Commercial Law Review

Dean Eduardo Abella

DOCUMENT OF TITLE

Governing Laws:
NCC (Sales)
Code of Commerce
Warehouse Receipts Act

Definition
It is an instrument or document where a bailee acknowledges goods and which contains his undertaking to dliver the
goods

Who issues DTs:

Based on what you learn, sino ba yung tumatanggap ng goods with the undertaking of delivering those goods?
Syempre, unang una yung
 Common carriers – Pag meron kayong ipapatransport,
padala mo sa traking company. Transport nila.
So yung common carrier is a BAILEE.
Pag may tinanggap, ano ang iniissue ng
common carrier?
Bill of Lading – yan yung document of title.
 Warehousemen – his business is storage.
Ang tanong, kaninong goods yung kanyang tinatago?
sa customer
Ano Undetaking? Simply Keep then deliver the goods
What does the warehouseman issue, after the receipt of the good for storage? A
Warehouse Receipt
Document of Title

- DIFF with Instrument under the Negotiable Instruments Law

1) Coverage: NCC covers GOODS to be transported or safely kept. NIL covers sums certain in money, except
other properties that may also be covered.
2) Modes of Endorsement
- In DTs, endorsements must be IN BLANK or ESPECIALLY
- In NIs, it may be blank, especially, conditional, qualified, or restrictive

Examples of Documents of Title

- Bill of Lading, issued by common carriers (Code of Commerce)
- Warehouse Receipt, issue by a warehousemen (under the Warehouse Receipts Act and the General Bonded
Warehouse Act).
- Quedan, a warehouse receipt that covers rice, sugar, or tobacco

Do not confuse negotiable document of title with negotiable instrument.

Magkaiba iyon.
Kapag sinabing negotiablre instrument, you talk about money.
But when you talk about negotiable documents of title, we talk about goods.

Forms of DTs – to facilitate trade

How will you know?
Just look for the words of negotiability.
The words of negotiability that you learn in negotiable law, are same words of negotiability for words of title.

1. Negotiable IF it contains words of negotiability, i.e. to order, to bearer, or those words or phrases with
equivalent meaning. (e.g. holder, possessor) Do not confuse it with negotiable instruments (money)
Kaya pwedeng nakalagay doon sa Bill of Lading, to order, Jose Cruz.
Pwede ding deliver to Jose Cruz or order.
Pwede ding deliver to bearer or order, Jose Cruz
Pwede ding deliver to Jose Cruz or bearer.
ANG HINDI PWEDE, DELIVER TO BEARER JOSE CRUZ.
Kasi pag sinabi mong bearer Jose Cruz that will be delivered to Jose Cruz who is holding the document.

Sa negotiablkke instrument, you consider Section 1 of the NIL

DAmi nun.
Kaya lang sa negotiable documents of title, tingnan mo lang, ano ba nakasulat dyan? Pag Nakita mo yung
words of negotiability, then, that’s negotiable.

The words of negotiability, appear in the document of title. So lumalabas, negotiable yan. Kaya lang nakatatak
red letters “NON NEGOTIABLE”
If you will be in possession of that document, it it negotiable or not?
Alin ang mag peprevail?
The civil code says, if the words of negotiability are present although it is stated in the document that it is
non-negotiable, the holder may treat it as negotiable.

Again, if goods are to be delivered to order or to bearer, but the document of title says it’s non negotiable,
the holder may treat it as negotiable.

2. Non-Negotiable

What if it contains “deliver to bearer” with a red stamp in big font of “NON-NEGOTIABLE”: It is negotiable
even if the bailee intends it to be non-negotiable, as long as it contains words of negotiability.

By the way, what is the advantage of negotiable documents of title?

It facilitates Commercial Transactions.
Kapag may negotiability of instruments, or negotiable documents of title, napapadali ang transactions

Papaano?
Kunwari lang,
Mayroon akong 100 crates offresh apples dyan sa ice plant nakatago ;ara di malanta agad..
I want to sell them to yo.
Naku, gusto kong bilhin pero wala akong paglalagyan puno pa bodega ko.
Sabinko, Kahit na.
Eto kunin mo yung WAREHOUSE RECEIPT.
Kunin mon a lang kapag kailangan mo
Kaya lang, binebenta ko na, ngayon pa lang.
Ikaw, sabi mo Christmas Season, kailangan ko ito. Maibenta sa iba.
So you decided to buy but you do not have yung mansanas.
All that you have to receive is the warehouse receipt.

Sa iiyo na iyon.
Akalain mo naman, may nagtanong na may tindahan dyan sa Agora Market.
May alam ka bang nagtitinda ng 100 crates of fresh apples?
Sabi, niya, OO, ako meron.
Nagkasundo kayo sa presyo.
Sabi mo,. “ ikaw ng kumuha”
In short, you don’t have to put out the goods and deliver.
Tipid ka sa transportation cost at tsaka tapos agad and transaction.
Tumubo ka na agad. Nagkabentahan agad.

Yan ang advantage ng negotiability of document of title.

Kahit hindi negotiable, pwede namang ipasa.

Kaya lang, the rights of a person who acquired it by negotiation, are better than the rights of a person who acquired
it by assignment.
Kaya nga may ganyang concept, negotiation.

How to Negotiate Documents of Title.

You have to qualify. Hindi lang isang sweaping statement.
1. To Order Document: Indorsement (Blank or Special) and Delivery
2. To Bearer Document: Delivery only

Parang negotiable instrument. Pero may pagkakaiba.

Eto ang pagkakaiba:

When you talk about endorsements under the negotiable instruments law, there arec5 ways of doing it.
But endorsement under the civil code, could only be in blank or special.
Walang conditional, walang qualified, walang restrictive.
Kapag sinabing in blank, yung may hawak, I sisign.
Kapag special, he writes the name of the transferee, then he signs. Pareho din ng blank at special in the NIL.

Eto ang isa pang pagkakaiba:

In the NIL, if an instrument is especially endorsed and delivered,
The transferee who may further want to negotiate it, can endores in blank and deliver. And the NIL says when the
only(?) or if the last endorsement is in blank, it becomes bearer and may further be negotiated by nere delivery.

Ngayon, iba sa civil code.

Sa civil code, kahit iyan ay delivery to bearer, but once it is especially endorsed, kahit kalian magkaroon ng special
endorsement
Further negotiation requires endorsement and delivery.
Hindi kagaya sa nrgotiable instrument nap ag nagging bearer puro delivery na lang.
Sa Documents of title, basta nagkaroon kahit kalian ng special endorsement, further negotiation requires
endorsement and delivery.
Kahit na blank, it requires endorsement and delivery.

If Originally To Bearer, then specially endorsed and delivered, the transferee must also negotiate by
endorsment and delivery.
(TIP) NOTE: Once it has been especially endorsed, negotiate by endorsement and delivery all the time
thereafter
EXCEPT IF the last endorsement is in blank, then just deliver it subsequently

DIFFERENCE WITH NI: Endorsement in a bearer NI has no effect.

 BILL OF LADING

Governing Law: Code of Commerce

Who issues BOL?

Common Carriers

Kinds:
 Bill of Lading – Common carrier of goods by water
 Waybill – by trucks on land (land carrier)
 Airwaybill – by aircrafts, airlines

Form of the Bill of lading

1. It must be printed (Under the Code of Commerce)
Ano ang dapat i-print?
Pangalan ng carrier and its complete address
2. It must contain the complete name and address of the carrier
3. It must contain the telephone number of the carrier

Content of B/L (Code of Commerce)

1.) Complete name and address of consignor/shipper.
2.) Complete name and address of consignee.
3.) Complete name and address of the carrier/shipee (NCC).
4.) Complete description of goods including marks and markings, e.g. Numbers on crates, Names in pomelo
crate from Davao
5.) Amount of fare
6.) Stipulations on limited liability (limiting of one’s liability in case of loss or damage.
Terms and conditions: (Dean gave examples on how the carrier limits their liability, like 50 pesos per box in
case of loss unless the shipper declares the actual valueof the goods and pays the corresponding fare.
Yan bang mga printer stipulsations na iyan ay binding on the shipper although the BOL are signed only the
the carrier’s representative? The answer is YES.
Ang sabi ng SC, contracts are perfected by mere consent and consent could be implied.
Kung ako yung common carrier at ikaw ay may ipapadeliver sa akin, inabot mon a, inissuehan kita ng bill of
lading, sa BOL, naka print na in case of loss, the liability shall only be 1 peso. Tinanggap mo, hindi ka naman
nagreklamo. Sabi ng SC that is binding on the shipper. Because contract is perfected by mere consent even
if it is only implied. Kaya lang dapat yung print na iyon must be legible.

Kasi mayroon naming kaso, sabi ng SC, where the prints are so small that they could hardly be read, then it
may not be said that the shipper has been informed and that it has given its consent.
Kaya kung magpapaprint kayo dapat 4 or font 6. or point 14. Para pag umabot sa SC legible.)

- Nature: Contract of Adhesion but it is not prohibited; it is only interpreted against the party who cause the
ambiguity

Q: Are printed stipulations on Bill of Lading binding on the shipper even if the shipper does not sign?
A: GR: Yes, a contract is perfected by mere consent. Here, consent is implied even if it is signed only by the
carrier’s representative.
(TIP) EXCEPTION: There is no consent if print is too small that the shipper could not have read it as in the
Shewaram Case.

When a bill of lading has been issued by a carrier does it give a conclusive presumption that the goods were received by
the carrier?
Effect of Issuance of a B/L: No. Disputable presumption that the carrier received the goods. It is not conclusive.

Purposes of Documents of Title and Bills of Lading (Applicable ito sa warehouse receipt)
1.) As a Receipt Resibo. Kasi idedeliver mmo yung goods. Syempre tatanggapin niya. Pag common carrier, issue
iyan ng bill of lading, warehouseman naman, issue iyan ng warehouse receipt.
2.) As a Written Contract between parties- because of the printed stripulations. As I said earlier, tgose printed
stipulations are binding on the shipper or depositor. Because contracts are perfected by mere consent and
consent could be implied.
3.) As a Symbol, standing for the goods mentioned therein (Symbol) – kasi kung inene-gotiate mo na, di mon a
kailangang dalin yung goods, tama na yung papel. Yun na ipasa mo. And that transfers the goods covered by
it.

WAREHOUSE RECEIPT

Governing Law: GENERAL BONDED WAREHOUSE ACT governs the conduct and business of warehousing

Who issues WR: Warehouseman.

(Dean identified areas in manila where warehouse could be found and how heavy equipments are used inside the
warehouse)

Lahat ng papasok sa negosyong warehousing are required to post a bond.

Kaya lang iba pa yung custom bonded warehouse.

Ganito naman yung custom bonded warehouse,

Kung halimbawa ako ay nasa garments. Gumagawa ako ng RTW.
Ang mga produkto ko use imported materials. Lahat ng finish product ko, export not for the local market.
Dahil nag import ako ng rawaterials- tela, pagbabayad ko dapat iyon ng custom duties at taxes.
Mayroon naming priviledge that if the finish product will be exported, refund dapat.
Dati, ang practice, kung ako yung importer and I will convert the imported materials into products and then later on
export. Dati, I was entitled, tawag dati don ay draw back. I-rerefund yung binayad.
Kaya lang ang problema naman sa government, pag naibayad na, ayaw naming magsoli.
Kung magsodsoli, paduduguin ka. You do not get it over night.
Pang matagalan.
Ang tinding follow up nyan. It could take years before you get your draw back.
Kaya nag rereklamo yung mga importers.
Ano naman ang incentive naming. Ang tagsal tagal bago i-refund.
By the time i-refund, millions na yung na-accumulate.

Nagkaroon ng arrangement sa government. Yung mga ganyang negosyo, mag iimport at ang lahat ng importation,
hindi ibibigay sa kanila lahat. Pasok muna yun sa custom bonded warehouse.
Ako yung importer, kailangan ko ng 1 ton of raw materials. Huhugot ako don. I will withdraw 1 ton. Wala akong
babayaran dyan. I will covert it to finish product at yung finish product ay i-eexport. Ngayon yung inexport, that will
account, that will be liquidated.

Yan yung purpose ng custom bonded warehouse.

Pasok yung goods.
Pay duties and taxes
And the goods will be converted to finish product.
Exported.
Kaya walang cash involve.
Kaya kung nagwithdraw ako halimbawa ng 1 ton ng tela. I just have to liquidate. May mga provision naman iyan for
waste stage. kasi pag naglabas ka naman ng telang 1 ton, hindi naman magagamit lahat iyon. May mga scrap don. Pag
within the permissible allowance, pwede naman iyon. Tapos, yung waste stage, ginagawang basahan. Pinagkakabit
kabit na lang. Ibebenta dyan sa Sta Mesa. Kaya nag daming nagtitinda ng basahan.

Requirements for Issuance

1. Annual license from DTI Director.
2. Bond must be posted before the issuance of a license, to answer for damages to goods suffered while the
goods are in storage. The bond is coterminous with the license.
3. Insurance against fire over all the goods stored in the warehouse.

Is there a prescribed minimum area for warehouses? NONE.

What is its difference with a Customs-Bonded Warehouse: WH is licensed and bonded, while a customs-bonded WH
is a facility by importers of raw materials.

What if a warehouseman issues more copies of WH receipts: He must indicate that it is only a copy and not the original.
Otherwise, he is liable to a TP who receive it in GF and for value
If a warehouseman issues more than one copy of a warehouse receipt, he should indicate on copies that they
are merely copies and not the original. If he fails to indicate it as a copy and a person in good faith received
the receipt for value, he would be entitled to the goods as if his warehouse receipt were original.

Negotiability of WH Receipts
A warehouse receipt is negotiable or non-negotiable.
If negotiable, look for the words of negotiability.

Effect of Negotiation of the warehouse receipt: BY negotiation, the Transferee acquires the direct obligation of the
warehouseman to deliver the goods tho him.

What are required to oblige the warehouseman to deliver the goods to the holder of the warehouse receipt?
1.) Person claiming the goods must first satisfy all the liens of the warehouseman.
2.) He must surrender the original (warehouse receipt) to the warehouseman.
3.) He must express his willingness to sign the receipt upon delivery of the goods to him.

Again, BY negotiation, the Transferee acquires the direct obligation of the warehouseman to deliver the goods tho
him.

Halimbawa, ako yung warehouseman, and depositor ko si pEdro.

To pedro, I issued a warehouse receipt.
Nai-negotiate ni pedro kay Maria.
Maria is now claiming the goods.
And I’m seeing Maria for the first time in my life.
Pwede ko bang itanong kay Maria, Mam, have we met before?
Sabi ni Maria, “hindi sir, ngayon lang ako pumunta ditto.
Pasensya na mam. Alam nyo kabilin bilinan ng nanay ko, don’t talk to stranger.
Pwede ko bang sabihin iyon? Hindi.
Kasi, through negotiation, the transferee acquires the direct obligation of the warehouseman to deliver the goods to
it.

Ano naman ang requirements so that the warehouseman could be obliged to deliver?
Binanggit ko kanina, tatlo iyan.

Oh mam, ok na, bigay ko na syo.

Kaya lang mam, may mga dapat bayaran.
Unang una – storage fees.
Kasi yan ang negosyo ng warehouseman.
Kaya kumikita ang warehouseman gawa ng storage fees
kaya dapat bayaran iyon.
And for as long as the storage fees has not been paid, warehouseman cannot be obliged to deliver
Reason is: warehouseman has a possessory lien over the goods na pag binitawan niya, wala na. Wala na syang habol.
Parang mechanics lien, ang mga mekaniko, may mechanics lien.

Ano ba yung mga liens ng warehouseman?

Yung depositor that could have an arrangement with the warehouseman, maaring sabihin ng depositor, boss yung
shipment ko ngayon, may kamahalan. Pwede bang pakikuha mo ng additional insurance coverage.
O sige, walang problema, pero akin na yung pambayad ng premium
I-advance mo na lang muna.
Ah, may patakaran ang warehouse, early advances ay may interest na 2% per month
Ang sabi ng depositor, sige po.
So, advances made by the warehouseman, they form part of his lien.

Kung nakapasok na kayo sa malalaking bodega,

You notice that there could be other activities going on.
Maaring ganito, ako yung warehouseman,
Ikaw yung depositor
And you bought into my warehouse crates of spices
kasi importer ka ng spices.
Dumating yung importation mo, crate ganito kalaki.
Ang laman, pepper cotrns galling India.
Ang sabi mo, ‘Boss, ang dumating sa akin, pepper corns, pwede ba nating i-repack? Kasi, ito , ibebenta ko sa mga
retailers.
Sabi ko, ano gagawin nating repacking?
Pwede bang bibigyan kita ng sachet. At sa bawat sachet, 10 peppercorns?
Sa palengke diba, repack.
Kaya, total nakabodega naman iyan, di pa ibebenta, maki-repack.
Sabi ko, ‘Oh sige, kaya lang, eto labor ko.
They will all form part of the liens of the warehouseman

Kaya kung i-pupull out na yung goods, bayad lahat.

Storage fees, amounts advance for the additional premium on insurance and the cost of repacking or repackaging.
Although bawal, kaya lang ginagawa naman. Hindi naman masama kung hindi nahuhuli.
Kung ang nakalagay don sticker made in China, lagay mo, made in Germany.
Bawal iyon ha?
Yun ang lien, kaya dapat bayaran lahat before the warehouseman could be obliged to deliver.

Liens of the Warehouseman Bayad pag i-pupull out na yung goods

Nature: Possessory and Waivable by parting with the goods
1.) Storage fees
2.) Other arrangements with the depositor, e.g. premium and interest for additional insurance coverage
Advance made by the warehouseman
3.) Cost of packaging and repackaging (though the latter is illegal)

The one claiming the goods must surrender the original receipt?
What if Nawala nya.
That is a big problem on his part
Why? Because if that is a negotiable warehouse receipt, at sinasabi mon a Nawala mo, malay ko kung Nawala mo,
baka na i-negotiate mo sa iba.
Kaya kung ibibigay sa iyo,
O kung wala ka na, tapos may dadating, hawak niya original, I will be obliged to deliver e problema na i-deliver ko na.
E di I get sued.
So, If the original got lost, that is a big problem on the part of the claimant.
Because he has to go to court and prove his rights

Effect of Loss of Original Receipt

- The claimant must file an action in court to prove his ownership or right over the goods. The cort requires the
claimant to post a bond to secure the warehouseman of his rights over the goods which bond shall later on answer
when later on someone comes with the original and he would be claiming the same goods.
In practice, the claimant merely posts a bond with the warehouseman.
- It would be the claimant’s problem because he cannot oblige the warehouseman to deliver the goods without the
original receipt
- To protect the warehouseman, the claimant must post a bond for the value of the goods.

Next requirement, the one receiving the goods must sign

That he has received the goods.
Kaya mapapansin ninyo, yang mga warehouse receipts na iyan, doon sa ilalim nakalagay, received the above goods in
good condition.
Yun lang ang pinipirmahan

And what should the warehouseman do after having delivered the goods to the claimant?
Q: What should warehouseman do with the original receipt?
A: The law obliges the warehouseman to Cancel it. If he fails to cancel it and the receipt falls into the hands of someone
in good faith and who got it for value, warehouseman is liable to the person.

