Mercantile Law

Jeff Davids notes

I. LETTERS OF CREDIT

A. Definition

- A letter of credit is a written instrument whereby the writer requests or

authorizes the addressee to pay money or deliver goods to a third person and

assumes responsibility for payment of debt therefore to the addressee (Transfield

Phils vs. Luzon Hydro Corp 443 Scra 307)

- Nature the letter of credit has evolved as the ubiquitous and most important

device in international trade. A creation of commerce and businessmen the letter

of credit is unique in the number of parties involved and its supranational

character. (Transfield Phils vs Luzon Hydro Corp, supra)

B. Parties to a Letter of Credit

- There would be at least 3 parties to a letter of credit.

- Arrangement:

Buyer (Applicant) one who procures the letter of credit

Issuing Bank one who issues the letter of credit and undertakes to pay

seller upon receipt of the draft and proper documents of title

Seller (Beneficiary) one who ships the goods to buyer and delivers the

documents of title to the bank along with the draft.

(Bank of America vs CA 228 Scra 357 (1993))

- Rights and Obligations of Parties

Obligations of Applicant (Buyer)

Reimbursement of issuing bank upon receipt of documents of title

Oligations of Issuing Bank

Letters of credit constitute the primary obligation, and not merely an

accessory contract, of the issuing bank separate from the underlying

contract it may support.

Protect importers interest by paying letters of credit only upon

surrender of documents that strictly conform to the terms of the

letter of credit.

Obligations of the Seller

Submission of documents of title to the correspondent bank

Ask the bank to honor the credit

C. Basic Principles of Letters of Credit

1. Doctrine of Independence

-engagement of issuing bank is to pay seller-beneficiary of the credit once the

draft and the required documents are presented to it. It assures the seller

that prompt payment is to be made, independent of any breach of the main

contract and precludes the issuing bank from determining whether the main

contract is actually accomplished or not. (Transfield Phils Inc. vs Luzon Hydro

Corp, supra)

2. Fraud Exception Principle

-Fraud is an exception to the independence principle, untruthfulness of a

certificate accompanying a demand for payment under a standby credit may

qualify as fraud sufficient to support an injunction against payment. The

remedy against fraudulent abuse should not be granted unless:

a. there is clear proof of fraud

b. fraud constitutes fraudulent abuse of independent purpose of the

letter of credit and not only of fraud of the main agreement

c. irreparable injury might follow if injunction is not granted or the

recovery of damages would be seriously damaged

(Transfield Phils Inc vs Luzon Hydro Corp, supra)

3. Doctrine of Strict Compliance

-documents tendered must conform strictly to the terms of the letters of

credit, a correspondent bank which departs from what has been stipulated

under the letter of credit as where it acts upon and accepts a fault tender acts

on its own risks and it may not therefore recover from the buyer or the

issuing bank, as the case may be, the money thus paid to the beneficiary

seller. (Feati Bank vs CA 196 Scra 576)

II. TRUST RECEIPTS LAW

A. Definition/Concept of Trust Receipt Transaction

- Definition

A trust receipt is a commercial document whereby the bank releases the

goods in the possession of the entrustee but retains ownership thereof

while the entrustree shall sell the goods and apply the proceeds for the full

payment of his liabilities with the bank

- Concept

It is a security arrangement to which a bank acquires ownership pf the

imported personal property (Garcia vs CA 258 Scra 446)

1. Loan/Security Feature

PART II

C. Obligation and Liability of the Entrustee

1. Payment/Delivery of Proceeds of Sale on Disposition of Goods, Documents or

Instruments

- a trust receipt transaction imposes upon the entrustee the obligation to deliver to

the entruster the price of the sale, or if the merchandise is not sold, to return the

same to the entruster, and a violation of any of these undertakings constitutes estafa

defined under Art. 315(1)(b) of the Revised Penal Code, as proved by Sec. 13 of PD

115

(Gonzales vs. HSBC, 537 SCRA 255)

2. Return of Goods, Documents of Proceeds of the Sale or Disposition of Goods,

Documents or Instruments in case of non-sale

- failure of the entrustee to turn over the sale proceeds, or to return said goods if

they were not disposed of in accordance with the terms of the trust receipt, shall be

punishable as estafa under Art. 315 (1) of the Revised Penal Code, without need of

proving intent to defraud.

(Colinares vs. Cort of Appeals, 339 SCRA 609)

3. Liability for loss of goods, documents or instruments

- it is the entrustee that bears the risk of loss

4. Penal sanction if offender is a Corporation

- under PD 115, performance of the act is an obligation directly imposed by law on

the Corporation, and consequently, since a corporation can only act through its

officers, then the responsible office must necessarily be the ones criminally liable

(Sia vs. Court of Appeals, 121 SCRA 655)

D. Remedies Available

- Entruster has the discretion to cancel the trust and take possession of the goods or

seeks any third party action/claim or a separate civil action which it deems best to

protect its rights, at any time upon default or failure of the entrustee to comply with

any of the terms and conditions of the trust agreement

(South City Homes, Inc. vs. BA Finance Corp., 371 SCRA 603)

1. Entrustee always bound to pay loan

since trust receipts agreements are merely security for the loan agreement,

the full-turnover of the goods subject of the trust receipts does not suffice to

divest debtors of their obligations to pay the principal amount of the loan.

Sec. 7, PD 115 expressly provides for it.

2. Entruster may file estafa charges against entrustee

SECRECY OF BANK DEPOSITS

1. Purpose

- RA 1405 has two allied purposes: (a) to discourage private hoarding and (b) at the

same time encourage the people to deposit their money in banking institutions so

that it may be utilized by way of authorized loans and thereby assist in economic

development

(BSB Group, Inc. vs. Go, 612 SCRA 596)

2. Prohibited Acts

- Prohibition on disclosure

the act declares unlawful for any official or employee of a banking

institution to disclose to any information concerning bank accounts

exceptions:

(1) upon the debtors written permission

(2) in cases of impeachment

(3) upon a competent courts order in cases of bribery of, or

dereliction of duty by public officials or;

