COMMREV
REVIEWER
Negotiable Instruments
Section 1. Form of negotiable instruments.-
An instrument to be negotiable must conform to
the following requirements:
(a) It must be in writing and signed by the maker
or drawer;
(b) Must contain an unconditional promise or
order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a
drawee, he must be named or otherwise
indicated therein with reasonable certainty.
The note is not negotiable. It is not an
unconditional promise to pay as it restricts the
payment to the proceeds of the sale of his
jaguar. When the note states that payment will
come from a particular fund, the note is not
negotiable
The note is negotiable when the sum or the
amount is certain even if mathematical
computations are needed in order to determine
the said sum
The Negotiable Instruments law does not
require for the negotiability of an instrument that
is be signed using the real name of the maker.
The law in section 1 merely requires that it be
signed by the maker or drawer and any
signature will be valid provided that he assents
thereto at the time of signing
What is material is the makers intention of
placing her signature on the instrument.
GR: Indorsement of the instrument must be in
full and not partial
XPN: partial payment = indorsement as to the
residue
Monique may run after Lou, Ralph, Naldo and
gina as indorsers when the check is dishonored
because they are secondarily liable
st
If Lou (1 indorser) was stricken out, Monique
cannot go after Lou, Ralph, Naldo and Gina
since Lou is the first indorser and when her
name was stricken out, she and all those after
her were discharged from any liability over the
instrument
No act of kindness however small is ever wasted
A bearer instrument is always a bearer
instrument (negotiated by: delivery or special
indorsement coupled with delivery)
Nikki may further negotiate the check to Brianna
by delivery since the instrument was a pay to
order of Kristine check, it is a bearer instrument
and may be negotiated by delivery regardless of
the indorsements made
Although the promissory note is not a bearer
instrument as the phrase bearer Jose Reyes
means Reyes is the bearer, the same is
nonetheless an order instrument and such
complies with the requisites of negotiability
As an order instrument, the promissory note is
negotiated by indorsement coupled with delivery
Restrictive Indorsement prohibits further
negotiation of the instrument
Presentment of payment is not necessary in
order to charge the person primarily liable (eg.
maker of the promissory note, presentment not
necessary)
Presentment of payment is necessary to charge
a person secondarily liable (eg. Indorsers)
I promise to pay signed by two or more
persons, the liability of such makers is solidary
Holder for value: note was issued to him to
secure a valid contract of simple loan
The note is still valid because it was issued
pursuant to a valid contract of loan between A
and B and the use of money by B is not part of
the consideration in the loan
The receipt is valid and negotiable because
despite the phrase non-negotiable it is not the
phrase that would determine whether an
instrument is negotiable or not. The basis will be
the tenor of the instrument and not the
phrase/stamp of non-negotiable. The fact that it
was indorsed in blank proves that it may be
negotiated
Sec. 52. What constitutes a holder in due
course. - A holder in due course is a holder who
has taken the instrument under the following
conditions:
a. That it is complete and regular upon its

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face;
b. That he became the holder of it before it
was overdue, and without notice that it
has been previously dishonored, if such
was the fact;
c. That he took it in good faith and for
value;
d. That at the time it was negotiated to him,
he had no notice of any infirmity in the
instrument or defect in the title of the
person negotiating it.
Crossed check would mean that it is not regular
upon its face and cannot be considered a HDC
because the requisites are not met
A can still sue upon the check although all
defenses may be raised against him as he is not
a HDC.
Negotiability and validity are different and non
negotiability does not affect the bills validity
Luisa becomes liable if she accepts the bill of
exchange. She becomes an acceptor or drawee
and is liable under the terms and conditions of
the acceptance
A may validly and effectively negotiate the check
as there is no prohibition disallowing minors
from negotiating promissory notes or bills of
exchange. Further only the minor can invoke the
defense of minority and not prior and
subsequent holders of the check.
