J.

Freezing of Monetary Instrument or Property

Under AMLA, a depositors bank account may be frozen.

a. By the bank when the account is the subject of a suspicious or covered
transaction report;
b. By the AMLC when the account belongs to a person already convicted of
money laundering;
c. By the RTC, upon ex parte motion by the AMLC, in a criminal
prosecution for money laundering pending before it;
d. By the Court of Appeals motu proprio in an appeal from a judgment of
conviction of a criminal charge for money laundering;
e. None of the above.

Answer:
e) None of the above. (BAR 2013)

K. Authority to Inquire Into Bank Deposits

C. Foreign Investments Act (R.A. No. 7042)

A. Policy of the Law

B. Definition of Terms
1. Foreign Investment
2. Doing Business in the Philippines
3. Export Enterprise
4. Domestic Market Enterprise

C. Registration of Investments on Non-Philippine Nationals

D. Foreign Investments in Export Enterprise
E. Foreign Investments in Domestic Market Enterprise

A foreign company has a distributor in the Philippines. The latter acts in his own
name and account. Will this distributorship be considered as doing business by
the foreign company in the Philippines? (2015)

Answer:
The appointment of a distributor in the Philippines is not sufficient to constitute doing
business unless it is under the full control of the foreign corporation. If the distributor is
an independent entity doing business for its own name and account, the latter cannot be
considered as doing business (Steel Case v. Design International Selection, GR No
171995, April 18, 2012).

A foreign delegation of business man and investment bankers called on your law
firm to discuss the possibilities of investing in various projects in the Philippines,
and wanted your thoughts on certain issues regarding foreign investments in the
Philippines.

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The delegation asked: aside from Filipino citizens, what entities would fall under
the definition of Philippine National under FIA 91?

You replied that the definition of Philippine National under FIA 91 covers ____.
a. Domestic partnership wholly composed of Filipino citizens;
b. Domestic corporations 60% of whose capital stock, outstanding and
entitled to vote, are owned and held by Filipino citizens;
c. Foreign corporations considered as doing business in the Philippines
under the Corporation Code, 100% of whose capital stock, outstanding and
entitled to vote, are wholly-owned by Filipino citizens;
d. All of the above, because the law considers the juridical personality,
whether domestic or foreign, as a mere medium; the test of nationality is
on the individuals who control the medium;
e. None of the above, because the term Philippine national can only cover
individuals and not juridical entities.

Answer:
d. All of the above, because the law considers the juridical personality, whether
domestic or foreign, as a mere medium; the test of nationality is on the individuals who
control the medium. (BAR 2013)

The delegation heard that foreigners can invest up to 100% of the equity in
export oriented enterprises and you were asked exactly what the term covers.

You replied that an export oriented enterprises under FIA 91 is an enterprise

that ________.
a. Only engages in the export of goods and services, and does not sell goods
or services to the domestic market;
b. Exports consistently at least 40% of its goods or services, and sells at least
60% of the rest to the domestic market;
c. Exports consistently at least 60% of the goods or services produced, and
sells at least 40% of the rest to the domestic market;
d. Exports consistently at least 60% of its goods or services produced, and
can sell goods or services to the domestic market;
e. None of the above.

Answer:
e. None of the above. (BAR 2013)

As a last question and by way of a concrete example, a delegation member finally

inquired which of the following corporations or businesses in the Philippines
may it invest and up to what extent?
a. A lifestyle magazine publication corporation up to 40% equity;
b. An advertising corporation, up to 100% equity;
c. A commercial bank, up to 60% equity;

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 d. A jeepney manufacturing corporation, up to 100% equity;
e. A real estate development corporation, up to 60% equity.

Answer:
d) A jeepney manufacturing corporation, up to 100% equity. (BAR 2013)

F. Foreign Investment Negative List

The main feature of the Foreign Investment Act of 1991 is to introduce the
concept of Negative Lists. Under the said law, what is a Negative List?
a. It is a list of business activities or enterprises in the Philippines that
foreigners are disqualified to engage in;
b. It is a list of business activities or enterprises in the Philippines that
foreigners are qualified to engage in;
c. It is a list of business activities or enterprises that are open to foreign
investments provided it is with the approval of the Board of Investment.
d. It is a list of business activities or enterprises that are open to foreign
investments provided it is with the approval of the SEC.

Answer:
a) It is a list of business activities or enterprises in the Philippines that foreigners are
disqualified to engage in. (BAR 2012)

A foreign delegation of business man and investment bankers called on your law
firm to discuss the possibilities of investing in various projects in the Philippines,
and wanted your thoughts on certain issues regarding foreign investments in the
Philippines.

