TABLE OF CONTENTS

PART ONE: COMMERCIAL LAW

I. BUSINESS ORGANIZATIONS
A. Partnerships
1. General Provisions
• Valdes v. La Colina Development Corp., G.R. No. 208140, July 12,
2021

B. Corporations
1. Classes of Corporations
• Bank of the Philippine Islands v. Central Bank of the Philippines,
G.R. No. 197593, October 12, 2020

2. Corporate Juridical Entity

• Gesolgon v. CyberOne PH., Inc., G.R. No. 210741, October 14,
2020

3. Corporate Powers
• Bank of the Philippine Islands v. Central Bank of the Philippines,
G.R. No. 197593, October 12, 2020
• Metroplex Berhad v. Sinophil Corp., G.R. No. 208281, June 28,
2021

4. Board or Directors and Trustees

• Agro Food and Processing Corp. v. Vitarich Corp., G.R. No.
217454, January 11, 2021
• Allied Banking Corp. v. Spouses Macam, G.R. No. 200635,
February 1, 2021
• Atienza v. Golden Ram Engineering Supplies & Equipment Corp.,
G.R. No. 205405, June 28, 2021

5. Other Corporations
• Magna Ready Mix Concrete Corp. v. Andersen Bjornstad Kane
Jacobs, Inc., G.R. No. 196158, January 20, 2021

II. BANKING LAWS

A. New Central Bank Act (R.A. No. 7653, as amended by R.A. No. 11211)
• Bank of the Philippine Islands v. Central Bank of the Philippines, G.R. No.
197593, October 12, 2020

III. INSURANCE LAW

• Malayan Insurance Co., Inc. v. Stronghold Insurance Co., Inc., G.R. No.
203060, June 28, 2021
• Multi-Ware Manufacturing Corp. v. Cibeles Insurance Corp., G.R. No. 230528,
February 1, 2021

IV. TRANSPORTATION LAW

• KLM Royal Dutch Airlines v. Tiongco, G.R. No. 212136, October 4, 2021

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V. INTELLECTUAL PROPERTY CODE (R.A. NO. 8293)
A. Trademarks
• Kho v. Summerville General Merchandising & Co., Inc., G.R. No. 213400,
August 4, 2021
• Kolin Electronics Co., Inc. v. Taiwan Kolin Corp. Ltd., G.R. Nos. 221347 &
221360-61, December 1, 2021
• Sao Paulo Alpargatas S.A. v. Kentex Manufacturing Corp., G.R. No.
202900, February 17, 2021

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 COMMERCIAL LAW - OMNIBUS NOTES

Agro Food and Processing Corp. v. Vitarich Corp., G.R. No. 217454, January 11, 2021

Allied Banking Corp. v. Spouses Macam, G.R. No. 200635, February 1, 2021

Atienza v. Golden Ram Engineering Supplies & Equipment Corp., G.R. No. 205405, June 28, 2021

Bank of the Philippine Islands v. Central Bank of the Philippines, G.R. No. 197593, October 12, 2020

Gesolgon v. CyberOne PH., Inc., G.R. No. 210741, October 14, 2020

Kho v. Summerville General Merchandising & Co., Inc., G.R. No. 213400, August 4, 2021

KLM Royal Dutch Airlines v. Tiongco, G.R. No. 212136, October 4, 2021

Kolin Electronics Co., Inc. v. Taiwan Kolin Corp. Ltd., G.R. Nos. 221347 & 221360-61, December 1,
2021

Magna Ready Mix Concrete Corp. v. Andersen Bjornstad Kane Jacobs, Inc., G.R. No. 196158, January
20, 2021

Malayan Insurance Co., Inc. v. Stronghold Insurance Co., Inc., G.R. No. 203060, June 28, 2021

Metroplex Berhad v. Sinophil Corp., G.R. No. 208281, June 28, 2021

Multi-Ware Manufacturing Corp. v. Cibeles Insurance Corp., G.R. No. 230528, February 1, 2021

Sao Paulo Alpargatas S.A. v. Kentex Manufacturing Corp., G.R. No. 202900, February 17, 2021

Valdes v. La Colina Development Corp., G.R. No. 208140, July 12, 2021

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Problem

Agro and Vitarich simultaneously executed two agreements: first, a Memorandum of Agreement (MOA)
under which Vitarich offered to buy Agro's chicken dressing plant located in Bulacan; and second, a
Toll Agreement under which Agro agreed to dress the chickens supplied by Vitarich for a toll fee.

However, when Vitarich made its offer to purchase based from the MOA, Agro did not accept the offer.
Thus, Agro needed to return the P20 million deposit.

And Since Vitarich was obligated to pay toll fees to Agro pursuant to the Toll Agreement, the parties
agreed that the manner of returning the P20 million deposit shall be through deductions of fifteen
percent (15%) of the gross receipts on the weekly billings of the toll fees.

Later on Vitarich filed a complaint for sum of money with damages against Agro. But Agro disputed the
computation made by Vitarich. It argued that the amount was inaccurate as it was based on the alleged
verbal amendments to the toll fees, which were not binding on Agro as they were entered into by
Vitarich and Agro's Finance Manager, Del Castillo, who allegedly had no authority to amend the original
Toll Agreement from Agro's board of directors.

Questions:
1. What is the doctrine of apparent authority?
2. In applying the doctrine of apparent authority in the case, is the reduced toll dressing
rates prepared by Mr. Del Castillo binding on Agro, depite the fact that the reduction
of the toll dressing rates were never authorized or ratified by Agro’s Board of
Directors?

Answers:

1. Doctrine of apparent authority means a corporation is estopped from denying the officer's authority
if it knowingly permits such officer to act within the scope of an apparent authority, and it holds
him out to the public as possessing the power to do those acts."

Thus, it is the corporation's acts which determine the existence of apparent authority, i.e., whether
the corporation knowingly permits its officer to act on its behalf and holds such officer out to the
public as having the authority to do those acts.

2. Yes, the reduced toll dressing rates prepared by Mr. Del Castillo is binding on Agro.
After evaluating the evidence presented by Vitarich, the conduct by which Agro clothed Del Castillo
with authority is evident on the following:
a. first, in over a span of two (2) years, with over eighty nine (89) billings and three (3) instances
of amendments, Agro never contested the amended toll fees;
b. second, even after receipt of several demand letters from Vitarich, Agro never made an issue
of the amended toll fees, and only raised the same in its Answer; and
c. third, Agro accepted the benefits arising from the amendments through the extension of the
period for its payment of the P20 million deposit (brought about by the decrease in the
percentage of billings to be deducted from the P20 million deposit), not to mention Agro's
corresponding increase in profits due to the increase or amendment in the price of gallantina
(type of chicken supplied by Agro) in the third amendment.

It bears stressing that the existence of apparent authority may be ascertained not only through
the "general manner in which the corporation holds out an officer or agent as having the apparent
authority to act in general," but also through the corporation's "acquiescence in his acts

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of a particular nature, with actual or constructive knowledge thereof, whether within
or beyond the scope of his ordinary powers."

Agro, reasonably appearing to have knowledge of the amendments, acquiesced to the same.
Indeed, Agro never contested nor protested the amendments; on the contrary, it even accepted
the benefits arising therefrom. "When a corporation intentionally or negligently clothes its
officer with apparent authority to act in its behalf, it is estopped from denying its
officer's apparent authority as to innocent third parties who dealt with this officer in
good faith." (Agro Food and Processing Corp. v. Vitarich Corp., G.R. No. 217454,
January 11, 2021, J. Hernando)

5
Problem

Mario Macam, on the recommendation of his brother Manuel and facilitation of Elena Valerio, invested
P1,572,000.00 in the cellular card business of Helen Garcia. Valerio was a Unit Manager in Helen's
business, soliciting investments and promising weekly interest payments of 2.29%. Mario deposited
P1,572,000.00 in Valerio's Savings Account with Allied Bank-Pasay Road Branch (AB-Pasay).

