UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW

Bar Operations 2008

COMMERCIAL LAW

Bar Operations Head Academics Head Subject Head

Arianne Reyes Henry Aguda Henry AgudaTere Licaros Ryan Balisacan

Subject Committee Information Management Committee

Lynn Ramos * Johaira Wahab Ruby Alberto * Dianne Capco Chino Baybay [Head * !imoun !alinas [Deputy * Rania Joya [Design " Lay#out * Ludee $ulido [Documentations * Linus %adamba * Des %ayoralgo * Jillian De Dumo * %i&e 'campo * Abel %aglan(ue * )dan %arri R* Ca+ete * Carmie Rome Cargo

TABLE OF CO TE TS

C!IMI AL LA" I

Commercia# La$TABLE OF CO TE TSI% II% III% I+% +% +I% +II% Corporation La$ egotiab#e Instruments La$ Insurance Code Transportation La$ ),& Code of Commerce )** Ban-ing La$ ).* Inte##ectua# /ropert0 La$ &). & '' ()*

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COMME!CIAL LA"

CORPORATION LAWa.THE CORPORATION CODE OF THE PHILIPPINES (BATAS PAMBANSA BLG. 68)

)as the powers, attributes and properties expressly authorized by law or incident to its existence as it is a $ere creature of the law, it can exercise only such powers as the law $ay choose to grant it, either expressly or i$pliedly

.-..A).a#ta%e$ !( the C!rp!rate Or%a#"/at"!#$ !) 'eparate "uridical personality + personality separate and distinct fro$ individual stoc%holders and $e$bers 2) ,i$ited liability to investors + stoc%holders are liable only to the extent of their contribution -eneral rule .here a corporation buys all the shares of another corporation, this will not operate to dissolve the other corporation and as the two corporations still $aintain their separate corporate entities, one will not answer for the debts of the other. /0ell v 1acific 2ar$s (!3 'C4A 5!3), 0ov. 2*, !6738 9xceptions o :f there is an express assu$ption of liabilities; o &here is a consolidation or $erger; o :f the purchase was in fraud of creditors; o :f the purchaser beco$es a continuation of the seller; o :f there are unpaid subscriptions (stoc%holder is liable for the unpaid balance). *) 2ree transferability of units of ownership + stoc%holders hold their shares as personal property with rights to dispose, assign or encu$ber the$ as they $ay desire (!"#) 5) Centralized $eeting of the petitioners, and for da$ages. :n contrast, the respondent alleged in his letterG petition in the 19D case that the petitioners were engaged in fraudulent sche$es, devices or $isrepresentations in violation of the law, and '9C rules and regulations. &he co$plainant )) 'toc% corporations are not re@uired to have any $ini$u$ authorized capital stoc% except when special laws provide otherwise (!2)

:0CF41F4A&F4' A0D D:49C&F4'; 0Cception: /ducational nonstock corporations E trustees may not e>ceed %( plicit) implicit) or based on e>igencies of the business (cf 9oard of =iquidators v Kalaw) The 9:4 may delegate its corporate powers to either an e>ecutive committee or officials or contracted managers The delegation) e>cept for the e>ecutive committee) must be for specific purposes The delegation makes the officers agents of the corporation For such officers to be deemed fully clothed by the corporation to e>ercise a power of the 9:4) the latter must specially authori?e them to do so (A9'-09- 9roadcasting 0orp v 0A) %&&&) &he directors or trustees shall not act individually nor separately but as a body in a lawful $eeting. Contracts entered into without a for$al board resolution does not bind the corporation except when $a"ority of the board has %nowledge of the contract and the contract benefited the corporation. (ratification) Directors owe their duties to corporation as a whole rather than to individual shareholders of classes of shareholders 9usiness Mudgment *ule - 'ec $# embodies the essence of the Abusiness 2udgment rule)D that unless otherwise provided in the 0ode) all corp powers and prerogatives are vested directly in the 9:4 0onsequently) the rule has two consequences: The resolution) contracts and transactions of the 9:4) cannot be overturned or set aside by the 'ercise of their business 2udgment />ceptions: o Ihen the 0orp 0ode e>pressly provides otherwise; o Ihen the directors or officers acted with fraud) gross negligence or in bad faith; and , $

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COMME!CIAL LA"corporation $ultiplied by the whole nu$ber of directors to be elected o -ives the $inority an opportunity to elect a representative to the AFD. Cannot itself give the $inority control of corporate affairs but $ay affect and li$it the extent of $a"ority(s control o Theoretically) this allows the minority block to dominate the election of 9:4 ies; information for litigation -ot good and honest purposes: obtain corporate secrets (e g ) formula); nuisance suit; to embarrass the company &9'& to deter$ine whether the purpose as proved by the corporation or as ad$itted by the stoc%holder is a legiti$ate one or notS + A legiti$ate purpose is one which is ger$ane to the interests of the stoc%holder as such and not contrary to the interests of the corporation (-o%ongwei v. '9C, !6>6).

1. Re2e)"e$ a.a"&a,&e "( "#$pe't"!# re(+$e) ception: (!"")

COMME!CIAL LA"if required by the by-laws

:nvest$ent of corporate funds another corporation or business Dissolution of the corporation

C,A''9' F2 ')A49' A. 0oGpar Co$$on 1ar 'ingle par value

*)3rocedure for re-issuance in case of loss) stolen or destroyed certificates: !. &he registered owner of certificates of stoc% or his legal representative shall file with the - . . / $age 45 o0 355

)olders of subscribed shares not fully paid which are not delin@uent shall have A,, the rights of a stoc%holder. (>2)

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COMME!CIAL LA"there $ust be unissued shares of the corporation. 6f there are none) there must be an increase in capital stock first) which requires an amendment of the A:6 $ there $ust be unrestricted retained earnings $ cannot be issued to nonG stoc%holders even for services rendered (0ielson v. ,epanto Consolidated isting assets This is sub2ect to fluctuation and is not yet reali?ed

-. De'&arat"!# !( D".")e#)$-. H!: D".")e#)$ are )e'&are)

Chapter CIII DI3IDENDS AND PURCHASE OF CORPORATION OF ITS OWN SHARES . F!r2 !( D".")e#)$ (;0-). CASH + $ost co$$on for$. .* STOCM + a distribution to the stoc%holders of the co$pany(s own stoc%. &he corporate profits are transferred to capital stoc% and shares of stoc% representing the increase in capitalization are distributed. These do not represent income on the part of the '< 6nvestment and proportional interest in the corp remain the same L"#'! Ph"&. L"(e . CA ( 558) 'toc% dividends are in the nature of shares of stoc%, the consideration for which is the a$ount of unrestricted retained earnings converted into e@uity in the corporation(s boo%s. JA stoc% dividend of a corporation is a dividend paid in shares of stoc% instead of cash, and is properly only out of surplus profits. 'o, a stoc% dividend is actually two things (!) a dividend and (2) the enforced use of the dividend $oney to purchase additional shares of stoc% at par.K

Approval U voting re@uire$ent a) Approval of AFD b) :n case of stoc% dividend $ust be approved by ')s representing not less than twoGthirds (2#*) of the outstanding capital stoc% at a regular or special $eeting duly called for the purpose. -.* D".")e#) De'&arat"!# D"$'ret"!#ar? :"th the B!ar) -en. 4ule .F0 there should be a distribution of dividends to the ')s in any given year U the for$ of such dividends are $atters addressed to the business "udg$ent of the AFD 9xceptions !. .hen the decision is tainted w# bad faith, fraud or gross negligence 2. :f the court finds, upon co$plaint of a '), that a surplus was unreasonably accu$ulated (profits accu$ulated in excess of !BBM of the corp(s paidGin capital stoc%), it $ay order the corp. to distribute dividends />ceptions to the e>ception (5*): a. when "ustified by definite corporate expansion pro"ects or progra$s approved by the board of directors; or b. when the corporation is prohibited under any loan agree$ent with any financial institution or creditor, whether local or foreign, fro$ declaring dividends without its#his consent, and such consent has not yet been secured; or

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COMME!CIAL LA"a) &o eli$inate fractional shares arising out of stoc% dividends; b) &o collect or co$pro$ise an indebtedness to the corporation, arising out of unpaid subscription, in a delin@uency sale, and to purchase delin@uent shares sold during said sale; and c) &o pay dissenting or withdrawing stoc%holders entitled to pay$ent for their shares under the provisions of this Code (appraisal right, Cf ?!). 6mproper purpose includes: raising of price of stock by making it appear that it is being actively traded (prohibited under 'ec $8 of the 'ecurities *egulations 0ode) and preferring some ') &he '9C $ay disapprove any a$end$ent thereto if the sa$e is not in co$pliance with the re@uire$ents of this Code &he '9C shall give the incorporators a reasonable ti$e within which to correct or $odify the ob"ectionable portions of the articles or a$end$ent. &he following are grounds for such disapproval a) A$end$ent is not substantially with the for$ prescribed b) 1urpose or purposes is#are patently unconstitutional, illegal, i$$oral, contrary to govern$ent rules and regulations c) &reasurer(s Affidavit concerning the a$ount of capital stoc% subscribed and#or paid is false d) 1ercentage re@uire$ent of ownership by 2ilipino citizens as re@uired by the Constitution not co$plied with

Approval of '/0 Any increase or decrease in the capital shall re@uire prior approval of the 'ecurities and 9xchange Co$$ission. Decrease of capital stoc% 0o decrease of the capital stoc% shall be approved by the Co$$ission if its effect shall pre"udice the rights of corporate creditors /ffectivity 2ro$ and after approval by the 'ecurities and 9xchange Co$$ission and the issuance by the Co$$ission of its certificate of filing, the capital stoc% shall stand increased or decreased Treasurer1s Affidavit: &he 'ecurities and 9xchange Co$$ission shall not accept for filing any certificate of increase of capital stoc% unless acco$panied by the sworn state$ent of the treasurer of the corporation lawfully holding office at the ti$e of the filing of the certificate, showing that at least twentyGfive (23M) percent of such increased capital stoc% (should be understood as proposed increaseGCa$pos) has been subscribed and that at least twentyGfive (23M) percent of the a$ount subscribed has been paid either in actual cash to the corporation or that there has been transferred to the corporation property the valuation of which is e@ual to twentyGfive (23M) percent of the subscription Appraisal right (?!Y!) Appraisal right $ay be exercised where the increase in capital stoc% results in the creation of shares with preferences superior to those of existing ones.