(4) in cases where money deposited or invested is the subject

matter o f litigation

Other exceptions

a. Anti- Graft and Corrupt Practices Act

requirements:

there must be a pending case before a court of competent jurisdiction

the account must be clearly identified

inspection should be limited to the subject matter of the pending case

before the court of competent jurisdiction

the bank personnel and account holder must be present and notified during

the inspection

b. Monetary Board Authority

MB orders revelation when there is danger of bank fraud

When independent auditors audit banks

c. Under the 1997 NIRC

- Sec. 6(F) of the 1997 NIRC (RA 8424) authorizes the BIR commissioner to inquire

into bank deposit accounts of:

a) a decedent to determine his gross estate

b) any taxpayer who has filed an application for compromise of his tax liability,

which application shall include a written waiver of his privilege under the

Secrecy of Ban Deposit Act or other general or special laws.

d. Anti-Money Laundering Act of 2001

e. Revised PDIC Charter

-Rep. 9576, in revising the PDIC Charter, provided that, notwithstanding the

provisions of the Secrecy of Bank Deposit Act, PDIC or BSP may inquire into or

examine deposit accounts and all information related [to bank deposits] in case there

is a finding of unsafe or unsound banking practice.

f. Exchange of Information on Tax Matters Act

3. Deposits Covered

under the act, all deposits of whatever nature with banks or banking

institutions, including investments in bonds issued by the Government, and

its political subdivisions and instrumentalities

FCDUs

4. Garnishment of Deposits

1) FCDUs FCDU accounts are exempt from attachment, garnishment, or any other

order or process of any court, legislative body, government agency, or any

administrative body whatsoever.

ANTI-MONEY LAUNDERING ACT (RA No. 9160, as amended by RA 9194)

1. Policy of the Law

(a) protect and preserve integrity and confidentiality of bank accounts, to

ensure that the Philippines shall not be used as a site for unlawful money laundering

activities; and

(b) pursue States foreign policy to extend cooperation in transnational

investigations and prosecutions on money laundering activities.

AMLA seeks to prevent money-laundering activities for providing more

transparency in the Philippine financial system

2. Covered Institutions

(a) Banks and other entities, their subsidiaries and affiliates, supervised/regulated by

BSP;

(b) Insurance companies and other entities supervised/regulated by the Insurance

Commission

(c) SEC supervised/regulated:

Securities dealers, brokers, salesmen, investment houses, and other entities

managing securities or rendering services as investment agents, advisor or

consultants;

Mutual funds, closed-end investment companies, common trust funds, pre

need companies, and other similar entities;

Foreign exchange corporations, money changers, money payment centers,

remittance, and transfer companies, and other similar entities; and

Other entities administering/dealing in currency, commodities or financial

derivatives based thereon, valuable objects, cash substitutes and other

similar monetary instruments or property

3. Obligations of Covered Institutions

a) Establish and record, maintain a system of verifying the true identities of clients

b) Keep records for five (5) years

c) Repeat covered transactions and suspicious transactions to AMLC within five (%)

working days from occurrence, which thereby shall not be a violation of Secrecy of

Bank Deposit Act, FCDU Law, and the General Banking Law of 2000

d) They are prohibited from allowing clients to open anonymous accounts, accounts

under fictitious names, and all other similar accounts.

EXCEPT: NUMBERED ACCTS. ALLOWED, EXCEPT FOR CHECKING ACCOUNTS

e) BSP may conduct annual testing of banking institutions solely limited to the

determination of the existence and true identity of the owners of such accounts

4. Covered Transactions

a) Threshold Transactions transaction in cash or other equivalent monetary

instrument in excess of P500,000.00 within one banking day

b) Suspicious Transactions Transaction with Covered Institutions regardless of

the amount involved, where any of the following circumstances exist:

1) no underlying legal or trade obligation, purpose or economic justification

2) client is not properly identified

3) amount involved not commensurate with clients business or financial

capacity

4) based on all known circumstances, it may be perceived by client s transaction

is structured in order to avoid being subject of reporting requirements

5) any circumstance relating to transaction observed to deviate from clients

profile and/or clients past transactions with covered institution

6) transaction is in any way related to an unlawful activity or offense under the

act that is about to be, is being or has been committed; or

7) Similar or analogous transactions

6. When Money Laundering Committed

- a money laundering crime is committed when the proceeds of an unlawful activity

are transacted to make them appear to have originated from legitimate sources, by

the following acts:

a) Transacting or attempting to transact, with monetary instrument or property,

knowing it represents/involves/relates to proceeds of any unlawful activity

b) Facilitating money laundering referred to item a above by knowingly or

failing to perform an act, or

c) Failing to disclose or file report with AMLC of any monetary instrument or

property as required under the law.

7. Unlawful Activities or Predicate Crimes

- Acts or omissions or combination or series thereof, involving or having relation to

the following:

1. Kidnapping for Ransom

2. Drug Trafficking

3. Graft and Corrupt Practices

4. Plunder

5. Rubbery and Extortion

6. Jueteng and Masiao

7. Piracy on the High Seas

8. Qualified Theft

9. Swindling

10. Smuggling

11. Violations of E-Commerce Act

12. Hijacking, destructive arson and murder, including acts of terrorism against

non-combatant persons and similar targets

13. Fraudulent practices under the Sec. Reg. Code 2000

14. Felonies or offenses of similar nature punishable under the penal laws of

other countries

* There can be separate convictions for the money laundering offense and unlawful

activity constituting it

* But unlawful activity shall be given precedence over money laundering charge

without prejudice to freezing and other remedies provided by the act.

8. Anti-Money Laundering Council (AMLC)

- Composition BSP Governor, as AMLC Chairman

- Insurance Commission Chairman

- SEC Chairman

9. Freezing of Money Instrument or Property

- The original power of the AMLC to freeze accounts has been deleted under RA 9194.

