VILLANUEVA CASTRO BAR REVIEW MATERIALS COMMERCIAL LAW - New PDF

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.
COMMERCIAL LAW REMINDERS
Prof. Maria Zarah R. Villanueva-Castro
TRUSTRECEIPTS
Whatisatrustreceipttransaction?
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A trust receipt as “a security transaction
ction iintended to aid in financing importers and retail
ion in
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dealerswhodonothavesufficientfundsorresourcestofinancetheimportationorpurchaseof
unds o
merchandise, and who may not not be able to acquire credit except through utilization, as
ot be
b
es
collateral,ofthemerchandiseimportedorpurchased.”(ROSARIOTEXTILEMILLSCORP.,ETAL.
e impor
mpor
bl
vs. HOME BANKERS SAVINGS NGS & & TRUST CO., G.R. No. 137232, 29 June 2005 citing Samo vs.
People,115Phil.346)
o
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ligations
gations t Receip
Ba
WhataretheobligationsoftheentrusteeinaTrustReceipttransaction?
an
es
The entrustee
eee is
is obliged
ob to (1) hold the goods,
ods, documents or instruments in trust for the
s, doc
h
entrusterandshalldisposeofthemstrictlyinaccordancewiththetermsandconditionsofthe
and sha
sh n accor
bl
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trustreceipt;(2)receivetheproceedsintrustfortheentrusterandturnoverthesametothe
pt; ( trust fo ver
er t
o
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entrustertotheextentoftheamountowedtotheentrusterorasappearsonthetrustreceipt;
owed t arss on th
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(3) insure the goods for their total value against loss from fire, theft,
tal valu heft, pilferage or other
an
casualties;(4)keepsaidgoodsortheproceedstherefromwhetherinmoneyorwhateverform,
r the pr
p in
n mo
m n
es
separate and capable of identification
entificat
ntificat as property of the entruster;
truster (5) return the goods,
ntruster
h
documentsorinstrumentsintheeventofnonsale
in the
he orupondemandoftheentruster;and(6)
deman
bl
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observeallothertermsandconditionsofthetrustreceiptnotcontrarytotheprovisionsofthe
co t not co the
he
o
r
TrustReceiptsLaw.(METROPOLITAN BANKvs.SEC.GONZALES,etal.,G.R.No.180165,7April
ONZALES
NZALES 7 April
R
2009)
Ba
an

es
If the entrustee were to return the goods to entruster as he was not ablee to sel
o the en sell them,
se
h
bl
wouldtheobligationsecuredbythetrustreceiptbeextinguished?Isdeficiencyclaimproper
eceipt
ceipt ency
ncy cla
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inatrustreceipttransaction?
o

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NO. A trust receipt is a security agreement, pursuant to which a ba bank
ank aacquires a “security
an
interest”inthegoods.xxxTheinitialrepossessionbythebankofthegoodssubjectofthetrust
th goo
the
h
receiptdidnotresultinthefullsatisfactionoftheloanobligation.Aclaimfordeficiencywould
tion.
ion. A c
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thusbeinorder.(LANDL&COMPANYINC.,VS.METROPOLITANBANK&TRUSTCOMPANYG.R.
AN BA
No.159622,30July2004)

1
www.chanroblesbar.com : www.chanroblesbar.com.ph
Iftheentrusteeweretocancelthetrustreceiptandtakepossessionofthegoods,wouldthis
amounttodacionenpago?

Neithercansaidrepossessionamounttodacionenpago.Dationinpaymenttakesplacewhen
propertyisalienatedtothecreditorinsatisfactionofadebtinmoneyandthesameisgoverned
by sales. Dation in payment is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of the obligation. (Ibid,
citingPNBvs.Hon.Pineda,G.R.46658,13May1991)

The repossession of the goods by the ent nt
entrustee was merely to secure the payment of its
obligation to the entrustor and not for or the
for the purpose of transferring ownership thereof in
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satisfactionoftheobligation.

es
LETTERSOFCREDIT
bl
o
r
Howdoestheindependenceprincipleapply
endence tolettersofcredit?
of credit
R
Ba

an
Thesocalled“independenceprinciple”assuresthesellerorthebeneficiaryofpromptpayment
“indepen
ndepe he sell
sel err
es
independent of aany breach of the main contract
nt of ontract and precludes the issuing bank from
h
bl
determiningwhetherthemaincontractisactuallyaccomplishedornot.Underthisprinciple,
ng whe actually
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banks assume
m no liability or responsibility ty for
ility for the form, sufficiency, accuracy,
uracy genuineness,
curacy
o
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falsification or legal effect of any documents,
cument or for the general and/or
ocument or particular
partic conditions
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stipulated in the documents or superimposed

superimp
perimp thereon, nor do they
Ba
ey assume
assu any liability or
an
responsibilityforthedescription,quantity,weight,quality,condition,packing,delivery,valueor
n,, quant on, pac
pa
es
existence of the goods represented
resented
res ented by any documents, or for the good
r the g
go faith or acts and/or
h
bl
omissions,solvency,performanceorstandingoftheconsignor,thecarriers,ortheinsurersof
rmance
mance gnor,
or, the f
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thegoods,oranyotherpersonwhomsoever.
o
r

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The independence principle thus liberates the issuing uing bank

ssuing b
Ba
from the duty of ascertaining
ce taini
cer
an
compliance by the parties in the main contract. The obligation under the letter
t.. The r of
of credit
cr
cre is
es
h
independentoftherelatedandoriginatingcontract.(TRANSFIELDPHILIPPINES,INC.vs.LUZON
ontract. INC.
NC vs
bl
C
HYDROCORPORATION,G.R.No.146717,22November2004) Novem

o

R
an
Whatisastandbyletterofcredit?Howdoesitdifferfromacommercialletterofcredit?
ercial
rcial let
l
h
There are three significant differences between commercial rcia and

rcial an standby credit. First,
C
commercial credits involve the payment of money under a a contract

co of sale. Such credits
become payable upon the presentation by the sellerbeneficiary of documents that show he
hastakenaffirmativestepstocomplywiththesalesagreement.Inthestandbytype,thecredit
is payable upon certification of a party’s nonperformance of the agreement. The documents
thataccompanythebeneficiary’sdrafttendtoshowthattheapplicanthasnotperformedhis
obligation. The beneficiary of a commercial credit must demonstrate by documents that he
2
hasperformedhiscontract.Thebeneficiaryofthestandbycreditmustcertifythathisobligor
hasnotperformedthecontract.(Ibid)

Howdoesaletterofcreditdifferfromacontractofguaranty?
Theconcept ofguaranteevisàvistheconceptofanirrevocableletterofcreditareinconsistent
witheachother.Theguaranteetheorydestroystheindependenceofthebank’sresponsibility
from the contract upon which it was opened and the nature of both contracts is mutually in
off guarantee,
conflict with each other. In contracts of g the guarantor’s obligation is merely
efault o
collateralanditarisesonlyuponthedefaultofthepersonprimarilyliable.Ontheotherhand,
r
Ba
e bank
inanirrevocableletterofcredit,thebankundertakesaprimaryobligation.Moreover,aletter
geme
ementt by a bank or other person made at the request of a
of credit is defined as an engagement
es
honor
onor d
customerthattheissuershallhonordraftsorotherdemandsofpaymentuponcompliancewith
the
he cre
theconditionsspecifiedinthecredit.(MWSSvs.HON.REYNALDOB.DAWAY,G.R. No.160732,
bl
21June2004).
o
r
R
Ba
an
es
INSTRU
NSTRU
NEGOTIABLEINSTRUMENTS
h
bl
C
r
ExplaintheSHELTERRULE.
R
Ba
an
Aholderwhoisnotaholderinduecoursebutderiveshistitlethroughaholderinduecourse,
due co rough
ough
es
and who is not himself a party to any fraud or illegality affecting
arty to cting the instrument, has all the
ing the
th
h
bl
rightsofsuchformerholderinrespectofallpartiespriortothelatter.(Section58,NIL)
r in re thee latte
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o
r
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Ba
Whenthedraweebankpaysamateriallyalteredcheck,canitclaimreimbursementfromthe
heck,
ck, ca rom the
an
drawer?
es
Whenthedraweebankpaysamateriallyalteredcheck,itviolatesthetermsofthecheck,as
ered che
ch f the ch
c
h
bl
well as its duty to charge its client’s account

ntt only
only for bona fide disbursements
nts he h
ts he had made.
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Sincethedraweebankdidnotpayaccordingtotheoriginaltenoroftheinstrument,asdirected
strumen
o
by the drawer, then it has no right to claim reimbursement from the drawer
drawer, much less, the
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right to deduct the erroneous payment it made from the drawer’s er’ss account
ac
acc which it was
an
expectedtotreatwithutmostfidelity.(METROBANKvs.CABILZO,06DECEMBER2006)
06 DECE
h

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Exception:whenthedrawerwastheonewhomadeorauthorizedthealterationorwhenhe
orize
failedtoexercisereasonablediligencetoavoidit.(ibid)

3
Distinguishbetween:contractofindorsementand guaranty.

Acontractofindorsementisprimarilythatoftransfer,whileacontractofguarantyisthatof
personalsecurity.Theliabilityofaguarantor/suretyisbroaderthanthatofanindorser.Thus,
unlessthebillispromptlypresentedforpaymentatmaturityandduenoticeofdishonorgiven
totheindorserwithinareasonabletime,hewillbedischargedfromliabilitythereon.Onthe
otherhand,exceptwhererequiredbytheprovisionsofthecontractofsuretyship,ademandor
noticeofdefaultisnotrequiredtofixthesurety’sliability.Hecannotcomplainthatthecreditor
has not notified him in the absence of special agreement to that effect in the contract of
suretyship. (ALLIED BANKING CORP. vs. CO COURT OF APPEALS, et al., G.R. No.125851, 11 July
2006)
r
Ba

es
Will discharge of the drawer r from
from liability
l due to lack of protest operate to discharge him
aking
king which
from his letter of undertaking w he signed as additional security for the draft (bill of
bl
exchange)?
o
r

R
Ba
ill be m f unde
Thedrawercanstillbemadeliableundertheletterofundertakingevenifheisdischargeddue
an
rotest
otest th rafts.
fts. xx
tofailuretoprotestthenonacceptanceofthedrafts.xxxItbearsstressingthatitisaseparate
es
m the si
s e drawe
contractfromthesightdraft.Theliabilityofthedrawerundertheletterofundertakingisdirect
h
bl
ary.
ry Itt is ility
ity und
andprimary.Itisindependentfromhisliabilityunderthesightdraft.Liabilitysubsistsoniteven
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if the sight dr

d naccep
draft was dishonored for nonacceptance RODU
ODU
or nonpayment. (PRODUCERS BANK OF
o
r
NC., G.R
THEPHILS.vs.EXCELSAINDUSTRIES,INC.,G.R.No.152071,8May2009)
R
Ba
an

rty?
ty? Wh
Whoisanaccommodationparty?Whatisthenatureofhisliability? lity?
ty?
es
h

bl
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one equisite
Anaccommodationpartyisonewhomeetsallthethreerequisites,viz:(1)hemustbeaparty tyy
o
r, or
to the instrument, signing as maker, drawer, acceptor, or ind ceive
eive
indorser; (2) he must not receive
r
R
Ba
of lendin
valuetherefor;and(3)hemustsignforthepurposeoflendinghisnameorcredit e other
tosomeother
an
person.
es
h
The accommodation party is liable on the instrum

nstrum
instrument to a holder for value even
ven tho
even th
though the
bl
C
kne an acco
holder,atthetimeoftakingtheinstrument,knewhimorhertobemerelyanaccommodation
o
en an a
party,asifthecontractwasnotforaccommodation.Therelationbetweenanaccommodation
R
hee acco
partyandtheaccommodatedpartyisoneofprincipalandsurety–theaccommodationparty
an
511,
11, SEP
being thesurety.(ANGvs.ASSOCIATEDBANK,ETAL.,G.R.NO.146511,SEPTEMBER5,2007)

h

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The accommodated party was allowed extension of payment nt without the consent of the
accommodationparty.Isthelatterstillliable?

Sincetheliabilityofanaccommodationpartyremainsnot onlyprimarybutalsounconditional
toaholderforvalue,eveniftheaccommodatedpartyreceivesanextensionoftheperiodfor
4
thepaymentwithouttheconsentoftheaccommodationparty,thelatterisstillliableforthe
wholeobligationandsuchextensiondoesnotreleasehimbecauseasfarastheholderforvalue
isconcerned,heisasolidarycodebtor.(Ibid.)

Acheck,payabletotheorderofXandYwasdepositedtoabank(collectingbank)withthe
lone indorsement of X. X, subsequently withdrew the entire proceeds thereof. State the
implications.

rde
de
Whereaninstrumentispayabletotheorderoftwoormorepayeesorindorseeswhoarenot
nee indo
partners,allmustindorseunlesstheoneindorsinghasauthoritytoindorsefortheothers.The
r
Ba
ssing in
paymentofaninstrumentoveramissingindorsementistheequivalentofpaymentonaforged
indo
nd rse
se
indorsementoranunauthorizedindorsementinitselfinthecaseofjointpayees.
es
check is
i
Acollectingbank,whereacheckisdepositedandwhichindorsesthecheckuponpresentment
bl
s an indo
ind dorsin
ors
withthedraweebank,isanindorser.Thisisbecauseinindorsingachecktothedraweebank,a
o
r
ps the b phrase
collectingbankstampsthebackofthecheckwiththephrase"allpriorendorsementsand/or
R
Ba

ent
lack of endorsementnt guaranteed"
gu
gua and, for all intents
nts and
an purposes, treats the check as a
and
an
negotiable instrument,
umen hence, assumes the warranty
trument rranty of an indorser. Without the collecting
ranty o
es
bank’swarranty,thedraweebankwouldnothavepaidthevalueofthesubjectcheck.
anty, the
th ave
ve paid
h
bl
The collecting
ting bank or last indorser, generally
cting erally suffers the loss because it
nerally t has the duty to
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ascertainthegenuinenessofallpriorindorsementsconsideringthattheactofpresentingthe
ndorsem act
ct of
o
r
check for payment to the drawee is an
an assertion
ass that the party making the presentment has
ng the
R
Ba

doneitsdutytoascertainthegenuinenessofpriorindorsements.
nuinenes
uinene (METROBANKvs.BAFINANCE
MET
ETROBA
an
CORPORATION,G.R.No.179952,4December2009)
52,, 4 Dec
es
h

bl
C

o
r
Cantheholdersuethedraweebankifthelatterrefusespaymentofachecknotwithstanding
ses
es paym nding
ding
R
Ba
sufficiencyoffunds?
an
es
NO.Acheckofitselfdoesnotoperateasanassignmentofanypartofthefundstothecreditof
ssignme
ssignmen to
o the cr
h
bl
thedrawerwiththebank,andthebankisnotliabletotheholder,unlessanduntilitacceptsor
ott liablebl until it
C
certifies the check(Section 189, NIL). Thus, if aa bank refuses to pay a check
eckk (notwithstanding
(not
o
the sufficiency of funds), the payeeholder cannot sue the bank. The payeeholder should
e paye
R
insteadsuethedrawerwhomightinturnsuethebank.Section189isasoundlawbasedon
9 is a so
an
logic and established legal principles; no privity of contract existstss between
betw the draweebank
andthepayee.(VILLANUEVAvs.NITE,G.R.No.148211,25July2006) 2006)
2006)
h

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Doesthealterationontheserialnumberofthecheckconstitutematerialalteration?

The alterations on the serial numbers do not constitute material alteration within the
contemplationoftheNegotiableInstrumentsLaw.Analterationissaidtobematerialifitalters
theeffectoftheinstrument.Itmeansanunauthorizedchangeinaninstrumentthatpurports
5
to modify in any respect the obligation of a party or an unauthorized addition of words or
numbersorotherchangetoanincompleteinstrumentrelatingtotheobligationofaparty.In
other words, a material alteration is one which changes the items which are required to be
statedunderSection1oftheNIL.(THEINTERNATIONALCORPORATEBANK,INC.v.COURTOF
APPEALS,G.R.No.129910,September5,2006)
Distinguishbetween:inlandandforeignbillofexchange.

