What Caused the Financial Crisis of 2008?

To give you a basic understanding of what really happened in 2008, what follows is a summary of the 2010 documentary that I watched entitled “The Inside Job,” which  was taken from Wikipedia.

Part I: How We Got Here

The American financial industry was regulated from 1940 to 1980, followed by a long period of deregulation. At the end of the 1980s, a savings and loan crisis cost taxpayers about $124 billion. In the late 1990s, the financial sector had consolidated into a few giant firms. In March 2000, the Internet Stock Bubble burst because investment banks promoted Internet companies that they knew would fail, resulting in $5 trillion in investor losses. In the 1990s, derivatives became popular in the industry and added instability. Efforts to regulate derivatives were thwarted by the Commodity Futures Modernization Act of 2000, backed by several key officials. In the 2000s, the industry was dominated by five investment banks (Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns), two financial conglomerates (Citigroup, JPMorgan Chase), three securitized insurance companies (AIG, MBIA, AMBAC) and the three rating agencies (Moody’s, Standard & Poors, Fitch). Investment banks bundled mortgages with other loans and debts into collateralized debt obligations (CDOs), which they sold to investors. Rating agencies gave many CDOs AAA ratings. Subprime loans led to predatory lending. Many home owners were given loans they could never repay.

Part II: The Bubble (2001–2007)

During the housing boom, the ratio of money borrowed by an investment bank versus the bank’s own assets reached unprecedented levels. The credit default swap (CDS), was akin to an insurance policy. Speculators could buy CDSs to bet against CDOs they did not own. Numerous CDOs were backed by subprime mortgages. Goldman-Sachs sold more than $3 billion worth of CDOs in the first half of 2006. Goldman also bet against the low-value CDOs, telling investors they were high-quality. The three biggest ratings agencies contributed to the problem. AAA-rated instruments rocketed from a mere handful in 2000 to over 4,000 in 2006.

Part III: The Crisis

The market for CDOs collapsed and investment banks were left with hundreds of billions of dollars in loans, CDOs and real estate they could not unload. The Great Recession began in November 2007, and in March 2008, Bear Stearns ran out of cash. In September, the federal government took over Fannie Mae and Freddie Mac, which had been on the brink of collapse. Two days later, Lehman Brothers collapsed. These entities all had AA or AAA ratings within days of being bailed out. Merrill Lynch, on the edge of collapse, was acquired by Bank of America. Henry Paulson and Timothy Geithner decided that Lehman must go into bankruptcy, which resulted in a collapse of the commercial paper market. On September 17, the insolvent AIG was taken over by the government. The next day, Paulson and Fed chairman Ben Bernanke asked Congress for $700 billion to bail out the banks. The global financial system became paralyzed. On October 3, 2008, President Bush signed the Troubled Asset Relief Program, but global stock markets continued to fall. Layoffs and foreclosures continued with unemployment rising to 10% in the U.S. and the European Union. By December 2008, GM and Chrysler also faced bankruptcy. Foreclosures in the U.S. reached unprecedented levels.

Part IV: Accountability

Top executives of the insolvent companies walked away with their personal fortunes intact. The executives had hand-picked their boards of directors, which handed out billions in bonuses after the government bailout. The major banks grew in power and doubled anti-reform efforts. Academic economists had for decades advocated for deregulation and helped shape U.S. policy. They still opposed reform after the 2008 crisis. Some of the consulting firms involved were the Analysis Group, Charles River Associates, Compass Lexecon, and the Law and Economics Consulting Group (LECG). Many of these economists had conflicts of interest, collecting sums as consultants to companies and other groups involved in the financial crisis.

Part V: Where We Are Now

Tens of thousands of U.S. factory workers were laid off. The new Obama administration’s financial reforms have been weak, and there was no significant proposed regulation of the practices of ratings agencies, lobbyists, and executive compensation. Geithner became Treasury Secretary. Feldstein, Tyson and Summers were all top economic advisers to Obama. Bernanke was reappointed Fed Chair. European nations have imposed strict regulations on bank compensation, but the U.S. has resisted them. Trust remains questionable.