Under the current version, the Court of Appeals may issue a Freeze Order only:

a) upon ex-parte application of AMLC;

b) after determination that probable cause exists that any way related to an

unlawful activity

* It shall be effective immediately, and for a period of 20 days unless extended by the

Court

10. Authority to Inquire into Bank Deposits

- AMLC may seek court order: to inquire into or examinee a particular deposit or

investment with a banking or non-bank financial institution

- AMLC on its own: and no account is required, in cases involving: (a) kidnapping for

ransom; (b) drug trafficking or (c) terrorism

* BASIS OF ORDER: UPON PROBABLE CAUSE THAT THE DEPOSITS OR INVESTMENTS

ARE IN ANY WAY RELATED TO AN UNLAWFUL ACTIVITY OR MONEY-LAUNDERING

OFFENSE

THERE CAN BE NO EXAMINATION OF DEPOSITS OR INVESTMENTS MADE PRIOR THE

ACTS EFFECTIVITY

MEMORIZE THE FOLLOWING PROVISIONS:

NIL

- Sec. 1

61

66

29

49 242-243

52 138-144

08 100

Insurance Code

- Sec. 2 10 14 93 77 60-61 64 32

3 11 19 20 82 52 26 94

10 relate this to Art. 739 of the Civil Code

93 double insurance

* Elements of Insurance

1) insured possesses insurable interest capable of pecuniary estimation

2) insured is a subject to a risk of loss upon the happening of the designated peril

3) the insured assumes the risk of loss

4) the assumption of risk is part of a general scheme to distribute actual losses

among a large group or substantial number of persons bearing a similar risk

5) the insured pays a premium

Requisites for double insurance

1) person insured is the same

2) there ate two or more insurers insuring separately

Implied warranties in Marine Insurance:

1) Seaworthiness at inception of insurance

2) Ship will not deviate from the agreed voyage, unless deviation is proper

3) Ship will not engage in illegal venture

4) Ship will carry requisite does of nationality of the ship or cargo

5) Presence of insurable interest

Corporation Code

- Sec. 2 5 10 16 36 31 42 83 22 104

123 23 19 18 23 81 82 76 96 105

Attribute of a Corporation

1) Artificial being with separate distinct personality

2) Created by operation of law

3) Has the right of succession

4) Has the powers and attributes conferred by law or incident to its existence

464 3800------- October 7

85 800

3,132.54 37,590.46

MONICA HSBC

General Powers of the Corporation Sec. 36

1) Sue and be sued in its Corporate name

2) Succession

3) Accept and use a Corporation Seal

4) Amend its articles of incorporation

5) Accept-amend or repeal by-laws

6) Deal in real and personal property

RA 7653

The New Central Bank Act

Sec. 15 powers

RA 8791

General Banking Act of 2000

Kinds of Banks:

1) Universal Bank are bans which can exercise the powers of an investment

house and invest in non-allied enterprises. Has the highest capitalization

requirement.

2) Commercial Bank banks that cannot exercise the powers of an investment

house nor invest in non-allied enterprises. It has a lower capitalization

requirement than universal universal banks.

3) Thrift Bank composed of: a) Savings and mortgage banks; b) Stock savings;

c) Private development banks governed by the Thrift Banks Act

4) Rural Banks are banks for rural development. They are mandated to

ensure that credit is available and readily accessible in the rural areas on

reasonable terms. Governed by the Rural Banks Act of 1992. These bans

must be wholly owned by Filipinos

5) Cooperative Banks are banks whose majority shares are owned by

cooperatives primarily to provide financial and credit services to

cooperatives

6) Islamic Banks are banks whose business dealings are subject to the basic

rules of Islamic Sharia

PART III

MERCANTILE LAW

NEGOTIABLE INSTRUMENTS

Functions of Negotiable Instruments:

Negotiable instruments are meant to be substitutes for money and

thereby increase the purchasing media in circulation.

Principal Features of Negotiable Instruments:

1. Negotiability

- only an instrument qualifying as a negotiable instrument may be

negotiated by:

a) endorsement coupled with delivery

b) delivery alone where instrument is in bearer form.

2. Accumulation of secondary contracts

- they are transferred from one person to another, as to allow a

transferee to have a better title than the transferor.

Specific Instruments covered:

1. Promissory note maker *The holder in

due course is the person

2. Bill of exchange primarily

protected by the NIL.

3. Check

Formal Requisites of Negotiable Instruments:

1. It must be in writing;

2. It must be signed by the maker or drawer;

3. It must contain an unconditional promise or order to pay a sum certain

in money;

4. It must be payable on demand, or at a fixed determinable future time.

5. It must be payable to order or to bearer;

6. Where it is a bill of exchange, drawee must be named or otherwise

indicated therein with reasonable certainty.

A negotiable document of title

- Warehouse receipts

- Symbolic or constructive delivery

- It is a substitute for goods

drawer

1, 23, 52 warranties of an

endorser

MEMORIZE

Memory aid for requisites of negotiability:

1. It must be in writing signed by a maker or drawer;

2. It must contain an unconditional promise or order to pay a sum certain

in money;

3. It must be payable on demand, or at a fixed or determinable future time;

4. Must be payable to order or to bearer;

5. Where the instrument is addressed to a drawee, he must be named or

otherwise indicated therein with reasonable certainty.1

Promissory Note

- An unconditional promise in writing made by one person to another,

signed by the maker, engaging to pay on demand, or at a fixed or

determinable future time, a sum certain in money to order or to

bearer.

Bill of Exchange

- An unconditional order in writing addressed by one person to

another, signed by the person giving it, requiring the person to whom

it is addressed to pay on demand or at a fixed determinable future

time a sum certain in money to order or to bearer.

*A negotiable instrument is a real contract; it is deliverable as it is

perfected only upon delivery. (delivery is required)

Complete but undelivered

- is a defense available only against parties to the fraud but cannot be

used against a holder in due course.

Incomplete but undelivered

- is a personal defense which cannot be used against a holder in due

course.

Incomplete and undelivered

- a real defense that can be availed of against a holder on due course.

1 #5 applies only to bills of exchange.

Forgery of Signature (Sec. 23)

If the signature of the person below is forged:

1. Drawer

a) Drawer vs. Drawee Drawer wins because the proximate

cause is the

negligence of the bank who is

supposed to know the

signature of its own depositor.

b) Drawee vs. Depositary Bank Drawee wins, depositary bank

is liable for warranties of an indorser.

2. Payee

a) Drawee vs. Drawer Drawer wins Section 23.

3. Indorser

a) Drawee vs. Drawer Drawer wins Section 23.

Warranties of an Indorser:

- Genuineness and due execution of the instrument.

- Authenticity of signature

- A guaranty on the solvency of the drawer (necessity of notice of

dishonor)

Alteration or Intercalation

*Parties before the alteration shall only be liable for the original amount

(unaltered amount)

*Parties after the alteration shall be liable for the whole amount (altered

amount) due to their warranties as indorser.

Holder in Due Course Section 52

1. That it is complete and regular upon its face;

2. That he became the holder of it before it was overdue, and without

notice that it has been previously dishonored, if such was the fact;

3. That he took it in good faith and for value;

4. That at the time it was negotiated to him, he had no notice of any

infirmity in the instrument or defect in the title of the person negotiating

it.

