Professional Documents
Culture Documents
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2. The cover note shall be valid and binding not Commissioner of Internal Revenue v. Lincoln
more than sixty (60) days from the date of its Philippine Life Insurance Company, G.R. No.
issuance; 119176 (March 19, 2001)
3. No separate premium is required for the When the requirements for a rider are complied
cover note; with (including clause, warranty or endorsement), it is
4. The policy should be issued within sixty (60) considered part of the policy. Thus, a rider containing
days after the issuance of the cover note; an automatic increase clause one that increases
5. The sixty (60) day period may be extended the coverage subject to the attainment of a certain
upon written approval or the Insurance age of the insured is not a separate contract. It is
Commission; and part of the original policy which is in the nature of a
6. The written approval of the Insurance conditional obligation.
Commission is dispensed with upon the
certification of the president, vice-president GROUNDS FOR CANCELLATION OF NON-LIFE
or general manager of the insurer that the POLICY: Cancellation by the insurer of an insurance
risk involved, the values of such risks and policy other than life requires (a) prior notice to the
premium therefore have not as yet been insured, and (b) any of the following grounds:
determined or established and the extension 1. Non-payment of premium;
or renewal is not contrary to or is not for the 2. Conviction of a crime out of acts increasing
purpose of violating the Insurance Code or the hazard insured against;
any rule. 3. Fraud or material misrepresentation;
4. Willful or reckless acts or omissions
INSURANCE POLICY A written document issued by increasing the risk insured against;
the insurer to the insured, embodying the terms 5. Physical changes in the property insured
and conditions of their contract of insurance. making it uninsurable; and
6. Determination by the Insurance
The policy is not necessary for the perfection of the Commissioner that the policy would violate
contract. It is required however that all policies issued the Insurance Code.
or delivered must be in the form previously approved
by the Insurance Commission. REQUISITES FOR CANCELLATION:
1. Prior notice of cancellation to insured;
BASIC CONTENTS OF A POLICY: 2. Notice must be based on the occurrence
1. Parties; after effective date of the policy of one or
2. Amount of insurance, except in open or more of the grounds mentioned;
running policies; 3. Notice must be in writing, mailed or delivered
3. Rate of premium; to the insured at the address shown in the
4. Property or life insured; policy; and
5. Interest of the insured in the property if he is 4. Notice must state the grounds relied upon
not the absolute owner; and upon request of insured, to furnish facts
6. Risk insured against; and on which cancellation is based.
7. The period during which the insurance is to
continue. KINDS OF POLICIES: Property insurance policies
are classified into:
RIDER An attachment to an insurance policy that 1. Open policy Value of thing insured is not
modifies the conditions QuickTime
of the policy and a by expanding or agreed upon, but left to be ascertained at
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restricting its benefits or excluding
are needed to see this picture.certain conditions time of loss;
from the coverage. Riders, together with other 2. Valued policy Definite valuation is agreed
attachments to the policy like clause, warranty or upon by both parties, and written on the face
endorsements, are not binding on the insured unless of the policy;
the descriptive title or name thereof is mentioned and 3. Running policy Contemplates successive
written on the blank spaces provided in the policy insurances and which provides that the
subject of the policy may from time to time be
defined.
Life insurance policies are always valued
policies.
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payment has been made at the time of the the insured. If there is transfer of property insurance
loss. without such consent, the insurance policy is
4. Where a credit term was agreed upon like suspended and will not be avoided until the interest in
the agreement in UCPB General Insruance, the thing and the interest in the insurance are vested
Inc. v. Masagana Telemart where the insurer in the same person.
granted a 60-90-day credit term for the
payment of the premiums despite full
awareness of Section 77. PRIMARY CONCERNS OF THE INSURER:
5. Where the parties are barred by estoppel. 1. Correct estimation of risk which enables
insurer to determine if he will approve the
American Home Assurance Co. v. Chua, G.R. No. policy application and if so at what premium
130421 (June 28, 1999) Where an insurer authorizes rate;
an insurance agent or broker to deliver a policy to the 2. Delimitation of the risk;
insured, it is deemed to have authorized said agent to 3. Control of risk to guard against increase in
receive the premium in its behalf. The insurer is also risk;
bound by its agents acknowledgement of receipt of 4. Determine if loss occurs and if so the amount
payment of premium.. thereof.
