1

2015 GOLDEN BEACON

MERCANTILE LAW
By:
Dean MANUEL R. BUSTAMANTE
1.

DOING BUSINESS IN THE PHILIPPINES

B. VAN ZUIDEN BROS. LTD. vs. GTVL MANUFACTURING INDUSTRIES, INC.

G.R. No. 147905, May 28, 2007, 523 SCRA 233
Q: What
is doing

is
the
test
business
in

for
the

determining
Philippines?

if

an

unlicensed

foreign

corporation

A: To be doing
or
transacting
business in the Philippines
for
purposes
of
Section
133
of
the
Corporation
Code,
the
foreign
corporation
must
actually
transact
business
in
the
Philippines,
that
is,
perform
specific
business
transactions
within
the
Philippine
territory
on
a
continuing
basis
in
its
own
name
and
for
its
own
account.
Actual
transaction
of
business
within
the
Philippines
is an essential
requisite
for
the
Philippines
to
acquire
jurisdiction
over
a
foreign
corporation
and thus require
the
foreign
corporation
to
secure
Philippine
business
license.
If a foreign
corporation does not transact such kind
the
Philippines,
even
if
it
exports
its
products
to
the
Philippines
has
no
jurisdiction
to
require
such
foreign
secure
a
Philippine
business
license.
Considering
it
does
not
collection
suit

of business
Philippines,
corporation

in
the
to

that
petitioner
is
not
doing
business
in
the
Philippines ,
need
a
license
in
order
to
initiate
and
maintain
a
against
the
respondent.

Acts constituting
doing business
in
the Philippines
RA
7042 otherwise known as Foreign Investment Act
1. soliciting
2. entering
3. opening

under Section
of 1991:

3 ( D)

of

orders
into

service

offices

4. participating
domestic entity

by

in

the

contracts
whatever

name

management,

supervision

or

control

5. appointing
representatives
or
distributors,
operating
control of the foreign entity,
who
is
domiciled
in
the
or who stays in the country for a period or periods
least 180
days in any calendar year.

of

any

under
the
Philippines
totaling at

2. BANKING LAWS
CITIBANK N.A. vs. SPOUSES LUIS & CARMELITA CABAMONGAN
G.R. No. 146918,
Q:
the

What
degree
protection
of

is
the

expected
interests

May 2, 2006,

488 SCRA 517

that
must
be
exercised
of
its
depositors?

by

banks

for

A:
Since
the
banking
business
is
impressed
with
public
interest ,
of
paramount
importance
thereto is the trust and confidence of the public in
general. Consequently, the
highest
degree
of
diligence
is
expected ,
and
the
high
standards
of
integrity
and
performance
are
even
required
of
it .
By
the
nature
of
its
functions ,
a
bank
is
under
obligation
to
treat
the
accounts
of
its
depositors
with
meticulous
care ,
always
having
in
mind
the
fiduciary
nature
of
their
relationship.

Banks
handle
daily
transactions
involving
millions
of
pesos .
By
the
very
nature
of
their
works
the
degree
of
responsibility,
care
and
trustworthiness
expected
of
their
employees
and
officials
is
far
greater
than
those
of
ordinary
clerks
and
employees .
Banks
are
expected
to
exercise
the
highest
degree
of
diligence
in
the
selection
and
supervision
of
their
employees.
Citibank, thru
Account
Officer
San
Pedro ,
openly
courted
disaster
when
despite
noticing
discrepancies
in
the
signature
and
photograph
of
the
person
claiming
to
be
Carmelita and
the
failure
to
surrender
the
original
certificate
of
time
deposit ,
the
pre-termination
of
the
account
was
allowed .
Even
the
waiver
document
was
not
notarized,
a
procedure meant
to
protect
the
bank .
For
not
observing
the
degree
of
diligence
required of
banking
institutions ,
whose
business
is
impressed
with
public
interest ,
Citibank
is
liable
for
damages.
Q:

What

is

the

nature

of

time

deposit?

A:
It
is
a
simple
loan
or
mutuum.
The
time
deposit
subject
matter
of
herein
petition is
a
simple
loan .
The
provisions
on
the
New
Civil
Code
on
simple
loan
govern the
contract
between
a
bank
and
its
depositor.
Specifically, Article 1980
thereof
categorically
provides
that savings deposits
of
money
in
banks
and
similar
institutions
shall
be
governed
by
the
provisions concerning simple
loan.

MACLARING LUCMAN

vs. ALIMANTAR MALAWI

G.R. No. 158794, December 19, 2006, 511 SCRA 268

NATURE

OF

BANK

DEPOSITS

FACTS: Malawi, et. al.

were
Barangay
Chairmen
of
various barangays
of
Lanao del Sur. From the 2nd quarter of 1997, the Land Bank was selected
as the government depository bank of the Internal Revenue Allotments (IRAs)
of
the
said
barangays .
After
the
failed
1997
elections ,
Malawi et. al.
attempted
to
open
their
respective
IRA
bank accounts ,
but
they
were
refused
by
Lucman,
Land Bank
manager,
because
the
former
needed
to
show
their
individual
certifications
showing
their
right
to
continue
serving
as Barangay Chairmen
and the requisite Municipal Accountants Advice giving
them the authority to withdraw
the IRA deposits , which they were unable
to show.
Later,
five
(5)
other
persons
presented
themselves
before
Lucman
as
the
newly
proclaimed
Barangay
chairmen
each
of
them
presenting
certifications.
Without
verifying
the
authenticity
of
the
certifications ,
Lucman
proceeded
to
release
the
IRA
funds
to
them .
Malawi
et. al.
filed
a
petition
for
mandamus
to
compel
Lucman
to
allow
them
to
open
and
maintain
deposit
accounts
covering
the
IRAs
of
their
barangays and
withdraw therefrom.
ISSUE:

What

is

the

nature

of

bank

deposits?

HELD: Bank
deposits
are
in
the
nature
of
irregular
deposits .
They are
really
loans
because
they
earn
interest .
All
kinds
of
bank
deposits,
whether fixed, savings or current are to be treated as loans
are to be
covered by the law on loans. (Guingona, Jr. vs. City Fiscal of Manila, 96 SCRA
96 (1980)].
There
exists
between
the barangay as depositors and Land Bank , as
depository, a
creditor-debtor
relationship.
Fixed,
savings
and
current
deposits
of
money
in
banks
and
similar
institutions
are
governed
by
the
provisions
concerning
simple
loan.
The
barangays
are
the
lenders
while
the
bank
is
the
borrower .
Failure
of
the
Land
Bank
to
honor
the
time
deposit
is
failure
to
pay
its
obligations
as
a
debtor
and
not
a
breach
of
trust
arising
from
a
depositors
failure
to
return
the
subject
matter
of
the
deposit .
Thus,
the
relationship
being
contractual,
mandamus
is
not
an
available
remedy
since
mandamus
does
not
lie
to
enforce
the
performance
of
contractual
obligations.

3. SECURITIES REGULATION CODE

ABACUS

SECURITIES
G.R. No. 160016,

Q: What

is

the

mandatory

CORPORATION

vs.

February

27,

2006,

483

close

out

rule

in

RUBEN
SCRA

margin

trading?

A: The
law
places
the
burden
of
compliance
with
margin
primarily
upon
the
brokers
and
dealers . Sections
23
&
25
25-1,
otherwise known
as
the
mandatory
close-out
rule,
upon
petitioner
the
obligation,
not
just
the
right,
to
otherwise
liquidate
a
customers
order ,
if
payment
is
within
three
days
from
the
date
of
purchase .
For
subsequent
to
an
unpaid
order,
the
broker
should
customers
to
deposit
funds
into
the
account
sufficient
each
purchase
transaction
prior
to
its
execution .
These
imposed
upon
the
broker
to
ensure
faithful
compliance
margin
requirements
of
the
law ,
which
forbids
a
extending
undue credit to a customer.
Q:

What

is

the

macroeconomic

purpose

A: The margin requirements set out

achieve a macro-economic purpose the
excessive
speculation
in
securities.
is
to
protect
small
investors.

of

the

AMPIL

315

margin

requirements
and
Rule
clearly
vest
cancel
or
not
received
transactions
require
its
to
cover
duties
are
with
the
broker
from

trading

rule?

in the RSA are primarily intended to

protection of the overall economy from
Their
recognized
secondary
purpose

BAVIERA vs. PAGLINAWAN

G.R. No. 168380,

February 8, 2007, 515 SCRA 170

A criminal charge for violation of the Securities Regulation Code

is a
specialized
dispute
which
must
be
first
be
referred
to
an
administrative
agency of special competence, i.e., the SEC. The Securities Regulation Code
is
a
special
law.
Its
enforcement
is
particularly
vested
in
the
SEC.
Hence, all complaints for any violation
of
the Code
and
its
implementing
rules
and
regulations
should
be
filed
with
the
SEC.
Where
the
complaint
is
criminal
in
nature,
the
SEC
shall
indorse
the
complaint
to
the
DOJ
for
preliminary
investigation
and
prosecution.

CEMCO HOLDING,

INC.

G.R. No. 171815,

vs.

August

TENDER

NATIONAL
7,

2007,

OFFER

529

LIFE

INSURANCE

SCRA 2007

RULE

A
tender
offer
is
an
offer
by
the
acquiring
person
to
stockholders
of
a public company for them to tender their shares therein
on
the terms
specified in the offer .
The
Tender Offer Rule applies also
in
an
indirect
acquisition
arising
from
the
purchase
of
shares
of
a
holding company of the listed
firm.
Tender
offer is in place
to
protect
minority
stockholders
against
any
scheme that
dilutes
the
share
value
of
their investments. 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.
Under
existing
SEC Rules,
the 15%
and
30%
threshold
acquisition of
shares
under the
foregoing provision
was
increased
to
thirty-five
percent
(35%).
It
is
further
provided
therein
that
mandatory
tender
of is
still
applicable
even
if
the a cquisition is less
than
35%
when
the
purchase
would
result
in
ownership
of
over
51% of the
total
outstanding
equity
securities
of
the
public
company .
Whatever
may
be
the
method
by
which
control of
a
public
company
is
obtained ,
either
through
the
direct
purchase
of
its
stock
or
an
indirect
means,
mandatory
tender
offer
applies.

QUEENSLAND TOKYO COMMODITIES vs. MATSUDA

G.R. No. 159008, January 23, 2007, 512 SCRA 276
COMMODITY

FUTURES

TRADING

Before
a
future
commodity
merchant
can
be
held
liable
under
Section 20
of
the
Revised
Rules
and
Regulations
on
Commodity
Futures
Trading, there must
be
proof
that it
knowingly permitted
an
unlicensed
person
to
commit
the
prohibited
acts .
The
law,
therefore,
prescribed
an
additional
element
to
the
offense .
In
this
case,
there
is
absolutely
no
evidence
to
show
that
Queensland
knowingly
allowed
the
unlicensed
persons
to
participate
in
the
trading.
Only
Charlie
Collado
and
Felix
Sampaga
had
in
fact,
assented
to
the
unlawful
acts
of
respondent

corporation,
and
they
should
jointly
payment
of
all
damages
sustained
by
the
complainant.

4. SECRECY

ON

and
and

severally
be
which
are

liable
for
the
sufficiently
proven

FOREIGN CURRENCY DEPOSIT

CHINA BANKING CORPORATION vs. COURT OF APPEALS

G.R. No. 140687, December 18, 2006, 511 SCRA 110
FACTS: Jose
Gotianuy
accused
his
daughter
Mary
Margaret
Dee
of
stealing
his
US
dollar
deposits
with
Citibank
N.A.
amounting
to
not
less
than Php35,000,000.00
and
US$864,000.00
and
deposited
the
same
to
China
Banking
Corporation (CBC).
Upon
order
of
the
court
to
divulge
in
whose
name
or
names
is
in
the
foreign
currency
fund , CBC
invoked
RA
6426
as
amended
by
PD
1246
which
provides
the
absolute
confidentially
of
foreign
currency
deposit
which
is
beyond
the
compulsive
process
of
the
court.
ISSUE: Whether
or
not
Jose
Gotianuy
being
questioned
foreign
currency
deposit
may
compel
someone
elses
foreign
currency
deposit.

the
CBC

owner
of
the
disclosure

the
of

HELD: YES. Under

RA
6426
as
amended
considered
absolute
confidential
in
nature
of
foreign
currency
deposit
and
may
not
be
inquired
into .
There
is
only
exception
to
the
secrecy
of
foreign
currency
deposits,
that
is,
disclosure
is
allowed
upon
written
permission
of
the
depositor .
As
the
owner
of
the
funds
unlawfully
taken
and
which
are
undisputably
now
deposited
with
China
Bank,
Jose
Gotianuy
has
the
right
into
the
said
deposits.

5. BANK SECRECY LAW

*** Deposits
in bank including
by any
person,
except:
a. if

depositor

agrees

b. impeachment

cases;

c. by
public
d.

court order
officials;

deposit

e. anti-graft

is

in

subject

government
in

may

not

be

inquired

into

writing;

cases
of

banks ,

of

bribery

and

dereliction

of

duty

against

litigation;

cases;

f. general and
of bank fraud

special examination of bank

or serious irregularity;

g. re-examination
made
by
to conduct its regular trust.

EJERCITO

an

vs.

order

independent

of

auditor

the

Monetary

hired

by

Board
bank

SANDIGANBAYAN

G.R. No. 157294-95, November 30, 2006, 509 SCRA 190

RA 1405
is
broad
enough
to
cover
Trust
Account
No. 858
because
the term deposit as used in RA 1405 is to be understood broadly and
not
limited
only
to
accounts
which
give
rise
to
a
creditor-debtor
relationship
between
the depositor and
the bank .
If
the
money deposited
under
an
account
may
be
used
by
banks
for
authorized
loans
to
third
persons,
then
such
account,
regardless
of
whether
it
creates
a
creditor-debtor
relationship
between
the
depositor
and
the
bank ,
falls
under
the
category
of
accounts
which
the
law
precisely
seeks
to
protect
for
the
purpose
of
boosting
the
economic
development
of
the
country.
However, there are
two
exceptions on
the
protection under
RA 1405 :
(1) the
examination
of
bank
accounts
is
upon
order
of
a
competent
court
in
cases
of
bribery
or
dereliction of
duty of public officials, and
(2) the
money
deposited or
nvested
is
the
subject
matter
of
litigation.
The
first
petitioner

exception
applies
is
analogous
to

since
the
plunder
case
bribery
or
dereliction

pending
against
of
duty
and

the
the

5
second
because
the
part
of
the
subject

money
matter

deposited
of
the

in petitioners
same.

