U.

P LAW BOC abon3298 COMMERCIAL LAW

COMMERCIAL LAW
CANONICAL DOCTRINES
INSURANCE
TOPIC DOCTRINE CITED IN CITING
Business of The business of insurance is imbued Republic v. Del AFP Mutual Benefit
insurance with public interest. It is subject to Monte Motors, Association, Inc. v.
imbued with regulation by the State, with respect Inc., G.R. No. NLRC, 334 Phil. 712,
public interest not only to the relations between the 156956, October 9, January 28, 1997;
insurer and the insured, but also to the 2006 citing Insular Life
internal affairs of insurance Assurance Co., Ltd.
companies. v. NLRC, 179 SCRA
459, November 15,
1989.
Nature of group The coverage terms for group Commissioner of Pineda v. Court of
insurance insurance are usually stated in a Internal Revenue Appeals, G.R. No.
master agreement or policy that is v. Manila Bankers' 105562, September
issued by the insurer to a Life Insurance, 27, 1993
representative of the group or to an G.R. No. 169103,
administrator of the insurance March 16, 2011
program, such as an employer. The
employer acts as a functionary in the
collection and payment of premiums
and in performing related duties.
Likewise falling within the ambit of
administration of a group policy is the
disbursement of insurance payments
by the employer to the employees.
Most policies, such as the one in this
case, require an employee to pay a
portion of the premium, which the
employer deducts from wages while
the remainder is paid by the employer.
This is known as a contributory plan
as compared to a non-contributory
plan where the premiums are solely
paid by the employer.

Although the employer may be the

titular or named insured, the
insurance is actually related to the life
and health of the employee. Indeed,
the employee is in the position of a
real party to the master policy, and
even in a non-contributory plan, the
payment by the employer of the entire
premium is a part of the total
compensation paid for the services of
the employee. Indeed, the employee
is in the position of a real party to the

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master policy, and even in a non-

contributory plan, the payment by the
employer of the entire premium is a
part of the total compensation paid for
the services of the employee. Put
differently, the labor of the employees
is the true source of the benefits,
which are a form of additional
compensation to them.
Insurable An insurable interest in property does Gaisano Cagayan,
interest in not necessarily imply a property Inc. v. Insurance
property interest in, or a lien upon, or Company of North
possession of, the subject matter of America, G.R. No.
the insurance, and neither the title nor 147839, June 8,
a beneficial interest is requisite to the 2006
existence of such an interest, it is
sufficient that the insured is so
situated with reference to the property
that he would be liable to loss should
it be injured or destroyed by the peril
against which it is insured. Anyone
has an insurable interest in property
who derives a benefit from its
existence or would suffer loss from its
destruction.
Exceptions to The first exception is in Section 77 of Philam Insurance UCPB General
rule on validity the Insurance Code, that is, "in the Co., Inc. v. Parc Insurance Co., Inc. v.
of insurance case of a life or an industrial life policy Chateau Masagana Telemart,
contract upon whenever the grace period provision Condominium Inc., G.R. No.
payment of applies." Unit Owners 137172, April 4,
premium Association, Inc., 2001; citing Makati
The second exception is in Section 78 G.R. No. 201116, Tuscany
of the Insurance Code, which states March 4, 2019 Condominium Corp.
that "an acknowledgment in a policy v. CA, G.R. No.
or contract of insurance or the receipt 95546, November 6,
of premium is conclusive evidence of 1992
its payment, so far as to make the
policy binding, notwithstanding any
stipulation therein that it shall not be
binding until the premium is actually
paid."

The exception in Section 78 is

inapplicable in this case, because
there was no acknowledgment of
receipt of premium in the policy or
insurance contract, and in fact, no
premium was ever paid.

The third exception is taken from the

case of Makati Tuscany
Condominium Corporation v. Court of
Appeals, wherein the Court ruled that
the general rule in Section 77 may not
apply if the parties agreed to the
payment of premium in installment
and partial payment has been made

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at the time of loss. Here, the parties

agreed to a payment by installment,
but no actual payment was made.
Thus, the third exception has no
application in this case.

The Makati Tuscany case also

provided the fourth exception, that is,
if the insurer has granted the insured
a credit term for the payment of the
premium, then the general rule may
not apply.

The fifth and last exception, taken

from the UCPB case, is estoppel in
instances when the insurer had
consistently granted a credit term for
the payment of premium despite full
awareness of Section 77. The insurer
cannot deny recovery by the insured
by citing the general rule in Section
77, because the insured had relied in
good faith on the credit term granted.
Reinstatement The stipulation in a life insurance Lalican v. Insular McGuire v.
of insurance policy giving the insured the privilege Life Assurance Manufacturers Life
policy to reinstate it upon written application Co. Ltd., G.R. No. Insurance Co., G.R.
discretionary on does not give the insured absolute 183526, August 25, No. L-3581,
insurer right to such reinstatement by the 2009 September 21, 1950
mere filing of an application. The
insurer has the right to deny the
reinstatement if it is not satisfied as to
the insurability of the insured and if the
latter does not pay all overdue
premium and all other indebtedness
to the insurer. After the death of the
insured the insurance Company
cannot be compelled to entertain an
application for reinstatement of the
policy because the conditions
precedent to reinstatement can no
longer be determined and satisfied.
Gross The ordinary negligence of the FGU Insurance
negligence by insured and his agents has long been Corp. v. Court of
insured held as a part of the risk which the Appeals, G.R. Nos.
constitues willful insurer takes upon himself, and the 137775 & 140704,
act exonerating existence of which, where it is the March 31, 2005
insurer proximate cause of the loss, does not
absolve the insurer from liability. But
willful exposure, gross negligence,
negligence amounting to misconduct,
etc.,have often been held to release
the insurer from such liability.