*. Spe'"a& A2e#)2e#t$*. I#'rea$e !r )e'rea$e !( 'ap"ta& $t!'4 (;-8) Approval and Hoting *equirement a) Approved by a $a"ority vote of the board of directors b) &woGthirds (2#*) of the outstanding capital stoc% shall favor the increase or di$inution of the capital stoc% at a $eeting duly called for the purpose 0ertificate of Filing A certificate in duplicate $ust be signed by a $a"ority of the directors of the corporation and countersigned by the

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COMME!CIAL LA"indorsed by the owner or his attorneyGinGfact or other person legally authorized to $a%e the transfer R+ra& Ba#4 !( Sa&"#a$ . CA Cle$ente, 1resident of 4ural Aan% of 'alinas and owner of shares in said corporation executed a 'pecial 1ower of Attorney to his wife ) H9' for both shortening and extension (?!)

Chapter C3 TRANSFER OF SHARES 1. Ma##er !( Tra#$(er

a#)

E((e't"."t?

.* I#)!r$e2e#t a#) )e&".er? 'hares of stoc% $ay be transferred as follows (7*) a) delivery of the certificate or certificates and

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COMME!CIAL LA"S+#$et 3"e: C!#)!2"#"+2 C!rp . Ca2p!$ 'unset Eiew Condo$iniu$ corporation filed suit against AguilarGAernares 4ealty and ,i$ 'iu ,eng for collection of assess$ents levied on their respective condo$iniu$ units which they bought on install$ents and had not yet fully paid )9,D 4espondents not shareholders of condo$iniu$ corporation because they are not yet fully paid a) 'ec 3 Condo$iniu$ Act + shareholding in a condo$iniu$ corporation will be conveyed only in a proper case b) 'ec 5 of Condo$iniu$ Act leaves to )8

5. Mer%er !r '!#$!&")at"!# "#.!&."#% a (!re"%# '!rp!rat"!# &"'e#$e) "# the Ph"&"pp"#e$ (; -*) Fne or $ore foreign corporations authorized to transact business in the 1hilippines $ay $erge or consolidate with any do$estic corporation or corporations if o 'uch is per$itted under 1hilippine laws and by the law of its incorporation o &he re@uire$ents on $erger or consolidation as provided in this Code are followed .henever a foreign corporation authorized to transact business in the 1hilippines shall be a party to a $erger or consolidation in its ho$e country or state as per$itted by the law of its incorporation, such foreign corporation shall, within sixty (7B) days after such $erger or consolidation beco$es effective, file with the '9C, and in govern$ent agency, a copy of the articles of $erger or consolidation duly authenticated by the proper official or officials of the country or state under the laws of which $erger or consolidation was effected 1rovided, however, that if the absorbed corporation is the foreign corporation doing business in the 1hilippines, the latter shall at the sa$e ti$e file a petition for withdrawal of its license.

6. App&"'at"!# t! eA"$t"#% (!re"%# '!rp!rat"!#$ (; 08) 9very foreign corporation which on the date of the effectivity of the Code is authorized to do business in the 1hilippines under a license issued to it, shall continue to have such authority under the ter$s and condition of its license, sub"ect to the provisions of this Code and other special laws.

6. Re.!'at"!# !( &"'e#$e (; -0) .ithout pre"udice to other grounds provided by special laws, the license of a foreign corporation to transact business in the 1hilippines $ay be revo%ed or suspended by the '9C upon any of the following grounds o 2ailure to file its annual report or pay any fees as re@uired by this Code; o 2ailure to appoint and $aintain a resident agent in the 1hilippines as re@uired by this &itle; o 2ailure, after change of its resident agent or of his address, to sub$it to the 'ecurities and 9xchange Co$$ission a state$ent of such change as re@uired by this &itle; o 2ailure to sub$it to the 'ecurities and 9xchange Co$$ission an authenticated copy of any a$end$ent to its articles of incorporation or byG laws or of any articles of $erger or consolidation within the ti$e prescribed by this &itle; o A $isrepresentation of any $aterial $atter in any application, report, affidavit or other docu$ent sub$itted by such corporation pursuant to this &itle; o 2ailure to pay any and all taxes, i$posts, assess$ents or penalties, if any, lawfully due to the 1hilippine -overn$ent or any of its agencies or political subdivisions;

7. A2e#)2e#t$ t! art"'&e$ !( "#'!rp!rat"!# !r ,?=&a:$ !( (!re"%# '!rp!rat"!#$ (; -6) .ithin sixty (7B) days after the a$end$ent beco$es effective, file with the '9C, and in the proper cases with the appropriate govern$ent agency, a duly authenticated copy of the articles of incorporation or byGlaws, as a$ended, indicating clearly in capital letters or by underscoring the change or changes $ade, duly certified by the authorized official or officials of the country or state of incorporation. &he filing thereof shall not of itself enlarge or alter the purpose or purposes for which such corporation is authorized to transact business in the 1hilippines.

8. A2e#)e) &"'e#$e (; - ) A foreign corporation authorized to transact business in the 1hilippines shall obtain an a$ended license in the event it o Changes its corporate na$e, or o Desires to pursue in the 1hilippines other or additional purposes Ay sub$itting an application therefor to the '9C, favorably endorsed by the

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COMME!CIAL LA"principle will be applied to prevent a person contracting with a foreign corporation fro$ later ta%ing advantage of its nonco$pliance with the statutes chiefly in cases where such person has received the benefits of the contract. MR H!&)"#%$9 Lt) .$. BaGar9( *66*) &he @uestion whether or not a foreign corporation is doing business is dependent principally upon the facts and circu$stances of each particular case, considered in the light of the purposes and language of the pertinent statute or statutes involved and of the general principles governing the "urisdictional authority of the state over such corporations CAA, the CA categorized as Jdoing businessK petitioner(s participation under the JAssign$ent Agree$entK and the JDeed of Assign$ent.K &his is si$ply untenable. &he expression Jdoing businessK should not be given such a strict and literal construction as to $a%e it apply to any corporate dealing. At this early stage and with petitioner(s acts or transactions li$ited to the assign$ent contracts, it cannot be said that it had perfor$ed acts intended to continue the business for which it was organized. :t $ay not be a$iss to point out that the purpose or business for which petitioner was organized is not discernible in the records. 0o effort was exerted by the CA to establish the nexus between petitioner(s business and the acts supposed to constitute Jdoing business.K &hus, whether the assign$ent contracts were incidental to petitioner(s business or were continuation thereof is beyond deter$ination.

o

o

&ransacting business in the 1hilippines outside of the purpose or purposes for which such corporation is authorized under its license; &ransacting business in the 1hilippines as agent of or acting for and in behalf of any foreign corporation or entity not duly licensed to do business in the 1hilippines; or Any other ground as would render it unfit to transact business in the 1hilippines. (n)

. I$$+a#'e !( 'ert"("'ate !( re.!'at"!# (; -1) Cpon the revocation of any such license to transact business in the 1hilippines, the 'ecurities and 9xchange Co$$ission shall issue a corresponding certificate of revocation, furnishing a copy thereof to the appropriate govern$ent agency in the proper cases. &he 'ecurities and 9xchange Co$$ission shall also $ail to the corporation at its registered office in the 1hilippines a notice of such revocation acco$panied by a copy of the certificate of revocation.

*. W"th)ra:a& ,? a (!re"%# '!rp!rat"!# (Se't"!# -6) :f a foreign corporation duly licensed to do business desires to withdraw, it $ust file a petition for withdrawal, and $ust $eet the following re@uire$ents o All clai$s accrued in the 1hilippines $ust be settled o All taxes $ust be paid o 1etition $ust be published once a wee% for three (*) consecutive wee%s. (!*7)

Chapter CIC SPECIAL CORPORATIONS . C&!$e C!rp!rat"!#$

Doing business in the 1hilippines without a license C!22+#"'at"!#$ Mater"a&$ .$. CA9 ( 556) :n deter$ining whether a corporation does business in the 1hilippines or not, aside fro$ their activities within the foru$, reference $ay be $ade to the contractual agree$ents entered into by it with other entities in the country. A scrutiny of the different contracts and agree$ents entered into with various business contacts in the country indicate convincingly a purpose to convey to custo$ers and the general public that they are dealing directly with the foreign corporation, and that foreign corporation is actively engaging in business in the country. &hese agree$ents also contain provisions which are highly restrictive in nature, reducing the local signatory to be a $ere extension or instru$ent of the foreign corporation. )ence, the foreign corporation is dee$ed to be doing business in the 1hilippines without a license. 0onetheless, petitioner is estopped fro$ raising this fact to bar the foreign corporation fro$ suing. Fne who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to do$estic corporations. &he 100% UP L AW , $ B A R ' $ !

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What "$ a '&!$e '!rp!rat"!#K (;56) A close corporation is one whose articles of incorporation provide that o All the corporationRs issued stoc% of all classes, exclusive of treasury shares, shall be held of record by not $ore than a specified nu$ber of persons, not exceeding twenty (2B); o All the issued stoc% of all classes shall be sub"ect to one or $ore specified restrictions on transfer per$itted by this &itle; and o &he corporation shall not list in any stoc% exchange or $a%e any public offering of any of its stoc% of any class. A corporation shall not be dee$ed a close corporation when at least twoG thirds (2#*) of its voting stoc% or voting rights is owned or controlled by another

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COMME!CIAL LA":f the issuance or transfer of stoc% to any person would cause the stoc% to be held by $ore than such nu$ber of persons. :f a stoc% certificate of any close corporation conspicuously shows a restriction on transfer of stoc% of the corporation, the transferee of the stoc% is conclusively presu$ed to have notice of the fact that he has ac@uired stoc% in violation of the restriction, if such ac@uisition violates the restriction. .henever any person to who$ stoc% of a close corporation has been issued or transferred has, or is conclusively presu$ed under this section to have, notice either o &hat he is a person not eligible to be a holder of stoc% of the corporation, or o &hat transfer of stoc% to hi$ would cause the stoc% of the corporation to be held by $ore than the nu$ber of persons per$itted by its articles of incorporation to hold stoc% of the corporation, or o &hat the transfer of stoc% is in violation of a restriction on transfer of stoc%, the corporation $ay, at its option, refuse to register the transfer of stoc% in the na$e of the transferee. &he provisions of subsection (5) shall not be applicable if the transfer of stoc%, though contrary to subsections (!), (2) or (*), has been consented to by all the stoc%holders of the close corporation, or if the close corporation has a$ended its articles of incorporation in accordance with this &itle. &he ter$ QtransferQ, as used in this section, is not li$ited to a transfer for value. &he provisions of this section shall not i$pair any right which the transferee $ay have to rescind the transfer or to recover under any applicable warranty, express or i$plied.

corporation which corporation.

