Commercial Laws: Larry P. Ignacio ©

COMMERCIAL LAWS
pointers & cases

larry p. ignacio ©
INTELLECTUAL PROPERTY
***************************************
Principle of automatic protection:

- Works are protected by the sole fact of their creation, irrespective of their mode or form of
expression, as well as their content, quality and purpose (Sec. 172.2, IPC).
- The copyright of a work is acquired by an intellectual creator from the moment of creation even
in the absence of registration and deposit (Columbia Pictures v. CA, 261 SCRA 144 [1966]).
Fair use (Sec. 185, IPC)/ Fair use doctrine:
- The fair use of a copyrighted work for criticism, comment, news reporting, teaching, including
multiple copies for classroom use, scholarship, research, and similar purposes is not an
infringement of copyright.
- A privilege in others than the owner of a copyright to use the copyrighted material in a
reasonable manner without the owner’s consent, notwithstanding the monopoly granted to the
owner. To determine whether fair use has been made of copyrighted material, the quantity and
value of material used and extent to which the use may diminish the value of the original work
must be considered (Black’s Law Dictionary, 6th ed.).
4-fold test in fair use
1. The purpose and character of the use, including whether such use is of a
commercial nature or is for non-profit educational purposes;
2. The nature of the copyrighted work;
3. The amount and substantiality of the portion used in relation to the copyrighted
work as a whole; and
4. The effect of the use upon the potential market for or value of the copyrighted
work.
The "transformative test" in fair use: is generally used in reviewing the purpose and
character of the usage of the copyrighted work. This court must look into whether the
copy of the work adds "new expression, meaning or message" to transform it into
something else.
Good faith or lack of knowledge is not a valid defense in infringement of copyright

- A copyright is infringed by the mere fact of the repetition of it or a substantial portion of it,
without authority from the author or writer of the copyrighted work. Good faith or lack of
knowledge is not a valid defense.
 Offenses involving infringement of copyright protections should be considered malum
prohibitum. It is the act of infringement, not the intent, which causes the damage. To
require or assume the need to prove intent defeats the purpose of intellectual property
protection. (ABS-CBN v. Gozon, GR No. 195956, 11 March 2015)
A news report expressed in a video footage is entitled to copyright protection.
- News or the event itself is not copyrightable. However, an event can be captured and
presented in a specific medium. News as expressed in a video footage is entitled to copyright
protection. Broadcasting organizations have not only copyright on but also neighboring rights
over their broadcasts. Copyrightability of a work is different from fair use of a work for purposes
of news reporting. (ABS-CBN Co. v. Gozon, G.R. No. 195956, March 11, 2015).
 the "gravamen of copyright infringement"

- It is not merely the unauthorized manufacturing of intellectual works but rather the
unauthorized performance of any of the acts covered by Section 5. Hence, any person who
performs any of the acts under Section 5 without obtaining the copyright owners prior consent
renders himself civilly and criminally liable for copyright infringement.
Section 5 of Presidential Decree No. 49 specifically defined copyright as an exclusive right in the
following manner:
(A) To print, reprint, publish, copy, distribute, multiply, sell, and make photographs, photo-
engravings, and pictorial illustrations of the works;
COMMERCIAL LAWS – pointers & cases (19 September 2019 (l.p. ignacio) 2
(B) To make any translation or other version or extracts or arrangements or adaptations thereof;
to dramatize it if it be a non-dramatic work; to convert it into a non-dramatic work if it be a drama;
to complete or execute if it be a model or design;
(C) To exhibit, perform, represent, produce, or reproduce, the work in any manner or by any
method whatever for profit or otherwise; it not reproduced in copies for sale, to sell any
manuscript or any record whatsoever thereof;
(D) To make any other use or disposition of the work consistent with the laws of the land.
 After a test-buy operation where an NBI agent was able to purchase softwares of Microsoft from
the store of Manansala who is doing business under the name and style Dataman Trading, a
search and seizure was conducted on the store of Manansala where it yielded several illegal
copies of Microsoft programs. Microsoft then filed before the DOJ a complaint-affidavit against
Manansala for copyright infringement, among others.
The charge for copyright infringement was dismissed. The investigating prosecutor resolved that
although Manansala is selling Microsoft computer software programs bearing the copyrights and
trademarks owned by Microsoft Corporation without authority from latter, there is no proof that
Manansala was the one who really printed or copied the products of Microsoft for sale in his
store. The CA upheld the DOJ and ruled that the legislative intent was to require that the
computer programs be first photographed, photo-engraved, or pictorially illustrated as a condition
for the commission of copyright infringement.
 The dismissal is not proper. The mere sale of the illicit copies of the software
programs was enough by itself to show the existence of probable cause for
copyright infringement. There was no need for the petitioner to still prove who
copied, replicated, or reproduced the software programs (Microsoft Corporation vs. Manansala,
773 SCRA 345, G.R. No. 166391 October 21, 2015)
Copyright is distinct from the property and the material object subject to it.
- The copyright is distinct from the property and the material object subject to it. Consequently,
the transfer or assignment of the copyright shall not itself constitute a transfer of the material
object. Nor shall a transfer or assignment of the sole copy or of one or several copies of the
work imply transfer or assignment of the copyright.
Ownership of copyright or inventions in the course of employment

Employee: if copyright/work or inventive activity is NOT part of his regular duties, even if
employee uses time, facilities and materials of employer.
Employer: if copyright or invention results from performance of his regularly-assigned duties,
unless there is an agreement express or implied, to the contrary.
First to file rule

 If two or more persons have jointly made an invention separately and independently of
each other, right shall belong to the applicant who has earliest filing date or earliest
priority date.
- RA 8293 espouses the “first-to-file” rule x x x. Under this provision, the registration of a mark is
prevented with the filing of an earlier application for registration. This must, not, however, be
interpreted to mean that ownership should be based upon an earlier filing date. While RA 8293
removed the previous requirement of proof of actual use prior to the filing of an application for
registration of a mark, proof of prior and continuous use is necessary to establish ownership of a
mark. Such ownership constitutes sufficient evidence to oppose the registration of a mark (E.Y.
Industrial Sales, Inc. v. Shen Dar Electricity and Machinery Co., Ltd., 634 SCRA 363, 20 October 2010).
 Ownership of a trademark is acquired by its registration and its actual use

- The ownership of a trademark is acquired by its registration and its actual use by the
manufacturer or distributor of the goods made available to the purchasing public. Sec. 122 of
RA 8293 provides that the rights in a mark shall be acquired by means of its valid registration
with the IPO. A certificate of registration of a mark, once issued constitutes prima facie evidence
of the validity of the registration, of the registrant’s ownership of the mark, and of the registrant’s
exclusive right to use the same in connection with the goods or services and those that are
related thereto specified in the certificate (Berris Agricultural Co., Inc. v. Abyadang, 633 SCRA 196, 13 October
2010; W LAND HOLDINGS, INC. v. STARWOOD HOTELS & RESORT WORLWIDE, GR No. 222366, 04 December 2017)
 A trade name need not be registered with the IPO before an infringement suit maybe filed
by its owners against the owner of an infringing trade mark. All that is required is
that the trade name be previously used in trade or commerce in the Philippines (Coffee
Partners, Inc. v. San Francisco Coffee & Roastery, Inc., GR No. 169504, 03 March 2010).
• Foreign marks which are not registered are still accorded protection against infringement
and/or unfair competition (Ecole de Cuisine Manille (Cordon Bleu of the Philippines), Inc. v. Renaud Caintreau &
Cie, 697 SCRA 345, 05 June 2013).
 Courts will protect trade names or marks, although not registered or properly selected
as trademarks, on the broad ground of enforcing justice and protecting one in the fruits
of his toil (Ecole de Cuisine Manille (Cordon Bleu of the Philippines), Inc. v. Renaud Caintreau & Cie, 697 SCRA 345,
05 June 2013).
Territoriality principle
- A mark must be used in commerce in the Philippines to be entitled to protection.
 While under the territoriality principle a mark must be used in commerce in the Philippines
to be entitled to protection, internationally well-known marks are the exceptions to this rule
(Fredco Mfg. Corp. v. President and Fellows of Harvard College (Harvard University), 650 SCRA 232, 01 June 2011).
Section 123.1(e) does not require that the well-known mark be used in commerce in the
Philippines but only that it be well-known in the Philippines (ibid.).
Case: Registration of a trademark, by itself, is NOT a mode of acquiring ownership.
Registration merely creates a prima facie presumption of the:
a) validity of the registration,
b) of the registrant's ownership of the trademark,
c) and of the exclusive right to the use thereof.
Birkenstock Orthopaedie GMBH and Co. KG vs. Philippine Shoe Expo Marketing
Corporation, G.R. No. 194307, November 20, 2013, J. Perlas-Bernabe
Birkenstock Orthopaedic, a German corporation, applied for various trademark registration before the
IPO. However, the registration proceedings were suspended in view of the existing registration of the
mark “BIRKENSTOCK AND DEVICE” under Registration No. 56344 by Shoe Town International and
Industrial Corp., Phil. Shoe Expo Marketing Corp’s predecessor-in-interest. During the pendency of the
cancellation of such registration proceedings, Phil Shoe Expo failed to file the required 10 th Year
Declaration of Actual Use (DAU) for Registration No. 56344 on the required date, resulting in the
cancellation of the mark and the case. When Birkenstock’s Co.’s application for such mark was approved,
Phil. Shoe Expo filed separate oppositions claiming that Birkenstock Co. has no right to the registration of
the marks. The BLA sustained the opposition, opining that while Registration No. 56344 was cancelled, it
does not follow that prior right over the mark was lost, as proof of continuous and uninterrupted use in
trade and business in the Philippines as presented. Upon appeal, the IPO Director General reversed the
BLA, holding that the evidence presented by Birkenstock Co. proved that they are the rightful owner of the
marks. The CA reinstated the BLA’s decision upon the same ground.
Will abandonment result in case of failure to file the declaration of actual use (DAU)?
YES. RA No. 166, the governing law for Registration No. 56334, requires the filing of Declaration of Actual
Use (DAU) on specific periods. The law reveals that failure to file the DAU within the requisite period
results in the automatic cancellation of registration of a trademark. In turn, such failure is tantamount to
the abandonment or withdrawal of any right or interest the registrant has over his trademark.
Phil. Shoe Expo failed to file the DAU within the requisite period. Hence, it was deemed to have
abandoned or withdrawn any right or interest over the mark “Birkenstock.” Neither can it invoke Sec. 236
of the IP Code which pertains to intellectual property rights obtained under previous intellectual property
laws, e.g., RA 166, precisely because it already lost any right or interest over the said mark.
Is the registration of a trademark, by itself, a mode of acquiring ownership?
No. It is not the application or registration of a trademark that vests ownership thereof , but it is the
ownership of a trademark that confers the right to register the same. A trademark is an industrial
property over which its owner is entitled to property rights which... cannot be appropriated by
unscrupulous entities that, in one way or another, happen to register such trademark ahead of its true and
lawful owner.
The presumption of ownership accorded to a registrant must then necessarily yield to superior evidence of
actual and real ownership of a trademark.
It must be emphasized that registration of a trademark, by itself, is not a mode of acquiring ownership. If
the applicant is not the owner of the trademark, he has no right to apply for its registration. Registration
merely creates a prima facie presumption of the validity of the registration, of the registrant's ownership of
the trademark, and of the exclusive right to the use thereof. Such presumption, just like the presumptive
regularity in the performance of official functions, is rebuttable and must give way to evidence to the
contrary.
W Land Holdings, Inc. v. Starwood Hotels & Resort Worldwide

GR No. 222366, 04 December 2017, J. Perlas-Bernabe
Does a trade mark owner have to be physically present in the Philippines to show
genuine use of the mark? NO need.
W Land Holding, Inc. (“W Land”) sought to cancel Starwood Hotels and Resorts Worldwide, Inc.’s
(“Starwood”) trademark “W” for non-use of its mark in the Philippines to owing to the absence of an actual
hotel or establishment in the Philippines offering services covered by its registration. Starwood denied
having abandoned its W mark, and alleged that it had already filed a Declaration of Actual Use in 2008
which was accepted by the IPOPHIL. It asserted that it operates an interactive website for its W Hotels
that allows Philippine residents to make reservations and bookings, which amount to an actual use of its
registered “W” trademark in the Philippines.
Is the mere use/display of the mark in the website actual use?
• Mere exhibition of goods or services over the internet, without more, is not enough to constitute
actual use. The “use” contemplated by law is genuine use—that is, a bonafide kind of use tending
towards a commercial transaction in the ordinary course of trade.
• Mere use of the mark on a website which can be accessed anywhere in the world will not
automatically mean that the mark has been used in the ordinary course of trade of a particular
country.
• There must be an actual commercial transaction through the website or at the very least, the
website must show that it intends to target local consumers by containing specific details geared
towards a commercial activity or interaction. These details may constitute a local contact phone
number for local consumers to call for information or other local concerns, a specific local
webpage, whether domestic language and currency is used on the website, and/or whether
domestic payment methods are accepted.
1) There must be bona fide use of the mark, not token use. This may be characterized as use which
results or tends to result, in one way or another, in a commercial interaction or transaction in the ordinary
course of business. The mere exhibiting of goods or services over the internet is not enough to constitute
actual use. It must be shown that the trade mark owner has actually transacted or intentionally targeted
customers of a particular jurisdiction. Showing an actual commercial link to the country is imperative.
2) Starwood proved its use of the mark in the Philippines. It owns Philippine registered domain names,
i.e., www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.wreservation.ph. These websites are
readily accessible to Philippine citizens and residents that they can use to instantaneously book and pay
for their accommodations, with immediate confirmation, in any W hotels. It further presented data of the
growing number of internet users in the Philippines visiting its website since 2003, and thus, taken
together, Starwood showed that use of the mark through its interactive website was intended to produce
and establish commercial interaction with Philippine consumers.
3) Starwood submitted in 2008 its Declaration of Actual Use (DAU), which the IPOPHIL accepted and
recognized as valid. There is no reason to disturb this recognition.
 Apart from its commercial utility, the benchmark of trademark registrability is

distinctiveness.
Great White Shark v. Caralde, Jr.

