ARTICLE 1. Instruments of credit are mercantile things. Their issue, forwarding, endorsement, "aval" or acceptance and the other operations which are therein set forth, are acts of commerce. The rights and obligations derived from the acts or contracts which have given rise to the issue or transfer of credit instruments, or which have been carried out with them, shall be governed by the rules enumerated in Article 2, when they can not be exercised or performed separately from the instrument itself and, in other cases, by the law which corresponds to the civil or mercantile nature of such acts of contracts.

The credit operations which this Law regulates are acts of commerce.

ARTICLE 2. The acts and operations referred to in the foregoing article shall be governed by:

ARTICLE 3. All parties having legal capacity to contract under the laws mentioned in the foregoing article may effect the operations to which this law refers, with the exception of those requiring a special authorization or concession.

ARTICLE 4. Co-debtors shall be presumed to be jointly obligated in the credit operations regulated by this Law.

ARTICLE 5. Credit instruments are the documents required to exercise the literal right therein set forth.

ARTICLE 6. The provisions of this Chapter are not applicable to tickets, countersign, counters or other documents which are not designated to circulate, and which serve exclusively to identify the person who has the right to claim compliance with the obligations mentioned therein.

ARTICLE 7. Credit instruments given in payment are presumed to be received under the condition: "subject to collection".

ARTICLE 8. Only the following exceptions and defenses may be opposed against actions derived from a credit instrument:

ARTICLE 9. Representation to execute or sign instruments of credit is conferred by:

In the case referred to in section 1, the representation shall be understood as conferred with respect to any person whatsoever, and in section 2 only with respect to the person to whom the written declaration has been addressed.

In both cases, the representation shall have no other limitations than those which the one represented has expressly fixed in the respective instrument or declaration.

ARTICLE 10. The person who accepts, certifies, executed, draws, issues, endorses, or in any other manner, signs a credit instrument in the name of another without a sufficient power-of-attorney or legal powers to do so, obligates himself personally, as if he had acted in his own name, and, if he pays, acquires the same rights as would correspond to the person apparently represented.

Express or tacit ratification of the acts referred to in the foregoing paragraph, by the person apparently represented, from the date of the act, the obligations arising from it.

Tacit ratification is that resulting from acts that necessarily imply acceptance of the act ratified or any of its consequences. Express ratification may be stipulated in the instrument itself or in a separate document.

ARTICLE 11. Whoever has given occasion, by positive acts or serious omissions, for others to believe, in conformance with the usages of commerce, that a third party is authorized to sign credit instruments in his name, may not invoke the exception referred to in section 3 of Article 8 hereof against a holder in good faith. Good faith shall be presumed, except there be proof to the contrary, provided the other circumstances mentioned in this article concur.

ARTICLE 12. The incapacity of any of the signers of a credit instrument, or the fact that in it there appear false signatures or signatures of imaginary persons, or the circumstances that, for any reason whatever, the instrument does not obligate any of the signers as such, shall in no way invalidate the obligations derived from the instrument against the other persons who signed it.

ARTICLE 13. In case of the alteration of the text of a credit instrument, subsequent signers obligate themselves in accordance with the altered text and the previous signers according to the original text. Where it is impossible to prove that a signature has been placed after or before the alteration, it shall be presumed that it was before.

ARTICLE 14. The documents and acts referred to in this Title shall only have the effects foreseen by the same when they fulfill the requisites and contain the specifications stipulated by the law and which the law does not expressly presume.

The omission of such requisites or specifications shall not effect the validity of the legal transaction which gave origin to the document or act.

ARTICLE 15. The requisites and specifications which are necessary for the efficiency of a credit instrument or the act provided for therein may be satisfied by whoever should fulfill them up to the time of presentation of the instrument for acceptance or payment.

ARTICLE 16. The credit instrument whose value is written in both figures and words should be valued, in case of difference, at the sum written in words. If the amount is mentioned several times in words and figures, the value of the document, in case of difference, shall be the lesser sum.

ARTICLE 17. The holder of an instrument shall have the obligation to exhibit it in order to exercise the right consigned therein. When it has been paid, he must return it. If it is only partially paid or if only accessories thereto are paid, mention of the payment must be made in the instrument. In cases of robbery, theft, destruction or serious deterioration, that which is provided by articles 42 to 68, 74 and 75 shall be applied.

ARTICLE 18. The transfer of a credit instrument implies the transfer of the principal right therein set forth, and, in the absence of a stipulation to the contrary, the transfer of the right to interest and dividends due thereon, as also of the guarantees and other accessory rights.

ARTICLE 19. Documents representative of merchandise give the legitimate holder the exclusive right to dispose of the merchandise specified in them.

The recovery of merchandise presented by the instruments to which this article refers may only be effected by recovery of the instrument itself, in accordance with the rules applicable for the purpose.

ARTICLE 20. Attachment of, or any other encumbrance on, the right set forth in the instrument or on the merchandise represented by it shall have no effect if the attachment or encumbrance does not include the instrument itself.

ARTICLE 21. Credit instruments may, according to their manner of circulation, be either nominative or bearer.

The holder of an instrument may not change its manner of circulation without the consent of the person who issued it, except in case of an express legal disposition to the contrary.

ARTICLE 22. With respect to Public Debt Bonds, bank-notes, shares of corporations and other instruments of credit regulated by special laws, that which is prescribed in the legal dispositions relative thereto shall be applied, and with respect to matters not provided for, they shall be governed by the provisions of this Chapter.

ARTICLE 23. Nominative instruments are those issued in favor of a person whose name is stated in the text of the document itself.

In the case of nominative securities with coupons attached, the coupons shall be considered as nominative coupons when they are identified and linked to the corresponding security by its number,

series and other data.

Only the legitimate owner of the nominative security or his legal representative may exercise patrimonial rights against delivery of the corresponding coupons which authorize the security to which they are attached.

ARTICLE 24. Whenever by provision in the instrument itself or in accordance with the law relative thereto, the instrument must be recorded in a register of the party who issues it, the latter shall not be obliged to recognize as the legitimate holder any person except the one who appears as such both in the instrument and the register. Where such registration is necessary, no act or operation relative to the credit shall have any effect against the issuer or against third parties if it is not set forth in the register and in the instrument.

ARTICLE 25. Nominative instruments shall always be understood to be issued to the order, unless there should be an insertion in the text or in the text of an endorsement of the clauses "not to the order" or "not negotiable". Those clauses may be recorded on the document by any holder and shall be effective as from the date of their insertion. An instrument containing the referenced clauses shall only be transferable in the manner and with the effects of an ordinary assignment.

ARTICLE 26. Nominative instruments are transferable by endorsement and delivery of the document itself, without prejudice to their being transferred by any other legal means.

ARTICLE 27. The transfer of a nominative instrument by ordinary cession or any other legal means other than endorsement subrogates the acquirer to all the rights which the instrument confers, but subjects him to all the personal exceptions which the obligor would have been able to oppose against the transferor before the transfer. The acquirer is entitled to demand delivery of the instrument.

ARTICLE 28. The person who proves that a negotiable nominative instrument has been transferred to him by means other than endorsement may require a Judge in ex-parte proceedings to confirm the transfer in the document itself or on a separate paper attached thereto. The signature of the Judge must be legalized.

ARTICLE 29. The endorsement must be set forth on the respective instrument or on a paper attached thereto, and fulfill the following requisites:

ARTICLE 30. The provisions of Article 32 shall apply when the first-named requisite is omitted. Omission of the second requisite renders the endorsement null; omission of the third requisite establishes the presumption that the instrument has been transferred in ownership, no proof to the contrary against a third party in good faith being valid. Omission of the place establishes the presumption that the document was endorsed at the domicile of the endorser, and omission of the date establishes the presumption that the endorsement was made on the date the endorser acquired the document, except where proof to the contrary is furnished.

ARTICLE 31. The endorsement must be pure and simple. Any condition to which it is subject shall be considered as not written. A partial endorsement is null.

ARTICLE 32. The endorsement may be made in blank, with only the signature of the endorser. Under such circumstances any holder may fill in the blank endorsement with his own name of that of a third party, or transfer the instrument without filling in the endorsement.

Endorsement to the bearer shall produce the same effects as a blank endorsement.

In the case of shares of stock, founder bonds, obligations or bonds, certificates of deposit and certificates of participation, and checks, the endorsement shall always be made in favor of a determined person; blank endorsement or endorsement to the bearer shall not produce any effect. The provision of this paragraph is not applicable to checks issued for amounts up to 5,000,000 pesos.

ARTICLE 33. An instrument may be transferred by endorsement in ownership, in procuration or in guaranty.

ARTICLE 34. The endorsement in ownership transfers the property in the instrument and all inherent rights. The endorsement in ownership shall not obligate the endorser jointly except in the case in which the law established joint liability.

When the law establishes the joint liability of the endorsers, they may free themselves from it through the clause "without responsibility on my part" or any equivalent.

ARTICLE 35. The endorsement which contains the words "in procuration", "for collection" or other equivalent does not transfer ownership, but it empowers the endorsers to present the document for acceptance, to collect it judicially or non-judicially, to endorse it for collection, or to protest it, as the case may be. An endorser shall enjoy the same rights and have the same obligations as an attorney-in-fact. The authority embodied in the endorsement shall not terminate with the death or incapacity of the endorser, and its revocation shall have no effect as regards a third party until the endorsement is cancelled in accordance with Article 41.

In the case presented in this article, the obligated parties may only oppose against the holder of the instrument the exceptions which they have against the endorser.

ARTICLE 36. Endorsements containing the words "in guarantee" or "in pledge" or other equivalent attribute to the endorsee all the rights and obligations of a secured creditor as regards the endorsed instrument and the rights inherent to it, including the powers conferred by an endorsement in procuration.

The parties obligated may not, in the case of this article, oppose against the endorsee the personal exceptions which they have against the endorser.

When the pledge is fulfilled, within the terms of Part 6 of Chapter IV, Title II of this Law, the broker or the merchants who intervene in the sale shall certify it thus, in the document, and once such requisite has been complied with, the creditor shall endorse the instrument in ownership, being entitled to insert the words "without liability".

ARTICLE 37. An endorsement made subsequently to the date of maturity of an instrument will produce the effect of an ordinary cession.

ARTICLE 38. The owner of a nominative instrument is the person in whose favor it is executed, in accordance with Article 23, so long as there is no endorsement.

The holder of a nominative instrument which bears endorsements shall be considered as the owner of the instrument, provided he proves his right by an uninterrupted series of endorsements.

The statement which a Judge places on an instrument in conformance with Article 28 shall be considered as an endorsement as an endorsement for the purposes of the preceding paragraph.

ARTICLE 39. The person who pays is not obliged to verify the authenticity of the endorsements, nor is he empowered to require that it be proved, but he must verify the identity of the person who presents the instrument as the last holder and the continuity of the endorsements. Credit institutions may collect instruments not endorsed, provided they are delivered by the beneficiaries to be credited to their account by means of a document signed by the beneficiary or his representative giving the characteristics of the instrument for its identification. Payment of the instrument shall be considered legal with the sole written declaration of the respective credit institution on the instrument that it has acted as provided for in this precept.

ARTICLE 40. Credit instruments may be transferred by means of a receipt for the value thereof, embodied in the document itself or attached to it, in favor of anyone liable on the same, whose name must be stated in the receipt. A transfer by receipt has the same effect as an endorsement without liability.

ARTICLE 41. Endorsements and annotations of receipt in a credit instrument which are legally erased or cancelled have no value whatsoever. The owner of a credit instrument may scratch out endorsements and receipts subsequent to his acquisition, but not those previous to it.

ARTICLE 42. The person who suffers the loss or theft of a nominative instrument may reclaim it, or request its cancellation and, in the latter case, its payment or replacement, in accordance with the following articles. Likewise, he is entitled, if he chose the latter, and guarantees reparation for the respective losses and damages, to ask that the fulfillment of the obligations set forth in the instrument be suspended while the instrument remains definitely cancelled or a resolution is taken in regard to the oppositions made to its cancellation.

The loss of an instrument due to other causes only gives right to the personal actions which may be derived from the judicial transaction or wrongful act which caused or produced same.

ARTICLE 43. The holder of a nominative instrument who proves his right to it under the terms of Article 38 cannot be obliged to return it or to refund sums received for its collection or negotiation, unless it is proved that he acquired it in bad faith or with culpable negligence.

If the instrument is of the kind that its issuance and transfer should be inscribed in a register, the person who acquires it from anyone not appearing as owner in the register, is guilty of culpable negligence.

Likewise, the person who acquires a lost or stolen instrument after the publications required by section 3 of Article 45, have been made, is guilty of culpable negligence.

If, notwithstanding the publications provided for in section 5 of Article 45, the instrument is negotiated on the Stock Exchange, the person who acquired it from same, during the period the suspension order is in force, shall be considered as having acted in bad faith.

The person who accepts a lost or stolen instrument in guaranty shall be comparable to the party who acquired it in ownership, for the purposes of the foregoing paragraphs.

ARTICLE 44. Cancellation of nominative instrument which has been lost or stolen shall be petitioned before the Judge located at the place where the principal obligor must comply with the obligations to which the instrument gives right.

The claimant shall accompany his petition with a copy of the document, but, where this is not possible, he shall insert in the petition the essential specifications of the document. He shall give the names and addresses of the persons to whom the notification provided for in section 3 of Article 45 should be made and those of the secondary obligors from whom payment of the document is to be exacted in case it is not obtained from the principal debtor. If he solicits the suspension of payment, in accordance with Article 42, he must offer a real or personal guaranty sufficient to secure reparation of any losses or damages that the suspension may occasion to whoever may prove to have a better right to the instrument. He must, moreover, when presenting the petition for consideration, or within a period not exceeding 10 days, prove the possession of the instrument and he was deprived of it by theft or loss.

ARTICLE 45. If, from the proofs submitted, there results at least a serious presumption in favor of the petition, the Judge:

ARTICLE 46. Payment made by any of the obligors to the holder of the instrument after being notified of the order of suspension will not free the one who makes it if the decree of cancellation is made firm.

ARTICLE 47. Any person who proves he has a better right to the instrument than that alleged by the claimant may oppose the cancellation, payment or replacement of the same.

Those who acquire the document without culpable negligence and in good faith shall be considered as having a better right than the claimant, provided that they accredit themselves as owners within the terms of Article 38.

The provisions of the second, third, fourth and fifth paragraphs of Article 43 are applicable to the one opposing.

ARTICLE 48. Opposition of the holder of the instrument must be instituted by summons to the person who requested the cancellation and to the persons referred to in section 3 of Article 45.

In order that the opposition may be admitted, it is necessary that the one opposing deposit the document at the disposal of the Court, and, furthermore, secure with a satisfactory real or personal guaranty the reparation of injuries, and damages which the opposition occasions to the one who obtained the decree of cancellation, in case the opposition is not admitted.

The claimant being heard within three days after the notification, the opposition proof shall be received within a period set by the judge considering the circumstances of the business, and which in no case shall exceed thirty days. The period for arguments shall be five days for each party, and the decision must be pronounced within ten days. None of the aforementioned periods may be suspended or extended.

ARTICLE 49. Once the opposition has been admitted to a definite decision, the decree of cancellation and the orders of suspension, and of payment and replacement, referred to in Article 45, shall be revoked in all respects, and the losing party must repair losses and damages which the said resolutions may have caused the one opposing, and, in addition, pay the cost of the proceedings.

ARTICLE 50. If the opposition is rejected, the one opposing must pay the costs, losses and damages caused thereby to the claimant, and the judge shall order delivery of the instrument deposited to such claimant.

ARTICLE 51. The opposition of one who is not in possession of the instrument shall be established in the same manner as that of the holder with the sole exception that the previous deposit of the document shall not be necessary for the admission of the complaint.

If the opposition is admitted, the provisions of Article 49 shall result. If it is rejected, the decree of cancellation and the orders of payment or replacement provided for in sections 1 and 4 of Article 45 shall become final, provided the holder of the instrument has not opposed its cancellation and has deposited it in accordance with the terms of Article 48. In the last case, the decision based on the opposition of the holder shall prevail.

Separate oppositions to the cancellation of a lost or stolen instrument shall be joined and shall be determined in the same decision.

ARTICLE 52. The person who although not the signer of the instrument, is designated as such in the petition for cancellation, must express his lack of conformity before the judge hearing the case, within thirty days following the notification ordered in section 3 of Article 45. The party who signed the document in a capacity other than that attributed to him in said complaint must do likewise.

If the party concerned fails to express his lack of conformity within the aforementioned period, it shall be presumed, except where there is proof to the contrary, that the affirmation of the complainant is true. No evidence may be admitted against such presumption except in the proceedings referred to in Articles 54, 55 and 57, and such person shall be considered as a signer in the capacity indicated in the complaint in everything concerning the preservative acts provided for in Articles 60 and 61, so long as the instrument is not deposited by the holder.

ARTICLE 53. Cancellation of a lost or stolen instrument shall not exempt the signers from the obligations imposed upon them thereby, it only extinguishes the actions and rights with respect to the signers which might pertain to the holder of the document from the time the decree of cancellation or the decision which rejects the opposition acquire force as final. From the time the cancellation is definite, on account of the failure of an opposer to appear or in account of the opposition formulated against the cancellation having been rejected, the person who obtained such cancellation may claim payment from the signers of the instrument, if it be then collectible, or may require a duplicate of the same if it be of a later maturity.

ARTICLE 54. If payment of the document is claimed, the complaint must be brought through executive action, under penalty of the lapsing of the respective action within thirty days following the date when the cancellation becomes final. All documents and evidence establishing the right of the claimant must accompany the complaint, without fail, in order that the attachment may be effected without delay.

