TABLE OF CONTENTS SUBJECT MATTER PAGE INSURANCE 2 CORPORATION LAW 17 SECURITIES REGULATIONS CODE 36 P. D. 902-A 38 NEGOTIABLE INSTRUMENTS 3 TRANSPORTATION !6 SPECIAL LAWS T"#$%&#"' #($ T"#$%(#&%) 7! T"*)+ R%,%-.+) L#/ 7! S%,"%,0 12 B#(' D%.1)-+) 76 1 INSURANCE 3. 41/ � # ,1(+"#,+ 12 -()*"#(,% 5% .%"2%,+%$6 A. A contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. There can be no contract of insurance unless the minds of the parties have met in agreement. Hence, it is only when the insurer accepts the application and communicates the same to the applicant that the contract of insurance is perfected. 1 f the offer and acceptance are made by correspondence, the acceptance shall not be binding until it has been made known to the one making the offer. ! Aside from meeting of the minds of the parties, premium on the policy must be paid before the contract can be valid and binding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
A. The contract was not perfected. t is only when the insurer accepts the application and communicates the same to the applicant and the latter pays the premium while he is in good health that the contract of insurance is perfected. The insurer$s acceptance is manifested when it issues a corresponding policy to the applicant. %ere& died before his application was brought to the head office of '( )ineman in *anila. There was absolutely no way the acceptance of the application could have been communicated to the applicant inasmuch as the applicant was already dead at that time. There can be no contract of insurance unless the minds of the parties have met in agreement.
3. 41/ );1*8$ -()*"#(,% ,1(+"#,+) 5% -(+%"."%+%$6
A. n case there is no doubt as to the terms of an insurance contract, the provisions must be construed in their plain, ordinary and popular sense. However, when the terms of the policy are ambiguous, uncertain or doubtful, they should be interpreted strictly against the insurer and liberally in favor of the insured, because the insured has no voice 1 %ere& vs. +ourt of Appeals, ,. -. .o. 11!"!/, 0anuary !1, !222. 2 3nri4ue& vs. Sun )ife nsurance of +anada, 51 %hil. !6/. 3 Section 77. 4 %ere& vs. +ourt of Appeals, ,. -. .o. 11!"!/, 0anuary !1, !222. ! in the selection of the words used, and the language of the contract is selected by legal advisers of the insurance company. 8 n such case, ambiguous provisions are construed strictissimi juris or of strictest terms 6 against the insurer. An insurance contract, being a contract of adhesion, should be interpreted as to carry out the purpose for which the parties entered into the contract which is to insure against risks of loss or damage to the goods. )imitations of liability should be regarded with e9treme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. 7 3. A"% ,1(+"#,+) 12 -()*"#(,% %(+%"%$ -(+1 50 +;% -()*"%" #($ -()*"%$ 1( %=*#8 211+-(:6 A. To characteri&e the insurer and the insured as contracting parties on e4ual footing is inaccurate at best. nsurance contracts are wholly prepared by the insurer with vast amounts of e9perience in the industry purposefully used to its advantage. *ore often than not, insurance contracts are contracts of adhesion containing technical terms and conditions of the industry confusing if at all understandable to lay persons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order to protect the interest of insurance applicants, insurance companies must be obligated to act with haste upon insurance applications, to either deny or approve the same, or otherwise be bound to honor the application as a valid, binding and effective insurance contract. 1 3. W;0 #"% -()*"#(,% ,1(+"#,+) ,#88%$ ,1(+"#,+) 50 #$;%)-1( 1" #$;%"%(,%6 A. nsurance contracts are prepared only by the insurer and imposed upon parties dealing with it which may not be changed, the latter$s participation in the agreement being reduced to the alternative to :take it or leave it;, in contrast to those entered into by parties bargaining on an e4ual footing and, therefore, any ambiguity thereon must be resolved against the insurer, the party preparing the contract. /
3. P;-8#&8-2% #($ E+%"(#8 G#"$%() %(+%"%$ -(+1 # G"1*. L-2% P18-,0 *($%" /;-,; +;% ,8-%(+) 12 E+%"(#8 /;1 .*",;#)%$ 5*"-#8 81+) 2"1& -+ 1( -()+#88&%(+ /1*8$ 5% -()*"%$ 50 P;-8#&8-2%. E+%"(#8 /#) "%=*-"%$ *($%" +;% .18-,0 +1 )*5&-+ # 8-)+ 12 8 +alanoc vs. +ourt of Appeals, 8! <. ,. 1/1= >ua +hee ,an vs. )aw ?nion -ock ns. +o., )td., 8! <. ,. 1/1!. 6 *c +ullough @ +o. vs. Taylor, !8 %hil. 11"= Asked, .o. A B!C, !22" 'ar 39ams. 7 D'% %ool of Accredited nsurance +ompanies vs. -adio *indanao .etwork, nc., 512 S+-A "15 "18, 0anuary !7, !226. 8 3ternal ,ardens *emorial %ark +orporation vs. The %hil. American )ife nsurance +o., ,. -. .o. 166!58, April /, !221. / B>ua +hee ,an vs. )aw ?nion -ock ns. +o., )td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he seemingly conflicting provisions must be harmoni&ed to mean that upon a party$s purchase of a memorial lot on installment basis from 3ternal, an insurance contract covering the lot purchaser is created and the same is effective, valid and binding until terminated by %hilamlife by disapproving the insurance application. nsurance is a contract by adhesion which must be construed liberally in favor of the insured and strictly against the insurer. 10 3. A"% 4MO) 1" 4%#8+; M#-(+%(#(,% O":#(-7#+-1() /;1)% ."-&#"0 15C%,+-1( -) +1 ."19-$% &%$-,#8 )%"9-,%) #) (%%$%$< %(:#:%$ -( -()*"#(,% 5*)-(%))6 A. The test to determine whether a company is engaged in the insurance business or not is whether the assumption of risk and indemnification of lass are the principal object and purpose of the organi&ation or whether they are merely incidental to its business. f these are the principal objectives, the business is that of insurance. 'ut if they are merely incidental and service is the principal purpose then the business is not insurance. H*< whose main object is to provide the members of a group with health services, is not engaged in the insurance business. 11
3. 41/ );1*8$ #&5-:*-+-%) -( # 4%#8+; C#"% A:"%%&%(+ 5% -(+%"."%+%$6 A. Health +are Agreement is in the nature of a nonElife insurance which is primarily a contract of indemnity 1! and hence, it is a contract of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. 1" 3. W;1 � 5% # 5%(%2-,-#"0 -( 8-2% -()*"#(,%6 A. Any person may be designated as beneficiary in a life insurance contract even 10 3ternal ,ardens *emorial %ark +orp. vs. %hilamlife, ,. -. 166!58, April /, !221. 11 %hlippine Health +are %roviders, nc. vs. +ommissioner of nternal -evenue, 622 S+-A 51", Sept. 1/, !22/. 12 %hilamcare Health Systems, nc. vs. +A, "7/ S+-A "86 B!22!C. 13 'lue +ross Health +are, nc. vs. <livares, 855 S+-A 812, 816, (ebruary 1!, !221. 5 though he is a stranger and has no insurable interest in the life insured, 15 e9cept those who are forbidden by law to receive donations from the insured 18 such asF BaC Those made between persons who are guilty of adultery or concubinage at the time of the donation= BbC Those made between persons found guilty of the same criminal offense, in consideration thereof= BcC Those made to a public officer or his wife, descendants and ascendants, by reason of his office. 16
n essence, a life insurance policy is no different from a civil donation insofar as designation of beneficiary is concerned. 'oth are founded upon the same considerationF liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds of the said insurance. As a conse4uence, the proscription in Article 7"/ of the +ivil +ode should e4ually operate in life insurance contracts. Any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation. 17 .o legal proscription e9ists in naming as beneficiaries the children of illicit relationships of the insured, and thus they may be named as beneficiaries. 11 3. M*)+ +;% 5%(%2-,-#"0 ;#9% -()*"#58% -(+%"%)+ -( 8-2% -()*"%$6 A. A person procuring insurance on his own life may name anyone he chooses as beneficiary thereof, even though he is stranger and has no insurable interest in the life insured. 1/ However, a person who cannot receive donation from the insured under Article 7"/ of the +ivil +ode cannot be designated as beneficiary. !2 3. M#0 +;% /-2% /;1 #5#($1(%$ ;%" ;*)5#($ 5% # 5%(%2-,-#"0 12 S1,-#8 S%,*"-+0 B%(%2-+)6 14 5 +ouch !d, 825= Asked, 1/56 BAug.C and 1/6/ 'ar 39ams.= .o. A, 1/17 'ar 39ams. 15 Art. !21!, +ivil +ode= Asked, 1/88 @ 1/6! 'ar 39ams.= .o. 5, 1/11 'ar 39ams., .o. 1", 1/18 'ar 39ams.= .o. G, 1//1 'ar 39ams. 16 Article 7"/ +ivil +ode. 17 nsular )ife Assurance +o., )td., vs. 3brado, 12 S+-A 111= Asked, .o. 5, 1/11 'ar 39ams.= .o. 1", 1/18 'ar 39ams.= .o. G, 1//1 'ar 39ams. 18 Heirs of )oreto +. *aramag vs. *aramag, 811 S+-A 775, 0une 8, !22/. 19 5 +ouch !d. 825= n re Saymanaki$s 3state, 167 A. 5!2, 12/ %a. Super, 888= Asked 1/5/ 'ar 39ams.= .o. A, 1/17 'ar 39ams. 20 See discussions under Section 11. 8 A. n the case of Social Security System, et al., vs. ,loria de los Santos !1 the Supreme +ourt ruled that a wife who left her husband and lived with another man is no longer entitled to receive Social Security benefits upon the death of the husband because she was no longer dependent upon him for her support. 3. L%)) +;#( # 0%#" #2+%" +;% &#""-#:% 12 A(+1(-1 $% 81) S#(+1) #($ G81"-# $% 81) S#(+1)< +;% 8#++%" 8%2+ A(+1(-1 #($ ,1(+"#,+%$ #(1+;%" &#""-#:% /-+; D1&-(:1 T#8%() -( 196!. I( 1969< G81"-# /%(+ 5#,' +1 A(+1(-1 #($ 8-9%$ /-+; ;-& *(+-8 1983 /;%( );% #:#-( 8%2+ A(+1(-1 #($ /%(+ +1 +;% U(-+%$ S+#+%) /;%"% );% 15+#-(%$ # $-91",% 2"1& A(+1(-1. I( +;% &%#(+-&%< A(+1(-1 &#""-%$ C-"-8# $% 81) S#(+1) #($ #&%($%$ ;-) SSS "%,1"$) 50 ,;#(:-(: ;-) 5%(%2-,-#"0 2"1& G81"-# +1 C-"-8#. A(+1(-1 $-%$ #($ G81"-# ,8#-&%$ +;% SSS -()*"#(,% 5%(%2-+). T;% C1*"+ 12 A..%#8) "*8%$ +;#+ +;% &#""-#:% 5%+/%%( A(+1(-1 #($ G81"-# )+-88 )*5)-)+%$ #($ +;% )*5)%=*%(+ &#""-#:%) ,1(+"#,+%$ 50 +;%& /%"% 91-$. T;*)< +;% C1*"+ 12 A..%#8) "*8%$ +;#+ G81"-# /#) )+-88 +;% 8%:#8 /-2% 12 A(+1(-1 #($ ;%(,% %(+-+8%$ +1 +;% SSS 5%(%2-+). S;1*8$ G81"-# 5% %(+-+8%$ +1 +;% SSS 5%(%2-+)6 A. The divorce obtained by ,loria against Antonio was not binding in this jurisdiction. ?nder %hilippine law, only aliens may obtain divorces abroad provided they are valid according to their national law. The divorce was obtained by ,loria while she was still a (ilipino citi&en, hence it did not sever her marriage with Antonio. However, although ,loria was the legal spouse, she is still dis4ualified to be his primary beneficiary under the SSS law. A wife who left her family until her husband died and lived with other men was not dependent upon her husband for support, financial or otherwise, during the same period. ,loria left the conjugal abode and lived with two different men. These facts remove her from 4ualifying as a primary beneficiary of her deceased husband. !! 3. W;#+ -) +;% &%#(-(: 12 -(,1(+%)+#58% ,8#*)%# A. An incontestable clause in a life insurance policy is an agreement by which the insurance company limits the period of time within which it will interpose objections to the validity of the policy or set up any defense. 23 After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentations of the insured or his agent. 2 3. W;#+ #"% +;% "%=*-)-+%) 12 -(,1(+%)+#5-8-+0# 21 ,. -. .o. 1657/2, August !/, !221. 22 Social Security System, et al., vs. ,loria de los Santos, August !/, !221, Third Division, Supreme +ourt. 23 58 +. 0. S. 781. 24 Section 51, par. !. 6 A. To become incontestable, a policy must have the following re4uisitesF 1. t must be a life insurance policy= !. t must be payable on the death of the insured= and ". t must have been in force during the lifetime of the insured for a period of two years. 2! 3. W;#+ #"% +;% %22%,+) 12 -(,1(+%)+#5-8-+0# A. Hhenever all the re4uisites of incontestability are present, the insurer can no longer escape liability under the policy nor be allowed to prove that the policy is void ab initio or rescindable by reason of concealment or misrepresentation of the insured or his agent. n other words, the insurer is precluded from contesting the policy on any ground. 26 3. W;%( � # +;-"$ .%")1( )*% +;% -()*"%"# A. f the insurance contract was intended to benefit third persons, the latter may directly claim from the insurer. Thus, f the insurance contract should contain some stipulation in favor of a third person, the latter although not a party to the contract may enforce the stipulation in his favor before it is revoked by the contracting parties, 27 or where the insurance contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable, can sue the insurer. 28 3. T;% -()*"%" -))*%$ # ,1&&1( ,#""-%" #,,-$%(+ -()*"#(,% .18-,0 +1 M#(-8# D%881/ T#E-,#5 /;%"%-( -+ /#) )+-.*8#+%$ +;#+ +;% -()*"%" /-88 -($%&(-20 #(0 #*+;1"-7%$ $"-9%" /;1 /#) $"-9-(: +;% &1+1" 9%;-,8% -()*"%$. A +#E-,#5 12 +;% -()*"%$< $"-9%( 50 C1=*-# &%+ # 9%;-,*8#" #,,-$%(+ /;-,; ,#*)%$ +;% $%#+; 12 C1=*-#. M#0 +;% ;%-") 12 C1=*-# ;18$ +;% -()*"%" 8-#58%# A. The policy under consideration is typical of contracts pour autrui and therefore, the enforcement thereof may be demanded by a third party for whose benefit it was made, although not a party to the contract. 29
3. A:*-8#" -()*"%$ ;-) C%%.(%0) #:#-()+ #,,-$%(+) #($ +;-"$-.#"+0 8-#5-8-+0. I( +;% .18-,0< +;% -()*"%" #:"%%$ +1 -($%&(-20 +;% -()*"%$ #:#-()+ ?#88 )*&) /;-,; +;% -()*"%$ );#88 5%,1&% 8%:#880 8-#58% +1 .#0 -( "%).%,+ 12 $%#+; 12 1" 51$-80 -(C*"0 +1 25 Section 51, par. !. !6 58 +. 0. S. 712= Asked, 'ar 39ams. F 1/57, 1/8" @ 1/66= Asked, .o. G, 1//1 'ar 39ams. 27 +o4uia vs. (ieldmen$s ns.+o., !6 S+-A 17/, 111. !1 ,uingon vs. del *onte, et al., !2 S+-A 125". !/ +o4uia vs. (ieldmen$s ns. +o., nc., !6 S+-A 17/. 7 #(0 .%")1(@. O(% 12 +;% C%%.(%0) -()*"%$ 5*&.%$ G*-(:1( /;1 ;#$ C*)+ #8-:;+%$ 2"1& #(1+;%" C%%.(%0. G*-(:1( $-%$. C#( +;% -()*"%" 5% &#$% $-"%,+80 8-#58% 21" +;% $%#+; 12 G*-(:1( /;1 /#) (1+ # .#"+0 +1 +;% -()*"#(,% ,1(+"#,+6 A. The insurance taken was one for indemnity for liability to third persons and, therefore, such third person is entitled to sue the insurer. 30 3. W;#+ #"% +;% )+#+*+1"0 %E,%.+-1() +1 +;% "*8% +;#+ +;% -()*"%" -) %(+-+8%$ +1 +;% .#0&%(+ 12 ."%&-*& #) )11( #) +;% +;-(: -()*"%$ -) %E.1)%$ +1 +;% .%"-8 -()*"%$ #:#-()+6 A. .otwithstanding any agreement to the contrary, no policy or contract of insurance is valid and binding unless and until the premium thereof has been paid. "1
The statutory e9ceptions wherein the policy shall be binding notwithstanding the nonEpayment of premiums areF 1. n case of life or industrial life insurance whenever the grace period applies= "! !. Hhen the insurer makes a written acknowledgment of the receipt of premium, such acknowledgment is a conclusive evidence of payment of premium to make the policy binding= "" ". Hhere the obligee has accepted the bond or suretyship contract in which case such bond or suretyship becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety. "5
3. A)-$% 2"1& +;% )+#+*+1"0 %E,%.+-1() &%(+-1(%$ #519% /;%"%-( +;% .18-,0 -) 9#8-$ #($ 5-($-(: (1+/-+;)+#($-(: +;% (1(-.#0&%(+ 12 ."%&-*&)< /;#+ #"% +;% 1+;%" %E,%.+-1() +;#+ %9189%$ 2"1& ,#)%) $%,-$%$ 50 +;% S*."%&% C1*"+F A. Aside from the statutory e9ceptions, the following are the instances when the Supreme +ourt ruled that the policy is valid and binding notwithstanding the nonE payment of premiumsF 1. n case of cover notes which are binding even if premiums are not paid thereon because no premium could be fi9ed on the cover note until all the particulars of the insurance are known. +over notes should be integrated to the regular policies so that the premiums on the regular policies include the consideration for the cover notes. "8 "2 ,uingon vs. del *onte, !2 S+-A 125". 31 Section 77, ! nd sentence. 32 Section 77, ! nd sentence. 33 Section 71. 34 Section 177. 35 %acific Timber and 39port +orporation vs. +ourt of Appeals, 11! S+-A 1//. 1 !. Hhen the parties agreed to have the premiums paid by installments or payment by installments is an established practice by the parties, acceptance of the payment of premium by installments would suffice to make the policy binding. "6 ". Hhen the insurer has granted the insured a credit term for the payment of premium, the insurer is barred by estoppel from claiming forfeiture of the policy due to nonEpayment of premium within the credit term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he rule that :evidence willfully suppressed would be adverse if produced; does not apply if the )*.."%))-1( -) #( %E%",-)% 12 # ."-9-8%:%. The refusal of <livares was justified. t was privileged communication between physician and patient. (urthermore, limitations of liability on the part of the insurer or health care provider must be construed in such a way as to preclude it from evading its obligations. Since 'lue +ross had the burden of proving e9ception to liability, it should have made its own assessment of whether <livares had a preEe9isting condition when it failed to obtain the attending physician$s report. t could not just passively wait for Dr. Saniel$s report to bail it out. "1 3. I( #( -()*"#(,% )*-+< /;#+ -) +;% #,+-1(#58% $1,*&%(+< +;% .18-,0 1" # &%&1"#($*& +;%"%12 1" # M#"-(% R-)' N1+%6 A. n an insurance suit, the actionable document is the policy which must be attached to the complaint pursuant to Section 7, -ule / of the -ules of +ourt. However, there is no specific provision in the -ules of +ourt which prohibits the admission in 36 *akati Tuscany +ondominium +orp. vs. +ourt of Appeals, !18 S+-A 56!= Asked, .o. A, !226 'ar 39ams. 37 ?+%' vs. *asagana Telamart, nc., "86 S+-A "27. There are however, strong dissenting opinions in this case. 38 'lue +ross Health +are, nc. vs. <livares, 855 S+-A 812, (ebruary 1!, !221. / evidence of an actionable document in the event a party fails to comply with the re4uirement of the rule on actionable document under Section 7, -ule /. 'ut what must be presented as evidence is the policy itself and not a mere *arine -isk .ote. "/ 3. 120 .-%,%) 12 &1+1") /%"% #-" );-..%$ 2"1& +;% US +1 ABB G1..%8< I(,. -( M#(-8#. A+ +;% NAIA< +;% ,#":1 /#) $-),;#":%$ #($ 21"/#"$%$ +1 +;% /#"%;1*)% 12 P#-",#":1 21" +%&.1"#"0 )+1"#:% .%($-(: "%8%#)% 50 +;% B*"%#* 12 C*)+1&). L#+%"< R%:-) B"1'%"#:% /-+;$"%/ +;% ,#":1 #($ $%8-9%"%$ -+ +1 ABB G1..%8. 41/%9%"< -+ /#) $-),19%"%$ +;#+ 1(80 6! 12 +;% 120 .-%,%) 12 &1+1") /%"% #,+*#880 $%8-9%"%$ #($ +;% "%&#-(-(: !! &1+1") ,1*8$ (1+ 5% #,,1*(+%$ 21". P#-",#":1 #($ R%:-) 51+; "%2*)%$ +1 .#0 +;% 9#8*% 12 +;% &-))-(: &1+1"). T;*)< M#8#0#( I()*"#(,% /-+; /;-,; ABB G1..%8 -()*"%$ +;% ,#":1 .#-$ ABB G1..%8 +;% -()*"#(,% ,8#-&. C8#-&-(: )*5"1:#+-1( +1 +;% "-:;+ 12 ABB G1..%8< M#8#0#( I()*"#(,% 2-8%$ #( #,+-1( #:#-()+ P#-",#":1 #($ R%:-) #+ +;% M%TC 12 M#(-8# /;%"% -+ ."%)%(+%$ M#"-(% R-)' N1+% #) ."112 +;#+ M#8#0#( I()*"#(,% -()*"%$ +;% ,#":1. T;% ,1&.8#-(+ /#) $-)&-))%$ 1( +;% :"1*($ +;#+ +;% M#"-(% R-)' N1+% ."%)%(+%$ #) ."112 +;#+ +;% ,#":1 /#) -()*"%$ /#) -(9#8-$. A#B W#) +;% M#"-(% R-)' N1+% )*22-,-%(+ +1 ."19% +;% %E-)+%(,% 12 +;% -()*"#(,% ,1(+"#,+6 A5B W#) M#8#0#( I()*"#(,% )*5"1:#+%$ +1 +;% "-:;+) 12 ABB G1..%8 #:#-()+ +;% .#"+0 "%).1()-58% 21" +;% 81)) 12 +;% );-.&%(+6 A. A#B The *arine -isk .ote was not the insurance contract itself, but merely a complementary or supplementary document to the contract of insurance that may have e9isted between *alayan and A'' Ioppel. A5B Since *alayan failed to introduce in evidence the *arine nsurance %olicy itself as the main insurance contract, or even advert to said document in the complaint, it failed to establish its cause of action for restitution as a subrogee of A'' Ioppel. *alayan$s right to recovery is derived from contractual subrogation as an incident to an insurance relationship, and not from any pro9imate injury to it inflicted by the defendants. t is critical that *alayan establish the legal basis of such right to subrogation by presenting the contract constitutive of the insurance relationship between it and A'' Ioppel. Hithout such legal basis, its cause of action cannot survive. The dismissal of the complaint is correct. 52 3. W;%( � #5#($1(&%(+ 5% &#$%6 A. Abandonment may be made in any of the following casesF 51 BaC f more than J of the value of the thing insured is actually lost= BbC f more than J of the value of the thing insured would have to be e9pended to recover it from the peril= 5! 39 *alayan nsurance +o., nc. vs. -egis 'rokerage +orporation, ,. -. .o. 17!186, .ov. !", !227. 40 *alayan nsurance +o., nc. vs. -egis 'rokerage +orporation, supra. 41 Section 1"/= Asked, G BbC, !228 'ar 39ams. 42 Asked, 1/71 'ar 39ams. 12 BcC f it is injured to such an e9tent as to reduce its value by more than J= BdC f the thing insured is a ship and the contemplated voyage cannot be lawfully performed without an e9pense to the insured of more than J of the value of the thing abandoned= BeC f the thing insured is a ship and the contemplated voyage cannot be lawfully performed without incurring risk which a prudent man would not take under the circumstances= BfC f the thing insured, being cargo or freightage, and the voyage cannot be performed nor another ship procured by the master within a reasonable time and with reasonable diligence, to forward the cargo without incurring an e9pense of more than J of the value of the thing 5" or without incurring a risk which a prudent man would not under take under the circumstances. 3. W;#+ � 5% "%,19%"%$ 50 +;% -()*"%$ /;%( #5#($1(&%(+ -) ."1.%"80 &#$%6 A. Hhen abandonment is properly made, the insured may recover a total loss, and the insurer ac4uires all the interests of the insured in the thing insured with all chances of recovery and indemnity. 'ut if the insured omits to abandon, he may recover only his actual loss. 55
