Pre-week Notes Mercantile

8/10/2019 Pre-week Notes Mercantile

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2001 PRE-WEEK REVIEW NOTESMERCANTILE LAW

AKSYON PART

ByAbelardo T. Domondon 1

HOW TO USE THESE NOTES:

These notes n the !orm o! te"t#al mater als and re$resentat %e re% e&'#est ons &ere s$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 )*-)+ A#,#st )**1s$onsored by PRIMUS ana,ement nl m ted Ser% (es/ In(./ held at theAs an So( al Inst t#te/ In(. Other re% e&ees he has $ersonally a#thor 0edmay also #se these Notes. Reviewees attending the 2002 Ateneo BaReview a e a!tho i"ed to !se these Notes#

The $#r$ose o! these Notes s to test the st#dent s ab l ty to ans&er hy$othet (al and $re% o#s bar '#est ons based on bas ( (on(e$ts as &ell as onsele(ted (ases de( ded by the S#$reme 2o#rt #$ to De(ember/ )***. The'#est ons are re$resentat %e o! $robable '#est ons that may be as3ed n the)**1 Bar E"am nat ons n er(ant le 4a&. There s an e"$anded treatmento! the $ro% s ons o! the Se(#r t es Re,#lat on 2ode 5R.A. No. 67889 &h (hshall be re!erred to as SR2/ and the Im$lement n, R#les and Re,#lat ons o! the Se(#r t es Re,#lat on 2ode to be re!erred to as SR2 R#les. Th s s so

be(a#se the $#bl shed re% e& mater als ha%e not yet n(l#ded th s s#b:e(t.The a#thor bel e%es that there &o#ld only be t&o bas ( '#est ons as3ed #nder the SR2 and the SR2 R#les.

It s re(ommended that the reader sho#ld (o%er the s#,,ested ans&ers&h le read n, the '#est ons. Th s &o#ld !or(e h m or her to re(all thea$$l (able la& and :#r s$r#den(e. I! reader has t me/ the ans&ers sho#ld be&r tten on a ,rade s(hool noteboo3 #s n, the s ,n $en ntended to be #sedd#r n, the a(t#al e"am nat ons. Ea(h '#est on sho#ld be ans&ered only& th n a s$an o! n ne 589 m n#tes. A!ter&ards/ (he(3 yo#r ans&ers re!err n,

to the s#,,ested ans&ers.DO NOT E ORI;E the s#,,ested ans&ers. They &ere $#r$osely

made to be len,thy to ser%e as e"$lanatory de% (es. Th s s so be(a#se yo#do not ha%e t me anymore to re!er ba(3 to yo#r re% e& mater als. Ta3e t me toread the notes and (omments as '#est ons may be dra&n !rom these areas

nstead o! !rom the '#est ons sho&n on these notes. I! yo# st ll (o#ld not#nderstand the (on(e$ts a!ter read n, these notes/ then re!er to yo#r re% e&mater als.

The mater als are arran,ed n a((ordan(e & th the (o%era,e o! thee"am nat ons. The a(t#al bar '#est ons may not be arran,ed n th s se'#en(e

I! $ressed !or t me the reader sho#ld read only those &h (h are mar3ed& th tr $le aster s3s


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

!orm or any means/ ele(tron ( or me(han (al/ n(l#d n, $hoto(o$y n, & tho#tthe &r tten $erm ss on o! the a#thor. These mater als are a#thor 0ed !or there$rod#(t on and #se only o! bar (and dates &ho ha%e attended the le(t#res(ond#(ted by Pro!. Domondon !or PRIMUS ana,ement nl m tedSer% (es/ In(./ and re% e&ees he has $ersonally a#thor 0ed. na#thor 0ed#sers shall not be $rose(#ted b#t SHA%% BE SUB&E'T TO THE %AWO( KARMA SU'H THAT THE) WI%% NE*ER PASS THE BAR !or steal n, the ntelle(t#al $ro$erty o! the a#thor.

Only (o$ es & th the man#al s ,nat#re o! Pro!. Domondon/ or h sa#thor 0ed re$resentat %e on th s $a,e/ are (ons dered a#thor 0ed (o$ es.Ho+de s o, a!tho i"ed -o.ies a e e/!ested not to +end thei -o.ies ,o

e o ing#

1 'O3E O( 'OMMER'E

a Me -hants and 'o44e -ia+ T ansa-tions # A ti-+es 1 to 56#

1# What is 4eant 78 the theo 8 o, 4ani,estation 9S >>ESTED ANSWER? A theory n the $er!e(t on o! (ontra(ts &h (h re(o,n 0es

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

2# Mig!e+ is a7ove twent8 one 8ea s 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 hab t#ally en,a,ed n (ommer(e. 5Art. 1/ 2ode o! 2ommer(e9. Wh le t s tr#e that he has had three 5+9 transa(t ons/ there s no le,al

$res#m$t on yet o! hab t#al ty. Th s s so be(a#se he has not anno#n(ed h s ntent on toen,a,e n (ommer(e or to o$en an establ shment &h (h has !or ts ob:e(t some (ommer( alo$erat on/ thro#,h ( r(#lars/ ne&s$a$ers/ handb lls/ $osters e"h b ted to the $#bl (/ or nany other manner &hatsoe%er. 5Art. +/ 2ode o! 2ommer(e9.

5b9/ 5(9 The transa(t ons are not (ommer( al n nat#re be(a#se the a(ts are not(onta ned n the $ro% s ons o! the 2ode o! 2ommer(e b#t those o! the 2 % l 2ode. Thesale s ,o%erned by the 2 % l 2ode $ro% s ons on sale/ that o! the (hattel mort,a,e by the

$ro% s ons o! the 2 % l 2ode and the 2hattel ort,a,e 4a& 5A(t 1@*6/ as amended9/ andthe del %ery o! the ord E"$ed t on !or sale s ,o%erned by the 2 % l 2ode $ro% s ons ona,en(y.

6# Pocholo, of legal age and otherwise qualified to engage in business seeks your 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 #upposing that 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$

19 a boo3 o! n%entor es and balan(es/ &h (h sho& all h s assets andl ab l t es n(l#d n, the d !!eren(e bet&een sa d assets and l ab l t es

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)9 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 2ode

o! 2ommer(e9/ l 3e those re'# red #nder the Nat onal Internal Re%en#e 2ode/ the2or$orat on 2ode and the Se(#r t es Re,#lat on 2ode.5b9 The (or$orat on/ !ormed by Po(holo & th others/ s re'# red to 3ee$ the same

boo3s as des(r bed abo%e. In add t on the (or$orat on s re'# red to 3ee$19 a boo3 or boo3s o! m n#tes/ n &h (h shall be entered all resol#t ons

re!err n, to the $ro,ress and o$erat ons o! the ent ty/ a$$ro%ed at ,eneral meet n,sor at least o! the board o! d re(tors 5Art. ++/ 2ode o! 2ommer(e9.It s also re'# red to 3ee$

)9 a boo3 o! all meet n,s/ as &ell as+9 a sto(3 and trans!er boo3. 5Se(. 7C/ 2or$orat on 2ode9.

7 %ette s o, ' edit !nde the 'ode o, 'o44e -e A ti-+es =5> to=>2; in-+!sive

?# !hat are the t hree distinct and independent contracts in a letter of credit "S >>ESTED ANSWER? The three d st n(t and nde$endent (ontra(ts are?a. The (ontra(t o! sale bet&een the b#yer and the seller

b. The (ontra(t o! the b#yer & th the ss# n, ban3/ and(. The letter o! (red t $ro$er n &h (h the ban3 $rom ses to $ay the seller $#rs#ant

to the terms and (ond t ons stated there n. 5Ken, #a Pa$er Prod#(ts 2o./ In(. %. 2o#rt o! A$$eals/ et al./ )6 S2RA )@79

NOTES AND 2O ENTS?a. %ia7i+it8 o, a -on,i 4ing 7an@ disting!ished , o4 a noti,8ing 7an@# A

(on! rm n, ban3 adds ts (red t to the letter o! (red t and there!ore s l able ! the o$en n,m$orter !a ls to $ay the e"$orter &h le a not !y n, ban3 be n, merely one &ho , %es

ad% (e as to the e" sten(e does not n(#r any s#(h l ab l ty.

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

=# %&' is the sole proprietor of a store engaged in the business of trading auto spare parts, both wholesale and retail. #cared by what he perceived as the

political 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 he

planned to reinvest in anada. /s he covered by the provisions of the 0ulk #ales 1aw " /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 (ons dered as a sales n b#l3 #nder theB#l3 Sales A(t ! t s a?

a. Sale/ trans!er/ or d s$os t on s other than n the ord nary (o#rse o! b#s ness b. Sale o! all or s#bstant ally all o! the b#s ness and(. Sale o! all or s#bstant ally all o! the ! "t#res and e'# $ments.S n(e the sale s (o%ered by the B#l3 Sales 4a&/ he m#st (om$ly & th the

!ollo& n, re'# rements n order to ma3e the sale %al d? a. Seller s a!! da% t l st n, all the names o! the (red tors/ the nat#re and amo#nt o!

(red ts d#e them

b. Seller $re$ares an n%entory o! the sto(3s to be sold and n!orms all the(red tors ten 51*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 2O ENTS?a. When a sa+e IS NOT -onside ed 7!+@ sa+e !nde the B!+@ Sa+es %aw:

19 When the sale/ trans!er or d s$os t on s n the ord nary (o#rse o! b#s ness

)9 When there s a &a %er o! the $ro% s ons o! the B#l3 Sales 4a&o! all the (red tors

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same l ab l t es he &o#ld ha%e n(#rred had the re(e $t been ne,ot able. 5Se(. 7/ TheWareho#se Re(e $ts 4a&.9

(. Negotia7+e wa eho!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 the

goods be delivered to the order of said Patrick. A $onth after, Paolo, one of Patrick>s creditors obtained 4udg$ent against

Patrick 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 deposited ce$ent.

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

b. Assu$ing that a week prior to the levy, Patrick sold the receipt to Roberto onthe basis of which, Roberto filed a clai$ 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 2om$any not to del %er the ,oods to the sher !!/

other& se t may be held l able !or (on%ers on. It sho#ld del %er only to Patr (3/ the $erson &ho de$os ted the ,oods and #$on $resentat on 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$os t. NOTES AND 2O ENTS?


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(. Wa eho!se +ia7+e ,o -onve sion I! he del %ers & tho#t a %al dndorsement the ,oods (o%ered by a ne,ot able &areho#se re(e $t del %erable to the

de$os tor or h s order.d. Instan-es whe e +ia7+e ,o -onve sion even with indo se4ent o

a!tho it8: The &areho#seman s also l able e%en & th ndorsement or & th a#thor ty / hes l 3e& se l able/ ! $r or to del %ery he had e ther?