All the exceptions and references enumerated in Article 8 are applicable against the claim.

ARTICLE 55. The signer of a cancelled instrument who pays it to the party who obtained the cancellation, is entitled to recover the document, in order to take the actions arising therefrom in his favor against the remaining obligors, without prejudice to the fundamental cause of action and of unjust enrichment which he may have respectively against his direct debtor or against the drawer of a bill, the maker of a check, the issuer or the signer, as the case may be.

Likewise, he may require a certified copy of the decisions and evidence of the cancellation and opposition proceedings which he may deem pertinent, and, with them and other justifying documents, he may take the executive actions which result from the cancelled document in his favor, against the other signatories thereon.

ARTICLE 56. If any of the signers of a cancelled instrument refuses to sign the corresponding duplicate, the Judge shall do it for him and the document shall produce, in accordance with its text, the same effects as the cancelled instrument.

The signature of the judge must be legalized.

ARTICLE 57. The procedure referred to in the foregoing article shall be substantiated in the following manner:

When the signing of a duplicate is demanded, within the terms of the preceding article, the petition must be presented to the judge of the domicile of the defendant, and within thirty days following the date on which the cancellation becomes final, under penalty of the respective action lapsing. The petition must be accompanied, without fail, by all the evidence and documents proving the rights of the complainant. The complainant being heard within three days after notice, the judge will fix a period for receiving evidence in the matter, considering all the circumstances of the case and which in no case shall exceed twenty days. The period for argument shall be five days for each party, and the decision shall be pronounced within ten days. None of these periods may be suspended or extended.

ARTICLE 58. If any of the persons named in the petition of cancellation as signers of the instrument manifests his lack of conformity within the terms of Article 52, payment of the document cannot be exacted from him nor can he be forced to sign a duplicate of the same in the procedure referred to in Articles 54, 55 and 57, unless that which is demanded of him results from the capacity in which he may have declared he signed the document; but the claimant will preserve in full effect the actions which he has against him(any signer) to execute them in the respective manner.

ARTICLE 59. The person who, having signed a credit instrument in the capacity mentioned in the petition for cancellation, manifests his lack of conformity with said petition, within the terms of Article 52, shall incur the penalty for false swearing under oath and, moreover, shall be liable for losses and damages which the declaration may cause the petitioner, which losses and damages shall in no case be estimated at less than one-fourth the value of the document.

ARTICLE 60. While the order of suspension referred to in section 2 of Article 45 is in force, the party who obtained it must exercise all the actions and do all the acts necessary to preserve the rights derived from the document, it sufficing for such purpose that he exhibit a certified copy of the decree cancellation and guarantee reparation of the relative losses and damages.

ARTICLE 61. If the instrument whose cancellation is requested is collectible or becomes so during the time the order of suspension is in force, any one of the parties concerned may petition that the signers be required to deposit the amount of the document at the disposal of the Court, commencing always with the principal debtor. A deposit made by any one of the signers relieves the others from the obligation of making it.

If the case is urgent, the judge shall be able to order the questioning of the persons designated in the petition as the signers, even though the period specified in Article 52 may not have elapsed, in order that they may at once state whether they admit having signed the document as claimed by the petitioner; and if they are in conformity with his declaration, they shall be required in the same proceedings to make the deposit.

The total or partial omission of the deposit by the party who should make it shall have the same effect as failure to pay, and subject the defaulter to the corresponding civil liability as from the date of the demand.

ARTICLE 62. The deposit shall in no way be prejudicial to the personal exceptions and defenses which the depositor has against the party who obtains the cancellation or return of the instrument, provided they are prior to the demand and the depositing signer makes express reservation of the same at the time of making the deposit or within ten days following such time or the notification of the summons provided for in Article 48.

Where the deposit is made without the reservation aforementioned, the judge shall transfer the instrument to the depositing signer at the expiration of the period specified in section 1 of Article 45, and shall order the amount deposited to be delivered to the party who, in the cancellation and opposition proceedings, becomes entitled thereto.

If the deposit is made with reservations, the judge shall place it at the disposal of the Court which is hearing the action referred to in Article 54, so that it may remain subject to the results of the same, unless said reservations do not refer to the party who obtained the cancellation or return of the instrument in his favor. In the latter case, the procedure set forth in the preceding paragraph shall be followed.

ARTICLE 63. The decision in which the oppositions to the cancellation are decided shall be appealable only when the value of the documents involved exceeds 2,000 pesos, the appeal without stay of proceedings only being admitted.

No appeal shall be admitted against the other decisions made in cancellation and opposition proceedings; but the Judge shall be responsible for the irregularities with which they are affected as well as for the fitness of the guarantees offered by those from which they have been demanded.

With respect to the proceedings referred to in Articles 56 and 57, the judgments and the decision pronounced in them shall be subject to the appeals which the Civil Law provides for executive mercantile actions.

ARTICLE 64. The party who negotiates a nominative instrument acquired in bad faith is liable for the losses and damages caused thereby to an endorser in good faith or to the owner of the document, whatever may the cause be of the latter's losing his possession thereof.

ARTICLE 65. In cases of total destruction, mutilation or serious deterioration of a nominative instrument, the holder may request its cancellation and payment or replacement, in accordance with the procedure outlined for lost or stolen instruments.

If the destruction, mutilation or deterioration affects any of the signatures without affecting the essential markings or requisites of the document, its cancellation shall not be necessary for the judge to sign for parties who refuse to do so, following the procedure specified in Article 57, Articles 56, 59, 60, 61, 62 and the last part of Article 63 being also applicable insofar as pertinent.

ARTICLE 66. In cases of theft, loss, total destruction, mutilation or serious deterioration of a non-negotiable nominative instrument, the person who proves he is the owner of it shall have the right to require that the signers issue a duplicate to him without the necessity of its being previously cancelled, and if any of the obligors fail to do so, the judge shall sign for him in accordance with the procedure specified in Article 57, Articles 56, 59, 60, 61, 62 and the last part of Article 63 also being applicable insofar as pertinent.

ARTICLE 67. The proceedings for cancellation, opposition and replacement to which the foregoing articles refer, suspend the prescriptive period for extinguishment, with respect to nominative instruments lost, stolen, destroyed, mutilated or seriously deteriorated.

ARTICLE 68. Suits which arise due to lost, stolen, destroyed, mutilated or seriously deteriorated nominative instruments, shall not be prejudiced by the omission of the preservatory acts which cannot be effected while the cancellation, opposition and replacement proceedings referred to in the foregoing articles are being held; but if the law fixes a time limit for the carrying out of said acts, such period shall commence to run from the time the cancelation becomes a definite due to lack of opposers, or is resolved by a final decision on such opposition to the cancellation or on the petition for replacement, within the terms of Article 57.

ARTICLE 69. Bearer instruments are those which are not made out in favor of any determined person irrespective of whether or not they contain the words "to bearer".

ARTICLE 70. Bearer instruments are transferred by mere delivery.

ARTICLE 71. The signing of a bearer instrument entails the obligation on the signer to pay it to whoever presents it, even though the instrument was put into circulation against the will of such signer or subsequent to his death or incapacity.

ARTICLE 72. Bearer instruments which contain the obligation to pay any sum of money may only be put in circulation in the cases expressly provided for in the law and in accordance with the rules therein prescribed. Instruments issued in violation of the provisions of this article will not support any action as instruments of credit. The maker shall be punished by the Federal Courts with a fine equivalent to the amount of the document issued.

ARTICLE 73. Bearer instruments may only be recovered where possession is lost due to loss or theft, and only those persons who may have found or have taken them and those persons who acquired them knowing, or who ought to have known, the defects in the possession of the transferor, shall be obligated to restore them or return the sums received from their collection or transfer.

Loss of an instrument due to other causes only gives a right to the personal actions which might be derived from the juridical transactions or illegal act which may have occasioned or produced it.

ARTICLE 74. Whoever may have suffered the loss or theft of a bearer instrument may petition the judge of the place where the document is to be paid to notify the maker or drawer. Such notification obligates the maker or drawer to pay the principal and interest on the instrument to the denunciator, after the actions which arise therefrom are prescribed, provided a holder in good faith has not previously presented the instrument for collection prior thereto. In the latter case, payment must be made to the bearer, the maker or drawer being freed with respect to the denunciator.

ARTICLE 75. Where a bearer instrument is not in condition to circulate due to having been partially destroyed or mutilated, the holder may request the cancellation and replacement in conformity with the procedure set forth for nominative instruments.

ARTICLE 76. A bill of exchange must contain:

ARTICLE 77. If the bill or exchange does not contain designation of the place where it is to be paid, it shall be considered as the domicile of the drawee; and if he has several domiciles, the bill shall be payable at any one of them, at the choice of the holder.

If in the bill, several places are specified for its payment, it shall be understood that the holder may exact payment at any one of the places mentioned.

ARTICLE 78. Any penal clause or stipulation for interest in a bill of exchange shall be considered as not inserted.

ARTICLE 79. A Bill of Exchange may be drawn:

Bills of exchange with other kinds of maturities or with successive maturities shall always be understood as payable at sight for the whole sum which they specify. Also a bill of exchange the due date of which is not indicated in the document, shall be considered as payable at sight.

ARTICLE 80. A bill of exchange drawn at one or several months from date or sight matures on the day of the month on which it is payable corresponding to that on which it was executed or presented. When there is no day corresponding to that of its execution or presentation, the draft shall mature on the last day of such month.

If maturity is fixed at the "beginning", "middle", or "end" of the month, such terms shall be understood to mean the first, fifteenth and last day of the corresponding month.

The expression "eight days" or "one week", "fifteen days", "two weeks", a "fortnight", or "half a month" should be understood not as one or two entire weeks, but as terms of eight or fifteen business days, respectively.

ARTICLE 81. When any of the acts which this Chapter imposes as obligatory upon the holder of a bill of exchange must be effected within a term whose last day is not a working day, such term shall be understood to be extended until the next working day. Intermediate non-working days shall be counted in computing the term. In neither legal periods nor those contracted shall the day which serves as the beginning point be included.

ARTICLE 82. A bill of exchange may be drawn to the order of the drawer.

It may likewise be drawn on the drawer himself when it is payable to a place other than that in which it is drawn. In the latter case, the drawer shall be obligated as an acceptor, and if the bill is drawn for a certain time after sight, its presentation alone will have the effect of fixing the date of maturity, the provisions of the last part of Article 98 being observed, in the respective case, with regard to the date of presentation.

Presentation shall be proved by a notation on the bill itself, signed by the drawer, or, in its absence, by deed made before a Notary or licensed broker (corredor).

ARTICLE 83. The drawer may specify as the place of payment the domicile or the residence of a third party, in the same place of domicile of the drawee or elsewhere. If the bill contains no indication that payment shall be made by the drawee himself at the domicile or residence of the third party designated therein, it shall be understood that payment will be made by the latter, who, in that case, shall simply have the character of domicile.

The drawer may also specify his own domicile or residence for the payment of the bill, even though the same be located in a place different from that of the drawee.

ARTICLE 84. The drawer and any other obligor may indicate in the bill the name of one or more persons from whom the acceptance and payment of the same should be demanded, or only the payment, on default of the drawee, provided they have their domicile or residence in the place specified in the bill for its payment, or where no place is designated, in the same place as the domicile of the drawee.

ARTICLE 85. The power to act in the name and for account of another does not include that of obligating him relative to instruments of exchange, except as provided for in the power-of-attorney or declaration referred to in Article 9.

Administrators or managers of companies or mercantile concerns are considered as authorized to sign bills of exchange in the name of such firms, by virtue of their appointment. The limitations of such authorization shall be those stated in the respective by-laws of said companies.

ARTICLE 86. If the drawer cannot or is unable to write, another person may do so at his request, in attestation of which his licensed broker, a notary or any other official who is empowered to attest, will also sign.

ARTICLE 87. The drawer is responsible for the acceptance and payment of the bill; and clause relieving him from such responsibility shall be considered as not written.

ARTICLE 88. A bill of exchange issued to bearer shall not take effect as such, the ruling contained in Article 14 being applicable thereto. If issued in the alternative to bearer or in favor of a given person, the words "to bearer" shall be considered as not inserted.

ARTICLE 89. Insertion of the words "documents against acceptance" or "documents against payment" or the markings "D/A" or "D/P" in the text of a bill of exchange which is accompanied by documents representative or merchandise obliges the holder of the bill to withhold delivery of the documents until the acceptance or the payment of the bill.

ARTICLE 90. The endorsement for ownership of a bill of exchange obligates the endorser jointly with the other parties responsible for the amount of the bill, the provisions of the final paragraph of Article 34 being abided by, in the respective case.

ARTICLE 91. The bill of exchange must be presented for acceptance at the place and at the address designated therein for such purpose. Where no address or place is given, presentation shall be made at the domicile or the residence of the drawee.

Where several places are mentioned in the bill for its acceptance, it shall be understood that the holder may present it at any one of them.

ARTICLE 92. If, in accordance with Article 84, the bill of exchange contains indication of other persons to whom, on default of the drawer, the acceptance should be required, the holder, after protest with respect to those who refuse acceptance, shall demand acceptance from the other persons mentioned.

The holder who fails to fulfill the aforementioned obligations shall lose his action at law or exchange action for failure of acceptance.

ARTICLE 93. Bills of exchange payable at a given time after sight must be presented for acceptance within six months following their date. Any of the obligors may shorten this term, stating so on the bill. In the same manner, the drawer may, also, extend it, and forbid presentation of the draft before the time so determined.

The holder who fails to present the draft within the legal term of that stipulated by any of the obligors shall lose the exchange action respectively against all the obligors or against the obligor who may have designated a term for acceptance and against those subsequent to him.

ARTICLE 94. The presentation of bills of exchange drawn at a fixed date or at a certain period from their date shall be optional, unless the drawer has made it obligatory by specifying a given period for presentation, expressly stating this condition in the bill. The drawer may likewise forbid presentation before a given time, so stating in the draft.

Where presentation of the bill of exchange is optional, the holder may present it not later than the last working day prior to its maturity.

ARTICLE 95. If the drawer has specified in the bill of exchange a place of payment different from that in which the drawee is domiciled, the acceptor must state in the acceptance the name of the person who must pay it. In default of such indication, the acceptor himself shall be obliged to meet same at the place designated for its payment.

ARTICLE 96. If the bill of exchange is payable at the domicile of the drawee, such drawee may, upon accepting it, indicate within the same place, an address where the draft should be presented for payment, unless the drawer has specified one.

ARTICLE 97. Acceptance must be stated in the draft itself, being expressed by the words "I accept" or their equivalent and the signature of the drawee. Nevertheless, his signature alone placed on the bill of exchange is sufficient to consider the acceptance effected.

ARTICLE 98. Only when a bill of exchange is payable at a certain term from sight or, by virtue of special specification, it must be presented for acceptance within a given time, shall the statement of its date be indispensable for the validity of the acceptance, but if the acceptor omits it the holder may state it.

ARTICLE 99. The acceptance must be unconditional, but it may be limited to an amount less than that of the bill. Any other change made by the acceptor shall be equivalent to a denial of acceptance. The drawee, however, shall remain obligated in the terms of his acceptance.

ARTICLE 100. An acceptance which the drawee crosses out before returning the bill of exchange shall be considered as refused.

ARTICLE 101. Acceptance of a bill of exchange obligates the acceptor to pay it at maturity, even though the drawer may have become bankrupt prior to the acceptance.

The acceptor is obligated collaterally with the drawer; but he has no exchange action against such drawer or the other signers of the bill of exchange.

ARTICLE 102. A bill of exchange not accepted by the drawee may be accepted by intervention, after the respective period.

ARTICLE 103. The holder is obliged to permit the acceptance by intervention by the persons mentioned in Article 92.

It is optional for him to permit or refuse the acceptance by intervention of the drawee who did not accept, of any other person already obligated on the same bill of exchange, or a third party.

ARTICLE 104. If the person who accepts by intervention fails to designate the person in whose favor he does so, it will be understood that he intervenes for the drawer, even though the recommendation has been made by an endorser.

ARTICLE 105. Acceptance by intervention extinguishes the exchange action for lack of acceptance against the person in whose favor it is made, and against subsequent endorsers and their "avalistas" (See footnote [5]).

ARTICLE 106. The acceptor by intervention is obligated in favor of the holder nd to signers subsequent to the person for whom he intervenes.

ARTICLE 107. The acceptor by intervention must give immediate notice of his intervention to the person for whom he has made it. Said person, the endorsers who precede him, the drawer, and the "avalistas", or of any of them may, in all cases, notwithstanding the intervention, require the holder to receive payment of the bill and deliver it to them.

ARTICLE 108. The provisions of Articles 95 to 100 are applicable to the acceptance by intervention.

"AVAL"--ENDORSEMENTS

ARTICLE 109. Through an "aval", payment of a bill of exchange, in whole or in part, is guaranteed.

ARTICLE 110. Any of the signers of a bill of exchange or any person who has not intervened in it may give an "aval".

ARTICLE 111. The "aval" must be stated in the bill itself or on a paper attached thereto. It shall be expressed by the words "por aval" or equivalent wording, and must bear the signature of the person who gives it. A signature alone placed on the bill, to which no other significance can be attributed, shall be considered as an "aval".

ARTICLE 112. In the absence of mention of the amount, the "aval" shall be deemed to guarantee the entire amount of the draft.

ARTICLE 113. The "aval" must indicate the person for whom it is given. In the absence of such indication, it shall be deemed to guarantee the obligations of the acceptor and, where there is none those of the drawer.