Research:

- Real defenses available even against holder in due course?

- What are personal defenses available only against the participants

of the fraud?

- Who is an accommodation party?

- Who is an irregular indorser?

One who signs without indicating at what capacity he is signing before the

issuance of the negotiable instrument.

- Who is a qualified indorser?

- When is a negotiable instrument discharged?

o Payment or maturity

o Upon a restrictive indorsement

- Different kind of indorsement

*If the instrument is payable to a fictitious person it is payable to bearer.

Holder in Due Course (Sec. 52)

- A holder who has taken the instrument under the following

conditions:

a) Complete and regular upon its face

b) That he became holder of it before it was overdue and without

notice that it had been previously dishonored

c) That he took it in good faith and for value

d) At the time it was negotiated to him, he had no notice of any

infirmity in the instrument or defect in the title of the person

negotiating it.

*Every holder of a negotiable instrument is deemed to be prima facie a

holder in due course.

The title of a person to the instrument is defective in two ways:

a) In its acquisition

- The tile of a person is defective if he acquired the instrument by

fraud, duress or force and fear, or other unlawful means, or for an illegal

consideration.

b) In its negotiation

Not a good defense against a holder in due

course Good against a holder not in due course

- If he negotiates the instrument in breach of faith or under

circumstances as to amount to fraud.

Rights of a Holder in Due Course

a) May sue in his own name

b) He may receive payment and payment to him in due course

discharges the instrument.

c) He holds the instrument free from any defect of title of prior parties

and free from defenses available to prior parties themselves

d) He may enforce payment of the instrument for the full amount

thereof against all parties liable thereon

Personal Defenses

- those that arise in the course of the life of the instrument emanating

from the conduct of circumstances surrounding its acquisition by a

party thereto.

Examples of Personal Defenses:

a) complete but undelivered instrument

b) incomplete but delivered instrument

c) acquisition of instrument

Examples of Real Defenses:

a) Incomplete and undelivered instruments

b) Forgery

c) Minority

Warranties of a Maker

a) He will pay the promissory note according to its tenor.

b) He admits the existence of the payor.

c) Admits the payee has the capacity to indorse.

Warranties of a Drawer

a) Existence of the payee and his then capacity to indorse

b) Engages that upon due presentment that the bill will be accepted or

paid, or both according to its tenor.

c) If dishonored by non-acceptance or non-payment he will pay the holder

of the bill or to any subsequent indorser who was compelled to pay it,

provided the necessary proceedings on dishonor were duly taken.

Securities Regulation Code

R.A. 8799

- enacted to protect the public from unscrupulous promoters, who stake no

business or venture claims without basis and sells shares or interests to

investors who are left holding certificate representing nothing more than a

claim to a square of the blue sky.

- securities transactions are impressed with public interest and are thus

subject to public regulation.

Protects the public from unsound, fraudulent and worthless securities by:

1. Requiring through a process of registration, issuers of securities, to

furnish the public with full and accurate disclosure of all material facts

concerning the issuer and its securities, so that the public may make a

reasonable business judgment whether or not to invest.

2. Limiting margin and borrowing requirements to prevent undue

speculations.

3. Punishing those who manipulatev the market and from

misrepresentations, manipulations and fraudulent practices covering

securities.

*It is self-executory does not require an issuance of implementing rules

from SEC to be valid.

Regulatory Control Covered

*Regulation of Securities

*Registration of Market Participants

*Mechanism to ensure sound market

*Expanded SEC powers as market regulation

Securities and Exchange Commission

*A collegial body

- composed of a chairman and 4 commissioners

- no longer has a quasi-judicial function

- must be natural born citizens, majority of whom are lawye rs including

the Chairman

- Presence of 3 commissioners shall constitute a quorum.

Registration of Securities

a) Debt instruments

b) Equity instruments

c) Investment instruments

d) Derivatives

e) Trust instruments

f) Other instruments as may in the future be determined by the SEC

General Rule of Registration:

Securities shall not be sold or offered for sale or distribution within the

Philippines:

a) Without registration statement duly filed with and approved by the SEC

b) Prior to such sale, information on the securities in such form and with

such substance as SEC may prescribe, shall be made available to each

prospective purchaser

Folowing securities may be sold without need of registration:

a) Exempt securities

1. Issued by or guaranteed by the government or its agents;

2. Issued or guaranteed by the government of any country with which

the Philippines has diplomatic relations;

3. Issued by the receiver or by the trustee in a bankruptcy duly

approved by an adjudicatory body;

4. Those involving a bank (except its own shares);

5. Those involving sales or transfers under the supervision and

regulation of OIC, HLURB, BIR.

Tender Offer

- A publicly announced intention by a person acting alone or in

consent with other person to acquire equity securities of a public

company among others. It affords such minority stckholders the

opportunity to withdraw or exit from the company under reasonable

terms.

INSURANCE

- Definition

- Characteristics

- Rules on Premiums

- Insurable interest in life/property

- Designation of beneficiary

- Constructive total loss

- Administrative provisions

- Fire insurance

- Third party liability

- No-fault insurance

*Warehouse Receipts Law

*Civil Code Provisions Book V

*Financial Rehabilitation and Insolvency Act

Insurance a contract whereby the insurer undertakes for a consideration

to indemnify against loss, damage or liability arising from an unknown or

contingent event.

Characteristics:

a) Aleatory There is an element of risk. An aleatory contract is one where

the obligation depends upon the concurrence of an uncertain event (fire

insurance), or one certain to happen but in an indeterminate time.

b) Contract of indemnity there is an exchange for value, particularly in

property insurance.

c) Onerous there is valuable consideration (premium)

d) Bilateral both parties are bound to do something.

e) Formal insurance contracts are formal and real (not consensual) in

nature because a policy needs to be issued and premium paid.

Insurance contracts are to be construed liberally in favor of the insured

and strictly against the insurer, being a contract of adhesion.

Premium an insurance premium is the consideration paid an insurer for

undertaking to indemnify the insured against a specified peril.min fire,

casualty and marine insurance, the premium becomes payable as a debt

as soon as the risk attaches.

Payment of Premium by Check insurer is liable if the payment is

acknowledged by a

receipt of premium.

Non-payment of premium non-payment of premiums does not

merely suspend but

puts an end to an

insurance contract since time of payment

is peculiarly the essence of

the contract.

Partial Payment of Premium partial payment of premium would not

make the

insurance

coverage effective.

