Professional Documents
Culture Documents
Letters of Credit
1. Doctrine of Independence
Where the applicant entered into a contract, the performance of
which is secured by a standby letter of credit, the resort to
arbitration by the applicant/contractor, in the absence of a
stipulation that any dispute must first be settled through arbitration
before the beneficiay can draw on the letter of credit, does not
preclude the beneficiary to draw on the letter of credit upon its
issuance of a certificate of default. The claim of fraud will not be
sufficient to support an injunction against payment by reason of the
independence principle which assures the beneficiary of prompt
payment independent of any breach of the main contract and
precludes the issuing bank from determining whether the main
contract is actually accomplished or not. (Transfield Philippines,
Inc. vs. Luzon Hydro Corp. 443 SCRA 307 (2004))
The issuing bank is not liable for damages even if the shipment did
not conform to the specifications of the applicant. Under the
independence principle, the obligation of the issuing bank to pay
the beneficiary arises once the latter is able to submit the stipulated
documents under the letter of credit. Hence, the bank is not liable
for damages even if the shipment did not conform to the
specifications of the applicant. (Land Bank of the Philippines
vs. Monets Export and Manufacturing Corp., 453 SCRA 173
(2005))
Where the trial court rendered a decision finding the buyer solely
liable to pay the seller and omitted by inadvertence to insert in its
decision the phrase without prejudice to the decision that will be
made against the issuing bank , the bank can not evade
responsibility based on this ground. The seller who is entitled to
draw on the credit line of the buyer from a bank against the
presentation of sales invoices and official receipts of the purchases
and who obtained a court judgment solely against the buyer even
though the suit is against the bank and the buyer may still enforce
the liability of the same bank under a letter of credit issued to
secure the credit line. The so-called "independence principle" in a
letter of credit assures the seller or the beneficiary of prompt
payment independent of any breach of the main contract and
precludes the issuing bank from determining whether the main
contract is actually accomplished or not. Philippine National
Bank vs. San Miguel Corporation. No. 186063, January 15,
2014.
does not extinguish the civil obligation of the entrustee. Hence, the
fact that the entrustee attempted to make a tender of goods to the
bank and as a consequence of the latters refusal, the goods were
stored in the entrustees warehouse and thereafter gutted by fire,
the liability of the entrustee still subsists; the principle of res perit
domino will not apply to the bank which holds only a security of
interest over the goods. (Rosario Textile Mills Corp. vs. Home
Bankers Savings and Trust Company, 462 SCRA 88 (2005))
4. Penal Sanctions if Offender is a Corporation
Recognizing the impossibility of imposing the penalty of
imprisonment on a corporation, it was provided that if the entrustee
is a corporation, the penalty shall be imposed upon the directors,
officers, employees or other officials or persons responsible for the
offense. However, the person signing the trust receipt for the
corporation is not solidarily liable with the entrustee-corporation for
the civil liability arising from the criminal offense unless he
personally bound himself under a separate contract of surety or
guaranty. (Ong vs. Court of Appeals, 401 SCRA 649 (2003))
When the entrustee is a corporation, the director, officer, employee,
or any person responsible for the violation of the Trust Receipts Law
is held criminally liable without prejudice to the civil liability, which
is imposed upon the entrustee-corporation. The fact that the officer
signed in his official capacity means that the corporation is the one
civilly liable; however, when such officer also signed a trust receipt
in his personal capacity, he will also be held civilly liable together
with the corporation, with the scope of liability depending on
whether he signed as a surety or as a guarantor. (Tupaz IV vs.
Court of Appeals, 475 SCRA 398 (2005))
The fact that the officer who signed the trust receipt on behalf of
the entrustee-corporation signed in his official capacity without
receiving the goods as he had never taken possession of such nor
committing dishonesty and abuse of confidence in transacting with
the entrustor, is immaterial.
The law specifically makes the
director, officer, employee or any person responsible criminally
liable precisely for the reason that a corporation, being a juridical
entity, cannot be the subject of the penalty of imprisonment.
(Alfredo Ching vs. Secretary of Justice, 481 SCRA 609
(2006))
D. Remedies Available
to the bearer of the documents or, for that matter, whosoever may
be the bearer at the time of presentment. [Caltex (Philippines),
Inc. vs. Court of Appeals and Security Bank and Trust
Company, G.R. No. 97753, August 10, 1992]
The language of negotiability which characterizes a negotiable
paper as a credit instrument is its freedom to circulate as a
substitute for money. This freedom in negotiability is totally absent
in a certificate indebtedness as it merely to pay a sum of money to
a specified person or entity for a period of time. (Traders Royal
Bank vs. Court of Appeals, Filriters Guaranty Assurance
Corporation and Central Bank of the Philippines, G.R. No.
93397, March 3, 1997)
Under the fictitious payee rule, a check made expressly payable to a
non-fictitious and existing person is not necessarily an order
instrument if the payee is not the intended recipient of the proceeds
of the check. There is, however, a commercial bad faith exception to
this rule which provides that a showing of commercial bad faith on
the part of the drawee bank, or any transferee of the check for that
matter, will work to strip it of this defense. (Philippine National
Bank vs. Erlando T. Rodriguez and Norma Rodriguez, G.R.
No. 170325, September 26, 2008)
Under the Negotiable Instruments Law, a check made payable to
cash is payable to the bearer and could be negotiated by mere
delivery without the need of an indorsement. However, the drawer
of the post-dated check can not be liable for estafa to the person
who did not acquire the instrument directly from drawer but through
negotiation of another by mere delivery. This is because the drawer
did not use the check to defraud the holder/private complainant.
PEOPLE OF THE PHILIPPINES VS. GILBERT REYES WAGAS.
G.R. No. 157943, September 4, 2013
2. Kinds of Negotiable Instruments
Postal money orders are not negotiable instruments, the reason
being that in establishing and operating a postal money order
system, the government is not engaged in the commercial
transactions but merely exercises a governmental power for the
public benefit. Some of the restrictions imposed upon money orders
by postal laws and regulations are inconsistent with the character of
negotiable instruments. For instance, such laws and regulations
usually provide for not more than one endorsement; payment of
money orders may be withheld under a variety of circumstances.
(Ting Ting Pua vs. Spouses Benito Lo Bun Tiong and Caroline
Siok Ching Teng, G.R. No. 198660, October 23, 2013)
1. Insertion of Date
2. Completion of Blanks
In any case, it is no defense that the promissory notes were signed
in blank as Section 14 of the Negotiable Instruments Law concedes
the prima facie authority of the person in possession of negotiable
instruments to fill in the blanks. (Quirino Gonzales Logging
Concessionaire, Quirino Gonzales and Eufemia Gonzales vs.
the Court of Appeals (CA) and Republic Planters Bank, G. R.
No. 126568, April 30, 2003)
3. Incomplete and Undelivered Instruments
4. Complete but Undelivered Instruments
As Assistant City Fiscal, the source of the salary of the payee is
public funds which he receives in the form of checks from the
Department of Justice. Since the payee of a negotiable interest
acquires no interest with respect thereto until it is delivered, such
checks, as a necessary consequence of being public fund, may not
be garnished because such funds do not belong to him. (Loreto D.
de la Victoria, as City Fiscal of Mandaue City and in his
personal capacity as garnishee vs. Hon. Jose P. Burgos,
Presiding Judge, RTC, Br. XVII, Cebu City, and Raul H.
Sesbreo, G.R. No. 111190, June 27, 1995)
If the post-dated check was given to the payee in payment of an
obligation, the purpose of giving effect to the instrument is evident,
thus title or ownership the check was transferred to the payee.
However, if the PDC was not given as payment, then there was no
intent to give effect to the instrument and ownership was not
transferred. The evidence proves that the check was accepted, not
as payment, but in accordance with the policy of the payee to cover
the transaction ( purchase of beer products ) and in the meantime
the drawer was to pay for the transaction by some other means
other than the check. This being so, title to the check did not
transfer to the payee; it remained with the drawer. The second
element of the felony of theft was therefore not established.
Hence, there is
no probable cause for theft.- San Miguel
Corporation vs. Puzon, Jr. G.R. No. 167567, 22 September
2010
The fact that a person, other than the named payee of the crossed
check, was presenting it for deposit should have put the bank on
guard. It should have verified if the payee authorized the holder to
present the same in its behalf or indorsed it to him. The banks
reliance on the holders assurance that he had good title to the
three checks constitutes gross negligence even though the holder
was related to the majority stockholder of the payee. While the
check was not delivered to the payee, the suit may still prosper
because the payee did not assert a right based on the undelivered
check but on quasi-delict. Equitable Banking Corporation vs
Special Steel Products, June 13, 2012
C. Signature
1. Signing in Trade Name
2. Signature of Agent
Under Section 20 of the Negotiable Instruments Law, where the
instrument contains or a person adds to his signature words
indicating that he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the instrument if he was
duly authorized; but the mere addition of words describing him as
an agent or as filing a representative character, without disclosing
his principal, does not exempt him from personal liability. In the
instant case, an inspection of the drafts accepted by the defendant
shows that nowhere has he disclosed that he was signing as a
representative of the Philippine Education Foundation Company and
such failure to disclose his principal makes him personally liable for
the drafts he accepted. (The Philippine Bank of Commerce vs.
Jose M. Aruego, G.R. Nos. L-25836-37, January 31, 1981)
3. Indorsement by Minor or Corporation
4. Forgery
As a general rule, a bank or corporation who has obtained
possession of a check upon an unauthorized or forged indorsement
of the payees signature and who collects the amount of the check
from the drawee, is liable for the proceeds thereof to the payee or
other owner, notwithstanding that the amount has been paid to the
person from whom the check was obtained. The theory of the rule is
that the possession of the check on the forged or unauthorized
indorsement is wrongful and when the money had been collected on
the check, the proceeds are held for the rightful owners who may
While a maker who signed a promissory note for the benefit of his
co-maker ( who received the loan proceeds ) is considered an
accommodation party, he is, nevertheless, entitled to a written
notice on the default and the outstanding obligation of the party
accommodated. There being no such written notice, the Bank is
grossly negligent in terminating the credit line of the
accommodation party for the unpaid interest dues from the loans of
the party accommodated and in dishonoring a check drawn against
the such credit line. Gonzales vs Phillippine Commercial and
International Bank, GR No. 180257, February 23, 2011
F. Negotiation
1. Distinguished from Assignment
If an assigned promissory note had already been extinguished
because its maker is similarly indebted to the assignor, then the
defense of set-off or legal compensation could also be invoked
against the assignee of the note. The debtors consent is not
needed to effectuate assignment of credit and negotiation.
(Sesbreno vs. Court of Appeals, 222 SCRA 466, 1993)
2. Modes of Negotiation
Where a check is made payable to the order of cash, the word
cashdoes not purport to be the name of any person, and hence
the instrument is payable to bearer. The drawee bank need not
obtain any indorsement of the check, but may pay it to the person
presenting it without any indorsement. (Ang Tek Lian vs. the
Court of Appeals, G.R. No. L-2516, September 25, 1950)
Under the Negotiable Instruments Law, an instrument is negotiated
when it is transferred from one person to another in such a manner
as to constitute the transferee the holder thereof, and a holder may
be the payee or indorsee of a bill or note, who is in possession of it,
or the bearer thereof. In case of a bearer instrument, mere delivery
would suffice. [Caltex (Philippines), Inc. vs. Court of Appeals
and Security Bank and Trust Company, G.R. No. 97753,
August 10, 1992]
3. Kinds of Indorsements
G. Rights of the Holder
1. Holder in Due Course
4. Dishonor by Non-Payment
J. Notice of Dishonor
The term "notice of dishonor" denotes that a check has been
presented for payment and was subsequently dishonored by the
drawee bank. This means that the check must necessarily be due
and demandable because only a check that has become due can be
presented for payment and subsequently be dishonored. A
postdated check cannot be dishonored if presented for payment
before its due date. (Jaime Dico vs. Hon. Court of Appeals and
People of the Philippines, G.R. NO. 141669, February 28,
2005)
1. Parties to Be Notified
Notice of dishonor to the corporation, which has a personality
distinct and separate from the officer of the corporation, does not
constitute notice to the latter. The absence of notice of dishonor
necessarily deprives an accused an opportunity to preclude a
criminal prosecution. (Lao vs. Court of Appeals, G.R. No.
119178, June 20, 1997)
If the drawer or maker is an officer of a corporation, the notice of
dishonor to the said corporation is not notice to the employee or
officer who drew or issued the check for and in its behalf. (Ofelia
Marigomen vs. People of the Philippines, G.R. No. 153451,
May 26, 2005)
Under the Negotiable Instruments Law, notice of dishonor is not
required if the drawer has no right to expect or require the bank to
honor the check, or if the drawer has countermanded payment. In
the instant case, all the checks were dishonored for any of the
following reasons: "account closed", "account under garnishment",
insufficiency of funds", or "payment stopped." In the first three
instances, the drawers had no right to expect or require the bank to
honor the checks, and in the last instance, the drawers had
countermanded
payment.