Joseph the Dreamer

joseph-the-dreamer

“Let Pharaoh proceed to appoint overseers over the land and take one-fifth of the produce of the land of Egypt during the seven plentiful years. And let them gather all the food of these good years that are coming and store up grain under the authority of Pharaoh for food in the cities, and let them keep it. That food shall be a reserve for the land against the seven years of famine that are to occur in the land of Egypt, so that the land may not perish through the famine.” (Genesis 41:34-36, ESV)

Just a few hours after writing my previous article about the importance of life insurance in estate planning, I came across the above-quoted passage during my devotions. Maybe God intentionally led me to this passage of Scripture, which totally drives home my point in all my recent posts since last month, and that is: “Failing to plan is planning to fail.”

In the Old Testament account of Joseph, we can read how he was the most favored son of his father, Jacob (Israel). He was so obviously the favorite that his brothers plotted to kill him in jealousy. Fortunately, one of them convinced the others that killing their own flesh and blood is wrong and that they should just instead leave him in the pit where he was trapped. Nevertheless, when Bedouin caravan merchants came by, the brothers instead sold Joseph to them as a slave. Then they in turn sold Joseph at the public market who was bought by an Egyptian official named Potiphar. After many successes and tragedies in his life, Joseph finally gained favor in the eyes of Pharaoh who made him ruler of all Egypt second only to the king due to his God-given ability to interpret dreams and leadership capabilities. As a severe famine was about to strike the land of Egypt and its neighboring nations, Joseph came up with a plan to dampen, if not eradicate, the effects of the imminent famine. This story of Joseph is very famous that it was made by Walt Disney™ into an animated full-length feature film entitled “Joseph the Dreamer.”

This biblical story clearly illustrates the importance of planning ahead of any undesirable circumstance that may come our way. While Egypt’s neighboring countries suffered due to the ravaging effects of the famine, Egypt remained prosperous and plentiful. For us living in the 21st century, these undesirable circumstances may take the form of loss of employment; natural calamities such as earthquakes, typhoons and inundation; conflagration; sickness; or even death. This is where sound risk management, together with effective financial planning is a must. As with everything else, financial security starts with a plan. According to Rienzie Biolena, a Registered Financial Planner, “A comprehensive financial plan is a document that outlines the goals of a person, assesses his/her financial status, and gives concrete recommendations on how to achieve those goals. Each plan is different as every person has unique status, needs and aspirations. Yet all comprehensive financial plans cover each aspect of a person’s finances – cash flow, debt management, investments, insurance, tax and estate, and retirement.”

So when is the best time to start planning for your and your children’s future in order to protect yourself from life’s uncertainties? The answer is: YESTERDAY. Remember, failing to plan is planning to fail. So what are you waiting for? Contact your legal and financial adviser before it’s too late!

Life Insurance as an Indispensable Tool in Estate Planning

life-insurance

In a previous article, I talked about the importance of having a sound estate plan in securing your family’s future, not only in terms of material needs, but also in order to ensure peace after you leave them for the afterlife. Now, I am here to discuss one of the most important, if not the most important tools in estate planning: life insurance.

Several years ago, I used to think that all life insurance agents are just out to get people to buy their product, which they cannot even enjoy during their lifetime. For me, life insurance was just another unnecessary expense that will further diminish my hard-earned money in addition to my contributions for my social security, PAG-IBIG, Philhealth, and those darn taxes. I was even annoyed how these agents refer to themselves as ‘financial advisors’ when in truth and in fact; all they are are but salesmen. Hence, whenever, a financial advisor would contact me in order to talk about my ‘future,’ I avoided them like the plague!

However, when I began learning about estate planning in order to include it in my law practice, I discovered and was truly convinced that life insurance is indeed very important and that 21st century insurance agents, at least the ones I know, are real financial advisors in the truest sense. As is often said in the insurance industry: “Life Insurance is the only necessity that you can purchase today when you do not need it and something that you cannot purchase in the future when you need it the most.” In fact, it is indispensable to sound estate planning and personal finance in general. Now why would I say such a thing? Here are some of the reasons:

