Commercial Law Review

Transportation Law
Sulpicio Lines vs. Napoleon Sesante
G.R. No. 172682, July 27, 2016
BERSAMIN, J.:
Facts:
M/V Princess of the Orient, a passenger vessel owned and operated Sulpicio Lines,
sank near Fortune Island in Batangas. Of the 388 recorded passengers, 150 were
lost.Napoleon Sesante, then a member of the Philippine National Police and a lawyer,
was one of the passengers who survived the sinking. He sued the petitioner for breach
of contract and damages. Sesante alleged in his complaint that the M/V Princess of
the Orient left the Port of Manila while Metro Manila was experiencing stormy weather.
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the
Orient due to its having been cleared to sail from the Port of Manila by the proper
authorities; that the sinking had been due to force majeure; that it had not been
negligent; and that its officers and crew had also not been negligent because they had
made preparations to abandon the "'vessel because they had launched life rafts and
had provided the passengers assistance in that regard.
The Regional Trial Court Branch 91 of Quezon City rendered judgment in favor of
Sesante and held the petitioner liable to pay temperate and moral damages due to
breach of contract of carriage. The RTC observed that the petitioner, being negligent,
was liable to Sesante pursuant to Articles 1739 and 1759 of the Civil Code; that the
petitioner had not established its due diligence in the selection and supervision of the
vessel crew; that the ship officers had failed to inspect the stowage of cargoes despite
being aware of the storm signal; that the officers and crew of the vessel had not
immediately sent a distress signal to the Philippine Coast Guard; that the ship captain
had not called for then "abandon ship" protocol; and that based on the report of the
Board of Marine Inquiry (BMI), the erroneous maneuvering of the vessel by the captain
during the extreme weather condition had been the immediate and proximate cause
of the sinking.
On appeal, CA lowered the temperate damages to ₱120,000.00, which approximated
the cost of Sesante's lost personal belongings; and held that despite the
seaworthiness of the vessel, the petitioner remained civilly liable because its officers
and crew had been negligent in performing their duties.

Issue:
Whether petitioner is liable for breach of contract of carriage?
Ruling:
Yes. Article 1759 of the Civil Code does not establish a presumption of negligence
because it explicitly makes the common carrier liable in the event of death or injury to
passengers due to the negligence or fault of the common carrier's employees. The
liability of common carriers under Article 1759 is demanded by the duty of
extraordinary diligence required of common carriers in safely carrying their
passengers.
On the other hand, Article 1756 of the Civil Code lays down the presumption of
negligence against the common carrier in the event of death or injury of its passenger,
viz.:
Article 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the common
carrier's fault or negligence. Even the mere proof of injury relieves the passengers
from establishing the fault or negligence of the carrier or its employees. The
presumption of negligence applies so long as there is evidence showing that: (a) a
contract exists between the passenger and the common carrier; and (b) the injury or
death took place during the existence of such contract. In such event, the burden shifts
to the common carrier to prove its observance of extraordinary diligence, and that an
unforeseen event or force majeure had caused the injury.
Sesante sustained injuries due to the buffeting by the waves and consequent sinking
of M/V Princess of the Orient where he was a passenger. To exculpate itself from
liability, the common carrier vouched for the seaworthiness of M/V Princess of the
Orient, and referred to the BMI report to the effect that the severe weather condition -
a force majeure – had brought about the sinking of the vessel.
The petitioner was directly liable to Sesante and his heirs.

Cathay Pacific Airways vs. Spouses Arnulfo and Evely Fuentebella

G. R. No. 188283, July 20, 2016
SERENO, C.J.:
Facts:
Congressmen Fuentebella and his wife was authorized to travel on an official business
to Sydney, Australia via Hong Kong from Manila. Respondents bought a business
class ticket from Cathay Pacific for Manila to Sydney via Hong Kong and back. They
later changed their minds and decided to upgrade their tickets to first class. Upon
payment of the fare difference, the airline issued to the respondent the first class
tickets but clarified they were open-dated or waitlisted. When respondent queued in
front of the first class counter in the airport, they were issued business class boarding
passes and only found out that they were not first class when denined entry into the
first class lounge. The respondents said the ground staff were discourteous, arrogant
and rude. Petitioner admitted the first class tickets were issued but qualified as open-
dated and in this case they would not be accommodated to first class since the
sections were full. The spouses flew nonetheless but experienced discomfort, and
when they returned to the Philippines, respondet demanded a formal apology and
payment for damages.
In resolving the case, RTC identified the ticket as contract of adhesion as the contract
was only entered because of the assurance that they would be give first class seats
and affording respondents’ testimonies, they ordered petitioner to pay P5 million as
moral damages, P1 million as exemplary damages, and P500 thousand as attorney’s
fees and found the airline to be in bad faith.
The CA affirmed the RTC’s decision that there was indeed bad faith on the airlines
inferred from the inattentiveness and lack of concern shown by petitioner’s personnel
to the predicament of the respondent and the fact that respondents were downgraded,
from first to business class, due to the overbooking.

Issues:
1. Whether the petitioner is liable for breach of contract
2. Whether the award of moral and exemplary damage is proper
Ruling:
1. Yes. In Air France v. Gillego this Court ruled that in an action based on a breach
of contract of carriage, the aggrieved party does not have to prove that the
common carrier was at fault or was negligent; all that he has to prove is the
existence of the contract and the fact of its non-performance by the carrier. In
this case, both the trial and appellate courts found that respondents were
entitled to First Class accommodations under the contract of carriage, and that
petitioner failed to perform its obligation. We shall not delve into this issue more
deeply than is necessary because We have decided to accord respect to the
factual findings of the trial and appellate courts. We must, however, point out a
crucial fact We have uncovered from the records that further debunks
petitioner's suggestion that two sets of tickets were issued to respondents - one
for Business Class and another for open-dated First Class tickets.
2. Yes. Moral and exemplary damages are not ordinarily awarded in breach of
contract cases. This Court has held that damages may be awarded only when
the breach is wanton and deliberately injurious, or the one responsible had
acted fraudulently or with malice or bad faith. Bad faith is a question of fact that
must be proven by clear and convincing evidence. Both the trial and the
appellate courts found that petitioner had acted in bad faith. After review of the
records, We find no reason to deviate from their finding.
However, the award of P5 million as moral damages is excessive, considering
that the highest amount ever awarded by this Court for moral damages in cases
involving airlines is P500,000. As We said in Air France v. Gillego, the mere
fact that respondent was a Congressman should not result in an automatic
increase in the moral and exemplary damages."

We find that upon the facts established, the amount of P500,000 as moral
damages is reasonable to obviate the moral suffering that respondents have
undergone. With regard to exemplary damages, jurisprudence shows that
P50,000 is sufficient to deter similar acts of bad faith attributable to airline
representatives.

Torres-Madrid Brokerage Inc. vs. FEB Mitsui Marine Insurance Company and
Benjamin Manalastas
G. R. No. 194121, July 11, 2016
BRION, J.
Facts:
A shipment of various electronic goods from Thailand and Malaysia arrived at the Port
of Manila for Sony Philippines, Inc. (Sony). Previous to the arrival, Sony had engaged
the services of TMBI to facilitate, process, withdraw, and deliver the shipment from the
port to its warehouse in Binan, Laguna. TMBI - who did not own any delivery trucks -
subcontracted the services of Benjamin Manalastas' company, BMT Trucking
Services(BMT), to transport the shipment from the port to the Binan
warehouse. Incidentally, TMBI notified Sony who had no objections to the
arrangement. Four BMT trucks picked up the shipment from the port at about 11:00
a.m. of October 7, 2000. However, BMT could not immediately undertake the delivery
because of the truck ban and because the following day was a Sunday. Thus, BMT
scheduled the delivery on October 9, 2000. In the early morning of October 9, 2000,
the four trucks left BMT's garage for Laguna.However, only three trucks arrived at
Sony's Binan warehouse. The truck driven by Rufo Reynaldo Lapesura (NSF-
391) was found abandoned along the Diversion Road in Filinvest, Alabang, Muntinlupa
City. Both the driver and the shipment were missing. BMT's Operations Manager
Melchor Manalastas informed Victor Torres, TMBI's General Manager, of the
development. They went to Muntinlupa together to inspect the truck and to report the
matter to the police. TMBI notified Sony of the loss through a letter dated October 10,
2000. It also sent BMT a letter dated March 29, 2001, demanding payment for the lost
shipment. BMT refused to pay, insisting that the goods were "hijacked."

In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the
goods. After evaluating the merits of the claim, Mitsui paid Sony PHP7,293,386.23
corresponding to the value of the lost goods. After being subrogated to Sony's rights,
Mitsui sent TMBI a demand letter for payment of the lost goods. TMBI refused to pay
Mitsui's claim. As a result, Mitsui filed a complaint against TMBI. TMBI, in turn,
impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party defendant.
TMBI alleged that BMT's driver, Lapesura, was responsible for the theft/hijacking of
the lost cargo and claimed BMT's negligence as the proximate cause of the loss. TMBI
prayed that in the event it is held liable to Mitsui for the loss, it should be reimbursed
by BMT,

At the trial, it was revealed that BMT and TMBI have been doing business with each
other since the early 80's. It also came out that there had been a previous hijacking
incident involving Sony's cargo in 1997, but neither Sony nor its insurer filed a
complaint against BMT or TMBI. The RTC found TMBI and Benjamin Manalastas
jointly and solidarity liable to pay Mitsui PHP 7,293,386.23 as actual damages,
attorney's fees equivalent to 25% of the amount claimed, and the costs of the suit.The
RTC held that TMBI and Manalastas were common carriers and had acted negligently.

Both TMBI and BMT appealed the RTC's verdict. TMBI denied that it was a common
carrier required to exercise extraordinary diligence. It maintains that it exercised the
diligence of a good father of a family and should be absolved of liability because the
truck was "hijacked" and this was a fortuitous event. BMT claimed that it had
exercisedextraordinary diligence over the lost shipment, and argued as well that the
loss resulted from a fortuitous event. CA affirmed the RTC's decision but reduced the
award of attorney's fees to PHP 200,000.
Issue:
Whether TMBI is a common carrier and should be held responsible for the loss,
destruction, or deterioration of the goods it transports
Ruling:
Yes. Common carriers are persons, corporations, firms or associations engaged in the
business of transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public. By the nature of their business and
for reasons of public policy, they are bound to observe extraordinary diligence in the
vigilance over the goods and in the safety of their passengers.chanrobleslaw

In A.F. Sanchez Brokerage Inc. v. Court of Appeals,we held that a customs broker -
whose principal business is the preparation of the correct customs declaration and the
proper shipping documents - is still considered a common carrier if it also undertakes
to deliver the goods for its customers. The law does not distinguish between one
whose principal business activity is the carrying of goods and one who undertakes this
task only as an ancillary activity. This ruling has been reiterated in Schmitz Transport
& Brokerage Corp. v. Transport Venture, Inc., Loadmasters Customs Services, Inc. v.
Glodel Brokerage Corporation, and Wesrwind Shipping Corporation v. UCPB General
Insurance Co., Inc.nrobleslaw

Despite TMBI's present denials, we find that the delivery of the goods is an integral,
albeit ancillary, part of its brokerage services. TMBI admitted that it was contracted to
facilitate, process, and clear the shipments from the customs authorities, withdraw
them from the pier, then transport and deliver them to Sony's warehouse in Laguna.
That TMBI does not own trucks and has to subcontract the delivery of its clients' goods,
is immaterial. As long as an entity holds itself to the public for the transport of goods
as a business, it is considered a common carrier regardless of whether it owns the
vehicle used or has to actually hire one.

Lastly, TMBI's customs brokerage services - including the transport/delivery of the

cargo - are available to anyone willing to pay its fees. Given these circumstances, we
find it undeniable that TMBI is a common carrier.

Consequently, TMBI should be held responsible for the loss, destruction, or

deterioration of the goods it transports unless it results from:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act of omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

In the present case, the shipper, Sony, engaged the services of TMBI, a common
carrier, to facilitate the release of its shipment and deliver the goods to its warehouse.
In turn, TMBI subcontracted a portion of its obligation - the delivery of the cargo - to
another common carrier, BMT. Despite the subcontract, TMBI remained responsible
for the cargo. Under Article 1736, a common carrier's extraordinary responsibility over
the shipper's goods lasts from the time these goods are unconditionally placed in the
possession of, and received by, the carrier for transportation, until they are delivered,
actually or constructively, by the carrier to the consignee. That the cargo
disappeared during transit while under the custody of BMT - TMBI's subcontractor -
did not diminish nor terminate TMBFs responsibility over the cargo. Article 1735 of the
Civil Code presumes that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI simply argued
that it was not a common carrier bound to observe extraordinary diligence. Its failure
to successfully establish this premise carries with it the presumption of fault or
negligence, thus rendering it liable to Sony/Mitsui for breach of contract.

PHIL-NIPPON KYOEI v. ROSALIA T. GUDELOSAO, GR No. 181375, 2016-07-13

Facts:
Phil-Nippon Kyoei, Corp. a domestic shipping corporation purchased a "Ro-Ro"
passenger/cargo vessel "MV Mahlia" in Japan in February 2003.

For the vessel's one month conduction voyage from Japan to the Philippines,
petitioner, as local principal, and Top Ever Marine Management Maritime Co., Ltd.
(TMCL), as foreign principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian, and
six other crewmembers.