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sked, .o. 8, 1/1! 'ar 39ams. 55 Sections. 156 and 188= Asked, .o. 8, 1/1! 'ar 39ams. 11 A. BaC The abandonment was proper since it could be made, when among others, :more than threeEfourths thereof in value is actually lost, or would have to be e9pended to recover it from the peril; 58 . The total value of the property insured was %"62 million and the damage was more than %!72 million or more than J of the vessel$s insured value. As a conse4uence of the proper abandonment, the loss became a constructive total loss 56 which entitles the insured to recover a total loss. 57 BbC The subrogation was proper because under Art. !!27 of the +ivil +ode, if the insured :has received indemnity from the insurance company for the injury or loss arising out ot the wrong or breach of contract complained of, the insurance company );#88 5% )*5"1:#+%$ to the rights of the insured against the wrongdoer or the person who violated the contract. t contemplates full substitution such that it places the party subrogated in the shoes of the creditor, and he may use all means that the creditor could employ to enforce payment. 51 BcC +lause !2 is a stipulation that may be considered contrary to public policy. To allow I+S to limit its liability to only %82,222,222.22, notwithstanding the fact that there was a constructive total loss in the amount of %"62,222,222.22, would sanction the e9ercise of a degree of diligence short of what is ordinarily re4uired. t would not be difficult for a negligent party to escape liability by the simple e9pedient of paying an amount very much lower than the actual damage or loss sustained by the other. 5/
3. 41/ ,#( +;% -()*"%" 5% ;%8$ 8-#58% *($%" +;% ?(1 2#*8+ -($%&(-+0@ ,8#*)% -( &1+1" 9%;-,8% +;-"$ .#"+0 8-#5-8-+0 -()*"#(,%6 A. An insurer may be held liable under the :no fault indemnity; provision without the necessity of proving fault or negligence of any kind provided the following re4uisites are presentF 82
BaC The claim is for death or injury to any passenger or third party= BbC The total indemnity in respect of any one person does not e9ceed %8,222= and BcC The necessary proof of loss under oath to substantiate the claim must be submitted. 3. W;-,; -()*"%" -) 8-#58% *($%" +;% ?(1 2#*8+ -($%&(-+0@ ."19-)-1(6 A. A claim under the :no fault indemnity; provision may be made against the insurer of one motor vehicle only. Such claim may be made directly by the injured party against the insurer as followsF 45 Section 1"/. 46 Section 131. 47 Ieppel +ebu Shipyard, nc. vs. %ioneer nsurance @ Surety +orp., ,. -. 112112E11, Sept. !8, !22/, 621 S+-A /6. 48 bid. 49 bid. 82 Section "71= Asked, 1/77 'ar 39ams.= .o. 6, 1/1" 'ar 39ams.= .o. B1C, 1/1/ 'ar 39ams.= .o. 1 B1C, 1//5 'ar 39ams. 1! BaC n case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. BbC n any other case, claim shall lie against the insurer of the directly offending vehicle. 81
A. An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party. 8"
3. W;#+ -) +;% "%8#+-1( 5%+/%%( +;% #,,1&&1$#+-1( .#"+0 #($ +;% .#"+0 #,,1&&1$#+%$6 A. The accommodated party is the principal while the accommodation party is the surety. t is a settled rule that as surety, the accommodation party is bound e4ually and absolutely with the principal and is deemed an original promissor and debtor from the beginning. The liability of the accommodation party is immediate and direct. 85 The relation between an accommodation party and the accommodated party is one of principal and suretyKthe accommodated party is one of principal and surety L the accommodated party being the surety. As such, he deemed to an original promissor and debtor from the beginning= he is considered in law as the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter since their liabilities are interwoven as to be inseperable. 88
3. A"% +;% 8-#5-8-+-%) #($ $%2%()%) 12 #( #,,1&&1$#+-1( .#"+0 *($%" +;% N%:1+-#58% I()+"*&%(+) L#/ #9#-8#58% -( ,#)% +;% -()+"*&%(+ -) (1(-(%:1+-#58%6 81 Section "71= Asked, .o. B1C, 1/1/ 'ar 39ams= .o. 1 B1C, 1//5 'ar 39ams. 8! AskedF 1/8!, 1/6", 1/65, 1/7", 1/75, 1/78, 1/76, 1/1!, 1/18 and 1/16 'ar 39ams.= .o. BaC, 1//" 'ar 39ams.= .o. G B1C, !22" 'ar 39ams. 53 Section !/= Ang vs. Associated 'ank, 8"! S+-A !55, September 8, !227. 54 ,arcia vs. )lamas, 517 S+-A !/!. 55 Ang vs. Associated 'ank, 8"! S+-A !55. 1" A. n case the instrument is nonEnegotiable, it is covered by the provisions of the +ivil +ode and not by the .egotiable nstruments )aw. A nonEnegotiable note is merely a simple contract in writing and is evidence of such intangible rights as may have been created by the assent of the parties. Hence, where the note was made payable to a specific person rather than to bearer or to order L a re4uisite of the .egotiable nstruments )aw, the parties cannot avail of the provisions of the .egotiable nstruments )aw on the liabilities and defenses of an accommodation party. 86 3. W;#+ #"% +;% "%=*-)-+%) -( 1"$%" +;#+ # .#"+0 � 5% ,1()-$%"%$ #) #( #,,1&&1$#+-1( .#"+06 A. The following are the re4uisites in order that a party may be considered as an accommodation partyF BaC He must have signed the instrument as maker, drawer, acceptor or indorser= BbC He signed without receiving value therefor= BcC He signed for the purpose of lending his name to some other person. 87
3. W;#+ -) +;% %22%,+ 12 #( %E+%()-1( 12 +-&% +1 .#0 +;% 158-:#+-1( :-9%( 50 # ;18$%" 21" 9#8*% +1 +;% #,,1&&1$#+%$ .#"+06 W-88 -+ "%8%#)% +;% #,,1&&1$#+-1( .#"+0 12 ;-) 8-#5-8-+06 A. 3ven if the accommodated party receives an e9tension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such e9tension does not release him because as far as the holder for value is concerned, he is a solidary coEdebtor. The liability of an accommodation party is not only primary but also unconditional to a holder for value. 81 3. W;#+ ,1()+-+*+%) # ;18$%" -( $*% ,1*")%6 !9
A. A holder in due course is a holder who has taken the instrument under the following conditionsF BaC That it is complete and regular upon its face= 56 ,arcia vs. )lamas, supra. 57 Section !/= Asked, .o. G BcC, !22" 'ar 39ams. 58 Ang vs. Associated 'ank, 8"! S+-A !55, September 8, !227. 59 AskedF 1/6!, 1/6", 1/66, 1/12 and 1/17 'ar 39ams.= .o. BbC, 1//! and .o. BcC. 1//6 'ar 39ams. 15 BbC That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact= MThat he took it in good faith and for value= BdC That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. 62
3. W;1 -) $%%&%$ # ;18$%" -( $*% ,1*")%6 A. 3very holder is deemed prima facie to be a holder in due course= but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims ac4uired the title as holder in due course. 'ut the last mentioned rule does not apply in favor of a party who became bound on the instrument prior to the ac4uisition of such defective title. 61
?nder the above provision, every holder is presumed prima facie to be a holder in due course. <ne who claims otherwise has the onus probandi to prove that one or more of the conditions re4uired to constitute a holder in due course are lacking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aC -o9as was a holder for value and a holder in due course. -o9as received the cashier$s check as payment for the vegetable oil he sold to +awili. The fact that -odrigo was the one who purchased the cashier$s check from '% will not affect -o9as$ status as a holder for value since the check was delivered to him as payment for the vegetable oil he sold to spouses +awili. -o9as is presumed to be a holder in due course and the one who claims otherwise must prove that one or more of the conditions re4uired 60 Section 8!. 61 Section 8/. 62 'ank of the %hilippine slands vs. -o9as, 8"6 S+-A 161, <ctober 18, !227. 18 to constitute a holder in due course are lacking. '% failed to prove that -o9as was not a holder for value. 6" BbC '% cannot be relived of its liability under the cashier$s check it issued. A cashier$s check is really the bank$s own check and may be treated as a promissory note with the bank as maker. The check becomes the primary obligation of the bank which issues it and constitutes a written promise to pay upon demand. t is of judicial notice that a cashier$s check is deemed as cash. This is because the mere issuance of a cashier$s check is considered acceptance thereof. Hence, a bank becomes liable to the payee the moment it issued the cashier$s check. 65
3. W;#+ #"% ,"1))%$ ,;%,')6 W;#+ #"% +;% '-($) 12 ,"1))%$ ,;%,')6 A. A crossed check is one with two parallel lines diagonally written on the left top portion of the check. 68 The crossing is special where the name of a bank or a business institution in written between the two parallel lines, which means the drawee should pay only with the intervention of that company. The crossing is general where the words written between the two parallel lines are :and +o.; or :for payee$s account only,; 66 or nothing is written between the parallel lines. This means that the drawee bank should not encash the check but merely accept it for deposit. 67
3. W;#+ #"% +;% %22%,+) 12 ,"1))-(: # ,;%,'6 68 A. The effects of crossing a check areF B1C The check may not be encashed but deposited only in a bank= B!C The check may be negotiated only once= and B"C The act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that he must in4uire if he has received the check pursuant to that purpose. 6/
However, issuing a crossed check imposes no legal obligation on the drawee not to honor such a check. t is more of a warning to the holder that the check cannot be presented to the drawee bank for payment in such case. nstead, the check can only be deposited with the payee$s bank which in turn must present it for payment with the 63 bid. 64 bid. 65 Asked, .o. BbC, !225 'ar 39ams.= .o. ! BaC, !228 'ar 39ams. 66 Associated 'ank vs. +ourt of Appeals, !21 S+-A 5/8. 67 Associated 'ank vs. +ourt of Appeals, supra= Asked, .o. A, 1//8 'ar 39ams. 68 Asked, .o. B1C, 1//5 and .o. BdC, 1//6 'ar 39ams.= .o. ! BaC, !228 'ar 39ams. 6/ State nvestment House vs. A+, 178 S+-A "12= Associated 'ank vs. +ourt of Appeals, !21 S+-A 568= Traders -oyal 'ank vs. -adio %hil. .etwork, nc., "/2 S+-A 621. 16 drawee bank in the course of normal banking transactions between banks. The crossed checks cannot be presented for payment but it can only be deposited and the drawee bank may only pay to another bank in the payee$s or indorser$s account. 72
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� 5% ;%8$ 8-#58% 50 I()*8#"6 A. BaC nsular cannot hold HiE+ement liable as the former was not a holder in due course. The last two elements of Section 8! have not been met by nsular. nsular did not act in good faith since it was grossly negligent. nsular knew that the checks were crossed and bore restrictions that they were for deposit for payee$s account only= hence, they could not be further negotiated to it. +rossing of checks should put the holder on in4uiry and upon him devolves the duty to ascertain the indorser$s title to the check or the nature of his possession. BbC nsular may hold the party who endorsedNencashed the checks. t was 3. T. Henry that reEdiscounted the checks and received their value from nsular hence, it should pay the latter. 71 CORPORATION LAW 3. W;#+ -) +;% &%#(-(: 12 +;% $1,+"-(% 12 8%:#8 %(+-+0 12 ,1".1"#+-1()6 A. t means that a corporation is a juridical person with a personality separate and distinct from that of each shareholder. t also means that the stockholders of a corporation are different from the corporation itself. 7!
3. W;#+ #"% +;% ,1()%=*%(,%) 12 +;% $1,+"-(% 12 8%:#8 %(+-+06 A. The conse4uences of the doctrine of legal entity regarding the separate identity of the corporation and its stockholders are as followsF 72 ,empesaw vs. +ourt of Appeals, ,.-. .o. /!!55, (eb. /, 1//". 71 HiE+ement +orporation vs. nsular 'ank of Asia and America, 8"5 S+-A !6/, September !1, !227. 72 Section != Seaoil %etroleum +orp. vs. Autocorp ,roup, 86/ S+-A "17, <ct. 17, !221= S3+ <pinions, 0an. 11, 1//" and 0une 11, 1//". 17 1. The stockholders are not personally liable for the debts of the corporation and viceEversa. 7" The stockholders are not liable for corporate acts unless otherwise provided by law. 75
!. The stockholders are not the owners of corporate properties and assets. 78
". The stockholders cannot sell or maintain actions in their own name in connection with corporation affairs, business or property. .either do stockholders have the right to recover possession of corporation property or to recover damages for injury to properties belonging to the corporation, and viceEversa. 76
5. The property belonging to the corporation cannot be attached to satisfy the debt of a stockholder and vice versa, the latter having only an indirect interest in the assets and business of the former. 77
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he subject vehicle belonging to ,ois cannot be attached to answer for the liabilities of a corporation of which she was an incorporatorNofficer. A corporation has a personality distinct and separate from its individual stockholders or members and from that of its officers who manage and run its affairs. The rule is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities. Thus, property belonging to a corporation cannot be attached to satisfy the debt of a stockholder and vice versa, the latter having only an indirect interest in the assets and business of the former. 71
3. P*")*#(+ +1 # /"-+ 12 %E%,*+-1( -( ?F%8-.% J#9-%"< J". 9). R*2-(1 B11,<@ +;% );%"-22 8%9-%$ +;% 8#($ 1/(%$ 50 F-9% S+#" M#"'%+-(: C1".1"#+-1(. T;% )#-$ ,1".1"#+-1(< (1+ 5%-(: # .#"+0 -( +;% ,-9-8 ,#)% $%&#($%$ +;% ,#(,%88#+-1( 12 +;% 73 1"A (letcher, Sec. 6!1". 75 Hise and +o. vs. *an Sun )ung, 52 <. ,. 82= Seaoil %etroleum +orp. vs. Autocorp ,roup, 86/ S+-A "17, <ct. 17, !221. 78 'erman 3nvironmental Dev. +orp. vs. +A 167 S+-A, 852. 76 Sulo ng 'ayan, nc. vs. Araneta, nc. 7! S+-A "57. 77 Delima vs. ,ois, 885 S+-A 7"1, 0une 17, !221= *andaue Dinghow Dimsum House, nc. vs. .)-+, 857 S+-A 52!, *arch ", !221. 78 Delima vs. ,ois, 885 S+-A 7"7, 0une 17, !221. 11 (1+-,% 12 8%90. T;% );%"-22< 1( +;% 1+;%" ;#($ ,8#-&%$ +;#+ R*2-(1 B11, /#) +;% 1/(%" 12 #"1*($ 200 );#"%) 12 )+1,' -( F-9% S+#" M#"'%+-(: C1".1"#+-1( #($ +;% 8%90 /#) &#$% 1( +;% );#"%< "-:;+) #($J1" -(+%"%)+ #($ .#"+-,-.#+-1( /;-,; R*2-(1 B11,< #) ."%)-$%(+ #($ )+1,';18$%"< � ;#9% -( +;% .#",%8 12 8#($ 1/(%$ 50 F-9% S+#" M#"'%+-(: C1".1"#+-1(. W#) +;% 8%90 1( +;% ,1".1"#+% ."1.%"+0 ."1.%"6 A. The sheriff overstepped his authority when he disregarded the distinct and separate personality of the corporation from that of -ufino 'ooc as stockholder of the corporation by levying on the property of the corporation. t is settled that a corporation is clothed with a personality separate and distinct from that of its stockholders. The mere fact one is a president of the corporation does not render the property which the corporation owns or possesses the property of the president of the corporation since the latter, as an individual and the corporation are separate entities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autista should not be made liable considering that he was ac4uitted of the crime charged and that the debts were clearly corporate debts for which only +ruiser should be held liable. 0uridical entities have personalities separate and distinct from its officers and are not personally liable for the obligations of the corporation e9cept when only when the veil of corporation fiction is being used as a cloak or cover for fraud or illegality, or to work injustice. These situations do not e9ist in this case. 12 3. M#0 # ,1".1"#+-1( 2-8% #( #,+-1( 1( 5%;#82 12 -+) &%&5%") 1" )+1,';18$%") 21" +;% "%,19%"0 12 ."1.%"+-%) 5%81(:-(: +1 +;% 8#++%"6 A. .o, the corporation cannot file an action to recover properties belonging to its stockholders. A corporation is a distinct legal entity considered as separate and apart from its individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members. 11 3. EE.8#-( +;% $1,+"-(% 12 ?.-%",-(: +;% 9%-8 12 ,1".1"#+% 2-,+-1(@. A. :%iercing the veil of corporate fiction; means that while a corporation can not generally be made liable for acts or liabilities of its stockholders or members, and vice 79 'ooc vs. 'antuas, "85 S+-A !7/. 80 'autista vs. Auto %arts Traders, nc., 861 S+-A !!". 11 Sulo ng 'ayan, nc. vs. Araneta, nc., 7! S+-A "57. 1/ versa because a corporation has a personality separate and distinct from its stockholders or members, however, the corporate e9istence is disregarded under this doctrine where the corporation is formed or used for illegitimate purposes or justify wrong or evade a just and valid obligation. n such case, the corporation and the stockholders shall be considered as one and the same. 1!