.* What e#t"t"e$ 2a? #!t ,e !r%a#"/e) a$ '&!$e) '!rp!rat"!#$K Any corporation $ay be incorporated as a close corporation, except o ) e. Diversion of funds of corporation fro$ pri$ary purpose to secondary purpose (5!) &he corporation $ay buyGbac% shares of stoc%holders sub"ect to the following li$itations (&reasury shares) a. &here $ust be unrestricted retained earnings b. ) *.* B!ar) !( Tr+$tee$ (; 68) a. 0onGstoc% !. Co$position=not less than 3 nor $ore than !3 trustees, but always in $ultiples of five. Cnless otherwise provided in the articles of incorporation or the byGlaws, the board or trustees of incorporated schools, colleges, or other institutions of learning shall a. 'o classify the$selves that the ter$ of office of oneGfifth (!#3) of their nu$bers shall expire every year. b. &rustees thereafter elected to fill vacancies, occurring before the expiration of a particular ter$ shall hold office only for the unexpired period c. &rustees elected thereafter to fill vacancies caused by expiration of ter$ shall hold office for five (3) years 2. Ouoru$=.5.

Part"e$ '!.ere) < :nsider insider(s spouse or relatives by affinity or consanguinity within the second degree, legiti$ate or co$$onGlaw, :t shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of $aterial infor$ation with respect to the issuer or the security that is not generally available to the public, unless ('ec. 2>) (a) &he insider proves that the infor$ation was not gained fro$ such relationship; or (b) :f the other party selling to or buying fro$ the insider (or his agent) is identified, the insider proves that he disclosed the infor$ation to the other party, or that he had reason to believe that the other party otherwise is also in possession of the infor$ation. Pre$+2pt"!# A purchase or sale of a security of the issuer shall be presu$ed to have been effected while in possession of $aterial nonGpublic infor$ation if transacted after such infor$ation ca$e into existence but prior to disse$ination of such infor$ation to the public and the lapse of a reasonable ti$e for the $ar%et to absorb such infor$ation &his presu$ption shall be rebutted upon a showing by the purchaser or seller that he was not aware of the $aterial nonG public infor$ation at the ti$e of the purchase or sale. Mater"a& #!#=p+,&"' "#(!r2at"!#< (a) :t has not been generally disclosed to the public and would li%ely affect the $ar%et price of the security after being disse$inated to the public and the lapse of a reasonable ti$e for the $ar%et to absorb the infor$ation; or (b) would be considered by a reasonable person i$portant under the circu$stances in deter$ining his course of action whether to buy, sell or hold a security. C!22+#"'at"!# !( the I#(!r2at"!# :t shall be unlawful for any insider to co$$unicate $aterial nonGpublic infor$ation about the issuer or the security to any person who, by virtue of the co$$unication, beco$es an insider, where the insider co$$unicating the infor$ation %nows or has reason to believe that such person will li%ely buy or sell a security of the issuer while in possession of such infor$ation.

6. Re%+&at"!# !( Mar4et Pr!(e$$"!#a&$ a#) Other E#t"t"e$6. Re%"$trat"!# !( Br!4er$9 Dea&er$9 Sa&e$2e# a#) A$$!'"ate) Per$!#$ -eneral 4ule o 0o person shall engage in the business of buying or selling securities in the 1hilippines as a bro%er or dealer, or act as a sales$an, or an associated person of any bro%er or dealer unless registered as such with the Co$$ission. o 0o registered bro%er or dealer shall e$ploy any sales$an or any associated person, and no issuer shall e$ploy any sales$an, who is not registered as such with the Co$$ission. o N"'!&a$ .$ CA ( 558) &he futility of petitionerRs action beca$e $ore pronounced by the fact that he traded securities for the account of others without the necessary license fro$ the '9C. Clearly, such o$ission was in violation of 'ection !6 of the 4evised 'ecurities Act. &he purpose of the statute re@uiring the registration of bro%ers selling securities and the filing of data regarding securities which they propose to sell, is to protect the public and strengthen the securities $echanis$. - . . / $age 80 o0 355

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COMME!CIAL LA"proficiency and %nowledge in the area of activity for which registration (b) :n the case of a bro%er or dealer, the applicant satisfy a $ini$u$ net capital and provide a bond or other security as the Co$$ission $ay prescribe (c) :f located outside of the 1hilippines, the applicant files a written consent to service of process upon the Co$$ission pursuant to 'ec. 73 hereof. 6.- SEC A't"!# (Se'. *8.8) a. .ithin *B days after the filing of any application, the Co$$ission shall by order (a) -rant registration if it deter$ines that the re@uire$ents of this 'ection and the @ualifications for registration have been satisfied; or (b) Deny said registration. b. &he na$es and addresses of all persons approved for registration and all orders of the Co$$ission with respect thereto shall be recorded in a 4egister of 'ecurities .5 (a) (i), or any rule or regulation thereunder, by purchasing or selling a security while in possession of $aterial infor$ation not generally available to the public, shall be liable in a suit brought by any investor who, conte$poraneously with the purchase or sale of securities that is the sub"ect of the violation, purchased or sold securities of the sa$e class unless such insider, or such person in the case of a tender offer, proves that such investor %new the infor$ation or would have purchased or sold at the sa$e price regardless of disclosure of the infor$ation to hi$. An insider who co$$unicates $aterial nonGpublic infor$ation, shall be "ointly and severally liable with and to the sa$e extent as, the insider, or person in the case of a tender offer.

8. Da2a%e$ t! ,e A:ar)e) (Se'. 6-)8. A2!+#t$ F M"#)$ !( Da2a%e$ All suits to recover da$ages pursuant to 'ections 37 (false registration state$ent), 3> (false prospectus, co$$unications, reports), 3? (fraud in connection with securities transactions), 36 ($anipulation of prices), 7B (co$$odity futures contracts and preGneed plans) and 7! (insider trading) shall be brought before the 4&C, which shall have exclusive "urisdiction to hear and decide such suits. &he Court is hereby authorized to award da$ages in an a$ount not exceeding triple the a$ount of the transaction plus actual da$ages. 9xe$plary da$ages $ay also be awarded in cases of bad faith, fraud, $alevolence or wantonness in the violation of this Code, and rules and regulations pro$ulgated hereunder. &he Court is also authorized to award attorney(s fees not exceeding *BM of the award. 8.* Per$!#$ &"a,&e t! pa? &he persons specified in 'ections 37, 3>, 3?, 36, 7B and 7! hereof shall be "ointly and severally liable fo he pay$ent of da$ages. )owever, any person who beco$es liable for the pay$ent of such da$ages $ay recover contribution fro$ any other person who, if sued separately, would have been liable to $a%e the sa$e pay$ent, unless the for$er was guilty of fraudulent representation and the latter was not. All persons, including the issuer, held liable under the provisions of 'ections 37, 3>, 3?, 36, 7B and 7! shall contribute e@ually to the total liability ad"udged herein. :n no case shall the principal stoc%holders, directors and other officers, recover their contribution to the liability fro$ the issuer. )owever, the right of the issuer to recover fro$ the guilty parties the a$ount it has contributed shall not be pre"udiced.

7. L"2"tat"!# !( A't"!#$ (Se'. 6*)0o action shall be $aintained to enforce any liability created under 'ection 37 (false registration state$ent) or 3> (false prospectus. Co$$unications, reports) unless brought within 2 years after the )"$'!.er? of the untrue state$ent or the o$ission. :f the action is to enforce a liability created under 'ubsection 3>.!(a) (registration of securities), unless brought within 2 years after the ."!&at"!# upon which it is based. :n no event shall any such action be brought to enforce a liability created under 'ection 37 or 'ubsection 3>.! (a) $ore than 3 years after the security was bona fide !((ere) t! the p+,&"', or under 'ubsection 3>.! (b) (sale based on false prospectus,

5. N!#=:a".er !( Pr!."$"!#$- . . / $age 88 o0 355

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CO!/O!ATIO

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COMME!CIAL LA"

Any condition, stipulation, provision binding any person to waive co$pliance with any provision of this Code or of any rule of an 9xchange as well as the waiver itself, shal be void.

*6. Pe#a&t"e$Any person who violates any of the provisions of this Code or any person who, in a registration state$ent $a%es any untrue state$ent of a $aterial fact or o$its to state any $aterial fact re@uired to be stated therein or necessary to $a%e the state$ents therein not $isleading, shall, upon conviction, suffer a fine of not less than 13B,BBB.BB nor $ore than 13,BBB,BBB.BB or i$prison$ent of not less than > years nor $ore than 2! years, or both in the discretion of the court.

:f the offender is a corporation, partnership or association or other "uridical entity, the penalty $ay be i$posed upon such "uridical entity and upon the officer or officers of the corporation, partnership, association or entity responsible for the violation. :f such officer is an alien, he shall in addition to the penalties prescribed, be deported.