ARTICLE 114. The "avalista" shall be jointly obligated with the person whose signature he has guaranteed, and his obligation is valid even though the obligation guaranteed may, for any reason, be null.

ARTICLE 115. The guarantor who pays the bill has an exchange action against the "avalado"(1) and the persons obligated towards him by virtue of the draft.

ARTICLE 116. Action against the "avalista"(1) shall be subject to the same terms and conditions as those governing action against the "avalado"(1).

ARTICLE 117. Where a bill does not contain the words "single" (unica) or "sold copy", the taker has the right to have the drawer issue one or more identical duplicates, paying all the expenses incurred thereby. Such duplicates must contain in their text the words "first", "second" and so on successively, according to the order of their issuance. In the absence of this indication, each duplicate shall be considered as a separate bill of exchange.

Any other holder may exercise the same right, through the immediately preceding endorser, who, in turn, must apply to his predecessor, and so on, successively, back to the drawer.

Endorsers and "avalistas" are obliged to place their respective signatures on each of the duplicates of the bill.

ARTICLE 118. Payment of one of the duplicates frees all the others from payment, but the drawee shall remain obligated on each duplicate he accepts.

The endorser who may have endorsed the duplicates to different persons, as well as subsequent endorsers, shall remain obligated by their endorsements, as if they were made on distinct bills of exchange.

ARTICLE 119. The person who has forwarded one of the duplicates for its acceptance shall mention in the others the name and domicile of the person in whose possession the first may be found; the omission of such mention shall not invalidate the bill of exchange.

A holder of the duplicate sent for acceptance is authorized, and furthermore, has the obligation, to present it at the proper time, and under proper circumstances, to protest it; if at its maturity, the draft has not been demanded by anyone having the right to it, he shall present it for collection, to the end that the amount of the draft be deposited in a bank, or, in its absence, with a commercial house, protesting the bill of exchange for non-payment if the drawee fails to make the deposit. He is likewise under the obligation to deliver the copy sent to him for acceptance and the notes of protest, if the occasion arises, to the legitimate holder of the other duplicate which contains the mention of the person to whom the "first" was sent.

ARTICLE 120. If the holder refuses to make delivery, the legitimate holder cannot exercise his action until he has caused a note of protest to be made:

ARTICLE 121. When two or more holders of the other duplicates present themselves to the holder of the original forwarded for acceptance, demanding delivery of same, he shall deliver it to the first demanding it; if several present themselves at the same time, he shall give preference to the holder of the duplicate bearing the lowest ordinal number.

ARTICLE 122. The holder of a bill of exchange has the right to make copies thereof. They must be exact reproductions of the original with the endorsements and all the statements which it contains, and indicating where that which is copied ceases.

ARTICLE 123. The autographed signatures of the acceptor, endorsers and "availistas" made on the copy, obligate the signers as if written on the original.

ARTICLE 124. The person who has sent the original for its acceptance, or has deposited it, must state on the copies the name and domicile of the person in whose possession the said original may be found. The omission of such statement shall not invalidate original endorsements placed on the copies.

The holder of the original is obligated to deliver it to the legitimate holder of the copy. The holder who, without the original, desires to exercise his rights against the signers of the copy, must prove by means of protest that the original was not delivered at his request.

ARTICLE 125. If two or more legitimate bearers of copies present themselves to the holder of the original, the latter shall act in the manner provided for in Article 121.

ARTICLE 126. A bill of exchange must be presented for payment at the place and at the address designated therein for such purpose, the provisions of Article 77 being observed in the respective case.

If no address is stated in the bill, it should be presented for payment:

ARTICLE 127. The draft must be presented for payment on the date of the maturity, the provisions of Article 81 being observed in the respective case.

ARTICLE 128. A sight draft must be presented for payment during the six months following its date. Any of the obligors may shorten this term, so stating in the bill. In like manner, the drawer may moreover extend it, nd prohibit its presentation before the time so determined.

ARTICLE 129. Payment of a bill of exchange must be made precisely against its delivery.

ARTICLE 130. The holder cannot refuse a partial payment, but he must retain the draft in his possession while it remains partially unpaid, noting thereon the amount collected and giving a separate receipt for the corresponding payments.

ARTICLE 131. The holder is not obliged to receive payment of a bill of exchange prior to its maturity.

The drawee who pays prior to maturity shall be responsible for the validity of the payment.

ARTICLE 132. If payment of the draft is not required at maturity, the drawee or any of the obligors, after the term for protest has elapsed, is entitled to deposit the amount of the draft in the bank of Mexico at the expense and risk of the holder, without obligation to give notice to the latter.

ARTICLE 133. If a bill of exchange is not paid by the drawee, the following may pay it by way of intervention, as follows:

A drawee who has not accepted as such may intervene as a third party, having preference over any other person intervening as a third party, except as provided for in Article 137.

ARTICLE 134. Payment by intervention shall be made in the note of protest of during the next succeeding working day, and, in order that it produce the effects provided for in this Part, the notary, licensed broker or political authority who executes the protest shall so state in the respective note or in a continuation thereof.

ARTICLE 135. Whoever pays by intervention shall indicate the person for whom he is active. In the absence of such indication, it shall be understood that he intervenes for the acceptor, and if there be none, for the drawer.

ARTICLE 136. The holder is obliged to deliver the bill of exchange to the intervener with a notation of the payment made, and said intervener may bring exchange action against the person for whom he paid and against obligors prior to the latter.

ARTICLE 137. If several persons appear offering their intervention as third parties, preference shall be given to the one whose intervention will free the largest number of those obligated on the bill of exchange.

ARTICLE 138. The holder of a bill of exchange cannot refuse payment by intervention while he keeps it in his possession. Should he refuse, he shall lose his rights against the person for whom the intervener offers the payment and against those obligated subsequently to said person.

ARTICLE 139. A bill of exchange shall be protested for total or partial failure of acceptance or payment, except as provided for in Article 141.

ARTICLE 140. The protest establishes authentically that a draft was presented at maturity and that the obligor failed to totally or partially accept or pay it. The protest may not be substituted by any other act, except by an express legal ruling.

ARTICLE 141. The drawer may exempt the holder from protesting a bill of exchange by inserting in it the words "without protest" or "without expenses" or other equivalent wording. Such clause does not exempt the holder from presenting the bill of exchange for acceptance or payment, nor, when the occasion arises, from giving notice on non-acceptance or non-payment to the obligors in reverse order.

In the case provided for in this article, proof of failure of presentation at the proper time falls on the person who makes it against the holder. If the holder, in spite of the clause, protests the draft, the expenses shall be for his account. Such clause when inserted by the holder or by an endorser shall be deemed as non-existent.

ARTICLE 142. Protest may be made through a notary or licensed broker, in the absence of either, the first political authority of the place may note the protest.

ARTICLE 143. Protest may be made for non-acceptance should be noted against the drawee and the alternate accepts (see Article 133) at the place and address specified for acceptance; and if no place is stated in the bill, then at the domicile or residence of the aforementioned parties.

Protest for non-payment should be made against the persons and at the places and addresses indicated in Article 216.

If the person against whom protest is made is not present, the proceedings shall be carried out with his employees, relatives or servants, or with any neighbor.

When the domicile or residence of the person against whom protest is to be made is unknown, such protest may be made at the address selected by the notary, broker or political authority who notes it.

ARTICLE 144. Protest for a non-acceptance must be made within the two working days next succeeding the day of its presentation, but always before the date of its maturity.

Protest for non-payment must be made within the two working days next succeeding the date of maturity.

ARTICLE 145. Protest for non-acceptance dispenses with presentation for payment and protest for non-payment.

ARTICLE 146. Sight drafts shall only be protested for non-payment. The same applies to drafts whose presentation for acceptance is optional, if they have not been presented within the term fixed in the last paragraph of Article 94.

ARTICLE 147. If the drawee is declared in bankruptcy or has made an assignment for benefit of creditors prior to his acceptance of the draft, or subsequent thereto but prior to its maturity, such draft must be protested for non-payment; the protest may be noted at any time between the date of the inception of the assignment and the day when it should be protested, according to law, for non-acceptance or non-payment.

ARTICLE 148. Protest shall be noted on the draft itself or on a paper attached thereto. Furthermore, the notary, broker or authority who makes it shall make notation thereof, in which shall appear:

ARTICLE 149. The notary, broker or authority who noted the protest shall retain the draft in his possession all the day the protest is made and the day following, the drawee having the right, during this time, to appear and pay the amount of the draft, plus interest after maturity, and cost of the proceedings.

ARTICLE 150. An action at law (commonly called an exchange action because they relate to action at law dealing with exchange documents) may be brought:

In the cases provided for in sections 1 and 3, the action may be brought prior to maturity of the total amount of the draft, or, in the case oF partial acceptance, for the amount which is not accepted.

ARTICLE 151. The action shall be direct or in reverse order; direct when it is brought against the acceptor or his "avalistas", in reverse order when brought against any other obligor.

ARTICLE 152. By means of the exchange action the last holder of a bill of exchange may claim the payment:

If the bill be not yet matured, the discount, calculated at the legal rate of interest, shall be deducted from its value.

ARTICLE 153. One obligated in reverse order who pays the draft is entitled to claim, by means of exchange action:

ARTICLE 154. The acceptor, drawer, endorsers and "avalistas"(1) shall be jointly responsible for the charges referred to in the two preceding articles.

The last holder of the draft may exercise exchange action against all the obligors at the same time, or against the others, and without obligation to follow the order of the signatures on the bill. The same right shall be enjoyed by any obligor who has paid the bill, against prior signers and the acceptor and his "availistas".

ARTICLE 155. With the exception of those in whose presence the protest of bills of exchange may have been made, for non-acceptance as well as non-payment, all those who have intervened in the bills shall be notified by means of notices forwarded to them by the notary, broker or first political authority who authorizes the protests.

Those interested in the bills of exchange who reside in the same place where the protest is noted shall be notified in the same manner and on the day following noting of protest. To those residing outside the place, the notice shall be forwarded by the next mail, registered, and to the addresses given by such persons in the bill of exchange.

The person who noted the protest shall record that it has been notified in the manner and terms stipulated in this article.

The failure to observe the foregoing obligations shall render the responsible party liable for the losses and damages that the omission or delay in advising them may cause to those obligated secondarily, provided they have taken care to record their addresses on the document.

The last holder of the bill incurs the same liability if he fails to give the notices referred to in Article 141.

ARTICLE 156. Any of the endorsers as well as the drawer of a protested draft, as soon as the protest is brought to their notice, may require the holder to receive payment of the bill of exchange, together with the amount of the legitimate expenses, and surrender to them the bill of exchange and a note of such expenses.

If both the drawer and the endorsers appear at the same time to make reimbursement, preference shall be given to the drawer, and if only the endorsers appear, to the one of prior date.

ARTICLE 157. The last holder of a duly protested bill of exchange, as well as the person obligated secondarily who may have paid it, may collect what the other signers owe them on account of it:

In both cases, the corresponding notice or bill of exchange must go accompanied by the original draft, with the annotation of the respective receipt, the affidavit or authorized copy of the act of protest, and a statement of interest and expenses, including, when same is applicable, the cost of re-exchange.

ARTICLE 158. For the purposes of the provisions of the foregoing article, section 4 of Article 152 and section 4 of Article 153, the cost of re-exchange shall be calculated at the current rate on the day of the protest or payment, at the place made or where it should have been made.

ARTICLE 159. All the persons whose names appear on a bill of exchange, signing for the same act, shall be jointly responsible for the obligations arising therefrom. Payment of the draft by one of the signers in the case referred to in this article, only gives such signer the rights and actions of a joint debtor against the other co-obligors; but the exchange actions which are applicable against the acceptor and prior obligors in reverse order and those which pertain to him, in accordance with Articles 168 and 169 against the endorser immediately preceding him or against the drawer remain available.

ARTICLE 160. The action of the last holder against the obligors in reverse order shall lapse:

ARTICLE 161. The action of the secondary obligor who pays the bill lapses against those obligated prior to himself in the same way:

In the cases considered by Article 157, the date of payment, for the purposes of section 2 of this article, shall be understood as the date of annotation of receipt which the paid bill of exchange should show, or in its absence, that of the notice or of the re-drawn bill to which that provision refers.

ARTICLE 162. The commencement of the action within the term fixed in section 5 of Article 160 and section 2 of Article 161 shall not prevent its lapsing unless the respective complaint shall have been presented within the same term, even though such complaint may have been filed before an incompetent judge.

ARTICLE 163. The action of any holder of a bill against the acceptor by intervenor and the acceptor of "domiciled bills" shall lapse for not having duly noted the protest for non-payment or, in the case specified in Article 141, for not having presented the bill for payment to the resident endorser or acceptor by intervention within the two working days following the date of maturity.

ARTICLE 164. The periods governing the lapsing of the action may not be suspended except in the case of force majeure, and can never be interrupted.

ARTICLE 165. An action (exchange action) lapses in three years, reckoned:

ARTICLE 166. The causes which interrupt prescriptions (Statute of Limitation) in regard to one of the exchange debtors shall not interrupt it as regards the others, except in the case of signatories to the same act who, in consequence, are jointly obligated.

The complaint interrupts prescription, even though it may have been filed before an incompetent judge.

ARTICLE 167. The action against any one of the signers of a bill is executive for its amount, interest and accessory expenses, without it being necessary that the defendant previously admit his signature.

Only the exceptions and defense enumerated in Article 8 may be raised in opposition thereto.

ARTICLE 168. If an action is derived from the transaction which gave rise to the issue or transfer of a bill of exchange, such action shall subsist, unless it be proved that there has been novation.

Such action should be started by restoring the bill to the defendant and is not applicable until after the bill of exchange has been presented without result for its acceptance or payment in accordance with Articles 91 to 94 and 126 to 128. In order to prove such facts, and except as provided for in the following paragraph, any other means of proof may substitute the protest.

If the action has become extinguished due to prescription or lapse, the holder of the bill may only exercise his primary causes of action if he has executed the acts required to preserve for the defendant the actions pertaining to him in virtue of the bill.

ARTICLE 169. Once the reverse action has been extinguished as against the drawer due to lapse, the holder of the bill who lacks a primary cause of action against him, or action or primary action against the other signatories, may exact from the drawer the sum by which he has enriched himself to the holder's damage.

Such action is prescribed in one year, reckoned from the day of lapsing of the action (exchange action).

ARTICLE 170. A promissory note must contain:

ARTICLE 171. Where a promissory note fails to state the date of its maturity, it shall be considered as payable at sight; if no place of payment is mentioned, such place shall be understood to be that of the domicile of the signer.

ARTICLE 172. Promissory notes which are collectible a given time after sight must be presented within six months following their date. Such presentation alone shall have the effect of fixing the date of maturity and shall be proved in accordance with the terms of the last paragraph of Article 82.

If the signer omits the date of sight, the holder may insert same.

ARTICLE 173. A domiciled promissory note shall be presented for payment to the person named as resident, or, failing such, to the signer himself, at the place given as the domicile.

Protest for non-payment should be noted at the domicile stated in the document, and its omission, when the person who should make the payment is not the signer himself, shall cause lapsing of the actions which, on a promissory note, pertain to the holder of the note against the endorsers and the signers.

Except in this case, the holder is not obliged, in order to preserve his actions and rights against the signer, either to present the promissory note at maturity or to protest it for non-payment.

ARTICLE 174. The last paragraph of Article 77, Articles 79, 80, 81, 85, 86, 88, 90, 109 to 116, 126 to 132, 139, 140, 142, the second, third and fourth paragraphs of Article 143, the second and third paragraphs of Articles 151 to 162 and 164 to 169 are, insofar as pertinent, applicable to promissory notes.

For the purposes of Article 152, the amount of a promissory note shall also include past due interest; the discount on a promissory note which is not yet due shall be calculated at the rate of interest agreed upon in it, or, in its absence, at the legal rate; and interest after maturity shall be computed at the rate stipulated therefor; in the absence of such stipulation, at the ordinary rate of interest stipulated in the document, and in the absence of both, at the legal rate.

The signer of a promissory note shall be considered as the acceptor for the effects of the provisions hereinbefore enumerated, except in the cases mentioned in Articles 168 and 169, in which he shall be considered as the drawer.

ARTICLE 175. A check may only be drawn on a bank. Documents which are drawn on other persons in the form of checks shall not take effect as credit instruments.

A check may only be issued by the person who, having funds available in a bank, is authorized by the latter to draw checks on it.

Such authorization shall be considered as extended by the fact that the banks furnishes the drawer with special forms for making out checks or credits him with a sum available as a sight or deposit account.

ARTICLE 176. A check must contain:

ARTICLE 177. For the purposes of sections 2 and 5 of the preceding article, and in the absence of special mention, the places of issue and of payment, respectively, shall be considered as those stated next to the name of the drawer or of the drawee.

If various places are mentioned, the first one written shall be considered, the others being deemed as not inserted.

If there is no indication of place, a check shall be considered as issued at the domicile of the maker and payable at that of the drawee, and if they both have establishments in different places, the check shall be considered as issued or payable at the principal establishment of the maker or of the drawee, respectively.

ARTICLE 178. A check shall in all cases be payable at sight. Any insertion to the contrary shall be considered as not made. A check presented for payment prior to the date stated as the date of its issuance shall be paid on the date it is presented for payment.

ARTICLE 179. A check may be nominative or to bearer.

A check issued for quantities over 5,000,000 (five million) pesos, must always be nominative. The latter amount, as well as the amount established in Article 32 of this Law, shall be updated on January 1 of each year, in the terms of Article 17-A of the Fiscal Code of the Federation, for the period elapsed since the month of December of the penultimate year until the month of December of the last year immediately preceding the year of updating.