Expansion of Exceptions to Sec. 77

a. General Rule Credit Accommodation on Premium

- Credit extensions are no longer allowed.

b. When payment of premium by instalments valid: Estoppel

- There are only 2 statutory exceptions to the requirement of payment

of the entire premium as a prerequisite to the validity of the

insurance contract:

i. In case of insurance coverage related to life or industrial life

(health) insurance when a grace period applies;

ii. When the insurer makes a written acknowledgment of receipt

of premium, this acknowledgment being declared by law to be

then conclusive evidence of premium/payment.

iii. The exception provided for in Phoenix and Makati Tuscany (if

the insurer accepted all the instalment payment with intent to

honor policy).

c. When full payment of premium expressly stipulated as condition

precedent

-not similar to the Phoenix ruling since prepayment is made a specific

stipulation in the insurance contract.

d. Credit accommodation now a clear exception

- When the insurance company has by practice renewed the fire

insurance over the years, under a clear credit term arrangement on

the payment of premium and the loss occurred during the credit

period, and such payment was accepted by the insurer.

Insurable Interest in Life Insurance

- A life insurance policy is a valued policy. Unless the interest of a

person insured is susceptible of exact pecuniary measurement.

- Every person has an insurable interest in the life and health of:

a. Himself, or his spouse and of his children;

b. Any person:

On whom he depends wholly or in part for education or

support, or in whom he has a pecuniary interest;

Under legal obligation to him for the payment of money,

respecting property or service, of which death or illness might

delay or prevent the performance; and

Must exist at the time of

perfection of contract.

Upon whom whose life any estate or interest vested in him

depends.

Insurable interest is one of the most basic and essential requirements

in an insurance

contract. It is determined by whether a person will suffer pecuniary loss or

damage from its destruction and will suffer.

Insurable Interest in Property Insurance

- Required to exist only at the time of perfection of the contract and

the time of loss.

Exceptions to the requirement of insurable interest:

a. Insuring two different properties in one policy

b. Succession

c. Co-owners of insured property

d. Co-insurance clause

Beneficiaries

General Rule : Insured may designate anyone he wishes as

beneficiary.

Exceptions:

1. Husband cannot designate his concubine as a beneficiary.

2. Cannot designate a public official by reason of the latters public

office.

*The right to designate a beneficiary means the right to change the

beneficiary anytime.

General Rule: The designation of a beneficiary is

revocable.

Exception: if there is an express stipulation that it is

irrevocable.

Its existence gives a person the legal right to insure

the subject matter of the policy insurance.

Importance of Beneficiary Designation:

a) Taxation if the designation is revocable then it is subject to estate tax.

if the designation is irrevocable, then it is not subject to estate

tax.

b) Disinheritance if revocable, then can be removed as beneficiary.

if irrevocable, then cannot be removed as beneficiary.

c) Cash surrender value if revocable, can borrow cash from value

without

consent of beneficiary.

if irrevocable, cannot borrow

from value without consent of

beneficiary, the latter must consent to the borrowing.

Constructive Total Loss

- When insured exercised the right to abandonment. This may be

exercised when the property insured suffers a damage from a

marine peril of at least if insured merely notified insurer of his

exercise of right of abandonment, immediately ownership over

damaged property passes to insurer once it pays the insured as if

there were actual loss.

Requisites:

1) Damage from marine peril

2) Damage caused was of the value of the item insured

3) Insured abandons the insured item and informs insurer of the

abandonment.

Administrative Provisions:

The Insurance Commission has the authority to regulate the business

of insurance and quasi-judicial power over claims and complaints

involving any loss, damage, or liability for which an insurer may be

answerable under any kind of policy or contract of insurance.

In line with its administrative authority the Insurance Commission:

1) Revokes the certificate of authority of the insurance company; and

2) Removal of its officers and directors for violation of the Insurance

Code.

Fire Insurance an example of a non-life insurance.

It is essentially a contract of indemnity. The insurance

company will not be liable for more than the value of property destroyed

even if the face value is more than the value of the property insured.

a. Open Policy value appears in the policy only for the purpose of fixing

the amount of premium and the maximum liability of the insurer. In case

of loss, the insured must prove 2 things:

Value of the property at the time of loss

Loss was due to peril insured against

b. Valued Policy parties agree in advance how much is the value of the

property at the time of loss. Insured only prove that loss was due to peril

insured against.

c. Running Policy also known as successive insurance, it is used to

cover the contents of a store which periodically change, so that the

policy continues to cover the replacements of the stock in store as the

same are sold.

Third Party Liability

- No car may be registered or its registration renewed without a

certificate of cover showing TPL insurance (Secs. 373 to 389). TPL

is the only compulsory insurance coverage under the insurance

code.

*Insurers liability under TPL accrues immediately upon occurrence of

injury or event upon which the liability depends, and does not depend on

the recovery of judgment by the injured party against the insured.

no fault clause when in a motor accident the following circumstances

are present:

Claim for physical injuries

Does not exceed Php 5,000.00

There is a police report

There is a medical certificate

*Insurer must pay as there is no defense, even if insured was negligent.

Marine Insurance

- By definition, the term marine insurance includes vessels, crafts,

cargo, profits, papers, bottomry, respondentice all exposed to

perils of the sea, transit or while awaiting or transhipment including

war risk, marine builders risk and floaters risk.

CORPORATION LAW

A corporation is an artificial being created by operation of law having

the right of succession, and the powers, attributes and properties

expressly authorized by law or incidental to its existence.

Four Attributes of a Corporation:

1. An artificial being. (Capacity to contract and transact business)

2. Created by operation of law (Creature of the Law)

3. With right of succession (Strong juridical personality)

4. Has powers, attributes and properties expressly authorized by law or

incident to its existence (A creature of limited powers)

Theories on Corporate Existence and Powers:

a) Theory of Concession

- A corporation will have no rights and privileges of a higher priority

than that of its creator and cannot legitimately refuse to yield

obedience to acts of its state organs (Tayag vs. Benguet

Consolidated Inc.).

b) Theory of Corporate Business Enterprise or Economic Unit

- Under this theory the Supreme Court has upon a corporation not

merely as an artificial being, but more as an aggregation of persons

doing business, or an underlying economic unit called the business

enterprise.

*This is the underlying theory of many of the cases where the Supreme

Court applies the doctrine of piercing the veil of corporate fiction, the de

facto corporation and corporation by estoppel doctrines.

