Designer Baskets, Inc. vs. Air Sea Transport, Inc.

G.R. No. 184513, March 9, 2016

Facts:
Ambiente, a foreign corporation, ordered from DBI, a domestic corporation, 223
cartoons of its assorted wooden products worth US $ 12, 590.87 and payable through
telegraphic transfer. ACCLI, a domestic corporation and an acting agent of ASTI, a
foreign corporation engaged in carrier transport business, was Ambiente’s forwarding
agent to ship out its order from the Philippines to the US. DBI delivered the shipment to
ACCLI and received triplicate copies of ASTI bill of lading. DBI retained such bills of
lading pending the payment of the goods by Ambiente. However, Ambiente entered into
an Indemnity Agreement with ASTI wherein ASTI delivers the shipment even without the
bill of lading and in return, Ambiente will hold ASTI and its agent free from any liability as
a result of the shipment. The shipment was then released without DBI’s knowledge and
without its receipt of payment for the cost of the goods shipped. DBI then made several
demands to Ambiente for it to pay, but to no avail. Thus, it filed a complaint against
ASTI, ACCLI, and ACCLI’s incorporators-stockholders for the payment of the value of
the shipment. It alleged that in the bill of lading, ASTI and/or ACCLI is to release the
shipment to the consignee only after the original copy of the bill of lading is surrendered
to them, otherwise, they are liable to the shipper for the value of the shipment. The
defendants filed a motion to dismiss arguing that: (a) they are not the real parties-in-
interest in the action because the cargo was delivered to Ambiente and that the case
was a simple case of non-payment of the buyer; (b) relative to the incorporators-
stockholders of ACCLI, piercing the corporate veil is misplaced; and (c) contrary to
DBI’s allegation, the bill of lading does not contain a proviso exposing ASTI to a liability
in case the shipment is released without the surrender of the bill of lading. DBI amended
its complaint and impleaded Ambiente. The trial court found ASTI, ACCLI, and Ambiente
solidarily liable to DBI for the shipment’s value. It held ASTI and ACCLI as its agent
liable for their unwarranted release of the shipment to Ambiente despite non-
presentation of the bill of lading. It absolved ACCLI’s incorporators-stockholders. Upon
appeal to the CA, it found Ambiente as the only one liable to DBI. Hence, this appeal.

Issue: Whether the ASTI/ACCLI may be held liable for releasing the shipment to the
consignee without first demanding the surrender of the bill of lading.

Held:
No. The Court held that a common carrier may release the goods to the
consignee even without the surrender of the bill of lading.
Under Article 350 of the Code of Commerce, “the shipper as well as the carrier of
the merchandise or goods may mutually demand that a bill of lading be made.” A bill of
lading, when issued by the carrier to the shipper, is the legal evidence of the contract of
carriage between the former and the latter. It defines the rights and liabilities of the
parties in reference to the contract of carriage. The stipulations in the bill of lading are
valid and binding unless they are contrary to law, morals, customs, public order or public
policy. Here, ACCLI, as agent of ASTI, issued a bill of lading to DBI. This bill of lading
governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that this bill of
lading contains a provision stating that ASTI and ACCLI are “to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or copies of the said
Bill of Lading is or are surrendered to them; otherwise they become liable to [DBI] for
the value of the shipment. Quite tellingly, however, DBI does not point or refer to any
specific clause or provision on the bill of lading supporting this claim. The language of
the bill of lading shows no such requirement. There is no obligation, therefore, on the
part of ASTI and ACCLI to release the goods only upon the surrender of the original bill
of lading.
Also, under Article 353 of the Code of Commerce, in case the consignee, upon
receiving the goods, cannot return the bill of lading subscribed by the carrier, because of
its loss or any other cause, he must give the latter a receipt for the goods delivered this
receipt producing the same effects as the return of the bill of lading. Here, Ambiente
could not produce the bill of lading not because it was lost, but for another cause: the
bill was retained by DBI pending Ambiente’s full payment of the shipment. Ambiente and
ASTI then entered into an Indemnity agreement, wherein Ambiente asked ASTI to
release even without the surrender of the bill. The execution of this agreement and the
fact that the shipment was released to Ambiente pursuant to it, operates as a receipt in
substantial compliance of the law.