The doctrine of piercing the corporate veil applies only in three B"C basic instances, namelyF aC when the separate and distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an e9isting obligation= BbC in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime= or BcC is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere alter ego or business conduit of a person, or where the corporation is so organi&ed and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit, or adjunct of another corporation. n the absence of malice, bad faith, such corporate officer cannot be made personally liable for corporate liabilities. 1" However, the application of the doctrine of piercing the corporate veil should be done caution. A court should be mindful of the milieu where it is to be applied. t must be certain that the corporate fiction was misused to such an e9tent that injustice, fraud, or crime was committed against another, in disregard of its rights. The wrongdoing must be clearly and convincingly established= it cannot be presumed. <therwise, an injustice that was never intended may result from an erroneous application. 15 'ad faith or wrongdoing of a corporate officer must be established clearly and convincingly L bad faith is never presumed. 18
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he fact that AS*+ was not included as defendant does not preclude recovery by Aiolago spouses against Avelino= neither would such nonEinclusion constitute a bar to 1! Solidbank +orporation vs. *indanao (erroalloy +orporation, 565 S+-A 52/, 0uly !1, !228= (ederation of )abor ?nion vs. <ple, 15" S+-A 1!5= Telephone 3ngineering @ Service +o., nc. vs. Horkmen$s +ompensation +ommission, 125 S+-A "85= Asked, 1/18 and 1//1 'ar 39ams.= .o. , !225 'ar 39ams.= .o. B1C, !226 'ar 39ams. 83 %risma +onstruction @ Dev. +orp. vs. *enchaves, 615 S+-A 8/2, *arch /, !212. 84 %hilippine .ational 'ank vs. Andrada 3lectric @ 3ngineering +ompany, "11 S+-A 158, April 17, !22!. 85 Seaoil %etroleum +orp. vs. Autocorp ,roup, 86/ S+-A "17, <ct. 17, !221. !2 the application of the piercingEofEtheEcorporate veil doctrine. Avelino, knowing fully well that the vehicle was already sold, and with abuse of his relationship with the spouses still proceeded with the sale and collected the down payment. His actions were the pro9imate cause of the Aiolago spouses$ loss. He cannot now hide behind the separate corporate personality of A*S+ to escape from liability. (or all legal intents and purposes defendant and the corporation are one and the same. The fiction of separate juridical personality conferred upon the corporation should be disregarded. 16 3. W;#+ -) &%#(+ 50 +;% alter ego $1,+"-(% 1" ?-()+"*&%(+#8-+0 "*8%@6 AF Hhere one corporation is so organi&ed and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the OinstrumentalityO may be disregarded. The control necessary to invoke the rule is not majority or even complete stock control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or e9istence of its own, and is but a conduit for its principal. 17
3. 41/ � # ,1".1"#+-1( 5% %)+#58-);%$ #) # &%"% #8+%" %:1 12 #(1+;%" ,1".1"#+-1( 1" .%")1(6 A. The 4uestion of whether a corporation is a mere alter ego is one of fact. %iercing the veil of corporation fiction may be allowed only if the following elements concurF B1C control L not mere stock control, but complete dominationE not only of finances, but of policy and business practice in respect to the transaction attacked, must have been such that the corporate entity as to this transaction had at the time no separate mind, will or e9istence of its own= B!C such control must have been used by the defendant to commit fraud or a wrong doing to perpetuate the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in contravention of the plaintiffs legal right= B"C the said control and breach of duty must have pro9imately caused the injury or unjust loss complained of. 11
3. I) &%"% -(+%"81,'-(: $-"%,+1"#+% )*22-,-%(+ :"1*($ +1 $-)"%:#"$ +;% )%.#"#+% ,1".1"#+% .%")1(#8-+06 A. The mere interlocking of directors and officers does not warrant piercing the separate corporate personalities of two corporations L not only must there be a showing that there was majority or complete control, but complete domination, not only of 86 Aiolago vs. 'A (inance +orporation, 88/ S+-A 6/. 17 )ipat vs. %acific 'anking +orporation 52! S+-A ""/, April "2, !22". 88 - @ 3 Transport, nc. vs. )atag, 5!! S+-A 6/1, 727= Heirs of -amon Durano, Sr. vs. ?y, "55 S+-A !"1. !1 finances but of policy and business practice in respect to the transaction attacked, so that the corporate entity as to a particular transaction had at the time no separate mind, will or e9istence of its own. 1/ 3. I) +;% &%"% 2#,+ +;#+ # )-(:8% .%")1( 1/() 1" ,1(+"18) 1(% 1" &1"% ,1".1"#+-1( 1" )*5)+#(+-#8 -$%(+-+0 12 -(,1".1"#+1") 12 +/1 ,1".1"#+-1()< )*22-,-%(+ +1 $-)"%:#"$ +;% )%.#"#+% .%")1(#8-+-%) 12 +;% ,1".1"#+-1()6 A. *ere ownership by a single stockholder or by another corporation of all or nearly all of the capital stocks of a corporation is not by itself a sufficient ground to disregard the separate corporate personality. /2 The substantial identity of the incorporators of two or more corporations does not imply that there was fraud so as to justify the piercing of the writ of corporate fiction. To disregard the said separate juridical personality, the wrong doing must be proven clearly and convincingly. /1
t is lawful to obtain a corporate charter, even with a single substantial stockholder, to engage in specific activity and such activity may coEe9ist with the other private activities of the stockholder. f the corporation is a substantial one, conducted lawfully and without fraud on another, its separate identity is respected. /!
However, the separate identity of the corporation may be disregarded where it serves but as a shield for ta9 evasion and treat the person who actually may take the benefits of the transactions as the person ta9able. /"
3. D% G*7&#( /#) +;% P"%)-$%(+ #($ ,1(+"188-(: )+1,';18$%" 12 EPG C1()+"*,+-1( C1.< I(,. S#-$ ,1".1"#+-1( %(+%"%$ -(+1 # ,1(+"#,+ /-+; +;% U(-9%")-+0 12 +;% P;-8-..-(%) 21" +;% ,1()+"*,+-1( 12 -+) 8#/ 8-5"#"0. C8#-&-(: $%2%,+) -( +;% #-"- ,1($-+-1(-(: -()+#88%$ 50 EPG< UP 2-8%$ #( #,+-1( #:#-()+ EPG #($ -+) P"%)-$%(+< $% G*7&#(. S;1*8$ $% G*7&#( 5% &#$% 8-#58%6 A. De ,u&man should not be made liable. *ere ownership by a single stockholder or 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. The president or general manager of a corporation therefore, should not be made personally answerable for the payment of the obligations of the corporation unless 89 ,. Holdings, nc. vs. .A*AH?, 625 S+-A 7", <ct. 16, !22/. 90 Secosa vs. Heirs of 3rwin Suare& (rancisco, 5"" S+-A !7", 0une !/, !225. 91 *artine& vs. +ourt of Appeals, 5"1 S+-A 1"2, September 12, !225. /! )idell @ +o., nc. vs. +ollector of nternal -evenue, ! S+-A 6"!= Hise @ +o., nc. vs. *an Sun )ung, 6/ %hil. "21= Asked, 1/72 'ar 39ams. /" )idell @ +o., nc. vs. +ollector of nternal -evenue, supra. !! he had acted maliciously or in bad faith. That e9ception is not applicable to de ,u&man because it was not proved that he acted maliciously or in bad faith when, as %resident of 3%,, he sought to protect its interests and resisted ?%$s claims. Hhatever damage was caused to ?% as a result of his acts is the sole responsibility of 3%, even though de ,u&man was its principal officer and controlling stockholder. /5
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nate and 3+< cannot be treated as one person so as to make <nate liable for 3+<$s debts. n the absence of any malice or bad faith, a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. The mere fact that <nate owned the majority of the shares of 3+< is not a ground to conclude that <nate and 3+< is one and the same. *ere ownership by a single stockholder of all or nearly all of the capital stock of a corporation is not by itself sufficient reason for disregarding the fiction of separate corporate personalities. .either is the fact that the name P3+<$ represents the first three letters of <nate$s name sufficient reason to pierce the veil. 3ven if it did, it does not mean that the said corporation is merely a dummy of <nate. A corporation may assume any name provided it is lawful. There is nothing illegal in a corporation ac4uiring the name or as in this case, the initials of one of its stockholders. t has not been shown that 3+< was used as a mere alter ego of <nate to obtain the loans. 'ad faith or fraud on the part of 3+< and <nate was not also shown. %ayment of %1 *illion out of the trust account of <nate and other investors merely showed that a shareholder wants to held his corporation. The evidence presented does not suffice to hold <nate personally liable for 3+<$s loans. /8
3. A-",1( #($ R%2"-:%"#+-1( I($*)+"-%)< I(,. )*..8-%$ JRB R%#8+0< I(,. /-+; #-"-,1($-+-1(-(: *(-+). A2+%" +;% *(-+) /%"% -()+#88%$< +;%0 ,1*8$ (1+ ."19-$% +;% $%)-"%$ ,118-(: +%&.%"#+*"%. A-",1( *($%"+11' +1 "%.8#,% +;% *(-+) /-+; (%/ 1(%) 5*+ +;-) /#) (%9%" $1(%. JRB R%#8+0< I(,. 2-8%$ #( #,+-1( (1+ 1(80 #:#-()+ A-",1( #($ /5 3%, +onstruction +o., nc. vs. +ourt of Appeal, !12 S+-A !"2= Asked, 1//6 'ar 39ams. 95 <nate vs. )and 'ank of the %hilippines, "65 S+-A "78, "1"E"15. !" R%2"-:%"#+-1( I($*)+"-%)< I(,. 5*+ #8)1 #:#-()+ J#"$-(% D#9-%)< I(,. 1( +;% :"1*($ +;#+ A-",1( /#) # )*5)-$-#"0 12 J#"$-(%. C#( J#"$-(% 5% &#$% 8-#58%6 A. 0ardine can not be made liable. Hhile it is true that Aircon is a subsidiary of 0arine, it does not necessarily follow that Aircon$s corporate legal e9istence can just be disregarded. A subsidiary has an independent and separate juridical personality, distinct from that of its parent company, hence, any claim or suit against the latter does not bind the former, and vice versa. 'efore the separate personality of the subsidiary may be disregarded the following re4uisites must be establishedF B1C control, not merely majority or complete stock control= B!C such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in contravention of plaintiff$s legal rights= and B"C the aforesaid control and breach of duty must pro9imately cause the injury or unjust loss complained of. /6 Aircon is a subsidiary of 0ardine only because the latter ac4uired the majority of Aircon$s capital stock. t however, does not e9ercise complete control over Aircon= nowhere can it be gathered that the petitioner manages the business affairs of Aircon. ndeed, no management agreement e9ists between 0ardine and Aircon and the latter is an entirely different entity from the 0ardine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� 5% ,1()-$%"%$ #) # )*-+ #:#-()+ PNB-IFL6 A. .o, the veil of corporate fiction should not be pierced. The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being treated as one entity. f used to perform legitimate functions, a subsidiary$s separate e9istence may be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The -itratto group failed to show any cogent reason why the separate entities of the %.' and %.'E() should be disregarded. The doctrine of piercing the corporate veil is applicable only when the corporate fiction is used to defeat public convenience, justify 96 0ardine Davies, nc. vs. 0-' -ealty, nc. 56" S+-A 888, 0uly 18, !228, citing Aelarde vs. )ope&, nc. 51/ S+-A 5!!, 0anuary 15, !225. 97 0ardine Davies, nc. vs. 0-' -ealty, nc., supra. !5 wrong, protect fraud or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person or another corporation. /1
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ishino agreed that he could take out the machineries provided the value of the said machineries would be deducted from his capital contribution. B*+ 8#+%"< N-);-(1 2"*)+"#+%$ D#&#&1+1>) ,8#-& 50 "%2*)-(: +;% )#&%. T;% C1*"+ 12 A..%#8) "*8%$ +;#+ +;% &#,;-(%"-%) ,8#-&%$ 50 D#&#&1+1 #"% ,1".1"#+% ."1.%"+-%) 12 NLII #($ ,#((1+ 5% "%+"-%9%$ 50 D#&#&1+1 /-+;1*+ +;% #*+;1"-+0 12 NLII 51#"$ 12 $-"%,+1"). O( +;% 1+;%" ;#($< D#&#&1+1 ,8#-&%$ +;#+ N-);-&1 ,#((1+ ;-$% 5%;-($ +;% );-%8$ 12 ,1".1"#+% 2-,+-1( 5%,#*)% NLII -) # &%"% -()+"*&%(+#8-+0 12 N-);-&1 #($ ;-) 5"1+;%". D%,-$% +;% ,#)% /-+; "%#)1(). A. The separate personality of .) cannot be disregarded since there is no showing that .ishimo used the separate personality of .) to unjustly act or do wrong to Qamamoto in contravention of his legal rights. The machineries and e4uipment, which comprised Qamamoto$s investment in .) thus remained part of the capital property of the corporation. //
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bid. !8 ,#)% 21" -(C*(,+-1( #($ ,8#-&%$ +;#+ "%).1($%(+ /#) (1+ +;% "%#8 .#"+0 -( -(+%"%)+ +1 21"%,81)% +;% &1"+:#:%. M#0 21"%,81)% +;% &1"+:#:% 15+#-(%$ 50 +;% .%+-+-1(%") +1 )%,*"% # 81#( 15+#-(%$ 50 EPCIB6 A. An e9trajudicial foreclosure instituted by a third party to the )oan Agreement and the real estate mortgage B-3*C would be in violation of the petitioners$ rights over their property. Thus, respondent cannot e9ercise the right of foreclosure not being a party to the -3*. -espondent, although a whollyEowned subsidiary of 3%+', has an independent and separate juridical personality from its parent company. The fact that the corporation owns all of the stocks of another corporation, taken alone, is not sufficient to justify their being treated as one entity. f used to perform legitimate functions, a subsidiary$s separate e9istence shall be respected. 122 3. W;%( #"% 122-,%") 12 # ,1".1"#+-1( )18-$#"-80 8-#58% /-+; +;% ,1".1"#+-1(6 A. The general rule is that obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities. However, solidary liability may be incurred, but only under the following e9ceptional circumstancesF 1C Hhen directors and trustees or, in appropriate cases, the officers of a corporationF BaC vote for or assent to patently unlawful acts of the corporation= BbC act in bad faith or with gross negligence in directing the corporate affairs= BcC are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons= !C Hhen a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto= "C Hhen a director, trustee or officers has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation= 5C Hhen a director, trustee or officer is made, by specific provision of law, personally liable for his personal action. 121 3. I( :%(%"#8< /;%( � # .%")1( 1" 122-,%" 12 +;% ,1".1"#+-1( 5-($ +;% ,1".1"#+-1(6 A. The general rule is that, in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. The power and responsibility to decide whether the corporation should enter into a contract that will bind the corporation is lodged in the board of directors. R1S 3. F"1& /;#+ � #..#"%(+ #*+;1"-+0 12 #( 122-,%" +1 5-($ +;% ,1".1"#+-1( 5% $%"-9%$6 A. Apparent authority is derived not merely from practice. ts e9istence may be ascertained throughF B1C the general manner in which the corporation holds out an officer or agent as having the power to act, or in other words, the apparent authority to act in 100 Borromeo vs. Court of Ae!"s# 550 SC$A 269# %!rc& 28# 2008. 101 Shrimp Specialists, nc. vs. (ujiETriumph AgriEndustrial +orp., 621 S+-A 1, Dec. 7, !22/. !6 general, with which it clothes him, or B!C the ac4uiescence in his acts of a particular nature with actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers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he authority of Atty. Soluta to act for and bind the petitioner may be presumed from acts of recognition in other instances, wherein the power was e9ercised without any objection from its board or shareholders. %etitioner had previously allowed Atty. Soluta to enter into the first agreement without a board resolution e9pressly authori&ing him= thus, it had clothed him with apparent authority to modify the same via the second letterEagreement. t is not the 4uantity of similar acts which establishes apparent authority, but the vesting of a corporate officer with the power to bind the corporation. %etitioner$s inaction, coupled with the apparent authority of Atty. Soluta to act on behalf of the corporation, validates the second letterEagreement and thus binds the corporation. t should be emphasi&ed that if a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of an apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against any person who has dealth in good faith with the corporation through such agent , be estopped from denying such authority. R1S 3. M#0 +;% 50-8#/) 12 # ,1".1"#+-1( ."19-$% 21" #$$-+-1(#8 =*#8-2-,#+-1() 12 $-"%,+1")6 A. The byElaws may provide for the 4ualifications of directors or trustees 12! provided they are not inconsistent with the +onstitution, law or charter of the corporation 102 Section 57, par. 8. !7 and they are reasonable. The minimum 4ualification re4uired by the +orporation +ode must however, be met. 12"
3. T;% 50-8#/) ."19-$% +;#+ 1(80 &%&5%") -( :11$ )+#($-(: 21" #+ 8%#)+ 2-9% A!B 0%#") );#88 5% =*#8-2-%$ +1 5% %8%,+%$ #) $-"%,+1". I) )*,; #$$-+-1(#8 =*#8-2-,#+-1( 12 $-"%,+1") 9#8-$6 A. Qes, it is valid because the byLlaws may prescribe the 4ualifications of directors. Thus, one who was elected despite the fact that his membership in the corporation has not reached five B8C years is in violation of the byElaws and hence, his election is null and void. 125
3. W;1 #"% $-)=*#8-2-%$ 2"1& 5%-(: %8%,+%$ #) $-"%,+1")6 A. The following are dis4ualified from being elected as directorsF BaC those convicted by final judgment of an offense punishable by imprisonment for a period e9ceeding si9 B6C years= BbC those convicted by final judgment of a violation of the +orporation +ode committed within five B8C years prior to the date of his election= 128 BSec. !7C= and BcC those dis4ualified by the byElaws. 126
3. T;% 50-8#/) 12 S#( M-:*%8 C1".1"#+-1( ASMCB $-)=*#8-2-%$ 2"1& 5%-(: %8%,+%$ #) $-"%,+1" +;1)% /;1 /%"% $-"%,+1") 12 #(1+;%" ,1".1"#+-1( /;1)% 5*)-(%)) /#) -( ,1&.%+-+-1( /-+; 1" /#) #(+#:1(-)+-, /-+; SMC. G1'1(:/%- /#) # $-"%,+1" 12 1+;%" ,1".1"#+-1() /;1)% 8-(%) 12 5*)-(%)) /%"% -( $-"%,+ ,1&.%+-+-1( /-+; )1&% 12 +;% 5*)-(%)) #,+-9-+-%) 12 SMC. M#0 G1'1(:/%- 5% %8%,+%$ #) $-"%,+1" 12 SMC6 A. ,okongwei was dis4ualified from being elected as director of S*+. The provision of the byElaws of S*+ dis4ualifying a competitor$s director from being elected as director of S*+ was valid. Sound principles of corporate management counsel against sharing sensitive information with a director whose fiduciary duty of loyalty may well re4uire that he disclose this information to a competitive rival. 127 3. A) # :%(%"#8 "*8%< #"% $-"%,+1")J+"*)+%%) #($ 122-,%") 12 # ,1".1"#+-1( 8-#58% .%")1(#880 21" +;%-" #,+) #) )*,;6 12" S3+ <pinion, Dec. 1, 1/11. 125 ,arcia vs. Diapo, S3+ +ase .o. !16/, 0uly "2, 1//2. 105 Section !7. 126 ,okongwei vs. S3+, 1/ S+-A ""6. 127 ,okongwei vs. S3+, 1/ S+-A ""6= Asked, 1//1 'ar 39ams.= .o. A BaC, !222 'ar 39ams.= .o. G, !221 'ar 39ams.
