Golden Beacon On Mercantile Law - 2018

1

2018 GOLDEN BEACON MERCANTILE LAW By: Dean MANUEL R. BUSTAMANTE 1.

“DOING BUSINESS IN THE PHILIPPINES”

B. VAN ZUIDEN BROS. LTD. vs. GTVL MANUFACTURING INDUSTRIES, INC. G.R. No. 147905, May 28, 2007, 523 SCRA 233 Q: What is doing

is the test business in

for the

determining Philippines?

if

an

unlicensed

foreign

corporation

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

of business Philippines , corporation

in the to

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

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

under Section of 1991:

3 (D)

of

orders into

service

offices

4. participating domestic entity

by

in

the

contracts whatever

name

management,

supervision

or

control

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

of

any

under the Philippines totaling at

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

What degree protection of

is the

expected interests

May 2, 2006,

488 SCRA 517

that must be exercised of its depositors?

by

banks

for

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

2

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

What

is

the

nature

of

time

deposit?

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

MACLARING LUCMAN

vs. ALIMANTAR MALAWI

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

OF

BANK

DEPOSITS

FACTS:

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

ISSUE:

What

is

the

nature

of

bank

deposits?

HELD:

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

A PURCHASER OF

MANAGER’S CHECK CAN ASSERT FORGERY

LAND BANK OF THE PHILIPPINES vs. NARCISO L. KHO G.R. No. 205840, July 7, 2016, 796 SCRA 21

3

FACTS:

Respondent Narciso Kho is a sole proprietor of oil trading business. Sometime in December 2006, he entered into a verbal agreement to purchase lubricants from Red Orange Trading . Red Orange insisted that it would only accept a Land Bank manager’s check for payment. Kho, accompanied by Rudy Medel, opened a savings petitioner Land Bank Araneta branch . Kho the purchased a manager’s check valued at P25,000,000 and made payable to Kho requested a photocopy of the manager’s check to give a proof that he had available funds for their transaction.

account at Land Bank Red Orange . Red Orange

Unfortunately, the deal with Red Orange did not push through . Sometimes later, BPI called Land Bank to inform them that Red Orange had deposited a Land Bank manager’s check. A faxed copy of the deposited check was then sent to the clearing office and upon examination , they thought the details matched the check purchased by Kho , Land Bank confirmed the check. Land Bank informed Kho by phone that his check was cleared and paid the BPI. Shocked, Kho informed Land Bank that never negotiated the check because the deal did not materialize and the actual check was still in his possession. They discovered that what was deposited and encashed with BPI was a spurious manager’s check.

ISSUES the

1) Whether a purchaser proximate cause of the

2) Whether manager’s check.

the

Land

of manager’s check can assert forgery loss is the negligence of the bank. Bank

is

liable

for

the

encashed

when

P25,000,000

RULINGS the

1) YES, proximate

a purchaser of a manager’s check can cause of the loss is the negligence of

assert forgery the bank.

when

Kho’s failure to inform Land Bank that the deal did not push through does not justify Land Bank’s confirmation and clearing of a fake check bearing the forged signatures of its own officers . Whether or not the deal pushed through, the check remained in Kho’s possession . He was entitled to a reasonable expectation that the bank would not release any funds corresponding to the check. risk

2) YES, Land Bank of incurring a loss

breached its duty on account of a

The business of banking is industry where the general public’s the paramount importance.

of diligence and assumed forged or counterfeit check.

imbued with public trust and confidence

interest . in the

It is system

the an is

Consequently, banks are expected to exact the highest degree of, if not the utmost, diligence. They are obligated to treat their depositors’ accounts with meticulous care, always keeping in mind the fiduciary nature of their relationship. Banks hold themselves out to the public as experts in determining the genuiness of checks and corresponding signatures thereon . Stemming from their primordial duty of diligence , one of a bank’s prime duties is to ascertain the genuineness of the drawer’s signature on check being encashed. This holds especially true for manager’s checks.

NATIVIDAD GEMPESAW vs. COURT OF APPEALS G.R. No. 92244, February 9, 1993, 218 SCRA 682 Natividad Gempesaw, a businesswoman, completely placed her trust in her bookkeeper. She allowed her bookkeeper to prepare the checks payable to her suppliers. She signed the checks without verifying their amounts and their corresponding invoices. Despite receiving her bank statements, Gempesaw never verified the correctness of the returned checks nor confirmed if the payees actually received payment. This went on for over two years , allowing her bookkeeper to forge the indorsements of over 82 checks.

4

Gempesaw failed to examine her records with reasonable diligence before signing the checks and after receiving her bank statements . Her gross negligence allowed her bookkeeper to benefit from the subsequent forgeries for over two years. Gempesaw’s negligence precluded her from asserting the forgery . Nevertheless, the Supreme Court adjudged the drawee Bank liable to share evenly in her loss for its failure to exercise utmost diligence, which amounted to a breach of is contractual obligations to the depositor.

ASSOCIATED BANK

vs. COURT OF APPEALS

G.R. No. 107382, January 31, 1996, 252 SCRA 620 The Province of Tarlac (the depositor) released 30 checks payable to the order of a government hospital to a retired administrative officer/cashier of the hospital. The retired officer forged the hospital’s indorsement and deposited the checks into his personal account . This took place for over three years resulting in the accumulated loss of P203,300.00. It was held that the Province of Tarlac was grossly negligent , to the point of substantially contributing to its loss . Nevertheless, the High Court apportioned the loss evenly between the Province of Tarlac and the drawee bank because of the bank’s failure to pay according to the terms of the check. It violated its duty to charge the customer’s account only for properly payable items.

3. SECURITIES REGULATION CODE ABACUS

SECURITIES G.R. No. 160016,

Q: What

is

the

mandatory

CORPORATION

vs.

February

27,

2006,

483

close

out

rule

in

RUBEN SCRA

margin

trading?

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

What

is

the

macroeconomic

purpose

A: The margin requirements set out achieve a macro-economic purpose the excessive speculation in securities. is to protect small investors.

of

the

margin

AMPIL

315

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

trading

rule?

in the RSA are primarily intended to protection of the overall economy from Their recognized secondary purpose

BAVIERA vs. PAGLINAWAN G.R. No. 168380,

February 8, 2007, 515 SCRA 170

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

CEMCO HOLDING,

INC.

G.R. No. 171815,

vs.

August

TENDER

NATIONAL 7,

2007,

OFFER

529

RULE

LIFE

INSURANCE

SCRA 2007

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

QUEENSLAND – TOKYO COMMODITIES vs. MATSUDA G.R. No. 159008, January 23, 2007, 512 SCRA 276 COMMODITY

FUTURES

TRADING

Before a future commodity merchant can be held liable under Section 20 of the Revised Rules and Regulations on Commodity Futures Trading, there must be proof that it “knowingly” permitted an unlicensed person to commit the prohibited acts . The law, therefore, prescribed an additional element to the offense . In this case, there is absolutely no evidence to show that Queensland knowingly allowed the unlicensed persons to participate in the trading. Only Charlie Collado and Felix Sampaga had in fact, assented to the unlawful acts of respondent corporation, and they should jointly and severally be liable for the payment of all damages sustained and which are sufficiently proven by the complainant.

4. SECRECY

ON

FOREIGN CURRENCY DEPOSIT

CHINA BANKING CORPORATION vs. COURT OF APPEALS G.R. No. 140687, December 18, 2006, 511 SCRA 110

FACTS:

Jose Gotianuy accused his daughter Mary Margaret Dee of stealing his US dollar deposits with Citibank N.A. amounting to not less than Php35,000,000.00 and US$864,000.00 and deposited the same to China Banking Corporation (CBC). Upon order of the court to divulge in whose name or names is in the foreign currency fund, CBC invoked RA 6426 as amended by PD 1246 which provides the absolute confidentially of foreign currency deposit which is beyond the compulsive process of the court.

ISSUE:

Whether or not Jose Gotianuy being the questioned foreign currency deposit may compel CBC someone else’s foreign currency deposit.

owner of the disclosure

the of

HELD:

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

5. BANK SECRECY LAW *** Deposits in bank including by any person, except: a. if

depositor

agrees

b. impeachment

cases;

government in

writing;

banks ,

may

not

be

inquired

into

6 c. by public d.

court order officials;

deposit

e. anti-graft

is

in

subject

cases of

of

bribery

and

dereliction

of

duty

against

litigation;

cases;

f. general and of bank fraud

special examination of bank or serious irregularity;

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

EJERCITO

an

vs.

order

independent

of

auditor

the

Monetary

hired

by

a

Board bank

SANDIGANBAYAN

G.R. No. 157294-95, November 30, 2006, 509 SCRA 190 RA 1405 is broad enough to cover Trust Account No. 858 because the term “deposit” as used in RA 1405 is to be understood broadly and not limited only to accounts which give rise to a creditor-debtor relationship between the depositor and the bank . If the money deposited under an account may be used by banks for authorized loans to third persons, then such account, regardless of whether it creates a creditor-debtor relationship between the depositor and the bank , falls under the category of accounts which the law precisely seeks to protect for the purpose of boosting the economic development of the country. However, there are two (1) the examination of bank court in cases of bribery (2) the money deposited or The first exception applies petitioner is analogous to second because the money part of the subject matter

exceptions on the protection under RA 1405 : accounts is upon order of a competent or dereliction of duty of public officials, and nvested is the subject matter of litigation. since the plunder case pending against the bribery or dereliction of duty and the deposited in petitioner’s bank accounts from of the same.

