckman Corporation vs. Court ofAppeals, 409 SCRA 33, G.R No. l ,?662'1 August 14, 2003)
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circumstances. (Sec. 68, /PC)
Explain the Fair Use Rule (Copyright}
The fair use or a copynghted work for criticism, comment, news reporting, teaching including limited
number or copies for dassroom use, scholarship, resean·h, and similar purpose;; is not an infringement or copyright
, • • .I • •' •
(Sec. 185, /PC) ; '
In case of a software progrom, ts It necessary to prove that the one who sold the program was also the person
who copied or reproduced IL so as to establish probable cause for lnfrlnaement of copyright?
No. Under the law, copyright shall consist in the exclusive right, among other things, to print, reprint,
publish, copy, distribute, multiply, sell, and m,1ke phot0graphs, photo-engravings, and pictorial illustrations of the
works. Jurisprudence teaches us that while the word "and" denotes joinder or union of words, literal construction
thereof to copyright would lead to absurdity as the act:; enumerated cannot be carried out on all of the classes or
works enumerated.
The mere sale of the illicit copies of the software programs was enough by itself to show the existence of
probable cause for copyright infringement There was no need for the petitioner to still prove who copied, replicated
or reproduced the software programs. (Microsoft Corpomtion vs. Manansala, 773 SCRA 345, G.R. No. 166391 October
21, 2015}
AMLA
Enumerate the cases where the AMLC can Inquire into bank deposits even without court order.
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as
amended;
(2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the
Comprehensive Dangerous Act of 2002;
(3) Hijacking and other violations under Republic Act No. 6235 (An Act Prohibiting Certain Acts Inimical to Civil
Aviation); destructive arson and murder, as defined under the Revised Penal Code, as amended, including
those perpetrated by terrorists against non-comb1tant persons and similar targets
BANl{ING
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What Is the relationship between the depositor and the bank with respect to the money deposited by the
former with the latter?
The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple
loan. There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the
depositor is the creditor. The depositor lends the bank m(lney and the bank agrees to pay the depositor on demand.
The sa\oings deposit agreement between the bank and th,~ depositor is the contract that determines the tights and
obligations of the parties. (BPI vs. First Metro, G.R. No. 132390. December 8, 2004) ·
Failure of the Bank to honor the time deposit is failure to pay itc; obligation as a debtor and not a breach of
trust arising from a depository's failure to return the subject matter of the deposit Thus, the relationship being
contractual, mandamus is not an available remedy sino! mandamus does not lie to enforce the performance of
contractual obligations. (Lucman vs. Malawi, eta/., G.R. No. 158794, December 19, 2006)
What remedies can the BSP take for t,anks In distress and what are the grounds therefor?
1. Conservatorship: Whenever, on the basis of a repott submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi -bank is: (a) In a state of continuing inability; or (b)
unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and
creditors.
2. Closure:
(a) Bank is unable to pay its liabilities as they become du~ in the ordinary course of business;
(b) Bank has insufficient realizable assets to meet its liabilities;
(c) Bank cannot continue without involving probable losses to its depositors or creditors;
(d) Bank has willfully violated a cease and desist order from the Monetary Board that has become final, involving
acts or transactions which amount to fraud or dissipation of the assets of the institution;
(e) Bank notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends the payment
of its deposit liabilities continuously for more than 30 clays.
3. Receivership:
(a) Inability to pay liabilities as they'become due in the ordinary course of business;
(b) Insufficiency of realizable assets to meet its liabilities;
(c) Inability to continue business without involving probable losses to its depositors or creditors;
(d) Willful violation of a cease and desist order under Sec 37 of the NCBA that has become final.
4. Liquidation:
(a) The condition of the bank is one of insolvency C'r that its continuance would involve probable loss to its
depositors and creditors;
(b) A determination by the MB that the bank cannot he rehabilitated.