They were hired through the local manning agency of TMCL, Top Ever Marine
Management Philippine Corporation (TEMMPC). TEMMPC, through their president
and general manager, Capt. Oscar Orbeta (Capt. Orbeta), and the eight crewmembers
signed separate contracts of employment. Petitioner secured a Marine Insurance
Policy (Maritime Policy No. 00001) from SSSICI over the vessel for P10,800,000.00
against loss, damage, and third party liability or expense, arising from the occurrence
of the perils of the sea for the voyage of the vessel from Onomichi, Japan to Batangas,
Philippines. This Marine Insurance Policy included Personal Accident Policies for the
eight crewmembers for P3,240,000.00 each in case of accidental death or injury.

On February 24, 2003, while still within Japanese waters, the vessel sank due to
extreme bad weather condition. Only Chief Engineer Nilo Macasling survived the
incident while the rest of the crewmembers, including Gudelosao and Tancontian,
perished.
Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate
complaints for death benefits and other damages against peti... tioner, TEMMPC,
Capt. Orbeta, TMCL, and SSSICI, with the Arbitration Branch of the National Labor
Relations Commission (NLRC).

Labor Arbiter

Magat rendered a Decision... finding solidary liability among petitioner, TEMMPC,

TMCL and Capt. Orbeta.

The LA also found SSSICI liable to the respondents for the proceeds of the Personal
Accident Policies and attorney's fees. The LA, however, ruled that the liability of
petitioner shall be deemed extinguished only upon SSSICI's payment of the insurance
proceeds.

On appeal, the NLRC modified the LA Decision in a Resolution

The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any
liability based on the limited liability rule.

It, however, affirmed SSSICI's liability after finding that the Personal Accident Policies
answer for the death benefit claims under the Philippine Overseas Employment
Administration Standard Employment Contract (POEA-SEC)

The CA found that the NLRC erred when it ruled that the obligation of petitioner,
TEMMPC and TMCL for the payment of death benefits under the POEA-SEC was ipso
facto transferred to SSSICI upon the death of the seafarers

TEMMPC and TMCL cannot raise the defense of the total loss of the ship because its
liability under POEA-SEC is separate and distinct from the liability of the shipowner.

To disregard the contract, which has the force of law between the parties, would defeat
the purpose of the Labor Code and the rules and regulations issued by the Department
of Labor and Employment (DOLE) in setting the minimum terms and conditions of
employment for the protection of Filipino seamen.

The CA noted that the benefits being claimed are not dependent upon whether there
is total loss of the vessel, because the liability attaches even if the vessel did not sink.

Thus, it was error for the NLRC to absolve TEMMPC and TMCL on the basis of the
limited liability rule.
Significantly though, the CA ruled that petitioner is not liable under the POEA-SEC,
but by virtue of its being a shipowner.

Thus, petitioner is liable for the injuries to passengers even without a determination of
its fault or negligence. It is for this reason that petitioner obtained insurance from
SSSICI - to protect itself against the consequences of a total loss of the vessel caused
by the perils of the sea.

Consequently, SSSICI's liability as petitioner's insurer directly arose from the contract
of insurance against liability

The CA then ordered that petitioner's liability will only be extinguished upon payment
by SSSICI of the insurance proceeds.

Issues:
Whether the doctrine of real and hypothecary nature of maritime law (also known as
the limited liability rule) applies in favor of petitioner.

Ruling:
Doctrine of limited liability is not applicable to claims under POEA-SEC.

Article 837 applies the limited liability rule in cases of collision. Meanwhile, Articles 587
and 590 embody the universal principle of limited liability in all cases wherein the
shipowner or agent may be properly held liable for the negligent or illicit acts of the
captain.

These articles precisely intend to limit the liability of the shipowner or agent to the
value of the vessel, its appurtenances and freightage earned in the voyage, provided
that the owner or agent abandons the vessel.

When the vessel is totally lost, in which case abandonment is not required because
there is no vessel to abandon, the liability of the shipowner or agent for damages is
extinguished.

Nonetheless, the limited liability rule is not absolute and is without exceptions. It does
not apply in cases: (1) where the injury or death to a passenger is due either to the
fault of the shipowner, or to the concurring negligence of the shipowner and the
captain; (2) where the vessel is insured; and (3) in workmen's compensation claims.

In Abueg v. San Diego, we ruled that the limited liability rule found in the Code of
Commerce is inapplicable in a liability created by statute to compensate employees
and laborers, or the heirs and dependents, in cases of injury received by or inflicted
upon them while engaged in the performance of their work or employment, to wit:

The real and hypothecary nature of the liability of the shipowner or agent embodied in
the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a
ship to the vessel, equipment, and freight, or insurance, if any, so that if the shipowner
or agent abandoned the ship, equipment, and freight, his liability was extinguished.

But the provisions of the Code of Commerce invoked by appellant have no room in the
application of the Workmen's Compensation Act which seeks to improve, and aims at
the amelioration of, the condition of laborers and employees. It is not the liability for
the damage or loss of the cargo or injury to, or death of, a passenger by or through
the misconduct of the captain or master of the ship; nor the liability for the loss of the
ship as a result of collision; nor the responsibility for wages of the crew, but a liability
created by a statute to compensate employees and laborers in cases of injury received
by or inflicted upon them, while engaged in the performance of their work or
employment, or the heirs and dependents of such laborers and employees in the event
of death caused by their employment.

We see no reason why the above doctrine should not apply here.

Thus, the claim for death benefits under the POEA-SEC is the same species as the
workmen's compensation claims under the Labor Code - both of which belong to a
different realm from that of Maritime Law. Therefore, the limited liability rule does not
apply to petitioner's liability under the POEA-SEC.

Asian Terminals, Inc. v Allied Guarantee Insurance, Co., Inc. GR No. 182208,
October 14, 2015

FACTS:
Marina, the predecessor of Asian Terminals Inc., is an arrastre operator based on
Manila. On February 5, 1989, a shipment of kraft linear board was loaded and received
from the ports of Lake Charles, LA, and Mobile, Al, USA for transport and delivery to
San Miguel. Upon offloading, it was assessed that a total of 158 rolls were damaged
during shipping. Further, upon the goods' withdrawal from arrastre and their delivery
to the customs broker, Dynamic and eventually to the consignee San Miguel, another
54 rolls were found to have been damaged, for a total of 212 rolls of damaged
shipment worth P755,666.84.

Allied Insurance was the insurer of the shipment. Thus, it paid San Miguel
P755,666.84 and was subrogated in the latter's right. Allied filed a Complaint against
Transocean, Philippine Transmarine, Dynamic and Marina seeking to be indemnified
for the P755,666.84 it lost paying San Miguel.

ISSUES:
Whether or not petitioner has been proven liable for the additional 54 rolls of damaged
goods to respondent

RULING:
Yes. Marina, the arrastre operator, from the above evidence, was not able to overcome
the presumption of negligence. The Bad Order Cargo Receipts, the Turn Over Survey
of Bad Order Cargoes as well as the Request for Bad Order Survey did not establish
that the additional 54 rolls were in good condition while in the custody of the arrastre.
Said documents proved only that indeed the 158 rolls were already damaged when
they were discharged to the arrastre operator and when it was subsequently withdrawn
from the arrastre operator by [the] customs broker. Further, the Turn Over Inspector
and the Bad Order Inspector who conducted the inspections and who signed the Turn
Over Survey of Bad [Order] Cargoes and the Request for Bad Order Survey,
respectively, were not presented by Marina as witnesses to verify the correctness of
the document and to testify that only 158 rolls was reported and no others sustained
damage while the shipment was in its possession.

On the other hand, defendant Dynamic (which) in its capacity as broker, withdrew the
357 rolls of kraft linear board from the custody of defendant Marina and delivered the
same to the consignee, San Miguel Corporation's warehouse in Tabacalera at United
Nations, Manila, is considered a common carrier.

It is noteworthy to mention that "in general, the nature of the work of an arrastre
operator covers the handling of cargoes at piers and wharves,"

"To carry out its duties, the arrastre is required to provide cargo handling equipment
which includes, among others, trailer, chassis for containers."

Hence, the "legal relationship betw.een the consignee and the arrastre operator is akin
to that of a depositor and the warehouseman. The relationship between the consignee
and the common carrier is similar to that of the consignee and the arrastre operator.
Since it is the duty of the arrastre to take good care of the goods that are in its custody
and to deliver them in good condition to the consignee, such responsibility also
develops upon the carrier. Both the arrastre and the carrier are, therefore, charged
with and obligated to deliver the goods in good condition to the consignee."
Since the relationship of an arrastre operator and a consignee is akin to that between
a warehouseman and a depositor, then, in instances when the consignee claims any
loss, the burden of proof is on the arrastre operator to show that it complied with the
obligation to deliver the goods and that the losses were not due to its negligence or
that of its employees.

the broker, Dynamic, cannot alone be held liable for the additional 54 rolls of damaged
goods since such damage occurred during the following instances: (1) while the goods
were in the custody of the arrastre ATI; (2) when they were in transition from ATI's
custody to that of Dynamic (i.e., during loading to Dynamic's trucks); and (3) during
Dynamic's custody.

While the trial court could not determine with pinpoint accuracy who among the two
caused which particular damage and in what proportion or quantity, it was clear that
both ATI and Dynamic failed to discharge the burden of proving that damage on the
54 rolls did not occur during their custody. As for petitioner ATI, in particular, what
worked against it was the testimony, as cited above, that its employees' use of the
wrong lifting equipment while loading the goods onto Dynamic's trucks had a role in
causing the damage. Such is a finding of fact made by the trial court which this Court,
without a justifiable ground, will not disturb,

The arrastre operator's principal work is that of handling cargo, so that its
drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody.

In the performance of its obligations, an arrastre operator should observe the same
degree of diligence as that required of a common carrier and a warehouseman.

Being the custodian of the goods discharged from a vessel, an arrastre operator's duty
is to take good care of the goods and to turn them over to the party entitled to their
possession. With such a responsibility, the arrastre operator must prove that the
losses were not due to its negligence or to that of its employees. And to prove the
exercise of diligence in handling the subject cargoes, petitioner must do more than
merely show the possibility that some other party could be responsible for the loss or
the damage. It must prove that it exercised due care in the handling thereof.

a mere sign-off from the customs broker's representative that he had received the
subject shipment "in good order and condition without exception" would not absolve
the arrastre from liability, simply because the representative's signature merely
signifies that said person thereby frees the arrastre from any liability for loss or damage
to the cargo so withdrawn while the same was in the custody of such representative
to whom the cargo was released, but it does not foreclose the remedy or right of the
consignee (or its subrogee) to prove that any loss or damage to the subject shipment
occurred while the same was under the custody, control and possession of the arrastre
operator.

As it is now established that there was negligence in both petitioner ATI's and
Dynamic's performance of their duties in the handling, storage and delivery of the
subject shipment to San Miguel, resulting in the loss of 54 rolls of kraft linear board,
both shall be solidarily liable for such loss.

DESIGNER BASKETS, INC. vs AIR SEA TRANSPORT

FACTS:
DBI is a domestic corporation engaged in the production of housewares and
handicrafts items for export. In October 1995, Ambiente, a foreign-based company,
ordered from DBI 223 cartons of assorted wooden items. Ambiente designated ACCLI
as the forwarding agent that will ship out its order from the Philippines to the United
States, ACCLI is a domestic corporation engaged in the carrier transport business, in
the Philippines.

On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from
Manila and delivery to Ambiente. To acknowledge receipt and to serve as the contract
of sea carriage, ACCLI issued to DBI triplicate copies of ASTI Bill of Lading. DBI
retained possession of the originals of the bill of Lading pending the payment of the
goods by Ambiente.

On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement.
Under the agreement, Ambiente obligated ASTI to deliver the shipment to it or its Order
“without the surrender of the relvenat bill(s) of lading due to the non-arrival or loss
thereof.” In exchange, Ambiente undertook to indemnity and hold ASTI and its agent
free from any liability as a result of the release of the shipment. Thereafter, ASTI
released the shipment to Ambiente without the knowledge of DBI, and without it
receiving payment for the total cost of shipmet.

DBI made several demands to Ambiente for the payment of the shipment, but to no
avail. Thus on October 7, 1996, DBI filed the Original Complaint against ASTI, ACCLI
and ACCLI’s incorporators-stockholders. They claimed that under Bill of Lading is “to
release and deliver the cardo/shipment to the consignee only after the original copy or
copies of the Bill of Lading is or are surrendered to them; otherwise, they become
liable to the shipper for value of the shipment. DBI also averred that ACCLI should be
jointly and severally liable with its codefendants because ACCLI failed to register ASTI
as a foreign corporation doing business in the Philippines. In addition, ACCLI failed to
secure a license to act as agent of ASTI.

ISSUE:
W/N ASTI, ACCLI and Ambiente are solidarily liable to DBI for the value of the
shipment?

RULING:

NO,

1) Common Carrier may release the goods to the consignee even without the
surrender of the Bill of Lading. The general rule is that upon receipt of the goods, the
consignee surrenders the Bill of Lading to the carrier and their respective obligations
are considered canceled. The Law, however, provides two exceptions: 1) are when
the Bill of Lading gets: 1) lost or 2)for other cause.

2) Arts 1733, 1734 and 1735 of the Civil Code are not applicable. It speaks of the
common carrier’s responsibility over goods. They refer to the general liability of
common carriers in case of loss, destruction or deterioration of goods and the
presumption of negligence against them.

3) Arts 1523 and 1503 refer to a contract of sale between seller and buyer. In
particular, they refer to who between the seller and the buyer has the right of
possession or ownership over the goods subject of sale.

