2014 Reminders for the Bar Examinations

Commercial Law
Atty. Maria Zarah R. Villanueva-Castro
INSURANCE
Section III of the insurance policy states that the Insurer shall not be liable for any
malicious damage caused by the Insured, any member of his family or by a person
in the Insureds service. It turned out that the Insurer instructed her driver to bring
the insured vehicle to a nearby auto shop for tune up. However, her driver never
returned and despite diligent efforts of finding the vehicle, the same could not be
found. Is the Insurer still liable?
Yes. Section III refers to the liability of the Insurer for loss of or damage to the
vehicle in the enumerated cases which includes theft. The exception only pertains
to any malicious damage caused by the Insured, any member of his family or by a
person in the Insureds service. The words loss and damage mean different
things. The word loss refers to act or fact of losing, while the word damage
means deterioration or injury to property. The exception clearly refers to malicious
damage and does not contemplate loss of property. Theft perpetrated by the
driver is not an exception to the coverage of the policy. (Alpha Insurance
v. Castor, 2 September 2013)
Jun Ting filed a fire insurance claim against the Insurer but the latter denied the
claim on the ground that at the time of loss, the insured machineries and
equipment were transferred to a location different from that indicated in the policy
which constitutes concealment or misrepresentation of material fact. Is the Insurer
liable?
The Insurer cannot be held liable for the loss of the insured properties under the fire
insurance policy. The policy forbade the removal of the insured properties unless
sanctioned by the Insurer as provided under the Policy. Evidently, by the clear and
express condition in the renewal policy, the removal of the insured property to any
building or place required the consent of the Insurer. Any transfer effected by the
Insured, without the Insurers consent, would free the latter from any liability.
(Malayan Insurance Company Inc., v. PAP Co., Ltd. (Phil. Branch) 7 August
2013)
On July 3, 1993,
Ando Ling took out a life insurance policy from Garantisabog
Insurance (Insurer), designating Dioni Sia, his niece, as his beneficiary. On April 10,
1996, when the insurance policy had been in force for more than two years and
seven months, Ando Ling died. Dioni Sia filed a claim for the insurance proceeds on
July 9, 1996. The Insurer conducted an investigation into the claim, and came out
with the finding that Ando Ling did not personally apply for insurance coverage as
he was illiterate. Can the Insurer refuse the claim due to fraud?
No. Applying Article 48 of the Insurance Code, an insurer is given two (2) 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 rescindable 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.
Section 48 regulates both the actions of the insurers and prospective takers of life
insurance. It gives insurers enough time to inquire whether the policy was obtained
by fraud, concealment, or misrepresentation; on the other hand, it forewarns
scheming individuals that their attempts at insurance fraud would be timely
uncovered. The insurer is deemed to have the necessary facilities to discover such
fraudulent concealment or misrepresentation within a period of two (2) years. It is
not fair for the insurer to collect the premiums as long as the insured is still alive,
only to raise the issue of fraudulent concealment or misrepresentation when the
insured dies. (Manila Bankers Life Insurance Corporation v. Aban, 29 July
2013)
Becky Sia insured with Jokla Insurance a sedan car under a comprehensive motor
vehicle insurance policy for one year. During the effectivity of the insurance, the
sedan car was unlawfully taken. Jokla refused to pay and maintained that that it is
not liable for the loss, since the car cannot be classified as stolen because Becky
Sia actually entrusted the possession thereof to another person. It appears that
Becky Sia entrusted the sedan to Becky Belo who took possession thereof to add
accessories and improvements thereon. Is this case covered by the theft clause of
the insurance policy and therefore should be paid by Jokla Insurance?
Yes. It is basic that there may be theft even if the accused has possession of the
property. If he was entrusted only with the material or physical (natural) or de facto
possession of the thing, his misappropriation of the same constitutes theft.
In this instant case, Becky Belo did not have juridical possession over the vehicle.
Here, it is apparent that the taking of the vehicle by Becky Belo is without any or
authority from Becky Sia. Possession of the vehicle was entrusted to Becky Belo only
to the extent that he will introduce repairs and accessories thereon and not to
permanently deprive Becky Sia of the possession thereof. This constitutes qualified
theft and well-within the ambit of the theft clause of the policy. (Malayan
Insurance Co., Inc. v. Alberto and Reyes, 1 February 2012)
TRANSPORTATION
Spidibagal, Inc. maintains that it is not a common carrier, but only a customs broker
whose participation is limited to facilitating withdrawal of the shipment in the
custody of Jowa, Inc.
by overseeing and documenting the turnover and
counterchecking if the quantity of the shipments were in tally with the shipping
documents at hand, but without participating in the physical withdrawal and loading
of the shipments into the delivery trucks. Decide.
It is settled that under a given set of facts, a customs broker may be regarded as a
common carrier. It suffices that Spidibagal undertakes to deliver the goods for