Allied Bank-Alabang Las Pinas Branch (AB-ALP), head respondent Maribel Caña informed bank teller
Melissa Berras to anticipate a deposit by Helen in the amount of P46 Million. Caña likewise instructed
the Branch Operating Officer (Mamalayan) to arrange for two armored vans to pick up the P46 Million
deposit. The armored vans arrived and Caña gave Berras five filled out and approved fund transfer
receipts. Since Helen had yet to make the promised deposit and her account balance did not amount
to P46 Million, Berras protested to Caña that she cannot credit the corresponding amounts to the five
accounts as indicated in the fund transfer receipts. Caña effected a local override and approved the
fund transfer.

Consequently, the amounts were credited to the five deposit accounts, including Valeria's, in the
amount of P10 Million. Valerio withdrew P1,722,500.00 from her deposit account at AB-Pasay. Valerio
deposited P1,590,000.00 to the account of Mario's brother Manuel and the latter's wife and Sheila
Macam. To prove the fund transfer to the Spouses Manuel Macam's account, Valerio presented the
deposit slip with her handwritten notation addressed to Mario.

On that same date, through Sheila's deposit of P1,590,000.00 by way of a credit memo, the
Spouses Mario Macam opened Savings Account No. 1850-06565-2 at Allied Bank-Pasong Tamo (AB-
PT) Branch. The Spouses Mario Macam were able to make withdrawals in the total amount of
P490,000.00, leaving a balance of P1.1 Million in their savings account with AB-PT. Later that day,
Caña again instructed Berras to debit specific amounts from different accounts. Mamalayan learned of
the debiting of the three accounts. Caña instructed Mamalayan to book the amount of P20.3 Million
under "Accounts Receivable" corresponding to the unrecovered amount from the P46 Million which
had been earlier transferred to various deposit accounts.

Due to the significant discrepancy, Allied Bank investigated the branch, AB-PT, and its transactions on
February 6, 2003. Angela Barcelona, Region Head, Retail Banking Group for Allied Bank's South Metro
Manila Branches, ordered the debit of the remaining P1.1 Million from the account of the Spouses
Mario Macam which resulted in the closure thereof. The Spouses Mario Macam learned of the closure
after they were unable to withdraw from their account. The Spouses Mario Macam filed a complaint
for Damages.

Question:
Is Allied Bank liable for unilaterally debiting and closing the deposit account of the Spouses
Mario Macam?

Answer: YES. Allied Bank is liable to the Spouses Mario Macam for the P1.1 Million in their deposit
account. All banks are charged with extraordinary diligence in the handling and care of its deposits as
well as the highest degree of diligence in the selection and supervision of its employees. The foregoing
obligation of banks is absolute and deemed written into every deposit agreement with its depositors.
Here, all the fund transfer transactions which culminated in the transfer of P1,590,000.00 to the
account of the Spouses Mario Macam were effected through Allied Bank's network of branches
nationwide.

With its acceptance of the Spouses Mario Macam's deposit and their opening of an account with the
bank's Pasong Tamo Branch on February 6, 2003, Allied Bank explicitly recognized the spouses'
ownership and title over the P1,590,000.00. Notably, the bank repeatedly acknowledged the creditor-

6
debtor relationship and its obligation to pay the Spouses Mario Macam on demand when the latter
withdrew money from the said account on three separate occasions.

Undoubtedly, Allied Bank is liable to the Spouses Mario Macam for the P1.1 Million in their deposit
account. The deposit in the Spouses Mario Macam's account consisting of money is generic and
fungible. Allied Bank cannot claim the money itself which transferred accounts based on the false fund
transfer transactions effected by Caña.

As to the authority of a corporate officer or agent in dealing with third persons, it may be actual or
apparent. The apparent authority to act for and to bind a corporation may be presumed from acts
of recognition in other instances, wherein the power was exercised without any objection from its
board or shareholders. Caña's act of approving the P46 Million fund transfer and the subsequent
transfers to different accounts in various branches of Allied Bank leading to the P1,590,000.00
transfer to the account of the Spouses Mario Macam all appear to have been clothed with authority.
Indeed, the subsequent transfers were approved by several Branch Heads. (Allied Banking Corp.
v. Spouses Macam, G.R. No. 200635, February 1, 2021, J. Hernando)

7
Problem

GRESEC is a corporation engaged in the business of selling engines. Through its president and manager
Engr. Torres, it sold two (2) MAN Diesel Engines to Atienza to be used for the latter’s passenger vessel
MV Ace I. Allegedly, during the test sea trial, Atienza observed that the right engine was not functioning
properly, but Engr. Torres assured him that it just needs adjustments. Engr. Torres also instructed
Atienza’s team that when something goes wrong with the engines, they should call Engr. Torres for
proper maintenance.

The sale was guaranteed with warranty for a period of 12 months from date of commissioning. The 2
Engines were commissioned by March 1994. After it was commissioned, the engine performed poorly,
but they were assured by Engr. Torres that they will replace anything which is wrong form the engine.
Six (6) months therefrom, it broke down completely. Because of this, Atienza suffered great loss.
Atienza informed GRESEC, and according to its service engineer, the defect was attributable to inherent
factory defect.

Atienza demanded Engr. Torres to repair or replace the engine, but the latter did not comply. Atienza
then sought to enforce the warranty since it is still within the stipulated period. However, GRESEC
informed Atienza that MAN Diesel denied its warranty claim because the defect was attributable to poor
maintenance of the engine, but proof of such denial was never presented to Atienza.

This prompted Atienza to file a complaint against GRESEC and Engr. Torres. During trial, it was found
out that the engine commissioned to Atienza was a demo unit and not a brand new one. The RTC ruled
in favor of Atienza and held that Engr. Torres shall be solidarily liable with GRESEC because of his
negligence and bad faith. On appeal, the CA ruled that Engr. Torres cannot be held solidarily liable with
GRSEC because the latter is a separate juridical entity.

Questions:
1. What is the rule on Separate Corporate Personality principle?
2. When can an officer or a director be held solidarily liable with the corporation?

Answers:

1. The principle of separate corporate personality provides that a corporation is vested by law
with a personality separate and distinct from that of each person composing or representing it.
Equally fundamental is the general rule that corporate officers cannot be held personally liable
for the consequences of their acts, for as long as these are for and in behalf of the corporation,
within the scope of their authority and in good faith. The separate corporate personality is a
shield against the personal liability of corporate officers, whose acts are properly attributed to
the corporation.

As an exception, a corporate director, trustee or officer can be personally liable (although not
necessarily) with the corporation, only when:

a. He assents (1) to a patently unlawful act of the corporation, or (2) for bad faith or gross
negligence in directing its affairs, or (3) for conflict of interest, resulting in damages to
the corporation, its stockholders or other persons;
b. He consents to the issuance of watered stocks or who, having knowledge thereof, does
not forthwith file with the corporate secretary his written objection thereto;
c. He agrees to hold himself personally and solidarily liable with the corporation; or
d. He is made, by a specific provision of law, to personally answer for his corporate action

8
2. There can be solidary liability when the obligation expressly so states, when the law so
provides, or when the nature of the obligation so requires. Settled is the rule that a director or
officer shall only be personally liable for the obligations of the corporation, if the following
conditions concur:
a. the complainant alleged in the complaint that the director or officer assented to patently
unlawful acts of the corporation, or that the officer was guilty of gross negligence or
bad faith; and
b. the complainant clearly and convincingly proved such unlawful acts, negligence or bad
faith, which 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 that partakes of the nature of fraud.
(Atienza v. Golden Ram Engineering Supplies & Equipment Corp., G.R. No.
205405, June 28, 2021, J. Hernando)

9
Problem

Bank of the Philippine Islands (BPI) and Citibank N.A. (Citibank) are both members of the Clearing
House established and supervised by the Central Bank of the Philippines (CBP), now Bangko Sentral ng
Pilipinas BPI Laoag City Branch discovered outstanding discrepancies in its inter-bank reconciliation
statements in CBP, hence, BPI filed a letter-complaint on the CBP’s irregular charging of its demand
deposit account and requested CBP to conduct the necessary investigation of the matter.

