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Atty. Guiller Asido Bar Reviewer in Mercantile Law For The 2019 Bar Exams.
Atty. Guiller Asido Bar Reviewer in Mercantile Law For The 2019 Bar Exams.
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1
NOTES
ON
MERCANTILE
LAW
REVIEW
2019
GUILLER
B.
ASIDO,
Ll.M.
LAWS COVERED
Branch of private law that regulates the juridical relations arising from
commercial acts.
Section 20. The State recognizes the indispensable role of the private
sector, encourages private enterprise, and provides incentives to
needed investments.
In the pursuit of these goals, all sectors of the economy and all region
s of the country shall be given optimum opportunity to develop.
Private enterprises, including corporations, cooperatives, and similar
collective organizations, shall be encouraged to broaden the base
of their ownership.
xxx
xxx
Section 12. The State shall promote the preferential use of Filipino
labor, domestic materials and locally produced goods, and adopt
measures that help make them competitive.
Section 13. The State shall pursue a trade policy that serves the
general welfare and utilizes all forms and arrangements of exchange
on the basis of equality and reciprocity.
Section 16. The Congress shall not, except by general law, provide for
the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good
and subject to the test of economic viability.
Section 19. The State shall regulate or prohibit monopolies when the
public interest so requires. No combinations in restraint of trade or
unfair competition shall be allowed.
1. Issuer – This is the entity that will issue the credit. It usually is a bank
but it can be any financial institution of substance. The issuer assumes
the full obligation topay the beneficiary upon the presentation of the
documents specified in the credit.
the credit that has been issued. In this capacity it is only playing “post
office”.
1. Commercial L/C
-‐‑ Used as a method of payment in a contract sale of goods, so that
the seller (beneficiary) can obtain payment directly from the issuer
instead of the beneficiary.
2. Stand by L/C
-‐‑ This involves non-sale transactions. The L/C is used as guarantee, or
secure either a monetary or non-monetary obligation, whereby the
issuer pays the creditor, if the debt defaults on the obligation.
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 cannot 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
accomplished or not. (Philippine National Bank vs. San Miguel
Corporation. G.R. No. 186063, January 15, 2014)
Once the issuing bank shall have paid the beneficiary after the
latter’s compliance with the terms of the letter of credit, the issuing
bank is entitled to reimbursement for the amount it paid under the
letter of credit. (Galvez vs. Court of Appeals [2012])
§ "Entruster" shall refer to the person holding title over the goods,
documents, or instruments subject of a trust receipt transaction, and
any successor in interest of such person.
Rights of Entruster
Obligations of Entrustee
2. Receive the proceeds in trust for the entruster and turn over
the same to the entruster to the extent of the amount owing to
the entruster or as appears on the trust receipt;
3. Insure the goods for their total value against loss from fire,
theft, pilferage or other casualties;
6. Observe all other terms and conditions of the trust receipt not
contrary to the provisions of PD 115.
There are two possible situations in a trust receipt transaction. The first
is covered by the provision which refers to money received under the
obligation involving the duty to deliver it (entregarla) to the owner of
the merchandise sold. The second is covered by the provision which
refers to merchandise received under the obligation to "return" it
(devolvera) to the owner.
Hur Tin Yang vs. People of the Philippines. (G.R. No. 195117, August
14, 2013)
When both parties entered into an agreement knowing fully well that
the return of the goods subject of the trust receipt is not possible
even without any fault on the part of the trustee, it is not a trust
receipt transaction penalized under Sec. 13 of PD 115 in relation to
Art. 315, par. 1(b) of the RPC, as 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.
May a civil case filed by the entruster against the entrustee proceed
separately from the criminal action?
Yes. A civil case filed by the entruster against the entrustees based
on the failure of the latter to comply with their obligation under the
Trust Receipt agreement is proper because this breach of obligation
is separate and distinct from any criminal liability for misuse and/or
misappropriation of goods or proceeds realized from the sale of
goods released under the trust receipts. Being based on an
obligation ex contractu and not ex delicto, the civil action may
proceed independently of the criminal proceedings instituted
against the entrustees regardless of the result of the latter. (Sarmiento
vs. Court of Appeals [2002])
In the application of the provisions of this Code the fact that no profit
is derived from the making of insurance contracts, agreements or
transactions or that no separate or direct consideration is received
therefor, shall not be deemed conclusive to show that the making
thereof does not constitute the doing or transacting of an insurance
business. (section 2 [a], Insurance Code)
§ Contract of Adhesion
§ Contract of Indemnity
§ Consensual
§ Voluntary
§ Unilateral
§ Aleatory
§ Conditional
§ Personal
§ Property
Through the years, the courts have held that in these type of
contracts, the parties do not bargain on equal footing, the weaker
party's participation being reduced to the alternative to take it or
leave it. Thus, these contracts are viewed as traps for the weaker
party whom the courts of justice must protect. Consequently, any
ambiguity therein is resolved against the insurer, or construed liberally
in favor of the insured.
The agreement has the force of law between the parties. The terms
of the policy constitute the measure of the insurer’s liability, and in
order to recover, the insured must show himself within those terms.
If the insured cannot comply with the terms and conditions of the
contract, he is not entitled as a rule to recover the loss or damage
suffered. This is a condition precedent to the right to recovery.
§ All rights, title and interest in the policy of insurance taken out by
an original owner on the life or health of a minor shall automatically
vest in the minor upon the death of the original owner.
§ Public Enemy
Kinds of Beneficiary
1 Insured himself
interest or not, and such person may recover upon it whatever the
insured might have recovered.
§ All rights, title and interest in the policy of insurance taken out by
an original owner on the life or health of a minor shall automatically
vest in the minor upon the death of the original owner, unless
otherwise provided for in the policy.
§ General Rule : Must exist when the insurance takes effect, but
need not exist thereafter or when the loss occurs. (section 19,
Insurance Code)
§ Exceptions:
Change of Interest
and he is thereby induced to estimate the risk upon a false basis that
it does not exist.
Bernardo Argente vs. West Coast Life Insurance Co., (G.R. No. 28499,
March 19, 1928)
§ EXCEPTION
§ Incontestability clause
Emilio Tan vs. Court of Appeals (G.R. No. 48049, June 29, 1989)
Warranties
§ SECTION 68. A warranty may relate to the past, the present, the
future, or to any or all of these.
§ SECTION 80. If a peril insured against has existed, and the insurer
has been liable for any period, however short, the insured is not
entitled to return of premiums, so far as that particular risk is
concerned.
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GUILLER
B.
ASIDO,
Ll.M.
Over Insurance
In case of loss, the company is bound to pay only to the extent of the
real value of the property lost. The insured is entitled to recover the
amount of premium corresponding to the excess in value of the
property.
Double Insurance
b) Where the policy under which the insured claims is a valued policy,
the insured must give credit as against the valuation for any sum
received by him under any other policy without regard to the actual
value of the subject matter insured;
d) Where the insured receives any sum in excess of the valuation in the
case of valued policies, or of the insurable value in the case of
unvalued policies, he must hold such sum in trust for the insurers,
according to their right of contribution among themselves;
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B.
ASIDO,
Ll.M.
Reinsurance
Fire Insurance
Measure of Indemnity
§ Under section 75, the insurer is given the right to insert terms and
conditions in the policy which if violated would avoid it. An alteration
made in the use or condition of the thing insured will thus avoid a
policy under the same section if such alteration is expressly
prohibited altough it does not increase the risk.
CASUALTY INSURANCE
The insurable interest does not depend upon whether the insured has
a legal or equitable interest in property but upon whether he may be
charged at law with liability against which insurance is taken out.
§ The right of the person injured to sue the insurer of the party at
fault (insured) depends on whether the contract of insurance is
intended to benefit third persons also or only the insured.
§ A protection coverage that will answer for legal liability for losses
and damages for bodily injuries or property damage that may be
sustained by another arising from the use and operation of a motor
vehicle by its owner.
(b.) "Motor Vehicle" shall mean any vehicle propelled by any power
other than muscular power using the public highways, but excepting
road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers,
bulldozers, graders, fork-lifts, amphibian trucks, and cranes if not used
on public highways, vehicles which run only on rails or tracks, and
tractors, trailers and traction engines of all kinds used exclusively for
agricultural purposes.
(d.) "Third Party" is any person other than a passenger as defined in this
section and shall also exclude a member of the household, or a
member of the family within the second degree of consanguinity or
affinity, of a motor vehicle owner or land transportation operator, as
likewise defined herein, or his employee in respect of death or bodily
injury, arising out of and in the course of employment”
(e.) "Owner" or "Motor Vehicle Owner" means the actual legal owner of a
motor vehicle, in whose name such vehicle is duly registered with the
Land Transportation Commission;
4. Endowment Policy
§ Insurer binds himself to pay a fixed sum to the insured if he survives for
a specified period, or if he dies within such period, to some other
person indicated.
Rule on Suicide
3. insurer can show that the policy was obtained with the intention to
commit suicide even in the absence of any suicide exclusion in the
policy.
- Valued policy
MARINE INSURANCE
§ Ship Owner
§ Cargo Owner
§ Charterer
§ Owner/Debtor
§ Creditor/Lender
§ Ship Owner
Over the vessel to the extent of its value, provided that if chartered,
the recovery is only up to the amount not recoverable from the
charterer
§ Cargo Owner
§ Creditor/Lender
§ Only Perils of the Sea, unless in case of an All Risk Policy where
perils of the ship are covered as well.
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GUILLER
B.
ASIDO,
Ll.M.
OTHER
MARINE
ITEM PROPERTY
INSURANCE
INSURANCE
The The
information information or
or the belief belief of a 3rd
Information
or expection party is not
of 3rd
of 3rd material and
persons
persons in need not be
reference to communicate
a material d unless it
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B.
ASIDO,
Ll.M.
Implied Warranties
4. Warranty of neutrality
§ Seaworthiness
2. In the case of Cargo Policy, each vessel upon which the cargo
is shipped or transhipped must be seaworthy at the commencement
of each particular voyage;
Deviation
§ Instances of Deviation
Proper Deviation
Improper Deviation
Loss
A. Total
1. Actual
1.3. Damage rendering the thing valueless to the owner for the
purpose for which he held it; or
2. Constructive
1. Abandon the goods or vessel to the insurer and claim for whole
insured value; (section 139)
Intended Effects
Key Features
Definition of securities
F. Impose sanctions for the violation of laws and rules, regulations and
orders, and issued pursuant thereto;
H. Enlist the aid and support of and/or deputized any and all
enforcement agencies of the Government, civil or military as well as
any private institution, corporation, firm, association or person in the
implementation of its powers and function under its Code;
J. Punish for the contempt of the Commission, both direct and indirect,
in accordance with the pertinent provisions of and penalties
prescribed by the Rules of Court;
Florencio Orendain vs. BF Homes, Inc., (G.R. No. 146313, October 31,
2006)
Juxtaposing the jurisdiction of the RTC under RA 8799 and the powers
that were retained by the SEC, it is clear that the SEC retained its
administrative, regulatory, and oversight powers over all
corporations, partnerships, and associations who are grantees of
primary franchises, and/or a license or permit issued by the
Government. However, the Securities Regulations Code (SRC) is clear
that when there is a controversy arising out of intra-corporate
relations, between and among stockholders, members or associates,
and between, any, or all of them and the corporation, it is the RTC,
not SEC, which has jurisdiction over the case.