pecuniary consideration. That Spidibagal is a common carrier is buttressed by the

fact that part of the services it offers to clients is cargo forwarding, which includes
the delivery of the shipment to the consignee. xxx As long as a person or
corporation holds itself to the public for the purpose of transporting goods as a
business, it is already considered a common carrier. (Westwind Corporation v.
UCPB General Insurance Co., Inc., 25 November 2014)
Does the one-year prescriptive period under the COGSA apply to a claim involving
an arrastre operator?
Under Paragraph (6), Section 3 of COGSA, the carrier and the ship owner may put
up the defense of prescription if the action for damages is not brought within one
year after the delivery of the goods or the date when the goods should have been
delivered. However, the COGSA does not mention that an arrastre operator may
invoke the prescriptive period of one year; hence, it does not cover the arrastre
operator. (Insurance Company of North America v. Asian Terminals, Inc., 15
February 2012)
Can the parties stipulate to extend the one-year prescriptive period to file action
under the COGSA?
Under Section 3(6) of the COGSA, the carrier is discharged from liability for loss or
damage to the cargo unless the suit is brought within one year after delivery of the
goods or the date when the goods should have been delivered. Jurisprudence,
however, recognized the validity of an agreement between the carrier and the
shipper/consignee extending the one-year period to file a claim. (Benjamin Cua v.
Wallen Philippines Shipping, Inc., 11 July 2012)

PRIVATE CORPORATION
What is the liability of the owner of the sole proprietorship for the illegal dismissal
of the latters employee?
A sole proprietorship does not possess a juridical personality separate and distinct
from that of the owner of the enterprise. Ergo, the owner has unlimited personal
liability for all the debts and obligations of the business, and it is against him that a
decision for illegal dismissal is to be enforced. (Alps Transportation and/or
Alfredo E. Perez v. Elpidio M. Rodriguez, G.R. No. 186732, 13 June 2013)
What are the legal consequences of change of corporate name?
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. The corporation, upon such
change in its name, is in no sense a new corporation, nor the successor of the
original corporation. It is the same corporation with a different name, and its
character is in no respect changed. (Zuellig Freight v. NLRC, G.R. No. 157900,
22 July 2013)