ANTI-MONEY LAUNDERING

ACT

REPUBLIC - AMLC vs. HON. JUDGE ANTONIO M. EUGENIO 545 SCRA 384, G.R. No. 174629, February 14, 2008

FACTS:

A series of investigations concerning the awards of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman and Anti-Money Laundering Council (AMLC). Alvarez was already charged by the Ombudsman . As per intelligence database financial information, Alvarez maintained eight (8) bank accounts with six (6) different banks. AMLC filed an ex-parte application to examine the deposits of Alvarez as mandated by Section 11 of RA 9160 and such application was granted by the RTC.

ISSUE: respect

Whether to bank

Section orders.

11

of

RA

9160

authorize

ex

parte

application

with

HELD:

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

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

FREEZE ORDER

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

REPUBLIC (AMLC)

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

FACTS:

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

CA web

issued accounts

Subsequently, order and

freeze

On Under period

a freeze order and vehicles.

ALMC filed a the CA granted

against

On January 31, 2006, the Ligots filed order considering it has already expired six on July 5, 2005.

six

Whether the months period.

freeze

order

Ligots

motion for extension the said motion.

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

ISSUE:

the

should

Forfeiture extended a

be

of

after

bank

effectivity

Cases for

motion to months after

lifted

various

took effect . a maximum

lift the it was

the

of

freeze issued

expiration

of

HELD:

YES. A freeze order cannot be issued for an indefinite period . As a rule, the effectivity of a freeze order may be extended by the CA not exceeding six months . Before or upon the lapse of this period , ideally, the AMLC should have already filed a case for civil forfeiture against property owner with the proper court. AMLC has not offered any explanation why it took six years from the time it secured a freeze order before a civil forfeiture case was filed in court despite the clear tenor of the Rules in Civil Forfeiture Cases allowing the extension of a freeze order for only a period of six months.

6. BULK SALES LAW *** Types

of

transactions

which

are

treated

as

“bulk

sales.”

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

mortgage or the business

a stock of otherwise than

assignments of of the vendor ,

all or mortgagor,

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

7.

LETTER

Q - Distinguish

OF

the laws

sale in violation and creditors

or the

of the subsequent

law to

CREDIT

Commercial

Letter

of

Credit

from

Standby

Letter

of

Credit

A - There are three significant differences between commercial and standby credits. First, commercial credits involve the payment of money under a contract of sale. Such credits become payable upon the presentation by the seller-beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement . In the standby type, the credit is payable upon certification of a party’s non-performance of the agreement. The beneficiary of a commercial credit must demonstrate by documents that he has performed his contract . The beneficiary of the standby credit must certify that his obligor has not performed the contract. (Transfield Philippines, Inc. vs. Luzon Hydro Corporation, G.R. No. 146717, November 22, 2004, 443 SCRA 307).

8 Q: Whether the beneficiary has the securities under the letter of credit

right

to

call

and

draw

on

the

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

there

any

exception

to

the

“independence

principle”?

A - An exception to the independence principle would be fraud of the “fraud exception rule.” The untruthfulness of a certificate accompanying a demand for payment under a standby credit may qualify as a fraud sufficient to support an injunction against payment . The remedy for fraudulent abuse is an injunction . However, injunction should not be granted unless (a) there is clear proof of fraud ; (b) the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud under the main agreement ; and (c) irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously damaged. (Transfield Philippines, Inc. vs. Luzon Hydro Corporation, supra).

LETTERS

OF

CREDIT

vs.

TRUST

RECEIPT

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

G.R.

No. 151895,

8. SUSPENSION

February

OF

16,

2005,

451

SCRA

PAYMENTS

484).

AND

REHABILITATION

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

SCRA

69).

SY CHIM and FELICIDAD CHAN SY vs. SY SIY HO & SONS, INC. G.R. No. 164958, January

FACTS: Felicidad

An Chan

27,

2006,

480

SCRA

465

intra-corporate dispute ensued between Sy Chim Sy, on the one hand, and their son, Sy Tiong

and his wife Shiou, on the

9 other, when a complaint for accounting and damages against the spouses was filed alleging that Felicidad , as custodian of all cash collections has been depositing amounts less than those appearing in the financial statements which are in the custody of the spouses. The spouses averred in their answer and irregularities in the management of full responsibility of Sy Tiong , since he of the corporation under the by-laws.

that the has

any unaccounted cash account corporation , if any, were the direct and actual management

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

ISSUE: receiver

Whether proper?

the

creation

of

a

management

committee/appointment

of

a

HELD:

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

SOBREJUANITE

vs.

ASB

DEVELOPMENT

CORPORATION

G.R. No. 165675, September 30, 2005, 471 SCRA 763 Q: What is of Claim?

the

purpose

of

Suspension

of

the

Proceedings

and

Definition

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

PUNONGBAYAN

vs.

PUNONGBAYAN

G.R. No. 157671, June 20, 2006, 491 SCRA 477 The RTC has the discretion to grant or deny an application for the creation of a management committee. Having the power to create a management committee, it follows that the RTC can order the reorganization of the existing management committee. Such appointment of new members does not mean the creation of a new management committee. The existing management committee was not abolished. The RTC merely reorganized it by appointing new members . The management committee created by the SEC continues to exist . However, when it failed to function due to the division among the members, the RTC replaced them. Clearly, there was no revocation of the final Order of the SEC.

9.

INTELLECTUAL

PROPERTY

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

No.

154342,

July

14,

2004,

434

SCRA

473

10 FACTS:

Petitioner herein is GALLO cigarettes for local a foreign corporation having whose GALLO wines are exclusive distributor.

a domestic corporation producing and manufacturing consumption since 1974 , while the respondent is no license to do business in the country , but being distributed in the country through an

The latter filed a complaint for unfair competition and infringement against that of the former. The respondent claimed their right under the trademark law (RA 166) and that of the Paris Convention. The petitioner, however, posed as a defense t hat the products are not the same so as to cause confusion to the consumers, and that he had a prior right over the trademark . The petitioner further questions the locus standi of the respondent to bring the action.

ISSUE:

Whether

the

petitioner

is

liable

for

infringement

and

unfair

competition.

HELD:

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

Trademark

Infringement

from

Unfair

A - (1) Infringement of trademark is the whereas unfair competition is the passing of another. (2) whereas

In in

infringement of unfair competition,

trademark, fraudulent

Competition.

authorized off of

use one’s

of a goods

fraudulent intent intent is essential.

trademark , as those

is

unnecessary ,

(3) In trademark is registration is

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

FACTORS

consider

(a)

to The

determining

resemblance

(b) The

similarity

(c) The

likely

(d) The equitable

in

of

effect

between the on

the

the

goods the

likelihood

of

confusion:

trademarks; to

which

purchaser;

the

trademarks

are

and

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

MCDONALD’S

CORPORATION

vs.

attached.

L. C.

BIG

MAK

fair

and

BURGER, INC.

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

FACTS:

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

ISSUE:

Whether competition.

the

respondent

is

liable

for

infringement

and

unfair

HELD:

YES. The evidence presented to the Court reveals that there is no distinction as to the use of BIG MAK as a trademark and as a corporate name of the respondent. The wrappers submitted as evidence only used the mark BIG MAK , without any showing that it was in fact part of the corporate name of the respondent. Further, the

respondent failed to substantiate the reason behind the use of the mark as its corporate name. Further still, there was no public notice made by the respondent so as to differentiate its products as against that of the petitioner . The said circumstances prove the intent of the respondent to defraud the petitioner and that of the public.

11

- - - On the determination of as against the holistic test.

infringement,

the

dominance

test

was

used

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

does

trademark

infringement

constitute

competition?

A - Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of general appearance of the goods . ( McDonald’s Corp. vs. LC Bigmak Burger, Inc., supra).

Q - Can

there

be

trademark

infringement

without

unfair

competition?

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

is

the

doctrine

of

equivalents

in

patent

infringement?

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

MC DONALD’S CORPORATION vs. MAC JOY FAST FOOD CORPORATION G.R. No. 166115, February 2, 2007, 514 SCRA 95

FACTS:

Mac Joy Fastfood Corporation filed an application for the registration of the trademark “MACJOY & DEVICE” for fried chicken, chicken barbeque, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo and steaks. Mc Donald’s Corporation opposed the application claiming that the trademark “MACJOY & DEVICE” so resembles its corporate logo, otherwise known as the Golden Arches or “M” design, and its other marks which would confuse or deceive purchasers into believing that the goods originate from the same source or origin. Mac Joy averred that it has used the mark “MACJOY” for the past many years in good faith and spent considerable amount for the mark’s promotion, especially in Cebu City where it has been doing business long before the Mc Donald’s opened its outlet thereat sometime in 1992.

ISSUE:

Whether or not there is MCDONALD’s marks and “MACJOY & food and food ingredients.

a confusing similarity between DEVICE” trademark when applied

the to

HELD:

YES. In determining similarity and likelihood, jurisprudence has developed two tests, the dominancy test and the holistic test . The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. Applying the dominancy test, “MCDONALD’S” and “MACJOY” marks confusing similarity with each other such that an ordinary purchaser conclude an association or relation between the marks. Both marks use

the can the

corporate “M” design, logo and prefixes “Mc” and/or “Mac” as dominant features. Both trademarks are used in the sale of fastfood products . Furthermore MCDonald’s has the right claim over the marks since it has registered them successively in 1971 and 1977, while Macjoy’s application for the registration of its trademark was filed only in 1991.

