Survey of Recent Jurisprudence in Commercial Law (January 2012 To December 31, 2015)

June 1, 2016
Survey of Recent Jurisprudence in Commercial Law

( January 2012 to May 31, 2016 )
( inclusive of cases penned by SC Justice Presbitero Velasco)
Dean Nilo T. Divina
SPECIAL COMMERCIAL LAWS
Letter of Credit
What is the doctrine of independence ?
Where the trial court rendered a decision finding the buyer solely liable to pay the seller and omitted by
inadvertence to insert in its decision the phrase without prejudice to the decision that will be made
against the issuing bank , the bank can not evade responsibility based on this ground. The seller who
is entitled to draw on the credit line of the buyer from a bank against the presentation of sales invoices
and official receipts of the purchases and who obtained a court judgment solely against the buyer even
though the suit is against the bank and the buyer may still enforce the liability of the same bank under a
letter of credit issued to secure the credit line. The so-called "independence principle" in a letter of
credit assures the seller or the beneficiary of prompt payment independent of any breach of the main
contract and precludes the issuing bank from determining whether the main contract is actually accom-
plished or not. Philippine National Bank vs. San Miguel Corporation. No. 186063, January 15,
2014.
Trust receipt
When is a trust receipt transaction considered a simple loan ?
There are two obligations in a trust receipt transaction. The first is covered by the provision that refers
to money under the obligation to deliver it (entregarla) to the owner of the merchandise sold. The sec-
ond is covered by the provision referring to merchandise received under the obligation to return it (de-
volvera) to the owner. Thus, under the Trust Receipts Law, intent to defraud is presumed when (1) the
entrustee fails to turn over the proceeds of the sale of goods covered by the trust receipt to the entruster;
or (2) when the entrustee fails to return the goods under trust, if they are not disposed of in accordance
with the terms of the trust receipts.
In all trust receipt transactions, both obligations on the part of the trustee exist in the alternative the
return of the proceeds of the sale or the return or recovery of the goods, whether raw or processed.
When both parties enter into an agreement knowing that the return of the goods subject of the trust re-
ceipt is not possible even without any fault on the part of the entrustee, it is not a trust receipt transac-
tion penalized under Section 13 of P.D. 115; the only obligation actually agreed upon by the parties
would be the return of the proceeds of the sale transaction. This transaction becomes a mere
loan, where the borrower is obligated to pay the bank the amount spent for the purchase of the goods.
Land Bank of the Philippines vs. Perez, GR no. 166884, 13 June 2012
The sale of goods by a person in the business of selling goods, for profit, who at the outset of the trans-
action, has as against the buyer, general property rights in such goods, or who sells goods to the buyer
on credit, retaining title or other interest as security for the payment of the purchase price, does not
constitute a trust receipt transaction. There is no trust receipt, notwithstanding the label, if goods of-
fered as security for a loan accommodation are goods sold to the debtor under a supposed trust receipt
transaction. Sps. Dela Cruz vs Dela Cruz, GR No. 158649, February 18, 2013
The fact that the entruster knew even before the execution of the alleged trust receipt agreements that
the covered construction materials were never intended by the entrustee for resale or for the manufac-
ture of items to be sold would take the transaction outside the ambit of the Trust Receipts Law. Hur
Ting Yang vs. People of the Philippines. G.R. No. 195117, August 14, 2013 ( J VELASCO )
2016 Dean Nilo T. Divina, All Rights Reserved 1

Banking Laws
What is the redemption period in case the mortgagee is a bank ?
NB. Under Section 47 of the General Banking Law, the redemption period is three months after
foreclosure or registration of the sale, whichever comes earlier, if the following requisites are pre-
sent: a ) the mortgagor is a juridical person; b ) the mortgagee is a bank, quasi-bank or trust en-
tity and c ) the mode of foreclosure is extra-judicial.
Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only
modified the time for the exercise of such right by reducing the one-year period originally provided in
Act No. 3135. The new redemption period commences from the date of foreclosure sale, and expires
upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There
is likewise no retroactive application of the new redemption period because Section 47 exempts from
its operation those properties foreclosed prior to its effectivity and whose owners shall retain their re-
demption rights under Act No. 3135. Section 47 does not infringe on the equal protection clause nor
discriminate mortgagors/property owners who are juridical persons. One class may be treated differ-
ently from another where the groupings are based on reasonable and real distinctions. The difference in
the treatment of juridical persons and natural persons was based on the nature of the properties fore-
closed whether these are used as residence, for which the more liberal one-year redemption period is
retained, or used for industrial or commercial purposes, in which case a shorter term is deemed neces-
sary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks to
dispose sooner of these acquired assets. In this context, the amendment introduced by Section 47 em-
bodied one of such safe and sound practices aimed at ensuring the solvency and liquidity of our banks.
It cannot therefore be disputed that the said provision amending the redemption period in Act 3135
was based on a reasonable classification and germane to the purpose of the law. This legitimate public
interest pursued by the legislature further enfeebles petitioners impairment of contract theory. The
right of redemption being statutory, it must be exercised in the manner prescribed by the statute, and
within the prescribed time limit, to make it effective. Furthermore, as with other individual rights to
contract and to property, it has to give way to police power exercised for public welfare. Golden-
gateway Merchandising vs. Equitable PCI Bank. G.R. No. 195540, March 13, 2013
Does BSP have quasi-judicial function ? Is its resolution proper subject matter for declaratory
relief ?
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. It is an independent central monetary authority and a body corporate with fiscal and adminis-
trative autonomy, mandated to provide policy directions in the areas of money, banking, and credit. It
has the power to issue subpoena, to sue for contempt those refusing to obey the subpoena without justi-
fiable reason, to administer oaths and compel presentation of books, records and others, needed in its
examination, to impose fines and other sanctions and to issue cease and desist order. Section 37 of Re-
public Act No. 7653, in particular, explicitly provides that the BSP Monetary Board shall exercise its
discretion in determining whether administrative sanctions should be imposed on banks and quasi-
banks, which necessarily implies that the BSP Monetary Board must conduct some form of investiga-
tion or hearing regarding the same.
The decision of the BSP Monetary Board cannot be a proper subject matter for a petition for declarato-
ry relief since it was issued by the BSP Monetary Board in the exercise of its quasi-judicial powers or
functions. The authority of the petitioners to issue the questioned MB Resolution emanated from its
powers under Section 37 of RA No. 7653 and Section 66 of RA No. 8791 to impose, at its discretion,
administrative sanctions, upon any bank for violation of any banking law. The Honorable Monetary
Board vs. Philippine Veterans Bank G.R. No. 189571, January 21, 2015
The PDIC must be substituted or made a co-defendant in a collection suit against a bank that eventually
closed since PDIC is the statutory receiver of closed banks and not on the basis of Section 19, Rule 3 of
the Revise Rules of Court on transfer of interest pendente lite.

For one, the properties of an insolvent bank are not transferred by operation of law to the statutory re-
ceiver/liquidator but rather these assets are just held in trust to be distributed to its creditors after the
liquidation proceedings in accordance with the rules on concurrence and preference of credits. The
debtors properties are then deemed to have been conveyed to the Liquidator in trust for the benefit of
creditors, stockholders and other persons in interest. This notwithstanding, any lien or preference to any
property shall be recognized by the Liquidator in favor of the security or lienholder, to the extent al-
lowed by law, in the implementation of the liquidation plan.
In addition, the insolvent bank's legal personality is not dissolved by virtue of being placed under re-
ceivership by the Monetary Board. It must be stressed here that a bank retains its juridical personality
even if placed under conservatorship; it is neither replaced nor substituted by the conservator who shall
only take charge of the assets, liabilities and the management of the institution.
In fine, the legal personality of the petitioner bank is not ipso facto dissolved by insolvency; it is not
divested of its capacity to sue and be sued after it was ordered by the Monetary Board to cease opera-
tion. The law mandated, however, that the action should be brought through its statutory liquida-
tor/receiver which in this case is the PDIC. The authority of the PDIC to represent the insolvent bank in
legal actions emanates from the fiduciary relation created by statute which reposed upon the receiver
the task of preserving and conserving the properties of the insolvent for the benefit of its creditors. Ba-
layan Bay Rural Bank vs National Livelihood Development Corporation, GR No. 194589, GR No.
194589, September 21, 2015
CORPORATION LAW
Cases on the application of the doctrine of separate legal entity
The personality of a corporation is distinct and separate from the personalities of its stockholders.
Hence, its stockholders are not themselves the real parties in interest to claim and recover compensa-
tion for the damages arising from the wrongful attachment of corporate assets. Only the corporation is
the real party in interest for that purpose. Stronghold Insurance Company, Inc. v. Cuenca,G.R. No.
173297, March 6, 2013
Where two banks foreclosed mortgages on certain properties of a mining company and resumed busi-
ness operations thereof by organizing a different company to which the banks transferred the foreclosed
assets, the banks are not liable to a contractor engaged by the re-organized mining company even
though the latter is wholly-owned by the two banks and they have interlocking directors, officers and
stockholders. Development Bank of the Philippines vs. Hydro Resources Contractors Corpora-
tion, GR. No. 167603, March 13, 2013
What are the elements of the alter-ego test to warrant the application of the doctrine of piercing
the veil of corporate fiction ?
1. Control, not mere majority or complete stock control, but complete domination, not only of fi-
nances but of policy and business practice in respect to the transaction attacked so that the cor-
porate entity as to this transaction had at the time no separate mind, will or existence of its own.
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention
of plaintiffs legal right; and
3. The aforesaid control and breach of duty must have proximately caused the injury or unjust loss
complained of. Development Bank of the Philippines vs. Hydro Resources Contractors
Corporation, GR. No. 167603, March 13, 2013
The fact that an employee of the corporation was made to resign and not allowed to enter the workplace
does not necessarily indicate bad faith on the part of the employer corporation if a sufficient ground
existed for the latter to actually proceed with the termination. Abbot Laboratories vs. Alcaraz, G.R.
No. 192571, July 23, 2013