In addition, both CBP and BPI agreed to refer the matter to the National Bureau of Investigation (NBI)
to conduct a separate investigation. Thereafter, the NBI Investigation Report showed that an organized
criminal syndicate using a scheme known as "pilferage scheme" committed the bank fraud through the
infiltration of the Clearing Division of the CBP with the connivance of some personnel of the CBP Clearing
House and the tampering of vital banking documents, such as clearing manifests and clearing
statements, among others.

It was found that Manuel Valentino, CBP's Bookkeeper, with the assistance of CBP’s Janitor-Messenger
Jesus Estacio, intercepted and pilfered the BPI Laoag City Branch checks, and tampered the clearing
envelope. They reduced the amounts appearing on the clearing manifest, the BPI clearing statement
and the CBP manifest to conceal the fact that the BPI Laoag City Branch checks showing the original
amounts were deposited with Citibank Greenhills Branch.

Estacio, together with other personalities, were then convicted of Estafa thru Falsification of Public
Documents. Thereafter, BPI requested CBP, to credit back to its demand deposit account the amount
of P9 million with interest but CBP credited only P4.5 million and despite repeated demands by BPI, still
refused to credit back the remaining amount.

Hence, BPI filed a complaint for sum of money against CBP. BPI claimed that Section 4 of Republic Act
No. 265 or the Central Bank Act provides that the CBP is authorized to sue and be sued, without any
qualification that it may only be sued in performance of its proprietary functions. CBP also collected
fees as per the Central Bank Manual of Regulations for its supervision of its employees, including those
in the Clearing Division. Thus, BPI contended that as a corporate entity, CBP shall be held liable for the
acts of its employees just like any other employer.

CBP, on the other hand, maintained that when the State consents to be sued, it does not necessarily
concede its liability. By consenting to be sued, CBP waives its immunity from suit but it does not waive
its lawful defenses to the action and applying Article 2180 of the Civil Code, CBP in its performance of
governmental functions may be held liable only for tort committed by its employees when it acts
through a special agent which is not the case here. Thus, CBP cannot be held liable for the damages
caused by the alleged tortuous acts of its officers and employees. Valentino and Estacio were not acting
within the scope of their duties when they committed the bank fraud.

Questions:
1. How can CBP be classified as a corporation?
Can the power of a corporation to sue and be sued be applicable to a government
corporation?

Answer:

1. CBP should be classified as a corporation created by special law or charter.

CBP was created under RA 265 or the Central Bank Act, and is a government corporation with
a separate juridical personality and not a mere agency of the government.

10
2. Yes, the power of a corporation to sue and be sued can be applicable to a government
corporation by express provision of its Charter that it has waived immunity from suit.

The question of its suability depends on whether it is incorporated or unincorporated. An

incorporated agency has a Charter of its own with a separate juridical personality while an
unincorporated agency has none. In addition, the Charter of an incorporated agency shall
explicitly provide that it has waived its immunity from suit by granting it with the authority to
sue and be sued. This applies regardless of whether its functions are governmental or
proprietary in nature. It was specifically provided under the Central Bank Act that CBP is a
corporate body with certain corporate powers which include the authority to sue and be sued.
While the CBP performed a governmental function in providing clearing house facilities, it is
not immune from suit as its Charter, by express provision, waived its immunity from suit.
(Bank of the Philippine Islands v. Central Bank of the Philippines, G.R. No. 197593,
October 12, 2020, J. Hernando)

11
Problem

Maria Lea Jane Gesolgon and Marie Stephanie Santos were hired in 2008 as home-based Customer
Service Representatives of CyberOne Pty. Ltd. (CyberOne AU), an Australian company. Sometime in
October 2009, Maciej Mikrut, the CEO of both CyberOne AU and CyberOne PH, asked Gesolgon, Santos,
and also one of the respondents, Benjamin Juson, to become dummy directors and/or incorporators of
CyberOne PH to which they agreed.

As a result, Gesolgon and Santos were given salary increases which were made to appear as paid for
by CyberOne PH. However, in 2011, Gesolgon and Santos were notified by CyberOne AU of their
dismissal through Furlough Notifications in view of the company's cost-cutting measure. Gesolgon and
Santos then filed a case for illegal dismissal against CyberOne PH, Mikrut, Juson and CyberOne AU.
CyberOne PH, Mikrut and Juson insisted that Gesolgon and Santos were incorporators or directors and
not regular employees of CyberOne PH. They further claimed that Gesolgon and Santos were employees
of CyberOne AU and that the NLRC had no jurisdiction over CyberOne AU because it is a foreign
corporation not doing business in the Philippines.

The Labor Arbiter (LA) held that Gesolgon and Santos were not employees but merely shareholders or
directors of CyberOne PH and there was no evidence showing that CyberOne PH and CyberOne AU are
one and the same entity. The LA further ruled that since CyberOne AU is a foreign corporation not
doing business in the Philippines, then it has no jurisdiction over it.

The NLRC, however, ruled that Gesolgon and Santos were employees of both CyberOne AU and
CyberOne PH and being nominal shareholders of CyberOne PH does not preclude them from also being
employees of the latter. The NLRC relied on the pay slips presented by Gesolgon and Santos indicating
that salaries came from CyberOnePH and similarly, from CyberOne AU. The NLRC also said that
CyberOne AU is doing business in the Philippines due to its participation in the management, supervision
or control of CyberOne PH which is indicative of a continuity of commercial dealings or arrangement
and further held that the doctrine of piercing the corporate veil must be applied as to it.

The CA reversed the ruling of the NLRC and that reliance on pay slips presented by Gesolgon and
Santos was flawed and even indicated that the salaries were paid in Australian dollars, which is unusual
for a Philippine corporation and just highlighted the fact that they were employees of CyberOneAU and
not CyberOne PH. CA further held that the NLRC misapplied the doctrine of piercing the corporate veil
and that although it was established that Mikrut and CyberOne AU owned majority of the shares of
CyberOne PH, such fact may not be a basis for disregarding the independent corporate status of
CyberOne PH.

Questions:
1. In what cases is the doctrine of piercing the corporate veil applied?
2. Is the doctrine of piercing the veil of corporate fiction applicable in this case?
3. Can CyberOne AU be considered as doing business in the Philippines?

Answers:

1. The doctrine of piercing the corporate veil applies in the following instances:
(a) when the separate distinct corporate personality defeats public convenience, as when the
corporate fiction is used as a vehicle for the evasion of an existing obligation;
(b) in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or
defend a crime; or
(c) is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere
alter ego or business conduit of a person, or where the corporation is so organized and

12
 controlled and its affairs conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation.

2. No, the doctrine of piercing the veil of corporate fiction is not applicable in this case.

First, no evidence was presented to prove that CyberOne PH was organized for the purpose of
defeating public convenience or evading an existing obligation. Second, Gesolgon and Santos
failed to allege any fraudulent acts committed by CyberOne PH in order to justify a wrong,
protect a fraud, or defend a crime. Lastly, the mere fact that CyberOne PH's major stockholders
are CyberOne AU and Mikrut does not prove that CyberOne PH was organized and controlled
and its affairs conducted in a manner that made it merely an instrumentality, agency, conduit
or adjunct of CyberOne AU. In order to disregard the separate corporate personality of a
corporation, the wrongdoing must be clearly and convincingly established.

3. No, CyberOne AU is a non-resident corporation not doing business in the Philippines.

Even granting that CyberOne AU and Mikrut exercised a certain degree of control over the
finances, policies and practices of CyberOne PH, there was not a single proof that CyberOne
PH was formed to defraud petitioners or that CyberOne PH was guilty of bad faith or fraud.
Hence, the doctrine of piercing the corporate veil cannot be applied here, which means that
CyberOne AU cannot be considered as doing business in the Philippines through its local
subsidiary CyberOne PH. (Gesolgon v. CyberOne PH., Inc., G.R. No. 210741, October
14, 2020, J. Hernando)

13
Problem

Elidad Kho and Violeta Kho were engaged in a business known as KEC Cosmetics Laboratory and were
charged with Unfair Competition by Summerville General Merchandise, represented by Victor Chua, the
General Manager. Summerville engaged in in the importation and distribution of facial cream products
with the trademark known as Chin Chun Su. It was alleged that the Khos willfully, unlawfully, knowingly
sold to the public facial cream products which give and depict the general appearance of Chin Chun Su
facial cream products and likely to influence purchaser to believe that the same are those of
Summerville’s products.

