PALS - Bar Ops Corporation Law Must Read Cases

MERCANTILE LAW FAC FORTIA ET PATERE
MUST READ CASES (MERCANTILE LAW)
SPECIAL COMMERCIAL LAWS

Letters of Credit
1. Reliance Commodities, Inc. Vs. Daewoo Industrial Co. Ltd., 228 SCRA 545 (1993)
Where there was a meeting of the minds between the buyer and the seller regarding the
sale of foundry pig iron to be paid for under a letter of credit, the failure of the buyer to
open the letter of credit did not prevent the perfection of the contract and neither did such
failure extinguish the contract. The opening of the letter of credit was not a condition
precedent for the birth of obligation of the buyer to purchase the foundry pig iron from the
seller. Where the buyer fails to open the letter of credit, as stipulated, the seller or exporter
is entitled to claim damages for such breach. Damages for failure to open the letter of credit
may include the loss of profit which the seller would have reasonably made had the
transaction been carried out
2. Rodzssen Supply Company, Inc. vs. Far East Bank and Trust Company, 357 SCRA
618 (2001)
An issuing bank which paid the beneficiary of an expired letter of credit can recover
payment from the applicant which obtained the goods from the beneficiary to prevent
unjust enrichment.
3. Transfield Philippines, Inc. vs. Luzon Hydro Corp. 443 SCRA 307 (2004)
Where the applicant entered into a Turnkey contract whereby it undertook to construct, on
a turnkey basis, a seventy (70)-Megawatt hydro-electric power station, the performance of
which is secured by a standby letter of credit, the resort to arbitration by the applicant/
contractor to arbitration to determine if the latter is guilty of delay does not preclude the
beneficiary to draw on the letter of credit upon its issuance of a certification of default
because whether or not the issuance of certification of default amounted to fraud was not
raised in the lower court and the parties did not stipulate that all dispute regarding delay
should first be settled through arbitration before the beneficiary would be allowed to call
upon the letter of credit. If the drawing upon the letter of credit was wrongful due to the
non-existence of the fact of default, the right of the applicant to seek indemnification for
damages it suffered would not normally be foreclosed pursuant to general principle of law.
4. MWSS vs. Hon. Daway, 432 SCRA 559 (2004)
The stay order issued by the rehabilitation court pursuant to the Interim Rules of Corporate
Rehabilitation does not apply to the beneficiary of the letter of credit against the banks that
issued it because the prohibition on the enforcement of claims against the debtor,
guarantors or sureties of the debtors does not extend to the claims against the
1|Page
issuing bank in a letter of credit. Letters of credit are primary obligations and not accessory
contracts and while they are security arrangements, they are not thereby converted into
contracts of guaranty.
5. Metrobank v. Ley Construction and Development Corporation, G.R. No.
185590, December 03, 2014
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 the Bank’s evidence to show
the provisions and conditions that govern its legal relationship with LCDC, particularly the
absence of the provisions and conditions supposedly printed at the back of the Application
and Agreement for Commercial Letter of Credit. Even assuming arguendo that there was
no impropriety in the negotiation of the Letter of Credit and the Bank’s cause of action was
simply for the collection of what it paid under said Letter of Credit, the Bank did not
discharge its burden to prove every element of its cause of action against LCDC.
6. Bank of the Philippine Islands vs. De Reny Fabric Industries, Inc. 35 SCRA 253
(1970)
A buyer who applied for a letter of credit to pay for imported dyestuffs must reimburse the
issuing bank which paid the beneficiary, even if the shipment contained colored chalks.
Banks are not required to investigate if the contract underlying the letter of credit has been
fulfilled or not because in a transaction involving letter of credit, banks deal only with
documents and not with goods.
7. Bank of America vs. Court of Appeals, 228 SCRA 357 (1993)
When the notifying bank entered into a discounting arrangement with the beneficiary, it
acts independently as a negotiating bank. As such, the negotiating bank has a right to
recourse against the issuer bank and until reimbursement is obtained, the beneficiary, as
the drawer of the draft, continues to assume a contingent liability thereon.
8. LBP vs. Monet’s Export and Manufacturing Corp., 452 SCRA 173 (2005)
The issuing bank is not liable for damages even if the shipment did not conform to the
specifications of the applicant. Under the “independence principle”, the obligation of the
issuing bank to pay the beneficiary arises once the latter is able to submit the stipulated
documents under the letter of credit. Hence, the bank is not liable for damages even if the
shipment did not conform to the specifications of the applicant.
9. Philippine National Bank vs. San Miguel Corporation, G.R. No. 186063, January 15,
2014.
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 which is entitled to draw on the credit line
2|Page
of the buyer from a bank against the presentation of sales invoices and official receipts of
the purchases and which 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.
10. Transfield Philippines, Inc. vs. Luzon Hydro Corp. 443 SCRA 307 (2004)
The “fraud exception principle” is an exception to the independence principle. The
untruthfulness of a certificate accompanying a demand for payment under a standby letter
of credit may qualify as fraud sufficient to support an injunction against payment. The
remedy for fraudulent abuse is an injunction. However, injunction should not be granted
unless: (a) there is a clear proof of fraud; (b) the fraud constitutes fraudulent abuse of the
independent purpose of the letter of credit and not only fraud under the main agreement;
and (c) irreparable injury might follow if injunction is not granted or the recovery of
damages would be seriously damaged.
11. Feati Bank & Trust Company vs. Court of Appeals, 196 SCRA 576 (1991)
When the letter of credit required the submission of a certification that the applicant/buyer
has approved the goods prior to shipment, the unjust refusal of the applicant/buyer to issue
said certification is not sufficient to compel the bank to pay the beneficiary thereof. Under
the doctrine of strict compliance, the documents tendered must strictly conform to the terms
of the letter of credit, otherwise, the bank which accepts a faulty tender, acts on its own
risks and may not be able to recover from the applicant/buyer.
Trust Receipts Law
12. Metropolitan Bank & Trust Company vs. Tonda, 338 SCRA 254 (2000)
Compensation shall not be proper when one of the debts consists in civil liability arising
from a penal offense; moreover, any compromise relating to the civil liability does not
automatically extinguish the criminal liability of the accused. The mere failure of the
entrustee to deliver the proceeds of the sale or the goods if not sold, constitutes a criminal
offense that causes prejudice not only to another, but more to the public interest.
13. Lee vs. Court of Appeals, 375 SCRA 579 (2002)
A trust receipt is a security transaction intended to aid in financing importers and retail
dealers who do not have sufficient funds or resources to finance the importation or purchase
of merchandise, and who may not be able to acquire credit except through utilization, as
collateral of the merchandise imported or purchased. Under a letter of credit-trust receipt
arrangement, a bank extends a loan covered by a letter of credit, with the trust receipt as a
security for the loan; hence, the transaction involves a loan feature
3|Page
represented by a letter of credit, and a security feature which is in the covering trust receipt
which secures an indebtedness.
14. Colinares vs. Court of Appeals, 339 SCRA 609 (2000)
The transaction is a simple loan when the goods subject of the agreement had been
purchased and delivered to the supposed entrustee prior to the execution of the trust receipt
agreement. The acquisition of ownership over the goods before the execution of the trust
receipt agreement makes the contract a simple loan, regardless of the denomination of the
contract.
15. Consolidated Bank & Trust Corp. vs. Court of Appeals, 356 SCRA 671 (2001)
Respondent Corporation is not an importer which acquired the bunker fuel oil for re-sale;
it needed the oil for its own operations. More importantly, at no time did title over the oil
pass to petitioner bank, but directly to respondent Corporation to which the oil was directly
delivered long before the trust receipt was executed; thus, the contract executed by the
parties is a simple loan and not a trust receipt agreement.
16. Prudential Bank vs. National Labor Relations Commission, 251 SCRA 412 (1995)
The security interest of the entruster pursuant to the written terms of a trust receipt shall be
valid as against all creditors of the entrustee for the duration of the trust receipt agreement,
including among others, the laborers of the entrustee. The only exception to the rule is
when the properties are in the hands of an innocent purchaser for value and in good faith.
17. Pilipinas Bank vs. Ong, 387 SCRA 37 (2002)
Failure of the entrustee to turn over the proceeds of the sale of the goods covered by a trust
receipt to the entruster or to return the goods, if they were not disposed of, shall constitute
the crime of estafa. However, what is being punished by law is the dishonesty and abuse of
confidence in the handling of money or goods to the prejudice of another regardless of
whether the latter is the owner. No dishonesty nor abuse of confidence can be attributed to
the entrustee if the latter failed to comply with its obligation upon maturity of the trust receipt
due to serious liquidity problems and after it was placed under the control of the management
committee created by SEC which took custody of the entrustee’s assets, including lumbers
subject of the trust receipt. Clearly, it was the management committee which could settle the
entrustee’s obligations. The mala prohibita nature of the offense notwithstanding, the
entrustee’s intent to misuse or misappropriate the goods or their proceeds has not been
established based on the circumstances.
Also, the Memorandum of Agreement between the parties did not only reschedule the
entrustee’s debts, but more importantly, it provided principal conditions which are
incompatible with the trust agreement. Hence, the MOA novated and effectively
extinguished the entrustee’s obligation under the trust receipt agreement.
18. Anthony L. Ng vs. People of the Philippines, G.R. No. 173905, April 23, 2010
4|Page
When the goods subject of the transaction, such as chemicals and metal plates, were not
intended for sale or resale but for use in the fabrication of steel communication towers, the
agreement cannot be considered a trust receipt transaction but a simple loan. P.D. No. 115
punishes the entrustee for his failure to deliver the price of the sale, or if the goods are not
sold, to return them to the entruster, which, in the present case, is absent and could not
have been complied with; therefore, the liability of the entrustee is only civil in nature.
19. Land Bank of the Philippines vs. Perez, G.R. No. 166884, June 13, 2012
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.
20. Hur Tin Yang vs. People of the Philippines, G.R. No. 195117, August 14, 2013
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.
21. Vintola vs. Insular Bank of Asia and America, 150 SCRA 140 (1987)
A trust receipt transaction is a security agreement, pursuant to which the entruster acquires
a security interest in the goods, which are released to the possession of the entrustee who
binds himself to hold the goods in trust for the entruster and to sell or otherwise dispose of
the goods or to return them in case of non-sale. The return of the goods to the entruster
however, does not relieve the entrustee of the obligation to pay the loan because the
entruster is not the factual owner of the goods and merely holds them as owner in the
artificial concept for the purpose of giving stronger security for the loan.
22. Rosario Textile Mills Corp. vs. Home Bankers Savings and Trust Company, 462
SCRA 88 (2005)
Where the entrustee tendered the return of the articles to the entrustee because they did not
meet its manufacturing requirements but the latter refused to accept and as a consequence,
the entruster stored them in its warehouse which was, however, gutted by fire, the
entrustee’s obligation was not extinguished despite the tender and its invocation of the
principle of res perit domino. Under the Trust Receipts law, the loss of the goods
5|Page
under trust receipt regardless of the cause and the period or time it occurred, does not
extinguish the civil obligation of the entrustee. A trust receipt has two features, the loan
and security features. The loan is brought about by the fact that the entruster financed the
importation or purchase of the goods under TR. Until and unless this loan is paid, the
obligation to pay subsists. The principle of res perit domino will not apply if under the trust
receipt, the bank is made to appear as the owner, it was but an artificial expedient, more of
legal fiction than fact, for if it were really so, it could dispose of the goods in any manner
that it wants, which it cannot do, just to give consistency with the purpose of the trust
receipt of giving a stronger security for the loan obtained by the importer. To consider the
bank as the true owner from the inception of the transaction would be to disregard the loan
feature thereof.
23. Ong vs. Court of Appeals, 401 SCRA 649 (2003)
Recognizing the impossibility of imposing the penalty of imprisonment on a corporation,
it was provided that if the entrustee is a corporation, the penalty shall be imposed upon the
directors, officers, employees or other officials or persons responsible for the offense.
However, the person signing the trust receipt for the corporation is not solidarily liable with
the entrustee-corporation for the civil liability arising from the criminal offense unless he
personally bound himself under a separate contract of surety or guaranty.
24. Alfredo Ching vs. Secretary of Justice, 481 SCRA 609 (2006)
The fact that the officer who signed the trust receipt on behalf of the entrustee- corporation
signed in his official capacity without receiving the goods as he had never taken possession
of such nor committing dishonesty and abuse of confidence in transacting with the
entrustor, is immaterial. The law specifically makes the director, officer, employee or any
person responsible criminally liable precisely for the reason that a corporation, being a
juridical entity, cannot be the subject of the penalty of imprisonment.
25. South City Homes, Inc. vs. BA Finance Corporation, 371 SCRA 603 (2001)
When the entrustee defaults on his obligation, the entruster has the discretion to avail of
remedies which it deems best to protect its right. The law uses the word “may” in granting
to the entruster the right to cancel the trust and take possession of the goods; hence, the
option is given to the entruster.
26. Sarmiento vs. Court of Appeals, 394 SCRA 315 (2002)
A civil case filed by the entruster against the entrustees based on the failure of the latter to
comply with their obligation under the Trust Receipt agreement is proper because this
breach of obligation is separate and distinct from any criminal liability for misuse and/or
misappropriation of goods or proceeds realized from the sale of goods released under the
trust receipts. Being based on an obligation ex contractu and not ex delicto, the civil action
may proceed independently of the criminal proceedings instituted against the entrustees
regardless of the result of the latter.
6|Page
27. Landl & Company vs. Metropolitan Bank, 435 SCRA 639 (2004)
As provided under Section 7, P.D. No. 115, in the event of default of the entrustee, the
entruster may cancel the trust and take possession of the goods subject of the trust or of the
proceeds realized therefrom at any time; the entruster may, not less than five days after
serving or sending of notice of intention to sell, proceed with the sale of the goods at public
or private sale where the entrustee shall receive any surplus but shall be liable to the
entruster for any deficiency. This is by reason of the fact that the initial repossession by the
bank of the goods subject of the trust receipt did not result in the full satisfaction of the
entrustee’s loan obligation.
Banking Laws
28. Teodoro Bañas vs. Asia Pacific Finance Corporation, G.R. No. 128703, October 18,
2000
Transactions involving purchase of receivables at a discount, well within the purview of
investing, reinvesting or trading in securities, which as investment company is authorized
to perform, does not constitute a violation of the General Banking Act. In this case, the
funds supposedly lent have not been shown to have been obtained from the public by way
of deposits, hence, it cannot be said that the investment company was engaged in banking.
29. PNB v. Sps. Tajonera, G.R. No. 195889, 24 September 2014
Being a banking institution, PNB owes it to the respondents to observe the high standards
of integrity and performance 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, according to Philippine National Bank v. Pike, "[t]he stability of banks
largely depends on the confidence of the people in the honesty and efficiency of banks."
Thus, PNB 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. Yet, PNB failed in this regard.
30. Consolidated Bank and Trust Corporation vs. Court of Appeals, G.R. No. 138569,
September 11, 2003
Banks must exercise a high degree of diligence in insuring that they return the passbook
only to the depositor or his authorized representative. The tellers should know that the rules
on savings account provide that any person in possession of the passbook is presumptively
its owner. By the teller giving the passbook to the wrong person, thereby facilitating
unauthorized withdrawals by that person, and for failing to return the passbook to the
authorized representative of the depositor, the Bank presumptively failed to observe such
high degree of diligence in safeguarding the passbook and in insuring its return to the
party authorized to receive the same. However, the Bank’s liability is
7|Page
mitigated by the depositor’s contributory negligence in allowing a withdrawal slip signed

