commercial law - atty. rondez(1)

8/19/2019 Commercial Law - Atty. Rondez(1)

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Commercial

Green Notes 2014

Prepared by: Atty. Renato Rondez

BAR OPERATIONS 2014

Page 1 of 50

MERCANTILE LAW

PRIVATE CORPORATIONS

How are cororations classi!e"#

Corporations are generally lassi!e" as

sto# or non$sto#%

A sto# orporation is one &'i'

'as apital sto# "i(i"e" into s'ares an"

is a)t'ori*e" to "istri+)te to t'e 'ol"ers

o, s)' s'ares "i(i"en"s or allot-ents o,

t'e s)rpl)s pro!ts on t'e +asis o, t'e

s'ares 'el"%

A non sto# orporation is one

&'ere no part o, its ino-e is

"istri+)ta+le as "i(i"en"s to its

-e-+ers. tr)stees or o/ers. an" &'en

any pro!t is o+taine" as an ini"ent i, its

operations s'all. &'ene(er neessary or

proper +e )se" ,or t'e ,)rt'erane o, t'e

p)rposes ,or &'i' t'e orporation &as

organi*e"%

$%at is t%e "octrine o& searate

le'al ersonalit(#

T'is "otrine 'ol"s t'at a

orporation 'as a personality

separate an" "istint ,ro- its

in"i(i")al sto#'ol"ers or

-e-+ers%

T'is aets lia+ility ,or ats or

ontrats. rig't to +ring ations.

a)isition o, property. an"

'anges in t'e i"entity o, sto#'ol"ers or -e-+ers%

Inso,ar as -oral "a-ages. t'e

general r)le is t'at it is not

entitle" to it% Reogni*e"

e3eptions are &'en t'e lai- ,or

it is +ase" on Artile 221 567 o,

t'e Ci(il Co"e in an ation ,or li+el

or "e,a-ation or it lai-s t'at its

rep)tation 'as +een +es-ir'e"%

Cororate tort lia)ilit(• Tort lia+ility an +e i-pose" on a

orporation +ea)se generally

spea#ing. t'e r)les go(erning

lia+ility o, a prinipal or -aster ,or

a tort o--itte" +y an agent or

ser(ant are t'e sa-e &'et'er t'e

prinipal or -aster +e a nat)ral

person or a orporation% 8ene.

&'en a tort)o)s at is o--itte"

+y an o/er or agent o, a

orporation )n"er e3press

"iretion or a)t'ority o, t'e

orporation. it &o)l" +e lia+le%

$%at is t%e e*ect o& iercin' t%e

+eil o& cororate !ction#

T'e eet is to -a#e sto#'ol"ers

or -e-+ers lia+le ,or a orporate

o+ligation%

T'e 9,ra)" test: applies &'en

orporate !tion is )se" to ;)sti,y

a &rong. protet ,ra)" or "e,en" a

ri-e%

T'e ot'er tests to "eter-ine

applia+ility are< 5a7 ontrol test

5+7 alter$ego or instr)-entality

test. or 57 e)ity test

How is t%e nationalit( o& a

cororation "etermine"#

As a general r)le. nationality is

"eter-ine" +y plae o,

inorporation%

T'e 9ontrol test: as a -eans o,

"eter-ining nationality loo#s at

t'e nationality o, t'e sto#'ol"ers

or -e-+ers o, t'e orporation%

T'e 9gran",at'er test: as a -eans

o, "eter-ining nationality loo#s at

t'e perentage o, ,oreign 'ol"ings

in a orporation &'i' is a

sto#'ol"er in a =ilipino

orporation to "eter-ine &'et'er

or not t'e perentage re)ire-ent

o, =ilipino o&ners'ip 'as +een

-et%

$%at is t%e "octrine o& relation#

T'is re,ers to t'e retroati(ity o,

t'e !ling o, t'e a-en"-ent to

e3ten" t'e orporate ter- to t'e

"ate o, t'e passage o, t'e

appropriate resol)tions to e3ten"

t'e ter- in instanes &'en t'e

,ail)re to !le t'e a-en"e" artiles

is ")e to t'e neglet o, t'e o/er

&it' &'o- it is re)ire" to +e !le"

or a &rong,)l re,)sal to reei(e it%

T'is is also #no&n as t'e 9relating

+a# "otrine%:


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How are s%ares classi!e"#

1% S'ares -ay +e lassi!e" as

o--on. 'ol"ers o, &'i' are

entitle" to a pro$rata "i(ision o,

pro!ts. or pre,erre". 'ol"ers o,

&'i' are entitle" to so-e priority

on "istri+)tion o, pro!ts an"

assets o(er o--on s'are'ol"ers%

2% T'ey an also +e lassi!e" as &it'

par (al)e. re,erring to a !3e"

-ini-)- iss)e prie state" in t'e

artiles an" t'e erti!ate. or &it'

no par (al)e. re,erring to t'e

a+sene o, any state" (al)e in t'eartiles an" t'e erti!ate%

>% Ban#s. tr)st o-panies. ins)rane

o-panies. p)+li )tilities an"

+)il"ing an" loan assoiations

annot iss)e no par (al)e s'ares%

$%at is a re"eema)le s%are#

• T'ese are s'ares o, sto#s iss)e"

+y a orporation &'i' sai"

orporation an p)r'ase or ta#e

)p ,ro- t'eir 'ol"ers )pon e3piryo, t'e perio" state" in erti!ates

o, sto# representing sai" s'ares%

• A,ter a re"e-ption. it is re)ire"

t'at t'e orporation s'o)l" 'a(e

s)/ient assets in its +oo#s to

o(er "e+ts an" lia+ilities.

inl)si(e o, apital sto#%

Re"e-ption. t'ere,ore. -ay not

+e -a"e &'ere t'e orporation is

insol(ent or i, s)' re"e-ption &ill

a)se insol(eny or ina+ility o, t'eorporation to -eet its "e+ts as

t'ey -at)re%

$%at is a treas,r( s%are#

A treas)ry s'are is a s'are t'at

'as +een iss)e" an" pai" ,or +)t

s)+se)ently rea)ire" +y

p)r'ase. re"e-ption. "onation or

any ot'er la&,)l -eans%

It -ay again +e "ispose" o, ,or a

reasona+le prie as "eter-ine" +yt'e +oar"%

Note t'at its a)isition -)st +e

al&ays +e ,)n"e" +y s)rpl)s

pro!ts. ot'er&ise it (iolates t'e

Tr)st =)n" ?otrine as apital is

i-paire"%

$%at are t%e r,les on non-+otin'

s%ares#

Pre,erre" s'ares -ay +e "epri(e"

o, (oting rig'ts. toget'er &it'

re"ee-a+le s'ares +)t i, so. t'ere

-)st +e a lassseries &'i' s'all

'a(e ,)ll (oting rig'ts%

Ne(ert'eless. e(en i, (oting rig'ts

are not en;oye". 'ol"ers o, s)'

s'ares s'all still (ote in t'e

,ollo&ing instanes< 517

a-en"-ent o, artiles 527

a"option or a-en"-ent o, +y la&s

5>7 sale. lease. e3'ange. ple"ge

or ot'er "isposition o, all or

s)+stantially all o, orporate

property 547 inrease"erease o,

orporate +on"e" in"e+te"ness

5@7 inrease"erease o, apital

sto# 57 -ergeronsoli"ation 567

in(est-ent in anot'er orporation

or +)siness. an" 57 "issol)tion

$%at is t%e e*ect o& Gam)oa +.

Te+es#• T'e r)ling in a-+oa (% Te(es

5@2 SCRA 0. D)ne 2. 20117

presri+es t'at in "eter-ining t'e

-eaning o, t'e ter- 9apital: as

presri+e" in Setion 11. Artile

II. National Eono-y an"

Patri-ony o, t'e Constit)tion it is

"ee-e" to re,er to s'ares o, sto#

t'at an (ote in t'e eletion o,

"iretors o, t'e orporation%

$%at is a s,)scrition contract#

It is a ontrat ,or t'e a)isition

o, )niss)e" s'ares in an e3isting

orporation or one t'at is to +e

,or-e" regar"less o, t'e &ay t'e

ontrat is "eno-inate"%

T'ey an +e eit'er +e a pre$

inorporation or post inorporation

s)+sription ontrat%

A pre$inorporation s)+sription

ontrat is irre(oa+le ,or a perio"

o, -ont's ,ro- "ate o,

s)+sription )nless all ot'er

s)+sri+ers onsent or t'e

orporation ,ails to -ateriali*e

&it'in t'e perio"% 8o&e(er. it

+eo-es a+sol)tely irre(oa+le i,


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Commercial

Green Notes 2014


BAR OPERATIONS 2014

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t'e artiles 'a(e +een !le" &it'

t'e SEC%

$%o is a romoter# A pro-oter is one &'o +rings

a+o)t t'e ,or-ation an"

organi*ation o, a orporation%

8e 'as ;oint personal lia+ility ,or a

orporation t'at &as ne(er

,or-e"%

W'en t'e orporation 'as +een

,or-e". )pon rati!ation +y t'e

+oar" o, 'is ontrats. 'e

+eo-es an agent o, t'e

orporation% Lia+ility t'en is +orne

+y t'e orporation in its apaity

as prinipal%

$%at are t%e non-amen"a)le arts

o& t%e Articles o& Incororation#

T'e ,ollo&ing ite-s annot +e

a-en"e"< 5a7 Na-es o,

inorporatorsF 5+7 Na-es o,

original s)+sri+ers to t'e apital

sto# o, t'e orporation an" t'eir

s)+sri+e" an" pai" )p apitalF 57

Na-es o, t'e original "iretorsF 5"7

Treas)rer elete" +y t'e original

s)+sri+ersF 5e7 Me-+ers &'o

ontri+)te" to t'e initial apital o,

t'e non$sto# orporationF an" 5e7

Witnesses to an"

a#no&le"ge-ent o, t'e artiles%

$%en "oes a cororation commence

to %a+e e/istence#

A orporation o--enes to 'a(e

e3istene ,ro- t'e iss)ane +y t'e

SEC o, a erti!ate o,

inorporation )n"er its o/ial

seal% T'e eet o, &'i' is to

onstit)te its sto#'ol"ers or

-e-+ers an" t'eir s)essors as

a Bo"y Politi an" Corporate )n"er

t'e na-e an" ,or t'e ter- state"

in t'e Artiles%

It is sai" to 'a(e +een gi(en "e

;)re e3istene or an +e sai" to +e

inorporate"%

T'e e3eption is a Corporation

Sole. &'i' is "ee-e"

inorporate" )pon !ling o, its

Artiles%

$%at m,st a cororation "o a&ter

incororation#

A orporation 'as to ,or-ally

organi*e an" o--ene

transation o, +)siness &it'in 2

years ,ro- "ate o, inorporation%

I, it ,ails to "o so. its orporate

po&ers ease an" it is "ee-e"

"issol(e"%

I, it o--enes. +)t +eo-es

ontin)o)sly inoperati(e ,or @

years. t'e sa-e is gro)n" ,or

s)spension or re(oation o, t'e

erti!ate%

$%at are (-Laws# $%at are its

elements#

By$la&s are< t'e r)les o, ation

a"opte" +y a orporation ,or its

internal go(ern-ent an" ,or t'e

go(ern-ent o, its sto#'ol"ers or

-e-+ers an" t'ose 'a(ing t'e

"iretion. -anage-ent an"

ontrol o, its aairs in relation to

t'e orporation an" a-ong

t'e-sel(es%

T'e ele-ents o, (ali" +y$la&s are<

5a7 t'ey -)st not +e ontrary to

t'e o"e. it is (oi" i, ontrary to

t'e o"e 5+7 not +e ontrary to

-oral or p)+li poliy 57 -)st not

i-pair o+ligations o, ontrat G as

a general r)le 5"7 t'ey -)st +e

general an" )ni,orin appliation

5e7 t'ey -)st +e onsistent &it'

t'e C'arter Artiles 5,7 t'ey -)st

+e reasona+le or apa+le o,

o-pliane%

General Caacit( +. Seci!c Caacit(

• T'e general apaity t'eory

-aintains t'at a orporation is

sai" to 'ol" s)' po&ers as are

not pro'i+ite" or &it''el" ,ro- it

+y general la&%

• T'e spei! apaity t'eory

-aintains t'at t'e orporation

annot e3erise po&ers e3ept

t'ose e3presslyi-plie"ly gi(en%

$%at is t%e "octrine o& in"i+i",alit(

o& s,)scrition# $%at is t%e

"octrine o& e,alit( o& s%ares#


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• T'e "otrine o, in"i(i")ality o,

s)+sription 'ol"s t'at a

s)+sription is one entire an"

in"i(isi+le &'ole ontrat% It

annot +e "i(i"e" into portions%

• T'e "otrine o, e)ality o, s'ares

'ol"s t'at &'ere t'e artiles o,

inorporation "o not pro(i"e ,or

any "istintion o, t'e s'ares o,

sto#. all s'ares iss)e" +y t'e

orporation are pres)-e" to +e

e)al an" en;oy t'e sa-e rig'ts

an" pri(ileges an" are also s)+;et

to t'e sa-e lia+ilities%

$%at are re-emti+e ri'%ts#

Pre$e-pti(e rig'ts re,erring to t'e

rig't to s)+sri+e to all iss)es or

"isposition o, s'ares in proportion

to a sto#'ol"erHs s'are'ol"ings

-ay +e "enie"%

As a general r)le. pre$e-pti(e

rig'ts e3ist +)t -ay +e restrite"

or "enie" +y t'e Artiles or an

a-en"-ent t'ereto% It &ill not

e3ist &'en 5a7 t'e s'ares areiss)e" in o-pliane &it' la&s

re)iring sto# oerings or

-ini-)- sto# o&ners'ip 5+7 t'e

s'ares are iss)e" in goo" ,ait'