The Khos filed a petition for review with the DOJ which assailed the Resolution of the Prosecutor’s office
of Manila, but the DOJ affirmed the Resolution. A motion for reconsideration was filed, which was issued
and recalled the Resolution, but it did not rule on the propriety of the complaint. Said resolution stated
that the case would be further be reviewed and a corresponding resolution would be issued. Then, the
DOJ issued a resolution dismissing the complaint and Summerville filed a Motion for reconsideration.
Based on the resolution, the prosecution filed a Motion to Withdraw Information which was granted by
the RTC. Summerville filed a Motion for reconsideration, The Khos filed a motion insisting that the case
be dismissed on the ground of double jeopardy. The RTC stated that there is no necessity to order the
dismissal of the case since there is an Order withdrawing the information, and refiling the information
would constitute double jeopardy. The DOJ issued a resolution granting the Motion for Reconsideration
filed by Summerville. But, the RTC maintained its position that the revival of the case is barred by
double jeopardy. The CA dismissed the appeal, and upon appeal to the SC, the Court remanded the
case to the RTC to determine if probable cause exists. The Court held that the remand of the case is
proper to determine if prima facie exists and it does not bar reinstatement of the Information and that
double jeopardy has not yet set in. The case was raffled to another court since the presiding judge
inhibited.

The RTC found no probable cause exists to hold the accused for trial for Unfair Competition, that the
Khos never deceived the public into believing that the medical facial cream they sold in a pink oval-
shaped container with the trademark Chin Chun Su were the same with the imported product of
Summerville. Summerville filed a Motion for Reconsideration which was denied by the RTC. Upon appeal
to the CA, the appeal was granted and the order of the lower court was set aside and annulled. The
CA directed the trial court to reinstate the Information Unfair Competition under Section 168.3(a) of
the Intellectual Property Code of the Philippines. They found that the court committed grave abuse of
discretion when it found no probable cause to indict the Khos for Unfair Competition.

Questions:
What are the essential elements of Unfair Competition?

Answers:

The essential elements of an action for unfair competition are: (1) confusing similarity in the
general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.

The confusing similarity may or may not result from similarity in the marks, but may result from
other external factors in the packaging or presentation of the goods. Likelihood of confusion of
goods or business is a relative concept, to be determined only according to peculiar
circumstances of each case. The element of intent to deceive and to defraud may be inferred
from the similarity of the appearance of the goods as offered for sale to the public. In this case,
the products were both medicated facial creams using the same color and shape of container.
And more prominently, both products contained the trademark "Chin Chun Su". Thus the
similarities far outweighed the differences. Indubitably from the foregoing comparisons, the
general appearance of the petitioners' product is confusingly similar to respondent." (Kho v.

14
Summerville General Merchandising & Co., Inc., G.R. No. 213400, August 4, 2021,
J. Hernando)

15
Problem

Dr. Tiongco was invited to be a keynote speaker in a United Nations-World Health Organization (UN-
WHO) event to be held in Almaty, Kazakhstan from November 27-28, 1998.

There being no direct flight from Manila to Kazakhstan, Dr. Tiangco had to fly to Singapore via
Singapore Airlines where he would then take two connecting flights to Almaty on board KLM, his main
carrier. Below was his travel itinerary:

Destination Date / ETD/ ETA Airline

1 Manila-Singapore Nov. 25 / 1800 / 2130 Singapore Airlines

Singapore-
2 Nov. 25 / 2335 / 0600 KLM
Amsterdam

Amsterdam-
3 Nov. 26 / 0820 / 0935 KLM
Frankfurt

4 Frankfurt-Almaty Nov. 26 / 1025 / 2205 Lufthansa Airlines

Dr. Tiongco, successfully arrived in Amsterdam, however, his KLM flight to Frankfurt departed from
Amsterdam 45 minutes late. As a result, Dr. Tiongco missed his fourth flight - from Frankfurt to Almaty.
KLM issued a new itinerary and boarding pass Dr. Tiongco after assuring the latter that his suitcase
would be travelling with him. Below was his new itinerary:

Destination Date / ETD/ ETA Airline

1 Frankfurt-Istanbul Nov. 26 / 1235 / 0435 Lufthansa Airlines

2 Istanbul-Almaty Nov. 26 / 1930 / 0439 Turkish Airlines

Dr. Tiongco was assured that his checked-in suitcase will be transported by an employee of Lufthansa.
Before he boarded Turkish Airlines for his second connecting flight from Istanbul to Almaty, Dr. Tiongco
looked for his suitcase but he could not find it. He was advised by an employee of Turkish Airlines to
go on board, and assured Dr. Tiongco that his suitcase will be loaded in the next available flight to
Almaty as soon as it is found.

Three (3) months passed after he had returned to the Philippines, and still there was no news about
what happened to his luggage. He demanded compensation for his lost luggage and inconvenience he
suffered from Singarpore Airlines, KLM, and Lufthansa, but his claim was denied. Hence, Dr. Tiongco
filed a Complaint for Damages and Attorney's Fees against the three (3) airlines.

The RTC ruled that KLM is solely liable for the damages suffered by Dr. Tiongco on account of his lost
suitcase. It noted that KLM, being the airline which issued the tickets, is the principal in the contract of
carriage and, hence, is liable for the acts and omissions of the other carriers to which it endorsed the
other legs of the flight. The CA agreed with the trial court on KLM’s liability for breach of contract of
carriage, and imposed legal interest upon the damages. KLM sought for reconsideration, but it was
denied.

16
KLM filed a petition for review on certiorari before the Supreme Court alleging that its mere failure to
deliver Dr. Tiongco's suitcase does not constitute gross negligence, willful misconduct, or proof of bad
faith to warrant the award of damages. KLM also avers that there are no bases for the awards of
damages, attorney's fees, and costs.

Questions:
1. Is KLM liable for breach of Contract of Carriage?
2. Was there bad faith by KLM?
3. Was the award of Damages proper?
4. Was the imposition of legal interest by CA proper?

Answers:
1. Yes.

The nature of the business which involves the transportation of persons or goods makes a
contract of carriage imbued with public interest. It is therefore bound to observe not just the
due diligence of a good father of a family but that of "extraordinary" care in the vigilance over
the goods as required under Article 1733 of the Civil Code. (Loadstar Shipping Company, Inc.
vs. Malayan Insurance Company, Inc., G.R. No. 185565, April 26, 2017)

A contract of air carriage is a peculiar one. Imbued with public interest, common carriers are
required by law to carry passengers safely as far a human care and foresight can provide, using
the utmost diligence of a very cautious person, with due regard for all the circumstances.
Failure of the carrier to observe this high degree of care and extraordinary diligence renders it
liable for any damage that may be sustained by its passengers. (Singson vs. Court of Appeals,
G.R. No. 119995 November 18, 1997)

2. Yes.

Bad faith is a factual question which is beyond the purview of a petition under Rule 45. The
undisputed facts which show that KLM did not update Dr. Tiongco of what had transpired of
the search for his luggage, even after the latter wrote to them. Being a factual issue, the Court
is not obliged to go over the evidence once more and recalibrate them for purposes of this
appeal.