As to the requirement that it must contain an
unconditional promise to pay a sum certain in
money, the promissory note is compliant
therewith notwithstanding the variance between
the amount written in words and the amount
written in numbers because it may be remedied
by applying the rule that the amount written in
words govern. As to the payees, the same is
negotiable notwithstanding multiple payees
The amount due and payable is 10k because it
is the amount written in words and as such it
governs as opposed to the amount written in
numbers
A check, which is payable to the order of cash is
a bearer instrument and the rule is that a bearer
instrument shall always be a bearer instrument
notwithstanding subsequent indorsements.
No act of kindness however small is ever wasted
Thus, being a bearer instrument, it can be
negotiated by mere delivery
Insurance
A person may designate any person as
beneficiary if he takes insurance upon his own
life subject to Art. 739 in relation to Art. 2012 of
the NCC.
Husband and wife living separately is not an
issue with regards to insurable interest over the
life of the other spouse
DQs as beneficiaries under the civil code:
Article 739. The following donations shall be
void:
(1) Those made between persons who were
guilty of adultery or concubinage at the time of
the donation;
(2) Those made between persons found guilty of
the same criminal offense, in consideration
thereof;
(3) Those made to a public officer or his wife,
descendants and ascendants, by reason of his
office.
Article 2012. Any person who is forbidden from
receiving any donation under article 739 cannot
be named beneficiary of a life insurance policy
by the person who cannot make any donation to
him, according to said article.
One act of sexual intercourse or the acceptance
of an indecent proposal cannot be characterized
as concubinage as they did not portray
themselves as husband and wife, have sexual
intercourse in a scandalous circumstance or the
husband bringing the mistress into the conjugal
dwelling
Constructive total loss: more than of the
thing insured must be lost
A can insure the raffle against theft for 10k
because it is the price of the ticket when he
bought it and he will be damnified by its loss to
the extent of such amount. However, he cannot
insure the grand prize because such is a
wagering contract which is not covered by
insurance

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A can now insure the raffle ticket for 10M since
the ticket had already won the grand prize, he
has now an expectancy founded on an existing
interest over the prize. (inchoate interest)
Lessor has insurable interest over the
warehouse because he has an expectancy over
an existing interest (ownership shall pertain to
him after the contract of lease)
Lessee has insurable interest over the
warehouse because he will be damnified in case
the warehouse and its goods are razed by fire
For one to be able to procure property
insurance, one must have an insurable interest
over the property insured, which may be an
existing interest, inchoate interest based on an
existing right or an expectancy founded on an
existing interest. A does not have any insurable
interest over the house prior to the perfection of
the sale as he has no existing right or interest.
Thus, he cannot insure the house
Negligence: not a ground to deny a claim
A can recover on the policy for as long as the
fire which destroyed the building was not
deliberately intended or sought by him. Mere
negligence is not an excepted peril in an
insurance against fire unless the contrary is
stipulated. Hence, the negligence of A cannot be
used to defeat the policy
SEC. 77. An insurer is entitled to payment of the
premium as soon as the thing insured is
exposed to the peril insured
against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance
issued by an insurance company is valid and
binding unless and until the premium thereof has
been paid, except in the case of a life or an
industrial life policy whenever the grace period
provision applies.
XPN: UCPB v Masagana
1. In case of a life or industrial life
policywhenever the grace period provision
applies [Sec. 77]
2. Any acknowledgment of the receipt of
premiumis conclusive evidence of
payment [Sec. 78]
3. If the parties have agreed to the payment
ininstallments of the premium and partial
payment has been made at the time of
loss [Makati Tuscany Condominium v. CA]
No act of kindness however small is ever wasted
4. The insurer may grant credit extensionfor
the payment of the premium [Makati
Tuscany Condominium]
5. Estoppel
The insurer may reject his claim. In the case of
UCPB v Masagana, the insurer has been
estopped to pay for the insurance claim because
there has been an established customary date of
payment to which UCPB has impliedly permitted.
This principle of estoppel is not applicable in this
case because A has yet to pay for the annual
premium within the customary date of payment
after the loss of the property has taken place.