&it' appro(al o, sto#'ol"ers

representing 2> o, t'e

o)tstan"ing apital sto# in

e3'ange ,or property nee"e" ,or

orporate p)rposes or in pay-ent

o, a pre(io)sly ontrate" "e+t%

I, restrite" +y an a-en"-ent. asto#'ol"er -ay e3erise 'is

appraisal rig't%

How can cororate assets )e

"isose" o

A orporation an ,reely "ispose o,

its assets%

8o&e(er. any sale. lease.

e3'ange. -ortgage. ple"ge or

ot'er "isposition o, all or

s)+stantially all o, orporate

assets &ill +e re)ire" to +e

)n"erta#en )pon a -a;ority (ote

o, t'e Boar" an" 2> (ote o,

sto#'ol"ers or -e-+ers. &ritten

notie 'a(ing +een gi(en &'en

t'e onte-plate" "isposition &ill

ren"ere" it inapa+le o, ontin)ing

t'e +)siness or ao-plis'ing its

p)rpose%

$%en can t%e cororation ac,ire

its own s%ares#

T'e po&er to a)ire its o&n

s'ares an only +e )n"erta#en i, it

is ,or legiti-ate orporate

p)rposes pro(i"e" t'at it 'as

)nrestrite" retaine" earnings%

T'e legiti-ate orporate p)rposes

,or a)isition are 5a7 eli-ination

o, ,rational s'ares or t'ose less

t'an 1 s'are 5+7 to ollet or

o-pro-ise an in"e+te"ness to

t'e orporation arising o)t o, an

)npai" s)+sription in a

"elin)eny sale an" to p)r'ase

"elin)ent s'ares at t'e a)tion

57 to pay "issenting or

&it'"ra&ing sto#'ol"ers entitle"

to t'e pay-ent o, t'eir s'ares%

$%at in" o& "i+i"en"s can )e

"eclare" an" w%en are t%e( 'i+en#

enerally "i(i"en"s -ay +e gi(en

in as' or in sto#%

T'e rig't o, a sto#'ol"er to t'e

"i(i"en" is i--e"iate i, it is a

as' "i(i"en"% T'e orporation

+eo-es a "e+tor o, t'e

sto#'ol"er% I, it is a sto#

"i(i"en". it is s)+;et to a

sto#'ol"er (ote an" an inrease

o, apital sto#. i, it o-es ,ro- a

ne& iss)ane%

8o&e(er. t'at any as' "i(i"en"

")e on "elin)ent sto# s'all !rst

+e applie" to t'e )npai" +alane.

osts. an" e3penses or i, it +e a

sto# "i(i"en". it is &it''el" )ntil

t'e )npai" s)+sription is pai"%

$%en an" %ow can "i+i"en"s )e

"eclare"#

T'e Boar" -ay "elare "i(i"en"s

o)t o, )nrestrite" retaine"

earnings or total assets less

lia+ilities an" legal apital. t'ey

-)st +e a)-)late" ,ro- nor-al

an" ontin)o)s operations not


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alloate" ,or any -anagerial.

ontrat)al or legal p)rpose an"

&'i' are ,ree ,or "istri+)tion to

sto#'ol"ers as "i(i"en"s paya+le

in as'. in property or in sto# to

all sto#'ol"ers on t'e +asis o,

o)tstan"ing sto# 'el" +y t'e-%

Can a "eclaration o& "i+i"en"s )e

comelle"#

?i(i"en" "elaration is generally

"isretionary +)t +eo-es

-an"atory &'en its s)rpl)s pro!ts

are in e3ess o, 100 o, pai" in

apital sto#% 8o&e(er. t'e-an"atory 'arater s'all not

o+tain< 5a7 &'en ;)sti!e" +y

"e!nite orporate e3pansion

pro;ets or progra-s appro(e" +y

t'e Boar" 5+7 &'en it is pro'i+ite"

+y a loan agree-ent &it' any

!nanial instit)tion or re"itor

,ro- "elaring "i(i"en"s &it'o)t

its onsent an" t'e onsent is not

yet o+taine" 57 &'en it an +e

s'o&n t'at s)' retention isneessary )n"er speial

ir)-stanes o+taining in t'e

orporation. as t'ere is a nee" ,or

a speial reser(e ,or pro+a+le

ontingenies%

$%at are mana'ement contracts#

How can t%e( )e entere" into#

It is any ontrat &'ere+y a

orporation )n"erta#es to -anage

or operate all or s)+stantially all o, t'e +)siness o, anot'er

orporation is a -anage-ent

ontrat e(en i, alle" a ser(ie or

operating ontrat%

It an +e )n"erta#en &it' t'e

appro(al +y a -a;ority (ote o, t'e

Boar" an" -a;ority (ote o, t'e

sto#'ol"ers or -e-+ers o, +ot'

t'e -anage" an" t'e -anaging

orporation% Pro(i"e" t'at. i, t'e

sto#'ol"ers representing t'esa-e interest o, +ot' t'e

-anaging an" -anage"

orporations o&n or ontrol -ore

t'an 1> o, t'e o)tstan"ing apital

sto# entitle" to (ote o, t'e

-anaging orporation or a

-a;ority o, t'e Boar" o, t'e

-anaging orporation li#e&ise

onstit)te a -a;ority o, t'e +oar"

o, t'e -anage" orporation. t'e

ontrat -)st +e appro(e" +y 2>

(ote o, t'e o)tstan"ing apital

sto# or o, t'e -e-+ers o, t'e

-anage" orporation%

$%at are ,ltra +ires acts#

Jltra Kires ats are ats t'at are in

(iolation o, t'e Co"e as it pro(i"es

t'at< no orporation s'all possess

or e3erise orporate po&ers

e3ept t'ose on,erre" +y t'eo"e. its Artiles an" e3ept as

s)' are neessary or ini"ental to

t'e e3erise o, t'e po&ers so

on,erre"%

A rati!ation is possi+le pro(i"e"

t'e at is not illegal%

I, )ltra (ires in part only an" i,

separa+le. it is (ali" as to t'e part

not )ltra (ires. in(ali" as to t'e

ot'er part%

$%at is t%e tr,st &,n" "octrine#

T'e s)+sri+e" apital sto# o, t'e

orporation is a tr)st ,)n" ,or t'e

pay-ent o, t'e "e+ts o, t'e

orporation &'i' t'e re"itors

'a(e t'e rig't to loo# )p to satis,y

t'eir re"its. an" &'i' t'e

orporation -ay not "issipate%

T'e e3eptions are< 5a7 Re")tion

o, t'e a)t'ori*e" apital sto#F 5+7

P)r'ase o, re"ee-a+le s'aresF

57 ?issol)tion an" e(ent)al

li)i"ation%

$%at are t%e mana'ement ri'%ts o&

a stoc%ol"er#

• 5a7 To atten" an" (ote in person or

+y pro3y at a sto#'ol"erHs

-eetingsF 5+7 To elet an" re-o(e

"iretorsF 57 To appro(e ertain

orporate atsF 5"7 To o-pel t'e

alling o, t'e -eetingsF 5e7 To

'a(e t'e orporation (ol)ntarily

"issol(e"F 5,7 To enter into a (oting

tr)st agree-entF an" 5g7 To

a"opta-en"appeal t'e +y$la&s

or a"opt ne& +y$la&s%


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$%at are t%e rorietar( ri'%ts o& a

stoc%ol"er#

• 5a7 To trans,er sto# in t'e

orporate +oo#F 5+7 To reei(e

"i(i"en"s &'en "elare"F 57 To

t'e iss)ane o, erti!ate o, sto#

or ot'er e(i"ene o, sto#

o&ners'ipF 5"7 To partiipate in t'e

"istri+)tion o, orporate assets

)pon "issol)tionF an" 5e7 To pre$

e-ption in t'e iss)e o, s'ares%

$%at are t%e reme"ial ri'%ts o& a

stoc%ol"er#• 5a7 To inspet orporate +oo#sF 5+7

To reo(er sto# )nla&,)lly sol"

,or "elin)enyF 57 To "e-an"

pay-ent in t'e e3erise o,

appraisal rig'tF 5"7 To +e ,)rnis'e"

reent !nanial state-ents or

reports o, t'e orporationHs

operationF an" 5e7 To +ring s)its

5"eri(ati(e s)it. in"i(i")al s)it.

an" representati(e s)it7%

$%at is a "eri+ati+e s,it# An

in"i+i",al s,it# A reresentati+e

s,it#

A "eri(ati(e s)it is one +ro)g't +y

one or -ore sto#'ol"ers or

-e-+ers in t'e na-e an" on

+e'al, o, t'e orporation to

re"ress &rongs o--itte" against

it or to protet or (in"iate

orporate rig'ts. &'ene(er t'e

o/ials o, t'e orporation re,)seto s)e or are t'e ones to +e s)e"

or 'ol" ontrol o, t'e orporation%

An in"i(i")al s)it is one +ro)g't

+y a sto#'ol"er against t'e

orporation ,or "iret (iolation o,

'is ontrat)al rig'ts%

A representati(e s)it is one

+ro)g't +y a person in 'is o&n

+e'al, an" on +e'al, o, all

si-ilarly sit)ate"%

$%at are t%e re,isites o& a

"eri+ati+e s,it#

• In t'e ase o, 8i$iel" Realty. In%

(% Co)rt o, Appeals. @0 SCRA @4

an" reiterate" in Lisa-

Enterprises In% (% Bano ?e Oro

Jni+an#. In%. 60 SCRA >10. it

&as 'el" t'at t'e re)isites o, a

"eri(ati(e s)it are< 5a7 t'e party

+ringing t'e s)it s'o)l" +e a

s'are'ol"er as o, t'e ti-e o, t'e

at or transation o-plaine" o,.

t'e n)-+er o, 'is s'ares not +eing

-aterial. 5+7 'e 'as trie" to

e3'a)st intra$orporate re-e"ies.

an" 57 t'e a)se o, ation

at)ally "e(ol(es on t'e

orporation. t'e &rong"oing or

'ar- 'a(ing +een a)se" t'e

orporation. an" not t'e parti)lar

sto#'ol"er +ringing t'e s)it%

$%at are t%e rimar( o)li'ations o&

a stoc%ol"er#

• Sto#'ol"ers 'a(e t'e ,ollo&ing

o+ligations< 5a7 O+ligation to pay

t'e orporation t'e onsi"eration

,or 'is s)+sription. inl)"ing

interest &'en re)ire"F 5+7

O+ligation to pay t'e re"itors o,

t'e orporation to t'e e3tent o,

t'eir s)+sription. or +eyon". inase t'e "otrine o, piering t'e

(eil o, orporate !tion is

applia+le%

$%at is a ro/(#

• Pro3y is a &ritten a)t'ori*ation.

e-po&ering anot'er person

5pro3y7 to represent a s'are'ol"er

an" (ote in 'is stea" in t'e

sto#'ol"erHs -eeting%

• W'at is a (oting tr)st agree-ent• It is an agree-ent &'ere+y one or

-ore sto#'ol"ers trans,er t'eir

s'ares o, sto#s to a tr)stee. &'o

t'ere+y a)ires ,or a perio" o,

ti-e t'e (oting rig'ts 5an"or any

ot'er spei! rig'ts7 o(er s)'

s'aresF an" in ret)rn. tr)st

erti!ates are gi(en to t'e

sto#'ol"ers. &'i' are

trans,era+le li#e sto# erti!ates.

s)+;et. to t'e tr)st agree-ent%

$%at owers are reser+e" onl( &or

stoc%ol"ers or mem)ers#

T'e po&ers t'at are e3pressly

reser(e" +y la& to sto#'ol"ers or

-e-+ers are


7/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 7 of 50

"iretors or tr)stees 5+7 granting

o, o-pensation. ot'er t'an per

"ie-s. to "iretors 57 rati!ation

o, ats o, sel, "ealing "iretor or

tr)stee. interlo#ing "iretors.