The Court is not a trier of facts. Only questions of law may be raised in a petition for review on
certiorari under Rule 45 of the Rules of Court. (Gatan vs. Vinarao, G.R. No. 205912, October
18, 2017)

3. Yes.

The Warsaw Convention does not operate as an exclusive enumeration of the instances of an
airline's liability, or as an absolute limit of the extent of that liability. Such a proposition is not
borne out by the language of the Convention, as this Court has now, and at an earlier time,
pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed
a limit of liability only in those cases where the cause of the death or injury to person, or
destruction, loss or damage to property or delay in its 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 otherwise
no special or extraordinary form of resulting injury. The Convention's provisions, in short, do
not "regulate or exclude liability for other breaches of contract by the carrier" or misconduct of
its officers and employees, or for some particular or exceptional type of damage. (Northwest
Airlines, Inc. vss. Court of Appeals , G.R. No. 120334 January 20, 1998)

17
 Under Article 2216 of the Civil Code, the assessment of damages is left to the discretion of the
court according to the circumstances of each case. The courts, however, must adhere to the
principle that the amount of damages awarded should not be palpably excessive as to indicate
that it was the result of prejudice or corruption on the part of the trial court. It must be fair,
reasonable, and proportionate to the injury suffered. (Air France vs. Gillego, G.R. No. 165266
: December 15, 2010)

4. Yes.

When petitioners interposed an appeal to the Court of Appeals, the appealed case was thereby
thrown wide open for review by that court, which is thus necessarily empowered to come out
with a judgment as it thinks would be a just determination of the controversy. Given this power,
the appellate court has the authority to either affirm, reverse or modify the appealed decision
of the trial court. To withhold from the appellate court its power to render an entirely new
decision would violate its power of review and would, in effect, render it incapable of correcting
patent errors committed by the lower courts. (Heirs of Alcaraz vs. Republic, G.R. No. 131667
July 28, 2005)

(KLM Royal Dutch Airlines v. Tiongco, G.R. No. 212136, October 4, 2021, J. Hernando)

18
Problem

KECI filed a trademark application for registration of the "KOLIN" mark under Class 35 of the Nice
Classification for use in the business of manufacturing, assembling, importing, and selling electronic
equipment or apparatus. Taiwan Kolin and KPII did not oppose the said registration, and the mark was
registered on December 22, 2008.

On August 16, 2007, KECI then filed Trademark Application for the mark "www.kolin.ph" under Class
35 for use in the business of manufacturing, assembling, importing, and selling electronic equipment
or apparatus. The application was published in the IPO e-Gazette on January 11, 2008, and Taiwan
Kolin was given four months or until May 10, 2008 to file an opposition thereto.

However, on May 12, 2008, Taiwan Kolin filed an Opposition 35 to the said application on the following
grounds that: 1) the application violates Section 123.1 (d) of the IP Code which proscribes the
registration of a mark identical with a registered mark belonging to a different proprietor with an earlier
filing or priority date; 2) the registration of "www.kolin.ph" will cause grave and irreparable injury to
Taiwan Kolin's goodwill, reputation, and business using the KOLIN brand; 3) that the trademark
application violates the rule in the Implementing Rules and Regulations (IRR) of the IP Code requiring
a specific description of goods, business or services; and 4) that "www.kolin.ph" does not function as
a mark. Notably, the documents attached to Taiwan Kolin's Opposition marked as "A" to "T" were all
photocopies.

Question: Does KECI have the right to register and use the mark "www.kolin.ph"
consistent with its exclusive right to use the "KOLIN" mark in relation to the
goods/services covered by Class 35.

Answer: Yes, KECI has the right to register and use the mark "www.kolin.ph."

KECI was already declared the first and prior user of the "KOLIN" mark in the Philippines and thus the
owner of the "KOLIN" mark under RA 166, in a final and executory decision rendered by the CA. In
connection thereto, Section 236 of the IP Code states that nothing in the IP Code shall impair the rights
of the enforcement of marks acquired in good faith prior to the effective date of said law. It is settled
that a certificate of registration of a mark is prima facie evidence of the validity of the registration, 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.

In connection thereto, it is beyond cavil that KECI, having been issued Certificate of Registration No.
4-2007-005421, is the registered owner of the "KOLIN" mark under Class 35, specifically for "the
business of manufacturing, importing, assembling, or selling electronic equipment or apparatus."
Significantly, the list of services in the said certificate is identical to the list of services of KECI's
application for "www.kolin.ph." This certificate of registration vests KECI the exclusive right to use the
"KOLIN" mark in relation to the services covered by the registration. Unless and until the said
registration of KECI is nullified or cancelled through the proper proceeding, the rights emanating from
the said registration should be respected.

And in today's internet-wired market, selling electronic equipment or apparatus will ideally involve the
registration of a domain name to establish an online presence. Information on the products sold by an
enterprise must necessarily be provided in all avenues, whether through print, media, or online.

In fine, the owner of a registered trademark, absent any legal obstacle or compelling reason to the
contrary, should be allowed to register, in its favor, a domain name containing its registered trademark
as a dominant feature. KECI's application to register and use the mark "www.kolin.ph," presumably as

19
its domain name and platform to sell its products in the internet, is merely in exercise of and consistent
with its exclusive right to use "KOLIN" on the business of manufacturing, importing, assembling or
selling electronic equipment or apparatus. KECI's exclusive right to use the "KOLIN" mark for the
business of manufacturing, importing, assembling, or selling electronic equipment or apparatus is
entitled to protection, whether such use is exercised online or through a physical market — and whether
the mark is printed on product packaging or included in the domain name of its website. Indeed, to
preclude KECI from safeguarding its right to protect the name of its domain name containing its
registered mark would unduly limit the scope of selling and antiquate the concept in relation to the
current times.

Considering that KECI's registration of "www.kolin.ph" is proper pursuant to KECI's existing registration
of "KOLIN" under Class 35, we need not belabor the issue raised by Taiwan Kolin as regards the
likelihood of confusion of "www.kolin.ph" with Taiwan Kolin's existing registrations in other
classifications. (Kolin Electronics Co., Inc. v. Taiwan Kolin Corp. Ltd., G.R. Nos. 221347 &
221360-61, December 1, 2021, J. Hernando)

20
Problem

MAGNA ready mix concrete corporation is a Philippine corporation engaged in the business of
developing precast plants projects, garage projects, and among others. On the other hand, ANDERSEN
is a foreign corporation engaged in the business of design and layout services.

MAGNA and ANDERSEN entered into an Agreement for Professional Services wherein ANDERSEN shall
provide designs to MAGNA’s development projects for a compensation. When MAGNA failed to pay
ANDERSEN, the latter filed a collection suit against MAGNA. In ANDERSEN’s complaint, it alleged that
it was neither doing business in the Philippines nor licensed to do business herein, and it is just suing
MAGNA out of an isolated transaction.

In MAGNA’s defense, it averred that ANDERSEN had a pending collection suit against another Philippine
corporation, and because of such discovery, MAGNA’s contention is that ANDERSEN is doing business
in the Philippines without the necessary license; thus, ANDERSEN has no legal capacity to sue.

Both the RTC and CA ruled in favor of ANDERSEN based on the following grounds: (1) ANDERSEN’s
filing of another case against another domestic corporation does not necessarily prove that it is doing
business in the Philippines without the requisite license, and the transaction with MAGNA is still deemed
isolated; and (2) MAGNA is estopped from disclaiming the existence of the contract.

Questions:
1. What is the general rule regarding a foreign corporation’s capacity to sue?
2. What is the test to determine whether a foreign corporation can be considered as
“doing business” in the Philippines?
3. What is the concept of an “isolated transaction”?
4. What is the doctrine of estoppel in relation to a foreign corporation’s capacity to
sue?
5. Can ANDERSEN’s transaction with MAGNA be considered as an isolated transaction?
6. Is MAGNA already estopped to question ANDERSEN’s legal capacity to sue?

Answers:

1. Pursuant to Section 150 of the Revised Corporation Code, a foreign corporation that conducts
business in the Philippines must first secure a license for it to be allowed to initiate or intervene
in any action in any court or administrative agency in the Philippines. A corporation has legal
status only in the state that granted it personality. Hence, a foreign corporation has no
personality in the Philippines, much less legal capacity to file a case, unless it procures a license
as provided by law.