Therefor, A cannot claim from the insurer
The date of loss is immaterial in ascertaining
whether A can file his claim since it is more
important to note if there has already been
payment of the annual premium before the loss
or it has been paid within the customary date or
payment, even after the loss took place
Irrevocable beneficiary: already has a vested
interest over the proceeds accruing from the
policy upon the death of the insured
SC case daw: insured cannot include additional
beneficiaries to an irrevocable beneficiary
because it will diminish the proceeds, which the
irrevocable beneficiary will receive as a vested
right
A and B cannot be added as beneficiaries.
Whenever a beneficiary is irrevocably
designated, the insurer cannot change or add
beneficiaries to his policy without the consent of
the irrevocable beneficiary
A beneficiary of an insurance policy has a
vested right over the policy and is allowed by law
to pay the premiums. As his/her payments
caused the policy to subsist at the time of the
loss or death of the insured, he/she may claim
the indemnity as beneficiary thereof
Double insurance: there is an insurance over
the same thing, the same risk, of the same
person for the same interest
Over insurance: the insurable interest of A is
only 10 million but he insured the building for 12
million against fire with XYZ insurance (7 million)
and BCE insurance (5 million)
Under insurance: If there was a partial loss of 1
million due to earthquake, A may recover 400k

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from ABC insurers since A is underinsured
against earthquakes because he only insured
the building for 4 million when its value is 10
million. A is deemed to be self insured as
regards to 6 million. Thus, when a partial loss
occurs, the loss will be apportioned to A and the
insurer as co-insurers. He can recover 4/10 or
40% of the value of the property which is the
value covered by the insurance company (pro-
rata) or the proportional value to be shouldered
by the insurer.
The owner of the shipment cannot file a claim on
the ground of constructive total loss because
there was no constructive total loss since only
80,000 marbles were lost and did not amount to
more than of the marbles.
The marine insurance policy covered 200,000
marbles so the basis of computing the total loss
would be the policy
A prospective buyer can insure the property
against fire because he has an inchoate interest
over the house. Sec 14 of the Insurance code
provides that an inchoate interest founded on an
existing interest or right can be insured
A person has an insurable interest over the life
of the person who is obligated to him for the
performance of an act
A person has an insurable interest on the life of
another whom he depends totally/partially for
support or education
Insurable Interets: Mortgagor can insure the
property to the extent of its value. The
mortgagee can insure the property to the extent
of the value of the principal obligation which the
mortgage secures
Letter of Credit
A bank letter of credit is a credit facility which
allows persons to enter into commercial
transactions wherein the seller is assured of
payment while the buyer is assured of delivery
Requirements of a Letter of Credit:
a. Name of the person to whom the letter of the
credit shall be extended
b. The amount of the extent of the amount of the
credit that is to be extended
c. 3 contracts are involved
3 Contracts in a letter of credit
No act of kindness however small is ever wasted
i. Contract between the buyer and seller
ii. Contract between the buyer and the bank
iii. Contract between the seller and the bank
A can only collect 225k from PDIC because the
deposits of a person in his savings, current and
time deposits are collected and paid in the
amount of the total deposit not exceeding 500k.
The marginal deposits are not covered since the
relationship of the bank and the depositor is not
in the nature of debtor and creditor. Since
marginal deposits are used in opening of letters
of credit. Likewise, money market placements
are expressly not covered by the law even if
such placement is treated by the bank in its
books as deposit
A letter of credit is not a negotiable instrument
under the provisions of the NIL. A bank letter or
credit may not be negotiated because it is
executed in favor of a particular person
The use of the word order makes the same
negotiable and not a valid letter or credit
Strict compliance rule: requisites of a letter of
credit must be complied with
Warehouse Receipt Law
Warehouse receipt issued as an order
instrument: negotiated by indorsement and
delivery
If indorsed in blank: A will affix his signature and
deliver it to B
If indorsed specially: A will affix his signature by
indorsing it to B or order then deliver it
Bearer instrument: delivery only
to claim the goods, A shall surrender the
negotiable warehouse receipt to B and
acknowledge receipt of the goods. He must also
satisfy the warehousemans lien before the
goods may be released to him
In the issuance of an extra copy, said copy must
must be indicated as duplicate in its face to
protect the interest and prevent the negotiation
of the duplicate receipt
Release of goods:
a. Satisfy the warehousmans liens
b. Surrender the receipt
c. Show willingness to sign or
acknowledge the receipt of the goods

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Interpleader: uncertain who is entitled to the
property. The court will decide who among the
parties has a better right
A person who has the original receipt of the
goods creates a presumption that he has the
right over the goods covered by the receipt.
