DIVINA Survey of Recent Jurisprudence

RECENT JURISPRUDENCE IN COMMERCIAL LAW
( January 2012-December 31, 2015 )

DEAN NILO T. DIVINA
SPECIAL COMMERCIAL LAWS
Letter of credit
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.
Despite the fact that the issuing bank in a letter of credit has paid the beneficiary, it can not obtain
reimbursement from the applicant if the account officer of the bank did not sufficiently authenticate the
documents which would have entitled to the Bank to such right and the legal rights of the Bank and the
correlative legal duty of LCDC have not been sufficiently established by the Bank in view of the failure of
its evidence to show the provisions and conditions that govern its legal relationship with the applicant.
Metropolitan Bank And Trust Company vs. Ley Construction And Development Corporation, G.R. No.
185590 December 03, 2014
Trust receipts
The officer of the entrustee corporation who signed a guaranty agreement in his personal capacity and
waived the benefit of excussion is solidarily liable with the corporation despite his acquittal in the
criminal case.Crisologo vs. People of the Philippines, GR No. 199481, December 3, 2012
The sale of goods by a person in the business of selling goods, for profit, who at the outset of the
transaction, has as against the buyer, general property rights in such goods, or who sells goods to the
buyer on credit, retaining title or other interest as security for the payment of the purchase price, does
not constitute a trust receipt transaction. There is no trust receipt, notwithstanding the label, if goods
offered as security for a loan accommodation are goods sold by the debtor under a supposed trust receipt
transaction. Sps. Dela Cruz vs Dela Cruz, GR No. 158649, February 18, 2013
Under the Trust Receipts Law, intent to defraud is presumed when (1) the entrustee fails to turn over the
proceeds of the sale of goods covered by the trust receipt to the entruster; or (2) when the entrustee fails
to return the goods under trust, if they are not disposed of in accordance with the terms of the trust
receipts. When both parties know that the entrustee could not have complied with the obligations under
the trust receipt without his fault, as when the goods subject of the agreement were not intended for sale
or resale, the transaction cannot be considered a trust receipt but a simple loan, where the liability is
limited to the payment of the purchase price. (Land Bank of the Philippines vs. Perez, G.R. No. 166884,
June 13, 2012)
When both parties entered into an agreement knowing fully well that the return of the goods subject of
the trust receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt
transaction penalized under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of the RPC, as the only
obligation actually agreed upon by the parties would be the return of the proceeds of the sale
transaction. This transaction becomes a mere loan, where the borrower is obligated to pay the bank the
amount spent for the purchase of the goods. (Hur Tin Yang vs. People of the Philippines, G.R. No. 195117,
August 14, 2013)
BSP Law
Remedies/tools available to BSP
Under R.A .No. 7653, the power of the Monetary Board (MB) over banks, including rural banks, was
increased and expanded. The Court, in several cases, upheld the power of the MB to take over banks
without need for prior hearing. It is not necessary inasmuch as the law entrusts to the MB the appre-
ciation and determination of whether any or all of the statutory grounds for the closure and receiver-ship
of the erring bank are present. The MB, under R.A. No. 7653, has been invested with more power of
closure and placement of a bank under receivership for insolvency or illiquidity, or because the banks
continuance in business would probably result in the loss to depositors or creditors.
The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation of the
banks assets and as a valid exercise of police power to protect the depositors, creditors, stock-holders,
and the general public. Swift, adequate and determined actions must be taken against fi-nancially
distressed and mismanaged banks by government agencies lest the public faith in the banking system
deteriorate to the prejudice of the national economy. Vivas vs. Monetary Board of the BangkoSentral ng
PilipinasG.R. No. 191424, August 07, 2013.
The debts and liabilities of the bank under liquidation are to be paid in accordance with the rules on
concurrence and preference of credit under the Civil Code. With reference to the other real and per-
sonal property of the debtor, sometimes referred to as free property, the taxes and assessments due the
National Government, other than those in Articles 2241(1) and 2242(1) of the Civil Code, such as the
corporate income tax, will come only in ninth place in the order of preference. If the BIRs contention that
a tax clearance be secured first before the project of distribution of the assets of a bank under liquidation
may be approved, then the tax liabilities will be given absolute preference in all instances, including those
that do not fall under Articles 2241(1) and 2242(1) of the Civil Code. Philippine Deposit Insurance
Corporation vs. Bureau of Internal Revenue G.R. No. 172892, June 13, 2013
The character of BSPs determination of whether or not appropriate sanctions may be imposed upon
erring banks ( as when BSP ordered a bank to return collection of premiums from the proceeds of various
salary and pension loans of borrowers to guarantee payment of outstanding loans as the scheme violated
the GBL prohibiting banks from directly engaging in insurance business ) is an exercise of quasi-judicial
function. As such, this decision of the BSP Monetary Board cannot be a proper subject matter for a
petition for declaratory relief..The Honorable Monetary Board vs. Philippine Veterans Bank G.R. No.
189571, January 21, 2015
2016 Dean Nilo T. Divina, All Rights Reserved
2
General Banking Act
Extra-ordinary diligence obligation of banks
A banking institution serving as an originating bank for the Unified Home Lending Program (UHLP) of the
Government owes a duty to observe the highest degree of diligence and a high standard of integrity and
performance in all its transactions with its clients because its business is imbued with public interest.
Comsavings Bank vs Sps Capistrano. G.R. No. 170942, August 28, 2013.
The bank failed in its duty to exercise the highest degree of diligence by prematurely foreclosing the
mortgages and unwarrantedly causing the foreclosure sale of the mortgaged properties despite the
mortgagor not being yet in default. Development Bank of the Philippines vs. Guarina Agricultural and
Realty Development Corporation.G.R. No. 160758, January 15, 2014.
True, banks and other financing institutions, in entering into mortgage contracts, are expected to
exercise due diligence. The ascertainment of the status or condition of a property offered to it as security
for a loan must be a standard and indispensable part of its operations. In this case, however, no evidence
was presented to show that the bank was remiss in the exercise of the standard care and prudence
required of it or that it was negligent in accepting the mortgage. The bank could not likewise be faulted
for relying on the presumption of regularity of the notarized SPA when it entered into the subject
mortgage agreement.
A banking institution owes it to the respondents to observe the high standards of integrity and per-
formance in all its transactions because its business is imbued with public interest. The high standards are
also necessary to ensure public confidence in the banking system, for the stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks. Thus, a bank was duty
bound to comply with the terms and stipulations under its credit agreements with the respondents,
specifically the release of the amount of the additional loan in its entirety, lest it erodes public
confidence. Philippine National Bank vs. Spouses Eduardo And Ma. Rosario Tajonera, G.R. No. 195889,
September 24, 2014
A bank that suspended the credit card privileges of its cardholder who is updated on his fees but simply
failed to submit a new application form when such application is not specified as a condition for re-
activation of the card under the terms and conditions of the card membership agreement is liable for
damages to the cardholder. BPI Express Card Corporation vs. Ma. Antonia R. ArmovitG.R. No. 163654
October 8, 2014
As a business affected with public interest and by reason of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship. A bank that mismanages the trust accounts of its client cannot benefit from
the inaccuracies of the reports resulting therefrom; it cannot impute the consequence of its negligence to
the client which resulted to miscrediting of funds. (Land Bank of the Philippines vs. Emmanuel Oate, G.R.
No. 192371, January 15, 2014)
3
The mortgagee, as a banking institution, owed it to Guaria Corporation to exercise the highest degree of
diligence, as well as to observe the high standards of integrity and performance in all its transactions
because its business was imbued with public interest. The bank failed in its duty by prematurely
foreclosing the mortgages and unwarrantedly causing the foreclosure sale of the mortgaged properties
despite the mortgagor not being yet in default. (Development Bank of the Philippines vs. Guaria
Agricultural and Realty Development Corporation, G.R. No. 160758, January 15, 2014)
Right of redemption
The General Banking Law, a special and subsequent legislation shall apply in case of foreclosure pro-
ceedings involving banks.The right of redemption of foreclosed properties was a statutory privilege the
mortgagor enjoys. Redemption is by force of law, and the purchaser at public auction is bound to accept
it. Thus, it is the law that provides the terms of the right; the mortgagee cannot dictate them.
Consequently, the bank cannot alter that right by imposing additional charges and including other
loans.Asia Trust Development Bank v. Carmelo H. Tuble, G.R. No. 183987, July 25, 2012.
Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only
modified the time for the exercise of such right by reducing the one-year period originally provided in
Act No. 3135. The new redemption period commences from the date of foreclosure sale, and ex-pires
upon registration of the certificate of sale or three months after foreclosure, whichever is earli-er. There is
likewise no retroactive application of the new redemption period because Section 47 ex-empts from its
operation those properties foreclosed prior to its effectivity and whose owners shall retain their
redemption rights under Act No. 3135. Section 47 does not infringe on the equal protection clause nor
discriminate mortgagors/property owners who are juridical persons. One class may be treated differently
from another where the groupings are based on reasonable and real distinctions. The difference in the
treatment of juridical persons and natural persons was based on the nature of the properties foreclosed
whether these are used as residence, for which the more liberal one-year redemption period is retained,
or used for industrial or commercial purposes, in which case a shorter term is deemed necessary to reduce
the period of uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of
these acquired assets. In this context, the amendment introduced by Section 47 embodied one of such
safe and sound practices aimed at ensuring the solvency and liquidity of our banks. It cannot therefore be
disputed that the said provision amending the redemption period in Act 3135 was based on a reasonable
classification and germane to the purpose of the law. This legitimate public interest pursued by the
legislature further enfeebles petitioners impairment of contract theory. The right of redemption being
statutory, it must be exercised in the manner prescribed by the statute, and within the prescribed time
limit, to make it effective. Furthermore, as with other individual rights to contract and to property, it has
to give way to police power exercised for public welfare. Golden Gate way Merchandising vs. Equitable
PCI Bank. G.R. No. 195540, March 13, 2013
The redemption price comprises not only the total amount due under the mortgage deed, but also with
interest at the rate specified in the mortgage, and all the foreclosure expenses incurred by the mortgagee
bank. .Leonardo C. Castillo, Represented By Lennard V. Castillo vs. Security Bank Corporation G.R. No.
196118,July 30, 2014
Interest rate for loans
4
BSPs authority to remove ceiling on interest rates for loans and forbearance of money has long been
recognized to be valid. CB Circular No. 905 did not repeal but merely suspended the effectivity of the
Usury Law, thereby allowing the parties to freely stipulate on the rate of interest. Nonetheless, the lifting
of the ceilings for interest rates does not authorize stipulations charging excessive, unconscionable, and
iniquitous interest. (Advocates for Truth in Lending vs. BSP, G.R. No. 192986, January 15, 2013)
Secrecy of bank deposits
Section 2 of R.A. No. 1405, the Law on Secrecy of Bank Deposits, provides for exceptions when records of
deposits may be disclosed. These are under any of the following instances: (a) upon written permission of
the depositor, (b) in cases of impeachment, (c) upon order of a competent court in the case of bribery or
dereliction of duty of public officials or, (d) when the money deposited or invested is the subject matter of
the litigation, and (e) in cases of violation of the Anti-Money Laundering Act, the Anti-Money Laundering
Council may inquire into a bank account upon order of any competent court. The Joint Motion to
Approve Agreement was executed by BPI and TIDCORP only. There was no written consent given by Doa
Adela or its representative that it is waiving the confidentiality of its bank deposits.It is clear therefore
that Doa Adela is not bound by the said provision since it was without the express consent of Doa Adela
who was not a party and signatory to the said agreement. DOA ADELA EXPORT INTERNATIONAL, INC.
vs. TRADE AND INVESTMENT DEVELOPMENT CORPORATION.R. No. 201931, February 11, 2015, J.
Villarama, Jr.
CORPORATION LAW
Doctrine of Separate Legal Entity
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 corporate assets. Only the corporation is the real party
in interest for that purpose. Stronghold Insurance Company, Inc. v. Cuenca,G.R. No. 173297, March 6,
2013
The mere fact that the same controlling stockholder/officer signed the loan document on behalf of the
corporation does not prove that he exercised control over the finances of the corporation. Neither is the
absence of a board resolution authorizing him to contract the loan nor the Corporations failure to object
thereto support this conclusion. While he is the signatory of the loan and the money was delivered to him,
the proceeds of the loan were intended for the business plan of the corporation. That the business plan
did not materialize is also not a sufficient proof to justify a piercing, in the absence of proof that the
business plan was a fraudulent scheme geared to secure funds from the lender. NUCCIO SAVERIOS VS.
PUYAT, G.R. No. 186433, November 27, 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
5
foreclosed assets, the banks are not liable to a contractor 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. Development Bank of the Philippines vs. Hydro Resources Contractors Corporation, GR.
No. 167603, March 13, 2013
Where the respondent was adjudged liable to pay the contractor he hired pursuant to the management
contract respondent signed with the corporation to renovate its food outlets, respondents right of
reimbursement is only against the corporation which engaged him and does not extend to its acting
president and controlling shareholder. Even granting that the latter exercised a certain degree of control
over the finances, policies and practices of the company, in view of his position as president, chairman
and treasurer of the corporation, such control does not necessarily warrant piercing the veil of corporate
fiction since there was not a single proof that the company was formed to defraud another or that the
acting President was guilty of bad faith or fraud. WPM International Trading, Inc. vs. Fe Corazon Labayen,
G.R. No. 182770, September 17, 2014
The writ of sequestration issued against the assets of the corporation is not valid because the suit in the
civil case was against the shareholder in the corporation and is not a suit against the latter. Thus, the
failure to implead these corporations as defendants and merely annexing a list of such corporations to the
complaints is a violation of their right to due process for it would be, in effect, disregarding their distinct
and separate personality without a hearing.
Furthermore, the sequestration order issued against the corporation is deemed automatically lifted due
to the failure of the Republic to commence the proper judicial action or to implead them therein within
the period under the Constitution. PALM AVENUE HOLDING CO.,INC vs. SANDIGANBAYAN), G.R. No.
173082, August 6, 2014,
The corporation and its President cannot be considered one and the same employer just because in the
SSS form of the corporation the name of its President appeared as employer. Hacienda Cataywa vs.
Rosario Lorezo, G.R. No. 179640, March 18, 2015
Doctrine of Piercing the Corporate Veil
Areas where the doctrine applies