Aninlandbillofexchangeisabillwhichisoronitsfacepurportstobe,bothdrawnandpayable
or
withinthePhilippines(Sec.129,NIL).Thus,aforeignbillofexchangemaybedrawnoutsidethe
Thus,
us, a f
r
Ba
Philippines, payable outside the Philippines,
Philippin or both drawn and payable outside of the
Philippines (BANK OF PHILIPPINE ISLANDS
E ISL
IS ND vs. CIR, G.R. No. 137002, 27 July 2006). Further, a
AND
es
foreign bill of exchange must be be pro
protested in case of dishonor to charge the drawer and the
indorserswhileaninlandbillofexchangeneednotbeprotested.
illl of exc
bl

o
r

R
Ba
Whatisamanager’scheck?
er’s
r’s chec
che
an

es
Amanager’scheckisonedrawnbythebank’smanageruponthebankitself.Itissimilartoa
s check s manag
mana
h
bl
cashier’scheckbothastoeffectanduse.Acashier’scheckisacheckofthebank’scashieron
check
heck b A cashie
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hisownoranothercheck.Ineffect,itisabillofexchangedrawnbythecashierofabankupon
an a bill of shier
hie o
o
r
thebankitself,andacceptedinadvancebytheactofitsissuance.Itisreallythebank’sown
nce by s really
eally
R
missory
Ba
checkandmaybetreatedasapromissorynotewiththebankasamaker.Thecheckbecomes
omissory maker.
ker. T
an
the primary obligation of the bank

bank
ank whwhich issues it and constitutes
ess its
its written
w promise to pay
es
upondemand.Themereissuanceofitisconsideredanacceptancethereof.(EQUITABLEPCIvs.
uance o ance
nce the
th
h
bl
ONG15September2006)
C

o
r
Discusstheeffectsofcertifyingacheck.
R

Ba
an
Theeffectsare:
es
h
1) Itisequivalenttoacceptanceandistheoperativeactthatmakesthebankliable.
e opera k liable.
liable
bl
C
2) Itamountstotheassignmentofthefundsofthedrawerinthehandsofthedrawee.
unds of the d
3) Ifobtainedbytheholder,personssecondarilyliablearedischarged. d.
o

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an

Explainthemeaningofcheckkiting.
h

C
It refers to the wrongful practice of taking advantage of the the
he float,
f the time that elapses
betweenthedepositofthecheckinonebankanditscollectionatanother.Inanticipationof
thedishonorofthecheckthatwasdeposited,theoriginalcheckwillbereplacedwithanother
worthless check. (Notes and Cases on Banks, Negotiable Instruments and other Commercial
Documents,Aquino,2006ed)

6
INSURANCE
Thepolicyreads:“TheinsuranceofanyeligibleLotPurchasershallbeeffectiveonthedatehe
contractsaloanwiththeAssured.However,thereshallbenoinsuranceiftheapplicationofthe
Lot Purchaser is not approved by the Company.” It would appear that at the time of loss, a
loan has been contracted with the Assured but it is not clear whether the Insurer has
approvedtheinsuranceapplication.Whenshouldthepolicybedeemedeffective?

While one provision appears to state that the insurance coverage of the clients of Assured
alreadybecameeffectiveuponcontractingaloanwiththeAssured,anotherappearstorequire
ga
theInsurertoapprovetheinsurancecontractbeforethesamecanbecomeeffective.
ontract
ntract
r
Ba

It must be remembered that an ins insurance
in ura
ra contract is a contract of adhesion which must be
es
construedliberallyinfavoroftheinsuredandstrictlyagainsttheinsurerinordertosafeguard
the
he ins
ns
the latter’s interest. Thus, the
the va
vague contractual provision must be construed in favor of the
bl
insuredandinfavoroftheeffectivityoftheinsurancecontract.
hee effec ract
ac
o
r
R
Ba
Theseeminglyconflictingprovisionsmust
nflicting
flicting beharmonizedtomeanthatuponaparty’spurchase
ized to
an
of a memorial lot

lot
ot onon installment from the Assured,
red, an
ured, a insurance contract covering the lot
es
purchaser is created and the same is effective,
s create ve, valid,
tive, val and binding until terminated by the
h
bl
Insurer by
y disapproving
disap the insurance application.
cation. The second sentence is in the nature of a
plication.
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resolutory co
condition which would lead to to the cessation of the insurance contract.
o the contr
ont Moreover,
o
r
themereinactionoftheinsurerontheinsuranceapplicationmustnotworktoprejudicethe
the
he insu t work t
R
s a term
Ba
insured;itcannotbeinterpretedasaterminationoftheinsurancecontract.Theterminationof
ontract.
an
theinsurancecontractbytheinsurermustbeexplicitandunambiguous.
nsurer biguo (ETERNALGARDENS
mbiguou
es
MEMORIALPARKvs.PHILAMLIFE,G.R.No.166245,09April2008)
MLIFE, G. 08)
8)
h
bl

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Does the buyer have insurable b interest over the goods even while the goods are stilll in
ds even
eve in
o
r
transit?
R

Ba
an
YES.Thebuyer’sinterestisbasedontheperfectedcontractofsale.Theperfectedcontractof
cted
ed con d contr
cont
es
h
salebetweenhimandtheseller/shipperofthegoodsoperatestovestinhimanequitabletitle
he good n equita
bl
C
even before delivery or before he performed med the conditions of the sale. The contract of
e. The
shipment, whether under “F.O.B.”, “C.I.F.”, or “C & F” is immaterial in the
the determination
de
det of
o
whetherthebuyerhasinsurableinterestornotinthegoodsintransit.(FILIPINOMERCHANTS
t. (FILIPI
R
an
INSURANCECO.vs.CA,28November1989)

h
Distinguishbetween:LossPayableClauseandStandardorUnionMortgageClause.
nion
ion Mo
C

UnderaLossPayableClause,themortgageeismademerelyabeneficiaryunderthecontract.
Anydefaultonthepartofthemortgagor,whichbythetermsofthepolicydefeathisrights,will
alsodefeatallrightsofthemortgageeunderthecontract,eventhoughthelattermaynothave
been in any fault. On the other hand, a Standard or Union Mortgage Clause create collateral
independentcontractsbetweentheinsurerandthemortgageeandprovidethattherightsof
7
themortgageeshallnotbedefeatedbytheactsordefaultsofthemortgagor.(Vance,pp.654
655)

WhatisaMortgageRedemptionInsurance?

A “Mortgage Redemption Insurance” is a group insurance policy of mortgagors which is
intendedasadevicefortheprotectionofboththemortgageeandthemortgagor.

On the part of the mortgagee, it has to enter into such contract so that in the event of the
unexpected demise of the mortgagor during urin
rin the subsistence of the mortgage contract, the
applied to the payment of the mortgage debt, thereby
proceeds from such insurance will be applied
r
Ba
gor from
relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample
gagor
gor suc
protectionisgiventothemortgagorsuchthatintheeventofdeath,themortgageobligation
es
will be extinguished by the e application
appl of the insurance proceeds to the mortgage
indebtedness. Consequently, tly,
y, where
whe the mortgagor pays the insurance premium under the
bl
group insurance policy,, making

makin mo
mort
making the loss payable to the mortgagee, the insurance is on the
o
r
, and the
th e a par
mortgagor'sinterest,andthemortgagorcontinuestobeapartytothecontract.Inthistypeof
R
Ba
the mor e of th
policyinsurance,themortgageeissimplyanappointeeoftheinsurancefund,suchlosspayable
an
t make hee contt

clausedoesnotmakethemortgageeapartytothecontract.(GREATPACIFICLIFEASSURANCE
es
A, 316 SCS
CORP.vs.CA,316SCRA677)
h
bl

C
ct brogatio
ogatio
Inacontractofinsurance,howdoessubrogationtakeplace?
o
r

R
an inde
Ba
mage to
Uponpaymenttotheconsigneeofanindemnityforthelossofordamagetotheinsuredgoods,
an
brogatio
rogatio a caus
theinsurer’sentitlementtosubrogationprotantoequipsitwithacauseofactionincaseofa
es
igence. In the exercise of its subrogatory
contractual breach or negligence. brogator
ogato right, an insurer may
h
bl
carrie
proceed against an erring carrier.To oses,
ses, it
all intents and purposes, itt stands in the place and in
n
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substitution of the consignee.(FEDERAL EXPRESS CORPORATION ORP

RPORA
ORA vs. AMERICAN HOME OME
ME
o
r
MPANY,
PANY, I
ASSURANCECOMPANYandPHILAMINSURANCECOMPANY,INC.,G.R.No.150094,August18, us 18,
ust
R
2004)
Ba
an

es
h
Statetheexceptionstothesubrogationrule.
bl
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Thereisnosubrogationinthefollowingcases:
o

R
an
from
rom lia
(1) Whentheinsured,byhisownact,releasesthepartyatfaultfromliability.
carrier
ca rrier
(2) Whentheinsurerpaystheinsuredwithoutnotifyingthecarrierwhohasingoodfaith
h
settledtheinsured’sclaimforloss.
C
rom
(3) Whentheinsurerpaystheinsuredforalossexceptedfromthepolicy.
(4) Whenlifeinsuranceisinvolved.

8
Inwhatcasesisthedesignationofbeneficiaryinlifeinsurancevoidduetodisqualifications
underthelaw?

Inthefollowingcases,thedesignationofbeneficiaryisvoid:

(a) Thosemadebetweenpersonswhowereguiltyofadulteryorconcubinageatthetimeof
thedonation;
(b) Those made between persons found guilty of the same criminal offense, in
considerationthereof;
sw
(c) Thosemadetopublicofficerorhiswife,descendantsandascendants,byreasonofhis
office.
r
Ba

plies
(NOTE: The disqualification applies es to
o life insurance (Article 2012, NCC) and the insurance
es
only
nly the
contractitselfremainsvalid, onlythedesignationofbeneficiaryisvoid.)

bl
ilities
lities w mm
Underthepolicy,disabilitieswhichexistedbeforethecommencementoftheagreementare
o
r
ome ma
excludedif theybecomemanifest om
m its ef
e
within one yearfromitseffectivity.The insuredallegedly
R
Ba
ntment
ment b who w
preventedpresentmentbytheinsurerofthedoctorwhowilltestifyonhermedicalcondition
an
e doctor
docto urer
er thu
u
becauseofthedoctorpatientprivilege.Theinsurerthusassumedthatthetestimonywould
es
as it wa e insure
beadverse asitwaswillfullysuppressedbytheinsured.Decidewhethertheinsurerisliable.
h
bl

C
ab
b
It is an established ontracts
ntracts that when their terms contain
rule in insurance contracts ntai limitations on
ntain
o
r
rictly
ictly ag e contra
ontra
liability,theyshouldbeconstruedstrictlyagainsttheinsurer.Thesearecontractsofadhesion
R
erpreted
preted and enforced stringently aagainst
the terms of which much be interpreted
Ba gainst the insurer which
an
CROSS HEALTH CARE, INC. vs. OLIVARES,

prepared the contract. (BLUE CROSS IVARES
VARE G.R. No. 169737, 12
es
February2008)
h
bl
C
thee insu
nsu
Theinsurerneverpresentedanyevidencetoprovethattheinsured’sstrokewasduetoapre pre
re
o
r
octor’s
ctor’s report would be adverse to
existing condition. It merely speculated that the doctor’s to the
the
R
privilege
ivilege esu
sumptio
insuredbasedonherinvocationofdoctorpatientprivilege.Thiswasadisputablepresumption
Ba
an
atbest.(Ibid)
es
h

bl
C
e insu victim?
Inathirdpartyliabilityinsurance,couldtheinsurerbesueddirectlybythevictim?Couldthe
insurerbemadesolidarilyliablewiththeinsuredorthewrongdoer?
o

R
an
The
h insu
Thevictimmayproceeddirectlyagainsttheinsurerforindemnity.Theinsuranceisintendedto
provide compensation for death or bodily injuries suffered by by innocent
inno
nno third parties or
h
passengers as a result of the negligent operation of motor r vehicles.
vehicle The victims and their
C
gard
dependentsareassuredofimmediatefinancialassistance,regardlessofthefinancialcapacity
ofvehicleowners.

Bethatasitmay,thedirectliabilityoftheinsurerunderindemnitycontractsagainstthirdparty
liabilitydoesnotmeanthattheinsurercanbeheldliableinsolidumwiththeinsuredand/or
theotherpartiesfoundatfault.Fortheliabilityoftheinsurerisbasedoncontract,thatofthe
9
insured carrier is based on tort. (WILLIAM TIU AND VIRGILIO TE LAS PIÑAS vs. PEDRO A.
ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO AND PHIL PHOENIX SURETY AND
INSURANCE,INC.[G.R.No.138060,01September2004)Thethirdpartyliabilityoftheinsureris
onlyuptotheextentoftheinsurancepolicyandthatrequiredbylaw;anditcannotbeheld
solidarily liable for anything beyond that amount. Any award beyond the insurance coverage
wouldalreadybethesoleliabilityoftheinsuredand/ortheotherpartiesatfault.(THEHEIRS
OFGEORGEPOEvs.MALAYANINSURANCECOMPANY,INC.,G.R.156302,7April2009)

Inwhatcasesisthepolicybindingevenifpremiumisunpaid?

n case
ase
(1) Whenthegraceperiodappliesincaseoflifeandindustriallifepolicy;
r
Ba
gement
(2) Whenthereisanacknowledgementinthepolicyofreceiptofpremium;
ent
nt that
at
(3) Whenthereisanagreementthatthepremiumshallbepayableoninstallment;
es
extensi
(4) Whenthereisacreditextension;and
e doctrin
(5) Whentheequitabledoctrineofestoppelapplies(SummarybasedontherulinginUCPB
bl
ANCE
NCE vs NC.,
GENERALINSURANCEvs.MASAGANATELAMART,INC.,G.R.137172,04April2001)
o
r

R
Ba
f premiu
Whenisreturnofpremiumwarranted?
an

es
remium
Returnofpremiumiswarrantedinthefollowingcases:ngg cases
case
h
bl

C
th ed to the
(1) Thethinginsuredwasnotexposedtotheperiodinsuredagainst(Sec.78,ICP) c.. 78,
o
r
ore the ec. 79, IC
(2) Timepolicyissurrenderedbeforethestipulatedperiodlapses(Sec.79,ICP)
R
uee to
(3) The contract is voidable due to fa
fault or misrepresentation of
Ba
f the
the insurer
in or default of
an
ctual fra
theinsuredotherthanactualfraud(Sec.81, ICP)
es
veral ins
(4) Overinsurancebyseveralinsurers(Sec.82,ICP)
h
bl

C
Whatdevicesareusedtopreventlapseoflifeinsurancepolicy? policy?
o
r

R
wing
ng de
To prevent lapse of life insurance policy, the following
Ba
devices are used: (a) grace per
e od; (b)
period; (
an
automatic policy loan; (c) application of dividend;idend;

dend; and (d) restatement clause. se.
e. (Aquino,
(A
(Aq
es
h
Essentialsof InsuranceLaw,p.80)
bl
C

Whatisan“AllRisks”insurancepolicy?
o

R
an
An “All Risks” insurance policy covers all kinds of loss other than n those
those due to willful and
PPEALS,
fraudulentactoftheinsured.(MAYERSTEELPIPEvs.COURTOFAPPEALS,274SCRA432)
h

C
Whatisanindustriallifeinsurance?

Anindustriallifeinsuranceisonewherethepremiumsarepayableeithermonthlyoroftener,if
thefaceamountoftheinsuranceprovidedinanypolicyisnotmorethan500timesthatofthe
currentstatutoryminimumdailywageintheCityofManila,andifthewords“industrialpolicy”
areprinteduponthepolicyaspartofthedescriptivematter.(Sec.229,ICP)
10
Whatarecovernotes?Whatarethelimitationsontheissuanceofcovernotes?