GREENSTAR EXPRESS, INC. AND FRUTO L. SAYSON, JR. vs. NISSIN-

UNIVERSAL ROBINA CORPORATION
G.R. No. 205090, October 17, 2016, J. Del Castillo

Facts:

Greenstar Express, Inc. is the owner of a passenger bus, driven by Fruto Sayson,
which collided head on with an L-300 van, owned by Unoversal Robina and Nissin
Universal Robina Corporation and driven by Renante Bicomong, NURC’s Operations
Manager, in Maharlika Highway, Laguna. As a result of the collision, Bicomong died
instantly, while the passenger bus owned by Greenstar sustained damages.
 Greenstar and Fruto filed a case for damages against the respondents, based on
the negligence of Bicomong, an employee of the respondents. During trial, it was
established that Bicomong used the L300, a vehicle owned by the respondents, in
transporting bulky material to his home, despite the fact that he himself was issued an
executive car. The incident also happened on a holiday, and the employee did not use
the vehicle for official company use.

The RTC ruled in favor of the respondents. It held that for the employer to be
liable for the damages caused by his employee, the latter must have caused the
damage in the course of doing his assigned tasks or in the-performance of his duties.
In this case, Bicomong was not in the performance of his duty on the day of the
accident because it was a holiday; there were no plants of the company in Quezon
and Laguna; the deceased was issued an executive car for his own use, and merely
preferred using the L300 for transporting bulky materials to his home. Because the
accident occurred outside Bicomong’s assigned tasks, defendant employers cannot
be held liable to the plaintiffs, even assuming that it is the fault of defendants’ employee
that was the direct and proximate cause of their damages.

CA affirmed the RTC judgment, thus the petitioners appealed to the Supreme
Court.

Issue:

Whether or not the respondents are liable for the negligence of their employee
even though the accident occurred not in the performance of the employee’s duty to
the company.

Ruling:

Respondents are not liable for the negligence of their employee.

The resolution of this case must consider 2 rules. First, Article 2180's specification
that '[e]mployers shall be liable for the damages caused by their employees acting
within the scope of their assigned tasks. Second, the operation of the registered-owner
rule that registered owners are liable for death or injuries caused by the operation of
their Vehicles.

When by evidence the ownership of the van and Bicomong's employment were
proved, the presumption of negligence on respondents' part attached, as the
registered owner of the van and as Bicomong's employer. The burden of proof then
shifted to respondents to show that no liability under Article 2180 arose. This may be
done by proof of any of the following:

1. That they had no employment relationship with Bicomong; or

2. That Bicomong acted outside the scope of his assigned tasks; or
3. That they exercised the diligence of a good father of a family in the selection and
supervision of Bicomong.
 Respondents succeeded in overcoming the presumption of negligence, having
shown that when the collision took place, Bicomong was not in the performance of his
work; that he was in possession of a service vehicle that did not belong to his employer
NURC, and which vehicle was not officially assigned to him; that his use of the URC
van was unauthorized; that the accident occurred on a holiday and while Bicomong
was on his way home to his family; and that Bicomong had no official business
whatsoever in his hometown in Quezon, or in Laguna where the collision occurred, his
area of operations being limited to the Cavite area.

On the other hand, the evidence suggests that the collision could have been
avoided if Sayson exercised care and prudence. Despite having seen Bicomong drive
the URC van in a precarious manner while the same was still a good 250 meters away
from his bus, Sayson did not take the necessary precautions, as by reducing speed
and adopting a defensive stance to avert any untoward incident. Instead, he
maintained his current speed. An experienced driver who is presented with the same
facts would have adopted an attitude consistent with a desire to preserve life and
property; for common carriers, the diligence demanded is of the highest degree.

The law exacts from common carriers (i.e., those persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public)
the highest degree of diligence (i.e., extraordinary diligence) in ensuring the safety of
its passengers. Articles 1733 and 1755 of the Civil Code state:

Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary, diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case.

Art. 1755. A common carrier is bound to carry the passengers safely as far as human
care arid foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.

In this relation, Article 1756 provides that '[i]n case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed
in Articles 1733 and 1755.

The doctrine of last clear chance provides that where both parties are negligent
but the negligent act of one is appreciably later in point of time than that of the other,
or where it is impossible to determine whose fault or negligence brought about the
occurrence of the incident, the one who had the last clear opportunity to avoid the
impending harm but failed to do so, is chargeable with the consequences arising
therefrom. Stated differently, the rule is that the antecedent negligence of a person
does not preclude recovery of damages caused by the supervening negligence of the
latter, who had the last fair chance to prevent the impending harm by the exercise of
due diligence.
Insurance Law
G.R. No. 204736
November 28, 2016
MANULIFE PHILIPPINES, INC.
vs.
HERMENEGILDA YBAÑEZ

Facts:
Before the RTC of Makati City, Manulife Philippines, Inc. (Manulife) instituted a
Complaint for Rescission of Insurance Contracts against Hermenegilda Ybañez
(Hermenegilda) and the BPI Family Savings Bank (BPI Family).
It is alleged in the Complaint that Insurance Policy Nos. 6066517-1 and 6300532-6
(subject insurance policies) which Manulife issued on October 25, 2002 and on July
25, 2003, respectively, both in favor of Dr. Gumersindo Solidum Ybañez (insured),
werevoid due to concealment or misrepresentation of material facts in the latter's
applications for life insurance, particularly the forms entitled Non-Medical Evidence,
Medical Evidence Exam, and the Declaration of Insurability in the Application for Life
Insurance (DOI); that on November 17, 2003, when one of the subject insurance
policies had been in force for only one year and three months, while the other for only
four months, the insured died; that the Death Certificate dated November 17, 2003
stated that the insured had "Hepatocellular CA., Crd Stage 4, secondary to Uric Acid
Nephropathy; SAM Nephropathy recurrent malignant pleural effusion.

Issue:
Whether the CA committed any reversible error in affirming the RTC Decision
dismissing Manulife's Complaint for rescission of insurance contracts for failure to
prove concealment on the part of the insured.

Ruling:
The present recourse essentially challenges anew the findings of fact by both the RTC
and the CA that the Complaint for rescission of the insurance policies in question will
not prosper because Manulife failed to prove concealment on the part of the insured.
This is not allowed.
It is horn-book law that in appeal by certiorari to this Court under Rule 45 of the
Revised Rules of Court, the findings of fact by the CA, especially where such findings
of fact are affirmatory or confirmatory of the findings of fact of the RTC, as in this case,
are conclusive upon this Court. The reason is simple: this Court not being a trial court,
it does not embark upon the task of dissecting, analyzing, evaluating, calibrating or
weighing all over again the evidence, testimonial or documentary, that the parties
adduced during trial. Of course, there are exceptions to this rule, such as:
1. when the conclusion is grounded upon speculations, surmises or conjectures;
2. when the inference is manifestly mistaken, absurd or impossible;
3. when there is a grave abuse of discretion;
4. when the judgment is based on a misapprehension of facts;
5. when the findings of fact are conflicting;
6. when there is no citation of specific evidence on which the factual findings are
based;
7. when the findings of absence of facts is contradicted by the presence of
evidence on record;
8. when the findings of the CA are contrary to the findings of the RTC;
9. when the CA manifestly overlooked certain relevant and undisputed facts that,
if properly considered, would justify a different conclusion;
 10. when the findings of the CA are beyond the issues of the case; and
11. when the CA’s findings are contrary to the admission of both parties.
The RTC correctly held that the CDH’s medical records that might have established
the insured’s purported misrepresentation/s or concealment/s was inadmissible for
beinghearsay, given the fact that Manulife failed to present the physician or any
responsible official of the CDH who could confirm or attest to the due execution and
authenticity of the alleged medical records. Manulife had utterly failed to prove by
convincing evidence that it had been beguiled, inveigled, or cajoled into selling the
insurance to the insured who purportedly with malice and deceit passed himself off as
thoroughly sound and healthy, and thus a fit and proper applicant for life insurance.
Manulife's sole witness gave no evidence at all relative to the particulars of the
purported concealment or misrepresentation allegedly perpetrated by the insured. In
fact, Victoriano merely perfunctorily identified the documentary exhibits adduced by
Manulife; she never testified in regard to the circumstances attending the execution of
these documentary exhibits much less in regard to its contents.

"The fraudulent intent on the part of the insured must be established to entitle the
insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid
liability is an affirmative defense and the duty to establish such defense by satisfactory
and convincing evidence rests upon the insurer." For failure of Manulife to prove intent
to defraud on the part of the insured, it cannot validly sue for rescission of
insurance contracts.

G.R. No. 175666 July 29, 2013

MANILA BANKERS LIFE INSURANCE CORPORATION
vs.
CRESENCIA P. ABAN

The ultimate aim of Section 48 of the Insurance Code is to compel insurers to

solicit business from or provide insurance coverage only to legitimate and bona
fide clients, by requiring them to thoroughly investigate those they insure within
two years from effectivity of the policy and while the insured is still alive. If they
do not, they will be obligated to honor claims on the policies they issue,
regardless of fraud, concealment or misrepresentation.

Facts:
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila
Bankers Life Insurance Corporation (Bankers Life), designating respondent Cresencia
P. Aban (Aban), her niece, as her beneficiary.
On April 10, 1996, when the insurance policy had been in force for more than two years
and seven months, Sotero died. Respondent filed a claim for the insurance proceeds
on July 9, 1996. Petitioner conducted an investigation into the claim, and came out
with the following findings:
1. Sotero did not personally apply for insurance coverage, as she was illiterate;
2. Sotero was sickly since 1990;
3. Sotero did not have the financial capability to pay the insurance premiums
on Insurance Policy No. 747411;
4. Sotero did not sign the July 3, 1993 application for insurance; and
5. Respondent was the one who filed the insurance application, and x x x
designated herself as the beneficiary.
Petitioner filed a civil case for rescission and/or annulment of the policy. The main
thesis of the Complaint was that the policy was obtained by fraud, concealment and/or
misrepresentation under the Insurance Code, which thus renders it voidable under
Article 1390 of the Civil Code.

Respondent filed a Motion to Dismiss claiming that petitioner’s cause of action was
barred by prescription pursuant to Section 48 of the Insurance Code

Issues:
I
WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE ORDER OF
THE TRIAL COURT DISMISSING THE COMPLAINT ON THE GROUND OF
PRESCRIPTION IN CONTRAVENTION (OF) PERTINENT LAWS AND APPLICABLE
JURISPRUDENCE.
II
WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE
APPLICATION OF THE INCONTESTABILITY PROVISION IN THE INSURANCE
CODE BY THE TRIAL COURT.

Ruling:

"Fraudulent intent on the part of the insured must be established to entitle the insurer
to rescind the contract." In the absence of proof of such fraudulent intent, no right to
rescind arises.

The "incontestability clause" is a provision in law that 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 (2) years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible
by reason of fraudulent concealment or misrepresentation of the insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by limiting
the rescinding of the contract of insurance on the ground of fraudulent concealment or
misrepresentation to a period of only two (2) years from the issuance of the policy
or its last reinstatement.
At least two (2) years from the issuance of the policy or its last reinstatement, the
beneficiary is given the stability to recover under the policy when the insured dies. The
provision also makes clear when the two-year period should commence in case the
policy should lapse and is reinstated, that is, from the date of the last reinstatement.
After two years, the defenses of concealment or misrepresentation, no matter how
patent or well-founded, will no longer lie.
The so-called "incontestability clause" precludes the insurer from raising the
defenses of false representations or concealment of material facts insofar as health
and previous diseases are concerned if the insurance has been in force for at least
two years during the insured’s lifetime. The phrase "during the lifetime" found in
Section 48 simply means that the policy is no longer considered in force after the
insured has died. The key phrase in the second paragraph of Section 48 is "for a period
of two years."
The business of insurance is a highly regulated commercial activity in the
country,29and is imbued with public interest. "An insurance contract is a contract of
adhesion which must be construed liberally in favor of the insured and strictly against
the insurer in order to safeguard the former’s interest."

G.R. No. 147839 June 8, 2006

GAISANO CAGAYAN, INC.
vs.
INSURANCE COMPANY OF NORTH AMERICA
Facts:
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks
owned by Levi Strauss & Co.. IMC and LSPI separately obtained from respondent fire
insurance policies with book debt endorsements. The insurance policies provide for
coverage on "book debts in connection with ready-made clothing materials which have
been sold or delivered to various customers and dealers of the Insured anywhere in
the Philippines." The policies defined book debts as the "unpaid account still
appearing in the Book of Account of the Insured 45 days after the time of the
loss covered under this Policy." The policies also provide for the following
conditions:
1. Warranted that the Company shall not be liable for any unpaid account in
respect of the merchandise sold and delivered by the Insured which are
outstanding at the date of loss for a period in excess of six (6) months from the
date of the covering invoice or actual delivery of the merchandise whichever
shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12)
days after the close of every calendar month all amount shown in their books
 of accounts as unpaid and thus become receivable item from their customers
and dealers.
Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25,
1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner,
was consumed by fire. Included in the items lost or destroyed in the fire were stocks
of ready-made clothing materials sold and delivered by IMC and LSPI.
Respondent filed a complaint for damages against petitioner. It alleges that IMC and
LSPI filed with respondent their claims under their respective fire insurance policies
with book debt endorsements; that as of February 25, 1991, the unpaid accounts of
petitioner on the sale and delivery of ready-made clothing materials with IMC
wasP2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the
claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their
rights against petitioner.

Petitioner contends that it could not be held liable because the property covered by
the insurance policies were destroyed due to fortuities event or force majeure; that
respondent's right of subrogation has no basis inasmuch as there was no breach of
contract committed by it since the loss was due to fire which it could not prevent or
foresee; that IMC and LSPI never communicated to it that they insured their properties;
that it never consented to paying the claim of the insured.

Issue:
Whether the CA erred in construing a fire insurance policy on book debts as one
covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of
the ready-made clothing materials sold and delivered to petitioner.