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$age 89 o0 355

E1OTIABLE I ST!2ME TS LA"

COMME!CIAL LA"haphazardly or lightly. 0or should it be brushed aside in order to $eet the necessities in a single case -. L"(e !( a Ne%!t"a,&e I#$tr+2e#t

egotiab#e Instruments La$ 3Act o% ),&(4

C5apter I% I T!O62CTIO. The Ne%!t"a,&e I#$tr+2e#t .ritten contract for the pay$ent of $oney, by its for$ intended as substitute for $oney and intended to pass fro$ hand to hand to give the )DC the right to hold the sa$e and collect the su$ due. :nstru$ents are negotiable when they confor$ to all the re@uire$ents prescribed by the 0:, (Act $5#%) 5# February %&%%). Although considered as $ediu$ for pay$ent of obligations, negotiable instru$ents are not legal tender ('ec "5) -ew 0entral 9ank Act) * A ,"(#); 0egotiable instru$ents shall produce the effect of pay$ent only when they have been encashed or when through the fault of the creditor they have been i$paired. (Art %$8&) 00) AC& a C)9CP which has been cleared and credited to the account of the creditor shall be e@uivalent to a delivery to the creditor of cash. Ne%!t"a,&e Contains all the re@uisites of 'ec. ! of the 0:, &ransferred by negotiation )DC $ay have better rights than transferor 1rior parties warrant pay$ent &ransferee has right of recourse against inter$ediate parties N!#=#e%!t"a,&e Does not contain all the re@uisites of 'ec. ! of the 0:, &ransferred by assign$ent &ransferee ac@uires rights only of his transferor 1rior parties $erely warrant legality of title &ransferee has no right of recourse

!. 2. *. 5. 3. 7. >. ?. 6. !B.

issue negotiation present$ent for acceptance in certain bills acceptance dishonor by or acceptance present$ent for pay$ent dishonor by nonpay$ent notice of dishonor protest in certain cases discharge

0. M"#)$ !( Ne%!t"a,&e I#$tr+2e#t$ 0. . Pr!2"$$!r? #!te G a promise to pay $oney unconditional pro$ise in writing $ade by one person to another signed by the $a%er engaging to pay on de$and, or at a fixed or deter$inable future ti$e a su$ certain in $oney to order or to bearer where a note is drawn to the $a%er(s own order, not co$plete until indorsed by hi$ ('ec %+8) -6=). 0.*. B"&& !( eA'ha#%e G an order $ade by one person to another to pay $oney to a third person. unconditional order in writing addressed by one person to another signed by the person giving it re@uiring the person to who$ it is addressed to pay on de$and or at a fixed or deter$inable future ti$e a su$ certain in $oney to order or to bearer ('ec %$") -6=). Che'4 bill of exchange drawn on a bank payable on de$and. Pr!2"$$!r? N!te Cnconditional pro$ise :nvolves 2 parties + NI() i. :n actions based upon a negotiable instru$ent, it is unnecessary to aver or prove consideration, for consideration is i$ported and presu$ed fro$ the fact that it is a negotiable instru$ent. &he presu$ption exists whether the words Qvalue receivedQ appear on the instru$ent or not (Fng v 1eople, 2BBB) BABANI 3S. PEOPLE (*660)

3.

9+ NI() Aill $ay be treated as dishonored by nonG acceptance a. .here the drawee is (!) dead, (2) absconded, (*) fictitious, (5) does not have capacity to contract by bill. b. .here, after the exercise of reasonable diligence, present$ent can not be $ade. c. .here, although present$ent has been irregular, acceptance has been refused on so$e other ground. i ii

b.

*.

c.

0.-. Pre$e#t2e#t (!r Pa?2e#t . IN GENERAL

5.

a. NECESSARB in order to charge the drawer and indorsers()ec8 7*+ NI() ,. NOT #e'e$$ar? i. to charge the person pri$arily liable on the instru$ent ()ec8 7*+ NI() ii. to charge the )ra:er where he has no right to expect or re@uire that the drawee or acceptor will pay the instru$ent. ()ec8 70+ NI() iii. to charge an "#)!r$er where the instru$ent was $ade or accepted for his acco$$odation and he has no reason to expect that the instru$ent will be paid if presented. ()ec8 9*+ NI() iv. 9xcused .here, after the exercise of reasonable diligence, present$ent cannot be $ade; 2) .here the drawee is a fictitious person; 3) Ay waiver of present$ent, express or i$plied. v. when a bill is dishonored by nonacceptance + i$$ediate right to recourse accrues to holder ('ec. !3!, 0:,) 1) vi. in case of waiver of protest, whether in the case of a foreign bill of exchange or other 0: + dee$ed to be a waiver not only of a for$al protest but also of present$ent and notice of dishonor. ()ec8 ///+ NI()

3.

6. D"$h!#!r a#) E((e't$ 100% UP L AW , $ B A R ' $ ! - . . / $age 115 o0 355

E1OTIABLE I ST!2ME TS LA"

COMME!CIAL LA"PAPA . A.U. 3ALENCIA ( 558)

*. Date a#) t"2e !( pre$e#t2e#t a. ,ear"#% ("Ae) 2at+r"t? F #!t pa?a,&e !# )e2a#) + on the day it falls due if day of $aturity falls on 'unday or a holiday, the instru$ents falling due or beco$ing payable on 'aturday are to be presented for pay$ent on the next succeeding business day ('ec +() -6=) ,. pa?a,&e !# )e2a#) + within a reasonable ti$e after its issue, at the option of the holder, $ay be presented for pay$ent before twelve oRcloc% noon on 'aturday when that entire day is not a holiday ('ec +() -6=) '. )e2a#) ,"&& !( eA'ha#%e + within a reasonable ti$e after the last negotiation. ('ec ,%) -6=) (-:T/: though reasonable time from last negotiation) it may be unreasonable time from issuance thus holder may not be + NI()

1.8. Whe# r+&e re@+"r"#% #!t"'e #!t app&"e) !. :n general a. 'ec !!2 notice of dishonor is dispensed with when after the exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be charged b. 4easonable diligence depends upon the circu$stance of the case 2. .hen notice of nonGacceptance is already given a. 'ec !!7 .here due notice of dishonor by nonGacceptance has been given, notice of a subse@uent debtor by nonGpay$ent is not necessary, unless in the $eanti$e the instru$ent has been accepted b. 4atio for the rule dishonor by nonG acceptance confers upon the holder an i$$ediate right against all secondary parties -. Wa".er a. .aiver of notice $ay be $ade either

1.6. T! :h!2 #!t"'e MAB ,e %".e#!.

2.

*.

5.

3.

7.

:f given by an agent a. to his principal, in case of an instru$ent dishonored in the hands of an agent ('ec. 65, 0:,), or b. to the parties liable thereon c. ex collecting ban% :0 -9094A, ('ec &,) a. 1arty hi$self b. Fr his agent in that behalf :f party is dead and death %nown to the party giving notice ()ec8 09+ NI() a. ? (1D !57B) &he 4evised -overn$ent 'ervice :nsurance Act of !6>> (1D !!57, as a$ended), with respect to insurance of govern$ent e$ployees &he 'ocial 'ecurity Act of !635 (4A !!7!, as a$ended) with respect to insurance of e$ployees in private e$ploy$ent Fthers + insofar as the Civil Code is concerned, the Code of Co$$erce is considered a special law 4A 737 (as a$ended by 1D 253), %nown as the J1roperty :nsurance ,aw,K dealing with govern$ent property 4A 5?6? (as a$ended by 4A 3>37) providing life, disability and accident insurance coverage to barangay officials 9F 23B (Iuly 23, !6?>) increases, integrates and rationalizes the insurance benefits of barangay official sunder 4A 5?6? and $e$bers of 'angguniang 1anlalawigan, 'angguniang 1anlungsod, and 'angguniang Aayan under 1D !!5>. &he insurance benefits are extended by the -':'. 4A *36! (as a$ended) establishes the 1hilippine Deposit :nsurance Corporation which insures the deposits of all ban%s which are entitled to the benefits of insurance under this Act

COMME!CIAL LA"

. De("#"t"!#$ . . Se't"!# *9 I#$+ra#'e C!)e'ec. 2. .henever used in this Code, the following ter$s shall have the respective $eanings hereinafter set forth or indicated, unless the context otherwise re@uires (!) A Qcontract of insuranceQ is an agree$ent whereby one underta%es for a consideration to inde$nify another against loss, da$age or liability arising fro$ an un%nown or contingent event. A contract of suretyship shall be dee$ed to be an insurance contract, within the $eaning of this Code, only if $ade by a surety who or which, as such, is doing an insurance business as hereinafter provided. (2) &he ter$ Qdoing an insurance businessQ or Qtransacting an insurance businessQ, within the $eaning of this Code, shall include (a) $a%ing or proposing to $a%e, as insurer, any insurance contract; (b) $a%ing or proposing to $a%e, as surety, any contract of suretyship as a vocation and not as $erely incidental to any other legiti$ate business or activity of the surety; (c) doing any %ind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the $eaning of this Code; (d) doing or proposing to do any business in substance e@uivalent to any of the foregoing in a $anner designed to evade the provisions of this Code. :n the application of the provisions of this Code the fact that no profit is derived fro$ the $a%ing of insurance contracts, agree$ents or transactions or that no separate or direct consideration is received therefore, shall not be dee$ed conclusive to show that the $a%ing thereof does not constitute the doing or transacting of an insurance business. (*) As used in this code, the ter$ QCo$$issionerQ $eans the Q:nsurance Co$$issionerQ.

.*. HC!#tra't !( I#$+ra#'eI An agree$ent by which one party (insurer) for a consideration (pre$iu$) paid by the other party (insured), pro$ises to pay $oney or its e@uivalent or to do so$e act valuable to the latter (or his no$inee), upon the happening of a loss, da$age, liability, or disability arising fro$ an un%nown or contingent event.

Wh"te G!&) Mar"#e Ser."'e$ .$. P"!#eer (*661) An insurance contract is a contract is a contract of inde$nity wherein one underta%es for a consideration to inde$nify another against loss, da$age, or liability arising fro$ an un%nown or contingent event. 4egulation by the state through a license or certification of authority is necessary since a contract of insurance involves public interest.

C5apter II THE CO T!ACT OF I S2!A CE100% UP L AW , $ B A R ' $ !