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Note: Concealment, whether intentional or not, NOTE: Information as to the nature of interest need
entitles the injured party to rescind a contract of not be disclosed except in property insurance, if the
insurance, provided the: insured is not the owner. If somebody is insuring
1. Party concealing must have knowledge of the properties of which he is not the owner, he must
facts concealed; disclose why he has insurable interest that would
2. Facts concealed must be material to the risk; entitle him to insure it.
3. Party is duty bound to disclose such fact to
the other; WAIVER OF MATERIAL FACTS:
4. Party concealing makes no warranty as to 1. by the terms of the insurance; or
the facts concealed; 2. by the neglect to make inquiry as to such
5. Other party has no other means of facts, where they are distinctly implied in
ascertaining the facts concealed. other facts which information is
communicated.
INSTANCES WHEN CONCEALMENT MADE BY
AN AGENT PROCURING THE INSURANCE BINDS Vda. de Canilang v. CA, 223 SCRA 443 (1993) Test
THE PRINCIPAL: of Materiality Materiality is determined not by the
1. Where it was the duty of the agent to acquire event, but solely by the probable and reasonable
and communicate information of the facts in influence of the facts upon the party to whom the
question; communication is due, in forming his estimate of the
2. Where it was possible for the agent, in the disadvantages of the proposed contract, or in making
exercise of reasonable diligence, to have his inquiries or in fixing the premium rate. Hence,
made the communication before the making good faith is no defense in concealment.
of the insurance contract.
Failure on the part of the insured to disclose such Sunlife Assurance Company of Canada v. Court
facts known to his agent, or wholly due to the of Appeals, 245 SCRA 268 (1995) The fact that the
fault of the agent, will avoid the policy, despite matter concealed had no bearing to the cause of
the good faith of the insured. death of the insured is not important because it is
well-settled that the insured need not die of the
INFORMATION NOT BOUND TO BE disease he had failed to disclose to the insurer. It is
COMMUNICATED: Neither party to the insurance sufficient that his non-disclosure misled the insurer in
contract is bound to communicate information on the forming his estimates of the risks of the proposed
following matters except in answer to the inquiries of insurance policy or in making inquiries.
the other:
1. Those of which the other knows;
2. That which, in the exercise of ordinary care, REPRESENTATION It is a factual statement made
the other ought to know and of which the by the insured at the time of, or prior to, the
former has no reason to suppose his issuance of the policy, to give information to the
ignorance, i.e. political situation, general insurer and otherwise induce him to enter into the
usages of trade; insurance contract. It may be made orally or in
3. Those of which the other waives writing. It may be made at the time of, or before,
communication; the issuance of the policy. It may be altered or
4. Those which prove or tend to prove the withdrawn before the insurance is effected, but
existence of the risk excluded by a warranty not afterwards.
and which are not otherwise material;
QuickTime and a
5. Those which relate
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a risk excepted from NOTE: A representation cannot qualify an express
are needed to see this picture.
the policy and which are not otherwise provision in a contract of insurance but it may qualify
material. an implied warranty. A representation as to the future
is to be deemed a promise unless it appears that it
NOTE: Neither party is bound to communicate his was merely a statement of belief or an expectation
mere opinion, even upon inquiry, because such that is susceptible to present, actual knowledge. The
opinion would add nothing to the appraisal of the statement of an erroneous opinion, belief or
application. information, or of an unfulfilled intention, will not avoid
the contract of insurance, unless fraudulent.
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KINDS OF REPRESENTATION:
1. Affirmative which is an affirmation of a fact Table 3
existing when the contracts begins; or Warranty Misrepresentation
2. Promissory which is a statement by the Part of the contract Collateral
insured concerning what is to happen during Inducement
the term of the insurance. Written on the policy Need not be written
or in a valid rider or
NOTE: If there is misrepresentation, the injured party attachment
is entitled to rescind from the time when the Generally Should be
representation becomes false. The right to rescind conclusively established to be
must be exercised previous to the commencement of presumed to be material
an action on the contract (the action referred to is that material
to collect a claim on the contract) Fact warranted must Requires only to be
be strictly complied substantially true
Table 2 with
Concealment Misrepresentation
Neglect of one party Communication OTHER INSURANCE CLAUSE This is a clause in
to communicate to required to comply the policy that provides that the policy shall be void if
the other material with the prohibition the insured procures additional insurance without the
facts against consent of the insurer. The purpose is to prevent
concealment; over-insurance and thus to avert the possibility of a
information insured perpetration of fraud. It is a warranty that entitles the
gives in compliance insurer to rescind in case of breach.