INTRA-CORPORATE CONTROVERSY
The first element requires that the controversy must arise out of intra-
corporate or partnership relations: (a) between any or all of the
parties and the corporation, partnership or association of which they
are stockholders, members or associates; (b) between any or all of
them and the corporation, partnership or association of which they
are stockholders, members or associates and (c) between such
corporation, partnership or association and the State insofar as it
concerns their individual franchises. On the other hand, the second
element requires that the dispute among the parties be intrinsically
connected with the regulation of the corporation. 15 If the nature of
the controversy involves matters that are purely civil in character,
necessarily, the case does not involve an intra-corporate
controversy.
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B.
ASIDO,
Ll.M.
§ From the above, it can be said that the SEC's regulatory authority
over private corporations encompasses a wide margin of areas,
touching nearly all of a corporation's concerns. This authority more
vividly springs from the fact that a corporation owes its existence to
the concession of its corporate franchise from the state. Under its
regulatory responsibilities, the SEC may pass upon applications for, or
may suspend or revoke (after due notice and hearing), certificates
of registration of corporations, partnerships and associations
(excluding cooperatives, homeowners' association, and labor
unions); compel legal and regulatory compliances; conduct
inspections; and impose fines or other penalties for violations of the
Revised Securities Act, as well as implementing rules and directives of
the SEC, such as may be warranted.
GD Express Worldwide N.V., et al. vs. Court of Appeals, et al., G.R. No.
136978, May 8, 2009
Leslie Okol vs. Slimmers World International, et al., (G.R. No. 160146,
December 11, 2009)
rules and regulations should be filed with the SEC. Where the
complaint is criminal in nature, the SEC shall indorse the complaint to
the DOJ for preliminary investigation and prosecution as provided in
Section 53.1 earlier quoted.
§ Section 8.3. The Commission may specify the terms and conditions
under which any written communication, including any summary
prospectus, shall be deemed not to constitute an offer for sale under
this Section.
Exceptions:
(c.) An isolated transaction in which any security is sold, offered for sale,
subscription or delivery by the owner therefore, or by his
representative for the owner’s account, such sale or offer for sale or
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B.
ASIDO,
Ll.M.
offer for sale, subscription or delivery not being made in the course of
repeated and successive transaction of a like character by such
owner, or on his account by such representative and such owner or
representative not being the underwriter of such security.\
(g.) The issue and delivery of any security in exchange for any other
security of the same issuer pursuant to a right of conversion entitling
the holder of the security surrendered in exchange to make such
conversion: Provided, That the security so surrendered has been
registered under this Code or was, when sold, exempt from the
provision of this Code, and that the security issued and delivered in
exchange, if sold at the conversion price, would at the time of such
conversion fall within the class of securities entitled to registration
under this Code. Upon such conversion the par value of the security
surrendered in such exchange shall be deemed the price at which
the securities issued and delivered in such exchange are sold.
(j.) The exchange of securities by the issuer with the existing security
holders exclusively, where no commission or other remuneration is
paid or given directly or indirectly for soliciting such exchange.
(k.) The sale of securities by an issuer to fewer than twenty (20) persons in
the Philippines during any twelve-month period.
(l.) The sale of securities to any number of the following qualified buyers:
a. Bank;
b. Registered investment house;
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B.
ASIDO,
Ll.M.
c. Insurance company;
d. Pension fund or retirement plan maintained by the Government of
the Philippines or any political subdivision thereof or manage by a
bank or other persons authorized by the Bangko Sentral to engage in
trust functions;
e. Investment company or;
f. Such other person as the Commission may rule by determine as
qualified buyers, on the basis of such factors as financial
sophistication, net worth, knowledge, and experience in financial
and business matters, or amount of assets under management.
of any such security shall be made until the same is lifted or set aside
by the Commission. Otherwise such sale shall be void.
§ 15.4. Until the issuance of a final order, the suspension of the right
to sell, though binding upon the persons notified there of, shall be
deemed confidential, and shall not be published, unless it shall
appear that the order of suspension has been violated after notice.
If, however, the Commission finds that the sale of the security will
neither be fraudulent nor result in fraud, it shall forthwith issue an
order revoking the order of suspension, and such security shall be
restored to its status as a registered security as of the date of such
order of suspension.
Tender Offer
Cemco Holdings, Inc. vs. National Life Insurance Co. of the Phil., Inc.,
(G.R. No. 171815, August 7, 2007)
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B.
ASIDO,
Ll.M.
§ The coverage of the mandatory tender offer rule covers not only
direct acquisition but also indirect acquisition or "any type of
acquisition".
Cemco Holdings, Inc. vs. National Life Insurance Co. of the Phil., Inc.,
(G.R. No. 171815, August 7, 2007)
Proxy Solicitation
20.3. Unless otherwise provided in the proxy, it shall be valid only for
the meeting for which it is intended. No proxy shall be valid only for
the meting for which it is intended. No proxy shall be valid and
effective for a period longer than five (5) years at one time.
20.5. A broker or dealer who holds or acquire the proxy for at least
ten percent (10%) or such percentage as the commission may
prescribe of the outstanding share of such issuer, shall submit a report
identifying the beneficial owner of ten days after such acquisition, for
its own account or customer, to the issuer of security, to the
exchange where the security is traded and to the Commission.
Wash Sales
§ The illegal practice in which traders buy and sell a specific security
among themselves, creating the illusion of high trading volume and
significant investor interest, which can attract unsuspecting investors
who might then buy the stock and enable the traders to profit.
§ Engaging in transactions where both the buy and sell orders are
entered at the same time with the same price and quantity by
different but colluding parties.
Scalping
Daisy Chain
Flipping
§ Option Trading is a contract that gives the buyer the right, but not
the obligation, to buy or sell an underlying asset at a specific price
on or before a certain date.
INSIDER’s TRADING
GENERAL RULE:
UNLESS:
a) The insider proves that the information was not gained from such
relationship; or
b) If the other party selling to or buying from the insider (or his agent)
is identified, the insider proves: (i) that he disclosed the information to
the other party, or (ii) that he had reason to believe that the other
party otherwise is also in possession of the information.
PRESUMPTION
Who is an insider?
Defense of an Insider:
Section 30 of the Revised Securities Act allows the insider the defense
that in a transaction of securities, where the insider is in possession of
facts of special significance, such information is “generally available”
to the public. Whether information found in a newspaper, a
specialized magazine, or any cyberspace media be sufficient for the
term “generally available” is a matter which may be adjudged given
the particular circumstances of the case. The standards cannot
remain at a standstill. A medium, which is widely used today was, at
some previous point in time, inaccessible to most. Furthermore, it
would be difficult to approximate how the rules may be applied to
the instant case, where investigation has not even been started.
Respondents failed to allege that the negotiations of their
agreement with GHB were made known to the public through any
form of media for there to be a proper appreciation of the issue
presented.
(2) years after the violation upon which it is based. In no event shall
any such action be brought to enforce a liability created under
Section 56 or Subsection 57.1 (a) more than five (5) years after the
security was bona fide offered to the public, or under Subsection 57.1
(b) more than five (5) years after the sale.
To benefit from this scheme, a PCI buyer must enlist and sponsor at
least two other buyers as his own down-lines. These second tier of
buyers could in turn build up their own down-lines. For each pair of
down-lines, the buyer-sponsor received a US$92.00 commission. But
referrals in a day by the buyer-sponsor should not exceed 16 since
the commissions due from excess referrals inure to PCI, not to the
buyer-sponsor.
The first is the Howey test, which traces its roots to the SEC v. W.J.
Howey Co. (328 US 293 [1946]) case in the United States. The decision
held that a contract, transaction or scheme is an investment
contract where a person (a) invests his money (b) in a common
enterprise (c) with an expectation of profits (d) solely from the efforts
of others.
The other test is the Turner test based on a later case at the Court of
Appeals—SEC vs. Turner (474 F.2d 476, 9th Cir. 1973)—which basically
has the same elements as the Howey test except that the profit was
described “primarily” from the efforts of others.
§ SEC. 4. Scope. – This Act shall not apply to banking and other
financial institutions which are governed and regulated by the
General Banking Act and other laws under the supervision of the
Central Bank.
A transferee under this Act may acquire not more than two (2) lots
which should be situated in different municipalities or cities anywhere
in the Philippines: Provided, That the Total land area thereof shall not
exceed five thousand (5,000) square meters in the case of urban
land or three (3) hectares in the case of rural land for use by him for
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ASIDO,
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§ Debtor-Creditor Relationship
§ Fiduciary Duty
§ Not a trust agreement
§ Indispensable Institution
§ Impressed with public interest
§ Not expected to be infallible
§ Primary Liability
§ Highest Degree of Responsibility
§ Respondeat Superior
§ Negligence of Manager
§ Negligence of Officers
§ Negligence of Tellers
§ Right to recover from employees
§ Liability for Damages
Governance of BSP
Does the BSP have supervision over the operations of and exercise
regulatory powers over quasi-banks, trust entities and other financial
institutions?
The Bangko Sentral shall also have supervision over the operations of
and exercise regulatory powers over quasi-banks, trust entities and
other financial institutions which under special laws are subject to
Bangko Sentral supervision.
• The Monetary Board may forbid a bank from doing business and
place it under receivership without prior notice and hearing it the MB
finds that a bank: (a) is unable to pay its liabilities as they become
due in the ordinary course of business; (b) has insufficient realizable
assets to meet liabilities; (c) cannot continue in business without
involving probable losses to its depositors and creditors; and (d) has
willfully violated a cease and desist order of the Monetary Board for
acts or transactions which are considered unsafe and unsound
banking practices and other acts or transactions constituting fraud or
dissipation of the assets of the institution. (Alfeo D. Vivas, vs. Monetary
Board and PDIC, G.R. No. 191424, August 7, 2013)
§ The BSP has the exclusive power and authority to issue the
national currency. BSP’s notes and coins are issued against, and in
amounts not exceeding, the assets of the BSP. All notes and coins
issued by the BSP are fully guaranteed by the government and are
considered legal tender for all private and public debts.