12 REGISTRATION OF

TAIWAN KOLIN CORPORATION G.R.

No. 209843,

IDENTICAL

MARKS

vs. KOLIN ELECTRONICS COMPANY

March 25, 2015, 754 SCRA 556

FACTS:

On February 29, 1996, Taiwan Kolin filed with the Intellectual Property Office (IPO) a trademark application for the use of “KOLIN” on its televisions and DVD players which are a combination of goods falling under Class 9 of the Nice Classification (NCL). On July 13, 2006, Kolin Electronics opposed the application alleging that the mark Taiwan Kolin seeks to register is identical, if not confusing similar, with its “KOLIN” mark previously registered on November 23, 2003 covering products , e.g., automatic voltage regulator, converter, recharger and the like which are also under Class 9 of NCL. Kolin Electronics “KOLIN” registration legal dispute between the same parties. application was opposed by Taiwan Kolin the prior registrant and user of the the same in Taiwan in 1988.

ISSUE: “KOLIN”

Whether Taiwan Kolin is over its specific goods

was the subject of a prior Kolin Electronics “KOLIN” own which claimed that Kolin was said trademark having registered

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

mark

HELD:

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

is of

not the intellectual

sole and decisive property right.

factor

in

The Hornbook Doctrine states that emphasis should be on the similarity of the products involved and not on the arbitrary classification of general description of their properties or characteristics. The mere fact that one person has adopted and used a trademark on his goods would not, without more, prevent the adoption and the use of the same trademark by others on unrelated articles of a different kind. In this case, the products covered by Taiwan Kolin’s application and Kolin Electrtonics’ registration are unrelated . Following the Mighty Corporation Doctrine, goods should be treated against several factors before arriving at a sound conclusion on the question of relatedness and the classification of the products under NCL is merely a part and parcel of the factors to be considered. It is not sufficient to state that the goods under consideration are electronics products under Class 9 of the NCL . Furthermore, the ordinary intelligent buyer is not likely to be confused since the products are electronics products , relatively luxury items not easily considered affordable. The casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Therefore, “KOLIN” over

Taiwan Kolin its televisions

is entitled and DVD

to the players.

registration

of

the

mark

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

462 SCRA Q:

What

are

A: Action for with Injunction.

the

remedies

infringement

52, G.R. No. 132993, June 29, 2005

of

an

and/or

Q: May an action for infringement damages proceed independently of an registered trademark?

owner action

of for

a

registered unfair

mark?

competition

or

damages,

or unfair competition with Injunction and administrative action for cancellation of the

A: YES. It bears stressing that an action for infringement or unfair competition, including the available remedies of injunction and damages , can be filed in the regular courts and can proceed independently or simultaneously with an action for the administrative cancellation of a

13 registered trademark in the BPTTT . As applied to the present case, petitioner’s prior filing of two inter partes cases against the respondent before the BPTTT for the cancellation of the latter’s trademark registration, namely, “LIVE’S” and “LIVE’S Label Mark” does not preclude petitioner’s right (as a defendant) to include in its Answer (to respondent’s complaint for damages) a counterclaim for infringement with a prayer for the issuance of a writ of preliminary injunction. Q:

What

is

the

nature

of

unfair

competition?

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

UNFAIR

SHANG

COMPETITION

PROPERTIES REALTY CORPORATION vs. FRANCIS DEVELOPMENT CORPORATION G.R. No. 190706,

July 21, 2014, 730

SCRA

ST.

275

FACTS:

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

its is is

ISSUES: (1) Whether competition.

the

(2) Whether the meaning warranting

Shang

(1) NO. Shang competition is the passing upon the public of the goods or business of deceiving the public.

is of the

when his goods

this case, the elements unfair competition.

There is no evidence general appearance that it public (2) Shang employed

and (3) discredit

guilty

acquires exclusive

of

unfair

a secondary use.

is not guilty of unfair competition . Unfair off (of palming off) or attempting to pass off goods or business of one person as the another with the end and probable effect of

In other words, it appearance of the goods deceiving the public, that In no

is

mark “ST. FRANCIS” SFDC’s right to its

HELD:

be

Properties

of

that was any

he gives competitors are those fraud

is

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

hence,

there

can

(1) Shang gave their goods/services the SFDC which offering the same to the means to induce SFDC’s goods/services;

Shang made any false the goods/services offered

statement by SFDC.

or

commit

acts

tending

to

The mark “ST. FRANCIS” is geographically descriptive in nature , thus, it cannot be exclusively appropriated unless a secondary meaning is acquired . Therefore, Shang is not guilty of unfair competition. (2) meaning.

NO. The Descriptive

mark ‘ST. geographical

FRANCIS” terms are

did not acquire secondary in the public domain in the

14 sense that customers of

the

every seller geographical

should origin of

have the his goods.

right

to

inform

A geographical descriptive term is any noun or adjective that designates geographical location and would tend to be regarded by buyers as descriptive of geographic location of origin of the goods or services. A geographically descriptive term can indicate any geographic location on earth, such as continents, nations, regions, states, cities, streets and addresses. Under Section 123.2 of the IP Code, specific requirements have to be met in order to conclude that geographically descriptive mark has acquired secondary meaning, to wit: (a) the secondary meaning must have arisen as a result of substantial commercial use of a mark in the Philippines; (b) such use must result in the distinctiveness of the mark insofar as the goods or the products are concerned; and (c) proof of substantially exclusive and continuous commercial use in the Philippines for five (5) years before the date on which the claim of distinctiveness is made. Unless secondary meaning has been established, a geographically descriptive mark, due to its general public domain classification , is perceptibly disqualified from trademark registration. In this case, SFDC was not able to prove its compliance with the above-mentioned requirements. While it is true that SFDC had been using the mark since 1992, its use thereof has been merely confined to its realty projects within the Ortigas Center . As its use thereof has been merely confined to a certain locality.

JESSIE

CHING

vs.

WILLIAM

M.

SALINAS

G.R. No. 161295, June 29, 2005, 462 SCRA 241 Q: Define from each

trademark, other.

copyright

and

patents

and

briefly

distinguish

them

A: Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new involves an inventive step and is industrially applicable. Q:

What

is

a

utility

model?

A: A utility model is a technical solution to a problem in any field of human activity which is new and industrially applicable . It may be, or may relate to, a product, or process, or an improvement of any of the aforesaid. Essentially, a utility model refers to an invention in the mechanical field. This is the reason why its object is sometimes described as a device or useful object. A utility model varies from an invention, for which a patent for invention is , likewise, available, on at least three aspects: first, the requisite of “inventive step” in a patent for invention is not required; second, the maximum term of protection is only seven years compared to a patent which is twenty years, both reckoned from the date of the application; and third, the provisions on utility model dispense with its substantive examination and prefer for a less complicated system. Q:

When

are

useful

articles

and

works

of

industrial

design

copyrightable?

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

ELIDAD

KHO

vs.

G.R. No. 150877,

HON.

ENRICO LANZANAS

May 4, 2006, 489 SCRA 444

15

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

COMPANIA GENERAL DE

TABACOS

G.R. No. 161051, July

DE FILIPINAS

vs. SEVENDAL

23, 2009, 593 SCRA 593

FACTS:

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

ISSUE: preliminary

Whether Tabaqueria is guilty of injunction should be issued.

unfair

competition

thus

writ

of

HELD:

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

Clearly, it is claim for the

incumbent upon issuance of a

REPUBLIC GAS

Tabacalera preliminary

CORPORATION

vs.

PETRON

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

FACTS:

Regasco is and carry on, the and marketing at (“LPG”).

to support injunction.

with

there writ claim acts its

evidence

CORPORATION

698 SCRA 666

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

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

ISSUE:

Whether competition.

HELD: registered

YES. The trademark

Regasco

is

liable

for

mere unauthorized in connection with

trademark

infringement

and

unfair

use of a container bearing sale, distribution or advertising

a of

16 goods or services which is deception among the buyers trademark infringement.

likely to cause confusion, mistake or consumers can be considered

or as

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

those LPG cylinders will give the LPGs products.

VICTORIO P. DIAZ vs.

PEOPLE & LEVI

bearing the trademarks sold by REGASCO the

STRAUSSS PHIL. INC.

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

FACTS:

Levi’s Philippines received information that Diaz was counterfeit LEVI’S 501 jeans in his tailoring shops and he not authorized to make and sell these jeans.

selling was

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

ISSUE:

Whether

HELD:

NO.

Diaz

is

is

not

Diaz

guilty guilty

of

trademark

of

trademark

infringement. infringement.

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

There case:

was

no

likelihood

of

confusion

between

trademarks

involved

in

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

DISTINCTIONS OF UNFAIR COMPETITION AND TRADEMARK INFRINGEMENT

ROBERTO

CO

vs.

KENG HUAN JERRY YEUNG

G.R. No. 212705, September

10, 2014, 735 SCRA 66

FACTS:

Greenstone Medicated Oil is a traditional Chinese medicine manufactured by Greenstone Pharmaceutical owned by Jerry Yeung and exclusively imported and distributed in the Philippines by Taka Trading owned by Yeung’s wife, Emma. On Greenstone

April from

24, 2000, Ruivivar, Emma’s Royal Chinese Drug Store .

brother, bought However, when

a he

bottle used

of the

17 product, Ruivivar doubted its different smell and the heat original Greenstone he frequently

authenticity it produced used.

considering was not

Investigations showed that Co offered the “Tienchi Fong Sap Oil Greenstone” to Royal caused confusion and deception to the public.