(Great
Asian
Sales
Center
Corporation and Tan Chong Lin vs. the Court of Appeals and
Bancasia Finance and Investment Corporation, G.R. No.
105774, April 25, 2002)
2. Parties Who May Give Notice and Dishonor
When what was stamped on the check was Payment Stopped
Funded and DAUD which means drawn against uncollected
deposits, the check was not issued without sufficient funds and was
not dishonored due to insufficiency of funds. Even with uncollected
deposits, the bank may honor the check at its discretion in favor of
favored clients, in which case there would be no violation of B. P. 22.
(Eliza T. Tan vs. People of the Philippines, G.R. No. 141466,
January 19, 2001)
3. Effect of Notice
In the case of DAUD, the depositor has, on its face, sufficient funds
in his account, although it is not available yet at the time the check
was drawn, whereas in DAIF, the depositor lacks sufficient funds in
his account to pay the check. Moreover, DAUD does not expose the
drawer to possible prosecution for estafa and violation of BP 22,
while DAIF subjects the depositor to liability for such offenses.
(Bank of the Philippine Islands vs. Reynald R. Suarez, G.R.
No. 167750, March 15, 2010)
The failure of the prosecution to prove the existence and receipt by
petitioner of the requisite written notice of dishonor and that he was
given at least five banking days within which to settle his account
constitutes sufficient ground for his acquittal in a case for violation
of BP 22. (James Svendsen vs. People of the Philippines, G.R.
NO. 175381, February 26, 2008)
4. Form of Notice
A notice of dishonor received by the maker or drawer of the check is
thus indispensable before a conviction for violation of BP 22 can
ensue. The notice of dishonor may be sent by the offended party or
the drawee bank, and it must be in writing. A mere oral notice to
pay a dishonored check will not suffice. The lack of a written notice
is fatal for the prosecution. (Jaime Dico vs. Hon. Court of
Appeals and People of the Philippines, G.R. NO. 141669,
February 28, 2005)
5. Waiver
6. Dispensation with Notice
7. Effect of Failure to Give Notice
K. Discharge of Negotiable Instrument
1. Discharge of Negotiable Instrument
In depositing the check in his name, the depositor did not become
the out-right owner of the amount stated therein. By depositing the
check with the bank, depositor was, in a way, merely designating
the bank as the collecting bank. This is in consonance with the rule
that a negotiable instrument, such as a check, whether a managers
check or ordinary check, is not legal tender. As such, after receiving
the deposit, under its own rules, the bank shall credit the amount to
the depositors account or infuse value thereon only after the
drawee bank shall have paid the amount of the check or the check
has been cleared for deposit. The depositors contention that after
the lapse of the 35-day period the amount of a deposited check
could be withdrawn even in the absence of a clearance thereon,
otherwise it could take a long time before a depositor could make a
withdrawal is untenable. Said practice amounts to a disregard of the
clearance requirement of the banking system. Bank of the
Philippine Islands vs. Court of Appeals, 326 SCRA 641 (2000)
Mere delivery of a check does not discharge the obligation. The
obligation is not extinguished and remains suspended until the
payment by commercial document is actually realized. Thus,
although the value of a check was deducted from the funds of the
drawer but the funds were never delivered to the payee because
the drawee bank set off the amount against the losses it incurred
from the forgery of the drawers check, the drawers obligation to
the payee remains unpaid. Cebu International Finance
Corporation vs. Court of Appeals, 316 SCRA 488 (1999)
While Section 119 of the Negotiable Instrument Law in relation to
Article 1231 of the Civil Code provides that one of the modes of
discharging a negotiable instrument is by any other act which will
discharge a simple contract for the payment of money, such as
novation, the acceptance by the holder of another check which
replaced the dishonored bank check did not result to novation.
There are only two ways which indicate the presence of novation
and thereby produce the effect of extinguishing an obligation by
another which substitutes the same. First, novation must be
explicitly stated and declared in unequivocal terms as novation is
never presumed. Secondly, the old and the new obligations must be
incompatible on every point. In the instant case, there was no
express agreement that the holders acceptance of the replacement
check will discharge the drawer and endorser from liability. Neither
is there incompatibility because both checks were given precisely to
terminate a single obligation arising from the same transaction.
The buyer of a car shall be liable to pay the unpaid balance on the
promissory note and not just the installments due and payable
before the said automobile was carnapped. Being the principal
contract, the promissory note is unaffected by whatever befalls the
subject matter of the accessory contract. (Perla Compania De
Seguros, Inc. vs. the Court of Appeals, Herminio Lim And
Evelyn Lim, G.R. No. 96452, May 7, 1992)
When a promissory note expresses "no time for payment," it is
deemed "payable on demand. (Jose L. Ponce de leon vs.
Rehabilitation Finance Corporation, G.R. No. L-24571,
December 18, 1970)
When there is a discrepancy between the amount in words and the
amount in figures in the check, the rule in the Negotiable
Instruments Law is that it would be the amount in words that would
prevail. (People of the Philippines vs. Martin L. Romero and
Ernesto C. Rodriguez, G.R. No. 112985, April 21, 1999)
An instrument which begins with I, We, or Either of us promise to
pay, when signed by two or more persons, makes them solidarily
liable. Also, the phrase joint and several binds the makers jointly
and individually to the payee so that all may be sued together for its
enforcement, or the creditor may select one or more as the object
of the suit. (Astro Electronics Corp. and Peter Roxas vs.
Philippine Export and Foreign Loan Guarantee Corporation,
G.R. No. 136729, September 23, 2003)
P. Checks
1. Definition
Settled is the doctrine that a check is the only a substitute for
money and not money; hence, the delivery of such an instrument
does not, by itself, operate as payment. This is especially true in
case of post-dated check. Thus, the issuance of a post-dated check
was not effective payment. It did not comply with the cardholders
obligation to pay his past due credit card charges. Consequently,
the card company was justified in suspending his credit card. BPI
Card Corporation vs. Court of Appeals, 296 SCRA 260 (1998)
2. Kinds
Under accepted banking practice, crossing a check is done by
writing two parallel lines diagonally on the left top portion of the
checks. The crossing is special where the name of a bank or a
A check may be used for the exercise of the right of redemption, the
same being a right and not an obligation. (Fortunado vs. Court of
Appeals, 196 SCRA 26, 1991)
The judgment creditor may validly refuse the tender of payment
partly in check and partly in cash. A cashiers check tendered by the
judgment debtor to satisfy the judgment debt is not a legal tender.
(Tibajia, Jr. vs. Court of Appeals, G.R. No. 100290, June 4,
1993)
A check does not constitute legal tender, but once the creditor
accepted a fully funded check to settle an obligation, he is estopped
from later on denouncing the efficacy of such tender of payment. By
accepting the tendered check and converting it into money, the
creditor is presumed to have accepted it as payment and to hold
otherwise would be inequitable and unfair to the obligor. (Far East
Bank & Trust Company vs. Diaz Realty, Inc., G.R. No. 138588,
August 23, 2001)
A stale check is one which has not been presented for payment
within a reasonable time after its issue. It is valueless and,
therefore, should not be paid. (International Corporate Bank vs.
Sps. Francis S. Gueco and Ma. Luz E. Gueco, G.R. No.
141968, February 12, 2001)
Where a managers check made payable to cash and appearing
regular on its face, was presented to another bank that immediately
honors it no faulty may be attributed to such bank in relying upon
the integrity of the check, even if payment thereon was later
ordered stopped by the drawer-bank because the one who encashed
the check was actually not the intended payee. In other words, as
between the bank that honored the managers check and the
drawer-bank, it is the latter that should bear the loss. (Security
Bank and Trust Company vs. Rizal Commercial Banking
Corporation, G.R. No. 170984, 30 January 2009)
a. Time
A check must be presented for payment within a reasonable time
after its issue, and in determining what is a reasonable time,
regard is to be had to the nature of the instrument, the usage of
trade or business with respect to such instruments and the facts of
the particular case. The test is whether the payee employed such
diligence as a prudent man exercise in his own affairs. This is
because the nature and theory behind the use of a check points to
its immediate use and payability. (International Corporate Bank
vs. Sps. Francis S. Gueco and Ma. Luz E. Gueco, G.R. No.
141968, February 12, 2001)
b. Effect of Delay
Failure to present for payment within a reasonable time will result to
the discharge of the drawer only to the extent of the loss caused by
the delay. Failure to present on time, thus, does not totally wipe out
all liability. In fact, the legal situation amounts to an
acknowledgment of liability in the sum stated in the check. In this
case, the debtors have not alleged, much less shown that they or
the bank which issued the managers check has suffered damage or
loss caused by the delay or non-presentment. Definitely, the original
obligation to pay certainly has not been erased. (International
Corporate Bank vs. Sps. Francis S. Gueco and Ma. Luz E.
Gueco, G.R. No. 141968, February 12, 2001)
IV. Insurance Code
A. Concept of Insurance
One test in order to determine whether one is engaged in insurance
business is whether the assumption of risk and indemnification of
loss (which are elements of an insurance business) are the principal
object and purpose of the organization or whether they are merely
incidental to its business. If these are the principal objectives, the
business is that of insurance. But if they are merely incidental and
service is the principal purpose, then the business is not insurance.
In this case, Health Maintenance Organizations (HMOs) are not
insurance business. (Philippine Health Care Providers, Inc., vs.
Commissioner of Internal Revenue, G.R. No. 167330,
September 18, 2009)
The contract of insurance is one of perfect good faith (uferrimal
fidei) not for the insured alone, but equally so for the insurer; in
fact, it is mere so for the latter, since its dominant bargaining
position carries with it stricter responsibility. (Qua Chee Gan v.
Law Union, 98 Phil 85, 1955)
Being a contract of adhesion, terms of a policy are to be construed
strictly against the party which prepared the contract - the insurer.
By reason of exclusive control of insurance contract, ambiguity must
be strictly interpreted against the insurer and liberally in favor of
the insured, especially to avoid forfeiture. (Philamcare Health
System vs. Court of Appeals, 379 SCRA 356, 2002)
5. Life
Where a GSIS member failed to state his beneficiary or beneficiaries
in his application for membership, the proceeds of the retirement
benefits shall accrue to his estate and will be distributed among his
legal heirs in accordance with the law on intestate succession. (Re:
Claims for Benefits of the Heirs of the Late Mario vs.
Chanliongco, Adm. Matter No. I90-RET., October 18, 1977)
A life insurance policy is no different from a civil donation insofar as
the beneficiary is concerned for both are founded upon the same
consideration: liberality. A beneficiary is like a donee, because from
the premiums of the policy which the insured pays, out of liberality,
the beneficiary will receive the proceeds or profits of said insurance.
As a consequence, the proscription in Article 739 of the new Civil
Code should equally operate in life insurance contracts. The
conviction for adultery or concubinage is not necessary before the
disabilities mentioned in Article 739 may effectuate. It would be
sufficient if evidence preponderates upon the guilt of the consort for
the offense indicated. (The Insular Life Assurance Company,
Ltd., vs. Carponia t. Ebrado And Pascuala Vda. De Ebrado,
G.R. No. l-44059, October 28, 1977)
There is nothing in the policy that relieves the insurer of the
responsibility to pay the indemnity agreed upon if the insured is
shown to have contributed to his own accident. Indeed, most
accidents are caused by negligence. Lim was unquestionably
negligent and that negligence cost him his own life. But it should
not prevent his widow from recovering from the insurance policy he
obtained precisely against accident. (Sun Insurance Office, Ltd.,
vs. The Court of Appeals, G.R. No. 92383, July 17, 1992)
The legitimate heirs of the insured who were not designated as
beneficiaries in the life insurance policies are considered third parties
to the insurance contracts and, thus are not entitled to the proceeds
thereof. The insurance companies have no legal obligation to turn over
the insurance proceeds to them. The revocation of the common law
spouse of the insured as a beneficiary in one policy and her
disqualification as such in another are of no moment considering that
the designation of the illegitimate children as beneficiaries in the
Insurance Policies remains valid. Because no legal proscription exists in
naming as beneficiaries children of illicit relationships by the insured,
the shares of the common-law spouse in the insurance proceeds,
whether forfeited by the Court in view of the prohibition on donation
under Article 739 of the Civil Code or by the insurers themselves for
reasons based on the insurance contracts, must be awarded to the said
illegitimate children, the designated beneficiaries, to the exclusion of
the legitimate heirs. It is only in cases where the insured has not
designated any beneficiary, or when the designated beneficiary is
disqualified by law to receive the proceeds, that the insurance policy
Philippines for more than 90 days and under the law, he could not
drive a motor vehicle without a Philippine drivers license. He was
therefore not an authorized driver under the terms of the
insurance policy in question, and MALAYAN was right in denying the
claim of the insured. (James Stokes, as Attorney-in-Fact of
Daniel Stephen Adolfson vs. Malayan Insurance Co., Inc.,
G.R. No. L-34768. February 24, 1984)
The requirement under the authorized driver clause that the
driver be permitted in accordance with the licensing or other laws
or regulations to drive the Motor Vehicle and is not disqualified from
driving such motor vehicle by order of a Court of Law or by reason
of any enactment or regulation in that behalf, applies only when
the driver is driving on the insureds order or with his permission.
