CORPORATION LAW 1. Jurisdiction over intra-corporate controversy DE ROSSI vs. NLRC G.R. No.

108710, September 14, 1999

Facts: An Italian citizen, herein petitioner, was the Executive VP and GM of private respondent Mating Industrial and Commercial Corporation (MICC). He started work on July 1, 1985 and terminated on August 10, 1988 by MICC based on the ground that the petitioner failed to secure his employment permit, grossly mismanaged the business of the company, and misused corporate funds. Consequently, petitioner filed with the NLRC, a complaint for illegal dismissal with corresponding damages to which the Labor Arbiter rendered a decision in favor of petitioner. On appeal to the NLRC (First Division), petitioner contended that the position of exec. VP is an elective post, specifically provided by the corporates by-laws. Thus, the dismissal of the petitioner was an intra-corporate matter within the jurisdiction of the SEC and not with the Labor Arbiter or the NLRC. Hence, the NLRC rendered the decision dismissing the case by virtue of Section 5, par. (c) of PD No. 902-A. Issue: Does SEC have jurisdiction over the complaint for illegal dismissal filed by the petitioner? Held: Yes. Sec. 45, par. (c) of PD 902-A unequivocally provides that SEC has jurisdiction over intra-corporate affairs regarding the election or appointment of officers of a corporation. In the present case, petitioner is considered an officer of MICC, elected and/or designated by its Board of Directors, since such is prescribed by the corporations by-laws. Note that a corporate officers removal from his office is a corporate act. if such removal occasions an intra-corporate controversy, its nature is not altered by the reason or wisdom, or lack thereof, with which the board of directors might have in tasking such action. When petitioner, as Exec. VP allegedly diverted company funds for his personal use resulting in heavy financial losses to the company, this matter would amount to fraud. Such fraud would be detrimental to the interest not only of the corporation but also of its members. This type of fraud encompasses controversies in a relationship within the corporation covered by SEC jurisdiction. Perforce, the matter would come within the area of corporate affairs and management, and such a corporate controversy would call for the adjudicative expertise of the SEC, not the Labor Arbiter or the NLRC. NOTE: Under R.A. 8799, otherwise known as the Securities Regulation Code, which was approved July 19, 2000, The Commissions jurisdiction over all cases enumerated under Sec. 5 of P.D. 902-A is hereby transferred to the courts of general jurisdiction or the appropriate RTC: Provided, that the Supreme Court in the exercise of its authority may designate the RTC branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra corporate disputes submitted for final resolution which should be resolved within one year from the enactment of this code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of June 30, 2000 until finally disposed. The case, however, is still important in determining if jurisdiction vests in the labor arbiter or the regular courts.

2. Jurisdiction of SEC over corporations organized pursuant to Corp. Code PHIL. NATIONAL CONSTRUCTION CORP. vs PABION G.R. No. 131715, December 8, 1999
Facts: Private respondents Ernesto Pabion and Lovella Ramiro, claiming to be stockholders of the PNCC filed with SEC a verified petition, therein alleging that since 1982 or for a period of 12 years, there has been no stockholders meeting of the PNCC to elect the corporations BOD, thus enabling the incumbent directors to hold on to their position beyond their 1-yr term, in violation of PNCCs By-Laws and the Corporation Code. Private respondents, therefore prayed the SEC to issue an order ordering the officers of PNCC or, in the alternative, authorizing