Paano mag cancel? Sulatan mo ng word cancel

E kung yan naman ay araw-araw mong ginagawa, maya’t maya mo ng ginaagawa e magpagawa ka na ng rubber
stamp.”cancel.
Kung high-tech ka naman, i-daan mo sa paper shredder. Doon mo idaan.
The point is, it wont be negotiated anymore.
Because the law says, if the warehouseman failed to do that, and that warehouse receipt would fall into the hands of
another person, who acted in good faith and paid value for it, the warehouseman should be liable to third person.

The warehouse receipts provide that if a warehouseman would issue more than 1 copy, of a negotiable warehouse
receipts, on the copy or copies,
He should state that it is not the original or it is merely a copy.

Ako warehouseman, depositor ko si Pedro, sabi sa akin ni Pedro, ‘Boss, yung mga goods na ipapasok ko ngayon sa
bodega mo, ibebenta ko din iyan sa aking mga customer.
Gusto ko na ang lahat ng warehouse receipt na i-isyu mo para sa akin, ilagay mo ay delivery to bearer. Kasi yung mga
customers ko na ang kukuha rito.
Oh walang problema,
‘boss meron pang isa,

For every warehouse receipt that you will issue, give me an an extra copy.
Kay sya humingi ng extra copy kasi pag iyong original ay pinasa niya,
Kinakailangan din syang mag maintain ng libro. Kailangan may kopya sya, di naman pwedeng zerox copy lang.
Kahit na pwede, ayaw nyang magpazerox, saying naman.
Cost pa raw iyon.
Kaya sabi nya, ‘Boss, bigyan mo ko ng extra copy.
In short, if I wanted business, no problem.
Bibigay ko sa kanya yung original, the very first copy.
Bibigay ko din sa kanya yung second copy, dapat nakalagay don na it is not an original or that it is merely copied.
Maaaring nakatatak doon duplicate, or pwede nakatatak doon C-O-P-Y. copy.
Ibig sabihin, hindi original iyon.

Why?
Baklit dapat lagyan?
Because the law says, if the warehouseman would issue more than 1 copy of a negotiable warehouse receipt, on the
copy or copies, he should indicate that they are not the original, or that they are merely copies. And if you would faul
to do that, he shall be liable to any person who would come into possession of those copies and said person shall be
considered having in his possession an original copy.

Kasi sa law nga naman, sa rules of evidence, matatandaan nyo, may tinatawag tayo na duplicate original, at mayroon
pang carbon original.
Ngayon, duplicate original, carbon original, have the same probative value in court. Kaya dapat para hindi lumabas
iyon na original iyon at iyon ay kopya lamang, tatakan mo. “Duplicate, triplicate, quadroiplate, sabi mo gastos lang sa
printing iyan, e di kumuha ka ng rubber stamp. COPY. Tapos itatak mo.

Kaya kung may magtatangka sa iyo, Oh may 100 crates ako ng apple, binebenta ko, kung ikaw ang kumuha Nakita mo,
Oh bakit may COPY ito, wag mong tanggapin iyon. Second copy lang iyon. Pag binigay mo sa warehouseman, asan ang
original? Eh original naman iyan. Boss, kaliwa liwanag naman, copy lang iyan.

Reduced – pinapalitan ng bago para walang alternation.

Q: May goods covered by a document of title be levied upon on attachment for execution?
A: Yes.

SECRECY OF BANK DEPOSITS (R.A. No. 1405)

Purpose of the law: To encourage people with money to deposit their money with banks for the purpose of promoting
the national economy.

Scope: Includes investments in government securities

Reserve Requirements
What: Percentage of deposit received by the bank is to be deposited with the BSP

How much: Percentage depends on the deposit liabilities

1. Highest – Checking
2. Medium- Savings
3. Low – Time Deposit

Q: How does BSP use reserve requirements to manage money supply? Why is there a need to manage money supply?
A: If there were a lot of money in circulation, prices would go up. The reserve requirement is also there in order for
the BSP to have money to lend to banks.

REDISCOUNTING FACILITY
- Promissory notes are used as security
Note: It is (it is a crime) illegal for a bank officer or employee to disclose any information regarding bank deposits
(either in savings, check or time accounts) and including investments in government securities.

Penalty is fine of 2o thousand pesos or imprisonment of up to 5 years or both at the discretion of the court.

Tandaan nyo, hindi lang deposits pati investments in government securities. This was asked in the 2015 Bar exam.

Exceptions:
1. Written authority from depositor himself – Self explanatory
2. In case of impeachment – ex. Clarissa Ocampo
3. Court order in case of bribery, dereliction of duties of public officer, violation of Anti-graft and Corrupt
Practices Act, extending to the spouses and relatives, close friends and associates in cases of AGCPA
4. Where the deposit is the subject matter of litigation – Must be read literally, e.g. settlement of estate; wife
channels funds out of a corporation
Other cases? When the Supreme Court made a pronouncement.

Ganito yung kaso, it’s about a FAMILY CORPORATION

President was the husband,
Wife was the cashier.
Unknown to the husband, wife was taking out funds from the corporation
When the husband found about it, he caused his wife to be charged criminally. Ang sabi, pakulong na kita.
The Private Prosecutor filed a Motion to orrder the bank where the wife was maintain her account to bring records
of her deposits. Doon yun sa criminal prosecution.
There was an objection invoking the Secrecy Law
Supreme Court said NO. There should be No inquiry
Because it was said in the law, where the deposit is the subject matter of the litigation. As I said, it has to be read
literally. Hindi pinayagan kasi yung kaso, criminal prosecution. Ang issue, whether or not the wife took funds of the
corporation. Hindi naman pinagtatalunan yung deposit nya.
Sabi ko sa inyo, you have to read it literally.

You might ask, kalian iyon?

Eh halimbawa, yung mga heirs, ang pinagaawayan ay may issue about inheritance. Ang issue don, halimbawa,
magkano deposit sa bangko. That will be the subject matter of litigation.

Yung sa asawa, ang issue don, nagnakaw ba si babae, yan ang issue. Hindi iyong deposito nya. The intention of the
private prosecutor bring records of her deposit para makita yung nawalang pera sa corporation ay doon na punta.
Kaya lang may objection and the objection was sustained by the Supreme court.

There are exemptions in other laws. Yang other laws naman ay di kasali sa bar. So we leave ourselves with what is
covered by the bar. An example, yung:

5. By Order of the CA in relation to the Anti-Money Laundering Act

6. Examination of books of banks by the BSP – syempre pag inexamine yung libre, kita deposits
7. Examination of books by Independent auditors they are not bank employees/officers.
Ang mga bangko big corporations, kaya yung kanilang mga financial records have to be examined by
independent auditors.like SGV. Syempre pag in-examine iyon ng mga auditors e di kita. .
Kaya lang, these are covered by other laws.

AS far as the law is concerned, apat lang.

1. Written authority
2. In case of impeachment
3. Written order from the court in case of bribery, dereliction of duties of public officials, and violation
of Anti-graft and Corrupt Practices Act,
 4. Where the deposit is the subject matter of litigation

Not part of the bar exam pero Mabuti na din na alam ninyo
There is a law known as
FOREIGN CURRENCY DEPOSIT ACT

It is the law that authorizes deposit with our banks in foreign currency.
You deposit foreign currency, you also withdraw foreign currency.
Pag nagdeposit ka ng dollar, may dollar account ka, you can also withdraw in dollars. Hindi kung nagdeposito ka ng
dollar, pag nagwiwithdraw ka, hindi ibibigay sa iyo peso, dollar din.

Under this law absolute prohibition.

Not Subject to garnishment
Yung deposits in Philippine peso, they can be garnished.
That was assailed as a violation of the law.
Kaya lang sabi ng Supreme Court, kapag ginarnish, hindi naman dinidisclose yung details nung deposito mo. The bank
simply delivers to the court, the amount stated in the writ of execution. Walang dinidisclose kung magkano pa balanse
mo and other information.
Kaya sabi ng Supreme Court, no violation of secrecy law if the deposit in Philippine peso will be garnished.

Kaya lang yung sa Foreign currency deposit act, by express provision of the law itself, not subject to garnishment

Although Supreme Court violated the law because in 1 case, the SC

Ordered the garnishment of a foreign currency deposit of a foreigner who was convicted of the crime of rape.
Wala naman tayong magagawa kapag SC ang nag order.
Jurisprudence na lang.
As far as the law is concerned, absolute prohibition. So fatr, isa pa lang naman yan.

GENERAL BANKING ACT OF 2000

What is a bank?
Under the law, it is a stock corporation that lends money from deposits.
Kasi ang bangko lang naman ang pwedeng tumanggap ng mga deposit.
At iying mga dineposit, pinapautang naman.
And banks should be organized as a stock corporation.

A bank is a stock corporation that lends money from deposits.

Definition: BANK
- It is a stock corporation authorized by the Monetary Board to accept deposits from the public and to grant loans.

Lends money from deposits

How are banks classified? (already asked in the bar)

Enumeration of 6
Enumeration starts with the biggest capitalized bank.Papunta sa pinaka maliit.
Kinds of Banks
1. Universal Banks
2. Commercial Banks – less capitalized
3. Thrift Banks – less capitalized than universal which could either be
 a. Savings and Mortgage Bank – retail banks catering small deposits; accepts deposits of small
depositors for home-building purposes (Amount is smaller than those of the universal bank’s, e.g.
P500 in BPI Family Bank)
b. Private Development Bank – accepts deposits and grants loans; once the bank runs out of capital, it
can invite the DBP to invest in it and DBP would require membership in its BOD; “Development” is
in its corporate name
c. Stock Savings and Loan Associations – it can be non-stock, where it cannot accept deposits from the
public but only from the restricted groups of persons.
(Ultimo yung mga thrift banks na iyan ang pagkaka organized is base on paid capitals. Kaya ang
pinakamalaking paid up capital among the thrift banks is the savings and mortgage bank, less is the
private development bank and least Stock Savings and loans Associations)
4. Cooperative Bank
5. Rural Bank
6. Islamic Bank

Sentral bank – Bank of banks

- Supervision over banks in the Philippines

Commercial Bank

Definition: It is not defined in law. The law only identifies its powers and functions:
1) To accept deposits in checking accounts (inherent in the function of a commercial bank ay tumanggap ng
deposito in check or current account)
subject to withdrawal by check.
However, the BSP may license other banks to accept similar deposits
2) To open letters of credit. (basic and inherent. Other bank, lower category, pwede din. Again, special
authority)
MB licensed savings bank to do the same, e.g Ph Business Bank
3) Other functions: acceptance of deposits in saving accounts; granting of loans, leasing of safety deposits (basic
bank functions)
4) To engage in allied enterprises
5) To exercise the powers of a corporation

(bakit dyan sa BPI saving, may checking account ako? O dun sa Sterling bank of Asia mayroon akong checking account?
Kung mayroong bank na lower in category could accept checking account, it is not inherent but by reason of special
authority from the Monetary board. I-aapply mo yon.
Halimbawa, ikaw ay thrift bank, gusto mo ay checking account, i-apply mo yan for special authority to accepts deposits
in checking account kaya mapapapansin nyo ganito, kung ikaw ay lower category bank at nabigyan ka ng authority,
mapapansin ninyo, mas mataas ang maintain balance kasi pag Universal bank, Commercial bank, usually ang
maintaining balance nyan ay 20k pesos sa checking account. But then you are going to deposit in a checking account
with a lower category bank, I think 50K pesos.)

As a matter of right, only commercial banks should accept deposits in checking accounts/current
accounts/commercial accounts/demand deposit
1.) May issue letters of credit
2.) Lend money
3.) Trading of government securities
4.) Foreign transactions
5.) Safety deposit box

Ownership of Other Banks

KB can own 100% of just one other KB. There is no limit on the number of smaller banks it can own.
Why: To encourage merger or consolidation.
Commercial bank limit is 35% of equity, but still with a maximum of 25% per industry.

Universal Bank
Ano ba yung Universal bank?
Waala naming definition, nakalagay lang, it’s a Commercial bank that may engage in the business of investment
bank.
Biggest capitalized bank

Nature: Actually a commercial bank, but also authorized by Monetary Board to engage in the business of an
investment house.
Yung universal bank ay commercial bank, yun nga lang, it can engage in the business of investment house.

Functions and Powers:

1) To accept deposits (in check or cash) subject to withdrawal by check.
2) To open letters of credit. (basic/inherent)
3) To engage in business of investment house
4) To engage in allied or non-allied enterprises. Non-allied enterprises have nothing to do with banking.
Example: Universal bank can sell insurance policies (Di ito pwede sa Commercial bank)
5) To sell life or non-life insurance policies – cross-selling with insurance companies where bank owns 5% of
outstanding shares

Definition of an Investment House

Mayroon ba kayong alam na investment house?
State investment House Incorporated.
Yung sa crossed check, we always refer it to the ruling in the CE and State Investment House Incorporated.
House of Investments Incorporated

Q: What is an investment house?

Ano ang negosyong Investment house?
Basic function ng Investment house?
1. Rediscounting of receivables
2. Underwriting for securities

A: It is a quasi-bank with two major functions:

1.) Rediscounting of receivables – one entity goes to an Investment House and as collateral pledges its
receivables. (Ex. Business sells on credit and needs capital again, so it borrows from an Investment House)
kapag ang bangko ay nanganagilangan ng pera, uutang ito sa Sentral Bank, ang collateral ay receivables from
its own borrowers. Kaya lang, hindi lang naman bangko ang nagpapautang. Marami ding commercial
establishments ang nagpapautang. Halimbawa, Automatic Center. Western Marketing, Ansons, Abenson.
Diba, pwede kang bumili ng appliances dyan on installment. Anong ginamit nila pambili ng appliances na
iyon? Ang kanilang paid up capital. Ang papautang sa iyo, 1 year to pay, gaano katagal makokolekta ng buo
yung pinautang sa iyo? Kung 1 year to pay e di isang taon. In the meantime, kinakailangang magreplenish ng
stocks iyon, saan kukuha ng pera? Yung mga merchants who are selling goods on installment, they used their
paid up capital. What if they already used their paid up capital? Ano ang gagawin nila? Syempre
magpaparediscount sila. Saan naman sila magpaparediscount? Sa investment house. Hindi sila pwedeng
magparediscount sa Sentral bank. Kasi ang sentral bank, ang pwede lang i-rediscount nyan ay mga bangko.

Bataang Cigar and Cigar Factory VS Ce - Yung Bataang Cigar, ang business nyan ay manufacture of Cigar and
cigarettes. Where does Bataan source it’s Tobacco? Saan ba maraming nagtatanimng Tabacco? Sa ilocos
Region. Kung ako ang Bataan, magpupunta baa ko sa Ilocos? Hahanapin ko ba yung mga farmers na
 nagtitinda? Hindi. Bat ako mag aabala. May mga tinatawag kasing mga salesmen. Itong mga taong ito,
pupunta saa Bataan Cigar. Ano ang Tobacco requirements ninyo? Anong variety? Yung mga ganun ang kausap
ng Bataan. The modus operandi, kung ano ang variety, may kausap silang salesman, sila naman ang may
kausap na farmers. Bataan would place an order at an agreed price, and the pinagkasunduan presyo, iisuehan
na ng Bataan ng postdated checks in the name of the salesman. Bataan made it crossed check. Si Saleman
kailangan ng pera pambayad sa farmers. Ginawa ng saleman, dahil ito naman talaga ang negosyo ng CE, Oh
eto may check ako rito mula sa Bataan. Ang ginawa naman ng CE kasi ang negosyo niya ay rediscounting, Oh
sige. Pasa mon a sa amin iyan. I-endorse mo. We give you cash, deducted yung pinag usapang interes. Yung
salesman, hindi naming ng tobacco leaves which Bataan order. Kaya nung hindi natanggap ng Bataan, yung
order by a certain day, nag issue ng stop order. Kaya when the day stated arrived, ang ginawa ng CE,
dineposito na. But the check was dishonored. Because of the stop payment order. CE sued Bataan claiming
that it was a holder in due course. SC said you do not qualify as a holder in due course. Because the first
order of a holder in due course is that the instrument must be complete and regular upon its face. That check
is crossed. As the check is crossed, it is not regular upon its face.

Ang daming merchants ang nagpapautang. Isa yang Emilio S Lim. Ano ang ginagamit niyang pamimili? Capital.
E pag nabenta na? matagal masingil.

Kun wari mayroon kang 50 million pesos. Binili mo lahat ng assorted appliances. Grand opening sale. Unang
araw, sold out ang lahat. E di wala ka ng stock. Wala ka ng pera, kasi lahat pinautang mo. Magsara ka muna?
Mayroon bang ganung negosyo? Kailangang magkapera agad. Yung receivables mo, yung promissory note
mo, parediscount mo sa investment house.

2.) Underwriting of securities where a corporation offers to the market securities for sale with certain
commitments (ex. In corporation that needs more capital that can’t be raised from stockholders – securities
only if 20 or more persons) Get SEC approval first, then have them sold by securities underwriters
Committing on a firm basis or best efforts to raise the money needed by the client

Have you read the plan of San Miguel Corporation to construct a new airport in Bulacan bulacan? Nadyaryo yan.
Sa NEDA. It would only be subject to the so called, swiss challenge. At malamang wala. Kasi yung mga other rich
corporation. They formed a consortium for the development of another airport. Kaya ng San Miguel lang ang
nagplanong mag gawaa ng airport sa Bulacan Bulacan. The estimated cost is 750 Billion pesos. Ang tanong meron
bang ganung kalaking pera ang San Miguel? Wala. Bat naman ganun kalakas ng loob ng San Miguel na magpropose?
Kasi alm ng san Miguel kung saan kukunin ang pera. Saan? Public. Sa atin. Paano gagawin? Paano malalaman ng San
Mguel na may pera tay? Ganito gagawin niya. If San Miguel gets the project, kailangan ng Funds, ang gagawin ng San
Miguel, it will file with the SEC. Kailangan mag open tayo ng preferred shares worth 750 billion pesos. I-papaapprove
muna iyan sa SEC. Wala naming problema ang San Miguel because San Miguel is very solvent. mOre solvent than the
Phil government. Approved na. Makikipag usap ba sa atin ang San Miguel? Hindi. Sino ang makikipag usap sa potential
investor? Yung mga underwriters of securities.
Ganito ang ginagawa, Kunyari approved na. Ako yung San Miguel, I have to engage the services of 10 investment
houses. Pag sinabi kong investment houses, kasama dyan ang universal bank. Kasi ang universal bank, also engages in
the business of an investment house. Madami iyan, pwedeng Bank of PI or pwede ding BPI Securities, sister company
iyan ng BPI pero iyan ay investment house. Pwede ding Bangko de Oro, BDO Securities. Yung mga corporation na may
securities as part of their name, some of them could be investment houses or pwede ding securities dealer.
San Miguel, namili ako, eto, eto, eto, siguro madaming connection ito. Halimbawa 10 kayo, invite for lunch. May
proposal ako sa inyo. SEC will just approve my preferred share offering of 750 billion pesos. Magkano kaya mo BDO,
ikaw security bank? Alam nila magkano ang kaya nilang i-akyat. Why? Mga bangko, alam kung sinong depositor ang
madaming pera. Computer, tingnan mo, kung sino ang may mga malalaking deposito natin. Ayan. Nakalista. Sa bangko,
mag-aassign iyan ng account executive. Eto assignment nyo, tawagan nyo isa-isa ito at offeran nyo ng San Miguel
preferred shares. E di, pa-isa isa iyan. (discussion on how an account executive calls a depositor and ask them to invest)
Yun ang underwriting of securities, committing on the best basis or effort to raise the money needed by the client.
Ano ang mapapala ng mga investment houses?
May commission yan.
 For whatever they will be able to raise, they get a percentage.
For your info, now a days pag nagoffer yang malalaking company ng preferred shares, lagging over subscribed. Ibig
sabihin kung kailangan lang ng 50 Billion pag pinagsamasama yung nag raise ng intent, umaabot ng 200 billion. E ang
approved lang naman 50. Sobra sobra talaga.