with the duty to
reveal information General Insurance and Surety Corp. v. Ng Hua,
Passive form of the Active form of the 106 Phil 1117 The other insurance clause may be
act act subject to waiver but the waiver must either be
express or if it is to be implied from conduct mainly,
WARRANTY It is a statement or promise set forth in said conduct must be clearly indicative of a clear
the policy or by reference incorporated therein, intent to waive such right. There must be clear
the untruth or non-fulfillment of which in any showing that the insurer knew about the violation of
respect, and without reference to whether insurer the clause.
was in fact prejudiced by such untruth or non-
fulfillment, renders the policy voidable. TIME TO EXERCISE THE RIGHT TO RESCIND:
1. Non-Life Policy Prior to the commencement
KINDS OF WARRANTY: of an action on the contract
1. Express; and 2. Life Policy A period of two years from the
2. Implied Warranties that are deemed date of issue or last reinstatement of the
included in the contract, although not policy (i.e. incontestability clause).
expressly mentioned. They are found only in
marine insurance. Sec. 48. Whenever a right to rescind a contract of
3. Affirmative Asserts the existence of a fact insurance is given to the insurer by an provision of
or condition at the time it is made; this chapter, such right must be exercised previous to
4. Promissory TheQuickTimeinsured
and a
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stipulates that the commencement of an action on the contract.
certain facts or conditions
are needed to see this picture.shall exist or thin
After a policy of life insurance made payable on the
shall be done or omitted. death of the insured shall have been in force during
the lifetime of the insured for a period of two years
EFFECT OF BREACH OF WARRANTY: It gives the from the date of its issue or of its last reinstatement,
insurer the right to rescind, except in the following the insurer cannot prove that the policy is void ab
instances initio or is rescindible by reason of the fraudulent
1. Loss occurs before the time of performance concealment or misrepresentation of the insured or
of the warranty; his agent.
2. The performance becomes unlawful;
3. Performance becomes impossible.
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instances when matters, although concealed, 3. If made in good faith to avoid a peril;
will not vitiate the contract except when they 4. If made to save human life or another
caused the loss: distressed vessel.
a. National character of the insured;
b. Liability of insured thing to capture or KINDS OF LOSSES IN MARINE INSURANCE:
detention; 1. Actual total loss
c. Liability to seizure from breach of foreign a. Total Destruction;
laws; b. Loss by sinking;
d. Want of necessary documents; and, c. Damage rendering the thing valueless; or
e. Use of false or simulated papers. d. Total deprivation of owner of possession
of thing insured.
SEAWORTHINESS A ship is seaworthy, when 2. Constructive total loss
reasonably fit to perform the service, and to a. Actual loss or more than three-fourths
encounter the ordinary perils of the voyage, (3/4) of the value of the object;
contemplated by the parties to the policy. There b. Damage reducing value by more than
should be due consideration to the nature of the three-fourths (3/4) of the value of the
ship, the voyage and the service to be performed. vessel and of cargo; and
c. Expenses of shipment exceed three-
WHEN A SHIP SHOULD BE SEAWORTHY: An fourths (3/4) of value of cargo.
