mercantile law} review notes of prof domondon } made 2001} 80 pages

8/12/2019 Mercantile Law} Review Notes of Prof Domondon } Made 2001} 80 Pages

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2001 PRE-WEEK REVIEW NOTES

ERCANTILE LAW1By

Abelardo T. Domondon2

HOW TO USE THESE NOTES:

These notes n the !orm o! te"t#al materals and re$resentat%e re%e&

'#estons &ere s$e(ally $re$ared by Pro!. Domondon !or the e"(l#s%e #seo! st#dents &ho attended the le(t#res he (ond#(ted !rom 2)-2* A#+#st 2)),s$onsored by PRIMUS ana+ement nlmted Ser%(es/ In(./ held at theAsan So(al Instt#te/ In(. Other re%e&ees he has $ersonally a#thor0edmay also #se these Notes. Reviewees attending the 2002 Ateneo BaReview ae a!thoi"ed to !se these Notes#

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

'#estons are re$resentat%e o! $robable '#estons that may be as3ed n the2)), Bar E"amnatons n er(antle 4a&. There s an e"$anded treatmento! the $ro%sons o! the Se(#rtes Re+#laton ode 5R.A. No. 67889 &h(hshall be re!erred to as SR/ and the Im$lementn+ R#les and Re+#latons o!the Se(#rtes Re+#laton ode to be re!erred to as SR R#les. Ths s so

be(a#se the $#blshed re%e& materals ha%e not yet n(l#ded ths s#b:e(t.The a#thor bele%es that there &o#ld only be t&o bas( '#estons as3ed #nderthe SR and the SR R#les.

It s re(ommended that the reader sho#ld (o%er the s#++ested ans&ers

&hle readn+ the '#estons. Ths &o#ld !or(e hm or her to re(all thea$$l(able la& and :#rs$r#den(e. I! reader has tme/ the ans&ers sho#ld be&rtten on a +rade s(hool noteboo3 #sn+ the s+n $en ntended to be #sedd#rn+ the a(t#al e"amnatons. Ea(h '#eston sho#ld be ans&ered only&thn a s$an o! nne 589 mn#tes. A!ter&ards/ (he(3 yo#r ans&ers re!errn+to the s#++ested ans&ers.

DO NOT EORI;E the s#++ested ans&ers. They &ere $#r$oselymade to be len+thy to ser%e as e"$lanatory de%(es. Ths s so be(a#se yo#do not ha%e tme anymore to re!er ba(3 to yo#r re%e& materals. Ta3e tme

to read the notes and (omments as '#estons may be dra&n !rom these areasnstead o! !rom the '#estons sho&n on these notes. I! yo# stll (o#ld not

,S"th Edton/ o$yr+ht 2)), by Abelardo T. Domondon.2 AB 5E(o9/ BS 5A((t+9/ 44B/ A 5E(o9/ 44/ D4 5and9. 4a&yer/ PA and #stoms

Bro3er. Pre-Bar Re%e&er n er(antle 4a&/ Remedal 4a&/ Ta"aton/ 4abor < So(al 4e+slaton and4e+al Eth(s < Pra(t(al E"er(ses.


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

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

I! $ressed !or tme the reader sho#ld read only those &h(h are mar3ed&th tr$le asters3s ===/ b#t be s#re to read and ans&er all the '#estons.

WARNIN$:These materals are (o$yr+hted and no $art may be re$rod#(ed n any

!orm or any means/ ele(tron( or me(han(al/ n(l#dn+ $hoto(o$yn+ &tho#tthe &rtten $ermsson o! the a#thor. These materals are a#thor0ed !or there$rod#(ton and #se only o! bar (anddates &ho ha%e attended the le(t#res(ond#(ted by Pro!. Domondon !or PRIMUS ana+ement nlmted

Ser%(es/ In(./ and re%e&ees he has $ersonally a#thor0ed. na#thor0ed#sers shall not be $rose(#ted b#t SHA%% BE SUB&E'T TO THE %AWO( KARMASU'H THAT THE) WI%% NE*ER PASS THE BAR !orstealn+ the ntelle(t#al $ro$erty o! the a#thor.

Only (o$es &th the man#al s+nat#re o! Pro!. Domondon/ or hsa#thor0ed re$resentat%e on ths $a+e/ are (onsdered a#thor0ed (o$es.Ho+des o, a!thoi"ed -o.ies ae e/!ested not to +end thei -o.ies ,oeoing#

1 'O3E O( 'OMMER'E

a Me-hants and 'o44e-ia+ Tansa-tions # Ati-+es 1 to 56#

1# What is 4eant 78 the theo8 o, 4ani,estation 9S>>ESTED ANSWER? A theory n the $er!e(ton o! (ontra(ts &h(h

re(o+n0es that the (ontra(t s $er!e(ted at the tme &hen the a((e$tan(e s made by theo!!eree.

2# Mig!e+ is a7ove twent8one 8eas o, age; not s!7>ESTED ANSWERS? 5a9 +#el s not a mer(hant. Altho#+h he has le+al

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

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

2


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6# Pocholo, of legal age and otherwise qualified to engage in business seeksyour advice on the books he should keep should he decide to engage in business. (a!hat books should he keep and what should these books contain " (b #upposingthat Pocholo, together with others decide to for$ a corporation which will engage inbusiness. !hat books should the corporation keep and $aintain "

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

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

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

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

boo3s as des(rbed abo%e. In addton the (or$oraton s re'#red to 3ee$

,9 a boo3 or boo3s o! mn#tes/ n &h(h shall be entered all resol#tonsre!errn+ to the $ro+ress and o$eratons o! the entty/ a$$ro%ed at +eneral meetn+sor at least o! the board o! dre(tors 5Art. **/ ode o! ommer(e9.It s also re'#red to 3ee$

29 a boo3 o! all meetn+s/ as &ell as*9 a sto(3 and trans!er boo3. 5Se(. 7C/ or$oraton ode9.

7 %ettes o, 'edit !nde the 'ode o, 'o44e-e Ati-+es =5>to =>2; in-+!sive

?# !hat are the three distinct and independent contracts in a letter of credit "

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

to the terms and (ondtons stated theren. 5Ken+ #a Pa$er Prod#(ts o./ In(. %. o#rto! A$$eals/ et al./ 26 SRA 2@79

NOTES AND OENTS?a. %ia7i+it8 o, a -on,i4ing 7an@ disting!ished ,o4 a noti,8ing 7an@# A

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

i B!+@ Sa+es %aw A-t 6=2

=# %&' is the sole proprietor of a store engaged in the business of tradingauto spare parts, both wholesale and retail. #cared by what he perceived as thepolitical and econo$ic instability besetting country, he decided to e$igrate to anadawith his entire fa$ily. )e liquidated all his assets including his auto spare partsbusiness %lock stock and barrel' to his co$padre for *#+,-,. which heplanned to reinvest in anada. /s he covered by the provisions of the 0ulk #ales1aw " /n the affir$ative, what $ust be done by the parties so as to co$ply with thelaw "

S>>ESTED ANSWER? Fes. A sales s (onsdered as a sales n b#l3 #nder theB#l3 Sales A(t ! t s a?

a. Sale/ trans!er/ or ds$oston s other than n the ordnary (o#rse o! b#snessb. Sale o! all or s#bstantally all o! the b#sness and(. Sale o! all or s#bstantally all o! the !"t#res and e'#$ments.Sn(e the sale s (o%ered by the B#l3 Sales 4a&/ he m#st (om$ly &th the

!ollo&n+ re'#rements n order to ma3e the sale %ald?

*


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a. Seller1s a!!da%t lstn+ all the names o! the (redtors/ the nat#re and amo#nt o!(redts d#e them

b. Seller $re$ares an n%entory o! the sto(3s to be sold and n!orms all the(redtors ten 5,)9 days be!ore the sale or the $ro:e(ted sale n b#l3 and

(. Nos. a < b are re+stered &th the B#rea# o! Domest( Trade.NOTES AND OENTS? a. When a sa+e IS NOT -onsideed 7!+@ sa+e !nde the B!+@ Sa+es %aw:

,9 When the sale/ trans!er or ds$oston s n the ordnary (o#rseo! b#sness

29 When there s a &a%er o! the $ro%sons o! the B#l3 Sales 4a&o! all the (redtors

*9 When the sale/ trans!er or ds$oston s by %rt#e o! a :#d(alorder.

b. P!.ose o, B!+@ Sa+es %aw# To $re%ent se(ret or !ra#d#lent sale o! theb#sness/ &h(h (o#ld lead to ts (los#re/ to the detrment o! the (redtors.

(. E,,e-ts o, ,ai+!e to o7seve the e/!ie4ents:,9 The sale s n#ll and %od

29 The $#r(haser holds the $ro$erty he bo#+ht n tr#st !or theseller

*9 The $#r(haser s lable to the seller1s (redtors !or $ro$ertes hebo#+ht and already ds$osed o! by hm and

C9 The $#r(haser has the r+ht to demand !rom the seller the ret#rno! the $#r(hase $r(e $l#s dama+es.

5# The shares of stock of Aldrin, /nc., engaged in the wholesale of paperproducts, is owned 2 by 3ustin. )e decided to sell all of his shares of stock to3a$es and 3ero$e. /s this a sale in bulk sub4ect to the 0ulk #ales Act " 56plainbriefly.

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

ii The Waeho!se Re-ei.ts %aw A-t 216> in e+ation to the$enea+ Bonded Waeho!se A-t; A-t 6C6

># &78 !arehouse, /nc. issued five (- warehouse receipts (quedans for sugarto Mia 9herese Merchandising. which were substantially in the for$ and contains theter$s prescribed for negotiable warehouse receipts by #ection : of Act ;o. :


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NOTES AND OENTS?a. Waeho!se e-ei.t; de,ined# A &areho#se re(e$t s a &rtten

a(3no&led+ment by the &areho#seman that he has re(e%ed +oods !rom the de$ostor andholds the same n tr#st !or hm.