The doctrine of piercing the corporate veil applies only in three (3) basic instances, namely: a) when the
separate and distinct corporate personality defeats public convenience, as when the corporate fiction is
used as a vehicle for the evasion of an existing obligation; b) in fraud cases, or when the corporate entity
is used to justify a wrong, protect a fraud, or defend a crime; or c) is used in alter ego cases, i.e., where a
corporation is essentially a farce, since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation.
iii. elements of the alter-ego test
6
Piercing the corporate veil based on the alter ego theory requires the concurrence of three elements,
namely:
(1) Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal duty, or dishonest and unjust act in
contravention of plaintiffs legal right; and
(3) The aforesaid control and breach of duty must have proximately caused the injury or unjust loss
complained of Development Bank of the Philippines vs. Hydro Resources Contractors
Corporation, GR. No. 167603, March 13, 2013; WPM INTERNATIONAL TRADING, INC. vs. FE
CORAZON LABAYEN G.R. No. 182770, 17 September 2014
Case example
Petitioner Santos cannot be allowed to hide behind the corporate veil. When petitioner Arco Pulp and
Papers obligation to respondent became due and demandable, she not only issued an unfunded check
but also contracted with a third party in an effort to shift petitioner Arco Pulp and Papers liability. She
unjustifiably refused to honor petitioner corporations obligations to respondent. These acts clearly
amount to bad faith. In this instance, the corporate veil may be pierced, and petitioner Santos may be
held solidarily liable with petitioner Arco Pulp and Paper. ARCO PULP AND PAPER CO., INC. vs. DAN T.
LIM, DOING BUSINESS UNDER THE NAME AND STYLE OF QUALITY PAPERS & PLASTIC PRODUCTS
ENTERPRISES G.R. No. 206806, 25 June 2014
Should the court first acquire jurisdiction over the corporation involved before its separate legal
personality may be disregarded?
The Court must first acquire jurisdiction over the corporation or corporations involved before its or their
separate personalities are disregarded; and the doctrine of piercing the veil of corporate entity can only
be raised after a full-blown trial over a cause of action duly commenced involving parties duly brought
under the authority of the court by way of service of summons or what passes as such service. Kukan
International Corporation vs Reyes, GR No. 182729, September 29, 2010, J VELASCO
In one case, Supreme Court ruled that if the RTC had sufficient factual basis to conclude that 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 they 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
While a third party mortgagor is liable only up to the extent of the value of the property, piercing the
7
corporate veil is warranted when a corporation ceased to exist only in name as it re-emerged in the
person of another corporation for the purpose of evading its unfulfilled obligation under a compromise
agreement. Thus, if the judgment for money claim could not be enforced against the employer
corporation, an alias writ may be enforced against the other corporation considering the indubitable link
between the closure of the corporation and of the other. Livesey vs Binswanger Philippines, GR No.
177493, March 19, 2014
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
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 199687, March 24, 2014
Compliance with the recognized modes of acquisition of jurisdiction can not be dispensed with in
piercing the veil of corporate fiction. In an action for subrogation against the travel agent after the
insurer paid the formers obligation to IATA for unremitted collections, the insurer can not hold an
unimpleaded corporation liable as it would offend due process. Pioneer Insurance Surety Corporation vs
Morning Star Travel and Tours, GR No. 198436, July 08, 2015
NB. There appears to be a lack of conclusive yardstick as to when the court may pierce the veil of
corporate fiction of a corporation which has not been brought to its jurisdiction by summons, voluntary
appearance or other recognized modes of acquiring jurisdiction. For academic purposes, it depends on
the similarity with the facts of each case.
effects
While a third party mortgagor is liable only up to the extent of the value of the mortgaged property, such
third party mortgagor may be required to pay the deficiency between the loan obligation and the
proceeds of the sale if it is only an instrumentality or alter ego of the borrower corporation. The two
corporations were treated as one entity because of the following factors : a ) both corporations are family
corporations of the same controlling shareholder; b) the two corporation share the same office and
practically transact their business from the same place; c ) they had a common President; d ) the
promissory notes were signed by the same person as President of the borrower corporation and President
of the mortgagor corporation; and, e ) the assets of the two corporations are co-mingled. Heirs of Fe Tan
Uy vs. International Exchange Bank, February 13, 2013
Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract

entered into by the corporations they represent if there are allegations of bad faith or malice in their acts
representing the corporation even though the arbitral agreement only covers the corporations. This is
because when the allegations of bad faith or malice in the acts of corporate representatives are proven,
then the corporation and the corporate representatives become one and the same. Gerardo Lanuza, Jr.
And Antonio O. Olbes vs. Bf Corporation, G.R. No. 174938, October 01, 2014
Classes of Corporations
Corporation by estoppel
8
a. concept
Corporation by estoppel results when a corporation represented itself to the public as such despite its
not being incorporated. A corporation by estoppel may be impleaded as a party defendant considering
that it possesses attributes of a juridical person, otherwise, it can not be held liable for damages and
injuries it may inflict to other persons. Macasaet vs. Francisco, GR No. 156759, June 5, 2013
Government owned and controlled corporation
i. Chartered GOCC
ii. Non-Chartered GOCC
GOCCs are stock or non-stock corporations vested with functions relating to public needs that are owned
and controlled by the government directly or through instrumentalities. By definition, three attributes
thus make an entity a GOCC; first, its organization as stock or non-stock corporation; second the public
character of its function; and third, government ownership over the same. Possession of all three
attributes is necessary to deem an entity a GOCC. The Manila Economic Council and Cultural Office is not
a GOCC because it is not owned by the government. It was organized as a non-stock corporation.
However, despite its non-governmental character, it handles government funds in the form of verification
fees it collects on behalf of DOLE and the consular fees it collects. Hence, these accounts of MECO should
be audited by COA Dennis AB vs. Manila Economic and Cultural Office, GR no. 193462, February 4, 2014
Nationality of Corporations
There are two cases in determining the nationality of the Investee Corporation. The first case is the
liberal rule, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and pertains to the
portion in said Paragraph 7 of the 1967 SEC Rules which states, (s)hares belonging to corporations or
partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of
Philippine nationality. Under the liberal Control Test, there is no need to further trace the ownership of
the 60% (or more) Filipino stockholdings of the Investing Corporation since a corporation which is at least
60% Filipino-owned is considered as Filipino.
The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said
Paragraph 7 of the 1967 SEC Rules which states, but if the percentage of Filipino ownership in the
corporation or partnership is less than 60%, only the number of shares corresponding to such percentage
shall be counted as of Philippine nationality. Under the Strict Rule or Grandfather Rule Proper, the
combined totals in the Investing Corporation and the Investee Corporation must be traced (i.e.,
grandfathered) to determine the total percentage of Filipino ownership.
The control test is still the prevailing mode of determining whether or not a corporation is a Filipino
corporation. However, when in the mind of the Court there is doubt, based on the attendant facts and
circumstances of the case, in the 60-40 Filipino-equity ownership in the corporation, then it may apply
the grandfather rule. NARRA NICKEL MINING AND DEVELOPMENT CORPvs. REDMONT
CONSOLIDATED MINES CORP.G.R. No. 195580, 21 April 2014 J. VELASCO
9
The Control Test can be, as it has been, applied jointly with the Grandfather Rule to determine the
observance of foreign ownership restriction in nationalized economic activities. The Control Test and the
Grandfather Rule are not, as it were, incompatible ownership-determinant methods that can only be
applied alternative to each other. Rather, these methods can, if appropriate, be used cumulatively in the
determination of the ownership and control of corporations engaged in fully or partly nationalized
activities, as the mining operation involved in this case or the operation of public utilities as
in Gamboa or Bayantel.
The Grandfather Rule, standing alone, should not be used to determine the Filipino ownership and
control in a corporation, as it could result in an otherwise foreign corporation rendered qualified to
perform nationalized or partly nationalized activities. Hence, it is only when the Control Test is first
complied with that the Grandfather Rule may be applied. Put in another manner, if the subject
corporations Filipino equity falls below the threshold 60%, the corporation is immediately considered
foreign-owned, in which case, the need to resort to the Grandfather Rule disappears.
On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity requirement can
be considered a Filipino corporation if there is no doubt as to who has the beneficial ownership and
control of the corporation. In that instance, there is no need for a dissection or further inquiry on the
ownership of the corporate shareholders in both the investing and investee corporation or the application
of the Grandfather Rule. As a corollary rule, even if the 60-40 Filipino to foreign equity ratio is apparently
met by the subject or investee corporation, a resort to the Grandfather Rule is necessary if doubt exists as
to the locus of the beneficial ownership and control. In this case, a further investigation as to the
nationality of the personalities with the beneficial ownership and control of the corporate shareholders in
both the investing and investee corporations is necessary. NARRA NICKEL MINING AND DEVELOPMENT
CORP vs. REDMONT CONSOLIDATED MINES CORP. G.R. No. 195580, 28 January 2015 J VELASCO
The grandfather rule is only employed when the 60% Filipino ownership is in doubt. In this case, not even
the slightest doubt is cast since the petition is severely wanting in facts and circumstances that raise
legitimate challenges to the Joint venture companys 60-40 Filipino ownership. The application of the
control test then will yield the result that the JV Company is a Philippine national. Querubin vs. COMELEC,
GR. NO. 218787, December 80 2015 J VELASCO
Corporate Name-Limitations on Use of Corporate Name
To fall within the prohibition of the law regarding the use of corporate name under Article 18 of the
Corporation Code, two requisites must be proven, to wit:
1. that the complainant corporation acquired a prior right over the use of such corporate name; and
2. the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law, or (c) patently deceptive, confusing
or contrary to existing law.
10
In this case, respondent was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family Bank.
Petitioner, on the other hand, was incorporated as GSIS Family - Thrift Bank only in 2002, or at least
seventeen (17) years after respondent started using its name.
The second requisite likewise obtains on two points:

the proposed name is (a) identical or (b) deceptive or confusingly similar to that of any existing
corporation or to any other name already protected by law.
Petitioner's corporate name is "GSIS Family BankA Thrift Bank" and respondent's corporate name is
"BPI Family Bank." The only words that distinguish the two are "BPI," "GSIS," and "Thrift." The first two
words are merely the acronyms of the proper names by which the two corporations identify themselves;
and the third word simply describes the classification of the bank. The overriding consideration in
determining whether a person, using ordinary care and discrimination, might be misled is the
circumstance that both petitioner and respondent are engaged in the same business of banking. "The
likelihood of confusion is accentuated in cases where the goods or business of one corporation are the
same or substantially the same to that of another corporation." GSIS Family Bank-Thrift Bank vs BPI Family
Bank, GR No. 175278, September 23, 2015
The mere change in the corporate name is not considered under the law as the creation of a new
corporation; hence, the renamed corporation remains liable for the illegal dismissal of its employee
separated under that guise. Verily, the amendments of the articles of incorporation of Zeta to change the
corporate name to Zuellig Freight and Cargo Systems, Inc. did not produce the dissolution of the former
as a corporation. (Zuellig Freight and Cargo Systemsvs. National Labor Relations Commission, et al., G.R.
No. 157900, July 22, 2013)
Board of Directors and Officers
Solidary liability will attach to the directors, officers or employees of the corporation in certain
circumstances, such as:
1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for or
assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in
directing the corporate affairs; and (c) are guilty of conflict of interest to the prejudice of the
corporation, its stockholders or members, and other persons;
2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary his written objection
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally
and solidarily liable with the corporation; or
4. When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action.
Before a director or officer of a corporation can be held personally liable for corporate obligations,
however, the following requisites must concur:
11
1) the complainant must allege in the complaint that the director or officer assented to patently
unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith;
and
2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.
Thus, the President of the corporation cannot be held personally liable if the complaint merely averred
that he signed as a surety to secure the obligation of the corporation and which surety turned out to be
spurious. Heirs of Fe Tan Uy vs. International Exchange Bank Feb 13, 2013
The execution of a document by a bank manager called pagares which guaranteed purchases on credit
by a client is contrary to the General Banking law which prohibits bank officers from guaranteeing loans
of bank clients. United Coconut Planters Bank vs. Planters Products Inc. GR No. 179015, 13 June 2012
To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) it
must be alleged in the complaint that the director or officer assented to patently unlawful acts of the
corporation or that the officer was guilty of gross negligence or bad 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
Absent any evidence that they have exceeded their authority, corporate officers are not personally liable
for their official acts. The lack of valid cause of the dismissal of an employee does not ipso fac-to mean
that the corporate officers acted with malice or bad faith. Torres vs. Rural Bank of San Juan G.R. No.
184520, March 13, 2013
In a complaint for nullification of mortgage and foreclosure with damages against the mortgagee-bank,
the plaintiff cannot compel the officers of the bank to appear and testify as plaintiffs initial witnesses
unless written interrogatories are first served upon the bank officers. This is in line with the Rules of Court
provision that calling the adverse party to the witness stand is not allowed unless writ-ten interrogatories
are first served upon the latter. This is because the officers of a corporation are considered adverse
parties as well in a case against the corporation itself based on the principle that corporations act only
through their officers and duly authorized agents. Spouses Afulugencia vs. Metropolitan Bank and Trust
Co. G.R. No. 185145, February 05, 2014
Meetings
The Board Resolution did not give any director the authority to act as corporate representative in the sale
as the meeting of the board of directors where such was passed was conducted without giving any notice
to another director. This is in violation of Section 53 of the Corporation Code which re-quires sending of
notices for regular or special meetings to every director.As a result, a meeting of the board of directors is
legally infirm if there is failure to comply with the requirements or formalities of the law or the
corporations by laws and any action taken on such meeting may be challenged as a consequence.
Notwithstanding, the actions taken in such a meeting by the directors or trustees may be ratified ex-
pressly or impliedly. In the case of ratification, it means that the principal voluntarily adopts, con-firms
12
and gives sanction to some unauthorized act of its agent on its behalf. Lopez Realty, Inc. And Asuncion
Lopez-Gonzales vs. Spouses Reynaldo Tanjangco And Maria Luisa Arguelles-Tanjangco G.R. No. 154291,
November 12, 2014
Doctrine of apparent authority
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.
Under the doctrine of apparent authority, a bank is liable to the seller who transferred ownership of his
property in favor of its buyer after the seller relied on the letter of the bank manager that the buyer had
an approved real estate loan with the bank and guaranteed that subsequent releases from the loan would
be made directly to the seller but the manager released the loan instead to the buyer who, however,
failed to pay the seller. Games and Garment Developers vs Allied Banking Corporation, GR No. 181426,
July 13, 2015
The doctrine of apparent authority finds no application in this case. The board of directors, not the
president, exercises corporate power. While in the absence of a charter or bylaw provision to the contrary
the president is presumed to have authority, the questioned act should still be within the domain of the
general objectives of the company's business and within the scope of his or her usual duties. Here,
PRHTAI is an association of professional horse trainers in the Philippine horse racing industry organized as
a non-stock corporation and it is committed to the uplifting of the economic condition of the working
sector of the racing industry. It is not in its ordinary course of business to enter into housing projects,
especially not in such scale and magnitude so massive as to amount to P101,150,000.00. Philippine Race
Horse Trainers Association vs Piedras Negras Construction and Development Corporation, GR No.
192659, December 2, 2015
General Powers, Theory of General Capacity
The general rule is that a corporation can only exercise its powers and transact its business through its
board of directors and through its officers and agents when authorized by a board resolution or its bylaws.
13
The power of a corporation to sue and be sued is exercised by the board of directors. The physical acts of
the corporation, like the signing of documents, can be performed only by natural persons duly authorized
for the purpose by corporate bylaws or by a specific act of the board. Absent the said board resolution, a
petition may not be given due course. Esguerra vs. Holcim Philippines G.R. No. 182571, September 2,
2013
Specific Powers, Theory of Specific Capacity
Power to Sell or Dispose of Corporate Assets
There are two types of corporate acquisitions: asset sales and stock sales. In asset sales, the corporate
entity sells all or substantially all of its assets to another entity. In stock sales, the individual or corporate
shareholders sell a controlling block of stock to new or existing shareholders.
In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected employees, but is
liable for the payment of separation pay under the law. The buyer in good faith, on the other hand, is not
obliged to absorb the employees affected by the sale, nor is it liable for the payment of their claims. The
most that it may do, for reasons of public policy and social justice, is to give preference to the qualified
separated personnel of the selling firm.
In contrast with asset sales, in which the assets of the selling corporation are transferred to another entity,
the transaction in stock sales takes place at the shareholder level. Because the corporation possesses a
personality separate and distinct from that of its shareholders, a shift in the composition of its
shareholders will not affect its existence and continuity.
Thus, notwithstanding the stock sale, the corporation continues to be the employer of its people and
continues to be liable for the payment of their just claims. Furthermore, the corporation or its new
majority shareholders are not entitled to lawfully dismiss corporate employees absent a just or authorized
cause. SME BANK INC, vs. GASPAR, G.R. No. 186641, October 8, 2013
The first exception under the Nell Doctrine, where the transferee corporation expressly or impliedly
agrees to assume the transferor's debts, is provided under Article 2047 of the Civil Code. When a person
binds himself solidarily with the principal debtor, then a contract of suretyship is produced. Necessarily,
the corporation which expressly or impliedly agrees to assume the transferor's debts shall be liable to the
same.
The second exception under the doctrine, as to the merger and consolidation of corporations, is well-
established under Sections 76 to 80, Title X of the Corporation Code. If the transfer of assets of one
corporation to another amounts to a merger or consolidation, then the transferee corporation must take
over the liabilities of the transferor.
Another exception of the doctrine, where the sale of all corporate assets is entered into fraudulently to
escape liability for transferor's debts, can be found under Article 1388 of the Civil Code. It provides that
whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for
damages suffered. Thus, if there is fraud in the transfer of all the assets of the transferor corporation, its
creditors can hold the transferee liable.
14
The legal basis of the last in the four (4) exceptions to the Nell Doctrine, where the purchasing
corporation is merely a continuation of the selling corporation, is challenging to determine.
In other words, in this last exception, the transferee purchases not only the assets of the transferor, but
also its business. As a result of the sale, the transferor is merely left with its juridical existence, devoid of
its industry and earning capacity. Fittingly, the proper provision of law that is contemplated by this
exception would be Section 40 of the Corporation Code.
The purpose of the business-enterprise transfer is to protect the creditors of the business by allowing
them a remedy against the new owner of the assets and business enterprise. Otherwise, creditors would
be left "holding the bag," because they may not be able to recover from the transferor who has
"disappeared with the loot," or against the transferee who can claim that he is a purchaser in good faith
and for value. Based on the foregoing, as the exception of the Nell doctrine relates to the protection of
the creditors of the transferor corporation, and does not depend on any deceit committed by the
transferee -corporation, then fraud is certainly not an element of the business enterprise doctrine. Y-I
Leisure Philippines vs James Yu, GR No. 207161, September 8, 2015
Right of Inspection
There is no cogent reason why Section 144 of the Corporation Code cannot be made to apply to
violations of the right of a stockholder to inspect the stock and transfer book of a corporation under
Section 74(4) given the already unequivocal intent of the legislature to penalize violations of a parallel
right, i.e., the right of a stockholder or member to examine the other records and minutes of a
corporation under Section 74(2). Certainly, all the rights guaranteed to corporators under Section 74 of
the Corporation Code are mandatory for the corporation to respect.
A perusal of the second and fourth paragraphs of Section 74, as well as the first paragraph of the same
section, reveal that they are provisions that obligates a corporation: they prescribe what books or records
a corporation is required to keep; where the corporation shall keep them; and what are the other
obligations of the corporation to its stockholders or members in relation to such books and
records. Hence, by parity of reasoning, the second and fourth paragraphs of Section 74, including the
first paragraph of the same section, can only be violated by a corporation.
It is clear then that a criminal action based on the violation of the second or fourth paragraphs of Section
74 can only be maintained against corporate officers or such other persons that are acting on behalf of
the corporation. Violations of the second and fourth paragraphs of Section 74 contemplates a situation
wherein a corporation, acting thru one of its officers or agents, denies the right of any of its stockholders
to inspect the records, minutes and the stock and transfer book of such corporation.
However, petitioners are not actually invoking their right to inspect the records and the stock and
transfer book of STRADEC under the second and fourth paragraphs of Section 74. What they seek to
enforce is the proprietary right of STRADEC to be in possession of such records and book. Such right,
though certainly legally enforceable by other means, cannot be enforced by a criminal prosecution based
15
on a violation of the second and fourth paragraphs of Section 74. That is simply not the situation
contemplated by the second and fourth paragraphs of Section 74 of the Corporation Code. ADERITO Z.
YUJUICO AND BONIFACIO C. SUMBILLA vs. CEZAR T. QUIAMBAO AND ERIC C. PILAPIL, G.R. No.
180416, 02 June 2014
The right of the shareholder to inspect the books and records of the petitioner should not be made
subject to the condition of a showing of any particular dispute or of proving any mismanagement or other
occasion rendering an examination proper, but if the right is to be denied, the burden of proof is upon
the corporation to show that the purpose of the shareholder is improper, by way of defense.
Among the purposes held to justify a demand for inspection are the following: (1) To ascertain the
financial condition of the company or the propriety of dividends; (2) the value of the shares of stock for
sale or investment; (3) whether there has been mismanagement; (4) in anticipation of shareholders'
meetings to obtain a mailing list of shareholders to solicit proxies or influence voting; (5) to obtain
information in aid of litigation with the corporation or its officers as to corporate transactions.
Among the improper purposes which may justify denial of the right of inspection are: (1) Obtaining of
information as to business secrets or to aid a competitor; (2) to secure business "prospects" or investment
or advertising lists; (3) to find technical defects in corporate transactions in order to bring "strike suits" for
purposes of blackmail or extortion.
In general, however, officers and directors have no legal authority to close the office doors against
shareholders for whom they are only agents, and withhold from them the right to inspect the books which
furnishes the most effective method of gaining information which the law has provided, on mere doubt or
suspicion as to the motives of the shareholder. While there is some conflict of authority, when an
inspection by a shareholder is contested, the burden is usually held to be upon the corporation to
establish a probability that the applicant is attempting to gain inspection for a purpose not connected
with his interests as a shareholder, or that his purpose is otherwise improper. The burden is not upon the
petitioner to show the propriety of his examination or that the refusal by the officers or directors was
wrongful, except under statutory provisions. Terelay Investment and Development Corporation vs Cecilia
Teresita Yulo, GR. No. 160924, August 05, 2015
Remedial Rights
Derivative Suit
Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra Corporate Controversies imposes the
following requirements for derivative suits:
1. He was a stockholder or member at the time the acts or transactions subject of the action
occurred and at the time the action was filed;
2. He 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
16
4. The suit is not a nuisance or harassment suit.
Although the shareholdings of petitioners are indeed only two out of the 409 alleged outstanding shares
or 0.24%, the Court has held that it is enough that a member or a minority of stockholders file a derivative
suit for and in behalf of a corporation.
With regard, however, to the second requisite, we find that petitioners failed to state with particularity in
the Complaint that they had exerted all reasonable efforts to exhaust all remedies available under the
articles of incorporation, by-laws, and laws or rules governing the corporation to obtain the relief they
desire. The Complaint contained no allegation whatsoever of any effort to avail of intra-corporate
remedies. Indeed, even if petitioners thought it was futile to exhaust intra-corporate remedies, they
should have stated the same in the Complaint and specified the reasons for such opinion. Failure to do so
allows the RTC to dismiss the Complaint, even motu proprio, in accordance with the Interim Rules. The
requirement of this allegation in the Complaint is not a useless formality which may be disregarded at
will.
The wordings of Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies are simple and do not leave room for statutory construction. The second paragraph thereof
requires that the stockholder filing a derivative suit should have exerted all reasonable efforts 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; and to allege such fact with particularity in the
