Legal Edge Pre Week - Mercantile Law 2019 PDF

2019 BAR REVIEW MERCANTILE LAW
PRE-WEEK Handout No. 7
DATA PRIVACY
Purpose of the Data Privacy Act
RA 10173, or the Data Privacy Act, protects individuals from unauthorized processing of personal
information that is (1) private, not publicly available; and (2) identifiable, where the identity of
the individual is apparent either through direct attribution or when put together with other
available information.
Processing of Personal Information
Under Sec. 3(j) of the Data Privacy Act, “[p]rocessing refers to any operation or any set of
operations performed upon personal information including, but not limited to, the collection,
recording, organization, storage, updating or modification, retrieval, consultation, use,
consolidation, blocking, erasure or destruction of data.”
Thus, processing of personal information is any operation where personal information is

involved. Whenever the personal information is, among other things, collected, modified, or used
for some purpose, processing already takes place.
Rights of the Data Subject
The data subject is entitled to:

a) Be informed whether personal information pertaining to him or her shall be, are being or
have been processed;
b) Be furnished the information indicated hereunder before the entry of his or her personal
information into the processing system of the personal information controller, or at the
next practical opportunity:
1) Description of the personal information to be entered into the system;
2) Purposes for which they are being or are to be processed;
3) Scope and method of the personal information processing;
4) The recipients or classes of recipients to whom they are or may be disclosed;
5) Methods utilized for automated access, if the same is allowed by the data subject,
and the extent to which such access is authorized;
6) The identity and contact details of the personal information controller or its
representative;
7) The period for which the information will be stored; and
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8) The existence of their rights, i.e., to access, correction, as well as the right to lodge
a complaint before the Commission. Sec. 16, Data Privacy Act
Cases where sensitive personal information and privileged information is allowed
Section 13 of the Data Privacy Act enumerates the cases where sensitive personal information
and privileged information may be processed. These are the following:
a) The data subject has given his or her consent, specific to the purpose prior to the
processing, or in the case of privileged information, all parties to the exchange have given
their consent prior to processing;
b) The processing of the same is provided for by existing laws and regulations: Provided,
That such regulatory enactments guarantee the protection of the sensitive personal
information and the privileged information: Provided, further, That the consent of the
data subjects are not required by law or regulation permitting the processing of the
sensitive personal information or the privileged information;
c) The processing is necessary to protect the life and health of the data subject or another
person, and the data subject is not legally or physically able to express his or her consent
prior to the processing;
d) The processing is necessary to achieve the lawful and noncommercial objectives of public
organizations and their associations: Provided, That such processing is only confined and
related to the bona fide members of these organizations or their associations: Provided,
further, That the sensitive personal information are not transferred to third parties:
Provided, finally, That consent of the data subject was obtained prior to processing;
e) The processing is necessary for purposes of medical treatment, is carried out by a medical
practitioner or a medical treatment institution, and an adequate level of protection of
personal information is ensured; or
f) The processing concerns such personal information as is necessary for the protection of
lawful rights and interests of natural or legal persons in court proceedings, or the
establishment, exercise or defense of legal claims, or when provided to government or
public authority. Sec. 13, Data Privacy Act
E-COMMERCE ACT
Scope of E-Commerce Act
E-Commerce Act applies to any kind of data message and electronic document used in the
context of commercial and non-commercial activities to include domestic and international

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dealings, transactions, arrangements, agreements, contracts and exchanges and storage of

information. Sec. 4, E-Commerce Act
Contracts can be expressed in electronic form.
Except as otherwise agreed by the parties the elements of contracts required under existing laws
for the perfection thereof may be expressed in, demonstrated, and proved by means of
electronic data message or electronic documents.
No contract shall be denied validity or enforceability on the sole ground that it is in the form of
an electronic data message or electronic document, or that any or all of the elements required
under existing laws for the formation of the contracts is expressed, demonstrated, and proved
by means of electronic documents. Sec. 16(a), E-Commerce Act
Rule on “lawful access”
This means that access to an electronic file, electronic signature, electronic data message, or
electronic document, shall be kept by the individual or entity who has a legal right to the
possession or the use of plaintext electronic signature or file. The electronic key for identity or
integrity shall not be made available to any person or party without the consent of the individual
or entity in lawful possession of that electronic key. Sec. 31, E-Commerce Act
An electronic document deemed an original for the purposes of the Best Evidence Rule.
An electronic data message or electronic document shall be considered as retained and

presented in the original form where:
(i) the integrity of the information from the time when it was first generated in its final
form, as an electronic data message or electronic document is shown by evidence
aliunde or otherwise; and
(ii) information, when required to be presented, is capable of being displayed to the
person to whom it is to be presented. Sec. 10(1), E-Commerce Act

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Electronic Document
It refers to information or the representation of information, data, figures, symbols or other

modes of written expression, described or however represented, by which a right is established
or an obligation extinguished, or by which a fact may be proved and affirmed, which is received,
recorded, transmitted, stored, processed, retrieved or produced electronically. Sec. 5[f]), E-
Commerce Act
It includes digitally signed documents and any print-out or output, readable by sight or other
means, which accurately reflects the electronic data message or electronic document. For
purposes of these Rules, the term "electronic document" may be used interchangeably with
"electronic data message". Rule 2, Sec. 1[g], A.M. No. 01-7-01-SC
INTELLECTUAL PROPERTY
The Philippines is obligated to assure nationals of the signatory-countries that they are
afforded an effective protection against violation of their intellectual property rights in the
Philippines in the same way that their own countries are obligated to accord similar protection
to Philippine nationals.
“Thus, under Philippine law, 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.’ Ecole De Cuisine Manille (Cordon Bleu of the Philippines), Inc.
vs. Renaud Cointreau & Cie, 697 SCRA 345, G.R. No. 185830 June 5, 2013, J. Perlas-Bernabe
Unfair Competition
This takes place where the defendant gives his goods the general appearance of the goods of his
competitor with the intention of deceiving the public that the goods are those of his competitor.
Here, it has been established that Co conspired with the Laus in the sale/distribution of
counterfeit Greenstone products to the public, which were even packaged in bottles identical to
that of the original, thereby giving rise to the presumption of fraudulent intent. In light of the
foregoing definition, it is thus clear that Co, together with the Laus, committed unfair
competition, and should, consequently, be held liable therefor. Co vs. Yeung, 735 SCRA 66, G.R.
No. 212705 September 10, 2014, J. Perlas-Bernabe