The mere fact that the same controlling stockholder/officer signed the loan document on behalf of the
corporation does not prove that he exercised control over the finances of the corporation. Neither is the
absence of a board resolution authorizing him to contract the loan nor the Corporations failure to ob-
ject thereto support this conclusion. While he is the signatory of the loan and the money was delivered
to him, the proceeds of the loan were intended for the business plan of the corporation. That the busi-
ness plan did not materialize is also not a sufficient proof to justify a piercing, in the absence of proof
that the business plan was a fraudulent scheme geared to secure funds from the lender. Nuccio Saveri-
os vs. Puyat, GR No. 186433, November 27, 2013
Where the respondent was adjudged liable to pay the contractor he hired pursuant to the management
contract respondent signed with the corporation to renovate its food outlets, respondents right of reim-
bursement is only against the corporation which engaged him and does not extend to its acting presi-
dent and controlling shareholder. Even granting that the latter exercised a certain degree of control over
the finances, policies and practices of the company, in view of his position as president, chairman and
treasurer of the corporation, such control does not necessarily warrant piercing the veil of corporate fic-
tion since there was not a single proof that the company was formed to defraud another or that the act-
ing President was guilty of bad faith or fraud. WPM International Trading, Inc. vs. Fe Corazon
Labayen, G.R. No. 182770, September 17, 2014
The corporation and its President can not be considered one and the same employer just because in the
SSS form of the corporation the name of its President appeared as employer. Hacienda Cataywa vs.
Rosario Lorezo, G.R. No. 179640, March 18, 2015
To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1)
it must be alleged in the complaint that the director or officer assented to patently unlawful acts of the
corporation or that the officer was guilty of gross negligence or bad faith; and (2) there must be proof
that the officer acted in bad faith. The fact that the corporation ceased its operations the day after the
promulgation of the SC resolution finding the corporation liable does not prove bad faith on the part of
the incorporator of the corporation. Polymer Rubber Corporation vs. Ang, G.R. No. 185160. July
24, 2013
The application of the doctrine of piercing the veil of corporate fiction is warranted when employment
was terminated on the pretext that there would be an impending permanent closure of the business as a
result of an intended sale of its assets to an undisclosed corporation, and that there would be a change
in the management but subsequent events, however, revealed that the buyer of the assets of the em-
ployer was a corporation owned by the same employer and members of his family. Furthermore, the
business re-opened in less than a month under the same management. Rosales vs New A.N.J.H Enter-
prises , GR. No. 203355, August 18, 2015 ( J VELASCO )
Doctrine of Piercing the veil of corporate fiction
Should the court first acquire jurisdiction over the corporation involved before its separate legal
personality may be disregarded ?
The court must first acquire jurisdiction over the corporation or corporations involved before its or their
separate personalities are disregarded; and the doctrine of piercing the veil of corporate entity can only
be raised during a full-blown trial over a cause of action duly commenced involving parties duly
brought under the authority of the court by way of service of summons or what passes as such service.
Kukan International Corporation vs. Hon. Judge Amor Reyes, G.R. No. 182729, 29 September
2010 ( J. VELASCO )
However, in another case involving an action for breach of contract of carriage resulting to the death of
one of the passengers, the Supreme Court ruled that if the RTC had sufficient factual basis to conclude
that the two corporations are one and the same entity as when they have the same President and con-
trolling shareholder and it is generally known in the place where they do business that both transporta-
tion companies are one, the third party claim filed by the other corporation was set aside and the levy
on its property held valid even though the latter was not made a party to the case . The judgment may
be enforced against the other corporation to prevent multiplicity of suits and save the parties unneces-

sary expenses and delay. Gold Line Tours vs. Heirs of Maria Concepcion Lacsa, GR No. 159108,
18 June 2012
Piercing the veil of corporate fiction is warranted when a corporation ceased to exist only in name as it
re-emerged in the person of another corporation, for the purpose of evading its unfulfilled financial ob-
ligation under a compromise agreement. Thus, if the judgment for money claim could not be enforced
against the employer corporation, an alias writ may be obtained against the other corporation consider-
ing the indubitable link between the closure of the first corporation and incorporation of the other.
Livesey vs. Binswanger Philippines, GR No. 177493, March 19, 2014
Where the court rendered judgment against a stock brokerage firm directing the latter to return shares
of stock which it sold without authority but the writ of execution was returned unsatisfied, an alias writ
could not be enforced against its parent company because the court has not acquired jurisdiction over
the latter and while the parent company owns and controls the brokerage firm, there is no showing that
the control was used to violate the rights of the plaintiff. Pacific Rehouse Corporation vs. Court of
Appeals, GR 199687, March 24, 2014
Compliance with the recognized modes of acquisition of jurisdiction can not be dispensed with in
piercing the veil of corporate fiction. In an action for subrogation against the travel agent after the in-
surer paid the formers obligation to IATA for unremitted collections, the insurer can not hold an un-
impleaded corporation liable as it would offend due process. Pioneer Insurance Surety Corporation
vs Morning Star Travel and Tours, GR No. 198436, July 08, 2015
NB. There appears to be a lack of conclusive yardstick as to when the court may pierce the veil of cor-
porate fiction of a corporation which has not been brought to its jurisdiction by summons, voluntary
appearance or other recognized modes of acquiring jurisdiction. For academic purposes, it depends on
the similarity with the facts of each case.
What is the effect of allegation of bad faith or malice in the acts of the corporate representatives
on the liability of the corporation ?
Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract

entered into by the corporations they represent if there are allegations of bad faith or malice in their acts
representing the corporation even though the arbitral agreement only covers the corporations. This is
because when the allegations of bad faith or malice in the acts of corporate representatives are proven,
then the corporation and the corporate representatives become one and the same. Gerardo Lanuza, Jr.
And Antonio O. Olbes vs. Bf Corporation, G.R. No. 174938, October 01, 2014
Nationality of Corporations
What are the tests in determining the nationality of the investee corporation engaged in national-
ized activity ?
There are two cases in determining the nationality of the Investee Corporation. The first case is the
liberal rule, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and pertains to
the portion in said Paragraph 7 of the 1967 SEC Rules which states, (s)hares belonging to corporations
or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as
of Philippine nationality. Under the liberal Control Test, there is no need to further trace the owner-
ship of the 60% (or more) Filipino stockholdings of the Investing Corporation since a corporation
which is at least 60% Filipino-owned is considered as Filipino.
The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said
Paragraph 7 of the 1967 SEC Rules which states, but if the percentage of Filipino ownership in the
corporation or partnership is less than 60%, only the number of shares corresponding to such percent-
age shall be counted as of Philippine nationality. Under the Strict Rule or Grandfather Rule Proper,
the combined totals in the Investing Corporation and the Investee Corporation must be traced (i.e.,
grandfathered) to determine the total percentage of Filipino ownership.

What is the prevailing mode of determining whether or not a corporation is a Filipino corpora-
tion ? Control test ? Grandfather rule ? Both tests cumulatively ?
The control test is still the prevailing mode of determining whether or not a corporation is a Filipino
corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake the explo-
ration, development and utilization of the natural resources of the Philippines. However, when in the
mind of the Court there is doubt, based on the attendant facts and circumstances of the case, in the 60-
40 Filipino-foreign equity ownership in the corporation, then it may apply the grandfather rule. Nar-
ra Nickel Mining And Development Corp., vs. Redmont Consolidated Mines Corp. G.R. No.
195580, April 21, 2014 ( J. VELASCO )
The Control Test can be, as it has been, applied jointly with the Grandfather Rule to determine the ob-
servance of foreign ownership restriction in nationalized economic activities. The Control Test and
the Grandfather Rule are not, as it were, incompatible ownership-determinant methods that can only
be applied alternative to each other. Rather, these methods can, if appropriate, be used cumulative-
ly in the determination of the ownership and control of corporations engaged in fully or partly
nationalized activities, as the mining operation involved in this case or the operation of public utilities.
The Grandfather Rule, standing alone, should not be used to determine the Filipino ownership and con-
trol in a corporation, as it could result in an otherwise foreign corporation rendered qualified to perform
nationalized or partly nationalized activities. Hence, it is only when the Control Test is first com-
plied with that the Grandfather Rule may be applied. Put in another manner, if the subject corpora-
tions Filipino equity falls below the threshold 60%, the corporation is immediately considered foreign-
owned, in which case, the need to resort to the Grandfather Rule disappears.
On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity require-
ment can be considered a Filipino corporation if there is no doubt as to who has the beneficial
ownership and control of the corporation. In that instance, there is no need for a dissection or
further inquiry on the ownership of the corporate shareholders in both the investing and investee corpo-
ration or the application of the Grandfather Rule. As a corollary rule, even if the 60-40 Filipino to
foreign equity ratio is apparently met by the subject or investee corporation, a resort to the Grandfa-
ther Rule is necessary if doubt exists as to the locus of the beneficial ownership and control.
Cite an example where the Supreme Court cumulatively applied the control test and grandfather
rule in determining the nationality of an investee corporation ?
In this case ( where based on the incorporation papers, the Filipino-Owned corporation subscribed to
60% of the capital while the foreign corporation subscribed to 40% but the subscription of the former is
only nominally paid-up and such corporation entered into a financial assistance agreement with the for-
eign-owned corporation), a further investigation as to the nationality of the personalities with the bene-
ficial ownership and control of the corporate shareholders in both the investing and investee corpora-
tions is necessary. Narra Nickel Mining And Development Corp. Inc. vs. Redmont Consolidated
Mines Corp. G.R. No. 195580, January 28, 2015 ( J VELASCO )
The grandfather rule is only employed when the 60% Filipino ownership in the corporation is in doubt.
In this case, not even the slightest doubt is cast since the petition is severely wanting in facts and cir-
cumstances that raise legitimate challenges to the joint venture companys 60-40 Filipino ownership.
Querubin vs Commission on Elections, GR No. 218787, December 08, 2015 ( J VELASCO )
Capital
What do you understand by the term capital when applied to corporation engaged in mining,
public utility or exploration of natural resources ?
The term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock that can
vote in the election of directors. To construe broadly the term capital as the total outstanding capital
stock, including both common and non-voting preferred shares, grossly contravenes the intent and let-

ter of the Constitution that the State shall develop a self-reliant and independent national econo-
my effectively controlled by Filipinos. A broad definition unjustifiably disregards who owns the all-
important voting stock, which necessarily equates to control of the public utility. Gamboa v. Teves, et
al.,G.R. No. 176579, June 28, 2011.
Nevertheless, if a corporation is engaged in a partially nationalized industry, issues a mixture of com-

mon and preferred non-voting shares, at least 60 percent of the common shares and at least 60 percent
of the preferred non-voting shares must be owned by Filipinos. Of course, if a corporation issues only a
single class of shares, at least 60 percent of such shares must necessarily be owned by Filipinos. In
short, the 60-40 ownership requirement in favor of Filipino citizens must apply separately to each class
of shares, whether common, preferred non-voting, preferred voting or any other class of shares. Heirs
of Wilson P. Gamboa vs. Teves, 682 SCRA 397(2012)
Corporation by estoppel
May a corporation by estoppel be impleaded as a party defendant independently of the persons

assuming themselves to be a corporation ?
Corporation by estoppel results when a corporation represented itself to the public as such despite its
not being incorporated. A corporation by estoppel may be impleaded as a party defendant considering
that it possesses attributes of a juridical person, otherwise, it can not be held liable for damages and in-
juries it may inflict to other persons. Macasaet vs. Francisco, GR No. 156759, June 5, 2013
NB This case involves the legality of a court order denying a motion to dismiss to drop as a party de-
fendant Abante tonight for not being a corporation registered with the SEC. There is no ruling yet on
the liability of such corporation. It will be interesting to see how the SC will eventually rule on how to
enforce a judgment against a corporation by estoppel ( independently of those who represented them-
selves as a corporation who, under the law, are liable as general partners ) considering that such class of
corporation does not have the legal personality to acquire and own assets which can be subject of levy.
Corporate name
Does change of corporate name dissolve the corporation ?
The mere change in the corporate name is not considered under the law as the creation of a new corpo-
ration; hence, the renamed corporation remains liable for the illegal dismissal of its employee separated
under that guise. Verily, the amendments of the articles of incorporation for change of corporate name
did not produce the dissolution of the corporation. For sure, the Corporation Code defined and deline-
ated the different modes of dissolving a corporation and amendment of the articles of incorporation was
not one of such modes. Zuellig Freight and Cargo Systems vs. NLRC, GR No. 157900, July 22,
2013
Is the use by GSIS-Family Bank in its corporate name of the words Family Bank deceptive and
confusingly similar to the name BPI Family Bank ?
To fall within the prohibition of the law on the right to the exclusive use of a corporate name, two req-
uisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of such corporate name;
and
(2) the proposed name is either
(a) identical or
(b) deceptive or confusingly similar to that of any existing corporation or to any other name
already protected by law; or
(c) patently deceptive, confusing or contrary to existing law.
In this case, respondent was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family
Bank. Petitioner, on the other hand, was incorporated as GSIS Family - Thrift Bank only in 2002, or at
least seventeen (17) years after respondent started using its name.

