JURISTS BAR REVIEW CENTER™

POINTERS IN COMMERCIAL LAW

Atty. Maria Zarah R. Villanueva-Castro

PRIVATE CORPORATIONS

The fact that Kukan, Inc. entered into a PhP 3.3 million contract when it only had a paid-up capital of PhP
5,000 is not an indication of the intent on the part of its management to defraud creditors. Paid-up capital
is merely seed money to start a corporation or a business entity. As in this case, it merely represented the
capitalization upon incorporation in 1997 of Kukan, Inc. Paid-up capitalization of PhP 5,000 is not and
should not be taken as a reflection of the firm’s capacity to meet its recurrent and long-term obligations. It
must be borne in mind that the equity portion cannot be equated to the viability of a business concern, for
the best test is the working capital which consists of the liquid assets of a given business relating to the
nature of the business concern. Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729
September 29, 2010

Mere ownership by a single stockholder or by another corporation of a substantial block of shares of a

corporation does not, standing alone, provide sufficient justification for disregarding the separate
corporate personality. For this ground to hold sway in this case, there must be proof that Chan had control
or complete dominion of Kukan and KIC’s finances, policies, and business practices; he used such control to
commit fraud; and the control was the proximate cause of the financial loss complained of by Morales. The
absence of any of the elements prevents the piercing of the corporate veil. And indeed, the records do not
show the presence of these elements. Kukan International Corporation vs. Reyes, 631 SCRA 596, G.R. No.
182729 September 29, 2010

Where the motion to pierce the veil of corporate fiction states a new cause of action, i.e., for the liability of
defendant corporation to be borne by another entity on the alleged identity of the two corporations, such
new cause of action should be properly ventilated in another complaint and subsequent trial where the
doctrine of piercing the corporate veil can, if appropriate, be applied, based on the evidence adduced—the
matter could hardly be the subject, under the premises, of a mere motion interposed after the principal
action against the defendant corporation alone had peremptorily been terminated. Kukan International
Corporation vs. Reyes, 631 SCRA 596, G.R. No. 182729 September 29, 2010

NEGOTIABLE INSTRUMENTS

A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date
and under the conditions agreed upon by the borrower and the lender. A person who signs such an
instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he
affixes thereto as a token of his good faith. If he reneges on his promise without cause, he forfeits the
sympathy and assistance of this Court and deserves instead its sharp repudiation. Sinamban vs. China
Banking Corporation, 752 SCRA 621, G.R. No. 193890 March 11, 2015

A negotiable promissory note within the meaning of this Act is an unconditional promise in writing made by
one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable
future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker’s own order,
it is not complete until indorsed by him. The Promissory Note in this case is made out to specific persons,
herein respondents, the Spouses Chua, and not to order or to bearer, or to the order of the Spouses Chua
as payees. Rivera vs. Chua, 746 SCRA 1, G.R. No. 184472 January 14, 2015

A demand draft is a bill of exchange payable on demand (Arnd vs. Aylesworth, 145 Iowa 185; Ward vs. City
Trust Company, 102 N.Y.S. 50; Bank of Republic vs. Republic State Bank, 42 S.W. 2nd 27). Considered as a
bill of exchange, a draft is said to be, like the former, an open letter of request from, and an order by, one
person on another to pay a sum of money therein mentioned to a third person, on demand or at a future
time therein specified (13 Words and Phrases, 371). As a matter of fact, the term “draft” is often used, and

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
Page 1 of 7
is the common term, for all bills of exchange. And the words “draft” and “bill of exchange” are used
indiscriminately (Ennis vs. Coshoctan Nat. Bank, 108 S.E. 881; Hinnemann vs. Rosenback, 39 N. Y. 98, 100,
101; Wilson vs. Buchenau, 43 Supp. 272, 275). Republic vs. First National City Bank of New York, 3 SCRA
851, No. L-16106 December 30, 1961

With regard to drafts or bills of exchange there is need that they be presented either for acceptance or for
payment within a reasonable time after their issuance or after last negotiation thereof as the case may be
(Section 71, Act 2031). Failure to make such presentment will discharge the drawer from liability or to ‘the
extent of the loss caused by the delay (Section 186, Act 2031). Republic vs. First National City Bank of New
York, 3 SCRA 851, No. L-16106 December 30, 1961

The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done
for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the
title thereto as of the date of delivery. (Underscoring supplied.) Note however that delivery as the term is
used in the aforementioned provision means that the party delivering did so for the purpose of giving effect
thereto. Otherwise, it cannot be said that there has been delivery of the negotiable instrument. Once there
is delivery, the person to whom the instrument is delivered gets the title to the instrument completely and
irrevocably. San Miguel Corporation vs. Puzon, Jr., 631 SCRA 48, G.R. No. 167567 September 22, 2010