GR No. 192294, 21 November 2012, J. Perlas-Bernabe
Caralde filed before the Bureau of Legal Affairs (BLA), IPO a trademark application seeking to register the
mark “SHARK & LOGO” for his manufactured goods under Class 25, such as slippers, shoes and
sandals. Great White Shark Enterprises opposed Caralde’s application for trademark registration by
claiming to be the owner of the mark consisting of a representation of a colored shark. When compared,
the only similarity in the competing marks is in the word “shark.” Great White Shark's mark was used in
clothing and footwear, among others, while Caralde's mark is used on similar goods like shoes and
slippers. Great White Shark’s mark consisted of an illustration of a shark while Caralde's mark had a
composite figure forming a silhouette of a shark.
Is Caralde’s mark registrable? Will there be confusion?
YES. NO confusion will arise.

Apart from its commercial utility, the benchmark of trademark registrability is distinctiveness. Thus, a
generic figure, as that of a shark in this case, if employed and designed in a distinctive manner, can be a
registrable trademark device, subject to the provisions of the IP Code. In determining similarity and
likelihood of confusion, case law has developed the Dominancy Test and the Holistic or Totality Test.
NO confusing similarity between the subject marks. While both marks use the shape of a shark, there are
distinct visual and aural differences between them. In Great White Shark's “GREG NORMAN LOGO,”
there is an outline of a shark formed with the use of green, yellow, blue and red lines/strokes. In contrast,
the shark in Caralde's “SHARK & LOGO” mark is illustrated in letters outlined in the form of a shark with
the letter “S” forming the head, the letter “H” forming the fins, the letters “A” and “R” forming the body, and
the letter “K” forming the tail. In addition, the latter mark includes several more elements such as the word
“SHARK” in a different font underneath the shark outline, layers of waves, and a tree on the right side,
and liberally used the color blue with some parts in red, yellow, green and white.
The visual dissimilarities between the two marks are evident and significant, negating the possibility or
confusion in the minds of the ordinary purchaser.
Doctrine of secondary meaning/doctrine of distinctiveness (Sec. 123.2, IPC)

- A long time exclusive and continuous use of a mark or name which is unregistrable for being
geographical, descriptive or a surname, such that the mark or name has lost its primary
meaning and it becomes associated in the public mind with particular goods, entitles the user to
have said mark or name registered.
Properties Realty Corp. (formerly The Shang Grand Tower Corp.) v. St. Francis
Development Corp., 730 SCRA 275, 21 July 2014, J. Perlas-Bernabe
St. Francis Dev’’t. Corp. (SFDC) assailed before the intellectual property office the use by Properties
Realty Corp. (PRC) of the mark "ST. FRANCIS" to identify its numerous property development projects
located at Ortigas Center, such as the St. Francis Square Commercial Center, a shopping mall called the
"St. Francis Square," and a mixed-use realty project plan that includes the St. Francis Towers. SFDC
added that as a result of the continuous use of the mark "ST. FRANCIS" in its real estate business, it has
gained substantial goodwill with the public that consumers and traders closely identify the said mark with
its property development projects. Accordingly, SFDC claimed that PRC could not have the mark "THE
ST. FRANCIS TOWERS" registered in their names, and that the use of the marks "THE ST. FRANCIS
TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" in their own real estate development projects
constitutes unfair competition as well as false or fraudulent declaration.
PRC denied committing unfair competition and false or fraudulent declaration, maintaining that they could
register the mark "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" under
their names. They contended that SFDC is barred from claiming ownership and exclusive use of the mark
"ST. FRANCIS" because the same is geographically descriptive of the goods or services for which it is
intended to be used. This is because SFDC’s as well as PRC’ real estate development projects are
located along the streets bearing the name "St. Francis," particularly, St. Francis Avenue and St. Francis
Street (now known as Bank Drive), both within the vicinity of the Ortigas Center.
The element of fraud is wanting; there can be no unfair competition and SFDC has no right to the
exclusive use of the mark "ST. FRANCIS.“ The use of the marks "THE ST. FRANCIS TOWERS" and
"THE ST. FRANCIS SHANGRI-LA PLACE" was meant only to identify, or at least associate, their real
estate project/s with its geographical location.
The geographically descriptive nature of the mark "ST. FRANCIS" bars its exclusive appropriability, unless
a secondary meaning is acquired. As deftly explained in the U.S. case of Great Southern Bank v. First
Southern Bank:
"[d]escriptive geographical terms are in the ‘public domain’ in the sense that every seller should have the
right to inform customers of the geographical origin of his goods. A ‘geographically descriptive term’ is any
noun or adjective that designates geographical location and would tend to be regarded by buyers as
descriptive of the geographic location of origin of the goods or services. A geographically descriptive term
can indicate any geographic location on earth, such as continents, nations, regions, states, cities, streets
and addresses, areas of cities, rivers, and any other location referred to by a recognized name. In order to
determine whether or not the geographic term in question is descriptively used, the following question is
relevant: (1) Is the mark the name of the place or region from which the goods actually come? If the
answer is yes, then the geographic term is probably used in a descriptive sense, and secondary meaning
is required for protection “
A generic or descriptive of the goods they seek to identify cannot be exclusively appropriated.
- Following Section 123, paragraph (h) of Republic Act (RA) No. 8293 which prohibits exclusive
registration of generic marks, the word “COFFEE” cannot be exclusively appropriated by either
Nestle or Puregold since it is generic or descriptive of the goods they seek to identify (Societe des
Products, Nestle, S.A. v. Puregold Price Club, Inc., 839 SCRA 177, 06 September 2017).
Actual sale of counterfeit goods not essential for trademark infringement

- Under the IPC, preparatory steps necessary to carry out the sale of any goods or services or in
connection with which such use is likely to cause confusion. Or to cause mistake, or to deceive
(Sec. 155.1) and to reproduce, counterfeit, copy or colorably imitate a registered mark or a
dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to
label, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in
commerce (Sec. 155.2) are acts of infringement regardless of whether there is actual sale of
goods or services using the infringing material (Gemma Ong a.k.a. Ma. Theresa Gemma Catacutan v. People, GR
No. 169440, 23 Nov. 2011).
 The likelihood of confusion is the gravamen of the offense of trademark

infringement (Philip Morris v. Fortune, 493 SCRA 437).
Factors to be considered in determining the likelihood of confusion

[a] the resemblance between the trademarks;
[b] the similarity of the goods to which the trademarks are attached;
[c] the likely effect on the purchaser and
[d] the registrant's express or implied consent and other fair and equitable
considerations. (Seri Soomboonsakdikul, G.R. No. 188996. February 1, 2017, Jardeleza, J.)
2 minimum conditions for confusion to arise
1) The prospective mark must nearly resemble or be similar to an earlier mark; and
2) The prospective mark must pertain to goods or services that are either identical,
similar or related to the goods or services represented by the earlier mark.
(Mang Inasal v. IFP Mfg. Corp., GR No. 221717, 19 June 2017 (Velasco, Jr., J.)
 use of trademark in UNRELATED articles of a different kind ALLOWED

• Registration of the trademark “SHELL” or “ESSO” for cigarettes was allowed
although there is a prior registrant for gasoline and petroleum products (Shell v. CA, GR No. L-
49145, 21 May 1979; Esso Standard Eastern, Inc. v. CA, 116 SCRA 336 [19982]).
• “CANNON” for sandals was allowed despite prior registration of the same for paints,
chemical products, toner and dyestuff (Canon Kabushki Kaisha v. CA & NSR Rubber Corp., 336 SCRA 266
[2001]).
• “GALLO” can be used for cigarettes without infringing the rights of the owner of
another mark which also contains the same word for wine (Mighty Corporation v. E & J Gallo, 434
SCRA 473 [2004]).
• “BRUTE” for briefs was allowed although similar to the symbol “BRUT” for after-
shave lotion, shaving cream, deodorant, talcum powder and toilet soap (Faberge, Inc. v. IAC,
215 SCRA 316 [1992]).
Unfair Competition: essential elements

1. Confusing similarity in the general appearance of the goods; and
2. Intent to deceive the public and defraud the creator.
 Registration of mark NOT required
** Actual fraudulent intent need not be shown (Mcdonalds v. LC BigMak, 437 SCRA 10 [2004])
 The element of intent to deceive maybe inferred from the similarity of the goods or
their appearance (NBI-Microsoft v. Huang, 460 SCRA 428)
 An act may still constitute UC even if the element of selling has not been proved
(Proline v. CA, 281 SCRA 162).
 The test of UC is whether certain goods have been intentionally clothed with an
appearance which is likely to deceive the ordinary purchasers exercising ordinary
care (Proline v. CA, 281 SCRA 162).
passing off (or palming off)/Unfair Competition
 Passing off (or palming off) takes place where the defendant by imitative devices on the
general appearance of the goods, misleads prospective purchasers into buying his
merchandise under the impression that they are buying that of his competitors (Properties Realty
Corp. (formerly The Shang Grand Tower Corp.) v. St. Francis Development Corp., 730 SCRA 275, 21 July 2014).
• Unfair competition has been defined as the passing (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 (Republic Gas Corp. v. Petron Corp., 698 SCRA
666, 17 June 2013).
• This takes place where the defendant gives his goods the general appearance of the goods
of his competitor with the intention of deceiving the public that the goods are those of his
competitor
Case: ROBERTO CO vs. KENG HUAN JERRY YEUNG and EMMA YEUNG, G.R. No. 212705,
September 10, 2014, J. Perlas-Bernabe
Co conspired with Laus in the sale/distribution of counterfeit Greenstone products to the public,
which were even packaged in bottles identical to that of the original, thereby giving rise to the
presumption of fraudulent intent. Co, together with Laus, committed unfair competition.
Although liable for unfair competition, Co was properly exculpated from the charge of trademark
infringement considering that the registration of the trademark "Greenstone" – essential as it is
in a trademark infringement case – was not proven to have existed during the time the acts
complained of were committed.
***************
NEGOTIABLE INSTRUMENTS LAW
***********************************************
Presumption of consideration; complete and delivered instruments
Case: Manuel C. Ubas, Sr., v. Wilson Chan, G.R. No. 215910, 06 February 2017, J. Perlas-
Bernabe
Manuel sued Wilson for collection of sum of money in the amount of P1.5Million representing
the price of boulders, sand, gravel, and other construction materials purchased by Wilson from
Manuel for the construction of the Macagtas Dam in Catarman, Samar. Wilson likewise issued 3
checks payable to cash but were dishonored because of a stop payment order. Wilson failed to
pay in spite of demands.
Wilson admitted singing the checks and drawn by Unimasters, Inc. that were issued not to
Manuel but to the project engineer of Unimasters for the replenishment of its revolving fund. The
checks were lost and unlawfully obtained. As president of Unimasters, Wilson issued a Stop
Payment Order. Wilson alleged that there are no supporting proofs of the deliveries of
aggregates and materials.
Is Wilson liable?
Yes.
When the creditor, such as Manuel, who possesses and submits in evidence an instrument (like
the 3checks) showing the indebtedness, a presumption that the credit has not been satisfied
arises in [his] (Manuel/creditor) favor. Thus, the defendant (Wilson in this case) is, in appropriate
instances, required to overcome the said presumption and present evidence to prove the fact of
payment so that no judgment will be entered against him. This presumption stems from Section
24 of the NIL, which provides that:
Section 24. Presumption of Consideration. - Every negotiable instrument is deemed

prima facie to have been issued for a valuable consideration; and every person whose
signature appears thereon to have become a party thereto for value.
The claim that the checks were lost and used as replenishment of revolving fund has no merit. It
would have been contrary to human nature and experience for Manuel to send Wilson a
demand letter detailing the particulars of the said checks if he indeed unlawfully obtained the
same. Besides, Section 16 of the NIL 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," as in this case.
Wilson did not overcome the foregoing presumption.