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Unless secondary meaning has been established, a geographically-descriptive mark, due to its
general public domain classification, is perceptibly disqualified from trademark registration.
Under Section 123.2 of the IP Code, specific requirements have to be met in order to conclude
that a geographically-descriptive mark has acquired secondary meaning, to wit:
(a) the secondary meaning must have arisen as a result of substantial commercial use of
a mark in the Philippines;
(b) such use must result in the distinctiveness of the mark insofar as the goods or the
products are concerned; and
(c) proof of substantially exclusive and continuous commercial use in the Philippines for
five (5) years before the date on which the claim of distinctiveness is made. Shang
Properties Realty Corporation (formerly The Shang Grand Tower Corporation) vs. St.
Francis Development Corporation, 730 SCRA 275, G.R. No. 190706 July 21, 2014, J.
Bernabe
It must be emphasized that registration of a trademark, by itself, is not a mode of acquiring

ownership. If the applicant is not the owner of the trademark, he has no right to apply for its
registration.
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. Such
presumption, just like the presumptive regularity in the performance of official functions, is
rebuttable and must give way to evidence to the contrary. Birkenstock Orthopaedie GMBH and
Co. KG (formerly Birkenstock Orthopaedie GMBH) vs. Philippine Shoe Expo Marketing
Corporation, 710 SCRA 474, G.R. No. 194307 November 20, 2013, J. Perlas-Bernabe
In determining similarity and likelihood of confusion, case law has developed the Dominancy
Test and the Holistic or Totality Test.
The Dominancy Test focuses on the similarity of the dominant features of the competing
trademarks that might cause confusion, mistake, and deception in the mind of the ordinary
purchaser, and gives more consideration to the aural and visual impressions created by the marks
on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market
segments.

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In contrast, the Holistic or Totality Test considers the entirety of the marks as applied to the
products, including the labels and packaging, and focuses not only on the predominant words
but also on the other features appearing on both labels to determine whether one is confusingly
similar to the other as to mislead the ordinary purchaser. The “ordinary purchaser” refers to one
“accustomed to buy, and therefore to some extent familiar with, the goods in question.” Great
White Shark Enterprises, Inc. vs. Caralde, Jr., 686 SCRA 201, G.R. No. 192294 November 21,
2012, J. Perlas-Bernabe
‘A mark which is considered by the competent authority of the Philippines to be well-known

internationally and in the Philippines, whether or not it is registered here,’ cannot be registered
by another in the Philippines.”
Rule 100(a) of the Rules and Regulations on Trademarks, Service Marks, Tradenames and Marked
or Stamped Containers defines “competent authority” in the following manner: (c) “Competent
authority” for purposes of determining whether a mark is well-known, means the Court, the
Director General, the Director of the Bureau of Legal Affairs, or any administrative agency or
office vested with quasi-judicial or judicial jurisdiction to hear and adjudicate any action to
enforce the rights to a mark. Dy vs. Koninklijke Philips Electronics, N.V., 821 SCRA 241, G.R. No.
186088 March 22, 2017
The mark “PHILITES” bears an uncanny resemblance or confusing similarity with respondent’s
mark “PHILIPS,” to wit: Applying the dominancy test in the instant case, it shows the uncanny
resemblance or confusing similarity between the trademark applied for by respondent with
that of petitioner’s registered trademark.
An examination of the trademarks shows that their dominant or prevalent feature is the five-
letter “PHILI,” “PHILIPS” for petitioner, and “PHILITES” for respondent. The marks are confusingly
similar with each other such that an ordinary purchaser can conclude an association or relation
between the marks.
The consuming public does not have the luxury of time to ruminate the phonetic sounds of the
trademarks, to find out which one has a short or long vowel sound. At bottom, the letters “PHILI”
visually catch the attention of the consuming public and the use of respondent’s trademark will
likely deceive or cause confusion.
Most importantly, both trademarks are used in the sale of the same goods, which are light bulbs.
The confusing similarity becomes even more prominent when we examine the entirety of the

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marks used by petitioner and respondent, including the way the products are packaged. In using
the holistic test, we find that there is a confusing similarity between the registered marks PHILIPS
and PHILITES, and note that the mark petitioner seeks to register is vastly different from that
which it actually uses in the packaging of its products. Dy vs. Koninklijke Philips Electronics, N.V.,
821 SCRA 241, G.R. No. 186088 March 22, 2017
Following Section 123, paragraph (h) of Republic Act (RA) No. 8293 which prohibits exclusive
registration of generic marks, the word “COFFEE” cannot be exclusively appropriated by either
Nestlé or Puregold since it is generic or descriptive of the goods they seek to identify.
The word “COFFEE” is the common dominant feature between Nestlé’s mark “COFFEE-MATE”
and Puregold’s mark “COFFEE MATCH.”
In Asia Brewery, Inc. v. Court of Appeals, 224 SCRA 437 (1993), this Court held that generic or
descriptive words are not subject to registration and belong to the public domain. Consequently,
we must look at the word or words paired with the generic or descriptive word, in this particular
case“-MATE” for Nestlé’s mark and “MATCH” for Puregold’s mark, to determine the
distinctiveness and registrability of Puregold’s mark “COFFEE MATCH.” Société des Produits,
Nestlé, S.A. vs. Puregold Price Club, Inc., 839 SCRA 177, G.R. No. 217194 September 6, 2017
The distinctive features of both marks are sufficient to warn the purchasing public which are
Nestlé’s products and which are Puregold’s products.
While both “MATE” and “MATCH” contain the same first three letters, the last two letters in
Puregold’s mark, “C” and “H,” rendered a visual and aural character that made it easily
distinguishable from Nestlé’s mark. Also, the distinctiveness of Puregold’s mark with two
separate words with capital letters “C” and “M” made it distinguishable from Nestlé’s mark which
is one word with a hyphenated small letter “-m” in its mark. In addition, there is a phonetic
difference in pronunciation between Nestlé’s “-MATE” and Puregold’s “MATCH.”
The likelihood of confusion between Nestlé’s product and Puregold’s product does not exist and
upholds the registration of Puregold’s mark. Société des Produits, Nestlé, S.A. vs. Puregold Price
Club, Inc., 839 SCRA 177, G.R. No. 217194 September 6, 2017