Cover notes are interim or preparatory contracts of insurance. An interim coverage may be
necessarybecausetheinsurermayneedmoretimetoprocesstheinsuranceapplication.The
issuanceofcovernotesissubjecttothefollowing:

(1) IssuanceorrenewalisuponapprovaloftheInsuranceCommission.
(2) Durationisnotmorethan60daysfromissuance.
n pr
p
(3) Cancellationbyeitherpartyisuponprior7daynoticetotheother.
60
0 days
(4) Mainpolicytobeissuedwithin60daysaftercovernotewasissued.
r
Ba
e is subj
(5) Extensionof60daycoverageissubjecttoInsuranceCommission’sapproval.

es
e origina
Inreinsurance,whendoestheoriginalinsuredhavedirectrecourseagainstthereinsurer?

bl
ayy direct rein

ei
Theoriginalinsuredmaydirectlysuethereinsurerifthereinsurancepolicyclearlycontainsa
o
r
ui in his wever,
ever,
stipulationpourautruiinhisfavor.Suchstipulation,however,shouldnot,inanyway,affector
R
Ba
al insure
insur l insure
insur
curtail,theoriginalinsured’srecoursetotheoriginalinsurerandthelatter’srecourseagainst
an
thereinsurer.
es

h
bl
hee Inchm
chm
ExplaintheInchmareeClauseinamarineinsurance. nsuranc
suranc
C

o
r
olicy
icy to
This is a clause included in a hull policy to cover loss or damage through ugh the
the bursting of the
R
ughh laten
Ba y orr equ
boiler,breakingofshaftsorthroughlatentdefectsofthemachineryorequipment,hullorits
an
or in n
ors f the v
appurtenancesandfaultsorerrorsinnavigationormanagementofthevessel.(CEBUSHIPYARD
es
vs. WILL . No. 13
ENGINEERINGWORKS,INC.vs.WILLIAMLINES,INC.,etal.,G.R.No.132607,05May1999)The
h
bl
clause should be expressly y provided

provi for because damage of of this
this ssort are not included in the
e
C
term“perilsofthesea.” (Ibid.) )
o
r
R
rance.
nce.
Statetherequisitesofcoinsuranceinmarineinsurance.
Ba
an

es
h
o the fol must be

b
Coinsuranceinmarineinsuranceissubjecttothefollowingrequisites:(a)theremustbepartial
bl
C
an th ured.
red.
loss;and(b)theinsurancecoverageislessthanthevalueofthepropertyinsured.

o
ExplaintheFPAClause.
R
an

f the in
FPAorFreefromParticularAverage)clauselimitstheliabilityoftheinsurerincaseofpartial
h
loss.(Sec.136,ICP)
C

Whataretherulesonclaimsunderthe“nofaultindemnity”provision?

Proofoffaultornegligenceisnotnecessaryforpaymentofanyclaimfordeathorinjurytoa
thirdpartysubjecttothefollowing:

11
(1) Aclaimmaybemadeagainstonemotorvehicleonly.
(2) If the victim is an occupant of a vehicle, his claim shall lie against the insurer of the
vehicleinwhichheisriding,mountingordismountingfrom.
(3) If the victim is not an occupant, the claim shall lie against the insurer of the directly
offendingvehicle.
(4) Inanycase,righttorecoverfromtheowneroftheresponsiblevehicleshallremain.
(5) TotalindemnityinrespectofanypersonshallnotexceedP15,000.00.(ICMemoCircular
42006)
(6) Proofs of loss shall consist of: (a) police report; (b) death certificate; and (c) medical
ho
hos
reportandevidenceofmedicalorhospitaldisbursement.

r
Ba

TR
TRANSPORTATION
es
Isatravelagencyacommoncarrier?
on
n carrie
carri
bl

o
r
No.Atravelagencyisnotanentityengagedinthebusinessoftransportingeitherpassengersor
s not an ness
ss of t
R
Ba
goods.Itscovenantwithitscustomersissimplytomaketravelarrangementsintheirbehalf.Its
nt with i ake trav
tra
an
services include
e procuring
proc
procu tickets and facilitating travel
ngg trav
tra e permits or visas as well as booking
es
customersfortours.(CRISOSTOMOvs.CA,G.R.No.138334.25August2003)
or tours No. 138
h
bl

C
Explaintheregisteredownerrule.Whatisthepurposeoftherule?
re iss the p
o
r

R
err is of
Ba
Regardlessofwhotheactualownerisofamotorvehiclemightbe,theregisteredowneristhe
he regis
an
operator of the same with respect

pect to
to the public and third persons, ns, and
ons, an as such, directly and
es
primarily responsible for the consequences of its operation.. In
he cons IIn con
contemplation of law, the
co
h
bl
owner/operator of record is the employer of the driver, the
is the he actual
the act operator and employerr
C
being consideredmerelyashisagent.
o
r

R
Themainpurposeofvehicleregistrationistheeasyidentificationoftheownerwhocanbeheld
y identifi
dentifi
Ba
an
n bee he
an
responsible for any accident, damage or injury caused by the vehicle. Easy identification
uryy caus dentific
entifi
es
h
prevents inconvenience and prejudice to a third third party

p injured by one who is
iss unknown
unkn or
bl
C
unidentified. (NOSTRADAMUS VILLANUEVA vs. vs. PRISCILLA

P
PR R. DOMINGO and LEANDRO
LEAND LUIS R.
DOMINGO,G.R.No.144274.September20,2004)
o

R
an
Iftheregisteredownerwasmadeliabletothevictim,canheclaimreimbursementfromthe
m reimb
actualowner/operatorofthevehicle?
h

C
Yes. The registered owner has a right to be indemnified by the the real or actual owner of the
amountthathemayberequiredtopayasdamagefortheinjurycausedtothevictim.(Ibid)

Whoisa“shipagent”?Ishisliabilitythesamewhetherheactsasagentoftheshipowneror
thecharterer?
12
Article 586 of the Code of Commerce states that a ship agent is “the person entrusted with
provisioning or representing the vessel in the port in which it may be found.”Hence,
whetheractingasagentoftheownerofthevesselorasagentofthecharterer,petitionerwill
beconsideredastheshipagentandmaybeheldliableassuch,aslongasthelatteristheone
that provisions or represents the vessel. (MACONDRAY vs. PROVIDENT INSURANCE
CORPORATION,G.R.No.154305,09December2004)

Does extraordinary diligence require the carrier to vouch for the correctness of the entries
madeinthetravelpapersofapassenger?

NO. It may be true that the carrier hasass the
the d
duty to inspect whether its passengers have the
r
Ba
necessary travel documents, however, ver, suc
such duty does not extend to checking the veracity of
every entry in these documents. A A carrier
arr could not vouch for the authenticity of a passport
es
and the correctness of the entries tries
ies therein.
the The power to admit or not an alien into the country
is a sovereign act, which cannot
annot b
cannot be interfered with even by the carrier.(JAPAN AIRLINES vs.
bl
al,l, G.R. N
MICHAELASUNCIONetal,G.R.No.161730,28January2005) 05)
o
r

R
Ba
could
uld no
n of a pa
p
Thus,thecarriercouldnotbefaultedforthedenialofapassenger’sshorepasswhereitwas
an
immigra
mmigr ared
red sho o
discoveredbyimmigrationofficialsthatheappearedshorterthanhisheightasindicatedinhis
es
bid)
passport.(Ibid)
h

bl
C
wn erated
ated u
DoestheownerofthevehiclebeingoperatedundertheBOUNDARYSYSTEMremainliableas EM re
o
r
commoncarrier?
R

Ba
an
ability
bility th
t e who
wh
YES.Indeed,toexemptfromliabilitytheownerofapublicvehiclewhooperatesitunderthe
es
ground t uld be
“boundarysystem”onthegroundthatheisamerelessorwouldbenotonlytoabetflagrant
h
bl
vic La
vice ding
ng pub
violationsofthePublicServiceLaw,butalsotoplacetheridingpublicatthemercyofreckless
C
and irresponsible drivers — reckless because the measure uree of

of their
t gely
earnings depends largely ely
o
r
upon the number of trips they make and, hence,, the the sspeed at which they drive;e; and
R
noo pos
irresponsiblebecausemostifnotallofthemareinnopositiontopaythedamagestheymight
Ba
hey mig
an
cause.(SPOUSESHERNANDEZ et al. vs. SPOUSES DOLOR et al, G.R. No. 160286; 30 July uly 2004)
200
es
h

bl
The defendant’s main business is brokerage gee but

but it also offers carrying services.
rvices.
ices. For
F liability
C
purposes, may the defendant be sued as common carrier if the damage mage oc o
occurred in the
o
performanceofitscarryingservices?
R
an

YES. Article 1732 does not distinguish between one whose principal incipal
ncipal business
b activity is the
h
n ancilla
carryingofgoodsandonewhodoessuchcarryingonlyasanancillaryactivity.Itsufficesthat
C
co
petitioner undertakes to deliver the goods for pecuniary consideration. (A.F. SANCHEZ
BROKERAGE INC. vs. THE HON.COURT OF APPEALS and FGU INSURANCECORPORATION, G.R.
No.147079,21December2004)

13
Explainthedoctrineoflastclearchance.Whendoesthedoctrineapply?

The doctrine states that where both parties are negligent but the negligent act of one is
appreciablylaterthanthatoftheother,orwhereitisimpossibletodeterminewhosefaultor
negligence caused the loss, the one who had the last clear opportunity to avoid the loss but
failedtodoso,ischargeablewiththeloss.(PHILIPPINENATIONALRAILWAYSvs.BRUNTY,G.R.
No.169891,02November2006)Thedoctrineappliestoasuitbetweentheownersanddrivers
oftwocollidingvehicles.Itdoesnotapplywhereapassengerdemandsresponsibilityfromthe
carrier to enforce its contractual obligations, for it would be inequitable to exempt the
negligent driver/owner on the ground that att the other driver was guilty of negligence. (TIU vs.
ptember
ember
ARRIESGADO,etal.,GR138060,01September2004).
r
Ba

off a Bill
ExplainthethreefoldcharacterofaBillofLading.
es

othh as a
Abillofladingoperatesbothasa(1)receiptandasa(2)contract.Itisacontractforthegood
bl
to transport
shipped and a contract to tran and deliver the same e as
a stipulated. It becomes effective
as
o
r
accepte a (3)
3) doc
do
upondeliverytoandacceptedbytheshipper.Itisalsoa(3)documentoftitle.
R
Ba

an
The consignee failed

failed to file a formal notice of f claim
clai
claim within 24 hours from receipt of the
es
merchand
erchan cle
le 366
damagedmerchandiseasrequiredunderArticle366oftheCodeofCommerce.Isthefilingof
h
bl
off claim
aim the acc
anoticeofclaimaconditionprecedenttotheaccrualofarightofactionagainstthecarrier
C
mag
forthedamagescausedtothemerchandise? dise?
ise?
o
r

R
Ba
an
f loss
oss o ott an em
Therequirementtogivenoticeoflossordamagetothegoodsisnotanemptyformalism.The
fundamental reason or purpose ose
se of s
of such a stipulation is not to relieve
reliev
relieve the carrier from just
es
h
nform it en dama
liability,butreasonablytoinformitthattheshipmenthasbeendamagedandthatitischarged
bl
C
to give
with liability therefor, and to gi it an opportunity to examine
amine
mine the
t nature and extent of the he
o
ortunity to make an investigation of

injury. This protects the carrier by affording it an opportunity of aa
r
R
Ba
tigat
ated
ed
claimwhilethematterisstillfreshandeasilyinvestigatedsoastosafeguarditselffromfalse m false
an
andfraudulentclaims.
es
h
strued a the
he acc
The24hourclaimrequirementhasbeenconstruedasaconditionprecedenttotheaccrualofa
bl
C
r dam ipper
pper o
rightofactionagainstacarrierforlossof,ordamageto,thegoods.Theshipperorconsignee
o
t of acti
act
mustallegeandprovethefulfillmentofthecondition.Otherwise,norightofactionagainstthe
R
CEE vs.
carrier can accrue in favor of the former. (UCPB GENERAL INSURANCE vs. ABOITIZ
A SHIPPING
an
CORP.,etal.,G.R.No.168433,10February2009)

h
y??
WhataretheclausesthatmaybeincludedinaCharterParty?
C

Theyareasfollows:

1. JasonClause–aprovisionwhichstatesthatincaseofmaritimeaccidentforwhichthe
shipowner is not responsible by law, contract or otherwise, the cargo shippers,
14
consigneesorownersshallcontributewiththeshipowneringeneralaverage(Pandect
ofCommercialLawandJurisprudence,JusticeJoseVitug,2006ed.)

2. ClauseParamount–aprovisionwhichstatesthatCOGSAshallapply,eventhoughthe
transportationisdomestic,subjecttotheextentthatifanytermofthebillofladingis
repugnanttotheCOGSAorapplicablelaw,thentotheextentthereof,theprovisionof
thebillofladingisvoid(ibid)
PO
CORPORATIONLAW
r
Ba
ExplaintheCONCESSIONTHEORY.

es
Under this theory, a corporationtion is aa creature without any existence until it has received the
ion is
imprimaturofthestateactingaccordingtolaw.
ting
ng acco
bl

o
r
Distinguishbetweenstockandnonstockcorporation.
stock a
R
Ba

an
A stock corporation
ration iis one whose capital stock
oration k isis d
dividend
iv into shares and authorized to
es
distributetotheholdersofsuchsharesdividends.Ontheotherhand,anonstockcorporation
o the ho nds.
ds. On
h
bl
is one where

e no
here n part of its income is distributable
no ibutab as dividends to its members, trustees or
ributabl
C
officers.(MANILAINTERNATIONALAIRPORATAUTHORITYvs.CA,495SCRA591)
AN ORAT
RAT AU 591)
91)
o
r

R
Whatareessentialfortheexistenceofadefactocorporation?
cee of a d
Ba
an

es
The filing of articles of incorporation
rporatio and the issuance of the certificate
certific of incorporation are
h
bl
essentialfortheexistenceofadefactocorporation.Ithasbeenheldthatanorganizationnot
of a d been
een he t
C
registered with the Securities and Exchange Commission sion

o (S(SEC)
S cannot be considered
d aa
o
r
corporation in any concept, not even as a corporation on de
ion de facto.
f (SEVENTH DAY ADVENTIST
ENTIST
R
CONFERENCECHURCHOFSOUTHERNPHILS.,INC.vs.NORTHEASTERNMINDANAOMISSIONOF
vs. NORT
NOR
BaISS
S ION
ON O
an
SEVENTHDAYADVENTIST,INC.GRNo.150416,21July2006) 21
1 July 2
es
h

bl
C
Whatisasoleproprietorship?Doesitenjoyseparatepersonality?
sepa
separ
o
businessenterprise. It
Asoleproprietorshipistheoldest,simplest,andmostprevalentformof busines
R
isanunorganizedbusinessownedbyoneperson.Thesoleproprietorispersonallyliableforall
is perso
pers
an
thedebtsandobligationsofthebusiness.
h
A sole proprietorship does not possess a juridical personality

tyy separate
sepa
separ and distinct from the
C
personalityoftheowneroftheenterprise.Thelawmerelyrecognizestheexistenceofasole
ecog
proprietorshipasaformofbusinessorganizationconductedforprofitbyasingleindividualand
requiresitsproprietororownertosecurelicensesandpermits,registeritsbusinessname,and
paytaxestothenationalgovernment.Thelawdoesnotvestaseparatelegalpersonalityonthe
sole proprietorship or empower it to file or defend an action in court. (EXCELLENT QUALITY
APPAREL,INC.vs.WINMULTIRICHBUILDERS,INC.,G.R.No.175048,10February2009)
15
ExplainbrieflytheDOCTRINE OFPIERCINGTHEVEILOFCORPORATEENTITY.