If the deposit is more than 5 years, it’s tax free. Kaya mag time deposit ka ng 5 years and 1 day.

Underwriting of security is an inherent and basic function of an investment house, which function may be
exercised by a universal bank

Example: House of Investment, Inc. and State Investment House, Inc.

Ownership of Other Banks

UB can own 100% of just one other UB or KB. There is no limit on the number of smaller banks it can own.
A commercial bank can own 100% of another commercial bank.
But we do not have any example, the reason is when a universal bank acquires another universal bank, they merge.
One survives , the other or others are dissolved.
Like when Equittable acquires PCI bank, it became Equittable PCI Bank. Survivor was Equittable. Then later Equittable
PCI was acquired by BDO. They merged. Survivor was BDO.

Commercial Banks, sa totoo lang, iisa na lang ang local na commercial bank. Bank of Commerce. Of course may foreign,
Standard Cahertered, HSBC, kaya lang, these are foreign banks. And they are just doing business in the Philippines.
Most common experience, a Universal bank, acquiring a thrift bank. Best example RCBC acquiring Capitol
Development and then another Security bank acquiring Premier Development. Kaya lang, they have not merged.
Although yung RCBC at RCBC Savings, there are already news article that they will merge. Kaya lang yung Security
bank having acquired Premier Development bank, yung Premier bank became the Savings bank of Security Bank. Yung
China Bank, a universal bank, having acquired Manila Banking Corporation and then later, Manila banking was made
China Bank Savings.

Hindi pwedeng Commercial acquiring universal.

Hindi din pwedeng Thrift bank acquiring commercial or universal.
Kinakailangan yung malaki, sa small one.

The law also provides that a Universal can also engage in both allied and non-allied enterprises.
On the other hand, a commercial bank may engage only in allied enterprise.

Best example of a non-allied enterprise is the case of Universal Banks.

Universal Banks can sell insurraance policies.
It has been a very good source of income in the case of Universal Bank
Kaya lang, Commercial bank, hindi pwede.
It’s only universal banks that can do, ang tawag dyan, bancassurance.
One word.

Q: if Universal Bank invests allied or non-allied, what is the limit?

A: Equivalent to 50% of net worth but only up to 25% in a single enterprise

Thrift Bank

Kinds:
1. Savings and mortgage bank –To lend money to those that want to construct houses. For small depositors
(small amounts of money). Banks prefer big depositors as maintenance costs are the same
It is a bank that accepts deposits of small depositors for the purpose of home building. Kaya lang may
kalabuan yang definition na iyan. Lumalabas, yung depositor ang maliit. Ang small talaga ay yung deposit,
hindi yung depositor.
Pag saving deposit, ang pwede lang bang ideposito don ay maliit? Pag malaki na ba, hindi tatanggapin. Ganito
kasi, kung ikaw ay minimum wage earner and you thought, planning for your future. Ang sabi mo, magumpisa
na kaya akong magsave ngayon pa lang. So bawat pay day, magtabi ako ng 100 pesos kaya in a month may
masasave akong 300 pesos. After a year, mayroon ka ng 2400. Yung nasave mon a iyon, nasa lata lang iyon
ng biscuit sa bahay. Kaya sabi mo, ideposit ko na ito sa bangko. Hard earned money iyon kaya tanong tanong
ka. Ano kaya ang safe na bangko na makapag deposit? May nagcomment kung safe at safe lang din naman ,
walang dadaig sa BPI. Kasi noong panahon pa ng Kastila iyan. Very conservative. Dala-dala mo yung 2400 mo.
Pasok ka ng BPI. Punta ka don sa New Accounts teller. Ang sabi mo sa New Accounts teller, mam, mag-open
po ako ng savings account sa inyo. Yung teller ang sabi, eto sir paki-fill up. Teka sir, magkano po ba idedeposit
nyo? 2400. Naku sir, pasensya na po kayo. Binawi na agad yung form. Hindi po kami tumatanggap ng ganyang
kaliit na deposit. Kasi sa amin at least 5000 pesos. Kung mababa pa, hindi kikita, mamumultahan pa kayo.
Kasi going below maintaining balance. Na insult ka. Minaliit yung hard earned savings mo. Maliit daw. Saan
ka pupunta ngayon? Maaring sabihin sa iyo, sir, doon kayo pumunta sa sister company namin. BPI family
savings bank. Sir, 1000 pesos lang pwede na. May atm card pa kayo. Although may mas mababa, China Bank
avings 500 pesos lang may atm ka pa. Yun ang mga thrift banks.
Ano ang ginagawa ng mga thrift banks sa deposit?
Ipinapautang for home building.
Kaya “It is a bank of deposits that accepts small deposits of small depositor for the purpose of home building.
Kung gusto mong bumili ng houe and lot or magpatayo ng bahay, wala ka naming pera. O kaya kulang. From
where do you borrow? Unahin mo ang pag-ibig. Kasi sap ag-ibig fund, “ang pinaghirapan may katuparan” 😊
E hindi ka qualified. Kulang ka pa sa hulog. Lahat ng bangko, universal bank…may housing loan. Delikado lang.
Why? Tatapatin ka naman. Sasabihin, sir, etong rates na ito, good only for 2 years, after 2 years, subject to
adjustment in case, gagalaw ang market rates. Ay delikado iyan, kasi pag gumalaw ang market rates, kahit 1
percent lang at ang inutang mo ay 2M aba ang 1% ng 2M ay 20k yon. Kakayanin ba ng bulsa mo yung
additional amount sa amortization? Kaya kung hindi ka sigurado, umutang ka na lang sa savings and mortgage
bank. Kasi sa savings ang mortgage bank, pag sinabing eto ang rate, straight na iyan. So based on your
resources, you can plan your savings. Pag universal bank kasi Tatapatin ka naman, eto yung rates, after 2
years, subject to adjustment depending on market rates

2. Private development bank – organized for development of community. If it needs additional capital, it may
invite DBP to invest with it. To recognize it, check corporate name, it always has development in its name.
Masmaliit sa savings and mortgage bank.
How do you recognize a private development bank?
Part of the corporate name is the word “Development”
Like dati mayroong Asian Trust Development Bank, mayroong Premier Development Bank. Dyan sa shaw 500,
mayroon dyang Luzon Development Bank. Doon sa Cubao, Capitol Development Bank. Doon sa Makati,
Planters Development Bank.
Kaya pag Nakita nyo doon sa part of the corporate name that means it is a Private Development Bank.
Mayoorng kakaiba dyan, pag Private Development Bank, it would need more capital na di na kayang i-
contribute nung mga stock holders, sayang naman yung mga opportunities. What they do is invite
Development Bank in the Philippines to invest with it. Yun nga lang, hindi basta ibibigay ng DBP yung kanilang
pera. Syempre may katapat iyong number of seats in the board. Ako yung DBP, babantayan ko yung ininvest
ko sa iyo. Some of the original directors may lose their directorship, in case DBP would like ro invest. Kung
mag iinvest ako ng equivaent ng 20 percent, aba I should have a proporte representationin the board, 20%
din.
 3. Stock savings and loan associations – There’s also a non-stock but not bank. If non-stock no ACS. If stock, may
accept deposits from general public, if non-stock only from limited clientele (ex. AFPLSAI restricted only to
AFP, PNP and family members; MESALA, Meralco employees including the Lopez group) Many corporations
have savings and loan associations and a credit union.
Kung may Stock savings and loan associations mayroon bang non stock? Mayroon. E ano ang pinag kaiba
aside from the stock structure? Pag 3. Stock savings and loan associations, it canaccept deposits from
the general public. Kaya baka pwedeng magtayo ng opisina dyan sa shaw blvd. o sa kalentong kasi pwedeng
mag walk in kahit sino.
Kaya lang pag non-stock, it can accept deposits only from a restricted group of persons. Best example. Hindi
komo’t nan-stock maliit. Hindi ha? May non-stock na mas malaki pa sa bangko. Upsline? AFPsavings..Sino
lang ang pwedeng magdeposito dyan? E di members ng AFP at PNP and their family members. Balita ko ang
laki ng interes dyan. Kaya yun, restricted group of persons. Mayroon pa yung isa, doon sa Meralco, Meralco
Savings yung tawagin MESALA. Daming resources nyan, malaki pa sa ibang bangko. (discussion on who can
open in MESALA)

Cooperative Bank

What: It is one set up and owned by cooperatives. There are no individual stockholders, all are cooperatives. Under
cooperative office, but bank under the BSP.

Organized by various cooperatives.

Kung nakapasyal na kayo sa Pilipinas, nakapunta na kayo sa agricultural areas, you noticed na in this areas, walang
branch ang BDO, BPI, Metrobank and the big universal banks, Wala. When they put iup branches in these areas, these
branches would truly suffer a loss. Yung volume of business wont justify the cost. Kaya lang kawawa naman yung mga
taga roon. What they do,ang mga farmers, wat they do is form a cooperatives. Kaya mayroong Seeds Cooperatives,
Farmers Cooperatives, may Equipment Cooperatives. Yang mga cooperatives, yung properly managed, they have
millions in resources. Kaya kung ikaw yung cooperative mayroon kang millions, saan mo iatatago yung pera mo? Sa
bangko. Anong bangko? Doon sa area, baka may rural bank pero wag doon. Baka mag sara iyon o malamang magsara
iyon. Kaya kayong mga cooperatives, magtayo na kayo ng sariling bangko. Yun ang tinatawag na cooperative bank.
A bank orgabized or set up by cooperatives yun ang tinatawag na cooperative bank. Kaya mapapansin nyo, mas mataas
yung cooperative bak sa rural bank. Kasi ang rural bank, mas maliit ang paid up capital.

Rural Bank

What: It is organized to provide banking services in rural communities, to farmers/tenants or simply stated, in rural
areas. It is recognizable by “Rural” in its corporate name.

Maliit ang paid up capital.

May be owned at most 60% by foreigners. Dati kasi ang rural banks ang requirement 100% Filipino owned. E wala,
nagkaubusan na. Sinara ng Sentral bank due to bankruptcy. To encourage creation of more rural banks, the law was
amemded allowing foreigners to own up to 60%

Islamic Banks

Note: There is only one, owned by the government of the DBP as a controlling SH.

Why: There are no interests earned on deposits because it is considered immoral, but there may be profit sharing.

To provide banking services to Muslim denominated areas.

Bakit kailangang Islam? Di ba pwedeng Christian?
In Islam, it is considered immoral to pay interest.
Kaya paano mabubuhay ang Christian bank lalo na ang bumbay bank sa Muslim community areas? E pinag uusapan
don interest e sa Muslim, masama iyan, immoral yan.
Kaya lang, kawawa naman sila. They also need banking services.
So, government created an Islamic bank.
Kaya lang wala naman nyan sa Mandaluyong.
Kung may Muslim man ditto, kaunti lang.
Doon sa Mindanao, mayroong areas that are dominantly Muslim.
Kaya doon may branch ang Philippine Allahmanah Bank.

LENDING MONEY

May any bank lend any amount to any borrower for as long as the loan will be fully secured?
NO
Because of the so called, single borrowers’ limit.

Is the bank allowed to lend any amount?

No. The amount of money lent must be secured by titled real properties and it must be subject to the Single
Borrower’s Limit, the maximum amount which any borrower may borrow.
The borrower will fully secure additional loans.
When an individual, a partnership or a corporation, they can only borrow up to a certain amount which is known as
the single borrower’s limit.

The law expressly provides that no bank can engage in the business of insurance as an insurer. Wag nyong kakalimutan
yung phrase na as an insurer. Kasi sabi ko lang kanina that universal banks can sell insurance policies.Hindi lang
pwedeng mangyari, universal bank or any other bank becoming an isurer.

And there is also an express provision in the insurance code, that no insurance company, can engage in the business
of banking. So mayron na sa insurance code, mayroon pa sa GB law.

DOSRI may borrow from banks on the condition that it is approved by the BOD in a meeting of the BOD with quorum,
without counting the officer involved in the quorum and approval votes, unless the loan is part of a package, e.g.
fringe benefits.

What is the amount of the SBL: 20% of net worth of the bank but may be increased by 10% of its net worth provided
that the additional liabilities of any borrower are adequately secured by trust receipts, shipping documents,
warehouse receipts or other similar documents transferring or securing title covering readily marketable, non-
perishable goods which must be fully covered by insurance.

Do the SBL and DOSRI include legitimate interests only? No, it includes illegitimate interests.

What is the remedy for SBL: Syndicated Loans where loans from several banks are obtained.

If secured by real property: Loans may be secured by Real Property; however, according to Section 37, the maximum
amount that may be lent is 75% of the appraised value of the land. If it has improvements, the value lent is not to
exceed 60% of the appraised value of improvements. Improvements must be insured.

REGULATION OF BANKS

Under the law, only corporations under supervision of the Monetary Board may use “Bank” or “Banking” in corporate
name.
No Corporation unless under the supervision of the Monetary Board, can add on its Corporate name the word bank
or banking.

Banks are prohibited from directly engaging in the business of insurance as an insurer BUT UB can sell insurance
policies of insurance companies which it may own.

All banks should be organized as a stock corporation and comply with the requirements of the Monetary Board for
licensing. Before a corporation can be organized, it must go through bank. After requirements submitted to the
Monetary Board and completed, endorsement by Monetary Board to SEC, which then has a ministerial duty to register
it.

There is paid-up capital required by the Monetary Board. There is a period increase in paid-up capital in order for
banks to be more stable.

For banks to open branches and installations of ATMs, it must first obtain a permit from the MB. Prior approval from
the monetary board.
In fact, even the movement from the left wing to the right wing, that also requires prior approval of the monetary
board.
I don’t know if you remember it, dyan lang sa Shangri la, sa ground floor nyan ay BDO, ngayon ay di na department
store na. Yung BDO umakyat na sa 5th floor. For security reasons. Sa ground floor nga naman, yung mga hold upper,
naka motor yan, mabilis yan lumabas. Eh kung nasa fifth floor, sasakay pa sila ng elevator or sasakay sa escalator. By
the time that they get to the ground floor, huli na sila.

Banks should have employees on permanent basis.

Q: How many directors may a bank have?

A: 5-15, odd or even, no law obliges the BOD number to be odd. If consolidated, it may have a maximum of 21.

There must be two independent directors who are neither officers nor employees of the bank.

Directors and officers – not just anybody may be a director or officer. There is the fit and proper rule.

Fit and proper rule – Monetary Board came out with qualifications. Must be a college grad.

Quorum in meetings – GBA allows meeting via tele- or video-conferencing

Bank should not acquire treasury shares of its own

Treasury Shares – shares already issued by a corporation but which shares a corporation reacquires in its own
name.

Subscribed and Issued Shares – no difference between them in terms of rights

If a bank acquires treasury shares, they should be gotten rid of in 6 months.

Under the General Banking Act, bank should cause to be published at least every quarter their financial statements.

Clearing House – Bangko Central Lending facility for purpose of collecting checks drawn on one bank but deposited in
another.

Ex. BPI Katipunan depositor deposited checks from other banks such as Metrobank and Allied Bank.

Clearing house is where banks swap checks they received drawn on other banks. Physically there is no cash involved,
but transactions recorded.
Under present rules, if within 24 hours a bank dishonors check, check should be returned or else considered cleared.

Bank cannot declare dividends if clearing house account are overdrawn. There is only movement of cash if clearing
house account is overdrawn.

New Central Bank Act

HISTORY
The Philippines got its independence from the United States in July 4, 1946
At that time, the Philippines had only 1 bank. Ibig sabihin, mayroong Bank of P.I but that’s not governed owned.
Ngayon, yung government bank Philippine National Bank – government owned. It was privatized only during the term
of president Ramos. At that time may BPI, mayroong PNB and there is a need for a government regulator. The
legislator created the Central Bank of the Philippines.
1948 – Central Bank of the Philippines (CBP) – became bankrupt
It was not nice that a country has a bankrupt central bank. Lumalabas, walang moral ascendency. Supposed to be a
government regulator yet it is bankrupt.
Kung ikaw yung bangko ireregulate ka, sasabihin mo, anong authority mo e bankrupt ka. Ako hindi.
So the legislature, in 1993 – Abolished CBP
But every country a Central Monetary Authority is needed
1993 - New Entity called Bangko Sentral ng Pilipinas
Iba iyan.
Hindi iyan, simply change of name.
It is entirely a new entity.
Hindi naman pwede na yung bago ay tawaging Central Bank of the Philippines. Otherwise, there will be confusion.
Yung makakatulong sa inyo to help you recall, yung mga old coins ninyo
Yung nauna lang. Yung luma, makikita nyo sa likod 1993. That is the year when the BSP was created.
Yung nasa harap na numero, yan yung year of minting.

BSP has a corporate existence.

It affairs are managed by a board.
A monetary Board manages the BSP
The same with the Central bank of the Philippines, except that magkaiba ang composition

Purpose of law: Because of the bankruptcy of the Central Bank, the Bangko Sentral was created, having a corporate
existence and is controlled by a board, the Monetary Board.

Composition of MB of the BSP has 7 members

1. BSP Governor. The BSP Governor has a term of 6 years, except when it is to fill a vacancy for an unexpired
term. He may be re-appointed once for a total term of 12 years.
2. Cabinet Member – depends on the President who to send, currently it is DTI Secretary (GMA – secretary of
Trade and Industry. Pinoy /Digong – Secretary of Finance)
3. 5 Fulltime directors from the private sector –Why? so that the BSP will not become a dumping ground of
political lame ducks. Private sector representatives need not necessarily be from privately owned private
corporations. They may come from GOCCs such as the DBP, SSS, GSIS but the appointment is staggered for
a 6-year term. They may be re-appointed once for a total term of 12 years. Basta hindi nagging politician

Regular term for Governor and directors: 6 years

BSP Governor and directors could be re-appointed. Max is 12 years.

Prohibition to Join Private Banks - Within the period of 2 years from separation from the Monetary Board, neither the
governor nor the full time directors may serve in any capacity in corporations under the supervision of the Monetary
Board (banks, quasi-banks and investment houses), except if he would be representing the interest of the Philippine
Government.

Business: The Monetary Board is obliged to meet every other week because it has to closely monitor the prices and
take action. (because economy is involved. Unlike in corporations where they meet only 1 a week) In every meeting,
there should be a quorum of at least 4. To pass a resolution, at least 4 members should concur. If the Governor
cannot attend, he should send a Deputy Governor. If the Secretary can’t attend, he should send an Undersecretary.

What are the corporations under the supervision of the monetary board?
Syempre banko
Investment houses
Trust companies
Those involved in foreign currencies
Those involve in remittance of foreign currencies
Pawnshops.

Not all entities involve in lending are under the supervision of monetary board.
Not all in the business of lending
Hindi lahat ng nagpapautang
Supervision of SEC ang mga nagpapautang na
1. Lending investors
2. Finance company

Ano ba ang pinagkaiba ng dalawa?