*Private Corporations cannot be created by specific legislative acts.

1. Separate Juridical Personality

- Piercing the veil of corporate fiction

Grounds:

a) To defeat public convenience

b) To defend crime, protect fraud, justify wrong

c) Alter ego doctrine

2. Fiduciary Duties of Directors and Officers

1. obedience ultra vires doctrine

2. diligence best business judgment rule

as long as the directors have acted with good faith and without

malice then no matter how disastrous directors cannot be held personally

liable.

3. loyalty Doctrine of Corporate Opportunity

Loyalty

- Director/stockholder cannot infringe upon the same business as the

corporation

- If found to be violating the Doctrine of corporate opportunity guilty

party must account for the profits and will be liable for damages.

Authorized Capital Stock 100

Subscribed 25

Paid up 25

Pre-emptive Rights

Corporate officers are not

personally liable for corporate acts.

Exceptions:

1. Ultra Vires Acts acts beyond the

scope of powers and functions.

May bind the corporation if:

There is estoppel

If there is ratification

(Acceptance of benefits)

2. JSS

3. Criminal and tortious acts

Mnemonics

dive-due

When not available:

1. May be provided in the articles of incorporation

2. if issuance was in consideration of past services

3. if shares are issued in exchange for property

Right of First Refusal

- may be provided in the articles of incorporation

or stockholders agreement cannot be in by-laws

- shares must first be offered to existing stockholders, if more than

one agrees to purchase it is to be allocated pro-rata. If no takers

then it may be sold to outsiders

- if in a closed corporation the right of first refusal is mandatory! (even

if not provided in the articles of incorporation/stockholders

agreement)

- if subsequently there is a reduction in the selling price it must be

reoffered to existing stockholders before it may be offered to

outsiders.

No impairment of this is allowed.

Trust Fund Doctrine

- Watered Stock Shares of stock issued not corresponding to the

capital stock of the corporation

- Appraisal rights of minority stockholders

In case of fundamental changes in capital structure:

extending/shortening of corporate life, merger/consolidation, investment in

another line of business, declaring stock dividends, increasing capital

stock.

- Treasury Shares outstanding shares of stock that have been

reacquired by the corporation

Requires 2/3 approval of

stockholders.

must have unrestricted retained earnings in order to push

through with purchase

capital of corporation cannot be used to acquire outstanding

shares as it will impair the trust find doctrine.

Section 80 Merger and Consolidation

*There is a transfer of assets between the absorbed corporation

and the surviving corporation.

*A member of the board of directors may be replaced even if there

is no stockholders meeting by the vote of the board of directors the latter

can elect a new member for any vacancy in the board.

Also it is required that the present board must constitute a

quorum.

Cumulative Voting

- a minority board of director who was elected through cumulative

voting may not be removed in a stockholders meeting except for

cause.

*Powers and Functions of the corporation are exercised by the

board of directors.

Cumulative Suit need not include all stockholders; they are not

indispensable party.

plaintiff is a corporation represented by a stockholder

(even if minority stockholder)

Requisites:

must be a stockholder at the time of questioned transaction

exhaustion of intra-corporate remedy

damages are recoverable for the corporation

*To determine control of a corporation the basis must be the

Before it can be exercised the

corporation must have

unrestricted retained earnings.

common shares.

[Gamboa Case]

common shares must be held by 60% Filipino stockholders

*Test for necessity of establishment of GOCC

Test of public welfare

Test of economic viability

*A corporation is entitled to moral damages for besmirched reputation and

damage to goodwill (generally)

Foreign Investments Act

Sale of all/substantially of assets correlate to Bulk Sales Law

Public corporations

Mining companies cannot operate as a close

corporation

Public utilities (not more than 20

stockholders)

Educational institution

Stock exchanges

Banks

Self-dealing director (Sec. 32)

- If a director enters into a contract with the corporation and there is a

need for it be voted upon by the board, the self-dealing directors

vote cannot be counted, if by his exclusion quorum cannot be had, it

may be presented to the stockholders 2/3 vote.

Interlocking Director (Sec. 33)

- If a director owns part of another company in which he is also a

director in case of transactions between the corporations, the

interlocking director is excluded from the vote of the board of

directors (same rule as self-dealing directors)

*Close corporations corporations that do not have more than 20

stockholders.

Right of First Refusal mandatory

To lessen opportunity of graft.

Pre-emptive Right

- Increase in capital stock

- Opening for subscription the unissued portion of existing capital

stock

- Disposition of treasury shares

Four Basic Advantages of Corporate Organizations

a) Strong juridical personality

b) Limited liability

c) Centralized management

d) Free transferability of units of ownership

*A corporation shall exist for a period not exceeding 50 years from the

date of incorporation unless sooner dissolved or unless said period is

extended.

Considered as incorporated upon issuance by the SEC of a

certificate of incorporation.

Can be extended but must follow below rules

Extension of corporate life cannot be made earlier than

5 years before the end of its original term.

There must be an amendment of the articles of

incorporation, such amendemtn requires the 2/3 votes of the outstanding

capital stocks.

Incorporators at least 5 but not more than 15 NATURAL PERSONS,

who must own at least one share of stock in a stock corporation

majority of whom are residents of the Philippines.

*Capital refers to the value of the property or assets of a corporation.

Minimum Capital Stock Required of Stock Corporations:

At least 25% of the total authorized capital stock must be subscribed;

then 25% of the total subscribed stock must be paid up. Paid up

capital shouls not be less than P5,000.00.

Doctrine of Centralized Management

*All corporate powers and prerogatives are vested in the board of

directors

a) The resolution, contracts and transactions of the board, cannot

be overturned or set aside by the stockholders or members and

not even by the courts under the principle that the business of

the corporation has been left to the hands of the board.

b) Directors and duly auhtorized officers cannot be held personally

liable for acts or contracts done with the exercise of their

business judgment.

Exception:

When the Corporation Code expressly provides otherwise;

When the directors or officers acted with fraud, gorss

negligence or in bad faith;

When the directors or officers acted aginst the corporation in

a conflict of interest situation.

In case of mismanagement or abuse of powers, the remedies are:

a) Receivership

b) Injunction if the act has not yet been done

c) Dissolution if abuse amounts to a ground for quo warranto but the

Solicitor General refuses to act.

Corporate Officers

Immediately after their election, the directors of a corporation must

formally organize by the lection of:

a) President who shall be a director.

b) Treasurer who may or may not be a director.

c) Secretary must be a resident and Filipino citizen.

d) Such other officers as may be provided for in the By-Laws.