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petitioners, to call and hold a meeting of the stockholders for the purpose of electing new directors. The care was assigned to SEC Hearing Officer Manuel Perea. The Commission en banc held that PNCC being incorporated under the Corporation Code is therefore, subject to Section 50 of the Corporation Code which requires the holding of regular stockholders meeting for the purpose of selecting PNCCs BOD. Issue: 1) Can SEC determine the corporate status of PNCC? 2) Does SEC have jurisdiction over GOCCs? Does it have the authority to compel PNCC to hold a stockholders meeting for the purpose of electing members of a BOD? 3) Is PNCC an acquired-asset corporation? Held: 1) Yes. It is certainly absurd to say that SEC is without jurisdiction to determine if PNCC is a GOCC simply because the latter claims to be one. The President does not determine whether a corporation is a GOCC or not. It is the law that does. PNCCs status as a GOCC can be ruled upon by SEC based on law. 2) Yes. GOCCs may either be (1) with original charter or created by special law; or (2) incorporated under general law, via either the Old Corporation Code or the New Corporation Code. SEC has no jurisdiction over corporations of the first type primarily because they are governed by their charters. But even this is not absolute, since the corporation Code may apply suppletorily, either by operation of law or through express provision in the charter. On the other hand, over GOCCs established or organized under Corporation Code, the SEC can exercise jurisdiction. These GOCCs are regarded as private corporations despite common misconception. That the government may own the controlling shares in the corporation does not diminish the fact that the latter owes its existence to the Corporation Code. Prescinding from such premises, it necessarily follows that SEC can compel PNCC to hold a stockholders meeting for the purpose of electing members of the latters BOD as clearly provided for by Section 50 of the Corporation Code. 3) Yes. PNCC is indeed an acquired asset corporation as defined in Section 2 (a) of A.O. 59, to wit: a corporation under private ownership, the voting or outstanding share of which (i) were conveyed to the government financial institutions in satisfaction of debts. Moreover, there is no inconsistency between AO 59 and EO 292 otherwise known as Revised Administrative Code. AO 59 does not purport to have established a new kind of corporation that supersedes EO 292. Neither does the former seek to revise the definition of GOCC given in the latter. What AO 59 in fact does is to distinguish GOCCs in general from those that are sought to be privatized. In fact, the definition given in EO 292 itself stated that the GOCCs may be further categorized. This caveat suggests that the definition is broad enough to admit distinctions as to the kinds of GOCCs defined under AC 59. Hence, PNCC is as a GOCC under EO 292. However, for purposes of AO 59, particularly in the application of Section 16 thereof, PNCC is an acquired asset corporation. In this light, the alleged inconsistency is more apparent than real.

3. SECs power to punish contempt YASAY, JR. vs. RECTO GR No. 129521; September 7, 1999
Facts: The case before the Court is an appeal from a decision of the Court of Appeals setting side the order of the SEC declaring respondents guilty of contempt for disobeying a TRO issued to respondents to desist from holding a stockholders meeting of the Interport Resources Corporation. The Court required respondents to comment on the petition within ten days from notice. Thereafter, the respondents filed their comment. In the main, respondents submit that contempt is criminal in character and their exoneration from a charge of contempt amounts to an acquittal from, which an appeal would not lie. Issue: Is contempt civil in nature? Held: No. In this case, the contempt is not civil in nature, but criminal, imposed to vindicate the dignity and power of the Commission; hence, as in criminal proceedings, an appeal would not lie form the order of dismissal of, or an exoneration from, a charge of contempt.

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Civil contempt proceedings are generally held to be remedial and civil in their nature; that is, they are proceedings for the enforcement of some duty, and essentially a remedy for coercing a person to do the thing required. In general, civil contempt proceedings should be instituted by an aggrieved party, or his successor, or someone who has pecuniary interest in the right to be protected. If the contempt is initiated by the court or tribunal exercising the power to punish a given contempt, it is criminal in nature, and the proceedings are to be conducted in accordance with the principles and rules applicable to criminal cases. The State is the real prosecutor. While the SEC is vested with the power to punish for contempt, the salutary rule is that the power to punish for contempt must be exercised on the preservative, not vindictive principle, and on the corrective and not retaliatory idea of punishment. The courts and other tribunals vested with the power of contempt must exercise the power to punish for contempt for purposes that are impersonal, because that power is intended as a safeguard not for the judges as persons but for the functions that they exercise.