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

)9 ad n!ormat on that the del %ery abo#t to be made &as to onenot la&!#lly ent tled to the $ossess on o! the ,oods. 5Se(. 1*/ WR49

iii P esidentia+ 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$ent. )e failed to pay and also failed to deliver the equip$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? 2ontent on s bere!t o! mer t. P.D. No. 11@/ s a

de(larat on by the le, slat %e a#thor ty to ma3e the a(t $#n shable #nder ts a#thor ty to $res(r be (erta n a(ts as $ern ( o#s and n m (al to $#bl ( &el!are #nder the e"er( se o! $ol (e $o&er. 5T om (o %. 2o#rt o! A$$eals/ et al./ >.R. No. 1))@+8/ $rom. ar(h C/18889

NOTES AND 2O ENTS?a. T !st e-ei.t; de,ined# A tr#st re(e $t s (ons dered as a se(#r ty transa(t on

ntended to a d n ! nan( n, m$orters and reta l dealers &ho do not ha%e s#!! ( ent !#nds

or reso#r(es to ! nan(e the m$ortat on or $#r(hase o! mer(hand se &ho may not be ableto a('# re (red t e"(e$t thro#,h #t l 0at on/ as (ollateral/ o! the mer(hand se m$orted or $#r(hased. The ,oods are held as se(#r ty by the lend n, nst t#t on !or the loanobl ,at on.

A letter o! (red t-tr#st re(e $t arran,ement s endo&ed & th ts o&n d st n(t %e!eat#res and (hara(ter st (s.. nder that set-#$/ a ban3 e"tends a loan (o%ered by theletter o! (red t/ & th the tr#st re(e $t as a se(#r ty !or the loan. In other &ords/ thetransa(t on n%ol%es a loan !eat#re re$resented by the letter o! (red t/ and a se(#r ty!eat#re &h (h s n the (o%er n, tr#st re(e $t. 5Na(# %s. 2o#rt o! A$$eals/ et al./ >.R.1*6 +6/ $rom. ar(h 11/ 188C9

#rther/ a tr#st re(e $t s a do(#ment n &h (h s e"$ressed a se(#r ty transa(t on&here#nder the lender/ ha% n, no $r or t tle to the ,oods on &h (h the loan s to be , %enand not ha% n, $ossess on &h (h rema ns n the borro&er/ lends h s money to the borro&er on se(#r ty o! the ,oods &h (h the borro&er s $r % le,ed to sell (lear o! the l en & th ana,reement to $ay all or $art o! the $ro(eeds o! the sale to the lender. It s a se(#r tya,reement $#rs#ant to &h (h a ban3 a('# res a se(#r ty nterestJ n the ,oods. It se(#resan ndebtedness and there (an be no s#(h th n, as se(#r ty nterest that se(#res noobl ,at on.

2learly/ a tr#st re(e $t $arta3es o! the nat#re o! a se(#r ty transa(t on. It (o#ldne%er be a mere add t onal or s de do(#ment. Other& se/ a $arty to a tr#st re(e $ta,reement (o#ld eas ly rene,e on ts obl ,at on there#nder/ #nderm n n, the m$ortan(eand de!eat n, & th m$#n ty the $#r$ose o! s#(h an nd s$ensable tool n (ommer( altransa(t ons. 52h n, %. 2o#rt o! A$$eals/ et al./ >.R. No. 11*6CC/ $rom. A$r l )7/ )***9

b. *io+ation o, T !st Re-ei.ts %aw is - i4ina+ in -ha a-te # Ret#rn o! the,oods ! #nsold merely e"t n,# shes the entr#stee s (r m nal l ab l ty. e s st ll ( % llyl able !or the #n$a d loan. 5V ntola %. IBAA/ 1@8 S2RA 1C*9

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

10# !hat are the requisites of a negotiable instru$ent "

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S >>ESTED ANSWER? An nstr#ment to be ne,ot able m#st (on!orm to the!ollo& n, re'# rements?

a. It m#st be n &r t n, and s ,ned by the ma3er or dra&er b. It m#st (onta n an #n(ond t onal $rom se or order to $ay a s#m (erta n 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 there n & th reasonable (erta nty. 5Se(. 1/ N.I.4.9 NOTES AND 2O ENTS?

ANA%)TI'A% STEPS (OR SO%*IN$ PROB%EMS IN*O%*IN$NE$OTIABI%IT) O( INSTRUMENTS# NOTE? This a ea is one o, the 4ost.o.!+a a eas !nde Negotia7+e Inst !4ents %aw# The 7a -andidate sho!+d 4astethe ana+8ti-a+ ste.s:

a. %oo@ ,o the DATE:19 I! dated . The date s prima facie the tr#e date o! the

nstr#ment. Ne,ot ab l ty s not a!!e(ted.)9 I! ante dated o .ost dated . Ne,ot ab l ty

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

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

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

519 Wron, date s nserted5a9 No e!!e(t on nstr#ment/ !

! holder n d#e (o#rse5b9 Instr#ment n%al d/ ! not

holder n d#e (o#rse b. %oo@ ,o SIGNATURE o! ma3er 5PN9 or dra&er 5BE9. 19 I! no s ,nat#re/ not ne,ot able.

)9 I! s ,ned/ ne,ot able.(. %oo@ ,o UNCONDITIONAL PROMISE PN or UNCONDITIONAL ORDER

BE #I! $resent/ ne,ot able 19 2ond t onal and not ne,ot able/ ! $rom se or order

de$ends #$on?a9 A !#t#re e%ent &h (h may or may not ha$$en

b9 A $ast e%ent #n3no&n to the $art es )9 2ond t onal and not ne,ot able ! $rom se or order to $ay

o#t o! a $art (#lar !#nd.E"am$le? Pay B or order P1*/***.** o#t o! my money n yo#r hands. Not ne,ot able be(a#se t s (ond t onal be n, $ayable o#to! a $art (#lar !#nd and no other.

+9 n(ond t onal and ne,ot able e%en ! nd (ates a $art (#lar !#nd o#t o! &h (h re mb#rsement s to be made or $art (#lar a((o#nt to be deb ted.E"am$le? Pay B or order P1*/***.** and re mb#rse yo#rsel! o#to! my money n yo#r hands. Ne,ot able be(a#se there s no(ond t on as to so#r(e o! !#nds only & th res$e(t to re mb#rsement&h (h o((#rs a!ter the nstr#ment s $a d.

C9 n(ond t onal and ne,ot able ! de$endent #$on a !#t#re

e%ent &h (h s (erta n to ha$$en e%en ! t me o! ha$$en n, s not3no&n.

@9 n(ond t onal and ne,ot able e%en ! statement o! the transa(t on s , %en.

E"am$le? I $rom se to $ay B or order P1/***/***.** n $aymento! the ho#se I bo#,ht !rom h m on ar(h 17/ 1888.

9 2ond t onal and not ne,ot able be(a#se '#al ! ed.

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E"am$le? I $rom se to $ay B or order P1/***/ ***.** s#b:e(t tothe terms and (ond t ons o! the ar(h 17/ 1888 Deed o! Sale !or the sale o! h s ho#se.

d. Is the s!4 CERTAIN IN MONEY L I! so/ ne,ot able 19 Not ne,ot able/ ! not n money.

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

)9 Ne,ot able e%en ! holder has ele(t on re'# re someth n, to be done n l e# o! money.

E"am$le? To 2? Pay to B or order P@*/***.** or @* (a%ans o! r (e at the o$t on o! the holder.

+9 I! at the o$t on o! the dra&er/ not ne,ot able be(a#se t s (ond t onal.

e. Is the inst !4ent .a8a7+e ON DEMAND o AT A I!ED OR DETERMINA"LE UTURE TIME L I! so/ ne,ot able.

19 I! not/ not ne,ot able. )9 Not ne,ot able/ ! $ayable on (ont n,en(y. a$$en n,

o! the e%ent does not (#re the de!e(t. E"am$le? Pay to B or order P1**/***.**/ t&o 5)9 days

a!ter he $asses the Bar. Ne,ot able?

+9 Payable on demand and ne,ot able &hen e"$ressed to be $ayable on demand/ at s ,ht or $resentat on/ no t me !or $ayment s e"$ressed on the nstr#ment/ or &hen the

nstr#ment s o%erd#e. C9 Payable at a determ nable !#t#re t me and ne,ot able !

$ayable at a ! "ed $er od a!ter date or s ,ht/ on or be!ore

a ! "ed or determ nable !#t#re t me s$e( ! ed there n/ or on or be!ore a ! "ed $er od a!ter o((#rren(e o! a (erta n e%ent tho#,hha$$en n, be #n(erta n.

!. Is the inst !4ent .a8a7+e TO ORDER o "EARER LI! so/ then ne,ot able. I! not/ not ne,ot able.

,. I, the inst !4ent is add essed to a d awee; is hena4ed o othe wise indi-ated on the inst !4ent with easona7+e -e taint8 9 I! so ne,ot able. I! not/ not ne,ot able.

SUMMAR) O( *ARIOUS SITUATIONS IN*O%*IN$ NE$OTIAB%EINSTRUMENTS# Another area that the reader sho#ld master? SUMMAR) O( SITUATIONS

a. In(om$lete nstr#ment19 Del %ered

a9 W th !or,ery and alterat on b9 W tho#t !or,ery and alterat on

)9 Not del %ereda9 W th !or,ery and alterat on

b9 W tho#t !or,ery and alterat ona. 2om$lete nstr#ment

19 Del %ereda9 W th !or,ery and alterat on

b9 W tho#t !or,ery and alterat on

)9 Not del %ereda9 W th !or,ery and alterat on

b9 W tho#t !or,ery and alterat on

IN'OMP%ETE INSTRUMENT BUT 3E%I*ERE3#a. older has prima facie a#thor ty to ! ll #$ blan3s

19 S ,nat#re on blan3 $a$er del %ered by s ,natory & th ntent on o! ma3 n, t a ne,ot able nstr#ment/ prima facie a#thor ty to ! ll t #$ !or any amo#nt.