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Absolute certainty of confusion or even actual confusion is not required to refuse registration.
Indeed, it is the mere likelihood of confusion that provides the impetus to accord protection to
trademarks already registered with the IPO.
The Court cannot emphasize enough that the cited marks "METRO" (word) and "METRO" (logo)
are identical with the registrant mark "METRO" both in spelling and in sound. In fact, it is the
same exact word.
Considering that both marks are used in goods which are classified as magazines, it requires no
stretch of imagination that a likelihood of confusion may occur. ABS-CBN Publishing, Inc. vs.
Director of the Bureau of Trademarks, G.R. No. 217916, June 20, 2018
Citi vs. City
Applying the dominancy test, this Court sees that the prevalent feature of respondent's mark,
the golden lion's head device, is not present at all in any of petitioner's marks. The only similar
feature between respondent's mark and petitioner's collection of marks is the word "CITY" in the
former, and the "CITI" prefix found in the latter. This Court agrees with the findings of the Court
of Appeals that this similarity alone is not enough to create a likelihood of confusion.
The context where respondent's mark is to be used, namely, for its ATM services, which could
only be secured at respondent's premises and not in an open market of ATM services, further
diminishes the possibility of confusion on the part of prospective customers. Citigroup, Inc. vs.
CityState Savings Bank, Inc., G.R. No. 205409, June 13, 2018
Cybershopping
In Mirpuri v. CA, 318 SCRA 516 (1999), the Supreme Court (SC) noted that “[a]dvertising on the
Net and cybershopping are turning the Internet into a commercial marketplace.”
Based on the amended Trademark Regulations, it is apparent that the IPO has now given due
regard to the advent of commerce on the Internet. Specifically, it now recognizes, among others,
“downloaded pages from the website of the applicant or registrant clearly showing that the goods
are being sold or the services are being rendered in the Philippines,” as well as “for online sale,
receipts of sale of the goods or services rendered or other similar evidence of use, showing that
the goods are placed on the market or the services are available in the Philippines or that the
transaction took place in the Philippines,” as acceptable proof of actual use. W Land Holdings,

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Inc. vs. Starwood Hotels and Resorts Worldwide, Inc., 847 SCRA 403, G.R. No. 222366 December
4, 2017
An action for infringement or unfair competition, including the available remedies of injunction
and damages, in the regular courts can proceed independently or simultaneously with an action
for the administrative cancellation of a registered trademark in the BPTTT (now, IPO).
As applied to the present case, petitioner’s prior filing of two inter partes cases against the
respondent before the BPTTT for the cancellation of the latter’s trademark registrations, namely,
“LIVE’S” and “LIVE’S Label Mark,” does not preclude petitioner’s right (as a defendant) to include
in its answer a counterclaim for infringement with a prayer for the issuance of a writ of
preliminary injunction. Levi Strauss (Phils.), Inc. vs. Vogue Traders Clothing Company, 462 SCRA
52, G.R. No. 132993 June 29, 2005
Broadcasting organizations are entitled to several rights and to the protection of these rights
under the Intellectual Property Code. Respondents’ argument that the subject news footage is
not copyrightable is erroneous.
The Court of Appeals, in its assailed Decision, correctly recognized the existence of ABS-CBN’s
copyright over the news footage: Surely, private respondent has a copyright of its news coverage.
Seemingly, for airing said video feed, petitioner GMA is liable under the provisions of the
Intellectual Property Code, which was enacted purposely to protect copyright owners from
infringement. News as expressed in a video footage is entitled to copyright protection.
Broadcasting organizations have not only copyright on but also neighboring rights over their
broadcasts. ABS-CBN Corporation vs. Gozon, 753 SCRA 1, G.R. No. 195956 March 11, 2015
NEGOTIABLE INSTRUMENTS
Iron Clad Rule
A cashier’s check (having the same legal effects of a certified check) is not subject to countermand
by the payee after indorsement. Republic vs. Philippine National Bank, G.R. No. L-16106, 30
December 1961

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The accommodation party is liable on the instrument to a holder for value even though the
holder, at the time of taking the instrument, knew him or her to be merely an accommodation
party, as if the contract was not for accommodation.
The relation between an accommodation party and the accommodated party is one of principal
and surety – the accommodation party being the surety. Virata vs. Alejandro Ng Wee, G.R. No.
220926, 5 July 2017
This rule on the sequence of recovery in case of unauthorized check transactions had already
been deeply embedded in jurisprudence. The liability of the drawee bank is based on its
contract with the drawer and its duty to charge to the latter’s accounts only those payables
authorized by him.
A drawee bank is under strict liability to pay the check only to the payee or to the payee’s order.
When the drawee bank pays a person other than the payee named in the check, it does not
comply with the terms of the check and violates its duty to charge the drawer’s account only for
properly payable items. BDO Unibank, Inc. vs. Lao, G.R. No. 227005, June 19, 2017
It has been repeatedly held that in check transactions, the collecting bank generally suffers the
loss because it has the duty to ascertain the genuineness of all prior endorsements considering
that the act of presenting the check for payment to the drawee is an assertion that the party
making the presentment has done its duty to ascertain the genuineness of the endorsements.
If any of the warranties made by the collecting bank turns out to be false, then the drawee bank
may recover from it up to the amount of the check. BDO Unibank, Inc. vs. Lao, G.R. No. 227005,
June 19, 2017
While manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against insufficient
funds, or for similar reasons such as a condition not appearing on the face of the check.
Long-standing and accepted banking practices do not countenance the countermanding of

manager’s and cashier’s checks on the basis of a mere allegation of failure of the payee to comply
with its obligations towards the purchaser. On the contrary, the accepted banking practice is that

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such checks are as good as cash. Metropolitan Bank and Trust Company vs. Chiok, 742 SCRA
435, G.R. No. 175394 November 26, 2014
Section 16 of the Negotiable Instruments Law (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.”
As aptly pointed out by the trial court, it would have been contrary to human nature and
experience for petitioner to send respondent a demand letter detailing the particulars of the said
checks if he indeed unlawfully obtained the same. Ubas, Sr. vs. Chan, 816 SCRA 659, G.R. No.
215910 February 6, 2017, J. Perlas-Bernabe
PRIVATE CORPORATIONS
The doctrine of corporation by estoppel applies for as long as there is no fraud and when the
existence of the association is attacked for causes attendant at the time the contract or dealing
sought to be enforced was entered into, and not thereafter.
In this controversy, Purificacion dealt with the petitioner as if it were a corporation. This is evident
from the fact that Purificacion executed two (2) documents conveying her properties in favor of
the petitioner – first, on October 11, 1999 via handwritten letter, and second, on August 29, 2001
through a Deed; the latter having been executed the day after the petitioner filed its application
for registration with the SEC.
The doctrine of corporation by estoppel rests on the idea that if the Court were to disregard the
existence of an entity which entered into a transaction with a third party, unjust enrichment
would result as some form of benefit have already accrued on the part of one of the parties. Thus,
in that instance, the Court affords upon the unorganized entity corporate fiction and juridical
personality for the sole purpose of upholding the contract or transaction. The Missionary Sisters
of Our Lady of Fatima (Peach Sisters of Laguna), represented by Rev. Mother Ma. Concepcion
R. Realon, et al. Vs Amando V. Alzona, et al., August 6, 2018, G.R. No. 224307
All transfers of shares of stock must be registered in the corporate books (stock and transfer
book) in order to be binding on the corporation.