Upon presentment of such to the
warehouseman, he shall have the direct
responsibility to deliver the goods to the person
who has in possession of the original receipt
A has a better right to the goods. A is a
purchaser in GF and for value. When the WHR
was negotiated to him, B warranted that he had
a title to such goods
The WHR is negotiable since what is controlling
is the tenor of the document which contains the
negotiability words of or bearer. Under the
WHR law, the only exception is that the tenor is
non negotiable but the receipt is stamped with
the word negotiable
When what was issued is a negotiable receipt
and hence the goods cannot be ceded or
transferred as to its ownership unless the receipt
is indorsed then delivered, or delivered alone
depending on the tenor of the negotiable receipt,
or assigned by delivering the receipt. Since the
receipt was not indorsed and delivered or
delivered or assigned, the warehouseman has
not acquired the ownership over the goods
A is not liable for conversion since under the
WHR law, his warranty over the receipt he
negotiated does not include the failure of the
warehouseman to deliver the goods. A as
negotiator warrant only the genuineness of the
receipt.
XYZ corp is also not liable for conversion as it is
a juridical peson and it is a basic precept in
criminal law that juridical persons cannot be
liable criminally because they cannot be put in
jail when found guilty unless the statute
otherwise provide that they be criminally liable
and punished with fines. Since the RPC does
not provide, XYZ corp is not liable.
When the original receipt was lost, A should go
to court and establish his rights over the goods.
The court will require him to post a bond. The
court thereafter will order the warehouseman to
deliver the goods to A
No act of kindness however small is ever wasted
Truth in Lending Act
Disclosure statement: to inform the buyer of all
interest and charges in an installment sale.
Additional interest cannot be imposed if not
stated or disclosed
Violation of the TLA is not a criminal offense but
a violation thereof will warrant civil liability
TRL act will not apply to contract of lease as the
TRL act only applies to loans and the like
Transportation Law
Requisites of a common carrier:
a. It transports goods and passengers or both
regularly
b. It is offering its services to the public
c. It must be open to all who wish to avail of the
services
d. It charges a fee for the services
GR: Presumption of Negligence in case of
accident or injury
XPN: Utmost diligence of a very cautious
person/Extraordinary dilligence: this
responsibility cannot be diminished by
agreement between the passenger and the
common carrier.
Injury sustained by the fault of the
passenger: there must be no negligence on the
part of the CC.
Claim to loss or damage of goods must be
filed with the CC: immediate (24 hrs) if the loss
or damage is apparent; within 3 days is the
damage is not apparent. Timely filing is a
condition precedent to filing a case in court
If the CC failed to act on the claim , its should be
filed in court within 1 year from the delivery to
the arrastre operator; if not delivered, the action
should be filed in court within 1 year from the
time the goods should have been delivered
The parties may not stipulate in writing to
shorten the period because it is contrary to
public policy but the period may be extended
Demand letter: it does not stop the running of
the prescriptive period. The 1 year prescriptive
period is provided by COGSA and not by the
civil code

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The parties may validly stipulate in writing to
suspend the running of the period to file the
claim during the pendency of a negotiation for
amicable settlement. It is not prohibited under
the law, it is among the matters the parties can
stipulate on and ultimately it promotes the
settlement of the case and the prevention of a
trial
Breach of Contract of Carriage: file in court to
allow recovery from the CC an action for
damages arising from breach of contract of
carriage because the carrier failed to exercise
extraordinary diligence in the carriage of goods.