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 honor behind its issuance. By its peculiar character and general use in commerce, a
manager’s check or a cashier’s check is regarded substantially to be as good as the money it represents.
Metropolitan Bank and Trust Company vs. Chiok, 742 SCRA 435, G.R. No. 175394 November 26, 2014

While indeed, it cannot be said that manager’s and cashier’s checks are precleared, clearing should not be
confused with acceptance. Manager’s and cashier’s checks are still the subject of clearing to ensure that the
same have not been materially altered or otherwise completely counterfeited. However, manager’s and
cashier’s checks are pre-accepted by the mere issuance thereof by the bank, which is both its drawer and
drawee. Thus, while manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against insufficient funds, or for
similar reasons such as a condition not appearing on the face of the check. Long-standing and accepted
banking practices do not countenance the countermanding of manager’s and cashier’s checks on the basis
of a mere allegation of failure of the payee to comply with its obligations towards the purchaser. On the
contrary, the accepted banking practice is that such checks are as good as cash. Metropolitan Bank and
Trust Company vs. Chiok, 742 SCRA 435, G.R. No. 175394 November 26, 2014

Among the different types of checks issued by a drawer is the crossed check. The Negotiable Instruments
Law is silent with respect to crossed checks, although the Code of Commerce makes reference to such
instruments. We have taken judicial cognizance of the practice that a check with two parallel lines in the
upper left hand corner means that it could only be deposited and could not be converted into cash. Thus,
the effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the
check for deposit only by the rightful person, i.e., the payee named therein. The change in the mode of
paying the obligation was not a change in any of the objects or principal condition of the contract for
novation to take place. Salazar vs. J.Y. Brothers Marketing Corporation, 634 SCRA 95, G.R. No. 171998
October 20, 2010

Another telling indicator of PCIB’s negligence is the fact that it allowed Balmaceda to encash the Manager’s
checks that were plainly crossed checks. A crossed check is one where two parallel lines are drawn across
its face or across its corner. Based on jurisprudence, the crossing of a check has the following effects: (a)
the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only
once—to the one who has an account with the bank; and (c) the act of crossing the check serves as a
warning to the holder that the check has been issued for a definite purpose and he must inquire if he
received the check pursuant to this purpose; otherwise, he is not a holder in due course. In other words,
the crossing of a check is a warning that the check should be deposited only in the account of the payee.
When a check is crossed, it is the duty of the collecting bank to ascertain that the check is only deposited to
the payee’s account. In complete disregard of this duty, PCIB’s systems allowed Balmaceda to encash 26

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
Page 2 of 7
Manager’s checks which were all crossed checks, or checks payable to the “payee’s account only.”
Philippine Commercial International Bank vs. Balmaceda, 658 SCRA 33, G.R. No. 158143 September 21,
2011

An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank (drawee), requesting
the latter to pay a person named therein (payee) or to the order of the payee or to the bearer, a named
sum of money. The issuance of the check does not of itself operate as an assignment of any part of the
funds in the bank to the credit of the drawer. Here, the bank becomes liable only after it accepts or certifies
the check. After the check is accepted for payment, the bank would then debit the amount to be paid to the
holder of the check from the account of the depositor-drawer. Rizal Commercial Banking Corporation vs.
Hi-Tri Development Corporation, 672 SCRA 514, G.R. No. 192413 June 13, 2012

There are checks of a special type called manager’s or cashier’s checks. These are bills of exchange drawn
by the bank’s manager or cashier, in the name of the bank, against the bank itself. Typically, a manager’s or
a cashier’s check is procured from the bank by allocating a particular amount of funds to be debited from
the depositor’s account or by directly paying or depositing to the bank the value of the check to be drawn.
Rizal Commercial Banking Corporation vs. Hi-Tri Development Corporation, 672 SCRA 514, G.R. No.
192413 June 13, 2012

The 17 original checks, completed and delivered to petitioner, are sufficient by themselves to prove the
existence of the loan obligation of the respondents to petitioner. Note that respondent Caroline had not
denied the genuineness of these checks. Instead, respondents argue that they were given to various other
persons and petitioner had simply collected all these 17 checks from them in order to damage respondents’
reputation. This account is not only incredible; it runs counter to human experience, as enshrined in Sec. 16
of the NIL which provides that when an instrument is no longer in the possession of the person who signed
it and it is complete in its terms “a valid and intentional delivery by him is presumed until the contrary is
proved.” Pua vs. Lo Bun Tiong, 708 SCRA 571, G.R. No. 198660 October 23, 2013