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)9 Party $r or to (om$let on bo#nd ! ! lled #$a9 In a((ordan(e & th a#thor ty

b9 W th n reasonable t me b. Irres$e(t %e o! (om$l an(e & th no. )9 abo%e $r or $art es st ll bo#nd b#t only

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

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

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

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

ould 1eon collect P:-, . fro$ Meg "S >>ESTED ANSWER? No/ be(a#se the nstr#ment &as not str (tly ! lled #$ n

a((ordan(e & th the a#thor ty , %en. #upposing in the above proble$, 1eon negotiated the instru$ent to Mara who

knows that MegBs instructions was for 1eon to fill it up to P , . only. ould Mara 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! rm ty &hen the nstr#ment &as ne,ot ated to her. e, (o#ld

nter$ose the $ersonal de!ense o! &ant o! a#thor ty. #upposing further, in the above proble$, that Mara did not know of the lack of

authority, $ay Mara collect the P:-, . fro$ Meg "S >>ESTED ANSWER? Fes/ be(a#se ara s a holder n d#e (o#rse/ she not

be n, a&are o! any n! rm ty n the nstr#ment at the t me she too3 t. She may th#s

en!or(e t as ! t had been ! lled #$ str (tly n a((ordan(e & th the a#thor ty , %en and& th n a reasonable t me. There s l 3e& se (on(l#s %e $res#m$t on 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 in

good faith as pay$ent for goods sold to 0eth. Ana learns of the dishonesty foisted upon her by 0eth. Ana was able to instruct the 0ank in ti$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#m n, that the 2arlos ,a%e not (e o! d shonor to Ana. Th s s a (ase o! an n(om$lete nstr#ment b#t del %ered as t &as entr#sted toBeth/ Ana s $ersonal ass stant. Th s s so be(a#se 2arlos s a holder n d#e (o#rse &hodoes not ha%e any 3no&led,e o! the e"tent o! a#thor ty , %en to Beth/ that the (he(3 s !or the $ayments o! Ana s a((o#nt only.

oreo%er #nder the do(tr ne o! (om$arat %e ne,l ,en(e/ as bet&een Ana and2arlos/ both nno(ent $art es/ t &as the ne,l ,en(e o! Ana n entr#st n, the (he(3 to Beth&h (h s the $ro" mate (a#se o! the loss.

IN'OMP%ETE INSTRUMENT NOT 3E%I*ERE3#

a. 2om$leted and del %ered with a#thor ty/ %al d. b. 2om$leted and del %ered witho!t a#thor ty

19 Val d a,a nst $arty &hose s ,nat#re &as $la(ed a,te del %ery l 3endorser. Reason? Indorser &arrants the nstr#ment s n all res$e(t

&hat t $#r$orts to be.)9 Not %al d a,a nst $arty &hose s ,nat#re &as $la(ed 7e,o e del %ery/ !

not a holder n d#e (o#rse. Reason? Del %ery s essent al to %al d ty.o&e%er/ & th res$e(t to a holder n d#e (o#rse/ there s prima facie

$res#m$t on o! del %ery &h (h may be reb#tted.

9


10/75


(. R#les a$$ly &hether 19 Prom ssory note or b ll o! e"(han,e)9 Payable to bearer or order +9 W th or & tho#t !or,ery and mater al alterat on.

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 by 5dwin 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 holder were 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 %al d del %ery &h (h s

essent al to the %al d ty o! the nstr#ment.*nder the sa$e set of facts, if Pocholo as well as the drawee bank dishonors

the check, $ay Rhia proceed against 3eddah "S >>ESTED ANSWER? Fes/ be(a#se Heddah as an ndorser &arrants that the

nstr#ment s &hat t $#r$orts to be and ! t s d shonored and ne(essary $ro(eed n,s !or d shonor ta3en/ she shall $ay the holder/ Rh a.

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

S >>ESTED ANSWER? Fes/ be(a#se he &as res$ons ble !or the the!t/ the ! ll n,#$ and s#bse'#ent ne,ot at on 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 the

drawee bank raise against Pocholo "S >>ESTED ANSWER?a. Rh a 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 !a th on the $art o! the ban3. ItMs obl ,at on 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 th s (ase/the $ayee d d not en(ash the (he(3/ hen(e no &ay o! dent !y n,.

d. As bet&een t&o nno(ent $art es/ the one &ho made $oss ble the loss sho#ld bel able. ere Po(holo made $oss ble the loss as he s ,ned the blan3 (he(3 3no& n, !#lly&ell that ! stolen/ t (o#ld be ne,ot ated. #rthermore/ Po(holo sho#ld ha%e mmed atelyad% sed the ban3 to sto$ $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 %al d del %ery.

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

16# Rochelle left her friend and class$ate 1ora inside her car. 1ora stole ablank check which she found in RochelleBs car, forged RochelleBs signature and encashed the sa$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 (ons dered 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 !r end &o#ld brea(h her tr#st.

b. A ban3 s bo#nd to 3no& the s ,nat#res o! ts (l ents and ! t $ays on a !or,ed(he(3/ t s (ons dered as ha% n, $a d o#t o! ts o&n !#nds.

'OMP%ETE AN3 3E%I*ERE3 INSTRUMENT#a. W tho#t !or,ery and alterat on/ all $art es bo#nd.

b. W th !or,ed ndorsement and or alterat on19 Order nstr#ments

10


11/75


a9 Order $rom ssory note519 Pr or $art esnot bo#nd.

Reason? or,ed s ,nat#re &holly no$erat %e #nlessesto$$el sets n/ then $r or $art es bo#nd.

5)9 S#bse'#ent $art es bo#ndReason? Bo#nd on &arrant es o! ndorsers #nless other& ses$e( ! ed

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

b9 Order b ll o! e"(han,e519 Dra&ee (annot (har,e

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

5)9 Dra&er has no r ,ht a,a nst (olle(t n, ban3 5+9 Dra&ee (an re(o%er !rom (olle(t n, ban3 5C9 2olle(t n, ban3 bears loss

5a9 2an re(o%er !rom $erson t $a d5@9 Payee (an re(o%er !rom

5a9 Dra&er 5b9 2olle(t n, ban3 5(9 Payee (annot re(o%er !rom dra&ee

5 9 Dra&er not l able to the (olle(t n, ban3 )9 Bearer nstr#ments

a9 Bearer $rom ssory note519 Pr or $art es l able5)9 or,ed s ,natory not l able to $arty not holder n d#e

(o#rse

b9 Bearer b ll o! e"(han,e519 Dra&ee ban3 l able

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 rightsand liabilities of the parties.

S >>ESTED ANSWER? (3y &hose ndorsement s !or,ed and the $art es $r or to h m n(l#d n, the ma3er/ Denn s and the $ayee/ Kay (annot be held l able to theholder Bea/ &hether or not she s a holder n d#e (o#rse. Reasons?

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

b. No r ,ht to reta n the note/ , %e d s(har,e there!ore/ or en!or(e $ayment (o#ld be a('# red #nder a !or,ed ndorsement.

(. S n(e the $rede(essor o! the holder obta ned the note by !ra#d#lent and#nla&!#l means/ then there are no r ,hts that are trans!erred.

d. An,elo s l able to Bea be(a#se o! An,eloMs &arrant es as a ,eneral ndorser thatthe nstr#ment s &hat t $#r$orts to be and that he shall $ay n (ase o! d shonor.

I%%USTRATI*E PROB%EM: RI$HTS O( PARTIES IN ORGED

IN3ORSEMENT O( "ILL O( 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. Didel then deposits it in ?aya 0ank ( ollecting 0ank . !estern 0ank indorses the check to

5astern 0ank through the clearing house. Didel then withdraws fro$ ?aya 0ank, the proceeds of the check.

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

11


12/75


a. Dra&erMs a((o#nt 5T naMMs9 (annot be (har,ed 5deb ted/ ded#(ted/ s#btra(ted or red#(ed9 by the dra&ee 5Eastern Ban39/ !or the amo#nt $a d/ and ! her a((o#nt s(har,ed/ T na (an re(o%er !rom Eastern Ban3.

Reason? The de$os tory 5dra&ee Eastern Ban39 o&es to the de$os tor 5dra&er T na9/ an absol#te and (ontra(t#al d#ty to $ay the (he(3 only to the $erson to &hommade $ayable or #$on h s ,en# ne ndorsement.

The dra&er a#thor 0es and d re(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/ T na s $re(l#ded !rom ra s n, thede!ense o! !or,ery d#e to esto$$el on a((o#nt o! ne,l ,en(e/ !or e"am$le/ ! the $ayee

Nell e ad% sed T na o! the loss/ b#t she 5T na9 d d not n!orm Eastern Ban3.(. Dra&er 5T na9 has no r ,ht to re(o%er !rom the (olle(t n, ban3 5Daya Ban39.

Reasons?a9 D#ty o! (olle(t n, ban3 to e"er( se (are n (olle(t n, 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(t n, 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(t n, ban3 5DayaBan39.

Reason? S n(e the (he(3 $assed thro#,h the (lear n, ho#se/ the (olle(t n, ban3 5Daya Ban39 m#st ha%e ndorsed the (he(3 to the dra&ee ban3 5Eastern Ban39/there!ore t s l able on an ndorserMs &arranty o! ,en# neness and l ab l ty to $ay n (aseo! d shonor.

e9 2olle(t n, ban3 5Daya Ban39 bears the loss b#t t (an re(o%er !rom the $ersonto &hom t $a d the (he(3/ del.

!9 The $ayee 5Nell e9 (an st ll re(o%er !rom the dra&er 5T na9. Reason? She st ll

reta ned her (la m as t &as not e"t n,# shed.E"(e$t on? The $ayee 5Nell e9 (annot re(o%er ! the (he(3 &as m$a red thro#,hher !a#lt.

,9 The $ayee 5Nell e9 (an re(o%er !rom the (olle(t n, ban3 5Daya Ban39.Reason? Possess on 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? Th s s on the ass#m$t on that/ the dra&erMsa((o#nt &as (har,ed by the dra&ee ban3/ other& se the dra&er &o#ld be #n:#stlyenr (hed9

h9 The $ayee 5Nell e9 (annot re(o%er !rom the dra&ee ban3 5Eastern Ban39.Reason? There s no $r % ty o! (ontra(t.

. Dra&er 5T na9 s not l able to the (olle(t n, ban3 5Daya Ban39. Reason? Theres no $r % ty o! (ontra(t bet&een T na and Daya Ban3.

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

"EARER "ILL O( 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 purporting that 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 tothe t tle o! the holder/ 4 na/ be(a#se the nstr#ment s a bearer nstr#ment that $asses t tle

by 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,a nst Nell e &hose s ,nat#re &as !or,ed.

Reason? Esto$$el.