Case: BDO UNIBANK, INC., vs. ENGR. SELWYN LAO G.R. No. 227005. June 19, 2017,
Mendoza, J.
Lao issued two (2) BDO crossed checks (Check No. 0127-242249 and Check No. 0127-242250 in the
amounts of ₱273,300.00 and ₱336,500.00, respectively) in favor of EverLink as down payment for the
supply of sanitary wares. The sanitary wares were not delivered and Lao learned that the checks were
deposited in two different bank accounts at Union Bank belonging to New Wave. BDO paid the value of
Check No. 0127-242250 to Union Bank, which, in turn, credited the amount to New Wave's account.
UnionBank endorsed the check by stamping at the back of the subject check the phrase "all prior
endorsements and/or lack of it guaranteed."
Who between BDO and UnionBank is liable?
In check transactions, the collecting bank generally suffers the loss

In check transactions, the collecting bank 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 collecting bank turns out to be
false, then the drawee bank may recover from it up to the amount of the check.
The liability of the drawee bank is based on its contract with the drawer and its duty to charge to the
latter's accounts only those payables authorized by him. A drawee bank is under strict liability to pay the
check only to the payee or to the payee's order. When the drawee bank pays a person other than the
payee named in the check, it does not comply with the terms of the check and violates its duty to charge
the drawer's account only for properly payable items.
On the other hand, the liability of the collecting bank is anchored on its guarantees as the last endorser of
the check. 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 valid and
subsisting."
crossed check
A crossed check is one where two parallel lines are drawn across its face or across the corner
thereof. A check may be crossed generally or specially. A check is crossed especially when the
name of a particular banker or company is written between the parallel lines drawn. It is crossed
generally when only the words "and company" are written between the parallel lines or none at
all.
effects of crossing a check

Jurisprudence dictates that the effects of crossing a check are:
(1) that the check may not be encashed but only deposited in the bank;
(2) that the check may be negotiated only once--to one who has an account with a bank;
and
(3) that the act of crossing the check serves as a warning to the holder that the check has
been issued for a definite purpose so that he must inquire if he has received the check
pursuant to that purpose.
The effects of crossing a check, thus, relate 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.
(BDO UNIBANK, INC., vs. ENGR. LAO G.R. No. 227005. June 19, 2017, Mendoza, J.)
******************
Alvin entrusted several pre-signed blank checks to Nap Gutierrez to answer for the expenses of
a business venture (Slam Dunk) co-owned between them. Further, that Gutierrez could only use
the checks upon prior approval of Alvin. Gutierrez, without the knowledge and consent of Alvin,
however delivered one of the checks to Marasigan as security for a loan in the amount of
P200,000.00. Gutierrez misrepresented that the loan is for the construction of Alvin’s house.
The blank portions of the check were filled out with the words “Cash” “Two Hundred Thousand
Pesos Only,” the amount of “P200,000.00” and the date “May 23, 1994.” When Marasigan
deposited the check, it was dishonored or the reason “ACCOUNT CLOSED.”
A) Is Alvin liable?
B) Is Marasigan a holder in due course (HDC)?
A) Alvin is NOT liable and Marasigan is not a HDC.

The check is incomplete but delivered. It was not completed strictly under the authority given
by Alvin to Gutierrez. Gutierrez was limited to the authority to fill up the blank pre-signed checks
to be used in the operation of their business and on the condition that Alvin’s prior approval be
first secured. The authority does not extend to its use (i.e., subsequent transfer or negotiation)
once the check is completed.
Gutierrez exceeded his authority. He used the check to pay the loan he supposedly contracted
for the construction of Alvin’s house.
B) Marasigan is NOT a HDC.

The rule that a possessor of the instrument is prima facie a holder in due course is inapplicable.
Marasigan is aware that Alvin is not a party or privy to the loan. The inaction and failure to
verify, despite knowledge that Alvin was not a party to the loan, may be construed as gross
negligence amounting to bad faith. Alvin had no obligation or liability to him, rendered him
dishonest, hence, in bad faith.
(PATRIMONIO v. GUTIERREZ & MARASIGAN, GR No. 187769, 14 June 2014)
Are electronic messages negotiable instruments?

HSBC performs custodial services in behalf of its investor-clients as regards their passive investments in
the Philippines mainly involving shares of stocks in domestic corporations. These investor-clients maintain
Philippine peso and/or foreign currency accounts with HSBC. Should they desire to purchase shares of
stock and other investments securities in the Philippines, the investor-clients send their instructions and
advises via electronic messages from abroad to HSBC directing the latter to debit their local or foreign
currency account and to pay the purchase price upon receipt of the securities.
NO. The electronic messages are not signed by the investor-clients as supposed drawers of a bill of
exchange; they do not contain an unconditional order to pay a sum certain in money as the payment is
supposed to come from a specific fund or account of the investor-clients; and, they are not payable to
order or bearer but to a specifically designated third party. Thus, the electronic messages are not bills of
exchange.
(HSBC v. CIR, GR Nos. G.R. Nos. 166018 & 167728, June 4, 2014, Leonardo-de Castro)
*********
TRANSPORTATION
***************************
*A beach resort operator who has boats (called Coco Beach boats) that ferry resort
guests and crew members is a common carrier.
The definition of a common carrier in Article 1732 of the Civil Code makes no
distinction between one whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local idiom, as “a
sideline”). The ferry services are so intertwined with its main business as to be properly
considered ancillary thereto. The constancy of the ferry services in the resort operations is
underscored by its having its own Coco Beach boats. And the tour packages offered, which
include the ferry services, may be availed of by anyone who can afford to pay the same. These
services are thus available to the public. That the operator does not charge a separate fee or
fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said
services at a loss. The Court is aware of the practice of beach resort operators offering tour
packages to factor the transportation fee in arriving at the tour package price. That guests who
opt not to avail of the ferry services pay the same amount is likewise inconsequential. These
guests may only be deemed to have overpaid. (Spouses Dante Cruz and Leonora Cruz v. Sun Holidays, Inc., G.R.
No. 186312, June 29, 2012)
******
Law of Destination
Under 1753 of the Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration (Phil-am Insurance Co., Inc. (now Chartis Philippines Insurance, Inc.) v. Heung-A Shipping Corp., 730 SCRA 512,
23 July 2014; Eastern Shipping Lines vs. IAC, 150 SCRA 464 [1984]).
 does NOT APPLY if the goods were NEVER transported
 If the UNPAID SELLER exercises his RIGHT OF STOPPAGE IN TRANSITU, the new
destination will be the country of the seller.
Safety of passengers (Arts. 1755-1763)
Carrier not an insurer against all risk

 the law does not make the common carrier an insurer of the absolute safety of its passengers.
 It is imperative for a party claiming against a common carrier to show that the
injury or death to the passenger/s arose from the negligence of the common
carrier and/or its employees in providing safe transport to its passengers.
Case: GV Florida v. Heirs of Battung, Sr., GR No. 208802, 14 October 2015, J. Perlas-Bernabe
Romeo boarded GV Bus in Delfin Albano, Isabela, bound for Manila. He was seated at the first
row behind the driver and slept during the ride. In San Jose City, four (4) men with hidden arms
boarded the bus. The conductor or the bus driver observed nothing about these 4-men which
would rouse their suspicion that the men were armed or were to carry out an unlawful activity.
With no such indication, there was no need for them to conduct a more stringent search (i.e.,
bodily search) on the aforesaid men. When the bus reached the Philippine Carabao Center in
Muñoz, Nueva Ecija, the bus driver, Duplio, stopped the bus and alighted to check the tires. At
this point, one of the 4 armed men who were seated at the fourth row of the bus stood up, shot
Romeo at his head, and then left with his companions. The bus conductor, Daraoay, and the
driver Duplio brought Romeo to the hospital, but the latter was pronounced dead on arrival.
It was found that GV Bus, et al. were unable to rebut the presumed liability of common carriers
in case of injuries/death to its passengers due to their failure to show that they implemented the
proper security measures to prevent passengers from carrying deadly weapons inside the bus
which, resulted in the killing of Romeo. As such, GV Bus, et al. were held civilly liable for the
latter's death based on culpa contractual. The CA affirmed the ruling of the trial court in toto. It
held that the killing of Romeo cannot be deemed as a fortuitous event, considering that such
killing happened right inside petitioner's bus and that GV Bus, et al. did not take any safety
measures in ensuring that no deadly weapon would be smuggled inside the bus.
Is the CA correct in affirming the ruling of the trial court finding GV Bus et al. for damages to the
heirs of Romeo arising from culpa contractual?
NO. Since the passenger’s death was caused by a co-passenger, the applicable provision is
Article 1763 of the Civil Code, which states that "a common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or negligence of other passengers or of
strangers, if the common carrier's employees through the exercise of the diligence of a good
father of a family could have prevented or stopped the act or omission." Notably, for this
obligation, the law provides a lesser degree of diligence, i.e., diligence of a good father of a
family, in assessing the existence of any culpability on the common carrier's part.
Caravan Travel v. Abejar GR No. 170631, 10 February 2016 (Leonen, J.)
Caravan Travel is the registered owner of a van driven by Bautista that hit a pedestrian, Reyes,
causing her hospitalization and death. Abejar, the paternal aunt of Reyes, filed a case for
damages against Caravan and Bautista. Bautista was eventually dropped as a party-defendant
as he is nowhere to be found and summons cannot be served. The complaint is anchored on an
employer's liability for quasi-delict provided in Article 2180, in relation to Article 2176 of the Civil
Code.
Abejar claims that since Caravan is the registered owner of the van, it is directly, primarily, and
solidarity liable for the tortious acts of Bautista, its driver.
Caravan contends that it is not liable since there is no proof that Bautista, the driver, acted
"within the scope of his assigned tasks" when the accident occurred. Caravan alleged that
Bautista’s tasks only pertained to the transport of company personnel or products, and when the
accident occurred, he had not been transporting personnel or delivering products of and for the
company. Caravan adds that it should not be held solidarily liable with Bautista since Bautista
was already dropped as a party.
The trial court found Bautista negligent and directed Caravan and Bautista jointly and solidary
liable to pay Abejar.
Art. 2180 and the registered owner rule
 Article 2180 (Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry) requires proof of two things:
first, an employment relationship between the driver and the owner; and
second, that the driver acted within the scope of his or her assigned tasks.
 On the other hand, the registered-owner rule only requires proof that the employer is the
registered owner of the vehicle.
Whether or not there is a need to establish that the driver acted within the scope of his assigned
tasks (pursuant to Art. 2180 in relation to Art. 2176) to render the registered owner liable.
There is NO need.
In cases where both the registered-owner rule and Article 2180 apply, the plaintiff must establish
that the employer is the registered owner of the vehicle in question. Once the plaintiff
successfully proves ownership, there arises a disputable presumption that the requirements of
Article 2180 have been proven. As a consequence, the burden of proof shifts to the defendant to
show that no liability under Article 2180 has arisen.
Whether or not the driver/employee is required to be impleaded as a party in the case to render
the registered owner liable.
There is no need to implead the driver/employee in the case. The liability imposed on the
registered owner is direct and primary. It does not depend on the inclusion of the negligent
driver in the action. Otherwise, it would render impotent the rationale of the motor registration
law in fixing liability on a definite person.
The employer's interest and liability is distinct from that of its driver. Regardless of the employer-
employee relationship, liability attaches to the employer on account of its being the registered
owner of a vehicle that figures in a mishap. This alone suffices. A determination of its liability as
owner can proceed independently of a consideration of how the employee conducted himself as
a driver. While certainly it is desirable that a determination of the driver’s liability be made
alongside that of the owner of the vehicle he was driving, his non-inclusion in the case does not
absolutely hamper a judicious resolution of the victim’s plea for relief.
The WARSAW CONVENTION (WC)
• It provides for rules applicable to international transportation by air (Mapa v. CA, 275 SCRA 286)
• It applies to all international transportation of persons performed by aircraft for hire (Santos
v. Northwest, 210 SCRA 256)
• The WC has the force and effect of a law in the PH being a treaty commitment assumed
by the Philippine government. However, the WC 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 liability (Mapa v. CA, 275 SCRA 286)
 What is “INTERNATIONAL TRANSPORTATION BY AIR”?
• Two (2) categories
1) Where the place of departure and the place of destination are situated within the
territories of two (2) HIGH CONTRACTING PARTIES (HCP) regardless of whether or not
there be a break in the transportation or a transshipment; and
2) Where the place of departure and the place of destination are within the territory of a
HCP if there be an agreed stopping place within a territory subject to the sovereignty,
mandate or authority of another power, even though the power is not a party to the WC.
 What is a HIGH CONTRACTING PARTY? A signatory to the WC and subscribed to it.
Where should an action for violation of a contract of international transportation by air be brought?
• It must be brought, at the OPTION OF THE PLAINTIFF, in one of the territories of the
HCPs before:
1) the court of the domicile of the carrier

2) the court of the carrier’s principal place of business
3) the court where it has a place of business through which the contract had been made
4) the court of the place of destination (Art. 28 [l], WC); (Santos v. Northwest, 210 SCRA 256)
 Allegations of tortious conduct committed against an airline passenger during the course
of the international carriage do not bring the case outside the ambit of the WC (Lluillier v.
British Airways, Inc., GR No. 171092, 15 March 2010).
When is the WC NOT applicable?
• The WC is not applicable if the damage is caused by the willful misconduct of the
carrier or by such default on its part which may be considered to be equivalent to willful
misconduct, or if the damage is similarly caused by any agent of the carrier acting within
the scope of his employment (Sabena v. CA, 255 SCRA 38)
• The carrier’s liability may not be limited to that prescribed in the WC. The WC is not an
exclusive enumeration of the instances of an airline’s liability. The WC should be
deemed a limit of liability only in cases where the cause of death, injury to a person, or
destruction, loss or damage to property or delay in transport, is not attributable to or
attended by any willful misconduct, bad faith, recklessness, or otherwise improper
conduct on the part of any official or employee for which the carrier is responsible,
and there is no special or extraordinary form of resulting injury. (Northwest v. CA, 284 SCRA 408)
• The WC does not “regulate or exclude liability for other breaches of contract by the
carrier” or misconduct of its officers and employers, or for some particular or exceptional
type of damage (ibid.)
COGSA: Carriage of Goods by Sea Act
Contracts covered by COGSA