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In the case at bar, records reveal that at the time Madrid called for the November 18, 2009
Meeting, as well as the actual conduct thereof, he was already the owner of 74.98% shares of
stock of FSVCI as a result of his inheritance of Angela’s 70.82% ownership thereof. However,
records are bereft of any showing that the transfer of Angela’s shares of stock to Madrid had
been registered in FSVCI’s Stock and Transfer Book when he made such call and when the
November 18, 2009 Meeting was held. Thus, the CA erred in holding that Madrid complied with
the required registration of transfers of shares of stock through mere reliance on FSVCI’s GIS
dated November 18, 2009. F & S Velasco Company, Inc. vs. Madrid, 774 SCRA 388, G.R. No.
208844 November 10, 2015, J. Perlas-Bernabe
Every director must own at least one (1) share of the capital stock of the corporation of which
he is a director, which share shall stand in his name on the books of the corporation.
Any director who ceases to be the owner of at least one (1) share of the capital stock of the
corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock
corporations must be members thereof. A majority of the directors or trustees of all corporations
organized under this Code must be residents of the Philippines. Tom vs. Rodriguez, 761 SCRA
679, G.R. No. 215764 July 6, 2015, J. Perlas-Bernabe
Before a director or officer of a corporation can be held personally liable for corporate
obligations, the following requisites must concur: (1) the complainant must allege in the
complaint that the director or officer assented to patently unlawful acts of the corporation, or
that the officer was guilty of gross negligence or bad faith; and (2) the complainant must clearly
and convincingly prove such unlawful acts, negligence or bad faith.
In this case, Tompar’s assent to patently unlawful acts of the MRII or that his acts were tainted
by gross negligence or bad faith was not alleged in Germo’s complaint, much less proven in the
course of trial. Therefore, the deletion of Tompar’s solidary liability with MRII is in order. Mactan
Rock Industries, Inc. vs. Germo, 850 SCRA 532, G.R. No. 228799 January 10, 2018, J. Perlas-
Bernabe
Once acquitted of the offense of violating BP 22, a corporate officer is discharged from any civil
liability arising from the issuance of the worthless check in the name of the corporation he
represents.

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This is without regard as to whether his acquittal was based on reasonable doubt or that there
was a pronouncement by the trial court that the act or omission from which the civil liability
might arise did not exist. Pilipinas Shell Petroleum Corporation vs. Duque, 818 SCRA 57, G.R. No.
216467 February 15, 2017
Applicability of the Doctrine of Piercing the Corporate Veil
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. California Manufacturing Company, Inc.
vs. Advanced Technology System, Inc., 824 SCRA 295, G.R. No. 202454 April 25, 2017
Piercing; Service of Summons; Exception
The piercing of the corporate veil is premised on the fact that the corporation concerned must
have been properly served with summons or properly subjected to the jurisdiction of the court a
quo. Corollary thereto, it cannot be subjected to a writ of execution meant for another in
violation of its right to due process.
There exists, however, an exception to this rule: if it is shown “by clear and convincing proof that
the separate and distinct personality of the corporation was purposefully employed to evade a
legitimate and binding commitment and perpetuate a fraud or like wrongdoings.” The resistance
of the Court to offend the right to due process of a corporation that is a nonparty in a main case,
may disintegrate not only when its director, officer, shareholder, trustee or member is a party to
the main case, but when it finds facts which show that piercing of the corporate veil is merited.
International Academy of Management and Economics (I/AME)vs. Litton and Company, Inc. ,
848 SCRA 437, G.R. No. 191525 December 13, 2017

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Equitable Owner
An equitable owner is an individual who is a non-shareholder defendant, who exercises sufficient

control or considerable authority over the corporation to the point of completely disregarding
the corporate form and acting as though its assets are his or her alone to manage and distribute.
International Academy of Management and Economics (I/AME)vs. Litton and Company, Inc. ,
848 SCRA 437, G.R. No. 191525 December 13, 2017
Outsider Reverse Piercing; Insider Reverse Piercing
Outsider reverse piercing occurs when a party with a claim against an individual or corporation
attempts to be repaid with assets of a corporation owned or substantially controlled by the
defendant.
In contrast, in insider reverse piercing, the controlling members will attempt to ignore the
corporate fiction in order to take advantage of a benefit available to the corporation, such as an
interest in a lawsuit or protection of personal assets. International Academy of Management
and Economics (I/AME) vs. Litton and Company, Inc. , 848 SCRA 437, G.R. No. 191525 December
13, 2017
Applying the relationship test, the Supreme Court (SC) notes that both Belo and Santos are
named shareholders in Belo Medical Group’s Articles of Incorporation and General Information
Sheet for 2007.
The conflict is clearly intra-corporate as it involves two (2) shareholders, although the ownership
of stocks of one (1) stockholder is questioned. xxx They continue to be stockholders until a
decision is rendered on the true ownership of the 25 shares of stock in Santos’ name. If Santos’
subscription is declared fictitious and he still insists on inspecting corporate books and exercising
rights incidental to being a stockholder, then, and only then, shall the case cease to be intra-
corporate. Belo Medical Group, Inc. vs. Santos, 838 SCRA 142, G.R. No. 185894 August 30, 2017
RTC has jurisdiction over intra-corporate cases involving sequestered companies.
The mere fact that a corporation’s shares of stocks are owned by a sequestered corporation does
not, by itself, automatically categorize the matter as one involving sequestered assets, or matters

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incidental to or related to transactions involving sequestered corporations and/or their assets.

San Jose vs. Ozamiz, 831 SCRA 51, G.R. No. 190590 July 12, 2017
Membership in a non-stock corporation is generally non-transferrable.
Section 90 of the Corporation Code states that membership in a nonstock corporation and all
rights arising therefrom are personal and nontransferable, unless the articles of incorporation or
the bylaws otherwise provide. Lim vs. Moldex Land, Inc., 815 SCRA 619, G.R. No. 206038 January
25, 2017
Section 97 of the Corporation Code only specifies that “the stockholders of the corporation shall
be subject to all liabilities of directors.”
Nowhere in that provision do we find any inference that stockholders of a close corporation are
automatically liable for corporate debts and obligations. Bustos vs. Millians Shoe, Inc., 824 SCRA
67, G.R. No. 185024 April 24, 2017
The basis in determining the presence of quorum in nonstock corporations is the numerical
equivalent of all members who are entitled to vote, unless some other basis is provided by the
By-Laws of the corporation.
To include those members without voting rights in the total number of members for purposes of
quorum would be superfluous for although they may attend a particular meeting, they cannot
cast their vote on any matter discussed therein. Lim vs. Moldex Land, Inc., 815 SCRA 619, G.R.
No. 206038 January 25, 2017
FRIA
It was improper for Misajon, et al. (BIR) to collect, or even attempt to collect, deficiency taxes
from LCI outside of the rehabilitation proceedings concerning the latter, and in the process,
willfully disregard the Commencement Order lawfully issued by the Rehabilitation Court.
Hence, the RTC Br. 35 correctly cited them for indirect contempt.