4. Suspension of Claims Against a Corp. Under Rehabilitation RCBC vs. IAC G.R. No. 74851, December 9, 1999
Facts: On September 28, 1984, BF Homes filed a Petition for Rehabilitation and for Declaration of Suspension of Payments with the SEC. RCBC, one of the creditors listed in BF Homes inventory of creditors and liabilities, on October 26, 1984, requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real estate mortgage on some properties of BF Homes. BF Homes opposed the auction sale and the SEC ordered the issuance of a writ of preliminary injunction upon petitioners filing of a bond. Presumably unaware of the filing of the bond on the very day of the auction sale, the sheriff proceeded with the public auction sale in which RCBC was the highest bidder for the properties auctioned. But because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of the certificate of sale covering the auctioned properties. On March 13, 1985, despite the SEC case, RCBC filed with RTC an action for mandamus against the provincial sheriff of Rizal to compel him to execute in its favor a certificate of sale of the auctioned properties. On March 18, 1985, the SEC appointed a Management Committee for BF Homes. Consequently, the trial court granted RCBCs motion for judgment on the pleading ordering respondents to execute and deliver to petitioner the Certificate of Auction Sale. On appeal, the SC affirmed CAs decision (setting aside RTCs decision dismissing the mandamus case and suspending issuance to RCBC of new land titles until the resolution of the SEC case) ruling that whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference but stand on equal footing with other creditors. Hence, this Motion for Reconsideration. Issue: When should the suspension of actions for claims against BF Homes take effect? Held: The issue of whether or not preferred creditors of distressed corporations stand on equal footing with all other creditors gains relevance and materiality only upon the appointment of a management committee, rehabilitation receiver, board or body. Upon cursory reading of Section 6, par (c) of PD 902-A, it is adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured up only upon the appointment of a management committee or a rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC may to some, be more logical and wise but unfortunately, such is incongruent with the clear language of the law. To insist on such ruling, no matter how practical and noble would be to encroach upon legislative prerogative to define the wisdom of the law --- plainly judicial legislation. Once a management committee, rehabilitation receiver, board or body is appointed pursuant to PD 902-A, all actions for claims against a distressed corporation pending before any court, tribunal, board or body shall be suspended accordingly; Suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a totally unsecured creditor. What it merely provides is that all actions for claims against the corporation, partnership or association shall be suspended. This should give the receiver a chance to rehabilitate the corporation if there should still be a possibility for doing so. In the event that rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be

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settled, the secured creditors shall enjoy preference over the unsecured creditors subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit.

5. Personal Liability of Officers and Members of BOD of a Corporation. RESTAURANTE LAS CONCHAS vs. LLEGO G.R. No. 119085, September 9, 1999
Facts: While private respondents (employees of Restaurante Las Conchas) were being employed by petitioners (David and Elizabeth Gonzales officers and members of BOD), the Restaurante Services Corporation got involved in a legal battle with the Ayala Land, Inc. over the land allegedly being occupied by the petitioners for their restaurant. Ayala Land, Inc. obtained a favorable judgment in the case filed against Restaurant Services Corporation for unlawful detainer and the latter were ordered to vacate the premises. Petitioners attempted to look for a suitable place for their restaurant business at the Ortigas Center but to no avail, thus sometime in February 1994 they shut down their business. This resulted in the termination of employment of private respondents. The NLRC, on appeal, ordered the petitioners to pay the separation benefits to the complainant. Issue: Can the petitioners be held personally liable as officers and members of the BOD of the corporation, notwithstanding the fact that it is the latter which is the owner of Restaurante Las Conchas? Held: Yes. Assuming that indeed, the Restaurant Services Corporation was the owner of the Restaurante Las Conchas and the employer of private respondents, this will not absolve petitioners David Gonzales and Elizabeth Gonzales from their liability as corporate officers. Although, as a rule, the officers and members of a corporation are not personally liable for acts done in the performance of their duties, this rule admits of exceptions, one of which is when the employer corporation is no longer existing and is unable to satisfy the judgment in favor of the employee, the officers should be held to satisfy the judgment in favor of the employee, the officers should be held liable for acting on behalf of the corporation. Here, the corporation does not appear to exist anymore. The employees can no longer claim their separation benefits and 13 th month pay from the corporation because it has already ceased operation. To require them to do so would render illusory the separation and 13th month pay awarded to them by the NLRC. Their only recourse is to satisfy their claim from the officers of the corporation who were, in effect, acting in behalf of the corporation. It would appear that, originally, Restaurante Las Conchas was a single proprietorship put up by the parents of Elizabeth Gonzales, who together with her husband, David, later took over its management. Private respondents claim, and rightly so, that the former were the real owners of the restaurant. The conclusion is bolstered by the fact that petitioners never revealed who were the other officers of the Restaurant Services Corporation, if only to pinp9int responsibility in the closure of the restaurant that resulted in the dismissal of private respondents from employment. Petitioners David and Elizabeth Gonzales are, therefore, personally liable for the payment of the separation and 13 th month pay due to their former employees. Note: The Court, in effect, pierced the veil of corporate fiction.