ISSUES:

Is

Co

guilty

of

(1)

Unfair

that as

products Chinese

Competition

it had strong as

a the

in April 2000 as Drug Store which

and

(2)

Trademark

Infringement?

HELD:

(1) YES. Unfair competition is the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. This appearance the public

takes place where the defendant gives his goods of the goods of his competitor with the intention that the goods are those of his competitor.

the general of deceiving

In this case, Co conspired with the Royal Chinese Drug Store in the sale/distribution of counterfeit Greenstone products to the public , which were packaged in bottles identical to that of the original , thereby giving rise to the presumption of fraudulent intent. (2). NO.

Trademark

infringement

and

Unfair

Competition

are

two

distinct

suits: (a) the former whereas the latter of another. is

(b) fraudulent essential in

is is

the the

unauthorized passing off

intent is unnecessary the latter.

use of a one’s goods in

the

former,

trademark , as those while

it

(c) in the former, prior registration of the trademark is prerequisite to the action, while it is not necessary in the latter. Thus the registration of the trademark is essential in the trademark infringement case. In this case, the registration of the proven to have existed during the time committed.

mark “GREENSTONE” the acts complained

was not of were

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

February

21,

2005

FACTS:

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

Petitioner challenged FMICI’s subrogation to Crispa’s right claim for the loss of the car , arguing that theft is not a against under FMICI’s insurance policy for the subject vehicle.

ISSUE: petitioner

HELD:

Whether under

FMICI was the insurance

validly policy

subrogated to it issued.

Crispa’s

to risk

file a insured

right

against

YES. Petitioner’s argument that there no valid subrogation of rights between Crispa and FMICI b ecause theft was not a risk insured against under FMICI Insurance Policy holds no water because it contains among other things, the following item: “Insured Estimated Value of Scheduled Vehicle – P800,000”. On the basis of such item, the coverage

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

INSURABLE

INTEREST

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

BURDEN IS UPON THE CAUSE OF

G.R.

No.

147839,

June

8,

2006, 490 SCRA 286).

THE INSURER TO PROVE THAT LOSS WAS AN EXCEPTED RISK

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

BREACH

OF

WARRANTY;

WAIVER;

DOUBLE

INTEREST

Section 74 of the Insurance Code provides that violation of a material warranty or other material provision of a policy on the part of either party thereto, entitles the other to rescind. However, for the breach of a warranty to avoid a policy, the same must be duly shown by the party alleging the same. Breach of a warranty or of a condition renders the contract defeasible at the option of the insurer , but if he so elects, he may waive his privilege and power to rescind by the mere expression of an intention to do so . In that event his liability under the policy continues as before. The insurer’s renewal of the policy is a clear intention of its waiver of the alleged breach by the insured. An award of double interest is lawful and justified under Section 243 and 244 of the Insurance Code. The term “double interest” can only be interpreted to mean twice the legal rate of interest of 12% per annum or 24% per annum interest. (Prudential Guarantee and Assurance Inc. vs. Trans-Asia Shipping Line, G.R. No. 151890, June 20, 2006, 491 SCRA 411).

PROBLEM:

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

ANSWER:

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

PROBLEM:

A sour and they the degree of

life life a

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

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

QUESTIONS: a.

Can

A

claim

the

proceeds

of

the

insurance

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

ANSWERS:

policy?

parties was the proceeds

legal upon

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

has insurable insurance was

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

PROBLEM:

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

QUESTIONS: a.

Is

b.

May

the

insurer

the

heirs

bound of

Peter

to

pay

claim

John

the

the

insurance

proceeds?

proceeds?

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

of Peter between

cannot them

claim and

over

the the

INCONTESTABILITY

MANILA

BANKERS

the

proceeds . insurer.

Bankers more

of

Peter

There

is

ceased

no

privity

CLAUSE

LIFE INSURANCE CORPORATION CRESENCIA P. ABAN

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

FACTS:

life

On July 3, 1993, Delia took out Life designating Cresencia, her niece,

a as

vs.

SCRA 417 life insurance policy her beneficiary.

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

been

in

from

force

for

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

barred

by

the

incontestability

clause

HELD:

YES. Section 48 of the Insurance Code provides that an insurer is given two years from the effectivity of a life insurance contract and while the insured is alive to discover or prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. the the

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

Section 48 regulates takers of life insurance.

CONCEALMENT

both

the

actions

of

the

insurers

and

within though

prospective

MUST BE SATISFACTORILY PROVED

MANULIFE PHILIPPINES, INC. vs. HERMENEGILDA YBANEZ G.R. No. 204736, November 28, 2016, 810 SCRA 516

FACTS: Solidum policies insured the

Petitioner Manulife issued in favor of insured Dr. Gumersindo Ybanez insurance policies. When one of the subject insurance had been in force for only one year and three months , the died.

Thus, respondent, the insured wife as said insurance policies. Petitioner, upon

beneficiary , filed a claim under investigation concluded that the

20 insured misrepresented or concealed insurance policies were applied for. Averring that the confined in the Cebu the application of the the insurance contracts During its Claims evidence to

material

facts

at

the

time

the

subject

insured concealed the fact that he was repeatedly Doctor Hospital within the last five years prior to insurance policy. Manulife prays for the rescission of and denied the claims on those policies.

trial, Manulife presented Ms. Victoriano , the senior manager and Settlements Department, who identified several documents prove concealment.

of as

ISSUE Whether Manulife’s complaint ground of concealment and

on

for rescission misrepresentation

of the insurance should prosper.

contracts

RULING the

NO, Manulife utterly failed alleged misrepresentation or

to prove that concealment of

Concealment as a ground for convincing proved before Manulife insurance contracts.

the insured had material facts.

committed

rescission must be satisfactorily can validly sue for rescission

and of

Fraudulent intent on the part of the insured must be established to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. The hospital’s medical records that might have established the insured’s purported misrepresentation or concealment was inadmissible for being hearsay. Manulife’s sole witness, Ms. Victoriano, merely perfunctorily identified the documentary exhibits, she never testified in regard to the circumstances attending the execution of these documentary exhibits much less in regard to its contents. of and

Manulife failed to present the physician or any responsible official the hospital who could confirm or attest to the due execution authenticity of the alleged medical records.

For failure of the insured, contracts.

11.

of it

Manulife cannot

NEGOTIABLE

to prove intent to validly sue for

defraud on rescission of

the part insurance

INSTRUMENT

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

No.

129015,

August

13,

2004,

436

SCRA

402

FACTS:

Plaintiff maintained a current account with respondent FEBTC . The sole signatory to plaintiff’s account was Jong , its Project Manager, while the checks remained in the custody of the company’s accountant , Kyu. A certain Roberto Gonzaga presented for payment FEBTC check payable to cash and drawn against the Samsung’s current account , in the amount of P999,500.00 had been encashed upon submission of proof of ide ntity and three (3) identification cards. The following day, Kyu, examined the balance of the bank account and discovered that a check in the amount of P999,500.00 had been encashed. As the last blank check was missing, Jong learned that his signature was forged.

ISSUE: liable to paid out.

HELD:

Whether a reimburse

bank which the drawer

pays from

out whose

on a account

forged check is the funds were

YES. The general rule is to the effect that a forged signature is “wholly inoperative” and payment made “through or under such signature” is ineffectual or does not discharge the instrument. If payment is made, the drawee cannot charge it to the drawer’s account . The traditional justification for the result is that the drawee is in a superior position to detect a forgery because he has the maker’s signature and is expected to know and compare it . The rule has a healthy cautionary effect on banks by encouraging care in the comparison of the signatures

21 against those on the signature very opportunity of the drawee among its customers who use party to spread the risk to

cards they have on to insure and to checks makes the insurance.

file . Moreover, the distribute the cost drawee an ideal

- - - Under Section 23 of the Negotiable Instrument Law , forgery is a real or absolute defense by the party whose signature is forged . On the premise that Jong’s signature was indeed forged , FEBTC is liable for the loss since it authorized the discharge of the forged check . Such liability attaches even if the bank exerts due diligence and care in preventing such faulty discharge. Forgeries often deceive the eye of the most cautious experts; and when a bank has been so deceived , it is a harsh rule which compels it to suffer although no one has suffered by its being deceived . The forgery may be so near like the genuine as to defy detection by the depositor himself and yet the bank is liable to the depositor if it pays the check. - - - The general rule remains that the drawee who has paid upon the forged signature bears the loss. The exception to this rule arises only when negligence can be traced on the part of the drawer whose signature was forged , and the need arises to weigh the comparative negligence between the drawer and drawee to determine who should bear the burden of loss. The Court finds no basis to conclude that Samsung was negligent in the safekeeping of its checks. For one, the settled rule is that the mere fact that the depositor leaves his check book lying around does not constitute such negligence as will free the bank from liability to him , where a clerk of the depositor or other persons taking advantage of the opportunity, abstract some of the check blanks, forges the depositor’s signature and collect on the checks from the bank . And for another, in point of fact Samsung was not negligent at all since it reported the forgery almost immediately upon discovery.