ANTI-MONEY LAUNDERING

bank

accounts

form

ACT

REPUBLIC - AMLC vs. HON. JUDGE ANTONIO M. EUGENIO

545 SCRA 384, G.R. No. 174629, February 14, 2008
FACTS: A
series
of
investigations
concerning
the
awards
of
the
NAIA 3
contracts
to
PIATCO
were
undertaken
by
the
Ombudsman
and
Anti-Money
Laundering Council (AMLC).
Alvarez was already charged by the Ombudsman .
As per intelligence database financial information, Alvarez maintained eight (8)
bank
accounts
with
six
(6)
different
banks.
AMLC
filed
an
ex-parte
application
to examine the deposits of Alvarez as mandated by Section 11
of RA 9160 and such application was granted by the RTC.
ISSUE: Whether Section 11
respect to bank orders.

of

RA

9160

authorize

ex

parte

application

with

HELD: NO.
Section 11
does
not
specifically
authorize,
as
a
general
rule,
the issuance
ex
parte
of
the
bank
inquiry
order .
Though,
Section 11
allows
the
AMLC
to
inquire
into
bank
accounts
without
having
to
obtain
a
judicial
order
in
cases
where
there
is
a
probable
cause
that
the
deposits
or
investments
are
related
to
kidnapping
with
ransom, certain violations of the Comprehensive
Dangerous
Drugs
Act
of
2002,
hijacking
and
other
violations
under
RA
6235 ,
destructive
arson
and
murder.
Such
special
circumstances
are
not
present
in
this
case.
of
are
at
the

A
bank
inquiry
order
under
Sec. 11 does not necessitate any form
physical
seizure
of
property
of
the
account
holder .
Said
records
in
the
possession
of
the
bank
and
therefore
cannot
be
destroyed
the
instance
of
the
account
holder
alone
as
that
would
require
extraordinary
cooperation and devotion
of
the
bank.

FREEZE ORDER
LT. GEN. JACINTO C. LIGOT (Ret.) vs.

REPUBLIC (AMLC)

G.R. No. 176944, March 6, 2013, 692 SCRA 509

FACTS: On June 27, 2005,
AMLC filed an application for the issuance of
a
freeze
order
with
the
CA
against
certain
monetary
instruments
and
properties of Lt. Gen. Ligot
and his
family based
on the recommendation
of
the
Office
of
the
Ombudsman.
The
accounts,
freeze

issued
accounts

Subsequently,
order
and
On

Under
period

CA
web

a
freeze
order
and vehicles.

ALMC
filed
a
the
CA granted

against

On January 31, 2006, the Ligots

filed
order considering it
has
already
expired
six
on
July 5, 2005.
freeze

order

Ligots

motion
for
extension
the
said
motion.

November
2005,
the
Rule
in
Civil
this
rule,
a
freeze
order
could
be
of
six
months.

ISSUE: Whether the

six
months period.

the

should

be

Forfeiture
extended

of

after

bank

effectivity

Cases
for

a
motion to
months after
lifted

various

took
effect .
a
maximum

lift the
it
was
the

of

freeze
issued

expiration

of

HELD: YES.
A
freeze
order
cannot
be
issued
for
an
indefinite
period.
As
a
rule, the
effectivity of
a
freeze order
may be
extended by the
CA not
exceeding
six months . Before or upon
the lapse of this period ,
ideally,
the
AMLC
should
have
already filed
a case
for
civil
forfeiture
against
property owner
with the proper court.

AMLC
has
not
offered
any
explanation
why
it
took
six
years
from
the
time
it
secured
a
freeze
order
before
a
civil
forfeiture
case
was
filed
in
court
despite
the
clear
tenor
of
the
Rules
in
Civil
Forfeiture
Cases
allowing
the
extension
of
a
freeze
order
for
only
a
period of
six
months.

6. BULK SALES LAW

*** Types

of

transactions

which

are

treated

as

bulk

sales.

a. Sale,
transfer,
mortgage
or
assignments
of
goods, wares,
merchandise,
provisions,
or
materials
in
the
ordinary course
of
trade;
b. Sale,
transfer,
substantially
all
of
transferor
or
assignor;

mortgage
or
the
business

a
stock
of
otherwise
than

assignments
of
of
the
vendor ,

all
or
mortgagor,

c.
Sale,
transfer,
mortgage,
or
assignment
of
all,
substantially
all,
of
all
the
fixtures
and
equipment
used
in
business
of
the
vendor,
mortgagor,
transferor
or
assignor.
*** Only
creditors
at
the
time
of
are
within
the
protection
of
the
the
sale
are
not covered.

7.

LETTER

Q - Distinguish

OF

the
laws

sale
in
violation
and
creditors

or
the

of
the
subsequent

law
to

CREDIT

Commercial

Letter

of

Credit

from

Standby

Letter

of

Credit

A - There
are
three
significant differences between commercial and standby
credits. First,
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
partys
non-performance
of
the
agreement. 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. vs. Luzon Hydro Corporation, G.R. No. 146717, November 22,
2004, 443 SCRA 307).
Q: Whether
the
beneficiary
has
the
securities under the letter of credit

right

to

call

and

draw

on

the

A: YES. The independence principle liberates the issuing bank from the duty
of
ascertaining
compliance
by
the
parties
in
the
main
contract .
The
obligation
under
the
letter
of
credit
is
independent
of
the
related
and
originating
contract.
To
say
that
the
independence
principle
may
only
be
invoked by the issuing banks would render nugatory the purpose of which
the
letter
of
credit
are
used
in
commercial
transactions
because
the
independence doctrine works to the benefit of both the issuing
bank
and
the
beneficiary.
Q - Is

there

any

exception

to

the

independence

principle?

A - An
exception
to
the
independence
principle
would
be
fraud
of
the
fraud exception
rule.
The
untruthfulness
of
a
certificate
accompanying
a
demand
for
payment
under
a
standby
credit
may
qualify
as
a
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
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. (Transfield Philippines, Inc. vs. Luzon Hydro
Corporation, supra).

7
LETTERS

OF

CREDIT

vs.

TRUST

RECEIPT

While
the
trust
receipt
may
been
executed
as
a
security
on
the
letter
of
credit,
still
the
two
documents
involve
different
undertakings
and
obligations.
A
letter
of
credit
is
an
agreement
by
a
bank
or
other
person
made
at
the
request
of
a
customer
that
the
issuer
will
honor
drafts
or
other
demands
for
payment
upon
compliance
with
the
conditions
specified
in
the
credit.
By contrast, a trust receipt transaction
is
one
where
the
entruster ,
who
holds
an
absolute
title
or
security
interests
over
certain
goods ,
documents
or
instruments,
released
the
same
to
the
entrustee,
who
executes
a
trust
receipt
binding
himself
to
hold
the
goods, documents
or
instruments
in
trust
for
the
entruster
and
to
sell
or
otherwise
dispose
of
the
goods , documents and instruments
with
the
obligation
to
turn
over
the
entruster
the
proceeds
thereof
to
the
extent
of
the
amount
owing
to
the
entruster, or as
appears
in
the
trust
receipt
or
return
the
goods,
documents
or
instruments
themselves
if
they
are
unsold, or
not
otherwise
disposed
of ,
in
accordance
with
the
terms
and
conditions
specified
in
the
trust
receipt. (Bank of Commerce vs. Teresita
Serrano,

G.R.

No. 151895,

8. SUSPENSION

February

OF

16,

2005,

451

SCRA

PAYMENTS

484).

AND

REHABILITATION

Q: What
is
the
objective
of
the
suspension
order
against
all
actions
against
distressed
corporation
when
a
management
committee
or
rehabilitation receiver is appointed?
A: The
avowed
objective
of
suspending
all actions
against
a
distressed
corporation
when
a
management
committee
or
rehabilitation
receiver
is
appointed,
as
enunciated
by
the
Court
in
Rubberworld Phil., Inc. vs. NLRC
and in RCBC vs. IAC
is
to
enable
such
management
committee
or
rehabilitation
receiver
to
effectively
exercise
its
power
free
from
any
judicial
or
extrajudicial
interference
that
might
unduly
hinder
or
prevent
the
rescue
of
the
distressed
company.
However,
this
purpose
can
no
longer
be
effectively
met
in
the
present
case
as
the
proceedings
herein
have
already
been
pending
for
almost
ten
years
and
have
already
reached
this
Court.
The
management
committee
has
been
unduly
burdened
enough,
its
time
and
resources
wasted
by
the
proceedings
that
took
place
before
the
RTC
and
the
appellate
court .
Hence,
to
decree
the
annulment
of
the
previous
proceedings
in
the
lower
courts
will
only
result
in
further
delay.
The
greater
interest
of
justice
demands
that
we
now
dispose
of
the
issues
raised
in
the
present
petition. (Tysons Super Concrete, Inc. vs. Court of Appeals, G.R. No. 140081, June 23, 2005,
461

SCRA

69).

SY CHIM and FELICIDAD CHAN SY vs. SY SIY HO & SONS, INC.

G.R. No. 164958, January

27,

2006,

480

SCRA

465

FACTS:
An
intra-corporate
dispute
ensued
between
Sy
Chim
and
his
wife
Felicidad Chan Sy, on the one hand, and their son, Sy Tiong Shiou, on the
other,
when
a
complaint
for
accounting
and
damages
against
the
spouses
was
filed
alleging
that
Felicidad ,
as
custodian
of
all
cash
collections
has
been
depositing
amounts
less
than
those
appearing
in
the
financial
statements
which
are
in
the
custody
of
the
spouses.
The spouses averred in their answer
and irregularities
in
the management
of
full responsibility of Sy Tiong ,
since he
of the corporation
under
the
by-laws.

that
the
has

any unaccounted cash account

corporation ,
if any, were the
direct and actual management

The RTC issued an Order granting the motion for the creation of a
management committee pendente lite.
It
was stated
therein that while
the
main case
is yet
to be heard , the
fact
remains
that
corporate
assets ,
funds,
properties
and
records
were
in
imminent
danger
of
further
dissipation or
total loss
and
that
the
appointment
of
a
receiver
was
justified
there
having
been
sufficient
allegations
of
misappropriation
of
corporate
assets.
ISSUE:
receiver

Whether
proper?

the

creation

of

management

committee/appointment

of

8
HELD: NO. The
creation
and
appointment
of
a
management
committee
and
a receiver is an extraordinary
and
drastic
remedy
to
be
exercised
with
care
and
caution;
and
only
when
the
requirements
under
the
Interim
Rules are shown. It is a drastic course for the benefit of the minority
stockholders,
the
parties-litigants
or
the
general
public
are
allowed
only
under
pressing
circumstances
and,
when
there
is
inadequacy ,
the
ineffectual
or
exhaustion
of
legal
or
other
remedies.
The
power
to
intervene before the legal remedy is exhausted
and
misused
when
it
is
exercised
in
aid
of
such
purpose.
The power
of the court to continue
a
business
of
a
corporation ,
partnership
or
association
must
be
exercised
with
the
greatest
care
and
caution .
There
should
be
a
full
consideration
of
all
the
attendant
facts ,
including
the
interest
of
all
the
parties
concerned.

SOBREJUANITE

vs.

ASB

DEVELOPMENT

CORPORATION

G.R. No. 165675, September 30, 2005, 471 SCRA 763

Q: What
is
of Claim?

the

purpose

of

Suspension

of

the

Proceedings

and

Definition

A:
The
purpose
for
the
suspension
of
the
proceedings
is
to
prevent
a
creditor
from obtaining
an
advantage
or
preference
over
another
and
to
protect and preserve the rights of party litigants
as well as the interest
of the investing public
or creditors. Such suspension
is
intended
to
give
enough
breathing
space
for
the
management
committee
or
rehabilitation
receiver
to
make
the
business
viable
again ,
without
having
to
divert
attention
and
resources
to
litigations in various
fora.
The
interim
rules
define
a
claim
as
referring
to
all
claims
or
demands,
of
whatever
against
a
debtor
or
its
property,
whether
for
money or
otherwise.
The
definition
is
all
encompassing
as
it
refers
to all actions whether for money
or
otherwise.
There
are
no
distinctions
or
exemptions.

PUNONGBAYAN

vs.

PUNONGBAYAN

G.R. No. 157671, June 20, 2006, 491 SCRA 477

The
RTC
has
the
discretion
to
grant
or
deny
an
application
for the creation of a management committee. Having
the
power
to
create
a
management
committee,
it
follows
that
the
RTC
can
order
the
reorganization of
the
existing
management
committee.
Such appointment of new members does not mean the creation of a
new
management
committee.
The
existing
management
committee
was
not
abolished. The RTC merely reorganized it
by appointing
new
members .
The
management
committee
created
by
the
SEC
continues
to
exist .
However,
when
it
failed
to
function
due
to
the
division
among
the
members,
the RTC replaced them. Clearly, there
was
no
revocation
of
the
final
Order
of
the
SEC.

9.

INTELLECTUAL

PROPERTY

MIGHTY CORPORATION & LA CAMPANA vs. E. & J. GALLO WINERY

G. R.

No.