!1 A. As a general rule, directorsNtrustees and officers of a corporation who purport to act for and in behalf of the corporation, keep within the lawful scope of their authority in so acting, and act in good faith, do not become liable, whether civilly or otherwise, for the conse4uences of their acts. Those acts, when they are of such a nature and are done under such circumstances, are properly attributed to the corporation alone and no personal liability is incurred by such officers and board membersNdirectors. 121
<fficers of a corporation who act as such within the scope of their authority have no personal liability for such acts unless it is shown that they have acted negligently or in bad faith. They are mere agents of the corporation who cannot be made liable if they acted within the scope of their authority. 12/
(or as long as the corporate officers acted within the scope of their authority and in good faith, they cannot be held personally liable for the conse4uences of their acts. The separate corporate personality is a shield against the personal liability of corporate officers, whose acts are property attributed to the corporation. 112
)ikewise, officers of a corporation are not personally liable for their acts as such officers unless it is shown that they have e9ceeded their authority. The corporation has a personality separate and distinct from its officers. 111 However, when the legal fiction that a corporation has a personality separate and distinct from the stockholders and members is disregarded, as when it is used as a means to perpetrate fraud or an illegal act or as a vehicle for the evasion of an e9isting obligation, or to confuse legitimate issues, the officers of such corporation shall be liable for their acts. 11!
109 *indanao *otor )ine, nc. vs. +ourt of ndustrial -elations, 6 S+-A 712= Asked, 1/61 and 1/// 'ar 39ams.= Sanche& vs. -epublic, 62" S+-A !!/, <ct. /, !22/. 110 Solidbank +orporation vs. *indanao (erroalloy +orporation, et al., 565 S+-A 52/, 0uly !1, !228. 111 %rudential 'ank vs. Alviar, 565 S+-A "8". 11! %abalan vs. .)-+, 115 S+-A 5/8= Asked, 1//6 'ar 39ams.C. !/ A. A corporation is invested by law with a personality separate and distinct from those of the persons composing it, such that, save for certain e9ceptions, corporate officers who entered into contracts in behalf of the corporation cannot be held personally liable for the liabilities of the latter. %ersonal liability of a corporate director, trustee or officer along Balthough not necessarilyC with the corporation may so validly attach, as a rule, only when B1C he assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons= B!C he consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto= B"C he agrees to hold himself personally liable with the corporation= or B5C he is made by a specific provision of law personally answerable for his corporate action. 11"
.one of the foregoing e9ceptions was established in this case, hence, (3? %resident de 0esus should not be held solidarily liable with (3?. 115 3. SSS 2-8%$ #( #,+-1( #:#-()+ I&.#,+ C1".1"#+-1( #($ -+) $-"%,+1") 21" (1(- "%&-++#(,% 12 SSS ."%&-*& ,1(+"-5*+-1() /-+;;%8$ 50 )#-$ ,1".1"#+-1( 2"1& -+) %&.810%%). I&.#,+ 5%,#&% -()189%(+ #($ #88 $-"%,+1") $-%$ %E,%.+ $-"%,+1" G#",-#. G#",-# ,8#-&%$ +;#+ 1(80 $-"%,+1") /;1 .#"+-,-.#+% -( *(8#/2*8 #,+) 1" #"% :*-8+0 12 :"1)) (%:8-:%(,% #($ 5#$ 2#-+; );#88 5% .%")1(#880 8-#58%< #($ +;#+ 5%-(: # &%"% )+1,';18$%" 12 +;% ,1".1"#+-1(< );% ,1*8$ (1+ 5% &#$% 8-#58%. I) G#",-# 8-#58%6 A. Among the e9ceptions when a director is liable for the obligations of the corporation is :when a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.$ The situation of ,arcia falls e9actly under the aforesaid situation because Section !1 BfC of the Social Security )aw imposes a civil liability upon its managing head, directors or partners for any act or omission pertaining to the violation of the Social Security )aw when committed by a corporation, partnership or association. 118 3. W;%( #"% $-"%,+1")J+"*)+%%) 8-#58% 21" $#&#:%) )*22%"%$ 50 +;% ,1".1"#+-1(< -+) )+1,';18$%")J&%&5%") #($ 1+;%" .%")1()6 A. Directors or trustees who BaC willfully and knowingly vote for or assent to patently unlawful acts of the corporation or BbC who are guilty of gross negligence or bad faith in directing the affairs of the corporation or BcC ac4uire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be jointly and severally liable for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. 116 113 %owton +onglomerate nc. vs. Agcolicol, 522 S+-A 8!", April ", !22", cited in Saludaga vs. (ar 3astern ?niversity, 88" S+-A 751, 788, April "2, !221. 114 Saludaga vs. (ar 3astern ?niversity, 88" S+-A 751, 788, April "2, !221. 115 ,arcia vs. Social Security System +ommission )egal and +ollection, 852 S+-A 58/, 578, Dec. 17, !227 116 Section "1, paragraph 1. "2 n letter BcC mentioned above, the director, trustee or officer who attempts to ac4uire or ac4uires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, shall likewise be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. 117
+onsistent with the foregoing provision, it has been held that personal liability of a corporate director, trustee or offer along Balthough not necessarilyC with the corporation may so validly attach, as a rule, only when B1C he assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons= B!C he consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto= B"C he agrees to hold himself personally liable with the corporation= or B5C he is made by a specific provision of law personally answerable for his corporate action. 111
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ince Dayrit merely acted as representative of Henceslao, in signing the contract, he could not be made personally liable for the corporation$s failure to comply with its obligation. 11/ 3. T;% 122-,%") #($ $-"%,+1") 12 C"-).#< I(,. .#))%$ # "%)18*+-1( +%"&-(#+-(: )%9%"#8 /1"'%") 1( +;% :"1*($ 12 )%"-1*) 5*)-(%)) 81))%). T;% $-)&-))%$ %&.810%%) 2-8%$ #( #,+-1( 21" -88%:#8 $-)&-))#8. C"-).# /#) *(#58% +1 ."19% -+) 2-(#(,-#8 81))%) 117 Section "1, par. != Asked, 1//6 and 1//7 'ar 39ams. 118 %owton +onglomerate nc. vs. Agcolicol, 522 S+-A 8!", April ", !22". 119 D. *. Henceslao and Associates, nc. vs. -eadycon Trading and +onstruction +orp., 5"" S+-A !81, 0une !/, !225. "1 #($ &%"%80 ."%)%(+%$ # S+#+%&%(+ 12 P"12-+ #($ L1))%) /;-,; $-$ (1+ 5%#" +;% )-:(#+*"% 12 # ,%"+-2-%$ .*58-, #,,1*(+#(+ (1" #*$-+%$ 50 #( -($%.%($%(+ #*$-+1". T;% NLRC 21*($ +;% 122-,%") #($ $-"%,+1") 12 C"-).# )18-$#"-80 8-#58% /-+; )#-$ ,1".1"#+-1( 21" +;% .#0&%(+ 12 5#,' /#:%) #($ )%.#"#+-1( .#0. W#) )*,; $%,-)-1( ,1""%,+6 A. +orporate officers and directors are solidarily liable with the corporation for the termination of employment of corporate employees done with malice or in bad faith. They were the ones, who as highEranking officers and directors of +rispa signed the board resolution retrenching the employees on the feigned ground of serious business losses that had no basis apart from an unsigned and unaudited %rofit and )oss Statement which has no evidentiary value whatsoever. This is indicative of bad faith on the part of the officers and directors for which they can be held jointly and severally liable with +rispa for all the money claims of the illegally terminated employees. 1!2
3. C*%)+# )18$ +1 T"#&#+ M%",#(+-8%< I(,. # +"#,+1". I( .#0&%(+ +;%"%12< D#9-$ O(:< T"#&#+>) ."%)-$%(+ #($ &#(#:%"< -))*%$ # ,;%,'. T"#&#+ -( +*"(< )18$ +;% +"#,+1" +1:%+;%" /-+; # 8#/( &1/%" 2#5"-,#+%$ 50 -+ +1 NAWASA. O(: )+1..%$ .#0&%(+ 12 +;% ,;%,' -))*%$ +1 C*%)+# 1( +;% :"1*($ +;#+ NAWASA "%2*)%$ +1 .#0 +;% +"#,+1" #($ 8#/( &1/%" 5%,#*)% 12 )1&% $%2%,+) -( +;% &1/%" #($ +;#+ +;% %(:-(% 12 +;% +"#,+1" /#) # "%,1($-+-1(%$ *(-+. C*%)+# )*%$ T"#&#+ #($ O(:. W#) O(: 8-#58%6 A. <ng was not liable because he acted not in his personal capacity, but as an officer of Tramat which has a distinct personality. <nly the corporation and not the person acting for and on its behalf could be made liable thereon. %ersonal liability of a corporate director, trustee or officer along with the corporation Balthough not necessarilyC may so validly attach, as a rule, only when L 1. He assents BaC to a patently unlawful act of the corporation, or BbC for bad faith or gross negligence in directing its affairs, or BcC for conflict of interest, resulting in damages to the corporation, its stockholders or other persons= !. He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto= ". He agrees to hold himself personally and solidarily liable with the corporation= or 5. He is made, by a specific provision of law, to personally answer for his corporate action. 1!1 3. W;#+ #"% +;% "%=*-)-+%) 12 # $%"-9#+-9% )*-+6 120 ?ichico vs. .)-+, !7" S+-A "8. 1!1 Tramat *ercantile, nc. vs. +ourt of Appeals, !"1 S+-A 15= Asked, 1//8 and 1//6 'ar 39ams. "! A. The re4uisites of a derivative suit areF BaC The party bringing suit should be a shareholder during the time the act or transaction complained of, the number of shares not being material= BbC The party has tried to e9haust intraEcorporate remedies i.e., has made a demand on the board of directors for the appropriate relief, but the latter has failed or refused to heed his pleas= and BcC The cause of action actually devolves on the corporation= the wrongdoing or harm having been caused to the corporation and not the particular stockholder bringing the suit. 1!! 3. W;#+ -) +;% (#+*"% 12 # $%"-9#+-9% )*-+ #($ 21" /;1)% 5%(%2-+ -) -+6 A. A derivative action is a suit by a stockholder to enforce a corporate cause of action. ?nder the +orporation +ode, where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. However, an individual stockholder may file a derivative suit on behalf of the corporation to protect or vindicate corporate rights wherever the officials of the corporation refuse to sue, or are the ones to be sued, or hold control of the corporation. n such actions, the corporation is the real party in interest while the suing stockholder, on behalf of the corporation is only a nominal party. 1!" 3. M#0 # (1&-(%% $-"%,+1" 12 PNCC< # G19%"(&%(+-1/(%$ 1" ,1(+"188%$ ,1".1"#+-1( 2-8% # $%"-9#+-9% )*-+ +1 #((*8 # ,1&."1&-)% #:"%%&%(+ %(+%"%$ -(+1 50 +;% ,1".1"#+-1(6 A. To be elected in the 'oard of a governmentEowned or controlled corporation, a nominal share is transferred to him so as to 4ualify him as director. Hence, he has legal standing to challenge the compromise agreement. The government nominees in the %.++ 'oard, who practically compose the entire %.++ 'oard, are public officer subject to the AntiE,raft and +orrupt %ractices Act, accountable to the ,overnment and the (ilipino %eople. To say that %.++ was organi&ed under the +orporate +ode, despite its being /2."T owned by the ,overnment is :an autonomous entity; that could solely through its 'oard of Directors compromise, and transfer ownership, of substantially all its assets to a private party without complying with the Administrative +ode of 1/17, is to invite the plunder of all such government owned corporations. 1!5 3. A#B W;#+ -) +;% 5#)-) 12 +;% )+1,';18$%">) "-:;+ 12 -().%,+-1( 12 +;% ,1".1"#+-1(>) 511') #($ "%,1"$)K A5B M#0 +;% ;%-") 12 # $%,%#)%$ )+1,';18$%" -&&%$-#+%80 %E%",-)% +;% "-:;+ 12 -().%,+-1( *.1( +;% $%#+; 12 +;% )+1,';18$%"6 122 -eyes vs. -T+ of *akati, 861 S+-A 8/", Aug. 11, !221. 123 Sison vs. %.++ and -adstock Securities )td., 627 S+-A 51", Dec. 5, !22/. 124 Sison vs. %.++ and -adstock Securities )td., 627 S+-A 51", Dec. 5, !22/. "" A. BaC The stockholder$s right of inspection of the corporation$s books and records is based upon his ownership of shares in the corporation and the necessity for selfE protection. BbC ?pon the death of a shareholder, the heirs do not automatically ac4uire the rights and privileges of the deceased as shareholder of the corporation L the stocks must be distributed first to the heirs in estate proceedings, and the transfer of the stocks must be recorded in the books of the corporation. During such interim period, the heirs stand as the e4uitable owners of the stocks, the e9ecutor or administrator duly appointed by the court being vested with the legal title to the stock. 1!8 3. I) +;% )+1,';18$%">) "-:;+ 12 -().%,+-1( 12 +;% 511') #($ "%,1"$) 12 +;% ,1".1"#+-1( #5)18*+%6 A. The right of inspection of corporate records by a stockholder must be germane to the petitioner$s interest as a stockholder, and has to be proper and lawful in character and not inimical to the interest of the corporation. 1!6 Thus, when a stockholder was not acting in good faith and for a legitimate purpose in making his demand for inspection of the corporate books, the corporation is justified in refusing his re4uest for e9amination of the corporation books. 1!7 3. D%2-(% $-9-$%($. A. Dividend is that portion of the profits and surplus funds of the corporation which has been actually set apart, by a valid act of the corporation, for distribution among the stockholders according to their respective interests. 1!1 t is the fund set aside and declared by the directors of the corporation and in case of stock dividends, with the approval BsicC of the stockholders, to be divided or distributed among the stockholders according to their respective interests. 1!/ The term is also used to designate the shares of the individual stockholders or members in the fund so set apart, and also to designate the assets distributed by a corporation among its stockholders out of capital on reduction of the capital stock or dissolution. 1"2
+orporate profits when set apart, declared and ordered by the directors for distribution among the shareholders are known as dividends. 1"1
3. D-)+-(:*-); $-9-$%($) 2"1& ."12-+). 125 %uno vs. %uno 3nterprises, nc., 8// S+-A 818, Sept. 11, !22/. 126 ,okongwei, 0r. vs. Securities and 39change +ommission, 171 %hil. !66= 1/ S+-A ""6. 127 AngEAbaya vs. Abaya, 87" S+-A 1"", Dec. 5, !221. 128 15 +. 0. Sec. 1!27. 129 .ielson @ +o., nc. vs. )epanto +onsolidated *ining +o., !6 S+-A 85!. 1"2 11 (letcher +yc. +orp., Sec. 8" 11, p. 62"= Asked, 1//2 'ar 39ams. 1"1 S3+ <pinion, 0anuary ", 1/1". "5 A. Dividends are declared only from profit after they are earned. 1"! %rofits in the coffers of a corporation do not become a dividend until they have been set apart or at least declared as a dividend. 1""
3. W;#+ � 5% +;% )1*",% 12 .#0&%(+ 12 $-9-$%($)6 A. A corporation cannot lawfully declare dividends out of its capital stock, and thereby reduce the same, or out of assets which are needed to pay the corporate debts. They can be declared only out of surplus profits. 1"5 The reason for the rule is that it would be a fraud upon the creditors of a corporation who e9tend credit to it on the faith of its capital stock, to permit it to be diverted by a distribution among the stockholders as dividends. *oreover, each stockholder is entitled to have the capital stock preserved unimpaired for the purpose of carrying out the object for which the corporation is formed. 1"8
3. W;#+ -) +;% %22%,+ 12 $%,8#"#+-1( 12 )+1,' $-9-$%($)6 A. The declaration of stock dividends is akin t8o a forced purchase of stocks. 'y declaring stock dividends, a corporation ploughs back a portion or its entire unrestricted retained earnings either to its working capital or for capital asset ac4uisition or investments. Hhen the dividend is distributed, it ceases to be a property of the corporation as the entire portion or its unrestricted retained is distributed pro rata to corporate stockholders. Hhen stock dividends are distributed, the amount declared ceases to belong to the corporation but is distributed among the stockholders. +onse4uently, the unrestricted retained earnings of the corporation are diminished by the amount of the declared dividend while the stockholders$ e4uity is increased. 1"6 3. I) # 21"%-:( ,1".1"#+-1( (1+ 8-,%()%$ +1 $1 5*)-(%)) -( +;% P;-8-..-(%) #5)18*+%80 -(,#.#,-+#+%$ 2"1& 2-8-(: # )*-+ -( 81,#8 ,1*"+)6 A. Hhen a foreign corporation does business in the %hilippines without the proper license, it cannot maintain any action of proceeding before %hilippine +ourts. :Doing business; implies a continuity of commercial dealings or arrangement which involve :profitEmaking;. :Soliciting purchases; has been deleted from the enumeration of acts or activities which constitute :doing business;. Thus, where a foreign company merely imports goods from a %hilippine e9porter, without opening an office or appointing an agent in the %hilippines, is not doing business in the %hilippines and hence, not barred from bringing action in %hilippine courts. 1"7
132 ndiana Aeneer and )umber +o. vs. Hageman, 87 nd. App. 661, 128 .3 !8". 133 )ord v. Territory of Hawaii, 7/ ( !d, 761= 11 (letcher +yc. +orp., Sec. 8"1/, p. 62/= Asked, .o. A, b, !228 'ar 39ams. 134 11 (letcher +yc. +orp. Sec. 8"1/, 611= Steinberg vs. Aelasco, 8! %hil. /8"= Asked, .o. A, a, !228 'ar 39ams. 1"8 15 +. 0. Sec. 1!12= Asked, 1/8" and 1/87 'ar 39ams.= .o. A c, !228 'ar 39ams. 136 %)DT vs. .T+, 8"/ S+-A "68, December 5, !227. 137 +argill, nc. vs. ntra Strata Assurance +orporation, 618 S+-A "25, *arch 18, !212. "8 <nly when a foreign corporation is transacting or doing business in the %hilippines will a license be necessary before it can institute suits. t may however, bring suits on isolated business transactions, which is not prohibited under %hilippine )aw. Thus, a foreign insurance company may sue in %hilippine courts for subrogation arising out of marine insurance policies issued by it abroad to cover internationalEbound cargoes shipped by a %hilippine carrier, even if it has no license to do business in the country. t is the act of engaging in business without the prescribed license, and not the lack of license per se which bars a foreign corporation from access to our courts. 1"1 T4E SECURITIES REGULATION CODE 3. W;#+ #"% +;% ."19-)-1() *($%" +;% S%,*"-+-%) R%:*8#+-1( C1$% -(+%($%$ +1 ."1+%,+ +;% -(+%"%)+ 12 );#"%;18$%")6 A. The following are the provisions under the Securities -egulation +ode intended to protect the interest of shareholdersF B1C Tender offers to stockholders whenever any person or group of persons intends to ac4uire 18T of the e4uity of a listed corporation or one with a capital of at least %82 million, or "2T of the e4uity of such corporation over a period of 1! months, as the case may be. 1"/ B!C -estrictions on pro9y solicitations= 152 and B"C -e4uirements for internal recordEkeeping and accounting controls. 151 3. W;#+ -) # ?+%($%" 122%"@6 W;#+ -) -+) .*".1)%6 A. A :tender offer; is a publicly announced intention by a person acting alone or in concert with other persons to ac4uire e4uity securities of a public company i. e., one listed on an stock e9change. t is also defined as an offer by the ac4uiring person to stockholders of a public company for them to tender their shares therein on the terms specified in the offer. 15!