• Subsection X326.1 Definitions. For purposes of these r egulati ons, t he follc v·ing defi~itions shall apply: xxx
( l) Spouse or r elative wit hi n the firs t degree of consa nguinity or affini1y. or r elative by lega l adoptio n, of a directo r, officer o r stockholder of the
bank; · ··
(Z) Partnership of which a directo r, nfficer, or stockholder of a ba n k 01 his spouse or r ela tive within the first degree of consanguinity or affini ty,
or relative by l~al adoption, is a general partner; · .
( 3 ) Co-owner with the director, officer, stockholder o r hi s spouse or •·elative \\'ithin the first degree of co nsanguinity or affi nity, o r relative by
legal adoption, of the property or interest or right mortgaged, pledged 11r assigned to secure the loans or otl1er credit accommoda\ions, except
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when th e mortgage, pledge or assignment covers onJy said co-owner's un~ivi dcd interest;
3,
No director or officer of any bank shall, directly or indirertly, for himself or as the representative or agent of
others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such bank to
others. ,Jr in any manner be an obligor or incur any contractual liability to the bank except with the written approval
of the majority of all the directors of the bank, excluding the director concerned: Provided, That such written
approval shall not be required for loans, other credit accommodations and advances granted to officers under a
fringe benefit plan approved by the Bangko Sentral. The required approval shall be entered upon the records of the
bank and a copy of such entry shall be tran~mitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be upon
terms not less favorable to the bank than those offered to nl·hers. (Anns Length) (Sec. 36, GBL)
j,\,'ho has the authority to determine whether a bank is t•erforming In an unsafe or unsound manner?
The authority to determine whether a bank is conducting business in an unsafe or unsound manner is also
vested in the Monetary Board. (Koruga vs. Arcenos,Jr., 590 srnA 49, G.R. No. 168332June 19, 2009)
Respondents, as directors and officers of a bank, were accused of engaging In unsafe, unsound, and fraudulent
banking practices, more particularly, acts that violate tl1e prohibition on self-dealing. In question was the
manner with which the directnrs hm·e handled the affairs of lhe bank, in particular, the fraudulent loans and
dacion en pago authorized by the directors in fa vor of se,·era/ dummy corporations known to have close ties
and are indirectly controlled by the directors. Decide whether the case is within the Jurisdiction of the BSP of
regular court ·
The allegations call for the examination of the allegedly questionable loans. Whether these loans are
covered by the prohibition on self-dealing is c1 matter rr,r the BSP to determine. These are not ordinary intra-
corporate matters; rather, they involve banking activitiei which are, by law, regulated and supervised by the BSP.
(Koruga vs. Arcenas, Jr., 590 SCRA 49, G.R. No. 168332 June 1?, 2009) ·
Explain the power of the Monetary Board to prescribe the ratio of the bank's net worth to its total risk assets.
Section 34 of the General Banking Law of 2000 gives the Monetary Board the authority to prescribe the
minimum ratio which the net worth of a bank must bEar to its total risk assets, which may include contingent
accounts. The Moneta ry Board may require that such ra tio be determined on the basis of the net worth and risk
assets of a bank and its subsidiaries, financial or otherwi!-e, as well as prescribe the composition and the manner of
determining the net worth and total risk assets of banks a;1d their-subsidiaries.
The books of the respondent banks were examined by the PDIC which revealed that both received from their
foreign head office and fo reign branches deposits in clollars. PDIC claimed these deposit liabilities that were
subject to assess ment for insurance. ls this correct?
No. There are various manners by which a foreign corporation can establish its presence in-the Philippines.
