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Corporation Law outside the object for which a corporation is created”. (University of
Mindanao, Inc. v. BSP, G.R. Nos. 194964-65, January 11, 2016)
Separate Personality Rule:
- It is a question, therefore, in each case, of the logical relation of the act
- As a general rule, a corporation has a separate and distinct personality to the corporate purpose expressed in the charter. If that act is one which
from those who represent it. Its officers are solidarily liable only when is lawful in itself, and not otherwise prohibited, is done for the purpose of
exceptional circumstances exist, such as cases enumerated in Sec. 31 serving corporate ends, and is reasonably tributary to the promotion of
of the corporation code. (Pioneer Insurance Surety Corp. vs. Morning those ends, in a substantial, and not in a remote and fanciful, sense, it
Star Travel & Tours, Inc., et. al., G.R. No. 198436, July 08, 2015) may fairly be considered within charter powers. The test to be applied
is whether the act in question is in direct and immediate furtherance
- The Doctrine of Separate Juridical Personality essentially states that a of the corporation's business, fairly incident to the express powers
corporation is vested by law with a personality separate and distinct from and reasonably necessary to their exercise. If so, the corporation has
the people comprising it. Ownership by a single or small group of the power to do it; otherwise, not (Magallanes Watercraft Association,
stockholders of nearly all of the capital stock of the corporation is not by Inc., et. al. vs. Margarito Auguis, et. al., G.R. No. 211485, May 30, 2016)
itself a sufficient ground to disregard the separate corporate personality.
Thus, obligations incurred by corporate officers, acting as corporate
agents, are direct accountabilities of the corporation they represent. Corporate officers
(Malixi v. Mexicali Philippines, G.R. No. 205061, [June 8, 2016] [Del
Castillo Case])) - Corporate officers are those officers of the corporation who are given that
character by the Corporation Code or by the corporation's by-laws. There
Exception to the Separate Personality Rule are three specific officers whom a corporation must have under Section
25 of the Corporation Code. These are the president, secretary and the
- The Court cited circumstances when a corporate officer can be jointly treasurer. A corporation may have such other officers as may be
and solidarily liable with the corporation: provided for by its by-laws. The number of corporate officers is thus
limited by law and by the corporation's by-laws. (Real v. Sangu
1. When directors and trustees or, in appropriate cases, the officers of a Philippines, Inc., G.R. No. 168757, January 19, 2011[Del Castillo Case])
corporation: -
Two-tier test in determining the existence of intra-corporate controversy
a) vote for or assent to patently unlawful acts of the corporation;
b) act in bad faith or with gross negligence in directing the corporate
affairs;
- The two-tier tests in determining the existence of intra-corporate
c) are guilty of conflict of interest to the prejudice of the corporation, its
controversy are the relationship test and the nature of the controversy
stockholders or members, and other persons.
test.
2. When the director or officer has consented to the issuance of watered The “relationship test” requires that the controversy must arise out of
stock or who, having knowledge thereof, did not forthwith file with the intra-corporate or partnership relations between any or all of the
corporate secretary his written objection thereto. parties and the corporation, partnership, or association of which they are
stockholders, members or associates, between any or all of them and the
3. When a director, trustee or officer has contractually agreed or stipulated corporation, partnership or association of which they are stockholders,
to hold himself personally and solidarily liable with the corporation. members or associates, respectively. (Vitaliano Aguirre II and Fidel
Aguirre vs. FQB+7, Inc., et. al., G.R. No. 170770, January 9, 2013)
4. When a director, trustee or officer is made, by specific provision of law, Under the nature of the controversy test, the incidents of that relationship
personally liable for his corporate action. must also be considered for the purpose of ascertaining whether the
controversy itself is intra-corporate. The controversy must not only be
Thus, the separate personality rule may be disregarded, or the veil of rooted in the existence of an intra-corporate relationship, but must as well
corporate fiction may be pierced attaching personal liability against responsible pertain to the enforcement of the parties' correlative rights and obligations
person if the corporation's personality "is used to defeat public convenience, under the Corporation Code and the internal and intra-corporate
justify wrong, protect fraud or defend crime, or is used as a device to defeat the regulatory rules of the corporation. If the relationship and its incidents are
labor laws x x x. (Dutch Movers, Inc. v. Lequin, G.R. No. 210032, [April 25, merely incidental to the controversy or if there will still be conflict even if
2017] [Del Castillo Case]) the relationship does not exist, then no intra-corporate controversy exists.