The second requisite likewise obtains on two points: the proposed name is (a) identical or (b) deceptive
or confusingly similar to that of any existing corporation or to any other name already protected by law.
Petitioner's corporate name is "GSIS Family BankA Thrift Bank" and respondent's corporate name is
"BPI Family Bank." The only words that distinguish the two are "BPI," "GSIS," and "Thrift." The first
two words are merely the acronyms of the proper names by which the two corporations identify them-
selves; and the third word simply describes the classification of the bank. The overriding consideration
in determining whether a person, using ordinary care and discrimination, might be misled is the cir-
cumstance that both petitioner and respondent are engaged in the same business of banking. "The like-
lihood of confusion is accentuated in cases where the goods or business of one corporation are the same
or substantially the same to that of another corporation." GSIS Family Bank-Thrift Bank vs BPI
Family Bank, GR No. 175278, September 23, 2015
Board of Directors/Corporate Officers
Who are officers of the corporation who may sign the verification and certification against non-
forum shopping on behalf of the corporation even in the absence of a board resolution ?
The following officers may sign the verification and certification against non-forum shopping on behalf
of the corporation even in the absence of board resolution,
a) Chairperson of the Board of Directors;

b) President,
c) General Manager,
d) Personnel Officer,
e) Employment Specialist in labor case.
These officers are in the position to verify the truthfulness and correctness of the allegations in the pet-
tion. Mid Pasig Land and Development Corporation v. Tablante, G.R. No. 162924, February 4,
2010; PNCC Skyway Traffic Management and Security Division Workers Organization vs
PNCC Skyway Corporation, GR No. 171231, February 17, 2010 2013 case
Removal of Directors
When a committee not authorized by the by-laws called a special stockholders meeting, any action
taken and resolutions adopted in that meeting such as the removal of incumbent directors and the elec-
tion of their replacement, as well as the action of the new board in ordering the expulsion of the re-
moved directors from the corporation and the sale of their shares are all invalid. They are not just in the
nature of ultra vires acts which can be ratified by the stocholders but acts which are null and void, not
subject to ratification. If the corporate secretary does not call a stockholders meeting, despite demands
by the stocholders, the remedy is not for a committee to call one but to petition the SEC to order him
to call a meeting after compliance with the notice requirements. Bernas, et. al. vs Cinco, et al. GR
Nos. 163356-57, July 1, 2015
Doctrine of Apparent Authority
What do you understand by the doctrine of apparent authority ?
By the doctrine of apparent authority, the corporation will be estopped from denying the agents au-
thority if it knowingly permits one of its officers or any other agent to act within the scope of an appar-
ent authority, and it holds him out to the public as possessing the power to do those acts.
Apparent authority is derived not merely from practice. Its existence may be ascertained through (1) the
general manner in which the corporation holds out an officer or agent as having the power to act or, (2)
the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within
or beyond the scope of his ordinary powers.
Recent cases where the Supreme Court applied the doctrine of apparent authority

When the sole management of the corporation was entrusted to two of its officers/incorporators with
the other officers never had dealings with the corporation for 14 years and that the board and the stock-
holders never had its meeting, the corporation is now estopped from denying the officers authority to
obtain loan from the lender on behalf of the corporation under the doctrine of apparent authority. Ad-
vance Paper Corporation vs. Arma Traders Corporation , G.R. No 176897, December 11, 2013.
Under the doctrine of apparent authority, a bank is liable to the seller who transferred ownership of his
property in favor of its buyer after the seller relied on the letter of the bank manager that the buyer had
an approved real estate loan with the bank and guaranteed that subsequent releases from the loan
would be made directly to the seller but the manager released the loan instead to the buyer who, how-
ever, failed to pay the seller. Games and Garment Developers vs Allied Banking Corporation, GR No.
181426, July 13, 2015
Derivative suit
What are the requirements for derivative suits ?
Section 1, Rule 8 of the Interim Rules imposes the following requirements for derivative suits:
(1) The person filing the suit must be a stockholder or member at the time the acts or transac-
tions subject of the action occurred and the time the action was filed;
(2) He must have exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or
rules governing the corporation or partnership to obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of; and
(4) The suit is not a nuisance or harassment suit. ANG, FOR AND IN BEHALF OF SUNRISE MAR-
KETING (BA COLOD), INC. V. SPS. ANG.G.R. No. 201675, June 19, 2013
The fifth requisite for filing derivative suits, while not included in the enumeration, is implied in the
first paragraph of Rule 8, Section 1 of the Interim Rules: The action brought by the stockholder or
member must be "in the name of [the] corporation or association. ..." This requirement has already been
settled in jurisprudence. Nestor Ching vs. Subic Bay Golf And Country Club, Inc. G.R. No. 174353
September 10, 2014
Cite instances where the Supreme Court held that the filing of the derivative suit is improper ?
The complaint filed by a stockholder to compel another stockholder to settle his share of the loan be-
cause this will affect the financial viability of the corporation can not be considered as a derivative suit
because the loan was not a corporate obligation but a personal debt of the stockholders. The fact that
the stockholders attempted to constitute a mortgage over their share in a corporate asset can not af-
fect the corporation where the wordings of the mortgage agreement reveal that it was signed by the
stockholders in their personal capacity as the owners of the pro-indiviso share in the corporate property
and not on behalf of the corporation. ANG, FOR AND IN BEHALF OF SUNRISE MARKETING (BACOLOD),
INC. V. SPS. ANG.G.R. No. 201675, June 19, 2013
Petitioners seek the nullification of the election of the Board of Directors composed of herein respond-
ents, who pushed through with the election even if petitioners had adjourned the meeting allegedly due
to lack of quorum. Petitioners are the injured party, whose rights to vote and to be voted upon were
directly affected by the election of the new set of board of directors. The parties-in-interest are the peti-
tioners as stockholders, who wield such right to vote. The cause of action devolves on petitioners, not
the condominium corporation, which did not have the right to vote. Hence, the complaint for nullifica-
tion of the election is a direct action by petitioners, who were the members of the Board of Directors
of the corporation before the election, against respondents, who are the newly-elected Board of Direc-
tors. Under the circumstances, the derivative suit filed by petitioners in behalf of the condominium cor-
poration is improper. Legaspi Towers 300, Inc., vs. Muer G.R. No. 170783, June 18, 2012.

Stockholder/s' suits based on fraudulent or wrongful acts of directors, associates, or officers may also
be individual suits or class suits. Individual suits are filed when the cause of action belongs to the indi-
vidual stockholder personally, and not to the stockholders as a group or to the corporation, e.g., denial
of right to inspection and denial of dividends to a stockholder. If the cause of action belongs to a group
of stockholders, such as when the rights violated belong to preferred stockholders, a class or repre-
sentative suit may be filed to protect the stockholders in the group. A complaint categorized as individ-
ual suit and not filed on behalf of the corporation can not be considered a derivative suit. Villamor v.
Umale et. al. G.R. Nos. 172843 & 172881, September 24, 2014
Shares of stock
May the buyer of shares of stock of the corporation rescind the sale agreement after he has paid
the purchase price and allowed to enjoy the rights of a shareholder ?
Section 63 of the Corporation Code provides that shares of stock so issued are personal property and
may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-
fact or other person legally authorized to make the transfer. The failure of the stockholder to deliver the
stock certificate to the buyer within a reasonable time the shares covered by the stock certificate should
have been delivered is a substantial breach that entitles the buyer to rescind the sale under Article 1191
of the Corporation Code . It is not entirely correct to say the sale had already been consummated as the
buyer already enjoyed the rights a shareholder can exercise. The enjoyment of these rights will not suf-
fice where the law, by its express terms, requires a specific form to transfer ownership. Fil-Estate Golf
and Development vs. Vertex Sales and Trading Inc., G.R. No. 202079, June 10, 2013
Can the corporation whose shares of stock are the subject of the transfer transaction appeal the
courts decision granting the rescission ?
The Corporation whose shares of stock are the subject of a transfer transaction (through sale, assign-
ment, donation, or any other mode of conveyance) need not be a party to the transaction, as may be in-
ferred from the terms of Section 63 of the Corporation Code. However, to bind the corporation as well
as third parties, it is necessary that the transfer is recorded in the books of the corporation. In a share
purchase transaction, the parties are the seller and buyer of the shares. Not being a party to the sale, the
Corporation is in no position to appeal the ruling rescinding the sale of the shares. If the Seller of the
shares filed no appeal against the court decision declaring the rescission of the sale, then the rescission
is deemed final despite any appeal by the corporation whose shares of stock are the subject of the trans-
fer transaction. Forest Hills Golf & Country Club vs. Vertex Sales and Trading Inc. G.R. No.
202205, March 6, 2013.
A stock certificate is prima facie evidence that the holder is a shareholder of the corporation but the
possession of the certificate is not the sole determining factor of ones stock ownership. A person be-
comes a stockholder of a corporation by acquiring a share either through purchase or subscription. A
stockholder who subscribed to shares of the corporation may file a petition for inspection of corporate
records even though he has not been actually issued a stock certificate. It is erroneous for a judge to
dismiss such petition just because the petitioner can not show any stock certificate to evidence their
share ownership when there are other documents/records to establish ownership. Insigne, et. al. vs
Abra Valley Colleges, Inc., GR No. 204089, July 29, 2015
Is the buyer corporation liable to pay the obligations of the seller corporation ?
There are two types of corporate acquisitions: asset sales and stock sales. In asset sales, the corporate
entity sells all or substantially all of its assets to another entity. In stock sales, the individual or corpo-
rate shareholders sell a controlling block of stock to new or existing shareholders.
In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected employees,
but is liable for the payment of separation pay under the law. The buyer in good faith, on the other
hand, is not obliged to absorb the employees affected by the sale, nor is it liable for the payment of