===b. Nonnegotia7+e waeho!se e-ei.t# de,ined# A re(e$t n &h(h t s statedthat the +oods re(e%ed &ll be del%ered to the de$ostor or to any other s$e(!ed $erson.5Se(. C/ The Wareho#se Re(e$ts 4a&.9

A non-ne+otable re(e$t shall ha%e $lanly $la(ed #$on ts !a(e by the ss#n+&areho#seman/ non-ne+otableJ or not ne+otable.J

$on !al#re to do so/ a holder &ho $#r(hased t !or %al#e s#$$osn+ t to bene+otable/ may/ at hs o$ton treat s#(h re(e$t as m$osn+ #$on the &areho#seman thesame labltes he &o#ld ha%e n(#rred had the re(e$t been ne+otable. 5Se(. 7/ TheWareho#se Re(e$ts 4a&.9

(. Negotia7+e waeho!se e-ei.t; de,ined# A re(e$t n &h(h t s stated that the+oods re(e%ed &ll be del%ered to the bearer or to the order o! any $erson named n s#(hre(e$t. 5Se(. @/ The Wareho#se Re(e$ts 4a&9

C# Patrick deposited with !arehouse o$pany for safekeeping ,bags of ce$ent. !arehouse o$pany issued a receipt e6pressly providing that thegoods be delivered to the order of said Patrick.

A $onth after, Paolo, one of Patrick>s creditors obtained 4udg$ent againstPatrick for P-,.. Acting upon a writ of e6ecution the sheriff proceeded to levyon the ce$ent and directed !arehouse o$pany to deliver to hi$ the depositedce$ent.

a. !hat advice will you give !arehouse o$pany " 56plain your answerbriefly.

b. Assu$ing that a week prior to the levy, Patrick sold the receipt to Robertoon the basis of which, Roberto filed a clai$ with the sheriff. !ould Roberto, the

buyer of the receipt, have better rights to the ce$ent than Paolo, the creditor "56plain your answers briefly.

S>>ESTED ANSWERS?a. I &o#ld ad%(e the Wareho#se om$any not to del%er the +oods to the sher!!/

other&se t may be held lable !or (on%erson. It sho#ld del%er only to Patr(3/ the$erson &ho de$osted the +oods and #$on $resentaton o! the &areho#se re(e$t.

b. Fes/ be(a#se Roberto &o#ld be a $erson &ho has ste$$ed nto the shoes o!Patr(3 &ho made the de$ost. NOTES AND OENTS?

=== a. Instan-es whee waeho!se4en 7o!nd o o7+igated to de+ive# A&areho#seman/ n the absen(e o! some la&!#l e"(#se $ro%ded by A(t No. 2,*7/ TheWareho#se Re(e$ts 4a&/ s bo#nd to del%er the +oods #$on a demand made ether bythe holder o! a re(e$t !or the +oods or by the de$ostor ! s#(h demand s a((om$aned&th?

,9 An o!!er to sats!y &areho#seman1s len29 An o!!er to s#rrender the re(e$t/ ! ne+otable/ &th s#(h

ndorsements as &o#ld be ne(essary !or the ne+otaton o! the re(e$t and*9 A readness and &lln+ness to s+n/ &hen the +oods are

del%ered/ an a(3no&led+ment that they ha%e been del%ered/ ! s#(hs+nat#re s re'#ested by the &areho#seman.

In (ase the &areho#seman re!#ses or !als to del%er the +oods n (om$lan(e &tha demand by the holder or de$ostor so a((om$aned/ the b#rden shall be #$on the&areho#seman to establsh the e"sten(e o! a la&!#l e"(#se !or s#(h re!#sal. 5Se(. 6/

WR49I, the a7ove ae not .esent ; then the waeho!se -o!+d +ega++8 e,!se to 4a@e

de+ive8# These ae the de,enses a waeho!se4an -o!+d !se to

=== b. &!sti,i-ation o, waeho!se4an in 4a@ing de+ive8# A &areho#seman s:#st!ed n del%ern+ the +oods to one &ho s?

@


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,9 The $erson la&!#lly enttled to the $ossesson o! the +oods/ orhs a+ent

29 A $erson &ho s ether hmsel! enttled to del%ery by the termso! the non-ne+otable re(e$t ss#ed !or the +oods/ or &ho has &rttena#thorty !rom the $erson so enttled ether ndorsed #$on the re(e$t or&rtten #$on another $a$er or

*9 A $erson n $ossesson o! a ne+otable re(e$t by the terms o!&h(h the +oods are del%erable to hm or order/ or to the bearer/ or &h(hhas been ndorsed to hm or n blan3 by the $erson to &hom del%ery &as$romsed by the terms o! the re(e$t or by hs medate or mmedatendorser. 5Se(. 8/ WR49

These 4a8 7e !sed 78 the waeho!se4an to de,end hi4se+, WH) HE3E%I*ERE3#

(. Waeho!se +ia7+e ,o -onvesion I! he del%ers &tho#t a %aldndorsement the +oods (o%ered by a ne+otable &areho#se re(e$t del%erable to thede$ostor or hs order.

d. Instan-es whee +ia7+e ,o -onvesion even with indose4ent o

a!thoit8: The &areho#seman s also lable e%en &th ndorsement or &th a#thorty / hes l3e&se lable/ ! $ror to del%ery he had ether?

,9 been re'#ested/ by or on behal! o! the $erson la&!#lly enttled toa r+ht o! $ro$erty or $ossesson n the +oods/ not to ma3e s#(h del%eryor

29 ad n!ormaton that the del%ery abo#t to be made &as to onenot la&!#lly enttled to the $ossesson o! the +oods. 5Se(. ,)/ WR49

iii Pesidentia+ 3e-ee 11= on T!st Re-ei.ts

# )er$inio opened a letter of credit with the 0ank of Philippine /slands

for the i$portation of certain equip$ent. )e failed to pay and also failed to deliverthe equip$ent despite de$and. )e now assails the constitutionality of P.?. ;o. -,the 9rust Receipts 1aw on the ground that it constitutions i$prison$ent for non@pay$ent of a debt. Rule on his contention.

S>>ESTED ANSWER? ontenton s bere!t o! mert. P.D. No. ,,@/ s ade(laraton by the le+slat%e a#thorty to ma3e the a(t $#nshable #nder ts a#thorty to$res(rbe (ertan a(ts as $ern(o#s and nm(al to $#bl( &el!are #nder the e"er(se o!$ol(e $o&er. 5Tom(o %. o#rt o! A$$eals/ et al./ >.R. No. ,22@*8/ $rom. ar(h C/,8889

NOTES AND OENTS?a. T!st e-ei.t; de,ined# A tr#st re(e$t s (onsdered as a se(#rty transa(ton

ntended to ad n !nan(n+ m$orters and retal dealers &ho do not ha%e s#!!(ent !#ndsor reso#r(es to !nan(e the m$ortaton or $#r(hase o! mer(handse &ho may not be ableto a('#re (redt e"(e$t thro#+h #tl0aton/ as (ollateral/ o! the mer(handse m$orted or$#r(hased. The +oods are held as se(#rty by the lendn+ nstt#ton !or the loanobl+aton.

A letter o! (redt-tr#st re(e$t arran+ement s endo&ed &th ts o&n dstn(t%e!eat#res and (hara(terst(s.. nder that set-#$/ a ban3 e"tends a loan (o%ered by theletter o! (redt/ &th the tr#st re(e$t as a se(#rty !or the loan. In other &ords/ thetransa(ton n%ol%es a loan !eat#re re$resented by the letter o! (redt/ and a se(#rty!eat#re &h(h s n the (o%ern+ tr#st re(e$t. 5Na(# %s. o#rt o! A$$eals/ et al./ >.R.,)6*6/ $rom. ar(h ,,/ ,88C9

#rther/ a tr#st re(e$t s a do(#ment n &h(h s e"$ressed a se(#rty transa(ton

&here#nder the lender/ ha%n+ no $ror ttle to the +oods on &h(h the loan s to be +%enand not ha%n+ $ossesson &h(h remans n the borro&er/ lends hs money to theborro&er on se(#rty o! the +oods &h(h the borro&er s $r%le+ed to sell (lear o! the len&th an a+reement to $ay all or $art o! the $ro(eeds o! the sale to the lender. It s ase(#rty a+reement $#rs#ant to &h(h a ban3 a('#res a se(#rty nterestJ n the +oods. Itse(#res an ndebtedness and there (an be no s#(h thn+ as se(#rty nterest that se(#res noobl+aton.


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learly/ a tr#st re(e$t $arta3es o! the nat#re o! a se(#rty transa(ton. It (o#ldne%er be a mere addtonal or sde do(#ment. Other&se/ a $arty to a tr#st re(e$ta+reement (o#ld easly rene+e on ts obl+aton there#nder/ #ndermnn+ the m$ortan(eand de!eatn+ &th m$#nty the $#r$ose o! s#(h an nds$ensable tool n (ommer(altransa(tons. 5hn+ %. o#rt o! A$$eals/ et al./ >.R. No. ,,)6CC/ $rom. A$rl 27/ 2)))9

b. *io+ation o, T!st Re-ei.ts %aw is -i4ina+ in -haa-te# Ret#rn o! the+oods ! #nsold merely e"tn+#shes the entr#stee1s (rmnal lablty. e s stll (%llylable !or the #n$ad loan. 5Vntola %. IBAA/ ,@8 SRA ,C)9

2 NE$OTIAB%E INSTRUMENTS %AW A-t No# 2061

10# !hat are the requisites of a negotiable instru$ent "S>>ESTED ANSWER? An nstr#ment to be ne+otable m#st (on!orm to the

!ollo&n+ re'#rements?a. It m#st be n &rtn+ and s+ned by the ma3er or dra&erb. It m#st (ontan an #n(ondtonal $romse or order to $ay a s#m (ertan n

money

(. It m#st be $ayable to order to bearerd. Where the nstr#ment s addressed to a dra&ee/ he m#st be named or other&se

nd(ated theren &th reasonable (ertanty. 5Se(. ,/ N.I.4.9NOTES AND OENTS? ANA%)TI'A% STEPS (OR SO%*IN$ PROB%EMS IN*O%*IN$

NE$OTIABI%IT) O( INSTRUMENTS# NOTE? This aea is one o, the 4ost.o.!+a aeas !nde Negotia7+e Inst!4ents %aw# The 7a -andidate sho!+d 4aste

the ana+8ti-a+ ste.s:a. %oo@ ,o theDATE:

,9 I! dated. The date s prima facie the tr#e date o! thenstr#ment. Ne+otablty s not a!!e(ted.

