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Mercantile Law Bar Examination Q & A (1990-2006) Page 1of103

ANSWERS TO BAR

EXAMINATION QUESTIONS

IN

MERCANTILE LAW

ARRANGED BY TOPIC

(1990 2006)

Edited and Arranged by:

Silliman Univerity

C!llege !" La# $at%& '00(

U)dated by:

DondeeD BAR-Retake 2007

From the ANSWERS TO BAR EXAMINATION QUESTIONS

b the U! "AW #OM!"EX $ !%I"I!!INE ASSO#IATION

OF "AW S#%OO"S 200&

'e 2*+ 200*

*eri!n 1++0,'003 Arranged by SULAW Cla '00( *eri!n 1++0,'00- U)dated byDondee


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Mercantile Law Bar Examination Q & A (1990-2006) Page 'of103

F O R E W A R ,

This work is not intended or sa!e or "o##er"e$ This work is reeware$ It #a% &e ree!%

"o'ied and distri&(ted$ It is 'ri#ari!% intended or a!! those who desire to ha)e a dee'er

(nderstandin* o the iss(es to("hed &% the Phi!i''ine Bar E+a#inations and its trend$ It

is s'e"ia!!% intended or !aw st(dents ro# the 'ro)in"es who, )er% oten, are re"i'ients

o de!i&erate!% distorted notes ro# other (ns"r('(!o(s !aw s"hoo!s and st(dents$ hare

to others this work and %o( wi!! &e ri"h!% rewarded &% God in hea)en$ It is a!so )er%

*ood kar#a$

.e wo(!d !ike to seek the ind(!*en"e o the reader or so#e Bar /(estions whi"h are

i#'ro'er!% "!assiied (nder a to'i" and or so#e to'i"s whi"h are i#'ro'er!% or

i*norant!% 'hrased, or the a(thors are (st Bar Re)iewees who ha)e 're'ared

this work whi!e re)iewin* or the Bar E+a#s (nder ti#e "onstraints and within

their !i#ited know!ed*e o the !aw$ .e wo(!d !ike to seek the readers ind(!*en"e or a

!ot o t%'o*ra'hi"a! errors in this work$

The A(thors

1(!% 2, 2003

4'dated5

1(ne 27, 2007

-er./o 1990200 Arr3e4 b SU"AW #5.. 200& -er./o 19902006

U4te4 bDondee


3/203


TA$LE ./ C.NTENTS

eneral0Prin%i)le !" Mer%antile La#62089089

Commercial6969Transaction (2003)

620:90:9

Joint2929

Account (2000)

6

2609609

Joint;9;9 Account vs. Partnership (2000)62669669

Theory 99

of Cognition vs. Theory of Manifestation (!!")629629

$aning3939La#

626;96;9

#an$s%99 Applica&ility% 'oreign Currency eposit Act *ecrecy of #an$ eposits (200+)

626969

#an$s%7979 Collateral *ecurity (2002)

62639639

#an$s%8989

*ecrecy of #an$ eposits, -arnishment (200)

6

;6969

#an$s,:9:9 Classifications of #an$s (2002)

6;679679

#an$s,609609

Conservator vs. /eceiver (200)6;689689

#an$s,669669

iligence /e1uire (!!2)

66:96:9

#an$s,629629

nsolvency, Prohi&ite Transactions (2000)

6209209

#an$s,6;96;9

nsolvency, /e1uirements (!!")

6269269

#an$s,6969

/estrictions on 4oan Accommoations (2002)

6229229

#an$s,639639

/estrictions on 4oan Accommoations (200)

632;92;9

#an$s,6969

*afety eposit #o5, 4ia&ility

632929

#an$s,679679

*ecrecy of #an$ eposit, AM4C (200)63239239

#an$s,689689

*ecrecy of #an$ eposit, 65ceptions (200)

62929

#an$s,6:96:9

*ecrecy of #an$ eposits (!!0)

6279279

#an$s,209209

*ecrecy of #an$ eposits (!!)

6289289

#an$s,269269


672:92:9

#an$s,229229

*ecrecy of #an$ eposits (!!)

67;09;09

#an$s,2;92;9

*ecrecy of #an$ eposits (!!+)

67;69;69

#an$s,2929


67;29;29

#an$s,239239

*ecrecy of #an$ eposits (2000) 6


4/203

8;;9;;9

#an$s,2929

*ecrecy of #an$ eposits, 65ceptions (200)

68;9;9

#an$s,279279

*ecrecy of #an$ eposits, -arnishment (200)68;39;39

#*P, 289289

/eceivership, Jurisiction (!!2)

68;9;9

4egal 2:92:9Tener (2000)

6

:;79;79

PC ;09;09

4a8 vs. *ecrecy of #an$ eposits Act (!!")

6:;89;89

/esponsi&ilities;69;69 9&:ectives of #*P (!!7)

6:;:9;:9

Truth;29;29

in 4ening Act (!!)

6:0909

Truth;;9;;9

in 4ening Act (2000)

6:6969

$2l;9;9Sale La#

202929

#ul$ ;39;39*ales 4a8, Covere Transactions (!!)20;9;9

#ul$ ;9;9*ales 4a8, Covere Transactions (2000)

2099

#ul$ ;79;79*ales 4a8, Covere Transactions (200)

203939

#ul$ ;89;89*ales 4a8, 65clusions (!!3)

2099

#ul$ ;:9;:9*ales 4a8, 9&ligation of the ;enor (!!+)

267979

#ul$0909

*ales 4a8, 9&ligation of the ;enor (!!")

2

68989

#ul$ 6969*ales 4a8, 9&ligation of the ;enor (200)

26:9:9

C!n2mer2929Pr!te%ti!n La#26309309

Metric ;9;9*ystem 4a8 (!!)

26369369


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Mercantile Law Bar Examination Q & A (1990-2006) Page of103C!r)!rati!n99La#$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$22 329329

#9%3939

6lection of Aliens as mem&ers (200+)223;93;9

#9,99

Capacity of irectors (!!)223939

#9,7979 Compensation (!!)

2

2339339

#9,8989

Conflict of nterest (!!)223939

#9,:9:9

nterloc$ing irectors (!!+)22379379

#9,309309

nterloc$ing irectors (!!)2;389389

#y369369


6/203

8779779

Corporation,709709Conversion of *toc$ Corporation (200)28789789

Corporation,769769e 'acto Corporation (!!)287:97:9

Corporation,729729issolution, Methos of 4i1uiation (200)

28809809

Corporation,7;97;9 ncorporation, /e1uirements (200)

2

8869869

Corporation,7979ncorporation, /e1uisites (2002)2:829829

Corporation,739739 Meetings, #9 *toc$holers (!!3)

2:8;98;9

Corporation,7979=ationality of Corporation (!!7)2:8989

Corporation,779779=on


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Mercantile Law Bar Examination Q & A (1990-2006) Page (of103

erivative :;9:;9 *uit% /e1uisites(200) erivative :9:9 *uit% ?atere*toc$ (!!3)erivative :39:39 *uit, Close Corporation, Corporate 9pportunity(200+) erivative :9:9 *uit, Minority *toc$holer (2003)istinction% :79:79 e facto Corporation vs. Corporation &y 6stoppel(200) istinction% :89:89 iviens vs. Profit% Cash ivien vs. *toc$ivien (200+) istinction, ::9::9 Private vs. Pu&lic Corporation (200)istinction, 60096009 *toc$ vs. =on


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:329329032793279032893289032:932:903;093;0903;693;6963;293;2963;;93;;9

63;93;9

23;393;3923;93;923;793;79

23;893;8923;:93;:9

23093092369369;3293293;93;9

;3939

;339339;3939

Credit6;:96;:9Trana%ti!n379379

Chattel609609

Mortgage vs. After


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Mercantile Law Bar Examination Q & A (1990-2006) Page -of103

Chattel669669

Mortgage vs. After


10/203

6379379

Concealment,679679Material Concealment, ncontesta&ility Clause (!!)

3637393739

Concealment,689689Material Concealment, ncontesta&ility Clause (!!7)

36379379

nsura&le6:96:9

nterest% #an$ eposit (2000)

3637793779

nsura&le67096

709 nterest% Pu&lic 6nemy (2000)

3

237893789

nsura&le67696769

nterest% *eparate nsura&le nterest (!!!)

3237:937:9

nsura&le67296729

nterest, 61uita&le nterest (!!)

3238093809

nsura&le67;967;9

nterest, 4ife vs. Property nsurance (!!")

3238693869

nsura&le679679

nterest, 4ife vs. Property nsurance (2000)

3238293829

nsura&le67396739

nterest, 4ife vs. Property nsurance (2002)

3;38;938;9

nsura&le679679

nterest, Property nsurance (!!)3;389389

nsura&le67796779

nterest, Property nsurance (200)

3;38393839

nsurance,67896789

Cash Carry #asis (2003)

3;389389

nsurance,67:967:9

Co


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nsure,68:968:9

Accient vs. *uicie (!!3)33:793:79

nsure,6:096:09

Accient vs. *uicie (!!+)33:893:89

nsurer%6:696:69

6ffects% *everal nsurers (200+)33::93::9

nsurer,6:296:29 3r Party 4ia&ility (!!)

3

009009

nsurer,6:;96:;9

3r Party 4ia&ility (2000)37069069

nsurer,6:96:9

3r Party 4ia&ility, =o 'ault nemnity (!!)37029029

nsurer,6:396:39

3r Party 4ia&ility, uitclaim (!!)

370;90;9

nsurer,6:96:9

AuthoriDe river Clause (!!)370909

nsurer,6:796:79

AuthoriDe river Clause (2003)37039039

nsurer,6:896:89

AuthoriDe river Clause, vehicle is stolen (!!3)380909

nsurer,6::96::9

-roup nsurance, 6mployer


12/203

6229229

Copyright,26392639Photocopy, 8hen allo8e (!!7)

62;92;9

nfringement269269vs. >nfair Competition (!!)

62929

nfringement26792679vs. >nfair Competition (2003)

6239239

nfringement,26892689Jurisiction (2003)

62929

Patent,26:926:9

=on


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nsolvency,2;92;9'rauulent Payment (2002)

399

nsolvency,2;792;79Jurisiction, *ole Proprietorship (!!0)

3939

nsolvency,2;892;89o&ligations that survive (!!")

99

nsolvency,2;:92;:9;oluntary nsolvency Proceeing (!!)

7979

nsolvency,209209;oluntary vs. nvoluntary *olvency (!!+)

8989

4a8269269on Corporate /ecovery (2003)

7:9:9

/eha&ilitation,229229*tay 9rer (200)

7309309

*uspension2;92;9of Payment vs. nsolvency (!!+)

7369369

*uspension2929of Payments vs. *tay 9rer (2003)

7329329

*uspension239239of Payments, /eha&ilitation /eceiver (!!!)73;93;9

*uspension2929of Payments, /emeies (2003)

83939

Letter279279!" Credit

8339339

4etter289289

of Creit% Mortgage (200+)

83939

4etter2:92:9

of Creit, Certification from Consignee (!!3)

8379379

4etters230923

09 of Creit, 4ia&ility of a confirming an notifying &an$ (!!)

:389389

4etters23692369

of Creit, 4ia&ility of a =otifying #an$ (2003)

:3:93:9

4etters23292329

of Creit, Three istinct Contract /elationships (2002):0909

Maritime23;923;9C!mmer%e

:6969

Average,239239

Particular Average vs. -eneral Average (2003)

:2929

#ottomry23392339

(!!)

70;9;9

Carriage239239

of -oos% eviation% 4ia&ility (200+)7099

Carriage23792379

of -oos, eviation, ?hen Proper (200+)

703939

Carriage23892389

of -oos, 65ercise 65traorinary iligence (200+)

7099

Charter23:923:9

Party (!!)

707979

Charter209209

Party (200)

768989

C9-*A%269269

Prescription of ClaimsFActions (200) 7


14/203

6:9:9

C9-*A,229229

Prescription of Claims (!!2)

76709709

C9-*A,2;92;9

Prescription of Claims (2000)

72769769

C9-*A,2929

Prescriptive Perio (!!+)729729

octrine239239

of nscruta&le 'ault (!!+)

727;97;9

octrine2929

of nscruta&le 'ault (!!")727979

octrine279279

of nscruta&le 'ault (!!7)

72739739

4imite289289

4ia&ility /ule (!!)

727979

4imite2:92:9

4ia&ility /ule (!!")

72779779

4imite27092709

4ia&ility /ule (!!!)