complaint. The obvious intent behind the rule is to make the derivative suit the final recourse of the
stockholder, after all other remedies to obtain the relief sought had failed. NESTOR CHING vs. SUBIC
BAY GOLF AND COUNTRY CLUB, INC. G.R. No. 174353 September 10, 2014
The fifth requisite for filing derivative suits, while not included in the enumeration, is implied in the first
paragraph of Rule 8, Section 1 of the Interim Rules: The action brought by the stockholder or member
must be "in the name of [the] corporation or association. ..." This requirement has already been settled in
jurisprudence.
Where the corporation assigned its lease option to another without valuable consideration and the
assignee it turn leased the property for which he was paid rentals, the complaint can not be considered a
derivative suit if the minority stockholder of the assignor-corporation did not allege in his complaint that
he is suing on a derivative cause of action on behalf of the corporation and all other shareholders similarly
situated who wish to join [him] and the corporation was not made a party to the case. ALFREDO L.
VILLAMOR, JR., vs. JOHN S. UMALEG.R. Nos. 172843 & 172881, 24 September 2014
Petitioners seek the nullification of the election of the Board of Directors composed of herein
respondents, who pushed through with the election even if petitioners had adjourned the meeting
allegedly due to lack of quorum. Petitioners are the injured party, whose rights to vote and to be voted
upon were directly affected by the election of the new set of board of directors. The party-in-interest are
the petitioners as stockholders, who wield such right to vote. The cause of action devolves on petitioners,
not the condominium corporation, which did not have the right to vote. Hence, the complaint for
nullification of the election is a direct action by petitioners, who were the members of the Board of
Directors of the corporation before the election, against respondents, who are the newly-elected Board
of Directors. Under the circumstances, the derivative suit filed by petitioners in behalf of the
17
condominium corporation is improper. Legaspi Towers 300, vs. Muer, G.R. No. 170783, June 18, 2012
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
Shares of Stocks
Section 63 of the Corporation Code provides that shares of stock so issued are personal property and may
be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or
other person legally authorized to make the transfer. The failure of the stockholder to deliver the stock
certificate to the buyer within a reasonable time the shares covered by the stock certificate should have
been delivered is a substantial breach that entitles the buyer to rescind the sale under Article 1191 of the
Corporation Code . It is not entirely correct to say the sale had already been consummated as the buyer
already enjoyed the rights a shareholder can exercise. The enjoyment of these rights will not suffice where
the law, by its express terms, requires a specific form to transfer ownership. Fil-Estate Golf and
Development vs. Vertex Sales and Trading Inc., G.R. No. 202079, June 10, 2013
The Corporation whose shares of stock are the subject of a transfer transaction (through sale, assignment,
donation, or any other mode of conveyance) need not be a party to the transaction, as may be inferred
from the terms of Section 63 of the Corporation Code. However, to bind the corporation as well as third
parties, it is necessary that the transfer is recorded in the books of the corporation. In a share purchase
transaction, the parties are the seller and buyer of the shares. Not being a party to the sale, the
Corporation is in no position to appeal the ruling rescinding the sale of the shares. If the Seller of the
shares filed no appeal against the court decision declaring the rescission of the sale, then the rescission is
deemed final despite any appeal by the corporation whose shares of stock are the subject of the transfer
transaction. Forest Hills Golf & Country Club vs. Vertex Sales and Trading Inc.G.R. No. 202205, March 6,
2013.
Under the two-tiered test, the government, thru PCGG, may vote sequestered shares if there is a prima
facie evidence that the shares are ill-gotten and there is imminent danger of dissipation of assets while
the case is pending. However, the two- tiered test contemplates a situation where the registered
stockholders were in control and had been dissipating company assets and the PCGG wanted to vote the
sequestered shares to save the company. It does not apply when the PCGG had voted the shares and is in
control of the sequestered corporation AFRICA V. THE HON. SANDIGANBAYAN , G.R. Nos. 172222/G.R. No.
174493/ G.R. No. 184636, November 11, 2013
KMergers and Consolidations
18
Through the service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced
intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to com-pliance with
all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the
court.
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
Where the purchase and sale of identified assets between two companies under a Purchase and Sale
Agreement does not constitute a 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
No merger took place between Bancommerce and TRB as the requirements and procedures for a merger
were absent. A merger does not become effective upon the mere agreement of the constituent
corporations. All the requirements specified in the law must be complied with in order for merger to take
effect. Section 79 of the Corporation Code further provides that the merger shall be effective only upon
the issuance by the Securities and Exchange Commission (SEC) of a certificate of merger.
No de facto merger took place in the present case simply because the TRB owners did not get in
exchange for the banks assets and liabilities an equivalent value in Bancommerce shares of stock.
Bancommerce and TRB agreed with BSP approval to exclude from the sale the TRBs contingent judicial
liabilities, including those owing to RPN, et al.
The dissenting opinion of Justice Mendoza cites certain instances indicating the existence of a de
facto merger in this case. One of these is the fact that the P & A Agreement involved substantially all the
assets and liabilities of TRB. But while this is true, such fact alone would not prove the existence of a de
facto merger because a corporation does not really lose its juridical entity on account of such sale.
Actually, the law allows a corporation to sell, lease, exchange, mortgage, pledge or otherwise dispose of
all or substantially all of its properties and assets including its goodwill to another corporation. This is not
merger because it recognizes the separate existence of the two corporations that transact the sale.
If one corporation sells or otherwise transfers all its assets to another corporation, the latter is not liable
for the debts and liabilities of the transferor if it has acted in good faith and has paid adequate
consideration for the assets, except: (1) where the purchaser expressly or impliedly agrees to assume such
debts; (2) where the transaction amounts to a consolidation or merger of the corporations; (3) where the
purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction
is entered into fraudulently in order to escape liability for such debts. BANK OF COMMERCE vs. RADIO
PHILIPPINES NETWORK, G.R. No. 195615, 21 April 2014.
Corporation Sole
19
Any corporation sole may purchase and hold real estate and personal property for its church, chari-table,
benevolent or educational purposes, and may receive bequests or gifts for such purposes. Such
corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from
the Court of First Instance of the province where the property is situated; x xx Provided, That in cases
where the rules, regulations and discipline of the religious denomination, sect or church, reli-gious
society or order concerned represented by such corporation sole regulate the method of ac-quiring,
holding, selling and mortgaging real estate and personal property, such rules, regulations and discipline
shall control, and the intervention of the courts shall not be necessary.Iglesia Filipina Independiente vs.
Heirs of Bernardino TaezaG.R. No. 179597, February 3, 2014
Non-Stock Corporations
Although Sec. 108 of the Corporation Code, second paragraph thereof sets the term of the members of
the Board of Trustees of non-stock educational corporation at five years, it likewise contains a proviso
expressly subjecting the duration to what is otherwise provided in the articles of incorporation or by-laws
of the corporation. That contrary provision controls on the term of office. Thus, at the time of petitioners
removal, he was already occupying the office in a hold-over capacity, and could be removed at any time,
without cause, upon the election or appointment of his successor.Barayuga v. Adventist University of the
Philippines,G.R. No. 168008, August 17, 2011
Dissolution and Liquidation
Pursuant to Section 145 of the Corporation Code, an existing intra-corporate dispute, which does not
constitute a continuation of corporate business, is not affected by the subsequent dissolution of the
corporation. The dissolution of the corporation simply prohibits it from continuing its business. However,
despite such dissolution, the parties involved in the litigation are still corporate actors. The dissolution
does not automatically convert the parties into total strangers or change their intra-corporate
relationships. Neither does it change or terminate existing causes of action, which arose because of the
corporate ties between the parties. Thus, a cause of action involving an intra-corporate controversy
remains and must be filed as an intra-corporate dispute despite the subsequent dissolution of the
corporation. Aguirre vs. FQB +7, Inc, GR No. 170770, January 9 2013.
The executed releases, waivers and quitclaims are valid and binding upon the parties notwithstanding the
fact that these documents were signed six years after the Corporations revocation of the Certificate of
Incorporation. These documents are thus proof that the employees had received their claims from their
employer-corporation in whose favor the release and quitclaim were issued. The revocation of the
corporation does not mean the termination of its liabilities to these employees. Section 122 of the
Corporation Code provides for a three-year winding up period for a corporation whose charter is
annulled by forfeiture or otherwise to continue as a body corporate for the purpose, among others, of
settling and closing its affairs As such, these liabilities are obligations of the dissolved corporation and not
of the corporation who contracted the services of the dissolved corporation. VIGILLA, ET AL.VS. PHILIPPINE
COLLEGE OF CRIMINOLOGY INC. G.R. No. 200094, June 10, 2013
20
There is nothing in the said cases which allows an already defunct corporation to initiate a suit after the
lapse of the said three-year period. On the contrary, the factual circumstances in the abovecited cases
would show that the corporations involved therein did not initiate any complaint after the lapse of the
three-year period. In fact, as stated above, the actions were already pending at the time that they lost
their corporate existence.
In the present case, petitioner filed its complaint not only after its corporate existence was terminated
but also beyond the three-year period allowed by Section 122 of the Corporation Code. Thus, it is clear
that at the time of the filing of the subject complaint petitioner lacks the capacity to sue as a
corporation. ALABANG CORPORATION, DEVELOPMENT vs. ALABANG HILLS VILLAGE ASSOCIATION
G.R. No. 187456, 02 June 2014,
Foreign Corporations
The appointment of a distributor in the Philippine is not sufficient to constitute doing business unless it is
under the full control of the foreign corporation. If the distributor is an independent entity which buys
and distributes products, other than those of the foreign corporation, for its own name and its own
account, the latter can not be considered doing business. SteelCase vs. Design International Selections,
GR no. 171995, April 18, 2012
SECURITIES REGULATION CODE (R.A.No. 8799)
Securities Required to Be Registered
A cease and desist order may only be issued by the Commission after proper investigation or
verification, and upon showing that the acts sought to be restrained could result in injury or fraud to the
investing public. Without doubt, these requisites were duly satisfied by the SEC prior to its issuance of
the subject cease and desist order.
It is beyond dispute that Primasa plans were not registered with the SEC. Primanila was then barred from
selling and offering for sale the said plan product. A continued sale by the company would operate as
fraud to its investors, and would cause grave or irreparable injury or prejudice to the investing public,
grounds which could justify the issuance of a cease and desist order under Section 64 of the SRC.
PRIMANILA PLANS, INC., HEREIN REPRESENTED BY EDUARDO S. MADRID vs. SECURITIES AND
EXCHANGE COMMISSION G.R. No. 193791, 02 August 2014
Liabilities in case of sale of unregistered securities
Under Section 62 of the SRC, no action shall be maintained to enforce any liability created under Section
56 of the SRC ( False registration statement ) and Section 57 ( sale of unregistered security and liabilities
arising in connection with prospectus, communication and other reports ) unless brought within two ( 2 )
years after discovery of the untrue statement or omission or after the violation upon which it is based but
not more than five ( 5 ) years after the security was bona fide offered to the public or more than 5 years
after the sale, respectively. However, it should be noted that the civil liabilities provided in the SRC are
not limited to Sections 56 and 57. Clearly, the intent is to encompass in Section 62 the prescriptive
21
periods only of the civil liability in cases of violations of the SRC. Given the absence of prescriptive period
for the enforcement of criminal liability in violations of SRC, ACT No. 3326, the law applicable to offenses
under special laws, applies. Under Section 73 of the SRC, violation of its provisions is punishable by
imprisonment of not less than seven years nor more than 21 years. Applying ACT no. 3326, criminal
prosecution for violations of SRC prescribes in 12 years. Citibank N.A. vs. TANCO-GABALDON, et al. G.R.
No. 198444, September 4, 2013
Civil suits falling under the SRC ( like liability for selling unregistered securities ) are under the exclusive
original jurisdiction of the RTC and hence, need not be first filed before the SEC, unlike criminal cases
wherein the latter body exercises primary jurisdiction. Pua vs. Citibank, N. A. G.R. No. 180064,
September 16, 2013
The violation of Section 28 of the SRC has the following elements: a ) engaging in the business of buying
or selling securities as a broker or dealer; or b ) acting as salesman; or c) acting as associated person of
any broker or dealer unless registered as such with the SEC. Thus, a person is liable for violating Section
28 of the SRC where acting as a broker, dealer or salesman, is in the employ of a corporation which sold or
offered for sale unregistered securities in the Philippines. Securities and Exchange Commission vs Santos,
GR. No. 195542, March 19, 2014
Protection of Investors
The power of the SEC to regulate proxies remains in place in instances when stockholders vote on matters
other than the election of directors. The test is whether the controversy relates to such election. All
matters affecting the manner and conduct of the election of directors are properly cognizable by the
regular courts. Otherwise, these matters may be brought before the SEC for resolution based on the
regulatory powers it exercises over corporations, partnerships and associations.
Indeed, the validation of proxies in this case relates to the determination of the existence of a quorum.
Nonetheless, it is a quorum for the election of the directors, and, as such, which requires the presence in
person or by proxy of the owners of the majority of the outstanding capital stock of the corporation. The
SEC therefore has no jurisdiction over the dispute but the Regional Trial Court. Securities And Exchange
Commission vs. The Honorable Court Of Appeals et. al. G.R. No. 187702, October 22, 2014
.Securities and Exchange Commission
Administrative and regulatory jurisdiction
SECs jurisdiction does not extend to the liquidation of a corporation. While the SEC has jurisdiction to
order the dissolution of a corporation, jurisdiction over the liquidation of the corporation now pertains to
the appropriate regional trial courts. This is the correct procedure because the liquidation of a
corporation requires the settlement of claims for and against the corporation, which clearly falls under
the jurisdiction of the regular courts. The trial court is in the best position to convene all the creditors of
the corporation, ascertain their claims, and determine their preferences. Bank of the Philippine Islands ,
as successor-in-interest of Far East Bank and Trust Company, v. Eduardo Hong, doing business under the
name and style "SUPER LINE PRINTING PRESS," G.R. No. 161771, February 15, 2012
22
As an administrative agency with both regulatory and adjudicatory functions, the SEC was given the
authority to delegate some of its functions to, inter alia, its various operating departments, such as the
SECCFD, the Enforcement and Investor Protection Department, and the Company Registration and
Monitoring Department. In this case, the Court disagrees with the findings of both the SEC En Banc and
the CA that the Revocation Order emanated from the SEC En Banc. Rather, such Order was merely issued
by the SEC-CFD as one of the SECs operating departments. In other words, the Revocation Order is
properly deemed as a decision issued by the SEC-CFD as one of the Operating Departments of the SEC,
and accordingly, may be appealed to the SEC En Banc, as what Cosmos properly did in this case. Perforce,
the SEC En Banc and the CA erred in deeming Cosmoss appeal as a motion for reconsideration and
ordering its dismissal on such ground. COSMOS BOTTLING CORPORATION vs. COMMISSION EN BANC
of the SECURITIES AND EXCHANGE COMMISSION (SEC) and JUSTINA F. CALLANGAN, in her capacity
as Director of the Corporation Finance Department of the SEC, G.R. No. 199028, November 12, 2014,
Intra-corporate controversies
Tests to determine intra-corporate controversy