Jurisprudence has pronounced that the crossing of a check means that the check may not be encashed but
only deposited in the bank. As Treasurer, respondent knew or is at least expected to be aware of and abide
by this basic banking practice and commercial custom. Clearly, the issuance of a crossed check reflects
management’s intention to safeguard the funds covered thereby, its special instruction to have the same
deposited to another account and its restriction on its encashment. Wesleyan University-Philippines vs.
Reyes, 731 SCRA 516, G.R. No. 208321 July 30, 2014

Section 63 of Act No. 2031 or the Negotiable Instruments Law provides that the acceptor, by accepting the
instrument, engages that he will pay it according to the tenor of his acceptance. The acceptor is a drawee
who accepts the bill. In Philippine National Bank v. Court of Appeals, 28 SCRA 984 (1968), the payment of
the amount of a check implies not only acceptance but also compliance with the drawee’s obligation. Areza
vs. Express Savings Bank, Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014

The second view is that the acceptor/drawee despite the tenor of his acceptance is liable only to the extent
of the bill prior to alteration. This view appears to be in consonance with Section 124 of the Negotiable
Instruments Law which states that a material alteration avoids an instrument except as against an assenting
party and subsequent indorsers, but a holder in due course may enforce payment according to its original
tenor. Thus, when the drawee bank pays a materially altered check, it violates the terms of the check, as
well as its duty to charge its client’s account only for bona fide disbursements he had made. If the drawee
did not pay according to the original tenor of the instrument, as directed by the drawer, then it has no right
to claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made
from the drawer’s account which it was expected to treat with utmost fidelity. The drawee, however, still
has recourse to recover its loss. It may pass the liability back to the collecting bank which is what the
drawee bank exactly did in this case. It debited the account of Equitable-PCI Bank for the altered amount of
the checks. Areza vs. Express Savings Bank, Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014

A depositary/collecting bank where a check is deposited, and which endorses the check upon presentment
with the drawee bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser
warrants “that the instrument is genuine and in all respects what it purports to be; that he has good title to
it; that all prior parties had capacity to contract; and that the instrument is at the time of his endorsement

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
Page 3 of 7
valid and subsisting.” It has been repeatedly held that in check transactions, the depositary/collecting bank
or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting the check for payment to the drawee is an assertion
that the party making the presentment has done its duty to ascertain the genuineness of the
endorsements. If any of the warranties made by the depositary/collecting bank turns out to be false, then
the drawee bank may recover from it up to the amount of the check. Areza vs. Express Savings Bank, Inc.,
734 SCRA 588, G.R. No. 176697 September 10, 2014

The law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the
purpose of determining their genuineness and regularity. The collecting bank being primarily engaged in
banking holds itself out to the public as the expert and the law holds it to a high standard of conduct. Areza
vs. Express Savings Bank, Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014

A depositary/collecting bank may resist or defend against a claim for breach of warranty if the drawer, the
payee, or either the drawee bank or depositary bank was negligent and such negligence substantially
contributed to the loss from alteration. In the instant case, no negligence can be attributed to petitioners.
We lend credence to their claim that at the time of the sales transaction, the Bank’s branch manager was
present and even offered the Bank’s services for the processing and eventual crediting of the checks. True
to the branch manager’s words, the checks were cleared three days later when deposited by petitioners
and the entire amount of the checks was credited to their savings account. Areza vs. Express Savings Bank,
Inc., 734 SCRA 588, G.R. No. 176697 September 10, 2014

Where the holder of an instrument payable to his order transfers it for value without indorsing it, the
transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in
addition, the right to have the indorsement of the transferor. But for the purpose of determining whether
the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is
actually made. It bears stressing that the above transaction is an equitable assignment and the transferee
acquires the instrument subject to defenses and equities available among prior parties. Thus, if the
transferor had legal title, the transferee acquires such title and, in addition, the right to have the
indorsement of the transferor and also the right, as holder of the legal title, to maintain legal action against
the maker or acceptor or other party liable to the transferor. The underlying premise of this provision,
however, is that a valid transfer of ownership of the negotiable instrument in question has taken place.
Transferees in this situation do not enjoy the presumption of ownership in favor of holders since they are
neither payees nor indorsees of such instruments. The weight of authority is that the mere possession of a
negotiable instrument does not in itself conclusively establish either the right of the possessor to receive
payment, or of the right of one who has made payment to be discharged from liability. Thus, something
more than mere possession by persons who are not payees or indorsers of the instrument is necessary to
authorize payment to them in the absence of any other facts from which the authority to receive payment
may be inferred. Bank of the Philippine Islands vs. Court of Appeals, 512 SCRA 620, G.R. No. 136202
January 25, 2007