*Any two or more positions may be held concurrently by the same person

except that no one shall act as President and Secretary or as President

and

Treasurer at the same time Corporate officers are elected by a

majority

of all members of the board.

Types of Ultra Vires Act

1. Those which are outside of the express, implied, or incidental powers of

the corporation.

2. Those which are effected by corporate representatives who act without

authority (even if contract is within the express/implied/incidental

powers of the corporation they represent)

3. Those which are contrary to laws or public policy.

Ultra vires acts performed by the corporation in excess of its corporate

powers are ultra vires and are generally binding on the corporation.

1. What is a corporation?

- A corporation is an artificial being created by operation of law, having

the right of succession, and the powers, attributes and properties

expressly authorized by law or incident to its existence.

2. Separate Corporate Juridical Personality

- A corporation has a personality that is separate and distinct from its

individual stockholders or members. Being an officer or stockholder

of a corporation does not make ones property also that of the

corporation and vice versa. This separate and distinct personality is,

however, merely a function in law for conveyance and to promote

the ends of justice.

3. What is the Ultra Vires doctrine?

- This is the doctrine which provides that an act performed by the

corporation which is in excess of its corporate powers are ultra vires,

which are generally not binding on the corporation.

4. What is pre-emptive right?

- A preemptive right is the shareholders right to subscribe to all

issues or disposition of shares of any class in proportion to his

present stockholdings, the purpose bein to enable the shareholder

to retain his proportinate control in the corporation and to retain his

equity in the retained earnings, and also in the net assets in the

event of dissolution.

5. Appraisal Right

- An appraisal right may be exercised by minority stockholders or

stockholders who dissented from the following transactions:

1. Extend or shorten corporate term;

2. Restriction of rights and privileges of shares through the

amendment of the articles of incorporation;

3. Sale of all or substantially of all corporate assets

4. Equity investment in non-primary purpose business enterprise

5. Merger or consolidation

Derivative Suit Requirements:

- That the person filing the derivative suit was a stockholder or

member at the time the acts or transactions subject to the action

occurred and at the time the action was filed.

- That he has exerted all efforts to exhaust all remedies available

under the articles of incorporation, by-laws, etc.

- No appraisal rights are available for the acts or acts complained of;

and

- The suit is not nuisance or harassment suit.

Proxies

- Are grants of authority by a stockholder to another stockholder to

allowa the latter to vote in all meetings of stockholders. It is generally

good only for one meeting but by express stipulation it is possible to

extend it for several meetings provided it not longer than 5 years.

Warehouse Receipts Act

Warehouseman one who receives and stores goods of another for

compensation

*Even if the deposits were made free does not detract from the

applicability of the law.

Nature and Functions of Warehouse Receipts

- It is a document of title and has the following functions:

1. Proof of the possession or control of the goods described

therein;

2. Authorizing or purporting to authorize the possession of the

warehouse receipt to transfer or receive either by indorsement or

by delivery, of the goods represented by such receipt.

Warehouse Lien:

General Rule: By issuing the receipt the warehouseman is estopped from

setting up any title or right to the possesion of the goods except when it

pertains to the enforcement of his lien.

However: the warehouseman has a lien on goods deposited on the

proceeds thereof in his hands for all lawful changes and fees.

Obligation of Warehouseman

- Under Sec. 8 of the Warehouse Receipts Act the warehouseman is

obliged to: deliver the goods upon demand by either the holder of

the receipt or by the depositor; when demand accompanied by:

a) An offer to satisfy warehousemans lien;

b) An offer to surrender the duly endorsed negotiable receipt

c) A readiness to sign an acknowledgment of delivery, when such is

requested by the warehouseman.

TRANSPORTATION LAW

Common Carriers

- A person, corporation, firm or association engaged in the business

of conveying or transporting passengers or goods or both, by land,

water or air for compensation offering their services to the public.

Arrastre

- It is the handling of cargo departed on the wharf or between the

establishment of the consignee or shipper and the ships tackle. It

has technical meaning and mainly refers to overseas trade.

Common Carrier

- Open to the public

- For compensation

Contract of Carriage

- Fiduciary duty of diligence for the safety of the passenger or cargo

- In case of injury or damage there is presumptive proof of negligence

which can be overturned by proof of the exercise of extraordinary

diligence by the common carrier.

- A commercial contract

Cargo bill of lading

Passenger ticket

Liability of Carriers

- Extraordinary diligence

- If baggage is entrusted to passenger or the agent of the passenger

then liability shall be that of an innkeeper.

Injuries caused by a passenger

Injuries caused by employees of common carrier

Injuries caused by a third party

Causes of Action Arising out of a Negligent Act:

- Culpa contractual it is the cause of action for the breach of the

carrier of the contract of carriage: the obligation of the carrier to

convey passengers safely to the point of destination.

- Culpa aquiliana it is the cause of action for the damage caused by

the carriers negligent acts.

- Culpa criminal it is the cause of action that arise upon the

commission of a crime by the carrier.

Two (2) Aspects of a Contract of Carriage

a) Contract to carry contract to carry at some future time.

b) Contract of carriage actual carriage is required.

Contract of carriage ends:

- The pasenger has been landed at the port of destination and has left

the owners dock or premises, the reasonable time is to be

determined from the circumstances. (Aboitiz Shipping vs. Court of

Appeals)

*The common carrier is obliged to carry the passengers safely as far

as human care and foresight could provide, using the utmost diligence of

a very cautious person, with due regard for all the circumstances (Art.

1755, Civil Code).

Maritime Transportation if no claim is filed then action

cannot proper

*Damage is apparent claim must be made upon arrival

*Damage is not apparent claim must be made within 24 hours

Prescription Period

- If under a bill of lading 10 years

- If under an oral contract

COGSA (Carriage of Goods by Sea Act)

- Prescriptive Perios is 1 year prospective

Arrival of lost cargo claim will prosper even if claim is not file ASAP

Need to be filed within 1 year!

*Liability of owner is limited to value of vessel or proceeds of insurance.

Real and Hypothecary Nature of Liability of Shipowner

Exceptions: Where the vessel is insured in Workmens Compensation

claims where injury was due to negligence of shipowner or master and

shipowner concurrently.

*New Ruling

- The negligence of the ship captain is the negligence of the

shipowner liable for all damages arising out of the tortious acts of

employee.