'OMP%ETE BUT NOT 3E%I*ERE3 INSTRUMENT#a. Del %ery (om$letes the (ontra(t

12


13/75


19 Bet&een mmed ate and remote $art es)9 Del %ery e!!e(t#al

b. I! #nder a#thor ty19 To a holder n d#e (o#rse

a9 Val d del %ery $res#med b9 Pr or $art es bo#nd

)9 I! del %ery (ond t onala9 Pr or $art es not bo#nd

1># A. Drancisco Realty and ?evelop$ent orporation (ADR? represented by 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$ent

Adelia 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 authori ed to sign 3ai$e>s na$e on the check by virtue of a

ertification e6ecuted by 3ai$e in her favor giving her authority to collect all thereceivables of ) fro$ E#/#, including the questioned checks. !ill the defense

prosper "S >>ESTED ANSWER? No. Where any $erson s #nder obl ,at on to ndorse

n a re$resentat %e (a$a( ty/ he may ndorse n s#(h terms as to ne,at %e $ersonal l ab l ty.An a,ent/ &hen so s ,n n,/ sho#ld nd (ate that he s merely s ,n n, n behal! o! the

$r n( $al and m#st d s(lose the name o! h s $r n( $al other& se he shall be held $ersonally

l able. E%en ass#m n, that Adel a &as a#thor 0ed by 222 to s ,n Ha me s name/ st ll/Adel a/ d d not ndorse the nstr#ment n a((ordan(e & th la&. Instead o! s ,n n, Ha me sname/ Adel a sho#ld ha%e s ,ned her o&n name and e"$ressly nd (ated that she &ass ,n n, as an a,ent o! 222. 5 ran( s(o %. 2o#rt o! A$$eals/ et al./ >.R. No. 11 +)*/

$rom. No%ember )8/ 18889

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

Fn March :s signatures, the three checks which were all drawn against its current account were encashed by unauthori ed persons. /t then

de$anded that #olid 0ank credits back its account the value of the checks it clai$ed were wrongfully encashed. Rebuffed in its de$and, 9riu$ph sues #olid 0ank. !ill the suit prosper "

S >>ESTED ANSWER? No. The loss res#lted !rom Tr #m$h s ne,l ,en(e.nder the abo%e ( r(#mstan(es a $r#dent and reasonable man &o#ld ha%e ,one o%er the

(he(3 boo3lets a!ter the b#r,lary and ha%e d s(o%ered that three (he(3s &ere m ss n,.The ban3 &o#ld ha%e been then mmed ately ad% sed. 5Se(#r ty Ban3 = Tr#st 2om$any %.Tr #m$h 4#mber and 2onstr#(t on 2or$orat on/ >.R. No. 1) 8 / $rom. Han#ary )1/18889

13


14/75


NOTES AND 2O ENTS? The abo%e ( ted (ase &as de( ded as sho&n abo%e be(a#se o! Tr #m$h s !a l#re to $ro%e !or,ery. It s the a#thor s % e& that had Tr #m$h been able to $ro%e !or,ery/ the ban3 &o#ld ha%e been l able as sho&n by the !ollo& n,d s(#ss on.

a. 'he-@s with ,o ged indo se4ents sho!+d 7e di,,e entiated , o4 -he-@s7ea ing ,o ged signat! es o, the d awe # 5Asso( ated Ban3 %. 2o#rt o! A$$eals/ et al./and ts (om$an on (ase Ph l $$ ne Nat onal Ban3 %. 2o#rt o! A$$eals/ et al./ )@) S2RA

)*9 b. E,,e-t o, ,o ged signat! e# When a s ,nat#re s !or,ed or made & tho#t

a#thor ty o! the $erson &hose s ,nat#re t $#r$orts to be/ it is who++8 ino.e ative; and nor ,ht to reta n the nstr#ment/ or to , %e a d s(har,e there!or/ or to en!or(e $aymenta,a nst any $arty thereto/ (an be a('# red thro#,h or #nder s#(h s ,nat#re !n+ess the.a t8 against who4 it is so!ght to en,o -e s!-h ight s $re(l#ded !rom sett n, #$ the!or,ery or &ant o! a#thor ty. 5Se(. )+/ Ne,ot able Instr#ments 4a&9

Se(. )+ does not a%o d the nstr#ment b#t only the !or,ed s ,nat#re. Th#s/ a!or,ed ndorsement does not o$erate as the $ayee s ndorsement.

A .e son 4a8 7e 7o!nd !nde a ,o ged signat! e . t he s $re(l#ded !romsett n, #$ the !or,ery or &ant o! a#thor ty. Part es &ho &arrant or adm t the ,en# nenesso! the s ,nat#re n '#est on and those &ho/ by the r a(ts/ s len(e or ne,l ,en(e areesto$$ed !rom sett n, #$ the de!ense o! !or,ery are $re(l#ded !rom #s n, th s de!ense.Indorsers/ $ersons ne,ot at n, by del %er and a((e$tors are &arrantors o! the ,en# nenesso! the s ,nat#res on the nstr#ment.

In bearer nstr#ments/ the s ,nat#re o! the $ayee or holder s not ne(essary to $asst tle to the nstr#ment. en(e/ &hen the ndorsement s a !or,ery/ only the $erson &hoses ,nat#re s !or,ed (an ra sed the de!ense o! !or,ery e%en a,a nst a holder n d#e (o#rse.5Asso( ated Ban3 %. 2o#rt o! A$$eals/ et al./ s$pra 9

(. E,,e-ts o, a ,o ged indo se4ent on an inst !4ent .a8a7+e to o de #

19 Where the nstr#ment s $ayable to order at the t me o! the !or,ery/ thes ,nat#re o! the r ,ht!#l holder s essent al to trans!er t tle to the same nstr#ment.When the holder s ndorsement s !or,ed all $art es $r or to the !or,ery may ra sethe real de!ense o! !or,ery a,a nst all $art es s#bse'#ent thereto.

)9 An ndorser o! an order nstr#ment &arrants that the nstr#ment s,en# ne and n all res$e(ts &hat t $#r$orts to be that he has ,ood t tle to t thatall $r or $art es had (a$a( ty to (ontra(t and that the nstr#ment s at the t me o! h s ndorsement %al d and s#bs st n,.J e (annot nter$ose the de!ense thats ,nat#res $r or to h m are !or,ed.

+9 A (olle(t n, ban3 &here a (he(3 s de$os ted and &h (h ndorses the(he(3 #$on $resentment & th the dra&ee ban3 s a ,narl ndorser &h (h &arrantsthe ,en# neness o! the nstr#ment. So/ e%en ! the ndorsement on the (he(3 de$os ted by the ban3 s (l ent s !or,ed/ the (olle(t n, ban3 s bo#nd by ts&arrant es as an ndorser and (annot set #$ the de!ense o! !or,ery as a,a nst thedra&ee ban3.

S n(e a !or,ed ndorsement s no$erat %e/ the (olle(t n, ban3 had no r ,htto be $a d by the dra&ee ban3. The (olle(t n, ban3 m#st ne(essar ly ret#rn themoney to the dra&ee ban3 be(a#se t &as $a d &ron,!#lly.

Th s l ab l ty s(heme o$erates & tho#t re,ard to !a#lt on the $art o! the(olle(t n, $resent n, ban3. E%en ! t &as not ne,l ,ent/ t &o#ld st ll be l able tothe dra&ee ban3 be(a#se o! h s ndorsement.

C9 The (olle(t n, ban3 or last endorser ,enerally s#!!ers the loss be(a#se thas the d#ty to as(erta n the ,en# neness o! all $r or endorsements (ons der n, that

the a(t o! $resent n, the (he(3 !or $ayment to the dra&ee s an assert on that the $arty ma3 n, the $resentment had done ts d#ty to as(erta n the ,en# neness o! theendorsements.

@9 oreo%er/ the (olle(t n, ban3 s made l able be(a#se t s $r %y to thede$os tor &ho ne,ot ated the (he(3. The ban3 3no&s h m/ h s address and h story

be(a#se he s a (l ent. It has ta3en a r s3 on the de$os t. The ban3 s also n a better $os t on to dete(t !or,ery/ !ra#d or rre,#lar ty n the endorsement.

9 The dra&ee ban3 s not s m larly s t#ated as the (olle(t n, ban3 be(a#sethe dra&ee ban3 ma3es no &arranty as to the ,en# neness o! the endorsements.

14


15/75


The dra&ee ban3 s d#ty s b#t to %er !y the ,en# neness o! the dra&er s s ,nat#reand not o! the endorsement be(a#se the dra&er s ts (l ent.

The dra&ee ban3 s #nder str (t l ab l ty to $ay the (he(3 to the order o! the $ayee. The dra&er s nstr#(t ons 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&er s 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 (#stomer s 5the dra&er s9a((o#nt only !or $ro$erly $ayable tems.

Where the dra&ee ban3 d d not $ay a holder or other $erson ent tled tore(e %e $ayment/ t has no r ,ht to re mb#rsement !rom the dra&er.

The ,eneral r#le then s that the dra&ee ban3 may not deb t the dra&er sa((o#nt and s not ent tled to ndemn ! (at on !rom the dra&er. The r s3 o! lossm#st $er!or(e !all on the dra&ee ban3.

79 The (ha n o! l ab l ty does not end & th the dra&ee ban3. Wh le thedra&ee ban3 may not deb t the dra&er s a((o#nt/ t may ,enerally $ass l ab l ty

ba(3 thro#,h the (olle(t on (ha n to the $arty &ho too3 !rom the !or,er and. o! (o#rse/ to the !or,er h msel!/ ! a%a lable.

The dra&ee ban3 (an see3 re mb#rsement or a ret#rn o! the amo#nt t $a d!rom the $resentor (olle(t n, ban3 or $erson. E%ent#ally/ the loss !alls on the

$arty &ho too3 the (he(3 !rom the !or,er 5the (olle(t n, ban39/ or on the !or,er h msel!. en(e/ the dra&ee ban3 (an re(o%er the amo#nt $a d on the (he(3

bear n, the !or,ed endorsement !rom the (olle(t n, ban3.69 A dra&ee ban3 has the d#ty to $rom$tly n!orm the $resentor (olle(t n,

ban3 o! the !or,ery #$on d s(o%ery. I! the dra&ee ban3 delays n n!orm n, the $resentor (olle(t n, ban3 o! the !or,ery/ thereby de$r % n, sa d $resentor (olle(t n, ban3 o! the r ,ht to re(o%er !rom the !or,er/ the dra&ee ban3 s deemed ne,l ,ent

and (an no lon,er re(o%er !rom the $resentor (olle(t n, ban3.89 I! the dra&ee ban3 (an $ro%e a !a l#re by the (#stomer dra&er toe"er( se ord nary (are that s#bstant ally (ontr b#ted to the ma3 n, o! the !or,eds ,nat#re/ the dra&er s $re(l#ded !rom assert n, the !or,ery as a de!ense.