Under the Relationship Test, no doubt exists that the parties were members of the same association, but
this conclusion must still be supplemented by the controversy test before it may be considered as an
intra-corporate dispute. Relationship alone does not ipso facto make the dispute intra-corporate; the
mere existence of an intra-corporate relationship does not always give rise to an intra-corporate
controversy. The incidents of that relationship must be considered to ascertain whether the controversy
itself is intra-corporate. This is where the Controversy Test becomes material.
Under the controversy test, the dispute must be rooted in the existence of an intra-corporate
relationship, and must refer to the enforcement of the parties' correlative rights and obligations under
the Corporation Code, as well as the internal and intra-corporate regulatory rules of the corporation, in
order to be an intra-corporate dispute. These are essentially determined through the allegations in the
complaint which determine the nature of the action. Gulfo v. Ancheta, G.R. No. 175301, August 15, 2012
Cases considered intra-corporate in nature
A complaint filed by condominium unit owners against the developer of the condominium for unsound
business practice and violation of the Master Deed and Declaration of Restrictions in that the developer
committed misrepresentations in its circulated flyers and brochures as to the facilities and amenities that
would be available in the corporation is an intra-corporate controversy. Go vs. Distinction Properties
Development Corporation, GR no. 194024, April 25, 2012
Where a member of the condominium corporation was denied the right to vote for alleged non-payment
of condominium dues and assessment, the action although denominated as one for damages is an intra-
corporate controversy and therefore, falling within the jurisdiction of the regional trial court designated
as a special commercial court. In determining whether a dispute constitutes an intra-corporate
controversy, the Court uses two tests, namely, the relationship test and the nature of the controversy test.
Applying these two tests, the present case is indeed an intra-corporate controversy.
23
Anent the first test, it is admitted that petitioner is a condominium corporation. On the other hand,
respondent is a member of the condominium corporation.
As regards the second test, the case principally dwells on the propriety of the assessment made by
petitioner against respondent as well as the validity of petitioners act in preventing respondent from
participating in the election of the corporations Board of Directors. To be sure, this action partakes of
the nature of an intra-corporate controversy. While the CA may be correct that the RTC has jurisdiction,
the case should have been filed not with the regular court but with the branch of the RTC designated as a
special commercial court. The CA, therefore, gravely erred in remanding the case to the RTC for further
proceedings. Also, while Republic Act (RA) No. 9904, or the Magna Carta for Homeowners and
Homeowners Associations empowers the HLURB to hear and decide inter-association and/or intra-
association controversies or conflicts concerning homeowners associations, the same can not be applied
in the present case as it involves a controversy between a condominium unit owner and a condominium
corporation. While the term association as defined in the law covers homeowners associations of other
residential real property which is broad enough to cover a condominium corporation, it does not seem to
be the legislative intent. MEDICAL PLAZA MAKATI CONDOMINIUM CORPORATION V. ROBERT H. CULLEN G.R. No.
181416, November 11, 2013
An action to compel PCGG to withdraw its opposition to the listing in the increase of capital stock of a
sequestered corporation after the Chairman of PCGG asked the PSE to defer listing until the issue of who
between two sets of directors is the legitimate board is an intra-corporate dispute that falls under the
jurisdiction of the Regional Trial Court (RTC), not the Sandiganbayan. Philippine Overseas
Telecommunications Corporation vs. Africa, et al. G.R. No. 184622, July 3, 2013; PHILIPPINE
COMMUNICATIONS SATELLITE CORPORATION v. SANDIGANBAYAN,G.R. No. 203023, 17 June 2015,
Upon the enactment of Republic Act No. 8799, the jurisdiction of the SEC over intra-corporate
controversies and the other cases enumerated in Section 5 of P.D. No. 902-A was transferred to the
Regional Trial Court. An action to enforce the right of inspection of a stockholder of a sequestered
corporation is intra-corporate in nature. The jurisdiction of the Sandiganbayan has been held not to
extend even to a case involving a sequestered company notwithstanding that the majority of the
members of the board of directors were PCGG nominees. Abad vs. Araneta, et al. G.R. No. 200620, March
18, 2015
Intra-corporate controversies, previously under the SEC's jurisdiction, are now under the jurisdiction of
RTCs designated as commercial courts. However, this does not oust the SEC of its jurisdiction to
determine if administrative rules and regulations were violated. SECURITIES AND EXCHANGE
COMMISSION v. SUBIC BAY GOLF AND COUNTRY CLUB, INC. AND UNIVERSAL INTERNATIONAL
GROUP DEVELOPMENT CORPORATION; G.R. No. 179047, March 11, 2015,
Cases considered not intra-corporate in nature
The Court held that the complaint for annulment of sale was properly filed with the regular court,
because the buyer of the property had no intra-corporate relationship with the stockholders, hence, the
buyer could not be joined as party-defendant in the SEC case. To include said buyer as a party-defendant
in the case pending with the SEC would violate the then existing rule on jurisdiction over intra-corporate
disputes. Lisam Enterprises vs. Banco De Oro G.R. No. 143264, APRIL 23, 2012.
24
A complaint for damages filed by a member of the subdivision homeowners association for the harm he
suffered when another member maliciously closed a portion of the plaintiffs drainage pipe which led to
the overflowing of his septic tank is not an intra corporate controversy following nature of the controversy
test. Gulfo v. Ancheta, G.R. No. 175301, August 15, 2012
In Reyes, the Court pronounced that in cases governed by the Interim Rules of Procedure on Intra-
Corporate Controversies a bill of particulars is a prohibited pleading. It is essential, therefore, for the
complaint to show on its face what are claimed to be the fraudulent corporate acts if the complainant
wishes to invoke the courts special commercial jurisdiction. This is because fraud in intra-corporate
controversies must be based on devises and schemes employed by, or any act of, the board of directors,
business associates, officers or partners, amounting to fraud or misrepresentation which may be
detrimental to the interest of the public and/or of the stockholders, partners, or members of any
corporation, partnership, or association, as stated under Rule 1, Section 1 (a)(1) of the Interim Rules. The
act of fraud or misrepresentation complained of becomes a criterion in determining whether the
complaint on its face has merits, or within the jurisdiction of special commercial court, or merely a
nuisance suit. Guy vs. Guy, G.R. No. 189486.September 5, 2012
A college dean is not a corporate officer if his position is not provided for in the by-laws. The complaint
for constructive dismissal is a labor dispute, not an intra-corporate controversy. Barba vs. Liceo de
Cagayan University, GR. No. 193857, November 28, 2012
The mere fact that petitioner was a stockholder and officer of the Corporation at the time the subject
controversy developed failed to necessarily make the case intra-corporate dispute. The Labor Arbiter had
the original jurisdiction over the complaint for illegal dismissal because petitioner although an officer of
the corporation for being AVP for Sales was not a corporate officer as the term is defined by law. It is
only when the officer claiming to have been illegally dismissed is classified as a corporate officer that the
issue is deemed intra-corporate dispute which falls within the jurisdiction of the trial court designated as
special commercial court. The enabling clause in a corporations by-laws empowering its board of
directors to create additional officers, even with the subsequent passage of the board resolution to that
effect, can not make such position a corporate office. The board of directors has no power to create other
corporate offices without first amending the corporate by-laws so as to include therein the newly created
corporate office Cosare vs. Bradcom Asia, GR. No. 201298, February 5, 2014
Pertinent to this case is RA 8799 which took effect on August 8, 2000. By virtue of said law, jurisdiction
over cases enumerated in Section 5 of Presidential Decree No. 902-A was transferred from the Securities
and Exchange Commission (SEC) to the RTCs, being courts of general jurisdiction. Item 5.2, Section 5 of
RA 8799 provides:
SEC. 5. Powers and Functions of the Commission. - x x x