"isloyal "iretors 5"7 "elegation o,

po&er to a-en" +y$la&s 5e7

alling o, a -eeting. )pon goo"

a)se. &'en no person is

a)t'ori*e" to all it 5,7 &'en

-anage-ent o, a lose

orporation is (este" in t'e

sto#'ol"ers%

$%at are t%e ercenta'e +otin're,irements w%en stoc%ol"ers or

mem)ers act#

T'e re)ire" (ote is )s)ally 2> o,

t'e o)tstan"ing apital sto#%

In t'e ,ollo&ing. it is a -a;ority< 5a7

eletion o, -e-+ers o, t'e Boar"

5+7 re-o(al o, "iretors or tr)stees

57 appro(al o, -anage-ent

ontrats 5"7 a"option o, +y la&s

its a-en"-ent or repeal an" to

re(o#e po&er o, a-en"-ent"elegate" to t'e Boar" 5e7 !3

iss)e prie o, no par (al)e s'ares

5,7 !3ing o-pensation o,

"iretors%

$%( is t%e )oar" t%e reositor( o&

cororate owers#

T'e la& pro(i"es t'at all orporate

po&ers o, all orporations ,or-e"

)n"er it s'all +e e3erise". all

+)siness on")te" an" allproperty 'el" +y a Boar" o,

?iretors or Tr)stees%

It is t'e +oar" &'i' "eter-ines

orporate poliy an" presri+es

t'e -anner o, general

-anage-ent o, its +)siness

ati(ities%

T'is is so ,or t'e p)rpose o,

e/ieny in e3'ange ,or pro!ts%

How "oes one )ecome a mem)er o&

t%e )oar"#

One -)st possess t'e ,ollo&ing

)ali!ations< 5178e -)st o&n at

least 1 s'are or at least it s'o)l"

+e liste" in 'is na-e as o&ner. i, it

is a non sto# orporation. 'e

-)st +e a -e-+erF 527 E(ery

"iretortr)stee -)st ontin)o)sly

o&n at least a s'are ")ring 'is

ter- or +e a -e-+erF 5>7 A

-a;ority -)st +e resi"ents o, t'e

P'ilippinesF 547 8e -)st not 'a(e

+een on(ite" +y !nal ;)"g-ent

o, an oense p)nis'a+le +y a

perio" in e3ess o, years or a

(iolation o, t'e o"e. o--itte"

&it'in a perio" o, @ years prior to

t'e "ate o, eletionF 5@7 Be a

=ilipino iti*en in t'e instanes

re)ire" +y la&F 57 S)' ot'er

)ali!ations as -ay +epresri+e" in t'e By$la&s%

$%at is meant )( in"een"ent

"irector#

An In"epen"ent ?iretor is a

person &'o. apart ,ro- 'is ,ees

an" s'are'ol"ings. is in"epen"ent

o, -anage-ent an" ,ree ,ro- any

+)siness or ot'er relations'ip

&'i' o)l". or o)l" reasona+ly

+e perei(e" to. -ateriallyinter,ere &it' 'is e3erise o,

in"epen"ent ;)"g-ent in arrying

o)t 'is responsi+ilities as a

"iretor%

How is t%e ower o& remo+al

e/ercise"#

T'e re-o(al o, "iretors or

tr)stees re)ire t'at 5a7 it -)st

ta#e plae at a reg)lar -eeting o,

t'e orporation or a speial-eeting alle" ,or t'at p)rpose 5+7

t'ere -)st +e pre(io)s notie to

sto#'ol"ers or -e-+ers o, t'e

intention to propose s)' re-o(al%

T'e notie -)st +e spei! an" in

&riting. +y p)+liation or sen"ing

o, a opy t'e notie 57 t'e

re-o(al is eete" +y 2> (ote o,

apital sto# -e-+ers entitle" to

(ote e3ept t'at a "iretor elete"

+y )-)lati(e (oting annot +ere-o(e" as its eet is to "epri(e

-inority sto#'ol"ers or -e-+ers

o, t'eir representation%

How are +acancies !lle"#


8/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 8 of 50

Kaanies are !lle" +y t'e

sto#'ol"ers or -e-+ers i, t'e

a)se is< 5a7 re-o(alF 5+7

e3pirationF 57 ot'er a)ses &'en

t'e re-aining -e-+ers o, t'e

+oar" "o not onstit)te a )or)-

or lea(es t'e !lling )p o, t'e

(aany to t'e-F 5"7 &'en t'ere is

an inrease in t'e n)-+er o,

"iretorstr)stees%

A (aany an also +e !lle" +y t'e

+oar" i, t'e a)se o, t'e (aany

is not re-o(al or e3piration an"

t'e re-aining -e-+ers still

onstit)te a )or)-% T'is an only

+e e3erise" +y t'e +oar" i, t'ey

ating &it'in t'eir ter-%

$%en is a )oar" mem)er consi"ere"

as "islo(al#

A "iretor is "isloyal i, +y (irt)e o,

'is o/e. 'e a)ires ,or 'i-sel, a

+)siness opport)nity &'i' s'o)l"

+elong to t'e orporation. t'ere+y

o+taining pro!t. 'e -)st ao)nt

,or it +y re,)n"ing t'e sa-e to t'e

orporation. e(en i, t'e "iretor

ris#e" 'is o&n ,)n"s in t'e

(ent)re. )nless. 'is at is rati!e"

+y a (ote o, t'e sto#'ol"ers

o&ning or representing 2> o,

o)tstan"ing apital sto#% T'is is

also #no&n as t'e ?otrine o,

Corporate Opport)nity% T'e

pro(ision "oes not apply i,< 5a7 'e

ats in goo" ,ait'. or. 5+7 t'e

orporation is )na+le to )n"erta#et'e opport)nity or t'e sa-e is not

essential to t'e orporation%

T'e ")ty o, loyalty o, a "iretor

prel)"es t'e "iretor ,ro-

a)iring an opport)nity t'at is

open to t'e orporation +ea)se

t'at is in eet o-peting &it'

t'e orporation. o,tenti-es &it'

t'e a"(antage o, insi"e

in,or-ation t')s "epri(ing it o, t'e

pro!ts t'at it &o)l" 'a(eot'er&ise earne"%

$%at is t%e r,le on )oar"

comensation#

T'e general r)le is +oar"

-e-+ers are not entitle" to

reei(e any o-pensation e3ept

reasona+le per "ie-s%

E3eptions are< 5a7 &'en t'e +y$

la&s pro(i"e ,or o-pensationF 5+7

&'en grante" +y a -a;ority (ote

o, t'e sto#'ol"ers or -e-+ers

s)+;et to t'e li-it t'at it s'o)l"

not e3ee" 10 o, t'e net ino-e

+e,ore ino-e ta3 ")ring t'e

pree"ing yearF 57 &'en +oar"

-e-+ers ren"er ser(ie as

o/ers%

$%at is t%e ),siness 3,"'ment r,le#

• T'e +)siness ;)"g-ent r)le 'ol"s

t'at o)rts &ill not inter,ere in t'e

"eisions -a"e +y t'e +oar" as

regar"s t'e internal aairs o, t'e

orporation. )nless s)' ontrats

are so )nonsiona+le an"

oppressi(e as to a-o)nt to a

&anton "estr)tion o, rig'ts o, t'e

-inority%

$%en is t%ere soli"ar( lia)ilit(

imose" ,on mem)ers o& t%e

)oar"# Soli"ary lia+ility is i-pose" &'en<

5a7 8e &ill,)lly an" #no&ingly

(otes ,or an" assents to a patently

)nla&,)l at o, t'e orporationF 5+7

T'ere is gross negligene or +a"

,ait' in "ireting t'e aairs o, t'e

orporationF 57 8e a)ires any

personal or pe)niary interest in

onit o, ")tyF 5"7 8e agrees or

stip)lates in a ontrat to 'ol"

'i-sel, lia+le &it' t'e orporationFor 5e7 A spei! pro(ision o, la&

re)ires it%

$%at is t%e secial &act "octrine#

$%at is insi"e in&ormation#

• It is a "otrine 'ol"ing t'at a

orporate o/er &it' s)perior

#no&le"ge gaine" +y (irt)e o,

+eing an insi"er o&es a li-ite"

!")iary ")ty to a s'are'ol"er in

transations in(ol(ing trans,er o, sto#%

• In,or-ation not #no&n to t'e

p)+li t'at one 'as o+taine" +y

(irt)e o, +eing an insi"er li#e a

"iretor%


9/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 9 of 50

$%at is t%e r,le on sel& "ealin'

"irectors#

T'e general r)le is t'at a ontrat

+et&een a sel, "ealing

"iretortr)stee or o/er an" t'e

orporation is (oi"a+le at t'e

option o, t'e orporation%

Not&it'stan"ing. t'e ontrat

s'all +e (ali" &'en< 5a7 presene

o, t'e "iretortr)stee in t'e +oar"

-eeting in &'i' t'e ontrat &as

appro(e" &as not neessary to

onstit)te a )or)- 5+7 'is (ote is

not neessary to appro(e t'e

ontrat 57 t'at t'e ontrat is,air an" reasona+le )n"er t'e

ir)-stanes% In t'e ase o, an

o/er. t'e ontrat 'as pre(io)sly

+een appro(e" +y t'e +oar"% I,

'o&e(er. on"itions 5a7 an" 5+7

are a+sent. t'e ontrat -ay +e

rati!e" +y 2> (ote o, t'e

o)tstan"ing apital sto# in a

-eeting ")ly alle" ,or s)'

p)rpose &it' ,)ll "islos)re o, t'e

a"(erse interest +eing -a"e att'e -eeting an" t'at t'e ontrat

is ne(ert'eless ,air an"

reasona+le%

$%at is t%e r,le on inter-locin'