  • Estate Tax. We all know that taxes are a pain in the ass (Especially for men because they keep their wallets in their back pockets!) and would therefore do anything to legally avoid paying them. Imagine, if you leave behind an estate worth at least ten million pesos (P10,000,000.00), then your heirs would have to pay a whopping minimum of P1,215,000.00 plus 20% of anything in excess of P10,000,000.00 in estate taxes! Now what if the only property you left was the ancestral or family home worth P10 million? Where will your heirs get the money to pay the estate tax, which, by the way, should be paid within six months from the time of your death? The only solution left is for them is to sell their beloved ancestral house and lot and usually at a loss. That would be so sad! However, ample life insurance can quickly solve this problem for just a fraction of the amount of estate tax due that your heirs would need to pay. How? By first applying the life insurance proceeds to the payment of the estate tax due. In this way, your heir/s would be able to receive their inheritance wholly intact.

estatetax

  • Equalization of Inheritance. Contrary to what most people think, Filipinos do not have the absolute liberty to dispose of their properties as they deem fit. One example of this is in the area of wills and succession. The law reserves a certain portion of our estate to those who are referred to as ‘compulsory heirs.’ This reserved portion is called their ‘legitime.’ There are instances however that some people would want to give more to an heir, especially if they have illegitimate children because under the Civil Code of the Philippines, the same are only entitled to one-half of the legitime of the legitimate children. One of the ways a testator can equalize the share of his illegitimate children is by bequeathing to them a bigger share from the free disposable portion of his estate. The problem with that strategy however is that it can and will cause feelings of hurt and resentment in the hearts of the surviving legitimate family because in addition to the betrayal, their share in the estate of their deceased parent is even lessened due to the presence of illegitimate children; or when the free disposable portion is insufficient. But there is a better way, and that is through life insurance. By naming the illegitimate children as beneficiaries, they will be able to receive more than what the law provides for them, provided that only a sufficient and fair amount is given to them in such a way that they will not receive a larger inheritance than the legitimate children.

These are just some of the reasons why life insurance is an indispensable tool in estate planning. To be sure, there are more but those will be discussed in later articles. For now, suffice it to say that life insurance is definitely not a want or a luxury, but certainly a necessity for those who are responsible enough to take care of the needs of their loved ones even in their permanent absence. If you would want to know more about how estate planning works, consult a trusted lawyer, accountant or financial planner.

Democracy at Work or Constitutional Strife?

It started with the impeachment trial of former Chief Justice Renato Corona. Then came the PDAF scam, then the DAP scam, and now the looming BIR controversy.

Driven by the Corona impeachment in 2012, the BIR sent the Supreme Court (SC) a request for copies of the statements of assets, liabilities and net worth (SALN) of its respective justices. However, in a resolution dated June 17, 2014, the SC denied the said request “for lack of sufficient basis.”

Analysts say that one of the reasons, if not the main reason, PNoy went after CJ Corona was because of the recent decision of the SC involving Hacienda Luisita, which is owned by the President’s clan. Thereafter, the PDAF scam was brought into the fore thanks to the whistleblowing efforts of a certain Benhur Luy and caused by the social media posts of Janet Napoles’ daughter showcasing her expensive stuff and lavish lifestyle. Nevertheless, despite the overwhelming evidence for the guilt of a majority of the senators, only three have been issued warrants of arrest and incarcerated. In an ironic twist of fate, Senate President Juan Ponce Enrile, the presiding judge of the Corona impeachment trial, was among those arrested for the PDAF scam along with Senators Bong Revilla and Jinggoy Estrada. Why is that? Could it have anything to do with those three senators being opposition members; or that Enrile was once a crony of the deposed dictator, Ferdinand Marcos, and hence an enemy of the Aquinos? Of course, we already know by now that the legislature, which consists of the Senate and the House of Representatives, is basically controlled by the President.

But this is not the end of it. On July 1, 2014, the SC ruled on the controversial Disbursement Acceleration Program (DAP) of the Executive Department, declaring the salient point thereof as unconstitutional. In response to this decision, PNoy gave a national address relative thereto on July 14, 2014 defending the DAP and asking the SC to reconsider its decision.

Considering this background, and the apparent vengefulness of PNoy, it is quite understandable that the SC justices would deny the BIR its request for fear of “harassment.” And why wouldn’t they be careful considering what happened to CJ Corona and the three senators? Atty. Mel Sta. Maria, the new dean of the FEU Institute of Law and resident legal analyst of TV5, said that these things simply show democracy at work (my own paraphrase). Now, is it really just democracy and constitutionalism at work or is it a case of the three co-equal branches of government, or maybe just two, fighting against each other in the quest for supremacy? Only time will tell. The only thing we can do right now is be vigilant by knowing what the law says about these things. Remember, “Ignorance of the law excuses no one from compliance therewith” (Article 3, Civil Code of the Philippines).