xxxx
5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court:
Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over the cases. The Commission shall retain jurisdiction over
25
pending cases involving intra-corporate disputes submitted for final resolution which should be resolved
within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/ rehabilitation cases filed as of 30 June 2000 until finally disposed.
To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally used by the legislature to
particularize the fact that the phrase "the Courts of general jurisdiction" is equivalent to the phrase "the
appropriate Regional Trial Court." In other words, the jurisdiction of the SEC over the cases enumerated
under Section 5 of PD 902-A was transferred to the courts of general jurisdiction, that is to say (or,
otherwise known as), the proper Regional Trial Courts.
The erroneous raffling to a regular branch instead of to a Special Commercial Court is only a matter of
procedure - that is, an incident related to the exercise of jurisdiction - and, thus, should not negate the
jurisdiction which the RTC of Muntinlupa City had already acquired. In such a scenario, the proper course
of action was not for the commercial case to be dismissed; instead, Branch 276 should have first referred
the case to the Executive Judge for re-docketing as a commercial case; thereafter, the Executive Judge
should then assign said case to the only designated Special Commercial Court in the station, i.e., Branch
256. Note that the procedure would be different where the RTC acquiring jurisdiction over the case has
multiple special commercial court branches; in such a scenario, the Executive Judge, after re-docketing
the same as a commercial case, should proceed to order its re-raffling among the said special branches.
Manuel Luis Gonzales vs GJH Land, Inc, GR No. 202664, November 20, 2015
INTELLECTUAL PROPERTY
Trademark
How acquired
It is not the application or registration of a trademark that vests ownership thereof, but it is the own-
ership of a trademark that confers the right to register the same. A trademark is an industrial proper-ty
over which its owner is entitled to property rights which cannot be appropriated by unscrupulous entities
that, in one way or another, happen to register such trademark ahead of its true and lawful owner. The
presumption of ownership accorded to a registrant must then necessarily yield to superi-or evidence of
actual and real ownership of a trademark. BIRKENSTOCK ORTHOPAEDIE GMBH AND CO. KG V.
PHILIPPINE SHOE EXPO MARKETING CORPORATION G.R. No. 194307, November 20, 2013.
The applicant for registration of trademark is not the lawful owner thereof and is not entitled to
registration if the trademark has been in prior use by a national of a country which is a signatory to the
Paris Convention. Ecole De Cuisine Manille Inc. vs Renaud Cointreau & CIE and Le Condron Bleu Intl B.V.
GR 185830, June 5, 2013
Non-registrable marks
Shang Properties are not guilty of unfair competition in using the marks THE ST. FRANCIS TOWERS and
THE ST. FRANCIS SHANGRI-LA PLACE. The true test of unfair competition has thus been whether the
acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making
26
his purchases under the ordinary conditions of the particular trade to which the controversy relates. It is
therefore essential to prove the existence of fraud, or the intent to deceive, actual or probable,
determined through a judicious scrutiny of the factual circumstances attendant to a particular case. Here,
the element of fraud is wanting hence, there can be no unfair competition. What the CA appears to have
disregarded or been mistaken in its disquisition, however, is the geographically-descriptive nature of the
mark ST. FRANCIS which thus bars its exclusive appropriability, unless a secondary meaning is acquired.
SFDC, however, was not able to prove its compliance with the requirements stated in Section 123.2 of the
IP Code to be able to conclude that it acquired a secondary meaning and, thereby, an exclusive right
to the ST. FRANCIS mark, which is geographically-descriptive of the location in which its realty
developments have been built. While it is true that SFDC had been using the mark ST. FRANCIS since
1992, its use thereof has been merely confined to its realty projects within the Ortigas Center. As its use of
the mark is clearly limited to a certain locality, it cannot be said that there was substantial commercial use
of the same recognized all throughout the country. Neither is there any showing of a mental recognition
in buyers and potential buyers minds that products connected with the mark ST. FRANCIS are
associated with the same source that is, the enterprise of SFDC. Thus, absent any showing that there
exists a clear goods/service-association between the realty projects located in the aforesaid area and
herein SFDC as the developer thereof, the latter cannot be said to have acquired a secondary meaning as
to its use of the ST. FRANCIS mark. Shang Properties Realty Corporation vs. St. Francis Development
Corporation, G.R. No. 190706, July 21, 2014
Infringement
The mere unauthorized use of a container bearing a registered trademark in connection with the sale,
distribution or advertising of goods or services which is likely to cause confusion, mistake or deception
among the buyers or consumers can be considered as trademark infringement. Here, petitioners have
actually committed trademark infringement when they refilled, without the respondents consent, the
LPG containers bearing the registered marks of the respondents. Petitioners acts will inevitably confuse
the consuming public, since they have no way of knowing that the gas contained in the LPG tanks bearing
respondents marks is in reality not the latters LPG product after the same had been illegally refilled. The
public will then be led to believe that petitioners are authorized refillers and distributors of respondents
LPG products, considering that they are accepting empty containers of respondents and refilling them for
resale.
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. Passing off (or palming off) takes place where the defendant, by
imitative devices on the general appearance of the goods, misleads prospective purchasers into buying
his merchandise under the impression that they are buying that of his competitors. Thus, the defendant
gives his goods the general appearance of the goods of his competitor with the intention of deceiving the
public that the goods are those of his competitor.
In the present case, respondents pertinently observed that by refilling and selling LPG cylinders bearing
their registered marks, petitioners are selling goods by giving them the general appearance of goods of
another manufacturer. Obviously, the mere use of those LPG cylinders bearing the trademarks "GASUL"
27
and "SHELLANE" will give the LPGs sold by REGASCO the general appearance of the products of the
petitioners. Republic Gas Corporation vs. Petron Corporation. G.R. No. 194062, June 17, 2013
It has been established that the parties conspired in the sale/distribution of counterfeit Greenstone
products to the public, which were even packaged in bottles identical to that of the original, thereby
giving rise to the presumption of fraudulent intent.Although there is unfair competition, there can be no
trademark infringement considering that the registration of the trademark "Greenstone" essential as it
is in a trademark infringement case was not proven to have existed during the time the acts complained
of were committed. The distinctions between suits for trademark infringement and unfair competition
prove useful: (a) the former is the unauthorized use of a trademark, whereas the latter is the passing off of
one's goods as those of another; (b) fraudulent intent is unnecessary in the former, while it is essential in
the latter; and (c) in the former, prior registration of the trademark is a pre-requisite to the action, while it
is not necessary in the latter.Roberto Co vs. KengHuan Jerry Yeung And Emma Yeung G.R. No. 212705,
September 10, 2014
The elements of infringement of trademark are the following:
(1) The trademark being infringed is registered in the Intellectual Property Office; (2) The trademark is
reproduced, counterfeited, copied, or colorably imitated by the infringer; (3) The infringing mark is used
in connection with the sale, offering for sale, or advertising of any goods, business or services; or the
infringing mark is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or services; (4) The use or
application of the infringing mark is likely to cause confusion or mistake or to deceive purchasers or
others as to the goods or services themselves or as to the source or origin of such goods or services or the
identity of such business; and (5)The use or application of the infringing mark is without the consent of
the trademark owner or the assignee thereof. Diaz vs People of the Philippines and Levi Strauss ( Phil. ),
GR No. 180677, February 18, 2013
Tests to determine infringement
There are distinct visual and aural differences between Great White Shark Greg Norman Logo and
Caraldes Shark and Logo mark. There being no confusing similarity between the subject marks, the
matter of Great White Sharks mark has gained recognition becomes unnecessary.Great White Shark
Enterprises vs. Caralde, GR No. 192294, November 21, 2012
The likelihood of confusion is the gravamen of the offense of trademark infringement. There are two tests
to determine likelihood of confusion, namely: the dominancy test, and the holistic test. As to what test
should be applied depends entirely on the set of facts availing in each case. That is the reason why in
trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in
point.
The jeans trademarks of Levis Philippines and Diaz must be considered as a whole in determining the
likelihood of confusion between them. The consuming public could easily discern if the jeans were
original or fake or were manufactured by other brands of jeans. Confusion and deception were
28
remotesince maong jeans are expensive and the casual buyer is predisposed to be more cautious and
discriminating in and would prefer to mull over his purchase. Further, Diaz used the trademark LS JEANS
TAILORING for the jeans he produced and sold. His trademark was visually and aurally different from the
trademark LEVI STRAUSS & CO appearing on the patch of original jeans. Diaz also aptly noted that the
design used by LEVIS was an image of two horses but the evidence will show that there was no such
design in the seized jeans, instead, what is shown is buffalo design. Moreover, based on the certificate
issued by the Intellectual Property Office, LS JEANS TAILORING was a registered trademark of Diaz. He
had registered his trademark prior to the filing of the present cases. The Intellectual Property Office
would certainly not have allowed the registration had Diazs trademark been confusingly similar with the
registered trademark for LEVIS 501 jeans. Diaz vs People of the Philippines and Levi Strauss ( Phil. ), GR
No. 180677, February 18, 2013
Doctrine of unrelated goods
Whether or not the products covered by the trademark sought to be registered by Taiwan Kolin, on the
one hand, and those covered by the prior issued certificate of registration in favor of Kolin Electronics, on
the other, fall under the same categories in the NCL is not the sole and decisive factor in determining a
possible violation of Kolin Electronics intellectual property right should petitioners application be
granted. It is hornbook doctrine, as held in the above-cited cases, that emphasis should be on the
similarity of the products involved and not on the arbitrary classification or general description of their
properties or characteristics. The mere fact that one person has adopted and used a trademark on his
goods would not, without more, prevent the adoption and use of the same trademark by others on
unrelated articles of a different kind.
In accord with common empirical experience, the useful lives of televisions and DVD players last for
about five (5) years, minimum, making replacement purchases very infrequent. The same goes true with
converters and regulators that are seldom replaced despite the acquisition of new equipment to be
plugged onto it. In addition, the amount the buyer would be parting with cannot be deemed minimal
considering that the price of televisions or DVD players can exceed todays monthly minimum wage. In
light of these circumstances, it is then expected that the ordinary intelligent buyer would be more
discerning when it comes to deciding which electronic product they are going to purchase, and it is this
standard which this Court applies herein in determining the likelihood of confusion should petitioners
application be granted. Taiwan Kolin Corporation, LTD., vs. Kolin Electronics Co. Inc. G.R. No. 209843,
March 25, 2015 J VELASCO
Violations
The Rules on the Issuance of the Search and Seizure in Civil Actions for Infringement of Intellectual
Property Rights are not applicable in this case as the search warrants were not applied based there-on,
but in anticipation of criminal actions for violation of intellectual property rights under RA 8293. It was
established that respondent had asked the NBI for assistance to conduct investigation and search warrant
implementation for possible apprehension of several drugstore owners selling imita-tion or counterfeit
TOP GEL T.G. & DEVICE OF A LEAF papaya whitening soap. What is applicable is Rule 126 of the Rules of
Criminal Procedure. A core requisite before a warrant shall validly issue is the existence of probable
cause. The pendency of a similar action for infringement of trademark and unfair competition against the
very person who applied for search warrant does not bar the issuance of the warrant if it is based on
29
probable cause.Century Chinese Medicine Co vs People of the Philippines, G.R. No. 188526, November
11, 2013.
Copyright
The improved broadcast signals that CATV offers may infringe or encroach upon the audience or viewer
market of the free-signal TV. This is so because the latters signal may not reach the remote areas or
reach them with poor signal quality. To foreclose this possibility and protect the free-TV market
(audience market), the must-carry rule was adopted to level the playing field. With the must-carry rule in
place, the CATV networks are required to carry and show in full the free-local TVs programs, including
advertisements, without alteration or deletion. This, in turn, benefits the public who would have a wide-
range of choices of programs or broadcast to watch. This also benefits the free-TV signal as their
broadcasts are carried under the CATVs much-improved broadcast signals thus expanding their viewers
share.
In view of the discussion above, the Court finds that the quoted sections of MC 4-08-88, i.e., 6.2, 6.2.1,
6.4(a)(1) and 6.4(b) which embody the must-carry rule, are the governing rules in the present
case. These provisions sufficiently and fairly implement the intent of Section 2 of EO No. 205 to protect
the broadcast television market vis--vis the CATV system. For emphasis, under these rules, the phrase
television and broadcast markets means viewers or audience market and not commercial advertisement
market as claimed by the petitioner. Therefore, the respondents act of showing advertisements does not
constitute an infringement of the television and broadcast markets under Section 2 of EO No. 205.
GMA Network, Inc. vs. Central CATV, Inc. G.R. No. 176694, July 18, 2014
TRANSPORTATION
Examples of common carrier
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
A charter party has two types. First, it could be a contract of affreightment whereby the use of shipping
space on vessels is leased in part or as a whole, to carry goods for others. The charter-party provides for
the hire of vessel only, either for a determinate period of time (time charter) or for a single or consecutive
voyage (voyage charter). The shipowner supplies the ships stores, pay for the wages of the master and the
crew, and defray the expenses for the maintenance of the ship. The voyage remains under the
responsibility of the carrier and it is answerable for the loss of goods received for transportation. The
charterer is free from liability to third persons in respect of the ship.
Second, charter by demise or bareboat charter under which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its navigation,
including the master and the crew, who are his servants. The charterer mans the vessel with his own
30
people and becomes, in effect, the owner for the voyage or service stipulated and hence liable for
damages or loss sustained by the goods transported.
[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage,
therefore, they have the burden of proving that they observed such diligence.
Here, HEUNG-A failed to rebut this prima facie presumption when it failed to give adequate explanation
as to how the shipment inside the container van was handled, stored and preserved to forestall or prevent
any damage or loss while the same was in its possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of lading the
former issued to NOVARTIS. PROTOP breached its contract with NOVARTIS, the consignee, when it failed
to deliver the goods in the same quantity, quality and description as stated in Bill of Lading. Philam
Insurance Company, Inc. (Now Chartis Philippines Insurance, Inc.) vs. Heung-A Shipping Corporation and
Wallem Philippines Shipping, Inc. G.R. No. 187701 &G.R. No. 187812, July 23, 2014
liability of common carrier
Presumption of fault
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
Obligation of the carrier to deliver
The liability of a common carrier does not cease by mere transfer of custody of the cargo to the arrastre
operator. Like the duty of seaworthiness, the duty of care of the cargo is non-delegable and the carrier is
accordingly responsible for the acts of the master, the crew, the stevedore and his other agents. The fact
that a consignee is required to furnish persons to assist in unloading a shipment may not relieve the
carrier of its duty as to such unloading. It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier. Since the damage to the cargo was incurred
during the discharge of the shipment and while 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
31
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
There is no dispute that the custody of the goods was never turned over to the consignee or his agents but
was lost into the hands of unauthorized persons who secured possession thereof on the strength of
falsified documents. When the goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable. To overcome the presumption of negligence, the common
carrier must establish by adequate proof that it exercised extraordinary diligence over the goods. In the
present case, Nedlloyd failed to prove that they did exercise the degree of diligence required by law over
the goods they transported, it failed to adduce sufficient evidence they exercised extraordinary care to
prevent unauthorized withdrawal of the shipments. Nedlloyd Lijnen B.V. Rotterdam And The East Asiatic
Co., Ltd. vs. Glow Laks Enterprises, Ltd., G.R. No. 156330, November 19, 2014
When the goods were damaged even before they were turned over to the stevedore and such damage
was even compounded by the negligent acts of the common carrier and stevedore when both mishandled
the goods during the discharging operation, the common carrier cannot deny its liability. From the nature
of their business and for reasons of public policy, common carriers are bound to observe extraordinary
diligence in the vigilance over the goods transported by them. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation 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. Eastern Shipping Lines vs.
BPI/MS Insurance Corp and Mitsui Sum Tomo, GR No. 193986, January 15, 2014
COGSA
In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods should have
been delivered: Provided, That if a notice of loss or damage, either apparent or concealed, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should have been delivered.
Asian Terminals Inc., v. Philam Insurance Co. G.R. NO.181262 ,July 24, 2013
Registered owner rule
The operator of a bus company cannot renege on the obligation brought about by collision of vehicles by
claiming that she is not the true owner of the bus. In case of collision of motor vehicles, the person whose
name appears in the certificate of registration shall be considered the employer of the person driving the
vehicle and shall be directly and primarily liable with the driver under the principle of vicarious
32
liability.Mariano C. Mendoza And Elvira Lim vs. Spouses Leonora J. Gomez And Gabriel V. Gomez, G.R.
No. 160110, June 18, 2014
Liability for acts of strangers
A bus company cannot be held liable for damages, because a passenger surreptitiously carried a gun in his
baggage and suddenly used it to shoot a passenger, because common carriers should be given leeway to
assume passengers are not bringing anything dangerous unless something indicates a stringent inspection
should be made. (G.V. Florida Transport, Inc. vs. Heirs of Romoe Battung, Jr., G.R. No. 208802, October
14, 2015.)
Force majeure
An air carrier is not liable as a result of the cancellation of a connecting flight due to typhoon and more so
if the common carrier demonstrated good faith when it exerted its best efforts to accommodate the
delayed flight passengers on another flight after the typhoon subsided but that flight also failed to leave
because of the airport set curfew. Marito Bernales vs Northwest Airlines, GR. No. 182395, October 5,
2015
NEGOTIABLE INSTRUMENTS LAW
Test of negotiability
The electronic messages are not signed by the investor-clients as supposed drawers of a bill of exchange;
they do not contain an unconditional order to pay a sum certain in money as the payment is supposed to
come from a specific fund or account of the investor-clients; and, they are not payable to order or bearer
but to a specifically designated third party. Thus, the electronic messages are not bills of exchange. As
there was no bill of exchange or order for the payment drawn abroad and made payable here in the
Philippines, there could have been no acceptance or payment that will trigger the imposition of the DST
under Section 181 of the Tax Code. The Hongkong And Shanghai Banking Corporation Limited-
Philippine Branches vs. Commissioner Of Internal Revenue G.R. Nos. 166018 & 167728, June 04, 2014
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a