It may choose to incorporate its own su bsidiary as a domestic corporation, in which case such subsidiary would
have its own separate and independent legal personalit} to conduct business in the country. In the alternative, it
(·l! Corporation. association, or firm of which a director or officer of ·J·e hank. or his spouse is also a director or officer of such corporation,
association nr firm, except (a) where the securities of such ,:orporation , ssociation or firm are listed ar.d traded in the big board or commercial
and industrial board of domestic stock cxchang~s and less than fifty pc, c~nt (50°b) of the voting stock thereof is owned by any one person or by
persons related to each other withii; the first d~gre~ of con~a nguinity o · 1flinity; or (h) where the di rector, officer or stockholder of the hank sits
2s a representative c,f the ba nk.in the board of directors of s,,ch r.orp,1r;,tion : Pt ovidcd. That the bank representative shall not haw any equity
interest in the hnrrower corporation except fo r the mini mu01: <har~s t eq, ired hy law, rules and regulations, or by the by-laws of the corporation:
Proridec1. further, that the horrowing corp•>ration is not amnng those 111,·1 tio 1'.cd in items e( S), c(6), e(7) and c(8) of this Scctior.:
(5 J Corporation, association or firm of which any or a group of d11 ·,, t >rs. offi :ers, stockholders of the lending bank and/or their spouses or
relatives within the first degree of consanguinity or aninity, or 1·elati"€ by lcg;1I adoption, hold or own at least twenty percent (20%) of the
subscribed capital of <uch corporatio r., or of the equity of su,:h as<nciati.,, or firm ;
(6) Co1·poratio11. association or firm wholly or majority•o·v11ed or cnrt•·ollect b_.., any related entity or a ·group of related entities mentioned in
Items e(2), c(4) and e(5) of this Section.
(7) Corpor?.tion, 2ssociali nn or firm which ow'nS or controls directly 01 indirectly whether singly or as part of a group of related interest at least
twer.ty percent (20%) of the suhscrihed capital of a substantial slo.:kh ,Ider ~f the lending bank or which controls majority interest of the ha r.k
pursuant to Sub, ection X303. l of the \!OR.
(!lJ Corporalior . asscciation or firm in which the lending bank and / or its parent/subsidiary holds or owns at least twenty percent (20%) of the
subscribed capital or such coqioralion, or in the equity of such a;so•:iilion 01 fi rm, or has an existing management contract or any simi lar
arrangcmer.t with the lending bani; or its parent/subs idiary.
Subsidiary shall refer to a corporation or firm more than rifty percent I50% ) of the outstanding voting stock of which is directly or indirect!)'
owned. controll~d or held with power to vole by its parenL rnrporation.
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I may create a branch in the Philippines, which w0uld not be a legally independent unit. and simply obtain a license to
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do business in the Philippines.
In the case of the Respondent~. it is ~pparent that they both did not incorporate a · separate domestic
corporation to represent its business interests in the Philippines. Their Philippine branches are, as the name
{ implies, merely branches. without a separate legal personitlity from their parent companies. Thus, being one and the
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same entity, the funds placed by the Respondents in th,?ir respective branches in the Philippines should not be
j treated as deposits made by third parties subject to depc•~it insurance under the PDIC Charter. (Philippine Deposit
/IISurance Corporadon v. CiObank, N.A. and Bank ofAmeriCC1, S.T. and N.A., G.R. No. 170290, April 11. 2012)
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! LETTERS OF CREDIT
TRUST RECEIPTS
The entruster knew even before the execution of the alleged trust receipt agreement that the covered
construction materials were never intended by the en trustee for resale or for the manufacture of items to be
sold. Can this be considered a trust receipt transaction?
No. When both parties enter into an agreement knowing fully well that the return of the goods subject of the
trust receipt is not possible· even without any fault on the part of the trustee, it is not a trust receipt transaction
penalized under Sec. 13 of PD 115 In relation to Art. 31'.i, paragraph l(b) of the Revised Penal Code, as the only
obligation actually agreed upon by the parties would be the return or" the proceeds of the sale transaction. This
transaction becomes a mere loan, where the borrower is obl igated to pay the bank the amount spent' for the
purchase of the goods. (Hur Tin Yang vs. People, 703 SCRA 606, G.R. No. 195117 August 14, 2013)
Can the en truster pursue the purchaser of the goods In case the en trustee falls to apply the proceeds of the sale
to his obligation to the entruster?