Real Pinoy Legal Horror Stories (No. 1)

Bobby, a successful iridologist and businessman, was married to Esperanza and they had a daughter named Queenie. They owned the house and lot they lived in located at White Plains, Quezon City currently valued at least P20,000,000.00. However, after a few years, Esperanza died. Bobby then allegedly married Dora who had children from a previous marriage named Luwalhati and Kiko. However, it was only Luwalhati who lived with Bobby and Dora in the house in White Plains. After several years, Bobby died leaving behind Dora and Luwalhati who continued living in their house in Quezon City. Luwalhati became a spinster who then adopted two children, one boy and one girl. The girl’s name was Tina and the boy’s name was Allan.

Afterwards, Dora died leaving the house to Luwalhati and her two adopted children. Unfortunately, after a few years, Luwalhati also died due to cancer leaving Tina and Allan to the care of her best friend, Suzy. During this time, Queenie has already been living in the United States with her family. When Queenie found out about the death of Luwalhati, she became concerned about their ancestral house as she is the only living legitimate child of the deceased patriarch Bobby.

Now the question is: To whom does the house and lot go? Originally, the house and lot in Quezon City was under the name of Bobby who allegedly then donated an undivided share thereof to Dora and Luwalhati, thus including their names in the Transfer Certificate of Title. However, upon the death of Luwalhati, it was discovered that the property is now under the name of Dora and Luwalhati. Now, Suzy, being the one who took care of Luwalhati during her battle with cancer, claimed that she has in her possession the Last Will and Testament of the latter and that she was named executor therein. The problem is, she refused and continues to refuse producing the same for the other property claimants to see. On the other hand, Kiko does not believe that his sister wrote and executed such a will and also claims that he is a legal intestate heir of Luwalhati because Allan and Tina were not legally adopted by her. However, Queenie, on the contrary, claims that Luwalhati was never validly adopted by her father Bobby and that he and Dora were not even married although there was a time that the TCT of the subject property was named under Booby “married to” Dora. Hence, she is likewise claiming the subject property as a primary compulsory heir of her father Bobby and her mother Esperanza. To make things more complicated, the Registry of Deeds of Quezon City could not find any copy of the transfer documents concerning the house and lot putting into question the validity of the subsequent transfers from Bobby to Dora and Luwalhati. It seems like somewhere along the way, an irregularity was committed regarding the transfers of ownership of the subject property.

Presently, it is still unclear about what truly transpired and how the title to the subject property was transferred from Bobby to Dora and Luwalhati. But one thing is clear: All of these problems could have been avoided if only Bobby came up with a sound estate plan including a Last Will and Testament.

How to Protect Your Hard-Earned Assets

Have you ever wondered how a lot of big business owners in America managed to keep their empires afloat and their properties intact even after a major trial or setback?  With the help of highly capable legal and financial professionals, they have learned to master the art and science of sound asset protection planning.

Sadly however, here in the Philippines, most of our countrymen have been lax when it comes to  keeping their money and property safe. Usually, Filipinos have the following mindset when it comes to asset protection planning:

-“I don’t need those sophisticated asset protection stuff, anyway, I only have a simple sari-sari store! Let’s just leave that to the rich and famous like Henry Sy or John Gokongwei!”

-“Lawyers are expensive! Why would I need to spend so much when I only have so little?”

-“This business has been passed on and survived for many generations. So why would I need asset protection now when they didn’t need it before?”

The people who think this way, whether they know it or not, are actually more at risk of losing everything they have worked so hard for.

The goal of asset protection is to shield assets from the reach of creditors, especially the government in the form of taxes.

Asset protection should simply be about structuring the ownership of one’s assets to safeguard them from potential future risks. Most asset protection structures are commonly used business and estate planning tools, such as corporations, limited partnerships, trusts and the like. Properly implemented asset protection planning should be legal and ethical. It should not be based on hiding assets or on secrecy. It is not a means or an excuse to evade taxes.

Asset protection will not work to insulate the proceeds of crime. Only properties that have been legally acquired are covered by asset protection methods. If an asset protection plan is implemented, it should be for legitimate business purposes, not as an instrument to defraud creditors.