72789789

4imite276

92769 4ia&ility /ule (2000)

7

;7:97:9

4imite27292729

4ia&ility /ule, octrine of nscruta&le 'ault (!!)7;809809

4imite27;927;9

4ia&ility /ule, -eneral Average 4oss (2000)

7;869869

4imite279279

4ia&ility /ule, -eneral Average 4oss (2000)

7;829829

Nati!nali7ed27392739A%tivitie !r Undertaing

78;98;9

=ationaliDe279279Activities or >nerta$ings (!!3)

78989

=ationaliDe27792779Activities or >nerta$ings (!!)7839839

=ationaliDe27892789Activities or >nerta$ings (!!+)

738989

/etail27:927:9

Trae 4a8 (!!0)73879879

/etail28092809

Trae 4a8 (!!)73889889

/etail28692869

Trae 4a8 (!!2)738:98:9

-er./o 1990200 Arr3e4 b SU"AW #5.. 200& -er./o 19902006U4te4 bDondee


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Mercantile Law Bar Examination Q & A (1990-2006) Page +of103/etail28292829

Trae 4a8 (!!3) 7:09:09

/etail28;928;9

Trae 4a8 (!!) 7:69:69

/etail289289

Trae 4a8 (!!) 7:29:29

/etail28392839

Trae 4a8, Consignment (!!) 7:;9:;9

Neg!tiable289289Intr2ment La# $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$7 :9:9

#on% 28792879

Cash #on vs. *urety #on (200) 7:39:39

Chec$s%28892889

Crosse Chec$s (200+) 77:9:9

Chec$s%28:928:9

Crosse Chec$s vs. Cancelle Chec$s (200) 77:79:79

Chec$s,2:092:09

Crosse Chec$ (!!) 77:89:89

Chec$s,2:692:69

Crosse Chec$ (!!) 77::9::9

Chec$s,2:292:29

Crosse Chec$ (!!+) 7870097009

Chec$s,2:;92:;9

Crosse Chec$ (!!) 7870697069

Chec$s,2:92:9

Crosse Chec$ (!!) 7870297029

Chec$s,2:392:39

6ffect, Acceptance &y the ra8ee &an$ (!!7) 7870;970;9

Chec$s,2:92:9

6ffects, Alterations, Prescriptive Perio (!!) 78709709

Chec$s,2:792:79

'orge Chec$, 6ffects (200) 7:70397039

Chec$s,2:892:89 4ia&ility, ra8ee #an$ (!!+) 80709709Chec$s,2::92::9

Material Alterations, 4ia&ility (!!!) 8070797079

Chec$s,;009;009

Presentment (!!) 8070897089

Chec$s,;069;069

Presentment (2003) 8070:970:9

Chec$s,;029;029

;aliity, ?aiver of #an$Gs lia&ility for negligence (!!) 8076097609

efenses,;0;9;0;9'orgery (200) 8676697669

'orgery,;09;09

4ia&ilities, Prior *u&se1uent Parties (!!0) 8676297629

'orgery,;039;039

4ia&ilities, Prior *u&se1uent Parties (!!+) 8676;976;9

ncomplete;09;09 elivere (200) 82769769

ncomplete;079;079an elivere (200+) 8276397639

ncomplete;089;089

nstruments, ncomplete elivere nstruments vs. ncomplete >nelivere nstrument (200) 82769769

norser%;0:9;0:9rregular norser vs. -eneral norser (200+)

8276797679

=egotia&ility ;609;609(!!3)

8276897689

=egotia&ility ;669;669(2002)

8;76:976:9

=egotia&ility,;629;629Eoler in ue Course (!!2)

8;72097209

=egotia&ility,;6;9;6;9/e1uisites (2000)

8;72697269

=egotia69;69

nstrument% Am&iguous nstruments (!!7)

872297229

=egotia639;639

nstrument% efinition Characteristics (200+)

872;972;9

=egotia69;69

nstrument% entification (200+)

8729729

=egotia679;679

nstrument% =egotia&le ocument vs. =egotia&le nstrument (200+)

8372397239

=egotia689;689

nstrument, =egotia&ility (!!")

83729729


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=egotia6:9;6:9

nstruments, #earer nstrument (!!7)

8372797279

=egotia209;209

nstruments, #earer nstruments (!!")8372897289

=egotia269;269

nstruments, &earer instruments, lia&ilities of ma$er an inorsers (200)

8372:972:9

=egotia229;229

nstruments, incomplete an unelivere instruments, holer in ue course (2000)

87;097;09

=egotia2;9;2;9

nstruments, ncomplete elivere nstruments, Comparative =egligence (!!")87;697;69

=egotia29;29

nstruments, $ins of negotia&le instrument, 8ors of negotia&ility (2002)

87;297;29

=egotia239;239

nstruments, /e1uisites (!!)

877;;97;;9

=otice;29;29

ishonor (!!)

877;97;9

Parties,;279;279

Accommoation Party (!!0)877;397;39

Parties,;289;

289 Accommoation Party (!!)

8

77;97;9

Parties,;2:9;2:9

Accommoation Party (!!)877;797;79


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Parties,;;09;;09

Accommoation Party (!!7)

877;897;89

Parties,;;69;;69

Accommoation Party (2003)

887;:97;:9

Parties,;;29;;29

Accommoation Party (2003)

88709709

Parties,;;;9;;;9 Accommoation Party (200+)

8

8769769

Parties,;;9;;9

Eoler in ue Course (!!3)

88729729

Parties,;;39;;39

Eoler in ue Course (!!)

887;97;9

Parties,;;9;;9

Eoler in ue Course (!!)

887979

Parties,;;79;;79

Eoler in ue Course (!!7)

8:739739

Parties,;;89;;89

Eoler in ue Course, norsement in &lan$ (2002)

8:7979

Place;;:9;;:9

of Payment (2000)8:779779

P2bli%;09;09

Servi%e La#

8:789789

Certificate ;69;69of pu&lic Convenience (!!7)

8:7:97:9

Certificate ;29;29of Pu&lic Convenience, insepara&ility of certificate an vessel (!!2)

:073097309

Certificate ;;9;;9of Pu&lic Convenience, /e1uirements (!!+)

:073697369

Po8ers;

9;9 of the Pu&lic *ervice Commission (!!3)

:

073297329

Pu&lic;39;39

utilities (2000)

:073;973;9

/evocation;9;9of Certificate (!!3)

:6739739

/evocation;79;79of Certificate (!!3)

:673397339

Se%2ritie;89;89Reg2lati!n

:6739739

nsier;:9;:9

(200)

:673797379

nsier;309;309

Traing (!!+):673897389

nsier;369;369

Traing, Manipulative Practices (!!)

:273:973:9

Manipulative;329;329Practices (200)

:2709709

*ecurities;3;9;3;9/egulation Coe, Purpose (!!7)

:2769769

*ecurities,;39;39efinition (!!)

:2729729

*ecurities,;339;339*elling of *ecurities, Meaning (2002) :


18/203

27;97;9

Tener;39;39

9ffer (2002)

:;7979

Tran)!rtati!n;379;379La#

:;739739

#ounary;389;389

*ystem (200+)

:;7979

Carriage,;3:9;

3:9 #reach of Contract, Presumption of =egligence (!!0)

:

;779779

Carriage,;09;09

#reach of Contract, Presumption of =egligence (!!")

:;789789

Carriage,;69;69

'ortuitous 6vent (!!+)

:;7:97:9

Carriage,;29;29

4ia&ility, 4ost #aggage or Acts of Passengers (!!")

:77097709

Carriage,;;9;;9

Prohi&ite ;ali *tipulations (2002)

:77697769

Carriage,;9;9

;aluation of amage Cargo (!!3)

:77297729

Common;39;39

Carrier (!!):77;977;9

Common;9;9

Carrier, #reach of Contract, amages (2003):779779

Common ;79;79

Carrier, efenses (2002):377397739

Common ;89;89

Carrier, efenses, 'ortuitous 6vents (!!):3779779

Common ;:9;:9

Carrier, efenses, 4imitation of 4ia&ility (!!7):377797779

Common;70

9;709 Carrier, efenses, 4imitation of 4ia&ility (200)

:

377897789

Common;769;769

Carrier, uration of 4ia&ility (!!):377:977:9

Common;729;729

Carrier, uty to 65amine #aggages, /ail8ay an Airline (!!2)

:78097809

Common;7;9;7;9

Carrier, Test (!!)

:78697869

Common ;79;79

Carriers, efenses (!!)

:78297829

Common;739;739

Carriers, 4ia&ility for 4oss (!!)

:78;978;9


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Common ;79;79vs. Private Carrier, efenses (2002) :7789789Ha⁢779;779

*ystem (200+) :778397839

Ha⁢789;789*ystem, Agent of the /egistere 98ner (200+) :7789789

Maritime ;7:9;7:9Commerce, #are&oat (2003) :778797879Prior;809;8099perator /ule (2003) :778897889/egistere;869;86998ner, Conclusive Presumption (!!0) :878:978:9

Trans;829;829


20/203



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Mercantile Law Bar Examination Q & A (1990-2006)

eneral Prin%i)le !"

Mer%antile La#

Commercial Transaction (2003)

.hat do %o( (nderstand &% the ter#


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the sa#e ti#e, Andrew e+e"(ted a Deed o

Assi*n#ent in a)or o the Bank assi*nin* to the

Bank his re"ei)a&!es ro# the O&!i*or$ The deed o

assi*n#ent read5



23/203



24/203

Page 13of103

,an-s Classi&ications o& ,an-s (2002)

There are si+ ? "!asses o &anks identiied in theGenera! Bankin* aw o 2000$ Na#e at !east o(r ?o the# and e+'!ain the distin*(ishin*"hara"teristi" or (n"tion o ea"h one$ ?3@SUESTE8 ANSWER:

An% o(r ? o the o!!owin* si+ ? "!asses o

&anks identiied in the Genera! Bankin* aw o 2002, to

wit5

6$ n"versal #an$sH These are those whi"h (sed to&e "a!!ed e+'anded "o##er"ia! &anks andthe o'erations o whi"h are now 'ri#ari!%*o)erned &% the Genera! Bankin* aw o 2002$The% "an e+er"ise the 'owers o an in)est#entho(se and in)est in non-a!!ied enter'rises$The% ha)e the hi*hest "a'ita!iationre(ire#ent$

2$ Co--er"al #an$s H These are ordinar% orre*(!ar "o##er"ia! &anks, as distin*(ished ro#a (ni)ersa! &ank$ The% ha)e a !ower"a'ita!iation re(ire#ent than (ni)ersa! &anks

and "annot e+er"ise the 'owers o an in)est#entho(se and in)est in non-a!!ied enter'rises$

;$ /!r"ft #an$sH These &anks ?s("h as sa)in*s and

#ort*a*e &anks, sto"k sa)in*s and !oan asso"iations,

and 'ri)ate de)e!o'#ent &anks #a% e+er"ise

#ost o the 'owers and (n"tions o a "o##er"ia!

&ank e+"e't that the% "annot, a#on* others, o'en

"(rrent or "he"k a""o(nts witho(t 'rior Fonetar%

Board a''ro)a!, and the% "annot iss(e !etters o

"redit$ Their o'erations are *o)erned 'ri#ari!%

&% the Thrit Banks A"t o 6::3 ?RA 7:0$

$ Rural #an$s H these are those whi"h are or*anied

'ri#ari!% to e+tend !oans and other "redit a"i!ities to

ar#ers, isher#en or ar# a#i!ies, as we!!

as "oo'erati)es, #er"hants, and 'ri)ate and

'(&!i" e#'!o%ees and whose o'erations are

'ri#ari!% *o)erned &% the R(ra! Banks A"t o 6::2

?RA 7;3;$

3$ Cooperat"ve #an$s H these are those whi"hare or*anied 'ri#ari!% to 'ro)ide inan"ia!and "redit ser)i"es to "oo'erati)es and whose

o'erations are 'ri#ari!% *o)erned &% theCoo'erati)e Code o the Phi!i''ines ?RA :;8$

$ Isla-" #an$s H these are those whi"h areor*anied 'ri#ari!% to 'ro)ide inan"ia! and

"redit ser)i"es in a #anner or transa"tion"onsistent with the Is!a#i" hariah$ At 'resent,

on!% the A! A#anah Is!a#i" In)est#ent Bank othe Phi!i''ines has &een or*anied as an Is!a#i"

Bank$

,an-s Conserator s! Receier (2004)

Distin*(ish &etween the ro!e o a "onser)ator and thato a re"ei)er o a &ank$ ?2$3@