their claims. The most that it may do, for reasons of public policy and social justice, is to give prefer-
ence to the qualified separated personnel of the selling firm.
In contrast with asset sales, in which the assets of the selling corporation are transferred to another enti-
ty, the transaction in stock sales takes place at the shareholder level. Because the corporation possesses
a personality separate and distinct from that of its shareholders, a shift in the composition of its share-
holders will not affect its existence and continuity.
Thus, notwithstanding the stock sale, the corporation continues to be the employer of its people and
continues to be liable for the payment of their just claims. Furthermore, the corporation or its new ma-
jority shareholders are not entitled to lawfully dismiss corporate employees absent a just or authorized
cause.
The fact that there was a change in the composition of its shareholders did not affect the employer-
employee relationship between the employees and the corporation, because an equity transfer affects
neither the existence nor the liabilities of a corporation. Thus, the corporation continued to be the em-
ployer of the corporations employees notwithstanding the equity change in the corporation.
In this case, the corporate officers and directors who induced the employees to resign with the assur-
ance that they would be rehired by the new management are personally liable to the employees who
were not actually rehired. However, the officer who did not participate in the termination of employ-
ment and persons who participated in the unlawful termination of employment but are not directors and
officers of the corporation are not personally liable. SME BANK INC, vs. GASPAR, G.R. No.
186641, October 8, 2013
No merger took place between Bancommerce and TRB as the requirements and procedures for a mer-
ger were absent. A merger does not become effective upon the mere agreement of the constituent cor-
porations. All the requirements specified in the law must be complied with in order for merger to take
effect. Section 79 of the Corporation Code further provides that the merger shall be effective only upon
the issuance by the Securities and Exchange Commission (SEC) of a certificate of merger.
No de facto merger took place in the present case simply because the TRB owners did not get in ex-
change for the banks assets and liabilities an equivalent value in Bancommerce shares of stock. Ban-
commerce and TRB agreed with BSP approval to exclude from the sale the TRBs contingent judicial
liabilities.
The dissenting opinion of Justice Mendoza cites certain instances indicating the existence of a de fac-
to merger in this case. One of these is the fact that the P & A Agreement involved substantially all the
assets and liabilities of TRB. But while this is true, such fact alone would not prove the existence of
a de facto merger because a corporation does not really lose its juridical entity on account of such
sale. Actually, the law allows a corporation to sell, lease, exchange, mortgage, pledge or otherwise
dispose of all or substantially all of its properties and assets including its goodwill to another corpora-
tion. This is not merger because it recognizes the separate existence of the two corporations that trans-
act the sale.
Under common law, if one corporation sells or otherwise transfers all its assets to another corporation,
the latter is not liable for the debts and liabilities of the transferor if it has acted in good faith and has
paid adequate consideration for the assets, except: (1) where the purchaser expressly or impliedly
agrees to assume such debts; (2) where the transaction amounts to a consolidation or merger of the cor-
porations; (3) where the purchasing corporation is merely a continuation of the selling corporation; and
(4) where the transaction is entered into fraudulently in order to escape liability for such debts.
The evidence in this case fails to show that Bancommerce was a mere continuation of TRB. TRB re-
tained its separate and distinct identity after the purchase. Although it subsequently changed its name to
Traders Royal Holdings, Inc. such change did not result in its dissolution. The changing of the name
of a corporation is no more than creation of a corporation than the changing of the name of a natural
person is the begetting of a natural person. The act, in both cases, would seem to be what the language
which we use to designate it importsa change of name and not a change of being. As such, Ban-

commerce and TRB remained separate corporations. Bank of Commerce vs. Radio Philippines Net-
work, Inc., et. al. G.R. No. 195615, April 21, 2014
Buyer is liable for the obligation of the seller corporation if what the buyer purchased is not just
the assets but the business of the seller
In the 1965 case of Nell v. Pacific Farms, Inc., the Court first pronounced the rule regarding the trans-
fer of all the assets of one corporation to another (hereafter referred to as the Nell Doctrine).
Legal bases of the Nell Doctrine
The first exception under the Nell Doctrine, where the transferee corporation expressly or impliedly
agrees to assume the transferor's debts, is provided under Article 2047 of the Civil Code. When a per-
son binds himself solidarily with the principal debtor, then a contract of suretyship is produced. Neces-
sarily, the corporation which expressly or impliedly agrees to assume the transferor's debts shall be lia-
ble to the same.
The second exception under the doctrine, as to the merger and consolidation of corporations, is well-
established under Sections 76 to 80, Title X of the Corporation Code. If the transfer of assets of one
corporation to another amounts to a merger or consolidation, then the transferee corporation must take
over the liabilities of the transferor.
Another exception of the doctrine, where the sale of all corporate assets is entered into fraudulently to
escape liability for transferor's debts, can be found under Article 1388 of the Civil Code. It provides
that whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter
for damages suffered. Thus, if there is fraud in the transfer of all the assets of the transferor corpora-
tion, its creditors can hold the transferee liable.
The legal basis of the last in the four (4) exceptions to the Nell Doctrine, where the purchasing corpora-
tion is merely a continuation of the selling corporation, is challenging to determine.
In other words, in this last exception, the transferee purchases not only the assets of the transferor, but
also its business. As a result of the sale, the transferor is merely left with its juridical existence, devoid
of its industry and earning capacity. Fittingly, the proper provision of law that is contemplated by this
exception would be Section 40 of the Corporation Code.
The purpose of the business-enterprise transfer is to protect the creditors of the business by allowing
them a remedy against the new owner of the assets and business enterprise. Otherwise, creditors would
be left "holding the bag," because they may not be able to recover from the transferor who has "disap-
peared with the loot," or against the transferee who can claim that he is a purchaser in good faith and
for value. Based on the foregoing, as the exception of the Nell doctrine relates to the protection of the
creditors of the transferor corporation, and does not depend on any deceit committed by the transferee -
corporation, then fraud is certainly not an element of the business enterprise doctrine. Y-I Leisure
Philippines vs James Yu, GR No. 207161, September 8, 2015
Right of inspection
For what purposes may the right of inspection be exercised and under what circumstances may
the same be denied ?
The right of the shareholder to inspect the books and records of the petitioner should not be made sub-
ject to the condition of a showing of any particular dispute or of proving any mismanagement or other
occasion rendering an examination proper, but if the right is to be denied, the burden of proof is upon
the corporation to show that the purpose of the shareholder is improper, by way of defense.
Among the purposes held to justify a demand for inspection are the following: (1) To ascertain
the financial condition of the company or the propriety of dividends; (2) the value of the shares of
stock for sale or investment; (3) whether there has been mismanagement; (4) in anticipation of
shareholders' meetings to obtain a mailing list of shareholders to solicit proxies or influence vot-

ing; (5) to obtain information in aid of litigation with the corporation or its officers as to corpo-
rate transactions. Among the improper purposes which may justify denial of the right of inspec-
tion are: (1) Obtaining of information as to business secrets or to aid a competitor; (2) to secure
business "prospects" or investment or advertising lists; (3) to find technical defects in corporate
transactions in order to bring "strike suits" for purposes of blackmail or extortion.
In general, however, officers and directors have no legal authority to close the office doors against
shareholders for whom they are only agents, and withhold from them the right to inspect the books
which furnishes the most effective method of gaining information which the law has provided, on mere
doubt or suspicion as to the motives of the shareholder. While there is some conflict of authority, when
an inspection by a shareholder is contested, the burden is usually held to be upon the corporation to es-
tablish a probability that the applicant is attempting to gain inspection for a purpose not connected with
his interests as a shareholder, or that his purpose is otherwise improper. The burden is not upon the pe-
titioner to show the propriety of his examination or that the refusal by the officers or directors was
wrongful, except under statutory provisions. Terelay Investment and Development Corporation vs
Cecilia Teresita Yulo, GR. No. 160924, August 05, 2015
Is an action to enforce the propriety right of the corporation to be in possession of its stock and
transfer book legally enforceable through criminal prosecution ?
A criminal action based on the violation of the second or fourth paragraphs of Section 74 can only be
maintained against corporate officers or such other persons that are acting on behalf of the corporation.
Violations of the second and fourth paragraphs of Section 74 contemplates a situation wherein a corpo-
ration, acting thru one of its officers or agents, denies the right of any of its stockholders to inspect the
records, minutes and the stock and transfer book of such corporation. However, petitioners are not ac-
tually invoking their right to inspect the records and the stock and transfer book of STRADEC under
the second and fourth paragraphs of Section 74. What they seek to enforce is the proprietary right of
STRADEC to be in possession of such records and book. Such right, though certainly legally enforcea-
ble by other means, cannot be enforced by a criminal prosecution based on a violation of the second
and fourth paragraphs of Section 74. That is simply not the situation contemplated by the second and
fourth paragraphs of Section 74 of the Corporation Code. Aderito Z. Yujuico And Bonifacio C.
Sumbilla vs. Cezar T. Quiambao And Eric C. Pilapil, G.R. No. 180416, June 02, 2014
Dissolution
Will an action to correct the entries in the General Information Sheet of the corporation continue
after the dissolution of the corporation ?
An action to correct entries in the General Information Sheet of the Corporation; to be recognized as a
stockholder and to inspect corporate documents is an intra-corporate dispute which does not constitute
a continuation of corporate business. As such, pursuant to Section 145 of the Corporation Code, this
action is not affected by the subsequent dissolution of the corporation. The dissolution of the corpora-
tion simply prohibits it from continuing its business. However, despite such dissolution, the parties in-
volved in the litigation are still corporate actors. The dissolution does not automatically convert the par-
ties into total strangers or change their intra-corporate relationships. Neither does it change or terminate
existing causes of action, which arose because of the corporate ties between the parties. Thus, a cause
of action involving an intra-corporate controversy remains and must be filed as an intra-corporate dis-
pute despite the subsequent dissolution of the corporation. Aguirre vs. FQB +7, Inc, GR No. 170770,
January 9 2013.
May a quitclaim agreement be valid and binding on the corporation if it was executed six years
after the corporations dissolution ?
The executed releases, waivers and quitclaims are valid and binding upon the parties notwithstanding
the fact that these documents were signed six years after the Corporations revocation of the Certificate
of Incorporation. These documents are thus proof that the employees had received their claims from
their employer-corporation in whose favor the release and quitclaim were issued. The revocation of the
corporation does not mean the termination of its liabilities to these employees. Section 122 of the Cor-
poration Code provides for a three-year winding up period for a corporation whose charter is annulled