.-. HD!"#% a# I#$+ra#'e B+$"#e$$I@eneral *ule: An insurance business consists of underta%ing, for a consideration, to inde$nify - . . / $age 128 o0 355

I S2!A CE CO6Eanother against loss, da$age or liability arising fro$ an un%nown or contingent event 'upplementary *ule: &he fact that an establish$ent is not for$ally designated as one of insurance does not preclude its being dee$ed to be engaged in an insurance business if it underta%es any of the following (even if not for profit or for any independent consideration) 23P, but the latter refused to pay as the loss is excluded fro$ the coverage of the insurance policy which reads J &he co$pany shall not be liable under this policy in respect of . . . any loss caused by any dishonest, fraudulent or cri$inal act of the insured or any officer, e$ployee, partner, director, trustee or authorized representative of the insured whether acting alone or in con"unction with othersVK He&)< &he insurance co$pany is not liable. :t is clear that insofar as 2ortune is concerned, it was its intention to exclude and exe$pt fro$ protection and coverage losses arising fro$ dishonest, fraudulent, or cri$inal acts of persons granted or having unrestricted access to the ban%(s $oney or payroll. .hen it used the ter$ Je$ployee,K it $ust have in $ind any person who @ualifies as such as generally and e@uivocally understood, or "urisprudentially established in light of the deter$ination of the 94G99 relationship. :t is settled that the ter$s of the policy constitute the $easure of the insurer(s liability. :n the absence of statutory prohibition to the contrary, insurance co$panies have the sa$e rights as individuals to li$it their liability and to i$pose whatever conditions they dee$ best upon their obligations not inconsistent with public policy

COMME!CIAL LA"stand. Also, except for the fact that the victi$s were not fareGpaying passengers, their status as beneficiaries under the policy is recognized. 9ven assu$ing there was an a$biguity, a$biguities or obscurities $ust be strictly interpreted against the party that caused the$. &his rigid application of the rule of a$biguities has beco$e necessary in view of current business practices. Ma&a?a# I#$. .$. CA Fa't$< &PC ! $etric tons of soya bean $eal which was loaded on board the ship U>?; 75 Se'. 7712 An :nsurer is entitled to pay$ent of the pre$iu$ as soon as the thing insured is exposed to the peril insured against. 0otwithstanding any agree$ent to the contrary, no policy or contract of insurance issued by an insurance co$pany is valid and binding unless and until the pre$iu$ thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. Pre2"+2 + the agreed price for assu$ing and carrying the ris%, that is, the consideration paid an insurer for underta%ing to inde$nify the insured against the specified peril. G if only one pre$iu$ is paid for several things not separately valued or separately insured, the contract is indivisible or entire, not divisible or severable, as to ite$s insured. ':4 .F4'& '9C&:F0 of the :nsurance Code. &his is the 'a$h=a#)='arr? provision (see below for explanation why) .hy it raises several @uestions (Ca$pos) GG:s it intended to apply to all classes of insurance, or does the word JthingK li$it it to property insuranceS As to exception, it only applies to life policies w#in the grace period w#c does not support the theory that it applies only to property insurance. G As to grace period, grace period in life insurance applies only to pre$iu$s subse@uent to the first, therefore, how can this be an exception to the ruleS G .ith respect to nonGlife policies, the first sentence gives the insurer the right to de$and the pay$ent of the pre$iu$ as soon as the Jthing insured is exposed to peril insured againstK &his assu$es the contract is binding even before the pay$ent of the pre$iu$ $eaning the contract is perfected when the applicant(s offer is accepted by the insurer. &his assu$ption is inconsistent w# the next sentence w#c says that no policy can be binding w#o pre$iu$ pay$ent. G Also, 'ec. >> and >? see$ contradictory. G )owever, 'ir says above does not apply to life insurance because ,ife :nsurance lapses upon nonGpay$ent. 1resent provision ca$e fro$ 'ec >2 of the old :nsurance Code. )owever, 'ec. >> has o$itted the portion of 'ec. >2 w#c per$itted credit extension of the pre$iu$ due ($eaning, extension of period to pay the pre$iu$). Apparently, the intention is to put the contract of insurance on a H'a$h=a#)= 'arr? ,a$"$I $eaning the pre$iu$ $ust be paid in cash as a condition precedent for a nonGlife insurance policy to be valid and binding, and an agree$ent to grant the the An the his

1,

Thi 1# # Ce& ,003, 1*)(, #%& 1*)). N$te the e88ect $8 %$%-9#0/e%t $8 9re/iu/ .- . . / $age 139 o0 355

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I S2!A CE CO6Einsured credit extension of the pre$iu$ is void. )owever, 7akati Tuscany v 0A and the second .039 case says otherwise. )ence, credit extension agree$ents $ay be valid. 9NC91&:F0' to 'ec. >> :n the case of a life or an industrial policy whenever the grace period provision applies ('ec. >>) Article >? (see below) Agree$ent to grant the insured credit extension for the pay$ent of the pre$iu$ .hen there is an agree$ent allowing the insured to pay pre$iu$ in install$ent and partial pay$ent has been $ade at the ti$e of the loss ('ee 7akati Tuscany v 0A) (f)

COMME!CIAL LA"a deter$ination by the Co$$issioner that the continuation of the policy would violate or would place the insurer in violation of this Code

BPI .$. P!$a)a$9 16 Ph"&. * 1 :f the pre$iu$s are paid out of the con"ugal funds, the proceeds are considered con"ugal. :f the beneficiary is other than the insured(s estate, the source of pre$iu$s would not be relevant. Ph"&"pp"#e Pr?'e A$$+ra#'e C!rp. .$. CA9 *-6 SCRA 60 ( 550) -enerally, pre$iu$ is also necessary in order for the contract of suretyship or bond to be binding. )owever, where the oblige has accepted the bond, it is binding even if the pre$iu$ has not been paid sub"ect to the right of the insurer to recover the pre$iu$ fro$ its principal. Se'. 78 An ac%nowledg$ent in a policy or contract of insurance of receipt of pre$iu$ is conclusive evidence of its pay$ent, so far as to $a%e the policy binding, notwithstanding any stipulation therein that it shall not be binding until the pre$iu$ is actually paid 9ffect of ac%nowledg$ent of receipt of pre$iu$ in property + :nsurer cannot deny the truth of the receipt of the pre$iu$ even if it is unpaid. ,aw established a legal fiction of pay$ent (prima facie evidence of pay$ent). &hus insurer presu$ed to have waived the condition of prepay$ent. 'C has decided that above is an exception to 'ec. >> Se'. 60 0o policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or $ore of the following (a) nonGpay$ent of pre$iu$; (b) conviction of a cri$e arising out of acts increasing the hazard insured against; (c) discovery of fraud or $aterial $isrepresentation (d) discovery of willful or rec%less acts or o$issions increasing the hazard insured against; (e) physical changes in the property insured which result in the property beco$ing uninsurable; or

Cancellation + right to rescind, abandon or cancel a contract of insurance, ter$ination of policy before its expiration. 1re$iu$ referred to in 75(a) refers to pay$ent Jafter effective date of the policyK because 'ec. >> ordains that insurance policy is valid and binding unless and until pre$iu$ has been paid. Conditions under w#c above exercised 1rior notice of cancellation to insured 0otice $ust be based on the occurrence, after the effective date of the policy) of one or $ore of the grounds $entioned :t $ust be in writing, $ailed or delivered to the na$ed insured at the address shown in the policy. :n this regard, proof of actual receipt of the notice is necessary for it to ta%e effect; $ere proof that the insurer $ailed the notice is not sufficient to effect the cancellation. :t $ust state w#c of the ground set forth is relied upon. :t is the duty of the insurer upon written re@uest of the insured to furnish the facts in which the cancellation is based. :f there was no pre$iu$ paid at all, the action appropriate would be a declaration of nullity, based on 'ection >> which provides that Jno policy or contract of insurance issued by an insurance co$pany is valid and binding unless and until the pre$iu$ thereof has been paidK` T",a? . CA Fa't$< 2ortune ,ife issued a fire insurance policy in favor of &ibay on a bldg in > applies. 'ince acceptance of partial pay$ent is not $entioned a$ong the exceptions provided in 'ec >> and >? of the :nsurance Code, no policy of insurance can ever pretend to be efficacious until pre$iu$ has been fully paid. G &he policy contained a condition w#c said that J&he policy including any renewal thereof is not in force until the pre$iu$ has been fully paid x x xK Clearly, the 1olicy provides for pay$ent of pre$iu$ in full. BissentF (673T) &he insurance coverage should beco$e effective fro$ the day that the partial pay$ent is accepted by the insurer, any stipulation in the policy to the contrary notwithstanding. 1artial pay$ent is enough to establish the "uridical relation between the two parties. &he law does not re@uire a specific a$ount of pre$iu$ pay$ent in order to create the "uridical tie. - . . / $age 140 o0 355

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I S2!A CE CO6EG :f the contract is auto$atically cancelled upon the nonGpay$ent in full by the insured, then the efficacy of the contract will be fully dependent on his will. &his violates the principle of $utuality of contracts.

COMME!CIAL LA"that the fire too% place before the tender of pre$iu$ pay$ent under the renewed policy. (0ote &his is a $otion for reconsideration fro$ previous 'C decision declaring that there was no renewal of the policy and that CC1A not liable) I$$+e< .F0 'ec >> of the :nsurance Code $ust be strictly applied despite its practice of granting a 7BG6B day credit ter$ for pay$ent of pre$iu$ He&)< 0F &here are exceptions to 'ec >> a.) &he first is provided by 'ec. >> itself and that is, in case of a life or industrial life policy whenever the grace period applies b.) 'ec >? An ac%nowledg$ent in a policy or contract of insurance of the receipt of pre$iu$ is conclusive evidence of its pay$ent, so far as to $a%e the policy binding, notwithstanding any stipulation therein that it shall not be binding until pre$iu$ is actually paid. c.) 'ec. >>$ay not apply if the parties have agreed to the pay$ent in install$ents of the pre$iu$ and partial pay$ent has been $ade at the ti$e of the loss. d.) &he insurer $ay grant credit extension for the pay$ent of the pre$iu$ e.) :t would be un"ust and ine@uitable if recovery on the policy would not be per$itted against CC1A, w#c consistently granted the 7BG6B day credit ter$ for the pay$ent of the pre$iu$s despite its full awareness of 'ec. >>. 9stoppel bars it fro$ ta%ing refuge under the action, since !. A state$ent in a policy, of a $atter relating to the person or thing insured, or to the ris%, as a fact, is an express warranty thereof. 'ec. >2. A state$ent in a policy, which i$ports that it is intended to do or not to do a thing which $aterially affects the ris%, is a warranty that such act or o$ission shall ta%e place. 'ection >2 refers to pro$issory warranty. Areach of pro$ises or agree$ents as to future acts will not avoid a policy unless the pro$ises are $aterial to the ris%. 9xpress warranties regarding the person, thing, or ris% $ust refer to a state$ent of fact. :f it is a $ere belief, it will not constitute a warranty as far as the policy is concerned, but $erely a warranty that the state$ent is his honest opinion or "udg$ent.