Acorporationwillbelookeduponasalegalentityasageneralrule,anduntilsufficientreason
to the contrary appears; but when the notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend a crime, the law will regard the
corporationasanassociationofpersons,orincaseoftwocorporations,mergethemintoone.
(KOPPEL[PHIL.]INC.vs.YATCO,77Phil496;YUTIVOSONSHARDWARECO.vs.COURTOFTAX
APPEALS,1SCRA160)

WhenshouldtheDOCTRINEOFPIERCINGberaised? be

r
Ba
rporate fiction should be raised before the trial court. The
The issue of piercing the veil of corporate
rst
st time
issuecannotbetreatedforthefirsttimeonappeal.
es

pursue
Toallowthepetitionertopursuesuchadefensewouldunderminebasicconsiderationsofdue
bl
theories
heories br
brou
process.Pointsoflaw,theories,issuesandargumentsnotbroughttotheattentionofthetrial
o
r
ought n eviewing
ewing
courtwillnotbeandoughtnottobeconsideredbyareviewingcourt,asthesecannotberaised
R
Ba
for the first time on
n ap
on appeal. It would be unfair to the
the aadverse party who would have no
an
presen to
o th
t e
opportunitytopresentfurtherevidencematerialtothenewtheorynotventilatedbeforethe
es
(ALMOC
(ALMOCE
trialcourt.(ALMOCERAvs.ONG,18February2008) 2008)
008)
h
bl

C
c dentity
ntity o
Citespecificcaseswheretheseparateidentityofthecorporationcouldbepierced. pierce
o
r

R
fiction
Ba
petuate
1. Whentheveilofcorporatefictionismadeasashieldtoperpetuateafraudorconfuse
an
s the rel ployee

oyee
legitimateissuessuchastherelationofemployerandemployee(CLAPAROLSvs.CIR,65
es
SCRA613);
h
bl
eld
ld for N & HA
2. Whenusedasashieldfortaxevasion(CIRvs.NORTON&HARRISONCO.,11SCRA714);
C
agains
gains forum shopping (FIRST PHIL.
3. When used to shield violation of the prohibition against HIL.
IL.
o
r
INTERNATIONALBANKvs.CA,252SCRA259);
R
4. When the separate identity of the corporation ation

on is
Ba
is being utilized to violate intellectual
nte
t llectu
ectu
an
VILLANU
LLANU
propertyrightsofathirdperson(UYvs.VILLANUEVA,GRNo.157851,29June2007) nee 2007
200
es
h

bl
C
ExplaintheINSTRUMENTALITYRULE.
o
conduct
Whereonecorporationissoorganizedandcontrolledanditsaffairsareconductedsothatitis,
R
hee corp
infact,amereinstrumentalityoradjunctoftheother,thefictionofthecorporateentityofthe
an
voke th
‘instrumentality’maybedisregarded.Thecontrolnecessarytoinvoketheruleisnotmajority
s, policie
orevencompletestockcontrolbutsuchdominationoffinances,policiesandpracticesthatthe
h
will
ill orr
controlledcorporationhas,sotospeak,noseparatemind,willorexistenceofitsown,andis
C
co
butaconduitforitsprincipal.Itmustbekeptinmindthatthecontrolmustbeshowntohave
been exercised at the time the acts complained of took place. Moreover, the control and
breach of duty must proximately cause the injury or unjust loss for which the complaint is
made.(CONCEPTBUILDERSvs.NLRC,G.R.No.108734,29May1996)

16
ExplainbrieflytheDOCTRINE OFRELATION.

Underthisdoctrine,whenthedelayineffectingorfilingtheamendedarticlesofincorporation
fortheextensionofcorporatetermisduetoaninsuperableinterferenceoccurringwithoutthe
corporation’s intervention which could not have been prevented by prudence, diligence, and
care,thesamewillbetreatedashavingbeeneffectedbeforetheexpirationoftheoriginalterm
ofthecorporation.

Whatsharescouldbedeprivedofvotingrights?

citly
tly pro
Section of the Corporation Code explicitly provides that “no share may be deprived of voting
r
Ba
rights except those classified and issued
issued as “preferred” or “redeemable” shares, unless
e”,, an
otherwise provided in this Code”, ndd that “there shall always be a class or series of shares
and
es
ights.
ghts Th
whichhavecompletevotingrights.Thereisnothinginthearticlesofincorporationoraniotaof
hows
ows th
evidence on record that shows that class “B” shares were categorized as either preferred or
bl
ASTILLO,
STILLO, et. al. vs. ANGELES BALINGHASAY,
redeemable shares. (CASTILLO, NGHA
GH et. al., GR No. 150976, 18
o
r
October2004)
R
Ba
an
CTRINE
TRINE
ExplaintheDOCTRINEOFEQUALITYOFSHARES.
es

h
bl
Where thee articles

artic
tic of incorporation do not t provid
provide any distinction of the shares of stock, all
C
edd umed
med to the
he sa
sharesissuedbyacorporationarepresumedtobeequalandentitledtothesamerightsand
o
r
bilities.
lities.
privilegesandsubjecttothesameliabilities.
R

Ba
an
iption
ption m r of th
thee
Woulddepositonstocksubscriptionmakeapersonastockholderofthecorporation?
es

h
bl
ription
iption oney
ney rec
Thedepositonstocksubscriptionismerelyanamountofmoneyreceivedbyacorporationwith h
C
uance
nce o
aviewofapplyingthesameaspaymentforadditionalissuanceofsharesinthefuture,anevent vent
nt
o
r
which may or may not happen. The person making a a deposit
depos on stock subscription does es not
not
R
have the standing of a stockholder and he is not entitled
titled to dividends, voting rights
entitled
Ba
so r oth
or other
an
OMMISS
MMISS
prerogativesandattributesofastockholder.(COMMISSIONEROFINTERNALREVENUEvs.FIRST NUE
UE vs.
es
h
os. 1720
EXPRESSPAWNSHOPCOMPANY,INC.,G.R.Nos.17204546,16June2009)
bl
C

inform
informa
Whichshouldprevailinthedeterminationofshareholders,thegeneralinformationsheetor
o
thecorporatebooks?
R
an

The information in the General Information Sheet submitted to o the S will still have to be
SE
the SEC
h
correlated with the corporate books of the Company. As betweenetween the General Information
C
g (LA
g. (L
Sheetandthecorporatebooks,itisthelatterthatiscontrolling.(LAOvs.LAO,G.R.No.170585,
6October2008)

17
Could any stockholder, at his pleasure, pullout the machines and equipment, following the
saleofhissharestoathirdparty?

NO.Thepropertyofacorporationisnotthepropertyofitsstockholdersormembers.Under
the trust fund doctrine, the capital stock, property, and other assets of a corporation are
regardedasequityintrustforthepaymentofcorporatecreditorswhicharepreferredoverthe
stockholders in the distribution of corporate assets. The distribution of corporate assets and
propertycannotbemadetodependonthewhimsandcapricesofthestockholders,officers,or
directors of the corporation unless the indispensable conditions and procedures for the
we
protectionofcorporatecreditorsarefollowed.(YAMAMOTOvs.NISHINOLEATHERINDUSTRIES,
G.R.No.150283,16April2008)
r
t be
State the requisites that must Ba
be es
eestablished for the legal existence of a subsidiary to be
es
disregarded.
bl
While a corporation mayayy be a subsidiary of another, it does

be a doe
o not necessarily follow that its
o
ence can
corporate legal existence c just be disregarded. A A subsi
subsidiary has an independent and
r
R
Ba
persona
rsona paren
parent
separatejuridicalpersonality,distinctfromthatofitsparentcompany;hence,anyclaimorsuit
an
ter
er does
against the latter do not bind the former, and
doe nd
d vvice
cee versa. In applying the doctrine, the
es
quisite must be established: (1) control,
quisites
following requisites control,
ontrol, not merely majority or complete stock
h
2)) such
ch ed by t
control;(2)suchcontrolmusthavebeenusedbythedefendanttocommitfraudorwrong,to
bl
C
perpetuate th y or
the violation of a statutory or oth
ot r dis
other positive legal duty, or d
dishonest acts in
o
r
s; and (3
( d breac
contraventionofplaintiff’slegalrights;and(3)theaforesaidcontrolandbreachofdutymust
R
Ba
just
ust loss AVIS, In
I
proximatelycausetheinjuryorunjustlosscomplainedof.(JARDINEDAVIS,Inc.vs.JRBREALTY,
an
G.R.No.151438,15July2005)
es
h

bl
C
iss rem racter

acter th
Whenthecorporatemaskisremoved,isthecorporatecharactertherebyabrogated?
o
r
R
rporate
porate
NO.Thecorporatemaskmayberemovedandthecorporateveilpiercedwhenacorporationis ation is
Ba
an
the mere alter ego of another. Where badges of f fraud

of enie
n nce is
fraud exist, where public convenience
es
stified
ified thereby,
defeated, where a wrong is sought to be justified th atee corp
or where a separate cor
corporate
h
ns to
identity is used to evade financial obligations to em es,
s, the
employees or to third parties, the notion of
bl
C
the n that ha
separatelegalentityshouldbesetasideandthefactualtruthupheld.Whenthathappens,the h
o
legitim
legitima
corporatecharacterisnotnecessarilyabrogated.Itcontinuesforotherlegitimateobjectives.
R
(PAMPLONA PLANTATION COMPANY, INC et al. vs. TINGHIL, et al., al., G.R.
G.R No. 159121, 03
G.R.
an
February2005)

h
Can a corporation provide limitations on the voting rights of o the
of the members of a nonstock
C
corporation?

YES. Section 89 of the Corporation Code pertaining to nonstock corporations provides that
"(t)herightofthemembersofanyclassorclasses(ofanonstockcorporation)tovotemaybe
limited,broadenedordeniedtotheextent specified in the articles of incorporation or the by
laws."ThisisanexceptiontoSection6ofthesamecodewhereitisprovidedthat"noshare
18
maybedeprivedofvotingrightsexceptthoseclassifiedandissuedaspreferredorredeemable
shares,unlessotherwiseprovidedinthisCode.Hence,thestipulationintheByLawsproviding
for the election of the Board of Directors by districts is a form of limitation on the voting
rightsofthemembersofanonstockcorporationasrecognizedundertheaforesaidSection
89.Section24oftheCode,whichrequiresthepresenceofamajorityofthemembersentitled
tovoteintheelectionoftheboardofdirectors,appliesonlywhenthedirectorsareelectedby
themembersatlarge,suchasisalwaysthecaseinstockcorporationsby virtueofSection6.
(LUISAOAS,etal.vs.COURTOFAPPEALS,etal.,G.R.No.128464,20June2006).

ExplaintheBUSINESSJUDGMENTRULE. E..
r
Ba

geme
ement are left solely to the honest decisions of officers and
Questions of policy or of management
es
d so long
lon
directorsofacorporation,andsolongastheyactingoodfaith,theirordersarenotreviewable
OURT O
bythecourts.(SABERvs.COURTOFAPPEALS,G.R.No.132981,August31,2004)
bl

o
r
e officer rsonally
onally
Inwhatinstancesareofficers,directors,ortrusteespersonallyliableforcorporateacts?
R
Ba

an
are:
e: whe
wh patent
aten ly
Theinstancesare:when—1.Heassents(a)toapatentlyunlawfulactofthecorporation,or(b)
es
h or gro s affairs
forbadfaithorgrossnegligenceindirectingitsaffairs,or(c)forconflictofinterest,resultingin
h
bl
to
o the
he rss or ot
damagestothecorporation,itsstockholdersorotherpersons;2.Heconsentstotheissuance
C
st edge
ge the e with
wi
ofwateredstocksorwho,havingknowledgethereof,doesnotforthwithfilewiththecorporate
o
r
eto;
secretary his written objection thereto; o; 3. H agrees to hold himself personal
3.He personally and solidarily
R
e is mad
Baf aw, to
liablewiththecorporation;or4.Heismade,byaspecificprovisionoflaw,topersonallyanswer
an
BLIC vs
forhiscorporateaction.(REPUBLICvs.INSTITUTEFORSOCIALCONCERN,FELIPE ONCERN
NCER SUZARAAND
es
56306 Ja K CORPO
CORP
RAMONGARCIA,G.R.NO.156306January28,2005;SOLIDBANKCORPORATIONvs.MINDANAO
h
bl
N, et a
FERROALLOYCORPORATION,etal.,G.R.No.153535,28July2005) 2005)
005)
C

o
r
What would constitute apatently unlawful act which chh make ble for
makes a director personally liable for
R
theobligationsofthecorporation?
Ba
an

es
h
For a wrongdoing to make a director personally sonally

son ally liable for debts of the corporation,
orporati
rporat the
bl
C
wrongdoing approved or assented to by the e dire nlawful act. Mere
director must be a patently unlawful
closure
failuretocomplywiththenoticerequirementoflaborlawsoncompanyclosureordismissalof
o
employees does not amount to a patently unlawful act. Patently unlawfu nlawfu acts are those
unlawful
R
an
off such
declaredunlawful bylaw whichimposespenaltiesforcommissionofsuchunlawfulacts.There
mustbealawdeclaringtheactunlawfulandpenalizingtheact.
h

C
mont
Inthiscase,Article283oftheLaborCode,requiringaonemonthpriornoticetoemployees
andtheDepartmentofLaborandEmploymentbeforeanypermanentclosureofacompany,
doesnotstatethatnoncompliancewiththenoticeisanunlawfulactpunishableunderthe
Code. There is no provision in any other Article of the Labor Code declaring failure to give such
noticeanunlawfulactandprovidingforitspenalty.(CARAGvs.NATIONALLABORRELATIONS
COMMISSION,etal.,G.R.No.147590,April2,2007)
19
Explain theDOCTRINEOFAPPARENTAUTHORITY.

Whenacorporationknowinglypermitsoneofitsofficers,oranyotheragent,toactwithinthe
scope of an apparent authority, itholds him out to the public as possessing the power to do
thoseacts;andthus,thecorporationwill,asagainstanyonewhohasingoodfaithdealtwithit
through such agent, be estopped from denying the agent’s authority. (LAPULAPU
FOUNDATIONvs.CA,29January2004)

Isteleconferencingnowlegallypermissible? ble?
e?

r
Ba
ology, the courts may take judicial notice that business
YES. In this age of modern technology,
transactions may be made by y individuals
in vid
ind through teleconferencing. In the Philippines,
es
conferen
onfere
teleconferencing and videoconferencing of members of board of directors of private
corporations is a reality, in
n light
in light of Republic Act No. 8792. The Securities and Exchange
bl
Memo
Commission issued SEC Memorandum n No
Circular No. 15, on N
November 30, 2001, providing the
o
r
mplied w ences
ces. (
guidelinestobecompliedwithrelatedtosuchconferences.(EXPERTRAVEL&TOURS,INC.vs.
R
Ba
152392
CA,etal.,G.R.No.152392,26May2005)
an

es
bylaws
by laws the pre
Incasethebylawscouldnotbefiledwithintheprescribedperiod,wouldjuridicalexistence
h
bl
cally
ally ce
automaticallycease?
C

o
r
cto
to lose e the re
NO.Acorporationwouldnotipsofactoloseitspowersforfailuretofiletherequiredbylaws.
R
ERS
RS ASS
Ba 681) At
(LOYOLAGRANVILLASHOMEOWNERSASSOCIATIONvs.CA,276SCRA681)Attheveryleast,the
an
a de fac t to ex
corporationmaybeconsideredadefactocorporationwhoserighttoexistmaynotbeinquired
es
SAWADJ
intoinacollateralmanner.(SAWADJAANvs.CA,8June2005)
h
bl

C
ExplaintheTRUSTFUNDDOCTRINE.CT
o
r

R
d other
Underthisdoctrine,thecapitalstock,propertyandotherassetsofacorporationareregarded
Baregarde
an
orate
ate de
asequityintrustforthepaymentofthecorporatedebts.Hence,nodisposition of cor
corp
ofcorporate
es
h
fundstotheprejudiceofcreditorsisallowed.
bl
C

Whoareentitledtoreceivedividends?
o

R
an
Dividends are payable to the stockholders of record as of the date ate of
date f the declaration of
of
dividendsorholdersofrecordonacertainfuturedate,asthecasemaybe,unlesstheparties
ase
se ma
m
h
have agreed otherwise. And a transfer of shares which is not ot recorded
reco in the books of the
C
corporationisvalidonlyasbetweentheparties,hence,thetransferorhastherighttodividends
nsfe
asagainstthecorporationwithoutnoticeoftransferbutitservesastrusteeoftherealowner
of the dividends, subject to the contract between the transferor and transferee as to who is
entitledtoreceivethedividends.(COJUANGCOvs.SANDIGANBAYAN,24April2009)

20
UnderwhatconditionscouldthePCGGvotesequesteredshares?

Itissettledthatasageneralrule,theregisteredownerofthesharesofacorporation,evenif
they are sequestered by the government through the PCGG, exercises the right and the
privilegeofvotingonthem.ThePCGGasamereconservatorcannot,asarule,exerciseactsof
dominionbyvotingtheseshares.