sum of money on deposit which the bank or banker promises to pay to the depositor, to the order of the
depositor, or to some other person or his order, whereby the relation of debtor and creditor between the
bank and the depositor is created. In particular, the certificates of deposit contain provisions on the
amount of interest, period of maturity, and manner of termination. Specifically, they stressed that
endorsement and presentation of the certificate of deposit is indispensable to their termination. In other
words, the accounts may only be terminated upon endorsement and presentation of the certificates of
deposit. Without the requisite presentation of the certificates of deposit, the bank may not terminate
them. Bank of the Philippine Islans vs Tarcila Fernandez, GR. No. 173134, September 2, 2015
Presumption of consideration
33
A check constitutes an evidence of indebtedness. Under Section 24 of the Negotiable Instruments Law,
every negotiable instrument is deemed prima facie to have been issued for a valuable consideration and
every person whose signature appears thereon to have become a party for value. Thus, checks completed
and delivered to a person by another are sufficient by themselves to prove the existence of a loan
obligation obtained by the latter from the former. Pua vs Benito, GR No. 198660, October 23, 2013
VELASCO
Liabilities of parties
A check made payable to cash is payable to bearer and could be negotiated by mere delivery without the
need of an endorsement. However, the drawer of the post-dated check can not be held liable for estafa
to the person who did not acquire the instrument directly from the drawer but through negotiation of
another by mere delivery. This is because the drawer did not use the check to defraud the holder. People
vs Wagas, GR No. 157943, September 4, 2013
The collecting bank which accepted a post-dated check for deposit and sent it for clearing and the
drawee bank which cleared and honored the check are both liable to the drawer for the entire face value
of the check. Allied Banking Corporation vs Bank of the Philippine Islands, GR No. 188363, February 27,
2013
When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its
duty to charge its clients account only for bona fide disbursements he had made. If the drawee did not
pay according to the original tenor of the instrument, as directed by the drawer, then it has no right to
claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made
from the drawers account which it was expected to treat with utmost fidelity. The drawee, however, still
has recourse to recover its loss. The collecting banks are ultimately liable for the amount of the materially
altered check. Cesar V. Areza And Lolita B. Areza vs. Express Savings Bank, Inc., G.R. No. 176697,
September 10, 2014
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
Holder in due course
The holder of an invalid promissory note may be considered a holder in due course if the note on its face
has all the elements of negotiability under Section 1 of the Negotiable Instruments law and the holder
34
acquired the instrument under conditions making him a holder in due course. Thus, a finance company
which acquired a promissory note under conditions making him a holder in due course may enforce
payment thereof against the installment buyer of a vehicle who refused to pay the seller corporation
after learning that the vehicle had been previously sold to another. Spouses Violago vs BA Finance
Corporation, GR No. 158262, July 21, 2008, J. VELASCO
Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally
barred from recovery. The NIL does not provide that a holder who is not a holder in due course may not in
any case recover on the instrument. The only disadvantage of a holder who is not in due course is that the
negotiable instrument is subject to defenses as if it were non-negotiable. Among such defenses is the
filling up blank not within the authority.
In order however that one who is not a holder in due course can enforce the instrument against a party
prior to the instruments completion, two requisites must exist: (1) that the blank must be filled strictly in
accordance with the authority given; and (2) it must be filled up within a reasonable time. If it was proven
that the instrument had not been filled up strictly in accordance with the authority given and within a
reasonable time, the maker can set this up as a personal defense and avoid liability. However, if the
holder is a holder in due course, there is a conclusive presumption that authority to fill it up had been
given and that the same was not in excess of authority.
In order however that one who is not a holder in due course can enforce the instrument against a party
prior to the instruments completion, two requisites must exist: (1) that the blank must be filled strictly in
accordance with the authority given; and (2) it must be filled up within a reasonable time. If it was proven
that the instrument had not been filled up strictly in accordance with the authority given and within a
reasonable time, the maker can set this up as a personal defense and avoid liability. However, if the
holder is a holder in due course, there is a conclusive presumption that authority to fill it up had been
given and that the same was not in excess of authority.
While under the law, Gutierrez had a prima facie authority to complete the check, such prima
facie authority does not extend to its use (i.e., subsequent transfer or negotiation) once the check is
completed. In other words, only the authority to complete the check is presumed. Further, the law used
the term "prima facie" to underscore the fact that the authority which the law accords to a holder is a
presumption juris tantum only; hence, subject to subject to contrary proof. Thus, evidence that there was
no authority or that the authority granted has been exceeded may be presented by the maker in order to
avoid liability under the instrument.
In the present case, no evidence is on record that Gutierrez ever secured prior approval from the
petitioner to fill up the blank or to use the check. In his testimony, petitioner asserted that he never
authorized nor approved the filling up of the blank checks. ALVIN PATRIMONIO vs. NAPOLEON
GUTIERREZ AND OCTAVIO MARASIGAN III G.R. No. 187769, 04 June 2014.
Managers check
While indeed, it cannot be said that managers and cashiers checks are pre-cleared, clearing should not
be confused with acceptance. Managers and cashiers checks are still the subject of clearing to ensure
that the same have not been materially altered or otherwise completely counterfeited. However,
35
managers and cashiers checks are pre-accepted by the mere issuance thereof by the bank, which is both
its drawer and drawee. Thus, while managers and cashiers checks are still subject to clearing, they cannot
be countermanded for being drawn against a closed account, for being drawn against insufficient funds,
or for similar reasons such as a condition not appearing on the face of the check. Long standing and
accepted banking practices do not countenance the countermanding of managers and cashiers checks
on the basis of a mere allegation of failure of the payee to comply with its obligations towards the
purchaser. On the contrary, the accepted banking practice is that such checks are as good as cash.
Metropolitan Bank And Trust Company vs. Wilfred N. Chiok G.R. No. 172652 November 26, 2014
INSURANCE
Concept of insurance
HMOs are not insurance business. One test that they have applied 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. Philippine Health Care Providers vs. Commissioner of Internal
Revenue, G.R. No. 167330, September 18, 2009.
For purposes of determining the liability of a health care provider to its members, a health care
agreement is in the nature of non-life insurance, which is primarily a contract of indemnity. Once the
member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated
contingent, the health care provider must pay for the same to the extent agreed upon under the contract.
Limitations as to liability must be distinctly specified and clearly reflected in the extent of coverage which
the company voluntary assume, otherwise, any ambiguity arising therein shall be construed in favor of the
member. Being a contract of adhesion, the terms of an insurance contract are to be construed strictly
against the party which prepared the contract - the insurer. This is equally applicable to Health Care
Agreements. The phraseology used in medical or hospital service contracts, such as standard charges ,
must be liberally construed in favor of the subscriber, and if doubtful or reasonably susceptible of two
interpretations the construction conferring coverage is to be adopted, and exclusionary clauses of
doubtful import should be strictly construed against the provider. Thus, if the member, while on vacation,
underwent a procedure in the USA, the standard charges referred to in the contract should mean
standard charges in USA and not the cost had the procedure been conducted in the Philippines. Fortune
Medicare Inc. vs Amorin. G.R. No. 195872, March 12, 2014.
Interpretation
Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of
the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be
taken and understood in their plain, ordinary and popular sense. Accordingly, in interpreting the
exclusions in an insurance contract, the terms used specifying the excluded classes therein are to be given
their meaning as understood in common speech.A contract of insurance is a contract of adhesion. So,
when the terms of the insurance contract contain limitations on liability, courts should construe them in
36
such a way as to preclude the insurer from non-compliance with his obligation. Alpha Insurance and
Surety Co. vs. Castor, GR No. 198174, September 2, 2013
The theft clause of a comprehensive motor vehicle insurance policy has been interpreted by the Court
in several cases to cover situations like (1) when one takes the motor vehicle of another without the
latters consent even if the motor vehicle is later returned, there is theft there being intent to gain as the
use of the thing unlawfully taken constitutes gain or (2) when there is taking of a vehicle by another
person without the permission or authority from the owner thereof.Paramount Insurance Corporation vs.
Spouses Remondeulaz, GR No. 173773, November 28, 2012
Elements of incontestability clause
The "Incontestability Clause" under Section 48 of the Insurance Code provides that an insurer is given two
years from the effectivity of a life insurance contract and while the insured is alive to discover or prove
that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies
within the period, the insurer must make good on the policy, even though the policy was obtained by
fraud, concealment, or misrepresentation, as in this case, when the insured did not personally apply for
the policy as she was illiterate and that it was the beneficiary who filled up the insurance application
designating herself as beneficiary. Section 48 regulates both the actions of the insurers and prospective
takers of life insurance. It gives insurers enough time to inquire whether the policy was obtained by fraud,
concealment, or misrepresentation; on the other hand, it forewarns scheming individuals that their
attempts at insurance fraud would be timely uncovered thus deterring them from venturing into such
nefarious enterprise. Manila Bankers Life Insurance Corporation vs Cresencia Aban. G.R. No. 175666, July
29, 2013.
Double insurance
Double insurance exists where the same person is insured by several insurers separately in respect to the
same subject and interest. The requisites in order for double insurance to arise are as follows: 1.) The
person insured is the same; 2.) two or more insurers insuring separately; 3.) there is identity of subject
matter; 4.) there is identity of subject interest insured; and 5.) There is identity of the risk or peril insured
against. In this case, there is no double insurance even though two policies were both issued over the
same subject matter and both covered the same peril insured against if the two policies were issued to
two different entities. Malayan Insurance Co vs. Philippine First Insurance Co. G.R. NO. 184300, July 11,
2012
Effect of Alteration in the use and condition of the thing insured
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. Under
Section 27 of the Insurance Code, a concealment entitles the injured party to rescind a contract of
37
insurance. Moreover, under Section 168 of the Insurance Code, the insurer is entitled to rescind the
insurance contract in case of an alteration in the use or condition of the thing insured. Section 168 of the
Insurance Code provides, as follows: An alteration in the use or condition of a thing insured from that to
which it is limited by the policy made without the consent of the insurer, by means within the control of
the insured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance. Malayan
Insurance Company vs. PAP Co. (PHIL. BRANCH). G.R. No. 200784, August 07, 2013.
Claims of settlement/Period to file action
The right of the insured to the payment of his loss accrues from the happening of the loss. However, the
cause of action in an insurance contract does not accrue until the insureds claim is finally rejected by the
insurer. This is because before such final rejection there is no real necessity for bringing suit.
It is thus clear that petitioners causes of action for indemnity respectively accrued from its receipt of the
letters where the insurer rejected its claims in the first instance. Consequently, given that it allowed more
than twelve (12) months to lapse before filing the necessary complaint before the RTC, its causes of action
had already prescribed. H.H. Hollero Construction, Inc. vs. Government Service Insurance System and
Pool of Machinery Insurers G.R. No. 152334, September 24, 2014
The Insurance Code provides that a policy may declare that a violation of specified provisions thereof
shall avoid it. Thus, in fire insurance policies, which contain provisions that if the claim be in any respect
fraudulent, or if any false declaration be made or used in support thereof, all the benefits under the policy
shall be forfeited , a fraudulent discrepancy between the actual loss and that claimed in the proof of loss
voids the insurance policy. Mere filing of such a claim will exonerate the insurer. United Merchants
Corporation vs. Country Bankers Insurance Corporation, GR. N0. 198588, July 11, 2012
Subrogation
The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.
When it is not disputed that the insurance company indeed paid, then there is valid subrogation in its
favor.Malayan Insurance Co vs Alberto, GR No. 194320, February 1, 2012
The rights of a subrogee cannot be superior to the rights possessed by a subrogor. Subrogation is the
substitution of one person in the place of another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or
securities. The rights to which the subrogee succeeds are the same as, but not greater than, those of the
person for whom he is substituted, that is, he cannot acquire any claim, security or remedy the subrogor
did not have. In other words, a subrogee cannot succeed to a right not possessed by the subrogor. A
subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise could
have recovered.
Consequently, an insurer indemnifies the insured based on the loss or injury the latter actually suffered
from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the
insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due, the
38
amount paid is excessive ( as in this case when the insurer paid the total insurance amount despite partial
loss only), the insurer takes the risk of not being able to seek recompense from the alleged wrongdoer.
This is because the supposed subrogor did not possess the right to be indemnified and therefore, no right
to collect is passed on to the subrogee. Loadstar Shipping Company, Incorporated And Loadstar
International Shipping Company, Incorporated vs. Malayan Insurance Company, Incorporated G.R. No.
185565, November 26, 2014.
In certain instances, the Court has admitted exceptions by declaring that a marine insurance policy is
dispensable evidence in reimbursement claims instituted by the insurer. In Delsan Transport Lines, Inc. v.
CA, the Court ruled that the right of subrogation accrues simply upon payment by the insurance company
of the insurance claim. Hence, presentation in evidence of the marine insurance policy is not
indispensable before the insurer may recover from the common carrier the insured value of the lost cargo
in the exercise of its subrogatory right. The subrogation receipt, by itself, was held sufficient to establish
not only the relationship between the insurer and consignee, but also the amount paid to settle the
insurance claim. The presentation of the insurance contract was deemed not fatal to the insurers cause
of action because the loss of the cargo undoubtedly occurred while on board the petitioners vessel.Asian
Terminals, Inc. vs. First Lepanto-Taisho Insurance Corporation G.R. No. 185964, June 16, 2014
After payment by the insurer to the insured, it is subrogated to the rights of the latter. Its right of
subrogation under Article 2207 of the Civil Code in relation to Article 1144 gives rise to a cause of action
created by law. The prescriptive period for cause of action based on law ( such as subrogation ) is ten
years. Thus, the insurer has 10 years from the date it indemnified the insured to file the action against the
wrongdoer. Vector Shipping Corporation vs. American Home Assurance Company, G.R. No. 159213, July
3, 2013.
Suretyship
The extent of the suretys liability is determined by the language of the suretyship contract or bond itself.
It can not be extended by implications beyond the terms of the contract. Having accepted the bond, the
creditor is bound by the recital in the surety bond that the terms and conditions of its distributorship
contract be reduced in writing or at the very least communicated in writing to the surety. Such non-
compliance by the creditor impacts not on the validity or legality of the surety contract but on the
creditors right to demand performance. First Lepanto-Taisho Insurance Corporation vs Chevron
Philippines, GR No. 177839, January 18, 2012
The incontestability clause precludes the insurer from disowning liability under the policy it issued on the
ground of concealment or misrepresentation regarding the health of the insured after a year of its
issuance. Since insured died on the 11th month following the issuance of his plan, the incontestability
period has not yet set in. Consequently, the insurer was not barred from questioning the beneficiarys
entitlement to the benefits of the pension plan.Florendo vs. Philam Plans, GR. No 186983, February 22,
2012
39
Miscellaneous
The security deposit of insurance companies with the Insurance Commission is immune from levy or
execution. Capital Insurance and Surety vs Del Monte Motor Works, GR No. 159979, December 9, 2015
Under the collateral source rule, if an injured person receives compensation for his injuries from a source
wholly independent of the tortfeasor, the payment should not be deducted from the damages which he
would otherwise collect from the tortfeasor. It finds no application to cases involving no-fault insurances
under which the insured is indemnified for losses by insurance companies, regardless of who was at fault
in the incident generating the losses. Here, it is clear that MMPC is a no-fault insurer. Hence, it cannot be
obliged to pay the hospitalization expenses of the dependents of its employees which had already been
paid by separate health insurance providers of said dependents.
Moreover, since the subject CBA provision is an insurance contract, the rights and obligations of the
parties must be determined in accordance with the general principles of insurance law. Being in the
nature of a non-life insurance contract and essentially a contract of indemnity, the CBA provision
obligates MMPC to indemnify the covered employees medical expenses incurred by their dependents
but only up to the extent of the expenses actually incurred. This is consistent with the principle of
indemnity which proscribes the insured from recovering greater than the loss. Indeed, to profit from a loss
will lead to unjust enrichment and therefore should not be countenanced. Mitsubishi Motors Philippines
Salaried Employees Union vs. Mitsubishi Motors Corporation G.R. No. 175773, June 17, 2013
40