by its authorized signatories to fall into the hands of an impostor.
31. Citibank, N.A. vs. Spouses Luis & Carmelita Cabamongan, G.R. No. 146918, May 2,
2006
Allowing the pretermination of the account despite noticing discrepancies in the signature
and photograph of the person claiming to be the depositor, accompanied by the failure to
surrender the original certificate of time deposit, amounted to negligence on the part of the
bank. A bank that fails to exercise the degree of diligence required of it becomes liable for
damages.
32. Comsavings Bank vs. Spouses Danilo and Estrella Capistrano, G.R. No. 170942,
August 28, 2013
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.
33. Land Bank of the Philippines vs. Emmanuel Oñate, G.R. No. 192371, January 15,
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.
34. Ileana Macalinao vs. Bank of the Philippine Islands, G.R. No. 175490, September 17,
2009
When the stipulation on the interest rate is void, it is as if there was no express contract
thereon; hence, courts may reduce the interest rate as reason and equity demand, which
would depend on the circumstances of each case. In the present case, the fact that petitioner
made partial payments makes the stipulated penalty charge of 3% per month or 36% per
annum, in addition to regular interests, iniquitous and unconscionable.
35. Heirs of Estelita Burgos-Lipat namely: Alan B. Lipat and Alfredo B. Lipat, Jr. vs.
Heirs of Eugenio D. Trinidad namely: Asuncion R. Trinidad, et. al., G.R. No. 185644,
March 2, 2010
Section 78 of the General Banking Act requires payment of the amount fixed by the court
in the order of execution, with interest thereon at the rate specified in the mortgage contract,
which shall be applied for the one-year period reckoned from the date of registration of the
certificate of sale. Nonetheless, when the period to exercise the right of redemption was
effectively extended beyond one year, it is only fair and just to require
8|Page
the payment of 12% interest per annum beyond the one-year period up to the date of
consignment of the redemption price with the RTC.
36. Advocates for Truth in Lending vs. BSP, G.R. No. 192986, January 15, 2013
The CB Circular No. 905 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.
37. Jose C. Go vs. BSP, G.R. No. 178429, October 23, 2009
The law on DOSRI transactions imposes three restrictions: a) the approval requirement,
which refers to the written approval of the majority of the bank’s board of directors,
excluding the director concerned; b) the reportorial requirement, which mandates that the
approval should be entered upon the records of the corporation, and a copy of the entry be
transmitted to the appropriate supervising department; and c) the ceiling requirement,
which limits the amount of credit accommodations to an amount equivalent to the
respective outstanding deposits and book value of the paid-in capital contribution in the
bank. Failure to observe the three requirements constitutes commission of three separate
and different offenses.
38. Hilario P. Soriano vs. People of the Philippines, et. al., G.R. No. 162336, February 1,
2010
The rule on DOSRI transactions covers loans by a bank director or officer which are made
either: (1) directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of
others. The bank officer’s act of indirectly securing a fraudulent loan application by using
the name of an unsuspecting person and without prior compliance with the requirements
of the law would make the officer liable not only for violation of the law on DOSRI
transactions but also for estafa through falsification of commercial documents
The New Central Bank Act (R.A. No. 7653)
39. Ana Maria Koruga vs. Teodoro Arcenas, Jr., G.R. No. 168332/ G.R. No. 169053,
June 19, 2009
The Monetary Board, is vested with exclusive authority to assess, evaluate and determine
the condition of any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors or creditors, forbid
bank or non-bank financial institution to do business in the Philippines; and shall designate
an official of the BSP or other competent person as receiver to immediately take charge of
its assets and liabilities. When the complaint filed by a stockholder of the bank pertains to
the alleged unsafe and unsound banking practices, the authority to determine the existence
of such is with the Monetary Board.
9|Page
40. BSP Monetary Board vs. Hon. Antonio-Valenzuela, G.R. No. 184778, October 2,
2009
The actions of the Monetary Board under Sec. 29 and 30 of RA 7653, which pertain to the
power to appoint a conservator or a receiver for a bank, may not be restrained or set aside
by the court except on petition for certiorari on the ground that the action taken was in
excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess
of jurisdiction. Hence, the issuance by the RTC of writs of preliminary injunction is an
unwarranted interference with the powers of the Monetary Board.
41. Central Bank of the Philippines vs. Court of Appeals, G.R. No. 88353, May 8, 1992
The following requisites must be present before the order of conservatorship may be set
aside by a court: 1) The appropriate pleading must be filed by the stockholders of record
representing the majority of the capital stock of the bank in the proper court; 2) Said
pleading must be filed within ten (10) days from receipt of notice by said majority
stockholders of the order placing the bank under conservatorship; and 3) There must be
convincing proof, after hearing, that the action is plainly arbitrary and made in bad faith.
42. Philippine International Bank vs. Court of Appeals, G.R. No. 115849, January 24,
1996
The authority of the conservator under the Central Bank Law is limited to acts of
administration; the conservator merely takes the place of the bank’s board of directors and
as such, the former cannot perform acts the latter cannot do. Hence, the conservator cannot
revoke a contract of sale of a property acquired by the bank entered into by a bank officer
even though the price agreed upon is no longer reflective of the fair market value of the
property by reason of its appreciation of value over time.
43. Rural Bank of San Miguel vs. Monetary Board, G.R. No. 150886, February 16, 2007
Under R.A. No. 265, an examination is required to be made before the Monetary Board
could issue a closure order; however, under R.A. No. 7653, prior notice and hearing are no
longer required and a report made by the head of the supervising and examining department
suffices for a bank to be closed and placed under receivership. The purpose of the law is
to make the closure of the bank summary and expeditious for the protection of the public
interest
44. Abacus Real Estate Development Center, Inc. vs. Manila Banking Corp., G.R. No.
162270, April 06, 2005
When a bank is placed under receivership, the appointed receiver is tasked to take charge
of the bank’s assets and properties and the scope of the receiver’s power is limited to acts
of administration. The receiver’s act of approving the exclusive option to purchase granted
by the bank’s president is beyond the authority of the former and as such, it cannot be
considered a valid approval.
10 | P a g e
45. Alfeo D. Vivas, vs. Monetary Board and PDIC, G.R. No. 191424, August 7, 2013
The Monetary Board may forbid a bank from doing business and place it under receivership
without prior notice and hearing it the MB finds that a bank: (a) is unable to pay its
liabilities as they become due in the ordinary course of business; (b) has insufficient
realizable assets to meet liabilities; (c) cannot continue in business without involving
probable losses to its depositors and creditors; and (d) has willfully violated a cease and
desist order of the Monetary Board for acts or transactions which are considered unsafe
and unsound banking practices and other acts or transactions constituting fraud or
dissipation of the assets of the institution.
46. ]Jerry Ong vs. Court of Appeals, G.R. No. 112830, February 1, 1996
The court shall have jurisdiction in the same proceedings to adjudicate disputed claims
against the bank and enforce individual liabilities of the stockholders and do all that is
necessary to preserve the assets of such institution and to implement the liquidation plan
approved by the Monetary Board. Hence, all claims against the insolvent bank should be
filed in the liquidation proceeding and it is not necessary that a claim be initially disputed
in a court or agency before it is filed with the liquidation court.
47. Domingo Manalo vs. Court of Appeals, G.R. No. 141297, October 8, 2001
The rule that all claims against a bank must be filed in the liquidation proceedings does not
apply to actions filed by the bank itself for the preservation of its assets and protection of
its property, such as a petition for the issuance of a Writ of Possession instituted by the
bank itself. Moreover, a bank ordered closed by the Monetary Board retains its personality
which can sue and be sued through its liquidator.
48. Leticia G. Miranda vs. Philippine Deposit Insurance Corporation, G.R. No. 169334,
September 8, 2006
As a rule, bank deposits are not preferred credits. However, when the deposits covered by
a cashier’s check were purchased from a bank at the time when it was already insolvent,
the purchase is entitled to preference in the assets of the bank upon its liquidation by reason
of the fraud in the transaction.
49. Oñate vs. Abrogar, G.R. No. 107303, February 23, 1995
In a case where the money paid by an insurance company for treasury bills was deposited
in a bank account, the examination of the said bank account is prohibited under R.A. No.
1405 by reason of the fact that the subject matter of the action filed by the insurance
company against the seller of the treasury bills is the failure to deliver the treasury bills,
not the money deposited.
50. Intengan vs. Court of Appeals, G.R. No. 128996, February 15, 2002
When the account subject of the complaint is in the foreign currency, such complaint filed
for violation of R.A. No. 1405 did not toll the running of the prescriptive period to
11 | P a g e
file the appropriate complaint for violation of R.A. No. 6426. The Law on Secrecy of Bank
Deposits (R.A. No. 1405) covers deposits under the Philippine Currency; a separate and
distinct law governs deposits under the foreign currency (R.A. No. 6426).
51. Ejercito vs. Sandiganbayan, G.R. Nos. 157294-95, November 30, 2006
The “deposits” covered by the law on secrecy of bank deposits should not be limited to
those creating a creditor-debtor relationship; the law must be broad enough to include
“deposits of whatever nature” which banks may use for authorized loans to third persons.
R.A. No. 1405 extends to funds invested such as those placed in a trust account which the
bank may use for loans and similar transactions.
52. Mellon Bank, N.A. vs. Magsino, G.R. No. 71479, October 18, 1990
One of the exceptions under R.A. No. 1405 is when a court order is issued for the disclosure
of bank deposits in a case where the money deposited is the subject matter of litigation.
When the subject matter is the money the bank transmitted by mistake, an inquiry to the
whereabouts of the amount extends to whatever concealed by being held or recorded in the
name of the persons other than the one responsible for the illegal acquisition.
53. Marquez vs. Desierto, G.R. No. 135882, June 27, 2001
In a case for violation of the Anti-Graft and Corrupt Practices Act, the Ombudsman can
only examine bank accounts upon compliance with the following requisites: there is a
pending case before a court of competent jurisdiction; the account must be clearly
identified, and the inspection must be limited to the subject matter of the pending case; the
bank personnel and the account holder must be informed of the examination; and such
examination must be limited to the account identified in the pending case. If there is no
pending case yet but only an investigation by the Ombudsman, any order for the
examination of the bank account is premature.
54. PCIB vs. Court of Appeals, G.R. No. 84526, January 28, 1991)
The law on secrecy of bank deposits cannot be used to preclude the bank deposits from
being garnished for the satisfaction of a judgment. There is no violation of R.A. No. 1405
because the disclosure is purely incidental to the execution process and it was not the
intention of the legislature to place bank deposits beyond the reach of the judgment
creditor.
55. Salvacion vs. Central Bank of the Philippines, G.R. No. 94723, August 21, 1997)
A foreign transient who raped a minor, escaped and was made liable for damages to the
victim cannot invoke the exemption from court process of foreign currency deposits under
R.A. No. 6426. The garnishment of his foreign currency deposit should be allowed by
reason of equity and to prevent injustice; moreover, the purpose of the law is to encourage
foreign currency deposits and not to benefit a wrongdoer.
12 | P a g e
56. Republic of the Philippines vs. Glasgow Credit and Collection Services, Inc., G.R.
No. 170281, January 18, 2008
Since the account of Glasgow in CSBI was (1) covered by several suspicious transaction
reports and (2) placed under the control of the trial court upon the issuance of the writ of
preliminary injunction, the conditions provided in Section 12(a) of RA 9160, as amended,
were satisfied. A criminal conviction for an unlawful activity is not a prerequisite for the
institution of a civil forfeiture proceeding. A finding of guilt for an unlawful activity is not
an essential element of civil forfeiture.
57. Republic of the Philippines vs. Cabrini Green & Ross, Inc., G.R. No. 154522, May 5,
2006
The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the Court
of Appeals over the extension of freeze orders. It is solely the CA which has the authority
to issue a freeze order as well as to extend its effectivity; it also has the exclusive
jurisdiction to extend existing freeze orders previously issued by the AMLC vis-à-vis
accounts and deposits related to money-laundering activities
58. Ret. Lt. Gen. Jacinto Ligot, et. al. vs. Republic of the Philippines, G.R. No. 176944,
March 6, 2013
The primary objective of a freeze order is to temporarily preserve monetary instruments or
property that are in any way related to an unlawful activity or money laundering, by
preventing the owner from utilizing them during the duration of the freeze order. The
effectivity of the freeze order was limited to a period not exceeding six months, which may
be extended by the CA should it become completely necessary. Nonetheless, when the
Republic has not offered any explanation why it took six years before a civil forfeiture
case was filed in court, it can only be concluded that the continued extension of the freeze
order beyond the six-month period violated the party’s right to due process.
Negotiable Instruments Law
59. Caltex (Philippines), Inc. vs. Court of Appeals and Security Bank and Trust
Company, G.R. No. 97753, August 10, 1992
When the documents provide that the amounts deposited shall be repayable to the
depositor, such instrument is negotiable because it is payable to the "bearer." The
documents do not say that the depositor is Angel de la Cruz and that the amounts deposited
are repayable specifically to him, but the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of presentment.
60. Traders Royal Bank vs. Court of Appeals, Filriters Guaranty Assurance
Corporation and Central Bank of the Philippines, G.R. No. 93397, March 3, 1997
13 | P a g e
The language of negotiability which characterizes a negotiable paper as a credit instrument

is its freedom to circulate as a substitute for money. The freedom of negotiability is the
touchstone relating to the protection of holders in due course and is the foundation for the
protection which the law thrown around a holder in due course. This freedom in
negotiability is totally absent in a certificate of indebtedness which merely acknowledges
to pay a sum of money to a specified persons or entity. Since a certificate of indebtedness
which is not payable to order or bearer but is payable to a specific person is not negotiable,
the assignee takes it subject to the defect in the title of the assignor. Thus, when the person
who signed the deed of assignment was not authorized by the board of directors, the
assignor had no title to convey to the assignee.
61. Hongkong & Shanghai Banking Corporation v. CIR, G.R. Nos. 166018 & 167728,
04 June 2014
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.
62. Philippine National Bank vs. Erlando T. Rodriguez and Norma Rodriguez, G.R. No.
170325, September 26, 2008
Under the fictitious payee rule, a check made expressly payable to a non-fictitious and
existing person is not necessarily an order instrument if the payee is not the intended
recipient of the proceeds of the check. There is, however, a commercial bad faith exception
to this rule which provides that a showing of commercial bad faith on the part of the drawee
bank, or any transferee of the check for that matter, will work to strip it of this defense.
63. People Of The Philippines Vs. Gilbert Reyes Wagas. G.R. No. 157943, September 4,
2013
Under the Negotiable Instruments Law, a check made payable to cash is payable to the
bearer and could be negotiated by mere delivery without the need of an indorsement.
However, the drawer of the post-dated check cannot be liable for estafa to the person who
did not acquire the instrument directly from drawer but through negotiation of another by
mere delivery. This is because the drawer did not use the check to defraud the holder/private
complainant.
64. Prudential Bank v. Commissioner of Internal Revenue (CIR) G.R. No. 180390, July
27, 2011
14 | P a g e
A certificate of deposit is defined as a written acknowledgement by a bank of the receipt

of a sum of money on deposit which the bank promise to pay to the depositor or 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. A document to be considered a
certificate of deposit need not be in a specific form. Thus, a passbook of an interest- earning
deposit account issued by a bank is a certificate of deposit drawing interest because it is
considered a written acknowledgment by a bank that it has accepted a deposit of a sum of
money from a depositor. Thus, it is subject to documentary stamp tax.
65. Ting Ting Pua vs. Spouses Benito Lo Bun Tiong and Caroline Siok Ching Teng, G.R.
No. 198660, October 23, 2013
The 17 original checks, completed and delivered to petitioner, are sufficient by themselves
to prove the existence of the loan obligation of the respondents to petitioner. Sec. 16 of the
NIL provides that when an instrument is no longer in the possession of the person who
signed it and it is complete in its terms "a valid and intentional delivery by him is presumed
until the contrary is proved.
66. Patrimonio v. Gutierrez, G.R. No. 187769, 04 June 2014
While under the law, the one in possession 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 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 the one to whom the check was delivered
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.
67. San Miguel Corporation vs. Puzon, Jr. G.R. No. 167567, 22 September 2010
If the post-dated check was given to the payee in payment of an obligation, the purpose of
giving effect to the instrument is evident, thus title or ownership the check was transferred
to the payee. However, if the PDC was not given as payment, then there was no intent to
give effect to the instrument and ownership was not transferred. The evidence proves that
the check was accepted, not as payment, but in accordance with the policy of the payee to
cover the transaction (purchase of beer products) and in the meantime the drawer was to
pay for the transaction by some other means other than the check. This being so, title to the
check did not transfer to the payee; it remained with the drawer. The second element of the
felony of theft was therefore not established. Hence, there is no probable cause for theft.
15 | P a g e
68. Equitable Banking Corporation vs Special Steel Products, June 13, 2012
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 bank’s
reliance on the holder’s 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.
69. Westmont Bank (formerly Associated Banking Corp.) vs. Eugene Ong, G.R. No.
132560, January 30, 2002
As a general rule, a bank or corporation who has obtained possession of a check upon an
unauthorized or forged indorsement of the payee’s signature and who collects the amount
of the check from the drawee, is liable for the proceeds thereof to the payee or other owner,
notwithstanding that the amount has been paid to the person from whom the check was
obtained. The theory of the rule is that the possession of the check on the forged or
unauthorized indorsement is wrongful and when the money had been collected on the
check, the proceeds are held for the rightful owners who may recover them. The payee
ought to be allowed to recover directly from the collecting bank, regardless of whether the
check was delivered to the payee or not.
70. Ramon K. Ilusorio vs. Hon. Court of Appeals, G.R. No. 139130, November 27, 2002
It is a rule that when a signature is forged or made without the authority of the person whose
signature it purports to be, the check is wholly inoperative and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof against any party,
can be acquired through or under such signature. However, the rule does provide for an
exception, namely: "unless the party against whom it is sought to enforce such right is
precluded from setting up the forgery or want of authority." In the instant case, it is the
exception that applies as the petitioner is precluded from setting up the forgery, assuming
there is forgery, due to his own negligence in entrusting to his secretary his credit cards
and checkbook including the verification of his statements of account.
71. Philippine National Bank vs. FF Cruz and Company, G.R. No. 173259, July 25, 2011
As between a bank and its depositor, where the bank’s negligence is the proximate cause
of the loss and the depositor is guilty of contributory negligence, the greater proportion of
the loss shall be borne by the bank. The bank was negligent because it did not properly
verify the genuineness of the signatures in the applications for manager’s checks while the
depositor was negligent because it clothed its accountant/bookkeeper with apparent
authority to transact business with the Bank and it did not examine its monthly statement
of account and report the discrepancy to the Bank. The court allocated the damages between
the bank and the depositor on a 60-40 ratio.
16 | P a g e
72. Philippine Commercial International Bank vs. Balmaceda,G.R. No. 158143,