by forfeiture or otherwise to continue as a body corporate for the purpose, among others, of settling and
closing its affairs As such, these liabilities are obligations of the dissolved corporation and not of the
corporation who contracted the services of the dissolved corporation. Vigilla vs. Philippine College of
Criminology, GR No. 200094, June 10, 2013
May a corporation initiate legal action more than three years after its dissolution ?
There is nothing in existing jurisprudence which allows an already defunct corporation to initiate a suit
after the lapse of the said three-year period. The actions which may continue beyond the three year liq-
uidation period are those already pending at the time that the corporations lost their corporate existence.
In the present case, petitioner filed its complaint not only after its corporate existence was terminated
but also beyond the three-year period allowed by Section 122 of the Corporation Code. Thus, it is clear
that at the time of the filing of the subject complaint petitioner lacks the capacity to sue as a corpora-
tion. Alabang Corporation, Development vs. Alabang Hills Village Association And Rafael Tinio
G.R. No. 187456, June 02, 2014
Corporate Rehabilitation
Can a corporation under rehabilitation file a claim against its insurer to recover whatever claim
it may have against it ?
The jurisdiction of the rehabilitation court is over claims against the debtor that is under rehabilitation,
not over claims by the debtor against its own debtors or against third parties.
The corporation under rehabilitation must file a separate action against its debtors/insurers to recover
whatever claim it may have against them. Steel Corporation vs. Mapfre Insular Insurance Corpo-
ration, G.R. No. 201199, October 16, 2013
Is HLURB's prior request for the appointment of a rehabilitation receiver a condition precedent
before the trial court can give due course to a rehabilitation petition of a real estate development
company ?.
Under Section 30 of RA 7653, which had been retained under Section 69 of RA 8971, the designation
of a conservator or the appointment of a receiver for the rehabilitation of banks and quasi-banks, is
vested exclusively with the Monetary Board. On the other hand, PD 612 specifically mandates the In-
surance Commission (IC) to designate the receiver of an insurance company in case of its insolvency or
rehabilitation.
Clearly, the respective charters of the BSP and the IC specifically authorize them to appoint a receiver
in case a company under their regulation is undergoing corporate rehabilitation. Notably, this is not the
case with the HLURB. Its enabling law does not grant it this particular power.
An administrative agency's powers are limited to those expressly conferred on it or granted by neces-
sary or fair implication in its enabling act. In our constitutional framework, which mandates a limited
government, its branches and administrative agencies exercise only those powers delegated to them as
"defined either in the Constitution or in legislation, or in both."
Notably, the powers granted to the HLURB are focused on its regulation of real estate companies to
ensure that the investing public is protected from fraudulent real estate practices. These powers do not
touch upon the HLURB's authority to intervene in the general corporate acts, e.g. the rehabilitation, of
those under its supervision.
While it may be argued that the HLURB should be informed of the financial rehabilitation of a real es-
tate company, to enable it to intelligently and meaningfully exercise its functions, the law is clear that
the HLURB's prior request for the appointment of a receiver of real estate companies, is not a condition
sine qua non before the trial court can give due course to their rehabilitation petition. LEXBER, INC.
v. DALMAN, G.R. No. 183587, 20 April 2015

Foreign Corporation
What is the effect of the appointment by a foreign corporation of a distributor in the Philippines
?
The appointment of a distributor in the Philippine is not sufficient to constitute doing business unless it
is under the full control of the foreign corporation. If the distributor is an independent entity which
buys and distributes products, other than those of the foreign corporation, for its own name and its own
account, the latter can not be considered doing business. SteelCase vs. Design International Selec-
tions, GR no. 171995, April 18, 2012
SECURITIES AND REGULATION CODE
Does SEC have jurisdiction to carry out the liquidation of a corporation ?
SECs jurisdiction does not extend to the liquidation of a corporation. While the SEC has jurisdiction to
order the dissolution of a corporation, jurisdiction over the liquidation of the corporation now pertains
to the appropriate regional trial courts. This is the correct procedure because the liquidation of a corpo-
ration requires the settlement of claims for and against the corporation, which clearly falls under the
jurisdiction of the regular courts. The trial court is in the best position to convene all the creditors of the
corporation, ascertain their claims, and determine their preferences. BANK OF THE PHILIPPINE
ISLANDS, as successor-in-interest of Far East Bank and Trust Company, v. EDUARDO HONG,
doing business under the name and style "SUPER LINE PRINTING PRESS," G.R. No. 161771,
February 15, 2012
What are the prescriptive periods to enforce liabilities in case of sale of unregistered securities or
falsity in the registration statement ?
Under Section 62 of the SRC, no action shall be maintained to enforce any liability created under Sec-
tion 56 of the SRC ( False registration statement ) and Section 57 ( sale of unregistered security and
liabilities arising in connection with prospectus, communication and other reports ) unless brought
within two ( 2 ) years after discovery of the untrue statement or omission or after the violation upon
which it is based but not more than five ( 5 ) years after the security was bona fide offered to the public
or more than 5 years after the sale, respectively. However, it should be noted that the civil liabilities
provided in the SRC are not limited to Sections 56 and 57. Clearly, the intent is to encompass in Sec-
tion 62 the prescriptive periods only of the civil liability in cases of violations of the SRC. Given the
absence of prescriptive period for the enforcement of criminal liability in violations of SRC, ACT No.
3326, the law applicable to offenses under special laws, applies. Under Section 73 of the SRC, viola-
tion of its provisions is punishable by imprisonment of not less than seven years nor more than 21
years. Applying ACT no. 3326, criminal prosecution for violations of SRC prescribes in 12 years.
Citibank N.A. vs. TANCO-GABALDON, et al. G.R. No. 198444, September 4, 2013
Is a civil suit for the enforcement of liability in case of sale of unregistered securities subject to
the doctrine of primary jurisdiction ?
Civil suits falling under the SRC ( like liability for selling unregistered securities ) are under the exclu-
sive original jurisdiction of the RTC and hence, need not be first filed before the SEC, unlike criminal
cases wherein the latter body exercises primary jurisdiction. Pua vs. Citibank, N. A. G.R. No.
180064, September 16, 2013
Can an employee be considered as associated person or salesman in case of sale of unregistered

securities ?
The violation of Section 28 of the SRC has the following elements : a ) engaging in the business of
buying or selling securities as a broker or dealer; or b ) acting as salesman; or c) acting as associated
person of any broker or dealer unless registered as such with the SEC. Thus, a person is liable for vio-
lating Section 28 of the SRC where acting as a broker, dealer or salesman, is in the employ of a corpo-
ration which sold or offered for sale unregistered securities in the Philippines. Securities and Ex-
change Commission vs Santos, GR. No. 195542, March 19, 2014

Which court/agency has jurisdiction to investigate violations of its rules on proxy solicitation ?
The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when
proxies are obtained to vote on matters unrelated to the cases enumerated under Section 5 of Presiden-
tial Decree No. 902-A. However, when proxies are solicited in relation to the election of corporate di-
rectors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy
solicitation, should be properly seen as an election controversy within the original and exclusive juris-
diction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section 5 (c) of Presidential
Decree No. 902-A
Indeed, the validation of proxies in this case relates to the determination of the existence of a quorum.
Nonetheless, it is a quorum for the election of the directors, and, as such, which requires the presence
in person or by proxy of the owners of the majority of the outstanding capital stock of the corpora-
tion. The SEC therefore has no jurisdiction over the dispute but the Regional Trial Court. Securities
And Exchange Commission vs. The Honorable Court Of Appeals et. al. G.R. No. 187702, Octo-
ber 22, 2014
Intra-corporate controversy
What are the tests to determine intra corporate controversy
In order to limit the broad definition of intra corporate dispute, the Supreme Court applied the relation-
ship and nature of the controversy test. Under the Relationship Test, no doubt exists that the parties
were members of the same association, but this conclusion must still be supplemented by the contro-
versy test before it may be considered as an intra-corporate dispute. Relationship alone does not ipso
facto make the dispute intra-corporate; the mere existence of an intra-corporate relationship does not
always give rise to an intra-corporate controversy. The incidents of that relationship must be considered
to ascertain whether the controversy itself is intra-corporate. This is where the Controversy Test be-
comes material.
Under the controversy test, the dispute must be rooted in the existence of an intra-corporate relation-
ship, and must refer to the enforcement of the parties' correlative rights and obligations under the Cor-
poration Code, as well as the internal and intra-corporate regulatory rules of the corporation, in order to
be an intra-corporate dispute. Gulfo v. Ancheta, G.R. No. 175301, August 15, 2012
A complaint against the PCGG to withdraw its opposion with the Philippine Stock Exchange for
the listing of the shares representing the increase of capital stock of a sequestered corporation (
until the conflicting claims of two sets of board of directors are settled ) is an intra-corporate dis-
pute that falls under the jurisdiction of the Regional Trial Court (RTC), not the Sandiganbayan.
Philippine Overseas Telecommunications Corporation vs. Africa, et al. G.R. No. 184622, July 3,
2013; PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION v. SANDI-
GANBAYAN,G.R. No. 203023, 17 June 2015,
Upon the enactment of Republic Act No. 8799, the jurisdiction of the SEC over intra-corporate contro-
versies and the other cases enumerated in Section 5 of P.D. No. 902-A was transferred to the Regional
Trial Court. The jurisdiction of the Sandiganbayan has been held not to extend even to a case involving
a sequestered company notwithstanding that the majority of the members of the board of directors were
PCGG nominees. Abad vs. Araneta, et al. G.R. No. 200620, March 18, 2015
Cite recent cases considered intra-corporate in nature
A controversy between the condominium corporation and its members-unit owners for alleged unsound
business practices and violation of the master deed of restriction does not fall within the jurisdiction of
the HLRUB despite its expansive jurisdiction. It is considered an intra-corporate controversy falling
within the jurisdiction of the Regional Trial Court designated as special commercial court. Lim vs.
Distinction Properties Development and Construction, GR no. 194024, April 25, 2012

Where a member of the condominium corporation was denied the right to vote for alleged non-payment
of condominium dues and assessment, the action although denominated as one for damages is an intra-
corporate controversy and therefore, falling within the jurisdiction of the regional trial court designated
as a special commercial court. In determining whether a dispute constitutes an intra-corporate contro-
versy, the Court uses two tests, namely, the relationship test and the nature of the controversy test. Ap-
plying these two tests, the present case is indeed an intra-corporate controversy.
Anent the first test, it is admitted that petitioner is a condominium corporation. On the other hand, re-
spondent is a member of the condominium corporation.
As regards the second test, the case principally dwells on the propriety of the assessment made by peti-
tioner against respondent as well as the validity of petitioners act in preventing respondent from partic-
ipating in the election of the corporations Board of Directors. To be sure, this action partakes of the
nature of an intra-corporate controversy. While the CA may be correct that the RTC has jurisdiction,
the case should have been filed not with the regular court but with the branch of the RTC designated as
a special commercial court. The CA, therefore, gravely erred in remanding the case to the RTC for fur-
ther proceedings. Also, while Republic Act (RA) No. 9904, or the Magna Carta for Homeowners and
Homeowners Associations empowers the HLURB to hear and decide inter-association and/or intra-
association controversies or conflicts concerning homeowners associations, the same can not be ap-
plied in the present case as it involves a controversy between a condominium unit owner and a condo-
minium corporation. While the term association as defined in the law covers homeowners associations
of other residential real property which is broad enough to cover a condominium corporation, it does
not seem to be the legislative intent. Medical Plaza Makati Condominium Corporation vs. Cullen
G.R. No. 181416, November 11, 2013
Cite recent cases not considered intra-corporate in nature
A complaint for damages filed by a member of the subdivision homeowners association for the harm he
suffered when another member maliciously closed a portion of the plaintiffs drainage pipe which led
to the overflowing of his septic tank is not an intra corporate controversy following nature of the con-
troversy test. Gulfo v. Ancheta, G.R. No. 175301, August 15, 2012
In Reyes, the Court pronounced that in cases governed by the Interim Rules of Procedure on Intra-
Corporate Controversies a bill of particulars is a prohibited pleading. It is essential, therefore, for the
complaint to show on its face what are claimed to be the fraudulent corporate acts if the complainant
wishes to invoke the courts special commercial jurisdiction. This is because fraud in intra-corporate
controversies must be based on devises and schemes employed by, or any act of, the board of direc-
tors, business associates, officers or partners, amounting to fraud or misrepresentation which may be
detrimental to the interest of the public and/or of the stockholders, partners, or members of any corpo-
ration, partnership, or association, as stated under Rule 1, Section 1 (a)(1) of the Interim Rules. The
act of fraud or misrepresentation complained of becomes a criterion in determining whether the com-
plaint on its face has merits, or within the jurisdiction of special commercial court, or merely a nui-
sance suit. Guy vs. Guy, G.R. No. 189486.September 5, 2012
A college dean is not a corporate officer if his position is not provided for in the by-laws. The com-
plaint for constructive dismissal is a labor dispute, not an intra-corporate controversy. Barba vs. Liceo
de Cagayan University, GR. No. 193857, November 28, 2012
When the officer claiming to have been illegally dismissed is an ordinary employee of the corporation,
jurisdiction over the same lies with the labor arbiter. It is only when the officer claiming to have been
illegally dismissed is classified as a corporate officer that the issue is deemed intra-corporate dispute
which falls within the jurisdiction of the trial court designated as special commercial court. Cosare vs.
Bradcom Asia, GR. No. 201298, February 5, 2014
An intra-cooperative dispute between two officers on one hand and the board of directors on the
other falls within the jurisdiction of the regular courts and not the labor arbiter. Pascual vs.
Caniogan Credit and Development Cooperative, GR No. 172980, July 22, 2015 )