• The Carriage of Goods by Sea Act (COGSA) or Public Act No. 521 of the 74 th US
Congress, was accepted to be made applicable to all contracts for the carriage of goods
by sea to and from Philippine Ports in foreign trade by virtue of Commonwealth Act (C.A.)
No. 65 (Asian Terminals, Inc. v. Philam Insurance Co., Inc., 702 SCRA 88, 24 July 2013).
Prescriptive period to file a claim for loss or damage
The suit must be brought within one year after delivery of the goods or the date when the
goods should have been delivered. (Section 3(6); Cua v. Wallem Phils. Shipping, Inc., GR No. 171337, 11 July
2012; Phil-am Ins. Co., Inc. (now Chartis Phil. Ins. Inc.) v. Heung-A Shipping Corp., 730 SCRA 512, 23 July 2014).
*The filing of a notice of claim/loss is NOT a condition precedent

*It is NOT interrupted or tolled by an extrajudicial demand (DOLE v. Maritime Co.,148 SCRA 118)
 Prescriptive period may be extended by agreement
Jurisprudence, however, recognized the validity of an agreement between the carrier
and the shipper/consignee extending the one-year period to file a claim (Cua v. Wallem Phils.
Shipping, Inc., GR No. 171337, 11 July 2012).
 A stipulation reducing the one (1) year prescriptive period is null and void.
“loss or damage” under the COGSA
 “Loss or Damage” as applied to the COGSA contemplates a situation where no delivery

at all was made by the shipper of the goods because the same had perished, gone out
of commerce, or disappeared in such a way that their existence is unknown or
they cannot be recovered.
 Thus, it is inapplicable in case of misdelivery or conversion. (Ang v. American Steamship

and damage arising from
Agencies, Inc., 19 SCRA 122; Art. 1189, Civil Code; par. 4, Sec 3[6], COGSA)
delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In such instance the, Civil Code rules on
prescription shall apply.
When the prescriptive is not applicable
 Does NOT APPLY to conversions or misdeliveries (CIA Maritima v. Insurance Co. of North
America, 19 SCRA 1223; Ang v. CIA Maritima, 133 SCRA 600).
***In such cases the Civil Code provision on prescription will apply: ten (10) years is
there is a written contract or bill of lading; six (6) years if contract is oral
 The one-year prescriptive period for filing an action for the loss or damage of goods
may not be invoked by an arrastre operator. (Insurance Company of North America v. Asian
Terminals, Inc., GR No. 180784, 12 February 2012)
 (SHIPPER vs. INSURER) Where the shipper or the consignee files the suit
against the insurer for payment under the insurance policy, the one (1) year period
does not apply but the ten (10) year prescriptive period under the Civil Code because
the suit is not against the carrier arising from the contract of carriage (Mayer Steel Pipe
Corp. v. CA, 274 SCRA 432).
***(INSURER vs. CARRIER) If the suit is filed by an insurer under its subrogatory rights,
the one (1) year prescriptive period applies (Fil-Merchants v. Alejandro, 145 SCRA 42)
*************
CORPORATION
*********************
 Purpose of piercing the corporate veil
• The purpose behind piercing a corporation’s identity is to remove the barrier between the
corporation and the persons comprising it to thwart the fraudulent and illegal schemes of
those who use the corporate personality as a shield for undertaking certain proscribed
activities (Mayor v. Tiu, GR No. 203770, 23 November 2016, 810 SCRA 256).
liability when corporate fiction is pierced
When a corporate veil is pierced, the corporation’s liability becomes personal to the person directly
responsible for and who acted in bad faith in committing the illegal dismissal or any act violative
of the Labor Code (Jose Emmanuel Guillermo v. Crisanto Uson, GR No. 198967, 07 March 2016). The responsible
persons maybe impleaded and be held solidarily liable (Dutch Movers, Movers, Inc. v. Lequin, 824 SCRA 310,
25 April 2017).
When the separate personality of the corporation is disregarded, the corporation will be treated
merely as an association of persons and the stockholders or members will be considered as the
corporation, i.e., liability will attach personally or directly to the officers and stockholders (Yao, Sr. v.
People, GR No. 168306, 19 June 2007).
Case: International Academy of Management and Economics (I/AME), vs. Litton and

Company, Inc., GR No.191525, 13 Dec. 2017 (CJ Sereno)
Atty. Emmanuel T. Santos was a lessee of a property belonging to Litton. Due to the failure to pay the
lease rentals, Litton filed and won an ejectment case against Santos. Atty. Santos was likewise directed to
pay rental arrears, realty taxes, penalties and attorney’s fees.
The judgment was not executed immediately but was later revived and became final and executory.
A property registered in the name of I/AME—TCT No. 187565— TCT was levied to pay the money
judgment. It was indicated that such was "only up to the extent of the share of Emmanuel T. Santos."
I/AME opposed the levy and moved for its cancellation on the following grounds:
1) It has a separate and distinct personality from Santos; hence, its properties should not be made
to answer for the latter's liabilities.
2) Its right to due process was violated when it was dragged into the case and its real property made
an object of a writ of execution in a judgment against Santos.
3) Since it was not impleaded in the main case, the trial court never acquired jurisdiction over it.
4) The doctrine of piercing the corporate veil applies only to stock corporations, and not to non-
stock, nonprofit corporations such as I/AME since there are no stockholders to hold liable in such
a situation but instead only members. Hence, they do not have investments or shares of stock or
assets to answer for possible liabilities. Thus, no one in a non-stock corporation can be held liable
in case the corporate veil is disregarded or pierced.
5) The piercing of the corporate veil cannot be applied to a natural person—in this case Santos—
simply because as a human being, he has no corporate veil shrouding or covering his person.
No violation of due process

• Facts show that piercing of the corporate veil is merited.
 It was shown "by clear and convincing proof that the separate and distinct personality of
the corporation was purposefully employed to evade a legitimate and binding
commitment and perpetuate a fraud or like wrongdoings. “
 Santos had an existing obligation that he owed monthly rentals and unpaid realty taxes
under a lease contract he entered into as lessee with Litton as lessor. He was not able to
comply with this particular obligation, and in fact, refused to comply therewith. Santos
used I/AME as a means to defeat judicial processes and to evade his obligation to Litton.
Thus, even while I/AME was not impleaded in the main case and yet was so named in a
writ of execution to satisfy a court judgment against Santos, it is vulnerable to the
piercing of its corporate veil.
Piercing the corporate veil applicable to all kinds of corporations

 The Supreme Court (SC) did not put in issue whether the corporation is a nonstock, nonprofit, non-
governmental corporation in considering the application of the doctrine of piercing of corporate veil
- Non-profit corporations are not immune from the doctrine of piercing the corporate veil.
- Piercing applies to any organization however organized and in whatever manner it operates.
- Control of ownership does not hinge on stock ownership.
 In a US case it was held that: [t]he mere fact that the corporation involved is a nonprofit
corporation does not by itself preclude a court from applying the equitable remedy of piercing the
corporate veil. The equitable character of the remedy permits a court to look to the substance of
the organization, and its decision is not controlled by the statutory framework under which the
corporation was formed and operated. While it may appear to be impossible for a person to
exercise ownership control over a nonstock, not-for-profit corporation, a person can be held
personally liable under the alter ego theory if the evidence shows that the person controlling the
corporation did in fact exercise control, even though there was no stock ownership.
Concept of equitable ownership in non-stock corporation

 An equitable owner is an individual who is a non-shareholder defendant, who exercises sufficient
control or considerable authority over the corporation to the point of completely disregarding the
corporate form and acting as though its assets are his or her alone to manage and distribute.
Piercing is applicable to natural persons

a) When the Corporation is the Alter Ego of a Natural Person
b) Reverse Piercing of the Corporate Veil
When the corporation is the alter ego of the natural person

 I/AME is the alter ego of Santos and Santos - the natural person - is the alter ego of I/AME.
Santos falsely represented himself as President of I/AME in the Deed of Absolute Sale when he
bought the Makati real property, at a time when I/AME had not yet existed.
Santos even admitted in its pleadings before that trial court that he is an alter ego of I/AME.
I/AME is the alter ego of the natural person, Santos, which the latter used to evade the execution
on the Makati property, thus frustrating the satisfaction of the judgment won by Litton.
 REVERSE CORPORATE PIERCING

• In a traditional veil-piercing action, a court disregards the existence of the corporate
entity so a claimant can reach the assets of a corporate insider.
• In a reverse piercing action, however, the plaintiff seeks to reach the assets of a
corporation to satisfy claims against a corporate insider.
• Reverse piercing flows in the opposite direction (of traditional corporate veil-piercing)
and makes the corporation liable for the debt of the shareholders.
OUTSIDER & INSIDER REVERSE PIERCING

 Outsider reverse piercing occurs when a party with a claim against an individual or
corporation attempts to be repaid with assets of a corporation owned or substantially
controlled by defendant.
In insider reverse piercing, the controlling members will attempt to ignore the corporate
fiction in order to take advantage of a benefit available to the corporation, such as an
interest in a lawsuit or protection of personal assets.
Here, outsider reverse veil-piercing is applicable. Litton, as judgment creditor, seeks to pierce the
corporate veil of I/AME in order to make its Makati real property answer for a judgment against Santos,
who formerly owned and still substantially controls I/AME.
A US case held that "[o]utsider reverse veil-piercing extends the traditional veil-piercing doctrine to permit
a third-party creditor to pierce the veil to satisfy the debts of an individual out of the corporation's assets."
Reverse corporate piercing is an equitable remedy and should be used
cautiously. The enforcement of judgment under the Rules shall be preferred.
 Reverse corporate piercing is an equitable remedy which if utilized cavalierly, may lead to disastrous
consequences for both stock and non-stock corporations. The ordinary judgment collection
procedures or other legal remedies are preferred.
But to avoid injustice and not to unwittingly condone the act of Santos in trying to frustrate the
decades-old judgment by hiding behind the corporate form to evade paying his obligation under the
judgment, the reverse piercing of the corporate veil of I/AME to enforce the levy on execution of the
Makati real property where the school now stands is applied.
Effect of transfer of shares not recorded in the STB
All transfers of share of stock must be registered in the corporate books in order to be binding
on the corporation (F & S Velasco Company, Inc. v. Madrid, 774 SCRA 388, 10 November 2015).
A transfer of a share of stock not recorded in the stock and transfer book is non-existent as far
as the corporation is concerned. From the corporation’s point of view, the transfer is not effective
until it is recorded (VC Ponce v. Cement, GR No. 139802, 10 Dec. 2002, 393 SCRA 602).
Right to transfer/sell shares
• Right of transferee to have stocks transferred in his name is an inherent right of

ownership of stocks
• to be valid against third parties and the corporation, the transfer must be recorded in the
books of corporation
• Surrender of the original certificate of stock is necessary before the issuance of a new
one so that the old certificate may be cancelled
Grace Borgoña Insigne, et al. vs. Abra Valley Colleges, Inc. and Francis Borgoña, G.R.
No. 204089, July 29, 2015
Insigne, et al. filed a complaint (with application for preliminary injunction) and damages in the RTC
against Abra Valley, praying, among others, that the RTC direct Abra Valley to allow them to inspect its
corporate books and records, and the minutes of meetings, and to provide them with its financial
statements. Abra Valley moved to dismiss the complaint on the ground that Insigne, et al. are not
stockholders; their proofs as such are certificates of stock still in the name of the original owners and they
are not listed as shareholders in the STB.
Insigne, et al. supported their claim of being stockholders by presenting the secretary’s certificate that
they are listed as shareholders, the official receipts of their payments for their subscriptions of the shares
of Abra Valley, SEC certifications stating that Abra Valley had issued shares in favor of Insigne, et al.,
letters, GIS and minutes of stockholders meetings. The RTC dismissed the complaint which the CA
sustained on the ground that Insigne, et al. have no stock certificate.
Are petitioners Insigne, et al. stockholders of Abra Valley; the nature of a certificate of
stock
YES. Although Insigne et al. failed to produce a stock certificate in their names, they were able to prove
that they are stockholders of Abra Valley.
A stock certificate is prima facie evidence that the holder is a shareholder of the corporation but the
possession of the certificate is not the sole determining factor of one’s stock ownership. A certificate
of stock is merely: –
x x x the paper representative or tangible evidence of the stock itself and of the various interests
therein. The certificate is not stock in the corporation but is merely evidence of the
holder's interest and status in the corporation, his ownership of the share represented
thereby, but is not in law the equivalent of such ownership. It expresses the contract
between the corporation and the stockholder, but it is not essential to the existence of a share in
stock or the creation of the relation of shareholder to the corporation.
To establish their stock ownership, Insigne duly established that they are stockholders through:
the secretary’s certificate that they are listed as shareholders, the official receipts of their
payments for their subscriptions of the shares of Abra Valley, SEC certifications stating that Abra
Valley had issued shares in favor of Insigne, et al., letters, GIS and minutes of stockholders
meetings.
Insigne are entitled to demand the production of the STB of Abra Valley
Indeed, transfer of shares of stock not recorded in the stock and transfer book of the corporation
is non-existent as far as the corporation is concerned. As between the corporation on the one
hand, and its shareholders and third persons on the other, the corporation looks only to its
books for the purpose of determining who its shareholders are. It is only when the transfer has
been recorded in the stock and transfer book that a corporation may rightfully regard the
transferee as one of its stockholders.
Nonetheless, the STB is not the exclusive evidence of the matters and things that ordinarily are or
should be written therein, for parol evidence may be admitted to supply omissions from the records, or to
explain ambiguities, or to contradict such records.
Since Insigne, et al. established that they are stockholders, they are entitled to demand the
production of the STB.
***************************
RA # 10142:
THE FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) of 2010
*****************************************************************
2-pronged purpose of rehabilitation