154342,

July

14,

2004,

434

SCRA

473

FACTS: Petitioner herein is a domestic corporation producing and manufacturing

GALLO cigarettes
for
local
consumption
since
1974 ,
while
the respondent is
a foreign corporation having no license to do business in the country , but
whose
GALLO wines
are
being
distributed
in
the
country
through
an
exclusive distributor.
The
latter
filed
a
complaint
for
unfair
competition
and
infringement against
that
of
the
former.
The
respondent
claimed
their
right
under
the
trademark
law
(RA 166) and
that
of
the
Paris
Convention.
The
petitioner,
however,
posed
as
a
defense
t hat
the
products
are
not
the
same
so
as
to
cause
confusion
to
the
consumers,
and
that
he
had
a
prior
right
over
the
trademark .
The
petitioner
further
questions
the
locus
standi
of
the
respondent
to
bring
the
action.
ISSUE:
Whether
competition.

the

petitioner

is

liable

for

infringement

and

unfair

9
HELD:
NO. The subject goods herein are in fact, different from each other.
There
are (1) substantial
differences
on
the
trademark
itself
applying
the
dominancy and holistic test , (2) they
are
of
different
channels
of
trade ,
(3)
they
have
different
qualities
and
purpose , (4) there
is
a
marked
difference on the price of goods.
Distinguish

Trademark

Infringement

from

Unfair

Competition.

A - (1) Infringement of trademark is the authorized use of a

unfair competition is the passing off of ones goods
as
(2) In infringement of trademark, fraudulent intent
unfair competition, fraudulent intent is essential.

is

trademark ,
those of

unnecessary,

whereas
another.

whereas

in

(3) In infringement of trademark, the prior registration of the trademark is

a prerequisite to the action, whereas in unfair competition, registration is not
necessary. (Mighty Corporation vs. E.J. Gallo Winery, supra)
FACTORS
(a)

to

consider

The

in

resemblance

(b) The

similarity

(c) The

likely

(d) The
equitable

of

effect

determining
between
the
on

the

the

goods
the

likelihood

of

confusion:

trademarks;
to

which

purchaser;

the

trademarks

are

and

registrants
express
or
implied
consent
and
other
considerations. (Mighty Corporation vs. E. J. Gallo Winery, supra).

MCDONALDS

CORPORATION

vs.

attached.

L. C.

BIG

MAK

fair

and

BURGER, INC.

G. R. No. 143993, August 18, 2004, 437 SCRA 10

FACTS: The petitioner herein
is
a
foreign
corporation
organized
under
the
laws
of
Delaware, USA,
while
the
respondent
is
a
domestic
corporation .
Both
of
them
are
engaged
in
the
selling
of
fast
food
products ,
including
the sale of hamburgers to which
the
petitioner claims
protection
for
the
use
of
the
BIG
MAC
trademark
over
the
same
items ,
in
contrast
to
the
BIG
MAK
trademark
of
the latter.
The
petitioner,
as
a
result,
filed
a
complaint
for
infringement and
unfair competition
against
that
of
the
respondent ,
to
which
the
latter
opposed on the ground
that
the
former
does
not
have
exclusive
right
to
use
the
said
trademark
for
it
was
previously
registered
by
two
corporations prior to the 1985
registration
of
the
petitioner.
ISSUE: Whether
competition.

the

respondent

is

liable

for

infringement

and

unfair

HELD: YES. The evidence presented to the Court reveals

that
there is no
distinction
as
to
the
use
of
BIG
MAK
as
a
trademark
and
as
a
corporate
name
of
the
respondent.
The
wrappers
submitted
as
evidence
only
used
the
mark
BIG
MAK ,
without
any
showing
that
it
was
in
fact
part
of
the
corporate
name
of
the
respondent .
Further,
the
respondent
failed
to
substantiate
the
reason
behind
the
use
of
the
mark
as
its
corporate
name.
Further
still,
there
was
no
public
notice
made
by
the
respondent
so
as
to
differentiate
its
products
as
against
that
of
the petitioner .
The
said
circumstances
prove
the
intent
of
the
respondent
to
defraud
the petitioner and that of the public.
- - - On the determination
against the holistic test.

of

infringement,

the

dominance

test

was

used

as

- - - Applying
the
dominancy
test,
the
Court
finds
that
respondent
use
of
the BIG MAK
mark
results
in
likelihood
of
confusion.
First, BIG MAK
sounds exactly the same
as
BIG MAC.
Second,
the first word in BIG
MAK
is
exactly
the
same
as
the
first
word
in
BIG
MAC,
Third,
the
first
two
letters
in
MAK are the same as the first
two
letters
in
MAC. Fourth,
the
last
letter
in MAK while
a K sounds the
same
as C when the word MAK is
pronounced,
Fifth, in Filipino, the letter
K replaces C
in
spelling, thus
Caloocan
is
spelled Kalookan.

Q - When

does

trademark

infringement

constitute

competition?

10

A - Trademark infringement constitutes unfair competition when there is not merely

likelihood of confusion, but also actual or
probable deception on the public
because of general
appearance
of
the goods . ( McDonalds Corp. vs. LC Bigmak Burger,
Inc., supra).

Q - Can

there

be

trademark

infringement

without

unfair

competition?

A - There
can be trademark infringement
without unfair competition
as when
the
infringer
discloses
on
the
labels
containing
the
mark
that
he
manufactures the goods, thus preventing the public from being deceived that
the goods originate from the trademark owner. (McDonalds Corp. vs. LC BigMak Burger,
Inc., supra).
Q - What

is

the

doctrine

of

equivalents

in

patent

infringement?

A - The
doctrine
of
equivalents
provides
that
an
infringement
also
takes
place
when
a
device
appropriates
a
prior
invention
by
incorporating
its
innovative concept and, although with some modification and change, performs
substantially
the
same
function
in
substantially the same way to achieve
substantially the same result. The doctrine
equivalents thus require satisfaction
of the function-means-and-result test,
the patentee having the burden to show
that
all
three
components
of
such
equivalency
test
are
met . (Smith Kline
Beckman Corp. vs. Court of Appeals, August 14, 2003, 409 SCRA 33).

MC DONALDS CORPORATION vs. MAC JOY FAST FOOD CORPORATION

G.R. No. 166115, February 2, 2007, 514 SCRA 95
FACTS: Mac Joy Fastfood Corporation filed an application for the registration of
the
trademark
MACJOY &
DEVICE
for
fried
chicken,
chicken
barbeque,
burgers,
fries, spaghetti, palabok, tacos,
sandwiches,
halo-halo and steaks. Mc
Donalds
Corporation
opposed
the
application
claiming
that
the
trademark
MACJOY &
DEVICE so resembles
its
corporate
logo,
otherwise
known
as
the
Golden
Arches
or
M
design,
and
its
other
marks
which would
confuse
or
deceive purchasers
into believing that the goods originate
from
the same source or origin.
Mac Joy averred that it has used the
mark MACJOY for the past
many
years
in
good
faith
and
spent
considerable
amount
for
the marks
promotion, especially in Cebu City where it
has been doing business long
before the Mc Donalds opened its outlet
thereat
sometime in 1992.
ISSUE: Whether
or
not
there
is
MCDONALDs
marks
and
MACJOY &
food and food ingredients.

a
confusing
similarity
between
DEVICE trademark
when
applied

the
to

HELD: YES.
In
determining
similarity
and
likelihood ,
jurisprudence
has
developed
two
tests,
the
dominancy
test
and
the
holistic
test .
The
dominancy
test
focuses
on
the
similarity
of
the
prevalent
features
of
the
competing
trademarks
that
might
cause
confusion
or
deception.
In
contrast,
the holistic test requires
the court to consider the entirety of the marks
as
applied
to
the
products,
including
the
labels
and
packaging,
in
determining confusing
similarity.
Applying
the
dominancy
test,
MCDONALDS
and
MACJOY
marks
the
confusing
similarity
with
each
other
such
that
an
ordinary
purchaser
can
conclude an association or relation between the marks. Both marks use
the
corporate M
design, logo and
prefixes
Mc and/or
Mac as
dominant
features.
Both
trademarks
are
used
in
the
sale
of
fastfood
products .
Furthermore MCDonalds has the right
claim over
the
marks since
it
has
registered
them
successively
in
1971
and
1977 ,
while
Macjoys
application
for the registration
of
its trademark
was
filed only
in 1991.

REGISTRATION OF

TAIWAN KOLIN CORPORATION

G.R.

No. 209843,

IDENTICAL

MARKS

vs. KOLIN ELECTRONICS COMPANY

March 25, 2015, 754 SCRA 556

FACTS:
On
February
29,
1996,
Taiwan
Kolin
filed
with
the
Intellectual
Property
Office
(IPO)
a
trademark
application
for
the
use
of
KOLIN
on
its
televisions
and
DVD players
which
are a
combination
of goods
falling under
Class 9 of the
Nice Classification (NCL).
On
July
13,
2006,
Kolin
Electronics
opposed
the
application
alleging that
the
mark
Taiwan
Kolin
seeks
to
register
is
identical ,
if
not
confusing
similar,
with
its
KOLIN
mark
previously
registered
on
November
23,
2003
covering
products,
e.g.,
automatic
voltage
regulator, converter,
recharger
and
the like
which are
also under
Class 9 of
NCL.
Kolin
Electronics
KOLIN
registration
legal
dispute
between
the
same
parties.
application
was
opposed
by
Taiwan
Kolin

was
the
subject
of
a
Kolin
Electronics
KOLIN
which
claimed
that
Kolin

prior
own
was

11
the
the

prior
same

registrant
in Taiwan

and
user
in
1988.

of

ISSUE: Whether
Taiwan Kolin is
KOLIN
over its
specific goods

the

said

trademark

having

registered

entitled
to the
registration of the
of
television
and
DVD
player.

mark

HELD:
YES.
Taiwan
Kolin is
entitled
to
register
the
trademark
KOLIN.
The
uniformity
of
categorization by
itself
does
not
automatically preclude
the
registration
of
what
appears
to
be
an
identical
mark .
Such
circumstance
does
not
necessarily
result in
trademark infringement.
Categorization in
the
NCL
determining
a
possible
violation

is
of

not the
intellectual

sole
and decisive
property right.

factor

in

The
Hornbook
Doctrine
states
that
emphasis
should
be
on
the
similarity of
the
products
involved and not on
the
arbitrary
classification
of
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
the
use
of
the
same
trademark
by
others
on
unrelated
articles
of
a
different
kind.
In
this
case,
the
products
covered
by
Taiwan
Kolins
application
and
Kolin
Electrtonics
registration
are
unrelated .
Following
the
Mighty
Corporation
Doctrine,
goods
should
be
treated
against
several
factors
before
arriving
at
a
sound
conclusion
on
the
question
of
relatedness
and
the
classification
of
the
products
under
NCL
is
merely
a
part
and parcel of the factors to be considered.
It
is
not
sufficient
to
state
that
the
goods
under
consideration
are
electronics
products
under
Class
9
of
the
NCL .
Furthermore,
the
ordinary
intelligent
buyer
is
not
likely
to
be
confused
since
the
products
are
electronics
products ,
relatively
luxury
items
not
easily
considered
affordable.
The
casual
buyer
is
predisposed
to
be
more
cautious
and
discriminating
in
and
would
prefer
to
mull
over
his
purchase.
Therefore,
KOLIN
over

Taiwan
Kolin
its
televisions

is
entitled
and DVD

to
the
players.

registration

of

the

mark

LEVI STRAUSS (PHIL.), INC. vs. VOGUE TRADERS CLOTHING COMPANY

462 SCRA 52, G.R. No. 132993, June 29, 2005
Q:

What

are

A: Action
for
with Injunction.

the

remedies

of

infringement

an

and/or

Q: May an action for infringement

damages proceed independently of an
registered trademark?

owner
action

of
for

registered
unfair

mark?

competition

or

damages,

or unfair competition with Injunction and

administrative action for cancellation of the

A: YES. It
bears
stressing
that
an
action
for
infringement
or
unfair
competition,
including the available
remedies of injunction and damages ,
can
be
filed
in
the
regular
courts
and
can
proceed
independently
or
simultaneously
with
an
action
for
the
administrative
cancellation
of
a
registered
trademark
in
the
BPTTT .
As
applied
to
the
present
case,
petitioners
prior
filing
of
two
inter
partes
cases
against
the
respondent
before
the BPTTT
for
the
cancellation
of
the
latters
trademark
registration ,
namely, LIVES and LIVES Label Mark
does not preclude
petitioners right
(as a
defendant)
to include in its Answer
(to
respondents
complaint
for
damages)
a
counterclaim
for
infringement
with
a
prayer
for
the
issuance
of
a
writ
of
preliminary
injunction.
Q:

What

is

the

nature

of

unfair

competition?

A:
More importantly,
the
crime
of
Unfair
Competition
punishable
under
Article 189 of the
Revised Penal Code is a public crime . It is essentially
an act against the State and it is the latter which principally stands as
the
injured
party.
The
complainants
capacity to sue in such case become
immaterial. (Melbarose R. Sasot vs. People of the Philippines, G.R. No. 143193, June 29, 2005 462
SCRA 138).

12

UNFAIR

SHANG

COMPETITION

PROPERTIES REALTY CORPORATION vs.

FRANCIS DEVELOPMENT CORPORATION
G.R. No. 190706,

July 21, 2014, 730

SCRA

ST.

275

FACTS: St. Francis

Development
Corporation (SFDC),
a
domestic
corporation
engaged
in the
real
estate
business
and
the
developer
of
St.
Francis
Square
Commercial
Center
in
Ortigas
Center ,
filed
complaint
for
unfair
competition
against
Shang
Properties
Realty
Corporation
(Shang) before
the
IPO - Bureau of Legal Affairs due to Shangs use and filing
of applications
for the
registration of the
marks
THE ST. FRANCIS
TOWER
and
THE
ST.
FRANCIS
SHANGRILA
PLACE
for
use
relative
to
Shangs
business ,
particularly
the
construction
of
permanent
buildings
or
structures
for
residential
and
office
purposes.
SFDC
alleged
that (1) it
used
ST. FRANCIS:
to
identify
numerous
property
development
projects
in
Ortigas
Center
and
(2)
as a
use of
its
continuous
projects
in
Ortigas
Center
and
real
estate
business ,
it
has
gained
substantial
goodwill
with
the
public
that
consumers
and
traders
closely
identify
the mark with its
property
development
projects.
On
the
other
hand ,
Shang
contended
that
the
mark
with
property
cannot
be
exclusively
owned
by
SFDC
since
the
marks
geographically
descriptive
of
the
goods
or
services
for
which
it
intended
to be
used.

its
is
is

ISSUES:
(1)
Whether
competition.

the

(2)
Whether
the
meaning warranting

Shang

Properties

is

mark
ST.
FRANCIS
SFDCs
right
to its

guilty

acquires
exclusive

of

unfair

a
secondary
use.