NEGOTIABLE INTRUMENTS LAW 1. When a Person is Deemed to be an Indorser; Civil Liability SAPIERA vs CA G.R. No. 128927, September 14, 1999
Facts: On several occasions, petitioner Sapiera, a sari-sari store owner, purchased from Monnico Mart certain grocery items, mostly cigarettes, and paid for them with checks issued by one Arturo de Guzman. These checks were signed at the back by the petitioner.

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When presented for payment, the checks were dishonored because the drawers account was already closed. Private respondent Roman Sua informed De Guzman and petitioner about the dishonor but both failed to pay the value of the checks. Hence, four (4) charges of estafa were filed against petitioner but consequently she was acquitted for insufficiency of evidence but the court a quo did not rule on whether she could be held civilly liable for the checks she indorsed to private respondent. On appeal, the respondent court ordered petitioner to pay private respondent the remaining P210, P150. After deducting the amount already collected by the latter as civil indemnity in the criminal cases against De Guzman. Hence, this instant petition. Issue: Can petitioner be required to pay civil indemnity to private respondent after trial court had acquitted her of criminal charges? Held: Yes. It is undisputed that the four (4) checks issued by De Guzman were signed by petitioner at the back without any indication as to how she should be bound thereby and, therefore, she is deemed to be an indorser thereof. The NIL clearly provides Sec. 17. Construction where instrument is ambiguous. --- Where the language of the instrument is ambiguous, or there are admissions therein, the following rules of construction apply: x x x (f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is deemed an indorser. x x x The dismissal of the criminal cases against petitioner did not erase her civil liability since the dismissal was due to insufficiency of evidence and not from a declaration from the court that the fact from which the civil action might arise did not exist. An accused acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. The accused should be adjudged liable for the unpaid value of the checks signed by her in favor of the complainant.

TRANSPORTATION LAW 1. Presentation of Bill of Lading For Delivery of Goods; When not required; Extraordinary Responsibility of Common Carriers MACAM vs. COURT OF APPEALS GR No. 125524; August 25, 1999
Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board vessel Nen-Jiang, owned and operated by respondent China Ocean Shipping Co. through local agent Wallem Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered by Bill of Lading No. HKG 99013. The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Rowloon (GPC) as notify party. Upon arrival in Hongkong, shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK, such that the latter, still in possession of original bill of lading, refused to pay petitioner thru SOLIDBANK. Since SOLIDBANK already pre-paid the value of shipment, it demanded payment from respondent WALLEM but was refused. MACAM constrained to return the amount paid by SOLIDBANK and demanded payment from WALLEM but to no avail. WALLEM submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shippers request since for prepaid shipt ofrt charges already fully paid. MACAM, however, argued that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK and not GPC. The RTC ruled for MACAM and ordered value of shipment. CA reversed RTCs decision.

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Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without the bills of lading or bank guarantee? Held: It is a standard maritime practice when immediate delivery is of the essence, for shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of bill of lading as that usually takes time. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. To implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the PAKISTANI BANK since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the PAKISTANI BANK to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof the buyer/importer is essentially a factor to reckon with. We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper.

2. Liability for deadfreight and demurrage NATIONAL FOOD AUTHORITY vs. CA G.R. No. 96453, August 4, 1999
Facts: National Food Authority (NFA), thru its officers, entered into a Letter of Agreement for Vessel/Barge Hire with Hongfil for the shipment of 200,000 bags of corn grains from Cagayan de Oro City to Manila. The loading of bags of corn grains in the vessel commenced but it took a longer period of 21 days, 15 hours, and 18 minutes to finish than as was certified by the arrastre firm as there was a strike staged by the arrastre workers in view of the refusal of the striking stevedores to attend to their work. The vessel was allowed to depart for the port of Manila and arrived there, but unfortunately, it took a longer period of 20 days, 14 hours and 33 minutes to finish the unloading than the discharging rate certified by the Port of Manila, due to the unavailability of a berthing space for the vessel M/V CHARLIE/DIANE. Only 166,798 bags were unloaded at the Port of Manila. After the discharging was completed, NFA paid Hongfil the amount of P1,006,972.11 covering the shipment of corn grains. Thereafter, Hongfil sent its billing to NFA claiming payment for freight covering the shut-out load or deadfreight as well as demurrage, allegedly sustained during the loading and unloading of subject shipment of corn grains. When NFA refused to pay the amount reflected in the billing, Hongfil brought the present action against NFA. Issues: 1) Can petitioners be held liable for deadfreight? 2) Can petitioners be held liable for demurrage? Held: 1) Yes. It bears stressing that subject Letter of Agreement is considered a Charter Party. A charter party is classified into (1) bareboat or demise charter and (2) contract of affreightment. Subject contract is one of affreightment, whereby the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel. Under such contract, the ship retains possession, command, and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire. Under the law, the cargo not loaded is considered a deadfreight. It is the amount paid by or recoverable from a charterer of a ship for the portion of the ships capacity the latter