It does not apply when the person driving is the insured himself.
(Andrew Palermo vs. Pyramid Insurance Co., Inc., G.R. No. L36480. May 31, 1988)
Where the drivers temporary operators permit had expired, and
the insurance policy states that a driver with an expired Traffic
Violation Receipt or expired Temporary Operators permit is not
considered an authorized driver within the meaning of the policy,
the expiration of the same bars recovery under the policy. In liability
insurance, the parties are bound by the terms of the policy and the
right of insured to recover is governed thereby. (Agapito Gutierrez
vs. Capital Insurance & Surety Co., Inc., G.R. No. L-26827,
June 29, 1984)
From a reading Section 378, the following rules on claims under the
no fault indemnity provision, where proof of fault or negligence is
not necessary for payment of any claim for death or injury to a
passenger or a third party, are established: 1.) A claim may be
made against one motor vehicle only. 2.) If the victim is an occupant
of a vehicle, the claim shall lie against the insurer of the vehicle in
which he is riding, mounting or dismounting from. 3.) In any other
case (i.e. if the victim is not an occupant of a vehicle), the claim
shall lie against the insurer of the directly offending vehicle. 4.) In
all cases, the right of the party paying the claim to recover against
the owner of the vehicle responsible for the accident shall be
maintained. (Perla Compania De Seguros, Inc., vs. Hon.
Constante A. Ancheta, Presiding Judge of the Court of First
Instance of Camarines Norte, Branch III, et al., G.R. No. L49699, August 8, 1988)
E. Insurable Interest
1. In Life/Health
Every person has an insurable interest in the life and health of: 1.)
Himself, or his spouse and of his children; 2.) Any person: (a) on
whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest; (b) under legal obligation to him
for the payment of money, respecting property or service, of which
death or illness might delay or prevent the performance; and (c)
upon whom whose life any estate or interest vested in him depends.
(Philamcare Health System vs. Court of Appeals, 379 SCRA
356, 2002)
The existence of an insurance interest gives a person the legal right
to insure the subject matter of the policy of insurance. Section 19 of
the Insurance Code states that an interest in the life or health of a
person insured must exist when the insurance takes effect, but need
not exist thereafter or when the loss occurs. (Lalican vs. Insular
Life Assurance Company Ltd, 597 SCRA 159, 2009)
An employer corporation has an insurable interest on its manager
where the death of the manager will be detrimental to the
corporations operations. (El Oriente Fabrica de Tabacos vs.
Posada, 56 Phil 147, 1931)
2. In Property
A non-life insurance policy such as the fire insurance policy taken by
spouses Cha over their merchandise is primarily a contract of
indemnity. Insurable interest in the property insured must exist at
the time the insurance takes effect and at the time the loss occurs.
The basis of such requirement of insurable interest in property
insured is based on sound public policy: to prevent a person from
taking out an insurance policy on property upon which he has no
insurable interest and collecting the proceeds of said policy in case
of loss of the property. In such a case, the contract of insurance is a
mere wager which is void under Section 25 of the Insurance Code.
(Spouses Nilo Cha and Stella Uy Cha vs. Court of Appeals,
G.R. No. 124520. August 18, 1997)
With the transfer of the location of the subject properties, without
notice and without the insurers consent, after the renewal of the
policy, the insured clearly committed concealment, misrepresentation
and a breach of a material warranty. Section 26 of the Insurance Code
provides that a neglect to communicate that which a party knows and
ought to communicate, is called a concealment.
premium therefor has been paid, except where the obligee has
accepted the bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the premium has been
paid by the obligor to the surety. (Philippine Pryce Assurance
Corporation vs. Court Of Appeals, et al., G.R. No. 107062,
February 21, 1994)
Section 78 of the Insurance Code explicitly provides that an
acknowledgment in a policy or contract of insurance of the receipt
of premium is conclusive evidence of its payment, so far as to make
the policy binding, notwithstanding any stipulation therein that it
shall not be binding until the premium is actually paid. This Section
establishes a legal fiction of payment and should be interpreted as
an exception to Section 77. (American Homes Assurance vs.
Antonio Chua, G.R. 130421, June 28, 1999)
Section 77 of the Insurance Code of 1978 provides that an insurer is
entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. The first exception is provided
by Section 77 itself, and that is, in case of a life or industrial life
policy whenever the grace period provision applies. The second is
that covered by Section 78 of the Insurance Code, which provides
that any acknowledgment in a policy or contract of insurance of the
receipt of premium is conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding any stipulation therein
that it shall not be binding until premium is actually paid. A third
exception was laid down in Makati Tuscany Condominium
Corporation vs. Court of Appeals, wherein the Court ruled that
Section 77 may not apply if the parties have agreed to the payment
in installments of the premium and partial payment has been made
at the time of loss. Tuscany has also provided a fourth exception,
namely, that the insurer may grant credit extension for the payment
of the premium. This simply means that if the insurer has granted
the insured a credit term for the payment of the premium and loss
occurs before the expiration of the term, recovery on the policy
should be allowed even though the premium is paid after the loss
but within the credit term. Moreover, as a fifth exception, estoppel
bars it from taking refuge under said Section, since Masagana relied
in good faith on such practice. (Ucpb General Insurance Co. Inc.,
vs. Masagana Telemart, Inc., G.R. No. 137172, April 4, 2001)
FEBTC is estopped from claiming that the insurance premium has
been unpaid. FEBTC induced Maxilite and Marques to believe that
the insurance premium has in fact been debited from Maxilites
account. However, FEBTC failed to do so. FEBTCs conduct clearly
constitutes gross negligence in handling Maxilites and Marques
c. Breach of Warranties
The insurance company is barred by waiver (or rather estoppel) to
claim violation of the so-called fire hydrants warranty, for the reason
policy. Mere filing of such a claim will exonerate the insurer. (United
Merchants Corporation vs. Country Bankers Insurance
Corporation, G.R. No. 198588, July 11, 2012)
A perusal of the records shows that Usiphil Incorporated, after the
occurrence of the fire, immediately notified Finman Gen. Assurance
thereof. Thereafter, Usiphil Incorporated submitted the following
documents: (1) Sworn Statement of Loss and Formal Claim and; (2)
Proof of Loss. The submission of these documents, constitutes
substantial compliance. Indeed, as regards the submission of
documents to prove loss, substantial, not strict as urged by Finman
Gen. Assurance, compliance with the requirements will always be
deemed sufficient. (Finman Gen. Assurance vs. Court of
Appeals, 361 SCRA 214, 2001)
Plaintiff's verified claim totalled P31,860.85, of which, in accordance
with the terms of the policy, three-fourths was asked, or P23,895.64.
Dependant's inventory of the goods found after the fire came to
P13,113. The difference between plaintiff's claim and defendant's
estimate of the loss, which was confirmed in the trial court, was
P18,747.85. In connection with these figures plaintiff suggests too
low a valuation by the representatives of the defendant. Computed
at plaintiff's valuation, the goods inventoried by the defendant's
committee would amount to P19,346.30. There would, however, still
remain a considerable void between the two amounts, of
P12.514.55. In this case, the difference under one hypothesis is
about 50 per cent, and under another hypothesis, about 25 per
cent. Still that constitutes a serious discrepancy between the true
value of the property and that sworn to in the proofs of loss, and is
an outstanding fact to be considered as bearing upon the presence
of fraud. It is more than an honest misstatement, more than
inadvertence or mistake, more than a mere error in opinion, more
than a slight exaggeration, and in connection with all the
surrounding circumstances, discloses a material overvaluation made
intentionally and willfully. The insured cannot therefore recover.
(Tan It v. Sun Insurance, 51 Phil. 212, 1927)
2.
V. Transportation Laws
I. Transportation Laws
A. Common Carriers
There is no doubt that FPIC is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum products,
for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services,
and transports the goods by land and for compensation. The fact that
FPIC has a limited clientele does not exclude it from the definition of a
common carrier. (First Philippine Industrial Corporation vs.
Court of Appeals, G.R. No. 125948, 29 December 1989)
Article
1732
makes
no
distinction
between
one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
(in local Idiom as "a sideline"). It also carefully avoids making any
distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does it
distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. (Pedro De Guzman vs. Court of Appeals, G.
R. No. L-47822, 22 December 1988).
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention of Sanchez
Brokerage that it is not a common carrier but a customs broker whose
principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It
suffices that Sanchez Brokerage undertakes to deliver the goods for
pecuniary consideration. (A.F. Sanchez Brokerage Inc. vs. The
Hon. Court of Appeals, G.R. No. 147079, 21 December 2004)
There is no dispute that Cebu Salvage was a common carrier. At the
time of the loss of the cargo, it was engaged in the business of
carrying and transporting goods by water, for compensation, and
offered its services to the public. Cebu Salvage was the one which
contracted with MCCII for the transport of the cargo. It had control
over what vessel it would use. All throughout its dealings with MCCII,
it represented itself as a common carrier. The fact that it did not own
A customs broker whose services were engaged for the release and
withdrawal of the cargoes from the pier and their subsequent delivery
to the consignees warehouse and the owner of the delivery truck
whom the customs broker contracted to transport the cargoes to the
warehouse are both common carriers. The latter is considered a
common carrier in the absence of indication that it solely and
exclusively rendered services to the customs broker. Thus, when the
truck failed to deliver one of the cargoes, both the broker and owner of
the truck are liable. Being both common carriers, they are mandated
from the nature of their business and for reasons of public policy, to
observe the extraordinary diligence in the vigilance over the goods
transported by them according to all the circumstances of such case.
Thus, in case of loss of the goods, the common carrier is presumed to
have been at fault or to have acted negligently. Loadmasters
Customs Services, Inc. vs. Glodel Brokerage Corporation, GR
No. 179446, January 10, 2011
Persons engaged in the business of transporting students from their
respective residences to their school and back are considered common
carrier. Despite catering to a limited clientele, they operated as a
common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.
Spouses Perena vs Spouses Nicolas, GR No. 157917, August
29, 2012
1. Diligence Required of Common Carriers
Under Article 1733 of the Civil Code, common carriers from the nature
of their business and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the
safety of passengers transported by them according to all
circumstances of each case. Thus, under Article 1735 of the same
Code, in all cases other than those mentioned in Article 1734 thereof,
the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law. More importantly, common
carriers cannot limit their liability for injury or loss of goods where
such injury or loss was caused by its own negligence. Otherwise
stated, the law on averages under the Code of Commerce cannot be
applied in determining liability where there is negligence. (American
Home Assurance Company vs. The Court of Appeals, G.R. No.
94149, 5 May 1992)
Article 1736 of the Civil Code imposes upon common carriers the duty
to observe extraordinary diligence from the moment the goods are
unconditionally placed in their possession "until the same are
delivered, actually or constructively, by the carrier to the consignee
or to the person who has a right to receive them. However, in the bills
of lading issued for the cargoes in question, the parties agreed to
limit the responsibility of the carrier for the loss or damage by
inserting a stipulation stating that the carrier shall not be responsible
for loss or damage to shipments billed 'owner's risk' unless such loss
or damage is due to negligence of carrier. Since such stipulation is
valid, and there is nothing therein that is contrary to law, morals or
public policy, the absence of negligence on the part of its employees
exempt the carrier from liability for loss of goods due to fire.
(Amparo C. Servando, Clara Uy Bico vs. Philippine Steam
Navigation Co., G.R. No. L-36481-2, 23 October 1982)
A common carrier is presumed at fault in the absence of a
satisfactory explanation on how the airplane crash occured. (Vda. De
Abeto vs. Philippine Air Lines, Inc. 115 SCRA 489, 1982)
When a bus hit a tree and house due to the fast and reckless driving of
the bus driver resulting in injury to one of its passengers, the bus
owner is liable and such liability does not cease even upon proof that
he exercised all the diligence of a good father of family in the selection
and supervision of its employees. R Transport Corporation vs.
Pante, GR No. 162104, September 15, 2009
Though it is true that common carriers are presumed to have been at
fault or to have acted negligently if the goods transported by them are
lost, destroyed, or deteriorated, and that the common carrier must
prove that it exercised extraordinary diligence in order to overcome the
presumption, the plaintiff must still, before the burden is shifted to the
defendant, prove that the subject shipment suffered actual shortage.
This can only be done if the weight of the shipment at the port of origin
and its subsequent weight at the port of arrival have been proven by a
preponderance of evidence, and it can be seen that the former weight
is considerably greater than the latter weight, taking into consideration
the exceptions provided in Article 1734 of the Civil Code. Asian
Terminals, Inc vs. Simon Enterprises, Inc. GR No. 177116,
February 27, 2013
object, which was the transportation of the passenger from the place
of departure to the place of destination and back, which are also
stated in his ticket. Clearly therefore Singson was not a mere "chance
passenger with no superior right to be boarded on a specific flight,"
as erroneously claimed by Cathay and sustained by the Court of
Appeals. (Carlos Singson vs. Court of Appeals, G.R. No.