HELD: (1) NO. Shang is

not
guilty of
unfair competition. Unfair competition
is
the
passing
off
(of
palming
off)
or
attempting
to
pass
off
upon
the
public
of
the
goods
or
business
of
one
person
as
the
goods
or
business
of
another
with
the end
and probable effect
of
deceiving
the
public.
In
other
words,
it
appearance
of
the
goods
deceiving
the
public, that
be

In
no

is
of
the

this case,
the
elements
unfair
competition.

when
his
goods
of

he
gives
competitors
are
those
fraud

is

his
goods
the
general
with
the
intention
of
of
his
competitor.
wanting ,

hence,

there

can

There
is
no
evidence
that
(1) Shang gave
their
goods/services
the
general appearance
that
it
was
SFDC
which
offering
the same to the
public
(2)
Shang
employed
any
means
to
induce
SFDCs
goods/services;
and
(3)
Shang
made
any
false
statement
or
commit
acts tending
to
discredit
the goods/services
offered by
SFDC.
The mark ST. FRANCIS
is geographically descriptive in nature , thus, it
cannot
be
exclusively
appropriated
unless
a
secondary meaning
is
acquired .
Therefore, Shang is not guilty of unfair competition.
(2)
NO.
The
mark
ST.
FRANCIS
did
not
acquire
secondary
meaning.
Descriptive
geographical
terms
are in the public domain in
the
sense
that
every
seller
should
have
the
right
to
inform
customers of the
geographical
origin of
his
goods.
A
geographical
descriptive
term
is
any
noun
or
adjective
that
designates
geographical
location
and
would
tend
to
be
regarded
by
buyers
as
descriptive
of
geographic
location of origin of the goods
or
services.
A
geographically
descriptive
term
can
indicate
any
geographic
location
on
earth,
such
as
continents,
nations,
regions,
states,
cities,
streets and
addresses.

Under
Section 123.2 of the IP Code, specific
met
in
order
to
conclude
that
geographically
acquired
secondary
meaning,
to
wit:
(a)
the

requirements
have to be
descriptive
mark
has
secondary
meaning
must

13
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. Unless secondary meaning has been established, a
geographically
descriptive
mark,
due
to
its
general
public
domain
classification ,
is
perceptibly disqualified
from
trademark
registration.
In
this
case,
SFDC
was not able to prove its compliance with the
above-mentioned
requirements.
While
it
is
true
that
SFDC
had
been
using
the
mark
since
1992,
its
use
thereof
has
been
merely confined
to
its
realty
projects
within
the
Ortigas
Center .
As
its
use
thereof
has been
merely
confined
to
a
certain locality.

JESSIE

CHING

vs.

WILLIAM

M.

SALINAS

G.R. No. 161295, June 29, 2005, 462 SCRA 241

Q:
Define
from
each

trademark,
other.

copyright

and

patents

and

briefly

distinguish

them

A: Trademark, copyright
and
patents
are
different intellectual property
rights
that
cannot be interchanged with one another.
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.
In
relation
thereto,
a
trade
name
means
the
name
or
designation identifying or distinguishing an enterprise. Meanwhile, the scope of a
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. Patentable
inventions,
on
the
other
hand,
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.
Q:

What

is

utility

model?

A: 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.
Essentially,
a
utility
model
refers
to
an
invention
in
the
mechanical field. This is the reason why its object is sometimes described
as a device
or
useful
object.
A
utility
model
varies
from
an
invention,
for
which a
patent for invention is , likewise, available, on at least three
aspects: first, the requisite of
inventive step in a patent for invention is
not required;
second, the maximum term of protection is only seven years
compared
to
a
patent
which
is
twenty
years,
both
reckoned
from
the
date
of
the
application;
and
third,
the
provisions
on
utility
model
dispense
with
its
substantive
examination
and
prefer
for
a
less
complicated system.
Q:

When

are

useful

articles

and

works

of

industrial

design

copyrightable?

A: Indeed, while works of applied art ,

original intellectual,
literary and artistic
works are copyrightable, useful
articles
and
works
of
industrial
design
are
not. A useful article may be copyrightable only if and only to the extent
that such design incorporates pictorial, graphic, or sculptural features that can
be identified separately from, and are capable
of
existing
independently
of
the
utilitarian
aspects
of
the
article.

ELIDAD

KHO

vs.

G.R. No. 150877,

HON.

ENRICO LANZANAS

May 4, 2006, 489 SCRA 444

ONLY THE CREATOR OF THE MARK MAY REGISTER IT IN HIS NAME

Kho
is
not
the
author
of
the
trademark
Chin Chun Su and
his
only
claim
to
the
use
of
the
trademark
is
based
on
the
Deed
of
Agreement
executed
in
his
favor
by
Quintin Cheng .
By
virtue
thereof,
he
registered
the
trademark
in
his
name.
The
registration
was
a
patent
nullity
because
Kho
is
not
the
creator
of
the
trademark
Chin Chun Su
and,
therefore,
has
no
right
to
register
the
same
in
his
name.
Furthermore,
the
authority
of
Cheng
to
be the sole
distributor
of
Chin
Chun
Su
in
the
Philippine
had
already
been
terminated
by
Shun
Yih
Chemistry .
Withal,
he
had
no
right
to
assign or
to
transfer
the
same to Kho.

COMPANIA GENERAL DE

TABACOS

G.R. No. 161051, July

DE FILIPINAS

vs. SEVENDAL

23, 2009, 593 SCRA 593

14
FACTS:
Tabacalera
is
a
foreign
corporation
and
duly
registered
with
the
Bureau
of
Patents
and
Trademarks
Technology
and
is
primarily
engaged
in
the
manufacture
and
sell
of
cigars
and
cigarettes
using
the
Tabacalera
trademarks.
On
the
other
had ,
Gabriel
Ripoli,
Jr.
was
an
employee
of
Tabacalera
for
28
years
and
was
General
Manager
before
he
retired
in
1993 . Upon
retirement,
he
organized
Tabaqueria, a
domestic
corporation
engaged
in
the
manufacture
of
tobacco
products
like
cigars.
Tabacalera
filed
a
complaint
with
the
DTI
and
sought
the
issuance
of
a
preliminary
order
requiring
Tabaqueria
to
refrain
from
manufacturing,
distributing
and/or
selling
Tabaqueria
products
because
the
same
attributed
to
the
alleged
26%
dropped
of
Tabacaleras
sales
as
a
result
of
a
confusion
created
in
the
minds
of
the
public
into
believing
that
the
Tabaquerias
cigars
are
the
same
or
are
somehow
connected
with
the
Tabacalera.
However,
Tabaqueria
opposed
the
issuance
of
the
injunctive
relief
on
the
ground
that
Tabacaleras
allegation
of
unfair
competition
is
unproved
and
unsubstantiated.
Besides,
Tabacalera
failed
to
establish
the
elements
required
for
the
issuance
of
an
injunctive
writ.
ISSUE: Whether
Tabaqueria
is
guilty
of
preliminary
injunction
should
be
issued.

unfair

competition

thus

writ

of

HELD: NO.
In
order
that
an
injunctive
relief
may
be
issued ,
the
applicant
must
show
that: (1)
the
right
of
the
complainant
is
clear
and
unmistakable;
(2)
the
invasion
of
the
right
sought
to
be
protected
is
material
and
substantial
and; (3)
there
is
an
urgent
and
paramount
necessity
for
the
issuance
of
the
writ
to
prevent
serious
damage.
In
the
case
at
bench ,
Tabacalera
has
failed
to
show
that
is an
urgent
and
paramount
necessity
for
the
issuance
of
the
to
prevent
serious
damage.
Tabacalera
failed
to
substantiate
its
that
the
abrupt
drop
in
sales
was
the
result
of
the
complaint
of
against
Tabaqueria
from
the
alleged
infringement
of
trademark.
its

Clearly,
it
is
claim
for
the

incumbent
upon
issuance
of
a

REPUBLIC GAS

Tabacalera
preliminary

CORPORATION

vs.

PETRON

G.R. No. 194062, June 17, 2013,

FACTS:
Regasco
and
carry
on,
and
marketing
(LPG).

is
the
at

to
support
injunction.

with

there
writ
claim
acts
its

evidence

CORPORATION

698 SCRA 666

an
entity
duly
licensed
to
engage
in ,
conduct
business
of
refilling,
buying,
selling,
distributing
wholesale
and
retail
of
Liquefied
Petroleum
Gas

The
Regasco
LPG
Refilling
Plant
in
Malabon
was
engaged
in
the
refilling
and
sale
of
LPG
cylinders
bearing
the
registered
marks
of
Gasul and
Shellane.
ISSUE:
Whether
competition.

Regasco

is

liable

for

trademark

infringement

and

unfair

HELD: YES.
The
mere
unauthorized
use
of
a
container
bearing
registered
trademark
in
connection with sale,
distribution
or
advertising
goods
or
services
which
is
likely
to
cause
confusion,
mistake
deception
among
the
buyers
or
consumers
can
be
considered
trademark
infringement.

a
of
or
as

Passing
off
takes
place
where
the
defendant ,
by
imitative
devices
on
the
general
appearance
of
the
goods,
misleads
prospective
purchasers
into
buying his merchandise
under
the
impression
that
they
are
buying
that of his
competitors. Thus, the defendant
gives his goods
the
general
appearance
of
the
goods
of
his
competitor
with
the
intention
of
deceiving
the
public
that
the
goods
are
those
of his competitor.
The
mere
use
of
GASUL
and
SHELLANE
general
appearance of
its

VICTORIO P. DIAZ vs.

those
LPG
cylinders
will
give
the
LPGs
products.

PEOPLE & LEVI

bearing
the
trademarks
sold
by
REGASCO
the

STRAUSSS PHIL. INC.

G.R. No. 180677, February 18, 2013, 691 SCRA 139

15
FACTS: Levis
LEVIS
501
authorized
to

Philippines received
jeans
in
his
make
and
sell

information that Diaz was

tailoring
shops
and
these
jeans.

selling counterfeit
he
was
not

On
the
other
hand ,
Diaz
claimed
that
he
did
not
manufacture
Levis jeans
and
that
he
used
the
label
LS
JEANS
TAILORING
in
the
jeans
that
he
made
and
sold ;
that
the
label
LS
JEANS
TAILORING
was
registered
with
the
IPO ;
that
his
shops
received
clothes
for
sewing
or
repair;
that
his
shops
offered
made-to-order
jeans,
whose
styles
or
designs
were
done
in
accordance
with
instructions
of
the
customers;
that
LS
stood
for
Latest
Style;
and
that
the
leather
patch
on
his
jeans
had two buffaloes ,
not
two
horses.
ISSUE:

Whether

HELD:

NO.

Diaz

Diaz
is

is
not

guilty

of

guilty

trademark

of

trademark

infringement.
infringement.

The
likelihood
of
confusion
is
the
gravamen
of
the
offense
of
trademark
infringement.
There
are
two
test
to
determine
likelihood
of
confusion, namely:
the
dominance
test
and
the
holistic
test.
The
holistic
test
is
applicable
here.
Accordingly,
the
jeans
trademarks
of
Levis
Philippines
and
Diaz
must
be
considered
as
a
whole
in
determining
the likelihood of confusion between them.
this

There
case:

was

no

likelihood

of

confusion

between

trademarks

involved

in

Diaz
used
the
trademark
LS JEANS TAILORING
for
the
jeans
he
produced
and
sold
in
his
tailoring
shops .
His
trademark
was
visually
and
aurally
different
from
the
trademark
LEVIS
STRAUSS
&
CO
appearing
on
the
patch
of
original
jeans
under
the
trademark
LEVIS
501.
The
word
LS
could
not
be
confused
as
a
derivative
from
LEVIS STRAUSS
by
virtue
of
the
LS
being
connected
to
the
word
TAILORING,
thereby openly
suggesting
that the jeans
bearing the trademark
LS
JEANS
TAILORING
came or
were bought
from
the
tailoring
shops
of
Diaz,
not
from
the
malls
or
boutique
selling
original
LEVIS
501
jeans to the consuming public.
Other remarkable
difference between two trademarks
that the consuming
public
would
easily
perceive
is
that
LEVIS
used
two
horses
design
while
Diaz
used
the buffalo designs. A
horse
and a
buffalo are
two
different
animals
which
an
ordinary
customer
can
easily
distinguish.

10. INSURANCE
TRIPLE-V FOOD SERVICES, INC. vs. FILIPINO MERCHANTS INSURANCE CO.
G. R. No. 160544,

February

21,

2005

FACTS: A certain Mary Joanne De Asis dined at petitioners Kamayan Restaurant .

De Asis was
using
the
car
assigned
to
her
by
her
employer Crispa
Textile Inc. On the said date, De Asis availed of the valet parking service of
petitioner. A corresponding parking ticket
was
issued
as
receipt for the car .
The car was then
parked
by
petitioners valet attendant
at
the
designated
parking area. Few minutes later,
Madridano noticed
that
the car was not
in
its
parking slot
and
its
key
no
longer
in
the
box
where valley
attendants usually keep the keys of the cars
entrusted to them . The car
was never recovered. Thereafter, Crispa filed a claim against the insurer, herein
respondent Filipino Merchants Insurance Co. Inc. (FMICI). Having indemnified Crispa
for the loss of the subject vehicle, FMICI, as
subrogee to Crispas rights,
filed with the RTC an action for damages against
petitioner Triple-V
Food
Services, Inc.
Petitioner
challenged
FMICIs
subrogation
to
Crispas
right
claim
for
the loss of the car ,
arguing
that
theft
is
not
a
against under FMICIs insurance policy for the subject vehicle.
ISSUE: Whether
petitioner
under

FMICI
was
validly
subrogated
to
the
insurance
policy
it
issued.