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contracted for but failed to occupy. Explicit and succinct is the law that the liability for deadfreight is on the charterer. (Article 680 of the Code of Commerce). 2) No. Demurrage is the sum fixed in a charter party as a remuneration to the owner of the ships for the detention of his vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing. Liability for demurrage, using the word in its technical sense, exists only when expressly stipulated in the contract. Shipper or charterer is liable for the payment of demurrage claims when he exceeds the period for loading and unloading as agreed upon or the agreed laydays. The period for such may or may not be stipulated in the contract. A charter party may either provide for a fixed laydays or contain general or indefinite words such as customary quick dispatch or as fast as the streamer can load. In the case at bar, the charter party provides merely for a general or indefinite words of customary quick dispatch. Such stipulation implies that loading and unloading of the cargo should be within a reasonable time. The charterer NFA could not be held liable for demurrage for it appears that cause of delay was not imputable to either of the parties. The cause of delay during the loading was the strike staged by the crew of the arrastre operator, and the unavailability of a berthing space for the vessel during the unloading. Here, the Court holds that the delay sued upon was still within the reasonable time embraced in the stipulation of Customary Quick Dispatch. Furthermore, considering the subject contract of affreightment contains an express provision Demurrage/Dispatch: NONE, the same left the parties with no recourse but to apply the literal meaning of such stipulation.

3. Warsaw Convention; Prescription of Action UNITED AIRLINES vs. UY G.R. No. 127768, November 19,1999
Facts: On October 13, 1989, respondent, a passenger of United Airlines, checked in together with his luggage one piece of which was found to be overweight at the airline counter. To his utter humiliation, an employee of petitioner rebuked him saying that he should have known the maximum weight allowance per bag and that he should have packed his things accordingly. Then, in a loud voice in front of the milling crowd, she told respondent to repair his things and transfer some of them to the light ones. Respondent acceded but his luggage was still overweight. Petitioner billed him overweight charges but its employee reused to honor the miscellaneous charges under MCD which he offered to pay with. Not wanting to leave without his luggage, he paid with his credit card. Upon arrival in manila, he discovered that one of his bags had been slashed and its contents stolen. In a letter dated October 16, 1989, he notified petitioner of his loss and requested reimbursement. Petitioner paid for his loss based on the maximum liability per pound. Respondent considered the amount grossly inadequate. He sent two more letters to petition but to no avail. On June 9, 1992, respondent filed a complaint for damages against petitioner Airline. Petitioner moved to dismiss the complaint invoking the provisions of Article 29 of the Warsaw Convention. Respondent countered that according to par. 2 of Article 29, the method of calculating the period of limitation shall be determined by the law of the court to which the case is submitted. Issues:1) Does the Warsaw Convention preclude the operation of the Civil Code and other pertinent laws? 2) Has the respondents cause of action prescribed? Held: 1) No. Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the peculiar facts presented by each case. Convention provisions do not regulate or exclude liabilities for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage. Neither may the Convention be invoked to justify the disregard of some extraordinary type of damage. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefore3 beyond the limits et by said convention. Likewise, we have held that the Convention does not preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carriers employees is found or established. 2) No. While his 2nd cause of action (an action for damages arising from theft or damage to property or goods) is well within the bounds of the Warsaw convention, his 1 st cause of action