(a) to sufficiently and equitably distribute the assets of the insolvent debtor to its creditors;
(EQUITABLE PURPOSE) and
(b) to provide the debtor with a fresh start (Phil. Bank of Communications v. Basic Polyprinters and Packaging
Corp., 738 SCRA 561, 20 October 2014; Asiatrust Dev’t. Bank v. First Aikka Dev’t. Inc., 650 SCRA 172 [2011]).
(REHABILITATIVE PURPOSE)
• The purpose of rehabilitation proceedings is not only to enable the company to gain a
new lease on life but also to allow creditors to be paid their claims from its earnings,
when so rehabilitated (BPI Family Savings Bank, Inc. v. St. Michael Medical Center, Inc., GR No. 205469, 25
March 2015, J. Perlas-Bernabe).
MATERIAL FINANCIAL COMMITMENT: essential in rehabilitation
A material financial commitment becomes significant in gauging the resolve, determination,

earnestness and good faith of the distressed corporation in financing the proposed rehabilitation
plan. This commitment may include the voluntary undertakings of the stockholders or the would-
be investors of the debtor-corporation indicating their readiness, willingness and ability to
contribute funds or property to guarantee the continued successful operation of the debtor
corporation during the period of rehabilitation (BPI Family Savings Bank, Inc. v. St. Michael Medical Center, Inc.,
GR No. 205469, 25 March 2015).
Without it, the petition for corporate rehabilitation must necessarily fail. (PHILIPPINE BANK OF
COMMUNICATIONS vs. BASIC POLYPRINTERS AND PACKAGING CORPORATION, G.R. No. 187581, October 20, 2014)
Basic Polyprinters commitment was insufficient for the following reasons:

• The commitment to add P10,000,000.00 working capital appeared to be doubtful considering that
the insurance claim from which said working capital would be sourced had already been written-
off.
• The conversion of all deposits for future subscriptions to common stock and the treatment of all
payables to officers and stockholders as trade payables was hardly constituting material financial
commitments. Such “conversion” of cash advances to trade payables was, in fact, a mere re-
classification of the liability entry and had no effect on the shareholders’ deficit.
• Basic Polyprinters’s rehabilitation plan likewise failed to offer any proposal on how it intended to
address the low demands for their products and the effect of direct competition from stores like
SM, Gaisano, Robinsons, and other malls.
• Basic Polyprinters’s proposal to enter into the dacion en pago to create a source of “fresh capital”
was not feasible because the object thereof would not be its own property but one belonging to its
affiliate, TOL Realty and Development Corporation, a corporation also undergoing rehabilitation.
Verified notice of claim and the failure of the creditor to file a notice of claim
Every creditor of the debtor or any interested party whose claim is not yet listed in the schedule
of debts and liabilities shall file his verified notice of claim not later than five (5) days before the first
initial hearing date fixed in the Commencement Order. (Sec. 12, Rule 1, F-Rules).
TIME-BAR RULE
If a creditor files a belated claim (Sec. 12, Rule 1, F-Rules) or a creditor fails to file its claim, he shall
not be entitled to participate in the rehabilitation proceedings, but shall be entitled to
receive distributions therefrom (Sec. 23, FRIA). (Bustos v. Millians Shoe, GR No. 185024, 24 April 2017, Sereo, CJ)
Issuance of commencement order & suspension or stay order/effects
The commencement order (Sec. 16, FRIA) shall also include a suspension or stay order suspending
all actions or proceedings for the enforcement of claims or judgments against the debtor and
prohibiting debtor from selling, encumbering or disposing of any of its properties and from
making any payment of its liabilities (Sec. 16q). In Section 8V, Rule 1, FRIA Rules, the Stay or
Suspension Order shall:
(i) suspend all actions or proceedings in court or otherwise, for the enforcement of
all claims against the debtor;
(ii) suspend all actions to enforce any judgment, attachment or other provisional
remedies against the debtor;
(iii) prohibit the debtor from selling, encumbering, transferring or disposing in any
manner any of its properties except in the ordinary course of business; and
(iv) prohibit the debtor from making any payment of its liabilities outstanding as of the
commencement date except as may be provided herein.
The suspension order, however shall not apply (Sec. 18, FRIA):
a) to cases on appeal in the Supreme Court at the time of the issuance of the
commencement order (Sec. 18a, FRIA);
b) the enforcement of claims against sureties and other persons solidarily liable with the
debtor and third party/accommodation mortgagors (Sec. 18c, FRIA);
c) the sale by licensed brokers or dealers of pledged securities pursuant to a securities
pledge or margin agreement (Sec. 18e, FRIA); and
d) any criminal action against the individual debtor or owner, partner, director or officer of a
debtor (Sec. 18g, FRIA).
There shall be no diminution of security or lien; they are merely suspended during the stay order
(Sec. 60, FRIA).
The issuance of stay order cannot suspend foreclosure of accommodation mortgages (Situs Dev.
Corp. v. Asiatrust Bank, 688 SCRA 621, 16 January 2013).
Case: BIR v. Misajon, G.R. No. 224764. April 24, 2017, Perlas-Bernabe
Can the BIR proceed to collect deficiency taxes in spite of the issuance of a commencement order?
NO
LCI filed a petition for corporate rehabilitation. Finding the same to be sufficient in form and substance,
the Rehabilitation Court issued a Commencement Order dated January 13, 2012 which, inter alia: (a)
declared LCI to be under corporate rehabilitation; (b) suspended all actions or proceedings, in court or
otherwise, for the enforcement of claims against LCI; (c) prohibited LCI from making any payment of its
outstanding liabilities as of even date, except as may be provided under RA 10142; and (d) directed the
BIR to file and serve on LCI its comment or opposition to the petition, or its claims against LCI. The BIR -
personally and by publication - was notified of the rehabilitation proceedings involving LCI and the
issuance of the Commencement Order related thereto. Instead of filing a comment or opposition, the BIR,
through Misajon, still opted to send LCI: (a) a notice of informal conference dated May 27, 2013, informing
the latter of its deficiency internal tax liabilities for the Fiscal Year ending June 30, 2010; and (b) a Formal
Letter of Demand dated May 9, 2014, requiring LCI to pay deficiency taxes in the amount of P567,51
9,348.39, notwithstanding the written reminder coming from LCI's court-appointed receiver of the
pendency of rehabilitation proceedings concerning LCI and the issuance of a commencement order.
The Rehabilitation court cited the BIR and Misajon in contempt of court for defying the commencement
order. The BIR justified their action by claiming that they only performed such acts to toll the prescriptive
period for the collection of deficiency taxes and (b) to cite them in indirect contempt would unduly interfere
with their function of collecting taxes due to the government, cannot be given any credence.
A) Can the BIR proceed to collect deficiency taxes in spite of the issuance of a commencement
order?
NO. Section 16 of RA 10142 provides, inter alia, that upon the issuance of a Commencement Order –
which includes a Stay or Suspension Order – all actions or proceedings, in court or otherwise, for the
enforcement of “claims” against the distressed company shall be suspended. Under the same law, claim
“shall refer to all claims or demands of whatever nature or character against the debtor or its property,
whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured,
disputed or undisputed, including, but not limited to; (1) all claims of the government, whether national or local,
including taxes, tariffs and customs duties; and (2) claims against directors and officers of the debtor arising
from acts done in the discharge of their functions falling within the scope of their
authority: Provided, That, this inclusion does not prohibit the creditors or third parties from filing cases
against the directors and officers acting in their personal capacities.”
B) What is the remedy of creditors in pursuing their claims against a distressed debtor in case of
issuance of a commencement order?
The remedy of creditors of the distressed debtor is to submit their claims to the rehabilitation court
for proper consideration so that they may participate in the proceedings, keeping in mind the general
policy of the law “to ensure or maintain certainty and predictability in commercial affairs, preserve and
maximize the value of the assets of these debtors, recognize creditor rights and respect priority of claims,
and ensure equitable treatment of creditors who are similarly situated.” In other words, the creditors must
ventilate their claims before the rehabilitation court, and any “[a]ttempts to seek legal or other resource
against the distressed corporation shall be sufficient to support a finding of indirect contempt of court.” x x
x
The insistence that: (a) Misajon, et al. only performed such acts to toll the prescriptive period for the
collection of deficiency taxes; and (b) to cite them in indirect contempt would unduly interfere with their
function of collecting taxes due to the government, cannot be given any credence. BIR could have easily
tolled the running of such prescriptive period, and at the same time, perform their functions as officers of
the BIR, without defying the Commencement Order and without violating the laudable purpose of RA
10142 by simply ventilating their claim before the Rehabilitation Court. After all, they were adequately
notified of the LCI’s corporate rehabilitation and the issuance of the corresponding Commencement
Order. It was improper for Misajon, et al. to collect, or even attempt to collect, deficiency taxes from LCI
outside of the rehabilitation proceedings concerning the latter, and in the process, willfully disregard the
Commencement Order lawfully issued by the Rehabilitation Court. Hence, the rehabilitation court
correctly cited them for indirect contempt.
Parri Passu Principle

• During rehabilitation, the assets of the distressed corporation are held in trust for the equal
benefit of all creditors to preclude one from obtaining an advantage or preference over
another. All creditors should stand on equal footing.
• Both secured and unsecured creditors shall suffer a write-off of penalties and default
interest and the escalating interest rates shall equally be imposed on them.
(Express Investments III Private Ltd. and Export Dev't. Canada v. Bayantel, Inc., 687 SCRA 50, 05 December 2012)
the rehabilitation plan and the “cram-down” power

• The court may exercise its cram-down power and approve the rehabilitation plan over the
objection of any class of creditors (Sec. 64, second par., FRIA).
• The provisions of other laws to the contrary notwithstanding, the court shall have the
power to approve or implement the Rehabilitation Plan despite the lack of approval, or
objection from the owners, partners or stockholders of the insolvent debtor (Sec. 68 last par.,
FRIA).
• Court may approve a rehabilitation plan even over the opposition of creditors holding a
majority of the total liabilities of the debtor (Pacific Wide Realty and Dev’t. Corp. v. Puerto Azul Land Inc.,
605 SCRA 503, 25 November 2009).
Case: Umale v. ASB Realty Corp., GR No. 181126, 15 June 2011 (J. del Castillo)
***Being placed under corporate rehabilitation and having a receiver appointed to carry out the rehabilitation
plan do not ipso facto deprive a corporation and its corporate officers of the power to recover its unlawfully
detained property.
Due to the termination of the lease and the continued illegal occupation, ASB Realty Corporation (ASB Realty) filed
a case for unlawful detainer seeking to recover from Umale a parcel of land identified as Lot 7, Block 5, Amethyst
Street, Ortigas Center, Pasig City which was originally owned by Amethyst Pearl Corporation (Amethyst Pearl), a
company that is, in turn, wholly-owned ASB Realty.

Umale challenged ASB Realty’s personality to recover the subject premises considering that ASB Realty had been
placed under receivership by the Securities and Exchange Commission (SEC) and a rehabilitation receiver had
been duly appointed. Umale claims that it is the rehabilitation receiver that has the power to take possession, control
and custody of the debtor’s assets. Hence, it is the duly-appointed receiver of ASB Reatly that should sue to recover
possession of the property.

Can a corporate officer of ASB Realty (duly authorized by the Board of Directors) file suit to recover an
unlawfully detained corporate property despite the fact that the corporation had already been placed under
rehabilitation?
YES.
Corporations, such as ASB Realty, are juridical entities that exist by operation of law. As a creature of law, the
powers and attributes of a corporation are those set out, expressly or impliedly, in the law. Among the general
powers granted by law to a corporation is the power to sue in its own name. This power is granted to a duly-
organized corporation, unless specifically revoked by another law. The question becomes: Do the laws on corporate
rehabilitation particularly PD 902-A, as amended, and its corresponding rules of procedure forfeit the power to sue
from the corporate officers and Board of Directors?
Corporate rehabilitation is defined as the restoration of the debtor to a position of successful operation and solvency,
if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the
present value of payments projected in the plan more if the corporation continues as a going concern than if it is
immediately liquidated. The intention of the law is to effect a feasible and viable rehabilitation by preserving a
floundering business as a going concern, because the assets of a business are often more valuable when so
maintained than they would be when liquidated. This concept of preserving the corporations business as a going concern
while it is undergoing rehabilitation is called debtor-in-possession or debtor-in-place. This means that the debtor
corporation (the corporation undergoing rehabilitation), through its Board of Directors and corporate officers, remains
in control of its business and properties, subject only to the monitoring of the appointed rehabilitation receiver.
The concept of debtor-in-possession, is carried out more particularly in the SEC Rules, the rule that is relevant to the
instant case. It states therein that the interim rehabilitation receiver of the debtor corporation
does not take over the control and management of the debtor corporation. Likewise, the
rehabilitation receiver that will replace the interim receiver is tasked only to monitor the
successful implementation of the rehabilitation plan. There is nothing in the concept of corporate
rehabilitation that would ipso facto deprive the Board of Directors and corporate officers of a debtor corporation,
such as ASB Realty, of control such that it can no longer enforce its right to recover its property from an errant
lessee.
 Being placed under corporate rehabilitation and having a receiver appointed to carry out the
rehabilitation plan do not ipso facto deprive a corporation and its corporate officers of the
power to recover its unlawfully detained property.