Ruling:
Indeed, when the terms of the agreement are clear and explicit that they do not justify
an attempt to read into it any alleged intention of the parties, the terms are to be
understood literally just as they appear on the face of the contract. Thus, what were
insured against were the accounts of IMC and LSPI with petitioner which
remained unpaid 45 days after the loss through fire, and not the loss or
destruction of the goods delivered.
IMC and LSPI did not lose complete interest over the goods. They have an insurable
interest until full payment of the value of the delivered goods. Unlike the civil law
concept of res perit domino, where ownership is the basis for consideration of who
bears the risk of loss, in property insurance, one's interest is not determined by
concept of title, but whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect thereof,
of such nature that a contemplated peril might directly damnify the insured."
Parenthetically, under Section 14 of the same Code, an insurable interest in property
may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a property
interest in, or a lien upon, or possession of, the subject matter of the insurance, and
neither the title nor a beneficial interest is requisite to the existence of such an interest,
it is sufficient that the insured is so situated with reference to the property that he would
be liable to loss should it be injured or destroyed by the peril against which it is insured.
Anyone has an insurable interest in property who derives a benefit from its existence
or would suffer loss from its destruction.

TRIPLE-V vs FILIPINO MERCHANTS

G.R. No. 160544. February 21, 2005

FACTS:

On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne De
Asis (De Asis) dined at petitioner's Kamayan Restaurant at 15 West Avenue, Quezon
City. De Asis was using a Mitsubishi Galant Super Saloon Model 1995 with plate
number UBU 955, assigned to her by her employer Crispa Textile Inc. (Crispa). On
said date, De Asis availed of the valet parking service of petitioner and entrusted her
car key to petitioner's valet counter. A corresponding parking ticket was issued as
receipt for the car. The car was then parked by petitioner's valet attendant, a certain
Madridano, at the designated parking area. Few minutes later, Madridano noticed that
the car was not in its parking slot and its key no longer in the box where valet
attendants usually keep the keys of cars entrusted to them. The car was never
recovered. Thereafter, Crispa filed a claim against its insurer, herein respondent
Filipino Merchants Insurance Company, Inc. (FMICI).

In its answer, petitioner argued that the complaint failed to aver facts to support the
allegations of recklessness and negligence committed in the safekeeping and custody
of the subject vehicle, claiming that it and its employees wasted no time in ascertaining
the loss of the car and in informing De Asis of the discovery of the loss. Petitioner
further argued that in accepting the complimentary valet parking service, De Asis
received a parking ticket whereunder it is so provided that "[Management and staff will
not be responsible for any loss of or damage incurred on the vehicle nor of valuables
contained therein", a provision which, to petitioner's mind, is an explicit waiver of any
right to claim indemnity for the loss of the car; and that De Asis knowingly assumed
the risk of loss when she allowed petitioner to park her vehicle, adding that its valet
parking service did not include extending a contract of insurance or warranty for the
loss of the vehicle.

During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim
for the loss of the car, arguing that theft is not a risk insured against under FMICI's
Insurance Policy No. PC-5975 for the subject vehicle.

ISSUE:

Whether FMICI was validly subrogated to Crispa’s right against petitioner under the
insurance policy it issued.

RULING:

Yes.

Petitioner's argument that there was no valid subrogation of rights between Crispa and
FMICI because theft was not a risk insured against under FMICI's Insurance Policy
No. PC-5975 holds no water.

Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains,
among others things, the following item: "Insured's Estimate of Value of Scheduled
Vehicle- P800.000". On the basis of such item, the trial court concluded that the
coverage includes a full comprehensive insurance of the vehicle in case of damage or
loss. Besides, Crispa paid a premium of P10,304 to cover theft. This is clearly shown
in the breakdown of premiums in the same policy. Thus, having indemnified CRISPA
for the stolen car, FMICI, as correctly ruled by the trial court and the Court of Appeals,
was properly subrogated to Crispa's rights against petitioner, pursuant to Article
2207 of the New Civil Code.

Banking
Land Bank of the Philippines vs. Narciso Kho, G. R. No. 205839, July 7,2016
BRION, J.:
Facts:
Narcico Kho purchased a manager's check from the Land Bank of the Philippines
Araneta Branch woth Php 25, 000,000.00 paid using the money from his savings
account in the same bank. The check was purchased in order to negotiate a deal with
Red Orange International Trading (Red Orange), represented by one Rudy Medel.
The check was postdated to January 2, 2006, and scheduled for actual delivery on the
same date after the three checks were expected to have been cleared. It was valued
at P25,000,000.00 and made payable to Red Orange. Kho requested a photocopy of
the manager's check to provide Red Orange with proof that he had available funds for
the transaction. The branch manager, petitioner Ma. Lorena Flores, accommodated
his request. Kho gave the photocopy of the check to Rudy Medel. Kho returned to the
bank and picked up check No. 07410. Accordingly, P25,000,000.00 was debited from
his savings account. Unfortunately, his deal with Red Orange did not push through.
An employee of the Bank of the Philippine Islands called Land Bank, Araneta Branch,
to inform them that Red Orange had deposited check No. 07410 for payment. Flores
confirmed with BPI that Land Bank had issued the check to Kho. The Central Clearing
Department (CCD) of the Land Bank Head Office faxed a copy of the deposited check
to the Araneta branch for payment. The officers of the Araneta branch examined the
fax copy and thought that the details matched the check purchased by Kho. Thus,
Land Bank confirmed the deposited check.
Flores informed Kho by phone that Check No. 07410 was cleared and paid by the BPI,
Kamuning branch.leslawShocked, Kho informed Flores that he never negotiated the
check because the deal did not materialize. More importantly, the actual check was
still in his possession.eslaw Kho immediately went to Land Bank with the check No.
07410. They discovered that what was deposited and encashed with BPI was a
spurious manager's check. Kho demanded the cancellation of his manager's check
and the release of the remaining money in his account (then P995,207.27). However,
Flores refused his request because she had no authority to do so at the time.

Kho returned to the Land Bank, Araneta branch on January 12, 2006, with the same
demands. He was received by petitioner Alexander Cruz who was on his second day
as the Officer in Charge (OIC) of the Araneta branch.1Cruz informed him that there
was a standing freeze order on his account because of the (then) ongoing investigation
on the fraudulent withdrawal of the manager's check.

Kho sent Land Bank a final demand letter for the return of his P25,000,000.00 and the
release of the P995,207.27 from his account but the bank did not comply. Hence, on
January 23, 2006, Kho filed a Complaint for Specific Performance and
Damagesagainst Land Bank, represented by its Araneta Avenue Branch Manager
Flores and its OIC Cruz. He also impleaded Flores and Cruz in their personal
capacities. Kho asserted that the manager's check No. 07410 was still in his
possession and that he had no obligation to inform Land Bank whether or not he had
already negotiated the check. On the other hand, Land Bank argued that Kho was
negligent because he handed Medel a photocopy of the manager's check and that this
was the proximate cause of his loss.
Issue:
Whether the petitioner bank is liable to pay Kho the amount of P25,000.00?

Ruling:
Yes. The business of banking is imbued with public interest; it is an industry where the
general public's trust and confidence in the system is of paramount importance.
Consequently, banks are expected to exert the highest degree of, if not the utmost,
diligence. They are obligated to treat their depositors' accounts with meticulous care,
always keeping in mind the fiduciary nature of their relationship.w

Banks hold themselves out to the public as experts in determining the genuineness of
checks and corresponding signatures thereon. Stemming from their primordial duty of
diligence, one of a bank's prime duties is to ascertain the genuineness of the drawer's
signature on check being encashed. This holds especially true for manager's checks.

A manager's check is a bill of exchange drawn by a bank upon itself, and is accepted
by its issuance. It is an order of the bank to pay, drawn upon itself, committing in effect
its total resources, integrity, and honor behind its issuance. The check is signed by the
manager (or some other authorized officer) for the bank. In this case, the signatories
were Macarandan and Benitez.

The genuine check No. 07410 remained in Kho's possession the entire time and Land
Bank admits that the check it cleared was a fake. When Land Bank's CCD forwarded
the deposited check to its Araneta branch for inspection, its officers had every
opportunity to recognize the forgery of their signatures or the falsity of the check.
Whether by error or neglect, the bank failed to do so, which led to the withdrawal and
eventual loss of the P25,000,000.00.

This is the proximate cause of the loss. Land Bank breached its duty of diligence and
assumed the risk of incurring a loss on account of a forged or counterfeit check. Hence,
it should suffer the resulting damage.

PNB vs JUAN VILLA

GR 213241

FACTS:

Petitioner PNB is a universal banking corporation duly authorized by Bangko Sentral

ng Pilipinas (BSP) to engage in banking business. Sometime in 1986, Spouses
Reynaldo Comista and Erlinda Gamboa Comista (Spouses Comista) obtained a loan
from Traders Royal Bank (Traders Bank).To secure the said obligation, the Spouses
Comista mortgaged to the bank a parcel of land.
For failure of the Spouses Comista to make good of their loan obligation after it has
become due, Traders Bank foreclosed the mortgage constituted on the security of the
loan. After the notice and publication requirements were complied with, the subject
property was sold at the public auction which respondent Juan F. Vila (Vila) was
declared as the highest bidder after he offered to buy the subject property for
P50,000.00.

A Certificate of Final Sale was issued to Vila after the one-year redemption period had
passed without the Spouses Comista exercising their statutory right to redeem the
subject property. He was, however, prevented from consolidating the ownership of the
property under his name because the owner's copy of the certificate of title was not
turned over to him by the Sheriff.

Despite the lapse of the redemption period and the fact of issuance of a Certificate of
Final Sale to Vila, the Spouses Comista were nonetheless allowed to buy back the
subject property by tendering the amount of ₱50,000.00.

Claiming that the Spouses Cornista already lost their right to redeem the subject
property, Vila filed an action for nullification of redemption, transfer of title and
damages against the Spouses Comista and Alfredo Vega in his capacity as the
Register of Deeds of Pangasinan.

Meanwhile, RTC rendered a Decision in Civil Case in favor of Vila thereby ordering
the Register of Deeds to cancel the registration of the certificate of redemption and the
annotation

In order to enforce the favorable decision, Vila filed before the RTC a Motion for the
Issuance of Writ of Execution which was granted by the court. Accordingly, a Writ of
Execution was issued.

By unfortunate turn of events, the Sheriff could not successfully enforce the decision
because the certificate of title covering the subject property was no longer registered
under the names of the Spouses Comista. Hence, the judgment was returned
unsatisfied

Upon investigation it was found out that during the interregnum the Spouses Comista
were able to secure a loan from the PNB in the amount of ₱532,000.00 using the same
property subject of litigation as security.

Eventually, the Spouses Comista defaulted in the payment of their loan obligation with
the PNB prompting the latter to foreclose the property offered as security. The bank
emerged as the highest bidder during the public sale as shown at the Certificate of
Sale issued by the Sheriff. As with the prior mortgage, the Spouses Comista once
again failed to exercise their right of redemption within the required period allowing
PNB to consolidate its ownership over the subject property.

The foregoing turn of events left Vila with no other choice but to commence another
round of litigation against the Spouses Comista and PNB.

To refute the allegations of Vila, PNB pounded that it was a mortgagee in good faith
pointing the fact that at the time the subject property was mortgaged to it, the same
was still free from any liens and encumbrances and the Notice of Lis Pendens was
registered only a month after the REM was annotated on the title. PNB meant to say
that at the time of the transaction, the Spouses Cornista were still the absolute owners
of the property possessing all the rights to mortgage the same to third persons. PNB
also harped on the fact that a close examination of title was conducted and nowhere
was it shown that there was any cloud in the title of the Spouses Cornista, the latter
having redeemed the property after they have lost it in a foreclosure sale.

RTC rendered a Decision in favor of Vila and ruled that PNB is not a mortgagee in
good faith. As a financial institution, the trial court held that PNB is expected to observe
a higher degree of diligence. In hastily granting the loan, the trial court declared that
PNB failed in this regard. Had the bank exercised due diligence, it could have easily
discovered that the Spouses Comista were not the possessors of the subject property
which could lead it to the fact that at the time the subject property was mortgaged to
it, a litigation involving the same was already commenced before the court. ·It was
further ratiocinated by the RTC that "[a] mortgagee cannot close his eyes to facts
which should put a reasonable man upon his guard" in ascertaining the status of a
mortgaged property.

ISSUE:

Whether PNB is mortgagee in good faith.

HELD:

No.

Clearly, the PNB failed to observe the exacting standards required of banking
institutions which are behooved by statutes and jurisprudence to exercise greater care
and prudence before entering into a mortgage contract

No credible proof on the records could substantiate the claim of PNB that a physical
inspection of the property was conducted. We agree with both the RTC and CA that if
in fact it were true that ocular inspection was conducted, a suspicion could have been
raised as to the real status of the property. By failing to uncover a crucial fact that the
mortgagors were not the possessors of the subject property, We could not lend
credence to the claim of the bank that an ocular inspection of the property was
conducted.1âwphi1 What further tramples upon PNB' s claim is the fact that, as shown
on the records, it was Vila who was religiously paying the real property tax due on the
property from 1989 to 1996, another significant fact that could have raised a red flag
as to the real ownership of the property. The failure of the mortgagee to take
precautionary steps would mean negligence on his part and would thereby preclude it
from invoking that it is a mortgagee in good faith.

Before approving a loan application, it is standard operating procedure for banks and
financial institutions to conduct an ocular inspection of the property offered for
mortgage and to determine the real owner(s) thereof. The apparent purpose of an
ocular inspection is to protect the "true owner" of the property as well as innocent third
parties with a right, interest or claim thereon from a usurper who may have acquired a
fraudulent certificate of title thereto.