Lending investors – paid up capital is at least 1Million
Finance company is at least 10 Million

Functions of the BSP

1.) Supervision over the banking system
2.) Manages currency and money supply
3.) Purchase of precious metal
4.) Issuance of currency -
5.) Representing the Philippine government in its international financial dealings

Q; What is MONEY?
A: Any medium of exchange, anything could be money
Kahit anong ginagamit sa palitan.
US dollar is a “money” – kahit ano.
Kung kayo ay graduate ng commerce, surely you must have read about money. It is any medium of exchange.
So yung bottled water na iyan, that could also be money.
Meron kayong ballpen, ,
Euro
Japanese yen
Sabi ko, kahit ano
Seashells? Yes
Puca shells?
Basta kahit anong ginagamit sa palitan

Yung mga notes at coins natin, they are actually tokens. They represent an amount.
That is a convenient way of having something with value.

Yung seashells, money kaso ang hirap naman kung nasa bulsa mo ay giant clams. Ok lang kung sigay.
Doon sa Papua New Guinee, the only part of their body that is covered is their private parts (male) babae wala. If you
want to marry the daughter of a tribesman, you hav to pay 2 sackfull of seashells. Yun ang medium of exchange nila,
sigay.

How do you call the Philippine money?

Sa law PESO
But as printed PISO
So ano ba talaga?, you go by the law – PESO
Yung lahat ng printed piso.

Ano ba talaga?

Hindi.
No offense intended ha?
I can only surmise. The person responsible for printing came from Cebu.

Ano yung Symbol of Peso? P na may 2 parallel line sa itaas- dati iyan nung Central Bank pa
Ngayon, simply a capital letter P
Yung PH that stands for Philippine. Yun ang abbreviation ng Philippine.
PHP – Philippine Peso
Kaya mapapansin nyo sa dyaryo, yung Php, Philippine.

If you are going to old documents… (discussion on how Peso sign was type written by lawyers using a typewriter)

TRIVIA
BSP prints the notes and mints the coins. Production is local but materials are imported. Notes are not paper; they
are cloth. The cost of materials is very high.
The currency is called Peso. Its symbol is the capital letter P. There are 2 other countries that use Peso; they are
Argentina and Mexico. Part of Peso is called a Centavo. The sign for a Centavo is the small letter c. Unit of peso is
a centavo. 100 centavos ay piso.

Money vs. Currency

Currency is defined by law as notes and coins issued by the BSP and are in circulation.

Currency has 2 qualifications:

1.) Issued by the BSP
2.) In circulation, meaning out of the BSP vaults

In circulation means it is outside the vaults of BSP

Our monetary system includes notes and coins
Yung mga notes 20 pesos – 1000 pesos. They are all printed in the Philippines. Kasama sa monetary system natin ay
coins. They are also minted in the Philippines.

Notes – printed
Coins – minted

Dati lahat yan, when brought in the Philippines, finish product yan. Then, we do not have the facility for printing and
minting. Now BSP has the facility for printing and the facility for minting. Sa East Avenue. Doon ginagawa kaya lang
pagkatapos ng printing or minting, di agad lumalabas. Pasok muna sa vaults ng BSP.

Inside the vault of BSP = Money

Outside the vault of BSP = Currency
Habang hindi gumagalaw,hindi iyan currency.

$20 in your wallet, it is a currency? NO. Because it was not issued by BSP. It was issued by federal reserve.
Is it money? YES

Q: What is LEGAL TENDER?

A: Legal tender refers to currency in such quantity prescribed by law or regulations to be acceptable in payment of all
obligations.

All Philippine notes from 20 pesos to 1000 pesos are legal tender for all obligations. So you can use these for payment
of any monetary obligation for any amount.

Napasakay ka ng jeep. Dumukat ng wallet, 1000 pesos wala ka kasing making coin. Inabot mo sa driver. Syempre galit
yung driver. Nakalimutan mo, any way, legal tender naman yan.

So lahat ng notes, legal tender for all obligations.

However, coins are legal tender only up to a certain amount.

Coins – tokens – represent value

1 centavo

Sa mga bangko bawal ang shortage at overage

Pati 1 centavo
Ang mga teller ay talgang may centavo coin.

1
5
10
25

Centavo coins

A Monetary Board Circular changed the amount of what may be legal tender for coins. All centavo coins are legal
tender up to P100 while all one peso coins are legal tender up to P1000. Contrast this with the law that states that
for coins worth 10 centavos or less, they are legal tender only up to P20, while coins worth 25 centavos and up are
legal tender only up to P50. Yung nasa law ay amended by a circular. The law authorizes the monetary board to
implement the law by coming up with rules and regulations.

REGULATIONS FROM THE MONETARY BOARD

All centavo coins – P100 – assorted
One peso – 1000

If the obligation is greater, the rest shall be paid in notes.

Kung papahirapan mong magbilang yung creditor, wag mong sabihin bigyan mo ko ng puro bente singko, madaling
bilangin yon. Sabihin mo assorted. May 1, 5, may 25. Kasi kung puro 25 (discussion on how easy it is to pay if it is of
the same coin)

Pag peso coins naman, ang hirap ngayon, Ako, tinititigan ko talaga. Ngayon, iisa ang size at kulay. Pare-pareho kaya
talagang hahanapin mo yung numero.
For your info, very rarely the BSP issue commemorative coins. Bihira iyon. You rarely see them. You don’t get them
when you withdraw from a bank.
Kasi pag sinabing commemorative coins, these are issued by the BSP to commemorate a very significant event. And
the last commemorative coins issued by the BSP when Pope Francis came over. Nung dumalaw si Pope Francis, nag
issue ang BSP ng commemorative coins. Most likely, Malaki yan. Why? Kasi, ganito ang nangyari. BSp made an
announcement. Naka dyaryo naman. If you want to have these commemorative coins, you subscribe online.
Subscription pa lang iyon. Some months later, nagpadala ng advise also online. Nakalagay doon sa advise, punta dyan
sa BSP yung mga nagsubscribe to claim them. Yung denominations,
P50
500
1000
Yung 1000 kinancel. Siguro konti ang nagsubscribe.

Yung denomination ng 50 peso coins ang presyo 500.

Yun naming 500 peso parang 1000 pesos ang isa.

Kaya yun ay hindi common.

Sa bangko, wala.
Ang nagkaroon lang ay yung nagsubscribe.
Kung sakaling gusto nyong makakita, doon sa megamall . sa 4th floor…
THEY ARE ALSO CONSIDERED LEGAL TENDER FOR THE AMOUNT STATED.
Kaya yung 50 peso coin,fifty pesos din.

Features of our notes:

Ang tanong, ilang set ng serial numbers
Hindi yung number of digits. Ilang sets?
Dalawa.
Isang lower, isang upper right

Ilang signatures?
Dalawa rin.
Whose? BSP Governor at Philippine President
Dapat buo ang pagsagot.
Dahil madaming governor at madaming presidents.
Kailangan specific.

A note contains 2 sets of serial numbers; they are located at the upper left and lower right. They also have 2 signatures
on them, one belongs to the Philippine President, and the other belongs to the BSP Governor.

Yung notes natin, even if they are made of durable materials, they also get damaged.
Yung notes, yung perang papel. Actually, di naman yan papel. It’s cloth.
Tela. Parang tela ng handkerchief ng babae. Pwedeng mapunit. Pwedeng masunog. Or damaged in any other way.
Hindi iyan papel. Ang tawag lang natin ay perang papel pero hindi iyan papel. You can try it later. Pag-uwi nyo mamaya.
Kung may 20 peso bill kayo na kulay brown na ngayon hindi na orange sa kulumaan. Tanggalin mo sa wallet mo. Ilagay
mo sa shirt mo. If you want to compare, get a bond paper, scratch. Tapos ihulog mo sa washing ,machine. Let it spin.
Yung 20 peso bill, buong buo iyon. Basa nga lang. Intact. E di ipitin mo. Yung bond paper, ahh wala na iyon. Mashed
na iyon. Di mo na pwedeng ibuka kasi durog na iyon.
Over night patuyuin, tapos plantsahin mo…
Yun ang tinatawag na money laundering ..hahahha.. maniwala naman kayo.
Kaya ko binabanggit yang mga features, kasi what if in the bar exam, itanong sa inyo, what are the requirements for
the replacement of damaged notes. Sabi ko sa inyo, pwedeng masunog, magupit, mapunit, whatever. In short, kung
nabawasan na, nasunog, napunit. Ang tanong, yan ba ay tatanggapin pa ng bangko for deposit? Or tatanggapin ba ng
bangko for replacement? Kaya dapat alam nyo ang requirements for the replacement or acceptability of a note for
deposit.
So kung may damage, at least 3/5 of the notes must still be present. Kaya kung may mapupunit dapat hanggang 2/5
lang kasi 3/5 of the note must still be there

May utang ka doon sa kaibigan mo na 500 pesos.

Sabi mo, best friend kita tayo doon sa canteen ng JRU.
Bayaran na kita ng utang kong 500 pesos.
In short, nagmadali naman yung kaibigan mo.
Kasi kailangan nya ng pera.
Ng nagkita kayo, inaabot mo sa kanya yung 1000 pesos.
Sabi nya, pre, kasi alam ko babayaran mo ko. Kaya hindi na ako nagdala ng pera. Kaya wala akong panukli.
Kaya nagtanong siya sa canteen kung pwedeng papalitan.
Sabi nung mga tindera. Wala na. Na i-remit na namin.
May problema ka ngayon.
Gusto mong magbayad, pero walang panukli.
So you tried to be logical. Sabi mo, 1000 peso bill. Hahatiin mo kaya sa gitnang gitna.
So, eto yung 500 para sa iyo. Akin yung kalahati. Logical diba? Hinati mo sa gitna.
Ang tanong, may halaga ba yung pinaghatian nyo? Wala.
Why? Gusto nyo mang ideposit o papalitan, ½ lang iyon. Hindi iyon 3/5.
And the requirement of the law is atleast 3/5

Another requirement of the laws is there must at least 1 complete set of serial numbers.
And there must also be at least 1 signature
And no sign of intentional defacement.

Q: May a damaged note be replaced or accepted for deposit?

A: Yes, it may, but it must fulfill the following requirements:
1. If damaged, there must be at least 3/5 of the note present.
2. It must have at least one set of complete serial numbers
3. It must have at least one signature present
4. There must be no intentional defacement (It’s a crime). BSP issued a circular for banks not to accept for
deposit or replacement notes showing intentional defacement.

For your info, intentionally damaging a note or a coin, is a crime.

For which a defender can go to jail.
So bawal na bawal na sulatan ang notes.
Bawal na bawal sirain ang coins
And if you would do it, it is a crime.
Penalty imposed is imprisonment.
Kaya kung kayo ay walang magawa, wag nyong lagyan ng bigote si Quezon or lagyan ng sungay si Ninoy. Or baka isulat
mo, wanted textmate. Bawal iyon.

Sa bangko kasi, yang mga teller pag wala iyang inaasikasong deposit or withdrawal, walang ginagawa iyan kundi bilang
ng bilang ng pera. Naka sort naman iyan. Bibilangin isa isa tapos ititie up ng rubber band. Dati, nung hindi pa crime
ang magdeface ng note, yung teller, doon sa top note, doon nya sinusulat kung ano yung nabilang. Kasi yung mga
teller gusto nila gawin agad yung report para makauwi na agad. Kaya kung nakapagbilang na sila, they keep track of
the money they counted.
Nowadays, di na pwede. Pag nahuli silang magsulat sa perang papel, they can be dismissed. And the dismissal would
be valid for having committed a crime. Kaya ang mga tellers ngayon, pagtapos magbilang, ganun padin kaya lang
nagsisiksik na lang ng papel. Doon sila sumusulat sa papel. Not anymore directly on the note.

Replacement.
Damage coin.
Actually, it is made of hard materials. Kaya lang over time it also deteriorates.
1994, 1995 coins madulas na. Constant Rubbing. Deteriorates na. Yung bago, matalim pa.

Kahit matigas ang material, pwedeng masira. Kunyari deformed.

Galit nag alit ka sa asawa mo, napiga mo.
Pwede mo bang ideposito iyon? Ipapalit sa bangko?
Yes if there is no sign of filing, clipping or perforation.
Filing – kikili

Coins have a much longer existence. Damaged coins may also be replaced if there is no sign of filing, clipping or
perforation; the reason for this is that the metal content would be diminished. Ideally, the amount stated is the total
cost of making coins; however, Philippine coins are worth more than their stated value.

Binawasan mo yung material content kaya hindi acceptable for replacement.

The life of a note is estimated to be 5 years, but in Metro Manila, it is merely 1 year. If the estimated life is over, it is
withdrawn and demonetized, i.e. it loses the character of money.

In case of possession of damages coins, the possessor is presumed to have caused the damage.

The year in front of the coin is the year it was minted.

FUNCTION OF BSP
1. The other function of BSP is to MANAGE MONEY SUPPLY
Kaya ang tanong, ano yung money supply?
All moneys in circulation. Kasama foreign. Hindi naman sinabing local money supply. Hindi lang Phillipine
currency, kasama dollar, riyal, dinar, hongkong dollar and other foreign currencies. It includes all other that
you have even foreign money
Why is there a need to manage money supply?
If there are too many money in circulation tendency of prices will go up. If prices will go up, beyond a
certain limit, the demand for goods will go down and it certainly mean, the manufacturer will have to cut
down on production. Just imagine, ang mga tao ngayon, madaming pera. So Pag madaming pera, ano bang
usual tendency ng madaming pera, e di gastusin. Yun naman ang masarap sap era. Pag madami kang pera,
ang sarap gastusin. Kung minsan, hindi mo kailangan, kaya lang ang dami mong pera kaya sige. (discussion
on how a lot of money affects your buying of luncheon meat.. you buy more.. manufacturer increases
production to respond to demand. It’s good for the economy) malaki ang demand, konti ang supply, prices
go up. Kaya lang pag nagtuloy tuloy ang pagtaas ng presyo, ang sabi natin, mahal na, wag na muna tayong
bumili, Pag hindi tayo bumili, humina na ang demand, magbawas tayo ng shift. Tanggal ng trabaho,
nabawasan deman. Kaya kailangang i-manage yung money supply.
Inflation is not bad.
Masama kung napakataas ng inflation
 Dito nag rereklamo sila sa 6% for the past month.Maganda pa iyon. In other countries, inflation rate is per
minute. Sa atin, per month pa iyon. (Discussion of inflation rate in Argentina...siling labuyo)

HOW DOES BSP MANAGES MONEY SUPPLY?

One way is through the so called RESERVE REQUIREMENT
Ano yung reserve requirement?
It is a percentage of deposit liabilities of banks
Which bank must deposit with the BSP or invest in government securities.
Ano yung deposit liabilities of bank?
Lahat ng dinedeposito natin sa bangko, bang records it as deposit liabilities.
Why?
Kasi ang relationship ng depositor at ng bangko ay debtor creditor.
Yung bangko ang debtor
Yung depositor ang creditor.
Everytime, we make a deposit to the bank, alam nyo naman ang recording,
Syempre kapag may debit, may credit. Kaya pag nag deposit tayo ng pera sa bangko, debit-cash. Kailangang may pang
balance, credit-liabilities.
Yung ibang accounts sa bank, kung tawagin, payables. Kaya lang yung mga bangko, pag deposit, hinihiwalay nilay and
they are recorded as deposit liabilities. Kaya nakalagay, time deposit, savings deposit, checking.

Anong percentage? Depende kung anong klaseng deposit.

Ano ba yung mga kinds ng deposit that we make with a bank? mayroong time, savings, checking.

Reserve Requirement
1. Checking Account – Pinakamalaki iyan = a high of 25%
2. Time – Pinakamaliit iyan = a low of 20%
3. Savings - Midway

Bakit magkaiba?
This was asked in the bar
1.To service withdrawals
2. A way that BSP manages money supply
3. It is a source of funds for the rediscounting facility of the BSP

Balikan natin yung una – To service awards.

Nagdeposit ka ng 1 million pesos, nag time deposit ka,
As you did not see immediate need for 1 M pesos sabi mo don sa bank, manager, boss pwede bang 1 year ito
paramalaki laki yung rate of interest.
O sige 1 year.
And we give you this rate of interest.
Pagdating mo sa bahay, sabi ng asawa mo, sweatheart, may Malaki tayong problema, mayroon tayong dapat bayaran
na 1 M pesos. Saan mo kukunin yung pambayad mo ng ! million?
Balik ka sa bangko, sabi mo sa branch manager, sir pasensya na kayo, bigla kasing nagkaroon ng emergency. Kailangan
ko ng 1M. Kung walang reserve requirement baka sabihin sa iyon ng branch manager, Naku! Pasensya ka na, wala
tayong perang ngayon. Diba sabi mo 1 year. Pinautang na naming. E gaano katagal, 1 year. Bumalik ka na lang next
year. Di naman pwedeng ganun. Kaya sa bangko, kahit na meron kang time deposit, pwede pa ring withdrawable
anytime. Yung nga lang may penalty. But the point is mababayaran ka. Kaya kapag time deposit pinaka maliit
Kapag checking account, pinaka malaki. Kasi, usually, when a person makes time deposit, he wont withdraw before
the arrival of the period. Ahh pag checking account, expect. Hindi magtatagal iyan, mag iisue ng mga cheque
pambayad ng mga accounts. Kaya kadalasan, ang checking account, maintaining balance lang. kung 20 touysand pesos
e di 20 thousand pesos. Yung check iniissue for convenience of payment. Ang hirap kayang magbilang ng pera, hirap
magdala. Kaya pag nagdedeposit ka sa checking account winiwithdraw iyon.
Pinakamaliit naman ang reserve requirement sa time deposit kasi most likely, when a person makes time deposit, he
will make advantage of the higher rate of interest and may not withdraw before the arrival of the stipulated term
Kaya lang midway, pag may saving deposit, malamang hindi magtatagal, magwiwithdraw ka ng konti. Tapos magtitira
ka din ng bahagi kaya yung reserve requirement rate could be 23% on savings deposit.

If there will be too much money in circulation, ang gagawin ng BSP tataasan lang kahit 1% yung reserve requirement.
And if we are talking about trillions of pesos withdrawn from circulation, that will be several billions withdrawn so
mababawasan yung money supply.

Ngayon if BSP wants to encourage spending, ang bangko, ano ang ginagamit nyan sa pagpapautang, e di syempre paid
up capital ng mga stock holders. Pati yung mga deposits.
Yung bangko could have a number of loan applications, kaya lang ubos nap era ng bangko.
Yung applicant, nangangamusta. Maganda naman talaga, approved naman talaga.
Ay approved na, kaya ang tanong ng umuutang, kalian pwedeng i-take out?
Ay hindi pwedeng sabihin ng bangko, ay wala pa kaming pera ngayon. Mag antay ka muna. No such thing. Kapag ang
bangko, Nakita na kailangan na ng pera, ang gagawin ng bangko, magpaparediscount sa Sentral bank.
Ano ibig sabihin nun?
Ang gagawin ng bangko, tatawag sa BSP.
Kailangan naming ng 100 million pesos.
Pautang.
Ano collateral?
Yung mga receivables ng bangko sa mga pinautang.
Yan ang tinatawag na rediscounting of receivable with the BSP.
Yung mga bangko kapag kailangan ng additional funds kasi madami ang pending loan applications. Paubos na ang pera
ng bangko, ang gagawin ng bangko, right away tatawag iyan sa Sentral Bank. Parediscount nga ng 100 million pesos.
Ang tanong saan naman kukunin ng Sentral Bank ang pera?
E di duon sa reserve requirement.
Kasi sabi ko sa inyo, reserve requirement is the percentage deposit of banks which banks deposit with BSP. Yung
deposit na iyon, hindi iyon interest bearing, kaya huhugutin mo lang in circulation, ilalagay mo sa BSP. Yung BSP
hahawakan yung pera at yun naman ang gagamiting pautang.