SUESTE8 ANSWER:The Conser)ator is a''ointed or a 'eriod note+"eedin* one ?6 %ear, to take "har*e o the assets,!ia&i!ities, and the #ana*e#ent o a &ank or a (asi-&ank in a state o "ontin(in* ina&i!it%, or(nwi!!in*ness to #aintain a "ondition o !i(idit%dee#ed ade(ate to 'rote"t the interest ode'ositors and "reditors$On the other hand, the Re"ei)er is a''ointed to #ana*e

a &ank or (asi-&ank that is (na&!e to 'a% its !ia&i!ities

in



25/203


the ordinar% "o(rse o &(siness, or has

ins(i"ient rea!ia&!e assets to #eet its !ia&i!ities, or

"annot "ontin(e in &(siness witho(t 'ro&a&!e !osses to

its de'ositors or "reditors or has wi!!(!!% )io!ated a

ina! "ease and desist order, in)o!)in* a"ts or transa"tions

a#o(ntin* to ra(d or a dissi'ation o the assets o the

instit(tion$ The #ain '(r'ose o the Re"ei)er is

to re"o##end the reha&i!itation or !i(idation o the

&ank$

,an-s Dili'ence Re5uire6 (**2)

P!a"ido, a &ank de'ositor, !et his "he"k&ook on hisdesk at his ho(se$ 4nknown to hi#, a )isitor atthe ti#e, noti"in* the sa#e, took a "he"k therero#,i!!ed it (' in the a#o(nt o P;,000$00 and s(""eededin en"ashin* the "he"k on the sa#e da%$ P!a"idosa""o(nt was there&% de&ited in the sa#e a#o(nt$

Dis"o)erin* the erroneo(s de&it, P!a"ido de#anded that

the &ank "redit hi# with a !ike a#o(nt$ The &ank re(sed

on the *ro(nd that P!a"ido was ne*!i*ent in !ea)in*

his "he"k&ook on his desk so that he "o(!d not '(t (' the

deense o or*er% or want o a(thorit% (nder the NI$

The a"ts dis"!ose that e)en to the naked e%e, there were

#arked dieren"es &etween P!a"idos si*nat(re and

the one in the "he"k or*ed &% the )isitor$ As

&etween P!a"ido and the &ank, who sho(!d &ear the !oss>

E+'!ain$SUESTE8 ANSWER:

The &ank sho(!d &ear the !oss$ A drawee &ank#(st e+er"ise the hi*hest di!i*en"e insae*(ardin* the a""o(nts o its "!ient-de'ositors$The &ank is a!so "har*ed with *en(ineness o thesi*nat(res o its "(rrent a""o(nt ho!ders$ B(t what

"an &e #ore strikin* is that there were #arkeddieren"es &etween P!a"idos si*nat(re and theone in the "he"k or*ed &% the )isitor$ Certain!%,P!a"ido was not ne*!i*ent in !ea)in* his"he"k&ook in his own desk ?0N# v u"-po 158

'CRA 582

,an-s 7nsolenc% "ro#i.ite6 Transactions (2000)

The Fonetar% Board o the BP "!osed 4r&an Bankater it en"o(ntered "ri''!in* inan"ia! dii"(!ties thatres(!ted in a &ank r(n$ J, one o the #e#&ers o theBOD o the &ank, attended and sta%ed thro(*ho(t theentire #eetin* o the Board that was he!d we!! inad)an"e o the &ank r(n and &eore news had &e*(n totri"k!e to the &(siness "o##(nit% a&o(t the direinan"ia! 'it the &ank had a!!en into$ I##ediate!%ater the #eetin*, J "a(sed the 're'aration andiss(an"e o a #ana*ers "he"k 'a%a&!e to hi#se! inthe s(# o 3 #i!!ion 'esos e(i)a!ent to thea#o(nt '!a"ed or in)ested in the &ank &% a&(siness a"(aintan"e$ 9e now "!ai#s that he iskee'in* the (nds in tr(st or the owner and thathe had "o##itted no )io!ation o the Genera!Bankin* A"t ?RA ;;7, as a#ended or whi"hhe sho(!d &e '(nished$ Do %o( a*ree that therehas &een no )io!ation o the stat(te> ?;@SUESTE8 ANSWER:

No$ I do not a*ree that there is no )io!ation o the stat(te

?RA ;;7, as a#ended$ J )io!ated e" 83 when he "a(sed

the 're'aration and iss(an"e o a #ana*ers

"he"k


26/203

Page 1of103'a%a&!eto hi#se! in the s(# o P3 #i!!ion$ This is'a%in* o(t or 'er#ittin* to &e 'aid o(t (nds o the&ank ater the !atter &e"a#e inso!)ent$ This a"t is'ena!ied &% ine o not !ess than P6,000$00 nor #orethan P60,000$00 and &% i#'rison#ent or not !essthan two nor #ore than ten %ears$

,an-s 7nsolenc% Re5uirements (**+)

Gi)e the &asi" re(ire#ents to &e "o#'!ied with &% theBP &eore the Fonetar% Board "an de"!are a&ank inso!)ent, order it "!osed and or&id it ro# doin*(rther &(siness in the Phi!i''ines$SUESTE8 ANSWER:

Beore the Fonetar% Board "an de"!are a &ankinso!)ent, order it "!osed and or&id it ro# doin*(rther &(siness in the Phi!i''ines, the o!!owin* &asi"re(ire#ents #(st &e "o#'!ied with &% the BP, towit56$ There #(st &e an e+a#ination &% the head o

the De'art#ent o ('er)ision or his e+a#iners

or a*ents into the "ondition o the &ank$

2$ The e+a#ination dis"!oses that the "ondition o the

&ank is one o inso!)en"%, or that its "ontin(an"ein &(siness wo(!d in)o!)e 'ro&a&!e !oss to"reditors or de'ositors$

;$ The head o said De'art#ent sha!! inor# inwritin* the Fonetar% Board o s("h a"ts$

$ 4'on indin* said inor#ation or state#ent to &e

tr(e, the Fonetar% Board sha!! a''oint a re"ei)er to

take "har*e o the assets and !ia&i!ities o the &ank$

3$ .ithin 0 da%s, the Fonetar% Board sha!!

deter#ine and "onir# i the &ank is inso!)ent,

and '(&!i" interest re(ires, to order the

!i(idation o the &ank$

,an-s Restrictions on 8oan Accommo6ations (2002)

As 'art o the sae*(ards a*ainst i#'r(dent &ankin*,the Genera! Bankin* aw i#'oses !i#its orrestri"tions on !oans and "redit a""o##odationswhi"h #a% &e e+tended &% &anks$ Identi% at!east two ?2 o these !i#its or restri"tions and

e+'!ain the rationa!e o ea"h o the#$ ?3@SUESTE8 ANSWER:

An% two ?2 o the o!!owin* !i#its or restri"tions on!oan and "redit transa"tions whi"h #a% &e e+tended &%&anks, as 'art o the sae*(ards a*ainst i#'r(dent&ankin*, to wit56$ SB" R5e.H ?i$e$, in*!e Borrowers i#it r(!es

are those 'ro#(!*ated &% the Ban*koentra! n* Pi!i'inas, ('on the a(thorit% oe"tion ;3 o the Genera! Bankin* aw o2000, whi"h re*(!ate the tota! a#o(nt o!oans, "redit a""o##odations and *(aranteesthat #a% &e e+tended &% a &ank to an%

'erson, 'artnershi', asso"iation, "or'orationor other entit%$ The r(!es seek to 'rote"t a &ankro# #akin* e+"essi)e !oans to a sin*!e&orrower &% 'rohi&itin* it ro# !endin*&e%ond a s'e"iied "ei!in*$

2$ ,OSRI R5e. H These r(!es 'ro#(!*ated &% the

BP, ('on a(thorit% o e"tion 3 o the Genera!

Bankin* aw o 2000, whi"h re*(!ate the a#o(nt o

"redit a""o##odations that a &ank #a% e+tend to its



27/203


dire"tors, oi"ers, sto"kho!ders and theirre!ated interests ?th(s, DORI$ Genera!!%, a&anks "redit a""o##odations to its DORI#(st &e in the re*(!ar "o(rse o &(sinessand on ter#s not !ess a)ora&!e to the &ankthan those oered to non- DORI &orrowers$

;$ No "o##er"ia! &ank sha!! #ake an% !oan

or dis"o(nt on the se"(rit% o shares o its own

"a'ita! sto"k$

,an-s Restrictions on 8oan Accommo6ations (2004)

Pio is the 'resident o .estern Bank$ 9is wiea''!ied or a !oan with the said &ank to inan"e aninternet "ae$ The !oan oi"er to!d her that hera''!i"ation wi!! not &e a''ro)ed &e"a(se the *rant o!oans to re!ated interests o &ank dire"tors, oi"ers,and sto"kho!ders is 'rohi&ited &% the Genera! Bankin*aw$E+'!ain whether the !oan oi"er is "orre"t$ ?3@SUESTE8 ANSWER:

e"tion ; o the Genera! Bankin* aw o 2000 does not

entire!% 'rohi&it dire"tors or oi"ers o the &ank, dire"t!%

or indire"t!%, ro# &orrowin* ro# the &ank$ In this "ase,Pio is the 'resident o .estern Bank, whi"h #akes hi#

an oi"er, dire"tor and sto"kho!der o the said &ank$ The

Genera! Bankin* aw 'ro)ides or additiona! restri"tions

to the &ank &eore it "an !end to its dire"tors or oi"ers$

A written a''ro)a! o the #aorit% )ote o a!!

the dire"tors o the &ank, e+"!(din* the dire"tor

"on"erned, is re(ired$ (rther#ore, s("h dea!in*s

#(st &e ('on ter#s not !ess a)ora&!e to the &ank than

those oered to others ?Section #$&, 'entral Ban)s

*+anual of egulations for Bans and -ther .inancial

/ntermediaries, cited in anioso v0 '1, 200 3o0

##4#&, December 6, 777$ A )io!ation o this

'ro)ision wi!! "a(se his or her 'osition to &e de"!ared)a"ant and the errin* dire"tor or oi"er s(&e"ted to the

'ena! 'ro)isions o the New Centra! Bank A"t$

,an-s Sa&et% De$osit ,o9 8ia.ilit%

FN and OP rented a saet% de'osit &o+ atIBANK$ The 'arties si*ned a "ontra"t o !ease withthe "onditions that5 the &ank is not a de'ositor% o the"ontents o the sae and has neither the 'ossessionnor "ontro! o the sa#e the &ank ass(#ed nointerest in said "ontents and ass(#es no !ia&i!it% in"onne"tion therewith$ The saet% de'osit &o+ hadtwo ke%ho!es5 one or the *(ard ke% whi"hre#ained with the &ank and the other or therenters ke%$ The &o+ "an &e o'ened on!% with the (seo &oth ke%s$The renters de'osited "ertii"ates o tit!e in the &o+$B(t !ater, the% dis"o)ered that the "ertii"ates were*one$ FN and OP now "!ai# or da#a*es ro#IBANK$ Is the &ank !ia&!e> E+'!ain &rie!%$ ?3@SUESTE8 ANSWER:

The &ank is !ia&!e, &ased on the de"isions o the ('re#e

Co(rt in '1 1gro8/ndustrial Development 'orp0 v0 'ourt of1ppeals, #9 S'1 & (#99$" and Sia v0 'ourt of 1ppeals,

S'1 (#99$"0 In those "ases, the ('re#e Co(rt r(!ed

that the rentin* o(t o saet% de'osit &o+es is a

Lspecial ind of depositL wherein the &ank is the

de'ositar%$ In the a&sen"e o an% sti'(!ation 'res"ri&in*

the de*ree o di!i*en"e re(ired, that o a *ood ather

o a a#i!% is to &e

*eri!n 1++0,'003 Arranged by SULAW Cla '00(


28/203

Page 1(of103 o&ser)ed&% the de'ositar%$ An% sti'(!ation e+e#'tin* thede'ositar% ro# an% !ia&i!it% arisin* ro# the !oss othe thin* de'osited wo(!d &e )oid or &ein* "ontrar% to!aw and '(&!i" 'o!i"%$ The de'osit &o+ is !o"ated in the&ank 're#ises and is (nder the a&so!(te "ontro! othe &ank$

,an-s Secrec% o& ,an- De$osit A8C (2004)

R(d% is o&!ess &(t is re'(ted to &e a (eten*

o'erator$ 9e has ne)er &een "har*ed or "on)i"ted o an%

"ri#e$ 9e #aintains se)era! &ank a""o(nts and has

'(r"hased 3 ho(ses and !ots or his "hi!dren ro# the

(ansin* Rea!t%, In"$ in"e he does not ha)e an%

)isi&!e o&, the "o#'an% re'orted his '(r"hases to

the Anti-Fone% a(nderin* Co(n"i! ?AFC$

Thereater, AFC "har*ed hi# with )io!ation o the

Anti-Fone% a(nderin* aw$ 4'on re(est o the

AFC, the &ank dis"!osed to it R(d%s &ank

de'osits a#o(ntin* to P600 Fi!!ion$ (&se(ent!%,

he was "har*ed in "o(rt or )io!ation o the Anti-

Fone% a(nderin* aw$

6$ Can R(d% #o)e to dis#iss the "ase on the *ro(nd

that he has no "ri#ina! re"ord> ?2$3@SUESTE8 ANSWER:

No$ 4nder the Anti-Fone% a(nderin* aw, R(d%

wo(!d &e *(i!t% o a L#one% !a(nderin* "ri#eL

"o##itted when the 'ro"eeds o an L(n!aw(! a"ti)it%,L

!ike (eten* o'erations, are #ade to a''ear as ha)in*

ori*inated ro# !e*iti#ate so(r"es$ The #one%

!a(nderin* "ri#e is se'arate ro# the (n!aw(! a"ti)it% o

&ein* a (eten* o'erator, and re(ires no

're)io(s "on)i"tion or the (n!aw(! a"ti)it% ?ee a!so

e"$ ;, Anti- Fone% a(nderin* A"t o 2006$

2$ To raise (nds or his deense, R(d% so!d the ho(ses

and !ots to a riend$ Can (ansin* Rea!t%,In"$ &e "o#'e!!ed to transer to the &(%erownershi' o the ho(ses and !ots> ?2$3@SUESTE8 ANSWER:

(ansin* Rea!t%, In"$ is a rea! estate "o#'an%, hen"e itis not a "o)ered instit(tion (nder e"tion ; o theAnti- Fone% a(nderin* A"t$ On!% &ankin*instit(tions, ins(ran"e "o#'anies, se"(rities dea!ersand &rokers, 're- need "o#'anies and otherentities ad#inisterin* or otherwise dea!in* in"(rren"%, "o##odities or inan"ia! deri)ati)es are"o)ered instit(tions$ 9en"e, (ansin* Rea!t%, In"$#a% not (se the Anti-Fone% a(nderin* A"t to re(seto transer to the &(%er ownershi' o the ho(ses

and !ots$

;$ In dis"!osin* R(d%s &ank a""o(nts to the

AFC, did the &ank )io!ate an% !aw> ?2$3@SUESTE8 ANSWER:

No, the &ank did not )io!ate an% !aw$ The &ank

&ein* s'e"iied as a L"o)ered instit(tionL (nder

the Anti- Fone% a(nderin* aw, is o&!i*ed to

re'ort to the AFC "o)ered and s(s'i"io(s

transa"tions, witho(t there&% )io!atin* an% !aw$ This is

one o the e+"e'tions to the e"re"% o Bank De'osit A"t$

*eri!n 1++0,'00- U)dated byDondee


29/203


$ (''osin* the tit!es o the ho(ses and !ots are in'ossession o the (ansin* Rea!t%, In"$, is it (ndero&!i*ation to de!i)er the tit!es to R(d%> ?2$3@SUESTE8 ANSWER:

Yes, it has an o&!i*ation to de!i)er tit!es to R(d%$

As (ansin* Rea!t%, In"$ is not a "o)ered instit(tion

(nder e"tion ; o the Anti-Fone% a(nderin* A"t, it

#a% not in)oke this !aw to re(se de!i)er% o the tit!es to

R(d%$

,an-s Secrec% o& ,an- De$osit E9ce$tions (2004)

4nder Re'(&!i" A"t No$603 ?The Bank e"re"%

aw, &ank de'osits are "onsidered a&so!(te!%

"onidentia! and #a% not &e e+a#ined, in(ired or

!ooked into &% an% 'erson, *o)ern#ent oi"ia!, &(rea(

or oi"e$

.hat are the e+"e'tions> ?3@SUESTE8 ANSWER:

The e+"e'tions to the Bank e"re"% aw arethe o!!owin*56$ 'e"ia! or *enera! e+a#ination o a

&ank, a(thoried &% the Ban*ko entra! n*

Pi!i'inas Fonetar% Board, in "onne"tion with a&ank ra(d or serio(s irre*(!arit%$

2$ E+a#ination &% an inde'endent A(ditor, hired&% the Bank and or the Banks e+"!(si)e (se$

;$ Dis"!os(re with the De'ositorswritten 'er#ission$

a$ In "ase o I#'ea"h#ent$&$ In "ases o Bri&er% or dere!i"tion o d(t%

&% a P(&!i" Oi"er, ('on ordero a "o#'etent "o(rt$

"$ In "ases o #one%de'ositedMin)ested whi"h, in t(rn, is thes(&e"t o iti*ation, ('on order o a

"o#'etent Co(rt$$ DORI oans5 oans with their Banks oBank Dire"tors, Oi"ers, to"kho!ders andre!ated interests$

a$ oans in e+"ess o 3@ o theBanks Ca'ita! (r'!(s

&$ The Borrower wai)ed his ri*ht asre*ards the e"re"% o Bank De'osits

3$ io!ation o the Anti-Grat and Corr('t Pra"ti"esA"t$

$ Co(' d etat aw ?RA :8, O"t 2,6::0$7$ BIR Co##issioners a(thorit% to )eri%

a de"edents Gross Estate and a ta+'a%ersre(est or a "o#'ro#ise a*ree#ent d(e to

in"a'a"it% to 'a% his ta+ !ia&i!it%$8$ orei*n C(rren"% De'osits &% orei*n !enders

in)estors (nder PDs 60;$:$ io!ations o the Anti-Fone% a(nderin* aw$60$ .hen the tate e+er"isesMin)okes its Po!i"e

Power$(3-:1 BE3E! /t is suggested that an & of the

above be given full credit"

,an-s Secrec% o& ,an- De$osits (**0)

Fanosa, a news'a'er "o!(#nist, whi!e #akin* a de'osit

in a &ank, o)erheard a 'rett% &ank te!!er inor#in* a "o-

e#'!o%ee that Gi*i, a we!! known '(&!i" oi"ia!, has (st

a ew h(ndred 'esos in her &ank a""o(nt and that

her ne+t "he"k wi!! in a!! 'ro&a&i!it% &o(n"e$ Fanosa

wrote this inor#ation in his news'a'er "o!(#n$

Th(s, Gi*i


30/203

Page 1-of103i!ed a "o#'!aint with the Cit% is"a! o Fani!aor (n!aw(!!% dis"!osin* inor#ation a&o(t her&ank a""o(nt$a .i!! the said s(it 'ros'er> E+'!ain %o(r answer$

& (''osin* that Gi*i is "har*ed with

(n!aw(!!% a"(irin* wea!th (nder RA 6;7: and that the

is"a! iss(ed a subpoena duces tecumor the re"ords o

the &ank a""o(nt o Gi*i$ Fa% Gi*i )a!id!% o''ose the

said iss(an"e on the *ro(nd that the sa#e )io!ates the !aw

on se"re"% o &ank

de'osits> E+'!ain %o(r answer$SUESTE8 ANSWER:

a The e"re"% o Bank De'osits A"t 'rohi&its, s(&e"t to

its e+"!(sionar% "!a(ses, an% 'erson ro# e+a#inin*,

in(irin* or !ookin* into a!! de'osits o whate)er nat(re

with &anks or &ankin* instit(tions in the Phi!i''ines

whi"h &% !aw are de"!ared


31/203


i#'air#ent "!a(se$ RA 8;2, "reatin* a "o##ission

to "ond("t an in)esti*ation o the ai!ed 6:8: "o('

detat and to re"o##end #eas(res to 're)ent si#i!ar

atte#'ts to seie 'ower is a )a!id e+er"ise o 'o!i"e

'ower$


o"orro re"ei)ed 60,000 ro# a orei*n &ank a!tho(*h

she was entit!ed on!% to 6,000$00$ In an a''arent '!anto "on"ea! the erroneo(s!% sent a#o(nt, she o'ened ado!!ar a""o(nt with her !o"a! &ank, de'osited the60,000 and iss(ed "he"ks in the a#o(nt o 2,000and 6 "he"k or 6,000 ea"h 'a%a&!e to dierentindi)id(a!s who de'osited the sa#e in theirres'e"ti)e do!!ar a""o(nts with dierent !o"a! &anks$

The sender &ank then &ro(*ht a "i)i! s(it &eore theRTC or the re"o)er% o the erroneo(s!% sent a#o(nt$In the "o(rse o the tria!, the sender 'resentedtesti#onies o &ank oi"ia!s to show that the(nds were, in a"t, de'osited in a &ank &% o"orro

and 'aid o(t to se)era! 'ersons, who 'arti"i'ated

in the "on"ea!#ent and dissi'ation o the a#o(ntthat o"orro had erroneo(s!% re"ei)ed$

o"orro #o)ed to strike o(t said testi#onies ro#

the re"ord in)okin* the !aw on se"re"% o &ankde'osits$ I %o( were the 1(d*e, wo(!d %o( iss(e

an order to strike the# o(t> .h%>SUESTE8 ANSWER:

I wi!! not strike o(t the testi#onies ro# the re"ord$ The

testi#onies o &ank oi"ia!s indi"atin* where the

(estioned do!!ar a""o(nts were o'ened in de'ositin*

#isa''ro'riated s(#s #(st &e "onsidered as !ikewise

in)o!)ed in !iti*ation H one whi"h is a#on* the e+"e'ted

"ases (nder the e"re"% o Bank De'osits A"t )elon#an$ v ags"no 19 'CRA 6((+

,an-s Secrec% o& ,an- De$osits (**)

Fi*(e!, a s'e"ia! "(sto#s a*ent is "har*ed &eore the

O#&(ds#an with ha)in* a"(ired 'ro'ert% o(t o

'ro'ortion to his sa!ar%, in )io!ation o the Anti-Grat

and Corr('t Pra"ti"es A"t$ The O#&(ds#an iss(ed a

subpoena duces tecum to the Ban"o de Cin"o

"o##andin* its re'resentati)e to (rnish the

O#&(ds#an re"ords o transa"tions &% or in the na#e

o Fi*(e!, his wie and "hi!dren$ A se"ond s(&'oena

was iss(ed e+'andin* the irst &% in"!(din* the

'rod("tion o re"ords o riends o Fi*(e! in said &ank

and in a!! its &ran"hes and e+tension oi"es, s'e"ii"a!!%na#in* the#$

Fi*(e! #o)ed to (ash the s(&'oenas ar*(in* thatthe% )io!ate the e"re"% o Bank De'osits aw$ Inaddition, he "ontends that the s(&'oenas are in thenat(re o


32/203

Page 14of103 na#e oother 'ersons$ To s(stain Fi*(e!s theor% andrestri"t the in(ir% on!% to 'ro'ert% he!d &% or inthe na#e o the *o)ern#ent oi"ia! wo(!d #akea)ai!a&!e to 'ersons in *o)ern#ent who i!!e*a!!%a"(ire 'ro'ert% an eas% #eans o e)adin*'rose"(tion$ A!! the% ha)e to do wo(!d &e to si#'!%'!a"e the 'ro'ert% in the na#e o 'ersons otherthan their s'o(ses and "hi!dren (Banco.ilipinoSavings vs0 ;urisima # scra 54&< Sec 6 1nti82raft =aw asamended b B; #95"


Fi"hae! withdrew witho(t a(thorit% (nds othe 'artnershi' in the a#o(nts o P300th and430th or ser)i"es he "!ai#s he rendered orthe &eneit o the 'artnershi'$ 9e de'osited theP300th in his 'ersona! 'eso "(rrent a""o(nt withPros'erit% Bank and the 430th in his 'ersona!orei*n "(rren"% sa)in*s a""o(nt with Eastern Bank$

The 'artnershi' instit(ted an a"tion in "o(rt

a*ainst Fi"hae!, Pros'erit%, and Eastern to "o#'e!