29 I! antedated o .ostdated. Ne+otabltynot a!!e(ted N4ESS ante-dated or $ost-dated !or !ra#d#lent$#r$ose.

*9 No date. Ne+otable (hara(ter not a!!e(ted. C9I! no date/ tr#e date may be nserted.

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

5,9 Wron+ date s nserted5a9 No e!!e(t on nstr#ment/ !! holder n d#e (o#rse

5b9 Instr#ment n%ald/ ! not

holder n d#e (o#rseb. %oo@ ,o SIGNATURE o! ma3er 5PN9 or dra&er 5BE9. ,9 I! no s+nat#re/ not ne+otable.

29 I! s+ned/ ne+otable.(. %oo@ ,o UNCONDITIONAL PROMISE PN or UNCONDITIONAL

ORDERBE# I! $resent/ ne+otable ,9 ondtonal and not ne+otable/ ! $romse or order

de$ends #$on?a9 A !#t#re e%ent &h(h may or may not ha$$enb9 A $ast e%ent #n3no&n to the $artes

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

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

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

7


8/76

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

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

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

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

9 ondtonal and not ne+otable be(a#se '#al!ed.E"am$le? I $romse to $ay B or order P,/)))/ ))).)) s#b:e(t tothe terms and (ondtons o! the ar(h ,7/ ,888 Deed o! Sale !orthe sale o! hs ho#se.

d. Is the s!4 CERTAIN IN MONEYL I! so/ ne+otable ,9 Not ne+otable/ ! not n money.

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

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

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

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

e. Is the inst!4ent .a8a7+e ON DEMAND o AT A I!ED ORDETERMINA"LE UTURE TIME L I! so/ ne+otable.

,9 I! not/ not ne+otable.

29 Not ne+otable/ ! $ayable on (ontn+en(y. a$$enn+o! the e%ent does not (#re the de!e(t. E"am$le? Pay to B or order P,))/))).))/ t&o 529 days

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

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

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

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

!. Is the inst!4ent .a8a7+e TO ORDERo "EARER LI! so/ then ne+otable. I! not/ not ne+otable.

+. I, the inst!4ent is addessed to a dawee; is hena4ed o othewise indi-ated on the inst!4ent with easona7+e -etaint8 9 I!so ne+otable. I! not/ not ne+otable.

SUMMAR) O( *ARIOUS SITUATIONS IN*O%*IN$ NE$OTIAB%E

INSTRUMENTS# Another area that the reader sho#ld master? SUMMAR) O( SITUATIONS

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

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

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

6


9/76

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

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

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

IN'OMP%ETE INSTRUMENT BUT 3E%I*ERE3#a. older hasprima faciea#thorty to !ll #$ blan3s

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

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

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

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

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

I%%USTRATI*E PROB%EMS: IN'OMP%ETE "UT 3E%I*ERE3INSTRUMENTS#

10A# Meg issued a negotiable pro$issory note to 1eon authoriing 1eon tofill up the a$ount in blank up to P,.. 1eon however, filled it up toP:-,..

ould 1eon collect P:-,. fro$ Meg "

S>>ESTED ANSWER? No/ be(a#se the nstr#ment &as not str(tly !lled #$ na((ordan(e &th the a#thorty +%en.

#upposing in the above proble$, 1eon negotiated the instru$ent to Mara whoknows that MegBs instructions was for 1eon to fill it up to P,. only. ouldMara collect P:-,. fro$ Meg "

S>>ESTED ANSWER? No/ be(a#se ara s not a holder n d#e (o#rse. She3ne& o! the nstr#mentMs n!rmty &hen the nstr#ment &as ne+otated to her. e+ (o#ldnter$ose the $ersonal de!ense o! &ant o! a#thorty.

#upposing further, in the above proble$, that Mara did not know of the lack ofauthority, $ay Mara collect the P:-,. fro$ Meg "

S>>ESTED ANSWER? Fes/ be(a#se ara s a holder n d#e (o#rse/ she notben+ a&are o! any n!rmty n the nstr#ment at the tme she too3 t. She may th#sen!or(e t as ! t had been !lled #$ str(tly n a((ordan(e &th the a#thorty +%en and&thn a reasonable tme. There s l3e&se (on(l#s%e $res#m$ton o! del%ery.

11# Ana a very busy businessperson does not have ti$e to sign checks one byone. #o, she signs several checks in blank and instructs 0eth, her personal assistant,to safekeep the checks and fill the$ out when and as required to pay her accounts asthey fall due. 0eth fills out one of the checks by placing her na$e as payee, fills in thea$ount of P-,., endorses and delivers the check to arlos who accepts it ingood faith as pay$ent for goods sold to 0eth. Ana learns of the dishonesty foistedupon her by 0eth. Ana was able to instruct the 0ank in ti$e to dishonor the check.!hen arlos encashes the check, it is dishonored.

an arlos hold Ana liable for the P-,. value of the check " 56plainbriefly.

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

8


10/76

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

IN'OMP%ETE INSTRUMENTNOT 3E%I*ERE3#a. om$leted and del%ered witha#thorty/ %ald.b. om$leted and del%ered witho!ta#thorty

,9 Vald a+anst $arty &hose s+nat#re &as $la(ed a,te del%ery l3endorser. Reason? Indorser &arrants the nstr#ment s n all res$e(t&hat t $#r$orts to be.

29 Not %ald a+anst $arty &hose s+nat#re &as $la(ed 7e,oe del%ery/ !not a holder n d#e (o#rse. Reason? Del%ery s essental to %aldty.o&e%er/ &th res$e(t to a holder n d#e (o#rse/ there sprima facie$res#m$ton o! del%ery &h(h may be reb#tted.

(. R#les a$$ly &hether,9 Promssory note or bll o! e"(han+e29 Payable to bearer or order

*9 Wth or &tho#t !or+ery and materal alteraton.

I%%USTRATI*E PROB%EMS: IN'OMP%ETE NOT 3E%I*ERE3INSTRUMENT#

12# Pocholo signed a blank check and kept it in his safe. 9his was stolen by5dwin who filled in the a$ount and placed a fictitious person as payee signed thena$e of the payee and indorsed the sa$e to Paolo, Paolo to Patrick, Patrick to #ally,#ally to 3eddah, 3eddah to Rhia. All of the subsequent indorsers as well as the holderwere all holders in due course.

May Rhia proceed against Pocholo in case of dishonor by the drawee bank "

S>>ESTED ANSWER? No/ be(a#se there &as no %ald del%ery &h(h sessental to the %aldty o! the nstr#ment.

*nder the sa$e set of facts, if Pocholo as well as the drawee bank dishonorsthe check, $ay Rhia proceed against 3eddah "

S>>ESTED ANSWER? Fes/ be(a#se Heddah as an ndorser &arrants that thenstr#ment s &hat t $#r$orts to be and ! t s dshonored and ne(essary $ro(eedn+s !ordshonor ta3en/ she shall $ay the holder/ Rha.

*nder the sa$e set of facts, in case of dishonor by the drawee bank andCorPocholo and the other indorsers, is 5dwin liable "

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

#upposing under the sa$e set of facts, that the drawee bank upon presentationby Rhia encashed the check and Pocholo now sues the bank, what defenses $ay thedrawee bank raise against Pocholo "

S>>ESTED ANSWER?a. Rha s a holder n d#e (o#rse/ there!ore there s a prima facie sho&n+ o!

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

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

d. As bet&een t&o nno(ent $artes/ the one &ho made $ossble the loss sho#ld belable. ere Po(holo made $ossble the loss as he s+ned the blan3 (he(3 3no&n+ !#lly

&ell that ! stolen/ t (o#ld be ne+otated. #rthermore/ Po(holo sho#ld ha%e mmedatelyad%sed the ban3 to sto$ $ayment.

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

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

,)


11/76

16# Rochelle left her friend and class$ate 1ora inside her car. 1ora stole ablank check which she found in RochelleBs car, forged RochelleBs signature andencashed the sa$e with the *nion 0ank (the drawee@depository. /s the bank liabledespite allegations that Rochelle was negligent "

S>>ESTEDANSWER? Fes. Reasons?a. nder the (r(#mstan(es/ Ro(helle (o#ld not be (onsdered ne+l+ent as she

(o#ld not ha%e e"$e(ted that 4ora &o#ld remo%e a (he(3 !rom her (he(3boo3. e had noreason to s#s$e(t that a (lassmate and !rend &o#ld brea(h her tr#st.

b. A ban3 s bo#nd to 3no& the s+nat#res o! ts (lents and ! t $ays on a !or+ed(he(3/ t s (onsdered as ha%n+ $ad o#t o! ts o&n !#nds.

'OMP%ETE AN3 3E%I*ERE3 INSTRUMENT#a. Wtho#t !or+ery and alteraton/ all $artes bo#nd.b. Wth !or+ed ndorsement andor alteraton

,9 Order nstr#mentsa9 Order $romssory note

5,9 Pror $artes notbo#nd.

Reason? or+ed s+nat#re &holly no$erat%e #nlessesto$$el sets n/ then $ror $artes bo#nd.