Crispas

to
risk

right

file
a
insured

against

HELD: YES. Petitioners argument

that
there
no
valid
subrogation
of
rights
between Crispa and FMICI
b ecause
theft
was
not
a
risk
insured
against
under
FMICI Insurance
Policy holds no
water
because
it
contains
among
other
things,
the
following
item:
Insured
Estimated
Value
of
Scheduled

16
Vehicle P800,000. On the basis of such item, the coverage includes a full
comprehensive
insurance
of
the
vehicle
in
case
of
damage
or
loss.
Besides, Crispa
paid
a
premium
of
P10,304
to
cover
theft .
This is
clearly
shown
in
the
breakdown
of
premiums
in
the
same
policy . Thus,
having
indemnified
CRISPA
for
the
stolen
car ,
FMICI,
was
properly
subrogated
to
Crispas
right
against
petitioner ,
pursuant
to
Article
2207
of
the
New
Civil
Code.

INSURABLE

INTEREST

A vendor
or
seller
retains
an
insurable
interest
in
the
property
until full payment
of the value
of the
delivered
goods .
Unlike the
civil
law
concept
of
res
perit
domino ,
where
ownership
is
the
basis
for
consideration
of
who
bears
the
risk
of
loss,
in
property
insurance,
ones
interest
is
not
determined
by
concept
of
title,
but
whether
insured
has
substantial economic interest in the property . (Gaisano Cagayan, Inc.
vs. Insurance Company of North America,

BURDEN IS UPON
THE
CAUSE
OF

G.R.

No.

147839,

June

8,

2006, 490 SCRA 286).

THE INSURER TO PROVE THAT

LOSS
WAS
AN
EXCEPTED RISK

The burden of proof

refers to the duty of the insured to show that
the
loss/damages
is
covered
by
the
policy .
Thus,
it
is
sufficient
for
the insured to prove the fact
of damage/loss after
or for which is not
liable. (DBP Pool of Accredited Insurance Companies vs. Radio Mindanao Network, Inc. G.R.
147039, January 27, 2006, 480 SCRA 314).

BREACH

OF

WARRANTY;

WAIVER;

DOUBLE

INTEREST

Section 74 of the Insurance Code provides that violation of a material

warranty or
other
material
provision
of
a
policy
on
the
part
of
either
party thereto, entitles the other to rescind. However, for the breach of a
warranty to avoid a policy, the same must be duly shown by the party
alleging
the
same.
Breach
of
a
warranty
or
of
a
condition
renders
the
contract
defeasible
at
the
option
of
the
insurer ,
but
if
he
so
elects,
he
may
waive
his
privilege
and
power
to
rescind
by
the
mere
expression
of
an intention to do so . In
that
event
his
liability under
the
policy continues as before. The insurers renewal of the policy is a clear
intention of its waiver of the alleged breach by the insured.
An award of double interest is lawful and justified under Section 243
and 244 of the Insurance Code. The term
double interest can only be
interpreted
to
mean twice the legal rate of interest of 12% per annum or
24% per annum interest. (Prudential Guarantee and Assurance Inc. vs. Trans-Asia Shipping
Line, G.R. No. 151890, June 20, 2006, 491 SCRA 411).

PROBLEM:

X
wanted
to
procure
life
insurance
over
Y,
his
son,
a
new lawyer. X comes to
you
for
advice
as
to
whether
he may
still
insure
his
son
who
is
no
longer
a
minor
and
is
now
married.
What will be your advice?

ANSWER:

X
may
insure
the
an
insurable
interest
over
the
distinguish
whether
the
child
is
married.

PROBLEM:

A
sour and they
the
degree of

life
life
a

of
Y,
his
son.
Every
person
has
of
his
child .
The
law
does
not
minor
or
whether
he
is
already

insured
the
life
of
his
wife, B. Their
relationship turned
sought
judicial dissolution
of
their
marriage.
B
died after
annulment
was
issued
by
the
court.

QUESTIONS:
a.

Can

claim

the

proceeds

of

the

insurance

b. Assume
that
what
was
sought
by
the
separation, and not
annulment, can
A
claim
the
death
of
B?

ANSWERS:

policy?

parties
was
the
proceeds

legal
upon

17
a. YES. A can recover
the proceeds
because
he
interest over
the
life
of
B
at
the
time
the
obtained.

has
insurable
insurance
was

b. YES.
A
decree
of
legal
separation
does
not
severe
the
marital
bond.
It
merely
allows
A
&
B
to
live
separately
from
bed
and
board .
A
has
insurable interest
over
B
at
the
time
the
insurance
took
effect ,
and
upon
the
latters
death. A
can
claim
the
proceeds
of
the
policy.

PROBLEM:

John insured the life of his debtor, Peter, for P1 Million, the
amount
of
the
obligation.
On April 1,
2013, Peter
fully
paid
his
debt.
On
May 12, 2013, Peter died of a
car accident.

QUESTIONS:
a.

Is

b.

May

the

insurer

the

heirs

bound
of

Peter

to

pay

claim

John

the

the

insurance

proceeds?

proceeds?

ANSWERS:
a. NO. The insurable interest of John
upon full payment of the debt.
b. The heirs
of
contract

of Peter
between

cannot
them

claim
and

over

the
the

BANKERS

more

On
Life

of

Peter

There

is

ceased

no

privity

CLAUSE

LIFE INSURANCE CORPORATION

CRESENCIA P. ABAN

G.R. No. 175666, July 29, 2013, 702

FACTS:
Bankers

life

proceeds .
insurer.

INCONTESTABILITY

MANILA

the

July
3,
1993,
Delia
designating
Cresencia,

took
her

vs.

SCRA 417

out
a
life
insurance
policy
niece, as
her beneficiary.

On
April 10, 1996, when the
insurance policy had
than two years and seven months, Delia died.

been

in

from

force

for

Cresencia
filed a claim for the insurance proceeds
on
July 9, 1996 .
Bankers
Life
conducted
an
investigation
into
the
claim
and
came
out
with
the
finding
that
Delia
did
not
personally
apply
for
insurance
coverage as she
was illiterate and
sickly.
ISSUE:
Whether
Bankers
Life
is
provision of
the
Insurance Code.

barred

by

the

incontestability

clause

HELD: YES.
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
rescindable
by
reason
of
the
fraudulent
concealment or
misrepresentation
of
the insured or
his agent.
the
the

After
the
two-year
period
lapses,
or
when
the
insured
died
period,
the
insurer
must
make
good
on
the
policy,
even
policy
was
obtained by fraud,
concealment or
misrepresentation.

Section 48
regulates
takers of life
insurance.

11.

NEGOTIABLE

both

the

actions

of

the

insurers

and

within
though

prospective

INSTRUMENT

SAMSUNG CONSTRUCTION CO. vs. FAR EAST BANK & TRUST CO.
G.R.

No.

129015,

August

13,

2004,

436

SCRA

402

FACTS: Plaintiff
maintained
a
current
account
with
respondent
FEBTC .
The
sole signatory to plaintiffs account was Jong, its Project Manager, while the
checks remained in the custody of the companys accountant , Kyu. A certain
Roberto Gonzaga presented
for
payment
FEBTC
check
payable
to
cash
and
drawn against
the Samsungs current account, in
the
amount
of
P999,500.00

had
been
encashed upon
submission
of
proof
of
identification
cards.
The
following day,
Kyu,
examined
bank account
and
discovered
that
a
check
in
the

ide ntity
and
three (3)
the
balance
of
the
amount
of
P999,500.00

18
had
that

been
encashed.
As
the
last
his signature was
forged.

ISSUE: Whether a
to
reimburse
the
out.

blank

check

bank
which
pays
out
drawer
from
whose

was

on
a
account

missing,

Jong

forged
check
is
the
funds
were

learned
liable
paid

HELD: YES. The general rule is to the effect that a forged signature is
wholly inoperative
and
payment
made through
or
under
such
signature
is
ineffectual
or
does
not
discharge
the
instrument.
If
payment
is
made,
the
drawee
cannot
charge
it
to
the
drawers
account .
The
traditional
justification for
the
result
is
that
the
drawee
is in a superior position
to
detect
a
forgery
because
he
has
the
makers
signature
and
is
expected
to
know
and
compare
it .
The
rule
has
a
healthy
cautionary
effect on banks by encouraging care in the comparison
of
the
signatures
against
those
on
the
signature
cards
they
have
on
file .
Moreover,
the
very
opportunity
of
the
drawee
to
insure
and
to
distribute
the
cost
among
its
customers
who
use
checks
makes
the
drawee
an
ideal
party
to
spread
the
risk
to
insurance.
- - - Under Section 23 of the Negotiable Instrument Law ,
forgery
is
a
real
or
absolute
defense
by
the
party
whose
signature
is
forged .
On
the
premise that
Jongs
signature
was
indeed
forged ,
FEBTC is liable for the
loss since it
authorized
the
discharge
of
the
forged
check .
Such
liability
attaches
even
if
the
bank
exerts
due
diligence
and
care
in
preventing
such
faulty
discharge. Forgeries
often
deceive
the
eye
of
the
most
cautious
experts;
and
when
a
bank
has
been
so
deceived ,
it is a
harsh
rule
which
compels
it
to
suffer
although
no
one
has
suffered
by
its
being
deceived .
The
forgery
may
be
so
near
like
the
genuine
as
to
defy
detection
by
the
depositor
himself
and
yet
the
bank
is
liable
to
the
depositor
if
it
pays
the
check.
- - - The
general
rule
remains
that
the
drawee
who
has
paid
upon
the
forged
signature
bears
the
loss.
The
exception
to
this
rule
arises
only
when
negligence
can
be
traced
on
the
part
of
the
drawer
whose
signature
was
forged ,
and
the
need
arises
to
weigh
the
comparative
negligence
between
the
drawer
and
drawee
to
determine
who
should
bear
the
burden
of
loss.
The
Court
finds
no
basis
to
conclude
that
Samsung
was
negligent
in
the
safekeeping
of
its
checks.
For
one,
the
settled
rule
is
that
the
mere
fact
that
the
depositor
leaves
his
check
book
lying
around
does
not
constitute
such
negligence
as
will
free
the
bank
from
liability
to
him ,
where
a
clerk
of
the
depositor
or
other
persons
taking
advantage
of
the
opportunity,
abstract
some
of
the
check
blanks,
forges
the
depositors
signature
and
collect
on
the
checks
from the
bank . And
for
another,
in
point
of
fact
Samsung
was
not
negligent
at
all
since
it
reported
the
forgery
almost
immediately
upon
discovery.

VALIDITY

AND

NEGOTIABLE

CHARACTER

OF

AN

INSTRUMENT

With
respect
to
Check
No.
0084078 ,
however,
which
was
drawn
against
another
account
of
Llano ,
albeit
the
date
of
issue
bears
only
the
year 1999, its
validity
and
negotiable
character
at
the
time
the
complaint
was
filed
was
not
affected .
Section
6
of
the
Negotiable
Instrument
Law
provides
that
the
liability
and
negotiable
character
of
an
instrument
are
not
affected
by
the
fact
that -- (a)
it
is
not
dated;
or
(b)
Does
not
specify
the
value
given ,
or
that
any
value
had
been
given
therefore ,
or
(c)
Does
not
specify
the
place
where
it
is
drawn or
the
place
where
it
is
payable;
or
(d)
Bears
a
seal; or (e)
Designate
a
particular
kind
of
current
money
in
which
payment
is
to
be
made (Victoria J. Ilano vs. Hon. Dolores
Espaol, G.R. No. 161758, December

AN

16,

INCOMPLETE

ALVIN PATRIMONIO

vs.

BUT

and
Dunk

SCRA

365)

DELIVERED

June 4, 2014, 724

Napoleon
entered
Corporation.

In
the
course
of
which
had
no
payees
expenses of
Slam
Dunk.

478

INSTRUMENT

NAPOLEON GUTIERREZ

G.R. No. 187769,

FACTS:
Alvin
name
Slam

2005,

their
name,

into

business ,
date
or

SCRA

business

&

MARASIGAN

636
venture

under

the

Alvin
pre-signed
several
checks ,
amount,
to
answer
for
the

19
The
blank
checks
instruction
not
to
fill
approval
by
Alvin.

were
them

entrusted
to
out
without

Napoleon
previous

with
the
notification

In
the
middle
of
1993
without
Alvins
knowledge
Napoleon
went
to
Marasigan
to
secure
a
loan
stating
needed
the
money for
the
construction
of
his
house.

and
that

specific
to
and
consent ,
Alvin

Marasigan
acceded
to
Napoleons
request
and
gave
him
P200,000.00.
In
exchange,
Napoleon
simultaneously
delivered
to
Marasigan
one
of
the
blank
checks
pre-signed
by
Alvin
with
the
blank
portion
filled
out
with
the
words
Cash,
Two
Hundred
Thousand
Pesos
Only,
the
amount
P200,000.00 and
dated May
24, 1994.
reason

When
Marasigan
deposited
ACCOUNT
CLOSED.

the

check ,

it

was

Marasigan
sought
recovery
from
Napoleon
and
demand letters
for the
payment of the
loan but
Marasigan to file a
criminal case for
violation of

dishonored

for

the

Alvin
sending
several
to no
avail
prompting
B.P. 22
against
Alvin.

Alvin
filed
a
complaint
for
declaration
of
nullity
of
loan
damages
against
Napoleon and Marasigan .
He
denied
authorizing
the
or
the
checks negotiation and asserted that
he was
not
privy to
parties loan agreement.

and
loan
the

ISSUES:
(1)
he

Whether
Alvin
pre-signed.

(2)

Whether

is

Marasigan

liable

for

is

holder

the

dishonor

in

due

of

the

check

course.