Fi"hae! to ret(rn the s(&e"t (nds to the 'artnershi'and 'endin* !iti*ation to order &oth &anks to disa!!ow

an% withdrawa! ro# his a""o(nts$

At the initia! hearin* o the "ase the "o(rt ordered

Pros'erit% to 'rod("e the re"ords o Fi"hae!s

'eso "(rrent a""o(nt, and Eastern to 'rod("e the

re"ords o his orei*n "(rren"% sa)in*s a""o(nt$

Can the "o(rt "o#'e! Pros'erit% and Eastern to

dis"!ose the &ank de'osits o Fi"hae!> Dis"(ss (!!%$SUESTE8 ANSWER:

Yes, as ar as the 'eso a""o(nt is "on"erned$ e" 2 oRA 603 a!!ows the dis"!os(re o &ank de'osits in "asewhere the #one% de'osited is the s(&e"t #atter o!iti*ation$ in"e the "ase i!ed a*ainst Fi"hae! is ai#edat re"o)erin* the a#o(nt he withdrew ro# the(nds o the 'artnershi', whi"h a#o(nt he a!!e*ed!%de'osited in his a""o(nt, a dis"!os(re o his &ank

de'osits wo(!d &e 'ro'er$

No, with res'e"t to the orei*n "(rren"% a""o(nt$

4nder the orei*n C(rren"% aw, the e+e#'tion

to the 'rohi&ition a*ainst dis"!os(re o inor#ation

"on"ernin* &ank de'osits is the written "onsent o the

de'ositor$

,an-s Secrec% o& ,an- De$osits (**)

6::8 ?20 An ins(ran"e "o#'an% is de!(ded into

re!easin* a "he"k to A or P;3th to 'a% or Treas(r% Bi!!s

?T-&i!!s whi"h A "!ai#s to &e en ro(te on &oard an

ar#ored tr("k ro# a *o)ern#ent &ank$ The "he"k is

de!i)ered to A who de'osits it to his a""o(nt with JYQBank &eore the ins(ran"e "o#'an% rea!ies it is a s"a#$

4'on s("h rea!iation, the ins(ran"e "o#'an% i!es an

a"tion a*ainst A or re"o)er% o the a#o(nt

dera(ded and o&tains a writ o 're!i#inar% atta"h#ent$

In addition to the writ, the Bank is a!so ser)ed a

s(&'oena to e+a#ine the a""o(nt re"ords o A$ The Bank

de"!ines to 'ro)ide an% inor#ation in res'onse to the

writ and #o)es to (ash the s(&'oena in)okin* se"re"%

o &ank



33/203


de'osits (nder RA 603, as a#ended$ Can theBank (stiia&!% in)oke RA 603 and a not res'ond tothe writ and & (ash the s(&'oena or e+a#ination>?3@SUESTE8 ANSWER:

Yes$ .hether the transa"tion is "onsidered a sa!eor #one% '!a"e#ent does not #ake the #one% E+'!ain$SUESTE8 ANSWER:

Yes$ The o''osition is )a!id$ GP is not a '(&!i" oi"ia!$

The in)esti*ation does not in)o!)e one o the e+"e'tions

to the 'rohi&ition a*ainst dis"!os(re o an% inor#ation

"on"ernin* &ank de'osits (nder the aw on e"re"%

o Bank De'osits$ The Co##ittee "ond("tin*

the in)esti*ation is not a "o#'etent "o(rt or

the O#&(ds#an a(thoried (nder the !aw to iss(e

a s(&'oena or the 'rod("tion o the &ank re"ord

in)o!)in* s("h dis"!os(re$

,an-s Secrec% o& ,an- De$osits E9ce$tions (200)

The aw on e"re"% o Bank De'osits 'ro)ides that a!!

de'osits o whate)er nat(re with &anks or

&ankin* instit(tions are a&so!(te!% "onidentia! in nat(reand #a% not &e e+a#ined, in(ired or !ooked into &% an%

'erson, *o)ern#ent oi"ia!, &(rea( or oi"e$ 9owe)er,

the !aw 'ro)ides e+"e'tions in "ertain instan"es$

.hi"h o the o!!owin* #a% not &e a#on*the e+"e'tions56$ In "ases o i#'ea"h#ent$2$ In "ases in)o!)in* &ri&er%;$ In "ases in)o!)in* BIR in(ir%$$ In "ases o anti-*rat and "orr('t 'ra"ti"es$3$ In "ases where the #one% in)o!)ed is the s(&e"t

o!iti*ation$

E+'!ain %o(r answer or "hoi"e &rie!%$ ?3@SUESTE8 ANSWER:


34/203

Page 16of1034nder e"tion ? o the Nationa! Interna! Re)en(e

Code, the Co##issioner o Interna! Re)en(e "an in(ire

into the de'osits o a de"edent or the '(r'ose o

deter#inin* the *ross estate o s("h de"edent$ A'art

ro# this "ase, a BIR in(ir% into &ank de'osits "annot &e

#ade$ Th(s, e+"e'tion ; #a% not a!wa%s &e a''!i"a&!e$

T(rnin* to e+"e'tion , an in(ir% into &ank de'osits is

'ossi&!e on!% in 'rose"(tions or (ne+'!ained wea!th

(nder the Anti-Grat and Corr('t Pra"ti"es A"t,

a""ordin* to the ('re#e Co(rt in the "ases o ;hilippine3ational Ban v0 2ancaco, #5 S'1 9# (#9&5" and Banco

.ilipino Savings and +ortgage Ban v0 ;urisima, #

S'1 54& (#966"0

9owe)er, a!! other "ases o anti-*rat and "orr('t

'ra"ti"es wi!! not warrant an in(ir% into &ank de'osits$

Th(s, e+"e'tion #a% not a!wa%s &e a''!i"a&!e$ ike an%

other e+"e'tion, it #(st &e inter'reted stri"t!%$

E+"e'tions 6, 2 and 3, on the other hand, are 'ro)ided

e+'ress!% in the aw on e"re"% o Bank

De'ositors$ The% are a)ai!a&!e to de'ositors at a!!

ti#es$

,an-s Secrec% o& ,an- De$osits Garnis#ment (200)

The aw on e"re"% o Bank De'osits, otherwiseknown as RA 603, is intended to en"o(ra*e 'eo'!e tode'osit their #one% in &ankin* instit(tions anda!so to dis"o(ra*e 'ri)ate hoardin* so that thesa#e #a% &e 'ro'er!% (ti!ied &% &anks to assistin the e"ono#i" de)e!o'#ent o the "o(ntr%$ Is anoti"e o *arnish#ent ser)ed on a &ank at the

instan"e o a "reditor o a de'ositor "o)ered &% thesaid !aw> tate the reason?s or %o(r answer$ ?3@SUESTE8 ANSWER:

No$ The noti"e o *arnish#ent ser)ed on a &ank at theinstan"e o a "reditor is not "o)ered &% the awon e"re"% o Bank De'osits$ Garnish#ent is (st a'art o the 'ro"ess o e+e"(tion$ The #o#ent anoti"e o *arnish#ent is ser)ed on a &ank andthere e+ists a de'osit &% the (d*#ent de&tor, the&ank is dire"t!% a""o(nta&!e to the sheri, or

the &eneit o the (d*#ent "reditor, or the who!ea#o(nt o the de'osit$ In s("h e)ent, the a#o(nt othe de'osit &e"o#es, in ee"t, a s(&e"t o the!iti*ation$

,S" Receiers#i$ Juris6iction (**2)

a#i!% Bank was '!a"ed (nder stat(tor% re"ei)ershi'and s(&se(ent!% ordered !i(idated &% the Centra!Bank ?CB d(e to ra(d and irre*(!arities inits !endin* o'erations whi"h rendered itinso!)ent$ 1(di"ia! 'ro"eedin*s or !i(idationwere thereater "o##en"ed &% the CB &eore theRTC$ a#i!% Bank o''osed the 'etition$

hort!% thereater, a#i!% Bank i!ed in the sa#e "o(rta s'e"ia! "i)i! a"tion a*ainst the CB seekin* to enoinand dis#iss the !i(idation 'ro"eedin* on the*ro(nd o *ra)e a&(se o dis"retion &% the CB$ The"o(rt 'oised to5 6 restrain the CB ro# "!osin*a#i!% Bank and 2 a(thorie a#i!% Bank towithdraw #one% ro# its de'osits d(rin* the'enden"% o the "ase$ I %o( were the 1(d*e, wo(!d%o( iss(e s("h orders> .h%>SUESTE8 ANSWER:



35/203


No$ The RTC has no a(thorit% to restrain the #onetar%&oard o the BP ro# stat(tor% a(thorit% to (ndertakere"ei)ershi' and (!ti#ate !i(idation o a &ank$An% o''osition to s("h an a"tion "o(!d &e #ade to the"o(rt itse! where assistan"e is so(*ht$ The a"tion othe RTC where the 'ro"eedin* is 'endin* a''ea! ha)eto &e #ade in the Co(rt o A''ea!s$

8e'al Ten6er (2000)

Ater #an% %ears o sho''in* in the Fetro Fani!aarea, ho(sewie 9. has de)e!o'ed the so(nd ha&it o#akin* "ash '(r"hases on!%, none on "redit$ In onesho''in* tri' to Fe*a Fa!!, she *ot the sho"k o hersho''in* !ie or the irst ti#e, a stores s#artsa!es*ir! re(sed to a""e't her "oins in 'a%#ent or a'(r"hase worth not #ore than one h(ndred 'esos$ 9.was 'a%in* se)ent% 'esos in 23- "enta)o "oins andtwent% i)e 'esos in 60 "enta)o "oins$ tran*e as it#a% see#, the sa!es*ir! to!d 9. that her "oinswere not

No$ The sa!es*ir!s (nderstandin* that "oins are not!e*a! tender is not "orre"t$ Coins are !e*a! tender ina#o(nts not e+"eedin* it% 'esos or deno#inationsro# twent% i)e "enta)os and a&o)e, and in a#o(ntsnot e+"eedin* twent% 'esos or deno#inations ten"enta)os and !ess$

"D7C 8a; s! Secrec% o& ,an- De$osits Act (**+)

An e#'!o%ee o a !ar*e #an(a"t(rin* ir# earns asa!ar% whi"h is (st a &it #ore than what heneeds or a "o#orta&!e !i)in*$ 9e is th(s a&!e tosti!! #aintain a P60,000 sa)in*s a""o(nt, a P20,000

"he"kin* a""o(nt, a P;0,000 #one% #arket'!a"e#ent and a P0,000 tr(st (nd in a #edi(#-sie "o##er"ia! &ank$a tate whi"h o the o(r a""o(nts are dee#ed

ins(red &% the PDIC$& tate whi"h o the a&o)e a""o(nts are "o)ered

&%

the aw on e"re"% o Bank De'osits$SUESTE8 ANSWER:

a The P60th sa)in*s a""o(nt and the P20th "he"kin*a""o(nt are dee#ed ins(red &% the PDIC$

& The P60th sa)in*s a""o(nt and the P20th "he"kin*

a""o(nt are "o)ered &% the aw on e"re"% o

Bank De'osits$

Res$onsi.ilities ?3@SUESTE8 ANSWER:

The BP sha!! 'ro)ide 'o!i"% dire"tions in theareas o #one%, &ankin* and "redit$ It sha!! ha)es('er)ision o)er the o'erations o &anks ande+er"ise s("h re*(!ator% 'owers as 'ro)ided in theCentra! Bank A"t and other 'ertinent !aws o)er theo'erations o inan"e "o#'anies and non-&ankinan"ia! instit(tions 'eror#in* (asi- &ankin*(n"tions, s("h as (asi-&anks and instit(tions

'eror#in* si#i!ar (n"tions$

The 'ri#ar% o&e"ti)e o the BP is to #aintain

'ri"e sta&i!it% "ond("i)e to a &a!an"ed and s(staina&!e

*rowth


36/203

Page 1+of103o the e"ono#%$ It sha!! 'ro#ote and #aintain

#onetar% sta&i!it% and "on)erti&i!it% o the Peso$

Trut# in 8en6in' Act (**)

Dana Gianina '(r"hased on a ; #onth insta!!#ent &asis

the !atest #ode! o the Nissan entra edan "ar ro# the

1o&e! Cars In"$ In addition to the ad)ertised se!!in* 'ri"e,

the !atter i#'osed inan"e "har*es "onsistin* o interests,

ees and ser)i"e "har*es$ It did not, howe)er, s(it to

Dana a written state#ent settin* orth therein the

inor#ation re(ired &% the Tr(th in endin* A"t

?RA ;73$ Ne)erthe!ess, the "onditiona! deed o sa!e

whi"h the 'arties e+e"(ted #entioned that the tota!

a#o(nt indi"ated therein in"!(ded s("h inan"e "har*es$

a$ 9as there &een s(&stantia! "o#'!ian"e othe aoresaid A"t>

&$ I %o(r answer to the ore*oin* (estion is inthe ne*ati)e, what is the ee"t o the)io!ation on the "ontra"t>

"$ In the e)ent o a )io!ation o the A"t, whatre#edies#a% &e a)ai!ed o &% Dana>

SUESTE8 ANSWER:

a There was no s(&stantia! "o#'!ian"e with the Tr(th

in endin* A"t$ The !aw 'ro)ides that the

"reditor #(st #ake a (!! dis"!os(re o the "redit

!ost$ The state#ent that the tota! a#o(nt d(e

in"!(des the 'rin"i'a! and the inan"ia!

"har*es, witho(t s'e"i%in* the a#o(nts d(e on

ea"h 'ortion thereo wo(!d &e ins(i"ient and

(na""e'ta&!e$

& A )io!ation o the Tr(th in endin* A"t wi!! not

ad)erse!% ae"t the )a!idit% o the "ontra"t itse!$

" It wo(!d a!!ow Dana to re(se 'a%#ent o inan"ia!