529 S#bse'#ent $artes bo#ndReason? Bo#nd on &arrantes o! ndorsers #nless other&ses$e(!ed

5a9 Whether or not holder n d#e (o#rse5b9 Only !or+ed s+nat#re s no$erat%e

b9 Order bll o! e"(han+e5,9 Dra&ee (annot (har+e

dra&erMs a((o#nt5a9 I! (har+ed dra&er has r+ht to re(o%er

529 Dra&er has no r+ht a+anst (olle(tn+ ban35*9 Dra&ee (an re(o%er !rom (olle(tn+ ban35C9 olle(tn+ ban3 bears loss

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

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

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

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

(o#rseb9 Bearer bll o! e"(han+e

5,9 Dra&ee ban3 lable

I%%USTRATI*E PROB%EM: RI$HTS O( PARTIES IN ORGEDIN3ORSEMENT O( PROMISSIOR)NOTE PAYA"LE TO ORDER#

1?# ?ennis $akes a pro$issory note payable to the order of Kay, who indorsesit to Micky. #o$ehow, Dreddie obtains possession of the note and forging thesignature of Micky endorses it to Angelo who then indorses it to 0ea. #tate the rights

and liabilities of the parties.S>>ESTED ANSWER? (3y &hose ndorsement s !or+ed and the $artes

$ror to hm n(l#dn+ the ma3er/ Denns and the $ayee/ Kay (annot be held lable to theholder Bea/ &hether or not she s a holder n d#e (o#rse. Reasons?

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

,,


12/76

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

(. Sn(e the $rede(essor o! the holder obtaned the note by !ra#d#lent and#nla&!#l means/ then there are no r+hts that are trans!erred.

d. An+elo s lable to Bea be(a#se o! An+eloMs &arrantes as a +eneral ndorser thatthe nstr#ment s &hat t $#r$orts to be and that he shall $ay n (ase o! dshonor.

I%%USTRATI*E PROB%EM: RI$HTS O( PARTIES IN ORGEDIN3ORSEMENT O("ILLO( ED'HAN$E PA)AB%E TO ORDER#

1=# 9ina issued a check to ;ellie or order as the payee with 5astern 0ank asthe drawee. Didel fraudulently obtains the check and forges ;ellieBs signature. Didelthen deposits it in ?aya 0ank (ollecting 0ank. !estern 0ank indorses the check to5astern 0ank through the clearing house. Didel then withdraws fro$ ?aya 0ank, theproceeds of the check.

!hat are the rights of the parties "S>>ESTED ANSWER?

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

Reason? The de$ostory 5dra&ee Eastern Ban39 o&es to the de$ostor 5dra&erTna9/ an absol#te and (ontra(t#al d#ty to $ay the (he(3 only to the $erson to &hommade $ayable or #$on hs +en#ne ndorsement.

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

b. Dra&ee 5Eastern Ban3Ms9 de!enses? Dra&er/ Tna s $re(l#ded !rom rasn+ thede!ense o! !or+ery d#e to esto$$el on a((o#nt o! ne+l+en(e/ !or e"am$le/ ! the $ayeeNelle ad%sed Tna o! the loss/ b#t she 5Tna9 dd not n!orm Eastern Ban3.

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

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

b9 The dra&er does not s#!!er any dama+e (a#sed by the(olle(tn+ ban3 as he (an re(o%er !rom the dra&ee ban3 &h(h has nor+ht to (har+e the dra&erMs a((o#nt.

d9 Dra&ee ban3 5Eastern Ban39 (an re(o%er !rom the (olle(tn+ ban3 5DayaBan39.

Reason? Sn(e the (he(3 $assed thro#+h the (learn+ ho#se/ the (olle(tn+ ban35Daya Ban39 m#st ha%e ndorsed the (he(3 to the dra&ee ban3 5Eastern Ban39/there!ore t s lable on an ndorserMs &arranty o! +en#neness and lablty to $ay n (aseo! dshonor.

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

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

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

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

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

enr(hed9h9 The $ayee 5Nelle9 (annot re(o%er !rom the dra&ee ban3 5Eastern Ban39.

Reason? There s no $r%ty o! (ontra(t.. Dra&er 5Tna9 s not lable to the (olle(tn+ ban3 5Daya Ban39. Reason? There

s no $r%ty o! (ontra(t bet&een Tna and Daya Ban3.

,2


13/76

I%%USTRATI*E PROB%EM: RI$HTS O( PARTIES IN ORGEDIN3ORSEMENT O( PROMISSOR) NOTE PA)AB%E TO "EARER# OR O("EARER "ILLO( ED'HAN$E#

15# ;ini $akes a pro$issory note payable to bearer. 9he bearer negotiates thenote to A$boy by $ere delivery thence to Ray$ond, thence to 0unny, thence to ;ellie.9he instru$ent was lost and Eeorge who found the note placed a signature purportingthat of ;ellie and negotiates the note to 1ina by $ere delivery such that 1ina is aholder in due course.

May 1ina proceed against ;ini, Ray$ond, 0unny and ;ellie "S>>ESTED ANSWER? Fes. Reason? or+ed ndorsement s not ne(essary to

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

#upposing 1ina is not a holder in due course $ay prior parties be held liable "S>>ESTED ANSWER? Fes/ b#t not a+anst Nelle &hose s+nat#re &as

!or+ed. Reason? Esto$$el.

'OMP%ETE BUTNOT3E%I*ERE3 INSTRUMENT#a. Del%ery (om$letes the (ontra(t

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

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

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

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

1># A. Drancisco Realty and ?evelop$ent orporation (ADR? representedby its president Adelia as well as )erby o$$ercial and onstruction orporation() represented by its president 3ai$e entered into a contract with E#/# for theconstruction of housing units and land develop$ent. E#/# partially paid on thecontract the a$ount of P-,.. 3ai$e discovered that fro$ the E#/# pay$entAdelia had received and signed seven checks of various dates and a$ounts drawnagainst /0AA and payable to ) for co$pleted and delivered work under thecontract. Adelia forged 3ai$e>s signature without his knowledge or consent, at thedorsal portion of the said checks to $ake it appear that ) had indorsed thechecks, and then deposited the checks in her /0AA savings account. Adelia nowclai$s that she was authoried to sign 3ai$e>s na$e on the check by virtue of aertification e6ecuted by 3ai$e in her favor giving her authority to collect all thereceivables of ) fro$ E#/#, including the questioned checks. !ill the defenseprosper "

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

E%en ass#mn+ that Adela &as a#thor0ed by to s+n Hame1s name/ stll/Adela/ dd not ndorse the nstr#ment n a((ordan(e &th la&. Instead o! s+nn+ Hame1sname/ Adela sho#ld ha%e s+ned her o&n name and e"$ressly nd(ated that she &ass+nn+ as an a+ent o! . 5ran(s(o %. o#rt o! A$$eals/ et al./ >.R. No. ,,*2)/

$rom. No%ember 28/ ,8889

1C# Fn 3une G, GH-, 9riu$ph 1u$ber orporation opened a currentaccount deposit with #ecurity 0ank and authoried withdrawals on the basis of any ofthree signatures of 9riu$ph>s president, treasurer and general $anager appearing onthe speci$en signature cards.

,*


14/76

Fn March :


15/76

*9 A (olle(tn+ ban3 &here a (he(3 s de$osted and &h(h ndorses the(he(3 #$on $resentment &th the dra&ee ban3 s a +narl ndorser &h(h &arrantsthe +en#neness o! the nstr#ment. So/ e%en ! the ndorsement on the (he(3de$osted by the ban31s (lent s !or+ed/ the (olle(tn+ ban3 s bo#nd by ts&arrantes as an ndorser and (annot set #$ the de!ense o! !or+ery as a+anst thedra&ee ban3.

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

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

C9 The (olle(tn+ ban3 or last endorser +enerally s#!!ers the loss be(a#se thas the d#ty to as(ertan the +en#neness o! all $ror endorsements (onsdern+ thatthe a(t o! $resentn+ the (he(3 !or $ayment to the dra&ee s an asserton that the$arty ma3n+ the $resentment had done ts d#ty to as(ertan the +en#neness o! theendorsements.

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

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

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

Payment #nder a !or+ed endorsement s not to the dra&er1s order. Whenthe dra&ee ban3 $ays a $erson other than the $ayee/ t does not (om$ly &th theterms o! the (he(3 and %olates ts d#ty to (har+e ts (#stomer1s 5the dra&er1s9a((o#nt only !or $ro$erly $ayable tems.

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

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

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

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

69 A dra&ee ban3 has the d#ty to $rom$tly n!orm the $resentor(olle(tn+ban3 o! the !or+ery #$on ds(o%ery. I! the dra&ee ban3 delays n n!ormn+ the$resentor(olle(tn+ ban3 o! the !or+ery/ thereby de$r%n+ sad$resentor(olle(tn+ ban3 o! the r+ht to re(o%er !rom the !or+er/ the dra&ee ban3s deemed ne+l+ent and (an no lon+er re(o%er !rom the $resentor(olle(tn+ ban3.

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

I! at the same tme the dra&ee ban3 &as also ne+l+ent to the $ont o!s#bstantally (ontrb#tn+ to the loss/ then s#(h loss !rom the !or+ery (an bea$$ortoned bet&een the ne+l+ent dra&er and the ne+l+ent ban3. 5Asso(atedBan3/s$pra9

,@


16/76

d. 2?ho! !+e de+eted sin-e 1C0# nder Se(ton C 5(9 o! .B. r(#lar No.@6)/ tems bearn+ a !or+ed endorsement shall be ret#rned &thn t&enty-!o#r 52C9 ho#rsa!ter ds(o%ery o! the !or+ery b#t n no e%ent beyond the $erod !"ed or $ro%ded by la&!or !ln+ o! a le+al a(ton by the ret#rnn+ ban3.