The lost or damaged goods creates a
presumption of negligence against the carrier
Defense of CC: if the CC can prove that the
proximate cause of the loss of the goods is the
character of the goods, then the CC may be
absolved from liability. (eg. Assumption of risk
that it may perish upon its transport)
Mortgage
A cannot claim the worth of the articles as
evidenced by the receipt amounting to 2k. To be
entitled to the actual or full amount of 20k, he
must not only prove that the actual worth of the
products but must actually declare the actual it
and pay for the corresponding additional fare.
PAL is only liable for 2k.
The NCC does not require that a common
carrier should be by way of a motorized vehicle
or mode of transportation. It can be any form
provided it is offered to the public, whether
general or a limited segment, for compensation
or for a fee. In this case, the chute made by A is
an accepted mode of transportation which will
qualify A to be a common carrier despite the fact
that is not motorized because A charges a fee
for its use and makes it available to anyone
A is not considered a common carrier although
his neighbors pay him 1k per month. He is only
an accommodation and A does not offer the
service to the public. Moreover, A is not
engaged in the business of transportation
They may sue the carrier for damages because
it was negligent in transporting them. The bus
was overloaded which caused the flat tire. Their
injuries will be compensated by the damages
awarded to them because the CC committed a
breach of their contract of carriage
No act of kindness however small is ever wasted
The carrier may not set up the defense of
fortuitous event because it was not the
proximate and only cause of the injuries suffered
by the passengers. The CC was negligent in
overloading the bus. If not for the flat tire, they
could have reached their destination safely.
Their negligence was the proximate cause and
not the storm. When there is human intervention
which caused the injuries, fortuitous event is not
a valid defense.
The demurrer must fail. CC are bound to
exercise utmost diligence of a very cautious
person in the transportation of passengers.
Thus, when there is death or injury arising from
such carriage, the carrier presumed liable. It has
the burden of proof to substantiate its claim that
it exercised the prescribed diligence of a very
cautious person. In this case, notwithstanding
the failure to submit any evidence by the
plaintiffs, the demurrer must fail as the CC is
burdened to discharge its liability
Affidavit of GF: binds third persons
(constructive notice) -> to be registered.
Absence of AoGF still binds the parties and does
not affect their obligations
10 day notice: cannot be waived by the
mortgagor because it was not implemented by
law for his favor but for third persons.
A deed of contractual sale is valid in so far as
transferring ownership after full payment has
been effected
Chattel mortgage over vessels must be
registered with the MARINA as stated in the ship
mortgage decree law whose vessel is registered
in the Philippines.
Chattel mortgage is registered in the books of
the issuing corporation and likewise registered in
the city or province of the principal place of
business of the corporation
Machineries of the tenant placed in the building
of another is treated as personal property unless
placed in the place where the owner is
conducting his business which will be treated as
real property
Ownership of the thing is essential to make the
mortgage valid

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Procedural requirements for foreclosure of REM
Right of redemption: period 1 year from the
registration of the certificate of sale. No express
waiver because it is contrary to law. He may
waive such right impliedly by not exercising the
right of redemption. He may likewise transfer
such right to his heirs or successors in interest
Mortgage is only an accessory to the principal
obligation. If the principal obligations has been
extinguished, the mortgage is likewise
extinguished
Mortgagee(bank) and Mortgagor (Juridical
person), the period of redemption is 3 months
from the date of sale or before the certificate of
sale is registered whichever comes first
Bulk Sales Law
BSL law applies when a seller sells all or
substantially all of his goods, merchandise or
wares not in the ordinary course of business. In
order for such sale to be valid he must inform his
creditors and deliver a sworn statement
Execution sale (writ of execution by judgment of
the RTC) is not covered by the bulk sales law
and there is no need to comply with the
requirements because there is no more fraud to
creditors to be taken into consideration
Bulk sales law covers sale, assignment,
mortgage, transfer of all or substantially all of:
1. Goods, stock, wares and merchandise
2. Fixtures and equipments
3. The business itself
Bulk sales law does not cover the ff:
1. Judicial sales
2. Sale of exempt articles
3. Sale of
4. Sale of goods which are owned and
manufactured by him
The owner is not liable under the BSL when the
main business of the owner is repairing
automobiles and the sale of spare parts is
merely incidental to its business and thus not
considered as those enumerated to which BSL
covers.