119995, November 18, 1997)
Spouses Vazquez had every right to decline the upgrade and insist on
the Business Class accommodation they had booked for and which
was designated in their boarding passes. They clearly waived their
priority or preference when they asked that other passengers be
given the upgrade. It should not have been imposed on them over
their vehement objection. By insisting on the upgrade, Cathay
breached its contract of carriage with Spouses Vazquez. (Cathay
Pacific Airways, Ltd., vs. Spouses Daniel Vazquez And Maria
Luisa Madrigal Vazquez, G.R. No. 150843, March 14, 2003)
When an airline issues a ticket to a passenger, confirmed for a
particular flight on a certain date, a contract of carriage arises. The
passenger has every right to expect that he be transported on that
flight and on that date, and it becomes the airlines obligation to carry
him and his luggage safely to the agreed destination without delay. If
the passenger is not so transported or if in the process of
transporting, he dies or is injured, the carrier may be held liable for a
breach of contract of carriage. (Philippine Airlines Inc. vs. Court
of Appeals, G.R. No. 123238, September 22, 2008)
It was established that the primary cause of the death of the
passenger of the jeepney was the negligence of the driver of the truck
which collided with the passenger jeepney. Thus, the truck owner is
liable for this failure to rebut the presumption of negligence in hiring
and supervision of his employee. Whenever an employees negligence
causes damage or injury to another, there instantly arises a
presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection or supervision of his
employee. Thus, in the selection of prospective employees, employers
are required to examine them as to their qualification, experience and
service record. With respect to the supervision of employees,
employers must formulate standard operating procedures, monitor
their implementation, and impose disciplinary measures for breaches
thereof. These facts must be shown by concrete proof. The Heirs of
the late Ruben Reinoso, Sr. vs. Court of Appeals, GR No.
116121, July 18, 2011
under the supervision of the carrier, the latter is liable for the damage
caused to the cargo.
The arrastre operator is likewise liable. The functions of an arrastre
operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ships
tackle. Being the custodian of the goods discharged from a vessel, an
arrastre operators duty is to take good care of the goods and to turn
them over to the party entitled to their possession. While it is true that
an arrastre operator and a carrier may not be held solidarily liable at all
times, the facts of these cases show that apart from the stevedores of
the arrastre operator being directly in charge of the physical unloading
of the cargo, its foreman picked the cable sling that was used to hoist
the packages for transfer to the dock. Moreover, the fact that the
packages were unloaded with the same sling unharmed is telling of the
inadequate care with which the stevedore handled and discharged the
cargo.Westwind Shipping Corporation vs. UCPB General
Insurance Co., GR no. 2002289, November 25, 2013
c. Temporary Unloading or Storage
4. Stipulation for Limitation of Liability
a. Void Stipulations
Condition No. 14 printed at the back of the passage tickets should be
held as void and unenforceable for first, it is not just and fair to bind
passengers to the terms of the conditions printed at the back of the
passage tickets, and second, Condition No. 14 subverts the public
policy on transfer of venue of proceedings of this nature, since the
same will prejudice rights and interests of innumerable passengers in
different parts of the country who, under Condition No. 14, will have
to file suits against Sweet Lines only in the City of Cebu. (Sweet
Lines, Inc. vs. Hon. Bernardo Teves, Presiding Judge, CFI of
Misamis Oriental, Branch VII, G.R. No. L-37750, 19 May 1978)
b. Limitation of Liability to Fixed Amount
c. Limitation of Liability in Absence of Declaration of Greater Value
The stipulation in the bill of lading limiting the common carrier's
liability to the value of the goods appearing in the bill, unless the
shipper or owner declares a greater value, is valid and binding. This
for instance, fails to take the witness stand and testify as to his social
humiliation, wounded feelings, anxiety, etc., moral damages cannot
be recovered. The rules applies, of course, to common carriers. (Pan
American World Airways, Inc. vs. Intermediate Appellate
Court, G.R. No. 68988. June 21, 1990)
In awarding moral damages for breach of contract of carriage, the
breach must be wanton and deliberately injurious or the one
responsible acted fraudulently or with malice or bad faith. Where in
breaching the contract of carriage the defendant airline is not shown
to have acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the breach of
obligation which the parties had foreseen or could have reasonably
foreseen. In that case, such liability does not include moral and
exemplary damages. Moral damages are generally not recoverable in
culpa contractual except when bad faith had been proven. However,
the same damages may be recovered when breach of contract of
carriage results in the death of a passenger. The award of exemplary
damages has likewise no factual basis. It is a requisite that the act
must be accompanied by bad faith or done in wanton, fraudulent or
malevolent mannercircumstances which are absent in this case. In
addition, exemplary damages cannot be awarded as the requisite
element of compensatory damages was not present. (Collin A.
Morris vs. Court of Appeals, G.R. No. 127957. February 21,
2001)
The rule is that moral damages are recoverable in a damage suit
predicated upon a breach of contract of carriage only where (a) the
mishap results in the death of a passenger and (b) it is proved that
the carrier was guilty of fraud and bad faith even if death does not
result. For having arrived at the airport after the closure of the flight
manifest, respondents employee could not be faulted for not
entertaining petitioners tickets and travel documents for processing,
as the checking in of passengers for SAS Flight SK 893 was finished.
There was no fraud or bad faith as would justify the courts award of
moral damages. (Collin A. Morris vs. Court of Appeals, G.R. No.
127957. February 21, 2001)
The law distinguishes a contractual breach effected in good faith from
one attended by bad faith. Where in breaching the contract, the
defendant is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable
consequences of the breach of the obligation and which the parties
had foreseen or could reasonably have foreseen; and in that case,
such liability would not include liability for moral and exemplary
damages. Under Article 2232 of the Civil Code, in a contractual or
overnight such that it could only have sustained the damage during
transit. Moreover, Aboitiz was able to immediately inspect the
damage while the matter was still fresh. In so doing, the main
objective of the prescribed time period was fulfilled. Thus, there was
substantial compliance with the notice requirement in this case.
(Aboitiz Shipping Corporation vs. Insurance Company of North
America, G.R. No. 168402, August 6, 2008)
4. Period for Filing Actions
In this jurisdiction, the filing of a claim with the carrier within the time
limitation therefor actually constitutes a condition precedent to the
accrual of a right of action against a carrier for loss of or damage to
the goods. The shipper or consignee must allege and prove the
fulfillment of the condition. If it fails to do so, no right of action
against the carrier can accrue in favor of the former. The
aforementioned requirement is a reasonable condition precedent; it
does not constitute a limitation of action. The requirement of giving
notice of loss of or injury to the goods is not an empty formalism. The
fundamental reasons for such a stipulation are (1) to inform the
carrier that the cargo has been damaged, and that it is being charged
with liability therefor; and (2) to give it an opportunity to examine the
nature and extent of the injury. This protects the carrier by affording
it an opportunity to make an investigation of a claim while the matter
is fresh and easily investigated so as to safeguard itself from false
and fraudulent claims. (Federal Express Corporation vs. American
Home Assurance Company, G.R. No. 150094, August 18, 2004)
The Court has construed the 24-hour claim requirement as a
condition precedent to the accrual of a right of action against a
carrier for loss of, or damage to, the goods. The shipper or consignee
must allege and prove the fulfillment of the condition. Otherwise, no
right of action against the carrier can accrue in favor of the shipper or
consignee. (Ucpb General Insurance Co., Inc., vs. Aboitiz
Shipping Corporation, et. Al., G.R. No. 168433, February 10,
2009)
The bills of lading unequivocally prescribes a time frame of thirty (30)
days for filing a claim with the carrier in case of loss of or damage to
the cargo and sixty (60) days from accrual of the right of action for
instituting an action in court, which periods must concur. As the
Cebu Salvage and MCCII entered into a "voyage charter," also known
as a contract of affreightment wherein the ship was leased for a
single voyage for the conveyance of goods, in consideration of the
payment of freight. Under a voyage charter, the shipowner retains
the possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his
payment of freight. An owner who retains possession of the ship
remains liable as carrier and must answer for loss or non-delivery of
the goods received for transportation. (Cebu Salvage Corporation
vs. Philippine Home Assurance Corporation, G.R. No. 150403,
January 25, 2007)
2. Liability of Ship Owners and Shipping Agents
The real and hypothecary nature of maritime law simply means that
the liability of the carrier in connection with losses related to maritime
contract is confined to the vessel, which is hypothecated for such
obligations or which stands as the guaranty for their settlement. The
only time the Limited Liability Rule does not apply is when there is an
actual finding of negligence on the part of the vessel owner or agent.
(Aboitiz Shipping Corporation vs. General Accident Fire and
Life Assurance Corporation Ltd., 217 SCRA 359, 1993)
In case of collision of vessels, in order to avail of the benefits of
Article 837 of the Code of Commerce the shipowner or agent must
abandon the vessel. In such case the civil liability shall be limited to
the value of the vessel with all the appurtenances and freight earned
during the voyage. However, where the injury or average is due to
the ship-owner's fault as in this case, the shipowner may not avail of
his right to limited liability by abandoning the vessel. (Luzon
Stevedoring Corporation vs. Court of Appeals, G.R. No. L58897, 3 December 1987)
The term "ship agent" as used in the foregoing provision is broad
enough to include the ship owner. Pursuant to said provision,
therefore, both the ship owner and ship agent are civilly and directly
liable for the indemnities in favor of third persons, which may arise
from the conduct of the captain in the care of goods transported, as
well as for the safety of passengers transported. However, under the
same Article, this direct liability is moderated and limited by the ship
agent's or ship owner's right of abandonment of the vessel and
earned freight. The most fundamental effect of abandonment is the
cessation of the responsibility of the ship agent/owner. The ship
owner's or agent's liability is merely co-extensive with his interest in
the vessel such that a total loss thereof results in its extinction. "No
vessel, no liability" expresses in a nutshell the limited liability rule.
The total destruction of the vessel extinguishes maritime liens as
there is no longer any res to which it can attach. (Chua Yek Hong
vs. Intermediate Appellate Court, G.R. No. 74811, 30
September 1988)
The LIMITED LIABILITY RULE cannot be availed of by the
charterers/sub-charterer in order to escape from their liability. The
Code of Commerce is clear on which indemnities may be confined or
restricted to the value of the vessel and these are the indemnities
in favor of third persons which may arise from the conduct of the
captain in the care of the goods which he loaded on the vessel. Thus,
what is contemplated is the liability to third persons who may have
dealt with the SHIPOWNER, the AGENT or even the CHARTERER in
case of demise or bareboat charter.
The Charterer cannot use the said Rule because the it does not
completely and absolutely step into the shoes of the shipowner or even
the ship agent because there remains conflicting rights between the
former and the real shipowner as derived from their charter
agreement. Therefore, even if the contract is for a bareboat or demise
charter where possession, free administration and even navigation are
temporarily surrendered to the charterer, dominion over the vessel
remains with the shipowner. Ergo, the charterer or the sub-charterer,
whose rights cannot rise above that of the former, can never set up the
Limited Liability Rule against the very owner of the vessel. Dela Torre
vs. Court of Appeals, GR No. 160088, July 13, 2011
Inasmuch as neither the Civil Code nor the Code of Commerce states
a specific prescriptive period on the matter, the Carriage of Goods by
Sea Act (COGSA) which provides for a one-year period of limitation
on claims for loss of, or damage to, cargoes sustained during transit
may be applied suppletorily to the case at bar. This one-year
prescriptive
period also applies to the insurer of the
goods. (Loadstar Shipping Co., Inc., vs. Court of Appeals, G.R.
No. 131621 September 28, 1999)
It is to be noted that the Civil Code does not of itself limit the liability
of the common carrier to a fixed amount per package although the
Code expressly permits a stipulation limiting such liability. Thus, the
COGSA which is suppletory to the provisions of the Civil Code, steps
in and supplements the Code by establishing a statutory provision
limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The
provisions of the Carriage of Goods by.Sea Act on limited liability are
as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the
parties. (Eastern Shipping Lines, Inc., vs. Intermediate
Appellate Court, G.R. No. L-69044 May 29, 1987)
It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier. In the
instant case, the damage or losses were incurred during the
discharge of the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or losses caused to
the shipment. Section 2 of the COGSA provides that under every
contract of carriage of goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody, care, and discharge of
such goods, shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the Act. Section 3 (2)
thereof which states that among the carriers responsibilities are to
properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried. (Philippine First Insurance Co. Inc.,
vs. Wallem Phils. Shipping, Inc., G.R. No. 165647, 26 March
2009)
Carriage of Goods by Sea Act is applicable up to the final port of
destination and that the fact that transshipment was made on an
interisland vessel did not remove the contract of carriage of goods
from the operation of said Act. (Sea-Land Service, Inc.,vs.
Intermediate Appellate Court, G.R. No. 75118 August 31,
1987)
c. Period of Prescription
The one-year period of limitation is designed to meet the exigencies
of maritime hazards. In a case where the goods shipped were neither
lost nor damaged in transit but were, on the contrary, delivered in
port to someone who claimed to be entitled thereto, the situation is
different, and the special need for the short period of limitation in
cases of loss or damage caused by maritime perils does not obtain.