The entral Ban3 r(#lar &as n !or(e !or all ban3s #ntl H#ne ,86) &hen thePhl$$ne learn+ o#se or$oraton 5P9 &as set #$ and (ommen(ed o$eratons.Se(ton 2* o! the P R#les deleted the re'#rement that tems bearn+ a !or+edendorsement sho#ld be ret#rned &thn t&enty-!o#r 52C9 ho#rs. 5Asso(ated Ban3/s$pra9

e. E,,e-ts whee the dawes signat!e was ,oged# The dra&er (an re(o%er!rom the dra&ee ban3. No dra&ee ban3 has the r+ht to $ay a !or+ed (he(3. I! t does/ tshall ha%e to re(redt the amo#nt o! the (he(3 to the amo#nt o! the dra&er. The lablty(han ends &th the dra&ee ban3 &hose res$onsblty t s to 3no& the dra&er1s s+nat#resn(e the latter s ts (#stomer. 5Asso(ated Ban3/s$pra9

1# A check with serial nu$ber =@


17/76

#uppose the bank requires your client to secure the signature of a person whois well@known to it before your client>s pro$issory note can be accepted, what do youcall that person and what are his liabilities "

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

NOTES AND OENTS? a. A--o4odation .at8# One &ho has s+ned the nstr#ment as ma3er/

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

b. A47ig!o!s negotia7+e inst!4ents# Where a ne+otable nstr#ment s soamb+#o#s that there s do#bt &hether t s a bll or a note/ the holder may treat t ether asa bll o! e"(han+e or a $romssory note at hs ele(ton.

21# Fn various occasions Re$edios, a sari@sari store owner purchased fro$Monrico Mart various $erchandise, and paid for the$ with checks issued by Arturo

and signed at the back by Re$edios. !hen presented for pay$ent these checks weredishonored because the drawerB> account was already closed. 0oth Arturo andRe$edios were acquitted of estafa. May Re$edios be held liable for the a$ount of thechecks "

S>>ESTED ANSWER? Fes. Where a s+nat#re s so $la(ed #$on ane+otable nstr#ment that t s not (lear n &hat (a$a(ty the $erson ma3n+ the samentended to s+n/ she s deemed to be an ndorser.

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

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

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

b. 'he-@ %isti*+$ishe% from 7i++ o, e-hange # A (he(3/ as dstn+#shed!rom an ordnary bll o! e"(han+e/ s s#$$osed to be dra&n a+anst a $re%o#s de$ost o!!#nds !or t s ordnarly ntended !or mmedate $ayment. A ban3 s #nder no obl+aton toma3e $art $ayment on a (he(3 #$ to only the amo#nt o! the dra&er1s !#nd. 5oran/s#$ra9

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

22# Fn 3uly s failure to deliver. Again 9P issued two (: postdated

crossed checks, check no. I-J=HG a$ounting to PI


18/76

S>>ESTED ANSWER? No/ be(a#se Indan ore"/ In(. s not a holder n d#e(o#rse. The (rossn+ o! the (he(3s sho#ld ha%e $#t Indan on n'#ry and #$on tde%ol%es the d#ty to as(ertan r. Boy1s ttle to the (he(3 or hs $ossesson. aln+ nths res$e(t/ Indan s +#lty o! +ross ne+l+en(e and as s#(h s not a holder n d#e (o#rse.

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

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

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

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

(. E,,e-ts o, -ossing a -he-@:

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

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

that the (he(3 has been ss#edfor a %efi*ite p$rpose/ other&se stated theholder s not a holder n d#e (o#rse. 5Bataan +ar and +arette a(tory/In(. %s. o#rt o! A$$eals/ et al./ 2*) SRA C*9

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

,9 That t s (om$lete and re+#lar #$on ts !a(e

29 That he be(ame a holder o! t be!ore t &as o%erd#e/ and &tho#tnot(e that t had been $re%o#sly dshonored ! s#(h &as the !a(t

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

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

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

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

26# Fn April :-, GG, Licente invested in /D, a quasi@banking institutionengaged in $oney $arket operations, the a$ount of P-,. to $ature after one$onth with interest at the rate of :.-2 for


19/76

the sa$e, or refuses within twenty@four hours after such delivery or such other periodas the holder $ay allow, to return the bill accepted or non@accepted to the holder, hewill be dee$ed to have accepted the sa$e.' !as there effective pay$ent to Licente "

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

2?# !hen is notice of dishonor *ot re-$ire% to be given to drawer "S>>ESTED ANSWER?a. Where the dra&er and the dra&ee are the same $ersonb. When the dra&ee s a !(tto#s $erson or a $erson not ha%n+ (a$a(ty to

(ontra(t(. When the dra&er s the $erson to &hom the nstr#ment s $resented !or

$aymentd. Where the dra&er has no r+ht to e"$e(t or re'#re that the dra&ee or a((e$tor

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

6 Ins!an-e 'ode P#3# 1?50

2=# 3ere$iah was a $ost valued e$ployee of Dortune Manufacturingorporation for the past twenty years. )e was insured by his e$ployer with itself as thebeneficiary. A co$pany owned house at ?as$arinas Lillage was furnished for hisuse which was insured with the owner as the beneficiary. 0oth of the policies were upto ?ece$ber


20/76

lablty n res$e(t thereo! o! s#(h nat#re that a (ontem$lated $erl m+ht dre(tly damn!ythe ns#red. 5Se(. ,*/ Ins#ran(e ode9

=== e. Ins!a7+e inteest in .o.et8 4!st eistat the tme o! ta3n+ AND atthe tme o! loss.

!. Ins!a7+e inteest in +i,e %isti*+$ishe% from ins!a7+e inteest in.o.et8#

,9 In ns#rable nterest n l!e m#st e"st at the tme o! ta3n+ andneed not e"st at the tme o! death WI4E ns#rable nterest n $ro$ertym#st e"st both at the tme o! ta3n+ and tme o! loss.

29 The bene!(ary need not ha%e an ns#rable nterest n the l!e o!the ns#red WI4E the bene!(ary n $ro$erty ns#ran(e sho#ld ha%e anns#rable nterest n the $ro$erty ns#red both at the tme o! ns#ran(e andat the tme o! loss.

25# Fn #epte$ber =, GGH, Marion insured her own life na$ing her boyfriend3effrey as her irrevocable beneficiary. 9he insurance co$panyBs physician conducteda physical e6a$ination but was not able to detect the fact that Marion was already in

the advance stage of cancer. /n good faith Marion did not disclose the fact that shepreviously consulted an oncologist because after the $edical consultation, nu$erousfortune tellers predicted that she will not die of cancer. Fn #epte$ber :, : whileMarion was on her way to ?e 1a #alle *niversity to take the 0ar e6a$s she was runover by a bulldoer which caused her death on the spot. 3effrey now clai$s the lifeinsurance proceeds. ?ecide.

S>>ESTED ANSWER? He!!rey (o#ld not re(o%er. There &as (on(ealment/&h(h s a ne+le(t to (omm#n(ate that &h(h a $arty 3no&s and o#+ht to (omm#n(ate.The matter (on(ealed &as materal and rele%ant to the a$$ro%al and ss#an(e o! the $ol(y/t ha%n+ $robable and reasonable n!l#en(e #$on the ns#rer1s !ormn+ an estmate o! thedsad%anta+es o! the $ro$osed (ontra(t.

>ood !ath s not a de!ense to (on(ealment/ as materalty o! the n!ormaton&thheld does not de$end on the state o! mnd o! the ns#red nor on the a(t#al or $hys(ale%ents &h(h ens#e.

It s settled that the ns#red need not de o! the dsease he had !aled to ds(lose tothe ns#rer. It s s#!!(ent that the non-ds(los#re msled the ns#rer n !ormn+ hsestmates on the rs3s o! the $ro$osed ns#ran(e $ol(y or n ma3n+ n'#res. 5S#nl!eAss#ran(e om$any o! anada %s. o#rt o! A$$eals/ et al./ 2C@ SRA 269

In the abo%e $roblem/ the n(ontestablty (la#se does not !nd a$$l(aton be(a#sethe t&o year $erod has not yet la$sed.

#upposing under the above set of facts that the insurance was secured onAugust


21/76

Note that ! the $arty does not 3no& he s s(3/ there s no (on(ealment.

2># EF7* applied for credit facilities and acco$$odations with Rial 0ank.As security for its credit facilities with Rial 0ank, EF7* e6ecuted two real estate$ortgages and two chattel $ortgages in favor of Rial 0ank, with were registered withthe Registry of ?eeds. *nder the four $ortgages, EF7* co$$itted itself to insure the$ortgaged property with M/F, an insurance co$pany approved by Rial 0ank, andsubsequently to endorse and deliver the insurance policies to Rial 0ank. Alchester,M/F>s underwriter, fro$ who$ EF7* secured the insurance prepared theindorse$ents but it turned out that the endorse$ents do not bear the signature of anyofficer of EF7*.

!ho could recover on the insurance clai$ "S>>ESTED ANSWER? R0al Ban3 (o#ld re(o%er #$ to the e"tent o! ts

nterest on the mort+a+e.Whle t s settled that a mort+a+or and a mort+a+ee ha%e se$arate and dstn(t

ns#rable nterests n the same mort+a+ed $ro$erty/ s#(h that ea(h one o! them may ns#rethe same $ro$erty !or hs o&n sole bene!t/ the ntenton o! the $artes sho#ld +o%ern. In

the (ase at bar the endorsements made n !a%or o! R0al Ban3/ (learly nd(ate that R0alBan3 s tr#ly the entty !or &hose bene!t the $ol(es &ere (learly ntended. 5R0alommer(al Ban3n+ or$oraton/ et al./ %. o#rt o! A$$eals/ et al./ and (om$anon (ases.268 SRA ,2829

2C# 1ara obtained a loan of P-,. fro$ Angelina and as security she$ortgaged her house worth P=-,. to Angelina. 1ara insured the house againstfire for P=-,. with roft /nsurance with the policy stating that any otherinsurances shall be declared otherwise all benefits under the policy shall be forfeited.Angelina likewise insured the house, also against fire with Raider /nsurance in thea$ount of P-,. 9he insurance policy also contained an %other insurance'

clause. 0oth 1ara and Angelina did not advise their respective insurers of thee6istence of the other insurances.