In this case, it was adjudged by the courts of competent jurisdiction in a final and
executory .decision that the Spouses Cornista's reacquisition of the property after the
lapse of the redemption period is fraudulent and the property used by the mortgagors
as collateral rightfully belongs to Vila, an innocent third party with a right, could have
been protected if PNB only observed the degree diligence expected from it.

PNB clearly failed to observe the required degree of caution in readily approving the
loan and accepting the collateral offered by the Spouses Comista without first
ascertaining the real ownership of the property. It should not have simply relied on the
face of title but went further to physically ascertain the actual condition of the property.
That the property offered as security was in the possession of the person other than
the one applying for the loan and the taxes were declared not in their names could
have raised a suspicion. A person who deliberately ignores a significant fact that could
create suspicion in an otherwise reasonable person is not an innocent purchaser for
value.

Corporation Law

AGDAO LANDLESS RESIDENTS ASSOCIATION vs ROLANDO MARAMION et al.

GR Nos. 188642 and 189425; October 17, 2016

FACTS:
Petitioners are Agdao Landless Residents Association, Inc. (ALRAI), a non-stock, non-
profit corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines.

Dakudao & Sons, Inc. (Dakudao) executed six Deeds of Donation in favor of ALRAI
covering 46 titled lots (donated lots).9 One Deed of Donation prohibits ALRAI, as
donee, from partitioning or distributing individual certificates of title of the donated lots
to its members, within a period of five years from execution, unless a written authority
is secured from Dakudao.11 A violation of the prohibition will render the donation void,
and title to and possession of the donated lot will revert to Dakudao. The other five
Deeds of Donation do not provide for the five-year restriction.

In the board of directors and stockholders meetings held on January 5, 2000 and
January 9, 2000, respectively, members of ALRAI resolved to directly transfer 10 of
the donated lots to individual members and non members of ALRAI.

Respondents filed a Complaint against petitioners. Respondents alleged that

petitioners expelled them as members of ALRAI, and that petitioners are abusing their
powers as officers. Respondents further alleged that petitioners were engaged in the
following anomalous and illegal acts: (1) requiring ALRAI's members to pay exorbitant
arrear fees when ALRAI's By-Laws only set membership dues at P1.00 per month; (2)
partially distributing the lands donated by Dakudao to some officers of ALRAI and to
some non-members in violation of the Deeds of Donation; (3) illegally expelling them
as members of ALRAI without due process; and (4) being unable to show the books
of accounts of ALRAI.

Respondents questioned the validity of their removal as members and the transfer of
said lots through individual suits filed with the court.

ISSUE:

Whether the members were removed validly.

HELD:

No.

Section 91 58 of the Corporation Code of the Philippines (Corporation Code) provides

that membership in a non-stock, non-profit corporation (as in petitioner ALRAI in this
case) shall be terminated in the manner and for the cases provided in its articles of
incorporation or the by-laws. Agdao’s constitution provides that in the removal of
members “The Secretary shall give or cause to be given written notice of all meetings,
regular or special to all members of the association at least three (3) days before the
date of each meetings either by mail or personally.” For failing to meet said notice
requirements the removal of the respondents as members is invalid.

GR No. 184008, Aug 03, 2016

INDIAN CHAMBER OF COMMERCE PHILS. v. FILIPINO INDIAN CHAMBER OF

COMMERCE IN THE PHILIPPINES
FACTS:
Filipino-Indian Chamber of Commerce of the Philippines, Inc. (defunct FICCPI) was
originally registered with the SEC as Indian Chamber of Commerce of Manila, Inc. on
November 24, 1951, with SEC Registration Number 6465. On October 7, 1959, it
amended its corporate name into Indian Chamber of Commerce of the Philippines,
Inc., and further amended it into Filipino-Indian Chamber of Commerce of the
Philippines, Inc. on

March 4, 1977, Pursuant to its Articles of Incorporation, and without applying for an
extension of its corporate term, the defunct FICCPI's term of existence expired on
November 24, 2001.[7]

On January 20, 2005, Mr. Naresh Mansukhani (Mansukhani) reserved

the corporate name "Filipino Indian Chamber of Commerce in the
Philippines, Inc." (FICCPI), for the period from January 20, 2005 to April 20, 2005, with
the Company Registration and Monitoring Department (CRMD) of the SEC.
In an opposition letter dated April 1, 2005, Ram Sitaldas (Sitaldas), claiming to be a
representative of the defunct FICCPI, alleged that the corporate name has been used
by the defunct FICCPI since 1951, and that the reservation by another person who is
not its member or representative is illegal.

The CRMD called the parties for a conference and required them to submit their
position papers. Subsequently, on May 27, 2005, the CRMD rendered a decision
granting Mansukhani's reservation, holding that he possesses the better right over the
corporate name. The CRMD ruled that the defunct FICCPI has no legal personality to
oppose the reservation of the corporate name by Mansukhani. After the expiration of
the defunct FICCPFs corporate existence, without any act on its part to extend its term,
its right over the name ended. Thus, the name "Filipino Indian Chamber of Commerce
in the Philippines, Inc." is free for appropriation by any party.

Sitaldas appealed the decision of the CRMD to the SEC En BanC but on December
7, 2005, the SEC En Bane denied the appeal.
Sitaldas appealed the SEC En Banc decision to the CA, and on September 27, 2006,
the CA affirmed the decision of the SEC En Banc. It ruled that Mansukhani, reserving
the name 'Filipino Indian Chamber of Commerce in the Philippines, Inc.," has the of
the better right over the corporate name. It ruled that with the expiration corporate life
of the defunct FICCPI, without an extension having been filed and granted, it lost its
legal personality as a corporation. Thus, the CA affirmed the SEC En Banc ruling that
after the expiration of its term, the defunct FICCPI's rights over the name also ended.

Mansukhani's opposition stated that the name "Indian Chamber of Commerce Phils.,
Inc." is deceptively or confusingly similar to "Filipino Indian Chamber of Commerce in
the Philippines, Inc." But the CRMD denied the same and approved and issued the
Certificate of Incorporation of petitioner ICCPI.

Thus, respondent FICCPI, through Mansukhani, appealed the CRMD's decision to the
SEC En Banc. The SEC En Bane granted the appeal filed by FICCPI, and reversed
the CRMD's decision.
Citing Section 18 of the Corporation Code, the SEC En Banc made a finding that "both
from the standpoint of their [ICCPI and FICCPI] corporate names and the purposes
for which they were established, there exists a similarity that could inevitably lead to
confusion." It also ruled that "oppositor [FICCPI] has the prior right to use its corporate
name to the exclusion of the others.
Issue:
Whether or not petitioner's corporate name (ICCPI) could inevitably lead to
confusion;

Ruling:

The CA affirmed the decision of the SEC En Banc. It held that by simply looking at the
corporate names of ICCPI and FICCPI, one may readily notice the striking similarity
between the two. Thus, an ordinary person using ordinary care and discrimination may
be led to believe that the corporate names of ICCPI and FICCPI refer to one and the
same corporation.
The CA further ruled that ICCPI's corporate name did not comply with the requirements
of SEC Memorandum Circular No. 14-2000. It noted that under the facts of this case,
it is the registered corporate name, FICCPI, which contains the word (Filipino) making
it different from the proposed corporate name.
SEC Memorandum Circular No. 14-2000 requires, however, that it should be the
proposed corporate name which should contain one distinctive word different from the
name of the corporation already registered, and not the other way around, as In this
case.
Finally, the CA held that the SEC En Bane did not violate ICCPFs right to equal
protection when it ordered ICCPI to change its corporate name. The SEC En Bane
merely compelled ICCPI to comply with its undertaking to change its corporate name
in case another person or firm has acquired a prior right to the use of the said name
or the same is deceptively or confusingly similar to one already registered with the
SEC.

The SC upheld the decision of the CA.

Section 18 of the Coiporation Code expressly prohibits the use of a corporate name
which is identical or deceptively or confusingly similar to that of any existing
corporation:

No corporate name may be allowed by the Securities and Exchange Commission if

the proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate of
incorporation under the amended name. (Underscoring supplied.)
In Philips Export B. V. v. Court of Appeals, this Court ruled that to fall within the
prohibition, two requisites must be proven, to wit:

1. that the complainant corporation acquired a prior right over the use of such
corporate name; and

2. the proposed name is either:

(a) identical; or
(b) deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law; or
(c) patently deceptive, confusing or contrary to existing law.
These two requisites are present in this case.
On the second point, ICCPI's corporate name is deceptively or confusingly similar to
that of FICCPI. It is settled that to determine the existence of confusing similarity in
corporate names, the test is whether the similarity is such as to mislead a person,
using ordinary care and discrimination. In so doing, the court must examine the record
as well as the names themselves. Proof of actual confusion need not be shown. It
suffices that confusion is probably or likely to occur.
Considering these corporate purposes, the SEC En Banc made a finding that it is
apparent that both from the standpoint of their corporate names and the purposes for
which they were established, there exist a I similarity that could inevitably lead to
confusion. "This finding of the SEC En Bane was fully concurred with and adopted by
the CA.

Findings of fact of quasi-judicial agencies, like the SEC, are generally accorded
respect and even finality by this Court, if supported by substantial evidence, in
recognition of their expertise on the specific matters under their consideration, and
more so if the same has been upheld by the appellate court, as in this case.

GR No. 206649, Jul 20, 2016

FOREST HELLS GOLF & COUNTRY CLUB v. FIL-ESTATE PROPERTIES
FACTS:
On March 31, 1993, Kingsville Construction and Development Corporation (Kingsville)
and Kings Properties Corporation (KPC) entered into a project agreement with
respondent Fil-Estate Properties, Inc. (FEPI), whereby the latter agreed to finance and
cause the development of several parcels of land owned by Kingsville in Antipolo,
Rizal, into Forest Hills Residential Estates and Golf and Country Club, a first-class
residential area/golf-course/commercial center. Under the agreement, respondent
FEPI was tasked to incorporate petitioner Forest Hills Golf and Country Club, Inc.
(FHGCCI) with an authorized stock of 3,600 shares; and to perform the development
and construction work and other undertakings as full payment of its subscription to the
authorized capital stock of the club. As to the remaining shares of the club, they agreed
that these should be retained by Kingsville in exchange for the parcels of land used
for the golf course development.

On July 10, 1995, respondent FEPI assigned its rights and obligations over the project
to a related corporation, respondent Fil-Estate Golf Development, Inc. (FEGDI).

On July 19, 1996, Rainier L. Madrid (Madrid) purchased two Class "A" shares at the
secondary price of P3 80,000.00 each, and applied for a membership to the club for
P25,000.00.

Due to the delayed construction of the second 18-Hole Golf Course, Madrid wrote two
demand letters dated October 29, 2009 and March 15, 2010 to the Board of Directors
of petitioner FHGCCI asking them to initiate the appropriate legal action against
respondents FEPI and FEGDI. The Board of Directors, however, failed and/or refused
to act on the demand letters.

Thus, on April 21, 2010, Madrid, in a derivative capacity on behalf of petitioner

FHGCCI, filed with the RTC of Antipolo City a Complaint for Specific Performance with
Damages, docketed as Civil Case No. 10-9042, against respondents FEPI and
FEGDI.

In their Answer with Compulsory Counterclaim, respondents FEPI and FEGDI argued
that there is no cause of action against them as petitioner FHGCCI failed to state the
contractual and/or legal bases of their alleged obligation; that no prior demand was
made to them; that the action is not a proper derivative suit as petitioner FHGCCI failed
to exhaust all remedies available under the articles of incorporation and by-laws; and
that petitioner FHGCCI failed to implead its Board of Directors as indispensable
parties.
Petitioner FHGCCI, in turn, filed a Reply arguing that the case does not involve an
intra-corporate controversy and that the exhaustion of intra-corporate remedies was
futile and useless as the Board of Directors of petitioner FHGCCI also own respondent
FEGDI.

The RTC issued an Order dismissing the case for lack of jurisdiction, without prejudice
to the re-filing of the same with the proper special commercial court sitting at
Binangonan, Rizal.

ISSUE:

WHETHER OR NOT PETITIONER [FHGCCI'S] ORDINARY CIVIL SUIT FOR

SPECIFIC PERFORMANCE WITH DAMAGES AGAINST RESPONDENTS [FEPI
AND FEGDI] VIS-A-VIS THE LATTER'S OBLIGATION UNDER THE PROJECT
AGREEMENT TO FULLY COMPLETE AND DEVELOP THE FOREST HELLS
RESIDENTIAL ESTATES AND GOLF COURSE AND COUNTRY CLUB IS
COGNIZABLE BY THE LOWER COURT AS A REGULAR COURT OR BY THE RTC-
BINANGONAN, BRANCH 70, AS A SPECIAL COMMERCIAL COURT FOR INTRA-
CORPORATE CONTROVERSIES

RULING:

The Complaint, denominated as a derivative suit for specific performance, falls

under the jurisdiction of special commercial courts.

This is a derivative suit filed by Shareholder and Club Member Rainier Madrid
on behalf of [petitioner FHGCCI] to compel [respondents FEPI and FEGDI], to finish
the construction and complete development of Club's Arnold Palmer 2nd Nine-Holes
Golf Course and the adjunct Country Club Premises.

Despite repeated demands on FHGCCI, which appears controlled and managed by

interlocking directors of [respondents FEPI and FEGDI] as an "OLD BOYS
CLUB," and therefore guilty of grave conflict of interest to initiate legal actions
against developer [respondent] FEGDI vis-a-vis the completion of the Club's Arnold
Palmer 2nd Nine-Holes Golf Course and the promised Country Club
Facilities, FHGCCI has failed, shirked, and refused to sue the [respondents FEPI
and FEGDI].