Any purchaser of goods fro.m an entrustee with right to sell, or of documents or instruments through their
customary form of transfer, who buys ·the goods, docum,mts, or instruments for value and in good faith from the
entrustee; acquires said goods, documents or instrument-; free from the entruster's security interest (Sec. 11, TRL).
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TRANSPORTATION
What is a common earner? How Is a common earner different from a private earner?
A canier is a person or corporation who undertakes to transport or convey goods or persons from one
place to another, gratuitously or for hire. The canier is classified either a~ _a private/~peclal c~nier or a~ a
l common/public canier. A private canier is one who, without makin~ the activtty a vocation, or without hold1~g
himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by special
agreement in a particular instance only, to transport goods o_r ~ersons from one place to another _either gra_tuitously
or for hire. The provisions on ordinary contracts of the C1vtl Code govern the contract of pnvate carnage. The
diligence required of a private canier is only ordinary, that is, the dillgence of a good father of the family. In contrast,
a common canier is a person, corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both. by land, water, or air, for compensation, offering such services to the public. Contracts
of common caniage are governed by the provisions on common caniers of the Civil Code, the Public Service Act. and
other special laws relating to transportation. A common carrier is required to observe extraordinary dillgence, and
is presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or
injuries to passengers. (Perefla vs. Zarate, 679 SCRA 208, G.R. No. 157917 August 29, 2012)
Heirs of the victim sued the earner breach of contract of carrier. At the same time, they sued PNR, likewise
involved In the inddent, for quasi-dellct. Can the court hold them Jointly and severally liable? Why?
Yes. The Court held in a case that although the basis of the right to relief of the Zarates (i.e., breach of
contract of caniage) against the Pereiias was distinct from the basis of the Zarates' right to relief against the
Philippine National Railways (PNR) (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held
jojntly and severally Hable by virtue of their respective negligence combining to cause the death of Aaron. (Perefla vs.
Zarate, 679 SCRA 208, G.R. No. 157917 August 29, 2012)
Respondent provides feny services for its resort. Its boats ( called coco beach boats) feny resort guests and
crew members only and respondent does not charge a separate fee for this. Is the respondent a common
earner? .
Respondent is a common canier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondent's ferry services in its resort operations is
underscored by Its having its own Coco Beach boats. And the tour packages It offers, which Include the ferry
services, may be availed of by anyone who can afford to pay the same. These services are thus available to the
public. That Respondent does not charge a separate fee or fare for its ferry semces is of no moment It would be
imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort
operators offering to.ur packages to factor the ·transportation fee in arriving at the tour package price. (Spouses
Dante Cruz and Leonora Cruz v. Sun Holidays, Inc., G.R. No. 186312,June 29, 2012)
Are collateral relatives, such as brothers and sisters of the passenger, entitled to demand moral damages for
the latter's death? ·
The omission from Article 2206(3) of .the brothers and sisters of the deceased passenger reveals the
legislative intent to exclude them from the recovery of moral damages for mental anguish by reason of the death of
the deceased. (Sulpicio lines, Inc. vs. Curso, 615 SCRA 575, G.R. No. 157009 March 17, 2010)
Can the passenger recover from the third party defendant brought into the suit by the common carrier?
Yes. In an action for breach of contract of carriage commenced by a passenger against his common carrier,
the plaintiff can recover damages from a third party defendant brought into the suit by the common carrier upon a
claim based on tort or quasi-delict The liability of the third party defendant is independent from the liability of the
common canier to the passenger. (Philtranco vs. Paras, G.R. No. 161909, April 25, 2012)
PRIVATE CORPORATION
In a business-enterprise transfer agreement, is the buyer liable for the debts of the selling corporation?
