The RFBT Reviewer

Redemption: exists only in Real Estate Mortgage enclosure. The period to

redeem shall depend if the foreclosure is:
1. Extrajudicial
a. General Rule: 1 year from date of foreclosure
b. Exception: Under the General Banking Law, 3 months from sale or
registration of the certificate of sale, whichever is earlier, whenever:
i. The debtor – juridical person
ii. The creditor – bank

ILLUSTRATION: ABC Bank borrowed money from XYZ Corporation and

secured the obligation with a real
estate mortgage. Due to non-payment, XYZ Corporation foreclosed the
mortgage. What will be the
applicable period of redemption?

ANSWER: The generic rule of 1 year. The exception under the General
Banking Law applies only if the
bank is the creditor and the juridical person is the debtor. In this case, the
juridical person (XYZ Corporation)
is the creditor, and the bank (ABC Bank) is the debtor.

2. Judicial -although the Rules of Court provide that the equity of redemption
is 90 to 120 days, it has been held that the equity of redemption exists as long
as there is no confirmation of sale by the court.

Void Stipulations:
1.A stipulation which provides for tipo or upset price in the foreclosure sale
of mortgaged property. A tipo or upset price is a maximum limit as to the
selling price in the public sale of mortgaged property. It is void because
the mortgaged property must be sold to the highest bidder and there
must be no maximum limitation on the price.
2.A stipulation allowing the automatic appropriation by the mortgagee of the
thing mortgaged in
case of default of the debtor.
3.A stipulation prohibiting the mortgagor from disposing or selling his
property.
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CHATTEL MORTGAGE

CHATTEL MORTGAGE: personal property is recorded in the Chattel

Mortgage Register as a security for the performance of an obligation.

If the movable, instead of being recorded, is delivered to the creditor or a third

person, the contract is a pledge and not a chattel mortgage.

Characteristics:
1. ACCESSORY - It cannot exist without a principal obligation such as
contract of loan.
2. INDIVISIBLE - It creates a lien on the whole or all of the properties
mortgaged, which lien continues
until the obligation is secures has been fully paid.
3. INSEPARABLE - It subjects the property upon which it is imposed,
whoever the possessor may be, to
the fulfillment of the obligation for whose security it was constituted.
4. FORMAL CONTRACT - It is perfected by the registration to chattel
mortgage register.
5. NOMINATE-It has a name given to it by law

Affidavit of Good Faith: stating that the parties swear that the mortgage is
made for the purpose of securing the obligations specified in the conditions
thereof, and for no other purposes, and that the same is a just and valid
obligation and not one entered into for purposes of fraud, is also required
under the law. However, the absence of such affidavit or the non-recording
should one exist, does not affect the validity of the contract as between the
parties, it only makes the contract non-binding to third persons who acted in
good faith.

Note, however, that a chattel mortgage is a formal contract. Nevertheless, it

remains valid between the parties despite the absence of an affidavit of good
faith and its registration, since both parties may be considered in pari delicto,
and thus has no available remedies against each other.

To affect third persons: there must be an Affidavit of Good Faith and the
same is registered with the Chattel Mortgage
Registry; or the MARINA- in case of

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vessels; and in case of vehicles with a report to the Land Transportation

Office.

Coverage: shall be the debts existing at the time the contract was entered into
and indicated in the Affidavit of Good Faith. As a rule, an amendment of the
Affidavit shall be necessary to cover subsequent obligations.

Disposal of the object during the pendency of the mortgage: is considered a

criminal act under Art.319 of the Revised Penal Code: Removal of Mortgaged
Property.

Foreclosure: shall be done extra judicially. Rule 68 of the Rules of Court

does not apply to foreclosure of a chattel mortgage.

Notice: Required 10 days prior to sale; Posting in two or more public places
10 days before auction.

Proceeds of Foreclosure Sale: if the amount of the proceeds of foreclosure

sale:

1. ls more than the unpaid amount - the excess shall belong to the mortgagor;
2. Is less than the unpaid amount:
a. General Rule: the creditor is entitled to the deficiency;
b. Except: if the object is subject of a sale in installment and covered
by the Recto Law which prohibits collection of unpaid amount once
the creditor (unpaid seller) already foreclosed the chattel mortgage
on the property itself.

Redemption: there is no right of redemption that exists in a foreclosure of

chattel mortgage.