If a complaint involving an intra-corporate controversy is raffled to a branch of the RTC that is
not a special commercial court, should the court dismiss the complaint for lack of jurisdiction or
order its re-raffle to the special commercial court ?
Pertinent to this case is RA 8799 which took effect on August 8, 2000. By virtue of said law, jurisdic-
tion over cases enumerated in Section 5 of Presidential Decree No. 902-A was transferred from the Se-
curities and Exchange Commission (SEC) to the RTCs, being courts of general jurisdiction. Item 5.2,
Section 5 of RA 8799 provides:
SEC. 5. Powers and Functionsof the Commission. - x x x
xxxx
5.2 The Commission's jurisdiction over all cases enumerated under

Section 5 of Presidential Decree No. 902-A is hereby transferred to
the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its au-
thority may designate the Regional Trial Court branches that shall
exercise jurisdiction over the cases. The Commission shall retain juris-
diction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June
2000 until finally disposed.
To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally used by the legislature to
particularize the fact that the phrase "the Courts of general jurisdiction" is equivalent to the phrase "the
appropriate Regional Trial Court." In other words, the jurisdiction of the SEC over the cases enumerat-
ed under Section 5 of PD 902-A was transferred to the courts of general jurisdiction, that is to say (or,
otherwise known as), the proper Regional Trial Courts.
Going back to the case at bar, the Court nonetheless deems that the erroneous raffling to a regular
branch instead of to a Special Commercial Court is only a matter of procedure - that is, an incident re-
lated to the exercise of jurisdiction - and, thus, should not negate the jurisdiction which the RTC of
Muntinlupa City had already acquired. In such a scenario, the proper course of action was not for the
commercial case to be dismissed; instead, Branch 276 should have first referred the case to the Execu-
tive Judge for re-docketing as a commercial case; thereafter, the Executive Judge should then assign
said case to the only designated Special Commercial Court in the station, i.e., Branch 256. Note that
the procedure would be different where the RTC acquiring jurisdiction over the case has multiple spe-
cial commercial court branches; in such a scenario, the Executive Judge, after re-docketing the same as
a commercial case, should proceed to order its re-raffling among the said special branches. Manuel
Luis Gonzales vs GJH Land, Inc, GR No. 202664, November 20, 2015
INTELLECTUAL PROPERTY
Trademark
Is the mark St. Francis registrable ?
Shang Properties are not guilty of unfair competition in using the marks THE ST. FRANCIS TOWERS and
THE ST. FRANCIS SHANGRI-LA PLACE. The true test of unfair competition has thus been whether the
acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his pur-
chases under the ordinary conditions of the particular trade to which the controversy relates. It is therefore es-
sential to prove the existence of fraud, or the intent to deceive, actual or probable, determined through a judi-
cious scrutiny of the factual circumstances attendant to a particular case. Here, the element of fraud is wanting
hence, there can be no unfair competition. What the CA appears to have disregarded or been mistaken in its dis-
quisition, however, is the geographically-descriptive nature of the mark ST. FRANCIS which thus bars its ex-
clusive appropriability, unless a secondary meaning is acquired.

SFDC, however, was not able to prove its compliance with the requirements stated in Section 123.2 of the IP
Code to be able to conclude that it acquired a secondary meaning and, thereby, an exclusive right to the
ST. FRANCIS mark, which is geographically-descriptive of the location in which its realty developments have
been built. While it is true that SFDC had been using the mark ST. FRANCIS since 1992, its use thereof has
been merely confined to its realty projects within the Ortigas Center. As its use of the mark is clearly limited to a
certain locality, it cannot be said that there was substantial commercial use of the same recognized all throughout
the country. Neither is there any showing of a mental recognition in buyers and potential buyers minds that
products connected with the mark ST. FRANCIS are associated with the same source that is, the enterprise
of SFDC. Thus, absent any showing that there exists a clear goods/service-association between the realty pro-
jects located in the aforesaid area and herein SFDC as the developer thereof, the latter cannot be said to have
acquired a secondary meaning as to its use of the ST. FRANCIS mark. Shang Properties Realty Corpo-
ration vs. St. Francis Development Corporation, G.R. No. 190706, July 21, 2014
Does the act of refilling empty LPG Gas cylinder tank bearing a registered trademark amount to
infringement or unfair competition or both ?
The mere unauthorized use of a container bearing a registered trademark in connection with the sale,
distribution or advertising of goods or services which is likely to cause confusion, mistake or deception
among the buyers or consumers can be considered as trademark infringement. Here, petitioners have
actually committed trademark infringement when they refilled, without the respondents consent, the
LPG containers bearing the registered marks of the respondents. Petitioners acts will inevitably con-
fuse the consuming public, since they have no way of knowing that the gas contained in the LPG tanks
bearing respondents marks is in reality not the latters LPG product after the same had been illegally
refilled. The public will then be led to believe that petitioners are authorized refillers and distributors of
respondents LPG products, considering that they are accepting empty containers of respondents and
refilling them for resale.
Unfair competition has been defined as 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. Passing off (or palming off) takes place where the defendant,
by imitative devices on the general appearance of the goods, misleads prospective purchasers into buy-
ing his merchandise under the impression that they are buying that of his competitors. Thus, the de-
fendant gives his goods the general appearance of the goods of his competitor with the intention of de-
ceiving the public that the goods are those of his competitor.
In the present case, respondents pertinently observed that by refilling and selling LPG cylinders bearing
their registered marks, petitioners are selling goods by giving them the general appearance of goods of
another manufacturer. Obviously, the mere use of those LPG cylinders bearing the trademarks
"GASUL" and "SHELLANE" will give the LPGs sold by REGASCO the general appearance of the
products of the petitioners. Republic Gas Corporation vs. Petron Corporation. G.R. No. 194062,
June 17, 2013
Can the registrant of the trademark Kolin for household appliances preclude the adoption of the
same trademark for electronic products ?
Whether or not the products covered by the trademark sought to be registered by Taiwan Kolin, on the
one hand, and those covered by the prior issued certificate of registration in favor of Kolin Electronics,
on the other, fall under the same categories in the NCL is not the sole and decisive factor in determin-
ing a possible violation of Kolin Electronics intellectual property right should petitioners application
be granted. It is hornbook doctrine, as held in the above-cited cases, that emphasis should be on the
similarity of the products involved and not on the arbitrary classification or 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 use of the same trademark by others on unre-
lated articles of a different kind.
In accord with common empirical experience, the useful lives of televisions and DVD players last for
about five (5) years, minimum, making replacement purchases very infrequent. The same goes true
with converters and regulators that are seldom replaced despite the acquisition of new equipment to be
plugged onto it. In addition, the amount the buyer would be parting with cannot be deemed minimal
considering that the price of televisions or DVD players can exceed todays monthly minimum wage.

In light of these circumstances, it is then expected that the ordinary intelligent buyer would be more
discerning when it comes to deciding which electronic product they are going to purchase, and it is this
standard which this Court applies herein in determining the likelihood of confusion should petitioners
application be granted. Taiwan Kolin Corporation, LTD., vs. Kolin Electronics Co. Inc. G.R. No.
209843, March 25, 2015 ( J VELASCO )
Copyright
What do you understand by the must carry rule ?
The improved broadcast signals that CATV offers may infringe or encroach upon the audience or
viewer market of the free-signal TV. This is so because the latters signal may not reach the remote
areas or reach them with poor signal quality. To foreclose this possibility and protect the free-TV mar-
ket (audience market), the must-carry rule was adopted to level the playing field. With the must-carry
rule in place, the CATV networks are required to carry and show in full the free-local TVs programs,
including advertisements, without alteration or deletion. This, in turn, benefits the public who would
have a wide-range of choices of programs or broadcast to watch. This also benefits the free-TV signal
as their broadcasts are carried under the CATVs much-improved broadcast signals thus expanding
their viewers share.
In view of the discussion above, the Court finds that the quoted sections of MC 4-08-88, i.e., 6.2, 6.2.1,
6.4(a)(1) and 6.4(b) which embody the must-carry rule, are the governing rules in the present
case. These provisions sufficiently and fairly implement the intent of Section 2 of EO No. 205 to pro-
tect the broadcast television market vis--vis the CATV system. For emphasis, under these rules, the
phrase television and broadcast markets means viewers or audience market and not commercial ad-
vertisement market as claimed by the petitioner. Therefore, the respondents act of showing advertise-
ments does not constitute an infringement of the television and broadcast markets under Section 2 of
EO No. 205. GMA Network, Inc. vs. Central CATV, Inc. G.R. No. 176694, July 18, 2014
TRANSPORTATION
Are the following common carrier ?
Freight forwarder ? informal school bus operator ? Uber ? Time charterer ?
Persons engaged in the business of transporting students from their respective residences to their
school and back are considered common carrier. Despite catering to a limited clientele, they operated
as a common carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for a fee.
Spouses Perena vs Spouses Nicolas, GR No. 157917, August 29, 2012
A charter party has two types. First, it could be a contract of affreightment whereby the use of shipping
space on vessels is leased in part or as a whole, to carry goods for others. The charter-party provides for
the hire of vessel only, either for a determinate period of time (time charter) or for a single or consecu-
tive voyage (voyage charter). The shipowner supplies the ships stores, pay for the wages of the master
and the crew, and defray the expenses for the maintenance of the ship. The voyage remains under the
responsibility of the carrier and it is answerable for the loss of goods received for transportation. The
charterer is free from liability to third persons in respect of the ship.
Second, charter by demise or bareboat charter under which the whole vessel is let to the charterer with
a transfer to him of its entire command and possession and consequent control over its navigation, in-
cluding the master and the crew, who are his servants. The charterer mans the vessel with his own peo-
ple and becomes, in effect, the owner for the voyage or service stipulated and hence liable for damages
or loss sustained by the goods transported.
[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraor-
dinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage,
therefore, they have the burden of proving that they observed such diligence.

