Professional Documents
Culture Documents
REMINDERS
in
Mercantile Law
by:
Prof. Arturo M. de Castro
(Pre-Bar Reviewer, Global Best Practice, UP Law
Center; Professor of Law, Ateneo, Lyceum, U.E.)
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Warehouse Receipt to D, who pays value to A in good faith and without any
notice of defect in the title of A.
B, the owner of the goods, notifies C that the goods were stolen from him
and demands delivery of the goods to him. As holder of the Negotiable
Warehouse Receipt, D claims delivery of the goods to him.
1. Who between B, the owner of the goods, and D, the holder of the
Negotiable Warehouse Receipt is entitled to the goods?
Ans: B, the owner, is entitled to the delivery of the goods. The authorities
are unanimous that in case of theft of goods, negotiation of the
warehouse receipt will not confer a better right to the holder. Article
1512 and 1513 of the Civil Code require that the negotiation must
be made by the owner or the person authorized by the owner.
2. Will your answer be the same if what is stolen by A from B is the
Negotiable Warehouse Receipt covering the goods, instead of the goods
themselves, and A then negotiates the stolen Negotiable Warehouse
Receipt to D?
Ans: No, my answer will be different. D, the holder will prevail. Under Art.
1518 of the Civil Code, the negotiation of the Warehouse Receipt is
not impaired by the fact that the owner has been deprived thereof
by theft, fraud, duress or conversion.
Note: The problem is the subject of an article published by the author in
the Ateneo Law Journal entitled The Rights of a Holder In Due
Course of a Negotiable Documents of Title to Goods to reconcile
the conflict between Art. 1518 on the one hand sustaining the
above answer and Articles 1512 and 1513 supporting the contrary
answer. If the problem is presented in another form requiring the
examinee to argue in favor of B, the owner of the stolen Warehouse
Receipt, Articles 1512 and 1513 may be cited and in favor of D,
Article 1518 may be cited. As Judge, the examinee may choose
and then support the answer with reasons. As for me, I suggest the
following answer.
As Judge, I would decide in favor of D, the holder, for the following
reasons:
1) The Code Commission that drafted the Civil Code made a
mistake in adopting both Articles 1512 and 1513 on the one
hand and Article 1518 on the other hand from the comparative
laws from the United States where the model of Articles 1512
and 1513 were already amended by the model for Article 1518.
As now codified in the Uniform Commercial Code in the United
States, the prevailing rule is as it now appears in Art. 1518
granting the holder of a Negotiable Document of Title to goods
the same right of a holder in due course of a Negotiable
Instrument, free from the personal defenses of prior parties.
2) The conflict may be reconciled by applying Articles 1512 and
1513 requiring negotiation by the owner or his authorized
representative to the situation of stolen goods, while Article
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3. By its payment of a check with forged signature of the drawer, does the
drawee bank become liable for the warranties of an acceptor?
Ans: No, the prevailing rule is that payment does not include
acceptance, for the following reasons:
a. Payment by the drawee as the party principally liable discharges
the instrument and reduces it into a mere voucher or receipt and it
may no longer be negotiated further.
b. Acceptance does not discharge the instrument, and instead
enhances its further negotiability by the firm commitment of the
drawee to pay upon presentment and its warranties as acceptor
admitting (1) the existence of the drawer, (2) the genuineness of the
drawers signature, (3) the capacity of the drawer to draw the
instrument and (4) the existence of the payee and his then capacity
to indorse.
4. Can a drawee be a holder in due course?
Ans: No, because by paying the instrument, the drawee discharges the
instrument whereas a holder in due course may negotiate the
instrument further.
V
1. What are the elements of insurance?
Ans: Elements of Insurance
a. Insurable Interest (Sec. 51, par. 9)
b. Risk of Loss (Sec. 2)
c. Assumption of Risk
d. Scheme to distributor losses
e. Payment of Premiums (Sec. 77; Phil-am Care Health System,
Inc. vs. CA, G.R. No. 125678, March 18, 2002)
2. A and B have children C, D & E. A and B obtained annulment of marriage
on the ground of psychological incapacity under Art. 36 of the Family
Code. Before partition of the conjugal property of A and B, do C, D and E
have insurable interest on the conjugal property of their parents, A and B?