Yes. Under the business-enterprise transfer, the transferee purchases not only the assets of the transferor;
but also its business. Thus, the transferee is liable_for the debts and liabilities of his transferor arising from the
business enterprise conveyed. The purpose of the business-enterprise transfer is to protect the creditors of the
business by allowing them a. remedy against the new owner of the assets and business enterprise. (Y-1 Leisure
Philippines, Inc. vs. Yu, 770 SCRA 56, G.R. No. 207161 September 8, 2015)
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I Thus, where the main purpose In forming the corporation was to evade one's subsidiary liability for
damages in a criminal case, the corporation may not be heard to say that it has a personality separate and distinct
from its members, because to allow it to do so would be to sanction the use or fiction of corporate entity as a shield
to further an end subversive of justice. (Gold Line Tours, Inc. vs. Heirs of Maria Concepcion Lacsa, 673 SCRA 399, G.R.
No. 159108June 18, 2012 dting La Campana Coffee Factory, et al. v. Kaisahan ng mga Manggagawa, etc., et al., L-S677,
May 25, 1953)
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extent that injustice, fraud, or crime was committed against another, in disregard of its rights. The wrongdoing must
be clearly and convincingly established; It cannot be presumed. Otherwise, an injustice that was never unintended
may result from an erroneous application. (Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729
September 29, 2010}
would mere ownership by a single stockholder of a substantial count of shares Justify plerdng the veil of
corporate fiction 7
Mere ownership by a single stockholder or by another corporation of a substantial block of shares of a
corporation does not, standing alone, provide sufficient justification for disregarding the separate corporate
personality. For this ground to hold sway in this case. there must be proof that one had control or complete
dominion or the company's finances. policies. and bus jness~ m ; he used such control to commit frawi; and the
control was the proximate cause of the financial loss complained of. The absence of any of the elements prevents the
piercing of the corporate veil. (Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729 September
29, 2010}
Can the court apply piercing the veil against a company that was never lmpleaded In the complaint? When
should piercing be raised?
(1) No: The court must first acquire jurisdiction over the corporation or corporations involved before its or
their separate personalities are dlsregarded. Otherwise, due process is violated.
(2) The doctrine of piercing the veil of corporate entity can only be raised during a full-blown Oial over a
cause of action duly commenced involving parties duly brought under the authority of the court by way of service of
summons or what passes as such service. (Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729
September 29, 2010)
The company only had paid-up capital of PhpS,000 but it entered into a Php3.3 million contract. May this be
considered as badge offraud for purposes ofapplying tile doctrine ofpiercing the veil of corporote fiction?
The fact that Kukan, Inc. entered into a PhP 3.3 million contract when it only had a ·p aid-up capital of PhP
5,000 is not an indication of the intent on the part of its management to defraud creditors. Paid-up capital is merely
seed money to start a corporation or a business entity. As in this case, it merely represented the capitalization upon
incorporation in 1997 of Kukan, Inc. Paid-up capitalization of PhP 5,000 is not and should not be taken as a
reflection of the fi rm's capacity to meet its recurrent and long-term obligations. It must be borne in mind that the
equity portion ca nnot be equated to the viability of a business concern, for the best test is the working capital which
consists of the liquid assets of a given business relating to the nature of the business concern. (Kukan International
Corporation vs. Reyes, 631 SCRA 596, G.R. /'{o. 182729 September 29, 2010)
Can the corporotion validly release a subscriber from his obligation under a subscription contract without any
consideration?
No. Under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber to icy
capital stock from the obligation of paying for his shares, in whole or in part, without a valuable consideration, or
fraudulently, to the prejudice of creditors. {Halley vs. Printwe/1, Inc., 649 SCRA 116, G.R. No. 157549 May 30, 2011)
Under what circumstance can a creditor ofthe corporation pursue Its stockholder?