(Mitsui O.S.K. Lines Ltd., represented by Magsaysay Agencies,
Inc. vs. Court of Appeals, G.R. No. 119571, March 11, 1998)
The one-year period within which the consignee should sue the
carrier is computed from "the delivery of the goods or the date when
the goods should have been delivered". The sensible and practical
interpretation is that delivery within the meaning of section 3(6) of
the Carriage of Goods by Sea Law means delivery to the arrastre
operator. That delivery is evidenced by tally sheets which show
whether the goods were landed in good order or in bad order, a fact
which the consignee or shipper can easily ascertain through the
customs broker. To use as basis for computing the one-year period the
delivery to the consignee would be unrealistic and might generate
confusion between the loss or damage sustained by the goods while
in the carrier's custody and the loss or damage caused to the goods
while in the arrastre operator's possession. (Union Carbide
it was the insurer which filed a claim against the carrier for
reimbursement of the amount it paid to the shipper. In the case at
bar, it was the shipper which filed a claim against the insurer. The
basis of the shipper's claim is the "all risks" insurance policies issued
by private respondents to petitioner Mayer. The ruling in Filipino
Merchants should apply only to suits against the carrier filed either by
the shipper, the consignee or the insurer. When the court said in
Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea
Act applies to the insurer, it meant that the insurer, like the shipper,
may no longer file a claim against the carrier beyond the one-year
period provided in the law. But it does not mean that the shipper may
no longer file a claim against the insurer because the basis of the
insurer's liability is the insurance contract. An insurance contract is a
contract whereby one party, for a consideration known as the
premium, agrees to indemnify another for loss or damage which he
may suffer from a specified peril. (Mayer Steel Pipe Corporation
vs. Court of Appeals, G.R. No. 124050 June 19, 1997)
The general provisions of the new Civil Code (Art. 1155 providing for
the interruption of the prescriptive period) cannot be made to apply in
a case under COGSA, as such application would have the effect of
extending the one-year period of prescription fixed in the law. It is
desirable that matters affecting transportation of goods by sea be
decided in as short a time as possible; the application of the
provisions of Article 1155 of the new Civil Code would unnecessarily
extend the period and permit delays in the settlement of questions
affecting transportation, contrary to the clear intent and purpose of
the law. (Dole Philippines, Inc. vs. Maritime Company of the
Philippines, G.R. No. L-61352 February 27, 1987)
Notwithstanding the fact that the case was filed beyond the one-year
prescriptive period provided under the COGSA, the suit ( against the
insurer ) will not be dismissed of the delay was not due the claimants
fault. Had the insurer processed and examined the claim promptly, the
claimant or the insurer itself, as subrogee, could have taken the judicial
action on time. By making an unreasonable demand for an itemized list
of damages which caused delay, the insurer should bear the loss with
interest, New World International Development Corporation vs
NYK-FilJapan Shipping Corporation, GR No. 171468, August 24,
2011
The term carriage of goods covers the period from the time when the
goods are loaded to the time when they are discharged from the ship;
thus, it can be inferred that the period of time when the goods have been
discharged from the ship and given to the custody of the arrastre
operator is not covered by the COGSA. Under the COGSA, the carrier and
the ship may put up the defense of prescription if the action for damages
is not brought within one year after delivery of the goods or the date
when the goods should have been delivered. However, the COGSA does
not mention than an arrastre operator may invoke the prescriptive
period; hence, it does not cover the arrastre operator. The arrastre
operators responsibility and liability for losses and damages are set forth
in the contract for cargo handling services executed between the
Philippine Ports Authority and Marina Port Services. Insurance
Company of North America vs. Asian Terminals, Inc. GR No.
180784, February 15, 2012
d. Limitation of Liability
Lastly, as to the liability of the carrier, it was reduced to to US$500
per package as provided in the Bill of Lading and by Section 4(5) of
COGSA. Stipulation in the bill of lading limiting to a certain sum the
common carrier's liability for loss or destruction of a cargo -- unless
the shipper or owner declares a greater value -- is sanctioned by
law. There are, however, two conditions to be satisfied: (1) the
contract is reasonable and just under the circumstances, and (2) it
has been fairly and freely agreed upon by the parties.The rationale
for this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods. (Belgian Overseas Chartering
and Shipping N.V. vs. Philippine First Insurance Co., Inc., G.R.
No. 143133, June 5, 2002)
F. The Warsaw Convention
1. Applicability
2. Limitation of Liability
The Warsaw Convention however denies to the carrier availment "of
the provisions which exclude or limit his liability, if the damage is
caused by his willful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered
to be equivalent to willful misconduct," or "if the damage is (similarly)
caused by any agent of the carrier acting within the scope of his
employment." The Hague Protocol amended the Warsaw Convention
by removing the provision that if the airline took all necessary steps
to avoid the damage, it could exculpate itself completely, and
declaring the stated limits of liability not applicable "if it is proved
that the damage resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or recklessly
and with knowledge that damage would probably result." The same
deletion was effected by the Montreal Agreement of 1966, with the
result that a passenger could recover unlimited damages upon proof
of willful misconduct. (Alitalia vs. Intermediate Appellate Court,
G.R. No. 71929, December 4, 1990)
Under Article 28 ( 1 ) of the Warsaw Convention, the plaintiff may
bring the action for damages before: 1) the court where carrier is
domiciled; 2 ) the court where the carrier has its principal place of
business; 3 ) the court where the carrier has an establishment by
which the contract has been made; or 4 ) the court of the place of
destination. In this case, it is not disputed that respondent is a British
corporation domiciled in London, United Kingdom with London as its
principal place of business. Hence, under the first and second
jurisdictional rules, the petitioner may bring her case before the
courts of London in the United Kingdom. In the passenger ticket and
baggage check presented by both the petitioner and respondent, it
appears that the ticket was issued in Rome, Italy. Consequently,
under the third jurisdictional rule, the petitioner has the option to
bring her case before the courts of Rome in Italy. Finally, both the
petitioner and respondent aver that the place of destination is Rome,
Italy, which is properly designated given the routing presented in the
said passenger ticket and baggage check. Accordingly, petitioner
may bring her action before the courts of Rome, Italy. Thus, the RTC
of Makati correctly ruled that it does not have jurisdiction over the
case filed by the petitioner even though it was based on tort and not
on breach of contract. Lhuillier vs British Airways, G.R. No.
171092, March 15, 2010.
a. Liability to Passengers
In its ordinary sense, "delay" means to prolong the time of or before;
to stop, detain or hinder for a time, or cause someone or something
to be behind in schedule or usual rate of movement in
progress. "Bumping-off," which is the refusal to transport passengers
with confirmed reservation to their planned and contracted
destinations, totally forecloses said passengers' right to be
transported, whereas delay merely postpones for a time being the
enforcement of such right. Consequently, Section 2, Article 30 of the
Warsaw Convention which does not contemplate the instance of
"bumping-off" but merely of simple delay, cannot provide a handy
excuse for Lufthansa as to exculpate it from any liability to Antiporda.
(Lufthansa German Airlines vs. Court of Appeals, G.R. No.
83612, November 24, 1994)
that an air carrier is not liable for the loss of baggage in an amount in
excess of the limits specified in the tariff which was filed with the
proper authorities, such tariff being binding on the passenger
regardless of the passengers lack of knowledge thereof or assent
thereto. This doctrine is recognized in this jurisdiction. (British
Airways vs. Court of Appeals, G.R. No. 121824, January 29,
1998)
Article 19 of the Warsaw Convention provides for liability on the part
of a carrier for damages occasioned by delay in the transportation
by air of passengers, baggage or goods. Article 24 excludes other
remedies by further providing that (1) in the cases covered by
articles 18 and 19, any action for damages, however founded, can
only be brought subject to the conditions and limits set out in this
convention. Therefore, a claim covered by the Warsaw Convention
can no longer be recovered under local law, if the statute of
limitations of two years has already lapsed. Nevertheless, the Court
notes that jurisprudence in the Philippines and the United States also
recognizes that the Warsaw Convention does not exclusively
regulate the relationship between passenger and carrier on an
international flight. The Court finds that the present case is
substantially similar to cases in which the damages sought were
considered to be outside the coverage of the Warsaw Convention.
(Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al., G.R.
No. 149547, July 4, 2008)
In United Airlines v. Uy, the Court distinguished between the (1)
damage to the passengers baggage and (2) humiliation he suffered
at the hands of the airlines employees. The first cause of action was
covered by the Warsaw Convention which prescribes in two years,
while the second was covered by the provisions of the Civil Code on
torts, which prescribes in four years. Had the present case merely
consisted of claims incidental to the airlines delay in transporting
their passengers, Grios Complaint would have been time-barred
under Article 29 of the Warsaw Convention. (Philippine Airlines
Inc. vs. Hon. Adriano Savillo, et. al., G.R. No. 149547, July 4,
2008)
c. Liability for Handcarried Baggage
3. Willful Misconduct
The Warsaw Convention however denies to the carrier availment of
the provisions which exclude or limit his liability, if the damage is
caused by his willful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered
to be equivalent to willful misconduct, or if the damage is similarly
caused by any agent of the carrier acting within the scope of his
employment. Under domestic law and jurisprudence (the Philippines
being the country of destination), the attendance of gross negligence
(given the equivalent of fraud or bad faith) holds the common carrier
liable for all damages which can be reasonably attributed, although
unforeseen, to the non-performance of the obligation, including moral
and exemplary damages. (Sabena World Airlines vs. Court of
Appeals, G.R. No. 104685, March 14, 1996)
VI. The Corporation Code
A. Corporation
1. Definition
A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence.
(Sec. 2, B.P. 68)
2. Attributes of the Corporation
When the corporation ( BB Sportswear, Inc. ) which the plaintiff
erroneously impleaded in a collection case was not the party to the
actionable agreement and turned out to be not registered with the
Securities and Exchange Commission, the judgment may still be
enforced against the corporation ( BB Footwear, Inc. ) which filed
the answer and participated in the proceedings, as well as its
controlling shareholder who signed the actionable agreement in his
personal capacity and as a single proprietorship doing business
under the trade name and style of BB Sportswear Enterprises.
Benny Hung vs BPI Finance Corporation . G.R. No. 182398,
20 July 2010
If the title over the land where the Hidden Valley Springs Resort is
located is registered in the name of the corporation, the heirs of a
stockholder who occupy houses built at the expense of the
and Tri-Star. Esses and Tri-Star, just like FBCI, are corporations. A
corporation has a personality distinct from that of its stockholders.
Properties registered in the name of the corporation are owned by it
as an entity separate and distinct from its members. (Ricardo S.
Silverio, jr., Esses Development Corporation, and Tri-Star
Farms, Inc. vs. Filipino Business Consultants, Inc., G.R. No.
143312, August 12, 2005)
The personality of a corporation is distinct and separate from the
personalities of its stockholders. Hence, its stockholders are not
themselves the real parties in interest to claim and recover
compensation for the damages arising from the wrongful
attachment of its assets. Only the corporation is the real party in
interest for that purpose. (Stronghold Insurance Company, Inc.
vs. Tomas Cuenca, et. al., G.R. No. 173297, March 6, 2013)
A corporation has its own legal personality separate and distinct
from those of its stockholders, directors or officers. Hence, absent
any evidence that they have exceeded their authority, corporate
officers are not personally liable for their official acts. Corporate
directors and officers may be held solidarily liable with the
corporation for the termination of employment only if done with
malice or in bad faith.(Rolando DS. Torres v. Rural Bank of San
Juan, Inc. et al., G.R. No. 184520, March 13, 2013)
In order for the Court to hold the officer of the corporation personally
liable alone for the debts of the corporation and thus pierce the veil of
corporate fiction, the Court has required that the bad faith of the
officer must first be established clearly and convincingly. Petitioner,
however, has failed to include any submission pertaining to any
wrongdoing of the general manager. Necessarily, it would be unjust to
hold the latter personally liable. Moreso, if the general manager was
never impleaded as a party to the case. Mercy Vda. de Roxas,
represented by Arlene C. Roxas-Cruz, in her capacity as
substitute appellant-petitioner v. Our Lady's Foundation, Inc.
G.R. No. 182378, March 6, 2013.