A check which does not state in whose favor it is issued, as also one issued in favor of a given person but which contains the phrase "to bearer", shall be deemed as to the bearer.

A nominative check may be issued in favor of a third party, to the maker himself, or of a drawee. A check issued to or endorsed over to the drawee shall not be negotiable.

ARTICLE 180. A check must be presented for its payment to the address indicated thereon, in default of such indication, it must be presented at the principal establishment of the drawee in the place of payment.

ARTICLE 181. Checks must be presented for payment:

ARTICLE 182. Presentation of a check at the Clearing House shall have the same effect as direct presentation to the drawee.

ARTICLE 183. The maker is responsible for payment of a check. Any stipulation to the contrary shall be considered not made.

ARTICLE 184. The person who authorizes another to draw checks on him is obligated with the other, in the terms of the respective agreement, to meet same up to the amount of the sums held to the credit of the drawer, except where an express legal provision frees him from such obligation.

When, without just cause, a drawee holding sufficient funds of the maker refuses to pay a check, he shall indemnify the maker for the losses and damages caused to him. Under no circumstances shall the indemnity be less than 20 per cent of the amount of the check.

ARTICLE 185. The maker of a check cannot revoke it nor oppose its payment until the periods mentioned in Article 181 have elapsed. The opposition or revocation he may make contrary to the provisions of this article shall produce no effect as regards the drawee until after the expiration of the period for presentation.

ARTICLE 186. Even though a check has not been presented or protested, within the proper time, the drawer should pay it while he holds sufficient funds of the maker wherewith to do so.

ARTICLE 187. The supervening death or incapacity of the maker does not authorize the drawer to withhold payment of a check.

ARTICLE 188. The declaration that the maker has suspended payments, is in bankruptcy or failure, obliges the drawee to refuse payment from the time he receives notice thereof.

ARTICLE 189. The holder may refuse to take partial payment; but if he accepts it, he must note it, together with his signature, on the check and give a receipt to the drawee for the amount the latter delivered to him.

ARTICLE 190. A check presentation of which is timely and which is not paid by the drawee, must be protested not later than the second working day following the period for presentation, in the same manner as a bill of exchange at sight.

In the case of a partial payment, the protest must be made for the unpaid portion.

If a check is presented at the Clearing House and the drawee refuses total or partial payment, the Clearing House shall certify such circumstance on the check and that the document was opportunely presented. Such annotation shall constitute the protest.

The annotations which the drawee places on the check itself to the effect that it was presented within the proper time and not paid in full or partially, shall have the same effect as the protest.

In the cases referred to in the two preceding paragraphs, the holder of the check must give notice of the failure of payment to all the signers of the document.

ARTICLE 191. Failure to present or protest a check in the manner and within the periods specified in this Chapter exterminates:

ARTICLE 192. The actions referred to in the preceding article shall prescribe in six months, reckoned:

ARTICLE 193. (Amended by Decree of December 30, 1983, published in the Diario Oficial of January 13, 1984) The maker of a check which is presented within the proper time and not paid, for reasons imputable to such maker, shall indemnify the holder for the losses and damages caused to him thereby. Under no circumstances shall such indemnity be less than 20 per cent of the amount of the check.

ARTICLE 194. Alteration of the amount for which a check is drawn or forgery of the maker's signature cannot be invoked by the latter to oppose the payment made the drawee if the drawer is responsible for the same through any fault of his or of his agents, representatives or employees.

Where a check appears as issued on the forms furnished by the drawee, to the maker, the latter may only object to the payment if the alteration or forgery is notorious or if, having lost the blank check or check book, he has given opportune notice of such loss to the drawee.

Any agreement contrary to the provisions of this article shall be null.

ARTICLE 195. The person who pays a credit instrument by check, making mention thereof on the check, shall be considered as the depositary of the instrument while the check is unpaid, and during the legal period for presentation, non-payment or partial payment of the credit instrument, and once the check has been protested, the holder shall be entitled to restitution of the instrument and payment of the expenses of collection and protest of the check; and, subject to the corresponding protest, he may exercise the actions to which the unpaid instrument entitles him. If the depositary of the instrument refuses to surrender it, on being required to do so before a judge, notary, broker, or the first political authority of the place, this fact shall be established in the respective affidavit, and this will have the same effect as a protest for the prespecified for the protest of instruments of credit in payment of which checks have been received, shall commence to run from the date on which the latter are legally

protested, all the actions which correspond to the holder of the instrument being preserved meanwhile.

ARTICLE 196. Articles 78, 81, 85, 86, 90, 109 to 116, 129, 142, the second, third and fourth paragraphs of Articles 143, the second and third paragraphs of Article 144, Articles 148, 149, sections 2 and 3 of Article 150, Articles 151 to 156, 158, 159, 164, and 166 to 169 are applicable to checks, insofar as pertinent.

ARTICLE 197. A check which the maker or the holder has crossed with two parallel lines across the face may only be collected through a bank.

If between the crossed lines of a check, there does not appear the name of the bank that must collect it, the crossing is general, but special if the name of a specific bank appears between them. In the latter case, the check can only be paid to the bank especially designated, or to the bank to whom the former bank may endorse it for collection.

A general crossing may be made into a special one, but the second cannot be changed into the first. Neither may the crossing of a check nor the name of the bank therein written be erased. Changes or suppressions made in violation of this article shall be deemed not made.

The drawee who pays a crossed check other than as stipulated in this article, shall be responsible for the payment made irregularly.

ARTICLE 198. The drawer or holder may forbid that a check be paid in cash by inserting therein the words "to be credited on account". In this case, the check may be deposited in any credit institution, which may only credit the amount of the check to the account which it keeps or will open in favor of the beneficiary. The check shall no longer be negotiable after the words "to be credited on account" have been inserted. These words cannot be erased.

The drawee who pays a check in any other manner shall be responsible for the payment made irregularly.

ARTICLE 199. The maker may require the drawee to certify a check before it is issued, by stating that he holds sufficient funds to meet it.

The certification cannot be partial nor made on checks to bearer.

A certified check is not negotiable.

The certification produces the same effect as the acceptance of a bill of exchange.

The insertion in a check of the words "accepto" (I accept), "visto" (approved), "bueno" (good), or equivalent words, signed by the drawee, or simply the signature of the latter, is equivalent to a certification.

The maker may revoke a certified check, provided he returns it to the drawee for its cancellation.

ARTICLE 200. Only credit institutions may issue cashier's checks drawn on their branches. Such checks, in order to be valid, must be nominative and non-negotiable.

ARTICLE 201. Checks which are not negotiable because of the insertion of the respective clause, or because the law gives them this character, may only be endorsed to a credit institution for collection.

ARTICLE 202. Travellers' checks are to be issued by their makers, drawn on themselves, and payable at their head office or by their branches or correspondents located in the Republic or abroad. Travellers' checks may be put in circulation by the makers or by their branches or correspondents authorized thereby for such purpose.

ARTICLE 203. Travellers' checks shall necessarily be nominative. Whoever pays such a check must verify the authenticity of the taker's signature, comparing it with the signature which is certified by the one who puts the checks in circulation.

ARTICLE 204. The holder of a travellers' check may present it for payment to any of the branches or correspondents shown on the list furnished for such purpose by the maker, and at any time prior to the running out or the period for prescription.

ARTICLE 205. Failure to immediately pay a travellers' check shall entitle the holder to exact the return the amount of the check from the maker and indemnify for losses and damages, which in no case shall be less than 20% of the amount of the unpaid document.

ARTICLE 206. The correspondent who puts travellers' checks into circulation, shall have the same obligations as an endorser and he must refund to the taker the amount of any unused checks returned by the latter.

ARTICLE 207. Actions against the drawee who certifies a check shall be prescribed 6 months after the date of expiration of the term for presentation. Prescription, in this case, shall be available to the maker.

Actions against the one issuing travellers' checks or who puts them in circulation shall be prescribed in one year from the date the checks are placed in circulation.

ARTICLE 208. Corporations may issue debentures which represent the individual participation of the holders in a collective credit established against the issuing corporation.

The debentures shall be personal property, even though they may be guaranteed by a mortgage.

ARTICLE 209. The debentures shall be nominative, and must be issued in denominations of $100 or multiples thereof, except in the case of debentures which are to be registered with the National Registry of Securities and Intermediaries, and which shall be placed abroad amongst the investing public at large, in which case they may be issued to the bearer. The debenture certificates shall have coupons attached to them.

The debentures shall give equal rights to their holders, within each series. Any debenture holder may petition the nullity of any issue made in violation of the provisions of this paragraph.

ARTICLE 210. The debentures must contain:

ARTICLE 210.bis. Corporation (sociedades anonimas) that wish to issue debentures or bonds which are convertible into shares of stock shall be subject to the following requirements:

ARTICLE 211. No agreement may be made providing for the amortization of the debentures by lot at a sum in excess of their nominal value, or by means of premiums or prizes, unless the object of the same be to compensate debenture holders for a premature redemption of the whole or a part of the issue, or where the interest to be paid to all the debenture holders exceeds 4% per annum and the periodical amount which must be devoted to amortization of the debentures and the payment of interest be the same during all the time stipulated for said amortization.

Any one of the debenture holders may petition the nullity of an issue made in violation of the provisions of this article.

ARTICLE 212. No issue or debentures may exceed the value of the net assets of the issuing company shown on the balance sheet referred to in section 2 of Article 210, unless the issue represents the value or price of property which the issuing company has contracted to purchase or construct.

The issuing company cannot reduce its capital except in proportion to the reimbursement made on debentures issued by it, neither may it change its object, domicile or name, without the consent of the General Meeting of Debenture Holders.

Companies which issue debentures must publish their balance sheet annually, certified by a Public Accountant. Such publication shall be made in the "Diario Oficial" of the Federation.

ARTICLE 213. The issue shall be made by expression of the decision of the issuing company in a deed executed before a Notary Public and registered in the Public Registry of Property which corresponds to the location of the property, if a mortgage is executed to guarantee the issue, and in the Commercial Registry of the domicile of the issuing company in all cases. The deed of issue must contain:

Where the debentures are offered in sale to the public, the announcements or propaganda must contain the aforementioned data. Violation of the provisions of this paragraph shall render the persons responsible therefor jointly liable for losses and damages.

ARTICLE 214. Where securities or properties are pledged in guarantee of an issue, the pledge shall be constituted within the terms of Part 6 of Chapter IV, Title II of this Law. Where a mortgage is executed, such mortgage shall be understood as covering, without the necessity of additional annotations or registrations in the Public Registry, all those balances which eventually, within the limits of the total credit represented by the issue, remain unpaid on account of the debentures or coupons not paid or amortized in the manner stipulated. The pledge given or ortgage executed to guarantee an issue may only be cancelled, totally or partially, according to the stipulations of the deed of issue, when such total or partial cancellation of the guaranteed debentures is effected with the intervention of the representative in common of all the debenture holders.

ARTICLE 215. If the issue is made to cover a credit already existing against the issuing company, the representative in common shall sign the debentures and authorize their delivery to the creditor, once the cancellation of the instruments, documents, registrations or guarantees which are replaced by the issue is duly established. When the issue is made in representation of a new loan contracted by the issuing company, the representative in common shall sign the debentures and authorize their delivery, once it is established that the issuing company has received the respective funds or that an irrevocable credit in its favor, covering the amount of the issue, has been opened in a bank.

The amount of the issue, for the purposes of this article, shall be the nominal value of all the debentures of said issue, less the deductions expressly stipulated in the deed of issue on account of premiums or commissions for floating the issue and, in the respective case, on account of a rate of issue which is less than the nominal value of the debentures.

ARTICLE 216. To represent the debenture holders, jointly, there shall be designated a representative in common, who does not need to be a holder himself. The responsibility of a representative in common shall be personal and shall be borne by the individual designated for this purpose or by the ordinary representatives of the bank or the finance company named for the responsibility. The representative in common shall have the authority to execute judicial powers-of-attorney.

The representative in common may resign only for serious reasons verified by the Judge of First Instance of the domicile of the issuing company, and may be removed at any time by the debenture holders, any stipulation to the contrary being null.

In default of the representative in common, he shall be replaced, if same is a bank, by another bank designated by the debenture holders; and in any other case, by the person or institution designated for such purpose by said holders. While the debenture holders are naming a new representative in common, an institution authorized to act as trustee shall be designated as provisional representatives, such appointment being made on the petition of the debtor or of any of the debenture holders, by the Judge of the First Instance of the domicile of the issuing company.

The institution designated as provisional representative shall issue, within a term not exceeding fifteen days from the date of accepting the responsibility, a call for the holding of a meeting of debenture holders. Where it is not possible to designate a trust company in the manner set forth in the preceding paragraph or the one designated refuses to accept the responsibility, the judge himself shall issue the aforementioned call or the meeting.

ARTICLE 217. The representative in common with the debenture holders shall act as their attorney-in-fact, with the following obligations and faculties, in addition to those expressly stated in the deed of issue:

ARTICLE 218. The General Meeting of Debenture Holders shall represent the whole of them, and its decisions, taken in the terms of this law and in accordance with the relative stipulations of the deed of issue, shall be valid with respect to all the holders of debentures, even those who are absent or who dissent.

The meeting shall assemble provided it is convened by the representative in common, or by the judge in the case provided for in the following paragraph.

Debenture holders who represent at least 10 per cent of the bonds or debentures in circulation may request the representative in common to call a general meeting, specifying in their petition the matters to be dealt with at such meeting. The representative in common shall issue the call for the meeting to be held within one month following receipt of the request. If the representative in common does not comply with this obligation, the Judge of First Instance of the domicile of the issuing company shall at the request of the petitioning debenture holders, issue the call for the holding of the meeting.

Notices of meetings of debenture holders shall be published once, at least, in the "Diario Oficial" of the Federation, and in one of the newspapers of widest circulation in the domicile of the issuing company, at least ten days prior to the date on which the meeting is to be held. The call shall specify the matters to be dealt with at the meeting.

ARTICLE 219. In order that the meetings of debenture holders may be considered as legally installed by virtue of the first call, at least one-half plus one of the debentures in circulation must be represented thereat, and its decisions shall be valid when approved by a majority of votes, except in the cases provided for in the following article. A meeting assembled by virtue of a second call shall be considered as legally installed irrespective of the number of debentures represented thereat.

ARTICLE 220. At least 75% of the debentures in circulation must be presented in the assembly, and the decisions taken approved by half plus one of the computable votes at the meeting:

If the meeting assembles by virtue of a second call, its decisions shall be valid whatever be the number of debentures represented thereat.

Any agreement stipulating requisites for attendance or majority less than those specified in this and the foregoing article is null.

ARTICLE 221. In order to attend meetings, debenture holders must deposit their debentures, or the certificates of deposit issued in regard thereto by a bank, at the place designated in the call for the meeting, at least one day prior to the date on which the meeting is to be held. The debenture holders may be represented at the meeting by an attorney-in-fact accredited by a proxy in the form of a letter.

The duly accredited directors of the issuing company may attend the meetings of debenture holders.

Under no circumstances may the debentures which have not been put in circulation in accordance with Article 215, nor those required by the issuing company, be represented at the meeting.

Minutes of the meeting shall be drawn up and signed by whoever may have acted as chairman and secretary. To the minutes there shall be attached an attendance list signed by those attending and by the scrutineers. The minutes, securities, books of account and other data and documents referring to the issue and the action taken in the meetings or by the representative in common shall be conserved by the latter and may, at all times, be consulted by the debenture holders, who are entitled to have the common representative issue them at their own expense certified copies of the aforesaid documents.

The meeting shall be presided over by the representative in common or, in his absence, by the judge, in the case of Article 218, and in it the debenture holders shall be entitled to as many votes as correspond to them by virtue of the debentures which they possess, counting one vote for each debenture of the least denomination issued.

Insofar as not provided for in this Law or in the deed of issue, the provisions of the Commercial Code with respect to General Meetings of stock holders of corporations shall apply to the General Meeting of Debenture Holders.

ARTICLE 222. When the deed of issue stipulates that the debentures shall be redeemed by drawings, such drawings shall be made before a notary, with the assistance of the representative in common and the directors of the company authorized for such purpose. The company shall publish in the "Diario Oficial" of the Federation, and in one of the newspapers of widest circulation in its domicile, a list of the debentures shown, with the date necessary for their identification, and stating the place where and the date when payment shall be made. The debentures drawn shall cease to bear interest from the date of the drawing, provided the company deposits in a bank, the amount necessary to cover their payment. Such deposit must be made within one month following the date of the drawing, and may not be withdrawn by the company until ninety days after the date specified for commencing payment of the debentures drawn. The date on which payment of the debentures shall be commenced shall be fixed specifically within the month following the date of the drawing.

ARTICLE 223. Holders of debentures may individually exercise the actions which correspond to them:

The individual actions of the debenture holders within the terms of sections 1, 2 and 3 of this article shall not be lawful when there is another action with the same object in process, or begun by the representative in common, or when said actions are incompatible with any resolution duly approved by the General Meeting of Debenture Holders.

ARTICLE 224. The nullity of the issue, in the case referred to in Articles 209 to 211, shall have as its sole object the making of the amounts paid by the debenture holders payable at once.

ARTICLE 225. In case of bankruptcy, or liquidation of the issuing company, the debentures shall only be considered in the liabilities for the sums already due and not paid, and for the amount which results from reducing the periodical payments which are due to mature to their present value at the nominal rate of interest stipulated in the issue.