"har*es or, i a!read% 'aid, to re"o)er the sa#e$

Dana #a% a!so initiate "ri#ina! "har*es

a*ainst the "reditor$

ALTERNATI*E ANSWER:

" ?Per Att% 1o#&% Paras i ( read the 'ro)isions"!ose!% 4nder the Tr(th in endin* A"t, saidinan"ia! "har*es are )a!id, and Dana #a% notre(se 'a%#ent thereo$ On!% "ri#ina! "har*es#a% &e initiated a*ainst the "reditor$

Trut# in 8en6in' Act (2000)

E#&ass% A''!ian"es se!!s ho#e theater "o#'onents that

are desi*ned and "(sto#ied as entertain#ent "enters or

"ons(#ers within the #edi(#-to-hi*h 'ri"e &ra"ket$

Fost, i not a!!, o these 'a"ka*es are so!d on insta!!#ent

&asis, (s(a!!% &% #eans o "redit "ards a!!owin*

a #a+i#(# o ; e(a! #onth!% 'a%#ents$

Preerred "redit "ards o this t%'e are those iss(ed &%&anks, whi"h re*(!ar!% ho!d #a!! wide sa!es &!ites

'arti"i'ated in &% a''!ian"e retai!ers !ike E#&ass%

A''!ian"es$ Yo( are a &(%er o a ho#e theater "enter at

E#&ass% A''!ian"es$ The sa!es"!erk who is attendin*

to %o( si#'!% swi'es %o(r "redit "ard on the

e!e"troni" a''ro)a! #a"hine ?whi"h #o#entari!% 'rints

o(t %o(r "har*e s!i' sin"e %o( ha)e (n!i#ited "redit,

tears the s!i' ro# the #a"hine, hands the sa#e o)er

to %o( or %o(r si*nat(re, and



37/203


38/203

Page '0of103 their !oan'orto!ios$ Co#'an% J was a"ed with the dis#a!

"hoi"e o either s(s'endin* its o'erations or se!!in*

its &(siness$ It "hose the !atter$ 9a)in* str("k a dea!

with Co#'an% Q, a #ore )ia&!e entit% en*a*ed in

the sa#e &(siness, Co#'an% J so!d its entire &(siness to

the or#er witho(t #("h anare or an% or# o

'(&!i"it%$ In a"t, e)iden"e e+ists that the transa"tion was

(rti)e!% entered into to a)oid the 'r%in* e%es o

Co#'an% Js "reditors$ The "reditor &anks and other

inan"ia! instit(tions s(ed Co#'an% J or )io!ation o

the B(!k a!es aw$ De"ide$ ?3@SUESTE8 ANSWER:

Co#'an% J )io!ated the B(!k a!es aw when it so!dits entire &(siness to Co#'an% Q (rti)e!% toa)oid the 'r%in* e%es o its "reditors$ Its#an(a"t(red *oods are so!d who!esa!e todistri&(tors and dea!ers$ The sa!e o a!! ors(&stantia!!% a!! o its sto"ks, not in the ordinar%"o(rse o &(siness, "onstit(tes &(!k sa!e$ Thetransa"tion &ein* a &(!k sa!e, enterin* into s("htransa"tion witho(t "o#'!%in* with the re(ire#entso the B(!k a!es aw, Co#'an% J )io!ated said !aw$

,ul- Sales 8a; Coere6 Transactions (2004)

P(rs(ant to a writ o e+e"(tion iss(ed &% theRe*iona! Tria! Co(rt in LE+'ress Bank )$ Don R(&io,Lthe sheri !e)ied and so!d at '(&!i" a("tion 8'hoto"o'%in* #a"hines o Don R(&io$ Is the sherissa!e "o)ered &% the B(!k a!es aw> ?3@SUESTE8 ANSWER:

No$ The sa!e &% sheri at '(&!i" sa!e is not a sa!e

&% a #er"hant$ e"tion 8 o the B(!k a!es aw itse!'ro)ides that it has no a''!i"ation to e+e"(tors,ad#inistrators, re"ei)ers, assi*nees in inso!)en"%,or '(&!i" oi"ers, a"tin* (nder 'ro"ess$ The B(!ka!es aw on!% a''!ies to the sa!e or en"(#&ran"eo a #er"hant o *oods, #er"handise or"o##odit% done Lin &(!kL as deined &% the awitse!$

,ul- Sales 8a; E9clusions (**3)

In the ann(a! #eetin* o JYQ Cor'oration,the sto"kho!ders (nani#o(s!% ado'ted a reso!(tion'ro'osed &% the BOD to se!! s(&stantia!!% a!! thei+t(res and e(i'#ent (sed in and a&o(t its &(siness$The President o the Cor'oration a''roa"hed %o(and asked or !e*a! assistan"e to ee"t the sa!e$6 .hat ste's sho(!d %o( take so that the sa!e #a% &e

)a!id>2 .hat are the two instan"es when the sa!e, transer,

#ort*a*e or assi*n#ent o sto"k o *oods,

wares, #er"handise, 'ro)ision, or #ateria!s

otherwise than in the ordinar% "o(rse o trade

and the re*(!ar 'rose"(tion o the &(siness o

the )endor are notdee#ed to &e a sa!e or transer in &(!k>

SUESTE8 ANSWER:

6 The re(ire#ents o the B(!k a!es aw #(st&e "o#'!ied with$ The se!!er de!i)ers to the '(r"hasera !ist o his "reditors and the '(r"haser in t(rnnotiies s("h "reditors o the 'ro'osed sa!e at asti'(!ated ti#e in ad)an"e$



39/203


2 I the sa!e and transer is #ade a &% the )endor,

#ort*a*or, transeror or assi*nor who 'rod("es and

de!i)ers a written wai)er o the 'ro)isions o the

B(!k a!es aw ro# his "reditors as shown &%

)eriied state#ent and & &% a )endor, #ort*a*or,

transeror or assi*nor who is an e+e"(tor,

ad#inistrator, re"ei)er, assi*nee in inso!)en"%, or

'(&!i" oi"er a"tin* (nder (di"ia! 'ro"ess, the sa!e or

transer is not "o)ered &% the B(!k a!es aw$

,ul- Sales 8a;

sworn, o the na#es and addresses o a!! "reditors to

who# said )endor #a% &e inde&ted, to*ether with

the a#o(nt o

Page '1of103inde&tedness d(e or owin*, on a""o(nt o the *oods,

i+t(res or &(siness s(&e"t #atter o the &(!k sa!e$

,ul- Sales 8a; ?6@SUESTE8 ANSWER:

The re"o(rse o J, Y, and Q is to (estion the )a!idit%o the sa!e ro# A to B so as to re"o)er the*oods and #er"handise to satis% their "redits$

C!n2mer Pr!te%ti!n La#

etric S%stem 8a; (**)

An*e!ene is a "(sto#er o Fera!"o E!e"tri"Co#'an% ?FECO$ Be"a(se o the a&r('t rise ine!e"tri"it% rates, An*e!ene "o#'!ained with FECOinsistin* that she sho(!d &e "har*ed the or#er rates$9owe)er, An*e!ene did not tender an% 'a%#ent$

.hen FECOs e#'!o%ees ser)ed the irst 8-ho(r noti"e o dis"onne"tion, An*e!ene 'rotested$

FECO, howe)er, did not i#'!e#ent the 8-ho(r

noti"e o dis"onne"tion$ Instead, its

e#'!o%ees e+a#ined An*e!enes e!e"tri" #eter,"han*ed the sa#e, and insta!!ed another$ ti!!,

An*e!ene, #ade no tender o 'a%#ent$

FECO ser)ed a se"ond 8-ho(r noti"e o

dis"onne"tion on 1(ne 22, 6:8$ It *a)e An*e!ene

(nti! 3 '# o 1(ne 23, 6:8 within whi"h to 'a%$As no 'a%#ent had &een #ade, FECO "(t

An*e!enes e!e"tri" ser)i"e on 1(ne 28, 6:8$


40/203

An*e!ene "ontends that the 8-ho(r written noti"e o dis"onne"tion r(!e "annot &e in)oked &% FECO



41/203


when there is a &ona ide and (st dis'(te as tothe a#o(nt d(e as her e!e"tri" "ons(#'tion rate$ IsAn*e!enes "ontention )a!id>SUESTE8 ANSWER:

No$ An*e!enes on!% !e*a! re"o(rse in this "ase was to'a% the e!e"tri" &i!! (nder 'rotest$ 9er ai!(re to

do so (stiied FECO to "(t the e!e"tri" ser)i"e('eni>a v '1 #6 S 97"

C!r)!rati!n La#

, E+'!ain$SUESTE8 ANSWER:

No, there is no &indin* "ontra"t or the 3,000 &a*s

o erti!ier$ irst, the a"ts do not indi"ate that Rod#an,

the President o T Co, was a(thoried &% the BOD to

enter into the said "ontra"t or that he was e#'owered to

do so (nder so#e 'ro)ision o the &%-!aws o T Co$ The

a"ts do not a!so indi"ate that Rod#an has &een "!othed

with the a''arent 'ower to e+e"(te the

"ontra"t or a*ree#ents si#i!ar to it$ e"ond, T Co

has s'e"ii"a!!% inor#ed Gre*orio that it has not ratiied

the "ontra"t or the sa!e o 3,000 &a*s o erti!ier and

that the de!i)er% to


42/203

Page ''of103Gre*orio o 300 &a*s, whi"h Gre*orio a""e'ted, isan entire!% new transa"tion$ (?ao @a Sin :rading v '12 5$67Aune #5, #99 79s4&$"

, E+'!ain$SUESTE8 ANSWER:

6$ At the #eetin* o the BOD o P!atin(# to

a''ro)e the "ontra"t, Chito wo(!d ha)e to #ake s(re that



43/203


a his 'resen"e as dire"tor at the #eetin* isnot ne"essar% to "onstit(te a (or(#or s("h #eetin*

& his )ote is not ne"essar% or the a''ro)a! othe "ontra"t and

" the "ontra"t is air and reasona&!e (nder

the "ir"(#stan"es$

At the #eetin* o the BOD o Kwik to a''ro)e

the "ontra"t, Chito wo(!d ha)e to #ake s(re that -

a there is no ra(d in)o!)ed and& the "ontra"t is air and reasona&!e (nder

the "ir"(#stan"es$

SUESTE8 ANSWER:

2$ I the "onditions re!atin* to the (or(# and re(iredn(#&er o )otes are not #et, the "ontra"t #(st &eratiied &% the )ote o sto"kho!ders re'resentin* at !east2M; o the o(tstandin* "a'ita! sto"k in a #eetin* "a!!edor the '(r'ose$ (rther#ore, the ad)erse interesto Chito in the "ontra"t #(st &e dis"!osed and the"ontra"t is air and reasona&!e$ ?e"s$ ;2 and ;;, BP

8

,


The dea!ershi' a*ree#ent is )oida&!e at the o'tion oNT Co inas#("h as the a"ts do not indi"ate that thesa#e was a''ro)ed &% the BOD o NT Co &eoreit was si*ned or, ass(#in* s("h a''ro)a!, that it wasa''ro)ed (nder the o!!owin* "onditions56 That the 'resen"e o Ra'hae!, the owner o A Ent,

in the #eetin* o the BOD at whi"h the a*ree#entwas a''ro)ed was not ne"essar% to "onstit(tea (or(# or s("h #eetin*

2 That the )ote o Ra'hae! was not ne"essar% or thea''ro)a! o the a*ree#ent

; That the a*ree#ent is air and reasona&!e (nder the"ir"(#stan"es ?e" ;2 Cor' Code

ALTERNATI*E ANSWER:

The dea!ershi' a*ree#ent is )a!id ('on the

ass(#'tion that the sa#e was a''ro)ed &% theBOD o NT Co &eore it was si*ned and thats("h a''ro)a! was #ade (nder the o!!owin*"onditions56 That the 'resen"e o Ra'hae!, the owner o A Ent,

in the #eetin* o the BOD at whi"h the a*ree#entwas a''ro)ed was not ne"essar% to "onstit(tea (or(# or s("h #eetin*

2 That the )ote o Ra'hae! was not ne"essar% or thea''ro)a! o the a*ree#ent

; That the a*ree#ent is air and reasona&!e (nder the

"ir"(#stan"es ?e" ;2 Cor' Code

,%?8a;s >ali6it% limitin' 5uali&ications o& ,


44/203

Page '3of103The BOD o J Co, a"tin* on a standin* a(thorit% othe sto"kho!ders to a#end the &%-!aws, a#ended its&%-!aws so as to dis(a!i% an% o its sto"kho!ders whois a!so a sto"kho!der and dire"tor o a "o#'etitorro# &ein* e!e"ted to its BOD$

Y, a sto"kho!der ho!din* s(i"ient assets to ass(re

hi# o a seat in the BOD, i!ed a 'etition with the EC

or a de"!aration o n(!!it% o the a#ended &%-!aws$ 9e

a!!e*ed a#on* other thin*s that as a sto"kho!der,

he had a"(ired ri*hts inherent in sto"k ownershi'

s("h as the ri*ht to )ote and &e )oted ('on in the

e!e"tion o dire"tors$ Is the sto"kho!ders 'etition

tena&!e> ?3@SUESTE8 ANSWER:

No$ There is no )ested ri*ht o a sto"kho!der to&e e!e"ted as dire"tor$ .hen a 'erson &(%s sto"kin a "or'oration he does so with the know!ed*e thatits aairs are do#inated &% a #aorit% o thesto"kho!ders$ To this e+tent, the sto"kho!der 'artedwith his 'ersona! ri*ht to re*(!ate the dis'osition ohis 'ro'ert% whi"h he in)ested in the "a'ita! sto"k o

the "or'oration and s(rrendered it to the wi!! o the#aorit% o his e!!ow in"or'orators or sto"kho!ders$

Cor'orations ha)e the 'ower to #ake &%-!aws

de"!arin* a 'erson e#'!o%ed in the ser)i"e o a ri)a!