§ SECTION 51. Liability for Notes and Coins. — Notes and coins
issued by the Bangko Sentral shall be liabilities of the Bangko Sentral
and may be issued only against, and in amounts not exceeding, the
assets of the Bangko Sentral. Said notes and coins shall be a first and
paramount lien on all assets of the Bangko Sentral.
The Bangko Sentral's holdings of its own notes and coins shall not be
considered as part of its currency issue and, accordingly, shall not
form part of the assets or liabilities of the Bangko Sentral.
Monetary Stabilization
Classification of Banks
securities;
and
extending
credit,
subject to
such rules as
the Monetary
Board may
promulgate.
These rules
may include
the
determinatio
n of bonds
and other
debt
securities
eligible for
investment,
the maturities
and
aggregate
amount of
such
investment.
in Section 53 of R.A.
No. 8791.
Rural Banks
Cooperative Banks
Universal Banks
UB KB
Has additional power other No such power. Only such
than those authorized for powers as are necessary to
commercial banks, carry on the business of
including the power of an banking.
investment house and the
power to invest in non-allied
enterprises
May invest in equities of May only invest in equities
allied, whether financial or of allied enterprises,
non-financial and non- whether financial or non-
allied enterprises. financial
Organization of Banks
§ Capabilities
Rules:
Rules on disqualification
Article 1198, Civil Code of the Philippines (Debtor loses the right to
make use of the period)
The bank invests the money that it holds in trust of its depositors. For
this reason, we have held that the business of a bank is one affected
with public interest, for which reason the bank should guard against
loss due to negligence or bad faith. In approving the loan of an
applicant, the bank concerns itself with proper information regarding
its debtors. The petitioner, as a bank and a financial institution
engaged in the grant of loans, is expected to ascertain and verify
the identities of the persons it transacts business with.
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The business of a bank is one affected with public interest, for which
reason the bank should guard against loss due to negligence or bad
faith. In approving the loan of an applicant, the bank concerns itself
with proper [information] regarding its debtors." Any investigation
previously conducted on the property offered by petitioners as
collateral did not preclude PNB from considering new information on
the same property as security for a subsequent loan.
[G.R. No. 161319. January 23, 2007.] SPS. EDGAR AND DINAH
OMENGAN, petitioners, vs. PHILIPPINE NATIONAL BANK, HENRY M.
MONTALVO AND MANUEL S. ACIERTO, * respondents.
While the Court recognizes the right of the parties to enter into
contracts and who are expected to comply with their terms and
obligations, this rule is not absolute. Stipulated interest rates are illegal
if they are unconscionable and the Court is allowed to temper
interest rates when necessary. In exercising this vested power to
determine what is iniquitous and unconscionable, the Court must
consider the circumstances of each case. What may be iniquitous
and unconscionable in one case, may be just in another. In a
number of cases, this Court equitably reduced the interest rate
agreed upon by the parties for being iniquitous, unconscionable,
and/or exorbitant.
Escalation clauses are not void per se. However, one "which grants
the creditor an unbridled right to adjust the interest independently
and upwardly, completely depriving the debtor of the right to assent
to an important modification in the agreement" is void. Clauses of
that nature violate the principle of mutuality of contracts. Article
1308 of the Civil Code holds that a contract must bind both
contracting parties; its validity or compliance cannot be left to the
will of one of them.
After due notice to the board of directors of the bank, the office of
any bank director or officer who violates the provisions of this Section
may be declared vacant and the director or officer shall be subject
to the penal provisions of the New Central Bank Act.
Banks were not created for the benefit of their directors and officers;
they cannot use the assets of the bank for their own benefit, except
as may be permitted by law. Congress has thus deemed it essential
to impose restrictions on borrowings by bank directors and officers in
order to protect the public, especially the depositors. Hence, when
the law prohibits directors and officers of banking institutions from
becoming in any manner an obligor of the bank (unless with the
approval of the board), the terms of the prohibition shall be the
standards to be applied to directors' transactions such as those
involved in the present case. (JOSE C. GO, petitioner, vs. BANGKO
SENTRAL NG PILIPINAS, respondent. (G.R. No. 178429. October 23,
2009.)
Conservatorship in Banks
The actions of the Monetary Board taken under this section or under
section 29 shall be final and executory, and may not be restrained or
set aside by the court except on petition for certiorari on the ground
that the action taken was in excess of jurisdiction or with grave abuse
of discretion as to amount to lack or excess of jurisdiction. The
petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within 10 days from
receipt by the board of directors of the institution of the order
directing receivership, liquidation or conservatorship. The designation
of a conservator under section 29 of this Act or the appointment of a
receiver under this section shall be vested exclusively with the
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§ The receiver or liquidator meanwhile acts not only for the benefit of
the bank, but for its creditors as well.
§ The Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines
and designate the Philippine Deposit Insurance Corporation as
receiver of the banking institution.
*Congress itself has recognized that a bank receiver only has powers
of administration. Section 30 of the New Central Bank Act expressly
provides that "[t]he receiver shall immediately gather and take
charge of all the assets and liabilities of the institution, administer the
same for the benefit of its creditors, and exercise the general powers
of a receiver under the Revised Rules of Court but shall not, with the
exception of administrative expenditures, pay or commit any act
that will involve the transfer or disposition of any asset of the
institution . . .“
1. Insure the deposits of all banks which are entitled to the benefits
of insurance and which shall have all the powers granted by law
statements in the certificates that the same are insured by PDIC are
not binding upon the latter.
§ In order that a claim for deposit insurance with the PDIC may
prosper, the law requires that a corresponding deposit be placed in
the insured bank.
INSURED DEPOSIT
§ The term ‘insured deposit’ means the amount due to any bona fide
depositor for legitimate deposits in an insured bank net of any
obligation of the depositor to the insured bank as of date of closure,
but not to exceed P500,000.00.
§ R.A. No. 9576 stipulates that PDIC will not pay deposit insurance for
the following accounts or transactions:
SPLITTING OF DEPOSITS
§ Knowingly failing to disclose and file with the AMLC any monetary
instrument/property required to be disclosed and filed. Penalty is 6
months to 4 years imprisonment or a fine of not less than P100,000 but
not more than P500,000, or both.
Provisional Remedies
On the one hand, Republic Act No. 1405 provides for four (4)
exceptions when records of deposits may be disclosed. These are
under any of the following instances: a) upon written permission of
the depositor, (b) in cases of impeachment, (c) upon order of a
competent court in the case of bribery or dereliction of duty of
public officials or, (d) when the money deposited or invested is the
subject matter of the litigation, and e) in cases of violation of the
Anti-Money Laundering Act (AMLA), the Anti-Money Laundering
Council (AMLC) may inquire into a bank account upon order of any
competent court. On the other hand, the lone exception to the non-
disclosure of foreign currency deposits, under Republic Act No. 6426,
is disclosure upon the written permission of the depositor.
§ A useful machine
§ A product or composition
§ A method or process, or
§ An improvement of any of the foregoing
§ Microorganism
§ Non-biological & microbiological process
1. NOVELTY
2. INVENTIVE STEP
3. INDUSTRIAL APPLICABILITY
"Priority date" means the date of filing of the foreign application for
the same invention referred to in Section 31 of this Act. (n)
Non-Patentable Inventions
OWNERSHIP OF PATENT
§ Section 29. First to File Rule. - If two (2) or more persons have made
the invention separately and independently of each other, the right
to the patent shall belong to the person who filed an application for
such invention, or where two or more applications are filed for the
same invention, to the applicant who has the earliest filing date or,
the earliest priority date. (3rd sentence, Sec. 10, R.A. No. 165a.)
xxx
30.2. In case the employee made the invention in the course of his
employment contract, the patent shall belong to:
(a) The employee, if the inventive activity is not a part of his regular
duties even if the employee uses the time, facilities and materials of
the employer.
61.1. Any interested person may, upon payment of the required fee,
petition to cancel the patent or any claim thereof, or parts of the
claim, on any of the following grounds:
(b) That the patent does not disclose the invention in a manner
sufficiently clear and complete for it to be carried out by any person
skilled in the art; or;
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61.2. Where the grounds for cancellation relate to some of the claims
or parts of the claim, cancellation may be effected to such extent
only. (Secs. 28 and 29, R.A. No. 165a)
65.3. If the fee for the printing of a new patent is not paid in due time,
the patent should be revoked.
65.5. Thereof, the Bureau shall, at the same time as it publishes the
mention of the cancellation decision, publish the abstract,
representative claims and drawings indicating clearly what the
amendments consist of. (n)
Patent Infringement
Doctrine of Equivalents
§ Legal Basis:
TRADEMARKS
Registration gives the trademark owner the exclusive right to use the
mark and to prevent others from using the same or similar marks on
identical or related goods and services.
DESCRIPTIVE
MISLEADING
Marks that are identical with or similar to marks that are known
internationally and, in the Philippines, will be refused registration
3. The infringing mark or trade name is used in connection with the sale,
offering for sale, or advertising of any goods, business or services; or
the infringing mark or trade name is applied to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be
used upon or in connection with such goods, business or services;
The holistic test considers the entirety of the marks, including labels
and packaging, in determining confusing similarity. The focus is not
only on the predominant words but also on the other features
appearing on the labels.
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. The essential
elements of unfair competition are (1) confusing similarity in the
general appearance of the goods; and (2) intent to deceive the
public and defraud a competitor. SUPERIOR COMMERCIAL
ENTERPRISES INC., vs. KUNNAN ENTERPRISES LTD. AND SPORTS
CONCEPT & DISTRIBUTOR, INC., G.R.No.169974, April 2010
Hoarding is not Unfair Competition and does not fall within IP Code
§ Given the IP Code's specific focus, a first test that should be made
when a question arises on whether a matter is covered by the Code
is to ask if it refers to an intellectual property as defined in the Code.
If it does not, then coverage by the Code may be negated.
Essentially, what the law punishes is the act of giving one's goods the
general appearance of the goods of another, which would likely
mislead the buyer into believing that such goods belong to the latter.
Examples of this would be the act of manufacturing or selling shirts
bearing the logo of an alligator, similar in design to the open-jawed
alligator in La Coste shirts, except that the jaw of the alligator in the
former is closed, or the act of a producer or seller of tea bags with
red tags showing the shadow of a black dog when his competitor is
producing or selling popular tea bags with red tags showing the
shadow of a black cat.