implied warranty of seaworthiness is complied with if NOTE: In case of constructive total loss,
the ship be seaworthy at the time of the insured may abandon the goods or vessel to
commencement of the risk, except in the following the insurer and claim for whole insured value,
cases: or he may, without abandoning vessel, claim
1. Time policy When the insurance is made for partial actual loss.
for a specified length of time, the implied
warranty is not complied with unless the ABANDONMENT The act of the insured by which,
vessel is seaworthy at the commencement of after a constructive total loss, he declares the
every voyage it undertakes during that time; relinquishment to the insurer of his interest in the
2. When the insurance is upon the cargo which, thing insured.
by the terms of the policy, description of the
voyage, or established custom of trade, is to REQUISITES FOR VALID ABANDONMENT:
be transshipped at an intermediate port, at 1. There must be an actual relinquishment by
the commencement of each particular the person insured of his interest in the thing
voyage; insured;
3. Where different portions of the voyage are 2. There must be constructive total loss;
contemplated, at the commencement of each 3. The abandonment be neither partial nor
portion; conditional;
4. When the ship was unseaworthy at the 4. It must be made within a reasonable time
commencement of the voyage but becomes after receipt of reliable information of the
unseaworthy during the voyage to which an loss;
insurance related, and unreasonable delay in 5. It must be factual;
repairing the defect exonerates the insurer 6. It must be made by giving notice thereof to
on ship or shipowners interest from liability the insurer which may be done orally or in
from any loss arising therefrom.
QuickTime and a writing; and
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are needed to see this picture. 7. The notice of abandonment must be explicit
DEVIATION Departure of vessel from course of and must specify the particular cause of the
voyage, or an unreasonable delay in pursuing abandonment.
voyage, or the commencement of an entirely
different voyage. KINDS OF AVERAGES:
1. Simple or Particular Average Includes all
DEVIATION IS PROPER WHEN: expenses and damages caused to the vessel
1. If due to circumstances outside the control of or cargo which have not inured to the
the ship captain or ship owner; common benefit of all persons interested in
2. If done to comply with a warranty; the vessel or cargo.
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2. General or Gross Average - Includes all the means within the control of the insured, and
damage and expenses which are deliberately increasing the risks, entitles the insurer to rescind a
caused in order to save the vessel, its cargo contract of fire insurance.
or both, from real and known risks.
EFFECT OF AN ALTERATION IN THRE USE OR
RIGHT TO FREIGHTAGE: CONDITION OF A THING INSURED FORM THAT
LIMITED BY THE POLICY: The insurer may rescind
1. Freightage earned before loss -Belongs to a contract of fire insurance provided the following
the insurer of freightage requisites are present:
2. Freightage earned after loss - Belongs to 1. The use or condition of the thing insured is
insurer of ship specially limited or stipulated in the policy;
2. Such use or condition is altered;
CO-INSURANCE Co-insurance is a form of 3. The alteration is made without the consent of
insurance in which a person who insures his the insurer;
property for less than the entire value is 4. The alteration is made by means within the
understood to be his own insurer for the control of the insured;
difference which exists between the true value of 5. The alteration increases the risk; and.
the property and the amount of insurance. 6. There must be a violation of a material policy
provision.
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specified period, and (3) Otherwise, contingently COMPULSORY MOTOR VEHICLE LIABILITY
on the continuance or cessation of life (b and c INSURANCE (CPTL) The Insurance Code
refer to endowment or annuities) makes it unlawful for any land transportation
operator or owner of a motor vehicle to operate
KINDS OF LIFE INSURANCE: the same in public highways unless there is an
1. Whole Life or Ordinary Policies - the insurance or guaranty to indemnify the death or
insured agrees to pay annual, semi-annual bodily injury of a third party or passenger arising
or; from the use thereof.
2. Quarterly premiums while he lives. The
insurer agrees to pay the face value of the RULES OF CPTL:
policy upon the death of the insured. 1. Registration of any vehicle will not be made
3. Limited Payment Life Policy - premiums or renewed without complying with the
paid only for a specified period of years. requirement.
4. Term Policy - insurers liability arises only 2. The protection may be complied with using
upon the death of the insured within the any of the following:
agreed term as period. If the latter survives a. Insurance policy
the period, the contract terminates and the b. Surety bond
insurer is not liable c. Cash bond
5. Endowment Policy - insurer agrees to pay a
certain sum to the insured if the latter outlives First Integrated Bonding and Ins. Co., Inc. v.
a designated period; if he dies before that Hernando, 199 SCRA 746 The purpose of CPTL is
time, the proceeds are paid to the beneficiary to give immediate financial assistance to victims of
6. Life Annuity - debtor binds himself to pay an motor vehicle accidents and/or their dependents,
annual pension or income during the life of especially if they are poor regardless of the financial
one or more persons in consideration of a capability of motor vehicle owners or operators
capital consisting of money or other property, responsible for the accident.