IIIarranties are either affirmative or promissory and e>pressed or implied E so it comes in pairs you can have an implied affirmative warranty or an e>pressed affirmative warranty IIA warranty is presumed to be affirmative unless the contrary intention appears

'ec. 7?. A warranty $ay relate to the past, the present, the future, or to any or all of these. 'ec. 76. 0o particular for$ of words is necessary to create a warranty.

6.-. Warra#t"e$ . Repre$e#tat"!# WARRANTB Considered part of the 100% UP L AW REPRESENTATION Collateral induce$ent , $

'ec. >*. .hen, before the ti$e arrives for the perfor$ance of a warranty relating to the future, a loss insured against happens, or perfor$ance beco$es unlawful at the place of the contract, or i$possible, the o$ission to fulfill the warranty does not avoid the policy.

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$age 163 o0 355

I S2!A CE CO6E

COMME!CIAL LA"'ec. !76. An alteration in the use or condition of a thing insured fro$ that to which it is li$ited by the policy, which does not increase the ris%, does not affect a contract of fire insurance. Re@+"$"te$ A&terat"!# t! E#t"t&e I#$+rer t! Re$'"#)< !. &he +$e !r '!#)"t"!# !( the th"#% "$ $pe'"("'a&&? &"2"te) !r $t"p+&ate) in the policy. 2. 'uch use or condition as li$ited by the policy is a&tere). *. &he a&terat"!# "$ 2a)e :"th!+t the '!#$e#t !( the "#$+rer 5. &he a&terat"!# "$ 2a)e ,? 2ea#$ :"th"# the '!#tr!& !( the "#$+re) 3. &he a&terat"!# "#'rea$e$ the r"$4. I#'rea$e !( R"$4 !r Ha/ar) "# Ge#era& :ncrease of hazard ta%es place whenever the insured property is put to so$e new use, and the new use increases the chance of loss. 1re$ise 9very insurance policy is $ade in reference to the conditions surrounding the sub"ect $atter of the ris% and the pre$iu$ is fixed with reference thereto. &here is thus an i$plied pro$ise or underta%ing on the part of the insured that he will not change the pre$ises or the character of the business carried there, or to be carried on there, so as to increase the ris% of loss by fire. Ge#era& R+&e< :nsurer is not liable if there was an increase in the ris% or hazard. &here is increase in hazard when the new use increases the chance of loss. &he increase of the ris% of loss $ust in all cases be of a substantial character. EA'ept"!#$< (Alterations which will not warrant the avoidance of the policy) !. &he use of the property is changed but it did not in any way increased the ris% of loss 2. &he use of $aterials prohibited fro$ being used as per the policy if such $aterials are necessary or ordinarily used in the insured(s business. *. :ncrease in ris%s brought about by the underta%ing of necessary repairs in the pre$ises 5. :ncrease in ris%s due to negligent acts te$porarily endangering the property, or te$porary acts or conditions which have ceased prior to the occurrence of the loss. 3. Alteration $ade by accident or without the %nowledge of the insured. Oualifier )owever, the acts of the insured(s tenants which cause alterations are dee$ed presu$ptively %nown to the insured. EA'ept"!# t! the eA'ept"!#< Cnder 'ection >3, the breach of an i$$aterial provision will not avoid the policy, but the insurer is given the right to insert ter$s which, if violated, would avoid it. &he increase in ris% brought by an alteration is therefore irrelevant if there is already a provision in the policy which stipulates that A0H alteration, of whatever nature and effect, shall avoid the policy. F!r $e'. 68 t! !perate9 e#t"t&"#% the "#$+rer the r"%ht t! re$'"#)9 there 2+$t ,e a# a't+a& "#'rea$e !( r"$4 a#) :h"&e "t "$ #!t #e'e$$ar? that the "#'rea$e) r"$4 $h!+&) ha.e 'a+$e !r '!#tr",+te) t! the &!$$9 "t "$ #e'e$$ar? that the "#'rea$e ,e !( a $+,$ta#t"a& 'hara'ter. - . . / $age 164 o0 355

6.0. Whe# Brea'h !( Warra#t? )!e$ #!t a.!") p!&"'?< !. .hen &!$$ !''+r$ ,e(!re ti$e for per(!r2a#'e 2. .hen per(!r2a#'e ,e'!2e$ +#&a:(+& *. .hen per(!r2a#'e ,e'!2e$ "2p!$$",&e (legal U physical i$possibility) 5. .hen "#$+rer :a".e$ the :arra#t?, i$pliedly or expressly. 6.1. Mater"a&"t? a#) Fra+) "# Warra#t? 'ec. >5. &he violation of a $aterial warranty, or other $aterial provision of a policy, on the part of either party thereto, entitles the other to rescind. 'ec. >3. A policy $ay declare that a violation of specified provision thereof shall avoid it, otherwise the breach of an i$$aterial provision does not avoid the policy. 'ec. >7. A breach of warranty without fraud, $erely exonerates an insurer fro$ the ti$e that it occurs, or where it is bro%en in its inception, prevents the policy fro$ attaching to the ris%. 2raud is not essential to entitle the insurer to rescind a contract for breach of warranty. 2alsity, not fraud, is the basis of liability in warranty. :f the breach of the warranty was WITHOUT FRAUD + insured is entitled to !. Ret+r# !( pre2"+2 paid at a proGrata rate fro$ the ti$e of breach if it occurs after the inception of the contract 2. &o a&& the pre2"+2$ "( "t "$ ,r!4e# )+r"#% the "#'ept"!# !( the '!#tra't. :n this case the contract is void ab initio and never beca$e binding. :f the breach of the warranty was WITH FRAUD + policy is void ab initio and the insured is not entitled to the return of the pre$iu$ paid

6.6. Warra#t"e$ "# F"re I#$+ra#'e 'ec. !7>. As used in this Code, the ter$ Jfire insuranceK shall include insurance against loss by fire, lightning, windstor$, tornado or earth@ua%e and other allied ris%s, when such ris%s are covered by extension to fire insurance policies or under separate policies. (a) A fire insurance is a contract of inde$nity by which the insurer, for consideration, agrees to inde$nify the insured against loss of, or da$age to, property by fire.

'ec. !7?. An alteration in the use or condition of a thing insured fro$ that to which it is li$ited by the policy $ade without the consent of the insurer, by $eans within the control of the insured, and increasing the ris%, entitles an insurer to rescind a contract of fire insurance.

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I S2!A CE CO6E 'ec. !>B. A contract of fire insurance is not affected by any act of the insured subse@uent to the execution of the policy, which does not violate its provisions, even though it increases the ris% and is the cause of a loss. :f the policy does not contain any prohibition li$iting the use or condition of the thing insured, an alteration in said use or condition does not constitute a violation of the policy. &he contract is not affected by such alteration even though it increases the ris% and is the cause of the loss.

COMME!CIAL LA":n case of partial loss, the full a$ount of the partial loss (but should not exceed the valuated a$ount) &otal loss exists when the result of the fire is such as to render the property wholly unfit for use. :f the thing is insured under two or $ore policies, each policy shall contribute proG rata to the pay$ent of such whole or partial loss. &he insured is not a coGinsurer under a fire insurance policy in the absence of stipulation unli%e in $arine insurance.

'ec. !>!. :f there is no valuation in the policy, the $easure of inde$nity in an insurance against fire is the expense it would be to the insured at the ti$e of the co$$ence$ent of the fire to replace the thing lost of in"ured in the condition in which it was at the ti$e of the in"ury; but if there is a valuation in a policy of fire insurance, the effect shall be the sa$e as in a policy of $arine insurance. 'ec. !>2. .henever the insured desires to have a valuation na$ed in his policy, insuring any building or structure against fire, he $ay re@uire such building or structure to be exa$ined by an independent appraiser and the value of the insured(s interest therein $ay then be fixed as between the insurer and the insured. &he cost of such exa$ination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured(s interest in such building or structure has been thus fixed. :n the absence of any change increasing the ris% without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole a$ount so insured upon the insured(s interest in such building or structure, as stated in the policy upon which the insurers have received a pre$iu$, shall be paid, and in case of a partial loss, the full a$ount of the partial loss shall be so paid, and in case there are two or $ore policies covering the insured(s interest therein, each policy shall contribute pro rata to the pay$ent of such whole or partial loss. Aut in no case the insurer be re@uired to pay $ore than the a$ount thus stated in such policy. &his section shall not prevent the parties fro$ stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially da$aged or destroyed. Mea$+re !( I#)e2#"t? U#)er a# Ope# P!&"'? 9ntitled to recover a$ount of actual loss sustained (burden of establishing the a$ount of loss by a preponderance of evidence is upon the insured) Mea$+re !( I#)e2#"t? U#)er a 3a&+e) P!&"'? &he valuation in the policy of fire insurance is conclusive between the parties in the ad"ust$ent of either partial or total loss if the insured has an insurable interest and was not guilty of fraud :n case of total loss, the insured can recover the whole a$ount so insured as stated in the policy (the valuated a$ount)