Ricafort vs. Dicdican

G.R. Nos. 202647-50, March 9, 2016

Facts:
On August 15, 2011, NADECOR held its annual stockholders’ meeting (ASM) to
elect its board of directors for the year 2011-2012. Gatmaitan, its corporate secretary,
attested to the presence of a quorum of 94.1% of its outstanding shares of stock. New
board of directors were then elected. On October 20, 2011, the shareholders of record,
Corazon Ricafort and some others filed a complaint against NADECOR itself, the newly-
elected directors, and Gatmaitan before the RTC to declare null and void the ASM. They
alleged that they had no knowledge or prior notice of the ASM since they only received
the notice of the ASM only on August 16, 2011 or one day late, in violation of the 3-day
notice provided in NADECOR’s By-Laws. The defendants seek the dismissal of the
case as because it is time-barred as it involved an election contest and as such, it
should have been filed within 15 days from the date of the election as provided for
under Section 3, Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies, and plaintiffs had no cause of action as they were duly served with
notice of the meeting as shown in the affidavit of the NADECOR messenger who mailed
the notices on August 11, 2011. The RTC ruled in favor of plaintiff contending that they
were not validly served with notice and that their complaint did not involve an election
contest and thus, was not subject to the 15-day prescriptive period for filing an election
protest. It declared null and void the ASM and ordered within 30 days the holding of
another ASM. Four separate petitions for certiorari were then filed by the defendants to
the CA against plaintiffs. Such was consolidated and the CA nullified and set aside the
RTC’s order. It declared the ASM to be valid and the board of directors and officers are
lawfully elected.

Issue: Whether the case is time-barred because it involves an elections contest and
therefore is subject to the 15-day prescription period.

Held:
Yes. The Court ruled that where one of the reliefs sought in the complaint is to
nullify the election of the Board of Directors at the annual stockholders’ meeting, the
complaint involves an election contest. Here the case put in issue the validity of the
ASM and indirectly, the election of the members of the Board of Directors. Here, by
seeking nullify the August 15, 2011 ASM of NADECOR, including all proceedings taken
thereat, all the consequences thereof, and all acts carried out pursuant thereto, the
petitioners were clearly challenging the validity of the election of the new board of
directors. As such, it should have been filed within the 15-day prescriptive period
allowed for an election protest under Section 3 of Rule 6 of the Interim Rules.

Olano vs. Lim Eng Co

G.R. No. 195835, March 14, 2016

Facts:
The petitioners are officers and/or directors of Metrotech Steel Industries, Inc.
while respondent Lim Eng Co is the chairman of LEC Steel Manufacturing Corporation
which specializes in architectural metal manufacturing. LEC was subcontracted by SKI-
FB to manufacture and install interior and exterior hatch doors for the 7th to 22nd floors
of the Project based on the final shop plans/drawings that LEC has submitted to them.
Sometime thereafter, LEC learned that Metrotech was also subcontracted to install
interior and exterior hatch doors forthe Project's 23rd to 41st floors. LEC demanded
Metrotech to cease from infringing its intellectual property rights but Metrotech insisted
that no copyright infringement was committed because the hatch doors it manufactured
were patterned in accordance with the drawings provided by SKI-FB. LEC sought the
assistance of the National Bureau of Investigation (NBI) which in turn applied for a
search warrant before the Regional Trial Court (RTC) of Quezon City, Branch 24. It
resulted in the confiscation of finished and unfinished metal hatch doors as well as
machines used in fabricating and manufacturing hatch doors from the premises of
Metrotech. On August 13, 2004, the respondent filed a Complaint-Affidavit before the
DOJ against the petitioners for copyright infringement. In the meantime or on
September 8, 2004, the RTC quashed the search warrant on the ground that copyright
infringement was not established. The investigating prosecutor dismissed the
respondent's complaint based on inadequate evidence. The respondent filed a petition
for review before the DOJ but it was also denied. Upon the respondent's motion for
reconsideration, however, the DOJ reversed the investigating prosecutor’s decision and
directed the Chief State Prosecutor to file the appropriate information for copyright
infringement against the petitioners ruling that there was copyright infringement. The
petitioners moved for reconsideration which was granted declaring that the evidence on
record did not establish probable cause because the subject hatch doors were plainly
metal doors with functional components devoid of any aesthetic or artistic features. The
respondent thereafter filed a motion for reconsideration but it was denied. The
respondent then sought recourse before the CA via a petition for certiorari ascribing
grave abuse of discretion on the part of the DOJ. CA granted the petition and reiterated
its ruling by denying the petitioner’s motion for reconsideration. Hence, this petition.

Issue: Whether there is copyright infringement in this case.

Held:
None. Copyright infringement is committed by any person who shall use original
literary or artistic works, or derivative works, without the copyright owner's consent
in such a manner as to violate the foregoing copy and economic rights. For a claim of
copyright infringement to prevail, the evidence on record must demonstrate: (1)
ownership of a validly copyrighted material by the complainant; and (2) infringement of
the copyright by the respondent. While both elements subsist in this case, they do not
simultaneously concur so as to substantiate infringement. The respondent failed to
substantiate the alleged reproduction of the drawings/sketches of hatch doors
copyrighted under its Certificate of Registrations. There is no proof that the petitioners
reprinted the copyrighted sketches/drawings of LEC's hatch doors. The raid on
Metrotech’s premises yielded no copies or reproduction of LEC’s copyrighted
sketches/drawings of hatch doors. What were discovered were finished and unfinished
hatch doors. As LEC’s Certificate of Registration only covers sketches/drawings, LEC’s
copyright protection covered only the hatch door sketches/drawings and not the actual
hatch door they depict. To constitute infringement, the usurper must have copied or
appropriated the original work of an author or copyright proprietor, absent copying, there
can be no infringement of copyright.