Theregisteredownerofsequesteredsharesmayonlybedeprivedofthesevotingrights,and
thePCGGauthorizedtoexercisethesame,onlyifitisabletoestablishthat(1)thereisprima
ess
facieevidenceshowingthatthesaidsharesareillgottenandthusbelongtotheState;and(2)
ation,
tion, th
there isanimminentdangerofdissipation,thusnecessitatingthecontinuedsequestrationof
r
Ba
reupon
thesharesandauthoritytovotethereuponbythePCGGwhilethemainissueispendingbefore
DLE
LE EAS
theSandiganbayan.(TRANSMIDDLEEAST(PHILS.)vs.SANDIGANBAYAN,etal.,G.R.No.172556,
es
09June2006)
bl

ertificate onditio
nditi
IstheissuanceofacertificateofmergerbytheSECaconditionprecedenttothetransferof
o
r
bed
ed corp
cor orporati
sharesoftheabsorbedcorporationtothesurvivingcorporation?
R

Ba
an
s not be ere agr

ag
Amergerdoesnotbecomeeffectiveuponthemereagreementoftheconstituentcorporations.
es
h
cally
ally provided
As specifically pro under Section 79 of the Co
the Corporation Code, the merger shall only be
bl
C
upon the issuance of a certificate

effective upon ficate
cate oof merger by the Securities es and Exchange
Commission (SEC), subject to its prior determi
determ
determination that the merger is not ot inc
not inconsistent with
o
r
party
arty to poratio
theCodeorexistinglaws.Whereapartytothemergerisaspecialcorporationgovernedbyits
R
Ba
an
own charter, the Code particularlyularly

arly m
mandates that a favorable e recommendation
recom
recom of the
appropriate government agency ncy
cy should
shou first be obtained. The issuance
issuanc
ssuanc of the certificate of
es
h
ot only roval
oval bu
mergeriscrucialbecausenotonlydoesitbearoutSEC'sapprovalbutalsomarksthemoment
bl
C
es o oper
peratio
atio
whereupontheconsequencesofamergertakeplace.Byoperationoflaw,upontheeffectivity ty
o
but its
ofthemerger,theabsorbedcorporationceasestoexistbutitsrights,andpropertiesaswellas ellll ass
r
R
Ba
liabilities shall be taken and deemed transferred to o and v
ve
and vested oration
in the surviving corporation
an
(POLIAND INDUSTRIAL LTD. vs. NATIONAL DEVELOPMENT ELOPME

OPM 14 866
143 66 &
CO., et al., G.R. Nos. 143866
es
143877,22August2005).
h

bl
C
Determine whether the buyer at execution ssale of shares will immediately diately
ately acquire title
o
thereto.
R
an
sonal
onal property,
It should be restated that since there is no right to redeem personal p
pr the rights of
ownership are vested to the purchaser at the foreclosure (or or execution)
exec
execu sale and are not
h
edempt
dempt
entangled in any suspensive condition that is implicit in aredemptiveperiod. xxxThere is no
C
valid reason why the buyers at execution sale of petitioner’s r’ shares of stock should be
preventedfromobtainingtitletothesame.Thependencyofa caseinvolvingthepartiesdoes
not affect the registrability of the shares of stock bought at execution sale, although the
registrationiswithoutprejudicetotheproceedingstodeterminetheliabilityofthepartiesas
againsteachother.(LEEvs.HON.TROCINO,etal.,G.R.No.164648,19June2009)
21
Should dead members of a nonstock corporation be counted for quorum and voting
purposes?

Inanonstockcorporation,membershipispersonalandnontransferableunlessthearticlesof
incorporation or bylaws states otherwise. Section 91 states that termination extinguishes all
the rights of a member of the corporation, unless otherwise stated in the articles of
incorporation.Hence,deadmembersarenottobe countedindeterminingtherequisitevotein
mi
corporatemattersortherequisitequoruminthemembers’meeting.(TANvs.SYCIP,499SCRA
216,17August2006)
r
atio
tio of
Incorpor
corpo
Ba
Aretherequirementsforterminationofmembershipinanonstockcorporationrequiredto
beprovidedintheArticlesofIncorporation?
tion
on Code
Section 91 of the Corporation Cod provides:
r
SEC. 91. Termination
nation of membership.—Membership p shall
shall
hall be terminated in the
Ba
mannerandforthecausesprovidedinthearticlesofincorporationorthebylaws.
for
or the s of inco
Termination
on ofof membership
m shall have the effect
ffec
ec ofof extinguishing all rights of a
member in th
err in the corporation or in its property,
rty, unless
erty, un otherwise provided in the
es
articlesofincorporationorthebylaws.(Emphasissupplied)
cles of in Emphasis
mphasis
bl
Clearly,therightofanonstockcorporationtoexpelamembermaybeestablishedin
ation to stablis
tablis theby
o
r
laws alone. It need not be providedd for
for in
in the articles of incorporation.
on (VALLEY
on. (VA GOLF AND
R
COUNTRYCLUBvs.VDA.DECARAM,G.R.No.158805,16April2009)
M, G.R. N
Ba
an

es
h
WhataretheconditionsforthepenalprovisionunderSection144oftheCorporationCodeto
the pen n 144 of
bl
apply in case of violation of

of a
a stockholder’s
s right to inspect
ct the
ect the corporate books/records ass
C
providedforunderSection74oftheCorporationCode?
o
r
R
(1)Adirector,trustee,stockholderormemberhasmadeapriordemandinwritingforacopyof
made
ade a a copy
opy
Ba
an
excerptsfromthecorporation’srecordsorminutes;
tes;
es
es
h
(2) Any officer or agent of the concerned corporation

corpora
orpora shall refuse to allow the
he said
the said director,
bl
C
trustee,stockholderormemberofthecorporationtoexamineandcopysaidexcerpts;
atio
ti d excerp
o
R
(3) If such refusal is made pursuant to a resolution or order of the board of directors or
he boar
boa
an
trustees,theliabilityunderthissectionforsuchactionshallbeimposeduponthedirectorsor
posed
osed u
trusteeswhovotedforsuchrefusal;and,
h
C
(4) Where the officer or agent of the corporation sets up the defense that the person
p th
demanding to examine and copy excerpts from the corporation’s records and minutes has
improperly used any information secured through any prior examination of the records or
minutesofsuchcorporationorofanyothercorporation,orwasnotactingingoodfaithorfora
legitimatepurposeinmakinghisdemand,thecontrarymustbeshown orproved.(ANGABAYA
vs.ANG,G.R.No.178511,4December2008)
22
Whataretherequisitesforfilingaderivativesuit?

Therequisitesforfilingaderivativesuitareasfollows:

a) The party bringing suit should be a shareholder as of the time of the act or transaction
complainedof,thenumberofhissharesnotbeingmaterial;
b)Thepartyhastriedtoexhaustintracorporateremedies,i.e.,hehasmadeademandonthe
boardofdirectorsfortheappropriatereliefbutthelatterhasfailedorrefusedtoheedhis
plea;
c) The cause of action actually devolves on o
on the corporation, the wrongdoing or harm having
oration
ation
been,orbeingcausedtothecorporationandnottotheparticularstockholderbringingthe
r
Ba
NC., ete
suit.(FILIPINASPORTSERVICES,INC.,etal.vs.Go,etal.,G.R.No.161886,March16,2007);
blee for th
d)Noappraisalrightsareavailablefortheact/scomplainedof;and
es
orr harassment
e) The suit is not a nuisance or hara suit (Sec.1, Rule 8, Interim Rules of Procedure for
versies)
IntraCorporateControversies)
bl

o
r
of intra ed as a r
Whenisexhaustionofintracorporateremediesexcusedasarequirementforderivatesuit?
R
Ba

an
that
hat the
th must
ust sat
Whileitistruethatthecomplainingstockholdermustsatisfactorilyshowthathehasexhausted
es
o redres corpora
allmeanstoredresshisgrievanceswithinthecorporation;suchremedyisnolongernecessary
h
bl
e corpo omplete
mplete
wherethecorporationitselfisunderthecompletecontrolofthepersonagainstwhomthesuit
C
ed
d The reason is obvious: a deman
is being filed. demand upon the board to institute itute
tut an action and
o
r
prosecute the same effectively would d have
have been useless and an exercise ise in
in fu
futility. (HIYIELD
R
LS,
S, G.R.
Ba) Note,
REALTY,INC.vs.COURTOFAPPEALS,G.R.No.168863,23June2009)Note,though,thatinYU,
an
et al. vs. YUKAYGUAN, et al., G.R. G.R. No

No. 177549, 18 June 2009, the hee Sup
Su
Supreme Court held that
es
exhaustion of intracorporate te reme
remedies cannot be dispensed with with eeven if the company is a
h
bl
family corporation. There is iss nothing

noth orr rules
in the pertinent laws or rules supporting the distinction n
C
i mily cor
between,andthedifferenceintherequirementsfor,familycorporationsvisàvisothertypes ypes
es
o
r
derivat
ofcorporations,intheinstitutionbyastockholderofaderivativesuit.
R

Ba
an
In an Agreement, the foreign company’s activities vities

ities in nfined
in the Philippines were confined fined to:
t (1)
es
h
purpose
maintainingastockofgoodssolelyforthepurposeofhavingthesameprocessedbyanother ssed
ed by
bl
C
company;and(2)consignmentofequipmentwithsuch ntt wit d in the

companytobeusedintheprocessing
ofproductsforexport.Dotheseactsamountto“doingbusiness”inthePhilippines? Philippin
o

R
an
NO. By and large, to constitute “doing business”, the activity y to
to bebe undertaken in the
Philippines is one that is for profitmaking. Under Section 1 of f the
the Im
Implementing Rules and
h
Regulations of the Foreign Investment Act, the foregoing activities ctivities do not constitute doing
C
NTEG
business.(AGILENTTECHNOLOGIESSINGAPORE(PTE)LTD.vs.INTEGRATEDSILICON,GR154618,
14April2004)

23
Would participation in a bidding for the development and operation of a modern marine
container terminal constitute doing business in the Philippines for which a license must be
secured?

Participatinginthebiddingprocessconstitutes“doingbusiness”becauseitshowstheforeign
corporation’sintentiontoengageinbusinesshere.Thebiddingfortheconcessioncontractis
but an exercise of the corporation’s reason for its existence. xxx it is the performance by a
foreigncorporationoftheactsforwhichitwascreated,regardlessofthevolumeofbusiness,
that determines whether a foreign corporation needs a license or not. (HUTCHISON PORTS
PHILIPPINES LIMITED vs. SBMA, GR 131367,36 31 August 2000; EUROPEAN RESOURCES AND
367
NIEUBUR
IEUBUR BIRKHAHN, et al., G.R. No. 159586, 26 July
TECHNOLOGIES, INC, et al. vs. INGENIEUBURO
r
Ba
2004)
es
Petitioner is engaged in the e importation
impo
impor and exportation of lace products. On several
rchased
chased lace products from the petitioner with the instruction to
occasions, respondent purchased
bl
goods
oods tot pan
pany
deliverthepurchasedgoodstoaHongKongbasedcompany.Uponreceiptofthegoodsin
o
r
ducts w Hongng Ko
HongKong,theproductswereconsideredsold.TheHongKongbasedcompany,inturn,had
R
Ba
the obligation too delive
deliver the lace products to the e Philippines.
Phi
Phil Determine whether the
an
oing
ing bus
petitionerisdoingbusinessinthePhilippines.
es

h
bl
It is not do

d ing
ng business in the Philippines.
doing nes.
es. To
To be doing or “transacting business in the
C
stt actua e Phili

Philippines”,theforeigncorporationmustactuallytransactbusinessinthePhilippines,thatis,
o
r
s within a contin
performspecificbusinesstransactionswithinthePhilippineterritoryonacontinuingbasisinits
R
own name and for its own account. unt.

nt. A
Actual transaction of business
Ba ess within
wit the Philippine
an
site
ite for
territory is an essential requisite for the Philippines to acquiree jurisdiction
juris over a foreign
es
e the for a Philip
Phili
corporationandthusrequiretheforeigncorporationtosecureaPhilippinebusinesslicense.If
h
bl
a foreign corporation does s not

not transact such kind of business iness
ess in t
in the Philippines, even if it
C
exports its products to the P Philippines, the Philippines s has

has no
n jurisdiction to require such uch
ch
o
r
ense
nse.. (B.
(B
foreigncorporationtosecureaPhilippinebusinesslicense.(B.VANZUIDENBROS.LTD.vs.GTVL . GTVL
R
MANUFACTURINGINDUSTRIES,INC.,G.R.No.147905,May28,2007) 05, May

Ba
an

es
h
Does the engagement of a Filipino nationall to to run emixed

run a foreign company’s premixed mixed concrete
c
bl
C
ing
ng bu
operationsinthePhilippinesamountto“doingbusiness”?

o
gn
n comp
com
YES.TheactofnegotiatingtoemployaFilipinonationaltorunaforeigncompany’spremixed
R
an
concrete operations in the Philippines are managerial and operational tional
onal aacts in directing and
establishing commercial operations in the Philippines. These are ree not
not mere acts of a passive
h
. 156848
investor.(PIONEERINTERNATIONALvs.HON.GUADIZ,G.R.No.156848,11October2007)
C

24
Whatarethegeneral teststodeterminewhetheraforeigncorporationisdoingbusinessin
thePhilippines?

Substance Test – whether the foreign corporation is continuing the body of the business or
enterpriseforwhichitwasorganizedorwhetherithassubstantiallyretiredfromitandturned
itovertoanother.

Continuity Test – continuity of commercial dealings and arrangements, and contemplates, to
thatextent,theperformanceofactsorworksortheexerciseofsomeofthefunctionsnormally
cu
cuti
incident to, and in the progressive prosecution of, the purpose and object of its organization
(PTE)
PTE) LT
(AGILENTTECHNOLOGIESSINGAPORE(PTE)LTD.vsINTEGRATEDSILICON,GR154618,14April
r
Ba
2004)
corpora
Do the powers of a foreign corporation’s resident agent include the authority to execute a
mshoppi
shoppi
certificationagainstforumshoppingonbehalfofitsprincipal?

r
while a re of act
ac
NO.Thisisbecausewhilearesidentagentmaybeawareofactionsfiledagainsthisprincipal(a
Ba
foreign corporation on doin es, being
doing business in the Philippines, be the one authorized to receive
ther
services and otherer legal
leg processes on its behalf),), such
suc resident may not be aware of actions
such
es
its
ts principal,
initiated byits prin ppines
pines againsta
whether in the Philippines a domesticcorporation or private
bl
o in
or
individual, or in the country where such corporation
orporati
rporat was organized and registered, against a
eg lipino
pino ci URS,
PhilippineregisteredcorporationoraFilipinocitizen.(EXPERTRAVEL&TOURS,INC.vs.COURT
o
r
.R.
R. No. 1
OFAPPEALSandKOREANAIRLINES,G.R.No.152392,26May2005)
R

Ba
an
corporat
orporat utt licen
Wheretheinsured(aforeigncorporationdoingbusinesswithoutlicense)isincapacitatedto
es
ourts, wo rer,
er, in ex
e
suebeforethePhilippinecourts,woulditfollowthatitsinsurer,inexercisingitssubrogation
h
bl
om suc
rights,wouldalsosufferfromsuchincapacity?
C

o
r
obligat
NO.Rightsinheritedbyasubrogeepertainonlytotheobligationsnottocapacity.Incapacityof acity of
R
er exerc
theinsuredwillnotaffectthecapacityoftheinsurerexercisingitsrightofsubrogationbecause
Ba
n becau
an
ed by
capacity is personal to its holder. It is conferred by law
l and not by the parties.s. (LORENZO
(LOR
es
h
SHIPPINGvs.CHUBB&SONS,8June2004)
bl
C

Would a pending intracorporate case against an officer preclude the e filing
filing of a criminal
o
actionagainstthesaidofficer?
R
an

The filing of the civil/intracorporate case before the SEC (now w RTC)
RTC) does not preclude the
h
ree the re
simultaneousandconcomitantfilingofacriminalactionbeforetheregularcourts;suchthat,a
C
fraudulent act may give rise to liability for violation of the rules
rules and regulations of the SEC
cognizablebytheSECitself,aswellascriminalliabilityforviolationoftheRevisedPenalCode
cognizable by the regular courts, both charges to be filed and proceeded independently, and
maybesimultaneouslywiththeother.