If instruments payable to named payees or to their order have not been indorsed in blank, only such payees
or their indorsees can be holders and entitled to receive payment in their own right. Bank of the Philippine
Islands vs. Court of Appeals, 512 SCRA 620, G.R. No. 136202 January 25, 2007

A bank generally has a right of set-off over the deposits therein for the payment of any withdrawals on the
part of a depositor—the right of a collecting bank to debit a client’s account for the value of a dishonored
check that has previously been credited has fairly been established by jurisprudence Bank of the Philippine
Islands vs. Court of Appeals, 512 SCRA 620, G.R. No. 136202 January 25, 2007

INTELLECTUAL PROPERTY

From a cursory appreciation of the petitioner’s corporate name “CONVERSE RUBBER CORPORATION," it is
evident that the word “CONVERSE" is the dominant word which identifies petitioner from where
corporations engaged in similar business. The respondents. having known that the word “CONVERSE"
belongs to and is being used by petitioner, has no right to appropriate the same for use on its products

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
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which are similar to those being produced by petitioner. A corporation is entitled to the cancellation of a
mark that is confusingly similar to its corporate name. Appropriation by another of the dominant part of a
corporate name is an infringement. Converse Rubber Corporation vs. Universal Rubber Products, Inc., 147
SCRA 154, No. L-27906 January 8, 1987

The testimony of petitioner’s witness, who is a legitimate trader as well as the invoices evidencing sales of
petitioner’s products in the Philippines, give credence to petitioner’s claim that it has earned a business
reputation and goodwill in the country. Thus, contrary to the dissemination of the Director of Patents, the
word “CONVERSE" has grown to be identified with petitioner’s products and has acquired a second
meaning within the context of trademark and tradename laws. Converse Rubber Corporation vs. Universal
Rubber Products, Inc., 147 SCRA 154, No. L-27906 January 8, 1987

The sales invoices provide the best proof that there were actual sales of petitioner’s products in the country
and that there was actual use for a protracted period of petitioner’s trademark or part thereof through
these sales. Converse Rubber Corporation vs. Universal Rubber Products, Inc., 147 SCRA 154, No. L-27906
January 8, 1987

The sales of 12 to 20 pairs a month of petitioner’s rubber shoes cannot be considered insignificant,
considering that they appear to be of very expensive quality, which not too many basketball players can
afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing
trademark rights since such sales are made in due course of business to the general public. Converse
Rubber Corporation vs. Universal Rubber Products, Inc., 147 SCRA 154, No. L-27906 January 8, 1987

It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in
the country and is not actually doing business here, it does not mean that its goods are not being sold here
or that it has not earned a reputation or goodwill as regards its products. Converse Rubber Corporation vs.
Universal Rubber Products, Inc., 147 SCRA 154, No. L-27906 January 8, 1987

The determinative factor in ascertaining whether or not marks are confusingly similar to each other “is not
whether the challenged mark would actually cause confusion or deception of the purchasers but whether
use of such mark would likely cause confusion or mistake on the part of the buying public. “The risk of
damage is not limited to a possible confusion of goods but also includes confusion of reputation if the
public could reasonably assume that the goods of the parties originated from the same source.'' Converse
Rubber Corporation vs. Universal Rubber Products, Inc., 147 SCRA 154, No. L-27906 January 8, 1987

An unlicensed, unregistered foreign corporation which has never done any business in the Philippines, but
is widely and favorably known in the Philippines through the use of its products bearing its corporate and
tradename, has a legal right to maintain an action in the Philippines to restrain the organization of a
corporation whose sole purpose is to deal and trade in the same goods as those of the f oreign corporation.
Converse Rubber Corporation vs. Universal Rubber Products, Inc., 147 SCRA 154, No. L-27906 January 8,
1987

BANKING

It is well-settled that the relationship of the depositors and the Bank or similar institution is that of creditor-
debtor. Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in
banks and similar institutions shall be governed by the provisions concerning simple loans. The bank is the
debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay
the depositor on demand. The savings deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties. Areza vs. Express Savings Bank, Inc., 734
SCRA 588, G.R. No. 176697 September 10, 2014

The diligence required of banks, therefore, is more than that of a good father of a family. In every case, the
depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only
of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to
the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
Page 5 of 7
time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it
as and to whomever he directs. Equitable PCI Bank vs. Tan, 628 SCRA 520, G.R. No. 165339 August 23,
2010