I! at the same t me the dra&ee ban3 &as also ne,l ,ent to the $o nt o! s#bstant ally (ontr b#t n, to the loss/ then s#(h loss !rom the !or,ery (an bea$$ort oned bet&een the ne,l ,ent dra&er and the ne,l ,ent ban3. 5Asso( atedBan3/ s$pra 9d. 2? ho! !+e de+eted sin-e 1 C0# nder Se(t on C 5(9 o! 2.B. 2 r(#lar No.

@6*/ tems bear n, a !or,ed endorsement shall be ret#rned & th n t&enty-!o#r 5)C9 ho#rsa!ter d s(o%ery o! the !or,ery b#t n no e%ent beyond the $er od ! "ed or $ro% ded by la&!or ! l n, o! a le,al a(t on by the ret#rn n, ban3.

The 2entral Ban3 2 r(#lar &as n !or(e !or all ban3s #nt l H#ne 186* &hen thePh l $$ ne 2lear n, o#se 2or$orat on 5P2 29 &as set #$ and (ommen(ed o$erat ons.Se(t on )+ o! the P2 2 R#les deleted the re'# rement that tems bear n, a !or,edendorsement sho#ld be ret#rned & th n t&enty-!o#r 5)C9 ho#rs. 5Asso( ated Ban3/ s$pra 9

e. E,,e-ts whe e the d awe s signat! e was ,o ged# The dra&er (an re(o%er !rom the dra&ee ban3. No dra&ee ban3 has the r ,ht to $ay a !or,ed (he(3. I! t does/ tshall ha%e to re(red t the amo#nt o! the (he(3 to the amo#nt o! the dra&er. The l ab l ty(ha n ends & th the dra&ee ban3 &hose res$ons b l ty t s to 3no& the dra&er s s ,nat#res n(e the latter s ts (#stomer. 5Asso( ated Ban3/ s$pra 9

1 # A check with serial nu$ber =@


16/75


0ank in turn debited R 0ank>s account, and sent the check back to ?5 0ank. ?5 0ank however returned the check to 7 0ank.

R 0ank could not debit & Marketing>s account which was already closed.!as the alteration of the serial nu$ber of the check a $aterial alteration affecting thenegotiability of the check "

S >>ESTED ANSWER? No/ the alterat on o! the ser al n#mber s mmater al or nno(ent alterat on. The a!orement oned alterat on d d not (han,e the relat ons bet&een

the $art es. the name o! the dra&er and the dra&ee &ere not altered. The ntended $ayee&as the same. The s#m o! money d#e to the $ayee rema ned the same.

An nno(ent alterat on 5,enerally/ (han,es on tems other than those re'# red to bestated #nder Se(. 1/ N.I.4.9 and s$ol at on 5alterat ons done by a stran,er9 & ll not a%o dthe nstr#ment/ b#t the holder may en!or(e t only a((ord n, to ts or , nal tenor. 5V t#,( ted n Ph l $$ ne Nat onal Ban3 %. 2o#rt o! A$$eals/ et al./ )@ S2RA C819

NOTES AND 2O ENTS?a. Mate ia+ a+te ation# An alterat on s sa d to be mater al ! t alters the e!!e(t o!

the nstr#ment. It means an #na#thor 0ed (han,e n an nstr#ment that $#r$orts to mod !yn any res$e(t the obl ,at on o! a $arty or an #na#thor 0ed add t on o! &ords or n#mbers

or other (han,e to an n(om$lete nstr#ment relat n, to he obl ,at on o! a $arty. In other &ords/ a mater al alterat on s one &h (h (han,es the tems &h (h are re'# red to be stated#nder Se(t on 1 o! the Ne,ot able Instr#ments 4a&. 5Ph l $$ ne Nat onal Ban3 %. 2o#rt o! A$$eals/ et al./ )@ S2RA C819

b. The sa+a 8 -he-@ o, a gove n4ent o,,i-e o e4.+o8ee does not 7e+ong tohi4 7e,o e it is .h8si-a++8 de+ive ed to hi4# nt l that t me the (he(3 belon,s to the,o%ernment.

nder Se(. 1 o! the Ne,ot able Instr#ments 4a&/ e%ery (ontra(t on a ne,ot ablenstr#ment s n(om$lete and re%o(able #nt l%e&i'er( o! the nstr#ment !or the $#r$ose o!

, % n, e!!e(t thereto. As ord nar ly #nderstood/ de+ive 8 means the trans!er o! the

$ossess on o! the nstr#ment by the ma3er or dra&er )ith i*te*t to tra*sfer tit&e to the pa(ee a*% reco+*i,e him as the ho&%er thereof# 5De la V (tor a %s. B#r,os/ et al./ )C@S2RA +7C9

20# 9he &78 0ank is willing to lend to your client the su$ of P ,- , . payable in five (- years with interest at :2 per annu$ secured only by a surety bond.

#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((omodat on $arty and he s l able on thenstr#ment.

NOTES AND 2O ENTS?a. A--o4odation .a t8# 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! lend n, h s name to some other $erson. S#(h a $erson s l able on the nstr#ment to aholder !or %al#e/ not& thstand n, s#(h holder/ at the t me o! ta3 n, the nstr#ment 3ne&h m to be only an a((omodat on $arty. 5Se(. )8/ N.I.4.9

b. A47ig!o!s negotia7+e inst !4ents# Where a ne,ot able nstr#ment s soamb ,#o#s that there s do#bt &hether t s a b ll or a note/ the holder may treat t e ther asa b ll o! e"(han,e or a $rom ssory note at h s ele(t on.

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 and

Re$edios were acquitted of estafa. May Re$edios be held liable for the a$ount of thechecks "

S >>ESTED ANSWER? Fes. Where a s ,nat#re s so $la(ed #$on a ne,ot ablenstr#ment that t s not (lear n &hat (a$a( ty the $erson ma3 n, the same ntended to

s ,n/ she s deemed to be an ndorser.Th#s/ as an ndorser/ Remed os en,a,es that #$on d#e $resentment/ the (he(3s are

to be a((e$ted or $a d/ or both/ as the (ase may be and ! d shonored and the ne(essary

16


17/75


$ro(eed n,s are ta3en/ she & ll $ay the amo#nt thereo! to the holder onr (o art.5Sa$ era %. 2o#rt o! A$$eals/ et al./ >.R. No. 1)68)7/ $rom. Se$tember 1C/ 18889

NOTES AND 2O ENTS?a. 'he-@# A b ll o! e"(han,e dra&n on a ban3 $ayable on demand. 5Bataan 2 ,ar

and 2 ,arette a(tory/ In(. %s. 2o#rt o! A$$eals/ et al. )+* S2RA C+ oran %s. 2o#rt o! A$$eals/ et al./ )+* S2RA 7889

b. 'he-@ %isti*+$ishe% from 7i++ o, e -hange# A (he(3/ as d st n,# shed!rom an ord nary b ll o! e"(han,e/ s s#$$osed to be dra&n a,a nst a $re% o#s de$os t o! !#nds !or t s ord nar ly ntended !or mmed ate $ayment. A ban3 s #nder no obl ,at on toma3e $art $ayment on a (he(3 #$ to only the amo#nt o! the dra&er s !#nd. 5 oran/s#$ra9

There s an element o! (erta nty or ass#ran(e n an ord nary (he(3 that t & ll be $a d #$on $resentat on that s &hy t s $er(e %ed as a s#bst t#te !or (#rren(y n(ommer( al and ! nan( al transa(t ons. 5Tan %s. 2o#rt o! A$$eals/ et al./ )+8 S2RA +1*9

22# Fn 3uly s failure to deliver. Again 9P issued two (: postdated crossed checks, check no. I-J=HG a$ounting to PI< , . payable on March -,: , and check no. : a$ounting to PI< , . payable on March =, : .

Mr. 0oy sold all the four checks at a discount to /ndian Dore6, /nc. As a result

of Mr. 0oy>s failure to deliver the $eat, 9P issued stop order pay$ents on all the four checks on March , : .ould /ndian Dore6, /nc. recover fro$ 9P , the value of the four checks "

!hy "S >>ESTED ANSWER? No/ be(a#se Ind an ore"/ In(. s not a holder n d#e

(o#rse. The (ross n, o! the (he(3s sho#ld ha%e $#t Ind an on n'# ry and #$on t de%ol%esthe d#ty to as(erta n r. Boy s t tle to the (he(3 or h s $ossess on. a l n, n th s res$e(t/Ind an 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 mmed ate ndorser. NOTES AND 2O ENTS?a. Finds o, -he-@s# There are d !!erent 3 nds o! (he(3s amon, &h (h are?

emorand#m (he(3/ (ash er s (he(3/ tra%eller s (he(3 and (rossed (he(3. b. ' ossed -he-@# A (he(3 s a b ll o! e"(han,e dra&n on a ban3 $ayable on

demand..2rossed (he(3 s one &here t&o $arallel l nes 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 &r tten bet&een the $arallel l nes dra&n.It s (rossed ,enerally &hen only the &ords and (om$anyJ are &r tten or noth n, s&r tten bet&een the $arallel l nes. It may be ss#ed so that $resentment (an be made only

by a ban3.(. E,,e-ts o, - ossing a -he-@:

19 The (he(3 may *ot be en(ashed b#t only de$os ted n the ban3)9 The (he(3 may be ne,ot ated o*&( o*ce - to one &ho has an

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

that the (he(3 has been ss#ed for a %efi*ite p$rpose / other& se stated theholder s not a holder n d#e (o#rse. 5Bataan 2 ,ar and 2 ,arette a(tory/In(. %s. 2o#rt o! A$$eals/ et al./ )+* S2RA C+9

d. Ho+de in d!e -o! se# Se(. @) o! the Ne,ot able Instr#ments 4a& statesthat a holder n d#e (o#rse s a holder &ho has ta3en the nstr#ment #nder the !ollo& n,(ond t ons?

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

17


18/75


)9 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 d shonored ! s#(h &as the !a(t

+9 That he too3 t n ,ood !a th and !or %al#e d9 That at the t me t&as ne,ot ated to h m he had no not (e o! any n! rm ty n the nstr#ment or de!e(t n the t tle o! the $erson ne,ot at n, t

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

The d sad%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,ot able. 5Bataan 2 ,ar and 2 ,arettea(tory/ In(. %s. 2o#rt o! A$$eals/ et al./ )+* S2RA C+9

e. 'ashie s -he-@# It s a $r mary obl ,at on o! the ss# n, ban3 and a((e$ted nad%an(e by ts mere ss#an(e and/ by ts $e(#l ar (hara(ter and ,eneral #se n the(ommer( al &orld s re,arded s#bstant ally to be as ,ood as the money &h (h tre$resents. 5Tan %s. 2o#rt o! A$$eals/ et al./ )+8 S2RA +1*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 >ESTED ANSWER?a. Where the dra&er and the dra&ee are the same $erson

b. When the dra&ee s a ! (t t o#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 $ayment

d. 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#ment

e. Where the dra&er has (o#ntermanded $ayment. 5Se(. 11C/ N.I.4.9

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

2=# 3ere$iah was a $ost valued e$ployee of Dortune Manufacturing orporation for the past twenty years. )e was insured by his e$ployer with itself as the

beneficiary. A co$pany owned house at ?as$arinas Lillage was furnished for his usewhich was insured with the owner as the beneficiary. 0oth of the policies were up to

?ece$ber < , : .