"irectors#

T'e r)le t'at o+tains as ,ar as

ontrats +et&een orporations

&it' interlo#ing "iretors is t'at

t'e ontrat is (ali" as long as

t'ere is no ,ra)" an" t'e ontratis ,air an" reasona+le% 8o&e(er. i,

a "iretorHs interest in one

orporation is s)+stantial an" 'is

interest in t'e ot'er orporations

is no-inal. t'e ontrat s'all +e

s)+;et to t'e r)le on sel,$"ealing

"iretors inso,ar as t'e

orporations &'ere 'e 'as a

no-inal s'are as it is as i, t'e

orporation is transating &it' a

sel, "ealing "iretor%S'are'ol"ings in e3ess o, 20 o,

t'e o)tstan"ing apital sto# s'all

+e onsi"ere" s)+stantial%

$%at is t%e r,le on a)stention

",rin' )oar" meetin's#

• An a+stention -ay 'a(e t'e

pratial eet o, a 9no: (ote

sine t'e -otion -ay ,ail ,or la#

o, s)/ient 9yes: (otes% Jnless a

greater n)-+er is alle" ,or in t'e

artiles or +y$la&s. a -atter is

"ee-e" 9appro(e": +y t'e +oar"

i, at any -eeting at &'i' a

)or)- is present at least a

-a;ority o, t'e re)ire" )or)- o,

"iretors (otes in ,a(or o, t'e

ation%

$%at is a certi!cate o& stoc# $%at

is its nat,re# $%at is an,ncerti!cate" s%are#

A erti!ate o, sto# is a paper

representation or tangi+le

e(i"ene o, t'e sto# itsel, an" o,

(ario)s interests t'erein%

T'e nat)re o, a erti!ate o, sto#

is t'at it is a pri-a ,aie proo, t'at

t'e sto# "esri+e" t'erein is (ali"

an" gen)ine in t'e a+sene o, an

e(i"ene to t'e ontrary%

An )nerti!ate" s'are is a

s)+sription ")ly reor"e" an"

pai" in t'e orporate +oo#s +)t

'as no orrespon"ing erti!ate o,

sto# yet iss)e"%

$%at is in+ol,ntar( "ealin'#

It re,ers to s)' &rit. or"er or

proess iss)e" +y a o)rt o, reor"

aeting s'ares o, sto#s &'i' +y

la& s'o)l" +e registere" to +e

eeti(e. an" also to s)'

instr)-ents &'i' are not t'e

&ill,)l ats o, t'e registere" o&ner

an" &'i' -ay 'a(e +een

e3e)te" e(en &it'o)t 'is

#no&le"ge or against 'is onsent%

An in(ol)ntary "ealing is re)ire"

to +e registere" to onstit)te

onstr)ti(e notie%

$%at is t%e ri'%t o& araisal#

T'e rig't o, appraisal is t'e rig't

o, sto#'ol"er to "e-an"

pay-ent o, t'e ,air (al)e o, 'is

s'ares a,ter "issenting ,ro- a

propose" orporate ation

in(ol(ing a ,)n"a-ental 'ange in


10/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 10 of 50

t'e orporation in t'e ases

pro(i"e" ,or +y la&%

It is a(aila+le &'en 5a7 artiles

are a-en"e" an" s)' 'as t'e

eet o, 'anging or restriting

t'e rig'ts o, a s'are'ol"er or a

lass o, s'ares or a)t'ori*ing

pre,erenes in any respet

s)perior to t'ose o)tstan"ing

s'ares o, any lass 5+7 e3ten"ing

or s'ortening t'e orporate ter-

57 in ases o, sale. lease.

e3'ange trans,er. -ortgage.

ple"ge or "isposition o, all or

s)+stantially all o, orporateassets or property 5"7 in ases o,

-ergersonsoli"ations 5e7

in(est-ent +y t'e orporation in

anot'er orporation or +)siness

ot'er t'an its pri-ary p)rpose 5,7

a sto#'ol"er in a lose

orporation ,or any reason -ay

o-pel t'e sai" orporation to

allo& t'e e3erise o, 'is appraisal

rig't%

How is t%e ri'%t o& araisal

e/ercise"#

A,ter (oting against t'e propose"

orporate ation. a &ritten

"e-an" -)st +e -a"e on t'e

orporation &it'in >0 "ays a,ter

t'e "ate on &'i' t'e (ote &as

ta#en ,or pay-ent o, t'e ,air (al)e

o, 'is s'ares%

I, no "e-an" is -a"e &it'in >0

"ays. 'e is "ee-e" to 'a(e&ai(e" t'e e3erise o, t'e rig't%

T'e sto#'ol"er -)st s)+-it 'is

erti!ate o, sto# &it'in 10 "ays

,or notation t'at s)' s'ares are

"issenting s'ares%

I, t'e erti!ate is not s)+-itte"

,or notation &it'in 10 "ays. t'e

orporation -ay onsi"er t'e

e3erise o, t'e rig't ter-inate" at

its option%

Jpon a "e-an". all rig'ts ar)ing

to t'e s'are are s)spen"e"

inl)"ing (oting rig'ts. only t'e

rig't to reei(e t'e ,air (al)e is

not s)spen"e". 'e is t'en pai"%

B)t . i, t'ere is no pay-ent &it'in

>0 "ays a,ter t'e a&ar". 'e is

restore" to all 'is rig'ts%

$%at are t%e mo"es o& "issol,tion# Kol)ntary "issol)tion re,erring to<

5a7 &'ere no re"itors are

aete"F 5+7 &'ere re"itors are

aete"F an" 57 +y s'ortening o,

t'e orporate ter-%

In(ol)ntary "issol)tion re,erring

to< 5a7 e3piration o, t'e orporate

ter-F 5+7 non$)serF 57 ontin)o)s

inoperation ,or a perio" o, at least

@ yearsF 5"7 legislati(e ationF an"

5e7 SEC ation in ases o, (iolation

o, t'e Co"e%

$%at are t%e mo"es o& li,i"ation#

A orporation -ay li)i"ate &it'in

t'e stat)tory perio" t'ro)g'< 5a7

By t'e orporation itsel, or its

+oar" o, "iretors or tr)steesF 5+7

By a tr)stee to &'o- t'e assets o,

t'e orporation 'a" +een

on(eye"F an" 57 By a

-anage-ent o--ittee or

re'a+ilitation reei(er appointe"

+y t'e SEC%

A orporation is allo&e" a > year

perio" to ena+le it to lose its

+)siness. ollet ,ro- "e+tors an"

settle &it' re"itors%

Can li,i"ation contin,e )e(on" t%e

(ear erio"#

Li)i"ation an ontin)e +eyon"

t'e > year perio"%

Reei(ers or tr)stees an at as

s)' +eyon" t'e > year perio"%

Pen"ing s)its )pon e3piration o,

t'e > year perio" -ay still +e

prose)te" +y t'e 'an"ling la&yer

&'o &ill t'en +e onstit)te" as a

tr)stee ,or s)' p)rpose%

$%at are close cororations#

It is one &'ose artiles pro(i"e

t'at< 5a7 All t'e orporationHs

iss)e" sto# o, all lasses.

e3l)si(e o, treas)ry s'ares. s'all

+e 'el" o, reor" +y not -ore t'an

a spei!e" n)-+er or persons not

e3ee"ing 20F 5+7 All t'e iss)e"

sto# o, all lasses s'all +e s)+;et


11/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 11 of 50

to one or -ore spei!e"

restritions on trans,erF an" 57

T'e orporation s'all not list in

any sto# e3'ange or -a#e any

p)+li oering o, any o, its sto#

o, any lass%

$%at are some o& t%e

c%aracteristics o& a close"

cororation#

• Sto#'ol"ers -ay at as "iretors

&it'o)t nee" o, eletion. 'o&e(er.

t'ey s'all ass)-e all o+ligations

an" lia+ilities o, "iretors%

• It -ay 'a(e a greater )or)-re)ire-ent%

• Pre$e-pti(e rig'ts e3ten" to all

sto# iss)es. e(en treas)ry s'ares%

• A sto#'ol"er -ay &it'"ra& an"

a(ail o, 'is rig't o, appraisal%

$%at is a "ea"loc#

It is &'en t'e "iretors or

sto#'ol"ers are so "i(i"e"

respeting t'e -anage-ent o, t'e

+)siness an" aairs o, t'eorporation t'at t'e (otes

re)ire" ,or any orporate ation

annot +e o+taine" an" as a

res)lt. +)siness an" aairs an no

longer +e on")te" to t'e

a"(antage o, t'e sto#'ol"ers%

$%en an ,nlicense" &orei'n

cororation %as t%e caacit( to s,e

I, it is not transating or "oing

+)siness in t'e P'ilippines. it ans)e )n"er< 5a7T'e isolate"

+)siness transation r)le. 5+7 A

a)se o, ation t'at is

in"epen"ent o, any +)siness

transation. 57 A a)se o, ation

t'at arises o)t o, a +)siness

transation t'at is not entere" into

in t'e P'ilippines. an" 5"7 A a)se

o, ation to protet its na-e.

rep)tation or goo"&ill s)+;et to

t'e r)le on reiproity )n"er t'eIPR%

$%at is a &orei'n cororation an"

t%e )asis &or o,r a,t%orit( o+er it#

• It is a orporation ,or-e".

organi*e" or e3isting )n"er any

la& ot'er t'an t'ose o, t'e

P'ilippines. an" &'ose la&s allo&

=ilipino iti*ens an" orporation to

"o +)siness in its o&n o)ntry or

state%

• T'e +asis o, a)t'ority o(er it is<

5a7 onsent an" 5+7 "oing +)siness

in t'e P'ilippines%

$%at tests ma( )e alie" to

"etermine transactin' ),siness in

t%e P%iliines#

5a7 Contin,it( test G "oing

+)siness i-plies a ontin)ity o,

o--erial "ealings an"

arrange-ents. an" onte-plates

to so-e e3tent t'e per,or-ane o,

ats or &or#s or t'e e3erise o,

so-e ,)ntions nor-ally ini"ent

to an" in progressi(e prose)tion

o,. t'e p)rpose an" o+;et o, its

organi*ationF 5+7 S)+se)ent test

G a ,oreign orporation is "oing

+)siness in t'e o)ntry i, it is

ontin)ing t'e +o"y or s)+stane

o, t'e enterprise o, +)siness ,or&'i' it &as organi*e"F an" 57

Contrat test G &'et'er t'e

ontrats entere" into +y t'e

,oreign orporation. or +y an agent

ating )n"er t'e ontrol an"

"iretion o, t'e ,oreign

orporation. are ons)--ate" in

t'e P'ilippines%

$%( is t%ere nee" &or a &orei'n

cororation to o)tain a license totransact ),siness#

T'e p)rpose o, t'e la& in re)iring

t'at a ,oreign orporation "oing

+)siness in t'e P'ilippines to +e

liense" is to s)+;et it to t'e

;)ris"ition o, t'e o)rts% T'e

o+;et is not to pre(ent ,oreign

orporation ,ro- per,or-ing single

ats +)t to pre(ent it ,ro-

a)iring a "o-iile ,or t'e

p)rpose o, +)siness &it'o)t ta#ingsteps neessary to ren"er it

a-ena+le to s)its in loal o)rts%

5oes a &orei'n cororation ossess

t%e ersonalit( to s,e# To )e s,e"#


12/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 12 of 50

As a general r)le. only ,oreign

orporations t'at 'a(e +een

iss)e" a liense to operate a

+)siness in t'e P'ilippines 'a(e

t'e personality to s)e%

By &ay o, e3eption. a party is

estoppe" to 'allenge t'e

personality o, a ,oreign

orporation to s)e. e(en i, it 'as

no liense. a,ter 'a(ing

a#no&le"ge" t'e sa-e +y

entering to a ontrat &it' it%

An )nliense" ,oreign orporation

"oing +)siness in t'e o)ntry

annot -aintain any ation +)t it

an +e s)e"%

$%at rinciles 'o+ern a &orei'n

cororation6s ri'%t to s,e#

T'e priniples go(erning a ,oreign

orporationHs rig't to s)e are< 5a7

i, it "oes +)siness &it'o)t a

liense. it annot s)e +e,ore

P'ilippine o)rts 5+7 i, it is not

"oing +)siness. it nee"s no liense

to s)e +e,ore P'ilippine o)rts on

an isolate" +)siness transation or

on a a)se o, ation entirely

in"epen"ent o, any +)siness

transation or to protet its na-e.

rep)tation or goo"&ill 57 i, it "oes

+)siness &it' t'e re)ire" liense.

it an s)e +e,ore P'ilippine o)rts

on any transation %

$%en is a "is,te wit% an intra-

cororate relations%i wit%in t%e

3,ris"iction o& t%e NLRC#

• In t'e ase o, Cosare (% Broa"o-

Asia. In. %R% No% 2012.

=e+r)ary @. 2014. t'e NLRC &as

'el" to 'a(e ;)ris"ition o(er t'e

"is-issal o, an AKP ,or Sales. &'o

&as also a sto#'ol"er. as 'e is

not a orporate o/er &'ose

"is-issal is ogni*a+le +y t'e RTC%

A orporate o/er &as "e!ne" as

one &'o -eets t'e ,ollo&ing< 5a7t'e reation o, t'e position is

)n"er t'e orporationHs 'arter or

+y$la&sF an" 5+7 t'e eletion o, t'e

o/er is +y t'e "iretors or t'e

sto#'ol"ers%

$%at are t%e in"s o& cororate

insol+enc(#

• T'ere are t&o #in"s o, insol(eny

onte-plate" in it< 517 at)al

insol(eny. i%e%. t'e orporationHs

assets are not eno)g' to o(er its

lia+ilitiesF an" 527 te'nial

insol(eny "e!ne" )n"er Se% >$

12. i%e%. t'e orporation 'as

eno)g' assets +)t it ,oresees its

ina+ility to pay its o+ligation ,or

-ore t'an one year%

• SEC s)per(ision o(er orporations

• In t'e ase o, Jnite" C')r' o,

C'rist in t'e P'ilippines. In% (%Bra",or" Jnite" C')r' o, C'rist.