The sale is valid. The BSL only covers
merchants who are engaged in buying and
selling of goods, wares, merchandise, etc. A
No act of kindness however small is ever wasted
being a manufacturer of school desks and chairs
is not covered by the BSL.
The sale made by A was not valid because A
failed to execute an affidavit or a sworn
declaration to inform his creditors of the sale and
to indicate the amount and nature of his loans.
The bulk sales law is applicable in this case
because his sales per day only averages about
2k and his sudden sale of his entire goods in the
warehouse which is 1M worth brings the
transaction under the BSL although A was not
insolvent. The sale creates a presumption of
status and thus necessitates notice to the
creditors in order to protect their interest.
Trust Receipts Law
Requisites to be covered by the TRL:
a. That the entrustee shall remit the proceeds of
the sale to the entrustor
b. That the entrustee shall return the goods to the
entrustor is it is not sold
Note: In order that a person may be criminally
liable under Art. 315 (estafa) of the RPC
pursuant to the TRL, the document that he
signed must be a trust receipt
A deed of sale with reservation of title will not be
covered by the TRL. It must contain the
requisites either in a statement or stipulated
A deed of sale with reservation of title is not
considered a trust receipt that would make A
liable for estafa
The TRL only covers transactions wherein the
entrustee is entrusted by the entrustor of the
goods for the purpose of selling it to other
persons. In this case, A cannot be deemed an
entrustee because he was not entrusted of the
TV set for the purpose of selling it to others but
for his personal use. The fact that he sold it
subsequently is immaterial
The entrustee bears the risk of loss. Further,
even assuming that the entrustor as owner
bears the loss, the entrustee nonetheless must
pay the former the price of the goods
The entrustee who procures the goods and
thereafter receives the same with the obligation
to sell the same and remit the proceeds to the
entrustor or if not sold, return the same to the
latter. Although the entrustor in the owner of the
goods, his participation is limited to the financing

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of the goods. If the goods are stolen, it is the
entrustee who should be liable
The interest and penalty in this case may be
collected, as the contract does not fall within the
TRL act. The TRL act applies to loans and not to
contracts of lease. In the present case, the
parties may validly enter into a contract and
agree on the interests and penalties in case of
failure to pay the rentals
Banking:
Bancassurance: A bank cannot engage in
insurance business even if it has enough capital.
However, it may sell insurance provided that it
owns 5% equity of the insurance company
whose insurance it sells
Tender of payment: centavo coins-100php;
peso coins-1000php
GR: a depositor can recover the full amount of
his deposit from PDIC upon closure of the bank
provided the amount will not exceed the
maximum limit of 500k per depositor and per
bank
The law on secrecy of bank deposits has
exceptions on its applicability and that includes if
said deposits are under litigation, upon order of
the court and the likes
The spouses may only recover 250k from PDIC
because that is the maximum amount insured for
every depositor. The spouses account were joint
accounts and the insurance will not cover each
account of the spouses.
IPL
Service names or product names of two entities
or two products may have the same name
provided they do not provide similar services,
closely related services or would prohibit a
registrant to expand his services or product in
the nature of his current business or product
Mere discoveries or observations, scientific
formulas, mathematical solutions cannot be
patented under the law.
Requisites for an invention to be patented:
a. It must be new
b. It must involve an inventive step (Trial
and error, experimentation or
investigation)
No act of kindness however small is ever wasted
c. It must be capable of industrial
application
Gas saving device is patentable as it complies
with the requisites. (refer to requisites above)
The discovery of the effect of berries, discovery
of herbal medicine, discovery of specie of a bird
cannot be patented
A is entitled to the patent because the inventor is
the one who is entitled to the patent even if B
registered it first. The first to file rule will not
apply because it is only applicable if an invention
was made independently. In this case, B only
copied As methods to come up with the
invention.