VALIDITY

AND

NEGOTIABLE

CHARACTER

OF

AN

INSTRUMENT

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

AN

16,

INCOMPLETE

ALVIN PATRIMONIO

vs.

BUT

478

SCRA

365)

DELIVERED

INSTRUMENT

NAPOLEON GUTIERREZ

G.R. No. 187769,

FACTS: name

2005,

June 4, 2014, 724

Alvin and Napoleon entered “Slam Dunk Corporation.”

In the course of which had no payee’s expenses of Slam Dunk.

their name,

The blank checks instruction not to fill approval by Alvin.

were them

into

business , date or

entrusted to out without

a

SCRA

business

&

MARASIGAN

636 venture

under

the

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

Napoleon previous

with the notification

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

specific to and

and consent , that Alvin

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

22

reason

When Marasigan deposited “ACCOUNT CLOSED.”

the

check ,

it

was

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

dishonored

for

the

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

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

and loan the

ISSUES: (1) he

Whether Alvin pre-signed.

(2)

Whether

is

Marasigan

liable

for

is

holder

a

the

dishonor

in

due

of

the

check

course.

HELD:

(1) NO. Alvin is not liable . Under Section 14 of the Negotiable Instrument Law, if the maker or drawer delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable instrument, that person is deemed to have prima facie authority to fill it up. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, two requisites must exist : (1) that the blank must be filled strictly in accordance with the authority given ; and (2) it must be filled up within a reasonable time. in the

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

blanks checks Alvin’s

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

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

While Napoleon had a prima facie authority to complete the check , such prima facie authority does not extend to its use , i.e., subsequent transfer or negotiation, once the check is complete. There is no evidence that Napoleon ever secured prior approval from Alvin to fill up the blank or to use the check. (2) NO. Marasigan is not a holder in 52 (c) of the NIL, states that a holder who takes the instrument “in good faith and

due in for

course . Under Section due course is one value.”

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

In the party or a no obligation

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

HOLDER

NOT

IN

DUE

RCBC SAVINGS BANK vs. NOEL

COURSE M. ODRADA

G.R. No. 219037, October 19, 2016, 806 SCRA 646

FACTS:

In April 2002, respondent Odrada sold Montero to Lim for P1,510,000. Lim initially paid was to be paid by RCBC thru a car loan.

a second hand Mitsubishi P510,000 and the balance

23 When RCBC received the OR and manager’s checks payable to Odrada for it over to Odrada. Before the that there was of the Montero. checks until his Without with IBank both times notified by loan.

CR from Odrada , it P900,000 and P13,500

issued two and turned

checks were presented to the bank , Lim notified Odrada an issue regarding the roadworthiness and hidden defects Lim further instructed Odrada not to encash the manager’s complaints are clarified and satisfied.

addressing Lim’s concern, Odrada deposited the manager’s checks and redeposited them . However, the checks were dishonored apparently upon Lim’s instruction to RCBC . Odrada was also RCBC the previous day of the cancellation of Lim’s auto

ISSUES 1) Whether

Odrada

2) Whether

RCBC

is may

a

holder

in

due

course.

interpose

a

personal

defense

to

refuse

payment.

RULINGS did

1) NO, respondent not acquire the

Odrada is not a holder instrument in good faith.

have

To be a holder in due course , acquired the instrument in good

the faith

law and

in

due

course

requires that for value.

a

because party

he must

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

Value, support

on the other hand , a simple contract.

is

defined

as

any

consideration

sufficient

In the present case, Odrada attempted to deposit the manager’s checks a day after Lim informed him that there was a serious problem with the Montero. Instead of addressing the issue, Odrada decided to deposit the manager’s checks. Odrada’s action in depositing the manager’s checks despite knowledge of the Montero’s defects amounted to bad faith. 2) YES, RCBC may refuse payment by interposing a personal defense of Lim that the title of Odrada had become defected when there arose a partial failure or lack of consideration. When Odrada notified by RCBC transaction.

redeposited the manager’s checks , he the previous day of the cancellation

was already formally of Lim’s auto loan

MARCELO A. MESINA vs. INTERMEDIATE APPELLATE COURT G.R. No. 70145, November 13, 1986, 229 Phil. 495

FACTS: he of

left the

Jose Go purchased a manager’s check from Associated Bank . As the bank, Go inadvertently left the check on top of the desk bank manager. The bank manager entrusted the check for

safekeeping to another bank official customer named Alexander Lim. men’s

After the bank official room, the manager’s

who

answered check no

After learning that his manager’s returned to the bank to give a stop

at

the

time

was

the telephone and longer be found.

attending

returned

from

to

a the

check was missing , Go immediately payment order on the check.

A third party named Marcelo Mesina deposited the Prudential Bank but the drawee bank sent back the the collecting bank with the words “payment stopped.”

manager’s check with manager’s check to

24 When asked how Mesina got hold of the check , he merely stated that Alexander Lim, who’s already at large, paid the check to him for “a certain transaction.”

ISSUE Whether

Mesina

is

a

holder

in

due

course.

RULING NO. Admittedly, Mesina endorsed by Alexander Lim to say how and why it of the defect of his title

became the holder of the manager’s check as who stole the check . Mesina, however, refused was passed to him . He had therefore notice over the check from the start.

The holder of a manager’s course cannot enforce such check the same. The check in question been properly negotiated and for owner of the said instrument. is

Therefore, the issuing not a holder in due

check who is not a holder in due against the issuing bank which dishonors suffers from the infirmity of not having value by Jose Go, who is the real

bank could course.

validly

refuse

payment

because

Mesina

UCPB vs. INTERMEDIATE APPELLATE COURT G.R. Nos. 72664-65, March 20, 1990, 262 Phil. 397

FACTS:

Altura Investors, Inc. purchased a manager’s check from UCPB, which then issued a manager’s check in the amount of P494,000 to Makati Bel-Air Developers, Inc. The manager’s check represented the payment of Altura for a condominium unit it purchased from Makati Bel-Air Developers. Subsequently, Altura instructed UCPB to hold payment misrepresentations by Makati Bel-Air Developers regarding unit.

due the

to material condominium

Pending negotiations, and while the stop payment order was in effect , Makati Bel-Air Developers insisted that UCPB pay the value of the manager’s check. UCPB refused to pay and filed an interpleader to allow Altuna and Makati Bel-Air Developers to litigate their respective claims.

ISSUE Whether check.

UCPB

can

validly

refuse

to

pay

the

value

of

the

manager’s

RULING YES. UCPB can validly refuse to pay check since Makati Bel-Air Developers’ title defective when there arose a partial failure of

the value of the manager’s to the instrument became consideration.

UCPB could validly invoke a personal against Makati Bel-Air Developers because the due course of the manager’s check.

defense latter is

NOTICE or

The notice maker by

of dishonor the drawee

OF

of a bank,

(Alfredo

Rigor

vs.

People

of

INDORSEMENT METROBANK

the

vs.

TWO B.A.

G.R. No. 179952, December

FACTS: the car

delivery of a

Philippines, G.R.

BY

the a

purchaser holder in

DISHONOR

check may the holder

offended party either by personal notice of dishonor to the maker

of not

No.

sent the

to the drawer check, or the

or by registered check must be 144887,

OR FINANCE 4,

be of

2009,

November

MORE

17,

mail. The in writing . 2004).

PAYEES

CORPORATION 607

SCRA

620

Bitanga obtained from BA Finance a P329,280 loan . To secure loan, he mortgaged his car to BA Finance and insured the against loss, damage and theft with Malayan Insurance.

25

The car was stolen. On Bitanga’s claim, Malayan Insurance issued a check payable to the order of “B. A. Finance Corporation and Lamberto Bitanga” for P224,500 drawn against China Bank. The check was crossed with notation “For Deposit Payees’ Account.” Without the indorsement or authority of his co-payee, Bitanga deposited the check to his bank account with Asianbank . He subsequently withdrew the entire proceeds of the check. the

BA Finance check from

ISSUE:

Whether

thereupon Asianbank

demanded the payment but to no avail.

Asianbank

as

collecting

bank

of

liable

the

to

value

BA

of

Finance

Corporation.

HELD:

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

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

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

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

MATERIAL BANK OF

the deposit of Bitanga , carry the

ALTERATION

AMERICA vs. PHILIPPINE RACING CLUB, INC. (PRCI) G.R. No.

150228, July 30, 2009, 590 SCRA 301

FACTS:

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

ISSUE:

Whether Bank of encashment of the checks.

America

is

liable

to

PRCI

for

wrongful

HELD:

YES. Although not in the strict sense “material alterations,” the misplacement of typewritten entries for the payee and the amount on the same blank and the repetition of the amount using a check writer were glaringly obvious irregularities on the face of the check . Clearly, someone made a mistake in filling up the check and the repetition of the entries was possibly an attempt to rectify the

mistake. All these circumstances should have alerted the bank to possibility that the holder or the person who is attempting encash the check did not have proper title to the checks or not have authority to fill up and encash the same.

PROBLEM -

the to did

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

26 ANSWER: promissory “X,” Amy bound by affix her

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

QUESTION:

State

if

the

following

instruments

are

negotiable

or

not.