Hongkong and Shanghai Banking Corporation Limited v. National Steel

Corporation and Citytrust Banking Corporation
G.R. No. 183486, February 24, 2016
Facts:
National Steel Corporation (NSC) entered into an Export Sales Contract with
Klockner East Asia Limited (Klockner) for the sale of 1,200 metric tons of prime cold
rolled coils to Klockner under FOB ST Iligan terms. In accordance with the requirements
in the contract, Klockner applied for an irrevocable letter of credit with HSBC in favor of
NSC. HSBC then issued an irrevocable and onsight letter of credit with NSC as the
beneficiary. The bill stated that it is governed by the International Chamber of
Commerce Uniform Customs and Practice for Documentary Credits (UCP 400). Under
UCP 400, HSBC, the issuing bank, has the obligation to immediately pay NSC upon
presentment of the documents listed in the Letter of Credit. These documents are: (1)
one original commercial invoice; (2) one packing list; (3) one non-negotiable copy of
clean on board ocean bill of lading made out to order, blank endorsed marked 'freight
collect and notify applicant etc. NSC, through Emerald Forwarding Corporation, loaded
and shipped the cargo of prime cold rolled coils on board MV Sea Dragon under China
Ocean Shipping Company Bill of Lading. The cargo arrived in Hongkong and NSC
coursed the collection of its payment from Klockner through CityTrust Banking
Corporation (CityTrust). NSC had earlier obtained a loan from CityTrust secured by the
proceeds of the Letter of Credit issued by HSBC. CityTrust sent a collection order to
HSBC respecting the collection of payment from Klockner. HSBC sent a cablegram to
CityTrust acknowledging receipt of the Collection Order. It also stated that the
documents will be presented to "the drawee against payment subject to UCP 322
[Uniform Rules for Collection (URC) 322] as instructed. It also informed SCB-M that it
has referred the matter to Klockner for payment and that it will revert upon the receipt of
the amount. 17 On December 8, 1993, the Letter of Credit expired. HSBC sent another
cablegram to SCB-M advising it that Klockner had refused payment. It then informed
SCB-M that it intends to return the documents to NSC with all the banking charges for
its account. CityTrust insisted that a demand for payment must be made from Klockner
since the documents "were found in compliance with LC terms and conditions." HSBC
replied that in accordance with CityTrust's instruction in its Collection Order, HSBC
treated the transaction as a matter under URC 322. Thus, it demanded payment from
Klockner which unfortunately refused payment for unspecified reasons. It then noted
that under URC 322, Klockner has no duty to provide a reason for the refusal.
Meanwhile, NSC sent a letter to HSBC where it, for the first time, demanded payment
under the Letter of Credit. Unable to collect from HSBC, NSC filed a complaint against it
for collection of sum of money in the RTC Makati. NSC alleged that it coursed the
collection of the Letter of Credit through CityTrust. However, notwithstanding CityTrust's
complete presentation of the documents in accordance with the requirements in the
Letter of Credit, HSBC unreasonably refused to pay its obligation in the amount of
US$485,767.93. HSBC denied that it has any liability under the Letter of Credit. It
argued that CityTrust modified the obligation when it stated in its Collection Order that
the transaction is subject to URC 322 and not under UCP 400.
The RTC Makati rendered a decision finding that HSBC is not liable to pay NSC the
amount stated in the Letter of Credit. It ruled that the applicable law is URC 322 as it
was the law which CityTrust intended to apply to the transaction. Under URC 322,
HSBC has no liability to pay when Klockner refused payment. The CA reversed the
ruling of the RTC. The CA found that it is UCP 400 and not URC 322 which governs the
transaction as the terms of the Letter of Credit clearly stated that UCP 400 shall apply.
Further, the CA explained that even if the Letter of Credit did not state that UCP 400
governs, it nevertheless finds application as this Court has consistently recognized it
under Philippine jurisdiction. Thus, applying UCP 400 and principles concerning letters
of credit, the CA explained that the obligation of the issuing bank is to pay the seller or
beneficiary of the credit once the draft and the required documents are properly
presented.

Issue: Who among the parties bears the liability to pay the amount stated in the Letter
of Credit.

Held:
HSCB is liable to pay NSC. In transactions where the letter of credit is payable
on sight, as in this case, the issuer must pay upon due presentment. This obligation is
imbued with the character of definiteness in that not even the defect or breach in the
underlying transaction will affect the issuing bank’s liability. This is the Independence
Principle on the law on letters of credit. Article 17 of UCP 400 explains that under this
principle, an issuing bank assumes no liability or responsibility for the form, sufficiency,
accuracy, genuineness, falsification, or legal effect of any documents, or for the general
and/or particular conditions stipulated in the documents or superimposed thereon. Thus,
as long as the proper documents are presented, the issuing bank has an obligation to
pay even if the buyer should later on refuse payment. Hence, Klockner’s refusal to pay
carries no effect whatsoever on HSBC’s obligation to pay under the Letter of Credit.To
allow HSBC to refuse to honor the Letter of Credit simply because it could not collect
first from Klockner is to countenance a breach of the Independence Principle.