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(an action for damages arising from the misconduct of the airline employees and the violation of respondents rights as passengers) clearly is not. The 2-yr limitation incorporated in Art. 29 of the Warsaw Convention as an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the forum, forecloses the application of our own rules on interruption of prescriptive periods. (Art. 29, par. 2 was indented only to let local laws determine whether an action shall be deemed commenced upon the filing of a complaint.) Since, it is indisputable that respondent filed the present action beyond the 2-yr time frame his 2nd cause of action must be barred. However, it is obvious that respondent was forestalled from immediately filing an action because petitioner gave him the runaround, answering his letters but not giving in to his demands. True, respondent should have already filed an action at the first instance when petitioner denied his claims but the same could only be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence, despite the express mandate of Article 29 of the Warsaw Convention that an action for damages should be filed within 2 years from the arrival at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airlines itself. Thus, respondents 2 nd cause of action cannot be considered as time barred.

4. Carriage of Goods by Sea Act; Arrastre; Prescription of Action INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. vs. PRUDENTIAL GUARANTEE & ASSURANCE CO., INC. G.R. No. 134514, December 8, 1999
Facts: Mother vessel Tao He loaded and received on board in San Francisco, California, a shipment of five lots of canned foodstuff complete and in good order and condition for transport to Manila in favor of Duel Food Enterprises (consignee) under shippers load and count. The shipment arrived at the port of Manila and discharged by the vessel MS Wei He in favor of ICTSI for safekeeping. The brokerage withdrew the shipment and delivered the same to the consignee. An inspection there revealed that 161 cartoons were missing valued at P85,984.40. Consignee learned of such shortage on June 4, 1990. It filed claim for loss on October 2, 1990. Claim for indemnification of the loss having been denied by ICTSI and the brokerage, consignee sought payment from Prudential (insurer) under the marine cargo policy. The appellate court found ICTSI negligent in its duty to exercise due diligence over the shipment. It also ruled that the filing of a claim depended on the issuance of a certificate of loss by ICTSI based on the liability clause printed on the back of the arrastre and wharfage receipt. Since ICTSI did not issue such a certificate despite being informed of the shortage, the 15-day period given to the consignee for filing a formal claim never began. Prudential, therefore can hold the ICTSI liable for the shortage. Issues: 1) Was ICTSI negligent in its duty to exercise due diligence over the shipment? 2) Did the consignee fail to file a formal claim within the period stated on the dorsal side of the arrastre and wharfage receipt? Held: 1) No. The consigned goods were shipped under shippers load and count. This means that the shipper was solely responsible for the loading of the container, while the carrier was oblivious to the contents of the shipment. Protection against pilferage of the shipment was the consignees lookout. The arrastre operator was not required to verify the contents of the container received and to compare them with those declared by the shipper because as earlier stated, the cargo was at the shippers load and count. The arrastre operator was expected to deliver to the consignee only the container received from the carrier. The legal relationship between the arrastre and consignee is akin to that between a warehouseman and a depositor. As to both the nature of the functions and the place of their performance, arrastre operators services are clearly not maritime in character. 2) Yes. In order to hold the arrastre operator liable for lost or damaged goods, the claimant should file with the operator a claim for the value of said goods within the 15-day period from the date of discharge of the last package from the carrying vessel. The filing within the period is in the nature of a prescriptive period for bringing an action and is a condition precedent to holding the arrastre operator liable. In an endeavor to promote fairness, equity and justness, however, a long line of cases has held that the 15-day period for filing claims should be counted from the date the consignee learns of the loss, damage or misdelivery of goods.

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In the case at bar, the consignee had all the time to make a formal claim from the day it discovered the shortage in the shipment, which was June 4, 1990, as shown by the records. By the time the claim for the loss was filed on October 2, 1990, four months had already elapsed from the date of delivery. In any event, within 15 days from the time the loss was discovered, the consignee could have filed a provisional claim, which would have constituted substantial compliance with the rule. Its failure to do so relieved the arrastre operator of any liability for the non-delivery of the goods. The rationale between the time limit is that, without it, a consignee could too easily concoct or fabricate claims and deprive the arrastre operator of the best opportunity to prove immediately their veracity.