September 21, 2011
While its manager forged the signature of the authorized signatories of clients in the
application for manager’s checks and forged the signatures of the payees thereof, the
drawee bank also failed to exercise the highest degree of diligence required of banks in the
case at bar. It allowed its manager to encash the Manager’s checks that were plainly crossed
checks. A crossed check is one where two parallel lines are drawn across its face or across
its corner. Based on jurisprudence, the crossing of a check has the following effects: (a) the
check may not be encashed but only deposited in the bank; (b) the check may be negotiated
only once — to the one who has an account with the bank; and (c) the act of crossing the
check serves as a warning to the holder that the check has been issued for a definite purpose
and he must inquire if he received the check pursuant to this purpose; otherwise, he is not
a holder in due course. In other words, the crossing of a check is a warning that the check
should be deposited only in the account of the payee. When a check is crossed, it is the
duty of the collecting bank to ascertain that the check is only deposited to the payee’s
account.
73. Town Saving and Loan Bank, Inc. vs. Court of Appeals, 223 SCRA 459, 1993
When a married couple signed a promissory note in favor of a bank to enable the sister of
the husband to obtain a loan, they are considered as accommodation parties who are liable
for the payment of said loan.
74. Gonzales vs Phillippine Commercial and International Bank, GR No. 180257,
February 23, 2011
While a maker who signed a promissory note for the benefit of his co-maker (who received
the loan proceeds) is considered an accommodation party, he is, nevertheless, entitled to a
written notice on the default and the outstanding obligation of the party accommodated.
There being no such written notice, the Bank is grossly negligent in terminating the credit
line of the accommodation party for the unpaid interest dues from the loans of the party
accommodated and in dishonoring a check drawn against such credit line.
75. Juanita Salas vs. Hon. Court of Appeals and First Finance & Leasing Corporation,
G.R. No. 76788 January 22, 1990
A holder in due course holds the instrument free from any defect of title of prior parties,
and free from defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof. This being so, petitioner cannot set
up against respondent the defense of nullity of the contract of sale between her and VMS.
76. Atrium Management Corporation vs. Court of Appeals, et al., G.R. No. 109491,
February 28, 2001
17 | P a g e
Where cashier’s checks were issued merely as financial assistance to the payee with
instruction that the checks were strictly endorsed for payee’s account only and not to be
further negotiated, the party in whose favor the checks were negotiated could not qualify
as a holder in due course. However, it does not follow as a legal proposition that simply
because the holder was not a holder in due course for having taken the checks with notice
that the same were for deposit only to the account of another that it was altogether
precluded from recovering on the instrument. The Negotiable Instruments Law does not
provide that a holder not in due course cannot recover on the instrument. The disadvantage
of the holder in not being a holder in due course is that the instrument is subject to defense
as if it were non-negotiable. One such defense is absence or failure of consideration (the
defense raised by the drawer since the checks had no consideration and was issued merely
as a form of financial assistance to the payee).
77. Samsung Construction Company Philippines, Inc. vs. Far East Bank and Trust
Company and Court Of Appeals, G.R. NO. 129015, August 13, 2004
If a bank pays a forged check, it must be considered as paying out of its funds and cannot
charge the amount so paid to the account of the depositor. A bank is liable, irrespective of
its good faith, in paying a forged check.
78. Maria Tuazon vs. Heirs of Bartolome Ramos, 463 SCRA 408, 2005
After an instrument is dishonored by non-payment, indorsers cease to be merely
secondarily liable; they become principal debtors whose liability becomes identical to that
of the original obligor.The holder of the negotiable instrument need not even proceed
against the drawer before suing the indorser.
79. Allied Banking Corporation vs. Bank of the Philippine Islands, GR. 188363,
February 27, 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.
80. Bank of the Philippine Islands vs. Court of Appeals, 326 SCRA 641 (2000)
In depositing the check in his name, the depositor did not become the out-right owner of
the amount stated therein. By depositing the check with the bank, the depositor was, in a
way, merely designating the bank as the collecting bank. This is in consonance with the
rule that a negotiable instrument, such as a check, whether a manager’s check or ordinary
check, is not legal tender. As such, after receiving the deposit, under its own rules, the bank
shall credit the amount to the depositor’s account or infuse value thereon only after the
drawee bank shall have paid the amount of the check or the check has been cleared for
deposit. The depositor’s contention that after the lapse of the 35-day period the amount of
a deposited check could be withdrawn even in the absence of a clearance thereon, otherwise
it could take a long time before a depositor could make a withdrawal
18 | P a g e
is untenable. Said practice amounts to a disregard of the clearance requirement of the

banking system.
81. Anamer Salazar vs. JY Brothers Marketing Corporation, GR no. 171998, October
20, 2010
While Section 119 of the Negotiable Instruments Law in relation to Article 1231 of the
Civil Code provides that one of the modes of discharging a negotiable instrument is by any
other act which will discharge a simple contract for the payment of money, such as
novation, the acceptance by the holder of another check which replaced the dishonored
bank check did not result to novation. There are only two ways which indicate the presence
of novation and thereby produce the effect of extinguishing an obligation by another which
substitutes the same. First, novation must be explicitly stated and declared in unequivocal
terms as novation is never presumed. Secondly, the old and the new obligations must be
incompatible on every point. In the instant case, there was no express agreement that the
holder’s acceptance of the replacement check will discharge the drawer and endorser from
liability. Neither is there incompatibility because both checks were given precisely to
terminate a single obligation arising from the same transaction.
82. The International Corporate Bank, Inc. vs. Court of Appeals and Philippine
National Bank, G.R. NO. 129910, September 5, 2006
Alterations of the serial numbers do not constitute material alterations on the checks. Since
there were no material alterations on the checks, respondent as drawee bank has no right
to dishonor them and return them to petitioner, the collecting bank.
Insurance Law
83. Philippine Health Care Providers, Inc., vs. Commissioner of Internal Revenue, G.R.
No. 167330, September 18, 2009
One test in order to determine whether one is engaged in insurance business is whether the
assumption of risk and indemnification of loss (which are elements of an insurance
business) are the principal object and purpose of the organization or whether they are
merely incidental to its business. If these are the principal objectives, the business is that
of insurance. But if they are merely incidental and service is the principal purpose, then the
business is not insurance. In this case, Health Maintenance Organizations (HMOs) are not
insurance business
84. Fortune Medicare Inc. vs Amorin. G.R. No. 195872, March 12, 2014
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
19 | P a g e
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.
85. Philamcare Health System vs. Court of Appeals, 379 SCRA 356, 2002
Every person has an insurable interest in the life and health of: 1.) Himself, or his spouse
and of his children; 2.) Any person: (a) on whom he depends wholly or in part for education
or support, or in whom he has a pecuniary interest; (b) under legal obligation to him for the
payment of money, respecting property or service, of which death or illness might delay or
prevent the performance; and (c) upon whom whose life any estate or interest vested in him
depends.
86. Alpha Insurance and Surety Co. vs. Castor, GR No. 198174, September 2, 2013
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 such
a way as to preclude the insurer from non-compliance with his obligation.
87. Heirs Of Loreto c. Maramag vs. Eva Verna De Guzman Maramag, et al., G.R. No.
181132, June 5, 2009
The only persons entitled to claim the insurance proceeds are either the insured, if still
alive; or the beneficiary, if the insured is already deceased, upon the maturation of the
policy. The exception to this rule is a situation where the insurance contract was intended
to benefit third persons who are not parties to the same in the form of favorable stipulations
or indemnity. In such a case, third parties may directly sue and claim from the insurer.
Because no legal proscription exists in naming as beneficiaries the children of illicit
relationships by the insured, the shares of Eva in the insurance proceeds, whether forfeited
by the court in view of the prohibition on donations under Article 739 of the Civil Code or
by the insurers themselves for reasons based on the insurance contracts,
20 | P a g e
must be awarded to the said illegitimate children, the designated beneficiaries, to the
exclusion of heirs.
88. Country Bankers Insurance Corporation vs. Antonio Lagman, G.R. No. 165487,
July 13, 2011
Section 177 of the Insurance Code states that the surety is entitled to payment of the
premium as soon as the contract of suretyship or bond is perfected and delivered to the
obligor. No contract of suretyship or bonding shall be valid and binding unless and until
the premium therefor has been paid, except where the obligee has accepted the bond, in
which case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety. A continuing bond, as in this case
where there is no fixed expiration date, may be cancelled only by the obligee, which is the
NFA, by the Insurance Commissioner, and by the court. By law and by the specific contract
involved in this case, the effectivity of the bond required for the obtention of a license to
engage in the business of receiving rice for storage is determined not alone by the payment
of premiums but principally by the Administrator of the NFA.
89. First Lepanto-Taisho Insurance Corporation vs Chevron Philippines, GR No.
177839, January 18, 2012
The extent of the surety’s 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 creditor’s right to demand
performance.
90. The Heirs of George Y. Poe vs. Malayan Insurance Company, Inc., G.R. No. 156302,
April 7, 2009
The liability of the insured carrier or vehicle owner is based on tort, in accordance with the
provisions of the Civil Code; while that of the insurer arises from contract, particularly, the
insurance policy. The third-party liability of the insurer is only up to the extent of the
insurance policy and that required by law; and it cannot be held solidarily liable for
anything beyond that amount.
91. Jewel Villacorta vs. The Insurance Commission, et al., G.R. No. 54171. October 28,
1980
The main purpose of the “authorized driver” clause is that a person other than the insured
owner, who drives the car on the insured’s order, such as his regular driver, or with his
permission, such as a friend or member of the family or the employees of a car service or
repair shop must be duly licensed drivers and have no disqualification to drive a motor
vehicle. The mere happenstance that the employee(s) of the shop owner diverts the use of
the car to his own illicit or unauthorized purpose in violation of the trust reposed in the
21 | P a g e
shop by the insured car owner does not mean that the “authorized driver” clause has been
violated such as to bar recovery, provided that such employee is duly qualified to drive
under a valid driver’s license. It is the theft clause, not the “authorized driver” clause that
applies.
92. Perla Compania De Seguros, Inc., vs. Hon. Constante A. Ancheta, Presiding Judge of
the Court of First Instance of Camarines Norte, Branch III, et al., G.R. No. L- 49699,
August 8, 1988
From a reading Section 378, the following rules on claims under the “no fault indemnity”
provision, where proof of fault or negligence is not necessary for payment of any claim for
death or injury to a passenger or a third party, are established: 1.) A claim may be made
against one motor vehicle only. 2.) If the victim is an occupant of a vehicle, the claim shall
lie against the insurer of the vehicle in which he is riding, mounting or dismounting from.
3.) In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie
against the insurer of the directly offending vehicle. 4.) In all cases, the right of the party
paying the claim to recover against the owner of the vehicle responsible for the accident
shall be maintained.
93. Lalican vs. Insular Life Assurance Company Ltd, 597 SCRA 159, 2009)
The existence of an insurance interest gives a person the legal right to insure the subject
matter of the policy of insurance. Section 19 of the Insurance Code states that an interest
in the life or health of a person insured must exist when the insurance takes effect, but need
not exist thereafter or when the loss occurs.
94. Spouses Nilo Cha and Stella Uy Cha vs. Court of Appeals, G.R. No. 124520. August
18, 1997
A non-life insurance policy such as the fire insurance policy taken by spouses Cha over
their merchandise is primarily a contract of indemnity. Insurable interest in the property
insured must exist at the time the insurance takes effect and at the time the loss occurs. The
basis of such requirement of insurable interest in property insured is based on sound public
policy: to prevent a person from taking out an insurance policy on property upon which he
has no insurable interest and collecting the proceeds of said policy in case of loss of the
property. In such a case, the contract of insurance is a mere wager which is void under
Section 25 of the Insurance Code.
95. Malayan Insurance Company vs. PAP Co. (PHIL. BRANCH). G.R. No. 200784,
August 07, 2013
With the transfer of the location of the subject properties, without notice and without the
insurer’s 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.
22 | P a g e
Under Section 27 of the Insurance Code, “a concealment entitles the injured party to rescind
a contract of 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.
96. Armando Geagonia vs. Court of Appeals, et al., G.R. No. 114427, February 6, 1995
A double insurance exists where the same person is insured by several insurers separately
in respect of the same subject and interest. Since, the insurable interests of a mortgagor and
a mortgagee on the mortgaged property are distinct and separate, the two policies of the
PFIC do not cover the same interest as that covered by the policy of the private respondent,
no double insurance exists.
97. Great Pacific Life vs. Court of Appeals, 316 SCRA 677, 1999
Where a mortgagor pays insurance premium under group insurance policy (Mortgage
Redemption Insurance), making loss payable to mortgagee, the insurance is on mortgagor’s
interest, and mortgagor continues to be a party to the contract. In this type of policy
insurance, mortgagee is simply an appointee of the insurance fund, such loss- payable
clause does not make mortgagee a party to the contract
98. Malayan Insurance Co., Inc., vs. Philippine First Insurance Co., Inc. and Reputable
Forwarder Services, Inc., G.R. No. 184300, July 11, 2012
By the express provision of Section 93 of the Insurance Code, 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 interest insured; and 5.) There is
identity of the risk or peril insured against. In the present case, even though the two
insurance policies were issued over the same goods and cover the same risk, there arises
no double insurance since they were issued to two different persons/entities having
distinct insurable interests. Necessarily, over insurance by double insurance cannot
likewise exist.
99. Malayan Insurance Co., Inc. vs. Gregoria Cruz Arnaldo, in her capacity as the
Insurance Commissioner, et al., G.R. No. L-67835, October 12, 1987
For a valid cancellation of the policy, the following requisites must concur: 1) There must
be prior notice of cancellation to the insured; 2) The notice must be based on the
occurrence, after the effective date of the policy, of one or more of the grounds mentioned;
3) The notice must be (a) in writing, (b) mailed, or delivered to the named
23 | P a g e
insured, (c) at the address shown in the policy; 4) It must state (a) which of the grounds
mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the
insurer will furnish the facts on which the cancellation is based. MICO claims it cancelled
the policy in question for non-payment of premium. However, there is no proof that the
notice, assuming it complied with the other requisites, was actually mailed to and received
by Pinca.
100. Pacific Timber Export Corporation vs. Court of Appeals, et al., G.R. No. L-
38613, February 25, 1982
The non-payment of premium on the cover note is no cause for Pacific to lose what is due
it as if there had been payment of premium, for non-payment by it was not chargeable
against its fault. Had all the logs been lost during the loading operations, but after the
issuance of the cover note, liability on the note would have already arisen even before
payment of premium. This is how the cover note as a "binder" should legally operate
otherwise, it would serve no practical purpose in the realm of commerce, and is supported
by the doctrine that where a policy is delivered without requiring payment of the premium,
the presumption is that a credit was intended and policy is valid.
101. American Homes Assurance vs. Antonio Chua, G.R. 130421, June 28, 1999
Section 78 of the Insurance Code explicitly provides that an acknowledgment in a policy
or contract of insurance of the receipt of premium is conclusive evidence of its payment,
so far as to make the policy binding, notwithstanding any stipulation therein that it shall
not be binding until the premium is actually paid. This Section establishes a legal fiction
of payment and should be interpreted as an exception to Section 77.
102. Ucpb General Insurance Co. Inc., vs. Masagana Telemart, Inc., G.R. No.
137172, April 4, 2001
Section 77 of the Insurance Code of 1978 provides that an insurer is entitled to payment of
the premium as soon as the thing insured is exposed to the peril insured against. The first
exception is provided by Section 77 itself, and that is, in case of a life or industrial life
policy whenever the grace period provision applies. The second is that covered by Section
78 of the Insurance Code, which provides that any acknowledgment in a policy or contract
of insurance of the receipt of premium is conclusive evidence of its payment, so far as to
make the policy binding, notwithstanding any stipulation therein that it shall not be binding
until premium is actually paid. A third exception was laid down in Makati Tuscany
Condominium Corporation vs. Court of Appeals, wherein the Court ruled that Section 77
may not apply if the parties have agreed to the payment in installments of the premium and
partial payment has been made at the time of loss. Tuscany has also provided a fourth
exception, namely, that the insurer may grant credit extension for the payment of the
premium. This simply means that if the insurer has granted the insured a credit term for the
payment of the premium and loss occurs before the expiration of the term, recovery on the
policy should be allowed even though the premium is paid after the
24 | P a g e
loss but within the credit term. Moreover, as a fifth exception, estoppel bars it from taking
refuge under said Section, since Masagana relied in good faith on such practice.
103. Jose Marques and Maxilite Technologies, Inc., vs. Far East Bank And Trust
Company, et al., G.R. No. 171379, January 10, 2011
FEBTC is estopped from claiming that the insurance premium has been unpaid. FEBTC
induced Maxilite and Marques to believe that the insurance premium has in fact been
debited from Maxilite’s account. However, FEBTC failed to do so. FEBTC’s conduct
clearly constitutes gross negligence in handling Maxilite’s and Marques’ accounts. As a
consequence, FEBTC must be held liable for damages pursuant to Article 2176 of the Civil
Code.
104. South Sea Surety and Insurance Company Inc. v. CA, G.R. No. 102253 June
2, 1995
An insurer which delivers to an insurance agent or insurance broker an insurance policy
shall be deemed to have authorized such agent to receive on its behalf payment of any
premium which is due on such policy.
105. Great Pacific Life Insurance Corporation vs. Court of Appeals, et al., G.R.
No. L-57308, April 23, 1990
Great Pacific should have informed Cortez of the deadline for paying the first premium
before or at least upon delivery of the policy to him, so he could have complied with what
was needful and would not have been misled into believing that his life and his family were
protected by the policy, when actually they were not. And, if the premium paid by Cortez
was unacceptable for being late, it was the company's duty to return it. By accepting his
premiums without giving him the corresponding protection, Great Pacific acted in bad faith
and since his policy was in fact inoperative or ineffectual from the beginning, the company
was never at risk, hence, it is not entitled to keep the premium.
106. Ng Gan Zee vs. Asian Crusader Life Assurance Corporation, G.R. No. L-
30685, May 30, 1983
Concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the assurer,
but he designedly and intentionally withholds the same. In the absence of evidence that the
insured had sufficient medical knowledge as to enable him to distinguish between "peptic
ulcer" and "a tumor", his statement that said tumor was "associated with ulcer of the
stomach, " should be construed as an expression made in good faith of his belief as to the
nature of his ailment and operation.
107. Sunlife Assurance Company of Canada vs. The Court of Appeals, et al., G.R.
No. 105135, June 22, 1995
Where the insured is specifically required to disclose to the insurer matters relating to his
health, the insured's failure to disclose the fact that he was hospitalized for two weeks
25 | P a g e
prior to filing his application for insurance, raises grave doubts about his bona fides.
Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom communication is due, in forming his
estimate of the disadvantages of the proposed contract or in making his inquiries.
108. Emilio Tan vs. The Court of Appeals, G.R. No. 48049. June 29, 1989
By virtue of the “incontestability clause,” the insurer has two years from the date of
issuance of the insurance contract or of its last reinstatement within which to contest the
policy, whether or not, the insured still lives within such period. After two years, the
defenses of concealment or misrepresentation, no matter how patent or well founded, no
longer lie. Considering that the insured died before the two-year period had lapsed, Phil-
Am Insurance is not, therefore, barred from proving that the policy is void ab initio by
reason of the insured’s fraudulent concealment or misrepresentation.
109. Manila Bankers Life Insurance Corporation vs. Cresencia p. Aban, G.R. No.
175666, July 29, 2013
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.
110. Florendo vs. Philam Plans, GR. No 186983, February 22, 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 beneficiary’s entitlement to the benefits of the
pension plan.
111. Summit Guaranty And Insurance Company, Inc. vs. Hon. Jose C. De Guzman,
in his capacity as Presiding Judge of Branch III, CFI of Tarlac, et al., G.R. No. L-
50997, June 30, 1987
There is absolutely nothing in the law which mandates that the two periods prescribed in
Section 384 of the Insurance Code—that is, the six-month period for filing the notice of
claim and the one-year period for bringing an action or suit must always concur. On the
contrary, it is very clear that the one-year period is only required “in proper cases.” The
one-year period should instead be counted from the date of rejection by the insurer as this
is the time when the cause of action accrues. Since in the case at hand, there has yet been
26 | P a g e
no accrual of cause of action, prescription has not yet set in. This is because, before such
final rejection, there was no real necessity for bringing suit.
112. H.H. Hollero v. GSIS, G.R. No. 152334, 24 September 2014
The prescriptive period for the insured’s action for indemnity should be reckoned from the
"final rejection" of the claim. "Final rejection" simply means denial by the insurer of the
claims of the insured and not the rejection or denial by the insurer of the insured’s motion
or request for reconsideration. A perusal of the letter dated April 26, 1990 shows that the
GSIS denied Hollero Construction’s indemnity claims. The same conclusion obtains for
the letter dated June 21, 1990 denying Hollero Construction’s indemnity claim. Holler's
causes of action for indemnity respectively accrued from its receipt of the letters dated
April 26, 1990 and June 21, 1990, or the date the GSIS 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 on September 27, 1991, its causes of action
had already prescribed.
113. Malayan Insurance Co., Inc., vs. Rodelio Alberto, et al., G.R. No. 194320,
February 1, 2012
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.
114. Loadstar Shipping Company v. Malayan Insurance Company, G.R. No.
185565, November 26, 2014
Under the Code of Commerce, if the goods are delivered but arrived at the destination in
damaged condition, the remedies to be pursued by the consignee depend on the extent of
damage on the goods. If the effect of damage on the goods consisted merely of diminution
in value, the carrier is bound to pay only the difference between its price on that day and
its depreciated value as provided under Article 364. Malayan, as the insurer of PASAR,
neither stated nor proved that the goods are rendered useless or unfit for the purpose
intended by PASAR due to contamination with seawater. Hence, there is no basis for the
goods’ rejection under Article 365 of the Code of Commerce. Clearly, it is erroneous for
Malayan to reimburse PASAR as though the latter suffered from total loss of goods in the
absence of proof that PASAR sustained such kind of loss.
115. Eastern Shipping Lines, Inc. vs. Prudential Guarantee and Assurance, Inc.,
G.R. No. 174116, September 11, 2009
The insurer, upon happening of the risk "insured" against and after payment to the insured,
is subrogated to the rights and cause of action of the latter. As such, the insurer has the
right to seek reimbursement for all the expenses paid. However, in a contract of carriage
involving the shipment of knock-down auto parts of Nissan motor vehicles which were
allegedly lost and destroyed, the insurer was not properly subrogated because of the non-
presentation of any marine insurance policy. The submission of a marine risk
27 | P a g e
note instead of the insurance policy doesn't satisfy the requirement for subrogation. The
marine risk note is not an insurance policy. It is only an acknowledgment or declaration of
the insurer confirming the specific shipment covered by its marine open policy, the
evaluation of the cargo and the chargeable premium.
116. Asian Terminals Inc. vs. First Lepanto Taisho Corporation, G.R. No. 185964,
16 June 2014
The shipment received by the ATI from the vessel of COCSCO was found to have
sustained loss and damages. An arrastre operator’s duty is to take good care of the goods
and to turn them over to the party entitled to their possession. It must prove that the losses
were not due to its negligence or to that of its employees. The Court held that ATI failed
to discharge its burden of proof. ATI blamed COSCO but when the damages were
discovered, the goods were already in ATI’s custody for two weeks. Witnesses also
testified that the shipment was left in an open area exposed to the elements, thieves and
vandals.
Transportation Laws
117. Pedro De Guzman vs. Court of Appeals, G. R. No. L-47822, 22 December
1988
Article 1732 makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom as "a sideline"). It also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does it distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
118. Philippine American General Insurance Company vs. Pks Shipping
Company, G.R. No. 149038, 9 April 2003
Much of the distinction between a “common or public carrier” and a “private or special
carrier” lies in the character of the business, such that if the undertaking is an isolated
transaction, not a part of the business or occupation, and the carrier does not hold itself out
to carry the goods for the general public or to a limited clientele, although involving the
carriage of goods for a fee, the person or corporation providing such service could very
well be just a private carrier.
119. Spouses Perena vs Spouses Nicolas, GR No. 157917, August 29, 2012
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
28 | P a g e
transportation indiscriminately to the students of a particular school living within or near