(Real v. Sangu Philippines, Inc., G.R. No. 168757, [January 19, 2011],
Consequence of the Separate Personality Rule 655 PHIL 68-92 [Del Castillo Case])
- The obligations incurred by corporate officers, acting as such corporate Certificate of Stocks
agents, are not theirs but the direct accountabilities of the corporation
they represent. As such, they should not be generally held jointly and
solidarily liable with the corporation. - A certificate of stock is a written instrument signed by the proper officer
of a corporation stating or acknowledging that the person named in the
The general rule is grounded on the theory that a corporation has a legal document is the owner of a designated number of shares of its stock.
personality separate and distinct from the persons comprising it. To
warrant the piercing of the veil of corporate fiction, the officer's bad faith Transfer of Stocks
or wrongdoing "must be established clearly and convincingly" as "bad
faith is never presumed." - Under Sec. 63 of the Corporation Code, certain minimum requisites must
be complied with for there to be a valid transfer of stocks, to wit:
(Harpoon Marine Services, Inc. and Jose Lido Rosit vs. Fernan Francisco, G.
R. No. 167751, March 2, 2011[Del Castillo Case]) 1) there must be delivery of the stock certificate;
2) the certificate must be endorsed by the owner or his attorney-in-fact or
other persons legally authorized to make the transfer; and
Concept of an Ultra Vires Act of a Corporation 3) to be valid against third parties, the transfer must be recorded in the
books of the corporation.
- Ultra vires actions are corporate acts that are outside those express
definitions under the law or articles of incorporation or those "committed (See Anna Teng vs. SEC and Ting Ping Lay, G.R. No. 184332, Feb. 17,
2016)
l) The person filing the suit must be a stockholder or member at The merger does not become effective upon the agreement of the
the time the acts or transactions subject of the action occurred and constituent corporations. (Mindanao Savings and Loan Association, Inc.
the time the action was filed; vs. Willkom, G.R. No. 178618, October 11, 2010)
2) He must have exerted all reasonable efforts, and alleges the
same with particularity in the complaint, to exhaust all remedies By law and jurisprudence, a merger becomes only effective upon
available under the articles of incorporation, by-laws, laws or rules approval by the Securities and Exchange Commission (SEC) of the
governing the corporation or partnership to obtain the relief he articles of merger. (BPI vs. BPI Employees Union-Davao Chapter-
desires; Federation of Unions in BPI Unibank, 627 SCRA 590)
3) No appraisal rights are available for the act or acts complained
of; Foreign Investment Act
4) The suit is not a nuisance or harassment suit.
Export Enterprise vs Domestic Market Enterprises under the Foreign
Stockholders‘ Right to Inspect Investment Act
- The Corporation Code has granted to all stockholders the right to - Under Sec. 3 (f) of the FIA, a domestic market enterprise shall mean an
inspect the corporate books and records, and in so doing has not enterprise which produces goods for sale, or renders services to the
required any specific amount of interest for the exercise of the right domestic market entirely or if exporting a portion of its output, fails to
to inspect. (Terelay Investment and Dev. Corp. vs. Cecilia Teresita consistently export at least sixty percent (60%) thereof.
Yulo, G.R. No. 160924, Aug. 05, 2015)
On the other hand, Sec. 3 (e) of the FIA defines export enterprise as an
- Specifically, stockholders cannot be prevented from gaining access to enterprise that exports sixty percent (60%) or more of its output or where
the: a trader purchases products domestically, exports sixty percent (60%) or
more of such purchases.