Indeed, the control, exclusive management and operations of FHGCCI, which should
have been turned-over to the General Membership, has been illegally withheld,
retained and continued to be enjoyed by FHGCCI Board of Directors via their abusive,
void and illegal Founder's Shares, subject now of a separate suit to compel turnover
of the FHGCCI to its General Membership.
In this case, however, to refer the case to a special commercial court would be a waste
of time since it is apparent on the face of the Complaint, as pointed out by respondents
FEPI and FEGDI in their Answer, that petitioner FHGCCI failed to comply with the
requisites for a valid derivative suit.

Corollarily, "[f]or a derivative suit to prosper, it is required that the minority stockholder
suing for and on behalf of the corporation must allege in his complaint that he is suing
on a derivative cause of action on behalf of the corporation and all other stockholders
similarly situated who may wish to join him in the suit." It is also required that the
stockholder "should have exerted all reasonable efforts to exhaust all remedies
available under the articles of incorporation, by-laws, laws or rules governing the
corporation or partnership to obtain the relief he desires [and that such fact is alleged]
with particularity in the complaint." The purpose for this rule is "to make the derivative
suit the final recourse of the stockholder, after all other remedies to obtain the relief
sought had failed." Finally, the stockholder is also required "to allege, explicitly or
otherwise, the fact that there were no appraisal rights available for the acts complained
of, as well as a categorical statement that the suit is not a nuisance or a harassment
suit."

In this case, Madrid, as a shareholder of petitioner FHGCCI, failed to allege with

particularity in the Complaint, and even in the Amended Complaint, that he exerted all
reasonable efforts to exhaust all remedies available under the articles of incorporation,
by-laws, or rules governing the corporation; that no appraisal rights are available for
the acts or acts complained of; and that the suit is not a nuisance or a harassment
suit. Although the Complaint alleged that demand letters were sent to the Board of
Directors of petitioner FHGCCI and that these were unheeded, these allegations will
not suffice.

Thus, for failing to meet the requirements set forth in Section 1, Rule 8 of the Interim
Rules of Procedure Governing Intra-Corporate Controversies, the Complaint,
denominated as a derivative suit for specific performance, must be dismissed.

GRNo. 204261, Oct 05, 2016 ]

EDWARD C. DE CASTRO v. CA
FACTS:

Nuvoland, a corporation formed primarily "to own, use, improve, develop, subdivide,
sell, exchange, lease and hold for investment or otherwise, real estate of all kinds,
including buildings, houses, apartments and other structures," was registered with the
Securities and Exchange Commission (SEC) on August 9, 2006. Respondent Ramon
Bienvenida (Bienvenida) was the principal stockholder and member of the Board of
Directors while Raul Martinez (Martinez) was its President.

Silvericon, on the other hand, was registered with the SEC on December 19, 2006. Its
Articles: of Incorporation described it as a "corporation organized 'to own, use,
improve, develop, subdivide, sell, exchange, lease and hold for investment or
otherwise, real estate of all kinds, including buildings, houses, apartments and other
structures.

Martinez recruited petitioner Edward de Castro (De Castro), a sales and marketing
professional in the field of real estate, to handle its sales and marketing operations,
including the hiring and supervision of the sales and marketing personnel. To formalize
this undertaking, De Castro was made to sign a Memorandum of
Agreement (MOA), denominated as Shareholders Agreement, wherein Martinez
proposed to create a new corporation, through which the latter's compensation,
benefits and commissions, including those of other sales personnel, would be coursed.
It was stipulated in the said MOA that the new corporation would have an authorized
capital stock of P4,000,000.00, of which P1,000,000.00 was subscribed and paid
equally by the Martinez Group and the De Castro Group.

As it turned out, the supposedly new corporation contemplated was Silvericon. De

Castro was appointed the President and majority stockholder of Silvericon while
Bienvenida and Martinez were named as stockholders and incorporators thereof, each
owning one (1) share of subscribed capital stock.

In the same MOA, Martinez was designated as Chairman of the new corporation to
whom De Castro, as President and Chief Operating Officer, would directly report. De
Castro was tasked to manage the day to day operations of the new corporation based
on policies, procedures and strategies set by Martinez. For their respective roles,
Martinez was to receive a monthly allowance of P125,000.00, while De Castro's
monthly salary was P400,000.00, with car plan and project income bonus, among
other perks. Both Martinez and De Castro were stipulated to receive override
commissions at 1% each, based on the net contract price of each condominium unit
sold.

During De Castro's tenure as Chief Operating Officer of the newly created Silvericon,
he recruited forty (40) sales and marketing personnel. One of them was petitioner Ma.
Girlie F. Platon (Platon) who occupied the position of Executive Property Consultant.
De Castro and his team of sales personnel were responsible for the sale of 100% of
the projects owned and developed by Nuvoland.

After the issuance of the said termination letter, De Castro and all the sales and
marketing personnel of Silvericon were barred from entering the office premises.
Nuvoland, eventually, was able to secure the settlement of all sales and marketing
personnel's commissions and wages with the exception of those of De Castro and
Platon. The claims of one of Silvericon's senior manager were settled during the
pendency of a complaint with the LA.

Aggrieved, De Castro and Platon filed a complaint for illegal dismissal before the LA,
demanding the payment of their unpaid wages, commissions and other benefits with
prayer for the payment of moral and exemplary damages and attorney's fees against
Silvericon, Nuvoland, Martinez, Bienvenida, and the Board of Directors of Nuvoland.

ISSUE:

WHETHER OR NOT SILVERICON IS A LABOR-ONLY CONTRACTOR

RULING:

Initially, because of the divergence in the conclusions of the LA and the NLRC, it
appears that the issues surrounding the legal arrangements between and among the
parties are complicated. After a perusal of the records, however, the Court comes to
view the case as a simple question of whether Silvericon was engaged in independent
contracting or a labor-only scheme. The answer to this issue would necessarily shape
the conclusions as to respondents' other contentions like jurisdiction. Before delving
into these matters, though, there is a need to first resolve the procedural issues.

After a careful review of the records, the Court decides to apply a tempered relaxation
of the procedural rules in accord with substantial justice.

As to the substantive issues, the Court is faced with divergent views in the arguments
raised. On one hand, the petitioners strongly urge the Court to consider numerous
factors that would justify the piercing of the corporate veil showing that Silvericon was
just a business conduit of Nuvoland. On the other, the respondents vehemently deny
the existence of an employer-employee relationship between Nuvoland and the
petitioners. This absence of a juridical tie, according to Nuvoland, necessarily directs
the claims of the petitioners to Silvericon as their employer, being an independent
contractor.

As correctly observed by the LA, the respondents failed to show any valid or just cause
under the Labor Code on which it may justify the termination of services of the
petitioners. There was no iota of evidence to substantiate their story of staged walkout
and abandonment which caused them to terminate the employment of the petitioners.
After the issuance of the termination letter, De Castro and all the sales and marketing
personnel of Nuvoland were barred from entering the premises of their office and
payment of wages, commissions and all other benefits were withheld. The
respondents also failed to comply with the rudimentary requirement of notifying the
petitioners why they were being dismissed, as well as giving them ample opportunity
to contest the legality of their dismissal. Failing to show compliance with the
requirements of termination of employment under the Labor Code, the respondents
were found liable for illegal dismissal. A contrary ruling would serve as a wallop on the
very principles of labor - justice and equity for a man to be made to work and thereafter
be denied of his due as to the fruits of his labor.

RICHARD K. TOM VS SAMUEL RODRIGUEZ

FACTS:
GDITI is the exclusive Shore Reception Facility (SRF) Service Provider of the PPA.
Records show that sometime in December 2008, Fidel CU, sold his shares of stock in
GDITI to RAMOS and BASALO. When the latter failed to pay the purchase price, Cu
sold 15,233 of the same shares through a Deed of Sale in favor of Edgar D. Lim (Lim),
Eddie C. Ong (Ong), and Arnold Gunnacao (Gunnacao), who also did not pay the
consideration therefor.

On September 11, 2009, the following were elected as officers of GDITI: Lim as
President and Chairman of the Board, Basalo as Vice President for Visayas and
Mindanao, Ong as Treasurer and Vice President for Luzon, and Gunnacao as Director,
among others.However, a group led by Ramos composed of individuals who were not
elected as officers of GDITI – which included Tom – forcibly took over the GDITI offices
and performed the functions of its officers. This prompted GDITI, through its duly-
elected Chairman and President, Lim, to file an action for injunction and damages
against Ramos, et al., before the Regional Trial Court of Manila, Branch 46 (RTC-
Manila), docketed as Civil Case No. 09-122149 (injunction case).

Pending the injunction case, Cu resold his shares of stock in GDITI to Basalo, with the
Agreement, that Cu will sold not only his remaining 1,997 shares of stock in GDITI, but
also the shares of stock subject of the previously-executed Deed of Conditional Sale
in favor of Ramos, as well as the Deed of Sale in favor of Lim, Ong, and Gunnacao,
where the respective considerations were not paid. As such, Cu intervened in the
injunction case claiming that, as an unpaid seller, he was still the legal owner of the
shares of stock subject of the previous contracts he entered into with Ramos, Lim,
Ong, and Gunnacao.

In view of his successful intervention in the injunction case, Cu executed a Special

Power of Attorney16 (SPA) dated October 18, 2010 in favor of Cezar O. Mancao II
(Mancao) constituting the latter as his duly authorized representative to exercise the
powers granted to him by the court. However, in September 2011, in a letter addressed
to Mancao, Basalo, and the Board of Directors of GDITI filed before the RTC-Manila,
Cu expressly revoked the authority that he had previously granted to Mancao and
Basalo under the SPA and other related documents, effectively reinstating the power
to control and manage the affairs of GDITI unto himself. Thus, Mancao and Basalo
filed the present Complaint for Specific Performance with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and a Writ of Preliminary Injunction against Cu,
Tom, and several John and Jane Does before the Regional Trial Court of Nabunturan,
Compostela Valley, Branch 3 (RTC-Nabunturan)

ISSUE:
W/N revocation of the authority given by CU is valid?

RULING:
YES.

Accordingly, it cannot be doubted that the management and control of GDITI, being a
stock corporation, are vested in its duly elected Board of Directors, the body that: (1)
exercises all powers provided for under the Corporation Code; (2) conducts all
business of the corporation; and (3) controls and holds all property of the corporation.
Its members have been characterized as trustees or directors clothed with a fiduciary
character

Negotiable Instruments Law

RCBC SAVINGS BANK v. NOEL M. ODRADA, GR No. 219037, 2016-10-19

Facts:

Respondent Noel M. Odrada (Odrada) sold a secondhand Mitsubishi Montero

(Montero) to Teodoro L. Lim (Lim) for One Million Five Hundred Ten Thousand Pesos
(P1,510,000)

(P610,000) was initially paid by Lim and the balance of Nine Hundred Thousand Pesos
(P900,000) was financed by petitioner RCBC Savings Bank (RCBC) through a car
loan
RCBC required Lim to submit the original copies of the Certificate of Registration (CR)
and Official Receipt (OR) in his name. Unable to produce the Montero's OR and CR,
Lim requested RCBC to execute a letter addressed to Odrada informing the latter that
his application for a car loan had been approved.

Odrada executed a Deed of Absolute Sale on 9 April 2002 in favor of Lim and the latter
took possession of the Montero.

When RCBC received the documents, RCBC issued two manager's checks... for Nine
Hundred Thousand Pesos (P900,000) and Thirteen Thousand Five Hundred Pesos
(P13,500).

After the issuance of the manager's checks and their turnover to Odrada but prior to
the checks' presentation, Lim notified Odrada in a letter dated 15 April 2002 that there
was an issue regarding the roadworthiness of the Montero. When you open its engine
cover there is a trace of a head-on collision. The 4-wheel drive shift is not functioning
, the odometer has still an original mileage data but found tampered represented the
vehicle as model 1998 however; it is indicated in the front left A-pillar inscribed at the
identification plate [as] model 1997.

Odrada filed a collection suit[9] against Lim and RCBC. Lim claimed that the
cancellation was not done ex parte but through a letter. RCBC contended that the
manager's checks were dishonored because Lim had cancelled the loan prior to the
presentation of the manager's checks. RCBC also sent a formal notice of cancellation
of the loan on 18 April 2002 to both Odrada and Lim. The trial court ruled in favor of
Odrada.

Odrada was the proper party to ask for rescission , the right of rescission is implied in
reciprocal obligations where one party fails to perform what is incumbent upon him
when the other is willing and ready to comply.

It was not proper for Lim to exercise the right of rescission since Odrada had already
complied with the contract of sale by delivering the Montero while Lim remained
delinquent in payment , the defective condition of the Montero was not a supervening
event that would justify the dishonor of the manager's checks.

A manager's check is equivalent to cash and is really the bank's own check. It may be
treated as a promissory note with the bank as maker ,constitutes a written promise to
pay on demand.

Being the party primarily liable, the trial court ruled that RCBC was liable to Odrada
for the value of the manager's checks. Court of Appeals dismissed the appeal... when
RCBC issued the manager's checks in favor of Odrada, RCBC admitted the existence
of the payee and his then capacity to endorse, and undertook that on due presentment
the checks which were negotiable instruments would be accepted or paid, or both
according to its tenor.

Issues:
Whether or not the court a quo erred in holding that Lim cannot cancel the auto loan
despite the failure in consideration due to the contested roadworthiness of the vehicle
delivered by Odrada to him.

Whether or not Lim can validly countermand the manager's checks in the hands of a
holder who does not hold the same in due course.

Ruling:

Petition granted.

A contract of sale is perfected the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price which is the consideration.
From that moment, the parties may reciprocally demand performance.