The creditor is allowed to maintain an action upon any unpaid subscriptions and thereby steps into the
shoes of the corporation for the satisfaction of its debt.
The prevailing rule is that a stockholder is personally liable for the financial obligations of the
corporation t.o f1!e ~x~ nt_of his unpaid subscription. [Halley vs. Printwe/1, Inc., 649 SCRA 116, G.R. No. 157549 May 30,
2011)
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3. In case of merger or consolidation. (Sec. 81, CC)
4. In case of investment of funds in another corporation or business or for any other purpose (Sec. 42, CC)
can stockholders demand appraisal right if the corporotion has no unrestricted retained earnings? Would it
matter ifajur the complaint therefor was filed, the corporation already had unrestricted retained earnings?
No. Although dissenting stockholders have the right of appraisal, the law no payment shall be made to any
dissenting stockholder unless the corporation has unrestlicted retained earnings i~ its books to cover the payment
In case the corporation has no available unrestlicted retained earnings in its books, Section 83 of the Corporation
Code provides that if the dissenting stockholder is not paid the value of his shares within 30 days after the award,
·his voting and dividend rights shall immediately be restored. (Turner vs. Lorenzo Shipping Corporation, 636 SCRA 13,
G.R. No. 157479 November 24, 2010)
Neither did the subsequent existence of unrestricted retained earnings after the filing of the complaint cure
the lack of cause of action against the company on appraisal right Thus, it would not matter if subsequent to the
filing of the complaint for appraisal right, the corporation was able to earn unrestricted retained earnings. (Turner
vs. Lorenzo Shipping Corporation, 636 SCRA 13, G.R. No. 157479 November 24, 2010) . ·
What are the requisites to hold a director or officer personally liable for corporate obligations?
To hold a director or officer personally liable for corporate obligations, two requisites must concur, to wit:
(1) the complaint must allege that the director or officer assented to the patently unlawful acts of the corporation, or
that the director or officer was guilty of gross negligence or bad faith; and (2) there must be proof that the director
or officer acted in bad faith. (Lozada vs. Mendoza, GR. 196134, October 12, 2016) \
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The Complaint alleged that FQB+ 7 was established In 1985 and that except for the death oftwo of its directors,
there has been no other change In the list of its stockholders. The Complaint further alleged that the FQB's
General Information Sheet (GIS) reflected erroneous changes in the composition of the FQB+7's board
members (which included the Respondents) and that despite complainant's previous demand upon the "real"
board members to rectify this, his request was just ignored. Complainant thus prayed for the nullification ofall
previous actions made by the Respondents, including tlie GIS they had filed with the SEC and that the rightful
members ofthe board be declared by the court. While this case was pending, FQB+ 7's existence was revoked.
Should the case now be dismissed following the revocation ofFQB+ 7's existence?
No. The Corporation Code (Sec. 122) allows a dissolved corporation to wind up its affairs within 3 years
from its dissolution. A corporation's board of directors is not rendered functus officio by its dissolution. Since the
Corporation Code allows a corporation to continue its existence for a limited purpose, necessarily, there must be a
board that will continue acting for and on behalf of the dissolved corporation for that purpose.
Here, the Complaint did not pray to continue the corporate business of FQB+ 7. The Complaint does not seek
to enter into contracts, issue new stocks, acquire properties, execute business transactions, etc. Its aim is to
determine who the rightful directors are and a corporation's right to remove usurpers and strangers from its affairs.
Resolution of these issues do not involve continuation of business of FQB+7. Also, the determination of which group
is the bona fide or rightful board of the FQB+7 will still provide practical relief to the parties involved. (Ayuirre II vs.
FQB+7, Inc., 688 SCRA 242, G.R. No.1 70770January 9, 201 3)
Explain the concept ofdoing business under the Foreign Investment Act?