NOTE: The provisions of the Civil Code pertaining to chattel mortgage have
been suspended by the Personal Property Security Act

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 DISTINCTIONS

PLEDGE REAL ESTATE CHATTEL

MORTGAGE MORTGAGE

OBJECT Personal property Real property but Personal property

susceptible of extend to the natural subject thereof
possession accessions,
including improvements,
incorporeal rights growing fruits, and
the rents or income
not yet received when
the become due, and
to the amount of
indemnity from
insurance or from
expropriation

And may include

after acquired
properties as per
stipulations

PERFECTION Delivery Consensual but Formal Contract –

covered by the statute Affidavit of Good
Public instrument of frauds. Faith registered in
required to bind the Chattel
third parties Public instrument that Mortgage Registry
is registered in in the Registry of
the Registry and Deeds required to
deeds is required to bind third parties
bind third parties. For vessels –
Philippine Coast
Guard of
port of entry of the
vessel

For motor vehicles

– registered with
the LTO where the
motor vehicle is

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PLEDGE REAL STATE CHATTEL
MORTGAGE MORTGAGE

registered

Note, however,
that Incase of a
failure to
execute an
affidavit or
none registration
if there is one,
will make the
parties in pari
delicto
and will have no
available remedy
as against each
other.

POSSESSION Transferred to the

pledgee Retained Retained by the
Return to the thing mortgagor mortgagor
pledged by the
pledgee to the
pledgor shall result
in extinguishment
of the contract
of pledge

PRINCIPAL That which is Generally, cover Those indicated

OBLIGATION existing at the time only that which in the affidavit
COVERED of is stated in the of Good Faith
the pledge deed even if less unless there is
than the amount stipulation as to
of loan. increase in
Exception if coverage which
there is will be binding
stipulation to but the security
cover future itself arises only
advancements. after amending
the old contract.

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 PLEDGE REAL STATE CHATTEL
MORTGAGE MORTGAGE

SALE OF THE Valid as long as Valid – any Mortgagor-owner

THING with consent of stipulation to the cannot sell
DURING THE thecreditor/pledg contrary is void. the property
PENDENCY ee who shall mortgage
OF THE continue in otherwise he can be
CONTRACT possession even criminally
if the ownership liable under Art.
is transferred to 319 of the RPC:
the buyer. Removal of
Mortgage Property.

SALE OF THE Done by notary Extrajudicial Extrajudicial (Act

THING public – public (Act No. 3135) No. 1508)
TO ANSWER auction –always or
FOR extrajudicial – judicial (Rule
THE DEBT no intervention 68)
of the courts

NOTICE OF Required – Extrajudicial – Required 10 days

SALE TO stating the not required, prior to sale.
THE amount due unless
MORTGAGOR In a legal pledge, stipulated.
/ a demand for the
PLEDGOR amount is Judicial Posting
required and in 3 public
only after 30 places at
days from such least 20 days
demand may prior to sale and
there be publication of
foreclosure the notice of sale
thereof. in a newspaper
of general
circulation.

CREDITOR’S The creditor is Creditor is not Creditor is not

RIGHT TO entitled to the entitled to the entitled to the
EXCESS excess excess excess
EXCEPT:

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 Credit Transactions
PLEDGE REAL STATE CHATTEL
MORTGAGE MORTGAGE

OF SELLING There is
PRICE stipulation to
OVER the contrary;
UNPAID and
OBLIGATIO Incase of legal
N pledges

CREDITOR’S The creditor is Creditor can recover Creditor can

RIGHT NOT entitled deficiency recover
TO to recover except if the deficiency
RECOVER any mortgagor is a unless the sale is
DEFICIENC deficiency person (unless there covered by
Y is a stipulation the RECTO
making him liable) LAW (i.e., sale
personal
property in
installment)

REDEMPTIO No right of EXTRAJUDICIAL No right of

N redemption FORECLOSURE: redemption after
1 year from date of foreclosure sale.
foreclosure, except:

1.Creditor is a bank
2.Debtor is a judicial
person
In which case the
redemption period
is until the
registration of the
foreclosure sale, not
exceeding 3
months.