where they operated the service and for a fee.
120. Unsworth Transport International (Phils.) vs. Court of Appeals ,G.R. No.
166250, 26 July 2010
A freight forwarder’s liability is limited to damages arising from its own negligence,
including negligence in choosing the carrier; however, where the forwarder contracts to
deliver goods to their destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods. A freight forwarder
assumes the responsibility of a carrier, which actually executes the transport, even though
the forwarder does not carry the merchandise itself.
121. Loadmasters Customs Services, Inc. vs. Glodel Brokerage Corporation, GR
No. 179446, January 10, 2011
A customs broker whose services were engaged for the release and withdrawal of the
cargoes from the pier and their subsequent delivery to the consignee’s warehouse and the
owner of the delivery truck whom the customs broker contracted to transport the cargoes
to the warehouse are both common carriers. The latter is considered a common carrier in
the absence of indication that it solely and exclusively rendered services to the customs
broker. Thus, when the truck failed to deliver one of the cargoes, both the broker and owner
of the truck are liable. Being both common carriers, they are mandated from the nature of
their business and for reasons of public policy, to observe the extraordinary diligence in
the vigilance over the goods transported by them according to all the circumstances of such
case. Thus, in case of loss of the goods, the common carrier is presumed to have been at
fault or to have acted negligently.
122. Westwind Shipping Corporation vs. UCPB General Insurance Co., GR no.
2002289, November 25, 2013
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 ship’s tackle. Being the custodian of the goods discharged from a vessel,
an arrastre operator’s duty is to take good care of the goods and to turn them over to the
party entitled to their possession. While it is true that an arrastre operator and a carrier may
not be held solidarily liable at all times, the facts of these cases show that apart from the
stevedores of the arrastre operator being directly in charge of the physical unloading of the
cargo, its foreman picked the cable sling that was used to hoist the packages for transfer to
the dock. Moreover, the fact that the packages were unloaded with the same sling unharmed
is telling of the inadequate care with which the stevedore handled and discharged the cargo.
123. Unknown Owner Of The Vessel M/V China Joy vs. Asian Terminals Inc. G.R.
No. 195661, 11 March 2015
29 | P a g e
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 ship’s tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operator’s duty is to take good
care of the goods and to turn them over to the party entitled to their possession. The legal
relationship between an arrastre operator and a consignee is akin to that between a
warehouseman and a depositor. As to both the nature of the functions and the place of their
performance, an arrastre operator’s services are clearly not maritime in character.
In Insurance Company of North America v. Asian Terminals, Inc., the Court explained that
the liabilities of the arrastre operator for losses and damages are set forth in the contract for
cargo handling services it had executed with the PPA. Corollarily then, the rights of an
arrastre operator to be paid for damages it sustains from handling cargoes do not likewise
spring from contracts of carriage. However, in the instant petition, the contending parties
make no references at all to any provisions in the contract for cargo handling services ATI
had executed with the PPA. Notwithstanding the above, the petitioners cannot evade
liability for the damage caused to ATI’s unloader in view of Article 2176 of the New Civil
Code.
124. R Transport Corporation vs. Pante, GR No. 162104, September 15, 2009
When a bus hit a tree and house due to the fast and reckless driving of the bus driver
resulting in injury to one of its passengers, the bus owner is liable and such liability does
not cease even upon proof that he exercised all the diligence of a good father of family in
the selection and supervision of its employees.
125. Asian Terminals, Inc vs. Simon Enterprises, Inc. GR No. 177116, February
27, 2013
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.
126. Equitable Leasing Corporation vs. Lucita Suyom et al., G.R. No. 143360, 5
September 2002
In an action based on quasi delict, the registered owner of a motor vehicle is solidarily
liable for the injuries and damages caused by the negligence of the driver, in spite of the
fact that the vehicle may have already been the subject of an unregistered Deed of Sale in
favor of another person. Unless registered with the Land Transportation Office, the sale --
30 | P a g e
while valid and binding between the parties -- does not affect third parties, especially the
victims of accidents involving the said transport equipment.
127. William Tiu, doing business under the name and style of “D’ Rough Riders,”
vs. Pedro A. Arriesgado, G.R. No. 138060, 1 September 2004
The principle of last clear chance only applies in a suit between the owners and drivers of
two colliding vehicles. It does not arise where a passenger demands responsibility from the
carrier to enforce its contractual obligations, for it would be inequitable to exempt the
negligent driver and its owner on the ground that the other driver was likewise guilty of
negligence.
128. Spouses Cesar & Suthira Zalamea vs. Court of Appeals, G.R. No. 104235
November 18, 1993
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain
date, a contract of carriage arises, and the passenger has every right to expect that he would
fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for
breach of contract of carriage. Where an airline had deliberately overbooked, it took the
risk of having to deprive some passengers of their seats in case all of them would show up
for the check in. For the indignity and inconvenience of being refused a confirmed seat on
the last minute, said passenger is entitled to an award of moral damages.
129. Cathay Pacific Airways, Ltd., vs. Spouses Daniel Vazquez And Maria Luisa
Madrigal Vazquez, G.R. No. 150843, March 14, 2003
Spouses Vazquez had every right to decline the upgrade and insist on the Business Class
accommodation they had booked for and which was designated in their boarding passes.
They clearly waived their priority or preference when they asked that other passengers be
given the upgrade. It should not have been imposed on them over their vehement objection.
By insisting on the upgrade, Cathay breached its contract of carriage with Spouses
Vazquez.
130. Heirs of Josemaria Ochoa vs. G&S Transport Corporation, March 19,2011
as affirmed in the July 16, 2012 decision
In a contract of carriage, it is presumed that the common carrier is at fault or is negligent
when a passenger dies or is injured. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence. Unfortunately, the common carrier miserably failed to overcome this
presumption as the accident which led to the passenger’s death was due to the reckless
driving and gross negligence of its driver.
131. Victory Liner, Inc. vs. Rosalito Gammad, G.R. No. 159636, November 25,
2004
31 | P a g e
A common carrier is bound to carry its passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard to all the
circumstances. In a contract of carriage, it is presumed that the common carrier was at fault
or was negligent when a passenger dies or is injured. Unless the presumption is rebutted,
the court need not even make an express finding of fault or negligence on the part of the
common carrier. This statutory presumption may only be overcome by evidence that the
carrier exercised extraordinary diligence.
132. Antonia Maranan vs. Pascual Perez, et al, G.R. No. L-22272, June 26, 1967
The basis of the carrier's liability for assaults on passengers committed by its drivers rests
either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's
implied duty to transport the passenger safely. Under the first, which is the minority view,
the carrier is liable only when the act of the employee is within the scope of his authority
and duty. It is not sufficient that the act be within the course of employment only. Under
the second view, upheld by the majority and also by the later cases, it is enough that the
assault happens within the course of the employee's duty. It is no defense for the carrier
that the act was done in excess of authority or in disobedience of the carrier's orders.The
carrier's liability here is absolute in the sense that it practically secures the passengers from
assaults committed by its own employees. As can be gleaned from Art. 1759, the Civil
Code of the Philippines evidently follows the rule based on the second view. At least three
very cogent reasons underlie this rule: (1) the special undertaking of the carrier requires
that it furnish its passenger that full measure of protection afforded by the exercise of the
high degree of care prescribed by the law, inter alia from violence and insults at the hands
of strangers and other passengers, but above all, from the acts of the carrier's own servants
charged with the passenger's safety; (2) said liability of the carrier for the servant's violation
of duty to passengers, is the result of the former’s confiding in the servant's hands the
performance of his contract to safely transport the passenger, delegating therewith the duty
of protecting the passenger with the utmost care prescribed by law; and (3) as between the
carrier and the passenger, the former must bear the risk of wrongful acts or negligence of
the carrier's employees against passengers, since it, and not the passengers, has power to
select and remove them.
133. Jose Pilapil vs. Hon. Court of Appeals, G.R. No. 52159, 22 December 1989
A tort committed by a stranger which causes injury to a passenger does not accord the latter
a cause of action against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent the tort from
being committed when the same could have been foreseen and prevented by them.
134. Alberta Yobido vs. Court of Appeals, G.R. No. 113003, 17 October 1997
A fortuitous event is possessed of the following characteristics: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply with his
obligations, must be independent of human will; (b) it must be impossible to foresee the
event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to
32 | P a g e
avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the obligor must be free from any participation in
the aggravation of the injury resulting to the creditor. Under the circumstances of this case,
the explosion of the new tire may not be considered a fortuitous event. There are human
factors involved in the situation. The fact that the tire was new did not imply that it was
entirely free from manufacturing defects or that it was properly mounted on the vehicle.
Neither may the fact that the tire bought and used in the vehicle is of a brand name noted
for quality, resulting in the conclusion that it could not explode within five days’ use.
135. Fortune Express, Inc. vs. Court of Appeals, G.R. No. 119756, 18 March 1999
Despite the report of Philippine Constabulary agent Generalao that the Maranaos were
going to attack its buses, Fortune took no steps to safeguard the lives and properties of its
passengers. The seizure of the bus of the Fortune was foreseeable and, therefore, was not
a fortuitous event which would exempt petitioner from liability.
136. Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, 28
September 1999
Loadstar was at fault or negligent in not maintaining a seaworthy vessel and in having
allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did
not sink because of any storm that may be deemed as force majeure, inasmuch as the wind
condition in the area where it sank was determined to be moderate. Since it was remiss in
the performance of its duties, Loadstar cannot hide behind the “limited liability” doctrine
to escape responsibility for the loss of the vessel and its cargo.
137. Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja, G.R.
No. 143008. June 10, 2002
Negligence is conduct that creates undue risk of harm to another. It is the failure to observe
that degree of care, precaution and vigilance that the circumstances justly demand, whereby
that other person suffers injury. Petitioner’s vessel was carrying chemical cargo—alkyl
benzene and methyl methacrylate monomer. While knowing that their vessel was carrying
dangerous inflammable chemicals, its officers and crew failed to take all the necessary
precautions to prevent an accident. Petitioner was, therefore, negligent.
138. Aniceto Saludo, Jr. vs. Hon. Court of Appeals, G.R. No. 95536, March 23,
1992
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods. When
a common carrier undertakes to convey goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the absence, of any agreement as to
the time of delivery. But where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfill its contract and is liable for
33 | P a g e
any delay, no matter from what cause it may have arisen. This result logically follows from
the well-settled rule that where the law creates a duty or charge, and the party is disabled
from performing it without any default in himself, and has no remedy over, then the law
will excuse him, but where the party by his own contract creates a duty or charge upon
himself, he is bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract. Whether or not there has
been such an undertaking on the part of the carrier to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the interpretation of
contracts.
139. Virgines Calvo doing business under the name and style Transorient
Container Terminal Services, Inc. vs. Ucpb General Insurance Co., Inc., G.R. No.
148496, 19 March 2002
The rule is that if the improper packing or, in this case, the defect/s in the container, is/are
known to the carrier or his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition,
he is not relieved of liability for damage resulting therefrom. In this case, Calvo accepted
the cargo without exception despite the apparent defects in some of the container vans.
Hence, for failure of Calvo to prove that she exercised extraordinary diligence in the
carriage of goods in this case or that she is exempt from liability, the presumption of
negligence as provided under Art. 1735 holds.
140. Provident Insurance Corp., vs. Court of Appeals, G.R. No. 118030, January
15, 2004
The bill of lading defines the rights and liabilities of the parties in reference to the contract
of carriage. Stipulations therein are valid and binding in the absence of any showing that
the same are contrary to law, morals, customs, public order and public policy. Where the
terms of the contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of the stipulations shall control. In light of the foregoing, there
can be no question about the validity and enforceability of Stipulation No. 7 in the bill of
lading. The twenty-four hour requirement under the said stipulation is, by agreement of the
contracting parties, a sine qua non for the accrual of the right of action to recover damages
against the carrier.
141. Keng Hua Paper Products Co., Inc. vs. Court of Appeals, 286 SCRA 257, 1998
A bill of lading serves two functions: First, it is a receipt for the goods shipped. Second, it
is a contract by which three parties, namely, the shipper, the carrier, and the consignee
undertake specific responsibilities and assume stipulated obligations. A bill of lading
delivered and accepted constitutes the contract of carriage even though not signed, because
the acceptance of a paper containing the terms of a proposed contract generally constitutes
an acceptance of the contract and of all its terms and conditions of which the acceptor has
actual or constructive notice.
34 | P a g e
142. Aboitiz Shipping Corporation vs. Insurance Company of North America,

G.R. No. 168402, August 6, 2008
Under the Code of Commerce, the notice of claim must be made within twenty four (24)
hours from receipt of the cargo if the damage is not apparent from the outside of the
package. For damages that are visible from the outside of the package, the claim must be
made immediately. Provisions specifying a time to give notice of damage to common
carriers are ordinarily to be given a reasonable and practical, rather than a strict
construction. Understandably, when the goods were delivered, the necessary clearance had
to be made before the package was opened. Upon opening and discovery of the damaged
condition of the goods, a report to this effect had to pass through the proper channels before
it could be finalized and endorsed by the institution to the claims department of the shipping
company. The call to Aboitiz was made two days from delivery, a reasonable period
considering that the goods could not have corroded instantly overnight such that it could
only have sustained the damage during transit. Moreover, Aboitiz was able to immediately
inspect the damage while the matter was still fresh. In so doing, the main objective of the
prescribed time period was fulfilled. Thus, there was substantial compliance with the notice
requirement in this case.
143. Ucpb General Insurance Co., Inc., vs. Aboitiz Shipping Corporation, et. al.,
G.R. No. 168433, February 10, 2009
The Court has construed the 24-hour claim requirement as a condition precedent to the
accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper
or consignee must allege and prove the fulfillment of the condition. Otherwise, no right of
action against the carrier can accrue in favor of the shipper or consignee.
144. Philam Insurance Company vs. Heung A Shipping Corporation, G.R. No.
187701 &G.R. No. 187812, 23 July 2014
Common 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. As the carrier of the subject shipment, HEUNG-A was bound to
exercise extraordinary diligence in conveying the same and its slot charter agreement with
DONGNAMA did not divest it of such characterization nor relieve it of any accountability
for the shipment. However, the liability of HEUNG-A is limited to $500 per package or
pallet because in case of the shipper’s failure to declare the value of the goods in the bill of
lading, Section 4, paragraph 5 of the COGSA provides that neither the carrier nor the ship
shall in any event be or become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package.
35 | P a g e
145. Oceaneering Contractrors (Phils), Inc. v. Nestor Barreto, doing business as