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As aptly put by the RTC Br. 35, they could have easily tolled the running of such prescriptive
period, and at the same time, perform their functions as officers of the BIR, without defying the
Commencement Order and without violating the laudable purpose of RA 10142 by simply
ventilating their claim before the Rehabilitation Court. Bureau of Internal Revenue vs. Lepanto
Ceramics, Inc., G.R. No. 224764 April 24, 2017, Justice Perlas-Bernabe
It is well to emphasize that the remedy of rehabilitation should be denied to corporations that
do not qualify under the Rules.
Neither should it be allowed to corporations whose sole purpose is to delay the enforcement of
any of the rights of the creditors, which is rendered obvious by: (a) the absence of a sound and
workable business plan; (b) baseless and unexplained assumptions, targets, and goals; and (c)
speculative capital infusion or complete lack thereof for the execution of the business plan.59
Unfortunately, these negative indicators have all surfaced to the fore, much to SMMCI’s chagrin.
BPI Family Savings Bank, Inc. vs. St. Michael Medical Center, Inc., G.R. No. 205469 March 25,
2015, J. Perlas-Bernabe
A distressed corporation should not be rehabilitated when the results of the financial
examination and analysis clearly indicate that there lies no reasonable probability that it may be
revived, to the detriment of its numerous stakeholders which include not only the corporation’s
creditors but also the public at large. Philippine Asset Growth Two, Inc. vs. Fastech Synergy
Philippines, Inc. (formerly First Asia System Technology, Inc.), G.R. No. 206528 June 28, 2016, J.
Perlas-Bernabe
As between creditors, the key phrase is “equality is equity.” When a corporation threatened by
bankruptcy is taken over by a receiver, all the creditors should stand on equal footing.
Not anyone of them should be given any preference by paying one or some of them ahead of the
others. This is precisely the reason for the suspension of all pending claims against the
corporation under receivership. Instead of creditors vexing the courts with suits against the
distressed firm, they are directed to file their claims with the receiver who is a duly appointed
officer of the SEC. Sobrejuanite vs. ASB Development Corporation, 471 SCRA 763, G.R. No.
165675 September 30, 2005

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TRUST RECEIPTS
Liability of officers for violation of the Trust Receipts Law
Section 13 of the Trust Receipts Law explicitly provides that if the violation or offense is
committed by a corporation, as in this case, the penalty provided for under the law shall be
imposed upon the directors, officers, employees or other officials or person responsible for the
offense, without prejudice to the civil liabilities arising from the criminal offense. Crisologo vs.
People, 686 SCRA 782, G.R. No. 199481 December 3, 2012
Validity of Entruster’s Security Interest as Against Creditors

The entruster's security interest in goods, documents, or instruments 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. Sec. 12, Trust Receipts Law
Repossession does not amount to dacion en pago.
Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt
in money and the same is governed by sales. Dation in payment is the delivery and transmission
of ownership of a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. As aforesaid, the repossession of the machinery and equipment
in question was merely to secure the payment of TCC’s loan obligation and not for the purpose
of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was
ever accomplished. Landl & Company (Phil.) Inc. vs. Metropolitan Bank & Trust Co., 435 SCRA
639, G.R. No. 159622 July 30, 2004
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. Sarmiento v. CA, G.R. No. 122502, December 27, 2002, 394 SCRA 315

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LETTERS OF CREDIT
It is settled rule in commercial transactions involving letters of credit that the documents
tendered must strictly conform to the terms of the letter of credit.
The tender of documents by the beneficiary (seller) must include all documents required by the
letter. A correspondent bank which departs from what has been stipulated under the letter of
credit, as when it accepts a faulty tender, acts on its own risks and it may not thereafter be able
to recover from the buyer or the issuing bank, as the case may be, the money thus paid to the
beneficiary. Thus the rule of strict compliance. Feati Bank & Trust Company vs. Court of Appeals,
196 SCRA 576, G.R. No. 94209 April 30, 1991
Non-Compliance with Strict Compliance
Hence, 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. Feati Bank & Trust Company vs.
Court of Appeals, G.R. No. 94209 April 30, 1991
Commercial vs. Standby Letter of Credit
Commercial credits involve the payment of money under a contract of sale. Such credits become
payable upon the presentation by the seller-beneficiary of documents that show he has taken
affirmative steps to comply with the sales agreement.
In the standby type, the credit is payable upon certification of a party’s nonperformance of the
agreement. The documents that accompany the beneficiary’s draft tend to show that the
applicant has not performed his obligation. The beneficiary of a commercial credit must
demonstrate by documents that he has performed his contract. The beneficiary of the standby
credit must certify that his obligor has not performed the contract. Transfield Philippines, Inc. v.
Luzon Hydro Corp., G.R. No. 146717 November 22, 2004

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Prescriptive period
Since the cause of action arises from a contract and not from solutio indebiti, the prescriptive
period is ten (10) years. National Commercial Bank of Saudi Arabia v. CA, G.R. No. 124267,
January 31, 2003
INSURANCE LAW
Anyone has an insurable interest in property who derives a benefit from its existence or would
suffer loss from its destruction.
Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any
interest therein, in other words, so long as he would suffer by its destruction, as where he has a
vendor’s lien. In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts
appearing in their Books of Account 45 days after the time of the loss covered by the policies.
Gaisano Cagayan, Inc. vs. Insurance Company of North America, 490 SCRA 286, G.R. No. 147839
June 8, 2006
Health Maintenance Contract
Petitioner’s contention that it is a health maintenance organization and not an insurance

company is irrelevant. Contracts between companies like petitioner and the beneficiaries under
their plans are treated as insurance contracts.
It is also incorrect to say that the health care agreement is not based on loss or damage because,
under the said agreement, petitioner assumes the liability and indemnifies its member for
hospital, medical and related expenses (such as professional fees of physicians). The term “loss
or damage” is broad enough to cover the monetary expense or liability a member will incur in
case of illness or injury. Philippine Health Care Providers, Inc. vs. Commissioner of Internal
Revenue, 554 SCRA 411, G.R. No. 167330 June 12, 2008
2-year period to contest a life insurance policy due to concealment/ misrepresentation
Under Section 48 of the Insurance Code, 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