1) records of all business transactions of the corporation; and
2) minutes of any meeting of stockholders or the board of directors,
including their various committees and subcommittees. “Doing Business” in the Philippines
- The corporation carries the burden of proving the exceptions, to wit: - Under the Foreign Investment Act, the phrase “doing business” shall
include:
1) that the stockholder has improperly used information before;
2) lack of good faith; or 1) soliciting orders, service contracts, opening offices, whether called
3) lack of legitimate purpose. “liaison” offices or branches;
2) appointing representatives or distributors domiciled in the
- An action for injunction filed by a corporation generally does not lie to Philippines or who in any calendar year stay in the country for a
prevent the enforcement by a stockholder of his or her right to inspection. period or periods totaling one hundred eighty (180) days or more;
3) participating in the management, supervision or control of any
The petition is a pre-emptive action unjustly intended to impede and domestic business, firm, entity or corporation in the Philippines;
restrain the stockholders' rights. If a stockholder demands the inspection and
of corporate books, the corporation could refuse to heed to such demand. 4) any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance
When the corporation, through its officers, denies the stockholders of of acts or works, or the exercise of some of the functions normally
such right, the latter could then go to court and enforce their rights. It is incident to, and in progressive prosecution of, commercial gain or
then that the corporation could set up its defenses and the reasons for of the purpose and object of the business organization:
the denial of such right. Thus, the proper remedy available for the
enforcement of the right of inspection is undoubtedly the writ of (Sec 3 [d] of the Foreign Investment Act)
mandamus to be filed by the stockholders and not a petition for injunction
filed by the corporation. (Philippine Associated Smelting and Refining - The term “doing business” does not include appointing a
Corp. vs. Pablito Lim et. al., G.R. No. 172948, October 05, 2016) representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.
Appraisal Right
(See the case of Steelcase, Inc. vs. Design International
- A stockholder who dissents from certain corporate actions has the right Selections, Inc., G.R. No. 171995, April 18, 2012)
to demand payment of the fair value of his or her shares.
Securities Regulation Code
Clearly, the right of appraisal may be exercised when there is a
fundamental change in the charter or articles of incorporation Rule on the sale of Securities
substantially prejudicing the rights of the stockholders. It does not vest
unless objectionable corporate action is taken. It serves the purpose of - Securities are shares, participation or interests in a corporation or in a
enabling the dissenting stockholder to have his interests purchased and commercial enterprise or profit-making venture and evidenced by
to retire from the corporation. (Philip Turner, et. al. vs. Lorenzo Shipping a certificate, contract, instrument, whether written or electronic in
Corp., G.R. No. 157479, November 24, 2010) character.
Pre-emptive Right and Right of First Refusal The law provides that no securities shall be sold or offered for sale
or distribution within the Philippines, without a registration
Thus, if the business operation or the scheme constitutes an - The mandatory tender offer rule provides that any person or group of
investment contract that is a security under R.A. No. 8799, it must persons acting in concert, who intends to acquire thirty five percent (35%)
be registered with the SEC before its sale or offer for sale or of the outstanding voting shares or such outstanding voting shares that are
distribution to the public. If such securities are not registered, the sufficient to gain control of the board in a public company in one or more
offering to the public can be rightfully enjoined the SEC. (Power transactions within a period of twelve (12) months, shall disclose such
Homes Unlimited Corp. vs. SEC, et.al, G.R. No.164182, Feb.26, intention and contemporaneously make a tender offer for the percentage
2008) sought to all holders of such securities within the said period. (Rule 19.2.2,
2015 RIRR of the SRC)
When is a business operation or a scheme deemed an investment contract?
- A business operation or a scheme deemed an an investment contract exist Prohibited Acts when Trading with Securities
when the following elements are present:
- Price Manipulation (Sec. 24)
1) a contract, transaction, or scheme;
2) an investment of money; These are fraudulent acts or series of fraudulent actions designed to alter
3) investment is made in a common enterprise; the true prices of security/ies through the malevolent pegging, fixing or
4) expectation of profits; and stabilizing of the price of such security.
5) profits arising primarily from the efforts of others
- Engagement in Fraudulent Acts (Sec. 26)
(adopted by the Supreme Court in the case of SEC vs.
Prosperity.Com, Inc., G.R. No. 164197, January 25, 2012) These are unlawful acts done, directly or indirectly, in connection with the
purchase or sale of any securities by:
Exempt Securities
a) Employing any device, scheme, or artifice to defraud;
1) Any security issued or guaranteed by the Government of the
Philippines, or by any political subdivision or agency thereof, or by b) Obtaining money or property by means of any untrue statement of a
any person controlled or supervised by, and acting as an material fact of any omission to state a material fact necessary in
instrumentality of said Government. order to make the statements made, in the light of the
2) Any security issued or guaranteed by the government of any country circumstances under which they were made, not misleading; or
with which the Phils. maintains diplomatic relations on the basis of
reciprocity. c) Engaging in any act, transaction, practice or course of business which
3) Certificates issued by a receiver or by a trustee in bankruptcy duly operates or would operate as a fraud or deceit upon any person.
approved by the proper adjudicatory body.