The phrase "doing business" shall include: soliciting orders, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who
in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more;
participating in the management. superyision or conb·ol of any domestic business, firm, entity or corporation in
the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization. · ·
NEGOTIABLE INSTRUMENTS
Would acceptance ofmanager's and cashier's check amount to clearing thereof by the bank?
While indeed, it cannot be said that manager's and cashier's checks are precleared, clearing should not be
confused with acceptance. Manager's and cashier's checks are still the subject of clearing to ensure that the same
have not been materially altered or otherwise completely counterfeited. However, manager's and cashier's checks
are pre-accepted by the mere issuance thereof by the bank, which is both its drawer and drawee. Thus, while
manager's and cashier's checks are still subject to clearing, they cannot be countermanded for.being drawn against a
closed account, for being drawn against insufficient funds, or for similar reasons such as a condition not appearing
on the face of the check. Long-standing and accepted banking practices do not countenance the qmntermanding of
manager's and cashier's checks on the basis of a mere allegation of failure of the payee to comply with its obligations
towards the purchaser. On the contrary, the accepted banking practice is that such checks are as. good _as cash.
(Metropolitan Bank and Trust Company vs. Chiok, 742 SCRA 435, G.R. No. 175394 November 26, 2014)
The drawee paid a materially altered check. Can It charge the payment made to the account ofthe drawer?
When !he <!rawee bank pays a materially altered check, it violates the tenns of the check, as well as its duty
to charge its client's account only for bona fide disbursements he had made. If the drawee did not pay according to
the original tenor of the instrument, as directed by the drawer, then it has no debt to claim reimbursement from the
~ much less, the right to deduct the erroneous payment it made from the drawer's account which it was
expected to treat with utmost fidelity. The drawee, however, still has recourse to recover its loss. It may pass the
liability back to the collecting bank xxx. (Areza vs. Express Savings Bank, Inc., 734 SCRA 588, G.R. No. i76697
September 10, 2014)
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· check transactions the depositary/collecting bank or last.endorser generally suffers the
been repea tedl. YhheIdththadt mty t ascertain the 'genuineness of all prior endorsements cons,"d enng
· t h at th e act o f
Joss because 1t as e u O • • th h d ·
. h k fi ent to the drawee is an .issert1on that the party making e presentment as one its
presentmg lhe ~ : or p~~ess of the endorsement~. If any of the warranties made by the depositary/collecting
duty to ascertain bee gfaenl umthen the drawee bank may recover from it up to the amount of the check. (Areza vs.
bank turns out to se, .
Express Savings Bank. Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014)
INSURANCE
As a rule, a change of insurable interest without a correspondl11f1 transfer of the policy, suspends the
insurance. What are the exceptions?
The exceptions are:
1. A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does
not affect the right of the insured to indemnity for the loss. (Sec. 21, IC}
2. A change of interest in one or more several distinct things, separately insured by one policy, does
not avoid the insurance as to the others. (Sec. 22, IC)
3. A change of interest, by will or succession. on the death of the insured, does not avoid an insurance;
and his interest in the insurance passes to the person taking his interest in the thing insured. (Sec.
23, IC}
4. A transfer of interest by one of several partners, joint owners, or owners in common, who are
jointly insured, to the others, does not avoid a n insurance even though it has been agreed that the
insurance shall cease upon an .alienation of the thing insured. (Sec. 24, IC)
S. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of
the risk, rriay become the owner of the interest insured. (Sec. 57, IC)
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Explain the incontestablllfJ' role on life insurance.
For a life insurance policy to be incontestable, the requisites are: (a) The Insurance is a life insurance policy
payable on the death of the Insured; and (b) It has been in force during the lifetime of the insured for at least two (2)
years from its date of issue or of its last reinstatement The period of two (2) years may be shortened but it cannot
be extended by stipulation. If the Insured dies after the two (2) year period, the insurer cannot rescind the contract
due to his misrepresentation or concealment (Sec. 48, IC)
ABRC FAMILY
,j
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