!hile both of the insurance policies were in force the house was burned.a 0oth insurance co$panies now disclai$ responsibility because of the

violation of the %other insurance clause.' ould they legally do so "b /n case, both 1ara and Angelina could recover, how $uch would be the

e6tent of their respective liabilities "c ould 1ara refuse to pay her obligation of P-,. considering that the

house was already burned " Reason out your answers.S>>ESTED ANSWERS?a. No. There s no %olaton o! the other ns#ran(e (la#se &here the mort+a+or

and the mort+a+ee too3 se$arate ns#ran(es/ n %olaton o! the other ns#ran(e (la#seJbe(a#se ther ns#rable nterest s d!!erent. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C,SRA ,@29

b. 4ara (o#ld re(o%er P7@)/))).)) and An+elna/ P@))/))).))/ the e"tent o! therres$e(t%e ns#rable nterests. or reasons see abo%e.

(. No. Rader Ins#ran(e ta3es the $la(e o! An+elna. In other &ords t ss#bro+ated to the nterest o! An+elna.

NOTES AND OENTS?a. Othe ins!an-e .ohi7ition -+a!se# An ns#ran(e $ol(y (ontans the

!ollo&n+ (la#se? The ns#red shall +%e not(e to the om$any o! any ns#ran(e orns#ran(es already e!!e(ted/ or &h(h may s#bse'#ently be e!!e(ted (o%ern+ any o! the$ro$erty or $ro$ertes hereby ns#red #nless s#(h not(e be +%en and the $art(#lars be

stated theren be!ore the o((#rren(e o! the loss other&se all bene!ts #nder the $ol(y shallbe deemed !or!eted.J

The (ondton s a $ro%son &h(h n%arably a$$ears n !re ns#ran(e $ol(es ands ntended to $re%ent an n(rease n the moral ha0ard. It s (ommonly 3no&n as theaddtonal or other ns#ran(eJJ (la#se and has been #$held as %ald and as a &arranty thatno other ns#ran(e e"sts.

2,


22/76

b. E,,e-t o, nondis-+os!e# The non-ds(los#re o! the t&o ns#ran(es &o#ld notbe !atal to re(o%ery. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29 Ths samee!!e(t also a$$les to the (on(e$t o! do#ble ns#ran(e.

(. The ationa+e 7ehind the in-+!sion o, Gothe ins!an-e -+a!se in ,ie.o+i-ies s to $re%ent o%er-ns#ran(e and th#s a%ert the $er$etraton o! !ra#d. When a$ro$erty o&ner obtans ns#ran(e $ol(es !rom t&o or more ns#rers n a total amo#ntthat e"(eeds the $ro$erty1s %al#e/ the ns#red may ha%e an nd#(ement to destroy the$ro$erty !or the $#r$ose o! (olle(tn+ the ns#ran(e. The $#bl( as &ell as the ns#rer snterested n $re%entn+ as st#aton n &h(h a !re &o#ld be $ro!table to the ns#red.

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

e. 3o!7+e ins!an-e# A do#ble ns#ran(e e"sts &here the same $erson s ns#redby se%eral ns#rers se$arately n res$e(t o! the same s#b:e(t and nterest. The ns#rable

nterests o! a mort+a+or and a mort+a+ee on the mort+a+ed $ol(y are se$arate anddstn(t hen(e there s no do#ble ns#ran(e ! the mort+a+or and the mort+a+ee ta3e o#tse$arate ns#ran(es.

!. E,,e-t o, nondis-+os!e# The non-ds(los#re o! the t&o ns#ran(es &o#ld notbe !atal to re(o%ery. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29 Ths e!!e(talso a$$les to the (on(e$t o! the other ns#ran(e $rohbton.

+. S!7ogation# I! the $lant!!1s $ro$erty has been ns#red/ and he has re(e%edndemnty !rom the ns#ran(e (om$any !or the n:#ry or loss arsn+ o#r o! the &ron+ orbrea(h o! (ontra(t (om$laned o!/ the ns#ran(e (om$any shall be s#bro+ated to the r+htso! the ns#red a+anst the &ron+doer or the $erson &ho %olated he (ontra(t. 5Art(le22)7/ %l ode9

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

2# Erepalife and ?0P entered into a contract of group life insurance withErepalife agreeing to insure the lives of eligible housing loan $ortgagors of ?0P. Fn;ove$ber , GHs death during the ter$s of theinsurance, a death benefit in the a$ount of PHJ,. shall be paid. /n the event ofthe debtor>s death before his indebtedness with the creditor shall have been fully paid,an a$ount to pay the outstanding indebtedness shall first be paid to the reditor andthe balance of the su$ assured, if there is any shall then be paid to the beneficiaryCiesdesignated by the debtor. /n August J, GHI, ?r. 1euterio died due to '$assivecerebral he$orrhage.' ?0P sub$itted a clai$, on the %$ortgage rede$ptioninsurance' but it was denied by Erepalife on the ground of non@disclosure that ?r.1euterio was suffering fro$ hypertension, the cause of his death.

As a result of the non@pay$ent insurance clai$, which would have resulted to

a full pay$ent of the $ortgage debt to ?0P, ?0P then foreclosed on the property.*pon being sued by ?r. 1euterio>s heirs for the insurance proceeds Erepalife

now raises, the defense of conceal$ent of ?r. 1euterio>s being hypertensive, and noshowing of the e6act a$ount of ?r. 1euterio>s outstanding indebtedness to ?0P at theti$e of his death.

ould ?r. 1euterio>s heirs recover " #tate your reasons.

22


23/76

S>>ESTED ANSWER? Fes. on(ealment o! the state o! health o! the ns#redmort+a+or as bass !or re!#sn+ $ayment o! ns#ran(e (lams sho#ld be establshed bys#!!(ent $roo! o! the real state o! health o! the ns#red.

The ns#ran(e ta3en &as a l!e ns#ran(e $ol(y &h(h s a %al#ed $ol(y. nlessthe nterest o! the $erson ns#red s s#s(e$tble o! e"a(t $e(#nary estmaton/ the meas#reo! ndemnty #nder a $ol(y o! ns#ran(e #$on l!e or health s the s#m !"ed n the $ol(y/n ths (ase P6/2)).)).

Sn(e DBP has already !ore(losed on the resdental lot n sats!a(ton o! Dr.4e#tero1s o#tstandn+ loan/ the ns#ran(e $ro(eeds shall n#re to the bene!t o! the herso! Dr. 4e#tero. DBP sho#ld not #n:#stly enr(h tsel! by (olle(tn+ the ns#ran(e$ro(eeds a!ter t has !ore(losed the $ro$erty. 5>reat Pa(!( 4!e Ass#ran(e or$oraton%. o#rt o! A$$eals/ et al./ >.R. No. ,,*688/ $rom. O(tober ,*/ ,8889

NOTES AND OENTS?a. Ins!a7+e inteest in 4otgaged .o.eties in G4otgage ede4.tion

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

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

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

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

$ayable (la#se does not ma3e the mort+a+ee a $arty to the (ontra(t.Ths (o#ld be seen !rom the $ro%sons o! Se(ton 6 o! the Ins#ran(e ode/ &h(h

reads? nless the $ol(y $ro%des/ &here a mort+a+or o! $ro$erty e!!e(ts ns#ran(e n hso&n name $ro%dn+ that the loss shall be $ayable to the mort+a+ee/ or ass+ns a $ol(y o!ns#ran(e to a mort+a+ee/ the ns#ran(e s deemed to be #$on the nterest o! themort+a+or/ &ho does not (ease to be a $arty to the or+nal (ontra(t/ and any a(t o! hs/$ror to the loss/ &h(h &o#ld other&se a%od the ns#ran(e/ &ll ha%e the same e!!e(t/altho#+h the $ro$erty s In the hands o! the mort+a+ee/ b#t any a(t &h(h/ #nder the(ontra(t o! ns#ran(e/ s to be $er!ormed by the mort+a+or/ may be $er!ormed by themort+a+ee theren named/ &th the same e!!e(t as ! t had been $er!ormed by themort+a+or.J 5>reat Pa(!( 4!e Ass#ran(e or$oraton %. o#rt o! A$$eals/ et al./ >.R.No. ,,*688/ $rom. O(tober ,*/ ,888

=== b. Ins!a7+e in 4otgaged .o.eties# The mort+a+or has an ns#rablenterest n the !#ll %al#e o! the mort+a+ed $ro$erty rres$e(t%e o! the amo#nt !or &h(h ts mort+a+ed.

The mort+a+ee has an ns#rable nterest only #$ to the e"tent o! the (redt he has+ranted to the mort+a+or.

(. Motgaged .o.eties# The mort+a+or and the mort+a+ee ha%e ea(h annde$endent ns#rable nterest on the $ro$erty and both nterests may be (o%ered by one$ol(y or ea(h may ta3e o#t a se$arate $ol(y (o%ern+ hs nterest/ &ther at the same tmeor at se$arate tmes.