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Manuel C. Espiritu, Jr., et al. vs. Petron Corp., et al., (G.R. No. 170891,
November 24, 2009)
CONTINUING OFFENSE
COPYRIGHT
§ The natural person who created the literary and artistic work owns
the copyright to the same.
Employee - if the work is not part of his regular duties, even if he used
the time, facilities and materials of the employer;
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For audiovisual works: the producer, the author of the scenario, the
composer of the music, the film director, and the author of the work
so adapted.
For audiovisual works: the producer, the author of the scenario, the
composer of the music, the film director, and the author of the work
so adapted.
§ The law also provides for the liability of a person who at the time
when copyright subsists in a work has in his possession an article
which he knows, or ought to know, to be an infringing copy of the
work for the purpose of:
rights are only such as the statute confers, and may be obtained and
enjoyed only with respect to the subjects and by the persons, and on
terms and conditions specified in the statute. Accordingly, it can
cover only the works falling within the statutory enumeration or
description.
20th Century Fox Film Corp. vs. Court of Appeals, G.R. Nos. L-76649-
51, August 19, 1988; Columbia Pictures Industries, Inc., et al. vs. Court
of Appeals, et al., (G.R. No. 97156, October 6, 1994)
Pacita I. Habana, et al. vs. Felicidad C. Robles, et al., G.R. No. 131522,
July 19, 1999; Wilson Ong Ching Kian Chuan vs. Court of Appeals, et
al., (G.R. No. 130360, August 15, 2000)
§ It is true that such master tapes are object evidence, with the
merit that in this class of evidence the ascertainment of the
controverted fact is made through demonstrations involving the
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Columbia Pictures, Inc. vs. Court of Appeals, et al., G.R. No. 110318,
August 28, 1996; Columbia Pictures Entertainment, Inc., et al. vs.
Court of Appeals, et al., G.R. No. 111267, September 20, 1996; People
of the Phil., et al. vs. Christopher Choi, (G.R. No. 152950, August 3,
2006)
Manly Sportwear Mfg., Inc. vs. Dadodette Ent., et al., (G.R. No.
165306, September 20, 2005)
The Rules on the Issuance of the Search and Seizure in Civil ctions for
Infringement of Intellectual Property Rights are not applicable in a
case where the search warrants were applied in anticipation of
criminal actions for violation of intellectual property rights under RA
8293. Rule 126 of the Revised Rules of Court would apply and a
warrant shall be validly issued upon finding the existence of probable
cause.
Century Chinese Medicine Co., et. al. vs. People of the Philippines,
(G.R. No. 188526, November 11, 2013)
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. The mere use of
the LPG cylinders for refilling and reselling, which bear the trademarks
"GASUL" and "SHELLANE" will give the LPGs sold by REGASCO the
general appearance of the products of the petitioners.
In the same case, the Supreme Court reiterated that Section 1 of the
Negotiable Instruments Law requires the concurrence of the
following elements, and that the absence of one makes the
instrument non-negotiable,1 to wit:
This does not mean however that, even if the instrument is not
negotiable, there is no more liability to be incurred under the terms of
the promissory note issued that remains to be unpaid.
1Section 1, Negotiable Instruments Law
2 Section 70, Effect of want of demand on principal debtor. – Presentment for payment is not
necessary in order to charge the person primarily liable on the instrument; but if the instrument is,
by its terms, payable at a special place, and he is able and willing to pay it there at maturity,
such ability and willingness are equivalent to tender of payment upon his part. But except as
herein otherwise provided, presentment for payment is necessary in order to charge the drawer
and indorsers.
3Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
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REQUISITES OF NEGOTIABILITY:
• Requisites
1. It must be in writing
2. It must contain an unconditional promise to pay a sum
certain money
3. It must be payable on demand, or at a fixed or
determinable future time
4. It must be payable to order or to bearer
RULE ON FORGERY:
• The theory of the rule is that the possession of the check on the
forged or unauthorized indorsement is wrongful and when the
money had been collected on the check, the proceeds are
held for the rightful owners who may recover them. The payee
ought to be allowed to recover directly from the collecting
bank, regardless of whether the check was delivered to the
payee or not. (Westmont Bank (formerly Associated Banking
Corp.) vs. Eugene Ong, G.R. No. 132560, January 30, 2002)
• EXCEPTION:
§ Sec. 26. What constitutes holder for value. - Where value has at
any time been given for the instrument, the holder is deemed a
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holder for value in respect to all parties who become such prior to
that time.
§ Absence or failure of consideration is a matter of defense as
against any person not a holder in due course; and partial failure of
consideration is a defense pro tanto, whether the failure is an
ascertained and liquidated amount or otherwise. (section 28)
Sec. 48. Striking out indorsement. - The holder may at any time strike
out any indorsement which is not necessary to his title. The indorser
whose indorsement is struck out, and all indorsers subsequent to him,
are thereby relieved from liability on the instrument.
Classes of Holder
1. A holder:
a. May Sue thereon in his own name
b. Payment to him in due course discharges the instrument (section 88)
2. In the hands of a holder other a HIDC, a negotiable instrument is
subject to the same defenses as if it were non-negotiable
Defenses
Incapacity No consideration
Insolvency Set-off
Real Defenses
§ Section 15
§ Section 23
§ Section 14 (fraud in factum or fraud in esse contractus)
§ Fraudulent alteration by holder (secs.124 and 125)
§ Prescription; Discharge at or after maturity (secs.88, 118, 121 and
122)
Personal Defenses
Personal Defenses
LIABILITIES OF PARTIES
PARTY LIABILITY
Sec. 60. Liability of maker. - The maker of a
negotiable instrument, by making it, engages
Maker that he will pay it according to its tenor, and
admits the existence of the payee and his
then capacity to indorse.
Sec. 61. Liability of drawer. - The drawer by
drawing the instrument admits the existence
of the payee and his then capacity to indorse;
and engages that, on due presentment, the
instrument will be accepted or paid, or both,
according to its tenor, and that if it be
Drawer dishonored and the necessary proceedings
on dishonor be duly taken, he will pay the
amount thereof to the holder or to any
subsequent indorser who may be compelled
to pay it. But the drawer may insert in the
instrument an express stipulation negativing or
limiting his own liability to the holder.
Sec. 62. Liability of acceptor. - The acceptor,
by accepting the instrument, engages that he
will pay it according to the tenor of his
acceptance and admits:
Acceptor a. The existence of the drawer, the genuineness
of his signature, and his capacity and
authority to draw the instrument; and
b. The existence of the payee and his then
capacity to indorse.
Sec. 68. Order in which indorsers are liable. - As respect one another,
indorsers are liable prima facie in the order in which they indorse; but
evidence is admissible to show that, as between or among
themselves, they have agreed otherwise. Joint payees or joint
indorsees who indorse are deemed to indorse jointly and severally.
NOTICE OF DISHONOR
Where it is payable to the order of a third person and has been paid
by the drawer; and
ALTERATION
a. The date;
b. The sum payable, either for principal or interest;
c. The time or place of payment:
d. The number or the relations of the parties;
e. The medium or currency in which payment is to be made;
f. Or which adds a place of payment where no place of payment is
specified, or any other change or addition which alters the effect of
the instrument in any respect, is a material alteration
BILL OF EXCHANGE
To: Y
sgd. Z
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§ Sec. 128. Bill addressed to more than one drawee. - A bill may be
addressed to two or more drawees jointly, whether they are partners
or not; but not to two or more drawees in the alternative or in
succession.
ACCEPTANCE
Definition
Kinds of Checks
In Wong v. Court of Appeals, the Court ruled that the 90-day period
provided in the law is not an element of the offense. Neither does it
discharge petitioner from his duty to maintain sufficient funds in the
account within a reasonable time from the date indicated in the
check. According to current banking practice, the reasonable
period within which to present a check to the drawee bank is six
months. Thereafter, the check becomes stale and the drawer is
discharged from liability thereon to the extent of the loss caused by
the delay.
The Supreme Court in the case of Metropolitan Bank vs. Chiok (GR
no.172652, November 26, 2014) stated that,” The legal effects of a
manager’s check and a cashier’s check are the same. A manager’s
check, like a cashier’s check, is an order of the bank to pay, drawn
upon itself, committing in effect its total resources, integrity, and
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honor behind its issuance. By its peculiar character and general use
in commerce, a manager’s check or cashier’s check is regarded
substantially to be as good as the money it represents.”
4 Section 125. What constitutes material alteration. Any alteration which changes:
a) The date;
xxx
Section 124. Alteration of instrument; effect of. Where a negotiable instrument is materially
altered without the assent of all parties liable thereon, it is avoided, except as against a party
who has himself made, authorized, and assented to the alteration and subsequent indorsers.
But when the instrument has been materially altered and is in the hands of a holder in due
course not a party to the alteration, he may enforce the payment thereof according to its
original tenor. (Emphasis ours.)
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The modification, however, is that items which have been the subject
of material alteration or bearing forged endorsement may be
returned even beyond the 24 hours so long that the same is returned
within the prescriptive period fixed by law. The prescriptive period is
ten (10) years because a check or endorsement thereon is a written
contract. Moreover, the item need not be returned through the
clearing house but by direct presentation to the presenting bank.”
A holder in due course, holds the instrument free from any defect of
title of prior parties and from defenses available to prior parties
among themselves, and may enforce payment of the instrument for
the full amount. Since the Financing Company is a holder in due
course, the mortgagor cannot raise the defense of non-delivery of
the object and nullity of the sale against the corporation. The NIL
considers every negotiable instrument prima facie to have been
issued for a valuable consideration. (Spouses Pedro Violago vs. BA
Finance Corporation [2008])
CORPORATION CODE
Classifications
- par value
- no par value
Yes. "A no-par value share does not purport to represent any stated
proportionate interest in the capital stock measured by value, but
only an aliquot part of the whole number of such shares of the issuing
corporation. The holder of no-par shares may see from the certificate
itself that he is only an aliquot sharer in the assets of the corporation.
But this character of proportionate interest is not hidden beneath a
false appearance of a given sum in money, as in the case of par
value shares. The capital stock of a corporation issuing only no-par
value shares is not set forth by a stated amount of money, but
instead is expressed to be divided into a stated number of shares,
such as, 1,000 shares. This indicates that a shareholder of 100 such
shares is an aliquot sharer in the assets of the corporation, no matter
what value they may have, to the extent of 100/1,000 or 1/10.