Here, HEUNG-A failed to rebut this prima facie presumption when it failed to give adequate explana-
tion as to how the shipment inside the container van was handled, stored and preserved to forestall or
prevent any damage or loss while the same was in its possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of lad-
ing the former issued to NOVARTIS. PROTOP breached its contract with NOVARTIS, the consignee,
when it failed to deliver the goods in the same quantity, quality and description as stated in Bill of Lad-
ing. Philam Insurance Company, Inc. (Now Chartis Philippines Insurance, Inc.) vs. Heung-A
Shipping Corporation and Wallem Philippines Shipping, Inc. G.R. No. 187701 &G.R. No.
187812, July 23, 2014
Recent cases on liability of common carrier
The liability of a common carrier does not cease by mere transfer of custody of the cargo to the arrastre
operator. Like the duty of seaworthiness, the duty of care of the cargo is non-delegable and the carrier
is accordingly responsible for the acts of the master, the crew, the stevedore and his other agents. The
fact that a consignee is required to furnish persons to assist in unloading a shipment may not relieve
the carrier of its duty as to such unloading. It is settled in maritime law jurisprudence that cargoes while
being unloaded generally remain under the custody of the carrier. Since the damage to the cargo was
incurred during the discharge of the shipment and while under the supervision of the carrier, the latter
is liable for the damage caused to the cargo.
The arrastre operator is likewise liable. The functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or shipper and the ships
tackle. Being the custodian of the goods discharged from a vessel, an arrastre operators duty is to take
good care of the goods and to turn them over to the party entitled to their possession. While it is true
that an arrastre operator and a carrier may not be held solidarily liable at all times, the facts of these
cases show that apart from the stevedores of the arrastre operator being directly in charge of the physi-
cal unloading of the cargo, its foreman picked the cable sling that was used to hoist the packages for
transfer to the dock. Moreover, the fact that the packages were unloaded with the same sling unharmed
is telling of the inadequate care with which the stevedore handled and discharged the cargo. Westwind
Shipping Corporation vs. UCPB General Insurance Co., GR no. 2002289, November 25, 2013
There is no dispute that the custody of the goods was never turned over to the consignee or his agents
but was lost into the hands of unauthorized persons who secured possession thereof on the strength of
falsified documents. When the goods shipped are either lost or arrived in damaged condition, a pre-
sumption arises against the carrier of its failure to observe that diligence, and there need not be an ex-
press finding of negligence to hold it liable. To overcome the presumption of negligence, the common
carrier must establish by adequate proof that it exercised extraordinary diligence over the goods. In the
present case, Nedlloyd failed to prove that they did exercise the degree of diligence required by law
over the goods they transported, it failed to adduce sufficient evidence they exercised extraordinary
care to prevent unauthorized withdrawal of the shipments. Nedlloyd Lijnen B.V. Rotterdam And The
East Asiatic Co., Ltd. vs. Glow Laks Enterprises, Ltd., G.R. No. 156330, November 19, 2014
Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order
at their destination constitutes a prima facie case of fault or negligence against the carrier. If no ade-
quate explanation is given as to how the deterioration, loss, or destruction of the goods happenedhe
transporter shall be held responsible. From the foregoing, the fault is attributable to ESLI. While no
longer an issue, it may be nonetheless state that ATI was correctly absolved of liability for the damage.
Eastern Shipping Lines, Inc. vs. BPI/MS Insurance Corp., & Mitsui Sumitomo Insurance Co.,
Ltd. G.R. No. 182864, January 12, 2015
As custodian of the shipment discharged from the vessel, the arrastre operator must take care of
the same and turn it over to the party entitled to its possession. It must establish that it exercised
the required diligence in handling the shipment. Otherwise, it shall be presumed that the loss or
damage to the shipment was due to its fault. However, if the arrastre operator was able to prove
delivery of the shipment to the consignee in good and complete condition and with locks and seals
intact and the consignees representative signed on the gate pass to evidence the receipt of the

shipment in good order, then the arrastre operator can not be held liable for the alleged loss or
damage. Marina Port Services, Inc. vs American Home Assurance Corporation, GR No. 201822,
August 12, 2015
Since it is the duty of the arrastre operator to take good care of the goods that are in its custody
and to deliver them in good condition to the consignee, such responsibility also develops upon the
carrier. Both the arrastre operator and the customs broker ( as a common carrier ) are therefore
charged with and obligated to deliver the goods in good condition to the consignee. In case of loss
or damage to the goods, they are both presumed to be at fault. ( Asian Terminals vs Allied
Guarantee Insurance, Co., INc. GR No. 182208, October 14, 2015 )
A bus company cannot be held liable for damages, because a passenger surreptitiously carried a
gun in his baggage and suddenly used it to shoot a passenger, because common carriers should be
given leeway to assume passengers are not bringing anything dangerous unless something indi-
cates a stringent inspection should be made. (G.V. Florida Transport, Inc. vs. Heirs of Romoe
Battung, Jr., G.R. No. 208802, October 14, 2015.)
A common carrier is converted into a private carrier notwithstanding the existence of the time
charter party agreement with the shipowner since the said agreement was not limited to the ship
but also extends to the control of its crew. Despite the denomination as Time Charter by the par-
ties, their agreement undoubtedly reflected that their intention was to enter into a Bareboat
Charter Agreement. Federal Phoenix Assurance Co. vs Fortune Sea Carrier, Inc., GR No.
188118, November 23, 2015
An air carrier is not liable as a result of the cancellation of a connecting flight due to typhoon and more
so if the common carrier demonstrated good faith when it exerted its best efforts to accommodate the
delayed flight passengers on another flight after the typhoon subsided but that flight also failed to leave
because of the airport set curfew. Marito Bernales vs Northwest Airlines, GR. No. 182395, October
5, 2015
NEGOTIABLE INSTRUMENTS LAW
Are the following instruments negotiable ?
Certificate of deposit ? Passbook ? SWIFT electronic messages ?
The electronic messages are not signed by the investor-clients as supposed drawers of a bill of ex-
change; they do not contain an unconditional order to pay a sum certain in money as the payment is
supposed to come from a specific fund or account of the investor-clients; and, they are not payable to
order or bearer but to a specifically designated third party. Thus, the electronic messages are not bills of
exchange. As there was no bill of exchange or order for the payment drawn abroad and made payable
here in the Philippines, there could have been no acceptance or payment that will trigger the imposition
of the DST under Section 181 of the Tax Code. The Hongkong And Shanghai Banking Corporation
Limited-Philippine Branches vs. Commissioner Of Internal Revenue G.R. Nos. 166018 & 167728,
June 04, 2014
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a

sum of money on deposit which the bank or banker promises to pay to the depositor, to the order of the
depositor, or to some other person or his order, whereby the relation of debtor and creditor between the
bank and the depositor is created. In particular, the certificates of deposit contain provisions on the
amount of interest, period of maturity, and manner of termination. Specifically, they stressed that en-
dorsement and presentation of the certificate of deposit is indispensable to their termination. In other
words, the accounts may only be terminated upon endorsement and presentation of the certificates of
deposit. Without the requisite presentation of the certificates of deposit, the bank may not terminate
them. Bank of the Philippine Islans vs Tarcila Fernandez, GR. No. 173134, September 2, 2015

Consideration
A check constitutes an evidence of indebtedness and is a veritable proof of an obligation. Thus,

checks completed and delivered to a person by another are sufficient by themselves to prove the
existence of the loan obligation obtained by the latter from the former. ( Ting Ting Pua vs Spous-
es Benito, GR No. 198660, October 23, 2013 ) ( J VELASCO )
The bare denial of the maker of a promissory note that he obtained a loan from the payee and
that he agreed to affix her signature on the loan documents in blank or in an incomplete state on-
ly because the branch manager led her to believe that what she was signing were related to the
banks high-yielding products, can not prevail over the presumption that every negotiable in-
strument has been issued for a valuable consideration. Philippine National Bank vs. Pasimio, GR
No. 205590, September 2, 2015 ( J VELASCO )
Cases on unauthorized payment of negotiable instrument
The fact that a person, other than the named payee of the crossed check, was presenting it for deposit
should have put the bank on guard. It should have verified if the payee authorized the holder to present
the same in its behalf or indorsed it to him. The banks reliance on the holders assurance that he had
good title to the three checks constitutes gross negligence even though the holder was related to the ma-
jority stockholder of the payee. While the check was not delivered to the payee, the suit may still pros-
per because the payee did not assert a right based on the undelivered check but on quasi-delict. Equi-
table Banking Corporation vs Special Steel Products, June 13, 2012
When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its
duty to charge its clients account only for bona fide disbursements he had made. If the drawee did not
pay according to the original tenor of the instrument, as directed by the drawer, then it has no right to
claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made
from the drawers account which it was expected to treat with utmost fidelity. The drawee, however,
still has recourse to recover its loss. The collecting banks are ultimately liable for the amount of the
materially altered check. It cannot further pass the liability back to Cesar and Lolita absent any show-
ing in the negligence on the part of Cesar and Lolita which substantially contributed to the loss from
alteration. Cesar V. Areza And Lolita B. Areza vs. Express Savings Bank, Inc. And Michael Po-
tenciano, G.R. No. 176697, September 10, 2014
If a blank check signed by a party to a joint venture and delivered to his co-party with the instruction
that it should not be filled up without his previous approval, was filled up and delivered by the co-party
to an acquaintance of the drawer by misrepresenting that the drawer needed a loan, the payee cannot
hold the drawer liable. The payee is not a holder in due course because of the lack of privity of the
drawer with the loan agreement. (Patrimonio vs. Gutierrez, , GR No. 187769, June 4, 2014)
When a car dealer had sold the same car twice with the second sale payable on installments, the
finance company to which the promissory note representing the balance of the purchase price
was negotiated will be considered a holder in due course provided that the PN is negotiable and
that the holder acquired the PN under conditions making him a holder in due course. An invalid
PN is not a defense available against such holder in due course . Consequently, the buyer who is-
sued the PN can not avoid liablity to the holder.( Violago vs. BA Finance Corporation, GR No.
158262, July 21, 2008, J VELASCO )
Is a managers check subject to stop payment order ?
While indeed, it cannot be said that managers and cashiers checks are pre-cleared, clearing should not
be confused with acceptance. Managers and cashiers checks are still the subject of clearing to ensure
that the same have not been materially altered or otherwise completely counterfeited. However, man-
agers and cashiers checks are pre-accepted by the mere issuance thereof by the bank, which is both its
drawer and drawee. Thus, while managers and cashiers checks are still subject to clearing, they can-
not be countermanded for being drawn against a closed account, for being drawn against insufficient
funds, or for similar reasons such as a condition not appearing on the face of the check. Long standing
and accepted banking practices do not countenance the countermanding of managers and cashiers