The mort+a+or1s ns#rable nterest (o%ers the !#ll %al#e o! the mort+a+ed $ro$erty/e%en tho#+h the mort+a+e debt s e'#%alent to the !#ll %al#e o! the $ro$erty/

The mort+a+ee1s ns#rable nterest s to the e"tent o! the debt/ sn(e the $ro$erty sreled #$on as se(#rty thereo!/ and n ns#rn+ he s not ns#rn+ the $ro$erty b#t hsnterest or len thereon. s ns#rable nterest s prima faciethe %al#e mort+a+ed ande"tends only to the amo#nt o! the debt/ not e"(eedn+ the %al#e o! the mort+a+ed$ro$erty/ Th#s/ se$arate ns#ran(es (o%ern+ d!!erent ns#rable nterests may be obtanedby the mort+a+or and the mort+a+ee/ and ths &o#ld not %olate the other ns#ran(eJ(la#se n the $ol(y. 5>ea+ona %s. o#rt o! A$$eals/ et al./ 2C, SRA ,@29

2*


24/76

=== d. E,,e-t o, -hange o, inteest in .o.et8# Any (han+e #na((om$aned bya (han+e n ns#ran(e s#s$ends the ns#ran(e #ntl the nterest n the thn+ and thens#ran(e s %ested n the same $erson. 5Se(. 2)/ Ins#ran(e ode9

60# !hat da$ages $ay be recovered in $arine insurance/S>>ESTED ANSWER? Re(o%ery (o#ld be made only ! the dama+e &as

(a#sed by $erls o! the sea not 78 $erls o! the sh$. De!e(ts o! the sh$ are $erls o! thesh$.

61# !hat is $eant by actual total loss in $arine insurance "S>>ESTED ANSWER? An a(t#al total loss !or ns#ran(e $#r$oses s (a#sed

by?a. A total destr#(ton o! the thn+ ns#redb. The rretre%able loss o! thn+ by sn3n+ or by ben+ bro3en #$(. Any dama+e to the thn+ &h(h renders t %al#eless to the o&ner !or the

$#r$ose !or &h(h he held t ord. Any other e%ent &h(h e!!e(t%ely de$r%es the o&ner o! the $ossesson/ at the

$ort o! destnaton/ o! the thn+ ns#red. 5Se(. ,*)/ Ins#ran(e ode9NOTES AND OENTS?a. 'onst!-tive tota+ +oss in 4aine ins!an-e# One &h(h +%es to a $erson a

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

whi-h wo!+d entit+e an ins!ed to a7andon in 4aine ins!an-e:,9 I! more than three-!o#rths o! ts %al#e s a(t#ally lost or &o#ld ha%e to

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

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

la&!#lly $er!ormed &tho#t n(#rrn+ ether an e"$ense to the ns#red o! more thanthree-!o#rths the %al#e o! the thn+ abandoned or a rs3 &h(h a $r#dent man&o#ld not ta3e #nder the (r(#mstan(es or

C9 I! the thn+ ns#red/ ben+ (ar+o or !re+hta+e/ and the %oya+e (annotbe $er!ormed nor another sh$ $ro(#red by the master/ &thn a reasonable tmeand &th reasonable dl+en(e/ to !or&ard the (ar+o/ &tho#t n(#rrn+ the l3ee"$ense or rs3. B#t !re+hta+e (annot n any (ase be abandoned #nless the sh$ salso abandoned. 5Se(. ,*8/ Ins#ran(e ode9

62# Fn April -, GG, *P0 Eeneral /nsurance o., /nc. issued five (-insurance policies covering Masagana 9ele$art, /nc.>s various properties against fire,for the period May ::, GG to May ::, GG:. /n March *P0 decided not to renewthe policies after its e6piration on May ::, GG:, and infor$ed Masagana>s broker,8uellig /nsurance 0rokers, /nc. Fn April J, GG:, *P0 gave written notice toMasagana of the non@renewal of the policies at the address stated in the policies. Fn3une s property covered by the three insurance policiesissued by *P0.

Fn 3uly s cashier five (- $anager>schecks representing pre$iu$ for the renewal of the policies fro$ May ::, GG: toMay ::, GGs checks that it tendered, and at the sa$e ti$e re4ected Masagana>s clai$ forthe reasons (a that the policies have e6pired, and (b that the fire occurred on 3unes tender of pre$iu$ pay$ent.

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

ns#ran(e s %ald #nless the $rem#ms are a(t#ally $ad. Any a+reement to the (ontrary s%od. The $artes may not a+ree e"$ressly or m$ledly on the e"tenson o! (redt or tme

2C


25/76

to $ay the $rem#m and (onsder the $ol(y bndn+ be!ore a(t#al $ayment. 5PB>eneral Ins#ran(e o./ %. asa+ana Telamart/ In(./ >.R. No. ,*7,72/ $rom. H#ne ,@/,8889

NOTES AND OENTS? Not&thstandn+ any a+reement to the (ontrary/ no$ol(y or (ontra(t o! ns#ran(e ss#ed by an ns#ran(e (om$any s %ald and bndn+ #nlessand #ntl the $rem#m thereo! has been $ad/ e"(e$t n the (ase o! a l!e or an nd#stral l!e$ol(y &hene%er the +ra(e $erod $ro%son a$$les. 52nd senten(e/ Se(. 77/ Ins#ran(eode9

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

66# /n GG Antonio obtained a fire insurance fro$ A$erican )o$eAssurance o$pany the stock in trade of his business, Moonlight 5nterprises. 9heinsurance was due to e6pire on :- March GG. Fn - April GG, Antonio issued acheck in the a$ount of P:,GHs agent 3a$es as pay$ent for therenewal of the policy. /n turn, 3a$es delivered to Antonio Renewal ertificate ;o.GGI=.

Fn J April GG, Moonlight 5nterprises was co$pletely raed by fire with atotal esti$ated loss of between P I $illion to P - $illion. 9he check was drawnagainst a Manila bank and deposited in A$erican>s agayan de Fro bank account.9he corresponding official receipt was issued on April GG. #ubsequently, a newinsurance policy, Policy ;o. :J@I:


26/76

9he insurer now disclai$s liability on the additional P-,. coveragebecause of failure to co$ply with the following requisites stated in the applicationfor$ for the perfection of the contract of insurance %9here shall be no contract ofinsurance unless and until a policy is issued on this application and that the saidpolicy shall not take effect until the pre$iu$ has been paid and the policy delivered toand accepted by $eCus in person while /C!e, a$Care in good health.'

/s Pri$itivo>s beneficiary entitled to the proceeds additional P-,.additional insurance which a$ounts to P-,. in view of a triple inde$nity rideron the policy" 56plain briefly.

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

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

The (ondtons m$osed by the ns#rer !or the $rote(ton o! the (ontra(t s not a$otestat%e or !a(#ltat%e (ondton/ b#t s a s#s$ens%e one &hereby the a('#ston o!r+hts de$ends #$on the ha$$enn+ o! an e%ent &h(h (onstt#tes the (ondton. In ths

(ase/ the s#s$ens%e (ondton &as the $ol(y m#st ha%e been del%ered and a((e$ted bythe a$$l(ant &hle he s n +ood health. There &as non-!#l!llment o! the (ondton/ho&e%er/ nasm#(h as the a$$l(ant &as already dead at the tme the $ol(y &as ss#ed.en(e/ the non-!#l!llment o! the (ondton res#lted n the non-$er!e(ton o! the (ontra(t.

b9 A (ontra(t o! ns#ran(e/ l3e other (ontra(ts/ m#st be assented to by both$artes ether n $erson or by ther a+ents. So lon+ as an a$$l(aton !or ns#ran(e has notbeen ether a((e$ted or re:e(ted/ t s merely an o!!er or $ro$osal to ma3e a (ontra(t. The(ontra(t/ to be bndn+ !rom the date o! a$$l(aton/ m#st ha%e been a (om$leted (ontra(t/one that lea%es nothn+ to be done/ nothn+ to be (om$leted/ nothn+ to be $assed #$on/or determned/ be!ore t shall ta3e e!!e(t. There (an be no (ontra(t o! ns#ran(e #nless themnds o! the $artes ha%e net n a+reement.

(9 The ns#rer (annot be held !or +ross ne+l+en(e. It sho#ld be noted that ana$$l(aton s a mere o!!er &h(h re'#res the o%ert a(t o! the ns#rer !or t to r$en nto a(ontra(t. Delay n a(tn+ on the a$$l(aton does not (onstt#te a((e$tan(e e%en tho#+hthe ns#red has !or&arded hs !rst $rem#m &th hs a$$l(aton. The (or$oraton may notbe $enal0ed !or the delay n the $ro(essn+ o! the a$$l(aton $a$ers. 5Pere0 %. o#rt o!A$$eals/ et al./ >.R. No. ,,2*8/ $rom. Han#ary 26/ 2)))9

NOTES AND OENTSa. When ins!an-e -onta-t .e,e-ted# ontra(t o! ns#ran(e s $er!e(ted

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

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

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

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

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

onsent m#st be man!ested by the meetn+ o! the o!!er and the a((e$tan(e #$on the thn+and the (a#se &h(h are to (onstt#te the (ontra(t. The o!!er m#st be (ertan and thea((e$tan(e absol#te. 5Pere0 %. o#rt o! A$$eals/ et al./ >.R. No. ,,2*8/ $rom. Han#ary

26/ 2)))9

6=# A collision between a truck driven by Euiller$o owned by the ;ationalDood Authority (;DA and a public utility 9a$araw D& owned and operated by Lictorresulted to the death of five persons and in4ury to ten others, all of who$ werepassengers of the D&. #everal cases were filed against Euiller$o, ;DA and E#/#,;DA>s insurer of the truck for death and in4uries, Lictor as well as his insurer. /t was

2


27/76

found that Euiller$o>s negligence was he pro6i$ate cause of the accident. ;DA,Euiller$o, E#/# and the insurer of the D& were required to pay 4ointly and severallythe heirs of the deceased passengers.

May the insurer be i$pleaded directly by the victi$s or their heirs " /f so,could they be held solidarily liable " 56plain your answers. S>>ESTED ANSWER? Fes. It s no& establshed that the n:#red or the herso! the %(tms o! a %eh(#lar a((dent may s#e dre(tly the ns#rer o! the %eh(le. Ths s sobe(a#se (ommon (arrers are re'#red to se(#re the om$#lsory otor Veh(le 4abltyIns#ran(e 5V4I9.