25
A dispute involving the corporation and its stockholders is not necessarily an intracorporate
dispute cognizable only by the Securities and Exchange Commission. Nor does it ipso facto
negatethejurisdictionoftheRegionalTrialCourtoverthesubjectcases.Itshouldbeobvious
thatnoteveryconflictbetweenacorporationanditsstockholdersinvolvescorporatematters
thatonlytheSECcanresolveintheexerciseofitsadjudicatoryorquasijudicialpowers.”The
betterpolicyindeterminingwhichbodyhasjurisdictionoveracasewouldbetoconsidernot
onlytherelationshipofthepartiesbutalsothenatureofthequestionsraisedinthesubjectof
the controversy. (PEOPLE vs. FERNANDEZ and HAJIME UMEZAWA, GR No. 149403, 04 March
2005)

Statetherequisitesforthecreationofa f a mana
managementcommittee.
r
Ba

f a mann
Therequisitesforthecreationofamanagementcommittee,towit:(1)animminentdangerof
es
dissipation, loss, wastage or or destr
dest
destruction of assets or other properties of respondent
ysis
sis of its
corporation;and(2)paralysisofitsbusinessoperationswhichmaybeprejudicialtotheinterest
bl
petitione
etition
ofthepartieslitigants,petitioners,orthegeneralpublic.
o
r

R
Ba
, the
he rec
re een no
Inthecaseatbar,therecordsshowthattherehasbeennoslackinthebusinessoperationsof
an
on. Furth
the corporation. Furt
Further, mere possibility withoututt proof
proo
pro o of abusing corporate positions and
es
dissipation of
of asse
ass
assets and properties of the e corporation
corpo is not a valid ground for the
h
bl
en of
ent /receive
receive
appointmentofamanagementcommittee/receiver.(SYCHIMvs.SYSIYHO,G.R.No.164958,
C
20
27January2006)
o
r

R
ExplaintheSERIOUSSITUATIONTEST. EST.
ST.
Ba
an

es
court shs e compa
Inappointingareceiver,thecourtshouldconsiderwhetherthecompany’sfinancialsituationis
h
bl
iss a cle hatt it wi

seriousandwhetherthereisaclearandimminentdangerthatitwillloseitscorporateassetsif f
C
P OURT
R OF
areceiverisnotappointed.(PRYCECORPORATIONvs.COURTOFAPPEALS,G.R.No.172302,04 , 04
o
r
February2008)
R

Ba
an
tify
fy the a
Doesthemisconductofdirectorsorofficersjustifytheappointmentofareceiver?
es
h

bl
C
offic
office
Misconduct of corporate directors or other officers appoin
is not a ground for the appointment of a
fficers, w
receiverwherethereareoneormoreadequatelegalactionagainsttheofficers,wheretheyare
o
solvent, or other remedies. The appointment of a receiver for a going ing
ng corporation
corp is a last
R
an
resort remedy, and should not be employed when another remedy medy
edy is
iis available. Relief by
f there
receivershipisanextraordinaryremedyandisneverexercisedifthereisanadequateremedy
h
estrainin
strainin
atlaworiftheharmcanbepreventedbyaninjunctionorarestrainingorder.Badjudgmentby
C
com
directors,orevenunauthorizeduseandmisapplicationofthecompany’sfunds,willnotjustify
the appointment of a receiver for the corporation if appropriate relief can otherwise be had.
(AOASvs.CA,G.R.No.128464,20June2006)

26
Discusstheeffect/softhecreationofamanagementcommittee.

The appointment will result in suspension of all actions against the corporation, the avowed
objective of which is to enable such management committee or rehabilitation receiver to
effectively exercise its powers free from any judicial or extrajudicial interference that might
unduly hinder or prevent the rescue of the distressed company.(TYSON’S SUPER CONCRETE,
INC.,etal.vs.COURTOFAPPEALS,etal.,G.R.No.140081,23June2005)

Are labor claims likewise suspended upon the creation of a management committee or
appointmentofareceiver?

r
Ba
The law is clear: upon the creation n of
of aa management committee or the appointment of a
fo act
for ct
rehabilitationreceiver,allclaimsforactions“shallbesuspendedaccordingly.”Noexceptionin
es
oned
ned in
favoroflaborclaimsismentionedinthelaw.(LINGKODMANGGAGAWASARUBBERWORLD,et
ILS.)
LS.) INC
al.VS.RUBBERWORLD(PHILS.)INC.,etal.,G.R.NO.153882,JANUARY29,2007)
bl

o
r
ed regar
Areactionssuspendedregardlessofthestageofproceedings? edings?
dings
R
Ba

an
n of all a e corp
corpoo
Thesuspensionofallactionsforclaimsagainstthecorporationembracesallphasesofthesuit,
es
the tria
tri before
efore t
beitbeforethetrialcourtoranytribunalorbeforethisCourt.Nootheractionmaybetaken,
h
bl
th rendition
the
including the re of judgment during g the
the state
st of suspension. It must be stressed that
C
ut
what are automatically ended
ded are
stayed or suspended a the proceedings of a suituit
it and
a not just the
an
o
r
ion
on stag me final
paymentofclaimsduringtheexecutionstageafterthecasehadbecomefinalandexecutory.
R
RLINES,
INES, I
Ba
us 29, 20
(GARCIA,ETAL.VS.PHILIPPINEAIRLINES,INC.,G.R.No.164856,August29,2007)
an

es
Are nonpecuniary claims also also stayed
sta f a
with the creation of a management
man committee or
h
bl
appointmentofareceiver? ?
C
r
on
n receiver,
When a corporation is taken over by a rehabilitation rece
recei all creditors stand on equal
equal
R
y paying
footing,notanyoneshouldbegivenpreferencebypayingaheadofothercreditors.Allclaims
Ba
A claim
Al
an
on
n Corp
whether pecuniary or not. The Interim Rules on Corporate Rehabilitation define e aa cla
claim as
es
h
er natu
referring to all claims, demands of whatever nature or character against the e debto
debtor or its
bl
C
properties,whether for money or otherwise.e The ssing,

sing, th
The definition is so encompassing, there are no
eptemb
eptembe
distinctionsorexemptions.(SOBREJUANITEvs.ASB,G.R.No.165675,30September2005)
o

R
an
Isenforcementofmaritimelienalsoaffectedbythesuspensionorder? der?
er?

h
PD 902A mandates that upon appointment of a management ement committee, rehabilitation
C
ons
ons,
receiver,boardorbody,allactionsforclaimsagainstcorporations,partnershipsorassociations
undermanagementorreceivershippendingbeforeanycourt,tribunal,boardorbodyshallbe
suspended. PD 902A does not make any distinction as to what claims are covered by the
suspension of actions for claims against corporations under rehabilitation. No exception is
madethereininfavorofmaritimeclaims.Thus,sincethelawdoesnotmakeanyexemptionsor
distinctions,neithershouldwe.Ubilexnondistinguitnecnosdistingueredebemos.
27
The issuance of the stay order by the rehabilitation court does not impair or in any way
diminish a creditor’s preferred status. The enforcement of its claim through court action was
merely suspended to give way to the speedy and effective rehabilitation of the distressed
shipping company. Upon termination of the rehabilitation proceedings or in the event of the
bankruptcy and consequent dissolution of the company, the creditor can still enforce its
preferred claim upon the company. (NEGROS NAVIGATION vs. COURT OF APPEALS, 10
December2008)

e prior
Doesapetitionforrehabilitationrequirepriorfilingofpetitionforsuspensionofpayment?
r
Ba
e asset
asse
Acorporationmayhaveconsiderableassetsbutifitforeseestheimpossibilityofmeetingits
ear,
ar, it s
obligationsformorethanoneyear,itisconsideredastechnicallyinsolvent.Thus,atthefirst
es
ilee a pet
instance,acorporationmayfileapetitionforrehabilitation—aremedyprovidedunderSec.41
bl
on
n Corp
oftheRulesofProcedureonCorporateRecovery.
o
r
oned tec
te c. 312,
WhenSec.41mentionedtechnicalinsolvencyunderSec.312, 12, itwasreferringtothedefinition
R
Ba
vency
ency in requir
requiri
oftechnicalinsolvencyinthesaidsection;itwasnotrequiring,therefore,apreviousfilingofa
an
spension
ensio URT
RT OF
OF
petitionforsuspensionofpayments.(PNBvs.COURTOFAPPEALS,G.R.No.165571,20January
es
2009)
h
bl

C
on Plan to
o non
DoestheapprovaloftheRehabilitationPlanviolatethecreditors’righttononimpairmentof
r
R
Ba
contracts?
an
provides
rovides off a ma
m
Section6[c]ofP.D.No.902Aprovidesthat"uponappointmentofamanagementcommittee,
es
d or
rehabilitation receiver, board or body,
bo ee,
e, all
pursuant to this Decree, all actions
a
ac for claims against
h
bl
corporations, partnerships or
or ass
associations under managementent
nt or
or receivership
r pending before
C
b
anycourt,tribunal,boardorbodyshallbesuspended."
o
r
R
Ba
ointmen
ntmen
TheapprovaloftheRehabilitationPlanandtheappointmentofarehabilitationreceivermerely mere
merely
an
ent corporations.
suspend the actions for claims against respondent corp erred
rred status
A creditor’s preferred t
es
mortgage nforcem
overtheunsecuredcreditorsrelativetothemortgageliensisretained,buttheenforcementof
h
bl
h en
such preference is suspended. Considering that enforcement of loan (including ing
ng preference)
pref is
C
merely suspended, there is no impairment of f contracts, specifically its lien
en in
in the
th mortgaged
o
properties.(ibid)
R
an

mplying
plying
DecidewhetherreceivershipwillexcusetheCompanyfromcomplyingwiththereinstatement
h
orderoftheLaborArbiter.
C
Caselawrecognizesthatunlessthereisarestrainingorder,theimplementationoftheorderof
reinstatement is ministerial and mandatory. This injunction or suspension of claims by
legislativefiat partakesofthenatureofarestrainingorderthatconstitutesalegaljustification
for respondent’s noncompliance with the reinstatement order. The Company’s failure to
28
exercisethealternativeoptionsofactualreinstatementandpayrollreinstatementistherefore
justified.Suchbeingthecase,theCompany’sobligationtopaythesalariespendingappeal,as
thenormaleffectofthenonexerciseoftheoptions,didnotattach.
While reinstatement pending appeal aims to avert the continuing threat or danger to the
survivaloreventhelifeofthedismissedemployeeandhisfamily,itdoesnotcontemplatethe
periodwhentheemployercorporationitselfissimilarlyinajudiciallymonitoredstateofbeing
resuscitated in order to survive. (GARCIA vs. PHILIPPINE AIRLINES, INC., G.R. No. 164856, 20
January2009)

e liquida
DoestheSEChavejurisdictionovertheliquidationofadissolvedcorporation?
r
end
nd to
SEC’s jurisdiction does not extendBa to the liquidation of a corporation. While the SEC has
es
olution
ution of a corporation, jurisdiction over the liquidation of the
jurisdiction to order the dissolution
o the ap
a
corporationnowpertainstotheappropriateregionaltrialcourts.Thisisthecorrectprocedure
bl
of a co leme
em
becausetheliquidationofacorporationrequiresthesettlementofclaimsforandagainstthe
o
r
clearly
early fa f the re
corporation,whichclearlyfallsunderthejurisdictionoftheregularcourts.(CONSUELOMETAL
R
Ba
PLANT
PLANTE .R. No.
No
CORPORATIONvs.PLANTERSDEVELOPMENTBANK,G.R.No.152580,26June2008)
an

es
Does the SEC ha
hav
SEC have the power to collect fees
fees fo
for examining and filing of articles of
h
bl
ation
tion an
incorporationandbylaws?
C
r
TheauthorityoftheSECtocollectand d receivefeesasauthorizedbylawisnotinquestion.Its
receiv w iss not
R
Ba
ning
ing and
power to collect fees for examining an ration and bylaws and
and filing articles of incorporation
an
es of inc apital
pital sto
to
amendmentsthereto,certificatesofincreaseordecreaseofthecapitalstock,amongothers,is
es
hed is it
i D No. 9
D.
recognized.LikewiseestablishedisitspowerunderSec.7ofP.D.No.902Atorecommendto
h
bl
the President the revision, altera stment

tment of the charges which it is
alteration, amendment or adjustment
C
G No.
o. 1640
authorizedtocollect.(SECvs.GMANETWORK,INC.,G.R.No.164026,23December2008)
o
r

R
ATIO
TION
NC
SECURITIESREGULATIONCODE
Ba
an
es
h
bl
C
UnderwhatconditionsmaytheSECissueaceaseanddesistorder?
ease
o

R
There are two essential requirements that must be complied with by by the
the SSEC before it may
an
issueaceaseanddesistorder:First,itmustconductproperinvestigationor
stigation
gation verification;and
Second, there must be a finding that the act or practice, unless
s restrained,
restr
restra will operate as a
h
fraudoninvestorsorisotherwiselikelytocausegraveorirreparableinjuryorprejudicetothe
eparable
parabl
C
investing public. (SECURITIES AND EXCHANGE COMMISSION N vs. PERFORMANCE FOREIGN

EXCHANGECORP.G.R.154131,20July2006)

Hence,amereclarificatoryconferenceundertakenbytheSECcannotbeconsideredaproper
investigation or verification process to justify the issuance of a CDO. It was merely an initial
29
stageofsuchprocessconsideringthataftertheSECissuedtheCDO,itsoughtverificationfrom
theBangkoSentralngPilipinasonthenatureoftherespondent’sbusinessactivity.(Ibid.)

IstheCDOvalidevenifsignedbyonlyoneSECcommissioner?

NO.TheSECisacollegialbodycomposedofaChairpersonandfour(4)Commissioners.Inorder
toconstituteaquorumtoconductbusiness,thepresenceofatleastthree(3)Commissionersis
required.

ECC
TheissuanceoftheCDOisanactoftheSECitselfdoneintheexerciseofitsoriginaljurisdiction
s.. It
to review actual casesor controversies. It sho
should be clear now that its power to issue a CDO
r
Ba
to an i
cannot,undertheSRC,bedelegatedtoanindividualcommissioner.

es
Out
ut Rul
ExplaintheMandatoryCloseOutRule.

bl
roker
oker o jus
just
Therulevestsuponabrokerordealer,theobligation,notjusttheright,tocancelorotherwise
o
r
r’s order,
liquidate a customer’s orde if payment is not received edd within
wit
with three days from the date of
R
Ba
ord
purchase. The word d "sha
"sh
"shall" as opposed to the word rd "ma
"m
"may," is imperative and operates to
an
, which ABACU
BACUUSS
imposea duty,whichmaybelegallyenforced.(ABACUSSECURITIESCORPORATIONvs.AMPIL,
es
0016, 27
G.R.No.160016,27February2006)
h
bl

C
iol gulation
ulation
HowmayviolationsoftheSecuritiesRegulationCodebepursued?
o
r

R
hee Secu
AcriminalchargeforviolationoftheSecuritiesRegulationCodeis
Ba
specializ
aspecializeddispute.Hence,
an
dministr
ministr mpeten
peten
itmustfirstbereferredtoanadministrativeagencyofspecialcompetence,i.e.,theSEC.Under
es
urisdictio courts will not determine
the doctrine of primary jurisdiction, mine
ine a
a controversy involving a
h
bl
ction
tion of
o al, where
questionwithinthejurisdictionoftheadministrativetribunal,wherethequestiondemandsthe e
C
e specia
pecia
exerciseofsoundadministrativediscretionrequiringthespecializedknowledgeandexpertise rtise
se
o
r
of said administrative tribunal to determine technical ical
cal and
an intricate matters of fact.
and t. The
R
forceme
rceme is particularly vested in tthe
Securities Regulation Code is a special law. Its enforcement
Bahee SE
SEC.
an
ode
de and
Hence,allcomplaintsforanyviolationoftheCodeanditsimplementingrulesandregulations d regula
regu
es
h
mplaint EC
shouldbefiledwiththeSEC.Wherethecomplaintiscriminalinnature,theSECshallindorse C shall
bl
C
the complaint to the DOJ for preliminary ry investigation

in ion.
on. (BAVIERA
and prosecution. (BA vs.
PAGLINAWAN,GRNo.168380,February8,2007)
o
R

an
Whatdoestenderoffermean?Whendoesitapply?
h
ders
e of
Atenderofferisanofferbytheacquiringpersontostockholdersofapubliccompanyforthem
C
r
totendertheirsharesthereinonthetermsspecifiedintheoffer.TheTenderOfferRuleapplies
alsoinanindirectacquisitionarisingfromthepurchaseofsharesofaholdingcompanyofthe
listed firm. Tender offer is in place to protect minority shareholders against any scheme that
dilutes the share value of their investments. It gives the minority shareholders the chance to
30
exitthecompanyunderreasonableterms,givingthemtheopportunitytoselltheirsharesat
thesamepriceasthoseofthemajorityshareholders.