2. There are two general tests to determine whether or not a foreign corporation can be
considered as "doing business" in the Philippines:

a. The first of these is the substance test, thus: The true test for doing business, however,
seems to be whether the foreign corporation is continuing the body of the business or
enterprise for which it was organized or whether it has substantially retired from it and
turned it over to another.

b. The second test is the continuity test, wherein the term doing business implies a continuity
of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to,
and in the progressive prosecution of, the purpose and object of its organization.

21
 The number of the transactions entered into is not determinative whether a foreign
corporation is doing business in the Philippines; the intention to continue the body of its
business prevails. The number or quantity is merely an evidence of such intention.

A single act or transaction may then be considered as doing business when a corporation
performs acts for which it was created or exercises some of the functions for which it was
organized

3. The concept of isolated transaction is one of the exemptions from the general rule that a foreign
corporation cannot sue without the requisite license to the business in the Philippines

The phrase "isolated transaction" means a transaction or series of transactions set apart from
the common business of a foreign enterprise in the sense that there is no intention to
engage in a progressive pursuit of the purpose and object of the business
organization.

Whether a foreign corporation is "doing business" does not necessarily depend upon the
frequency of its transactions, but more upon the nature and character of the transactions.
Based on the foregoing, a single act may be considered as either doing business or an isolated
transaction depending on its nature. It may be considered as doing business if it implies a
continuity of commercial dealings and contemplates the performance of acts or the
exercise of functions normally incidental to and in the progressive pursuit of its
purpose. Contrarily, it may be considered as an isolated transaction if it is different from
or not related to the common business of the foreign corporation in the sense that
there is no objective to increasingly pursue its purpose or object. And as stated, a
license is not required if the foreign corporation is suing on an isolated transaction.

4. The doctrine of estoppel states that the other contracting party may no longer challenge
the foreign corporation's personality after acknowledging the same by entering into
a contract with it. This is another exception to the general rule on foreign corporation’s legal
capacity to sue.

A foreign corporation doing business in the Philippines may sue in Philippine Courts although
not authorized to do business here against a Philippine citizen or entity who had contracted
with and benefited by said corporation. The doctrine of estoppel to deny corporate existence
applies to a foreign as well as to domestic corporations. One who has dealt with a corporation
of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity.
The principle will be applied to prevent a person contracting with a foreign corporation from
later taking advantage of its noncompliance with the statutes chiefly in cases where such
person has received the benefits of the contract.

The rule is deeply rooted in the time-honored axiom of commodum ex injuria sua non habere
debet — no person ought to derive any advantage of his own wrong. This is as it should be for
as mandated by law, "every person must in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe honesty and good faith."

5. No, ANDERSEN's act of entering into a contract with MAGNA does not fall into the category
of isolated transactions. The contract clearly shows that ANDERSEN was to render
professional services to MAGNA for a fee. It is clear then that ANDERSEN, in entering into that
contract with MAGNA, was performing acts that were in progressive pursuit of its
business purpose, which involved consultation and design services. Though it was a single
transaction, ANDERSEN's act of entering into a contract with MAGNA constitutes doing business
in the Philippines. It cannot be considered as an isolated transaction because the act

22
 is related to ANDERSEN's specific business purpose. Thus, in doing business without a
license, ANDERSEN had no legal capacity to sue in the Philippines

6. Yes, MAGNA is already estopped from challenging ANDERSEN's legal capacity to sue due to its
prior dealing with the latter, that is, entering into a contract with it. There was already a
perfected and binding contract between the parties; thus, MAGNA effectively
acknowledged ANDERSEN's personality. MAGNA's allegation that it only discovered during
the trial that ANDERSEN was doing business in the Philippines without a license, is therefore
irrelevant. Moreover, MAGNA had already benefited from the contract because ANDERSEN
indeed rendered services to MAGNA pursuant to their contract. (Magna Ready Mix Concrete
Corp. v. Andersen Bjornstad Kane Jacobs, Inc., G.R. No. 196158, January 20, 2021,
J. Hernando)

23
Problem

Pablo obtained a Compulsory Third Party Liability (CTPL) insurance worth P100,000.00 from Stronghold
Insurance Company (Stronghold). He also obtained an Excess Cover for Third Party Bodily and Death
Liability worth P200, 000 from Malayan Insurance (Malayan) for the same vehicle.

Insurance Memorandum Circular No. 4-200611 (IMC No. 4-2006) is the most recent issuance at that
time that sets the limits for third party liability and indemnities in settlement of claims under compulsory
motor vehicle liability insurance (CMVLI) policies.

During the effectivity of the two policies, Pablo hit a six-year-old pedestrian who sustained bodily
injuries and was brought to the hospital for treatment. Pablo claimed that he incurred hospital and
medical expenses in the amount of P100,318.08 for the treatment of the pedestrian. As a result, he
filed third party liability claims for reimbursement with both Stronghold and Malayan.

Stronghold computed its liability based on the schedule of indemnities provided in the CTPL insurance
policy, and arrived at the amount of P29,000.00. The excess of P71,318.08 (out of the total amount of
P100,318.08) was not covered or in excess of the limits in the schedule of indemnities, and should be
shouldered by Malayan pursuant to the excess coverage.

Malayan, however, would not agree to pay this excess.

Pablo sought the assistance of the Insurance Commission (IC). It ruled in favor of Malayan and ordered
Stronghold to pay Pablo the amount of P100,000.00, and Malayan to pay the amount of only
P318.08 23.

Question:
What is the extent of liability of Stronghold pursuant to the insurance policy it issued?

Answer:
The limit of liability with regard to the items listed in the Schedule of Indemnities is the amount provided
therein; the limit of liability with regard to other kinds of damages not listed in the same Schedule of
Indemnities is the total amount of insurance coverage. It then follows that the amounts in excess of
the limits of liability in the schedule for items listed therein are not covered by the total coverage. Such
excess is already for the personal account of the insured or an excess coverage provider.

Stronghold's liability with regard to injuries provided in its policy's Schedule of Indemnities is subject to
the limits provided therein. Any excess will not be for its account, and will be for the account of the
excess coverage provider—Malayan in this case. Hence, Stronghold is liable in the amount of
P42,714.83; Malayan, on the other hand, is liable in the amount of P57,603 25. (Malayan Insurance
Co., Inc. v. Stronghold Insurance Co., Inc., G.R. No. 203060, June 28, 2021, J. Hernando)

24
Problem

MBG Co. is a corporation in liquidation duly organized and existing under and by virtue of the laws of
Malaysia and SPhil Co is a publicly-listed corporation duly organized and existing under and by virtue
of the laws of the Philippines. In 1998, SPhil Co entered into a Share Swap Agreement with MBG Co.
In the agreement, MBG Co. agreed to transfer 40% of their shareholdings in Legend Resorts for a
combined 35.5% stake in Sinophil. Pursuant to the Swap Agreement, Sinophil issued 3.87 billion shares
to MBG Co, totaling 3.87 billion shares in exchange for 46.38 million shares of Legend which were
transferred by the MBG Co to SPhil Co.

In 2001, SPhil Co executed a Unwinding Agreement with MBG Co rescinding the 1998 Swap Agreement.
After the execution of the Unwinding Agreement, MBG Co was unable to return 1.87 billion of the
Sinophil shares while another two billion Sinophil shares remained pledged by MBG Co in favor of Asian
Bank. In 2002 and 2005, the shareholders of Sinophil in a meeting voted for the reduction of SPhil Co’s
authorized capital stock. In 2006, the CRMD and the CFD approved the first amendment of the Articles
of Incorporation of SPhil Co. In 2007, the shareholders of SPhil Co again approved the proposal of the
Board of Directors to reduce its authorized capital stock by another one billion shares. The CRMD and
the CFD approved the second amendment of the Articles of Incorporation of SPhil Co.

In 2008, petitioner MBG Co filed a Petition for Review before the SEC assailing the approval by the
CRMD and the CFD of the amendments by Sinophil of its Articles of Incorporation. The SEC found that
SPhil complied with the requirements imposed by the Corporation Code in Section 38. MBG Co. appealed
to the CA. The CA promulgated its Decision which upheld the findings of the SEC.