If BSP wants to encourage loans, ang gagawin ng BSP, sasabihin sa bangko, O, ang interest rate, 2% per annum. Yung
bangko naman magpapautang, ang gusto is to encourage lending, ang sasabihin ng bangko, o sige, 8% per annum,
kaya Ganado umutang kasi mababa ang interest rate.
Kaya lang if BSP does not want to encourage lending, kasi hanggat maari hindi masyadong madaming pera in
circulation, kay ang gagawin hindi naman pwedeng altogether ay di ka maglabas ng pera, cause some people might
be willing to pay the higher interest basta may pera kasi baka may iba silang pagkakakitaan. Kaya, sasabihin ng BSP,
sige 4% per annum. Ang bangko naman, sasabihin sa borrower 10% per annum.
Yan yung isa pang reason for reserve requirement: Source of fund for the rediscounting facility of BSP.

BSP lends only to bank.

It’s the bank of banks.
Kasi ang bangko kapag kailangan ng pera, saan tatakbo iyan, sa sentral bank.
Hindi iyan tatakbo sa financing company or insurance company.

Although para alam nyo na din, towards the end of every year, halimbawa, December 29, yung mga bangko kung
mababa ang cash position, uutang iyan sa ibang bangko na mataas naman ang cash position.
Halimbawa, yung BDO sumobra ang dami ng withdrawal, in short, mababa yung cash on hand nila, ngayon, syempre
ang lahat ng bangko, gagawa iyan ng statement of condition. Panget, kapag ang cash on hand mo ay mababa, kapag
may nakakita na mababa ang cash position ng BDO, in short para hindi naman ganun kapangit, ang gagawin ng BDO,
tatawag iyan sa BPI.
BPI, pwede ba overnight loan?
How much?
In short, uutang.
Inter- bank para lang mapaganda yung cash position.
E di pag napublish, ..that’s how they do it.
Yun ang tinatawag na year end window dressing
Pinapaganda nila yung statement condition kasi panget sa isang bangko na mababa yung cash on hand. Maganda
kapag, , hindi naman gaanong mataas.
Kaya kung ako naman yung bangko, sobra sobra yung cash ko, kasi baka yung winidraw sa BDO ay syang dineposit
naman sa BPI. Bpi naman ang dami daming pera. Masama rin yon. Hindi kumikita iyon. Nagbabayad ng interes sa
depositor. Para kumite, soige BDO, pautangin kita. Anyway, 2-3 days lang namn iyon.
That’s how they do it.

Basta tandaan ninyo a Sentral Bank is known as the Bank of banks.

Because everytime, a bank needs money, it borrows from the Sentral bank
And when the bank borrows from the sentral bank, that is known as rediscounting of receivables. Ang collateral ay
yung mga receivables ng bangko from their own borrowers.

The BSP has supervision over the banking system.

BSP has supervision over bank in the Philippines kay lang in reality control.
Sa law supervision. Sa totoo control.
Why do I say control?
Because the BSP is empowered to issue rules and regulations.
And when you have that power to issue rules and regulations.
Which should be followed, you have control.

Kaya yung friend mo, sabi mo, friend labas naman tayo.
Ay ayaw ni misis, sabi dapat nasa bahay na daw ako ng 7.
Sabi naman ng friend mo, bakit ka nagpapacontrol sa asawa mo?
Friend, hindi iyon control, supervision lang.

In reality control, you have to follow. Otherwise, there will be sanction.

In connection with the supervision of the BSP over the banking system, we have the so called, close now, investigate
later rule.
Kung sa police, shoot now, ask questions later.

So ano ba yung close now, investigate later rule

If the BSP receives numerous complaints of unsound practices being committed by a bank, BSP can order the
immediate suspension of the bank and thereafter investigate those complaints.

So nagreklamo mo yung bangko, na violation of due process. That the act of the BSP is unconstitutional.
Kaya lang sabi naman ng Supreme Court. No. It was a valid exercise of police power because banking always involve
public interest.

Another function of BSP is PURCHASE of PRECIOUS METALS

Anong precious metal ang binibili ng BSP?
Yung production of gold of mining companies, they have to be sold to BSP.
Yung mga gold production ng mining companies, hindi iyon pwedeng ibenta sa mga alahera. Ang bumibili doon ay
BSP.
Ano naman ang ginagaw ng BSP?
Ibinebenta.
US government pati China
Kasi mostly US government.
Kasi US dollar, is back up by gold,
Bawat US dollar na piniprint ng federal reserve mayroon iyon, back up by gold.
Philippine money, nothing backs up Philippine money.
Despite that, mahina ang loob ng mga Amerikano. Pansinin nyo lahat ng US dollar, may nakalagay, “In God we Trust.”
Philippine money, walang ganun.
Philippine masyadong confident, kaya nga naka-print, “Ito ay pananagutan ng Republika ng Pilipinas”
Categorical iyon, wala ng invoking, “In God we trust”
In representing the Philippines in its International Financial dealings,
Like World bank, IMF
Pati doon sa bangko na itinayo ng China
Pati doon sa Asian Development Bank
It is the BSP that deals with them.

LETTER OF CREDIT

What is a letter of credit?

Yan ay define in law

Governing law: Code of Commerce, which deals with merchants.

Definition: L/C
- It is a letter addressed by a merchant to another merchant to enable the person named in the letter to attend to a
commercial transaction.
- A form of bank facility or accommodation to enable persons to have a commercial transaction where the buyer is
assured of the delivery of the goods he is buying and the seller is assured of payment.

Yan ay sulat, letter, correspondence

Yan ay commercial transaction since time in memorial.
Ang tagal ng may merchants

Imagine Mandaluyong,
Halimbawa 100 years ago
Ang mga residente dito, konti lang
Tsaka ang mga bahay malalayo

Kapag kayo pumunta sa probinsya

Mapapansin nyo may mga Merchants
Yung ibang probinsya nga, wala pang palengke
Merchants to do business, mayroon silang mga kariton
Or cart drawn by the horse or cow- babaeng baka

Imagine if you are a merchant 100 years ago

Ikaw may Cart
Doon sa cart nakalagay yung mga binebenta mo
Yung cart mo, naglalakad doon sa komunidad.

Ako naman, during those days was also a merchant.

If you are going north ward,
I am going southward
Kaya lagi tayong nagkakasalubong.
In fact during noon time, nagkakayayaan pa nga tayo.
Friend, ikaw ba ay nanaghalian na.
Di pa.
Halika luto tayo dito sa ilalim ng puno.
Sila ang nagkikita, nagtatanungan sila.
Ano ang dala mo ngayon?
Ng tinannong mo naman ako, ay iyan, tingnan mo kung ano ang nandiyan.
The merchant looks at the inside of the cart and among the goods that I am transporting, you saw dried fish.
Sabi mo, ang ganda ng dried fish mo. Silvery pa yung isda, at yung kulay orange pa.
Saan mo nakukuha iyan? Ang ganda ng dried fish mo.
Ay mayroon akong supplier sa Malabon
Ay ang ganda talaga , yung sa akin mukhang embalsamado na 😊
Tanong mo sa akin, ‘Ang pagkuha mo, utang o cash?’
Ay suki na ako dyan. Nakakautang ako, 30 days.
Pwede ba tulungan mo akong makautang?
Sige, gawa ko ng sulat

Dear Mr. Malabon,

Please extend credit to my friend Jose Cruz in the amount of fifty pesos.

Thank you.

Very truly yours,

Yun ang letter of credit.

It’s a letter addressed by a merchant to another merchant to enable the person named in the letter to attend to a
commercial transaction.

Sinulatan ko yung ano para pautangin ka.

Kaya nga letter of credit.

(Student) Sir, ikaw ang guarantor?

(Dean) Oo. Ako nga ang sumulat.
Hindi ka naman papautangin kung hindi dahil sa akin.
Kaya ako ang mananagot doon.

Ano ang requirements for a letter of credit?

By the way, ang gumagawa ng Letter of credit, merchant.
Ang sinusulatan merchant

Ilang merchants ang involved sa letter of credit?

2
Yung sumusulat at sinusulatan.

Yung person named in the letter, may or may not be a mderchant.

Baka hindi ka naman merchant.
Sabi mo, tulungan mo naman akong maka utang.
Para ma kain naman kami.
Kaya ayun, sinulatan ko.
Ikaw, hindi ka merchant.
Kaya ang tanong, sino ba ang merchant?
Who is a MERCHANT
He is a person, natural or juridical,
having the capacity to engage in commerce and regularly engages in it
“Regularly engages” means habitual, not necessarily a big volume of transaction

What is a COMMERCIAL TRANSACTION

It is buy and sell. Which is a contract. May capacity to give consent
Kasi mayroong insane
Mayroong who does not know how to read and write
Sila, hindi sila pwedeng maging merchants

If a natural person:
1.) At least 18 years of age
2.) With the capacity to enter into contracts

If a juridical person – partnerships and stock corporations

1.) Organized according to law
2.) Regularly engaged in commerce.
3.) SEC Certificate of Registration (corporations)

How many persons are involved in a letter of credit? 3

Persons Involved
1. The sender or maker, who is a merchant - sumusulat
2. The addressee who is also a merchant, and sinusulatan
3. The beneficiary or person name in the letter who may or may not be a merchant. Yung magdadala ng sulat,
hindi kailangang merchant

Ano yung requirements under the Code of Commerce for a letter to qualify as a letter of Credit?
Requirements for a Letter of Credit
1.) The person to whom credit is extended should be named. It must not be a bearer instrument. Must not be
issued in a negotiable form
2.) The amount or maximum amount of credit to be extended to that person, the benificiary shall be stated. It
must not be an open L/C. Addressee must not have the discretion as to how much is to be given under the
L/C.

Kaya nga yung example ko kanina,

Please extend credit to Jose Cruz in the amount of Fifty pesos.

So nakalagay, yung pangalan ng beneficiary.

Si Jose Cruz.
Magkano ang ipapa utang?
50 pesos.

Pwede din, please extend credit to Jose Cruz,

in any amount not more than fifty pesos
The amount or the maximum amount should be stated

Kaya pag ganoon, pag sinabi kong 50 pesos,

Yung sinulatan ko, ipapautang 50 pesos.
He cannot exercise judgment if fifty pesos
He can exercise judgment if ang nakasulat
 in any amount not more than fifty pesos
Kaya sabi nya, type ko ito, sige 50 pesos.
Kamukha ito ng byenan ko, sige 5 pesos na lang.

If the requirements are not met, it is called a Letter of Recommendation. Yung gumawa ng sulat incurs no liability.
Nag rerecommend lang naman siya. Hindi naman niya sinasagot.
Because if you make a letter of credit, ang credit was extended because of your letter, the maker becomes obliged to
the addressee.
And the beneficiary becomes obliged to the maker.

Kaya hindi pwedeng maging negotiable ang Letter of Credit.

Kasi kung ikaw ang binigyan mo at nai-negotiate mo, ang gumamit ng sulat ay yung pinagpasahan mo. Syempre, ako
yung magbabayad sa sinulatan ko. Ang tanong, sino hahabulin ko ngayon?
Kaya yung Letter of credit cannot be issued in a negotiable form.

Q: Why is there a need to specificy the beneficiary? Why not just bearer or order?
A: Because of obligations to each other.

Law says that the Letter of credit could be domestic or foreign

Kinds:
1.) Domestic – all parties are in the same country; should be transacted /good for 6 months 180 days
2.) Foreign – parties are in different countries; good for 12 months 360 days

Overtime, Letters of Credit had been a bank facility or accommodation

Overtime!
Dati kasi, yung Letters of Credit were as I described earlier, talagang sulat lang iyan.
Overtime : Transactions were being complicated. Parties are in different palaces yet, they want to have commercial
transactions but they don’t know one another.

Ganito ang eksena:

Ako may supermarket sa Mandaluyong
Among the products I am selling in my supermarket are dried manggoes
Isa ka sa mga customers ko.
And your comment was, sir bakit ang mahal ng dried mangoes ninyo?
Kasi bumibili ako sa distributor
Your suggestion, Sir, bakit hindi na lang kayo bumili sa manufacturer
Sabi ko, wala akong kakilala
Ikaw, you know how to do things. Sir, bakit hindi kayo kumontact ng manufacturer sa Cebu? Andon ang karamihan
niyan.
E wala akong panahong pumunta ng Cebu.
Hindi mo kinakailangang pumunta ng Cebu para makakita ng Supplier. Iinternet lang natin
Kinalikot mo ng kinalikot gadget mo. Oh sir, eto mga suppliers oh.
Sullatan na natin.
O sige, pag dating ko sa opisina, gawa ako ng sulat.
Hindi sir, ngayon na. Gawa kayo ng sulat. Email ko na.
Tinulungan mo na nga ako although out. Email mo
To my surprise, in 5 minutes may reply
Namili
Order
No. Shipment first before payment
No. Delivery only if paid
A third person has to intervene.
Bank can intervene
Through a Bank letter of credit
Dyan nag umpisa yung bank letter of credit.

A bank letter of credit is a bank accommodation or facility to enable pesons to have a commercial transaction where
the seller will be assured of payment and the buyer assured of delivery.

Balikan natin yung order ko kanina,

Ayaw ipadala,
Ayokong magbayad.
Kaya ang tanong ko sa manufacturer, are you willing to be paid with a bank letter of credit and if so, let me know your
bank.
Sagot agad iyan. Yes. I bank with BPI Cebu.

Ang gagawin ko naman Go to BPI na malapit.

I tell BPI, I want to open a letter of Credit in favor of Mr. Cebuano
For my order of 1 ton of dried mango
Valued at 600k pesos
Are you willing to accommodate me?

Ay sir, walang problema.

Bank: akin na muna yung 600K
Deposit muna yung 600K. Yun ang tinatawag na marginal deposit

Marginal deposit is the amount required by the bank to be deposited with it for the purpose of opening a letter of
credit.

Walang problema, ang bangko, hindi naman tayo tatakbuhan .

So anong arrangement?
Sabi ng bangko, sige sir, nasa amin na yung iyong 600K.
Ang usapan natin, ito, i-reremit naming kay Mr. Cebuano
When he presents to us proof that he had already delivered your order of 1 ton of dried mangoes.

BPI manila, calls up BPI cebu.

Sabi ng BPI manila, we opened a letter of credit in favor of Mr. Cebuano.
For 600k.
This is payment of the order order of Mr. Manilaneo of 1 ton of dried mangoes.
Advise Mr. Cebuano to ship the order.
Gagawin naman ng BPI cebu, tatawagan si Mr. Cebuano.
Sir, peron po ditong Letter of Credit.
In your favor. For the order of Mr. Manileneo
Are you going to accept this? Of course

Sige sir, ganito.

Babayaran naming kayo upon presentatation to us of proof that you have already delivered the order of Mr.
Manileneo.

Walang problema.
He boxed 1 ton of dried Mangoes.
Dadalin nya iyon sa pier. Delivers it to a common carrier.
Baka dineliver sa To Go
To Go issues bill of lading goods were already received by the carrier and
The civil code says that the deliver of goods to the carrier for delivery to the buyer is already considered as delivery
to buyer.
Kahit andon pa sa bodega ng To Go sa Cebu, the goods are already considered delivered to the buyer.

Kaya hawak hawak ni mr. Cebuano yung original bill of lading,

Now, he wants tpo be paid.
Pupunta sya sa BPI
Na –deliver ko na.
Eto ang proof.
Original BOL of To Go.
Sige na amin nay an.
Tsaka bigyan mo kami ng copy ng packing list
Sales invoice.
Whatever. Kung ano anong dokumento.
Pag binigay na iyon, oh ayan ang bayd.
Kukunin ngayon ng BPI cebu yung original Bill of Lading.
Ifforward sa BPI Manila.
Pagdating nga manila, tatawagan si buyer.
Sir, nandito na po yung BOL
Kunin nyo na. Para pagdating nung barko sa North Harbor, claim the goods.

In short, may transaction.

Allthough the parties may have not met and in their lifetimes they will not meet, kaya lang may transaction because
of the intervention of the bank and the facility is known as bank LOC.

Kung tatanungin kayo base an a SC ruling, how many independent contracts are involved in a domestic LOC? 3
1. Contract between the Buyer and Seller – mayroon kaming sale
2. Contract with the buyer and the issuing bank – binigay ko ang pera sa bangko, may usapan kami. Ireremit mo
lang iyan kay seller upon presentation of proof that it has been delivered to me
3. Contract with the bank ang the Seller

Who issues L/Cs: Commercial banks as a general rule are allowed to issue letters of credit, but Monetary Board may
allow other banks to issue Letters of Credit.

How do L/Cs work

1. Buyer and seller are insecure
2. Buyer goes to the full service branch of a bank to open a L/C in favor of the seller
3. Bank requires a marginal deposit, the amount required by banks of the purpose of opening L/C
4. Bank remits the amount to the seller only after the seller presents proof of delivery

Example
BPI QC requests BPI Cebu to open a L/C in favor of a seller in Cebu.
BPI Cebu communicates to the Cebuano seller to ship the goods and upon proof of such delivery, BPI Cebu will pay
him. Shipper thus ships the goods and the shipping company issues a bill of lading. If the goods are delivered to the
common carrier and it issues a B/L, it is considered as delivery to the buyer.
BPI Cebu gets the B/L from the seller, pays the seller, forwards the B/L to BPI Manila.
Buyer pays BPI Manila, claims the B/L, and receives the goods under the B/L from the carrier.

What is the benefit of L/Cs to banks

Service fees and interest on advance.
 Example: Purchase price is P200k. The marginal deposit required is P120k, from which the bank advances
P80k to the seller. Interest on the P80k advanced by the bank is payable by the buyer to the bank.

Foreign Letters of Credit- parties are in different countries

Ako yung importer, Tiga manila ako.
Nabalitaan ko, ang mga babae pala ang hilig sa Sampaloc.
Saan nakakabili ng matamis na Sampaloc? SaThailand
Contact ako ng supplier sa Thailand.
Communicate kami.
Nagbigay sya ng presyo.
I’m ready to order
Ang tanong ko, are you willing to be paid with a bank LOC and if so, please let me know your bank.
Sagot naman yung taga Thailand. Yes willing – letters of credit – Royal Bank of Siam
May branch ba iyon dito?
Wala.
Please let me know the Correspondent bank in the Philippines of the Royal Bank of Siam.
It’s bank of PI
All Commercial Bank has a tie up with commercial banks in other countries
Kaya pag sinabing correspondent bank, it’s the local bank, and the foreign bank.
And in the foreign letters of credit there is a 4th independent contract.
And that is the contract between the correspondent bank

When you talk about Bank Facility and Letters of Credit

Ang tawag dyan sa bangko LCTR line – letters of credit and Trust Receipts Line

When a document has the same stipulations as a promissory note along with undertakings present in a trust receipt,
then it is still considered a trust receipt.

In banks, the transaction is often called an L/C-T/R line because of the interrelation of the 2 transactions.

How does it work?