HELD: (1) NO. Alvin is

not
liable. Under
Section 14
of
the
Negotiable
Instrument
Law,
if
the
maker
or
drawer
delivers
a
pre-signed
blank
paper
to
another
person
for
the
purpose
of
converting
it
into a
negotiable instrument, that
person is deemed to have prima facie
authority
to
fill
it
up.
In
order,
however,
that
any
such
instrument
when
completed
may
be enforced
against
any
person
who became a party
thereto
prior
to
its
completion, two requisites
must
exist:
(1) that
the
blank
must
be
filled
strictly
in
accordance
with
the
authority
given ;
and
(2)
it
must
be
filled up
within a
reasonable time.
in
the

If
it
was
proven that
the
accordance
with
the
authority
maker
can set
this up
as
In

blanks
checks
Alvins

instrument
had not
filled
up
strictly
given
and
within
a
reasonable
time ,
a
personal defense and avoid
liability.

this
case,
Napoleon
exceeded
his
authority
to
fill
up the
and
use
the
check
which
was
limited
to
the
use
of
the
for
the
operation
of
their
business
and
on
condition
that
prior
approval
must
be
first
secured.

While Napoleon 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
complete.
There
is
no
evidence that
Napoleon ever
secured prior
approval
from
Alvin
to
fill
up
the
blank
or
to
use
the
check.
(2) NO.
Marasigan is
not
a
holder
in
52 (c)
of
the
NIL,
states
that
a
holder
who
takes the
instrument in good
faith
and

due
in
for

course . Under Section

due
course
is
one
value.

It
also provides
in
Section 52
(d)
that
in
order
that one may
be a
holder
in
due
course,
it
is
necessary
that
at
the time it
was
negotiated
to
him ,
he
has
no
notice
of
any
infirmity
in the
instrument or
defect in
the
title
of
the
person negotiating it.
Acquisition in good
faith means
taking
without
knowledge
or
notice
of equities
of
any
sort
which
could
beset
up
against
a
prior
holder
of
the
instrument. It
means
that
he
does
not
have
any
knowledge
of
fact which would
render
it
dishonored for
him to
take a negotiable
paper. The abuse
of
the
defense ,
when
the
instrument
was
taken ,
is
the
essential element
of
good
faith.

In
the
party
or
a
no obligation

present
case,
Marasigans
knowledge
that
Alvin
is
not
a
privy
to
the
contract
of
loan ,
and
correspondingly
had
to
him,
renders
him
dishonest,
hence, in bad
faith.

20
NOTICE

OF

DISHONOR

The notice of dishonor

of a
check
may
be
sent
to
the
drawer
or
maker by
the
drawee
bank,
the
holder
of
the
check,
or
the
offended
party
either
by
personal
delivery
or
by
registered
mail.
The
notice
of
dishonor
to
the
maker
of
a
check
must
be
in
writing .
(Alfredo

Rigor

vs.

People

of

the

INDORSEMENT
METROBANK

Philippines, G.R.

BY
vs.

TWO
B.A.

G.R. No. 179952, December

No.

144887,

OR

MORE

FINANCE
4,

2009,

November

17,

2004).

PAYEES

CORPORATION
607

SCRA

620

FACTS: Bitanga
obtained
from
BA
Finance
a
P329,280
loan .
To
secure
the
loan,
he
mortgaged
his
car
to
BA
Finance
and
insured
the
car
against
loss,
damage
and
theft
with
Malayan
Insurance.
The
car
was
stolen.
On
Bitangas
claim,
Malayan
Insurance
issued
a
check
payable
to
the
order
of
B. A. Finance Corporation and
Lamberto Bitanga
for
P224,500
drawn
against
China
Bank.
The
check
was
crossed
with
notation
For Deposit Payees Account.
Without
the
indorsement
or
authority
of
his
co-payee ,
Bitanga
deposited
the
check
to his
bank account with Asianbank . He subsequently
withdrew
the
entire
proceeds
of
the
check.
the

BA
Finance
check
from

ISSUE:
Whether
Corporation.

thereupon
Asianbank
Asianbank

HELD:
YES.
The
indorsement
is
the
or
an
unauthorized
payees.
an
or
one

demanded
the
payment
but
to
no
avail.
as

collecting

bank

of

liable

the
to

value
BA

of

Finance

payment
of
an
instrument
over
a
missing
equivalent
of
payment
on
a
forged
indorsement
indorsement
in
itself
in
the
case
of
joint

Section
41
of
the
Negotiable
Instrument
Law
provides :
Where
instrument
is
payable
to
the
order
of
two
or
more
payees
indorsees
who
are
not
partners ,
all
must
indorse
unless
the
indorsing
has
authority
to
indorse
for
the
others.

Clearly,
Asianbank
was
negligent
when
it
allowed
of
the
crossed
check
despite
the
lone
indorsement
ostensibly
ignoring
the
fact
that
the
check
did
not
indorsement
of
BA
Finance.

MATERIAL
BANK OF

the
deposit
of
Bitanga ,
carry
the

ALTERATION

AMERICA vs. PHILIPPINE RACING CLUB, INC. (PRCI)

G.R. No.

150228, July 30, 2009, 590 SCRA 301

FACTS: On
the
second
week
of
December
1988 ,
the
President
and
Vice
President
of
PRCI
were
scheduled
to
go
out
of
the
country in
connection
with
the
corporations
business. They
pre-signed
several
checks
to
insure
continuity
of
PRCIs
operation
to
settle
obligations
that
might
become
due.
These
checks
were
entrusted
to
the
accountant
with
instructions
to
make
use
of
the
same
as
the
need
arises.
On
December
16,
1988,
a
John
Doe
presented
to
Bank
of
America
for
encashment
a
couple
of
PRCIs
checks
with
indicated
value
of
P110,000
each.
The
two (2)
checks
had
similar
entries
with
similar
infirmities
and
irregularities.
On
the
space
where
the
name
of
the
payee
should
be
indicated
(Pay
To
The
Order
Of )
the
following
2-line
entries
were
instead
typewritten :
on
the
upper
line
was
the
word
CASH
while
the
lower
line
had
the
following
typewritten
words,
viz:
ONE
HUNDRED
TEN
THOUSAND
PESOS
ONLY.
Despite
the
highly
irregular
entries
on
the
face
of
the
checks,
Bank
of
America
encashed
said
checks.

ISSUE: Whether
encashment
of
HELD: YES.
misplacement
the
same
writer
were

Bank
of
the
checks.

America

is

liable

to

PRCI

for

wrongful

Although
not
in
the
strict
sense
material
alterations,
the
of
typewritten
entries
for
the
payee
and
the
amount
on
blank
and
the
repetition
of
the
amount
using
a
check
glaringly
obvious
irregularities
on
the
face
of
the
check .

21
Clearly,
someone
made
a
mistake
in
filling
up
the
check
and
repetition
of
the
entries
was
possibly
an
attempt
to
rectify
mistake.
All
these
circumstances
should
have
alerted
the
bank
to
possibility
that
the
holder
or
the
person
who
is
attempting
encash
the
check
did
not
have
proper
title
to
the
checks
or
not
have
authority
to
fill
up
and
encash
the
same.

the
the
the
to
did

PROBLEM -

Amy
borrowed
P1,000.00
from
Alice
as
evidenced
by
a
promissory
note.
The
note
complied
with
all
the
requisites
of
negotiability,
except
that
Amy
did
not
affix
her
usual
signature
thereon
as
she
was
very
ill
at
the
time
she
prepared
the
instrument. Amy
wrote
X
on
the
space intended
for
the
signature
of
the
maker.
Is
the
instrument
negotiable?

ANSWER:
promissory
X,
Amy
bound by
affix
her

YES,
the
letter
X
complies
with
the
requirement
that
the
note
must
be
signed
by
the
maker .
In
signing
with
intended
to
authenticate
the
instrument
and
to
be
the obligation. The
law
does
not
require
that
the
maker
usual
or
customary
signature
in
the
promissory
note.

QUESTION:

State

if

the

following

instruments

are

negotiable

or

not.

reasons.
a.
I promise to pay X or order P1,000.00
the sale of my house. (Signed) Y.
b.
I
promise
to pay Rosario
Contract of Sale dated December

out

of

the

proceeds

or order P1,000.00 pursuant

20, 2012. (Signed) Arnold.

to

of
the

c. I promise to pay to the order of X P1,000.00 subject to the terms

and conditions of
the
contract
of
mortgage. (Signed) Y.
d. I promise
equal monthly

to pay to
installments.

e.
To
(Signed)

Pay

A:
X.

to

the

f.
To
A:
Pay
to
X
days after his pet cat,
g.
I
promised
to
date. (Signed) Y.
h. To A:
Pay to
sight. (Signed) Y.

the order of
(Signed) Y.

pay
the

order

X
of

P1,000.00
the

bearer

or
order
the
sum
of
Twinkle, dies. (Signed) Y.
X

or

order

order
of

payable

in

two

P10,000.00

P50,000.00

five

P1,000.00

25

days

after

P1,000.00

25

days

after

ANSWERS:
a. The instrument is non-negotiable
because it fixes the fund out
of which payment is to
be
made. Payment
is
subject
to the
condition that the
sale
would materialize, and that the proceeds
of
the
sale
would
be
sufficient
to
cover
the
obligations.
The
promise
to
pay
is
conditional,
thereby
violating
Sec. 1 (b)
of
the
NIL.
b. The
instrument
which
was
executed
pursuant
to
the
Contract
of
Sale
is
negotiable
because
this
is
merely
statement
of
the
transaction
that
gave
rise
to
the
obligation
and
not
an
indication
of
the
fund
from
which
payment
shall
be
taken.
c.
The
instrument
is
burdened
by
a
separate
contract
rendering
it
non-negotiable.
The
holder
would
have
to
go
beyond
the instrument
and check the
terms
and
conditions
of
the
contract
of
mortgage.
The
separate
agreement
restricts
the
instrument.

d. The
instrument
is
not
negotiable
as
it
did
not
comply
with
the
rule
on
fixing
maturity
date
by
installments.
If
the
obligation is
payable in
installments, the exact
amount
of
each
installment
and
the date when each installment is due must be
stated
in
the
instrument.
Otherwise,
the
instrument
is
nonnegotiable
as
in
this
case
where
the
due
date
of
each
installment was not specified.

Give

22

e.
The
instrument
is
negotiable.
An
instrument
payable
to
the
order
of
bearer
is
considered
an
order
instrument. (American
National Bank vs. Joe Kerley, 105 Or. 155, 220 Pac. 116; 32 A.L.R. 262).
f. The instrument
is
negotiable. It is payable at a fixed period
after
the
occurrence
of
a
specified
event.
The
fact
that
the
date
when
Twinkle
would
die
is
uncertain
will
not
militate
against negotiability. Death is certain to happen, though
the
time
of
happening
is
uncertain.
g. The
instrument
is
negotiable .
It
is
payable
at
a
fixed
period after
date. The maturity date is
counted 25
days
from
the
date
of
the
instrument.
If undated, the
25-day period
is
reckoned from the date of issuance.
h. The
instrument
is
negotiable. It
the first
presentment
for acceptance.

is

payable

25

days

after

PROBLEM:

Lee,
the
President
of
SMX
Corporation,
issued
a
company
check
and
signed
it
in
his
capacity
as
President
as
payment
of
a
condominium
unit
which he purchased for his use.
The
check was
later
dishonored by the drawee bank.

QUESTIONS:
a.

Is

SMX

Corporation

liable

b.
Against
whom
demand payment?

can

c.

recover

Can

the

seller

the

for

payment

seller
payment

of

of

the

from

the

the

obligation?

condominium
drawee

unit

bank?

ANSWERS:
a. NO. The issuance of
the check
payment
of the condominium
unit
is
an
ultra
vires
act ,
as
it
was
made
beyond
the
powers
of
SMX
Corporation.
This
is
a
real
defense
that
may be
set
up
against
any
holder,
even a
holder
in due
course.
SMX
may
not
be
held
liable
for
the
obligation
of
its
President
as
it
did
not
authorize
the
issuance
of
the
check
through
a
board
resolution. (Sec. 22, NIL)
b. The seller
can
personally
liable
for

demand payment
the
issuance

from President Lee .

of
the
check.

He

is

c.
NO.
A
check
by
itself
does
not
operate
as
an
assignment
of any part
of
the funds to
the
credit
of
the
drawer
with
the bank. The
bank is
not
liable to the holder,
until
and
unless
it
accepts
or certifies
the check.

12.

CORPORATION

LAW

FILIPINAS BROADCASTING NETWORK, INC. vs. AGO MEDICAL &

EDUCATIONAL CENTER - BICOL CHRISTIAN COLLEGE OF MEDICINE
G. R. No. 141994,

January

17,

2005,

448

SCRA

413

FACTS: Expose is a radio documentary program aired over DZRC-AM which

is
owned by petitioner FBNI. In
two (2) mornings,
the
program exposed
various
alleged
complaints
from
students,
teachers
and
parents
against
respondent
AMEC and its administrators .
Claiming
that
the
broadcasts
were
defamatory, AMEC and Ago,
Dean
of
AMECs
College
of
Medicine , filed a
complaint
for
damages
against
FBNI.
Respondent
corporation
alleged,
among
others,
that
due
to
the
libelous
statements ,
it
is
entitled
for
moral
damages.
ISSUE:

Whether

corporation

is

entitled

to

moral

damages.

HELD: YES.
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,
AMECs
claim
for
moral
damages
falls
under
item
7
of Article 2219 of NCC . This provision 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

23
corporation
can
validly
complain
for
libel
or
any
other
form
of
defamation
and
claim
for
moral
damages.
Moreover,
where
the
broadcast
is
libelous
per
se,
the
law
implies
damages.
In
such
a
case,
evidence
of
an
honest
mistake
or
the
want
of
character
or
reputation
of
the
party
libeled
goes
only
in
mitigation
of
damages .
Neither
in
such
a
case
is
the
plaintiff
required
to
introduce
evidence
of
actual
damages
as
a
condition precedent
to
the
recovery
of
some
damages .
In
this
case,
the
broadcasts
are
libelous
per
se .
Thus, AMEC is
entitled
to
moral
damages.