"o#'an% to &e ine!i*i&!e or the Cor'orationsBOD$ An a#end#ent whi"h renders a dire"tor

ine!i*i&!e, or i e!e"ted, s(&e"ts hi# to re#o)a!, i heis a!so a dire"tor in a "or'oration whose &(siness is in

"o#'etition with or is anta*onisti" to the other

"or'oration is )a!id$

,%?8a;s >ali6it% limitin' 5uali&ications o& ,ali6it% limitin' 5uali&ications o& ,


45/203


Is a &%-!aw 'ro)ision o J Cor'oration

tate %o(r reasons$ ?3@$SUESTE8 ANSWER:

Yes, the &%-!aw 'ro)ision is )a!id$ It is the ri*hto a "or'oration to 'rote"t itse! a*ainst 'ossi&!ehar# and 're(di"e that #a% &e "a(sed &% its

"o#'etitors$ The 'osition o dire"tor is hi*h!%sensiti)e and "onidentia!$ To sa% the !east, to a!!ow a'erson, who is a dire"tor in a "or'oration whose&(siness is in "o#'etition with or is anta*onisti" to JCor'oration, to &e"o#e a!so a dire"tor in JCor'oration wo(!d &e har&orin* a "on!i"t ointerest whi"h is har#(! to the !atter (2oongwei Ar vSE' 69 S $$& (#949"< 94 S 46 (#967""0

,%?8a;s >ali6it% limitin' 5uali&ications o&

,


46/203

Page 'of103 whi"h toin)est the (nds o the "or'oration$ Ro&ert wants

the dead!o"k &roken$

6$ .hat are the re#edies a)ai!a&!e to Ro&ert (nderthe Cor' "ode to &reak the dead!o"k> E+'!ain$2$ Are there an% re#edies to 're)ent the 'ara!%ationo the &(siness a)ai!a&!e to Ro&ert (nder PD :02-A whi!e the 'etition to &reak the dead!o"k is'endin* !iti*ation> E+'!ain$SUESTE8 ANSWER:

6$ Ro&ert "an 'etition the EC to ar&itrate thedis'(te, with s("h 'owers as 'ro)ided in e" 60o the Cor' Code$2$ The EC "an a''oint a reha&i!itation re"ei)er or

a #ana*e#ent "o##ittee$

Close6 Cor$oration Restriction Trans&er o&

s#ares (**)

Raae! inherited ro# his (n"!e 60,000 shares o ta$Ana Cor'oration, a "!ose "or'oration$ The shares ha)ea 'ar )a!(e o P60$00 'er share$ Raae! notiiedta$ Ana that he was se!!in* his shares at P70$00 'ershare$ There &ein* no takers a#on* the sto"kho!ders,

Raae! so!d the sa#e to his "o(sin i"ente ?who isnot a sto"kho!der or P700,000$

The Cor'orate e"retar% re(sed to transer the sharesin i"entes na#e in the "or'orate &ooks &e"a(se

A!&erto, one o the sto"kho!ders, o''osed thetranser on the *ro(nd that the sa#e )io!ated

the &%-!aws$ A!&erto oered to &(% the shares atP62$30 'er share, as i+ed &% the &%-!aws or a tota!

'ri"e o P623,000 on!%$

.hi!e the &%-!aws o ta$ Ana 'ro)ides that the ri*ht o

irst re(sa! "an &e e+er"ised


47/203


9ere, !i#itin* the 'ri"e to &e 'aid, when the ri*ht o irst

re(sa! is e+er"ised, to not #ore than 23@ 'ar )a!(e,

witho(t an% (a!ii"ation whatsoe)er, is not in

the arti"!es$ It is #ere!% stated in the B%-!aws$ Thereore

s("h !i#itation sha!! not &e &indin* on the '(r"haser$(2oSoc Sons S 2ui uat /nc v /1' #9 .eb 64 +in es"

Controers% 7ntra?Cor$orate (**)

Be"a(se o disa*ree#ent with the BOD and a threat &%

the BOD to e+'e! her or #is"ond("t and

inei"ien"%, Carissa oered in writin* to resi*n as

President and #e#&er o the BOD, and to se!! to the

"o#'an% a!! her shares therein or P;00,000$00 9er

oer to resi*n was A a&or Ar&iter &

RTC or " EC>SUESTE8 ANSWER:

The RTC has (risdi"tion o)er this "ase whi"h

in)o!)es intra-"or'orate "ontro)ers%$ As o 200, the

a''!i"a&!e r(!e is that there is a TRANERRED

14RIDICTION (nder e"$ 3$2 o the RC, the

Co##issions (risdi"tion o)er a!! "ases en(#erated

(nder PD :02-A se"$ 3 has &een transerred to the

Co(rts o *enera! (risdi"tion or the a''ro'riate Re*iona!

Tria! Co(rt$

Controers% 7ntra?Cor$orate (**4)

In 6:70, Fa*no oined AFD Co as a 1(niorA""o(ntant$ 9e steadi!% rose ro# the ranks (nti! he&e"a#e AFDs E+e"(ti)e P$ (&se(ent!%,howe)er &e"a(se o his in)o!)e#ent in "ertainano#a!ies, the AFD BOD "onsidered hi#resi*ned ro# the "o#'an% d(e to !oss o"oniden"e$

A**rie)ed, Fa*no i!ed a "o#'!aint in the EC

(estionin* the )a!idit% o his ter#ination, and

seekin* reinstate#ent to his or#er 'osition, with&a"kwa*es, )a"ation and si"k !ea)e &eneits, 6;th

#onth 'a% and Christ#as &on(s, '!(s #ora! and

e+e#'!ar% da#a*es, attorne%s ees and "osts$ AFD

i!ed a #otion to dis#iss, ar*(in* that the EC has no

(risdi"tion o)er "ases o i!!e*a! dis#issa!, and has no

'ower to award da#a*es$

ho(!d the #otion to dis#iss &e *ranted> E+'!ain$SUESTE8 ANSWER:

As o 200, the a''!i"a&!e r(!e is that thereis a TRANERRED 14RIDICTION (nder e"$3$2 o the RC, the Co##issions (risdi"tion o)era!! "ases en(#erated (nder PD :02-A se"$ 3 has &een

transerred to the Co(rts o *enera! (risdi"tion orthe a''ro'riate REGIONA TRIA CO4RT$

Controers% 7ntra?Cor$orate (**4)


48/203

Page '(of1031ennier and Ga&rie! owned the "ontro!!in* sto"ksin F Co and CO In", &oth a#i!% "or'orations$D(e to serio(s disa*ree#ents, 1ennier assi*ned a!! hershares in F to Ga&rie!, whi!e Ga&rie! assi*ned a!!his shares in CO to 1ennier$ (&se(ent!%, 1ennierand CO i!ed a "o#'!aint a*ainst Ga&rie! and Fin the EC seekin* to re"o)er the "or'orate re"ordsand (nds o CO whi"h Ga&rie! a!!e*ed!% re(sedto t(rn o)er, and whi"h re#ained in the oi"es oF$

Is there an intra-"or'orate "ontro)ers% in this "ase>SUESTE8 ANSWER:

Yes, there is an intra-"or'orate "ontro)ers% in this "ase$The a"t that, when the "o#'!aint a*ainst Ga&rie!and F was i!ed with the EC ?'er 200,RTCs 1(risdi"tion, 1ennier and CO wereno !on*er sto"kho!ders o F did not di)est theEC ?'er 200, RTCs 1(risdi"tion o its(risdi"tion o)er the "ase inas#("h as 1ennier wasa or#er sto"kho!der o F and the "ontro)ers%arose o(t o this re!ation$ (SE' v '1 2 9$6$ 1ug $9#< 7#s#"

Controers% 7ntra?Cor$orate (2004)

3!at "s an "ntra4orporate ontroversy )8+SUESTE8 ANSWER:

An intra-"or'orate "ontro)ers% is a "on!i"t &etween

sto"kho!ders, #e#&ers or 'artners and the "or'oration,

asso"iation or 'artnershi' re*ardin* the re*(!ation o the

"or'oration$ The "ontro)ers% #(st arise o(t o intra-

"or'orate or 'artnershi' re!ations o the 'arties or

&etween s("h "or'oration, 'artnershi' or asso"iation and

the tate insoar as it "on"erns their indi)id(a! ran"hises$

It is (rther re(ired that the dis'(te &e intrinsi"a!!%

"onne"ted with the re*(!ation o the "or'oration(Speed Distributing 'orp0, et al0 v0 'ourt of 1ppeals, et al, 200

3o0 #9$5#, +arch #4, 77< /ntestate Estate of

1lexander :0:v0 'ourt of 1ppeals, 200 3o0 ##64, 1pril

#9, 77#"0

Is t!e 'eur"t"es an7 !ange Co--"ss"on t!evenue for at"ons "nvolv"ng "ntra4orporateontrovers"es )2+SUESTE8 ANSWER:

No, '(rs(ant to (&se"tion 3$2 o the e"(rities

Re*(- !ation Code, the (asi-(di"ia! (risdi"tion

o the e"(rities and E+"han*e Co##ission to hear

"or'orate "ases, in"!(din* intra-"or'orate

"ontro)ersies, (nder e"tion 3 o Pres$ De"ree No$ :02-

A, has &een e+'ress!% transerred to the desi*nated

Re*iona! Tria! Co(rt$ P(rs(ant to a #e#orand(#

"ir"(!ar iss(ed &% the ('re#e Co(rt, on!%

'arti"(!ar!% desi*nated RTC s'e"ia! "o##er"ia! "o(rts

in ea"h (di"ia! re*ion ha)e ori*ina! and e+"!(si)e

(risdi"tion o)er s("h "ases (See /ntestate Estate of1lexander :0 : v0 'ourt of 1ppeals, 200 3o0 ##64,

1pril #9, 77#"0

Controers% 7ntra?cor$orate Juris6iction (**+)

1(an was a sto"kho!der o J Co$ 9e owned a tota! o 300

shares e)iden"ed &% Cert o to"k No 6006$ 9e so!d the

shares to Pedro$ Ater *ettin* 'aid, 1(an indorsed and

de!i)ered said Certii"ate o to"k No 6006 to Pedro$ The

o!!owin* da%, 1(an went to the oi"es o the "or'oration

and "!ai#ed that his Certii"ate o to"k No 6006

was !ost and that, des'ite di!i*ent eorts, the "ertii"ate

"o(!d



49/203


not &e !o"ated$ The or#a!ities 'res"ri&ed &% !aw or the

re'!a"e#ent o the

transerred or )a!(a&!e "onsideration the new "ertii"ate

to 1ose who knew nothin* o the 're)io(s sa!e to Pedro$

In ti#e, the "or'oration was "onronted with the

"on!i"tin* "!ai#s o 1ose and Pedro$ The BOD o J Co

in)ited %o( to en!i*hten the# on these (estions )i5

a I a s(it were to &e initiated in order to reso!)e the"ontro)ers% &etween Pedro and 1ose, sho(!dthe #atter &e s(itted to the EC or to there*(!ar "o(rts>

& Between 1ose and Pedro, who# sho(!d

the "or'oration so re"o*nie as the ri*ht(!

sto"kho!der>

9ow wo(!d %o( res'ond to the a&o)e (eries>SUESTE8 ANSWER:

a The #atter sho(!d &e s(itted to the re*(!ar "o(rts

H s'e"ii"a!!% in the Re*iona! Tria! Co(rt

where the 'rin"i'a! oi"e o the "or'oration is

!o"ated$ The "ontro)ers% &etween Pedro and 1ose

is not an intra- "or'orate "ontro)ers%$

& I there is no o)er-iss(an"e o shares res(!tin*

ro# the two-transa"tions o 1(an, the "or'oration

sho(!d re"o*nie &oth Pedro and 1ose as ri*ht(!