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

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

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

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

order o! re(o%er. Proo!s o! loss shall be s#!!(ent to s#bstantate the (lam/ amon+ &h(hn(l#de

a. Pol(e re$ort o! a((dent

b. Death (ert!(ate and e%den(e s#!!(ent to establsh the $ro$er $ayee ormed(al re$ort and e%den(e o! med(al or hos$tal dsb#rsement n res$e(t o! &h(hre!#nd s (lamed. 5Se(. *76/ Ins#ran(e ode9

NOTES AND OENTS?a. 'onditions ,o avai+4ent?

,9 Only !or (lams !or death or n:#ry o! any $assen+er or thrd $arty. Itdoes not n(l#de $ro$erty dama+e

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

o((#$ant ! a %eh(le/ (lam shall le a+anst the ns#rer o! the %eh(le n &h(h theo((#$ant s rdn+/ mo#ntn+ or dsmo#ntn+ !rom. In any other (ase/ (lam shallbe a+anst the ns#rer o! the dre(tly o!!endn+ %eh(le. In all (ases/ the r+ht o! the$arty $ayn+ the (lam to re(o%er a+anst the o&ner o! the %eh(le res$onsble !orthe a((dent shall be mantaned. 5Se(. *76/ Ins#ran(e ode9

6># Pes-i.tive .eiod o, one 1 8ea ,o4 e


28/76

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

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

There s soldary lablty only &hen the obl+aton e"$ressly so states or &hen thela& or the nat#re o! the obl+aton re'#res soldarty. #rthermore/ Se(. ,8) o! theIns#ran(e ode (lar!es the role o! the resdent a+ent o! a !ore+n ns#ran(e (om$any tobe merely the re$resentat%e tas3ed to re(e%e le+al $ro(esses on behal! o! ts $rn($al andnot to ans&er $ersonally !or any ns#ran(e (lams. 5Smth/ Bell < o./ In(. %. o#rt o!A$$eals/ et al./ 27 SRA @*)9

6# ?istinguish one fro$ the other conceal$ent, representation and warrantyas used in insurance.

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

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

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

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

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

?0# Fn March


29/76

(a#sed the obs(#rty.J 5R0al S#rety < Ins#ran(e om$any %. o#rt o! A$$eals/ et al./$rom. H#ly ,6/ 2)))9

Phi+i..ine 3e.osit Ins!an-e 'o.oation A-t R#A# 6=1; as

a4ended 78 P#3# No# 16> and R#A# No# >?00

?1# )orace $aintains a P,. savings account, a P:,. checkingaccount, a P>ESTED ANSWER? The P,)/))).)) sa%n+s a((o#nt and the P2)/))).))(he(3n+ a((o#nt are deemed ns#red by the Phl$$ne De$ost Ins#ran(e or$oraton.

NOTES AND OENTS? A--o!nts -oveed 78 P3I' !. to P100;000#00rres$e(t%e o! the nat#re and (hara(ter o! the de$ost.

? Tans.otation %aws

a 'o44on 'aies New 'ivi+ 'ode; Ats# 1>62 to 1>557 'o44e-ia+ 'onta-ts ,o Tans.otation Ove+and 'ode o,

'o44e-e Ats# 6? to 6>

?2# hristine charters a vessel owned and operated by #tar #hipping o., aco$$on carrier, for the purpose of transporting two generators to ebu. #tar#hipping>s e$ployees negligently stowed the two generators by failing to properly lashand secure the$ in the vessel>s hold. ?uring the trip, a strong wind hits the vessel,

causing severe da$ages to the generators which slid in the hold and hit each other.!hen sued for da$ages #tar #hipping cites a stipulation in the charteragree$ent e6e$pting the co$pany fro$ liability for loss or da$age a rising fro$ thenegligence of its agents. hristine countered by stating that the afore$entionedstipulation is against public policy and therefore, null and void.

/s the stipulation valid " !ould you hold the shipping co$pany liable "S>>ESTED ANSWER? Fes. The st$#laton s %ald/ hen(e the sh$$n+

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

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

?6# 1oadstar received, fro$ a single consignee, on board its MCL herokeelawanit hardwood, tile wood asse$blies and apitong $ouldings with a total value ofPJ,J=,=H., and insured for the sa$e a$ount with M/ against various risks,including %total loss by total loss of the vessel.' /t likewise carried passengers. 9hevessel, in turn was insured by PEA/ for PI $illion. Fn : ;ove$ber GHI, the vesselsank off 1i$asawa /sland, allegedly as a result of a typhoon, resulting to total loss ofthe vessel and the cargo. 5vidence shows that the wind condition in the area wherethe vessel sank was $oderate. 9he consignee $ade a clai$ with 1oadstar which wasignored. M/ then paid the consignee and the latter signed a subrogation receipt.

M/ then filed suit against both 1oadstar and PEA/. 1oadstar raises thedefense that it is not a co$$on carrier because it does not have a P;, that therewas only one shipper consignee for a special cargo.

/t likewise posits the application of the %li$ited liability' theory, and that theclai$ was barred by prescription. Rule on the contentions.

S>>ESTED ANSWER? 4oadstar s a (ommon (arrer. t s not ne(essary thatthe (arrer be ss#ed a (ert!(ate o! $#bl( (on%enen(e/ and ths $#bl( (hara(ter s not

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altered by the !a(t that the (arra+e o! the +oods n '#eston &as $erod(/ o((asonal/e$sod( or #ns(hed#led. The re(ords do not ds(lose that V hero3ee on the date n '#eston/ #ndertoo3to (arry a s$e(al (ar+o or &as (hartered to a s$e(al $erson only. There &as no (harter$arty. #rther/ the bare !a(t that the %essel &as (arryn+ a $art(#lar ty$e o! (ar+o !orone sh$$er/ &h(h a$$ears to be $#rely (on(dental/ s not reason eno#+h to (on%ert the%essel !rom a (ommon (arrer to a $r%ate (arrer/ es$e(ally &here/ as n ths (ase/ t &assho&n that the %essel &as also (arryn+ $assen+ers.

The do(trne o! lmted lablty does not a$$ly &here there &as ne+l+en(e on the$art o! the %essel o&ner or a+ent. 4oadstar &as at !a#lt or ne+l+ent n not mantann+ asea&orthy %essel and n ha%n+ allo&ed ts %essel to sal des$te 3no&led+e o! ana$$roa(hn+ ty$hoon. In any e%ent/ t dd not sn3 be(a#se o! any storm that may bedeemed asforce ma0e$re/ nasm#(h as the &nd (ondton n the area &here t san3 &asdetermned to be moderate.

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

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

NOTES AND OENTS?

=== a. 'o44on -aie# A $erson/ (or$oraton/ !rm or asso(aton en+a+ed nthe b#sness o! (arryn+ OR trans$ortn+ $assen+ers or +oods or both/ by land/ &ater o!ar !or (om$ensaton/ o!!ern+ ts ser%(es to the $#bl(. 5Art. ,7*2/ %l ode9

It s not ne(essary !or a trans$ort (om$any to ha%e a (ert!(ate o! $#bl((on%enen(e and ne(essty be!ore t (o#ld be (onsdered as a (ommon (arrer. 5De>#0man %. o#rt o! A$$eals/ et al./ ,6 SRA ,29

b. No distin-tion 7etween .in-i.a+ 7!siness and Gside+ine o,,eing o,sevi-e to .!7+i-# Art. ,7*2 o! the %l ode ma3es no dstn(ton bet&een one &hose

$rn($al b#sness a(t%ty s the (arryn+ o! $ersons or +oods or both/ and one &ho doess#(h (arryn+ only as an an(llary a(t%ty 5n lo(al dom/ as a sdelneJ9 It (are!#llya%ods ma3n+ any dstn(ton bet&een a $erson or enter$rse o!!ern+ trans$ortatonser%(e on a re+#lar or s(hed#led bass and one o!!ern+ s#(h ser%(e on an o((asonal/e$sod( or #ns(hed#led bass. Nether does t dstn+#sh bet&een a (arrer o!!ern+ tsser%(es to the +eneral $#bl(/J .e./ the +eneral (omm#nty or $o$#laton/ and one &hoo!!ers ser%(es or sol(ts b#sness only !rom a narro& se+ment o! the +eneral $o$#laton.54oadstar Sh$$n+ o./ In(. %. o#rt o! A$$eals/ et al./ >.R. No. ,*,2,/ $rom.Se$tember 26/ ,8889

(. 'o44on -aie -eases to 7e -o44on -aie ! (hartered and be(omes a$r%ate (arrer.

d. Bi++ o, +ading de,ined# A &rtten a(3no&led+ment o! the re(e$t o! +oods andan a+reement to trans$ort and to del%er them at a s$e(!ed $la(e to a $erson namedtheren or on hs order.

e. Two,o+d -haa-te o, 7i++ o, +ading#,9 It s a re(e$t o! the +oods sh$$ed and29 It s a (ontra(t by &h(h three $artes/ namely/ the sh$$er/ the

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

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

=== !. Thee @inds o, sti.!+ations 4ade in 7i++s o, +ading egading +ia7i+it8#The !rst s one e"em$tn+ the (arrer !rom any and all lablty !or

loss or dama+e o((asoned by ts o&n ne+l+en(e.The se(ond s one $ro%dn+ !or an #n'#al!ed lmtaton o! s#(h

lablty to an a+reed %al#aton.The thrd s one lmtn+ the lablty o! the (arrer to an a+reed

%al#aton #nless the sh$$er de(lares a h+her %al#e and $ays a h+her rate

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o! !re+ht. A((ordn+ to an almost #n!orm &e+ht o! a#thorty/ the !rstand se(ond 3nds o! st$#latons are n%ald as ben+ (ontrary to $#bl($ol(y/ b#t the thrd s %ald and en!or(eable

mercantile law} review notes of prof domondon } made 2001} 80 pages

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