CONTRA: Bank officers/directors have no power over the bank and its
operation when a receiver is appointed.
• The bank officers/directors have no power over the bank and its operation when a
receiver is appointed.
• The receivership is equivalent as an injunction to restrain bank officers from
intermeddling with the property of the bank in any way.
• When a bank is placed under receivership, its officers, including its acting president, are
no longer authorized to transact business in connection with the bank’s assets and
property.
SUSPENSION OF PAYMENT OF INSOLVENT INDIVIDUAL DEBTORS

 only individual debtors are covered
 a natural person who is a resident and citizen of the Philippines who has become
insolvent (Sec. 4(o), FRIA)
• NOT available to non-resident citizens and aliens
 NO more corporate suspension of payment proceedings
Who may refrain from attending creditor’s meeting?

Secured creditors and creditors having claims for personal labor, maintenance, expense of last
illness and funeral of the wife or children of the debtor incurred within sixty (60) days
immediately prior to the filing of the petition may refrain from attending the creditors’ meeting
and from voting therein. Such persons shall not be bound by any agreement arrived at in such
meeting. Unless, being aware of this right, they attend the meeting, participate in the
discussions and vote therein.
Residual power of court

The court, upon motion of any affected party, may issue any order which may be necessary or
proper to enforce the agreement. If the debtor fails, wholly or in part, to perform his obligations
under the agreement, or to comply with any order of the court, the court, upon motion of any
creditor, shall declare the agreement terminated, and all the rights which the creditors had
against the debtor before the agreement shall revest in them.
************
INSURANCE
*****************
“CASH TO CARRY” principle (Sec. 77)

- This principle requires payment of the premium before the contract of insurance can be valid
and binding.
- The philosophy behind this principle is that the insurer, upon issuance of the policy, is
immediately exposed to liability for the risks insured against, hence, it is entitled to be paid the
premium for extending protection to the insured immediately upon such exposure.
The payment of premium is a condition precedent to, and essential for, the efficacy of
the contract of insurance. Unless premium is paid, the policy shall not be valid and
binding notwithstanding any agreement to the contrary (Sec. 77, Ins. Code; Valenzuela v. CA, 191
SCRA 1 [1990]).
- There is no excuse for non-payment of premium; even the failure of the insurer to notify the
insured of the change of address.
- Premium and risk are the very essence of a contract of insurance and each is dependent and
inseparable from the other.
The premium is the elixir vitae or source of life of the insurance business

This risk-distributing mechanism operates under a system where, by prompt payment of the
premiums, the insurer is able to meet its legal obligation to maintain a legal reserve fund needed
to meet its contingent obligations to the public. The premium, therefore, is the elixir vitae or
source of life of the insurance business x x x. (Gaisano v. Dev’t. Insurance, G.R. No. 190702, 27 February 2017)
PAYMENT OF PREMIUM: salary deduction
Employees of the Republic of the Philippines, including its political subdivisions and
instrumentalities, and government-owned or-controlled corporations, may pay their insurance
premiums and loan obligations through salary deduction (Sec. 78)
EXCEPTIONS to the rule that no insurance contract takes effect unless premium is paid
(1) in case of life or industrial life policy, whenever the grace period provision applies, as
expressly provided by Section 77 itself;
(2) where the insurer acknowledged in the policy or contract of insurance itself the receipt of
premium, even if premium has not been actually paid, as expressly provided by Section 78
itself;
(3) where the parties agreed that premium payment shall be in installments and partial payment
has been made at the time of loss, as held in Makati Tuscany Condominium Corp. v. Court of
Appeals;
(4) where the insurer granted the insured a credit term for the payment of the premium, and loss
occurs before the expiration of the term, as held in Makati Tuscany Condominium Corp.; and
(5) where the insurer is in estoppel as when it has consistently granted a 60 to 90-day credit
term for the payment of premiums. (Gaisano v. Dev’t. Ins, G.R. No. 190702, 27 Feb. 2017)
Collateral source rule
As part of American personal injury law, the collateral source rule was originally applied to tort
cases wherein the defendant is prevented for benefitting from the plaintiff’s receipt of money
from other sources. Under this rule, if an injured person receives compensation for his
injuries from a source wholly independent of the tortfeasor, the payment should not be
deducted from the damages which he would otherwise collect from the torfeasor (Mitsubishi
Motors Phils. Salaried Employees Union (MMPSEU) v. Mitsubishi Motors Phils. Corp., 698 SCRA 599, 17 June 2013).
collateral source rule cannot be invoked in indemnity contracts/no fault insurance contracts
The dispute here is on whether employees of Mitsubishi Motors may recover from an insurance
clause in a CBA the full amount of hospital bills that was already paid by a Health Maintenance
Organization (HMO) or by an insurance company offering health insurance. The collateral
source rule was invoked to justify a second recovery from the insurance clause of the CBA.
The collateral source rule is intended “to place the responsibility for losses on the
party causing them.” The Rule has “no application to cases involving no-fault insurances
under which the insured is indemnified for losses by insurance companies, regardless of
who was at fault in the incident generating the losses.”
Accordingly, the company obligated to provide health insurance under the CBA “cannot
be obliged to pay the hospitalization expenses of the dependents of its employees which had
already been paid by separate health insurance providers of said dependents.”
It was also noted that “the conditions set forth in the CBA provision indicate an intention
to limit MMPC’s liability only to actual expenses incurred by the employees’ dependents, that is,
excluding the amounts paid by dependents’ other health insurance providers.”
The payment of amount already paid under other insurance policies would constitute
double recovery which is not allowed under the law. “Being in the nature of a nonlife insurance
contract and essentially a contract of indemnity, the CBA provision obligates MMPC to indemnify
the covered employees’ medical expenses incurred by their dependents but only up to the
extent of the expenses actually incurred. This is consistent with the principle of indemnity which
proscribes the insured from recovering greater than the loss. Indeed, to profit from a loss will
lead to unjust enrichment and therefore should not be countenanced.”
***Non-presentation of the insurance contract or policy is not necessarily fatal. The presentation in evidence of the
marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier
the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is
sufficient to establish not only the relationship of the insurer and the insured shipper of the lost cargo, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.
ASIAN TERMINALS, INC. vs. MALAYAN INS. CO., INC.

GR No. 171406, 04 April 2011
60,000 plastic bags of soda ash dense (each bag weighing 50 kilograms) were shipped from China to
Manila. Malayan Insurance Company, Inc. insured the shipment under Marine Risk Note No. RN-0001-
21430 with Philippine Banking Corporation as the consignee.
Asian Terminals Inc. handled the unloading and storing of the cargoes from the vessel. Due to the negligent
handling of the stevedores of ATI, a total of 2,881 bags were in bad order condition due to spillage, caking, and
hardening of the contents. Malayan, as insurer, paid the value of the lost/ damaged cargoes to the consignee in the
amount of P643,600.25.
Malayan, as subrogee of the consignee, thereafter filed before the Regional Trial Court (RTC) of Manila, a
Complaint for damages against ATI. The RTC, which the CA sustained on appeal, found ATI liable for the
damage/loss sustained by the shipment. ATI questioned the ruling claiming that Malayan as insurer is not entitled to
the relief granted as it failed to establish its cause of action against ATI since, as the alleged subrogee, it never
presented any valid, existing, enforceable insurance policy or any copy thereof in court covering the shipment. ATI
argues that the Subrogation Receipt presented by Malayan is not sufficient to prove that the shipment was insured
and that Malayan was validly subrogated to the rights of the consignee. ATI submits that without proof of a valid
subrogation, Malayan is not entitled to any reimbursement.
Whether the non-presentation of the insurance contract or policy is fatal to Malayan’s cause of
action.
Non-presentation of the insurance contract or policy is not necessarily fatal. The presentation in evidence of the
marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier
the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is
sufficient to establish not only the relationship of the insurer and the insured shipper of the lost cargo, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.
In addition, ATI never questioned Malayan’s right to subrogation, nor did it dispute the coverage of the insurance
contract or policy. Since there was no issue regarding the validity of the insurance contract or policy, or any provision
thereof, Malayan had no reason to present the insurance contract or policy as evidence during the trial.
***An insurer is given two years – from the effectivity of a life insurance contract and while the insured
is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent
concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when
the insured dies within the period, the insurer must make good on the policy, even though the policy was
obtained by fraud, concealment, or misrepresentation.
***If insurers cannot vouch for the integrity and honesty of their insurance agents/salesmen and the
insurance policies they issue, then they should cease doing business. If they could not properly screen
their agents or salesmen before taking them in to market their products, or if they do not thoroughly
investigate the insurance contracts they enter into with their clients, then they have only themselves to
blame. Otherwise said, insurers cannot be allowed to collect premiums on insurance policies, use these
amounts collected and invest the same through the years, generating profits and returns therefrom for
their own benefit, and thereafter conveniently deny insurance claims by questioning the authority or
integrity of their own agents or the insurance policies they issued to their premium-paying clients.
MANILA BANKERS LIFE INS. CORP. vs. ABAN

GR No. 175666, 29 July 2013
Sotero took out a life insurance policy from Manila Bankers Life Insurance Corporation designating Aban,
her niece, as her beneficiary.
On April 10, 1996, when the insurance policy had been in force for more than two years and seven
months, Sotero died. Aban filed a claim for the insurance proceeds on July 9, 1996. Manila Bankers
conducted an investigation and found the claim spurious, as it appeared that Sotero did not actually apply
for insurance coverage, was unlettered, sickly, and had no visible source of income to pay for the
insurance premiums; and that Aban was an impostor, posing as Sotero and fraudulently obtaining
insurance in the latter’s name without her knowledge and consent. Manila Bankers further found that the
insurance underwriter who solicited the insurance is a cousin of Aban’s husband. Manila Bankers denied
the claim and refunded the premiums paid.
Manila Bankers then filed a civil case for rescission and annulment of the policy as it was obtained by
fraud, concealment and/or misrepresentation. The trial court dismissed the case as it was barred by
prescription pursuant to Section 48 of the Insurance Code. The CA sustained the ruling of the trial court.
Manila Bankers assailed the ruling before the SC. It argued that Section 48 cannot apply to a case where
the beneficiary under the insurance contract posed as the insured and obtained the policy under
fraudulent circumstances. Aban, who was merely Sotero’s niece, had no insurable interest in the life of
her aunt. Manila Bankers adds that the policy was void ab initio and could not have given rise to rights
and obligations; as such, the action for the declaration of its nullity or inexistence does not prescribe.
1) Whether or not that policy may still be rescinded.

2) Whether or not the policy may be assailed on the claim that the insurance underwriter
who solicited the insurance is a cousin of the insured’s husband.
1) The policy can no longer be rescinded. It has become incontestable. After two years as contemplated
in Section 48, the defenses of concealment or misrepresentation, no matter how patent or well-founded,
will no longer lie.
The "incontestability clause" is a provision in law that after a policy of life insurance made payable on the
death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years
from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescindible by reason of fraudulent concealment or misrepresentation of the insured or his
agent.
The ultimate aim of Section 48 of the Insurance Code is to compel insurers to solicit business from or
provide insurance coverage only to legitimate and bona fide clients, by requiring them to thoroughly
investigate those they insure within two years from effectivity of the policy and while the insured is still
alive. If they do not, they will be obligated to honor claims on the policies they issue, regardless of fraud,
concealment or misrepresentation. The law assumes that they will do just that and not sit on their laurels,
indiscriminately soliciting and accepting insurance business from any Tom, Dick and Harry.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under
the provision, an insurer is given two years – from the effectivity of a life insurance contract and while the
insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period lapses,
or when the insured dies within the period, the insurer must make good on the policy, even though the
policy was obtained by fraud, concealment, or misrepresentation. This is not to say that insurance fraud
must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business must
be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona
fide takers of insurance and the public in general.
The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of
the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period of only
two (2) years from the issuance of the policy or its last reinstatement.
2) On the claim that the insurance underwriter who solicited the insurance is a cousin of Aban’s
husband
This will not affect the policy.
If insurers cannot vouch for the integrity and honesty of their insurance agents/salesmen and the
insurance policies they issue, then they should cease doing business. If they could not properly screen
their agents or salesmen before taking them in to market their products, or if they do not thoroughly
investigate the insurance contracts they enter into with their clients, then they have only themselves to
blame. Otherwise said, insurers cannot be allowed to collect premiums on insurance policies, use these
amounts collected and invest the same through the years, generating profits and returns therefrom for
their own benefit, and thereafter conveniently deny insurance claims by questioning the authority or
integrity of their own agents or the insurance policies they issued to their premium-paying clients. This is
exactly one of the schemes which Section 48 aims to prevent.
***"The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the
insurer."
MANULIFE PHILS. vs. YBAÑEZ, GR No. 204736, 28 Nov. 2016
Manulife Philippines, Inc. (Manulife) instituted a Complaint for Rescission of Insurance Contracts against
Hermenegilda Ybañez (Hermenegilda). Manulife alleged that the insurance policies in favor of Dr.
Gumersindo Solidum Ybañez (insured), where Hermenegilda was designated as revocable beneficiary,
were void due to concealment or misrepresentation about the true health of the insured.
Hermenegilda countered that Manulife's own insurance agent, Ms. Elvira Monteclaros herself assured
that there would be no problem regarding the application for the insurance policy. It was Monteclaros who
likewise filled up everything in the questionnaire, answered the queries and checked all the boxes in the
form, which the insured simply signed.
Manulife presented only one witness who gave no first-hand, direct evidence at all relative to the
particulars of the alleged misrepresentation/s or concealment/s that the insured allegedly practiced or
committed against it. This witness did not testify at all in respect to the circumstances under which the
documentary exhibits were executed, nor yet about what these documentary exhibits purported to
embody. He only identified the documents relative to the policies.
Can the policies be rescinded due to concealment or misrepresentation on the basis of the
testimony of the sole witness of Manulife?
NO.
Manulife had utterly failed to prove by convincing evidence that it had been beguiled, inveigled, or cajoled
into selling the insurance to the insured who purportedly with malice and deceit passed himself off as
thoroughly sound and healthy, and thus a fit and proper applicant for life insurance. Manulife's sole
witness gave no evidence at all relative to the particulars of the purported concealment or
misrepresentation allegedly perpetrated by the insured. In fact, the sole witness merely perfunctorily
identified the documentary exhibits adduced by Manulife; she never testified in regard to the
circumstances attending the execution of these documentary exhibits much less in regard to its contents.
The mere mechanical act of identifying the documentary exhibits, without the testimonies of the actual
participating parties thereto, adds up to nothing. These documentary exhibits did not automatically
validate or explain themselves. "The fraudulent intent on the part of the insured must be established
to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to
avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the insurer." For failure of Manulife to prove intent to defraud on the
part of the insured, it cannot validly sue for rescission of insurance contracts.
*******
THE ANTI-MONEY LAUNDERING ACT [AMLA]