4) Any security or its derivatives the sale or transfer of which, by law, is - Insider Trading (Sec. 27)
under the supervision and regulation of the OIC, HLURB, or the BIR.
5) Any security issued by a bank except its own shares of stock. Insider Trading is the selling or buying of a security of the issuer by an
insider while in possession of material information with respect to the
(Sec. 9.1, SRC) issuer or the security that is not generally available to the public.
Accommodation Party - The drawer of the check has a right of action against the drawee bank
for its failure to comply with its duty as the drawee bank. However,
- An accommodation party is one who lends his name to enable the the drawee bank, in turn, would have a right of action against the
accommodated party to obtain credit or to raise money. He receives no part collecting bank because of the falsity of its warranties as the
of the consideration for the instrument but assumes liability to the other collecting bank.
party or parties thereto. (Virata v. Ng Wee, G.R. Nos. 220926, July 5, 2017)
1) he must be a party to the instrument, signing as maker, drawer, - A negotiable instrument is deemed materially altered when such
acceptor, or indorser; alteration changes:
2) he must not receive value therefor; and
3) he must sign for the purpose of lending his name or credit to some
1) The date;
other person.
2) The sum payable, either for principal or interest;
3) The time or place of payment;
(Virata v. Ng Wee, G.R. Nos. 220926, July 5, 2017)
4) The number or the relations of the parties;
5) The medium or currency in which payment is to be made;
6) Or which adds a place of payment where no place of payment is
Nature of the relationship between an accommodation party and the party specified, or any other change or addition which alters the effect
accommodated of the instrument in any respect, is a material alteration.
- The relation between an accommodation party and the party
accommodated is, in effect, one of principal and surety — the (Sec. 125, NIL)
accommodation party being the surety. It is a settled rule that a surety is
bound equally and absolutely with the principal and is deemed an original Effects of materially altered negotiable instrument
promisor and debtor from the beginning. The liability is immediate and
direct. (Fideliza Aglibot vs. Ingersol R. Santia, G.R. No. 185945, Dec. 5,
2012) - Where a negotiable instrument is materially altered without the assent of
all parties liable thereon, it is avoided, except as against a party who has
Rule on Forgery himself made, authorized, or assented to the alteration and subsequent
indorsers.
- Under Sec. 23 of the NIL, when a signature is forged or made without the
authority of the person whose signature it purports to be, it is wholly But when an instrument has been materially altered and is in the hands
inoperative, and no right to retain the instrument, or to give a discharge of a holder in due course, not a party to the alteration, he may enforce
therefor, or to enforce payment thereof against any party thereto, can be payment thereof according to its original tenor.
acquired through or under such signature, unless the party against whom
it is sought to enforce such right is precluded from setting up the forgery or
want of authority. (Sec. 23, NIL) (Sec. 124, NIL)
Holder in due course Thus, an alteration is said to be material if it alters the effect of the
instrument. It means an unauthorized change in an instrument that
- A holder in due course is a holder who has taken the instrument under the purports to modify in any respect the obligation of a party or an
following conditions: unauthorized addition of words or numbers or other change to an
incomplete instrument relating to the obligation of a party. In other words,
1) That it is complete and regular upon its face; a material alteration is one which changes the items which are required
2) That he became the holder of it before it was overdue, and without to be stated under Section 1 of the Negotiable Instruments Law. (The
notice that it has been previously dishonored, if such was the fact; International Corporate Bank, Inc. vs. Court of Appeals and PNB, G.R.
3) That he took it in good faith and for value; NO. 129910, September 5, 2006)
4) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating
Manager’s check.
it.
(Sec. 52, NIL) - Jurisprudence defines a manager's check as a check drawn by the bank's
manager upon the bank itself and accepted in advance by the bank by
the act of its issuance. It is really the bank's own check and may be
Shelter Rule in Negotiable Instrument
treated as a promissory note with the bank as its maker. Consequently,
upon its purchase, the check becomes the primary obligation of the bank
- The shelter rule is the principle that provides that a person who does not and constitutes its written promise to pay the holder upon demand. It is
qualify as a holder in due course can, nonetheless, acquire the rights and similar to a cashier's check both as to effect and use in that the bank
privileges of a holder in due course if he derives his title to the instrument represents that the check is drawn against sufficient funds. (RCBC
through a holder in due course. However, a person who previously held the Savings Bank vs. Noel Odrada, G.R. No. 219037, October 19, 2016)
instrument cannot improve his position by later reacquiring it from a holder
in due course if the former holder was a party to fraud or illegal activity The drawee bank of a manager's check may interpose personal defenses
affecting the instrument or had notice of a claim or defense against the of the purchaser of the manager's check if the holder is not a holder in
instrument. (Sec. 58, NIL) due course. In short, the purchaser of a manager's check may validly
countermand payment to a holder who is not a holder in due course.