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PRE-NEED
TOPIC DOCTRINE CITED IN CITING
HMOs vs The main difference between an HMO Medicard Philippine Health
insurance and an insurance company is that Philippines, Inc. v. Care Providers, Inc.
companies HMOs undertake to provide or CIR, G.R. No. v. CIR, G.R. No.
arrange for the provision of medical 222743, April 5, 167330, September
services through participating 2017 18, 2009
physicians while insurance
companies simply undertake to
indemnify the insured for medical
expenses incurred up to a pre-agreed
limit.

TRANSPORTATION
TOPIC DOCTRINE CITED IN CITING
Definition of a A "public utility" is "a business or Metropolitan Cebu Napocor v. Court of
public utility service engaged in regularly Water District v. Appeals, G.R. Nos.
supplying the public with some Adala, G.R. No. 112702 &113613,
commodity or service of public 168914, July 4, September 26, 1997,
consequence such as electricity, gas, 2007 citing Albano v.
water, transportation, telephone or Reyes, G.R. No.
telegraph service. The term "public JG Summit 83551. July 11, 1989
utility" implies public use and service Holdings v. Court
to the public of Appeals, G.R.
No. 124293,
September 24,
2003
Statues enacted Statutes enacted for the regulation of Radio Pangasinan
for regulation of public utilities, being a proper exercise Communications Transportation Co,
public utilities by the state of its police power, are of the Philippines, Inc v. Public Service
are retroactive applicable not only to those public Inc. v. National Commission, G.R.
utilities coming into existence after its Telecommunica- No. 47065. June 26,
passage, but likewise to those already tions 1940
established and in operation Commission, G.R.
No. L-68729, May
29, 1987

Cebu Transit Co.,

Inc. v. Public
Service
Commission, G.R.
No. L-788, October
30, 1947
Power to issue a That the issuance of a franchise, Francisco, Jr. v. Albano v. Reyes,
franchise, certificate or other form of Toll Regulatory G.R. No. 83551. July
certificate or any authorization for the operation of a Board, G.R. Nos. 11, 1989
form of public utility shall be subject to 166910, 169917,
authorization for amendment, alteration or repeal by 173630 & 183599,
operation of Congress does not necessarily imply October 19, 2010
public utilities is that only Congress has the power to
not limited to the grant such authorization
Congress
Franchises Franchises issued by Congress are Francisco, Jr. v. Albano v. Reyes,
issued by not required before each and every Toll Regulatory G.R. No. 83551. July
Congress are public utility may operate Board, G.R. Nos. 11, 1989
not required 166910, 169917,

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before each and 173630 & 183599,

every public October 19, 2010
utility may
operate Philippine
Airlines, Inc. v.
Civil Aeronautics
Board, G.R. No.
119528, March 26,
1997
Transfer of If the property covered by the Y Transit Co, Inc. Montoya v. Ignacio,
franchise franchise is transferred, or leased to v. National Labor G.R. No. L-5868,
without PSC's another without obtaining the requisite Relations December 29, 1953
approval is not approval the transfer is not binding Commission, G.R.
binding on the against the Public Service Nos. 88195-96,
latter Commission and in contemplation of January 27, 1994
law the grantee continues to be
responsible under the franchise in Gelisan v. Alday,
relation to the Commission and to the G.R. No. L-30212,
Public September 30,
1987
Prior-operator So long as the first licensee keeps and Vda. de Fernando Batangas Trans. Co.
rule performs the terms and conditions of v. Gallardo, G.R. v. Orlanes, G.R. No.
its license and complies with the No. L-4860, 28865, December 19,
reasonable rules and regulations of September 8, 1953 1928
the Commission and meets the
reasonable demands of the public, it Tan Sima v.
should have more or less of a vested Hacbang, G.R. No.
and preferential right over a person 37321, March 3,
who seeks to acquire another and a 1933
later license over the same route
Kabit system The kabit system is an arrangement Lim v. Court of Teja Marketing v.
whereby a person who has been Appeals, G.R. No. Intermediate
granted a certificate of public 125817, January Appellate Court, G.R.
convenience allows other persons 16, 2002 No. L-65510, March
who own motor vehicles to operate 9, 1987
them under his license, sometimes for
a fee or percentage of the earnings
Registered- Under the registered owner rule, Greenstar Caravan Travel and
owner rule registered owners are liable for death Express, Inc. v. Tours International,
or injuries caused by the operation of Universal Robina Inc. v. Abejar, G.R.
their vehicles. Its main aim is to Corp., G.R. No. No. 170631,
identify the owner so that if any 205090, October February 10, 2016,
accident happens, or that any 17, 2016 citing Erezo v. Jepte,
damage or injury is caused by the G.R. No. L-9605,
vehicle on the public highways, September 30, 1957
responsibility therefor can be fixed on
a definite individual, the registered
owner
The definition of Article 1732 also carefully avoids LTFRB v. Bascos v. Court of
a common making any distinction between a Valenzuela, G.R. Appeals, G.R. No.
carrier makes person or enterprise offering No. 242860. March 101089, April 7,
no distinction transportation service on a regular or 11, 2019. 1993; citing De
whether the scheduled basis and one offering Guzman v. Court of
business of such service on an occasional, Cruz v. Sun Appeals, G.R. No. L-
carrying/trans- episodic or unscheduled basis. Holidays, G.R. No. 47822, Dec. 22, 1988
porting is Neither does Article 1732 distinguish 186312. June 29,
principal or only between a carrier offering its services

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ancillary, to the “general public,” i.e., the 2010

whether the general community or population, and
business one who offers services or solicits Loadstar Shipping
schedule is business only from a narrow segment Co v. CA, G.R. No.
regular or of the general population. 131621, September
occasional, or 28, 1999
whether the
business serves First Philippine
the general Industrial
public or only a Corporation v. CA,
narrow segment G.R. No. 125948,
of it. December 29, 1998