DIVINA Survey of Recent Jurisprudence

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

DIVINA Survey of Recent Jurisprudence

Hochgeladen von

Copyright:

Verfügbare Formate

RECENT JURISPRUDENCE IN COMMERCIAL LAW

( January 2012-December 31, 2015 )

SPECIAL COMMERCIAL LAWS

Remedies/tools available to BSP

2016 Dean Nilo T. Divina, All Rights Reserved

Extra-ordinary diligence obligation of banks

2016 Dean Nilo T. Divina, All Rights Reserved

Interest rate for loans

2016 Dean Nilo T. Divina, All Rights Reserved

Secrecy of bank deposits

Doctrine of Separate Legal Entity

2016 Dean Nilo T. Divina, All Rights Reserved

Doctrine of Piercing the Corporate Veil

Areas where the doctrine applies

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract

2016 Dean Nilo T. Divina, All Rights Reserved

Government owned and controlled corporation

2016 Dean Nilo T. Divina, All Rights Reserved

Corporate Name-Limitations on Use of Corporate Name

2016 Dean Nilo T. Divina, All Rights Reserved

The second requisite likewise obtains on two points:

Board of Directors and Officers

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

Doctrine of apparent authority

General Powers, Theory of General Capacity

2016 Dean Nilo T. Divina, All Rights Reserved

Specific Powers, Theory of Specific Capacity

Power to Sell or Dispose of Corporate Assets

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

KMergers and Consolidations

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

Dissolution and Liquidation

2016 Dean Nilo T. Divina, All Rights Reserved

SECURITIES REGULATION CODE (R.A.No. 8799)

Securities Required to Be Registered

Liabilities in case of sale of unregistered securities

2016 Dean Nilo T. Divina, All Rights Reserved

.Securities and Exchange Commission

Administrative and regulatory jurisdiction

2016 Dean Nilo T. Divina, All Rights Reserved

Tests to determine intra-corporate controversy

Cases considered intra-corporate in nature

2016 Dean Nilo T. Divina, All Rights Reserved

Cases considered not intra-corporate in nature

2016 Dean Nilo T. Divina, All Rights Reserved

SEC. 5. Powers and Functions of the Commission. - x x x

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

The elements of infringement of trademark are the following:

Tests to determine infringement

2016 Dean Nilo T. Divina, All Rights Reserved

2016 Dean Nilo T. Divina, All Rights Reserved

Examples of common carrier

2016 Dean Nilo T. Divina, All Rights Reserved

Obligation of the carrier to deliver