OF

CORPORATION NOT LIABLE FOR THE OBLIGATION

ITS
SUBSIDIARY
DESPITE
BEING
A
MAJORITY
STOCKHOLDER
OF
THE
LATTER

A corporation, upon coming into

existence, is
invested by
law
with
a
personality
separate
and
distinct
from
those
persons
composing
it
as
well
as
from
any
other
legal
entity
to
which
it
may
be
related .
The
veil
of
corporate
fiction may only be
disregarded in cases where the
corporate vehicle is being used to defeat public convenience ,
justify a wrong,
protect fraud
or
defend
crime.
Mere
ownership
by
a
single
stockholder
by
another
corporation
of
all
or
nearly
all
of
the
capital stock
of
a
corporation
is
not
of
itself
sufficient
ground
for
disregarding
the
separate corporate personality. To disregard the separate juridical personality of
a corporation, the wrong doing must be clearly and convincingly established
(Construction and Development
2005, 446 SCRA 714 )

Corporation

vs.

Rodolfo

Cuenca,

G.R.

No.

163981,

August

12,

BOARD
RESOLUTION
AUTHORIZING
CORPORATE
OFFICERS
TO
SELL
PROPERTIES
BELONGING
TO
THE
CORPORATON
NECESSARY
TO MAKE
THE
SALE
BINDING
AGAINST
THE
CORPORATION
While
a
corporation
may
appoint
agents
to
negotiate
for
the
sale
of
its
real
properties,
the
final
say
will
have
to
be
with
the
board
of
directors
through
its
officers
and
agents
as
authorized
by
a
board
resolution
or
by
by-laws.
An
unauthorized
act
of
an
officer
of
the
corporation
is
not
binding
on
it
unless
the
latter
ratifies
the
same
expressly
or
impliedly
by
its
board
of
directors.
Any
sale
of
real
property
of
a
corporation
by
a
person
purporting
to be
an
agent
thereof
but
without
written
authority
from
the
corporation
is
null
and
void.
The
declarations
of
the
agent
alone
are
generally
insufficient
to
establish
the
fact
or
extent
of
his/her
authority. (Eduardo Litonjua vs.
Eternit

Corporation,

G.R.

No.

144805,

June

8,

2006,

490

SCRA

204).

**** The
certificate
of
non-forum
shopping
may
be
signed ,
for
and
on
behalf
of
a
corporation,
by
a
specifically
authorized
lawyer
who
has
personal
knowledge
of
the
facts
required
to
be
disclosed
in
such
document. (BPI Leasing vs. Court of Appeals, G.R. No. 127624, November 18, 2004)

QUESTION:

X
Corporation
declared
cash
dividends,
upon
approval
of
the
Board of Directors. A, a
stockholder, questions
the
declaration
on the ground
that the approval of the stockholders representing
not
less
than 2/3 of the
outstanding capital is necessary for such act. Is A correct?

ANSWER:

NO.
A
corporation
may
validly
declare
cash
or
property
dividends,
upon
approval
of
the
Board
of
Directors
alone . It is only
when stock
dividends
are
declared
that
the
consent
of
the stockholders is
needed.

SOLE

ALPS

PROPRIETORSHIP

TRANSPORTATION and/or ALFREDO E.

vs. ELPIDIO M. RODRIGUEZ

PEREZ

G.R. No. 186732, June 13, 2013, 698 SCRA 423

FACTS:
Elpidio
was
employed as a bus conductor of
ALPS Transportation,
a
sole
proprietorship
owned
by
Perez.
During
the
course
of
his
employment, Elpidio
was terminated as allegedly he had collected bus fares
without issuing corresponding tickets to passengers.
The
court
entitled
to
the
backwages.

found
twin

that
Elpidio
remedies
of

was
illegally
reinstatement

dismissed
and
and
payment

he
of

is
full

24
ISSUE:
Whether
backwages.
HELD: YES.
Perez, it is
to
Elpidio.

Perez,

the

owner

of

ALPS

Transportation ,

is

liable

Since
ALPS
Transportation is
a
sole proprietorship
he who must be held liable for
the payment of

The
owner
has
unlimited
personal
obligations
of
the
business
and
it
is
illegal dismissal is to be enforced.

TRANSFER

liability
against

OF

for
him

all
the
that
a

for

owned by
backwages

debts
decision

and
for

SHARES

FOREST HILLS GOLF & COUNTRY CLUB vs.

VERTEX

SALES INC.

G.R. No. 202205, March 6, 2013, 692 SCRA 706

FACTS: Forest
Hills
operates
and
maintains
facility
in
Antipolo
City.
Kings
and
FEGDI
of Forest Hills.

a
golf
and
country
club
owned
the
shares
of
stocks

FEGDI sold to Asuncion Construction one

million. Prior
to
the
full
payment,
Asuncion
Vertex.
Asuncion
advised
FEGDI,
in
turn,
recognize Vertex as a
shareholder.
Forest
membership

Hills
acceded
to
privileges
in the

the
gold

request,
and
and country

The
share
remained
in
the
name
demand
for
the
issuance
of
a
stock
demand
went
unheeded,
Vertex
filed
a
Forest Hills and FEGDI.
it

Forest
Hills
denied
was not a
party to

ISSUE: Whether
by Vertex by

Forest
reason

transacting
the sale

(1) common share for

P1.1
transferred
its
interest
to
requested
Forest
Hills
to
Vertex
club.

able

to

enjoy

of
FEGDI ,
prompting
Vertex
to
certificate
in
its
name .
As
its
complaint
for
rescission
against

business with
of the share.

Hills is
under
of the sale.

was

obligation

to

Vertex

and

claimed

that

return

the

amount

paid

HELD:
NO.
A
necessary
consequence
of
rescission
is
restitution :
the
parties
to a
rescinded contract
must be
brought
back
to their original
situation prior to the inception of the contract ,
hence FEGDI must
return
what it
received pursuant to the contract.
Not
being
a party
no
obligation
to
return
sale.

12.

to
the

TRANSPORTATION
JAPAN
G.R.

No.

the
rescinded
amount
paid

Hills is under
reason
of
the

LAW

AIRLINES
161730,

contract , Forest
by
Vertex
by

vs.

January

MICHAEL
28,

2005,

ASUNCION

449

SCRA

714

FACTS: Respondent
left
Manila
on
board
Japan
Airlines
(JAL)
Flight
742
bound
for
Los
Angeles.
His
itinerary
included
a
stopover
in
Narita
and
an
overnight
stay
at
Hotel
Nikko
Narita .
Upon
arrival
at
Narita,
Mrs.
Noriko
Etou-Higuchi
of
JAL
endorsed
his
application
for
shore pass and
directed him to the Japanese immigration
official. A shore pass is required
of a foreigner
aboard a vessel
or
aircraft
who
desires to stay in the
neighborhood of the port of call for not more than 72 hours.
During
his
interview,
the
Japanese
immigration
official
noted
that
respondent
Michael
appeared
shorter
than
his
height
as
indicated
in
his
passport. Because of
this
inconsistency ,
respondent
was denied shore pass
entries
and
was
brought
instead
to
the
Narita
Airport
Rest
House
where
he was billeted overnight.

Respondent
filed
a
complaint
for
damages
fully
apprise
him
of
his
travel
requirements
forcibly detained
at
Narita Airport.
ISSUE: Whether
carriage.

Japan

Airlines

is

guilty

of

claiming
that
JAL
did
and
he
was
rudely
breach

of

contract

not
and
of

HELD: NO.
JAL
did
not
breach
its
contract
of
carriage
with
respondent. It
may
be
true
that
JAL
has
the
duty
to
inspect
whether
its
passengers
have
the
necessary
travel
documents ,
however,
such
duty
does
not
extend
to
checking
the
veracity
of
every
entry

25
in
these
documents.
JAL
could
not
vouch
for
the
authenticity
of
a
passport
and
the
correctness
of
the
entries
therein .
The
power
to
admit
or
not
an
alien
into
the
country
is
a
sovereign
act ,
which
cannot
be
interfered
with
even
by
JAL .
This
is
not
within
the
ambit
of
the
contract
of
carriage
entered
into
by
JAL
and
herein
respondents. As such,
JAL
should
not
be
faulted
for
the
denial
of
respondents
shore
pass
application.
JAL
or
any
of
its
representatives
have
no
authority
to
interfere
with
or
influence
the
immigration
authorities.
The
most
that
could
be
expected
of
JAL
is
to
endorse
respondents
application.
It
bears
repeating
into
the
country
is
a
by
JAL.

that
the
sovereign

JAPAN

AIRLINES

552

341,

SCRA

power
to
act
which

vs.

G.R.

admit
cannot

JESUS

No. 170141,

or
not
interfere

an
with

alien
even

SIMANGAN
April 22, 2008

FACTS: Simangan
decided
to
donate
a
kidney
to
his
ailing
cousin
in
Los
Angeles,
California,
USA.
He
was
granted
an
emergency
US
visa
by
the
US
consulate
in
Manila.
A
roundtrip
ticket
was
bought
from
Japan
Airlines
(JAL)
and
was
issued
corresponding
boarding
pass.
At
the
date
of
his
flight,
he
was
able
to
go
through
immigration
and
security
procedures,
but
while
inside
the
airplane ,
JALs
airline
crew
suspected
Simangan
of
carrying
a
falsified
travel
document
and
imputed
that
he
would
only
use
the
trip
to
the
United
States
as
a
pretext
to
stay
and
work
in
Japan .
In
short,
he
was
haughtily
ejected, embarrassed
and
humiliated
in
the
presence
of
other
passengers
and
was
left
behind
at
the
airport .
Afterwards,
he
was
informed
that
his
travel
documents
were,
indeed,
in
order.
ISSUE:

Whether

JAL

is

guilty

of

breach

HELD:
YES.
The
fact
that
Simangans
authority
and
personal
articles
already
security
routines,
JAL, as
a
common
of
valid
documents
Simangan
carried.

of

contract

of

carriage.

plane
ticket,
boarding
pass,
travel
passed
the
rigid
immigration and
carrier,
ought
to
know
the
kind

As
provided
in
Article 1755 of
the
New
Civil
Code : A common
carrier
is
bound
to
carry
the
passenger
safely
as
far
as
human
care
and
foresight
can
provide,
using
the
utmost
diligence
of
very
cautious
persons,
with
a
due
regard
for
all
the
circumstances.

CORNELIO
545

LAMPESA
SCRA

290,

vs.

G.R.

No.

DR.

JUAN

155111,

DE

February

VERA, JR.
14,

2008

FACTS: The
passenger
jeepney
boarded
by
Dr. de
Vera
was
hit
by
a
truck
owned
by
Lampesa
and
driven
by
Dario .
The
latter
was
employed
by
Lampesa
as
a
driver .
As a
result of
the
accident ,
Dr.
de
Vera
lost
a
finger .
Dr.
de
Vera
filed
an
action
for
damages
against
Lampesa,
Dario,
Felix
and
Modesto
as
the
truck
owner ,
truck
driver,
jeepney
owner/operator
and
jeepney
driver,
respectively.
ISSUE: Whether
an
employer
his
driver
while
the
latter

is

should
be
liable
for
the
negligence
in
the
performance
of
his
duty.

of

HELD:
YES.
Once
negligent
on
the
part
of
the
employee
is
established, a
presumption
arises
that
the
employer
is
negligent
in
the
selection
and/or
supervision
of
said
employee.
To rebut
this
presumption,
the
employer
must
present
adequate
and
convincing
proof
that
he
exercised
care
and
diligence
in
the
selection
and
supervision
of
his
employees.

In
this
case,
both
the
trial
and
appellate
courts
found
Dario
negligent
in
maneuvering
the
truck
and
ruled
that
his
negligence
was
the
proximate
cause
of
the
injury
sustained
by
Dr.
de
Vera .
Lampesa
was
also
held
accountable
by
both
courts
because
he
failed
to
exercise
due
diligence
in
the
supervision
of
his
driver.

HERMINIO MARIANO, JR. vs. ILDEFONSO C. CALLEJAS

G.R. No. 166640, July 31, 2009, 594 SCRA 569
FACTS:
Dr.
Frelinda
Mariano
was
the
passenger
of
Celyrosa
Express
bus.
The
passenger
bus
was
cruising
on
its
rightful
lane
along
the
Aguinaldo
Highway
when
a
trailer
truck coming
from
the
opposite

26
direction,
on
full
speed,
suddenly
swerved
and
encroached
on
its
lane,
and
bumped
the
passenger
bus
on
its
left
portion .
Due
to
the
impact,
the
passenger
bus
fell
on
its
right
side
on
the
right
shoulder
of
the
highway
and
caused
the
death
of
Dr. Mariano.
ISSUE:
Whether
are
liable.

the

registered

owner

HELD: NO. While

the
law
requires
the
common carriers
in
the safe
transport
a
presumption
of
negligence
against
make
the
carrier
an
insurer
of
passenger.

and

driver

of

the

bus

company

highest
degree
of
diligence from
of
their
passengers
and
creates
them ,
it
does
not,
however,
the
absolute
safety
of
its

The
totality of evidence
shows
that
the death of
Dr. Mariano
was
caused
by
the
reckless
negligence
of
the
driver
of
the
Isuzu
trailer
truck
which
lost
its
brakes
and
bumped
the
Celyrosa
Express
bus.

NORTHWEST AIRLINES, INC. vs. STEPHEN V. CHIONG

543 SCRA 308, G.R. No. 155555, January 31, 2008
FACTS: Philmare
Shipping
hired
Steven
Chiong
as
M/V
Elbia
at
San
Diego ,
California.
For
this
purchased
for
Chiong
a
Northwest
plane
ticket
California.

Third
Engineer
of
purpose,
Philmare
for
San
Diego ,

At
the
scheduled
time
of
departure
at
MIAA
terminal
3,
Chiong
sought
clearance
from
Philippine
Coast
Guard
and
after
its
compliance ,
he
proceeded
to
queue
at
the Northwest
check-in-counter .
The
Northwest
personnel
informed
him
that
his
name
did
not
appear
in
the
computers list
of
confirmed
departing
passengers .
In
order
to
obtain
a
boarding
pass,
a
man in barong
demanded US$100
in exchange therefor .
Because
of
his
refusal
to
such demand,
Chiong
was
not
allowed
to
board
Northwest
flight
bound
for
San
Diego
and
consequently
was
unable
to
work
at
M/V
Elbia.
ISSUE: Whether
carriage.