NNB Lighterage , GR No. 184215, February 9, 2011
Where the agreement executed by the parties was a time charter where the possession and
control of the barge was retained by the owner, the latter is, therefore, a common carrier
legally charged with extraordinary diligence in the vigilance over the goods transported by
him. The sinking of the vessel created a presumption of negligence and/or unseaworthiness
which the barge owner failed to overcome and gave rise to his liability for the charterer lost
cargo despite the latter’s failure to insure the same.
146. Caltex Philippines, Inc. vs. Sulpicio Lines, Inc., et. al., G.R. No. 131166,
September 30, 1999
A charter party is a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; a contract of affreightment is
one by which the owner of a ship or other vessel lets the whole or part of her to a merchant
or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight. A contract of affreightment may be either time charter, wherein
the leased vessel is leased to the charterer for a fixed period of time, or voyage charter,
wherein the ship is leased for a single voyage. In both cases, the charter-party provides for
the hire of the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship’s store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance of the ship. Under a
demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to
liability for damages caused by negligence. If the charter is a contract of affreightment,
which leaves the general owner in possession of the ship as owner for the voyage, the rights
and the responsibilities of ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at
least insofar as the particular voyage covering the charter-party is concerned.
147. Chua Yek Hong vs. Intermediate Appellate Court, G.R. No. 74811, 30
September 1988
The term "ship agent" as used in the foregoing provision is broad enough to include the
ship owner. Pursuant to said provision, therefore, both the ship owner and ship agent are
civilly and directly liable for the indemnities in favor of third persons, which may arise
from the conduct of the captain in the care of goods transported, as well as for the safety
of passengers transported. However, under the same Article, this direct liability is
moderated and limited by the ship agent's or ship owner's right of abandonment of the
vessel and earned freight. The most fundamental effect of abandonment is the cessation of
the responsibility of the ship agent/owner. The ship owner's or agent's liability is merely
co-extensive with his interest in the vessel such that a total loss thereof results in
36 | P a g e
its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The
total destruction of the vessel extinguishes maritime liens as there is no longer any res to
which it can attach.
148. Dela Torre vs. Court of Appeals, GR No. 160088, July 13, 2011
The LIMITED LIABILITY RULE cannot be availed of by the charterers/sub-charterer in
order to escape from their liability. The Code of Commerce is clear on which indemnities
may be confined or restricted to the value of the vessel and these are the – “indemnities in
favor of third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel.” Thus, what is contemplated is the liability to third
persons who may have dealt with the SHIPOWNER, the AGENT or even the
CHARTERER in case of demise or bareboat charter.
The Charterer cannot use the said Rule because it does not completely and absolutely step
into the shoes of the shipowner or even the ship agent because there remains conflicting
rights between the former and the real shipowner as derived from their charter agreement.
Therefore, even if the contract is for a bareboat or demise charter where possession, free
administration and even navigation are temporarily surrendered to the charterer, dominion
over the vessel remains with the shipowner. Ergo, the charterer or the sub- charterer, whose
rights cannot rise above that of the former, can never set up the Limited Liability Rule
against the very owner of the vessel.
149. National Development Company vs. The Court of Appeals, G.R. No. L-49469,
August 19, 1988
The law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration (Article 1753, Civil Code).
Thus, the rule was specifically laid down that for cargoes transported from Japan to the
Philippines, the liability of the carrier is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws (Article 1766, Civil Code). Hence,
the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision of
the Civil Code.
150. Loadstar Shipping Co., Inc., vs. Court of Appeals, G.R. No. 131621
September 28, 1999
Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive
period on the matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a
one-year period of limitation on claims for loss of, or damage to, cargoes sustained during
transit — may be applied suppletorily to the case at bar. This one-year prescriptive period
also applies to the insurer of the goods.
37 | P a g e
151. Wallem Philippines Shipping vs SR Farms, GR No. 161849, July 9, 2010

Under Section 3 (6) of the COGSA, notice of loss or damages must be filed within three
days of delivery. Under the same provision, however, a failure to file a notice of claim
within three days will not bar recovery if a suit is nonetheless filed within one year from
delivery of the goods or from the date when the goods should have been delivered. The
filing of an amended pleading does not retroact to the date of the filing of the original. It is
true that, as an exception, an amendment which merely supplements and amplifies facts
originally alleged in the complaint relates back to the commencement of the action and is
not barred by the statute of limitations which expired after the service of the original
complaint. The exception, however, would not apply to the party impleaded for the first
time after the service of the amended complaint. In this case, petitioner was not impleaded
as a defendant in the original complaint filed on March 11, 1993. It was only on June 7,
1993 that the Amended Complaint, impleading petitioner as defendant, was filed.
Considering this circumstances, clearly, the suit against the petitioner was filed beyond the
prescriptive period of the filing of claims as provided in the COGSA.
152. Asian Terminals Inc., v. Philam Insurance Co. G.R. NO. 181262 , July 24,
2013
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.
153. Mitsui O.S.K. Lines Ltd. vs. Court of Appeals, G.R. No. 119571, March 11,
1998
The one-year period of limitation is designed to meet the exigencies of maritime hazards.
In a case where the goods shipped were neither lost nor damaged in transit but were, on the
contrary, delivered in port to someone who claimed to be entitled thereto, the situation is
different, and the special need for the short period of limitation in cases of loss or damage
caused by maritime perils does not obtain.
154. New World International Development Corporation vs NYK-FilJapan
Shipping Corporation, GR No. 171468, August 24, 2011
Notwithstanding the fact that the case was filed beyond the one-year prescriptive period
provided under the COGSA, the suit (against the insurer) will not be dismissed if the delay
was not due to the claimant’s fault. Had the insurer processed and examined the claim
promptly, the claimant or the insurer itself, as subrogee, could have taken the judicial action
on time. By making an unreasonable demand for an itemized list of damages which caused
delay, the insurer should bear the loss with interest,
38 | P a g e
155. Insurance Company of North America vs. Asian Terminals, Inc. GR No.
180784, February 15, 2012
The term “ carriage of goods “ covers the period from the time when the goods are loaded
to the time when they are discharged from the ship; thus, it can be inferred that the period
of time when the goods have been discharged from the ship and given to the custody of the
arrastre operator is not covered by the COGSA. Under the COGSA, the carrier and the
ship may put up the defense of prescription if the action for damages is not brought within
one year after delivery of the goods or the date when the goods should have been delivered.
However, the COGSA does not mention than an arrastre operator may invoke the
prescriptive period; hence, it does not cover the arrastre operator. The arrastre operator’s
responsibility and liability for losses and damages are set forth in the contract for cargo
handling services executed between the Philippine Ports Authority and Marina Port
Services.
156. Lhuillier vs British Airways, G.R. No. 171092, March 15, 2010
Under Article 28 (1) of the Warsaw Convention, the plaintiff may bring the action for
damages before: 1) the court where carrier is domiciled; 2) the court where the carrier has
its principal place of business; 3) the court where the carrier has an establishment by which
the contract has been made; or 4) the court of the place of destination. In this case, it is not
disputed that respondent is a British corporation domiciled in London, United Kingdom
with London as its principal place of business. Hence, under the first and second
jurisdictional rules, the petitioner may bring her case before the courts of London in the
United Kingdom. In the passenger ticket and baggage check presented by both the
petitioner and respondent, it appears that the ticket was issued in Rome, Italy.
Consequently, under the third jurisdictional rule, the petitioner has the option to bring her
case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver
that the place of destination is Rome, Italy, which is properly designated given the routing
presented in the said passenger ticket and baggage check. Accordingly, petitioner may
bring her action before the courts of Rome, Italy. Thus, the RTC of Makati correctly ruled
that it does not have jurisdiction over the case filed by the petitioner even though it was
based on tort and not on breach of contract.
157. Philippine Airlines Inc. vs. Court of Appeals, G.R. No. 119706, March 14,
1996
While the Warsaw Convention has the force and effect of law in the Philippines, being a
treaty commitment by the government and as a signatory thereto, the same does not operate
as an exclusive enumeration of the instances when a carrier shall be liable for breach of
contract or as an absolute limit of the extent of liability, nor does it preclude the operation
of the Civil Code or other pertinent laws. The acceptance in due course by PAL of Mejia’s
cargo as packed and its advice against the need for declaration of its actual value operated
as an assurance to Mejia that in fact there was no need for such a declaration. Mejia can
hardly be faulted for relying on the representations of PAL’s own
39 | P a g e
personnel. In other words, Mejia could and would have complied with the conditions stated
in the air waybill, i.e., declaration of a higher value and payment of supplemental
transportation charges, entitling her to recovery of damages beyond the stipulated limit of
US$20 per kilogram of cargo in the event of loss or damage, had she not been effectively
prevented from doing so upon the advice of PAL’s personnel for reasons best known to
themselves. Even if the claim for damages was conditioned on the timely filing of a formal
claim, under Article 1186 of the Civil Code that condition was deemed fulfilled,
considering that the collective action of PAL’s personnel in tossing around the claim and
leaving it unresolved for an indefinite period of time was tantamount to “voluntarily
preventing its fulfillment.” On grounds of equity, the filing of the baggage freight claim,
which sufficiently informed PAL of the damage sustained by private respondent’s cargo,
constituted substantial compliance with the requirement in the contract for the filing of a
formal claim.
158. Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al., G.R. No. 149547,
July 4, 2008
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for
“damages occasioned by delay in the transportation by air of passengers, baggage or
goods.” Article 24 excludes other remedies by further providing that “(1) in the cases
covered by articles 18 and 19, any action for damages, however founded, can only be
brought subject to the conditions and limits set out in this convention.” Therefore, a claim
covered by the Warsaw Convention can no longer be recovered under local law, if the
statute of limitations of two years has already lapsed. Nevertheless, the Court notes that
jurisprudence in the Philippines and the United States also recognizes that the Warsaw
Convention does not “exclusively regulate” the relationship between passenger and carrier
on an international flight. The Court finds that the present case is substantially similar to
cases in which the damages sought were considered to be outside the coverage of the
Warsaw Convention.
Corporation Law
159. Benny Hung vs BPI Finance Corporation . G.R. No. 182398, 20 July 2010
When the corporation (BB Sportswear, Inc.) which the plaintiff erroneously impleaded in
a collection case was not the party to the actionable agreement and turned out to be not
registered with the Securities and Exchange Commission, the judgment may still be
enforced against the corporation (BB Footwear, Inc.) which filed the answer and
participated in the proceedings, as well as its controlling shareholder who signed the
actionable agreement in his personal capacity and as a single proprietorship doing business
under the trade name and style of BB Sportswear Enterprises.
40 | P a g e
160. Sappari K. Sawadjaanvs. the Honorable Court of Appeals, the Civil Service
Commission and Al-amanah Investment Bank of the Philippines, G.R. No. 141735,
June 8, 2005
By its failure to submit its by-laws on time, the AIIBP may be considered a de facto
corporation whose right to exercise corporate powers may not be inquired into collaterally
in any private suit to which such corporation may be a party. A corporation which has
failed to file its by-laws within the prescribed period does not ipso facto lose its powers as
such. The SEC Rules on Suspension/Revocation of the Certificate of Registration of
Corporations, details the procedures and remedies that may be availed of before an order
of revocation can be issued. There is no showing that such a procedure has been initiated
in this case.
161. Reynaldo M. Lozano vs. Hon. Eliezer R. De los Santos, Presiding Judge, RTC,
Br. 58, Angeles City; and Antonio Anda, G.R. No. 125221, June 19, 1997
The plan of the parties to consolidate their respective jeepney drivers' and operators'
associations into a single common association, if not yet approved by the SEC, neither had
its officers and members submitted their articles of consolidation in accordance with
Sections 78 and 79 of the Corporation Code, is a mere proposal to form a unified
association. Any dispute arising out of the election of officers of said unified association is
therefore not an intra-corporate dispute.
162. Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc., G.R. No. 136448,
3 November 1999
Under the law on estoppel, those acting on behalf of a corporation and those benefited by
it, knowing it to be without valid existence, are held liable as general partners. Technically,
it is true that petitioner did not directly act on behalf of the corporation. However, having
reaped the benefits of the contract entered into by persons with whom he previously had
an existing relationship, he is deemed to be part of said association and is covered by the
scope of the doctrine of corporation by estoppel.
163. International Express Travel & Tour Services, Inc. vs. Hon. Court of Appeals,
Henri Kahn, Philippine Football Federation, G.R. No. 119002, October 19, 2000
When the petitioner is not trying to escape liability from the contract but rather the one
claiming from the contract, the doctrine of corporation by estoppel is not applicable. This
doctrine applies to a third party only when he tries to escape liability on a contract from
which he has benefited on the irrelevant ground of defective incorporation.
164. Macasaet vs. Francisco, GR No. 156759, June 5, 2013
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
41 | P a g e
party defendant considering that it possesses attributes of a juridical person, otherwise, it

cannot be held liable for damages and injuries it may inflict to other persons.
165. Engr. Ranulfo C. Feliciano, in his capacity as General Manager of the Leyte
Metropolitan Water District (LMWD), Tacloban City vs. Commission on Audit,
Chairman CELSO D. GANGAN, Commissioners Raul C. Flores and Emmanuel M.
Dalman, and Regional Director of COA Region VIII, G.R. No. 147402, 14 January
2004
Congress can not enact a law creating a private corporation with a special charter. Such
legislation would be unconstitutional. Private corporations may exist only under a general
law. If the corporation is private, it must necessarily exist under a general law.
166. Dante V. Liban, Reynaldo M. Bernardo and Salvador M. Viari vs. Richard J.
Gordon, G. R. No. 175352, January 18, 2011
Although the Philippine National Red Cross was created by a special charter, it can not be
considered a government-owned and controlled corporation in the absence of the essential
elements of ownership and control by the government. It does not have government assets
and does not receive any appropriation from the Philippine Congress. It is a non-profit,
donor-funded, voluntary organization, whose mission is to bring timely, effective and
compassionate humanitarian assistance for the most vulnerable without consideration of
nationality, race, religion, gender, social status or political affiliation. This does not mean
however that the charter of PNRC is unconstitutional. PNRC has a sui generis status.
Although it is neither a subdivision, agency, or instrumentality of the government, nor a
government-owned or -controlled corporation or a subsidiary thereof, so much so that
Gordon was correctly allowed to hold his position as Chairman thereof concurrently while
he served as a Senator, such a conclusion does not ipso facto imply that the PNRC is a
“private corporation” within the contemplation of the provision of the Constitution, that
must be organized under the Corporation Code. The PNRC enjoys a special status as an
important ally and auxiliary of the government in the humanitarian field in accordance with
its commitments under international law. This Court cannot all of a sudden refuse to
recognize its existence, especially since the issue of the constitutionality of the PNRC
Charter was never raised by the parties.
167. Antonio M. Carandang vs. Honorable Aniano A. Desierto, Office of the
Ombudsman, G.R. No. 153161, January 12, 2011
A government–owned or controlled corporation refers to any agency organized as a stock
or non-stock corporation vested with functions relating to public needs whether
governmental or proprietary in nature and owned by the government through its
instrumentalities either wholly or where applicable as in the case of stock corporation to
the extent of at least 51% of its capital stock. When a stockholder ceded to the government
shares representing 72.4 % of the voting stock of the corporation but subsequently clarified
that it should be reduced to 32.4%, the corporation shall not be
42 | P a g e
considered government-owned and controlled until the quantification of shares is resolved

with finality.
168. Marissa R. Unchuan vs. Antonio J.P. Lozada, Anita Lozada and the Register
of Deeds of Cebu City, G.R. No. 172671, April 16, 2009
A corporation organized under the laws of the Philippines of which at least 60% of the
capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines, is considered a Philippine National. As such, the corporation may acquire
disposable lands in the Philippines.
169. Narra Nickel Mining & Development Corp. v. Redmont Consolidated Mines
Inc., G.R. No. 195580, 28 January 2015
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 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. “Doubt” refers
to various indicia that the “beneficial ownership” and “control” of the corporation do not
in fact reside in Filipino shareholders but in foreign stakeholders. Even if at first glance the
petitioners comply with the 60-40 Filipino to foreign equity ratio, doubt exists in the
present case that gives rise to a reasonable suspicion that the Filipino shareholders do not
actually have the requisite number of control and beneficial ownership in petitioners Narra,
Tesoro, and McArthur. Hence, the Court is correct in using the Grandfather Rule in
determining the nationality of the petitioners.
170. Rolando DS. Torres v. Rural Bank of San Juan, Inc. et al., G.R. No. 184520,
March 13, 2013
A corporation has its own legal personality separate and distinct from those of its
stockholders, directors or officers. Hence, absent any evidence that they have exceeded
their authority, corporate officers are not personally liable for their official acts. Corporate
directors and officers may be held solidarily liable with the corporation for the termination
of employment only if done with malice or in bad faith.
171. Mercy Vda. de Roxas, represented by Arlene C. Roxas-Cruz, in her capacity
as substitute appellant- petitioner vs. Our Lady's Foundation, Inc. G.R. No. 182378,
March 6, 2013
In order for the Court to hold the officer of the corporation personally liable alone for the
debts of the corporation and thus pierce the veil of corporate fiction, the Court has required
that the bad faith of the officer must first be established clearly and convincingly. Petitioner,
however, has failed to include any submission pertaining to any wrongdoing of the general
manager. Necessarily, it would be unjust to hold the latter personally liable. Moreso, if the
general manager was never impleaded as a party to the case.
43 | P a g e
172. Development Bank of the Philippines vs. Hydro Resources Contractors