sto"kho!ders$ This is witho(t 're(di"e to the ri*ht o

the "or'oration to "!ai# a*ainst 1(an or the )a!(e

o the shares whi"h 1(an so!d to 1ose$

Cor$oration Sole De&inition (200)

.hat is a "or'oration so!e>SUESTE8 ANSWER:

e"tion 660 o the Cor'oration Code deines aL"or'oration so!eL as one or#ed or the '(r'ose o

ad#inisterin* and #ana*in*, as tr(stee, the aairs,

'ro'ert% and te#'ora!ities o an% re!i*io(s deno#ination,

se"t or "h(r"h$ It is or#ed &% the "hie ar"h&isho',

&isho', 'riest, #inister, ra&&i or other 'residin* e!der o

s("h re!i*io(s deno#ination, se"t or "h(r"h$

Cor$oration: 7ssuance o& s#ares o& stoc- to $a% &or

t#e serices (2001)

1ani"e rendered so#e "ons(!tan"% work orJYQ Cor'oration$ 9er "o#'ensation in"!(ded shareso sto"k therein$ Can JYQ Cor'oration iss(e shareso sto"k to 'a% or the ser)i"es o 1ani"e as its"ons(!tant> Dis"(ss %o(r answer$ ?2@SUESTE8 ANSWER:

Yes, 'ro)ided the a''ro)a! o sto"kho!ders re'resentin*

two-thirds ?2M; o the o(tstandin* "a'ita! sto"k

is o&tained$ A!tho(*h the a"ts indi"ate that the

"ons(!tan"% work has a!read% &een LrenderedL

"onstit(tin* L're)io(s!% "ontra"ted de&t,L (nder

e"tion ;: o the Cor'oration Code, the 're-e#'ti)e

ri*hts o e+istin* sto"kho!ders need not &e res'e"ted

Lin 'a%#ent o a 're)io(s!% "ontra"ted de&t,L &(t on!%

with the indi"ated sto"kho!ders a''ro)a!$ 4nder

e"tion 2 o the Cor'oration Code, "onsideration

or the iss(an"e o

Page '-of103 sto"k#a% in"!(de !a&or 'eror#ed or or ser)i"es

a"t(a!!% rendered to the "or'oration$

Cor$oration: Ri'#t o& Re$urc#ase o& S#ares Trust /un6

Doctrine (2001)

4nder what "onditions #a% a sto"k "or'oration a"(ireits own shares> ?2@SUESTE8 ANSWER:

In !ine with the tr(st (nd do"trine that *enera!!% renders

it (n!aw(! or the "or'oration to ret(rn assets to thesto"kho!ders re'resentin* "a'ita!, a "or'oration #a%

a"(ire its own shares onl when there exists in the

boos unrestricted retained earnings to cover the

repurchase of shares0 The '(r'ose o the re'(r"hase o

shares #(st &e a !e*iti#ate &(siness '(r'ose o the

"or'oration, s("h as to5

6$ EIFINATE ra"tiona! shares arisin* o(t osto"k di)idends

2$ COECT or COFPROFIE an inde&tednessto the "or'oration arisin* o(t o (n'aids(&s"ri'tion in a de!in(en"% sa!e

;$ to P4RC9AE de!in(ent shares so!d d(rin*

the sa!e and$ to PAY dissentin* or withdrawin* sto"kho!ders

entit!ed to s("h 'a%#ent (nder the Cor'oration

Code$ ?ees$ 6 and 82, Cor'oration Code

Cor$oration: Sole "ro$rietors#i$ (200)

YK Tradin* i!ed a "o#'!aint or s'e"ii" 'eror#an"e

with da#a*es a*ainst P.C Cor'oration or ai!(re to

de!i)er "e#ent ordered &% '!ainti$ In its answer, P.C

denied !ia&i!it% on the *ro(nd, inter a!ia, that YK has no

'ersona!it% to s(e, not &ein* in"or'orated, and that

the President o P.C was not a(thoried to enter

into a "ontra"t with '!ainti &% the P.C Board o

Dire"tors, hen"e the "ontra"t is (!tra )ires$ YKTradin* re'!ied that it is a so!e 'ro'rietorshi' owned &%

YK, and that the President o P.C had #ade it

a''ear in se)era! !etters 'resented in e)iden"e that he

had a(thorit% to si*n "ontra"ts on &eha! o the Board o

Dire"tors o P.C$ .i!! the s(it 'ros'er or not> Reason

&rie!%$ ?3@SUESTE8 ANSWER:

Yes the s(it wi!! 'ros'er$ As a so!e'ro'rietorshi', the 'ro'rietor o YK Tradin* hasthe "a'a"it% to a"t and the 'ersona!it% to s(e P.C$It is not ne"essar% or YK Tradin* to &ein"or'orated &eore it "an s(e$ On the other hand,P.C is esto''ed ro# assertin* that its President had

no a(thorit% to enter into the "ontra"t, "onsiderin*that, in se)era! o P.Cs !etters, it had "!othed itsPresident with a''arent a(thorit% to dea! with YKTradin*$

Cor$oration Articles o& 7ncor$oration (**0)

The arti"!es o in"or'oration to &e re*istered in theEC "ontained the o!!owin* 'ro)isions - -a


50/203

in s("h #(ni"i'a!it% therein as its Board o Dire"tors #a% desi*nate$=



51/203


" SUESTE8 ANSWER:

a On the irst Arti"!e, I wo(!d s(**est that

the "or'orate na#e indi"ate the a"t o in"or'oration

&% (sin* either SUESTE8 ANSWER:

The transa"tions wo(!d "onstit(te a sa!e oLs(&stantia!!% a!! o the assets o Di)ineCor'oration "o#'!%in* with the test (nder e"$ 0o the Cor'oration Code, the transa"tions not&ein* Lin the ordinar% "o(rse o &(siness,L andone Lthere&% the "or'oration wo(!d &e renderedin"a'a&!e o "ontin(in* the &(siness ora""o#'!ishin* the '(r'ose or whi"h itwas in"or'orated$LALTERNATI*E ANSWER:

It is a sa!e and transer in &(!k in "onte#'!ation o the

B(!k a!es aw$ 4nder e"$ 2 o the B(!k a!esaw, a &(!k sa!e in"!(des an% sa!e, transer,#ort*a*e, or assi*n#ent o a!!, or s(&stantia!!% a!!, othe &(siness or trade theretoore "ond("ted &% the)endor, #ort*a*or, transeror, or assi*nor$ This ise+a"t!% what ha''ened in the "ase at &ar$

2 Can Di)ine Cor'oration se!! the aoresaid ite#s

to its "o#'etitor, To' Grade ashion

Cor'oration> .hat are the re(ire#ents to )a!id!%

se!! the ite#s>


or s("h a transa"tion to &e )a!id, it re(ires not on!%the a)ora&!e reso!(tion o the Board o Dire"tors oDi)ine Cor'oration, &(t a!so the ratii"ator%)ote o


52/203

Page '4of103sto"kho!ders re'resentin* at !east two-thirds ?2M; othe o(tstandin* "a'ita! sto"k, as #andated (nder e"$0 o the Cor'oration Code$ The sa!e wo(!d &e )oid in"ase o ai!(re to #eet the twin a''ro)a!s$ (/slamic

Directorate of the;hilippines v0 'ourt of 1ppeals, 2003o0 ##4694, +a #, #994"ALTERNATI*E ANSWER:

Di)ine Cor'oration "an se!! the ite#s to its "o#'etitor,

To' Grade ashion Cor'oration$ 9owe)er, Di)ine

Cor'oration #(st "o#'!% with e"tions ;, and 3 o theB(!k a!es aw, na#e!%5 ?6 de!i)er sworn state#ent

o the na#es and addresses o a!! the "reditors to who#

the )endor or #ort*a*or #a% &e inde&ted to*ether with

the a#o(nt o inde&tedness d(e or owin* to ea"h o the

said "reditors ?2 a''!% the '(r"hase or #ort*a*e

#one% to the 'ro-rata 'a%#ent o &ona ide "!ai#s o the

"reditors and ?; #ake a (!! detai!ed in)entor% o

the sto"k o *oods, wares, #er"handise, 'ro)isions or

#ateria!s, in &(!k, and noti% e)er% "reditor at !east

ten ?60 da%s &eore transerrin* 'ossession$

; 9ow wo(!d %o( 'rote"t the interests o the

"reditors o Di)ine Cor'oration>SUESTE8 ANSWER:Considerin* that Di)ine Cor'oration has entered a de

a"to sta*e o disso!(tion with the "easin* o its

o'erations, I wo(!d in)oke on &eha! o the "reditors the

'rote"tion (nder e"$ 622 o the Cor'oration Code, that

the 'ro"eeds o the sa!e sho(!d irst &e a''!ied towards

the sett!e#ent o the o&!i*ations o the "or'oration,

&eore an% a#o(nt "an &e 'aid to the sto"kho!ders$ALTERNATI*E ANSWER:

4nder the B(!k a!es aw, i the 'ro"eeds are not

a''!ied 'ro'ortionate!% towards the sett!e#ent o the

a""o(nts o the "or'orate de&ts, to ha)e the sa!e o the

s(&e"t #atters to To' Grade ashion Cor'$, as &ein*

Lra(d(!ent and )oidL and o&tain satisa"tion ro# the

'ro'erties whi"h are dee#ed to sti!! &e owned &% Di)ine

Cor'oration in s'ite o de!i)er% to the &(%er$

The "reditors "an "o!!e"t on the "redit a*ainst

Di)ine Cor'oration, and i it "annot 'a%, the "reditors "an

a''!% or atta"h#ent on the 'ro'ert% ra(d(!ent!%

so!d$ )'ee

0eople v. apoy, G.R. No. &88(6, 'epte-ber 21, 19&2+

In "ase Di)ine Cor'oration )io!ated the !aw,

what re#edies are a)ai!a&!e to To' Grade

ashion

Cor'oration a*ainst Di)ine Cor'oration>SUESTE8 ANSWER:

I the sa!e &% Di)ine Cor'oration did not o&tain the

re(ired two-thirds ?2M; )ote o the o(tstandin* "a'ita!

sto"k, then the transa"tion is )oid0 (/slamic Directorateof the ;hilippines v0 'ourt of 1ppeals, 200 3o, ##4694,

+a #, #994"

To' Grade ashion Cor'oration "an ha)e the '(r"hasede"!ared )oid and re"o)er the '(r"hase 'ri"e 'aid, aswe!! as da#a*es a*ainst the dire"tors andoi"ers who (ndertook the transa"tion in )io!ation othe !aw$ALTERNATI*E ANSWER:

or )io!ation o the B(!k a!es aw, the 'rin"i'a!oi"ers o the Di)ine Cor'oration "an &e he!d"ri#ina!!% !ia&!e$ In addition, To' Grade "an s(eDi)ine Cor'oration or da#a*es$ io!ation o the B(!ka!es aw wo(!d render s("h a sa!e ra(d(!ent and)oid$ in"e To' Grade wo(!d &e "o#'e!!ed to ret(rnthe *oods to Di)ine Cor'oration,



53/203


To' Grade "an "o#'e! Di)ine Cor'oration to ret(rn

the '(r"hase 'ri"e and 'a% da#a*es$

Cor$oration ,%?la;s (200)

(''ose that the &%-!aws o J Cor', a #inin*ir# 'ro)ides that .h%> ?;@

& .hat ha''ens i dire"tor A is a&!e to

"ons(##ate his #inin* "!ai#s o)er and a&o)e

that o the

"or'orations "!ai#s> ?2@SUESTE8 ANSWER:

a No$ It is in )io!ation o e"tion ;2 o the Cor' Code$

& A sho(!d a""o(nt to the "or'oration or the

'roits whi"h he rea!ied ro# the transa"tion$ 9e

*ra&&ed the &(siness o''ort(nit% ro# the "or'oration$

?e"tion ;, Cor' Code

Cor$oration Commencement Cor$orate E9istence

(2003)6$ .hen does a "or'oration a"(ire "or'orate

e+isten"e>SUESTE8 ANSWER:

2$ CBY Co$, In"$, re*istered with the e"(rities and

E+"han*e Co##ission its arti"!es o in"or'oration$

It ai!ed, howe)er, or one reason or another, to

ha)e its &%-!aws i!ed with, and re*istered &%,

the Co##ission$ It ne)erthe!ess transa"ted and

did &(siness as a "or'oration or so#eti#e$ A s(it

was "o##en"ed &% its #inorit% sto"kho!ders

assai!in* the "ontin(ed e+isten"e o CBY Co$,

In"$, &e"a(se o the non-ado'tion and re*istration o

its &%-!aws$

.o(!d the a"tion 'ros'er> .h%>

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