The delegation has been told about the Foreign Investments Act of 1991, as
amended (FIA 91), and they asked what exactly is the laws essential thrust
regarding foreign investments in Philippine business and industries.

You replied that FIA 91 essentially reflects __________.

a. The Filipino First Policy;
b. The Foreign Investments Positive Lists concept;
c. The Foreign Investments Negative Lists concept;
d. The Control Test concept;
e. All of the above.

Answer:
c) The Foreign Investments Negative Lists concept. (BAR 2013)

Truth In Lending Act (R.A. No. 3765)

Embassy Appliance sells home theater components that are designed and
customized as entertainment centers for consumers within the medium-to-high

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price bracket. Most, if not all, of these packages are sold on installment basis,
usually by means of credit cards allowing a maximum of 36 equal monthly
payments. Preferred credit cards of this type are those issued by banks, which
regularly hold mall-wide sales blitzes participated in by appliance retailers like
Embassy Appliances. The salesclerk who is attending to you simply swipes your
credit card on the electronic approval machine (which momentarily prints out
your charge slip since you have unlimited credit), tears the slip from the machine,
hands the same over to you for your signature, and without more, proceeds to
arrange the delivery and installation of your new home theatre system. You know
you will receive a statement on your credit card purchases from the bank
containing an option to pay only a minimum amount, which is usually 1/36 of the
total price you were charges for your purchase. Did Embassy Appliance comply
with the provisions of the Truth in Lending Act?

Answer:
There is no need for Embassy Appliances to comply with the Truth in Lending Act. The
transaction is not a sale on installment basis. Embassy Appliances is a seller on cash
basis. It is the credit card company which allows the buyer to enjoy the privilege of
paying the price on installment basis. (BAR 2000)

A. Disclosure Requirement
Without going into unnecessary details, discuss the legal consequences of a
creditors failure to comply with the Truth in Lending Act, including the effect on
the validity or enforceability of the contract or transaction involved.

Answer:
The failure of a creditor to comply with the Truth in Lending Act would result in the
debtor being allowed to recover the interest payment from the creditor but the validity of
the contract or transaction itself is not adversely affected. (BAR 1986)

Dana Gianina purchase on a 36-month installment basis the latest model of the
NISSAN Sentra Sedan car from the Jobel Cars, Inc. In addition to the advertised
selling price, the latter imposed finance charges consisting of interests, fees and
service charges. It did not, however, submit to Dana a written statement setting
forth therein the information required by the Truth in Lending Act (RA No. 3765).
Nevertheless, the conditional deed of sale which the parties executed mentioned
that the total amount indicated therein included such finance charges.

Has there been substantial compliance of the aforesaid Act?

Answer:
No. there was no substantial compliance with the Truth in Lending Act. The law
provides that the creditor must make a full disclosure of the credit cost. The statement
that the total amount due includes the principal and the financial charges, without
specifying the amounts due on each portion thereof would be insufficient and
unacceptable.

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If your answer to the foregoing question is in the negative, what is the effect of
the violation on the contract?

Answer:
A violation of the Truth in Lending Act will not adversely affect the validity of the contract
itself.

In the event of a violation of the Act, what remedies may be availed of by Dana?

Answer:
The violation of the Truth in Lending Act would allow Dana to refuse payment of
financial charges or, if already paid, to recover the same. Dana may also initiate criminal
charges against the creditor. (BAR 1991)

TRUE or FALSE. A loan agreement which provides that the debtor shall pay
interest at the rate determined by the banks branch manager violates the
disclosure requirement of the Truth in Lending Act.

Answer:
True. This is contrary to the duty of the creditor to disclose in detail the interests,
charges and other figures indicating in detail the cost of the credit granted to the debtor.
(BAR 2009)

XYZ Corporation bought 10 units of Honda Civic from CCC Corporation. ABC
Bank granted a loan to XYC Corporation which executed a financing agreement
which provided for the principal amount, the installment payments, the interest
rates and the due dates. On due dates of the installment payments, XYZ
Corporation was asked to pay for some handling charges and other fees which
were not mentioned in the financing Agreement. Can XYC Corporation refuse to
pay the same?
a. No, because handling charges and other fees are usual in certain banking
transactions;
b. Yes, because ABC Bank is required to provide XYZ Corporation not only
the amount of the monthly installments but also the details of the finance
charges as required by the Truth in Lending Act;
c. No, because the Financing Agreement is a valid document to establish the
existence of the obligation;
d. Yes, because legally, finance charges are never allowed in any banking
transaction.

Answer:
b) Yes, because ABC Bank is required to provide XYZ Corporation not only the amount
of the monthly installments but also the details of the finance charges as required by the
Truth in Lending Act. (BAR 2012)

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