Nationality of Corporations
Siain Enterprises vs. Cupertino Realty Corp., et al., (G.R. No. 170782,
June 22, 2009)
Adelio Cruz vs. Quiterio Dalisay, (A.M. No. R-181-P, July 31, 1987);
Traders Royal Bank vs. Court of Appeals, (G.R. No. 78412, September
26, 1989)
Solid Homes, Inc. vs. Court of Appeals, (G.R. No. 117501, July 8, 1997)
Concept Builders, Inc. v. NLRC, (G.R. No. 108734, May 29, 1996); "G"
Holdings, Inc. vs. NAMAWU, et al., (G.R. No. 160236, October 16,
2009)
§ The term "capital" and other terms used to describe the capital
structure of a corporation are of universal acceptance, and their
usages have long been established in jurisprudence. Briefly, capital
refers to the value of the property or assets of a corporation.
§ The term "capital" in Section 11, Article XII of the 1987 Constitution
refers only to shares of stock entitled to vote in the election of
directors, and thus in the present case only to common shares, and
not to the total outstanding capital stock (common and non-voting
preferred shares. Gamboa vs. Teves (2011)
GSIS vs. Court of Appeals, et al., (G.R. Nos. 183905 & 184275, April 16,
2009)
Republic Planters Bank vs. Enrique A. Agana, Sr., (G.R. No. 51765,
March 3, 199)7
Republic Planters Bank vs. Enrique A. Agana, (Sr., G.R. No. 51765,
March 3, 1997)
§ Treasury shares - stocks issued and fully paid for and re-acquired
by the corporation either by purchase, donation, forfeiture or other
means. Treasury shares are therefore issued shares but being in the
treasury they do not have the status of outstanding shares.
Consequently, although a treasury share, not having been retired by
the corporation re-acquiring it, may be re-issued or sold again, such
share, as long as it is held by the corporation as a treasury share,
participates neither in dividends, because dividends cannot be
declared by the corporation to itself, nor in the meetings of the
corporation as voting stock, for otherwise equal distribution of voting
powers among stockholders will be effectively lost and the directors
will be able to perpetuate their control of the corporation, though it
still foregoing essential features of a treasury stock are lacking in the
questioned shares .
IEMELIF, et al. vs. Nathanael Lazaro, et al., (G.R. No. 184088, July 6,
2010)
Ang Mga Kaanib Sa Iglesia Ng Dios Kay Kristo Hesus vs. Iglesia Ng
Dios Kay Cristo Jesus, (G.R. No. 137592, December 12, 2001)
Valle Verde Country Club, Inc., et al. vs. Victor Africa, (G.R. No.
151969, September 4, 2009)
§ The term of the members of the board of directors shall be only for
one year; their term expires one year after election to the office. The
holdover period — that time from the lapse of one year from a
member's election to the Board and until his successor's election and
qualification — is not part of the director's original term of office, nor
is it a new term; the holdover period, however, constitutes part of his
tenure. Corollary, when an incumbent member of the board of
directors continues to serve in a holdover capacity, it implies that the
office has a fixed term, which has expired, and the incumbent is
holding the succeeding term.
Valle Verde Country Club, Inc., et al. vs. Victor Africa, (G.R. No.
151969, September 4, 2009)
Hans Christian M. Señeres vs. COMELEC, et al., (G.R. No. 178678, April
16, 2009)
Luzviminda Visayan vs. NLRC, (G.R. No. 69999, April 30, 1991)
§ the SEC and the courts are barred from intruding into business
judgments of corporations, when the same are made in good faith.
The said rule precludes the reversal of the decision of the PSE to deny
PALI's listing application, absent a showing of bad faith on the part of
the PSE
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., (G.R. Nos.
181455-56 & 182008, December 4, 2009)
Derivative Suit
case of
wrong to the
corporation,
each
stockholder is
necessarily
affected
because the
value of his
interest
therein would
be impaired,
this fact of
itself is not
sufficient to
give him an
individual
cause of
action since
the
corporation is
a person
distinct and
separate from
him and can
and should
itself sue the
wrongdoer.
authority from the board of directors, no person, not even its officers,
can validly bind a corporation. However, just as a natural person
may authorize another to do certain acts for and on his behalf, the
board of directors may validly delegate some of its functions and
powers to its officers, committees or agents. The authority of these
individuals to bind the corporation is generally derived from law,
corporate bylaws or authorization from the board, either expressly or
impliedly by habit, custom or acquiescence in the general course of
business.
Violeta Tudtud Banate, et al. vs. Phil. Countryside Rural Bank (Liloan,
Cebu), Inc., et al., (G.R. No. 163825, July 13, 2010)
GSIS vs. Court of Appeals, et al., (G.R. Nos. 183905 & 184275, April 16,
2009)
GSIS vs. Court of Appeals, et al., (G.R. Nos. 183905 & 184275, April 16,
2009)
Valle Verde Country Club, Inc., et al. vs. Victor Africa, (G.R. No.
151969, September 4, 2009)
Valle Verde Country Club, Inc., et al. vs. Victor Africa, (G.R. No.
151969, September 4, 2009)
Manuel Luis S. Sanchez vs. Republic of the Phil., (G.R. No. 172885,
October 9, 2009)
H.L. Carlos Construction, Inc. vs. Marina Properties Corp., et al., (G.R.
No. 147614, January 29, 2004)
Andrea Uy, et al. vs. Arlene Villanueva, et al., G.R. No. 157851, June
29, 2007; Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-Industrial Corp.,
(G.R. Nos. 168756 & 171476, December 7, 2009)
Seaoil Petroleum Corp. vs. Autocorp Group, et al., (G.R. No. 164326,
October 17, 2008)
"G" Holdings, Inc. vs. NAMAWU, et al., (G.R. No. 160236, October 16,
2009)
Nestle Philippines, Inc. vs. CA and SEC, (G.R. No. 86738, November
13, 1991)
§ Notice Requirement
Donnina C. Halley vs. Printwell, Inc., (G.R. No. 157549, May 30, 2011)
§ In legal parlance, "ultra vires" act refers to one which is not within
the corporate powers conferred by the Corporation Code or articles
of incorporation or not necessary or incidental in the exercise of the
powers so conferred.
Lopez Realty, Inc. vs. Florentina Fontecha, (G.R. No. 76801, August 11,
1995)
Maria Carla Pirovano vs. The De La Rama Steamship Co., (G.R. No. L-
5377, December 29, 1954)
BY LAWS
§ With the adoption of PD 902-A, it is now clear that the failure to file
by-laws within the required period is only a ground for suspension or
revocation of the certificate of registration of corporations. Non-filing
of the by-laws will not result in automatic dissolution of the
corporation.
§ A voting trust agreement may confer upon a trustee not only the
stockholder's voting rights but also other rights pertaining to his shares
as long as the voting trust agreement is not entered "for the purpose
of circumventing the law against monopolies and illegal
combinations in restraint of trade or used for purposes of fraud." Thus,
the traditional concept of a voting trust agreement primarily
intended to single out a stockholder's right to vote from his other
rights as such and made irrevocable for a limited duration may in
practice become a legal device whereby a transfer of the
stockholders’ shares is effected subject to the specific provision of
the voting trust agreement. The execution of a voting trust
agreement, therefore, may create a dichotomy between the
equitable or beneficial ownership of the corporate shares of a
stockholder, on the one hand, and the legal title thereto on the other
hand.
Ramon C. Lee vs. Court of Appeals, (G.R. No. 93695, February 4, 1992)
STOCK TRANSFERS
Rural Bank of Salinas, Inc. vs. Court of Appeals, (G.R. No. 96674, June
26, 1992); Eric L. Lee vs. Henry J. Trocino, et al., (G.R. No. 164648, June
19, 2009)
REGISTRATION IN BOOKS
RIGHT OF INSPECTION
Rep. of the Phil. (PCGG) vs. Sandiganbayan, et al., (G.R. No. 88809,
July 10, 1991); Victor Africa vs. PCGG, (G.R. No. 83831, January 9,
1992); Ma. Belen Flordeliza C. Ang-Abaya, et al. vs. Eduardo G. Ang,
(G.R. No. 178511, December 4, 2008)
RIGHT OF APPRAISAL
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., (G.R. Nos.
181455-56 & 182008, December 4, 2009)
B. Van Zuiden Bros., Ltd. vs. GTVL Mfg. Industries, Inc., (G.R. No.
147905, May 28, 2007)
Aboitiz Shipping Corp. vs. Insurance Co. of North America, (G.R. No.
168402, August 6, 2008)
Requisites
Sy Tiong Shiou, et al. vs. Sy Chim, et al., (G.R. Nos. 174168 & 179438,
March 30, 2009)
ON CORPORATION LAW
In the case of Forest Hills Golf and Country Club, Inc., vs. Gardpro
(GR no.164686, October 22, 2014), the Supreme Court had
emphasized that the Articles of Incorporation defines the contractual
relationship between the corporation with its stockholders, the
corporation and the state, and the stockholders and the state.
Hence, they are binding not just on the corporation but also on the
stockholders themselves. On the other hand, the by-laws are
considered to be the “private statutes” by which the corporation is
to be governed. In construing and applying the provisions of the
articles of incorporation and the by-laws of the corporation
therefore, the plain meaning or literal meaning rule embodied in
Article 1370 of the Civil Code shall apply.
The implication of the above comment is twofold: (1) the court must
first acquire jurisdiction over the corporation or corporations involved
before its or their separate personalities are disregarded; and (2) 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 vs. J.Amor Reyes [2010])
Neither should the level of paid-up capital of Kukan, Inc. upon its
incorporation be viewed as a badge of fraud, for it is in compliance
with Sec. 13 of the Corporation Code, which only requires a minimum
paid-up capital of PhP 5,000.
In Ching vs. Subic Bay Golf and Country Club, Inc., (GR no.174353,
September 10, 2014), the High Court ruled that a stockholders’ right
to institute a derivative suit is not based on any express provision of
the Corporation Code or even the Securities Regulation Code, but is
impliedly recognized when the said laws make corporate directors or
officers liable for damages suffered by the corporation and its
stockholders for violation of their fiduciary duties.
The following are the elements of a derivative suit, which must all
concur:
This was the issue that the Supreme Court had to confront with in the
case of Aquino vs. Pacific Plans, Inc., (GR no.193108, December 10,
2014) involving the plan holders and other creditors of pre-need
company Pacific Plans.
In this case, the Supreme Court had the opportunity to discuss the
“Cram Down”5 power of the rehabilitation court. This prerogative
given to the Rehabilitation Court maintains that the court may
approve a rehabilitation plan over the objection of the creditors if, in
its judgment, the rehabilitation of the debtors is feasible and the
opposition of creditors is manifestly unreasonable. The High Court
noted that:
5 See section 64 of the Financial Rehabilitation and Insolvency Law (FRIA): Section 64. Creditor
Approval of Rehabilitation Plan. – The rehabilitation receiver shall notify the creditors and
stakeholders that the Plan is ready for their examination. Within twenty (2Q) days from the said
notification, the rehabilitation receiver shall convene the creditors, either as a whole or per class,
for purposes of voting on the approval of the Plan. The Plan shall be deemed rejected unless
approved by all classes of creditors w hose rights are adversely modified or affected by the Plan.