The business of banking is impressed with public interest and great reliance is made on the bank’s sworn
profession of diligence and meticulousness in giving irreproachable service. Like a common carrier whose
business is imbued with public interest, a bank should exercise extraordinary diligence to negate its liability
to the depositors. In this instance, PCIB is sorely remiss in the diligence required in treating with its client,
Gonzales. It may not wantonly exercise its rights without respecting and honoring the rights of its clients.
(Gonzales vs. Philippine Commercial and International Bank, 644 SCRA 180, G.R. No. 180257 February 23,
2011). The law imposes on banks a high degree of obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of banking. Had Gonzales been properly
notified of the delinquencies of the PhP 1,800,000 loan and the process of terminating his credit line under
the COHLA, he could have acted accordingly and the dishonor of the check would have been avoided. (Ibid)

Considering that banks can only act through their officers and employees, the fiduciary obligation laid down
for these institutions necessarily extends to their employees. Thus, banks must ensure that their employees
observe the same high level of integrity and performance for it is only through this that banks may meet
and comply with their own fiduciary duty. It has been repeatedly held that “a bank’s liability as an obligor is
not merely vicarious, but primary” since they are expected to observe an equally high degree of diligence,
not only in the selection, but also in the supervision of its employees. Thus, even if it is their employees
who are negligent, the bank’s responsibility to its client remains paramount making its liability to the same
to be a direct one. Westmont Bank vs. Dela Rosa-Ramos, 684 SCRA 429, G.R. No. 160260 October 24,
2012

A bank does not have a unilateral right to freeze the account of a depositor based on its mere suspicion
that the funds therein were proceeds of some shady transactions; For legal compensation to take place,
two persons, in their own right, must first be creditors and debtors of each other. Philippine Commercial
International Bank vs. Balmaceda, 658 SCRA 33, G.R. No. 158143 September 21, 2011

Under the Negotiable Instruments Law, it is presumed that every party to an instrument acquires the same
for a consideration or for value. As petitioner alleged that there was no consideration for the issuance of
the subject checks, it devolved upon him to present convincing evidence to overthrow the presumption and
prove that the checks were in fact issued without valuable consideration. Cayanan vs. North Star
International Travel, Inc., 658 SCRA 644, G.R. No. 172954 October 5, 2011

The payment of the amounts of checks without previously clearing them with the drawee bank especially
so where the drawee bank is a foreign bank and the amounts involved were large is contrary to normal or
ordinary banking practice. Philippine National Bank vs. Cheah Chee Chong, 671 SCRA 49, G.R. No. 170865
April 25, 2012

In case the bank complies with the provisions of the law and the unclaimed balances are eventually
escheated to the Republic, the bank shall not thereafter be liable to any person for the same and any action
which may be brought by any person against any bank for unclaimed balances so deposited shall be
defended by the Solicitor General without cost to such bank. Rizal Commercial Banking Corporation vs. Hi-
Tri Development Corporation, 672 SCRA 514, G.R. No. 192413 June 13, 2012

TRANSPORTATION

The term “freight forwarder” refers to a firm holding itself out to the general public (other than as a
pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the
ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for break-bulk and distribution operations of the
shipments; (2) to assume responsibility for the transportation Unsworth Transport International (Phils.),
Inc. vs. Court of Appeals, 625 SCRA 357, G.R. No. 166250 July 26, 2010

A freight forwarder’s liability is limited to damages arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
Page 6 of 7
of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to
goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport,
even though the forwarder does not carry the merchandise itself. Unsworth Transport International
(Phils.), Inc. vs. Court of Appeals, 625 SCRA 357, G.R. No. 166250 July 26, 2010

A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or on his or her order. It operates both as a receipt and
as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as
therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to
quantity, weight, dimensions, identification marks, condition, quality, and value. As a contract, it names the
contracting parties, which include the consignee; fixes the route, destination, and freight rate or charges;
and stipulates the rights and obligations assumed by the parties. Unsworth Transport International (Phils.),
Inc. vs. Court of Appeals, 625 SCRA 357, G.R. No. 166250 July 26, 2010

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. Unsworth Transport International (Phils.), Inc. vs. Court of Appeals, 625 SCRA
357, G.R. No. 166250 July 26, 2010

2017 Pre-week Pointers in Commercial Law by Atty. Maria Zarah R. Villanueva-Castro. Unauthorized reproduction,
use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative
complaints with the Office of the Bar Confidant, Supreme Court.
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