Sps. Fabre v. CA,

G.R. No. 111127,
July 26, 1996
Stipulation A stipulation at the back of an airline Pan Am v. IAC, Ong Yiu v. CA, G.R.
limiting carrier's ticket limiting the liability of the carrier G.R. No. 70462, No. L-40597, June
liability is valid for lost baggage to a specified amount August 11, 1988 29, 1979
is valid and that the carrier's liability
was limited to such amount because
of the passenger's failure to declare a
higher value, much less pay additional
charges.
Carrier- The relation of carrier and passenger Aboitiz Shipping La Mallorca v. Court
passenger does not cease at the moment the Corp. v. Court of of Appeals, G.R. No.
relationship passenger alights from the carrier's Appeals, G.R. No. L-20761, July 27,
continues until vehicle at a place selected by the 84458 November 6, 1966
after a carrier at the point of destination, but 1989
reasonable continues until the passenger has had
time/opportunity a reasonable time or a reasonable
for the opportunity to leave the carrier's
passenger to premises. And, what is a reasonable
leave the time or a reasonable delay within this
carrier's rule is to be determined from all the
premises circumstances
Shipowners and Shipowners and ship agents are civilly Westwind Standard Oil v.
ship agents liable for the acts of the captain and Shipping v. UCPB Castelo, G.R. No.
civilly liable for for the indemnities due to third General 13695. October 18,
acts of the persons and injured parties may Insurance, G.R. 1921
captain and for immediately look for reimbursement No. 200289.
indemnities in to the owner of the ship, it being November 25,
favor of 3rd universally recognized that the ship 2013.
persons master or captain is primarily the
representative of the owner Luzon
Stevedoring v. CA,
G.R. No. L-58897.
December 3, 1987

Manila Steamship
v. Abdullhaman,
G.R. No. L-9534.
September 29,
1956
3 elements Three elements are necessary to a Barrios v. Go The Mayflower vs.
necessary to a valid salvage claim, namely, (1) a Thong, G.R. No. L- The Sabine (101 U.
marine peril, (2) service voluntarily 17192, March 30, S., 384)

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valid salvage rendered when not required as an 1963

claim existing duty or from a special
contract, and (3) success in whole or Erlanger &
in part, or that the service rendered Galinger, G.R. No.
contributed to such success L-10051, March 9,
1916
Contract of A contract of affreightment is a Cebu Salvage v. Puromines v. CA,
affreightment contract for special service to be Philippine Home G.R. No. 91228
and demise/ rendered by the owner of the vessel Assurance, G.R. March 22, 1993
bareboat charter and under such contract the general No. 150403.
owner retains the possession, January 25, 2007
command and navigation of the ship,
the charterer or freighter merely Caltex Inc v.
having use of the space in the vessel Sulpicio Lines,
in return for his payment of the charter G.R. No. 131166
hire September 30,
1999
Under a demise or bareboat charter,
the charterer mans the vessel with his Coastwise
own people and becomes the owner Lighterage v. CA,
pro hac vice, subject to liability to G.R. No. 114167
others for damages caused by July 12, 1995
negligence

BUSINESS ORGANIZATIONS
TOPIC DOCTRINE CITED IN CITING
Parties A corporation cannot become a Mendiola vs. Court J.M. Tuason v.
member of a partnership in the of Appeals, 497 Bolanos, 95 Phil. 106
absence of express authorization by SCRA 346, G.R. (1954); Esteban B.
statute or charter. No. 159333 July 31, Bautista, Treatise on
2006 Philippine
Partnership Law,
1978 ed., citing 60
A.L.R.2d 917; 6
Fletcher, Cyclopedia
of Corporations, Sec.
2520 (1950).
Mendiola vs. Court of
Appeals, 497 SCRA
346, G.R. No. 159333
July 31, 2006
Partnership term The birth and life of a partnership at Ortega vs. Court Rojas vs. Maglana,
will is predicated on the mutual desire of Appeals, 245 192 SCRA 110, G.R.
and consent of the partners. The right SCRA 529, G.R. No. 30616 December
to choose with whom a person wishes No. 109248 July 3, 10, 1990
to associate himself is the very 1995
foundation and essence of that
partnership. Its continued existence Rojas vs. Maglana,
is, in turn, dependent on the 192 SCRA 110,
constancy of that mutual resolve, G.R. No. 30616
along with each partner’s capability to December 10, 1990
give it, and the absence of a cause for
dissolution provided by the law itself.
Verily, any one of the partners may, at
his sole pleasure, dictate a dissolution
of the partnership at will. He must,

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however, act in good faith, not that the

attendance of bad faith can prevent
the dissolution of the partnership but
that it can result in a liability for
damages.
Partnership as A joint venture is considered in this J. Tiosejo Primelink Properties
distinguished jurisdiction as a form of partnership Investment Corp. and Development
from joint and is, accordingly, governed by the v. Spouses Ang, Corporation v.
venture law of partnerships. G.R. No. 174149, Lazatin-Magat, G.R.
September 8, 2010 No. 167379, 27 June
2006, 493 SCRA 444,
467; Aurbach v.
Sanitary Wares
Manufacturing
Corporation, 259 Phil.
606, 624 (1989).
Right to Formal For as long as the partnership exists, Emnace v. Court Fue Leung v. IAC,
Account any of the partners may demand an of Appeals, G.R. 169 SCRA 746, 755
accounting of the partnership's No. 126334, (1989).
business. Prescription of the said right November 23, 2001
starts to run only upon the dissolution
of the partnership when the final
accounting is done.
Nature of Only in exceptional circumstances Guy v. Gacott, Muñasque v. CA,
Individual shall the partners' liability be solidary G.R. No. 206147, G.R. L-39780 (1985)
Liability in nature. Articles 1822, 1823 and January 13, 2016
Subsidiary 1824 of the Civil Code provide for
these exceptional conditions. In
essence, these provisions articulate
that it is the act of a partner which
caused loss or injury to a third person
that makes all other partners solidarily
liable with the partnership because of
the words "any wrongful act or
omission of any partner acting in the
ordinary course of the business," "one
partner acting within the scope of his
apparent authority" and "misapplied
by any partner while it is in the custody
of the partnership." The obligation is
solidary because the law protects the
third person, who in good faith relied
upon the authority of a partner,
whether such authority is real or
apparent.
Right to Formal As an industrial partner, private Tocao v. Court of Evangelista & Co. v.
Account respondent had the right to demand Appeals, G.R. No. Abad Santos,151-A
for a formal accounting of the 127405, October 4, Phil. 853-860 (1973)
business and to receive her share in 2000
the net profit.
Partnership by A third party who, knowing an Missionary Sisters Lim v. Phil. Fishing
estoppel association to be unincorporated, of Our Lady of Gear Industries, Inc.,
nonetheless treated it as a Fatima v. Alzona, 376 Phil. 76, 92
corporation and received benefits G.R. No. 224307, (1999||| (Missionary
from it, may be barred from denying [August 6, 2018] Sisters of Our Lady of
its corporate existence in a suit Fatima v. Alzona,
brought against the alleged