Where two banks foreclosed mortgages on certain properties of a
mining company and resumed business operations thereof by
organizing a different company to which the banks transferred the
foreclosed assets, the banks are not liable to a contractor which was
engaged by the re-organized mining company even though the latter is
wholly-owned by the two banks and they have interlocking directors,
officers and stockholders. While ownership by one corporation of all or
a great majority of stocks of another corporation and their interlocking
directorates may serve as indicia of control, by themselves and without
the two corporations are one and the same entity as when they have
the same President and controlling shareholder and it is generally
known in the place where they do business that both transportation
companies are one, the third party claim filed by the other corporation
was set aside and the levy on its property held valid even though the
latter was not made a party to the case . The judgment may be
enforced against the other corporation to prevent multiplicity of suits
and save the parties unnecessary expenses and delay. Gold Line
Tours vs. Heirs of Maria Concepcion Lacsa, GR No. 159108, 18
June 2012
The doctrine of piercing the veil of corporate fiction is applicable not
only to corporations but also to a single proprietorship as when the
corporation transferred its employees to the company owned by the
controlling stockholder of the corporation and yet despite the transfer,
the employees daily time records, reports, daily income remittances
and schedule of work were all made, performed, filed and kept in the
corporation. The corporation is clearly hiding behind the supposed
separate and distinct personality of the company. As such, the
corporation and the company should be solidarily liable for the claims
of the illegally dismissed employees. Prince Transport, Inc. vs.
Garcia, GR No. 167291, January 12, 2011
Although the corporate veil between two corporations can not be
pierced for lack of legal basis, it does not necessarily mean that the
corporate officers of such corporations are exempt from liability.
Section 31 of the Corporation Code makes a director or officer
personally liable if he is guilty of bad faith or gross negligence in
directing the affairs of the corporation. In this case, the officers of the
corporation who maliciously terminated the employment of certain
employees without any valid ground and in order to suppress their
right to self-organization, having acted in bad faith in directing the
affairs of the corporation, are solidarily liable with the corporation for
the unlawful dismissal. Park Hotel vs. Soriano, GR No. 171118,
September 10, 2012
Where the court rendered judgment against a stock brokerage firm
directing the latter to return shares of stock which it sold without
authority, but the writ of execution was returned unsatisfied, an alias
writ of execution could not be enforced against its parent company
because the court has not acquired jurisdiction over the latter and
while the parent company owns and controls the brokerage firm, there
is no showing that the control was used to violate the rights of the
plaintiff. Pacific Rehouse Corporation vs. Court of Appeals, GR.
No. 199687, March 24, 2014
Adoption
of
By-Laws
Insurance
And Guaranty Corporation, Emden Encarnacion
and Horatio Aycardo, G.R. No. 117188, August 7, 1997)
Conformably with Section 25 of the Corporation Code, a position
must be expressly mentioned in the By-Laws in order to be
considered as a corporate office. Thus, the creation of an office
pursuant to or under a By-Law enabling provision is not enough to
make a position a corporate office. (Matling Industrial and
Commercial Corporation, et al. vs. Ricardo R. Coros, G.R. No.
157802, October 13, 2010)
b. Requisites of Valid By-Laws
A provision in the by-laws of the corporation stating that of the 15
members of its Board of Directors, only 14 members would be
elected while the remaining member would be the representative of
an educational institution located in the village of the homeowners,
is invalid for being contrary to law. The fact that for fifteen years it
has not been questioned or challenged but, on the contrary,
appears to have been implemented by the members of the
association cannot forestall a later challenge to its validity because,
if it is contrary to law, it is beyond the power of the members of the
association to waive its invalidity(Grace Christian High
Schoolvs.the Court Of Appeals, Grace Village Association,
Inc., Alejandro G. Beltran, and Ernesto L. Go, G.R. No.
108905, 23 October 1997)
The Corporation does not necessarily prohibit the transfer of
proprietary shares by its members when its amended Articles of
Incorporation provides that: "No transfer shall be valid except
between the parties, and shall be registered in the Membership
Book unless made in accordance with these Articles and the ByLaws." The authority granted to a corporation to regulate the
transfer of its stock does not empower it to restrict the right of a
stockholder to transfer his shares by means of by-laws provisions,
but merely authorizes the adoption of regulations as to the
formalities and procedure to be followed in effecting transfer.
(Marsh Thomson vs. Court of Appeals and the American
Champer of Commerce of the Philippines, Inc,, G.R. No.
116631, October 28, 1998)
c. Binding Effects
CBC is not bound by the provision in the by-laws of the VGCCI
granting the VGCCI a preferred lien over the share of stock of a
member for unpaid dues. The by-law restricting the transfer of
of
Directors;
Manager,
Officer,
labor
case.
general manager and the corporation never questioned his acts and
even took time and effort to forward all the court documents to him.
The lawyer may not have been armed with a board resolution but
the doctrine of apparent authority imposes liability not as a result of
contractual relationship but rather because of the actions of the
principal or an employer in somehow misleading the public that the
relationship or the authority exists. Megan Sugar Corporation vs.
RTC of Ilo-ilo Br. 68, GR no. 170352, June 1, 2011
The doctrine of apparent authority provides that a corporation will
be estopped from denying the agents authority if it knowingly
permits one of its officers or any other agent to act within the scope
of an apparent authority, and it holds him out to the public as
possessing the power to do those acts.
Apparent authority is derived not merely from practice. Its existence
may be ascertained through (1) the general manner in which the
corporation holds out an officer or agent as having the power to act
or, in other words the apparent authority to act in general, with
which it clothes him; or (2) the acquiescence in his acts of a
particular nature, with actual or constructive knowledge thereof,
within or beyond the scope of his ordinary powers. It is not the
quantity of similar acts which establishes apparent authority, but
the vesting of a corporate officer with the power to bind the
corporation. When the sole management of the corporation was
entrusted to two of its officers/incorporators with the other officers
never had dealings with the corporation for 14 years and that the
board and the stockholders never had its meeting, the corporation
is now estopped from denying the officers authority to obtain loan
from the lender on behalf of the corporation under the doctrine of
apparent authority.
Advance Paper Corporation vs
Arma
Traders Corporation , G.R. No 176897, December 11, 2013.
4. Trust Fund Doctrine
In the instant case, the rescission of the Pre-Subscription Agreement
will effectively result in the unauthorized distribution of the capital
assets and property of the corporation, thereby violating the Trust
Fund Doctrine and the Corporation Code, since rescission of a
subscription agreement is not one of the instances when
distribution of capital assets and property of the corporation is
allowed. The Trust Fund Doctrine provides that subscriptions to the
capital stock of a corporation constitute a fund to which the
creditors have a right to look for the satisfaction of their claims.
(Ong Yong, et al. vs. David S. Tiu, et al., G.R. No. 144476 &
G.R. No. 144629, 8 April 2003)
faith; and (2) there must be proof that the officer acted in bad faith.
The fact that the corporation ceased its operations the day after the
promulgation of the SC resolution finding the corporation liable does
not prove bad faith on the part of the incorporator of the corporation.
Polymer Rubber Corporation vs. Ang, G.R. No. 185160. July 24,
2013
Although joint and solidary liability for money claims and damages
against a corporation attaches to its corporate directors and officers
under R.A. 8042, it is not automatic. To make them jointly and
solidarily liable, there must be a finding that they were remiss in
directing the affairs of the corporation, resulting in the conduct of
illegal activities. Absent any findings regarding the same, the
corporate directors and officers cannot be held liable for the
obligation of the corporation against the judgment debtor.
(Elizabeth M. Gaguivs. Simeon Dejeroand TeodoroPermejo,
G.R. No. 196036, October 23, 2013)
9. Responsibility for Crimes
The Trust Receipts Law recognizes the impossibility of imposing the
penalty of imprisonment on a corporation. Hence, if the entrustee is
a corporation, the law makes the officers or employees or other
persons responsible for the offense liable to suffer the penalty of
imprisonment. (Edward C. Ong, vs. the Court of Appeals and
the People of the Philippines, G.R. No. 119858, April 29,
2003)
Though the entrustee is a corporation, nevertheless, the law
specifically makes the officers, employees or other officers or
persons responsible for the offense, without prejudice to the civil
liabilities of such corporation and/or board of directors, officers, or
other officials or employees responsible for the offense. The
rationale is that such officers or employees are vested with the
authority and responsibility to devise means necessary to ensure
compliance with the law and, if they fail to do so, are held criminally
accountable; thus, they have a responsible share in the violations of
the law. (Alfredo Ching vs. the Secretary of Justice, et al., G.
R. No. 164317, February 6, 2006)
10. Inside Information
11. Contracts
a. By Self-Dealing Directors with the Corporation
b. Between Corporations with Interlocking Directors
Even if pre-emptive right does not exist either because the issue
comes within the exceptions in Section 39 of the Corporation Code
or because it is denied in the articles of incorporation, an issue of
shares may still be objectionable if the directors acted in breach of
trust and their primary purpose is to perpetuate or shift control of
the corporation or to freeze out the minority interest. The
issuance of unissued shares out of the original authorized capital
stock pursuant to a rehabilitation plan the propriety and validity of
which was on question by the minority stockholders and
subsequently disapproved by the court amounts to unlawful dilution
of the minority shareholdings. Majority of Stockholders of Ruby
Industrial Corporation vs Lim, GR No. 165887, June 6, 2011
e. Right to Vote
f. Right to Dividends
Stock dividends cannot be issued to one who is not a stockholder of
a corporation for payment of services rendered.(Nielson &
Company, Inc. vs.Lepanto Consolidated Mining Company,
G.R. No. L-21601, December 17, 1966)
Dividends are distributed to stockholders pursuant to their right to
share in corporate profits. When a dividend is declared, it belongs
to the person who is the substantial and beneficial owner of the
stock at the time regardless of when the distribution profit was
earned. (Nora A. Bitongvs. Court of Appeals, et al., G.R. No.
123553, July 13, 1998)
g. Right of First Refusal
A joint venture agreement giving to the shareholders the right to
purchase the shares of their co-shareholders before they are offered
to a third party does not violate the provision of the Constitution
limiting land ownership to Filipinos and Filipino corporations. If the
corporation still owns the land, the right of first refusal can be
validly assigned to a qualified Filipino entity in order to maintain the
60% - 40% ratio.(J.G. Summit Holdings, Inc. vs. Court of
Appeals, et al. G.R. No. 124293, January 31, 2005)
4. Remedial Rights
a. Individual Suit
b. Representative Suit
c. Derivative Suit
(2) He must have exerted all reasonable efforts, and alleges the same
with particularity in the complaint, to exhaust all remedies available
under the articles of incorporation, by-laws, laws or rules governing the
corporation or partnership to obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of;
and
(4) The suit is not a nuisance or harassment suit.
The complaint filed by a stockholder to compel another stockholder to settle
his share of the loan because this will affect the financial viability of the
corporation can not be considered as a derivative suit because the loan was
not a corporate obligation but a personal debt of the stockholders. The fact
that the stockholders attempted to constitute a mortgage over their
share in a corporate asset can not affect the corporation where the wordings
of the mortgage agreement reveal that it was signed by the stockholders in
their personal capacity as the owners of the pro-indiviso share in the
corporate property and not on behalf of the corporation. ANG, FOR AND IN
BEHALF OF SUNRISE MARKETING (BACOLOD), INC. V. SPS.
ANG.G.R. No.
201675, June 19, 2013
5. Obligation of a Stockholder
6. Meetings
a. Regular or Special
i. When and Where
ii. Notice
b. Who Calls the Meetings
c. Quorum
Quorum is based on the totality of the shares which have been
subscribed and issued, whether it be founders shares or common
shares. There is no gainsaying that the contents of the articles of
incorporation are binding, not only on the corporation, but also on
its shareholders. (Jesus V. Lanuza, et al.vs. Court of Appeals,
et al., G.R. No. 131394, March 28, 2005)
d. Minutes of the Meetings
I. Capital Structure
1. Subscription Agreements
A subscription contract necessarily involves the corporation as one
of the contracting parties since the subject matter of the transaction
Juan
T.
September
i. Full Payment
When a stockholder in a stock corporation subscribes to a certain
number of shares but does not pay the full amount for such shares,
a certificate of stock shall still be issued to him and he shall be
entitled to vote the shares even though they are not fully paid.
(Irineo S. Baltazar vs. Lingayen Gulf Electric Power, Co., Inc.,
G.R. No. L-16236, June 30, 1965)
ii. Payment Pro-Rata
e. Lost or Destroyed Certificates
6. Stock and Transfer Book
a. Contents
A stock and transfer book is necessary as a measure of precaution,
expediency and convenience since it provides the only certain and
accurate method of establishing the various corporate acts and
transactions and of showing the ownership of stock and like
matters. However, a stock and transfer book, like other corporate
books and records, is not in any sense a public record, and thus is
not exclusive evidence of the matters and things which ordinarily
are or should be written therein. (Jesus V. Lanuza, et al.vs. Court
of Appeals, et al., G.R. No. 131394, March 28, 2005)
b. Who May Make Valid Entries
In the absence of any provision to the contrary, the corporate
secretary is the custodian of corporate records. The transferor, even
though he may be the controlling stockholder cannot take the law
into his hands and cause himself the recording of the transfers of
the qualifying shares to his nominee-directors in the stock and
transfer book of the corporation.(Manuel A. Torres, Jr.,
(Deceased), et al. vs. Court of Appeals, et al., G.R. No.