JUDICIAL
FORECLOSURE:
Equity of redemption
is until the

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MULTIPLE CHOICE QUESTIONS

1. A contract of pledge is perfected upon:

a. Consent of both the contracting parties
b. Delivery of the thing pledged
c. Execution of the contract in writing
d. Execution of the contract in a public instrument

2. In what capacity can an agent retain the things which are the objects of
agency until the principal effects the reimbursement and pays the indemnity?
a. In the capacity of a pledgor
b. In the capacity of an unpaid seller
c. In the capacity of a guarantor
d. In the capacity of an antichretic creditor

3. A, minor, entered into a contract of loan with B, of legal age. Under the
contract, B borrowed P100,000 from A. Pursuant to this contract. A and
likewise executed a contract of pledge whereby B delivered his laptop and his
phone to A to secure the obligation. Is the contract of pledge valid?
a. No. A contract of pledge cannot secure a voidable contract.
b. No. A contract of pledge cannot secure an unenforceable contract
c. Yes. A contract of pledge can secure a voidable contract.
d. Yes. A contract of pledge can secure an unenforceable contract.

4. Ocean entered into a contract of loan with Lake whereby Lake borrowed
P250,000 from Ocean. Bay entered into a contract of pledge with Ocean
whereby Bay delivered her car to Ocean to secure Lake's obligation. is the
contract of pledge valid?

a. Yes. The contract of pledge is valid as long as Bay is the absolute

owner of the car.
b. No. The contract of pledge is not valid because Bay does not have
the free disposal of the proceeds of the loan.
c. Yes. The contract of pledge is valid provided that prior consent of
Lake was secured.
d. No. The contract of pledge is not valid because Bay is not a party to
the principal obligation secured.

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5. In a contract of pledge, the pledgor transfers:

a. Possession over the
b. Ownership thing pledged. over the thing pledged.
c. Both possession and ownership over the thing pledged.
d. Neither possession nor ownership over the thing pledged.

6. A pledge shall take effect against third persons if the following C.

information appear in a public instrument:
a. Description of the thing pledged and date of the pledge
b. Description of the thing pledged, date of the pledge, and the
original contract of loan
c. Description of the thing pledged, date of the pledge, the original
contract of loan, and the due date of payment of the loan
d. Description of the thing pledged, date of the pledge, the original
contract of loan, the due date of payment of the loan, and the
intended disposition of the proceeds of the loan

7. Toby and Shiela entered into a contract of loan whereby Toby borrowed
P4,000,000 from Shiela by way of loan. Toby likewise delivered by way of
pledge his car to Shiela. Toby eventually sold the car to Max, who paid
sufficient and valuable consideration for the car. Which of the following
statements is true?
a. Even without the consent of Shiela, Max will gain ownership and
possession over the car.
b. Even without the consent of Shiela, Max will gain ownership over
the car, but, as a rule, possession will remain with Shiela.
c. It is only with the consent of Shiela that Max will gain ownership
over the car, and, as a rule, possession shall likewise be with Max.
d. It is only with the consent of Shiela that Max will gain ownership
over the car, but, as a rule, possession will remain with Shiela.

8. Statement 1: A pledgee cannot deposit the thing pledged.

Statement 2: Any stipulation allowing the pledgee to deposit the thing pledged
is void.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

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9. Lala and Po entered into a contract of pledge over a motorcycle to secure

Po's debt of P100,000. Lala, the pledgee, suddenly had an errand to buy
tomatoes on the public market, but the public market is t kilometers away. She
suddenly remembered that she has in his three possession Po's motorcycle,
Can Lala use the motorcycle?
a. No. Lala has not been granted authority by Po to use the
motorcycle
b. Yes. Lala can use the motorcycle to go to the public market because
this is considered as ordinary usage.
c. No. Lala can only use the motorcycle for purposes that are
beneficial to Po.
d. Yes. Lala can use the motorcycle provided she gives notice to Po.

10. Which of the following contracts require delivery for perfection?

I. Pledge
I. Chattel mortgage
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

11. In order for a contract of chattel mortgage to valid, it:

a. It must be in a public instrument subscribed by both parties
b. It must be in writing subscribed by both parties in the presence of
two (2) witnesses
c. It must be in writing subscribed by both parties in the presence of
three (3) witnesses
d. It must be in a public instrument subscribed by at least one of the
parties

12. Statement 1: Personal properties can be the subject of chattel mortgage.

Statement 2: An affidavit of merit must be attached to the contract of chattel
mortgage.
a. Only Statement 1 is true,
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

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13. Patrick entered into a contract of chattel mortgage with Edward involving
the former's fleet of cars. At the time of execution of the chattel mortgage,
Patrick earns a blue and a red car. The contract described the two (2) cars as
constitutive of the entire fleet of cars of Patrick that is the subject of the chattel
mortgage. Two months after the execution of the chattel mortgage, Patrick was
able to purchase another car, a green one. Edward, being unpaid sought to
foreclose the blue, red, and green cars. Can Edward do so?

a. No. The green car was not particularly described in the contract of
chattel mortgage.
b. Yes. It is the intention of the parties to subject the entire fleet of cars
of Patrick to the chattel mortgage.
c. No. Foreclosure can only be done on one of the cars, not all.
d. Yes. After-acquired properties are, as a rule, deemed to be included in
the contract of chattel mortgage.