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ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the

insured or his agent. Manila Bankers Life Insurance Corporation vs. Aban, 702 SCRA 417, G.R.
No. 175666, July 29, 2013
Effect of lapse of 2 years/death of insured within the 2-year period
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. Manila Bankers Life Insurance Corporation vs. Aban, 702 SCRA 417, G.R. No.
175666, July 29, 2013
The insurer has two years from its issuance to investigate and verify whether the policy was
obtained by fraud, concealment, or misrepresentation. Upon the death of the insured within the
two-year period from the issuance of the policy, the insurer loses its right to rescind the policy.
Sun Life of Canada (Philippines), Inc. v. Ma. Daisy’s Sibya, G.R. No. 211212, June 8, 2016
Exceptions to subrogation
There is no subrogation in the following cases:
(1) When the insured, by his own act, releases the party at fault from liability.
(2) When the insurer pays the insured without notifying the carrier who has in good faith
settled the insured’s claim for loss.
(3) When the insurer pays the insured for a loss excepted from the policy.
(4) When life insurance is involved.
Reinsurance
It is a contract by which the insurer procures a third person to insure him against loss or liability
by reason of an original insurance. Sec. 97, Insurance Code An original insured has no interest in
a contract of reinsurance. Sec. 100, Insurance Code A reinsurance is presumed to be a contact of
indemnity against liability, and not merely against damage. Sec. 99, Insurance Code

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TRANSPORTATION LAW
Franchise issued to a public utility cannot be exclusive.
The 1935, 1973 and 1987 Constitutions expressly and clearly prohibit the creation of franchises
that are exclusive in character. The President, Congress and the Court cannot create indirectly
franchises that are exclusive in character by allowing the Board of Directors of a water district
and the Local Water Utilities Administration to create franchises that are exclusive in character.
Tawang Multi-Purpose Cooperative v. La Trinidad Water District, G.R. No. 166471, March 22,
2011
That Respondent Resort Operator does not charge a separate fee or fare for its ferry services is
of no moment.
It would be imprudent to suppose that it provides said services at a loss. The Court is aware of
the practice of beach resort operators offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not to avail of respondent’s ferry services
pay the same amount is likewise inconsequential. These guests may only be deemed to have
overpaid. Spouses Dante Cruz and Leonora Cruz v. Sun Holidays, Inc., G.R. No. 186312, June 29,
2012
Liability for acts of strangers/passengers
Since Battung’s death was caused by a co-passenger, the applicable provision is Article 1763 of
the Civil Code, which states that “a common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers or of strangers, if the
common carrier’s employees through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.”
Notably, for this obligation, the law provides a lesser degree of diligence, i.e., diligence of a good
father of a family, in assessing the existence of any culpability on the common carrier’s part. G.V.
Florida Transport, Inc. vs. Heirs of Romeo L. Battung, Jr., G.R. No. 208802 October 14, 2015, J.
Perlas-Bernabe

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In requiring compliance with the standard of extraordinary diligence, a standard which is, in
fact, that of the highest possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seeks to compel them to control their
employees, to tame their reckless instincts and to force them to take adequate care of human
beings and their property.
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the
status of the ticket and they were assured that the ticked remained unused and perfectly valid.
And, to avoid any future problems that may be encountered on the validity of the ticket, a new
ticket was issued to Jesus Fernando. The failure to promptly verify the validity of the ticket
connotes bad faith on the part of Northwest. Spouses Fernando vs. Northwest Airlines, G.R. No.
212038 and G.R. No 212043, February 8, 2017
A bill of lading is defined as “an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify it, stating the name of the consignor, the terms of the
contract for carriage, and agreeing or directing that the freight to be delivered to the order or
assigns of a specified person at a specified place.
It operates both as a receipt and as a contract. As a receipt, it recites the date and place of
shipment, describes the goods as to quantity, weight, dimensions, identification marks and
condition, quality, and value. As a contract, it names the contracting parties, which include the
consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and
obligations assumed by the parties. As such, it shall only be binding upon the parties who make
them, their assigns and heirs. Ace Navigation Co., Inc. vs. FGU Insurance Corporation, 674 SCRA
348, G.R. No. 171591 June 25, 2012, J. Perlas-Bernabe
In case of death of or injury to their passengers, Article 1756 of the Civil Code provides that
common carriers are presumed to have been at fault or negligent, and this presumption can be
overcome only by proof of the extraordinary diligence exercised to ensure the safety of the
passengers.
Being an operator and owner of a common carrier, Sanico was required to observe extraordinary
diligence in safely transporting Colipano. When Colipano’s leg was injured while she was a
passenger in Sanico’s jeepney, the presumption of fault or negligence on Sanico’s part arose and
he had the burden to prove that he exercised the extraordinary diligence required of him. He
failed to do this. Sanico vs. Colipano, 841 SCRA 141, G.R. No. 209969 September 27, 2017

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Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico is
direct as the contract is between him and Colipano. Castro, being merely the driver of Sanico’s
jeepney, cannot be made liable as he is not a party to the contract of carriage.
Here, it is beyond dispute that Colipano was injured while she was a passenger in the jeepney
owned and operated by Sanico that was being driven by Castro. Both the CA and RTC found
Sanico and Castro jointly and severally liable. This, however, is erroneous because only Sanico
was the party to the contract of carriage with Colipano. Since the cause of action is based on a
breach of a contract of carriage, the liability of Sanico is direct as the contract is between him and
Colipano. Castro, being merely the driver of Sanico’s jeepney, cannot be made liable as he is not
a party to the contract of carriage. Sanico vs. Colipano, 841 SCRA 141, G.R. No. 209969
September 27, 2017
The obligation of the airline to exercise extraordinary diligence commences upon the issuance
of the contract of carriage. Ticketing, as the act of issuing the contract of carriage, is necessarily
included in the exercise of extraordinary diligence.
When a common carrier, through its ticketing agent, has not yet issued a ticket to the prospective
passenger, the transaction between them is still that of a seller and a buyer. Manay, Jr. vs. Cebu
Air, Inc., 788 SCRA 155, G.R. No. 210621 April 4, 2016
Once the ticket is paid for and printed, the purchaser is presumed to have agreed to all its terms
and conditions.
Even assuming that the ticketing agent encoded the incorrect flight information, it is incumbent
upon the purchaser of the tickets to at least check if all the information is correct before making
the purchase.. Manay, Jr. vs. Cebu Air, Inc., 788 SCRA 155, G.R. No. 210621 April 4, 2016
The Air Passenger Bill of Rights recognizes that a contract of carriage is a contract of adhesion,
and thus, all conditions and restrictions must be fully explained to the passenger before the
purchase of the ticket.
The duty of an airline to disclose all the necessary information in the contract of carriage does
not remove the correlative obligation of the passenger to exercise ordinary diligence in the