There is no one “magic bullet” in asset protection. The term “asset protection” encompasses a number of planning and structuring mechanisms that may be implemented by a practitioner to minimize a client’s exposure to risk. For each client the asset protection solution will be different, depending on (i) the identity of the debtor; (ii) the nature of the claim; (iii) the identity of the creditor; and (iv) the nature of the assets. These are four threshold factors that are either expressly or implicitly analyzed in each asset protection case. The analysis of these four factors determines what planning would be possible and effective for a specific client.

A.​ Identity of the Debtor

In analyzing the identity of the debtor, one should consider the following initial issues:

1. Is the debtor an individual or an entity?

a. If the debtor is an individual:

i. Does he or she have a spouse, and is the spouse also liable? For example, the spouse may be liable as a co-signor of a personal guarantee or as a co-owner of community property assets.

– If the spouse of the debtor is not liable, is it possible to file an action in court in order to transmute the assets from community property to the respective separate property of each of the spouses?

ii. Are the spouses engaged in activities that are equally likely to result in lawsuits, or is one spouse more likely to be sued than the other?

b. If the debtor is an entity:

i. Did an individual guarantee the entity’s debt?

ii. How likely is it that the creditor will be able to pierce the corporate veil, or otherwise get at the assets of the individual owners?

iii. Is there a statute that renders the individual personally liable for the obligations of the entity? Often, clients assume that if assets are placed within a limited liability entity, such assets are shielded from lawsuits. Another common assumption is that a lawsuit against such an entity cannot reach the owners of the entity. These assumptions are frequently erroneous.

B. The Nature of the Claim

It is not sufficient to know the identity of the debtor. The practitioner will also need to know what type of a claim will be brought against the client. Here are some variables:

1. Are there any specific claims against the client, or is asset protection being undertaken as a result of a general fear of lawsuits and the desire to insulate the client from lawsuits?

2. Has the claim been reduced to a judgment? If the claim has been reduced to a judgment, what assets does the judgment encumber? For example, a lien will cover only those assets that are titled in the name of the defendant. If there is any variance, the judgment lien will not attach. Similarly, a notice for a debtor’s examination will impose an automatic lien only on those assets which are titled in the name of the debtor.

3. Has the claim matured to the extent that any transfer of assets will constitute a fraudulent transfer?

4. Is the claim brought against the debtor a tort claim? Tort claims are generally covered by liability insurance. To the extent that asset protection is desired, it is because the plaintiff will deem that the insurance coverage is not sufficient, and will seek to get the defendant to contribute to a settlement with the defendant’s own funds.

5. Certain debts are subject to pre-judgment attachment, if: (i) they arose in the context of the debtor’s business, and (ii) the amount owed is readily ascertainable. In this case the plaintiff does not need to wait until he obtains a judgment in order to encumber the asset. However, the amount of the debt must be evident from the face of the instrument sued upon, such as a promissory note or a liquidated damage provision.

6. An always relevant question is the dischargeability of the claim in bankruptcy. If the claim is dischargeable in bankruptcy, and the debtor’s debts are exempt or otherwise unreachable, then asset protection planning may not be warranted – a bankruptcy discharging the claim will be sufficient.

a. The fact that a claim is dischargeable provides leverage when negotiating with creditors.

b. Asset protection planning and bankruptcy planning usually go hand-in-hand. Often the goal of asset protection planning is to structure the debtor’s assets so that upon the filing of a bankruptcy the debtor’s claims are discharged and assets are retained.

7. What is the statute of limitations for bringing the claim?

8. What is the size of the potential claim? Creditors become more aggressive if the liability is greater. In addition, certain asset protection strategies are more expensive than others.

C. Identity of the Creditor

The third factor to be considered before implementing an asset protection strategy is the identity of the creditor. Here we are referring to certain creditor traits:

1. How aggressive/lazy is the creditor? How smart/knowledgeable is the creditor and the creditor’s counsel? Accurately answering these questions will help us determine the scope of collection activities that the creditor is likely to engage in. This tells us how much protection the debtor requires.

2. Is the creditor a government agency? Taxing authority? Some government agencies possess powers of seizure that other government agencies do not. For example, the Bureau of Internal Revenue and Bureau of Customs, with due process, have the power to seize assets that it deems are used to defraud the Government.