whose ownership is transferred to him with
the burden of income. NO FAULT CLAUSE The injured third party or
passenger is given the option to file a claim for death
VARIABLE CONTRACT Any policy or contract on or injury without the necessity of proving fault or
either on either a group or individual basis issued by negligence of any kind.
an insurance company providing for benefits or other
contractual payments or values thereunder to vary so CONDITIONS FOR APPLICATION OF NO FAULT
as to reflect investment results of any segregated CLAUSE:
portfolio of investment. 1. The total indemnity in respect of any person
shall not exceed five thousand pesos;
EFFECT OF DEATH OF INSURED THROUGH 2. The following proofs of loss, when submitted
SUICIDE: The insurer in alife insurance contract shall under oath, shall be sufficient evidence to
be liable in case of suicide by the insured if: substantiate the claim:
1. Suicide was committed after the policy has a. Police report of accident; and,
been in force for a period of two years from b. Death certificate and evidence sufficient
the date of its issue or its last reinstatement, to establish the proper payee; or,
unless the policy provides a shorter period; c. Medical report and evidence or medical
2. Suicide committed in a state of insanity; it
QuickTime and a or hospital disbursement in respect of
shall made arethe
neededinsurer liable regardless of
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to see this picture. which refund is claimed.
the date of the commission of the suicide. 3. Claim may be made against one motor
vehicle only.
SURETYSHIP Agreement whereby surety
guarantees the performance by another of an RECOVERY OF INJURED PERSON:
undertaking or an obligation in favor of a 3rd 1. In the case of an occupant of a vehicle, claim
party. shall lie against the insurer of the vehicle,
claim shall lie against the insurer of the
vehicle in which the occupant is riding,
mounting or dismounting from.
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2. If not an occupant, claim shall lie against the insured vehicle to the insured himself or any person
insurer of the directly offending vehicle. who drived on his order or with his permission.
3. In all cases, the right of the party paying the
claim to recover against the owner of the CCC Insurance Corporation v. CA, 31 SCRA 264 If
vehicle responsible for the accident shall be the claimant was able to present a drivers license the
maintained. same is presumed to be genuine. Thus, even if it was
established that the driver does not know how to read
TIME TO FILE AND PROCESS CLAIM UNDER and write, the license will still be sustained in the
CPTL: absence of proof that it was not validly issued.
1. Period to File Notice The written notice of
claim must be presented within six (6) Gutierrez v. Capital Insurance Co., 130 SCRA 618
months from the date of the accident A driver (not the insured himself) who holds an
otherwise the claim is deemed waived. expired drivers license is not an authorized driver.
2. Prescriptive Period The action must be
filed in court of the Insurance Commission
THEFT CLAUSE The risks insured against in the
within one (1) year from denial of the claim.
policy may include theft. If there is such a provision
3. If there is an agreement, the insurance
and the vehicle was unlawfully taken, the insurer is
company shall forthwith ascertain the truth
liable under the theft clause and the authorized driver
and extend of the claim and make payment
clause does not apply. The insured can recover even
within five (5) working days after reaching an
if the thief has no drivers license.
agreement.
4. If no agreement is reached, the insurance
CIRCUMSTANCES WHEN THE COMMISSIONER
company shall pay only the no-fault
MAY REVOKE OR SUSPEND THE LICENSE OF
indemnity without prejudice to the claimant
AN INSURER:
from pursuing his claim further, in which
1. If insurance contract is in unsound condition
case, he shall not be required or compelled
2. If it has failed to comply with the provisions of
by the insurance company to execute any
law or regulations obligatory upon it
quit claim or document releasing it from
3. Its conditions or methods of business is such
liability under the policy of insurance or
as to render its proceedings hazardous to the
surety bond issued.
public or to its policy holders
4. That its paid up capital stock, or its available
Bonifacio Brothers v. Mora, 20 SCRA 261 If the cash assets, or its security deposits, as the
policy provides for indemnity against liability, the case may be, is impaired or deficient
insurer can be sued directly by a third person. 5. That the margin of solvency required of each
However, if the policy provides for reimbursement company is deficient
after actual payment by the insured, or for the
indemnity against loss, a third person has no cause NOTE: The Insurance Commissioner has concurrent
of action against the insurer. jurisdiction with the regular courts to hear and decide
claims for which an insurer may be answerable under
Pan Malayan Insurance Corporation v. CA, 184 any kind of policy or contract of insurance where the
SCRA 54 While insurers liability may be direct, it amount of the loss, damage or liability excluding
does not mean that the insurer can be held solidarily interest, costs and attorneys fees, does not exceed
liable with the insured. The insurers liability is based in any single claim P100,000.
on contract; that of theQuickTime
insured and ais based on torts.