14. A mortgagor in default may prevent the transfer of ownership from the
foreclosure of the mortgaged property by paying the amount due on the
mortgage and the reasonable costs and expenses:

a. Before notice of the foreclosure sale

b. Before the foreclosure sale
c. Within thirty (30) days from the foreclosure sale
d. Within ninety (90) days from the foreclosure sale

15. Sally, as the mortgagor, entered into a contract of chattel mortgage over a car
with Jenny, as the mortgagee to secure a contract of loan amounting to
P500,000. When the loan fell due after one (1) year, Sally was unable to pay
Jenny, and Sally's balance is now P525,000, considering the addition of interest.
Jenny sought to foreclose Jenny's car. Jenny spent P12,000 as cost of foreclosure
sale. She was able to sell the car for P400,000. Can Jenny recover the
deficiency?

a. No, there is no right of recovery in foreclosures of chattel mortgages.

b. Yes, but only up to P100,000. The recovery should exclude the
interest and costs of foreclosure sale.
c. Yes, but only up to P125,000. The recovery should exclude the costs
of foreclosure sale.
d. Yes. The recovery includes both interest and costs of foreclosure sale.

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16. The mortgagee in a real estate mortgage:

a. Takes ownership and possession of the property mortgaged.

b. Takes possession, but not ownership, of the property mortgaged.
c. Does not take possession and ownership of the property mortgaged
but is entitled to the fruits of the property mortgaged.
d. Does not take possession and ownership of the property mortgaged
and is likewise not entitled to the fruits of the property mortgaged.

17. Cairo and Beirut entered into a contract of loan for P1,220,000 secured by a
real estate mortgage over a 1,200 square meter parcel of land owned by Cairo as
the mortgagor located in Camarines Sur. Jeddah is interested in acquiring
Cairo's land. Can Cairo sell his land?

a. Yes, but only if there is a stipulation allowing him to do so.

b. Yes, but only if there is no stipulation prohibiting him to do so.
c. Yes, even if there is a stipulation prohibiting him to do so.
d. No, Cairo cannot sell his land to Jeddah as it is mortgaged with
Beirut.

18. Normani and Camila entered into a contract of loan secured by a real estate
mortgage. The contract was entered into in writing but is not recorded in the
Registry of Deeds. When Normani was not able to pay the loan, the mortgagee,
Camila, sought to foreclose the real estate mortgage. However, Normani
opposed the move, contending that the contract of real estate mortgage is not
recorded in the Registry of Deeds. Can Camila foreclose?

a. Yes. Recording in the Registry of Deeds is not required for the validity
of the real estate mortgage.
b. No. Recording in the Registry of Deeds is required for the validity of
the real estate mortgage.
c. Yes. Although the recording in the Registry of Deeds is required for
the validity of the real estate mortgage, it is required before 1 property
may be foreclosed.
d. No. Although the recording in the Registry of Deeds is required for
the validity of the real estate mortgage, it is not required before a
property may be foreclosed.

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19. Statement 1: A real estate mortgage cannot secure a future loan

Statement 2: A real estate mortgage is always a right in rem.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

20. If there is equity of redemption, the court orders the mortgagor to pay the
amount due and other charges within a period of:
a. Not less than 30 days nor more than 60 days.
b. Not less than 60 days nor more than 90 days.
c. Not less than 90 days nor more than 120 days.
d. Not less than 120 days nor more than 180 days.

21. There is equity of redemption in:

a. Judicial foreclosure only.
b. Extrajudicial foreclosure only.
c. Both judicial and extrajudicial foreclosure.
d. Neither judicial not extrajudicial foreclosure.

22. Which of the following act in a judicial foreclosure operates to divest the
rights of all parties to the action?
a. Expiration of the period of redemption.
b. Order of sale at a public auction
c. Confirmation of sale by the court
d. Recording of the sale in the Registry of Deeds.