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corporation. In such case, all those G.R. No. 224307,

who benefited from the transaction [August 6, 2018]
made by the ostensible corporation,
despite knowledge of its legal defects,
may be held liable for contracts they
impliedly assented to or took
advantage of.
Partnership still The partnership, although dissolved, Emnace v. Court Sy v. Court of
exists even after continues to exist and its legal of Appeals, G.R. Appeals, 313 SCRA
dissolution personality is retained, at which time it No. 126334, 328, 347 (1999);
completes the winding up of its affairs, [November 23, Ortega v. Court of
including the partitioning and 2001], 422 PHIL 10- Appeals, 245 SCRA
distribution of the net partnership 28 529, 536 (1995).
assets to the partners.
Termination of Since it is the partnership, as a Jarantilla, Jr. v. Villareal v. Ramirez,
partnership separate and distinct entity, that must Jarantilla, G.R. No. G.R. No. 144214,
refund the shares of the partners, the 154486, December [July 14, 2003], 453
amount to be refunded is necessarily 1, 2010 PHIL 999-1013
limited to its total resources. In other
words, it can only pay out what it has
in its coffers, which consists of all its
assets. However, before the partners
can be paid their shares, the creditors
of the partnership must first be
compensated. After all the creditors
have been paid, whatever is left of the
partnership assets becomes available
for the payment of the partners'
shares.
Doctrine of A corporation, upon coming into Land Bank of the
Separate existence, is invested by law with a Philippines v. CA,
Juridical personality separate and distinct from G.R. No. 127181
Personality those persons composing it as well as (2001)
from any other legal entity to which it
may be related. By this attribute, a
stockholder may not, generally, be
made to answer for acts or liabilities of
the said corporation, and vice versa.
Doctrine of "The general rule remains that, in the Westmont Bank v. People's Aircargo
apparent absence of authority from the board of Inland and Warehousing Co.
authority directors, no person, not even its Construction and v. Court of Appeals,
officers, can validly bind a Development G.R. No. 117847,
corporation. 21 If a corporation, Corp., G.R. Nos. October 7, 1998, 297
however, consciously lets one of its 123650 & 123822, SCRA 170, 184-185;
officers, or any other agent, to act March 23, 2009 citing Francisco v.
within the scope of an apparent GSIS, 7 SCRA 577,
authority, it will be estopped from 583 (1963)
denying such officer's authority."
Trust fund "It is established doctrine that Enano-Bote v. Halley v. Printwell,
doctrine subscriptions to the capital of a Alvarez, G.R. No. G.R. No. 157549.
corporation constitute a fund to which 223572, November May 30, 2011; citing
creditors have a right to look for 10, 2020 Philippine Trust Co.
satisfaction of their claims and that the v. Rivera, G.R. No.
assignee in insolvency can maintain 19761, January 29,
an action upon any unpaid stock 1923
subscription in order to realize assets
for the payment of its debts. (Velasco

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vs. Poizat, 37 Phil. 802) . . .

We clarify that the trust fund doctrine

is not limited to reaching the
stockholder's unpaid subscriptions.
The scope of the doctrine when the
corporation is insolvent encompasses
not only the capital stock, but also
other property and assets generally
regarded in equity as a trust fund for
the payment of corporate debts. All
assets and property belonging to the
corporation held in trust for the benefit
of creditors that were distributed or in
the possession of the stockholders,
regardless of full payment of their
subscriptions, may be reached by the
creditor in satisfaction of its claim.

Also, under the trust fund doctrine, a

corporation has no legal capacity to
release an original subscriber to its
capital stock from the obligation of
paying for his shares, in whole or in
part, without a valuable consideration,
or fraudulently, to the prejudice of
creditors. The creditor is allowed to
maintain an action upon any unpaid
subscriptions and thereby steps into
the shoes of the corporation for the
satisfaction of its debt. To make out a
prima facie case in a suit against
stockholders of an insolvent
corporation to compel them to
contribute to the payment of its debts
by making good unpaid balances
upon their subscriptions, it is only
necessary to establish that the
stockholders have not in good faith
paid the par value of the stocks of the
corporation."
Imprisonment If the crime is committed by a Ching v. Secretary Ong v. CA, G.R. No.
inapplicable for corporation or other juridical entity, of Justice, G.R. 119858, April 29,
corporations the directors, officers, employees or No. 164317, 2003; citing
convicted of other officers thereof responsible for February 6, 2006
crimes the offense shall be charged and
penalized for the crime, precisely
because of the nature of the crime and
the penalty therefor. A corporation
cannot be arrested and imprisoned;
hence, cannot be penalized for a
crime punishable by imprisonment.
Piercing the "The doctrine of piercing the corporate Maricalum Mining General Credit
corporate veil veil applies only in three (3) basic Corp. v. Corporation v. Alsons
areas, namely: (a) defeat of public Florentino, G.R. Development and
convenience as when the corporate Nos. 221813 & Investment
fiction is used as a vehicle for the Corporation, G.R. No.