Based on what I just narrated, paano kikita ang bangko?
In the form of service fees.
The bank may want to earn more.
After some time, baka sabihin sa akin nung bangko,
Boss, maganda record nyo sa amin
Next time, no longer require 100% marginal deposit.
Next time 60% na lang ang marginal deposit.
Kaya kung ang order ninyo 600k, ang marginal deposit nyo 360k na lang.
Kaya lang i-aadvance naming yung pambayad, may interest iyon plus service fee. So the bak earns more

Ganun din yung cycle na iyon except that this time, yung original BOL is now with BPI manila
Tatawagan ako, Dito na po iyong original Bill of Lading
Babayaran nyo po sa amin yung 240K. Tapos yung interest na 1 month or 2 months plus the service fee. Kunyari,
inabot ng 280k.
Ang sabi ko, naku! Kamalas naman, hindi pumasok ang mga collection ko. Wala akong pera
Bank, sir walang problema.
Wala kayong pera?
We will release the original Bill of Lading
Para pagdating ng barko, claim nyo agad yung goods
Pag naclaim nyo na, Benta nyo
 Bayaran nyo kami sa nagpagbentahan nyo by this day.
Pag di nyo nabenta by that day, soli nyo na lang sa amin ang goods
Pipirma lang po kayo ng resibo- Ito yung Trust Receipt
Na pag nagkamali ka, kulong ka 😊

What is a Letter of Credit – Trust Receipt Line

A trust receipt is a receipt with undertakings. In lieu of a 100% marginal deposit, the buyer has the option to execute
a Trust Receipt in addition to the marginal deposit. Under the Trust Receipt, the bank releases the B/L to enable the
buyer to acquire the goods which he would sell and either (a) use the proceeds thereof in paying the bank within a
stipulated period, and/or (b) return the goods unsold.

What are TRUST RECEIPTS

- A trust receipt is a receipt with undertakings.
- In a trust receipt transaction, the entruster, who has security interests over the goods, entrusts those goods to the
entrustee so that the entrustee may sell those goods and remit the proceeds of the sale to the amount owing to the
entruster within the stipulated period. If the amount owing to the entruster has not been met within the period, the
entrustee is to return the goods not sold.
- Trust receipts are issued to guarantee debts due to failure to pay the amount bank advanced in the Letter of Credit.

Kulang iyan ha, ang nakalagay sa law, goods, instruments, documents

Kaya pwedeng isingin nyo na sa unahan

Ano ba yung goods?

Commodities
Ano yung instruments?
Negotiable instruments
Ano yung negotiable instruments?
Kapag mayroon kang negotiable instruments, an example is PN, that piece of paper represents a receivable. Maaring
di mo masingil ngayon. Maaring 1 year to pay pa iyan. Or several years to pay. The point is, yang papel na iyan, that
represents money.
If you would recall, diba may rediscounting?

Kanina naman binanggit ko yung documents of Title and I mention that, that the 3rd purpose of the documents of title
is that it stands for the goods mentioned therein.
Maaaring ang hawak mo nga ay papel lang, but that papel represents goods.
Kaya kahit hindi mo hawak yung goods, maibebenta mo kasi you have the document representing goods over those
goods.

Papaano yung Trust receipts?

In a trust receipt, the entruster entrust goods, documents or instrument to the entrustee.

Ano ang undertaking ng entrustee?

Undertakings of the Entrustee
1. To sell the goods and from the proceeds of the sale, remit the amount owing to the entruster within the
period stipulated. The proceeds mentioned include the profits as long as there is still an amount owing to
the entrustee.
2. If the amount owed cannot be remitted within the period (lahat kasama tubo), to return the goods which
have not been sold.

Who is the theoretical owner of those goods?

Entruster.
Because sabi ng SC, it was the one, that advanced full payment for those goods etc.
Ano ang untertakings ing entrustee? Ibenta ang remit the proceeds of sale. Pag sinabing proceeds of sale, yung buong
pinagbentahan na iyon kasama don yung tubo ng entrustee. So kung ikaw yung entrustee, habang hindi mon a i-
reremit ng lahat ng halaga para sa entruster, yung mga tubo mo, hindi mo pa mapapakinabangan. Because your
undertaking is to remit the proceeds of sale to the exent of the amount owing to the entruster.

Kaya halimbawa, nagbenta ka

3 kilos
Kunyari may tubo kang 10k pesos,
Yung tubo mo, hindi mo pwedeng kunin iyon
Kasi iyong buong napagbentahan i-remit mo.
Kasi ang undertaking mo is to remit the proceeds of sale
Kaya hanggang ma-iremit mon a, maibayad mon a sa bangko,
Lahat that you may be owing to it.
Hindi mo pa pwedeng mapakinabangan ang profit mo.
Yung profit mo, mapapakinabangan mol ang after you should have remitted to the entruster, the full amount of owing
to it.
Maaring nakabenta ka na ng 3/4
Habang hindi mo pa nareremit, lahat ng amount owing to the entruster, the bank, yung mga tubo mo, hindi mo pa
pwedeng mapakinabangan. Kaya lang pag naremit mon a lahat, kahit na saan pa nanggaling yung pinang remit mo.
Pinambayad mo.
Halimbawa bigla kang nagkapera, tumama ka sa lotto.
Bayad mo sa bangko.
Kahit di mo pa nabebenta yung isang toniladang dried mangoes, iyo na iyon.
Kasi ang importante lang, whatever amount you are owing to the entruster, remit.
And once you have remitted it, wala ng pakielam ang entruster. Iyong iyo na yung natitira pa.
Kaya lang habang hindi nabubuo yung pambabayad mo sa entruster, sa bangko, the goods remain its property. Kaya
kung ikaw ay takam na takam na kumain ng dried mangoes ay di ka pwedeng kumagat.
Kasi hindi pa iyon sa iyo.
Kaya lang pag nabayaran mon a ng buo, kahit may isang tonelada ka pa, ubusin mon a yung isang tonelada. Iyong iyo
yon.
Yan ang trust receipt.

Parties to a T/R
- Entrustee
- Entruster, who has security interests over the goods, e.g. holder of a B/L which is a document of title
SC: In a TR, the entruster is the theoretical owner of the goods as he advanced the full payment of the goods.

Note: Trust receipts may be between individuals

Why is there a need for the Trust Receipts Law:

The bankruptcy of bank became rampant from their failure to collect from borrowing importers who did not remit
any amount to the banks after they have claimed the goods. The P.D. regulating trust receipts was made to protect
the banking system. The PD requires the entrustee to insure the goods against all risks.

Para pag hindi ka nakabayad – pinapipirma ka ng trust receipts

Person is regularly engaged in the issuance of Trust Receipts

Consequences of the Entrustee’s Failure:

- Before, there are two views
1. Violation of a TR is a criminal act under Art. 315 of the RPC. (punishes conversion)
2. Violation of a TR only leads to civil liability.
- NOW, the TR Law explicitly provides for criminal liability and requires the entrustee to insure the goods against all
risks.

Nakuha mo na yung goods

Department of Health Advisory – Eating dried mangoes is dangerous to your health
.E mayroon kang isang tonelada, wala ng bumili ngayon.

Ano gagawin mo ngayon?

Para wala kang criminal liability, soli mo na sa bangko
Yung buong isang tonelada. Bahala na yung bangko
Baka ibenta yan, animal feeds
Kaya lang baka may civil liability ka pa
Kunwari ang utang mo ay 300k
E naibenta lang iyon ng 30k.
E di may utang ka pa na 270K
Hindi na bale
Aat least, walang kulong.
Civil liability lang kasi walang conversion.

Effect of Returning Goods to Entruster

- The entrustee has the option of returning all of the goods to the entruster if the due date is near and he has not sold
the goods to avoid a prosecution for estafa. In this event, the bank would be the one to sell the goods and deduct the
proceeds from the debt of the entrustee.
- Returning the goods does not extinguish the obligation to pay the amount advanced by the bank.

Kapag may criminal liability, who goes to jail?

Or who gets charged criminally if the trust receipt was signed on behalf of a partnership or corporation?

Kapag individual, ay walang magagawa, kung sinong pumirma, syang makukulong.

Kasi lalabas siya, entrustee.

if it is corporation, partnership that violates the Trust Receipts, the person who actually signed on behalf of the
partnership or corporation shall be liable criminally. Kung sino yung actual na pumirma for the partnership or
corporation.

Alam ninyo may mga nagpapa-utang.

This is already anticipated.
Kung sino man ang nag draft ng PD on Trust Receipts.
Nakita nya na yung mga nagpapautang, halimbawa, bibili kayo ng appliances, papautangin, papapirma sa iyo, hindi
promissory note.
Hindi rin charge sales invoice.
Papipirmahin ka ng Trust Receipts
Para pag hindi ka nakabayad may panakot, papakulong kita.

But then, it is provided in the law,

That if the operson is regularly engaged in the selling of goods for profit, no trust receipt transaction.
Kasi nga naman talaga, bumili ka naman ng appliance on installment
Ikaw naman, wala kang kamay-malay sa trust receipts.
Hindi moa lam kung anong document ang pinapipirma.
E ang sabi sa iyo, O mam pirma kayo.
Ikaw naman pirma in good faith.
Kaya lang ang tanong, ano ba talaga usapan natin?
E di installment
Kung may violation, civil liability
Binili mo naman hindi para ibenta.

O isipin mo, wala kang kamalay-malay, bumili ka ng LED TV set, 200k. Ganda.
Yung trust receipt na pinapirma sa iyo, hindi moa lam, pirma ka lang.
Pag dating mo sa bahay, nilagay mo sa stand.
Kinabitan mo pa ng home theater.
Naka tatlong pelikula ka ng pinanood. Sunod sunod. Enjoy.
Nakatulugan mo. Hindi mo na lock yung pinto
Kaya habang natutulog ka, pumasok yung magnanakaw
Tangay tangay TV set mo.
Nagising ka kinaumagahan, als dyis na.
Napasarap ka.
Kaya pag dating mo sa opisina, ang sabi g boss mo, late ka nanaman.
You’re fired. E di wala ka ng trabaho.
Wala ka ng pambayad.
Di mo pa masosoli.
E di makukulong ka ba?
Hindi.
Hindi naman kasi trust receipt transaction iyon.
Installment sales iyon.

CREDIT INSTALLMENT SALES

- It is the use of TR but is not a trust receipt by provision of law because the buyer did not intend to sell the goods sold
but to use it.
 COMMON CARRIERS

Who is a common carrier?

Civil code defines common carrier as any person
In fact even an association.

Kapag sinabi kong association, hindi iyan person

Kasi pag sinabi mong person, either an individual, a partnership or a corporation .
But the law also says an association.
And an association is not a person.
But an association can also become a common carrier.

Definition: A common carrier is a person natural or juridical who is regularly engaged in the transportation of goods,
passengers or both, offering its services to the public for a fee.

To be a common carrier,
Elements
1.) Transporting goods, passengers or both.
2.) Offering service to the public
3.) For a fee / compensation

As a said earlier, anybody can become a common carrier even without juridical personality.

The common carrier is at liberty to transport what they want.

It may want to transport only goods
Best example
LBC, JRS. They only transport goods.
Also, Tracking companies. They move things
And there are those that transport only passengers
Best example: taxi cab operators, jeepney operators, city bus operators, even yung mga tricycle operators, pati yung
pedicabs

There are those that transport both goods and passengers.

There are the Airlinea and Shipping companies.

Pier to warehouse – Custom Broker = common carrier

To be considered a common carrier, one must offer himself to the public.

Q: What is “public”?
A: It is not necessarily the general public; long ago, the Sc said that it could be merely a narrow segment of the public,
e.g. school bus (sumusundo sa mga bata) operator is a common carrier; pipeline (Batangas to pandacan) is also
considered a common carrier, transporting fuel, and its clients are Shell and Caltex.

This came out in the pronouncement about a school bus operator. Nung ginagawa ang ruling, ang school bus, talagang
bus. Kasi now a days, school service ang tawag. Yung mga AUV like L300, Revo, adventure which transports passengers
at any one time. Kaya nung school bus dati, it was like any other bus. Parang yung ginagamit nung JRU pag may NCAA.
Yan ang school bus dati. And I remember my younger days, yan ang mga sumusundo sa mga studyante na nagbabahay-
bahay. Bringing them to school and they later in the day, bring them back home.

Later, nagkaroon ng ruling involving the pipe line operator.

Yung First Philippines Industrial Corporation
Which established the Pipeline from Batangas all the way to the former oil depots in Pandacan.
Anong function ng pipeline na iyon?
Instead of transporting the finished petroleum products from Batangas to manila by land, dinadaan doon sa pipeline
2 lang ang customer noon (Shell at Caltex)
And the SC said that it is a common carrier
SC said that Carriage is synonymous to transportation
So when you move things from one point to another, that’s transportation.
And that’s also carriage.
Ang issue nga lang, 2 lang ang customer (Shell at Caltex)
SC said that it’s not the number of clients that determine whether it is a public or private carrier butwhether or not
the services are available to those who wants the services.
Yun nga lang wala naming taong gustong magpa transport sa pipeline 😊

Ngayon nag-iisa na lang.

And the ruling involved a custom broker.
Who as part of his services to his client, transports the goods of the client from the pier to his warehouse.
Isa nga lang.
Sabi ng Sc, the custom broker who as part of his agreement with his client agrees to transport goods, ualifues as a
common carrier.
Kasi ang palusot ng custom broker, hindi naman ako common carrier.
Kasi isa lang customer ko.
Sabi ng SC, no.
Still qualifies as a common carrier.
So, ngayon wala ng bilang.
As long as the services are available, to those who may want to avail the services, the carrier qualifies as a common
carrier.

To qualify as a common carrier, the services must be for compensaton.

Hindi libre.
Kung libre, even if the services ay available to the public, kaya lang libre, ay hindi iyan common carrier, private carrier
pa din iyan.

That’s why we have a provision, that if a cc transports passengers gratituously

common carrier can stipulate that it is not liable for negligence
Bakit ganun?
Kasi yung libre, walang bayd iyon.
So with respect to that person, it’s just a private carrier.
In short, no public interest is involve

We have a Religious Group that on a daily basis, it transports its passengers on a bus or buses from monument to
baclaran and baclaran to momumento.
Libreng Sakay.
Is that a common carrier?
No, private carrier.
Yan yung ang Dating Daan kay Eli Soriano.
Mayroong bus yung grupo, UNTV
One trip, in the morning, one round trip, Baclaran to Monumento
Ang tanong, yun bay ay Common Carrier? No.
Kasi hindi for compensation. Libre
Yun ngang slogan niya, libreng sakay.
Q: Do you need a motor vehicle?
A: No.
Importance of Classification: The diligence required of a common carrier is extraordinary diligence.

What standard of care is required of common carriers in the transportation of goods and of passengers?
Well, there is a common provision that is if the transportation of goods and passengers, common carriers should
exercise extra-ordinary diligence.

Kaya lang, there is another provision, with respect only to passengers.

Civil Code says that in the transportation of Passengers Common Carrier, must transport them safely exercising
outmost diligence of a cautious person.
Certainly, that is hoe the extra-ordinary diloigence is done.
Kasi initially, one article says that in the transportation of goods and passengers, common carriers should transport
them exercising extra- ordinary diligence. Kaya lang may pahabol.
In another provision with respect to passenger.
So question now is, since the law states that the common carrier should exercise extra-ordinary diligrence, does that
make a common carrier an insurer on all risk related to transportation? NO

CARRIAGE OF PASSENGERS

Q: When should diligence start?

A: When the carrier agrees to take in the person as a passenger.

Q: May the passenger and the carrier stipulate a lower standard of care?
A: No

Q: Is a common carrier insurer against all risks?

A: No, it is not, BUT in case of mechanical defects or when a common carrier violates a traffic rule, the common carrier
is always liable.

Employees’ Negligence: The common carrier shall be liable for acts or omission of its employees although said
employees may have acted without or in excess of their authority

Stranger’s Negligence: For acts or omissions of other passengers or third persons, if the common carrier could
have prevent death or injury by merely exercising the diligence of a good father of a family and it failed to
do so, the carrier is liable.

CARRIAGE OF GOODS

When to exercise ED:

General Rule: Extraordinary diligence is to be exercised when
the goods are unconditionally placed at the disposal of the common carrier,
until the goods shall have been delivered to the consignee or
until consignee has been informed of arrival of the goods and given a reasonable opportunity to claim the goods.

Reasonable opportunity is dependent upon the circumstances.

Exception: When the shipper exercises the right of stoppage in transitu.

Q: In case of stoppage in transit, what is the relationship of the common carrier to the shipper?
A: The common carrier is merely a bailee, where the diligence required is only that of a good father of a family.

Exception to the exception: Eordinary Diligence if the shipper asks for delivery back to himself.
Q: Is the common carrier an insurer of the goods?
A: No, the common carrier is not an insurer against all risks related to transportation.

The law itself, mention 5 instances when the common carrier may avoid liability in case of loss or damage to goods
When may the CC avoid liability for loss or damage to goods: Burden of proof is on the shipper if any of these.
1.) When the proximate and only cause is a storm, earthquake, lightning, or other natural calamity.
2.) When the proximate and only cause is an act of a public enemy in times of war, whether civil or international.
3.) When the proximate and only cause is the character of goods or a defect in the container or packaging.
4.) When the proximate and only cause is the act or omission of the shipper himself.
5.) When the proximate and only cause is the order of a competent public authority.

MAY hindi ko sinabing shall

MAY avoid liability.

There is a case that the SC added that the common carrier must not have incurred unnecessary delay

In another case, the SC said that the carrier should have not have committed an improper deviation.
Kasi nga naman kung nag deviate, madedelay yung prosection ng voyage. Kaya lang may deviation naman that’s
proper. Ang hindi allowed, for which the common carrier will be liable if the deviation is improper.

The deviation is proper when the deviation is to save human life.

But if it is to save property, the deviation is improper.

REQD: There must be no unnecessary delay in the prosecution of the voyage. The carrier should not have committed
an improper deviation. The diligence required is still extraordinary diligence (BUT, according to NCC 1739, it is only
Due Diligence).

If the proximate cause is one of gjose 5, no unnecessary delay, no improper deviation, shall that certainly mean that
the common carrier wont anymore be liable for damages, for loss or damage to the shipment of goods?
No.
If the proximate cause of the .loss or damage is one of those 5, carrier could still be liable for loss or damage.
But, the burden of proof will be on the shipper.

Q: If one of these five occurred, is there a chance to recover from the common carrier?
A: Yes, but the burden of proof is on the shipper to prove that there is failure to exercise the required standard of
care, still extraordinary diligence.

Q: If not one of these five occurred, might the carrier excuse itself from liability?
A: Yes it may, but it is the obligation of the Common Carrier to prove that under the circumstances, it exercised
extraordinary diligence. The burden of proof is on the common carrier.

If not one of those 5, carrier could still avoid liability, but the burden of proof will be on the carrier. It will have to
prove that under the circumstances, it was able to exercise extra-ordinary diligence.

Kaya ang nagyayari dyan, shifting of the burden of proof.

If one of those 5 – burden of proof is on the shipper. You have tp prove that the carried failed to exercise, the required
standard of care.
On the other hand, if the proximate and only cause of damage is not one of those 5, the burden of proof shifts to the
common carrier.It will have to prove that under the circumstances, it was able to exercise extra-ordinary diligence.