(RA No. 9160, as amended by RA No. 9194, RA 10167, RA 10365 & RA 10927, the Revised
Implementing Rules and Regulations [RIRR]), and the Casino Implementing Rules and
Regulations (CIRR) of RA 10927
Who are the “covered persons” under the AMLA?
- ‘Covered persons’, natural or juridical, refer to:
1) Persons supervised or regulated by BSP

2) Persons supervised or regulated by IC
3) Persons supervised or regulated by SEC
4) Designated Non-Financial Businesses and Professions (DNFBPs)
(Rule 3 E. 2016, RIRR; Sec. 3a, RA 10365)
5) Casinos, including internet and ship-based casinos, with respect to their casino
cash transactions related to the gaming operations (Sec. 1, RA 10927). Included are
other entities as may be determined by the AGA (Appropriate Government Agency)
(Section 5, Rule II, CIRR).
Are lawyers and accountants included in the term "covered persons?"
- The term ‘covered persons’ shall exclude lawyers and accountants acting as
independent legal professionals in relation to information concerning their clients or where
disclosure of information would compromise client confidences or the attorney-client
relationship: Provided, That these lawyers and accountants are authorized to practice in
the Philippines and shall continue to be subject to the provisions of their respective
codes of conduct and/or professional responsibility or any of its amendments. (Sec. 3a, RA
10365)
HOWEVER, persons, including lawyers and accountants, who provide any of the following
services are covered:
i. Managing of client money, securities or other assets;

ii. Management of bank, savings, securities or other assets;
iii. Organization of contributions for the creation, operation or management of
companies; and
iv. Creation, operation or management of juridical persons or arrangements,
and buying and selling business entities.
(Rule III, 2016 RIRR)
What is a “covered transaction?”
• It is a transaction in cash or other equivalent monetary instrument involving a total

amount in excess of Five Hundred Thousand Pesos (P500,000.00) within one (1)
banking day (Sec. 3b, AMLA).
• Covered transaction in casinos refers to a single casino cash transaction involving an
amount in excess of Five Million Pesos (P5,000,000.00) or its equivalent in any other
currency (Sec. 6M, Rule III, CIRR).
• jewelry dealers in precious metals or precious stones, who, as a business, trade in precious
metals/stones, for transactions in excess of One million pesos (P1,000,000.00)
What court has jurisdiction over money laundering cases?
The Regional Trial Courts shall have jurisdiction to try all cases on money laundering. Those
committed by public officers and private persons who are in conspiracy with such pubic officers
shall be under the jurisdiction of the Sandiganbayan (Sec. 5, AMLA; Rule 5.1., RIRR).
SAFE HARBOR PROVISION
No administrative, criminal or civil proceedings shall lie against any person for having made a
covered or suspicious transaction report in the regular performance of his duties and in good
faith, whether or not such reporting results in any criminal prosecution under this Act or any
other Philippine law (Rule 9.3.e, AMLA IRR).
The AMLC may inquire, look into, & examine bank deposits
Notwithstanding the provisions of RA No. 1405 (Secrecy of Bank Deposits), RA No. 6426
(Foreign Currency Deposits Acts), RA No. 8791 (General Banking Law) and other laws, the
AMLC may inquire or examine any particular deposit or investment, including related accounts,
with any banking institution or non-bank financial institutions (Sec. 11, AMLA, as amended by RA 10167).
 Bank inquiry may be with or without a court order.
AMLC bank inquiry WITHOUT a court order
 inquiry of bank deposits WITHOUT a court-order
1. Kidnapping for ransom under Article 267 of Act No. 3815, otherwise
known as the Revised Penal Code, as amended;
2. Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No.
9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002;
3. Hijacking and other violations under Republic Act No. 6235; destructive
arson and murder, as defined under the Revised Penal Code, as amended;
4. Felonies or offenses of a nature similar to those mentioned in Section 3(i)

(1), (2) and (12) of the AMLA which are punishable under the penal laws of other
countries;
(1) Kidnapping for ransom under Article 267 of Act No. 3815,
otherwise known as the Revised Penal Code, as amended.
(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic
Act No. 9165, otherwise known as the Comprehensive Dangerous
Drugs Act of 2002.
(12) Hijacking and other violations under Republic Act No. 6235;
destructive arson and murder, as defined under the Revised
Penal Code, as amended.
5. Terrorism and conspiracy to commit terrorism as defined and

penalized under Republic Act No. 9372; and
6. Financing of terrorism under Section 4 and offenses punishable under

Sections 5, 6, 7 and 8 of Republic Act No. 10168, otherwise known as the
Terrorism Financing Prevention and Suppression Act of 2012.
(Rule 11B, 2016, RIRR).
Bank inquiry order is EX-PARTE
Bank inquiry order maybe availed of ex parte premised on the existence of probable cause
for violation of an unlawful activity under Sec. 3 (i) or money laundering offense under Sec. 4 of
the AMLA.
- inquiry includes related accounts which shall refer to accounts, the funds and sources of
which originated from and/or are materially linked to the monetary instruments(s) or
property(ies) subject of the freeze order(s).
-The Court of Appeals shall act on the application to inquire into or examine any deposit or
investment with any banking institution or non-bank financial institution within twenty-four (24)
hours from filing of the application. (RA 10167)
Republic v. Bolante, GR No. 190357, 17 April 2017 (Sereno, CJ)
Acting on a suspicious transaction report from the PNB and based on a Senate Committee Report, the
AMLC conducted an investigation on several NGOs—LIVECOR, Molugan and AGS—of which former
Agriculture Usec. Jocelyn Bolante was a former officer, came out with a Resolution finding probable
cause to believe that the accounts of the NGOs were related to what became known as the "fertilizer fund
scam."
The AMLC then filed an ex-parte petition for bank inquiry of the account of the NGOs and for the issuance
of a freeze order.
The RTC found no probable cause to believe that the deposits and investments of respondents were
related to an unlawful activity. It pointed out that the Republic, in support of the latter's application, relied
merely on two pieces of evidence: Senate Committee Report and the court testimony of witness Thelma
Espina of the AMLC Secretariat.
A) Is the application ex parte for a bank inquiry order pursuant to Section 11 of RA 9160 Constitutional?
B) Is it a violation of right to privacy or right to due process?
It is Constitutional and does not violate substantive due process.

- There is no physical seizure of the targeted corporeal property.
- The AMLC ex parte inquiry into bank accounts, is merely in pursuance of its
investigative functions akin to those of the NBI. The AMLC does not exercise
quasi-judicial functions.
- The account holder can then question the finding of probable cause for the
issuance of the bank inquiry order.
NO violation of the right to privacy.

- The source of the right to privacy governing bank deposits is statutory, not
constitutional. The legislature may validly carve out exceptions to the rule on the
secrecy of bank deposits, and one such legislation is Section 11 of R.A. 9160.
What is the basis of bank inquiry?
• When it has been established that there is probable cause that the deposits or investments,
including related accounts involved, are related to an unlawful activity as defined in Section
3(i) or a money laundering offense under Section 4. (RA 10167)
• Bank inquiry maybe made in the event of violation of the AMLA and does not presuppose
the pre-existence of a money laundering offense case already filed in court. (Republic v. Eugenio,
Jr. (545 SCRA 384 [2008])
The AMLC must show specific facts and circumstances that provide a link between an unlawful
activity or a money laundering offense.
For the issuance of a bank inquiry order, it is necessary for the AMLC to be able to show
specific facts and circumstances that provide a link between an unlawful activity or a money
laundering offense, on one hand, and the account or monetary instrument or property sought to
be examined on the other hand. In the absence of any proof to that effect, the bank inquiry order
will not be issued. (Republic v. Bolante, GR No. 190357, 17 April 2017)
The owner of the account has the right to ascertain from the CA the basis for the issuance of the
bank inquiry order ex-parte.
In 2015, a year before the 2016 presidential elections, reports abounded on the supposed
disproportionate wealth of then Vice President Jejomar Binay and the rest of his family, some of
whom were likewise elected public officers. The Office of the Ombudsman and the Senate
conducted investigations and inquiries thereon ostensibly based on their respective powers
delineated in the Constitution.
News reports announced the AMLC inquiry into then VP Binay's bank accounts, including
accounts of members of his family, and the law firm of Subido Pagente Certeza Mendoza &
Binay (SPCMB) where a family member was a partner. The SPCMB then wrote the CA about
the bank inquiry with a request to be furnished with copies of the petition for bank inquiry. The
CA denied the letter request citing the ex-parte nature and the confidentiality of the proceedings.
The SPCMB assailed the CA denial and questioned the Constitutionality of Section 11 of the
AMLA on the ex-parte bank inquiry.
Although the bank inquiry order ex-parte passes constitutional muster, there is nothing in
Section 11 nor the implementing rules and regulations of the AMLA which prohibits the owner of
the bank account, to ascertain from the CA, post issuance of the bank inquiry order ex-parte, if
his account is indeed the subject of an examination. There is nothing in Section 11 which
precludes the owner of the account from challenging the basis for the issuance thereof. (Subido
Pagente Certeza Mendoza and Binay Law Offices v. CA, G.R. No. 216914, 06 December 2016)
What action may the AMLC interpose against proceeds of any unlawful activity?
The AMLC shall apply via a verified ex parte petition before the Court of Appeals (CA) for a
FREEZE ORDER of any monetary instrument or property alleged to be proceeds of any
unlawful activity (Rule 7.2. par. 6, RIRR; Section 4, RA 10967).
The AMLC may also apply for an asset preservation order before the Regional Trial Court
having jurisdiction over the appropriate anti-money laundering case or civil forfeiture case
regarding the same account (Section 4, RA 10967).
What is the basis in obtaining a freeze order?

Upon a determination that probable cause exist that any monetary instrument or property is in any
way related to an unlawful activity in Sec. 3(i). (RA 10365; Sec. 4, RA 10967)
What is the effective period of the freeze order?
- The freeze order shall be effective immediately, for a period of twenty (20) days. Within the
twenty (20)-day period, the CA shall conduct a summary hearing, with notice to the parties, to
determine whether or not to modify or lift the freeze order, or extend its effectivity. The total
period of the freeze order issued by the CA under this provision shall not exceed six (6) months.
 If there is no case filed against a person whose account has been frozen within the
period determined by the CA, not exceeding six (6) months, the freeze order shall be
seemed ipso facto lifted (Section 4, RA 10967).
On motion of the AMLC filed before the expiration of the original period of the freeze order, the
court may, for good cause shown, extend its effectivity. Upon the timely filing of such motion
and pending resolution by the Court of Appeals, the freeze order shall remain effective (Rule 10A3,
2016, RIRR).
Within what period will the CA act on the application for a freeze order?
CA shall act on the application within 24-hours from filing of the petition. If the application is filed
a day before a nonworking day, the computation of the 24-hour period shall exclude the
nonworking days (Section 4, RA 10967).
What is the remedy of a person whose account was frozen?
A person whose account has been frozen may file a motion to lift the freeze order and the court
must resolve this motion before the expiration of the freeze order.
May a court issue a TRO/injunction against a freeze order?
No court shall issue a temporary restraining order or a writ of injunction against any freeze order
except the Supreme Court (SC) (Sec. 10, RA 10365).
***********
THE DATA PRIVACY ACT [DPA]

RA 10173
What is the data privacy act (DPA)?
 Republic Act No. 10173, otherwise known as the Data Privacy Act is a law that seeks to
protect all forms of information, be it private, personal, or sensitive. It is meant to cover
both natural and juridical persons involved in the processing of personal information.
Data privacy
 Refers to the act of protecting the integrity, confidentiality and availability of personal
information that are collected, processed and stored.
 Also known as information privacy.
What is the scope of the DPA?