ARTICLE 226. Except there by an agreement to the contrary, the issuing company shall pay the remuneration due to the representative in common, as also the expenses incurred by the exercise of the actions preservative of the rights of the debenture holders or to cash the debentures or the guarantees set aside therefor. The expenses incurred in calling and holding the meetings solicited by the debenture holders, in the case provided for in Article 218, shall be paid by the petitioners, if the meeting of debenture holders does not approve the decisions proposed by them.

ARTICLE 227. Actions for the collection of matured coupons or interest due on debentures shall be prescribed in three years from the date of maturity.

Actions for the collection of debentures shall be prescribed in five years from the date on which the periods stipulated for their amortization expire, or in the case of a drawing, from the date of the publication of the list referred to in Article 222.

ARTICLE 228. The last paragraph of Article 77, Articles 81, 90, 127, 130, 132, 139, 140, 142, 148, 149, 151 to 162, 164, 166 to 169, and the last paragraph of Article 174 are applicable to debentures and their coupons, insofar as pertinent.

ARTICLE 228.a. Participation certificates are credit instruments representing:

In the case of sub-paragraphs (b) and (c) the total right of the holders of certificates of each issue shall be equal to the percentage represented by the total nominal value of the issue at the time it is made, in relation to the commercial value of the corresponding properties, rights or securities fixed by experts' examination as provided for in Article 228h. In case the commercial value of the said properties, rights or securities, has gone down at the time of their adjudication or sale, without being less than the total nominal value of the issue, the adjudication or payment in case shall be made to the holders up to an amount equal to the nominal value of their certificates; and if the commercial value of the property held in trust is less than the total nominal value of the issue, they shall have the right to the application of the entire amount thereof or of the net amount received from the sale thereof.

ARTICLE 228.b. The certificates shall be movable property even though the properties in trust covered by the issue, be immovable ones.

Only credit institutions authorized to carry out trust operations in accordance with the provisions of the respective Law, may issue these credit instruments.

Certificates issued by the trust companies, stating the participation of the different co-owners in the properties, deeds or securities in their possession, shall have no effects as credit instruments and shall only be considered as corroboratory documents.

ARTICLE 228.c. Trusts may be set up on all kinds of industrial and mercantile concerns that are considered as economic units, for the purpose of the issue of participation certificates.

ARTICLE 228.d. Participation certificates shall be called ordinary or immovable, in accordance with whether the property in trust covered by the issue is movable or immovable.

ARTICLE 228.e. In the case of immovable participation certificates, the issuing concern may set up, in favor of the holders thereof, a right to the direct utilization of the immovable property in trust, the amount, reach and conditions of which shall be specified in the record of the corresponding issue.

ARTICLE 228.f. After obtaining the consent and approval of the general representative of the holders, in case there should be one, the issuing concern may reach an agreement and obtain a loan for the improvement and enlargement of the immovable properties covered by the issue, issuing "debt trust certificates" for that purpose.

The debt trust certificates shall be credit instruments against the corresponding trust. Their payment shall be preferential to the payment of the participation certificates of that trust.

ARTICLE 228.g. When the issuing concern is also authorized to carry out financial operations under the provisions of the respective law, it may guarantee that the holders of the certificates it issues a minimum return; that guarantee shall be given without implying any obligation for the trust department of said institution.

ARTICLE 228.h. The total nominal value of an issue of participation certificates shall be fixed in a report drawn up by the "Nacional Financiera, S. A." or by the National Urban Mortgage and Public Works Bank, depending on whether the properties in question are movable or immovable, after obtaining an expert's report upon the properties in trust covered by that issue.

The "Nacional Financiera" or the National Urban Mortgage and Public Works Bank, when drawing up the above mentioned report and fixing the total nominal value of the issue, shall take as a basis the commercial value of the properties, and in case of amortizable certificates they shall calculate a prudent margin of safety for the investment of the corresponding holders. The rules drawn up by such institutions shall be final.

ARTICLE 228.i. The certificates may be amortizable or not.

ARTICLE 228.j. The amortizable certificates shall give their holders, besides the right to a proportional part of the corresponding profits, the right to the refund of the nominal value of the instruments. In case the issuing trust company does not make the payment of the nominal value of the certificates when they mature, the holders thereof shall have the rights referred to in subparagraphs b) and c) of the last paragraph in Article 228a.

ARTICLE 228.k. In case of non-amortizable participation certificates the issuing concern is not at any time obliged to make the payments of the nominal value thereof to their holders. When the trust which served as a basis for the issue, terminates, and in accordance with the resolutions of the General Certificate Holders Meeting, the issuing concern shall proceed with the adjudication and sale of the properties in trust and the distribution of the net proceeds thereof, in accordance with the provisions of Article 228a.

ARTICLE 228.1. The certificates shall be nominative with coupons, and must be issued in series, in one hundred peso denominations or in multiples thereof.

The certificates shall grant the holders thereof equal rights; within each series.

Any holder may request the cancellation of an issue made without complying with the provisions of this paragraph.

ARTICLE 228.m. The issue shall be made after a unilateral declaration of intentions is made by the issuing concern contained in a public deed, which shall contain:

In case the certificates are offered for sale to the public, the notices or propaganda covering them shall contain the foregoing information. Those violating the provisions of this paragraph shall be jointly liable for any damage or prejudice arising therefrom.

ARTICLE 228.n. A participation certificate should contain:

ARTICLE 228.o. The terms and conditions of issues of participation certificates must be approved by the National Banking Commission, as well as the wording of the deeds of issue and of the certificates and of any notifications thereof. Furthermore, a representative of the National Banking Commission should take part in authorizing a deed of issuance or any modification thereof.

ARTICLE 228.p. When the deed of issue stipulates that the certificates shall be refunded by means of drawings, the procedure set forth in Article 222 of this Law shall be followed.

ARTICLE 228.q. A common representative, who does not necessarily have to be a certificate holder, shall be appointed to represent the whole of the certificate holders. The charge of common representative is a personal one and shall be carried out by the person appointed for that purpose or be the ordinary representatives of the credit institution or of the financial or trust company who may be named for the office. The common representative may grant judicial powers of attorney.

The provisions of Articles 216 and 226 of the Law shall govern the common representative of the certificate holders, in as far as applicable.

ARTICLE 228.r. The common representative of the certificate holders shall act as their head, with the following rights and obligations besides those expressly stated in the deed of issue:

ARTICLE 228.s. The general participation certificate holders meeting shall represent the holders as a whole and its decisions, taken in accordance with the provisions of this Law and the corresponding stipulations of the deed issue, shall be valid with regard to all holders, including the absent or dissident ones.

The provisions of Articles 218-221 of this Law are applicable to the general participations certificate holders meetings.

ARTICLE 228.t. The trust serving as a basis for the issue shall not be terminated while there are unpaid balances arising out of credits against the trust as a whole, certificates or participations in the profits.

ARTICLE 228.u. Articles 223 and 224 shall govern the rights of the certificate holders, in as far as applicable.

ARTICLE 228.v. Suits for the collection of the certificate coupons shall prescribe 3 years after the maturity thereof. Suits for the collection of amortizable certificates shall prescribe 5 years from the date of the expiration of the time limits stipulated for the amortization or, in case of drawings, from the date the list referred to in Article 222 is published.

In case of non-amortizable certificates, the prescription of suits for the collection in cash or by adjudication shall be governed by the rules or local law and the corresponding time limit shall begin to run from the date fixed by the general holders meeting in which the termination of the corresponding trust is made known.

The prescription shall operate in every case in favor of the funds of the Departments of Health and Public Welfare.

ARTICLE 229. The certificate of deposit verifies the ownership of merchandise of goods deposited in the Bonded warehouse by which it is issued, the pledge bond, the establishment of a pledge credit or merchandise or goods mentioned in the corresponding certificate of deposit.

Only the General Bonded Warehouses authorized by the General Law of Credit Institutions may issue these instruments.

The verifications, receipts or certificates issued by other persons or institutions to prove the deposit of goods or merchandise shall not produce effects as credit instruments.

ARTICLE 230. In the case of merchandise or goods separately designated the warehouses may issue a pledge bond in relation to each certificate of deposit. In the case of merchandise of goods designated generically, the Warehouses may issue, at the option of the depositor, multiple pledge bonds. When a certificate of deposit is issued with the express stipulation that it is non-negotiable, no pledge bond shall be issued in regard thereto.

If only one bond is issued, it must be attached to the certificate of deposit.

Except in the case of a non-negotiable certificate, the warehouse may not issue only one of the instruments.

ARTICLE 231. Both the certificate of deposit and the pledge bond must contain:

ARTICLE 232. The pledge bond should, furthermore, contain:

ARTICLE 233. When the pledge bond does not indicate the amount of the credit which it represents, it shall be understood that it represents the entire value of the goods deposited in favor of the holder in good faith, except the right of the holder of the certificate of deposit to claim the excess which the holder of the bond received over the real value of his credit.

When no rate of interest is mentioned, it shall be presumed that the bond has been discounted.

ARTICLE 234. Warehouses shall issue these instruments detaching them from books with stubs on which the same data shall be noted as in the documents issued, in accordance with the records kept by the Warehouses or the notice of the credit instituted which financed the first negotiation of the bond.

ARTICLE 235. When multiple pledge bonds are issued in respect to a certificate, the Warehouse must, from the moment they are issued, state in the bonds, the requisites referred to in sections 2 to 4 of Article 232, and in the certificate the issuance of the bonds with the aforesaid specifications.

ARTICLE 236. The pledge bond may only be negotiated the first time separately from the certificate of deposit when financed by the Warehouse which issued the documents or by a credit institution.

When a bond is negotiated for the first time, the requisites specified in sections 1 to 4 of Article 232 must be satisfied, if it be the case of a single bond, or the requisites specified in sections 1, 5 and 6 of said article, if it be the case of multiple bonds.

The annotations referred to in this article must be signed by the holder of the certificate and by the Warehouse or credit institution which financed the negotiation, both of whom shall be responsible for losses and damages caused by any commissions or inaccuracies in regard thereto.

The credit institution which finances the issue of a bond must give notice, in writing, of its financing to the Warehouse which issued the document.

ARTICLE 237. The multiple pledge bonds referred to in Article 230 shall be issued covering a total amount, divided into as many equal parts as there are bonds issued with respect to each certificate, it being stated in each bond that the credit of its rightful holder shall have, with respect to its collection, the order of preference indicated by the serial number of the bond itself.

ARTICLE 238. Certificates of deposit and pledge bonds must be issued in favor of a depositor, or to a third party.

ARTICLE 239. The legitimate holder of the certificate of deposit or of the pledge bond or bonds, respectively, shall have full dominion over the merchandise or goods deposited, and may take possession of them at any time upon delivering the corresponding certificate and the corresponding pledge bond or bonds, and by paying the amount due, respectively, the fiscal authorities and to the Warehouse.

ARTICLE 240. Only the person who holds the certificate of deposit has dominion over the goods deposited, but he cannot remove them except by paying the amounts owing to the Fiscal Authorities and to the Warehouse, and the deposit in said Warehouse of the amount covered by it of the respective pledge bond or bonds. He may, likewise, in the case of goods which permit easy division, and, under the responsibility of the Warehouse, remove a part of the goods deposited, paying the Warehouse, in exchange therefore a sum of money proportional to the amount of the debt represented by the relative pledge bond or bonds and the amount of the merchandise taken out, and paying the proportionate part of the amounts owning to the Fiscal Authorities and to the Warehouse. Under such circumstances, the Warehouse should make the corresponding annotations on the respective certificate and stub.

ARTICLE 241. Except where there is an agreement to the contrary, the legitimate holder of a non-negotiable certificate of deposit may dispose of all or a part of the merchandise or goods deposited, if they permit easy division, by means of delivery orders drawn on the Warehouse, in the respective case, on the proportional part corresponding to the lot whose disposal is referred to, unless there by an agreement to the contrary.

ARTICLE 242. The pledge bind which is not totally or partially paid within the proper time must be protested not later than the second working day following the date of maturity, in the same manner as a bill of exchange.

The protest must be carried out precisely at the Warehouse which issued the corresponding certificate of deposit, and against the holder at the time, even though neither his name nor address be known nor he be present at the act of protest.

The annotation which the Warehouse makes on the pledge bond or attached paper, that it was presented at maturity and not paid in full, shall have the same effect as a protest. In this case, the holder of the bond must give notice to all the signers of the document of its non-payment.

ARTICLE 243. the holder of a pledge bond protested in accordance with the foregoing article must, within 8 days following the date of the protest, petition the Warehouse to sell the deposited merchandise or goods at public auction.

ARTICLE 244. The proceeds from the sale of the merchandise or assets deposited shall be directly applied by the Warehouses in the following order:

The surplus shall be kept by the Warehouse at the disposal of the holder of the certificate of deposit.

ARTICLE 245. If the deposited goods are insured, the amount of the corresponding indemnity, in case of loss, shall be applied in the terms of the preceding article.

ARTICLE 246. The warehouses shall be considered as depositories of the amounts proceeding from the sale or withdrawal of the merchandise, or of the indemnification in the case of insured loss, which belong to the holders of pledged bonds and of certificates of deposit.

ARTICLE 247. The warehouses must state the amount paid on the bond with the proceeds from the sale of the deposited goods or with the delivery of the corresponding amounts which the warehouses houses keep in accordance with Article 246, on the bond itself, or an attached page. Whether or not the sale of the goods was carried out must also be stated. This notation shall serve as evidence in the filing of recourse suits.

ARTICLE 248. If the proceeds from the sale of the deposited goods or the amount of the sums which the Warehouses deliver to the holder of the pledge bond, in the cases of Articles 240 and 245, are not sufficient to totally cover the debt consigned on the bond, or if, for any reason, the warehouses do not carry out the auction or do not deliver the corresponding sums which they have received in accordance with Article 246, the bondholder may file a collection suit against the person who negotiated the bond in the first instance, separately from the certificate of deposit, and against the subsequent endorsers of the bond and the guarantors (avalistas). The parties obligated by way of recourse who shall have paid the bond shall have the same right against the preceding endorsers.

ARTICLE 249. Suits of the bondholding pledge against the endorsers and their guarantors (avalistas) shall lapse:

Notwithstanding the limitation of actions against the endorsers and their guarantors (avalistas), the pledge bondholder shall conserve action against whoever negotiated the bond in the first instance separately from the certificate and its guarantors.

ARTICLE 250. The actions derived from the certificate of deposit for the withdrawal of the merchandise shall be prescribed in 3 years from the expiration of the period specified for the deposit in the certificate.

Actions derived from the pledge bond shall be prescribed in 3 years reckoned from the date of maturity of the bond.

The actions derived from the certificate of deposit to recover, in the respective case, the amounts held by the warehouses in accordance with Article 246 shall be prescribed within the same period.

ARTICLE 251. Articles 81, 85, 86, 129, 131 and 167 are applicable to the certificates of deposit and pledge bond, insofar as pertinent.

Articles 90, 109-116, 127, 130, 142, 148, 149, 151-162, 164, 166, 168 and 169 are applicable to the pledge bond, insofar as pertinent.

For the purposes of Article 152, by the amount of the pledge bond shall be understood the unpaid amount of the debt therein mentioned, including past due interest; interest on extension shall be calculated at the rate stipulated therefore; in the absence of such stipulation, the rate of interest specified in the document; and where no such rate is stated, at the legal rate.

The holder who for the first time negotiates a pledge bond separately from the certificate of deposit shall be considered as an acceptor, for all the purposes of the provisions hereinbefore enumerated, except in the cases mentioned in Articles 168 and 169, in which he will be compared to a drawer.

ARTICLE 252. The capacity to issue instruments of credit in foreign countries or to execute any of the acts therein provided for shall be determined in accordance with the law of the country where the instrument is issued or the act is executed.

The Mexican Law shall govern the capacity of foreigners to issue instruments, or to execute any of the acts therein provided for, within the territory of the Republic.

ARTICLE 253. The essential conditions for the validity of a credit instrument issued in a foreign country, or the acts therein provided for, shall be determined by the law of the place where such instrument is issued or the act is executed.

Nevertheless, instruments which must be paid in Mexico shall be valid if they fulfill the requisites stipulated in the Mexican Law, even though they are irregular according to the law of the place where issued, or where any act was provided for in them.

ARTICLE 254. If it is not expressly stipulated that the act be governed by the Mexican Law, the obligations and rights derived from the issuance of an instrument or an act therein provided for in a foreign country shall be governed by the law of the place of execution, provided it must be paid wholly or partly within the Republic, unless this is contrary to the Mexican Laws of public policy.

ARTICLE 255. Instruments secured by any real right on real property located in the Republic shall be governed by the Mexican Law in everything relating to the security.

ARTICLE 256. The time limits and formalities governing the presentation, payment and protest of the instrument shall be those stipulated in the law of the place where such acts must be executed.

ARTICLE 257. The adoption of the measures prescribed by the law of the place where an instrument may be lost or stolen shall not relieve the party concerned from taking the measures stipulated in this law, if in the instrument is to be paid within the territory of the Republic.

ARTICLE 258. The Mexican Laws relative to prescription and forfeiture of actions derived from a credit instrument shall be applicable, even though the instrument may have been executed in a foreign country, if the respective action is submitted to the jurisdiction of the Mexican courts.

ARTICLE 259. By means of the "reporto" or credit instruments, the one who (reportador) acquires, for a sum of money, the ownership of a credit instrument and is obliged to transfer to the "reportado" or the one from whom the property is acquired, the ownership of a certain number of other instruments of the same kind within an agreed term and against payment of the same price, plus a premium. Except there be an agreement to the contrary, the premium shall be for the benefit of the "reportador".