Corporation, GR. No. 167603, March 13, 2013
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1)
defeat of public convenience as when the corporate fiction is used as a vehicle for the
evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to
justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a
corporation is merely 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 are so conducted as
to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
In this connection, case law lays down a three-pronged test to determine the application of
the alter ego theory, which is also known as the instrumentality theory, 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 plaintiff’s legal right; and;
3. The aforesaid control and breach of duty must have proximately caused the injury or
unjust loss complained of.
The first prong is the "instrumentality" or "control" test. This test requires that the
subsidiary be completely under the control and domination of the parent. It inquires
whether a subsidiary corporation is so organized and controlled and its affairs are so
conducted as to make it a mere instrumentality or agent of the parent corporation such that
its separate existence as a distinct corporate entity will be ignored. In addition, the control
must be shown to have been exercised at the time the acts complained of took place.
The second prong is the "fraud" test. This test requires that the parent corporation’s conduct
in using the subsidiary corporation be unjust, fraudulent or wrongful. It examines the
relationship of the plaintiff to the corporation. It recognizes that piercing is appropriate
only if the parent corporation uses the subsidiary in a way that harms the
44 | P a g e
plaintiff creditor. As such, it requires a showing of "an element of injustice or fundamental

unfairness."
The third prong is the "harm" test. This test requires the plaintiff to show that the
defendant’s control, exerted in a fraudulent, illegal or otherwise unfair manner toward it,
caused the harm suffered. A causal connection between the fraudulent conduct committed
through the instrumentality of the subsidiary and the injury suffered or the damage incurred
by the plaintiff should be established. The plaintiff must prove that, unless the corporate
veil is pierced, it will have been treated unjustly by the defendant’s exercise of control and
improper use of the corporate form and, thereby, suffer damages.
173. Gregorio Singian, Jr. vs. the Honorable Sandiganbayan and the Presidential
Commission on Good Government, G.R. Nos. 160577-94, December 16, 2005
The powers to increase capitalization and to offer or give collateral to secure indebtedness
are lodged with the corporation’s board of directors. However, this does not mean that the
officers of the corporation other than the board of directors cannot be made criminally
liable for their criminal acts if it can be proven that they participated therein.
174. Filipinas Broadcasting Network, Inc. vs. AGO Medical And Educational
Center-Bicol Christian College of Medicine, (AMEC-BCCM) and Angelita F. Ago,
G.R. No. 141994, January 17, 2005
A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock. Nevertheless, AMEC’s claim for moral
damages falls under item 7 of Article 2219 of the Civil Code which expressly authorizes
the recovery of moral damages in cases of libel, slander or any other form of defamation.
Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person.
Therefore, a juridical person such as a corporation can validly complain for libel or any
other form of defamation and claim for moral damages.
175. Manila Electric Company vs. T.E.A.M. Electronics Corporation, Technology
Electronics Assembly and Management Pacific Corporation; and Ultra Electronics
Instruments, Inc., G.R. No. 131723, December 13, 2007
As a rule, a corporation is not entitled to moral damages because, not being a natural person,
it cannot experience physical suffering or sentiments like wounded feelings, serious
anxiety, mental anguish and moral shock. The only exception to this rule is when the
corporation has a reputation that is debased, resulting in its humiliation in the business
realm. But in such a case, it is essential to prove the existence of the factual basis of the
damage and its causal relation to petitioner's acts. Thus, where the records are bereft of
evidence that the name or reputation of the corporation has been debased as a
45 | P a g e
result of Meralco’s act (which in this case is the disconnection without written notice of
the disconnection of the electricity supply to the building of the corporation due to alleged
meter tampering), the corporation is not entitled to moral damages.
176. Kukan International Corporation vs. Hon. Judge Amor Reyes, G.R. No.
182729, 29 September 2010
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 during 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.
177. Gold Line Tours vs. Heirs of Maria Concepcion Lacsa, GR No. 159108, 18
June 2012
However, in another case involving an action for breach of contract of carriage resulting to
the death of one of the passengers , 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 both transportation companies are one, the third party claim
filed by the other corporation was set aside and the levy on its property held valid even
though the latter was not made a party to the case . The judgment may be enforced against
the other corporation to prevent multiplicity of suits and save the parties unnecessary
expenses and delay.
178. Prince Transport, Inc. vs. Garcia, GR No. 167291, January 12, 2011
The doctrine of piercing the veil of corporate fiction is applicable not only to corporations
but also to a single proprietorship as when the corporation transferred its employees to the
company owned by the controlling stockholder of the corporation and yet despite the
transfer, the employees’ daily time records, reports, daily income remittances and schedule
of work were all made, performed, filed and kept in the corporation. The corporation is
clearly hiding behind the supposed separate and distinct personality of the company. As
such, the corporation and the company should be solidarily liable for the claims of the
illegally dismissed employees.
179. Pacific Rehouse Corporation vs. Court of Appeals, GR. No. 199687, March
24, 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 of execution could not be enforced against its parent company
because the court has not acquired jurisdiction over the latter and while the
46 | P a g e
parent company owns and controls the brokerage firm, there is no showing that the control
was used to violate the rights of the plaintiff.
180. Arco Pulp & Paper Co. Inc. v. Lim, G.R. No. 206806, 25 June 2014
The corporate existence may be disregarded where the entity is formed or used for non-
legitimate purposes, such as to evade a just and due obligation, or to justify a wrong, to
shield or perpetrate fraud or to carry out similar or inequitable considerations, other
unjustifiable aims or intentions, in which case, the fiction will be disregarded and the
individuals composing it and the two corporations will be treated as identical. In the case
at bar, when petitioner Arco Pulp and Paper’s obligation to Lim 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 Paper’s liability. She unjustifiably refused to
honor petitioner corporation’s 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.
181. Livesey vs. Binswanger Philippines, GR No. 177493, March 19, 2014
Piercing the veil of corporate fiction 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 financial 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 obtained against the other corporation considering the indubitable link between the
closure of the first corporation and incorporation of the other.
182. WPM International Trading Inc. v. Labayen, G.R. No. 182770, 17 September
2014
When an officer owns almost all of the stocks of a corporation, it does not ipso facto
warrant the application of the principle of piercing the corporate veil unless it is proven
that the officer has complete dominion over the corporation.
183. Heirs of Fe Tan Uy, represented by her heir, Mauling Uy Lim vs.
International Exchange Bank, G.R. No. 166282 & 83, February 13, 2013
Under a variation of the doctrine of piercing the veil of corporate fiction, when two
business enterprises are owned, conducted and controlled by the same parties, both law
and equity will, when necessary to protect the rights of third parties, disregard the legal
fiction that two corporations are distinct entities and treat them as identical or one and the
same. While the conditions for the disregard of the juridical entity may vary, the
following are some probative factors of identity that will justify the application of the
doctrine of piercing the corporate veil, as laid down in Concept Builders, Inc.,v NLRC: (1)
Stock ownership by one or common ownership of both corporations; (2) Identity of
directors and officers; (3) The manner of keeping corporate books and records, and (4)
Methods of conducting the business.
47 | P a g e
184. Mariano A. Albert vs. University Publishing Co., Inc., G.R. No. L-19118,
January 30, 1965
When the President of a non-existent principal entered into a contract and failed to pay its
obligation, he shall be the one liable to the aggrieved party. A person acting as a
representative of a non-existent principal is the real party to the contract sued upon, being
the one who reaped the benefits resulting from it.
185. Samahang Optometrists saPilipinas, Ilocos Sur- Abra Chapter, et al. vs.
Acebedo International Corporation and the Hon. Court of Appeals, G.R. No. 117097,
21 March 1997
A corporation created and organized for the purpose of conducting the business of selling
optical lenses or eyeglasses is not engaged in the practice of optometry because the
determination of the proper lenses to sell to private respondent's clients entails the
employment of optometrists who have been precisely trained for that purpose. Private
respondent's business, rather, is the buying and importing of eyeglasses and lenses and
other similar or allied instruments from suppliers thereof and selling the same to
consumers.
186. P.C. Javier & Sons, Inc., et al. vs.Paic Savings & Mortgage Bank, Inc., et al.,
G.R. No. 129552, June 29, 2005
A change in the corporate name does not make a new corporation, whether effected by a
special act or under a general law. It has no effect on the identity of the corporation, or on
its property, rights, or liabilities because the corporation upon such change in its name, is
in no sense a new corporation, nor the successor of the original corporation.
187. Zuellig Freight and Cargo Systemsvs. National Labor Relations Commission,
et al., G.R. No. 157900, July 22, 2013
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.
188. Heirs of Wilson P. Gamboa vs. Finance Secretary Margarito B. Teves, et al.,
G.R. No. 176579, October 9, 2012
Since the constitutional requirement of at least 60 percent Filipino ownership applies not
only to voting control of the corporation but also to the beneficial ownership of the
corporation, it is therefore imperative that such requirement applies uniformly and across
the board to all classes of shares, regardless of nomenclature and category, comprising the
capital of a corporation. Since a specific class of shares may have rights and privileges or
restrictions different from the rest of the shares in a corporation, the 60-40 ownership
requirement in favor of Filipino citizens in Section 11, Article XII of the
48 | P a g e
Constitution must apply not only to shares with voting rights but also to shares without
voting rights.
189. Alicia E. Gala, et al.vs. Ellice Agro-Industrial Corporation, et al., G.R. No.
156819, December 11, 2003
The best proof of the purpose of a corporation is its articles of incorporation and by-laws,
and in the case at bar, a perusal of the Articles of Incorporation of Ellice and Margo shows
no sign of the allegedly illegal purposes that petitioners are complaining of. It is well to
note that, if a corporation’s purpose, as stated in the Articles of Incorporation, is lawful,
then the SEC has no authority to inquire whether the corporation has purposes other than
those stated, and mandamus will lie to compel it to issue the certificate of incorporation.
190. Hyatt Elevators and Escalators Corporation vs. Goldstar Elevators Phils.,
Inc., G.R. No. 161026, October 24, 2005
The venue in this case was improperly laid because the principal office of Hyatt as stated
in the Articles of Incorporation is in Makati but the case was filed in Mandaluyong where
Hyatt transferred its operations. Since the principal place of business of a corporation
determines its residence or domicile, then the place indicated in petitioner’s articles of
incorporation becomes controlling in determining the venue for the filing of a case.
191. John Gokongwei, Jr. vs. Securities and Exchange Commission, et al., G.R. No.
L-45911, April 11, 1979
Every corporation has the inherent power to adopt by-laws 'for its internal government, and
to regulate the conduct and prescribe the rights and duties of its members towards itself
and among themselves in reference to the management of its affairs. Under Section 21 of
the Corporation Law, a corporation may prescribe in its by-laws the qualifications, duties
and compensation of directors, officers and employees.
192. Loyola Grand Villas Homeowners (South) Association, Inc. vs. Hon. Court of
Appeals, Home Insurance And Guaranty Corporation, Emden Encarnacion and
Horatio Aycardo, G.R. No. 117188, August 7, 1997
Non-filing of the by-laws will not result in automatic dissolution of the corporation. Under
Section 6(I) of PD 902-A, the SEC is empowered to ‘suspend or revoke, after proper notice
and hearing, the franchise or certificate of registration of a corporation’ on the ground inter
alia of ‘failure to file by-laws within the required period.
193. Matling Industrial and Commercial Corporation, et al. vs. Ricardo R. Coros,
G.R. No. 157802, October 13, 2010
Conformably with Section 25 of the Corporation Code, a position must be expressly
mentioned in the By-Laws in order to be considered as a corporate office. Thus, the creation
of an office pursuant to or under a By-Law enabling provision is not enough to make a
position a corporate office.
49 | P a g e
194. Grace Christian High Schoolvs.the Court Of Appeals, Grace Village

Association, Inc., Alejandro G. Beltran, and Ernesto L. Go, G.R. No. 108905, 23
October 1997
A provision in the by-laws of the corporation stating that of the 15 members of its Board
of Directors, only 14 members would be elected while the remaining member would be the
representative of an educational institution located in the village of the homeowners, is
invalid for being contrary to law. The fact that for fifteen years it has not been questioned
or challenged but, on the contrary, appears to have been implemented by the members of
the association cannot forestall a later challenge to its validity because, if it is contrary to
law, it is beyond the power of the members of the association to waive its invalidity.
195. Cebu Country Club, Inc., et al. vs. Ricardo F. Elizagaque, G.R. No. 160273,
January 18, 2008
When an amendment to a provision in the Amended By-Laws requiring the unanimous
vote of the directors present at a special or regular meeting was not printed on the
application form for proprietory membership, and what was printed thereon was the
original provision which was silent on the required number of votes needed for admission
of an applicant as a proprietary member, the Board of Directors committed fraud and
evident bad faith in disapproving respondent’s application under Article 31 of the
Corporation Code. The explanation given by the petitioner that the amendment was not
printed on the application form due to economic reasons is flimsy and unconvincing
because such amendment, aside from being extremely significant, was introduced way
back in 1978 or almost twenty (20) years before respondent filed his application.
196. Mid Pasig Land and Development Corporation v. Tablante, G.R. No. 162924,
February 4, 2010
These officers are in the position to verify the truthfulness and correctness of the allegations
in the petition.
197. Esguerra vs. Holcim Philippines G.R. No. 182571, September 2, 2013
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. 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.
198. Spouses Afulugencia vs. Metropolitan Bank and Trust Co. G.R. No. 185145,
February 05, 2014
50 | P a g e
In a complaint for nullification of mortgage and foreclosure with damages against the
mortgagee-bank, the plaintiff can not compel the officers of the bank to appear and testify
as plaintiff’s 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 written 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.
199. Islamic Directorate of the Philippines, Manuel F. Perea and Securities &
Exchange Commission,vs. Court of Appeals And Iglesia Ni Cristo, G.R. No. 117897,
May 14, 1997
Where an asset constitutes the only property of the corporation, its sale to a third-party is a
sale or disposition of all the corporate property and assets of said corporation falling
squarely within the contemplation of Section 40 of the Corporation Code. Hence, for the
sale to be valid, the majority vote of the legitimate Board of Trustees, concurred in by the
vote of at least 2/3 of the bona fide members of the corporation should have been obtained.
200. Republic Planters Bank vs. Hon. Enrique A. Agana, Sr., as Presiding Judge,
Court of First Instance of Rizal, Branch XXVIII, Pasay City, Robes-Francisco Realty
& Development Corporation and Adalia F. Robes, G.R. No. 51765, March 3, 1997
Dividends cannot be declared for preferred shares which were guaranteed a quarterly
dividend if there are no unrestricted retained earnings. "Interest bearing stocks,” on which
the corporation agrees absolutely to pay interest before dividends are paid to common
stockholders, is legal only when construed as requiring payment of interest as dividends
from net earnings or surplus only.
201. Lopez Realty Inc. v. Spouses Tanjangco, G.R. No. 154291, November 12, 2014
The general rule is that a corporation, through its board of directors, should act in the
manner and within the formalities, if any, prescribed by its charter or by the general law.
Directors must act as a body in a meeting called pursuant to the law or the corporation's by-
laws, otherwise, any action taken therein may be questioned by any objecting director or
shareholder; but an action of the board of directors during a meeting, which was illegal for
lack of notice, may be ratified either expressly, by the action of the directors in subsequent
legal meeting, or impliedly, by the corporation's subsequent course of conduct.
202. Atrium Management Corporation vs. Court of Appeals, et al., G.R. No.
109491, February 28, 2001
51 | P a g e
The act of issuing the checks was well within the ambit of a valid corporate act, for it was
for securing a loan to finance the activities of the corporation, hence, not an ultra vires act.
203. Megan Sugar Corporation vs. RTC of Ilo-ilo Br. 68, GR no. 170352, June 1,
2011
A corporation cannot deny the authority of lawyer when they clothed him with apparent
authority to act in their behalf such as when he entered his appearance accompanied by the
corporation’s general manager and the corporation never questioned his acts and even took
time and effort to forward all the court documents to him. The lawyer may not have been
armed with a board resolution but the doctrine of apparent authority imposes liability not
as a result of contractual relationship but rather because of the actions of the principal or
an employer in somehow misleading the public that the relationship or the authority exists.
204. Advance Paper Corporation vs Arma Traders Corporation , G.R. No 176897,
December 11, 2013.
The doctrine of apparent authority provides that a corporation will be estopped from
denying the agent’s 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.
205. Ong Yong, et al. vs. David S. Tiu, et al., G.R. No. 144476 & G.R. No. 144629,
8 April 2003
In the instant case, the rescission of the Pre-Subscription Agreement will effectively result
in the unauthorized distribution of the capital assets and property of the corporation, thereby
violating the Trust Fund Doctrine and the Corporation Code, since rescission of a
subscription agreement is not one of the instances when distribution of capital assets and
property of the corporation is allowed. The Trust Fund Doctrine provides that
52 | P a g e
subscriptions to the capital stock of a corporation constitute a fund to which the creditors
have a right to look for the satisfaction of their claims.
206. Filipinas Port Services, Inc., represented by stockholders, Eliodoro C. Cruz
and Mindanao Terminal and Brokerage Services, Inc. vs. Victoriano S. Go, et al.,
G.R. No. 161886, March 16, 2007
The determination of the necessity for additional offices and/or positions in a corporation
is a management prerogative which courts are not wont to review in the absence of any
proof that such prerogative was exercised in bad faith or with malice.Indeed, it would be
an improper judicial intrusion into the internal affairs of Filport for the Court to determine
the propriety or impropriety of the creation of offices therein and the grant of salary
increases to officers thereof.
207. United Coconut Planters Bank vs. Planters Products, Inc., Janet Layson and
Gregory Grey, G.R. No. 179015, June 13, 2012
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. In this case, it is plain from the
guarantee Grey executed that he was acting for himself, not in representation of UCPB;
hence, UCPB cannot be bound by Grey’s above undertaking since he appears to have made
it in his personal capacity.
208. Mercy Vda. de Roxas vs. Our Lady's Foundation, Inc., G.R. No. 182378,
March 6, 2013
To hold the general manager personally liable alone for the debts of the corporation and
thus pierce the veil of corporate fiction, it is required that the bad faith of the officer be
established clearly and convincingly. Petitioner, however, has failed to include any
submission pertaining to any wrongdoing of the general manager. Necessarily, it would be
unjust to hold the latter personally liable.
209. Polymer Rubber Corporation vs. Ang, G.R. No. 185160. July 24, 2013
Obligations incurred as a result of the directors’ and officers’ acts as corporate agents, are
not their personal liability but the direct responsibility of the corporation they represent. As
a rule, they are only solidarily liable with the corporation for the illegal termination of
services of employees if they acted with malice or bad faith.
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.
53 | P a g e
210. Elizabeth M. Gagui vs. Simeon Dejero and Teodoro Permejo, G.R. No. 196036,
October 23, 2013
Although joint and solidary liability for money claims and damages against a corporation
attaches to its corporate directors and officers under R.A. 8042, it is not automatic. To make
them jointly and solidarily liable, there must be a finding that they were remiss in directing
the affairs of the corporation, resulting in the conduct of illegal activities. Absent any
findings regarding the same, the corporate directors and officers cannot be held liable for
the obligation of the corporation against the judgment debtor.
211. Rosita Peña vs. the Court of Appeals, Spouses Rising T. Yap and Catalina Yap,
Pampanga Bus Co., Inc., Jesus Domingo, Joaquin Briones, Salvador Bernardez,
Marcelino Enriquez and Edgardo A. Zabat, G.R. No. 91478, February 7, 1991
Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation
or by-laws of the corporation may fix a greater number than the majority of the number of
board members to constitute the quorum necessary for the valid transaction of business.
When only three (3) out of five (5) members of the board of directors of PAMBUSCO
convened on November 19, 1974 by virtue of a prior notice of a special meeting,there was
no quorum to validly transact business since, under Section 4 of the amended by- laws
hereinabove reproduced, at least four (4) members must be present to constitute a quorum
in a special meeting of the board of directors of PAMBUSCO.
212. SEC vs. CA, G.R. No. 187702, October 22, 2014
The power of the SEC to investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated to the cases
enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies are
solicited in relation to the election of corporate directors, the resulting controversy, even if
it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly
seen as an election controversy within the original and exclusive jurisdiction of the trial
courts by virtue of Section 5.2 of the SRC in relation to Section 5 (c) of Presidential Decree
No. 902-A
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 Omico. Also, the fact that there was no actual voting did not
make the election any less so, especially since Astra had never denied that an election of
directors took place.
213. Tam Wing Tak vs. Hon. Ramon P. Makasiar, G.R. No. 122452, January 29,
2001
Under Section 36 of the Corporation Code, read in relation to Section 23, it is clear that
where a corporation is an injured party, its power to sue is lodged with its board of
54 | P a g e
directors or trustees. In this case, the petitioner failed to show any proof that he was
authorized or deputized or granted specific powers by the corporation’s board of director
to sue Victor AngSiong for and on behalf of the firm, and therefore he had no such power
or authority to sue on Concord’s behalf.
214. Villamor v Umale, G.R. Nos. 172843 & 172881, 24 September 2014
The Court has recognized that a stockholder's right to institute a derivative suit is not based
on any express provision of the Corporation Code, or even the Securities Regulation Code,
but is impliedly recognized when the said laws make corporate directors or officers liable
for damages suffered by the corporation and its stockholders for violation of their fiduciary
duties. In effect, the suit is an action for specific performance of an obligation, owed by the
corporation to the stockholders, to assist its rights of action when the corporation has been
put in default by the wrongful refusal of the directors or management to adopt suitable
measures for its protection.
215. Legaspi Towers 300, Inc., vs. Muer G.R. No. 170783, June 18, 2012
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
condominium corporation is improper.
216. Majority of Stockholders of Ruby Industrial Corporation vs Lim, GR No.
165887, June 6, 2011
A stock corporation is expressly granted the power to issue or sell stocks. The power to
issue stocks is lodged with the Board of Directors and no stockholders meeting is required
to consider it because additional issuances of stock (unlike increase in capital stock) does
not need approval of the stockholders. What is only required is the board resolution
approving the additional issuance of shares. The corporation shall also file the necessary
application with the SEC to exempt these from the registration requirements under the
SRC.
217. Africa vs. Hon. Sandiganbayan , G.R. Nos. 172222/G.R. No. 174493/ G.R. No.
184636, November 11, 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
55 | P a g e
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
218. Marsh Thomson vs. Court of Appeals and the American Champer of
Commerce of the Philippines, Inc,, G.R. No. 116631, October 28, 1998
The authority granted to a corporation to regulate the transfer of its stock does not empower
it to restrict the right of a stockholder to transfer his shares, but merely authorizes the
adoption of regulations as to the formalities and procedure to be followed in effecting
transfer.
219. Valley Golf and Country Club, Inc. v. Vda. De Caram, 585 SCRA 218 (2009)
The arrangement provided for in the by-laws of the Corporation whereby a lien is
constituted on the membership share to answer for subsequent obligations to the
corporation finds applicable parallels under the Civil Code. Membership shares are
considered as movable or personal property, and they can be constituted as security to
secure a principal obligation, such as the dues and fees. There are at least two contractual
modes under the Civil Code by which personal property can be used to secure a principal
obligation. The first is through a contract of pledge, while the second is through a chattel
mortgage. If the stockholder had not signed any document that manifests his agreement to
constitute his Golf Share as security in favor of the Corporation to answer for his
obligations to the club and there is no document that it is substantially compliant with the
form of chattel mortgages, the by-laws could not suffice for that purpose since it is not
designed as a bilateral contract between the stockholder and the Corporation or a vehicle
by which the stockholder expressed his consent to constitute his Share as security for his
account with the Corporation.
220. The Rural Bank of Lipa City, Inc., et al.vs. Honorable Court of Appeals, G.R.
No. 124535, September 28, 2001
For a valid transfer of stocks, there must be strict compliance with the mode of transfer
prescribed by law. The requirements are: (a) There must be delivery of the stock certificate;
(b) The certificate must be endorsed by the owner or his attorney-in-fact or other persons
legally authorized to make the transfer; and (c) To be valid against third parties, the transfer
must be recorded in the books of the corporation. A deed of assignment of shares without
endorsement and delivery is binding only on the parties and does not necessarily make the
transfer effective as against the corporation.
221. Vicente C. Ponce vs. Alsons Cement Corporation, and Francisco M. Giron,
Jr., G.R. No. 139802, December 10, 2002
Without such recording, the transferee may not be regarded by the corporation as one
among its stockholders and the corporation may legally refuse the issuance of stock
certificates in the name of the transferee even when there has been compliance with the
56 | P a g e
requirements of Section 64 of the Corporation Code. The situation would be different if