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conduct of his or her affairs. Manay, Jr. vs. Cebu Air, Inc., 788 SCRA 155, G.R. No. 210621 April
4, 2016
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both parties are negligent but the negligent
act of one is appreciably later than that of the other, or where it is impossible to determine whose
fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss
but failed to do so, is chargeable with the loss—the antecedent negligence of plaintiff does not
preclude him from recovering damages caused by the supervening negligence of defendant, who
had the last fair chance to prevent the impending harm by the exercise of due diligence.
Philippine National Railways vs. Brunty, 506 SCRA 685, G.R. No. 169891 November 2, 2006
Limited Liability Rule
The liability of the shipowner or agent is limited to the value of the vessel, its appurtenances and
freightage earned in the voyage, provided that the owner or agent abandons the vessel. When
the vessel is totally lost, in which case abandonment is not required because there is no vessel to
abandon, the liability of the shipowner or agent for damages is extinguished. Phil-Nippon Kyoei,
Corp. vs. Gudelosao, G.R. No. 181375, July 13, 2016
The liability of SSSICI to the beneficiaries is direct under the insurance contract. Under the
contract, petitioner is the policyholder, with SSSICI as the insurer, the crew members as the
cestui que vie or the person whose life is being insured with another as beneficiary of the
proceeds, and the latter’s heirs as beneficiaries of the policies. Upon petitioner’s payment of
the premiums intended as additional compensation to the crew members, SSSICI as insurer
undertook to indemnify the crew members’ beneficiaries from an unknown or contingent event.
When the CA conditioned the extinguishment of petitioner’s liability on SSSICI’s payment of the
Personal Accident Policies’ proceeds, it made a finding that petitioner is subsidiarily liable for the
face value of the policies.
There is no basis for such finding; there is no obligation on the part of petitioner to pay the
insurance proceeds because petitioner is, in fact, the obligee or policyholder in the Personal
Accident Policies. Since petitioner is not the party liable for the value of the insurance proceeds,

0917 – 894 53 56
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it follows that the limited liability rule does not apply as well. Phil-Nippon Kyoei, Corp. vs.
Gudelosao, 796 SCRA 508, G.R. No. 181375 July 13, 2016
Under Sec. 4(5) of the COGSA, when the shipper fails to declare the value of the goods in the
bill of lading, 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 US$500
per package.
Thus, where there is a loss/damage to goods covered by contracts of carriage from a foreign port
to a Philippine port and there is an absence of a shipper’s declaration of the value of the goods
in the bill of lading, the rule on package limitation liability of US$500 per package shall apply.
Philam Insurance Company, Inc. v. Heung-A Shipping Corporation and Wallem Philippines
Shipping, Inc., G.R. No. 187701, July 23, 2014.
Per the "Shipper’s Load and Count" arrangement, the contents are not required to be checked
and inventoried by the carrier at the port of loading or before said carrier enters the port of
unloading in the Philippines since it is the shipper who has the sole responsibility for the
quantity, description and condition of the cargoes shipped in container vans.
As such, the carrier cannot be held responsible for any discrepancy if the description in the bill of
lading is different from the actual contents of the container. Philam Insurance Company, Inc. v.
Heung-A Shipping Corporation and Wallem Philippines Shipping, Inc., G.R. No. 187701, July 23,
2014.
One-year period to file legal action by the subrogee.
The consignee, NOVARTIS, received the subject shipment on January 5, 2001. PHILAM, as the
subrogee of NOVARTIS, filed a claim against PROTOP on June 4, 2001, against WALLEM on
October 12, 2001 and against HEUNG-A on December 11, 2001, or all within the one-year
prescriptive period. Verily then, despite NOV AR TIS' failure to comply with the three-day notice
requirement, its subrogee PHILAM is not barred from seeking reimbursement from PROTOP,
HEUNG-A and WALLEM because the demands for payment were timely filed. Philam Insurance
Company, Inc. v. Heung-A Shipping Corporation and Wallem Philippines Shipping, Inc., G.R. No.
187701, July 23, 2014.

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Warsaw Convention – Jurisdiction on action for damages
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. Lhuillier v. British Airways, G.R. No. 171092,
March 15, 2010
BANKING LAW
The actions of the Monetary Board taken under this section or under Section 29 of this Act (RA
7653) shall be final and executory, and 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. The petition
for certiorari may only be filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of the institution of the
order directing receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of this Act or the appointment of a receiver
under this section shall be vested exclusively with the Monetary Board. Furthermore, the
designation of a conservator is not a precondition to the designation of a receiver. Apex
Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436, G.R. No. 214866
October 2, 2017, J. Perlas-Bernabe
Nothing in Section 30 of Republic Act (RA) No. 7653 requires the Bangko Sentral ng Pilipinas
(BSP), through the Monetary Board, to make an independent determination of whether a bank
may still be rehabilitated or not.
Suffice it to say that if the law had indeed intended that the Monetary Board make a separate
and distinct factual determination before it can order the liquidation of a bank or quasi-bank,
then there should have been a provision to that effect. There being none, it can safely be
concluded that the Monetary Board is not so required when the PDIC has already made such
determination. Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436,
G.R. No. 214866 October 2, 2017, J. Perlas-Bernabe

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In the same way that banks are “presumed to be familiar with the rules on land registration,”
given that they are in the business of extending loans secured by real estate mortgage, banks
are also expected to exercise the highest degree of diligence.
The high degree of diligence required of banks equally holds true in their dealing with mortgaged
real properties, and subsequently acquired through foreclosure, such as the Unit purchased by
petitioner. This is especially true when investigating real properties offered as security, since they
are aware that such property may be passed on to an innocent purchaser in the event of
foreclosure. Indeed, “the ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of a bank’s operations.” Poole-
Blunden vs. Union Bank of the Philippines, 847 SCRA 146, G.R. No. 205838 November 29, 2017
Whether it was unaware of the unit’s actual interior area; or, knew of it, but wrongly thought
that its area should include common spaces, respondent’s (Union Bank) predicament
demonstrates how it failed to exercise utmost diligence in investigating the Unit offered as
security before accepting it. This negligence is so inexcusable; it is tantamount to bad faith.
Credit investigations are standard practice for banks before approving loans and admitting
properties offered as security. It entails the assessment of such properties: an appraisal of their
value, an examination of their condition, a verification of the authenticity of their title, and an
investigation into their real owners and actual possessors. Poole-Blunden vs. Union Bank of the
Philippines, 847 SCRA 146, G.R. No. 205838 November 29, 2017
Counterfeit USD
Although the petitioners suffered humiliation resulting from their unwitting use of the
counterfeit US dollar bills, the respondent, by virtue of its having observed the proper protocols
and procedure in handling the US dollar bills involved, did not violate any legal duty towards
them.
Being neither guilty of negligence nor remiss in its exercise of the degree of diligence required by
law or the nature of its obligation as a banking institution, the latter was not liable for damages.
Given the situation being one of damnum absque injuria, they could not be compensated for the
damage sustained. Carbonell vs. Metropolitan Bank and Trust Company, 825 SCRA 1, G.R. No.
178467 April 26, 2017