• applies to any natural or juridical persons involved in the processing of personal
information
• in the government of private sector
• applies to an act done or practice engaged in and outside of the Philippines
 use equipment located in the Philippines, or those who maintain an office, branch,
or agency in the Philippines
Requisites
 Must involve any processing of personal information
 By either natural or juridical persons
 Either acting as a controller or processor
 Whether or not found in the Philippines that uses equipment or maintains an office,
branch or agency in the Philippines.
Extraterritorial application (Sec. 6)

Applies to entities within and outside of the Philippines when
 Processing of personal information about a Philippine citizen or resident
 Processing of personal information when the entity has a link with the Philippines and
such personal information is about a Philippine citizen or resident.
Examples:
 Contract entered in the Philippines
 A foreign company with central management and control in the
Philippines
 A Philippine subsidiary of a foreign company where the latter has access
to personal information in the Philippines.
 Entity is doing business in the Philippines
 Personal information is collected by an entity in the Philippines
The data subject

• An individual whose personal
information, sensitive personal information is processed
 natural person
 could include employees and customers
Consent of data subject

Data subject agrees to the collection and processing of his personal information, sensitive
personal information or privileged information.
- need to be proven
- informed consent
- mechanical act required
- freely given, & unambiguous indication of the data subject’s wishes.
3 forms of information under the DPA

1) personal information
2) sensitive personal information
3) privileged information
Personal information
• any information which can be linked to your identity, thus making you readily identifiable
• any information from which the identity of an individual is apparent or certain
• any information that would directly and certainly identify an individual when put together with
other information
• applies to both paper-based and electronic records.
 If such information can be reasonably traced back to an individual, then it is
personal information.
sample of personal information:

• a person's name, address, phone number or email address.
• ID number, online usernames, stage names.
• a photograph of a person.
• a video recording of a person, whether CCTV or otherwise, for example, a
recording of events in a classroom, at a train station, or at a family barbecue.
Privileged information
• refers to any and all forms of data which under the Rules of Court and other pertinent
laws constitute privileged communication.” (Sec.3k)
• Conversation that takes places within the context of a protected relationship
• attorney and client
• husband and wife
• priest and penitent
• a doctor and patient
• communications made to a public officer in official confidence
Sensitive personal information
Refers to personal information:

(1) About an individual’s race, ethnic origin, marital status, age, color, and religious,
philosophical or political affiliations;
(2) About an individual’s health, education, genetic or sexual life of a person, or to any
proceeding for any offense committed or alleged to have been committed by such person, the
disposal of such proceedings, or the sentence of any court in such proceedings;
(3) Issued by government agencies peculiar to an individual which includes, but not limited to,
social security numbers, previous or current health records, licenses or its denials, suspension
or revocation, and tax returns; and
(4) Specifically established by an executive order or an act of Congress to be kept classified.
(Sec. 3l)
Sample of SPI
• Health information such as medical diagnosis or prognosis by itself is not sensitive
personal information unless there is a Patient ID or name of the patient together with
the health information that will be used to trace back to an individual.
• - BIR, SSS, GSIS, PhilHealth and other government r
Processing
“Processing 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.” (Sec. 3j)
- any operation where personal information is involved. Whenever information is, among
other things, collected, modified, or used for some purpose, processing already takes place.
 The list is not exhaustive. Hence, “any” kind of operation upon personal information is included
in the word “processing.” What the definition in the DPA provided is an example of operations
performed upon personal information but the DPA did not limit the definition to the said list.
• Processing is mechanical
• includes any non-traditional collection of data
ex. texting, delivery via phone
• by any mode or medium
 The processing of sensitive personal information & privileged

information is prohibited.
Processing of sensitive and personal information is prohibited except in certain circumstances. The
exceptions are:
1) Consent of the data subject;
2) Pursuant to law that does not require consent;
3) Necessity to protect life and health of a person;
4) Necessity for medical treatment;
5) Necessity to protect the lawful rights of data subjects in court proceedings, legal
proceedings, or regulation.
3 principles in processing of personal information
1) Transparency
The data subject
 must be aware of the nature, purpose, and extent of the processing of his or her
personal data,
 including the risks and safeguards involved,
 the identity of personal information controller,
 his or her rights as a data subject, and
 how these can be exercised.
Any information and communication relating to the processing of personal data should be easy
to access and understand, using clear and plain language.
2) Legitimate purpose
The processing of information shall be compatible with a declared and specified purpose which
must not be contrary to law, morals, or public policy.
3) Proportionality
The processing of information shall be adequate, relevant, suitable, necessary, and not
excessive in relation to a declared and specified purpose. Personal data shall be processed
only if the purpose of the processing could not reasonably be fulfilled by other means.
The data protection officer (DPO)

All organizations are required to appoint a Data Protection Officer (“DPO”).
The DPO shall be accountable for ensuring compliance with the appropriate data protection
laws and regulations.
**designation is MANDATORY
 If no DPO is designated, the head of the agency is the default DPO
compliance officer for privacy (COP)

 In case of component units in the government or private sector, a COP maybe
designated or appointed COP for each sub-unit or component unit
 shall be under the supervision of the DPO (NPC Advisory No. 2017-01)
Requirements
• should be a full-time or organic employee of the PIC or PIP.
• In the government or public sector, the DPO or COP may be a career or appointive
position.
• In the private sector, the DPO or COP should ideally be a regular or permanent position.
Where DPO or COP is employed based on a contract, the term or duration should at
least be two (2) years.
 A PIC or PIP may outsource or subcontract the functions of its DPO or COP
(NPC Advisory No. 2017-01)
Personal information controller (PIC)

• Controls the collection, holding, processing or use of personal information. (CHUP)
• Includes one who instructs another person or organization to collect, hold, process,
use, transfer or disclose personal information.
• Determines the purpose of data processing.
• Natural or juridical
Personal information processor (PIP)

• Any person “qualified to act as such to whom a personal information controller may
outsource the processing of personal data pertaining to a data subject.”
• Anyone who processes personal data in behalf of the data controller.
• Takes instructions only from PIC; cannot share information
• Holds information with strict confidence EXCEPT: a) for scientific & statistical research;
and b) for criminal, administrative investigation involving data subject
Example (of processing on behalf of a Data Controller)

UNO runs a grocery store, he uses a POS (Point-of-sale) system for complying with BIR for tax purposes,
issuance of receipt and reporting to the manufacturer for warranty purposes, when DOS buys goods from
UNO’s store, he is asked his name, address, contact number and signature to which the cashier inputs on
their POS for warranty purposes. After the cashier processes the transaction and the receipt is printed
out, the POS saves the data on the local hard drive.
UNO did not personally collect the information. It was the cashier who typed it on the POS, but the cashier is not the
data controller but it is still UNO. Why? Because UNO determines how the data is used and how is it collected. The
cashier is under authorization by UNO to process the personal information of DOS for warranty purposes. The
cashier’s clerical act on behalf of UNO is considered an activity of a Data Processor.
Example (of a Data Controller also acting as a Data Processor)

An airline CEBU PAK processes its ticket sales via a travel agency GALA which in turn asks for your
personal information in order to book your flight.
First, GALA processes the transaction of booking of flights of CEBU PAK, which makes it a processor on
behalf of CEBU PAK.
Second, GALA keeps your personal information for the purposes of sending you periodic newsletters, emails
and updates regarding new and upcoming ticket sales. In this regard, GALA is deemed a Data Controller for
such purposes.
Rights of the data subject

The following are the substantive rights of the Data Subject:
1. Right to be Informed
2. Right of Access
3. Right to Correction
4. Right to Suspend, Withdraw, or Order the Removal of Personal Information from the Controller’s
Filing System
5. Right to Indemnity
6. Right to Data Portability
The Data Subject has the following auxiliary rights:
7. Right to Lodge a Complaint before the Commission
8. Right to Know the Identity of Accountable Individuals
Right to be informed (Sec. 16(a) and Sec. 16(b))

As a data subject, you have the right to be informed that your personal data will be, are being, or were, is
being collected and processed. (Sec. 16(a))
Data subjects also has the right to be furnished information prior or upon the next practicable opportunity
to be informed about how personal information will be stored, access, shared, contained, methods,
period, contact details of the controller, and existence of the rights under the Data Privacy Act . (Sec. 16(b))
Right to Access (Sec. 16(c)) : You have a right to obtain from an organization a copy of any information
relating to you that they have on their computer database and/or manual filing system. It should be
provided in an easy-to-access format, accompanied with a full explanation executed in plain language.
Right to Rectify (Sec. 16(d)) : You have the right to dispute and have corrected any inaccuracy or error in
the data a personal information controller (PIC) hold about you.
Right to Erasure/Blocking/Right to be forgotten (Sec. 16(e))

Right to Suspend, withdraw or order the blocking, removal or destruction of his or her personal
information from the personal information controller’s filing system upon discovery and substantial proof
that the personal information are incomplete, outdated, false, unlawfully obtained, used for unauthorized
purposes or are no longer necessary for the purposes for which they were collected.
Right to Object (Sec. 16(e)) : You can exercise your right to withdraw or object if the personal data
processing involved is based on consent or on legitimate interest.
Right to Damages (Sec. 16(f)) : You may claim compensation if you suffered damages due to inaccurate,
incomplete, outdated, false, unlawfully obtained or unauthorized use of personal data, considering any
violation of your rights and freedoms as data subject.
Transmissibility Rights (Sec. 17) : The lawful heirs and assigns of the data subject may invoke the
rights of the data subject upon death or incapacity.
Right to File Complaints (Sec. 7(b)) : The right to file a complaint with the National Privacy Commission.
Right to Data Portability (Sec. 18): Data portability allows you to obtain and electronically move, copy or
transfer your data in a secure manner, for further use.
****** © LP Ignacio ******

Commercial Laws: Larry P. Ignacio ©

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Commercial Laws: Larry P. Ignacio ©

Uploaded by

Copyright:

Available Formats

COMMERCIAL LAWS

pointers & cases

Principle of automatic protection:

Good faith or lack of knowledge is not a valid defense in infringement of copyright

 the "gravamen of copyright infringement"

Ownership of copyright or inventions in the course of employment

First to file rule

 Ownership of a trademark is acquired by its registration and its actual use

Is the registration of a trademark, by itself, a mode of acquiring ownership?

W Land Holdings, Inc. v. Starwood Hotels & Resort Worldwide

Is the mere use/display of the mark in the website actual use?

 Apart from its commercial utility, the benchmark of trademark registrability is

Great White Shark v. Caralde, Jr.

Is Caralde’s mark registrable? Will there be confusion?

YES. NO confusion will arise.

Doctrine of secondary meaning/doctrine of distinctiveness (Sec. 123.2, IPC)

Actual sale of counterfeit goods not essential for trademark infringement

 The likelihood of confusion is the gravamen of the offense of trademark

Factors to be considered in determining the likelihood of confusion

 use of trademark in UNRELATED articles of a different kind ALLOWED

Unfair Competition: essential elements

passing off (or palming off)/Unfair Competition

Section 24. Presumption of Consideration. - Every negotiable instrument is deemed

Wilson did not overcome the foregoing presumption.

Who between BDO and UnionBank is liable?

In check transactions, the collecting bank generally suffers the loss

effects of crossing a check

A) Alvin is NOT liable and Marasigan is not a HDC.

B) Marasigan is NOT a HDC.

Are electronic messages negotiable instruments?

 does NOT APPLY if the goods were NEVER transported

Safety of passengers (Arts. 1755-1763)

Carrier not an insurer against all risk

Art. 2180 and the registered owner rule

The WARSAW CONVENTION (WC)

• Two (2) categories

 What is a HIGH CONTRACTING PARTY? A signatory to the WC and subscribed to it.

1) the court of the domicile of the carrier

When is the WC NOT applicable?

COGSA: Carriage of Goods by Sea Act

Contracts covered by COGSA

Prescriptive period to file a claim for loss or damage

*The filing of a notice of claim/loss is NOT a condition precedent

“loss or damage” under the COGSA

 “Loss or Damage” as applied to the COGSA contemplates a situation where no delivery

 Thus, it is inapplicable in case of misdelivery or conversion. (Ang v. American Steamship

 Purpose of piercing the corporate veil

Case: International Academy of Management and Economics (I/AME), vs. Litton and

No violation of due process

Piercing the corporate veil applicable to all kinds of corporations

Concept of equitable ownership in non-stock corporation

Piercing is applicable to natural persons

When the corporation is the alter ego of the natural person

 REVERSE CORPORATE PIERCING

OUTSIDER & INSIDER REVERSE PIERCING

Effect of transfer of shares not recorded in the STB

Right to transfer/sell shares

• Right of transferee to have stocks transferred in his name is an inherent right of

2-pronged purpose of rehabilitation

MATERIAL FINANCIAL COMMITMENT: essential in rehabilitation

A material financial commitment becomes significant in gauging the resolve, determination,

Basic Polyprinters commitment was insufficient for the following reasons:

Parri Passu Principle

© LP Ignacio