18


19/75


Fn 3une -, : 3ere$iah retired fro$ the co$pany. As part of hisretire$ent package, the title of the house at ?as$arinas Lillage was transferred to

3ere$iahBs na$e. Fn 3uly I, : , the house was burned resulting to 3ere$iahBsdeath.

!ho could recover on the insurance policies " 56plain.S >>ESTED ANSWER? Nobody (o#ld re(o%er on the ns#ran(e $ol (y (o%er n,

the ho#se. ort#ne (o#ld not re(o%er on the $ol (y (o%er n, the ho#se be(a#se t d d notha%e any ns#rable nterest at the t me o! the loss on H#ly C/)**1. Th s s so be(a#se theo&nersh $ &as already trans!erred to Herem ah. o&e%er there s no sho& n, n the

$roblem o! any (han,e n the ns#ran(e n Herem ah s !a%or so h s he rs (o#ld not alsore(o%er on the $ol (y.

ort#ne (o#ld re(o%er on the $ol (y (o%er n, Herem ahMs l !e be(a#se ns#rablenterest on l !e need not e" st at the t me o! the death.

NOTES AND 2O ENTS?a. Ins! a7+e inte est s re'# red !or a $erson &ho ns#res the l !e o! another #

E%ery $erson has an ns#rable nterest n the l !e and health?19 O! h msel!/ o! h s s$o#se and o! h s (h ldren)9 O! any $erson on &hom he de$ends &holly or n $art !or ed#(at on or

s#$$ort/ or n &hom he has a $e(#n ary nterest+9 O! any $erson #nder a le,al obl ,at on to h m !or he $ayment o! money/

or res$e(t n, $ro$erty or ser% (e/ o! &h (h death or llness m ,ht delay or $re%entthe $er!orman(e and

C9 O! any $erson #$on &hose l !e any estate or nterest %ested n h mde$ends. 5Se(. 1*/ Ins#ran(e 2ode9

b. P! .ose ,o e/!i e4ent o, ins! a7+e inte est in +i,e# To remo%e thetem$tat on o! ns#r n, a $ersonMs l !e and then 3 ll n, h m to re(o%er the ns#ran(e

$ro(eeds.


20/75


>ood !a th s not a de!ense to (on(ealment/ as mater al ty o! the n!ormat on& thheld does not de$end on the state o! m nd 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 d e o! the d sease he had !a led to d s(lose tothe ns#rer. It s s#!! ( ent that the non-d s(los#re m sled the ns#rer n !orm n, h sest mates on the r s3s o! the $ro$osed ns#ran(e $ol (y or n ma3 n, n'# r es. 5S#nl !eAss#ran(e 2om$any o! 2anada %s. 2o#rt o! A$$eals/ et al./ )C@ S2RA ) 69

In the abo%e $roblem/ the n(ontestab l ty (la#se does not ! nd a$$l (at on be(a#sethe t&o year $er od has not yet la$sed.

#upposing under the above set of facts that the insurance was secured on August < , GGH, would your answer be the sa$e "

S >>ESTED ANSWER? No. S n(e the $ol (y s t&o years old/ then(ontestab l ty (la#se has already set n &h (h de!eats the (on(ealment.

NOTES AND 2O ENTS?a. In-ontesta7i+it8 -+a!se# A!ter a $ol (y o! l !e ns#ran(e made $ayable on

the death o! the ns#red shall ha%e been n !or(e d#r n, the l !et me o! the ns#red !or a $er od o! t&o years !rom the date o! ts ss#e or ts last re nstatement/ the ns#rer (annot $ro%e that the $ol (y s %o da. i*itio or s res( ndable by reason o! the !ra#d#lent(on(ealment or m sre$resentat ons o! the ns#red or h s a,ent. 5)nd $ar./ Se(. C6/Ins#ran(e 2ode9

Wo!+d it 4a@e an8 di,,e en-e in 8o! answe s to the a7ove i, Ma ion was4a ied to ( an-is 9 What a7o!t i, it was &e,, e8 who was 4a ied to 3anie+a 9

S >>ESTED ANSWER? nder the abo%e ( r(#mstan(es ! ar on and He!!rey&ere marr ed to $ersons other than themsel%es/ then there (o#ld be no re(o%ery on the

ns#ran(e $ol (y o! ar on. He!!rey (o#ld not be a donee be(a#se o! the ll ( t relat onsh $hen(e (annot be a bene! ( ary n l !e ns#ran(e.

NOTES AND 2O ENTS?'on-ea+4ent de,ined# A ne,le(t to (omm#n (ate that &h (h a $arty 3no&s ando#,ht to (omm#n (ate. 5Se(. ) / Ins#ran(e 2ode9

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

2># EF7* applied for credit facilities and acco$$odations with Ri al 0ank. As security for its credit facilities with Ri al 0ank, EF7* e6ecuted two real estate$ortgages and two chattel $ortgages in favor of Ri al 0ank, with were registered withthe Registry of ?eeds. *nder the four $ortgages, EF7* co$$itted itself to insure the$ortgaged property with M/ F, an insurance co$pany approved by Ri al 0ank, and subsequently to endorse and deliver the insurance policies to Ri al 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? R 0al Ban3 (o#ld re(o%er #$ to the e"tent o! ts

nterest on the mort,a,e.Wh le t s settled that a mort,a,or and a mort,a,ee ha%e se$arate and d st n(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 h s o&n sole bene! t/ the ntent on o! the $art es sho#ld ,o%ern. Inthe (ase at bar the endorsements made n !a%or o! R 0al Ban3/ (learly nd (ate that R 0alBan3 s tr#ly the ent ty !or &hose bene! t the $ol ( es &ere (learly ntended. 5R 0al2ommer( al Ban3 n, 2or$orat on/ et al./ %. 2o#rt o! A$$eals/ et al./ and (om$an on (ases.

)68 S2RA 1)8)9

2C# 1ara obtained a loan of P- , . fro$ Angelina and as security she$ortgaged her house worth P=- , . to Angelina. 1ara insured the house against

fire for P=- , . with roft /nsurance with the policy stating that any other insurances 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'

20


21/75


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 % olat on 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 % olat on o! the other ns#ran(e (la#seJ be(a#se the r ns#rable nterest s d !!erent. 5>ea,on a %s. 2o#rt o! A$$eals/ et al./ )C1S2RA 1@)9

b. 4ara (o#ld re(o%er P7@*/***.** and An,el na/ P@**/***.**/ the e"tent o! the r res$e(t %e ns#rable nterests. or reasons see abo%e.

(. No. Ra der Ins#ran(e ta3es the $la(e o! An,el na. In other &ords t ss#bro,ated to the nterest o! An,el na.

NOTES AND 2O ENTS?a. Othe ins! an-e . ohi7ition -+a!se# An ns#ran(e $ol (y (onta ns the

!ollo& n, (la#se? The ns#red shall , %e not (e to the 2om$any o! any ns#ran(e or ns#ran(es already e!!e(ted/ or &h (h may s#bse'#ently be e!!e(ted (o%er n, any o! the

$ro$erty or $ro$ert es hereby ns#red #nless s#(h not (e be , %en and the $art (#lars bestated there n be!ore the o((#rren(e o! the loss other& se all bene! ts #nder the $ol (y shall

be deemed !or!e ted.JThe (ond t on s a $ro% s on &h (h n%ar ably a$$ears n ! re ns#ran(e $ol ( es and

s ntended to $re%ent an n(rease n the moral ha0ard. It s (ommonly 3no&n as the

add t onal or other ns#ran(eJJ (la#se and has been #$held as %al d and as a &arranty thatno other ns#ran(e e" sts. b. E,,e-t o, non dis-+os! e# The non-d s(los#re o! the t&o ns#ran(es &o#ld not

be !atal to re(o%ery. 5>ea,on a %s. 2o#rt o! A$$eals/ et al./ )C1 S2RA 1@)9 Th s samee!!e(t also a$$l es 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 ,i e.o+i-ies s to $re%ent o%er- ns#ran(e and th#s a%ert the $er$etrat on o! !ra#d. When a

$ro$erty o&ner obta ns ns#ran(e $ol ( es !rom t&o or more ns#rers n a total amo#ntthat e"(eeds the $ro$erty s %al#e/ the ns#red may ha%e an nd#(ement to destroy the

$ro$erty !or the $#r$ose o! (olle(t n, the ns#ran(e. The $#bl ( as &ell as the ns#rer snterested n $re%ent n, as s t#at on n &h (h a ! re &o#ld be $ro! table to the ns#red.

d. E,,e-t o, vio+ation# The % olat on o! the other ns#ran(eJ (la#se &o#ld a%o dthe $ol (y. E -e.tion: The other ns#ran(e m#st be #$on the same s#b:e(t matter/ thesame nterest there n/ and the same r s3. There s no % olat on &here the mort,a,or andthe mort,a,ee too3 se$arate ns#ran(es/ n % olat on o! the other ns#ran(e (la#seJ

be(a#se the r ns#rable nterest s d !!erent. 5>ea,on a %s. 2o#rt o! A$$eals/ et al./ )C1S2RA 1@)9

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

nterests o! a mort,a,or and a mort,a,ee on the mort,a,ed $ol (y are se$arate andd st n(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, non dis-+os! e# The non-d s(los#re o! the t&o ns#ran(es &o#ld not

be !atal to re(o%ery. 5>ea,on a %s. 2o#rt o! A$$eals/ et al./ )C1 S2RA 1@)9 Th s e!!e(talso a$$l es to the (on(e$t o! the other ns#ran(e $roh b t on.