Q: May a common carrier and shipper validly stipulate on a standard of care less than extraordinary?
A: Yes, the law allows this, applicable lang ito sa shipper because with respect to passengers and carrier, it cannot
validly stipulate less than the standard of care required by law. Because the hunan life is involved.
For the shipper and carrier yes for a lesser standard of care, but it must conform to the following requirements:
1.) Stipulation must be in writing and signed by both parties hindi pwedeng oral)
2.) It must be supported by consideration other than the promise to transport (ex. Discount)
3.) The stipulated standard of care must not be less than the diligence of a good father of a family.
4.) If there are other stipulations, they must be fair and reasonable.

Explanation don sa pangalawa:

In a contract of carriage, how many considerations are there?
There are 2 prestations (considerations) in a bilateral contract to transport.

What are the considerations?

With respect to the carrier its prestation is the promise of the shipper to pay the fare. With respect of the shipper, it
is the promise of the carrier to transport the goods.

What could be that consideration other than the promise to transport.

Usually, it is the promise of the carrier to give discount in the fare.

Explanation of number 3:
Kung tatanungin kayo, ano yung highest standard of care in our laws?
Pinaka mataas yung utmost

Standards of Care:
1.) Utmost diligence of a very cautious person (transportation of person)
2.) Extraordinary diligence (transportation of goods)
Something in between. No name. Kasi iba-iba na depende sa circumstances. Circumstances of time, place
and person.
3.) Good father of a family. (least)

Note: There is no name for the standard of care in between extraordinary diligence and that of a good father
of family.
The law allows the shipper and the carrier to stipulate that the diligence will be less than the extra-ordinary
diligence but not that of a good father of a family.

A common carrier transporting live passengers is obliged to transport them safely exercising utmost diligence of a
very cautious person.
Does this make an insurer an insurer of all risk related to transportation of passengers?
The answer is still no.
Yun nga lang, it is a higher standard of care than extra ordinary diligence.
Kaya lang the law does not allow the passenger and the carrier to stipulate a standard of care less than that required
by law.
The only exception being as I said in the start is the passenger being transported gratituously.
Sabi ko naman sa inyo, with respect to the passenger who is not paying, lumalabas yung carrier, yung contract nila ay
hindi common carriage but a private carriage.

The law also obliges its passenger to observe diligence of a good father to the family for its own safety.
Kaya kung pasahero ka ng bus o jeepney,
Wag mo naming ilalabas yung ulo mo o braso mo.
Kasi hindi na exercising diligence iyon.
Kasi usually kapag maiinit, ang bus aircool hindi aircon, tendency of the passengers, ilabas ang ulo. Para mahanginan
naman ng konti. Ang masama don, kung mayroong bus coming from the opposite direction, ang that bus, takes away
his head. Kasalanan ba nung operator ng bus kung saan siya nakasakay? E kasalanan niya iyon.

The shipper also has the obligation to minimize damage to itself.

Q: When may a common carrier be liable for moral damages?

A: In the following instances:
1.) Death of passengers –in favor of the heirs (immediate members of the family only: do not include brothers
and sisters. Sino lang? asawa, descendants, ascendants. Kaya kahit dadalawa lang kayo ng kapatid mo sa
mundo, hindi sya entitled sa moral damages.)
2.) When passenger suffers physical injuries (injured passengers only not to the members of his family. Kung
Nakita mo yung asawa mon a badly injured, na ang wala na lang sugat ay yung mata. Awang awa ka, Ang
sama-sama ng kalooban mo, despite your feelings, you will not be entitled to moral damages. Kasi pag
physical injuries, moral damages are awarded only to injured party.)
3.) When the common carrier acts in bad faith (VP Lopez case)
PANAM- seat of Lopez was given to an American
4.) Discourteous acts of employees (PHIL from Hawaii, from Surigao. Baggage to be left behind – hotel
5.) Discriminated against Passenger – Fiscal to Manila, nakitulog

A common carrier is liable for moral damages against a waitlisted passenger whose number is called, given a boarding
pass, allowed to proceed to the pre-departure area but not allowed to board.

VP Lopez case
Alam nyo yang si Lopez, super rich iyan.
Isa iyang sugar baron. Kapatid nya yung may ari ng Meralco. The family used to own the University of Iloilo.
Si Lopez, maganda ang image nyan.
When he was serving the govt, he never drew his salary. Tinga lang yan sa kinikita nya.
He went to the USA. Mayroon siyang confirmed reservation back to the Philippines. Kaya lang when he was
in the airport, he ws bumped off. And his seat was given to a white man. Nangyari ito in the height of racial
discrimination in the USA. Na basta hindi puti, either American or European, basta may kulay ang balat mo, no class
ka doon. E si Fernando Lopez ay pinoy na pinoy. Although matangkad. I would say close to 6feet. Bronn a brown ang
balat. Ng pasakay na sa PanAm ng pa-uwi, yung seat nya, binigay sa puti.
Upon arrival in the Philippines, he sued PanAm airways. And he was awarded moral damages. Because of the
bad faith of PanAm.

Explanation of Number 4
Eto naman ay kaso ng 2 Pilipino from Hawaii
They went to the Philippines from Hawaii kaya lang ang destinasyon talaga nila Surigao. Kaya ang flight nila Hawaii to
Cebu connectiong to Surigao. Upon arrival in Cebu, the couple were told that there baggage has to be left behind so
as not to overload the aircraft. E yung pasahero, Pilipino yon. Alam nyo naman ang Pilipino, pag siumakay ng eroplano
yan ang daming dala nyan. Kung pwede lang dalin ang buong bahay, dadalin nyan. Nasabihan sila, and will be coming
in the next flight of Philippine airlines. Nasabihan sila, meanwhile, you stay in Cebu and the thing will be on us. Ganun
naman ang airline business, kapag hindi ka mailipad ang accommodation mo will be libre. Kaya lang ng nasabihan sila
ng ganun, they said, we want to be at the Cebu Plaza Hotel.
At that time, that was the only 5 star hotel in Cebu. Kaya lang itong mga airlines na ito, may mga tie up na sila. Lahat
ito. With different hotels in different place. Kaya ang instant reaction, instant comment ng PAL employee, fully booked
na ang Cebu Plaza na hotel. But we made reservations with you in another hotel. Hindi naniwala yung mag-asawa.
Kasi nga naman, Cebu Plaza at that time was the only 5 star hotel in Cebu at ang 5 star hotel, hindi iyan nafufully
booked unless mayroong event. Ginawa ng mag-asawa, tumawag, tinanong kung fully booked. E madami daw silang
kwarto.In short, they insisted to be billetted at the Cebu Plaza Hotel. Nung sinabi nila sa PAL employee, sige dalin
naming kayo don kaya lang the PAL employee was discortious. O, sakay na kayo sa coach that will bring you there,
nung pasakay na, humingi ng 300 pesos yung mag-asawa. Sabi ng PAL employee, you don’t have to pay anything, you
just have to charge it, lahat yan sa amin. E sabi ng mag-asaw e paano yung pang tip namin? Abay’ kung nasa 5 star
hotel ka, room service na lang. Wag ka ng mag-abalang mag lakad pa. E ngayon, pag nagparoom service ka, dapat,
abutan mo yung waiter ng tip. Kasi kung hindi mo aabutan, hindi ka makakasiguro kung anong sangkap doon sa
susunod mong order 😊
So binigyan ng 150 pesos, ang problema lang, employee of PAL was very discourteous. Ang ginawang mag-asaw,
dinemanda ang PAL for damages.
The SC awarded them moral damages for discourtesy by the employee of PAL.

There is a very categorical provision in the law, that a common carrier shall be liable for the acts or omission of the
employees although the employess acted without authority or in excess of their autrhority.
Walang exemption iyang ruke na iyan.

Sabi ko nga sa inyo na kung kayo ay maging common carrier, maging operator kayo, kailangan tutok kayo at turo nyo
sa employees nyo na wag mambastos ng pasehero kasi at the end of the day, ang magiging liable ay yung operator.
Keep in mind that the contract of carriage is between the passenger or shipper and the operator. Not the driver. Yung
driver is just an employee of the operator.
Kaya kung magdedemanda ka, pwede mong idemanda yung operator for breach of contract. Yun namang driver for
quasi-delict. Kasi walang pre-existing contractual relatioinship with the driver and the passenger. As the contract of
carriage is with the operator.

Explanation of number 5
Merong fiscal galling Surigao, papuntang Maynila.
And during those days, ang flight, Surigao-Cebu connecting flight Manila. Walang problema, going to Manila. Ang
nagging problema yung pabalik.
Manila to cebu.
Pagdating sa Cebu, all passengers were told that the aircraft cannot fly to Surigao. Because of the ongoing storm. The
passengers will have to stay overnight until the storm has passed.
Ang tanong ni fiscal, will we be accommodated for free?
Sabi nung PAL employee, No. This is not our fault. No free accommodation.
Basta nga naman may pagkukulang ang carrier, may free accommodation yan.
So si Fiscal namroblema. Walang pera si fiscal.
He had to swallow his pride ang talk to one of the passengers to accommodate him overnight.
Inaccomodate naman sya.
Imaginine nyo naman na kayo ay walang pera.
Nakikiusap ka sa estranghero, pwede ba, makikikain na lang ako.
Pwede ba, makishare na lang ako ng kwarto mo, kahit doon na lang ako sa sahig.
Talagang nilunok nya ang pride nya so he could be accommodated overnight.
The following day, when the plane was able to fly to Surigao, he learned that some passengers were accommodated
for free.
He filed a complaint for moral damages.
And he was awared moral damages because PAL has committed discrimination among passengers.
( Dean shared his personal experience when his flight was delayed. Free meal. Tinitingnan ko yung pagkain nila if 2
manok ako isa lang 😊 discrimination 😊 Kaso iyon, Wala naman 😊)

CARRIAGE OF GOODS BY SEA ACT

Actually an American law.

A very old law.
And many of its provisions are no longer relevant.
Yung COGSA, Matandang batas na iyan
Yung when the Americans are still around, they made it part of our laws.

Background
The COGSA is a law of American origin; it was made part of our laws during the American occupation.

Kaya lang nasa American pa lang iyan, luma na iyan.

One factor that I would say that it is a very antiquated law is the COGSA is not applicable to shipment of goods agreed
upon to be transported on the deck of a vessel. Ngayon, mayroon pa bang barkong may deck?
Wala na.
Kasi lahat ng barko ngayon, transportation of goods yan.
Goods hindi tao, kung passengers iyan, ok lang.
Kung sa goods, how is it transported?
Nasa loob ng container. At yung container, ay transported through a container ship.
Kaya paano pa ba magkakaroon ng deck ang mga iyan samantalang yung mga decks has stocked up on one another,
several stories high.
Kaya, wala ng applicable scenario.

Tsaka another provision of COGSA that is no longer applicable

That is applicable to goods is where no BOL is issued.
E ngayon, lahat ng goods ay kinakailangang may BOL
Kasi para malaman kung saan ang source of origin.
Kasi irerequire talaga iyon. Patoi pagbabayad ng duties upon arrival.

In case of conflict between the Code of Commerce and the COGSA, the former prevails due to specific provision in the
COGSA.

Scope of COGSA
It covers the shipment of goods by sea coming from another country into the Philippines. (Imported goods
transported by sea, barko iyan. Hindi by air. Pag by air, ibang law ang applicable, WARSAW convention. Surely, hindi
naman by land.) The shipment of goods must be covered by a B/L.

There could also be shipment of goods by sea, within the Philipppines like Inter-island (manila to cebu, manila to
Zamboanga. We still have the Code of Commerce.
And the code of commerce is applicable to, shipment of goods within the Philippines whether over land, by water or
by air.
Again we have the code of Commerce which is applicable to all kinds of transportation of goods within the Philippines
whether over land, by water or by air.

COGSA, It is not applicable to:

1.) Inter-island (manila to cebu, manila to zamboanga) or coast-wise shipping
2.) Shipment of livestock
3.) Those not covered by BL
4.) Before, COGSA does not apply also to shipment of goods on deck. But NOW, there is no more transportation
on deck because goods are transported only via containers.

Ito na lang ytung mga dapat tandaan:

Salient Features
 Time of filing claims (Claim iyan hindi complaint):
o Apparent Loss or Damage to a shipment of goods: File it right away, immediately with the carrier
 o Not Apparent: within 3 days from delivery

Note: Under general law (Civil Code and Code of Commerce), the claim must be filed right away if the damage
is apparent; if it is not apparent, it must be filed within 24h from delivery (Code of Commerce).

Kapag complaint, file with the court

Eto yung parallelism sa COGSA at Code of Commerce,

A claim should be filed with the carrier immediately if the loss or damage is apparent. Pareho ng COGSA

Eto yung iba, Within 24 hours sa code of commerce – if not apparent

Eto pa yung iba,

Under the COGSA, without a claim having been filed with the carrier, a complaint could be filed in court.
Kaya lang sa Code of commerce, without a timely filing of claim with the carrier no complaint could be filed in court.

Q: Is the filing of a claim with the common carrier a condition precedent to recover from the carrier by complaint in
court?
A: Under COGSA, no, it is not required. But under the Code of Commerce, it is a condition precedent to the filing of
claim in court and thus constitutes the cause of action.

If the transportation be within the Philippines by whatever means, over land, by water, di kinakailangang dagat,
pwedeng ilog, lake or by air. The applicable laws are civil Code and Code of Commerce.

Shipment of goods to the Philippines from another country, by sea – COGSA

By air – WARSAW convention
Shipment of goods from the Philippines to japan – Law of Japan. Wala na tayong pakielam don. Nasa japan na iyon.
Nasa Civil code nyo yan.
It is the law of the country to which the goods are shipped that shall determine the liability of the carrier.
Kahit na yan ba ay pasok sa warsaw convrention, kasi Japan, in the other country may not be bound by the warsaw
convention.
So, simply, It is the law of the country to which the goods are shipped that shall govern the liability of the carrier.
Logical lang naman, wala na sa atin iyon.
Andon na iyon sa ibang bansa. Let the law of that country apply.

Ito yung periods that you should keep in mind.:

About the timeliness of filing complaint in court.
One is complaint should be filed within 1 year from deliver of goods to the arrastre operator.
Paano naman napasok ang arrastre?

Wala ito sa law, base ito sa ruling ng SC.

Bakit napasama ang arrastre dito at ano ang arrastre?

When goods come from another country, hindi naman agad iyan pinapadala doon sa consignee.
Pagdating ng barko, let’s say goods intended for the port of Manila will be off loaded. Tapos, ituturn over sa arrastre
hindi agad sa consignee.
Why?
Kasi i-aassess pa yung duties na babayaran.

First thing, pag nagbaba iyan sa pier, bubuksan pa yan. Titingnan kung ano yung goods na iyon tapos titingnan under
what classification.
Pag na determine na, i-aassess yung custom duties. Kung ikaw yung consignee, bayaran mo.
In short, You get the goods only after the issuance of the clearance.
Kaya matagal.
Kaya nagging ganyan yung ruling, upon delivery of goods from the arrastre operator.
Kasi ganito, pag naibaba na, tuturnover sa arrastre. Syempre yung arrastre bago tanggapin yan, titingnan muna yung
condition ng packaging.
Meron bang signo f damage or breakage?
Pag nerong sign, bukas, so that they can determine the extent of the loss or damage.
So pag nakitang may loss or damage, yung turnover form, yung dokumento, from the carrier to the arrastre operator,
ang tawag don tally sheet.

E di parang may damage, bubuksan.

E nakitang, kun yari may Nakita, 7 bottles broken.
Bago pirmahan ng arrastre operator yung tally sheet, mag lalagay muna ng annotation. What was ascertained or
determined as loss or damaged.
Nkalagay don, annotation, ang sabi 7 bottles broken.
Tsaka lang pipirmahan.
i-fformalize ngayon iyon.
Yung para bang, initial stage lang yung mag annotate sa tally sheet. Na determined as loss or damage.

Igagawa iyan ng formal.

BO Form kung tawagin. Bad order form.
Yan ang formal na.

This, one term , baka itanong sa inyo, what is a clean Tally Sheet?
Clean Tally Sheet – One that has no annotation that anything had gotten loss or damage.
Yun ang clean tally sheet at ganun din ang clean bill of lading

Pag may naka- annotate that something had gotten loss or damaged, then it is not clean.

Yun ang dahilan that is why the one year period is reckon from the delivery of goods to the arrastre operator.

Again, the complaint to the carrier should be filed within one year from the delivery of goods to the arrastre operator.

Sabi ng law mismo, sabi ng COGSA, You can file a complaint in court without filed a claim with the carrier.

Yan yung binanggit ko kaninang parallelism sa Code of Commerce

Sa code of commerce, you cannot file a complaint in court, without having filed a claim with the carrier.

Another scenario involving Timeliness of filing in court:

The goods were insured, there was loss or damaged
The claim was filed with the insurer.
So, the insurer paid the claim.
By reason pf the payment of the insurer, the insurer was subrogated to the rights of the insured in running after the
carrier.
Within what period should the insurer file it’s claim against the carrier?
Likewise, within 1 year from the delivery of goods to the arrastre operator.
Kasi yung insurer, simply steps into the shoes of the insured
So it can have no better rights than the insured.

Q: When goods are insured and turned over to the arrestre operator and loss or damage is determined, where and
when should the claim by the insurer be filed?
A: Claim of the consignee must be filed with the insurer also within one year from delivery to the arrestre operator.
The insurer merely subrogates and steps into the rights of the insured.
Another scenario:
Goods were turned over to the arratre operator. The tally sheet is clean.
So walang problema, walang loss or damage.
So after customs had issued the clearance, to release the goods, the goods were released by the arrastre operators
to the consignee or kung hindi man to his custom’s broker.
Kung ikaw yung consignee, pag tinuturn over na sa iyo, titingnan mo ulit. Mayroon ka bang sign that something had
gotten loss or damaged?
Pag mayroon kang Nakita, aba bukas yan. Kung may loss or damaged, sino i-dedemanda mo? Demanda mo lang kung
sino ka may ebidensya wag kang mag-shot down face. Kasi pag ganun, mahirap madaming kalaban.
Clean ang tally sheet so bakit mo pa idedemanda ang carrier
Demanda mo yng arrastre.
Kung i-dedemanda mo yung arrastre operator, what is your basis?
Basis is quasi-delict.

Q: What if the goods are not annotated as damaged in the tally sheet or bad order form upon turnover to the arrastre,
but the goods are damaged upon turnover by the arrastre to the consignee?
A: The suit should be against the arrastre operator on the basis of quasi-delict since there is no pre-existing contractual
relationship between the arrastre and the consignee.

Another scenario:
Goods were insured.
There was also loss and damaged
A claim was filed with the insurer
But the insurer did not act on the complaint and 1 year had passed from the filing of the complaint against the carrier.
Ngayon, dahil lumampas na yung 1 year prescribed na yung action against the common carrier. Ang ginawa ng isured,
dinemanda yung insurer.
And the complaint was filed after 1 year that the goods had been delivered to the arrastre operator.
Kaya and depensa ng insurer, the action has prescribed.
Is the action with the insurer prescribed?
No ang sagot ng SC.
When it comes to the timeliness of complaint against the insurer, what governs is either the insurance policy, if not
the insurance code.

Q: If the insurer did not act on the claim of the insured until after 1y, can it involve prescription?
A: No. Prescription between the insurer and the insured is as stated in the insurance policy or Insurance Code.