The IPO is correct in disapproving Einsteins
application because mere concepts and theories
are not patentable.
The fair use and intellectual property code states
that annotations made or taken for the purpose
of research or formulating legal opinions cannot
be considered infringement
Infringement or copyright does not cover:
a. Personal use
b. Research and Instruction purposes
c. Government use with the obligation to
pay for royalty
Corporation Law
Merger: one of the two corporation will survive
Consolidation: a new entity is created and both
existing corporation will be dissolved
The corporation may be merged or consolidated
in order for their licenses may not be revoked.
One of the purposes of a merger or
consolidation is to meet the minimum paid up
capital. Other purposes are for profit, better
opportunities and better image
Steps of a valid Merger or Consolidation:
a. There must be a board resolution as to
the Merger or Consolidation
b. Special meeting of the stockholders
must be called for to verify the merger or
consolidation
c. Ratification/affirmative vote of at least
2/3 OCS
d. Prepare the articles of merger or
consolidation

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e. Submit the articles of merger or
consolidation to the SEC
f. Approval of the Merger or consolidation
upon issuance of the certificate of
merger or consolidation
Yes, the purchase is valid because the law
allows the same. Likewise, they may buy their
shares and later sell the same for a higher price
if it would benefit the corporation and would help
them in the transaction of their business
Treasury shares are defined as shares that was
once issued by a corporation and was re-
acquired by the same. ABC corp acquiring their
own shares are considered treasury shares
Treasury shares are not outstanding shares
Treasury shares are not entitled to participate in
dividends and have no voting rights. It would be
absurd to allow treasury shares to participate in
stock dividends because it will be saying that the
corporation will benefit or will acquire its own
stock dividends
The board can distribute the treasury shares
they have if such are available. If the treasury
shares are not available, they can amend the
AOI to increase the authorized capital stock. In
case of the former, the vote of the 2/3 OCS is
necessary
Dividends may be declared and distributed by a
board acting as board of directors and not acting
as an executive committee
ABC corp is not a stock corporation. A stock
corporation is operated for the purpose of profits.
In this case, ABC corp is a non stock corporation
because its AOI and by laws do not provide
distribution of dividends upon dissolution but
rather it will give its assets to a charitable
institution upon dissolution
A president of a corporation must be a director,
owns atleast 1 share (common or preffered), he
is not a treasurer or corporate secretary of the
said corporation.
Dividends may be given or distributed if there
were no prior losses for as long as there are
surplus profits. In this case, there were no
surplus profits dividends may not be distributed.
Likewise, if there are losses, it must be
prioritized before the distribution of dividends
No act of kindness however small is ever wasted
Declaration of stock dividends: approval of
the stockholders representing 2/3 of the OCS
A disgruntled stockholder cannot demand
payment of his appraisal right because it is only
in certain instances where he may do so and
declaration of dividends is not one of them
Instances where a SH can demand his
appraisal right:
a. Amendments of the AOI or by laws
restricting the rights of the stockholders
b. Investment in another corporation
c. Merger or consolidation
In order to compute the maximum number of
votes, it is the number of shares of stock
multiplied by the number of directors to be
elected
It is legal to have 19 directors in a non-stock
corporation because a non-stock corporation
only requires a minimum of 5 directors without a
limit on its maximum number. In a stock
corporation, only a maximum of 15 directors are
allowed
There is no cumulative voting in a non-stock
corporation. One member is entitled to one vote
Filling of vacancy of BOD: if there is still a
quorum among the directors, the directors may
vote and choose from the stockholders the
replacement. If there is no more quorum, the
stockholders will vote for and choose the director
in a special meeting called for that purpose
Removal of a Director: he may be removed
upon majority vote of directors and ratification of
2/3 of the stockholders. However, he may not be
removed without cause if he is a director
representing the minority
Note: the 2/3 OCS vote only applies to removal.