23. In extrajudicial foreclosure, the debtor has the right to redeem the property
sold within:
a. 30 days from the date of sale.
b. 90 days from the date of sale.
c. 180 days from the date of sale
d. 1 year from the date of sale

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24. What is the notice required prior to the conduct of public sale in an judicial
foreclosure?

a. Posting of the notice in three public places

b. Publication in a newspaper of general circulation
c. Posting of the notice in three public places and publication in a
newspaper of general circulation
d. Posting of the notice in three public places or newspaper of general
circulation

25. If the mortgagee is a bank, quasi-bank or trust entity and the debtor is a
juridical person:

a. There is no right of redemption. However, juridical mortgagors may a.

redeem the property before the registration of the TCT to the buyer
b. There is no right of redemption. Juridical mortgagors cannot redeem
the property before the registration of the TCT to the buyer
c. There is a right of redemption. Juridical mortgagors may redeem the
property within three months after the registration of the TCT to the
buyer.
d. There is a right of redemption. Juridical mortgagors may redeem the
property within one year after the registration of the TCT to the buyer.

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ANSWERS TO MULTIPLE CHOICE QUESTION

1. B
2. A
3. C
4. A
5. A
6. A
7. D
8. A
9. A
10. A
11. B
12. A
13. A
14. B
15. D
16. D
17. C
18. A
19. D
20. C
21. A
22. C
23. D
24. D
25. A

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 Anti-Bouncing Checks

CHAPTER 5
ANTI-BOUNCING
CHECKS LAW

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The RFBT Reviewer

Chapter 5

ANTI-BOUNCING CHECKS LAW

ELEMENTS OF VIOLATION

1. The making, drawing, and issuance of any check to apply for account or for
value;

2. The knowledge of the maker, drawer, or issuer that at the time of issue he
does not have sufficient funds in or credit with the drawee bank for the payment
of the check in full upon its presentment; and

3. (a) The subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit or (b) would have been dishonored for the same
reason had not the drawer, without any valid cause, ordered the bank to stop
payment.

*Knowledge of the maker/drawer: The making, drawing and issuance of a

check payment of which is refused by the drawee because of insufficient funds
in or credit with such bank, when presented within ninety (90) days from the
date of the check, shall be prima facie evidence of knowledge of such
insufficiency of funds or credit.

Valid Defense - payment; Requirement of Notice: Such maker or drawer will

not be liable if he pays the holder thereof the amount due thereon, or makes
arrangements for payment in full by the drawee of such check within (5)
banking days after receiving notice that such check has not been paid by the
drawee.

DUTY OF THE DRAWEE

It shall be the duty of the drawee of any check, when refusing to pay the same to
the holder thereof upon presentment, to cause to be written, printed, or

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 Anti-Bouncing Checks

stamped in plain language thereon, or attached thereto, the reason for drawee’s
dishonor or refusal to pay the same.

Where there are no sufficient funds in or credit with such drawee bank such fact
shall always be explicitly stated in the notice of dishonor or refusal.

In all prosecutions under BP Blg 22, the introduction in evidence of any unpaid
and dishonored check, having the drawee's refusal to pay stamped or written
thereon or attached thereto, with the reason therefor as aforesaid, shall be prima
facie evidence of:

1. The making or issuance of said check, and

2. The due presentment to the drawee for payment and

3. The dishonor thereof, and

4. That the same was properly dishonored for the reason written, stamped or
attached by the drawee on such dishonored check.

Notwithstanding receipt of an order to stop payment, the drawee shall state in

the notice that there were no sufficient funds in or credit with such bas for the
payment in full of such check, if such be the fact.

CREDIT CONSTRUED

The word "credit" as used herein shall be construed to mean an arrangement or

understanding with the bank for the payment of such check.

EFFECT OF ACQUITTAL ON CIVIL LIABILITY

An acquittal does not entail the extinguishment of the civil liability for the
dishonored checks. An acquittal based on lack of proof beyond reasonable doubt
does not preclude the award of civil damages. (Mateo v. People, G 200090,
March 6, 2013)

PENALTY AND PRESCRIPTIVE PERIOD

Penalty:

1. Imprisonment - not less than 30 days but not more than 1 year

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2. Fine- not less than but not more than double the amount of the check, which
fine shall not exceed the amount of P200,000, or
3. Both, at the discretion of the court.