The "reporto" is perfected by delivery of the instruments and by their endorsement when they are nominative.

ARTICLE 260. The "reporto" must be made in writing, giving the complete name of the "reportador" and of the "reportado", the kind of instruments given for "reporto" and the data necessary for their identification, the term fixed for the maturity of the operation, and the price and the agreed premium or the manner of calculating them.

ARTICLE 261. If the instruments grant a right of operation which must be exercised during the "reporto", the "reportador" is obliged to exercise it for account of the "reportado", the latter, however, must furnish him with sufficient funds wherewith to do so at least two days prior to the expiration of the term specified for exercising the right of option.

ARTICLE 262. Unless there is an agreement to the contrary, accessory rights of the instruments given for "reporto" and the dividends or interest which are paid on the instruments during the "reporto" shall be credited to the "reportado", to be liquidated at conclusion of the operation. Refunds and premiums shall be for the benefit of the "reportado" when the instruments or securities have been specifically designated at the time the transaction is made.

ARTICLE 263. When, during the term of the "reporto" and payment made on stocks or bonds (exhibicion) must be paid on the instruments, the "reportado" must furnish the "reportador" the necessary funds at least two days prior to the date on which the "exhibicion" is payable. In case the "reportado" does not comply with this obligation, the "reportador" may proceed at once to liquidate the "reporto".

ARTICLE 264. If a term is not expressly stipulated, the "reporto" shall be understood as payable on the last working day of the same month in which the transactions was entered into, unless the date of its execution was after the twentieth of the month, in which case it shall be understood as agreed that it will be liquidated on the last working day of the following month.

ARTICLE 265. The term for the "reporto" shall in no case exceed forty-five days. Any clause to the contrary shall be considered as not inserted. The transaction may be extended one or more times, without it being necessary to execute a new contract, the simple expression "extended" signed by both parties and written on the document which was used to establish the first operation being sufficient for the purpose.

ARTICLE 266. If the "reportado" fails to liquidate the transaction on the first working day following the expiration of the term in which the "reporto" must be liquidated, and the operation is not extended, it shall be considered as abandoned, and the "reportador" may at once require from the "reportado" the differences which result against him.

ARTICLE 267. The deposit of a sum of money, in Mexican currency or foreign money, transfers ownership to the depositary and obligates him to refund the amount deposited in the same specie, except as provided for in the following article.

ARTICLE 268. Deposits made in boxes, bags or sealed envelopes do not transfer ownership to the depositary, their withdrawal being subject to the terms and conditions stipulated in the agreement made relative thereto.

ARTICLE 269. In sight deposits, in checking accounts, the depositor has the right to freely make remittances in cash for the credit of his account, and totally and partially dispose of the sum deposited by means of checks drawn on the depositary. Deposits in money at sight in banks shall be understood as delivered for a checking account, except there be an agreement to the contrary.

In order that the depositor may make remittances in accordance with this article by credit instruments, the authorization of the depositary is required. The credits shall be understood as entered "subject to collection".

ARTICLE 270. Deposits received in joint accounts, in the name of two or more persons, may be paid out to any one of them or to his order, except where otherwise agreed.

ARTICLE 271. Bank deposits are withdrawable at sight, at a given term, or on previous notice. When a deposit is subject to previous notice and no period for notice is provided for, it shall be understood that the deposit is withdrawable on the working day following that on which the notice is given. If the deposit is made without any special mention of a period for notice it shall be understood as withdrawable at sight.

ARTICLE 272. Except where stipulated to the contrary, deposits shall be payable in the same office where made.

ARTICLE 273. Except where there be an agreement to the contrary, deposits bearing interest shall draw same from the first working day after the date of the remittance up to and including the last working day before their withdrawal.

ARTICLE 274. Deposits in checking accounts shall be proved solely by receipts of the depositary or the notations of the same in the bank books which for the purpose must be delivered to the depositors, except where the General Law of Banking Institutions otherwise provides.

ARTICLE 275. Remittances and refunds made in time accounts or accounts subject to notice shall be proved solely by written documents, necessarily nominative and non-negotiable, except as provided in the General Law of Banking Institutions.

ARTICLE 276. The bank deposit of instruments shall not transfer the ownership to the depositary unless, by written agreement, the depositor authorized the former to dispose of them under the obligation of returning a certain number of other instruments or the same kind.

ARTICLE 277. Where ownership is not transferred to the depositary, he is under the obligation of simply holding the instruments, unless, under an express agreement, a deposit with administration has been made.

ARTICLE 278. The bank deposit of instruments with administration obligates the depositary to effect the collection of instruments and to exercise all the acts necessary for the preservation of the rights which they confer on the depositor. The provisions of Articles 261 to 263 shall govern cases where accessory or optional rights have to be exercised or "exhibiciones" or if payments of any nature relating to the instruments deposited have to be made.

ARTICLE 279. Articles 269 to 272, 274 and 275 shall be applicable to the deposit of instruments, insofar as pertinent. Orders for delivery issued by the depositor to dispose of the instruments, in the case provided for in Article 269, shall not be negotiable.

ARTICLE 280. Except as provided for in the following article, bonded warehouses are obliged to return the same goods or merchandise deposited, in the same condition in which they were received, being solely responsible for their ordinary preservation and the damages which result from their negligence.

ARTICLE 281. Bonded warehouses may accept for safekeeping merchandise or goods designated by class, with the obligation of returning the same number of like kind and quality provided such goods or merchandise are of standard quality or, if not so, may be kept in the warehouses under conditions which assure their authenticity and in accordance with which their return may be made. In the latter case, the warehouses shall be responsible not only for the damages resulting from their negligence, but also for the risks inherent to the merchandise or goods deposited.

ARTICLE 282. In the case of the deposit of merchandise or goods which are designated individually, the warehouses are obliged to safeguard the merchandise or goods deposited for the entire time stipulated for the duration of the deposit, and if, for causes beyond their control, the merchandise or effects should spoil as to become unsafe or unhealthy, the warehouses with the assistance of the licensed broker or with the authorization of the Department of Public Health, respectively, may proceed, without liability, to sell or destroy the merchandise or effects in question. In all cases, any damages suffered by the warehouses as a consequence of the decomposition or change of the goods or merchandise deposited with individual designation shall be for account of the depositor, except where a stipulation to the contrary is made in the certificate of deposit. The proceeds of the sale, in the respective case, shall be applied in the manner provided for in Article 244.

ARTICLE 283. When warehouses receive merchandise or goods which are subject to the payment of import duties, they shall not permit the withdrawal of the deposit except on the legal verification of the payment of such taxes or duties, or upon consent of the corresponding Fiscal Authorities, and they shall be responsible to the Treasury up to the amount of proceeds of the sale of the merchandise or goods deposited, for payment of all duties, taxes, fines, surcharge or fiscal charges which may be owing by the owners or consignees up to the date of the deposit of the merchandise or goods in the warehouse.

ARTICLE 284. In the case of a deposit of goods or merchandise which are designated generically, the Warehouses are obligated to insure the goods or merchandise deposited for their current market value against fire on the date of formation of the deposit.

ARTICLE 285. In the case of a deposit of merchandise or goods designated by class, warehouses are only obliged to hold a like stock, in quality and quantity, as that deposited, all losses due to change or decomposition of the goods or merchandise being for their account, except as regards natural shrinkage expressly provided for in the respective certificate of deposit. The warehouses may, in the case provided for in this article, dispose of the goods or merchandise received, on condition that they keep at all times a stock equal, in quantity and quality, to that covered by the corresponding certificate of deposit.

ARTICLE 286. The duration of the deposit of merchandise or goods shall be freely agreed upon between warehouses and the depositor, except in the case of merchandise or goods which are liable for payment of taxes or fiscal changes of any kind, in which case the duration of the deposit shall not exceed the term specified for this purpose by the Secretariat of Finance, or a period of two years when no term is expressly specified.

ARTICLE 287. The goods or merchandise deposited in warehouses, and the proceeds from their sale, or the amount of the indemnity in case of fire, may neither be subject to replevin, embargoes nor in any way encumbered when certificates of deposit have been issued therefor, the provisions of Article 20 being observed in regard thereto.

Goods or merchandise deposited in warehouses with respect to which certificates of deposit have been issued may only be withheld by judicial order issued in cases of bankruptcy, of inheritance, and of theft, loss, total destruction, mutilation or serious deterioration of the certificate and corresponding bond.

The goods or merchandise deposited, the proceeds from the sale thereof, the amount of the indemnity in case of fire, or the moneys which the warehouse holds at the disposal of the holder of the bond certificate, in the case of the estate or the bankruptcy of the holder of the certificate or of the bond, respectively, who are entitled, under this Law, to the merchandise or moneys, may be withheld by judicial order, in conformance with the legal dispositions relative thereto. Such retention may also be made in cases of loss, theft, total destruction, mutilation or serious deterioration of the certificate or bond, in conformance with section 2 of Article 45 and Article 65.

ARTICLE 288. Credits opened in the books of merchants may be discounted, even though not covered by credit instruments signed by the debtor, provided they fulfill the following conditions:

ARTICLE 289. The one furnishing the discount shall be considered, for all the purposes of this Law, as the agent of the one seeking the discount, insofar as they refer to the collection of the credits which are discounted.

ARTICLE 290. Only banks may effect the operations referred to in this chapter.

ARTICLE 291. By virtue of the opening of a credit, the grantor of the credit obligates himself to put a sum of money at the disposal of the grantee so that the latter may make use of the credit so extended in the manner and under the terms and conditions agreed upon, the grantee being under the obligation of repaying the grantor the amounts which he uses, or to opportunely pay him the amount of the obligation contracted, and, in all cases, to pay him the interest, charges, expenses, and commission which may be stipulated.

ARTICLE 292. Where the parties limit the amount of the credit, it shall be understood, unless otherwise agreed, that such credit includes interest, commission and expenses, to be repaid by the grantee.

ARTICLE 293. Where the contract stipulates no limit to the amount which the grantee may dispose of, and, due to the object for which the credit is granted, its amount cannot be calculated, or such is the case due to an agreement between the parties, it shall be understood that the grantor is empowered to limit the amount of the credit at any time.

ARTICLE 294. Even though the contract may specify the amount of the credit and the term for which it is granted, the parties may agree that either or only one of them is empowered to restrict one or the other, or both at the same time, or to denounce the contract after a given date or at any time, by notifying the other party in the manner provided for in the contract, or, in the absence of such a clause, through a notary or licensed broker, or, there being neither, through the first political authority of his residence, the provisions of the third and fourth paragraphs of Article 143 being applicable to the respective act.

If no term be stipulated, it shall be understood that either of the parties may consider the contract as terminated at any time, and may so advise the other party in the manner provided for in the preceding paragraph.

Once the contract is denounced or its termination has been notified in the aforesaid manner, the unused part of the credit at the time these acts take place shall become extinguished, but, unless otherwise stipulated, the grantee must still pay the premiums, commissions and expenses pertaining to the unused sum, unless the denouncement or notification has been made by the grantor.

ARTICLE 295. Except where otherwise agreed, the grantee may dispose at once of the sum contracted for.

ARTICLE 296. The opening of a credit in current account entitles the grantee to make remittances prior to the date stipulated for the liquidation, as partial or total reimbursement of amounts he may have previously disposed of, he being empowered, until the termination of the contract, to dispose of the balance remaining in his favor in the agreed manner.

The provisions of Articles 306, 308 and 309, insofar as pertinent, are applicable to the opening of a credit in current account.

ARTICLE 297. Unless otherwise agreed, and whenever, in virtue of the opening of a credit, the grantor contracts an obligation to accept or execute bills of exchange, to sign promissory notes, to give his "aval" or, in general, to appear as the endorser or signatory of a credit instrument for account of the grantee, the latter shall be under the obligation of providing the grantor with the necessary funds not later than the first working day preceding the date on which the document accepted, executed or signed must be paid.

The acceptance, endorsement, "aval" or signing of the document, as well as the execution of the act by which the grantor contracts the obligation for account of the grantee, irrespective of whether the latter be obligated or not to provide the funds above referred to, shall at once diminish the amount of the credit, unless there be a stipulation to the contrary; but, apart from the expenses, commissions, premiums and other charges payable for use of the credit, the grantee shall only be obliged to refund the amount actually covered by the grantor in payment of the obligations which may have been contracted for account of the grantee, and to pay only the interest on such amounts.

ARTICLE 298. The opening of a simple credit or current account may be covenanted with a real or personal guarantee. The guarantee shall be understood to be extended, unless there exists an agreement to the contrary, to the amounts that the person credited therewith shall make use of within the credit limits.

ARTICLE 299. The execution or transfer of a credit instrument or of any other document by the grantor, as a recognition of the debt contracted by disposing of the credit granted, shall in no way authorize the grantor to discount or transfer the credit so represented prior to the maturity, unless the grantee expressly authorizes him to do so.

Once the credit has been negotiated or transferred by the grantor, the latter shall credit the grantee, from the date of such act, with the interest on the amounts disposed of under the credit, at the rate of interest agreed on when such credit was granted; but the credit granted shall not be understood as renewed for that amount unless this has been agreed on by the parties.

ARTICLE 300. Where the parties fix no time limit for the return of the sums which the grantee may dispose of or for the refunding by such grantee of the amounts paid for his account by the grantor in accordance with their contract, it shall be understood that restitution shall be made at the expiration of the term specified for use of the credit, or, there being none, within one month following the extinguishing of such credit.

The same rule shall apply to premiums, commissions, expenses and other charges payable by the grantee, as well as to the balance to his debit when the credit opened in current account becomes extinguished.

ARTICLE 301. A credit shall become extinguished, as well as the right of the grantee to make use of it in the future for any of the following reasons:

ARTICLE 302. By means of a current account contract, the credits resulting from reciprocal remittances of the parties are recorded as items of credit or debit, and only the resulting balance at the closing of the account constitutes an available and collectible credit.

ARTICLE 303. The commissions and expenses for the business to which the account refers shall be included therein, except where there be an agreement to the contrary.

ARTICLE 304. The entering of a credit in the current account shall not exclude the actions or exceptions relative to the validity of the acts or contracts which originated the remittance, except where there by an agreement to the contrary.

If the act or contract be annulled, the corresponding entry shall be cancelled in the account.

ARTICLE 305. The holder of a current account who includes therein a credit secured by pledge of mortgage is entitled to foreclose the guarantee for the amount of the credit secured insofar as he becomes a creditor of the balance.

If for a credit included in the account there are guarantors or co-obligors, they shall be obligated in the terms of their contracts for the amount of such credit in favor of the holder of the current account who made the remittance, and insofar as the latter becomes a creditor for the balance.

ARTICLE 306. The entering on account of a credit against a third party shall be understood as final and at the risk of whoever received the remittance, save an express reservation in case of the insolvency of the debtor.

In the absence of an express agreement, the remittance of credit instruments shall be understood as in all cases made "subject to collection".

If the credit is not paid at maturity and the clause "subject to collection" exists, express or understood, whoever received the credit may, at his election, enter in the account a reverse entry, restoring the instrument, or he may exercise the actions derived therefrom.

ARTICLE 307. The creditor of the holder of a current account may request the attachment and adjudication of the ultimate balance of the current account. In this case from the date of the attachment, the debit entries corresponding to new transactions cannot be taken into consideration as regards the person who is attaching. The operations resulting from the right of the other holder in current account already existing at the time the account is attached shall not be considered as new transactions, even though the respective entries have not yet been made at the time of the attachment. The holder of a current account against whom an attachment has been made must notify the other holder, who is entitled to petition at once the termination of the account.

ARTICLE 308. All accounts shall be closed and the balance liquidated every six months, save some agreement or custom to the contrary. The credit represented by the balance is a liquid credit, and is collectible at sight or in the terms of the relative agreement. If the balance is carried over to another account, it shall bear interest at the rate agreed for other remittances, or, where not stated, at the legal rate.

ARTICLE 309. Actions brought to rectify errors in calculation, omissions, or duplications shall be prescribed in six months from the closing of the accounts.

ARTICLE 310. A contract of current account terminates at the expiration of the term agreed upon. In the absence of such agreement, either of the holders of a current account may, at each period for the closing of the account, terminate the contract, giving notice to the other holder at least ten days prior to the date of closing.

The supervening death or incapacity of one of the holders of the account does not cause the termination of the account, except when his heirs or representatives, or the other holder of the account, elect to terminate it.

ARTICLE 311. Letters of credit shall be issued in favor of given persons and shall not be negotiable; they shall stipulate a fixed amount or several indeterminate amounts, but all included in a maximum sum, the limits of which shall be exactly stated.

ARTICLE 312. Letters of credit shall neither be accepted nor protestable, nor confer on their holders any rights against the persons to whom they are addressed.

ARTICLE 313. The taker shall have no right against the giver except when he may have left in his control the amount of the letter of credit or if he be his creditor for this amount, in which cases the giver shall be obligated to refund the amount of such letter, if it is not paid, and to pay losses, and damages. If the taker has furnished a bond or insured the amount of the letter, and it is not paid, the giver is obligated to pay losses and damages.

The damages and losses referred to in this article shall not exceed one-tenth of the amount unpaid, plus the cost of the insurance or the bond.

ARTICLE 314. Whoever issues a letter of credit may cancel it at any time, so advising the taker and the party to whom it is addressed, except where the taker has deposited with the giver the amount of the letter, has bonded or insured it, or is his creditor for such an amount.

ARTICLE 315. Whoever issues a letter of credit is obligated toward the person on whom he drew it, for the amount the latter pays by virtue of the letter, within the limits therein specified.