Question:
1. What are the requirements for a corporation to decrease its capital stock?
2. Does the SEC perform a ministerial function in approving the decrease of capital
stock of a corporation?
3. Is the act of decreasing capital stock in this case amount to fraud to justify an
issuance of Temporary Restraining Order?

Answer:

1. Section 38 is clear. A corporation can only decrease its capital stock if the following are present:
(a) Approval by a majority vote of the board of directors;
(b) Written notice of the proposed diminution of the capital stock, and of the time and place
of a stockholders' meeting duly called for the purpose, addressed to each stockholder at
his place of residence;
(c) 2/3 of the outstanding capital stock voting favorably at the said stockholders' meeting
duly;
(d) Certificate in duplicate, signed by majority of the directors and countersigned by the
chairman and secretary of the stockholders' meeting stating that legal requirements have
been complied with;
(e) Prior approval of the SEC; and 6. Effects do not prejudice the rights of corporate creditors.

2. Yes. It performs a ministerial function. After a corporation faithfully complies with the
requirements laid down in Section 38, the SEC has nothing more to do other than approve the
same. Pursuant to Section 38, the scope of the SEC's determination of the legality of the
decrease in authorized capital stock is confined only to the determination of whether the
corporation submitted the requisite authentic documents to support the diminution. Simply, the
SEC's function here is purely administrative in nature.

25
 Furthermore, the SEC is not vested by law with any power to interpret contracts and interfere
in the determination of the rights between and among a corporation's stockholders. Neither
can the SEC adjudicate on the contractual relations among these same stockholders. Thus,
petitioners' allegation that it is the SEC that should determine the parties' rights under the
contracts executed, particularly the Swap Agreement, the Unwinding Agreement, and the
general proxy, has no basis. To stress, the SEC's only function here was to determine the
corporation's compliance with the formal requirements under Section 38 of Corporation Code.

3. No. It does not justify an issuance of TRO. The alleged fraud as well as the grave or irreparable
injury or prejudice to the investing public are not present in the case. Firstly, there is no
fraudulent act committed by respondents as has been held by both the CA and this Court, as
discussed above. Secondly, petitioners failed to show how the investing public would be
prejudiced by the decrease and delisting in view of its disclosure to the PSE.

Disclosure of corporate actions to the stock exchange is intended to apprise the investing public
of the condition and planned corporate actions of the listed corporation, thereby providing
investors with sufficient, relevant and material information as to the nature of the investment
vehicle and the relationship of the risks and returns associated with it. 38 The corporation's
simple act of disclosing the decrease and delisting to the PSE was more than enough notice to
the investing public. There was nothing in the corporation's act that resulted in grave or
irreparable injury or prejudice to the investing public.

(Metroplex Berhad v. Sinophil Corp., G.R. No. 208281, June 28, 2021, J. Hernando)

26
Problem

Multi-Ware Manufacturing Corporation (Multi-Ware) is a domestic corporation engaged in the

manufacture of various plastic products. In December 1999, Multi-Ware took out Fire Policy Insurance
from Western Guaranty Corporation (Western Guaranty) in the amount of P10M. The properties insured
were the pieces of machinery and equipment, tools, spare parts and accessories stored at Buildings 1
and 2, PTA Compound, No. 26 Isidro Francisco Street, Malinta, Valenzuela, Metro Manila.

In February 2000, Multi-Ware secured another fire insurance policy, this time from Cibeles Insurance
Corporation (Cibeles Insurance) for P7M, covering the pieces of machinery and equipment, tools, spare
parts and accessories excluding mold, and stocks of manufactured goods and/or goods still in process,
raw materials and supplies found in the PTA Central Warehouse Compound, Building 1, No. 26 Isidro
Francisco Street, Brgy. Vicente Reales, Dalandan, Valenzuela, Metro Manila.

Subsequently, Multi-Ware obtained from Prudential Guarantee Corp. (Prudential Guarantee) Fire
Insurance Policy covering the same machinery and equipment located at Building 1, PTA Compound,
No. 26 Francisco St., Malinta, Valenzuela, Metro Manila.

In April, 2000, a fire broke out in the PTA Compound causing damage and loss on the properties of
Multi-Ware covered by the fire insurance policies. Consequently, Multi-Ware filed insurance claims with
Cibeles Insurance and Western Guaranty, but these were denied on the ground of Multi-Ware's violation
of Policy Condition Nos. 3, on non-disclosure of co-insurance; on fraudulent claims; and on arson.
Hence, its insurance claims for payment were denied by Cibeles Insurance and Western Guaranty.

Multi-Ware filed separate civil actions against these insurance companies before the RTC of Manila.
However, the RTC dismissed these two cases. Multi-Ware then filed a motion for reconsideration but it
was denied by the RTC. On appeal, the CA sustained the RTC judgment.

Questions:
1. What is an “other insurance clause”?
2. What is the purpose of an “other insurance clause”?
3. Did the petitioner violate Policy Condition No. 3 or the "other insurance clause"
uniformly contained in the subject insurance contracts resulting to avoidance of the
said policies?

Answers:

1. In American Home Assurance Company v. Chua, the Court held that where the insurance policy
specifies as a condition the disclosure of existing co-insurers, non-disclosure thereof is a
violation that entitles the insurer to avoid the policy. This condition is common in fire insurance
policies and is known as the "other insurance clause."

2. 2. In Geagonia v. Court of Appeals, the Court explained that the rationale behind the
incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus
avert the perpetration of fraud. When a property owner obtains insurance policies from two or
more insurers in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance. The public as
well as the insurer is interested in preventing a situation in which a fire would be profitable to
the insured.

27
3. Yes. Policy Condition No. 3 is clear that it obligates petitioner, as insured, to notify the insurer
of any insurance effected to cover the insured items which involve any of its property or stocks
in trade, goods in process and/or inventories and that non-disclosure by the insured of other
insurance policies obtained covering these items would result in the forfeiture of all the benefits
under the policy. It is to be regarded as a violation of Policy Condition No. 3, the other existing
but undisclosed policies must be upon the same matter and with the same interest and risk.
The non-disclosure of these policies to the insurers was fatal to petitioner's right to recover on
the insurance policies. (Multi-Ware Manufacturing Corp. v. Cibeles Insurance Corp.,
G.R. No. 230528, February 1, 2021, J. Hernando)

28
Problem

SPASA is the owner and manufacturer of the footwear brand "Havaianas" and distributed by Terry S.A.,
Inc. in the Philippines. Meanwhile, respondents Kentex Manufacturing and its president, Ong own and
manufacture the slippers or footwear with the brand name "Havana." In 2010, the NBI Director
received a letter-complaint from SPASA's legal representative, requesting for the NBI's assistance in
the investigation and prosecution of entities which are engaged in the sale and distribution of fake
"Havaianas" products bearing the same mark and designs. The investigators found the Havana items
that closely resembled Havaianas and its rice pattern logo. Months later, the investigator filed
applications for search warrants against the respondents for violating RA 8293 on trademark
infringement and unfair competition. The implementation of the search warrants caused the seizure of
respondents' products. Thus, respondents filed a Motion to Quash Search Warrant. In support of their
motion, the respondents submitted a Certificate of Copyright Registration. G.R. No. 202900, February
17, 2021

SPASA filed a Petition for Cancellation of the respondents' Certificate of Registration for the industrial
design entitled "Slipper". In its Order, the IPO granted SPASA's prayer for the issuance of a Writ of
Preliminary Injunction. It ruled that SPASA established its clear and unmistakable right which needs to
be protected. The case was elevated to the CA, it held that the respondents are the registered owners
of the industrial design for their "Havana" products as shown by the industrial design registrations
issued by the Director of Patents of the IPO. The registration's cover pages showed that the registered
owner has the exclusive right to make, use, sell or import the industrial design. SPASA elevated the
case before the Court via a Petition for Review on Certiorari

After the instant petition was filed, the IPO issued a Decision which canceled the registration of the
respondents' industrial design, "Slipper”. In the pendency of the petition, SPASA filed a Manifestation,
SPASA's representatives and Ong, together with his associates, arrived at an amicable settlement, In
which Kentex owner declared that they no longer manufacture, import or sell any products that will
infringe upon the HAVAIANAS brand rendering the assailed CA Decision and consequently, the instant
petition, moot and academic.