An employee cannot invoke such voting to be
elected as director.
Yes, XYZ corp can issue shares of stock to A as
long as it is stipulated and such is ratified by 2/3
of the OCS
The deadlock shall be resolved by filing a
petition with the RTC for a provisional director.
The provisional director will vote in order to
break the deadlock. The provisional director
must be an uninterested third party

COMMREV REVIEWER
Dissolution: the corporation may not enter into
new contracts since it ceased to be an artificial
being. It has no capacity to contract. It may only
continue business or activities which are related
to the winding up process
The corporation should now undergo liquidation
and winding up. It should settle any liabilities it
has and liquidate its assets
Creditors have a period of 3 years from
expiration of term to file their claims
The corporation cannot enter into new contracts
upon expiration of its term because it ceases to
be an artificial being
Watered stock: the value of shares is lower
than the par value and book value. Issuance of
the same is not valid
The persons receiving the said shares, the
directors who approved the issuance of the
same and the directors who did not object to the
issuance of the same shall be liable
Section 52 of the corporation code provides that
in a stockholders meeting, the presence of
stockholders representing majority of the OCS
constitutes a quorum. In this case, since the bulk
of the OCS is owned by A while B, C, D and E
only owns 1 share each, the presence of A
already constitutes a quorum
Section 25 provides that in a board meeting, the
presence of the majority of the number of
directors constitute a quorum. In this case, there
are only 5 directors and the majority of 5 is 3.
Hence, at least 3 of them constitutes a quorum
Amendment of AOI:
a. Majority vote of the BOD
b. Ratification of the Stockholders
representing at least 2/3of the OCS
c. Submit to the SEC the amended AOI by
copying verbatim the original and
inserting the changes which should be
indicated as amended
d. The amendment becomes effective
upon the approval of the SEC or the
date of filing if the SEC fails to act on the
amendment for 6 months
Corporate creditors cannot sue A in his personal
capacity for collection of corporate debts.
Section 2 provides that a corporation is an
No act of kindness however small is ever wasted
artificial being and has a separate and distinct
personality from the stockholders. The mere fact
that A is a controlling stockholder does not
warrant piercing of the corporate veil in the
absence of clear and convincing evidence that
the corporation was established to commit fraud,
etc.
Section 64 provides that a stock certificate will
be issued only upon full payment of the
subscription
Steps when the stockholder lost his
certificate:
a. File an affidavit of loss to the corporate
secretary
b. The corporate secretary verifies the
affidavit
c. Publication of the notice of the loss must
be made once a week for 3 consecutive
weeks in a newspaper of general
circulation in the place where the
principal office of the corporation is
located
d. The stockholder has to wait for 1 year
from the last publication before he may
be issued a new certificate unless he
files a bond
The 2M net income after tax may be entirely
used for cash dividends provided there is no
diminution of the paid up capital during the
preceding year/s. if the corporation experienced
losses and the paid up capital was diminished,
the total paid up capital must be returned first
and if there is an excess, such may be
distributed as dividends
The position of Manager is different from a
Director. The latter needs the 2/3 votes of the
OCS while the former, no such requirement is
needed
If the sale materializes, A becomes a trustee of
the shares and he will hold it in trust for B. under
the NCC, one who holds a thing but does not
have the beneficial ownership of such thing is a
mere trustee and the beneficial owner is the
beneficiary. The relationship is called trust
relationship
Replacement of a Director:
a. Call a special stockholders meeting for
the purpose of electing a replacement

COMMREV REVIEWER

b. If the remaining BOD still constitute a
quorum, they can choose a replacement
by a resolution approved by majority of
the directors present in the meeting

Registration is not necessary since the no public

offering of the stock has been made. Although
the stocks are to be distributed to more than 20
people. These are existing stockholders of the
company and the stocks are to be issued by way
of dividends. Their transaction does not involve
an exchange which falls within the ambit of the
SRC

No act of kindness however small is ever wasted