In%. 64 SCRA 2. it &as 'el" t'at

t'e SEC s'all 'a(e a+sol)te

;)ris"ition. s)per(ision an"

ontrol o(er all orporations% E(en

&it' t'eir religio)s nat)re. t'e SEC

-ay e3erise ;)ris"ition o(er

t'e- in -atters t'at are legal an"

orporate%

Re%a)ilitation "e!ne"• In t'e ase o, San Dose Ti-+er

Corporation (% SEC. 6 SCRA 1>.

re'a+ilitation &as "e!ne" as

9restoration o, t'e "e+tor to a

position o, s)ess,)l operation

an" sol(eny%:

• A s)ess,)l re'a+ilitation

"epen"s on 2 ,ators< 5a7 positi(e

'ange in t'e +)siness ,ort)nes o,

t'e "e+tor. an" 5+7 t'e &illingness

o, t'e re"itors an" s'are'ol"ersto arri(e at a o-pro-ise

agree-ent on repay-ent an" t'e

e3tent o, "il)tion%

SEC7RITIES REG7LATION CO5E

$%at are sec,rities#

In general. se)rities are

e(i"enes o, in(est-ent in a

o--on enterprise -a"e &it' t'e

e3petation o, "eri(ing a pro!tsolely ,ro- t'e eorts o, ot'ers

&'o a)ire ontrol o(er t'e ,)n"

in(este"%

As "e!ne" +y la&. t'ey are

S'ares. Partiipation or Interest

5SPI7 in a Corporation or in a


13/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 13 of 50

Co--erial enterprise or Pro!t$

-a#ing (ent)re 5CCP7 an"

e(i"ene" +y a Certi!ate.

ContratF Instr)-ent. &'et'er

&ritten or eletroni in 'arater

5CCI7%

$%at are ten"er o*ers#

A Ten"er Oer is a p)+li oer to

p)r'ase a spei!e" n)-+er o,

s'ares ,ro- s'are'ol"ers )s)ally

at a pre-i)- in an atte-pt to

gain ontrol o, t'e iss)ing

o-pany% Note t'at in so-e

instanes. t'e pre-i)- is paya+leonly i, t'e oeror is a+le to o+tain

t'e re)ire" n)-+er o, s'ares%

A Ten"er Oer "islos)re &ill +e

re)ire" i, a person. inl)"ing a

partners'ip. li-ite" partners'ip.

syn"iate. orporation or any

ot'er gro)p inten"s to a)ire at

least !,teen perent 51@7 or at

least t'irty perent 5>07 o(er a

perio" o, t&el(e -ont's any lass

o, e)ity se)rity o, a liste"orporation or any lass o, e)ity

se)rity o, a orporation &it'

assets o, at least @0 -illion an"

'a(ing 200 or -ore sto#'ol"ers

&it' at least 100 s'ares ea'%

$%at are ro/( solicitations#

Pro3y Soliitations is an ation to

se)re t'e rig't to (ote o, so

-)' a n)-+er o, s'ares to

ens)re t'e appro(al o, a propose"orporate ations%

T'e prinipal p)rpose o, reg)lating

pro3y soliitations +y re)iring t'e

!ling o, a pro3y state-ent is to

pro(i"e s'are'ol"ers &it'

appropriate in,or-ation to per-it

an intelligent "eision on &'et'er

to per-it t'eir s'ares to +e (ote"

as soliite" ,or a parti)lar -atter

at a ,ort'o-ing sto#'ol"ers

-eeting%

$%at is sec,rit( rice mani,lation#

• Se)rity prie -anip)lation is an

arti!ial ontrol o, se)rity pries%

It is an atte-pt to ,ore se)rities

to sell at pries eit'er a+o(e or

+elo& t'ose &'i' &o)l" e3ist as

a res)lt o, t'e nor-al operations

o, s)pply an" "e-an"% T'e

-anip)lator 'opes to pro!t +y

reating !titio)s pries at t'e

e3pense o, t'e general tra"ing

p)+li%

$%at is insi"er tra"in'#

Insi"er Tra"ing o)rs &'en an

insi"er sells or +)ys a se)rity o,

t'e iss)er. &'ile in possession o,

-aterial in,or-ation &it' respet

to t'e iss)er or t'e se)rity t'at is

not generally a(aila+le to t'ep)+li%

Jnless< 5a7 t'e insi"er pro(es t'at

t'e in,or-ation &as not gaine"

,ro- s)' relations'ipF or 5+7 I, t'e

ot'er party selling to or +)ying

,ro- t'e insi"er 5or 'is agent7 is

i"enti!e". t'e insi"er pro(es< 517

t'at 'e "islose" t'e in,or-ation

to t'e ot'er party. or 527 t'at 'e

'a" reason to +elie(e t'at t'e

ot'er party ot'er&ise is also inpossession o, t'e in,or-ation%

INS7RANCE

$%at is t%e concet o& ins,rance#

Ins)rane is a -eans +y &'i' one

see#s to +e o(ere" against t'e

onse)enes o, an e(ent t'at

-ay a)se loss or "a-age%

T'e onept is t'at t'e pre-i)-s

t'at are pai" are a)-)late" in a

pool ,ro- &'i' pay-ent o,

lai-s are to +e o+taine"% As a

+asis. it is ass)-e" t'at t'e

people ontri+)ting pre-i)-s are

in e3ess o, t'ose -a#ing lai-s

res)lting in a larger pool o, -oney

t'an t'e a-o)nts +eing lai-e"

$%at are ,re an" sec,lati+e

riss#• T'e ris#s t'at -ay +e ins)re"

against are &'at are #no&n as

p)re ris#s as oppose" to

spe)lati(e ris#s%


14/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 14 of 50

• A p)re ris# is &'et'er a person &ill

s)er or &ill not s)er a loss ,ro-

t'e o)rrene o, an e(ent%

• A spe)lati(e ris# is &'et'er a

person &ill pro!t or s)er a loss

,ro- t'e o)rrene o, an e(ent%

Ins,rance is ris "istri),tin'

• Ins)rane is a ris# "istri+)ting

"e(ie +ea)se &'en t'e ins)rer

ass)-es t'e ris#. it is "istri+)ting

potential lia+ility. in part. a-ong

ot'ers%

• It is not ris# s'i,ting +ea)se t'e

entirety o, ris# o, loss is nots'i,te" to anot'er%

$%at is t%e nat,re o& a %ealt% care

a'reement#

• In t'e ase o, =ort)ne Me"iare.

In% (% A-orin. %R% No% 1@62.

Mar' 12. 2014. it &as 'el" to +e

in t'e nat)re o, non$li,e ins)rane.

&'i' is pri-arily a ontrat o,

in"e-nity% One t'e -e-+er

in)rs 'ospital. -e"ial or anyot'er e3pense arising ,ro-

si#ness. in;)ry or ot'er stip)late"

ontingeny. t'e 'ealt' are

pro(i"e" -)st pay ,or t'e sa-e to

t'e e3tent pro(i"e" )n"er t'e

ontrat%

• T'e Co)rt also interprete" an

a-+ig)ity in ,a(or o, t'e ins)re"

allo&ing 'i- to reo(er ,or 'is

-e"ial e3penses in)rre" &'ile

a+roa"%• In -arine ins)rane. &'at is

-eant +y perils o, t'e sea an"

perils o, t'e s'ip

• Perils o, t'e sea re,ers to all #in"s

o, -arine as)alties an" "a-ages

"one to t'e s'ip or goo"s at sea

+y t'e (iolent ation o, t'e &in"s

or &a(es. one t'at o)l" not +e

,oreseen an" is not attri+)ta+le to

t'e ,a)lt o, any+o"y%

• Perils o, t'e s'ip are losses or"a-ages t'at res)lt ,ro- 5a7

nat)ral an" ine(ita+le ation o,

t'e sea 5+7 or"inary &ear an" tear

o, t'e s'ip 57 negligent ,ail)re o,

t'e s'ip o&ner to pro(i"e t'e

(essel &it' t'e proper e)ip-ent

to on(ey t'e argo )n"er

or"inary on"itions%

$%at matters w%en conceale"8 "onot +itiate a marine ins,rance

olic(#

T'e oneal-ent o, t'e ,ollo&ing

-atters &ill not (itiate t'e poliy

+)t &ill -erely e3onerate t'e

ins)rer in ase o, a loss are< 5a7

t'e national 'arater o, t'e

ins)re" 5+7 t'e lia+ility o, t'e t'ing

ins)re" to apt)re an" "etention

57 t'e lia+ility to sei*)re ,ro-

+rea' o, ,oreign la&s o, tra"e 5"7t'e &ant o, t'e neessary

"o)-ents 5e7 t'e )se o,

,alsesi-)late" "o)-ents%

$%at are t%e imlie" warranties in

marine ins,rance#

In e(ery ontrat o, -arine

ins)rane )pon a s'ip or ,reig't.

,reig'tage or )pon anyt'ing &'i'

is t'e s)+;et o, -arine ins)rane.

t'ere are i-plie" &arranties< 5a7t'at t'e s'ip is sea&ort'yF 5+7 It

s'all arry t'e re)isite

"o)-ents to s'o& its nationality

or ne)trality an" t'at it s'all not

arry any "o)-ent t'at &ill ast

reasona+le s)spiion on t'e

(esselF 57 T'at t'e (essel s'all

not -a#e any i-proper "e(iationF

an" 5"7 T'at t'e (essel "oes not

or &ill not engage in any illegal

(ent)re%

$%en is t%e imlie" warrant( o&

seawort%iness comlie" wit%#

T'e i-plie" &arranty o,

sea&ort'iness is o-plie" &it' as

a general r)le &'en it is

sea&ort'y at t'e ti-e o, t'e

o--ene-ent o, t'e ris# e3ept

5a7 &'en t'e ins)rane is -a"e ,or

a spei!e" lengt' o, ti-e. it -)st

+e sea&ort'y at t'eo--ene-ent o, e(ery (oyage it

)n"erta#es at t'at ti-e 5+7 &'en

t'e ins)rane is )pon argo. &'i'

+y t'e ter-s o, t'e poliy.

"esription o, t'e (oyage. or

esta+lis'e" )sto- o, tra"e. is


15/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 15 of 50

re)ire" to +e transs'ippe" at an

i--e"iate port. in &'i' ase G

ea' (essel )pon &'i' t'e argo

is s'ippe" or transs'ippe" -)st

+e sea&ort'y at t'e

o--ene-ent o, ea' parti)lar

(oyage 57 &'ere "ierent

portions o, t'e (oyage

onte-plate" in t'e poliy "ier in

respet to t'e t'ings re)isite to

-a#e t'e s'ip sea&ort'y. in &'i'

ase it -)st +e sea&ort'y at t'e

o--ene-ent o, ea' portion%

$%en is a "e+iation roer#Imroer#

A "e(iation is proper< 5a7 W'en it

is a)se" +y ir)-stanes o(er

&'i' neit'er t'e -aster nor t'e

o&ner o, t'e s'ip 'as any ontrol%

5+7 W'en neessary to o-ply

&it' a &arranty. or to a(oi" a

peril. &'et'er or not t'e peril is

ins)re" against% 57 W'en -a"e in

goo" ,ait'. an" )pon reasona+le

gro)n"s o, +elie, in its neessity toa(oi" a peril% 5"7 W'en -a"e in

goo" ,ait'. ,or t'e p)rpose o,

sa(ing ')-an li,e or relie(ing

anot'er (essel in "istress

Any "e(iation t'at onsists o, a

"epart)re ,ro- t'e o)rse o, t'e

(oyage as "e!ne" +y la& or an

)nreasona+le "elay in p)rs)ing

t'e (oyage or t'e o--ene-ent

o, an entirely "ierent (oyage is

an i-proper "e(iation an" t'eins)rer &ill not lia+le ,or any loss

'appening to t'e t'ing ins)re"

s)+se)ent to it. regar"less o,

&'et'er t'e ris# &as inrease" or

"i-inis'e"%

$%at constit,tes an act,al total

loss#

An at)al total loss o)rs &'en

t'ere is < 5a7 total "estr)tion o,

t'e t'ing ins)re"F 5+7 anirretrie(a+le loss o, t'e t'ing +y

sin#ing or +y +eing +ro#en )pF 57

any "a-age to t'e t'ing &'i'

ren"ers it (al)eless to t'e o&ner

,or t'e p)rpose t'at 'e 'el" itF or

5"7 any ot'er e(ent &'i'

eeti(ely "epri(es t'e o&ner o,

t'e possession. at t'e port o,

"estination. o, t'e t'ing ins)re"%

$%at is a constr,cti+e total loss#

A onstr)ti(e total loss o)rs

&'en5a7 -ore t'an t'ereo, in

(al)e is at)ally lost or &o)l"