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evasion of an existing obligation; (b) 222723, July 23, 154975, January 29,
fraud cases or when the corporate 2018 2007; citing Traders
entity is used to justify a wrong, Royal Bank v. CA,
protect fraud, or defend a crime; or (c) G.R. 93397, March 3,
alter ego cases, where a corporation 1997, 269 SCRA 15,
is merely a farce since it is a mere Koppel (Phil.), Inc. v.
alter ego or business conduit of a Yatco, 77 Phil. 496
person, or where the corporation is so (1946), and Umali v.
organized and controlled and its CA, G.R. No. 89561,
affairs are so conducted as to make it September 13, 1990,
merely an instrumentality, agency, 189 SCRA 529
conduit or adjunct of another
corporation. This principle is basically
applied only to determine established
liability. However, piercing of the veil
of corporate fiction is frowned upon
and must be done with caution. This is
because a corporation is invested by
law with a personality separate and
distinct from those of the persons
composing it as well as from that of
any other legal entity to which it may
be related."
Derivative suit "It is well settled in this jurisdiction that Cua, Jr. v. Tan, Angeles v. Santos,
where corporate directors are guilty of G.R. Nos. 181455- G.R. No. 43413,
a breach of trust — not of mere error 56 & 182008, August 31, 1937
of judgment or abuse of discretion — December 4, 2009
and intracorporate remedy is futile or
useless, a stockholder may institute a
suit in behalf of himself and other
stockholders and for the benefit of the
corporation, to bring about a redress
of the wrong inflicted directly upon the
corporation and indirectly upon the
stockholders."
Moral damages As a rule, a corporation is not entitled Manila Electric Co. Inter-Asia
to moral damages because, not being v. Nordec Investments Ind., Inc.
a natural person, it cannot experience Philippines, 861 v. Court of Appeals,
physical suffering or sentiments like SCRA 515 (2018) supra note 34, at 560,
wounded feelings, serious anxiety, citing People’s
mental anguish and moral shock. The Aircargo and
only exception to this rule is when the Warehousing Co.,
corporation has a reputation that is Inc. v. CA, 357 Phil.
debased, resulting in its humiliation in 850 (1998); BPI
the business realm. Family Savings Bank,
Inc. v. First Metro
Investment
Corporation
Definition of "The terms 'doing' or 'engaging in' or SMI-ED Phil. Mentholatum Co.,
doing business 'transacting' business 'impl[y] a Technology, Inc. Inc. v. Mangaliman,
continuity of commercial dealings and v. Commissioner 72 Phil. 525 (1941)
arrangements, and contemplates, to of Internal
that extent, the performance of acts or Revenue, G.R. No.
works or the exercise of some of the 175410, November
functions normally incident to, and in 12, 2014
progressive prosecution of, the

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purpose and object of its

organization.'"
Foreign Under the SEC Rules, there are two Narra Nickel Rivera v. Litam &
Ownership of cases in determining the nationality of Mining & Company, Inc., L-
Shares - Control the Investee Corporation. The first Development 16954, 25 April 1962,
Test case is the Control Test [wherein] Corp. v. Redmont 4 SCRA 1072.
‘(s)hares belonging to corporations or Consolidated
partnerships at least 60% of the Mines Corp., G.R.
capital of which is owned by Filipino No. 195580, April
citizens shall be considered as of 21, 2014
Philippine nationality.’ Under the
liberal Control Test, there is no need
to further trace the ownership of the
60% (or more) Filipino stockholdings
of the Investing Corporation since a
corporation which is at least 60%
Filipino-owned is considered as
Filipino.

The second case is the Strict Rule or

the Grandfather Rule Proper
[wherein] "if the percentage of Filipino
ownership in the corporation or
partnership is less than 60%, only the
number of shares corresponding to
such percentage shall be counted as
of Philippine nationality." Under the
Strict Rule or Grandfather Rule
Proper, the combined totals in the
Investing Corporation and the
Investee Corporation must be traced
(i.e., "grandfathered") to determine
the total percentage of Filipino
ownership.

The "control test" is still the prevailing

mode of determining whether or not a
corporation is a Filipino corporation,
within the ambit of Sec. 2, Art. II of the
1987 Constitution, entitled to
undertake the exploration,
development and utilization of the
natural resources of the Philippines.
When in the mind of the Court there is
doubt, based on the attendant facts
and circumstances of the case, in the
60-40 Filipino-equity ownership in the
corporation, then it may apply the
"grandfather rule."
Corporation "As a rule, a corporation that Philippine
purchasing purchases the assets of another will National Bank v.
assets of not be liable for the debts of the selling Andrada Electric &
another not corporation, provided the former Engineering Co.,
ordinarily liable acted in good faith and paid adequate G.R. No. 142936,
for debts of consideration for such assets, except April 17, 2002
selling when any of the following
corporation circumstances is present: (1) where

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the purchaser expressly or impliedly

agrees to assume the debts, (2)
where the transaction amounts to a
consolidation or merger of the
corporations, (3) where the
purchasing corporation is merely a
continuation of the selling corporation,
and (4) where the transaction is
fraudulently entered into in order to
escape liability for those debts."
Merger vs "A consolidation is the union of two or Philippine
consolidation more existing entities to form a new National Bank v.
entity called the consolidated Andrada Electric &
corporation. A merger, on the other Engineering Co.,
hand, is a union whereby one or more G.R. No. 142936,
existing corporations are absorbed by April 17, 2002
another corporation that survives and
continues the combined business."
Business "If the cause of the losses is merely Filipinas Port Board of Liquidators
judgment rule error in business judgment, not Services, Inc. v. v. Heirs of Maximo M.
amounting to bad faith or negligence, Cruz, G.R. No. Kalaw, et al., G.R.
directors and/or officers are not liable. 161886, [March 16, No. L-18805, August
For them to be held accountable, the 2007 15, 1967
mismanagement and the resulting
losses on account thereof are not the
only matters to be proven; it is likewise
necessary to show that the directors
and/or officers acted in bad faith and
with malice in doing the assailed acts.
Bad faith does not simply connote bad
judgment or negligence; it imports a
dishonest purpose or some moral
obliquity and conscious doing of a
wrong, a breach of a known duty
through some motive or interest or ill-
will partaking of the nature of fraud."