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

out

of

the

proceeds

or order P1,000.00 pursuant 20, 2012. (Signed) Arnold.”

to

of the

c. “I promise to pay to the order of X P1,000.00 subject to the terms and conditions of the contract of mortgage. (Signed) Y.” d. “I promise equal monthly

to pay to installments.

e. “To (Signed)

Pay

A: X.”

to

the

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

the order of (Signed) Y.”

pay the

order

X of

P1,000.00 the

bearer

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

or

order

order of

X

payable

in

two

P10,000.00

P50,000.00

five

P1,000.00

25

days

after

P1,000.00

25

days

after

ANSWERS: a. The instrument is non-negotiable because it fixes the fund out of which payment is to be made. Payment is subject to the condition that the sale would materialize, and that the proceeds of the sale would be sufficient to cover the obligations. The promise to pay is conditional, thereby violating Sec. 1 (b) of the NIL. b. The Contract statement obligation payment

instrument which was executed “pursuant to the of Sale” is negotiable because this is merely of the transaction that gave rise to the and not an indication of the fund from which shall be taken.

c. The instrument is burdened by a separate contract rendering it non-negotiable. The holder would have to go beyond the instrument and check the terms and conditions of the contract of mortgage. The separate agreement restricts the instrument. d. The instrument is not negotiable as it did not comply with the rule on fixing maturity date by installments. If the obligation is payable in installments, the exact amount of each installment and the date when each installment is due must be stated in the instrument. Otherwise, the instrument is nonnegotiable as in this case where the due date of each installment was not specified.

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

Give

27

h. The instrument is negotiable. It the first presentment for acceptance.

is

payable

25

days

after

PROBLEM:

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

QUESTIONS: a.

Is

SMX

Corporation

liable

b. Against whom demand payment?

can

c.

recover

Can

the

seller

for

the

payment

seller payment

of

of

the

from

the

the

obligation?

condominium drawee

unit

bank?

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

demand payment the issuance

from President Lee . of the check.

He

is

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

NO RIGHT

TO

RESCIND SALE OF MANAGER’S CHECK

METROBANK, BPI & GLOBAL BANK vs. WILFRED CHIOK G.R. Nos. 175652, 175302 & 175394,

FACTS:

Chiok had usually buys dollars date of the sale.

been from

engaged Nuguid

November 28, 2014, 742 SCRA 835

in at

dollar trading the exchange

for rate

several years . He prevailing on the

Chiok pays Nuguid either in cash or manager’s check, to be picked up by the latter or deposited in the latter’s bank account. Nuguid delivers the dollars either on the same day or on a later date as may be agreed upon between them, up to a week later. to

Chiok and eight years,

Bank

Nuguid had been dealing in with their transactions running

for of

about pesos.

In the afternoon of the same day, Nuguid, prompting Chiok to request that payment on stopped.

ISSUES: stop

(1) Is it payment?

(2) Can checks are represent in

six

Global

Chiok deposited the three (3) manager’s checks from Bank with an aggregate value of P26,068,035 in BPI. Nuguid was supposed to deliver US$1,022,288.50

Chiok was allegedly advised to hour clearing period, so he filed a parte restraining order or TRO with Bank.

to

manner millions

For this purpose, Chiok maintained accounts with Metrobank and and entered into a Bills Purchase Line Agreement (BPLA).

On July 5, 1995, Metrobank & Global Nuguid’s account with as agreed upon.

so, be

this into

legally

the court considered the case?

possible

secure a complaint the RTC

for

a

however, failed the three (3)

to do checks

court order within the 24with an application for ex against Metrobank and Global

purchaser

of

a

manager’s

check

deviate from the general principles that manager’s as substantially as good as the money they

28

HELD:

(1) NO. Under Art. 1191 of the Civil Code , the rescind obligation is implied in reciprocal ones in case one obligors should not comply with what is incumbent upon him.

right of

to the

The cause of action, however, is predicated upon the reciprocity of the obligations of the injured party and the guilty party. Thus, the right of rescission can be exercised in accordance with the principle of relativity of contracts under Art. 1131 of the Civil Code. In this case, when Nuguid failed to deliver the agreed amount to Chiok, the latter had a cause of action against Metrobank and Global Bank that would allow him to rescind the contract of sale of the manager’s checks, which would have resulted in the crediting of the amounts thereof back to Chiok’s checks. However, Metrobank and Global Bank are not parties to the contract. Neither could Chiok be Metrobank and Global Bank subject manager’s checks.

validly granted a to enjoin said

writ of injunction against banks from honoring the

An injunction should never issue when an action for would adequately compensate the injuries caused . The very of the jurisdiction to issue the writ of injunction rests fact that the damage caused are irreparable and that would not adequately compensate. Chiok could have to claim damages for where he deposited the

and should have proceeded breach of contract and to subject check be garnished.

directly against have the very

If the intention of Chiok was for Nuguid to be withdraw the proceeds of the checks after clearing , he could deposited personal checks, instead of going through the purchasing manager’s checks. Chiok actually intended that Nuguid to immediately withdraw the proceeds of the subject checks. Therefore, Metrobank and Global and cannot be prejudiced by the terms thereof.

Bank are failure of

damages foundation in the damages

not bound Nuguid to

Nuguid account

allowed to have easily trouble of be allowed

by such contract comply with the

(2) NO. The well-settled concept and principle in commercial law is that manager’s check are primary obligation of the issuing bank and accepted in advance by mere issuance. total good base

They are bank’s order to pay drawn itself , resources, integrity and honors. Thus, they are as the money they represent. In on

deviating from general banking principles equity, the courts should ensure that it

committing in effect regarded substantially and disposing is equitable.

the

its as case

In the case, it was observed that equity was not served . The disposition wherein Nuguid, the person who violated his contract, was absolved from his liability, leaving the banks, who were not parties to the contract, to suffer the losses is not equitable. Thus, Chiok’s complaint should be denied insofar as it prayed for the withdrawal of the proceeds of the subject checks . Accordingly, the writ of preliminary enjoining Metrobank and Global Bank from honoring the said checks should be lifted.

12.

CORPORATION

LAW

FILIPINAS BROADCASTING NETWORK, INC. vs. AGO MEDICAL & EDUCATIONAL CENTER - BICOL CHRISTIAN COLLEGE OF MEDICINE G. R. No. 141994,

FACTS:

January

17,

2005,

448

SCRA

413

“Expose” is a radio documentary program aired over DZRC-AM which is owned by petitioner FBNI. In two (2) mornings, the program exposed various alleged complaints from students , teachers and parents against respondent AMEC and its administrators. Claiming that the broadcasts were defamatory, AMEC and Ago, Dean of AMEC’s College of Medicine, filed a complaint for damages against FBNI . Respondent corporation alleged, among others, that due to the libelous statements , it is entitled for moral damages.

29

ISSUE:

Whether

a

corporation

is

entitled

to

moral

damages.

HELD:

YES. A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 2219 of NCC . This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219 (7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages. Moreover, where the broadcast is libelous per se, the law implies damages. In such a case, evidence of an honest mistake or the want of character or reputation of the party libeled goes only in mitigation of damages . Neither in such a case is the plaintiff required to introduce evidence of actual damages as a condition precedent to the recovery of some damages . In this case, the broadcasts are libelous per se . Thus, AMEC is entitled to moral damages.

OF

CORPORATION NOT LIABLE FOR THE OBLIGATION ITS SUBSIDIARY DESPITE BEING A MAJORITY STOCKHOLDER OF THE LATTER

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

Corporation

vs.

Rodolfo

Cuenca,

G.R.

No.

163981,

August

12,

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

Corporation,

G.R.

No.

144805,

June

8,

2006,

490

SCRA

204).

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

QUESTION:

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

ANSWER:

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

SOLE

ALPS

PROPRIETORSHIP

TRANSPORTATION and/or ALFREDO E. vs. ELPIDIO M. RODRIGUEZ G.R. No. 186732, June 13, 2013, 698 SCRA 423

PEREZ

30

FACTS:

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

found twin

that Elpidio remedies of

Perez,

the

HELD:

YES. Since ALPS by Perez, it is he who backwages to Elpidio.

was illegally reinstatement

owner

of

ALPS

Transportation is must be held

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

TRANSFER

Transportation ,

is

he of

is full

liable

for

a sole proprietorship owned liable for the payment of

liability against

OF

dismissed and and payment

for him

all the that a

debts decision

and for

SHARES

FOREST HILLS GOLF & COUNTRY CLUB vs.

VERTEX

SALES INC.

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

FACTS: facility in of Forest

Forest Hills operates Antipolo City. Kings Hills.

and and

maintains a golf FEGDI owned the

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

Hills acceded to privileges in the

the gold

request, and and country

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

Forest Hills denied was not a party to

ISSUE: paid

by

transacting the sale

Whether Forest Hills Vertex by reason of

is the

(1) common share for P1.1 transferred its interest to requested Forest Hills to Vertex club.

was

able

to

enjoy

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

business with of the share. under sale.

and country club shares of stocks

obligation

Vertex

to

and

return

claimed

the

that

amount

HELD:

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

12.

to the

TRANSPORTATION JAPAN G.R.

No.

the rescinded amount paid

Hills is under reason of the

LAW

AIRLINES 161730,

contract , Forest by Vertex by

vs.

January

MICHAEL 28,

2005,

449

ASUNCION SCRA

714

FACTS:

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

31 entries and was brought he was billeted overnight.

instead

to

the

Narita

Airport

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

ISSUE:

Whether

Japan

Airlines

is

guilty

Rest

House

where

claiming that JAL did and he was rudely

of

breach

of

contract

not and

of

carriage.