C!=I#$+ra#'e C&a+$e :s a clause re@uiring the insured to $aintain insurance to an a$ount e@ual to a specified percentage of the value of the insured property under penalty of beco$ing coGinsurer to the extent of such deficiency. *. 0o policy of fire insurance shall be pledged, hypothecated, or transferred to any person, fir$ or co$pany who acts as agent for or otherwise represent the issuing co$pany, and any such pledge, hypothecation, or transfer hereafter $ade shall be void and of no effect insofar as it $ay affect other creditors of the insured. E((e't !( P&e)%e !( F"re I#$+ra#'e P!&"'? After a loss has occurred, the insured applies only if (!) the loss is partial and (2) the a$ount of insurance is less than the insured entire insurable interest in the property insured. ,oss of profits separately insured G :f the profits to be realized are separately insured fro$ the vessel or cargo, the insured is entitled to recover, in case of loss, such proportion of the profits as the value of the property lost bears to the value of the whole propertyV#"ue $8 9r$9ert0 "$ tIIII V#"ue $8 the 1h$"e 9r$9ert0 i% ure& A/$u%t $8 9r$8it K A/$u%t $8 rec$:er0

Fre"%hta%e

3ALUE "# OPEN POLICB Ealue at beginning of ris% (incl all articles which add to its per$anent value or which are necessary to prepare if for the voyage insured), not the value at ti$e she was built Actual cost when laden on board. :2 actual cost can(t be deter$ined, $ar%et value at ti$e and place of lading, 1,C' expenses incurred in purchasing and placing the$ on board. 9xpected profits are not considered since they can be separately isnured. -ross freightage without reference to cost of earning it

J

&he cost of insurance is added in calculating the value of the ship, cargo, or freightage of other sub"ect $atter in an open policy. .here cargo insured against partial loss is da$aged G 'ection !72 is applicable if the cargo is insured against a partial loss and it suffers da$age as a result of which its $ar%et value at the port of destination is reduced

G :f policy is valued, loss of such profits is conclusively presu$ed fro$ a loss of the property out of which they are expected to arise, and the valuation fixes their a$ount. .here only part of a cargo or freightage insured exposed to ris% G &he valuation will be reduced proportionately. &he insurer is bound to return such portion of the pre$iu$ as corresponds with the portion of the cargo which had been exposed to the ris%. 1resu$ption of loss of profits .here profits are separately insured fro$ the property out of which they are expected to arise, the insured, in case of partial loss of the property, is entitled $erely to partial inde$nity for the profits lost. :f the property is totally lost, pro tanto the total profits are also lost. 'uch loss of the profits is conclusively presu$ed

, 2BB? Fa't$ 1etitioner had pledged her 123BP watch to respondent pawnshop. &he pawnshop was robbed, and a$ong the ite$s seized was petitioner(s watch. 1etitioner tried to recover the watch but respondent argued that the robbery was a fortuitous event, hence, they were not liable. He&) )ad respondent co$pany insured the articles pledged against burglary, petitioner would have been co$pensated for the loss fro$ the burglary. 4espondent co$pany(s failure to insure the article is, therefore, a contributory cause to petitioner(s loss. Considering, however, that petitioner agreed to a valuation of 1!3,BBB for the article pledged in case of a loss, the replace$ent value for failure to insure is li%ewise li$ited to 1!3,BBB. 0evertheless, this Court, ta%ing into account all the circu$stances of this case, dee$s it fair and "ust to award exe$plary da$ages against respondent co$pany for its failure to co$ply with the rule and regulation re@uiring it to insure the articles pledged against fire and burglary, in the a$ount of &wenty 2ive &housand (123,BBB) 1esos. &his is without pre"udice to appropriate proceedings to recover any excess value of the article pledged fro$ a$ounts that $ay be or have been awarded payable by third parties answerable for the loss arising fro$ the robbery.

/5i#ippine 6eposit Insurance Corporation Act(RA -15 a$ a2e#)e) ,? RA$ 66-79 70669 875 a#) 5-6* a#) PD$ *69 6509 01 a#) 5-1)

. Ba$"' P!&"'? &o insure the deposits of all ban%s which are entitled to the benefits of insurance under this Act &o pro$ote and safeguard the interests of the depositing public by way of providing per$anent and continuing insurance coverage on all insured deposits.

*. PDIC F+#'t"!#$ Can lend $oney to ban%s before closure

:nsurer of deposits against ban% closures Acts as receiver for ban%s &he 1D:C Act is not applicable to Fffshore Aan%ing Cnits 0ature of insurance function co$pulsory insurance on all ban% deposits

co$$unity $aintain stability in the econo$y.

financial

Ad$inistrative 2unctions *. . A+th!r"t? t! EAa2"#e Ba#4$ &he 1D:C has the power to conduct exa$ination of ban%s with prior approval of the ,!?,!6) 'ince a public service is necessarily a public utility, therefore public services are sub"ect to the sa$e Constitutional li$itations and restrictions. :f a public utility is not a public service, it is still sub"ect to the sa$e Constitutional li$itations and restrictions. &herefore, public utility X Constitution public service X Constitution Z 1ublic 'ervice Act B. Tra#$p!rtat"!# DEFINITION &he $ove$ent of goods or persons fro$ one place to another, by a carrier. (Alac%(s ,aw Dictionary) A contract of transportation is one whereby a certain person or association of persons obligate the$selves to transport persons, things, news fro$ one place to another for a fixed price. :t is the re$oval of goods or persons fro$ one place to another. - . . / $age 209 o0 355

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COMME!CIAL LA"to render a decision or issue an order in any case is not present, or in the event of a tie vote a$ong the Co$$issioners, the 'ecretary of Iustice $ay designate such nu$ber of Iudges of the Courts of 2irst :nstance, or such nu$ber of attorneys of the legal division of the Co$$ission, as $ay be necessary to sit te$porarily as Co$$issioners in the 1ublic 'ervice Co$$ission. &he 1ublic 'ervice Co$$ission shall sit individually or as a body en banc or in two divisions of three Co$$issioners each. &he 1ublic 'ervice Co$$issioner shall preside when the Co$$ission sits en banc and in one division. :n the other division, the Associate Co$$issioner with seniority of appoint$ent in that division shall preside. 2ive Co$$issioners shall constitute a @uoru$ for sessions en banc and two Co$$issioners shall constitute a @uoru$ for the sessions of a division. :n the absence of a @uoru$, the session shall be ad"ourned until the re@uisite nu$ber is present. All the powers herein vested upon the Co$$ission shall be considered vested upon any of the Co$$issioners, acting either individually or "ointly as hereinafter provided. &he Co$$issioners shall e@uitably divide a$ong the$selves all pending cases and those that $ay hereafter be sub$itted to the Co$$issioner, in such $anner and for$ as they $ay deter$ine, and shall proceed to hear and deter$ine the case assigned to each or to their respective divisions, or to the Co$$ission en banc as follows uncontested cases, except those pertaining to the fixing of rates, shall be decided by one Co$$issioner; contested cases and all cases involving the fixing of rates shall be decided by the Co$$ission in division and the concurrence of at least two Co$$issioners in the division shall be necessary for the pro$ulgation of a decision or nonGinterlocutory order in these cases 1rovided, however, &hat any $otion for reconsideration of a decision or nonGinterlocutory order of any Co$$issioner or division shall be heard directly by the Co$$ission en banc and the concurrence of at least four Co$$issioners shall be necessary for the pro$ulgation of a final decision or order resolving such $otion for reconsideration. (As a$ended by 4epublic Act 0os. >2* and 27>>) SECTION 0 &he 1ublic 'ervice Co$$issioner shall receive an annual co$pensation of thirteen thousand pesos; and each of the Associate Co$$issioners an annual co$pensation of twelve thousand pesos. &he Co$$issioners shall be assisted by one chief attorney, one finance and rate regulation officer, one chief utilities regulation engineer, one chief accountant, one transportation regulation chief, one secretary of the 1ublic 'ervice Co$$ission, and three public utilities advisers who shall receive an annual co$pensation of not less than ten thousand eight hundred pesos each; five assistant chiefs of division who shall receive an annual co$pensation of not less than nine thousand six hundred pesos each; twelve attorneys who shall receive an annual co$pensation of not less than nine thousand pesos each; and a technical and confidential staff to be co$posed of two certified public accounts, two electrical engineers, two $echanical or co$$unication engineers, and two special assistants who shall receive an annual co$pensation of not less than seven thousand two hundred pesos each. (As a$ended by 4epublic Act 0os. >2*, 27>> and *>62) SECTION 1 &he 1ublic 'ervice Co$$issioner, the Associate 1ublic 'ervice Co$$issioners, and all other officers - . . / $age 210 o0 355

0F&9 Art. !>77 :n all $atters not regulated by this Code, the rights and obligations of co$$on carriers shall be governed by the Code of Co$$erce and by special laws. PUBLIC NATURE :t is for public use, which $eans that the use is not confined to privileged individuals, but is instead open to an indefinite public. :t is this indefinite or unrestricted @uality that gives it its public character. &he true criterion by which to "udge the character of the use is whether the public $ay en"oy it by right or by per$ission. &here $ust be, in general, a right under the law which co$pels the owner to give the service for the general public. PUBLIC SER3ICE ACT THE PUBLIC SER3ICE LAW (CA 06) (As a$ended, and as $odified particularly by 1D 0o. !, :ntegrated 4eorganization 1lan and 9F 357) CHAPTER I ORGANI>ATION SECTION &his Act shall be %nown as the Q1ublic 'ervice Act.Q SECTION * &here is created under the Depart$ent of Iustice a co$$ission which shall be designated and %nown as the 1ublic 'ervice Co$$ission, co$posed of one 1ublic 'ervice Co$$issioner and five Associate Co$$issioners, and which shall be vested with the powers and duties hereafter specified. .henever the word QCo$$issionQ is used in this Act, it shall be held to $ean the 1ublic 'ervice Co$$ission, and whenever the word QCo$$issionerQ is used in this Act it shall be held to $ean the 1ublic 'ervice Co$$issioner or anyone of the Associate Co$$issioners. &he 1ublic 'ervice Co$$issioner and the Associate 1ublic 'ervice Co$$issioners shall be natural born citizens and residents of the 1hilippines, not under thirty years of age; $e$bers of the Aar of the 1hilippines, with at least five years of law practice or five years of e$ploy$ent in the govern$ent service re@uiring a lawyerRs diplo$a; and shall be appointed by the 1resident of the 1hilippines, with the consent of the Co$$ission on Appoint$ents of the Congress of the 1hilippines 1rovided, however, &hat the present Co$$issioner and the personnel of the Co$$ission shall continue in office without the necessity of reGappoint$ent. &he Co$$issioners shall have the ran% and privilege of retire$ent of Iudges of the Courts of 2irst :nstance. (As a$ended by 4epublic Act 0os. !>? and 27>>) SECTION &he Co$$issioner and Associate Co$$issioners shall hold office until they reach the age of seventy years, or until re$oved in accordance with the procedures prescribed in section one hundred and seventyGthree of Act 0u$bered &wentyGseven hundred and eleven, %nown as the 4evised Ad$inistrative Code 1rovided, however, &hat upon retire$ent any Co$$issioner of Associate Co$$issioner shall be entitled to all retire$ent benefits and privileges for Iudges of the Courts of 2irst :nstance or under the retire$ent law to which he $ay be entitled on the date of his retire$ent. :n case of the absence, for any reason, of the 1ublic 'ervice Co$$issioner, the Associate Co$$issioner with seniority of appoint$ent shall act as Co$$issioner. :f on account of absence, illness, or incapacity of any of three Co$$issioners, or whenever by reason of te$porary disability of any Co$$issioner or of a vacancy occurring therein, the re@uisite nu$ber of Co$$issioners necessary 100% UP L AW , $