,. S!7 ogation# I! the $la nt !! s $ro$erty has been ns#red/ and he has re(e %edndemn ty !rom the ns#ran(e (om$any !or the n:#ry or loss ar s n, o#r o! the &ron, or

brea(h o! (ontra(t (om$la ned o!/ the ns#ran(e (om$any shall be s#bro,ated to the r ,htso! the ns#red a,a nst the &ron,doer or the $erson &ho % olated he (ontra(t. 5Art (le))*7/ 2 % l 2ode9

The r ,ht o! s#bro,at on s not de$endent #$on/ nor does t ,ro& o#t o!/ any $r % ty o! (ontra(t or #$on &r tten ass ,nment o! (la m. It a((r#es s m$ly #$on $ayment

21


22/75


o! the ns#ran(e (la m by the ns#rer. 52oast& se 4 ,htera,e 2or$orat on %s. 2o#rt o! A$$eals/ et al./ )C@ S2RA 78 9

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$ount of PHJ, . shall be paid. /n the event of the debtor>s death before his indebtedness with the creditor shall have been fully paid,an a$ount to pay the outstanding indebtedness shall first be paid to the reditor and the 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 '$assive cerebral he$orrhage.' ?0P sub$itted a clai$, on the %$ortgage rede$ption insurance' but it was denied by Erepalife on the ground of non@disclosure that ?r. 1euterio wassuffering fro$ hypertension, the cause of his death.

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

S >>ESTED ANSWER? Fes. 2on(ealment o! the state o! health o! the ns#redmort,a,or as bas s !or re!#s n, $ayment o! ns#ran(e (la ms sho#ld be establ shed 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 $erson ns#red s s#s(e$t ble o! e"a(t $e(#n ary est mat on/ the meas#reo! ndemn ty #nder a $ol (y o! ns#ran(e #$on l !e or health s the s#m ! "ed n the $ol (y/

n th s (ase P6 /)**.**.S n(e DBP has already !ore(losed on the res dent al lot n sat s!a(t on o! Dr.

4e#ter o s o#tstand n, loan/ the ns#ran(e $ro(eeds shall n#re to the bene! t o! the he rs o! Dr. 4e#ter o. DBP sho#ld not #n:#stly enr (h tsel! by (olle(t n, the ns#ran(e $ro(eedsa!ter t has !ore(losed the $ro$erty. 5>reat Pa( ! ( 4 !e Ass#ran(e 2or$orat on %. 2o#rt o! A$$eals/ et al./ >.R. No. 11+688/ $rom. O(tober 1+/ 18889

NOTES AND 2O ENTS?a. Ins! a7+e inte est in 4o tgaged . o.e ties in G4o tgage ede4.tion

ins! an-e# The rat onale o! a ,ro#$ ns#ran(e $ol (y o! mort,a,ors/ other& se 3no&nas the mort,a,e redem$t on ns#ran(e/J s a de% (e !or the $rote(t on 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 dem se o! the mort,a,or d#r n, the s#bs sten(e o! themort,a,e debt/ the $ro(eeds !rom s#(h ns#ran(e & ll be a$$l ed to the $ayment o! themort,a,e debt/ thereby rel e% n, the he rs o! the mort,a,or !rom $ay n, the obl ,at on.

In a s m lar %e n/ am$le $rote(t on s , %en to the mort,a,or so that n the e%ent o! h s death/ the mort,a,e obl ,at on & ll be e"t n,# shed by the a$$l (at on o! the ns#ran(e

$ro(eeds to the mort,a,e ndebtedness.2onse'#ently/ &here the mort,a,or $ays the ns#ran(e $rem #m #nder the ,ro#$

ns#ran(e $ol (y/ ma3 n, the loss $ayable to the mort,a,ee/ the ns#ran(e s on themort,a,or s nterest/ and the mort,a,or (ont n#es to be a $arty to the (ontra(t. In th sty$e o! ns#ran(e/ the mort,a,ee s s m$ly an a$$o ntee 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.Th s (o#ld be seen !rom the $ro% s ons o! Se(t on 6 o! the Ins#ran(e 2ode/ &h (h

reads? nless the $ol (y $ro% des/ &here a mort,a,or o! $ro$erty e!!e(ts ns#ran(e n h so&n name $ro% d n, that the loss shall be $ayable to the mort,a,ee/ or ass ,ns a $ol (y o!

22


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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! h s/

$r or to the loss/ &h (h &o#ld other& se a%o d 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 there n named/ & th the same e!!e(t as ! t had been $er!ormed by themort,a,or.J 5>reat Pa( ! ( 4 !e Ass#ran(e 2or$orat on %. 2o#rt o! A$$eals/ et al./ >.R.

No. 11+688/ $rom. O(tober 1+/ 1888ea,on a %s. 2o#rt o! A$$eals/ et al./ )C1 S2RA 1@)9

ESTED ANSWER? Re(o%ery (o#ld be made only ! the dama,e &as

(a#sed by $er ls o! the sea not 78 $er ls o! the sh $. De!e(ts o! the sh $ are $er ls 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#(t on o! the th n, ns#red

b. The rretr e%able loss o! th n, by s n3 n, or by be n, bro3en #$(. Any dama,e to the th n, &h (h renders t %al#eless to the o&ner !or the $#r$ose

!or &h (h he held t or d. Any other e%ent &h (h e!!e(t %ely de$r %es the o&ner o! the $ossess on/ at the

$ort o! dest nat on/ o! the th n, ns#red. 5Se(. 1+*/ Ins#ran(e 2ode9 NOTES AND 2O ENTS?a. 'onst !-tive tota+ +oss in 4a ine ins! an-e# One &h (h , %es to a $erson a

r ,ht to abandon. 5Se(. 1+1/ Ins#ran(e 2ode9 b. Instan-es whe e the e is a -onst !-tive tota+ +oss o, the thing ins! ed whi-h

wo!+d entit+e an ins! ed to a7andon in 4a ine ins! an-e:19 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 $er l)9 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 th n, ns#red/ s a sh $ and the (ontem$lated %oya,e (annot be

la&!#lly $er!ormed & tho#t n(#rr n, e ther an e"$ense to the ns#red o! more thanthree-!o#rths the %al#e o! the th n, abandoned or a r s3 &h (h a $r#dent man&o#ld not ta3e #nder the ( r(#mstan(es or

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

23


24/75


& th reasonable d l ,en(e/ to !or&ard the (ar,o/ & tho#t n(#rr n, the l 3e e"$enseor r s3. B#t !re ,hta,e (annot n any (ase be abandoned #nless the sh $ s alsoabandoned. 5Se(. 1+8/ Ins#ran(e 2ode9

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 to Masagana of the non@renewal of the policies at the address stated in the policies. Fn 3une 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: to

May ::, GGs checks that it tendered, and at the sa$e ti$e re4ected Masagana>s clai$ for the reasons (a that the policies have e6pired, and (b that the fire occurred on 3une

s tender of pre$iu$ pay$ent.ould Masagana recover "

S >>ESTED ANSWER? No. The ns#ran(e la& $ro% des that/ no non-l !ens#ran(e s %al d #nless the $rem #ms are a(t#ally $a d. Any a,reement to the (ontrary s

%o d. The $art es may not a,ree e"$ressly or m$l edly on the e"tens on o! (red t or t meto $ay the $rem #m and (ons der the $ol (y b nd n, be!ore a(t#al $ayment. 5 2PB>eneral Ins#ran(e 2o./ %. asa,ana Telamart/ In(./ >.R. No. 1+717)/ $rom. H#ne 1@/

18889 NOTES AND 2O ENTS? Not& thstand n, 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 %al d and b nd n, #nlessand #nt l the $rem #m thereo! has been $a d/ e"(e$t n the (ase o! a l !e or an nd#str al l !e

$ol (y &hene%er the ,ra(e $er od $ro% s on a$$l es. 5)nd senten(e/ Se(. 77/ Ins#ran(e2ode9

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

66# /n GG Antonio obtained a fire insurance fro$ A$erican )o$e Assurance 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.

GG I=.Fn J April GG , Moonlight 5nterprises was co$pletely ra ed by fire with a

total 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:


25/75


$resented and Amer (an !orth& th ss#ed ts o!! ( al re(e $t. Se(t on +* o! the Ins#ran(e2ode $ro% des that any ns#ran(e (om$any &h (h del %ers a $ol (y or (ontra(t o!

ns#ran(e to an ns#ran(e a,ent or bro3er shall be deemed to ha%e a#thor 0ed s#(h a,entor bro3er to re(e %e on ts behal! $ayments o! $rem #ms.

Se(. 76 o! the same 2ode e"$l ( tly $ro% des/ An a(3no&led,ment n a $ol (y or (ontra(t o! ns#ran(e o! the re(e $t o! $rem #m s (on(l#s %e e% den(e o! ts $ayment/ so!ar as to ma3e the $ol (y b nd n,/ not& thstand n, any st $#lat on there n that t shall not

be b nd n, #nt l the $rem #m s a(t#ally $a d.JSe(t on. 76 establ shes a le,al ! (t on o! $ayment and sho#ld be nter$reted as an

e"(e$t on to Se(t on 77. 5Amer (an ome Ass#ran(e 2om$any %. 2h#a/ >.R. No.1+*CC)1/ $rom. H#ne )6/ 18889

6?# /n GH , Pri$itivo was insured with 0D 1ife$an /nsuranceorporation for P: , . . Fn Fctober : , GH=, he applied for an additional

insurance coverage of P- , . . )is wife paid P:, =-. as pre$iu$s to the agent who issued a receipt indicating that the a$ount was $erely a %deposit'. 9heapplication for$ was lost, so Pri$itivo acco$plished another one. Fn ;ove$ber ,

GH=, he underwent a physical e6a$ination which he passed. As is the procedure, all of Pri$itivo>s papers were then sent to the Manila office

of 0D 1ife$an /nsurance orporation which received the papers on ;ove$ber :=,GH=. Fn ?ece$ber :, GH=, the insurer then approved the policy and issued the

corresponding policy not knowing that in the $eanti$e, Pri$itivo drowned and died on ;ove$ber :-, GH=.

9he insurer now disclai$s liability on the additional P- , . coveragebecause of failure to co$ply with the following requisites stated in the application

for$ for the perfection of the contract of insurance %9here shall be no contract of insurance unless and until a policy is issued on this application and that the said

policy 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 rider on the policy" 56plain briefly.