Tender offer is in place to protect the interests of minority stockholders of a target company against any scheme that dilutes the share value of their investments. t affords such minority shareholders the opportunity to withdraw or e9it from the company under reasonable terms, a change to sell their shares at the same price as those of the majority stockholders. 15" 138 Aboiti& Shipping +orporation vs. nsurance +ompany of .orth America, 861 S+-A !6!. 139 Section 1/.1, Asked, .o. A, !22! 'ar 39ams. 140 Section !2. 141 Section !!. 142 <smena vsN Social Security System of the %hilippines, 8"" S+-A, Sept. 1", !227. 143 bid. "6 3. W;%( &*)+ +%($%" 122%" 5% &#$% +1 );#"%;18$%")6 A. Any person or group of persons acting in concert who intends to ac4uire at least fifteen percent B18TC of any class of any e4uity security of a listed corporation or of any class of any e4uity security of a corporation with assets of at least (ifty million pesos B%82,222,222.22C and having two hundred B!!C or more stockholders with at least one hundred B122C shares each or who intends to ac4uire at least thirty percent B"2TC of such e4uity over a period of twelve B1!C months shall make a tender offer to stockholders by filing with the +ommission a declaration to that effect= and furnish the issuer, a statement containing such of the information re4uired in Section 17 of this +ode as the +ommission may prescribe. Such person or group of persons shall publish all re4uests or invitations for tender, or materials making a tender offer or re4uesting or inviting letters of such a security. +opies of any additional material soliciting or re4uesting such tender offers subse4uent to the initial solicitation or re4uest shall contain such information as the +ommission may prescribe, and shall be filed with the +ommission and sent to the issuer not later than the time copies of such materials are first published or sent or given to security holders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he case is already moot and academic. The condition under which the parties have agreed into a S%A case to e9ist because of the tender offer at a higher price. The pricing component L at %5".82 per share L has ceased to e9ist. 158
3. W;#+ -) +;% &%#(-(: 12 ?S/-)) C;#88%(:%@6 A. ?nder the :Swiss +hallenge; format, one of the bidders is given the option or preferential right to match the winning bid. 156 3. W;#+ #"% ?P"%-N%%$ P8#()@6 144 Section 1/.1= Asked, .o. A, !22! 'ar 39ams. 145 <smena vs. Social Security System of the %hilippines, infra. 146 <smena vs. Social Security System of the %hilippines, 8"" S+-A "1", "!1, September 1", !227. "7 A. :%reE.eed %lans; are contracts which provide for the performance of future services or the payment of future monetary considerations at the time of actual need, for which planholders pay in cash or installment at stated prices, with or without interest or insurance coverage, and includes life, pension, education, interment, and other plans which the +ommission may from time to time approve. 157 PRESIDENTIAL DECREE NO. 902-A AA) #&%($%$ 50 S%,*"-+-%) R%:*8#+-1( C1$%B 3. W;-,; ,1*"+ ;#) C*"-)$-,+-1( 19%" ,#)%) ."%9-1*)80 ,1:(-7#58% 50 +;% SEC6 A. The court designated by the Supreme +ourt as Special +ommercial +ourt is vested with jurisdiction over cases previously cogni&able by the Securities and 39change +ommission. Hhen a case is erroneously filed in the regular -egional Trial +ourt, such court does not have the authority or power to order the transfer of cases erroneously filed with it to another branch of the -egional Trial +ourt L the only action that it could take on the matter is to dismiss the petition for lack of jurisdiction. 151
3. W;1 � 2-8% # .%+-+-1( 21" "%;#5-8-+#+-1( 12 # ,1".1"#+-1(6 A. The petitioner in a %etition for -ehabilitation of the corporation must either beF B1C an actual insolvent debtor= B!C a technically insolvent debtor= or B"C a creditor or stockholder of the debtor. 15/ 3. W;#+ -) +%,;(-,#8 -()189%(,06 W;#+ -) +;% "%&%$0 12 +;% ,1".1"#+% $%5+1" /-+; +%,;(-,#8 -()189%(,0. A. Technical insolvency is the inability of a corporation to pay its obligations although it has sufficient assets, for a period longer than one year from filing of the petition. ts remedy is to file a %etition for -ehabilitation. 182
3. D-)+-(:*-); #,+*#8 -()189%(,0 2"1& +%,;(-,#8 -()189%(,0. A. There is actual insolvency when the corporation$s assets are not enough to cover its liabilities, while technical insolvency e9ists when the corporation has enough assets but it foresees its inability to pay its obligations for more than one year from the filing of the petition. 181
147 Abrera, et al., vs. 'ar&a and +ollege Assurance %lan of the %hil., nc., 8// S+-A 8"5, Sept. 11, !22/. 148 bid. 149 ?nion 'ank of the %hilippines vs. AS' Development +orporation, 862 S+-A 871. 150 ?nion 'ank of the %hilippines vs. AS' Development +orporation, 862 S+-A 871. 151 %.' vs. +ourt of Appeals, 876 S+-A 8"7, 0anuary 7, !22/. "1 3. W;%( � # .#"+0 #..80 21" +;% #..1-(+&%(+ 12 # &#(#:%&%(+ ,1&&-++%% 21" +;% ,1".1"#+-1(< .#"+(%");-. 1" #))1,-#+-1(6 A. A party may apply for the appointment of a management committee for the corporation, partnership or association when there is imminent danger ofF B1C Dissipation, loss, wastage or destruction or assets or other properties= and B!C %araly&ation of its business operations which may be prejudicial to the interest of the minority stockholders, partiesElitigants or the general public. 18! The situations contemplated in these instances are serious in nature. There must e9ist a clear and imminent danger of losing the corporate assets if a receiver is not appointed. 18" 3. W;%( � "%,%-9%") 5% #..1-(+%$ 21" # ,1".1"#+-1(6 A. -eceivers may be appointed wheneverF B1C necessary in order to preserve the rights of the partiesElitigant, andNor B"C protect the interest of the investing public and creditors. 185
3. W;#+ -) +;% ?S%"-1*) S-+*#+-1( T%)+@ -( ,1".1"#+% "%;#5-8-+#+-1( ,#)%)6 A. The :Serious Situation Test; in a petition for rehabilitation case means that there is a clear and imminent danger that the corporate petitioner will lose its corporate assets if a receiver is not appointed. 188 3. W;#+ -) +;% %22%,+ 12 +;% #..1-(+&%(+ 12 # "%;#5-8-+#+-1( "%,%-9%"6 W;#+ -) +;% .*".1)% +;%"%126 A. ?pon appointment by the S3+ Bnow, -T+ Special +ommercial +ourtC of a rehabilitation receiver, all actions for claims against the corporation pending before any court, tribunal or board shall ipso jure be suspended. 186
The purpose of the automatic stay of all pending actions for claims is to enable the rehabilitation receiver to effectively e9ercise itsNhis powers free from any judicial or e9trajudicial interference that might unduly hinder or prevent the rescue of the corporation. *ore importantly, the suspension of all actions for claims against the corporation embraces all phases of the suit, be it before the trial court or any tribunal or 152 Sy +him vs. Sy Siy Ho @ Sons, nc., 512 S+-A 568, 0anuary !7, !226, citing Section 1, -ule / of the nterim -ules on +orporate -ehabilitation. 153 %ryce +orporation vs. +ourt of Appeals, 85" S+-A 687, (ebruary 5, !221. 154 Section 6 BcC, %. D. /2!EA, as amended. 155 %ryce +orporation vs. +ourt of Appeals, supra. 156 ,arcia vs. %hilippine Air )ines, nc., 8"1 S+-A 875. "/ before the Supreme +ourt. .o other action may be taken, including the rendition of judgment during the state of suspension. t must be stresses that what are automatically stayed or suspended are the proceedings of a suit and not just the payment of claims during the e9ecution stage after the case had become final and e9ecutory. 187 3. W;#+ #"% +;% #,+-1() +;#+ #"% )*).%($%$ $*"-(: +;% ."1,%)) 12 "%;#5-8-+#+-1(6 A. The actions that are suspended cover all claims against the corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature. .o e9ception in favor of labor claims is mentioned in the law. 181 .o e9ception either is made therein in favor of maritime claims. Thus, since the law does make any e9emptions or distinctions, neither should we. 18/ +laims for tuition fees against a :preEneed; company are likewise included among the claims to be suspended by the petition. 162 3. W;#+ -) +;% .*".1)% 12 )*).%($-(: +;% ."1,%%$-(:) -(-+-#+%$ 50 +;% ,"%$-+1") 21" +;% ,188%,+-1( 12 +;%-" ,"%$-+) /;%(%9%" # ,1".1"#+-1( -) *($%":1-(: "%;#5-8-+#+-1(6 A. The purpose for the suspension of the proceedings is to prevent a creditor from obtaining an advantage or preference over another and to protect and preserve the rights of party litigants as well as the interest of the investing public or creditors. Such suspension is intended to give enough breathing space for the management committee or rehabilitation receiver to make the business viable again, without having to divert attention and resources to litigations in various fora. The suspension would enable the management committee or rehabilitation receiver to effectively e9ercise itsNhis powers free from any judicial or e9trajudicial interference that might unduly hinder or prevent the :rescue; of the debtor company. To allow such other action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation. 161 3. W-88 +;% )*).%()-1( 12 #88 ."1,%%$-(:) #) # ,1()%=*%(,% 12 "%;#5-8-+#+-1( -(,8*$% )*).%()-1( 12 ,"-&-(#8 ."1)%,*+-1( 21" 9-18#+-1( 12 BP 22 1" B1*(,-(: C;%,' L#/6 A. Aiolation of '% !! is not a :claim; that can be enjoined within the purview of %.D. .o. /2!EA although the conviction of the accused for the alleged crime could result in the restitution, reparation or indemnification of the offended party for the damage or injury he sustained by reason of the felonious act of the accused because prosecution for 157 bid. 158 %hilippine Airlines, nc. vs. Heirs of 'ernardin 0. Uamora, 8"1 S+-A 586, .ovember !", !227. 159 .egros .avigation +o., nc. vs. +ourt of Appeals, 87" S+-A 5"5, December 12, !221. 160 Abrera, et al., vs. 'ar&a and +A%, 8// S+-A 8"5, Sept. 11, !22/. 161 %hilippine slands +orporation for Tourism Development, nc. vs. Aictorias *illing +ompany, nc.. 885 S+-A 861, 0une 17, !221. 52 violation of '.%. !! is a criminal action. The dominant and primordial objective of the criminal action is the punishment of the offender. The civil action is merely incidental to and conse4uent to the conviction of the accused. +riminal actions are primarily intended to vindicate an outrage against the sovereignty of the state and to impose the appropriate penalty for the vindication of the disturbance to the social order caused by the offender. <n the other hand, the action between the private complainant and the accused is intended solely to indemnify the former. 16! 3. W;#+ -) +;% $-22%"%(,% 5%+/%%( S*).%()-1( 12 P#0&%(+) *($%" +;% I()189%(,0 L#/ #($ )*).%()-1( 12 .#0&%(+) 12 # ,1".1"#+-1( *($%":1-(: "%;#5-8-+#+-1( *($%" P"%)-$%(+-#8 D%,"%% 902-A6 A. ?nlike the provisions in the nsolvency )aw which e9empts secured creditors from the suspensive effect of the order issued by the court in an ordinary suspension of payment proceedings, the provisions of %.D. .o. /2!EA, when it comes to the appointment of a management committee or a rehabilitation receiver, do not contain an e9emption for secured creditors. 16"
3. V-,+1"-#) M-88-(: C1".1"#+-1( AVMCB 15+#-(%$ 81#() 2"1& CICM M-))-1(#"-%)< I(,. #($ C1(:"%:#+-1( 12 +;% M1)+ 4180 R%$%%&%" /;-,; /%"% #))-:(%$ +1 PICTD. W;%( +;% 81#() &#+*"%$< PICTD $%&#($%$ .#0&%(+ 2"1& VMC /;-,; 2#-8%$ +1 .#0. PITC 2-8%$ # ,1&.8#-(+ #:#-()+ VMC /-+; # ."#0%" 21" ."%8-&-(#"0 #++#,;&%(+ /;-,; +;% ,1*"+ :"#(+%$. T;% ,1*"+ 8-2+%$ +;% #++#,;&%(+ /;%( VMC 2-8%$ # ,1*(+%"51($. T;%"%#2+%"< VMC 2-8%$ /-+; +;% SEC # .%+-+-1( +1 $%,8#"% -+)%82 -( # )+#+% 12 )*).%()-1( 12 .#0&%(+) #($ )1*:;+ +;% #..1-(+&%(+ 12 # &#(#:%&%(+ ,1&&-++%% +;#+ /1*8$ 19%")%% -+) ."1.1)%$ "%;#5-8-+#+-1( .8#(. SEC 1"$%"%$ +;% )*).%()-1( 12 #88 #,+-1() #:#-()+ VMC. PICTD 2-8%$ # &1+-1( +1 8-2+ +;% )*).%()-1( 12 ."1,%%$-(:) 1( +;% :"1*($ +;#+ -+ -) # )%,*"%$ ,"%$-+1" ;#9-(: ."%9-1*)80 15+#-(%$ #( #++#,;&%(+ 19%" VMC>) ."1.%"+-%). I) +;% ,1(+%(+-1( 12 PICTD ,1""%,+. A. He are not persuaded by %+TD$s argument that it should be e9empt from the suspension order because it is a secured creditor. ?nlike the provisions in the nsolvency )aw which e9empts secured creditors from the suspensive effect of the order issued by the court in an ordinary suspension of payment proceedings, the provisions of %.D. .o. /2!EA, when it comes to the appointment of a management committee or a rehabilitation receiver, do not contain an e9emption for secured creditors. 165 3. W;#+ -) +;% %22%,+ 12 +;% #..1-(+&%(+ 12 # &#(#:%&%(+ ,1&&-++%% 1" "%;#5-8-+#+-1( "%,%-9%" 1( +;% "-:;+ 12 +;% )%,*"%$ ,"%$-+1" +1 21"%,81)% +;% &1"+:#:% -( -+) 2#91"6 162 -osario vs. +o, 86" S+-A !"/, Aug. !6, !221. 163 %hilippine slands +orporation for Tourism Development, nc. vs. Aictorias *illing +ompany, nc., supra. 164 Ibid. 51 A. The right to foreclose such mortgage is merely suspended upon the appointment of a management committee or rehabilitation receiver or upon the issuance of a stay order by the trial court. However, the creditorEmortgagee may e9ercise his right to foreclose the mortgage upon the termination of the rehabilitation proceedings or upon the lifting of the stay order. 168 3. W;#+ -) +;% ,1()%=*%(,% -2 "%;#5-8-+#+-1( -) (1 81(:%" 2%#)-58% #($ +;% #))%+) 12 +;% ,1".1"#+-1( #"% 2-(#880 8-=*-$#+%$6 A. Secured creditors shall then enjoy preference over unsecured creditors, subject only to the provisions of the +ivil +ode on concurrence and preference of credits. +reditors of secured obligations may pursue their security interest on lien, or they may choose to abandon the preference and prove their credits as ordinary claims. 166 .3,<TA')3 .ST-?*3.TS 3. T;% ."1&-))1"0 (1+% )-:(%$ 50 +;% &#'%") "%#$)< ?R%,%-9%$ 2"1& A++0. D-1(-)-1 V. L8#&#)< +;% )*& 12 P<000< P;-8-..-(% ,*""%(,0 .#0#58% 1( 1" 5%21"% J#(*#"0 23< 1997 #+ N1. 1 G-10 G#&-#)< 3*%71( C-+0< /-+; -(+%"%)+ #+ +;% "#+% 12 !L .%" &1(+; 1" 2"#,+-1( +;%"%12. I+ -) *($%")+11$ +;#+ 1*" 8-#5-8-+0 *($%" +;-) 81#( -) C1-(+80 #($ )%9%"#880.@A)-,B. I) +;% )#-$ ."1&-))1"0 (1+% (%:1+-#58%6 A. 'y its terms, the note was made payable to a specific person rather than to bearer or to order L a re4uisite for negotiability under the .egotiable nstruments )aw. Hence, the note is nonEnegotiable. 167 3. I) # )+-.*8#+-1( +;#+ .#0&%(+ /-88 5% &#$% -( # 21"%-:( ,*""%(,0 )+#+%$ -( +;% -()+"*&%(+ 9#8-$6 D1%) -+ #22%,+ (%:1+-#5-8-+06 A. An obligation for the payment of money may be discharged by payment in a currency which is the legal tender in the %hilippines. 161 However, a stipulation to pay in a foreign currency shall be valid and the obligation need not be converted to its e4uivalent in %hilippine peso at the rate of e9change prevailing at the time of payment. 16/ -. A. 8!/ as amended, was repealed by -. A. 111" which was enacted into law on 0une 11, 1//6. 165 Consue"o %et!" Coror!tion vs. '"!nters (eve"oment B!n)# 465 SC$A 465. 166 Consue"o %et!" Coror!tion vs. '"!nters (eve"oment B!n)# 465 SC$A 465# *une 26# 2008. 167 ,arcia vs. )lamas, 517 S+-A !/!, December 1, !22". 168 Article 1!5/, +ivil +ode, as amended. 169 -A 8!/ as amended by -A 5122 and -. A. 111"= Asked, 1/71 'ar 39ams. 5! ?nder the said law, all monetary obligations shall be settled in the currency which is the legal tender in the %hilippines. However, the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment. 172
3. W;%( ,#( #( -()+"*&%(+ 1" ,;%,' .#0#58% +1 +;% 1"$%" 12 # ).%,-2-%$ .%")1( 5% ,1()-$%"%$ #) .#0#58% +1 5%#"%"6 41/ � -+ 5% (%:1+-#+%$6 A. An instrument or check payable to the order of a specified person may be considered payable to bearer when the payee is a fictitious or nonEe9isting person and such fact is known to the person making it so payable. Thus, checks issued to :%rinsipe Abante; of :Si *alakas at si *aganda;, who are wellEknown characters in %hilippine mythology, are bearer instruments because the named payees are fictitious and nonE e9istent. 171 3ven actual, e9isting, and living payee may likewise be :fictitious; if the drawer of the check did not intend the payee to in fact receive the proceeds of the check L if the payee is not the intended recipient of the check, the payee is considered a :fictitious; payee and the check is a bearer instrument. 17!