However, the obligations between the parties do not cease upon delivery of the subject
matter. The vendor and vendee remain concurrently bound by specific obligations.
The vendor, in particular, is responsible for an implied warranty against hidden defects.

Article 1547 of the Civil Code... e states: "In a contract of sale, unless a contrary
intention appears, there is an implied warranty that the thing shall be free from any
hidden faults or defects."

Article 1566 of the Civil Code provides that "the vendor is responsible to the vendee
for any hidden faults or defects in the thing sold, even though he was not aware
thereof."... under the law, Odrada's warranties against hidden defects continued even
after the Montero's delivery. Consequently, a misrepresentation as to the Montero's
roadworthiness constitutes a breach of warranty against hidden defects.
Supercars Management & Development Corporation v. Flores... a breach of warranty
against hidden defects occurred when the vehicle, after it was delivered to respondent,
malfunctioned despite repairs by petitioner.

When Lim acquired possession, he discovered that the Montero was not roadworthy.

However, during the proceedings in the trial court, Lim's testimony was stricken off the
record because he failed to appear during cross-examination.

Jurisprudence defines a manager's check as a check drawn by the bank's manager

upon the bank itself and accepted in advance by the bank by the act of its issuance.

It is really the bank's own check and may be treated as a promissory note with the
bank as its maker.

Upon its purchase, the check becomes the primary obligation of the bank and
constitutes its written promise to pay the holder upon demand

As a general rule, the drawee bank is not liable until it accepts.

Prior to a bill's acceptance, no contractual relation exists between the holder... and the
drawee.

Acceptance,... creates a privity of contract between the holder and the drawee so
much so that the latter, once it accepts, becomes the party primarily liable on the
instrument.

acceptance is the act which triggers the operation of the liabilities of the drawee
(acceptor) under Section 62... of the Negotiable Instruments Law... once he accepts,
the drawee admits the following: (a) existence of the drawer; (b) genuineness of the
drawer's signature; (c) capacity and authority of the drawer to draw the instrument;
and (d) existence of the payee and his then capacity to endorse.

a manager's check is accepted by the bank upon its issuance.

the distinct feature of a manager's check is that it is accepted in advance.

the mere issuance of a manager's check creates a privity of contract between the
holder and the drawee bank, the latter primarily binding itself to pay according to the
tenor of its acceptance.
The drawee bank, as a result, has the unconditional obligation to pay a manager's
check to a holder in due course irrespective of any available personal defenses.

However, while this Court has consistently held that a manager's check is
automatically accepted, a holder other than a holder in due course is still subject to
defenses.

the mere issuance of a manager's check does not ipso facto work as an automatic
transfer of funds to the account of the payee.

In order for the holder to acquire title to the instrument, there still must have been
effective delivery.

the doctrine that the deposit represented by a manager's check automatically passes
to the payee is inapplicable, because the instrument - although accepted in advance
remains undelivered."[57]... if the holder of a manager's check is not a holder in due
course, can the drawee bank interpose a personal defense of the purchaser?

"the holder of a cashier's check who is not a holder in due course cannot enforce such
check against the issuing bank which dishonors the same."[64]... the purchaser of a
manager's check may validly countermand payment to a holder who is not a holder in
due course. Accordingly, the drawee bank may refuse to pay the manager's check by
interposing a personal defense of the purchaser. Hence, the resolution of the present
case requires a determination of the status of Odrada as holder of the manager's
checks.

the Court of Appeals gravely erred when it considered Odrada as a holder in due
course. Section 52 of the Negotiable Instruments Law defines a holder in due course
as one who has taken the instrument under the following conditions:(a) That it is
complete and regular upon its face;(b) That he became the holder of it before it was
overdue, and without notice that it has been previously dishonored, if such was the
fact;(c) That he took it in good faith and for value;(d) 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.

To be a holder in due course, the law requires that a party must have acquired the
instrument in good faith and for value.

Good faith means that the person taking the instrument has acted with due honesty
with regard to the rights of the parties liable on the instrument and that at the time
he,took the instrument, the holder has no knowledge of any defect or infirmity of the
instrument
To constitute notice of an infirmity in the instrument or defect in the title of the person
negotiating the same, the person to whom it is negotiated must have had actual
knowledge of the infirmity or defect, or knowledge of such facts that his action in taking
the instrument would amount to bad faith.

Value, on the other hand, is defined as any consideration sufficient to support a simple
contract.

Odrada attempted to deposit the manager's checks on 16 April 2002, a day after Lim
had informed him that there was a serious problem with the Montero. Instead of
addressing the issue, Odrada decided to deposit the manager's checks. Odrada's
actions do not amount to good faith.

Odrada's action in depositing the manager's checks despite knowledge of the

Montero's defects amounted to bad faith.

Moreover, when Odrada redeposited the manager's checks on 19 April 2002, he was
already formally notified by RCBC the previous day of the cancellation of Lim's auto
loan transaction.

CBC may refuse payment by interposing a personal defense of Lim - that the title of
Odrada had become defective when there arose a partial failure or lack of
consideration.

RCBC acted in good faith in following the instructions of Lim. The records show that
Lim notified RCBC of the defective condition of the Montero before Odrada presented
the manager's checks.

RCBC also received a formal notice of cancellation of the auto loan from Lim and this
prompted RCBC to cancel the manager's checks since the auto loan was the
consideration for issuing the manager's checks. RCBC acted in good faith in stopping
the payment of the manager's checks.

Section 58 of the Negotiable Instruments Law provides: "In the hands of any holder
other than a holder in due course, a negotiable instrument is subject to the same
defenses as if it were non-negotiable, x x x." Since Odrada was not a holder in due
course, the instrument becomes subject to personal defenses under the Negotiable
Instruments Law.
Land Bank of the Philippines vs. Narciso Kho, G. R. No. 205839, July 7,2016
Facts:
Narcico Kho purchased a manager's check from the Land Bank of the Philippines
Araneta Branch woth Php 25, 000,000.00 paid using the money from his savings
account in the same bank. The check was purchased in order to negotiate a deal with
Red Orange International Trading (Red Orange), represented by one Rudy Medel.
The check was postdated to January 2, 2006, and scheduled for actual delivery on the
same date after the three checks were expected to have been cleared. It was valued
at P25,000,000.00 and made payable to Red Orange. Kho requested a photocopy of
the manager's check to provide Red Orange with proof that he had available funds for
the transaction. The branch manager, petitioner Ma. Lorena Flores, accommodated
his request. Kho gave the photocopy of the check to Rudy Medel. Kho returned to the
bank and picked up check No. 07410. Accordingly, P25,000,000.00 was debited from
his savings account. Unfortunately, his deal with Red Orange did not push through.
An employee of the Bank of the Philippine Islands called Land Bank, Araneta Branch,
to inform them that Red Orange had deposited check No. 07410 for payment. Flores
confirmed with BPI that Land Bank had issued the check to Kho. The Central Clearing
Department (CCD) of the Land Bank Head Office faxed a copy of the deposited check
to the Araneta branch for payment. The officers of the Araneta branch examined the
fax copy and thought that the details matched the check purchased by Kho. Thus,
Land Bank confirmed the deposited check.
Flores informed Kho by phone that Check No. 07410 was cleared and paid by the BPI,
Kamuning branch.leslawShocked, Kho informed Flores that he never negotiated the
check because the deal did not materialize. More importantly, the actual check was
still in his possession.eslaw Kho immediately went to Land Bank with the check No.
07410. They discovered that what was deposited and encashed with BPI was a
spurious manager's check. Kho demanded the cancellation of his manager's check
and the release of the remaining money in his account (then P995,207.27). However,
Flores refused his request because she had no authority to do so at the time.

Kho returned to the Land Bank, Araneta branch on January 12, 2006, with the same
demands. He was received by petitioner Alexander Cruz who was on his second day
as the Officer in Charge (OIC) of the Araneta branch.Cruz informed him that there was
a standing freeze order on his account because of the (then) ongoing investigation on
the fraudulent withdrawal of the manager's check.

Kho sent Land Bank a final demand letter for the return of his P25,000,000.00 and the
release of the P995,207.27 from his account but the bank did not comply. Hence, on
January 23, 2006, Kho filed a Complaint for Specific Performance and
Damagesagainst Land Bank, represented by its Araneta Avenue Branch Manager
Flores and its OIC Cruz. He also impleaded Flores and Cruz in their personal
capacities. Kho asserted that the manager's check No. 07410 was still in his
possession and that he had no obligation to inform Land Bank whether or not he had
already negotiated the check. On the other hand, Land Bank argued that Kho was
negligent because he handed Medel a photocopy of the manager's check and that this
was the proximate cause of his loss.
Issue:
Whether Kho is precluded from setting the defense of forgery
Ruling:
No. We cannot agree with the Land Bank and the RTC's positions that Kho is
precluded from invoking the forgery. A drawer or a depositor of the bank is precluded
from asserting the forgery if the drawee bank can prove his failure to exercise ordinary
care and if this negligence substantially contributed to the forgery or the perpetration
of the fraud.
In Gempesaw v. Court of Appeals, Natividad Gempesaw, a businesswoman,
completely placed her trust in her bookkeeper. Gempesaw allowed her bookkeeper to
prepare the checks payable to her suppliers. She signed the checks without verifying
their amounts and their corresponding invoices. Despite receiving her banks
statements, Gempesaw never verified the correctness of the returned checks nor
confirmed if the payees actually received payment. This went on for over two years,
allowing her bookkeeper to forge the indorsements of over 82 checks.

Gempesaw failed to examine her records with reasonable diligence before signing the
checks and after receiving her bank statements. Her gross negligence allowed her
bookkeeper to benefit from the subsequent forgeries for over two years.

Gempesaw's negligence precluded her from asserting the forgery. Nevertheless, we

adjudged the drawee Bank liable to share evenly in her loss for its failure to exercise
utmost diligence, which amounted to a breach of its contractual obligations to the
depositor.

In Associated Bank v. Court of Appeals, the province of Tarlac (the depositor) released
30 checks payable to the order of a government hospital to a retired administrative
officer/cashier of the hospital. The retired officer forged the hospital's indorsement and
deposited the checks into his personal account. This took place for over three years
resulting in the accumulated loss of P203,300.00. We found the province of Tarlac
grossly negligent, to the point of substantially contributing to its loss.

Nevertheless, we apportioned the loss evenly between the province of Tarlac and the
drawee bank because of the bank's failure to pay according to the terms of the check.
Tt violated its duty to charge the customer's account only for properly payable items.

Kho's negligence does not even come close to approximating those of Gempesaw or
of the province of Tarlac. While his act of giving Medel a photocopy of the check may
have allowed the latter to create a duplicate, this cannot possibly excuse Land Bank's
failure to recognize that the check itself - not just the signatures - is a fake instrument.
More importantly, Land Bank itself furnished Kho the photocopy without objecting to
the latter's intention of giving it to Medel.
Kho's failure to inform Land Bank that the deal did not push through as of January 2,
2006, does not justify Land Bank's confirmation and clearing of a fake check bearing
the forged signatures of its own officers. Whether or not the deal pushed through, the
check remained in Kho's possession. He was entitled to a reasonable expectation that
the bank would not release any funds corresponding to the check.

Intellectual Property
COCA-COLA BOTTLERS PHILIPPINES, INC., PETITIONER, VS. SPOUSES JOSE
R. BERNARDO AND LILIBETH R. BERNARDO, DOING BUSINESS UNDER THE
NAME AND STYLE "JOLLY BEVERAGE ENTERPRISES," RESPONDENTS , G.R.
No. 190667, November 07, 2016

Facts:

Petitioner is a domestic corporation engaged in the large-scale manufacture, sale, and

distribution of beverages around the country.[On the other hand, respondents, doing
business under the name "Jolly Beverage Enterprises," are wholesalers of softdrinks
in Quezon City, particularly in the vicinities of Bulacan Street, V. Luna Road, Katipunan
Avenue, and Timog Avenue.

The business relationship between the parties commenced in 1987 when petitioner
designated respondents as its distributor. On 22 March 1994, the parties formally
entered into an exclusive dealership contract for three years.Under the Agreement,
petitioner would extend developmental assistance to respondents in the form of cash
assistance and trade discount incentives. For their part, respondents undertook to sell
petitioner's products exclusively, meet the sales quota of 7,000 cases per month, and
assist petitioner in its marketing efforts.

Sometime in late 1998 or early 1999, before the contract expired, petitioner required
respondents to submit a list of their customers on the pretext that it would formulate a
policy defining its territorial dealership in Quezon City. It assured respondents that
their contract would be renewed for a longer period, provided that they would submit
the list. However, despite their compliance, the promise did not materialize.

Respondents filed a Complaint for damages, alleging that the acts of petitioner
constituted dishonesty, bad faith, gross negligence, fraud, and unfair competition in
commercial enterprise.The Complaint was later amended to implead petitioner's
officers and personnel, include additional factual allegations, and increase the amount
of damages prayed for.
Petitioner denied the allegations. It maintained that it had obtained a list of clients
through surveys, and that promotional activities or developmental strategies were
implemented only after the expiration of the Agreements. It opined that the filing of the
complaint was a mere ploy resorted to by respondents to evade the payment of the
deliveries.

Issue:

WON petitioner violate Articles 19, 20, 21 or 28; hence, the award of damages and
attorney's fees was proper.

Ruling:

Petitioner was liable for temperate, moral and exemplary damages, as well as
attorney's fees, tor abuse of rights and unfair competition.