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Closed Now, Hear Later
Under Republic Act (RA) No. 7653, when the Monetary Board finds a bank insolvent, it may
“summarily and without need for prior hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance Corporation (PDIC) as receiver of the
banking institution.” Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas,
864 SCRA 32, G.R. No. 200678 June 4, 2018
A closed bank under receivership can only sue or be sued through its receiver, the Philippine
Deposit Insurance Corporation.
This Court in Manalo v. Court of Appeals, 366 SCRA 752 (2001), reiterated this principle: A bank
which had been ordered closed by the monetary board retains its juridical personality which can
sue and be sued through its liquidator. The only limitation being that the prosecution or defense
of the action must be done through the liquidator. Otherwise, no suit for or against an insolvent
entity would prosper.
Under the old Central Bank Act, or Republic Act No. 265, as amended, the same principle applies
to the receiver appointed by the Central Bank. The law explicitly stated that a receiver shall
“represent the [insolvent] bank personally or through counsel as he [or she] may retain in all
actions or proceedings for or against the institution.” Banco Filipino Savings and Mortgage Bank
vs. Bangko Sentral ng Pilipinas, 864 SCRA 32, G.R. No. 200678 June 4, 2018
Considering that the receiver has the power to take charge of all the assets of the closed bank
and to institute for or defend any action against it, only the receiver, in its fiduciary capacity,
may sue and be sued on behalf of the closed bank.
It was possible that Philippine Deposit Insurance Corporation could have granted its permission
to be joined in the suit. If it had refused to allow petitioner to file its suit, petitioner still had a
remedy available to it. Under Rule 3, Section 10 of the Rules of Court, petitioner could have made
Philippine Deposit Insurance Corporation an unwilling co-petitioner and be joined as a
respondent to this case. Petitioner’s suit concerned its Business Plan, a matter that could have
affected the status of its insolvency.
Philippine Deposit Insurance Corporation’s participation would have been necessary, as it had
the duty to conserve petitioner’s assets and to examine any possible liability that petitioner might
undertake under the Business Plan. Philippine Deposit Insurance Corporation also safeguards the

0917 – 894 53 56
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interests of the depositors in all legal proceedings. Most bank depositors are ordinary people
who have entrusted their money to banks in the hopes of growing their savings. When banks
become insolvent, depositors are secure in the knowledge that they can still recoup some part
of their savings through Philippine Deposit Insurance Corporation. Thus, Philippine Deposit
Insurance Corporation’s participation in all suits involving the insolvent bank is necessary and
imbued with the public interest. Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral
ng Pilipinas, 864 SCRA 32, G.R. No. 200678 June 4, 2018
The legislative intent in creating the Philippine Deposit Insurance Corporation (PDIC) as a quasi-
judicial agency is clearly manifest. Indeed, PDIC exercises judicial discretion and judgment in
determining whether a claimant is entitled to a deposit insurance claim, which determination
results from its investigation of facts and weighing of evidence presented before it.
A petition for certiorari, questioning the Philippine Deposit Insurance Corporation’s (PDIC’s)
denial of a deposit insurance claim should be filed before the Court of Appeals (CA), not the
Regional Trial Court (RTC). So vs. Philippine Deposit Insurance Corporation, 859 SCRA 478, G.R.
No. 230020 March 19, 2018

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2019 BAR REVIEW MERCANTILE LAW

PRE-WEEK Handout No. 7

Purpose of the Data Privacy Act

Processing of Personal Information

Thus, processing of personal information is any operation where personal information is

Rights of the Data Subject

The data subject is entitled to:

Legal Edge Bar Review 0942 – 949 91 76

Cases where sensitive personal information and privileged information is allowed

Scope of E-Commerce Act

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dealings, transactions, arrangements, agreements, contracts and exchanges and storage of

Contracts can be expressed in electronic form.

Rule on “lawful access”

An electronic data message or electronic document shall be considered as retained and

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It refers to information or the representation of information, data, figures, symbols or other

Legal Edge Bar Review 0942 – 949 91 76

It must be emphasized that registration of a trademark, by itself, is not a mode of acquiring

Legal Edge Bar Review 0942 – 949 91 76

‘A mark which is considered by the competent authority of the Philippines to be well-known

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Citi vs. City

Legal Edge Bar Review 0942 – 949 91 76

Iron Clad Rule

Legal Edge Bar Review 0942 – 949 91 76

Long-standing and accepted banking practices do not countenance the countermanding of

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Applicability of the Doctrine of Piercing the Corporate Veil

Piercing; Service of Summons; Exception

Legal Edge Bar Review 0942 – 949 91 76

An equitable owner is an individual who is a non-shareholder defendant, who exercises sufficient

Outsider Reverse Piercing; Insider Reverse Piercing

RTC has jurisdiction over intra-corporate cases involving sequestered companies.

Legal Edge Bar Review 0942 – 949 91 76

incidental to or related to transactions involving sequestered corporations and/or their assets.

Membership in a non-stock corporation is generally non-transferrable.

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Liability of officers for violation of the Trust Receipts Law

Validity of Entruster’s Security Interest as Against Creditors

Repossession does not amount to dacion en pago.

Legal Edge Bar Review 0942 – 949 91 76

Non-Compliance with Strict Compliance

Commercial vs. Standby Letter of Credit

Legal Edge Bar Review 0942 – 949 91 76

Health Maintenance Contract

Petitioner’s contention that it is a health maintenance organization and not an insurance

2-year period to contest a life insurance policy due to concealment/ misrepresentation

Legal Edge Bar Review 0942 – 949 91 76

ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the

Effect of lapse of 2 years/death of insured within the 2-year period

There is no subrogation in the following cases:

Legal Edge Bar Review 0942 – 949 91 76

Franchise issued to a public utility cannot be exclusive.

Liability for acts of strangers/passengers

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Doctrine of Last Clear Chance