In the absence of authorization from the Board, can an officer purchase a property
in the absence of authorization from the Board?
No. Section 23 of the Corporation Code expressly provides that the corporate
powers of all the corporations shall be exercised by the board of directors.
Additionally, Section 36 of the same Code provides for the corporate powers and
capacity to purchase or deal with real and personal property and such power is
vested in the board of directors or trustees. While a corporation may appoint agents
to negotiate for the purchase of real property, the final say will have to be with the
board, whose approval will finalize the transaction.
Hence, without authority form the Board to purchase the said property, the sale is
null and void. (Aquiles Riosa v. Tabaco La Suerte Corporation; G.R. No.
203786, 23 October 2013)
On various dates, Calacal Traders purchased on credit notebooks and other paper
products amounting to P7,533,001.49 from Epal, Inc. Upon the representation of
Bekla and Tekla, Calacal Traders also obtained three loans from Epal, Inc. for a total
amount of P7, 788,796.76. As payment for the purchases on credit and the loan
transactions, Calacal Traders issued 82 postdated checks payable to cash or to
Epal, Inc. Bekla and Tekla were Calacal Traders authorized bank signatories who
signed and issued these checks which had the aggregate amount of
P15,130,636.87. Epal, Inc. presented the checks to the drawee bank but these were
dishonoured. Despite repeated demands Calacal Traders failed to settle its account
with Epal, Inc. Calacal Traders denies liability in the ground that Bekla and Tekla
have no authority to bind it due to lack of board authorization. Decide.
Calacal Traders bestowed upon Bekla and Tekla broad powers by allowing them to
transact with third persons without the necessary written authority from its nonperforming board of directors. Calacal Traders failed to take precautions to prevent
its own corporate officers from abusing their powers. Because of its own laxity in its
business dealings, Calacal Traders is now estopped from denying Bekla and Teklas
authority to obtain loan from Epal, Inc. (Advance Paper v. Arma Traders
Corporation, 11 December 2013)
A stock certificate is endorsed in blank by its owner. Discuss the legal effects.
When a stock certificate is endorsed in blank by the owner thereof, it constitutes
what is termed as street certificate, so that upon its face, the holder is entitled to
demand its transfer into his name from the issuing corporation. Such certificate is
deemed quasi-negotiable, an as such the transferee thereof is justified in believing
that it belongs to the holder and transferor. An endorsement in blank of the stock
certificates coupled with its delivery, entitles the holder thereof to demand the
transfer of said stock certificates in his name from the issuing corporation. (Simny
Guy v. Gilbert Guy, 5 September 2012)
What are the two tests on intra-corporate controversy? Explain.

The two tests are: (a) the relationship test and (b) the nature of the controversy
test.
An intra-corporate controversy is one which pertains to any of the following
relationships: (1) between the corporation, partnership or association and the
public; (2) between the corporation, partnership or association and the State insofar
as its franchise, permit or license to operate is concerned; (3) between the
corporation, partnership or association and its stockholders, partners, members or
officers; and (4) among the stockholders, partners or associates themselves. Thus,
under the relationship test, the existence of any of the above intra-corporate
relations makes the case intra-corporate.
Under the nature of the controversy test, "the controversy must not only be rooted
in the existence of an intra-corporate relationship, but must as well pertain to the
enforcement of the parties correlative rights and obligations under the Corporation
Code and the internal and intra-corporate regulatory rules of the corporation." In
other words, jurisdiction should be determined by considering both the relationship
of the parties as well as the nature of the question involved. (Medical Plaza
Makati Condominium Corporation vs. Robert H. Cullen, GR No. 181416, 11
November 2013)
Sometime in 1986 or 1987, B-Gas Co., a foreign company and M-Gas, Inc., a local
company, orally entered into a dealership agreement whereby B-Gas Co. granted MGas, Inc. the right to market, sell, distribute, install, and service its products to enduser customers within the Philippines. Under what condition/s may B-Gas Co. be
considered doing business in the Philippines?
Following the Foreign Investment Act (FIA) and its IRR, 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. On the other hand, if the
distributor is an independent entity which buys and distributes products, other than
those of the foreign corporation, for its own name and its own account, the latter
cannot be considered to be doing business in the Philippines. It should be kept in
mind that the determination of whether a foreign corporation is doing business in
the Philippines must be judged in light of the attendant circumstances. (Steelcase,
Inc. v. Design International Selections, Inc., 18 April 2012)
BANKING
What is the current legal rate of interest?
The old case of Eastern Shipping Lines vs CA is already modified by the
promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796
which lowered the legal rate of interest from 12% to 6%. (Dario Nacar v. Gallery
Frames and/or Felipe Bordey, Jr., G.R. No. 189871, 13 August 2013)
Is the Monetary Board (MB) empowered to forbid a bank from doing business and
place it under receivership without prior notice and hearing? Is its power limited
only to supervision and management take-over of banks and not receivership?