Crossed check Accordingly, the drawee bank may refuse to pay the manager's check by
interposing a personal defense of the purchaser.
- A crossed check is one where two parallel lines are drawn across its face
or across the corner thereof. (RCBC Savings Bank vs. Noel Odrada, G.R. No. 219037, October 19, 2016)
A check is crossed especially when the name of a particular banker or
company is written between the parallel lines drawn. It is crossed generally Discharged a negotiable instrument
when only the words "and company" are written at all between the parallel
lines. - A negotiable instrument is discharged:
Jurisprudence dictates that the effects of crossing a check are: (1) that 1) By payment in due course by or on behalf of the principal debtor;
the check may not be encashed but only deposited in the bank; (2) that 2) By payment in due course by the party accommodated, where the
the check may be negotiated only once — to one who has an account with instrument is made or accepted for his accommodation;
a bank; and (3) that the act of crossing the check serves as a warning to 3) By the intentional cancellation thereof by the holder;
Acquisition of ownership over a trademark (Fernando Juan vs. Roberto Juan and Laundromatic Corp. G.R.
No. 221732, August 23, 2017)
- The ownership of a trademark is acquired by its registration and its
actual use by the manufacturer or distributor of the goods made Insurance Law
available to the purchasing public. (UFC Philippines, Inc. v. Barrio
Fiesta Manufacturing Corp., G.R. No. 198889, January 20, 2016 citing Interpretation of Insurance Policy
Section 122 of R.A. No. 8293)
- The terms of the insurance policy should be interpreted in their plain
Extent of Protection given to Trademark Owners ordinary and popular meaning. However, in case of ambiguity, any
ambiguity therein should be resolved against the insurer; in other words,
- The scope of protection afforded to registered trademark owners is not it should be construed liberally in favor of the insured and strictly against
limited to protection from infringers with identical goods. The scope of the insurer. (Insular Life Assurance Co., Ltd. vs. Paz Khu, et. al., G.R.
protection extends to protection from infringers with related goods, and No. 195176, April 18, 2016[Del Castillo Case] )
to market areas that are the normal expansion of business of the
registered trademark owners. Double insurance
The registered trademark owner may use his mark on the same or similar - Double Insurance exists where the same person is insured by several
products, in different segments of the market, and at different price levels insurers separately in respect to the same subject and interest. The
depending on variations of the products for specific segments of the requisites in order for double insurance to arise are as follows:
market. The Court has recognized that the registered trademark owner
enjoys protection in product and market areas that are the normal 1. The person insured is the same;
potential expansion of his business. (UFC Philippines, Inc. v. Barrio 2. Two or more insurers insuring separately;
Fiesta Manufacturing Corp., G.R. No. 198889, January 20, 2016) 3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
Copyrightability of news
- The news footage is copyrightable. (Malayan Insurance Co., Inc. vs. Phil. First Ins., Co., Inc., et al., G.R. No.
184300, July 11, 2012)
News or the event itself is not copyrightable. However, an event can be
captured and presented in a specific medium. As recognized by this court
in Joaquin, television "involves a whole spectrum of visuals and effects, - Double insurance, unless prohibited in the policy, cannot be a ground for
video and audio." News coverage in television involves framing shots, the denial of an insurance claim. Under R.A. 10607, where the insured
using images, graphics, and sound effects. It involves creative process in a policy other than life is over insured by double insurance, the insured,
and originality. Television news footage is an expression of the news. unless the policy otherwise provides, may claim payment from the
(ABS-CBN Corp. vs. Felipe Gozon, et. al. G.R. No. 195956, March 11, insurers in such order as he may select, up to the amount for which the
2015) insurers are severally liable under their respective contracts. (Section 96,
R.A. 10607)
Concept of Fair Use Doctrine
Collateral Source Rule
- Fair use is “a privilege to use the copyrighted material in a reasonable
manner without the consent of the copyright owner or as copying the - Under Collateral Source Rule, if an injured person receives compensation
theme or ideas rather than their expression.” Fair use is an exception to for his injuries from a source wholly independent of the tortfeasor, the
the copyright owner’s monopoly of the use of the work to avoid stifling payment should not be deducted from the damages which he would
“the very creativity which that law is designed to foster. otherwise collect from the tortfeasor.