'a(e to +e e3pen"e" to reo(er it

,ro- t'e peril 5+7 i, it is in;)re" to

s)' e3tent as to re")e its (al)e

+y -ore t'an o, (al)e 57 i, t'e

t'ing in;)re" is a s'ip. an" t'e

onte-plate" (oyage annot

la&,)lly +e per,or-e" &it'o)tin)rring eit'er an e3pense to t'e

ins)re" o, -ore t'an t'e (al)e

o, t'e t'ing a+an"one" or a ris#

&'i' a pr)"ent -an &o)l" not

ta#e )n"er t'e ir)-stanes 5"7

i, t'e ins)re" is ,reig'tage or

argo an" t'e (oyage annot +e

per,or-e". nor anot'er s'ip

pro)re" +y t'e -aster. &it'in a

reasona+le &it' reasona+le

"iligene to ,or&ar" t'e argo&it'o)t in)rring t'e li#e e3pense

or ris# -entione" in ite- 57 +)t

,reig'tage annot +e a+an"one"

)nless t'e s'ip is also a+an"one"%

$%en "oes co-ins,rance e/ist#

• Co$ins)rane e3ists &'en t'e

s)+;et -atter is ins)re" ,or an

a-o)nt less t'an it (al)e% In t'is

ase. t'e ins)re" is onsi"ere" as

a o$ins)rer ,or t'e portion noto(ere" +y ins)rane%

• T'is &ill apply only i, t'e loss is

partial%

• T'is is also #no&n as t'e 9a(erage

la)se%:

$%at is t%e r,le on lia)ilit( &or an

a+era'e#

As a r)le. &'en it 'as +een agree"

t'at an ins)rane )pon a

parti)lar t'ing or lass o, t'ingss'all +e ,ree ,ro- a parti)lar

a(erage. a -arine ins)rer is not

lia+le ,or a parti)lar a(erage loss

not "epri(ing t'e ins)re" at t'e

port o, "estination. o, t'e &'ole

s)' t'ing. or lass o, t'ings. e(en


16/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 16 of 50

t'o)g' it +eo-es entirely

&ort'less. +)t s)' ins)rer is

lia+le ,or 'is proportion o, all

general a(erage loss assesse"

)pon t'e t'ing ins)re"%

$%at is !re ins,rance#

• Is ins)rane against loss +y

t'ro)g' a 'ostile !re%

• A !re is 'ostile &'en it< 5a7 +)rns

at a plae &'ere it is not inten"e"

to +)rn 5+7 is ,rien"ly +)t +eo-es

'ostile +ea)se it esapes ,ro-

t'e plae &'ere it is inten"e" to+)rn an" +eo-es )nontrolla+le

57 is a ,rien"ly !re &'i' +eo-es

'ostile +ea)se o, t'e )ns)ita+le

-aterial )se" to lig't it an" it

+eo-es in'erently "angero)s

an" )nontrolla+le%

$%at is an alteration#

• An alteration is a 'ange in t'e

)se or on"ition o, a t'ing ins)re"

,ro- t'at to &'i' it is li-ite" +yt'e poliy. -a"e &it'o)t t'e

onsent o, t'e ins)rer. +y -eans

&it'in t'e ontrol o, t'e ins)re".

an" inreasing t'e ris#. &'i'

entitles t'e ins)rer to resin" t'e

ontrat o, ins)rane%

$%at is cas,alt( ins,rance#

enerally. it is one t'at o(ers

loss or lia+ility arising ,ro- an

ai"ent or -is'ap. e3l)"ingt'ose t'at ,all e3l)si(ely &it'in

ot'er types o, ins)rane li#e !re or

-arine ins)rane%

It inl)"es e-ployerHs lia+ility.

&or#-enHs o-pensation. p)+li

lia+ility. -otor (e'ile lia+ility.

plate glass lia+ility. +)rglary an"

t'e,t .personal ai"ent an"

'ealt' ins)rane as &ritten +y

non$li,e o-panies. an" ot'er

s)+stantially si-ilar ins)rane%

Can a CA ro+ision )e interrete"

as an ins,rance contract#

• In t'e ase o, Mits)+is'i Motors

P'ilippines Salarie" E-ployees

Jnion (% Mits)+is'i Motors

P'ilippines Corporation. %R% No%

16@66>. D)ne 16. 201>. a CBA

pro(ision pro(i"ing ,or an MMPC

o+ligation to pay ,or t'e -e"ial

e3penses o, MMPSEJ "epen"ents

&as onsi"ere" as a non$ li,e

ins)rane ontrat an" interprete"

as a ontrat o, in"e-nity%

• T'is interpretation +arre" t'e

appliation o, t'e 9ollateral

so)re r)le.: &'i' "isallo&s a

&rong"oer ,ro- lai-ing a +ene!t

arising ,ro- a ontrat &'i' t'e

in;)re" party -ay 'a(e &it' t'ir"

persons to lessen 'is lia+ility% Int'is ase. MMPC is not t'e

&rong"oer. rat'er. it is a no$,a)lt

ins)rer%

$%at is s,ret(s%i#

S)retys'ip is an agree-ent

&'ere+y a party alle" t'e s)rety

g)arantees t'e per,or-ane +y

anot'er party alle" t'e prinipal

or o+ligor o, an o+ligation or

)n"erta#ing in ,a(or o, a >r" partyalle" t'e o+ligee%

It is "ee-e" to +e an ins)rane

ontrat &'en -a"e +y a s)rety

&'o or &'i'. as s)'. is "oing an

ins)rane +)siness as pro(i"e" +y

t'e Ins)rane Co"e%

T'e lia+ility o, t'e s)rety is

soli"ary &it' t'e o+ligor +)t

li-ite" to t'e a-o)nt o, t'e +on"

an" "eter-ine" stritly +y t'e

ter-s o, t'e ontrat in relation tot'e prinipal ontrat +et&een

o+ligor an" o+ligee%

$%at is li&e ins,rance#

It is ins)rane on ')-an li(es an"

ins)rane appertaining t'ereto or

onnete" t'ere&it'% It is paya+le

on< 5a7 "eat' o, t'e person. )nless

e3epte" or 5+7 s)r(i(ing a

spei!e" perio". or 57

ontingently on t'e ontin)ane oressation o, li,e%

S)ii"e is generally not

o-pensa+le )nless o--itte"

a,ter t'e poliy 'as +een in ,ore

,or a perio" o, t&o years ,ro-

"ate o, iss)e or last reinstate-ent


17/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 17 of 50

or a s'orter perio" i, pro(i"e". or

i, o--itte" in a state o, insanity%

$%at is co+ere" )( com,lsor( t%ir"art( motor +e%icle lia)ilit(

ins,rance#

It pro(i"es protetion or o(erage

to ans&er ,or +o"ily in;)ry or

property "a-age t'at -ay +e

s)staine" +y anot'er arising ,ro-

t'e )se o, a -otor (e'ile%

It is an ins)rane poliy t'at

"iretly ins)res against lia+ility%

T'e ins)rerHs lia+ility ar)es

i--e"iately )pon t'e o)rrene

o, t'e in;)ry )pon &'i' lia+ility

"epen"s. an" "oes not "epen" on

t'e reo(ery o, ;)"g-ent +y t'e

in;)re" party against t'e ins)re"%

$%at is a 9no &a,lt in"emnit(

claim:#

A no ,a)lt in"e-nity lai- is a

lai- ,or pay-ent ,or "eat' or

in;)ry to a passenger or t'ir" party

&it'o)t neessity o, pro(ing ,a)lt

or negligene%

T'is is paya+le +y t'e ins)rer

pro(i"e" 5a7 in"e-nity in respet

o, one person s'all not e3ee"

P8P [email protected]%00. an" 5+7 t'e

neessary proo, o, loss )n"er oat'

to s)+stantiate t'e lai- are

s)+-itte"%

A lai- )n"er t'e no ,a)lt

in"e-nity la)se -ay +e -a"e

against one -otor (e'ile ins)rer

only as ,ollo&s< 5a7 in ase o, an

o)pant o, a (e'ile$ against t'e

ins)rer o, t'e (e'ile in &'i' t'e

o)pant is ri"ing. -o)nting or

"is-o)nting ,ro- 5+7 in any ot'er

ase. ,ro- t'e ins)rer o, t'e

"iretly oen"ing (e'ile 57 in all

ases. t'e rig't o, t'e party

paying t'e lai- to reo(er

against t'e o&ner o, t'e (e'ile

responsi+le ,or t'e ai"ent s'all

+e -aintaine"%

How is t%e 9a,t%ori;e" "ri+er:

"e!ne"#

T'e a)t'ori*e" "ri(er la)se is

interprete" to re,er to t'e ins)re"

or any person "ri(ing on t'e or"er

o, t'e ins)re" or &it' 'is

per-ission pro(i"e". s)' person

is per-itte" to operate a -otor

(e'ile in aor"ane &it' o)r

liensing la&s or reg)lations an"

&'o is not ot'er&ise "is)ali!e"%

W'en t'e ins)re" is t'e one

"ri(ing t'e (e'ile. a liense is not

neessary% 8e 'as a rig't to

reo(er t'e "a-age e(en i, 'e 'as

no "ri(erHs liense or t'at t'e

sa-e 'a" e3pire" at t'e ti-e o,

t'e ai"ent%

How can t%e t%e&t cla,se )e

interrete"#

In t'e ase o, Para-o)nt

Ins)rane Corporation (% Spo)ses

(es an" Maria Teresa

Re-on"e)la*. %R% No% 16>66>.

No(e-+er 2. 2012 t'e

respon"ents entr)ste" possession

o, t'eir (e'ile only to t'e e3tent

t'at Sales &ill intro")e repairs

an" i-pro(e-ents t'ereon an"not to per-anently "epri(e t'e-

o, possession t'ereo,% Sine t'e,t

an also +e o--itte" +y

-isappropriation. t'e ,at t'at

Sales ,aile" to ret)rn t'e s)+;et

(e'ile to t'e respon"ents

onstit)tes )ali!e" T'e,t% 8ene.

sine t'e respon"entsH ar is

)n"enia+ly o(ere" +y a

Co-pre'ensi(e Motor Ke'ile

Ins)rane Poliy t'at allo&s ,orreo(ery in ases o, t'e,t.

petitioner is lia+le )n"er t'e poliy

,or t'e loss o, respon"entsH (e'ile

)n"er t'e Qt'e,t la)se%:

$%en is t%ere ins,ra)le interest#

Ins)ra+le interest &ill e3ist &'en

t'e ins)re" 'as s)' a relation or

onnetion &it'. or onern in.

s)' s)+;et -atter t'at 'e &ill

"eri(e pe)niary +ene!t ora"(antage ,ro- its preser(ation or

&ill s)er pe)niary loss or

"a-age ,ro- its "estr)tion.

ter-ination. or in;)ry +y t'e

'appening o, t'e e(ent ins)re"

against%


18/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 18 of 50

$%at "i*erentiates ins,ra)le

interest in li&e &rom t%at in

roert(# Ins)ra+le interest in li,e an +e

+ase" on onsang)inity. a/nity.

ontrat or a pe)niary interest.