t may be negotiated by mere delivery 17" because the drawer cannot e9pect a fictitious payee to negotiate the check by placing his indorsement thereon, the drawer in such situation must have intended the check to be negotiated by mere delivery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he signatures of the drawer of the checks were forged and therefore, the drawer is deemed to have never become a party thereto and to have never consented to the contract that gave rise to it. '%, the drawee erred in making payments by virtue thereof. The forged signatures are wholly inoperative, and +asa, the drawer whose authori&ed signatures do not appear on the negotiable instruments, cannot be held liable thereon. .either is the latter precluded from raising the defense of forgery. 178 Since banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. +onse4uently, the 170 -. A. 111". 171 %.' vs. -odrigue&, 866 S+-A 81", Sept. !6, !221. 172 %.' vs. -odrigue&, 866 S+-A 81", Sept. !6, !221. 173 Section /, .egotiable nstruments )aw. 174 %.' vs. -odrigue&, 866 S+-A 81", Sept. !6, !221. 175 'ank of the %hilippine slands vs. +asa *ontessori nternationale, 5"2 S+-A !61, !1". 5" highest degree of diligence 176 is e9pected, and high standards of integrity and performance are even re4uired, of it. 177 'y 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. 171
The drawer, despite signature verification, failed to deter the instances of forgery. ts negligence consisted in the omission of that degree of diligence re4uired of a bank. A bank is bound to know the signatures of its customers= and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. '% must therefore, return the amount of the checks it debited from the account of the drawer. 17/ 3. S#&)*(: ;#$ # ,*""%(+ #,,1*(+ /-+; FEBTC #+ -+) M#'#+- B%8-A-" 5"#(,;. T;% )18% )-:(#+1"0 /#) J1(: G0* L%%. A ,%"+#-( G1(7#:# ."%)%(+%$ +1 FEBTC #+ -+) M#'#+- B%8-A-" 5"#(,; # ,;%,' .#0#58% +1 ,#); 21" P999<!00. A2+%" #),%"+#-(-(: +;#+ S#&)*(: ;#) )*22-,-%(+ 5#8#(,% +1 ,19%" +;% ,;%,'< +;% +%88%" ,1&.#"%$ +;% )-:(#+*"% 1( +;% ,;%,' /-+; +;% ).%,-&%( )-:(#+*"% 12 J1(: #) ,1(+#-(%$ -( +;% ).%,-&%( )-:(#+*"% ,#"$ /-+; +;% 5#('. A2+%" 5%-(: )#+-)2-%$ 12 +;% #*+;%(+-,-+0 12 +;% )-:(#+*"% 1( +;% ,;%,'< +;% +%88%" #)'%$ G1(7#:# +1 )*5&-+ ."112 12 ;-) -$%(+-+0< #($ +;% 8#++%" ."%)%(+%$ +;"%% -$%(+-2-,#+-1( ,#"$). T;% +%88%" 21"/#"$%$ +;% ,;%,' +1 V%8%7< +;% )%(-1" #))-)+#(+ ,#);-%" .*")*#(+ +1 +;% 5#(' .18-,0 "%=*-"-(: +/1 122-,%") +1 #.."19% +;% ,;%,' /;%( +;% #&1*(+ 12 +;% ,;%,' 21" %(,#);&%(+ /#) &1"% +;#( P100<000. V%8%7 ,1(,8*$%$ +;#+ +;% ,;%,' /#) -($%%$ )-:(%$ 50 J1(:. V%8%7 21"/#"$%$ +;% ,;%,' +1 S02*< #(1+;%" 122-,%" 12 +;% 5#('< 21" #.."19#8. S02* (1+-,%$ S%&.-1 /%88-'(1/( +1 S02* #) #))-)+#(+ #,,1*(+#(+ 12 S#&)*(: #($ );1/%$ +;% ,;%,' +1 ;-&. S%&.-1 91*,;%$ 21" +;% :%(*-(%(%)) 12 J1(:>) )-:(#+*"% #($ )#-$ -+ /#) 21" +;% .*",;#)% 12 %=*-.&%(+ 21" S#&)*(:. S#+-)2-%$ /-+; +;% :%(*-(%(%)) 12 J1(:>) )-:(#+*"%< S02* #*+;1"-7%$ +;% %(,#);&%(+ 12 +;% ,;%,' +1 G1(7#:# #($ $%5-+%$ +;% .#0&%(+ 2"1& +;% #,,1*(+ 12 S#&)*(:. T;% 21881/-(: $#0< +;% 21":%"0 12 +;% ,;%,' /#) $-),19%"%$. S#&)*(: #)'%$ "%-&5*")%&%(+ 2"1& FEBTC /;-,; "%2*)%$ 1( +;% :"1*($ +;#+ S#&)*(: /#) (%:8-:%(+ /;-8% +;% 5#(' /#) (1+. I+ +*"(%$ 1*+ +;#+ S%&.-1 )+18% +;% 58#(' ,;%,' #($ /#) ."%)*Ʉ "%).1()-58% 21" -+) %(,#);&%(+ +;"1*:; +;% 21":%$ )-:(#+*"% 12 J1(:. A1B I) FEBTC 8-#58% +1 S#&)*(:6 R%#)1(). A2B I) +;% .#"+-,-.#+-1( 12 S%&.-1 )*22-,-%(+ +1 %)+1. S#&)*(: 2"1& "#-)-(: +;% $%2%()% 12 21":%"06 R%#)1(). A. B1C (3'T+ is liable since it authori&ed the discharge of the forged check. Such liability attaches even if the bank e9erts due diligence and care in preventing such faulty discharge. (orgeries often deceive the eye of the most cautious e9perts= and when a bank has been so deceived, it is a harsh rule which compels it to suffer. The forgery may be so 176 bid., citing 'ank of %. . vs. +ourt of Appeals, "1" %hil. 8"1. 177 bid., citing Section ! of -. A. 17/1, otherwise known as :The ,eneral 'anking )aw of !222.; 178 bid., citing Sime9 nternational B*anilaC, nc. vs. +ourt of Appeals, !"! S+-A 88/. 179 'ank of the %hilippine slands vs. +asa *ontessori nternationale, supra., citing San +arlos *illing +o. vs. 'ank of %. ., 82 %hil. 8/. 55 near like the genuine one as to defy detection by the depositor himself, and yet the bank is liable to the depositor if it pays the check. 112 f payment is made by the drawee bank despite the forgery of the drawer$s signature, the drawee cannot charge it to the drawer$s account because the drawee is in a superior position to detect a forgery because he has the drawer$s signature and is e9pected 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. 111 B!C Samsung is not barred from raising the claim of forgery. The bare fact that the forgery was committed by an employee of the party whose signature was forged cannot do not possess the preternatural gift of cognition as to the evil that may lurk with the necessarily imply that such party$s negligence was the cause of the forgery. 3mployers hearts and minds of their employees. t was incumbent upon (3'T+ to prove that Samsung was negligent which it failed to do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he three manager$s checks issued by T-' were payable to the '- and yet said checks were never delivered or paid to the '- but were presented for payment by some unknown persons who, in order to receive payment therefor, forged the name of the payee. Despite this fraud, T-' paid the three checks. T-' ought to know that when a check is drawn payable to order and is presented for payment, it is the primary duty of said bank to know that the check was duly indorsed by the original payee and where it pays to a third person who forged the signature of the payee, the loss falls upon T-' who cashed the check. Aside therefrom, one of the checks was crossed. The crossing of one of the checks should have put T-' on guard= it was dutyEbound to ascertain the indorser$s title to the check or the nature of his possession. 'y encashing the checks in favor of unknown 180 Samsung +onstruction +ompany %hilippines, nc. vs. (ar 3ast 'ank @ Trust +o., 5"6 S+-A 52!. 181 bid. 182 Samsung +onstruction +ompany %hilippines, nc. vs. (ar 3ast 'ank and Trust +o., supra. 58 persons checks which were on their face payable to the '-, a government agency which can only act through its agents, T-' did so at its peril and must suffer the conse4uences of the unauthori&ed or wrongful endorsement. T-' cannot e9culpate itself from liability. ts only remedy is against the person to whom it paid the money. f proven that S' was a collecting bank which indorsed the checks bearing a forged indorsement and presents it to the drawee bank, it should ultimately be bound to pay. However, it is doubtful if the checks were ever presented to and accepted by S' so as to hold it as a collecting bank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s drawee, +itibank should have scrutini&ed the checks before paying the proceeds thereof. Had +itibank e9amined the checks it would have discovered that the clearing stamps on the checks do not bear any initials. (or this reason, +itibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee. The fact that the drawee bank did not discover the irregularity seasonably, constitutes negligence in carrying out its duty to its depositors. +itibank breached its contractual obligation to the drawer, (ord. +itibank therefore, is liable to (ord. +astro as proEmanager of %+' and his coEconspirator performed their activities using facilities in their official capacity or authority but for their personal and private gain 183 Traders -oyal 'ank vs. -adio %hilippines .etwork, nc., "/2 S+-A 621. 56 or benefit. A bank hold out its officers and agents as worthy of confidence will not be permitted to profit by the fraud of these officers or agents= nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. The bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority. Hence, %+' is liable to (ord. 'oth %+' and +itibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of the checks of (ord. Thus, both of them are e4ually liable for the proceeds of the checks to (ord. However, the contributory negligence of (ord in failing to e9amine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time, serves to mitigate the banks$ liability by reducing the award of interest from 1!T to 6T per annum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hilippine +ommercial nternational 'ank vs. +ourt of Appeals, "82 S+-A 556. 57 A. Section !5 of the .egotiable nstruments )aw creates a presumption that every party to an instrument ac4uired the same for a consideration or for value. Thus, the law itself creates a presumption in David$s favor that he gave valuable consideration for the checks in 4uestion. n alleging otherwise, Qang has the onus to prove that David got hold of the checks absent said consideration. n other words, Qang must present convincing evidence to overthrow the presumption. Qang failed to discharge her burden of proof. Qang$s averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. <n the contrary, it was shown that David did not receive the checks gratis but instead gave +handiramani ?S V"62,222 as consideration for the said checks. 118
3. D5#(%7 #*+;1"-7%$ S#5#( +1 )%88 ;-) 1<000 )=. &. 81+ -( C%5* C-+0 21" P200<000 /-+; +;% #:"%%&%(+ +;#+ S#5#( �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nder Section !/ of the .egotiable nstruments )aw, the accommodation party is one who meets all of the following re4uisitesF B1C he signed the instrument as maker, drawer, acceptor or indorser= B!C he did not receive value for the signature= and B"C he signed for the purpose of lending his name to some other person. Hhile )im signed as drawer of the checks she did not satisfy the two other remaining re4uisites. She drew the checks in payment of the balance of the purchase price of the lot subject of the transaction. n other words, the amounts covered by the checks form part of the cause or consideration for the purchase of the lot, ergo, )im received value for her signature on the checks. .either is there any indication that )im issued the checks for the purpose of enabling Qbane&, or any other person to obtain credit or to raise money, thereby totally debunking the presence of the third re4uisite of an accommodation party. )im was not therefore, an accommodation party, and she was liable for the amounts of the check to Saban. 116
3. B#*+-)+# -( ;-) ,#.#,-+0 #) P"%)-$%(+ 12 C"*-)%" B*) L-(%) #($ T"#().1"+ C1".1"#+-1( AC"*-)%"B< .*",;#)%$ ).#"% .#"+) 2"1& A*+1 P8*) T"#$%")< I(,. AA*+1 P8*)B #($ -))*%$ +/1 .1)+$#+%$ ,;%,')< 1(% # .%")1(#8 ,;%,' 21" P1!1<200 #($ #(1+;%" ,1".1"#+% ,;%,' 12 C"*-)%" 21" P97<!00. S#-$ ,;%,') /%"% $-);1(1"%$ #($ 185 Qang vs. +ourt of Appeals, 52/ S+-A 18/. 186 )im vs. Saban, 557 S+-A !"". 51 B#*+-)+# /#) ."1)%,*+%$ 21" 9-18#+-1( 12 +;% B1*(,-(: C;%,' 8#/. P*")*#(+ +1 # $%&*"%" +1 +;% %9-$%(,%< B#*+-)+# /#) #,=*-++%$ 5*+ /#) #$C*$:%$ +1 .#0 A*+1 P8*) +;% +1+#8 #&1*(+ 12 +;% ,;%,'). A*+1 P8*) ,8#-&%$ +;#+ B#*+-)+# ,1*8$ 5% &#$% 8-#58% 21" +;% .%")1(#8 ,;%,' ;% -))*%$ )-(,% ;% #,+%$ #) #( #,,1&&1$#+-1( .#"+0 12 C"*-)%". D%,-$% /-+; "%#)1(). A. 'autista should not be made liable. An accommodation party lends his name to enable the accommodated party to obtain credit or to raise money. There is no showing in what capacity 'autista issued the check. t cannot be assumed that he intended to lend his name to the corporation. Hence, 'autista cannot be considered as an accommodation party. 117 Hence, he raise the defense of lack of consideration against Auto %lus which was aware that the purchases were made by +ruiser and not by 'autista. 111 3. A#B W;%"% # ,;%,' -) .#0#58% +1 C1-(+ .#0%%) /;1 #"% (1+ .#"+(%")< /;1 );1*8$ -($1")% +;% )#&%6 A5B W;#+ -) +;% %22%,+ 12 .#0&%(+ 12 )#-$ ,;%,' *.1( +;% %($1")%&%(+ 12 1(80 1(% 12 +;% .#0%%)6 A. BaC Hhere an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others. BbC The payment of an instrument despite a missing indorsement is e4uivalent to payment on a forged indorsement or an unauthori&ed indorsement in itself in the case of joint payees. The bank that credits the proceeds of a check to the account of indorsing payee is liable for conversion to the nonEindorsing payee for the entire amount of the check. 11/ 3. W;#+ -) +;% %22%,+ 12 .#0&%(+ 12 # 5-88 50 +;% $"#/%%6 M#0 +;% $"#/%% #2+%" .#0&%(+ 12 +;% 5-88 ,8#-& +;#+ -+ -) (1+ 8-#58% +;%"%1( #($ );1*8$ 5% #881/%$ +1 "%,19%" +;% #&1*(+ .#-$6 A. The actual payment of the bill is e4uivalent to acceptance. Hence, when the drawee pays a bill that it has not previously accepted, the actual payment implies not only his assent to the order of the drawer and a recognition of his corresponding obligation to pay the aforementioned sum, but also, his clear compliance with that obligation. Actual payment by the drawee is greater than his acceptance, which is merely a promise in writing to payment. The payment of a check includes its acceptance. 1/2
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autista vs. Auto %arts Traders, nc., 861 S+-A !!". 188 'autista vs. Auto %arts Traders, nc., 861 S+-A !!". 189 *etrobank vs. 'A (inance, 627 S+-A 6!2, Dec. 5, !22/. 190 (ar 3ast 'ank @ Trust +o. vs. ,old %alace 0ewellery +o., 86! S+-A 625, Aug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he refusal to pay was correct. )'% as drawee bank cleared and paid the draft and forwarded the amount thereof to the collecting bank, (ar 3ast 'ank. The latter then credited to ,old %alace$s account the payment it received. The drawee by said payment recogni&ed and complied with the obligation to pay in accordance with the tenor of his acceptance. The tenor of the acceptance is determined by the terms of the bill as it is when the drawee accepts. )'% was liable on its payment of the draft according to the tenor thereof at the time of payment, which was the raised or altered amount. )'% could no longer repudiate the payment it erroneously paid to a holder in due course. ,old %alace was not a participant in the alteration of the draft, was not negligent, and was a holder in due course L it received the draft complete and regular upon its face, before it became overdue and without notice of any dishonor, in good faith and for value, and absent any knowledge of any infirmity in the instrument or defect in the title of the person negotiating it. (ar 3ast could not debit ,old %alace. 1/1
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telco cannot hold Steelweld liable there being no showing that Stelco was a holder for value of the check. %ossession by Stelco of the check after presentment and dishonor or payment, is utterly inconse4uential= it does not make the possessor a holder for value within the meaning of the law= it gives rise to no liability on the part of the maker or drawer and indorsers. There is even no evidence that Armstrong ndustries to whom -.Q.)im negotiated the check accepted the instrument and attempted to encash it in behalf of and as agent of Stelco. 1/!
191 (ar 3ast 'ank @ Trust +o. vs. ,old %alace 0ewellery +o., 86! S+-A 625, Aug. !2, !221. 1/! Stelco *arketing +orp. vs. +ourt of Appeals, supra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inance is a holder in due course having met all the re4uirements of Section 8! and therefore, it holds the instrument free from any defect of title of prior parties and from defenses available to prior parties among themselves, and may enforce the instrument for the full amount thereof. Since 'A (inance is a holder in due course, Aiolago cannot raise the defense of nonEdelivery of the object and nullity of the sale with A*S+. Hence, Aiolago spouses are liable to 'A (inance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very holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 1/1 of the .egotiable nstruments )aw, meaning a :payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.; David was the payee of the checks in 4uestion who was in possession thereof and therefore, a holder. The weight of authority sustains the view that a payee may be a holder in due course. The presumption that every holder is deemed prima facie to be a holder in due course applies in his favor. However, said presumption may be rebutted. n case any of the 4ualifications of a holder in due course provided for in Section 8! was proven to be lacking, David cannot be deemed a holder in due course. 1/5
193 Aiolago vs. 'A (inance +orporation, 88/ S+-A 6/. 194 Qang vs. +ourt of Appeals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o9as signed the promissory notes twiceF first, as president of Astro and second, in his personal capacity. Since he signed the notes twice, it necessarily implied that he was undertaking the obligation in the notes in two different capacities, official and personal. %ersons who write their names on the face of promissory notes are makers, promising that they will pay to the order of the payee or any holder according to its tenor. Thus, even without the phrase :personal capacity,; -o9as will still be primarily liable under the notes. 1/8
3. T*#71( .*",;#)%$ "-,% 2"1& R#&1). I( .#0&%(+ 12 +;% "-,%< T*#71( -($1")%$ +;% ,;%,') -))*%$ 50 S#(+1) #($ :#9% +;% )#&% +1 R#&1). T;% ,;%,') 51*(,%$. A( #,+-1( /#) 2-8%$ 50 R#&1) #:#-()+ T*#71( 21" ,188%,+-1( 12 +;% #&1*(+ 12 +;% ,;%,')< /-+;1*+ -(,8*$-(: +;% $"#/%" 12 +;% ,;%,')< S#(+1). W#) +;% (1(- -(,8*)-1( 12 S#(+1) -( +;% #,+-1( 2#+#8 +1 +;% ,#)% 2-8%$ 50 R#&1)6 A. As indorser, Tua&on warranted that upon due presentment, the checks were to be accepted or paid, or both, according to their tenor= and that in case they were dishonored, she would pay the corresponding amount. After an instrument is dishonored by nonpayment, indorsers cease to be merely secondarily liable= they become principal debtors whose liability becomes identical to that of the original obligor. The holder of a negotiable instrument need not even proceed against the drawer before suing the indorser. +learly, Santos L as the drawer of the checks is not indispensable party in action against Tua&on, the indorser of the checks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stro 3lectronics +orporation vs. %hilguarantee, 511 S+-A 56!. 196 Tua&on vs. Heirs of 'artolome -amos, 56" S+-A 521, 516E517, citing *etropol vs. Sambok *otors +o., !28 %hil. 781, 76!= 1!2 S+-A 165, 161. 8! ?#88 ."-1" -($1")%&%(+) #($J1" 8#,' 12 -($1")%&%(+ :*#"#(+%%$<@ #($ /%"% ."%)%(+%$ +1 #($ .#-$ 50 +;% $"#/%% 5#('< C-+-5#('. W;1 ,#( 5% &#$% 8-#58% 50 F1"$< PCIB#(' #) ,188%,+-(: 5#(' 1" C-+-5#('< +;% $"#/%% 5#('6 A. %+'ank is liable. Since the 4uestioned checks were deposited with %+'ank, it had the responsibility to make sure that the check in 4uestion is deposited in payee$s account only, ndeed, the crossing of the check with the phrase :%ayee$s Account <nly; is a warning that the check should be deposited only in the account of the +ommissioner of nternal -evenue. Thus, it is the duty of the collecting bank %+'ank to ascertain that the check be deposited in payee$s account only. Therefore, it is the collecting bank B%+'ankC which is bound to scrutini&e the check and to know its depositors before it could make the clearing indorsement :all prior indorsements andNor lack of indorsement guaranteed.; The drawee bank has a right to believe that the cashing bank Bor the collecting bankC had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. 1/7
3. P8#-(+-22) .*",;#)%$ 2"1& $%2%($#(+ T"#$%") R10#8 B#(' +;"%% &#(#:%">) ,;%,') .#0#58% +1 +;% B*"%#* 12 I(+%"(#8 R%9%(*%. O(% 12 +;% )#-$ ,;%,') /%"% ,"1))%$. T;% ,;%,') /%"% (%9%" $%8-9%"%$ +1 +;% .#0%% 5*+ /%"% ."%)%(+%$ 21" .#0&%(+ 50 *('(1/( .%")1() /;1 21":%$ +;% )-:(#+*"% 12 +;% .#0%%. T"#$%") R10#8 B#(' .#-$ +;% )#-$ ,;%,'). I) T"#$%") R10#8 B#(' 8-#58%6 A. 'y encashing in favor of unknown persons checks which were on their face payable to the '-, a government agency which can only act through its agents, Traders -oyal 'ank did so at its peril and must suffer the conse4uences of the unauthori&ed or wrongful endorsement. t should be noted further that one of the checks was crossed. The crossing of the check should have put Traders -oyal 'ank on guard= it was dutyEbound to ascertain the indorser$s title to the check or the nature of his possession. The bank should have known the effects of a crossed checkF BaC the check may not be encashed but only deposited in the bank= BbC the check may be negotiated only once to one who has an account with a bank and BcC the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must in4uire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. Traders -oyal 'ank is therefore, liable. 1/1
3. P*")*#(+ +1 # C1&."1&-)% A:"%%&%(+< P-1 B#""%++1 R%#8+0 $%8-9%"%$ +1 M1)8#"%) # ,;%,' -( .#0&%(+ 12 +;% -(+%"%)+ 12 +;% 8#++%" -( # "%#8 ."1.%"+0. M1)8#"%) (%9%" ,#);%$ +;% ,;%,' (1" =*%)+-1(%$ +;% +%($%" $1(% $%).-+% +;% 8#.)% 12 +;"%% 0%#"). L#+%"< M1)8#"%) ,8#-&%$ +;#+ +;% $%8-9%"0 12 +;% ,;%,' +1 ;-& $-$ (1+ ."1$*,% +;% %22%,+ 12 .#0&%(+ 5%,#*)% ;% (%9%" ,#);%$ +;% ,;%,'. W#) P-1 B#""%++1 R%#8+0 197 %hilippine +ommercial nternational 'ank vs. +ourt of Appeals, "82 S+-A 556, 567E561, citing 'anco de <ro Savings and *ortgage 'ank vs. 34uitable 'anking +orporation, 187 S+-A 111. 198 Traders -oyal 'ank vs. -adio %hilippines .etwork, nc., "/2 S+-A 621, 615. 8" $-),;#":%$ 2"1& -+) 158-:#+-1( +1 .#0 M1)8#"%) ,1()-$%"-(: +;#+ +;% 8#++%" $-$ (1+ ,#); +;% ,;%,' $%8-9%"%$ +1 ;-&6 A. The fact that the check paid him by %io 'arretto -ealty was never encashed should not be invoked against the latter. *oslares never 4uestioned the tender of the check to him done three years earlier. Hhile delivery of a check produces the effect of payment only when it is encashed, the rule is otherwise if the debtor was prejudiced by the creditor$s unreasonable delay in presentment. Acceptance of a check implies an undertaking of due diligence in presenting it for payment. f no such presentment was made, the drawer cannot be held liable irrespective of loss or injury sustained by the payee. %ayment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. 1// 3. A1B W;#+ #"% +;% %22%,+) 12 ,"1))-(: # ,;%,'6 A2B W;#+ -) +;% 8-#5-8-+0 12 +;% $"#/%% 5#(' +;#+ %(,#);%) # ,"1))%$ ,;%,'6 A3B W;#+ -) +;% 8-#5-8-+0 12 +;% ,188%,+-(: 5#(' +;#+ -($1")%) # ,"1))%$ ,;%,'6 A. B1C The effects of crossing a check are as followsF BaC the check may not be encashed but only deposited in the bank= BbC the check may be negotiated only once L to one who has account with a bank, and BcC the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must in4uire if he has the check pursuant to that purpose, otherwise, he is not a holder in due course. B!C B"C A collecting bank where a check is deposited and which endorses the check upon presentment with the drawee bank, is an indorser, and thus assumes all the warranties of an indorser. The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements. 'y stamping the check with the phrase, :all prior endorsements andNor lack of endorsement guaranteed;, that bank had for all intents of purposes assumed the warranties Brelated to the endorsements on the checksC. !22 3. W;#+ -) # N%:1+-#58% O"$%" 12 W-+;$"#/#8 ANOWB A,,1*(+6 A. .egotiable <rder of Hithdrawal B.<HC Account is an interestEbearing deposit account that combines the payable on demand feature of checks and the investment feature of savings accounts. !21 199 %io 'arretto -ealty Development +orporation vs. +ourt of Appeals, "62 S+-A 1!6. 200 'ank of America vs. Associated +iti&ens 'ank, 811 S+-A 81, *ay !1, !22/. 201 %eople vs. -eyes, 585 S+-A 6"6. 85 3. T;% ,;%,' -))*%$ *($%" +;% N%:1+-#58% O"$%" 12 W-+;$"#/#8 ANOWB A,,1*(+ -) .#0#58% +1 # ).%,-2-, .%")1( #($ (1+ +1 ?1"$%"@ 1" +1 ?5%#"%"@. I) -+ (%:1+-#58%6 A. t is not negotiable since it does not comply with one of the re4uisites of negotiability that it must be payable to order or to bearer. !2! TRANSPORTATION IV N TRANSPORTATION 3. W;#+ -) # +%)+ +1 $%+%"&-(% # ,1&&1( ,#""-%"6 A. The test to determine a common carrier is whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the 4uantity or e9tent of the business transacted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� ,1(+"#,+ -( +;% ,1*")% 12 ;%" 5*)-(%)). I) .%+-+-1(%"< # ,*)+1&) 5"1'%" ,1()-$%"%$ # ,1&&1( ,#""-%"6 A. The petitioner is a common carrier. There is greater reason for holding the petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner$s contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers is part and parcel of petitioner$s business. The definition of common carriers under Article 17"! of the +ivil +ode makes no distinction between one who whose principal activity is the carrying of passengers or goods or both and one who does such carrying only as an ancillary activity. t does not make any distinction between a person or enterprise offering such service on a regular or 202 Section 1= See %eople vs. -eyes, supra. 203 Asia )ighterage and Shipping, nc. vs. +ourt of Appeals, 52/ S+-A "52, August 1/, !22". 88 scheduled service and one on an occasional basis. .either does the article distinguish between carriers offering its services to the :general public; nor one who offers services only from a narrow segment of the general population. !25
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aC .o, ,%S cannot be considered as a common carrier. ,%S, being an e9clusive contractor and hauler of +oncepcion ndustries, nc., rendering or offering its services to no other individual or entity, cannot be considered a common carrier. +ommon carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the .*58-,,
whether to the public in general or to a limited clientele in particular, but never on an e9clusive basis.