The four-factor tests to determine fair use are as follows: In cases where the employee is both covered by hospitalization
insurance and a CBA stipulation on compensation for work-related injury,
The four (4) factors to determine if there was fair use of a copyrighted the covered employees cannot recover from both. This rule is true even
work are: if there is no express provision in the CBA barring claims for
hospitalization expenses already paid by other insurers,.
1) The purpose and character of the use, including whether such use
is of a commercial nature or is for non-profit educational purposes; (Mitsubishi Motors Phil. Salaried Employees Union v. Mitsubishi Motors
Phil. Corp., G.R. No. 175773, June 17, 2013[Del Castillo Case])
2) The nature of the copyrighted work;
Premium
Constestability Period in Life Insurance On the other hand, the Monetary Board can place a bank under
receivership and liquidation if such bank:
- Fraudulent intent on the part of the insured must be established to
entitle the insurer to rescind the contract." In the absence of proof of 1) is unable to pay its liabilities as they become due in the ordinary
such fraudulent intent, no right to rescind arises. course of business:
2) has insufficient realizable assets to meet its liabilities; or
Under Section 48 of the Insurance Code, an insurer is given two years 3) cannot continue in business without involving probable losses to its
– from the effectivity of a life insurance contract and while the insured depositors or creditors; or
is alive – to discover or prove that the policy is void ab initio or is 4) has willfully violated a cease and desist order that has become
rescindible by reason of the fraudulent concealment or final, involving acts or transactions which amount to fraud or a
misrepresentation of the insured or his agent. After the two-year period dissipation of the assets of the institution
lapses, or when the insured dies within the period, the insurer must
make good on the policy, even though the policy was obtained by fraud, (Sec. 30, R.A. 7653)
concealment, or misrepresentation. This is not to say that insurance
fraud must be rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must be penalized, for such Consequence of a Bank Being Insolvent
recklessness and lack of discrimination ultimately work to the detriment
of bona fide takers of insurance and the public in general. - After the Monetary Board has declared that a bank is insolvent and has
ordered it to cease operations, the MB becomes the trustee of its assets
for the equal benefit of all the creditors, including depositors. The assets
(Manila Bankers Life Insurance vs. Cresencia Aban, G.R. No. of the insolvent banking institution are held in trust for the equal benefit
175666, July 29, 2013[Del Castillo Case]) of all creditors, and after its insolvency, one cannot obtain an advantage
or a preference over another by an attachment, execution or otherwise.
Banking Laws
Towards this end, the PDIC, as the statutory receiver/liquidator of the
Fit and Proper rule bank, is mandated to immediately gather and take charge of all the assets
and liabilities of the institution and administer the same for the benefit of
- Fit and Proper Rule is a rule that provides that in order to maintain the its creditors.
quality of bank management and afford better protection to depositors
and the public in general, the Monetary Board shall prescribe, pass As the fiduciary of the properties of a closed bank, the PDIC may
upon and review the qualifications and disqualifications of individuals prosecute or defend the case by or against the said bank as a
elected or appointed bank directors or officers and disqualify those representative party while the bank will remain as the real party in
found unfit. interest.
After due notice to the board of directors of the bank, the Monetary (Balayan Bay Rural Bank, Inc., et. al., v. Nat’l Livelihood Dev. Corp., G.R. No.
Board may disqualify, suspend or remove any bank director or officer 194589, Sept. 21, 2015)
who commits or omits an act which render him unfit for the position. In
determining whether an individual is fit and proper to hold the position
of a director or officer of a bank, regard shall be given to his integrity, Exclusive Issue Power of the BSP
experience, education, training, and competence. (Section 16, R.A.