&'ile ins)ra+le interest in property

is +ase" on pe)niary interest%

Ins)ra+le interest in li,e -)st e3ist

only at t'e eeti(ity o, t'e

ontrat e3ept t'at ta#en +y a

re"itor on t'e li,e o, t'e "e+tor


-)st e3ist at t'e ti-e o,

eeti(ity o, t'e ontrat an"

&'en loss o)rs. alt'o)g' it -ay

not e3ist in t'e -eanti-e%

T'e (al)e o, ins)ra+le interest in

li,e is not li-ite" )nless ta#en +y a

re"itor on t'e li,e o, t'e "e+tor


is li-ite" to t'e at)al (al)e o, t'e

interest in t'e property%

$%o %as ins,ra)le interest in li&e#

8i-sel,. 'is spo)se an" o, 'is

'il"ren%

Any person on &'o- 'e "epen"s

&'olly or in part ,or e")ation or

s)pport. or in &'o- 'e 'as a

pe)niary interest%

Any person )n"er a legal

o+ligation to 'i- ,or t'e pay-ent

o, -oney. respeting property or

ser(ies. o, &'i' "eat' or illness

-ig't "elay or pre(ent

er,or-ane%

Any person )pon &'ose li,e. any

estate or interest (este" in 'i-

"epen"s%

$%at "oes ins,ra)le interest in

roert( consist o

An e3isting interest%

An in'oate interest ,o)n"e" on

an e3isting interest%

An e3petany. o)ple" &it' ane3isting interest in t'at o)t o,

&'i' t'e e3petany arises%

A arrier or "epository o, any #in"

'as ins)ra+le interest in t'e t'ing

'el" +y 'i- as s)' to t'e e3tent

o, 'is lia+ility +)t not to e3ee"

t'e (al)e t'ereo,%

$%at can an" cannot )e ins,re"

a'ainst#

• Any )n#no&n or ontingent e(ent.

&'et'er past or ,)t)re. &'i' -ay

"a-ni,y a person 'a(ing ins)ra+le

interest or reate a lia+ility against

'i- -ay +e ins)re" against%

• Ins)rane ,or or against t'e

"ra&ing o, any lottery or ,or or

against any 'ane or ti#et in a

lottery "ra&ing a pri*e annot +e

a)ire"%

$%o will ,ali&( as an ins,re"#• Anyone e3ept a p)+li ene-y or

a nation at &ar &it' t'e

P'ilippines an" e(ery iti*en or

s)+;et o, s)' nation -ay +e

ins)re"%

$%o will ,ali&( as a )ene!ciar(#

• In li,e ins)rane. anyone. e3ept

t'ose &'o are pro'i+ite" +y la& to

reei(e "onations ,ro- t'e

ins)re"%• In property ins)rane. only t'e

ins)re" &it' ins)ra+le interest &ill

)ali,y as a +ene!iary%

• In ins)rane against lia+ility. t'e

party in &'ose ,a(or lia+ility e3ists

is t'e +ene!iary%

$%en is t%ere m,ltile ins,ra)le

interest#

• M)ltiple ins)ra+le interest e3ists

&'en -ore t'an one ins)ra+leinterest -ay e3ist in t'e sa-e

property%

• E3a-ples are t'at o,< 5a7

-ortgagor an" -ortgagee 5+7 a

tr)stor an" tr)stee 57 a lessor an"

a lessee

$%at is "o,)le ins,rance# O+er

ins,rance# ?o)+le ins)rane e3ists &'ere t'e

sa-e person is ins)re" +y se(eral

ins)rers separately in respet to

sa-e s)+;et an" interest%

Its re)isites are< 5a7 sa-e person

is ins)re" 5+7 t'ere are se(eral


19/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 19 of 50

ins)rers 57 s)+;et ins)re" is t'e

sa-e 5"7 interest ins)re" is t'e

sa-e 5e7 ris# or peril ins)re"

against is t'e sa-e% O(er ins)rane o)rs &'en

property is ins)re" ,or an a-o)nt

in e3ess o, its (al)e%

$%en is an ins,rance contract

er&ecte"#

• It is per,ete" &'en t'e assent or

onsent is -ani,este" +y t'e

-eeting o, t'e -in"s o, t'e oer

an" aeptane )pon t'e t'ing

an" t'e a)se &'i' are to

onstit)te t'e ontrat%

How is an o*er an" accetance

ma"e in li&e or %ealt% ins,rance#

I, t'e pre-i)- is not pai" &'en

t'e ins)rane is applie" ,or. it is

an in(itation to t'e ins)rer to

-a#e an oer &'i' t'e ins)re"

-)st aept% I, a pre-i)- is pai"

&it' t'e appliation. it is

onsi"ere" an oer% Aeptane o)rs &'en a poliy

is iss)e" stritly in aor"ane

&it' t'e oer% I, ot'er&ise. t'e

ins)rer is -a#ing an oer. &'i'

t'e ins)re" an aept or re;et%

Jnreasona+le "elay in t'e ret)rn

o, t'e pre-i)- raises a

pres)-ption t'at t'e oer 'as

+een aepte"%

How is an o*er an" accetance

ma"e in roert( an" lia)ilit(

ins,rance#

• W'en t'e ins)re" applies ,or t'e

ins)rane. 'e is alrea"y -a#ing an

oer to t'e ins)rer. &'o -ay no&.

aept. re;et or -a#e a o)nter$

oer%

• Aeptane o)rs in t'e sa-e

-anner as in li,e an" 'ealt'

ins)rane%

$%at is meant )( t%e remi,m an"

w%( m,st it )e ai"#

T'e pre-i)- is t'e agree" prie

,or ass)-ing an" arrying t'e ris#

&'i' t'e ins)rer is entitle" to t'e

pay-ent o, a pre-i)- as soon as

t'e t'ing ins)re" is e3pose" to t'e

peril ins)re" against%

T'e pay-ent o, a pre-i)- is

essential to t'e (ali"ity o, an

ins)rane poliy is #no&n as t'e

9as' an" arry +asis: or 9no

pre-i)- pay-ent no poliy: r)le%

$%en is ins,rance e*ecti+e "esite

non-a(ment o& t%e remi,m#

T'is o)rs< 5a7 in ase o, li,e or

in")strial li,e &'ere t'e pre-i)-

is paya+le -ont'ly or o,tener.

&'ene(er t'e grae perio"

appliesF 5+7 &'en t'e ins)rer

-a#es a &ritten a#no&le"g-ent

o, t'e reeipt o, pre-i)-. s)' is

onl)si(e e(i"ene o, t'e

pay-ent o, t'e pre-i)- to -a#e

it +in"ing not&it'stan"ing any

stip)lation t'erein t'at it s'all not

+e +in"ing )ntil t'e pre-i)- is

pai"F an" 57 &'ere t'e o+ligee

'as aepte" t'e +on" or

s)retys'ip ontrat%

It also o)rs &'en t'e ins)rer is

estoppe" ,ro- lai-ing ot'er&ise%

$%at are t%e non-"e&a,lt otions in

li&e ins,rance#

• T'e non$"e,a)lt options are< 5a7

grae perio" 5+7 as' s)rren"er

(al)e 57 pai" )p ins)rane 5"7

a)to-ati loan la)se. an" 5e7

reinstate-ent

How is reinstatement o& t%e olic(e*ecte"#

• Reinstate-ent an +e per-itte"

&it'in > years. or a stip)late"

longer perio". ,ro- t'e "ate o,

"e,a)lt%

• T'is is not an a+sol)te rig't as it is

on"itione" on ins)ra+ility o, t'e

ins)re" or e(i"ene o, goo" 'ealt'

an" t'e pay-ent o, all o(er")e

pre-i)-s an" in"e+te"ness. i,

any%

$%at is concealment an" its

re,isites#

Coneal-ent is a neglet to

o--)niate t'at &'i' a party

#no&s an" o)g't to o--)niate%


20/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 20 of 50

Its re)isites are< 5a7 s)' ,ats

t'at -)st +e &it'in 'is #no&le"ge

as oneal-ent re)ires

#no&le"ge o, t'e ,at oneale"

+y t'e party 'arge" &it'

oneal-ent 5+7 ,ats -)st +e

-aterial to t'e ontrat as it -)st

+e o, s)' nat)re t'at 'a" t'e

ins)rer #no&n o, it. it &o)l" not

'a(e aepte" t'e ris# or

"e-an"e" a 'ig'er pre-i)- 57

t'at t'e ot'er party 'a" no -eans

o, asertaining s)' ,ats 5"7 t'at

t'e party &it' a ")ty to

o--)niate -a#es no &arranty%

$%en is t%ere a wai+er o&

in&ormation#

• A &ai(er ta#es plae eit'er. +y t'e

ter-s o, t'e ins)rane or +y t'e

neglet to -a#e in)iries as to

s)' ,ats &'ere t'ey are

"istintly i-plie" in ot'er ,ats o,

&'i' in,or-ation is

o--)niate"%

$%at is t%e e*ect o& concealment

an" w%en m,st it tae lace#

W'et'er intentional or not. it

entitles t'e in;)re" party to

resin" t'e ontrat o, ins)rane%

enerally. oneal-ent re)ires a

party to 'a(e #no&le"ge o, t'e

,at oneale" prior to or at t'e

eeti(ity o, t'e poliy%

In,or-ation a)ire" a,ter

eeti(ity is not oneal-ent an"

"oes not onstit)te gro)n" to

resin" t'e poliy. as a,ter t'e

poliy is iss)e". in,or-ation

s)+se)ently a)ire" is no longer

-aterial as it &ill not aet or

in)ene t'e party to enter into

ontrat% 8o&e(er. in ase o, t'e

reinstate-ent o, a lapse" poliy.

,ats #no&n a,ter eeti(ity +)t

+e,ore reinstate-ent -)st +e

"islose"%

$%at are reresentations# $%at are

t%e in"s o& reresentations#

A representation is an oral or

&ritten state-ent o, a ,at or a

on"ition aeting t'e ris# -a"e

+y t'e ins)re" to t'e ins)rane

o-pany. ten"ing to in")e t'e

ins)rer to ta#e t'e ris#%

Representations -ay +e oral or

&ritten%

T'ey an +e a/r-ati(e &'en it is

an a/r-ation o, a ,at e3isting

&'en t'e ontrat +egins or

pro-issory &'en it is a state-ent

+y t'e ins)re" onerning &'at is

to 'appen ")ring t'e ter- o, t'e

ins)rane%

Is a reresentation art o& t%e

ins,rance contract#

• A representation "oes not ,or-

part o, t'e ontrat as an e3press

pro(ision t'ereo, as it is a

ollateral in")e-ent to t'e sa-e%

• W'ile it "oes not ,or- part o, t'e

ontrat. it -ay )ali,y an i-plie"

&arranty%

To w%at "ate "oes a reresentation

re&er to#

It pres)-e" to re,er to t'e "ate on

&'i' t'e ontrat goes into

eet%

T'ere is no ,alse representation i,

it is tr)e at t'e ti-e t'e ontrat

ta#es eet alt'o)g' ,alse at t'e

ti-e it is -a"e%

T'ere is a ,alse representation. i, it

is tr)e at t'e ti-e it is -a"e +)t

,alse at t'e ti-e t'e ontrat

ta#es eet%

$%en is a reresentation &alse an"

w%at is its e*ect#

A representation is sai" to +e ,alse

&'en t'e ,ats ,ail to orrespon"

&it' its assertions or stip)lations%

I, it is ,alse on a -aterial point.