For purposes of this section, the Plan is deemed to have been approved by a class of creditors if
members of the said class holding more than fifty percent (50%) of the total claims of the said
class vote in favor of the Plan. The votes of the creditors shall be based solely on the amount of
their respective claims based on the registry of claims submitted by the rehabilitation receiver
pursuant to Section 44 hereof.
Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm the
Rehabilitation Plan if all of the following circumstances are present:
(a)The Rehabilitation Plan complies with the requirements specified in this Act.
(b) The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan;
(c) The shareholders, owners or partners of the juridical debtor lose at least their controlling
interest as a result of the Rehabilitation Plan; and
(d) The Rehabilitation Plan would likely provide the objecting class of creditors with
compensation which has a net present value greater than that which they would have
received if the debtor were under liquidation.
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Yes. Hospitals may be found liable for the negligent acts committed
by its doctor-consultants, even if there is no employer-employee
relationship between them.
In such actions, the corporation is the real party-in-interest while the suing
stockholder, on behalf of the corporation, is only a nominal party.
The term capital and other terms used to describe the capital
structure of a corporation are of universal acceptance and their
usages have long been established in jurisprudence. Briefly, capital
refers to the value of the property or assets of a
corporation. The capital subscribed is the total amount of the capital
that persons (subscribers or shareholders) have agreed to take and
pay for, which need not necessarily by, and can be more than, the
par value of the shares.
Dividends, regardless of the form these are declared, that is, cash,
property or stocks, are valued at the amount of the declared
dividend taken from the unrestricted retained earnings of a
corporation. Thus, the value of the declaration in the case of a stock
dividend is the actual value of the original issuance of said stocks.
The Supreme Court has also said that in the case of stock dividends,
it is the amount that the corporation transfers from its surplus profit
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(A) Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice
in respect to the transaction attacked so that the corporate entity as
to this transaction had at the time no separate mind, will or existence
of its own
(B) 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
plaintiff’s legal right; and
(C) The aforesaid control and breach of duty must have
proximately caused the injury or unjust loss complained of.
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The first prong is the "instrumentality" or "control" test. This test requires
that the subsidiary be completely under the control and domination
of the parent. It inquires whether a subsidiary corporation is so
organized and controlled and its affairs are so conducted as to
make it a mere instrumentality or agent of the parent corporation
such that its separate existence as a distinct corporate entity will be
ignored. In addition, the control must be shown to have been
exercised at the time the acts complained of took place.
The second prong is the "fraud" test. This test requires that the parent
corporation’s conduct in using the subsidiary corporation be unjust,
fraudulent or wrongful. It examines the relationship of the plaintiff to
the corporation. It recognizes that piercing is appropriate only if the
parent corporation uses the subsidiary in a way that harms the
plaintiff creditor. As such, it requires a showing of "an element of
injustice or fundamental unfairness."
The third prong is the "harm" test. This test requires the plaintiff to show
that the defendant’s control, exerted in a fraudulent, illegal or
otherwise unfair manner toward it, caused the harm suffered. A
causal connection between the fraudulent conduct committed
through the instrumentality of the subsidiary and the injury suffered or
the damage incurred by the plaintiff should be established. The
plaintiff must prove that, unless the corporate veil is pierced, it will
have been treated unjustly by the defendant’s exercise of control
and improper use of the corporate form and, thereby, suffer
damages.
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Yes. A dissolved corporation may still continue to file cases within the
prescribed three-year period under Section 122 of the Corporation
Code.
At any time during said three (3) years, said corporation is authorized
and empowered to convey all of its property to trustees for the
benefit of stockholders, members, creditors, and other persons in
interest. From and after any such conveyance by the corporation of
its property in trust for the benefit of its stockholders, members,
creditors and others in interest, all interest which the corporation had
in the property terminates, the legal interest vests in the trustees, and
the beneficial interest in the stockholders, members, creditors or
other persons in interest.
The mere change in the corporate name is not considered under the
law as the creation of a new corporation; 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 of Zeta to change the corporate name to Zuellig
Freight and Cargo Systems, Inc., did not produce the dissolution of
the former as a corporation. (Zuellig Freight and Cargo Systems.
National Labor Relations Commission, et al., G.R. No. 157900, July 22,
2013)
(e.) If necessary, the SEC shall set a hearing, notifying all corporations
concerned at least two weeks before.
TRANSPORTATION LAW
Laws Covered
1. Civil Code
2. Warsaw Convention
Vector Shipping Corp., et al. vs. Adelfo B. Macasa, et al., G.R. No.
160219, July 21, 2008
Alejandro Arada vs. Court of Appeals, G.R. No. 98243, July 1, 1992
Philippine Air Lines, Inc. vs. Court of Appeals, G.R. No. L-46558, July 31,
1981
Estrellita M. Bascos vs. Court of Appeals, G.R. No. 101089, April 7, 1993
First Phil. Industrial Corp. vs. Court of Appeals, G.R. No. 125948,
December 29, 1998
National Steel Corp. vs. Court of Appeals, G.R. No. 112287 & 112350,
December 12, 1997
Engracio Fabre, Jr. vs. Court of Appeals, G.R. No. 111127, July 26,
1996
Asia Lighterage and Shipping, Inc. vs. Court of Appeals, G.R. No.
147246, August 19, 2003
FGU Insurance Corp. vs. G.P. Sarmiento Trucking Corp., G.R. No.
141910. August 6, 2002
Virgines Calvo vs. UCPB General Insurance Co., G.R. No. 148496.
March 19, 2002
Virgines Calvo vs. UCPB General Insurance Co., G.R. No. 148496.
March 19, 2002
Phil-Am General Insurance Co., Inc. vs. Court of Appeals, G.R. No.
116940, June 11, 1997
American Home Assurance, Co. vs. Court of Appeals, G.R. No. 94149,
May 5, 1992
Heirs of Amparo De Los Santos vs. Court of Appeals, G.R. No. 51165,
June 21, 1990
Philippine Air Lines, Inc. vs. Court of Appeals, G.R. No. L-46558, July 31,
1981
We need only to stress that from the nature of their business and for
reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to
all the circumstances of each case. In the event of loss, destruction
or deterioration of the insured goods, common carriers are
responsible, unless they can prove that the loss, destruction or
deterioration was brought about by the causes specified in Article
1734 of the Civil Code. In all other cases, common carriers are
presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence.
Aboitiz Shipping Corp. vs. New India Assurance Co., Ltd., G.R. No.
156978, August 24, 2007
Victory Liner, Inc. vs. Pablo Race, G.R. No. 164820, December 8, 2008
A common carrier, from the nature of its business and for reasons of
public policy, is bound to observe extraordinary diligence for the
safety of the passengers it transports.
Philippine Airlines, Inc. vs. Court of Appeals, et al., G.R. No. 123238,
September 22, 2008
Art. 1734 - When common carriers are not responsible for loss,
destruction, or deterioration of goods
Iron Bulk Shipping Phil., Co., Ltd. vs. Remington Industrial Sales Corp.,
G.R. No. 136960, December 8, 2003
DSR-Senator Lines vs. Federal Phoenix Assurance Co., Inc., G.R. No.
135377, October 7, 2003
Asia Lighterage and Shipping, Inc. vs. Court of Appeals, G.R. No.
147246, August 19, 2003
Phil. American General Insurance vs. MGG Marine Services, G.R. No.
135645, March 8, 2002
Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July
12, 1994
American Home Assurance, Co. vs. Court of Appeals, G.R. No. 94149,
May 5, 1992
Asian Terminals, Inc. vs. Simon Enterprises, Inc., G.R. No. 177116,
February 27, 2013
The Berth Term Grain Bill of Lading states that the subject shipment
was carried with the qualification "Shipper's weight, quantity and
quality unknown," meaning that it was transported with the carrier
having been oblivious of the weight, quantity, and quality of the
cargo. This interpretation of the quoted qualification is supported by
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The fact that the cargo was shipped with the arrangement "Shipper's
weight, quantity and quality unknown," indeed means that the
weight of the cargo could not be determined using as basis the
figures written on the Berth Term Grain Bill of Lading... Consequently,
the respondent must still prove the actual weight of the subject
shipment at the time it was loaded at the port of origin so that a
conclusion may be made as to whether there was indeed a
shortage for which petitioner must be liable. . . The respondent
having failed to present evidence to prove the actual weight of the
subject shipment when it was loaded onto the M/V "Tern," its cause
of action must then fail because it cannot prove the shortage that it
was alleging. Indeed, if the claimant cannot definitively establish the
weight of the subject shipment at the point of origin, the fact of
shortage or loss cannot be ascertained. The claimant then has no
basis for claiming damages resulting from an alleged shortage.
Asian Terminals, Inc. vs. Simon Enterprises, Inc., G.R. No. 177116,
February 27, 2013 citing Wallem Philippines Shipping, Inc. v. Prudential
Guarantee & Assurance, Inc., 445 Phil. 136, 153 (2003)
Air France vs. Bonifacio H. Gillego, G.R. No. 165266, December 15,
2010
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Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July
12, 1994
Home Insurance Corp. vs. Court of Appeals, G.R. No. 109293, August
18, 1993
Aboitiz Shipping Corp. vs. Insurance Co. of North America, G.R. No.
168402, August 6, 2008
Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 80936,
October 17, 1990
Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from the
time the goods are delivered to the carrier. This responsibility remains
in full force and effect even when they are temporarily unloaded or
stored in transit unless the shipper or owner exercises the right of
stoppage in transit and terminates only after the lapse of a
reasonable time for the acceptance of the goods by the consignee
or such other person entitled to receive them. And, there is delivery
to the carrier when the goods are ready for and have been placed
in the exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by
the carrier, the liability of the common carrier commences eo
instanti.
Benito Macam vs. Court of Appeals, G.R. No. 125524, August 25, 1999
Aniceto G. Saludo, Jr. vs. Court of Appeals, G.R. No. 95536, March 23,
1992
Alejandro Arada vs. Court of Appeals, G.R. No. 98243, July 1, 1992
Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court, G.R. No.
L-69044. May 29, 1987
Iron Bulk Shipping Phil., Co., Ltd. vs. Remington Industrial Sales Corp.,
G.R. No. 136960, December 8, 2003
Samar Mining Co., Inc. vs. Nordeutscher Lloyd, G.R. No. L-28673.