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Furthermore, the insurers liability
are needed to see this picture. is limited to the
PDIC v. CA, 283 SCRA 462 (1997) In order for a
amount of the insurance coverage. claim for deposit insurance with PDIC to prosper, the
law requires that a corresponding deposit be placed
AUTHORIZED DRIVER CLAUSE A stipulation in a in the insured bank; and a deposit as defined under
motor vehicle insurance which provides that the Section 3(f) of R.A. No. 3591 may be constituted only
driver, other than the insured owner, must be duly if money or the equivalent of money is received by a
licensed to drive the motor vehicle otherwise the bank. When the evidence shows that the certificates
insurer is excused from liability. The clause means of time deposit were issued in consideration of
that the insurer indemnifies the insured owner against checks received by the issuing bank, which checks
loss or damage to the car but limits the use of the
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GENERAL PROVISIONS
CONCURRENCE AND
PREFERENCE OF CREDITS Art. 2236. The debtor is liable with all his property
present and future, for the fulfillment of his
obligations, subject to the exemptions provided by
law. (1911a)
CHARACTERISTICS OF CONCURRENCE AND
PREFERENCE The creditors have the right to pursue the
1. The liens and mortgages with respect to property in possession of the debtor to satisfy
specific movable and immovable property the debt
have been increased. Creditors may impugn the acts which the
2. The New Civil Code and the Insolvency Law debtor may have done to defraud them
have been brought into harmony.
3. Preferred claims as to the free property of the EXEMPT PROPERTY
insolvent have also been augmented.
4. The order of preference among claims with 1. Present property: family home; those
respect to specific personal and real property enumerated in Rule 39, Sec. 13 of the Rules
has been abolished, except that taxes must of Court; and Sec. 118 of Public Land Act
first be satisfied. 2. Future property: a debtor who obtains a
discharge from his debts on account of
CONCURRENCE OF CREDIT insolvency is not liable for the unsatisfied
A concurrence of credit implies the possession by claims of his creditors with said property
two or more creditors of equal rights or privileges subject to certain exceptions provided by law
over the same property or all of the property of the 3. Custodia legis & public dominion: under
debtor. legal custody and those owned by municipal
corporations necessary for governmental
PREFERENCE OF CREDIT purposes
A preference of credit is the right held by a creditor to
be preferred in the payment of his claim above others Art. 2237. Insolvency shall be governed by special
(to be paid first) out of the debtors assets laws insofar as they are not inconsistent with this
Code. (n)
A concurrence or preference of credit does not create
a lien. It merely creates a right of one creditor to be The Civil Code prevails in case of conflict
paid first as against other creditors. If the property is with special laws on insolvency unless
not sufficient, creditors who concur share pro-rata. otherwise provided
Art. 110, Labor Code: preference of workers
APPLICATION OF THE RULES ON PREFERENCE as regards unpaid wages and money claims
The rules on preference generally
QuickTime and a apply only when
TIFF (Uncompressed) decompressor Insolvency proceedings have for their aim the
the debtor does not have sufficient property to pay
are needed to see this picture.
conservation of all the remaining assets of
his debts. These rules are inapplicable when there is the insolvent/liquidated person/corporation
enough to pay everyone. Specifically, these rules for distribution to the creditors, after payment
apply only when the following concur: of taxes.
1. There are two or more creditors.
2. The debtors assets are not enough.
Art. 2238. So long as the conjugal partnership or
3. The claims held by various creditors have
absolute community subsists, its property shall not be
been established (in a proper proceeding).
among the assets to be taken possession of by the
4. All the credits must be due.
assignee for the payment of the insolvent debtors
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