HELD:

NO. JAL did not breach its contract of carriage with respondent. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents , however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein . The power to admit or not an alien into the country is a sovereign act , which cannot be interfered with even by JAL . This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondent’s shore pass application. JAL or any of its representatives have no authority to interfere with or influence the immigration authorities. The most that could be expected of JAL is to endorse respondent’s application. It bears repeating into the country is a by JAL.

that the sovereign

JAPAN

AIRLINES

552

341,

SCRA

power to act which

vs.

G.R.

admit cannot

JESUS

No. 170141,

or not interfere

an with

alien even

SIMANGAN

April 22, 2008

FACTS:

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

ISSUE:

Whether

JAL

is

guilty

of

breach

of

HELD: travel and kind

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

contract

of

carriage.

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

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

CORNELIO 545

LAMPESA SCRA

290,

G.R.

vs. No.

DR.

JUAN

155111,

DE

February

VERA, JR. 14,

2008

FACTS:

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

ISSUE: his

Whether driver while

HELD:

an employer should be liable for the negligence the latter is in the performance of his duty.

of

YES. Once negligent on the part of the employee is established, a presumption arises that the employer is negligent in the selection and/or supervision of said employee. To rebut this presumption,

32 the employer exercised care employees.

must and

present diligence

adequate in the

and convincing proof that selection and supervision of

he his

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

HERMINIO MARIANO, JR. vs. ILDEFONSO C. CALLEJAS G.R. No. 166640, July 31, 2009, 594 SCRA 569

FACTS:

Dr. Frelinda Mariano was the passenger of Celyrosa Express bus. The passenger bus was cruising on its rightful lane along the Aguinaldo Highway when a trailer truck coming from the opposite direction, on full speed, suddenly swerved and encroached on its lane, and bumped the passenger bus on its left portion . Due to the impact, the passenger bus fell on its right side on the right shoulder of the highway and caused the death of Dr. Mariano.

ISSUE: are

Whether liable.

the

registered

owner

and

driver

of

the

bus

company

HELD:

NO. While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them , it does not, however, make the carrier an insurer of the absolute safety of its passenger. The totality of evidence shows that the death of Dr. Mariano was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus.

NORTHWEST AIRLINES, INC. vs. STEPHEN V. CHIONG 543 SCRA 308, G.R. No. 155555, January 31, 2008

FACTS:

Philmare Shipping hired Steven Chiong as M/V Elbia at San Diego, California. For this purchased for Chiong a Northwest plane ticket California.

Third Engineer of purpose, Philmare for San Diego ,

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

ISSUE:

Whether

Northwest

Airlines

is

liable

for

breach

of

contract

of

carriage.

HELD:

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

NORTHWEST AIRLINES, INC. vs. DELFIN S. CATAPANG G.R. No. 174364, July 30, 2009, 594 SCRA 401

FACTS:

Atty. Catapang was directed a business trip. As he intends to was asked for additional US$50 for by the airlines.

by UCPB visit his rerouting

to go to siblings in or booking

Paris on USA , he of flight

33 Upon his arrival in New York , he was informed that his ticket was not rebookable or reroutable and was treated in a rude manner by an employee by the airlines since his ticket was of a “restricted type” and that unless he upgraded it by paying US$644 , he could not rebook. Left with no choice, he paid that amount for rebooking.

ISSUE:

Whether Northwest Airlines for its rude treatment.

damages

is

liable

for

moral

and

exemplary

HELD:

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

PHIL. CHARTER INSURANCE vs. NEPTUNE ORIENT AGENCY, INC. 554

ISSUE:

What

is

SCRA the

335,

liability

G.R. No. of

the

145044, common

June

12,

2008

carrier?

HELD:

Since the cargoes were lost while being transported to the Philippines, the Civil Code applies. The rights and obligations of the common carrier are thus governed by the provisions of the Civil Code and the COGSA, which is a special law, applies suppletorily. Art. 1749 states that “A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading , unless the shipper or owner declares a greater value,” is binding. Art. 1750 states that “A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances , and has been fairly and freely agreed upon.” The COGSA provides that “Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package . . . unless the nature and value of such goods have been declared by the shipper before the shipment and inserted in the bill of lading. Since in the bill of lading, the shipper did not declare the value of the goods and no additional value had been paid, the stipulation in the bill of lading that the carrier’s liability shall not exceed $500 per package applies.

PHILIPPINE NATIONAL RAILWAYS vs. COURT OF APPEALS 536 SCRA 147,

ISSUES:

1)

2)

Whether

What

is

PNR the

G.R.

No.

observes liability

157658,

due of

October

15,

2007

diligence.

PNR?

HELD:

1) NO. It was ascertained beyond doubt that the proximate cause of the collision is the negligence and imprudence of the PNR and its locomotive driver in operating the passenger train . The train was running at a high speed, there was no crossing bar or flagman and the signaling device was in a dilapidated condition. It is the responsibility of

the railroad company to use reasonable care to keep the signal devices in working order. Failure to do so would be an indication of negligence that the train has a right of way in a railroad crossing under Section 42 (d) Article III of RA 4136, otherwise known as the Land Transportation & Traffic Code can only be invoked if the street or crossing is so designated and sign posted. 2) Under Article 2180 of the NCC, the employer is primarily liable on the 0assumption of juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. Even the existence of hiring procedures and supervisory employees cannot be incidentally invoked to overturn the presumption of negligence on the part of employer.

A BROKERAGE IS CONSIDERED A COMMON CARRIER

34 TORRES – MADRID BROKERAGE, INC. vs. FEB MITSUI MARINE INSURANCE, INC. et. al. G.R. No. 194121, July 11, 2016, 796 SCRA 142

FACTS:

Sony Brokerage, Inc. the goods to BMT Trucking warehouse. On however, and the

Philippines engaged the services of petitioner Torres – Madrid (TMBI) to facilitate the release of its shipment and deliver its warehouse . In turn, TMBI subcontracted the services of Service to transport the shipment from the port to the

the day one of shipment

of the scheduled the trucks was were missing.

delivery , four trucks left BMT’s found abandoned with both the

garage , driver

Sony filed an insurance claim against the insurer of the goods , Mitsui. After being subrogated to Sonny’s rights, Mitsui demanded from TMBI payment of the lost goods. TMBI impleaded BMT as the proximate cause of the lost goods and said that in the event it is held liable to Mitsui, BMT should reimburse. RTC and CA found TMBI and BMT jointly and denied being a common carrier because it did not and the service that it offered was limited to paperwork. It blamed BMT who had the full control cargo when it was lost, and being a common negligent and shall be responsible for the loss. BMT argued hijacking was a

that it fortuitous

observed event.

the

required

solidarily liable . TMBI own a single truck the processing of and custody of the carrier, is presumed

standard

of

care

and

that

ISSUES also

1) Whether undertakes 2) Whether

a to

brokerage may be considered a deliver goods for its customers.

TMBI

3) Distinguish

and

culpa

BMT

are

contractual

solidarily

from

culpa

liable

common to

carrier

if

it

Mitsui.

aquilliana.

RULINGS 1) YES, undertakes to

a brokerage may be considered deliver goods for its customers.

a

common

carrier

if

it

also

Common carrier are persons, corporations, firms or association engaged in the business of transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public . By the nature of their business and for reasons of public policy , they are bound to observe extraordinary diligence in the vigilance over the goods and in the safety of their passengers. The law does not distinguish between one whose principal business activity is the carrying of goods and one who undertakes this task only in an ancillary activity.

As long as an entity holds itself to the public for the transport goods as a business, it is considered a common carrier regardless whether it owns the vehicle used or has to actually hire one.

of of

TMBI admitted that it was contracted to facilitate, process, and clear the shipments from the customs authorities , withdraw them from the pier, to transport and deliver them to Sony’s warehouse in Laguna . The fact that BMT does not own trucks and has to subcontract the delivery of its client’s goods, is immaterial. 2) NO,

TMBI

and

BMT

are

not

solidarily

liable

to

Mitsui.

TMBI’s liability to Mitsui does not stem from a quasi-delict (culpa aquilliana) but from its breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual, albeit one that passed on to Mitsui as a result of TMBI’s contract of carriage with Sony to which Mitsui has been subrogated as an insurer who had paid Sony’s insurance claim. The application

legal reality that results from this of quasi-delict based Article 2194.

contractual

tie

precludes

the

35

While it is undisputed that the cargo was lost under the actual custody of BMT, no direct contractual relationship existed between Sony/Mitsui and BMT. If at all, Sony/Mitsui’s cause of action against BMT could only arise from quasi-delict, as a third party suffering damage from the action of another due to the latter’s fault or negligence, pursuant to Article 2176 of the Civil Code. In the present case, Mitsui’s action is solely premised on TMBI’s breach of contract. Mitsui did not even sue BMT, much less prove any negligence on its parts. If BMT has entered the picture at all , it is because TMBI sued it for reimbursement for the liability that TMBI might incur from its contract of carriage with Sony/Mitsui for quasi-delict. In these lights, TMBI is liable breaching the contract of carriage . In from BMT due to latter’s own breach

to Sony (subrogated by Mitsui) for turn, TMBI is entitled reimbursement of contract of carriage with TMBI.