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COMME!CIAL LA"of profit or trust with the -overn$ent of the 1hilippines. SECTION 6 &he Co$$ission shall have its office in the City of ? and *>62) SECTION 7 &he 'ecretary of the Co$$ission, under the direction of the Co$$issioner, shall have charge of the ad$inistrative business of the Co$$ission and shall perfor$ such other duties as $ay be re@uired of hi$. )e shall be the recorder and official reporter of the proceedings of the Co$$ission and shall have authority to ad$inister oaths in all $atters co$ing under the "urisdiction of the Co$$ission. )e shall be the custodian of the records, $aps, profiles, tariffs, itineraries, reports, and any other docu$ents and papers filed with the Co$$ission or entrusted to his care and shall be responsible therefor to the Co$$ission. )e shall have authority to designate fro$ ti$e to ti$e any of his delegates to perfor$ the duties of Deputy 'ecretary with any of the Co$$issioners. SECTION 8 &he Co$$ission shall furnish the 'ecretary such of its findings and decisions as in its "udg$ent $ay be of general public interest; the 'ecretary shall co$pile the sa$e for the purpose of publication in a series of volu$es to be designated Q4eports of the 1ublic 'ervice Co$$ission of the 1hilippines,Q which shall be published in such for$ and $anner as $ay be best adapted for public infor$ation and use, and such authorized publications shall be co$petent evidence of the reports and decisions of the Co$$ission therein contained without any further proof or authentication thereof. SECTION 5 0o $e$ber or e$ployee of the Co$$ission shall have any official or professional relation with any public service as herein defined, or hold any office

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COMME!CIAL LA"proper notice and hearing in accordance with the rules and provisions of this Act) sub2ect to the limitations and e>ceptions mentioned and saving provisions to the contrary: &a) To issue certificates which shall be known as certificates of public convenience) authori?ing the operation of public service within the 3hilippines whenever the 0ommission finds that the operation of the public service proposed and the authori?ation to do business will promote the public interest in a proper and suitable manner 3rovided) That thereafter) certificates of public convenience and certificates of public convenience and necessity will be granted only to citi?ens of the 3hilippines or of the .nited 'tates or to corporations) copartnerships) associations or 2oint-stock companies constituted and organi?ed under the laws of the 3hilippines; 3rovided) That si>ty per centum of the stock or paid-up capital of any such corporations) co-partnership) association or 2oint-stock company must belong entirely to citi?ens of the 3hilippines or of the .nited 'tates: 3rovided) further) That no such certificates shall be issued for a period of more than fifty years &$) To approve) sub2ect to constitutional limitations any franchise or privilege granted under the provisions of Act -o 'i> press action on the part of the 0ommission 6n estimating the depreciation) the effect of the use of the equipment) its actual condition) the age of the model) or other circumstances affecting its value in the market shall be taken into consideration The foregoing is likewise applicable to any e>tension or amendment of certificates actually in force and to those which may hereafter be issued) to permit to modify itineraries and time schedules of public services) and to authori?ations to renew and increase equipment and properties )ECTION /A2* 3roceedings of the 0ommission) upon notice and hearing - The 0ommission shall have power) upon,0

The 9$1er $8 the Pu2"ic Ser:ice C$//i i$% 1ere # Ce& i% 1**3.100% UP L AW , $

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$age 212 o0 355

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COMME!CIAL LA"&n) To suspend or revoke any certificate issued under the provisions of this Act whenever the holder thereof has violated or willfully and contumaciously refused to comply with any order rule or regulation of the 0ommission or any provision of this Act: 3rovided) That the 0ommission) for good cause) may prior to the hearing suspend for a period not to e>ceed thirty days any certificate or the e>ercise of any right or authority issued or granted under this Act by order of the 0ommission) whenever such step shall in the 2udgment of the 0ommission be necessary to avoid serious and irreparable damage or inconvenience to the public or to private interests &o) To fi>) determine) and regulate) as the convenience of the state may require) a special type for auto-busses) trucks) and motor trucks to be hereafter constructed) purchased) and operated by operators after the approval of this Act; to fi> and determine a special registration fee for autobuses) trucks) and motor trucks so constructed) purchased and operated: 3rovided) That said fees shall be smaller than more those charged for autobusses) trucks) and motor trucks of types not made regulation under the subsection )ECTION /9 6t shall be unlawful for any individual) copartnership) association) corporation or 2oint-stock company) their lessees) trustees or receivers appointed by any court whatsoever) or any municipality) province) or other department of the @overnment of the 3hilippines to engage in any public service business without having first secured from the 0ommission a certificate of public convenience or certificate of public convenience and necessity as provided for in this Act) e>cept grantees of legislative franchises e>pressly e>empting such grantees from the requirement of securing a certificate from this 0ommission as well as concerns at present e>isting e>pressly e>empted from the 2urisdiction of the 0ommission) either totally or in part) by the provisions of section thirteen of this Act )ECTION /0 .nlawful Acts - 6t shall be unlawful for any public service: &a) To provide or maintain any service that is unsafe) improper) or inadequate or withhold or refuse any service which can reasonably be demanded and furnished) as found and determined by the 0ommission in a final order which shall be conclusive and shall take effect in accordance with this Act) upon appeal of otherwise &$) To make or give) directly or indirectly) by itself or through its agents) attorneys or brokers) or any of them) discounts or rebates on authori?ed rates) or grant credit for the payment of freight charges) or any undue or unreasonable preference or advantage to any person of corporation or to any locality or to any particular description of traffic or service) or sub2ect any particular person or corporation or locality or any particular description of traffic to any pre2udice or disadvantage in any respect whatsoever; to adopt) maintain) or enforce any regulation) practice or measurement which shall be found or determined by the 0ommission to be un2ust) unreasonable) unduly preferential or un2ustly discriminatory in a final order which shall be conclusive and shall take effect in accordance with the provisions of this Act) upon repeal or otherwise &%) To sell) alienate) mortgage) encumber or lease its property) franchises) certificates) privileges) or rights or any part thereof; or merge or consolidate - . . / $age 213 o0 355

&%) To compel any public service to furnish safe) adequate) and proper service as regards the manner of furnishing the same as well as the maintenance of the necessary material and equipment &!) To require any public service to establish) construct) maintain) and operate any reasonable e>tension of its e>isting facilities) where in the 2udgment of said 0ommission) such e>tension is reasonable and practicable and will furnish sufficient business to 2ustify the construction and maintenance of the same and when the financial condition of the said public service reasonably warrants the original e>penditure required in making and operating such e>tension &i) To direct any railroad) street railway or traction company to establish and maintain at any 2unction or point of connection or intersection with any other line of said road or track) or with any other line of any other railroad) street railway or traction to promote) such 2ust and reasonable connection as shall be necessary to promote the convenience of shippers of property) or of passengers) and in like manner direct any railroad) street railway) or traction company engaged in carrying merchandise) to construct) maintain and operate) upon reasonable terms) a switch connection with any private sidetrack which may be constructed by any shipper to connect with the railroad) street railway or traction company line where) in the 2udgment of the 0ommission) such connection is reasonable and practicable and can be out in with safety and will furnish sufficient business to 2ustify the construction and maintenance of the same &-) To authori?e) in its discretion) any railroad) street railway or traction company to lay its tracks across the tracks of any other railroad) street railway or traction company or across any public highway & ) To direct any railroad or street railway company to install such safety devices or about such other reasonable measures as may in the 2udgment of the 0ommission be necessary for the protection of the public are passing grade crossing of (%) public highways and railroads) ($) public highways and streets railway) or (#) railways and street railways &l) To fi> and determine proper and adequate rates of depreciation of the property of any public service which will be observed in a proper and adequate depreciation account to be carried for the protection of stockholders) bondholders or creditors in accordance with such rules) regulations) and form of account as the 0ommission may prescribe 'aid rates shall be sufficient to provide the amounts required over and above the e>pense of maintenance to keep such property in a state of efficiency corresponding to the progress of the industry /ach public service shall conform its depreciation accounts to the rates so determined and fi>ed) and shall set aside the moneys so provided for out of its earnings and carry the same in a depreciation fund The income from investments of money in such fund shall likewise be carried in such fund This fund shall not be e>pended otherwise than for depreciation) improvements) new construction) e>tensions or conditions to the properly of such public service &m) To amend) modify or revoke at any time certificate issued under the provisions of this Act) whenever the facts and circumstances on the strength of which said certificate was issued have been misrepresented or materially changed

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its property) franchises privileges or rights) or any part thereof) with those of any other public service The approval herein required shall be given) after notice to the public and hearing the persons interested at a public hearing) if it be shown