Prescriptive period: Prescriptive period of BP 22 Violation of B.P. Blg, 22

prescribes in four (4) years from the commission of the offense or, if the same
be not known at the time, from the discovery, thereof

DIFFERENCE WITH ESTAFA BY POST-DATING OR ISSUING

A WORTHLESS CHECK

1. GOOD FAITH IS A DEFENSE IN ESTAFA: So that when the accused

who issued the check believing that he would be able to make the corresponding
deposit, informed the complainant, when he sensed that he could not make the
deposit, not to present the check to the bank for cancellation, he could not be
held liable for Estafa. (See People vs. Villapando) By informing the payee, there
is no deceit. (Firestone Tire and Rubber Co. of the Philippines vs. Ines Chavez)

In BP Blg. 22, good faith is NOT a valid defense.

2. PAYMENT OF A PRE-EXISTING OBLIGATION - NO ESTAFA: If the

check is in payment of a pre-existing obligation there is no deceit and hence, the
crime of Estafa cannot exist.

In BP Blg. 22, even if the check is issued to pay a pre-existing obligation, there
may still be liability.

3. ESTAFA MAY BE COMMITTED BY MERELY ISSUING A

WORTHLESS CHECK - unlike in BP Blg. 22 which requires that the accused
BOTH drew and issued the check.

4. PERIOD TO MAKE GOOD THE CHECK-is only 3 days in estafa, but 5

banking days in BP Blg. 22.

LIABLE FOR BOTH ESTAFA AND BP 22: Under Sec. 5 of BP Blg. 22, the
prosecution thereof shall be without prejudice to any liability for violation of

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 Anti-Bouncing Checks

any provision of the RPC. It is now well settled that a single act can give to
Estafa and at the same time to violation of BP Blg. 22.

ILLUSTRATION (ESTAFA AND BP 22): A drew a check for

P10,000 a issued the same to B for the payment of a pre-existing
obligation. B th issued said check to C representing the same to be a
good check. The check was later on dishonored for insufficient
funds.

A: would not be liable for Estafa since the check was issued for the
payment of a pre-existing obligation. But he is liable for BP Blg. 22
for the making, w issuance of a worthless check.

If, however, C presented the check for cancellation, deposit or

encashment on the 91 day from the date indicated thereon, A would not
be liable anymore

B: on the other hand, may be liable for estafa but not for BP Blg. 22 since
he is not the drawer of the check but merely issued it.

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RFBT Reviewer

MULTIPLE CHOICE QUESTIONS

1. A person is liable for violation of the Bouncing Checks Law if he

makes or draws and issues a check having sufficient funds in or credit
with the drawee bank and then fails to keep sufficient funds or to
maintain a credit to cover the full amount of the check
a. Within a period of 30 days
b. Within a period of 60 days
c. Within a period of 90 days
d. Within a period of 120 days.

2. In order to avoid liability under BP Blg. 22, the maker or drawer may pay the
holder of the check the amount due thereon, or make arrangements for payment
in full by the drawee of such check

a. Within five (5) banking days after receiving notice that such check
has not been paid by the drawee.
b. Within seven (7) banking days after receiving notice that such check
has not been paid by the drawee.
c. Within thirty (30) banking days after receiving notice that such check
has not been paid by the drawee.
d. Within forty-five (45) banking days after receiving notice that such
check has not been paid by the drawee.

3. Statement 1: For a conviction to lie under the Bouncing Checks Law, the
notice of dishonor must always be in writing.
Statement 2: A conviction of the crime of estafa precludes a conviction under
the Bouncing Checks Law.

a. Only Statement 1 is true.

b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

4. Alex issued a check naming Holly as the payee. At the time of the issuance of
the check, Alex had sufficient balance in his bank account. However, a week
after the issuance of the check to Holly, Alex withdrew all his funds from the
bank because he needed it for his medical expenses. Due to the withdrawal,
when Holly presented the check for payment, the check was dishonored for
insufficiency of funds. Assuming the requisite

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 Anti-Bouncing Checks Law

notice of dishonor was made, can Alex be held liable for violation of the
Bouncing Checks Law?

a. No. Alex did not issue with intention to evade payment.

b. Yes. The fact that Alex failed to maintain sufficient funds in the banks
makes him liable for violation of the Bouncing Checks Law
c. No. The insufficiency was due to causes out of control of Alex
d. No. At the time the check was issued, there were still sufficient
funds.