ARTICLE 316. Unless there by an agreement to the contrary, the terms for letters of credit shall be six months, calculated from the date of their issue. Upon the expiration of the period specified in the letter, or if not specified, of the period herein stipulated, the letter shall be cancelled.

ARTICLE 317. A confirmed credit is executed as a direct obligation of the grantor toward a third party; it must be made in writing and cannot be revoked by the person who applied for the credit.

ARTICLE 318. Except there be an agreement to the contrary, the third party in whose favor a credit is opened may transfer it; but he shall remain subject to all the obligations placed on him in the letter of confirmation of the credit.

ARTICLE 319. The grantor is responsible towards the person who requested the credit, in accordance with the provisions of the contract. Unless otherwise contracted, he shall have the same responsibility for the acts of the person whom he designates as his substitute for the execution of the operation.

ARTICLE 320. The grantor may oppose against the third party beneficiary the exceptions provided for in the letter of confirmation, and, unless otherwise stated in said letter, those derived from relations between said third party and whoever requested the credit; but under no circumstances may he oppose against him those which result from the relations between the latter and the grantor himself.

ARTICLE 321. By virtue of a contract for an equipment or operating credit, the grantee thereof is obligated to turn the exact amount of the credit into the acquisition of raw materials and equipment and into the payment of wages, salaries, and the direct expenses of operation which are indispensable for the purpose of his enterprise.

ARTICLE 322. Equipment or operating credits shall be secured by the raw materials or equipment acquired and with the fruits, products or manufactures resulting from the credit, even though they be future or pending.

ARTICLE 323. By virtue of the financing credit the grantee is obliged to turn the exact amount of the credit into the purchase of tools, instruments, farming implements, fertilizers, cattle or breeding stock; in the development of plantations or the raising of crops, either seasonal or permanent; in the opening up of lands for cultivation; in the purchase or installation of machinery and the construction or development of working equipment necessary for the carrying on of the enterprise of the grantee.

It may likewise be stipulated in the financing contract that a part of the amount of the credit may be used to pay fiscal debts of the grantee or amounts owing to the fiscal authorities on property used by him at the time the contract is executed; likewise that a portion of the credit may be utilized to pay off debts incurred by the grantee for operating expenses, purchase of movable or immovable property, or in the execution of the above-mentioned works, provided such acts or operations giving rise to the debts in question have taken place within the year preceding the date of the contract.

ARTICLE 324. Financing credits shall be secured, simultaneously and separately, with the real estate, constructions, buildings, machinery, tools, instruments, furniture and fixtures, and fruits or products, future, pending or already obtained, from the enterprise for the development of which the loan was obtained.

ARTICLE 325. Financing, equipment and operating credits may be granted in accordance with Part 1 of this Chapter.

The party who receives the credit may execute promissory notes to the order of the party who grants it representing the disposals which he makes of the credit granted, provided the due dates are not later than that of the credit, that such documents state from what they are derived in such a way that they may be properly identified, and that they bear annotations regarding registration of the original credit. Transfer of these instruments implies in all cases the joint liability of whoever effects it and the transfer of the respective portion of the principal of the credit represented by the promissory note, with the guarantees and other accessory rights in the proper proportion.

ARTICLE 326. Contracts of financing, equipment and operating credits:

The contracts for equipment or operation shall have no effect against a third party except from the date of their inscription in the Register.

ARTICLE 327. Whoever executed financing, equipment or operating credits shall take care that the amount thereof be devoted precisely to the purposes stipulated in the contract; if it be proved that they were otherwise invested, to the knowledge of the creditor or due to his negligence, he shall lose the privilege referred to in Articles 322 and 324.

The creditor shall at all times be entitled to appoint an intervenor to insure that the obligations of the grantee are duly complied with. The salary and expenses of the intervenor shall be paid by the creditor, except where otherwise agreed. The grantee of the credit is obliged to give the intervenor the necessary facilities in order that he may fulfill his duties. If the grantee fails to attend to his business with the required diligence, the creditor may rescind the contract, cause the anticipatory maturity of the obligation, and require the return of the amounts furnished plus interest.

Whenever the grantor of the credit has endorsed the promissory notes mentioned in Article 325, he shall continue to be under the obligation of supervising the investment which the creditor makes with it, unless there be a pact to the contract, and of taking care of the preserving the guarantees furnished, for which purpose he shall have the status of attorney for the holders of the promissory notes issued. The grantor of the credit may, with this same

status, rescind the obligation in the manner set forth in the last part of the preceding paragraph and receive the value of the promissory note issued, which shall be considered as having anticipatory maturity.

ARTICLE 328. Equipment or operating credits which are duly registered shall be paid in preference to financing credits, and both in preference to mortgages registered subsequently. When the transfer of the property or business for the development of which the loan was furnished is made without the previous consent of the creditor, the latter shall be entitled to rescind the contract and cause the anticipatory maturity of the obligation and exact its immediate payment.

ARTICLE 329. In cases of financing, equipment or operating credits, the pledge may remain in the possession of the debtor. For purposes of the corresponding civil and penal liability, the latter shall be considered as the judicial trustee of the fruits, products, cattle, tools and other personal property given in pledge.

ARTICLE 330. The creditor may replevin the fruits or products given in pledge for an equipment or financing credit against whoever has obtained them from the grantee of the credit or against subsequent acquirers who know or would have known of the pledge established on them.

ARTICLE 331. In cases of equipment, operating and financing credits the pledge may be constituted by whoever exploits the enterprise for the development of which the credit is destined, even though he may not be the owner of it, unless, in the case of lessees or settlers, the contract is recorded in the respective Registries of Property, of Agricultural Credit, of Mines or of Commerce, and the owner of the enterprise has, in the contract, reserved the right to approve the constitution of the pledge.

ARTICLE 332. The security, constituted for financing creditors on real property constructions, buildings and immovable chattels shall include:

ARTICLE 333. The creditor shall, by virtue of the guaranty referred to in the foregoing article, have a preferential right for the payment of his credit, with the product of the property encumbered; over all other creditors of the debtor, with the exception of those invested with ownership and the creditors with mortgage credits which have been recorded previously.

The preference established by this article shall not be extinguished by the transferring of the encumbered property into the power of a third party, whatever the cause be of the transfer of ownership.

ARTICLE 334. In commercial transactions a pledge is constituted:

ARTICLE 335. When fungible goods or instruments are pledged, the pledge shall contain even though other goods or instruments of the same kind be substituted therefor.

ARTICLE 336. When the pledge consists of fungible goods or instruments, it may be contracted that ownership of same be transferred to the creditor, who shall be obligated, in the respective case, to restore to the debtor a like amount of other property or instruments of the same kind. Such agreement must be made in writing.

When money is pledged, it shall be understood that ownership thereof is transferred, unless there be an agreement to the contrary.

ARTICLE 337. The creditor who holds a pledge is under the obligation of delivering it to the debtor, at the expense of the latter, in the cases referred to in sections 1, 2, 3, 5 and 6 of Article 334, a voucher acknowledging receipt of the goods or instrument pledged, giving the necessary details for their identification.

ARTICLE 338. The creditor who holds a pledge, in addition to being obliged to keep and preserve the goods or instruments pledged, must exercise all the rights inherent in them, all expenses to be for account of the debtor, and must apply all payments received to paying off the loan, unless there be an agreement to the contrary. Any agreement which limits the liability of the creditor, as stipulated in this article, shall be null.

ARTICLE 339. The prohibitions established as regards the "reportador" and the "reportado" respectively, in Article 261 and the first part of Article 263, shall be applicable to the creditor and the debtor, insofar as pertinent.

ARTICLE 340. If the price of the goods or instruments pledged so decreases that they are no longer sufficient to cover the amount of the debt, plus 20%, the creditor may proceed to sell the pledge, in the manner provided for in Article 342.

ARTICLE 341. The creditor may petition the judge to authorize the sale of the property or instruments pledged when the guaranteed obligation matures.

The judge shall immediately have such petition transferred to the debtor, notifying him that he has a period of 15 days, as from the petition of the creditor, to oppose it with the defenses and exceptions that will assist him to demonstrate the illegality thereof, in which case, the judge shall decide in a period no greater than 10 days. If the debtor does not assert this right, the judge shall authorize the sale. In case of notorious urgency, and under the responsibility of the creditor that the judge shall determine, the latter may authorize the sale even before notifying the debtor.

The broker or the merchants who intervene in the sale shall give a certificate of the same to the creditor.

The proceeds from the sale shall be held in pledge by the creditor, in place of the property or instruments sold.

ARTICLE 342. The creditor may likewise request the sale of the property or instruments pledged in the case provided for in Article 340, or if the debtor fails to comply with his obligation to furnish the necessary funds, at the proper time, to meet the payments made on stocks or bonds (exhibiciones) to be made on the instruments.

The debtor may oppose the sale, making payment of the funds required to effect the "exhibicion" or increasing the guaranty by an addition to the property pledged, or by the reduction of the debt.

ARTICLE 343. If the instruments pledged mature or are amortized prior to the maturity of the credit guaranteed, the creditor may hold in pledge the amounts received from such sources in place of the documents collected or amortized.

ARTICLE 344. The creditor cannot make himself owner of the goods or instruments pledged without the express consent of the debtor, in writing, subsequent to the establishment of the pledge.

ARTICLE 345. The provisions of this Part shall not modify the provisions relative to pledge bonds, nor those contained in the General Law of Banking Institutions or in other special laws.

ARTICLE 346. A pledge without transfer of possession constitutes an in rem right on personal property whose object is to guarantee compliance with an obligation and its priority of payment, allowing the debtor the material possession of such property. Exceptionally, it may be agreed that the creditor or a third party take material possession of the pledged property.

In any case, the process of enforcement of the guarantee shall be subject to that which is established by Title III Bis of the Commercial Code.

ARTICLE 347. Contracts by means of which the constitution of guarantees through pledge without transfer of possession is documented, shall be mercantile for all the parties involved therein. Those acts that are concluded between two or more individuals who are not merchants in the terms of the Commercial Code, as well as those acts that, in accordance with the same Code, are not considered as acts of commerce, are excepted.

In controversies that arise due to a pledge without transfer of possession, it shall be governed by the provisions of articles 1049 and 1050 of said Commercial Code.

ARTICLE 348. The amount of the guarantee may be an amount determined at the time of the constitution of the guarantee or determinable at the time of its enforcement.

Unless there exists an agreement to the contrary, the guarantee shall include ordinary and delinquent interest stipulated in the respective contract and the expenses incurred in the process of execution.

ARTICLE 349. When the debtor is allowed to make partial payments, the guarantee shall be reduced indeed proportionally in respect to the payments made, if the guarantee devolves upon several objects or they are comfortably divisible by reason of their legal nature without reducing their value, provided that the rights of the creditor remain duly guaranteed.

ARTICLE 350. If the debtor becomes subject to a bankruptcy process, the credits charged to him which are guaranteed by means of a pledge without transfer of possession shall be demandable from the date of the declaration and the ordinary interest stipulated shall continue to accrue within the scope of the respective guarantee.

ARTICLE 351. In case of insolvency or bankruptcy of the debtor, the property that is the object of a pledge without transfer of possession existing in the assets may be foreclosed upon by the chattel mortgage holder, by means of a corresponding action pursuant to the law on the matter, before the bankruptcy court, which must decree the foreclosure without further proceedings.

If the foreclosure is opposed, the litigation shall be resolved collaterally. The decision that the judge hands down, whether or not by litigation, shall only be appealed under a devolutive appeal.

ARTICLE 352. Any obligation may be guaranteed by a pledge without transfer of possession, regardless of the principal activity in which the debtor is engaged.

ARTICLE 353. Any classification of rights or personal property may be pledged without transfer of possession.

Property that are already pledged in accordance with this Part Seven may not be given in an ordinary pledge or other guarantee.

ARTICLE 354. Pledged property must be identified, except in the case in which the debtor pledges all the personal property that he uses in carrying out his principal activity to the creditor without transfer of possession, in which case the property may be identified generically.

ARTICLE 355. The following personal property may be pledged without transfer of possession:

ARTICLE 356. Unless there exists an agreement to the contrary, a collateral debtor shall have a right to:

The right granted to the debtor to sell or transfer, in the ordinary course of his principal activities, and the pledged property shall be extinguished from the moment in which notification of the initiation of any of the enforcement procedures, provided in Book Five, Title Three Bis of the Commercial Code, against him may be received. If the pledged property represents more than 80% of the assets of the debtor, such assets may be disposed of in the ordinary course of his activities with the prior authorization of the Judge or of the creditor, as the case may be.

ARTICLE 357. For purposes of the provisions in articles 355 and 356, the parties must agree upon the following, at the conclusion of the contract of a pledge without transfer of possession:

In case of non-compliance with the stipulations agreed upon on the basis of this article, the credit guaranteed with a pledge without transfer of possession shall be considered as matured in advance and thus due and payable immediately.

ARTICLE 358. Notwithstanding that the debtor pledges in non-possessory pledge all the personal property that he utilizes in his principal activities to his creditor, the debtor may give the assets that he acquires with the resources of the credit in guarantee to other creditors that the new creditors grant him, in the terms provided in this Part Seven.

In this case, the first creditor shall continue to have priority for the payment of his credit on all the personal property that the debtor has given in pledge without transfer of possession, ahead of any creditor, with exception of the assets acquired by the debtor with the resources that the new creditor furnished to him, which may serve as a guarantee to the new creditor and assure his priority in payment in respect to any other creditor of the debtor, including the first creditor.

The exception to which this article refers shall only proceed in the case of personal property that can be identified with every precision and distinguished from the rest of the personal property that the debtor has given in pledge to the first creditor.

ARTICLE 359. Future obligations may be guaranteed by a non-possessory pledge, but in this case the guarantee cannot be enforced, nor be adjudicated to the creditor, if the principal obligation remains demandable.

ARTICLE 360. If the respective contract establishes that the pledged assets must be insured for an amount that covers their replacement value, the debtor has the faculty of determining the insurance company that shall be entrusted therewith. The collateral creditor must be designated as beneficiary in the aforementioned policy. The unpaid balance of the guaranteed credit shall be reduced in proportion to the payment that the creditor receives from the insurance institution. If any remainder should exist, the creditor must deliver it to the debtor no later than the third working day following the date on which it was received.

ARTICLE 361. The debtor is obligated to maintain the assets pledged in non-possessory pledge, to be liable for deterioration and losses that are sustained due to his fault or negligence; and to not utilize them for a purpose other than that agreed to with the debtor.

The expenses necessary for the due maintenance, repair, administration and recovery of the pledged property shall be the responsibility of the debtor.

The creditor shall have the right to demand another pledge or the payment of the debt even before the agreed period if the pledged assets are lost or deteriorate in excess of the limit that the contracting parties stipulated for that purpose.

ARTICLE 362. The debtor shall be obligated to permit the creditor to inspect the pledged property for the purpose to determine, as the case may be, its weight, quantity and state of general maintenance. That inspection shall have the characteristics and extension that the parties agree upon.

If thus agreed upon in the contract, if the market value of the property pledged in a non-possessory pledge decreases to the extent that it is not sufficient to cover the amount of the principal and the accessories of the debt that is guaranteed, the debtor may pledge additional assets to restore the original proportion. In the contrary case, the credit may be matured in advance, once the procedure provided in the following article has been carried out, in which case the creditor must notify the debtor thereof judicially or through a notary. For this purpose, the parties must agree upon the amount that such reduction of market value must reach for the credit to be able to mature in advance.

ARTICLE 363. From the conclusion of the contract constituting the non-possessory pledge, the parties must establish the bases for appointing an expert, whose responsibility shall be to report upon the updating of the cases provided in articles 361 and 362, after having heard both parties.

The parties may appoint a general deposit warehouse as an expert for the purposes of the provisions of this article, as well as entrust thereto the safekeeping and conservation of the pledged property, in terms of item I of article 357.

ARTICLE 364. The creditor is obligated to release the pledge after the principal, interest and other accessories of the debt are fully paid, for which purpose the same formalities utilized for its constitution shall be followed.

When the creditor does not release the pledge in accordance with that which is established in the preceding paragraph, the debtor shall be indemnified for damages and losses occasioned thereby, regardless of the fact that the pledged property must be released.

ARTICLE 365. The contract constituting the non-possessory pledge, must be in writing and when the transaction refers to assets whose amount is equal or greater than the equivalent in national currency than 250,000 Investment Units, the parties must ratify their signatures before a notary public.

The guarantee shall be considered constituted upon the signing of the contract, becoming effective between the parties from the date of its conclusion.

ARTICLE 366. A pledge without transfer of possession shall become effective against third parties from the date of its registration in the register.

ARTICLE 367. Creditors guaranteed with a pledge without transfer of possession, shall receive the principal and the interest of their credits from the product of the property that is the object of those guarantees, to the absolute exclusion of other creditors of the debtor.

The provision of the preceding paragraph is without prejudice to the priorities that correspond to labor claims against the debtor pursuant to the law.

In any case, attachments for indebtedness to workers that devolve upon assets in possession of the debtor, must be made only on those assets that will cover the amount of the corresponding labor claim.

When the assets that are the object of the guarantee have been acquired with the product of the guaranteed credit, the priority that this article establishes, by which it refers to the aforementioned assets, shall prevail over the creditors (the labor claims) mentioned in the second paragraph of this provision.

ARTICLE 368. A pledge without transfer of possession shall have the priority to which the preceding article refers from the moment of its registration.

The priority of the new creditors to which article 358 refers shall not be affected by the fact of registration of their guarantees after the registration of those by means of which the debtor has given all the personal property that he utilizes in carrying on his principal activities in guarantee to the other creditor.