SECURITIES
TOPIC DOCTRINE CITED IN CITING
Securities; kinds A test to determine whether a Power Homes
of securities; transaction falls within the scope of an Unlimited Corp. v.
Howey test "investment contract." Known as the SEC and Manero,
Howey Test, it requires a transaction, G.R. No. 164182
contract, or scheme whereby a (2008)
person (1) makes an investment of
money, (2) in a common enterprise,
(3) with the expectation of profits, (4)
to be derived solely from the efforts of
others.
A scheme wherein an investor enrolls
to be entitled to recruit other investors,
and to receive commissions from the
investments of those directly recruited
by him, constitutes an investment
contract, which is a security under RA
8799. Under the scheme, the

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accumulated amount received by the

investor comes primarily from the
efforts of his recruits.
Securities; The mere fact that a banking Union Bank v SEC, BASECO vs. PCGG,
procedure for institution, in regard to its banking G.R. No. 138949, et al. 150 SCRA 181
registration of functions, is already subject to the (2001) (1987).
securities supervision of the Bangko Sentral ng
Pilipinas does not exempt the former
from reasonable disclosure
regulations issued by the Securities
and Exchange Commission (SEC).
These regulations -- imposed on
petitioner as a banking institution
listed in the stock market -- are meant
to assure full, fair and accurate
information for the protection of
investors. Imposing such regulations
is a function within the jurisdiction of
the SEC.
Tender Offer Tender offer is a publicly announced Cemco Holdings,
Rule intention by a person acting alone or Inc. v. National
in concert with other persons to Life Insurance
acquire equity securities of a public Company of the
company. Stated differently, a tender Philippines, G.R.
offer is an offer by the acquiring No. 171815 (2007)
person to stockholders of a public
company for them to tender their
shares therein on the terms specified
in the offer.Tender offer is in place to
protect minority shareholders against
any scheme that dilutes the share
value of their investments. It gives the
minority shareholders the chance to
exit the company under reasonable
terms, giving them the opportunity to
sell their shares at the same price as
those of the majority shareholders.

BANKING
TOPIC DOCTRINE CITED IN CITING
Nature of By the nature of its functions, a bank Philippine Savings Bank of the Philippine
relationship is under obligation to treat the Bank v. Sakata, Islands v. Casa
accounts of its depositors "with G.R. No. 229450, Montessori
meticulous care, always having in June 17, 2020 Internationale, 474
mind the fiduciary nature of their Phil. 298, 318 (2004),
relationship." As such, in dealing with and Philippine
its depositors a bank should exercise National Bank v.
its functions not only with the diligence Quimpo, 242 Phil.
of a good father of a family but it 324, 327 (1988)
should do so with the highest degree
of care.
Degree of This fiduciary relationship means that Consolidated Sec. 2, Republic Act
diligence for the bank's obligation to observe "high Bank and Trust No. 8791
banks standards of integrity and Corporation v.
performance" is deemed written into Court of Appeals,
every deposit agreement between a

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bank and its depositor. The fiduciary 410 SCRA 562

nature of banking requires banks to (2003)
assume a degree of diligence higher
than that of a good father of a family.
Bank secrecy The contention that trust accounts are Ejercito v.
not covered by the term "deposits," as Sandiganbayan,
used in R.A. 1405, by the mere fact 509 SCRA 190
that they do not entail a creditor- (2006)
debtor relationship between the
trustor and the bank, does not lie. An
examination of the law shows that the
term "deposits" used therein is to be
understood broadly and not limited
only to accounts which give rise to a
creditor-debtor relationship between
the depositor and the bank.
Joint accounts A joint account is one that is held In the Matter of the Apique v.
jointly by two or more natural persons, Intestate Estate of Fahnenstich, 765
or by two or more juridical persons or Reynaldo G. Phil. 915, 922 (2015)
entities. Under such setup, the Rodriguez v.
depositors are joint owners or co- Rodriguez, 854
owners of the said account, and their SCRA 63, 2018
share in the deposits shall be
presumed equal, unless the contrary
is proved. The nature of joint accounts
is governed by the rule on co-
ownership.

INTELLECTUAL PROPERTY
TOPIC DOCTRINE CITED IN CITING
Doctrine of Under the doctrine of equivalents, an Smith Kline Continental Oil
Equivalents infringement occurs when a device: Beckman Corp. Company v. Cole, 634
(1) Appropriates a prior invention by v. CA, G.R. No. F. 2d 188 at 191
incorporating its innovative 126627 (2003) (1981); Godinez v. CA,
concept, albeit with some G.R. No. L-97343
modification and change, (1993)
(2) Performs substantially the same
function in substantially the same
way, and
(3) Achieves substantially the same
result.
Functions of a The function of a trademark is to point Zuneca Citigroup, Inc. v.
Trademark out distinctly the origin or ownership of Pharmaceutical Citystate Savings
the goods to which it is affixed; to v. Natrapharm, Bank, Inc., G.R. No.
secure to him, who has been Inc., G.R. No. 205409, [June 13,
instrumental in bringing into the 211850, 2018]; citing Manolo P.
market a superior article of [September 8, Samson v. Caterpillar,
merchandise, the fruit of his industry 2020]) Inc., IPO Appeal No.
and skill; to assure the public that they 14-2013-0014,
are procuring the genuine article; to [February 7, 2014]);
prevent fraud and imposition; and to citing Ecole de Cuisine
protect the manufacturer against Manille, Inc. v. Renaud
substitution and sale of an inferior and Cointreau & Cie, G.R.
different article of his product. No. 185830, [June 5,
2013], citing Mirpuri v.