Warsaw Convention

*Maximum liability is 500 USD with maximum number of 4

baggage.

*Unless a higher valuation is declared and the appropriate fees are

paid.

*This is not a limitation in liability if the actions are based on tortious

actions; damages are also proper.

Constructive Total Loss

- Subject to abandonment of vessel by shipowner and insurer must

pay the full amount of insurance.

Warranties of

- Vessel of shipowner

- Voyage shall not ndeviate except on conditions allowed by law

- Warranty of neutrality

- Possession of necessary documents

- Presence of insurable interest

Charter Party

Contract of Affreightment

- Shipowner remains liable as common carrier.

Demise Charter/ Bareboat Charter

- Charterer is considered as owner pro hac vice and can be held liable

for negligence

- Owner hands exclusively command over vessel over to the

charterer.

*Leading Case

188 SCRA 387 (1990) [Aboitiz Case]

GR 156798 May 2, 2006 [Aboitiz vs. Gen. India]

Limited liability cannot be applied where shipowner is presumed

negligent.

Insurable Interest in Non-Life Insurance

- Insurable interest must exist in theb same person both at the

perfection of the contract as well as at the time of loss. In betwee,

the effect of insurable interest loss is merely to suspend the policy

(Sec.19)

- Contingent interest without any existing interest is not insurable

interest (Sec.16)

*Creditor has an insurable interest on the life of the debtor.

*Creditor must have an existing interest over property sought to be

insured to be considered to have insurable interest.

Mortgagor and mortgagee have separate and distinct insurable

interests in the same mortgaged property, such that each one of them

may insure the property for his own benefit. In case of loss of

insured mortgaged property there will be legal subrogation.

Wherein the insurer will become the new creditor of mortgagor.

Exceptions to requiremtn of insurable interest:

a) Insuring two different properties in one policy

b) Succession (testate or intestate)

c) Co-owners of insured property

*When there is partial loss, and there is under insurance, under Standard

Policy Stipulation there will be co-insurance this must be

expressly stipulated if not insurer is liable for full amount of loss.

Subrogation substitution of one person in the place of another with

reference to a lawful claim or right so that he who is substituted succeeds

to the rights of the other in relation to adebt or claim including its remedies

or securities.

contemplates full substitution such that it places the party

subrogated in the shoes of the creditor.

Compulsory Motor Car Insurance (TPL)

- The only mandatory insurance coverage under the insurance code.

Marine Insurance

Main Warranty: Seaworthiness fit to perform service, properly laden,

properly equipped and

properly manned.

Warranties in Marine Insurance

- Defined as a stipulation, either expressed or implied, forming part of

the policy as to some fact, condition or circumstance relating to risk.

Insurable Interest in Marine Insurance

a) Shipowner on the vessel eventhough the latter is under a charter party

b) Charterer

c) If there is concurrence of bottomry loan and insurance covers excess of

the value of the vessel over the bottomry loan.

d) Freightage

e) Profits

*All Risk Marine Insurance

- an all risk marine insurance policy covers all kinds of loss other than

those due to the willfull and fraudulent act of the insured.

Co-insurance in Marine Insurance

Insured shall bear part of the loss when property is insured for less than

the value it really has.

When there is partial loss, there will always be co-insurance even if there

is full coverage.

When there is partial loss, under Standard Policy Stipulation, and there

was under insurance.

Deviation unjustified deviation will bar recovery in a marine policy

1. Caused by circumstances beyond the control of vessel

2. To comply with a warranty

3. In good faith to avoid a peril

4. In good faith to save a human life or another vessel

Concealment when insured had knowledge of facts material to the risk,

and good faith and fair dealing require him to reveal them, and he

Deviation is proper

and may allow for

recovery

fails to do so.

Representation a statement incidental to the contract of insurance

relative

to some fact having reference thereto and upon the faith of which

the

contract is entered into.

Similarities of concealment and representation:

Both take place before the contract is entered into

Both give rise to the same remedy: discovery of the

concealment or misrepresentation before loss or death will

entitle the insurer to cancel the policy.

They apply to both life and non-life insurance.

Exceptions: If after 2 years from issuance of policy, the company fails to

discover concealment or misrepresentation, any discovery after the 2-year

period cannot be a ground for cancelling or refusing to pay.

[incontestability clause] 2 years from perfection

2

years from reinstallment

Losses

1. Actual Loss

2. Constructive Total Loss when insured exercises the right of

abandonment when a property suffers a damage from a marine peril of

at least .

3. Partial Loss carries with it co-insurance; owner shall bear part of the

loss.

Over insurance when insured insures the same property for an amount

greater than the value of the property with the same insurance company.

*In case of loss, insurer is bound to pay only to the extent of the property

lost. The insured may recover the amount of premium corresponding to

the excess in value of the property.

Double Insurance where ther is over insurance with two or more

companies covering the same property, same insurable interest and same

risk.

Effects of Double Insurance:

1. Insured can recover, before or after loss, from both insurers the excess

premium he has paid.

2. In case of loss insurers are liable severally to the extent of their

coverage. The insured can recover from any of them or all of them to

the extent of his loss.

GENERAL BANKING LAW RA 8791

- Universal Banks

- Commercial Banks

- Thrift Banks

Savings and Mortgage Bank

Stock Savings and Loans Associations

Privatev Development Bank

- Rural Banks

- Cooperative Banks

- Islamic Banks

Banks

- An entity engaged in the lending of funds obtained in the form of

deposit.

It has the following qualities:

1. It is impressed with public interest;

2. Its fiduciary obligation, binds it to the highest degree of diligence;

3. GFIs are covered by the highest degree of fiduciary obligations;

4. Highest degree of diligence does not cover transactions outside

bank deposits

Bulk Sales Law

- Primary objective of BSL is to compel the seller in bulk execute and

deliver a verified list of his creditors to his buyer, and notice of the

intended sale to be sent in advance to his creditors.

Transactions covered:

1. Any sale, transfer, mortgage or assignments of:

a) A stock of goods, wares, merchandise, provisions or

materials otherwise than in the normal or ordinary course of

trade and regular prosecution of business of seller, mortgagor,

transferor or assignor;

b) All or substantially all of business or trade therefor conducted

by the seller, mortgagor, transferor or assignor;

c) All or substantially or of fixtures and equipment used in and

about business of seller, mortgagor, transferor or assignor.

* * *