the petitioner was himself the registered owner of the stock which he sought to transfer to
a third party, for then he would be entitled to the remedy of mandamus.
222. Fil-Estate Golf and Development vs. Vertex Sales and Trading Inc., G.R. No.
202079, June 10, 2013
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.
223. Yujuico v. Quaiambao, G.R. No. 180416, 02 June 2014

A criminal action based on the violation of a stockholder's right to examine or inspect the
corporate records and the stock and transfer book of a corporation under the second and
fourth paragraphs of Section 74 of the Corporation Code can only he maintained against
corporate officers or any other persons acting on behalf of such corporation. The complaint
and the evidence Quiambao and Sumbilla submitted during preliminary investigation do
not establish that Quiambao and Pilapil were acting on behalf of STRADEC. Violations 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. Thus, the dismissal is valid.
224. SME BANK INC, vs. GASPAR, G.R. No. 186641, October 8, 2013
In this case, the corporate officers and directors who induced the employees to resign with
the assurance that they would be rehired by the new management are personally liable to
the employees who were not actually rehired. However, the officer who did not participate
in the termination of employment and persons who participated in the unlawful termination
of employment but are not directors and officers of the corporation are not personally liable.
225. Bank of Commerce v Radio Philippines Network, G.R. No. 195615, 21 April
2014
57 | P a g e
Indubitably, it is clear that 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. Here, Bancommerce and
TRB remained separate corporations with distinct corporate personalities. What happened
is that TRB sold and Bancommerce purchased identified recorded assets of TRB in
consideration of Bancommerce’s assumption of identified recorded liabilities of TRB
including booked contingent accounts. There is no law that prohibits this kind of
transaction especially when it is done openly and with appropriate government approval.
226. Mindanao Savings and Loan Association, Inc., represented by its Liquidator,
the Philippine Deposit Insurance Corporation vs. Edward Willkom; Gilda Go;
RemediosUy; MalayoBantuas, in his capacity as the Deputy Sheriff of Regional Trial
Court, Branch 3, Iligan City; and the Register of Deeds of Cagayan de Oro City, G.R.
No. 178618, October 11, 2010
The issuance of the certificate of merger is crucial because not only does it bear out SEC’s
approval but it also marks the moment when the consequences of a merger take place. By
operation of law, upon the effectivity of the merger, the absorbed corporation ceases to
exist but its rights and properties, as well as liabilities, shall be taken and deemed
transferred to and vested in the surviving corporation.
227. Bank of the Philippine Islands vs. BPI Employees Union- Davao Chapter-
Federation Of Unions In Bpi Unibank, G.R. No. 164301, October 19, 2011
It is more in keeping with the dictates of social justice and the State policy of according
full protection to labor to deem employment contracts as automatically assumed by the
surviving corporation in a merger, even in the absence of an express stipulation in the
articles of merger or the merger plan. By upholding the automatic assumption of the non-
surviving corporation’s existing employment contracts by the surviving corporation in a
merger, the Court strengthens judicial protection of the right to security of tenure of
employees affected by a merger and avoids confusion regarding the status of their various
benefits which were among the chief objections of our dissenting colleagues.
228. Bank of Philippine Islands v. Lee, G.R. No. 190144, August 1, 2012
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.
229. Aguirre vs. FQB +7, Inc, GR No. 170770, January 9 2013
58 | P a g e
An action to correct entries in the General Information Sheet of the Corporation; to be

recognized as a stockholder and to inspect corporate documents is an intra-corporate
dispute which does not constitute a continuation of corporate business. As such, pursuant
to Section 145 of the Corporation Code, this action 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.
230. Rene Knecht and Knecht, Inc. vs. United Cigarette Corp., represented by
Encarnacion Gonzales Wong, and Eduardo Bolima, Sheriff, Regional Trial Court,
Branch 151, Pasig City, G.R. No. 139370, July 4, 2002
The trustee (of a dissolved corporation) may commence a suit which can proceed to final
judgment even beyond the three-year period of liquidation. No reason can be conceived
why a suit already commenced by the corporation itself during its existence, not by a mere
trustee who, by fiction, merely continues the legal personality of the dissolved corporation,
should not be accorded similar treatment – to proceed to final judgment and execution
thereof. Indeed, the rights of a corporation that has been dissolved pending litigation are
accorded protection by Section 145 of the Corporation Code which provides “no right or
remedy in favor of or against any corporation, its stockholders, members, directors,
trustees, or officers, nor any liability incurred by any such corporation, stockholders,
members, directors, trustees, or officers, shall be removed or impaired either by the
subsequent dissolution of said corporation or by any subsequent amendment or repeal of
this Code or of any part thereof.”
231. Lucia Barramedavda. de Ballesteros vs. Rural Bank of Canaman, Inc.,
represented by its liquidator, the Philippine Deposit Insurance Corporation, G.R. No.
176260, November 24, 2010
To allow a creditor’s case to proceed independently of the liquidation case, a possibility of
favorable judgment and execution thereof against the assets of the distressed corporation
would not only prejudice the other creditors and depositors but would defeat the very
purpose for which a liquidation court was constituted as well. The requirement that all
claims against the bank be pursued in the liquidation proceedings filed by the Central Bank
is intended to prevent multiplicity of actions against the insolvent bank and designed to
establish due process and orderliness in the liquidation of the bank, to obviate the
proliferation of litigations and to avoid injustice and arbitrariness.
232. Alabang Corporation Development vs. Alabang Hills Village Association, G.R.
No. 187456, 02 June 2014
59 | P a g e
ADC 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. To allow
ADC to initiate the subject complaint and pursue it until final judgment, on the ground that
such complaint was filed for the sole purpose of liquidating its assets, would be to
circumvent the provisions of 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.
233. Vigilla vs. Philippine College of Criminology, GR No. 200094, June 10, 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 Corporation’s
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.
234. Sergio F. Naguiat, doing business under the name and style Sergio F.
NaguiatEnt., Inc., & Clark Field Taxi, Inc. vs. National Labor Relations Commission
(Third Division), National Organization Of Workingmen and its members, Leonardo
T. Galang, et al., G.R. No. 116123, 13 March 1997
To the extent that the stockholders are actively engaged in the management or operation of
the business and affairs of a close corporation, the stockholders shall be held to strict
fiduciary duties to each other and among themselves. Said stockholders shall be personally
liable for corporate torts unless the corporation has obtained reasonably adequate liability
insurance.
235. PetroniloJ. Barayuga vs. Adventist University of the Philippines, through its
Board of Trustees, represented by its Chairman, Nestor D. Dayson, G.R. No. 168008,
August 17, 2011
The second paragraph of Section 108 of the Corporation Code, although setting the term
of the members of the Board of Trustees at five years, contains a proviso expressly
subjecting the duration to what is otherwise provided in the articles of incorporation or by-
laws of the educational corporation. In AUP’s case, its amended By-Laws provided that
members of the Board of Trustees were to serve a term of office of only two years; and the
officers, who included the President, were to be elected from among the members of the
Board of Trustees during their organizational meeting, which was held during the election
of the Board of Trustees every two years. Naturally, the officers, including the
60 | P a g e
President, were to exercise the powers vested by Section 2 of the amended By-Laws for a
term of only two years, not five years.
236. Rev. Luis Ao-as, et al. vs. Hon. Court of Appeals, G.R. No. 128464, June 20,
2006
Section 89 of the Corporation Code pertaining to non-stock corporations which provides
that "the right of the members of any class or classes (of a non-stock corporation) to vote
may be limited, broadened or denied to the extent specified in the articles of incorporation
or the by-laws," is an exception to Section 6 of the same code where it is provided that "no
share may be deprived of voting rights except those classified and issued as ‘preferred’ or
‘redeemable’ shares, unless otherwise provided in this Code." The stipulation in the By-
Laws providing for the election of the Board of Directors by districts is a form of limitation
on the voting rights of the members of a non-stock corporation as recognized under the
aforesaid Section 89.
237. Cargill, Inc. vs. Intra Strata Assurance Corporation, G.R. No. 168266, March
15, 2010
A foreign company that merely imports goods from a Philippine exporter, without opening
an office or appointing an agent in the Philippines, is not doing business in the Philippines.
Since the contract between petitioner and NMC involved the purchase of molasses by
petitioner from NMC, it was NMC, the domestic corporation, which derived income from
the transaction and not petitioner. To constitute “doing business,” the activity undertaken
in the Philippines should involve profit-making.
238. Hutchison Ports Philippines Limitedvs.Subic Bay Metropolitan Authority,
International Container Terminal Services Inc., Royal Port Services, Inc. and the
Executive Secretary, G.R. No. 131367, August 31, 2000
There is no general rule or governing principle laid down as to what constitutes “doing” or
“engaging in” or “transacting” business in the Philippines. Each case must be judged in
the light its peculiar circumstances. Thus, it has often been held that a single act or
transaction may be considered as “doing business” when a corporation performs acts for
which it was created or exercises some of the functions for which it was organized. The
amount or volume of the business is of no moment, for even a singular act cannot be merely
incidental or casual if it indicates the foreign corporation’s intention to do business.
Participating in the bidding process constitutes “doing business” because it shows the
foreign corporation’s intention to engage in business here.
239. Steelcase, Inc. vs. Design International Selections, Inc., G.R. No. 171995, April
18, 2012
The appointment of a distributor in the Philippines 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
61 | P a g e
corporation, for its own name and its own account, the latter cannot be considered to be
doing business in the Philippines.
240. MR Holdings, Ltd.vs. Sheriff Carlos P. Bajar, Sheriff Ferdinand M. Jandusay,
Solidbank Corporation, and Marcopper Mining Corporation, G.R. No. 138104, April
11, 2002
241. Global Business Holdings, Inc. vs. Surecomp Software, B.V., G.R. No. 173463,
October 13, 2010
A party is estopped from challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. The principle is applied to
prevent a person contracting with a foreign corporation from later taking advantage of its
noncompliance with the statutes, chiefly in cases where such person has received the
benefits of the contract.
Securities Regulation Code
242. Betty Gabionza and Isabelita Tan vs. Court of Appeals, G.R. No. 161057,
September 12, 2008
The issuance of checks for the purpose of securing a loan to finance the activities of the
corporation is well within the ambit of a valid corporate act. It is one thing for a corporation
to issue checks to satisfy isolated individual obligations, and another for a corporation to
execute an elaborate scheme where it would comport itself to the public as a pseudo-
investment house and issue postdated checks instead of stocks or traditional securities to
evidence the investments of its patrons.
243. Securities and Exchange Commission vs. Prosperity.Com, Inc., G.R. No.
164197, January 25, 2012
For an investment contract to exist, the following elements, referred to as the Howey test
must concur: (1)a contract, transaction, or scheme; (2)an investment of money;
(3)investment is made in a common enterprise; (4) expectation of profits; and (5)profits
arising primarily from the efforts of others. Network marketing, a scheme adopted by
companies for getting people to buy their products where the buyer can become a down-
line seller, who earns commissions from purchases made by new buyers whom he refers to
the person who sold the product to him, is not an investment contract.
244. Securities and Exchange Commission vs. Oudine Santos, G.R. No. 195542,
March 19, 2014
A person is liable for violation of 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. The transaction initiated by the investment consultant of a
corporation is an investment contract or participation in a profit sharing agreement that
62 | P a g e
falls within the definition of law—an investment in a common venture premised on a