Ans: Yes, to the extent of their entitlement to presumptive legitime, which
is an existing right. Children of parents whose marriage are
annulled or who obtain legal separation are entitled to presumptive
legitime.
3. Masagana Telemart Inc. insures its building against fire with UCPB
General Insurance Co. In the past, the insurer as a matter of practice had
been extending grace period within which to pay renewal premium after
expiration of the policy. The policy expires and the Building is gutted by fire
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within the usual grace period granted as a matter of practice in the past.
The insured pays the renewal premium the following day after the fire and
then files a claim with the insurer which refuses to pay the claim on the
ground that the renewal premium was paid after the building was already
lost by fire.
What will be your arguments
a. As counsel for the Insurer
b. As counsel for the Insured
c. As a Judge, decide, with reasons.
Ans:
a. As counsel for the Insurer, I will cite Sec. 77 of the Insurance
Code that the policy shall not take effect until the premium is
paid, notwithstanding any agreement to the contrary. Credit
extension for the payment of premium is contrary to the policy of
the law.
b. As counsel for the Insured, I will cite the latest ruling of the
Supreme Court in UCPB Insurance Company vs. Masagana
Telemart in which the Supreme Court held, under identical facts
as given in the problem, that the Insurer is liable for the claim
because (1) the Insurer is under estoppel by reason of the grace
period to pay the renewal period extended in the past, and (2)
the credit extension renders the policy effective.
c. As a Judge, I will apply the Supreme Court decision in UCPB
Insurance Company vs. Masagan Telemart and order the
insurer to pay the claims.
1) Although the legislative history of the amendment to Sec. 77
shows that notwithstanding any agreement to the contrary
was introduced to do away with credit extension as an
exception, as initially held by the Supreme Court in the
aforesaid case, on reconsideration the Supreme Court finally
ruled in said case that credit extension is a recognized
exception to the general rule that the policy shall not take
effect until the premium is paid.
2) The law is what the Supreme Court says it is, and judicial
decisions form part of the legal system.
3) The practice in the past of giving grace period to the insured
in the payment of renewal premium places the insurer in
estoppel to depart from the established practice under the
general principle of equity.
4. What are the exceptions to the rule that the policy shall not take effect until
the premium is paid?
Ans:
a. In case of life and industrial life whenever the grace period
provision applies (Sec. 77).
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V
1. Explain whether the following are common carriers bound to exercise
extra-ordinary diligence in the carriage of goods or passengers or a
private carrier.
a. Customs broker
Ans: Common carrier because although the transport services from the
pier to the warehouse of the shipper are only incidental or ancillary
to the brokerage business, the same is offered to the public in
general and for compensation.
b. Arrastre
Ans: Arrastre refers to hauling and handling of cargoes on the wharf
and between the establishment of the consignee or shipper and the
ships tackle, usually performed by the longshoreman.
An arrastre operator is not a common carrier, but more of a
warehouseman (Sua Kiam vs. Manila Railroad Co., 19 SCRA 5).
Hence,
1) The one year prescriptive period under the COGSA is
inapplicable
2) Arrastre services are not maritime hence maritime laws are
inapplicable.
c. Vessel chartered under Contract of affreightment.
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V
1. May a private corporation be organized under a special law or charter?
Ans: No. Under the Constitution, a private corporation may be organized
only under the Corporation Code as a general law and may not be
organized under a special law or charter. (Agrix Marketing Inc.)
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7. What are the requisites for the validity of corporate transactions of:
a. A self-dealing director?
b. An interlocking director?
Ans:
a. Sec. 32. Dealings of directors, trustees or officers with the
corporation A contract of the corporation with one or more of
its directors or trustees or officers is voidable, at the option of
such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board
meeting in which the contract was approved was not
necessary to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary
for the approval of the contract;
3. That the contract is fair and reasonable under the
circumstances; and
4. That in case of an officer, the contract has been previously
authorized by the board of directors.
Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or
trustee, such contract may be ratified by the vote of the
stockholders representing at least two-thirds (2/3) of the
outstanding capital stock or of at least two-thirds (2/3) of the
members in a meeting called for the purpose: Provided, That full
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V
1 What are pre-need plans?
Ans: These are contracts which provide for the performance of future
services in the payment of future monetary consideration at the
time of actual need, for which the plan holders pay in cash or
installment at stated prices, which includes life, pension, education,
interments and other plans which the SEC may approve.
2 What is a tender offer?
Ans: A tender of offer is a publicly announced intention by a person
acting alone or in concert with other persons to acquire equity
securities of a public company (Sec. 19).
3 Why are tender offers regulated?
Ans: Tender offers are regulated to prevent the stockholders of the target
company from being misled by the offeror or the targets
management. Thus, a principal requirement of the SEC rules on
tender offers is the disclosure by the offeror of certain information
about the offer, with a copy of such information being given or sent
to the stockholders. (See SRC Rule 19.1, para. 7)
4 Under what circumstances is a tender offer mandatory?
Ans: Except when relief from the mandatory tender offer requirement is
granted under SRC Rule 19.1, paragraph 3, a person is required
under the following circumstances to make a tender offer for equity
shares of a pubic company in an amount equal to the number of
shares that the person intends to acquire:
a Where the person intends to acquire 15% or more of the equity
shares of a public company pursuant to an agreement made
between or among the person and one or more sellers;
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V
1 What are the primary objectives of the BSP? (Sec. 3)
Ans:
(a) To maintain price stability for a balanced and sustainable
growth of the economy.
(b) Promote and maintain
convertibility of the peso.
monetary
stability
and
the
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X
1. Distinguish Trademark Infringement from Unfair Competition.
Ans:
(a) Infringement of trademark is the unauthorized use of a
trademark, whereas unfair competition is the passing off of
ones goods as those of another.
(b) In infringement of trademark, fraudulent intent is unnecessary,
whereas in unfair competition fraudulent intent is essential.
(c) In infringement of trademark the prior registration of the
trademark is a prerequisite to the action, whereas in unfair
competition registration is not necessary. (Mighty Corp. vs.
E.J. Gallo Winery, July 14, 2004)
2. Are tradenames protected even without registration?
Ans:
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X
1. May a bank collect handling charges if the PN does not contain stipulation
on payment of handling charges?
Ans: No, for violation of the Truth and Lending Act (Solid Bank vs. CA,
246 SCRA 193 [1995]).
2. Is the assignment of credit covered by the Truth and Lending Act?
Ans: Yes.
3. For what amount may foreclosure of real estate mortgage be made?
Ans: A mortgage may be foreclosed only for the amount appearing in the
mortgage document. (Landrito, Jr. vs. Court of Appeals, 466
SCRA 107 [2005])
4. What is the effect of iniquitous and unconscionable interest rate?
Ans: Stipulations authorizing iniquitous or unconscionable interest are
contrary to morals (contra bonos mores), if not against the law.
Under Article 1409 of the Civil Code, these contracts are inexistent
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and void from the beginning. They cannot be ratified nor the right to
set up their illegality as a defense be waived.
Since the stipulation on the interest rate is void, it is as if there were
no express contract thereon (Tongoy vs. CA, 123 SCRA 99
(1983). Hence, courts may reduce the interest rate as reason and
equity demand.
In Medel vs. CA, 359 SCRA 820 (1998) it was held that the
stipulated interest rate of 5.5 percent per month, or 66 percent per
annum, was unconscionable. In the present case, the rate is even
more iniquitous and unconscionable, as it amounts to 192 percent
per annum. When the agreed rate is iniquitous or unconscionable, it
is considered contrary to morals, if not against the law. Such
stipulation is void (Ibarra vs. Aveyro, 37 Phil. 274 (1917); Sps.
Almeda vs. CA, 326 Phil. 309 [1996]). (Imperial vs. Jaucian, April
14, 2004)
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