The MB may forbid a bank from doing business and place it under receivership
without prior notice and hearing as it is not necessary inasmuch as under Sec. 30 of
R.A. No. 7653, the MB was entrusted with the appreciation and determination of
whether any or all of the statutory grounds for the closure and receivership of the
erring bank are present.
This "close now, hear later" doctrine has already been justified as a measure for the
protection of the public interest. xxx placing a bank under receivership would
effectively put a stop to the further draining of its assets. (Vivas v. Monetary
Board of the Bangko Sentral ng Pilipinas, 7 August 2013)

ANTI-MONEY LAUNDERING
What are the requisites for the issuance of a freeze order?
There are only two requisites for the issuance of a freeze order: (1) the application
ex parte by the AMLC and (2) the determination of probable cause by the CA. The
probable cause required for the issuance of a freeze order differs from the probable
cause required for the institution of a criminal action, and the latter was not an
issue before the CA nor is it an issue before us in this case.
In resolving the issue of whether probable cause exists, the CAs statutorily-guided
determinations focus is not on the probable commission of an unlawful activity (or
money laundering) xxx, but on whether the bank accounts, assets, or other
monetary instruments sought to be frozen are in any way related to any of the
illegal activities enumerated under RA No. 9160, as amended.
Thus, a freeze order is not dependent on a separate criminal charge, much less
does it depend on a conviction. (Ligot vs. Republic, 6 March 2013)
INTELLECTUAL PROPERTY
Is registration of a trademark a mode of acquiring ownership thereof?
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 registrants ownership of the trademark, and of the exclusive
right to the use thereof. (Birkenstock Orthopaedia vs. Philippine Shoe Expo,
20 November 2013)
What are the two types of confusion arising from the use of similar or colorable
imitation marks?

Under Section 22, IPC covers two types of confusion: a) confusion of goods
(product confusion), in which event the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the other
and b) confusion of business (source or origin confusion), though the goods of
the parties are different, the defendants product is such as might reasonably be
assumed to originate with the plaintiff, and the public would then be deceived either
into that belief or into the belief that there is some connection between the plaintiff
and defendant, which, in fact, does not exist. (Mcdonalds Corporation vs. L.C.
Big Mak Burger, Inc., 18 August 2004)
What is the protection to foreign marks under the Paris Convention?
Under the Paris Convention, 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. v. Renaud Cointreau & CIE
and Le Condron Bleu Intl., B.V., 5 June 2013)
Under what circumstances are directors and/or officers liable for infringement of
trademark?
Corporate officers and/or directors, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for
the crime.
Thus, where the petitioners, being in direct control and supervision in the
management and conduct of the affairs of the corporation, must have known or are
aware that the corporation is engaged in the act of refilling LPG cylinders bearing
the marks of the respondents without authority or consent from the latter which,
under the circumstances, could probably constitute the crimes of trademark
infringement and unfair competition. The existence of the corporate entity does not
shield from prosecution the corporate agent who knowingly and intentionally caused
the corporation to commit a crime. Thus, petitioners cannot hide behind the cloak of
the separate corporate personality of the corporation to escape criminal liability. A
corporate officer cannot protect himself behind a corporation where he is the actual,
present and efficient actor. (Republic Gas Corporation v. Petron Corporation,
17 June 2013)
TRUST RECEIPTS
Is the transaction one covered by the Trust Receipts Law where the lender knew all
along that the construction materials subject matter of the trust receipt were not
intended for resale for for the personal use of the obligor?
The dealing will not be considered a trust receipt transaction but one of simple loan.

When both parties enter 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 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.
In such a situation, the Trust Receipts Law and corresponding liability for estafa will
not apply. (Hur Tin Yang v. People of the Philippines, 14 August 2013)
Good Luck