ARTICLE 369. The guarantee on personal property constituted in terms of this Section Seven shall have priority over a mortgage guarantee, financing or trust guarantee, if the former guarantee is recorded before the aforementioned personal property is attached, if applicable, to the real property that is the object of the latter guarantees.

ARTICLE 370. The priority between the guarantees that have not been recorded shall be determined by the chronological order of the respective authentic contracts.

ARTICLE 371. A registered pledge without transfer of possession shall have priority over:

I. Unsecured credits;

II. Unregistered liens on real property, and

III. Unregistered pre-existing judicial liens.

ARTICLE 372. The priority established on behalf of creditors, guaranteed pursuant to this Section Seven, may be modified by means of an agreement signed by the affected creditor.

The new priority established by the parties shall be effective as from its registration.

ARTICLE 373. For purposes of article 356, a purchaser in bad faith shall be understood as any person who, knowing of the existence of the guarantee, acquires the personal property subject thereto through transactions in which conditions or terms are agreed upon that significantly differ from market conditions prevailing at the time of their conclusion, or from the general marketing policies that the debtor follows, or from sound commercial practices and customs.

A purchaser shall not be understood to be in bad faith even though the conditions established in the preceding paragraph are violated, if the prior authorization of the creditor is obtained.

ARTICLE 374. The debtor shall be obligated to request written authorization from the guaranteed creditor in order to sell the assets subject to the guarantee in the terms of article 356, to the following persons:

For the purposes of the authorization that the guaranteed creditor must grant, he shall have 10 calendar days to give it; if he does not respond, the authorization shall be considered tacitly granted to the debtor.

Sales made without the authorization to which this article and the preceding article refer, shall be null and void, so far as applicable, for which the effects of the guarantee shall not cease and the creditor shall reserve the right of pursuit on the respective assets in relation to the purchasers.

Likewise, the respective contract may foresee that if sales are made in violation of the provisions of this article, the period of the credit shall mature in advance.

ARTICLE 375. The rights of creditors guaranteed pursuant to this Part Seven shall prescribe in three years from the time that the guaranteed obligation could be demanded. In this case the right to request compliance therewith shall be extinguished.

ARTICLE 376. Acts in which the constitution, modification, extinction, transfer and the judicial decisions on cancellations of the pledge without transfer of possession to which this Part Seven refers, are recorded, must be registered in the Public Trade Register of the place in which the debtor is domiciled or, if applicable, in the Special Register corresponding to nationality, as the case may be.

ARTICLE 377. Registrars shall abstain from suspending or refusing the registration of guarantees on personal property, whose identification is made generically in correspondence to the principal activity of the debtor, in terms of the provisions in article 354.

ARTICLE 378. In the case of guaranteed obligations whose amount shall be determinable at the time of the enforcement of the guarantee, their registration shall proceed even when the maximum amount that the collateral guarantees is not fixed.

ARTICLE 379. The parties must stipulate in the contracts through which the guarantees by means of a pledge without transfer of possession are granted, that if the product of the sale of the asset or assets subject to the guarantee does not cover the total amount of the guaranteed obligations of the debtor, the latter shall be released from the obligation of covering the differences that result, the rights of the creditor to demand those differences being considered extinguished.

The provisions of this article may not be waived.

ARTICLE 380. Whoever having material possession of assets subject to guarantees granted by means of a pledge without transfer of possession, even the creditor himself, should transfer them in terms other than those provided in the law, encumbers or affects the ownership or possession thereof, removes their components or abuses them outside of their normal use or for any reason intentionally decreases their value, shall be penalized with a prison sentence up to one year and a fine of 100 times the general minimum daily wage in force in the Federal District, when the amount of the guarantee does not exceed 200 times the equivalent of that wage.

If said amount exceeds this amount, but is not over 10,000, the prison sentence shall be from one to six years and the fine from 100 to 180 times the general minimum daily wage in force in the Federal District. If the amount is greater than the equivalent of 10,000 days of the aforementioned wage, the prison sentence shall be from six to 12 years and the fine 120 times the general minimum daily wage in force in the Federal District.

ARTICLE 381. By means of a trust the maker thereof assigns certain property for a definite legal purpose, entrusting its execution to a fiduciary institution.

ARTICLE 382. A trust shall be valid even though constituted without a beneficiary being designated, provided the purpose is both legal and definite.

ARTICLE 383. Both individuals and juridical persons, who have the necessary capacity to receive the benefits which the trust implies, must be trustees.

The maker of a trust may designate several trustees to receive the benefits of the trust simultaneously or successively, except in the case provided for in item II of Article 394.

When there are two or more trustees and their wishes must be consulted on matters no provided for in the establishment of the trust, the decisions shall be taken by a majority vote computed by representation and not by persons. In case of a tie, the Judge of First Instance of the domicile of the fiduciary will decide.

Any trust constituted in favor of the fiduciary, except that which is provided in the following paragraph and in other applicable legal provisions, shall be null and void.

A trust institution may be a trustee in trusts in which, upon being formed, the ownership of the property in trust was transferred and whose purpose is to serve as an instrument of payment of unpaid obligations, in the case of credits granted by the same institution in order to carry out business activities. In this case, the parties must appoint a substitute trust institution by common agreement should a conflict of interests arise among them.

ARTICLE 384. Only individuals or juridical persons duly capacitated to dispose of the property covered by the trust may be makers of trusts. The competent judicial or administrative authorities, when it is a matter of property, the care, conservation, administration, liquidation, distribution, or alienation of which corresponds to said authorities or the persons they designate, may become trustees.

ARTICLE 385. Only the institutions duly authorized as fiduciaries by the General Law of Banking Institutions may act in such capacity.

In case, at the time a trust is constituted, a fiduciary institution is not designated by name, the institution selected by the trustee or in default thereof, by the Judge of First Instance of the place where the property is located, from among the institutions expressly authorized in conformance with the law, shall be deemed as designated.

The maker of the trust may designate several fiduciary institutions to jointly or successively execute the trust, establishing the order and conditions of substitution.

Except as provided for in the deed establishing the trust, when the fiduciary institution does not accept it, or if by resignation or removal, it ceases to discharge its duties, another such institution must be named as its substitute.

The trust shall cease if no substitution is possible.

ARTICLE 386. Property and rights of all kinds may be placed in trust, except those which, according to law, are strictly personal ones of the holder.

Property placed in trust shall be considered as subject to the end for which it is destined, and in consequence, only the rights and actions relating to such end may be exercised with respect thereto, with the exception of those expressly reserved by the maker of the trust, those which are derived for him from the trust itself, or those legally acquired with respect of such property prior to the constitution of the trust by the trustee or by the trustee or by third parties.

The trust constituted in fraud of third parties may at all times be attacked on a basis of nullity by the interested parties.

ARTICLE 387. The trust may be constituted by a deed executed by living persons or by will. The creation of a trust must in all cases be made in writing, and conform to the terms of ordinary legislation governing the transfer of rights or the transfer of ownership of the things given in trust.

ARTICLE 388. The trust which involves immovable property must be registered in the section of the Public Property Registry corresponding to the place in which the property is located.

The trust shall take effect against a third party, in the case of this article, from the date of its inscription in the Registry.

ARTICLE 389. The trust involving movable property shall take effect against a third party from the date the following requisites are complied with:

ARTICLE 390. The trustee shall have, in addition to the rights granted by the trust indenture, the right to require the fiduciary institution to comply therewith; to attack the validity of the acts committed by the latter to his detriment, in bad faith, or exceeding its power which, under the trust indenture or the law, corresponds thereto, and where applicable, to recover the property which in consequence of such acts, has passed out from the patrimony which is the object of the trust.

When there is no specified trustee, or when he is incapacitated, the rights stipulated in the preceding paragraph shall belong to whoever has parental authority or acts as guardian, or by the State's Attorney, as the case may be.

ARTICLE 391. The fiduciary institution shall have all the rights and actions required for the carrying out of the trust, with the exception of the rules and limitations in this respect established at the time of drawing up the trust indenture; it shall be obligated to carry out said trust in accordance with the trust indenture; it cannot excuse itself or resign except for grave causes approved by the Judge of First Instance of the place of its domicile, and must act at all times with due care, being responsible for the losses or of damages to the property which are due to its negligence.

ARTICLE 392. The trust is extinguished:

ARTICLE 393. The trust having become extinguished, the property destined thereto which is held by the fiduciary institution shall be returned to the maker, of the trust or his heirs. In order that such return may take effect, in the case of immovable property or encumbrances imposed thereon, it shall suffice for the fiduciary institution to record same in the document which constituted the trust, and that this declaration be inscribed in the Registry of Property where the former was recorded.

ARTICLE 394. The following are prohibited:

ARTICLE 395. By virtue of the guarantee trust, the maker of a trust transmits ownership of certain property to the fiduciary institution for the purpose of guaranteeing compliance with an obligation to the trustee and his payment priority.

From the time of the constitution of the guarantee trust, the institution that shall act as fiduciary must be appointed.

ARTICLE 396. The makers and trustees of a trust may be any individual or legal person, regardless of the principal activity in which he or it is engaged.

The makers of a trust, moreover, must have the necessary capacity to make the allocation of property and rights that the trust implies.

ARTICLE 397. The trustee may be appointed by the maker of the trust in the constitutional deed of the trust or in a subsequent act.

The maker of the trust may appoint two or more trustees, for which effect the order of priority among them must be stipulated or, as the case may be, the percentage that shall correspond to each one of them from the property allotted to the trust.

ARTICLE 398. The same guarantee trust may be utilized to guarantee different obligations that the trustor contracted with different creditors simultaneously or successively, for which effect the trustee shall be obligated to notify the fiduciary institution that the obligation in its favor has been extinguished, within the 10 days following the day on which such occurred, the rights that in respect thereof were derived from the trust becoming ineffective. The notification must be delivered by means of a notary public, no later than five working days following the date on which the payment was received.

As from the time in which the fiduciary receives the aforementioned notification, the trustor may appoint a new trustee or manifest to the fiduciary institution that the end for which the trust was formed has been realized.

A trustee who does not deliver the notification to which this article refers to the fiduciary within the time period allowed, shall compensate the trustor for the damages and losses that he occasioned thereby.

ARTICLE 399. The following entities may act as fiduciaries of guarantee trusts provided in this Second Part, subject to that which article 85 Bis of the Law of Credit Institutions provides for the purpose:

I. Credit institutions;

II. Insurance institutions;

III. Bond institutions;

IV. Limited purpose financial companies, and

V. General deposit warehouses.

ARTICLE 400. The institutions and companies mentioned in the preceding article may be both fiduciaries and trustees, in the case of trusts whose purpose is to guarantee obligations in their favor.

Said institutions and companies shall be liable for the acts that they commit in prejudice of the trustors, in bad faith or in excess of the faculties that correspond to them for the execution of the trust, by virtue of the constitutional deed or the law, except for those activities or operations other than those established in article 402 of this Law.

ARTICLE 401. Any class of rights and real and personal property may be the object of guarantee trusts.

Property and rights that are given in trusts shall be the property of the fiduciary institution, shall be considered allotted to the purpose of guaranteeing obligations contracted by the trustor and, consequently, only the rights and shares referred to the aforementioned purpose may be exercised in respect thereto, except those that are derived for the maker of the same trust or those acquired legally by third parties, prior to the constitution of the trust.

ARTICLE 402. In the case of trusts on personal property, the maker of the trust shall have a right to do the following, unless there exists an agreement to the contrary:

The right granted to the trustor to sell or transfer the personal property allotted in trust in the normal course of his principal activities shall be extinguished from the time he receives notification of the initiation of any of the procedures of distraint against him, provided in the Fifth Book, Title Three Bis of the Commercial Code. If the pledged property represents more than 80% of the assets of the debtor, the latter may sell them in the ordinary course of his activities with the prior authorization of the Court or of the creditor, as the case may be.

The fiduciary cannot be entrusted with the performance of the activities and the operations provided in this article.

ARTICLE 403. If the respective contract establishes that the property allotted in trust other than land must be insured for an amount that covers its replacement value, the debtor shall have the faculty to determine the insurance company that shall be entrusted therewith. The fiduciary must be designated as beneficiary in the aforementioned insurance.

The fiduciary shall utilize the amounts that it receives from the insurance institution to liquidate the unpaid balance of the credit in favor of the trustor. If any remainder exists, the fiduciary must deliver it to the trustor.

ARTICLE 404. The risks of loss, damage or deterioration of the value of the property in trust, shall be carried by the party that is in possession thereof, the other parties being duly permitted to inspect it for the purpose of verifying its weight, quantity and state of general conservation, as the case may be.

If so agreed in the contract, if the market value of the property in trust decreases insofar that it is not sufficient to cover the amount of the principal and the accessories of the debt that they guarantee, the debtor may add additional property to restore the original proportion. In the contrary case, the credit may be matured in advance, the creditor having to notify the debtor thereof judicially or through a notary.

ARTICLE 405. When material possession of the property in trust corresponds to the trustor, he shall be obligated to keep them as if they were his own, to not utilize them for a purpose other than that which has been agreed for the purpose with the trustee and to be liable for the damages caused to third parties by making use thereof. This liability may not be required of the fiduciary.

In this case, the expenses necessary for the due conservation, repair, administration and recollection of the property in trust shall be the liability of the trustor.

If the property in trust is lost or deteriorates, the trustee has the right to require the trustor to allot other property in trust or to pay the debt even before the agreed upon period.

ARTICLE 406. For purposes of the provisions in articles 402, 404 and 405, the parties must agree upon the following, as from the constitution of the trust:

If the conventions concluded on the basis of this article are not fulfilled, the credit guaranteed by the trust shall come due in advance.

ARTICLE 407. The formation contract of the guarantee trust must be in writing and when the transaction refers to personal property and their amount is equal to or greater than the equivalent to 250,000 Investment Units in national currency, the parties must ratify their signatures before a notary.

The allocation of real property in a guarantee trust shall be recorded on a public deed.

The guarantee shall be considered formed by signing of the contract, the date of its conclusion being considered the effective date thereof between the parties.

ARTICLE 408. When personal property is allotted in trust the assets thereof must be specified, adjusting to the provisions in article 354.

ARTICLE 409. Actions of creditors guaranteed with a guarantee trust shall prescribe in three years from the date on which the guaranteed obligation can be demanded. In this case the right to request compliance therewith will be extinguished and the ownership of the assets subject to the guarantee shall revert to the net wealth of the trustor.

ARTICLE 410. The acts in which the constitution, modification, extinction, assignment and judicial resolutions on cancellations of guarantee trusts to which this Second Part refers are recorded must be registered in the Public Commercial Register of the place in which the domicile of the debtor is located in the case of trusts in which only personal property is allotted.

When real property, or real property and personal property, is subject to the guarantee trust, the registration of the acts to which the preceding paragraph refers must be made in the corresponding register in the place in which the real property is located or, in certain cases, in the Special Register that corresponds to the nature of the property.

ARTICLE 411. The institutions stipulated in article 399 of this Law shall indemnify trustors for acts in bad faith or in excess of the faculties that correspond to them for execution of the trust, by virtue of the deed of formation or of the law, that they realize in prejudice thereof.

The indemnity to be paid in terms of this article shall not be less than 10% of the principal value and the interest of the sum guaranteed, and at any time that such indemnity is procured it shall cover the losses caused by said institutions. When the violating institution is both fiduciary and trustee, the indemnity shall be double the aforementioned amount.

ARTICLE 412. The parties must stipulate in the contracts through which they grant guarantees by means of a guarantee trust, that in case the product of the sale of the asset or assets subject to the guarantee do not cover the total amount of the guaranteed obligations charged to the debtor, the latter shall not have to cover the differences that result and the rights of the creditor to demand the differences shall be considered extinguished.

The provision in this article is unwaivable.

ARTICLE 413. Whoever, having the material possession of the assets subject to guarantees granted through a guarantee trust, even the creditor, transmits the ownership or possession thereof in terms other than that provided in the law, encumbers or allots the ownership or possession thereof, takes away components therefrom or wears them down more than normal use would indicate or for any reason intentionally decrease the value thereof, will be penalized with prison up to one year and a fine of 100 times the general daily minimum wage in force in the Federal District, when the amount of the guarantee does not exceed the equivalent of 200 times said wage.

If that amount exceeds that quantity, but not 10,000, the prison sentence shall be from one to six years and the fine from 100 to 180 times the general daily minimum wage in force in the Federal District. If the amount is greater than 10,000 times said wage, the prison sentence shall be from six to twelve years and the fine 120 times the general daily minimum wage in force in the Federal District.

ARTICLE 414. Articles 346 to 349, 351, 367 to 375 and 378 to 393 of this Law shall be applicable to the guarantee trust provided in this Second Part.

ARTICLE 1. This Law shall go into force on September 15, 1932.

ARTICLE 2. The juridical effects of acts executed prior to its promulgation shall be governed by this Law, provided its application is not retroactive.

In consequence:

ARTICLE 3. Articles 337, 339, 340-357, 365-370, 449-575, 605-634, and section 1 of Article 1044 of the Commercial Code of September 15, 1899 and the Laws of November 29, 1897 and June 4, 1902 are hereby repealed.

All other laws and dispositions which oppose the present Law are hereby repealed.

In compliance with the provisions of section 1 of Article 89 of the Political Constitution of the Mexican United States, and for its publication and observance, I hereby promulgate the present Law at the seat of the Federal Executive Power, in the City of Mexico, on the 26th day of August, 1932.

Signed P. Ortiz Rubio. The Secretary of the State and the Office of Finance and Public Credit.

(Signed) A. J. Pani.

National Law Center for Inter-American Free Trade

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