reasonable expectation of profits to be derived from the entrepreneurial or managerial
efforts of others.
245. Securities and Exchange Commission vs. Interport Resources Corporation, et.
al., G.R. No. 135808, October 6, 2008
The term “insiders” now includes persons whose relationship or former relationship to the
issuer gives or gave them access to a fact of special significance about the issuer or the
security that is not generally available, and one who learns such a fact from an insider
knowing that the person from whom he learns the fact is such an insider. Insiders have the
duty to disclose material facts which are known to them by virtue of their position but
which are not known to persons with whom they deal and which, if known, would affect
their investment judgment.
246. Philippine Veterans Bank v. Callangan, in her capacity Director of the
Corporation Finance Department of the Securities and Exchange Commission and/or
the Securities and Ex-change Commission, G.R. No. 191995, August 3, 2011
A “public company,” as contemplated by the SRC is not limited to a company whose shares
of stock are publicly listed; even companies whose shares are offered only to a specific
group of people, are considered a public company, provided they fall under Subsec. 17.2
of the SRC, which provides: “any corporation with a class of equity securities listed on an
Exchange or with assets of at least Fifty Million Pesos (P50,000,000.00) and having two
hundred (200) or more holders, at least two hundred
(200) of which are holding at least one hundred (100) shares of a class of its equity
securities.” Philippine Veterans Bank meets the requirements and as such, is subject to the
reportorial requirements for the benefit of its shareholders.
247. Cemco Holdings, Inc. vs. National Life Insurance Company of the Philippines,
G.R. No. 171815, August 7, 2007
A tender offer is an offer by the acquiring person to stockholders of a public company for
them to tender their shares; it gives the minority shareholders the chance to exit the
company under reasonable terms, giving them the opportunity to sell their shares at the
same price as those of the majority shareholders. The mandatory tender offer is still
applicable even if the acquisition, direct or indirect, is less than 35% when the purchase
would result in ownership of over 51% of the total outstanding equity securities of the
public company.
248. Securities and Exchange Commission vs. Interport Resources Corporation, et.
al., G.R. No. 135808, October 6, 2008
Section 27 (SRC) penalizes an insider’s misuse of material and non-public information
about the issuer, for the purpose of protecting public investors; Section 26 widens the
coverage of punishable acts, which intend to defraud public investors through various
63 | P a g e
devices, misinformation and omissions. Section 23 imposes upon (1) a beneficial owner of
more than ten percent of any class of any equity security or (2) a director or any officer of
the issuer of such security, the obligation to submit a statement indicating his or her
ownership of the issuer’s securities and such changes in his or her ownership thereof.
249. Jose U. Pua vs. Citibank, N. A. G.R. No. 180064, September 16, 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.
INTELLECTUAL PROPERTY LAW
250. Pearl & Dean (Phil.), Inc. vs. Shoemart, Inc., G.R. No. 148222, August 15,
2003
A trademark is any visible sign capable of distinguishing the goods (trademark) or services
(service mark) of an enterprise and shall include a stamped or marked container of goods;
a trade name refers to the name or designation identifying or distinguishing an enterprise.
Copyright is confined to literary and artistic works which are original intellectual creations
in the literary and artistic domain protected from the moment of their creation. On the other
hand, patentable inventions refer to any technical solution of a problem in any field of
human activity which is new, involves an inventive step and is industrially applicable.
251. Jessie Ching vs. William Salinas, et. al., G.R. No. 161295, June 29, 2005
A utility model is a technical solution to a problem in any field of human activity which is
new and industrially applicable; it may be, or may relate to, a product, or process, or an
improvement of any of the aforesaid. Being plain automotive spare parts that must conform
to the original structural design of the components they seek to replace, the Leaf Spring
Eye Bushing and Vehicle Bearing Cushion are not ornamental; they lack the decorative
quality or value that must characterize authentic works of applied art and in actuality, they
are utility models, useful articles, albeit with no artistic design or value.
252. Smith Kline Beckman Corporation vs. Court of Appeals, G.R. No. 126627,
August 14, 2003
When the language of its claims is clear and distinct, the patentee is bound thereby and
may not claim anything beyond them. the language of Letter Patent No. 14561 fails to yield
anything at all regarding Albendazole and no extrinsic evidence had been adduced to prove
that Albendazole inheres in petitioner’s patent in spite of its omission therefrom or that the
meaning of the claims of the patent embraces the same.
64 | P a g e
253. Phil. Pharmawealth, Inc. vs. Pfizer, Inc., G.R. No. 167715, November 17,
2010
A patentee shall have the exclusive right to make, use and sell the patented machine, article
or product, and to use the patented process for the purpose of industry or commerce,
throughout the territory of the Philippines for the term of the patent; and such making,
using, or selling by any person without the authorization of the patentee constitutes
infringement of the patent. The patentee’s exclusive rights exist only during the term of the
patent, hence, after the cut-off date, the exclusive rights no longer exist and the temporary
restraining order can no longer be issued in its favor.
254. Pascual Godines vs. Court of Appeals, G.R. No. 97343, September 13, 1993
To determine whether the particular item falls within the literal meaning of the patent
claims, the court must juxtapose the claims of the patent and the accused product within
the overall context of the claims and specifications, to determine whether there is exact
identity of all material elements. Viewed from any perspective or angle, the power tiller of
the defendant is identical and similar to that of the turtle power tiller of plaintiff in form,
configuration, design, appearance, and even in the manner of operation.
255. Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. and
Sports Concept & Distributor, Inc., G.R. No. 169974, April 20, 2010
The cancellation of registration of a trademark has the effect of depriving the registrant of
protection from infringement from the moment the judgment or order of cancellation has
become final. Accordingly, a distributor has no right to the registration of the disputed
trademarks since the right to register a trademark is based on ownership. An exclusive
distributor who employs the trademark of the manufacturer does not acquire proprietary
rights of the manufacturer, and a registration of the trademark by the distributor as such
belongs to the manufacturer, provided the fiduciary relationship does not terminate before
application for registration is filed.
256. Birkenstock Orthopaedie Gmbh and Co. Kg vs. Philippine Shoe Expo
Marketing Corporation, G.R. No. 194307, November 20, 2013
It is not the application or registration of a trademark that vests ownership thereof, but it is
the ownership of a trademark that confers the right to register the same. Registration merely
creates a prima facie presumption of the validity of the registration, of the registrant’s
ownership of the trademark, and of the exclusive right to the use thereof; it is rebuttable,
thus, it must give way to evidence to the contrary.
257. Ecole De Cuisine Manille (Cordon Bleu of the Philippines), Inc. vs. Renaus
Cointreau & Cie and Le Cordon Bleu Int’l, B.V., G.R. No. 185830, June 5, 2013)
Under the Paris Convention to which the Philippines is a signatory, a trade name of a
national of a State that is a party to the Paris Convention, whether or not the trade name
forms part of a trademark, is protected without the obligation of filing or registration. It
65 | P a g e
follows then that 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.
258. Societe Des Produits Nestle, S.A. vs. Court of Appeals and CFC Corporation,
G.R. No. 112012, April 4, 2001
The word MASTER, the dominant feature of the opposer’s mark, is neither generic nor
descriptive and as such, it cannot be invalidated as a trademark. When the term “MASTER”
has acquired a certain connotation to mean the coffee products MASTER ROAST and
MASTER BLEND produced by Nestle, the use by the CFC of the term “MASTER” in the
trademark for its coffee product FLAVOR MASTER is likely to cause confusion or
mistake or even deception of the ordinary purchasers.
259. Prosource International, Inc. vs. Horphag Research Management SA, G.R.
No. 180073, November 25, 2009
Both the words PYCNOGENOL and PCO-GENOLS have the same suffix “GENOL”
which appears to be merely descriptive and furnish no indication of the origin of the article
and hence, open for trademark registration by the plaintiff thru combination with another
word or phrase such as PYCNOGENOL. Although there were dissimilarities in the
trademark due to the type of letters used as well as the size, color and design employed on
their individual packages/bottles, still the close relationship of the competing products’
name in sounds as they were pronounced, clearly indicates that purchasers could be misled
into believing that they are the same and/or originates from a common source and
manufacturer.
260. Sketchers USA vs. Inter Pacific Industrial Trading Corporation, GR No.
164321, March 28, 2011
The Dominancy Test focuses on the similarity of the prevalent or dominant features of the
competing trademarks that might cause confusion, mistake, and deception in the mind of
the purchasing public. Respondent’s use of the stylized “S” in its Strong rubber shoes
infringes on the mark of the petitioner as it is the dominant feature of the latter’s trademark;
the likelihood of confusion is present as purchasers may associate the respondent’s product
as connected with petitioner’s business.
261. Emerald Garment Manufacturing Corporation vs. Court of Appeals, G.R.
No. 100098, December 29, 1995
In applying the holistic test, petitioner’s trademark, “STYLISTIC MR. LEE,” which
pertains to jeans, should be considered as a whole. The test of fraudulent simulation is to
be found in the likelihood of the deception of some persons in some measure acquainted
with an established design and desirous of purchasing the commodity with which that
design has been associated. When the casual buyer is predisposed to be more cautious in
his purchase, as in this case where the products concerned are not inexpensive, the
likelihood of confusion is absent.
66 | P a g e
262. Philip Morris, Inc. vs. Fortune Tobacco Corporation, G.R. No. 158589, June
27, 2006
The application of the holistic test entails a consideration of the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing
similarity. Although the perceived offending word “MARK” is itself prominent in
petitioner’s trademarks “MARK VII” and “MARK TEN,” the entire marking system
should be considered as a whole and not dissected, because a discerning eye would focus
not only on the predominant word but also on the other features appearing in the labels;
only then would such discerning observer draw his conclusion whether one mark would be
confusingly similar to the other and whether or not sufficient differences existed between
the marks.
263. Victorio Diaz vs. People of the Philippines, G.R. No. 180677, February 18,
2013
The gravamen of the offense of infringement of a registered trademark is the likelihood of
confusion. In applying the Holistic Test, confusion was remote because the jeans made
and sold by Levi’s Philippines were not only very popular but also quite expensive, as
opposed to Diaz’s tailored jeans which were acquired on a “made-to-order” basis;
moreover, since the jeans are expensive, the casual buyer is predisposed to be more
cautious and discriminating in and would prefer to mull over his purchase.
264. Taiwan Kolin Corp. v. Kolin Electronics Co., G.R. No. 209843, 25 March
2015
In trademark registration, while both competing marks refer to the word “KOLIN” written
in upper case letters and in bold font, but one is italicized and colored black while the other
is white in pantone red color background and there are differing features between the two,
registration of the said mark could be granted. It is hornbook doctrine 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.
265. Mighty Corporation and La Campana Fabrica De Tabaco, Inc. vs. E. & J.
Gallo Winery and the Andresons Group, Inc., G.R. No. 154342, July 14, 2004
The Paris Convention for the Protection of Industrial Property does not automatically
exclude all countries of the world which have signed it from using a tradename which
happens to be used in one country. “GALLO” cannot be considered a “well-known” mark
within the contemplation and protection of the Paris Convention in this case since GALLO
wines and GALLO cigarettes are neither the same, identical, similar nor related goods.
67 | P a g e
266. Fredco Manufacturing Corporation vs. President and Fellows of Harvard

College, GR No. 185917, June 1, 2011
The essential requirement under the Paris Convention (and the Intellectual Property Code)
is that the trademark to be protected must be “well-known” in the country where protection
is sought and the power to determine whether a trademark is well-known lies in the
competent authority of the country of registration or use. “Harvard” is a well- known name
and mark not only in the United States but also internationally, including the Philippines;
as such, even before Harvard University applied for registration of the mark “Harvard” in
the Philippines, the mark was already protected under the Paris Convention.
267. Del Monte Corporation and Philippine Packing Corporation vs. Court of
Appeals, G.R. No. L-78325, January 25, 1990
The question is not whether the two articles are distinguishable by their label when set side
by side but whether the general confusion made by the article upon the eye of the casual
purchaser who is unsuspicious and off his guard, is such as to likely result in his
confounding it with the original. It is not difficult to see that the Sunshine label is a
colorable imitation of the Del Monte trademark; the predominant colors used in the Del
Monte label are green and red-orange, the same with Sunshine; the word "catsup" in both
bottles is printed in white and the style of the print/letter is the same; and although the logo
of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato.
268. Coffee Partners vs. San Francisco Coffee and Roastery, Inc., G.R. No. 169504,
3 March 2010
A trade name previously used in trade or commerce in the Philippines need not be
registered with the IPO before an infringement suit may be filed by its owner against the
owner of an infringing trademark. Nonetheless, respondent does not have the right to the
exclusive use of the geographic word “San Francisco” or the generic word “coffee.” It is
only the combination of the words “SAN FRANCISCO COFFEE,” which is respondent’s
trade name in its coffee business, that is protected against infringement on matters related
to the coffee business to avoid confusing or deceiving the public.
269. Ong vs. People of the Philippines, GR No. 169440, November 23, 2011
The trademark “Marlboro” is not only valid for being neither generic nor descriptive, it
was also exclusively owned by PMPI, as evidenced by the certificate of registration issued
by the Intellectual Property Office. Infringement of trademark clearly lies since the
counterfeit cigarettes not only bore PMPI’s trademark, but they were also packaged almost
exactly as PMPI’s products.
270. Republic Gas Corporation (REGASCO), et. al. vs. Petron Corporation, et. al.,
G.R. No. 194062, June 17, 2013
68 | P a g e
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 among the buyers or consumers can be considered as trademark infringement.
Petitioners’ act of refilling, without the respondents’ consent, the LPG containers bearing
the registered marks of the respondents will inevitably confuse the consuming public, who
may also be led to believe that the petitioners were authorized refillers and distributors of
respondent’s LPG products.
271. McDonald’s Corporation vs. L.C. Big Mak Burger, Inc., G.R. No. 143993,
August 18, 2004
The essential elements of an action for unfair competition are (1) confusing similarity in
the general appearance of the goods, and (2) intent to deceive the public and defraud a
competitor. The confusing similarity may or may not result from similarity in the marks,
but may result from other external factors in the packaging or presentation of the goods.
In this case, the intent to deceive and defraud may be inferred from the fact that there was
actually no notice (on their plastic wrappers) to the public that the “Big Mak” hamburgers
are products of “L.C. Big Mak Burger, Inc.”
272. Coca- Cola Bottlers Philippines, Inc. (CCBPI), Naga Plant vs. Quintin
Gomez, et, al., G.R. No. 154491, November 14, 2008
Hoarding does not relate to any patent, trademark, trade name or service mark that the
respondents have invaded, intruded into or used without proper authority from the
petitioner nor are the respondents alleged to be fraudulently “passing off” their products or
services as those of the petitioner. The respondents are not also alleged to be undertaking
any representation or misrepresentation that would confuse or tend to confuse the goods of
the petitioner with those of the respondents, or vice versa. What in fact the petitioner alleges
is an act foreign to the Code, to the concepts it embodies and to the acts it regulates; as
alleged, hoarding inflicts unfairness by seeking to limit the opposition’s sales by depriving
it of the bottles it can use for these sales
273. Manly Sportwear Manufacturing, Inc. vs. Dadodette Enterprises and/or

Hermes Sports Center, G.R. No. 165306, September 20, 2005
At most, the certificates of registration and deposit issued by the National Library and the
Supreme Court Library serve merely as a notice of recording and registration of the work
but do not confer any right or title upon the registered copyright owner or automatically
put his work under the protective mantle of the copyright law; it is not a conclusive proof
of copyright ownership. Hence, when there is sufficient proof that the copyrighted products
are not original creations but are readily available in the market under various brands, as in
this case, validity and originality will not be presumed.
69 | P a g e
274. Francisco Joaquin, Jr. vs. Franklin Drilon, et. al., G.R. No. 108946, January
28, 1999
The format or mechanics of a television show is not included in the list of protected works
in Sec. 2 of P.D. No. 49, which is substantially the same as Sec. 172 of the Intellectual
Property Code (R.A. No, 8293). For this reason, the protection afforded by the law cannot
be extended to cover them.
275. ABS-CBN Broadcasting Corporation vs. Philippine Multi-Media System,
Inc., G.R. Nos. 175769-70, January 19, 2009
Under Sec. 184.1 (h), the use made of a work by or under the direction or control of the
Government, by the National Library or by educational, scientific or professional
institutions where such use is in the public interest and is compatible with fair use will not
constitute copyright infringement. The carriage of ABS-CBN’s signals by virtue of the
must-carry rule is under the direction and control of the government through the NTC. The
imposition of the must-carry rule is within the NTC’s power to promulgate rules and
regulations, as public safety and interest may require, to encourage a larger and more
effective use of communications, radio and television broadcasting facilities, and to
maintain effective competition among private entities in these activities whenever the
Commission finds it reasonably feasible.
276. Pacita Habana, et. al. vs. Felicidad Robles and Goodwill Trading Co., Inc.,
G.R. No. 131522, July 19, 1999
To constitute infringement, it is not necessary that the whole or even a large portion of the
work shall have been copied; if so much is taken that the value of the original is sensibly
diminished, or the labors of the original author are substantially and to an injurious extent
appropriated by another, that is sufficient in point of law to constitute piracy. The injury is
sustained when respondent lifted from petitioners’ book materials that were the result of
the latter’s research work and compilation and misrepresented them as her own, even
circulating the book DEP for commercial use without acknowledging petitioners as her
source.
277. NBI-Microsoft Corporation vs. Judy Hwang, et. al., G.R. No. 147043, June 21,
2005
The gravamen of copyright infringement is not merely the unauthorized “manufacturing”
of intellectual works but rather the unauthorized performance of any of the rights
exclusively granted to the copyright owner. Hence, any person who performs any of such
acts without obtaining the copyright owner’s prior consent renders himself civilly and
criminally liable for copyright infringement.
70 | P a g e

PALS - Bar Ops Corporation Law Must Read Cases

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

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

PALS - Bar Ops Corporation Law Must Read Cases

Hochgeladen von

Copyright:

Verfügbare Formate

MERCANTILE LAW FAC FORTIA ET PATERE

MUST READ CASES (MERCANTILE LAW)

SPECIAL COMMERCIAL LAWS

mitigated by the depositor’s contributory negligence in allowing a withdrawal slip signed

The language of negotiability which characterizes a negotiable paper as a credit instrument

A certificate of deposit is defined as a written acknowledgement by a bank of the receipt

72. Philippine Commercial International Bank vs. Balmaceda,G.R. No. 158143,

is untenable. Said practice amounts to a disregard of the clearance requirement of the

transportation indiscriminately to the students of a particular school living within or near

142. Aboitiz Shipping Corporation vs. Insurance Company of North America,

145. Oceaneering Contractrors (Phils), Inc. v. Nestor Barreto, doing business as

151. Wallem Philippines Shipping vs SR Farms, GR No. 161849, July 9, 2010

party defendant considering that it possesses attributes of a juridical person, otherwise, it

considered government-owned and controlled until the quantification of shares is resolved

172. Development Bank of the Philippines vs. Hydro Resources Contractors

plaintiff creditor. As such, it requires a showing of "an element of injustice or fundamental

194. Grace Christian High Schoolvs.the Court Of Appeals, Grace Village

requirements of Section 64 of the Corporation Code. The situation would be different if

223. Yujuico v. Quaiambao, G.R. No. 180416, 02 June 2014

An action to correct entries in the General Information Sheet of the Corporation; to be

falls within the definition of law—an investment in a common venture premised on a

INTELLECTUAL PROPERTY LAW

266. Fredco Manufacturing Corporation vs. President and Fellows of Harvard

The mere unauthorized use of a container bearing a registered trademark in connection

273. Manly Sportwear Manufacturing, Inc. vs. Dadodette Enterprises and/or

Das könnte Ihnen auch gefallen