The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee. ,%S scarcely falls within the term Wcommon carrier.W BbC Qes, notwithstanding the fact that ,%S cannot be considered as a common carrier it still cannot escape liability. n culpa contractual, upon which the action of petitioner rests as being the subrogee of +oncepcion ndustries, nc., the mere proof of the e9istence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.
The law, recogni&ing the obligatory force of contracts,
will not permit a party to be set free from liability for any kind of nonEperformance of the contractual undertaking or a contravention of the tenor thereof.
A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. !28 3. W-88 ,;#"+%" .#"+0 12 # 9%))%8 5%81(:-(: +1 # ,1&&1( ,#""-%" (%,%))#"-80 ,1(9%"+ +;% ,#""-%" -(+1 # ."-9#+% ,#""-%"6 !25 Calvo vs. UCPB General Insurance Co., Inc., 379 SCRA 510, March 19, 2002. 205 (,? nsurance +orporation vs. ,. %. Sarmiento Trucking +orporation, "16 S+-A "1!, August 6, !22!. 86 A. The public or common carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a timeEcharter or voyageEcharter. t is only when the charter includes both the vessel and its crew, as in a bareEboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charterE party is concerned. The reason is that a shipowner in a time or voyageEcharter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. !26 <n the other hand, in a demise or bareEboat charter, the charterer will generally be considered as the owner of the voyage or service stipulated because the owner of the vessel completely and e9clusively relin4uishes possession, command and navigation of the vessel to the charterer. Thus, a demise or bareEboat charter indicates a business undertaking that is private in character. +onse4uently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers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he voyageEcharter agreement between )oadstar and .orthern *indanao Transport did not in any way convert the common carrier into a private carrier. )oadstar remains a common carrier notwithstanding the e9istence of the charter agreement with .orthern *indanao Transport since the said charter is limited to the ship only and does not involve both the vessel and its crew. As a common carrier, )oadstar is re4uired to observe e9traordinary diligence in the vigilance over the goods it transports. Hhen the goods placed in its care are lost, )oadstar is presumed to have been at fault or to have acted negligently. )oadstar has the burden of proving that it observed e9traordinary diligence in order to avoid responsibility for the lost cargo. !21 3. C"-)1)+1&1 ,1(+"#,+%$ +;% )%"9-,%) 12 C#"#9#(< # +"#9%8 #:%(,0 +1 #""#(:% #($ 2#,-8-+#+% ;%" 511'-(:< +-,'%+-(: #($ #,,1&&1$#+-1( 21" # .#,'#:% +1*" +1 E*"1.%. 4%" (-%,% /;1 #8)1 /1"'%$ 21" +;% #:%(,0 /%(+ +1 ;%" ;1*)% +1 $%8-9%" 206 %lanters %roducts, nc. vs. +ourt of Appeals, !!6 S+-A 576. 207 Lea Mer Industries, Inc. vs. Malayan Insurance Co., Inc., 471 SCRA 698, Septe!er "#, $##%. 208 )oadstar Shipping +o., nc. vs. %ioneer Asia nsurance +orp., 57/ S+-A 688, 0anuary !5, !226. 87 .%+-+-1(%">) +"#9%8 $1,*&%(+) #($ .8#(% +-,'%+). P%+-+-1(%"< -( +*"( :#9% ;%" +;% 2*88 .#0&%(+ 21" +;% .#,'#:% +1*". 4%" (-%,% -(21"&%$ ;%" +;#+ ;%" 28-:;+ /#) 1( # S#+*"$#0. W-+;1*+ ,;%,'-(: ;%" +"#9%8 $1,*&%(+)< .%+-+-1(%" /%(+ +1 NAIA +1 +#'% ;%" 28-:;+. T1 ;%" $-)�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aravan, the travel agency was not a common carrier. +aravan was not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a common carrier. +aravan did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their behalf. Hhile petitioner concededly bought her plane ticket through the efforts of +aravan, this does not mean that the latter ipso facto is a common carrier. At most, +aravan acted merely as an agent of the airline, with whom petitioner ultimately contracted for her carriage to 3urope. +aravan$s obligation to petitioner in this regard was simply to see to it that petitioner was properly booked with the airline for the appointed date and time. Her transport to the place of destination, meanwhile, pertained directly to the airline. The object of petitioner$s contractual relation with respondent is the latter$s service of arranging and facilitating petitioner$s booking, ticketing and accommodation in the package tour. n contrast, the object of a contract of carriage is the transportation of passengers or goods. t is in this sense that the contract between the parties in this case was an ordinary one for services and not one of carriage. !2/
3. I) # +"#9%8 #:%(,0 "%=*-"%$ +1 %E%",-)% +;% )#&% $%:"%% 12 %E+"#1"$-(#"0 $-8-:%(,% 12 # ,1&&1( ,#""-%"6 A. .o, a travel agency not being a common carrier is not re4uired to e9ercise the same degree of e9traordinary diligence of a common carrier. The object of a passenger$s contractual relation with a travel agency is the latter$s service of arranging and facilitating passenger$s booking, ticketing and accommodation in the package tour. n contrast, the object of a contract of carriage is the transportation of passengers or goods. The contract between the passenger and a travel agency is an ordinary one for services and not one of !2/ +risostomo vs. +ourt of Appeals, B52/ S+-A 8!1, August !8, !22". 81 carriage. Since the contract between the parties is an ordinary one for services, the standard of care re4uired of a travel agency is only that of a good father of a family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es. HellEsettled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. Thus, common carriers are re4uired to render service with the greatest skill and foresight and Wto use all reasonable means to ascertain the nature and characteristics of the goods tendered for shipment, and to e9ercise due care in the handling and stowage, including such methods as their nature re4uires.W The e9traordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them. <wing to this high degree of diligence re4uired of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they e9ercise e9traordinary diligence in transporting the goods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risostomo vs. +ourt of Appeals, supra. 211 'elgian <verseas +hartering @ Shipping .. A. vs. %hilippines (irst nsurance +o., nc., "1" S+-A, !", 0une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espondent )S+ is not liable because it observed e9traordinary diligence. 39traordinary diligence is that e9treme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. The presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed e9traordinary diligence over the goods. n this case, the respondent ade4uately proved that it e9ercised e9traordinary diligence. Although, the original bills of lading remained with petitioner, respondent$s agent demanded from Abdurahman 0ama the certified true copies of the bills of lading. They also asked the latter to sign the cargo delivery receipts. The surrender of the original bills of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. f surrender of the bill of lading is not possible, acknowledgement of the delivery by signing the delivery receipt suffices. And this is what respondent did, making him not liable to petitioner although the latter allegedly did not receive the goods. !1!
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aC )-T was liable as a common carrier. A contract of carriage was deemed created from the moment .avidad paid the fare and entered the )-T station, entitling him to all the rights and protection under a contractual relation. )-TA was liable due to its failure to e9ercise e9traordinary diligence imposed on a common carrier. Such duty to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance of the contract of carriage. The foundation of )-TA$s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its reason of its failure to e9ercise the high diligence re4uired of the common carrier. !1! -epublic vs. )oren&o Shipping +orporation, 582 S+-A 882, (ebruary 7, !228. 62 !" In #he $%schar&e o' %#s co((%#(en# #o e)erc%se e)#raor$%nar* $%l%&ence %n ensur%n& #he sa'e#* o' +assen&ers, a carr%er (a* choose #o h%re %#s o,n e(+lo*ees or ava%l o' #he serv%ces o' a #h%r$ +erson #o un$er#a-e #he #as-. In e%#her case, #he co((on carr%er %s no# rel%eve$ o' %#s res+ons%!%l%#%es un$er #he con#rac# o' carr%a&e. 213
3. W;#+ #"% +;% -()+#(,%) /;%"%-( +;% ."%)*&.+-1( 12 2#*8+ 1" (%:8-:%(,% /-88 (1+ #"-)%6 A. The presumption of fault or negligence will not arise if the loss is due to any of the following causesF B1C (lood, storm, earth4uake, lightning, or other natural disaster or calamity= B!C An act of the public enemy in war, whether international or civil= B"C An act or omission of the shipper or owner of the goods= B5C The character of the goods or defects in the packing or the container= or B8C An order or act of competent public authority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o. ?nder Article 17"5 of the .ew +ivil +ode, the presumption does not apply in five causes. <ne of which is the :character of the goods or defects in the packing or in the containers;. To e9culpate itself from liability, the common carrier has the burden to prove any of the five causes claimed by it by a preponderance of evidence. f the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent. <n the one hand, :defect; is the want or absence of something necessary for completeness or perfectionF a lack or absence of something essential to completeness= a !1" .%&h# Ra%l /rans%# Au#hor%#* vs. 0av%$a$, 397 SCRA 75, 1e!ruar* 2, 2003. 214 bid. 61 deficiency in something essential to the proper use for the purpose for which a thing is to be uses. <n the other hand, :inferior; means a poor 4uality, mediocre, or second rate. A thing may be of inferior 4uality but not necessarily defection. n other words, :defectiveness; is not synonymous to :inferiority;. n the case at bar, the crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to support its contents. However, in this case, although there were three wooden battens on its flooring, the middle batten, which carried the substantial volume of the cargo, had a knot hole, which considerably affected, reduced and weakened its strength. !18
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he common carrier$s liability will not be e9tinguished by reason of fire. Article 17"5 of the +ivil +ode provides, common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes onlyF 1. (lood, storm, earth4uake, lightning, or other natural disaster or calamity= !. Act of the public enemy in war, whether international or civil= ". Act or omission of the shipper or owner of the goods= 5. The character of the goods or defects in the packing or in the containers= 8. <rder or act of competent public authority. (ire is not one of those enumerated under the above provision which e9empts a carrier from liability for loss or destruction of the cargo. 3ven if fire were to be considered a natural disaster within the purview of Article 17"5, it is re4uired under Article 17"/ of the same +ode that the natural disaster must have been the pro9imate and only cause of the loss, and that the carrier has e9ercised due diligence to prevent or minimi&e the loss before, during or after the occurrence of the disaster. !16 3. S#( M-:*%8 C1".1"#+-1( -()*"%$ )%9%"#8 ,#)%) 12 5%%" 51++8%) /-+; P;-8-..-(% A&%"-,#( G%(%"#8 I()*"#(,% C1. I(,. T;% 5%%" 51++8%) /%"% 81#$%$ 1( 51#"$ +;% MJV P%#+;%"#0. W;%( ,8%#"%$ 50 +;% C1#)+ G*#"$< +;% 9%))%8 8%2+ +;% .1"+ !18 %hilippine +harter nsurance +orporation vs. ?nknown <wner of the Aessel *NA :.ational Honor;, 56" S+-A !2!, 0uly 1, !228. !16 DS-ESenator )ines vs. (ederal %hoeni9 Assurance +o., nc., 51" S+-A 15. <ctober 7, !22". 6! 12 M#($#*% 21" B-)8-:< S*"-:#1 $%8 S*". T;% /%#+;%" /#) ,#8& /;%( +;% 9%))%8 )+#"+%$ /-+; +;% 910#:%. 41/%9%"< +;% 21881/-(: $#0 +;%"% /%"% )+"1(: /-($) #($ %(1"&1*) /#9%) /;-,; ,#*)%$ +;% 9%))%8 +1 8-)+< '%%8 19%"< #($ 81)% +;% ,#":1 ,1(+#-(%$ +;%"%-(. I) +;% MJV P%#+;%"#0 #5)189%$ 2"1& 8-#5-8-+06 A. The answer is in the affirmative. n order for common carriers are absolved from liability where the loss, destruction, or deterioration of goods is due to a natural disaster or calamity, it must further be shown that such natural disaster or calamity was the pro9imate and only cause of the loss, there must be :an entire e9clusion of human agency from the cause of the injury or the loss;. *oreover, a common carrier is re4uired to e9ercise due diligence to prevent or minimi&e the loss before, during and after the occurrence of the natural disaster. All this present, the common carrier is e9empt from liability under the law for the loss of goods. Since the presence of strong winds and enormous waves was shown to be the pro9imate and only cause of the sinking of the *NA %eatheray and the loss of the cargo belonging to San *iguel +orporation, the carrier cannot be held liable for the said loss. !17
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es, the petitioner is liable for the loss of the cargo because it failed to observe e9traordinary diligence re4uired of a common carrier, under Art 17"" of the +ivil +ode. n the event of loss, destruction or deterioration of the goods, common carriers are responsible= that is, unless they prove that such loss, destruction or deterioration was brought about E E among others L by :flood, storm, earth4uakes, lightning or other natural disaster or calamity;, as provided in Article 17"5 of the +ivil +ode. n the present case, the weather disturbance encountered by the vessel was not a storm but a strong southwest monsoon winds. n other words, the defense of natural disaster or fortuitous event cannot be used by petitioner because the injury could have been avoided by the petitioner. (urthermore, petitioner failed to prove that such natural disaster or calamity was the pro9imate and only cause of the loss. The defense of fortuitous event or natural disaster cannot be successfully made when the injury could have been avoided by human precaution. Therefore, petitioner cannot be e9empt from liability. !11
!17 %hilippine American ,eneral nsurance co., nc. vs. *,, *arine Services, nc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aC The principal business of the petitioner is that of lighterage and drayage and it offers its barges to the public for carry or transporting goods by water for compensation. %etitioner is a common carrier, not private. The Supreme +ourt held that petitioner is a common carrier whether carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fi9ed and publicly known routes. .either does it have to maintain terminals or issue tickets. BbC n the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. %etitioner claims that this was caused by a typhoon= hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the pro9imate and only cause of the loss of the goods, and that it e9ercised due diligence before, during and after the occurrence of the typhoon to prevent or minimi&e the loss. The evidence shows that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object. t even suffered a hole. +learly, this could not be solely attributed to the typhoon. The partlyE submerged vessel was refloated but its hole was patched with only clay and cement. The patchwork was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly e9posed the cargo to further damage. n addition, testimonies have shown that the petitioner still headed to the consignee$s wharf despite knowledge of an incoming typhoon. Accordingly, the petitioner !11 +entral Shipping +ompany, nc. vs. nsurance company of .orth America, 5"1 S+-A 811, September !2, !225. 65 cannot invoke the occurrence of the typhoon as force majeure to escape liability for the loss sustained by the ,eneral *illing. Surely, meeting a typhoon headEon falls short of due diligence re4uired from a common carrier. *ore importantly, the officersNemployees themselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo, it was no longer affected by the typhoon. The typhoon then is not the pro9imate cause of the loss of the cargo= a human factor, i.e., negligence had intervened. !1/
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rticle 17"! of the +ivil +ode does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. The contention of Sanche& 'rokerage that it is not a common carrier but a customs broker whose principal function is to prepare correct customs declaration and proper shipping documents as re4uired by law is bereft of merit. t suffices that petitioner undertakes to deliver the goods for pecuniary consideration. !!2
3. W;#+ -) +;% $-8-:%(,% "%=*-"%$ 12 # ,1&&1( ,#""-%"6 A. A common carrier is mandated under Art. 17"" of the +ivil +ode, to observe e9traordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case. n the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed e9traordinary diligence. Hhen a common carrier received the cargoes in good order, it was incumbent upon it to prove that it e9ercised e9traordinary diligence in the carriage of the goods. !!1
!1/ Asia )ighterage and Shipping, nc. vs. +ourt of Appeals, B52/ S+-A "52, Autust 1/, !22". !!2 A.(. SA.+H3U '-<I3-A,3, .+. vs. +A, 557 S+-A 5!7, December !1, !225. 221 bid. 68 +ommon carriers are obliged to observe e9traordinary diligence in the vigilance over the goods transported by them. Accordingly they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 17"5. n those cases where the presumption is applied, the common carrier must prove that it e9ercised e9traordinary diligence in order to overcome the presumption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o. Art. 17"5 paragraph 5 of the civil +ode e9empts a common carrier from liability if the loss or damage is due to the character of the goods or defects in the packing or in the containers. The rule is that if the improper packing is known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or e9ception notwithstanding such condition, he is not relieved of liability for the resulting damage. n this case, if the claim of Sanche& 'rokerage that some cartons were already damaged upon delivery to it were true, then it should naturally have received the cargo under protest or with reservations duly noted on the receipt issued by %S. 'ut it made no such protest or reservation. !!" 3. A C*$:&%(+ /#) "%($%"%$ 2-($-(: P%)+#(1 +1 ;#9% 5%%( (%:8-:%(+ -( $"-9-(: +;% .#))%(:%" 5*) +;#+ ;-+ +;% $%,%#)%$. I+ /#) );1/( +;#+ P%)+#(1 (%:8-:%(+80 #++%&.+%$ +1 19%"+#'% +;% &1+1",0,8% #+ # $#(:%"1*) ).%%$ #) +;%0 /%"% ,1&-(: *.1( # C*(,+-1( -( +;% "1#$. M%+"1 C%5* /#) #8)1 ;%8$ +1 5% $-"%,+80 #($ ."-&#"0 8-#58%< #81(: /-+; P%)+#(1< 21" 2#-8*"% +1 15)%"9% +;% $-8-:%(,% 12 # :11$ 2#+;%" 12 # 2#&-80 -( +;% )*.%"9-)-1( 12 -+) %&.810%%) #($ -( +;% &#-(+%(#(,% 12 9%;-,8%). P%)+#(1 #($ M%+"1 C%5* #..%#8%$ ,1(+%($-(: +;#+ +;% &1+1",0,8% /#) (1+ -( +;% &-$$8% 12 +;% "1#$ #) 21*($ 50 +;% +"-#8 #($ #..%88#+% ,1*"+)< 5*+ /#) 1( +;% -((%" 8#(%. T;-) %E.8#-() +;% 81,#+-1( 12 +;% $%(+) 1( +;% 5*&.%" #($ +;% :"-88. 222 DS-ESenator )ines vs. (ederal %hoeni9 Assurance +o., nc. 51" S+-A 15, <ctober 7, !22". !!" A.(. SA.+H3U '-<I3-A,3, .+. vs. +A, 557 S+-A 5!7 December !1, !225. 66 4%(,%< +;%0 -()-)+ -+ /#) +;% 9-,+-& /;1 /#) (%:8-:%(+. S;1*8$ +;% 2-($-(:) 12 +;% 81/%" ,1*"+ 5% $-)+*"5%$6 A. .o. There is no cogent reason to reverse or modify the factual findings of the lower and appellate courts. The +A agreed with the trail court that the vehicular collision was caused by %estano$s negligence when he attempted to overtake the motorcycle. As a professional driver operating a public transport bus, he should have anticipated that overtaking at a junction was a perilous maneuver and should thus have e9ercised e9treme caution. !!5 3. T;% 81/%" ,1*"+ "%($%"%$ # C*$:&%(+ 2-($-(: +;% %&.810%"< M%+"1 C%5* 9-,#"-1*)80 8-#58% +1 +;% 9-,+-&) 12 # 9%;-,*8#" #,,-$%(+. T;% #..%88#+% ,1*"+ ;%8$ +;#+ #881/-(: -+) $"-9%"< P%)+#(1< +1 .80 ;-) "1*+% /-+; # $%2%,+-9% ).%%$1&%+%" );1/%$ 8#E-+0 1( +;% .#"+ 12 M%+"1 C%5* -( +;% 1.%"#+-1( 12 -+) 5*)-(%)) #($ -( +;% )*.%"9-)-1( 12 -+) %&.810%%). D-$ +;% %&.810%" %E%",-)% +;% ,#"% #($ $-8-:%(,% 12 # :11$ 2#+;%" 12 # 2#&-80 -( +;% )%8%,+-1( #($ )*.%"9-)-1( 12 -+) %&.810%%)6 A. The fact that %estano was able to use a bus with a faulty speedometer shows that *etro +ebu was remiss in the supervision of its employees and in the proper care of its vehicles. t had thus failed to conduct its business with the diligence re4uired by law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� ;%8$ 8-#58% 21" &1"% +;#( /;#+ /#) $%,8#"%$ 50 +;% +;% );-..%")J,1()-:(%%) #) +;% 9#8*% 12 +;% :11$) -( +;% B-88) 12 L#$-(:6 A.n Aboitiz Shipping Corp. vs. CA, the description of the nature and the value of the goods shipped were declared and reflected in the bill of lading, like the present case. The +ourt therein considered this declaration as the basis of the carrier$s liability and ordered payment based on such amount. (ollowing this ruling, 3+S) should not be held liable for more than what was declared by the shippersNconsignees as the value of the goods in the bills of lading. !!6