120138, September 5, 1997)
7. Disposition and Encumbrance of Shares
a. Allowable Restrictions on the Sale of Shares
b. Sale of Partially Paid Shares
c. Sale of a Portion of Shares Not Fully Paid
d. Sale of All of Shares Not Fully Paid
e. Sale of Fully Paid Shares
merger, the seller and the purchaser are considered entities different
from one another. Thus, the purchaser company can not be held liable
for the payment of deficiency documentary stamp tax against the
seller company. Commission of Internal Revenue vs, Bank of
Commerce, GR No. 180529, November 25, 2013
2. Constituent vs. Consolidated Corporation
In consolidation, all the constituents are dissolved and absorbed by
the new consolidated enterprise, while in merger, all constituents,
except the surviving corporation, are dissolved. The surviving or
consolidated corporation assumes automatically the liabilities of the
dissolved corporations, regardless of whether the creditors have
consented or not to such merger or consolidation. (John F. McLeod
vs.National Labor Relations Commission (First Division), et
al., G.R. No. 146667, January 23, 2007)
3. Plan of Merger or Consolidation
4. Articles of Merger or Consolidation
5. Procedure
6. Effectivity
A merger is not effective unless it has been approved by the
Securities and Exchange Commission. (Philippine National Bank
& National Sugar Development Corporation vs. Andrada
Electric & Engineering Company, G.R. No. 142936, April 17,
2002)
The issuance of the certificate of merger is crucial because not only
does it bear out SECs approval but it also marks the moment when
the consequences of a merger take place. By operation of law, upon
the effectivity of the merger, the absorbed corporation ceases to
exist but its rights and properties, as well as liabilities, shall be
taken and deemed transferred to and vested in the surviving
corporation.(Mindanao Savings and Loan Association, Inc.,
represented by its Liquidator, the Philippine Deposit
Insurance Corporation vs. Edward Willkom; Gilda Go;
RemediosUy; MalayoBantuas, in his capacity as the Deputy
Sheriff of Regional Trial Court, Branch 3, Iligan City; and the
Register of Deeds of Cagayan de Oro City, G.R. No. 178618,
October 11, 2010)
7. Limitations
8. Effects
Although there is a dissolution of the absorbed corporations, there is
no winding up of their affairs or liquidation of their assets, because
the surviving corporation automatically acquires all their rights,
privileges and powers, as well as their liabilities. The fact that the
promissory note was executed after the effectivity date of the
merger does not militate against petitioner because the agreement
itself clearly provides that all contracts -- irrespective of the date of
execution -- entered into in the name of the absorbed corporation
shall be understood as pertaining to the surviving bank, herein
petitioner. (Associated Bank vs. Court of Appeals and Lorenzo
Sarmiento, Jr.,G.R. No. 123793, June 29, 1998)
It is more in keeping with the dictates of social justice and the State
policy of according full protection to labor to deem employment
contracts as automatically assumed by the surviving corporation in
a merger, even in the absence of an express stipulation in the
articles of merger or the merger plan. By upholding the automatic
assumption of the non-surviving corporations existing employment
contracts by the surviving corporation in a merger, the Court
strengthens judicial protection of the right to security of tenure of
employees affected by a merger and avoids confusion regarding the
status of their various benefits which were among the chief
objections of our dissenting colleagues. (Bank of the Philippine
Islands vs. BPI Employees Union-Davao Chapter-Federation
Of Unions In Bpi Unibank, G.R. No. 164301, October 19,
2011)
Citytrust, therefore, upon service of the notice of garnishment and
its acknowledgment that it was in possession of defendants' deposit
accounts became a "virtual party" to or a "forced intervenor" in the
civil case. As such, it became bound by the orders and processes
issued by the trial court despite not having been properly impleaded
therein. Consequently, by virtue of its merger with BPI , the latter,
as the surviving corporation, effectively became the garnishee, thus
the "virtual party" to the civil case. Bank of Philippine Islands v.
Lee, G.R. No. 190144, August 1, 2012
VII. Securities Regulation Code (R.A. No. 8799)
A. State Policy, Purpose
The rise and fall of stock market indices reflect to a considerable
degree the state of the economy. Securities transactions are
3. Fraudulent Transactions
4. Insider Trading
The term insiders now includes persons whose relationship or
former relationship to the issuer gives or gave them access to a fact
of special significance about the issuer or the security that is not
generally available, and one who learns such a fact from an insider
knowing that the person from whom he learns the fact is such an
insider. Insiders have the duty to disclose material facts which are
known to them by virtue of their position but which are not known
to persons with whom they deal and which, if known, would affect
their
investment
judgment. (Securities
and
Exchange
Commission vs. Interport Resources Corporation, et. al.,
G.R. No. 135808, October 6, 2008)
E. Protection of Investors
A public company, as contemplated by the SRC is not limited to a
company whose shares of stock are publicly listed; even companies
whose shares are offered only to a specific group of people, are
considered a public company, provided they fall under Subsec. 17.2
of the SRC, which provides: any corporation with a class of equity
securities listed on an Exchange or with assets of atleast Fifty Million
Pesos (P50,000,000.00) and having two hundred (200) or more
holders, at least two hundred (200) of which are holding at least one
hundred (100) shares of a class of its equity securities. Philippine
Veterans Bank meets the requirements and as such, is subject to
the reportorial requirements for the benefit of its shareholders.
(Philippine Veterans Bank v. Callangan, in her capacity
Director of the Corporation Finance Department of the
Securities and Exchange Commission and/or the Securities
and Ex-change Commission, G.R. No. 191995, August 3,
2011)
1. Tender Offer Rule
A tender offer is an offer by the acquiring person to stockholders of
a public company for them to tender their shares; it gives the
minority shareholders the chance to exit the company under
reasonable terms, giving them the opportunity to sell their shares at
the same price as those of the majority shareholders.
The
mandatory tender offer is still applicable even if the acquisition,
direct or indirect, is less than 35% when the purchase would result
in ownership of over 51% of the total outstanding equity securities
of the public company. (Cemco Holdings, Inc. vs. National Life
Constitution. (Central Bank vs. Court of Appeals, G.R. L50031-32, July 27, 1981)
The claim that the Central Bank, by suspending the banking
operations, had made it impossible for the bank to pay its debts, or
the further claim that it had fallen into a "distressed financial
situation," cannot in any sense excuse it from its obligation to remit
the time deposits of its depositors which matured before the banks
closure. (Overseas Bank of Manila vs. Court of Appeals, G.R.
No. L-45866, April 19, 1989)
The Central Bank Act vests authority upon the Central Bank and
Monetary Board to take charge and administer the monetary and
banking system of the country and this authority includes the power
to examine and determine the financial condition of banks for
purposes provided for by law, such as for the purpose of closure on
the ground of insolvency stated in Section 29 of the Central Bank
Act. Nonetheless, the authority given must not be exercised
arbitrarily such as to prematurely conclude that a bank is insolvent
if the basis for such conclusion is lacking and insufficient. (Banco
Filipino Savings and Mortgage Bank vs. Central Bank, G.R.
No. 70054, December 11, 1991)
Under R.A. No. 265, an examination is required to be made before
the Monetary Board could issue a closure order; however, under R.A.
No. 7653, prior notice and hearing are no longer required and a
report made by the head of the supervising and examining
department suffices for a bank to be closed and placed under
receivership. The purpose of the law is to make the closure of the
bank summary and expeditious for the protection of the public
interest. (Rural Bank of San Miguel vs. Monetary Board, G.R.
No. 150886, February 16, 2007)
Under the close now, hear later principle, the BSP can impose the
sanction of closure upon a bank even without prior notice and
hearing, which is grounded on practical and legal considerations to
prevent unwarranted dissipation of the banks assets and as a valid
exercise of police power to protect the depositors, creditors,
stockholders, and the general public. The remedy of the closed
bank is a subsequent one, which will determine whether the closure
of the bank was attended by grave abuse of discretion. (BSP
Monetary Board vs. Hon. Antonio-Valenzuela, G.R. No.
184778, October 2, 2009)
c. Receivership
The Monetary Board, upon finding that the bank failed to put up the
required capital to restore its solvency, prohibited a bank from doing
business and instructed the Acting Superintendent of Banks to take
charge of the assets of the bank.
When by reason of this
prohibition, only a portion of the loan approved by the bank was
released to its debtor, it also follows that the bank, in exercising its
right to foreclose the real estate mortgage, can only foreclose up to
the extent of the amount it released. (Central Bank of the
Philippines vs. Court of Appeals, G.R. No. L-45710, October
3, 1985)
As a rule, the execution of a judgment cannot be stayed. However,
in the present case, the respondent bank was placed under
receivership and to execute the judgment would unduly deplete the
assets of respondent bank; moreover, the assets of the insolvent
banking institution are held in trust for the equal benefit of all
creditors, and after its insolvency, one cannot obtain an advantage
or a preference over another by an attachment, execution or
otherwise. (Spouses Romeo Lipana and Milagros Lipana vs.
Development Bank of Rizal, G.R. No. 73884, September 24,
1987)
When a bank is placed under receivership, the appointed receiver is
tasked to take charge of the banks assets and properties and the
scope of the receivers power is limited to acts of administration.
The receivers act of approving the exclusive option to purchase
granted by the banks president is beyond the authority of the
former and as such, it cannot be considered a valid approval.
(Abacus Real Estate Development Center, Inc. vs. Manila
Banking Corp., G.R. No. 162270, April 06, 2005)
The Monetary Board may forbid a bank from doing business and
place it under receivership without prior notice and hearing it the
MB finds that a bank: (a) is unable to pay its liabilities as they
become due in the ordinary course of business; (b) has insufficient
realizable assets to meet liabilities; (c) cannot continue in business
without involving probable losses to its depositors and creditors;
and (d) has willfully violated a cease and desist order of the
Monetary Board for acts or transactions which are considered
unsafe and unsound banking practices and other acts or
transactions constituting fraud or dissipation of the assets of the
institution. (Alfeo D. Vivas, vs. Monetary Board and PDIC, G.R.
No. 191424, August 7, 2013)
d. Liquidation
When a collecting bank sued the drawee bank because the latter
had erroneously undercoded the amount of the check it presented
for clearing, the collecting bank cannot be allowed to examine the
account of the drawer of the check absent any showing that the
money in the said account is the subject matter of litigation. The
action filed by the collecting bank is not for the recovery of the
money contained in the deposit but for the recovery of the money
from the drawee bank as a result of the latters alleged failure to
inform the former of the discrepancy. (Union Bank of the
Philippines vs. Court of Appeals, G.R. No. 134699,
December 23, 1999)
3. Deposits Covered
When the account subject of the complaint is in the foreign
currency, such complaint filed for violation of R.A. No. 1405 did not
toll the running of the prescriptive period to file the appropriate
complaint for violation of R.A. No. 6426. The Law on Secrecy of
Bank Deposits (R.A. No. 1405) covers deposits under the Philippine
Currency; a separate and distinct law governs deposits under the
foreign currency (R.A. No. 6426). (Intengan vs. Court of Appeals,
G.R. No. 128996, February 15, 2002)
The deposits covered by the law on secrecy of bank deposits
should not be limited to those creating a creditor-debtor
relationship; the law must be broad enough to include deposits of
whatever nature which banks may use for authorized loans to third
persons. R.A. No. 1405 extends to funds invested such as those
placed in a trust account which the bank may use for loans and
similar transactions. (Ejercito vs. Sandiganbayan, G.R. Nos.
157294-95, November 30, 2006)
4. Exceptions
When pursuant to a court order garnishing the depositors funds, a
bank complied by delivering in check the amount garnished to the
sheriff, the bank cannot be held liable to its depositor. There is no
violation of the law on secrecy of bank deposits when the bank had
no choice but to comply with the court order for delivery of the
garnished amount. (RCBC vs. De Castro, G.R. No. L-34548,
November 29, 1988)
One of the exceptions under R.A. No. 1405 is when a court order is
issued for the disclosure of bank deposits in a case where the
money deposited is the subject matter of litigation. When the
subject matter is the money the bank transmitted by mistake, an
In every case, the depositor expects the bank to treat his account
with the utmost fidelity, whether such account consists only of a few
hundred pesos or of millions; the bank must record every single
transaction accurately, down to the last centavo, and as promptly
as possible. When the banks negligence caused the dishonor of the
checks issued by its client, which eventually resulted to the latters
embarrassment and financial loss, the bank should be held liable for
damages. (Simex International (Manila) Inc. vs. Court of
Appeals, 183 SCRA 360 (1990))
In the absence of any stipulation, the depositarys responsibility for
the safekeeping of the objects deposited would require the diligence
of a good father of a family; hence, any stipulation exempting the
depositary from any liability arising from the loss of the things
deposited on account of fraud, negligence or delay would be void
for being contrary to law and public policy. The banks negligence in
failing to notify the depositor aggravated the injury or damage to
the stamp collection which was inundated by floodwaters, thus, the
bank should be held liable. (Luzan Sia vs. Court of Appeals, G.R.