Northwest

Airlines

is

liable

for

breach

of

contract

of

HELD:
YES.
Time
and
again,
we
have
declared
that
a
contract
of
carriage
by
air
transport ,
is
primarily
intended
to
serve
the
traveling
public
and
thus,
imbued
with
public
interest.
The
law
governing
common
carriers
consequently
imposes
an
exacting
standard
of
conduct .
As
the
aggrieved
party,
Stephen
Chiong
only
had
to
prove
the
existence
of
the
contract
and
the
fact
of
its
non-performance
by
Northwest,
as
carrier,
in
order
to
be
awarded
compensatory
and
actual
damages.

NORTHWEST AIRLINES, INC. vs. DELFIN S. CATAPANG

G.R. No. 174364, July 30, 2009, 594 SCRA 401
FACTS: Atty.
Catapang
was
directed
by
UCPB
to
go
to
Paris
on
a
business
trip.
As
he
intends
to
visit
his
siblings
in
USA ,
he
was
asked
for
additional
US$50
for
rerouting
or
booking
of
flight
by
the
airlines.
Upon
his
arrival
in
New
York ,
he
was
informed
that
his
ticket
was
not
rebookable
or
reroutable
and
was
treated in a
rude
manner
by an
employee
by
the
airlines
since
his
ticket
was of
a
restricted type and
that
unless
he
upgraded
it
by paying US$644 , he
could
not
rebook.
Left
with
no
choice,
he
paid
that
amount
for
rebooking.

ISSUE: Whether
damages
for

Northwest
its
rude

Airlines
treatment.

is

liable

for

moral

and

exemplary

HELD:
YES.
Passengers
have
the
right
to
be
treated
by
a
carriers
employees
with
kindness,
respect,
courtesy
and
due
consideration.
They
are
entitled
to
be
protected
against
personal
misconduct,
injurious
language,
indignities
abuses
from
such
employees .
So
it
is
that
any
discourteous
conduct
on
the part
of
the
employees toward
a passenger ,
gives the latter, an
action for
damages
against
the
carrier.

PHIL. CHARTER INSURANCE vs. NEPTUNE ORIENT AGENCY, INC.

554

SCRA

335,

G.R. No.

145044,

June

12,

2008

27
ISSUE:

What

is

the

liability

of

the

common

carrier?

HELD:
Since
the
cargoes
were
lost
while
being
transported
to
the
Philippines,
the
Civil
Code
applies.
The
rights
and
obligations
of
the
common
carrier
are
thus
governed
by
the
provisions
of
the Civil Code
and
the
COGSA,
which
is
a
special
law ,
applies
suppletorily.
Art. 1749
states
that
A
stipulation
that
the
common
carriers
liability
is
limited
to
the
value
of
the
goods
appearing
in
the
bill
of
lading ,
unless
the
shipper
or
owner
declares
a
greater
value,
is
binding.
Art.
1750
states
that A contract
fixing
the
sum
that may be recovered
by the owner
or
shipper
for
the
loss,
destruction
or
deterioration
of
the goods is
valid, if it is reasonable and just under the circumstances , and has been
fairly and freely agreed upon.
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 . . .
unless
the
nature
and
value
of
such
goods
have
been
declared
by
the
shipper
before
the
shipment
and
inserted
in
the
bill
of
lading.
Since
in
the
bill
of
lading,
the
shipper
did
not
declare
the
value
of
the
goods
and
no
additional
value
had
been
paid, the
stipulation in
the
bill
of
lading
that
the
carriers
liability
shall
not
exceed $500
per package applies.

PHILIPPINE NATIONAL RAILWAYS vs. COURT OF APPEALS

536 SCRA 147,
ISSUES:

1)

Whether

2)

What

PNR

is

the

G.R.

observes
liability

No.

157658,

October

due

diligence.

of

PNR?

15,

2007

HELD: 1) NO.
It
was
ascertained
beyond
doubt
that
the
proximate
cause
of
the
collision
is
the
negligence
and
imprudence
of
the
PNR
and
its
locomotive
driver
in
operating
the
passenger
train .
The
train
was
running
at
a
high
speed,
there
was
no
crossing
bar
or
flagman
and
the
signaling device
was in a dilapidated
condition .
It is the responsibility of
the
railroad
company
to
use
reasonable
care
to
keep
the
signal
devices
in working order.
Failure to do so would be an indication of negligence
that the train
has a right of way in a railroad crossing under Section
42 (d)
Article
III
of
RA
4136,
otherwise
known
as
the
Land
Transportation
&
Traffic
Code
can
only
be
invoked
if
the
street
or
crossing is so designated and sign posted.
2) Under Article 2180 of the NCC, the employer is primarily liable on
the
0assumption
of
juris
tantum
that
the
employer
failed
to
exercise
diligentissimi
patris
families
in
the
selection
and
supervision
of
its
employees.
Even
the
existence
of
hiring
procedures
and
supervisory
employees
cannot
be
incidentally
invoked
to
overturn
the
presumption
of
negligence
on
the
part
of
employer.

VOYAGE

CHARTER

Loadstar Shipping Co., Inc. remains a common carrier notwithstanding the

existence
of
the
charter
agreement
with
Northern
Mindanao
Transport
Company, Inc., since
the
said
charter
is
limited
to
the
ship
only
and
does
not
involve
both
the
vessel
and
its
crew .
Its
charter
is
only
voyage-charter,
not
a
bareboat
charter .
It
is
only
when
the
charter
includes
both
vessel
and
its
crew,
as
in
a
bareboat
or
demise
charter
that
a
common
carrier
becomes
private.

As
a
common
carrier,
Loadstar
is
required
to
observe
extraordinary
diligence
in
the
vigilance
over
the
goods
it
transports.
When
the
goods
placed
in
its
care
are
lost ,
it
is
presumed
to
have
been
at
fault
or
to
have
acted
negligently.
Loadstar,
therefore,
has
the
burden
of
proving
that
it
observed
extraordinary
diligence
in
order
to
avoid responsibility
for
the
lost
cargo . (Loadstar Shipping Co. Inc. vs. Pioneer Asia
Insurance

Corporation,

G.R.

No.

NEGLIGENCE

157481,

IN

January

24,

2006,

CONTRACT

479

SCRA

OF

655).

TOWAGE

A
tug
and
its
owner
must
observe
ordinary
diligence
in
the
performance of its obligations under the contract of towage . The negligence
of the obligor in the performance of the obligation
renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence

28
of the obligor consists
in the performance
of
demands.

in
the

his failure to exercise due care

obligation
as the nature of the

and prudence
obligation so

The exercise of ordinary prudence by the owner

means ensuring that
its
tugboat
is
free
of
mechanical
problems .
While
adverse
weather
has
always
been
a
real
threat
to
maritime
commerce ,
the
least
that
the
owner could have done was to ensure that its other
tugboats would be
able
to secure the
barge at
all
times during
the
engagement . (Cargolift
Shipping Inc. vs. Acuario Marketing Corporation, G.R. No. 146426, June 27, 2006, 493
SCRA 157)

WHEN

CONSIGNEE

BECOMES

PARTY

OF

THE

CONTRACT

A
consignee,
although
not
a
signatory
of
the
contract
of
carriage
between the
shipper
and
the
carrier ,
becomes a
party to
the
contract
by
reason
either (a)
the
relationship
of
agency
between
the
consignee
and
the
shipper/consignor; b)
the
unequivocal acceptance
of
the
bill
of
lading
delivered
to
the
consignee,
with
full
knowledge
of
its
contents
or
c)
availment
of
the
stipulated
pur autrui. (MOF COMPANY, INC. vs. SHIN
YANG BROKERAGE CORPORATION, G.R. No. 172822, December 18, 2009).

FREIGHT

FORWARDERS

UNSWORTH TRANSPORT INTERNATIONAL (PHIL) INC. vs. COURT OF APPEALS

G.R. No. 166250, July 26, 2010, 625 SCRA 357
Where
instead of
a
common

the
forwarder
contracts
to
deliver
goods
merely arranging
for
their transportation,
it
carrier
for loss
or
damage
to
goods.

to

their
becomes

destination
liable as

A
freight forwarders
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.
The
Civil
Code
does
not
limit
the
liability
of
the
common
carrier
to
a
fixed
amount per
package .
In
all matters
not
regulated by
the
Civil
Code,
the
rights
and
obligations
of
common
carrier
are
governed
by
the
Code
of
Commerce
and
special
laws .
Thus,
the
COGSA
supplements
the
Civil
Code
by
establishing
a
provision
limiting
the
carriers
liability
in the
absence
of a
shippers
declaration of
a
higher
value
in
the
bill
of
lading.

TEMIC AUTOMATIVE

PHILIPPINES

G.R. No. 186965,

December

vs.
23,

TAPI EMPLOYEES UNION

2009,

609

SCRA

355

Freight
forwarders
have been
called
travel
agents
for
freight.
Temic
was
within
its
right
in
entering
the
forwarding
agreements
with
the
forwarders
as
an exercise of
its
management
prerogative.

COGSA -

NOTICE

OF LOSS

Under
Section
3 (6)
of
the
COGSA,
notice
of
loss
or
damages
must
be filed within three days
from
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. (WALLEM PHILIPPINES SHIPPING INC. vs. S.P. FARMS, INC., G.R. No.
161849, July 9, 2010, 624 SCRA 329).

13. TRUTH IN LENDING ACT

HEIRS OF ZOILO ESPIRITU vs. SPS. LANDRITO
520 SCRA 383, G.R. No. 169617, April 4, 2007

29
FACTS: Spouses
Landrito
obtained
a
loan
from
Spouses
Espiritu
in
the
amount
of P350,000 payable
in
3
months
and
secured
by
a
real
estate
mortgage. The Landritos actually received P325,000 after deducting 5% interest
of the principal debt for the first month and service fee . The agreement,
however,
provided
that
the
principal
indebtedness
earns
interest
at
the
legal rate.
Due to failure to pay the principal amount and interest , the Spouses
Landrito and Espiritu agreed to an extension and restructuring of the loan
agreement
such
that
principal
was
increased
to
P874,125 .
Since
the
loan
remained
unpaid,
Spouses
Espiritu
foreclosed
the
mortgage .
At
the
auction
sale, the property was sold to Spouses Espiritu as the lone bidder . Upon
failure
of
Spouses
Landrito
to
redeem
the
property ,
Spouses
Espiritu
consolidated
ownership
over
said
property
and
registered
it
in
their
name .
Spouses
Landrito
filed
an
action
for
annulment/reconveyance
of
title
against
Spouses
Espiritu
alleging
that
they
negotiated
for
the
redemption
of
the
property but Spouses Espiritu increased
the
price.
ISSUE:
Whether
the
5%
interest
rate
Landrito
for
the
first
month
and
the
for
the
succeeding
months
are
valid.

imposed
upon
varying
interest

the
rates

Spouses
imposed

HELD: NO. The omission of interest rate in a contract , and a stipulation

authorizing iniquitous
or unconscionable interests are contrary to morals .
The
omission of the Spouses Espiritu in specifying in the contract the interest
rate
which
was
actually
imposed,
in
contravention
of
the
law,
manifested
bad
faith.
The
real
estate
mortgage
executed
between
the
parties
specified
that the principal indebtedness shall earn interest
at
the
legal rate . The
agreement
contained
no
other
provision
on
interest
or
any
fees
or
charges
incident
to
the
debt.
Aside
from
lack
of
transparency
of
said
agreements,
the
interest
rates
and
the
service
charge
imposed ,
at
an
average of
6.39%
per
month, are excessive.
In enacting RA 3765, otherwise known as the Truth in Lending Act,
the State seeks to protect its citizens from a lack of awareness of the
true cost of credit by assuring the full disclosure of such costs . Section
4,
in
connection
with Section 3 (3) of
the
said
law ,
gives
a
detailed
enumeration
of
the
specific
information
required
to be
disclosed ,
among
which
are
the
interest and
other
charges
incident
to the
extension
of
credit.
Section 6
of
the
same
law
imposes
on
anyone
who
willfully
violates
these provisions,
sanctions
which include civil liability ,
and a fine
and/or
imprisonment.

14.

TRUST

RECEIPTS

LAW - PD 115

HUR TIN YANG vs. PEOPLE OF THE PHILIPPINES

G.R. No. 195117, August 14, 2013, 703 SCRA 606
FACTS: On
various occasions,
Metrobank extended several
commercial letters
of
credits to
Supermax.
These LCs were used by Supermax to pay for
the
delivery of several construction materials
which will be used in their
construction business.
Thereafter,
Metrobank
required
Yang,
as
representative
and
Vice
President
for
Internal Affairs
of
Supermax ,
to
sign 24 trust
receipts as
security for the construction materials
and to hold
those materials
or
the
products of the sale in trust
for
Metrobank.
When the trust
receipts
fell
letter,
Supermax
failed
to
pay
Metrobank.

Hence,

Metrobank

filed

due and despite the receipt

of demand
or
deliver
the
goods
as
proceeds
to

criminal

complaints

for

estafa

against

Yang.

For
his
defense,
while
admitting
signing
the
trust
receipts ,
Yang
argued
that
said
receipts
were
demanded
by
Metrobank
as
additional
security
for
the
loan
extended
to
Supermax
for
the
purchase
of
construction
materials
and
equipment ,
and
that
the
transactions
do
not
constitute
trust
receipt agreements but
rather of
simple loan.
ISSUE:
law.

Whether

HELD:
receipt

NO. The
transaction

Yang

is

liable

for

dealing
between
Yang
but
one
of
simple

estafa
and
loan.

for

violation

Metrobank

of
was

trust
not

receipt
a

trust

30
When
both
parties
enter
into
an
agreement
knowing
fully
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
transactions penalizing under
Sec. 13
of
PD 115
in
relation
to
Article
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
obligated
to
pay
the
goods.

becomes
a
mere
loan
where
bank
the
amount
spent
for
the

NOTHING IS IMPOSSIBLE

the
borrower
purchase
of

WITH GOD

is
the