checks on the basis of a mere allegation of failure of the payee to comply with its obligations towards
the purchaser. On the contrary, the accepted banking practice is that such checks are as good as cash.
Metropolitan Bank And Trust Company vs. Wilfred N. Chiok G.R. No. 172652 November 26,
2014
INSURANCE
Are HMOs liable as insurance company ?
HMOs are not insurance business. One test that they have applied is whether the assumption of risk and
indemnification of loss (which are elements of an insurance business) are the principal object and pur-
pose of the organization or whether they are merely incidental to its business. If these are the principal
objectives, the business is that of insurance. But if they are merely incidental and service is the princi-
pal purpose, then the business is not insurance. Philippine Health Care Providers vs. Commissioner
of Internal Revenue, G.R. No. 167330, September 18, 2009.
For purposes of determining the liability of a health care provider to its members, a health care agree-
ment is in the nature of non-life insurance, which is primarily a contract of indemnity. Once the mem-
ber incurs hospital, medical or any other expense arising from sickness, injury or other stipulated con-
tingent, the health care provider must pay for the same to the extent agreed upon under the contract.
Limitations as to liability must be distinctly specified and clearly reflected in the extent of coverage
which the company voluntary assume, otherwise, any ambiguity arising therein shall be construed in
favor of the member. Being a contract of adhesion, the terms of an insurance contract are to be con-
strued strictly against the party which prepared the contract - the insurer. This is equally applicable to
Health Care Agreements. The phraseology used in medical or hospital service contracts, such as
standard charges , must be liberally construed in favor of the subscriber, and if doubtful or reasonably
susceptible of two interpretations the construction conferring coverage is to be adopted, and exclusion-
ary clauses of doubtful import should be strictly construed against the provider. Thus, if the member,
while on vacation, underwent a procedure in the USA, the standard charges referred to in the contract
should mean standard charges in USA and not the cost had the procedure been conducted in the Philip-
pines. Fortune Medicare Inc. vs Amorin. G.R. No. 195872, March 12, 2014.
Elements of incontestability clause
The "Incontestability Clause" under 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 rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies
within the period, the insurer must make good on the policy, even though the policy was obtained by
fraud, concealment, or misrepresentation, as in this case, when the insured did not personally apply for
the policy as she was illiterate and that it was the beneficiary who filled up the insurance application
designating herself as beneficiary. Section 48 regulates both the actions of the insurers and prospective
takers of life insurance. It gives insurers enough time to inquire whether the policy was obtained by
fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming individuals that
their attempts at insurance fraud would be timely uncovered thus deterring them from venturing into
such nefarious enterprise. Manila Bankers Life Insurance Corporation vs Cresencia Aban. G.R.
No. 175666, July 29, 2013.
Effect of Alteration in the use and condition of the thing insured
With the transfer of the location of the subject properties, without notice and without the insurers con-
sent, after the renewal of the policy, the insured clearly committed concealment, misrepresentation and
a breach of a material warranty. Section 26 of the Insurance Code provides that a neglect to communi-
cate that which a party knows and ought to communicate, is called a concealment. Under Section 27 of
the Insurance Code, a concealment entitles the injured party to rescind a contract of insurance. More-
over, under Section 168 of the Insurance Code, the insurer is entitled to rescind the insurance contract
in case of an alteration in the use or condition of the thing insured. Section 168 of the Insurance Code
provides, as follows: An alteration in the use or condition of a thing insured from that to which it is

limited by the policy made without the consent of the insurer, by means within the control of the in-
sured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance. Malayan In-
surance Company vs. PAP Co. (PHIL. BRANCH). G.R. No. 200784, August 07, 2013.
When does the right to payment of the insured accrue ?
The right of the insured to the payment of his loss accrues from the happening of the loss. However, the
cause of action in an insurance contract does not accrue until the insureds claim is finally rejected by
the insurer. This is because before such final rejection there is no real necessity for bringing suit.
It is thus clear that petitioners causes of action for indemnity respectively accrued from its receipt of
the letters where the insurer rejected its claims in the first instance. Consequently, given that it allowed
more than twelve (12) months to lapse before filing the necessary complaint before the RTC, its causes
of action had already prescribed. H.H. Hollero Construction, Inc. vs. Government Service Insur-
ance System and Pool of Machinery Insurers G.R. No. 152334, September 24, 2014
What are the rights of the insurer as subrogee ?
The rights of a subrogee cannot be superior to the rights possessed by a subrogor. Subrogation is the
substitution of one person in the place of another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in relation to a debt or claim, including its reme-
dies or securities. The rights to which the subrogee succeeds are the same as, but not greater than,
those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy
the subrogor did not have. In other words, a subrogee cannot succeed to a right not possessed by the
subrogor. A subrogee in effect steps into the shoes of the insured and can recover only if the insured
likewise could have recovered.
Consequently, an insurer indemnifies the insured based on the loss or injury the latter actually suffered
from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the
insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due, the
amount paid is excessive, the insurer takes the risk of not being able to seek recompense from the al-
leged wrongdoer. This is because the supposed subrogor did not possess the right to be indemnified
and therefore, no right to collect is passed on to the subrogee. Loadstar Shipping Company, Incorpo-
rated And Loadstar International Shipping Company, Incorporated vs. Malayan Insurance
Company, Incorporated G.R. No. 185565, November 26, 2014.
What is the prescriptive period for the insurer to enforce its rights of subrogation ?
After payment by the insurer to the insured, it is subrogated to the rights of the latter. Its right of subro-
gation under Article 2207 of the Civil Code in relation to Article 1144 gives rise to a cause of action
created by law. The prescriptive period for cause of action based on law ( such as subrogation ) is ten
years. Thus, the insurer has 10 years from the date it indemnified the insured to file the action against
the wrongdoer. Vector Shipping Corporation vs. American Home Assurance Company, G.R. No.
159213, July 3, 2013.
The security deposit of insurance companies with the Insurance Commission is immune from levy or
execution. Capital Insurance and Surety vs Del Monte Motor Works, GR No. 159979, December
9, 2015
Laws on Secrecy of Bank Deposits
Recent laws relevant to confidentiality of bank deposits
1. REPUBLIC ACT NO. 10365 (Approved 15 February 2013), amending the Anti-Money Launder-
ing law

Who are the additional covered institutions/persons under the amended Anti-Money Laundering
law ?
1. (4) jewelry dealers in precious metals, who, as a business, trade in precious metals, for trans-
actions in excess of One million pesos (P1,000,000.00);
2. (5) jewelry dealers in precious stones, who, as a business, trade in precious stones, for transac-
tions in excess of One million pesos (P1,000,000.00);
3. (6) company service providers which, as a business, provide any of the following services to
third parties: (i) acting as a formation agent of juridical persons; (ii) acting as (or arranging for
another person to act as) a director or corporate secretary of a company, a partner of a partner-
ship, or a similar position in relation to other juridical persons; (iii) providing a registered of-
fice, business address or accommodation, correspondence or administrative address for a com-
pany, a partnership or any other legal person or arrangement; and (iv) acting as (or arranging for
another person to act as) a nominee shareholder for another person; and
4. (7) persons who provide any of the following services:
(i) managing of client money, securities or other assets;

(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or management of
companies; and
(iv) creation, operation or management of juridical persons or arrangements, and buying
and selling business entities.
Notwithstanding the foregoing, the term covered persons shall exclude lawyers and account-
ants acting as independent legal professionals in relation to information concerning their clients
or where disclosure of information would compromise client confidences or the attorney-client
relationship: Provided, That these lawyers and accountants are authorized to practice in the
Philippines and shall continue to be subject to the provisions of their respective codes of con-
duct and/or professional responsibility or any of its amendments.
What are the additional instances of money laundering law under the amendatory law ?
Money laundering is committed by any person who, knowing that any monetary instrument or property
represents, involves, or relates to the proceeds of any unlawful activity:
(a) transacts said monetary instrument or property;
(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary
instrument or property;
(c) conceals or disguises the true nature, source, location, disposition, movement or
ownership of or rights with respect to said monetary instrument or property;
(d) attempts or conspires to commit money laundering offenses referred to in para-

graphs (a), (b) or (c);
(e) aids, abets, assists in or counsels the commission of the money laundering offenses
referred to in paragraphs (a), (b) or (c) above; and
(f) performs or fails to perform any act as a result of which he facilitates the offense of
money laundering referred to in paragraphs (a), (b) or (c) above.
Money laundering is also committed by any covered person who, knowing that a covered or
suspicious transaction is required under this Act to be reported to the Anti-Money Laundering
Council (AMLC), fails to do so.

Expanded the list of predicate crimes or unlawful activities to include:
o terrorism and financing terrorism

o conspiracy to commit terrorism
o bribery
o fraud
o illegal exactions
o malversation of public funds
o violations to the: Anti Trafficking Act, Revised Forestry Code, Philippine Fisher-
ies Code, Philippines Mining Act, Wildlife Resources Conservation and Protec-
tion Act, National Caves and Cave Resources Management Protection Act, and
Anti-Car napping Act
o illegal possession, manufacture or disposition of firearms, ammunition or explo-
sives
The amendatory law also provides that both bank inquiry order and freeze orders may be grant-
ed ex parte. Freeze order can be any period but not to exceed 6 months. It may be extended up-
on application with the Court of Appeals.
2. REPUBLIC ACT NO. 10168 (Approved 20 June 2012)

THE TERRORISM FINANCING PREVENTION AND SUPPRESSION ACT OF 2012
Made financing terrorism a predicate offense to money laundering

Survey of Recent Jurisprudence in Commercial Law (January 2012 To December 31, 2015)

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Survey of Recent Jurisprudence in Commercial Law (January 2012 To December 31, 2015)

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June 1, 2016

Survey of Recent Jurisprudence in Commercial Law

SPECIAL COMMERCIAL LAWS

When is a trust receipt transaction considered a simple loan ?

2016 Dean Nilo T. Divina, All Rights Reserved 1

What is the redemption period in case the mortgagee is a bank ?

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Cases on the application of the doctrine of separate legal entity

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Doctrine of Piercing the veil of corporate fiction

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Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract

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Nevertheless, if a corporation is engaged in a partially nationalized industry, issues a mixture of com-

May a corporation by estoppel be impleaded as a party defendant independently of the persons

Does change of corporate name dissolve the corporation ?

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Board of Directors/Corporate Officers

a) Chairperson of the Board of Directors;

Doctrine of Apparent Authority

What do you understand by the doctrine of apparent authority ?

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What are the requirements for derivative suits ?

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Legal bases of the Nell Doctrine

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SECURITIES AND REGULATION CODE

Does SEC have jurisdiction to carry out the liquidation of a corporation ?

Can an employee be considered as associated person or salesman in case of sale of unregistered

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What are the tests to determine intra corporate controversy

Cite recent cases considered intra-corporate in nature

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Cite recent cases not considered intra-corporate in nature

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SEC. 5. Powers and Functionsof the Commission. - x x x

5.2 The Commission's jurisdiction over all cases enumerated under

Is the mark St. Francis registrable ?

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What do you understand by the must carry rule ?

Are the following common carrier ?

Freight forwarder ? informal school bus operator ? Uber ? Time charterer ?

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Recent cases on liability of common carrier

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NEGOTIABLE INSTRUMENTS LAW

Are the following instruments negotiable ?

Certificate of deposit ? Passbook ? SWIFT electronic messages ?

A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a

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A check constitutes an evidence of indebtedness and is a veritable proof of an obligation. Thus,

Cases on unauthorized payment of negotiable instrument

Is a managers check subject to stop payment order ?

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Are HMOs liable as insurance company ?

Elements of incontestability clause

Effect of Alteration in the use and condition of the thing insured