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CA, G.R. No. 114508

(1999);
Generic Marks Generic terms are those which De La Salle Societe Des Produits
constitute "the common descriptive Montessori Nestle v. CA, G.R. No.
name of an article or substance," or International of 112012, 2001
comprise the "genus of which the Malolos, Inc. v.
particular product is a species," or are De La Salle
"commonly used as the name or Brothers, Inc.,
description of a kind of goods," or G.R. No. 205548,
"imply reference to every member of a [February 7, 2018]
genus and the exclusion of
individuating characters," or "refer to
the basic nature of the wares or
services provided rather than to the
more idiosyncratic characteristics of a
particular product," and are not legally
protectable.
Bad Faith One who has imitated the trademark Zuneca Fredco Manufacturing
Registration of another cannot bring an action for Pharmaceutical Corp. v. President and
infringement, particularly against the v. Natrapharm, Fellows of Hardvard
true owner of the mark, because he Inc., G.R. No. College, G.R. No.
would be coming to court with unclean 211850, 185917, [June 1,
hands. Priority is of no avail to the bad [September 8, 2011], 665 PHIL 374-
faith plaintiff. Good faith is required in 2020] 399; citing Shangri-la
order to ensure that a second user International Hotel
may not merely take advantage of the Management, Ltd v.
goodwill established by the true Developers Group of
owner. Companies, Inc. GR.
159938, Mar. 31, 2006
Doctrine of Secondary meaning is acquired when Lyceum of the Arce Sons and Co. v.
Secondary a descriptive mark or a mark that Philippines, Inc. Selecta Biscuit
Meaning consists of a shape or color becomes v. Court of Company, G.R. No. L-
distinctive because of its exclusive Appeals, G.R. No. 14761 & L-17981,
and continuous use in Philippine 101897, [March 5, [January 28, 1961],
commerce. This doctrine is to the 1993] 110 PHIL 858-873;
effect that a word or phrase originally citing Ang v. Teodoro,
incapable of exclusive appropriation G.R. No. L-48226
with reference to an article on the (1942)
market, because geographically or
otherwise descriptive, might
nevertheless have been used so long
and so exclusively by one producer
with reference to his article that, in
that trade and to that branch of the
purchasing public, the word or phrase
has come to mean that the article was
his product.
Tests to To determine whether a trademark Asia Brewery, Del Monte Corporation,
Determine has been infringed, we must consider Inc. v. Court of et al. v. CA, G.R. No. L-
Confusing the mark as a whole and not as Appeals, G.R. No. 78325 (1990)
Similarity dissected. If the buyer is deceived, it 103543, [July 5,
between Marks; is attributable to the marks as a 1993]
Holistic Test totality, not usually to any part of it.
The court therefore should be guided
by its first impression, or a buyer acts
quickly and is governed by a casual
glance, the value of which may be

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dissipated as soon as the court

assumes to analyze carefully the
respective features of the mark.
Doctrine of Goods are related when they belong Kolin Electronics Asia Pacific Resources
Related Goods to the same class or have the same Co., Inc. v. Kolin International Holdings,
or Services descriptive properties; when they Philippines Ltd. v. Paperone, Inc.,
possess the same physical attributes International, G.R. Nos. 213365-66,
or essential characteristics with Inc., G.R. No. [December 10, 2018];
reference to their form, composition, 228165, [February citing Esso Standard
texture or quality. They may also be 9, 2021] Eastern, Inc. v. Court
related because they serve the same of Appeals, 116 SCRA
purpose. 336 (1982)
Doctrine of In resolving whether goods are Mighty Corp. v. Emerald Garment
Related Goods related, several factors come into E&J Gallo, G.R. Manufacturing
or Services play: No. 154342, Jul Corporation vs. Court
(a) The business (and its location) to 14, 2004 of Appeals,251 SCRA
which the goods belong; 600 [1995]; citing Del
(b) The class of product to which the Monte Corporation, vs.
goods belong; Court of Appeals,181
(c) the product's quality, quantity, or SCRA 410 [1990];
size, including the nature of the citing Asia Brewery,
package, wrapper or container; Inc. vs. Court of
(d) The nature and cost of the article; Appeals,224 SCRA
(e) The descriptive properties, 437 [1993]; citing
physical attributes or essential Philippine Refining
characteristics with reference to Co., Inc. vs. Ng Sam
their form, composition, texture or and the Director of
quality; Patents,115 SCRA 472
(f) The purpose of the goods; [1982]
(g) Whether the article is bought for
immediate consumption, that is,
day-to-day household items;
(h) The fields of manufacture;
(i) The conditions under which the
article is usually purchased; and
(j) The channels of trade through
which the goods flow, how they
are distributed, marketed,
displayed and sold
Idem Sonans Similarity of sound is sufficient ground Kolin Electronics American Wire & Cable
for this Court to rule that the two Co., Inc. v. Kolin Co. v. Director of
marks are confusingly similar when Philippines Patents, G.R. No. L-
applied to merchandise of the same International, 26557, [February 18,
descriptive properties. Inc., G.R. No. 1970]; citing Marvex
228165, [February Commercial v. Director
9, 2021] of Patent, G.R. No. L-
19297, Dec. 22, 1966;
citing Co Tiong Sa v.
Director of Patents,
G.R. No. L-5378, [May
24, 1954]
Doctrine of The protection to which the owner of Dermaline v. McDonald's
Natural a trademark is entitled extends to Myra Corporation v. L.C. Big
Expansion of cases in which the use of by a junior Pharmaceuticals, Mak Burger, Inc., supra
Business appropriator of a trademark of trade Inc., G.R. No. at 432, citing Sta. Ana
name is likely to lead to a confusion of 190065 (2010) v. Maliwat, et al., 133
Phil. 1006, 1013 (1968)

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source.