Another scenario:
The tally sheet is clean, but the consignee, engaged the services of custom’s broker.
Alam nyo ba kung ano ang custom’s broker?
No malice intended ha? Yan ay fixer kaya lang professional iyan.
Kinakailangan para maging custom broker ka, kailangan naipasa mo government exam. Then you become a licensed
custom broker.
Kaya lang ano ba talaga ang function ng custom’s broker?
Fixer talaga iyan.
Kasi yung mga consignee, especially yung mga regular na may importation, they wont deal directly with the customs
Kaya yun ang papel ng custom broker
Siya ang haharap.
In short, he represents the client.
So imbes na yung client ang makikipag usap sa customs about the assessment kung anong duties ang babayaran, yung
ang trabaho ng custom broker.
Kaya sabi ko sa inyo, fixer talaga yan. Yun nga lang ginawang profession.
So nangyari may custom broker, siya ang humarap. Siya pa ang tumanggap ng goods from the arrastre. E di pag nag
turn-over ang arrastre sa custom broker o kung kanino man pinapipirma iyan ng parang delivery receipt. Malinis.
Kaya lang when the goods are turned over by the custom broker to the client, kita ng kliente, something got loss or
damaged. Kaya ang tanong, sinong idedemanda?
Custom broker
And the action should be based on civil code.
Breach of contract.

Q: What if there is no damage annotation on the tally sheet, and the customs broker received the goods from the
arrastre, but upon delivery by the customs broker to the consigee, there is damage which is not annotated on the
delivery receipt?
A: Sue the broker on the basis of breach of contract of carriage, because the customs broker is a common carrier. The
ruling is that a customs broker who offers to transport goods to client as part of services qualifies as a common carrier.
(sabi ko nga sa inyo kanina kahit iisa lang ang kliente, you could still qualify as a common carrier.Transport goods from
the port area to the warehouse)

Q: If the goods are insured but no claim is made by the insured against the insurer within 1 year from delivery of
goods, is the claim against the insurer barred after one year?
A: No.

(Yan ang tatandaan nyo sa COGSA, kung may mga tanong, it would be the timeliness of filing in court.)

Sabi ng SC, a case against the arrastre operator does not qualify as a maritime case. Kahit na yung arrastre ay nandoon
sa may pier, hindi pa rin iyon maritime case. Tama naman kasi, ano ba ang function ng arrastre? Warehousing.

Kaya lang ito, para alam nyo na rin.

The SC made a pronouncement that an arrastre operator in the custody of goods should exercise extra ordinary
diligence.

 Actions of the Carrier on the Claim

o Settle it right away
o Not to act on it
o Reject the claim.

What is the remedy of the consignee in case of rejection: If the claim is denied, the claim should be filed in
court within 1 year from the delivery of the goods by the common carrier to the arrastre operator. This is
because the transfer of the goods from the carrier to the arrastre is documented in a tally sheet after an
ocular inspection by the arrastre operator. When the arrastre receives the goods, it inspects the goods and
lists the defects in the tally sheet. If there are defects found, they are formalized in the Bad Order Form.

Q: In case of missing goods, or, if the vessel arrives but the goods are not off-loaded, when should the claim be filed?
A: Within one year from the arrastre operator, e.g. before the ship sails to another port.

Q: If the prescriptive period is about to expire, can the consignee extend it by sending a Demand Letter to the carrier?
A: No.

ADMIRALTY

Found in the Code of Commerce

Qualifications to be a Vessel: Not every watercraft is a vessel; it has to have the following qualifications:
1.) It must not be a mere accessory to another watercraft (ex. Lifeboats)
2.) It must be registered with the MARINA
3.) It must be used to transport goods, passengers or both
4.) It is seagoing

Q: Who may own a vessel?

A: Anybody. If a vessel is owned by more than one person, there is a disputable presumption that a partnership exists.

Hypothecary Rule
The limited liability of a shipowner.
It is the value of the vessel, plus
earned freightage plus
insurance, if any.(over the vessel in the absence of negligence

Q: Who participates in admiralty?

A: Those involved in navigation (crew) and housekeeping (compliment)

Crew of a Vessel:
1.) Captain
The title captain is used to refer to the commanding officer of a ship that goes abroad.
The title master is used to refer to the commanding officer of a ship that is engaged in local/inter-island
travel.

A ship captain has three roles:

a. Represent the owner of the vessel
b. Be the technical director of the vessel
c. Represent the country where the vessel is registered.

2.) Mates (1st, 2nd, 3rd etc.)

3.) Engineers.

Contracts in Admiralty:
1.) Charter party - Contract of lease over the vessel
2.) Bottomry – loan on Bottomry
3.) Respondentia – loan on respondentia
4.) Marine Insurance

Charter Party
Definition: A contract of lease over a vessel

Kinds:
1.) Bareboat/demise, where the lessor provides only the vessel, without crew, stores (things you eat) (refers to
food staff), provisions (water and fuel).
2.) Affreightment (contract of carriage)
3.) Time-charter, or a lease for a specific term of the vessel, with stores and provisions
4.) Voyage-charter, or a lease of a vessel for a voyage or series of voyages, with stores and provisions.

According to the Supreme Court, the true charter is the bareboat charter.
The time and voyage charter are merely subtypes of affreightment, which is a contract of carriage.
Ship Agent: Corporation representing the owner in every port where the vessel may make a call or stop. The ship
agent is in charge of provisioning the vessel.

Q: What will be the liability of a ship agent for procurement of provisions?

A: A ship agent is solidarily liable with the ship owner for contracts entered into for provisions of the vessel. This
liability is different from that of a mere agent, who is not liable if he discloses his principal and acts within the authority
given him.
Ship agent may avoid liability by abandoning the vessel should the owner did not pay the provision

Husbanding Agent: Agent in charge of freightage and settlement of averages

A corporation representing the ship owner who is an agent

Q: What are AVERAGES?

A: In admiralty, they refer to damages

Types of Averages:
1.) Gross/General Average, or damages suffered by the vessel or owners of cargo that shall benefit not only the
ship-owner but also the owners of the other cargo.
2.) Specific/Particular Average or those that do not benefit anyone.

Procedure for General Average:

1.) Captain calls a meeting with the representatives of the owners of cargo.
2.) They make a decision to throw away certain cargo.
3.) If the decision is urgent, the captain may choose from the largest and of least value proceeding to the
smallest of the most value.

Supercargoes: representatives of owners of cargoes. They sell cargo for the owner. Generally, they are only able to
use profits to buy goods. If they have a special power of attorney, they may use capital to buy goods.

Bottomry: Loan taken by the ship-owner secured by the vessel. If the vessel sinks, the creditor loses the right to collect
and the obligation to pay is extinguished. If loan exceeds the value of the vessel, the excess is an ordinary loan.

Respondentia: Loan taken by the cargo owner and secured by the cargo. If loan exceeds the value of the cargo, the
excess is an ordinary loan.

Marine Insurance: Insurance over the vessel or freightage, cargoes or profits expected from cargo.

Accidents in Admiralty:
1.) Collision, or the impact of two or more moving vessels
As opposed to Allision,
the impact of one stationary and one moving vessel

2.) Arrival under stress, or when a vessel is forced to sail to the nearest port.
Q: What is the obligation of a ship captain in arrival under stress?
A: The captain must execute a MARITIME PROTEST, a sworn statement where the captain relates
what transpired.

Examples:
a. Natural calamity along route.
b. Avoidance of pirates
c. Loss of provisions
d. Accident that renders the vessel incapable of prosecuting the voyage
 3.) Shipwreck

Q: Is the owner of a barge a party to a contract of carriage?

A: No, he is not a party, unless the barge is self-propelled. The contracting party is the owner of the towing vessel.

Three zones of time in Collision:

1.) First time – anytime the danger of collision appears.
2.) Second time – from the time the danger appears until it becomes a practical certainty
3.) Third time – from the time it becomes a practical certainty to impact.

DOCTRINE OF INSCRUTABLE FAULT:

If there is a collision of two vessels and it cannot be determined who is at fault, each bears his own loss. However,
both ship-owners are solidarily liable for the damage to all cargoes.
WARSAW CONVENTION

What is WARSAW?
Is the capital of Poland.
How do you call the people of Poland?
Poles
Polish, yan yung adjective form ng Poland.

What: It is an agreement among sovereign nations for 2 purposes:

1.) To Have uniform documents in connection with international air transportation,
2.) To Fix the liabilities of international air carriers.

How the sovereign nations which participated in the convention referred to therein?
High contracting Parties

Who are the parties:

The signatories are referred to as HIGH CONTRACTING PARTIES.
The Philippines was not an original party because at the time, it was not yet a sovereign nation and it had no aircraft.
Philippines became a party by accession to the US.

1929 nangyari yung convention and the Philippines got its independence from the US in 1946. Hindi pa sovereign
nation so it cannot have participated in the Warsaw convention

The Philippines had no aircraft. Bat ka naman sasali sa usapan ng mga may eroplano e wala ka naman pa lang eroplano.

What is an INTERNATIONAL AIR TRANSPORTATION:

At the time of the meeting, what is the meaning of international?

Yung una alam ninyo,
- One where the port of origin is in one country and the port of destination is in another
Para bang byaheng Manila – Hongkong

Kaya lang may isa pa, ito aay international dati. parang wala ng ganito ngayon
- One where the port of origin is in one country and the port of destination is in the same country but the agreed
stopping place is in another country. This often occurred when there were multiple colonies, e.g. LA (US) – Tokyo
(Japan) – Guam (US).
Dati kasi, yung mga aircrafts, propeller driven. In short, mabagal. Tapos hindi pa fuel efficient. Kaya dati walang direct
flights. Halimbawa, during those days; Hawaii, USA yan kaya kung mag uumpisa ka ng Hawaii, USA papunta ka ng San
Francisco, USA lumalabas yan domestic lang. Port of origin Hawaii, USA. Port of destination, California, USA. E di
domestic lang iyon. Kaya lang during those days wala pang jet kaya nung panahong iyon kailangan may stop over in
another country. I remember those days, from Hawaii to US, ang stop over Japan, in between. Kasi mabagal nga ang
eroplano, propeller drive. Mabagal.
During those days, walang direct flight. Kinakailangang magpahinga nag pasahero, kailangang magpahinga ang piloto.
Kaya kasama sa itinerary ang stop over in another country. Kaya lang nag-improve ang technology, bumilis ang flight.
Tapos yung conveniences mayron na sa eroplano.

SA ngayon may direct flight na.

Kung may stop over dahil sa emergency, di iyon count as international flight.
Dapat part of the itinerary to be considered as international.

- Movement of goods by land or water to the aircraft

What documents must be uniform:

1.) Passenger Ticket, issued by the carrier
2.) Baggage Check, the white strip of long sticker with a bar code
3.) Airwaybill, it is a B/L

Currency of Indemnity: Before, original indemnity used to be fixed in Swiss Francs; now, this was changed to US Dollars.

Another purpose of the WARSAW convention is to fix the liabilities of international air carriers.
Bakit?
Kasi every country has its own rule of awarding damages.
Specially moral damages.
Kaya isipin mo naman kung halimbawa yung aircraft galling Germany papuntang south Africa. Hindi natin alam kung
anong rules regarding awards on damages dyan sa Africa. Baka yung isang pasahero ay nabukulan lang
Tapos nagkaso sa south Africa. Yun pasa sa south Africa, pag nabukulan ka 1 million dollars agad. Kawawa naman yung
carrier.

Why are liabilities fixed: Because of the different ways to assess damages for injuries or loss of goods

Ginawa ng warsaw convention, nag usap usap yung ibang countries, o sige, pag usapan natin yung limit on liabilities
of international air carriers.

There was a limit in the warsaw convention but it ws later amended by the sovereign nations.
Kaya dati ang indemnities before are paid in French francs. Hindi na ngayon, US dollar na ang ginagamit. Kasi nung
nangyari yung warsaw convention it was in year 1929, later in the 1950’s nagkaroon ng Guatemala protocol.
And in the Guatemala protocol they revised the amount of damages and also the currency in which damages were
payable.

What are the fixed liabilities of the carrier

1.) Death of a passenger: $100k, no question asked. (pag confirmed na yung asawa mo ay sumakay sa eroplano
at bumagsak yung eroplano na iyon, e di 100k dollars agad iyon. Wala ng tawaran iyon. After all, wala namang
problema ang carriers, naka insure yan. Pag patay fixed amount 100K US dollars kahit baby pa yan. Basta tao.
2.) Physical injuries: $100k maximum, depending on the severity of the injury. Kung halimbawa, sunod na sunog
katawan mo, $100k. e naputulan ka lang ng pinky, wag ka namang umasa ng $100K. sabihin ng carrier $10k
Why? E diba you have 10 fingers 😊
 3.) Checked-in articles: maximum indemnity is $1k per kilogram UNLESS a greater value is declared and the fare
corresponding to the bigger value is paid
The value must be proven to be at least $1/kilogram;
otherwise it is only value you can prove.
Kaya kung ikaw ay magbbyahe, mamimili ka sa abroad, wag mong iwawala yung mga sales invoices.
Para kung mawala man yung mgapinamili mo, when you claim, sasabihin mo, eto proof. Na eto yung
laman ng aking mga maleta. Kaya wag mong iwawala yung mga sales invoices.

Talagang mamahalin yung mga binili mo, maximum indemnity that you will receive is only up to that
rate.
1k US dollars per kilogram

Kaya kung mga pinagbibili mo ay talagang mamahalin, umabot ng 5K US dollars per kilogram, the
maximum that you could receive is only up to 1K US dollar per kilogram.

Kaya lang kung yung mga pinamili mo ay puro mga imitation, whatever you can prove. Kung
equivalent ng pinamili mo ay 5 us dollar per kilogram e di iyon lang or whatever you could prove.

4.) Hand-carried articles (usually 7 kilograms. Pag sumobra, you are required to check in: $1k maximum
regardless of weight and actual value

Halimbawa, bumili ka ng relo, ayaw mo munang isuot. Sa pilipinas ko na lang isusuot kapag may reunion kami
o homecoming, eto para walang gasgas.
Pag hand carried articles, maximum indemnity is $1k
Hindi na iyon per kilogram
Halimbawa, bumili ka ng rolex watch, sale. 1200 US Dollars. Binigyan ka ng sales invoice. Nakalagay 1200 US
dollars. Di mo sinuot. Nilagay mo sa handbag mo. Napansin ka ng stewardess. Mamn asa exit row kayo, dapat
walang hawak. You got up, open the lid, nilagay mo yung hand bag mo doon. Then you close the lid. Smooth
flight until you reached Philippine territory. Nung nasa Philippine territory na, mayroon turbulence. Then
yung aircraft, parang dinidribble. Kaya lang you survived the flight. Kaya nung nag landing na, you got up to
get your hand bag. Hindi makita yung hand bag mo. What happened cannot be explained. Tiningnan lahat
ng ano. Pero hindi talaga makita handbag mo. You lost your genuine rolex watch. How much can you recover
from the carrier?
Hindi 1200 kun di only 100 US Dollars kasi yun lang ang limit. Hindi na per kilogram bastand carried.

Actually, the Guatemala Protocol has not yet been ratified by the Senate pero yan nay ng sinusunod worldwide.

What to do to claim the full amount:

1.) Declare the value
2.) Pay fare according to the value
 PUBLIC SERVICE

Who may engage in public service

Only - Ph citizens or
- Corporations with 60% ownership by Ph citizens

Grandfather Rule: Control test where the citizenship of the corporation owning another is taken into
consideration in determining the 60% Filipino ownership

Requirements or Qualifications to engage in PS

1. Ph citizenship
2. Willingness to engage in PS
3. Financial capacity – why:
a. Acquiring equipment to engage in PS
b. Settling damage claims

What are required before one may engage in public service?

1. Filipino Citizenship
2. Willingness to engage in public service
3. Financial capacity

What for is that requirement of financial capacity?

The requirement is not just for the purpose of acquiring the equipment for the public service but also for the
payment of liabilities.

Kaya s atotoo lang madaming nag pupublic service disqualified.

Why?
Walang financial capacity
Yung mga tricycle operators lalo na yung mga pedicab operators.
Pag nabangga ka nun, kakamutan ka lang ng ulo.
Yung tricycle, nabangga ka ng driver, kakamutan ka din ng ulo.
Sya ng bumangga, papalabasin kasalanan mo pa.

Maganda sana yung requirement ng SC, but these are not followed in allowing people to engage in public service.
Yan tulad nyang mga pedicab drivers. Tricycle, puro yan mga walang financial capacity. Kaya lang government
allows, livelihood program. Para mabawasan nga naman daw ang unemployment.

How to engage in public service

1. Application by petition
2. Hearing
3. Issuance of a CERTIFICATE OF PUBLIC CONVENIENCE, a written authority issued by the government
regulator to enable persons to engage in public service

DIFF WITH CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY: Issued by the government regulator to
enable the person to engaged in public service for which service, a legislative franchise is required.
Halimbawa: shipoping companies, airlines, telecommunications. They all require legislative franchise.

Who regulates public service

Under the 1935 Constitution, it was the Public Service Commission (Abolished).
Now, it is regulated by different government agencies: DOTC, LTFRB, CAB, MARINA, LGUs (lakes, rivers)

Dati kasi, Centralized, pati ice plant.

Now, ice plants are regulated by the LGU
Transportation – DOTR
Mayroong pang land, -TFRB
Vessels – MARINA
Airlines – Civil Aeronotics Board
Yung mg abngkang tawiran – LGU
Tawiran ng manila, Makati – 2 , you deal with both LGU
Telecommunication – DICT

What is the relationship between the driver and the operator?

Employee – employer.
Driver is the employee
Operator is the employer

KABIT SYSTEM – it is an illegal manner of engaging PS by doing it through others where it does not itself
possess of the qualifications
PRIOR APPLICANT RULE: If two or more persons apply to render the same public service, the one who first filed the
application should be granted the authority.

Example: Boundary System where the driver pays an amount to the operator of a jeep for use of the motor
vehicle for an agreed period. According to the SC, there is an employer-employee relationship between
the driver and the operator by reason of the control test.

OLD OPERATOR RULE(no longer exists): If someone is already rendering the service, it must first be allowed to offer
to add the same service
 FOREIGN INVESTMENTS ACT

Purpose of law: to encourage and entice foreign investments to bring in more foreign currency. It was formerly illegal
for transactions to be paid in foreign currency or in relation to foreign currency.

Salient Features
 Foreigners can own 100% of any enterprise related to exports so long as it is not covered by Negative List A
&B
 Negative List A, activities reserved by the Constitution or other special laws to Filipinos
e.g. advertising, public service
 Negative List B, activities that are exclusively for Filipinos
e.g. those relating to ammunition and firearms (unless the Secretary of National Defense consents),
pyrotechnics, nightclubs, beerhouses, steambaths, and massage parlours.

 Inward Remittance: A foreigner may also own 100% of a domestic market enterprise if the foreigner remits
and makes an investment worth $200k or equivalent but not in areas where there are health related risks
ex. Bars, beer houses, massage parlors, sauna baths, dancing halls.
EXCEPTION TO $200k REMITTANCE:
 If the enterprise advances technology, as determined by the DOST and hires more than 50 Filipino
employees; the investment must also be no less than $100k; or
 If the alien is a former natural-born Filipino, then he is allowed to own urban properties with an area of
5000sqm. or rural properties up to 3 hectares. If both spouses are formerly natural born Filipinos, their
total lands must not exceed the above-stated land areas, and the land acquired must be in different
locations.

 Filipino Corporations:
a. Domestic corporations must be at least 60% owned by Filipinos.
b. Foreign corporations must be 100% Filipino owned.