Question:
Did the Agreement between SPASA and Kentex to stop the manufacturing and selling of
the HAVANA brand render the petition for review of SPASA moot and academic?

Answer:
YES. The petition is moot and academic. A case or issue is considered moot when "it ceases to present
a justiciable controversy by virtue of supervening events, so that an adjudication of the case or a
declaration on the issue would be of no practical value or use. Since the parties entered into the said
Settlement Agreement, the effect is to put the litigation between them to an end, as expressly stated
in the said document.

In this case, SPASA itself, through its Manifestation, prayed that the Court take notice of the existence
of the Settlement Agreement and posited that the CA's assailed Decision became moot and academic
pursuant thereto. In fine, "where the issues have become moot and academic, there ceases to be any
justiciable controversy and where there is no substantial relief to which petitioner will be entitled, courts
will decline jurisdiction. The Court, thus, abstains from expressing its opinion in a case, such as this,
where no substantial legal relief is necessary." Stated differently, the Court will no longer render a
ruling notwithstanding the relevance of the issues raised. (Sao Paulo Alpargatas S.A. v. Kentex
Manufacturing Corp., G.R. No. 202900, February 17, 2021, J. Hernando)

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Problem

Carlos Valdes and his children, are the stockholders of BARECO, which owned a large tract of land in
Bataan. Carlos, Sr. invited Francisco Cacho and the latter's son, Jose Mari who fully owned LCDC , to
visit and assess the property’ suitability for a beach resort which was called the Montemar Project.
Having received a favorable response from Francisco, the Cachos proceeded to carry out the Montemar
Project, which included the development and improvement of the beach resort called Montemar Beach
Club, and the conversion of the remaining land area into a residential subdivision, Montemar Villas.

The Valdeses then transferred and conveyed their 4,000 shares of stock in BARECO in favor
of LCDC, through a Deed of Sale for a consideration of P20M. LCDC made a partial
payment of P2.5M while the remaining P17.5M was covered by promissory notes. The P17.5M was to
be paid by way of an Assignment of Rights wherein LCDC: (1) assigned to the Valdeses 3M worth
of shares in LCRC, the corporation established by LCDC to market and sell the shares of the beach
resort; and (2) undertook to pay the Valdeses (50%) of the net proceeds (later reduced 40%) from
the sale of the Montemar Villas lots inside BARECO, as previously acquired by LCDC.

Since Carlos, Sr. did not intend to use all BARECO real properties for the Montemar Project, he prepared
a Deed of Partition, whereby only the real properties intended to be part of the project were transferred
to LCDC. These properties, now owned by LCDC through its purchase of the BARECO shares were, in
turn, transferred by LCDC to LCRC in exchange for 50,000 LCRC shares issued in favor of LCDC.
By virtue of the aforementioned Assignment of Rights, LCDC and Carlos, Sr. became 70% and
30% shareholders of LCRC, respectively. Meanwhile, LCDC, as sole shareholder of BARECO, amended
BARECO's Articles of Incorporation and dissolved BARECO by shortening its term of existence.
Thereafter, MBCI, a non-stock, non-profit club, was organized to develop the Montemar Project.
Proprietary shares in MBCI were later sold by LCRC to the general public. Meanwhile, LCDC obtained
loans to finance the construction and development of the Montemar Villas, including the building and
facilities in the Montemar Beach Club, but incurred heavy losses.

As a result, Philcomsat as a new investor decided to invest in the new project, subject to
conditions, particularly, that the Valdeses: (1) give their conformity to the new project; and (2)
forego their claim to the proceeds of the sale of the Montemar Villas lots. Pursuant to the
Memorandum of Intent and the letter-conformity, Philcomsat, LCDC, LCRC, and MBCI executed a MOA
essentially identical to the Memorandum of Intent. LCRC and LCDC, through a Consolidated
Deed of Absolute Sale, conveyed and sold to MRDC all their real and personal properties
situated in Bataan.
However, the Valdeses filed before the RTC a Complaint for Reconveyance, Annulment
and/or Rescission of Contract, Specific Performance and Damages with Prayer for TRO and WPI
against LCDC,LCRC, Philcomsat, MRDC, Jose Mari.

The Valdeses contend that the original agreement between the Valdeses and LCDC required the
Valdeses to contribute the BARECO properties to the Montemar Project. In consideration thereof, LCDC
shall form LCRC to develop and improve the said properties. Meanwhile, both the Valdeses and LCRC
shall sell the properties and share proportionately in the profits realized. This scenario, Valdeses insist,
is the very joint venture agreement executed by and between the Valdeses and LCRC, which is
supposedly reflected in the
Deed of Sale, the promissory notes issued to the Valdeses, including the Assignment of Rights and a
Memorandum of Agreement. They emphasized that the joint venture agreement between the Valdeses
and LCDC is not a one-time transaction, but a recurring promise to share in the proceeds of the sale of
the Montemar Villas lots.

LCDC, LCRC, and Cacho maintain that the contract executed by and between the Valdeses and LCDC
was a contract of sale, whereby the Valdeses, for a consideration of P20 Million, conveyed to LCDC,

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and later, to LCRC, the BARECO properties in Bataan. As owner in fee simple of the said BARECO
properties by virtue of a Deed of Sale, LCDC had full disposal of the said properties, which necessarily
included the right to convey, sell, encumber, or mortgage the same.

Question:
1. How is Joint Venture different from Partnership?
2. Is there a joint venture between LCDC and the Valdeses?

Answers:
1. The legal concept of a joint venture is of common law origin. It has no precise legal definition,
but it has been generally understood to mean an organization formed for some temporary
purpose. It is in fact hardly distinguishable from the partnership, since their elements are
similar — community of interest in the business, sharing of profits and losses, and a mutual
right of control. The main distinction cited by most opinions in common law jurisdictions is that
the partnership contemplates a general business with some degree of continuity, while the
joint venture is formed for the execution of a single transaction, and is thus of a temporary
nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code,
a partnership may be particular or universal, and a particular partnership may have for its
object a specific undertaking. It would seem therefore that under Philippine law, a joint venture
is a form of partnership and should be governed by the law of partnerships. The Supreme Court
has however recognized a distinction between these two business forms, and has held that
although a corporation cannot enter into a partnership contract, it may however engage in a
joint venture with others. A joint venture is akin to a partnership, the essential elements
of which are as follows: an agreement to contribute money, property, or industry
to a common fund; and an intent to divide the profits among the contracting parties.

2. NO, the agreement entered into by the parties is a contract of sale.

Article 1370 of the New Civil Code states that if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control.

A contract of sale is defined under Article 1458 of the Civil Code: By the contract of sale one
of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in money or its equivalent.
"The elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent
to transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price
certain in money or its equivalent."

Here, the Deed of Sale executed by Carlos, Sr. and LCDC resulted in a perfected contract of
sale, all its elements being present. There was a mutual agreement between them, wherein
4,000 shares of stock of the Valdeses in BARECO were sold to LCDC for a consideration of P20
Million. To be clear, the foregoing amount was paid in cash and the balance covered by
promissory notes to be paid by way of an Assignment of Rights. Specifically, P2.5 Million of the
P20 Million purchase price was paid in cash, while the balance of P17.5 Million was covered by
promissory notes and settled through the Assignment of Rights.

Thus, there is nothing in the abovementioned documents, nor in any of the subsequent
contracts between the parties that indicates that the transaction entered by and between them
was a joint venture. The transaction between the parties was clearly a sale of property.
(Valdes v. La Colina Development Corp., G.R. No. 208140, July 12, 2021, J.
Hernando)

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