3) In culpa contractual, the plaintiff only needs to establish the existence of the contract and the obligor’s failure to perform his obligation . It is not necessary for the plaintiff to prove or even allege that the obligor’s non-compliance was due to fault or negligence because Article 1735 already presumes that the common carrier is negligent . The common carrier can only free itself from liability by proving that it observed extra-ordinary diligence. It cannot discharge this liability by shifting the blame on its agents or servants. On the other hand, the plaintiff in culpa aquilliana must clearly establish the defendant’s fault or negligence because this is the very basis of the action. Moreover, if the injury to the plaintiff resulted from the act or omission of the defendant’s employee or servant, the defendant may absolve himself by proving that he observed the diligence of a good father of a family to prevent the damage.

BENITO MACAM vs. COURT OF APPEALS G.R. No. 125524, August 25, 1999, 313 SCRA 77 Under any form lading, for the

special circumstances, it was of receipt by the consignee , the release of the goods.

The carrier was consignee without

not even required presentation in lieu of the original bill

absolved from liabilities the bill of lading.

for

releasing

the

goods

of of to

In clearing the carrier from liability , it takes into consideration that the shipper sent a telex to the carrier after the goods were shipped . The telex instructed the carrier to deliver the goods without need of presenting the bill of lading upon shipper’s request. It shipping calls.

is well noted the usual practice of the shipper to request the lines to immediately release perishable cargoes through telephone

VOYAGE

CHARTER

Loadstar Shipping Co., Inc. remains a common carrier notwithstanding the existence of the charter agreement with Northern Mindanao Transport Company, Inc., since the said charter is limited to the ship only and does not involve both the vessel and its crew. Its charter is only voyage-charter, not a bareboat charter. It is only when the charter includes both vessel and its crew, as in a bareboat or demise charter that a common carrier becomes private. As a common carrier, Loadstar is required to observe extraordinary diligence in the vigilance over the goods it transports. When the goods placed in its care are lost , it is presumed to have been at fault or to have acted negligently. Loadstar, therefore, has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo . (Loadstar Shipping Co. Inc. vs. Pioneer Asia Insurance

Corporation,

G.R.

No.

NEGLIGENCE A tug and performance of its of the obligor in

157481,

IN

A

January

24,

2006,

CONTRACT

479

SCRA

OF

655).

TOWAGE

its owner must observe ordinary diligence in the obligations under the contract of towage . The negligence the performance of the obligation renders him liable for

36 damages for the resulting loss suffered by the obligee. Fault of the obligor consists in his failure to exercise due care in the performance of the obligation as the nature of the demands.

or negligence and prudence obligation so

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

WHEN

CONSIGNEE

BECOMES

PARTY

OF

THE

CONTRACT

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

FREIGHT

FORWARDERS

UNSWORTH TRANSPORT INTERNATIONAL (PHIL) INC. vs. COURT OF APPEALS G.R. No. 166250, July 26, 2010, 625 SCRA 357 Where instead of a common

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

to

their becomes

destination liable as

A freight forwarder’s liability is limited to damages arising from its own negligence, including negligence in choosing the carrier , however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation , it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself. The Civil Code does not limit the liability of the common carrier to a fixed amount per package . In all matters not regulated by the Civil Code, the rights and obligations of common carrier are governed by the Code of Commerce and special laws . Thus, the COGSA supplements the Civil Code by establishing a provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading.

TEMIC AUTOMATIVE

PHILIPPINES

G.R. No. 186965,

December

vs. 23,

TAPI – EMPLOYEES UNION 2009,

609

SCRA

355

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

COGSA -

NOTICE

OF LOSS

Under Section 3 (6) of the COGSA, notice of loss or damages must be filed within three days from delivery. Under the same provision, however, a failure to file a notice of claim within three days will not bar recovery if a suit is nonetheless filed within one year from delivery of the goods or from the date when the goods should have been delivered. (WALLEM PHILIPPINES SHIPPING INC. vs. S.P. FARMS, INC., G.R. No. 161849, July 9, 2010, 624 SCRA 329).

SURRENDER OF GOODS BY A CARRIER DESIGNER BASKETS, INC. vs. AIR SEA TRANSPORT, INC., et. al. G.R. No. 184513, March 9, 2016, 787 SCRA 138

FACTS:

Petitioner DBI is a domestic corporation engaged in the production of housewares and handicraft items for export . Ambiente, a foreign-based company, ordered from DBI 223 cartoons of assorted wooden items.

37 Ambiente designated ACCLI as the forwarding agent that will ship out its order from the Philippines to the United States . ACCLI is a domestic corporation acting as agent of ASTI, a US-based corporation engaged in carrier transport business in the Philippines. DBI delivered the shipment to ACCLI for sea transport from Manila and delivery to Ambiente. ACCLI issued to DBI triplicate copies of ASTI Bill of Lading. DBI retained possession of the originals of the Bill of Lading pending payment of the goods by Ambiente. Later on, Ambiente and ASTI entered into an Indemnity Agreement obligating the latter to deliver the shipment to the former or to its order “without the surrender of the relevant bill of ladings due to nonarrival or loss thereof. Thereafter, ASI released the shipment to Ambiente without the knowledge of DBI, and without it receiving payment for the total cost of the shipment. DBI then made several demands to Ambiente for the payment of the shipment but to no avail. Then, DBI filed a complaint against ASTI and ACCLI. DBI claimed that under the Bill of Lading , it provides that the release and delivery of the cargo/shipment to the consignee only after the original copies of the Bill of Lading are surrendered , otherwise, they become liable to the shipper for the value of the shipment.

ISSUES for

1) Whether ASTI and ACCLI the value of the shipment.

be

held

the

2) Whether ASTI may surrender the surrender of Original Bill of Lading.

solidarily

goods

to

liable the

with

assignee

Ambiente without

RULINGS for

1) NO, ASTI the value of

and ACCLI the shipment.

may

not

be

held

solidarily

liable

to

DBI

ASTI as the carrier cannot be held liable for the unpaid value of the goods, as it is not a party to the contract of sale . The carrier’s liability if any should be pursuant to the contract of carriage of goods and the law on the transportation of the goods , not on the contract of sale between the unpaid seller and buyer of the goods. Articles 1733, 1734 and 1735 speak of the common carrier’s responsibility over the goods. They refer to the general liability of common carriers in case of loss , destruction or deterioration of goods and the presumption of negligence against them . This responsibility or duty of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation , until the same is delivered, actually or constructively, by the carrier to the consignee or to the person who has the right to receive them. It proper

the

is, in fact, consignee or

2) YES, surrender

undisputed that the goods were timely delivered to to the one who was authorized to receive them.

the carrier of the bill

has no liability of lading.

for

releasing

the

goods

the

without

Although the general rule is that upon receipt of the goods , the consignee surrenders the bill of lading to the carrier and their respective obligations are considered canceled. Article 53 of the Code of Commerce provides for two exceptions : when the bill of lading gets lost or for any other cause. In either case, the consignee must provide a receipt to the carrier for the goods surrendered. It is settled that the absolute, that in case of may release the goods to

surrender of the original bill of lading is not loss or any other cause, a common carrier the consignee even without them.

REPUBLIC vs. LORENZO SHIPPING CORPORATION G.R. No. 153563, February 7, 2005, 450 SCRA 550 not

It is ruled violate the

that the non-surrender of the original carrier’s duty of extraordinary diligence

bill of lading does over the goods.

38 It was found that the carrier exercised extraordinary released the shipment to the consignee, not upon the original bill of lading is not a condition precedent for to be discharged of its contractual obligation.

diligence when it surrender of the a common carrier

13. TRUTH IN LENDING ACT HEIRS OF ZOILO ESPIRITU vs. SPS. LANDRITO 520 SCRA 383, G.R. No. 169617, April 4, 2007

FACTS:

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

ISSUE: Landrito for the

Whether the 5% interest rate for the first month and the succeeding months are valid.

imposed upon varying interest

the rates

Spouses imposed

HELD:

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

14.

TRUST

RECEIPTS

LAW - PD 115

HUR TIN YANG vs. PEOPLE OF THE PHILIPPINES G.R. No. 195117, August 14, 2013, 703 SCRA 606

FACTS:

On various occasions, Metrobank letters of credits to Supermax. These LCs pay for the delivery of several construction in their construction business.

extended several commercial were used by Supermax to materials which will be used

Thereafter, Metrobank required Yang, as representative and Vice President for Internal Affairs of Supermax , to sign 24 trust receipts as security for the construction materials and to hold those materials or the products of the sale in trust for Metrobank. When the trust receipts fell letter, Supermax failed to pay Metrobank.

due and despite the receipt of demand or deliver the goods as proceeds to

39 Hence,

Metrobank

filed

a

criminal

complaints

for

estafa

against

Yang.

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

ISSUE:

Whether

Yang

is

liable

for

estafa

for

violation

of

trust

receipt

law.

HELD: receipt

NO. The transaction

dealing between Yang but one of simple

and loan.

Metrobank

was

not

a

trust

When both parties enter into an agreement knowing fully that the return of the goods subject of the trust receipt is not possible even without any fault on the part of the trustee , it is not a trust receipt transactions penalizing under Sec. 13 of PD 115 in relation to Article 315 par. 1 (b) of RPC, as the only obligation actually agreed upon by the parties would be the return of the proceeds of the sale transaction. This transaction obligated to pay the goods.

becomes a mere loan where bank the amount spent for the

“NOTHING IS IMPOSSIBLE

the borrower purchase of

WITH GOD”

is the