3. Is the potential creditor a spouse in an action for annulment of marriage or declaration of nullity of marriage that has not yet been filed?

D. The Nature of the Assets

The final factor that needs to be analyzed is the nature of the assets we are seeking to protect. This factor, to a much greater extent than anything else, will determine what may be done and what needs to be done to protect the debtor:

1. To what extent are the assets exempt from the claims of creditors?

2. How are the assets titled? If assets constitute community property, it is usually irrelevant that the assets are titled in the name of one spouse. The creditor can attach all of the community property, even if only one spouse is the debtor, provided that the debt inured to the benefit of the family. This may hold true even if the debt arose prior to the marriage.

Each of the issues presented above should be carefully considered by the legal counsel or financial planner before structuring and implementing an asset protection plan. Consult a specialist for adequate and sound asset protection planning.

Estate Planning for Every Juan

“A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.” (Proverbs 13:22)

Both as a lawyer and a pastor, I have come across several people who are having problems with disposing certain properties which are still under the name of their long-deceased relative. The relative is usually a parent, a grandparent, an uncle, an aunt, or even a sibling. In other cases, I also encounter siblings quarrelling amongst each other or even with their surviving parent. Such situations are truly heartbreaking to say the least. These kinds of problems usually arise due to the failure of the surviving relatives, who are more often than not the legal heirs, to pay the necessary estate tax and settle the estate of the decedent. However, are the heirs the only ones to blame? Definitely not. The decedent, while living, likewise has a part, if not more parts, to play in ensuring that his descendants or heirs do not have a difficult time in acquiring the inheritance he had left for them to enjoy. Now, this is where sound estate planning comes in.

Before going any further, it is imperative that we first clarify some key terms because most people are confused between “estate” and “real estate.” On the one hand, an “estate” is the accumulation of all the property, real or personal, tangible or intangible, wherever situated, of a person at the time of his death (Sec. 85, National Internal Revenue Code). On the other hand, “real estate” is property consisting of land and anything permanently fixed to it, including buildings, trees, sheds and other items attached to the structure (Art. 415, Civil Code of the Philippines). Hence, from the above definitions, we can infer that “real estate tax” is different from “estate tax.”

Contrary to what most people think, estate planning is not only for the rich and famous. For as long as you own something, anything, you have an estate! Most of the time, family members don’t even fight among themselves over a piece of expensive property but over those which have sentimental value such as trinkets, paintings, jewelry, books, etc. As a famous saying goes: “There are only two certain things in life, death and taxes.” Of course, in reality, there are more than those two. Still, for some people, when they hear of estate planning, what comes to mind is the Last Will and Testament. Although indispensable thereto, the latter is merely one of the tools used in estate planning. Simply put, Estate Planning is basically transferring your properties to your heirs in the best way possible while avoiding unnecessary costs, especially on taxes.

It is never too early to start planning your estate. Death comes like a thief in the night, to borrow Jesus’ words. Therefore, in order to avoid the hassles and problems that you may leave your loved ones as illustrated by the true to life cases given above, show them that you care by planning ahead. Remember, failing to plan is planning to fail! In the following weeks, I will be sharing more real life horror stories of people who failed to plan their estates resulting in heart-wrenching family feuds or squabbles. So what are you waiting for? Consult your lawyer, accountant or financial planner today!

The Importance of Having a Retained Counsel

Most people have heard of a “retainer fee” or “legal retainer.” There are times that when a problem concerning the law comes up, their friends would advise them to “retain an attorney.” So what exactly does it mean to retain the services of a lawyer and what are its advantages?

A “retainer” is a fee paid to the lawyer, often monthly or annually, to retain or keep the lawyer available to the client. This type of fee is often paid by corporations and other business organizations to make sure they have access to their lawyers whenever they need advice or representation. A true retainer is usually non-refundable. In most cases, the lawyer shall provide the prospective client a Retainership Proposal that outlines the services the same is entitled to by virtue of the retainer fee such as, but not limited to, legal consultation and document review.

Now, how is this different from “legal fees” and “costs?”