No. 102970, May 13, 1993)
The degree of diligence required of banks, which should be more
than that of a good father of a family is grounded on the fiduciary
nature of the relationship between the bank and its depositors on
account of the banks obligation as a depositary of its clients
deposits. Nevertheless, in a sale and issuance of foreign exchange
demand draft, the same degree of diligence is not required because
the nature of the transaction does not involve the banks fiduciary
relationship with its depositors. (Gregorio Reyes vs. Court of
Appeals, G.R. No. 118492, August 15, 2001)
When the bank teller has failed to return the passbook to its owner
or to the authorized representative of the depositor, the bank is
presumed to have failed to exercise and observe a higher degree of
diligence required of it, which makes it liable for the damage done
to the depositor. However, the banks liability can be mitigated by
the depositors contributory negligence when the latter allowed a
signed withdrawal slip to fall into the hands of an unauthorized
person. (Consolidated Bank and Trust Corporation vs. Court
of Appeals, G.R. No. 138569, September 11, 2003)
Allowing the pretermination of the account despite noticing
discrepancies in the signature and photograph of the person
claiming to be the depositor, accompanied by the failure to
surrender the original certificate of time deposit, amounted to
negligence on the part of the bank. A bank that fails to exercise the
are not ornamental; they lack the decorative quality or value that
must characterize authentic works of applied art and in actuality,
they are utility models, useful articles, albeit with no artistic design
or value. (Jessie Ching vs. William Salinas, et. al., G.R. No.
161295, June 29, 2005)
2. Non-Patentable Inventions
3. Ownership of a Patent
a. Right to a Patent
When petitioner never secured a patent for the light boxes, it
therefore acquired no patent rights which could have protected its
invention. The ultimate goal of a patent system is to bring new
designs and technologies into the public through disclosure; hence,
ideas, once disclosed to the public without protection of a valid
patent, are subject to appropriation without significant restraint.
(Pearl & Dean (Phil.), Inc. vs. Shoemart, Inc., G.R. No.
148222, August 15, 2003)
b. First-to-File Rule
c. Inventions Created Pursuant to a Commission
d. Right of Priority
4. Grounds for Cancellation of a Patent
5. Remedy of the True and Actual Inventor
6. Rights Conferred by a Patent
The tiles produced from respondents process are suitable for
construction and ornamentation, which previously had not been
achieved by tiles made out of the old process of tile making;
therefore, the said invention having brought about a new and useful
kind of tile, the patent is legally issued. With this, the act of
making, using and selling tiles embodying said patented invention
constitute infringement. (Domiciano Aguas vs. Conrado De
Leon, G.R. No. L-32160, January 30, 1982)
The validity of the patent issued by the Philippine Patent Office and
the question over the inventiveness, novelty and usefulness of the
improved model of the LPG burner are matters which are better
determined by the Patent Office. There is a presumption that the
Philippine Patent Office has correctly determined the patentability of
the model and such action must not be interfered with in the
a. Prior User
b. Use by the Government
8. Patent Infringement
a. Tests in Patent Infringement
i. Literal Infringement
To determine whether the particular item falls within the literal
meaning of the patent claims, the court must juxtapose the claims
of the patent and the accused product within the overall context of
the claims and specifications, to determine whether there is exact
identity of all material elements. Viewed from any perspective or
angle, the power tiller of the defendant is identical and similar to
that of the turtle power tiller of plaintiff in form, configuration,
design, appearance, and even
in the manner of operation.
(Pascual Godines vs. Court of Appeals, G.R. No. 97343,
September 13, 1993)
ii. Doctrine of Equivalents
Under the doctrine of equivalents, there is infringement if two
devices do the same work in substantially the same way, and
accomplish substantially the same result, even though they differ in
name, form, or shape. The reason for the doctrine of equivalents is
that to permit the imitation of a patented invention which does not
copy any literal detail would be to convert the protection of the
patent grant into a hollow and useless thing. (Pascual Godines vs.
Court of Appeals, G.R. No. 97343, September 13, 1993)
The doctrine of equivalents provides that an infringement takes
place when a device appropriates a prior invention by incorporating
its innovative concept and, although with some modification and
change, performs substantially the same function in substantially
the same way to achieve substantially the same result; it requires
satisfaction of the function-means-and-result test. In this case,
while both compounds have the effect of neutralizing parasites in
animals, identity of result does not amount to infringement of
patent unless Albendazole operates in substantially the same way
or by substantially the same means as the patented compound,
even though it performs the same function and achieves the same
result. (Smith Kline Beckman Corporation vs. Court of
Appeals, G.R. No. 126627, August 14, 2003)
C. Trademarks
A "trademark" is any word, name, symbol, emblem, sign or device
or any combination thereof adopted and used by a manufacturer or
merchant to identify his goods and distinguish them from those
manufactured, sold or dealt in by others; it is any visible sign
capable of distinguishing goods. The trademark is not merely a
symbol of origin and goodwill; it is often the most effective agent for
the actual creation and protection of goodwill. (Pribhdas J. Mirpuri
vs. Court of Appeals, G.R. No. 114508, November 19, 1999)
1. Definition of Marks, Collective Marks, Trade Names
2. Acquisition of Ownership of Mark
The name and container of a beauty cream product are proper
subjects of a trademark inasmuch as the same falls squarely within
its definition. In order to be entitled to exclusively use the same in
the sale of the beauty cream product, the user must sufficiently
prove that she registered or used it before anybody else did. The
petitioners copyright and patent registration of the name and
container would not guarantee her the right to the exclusive use of
the same for the reason that they are not appropriate subjects of
the said intellectual rights. (Elidad C. Kho, doing business under
the name and style of KEC Cosmetics Laboratory vs. Court of
Appeals, et. al., G.R. No. 115758, March 19, 2002)
AND DEVICE" especially considering the fact that both marks are
being used on almost the same products falling under Classes 29
and 30 of the International Classification of Goods i.e. Food and
ingredients of food. In this case, the common awareness or
perception of customers that the trademarks McDonalds mark and
MACJOY & DEVICE are one and the same, or an affiliate, or under the
sponsorship of the other is not far-fetched. (McDonalds
Corporation vs. Macjoy Fastfood Corporation, G.R. No.
166115, February 2, 2007)
Both the words PYCNOGENOL and PCO-GENOLS have the same
suffix GENOL which appears to be merely descriptive and furnish
no indication of the origin of the article and hence, open for
trademark registration by the plaintiff thru combination with
another word or phrase such as PYCNOGENOL. Although there were
dissimilarities in the trademark due to the type of letters used as
well as the size, color and design employed on their individual
packages/bottles, still the close relationship of the competing
products name in sounds as they were pronounced, clearly
indicates that purchasers could be misled into believing that they
are the same and/or originates from a common source and
manufacturer. (Prosource International, Inc. vs. Horphag
Research Management SA, G.R. No. 180073, November 25,
2009)
In applying the dominancy test, both confusion of goods and
confusion of business were apparent in both trademarks as the
mark Dermaline Dermaline, Inc. is confusingly similar with the
registered trademark Dermalin.
Dermalines stance that its
product belongs to a separate and different classification from
Myras products with the registered trademark does not eradicate
the possibility of mistake on the part of the purchasing public to
associate the former with the latter, especially considering that both
classifications pertain to treatments for the skin. (Dermaline, Inc.
Vs. Myra Phamaceuticals, Inc., G.R. No. 190065, August 1,
2010)
NANNY is confusingly similar to NAN, the prevalent feature of
Nestles line of infant powdered milk products which is is written in
bold letters and used in all products. The first three letters of
NANNY are exactly the same as the letters of NAN and when
NAN and NANNY are pronounced, the aural effect is confusingly
similar. (Soceite Des Produits Nestle, S.A. vs. Dy, Jr., G.R. No.
172276, August 8, 2010)
Unfair Competition
Mere similarity in the shape and size of the container and label does
not constitute unfair competition. SMC cannot claim unfair
competition arising from the fact that ABI's BEER PALE PILSEN is
sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles
absent any showing that the BEER PALE PILSEN is being passed off
as SAN MIGUEL PALE PILSEN. (Asia Brewery, Inc. vs. Court of
Appeals and San Miguel Corporation, G.R. No. 103543, July
5, 1993)
The essential elements of an action for unfair competition are (1)
confusing similarity in the general appearance of the goods, and (2)
intent to deceive the public and defraud a competitor. The confusing
similarity may or may not result from similarity in the marks, but
may result from other external factors in the packaging or
presentation of the goods. In this case, the intent to deceive and
defraud may be inferred from the fact that there was actually no
notice (on their plastic wrappers) to the public that the Big Mak
hamburgers
are
products
of
L.C.
Big
Mak
Burger,
Inc.(McDonalds Corporation vs. L.C. Big Mak Burger, Inc.,
G.R. No. 143993, August 18, 2004)
Hoarding does not relate to any patent, trademark, trade name or
service mark that the respondents have invaded, intruded into or
used without proper authority from the petitioner nor are the
respondents alleged to be fraudulently passing off their products
or services as those of the petitioner. The respondents are not also
alleged to be undertaking any representation or misrepresentation
that would confuse or tend to confuse the goods of the petitioner
with those of the respondents, or vice versa. What in fact the
petitioner alleges is an act foreign to the Code, to the concepts it
embodies and to the acts it regulates; as alleged, hoarding inflicts
unfairness by seeking to limit the oppositions sales by depriving it
of the bottles it can use for these sales. (Coca-Cola Bottlers
Philippines, Inc. (CCBPI), Naga Plant vs. Quintin Gomez, et,
al., G.R. No. 154491, November 14, 2008)
Unfair competition has been defined as the passing off (or palming
off) or attempting to pass off upon the public of the goods or
business of one person as the goods or business of another with the
end and probable effect of deceiving the public. The mere use of the
LPG cylinders for refilling and reselling, which bear the trademarks
"GASUL" and "SHELLANE" will give the LPGs sold by REGASCO the
general appearance of the products of the petitioners. (Republic
Gas Corporation (REGASCO), et. al. vs. Petron Corporation,
et. al., G.R. No. 194062, June 17, 2013)
12.
Collective Marks
D. Copyrights
At most, the certificates of registration and deposit issued by the
National Library and the Supreme Court Library serve merely as a
notice of recording and registration of the work but do not confer
any right or title upon the registered copyright owner or
automatically put his work under the protective mantle of the
copyright law; it is not a conclusive proof of copyright ownership.
Hence, when there is sufficient proof that the copyrighted products
are not original creations but are readily available in the market
under various brands, as in this case, validity and originality will not
be presumed. (Manly Sportwear Manufacturing, Inc. vs.
Dadodette Enterprises and/or Hermes Sports Center, G.R.
No. 165306, September 20, 2005)
1. Basic Principles, Sections 172.2, 175 and 181
2. Copyrightable Works
a. Original Works
b. Derivative Works
3. Non-Copyrightable Works
The format or mechanics of a television show is not included in the
list of protected works in Sec. 2 of P.D. No. 49, which is substantially
the same as Sec. 172 of the Intellectual Property Code (R.A. No,
8293). For this reason, the protection afforded by the law cannot be
extended to cover them. (Francisco Joaquin, Jr. vs. Franklin
Drilon, et. al., G.R. No. 108946, January 28, 1999)
Pearl & Deans copyright protection extended only to the technical
drawings and not to the light box itself as the latter does not fall
under the category of prints, pictorial illustrations, advertising
copies, labels, tags and box wraps. The light box was not a literary
or artistic piece which could be copyrighted under the copyright
law; and no less clearly, neither could the lack of statutory authority
to make the light box copyrightable be remedied by the simplistic
act of entitling the copyright certificate issued by the National
A. The Chattel Mortgage Law and Real Estate Mortgage Law (Excluded
and made a part of Civil Law coverage)
B. Anti-Money Laundering Act (R.A. No. 9160, as amended by R.A. No.
9194)
1. Policy of the Law
2. Covered Institutions
3. Obligations of Covered Institutions
4. Covered Transactions
5. Suspicious Transactions
6. When is Money Laundering Committed
7. Unlawful Activities or Predicate Crimes
Since the account of Glasgow in CSBI was (1) covered by several
suspicious transaction reports and (2) placed under the control of
the trial court upon the issuance of the writ of preliminary
injunction, the conditions provided in Section 12(a) of RA 9160, as
amended, were satisfied. A criminal conviction for an unlawful
activity is not a prerequisite for the institution of a civil forfeiture
proceeding. A finding of guilt for an unlawful activity is not an
essential element of civil forfeiture. (Republic of the Philippines
vs. Glasgow Credit and Collection Services, Inc., G.R. No.
170281, January 18, 2008)
Section 11 allows the AMLC to inquire into bank accounts without
having to obtain a judicial order in cases where there is probable
cause that the deposits or investments are related to kidnapping for
ransom, certain violations of the Comprehensive Dangerous Drugs
Act of 2002, hijacking and other violations under R.A. No. 6235,
destructive arson and murder.
Absent any of the mentioned
predicate crimes, a court order is necessary to inquire into bank
deposits. (Republic of the Philippines vs. Hon. Antonio
Eugenio, G.R. No. 174629, February 14, 2008)
NOTE: By virtue of R.A. No. 10168, Anti-Financing of Terrorism is now
included as one of the predicate crimes where a court order is not
necessary to examine or inquire into bank deposits.
8. Anti-Money Laundering Council
9. Functions
10.