October 23, 1984
Amparo Servando vs. Phil. Steam Navigation Co., G.R. Nos. L-36481-2.
October 23, 1982
It is to be noted that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the rights and obligations of common
carriers are governed by the Code of Commerce and special laws.
Thus, the COGSA supplements the Civil Code by establishing a
provision limiting the carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.
Estrellita M. Bascos vs. Court of Appeals, G.R. No. 101089, April 7, 1993
Phil. Charter Insurance Corp. vs. Neptune Orient Lines, et al., G.R. No.
145044, June 12, 2008
Yao Ka Sin Trading vs. Court of Appeals, G.R. No. 53820, June 15,
1992
Art. 1750 - Contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods, when valid
Phil. Charter Insurance Corp. vs. Neptune Orient Lines, et al., G.R. No.
145044, June 12, 2008
American Home Assurance, Co. vs. Court of Appeals, G.R. No. 94149,
May 5, 1992
Maritime Company of the Phils. vs. Court of Appeals, G.R. No. 47004,
March 8, 1989
Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court, G.R. No.
L-69044. May 29, 1987
Japan Airlines vs. Jesus Simangan, G.R. No. 170141, April 22, 2008
Fortune Express vs. Court of Appeals, G.R. No. 119756, March 18, 1999
Heirs of Amparo De Los Santos vs. Court of Appeals, G.R. No. 51165,
June 21, 1990
Kapalaran Bus Line vs. Angel Coronado, G.R. No. 85331, August 25,
1989
Philippine Air Lines, Inc. vs. Court of Appeals, G.R. No. L-46558, July 31,
1981
Philippine Airlines, Inc. vs. Court of Appeals, et al., G.R. No. 123238,
September 22, 2008
Japan Airlines vs. Jesus Simangan, G.R. No. 170141, April 22, 2008
Heirs of Amparo De Los Santos vs. Court of Appeals, G.R. No. 51165,
June 21, 1990
Philippine Air Lines, Inc. vs. Court of Appeals, G.R. No. L-46558, July 31,
1981
Art. 1759 - When common carriers are liable for negligence or willful
acts of its employees
Baliwag Transit, Inc. vs. Court of Appeals, G.R. No. 116110, May 15,
1996
Fortune Express vs. Court of Appeals, G.R. No. 119756, March 18, 1999
Jose Pilapil vs. Court of Appeals, G.R. No. 52159. December 22, 1989
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Japan Airlines vs. Jesus Simangan, G.R. No. 170141, April 22, 2008
Fortune Express vs. Court of Appeals, G.R. No. 119756, March 18, 1999
Suplicio Lines, Inc. vs. Court of Appeals, G.R. No. 113578, July 14, 1995
Philippine Airlines, Inc. vs. Court of Appeals, G.R. No. 54470, May 8,
1990
Philex Mining Corp. vs. CIR, G.R. No. 148187, April 16, 2008
[Articles 1764 and 2206] set forth the persons entitled to moral
damages. The omission from Article 2206 (3) of the brothers and
sisters of the deceased passenger reveals the legislative intent to
exclude them from the recovery of moral damages for mental
anguish by reason of the death of the deceased. Inclusio unius est
exclusio alterius.
Sulpicio Lines, Inc. vs. Domingo E. Curso, et al., G.R. No. 157009,
March 17, 2010
Philtranco Service Enterprises, Inc. vs. Felix Paras, et al., G.R. No.
161909, April 25, 2012
American Home Assurance, Co. vs. Court of Appeals, G.R. No. 94149,
May 5, 1992
WARSAW CONVENTION
February 9, 1951
CHAPTER I
Scope of Definitions
CHAPTER II
Transportation Documents
SECTION I
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Passenger Ticket
(c) The agreed stopping places, provided that the carrier may
reserve the right to alter the stopping places in case of necessity,
and that if he exercises that right, the alteration shall not have the
effect of depriving the transportation of its international character;
SECTION II
Baggage Check
(2) The baggage check shall be made out in duplicate, one part
for the passenger and the other part for the carrier.
SECTION III
Air Waybill
ARTICLE 5. (1) Every carrier of goods has the right to require the
consignor to make out and hand over to him a document called an
"air waybill"; every consignor has the right to require the carrier to
accept this document.
ARTICLE 6. (1) The air waybill shall be made out by the consignor in
three original parts and be handed over with the goods.
(2) The first part shall be marked "for the carrier” and shall be
signed by the consignor. The second part shall be marked "for the
consignee"; it shall be signed by the consignor and by the carrier and
shall accompany the goods. The third part shall be signed by the
carrier and handed by him to the consignor after the goods have
been accepted.
(5) If, at the request of the consignor, the carrier makes out the air
waybill, he shall be deemed, subject to proof to the contrary, to
have done so on behalf of the consignor.
ARTICLE 10. (1) The consignor shall be responsible for the correctness
of the particulars and statements relating to the goods which he
inserts in the air waybill.
(2) The consignor shall be liable for all damages suffered by the
carrier or any other person by reason of the irregularity, incorrectness
or incompleteness of the said particulars and statements.
ARTICLE 11. (1) The air waybill shall be prima facie evidence of the
conclusion of the contract, of the receipt of the goods and of the
conditions of transportation.
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ARTICLE 12. (1) Subject to his liability to carry out all his obligations
under the contract of transportation, the consignor shall have the
right to dispose of the goods by withdrawing them at the airport of
departure or destination, or by stopping them in the course of the
journey on any landing, or by calling for them to be delivered at the
place of destination, or in the course of the journey to a person other
than the consignee named in the air waybill, or by requiring them to
be returned to the airport of departure. He must not exercise this right
of disposition in such a way as to prejudice the carrier or other
consignors, and he must repay any expenses occasioned by the
exercise of this right.
(3) If the carrier obeys the orders of the consignor for the
disposition of the goods without requiring the production of the part
of the air waybill delivered to the latter, he will be liable, without
prejudice to his right of recovery from the consignor, for any damage
which may be caused thereby to any person who is lawfully in
possession of that part of the air waybill.
ARTICLE 13. (1) Except in the circumstances set out in the preceding
article, the consignee shall be entitled, on arrival of the goods at the
place of destination, to require the carrier to hand over to him the air
waybill and to deliver the goods to him, on payment of the charges
due and on complying with the conditions of transportation set out in
the air waybill.
(3) If the carrier admits the loss of the goods, or if the goods have
not arrived at the expiration of seven days after the date on which
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ARTICLE 15. (1) Articles 12, 13, and 14 shall not affect either the
relations of the consignor and the consignee with each other or the
relations of third parties whose rights are derived either from the
consignor or from the consignee.
(2) The provisions of Article 12, 13, and 14 can only be varied by
express provision in the air waybill.
ARTICLE 16. (1) The consignor must furnish such information and
attach to the air waybill such documents as are necessary to meet
the formalities of customs, octroi, or police before the goods can be
delivered to the consignee. The consignor shall be liable to the
carrier for any damage occasioned by the absence, insufficiency, or
irregularity of any such information or documents, unless the damage
is due to the fault of the carrier or his agents.
CHAPTER III
ARTICLE 17. The carrier shall be liable for damage sustained in the
event of the death or wounding of a passenger or any other bodily
injury suffered by a passenger, if the accident which caused the
damage so sustained took place on board the aircraft or in the
course of any of the operations of embarking or disembarking.
ARTICLE 18. (1) The carrier shall be liable for damage sustained in the
event of the destruction or loss of, or of damage to, any checked
baggage or any goods, if the occurrence which caused the
damage so sustained took place during the transportation by air.
(3) The period of the transportation by air shall not extend to any
transportation by land, by sea, or by river performed outside an
airport. If, however, such transportation takes place in the
performance of a contract for transportation by air, for the purpose
of loading, delivery or transshipment, any damage is presumed,
subject to proof to the contrary, to have been the result of an event
which took place during the transportation by air.
ARTICLE 20. (1) The carrier shall not be liable if he proves that he and
his agents have taken all necessary measures to avoid the damage
or that it was impossible for him or them to take such measures.
ARTICLE 21. If the carrier proves that the damage was caused by or
contributed to by the negligence of the injured person the court
may, in accordance with the provisions of its own law, exonerate the
carrier wholly or partly from his liability.
ARTICLE 24. (1) In the cases covered by Articles 18 and 19 any action
for damages, however founded, can only be brought subject to the
conditions and limits set out in this convention.
ARTICLE 25. (1) The carrier shall not be entitled to avail himself of the
provisions of this convention which exclude or limit his liability, if the
damage is caused by his wilful misconduct or by such default on his
part as, in accordance with the law of the court to which the case is
submitted, is considered to be equivalent to wilful misconduct.
(2) Similarly, the carrier shall not be entitled to avail himself of the
said provisions, if the damage is caused under the same
circumstances by any agent of the carrier acting within the scope of
his employment.
(4) Failing complaint within the times aforesaid, no action shall lie
against the carrier, save in the case of fraud on his part.
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ARTICLE 27. In the case of the death of the person liable, an action
for damages lies in accordance with the terms of this convention
against those legally representing his estate.
CHAPTER IV
(2) Nothing in this convention shall prevent the parties in the case
of combined transportation from inserting in the document of air
transportation conditions relating to other modes of transportation,
provided that the provisions of this convention are observed as
regards the transportation by air.
CHAPTER V
ARTICLE 32. Any clause contained in the contract and all special
agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied, or by altering the rules as
to jurisdiction, shall be null and void. Nevertheless, for the
transportation of goods arbitration clauses shall be allowed, subject
to this convention, if the arbitration is to take place within one of the
jurisdictions referred to in the first paragraph of article 28.
ARTICLE 38. (1) This convention shall, after it has come into force,
remain open for adherence by any state.
(3) The adherence shall take effect as from the ninetieth day after
the notification made to the Government of the Republic of Poland.
ARTICLE 39. (1) Any one of the High Contracting Parties may
denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once inform
the Government of each of the High Contracting Parties.
(2) Denunciation shall take effect six months after the notification
of denunciation and shall operate only as regards the party which
shall have proceeded to denunciation.
ARTICLE 40. (1) Any High Contracting Party may, at the time of
signature or of deposit of ratification or of adherence, declare that
the acceptance which it gives to this convention does not apply to
all or any of its colonies, protectorates, territories under mandate, or
any other territory subject to its sovereignty or its authority, or any
other territory under its suzerainty.
ARTICLE 41. Any High Contracting Party shall be entitled not earlier
than two years after the coming into force of this convention to call
for the assembling of a new international conference in order to
consider any improvements which may be made in this convention.
To this end it will communicate with the Government of the French
Republic which will take the necessary measures to make
preparations for such conference.