On the one hand, legal fees are paid to a lawyer for his advice and services or advice and services provided by his firm while costs, on the other hand, are other expenses, such as filing fees, copying costs, or expert witness fees that the lawyer is paying to others on the client’s behalf. Usually the client is required to pay all costs as they are incurred or as part of a regular billing. In several cases, lawyers may likewise require a deposit called a “mobilization fund” from which he shall charge any and all of the said out-of-pocket expenses that may be incurred relative to the client’s cause. Any excess therefrom may either be reimbursed to the client or be deducted from the legal fees due to the lawyer.

Having a retained legal counsel on hand provides clients with a sense of security that whenever they would require the services of a lawyer, the same is available. Moreover, entering into a retainer also ensures that legal fees for services not covered by the retainership agreement shall be charged at a significantly discounted rate as opposed to those that have not entered into a retainer.

From my own personal experience, I have encountered several prospective clients who only seek the advice and assistance of a lawyer when their problems have already blown up on their faces. I usually tell them that they should have sought the counsel of a competent attorney even at the onset of their new business endeavor, as in from the time they incorporate their corporations or establish their business partnership. It is quite similar to having periodic check-ups with the physician or dentist so as to detect and deter any developing sickness rather than doing so only when the disease has already become terminal.

So just as it is important for everyone to have a regular family or personal physicians, whether general practitioners or specialists, it is no less true when it comes to securing the services of an attorney in order to protect your rights and interests in this dog-eat-dog world.

Same-Sex Marriage and the Law

Nowadays, there has been so much clamor for the so-called ‘marriage equality’ by LGBT or homosexual activists. They claim that because normal heterosexual people have the right under the law to marry whom ever they want, then homosexuals should likewise have the legal right to ‘marry’ their same-sex partners. To this end, they lobby for the amendment of the Family Code of the Philippines which defines marriage as “a special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life” (Article 1). LGBT activists claim that such a definition is a violation of their basic human right to equality in the eyes of the law because there should be no distinction between heterosexuals and homosexuals when it comes to the right to marry. As with all other proponents of sinful immorality, they use euphemisms such as ‘marriage equality,’ ‘freedom of choice,’ and the like in order to deceive the general populace that their advocacy is good and just. To correct and clarify what “equality under the law” truly means, let us look at the Right to Equal Protection as enshrined in the Bill of Rights under 1987 Philippine Constitution.

Article III, Section 1 provides that “No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.” This Constitutional provision deals with two fundamental rights. The first part of this provision deals with the right to due process while the second part deals with the right to the equal protection of the laws. The Supreme Court held in the case of Ichong v. Hernandez (G.R. No. L-7995; May 31, 1957), “equal protection simply requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed.”

However, according to respected Constitutional Law professor Isagani A. Cruz, it is not enough that the members of a group have the characteristics that distinguish them from others. The classification must, as an indispensable requisite, not be arbitrary. Citing the case of People v. Cayat (68 Phil. 12), this classification must conform to the following requirements:

  1. It must be based upon substantial distinctions;

  2. It must be germane to the purposes of the law;

  3. It must not be limited to existing conditions only; and

  4. It must apply equally to all members of the same class.

First, the distinction, to be valid, must be substantial. Certain physical differences can in some instances be the basis of a valid classification. Thus, women, being generally weaker, may be treated more tenderly by the law than men in specifying work conditions; height and weight are allowable criteria for purposes of certain public employments, as in the police force; health may be considered in the curtailment of some rights, as where lepers are segregated from the rest of the community; age may be a factor in the imposition of public duties such as military service or the granting of certain privileges under the senior citizen law. Surely, physical differences between men and women were taken into account in the case of Philippine Association of Service Exporters v. Drilon (163 SCRA 386) when the Supreme Court held that Filipino female domestics working abroad were in a class by themselves, because of the special risks to which their class was exposed. In addition, the accepted difference in physical stamina between men and women will justify the prohibition of the latter from employment as miners or stevedores or in any other heavy or strenuous work. On the basis of this same classification, however, the law cannot provide for a lower passing average for women in the bar examinations because physical strength is not the test for admission to the legal profession. With regard to marriage, men and women were designed to complement each other. This is obvious through a simple analysis of their sexual organs in that the male penis, protruding as it is, is designed to be inserted into the female vagina and such marital sexual intercourse results in pleasure due to the presence of sensitive nerve endings in the glans penis and clitoris. Moreover, the same may also result in procreation as when the male spermatozoa fertilizes the female ovum. Another distinction lies in the chromosomes of the males and females. Males have an XY chromosome while females possess an XX chromosome. However, all these are substantial distinctions are absent in homosexual relationships thus defeating the very God-given purposes of the institution of marriage, which is the second requirement of a valid classification, i.e. that it must be germane to the purpose of the law, which is “the establishment of conjugal and family life.”