UnderexistingSECRules,the15%and30%thresholdacquisitionofsharesundertheforegoing
provision was increased to thirtyfive percent (35%). It is further provided therein that
mandatory tender offer is still applicable even if the acquisition is less than 35% when the
purchasewouldresultinownershipofover51%ofthetotaloutstandingequitysecuritiesofthe
public company. Whatever may be the method by which control of a public company is
obtained, either through the direct purchase of its stocks or an indirect means, mandatory
INC
tender offer applies. (CEMCO HOLDINGS INC.N vs. NATIONAL LIFE INSURANCE COMPANY, G.R.
No.171815,August7,2007)
r

Ba
es
duct
uct of
Can the RTC order the conduct of a stockholders’ meeting in connection with an intra
s jurisdi
corporatedisputeunderitsjurisdiction?
bl
Yes. The RTC now has s the

the power
p to hear and decide thethe in
intracorporate controversy and
o
r
concomitant to said d power
powe is the authority to issue e orders
order necessary or incidental to the
R
hee powers
carrying out of the pow
Ba
t. Thus,
expressly granted to it. Thus,
hus, the RTC may, in appropriate cases,
an
ding
ing of a olders
ders o
ordertheholdingofaspecialmeetingofstockholdersormembersofacorporationinvolvingan
es
h
orate dis (YUICO

YUICO
intracorporatedisputeunderitssupervision(YUICOvs.QUIAMBAO,513SCRA208,29January
bl
C
2007)

o
r
R
Ba
versy?
ersy?
Whatisanintracorporatecontroversy?
an
y is one hee follo

foll
Anintracorporatecontroversyisonewhich"pertainstoanyofthefollowingrelationships:(1)
es
h
partne
between the corporation, partnership or association and the th
the ppublic; (2) between the
bl
C
asso
assoc farr as its
corporation,partnershiporassociationandtheStateinsofarasitsfranchise,permitorlicense e
on,
n, partnership
to operate is concerned; (3) between the corporation, part
partn d its
or association and
o
r
4)) among
stockholders, partners, members or officers; and (4) amo the stockholders, partners ners or
or
R
Ba
an
associatesthemselves.
es

h
bl
C
Whatisanelectioncontest?
o
or claim
Anelectioncontestreferstoanycontroversyordisputeinvolvingtitleorclaimtoanyelective
R
thee ma
officeinastockornonstockcorporation,thevalidationofproxies,themannerandvalidityof
an
oclamati
clamati of winners, to the
elections, and the qualifications of candidates, including the proclamation
h
office of director, trustee or other officer directly elected by

by the
the stockholders in a close
C
ree the
corporationorbymembersofanonstockcorporationwherethearticlesofincorporationor
bylawssoprovide.

31
CantheSECpassuponthevalidityofproxiesinrelationtoelectioncontroversies?
NO.ThispowerhasbeenwithdrawnfromtheSECbytheSRCandtransferredtotheregular
courts. Questions relating to the proper solicitation of proxies used in election are now
cognizable by the regular courts. However, the power of the SEC to regulate proxies remains
extant and could very well be exercised when stockholders vote on matters other than the
electionofdirectors.(GSISvs.CA,G.R.No.183905,16April2009)

Statethereasonfortheprohibitionagainstinsidertrading.
off inve
Theintentofthelawistheprotectionofinvestorsagainstfraudcommittedwhenaninsider,
r
ntage o
usingsecretinformation,takesadvantageofanuninformedinvestor.Insidersareobligatedto
disclose material information to th
corporation.
Ba
tthe
e oth
other party or abstain from trading the shares of his
es
sed
ed on
The duty to disclose is based on two factors: first, existence of a relationship giving access,
bl
informa
nforma blee on
o
directlyorindirectlytoinformationintendedtobeavailableonlyforacorporatepurposesand
o
r
benefit of anyone and second, the
not for the personal benefit he inher
inhe
inherent unfairness involved when a
R
Ba
ntage
tage of g t is un
partytakesadvantageofsuchinformationknowingitisunavailabletothosewithwhomheis
an
vs. INTERPORT
dealing. (SEC vs. INTE ORATIO
RATION
RESOURCES CORPORATION, N et al., G.R. No. 135808, 6 October
es
2008)
h
bl
C

o
r
for
or purp
Whatisafactofspecialsignificanceforpurposesofinsidertrading?
R
ybe
be (a)
A fact of special significance maybe (a) a material fact which would
Ba
db e lik
be likely, on being made
an
hee mark
generally available, to effect the mar
market price of a security to a signific
signifi
significant extent, or (b) one
es
h
which a reasonable person would

would consider especially importanttant
ant in nd
in determining his course of
bl
C
of sto
actionregardtothesharesofstock.(ibid)
o
r

R
AWS
WS
BANKINGLAWS
Ba
an
es
h
Whatdegreeofdiligencearebanksrequiredtoobserve?
d to
t obs
bl
C
Sincethebankingbusinessisimpressedwithpublicinterest,ofparamountimportancethereto
unt
nt impo
R
is the trust and confidence of the public in general. Consequently,ly,, the
the highest degree of
an
diligenceisexpected,andhighstandardsofintegrityandperformanceareevenrequired,ofit.
ance ar
Bythenatureofitsfunctions,abankisunderobligationtotreattheaccountsofitsdepositors
at the a
h
with meticulous care, always having in mind the fiduciary ry nature
ary na of their relationship.
C
(CITIBANK,N.A.vs.SPOUSESLUISANDCARMELITACABAMONGAN,etal.,G.R.No.146918,02
A
May2006).

Banks handle daily transactions involving millions of pesos. By the very nature of their works
thedegreeofresponsibility,careandtrustworthinessexpectedoftheiremployeesandofficials
32
isfargreaterthanthoseofordinaryclerksandemployees.Banksareexpectedtoexercisethe
highestdegreeofdiligenceintheselectionandsupervisionoftheiremployees.(ibid)

Thus, the Court held that the bank was negligent when it allowed the pretermination of the
account despite noticing the discrepancies in the signature and photograph of the person
claiming to be the concerned depositor. Further the required waiver document has not been
notarizedcontrarytothestandardproceduredesignedtoprotectthebank.(ibid)

Thebankwasalsofoundnegligentandthuscouldnotbeconsideredamortgageeingoodfaith
e re
itappearingthatithadknowledgethattherespondentwasintheUnitedStatesatthetimeher
did
id not
SPAs wereallegedly executed, yet, it did not question their due execution. (CHINA BANKING
r
Ba
VS.LAGON11JULY2006)

es
att bank
TheCourtalsoemphasizedthatbankscannotmerelyrelyoncertificatesoftitleinascertaining
roperties
opertie
thestatusofmortgagedproperties;astheirbusinessisimpressedwithpublicinterest,theyare
bl
ore
re care ings
ngs
expectedtoexercisemorecareandprudenceintheirdealingsthanprivateindividuals.Indeed,
o
r
dealing rely
ly sole
sol
therulethatpersonsdealingwithregisteredlandscanrelysolelyonthecertificateoftitledoes
R
Ba
s. (URSA Octob
Octobe
notapplytobanks.(URSALvs.COURTOFAPPEALS14October2005)
an

es
What is thee relatio sitor
relationship between the depositoritor and
and the bank with respect to the amount
h
bl
d by the
depositedbytheformerwiththelatter?
C

o
r
s depos visions
ThecontractbetweenthebankanditsdepositorisgovernedbytheprovisionsoftheCivilCode
R
creditor
editor
Ba
bank and
onsimpleloan.Thereisadebtorcreditorrelationshipbetweenthebankanditsdepositor.The
an
positor
ositor is orr lend
bankisthedebtorandthedepositoristhecreditor.Thedepositorlendsthebankmoneyand
es
deposito deposit
eposit
thebankagreestopaythedepositorondemand.Thesavingsdepositagreementbetweenthe
h
bl
he con
co rights
ghts an
bankandthedepositoristhecontractthatdeterminestherightsandobligationsoftheparties. s.
C
(BPI vs. FIRST METRO, G.R. N 004) Failure

No. 132390, December 8, 2004) Fai the
he
of the Bank to honor the
o
r
r and non
timedepositisfailuretopayitsobligationasadebtorandnotabreachoftrustarisingfroma from a
R
of the
depository's failure to return the subject matter of the deposit.
de
Ba
ship
h being
Thus, the relationship bein
an
edy
dy since
contractual,mandamusisnotanavailableremedysincemandamusdoesnotlietoenforcethe o enforc
enfor
es
h
LUCMAN
performance of contractual obligations. (LUCMANUCMAN vs. MALAWI, et al., G.R. R. No.
No. 158794,
bl
C
December19,2006)

o
R
HowdoesDOSRIviolationdifferfromestafa?
an
with
ith pro
ADOSRIviolationconsistsinthefailuretoobserveandcomplywithprocedural,reportorialor
h
to a dire
ceilingrequirementsprescribedbylawinthegrantof aloantoadirector,officer,stockholder
C
and other related interests in the bank, i.e. lack of written appr
approval of the majority of the
directorsofthebankandfailuretoentersuchapprovalinto corporaterecordsandtotransmit
acopythereoftotheBSPsupervisingdepartment.Theelementsofabuseofconfidence,deceit,
fraudorfalsepretenses,anddamage,whichareessentialtotheprosecutionforestafa,arenot
elements of a DOSRI violation. (SORIANO vs. PEOPLE OF THE PHILS., et al., G.R. No. 159517, 30
June2009)
33
Respondents, as directors and officers of a bank, were accused of engaging in unsafe,
unsound, and fraudulent banking practices, more particularly, acts that violate the
prohibition on selfdealing. In question was the manner with which the directors have
handled the affairs of the bank, in particular, the fraudulent loans and dacion en pago
authorizedbythedirectorsinfavorofseveraldummycorporationsknowntohavecloseties
and are indirectly controlled by the directors. Decide whether the case is within the
jurisdictionoftheBSPorregularcourt.
he
Theallegationcallfortheexaminationoftheallegedlyquestionableloans.Whethertheseloans
dealing
arecoveredbytheprohibitiononselfdealingisamatterfortheBSPtodetermine.Theseare
r
s; rath
rathee
notordinaryintracorporatematters;rather,theyinvolvebankingactivitieswhichare,bylaw,
BSP
SP
regulatedandsupervisedbytheBSP. Ba
es
and jurisprudence
It is wellsettled in both law and jur that the Central Monetary Authority, through
bl
ested
theMonetaryBoard,isvestedwithsted wi
w exclusive authoritytoassess,evaluateanddeterminethe
condition of any bank, k, and
and finding such condition to be be one of insolvency, or that its
o
r
ness
ess wou to its de
continuanceinbusinesswouldinvolveaprobablelosstoitsdepositorsorcreditors,forbidbank
R
ncial
cial ins
Ba
he Philip
ornonbankfinancialinstitutiontodobusinessinthePhilippines;andshalldesignateanofficial
an
other
ther co err to im
i
oftheBSPorothercompetentpersonasreceivertoimmediatelytakechargeofitsassetsand
es
liabilities.
h
bl
C
ratio eral
ral law pora
or
TheCorporationCode,however,isagenerallawapplyingtoalltypesofcorporations,whilethe
o
r
ically ba titutions
tutions
NewCentralBankActregulatesspecificallybanksandotherfinancialinstitutions,includingthe
R
Ba
f. As
dissolution and liquidation thereof. As be
b cial law
between a general and special law, the latter shall
an
non
on de
prevail – generalia specialibus non d
derogant. (ARCENAS, JR. vs. HON
HO N MARELLA, G.R. Nos.
HON.
es
168332/169053,19June2009) 9))
h
bl

C
r
be inte bank
ank
Wouldtheperiodtoforeclosearealestatemortgagebeinterruptedifthemortgageebank
R
Ba
weretobeplacedunderreceivership?
an
receiver'
eceiver' nisteri
nisterin
NO.xxxForeclosureofmortgagesispartofthereceiver's/liquidator'sdutyofadministeringthe
es
s and cr scriptive
riptive
bank'sassetsforthebenefitofitsdepositorsandcreditors.Thetenyearprescriptiveperiod
h
bl
bank nder
der rec
wouldnotbeinterruptedifthemortgageebankweretobeplacedunderunderreceivership.
C
strued
TheMonetaryBoard'sprohibitionfromdoingbusinessshouldnotbeconstruedasbarringany
o
and all business dealings and transactions by the bank. Foreclosure re
e is
is not
no among those
R
stent
nt wi
activities which banks are prevented from doing for it is consistent w
with the purpose of
an
erve
rve the
receivership proceedings, i.e., to receive collectibles and preserve the assets of the bank in
h
dissipat
substitution of its former management, and prevent the dissipation of its assets to the
C
ETERA
TERA BANK, G.R. No. 135706,
detriment of the creditors. (SPS. LARROBIS vs. PHILIPPINE VETERANS
October1,2004)

TheMonetaryBoardissuedaResolutionorderingtheliquidationofPhilippineVeteransBank.
A number of employees accepted their separation pay while the others chose to question
34
their separation. Subsequently, Congress enacted RA 7169 authorizing the reopening of the
bank.TheaffectedemployeesarenowclaimingthatRA7169effectivelynullifiedtheearlier
resolutionoftheMonetaryBoardandineffect,alsonullifiedtheirtermination.

Upon implementation of the Monetary Board resolution and prior to the passage of R.A. No.
7169,theBankhadalreadyceasedtoexist.Itssubsequentrehabilitationwasnotanordinary
rehabilitation.R.A.No.7169hadtobepassedasalegislativefiattobreathelifeintotheBank.
WhileitistruethattheBankuseditsoldname,anewlawhadtobeenactedtorestructureits
outstandingliabilities.xxx

The enactment of R.A. No. 7169 did d not,
not, ttherefore, nullify the subject resolution of the
r
Ba
d the Ba
B
MonetaryBoardwhichearlierplacedtheBankunderliquidationandcausedtheterminationof
employment of the petitioners. The
Th Ba
The Bank’s subsequent rehabilitation did not, by any test of
es
reason,“revive”whatwasalreadyready
eady adeadrelationshipbetweenthepetitionersandtheBank.
a
NLRC,
LRC, 17
(CORNISTADOMINGOvs.NLRC,17October2006)
bl
o
r
Does Section 30 of f RA
RA 7653
76 (The New Central Bank nk Act)
Act) require a current and complete
R
thee bank
Ba
d placed
placed
examinationofthebankbeforeitcanbeclosedandplacedunderreceivership?
an

es
h
No. From the

the wor 53
3 no
words used in Sec. 30, RA 7653 no lo
longer requires an examination before the
bl
C
of a
issuance of a closure order. Where the words
words of a statute are clear, plain
ain and free from
meanin and applied without attempted
meaning
ambiguity, it must be given its literal meaning mpted interpretation.
o
r
anothe port” o
TheCourtcannotlookfororimposeanothermeaningontheterm“report”ortoconstrueitas
R
Ba
an
synonymouswith“examination.”

es
h
ation
tion be did not
no
Theabsenceofanexaminationbeforetheclosureofabankdidnotmeanthattherewasno
bl
C
r N
basis for the closure order. on
Needless to say, the decisionn of
of th
tthe Monetary Board and the
hee
o
have som
so
CentralBank,likeanyotheradministrativebody,musthavesomethingtosupportitselfandits ndd its
ts
r
R
Ba
vidence.
ence
findingsoffactmustbesupportedbysubstantialevidence.ButitisclearunderRA7653that 53 that
an
equired
uired
thebasisneednotarisefromanexaminationasrequiredintheoldlaw.
es

h
ure
re off a
Thepurposeofthelawistomaketheclosureofabanksummaryandexpeditiousinorderto itious
tious in
bl
C
no nger
ger req
protectpublicinterest.Thisisalsowhypriornoticeandhearingarenolongerrequiredbefore
o
a bank can be closed. (RURAL BANK OF SAN MIGUEL, INC. vs. MONETARY TARY BOBOARD, G.R. No.
R
150886,16February2007)
an

Discusstheeffectsofabankclosure.
h

C
The bank’s closure did not diminish the authority and powers o of the designated liquidator to
effectuate and carry on the administration of the bank. The bank liquidator is allowed to
continue receiving collectibles and receivables or to pay off creditor’s claims and other
transactions pertaining to the normal operations of the bank. Among these transactions are the
prosecutionofsuitsagainstdebtorsforcollectionandtheforeclosureofmortgages.Thebankis
35
allowedtocollectinterestsonitsloanswhileunderliquidation,providedthattheinterestsare
legal.Infine,theinterestrateontheloanagreeduponbetweenthepartiesisnotexcessiveor
unconscionable; and that during the closure of respondent bank, it could still function as a
bondinginstitution,hence,couldcontinuecollectinginterestsfrompetitioners.(BACOLORvs.
BANCOFILIPINOSAVINGSANDMORTGAGEBANK,G.R.No.148491,08February2007)

Doestheliquidationofabankrequireapriortaxclearance?