A claim for the alleged lost items from the baggage of petitioners
cannot prosper because they failed to give timely notice of the loss
to respondent. The Conditions printed on the airline ticket plainly
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Although the Warsaw Convention has the force and effect of law in
this country, being a treaty commitment assumed by the Philippine
government, said convention does not operate as an exclusive
enumeration of the instances for declaring a carrier liable for breach
of contract of carriage or as an absolute limit of the extent of that
liability. The Warsaw Convention declares the carrier liable in the
enumerated cases and under certain limitations. However, it must
not be construed to preclude the operation of the Civil Code and
pertinent laws. It does not regulate, much less exempt, the carrier
from liability for damages for violating the rights of its passengers
under the contract of carriage, especially if willful misconduct on the
part of the carrier's employees is found or established. (Cathay
Pacific Airways, Ltd. vs. Court of Appeals, et al., G.R. No. 60501,
March 5, 1993)
xxx
Under Article 28 (1) of the Warsaw Convention, the plaintiff may bring
the action for damages before —
1. the court where the carrier is domiciled;
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2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the
contract has been made; or
4. the court of the place of destination.
In this case, it is not disputed that respondent is a British corporation
domiciled in London, United Kingdom with London as its principal
place of business. Hence, under the first and second jurisdictional
rules, the petitioner may bring her case before the courts of London
in the United Kingdom. In the passenger ticket and baggage check
presented by both the petitioner and respondent, it appears that the
ticket was issued in Rome, Italy. Consequently, under the third
jurisdictional rule, the petitioner has the option to bring her case
before the courts of Rome in Italy. Finally, both the petitioner and
respondent aver that the place of destination is Rome, Italy, which is
properly designated given the routing presented in the said
passenger ticket and baggage check. Accordingly, petitioner may
bring her action before the courts of Rome, Italy. We thus find that
the RTC of Makati correctly ruled that it does not have jurisdiction
over the case filed by the petitioner.
Petitioners filed with the trial court a complaint for damages. The trial
court dismissed the case for lack of jurisdiction in light of Article 28(1)
of the Warsaw Convention. The trial court held that the Warsaw
Convention is applicable in case at bar, since the Philippines and the
United States are parties to the convention, the contracts of
transportation come within the meaning of "International
Transportation." The trial court also held that the Philippines, not being
one of the places specified in Art. 28 (1) of the Warsaw Convention
where the complaint may be instituted then it has no jurisdiction over
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THIRD DIVISION
[G.R. No. 149547. July 4, 2008.]
PHILIPPINE AIRLINES, INC., petitioner, vs. HON. ADRIANO SAVILLO,
Presiding Judge of RTC Branch 30, Iloilo City, and SIMPLICIO GRIÑO,
respondents.
NOTES
Thus, the High Court reiterated in the same case that, “When the
goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that
diligence, and there not be an express finding of negligence to hold
it liable. To overcome the presumption of negligence, the common
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This was one of the issues that the Supreme Court had to address in
the case of Loadstar Shipping Company vs. Malayan Insurance Inc.,
(GR no.185565, November 26, 2014). In this case, the High Court
stated that, “If goods are rendered useless for sale, consumption, or
for the intended purpose, the consignee may reject the goods and
demand payment of such goods at their market price on that day
pursuant to Article 365 of the Code of Commerce of the Philippines.
In case the damaged portion of the goods can be segregated from
those delivered in good condition, the consignee may reject those in
damaged condition and accept merely those which are in good
condition. But if the consignee is able to prove that it is impossible to
use those goods which were delivered in good condition without the
others, then the entire shipment may be rejected.”
In Asian Terminals Inc, vs. First Lepanto Taisho Insurance Corp. (GR
no.185964, June 16, 2014), the Supreme Court emphasized that, “The
relationship between the consignee and arrastre operator is akin to
that existing between the consignee and/or the owner of the
shipped goods and the common carrier, or that between a
depositor and a warehouseman. Hence, in the performance of its
obligations, an arrastre operator should observe the same degree of
diligence as that required of a common carrier and a
warehouseman. Being the custodian of goods discharged from a
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1. Repairs and provisioning of the vessel before the loss of the vessel;
(Art. 586)
5. Private carrier; or
xxx
1. Court Supervised
COMMENCEMENT ORDER
This follows the rule in MWSS vs. Daway [GR No. 160732, 21 June 2004]
which held that a letter of credit is excluded from the jurisdiction of
the rehabilitation court.
Waiver of Taxes
Validity of Contracts
“In case the court appoints the rehabilitation receiver to assume the
powers of management of the debtor, the court may:
Administration Proceedings
• Within forty (40) days from the Initial Hearing, the Rehabilitation
Receiver is required to submit his written Report to the court, which
will include a determination of (a) whether or not there is substantial
likelihood for the debtor to be successfully rehabilitated or in the
alternative (b) whether the debtor should be dissolved or liquidated.
After submission of report, the Court shall act on the petition by: (i)
giving due course to the petition, (ii) dismissing the petition or (iii)
converting the proceedings into one for liquidation.
• In the event the court gives due course to the petition, the
court will require the Rehabilitation Receiver to review the
Rehabilitation Plan, taking into consideration the views of the debtor
and all creditor classes. While the consultation is a necessary
procedure, the Receiver is not bound by the objections of the
parties.
“(d) The Rehabilitation Plan would likely provide the objecting class
of creditors with compensation which has a net present value
greater than that which they would have received if the debtor were
under liquidation.”
• This was the issue that the Supreme Court had to confront with
in the case of Aquino vs. Pacific Plans, Inc., (GR no.193108,
December 10, 2014) involving the plan holders and other creditors of
pre-need company Pacific Plans. The Supreme Court ruled that:
“While the voice and participation of the creditors is crucial in the
determination of the viability of the rehabilitation plan, as they stand
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“(b) The majority of any class of the creditors do not in fact support
the Rehabilitation Plan;
• If, after due hearing, the courts find merit to the objection, it
will order the debtor to cure the defect.
2. Scope
Under Sec. 3(j) of the Data Privacy Act, “[p]rocessing refers to any
operation or any set of operations performed upon personal
information including, but not limited to, the collection, recording,
organization, storage, updating or modification, retrieval,
consultation, use, consolidation, blocking, erasure or destruction of
data.”
4. Exceptions
The Data Privacy Act explicitly states that its provisions are not
applicable in the following cases:
Under Chapter IV of the Act, there are eight (8) rights that belong to
data subjects, namely: the right to be informed; the right to access;
the right to object; the right to erasure and blocking; the right to
rectify; the right to file a complaint; the right to damages; and the
right to data portability.
First, the right to be informed means that the data subject has the
right to know when his or her personal data shall be, are being, or
have been processed. Collection and processing of data without
the data subject’s knowledge and explicit consent is made unlawful,
and entities in possession of personal data is obligated to inform the
data subject of any breaches or compromises in their data.
Second, the right to access involves being able to compel any entity
possessing any personal data to provide the data subject with a
description of such data in its possession, as well as the purposes for
which they are to be or are being processed. Furthermore, other
details regarding the processing of their information may be
obtained, such as the period for which the information will be stored,
and the recipients to whom the information may be disclosed. This
must be complied with in an easy-to-access format, accompanied
by a description in plain language.
Thirdly, the right to object requires that the consent of the data
subject be secured in the collecting and processing of his or her
data. It grants the data subject the choice of refusing to consent, as
well as the choice to withdraw consent, as regards collection and
processing. As earlier stated, any activity involving a data subject’s
personal data without his or her consent is deemed illegal.
Corollarily, the right to rectify, allows the data subject to dispute any
inaccuracy or error in the personal information processed, and to
have the personal information controller correct it immediately. In
line with this, the personal information controller must ensure that the
new and the retracted information will be accessible, and that third
parties who received the erroneous data will be informed, upon the
request of the data subject.
In line with the control given to the data subject, the right to data
portability enables the data subject to obtain and electronically
move, copy, or transfer personal data for further use. This also carries
out another policy behind the law–ensuring the free flow of personal
information.
The last two rights are related to the enforcement of the above-
discussed rights. First, the right to file a complaint with the National
Privacy Commission affords a remedy to any data subject who
“[feels] that [his or her] personal information has been misused,
maliciously disclosed, or improperly disposed,” or in case of any
violation of his or her data privacy rights. Secondly, the right to
damages entitles the aggrieved data subject to be indemnified for
any damages sustained due to inaccurate, incomplete, outdated,
false, unlawfully obtained or unauthorized use of his or her personal
information.
As can be gleaned from these rights, the Data Privacy Act of 2012 is
comprehensive in its protection to the data subject. This is even
strengthened by the fact that these rights can also be invoked by
the data subject’s lawful heirs and assigns in the event of his or her
incapacity and even after his or her death.
FACTS:
Also, Escudero’s students claimed that there were times when access
to or the availability of the identified students’ photos was not
confined to the girls’ Facebook friends, but were, in fact, viewable
by any Facebook user.
ISSUE:
HELD:
Note that the writ will not issue on the basis merely of an alleged
unauthorized access to information about a person.
1. Public – the default setting; every Facebook user can view the
photo;
2. Friends of Friends – only the user’s Facebook friends and their
friends can view the photo;
3. Friends – only the user’s Facebook friends can view the photo;
4. Custom – the photo is made visible only to particular friends
and/or networks of the Facebook user; and
5. Only Me – the digital image can be viewed only by the user.
LONE ISSUE:
The Supreme Court held that STC did not violate petitioners’
daughters’ right to privacy as the subject digital photos were
viewable either by the minors’ Facebook friends, or by the public at
large.
however, neither the minors nor their parents imputed any violation
of privacy against the students who showed the images to Escudero.
Had it been proved that the access to the pictures posted were
limited to the original uploader, through the “Me Only” privacy
setting, or that the user’s contact list has been screened to limit
access to a select few, through the “Custom” setting, the result may
have been different, for in such instances, the intention to limit
access to the particular post, instead of being broadcasted to the
public at large or all the user’s friends en masse, becomes more
manifest and palpable.
(c.) Paragraph (a) applies whether the requirement therein is in the form
of an obligation or whether the law simply provides consequences
for the document not being presented or retained in its original from.
(b) The electronic signature was affixed by that person with the
intention of signing or approving the electronic document unless the
person relying on the electronically signed electronic document
knows or has noticed of defects in or unreliability of the signature or
reliance on the electronic signature is not reasonable unde
r the circumstances.
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(b) On the ground that it is not in the standard written form, and the
electronic data message or electronic document meeting, and
complying with the requirements under Sections 6 or 7 hereof shall
be the best evidence of the agreement and transaction contained
therein.