The third requirement for a valid classification is that it must not be limited to existing conditions only. In People v. Cayat (68 Phil. 12), the Supreme Court upheld the validity of the law prohibiting members of non-Christian tribes from drinking liquor, on the ground that their low degree of culture and unfamiliarity with the drink rendered them more susceptible to its effects. As for marriage, the above-discussed distinctions between men and women are ingrained in their very being since the time of Adam and Eve and until the end of the ages.

The fourth and last requirement is that it must apply equally to all members of the same class. Thus, a sterile woman would still be entitled to the benefits of a law protecting the reproductive functions of her sex, such as one prohibiting women from work requiring them to be continuously on her feet. Her inability to bear children does not make her any less of a woman. Although both men and women belong to the human race, they belong to different classes of humans, namely, male and female.

As the differences between men and women are manifestly substantial and valid, the prohibition of same-sex marriage is surely constitutional and not a violation of basic human rights. The apostle Paul in his second epistle to the Corinthians posits that “The god of this age has blinded the minds of unbelievers, so that they cannot see the light of the gospel that displays the glory of Christ, who is the image of God” (4:4). The gospel of Jesus Christ and the acceptance of the truths thereof requires repentance, which simply means the ‘changing of one’s mind’ with regard to the person and work of Christ and those things that please God. It is one thing to fall into sin or even a sinful lifestyle but another thing to promote the same. The former deserves love, acceptance, help and prayer, while the latter deserves condemnation. As I conclude, I leave you with the words of St. Paul to his young disciple Timothy: “Watch your life and doctrine closely. Persevere in them, because if you do, you will save both yourself and your hearers” (1 Timothy 4:16).

The Process of Pastoral Counseling

Pastoral Counseling is not a lecture but a process. As students, this has been pounded to us over and over again. The tendency to monologue during counseling sessions for those in the teaching and preaching ministry are very high. However, as discussed in my previous articles, it is also by those in the said ministry that pastoral or nouthetic counseling are best conducted because it is to them that God has entrusted the spiritual, psychological, and sometimes, even physiological care of His flock. So what exactly is this process?

Obviously, the very first stage of counseling is making the contact. These contacts are not only limited to the formal arrangements made by the parishioner or client with the counselor but also during informal settings, including what Dr. Harold Sala in his Counseling Friends in Need, refers to as “peer counseling.” These informal meetings often occur during social gatherings such as parties, family reunions, funerals, weddings, parent-teacher associations, and the like. That is why, according to Dr. Wayne Oates in his An Introduction to Pastoral Counseling, “The pastor and other religious workers, therefore, can never become so professional in their pictures of themselves that they underestimate the importance of informal relationships both as powerful ministries in and of themselves and as points of vital contact for beginning more formal counseling relationships.”

Aside from informal settings, the initial contact may also be in the form of formal pastoral visitation and counseling. In smaller congregations such as community or house churches, pastoral house visitation of parishioners are quite common. However, as far as megachurches are concerned, this practice seems highly impractical if not altogether humanly impossible unless the pastoral complement of the church is large enough to cover each and every household in their membership. To alleviate this, house visitations are usually delegated to the deacons or discipleship group leaders who have a more personal and intimate relationship with their respective group members. Nevertheless, pastoral visits, whether done by the pastor himself or other church leaders gives the ministers a opportunity to know their flock better. This enables them to effectively assess their members’ current situation in life such as their economic status, vocational issues, and interfamily tensions, which in turn helps them in counseling their people when the need arises.

On the side of the parishioners, pastoral visits give them a sense of value and belonging to the local church they are members of. Such feeling aids them in their ability to perceive their minister as someone who truly cares for them thus making it easier for them to open up their problems for counseling. Finally, pastoral visiting helps establish that relationship of rapport, of confidence and affection, between counselor and client without which the entire procedure is impossible.