S >>ESTED ANSWER. Pr m t %o s bene! ( ary s not ent tled to the ns#ran(e $ro(eeds !or the !ollo& n, reasons?

a. The ! l n, o! the ns#ran(e a$$l (at on/ $ayment o! the $rem #m/ and s#bm ss onto the ns#rer/ &ere all s#b:e(t to the a((e$tan(e o! the ns#rer. There &as no a((e$tan(e

by the ns#ran(e as o! the date &hen Pr m t %o d ed on No%ember )@/ 1867.The (ond t ons m$osed by the ns#rer !or the $rote(t on o! the (ontra(t s not a

$otestat %e or !a(#ltat %e (ond t on/ b#t s a s#s$ens %e one &hereby the a('# s t on o! r ,hts de$ends #$on the ha$$en n, o! an e%ent &h (h (onst t#tes the (ond t on. In th s(ase/ the s#s$ens %e (ond t on &as the $ol (y m#st ha%e been del %ered and a((e$ted bythe a$$l (ant &h le he s n ,ood health. There &as non-!#l! llment o! the (ond t on/ho&e%er/ nasm#(h as the a$$l (ant &as already dead at the t me the $ol (y &as ss#ed.

en(e/ the non-!#l! llment o! the (ond t on res#lted n the non-$er!e(t on o! the (ontra(t. b9 A (ontra(t o! ns#ran(e/ l 3e other (ontra(ts/ m#st be assented to by both

$art es e ther n $erson or by the r a,ents. So lon, as an a$$l (at on !or ns#ran(e has not been e ther a((e$ted or re:e(ted/ t s merely an o!!er or $ro$osal to ma3e a (ontra(t. The(ontra(t/ to be b nd n, !rom the date o! a$$l (at on/ m#st ha%e been a (om$leted (ontra(t/one that lea%es noth n, to be done/ noth n, to be (om$leted/ noth n, to be $assed #$on/or determ ned/ be!ore t shall ta3e e!!e(t. There (an be no (ontra(t o! ns#ran(e #nless the

m nds o! the $art es 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 an

a$$l (at on s a mere o!!er &h (h re'# res the o%ert a(t o! the ns#rer !or t to r $en nto a(ontra(t. Delay n a(t n, on the a$$l (at on does not (onst t#te a((e$tan(e e%en tho#,hthe ns#red has !or&arded h s ! rst $rem #m & th h s a$$l (at on. The (or$orat on may not

be $enal 0ed !or the delay n the $ro(ess n, o! the a$$l (at on $a$ers. 5Pere0 %. 2o#rt o! A$$eals/ et al./ >.R. No. 11)+8/ $rom. Han#ary )6/ )***9

NOTES AND 2O ENTS

25


26/75


a. When ins! an-e -ont a-t .e ,e-ted# 2ontra(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 -ont a-t o, ins! an-e# Ins#ran(e s a (ontra(t &hereby/ !or ast $#lated (ons derat on/ one $arty #nderta3es to (om$ensate the other !or loss on as$e( ! ed s#b:e(t by s$e( ! ed $er ls.

A (ontra(t/ on the other hand/ s a meet n, o! the m nds bet&een t&o $ersons&hereby one b nds h msel!/ & th res$e(t to the other to , %e someth n, or to render someser% (e.

nder Art (le 1+16 o! the 2 % l 2ode/ there s no (ontra(t #nless the !ollo& n,re'# s tes (on(#r?

519 2onsent o! the (ontra(t n, $art es5)9 Ob:e(t (erta n &h (h s the s#b:e(t matter o! the (ontra(t5+9 2a#se o! the obl ,at on &h (h s establ shed.

2onsent m#st be man !ested by the meet n, o! the o!!er and the a((e$tan(e #$on the th n,and the (a#se &h (h are to (onst t#te the (ontra(t. The o!!er m#st be (erta n and thea((e$tan(e absol#te. 5Pere0 %. 2o#rt o! A$$eals/ et al./ >.R. No. 11)+8/ $rom. Han#ary)6/ )***9

6=# A collision between a truck driven by Euiller$o owned by the ;ational Dood Authority (;DA and a public utility 9a$araw D& owned and operated by Lictor resulted to the death of five persons and in4ury to ten others, all of who$ were

passengers of the D&. #everal cases were filed against Euiller$o, ;DA and E#/#, ;DA>s insurer of the truck for death and in4uries, Lictor as well as his insurer. /t was found that Euiller$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& establ shed that the n:#red or the he rso! the % (t ms o! a %eh (#lar a(( dent may s#e d re(tly the ns#rer o! the %eh (le. Th s s so

be(a#se (ommon (arr ers are re'# red to se(#re the 2om$#lsory otor Veh (le 4 ab l tyIns#ran(e 52 V4I9.

Altho#,h the % (t ms or the r he rs may $ro(eed d re(tly a,a nst the ns#rer !or ndemn ty/ the th rd $arty l ab l ty s only #$ to the e"tent o! the ns#ran(e $ol (y and those

re'# red by la&.Wh le t s tr#e that &here the ns#ran(e (ontra(t $ro% des !or ndemn ty a,a nst

l ab l ty to th rd $ersons/ and s#(h th rd $ersons (an d re(tly s#e the ns#rer/ the d re(tl ab l ty o! the ndemn ty (ontra(ts a,a nst th rd $arty l ab l ty does not mean that the

ns#rer (an be held l able i* so&i%$m & th the ns#red and or the other $art es !o#nd at!a#lt.

Th s s so be(a#se the l ab l ty o! the ns#rer s based on (ontra(t that o! thens#red (arr er or %eh (le o&ner s based #$on tort. The l ab l ty o! the ns#rer there!ore/

be n, $r mary/ s not de$endent on the re(o%ery o! :#d,ment !rom the :#d,ment ns#red.5>o%ernment Ser% (e Ins#ran(e System %. 2o#rt o! A$$eals/ et al./ >.R. No. 1*1C+8/

$rom. H#ne )1/ 18889

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 3 nd n

order o! re(o%er. Proo!s o! loss shall be s#!! ( ent to s#bstant ate the (la m/ amon, &h (hn(l#de

a. Pol (e re$ort o! a(( dent b. Death (ert ! (ate and e% den(e s#!! ( ent to establ sh the $ro$er $ayee or

med (al re$ort and e% den(e o! med (al or hos$ tal d sb#rsement n res$e(t o! &h (hre!#nd s (la med. 5Se(. +76/ Ins#ran(e 2ode9

NOTES AND 2O ENTS?a. 'onditions ,o avai+4ent ?

19 Only !or (la ms !or death or n:#ry o! any $assen,er or th rd $arty. Itdoes not n(l#de $ro$erty dama,e

)9 Total ndemn ty n res$e(t o! one $erson shall not e"(eed P@/***.**

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+9 2la m may be made a,a nst one motor %eh (le only. In the (ase o! ano((#$ant ! a %eh (le/ (la m shall l e a,a nst the ns#rer o! the %eh (le n &h (h theo((#$ant s r d n,/ mo#nt n, or d smo#nt n, !rom. In any other (ase/ (la m shall

be a,a nst the ns#rer o! the d re(tly o!!end n, %eh (le. In all (ases/ the r ,ht o! the $arty $ay n, the (la m to re(o%er a,a nst the o&ner o! the %eh (le res$ons ble !or the a(( dent shall be ma nta ned. 5Se(. +76/ Ins#ran(e 2ode9

6># P es- i.tive .e iod o, one 1 8ea , o4 e


28/75


fun and a$use$ent $achines and spare parts were stored, was also destroyed by the fire. Ri al now refuses to pay contending that the fire insurance policy covered onlythe contents of the four@span building, and not the da$age caused on the two@storeyanne6 building.

/s the contention correct "S >>ESTED ANSWER? No. R 0al s l able !or the dama,e (a#sed on the t&o-

storey b# ld n,.The t&o storey-b# ld n, &as already e" st n, &hen the ! res ns#ran(e $ol (y

(ontra(t &as entered nto. R 0al sho#ld ha%e s$e( ! (ally e"(l#ded sa d t&o-storey b# ld n, !rom the (o%era,e o! the ! re ns#ran(e ! m nded to e"(l#de the same/ b#t t d dnot. It &ent on to $ro% de s#(h ! re ns#ran(e $ol (y &h (h (o%ers the $rod#(ts/ ra&mater als and s#$$l es stored n the $rem sesJ o! Trans&orld &h (h &as an nte,ral $arto! the !o#r-s$an b# ld n,. 5R 0al S#rety = Ins#ran(e 2om$any %. 2o#rt o! A$$eals/ et al./

$rom. H#ly 16/ )***9 NOTES AND 2O ENTS?a. Inte . etation o, ins! an-e -ont a-ts# A st $#lat on as to the (o%era,e o! the

! re ns#ran(e $ol (y &h (h has (reated do#bt sho#ld be resol%ed a,a nst the ns#rer &hosela&yer or mana,ers &o#ld ha%e dra!ted the ! re ns#ran(e $ol (y. Th s s n a((ord & ththe $ro% s ons o! Art (le 1+77 o! the Ne& 2 % l 2ode &h (h $ro% des that/ The

nter$retat on o! obs(#re &ords or st $#lat ons n a (ontra(t shall not !a%or the $arty &ho(a#sed the obs(#r ty.J 5R 0al S#rety = Ins#ran(e 2om$any %. 2o#rt o! A$$eals/ et al./

$rom. H#ly 16/ )***9

Phi+i..ine 3e.osit Ins! an-e 'o .o ation A-t R#A# 6= 1 ; asa4ended 78 P#3# No# 1 6> and R#A# No# >?00

?1# )orace $aintains a P , . savings account, a P: , . checking account, a P< , . $oney $arket place$ent and a PI , . trust fund in a$ediu$ si e co$$ercial bank.

#tate which of the four accounts are dee$ed insured by the Philippine ?eposit /nsurance orporation.

S >>ESTED ANSWER? The P1*/***.** sa% n,s a((o#nt and the P)*/***.**(he(3 n, a((o#nt are deemed ns#red by the Ph l $$ ne De$os t Ins#ran(e 2or$orat on.

NOTES AND 2O ENTS? A--o!nts -ove ed 78 P3I' !. to P100;000#00rres$e(t %e o! the nat#re and (hara(ter o! the de$os t.

? T ans.o tation %aws

a 'o44on 'a ie s New 'ivi+ 'ode; A ts# 1>62 to 1>557 'o44e -ia+ 'ont a-ts ,o T ans.o tation Ove +and 'ode o,

'o44e -e A ts# 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 charter

agree$ent e6e$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$entioned stipulation 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 $#lat on s %al d/ hen(e the sh $$ n,

(om$any s not l able.The $roh b t on a,a nst e"em$t n, a (arr er !rom l ab l ty as a res#lt o! the a(ts or

om ss ons o! ts em$loyees s a$$l (able only to (ommon (arr ers. A (ommon (arr er #nderta3 n, to (arry a s$e( al (ar,o or (hartered to a s$e( al $erson be(omes a $r %ate

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(arr er hen(e not s#b:e(t to the abo%e $roh b t on. 5 ome Ins#ran(e 2o./ %. Amer (anSteamsh $ A,en( es/ )+ S2RA )C9

?6# 1oadstar received, fro$ a single consignee, on board its MCL her

Documents

Pre-week Notes Mercantile