5. Statement 1: Deceit must be present in order for one to be convicted of a

violation of the Bouncing Checks Law
Statement 2: Damage must be present in order for one to be convicted of a
violation of the Bouncing Checks Law

a. Only Statement 1 is true.

b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

ANSWERS TO MULTIPLE CHOICE QUESTIONS

1. C
2. A
3. A
4. B
5. D

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CHAPTER 6
PARTNERSHIP

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Chapter 6
PARTNERSHIP

CONTRACT OF PARTNERSHIP, IN GENERAL

PARTNERSHIP - is a contract whereby two or more persons bind

themselves to contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves, or in order to exercise a
profession.

CHARACTERISTICS:

1. Consensual - it is generally perfected by mere consent of the parties;

2. Bilateral or Multilateral - it is entered into between two or more persons;
3. Nominate - it is designated by a specific name and there are specific rules
applicable only to it;
4. Principal - its existence does not depend on the existence of another contract;
5. Onerous - certain contributions have to be made to become a partner;
6. Preparatory - in the sense that after it has been entered into, other contracts
essential in the carrying out of its purposes can be entered into.

Principles applicable:
1. There must be Affectio Societatis - the desire to formulate an ACTIVE union
with people among whom there exist mutual confidence and trust.
2. Delectus Personae (Personal Choices) which means that a partner has a right
to choose those whom he wants to be associated with the partnership because it
is based on trust and confidence. Admission of a third person as a partner
requires unanimous consent of all the partners because being a partner is purely
personal. Thus, a purchaser or assignee of an interest of an existing partner does
not automatically become a partner in an existing partnership without the
unanimous consent of all

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The partners. As a consequence, partnership as an organization has no right of

succession..

PURPOSE: can either be for the intention of dividing the profits among among
themselves or in order to exercise a profession , Nevertheless, it is required that a
partnership must have a LAWFUL object or purpose, otherwise it may be
declared dissolved by judicial decree, and the profits shall be confiscated in
favor of the state. (art.1770)

PARTNERSHIP VS. CORPORATION

PARTNERSHIP CORPORATION

Creation Voluntary agreement of Created by the state in the

parties. form of a special character
or by a general enabling law.
(The Corporation Code)

Number of Two or more Not more than 15

organization

Existence Gerelally, no time limit Not more than 50 years (

except will l of the parties. now with perpetual
existence under Revised
Corporation Code)

Liability of owners May extend to private Liable only up to their

property. capital contributions

Transferability of All partners need to consent Does not need the consent of
interest to the transfer of interest to the other stockholders.
another

Ability of owners to Generally, partners acting Generally, stockholders

bind the firm on behalf of the partnership cannot bind corporations
are agents thereof; since its official acts are
through a Board of Directors

Remedies in case of A partner can sue another A stockholder cannot sue a

mismanagement partner who mismanages director who mismanages, it
must be in the name of
corporation, through a
derivative suit.

Nationality A partnership is a national Generally, under whose laws

of the it was created as to whether
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PARTNERSHIP CORPORATION

country where it was created, domestic or foreign, and as to

dependent on percentage of nationality, on the ownership
ownership. of the outstanding capital
stock.

Legal Personality from the time the contracts Generally, from the issuance
begins of the Certificate of
Registration/ Incorporation

Right of None. Death, retirement, Yes. Such causes do not

Succession insolvency, civil interdiction, dissolve a corporation.
or insanity of a partner
dissolves the partnership.

SEPARATE JURIDICAL PERSONALITY: The partnership has a judicial

personality separate and distinct from that of each of the partners. The
partnership can, in general:

1. Acquire and possess property of all kinds;

2. Incur obligations;
3. Bring civil or criminal actions;
4. Adjudged insolvent even if the individual members be each financially
solvent.

RULES TO APPLY IN DETERMINING EXISTENCE OF

PARTNERSHIP:

1.There is no partnership:
a. Between persons who are not partners as to each other are not partners
as to third persons; except a partnership by estoppel.
b. Co-ownership or co-possession of itself, whether such-co-owners or
co-possessors do or do not share any profits made by the use of the property;
c. The sharing of gross returns, whether or not the persons sharing them
have a joint or common right or interest in any property from which the
returns are derived;
Presumption: the receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner in the business, but no such inference
shall be drawn if such profits were received in payment:

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