&'et'er a/r-ati(e or pro-issory.

t'e in;)re" party is entitle" to

resin" t'e ontrat ,ro- t'e ti-e

t'e representation +eo-es ,alse%

8o&e(er. t'e rig't to resin" is

onsi"ere" &ai(e" +y t'e

aeptane o, pre-i)- pay-ents


21/50

Commercial

Green Notes 2014


BAR OPERATIONS 2014

Page 21 of 50

"espite #no&le"ge o, t'e gro)n"

to resin"%

T'ere is no &ai(er. i, t'e ins)rer

'a" no #no&le"ge o, t'e gro)n"

at t'e ti-e o, t'e aeptane o,

t'e pre-i)-%

How is concealment "istin',is%e"

&rom misreresentation#

• Coneal-ent is t'e neglet o, one

party to o--)niate to t'e ot'er

-aterial ,ats% T'e in,or-ation 'e

gi(es in o-pliane &it' 'is ")ty

to re(eal in,or-ation is

representation%

$%at is t%e incontesta)ilit( cla,se #

It is a la)se in a li,e ins)rane

poliy t'at is 5a7paya+le on t'e

"eat' o, t'e ins)re". an" 5+7

&'i' 'as +een in ,ore ")ring t'e

li,eti-e o, t'e ins)re" ,or a perio"

o, 2 years ,ro- t'e "ate o, iss)e

or its last reinstate-ent t'at

&o)l" pre(ent t'e ins)rer ,ro-

pro(ing t'at t'e poliy is (oi" a+initio or is s)+;et to resission +y

reason o, a ,ra)")lent

oneal-ent or -isrepresentation

o, t'e ins)re" or 'is agent%

$%at is a warrant(# $%at are t%e

in"s o& warranties#

It is a state-ent or pro-ise state"

in t'e poliy or inorporate"

t'erein +y re,erene. &'ere+y t'e

ins)re". e3pressly or i-plie"lyontrats as to t'e past. present

or ,)t)re e3istene o, ertain ,ats

on"itions or ir)-stanes. t'e

literal tr)t' o, &'i' is essential to

t'e (ali"ity o, t'e ontrat%

Warranties an +e a/r-ati(e

&'en t'ey re,er to to -atters t'at

e3ist at or +e,ore t'e iss)ane o,

t'e poliy or pro-issory &'en

t'ey re,er to pro-ises or

)n"erta#ing o, t'e ins)re" t'atertain -atters s'all e3ist or &ill

+e "one or &ill +e o-itte" a,ter

t'e poliy ta#es eet%

T'ey an also +e e3press &'en

pro(i"e" ,or in t'e poliy or

i-plie" &'en t'ey are in,erre"

,ro- t'e nat)re o, t'e ins)rane%

$%at is t%e e*ect o& a +iolation o& awarrant(#

T'e (iolation o, a -aterial

&arranty. or ot'er -aterial

pro(ision o, t'e poliy. on t'e part

o, eit'er party t'ereto. entitles t'e

ot'er to resin"%

8o&e(er. a +rea' o, a &arranty

&it'o)t ,ra)". -erely e3onerates

an ins)rer ,ro- t'e ti-e it o)rs.

or &'ere it is +ro#en at its

ineption. pre(ents t'e poliy ,ro-

atta'ing to t'e ris#%

$%en is t%e non-er&ormance o& a

warrant( e/c,se"#

• T'e non$per,or-ane o, a

pro-issory &arranty is e3)se" i,

+e,ore t'e arri(al o, t'e ti-e ,or

per,or-ane< 5a7 t'e loss ins)re"

against 'appensF5+7 t'e

per,or-ane +eo-es )nla&,)l at

t'e plae o, t'e ontratF or 57t'e per,or-ane +eo-es

i-possi+le%

$%at are t%e r,les on losses#

Loss o, &'i' a peril ins)re"

against is t'e pro3i-ate a)se.

alt'o)g' a peril not onte-plate"

+y t'e ontrat -ay 'a(e +een a

re-ote a)se +)t t'e ins)rer is

not lia+le ,or a loss o, &'i' t'e

peril ins)re" against &as only are-ote a)se%

Loss a)se" +y eorts to res)e

t'e t'ing ins)re" ,ro- a peril

ins)re" against t'at &o)l"

ot'er&ise 'a(e a)se" a loss. i, in

t'e o)rse o, s)' res)e. t'e

t'ing is e3pose" to peril not

ins)re" against. &'i'

per-anently "epri(es t'e ins)re"

o, its possession. in &'ole or in

part. or &'ere a loss is a)se" +yeorts to res)e t'e t'ing ins)re"

,ro- a peril ins)re" against%

An ins)rer is not lia+le ,or a loss

a)se" +y t'e &ill,)l at or

t'ro)g' t'e onni(ane o, t'e

ins)re"F +)t 'e is not e3onerate"


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Page 22 of 50

+y t'e negligene o, t'e ins)re".

or o, t'e ins)re"Hs agent or ot'ers%

$%at is a notice o& loss8 w%o an"w%en s%o,l" it )e 'i+en#

• A notie o, loss is t'e ,or-al

notie gi(en +y t'e ins)re" or

so-e person entitle" to t'e

+ene!t o, t'e ins)rane &it'o)t

)nneessary "elay in,or-ing t'e

ins)rer o, t'e o)rrene o, t'e

loss ins)re" against%

$%at is meant )( roo& o& loss#

• It re,ers to t'e e(i"ene gi(en +yt'e ins)re" to t'e ins)rer )pon t'e

o)rrene o, t'e loss +y ins)re"

against. stating t'e parti)lars

an" t'e neessary "ata to ena+le

t'e ins)rer to "eter-ine its

lia+ility an" t'e e3tent t'ereo,%

$%at is claim settlement#

• T'is re,ers to t'e in"e-ni!ation

o, t'e loss s)ere" +y t'e ins)re"%

• T'e lai-ants entitle" to t'ein"e-ni!ation -ay +e t'e

ins)re". t'e reins)re". t'e ins)rer

entitle" to s)+rogation. or a t'ir"

party in an ins)rane poliy

pro(i"ing in"e-nity against

lia+ility%

$%at is ,n&air claim settlement#

no&ingly -isrepresenting ,ats

or poliy pro(isions%

=ailing to a#no&le"ge pertinento--)niations &it' reasona+le

pro-ptness%

=ailing to a"opt an" i-ple-ent

reasona+le stan"ar"s ,or pro-pt

in(estigation o, lai-s%

Not atte-pting to eet)ate

pro-pt. ,air an" e)ita+le

settle-ent o, lai-s in ases

&'ere lia+ility is reasona+ly lear%

Co-pelling poliy 'ol"ers to !le

s)it +y oering a-o)nts

s)+stantially less t'an t'at &'i'

t'ey are entitle" to%

$%at is t%e e*ect o& a &ra,",lent

claim#

In t'e ase o, Jnite" Mer'ants

Corporation (% Co)ntry Ban#ers

Ins)rane Corporation. %R% No.

1@. D)ly 11 2012. t'e

S)pre-e Co)rt 'el" t'at< W'ere a

!re ins)rane poliy pro(i"es t'at

9i, t'e lai- +e in any respet

,ra)")lent. or i, any ,alse

"elaration +e -a"e or )se" in

s)pport t'ereo,. or i, any

,ra)")lent -eans or "e(ies are

)se" +y t'e ins)re" or anyone

ating in 'is +e'al, to o+tain any

+ene!t )n"er t'e poliy: an" t'e

e(i"ene is onl)si(e t'at t'eproo, o, t'e lai- &'i' t'e

ins)re" s)+-itte" &as ,alse an"

,ra)")lent as +ot' as to #in".

)ali,y an" a-o)nt o, t'e goo"s

an" t'eir (al)e "estroye" +y !re.

s)' proo, o, lai- is a +ar against

t'e ins)re" ,ro- reo(ering on t'e

poliy e(en ,or t'e a-o)nt o, 'is

at)al loss% It 'as long +een

settle" t'at a ,alse an" -aterial

state-ent -a"e &it' intent to"eei(e or "e,ra)" (oi"s on

ins)rane poliy. In ) C)a (%

So)t' Britis' Ins)rane Co%. t'e

lai- &as ,o)rteen ti-es +igger

t'an t'e real lossF In o L) (%

or#s'ire Ins)rane Co%. eig't

ti-esF an" in T)ason (% Nort'

C'ina Ins)rane Co%. si3 ti-es% In

t'e present ase. t'e lai- is

t&enty !(e ti-es t'e at)al lai-

pro(e"%

$%at is t%e rescriti+e erio" &or

t%e commencement o& an action#

T'e parties an agree on a perio"

pro(i"e" it is not less t'an 1 year

,ro- t'e ti-e t'e a)se o, ation

ar)es%

I, t'e perio" presri+e" (oi"

+ea)se it is less t'an 1 year or

t'ere is no perio". t'e ins)re" an

+ring t'e ation &it'in 10 years,ro- t'e ti-e t'e a)se o, ation

ar)es%

In a o-pre'ensi(e -otor lia+ility

ins)rane lai-. a &ritten notie

o, lai- -)st +e !le" &it'in

-ont's ,ro- t'e "ate o, ai"ent.


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Page 23 of 50

ot'er&ise. t'e lai- is &ai(e".

e(en i, an ation is s)+se)ently

+ro)g't &it'in 1 year ,ro-

re;etion o, t'e lai-%

$%en "oes s,)ro'ation tae lace#

• S)+rogation in)res to t'e ins)rer

&it'o)t nee" o, assign-ent or

e3press stip)lation )pon pay-ent

-a"e to t'e ins)re"% T'e at o,

pay-ent -a#es t'e ins)rer a

s)+rogee in e)ity%

• 8o&e(er. s)+rogation o)rs only

in property ins)rane%

$%at is t%e concet )e%in"

s,)ro'ation#

In t'e ase o, Malayan Ins)rane

Co%. In% (s Ro"elio Al+erto an"

Enrio Al+erto Reyes. R No%

14>20. =e+r)ary 1. 2012 it &as

'el" t'at s)+rogation is t'e

s)+stit)tion o, one person +y

anot'er &it' re,erene to a la&,)l

lai- or rig't. so t'at 'e &'o is

s)+stit)te" s)ee"s to t'e rig'tso, t'e ot'er in relation to a "e+t or

lai-. inl)"ing its re-e"ies or

se)rities% T'e pay-ent +y t'e

ins)rer to t'e ins)re" operates as

an e)ita+le assign-ent to t'e

ins)rer o, all t'e re-e"ies t'at t'e

ins)re" -ay 'a(e against t'e t'ir"

party &'ose negligene or

&rong,)l at a)se" t'e loss%

T'e rig't o, s)+rogation is not

"epen"ent )pon. nor "oes i, gro&o)t o,. any pri(ity o, ontrat% It

ar)es si-ply )pon pay-ent +y

t'e ins)rane o-pany o, t'e

ins)rane lai-%

• It is inten"e" to -a#e t'e person

&'o a)se" t'e loss legally

responsi+le ,or it. pre(ents t'e

ins)re" ,ro- reo(ering t&ie. an"

)p'ol"s p)+li poliy +y

pre(enting tort,easors ,ro- +einga+sol(e" ,ro- lia+ility%

NEGOTIALE INSTR7


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$%at is meant )( a)sence o& a

consi"eration #

T'e -eaning o, a+sene or &ant

o, onsi"eration

-eans a total

la# o, any (ali" onsi"eration ,or

t'e ontrat. in onse)ene o,

&'i' t'e allege" ontrat -)st

,all% Conse)ently. i, t'e Ma#er

-a#es a pro-issory note to t'e

Payee in pay-ent ,or a parel o,

lan" &'i' "oes not e3ist% As

+et&een t'e parties. t'ere an +e

no reo(ery on t'e note as t'ere is

a+sene o, onsi"eration% B)t i, t'e Payee in"orses t'e note to

anot'er. &'o is a 'ol"er in ")e

o)rse. t'ere an +e reo(ery

,ro- t'e Ma#er +ea)se a+sene

o, onsi"eration is only a personal

"e,ense not a(aila+le against a

'ol"er in ")e o)rse%

$%o is an accommo"ation art(#

An ao--o"ation party is one

&'o 'as signe" t'e instr)-ent as-a#er. "ra&er. aeptor. or

in"orser. &it'o)t reei(ing (al)e

t'ere,or. an" ,or t'e p)rpose o,

len"ing 'is na-e to so-e ot'er

person% S)' a person is lia+le on

t'e instr)-ent to a 'ol"er ,or

(al)e. not&it'stan"ing s)'

'ol"er. at t'e ti-e o, ta#ing t'e

instr)-ent. #ne& 'i- to +e only

an ao--o"ation party%

T'e re)isites to +e anao--o"ation party are< 5a7

T'e party to t'e instr)-ent

signs as -a#er. "ra&er. aeptor

or in"orser 5+7 Wit'o)t reei(ing

(al)e t'ere,or. an" 57 =or t'e

p)rpose o, len"ing 'is na-e to

so-e ot'er person%

$%at are t%e e*ects o& &or'eries#

T'e eets o, a ,orgery are< 5a7

T'e instr)-ent is not "elare"totally (oi" nor are t'e gen)ine

signat)res t'ereon ren"ere"

inoperati(e% It is only t'e ,orge"

signat)re t'at is "elare"

inoperati(e% 8ene< rig'ts still

e3ist an" -ay +e en,ore" +y

(irt)e o, t'e instr)-ent as

+et&een parties &'ose signat)res

&ere not ,orge". an" 5+7 A ,orge"

instr)-ent ;)st pre(ents any

s)+se)ent party ,ro- a)iring

any rig'ts as against any party

&'ose na-e appears prior to t'e

,orgery% T'ere is no rig't to retain

t'e instr)-ent. or to gi(e

"is'arge or to en,ore pay-ent%

8o&e(er. rig'ts &ill e3ist an" -ay

+e en,ore" as +et&een

s)+se)ent parties +)t no one an

a)ir

commercial law - atty. rondez(1)

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