Both the RTC and the CA found that petitioner had employed oppressive and high-
handed schemes to unjustly limit the market coverage and diminish the investment
returns of respondents.[49] The CA summarized its findings as follows:[50]
This [cut-throat competition] is precisely what appellant did in order to take over the
market: directly sell its products to or deal them off to competing stores at a price
substantially lower than those imposed on its wholesalers. As a result, the wholesalers
suffered losses, and in [respondents'] case, laid ofT a number of employees and
alienated the patronage of its major customers including small-scale stores.
It must be emphasized that petitioner is not only a beverage giant, but also the
manufacturer of the products; hence, it sets the price. In addition, it took advantage of
the infonnation provided by respondents to facilitate its takeover of the latter's usual
business area. Distributors like respondents, who had assisted petitioner in its
marketing efforts, suddenly found themselves with fewer customers. Other distributors
were left with no choice but to fold.

Articles 19, 20, and 21 of the Civil Code provide the legal bedrock for the award of
damages to a party who suffers damage whenever another person commits an act in
violation of some legal provision; or an act which, though not con'itituting a
transgression of positive law, nevertheless violates certain rudimentary rights of the
party aggrieved.
Meanwhile, the use of unjust, oppressive, or high-handed business methods resulting
in unfair competition also gives a right of action to the injured party. Article 28 of the
Civil Code provides:
Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in
labor through the use of force, intimidation, deceit, machination or any other unjust,
oppressive or highhanded method shall give rise to a right of action by the person who
thereby sutlers damage.

FEDERATED LPG DEALERS ASSOCIATION, Petitioner, v. MA. CRISTINA L. DEL

ROSARIO, CELSO E.ESCOBIDO II, SHIELA M. ESCOBIDO, AND RESTY P.
CAPILI, Respondents , G.R. No. 202639, November 09, 2016

Facts

Petitioner, through counsel Atty. Genesis M. Adarlo (Atty. Adarlo) of Joaquin Adarlo
and Caoile, sought assistance from the Criminal Investigation and Detection Group,
Anti-Fraud and Commercial Crimes Division (CIDG-AFCCD) of the Philippine National
Police3 in the surveillance, investigation, apprehension, and prosecution of certain
persons and establishments within Metro Manila reportedly committing acts violative
of Batas Pambansa Blg. 33.

A few days later Atty. Adarlo again wrote the CIDG-AFCCD informing the latter of its
confirmation that ACCS Ideal Gas Corporation (ACCS), which allegedly has been
refilling branded LPG cylinders in its refilling plant at 882 G. Araneta Avenue, Quezon
City, has no authority to refill per certifications from gas companies owning the
branded LPG cylinders. Acting upon the same, they conducted a test-buy operation.

Having reasonable grounds to believe that ACCS was in violation of BP 33, P/Supt.
Esguerra filed with the Regional Trial Court (RTC) of Manila applications for search
warrant against the officers of ACCS. Pursuant to search warrant , a search and
seizure operation was conducted . This resulted in the seizure of an electric motor, a
hose with filling head, scales, v-belt, vapor compressor, booklets of various receipts,
and 73 LPG cylinders of various brands and sizes, four of which were filled, i.e., two
Superkalan 3.7 kg. LPG cylinders, one Shellane 11 kg. LPG cylinder, and one
Totalgaz 11 kg. cylinder.17 Inspection and evaluation of the said filled LPG cylinders
showed that they were underfilled by 0.5 kg. to 0.9 kg.18
On December 14, 2006, P/Supt Esguerra filed with the Department of Justice (DOJ)
Complaints-Affidavits against Antonio and respondents for illegal trading of petroleum
products and for underfilling of LPG cylinders under Section 2(a) and 2(c),
respectively, of BP 33, as amended.

The DOJ recommended that Antonio G. Del Rosario be charged with illegal refilling
of LPG cylinders penalized under Section 2(a) of Batas Pambansa Bilang 33 as
amended by Presidential Decree No. 1865 and that the complaints as against Ma.
Cristina L. Del Rosario, Celso E. Escobido II, Sheila M. Escobido, and Resty P. Capili
be dismissed.

P/Supt. Esguerra and petitioner elevated the matter to the CA through a certiorari
petition. They contended that the Secretary of Justice acted with grave abuse of
discretion amounting to lack of or in excess of jurisdiction in affirming the dropping of
respondents from the complaints and the ruling out of the offense of underfilling.

The CA, however, sustained the Secretary of Justice.

Issues

1. WON respondents, as members of the Board of Directors of ACCS, may be

criminally prosecuted for the latter's alleged violation/s of BP 33 as amended?

2. WON offenses of illegal trading of petroleum products under Section 2(a) and
underfilling under Section 2(c), both of BP 33 as amended, distinct offenses?

Ruling

1. Respondents cannot be prosecuted for ACCS' alleged violations of BP 33. They

were thus correctly dropped as respondents in the complaints.

The CA ratiocinated that by the election or designation of Antonio as General Manager

of ACCS, the daily business operations of the corporation were vested in his hands
and had ceased to be the responsibility of respondents as members of the Board of
Directors. Respondents, therefore, were not officers charged with the management of
the business affairs who could be held liable pursuant to paragraph 3, Section 4 of BP
33, as amended, which states that:
When the offender is a corporation, partnership, or other juridical person, the
president, the general manager, managing partner, or such other officer charged with
the management of the business affairs thereof, or employee responsible for the
violation shall be criminally liable.

2. The offenses of illegal trading under Section 2(a) and underfilling under Section 2(c)
both under BP 33, as amended distinct offenses.

Illegal trading and underfilling are among the eight acts prohibited under Section 2 of
BP 33, as amended.

By definition, the acts penalized by both offenses are essentially different. Under
paragraph 1(c) of Section 3 of the said law, illegal trading in petroleum and/or
petroleum products is committed by refilling LPG cylinders without authority from the
Bureau of Energy Utilization, or refilling of another company's or firm's cylinder without
such company's or firm's written authorization. Underfilling or underdelivery, on the
other hand, under paragraph 3 of the same section refers to a sale, transfer, delivery
or filling of petroleum products of a quantity that is actually below the quantity indicated
or registered on the metering device of a container. While it may be said that an act
could be common to both of them, the act of refilling does not in itself constitute illegal
trading through unauthorized refilling or that of underfilling. The concurrence of an
additional requisite different in each one is necessary to constitute each offense. Thus,
aside from the act of refilling, the offender must have no authority to refill from the
concerned government agency or the company or firm owning the LPG cylinder refilled
for the act to be considered illegal trading through unauthorized refilling. Whereas in
underfilling, it is necessary that apart from the act of refilling, the offender must have
refilled the LPG cylinder below the authorized limits in the sale of petroleum products.
Moreover, the offense of underfilling is not limited to the act of refilling below the
authorized limits. Possession of an underfilled LPG cylinder another way of
committing the offense. As therefore correctly argued by petitioner, the offenses of
illegal trading through unauthorized refilling and underfilling are separate and distinct
offenses.

Besides, it is not accurate to say that in this case the charges of illegal trading and
underfilling were based on the same act of refilling committed by ACCS during the
test-buy operation. While it appears from the records that the charge of illegal trading
was principally based on ACCS' act of refilling the four branded LPG cylinders without
authority during the test buy, the Complaint-Affidavit for underfilling would show that it
was not solely based on the same. Aside from the four branded LPG cylinders caused
to be refilled by police operatives in the test buy which were later found to be
underfilled by 0.5 kg to 1.3 kg, the said complaint was likewise anchored on the other
four branded LPG cylinders seized during the search and seizure operation which
were also found to be underfilled, this time by 0.5 kg. to 0.9 kg. It is thus apparent that
with respect to the last four underfilled cylinders, the basis for the charge is not the act
of refilling but ACCS's possession of the same since as already mentioned, the offense
of underfilling is not limited to the act of refilling an LPG cylinder below authorized
limits but also contemplates possession of underfilled LPG cylinders for the purpose
of sale, distribution, transportation, exchange or barter.

August 31, 2016

G.R. No. 174379
E.I DUPONT DE NEMOURS AND CO., (assignee of inventors Carino, Duncia and
Wong),
vs.
DIRECTOR EMMA C. FRANCISCO (in ger capacity as DIRECTOR GENERAL OF
THE INTELLECTUAL PROPERTY OFFICE), DIRECTOR EPIFANIO M. VELASCO
(in his capacity as the DIRECTOR OF THE BUREAU OF PATENTS, and
THERAPHARMA, INC.

Facts:
On July 10, 1987, E.I. Dupont Nemours filed Philippine Patent Application No. 35526
before the Bureau of Patents, Trademarks, and Technology Transfer. The application
was for Angiotensin II Receptor Blocking Imidazole (losartan), an invention related to
the treatment of hypertension and congestive heart failure.
On December 19, 2000, E.I. Dupont Nemours' new counsel, Ortega, Del Castillo,
Bacorro, Odulio, Calma, and Carbonell, sent the Intellectual Property Office a letter
requesting that an office action be issued on Philippine Patent Application No. 35526.
In its Petition for Revival, E.I. Dupont Nemours argued that its former counsel, Atty.
Mapili, did not inform it about the abandonment of the application, and it was not aware
that Atty. Mapili had already died.
On April 18, 2002, the Director of Patents denied the Petition for Revival for having
been filed out of time.
Issues:
Whether the Court of Appeals erred in denying petitioner's appeal for the revival of its
patent application on the grounds that (a) petitioner committed inexcusable negligence
in the prosecution of its patent application; and (b) third-party rights and the public
interest would be prejudiced by the appeal.
Whether the invention has already become part of public domain.

Held:
TIME FOR RESPONSE BY APPLICANT; ABANDONMENT OF APPLICATION
111. Abandonment for failure to respond within the time limit.-
(a) If an applicant fails to prosecute his application within four months after the date
when the last official notice of action by the Office was mailed to him, or within such
time as may be fixed (rule 112), the application will become abandoned.
Rule 929 of the Revised Implementing Rules and Regulations for Patents, Utility
Models and Industrial Design provides:
Rule 929. Revival of Application. - An application deemed withdrawn for failure to
prosecute may be revived as a pending application within a period of four (4) months
from the mailing date of the notice of withdrawal if it is shown to the satisfaction of the
Director that the failure was due to fraud, accident, mistake, or excusable negligence.
A petition to revive an application deemed withdrawn shall be accompanied by:
(a) A showing of a justifiable reason for the failure to prosecute;
(b) A complete proposed response; and
(c) Full payment of the required fee.
No revival shall be granted to an application that has been previously revived with
cost.
An application not revived in accordance with this Rule shall be deemed forfeited.
The right of priority given to a patent applicant is only relevant when there are two or
more conflicting patent applications on the same invention. Because a right of priority
does not automatically grant letters patent to an applicant, possession of a right of
priority does not confer any property rights on the applicant in the absence of an actual
patent.
Under Section 31 of the Intellectual Property Code, a right of priority is given to
any patent applicant who has previously applied for a patent in a country that
grants the same privilege to Filipinos. Section 31 states:
SECTION 31. Right of Priority. - An application for patent filed by any person who has
previously applied for the same invention in another country which by treaty,
convention, or law affords similar privileges to Filipino citizens, shall be considered as
filed as of the date of filing the foreign application: Provided, That:
a. the local application expressly claims priority;
b. it is filed within twelve (12) months from the date the earliest foreign application was
filed; and
c. a certified copy of the foreign application together with an English translation is filed
within six (6) months from the date of filing in the Philippines.
A patent applicant with the right of priority is given preference in the grant of a patent
when there are two or more applicants for the same invention. Section 29 of the
Intellectual Property Code provides:
SECTION 29. First to File Rule. - If two (2) or more persons have made the invention
separately and independently of each other, the right to the patent shall belong to the
person who filed an application for such invention, or where two or more applications
are filed for the same invention, to the applicant who has the earliest filing date or, the
earliest priority date.
Since both the United States and the Philippines are signatories to the Paris
Convention for the Protection of Industrial Property, an applicant who has filed a patent
application in the United States may have a right of priority over the same invention in
a patent application in the Philippines. However, this right of priority does not
immediately entitle a patent applicant the grant of a patent. A right of priority is not
equivalent to a patent. Otherwise, a patent holder of any member-state of the Paris
Convention need not apply for patents in other countries where it wishes to exercise
its patent.
It was, therefore, inaccurate for petitioner to argue that its prior patent application in
the United States removed the invention from the public domain in the Philippines.
This argument is only relevant if respondent Therapharma, Inc. had a conflicting patent
application with the Intellectual Property Office. A right of priority has no bearing in
a case for revival of an abandoned patent application.
Under the Intellectual Property Code, a patent holder has the right to "to restrain,
prohibit and prevent" any unauthorized person or entity from manufacturing, selling,
or importing any product derived from the patent. However, after a patent is granted
and published in the Intellectual Property Office Gazette, any interested third party
"may inspect the complete description, claims, and drawings of the patent."
The grant of a patent provides protection to the patent holder from the indiscriminate
use of the invention. However, its mandatory publication also has the correlative effect
of bringing new ideas into the public consciousness. After the publication of the patent,
any person may examine the invention and develop it into something further than what
the original patent holder may have envisioned. After the lapse of 20 years, the
invention becomes part of the public domain and is free for the public to use. In Pearl
and Dean v. Shoemart, Inc.:
To be able to effectively and legally preclude others from copying and profiting from
the invention, a patent is a primordial requirement. No patent, no protection. The
ultimate goal of a patent system is to bring new designs and technologies into
the public domain through disclosure. Ideas, once disclosed to the public
without the protection of a valid patent, are subject to appropriation without
significant restraint.

A patent is a monopoly granted only for specific purposes and objectives. Thus, its
procedures must be complied with to attain its social objective. Any request for
leniency in its procedures should be taken in this context. Petitioner, however, has
failed to convince this court that the revival of its patent application would have a
significant impact on the pharmaceutical industry.