As where prospective purchasers

would be misled into thinking that the
complaining party has extended his
business into the field or is in any way
connected with the activities of the
infringer; or

When it forestalls the normal potential

expansion of the business.
Nature of a Copyright, in the strict sense of the Olaño v. Lim Eng Pearl & Dean (Phil.) v.
copyright term, is purely a statutory right. Being Co, G.R. No. Shoemart, G.R. No.
a mere statutory grant, the rights are 195835, [March 148222, [August 15,
limited to what the statute confers. It 14, 2016] 2003], 456 PHIL 474-
may be obtained and enjoyed only 497; citing Joaquin, Jr.
with respect to the subjects and by the v. Drilon, G.R. No.
persons, and on terms and conditions 108946, [January 28,
specified in the statute. Accordingly, it 1999], 361 PHIL 900-
can cover only the works falling within 916; citing 18 C.J.S.
the statutory enumeration or 161
description.
When a work is A person to be entitled to a copyright Juan v. Juan, Ong Ching Kian Chuan
considered must be the original creator of the G.R. No. 221732, v. Court of Appeals,
original work. He must have created it by his [August 23, 2017], G.R. No. 130360,
own skill, labor and judgment without 817 PHIL 192-208 [August 15, 2001], 415
directly copying or evasively imitating PHIL 365-375; citing
the work of another. Hoffman vs. Le
Traunik, 209 Federal
Reporter 375, 379
Copyright For a claim of copyright infringement Olaño v. Lim Eng Ching v. Salinas Sr.,
infringement to prevail, the evidence on record Co, G.R. No. G.R. No. 161295,
must demonstrate: (1) ownership of a 195835, [March [June 29, 2005], 500
validly copyrighted material by the 14, 2016] PHIL 628-651
complainant; and (2) infringement of
the copyright by the respondent.

SPECIAL LAWS
TOPIC DOCTRINE CITED IN CITING
Real estate A "blanket mortgage clause," also Prudential Bank Philippine Bank of
mortgage; known as a "dragnet clause" in v. Alviar, G.R. No. Communications v.
definition and American jurisprudence, is one which 150197, July 28, CA, February 5, 1996;
characteristics; is specifically phrased to subsume all 2005 55 Am Jur 28,
dragnet clause debts of past or future origins. Such Mortgages, Section
clauses are "carefully scrutinized and 142, 283-284
strictly construed." Mortgages of this
character enable the parties to
provide continuous dealings, the
nature or extent of which may not be
known or anticipated at the time, and
they avoid the expense and
inconvenience of executing a new
security on each new transaction.
Real estate The mortgage provision relied upon Philippine Bank 55 Am Jur 28,
mortgage; by the petitioner is known in American of Mortgages, Section
definition and jurisprudence as a "dragnet" clause, Communications 142, 283-284

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characteristics; which is specifically phrased to v. CA, February 5,

dragnet clause subsume all debts of past or future 1996
origin. Such clauses are "carefully
scrutinized and strictly construed.
Guaranty; First, excussion is not a pre-requisite Tupaz v. CA, G.R. Southern Motors v.
excussion to secure judgment against a 145578, Barbosa, 99 Phil. 263
guarantor. The guarantor can still November 18, (1956)
demand deferment of the execution of 2005
the judgment against him until after
the assets of the principal debtor shall
have been exhausted. Second, the
benefit of excussion may be waived.
Surety; concept; Nothing can be clearer, both upon La Insular v. Go- Miller v. Stewart (9
strictissimi juris principle and authority, than the Tauco, G.R. No. Wheat. 680; 6 L. ed
rule doctrine that the liability of a surety is L-13370, 189)
not to be extended, by implication, February 3, 1919
beyond the terms of his contract. To
the extent, and in the manner, and
under the circumstances pointed out
in his obligation, he is bound, and no
farther.
Letters of credit; By definition, a letter of credit is a Transfield 24 A Words and
definition and written instrument whereby the writer Philippines, Inc. Phrases 590,
purpose requests or authorizes the addressee v. Luzon Hydro Permanent Edition.
to pay money or deliver goods to a Corp., G.R. No.
third person and assumes 146717,
responsibility for payment of debt November 22,
therefor to the addressee. A letter of 2004
credit, however, changes its nature as
different transactions occur and if
carried through to completion ends up
as a binding contract between the
issuing and honoring banks without
any regard or relation to the
underlying contract or disputes
between the parties thereto.
Letters of credit; There would at least be three (3) Bank of America William S. Shaterian
definition and parties: (a) the buyer, who procures v. CA, G.R. No. Export-Import Banking:
purpose; parties the letter of credit and obliges himself 105395, The Instruments and
to reimburse the issuing bank upon December 10, Operations Utilized by
receipts of the documents of title; (b) 1993 American Exporters
the bank issuing the letter of credit, and Importers and their
which undertakes to pay the seller Banks in Financing
upon receipt of the draft and proper Foreign Trade (The
document of titles and to surrender Ronal Press Company:
the documents to the buyer upon New York, 1947)
reimbursement; and, (c) the seller,
who in compliance with the contract of
sale ships the goods to the buyer and
delivers the documents of title and
draft to the issuing bank to recover
payment.
Letters of credit; By this so-called "independence Bank of America Article 17 of U.C.P.
independence principle," the bank determines v. CA, G.R. No.
principle compliance with the letter of credit 105395,
only by examining the shipping December 10,
documents presented; it is precluded 1993

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from determining whether the main

contract is actually accomplished or
not.

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