INSURANCE LAW 1. Concealment; Real Party-in-Interest GREPALIFE vs. CA G.R. No. 113899, October 13, 1999.
Facts: A contract of group life insurance was executed between petitioner and DBP wherein the former agreed to insure the lives of eligible housing loan mortgages of the latter. Dr. Leuterio was one of those who applied for membership in the said insurance plan. In the application for, when asked whether he is suffering from any physical impairment, he answered in the negative; and when asked whether he is good health to the best of his knowledge, he answered in the affirmative. Petitioner approved the application and issued the corresponding certificate. Dr. Leuterio died due to massive cerebral hemorrhage. When DBP submitted a claim to petitioner, it was denied on the ground that Dr. Leuterio was not physically healthy when he applied for an insurance coverage and that he did not disclose he had been suffering from hypertension. Allegedly such non-disclosure constituted concealment. The widow of Dr. Leuterio filed a complaint against petitioner for specific performance with damages. Issues: 1) Is the widow of the insured-mortgagor a real party in interest in a claim under the life insurance contract? 2) Is there concealment that will vitiate the insurance contract? 3) Can the mortgagor of DBP hold the insurer liable without proof of the actual outstanding mortgage payable? Held: 1) Yes. Where the mortgagor pays the insurance premium under the group insurance policy, making the loans payable to the mortgagee, the insurance is on the mortgagors interest (because (a) the proceeds will be applied to the payment of mortgage debt, thereby relieving the heirs of mortgagor from paying the obligation; and (b) in the event of death, the mortgage obligation will be extinguished by the application of insurance proceeds to mortgage indebtedness), and the mortgagor continues to be a party to the contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the mortgagee a party to the contract. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the incurred might have recovered, the widow of Dr. Leuterio may file the suit against the insurer Grepalife. 2) No. Concealment exists where the assured had knowledge of a fact material to the risk, and with honesty, good faith and fair dealing requires that he should communicate it to the assured, but he designedly and intentionally withheld the same. The fraudulent intent on the part of the insured need be established to entitle the insurers to rescind the contract. Misrepresentation as the defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance. 3) Yes. A life insurance is a valued policy. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or death is the sum fixed in the policy.

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INTELLECTUAL PROPERTY 1. Trademark; Res Judicata MIRPURI vs. CA G.R. No. 114508, November 19, 1999
Facts: In 1970, Escobar filed an application with the Bureau of Patents for the registration of the trademark Barbizon for use in horsiers and ladies undergarments (IPC No. 686). Private respondent reported Barbizon Corporation, a corporation organized and doing business under the laws of New York, USA, opposed the application. It was alleged that its trademark is confusingly similar with that of Escobar and that the registration of the said trademark will cause damage to its business reputation and goodwill. In 1974, the Director of Patents gave due course to the application. Escobar later assigned all his rights and interest over the trademark to petitioner. In 1979, Escobar failed to file with the Bureau the affidavit of use of the trademark required under the Philippine Trademark Law. Due to this failure, the Bureau cancelled Escobars certificate of registration. In 1981, Escobar and petitioner separately filed this application for registration of the same trademark. (IPC 2049). Private respondent opposed again. This time it alleged (1) that the said trademark was registered with the US Patent Office; (2) that it is entitled to protection as well-known mark under Article 6 bis of the Paris Convention, EO 913 and the two Memoranda of the Minister of Trade and Industry and (3) that its use on the same class of goods amounts to a violation of the Trademark Law and Art. 189 of the RPC. Petitioner raised the defense of Res Judicata. Issue: One of the requisites of res judicata is identical causes of action. Do IPC No. 686 and IPC No. 2049 involve the same cause of action? Held: No. The issue of ownership of the trademark was not raised in IPC 686. IPC 2049 raised the issue of ownership, the first registration and use of the trademark in the US and other countries, and the international recognition of the trademark established by extensive use and advertisement of respondents products for over 40 years here and abroad. These are different from the issues of confessing similarity and damage in IPC 686. The issue of prior use may have been raised in IPC 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC 2049 stems from the respondents claims originator of the word and symbol Barbizon, as the first and registered user of the mark attached to its products which have been sold and advertised would arise for a considerable number of years prior to petitioners first application. Indeed, these are substantial allegations that raised new issues and necessarily gave respondents a new cause of action. Moreover, the cancellation of petitioners certificate registration for failure to file the affidavit of use arose after IPC 686. This gave respondent another cause to oppose the second application. It is also to be noted that the oppositions in the first and second cases are based on different laws. Causes of action which are distinct and independent from each other, although out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operating as res judicata, such as where the actions are based on different statutes.

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