224 'est!no vs. Sum!+!n,# 346 SC$A 870# (ecember 4# 2000. 225 bid. !!6 3dgar +okaliong Shipping )ines, nc. vs. ?+%' ,eneral nsurance +o., nc., 525 S+-A 726. 67 3. ECSLI -))*%$ B-88) 12 L#$-(: ,1(+#-(-(: +;% )+-.*8#+-1( +;#+ -( ,#)% 12 ,8#-& 21" 81)) 1" 21" $#&#:% +1 +;% );-..%$ ."1.%"+0< ?+;% 8-#5-8-+0 12 +;% ,1&&1( ,#""-%" EEE );#88 (1+ %E,%%$ +;% 9#8*% 12 +;% :11$) #) #..%#"-(: -( +;% 5-88 12 8#$-(:.@ I) )*,; # )+-.*8#+-1( 8-&-+-(: +;% ,1&&1( ,#""-%">) 8-#5-8-+0 9#8-$6 A. Qes. A stipulation that limits liability is valid as long as it is not against public policy. n verett Steamship Corp. v. CA the +ourt statedF :A stipulation in the bill of lading limiting the common carrier$s liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 175/ and 1782 of the +ivil +ode. !!7
3. W;%( $1%) +;% ,1(+"#,+ 12 ,#""-#:% 21" A-" T"#().1"+#+-1( ,1&&%(,%6 A. Hhen an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises and the passenger has every right to e9pect that he be transported on that flight and on that date and it becomes the carrier$s obligation to carry him and his luggage safely to the agreed destination. f the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage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ingapore Airlines was liable for moral and e9emplary damages. Hhen an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. Since the defendant did not transport the plaintiff as covenanted by it on said terms, it clearly breached its contract of carriage. !!7 3dgar +okaliong Shipping )ines, nc. vs. ?+%' ,eneral nsurance +o., nc., 525 S+-A 726. !!1 0A%A. A-).3S vs. AS?.+<., 55/ S+-A 855 0anuary !1, !228 61 The defense of fortuitous event was unavailing. Singapore Airlines was not without recourse to enable it to fulfill its obligation to transport the plaintiff safely as scheduled as far as human care and foresight can provide to her destination. Tagged as a premiere airline as it claims to be and with the comple9ities of air travel, it was certainly wellEe4uipped to be able to foresee and deal with such situation. Singapore Airlines was guilty of bad faith when its employees did not accord plaintiff the attention and treatment allegedly warranted under the circumstances. The inattentiveness and rudeness of its personnel to plaintiff$s plight was gross enough amounting to bad faith. Also, knowing fully well that even before the plaintiff boarded defendant$s 0umbo aircraft in (rankfurt bound for Singapore, it has already incurred a delay for two hours, and it did not take the trouble of informing plaintiff of such a delay. Thus, the award of e9emplary damages was proper. !!/
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es. Haitlisted and nonErevenue passengers were accommodated while plaintiff who had fully paid her fare and was a confirmed passenger was unduly deprived of enplaning. %A) was also of guilty of overbooking its flight to the prejudice of its confirmed passengers. This practice cannot be countenanced especially considering that the business of air carriage is imbued with public character. He have ruled that where in breaching the contract of carriage, the airline is shown to have acted in bad faith, as in this case, the award of e9emplary damages in addition to moral and actual damages is proper. !"2 3. M-,;#%8 #($ J%#(%++% A)*(,-1( 8%2+ M#(-8# 1( 51#"$ # J#.#( A-"8-(%) AJALB 28-:;+ 51*($ 21" L1) A(:%8%). T;%-" -+-(%"#"0 -(,8*$%$ # )+1.19%" -( N#"-+# #($ #( 19%"(-:;+ )+#0 #+ 41+%8 N-''1 N#"-+#. U.1( #""-9#8< +;%0 #..8-%$ 21" # );1"% .#))< /;-,; -) "%=*-"%$ 21" # 21"%-:(%" #51#"$ #( #-","#2+ /;1 $%)-"%) +1 )+#0 -( +;% (%-:;51";11$ 12 +;% .1"+ 12 ,#88 21" (1+ &1"% +;#( 72 ;1*"). T;% J#.#(%)% -&&-:"#+-1( 122-,-#8 $%(-%$ +;%-" #..8-,#+-1( 5%,#*)% 12 -(,1()-)+%(,0 -( M-,;#%8>) !!/ Singapore Airlines )imited vs. Andion (ernande&, ,.-. .o. 15!"28, December 12, !22". !"2 %hilippine Airlines, nc. vs. +ourt of Appeals, 517 S+-A 1/6, ,.-. .o. 1!757", December 1, !22"= %hilippine Airlines, nc. vs. +ourt of Appeals, 866 S+-A 1!5, Sept. !!, !221. 6/ ;%-:;+ -( ;-) .#)).1"+. T;%0 /%"% 5"1*:;+ -()+%#$ +1 +;% N#"-+# A-".1"+ R%)+ 41*)% /;%"% +;%0 /%"% 5-88%+%$ 19%"(-:;+. T;% ).1*)%) )*%$ JAL 21" 5"%#,; 12 ,1(+"#,+ 12 ,#""-#:%. I) JAL 8-#58% 21" 2#-8*"% +1 ,#""0 +;%& )#2%80 +1 +;%-" $%)+-(#+-1(6 A. 0A) did not breach its contract of carriage with the Asuncion spouses. t may be true that 0A) has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not e9tend to checking the veracity of every entry in these documents. 0A) could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act, which cannot be interfered with even by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athay %acific could be made liable for damages. 'y upgrading the seat accommodation of the Aas4ue&es, +athay %acific breached its contract of carriage with the latter. The contract between +athay %acific and the Aas4ue&es by which the latter gave their consent was the transportation of the Aas4ue&es from *anila to Hong Iong and back to *anila in the 'usiness class section of the aircraft and whose cause or consideration was the fare paid by them to +athay %acific. The Spouses Aas4ue& should have been consulted first whether they would consent to a change of seat accommodation. The upgrade should not have been imposed on them over their objection. 'y insisting on the upgrade, +athay %acific breached its contract of carriage with the Aas4ue&es. !"!
3. I) +;% .%"-1$ 12 ."%),"-.+-1( 12 #,+-1( 5#)%$ 1( +;% "%8#+-1();-. 5%+/%%( .#))%(:%" #($ ,#""-%" 1( #( -(+%"(#+-1(#8 28-:;+ :19%"(%$ 50 +;% W#")#/ C1(9%(+-1( +;#+ )%+) +;% .%"-1$ 12 ."%),"-.+-1( 12 +/1 0%#") 2"1& +;% #,,"*#8 12 +;% ,#*)% 12 #,+-1(6 !"1 0A%A. A-).3S vs. AS?.+<., 55/ S+-A 855 0anuary !1, !228 !"! +athay %acific Airways, )td. vs. Aas4ue&, "// S+-A !27, *arch 15, !22". 72 A. n case of damage to passengers baggage, the period of prescription is two years as mandated by the Harsaw +onvention but in case of damages caused by humiliation, embarrassment, mental anguish, serious an9iety, fear and distress or hurt feelings, the civil code provisions on tort shall apply and hence, outside the coverage of the Harsaw +onvention. The period of prescription is four years. !""
3. W;#+ -) # );-. #:%(+6 A. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. !"5
3. W;%( � # );-. #:%(+ 5% ;%8$ ,-9-880 8-#58%6 A. A ship agent, may be held civilly liable in certain instances as provided for in Articles 816 and 817 of the +ode of +ommerce, to witF B1C The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, e4uip and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same. !"8 B!C Art. 817. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which hew loaded on the vessel= but he may e9empt himself therefrom by abandoning the vessel with all her e4uipments and the freight it may have earned during the voyage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hilippine Airlines vs. Savillo, 887 S+-A 66. 234 Article 816, +ode of +ommerce. 235 Article 816, +ode of +ommerce. 236 Article 817, +ode of +ommerce. 71 A. Hhether acting as an agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel. *acondray was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel. 3vidence shows that petitioner represented the vessel. The latter prepared the .otice of readiness, the Statement of (acts, the +ompletion .otice, the Sailing .otice and +ustom$s +learance. %etitioner$s employees were present at Sangi, Toledo +ity, one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. *oreover, *r. Dela +ru&, the representative of the petitioner, also prepared for the needs of the vessel, like money, provision, water and fuel. These acts all point to the conclusion that it was the entity that represented the vessel in the %ort of *anila and was the ship agent within the meaning and conte9t of Article 816 of the +ode of +ommerce. *acondray, therefore, was liable to the respondent for the losses sustained by the subject shipment. !"7 3. U($%" +;% C1$% 12 C1&&%",%< /-+;-( /;#+ .%"-1$ );1*8$ +;% (1+-,% 12 ,8#-& 5% :-9%( +1 +;% );-..%"6 A. ?nder the +ode of +ommerce, the notice of claim must be made within twentyEfour B!5C hours from receipt of the cargo if the damage is not apparent from the outside of the package. (or damages that are visible from the outside of the package, the claim must be made immediately. !"1
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he Hernande& spouses are mistaken. 0urisprudence has held that an employerE employee relationship e9ists in a 'oundary System. To e9empt from liability the owner of a public vehicle who operates it under the :boundary system; on the ground that he is a mere lessor would be not only to abet flagrant violations of the %ublic Service )aw, but 237 *acondray @ +o., nc. vs. %rovident nsurance +orporation, 558 S+-A 655, December /, !225. 238 Aboiti& Shipping +orporation vs. nsurance +ompany of .orth America, 861 S+-A !6!, Aug. 6, !221. 7! also to place the riding public at the mercy of reckless and irresponsible drivers. *oreover, the spouses cannot hide behind nonEliability die to the proper due care in the selection and supervision of their employee. Article !112 of the +ivil +ode provides, :3mployers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. n the case at bar, it was established that ,on&ales obtained his professional driver$s license only " months before the accident. Hence, he lacked the e9perience to drive a common carrier. !"/ 3. W;#+ -) +;% OR-$C1@ $1,+"-(%6 A. The :-idjo; doctrine simply states that the public utility has the imperative duty to make reasonable and proper inspection of its apparatus and e4uipment to ensure that they do not malfunction. !52 3. W;#+ -) %22%,+ 12 +;% 2#-8*"% 12 +;% .*58-, *+-8-+0 +1 $-),19%" +;% $%2%,+ 12 -+) %8%,+"-, &%+%" 1" 2#-8*"% +1 "%.#-" 1" "%.8#,% +;% )#&%6 A. The failure of the public utility to discover the $%2%,+, if any, amounts to ine9cusable negligence and its failure to make the necessary repairs and replace the $%2%,+-9% electric meter installed within the consumer$s premises limits the latter$s liability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eralco noted the sudden drop of electric consumption of Hilcon in 1/15 and yet it conducted an inspection only in 1//1 allowing the :defect; to remain unrepaired for a period of more or less seven B7C years. t would be highly ine4uitable if we are to allow a public utility company to be continuously remiss in its duty and then later on charge the consumer e9orbitant amounts for the alleged unbilled consumption or differential billing when such a situation could have been easily averted. (ollowing the :-idjo; doctrine, negligence could be imputed on *eralco and bar it from collection its claim of differential billing. !5! !"/ Hernande& vs. Dolor, 5"8 S+-A 661, 0uly "2, !225. 240 *eralco vs. Hilcon 'uilders Supply, nc., 886 S+-A 75!. 241 bid. 242 bid. 7" SPECIAL LAWS TRADEMARGS AND TRADENAMES 3. W;%"% );1*8$ #( #,+-1( -(9189-(: +"#$%&#"')< -(,8*$-(: ,;#":%) 12 *(2#-" ,1&.%+-+-1(< ,#(,%88#+-1( 12 +"#$%&#"' #($ $#&#:%) 21" 9-18#+-1( 12 -(+%88%,+*#8 ."1.%"+0 "-:;+) 5% 2-8%$6 A. A complaint involving trademarks, including charges of unfair competition, cancellation of trademark and damages for violation of intellectual property rights fall within the jurisdiction of the ntellectual %roperty <ffice Director of )egal Affairs and must therefore be filed in the said office. Any appeal therefrom should be filed with the ntellectual %roperty <ffice Director ,eneral. !5" TRUST RECEIPT LAW 3. W;#+ -) # +"*)+ "%,%-.+6
A. Trust receipt is a document wherein the entrustee !55 binds himself to hold the designated goods, documents or instruments in trust for the entruster !58 and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the e9tent of the amount owing to the entruster. !56 3. F1" /;#+ .*".1)% -) # +"*)+ "%,%-.+ -))*%$6 A. trust receipt is a security transaction intended to aid in financing the importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to ac4uire credit e9cept through the utili&ation, as collateral of the merchandise imported or purchased. !57 A trust receipt therefore, is a document of security pursuant to which a bank ac4uires a :security interest; in the goods under trust receipt. ?nder a letter of creditEtrust receipt arrangement, a bank e9tends a loan covered by a letter of credit, with the trust receipt as a security for the loan. The transaction involves a loan feature represented by a letter of credit, a security feature which is in the covering trust receipt which secures indebtedness. !51 243 nE.E<ut 'urger, nc. vs. Sehwani, nc., 878 S+-A 8"8, December !5, !221. 244 3ntrustee shall refer to the person having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose or purposes specified in the trust receipt agreement. Sec. " BaC, %. D. 118 known as Trust -eceipts )aw. 245 3ntruster shall refer to the person holding title over the goods, documents, or instruments subject of a trust receipt transaction, and any successor in interest of such person. Section " BcC, %. D. 118. 246 Section 5, %. D. 118 known as Trust -eceipts )aw. 247 Aintola vs. nsular 'ank of Asia and America, 182 S+-A 871, 81"E815 citing Samo vs. %eople, 8 S+-A "85, "86E"87. 248 )ee vs. +ourt of Appeals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he Trust -eceipts )aw is violated whenever the entrustee fails toF B1C turn over the proceeds of the sale of the goods, or B!C return the goods covered by the trust receipt if the goods are not sold. Section 1" of the Trust -eceipts )aw states that in case the violation of the law is committed by a corporation, the penalty shall be imposed upon the directors, officers, employees or other officials responsible for the offense. The reason is obviousF corporations, partnerships, associations and other juridical entities cannot be put to jail. !5/ 3. A"% 8%++%") 12 ,"%$-+ #($ +"*)+ "%,%-.+) (%:1+-#58% -()+"*&%(+)6 A. )etters of credit and trust receipts are not negotiable instruments because they do not conform to the re4uirements of a negotiable instrument stated in Section 1 of the .egotiable nstruments )aw. However, drafts issued in connection with letters of credit are negotiable instruments !82 if they comply with the re4uirements of Section 1 of the .egotiable nstruments )aw. A trust receipt is a security transaction intended to aid in financing the importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to ac4uire credit e9cept through the utili&ation, as collateral of the merchandise imported or purchased. !81 A trust receipt therefore, is a document of security pursuant to which a bank ac4uires a :security interest; in the goods under trust receipt. ?nder a letter of creditEtrust receipt arrangement, a bank e9tends a loan covered by a letter of credit, with the trust receipt as a security for the loan. The transaction involves a loan feature represented by a letter of credit, a security feature which is in the covering trust receipt which secures indebtedness. !8! SECRECD OF BANG DEPOSITS 3. T;% :19%"(&%(+< +;"1*:; +;% P"%)-$%(+-#8 C1&&-))-1( 1( G11$ G19%"(&%(+ APCGGB< #"% ."-9#+%80 %(+%"-(: -(+1< .%"2%,+-(: #($J1" %E%,*+-(: # ,1&."1&-)% #:"%%&%(+ /-+; +;% M#",1) ;%-") #) "%:#"$) +;%-" #88%:%$ -88-:1++%( /%#8+;. P%+-+-1(%" F#(,-),1 I. C;#9%7 < #) +#E.#0%"< ,-+-7%( #($ 21"&%" :19%"(&%(+ 249 <ng vs. +ourt of Appeals, 521 S+-A 651, April !/, !22". 250 bid. 251 Aintola vs. nsular 'ank of Asia and America, 182 S+-A 871, 81"E815 citing Samo vs. %eople, 8 S+-A "85, "86E"87. 252 )ee vs. +ourt of Appeals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he constitutional right to information and the correlative duty of the state to disclose publicly all its transactions involving the national interest have as yet no defined scope and e9tent. However, the following are some of the recogni&ed restrictions of the rule on compulsory disclosureF B1C national security matters and intelligence information, B!C trade secrets and 5#('-(: +"#()#,+-1() Bpursuant to the Secrecy of 'ank Deposits Act !8" C, B"C criminal matters, and B5C other confidential information. t is incumbent upon the %+,, and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of illEgotten wealth. There is a need, of course, to observe the same restrictions on disclosure of information in general. !85
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o. 1528, as amended. !85 +have& vs. %+,,, ,.-. .o. 1"2716 December /, 1//1. 76 A,+ N1. 10!< 1+;%"/-)% '(1/( #) +;% B#(' S%,"%,0 L#/< #:#-()+ C-+-5#('. I) R.A. N1. 10! AB#(' S%,"%,0 L#/B #..8-,#58% +1 U.S. $188#" $%.1)-+)6 A. The allegation of violation of -.A. .o. 1528 B'ank Secrecy )awC is incorrectly invoked. The accounts in 4uestion are ?.S. dollar deposits= conse4uently, the applicable law is not !epublic Act "o. #$%&, but !epublic Act "o. '$(', known as the :(oreign +urrency Deposit Act of the %hilippines.; Section 1 of -.A. .o. 65!6 providesF Sec. 1. Secrecy of )oreign Currency *eposit+, All foreign currency deposits authori&ed under this Act, as amended by %residential Decree .o. 12"5, are hereby declared as and considered of an absolutely confidential nature and, e9cept upon written permission of the depositor, in no instance shall such foreign currency deposits be e9amined, in4uired or looked into by any person, government official bureau or office whether judicial or administrative or legislative or any other entity whether public or private= %rovided, however, that said foreign currency deposits shall be e9empt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. !88