No.TheliquidationofabankisundertakenaccordingtoSec.30oftheNewCentralBankAct.
din for receivership and liquidation of a bank. It is
ding
The said provision lays down the proceedings
clearanc
earanc
silentasregardsthesecuringofataxclearancefromtheBIR.Theomissioncannotcompelthe
r
Ba
learanc
CourttoapplybyanalogythetaxclearancerequirementoftheSECsincethedissolutionofa
diffe
iff ren
en
corporationbytheSECistotallydifferentfromthereceivershipandliquidationofabankbythe
es
BSP.

bl
fference
ference olunta
un
Therearesubstantialdifferencesintheprocedureforinvoluntarydissolutionandliquidationof
o
r
the Cor f a bank
ban
acorporationundertheCorporationCode,andthatofabankingcorporationundertheNew
R
Ba
so that annot s
CentralBankAct,sothattherequirementsinonecannotsimplybeimposedintheother.(IN
an
RE: PETITION FOR OR A DATION OF THE RURAL BANK OF BOKOD
ASSISTANCE IN THE LIQUIDATION
es
INC. (RBBI),
(BENGUET), INC. (R NSURAN
SURAN CORPORATION (PDIC) vs. BUREAU OF
PHILIPINE DEPOSIT INSURANCE
h
bl
L REVEN 18 Dece
INTERNALREVENUE(BIR),G.R.No.158261,18December18,2006)
C
r
der RA May tr
AretrustaccountsalsoprotectedunderRA1405(BankSecrecyLaw)?Maytrustaccountsbe
R
under
der ca
examinedinconnectionwithaplundercasewithoutviolatingthelaw?
Ba
w?
an

es
RA 1405 is broad enough too cover
cover trust accounts because the e term
term “deposit” as used in RA
h
bl
roadly
oadly counts
1405istobeunderstoodbroadlyandnotlimitedonlytoaccountswhich unts w giverisetoacreditor
C
debtor relationship between the depositor and the bank. nk.. If

f th
If the money deposited under an an
o
r
account may be used by banks for authorized loans nss to
to th ccount,
third persons, then such account,
R
relation
lation
regardlessofwhetheritcreatesacreditordebtorrelationshipbetweenthedepositorandthe
Ba
or andnd th
an
ich
ch the
bank, falls under the category of accounts which otect
tect for
the law precisely seeks to protect f the
fo
es
h
ent of th
purposeofboostingtheeconomicdevelopmentofthecountry.
bl
C

examin
examina
However,thereareexceptionsontheprotectionunderRA1405:(1)theexaminationsofbank
o
eliction
liction
accountsisuponorderofacompetentcourtincasesofbriberyorderelictionofdutyofpublic
R
an
matter
atter of
officials, and (2) the money deposited or invested is the subjectmatter of litigation. The first
titioner
itioner
exceptionappliessincetheplundercasependingagainstthepetitionerisanalogoustobribery
h
or dereliction of duty and the second, because the money y deposited
depos in petitioner’s bank
C
accounts form part of the subject matter of the same e plunder
p
pl case. (EJERCITO vs.
SANDIGANBAYANANDPEOPLEOFTHEPHILIPPINES,G.R.No.15729495,30November2006)

36
Whenacodepositorinquiresintothedeposit,doesheneedthewrittenconsentoftheother
depositor?

A copayee in a check deposited in a bank is likewise a codepositor. No written consent
thereforeoftheothercopayeeisneededinaninquiryofthedepositsbythe saidcodepositor.
(CHINABANKINGCORPORATIONvs.COURTOFAPPEALS,G.R.No.140687,18December2006)

Canaforeignerowncapitalstockinaruralbank?

No. Section 4, Republic Act No. 7353, prov
rov
provides that with the exception of shareholdings of
old
d equi
corporationsorganizedprimarilytoholdequitiesinruralbanksasprovidedforunderSection
r
Ba
12C of Republic Act No. 337, as amende
amended, and of Filipinocontrolled domestic banks, the
hall
all be f
capitalstockofanyruralbankshallbefullyownedandhelddirectlyorindirectlybycitizensof
ns,
s, assoc
thePhilippinesorcorporations,associationsorcooperativesqualifiedunderPhilippine lawsto
stock.
tock. (B
ownandholdsuchcapitalstock.(BULOS,JR.vs.KOJIYASUMA,G.R.No.164159,July17,2007)

r
clause o
Explainthedragnetclauseorblanketmortgageclause? ?
iss one
A dragnet clause is
origins. Such clauses
clauses are "carefully scrutinized Ba
one which is specifically phrased
ed to
d and
to subsume
su all debts of past and future
and strictly construed." Mortgages of this
es
enable t nuous
uous de
d
characterenablethepartiestoprovidecontinuousdealings,thenatureorextentofwhichmay
bl
nown
own or anticipated at the time,, and
not be known and th
they avoid the expense and iinconvenience of
executing a new security on each new new transaction.
t
tra use"
A "dragnet clause"se" operates
o as a
o
r
convenience and accommodation to too the
the borrowers
b ailable additional funds
as it makes available
R
Ba
an
dditiona
itiona eby
by savi
withouttheirhavingtoexecuteadditionalsecuritydocuments,therebysavingtime,travel,loan
gal
al servi ra
a. (PRO
(PR
closingcosts,costsofextralegalservices,recordingfees,etcetera.(PRODUCERSBANKOFTHE
es
h
RIES,
IES Inc
PHILS.vs.EXCELSAINDUSTRIES,Inc.,G.R.No.152071,8May2009) 009)
bl
C

o
r
Machang Realty was incorporated to hold and purchase hase real
chase re properties in trust for PiguePigue
gue
R
Ba
Bank. This was conceived by Pigue Bank in view ew of the limit on a bank’s allowable
w of owabl
an
investments in real estate to 50% of its capital

al assets.
asset In the implementation of
assets of the
the trust
t
es
agreement, Pigue Bank sold to Machang Realtyealty some
so
som of its real properties while
while the latter
hile the
h
bl
simultaneously leased to the former the properties for 20 years. Eventually,
e prope
prop ually, Machang
ntually,
C
repudiatedthetrust,claimedthetitlesforitselfanddemandedpaymentofrentals,deposits
se t of rent
o
and goodwill, with a threat to eject Pigue Bank. Pigue Bank filed filed a
a complaint for
R
reconveyanceofthepropertiesagainstMachangRealty.Willthecaseprosper? see prosp

an
h
The agreement between the parties adverted to as an implied
ed trust
rus is contrary to law. Thus,
trust
C
whilethesaleandleaseofthesubjectpropertyisgenuineandbindinguponthe
nd b parties,the
implied trust cannot be enforced even assuming the parties intended to create it. xxx "the
courtswillnotassistthepayorinachievinghisimproperpurposebyenforcingaresultanttrust
for him in accordance with the ‘clean hands’ doctrine." Pigue Bank cannot thus demand
reconveyance of the property based on its alleged implied trust relationship with Machang
Realty.
37
Thepartiesbeinginparidelicto,thus,noaffirmativereliefshouldbegiventooneagainstthe
other.PigueBankshouldnotbeallowedtodisputethesaleofitslandstoMachangRealtynor
should Machang Realty be allowed to further collect rent from Pigue Bank. The clean hands
doctrinewillnotallowthecreationnortheuseofajuridicalrelationsuchasatrusttosubvert,
directlyorindirectly,thelaw.Neitherpartycametocourtwithcleanhands;neitherwillobtain
relief from the court asthe one who seeks equity and justice must come to court with clean
hands.(TALAREALTY,etal.vs.COURTOFAPPEALS,7April2009)
INTELLECTUALPROPERTY
r
ExplaintheDOCTRINEOFSECONDARYMEANING. Y MEAN

Ba
Awordorphraseoriginallyincapableofexclusiveappropriationwithreferencetoanarticleon
apable
pable
the market, because geographically
phically or otherwise descriptive, might nevertheless have been
aphically
usedsolongandsoexclusivelybyoneproducerwithreferencetohisarticlethat,inthattrade
sively
vely by
and to that branch of the
the
he purchasing
pur public, the word oror phra
phrase has come to mean that the
r
articlewashisproduct.(LYCEUMOFTHEPHILS.vs.CA,219SCRA610)
uct.
ct. (L
(LYC
Y 219 SCR

If the mark “GALLO
“GALLO”
GALLO has been registered for Ba
r wine
wine products, would its use on cigarette
es
productsconstituteaninfringementoftrademark?
onstitut emark?
mark?
bl

NO. The goods are different from each ch other.
oth
othe There are (1) substantial differences on the
al diffe
o
r
trademarkitselfapplyingthedominancyandholistictest,(2)theyareofdifferentchannelsof
ancy
ncy an of diffe
R
Ba
an
trade, (3) they have different qualities

alities and purpose, (4) there is a m
ualities marked
rke difference on the
arked
priceofgoods.
es
h

bl
C
Itiswellsettledbyjurisprudencethatatrademarkregistrationcanonlyextendtothoseitems
denc ation
tion ca ms
o
that are included in the certificate. (MIGHTY CORPORATION ATION and LA CAMPANA FABRICA A DE
DE
r
R
Ba
TABACO,INC.vs.E.&J.GALLOWINERYandTHEANDRESONSGROUP,INC.,G.R.
NDRESO
DRESO No.154342.
154342.
an
July14,2004citingSterlingProductsInternationalInc.vs.FarbenfabrikenBayer(27SCRA1214
l Inc. vs
v SCRA
CRA 12
es
[1969])
h

bl
C
ExplaintheDOCTRINEOFEQUIVALENTS.
o

R
The doctrine of equivalents provides that an infringement also takes kess place
plac when a device
an
appropriatesapriorinventionbyincorporatingitsinnovativeconceptand,althoughwithsome
ept and,
and
modification and change, performs substantially the same function ction in substantially the same
tion in
h
waytoachievesubstantiallythesameresult.(SMITHKLINEBECKMANCORPORATIONvs.CA,et
ECKMA
C
al.,G.R.No.126627,14August2003)

38
Statetheelementsofunfaircompetition.

The essential elements of an action for unfair competition are (1) confusing similarity in the
generalappearanceofthegoodsand(2)intenttodeceivethepublicanddefraudacompetitor.
Theconfusingsimilaritymayormaynotresultfromsimilarityinthemarks,butmayresultfrom
otherexternalfactorsinthepackagingorpresentationofthegoods.Theintenttodeceiveand
defraudmaybeinferredfromthesimilarityoftheappearanceofthegoodsasofferedforsale
to the public. Actual fraudulent intent need not be shown. (INNOUT BURGER, INC. vs.
SEHWANI,INC.,G.R.No.179127,24December2008)

a prejud
Doesaninfringementcaseconstituteaprejudicialquestiontoanunfaircompetitioncase?
r
Ba

ion
on s nce
NO.Thereisnoprejudicialquestionsincethetwoactionsanactionforinfringementandunfair
es
nt of eac
competition–areindependentofeachofother.Thebasisofanactionforunfaircompetitionis
ement,
ment, t
fraud,whilethatofinfringement,thefactofregistration.
bl

o
r
s no
At any rate, there is no prejudicial
pr ivilil (infringement)
question if the civil (inf and criminal (unfair
R
Ba
on can,
competition) action can, according to law, proceed independently
indepe of each other. Under Rule
an
of the R roced
ocedurr
111,Section3oftheRevisedRulesonCriminalProcedure,inthecasesprovidedinArticles32,
es
2176 of ndent
dent civ
33,34and2176oftheCivilCode,theindependentcivilactionmaybebroughtbytheoffended
h
bl
t shall
party. It shall
all proceed independently off the the criminal action and shall require only a
C
nc s. HON.
preponderanceofevidence.(SAMSONvs.HON.REYNALDOB.DAWAY,etal.,G.R.Nos.160054 l.,, G.R
G
o
r
55.21July2004)
R

Ba
an
onfusion
nfusion arising from the use of similar
What are the two types of confusion imilar
milar or colorable imitation
es
marks?
h
bl

C
sion n of
Section22,IPCcoverstwotypesofconfusion:a)confusionofgoods(productconfusion),“in “in
o
r
e induce
induc
whicheventtheordinarilyprudentpurchaserwouldbeinducedtopurchaseoneproductinthe in the
R
belief that he was purchasing the other” and b) b) confu
confusion of business (source o
Baor orig
origin
an
e differe
differ
confusion),“thoughthegoodsof thepartiesaredifferent,thedefendant’sproductissuchas uct
ct is su
s
es
h
might reasonably be assumed to originate with with the

the plaintiff, and the public would
would then be
bl
C
deceived either into that belief or into the belief ction
belief that there is some connectiontion be
between the
ORPORAT
RPORA
plaintiffanddefendant,which,infact,doesnotexist.”(MCDONALD’SCORPORATION,etal.vs.
o
L.C.BIGMAKBURGER,INC.,etal.,G.R.No.143993,August18,2004)
R
an

DoestheexemptionprovidedbyRA623applyeventolargescalemanufacturing? e manuf
manu
h
C
ate the Use of Duly Stamped or

YES. RA 623, as amended by R.A. 5700 or “An Act to Regulate
Marked Bottles, Casks, Kegs, Barrels and other similar Containers” was meant to protect the
intellectualpropertyrightsoftheregistrantsofthecontainersandpreventunfairpracticesand
fraud on the public. However, Section 6 of the said Act specifically allows the reuse of such
bottlesascontainersfor“sisi”,“patis”,“bagoong”,andothernativeproducts.

39
The law did not distinguish between small scale and large scale manufacturing. Hence,
notwithstandingthatthenativeproductsareproducedonalargescale,thereuseofregistered
bottlesstillcomeswithintheexceptionprovidedbythelaw.(TWINACEHOLDINGSCORP.vs.
RUFINAANDCOMPANY(G.R.No.160191,08June2006)

r
Ba

es

bl
o
r
R
Ba
an
es
h
bl
C
r
R
Ba
an
es
h
bl
C
r
R
Ba
an
es
h
bl
C
o
R
an
h
C
40

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Prof. Maria Zarah R. Villanueva-Castro

stipulated in the documents or superimposed

The independence principle thus liberates the issuing uing bank

There are three significant differences between commercial rcia and

commercial credits involve the payment of money under a a contract

well as its duty to charge its client’s account

if the sight dr

The accommodation party is liable on the instrum

the primary obligation of the bank

of a memorial lot

group insurance policy,, making

t make hee contt

substitution of the consignee.(FEDERAL EXPRESS CORPORATION ORP

CROSS HEALTH CARE, INC. vs. OLIVARES,

automatic policy loan; (c) application of dividend;idend;

ayy direct rein

clause should be expressly y provided

o the fol must be

operator of the same with respect

prevents inconvenience and prejudice to a third third party

unidentified. (NOSTRADAMUS VILLANUEVA vs. vs. PRISCILLA

and irresponsible drivers — reckless because the measure uree of

The defendant’s main business is brokerage gee but

The consignee failed

ortunity to make an investigation of

is one where

registered with the Securities and Exchange Commission sion

A sole proprietorship does not possess a juridical personality

s the rel ployee

4. When the separate identity of the corporation ation

Where thee articles

While a corporation mayayy be a subsidiary of another, it does

iss rem racter

the mere alter ego of another. Where badges of f fraud

For a wrongdoing to make a director personally sonally

s not be ere agr

upon the issuance of a certificate

own charter, the Code particularlyularly

(POLIAND INDUSTRIAL LTD. vs. NATIONAL DEVELOPMENT ELOPME

apply in case of violation of

(2) Any officer or agent of the concerned corporation

et al. vs. YUKAYGUAN, et al., G.R. G.R. No

family corporation. There is iss nothing

In an Agreement, the foreign company’s activities vities

company;and(2)consignmentofequipmentwithsuch ntt wit d in the

It is not do

stt actua e Phili

own name and for its own account. unt.

a foreign corporation does s not

exports its products to the P Philippines, the Philippines s has

MANUFACTURINGINDUSTRIES,INC.,G.R.No.147905,May28,2007) 05, May

Does the engagement of a Filipino nationall to to run emixed

iss a cle hatt it wi

properties,whether for money or otherwise.e The ssing,

the President the revision, altera stment

investing public. (SECURITIES AND EXCHANGE COMMISSION N vs. PERFORMANCE FOREIGN

the complaint to the DOJ for preliminary ry investigation

Yes. The RTC now has s the

orate dis (YUICO

y is one hee follo

office of director, trustee or other officer directly elected by