8791) - Under the General Banking Act of 2000, BSP have the sole power and
authority to issue currency, within the territory of the Philippines. No other
DOSRI Rule person or entity, public or private, may put into circulation notes, coins or
any other object or document which, in the opinion of the Monetary
- DOSRI stands for Directors, Officers, Stockholders and their Related Board, might circulate as currency, nor reproduce or imitate the
Interests. facsimiles of BSP notes without prior authority from BSP. This is what is
called the “Exclusive Issue Power” of BSP. (Sec. 50, R.A. 7653)
The DOSRI rule provides that no director or officer of any bank shall,
directly or indirectly, for himself or as the representative or agent of Anti-Money Laundering Act
others, borrow from such bank nor shall he become a guarantor,
endorser or surety for loans from such bank to others, or in any manner
be an obligor or incur any contractual liability to the bank, except with Freeze Order
the written approval of the majority of all the directors of the bank,
excluding the director concerned. - Under Sec. 10 of R.A. 9160, as amended, only the Court of Appeals may
issue a freeze order. The AMLC has no authority to freeze the monetary
The purpose of the rule is to ensure that all dealings of a bank with any instrument of one who is suspected of money laundering.
of its directors, officers or stockholders and their related interests shall
be upon terms not less favorable to the bank than those offered to
others. Safe Harbor Clause
In case of violation of the rule, the office of any bank director or officer - The Safe Harbor Clause provides that he concerned bank officers who
who violates may be declared vacant and the director or officer shall submitted covered and suspicious transaction reports to the AMLC will
Common Carrier vs. private carrier 1) an accident results in the death of a passenger; or
2) the carrier is guilty of fraud or bad faith
- A private carrier is one who, without making the activity a vocation, or
without holding himself or itself out to the public as ready to act for all (Darines v. Quiñones, G.R. No. 206468, August 2, 2017 (Del Castillo Case)
who may desire his or its services, undertakes, by special agreement in citing Article 1764 in relation to Article 2206(3) and Article 2220 of the Civil
a particular instance only, to transport goods or persons from one place Code)
to another either gratuitously or for hire.
Bill of Lading
In contrast, a common carrier is a person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods - A bill of lading is defined as "a written acknowledgment of the receipt of
or both, by land, water, or air, for compensation, offering such services goods and an agreement to transport and to deliver them at a specified
to the public. place to a person named or on his order." It may also be defined as an
instrument in writing, signed by a carrier or his agent, describing the freight
(Sps. Teodoro and Nanette Perena vs. Sps. Nicolas and Teresita Zarate, PNR, so as to identify it, stating the name of the consignor, the terms of the
et. al., G.R. No. 157917, Aug. 19, 2012 contract of carriage, and agreeing or directing that the freight be delivered
to bearer, to order or to a specified person at a specified place. (Designer
True test if a transport carrier is a common carrier Baskets, Inc. vs. Air Sea Transport, Inc. and Asia Cargo Container Lines,
Inc., G.R. No. 184513, March 09, 2016)
- The true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the In maritime transportation, a bill of lading is issued by a common carrier as
conveyances used in the activity, but whether the undertaking is a part of a contract, receipt and symbol of the goods covered by it. (Eastern Shipping
the activity engaged in by the carrier that he has held out to the general Lines, Inc. vs. BPI/MS Insurance Corp., & Mitsui Sumitomo Insurance Co.,
public as his business or occupation. If the undertaking is a single Ltd., G.R. No. 182864, January 12, 2015 citing Lorenzo Shipping Corp. vs.
transaction, not a part of the general business or occupation engaged in, Chubb and Sons, Inc., G.R. No. 147724, 8 June 2004)
as advertised and held out to the general public, the individual or the
entity rendering such service is a private, not a common, carrier. The general rule is that upon receipt of the goods, the consignee
surrenders the bill of lading to the carrier and their respective obligations
The question must be determined by the character of the business are considered canceled. The law, however, provides two exceptions
actually carried on by the carrier, not by any secret intention or mental where the goods may be released without the surrender of the bill of lading
reservation it may entertain or assert when charged with the duties and because the consignee can no longer return it. These exceptions are when
obligations that the law imposes”. (Sps. Teodoro and Nanette Perena vs. the bill of lading gets lost or for other cause. In either case, the consignee
Sps. Nicolas and Teresita Zarate, PNR, et. al., G.R. No. 157917, Aug. must issue a receipt to the carrier upon the release of the goods. Such
19, 2012) receipt shall produce the same effect as the surrender of the bill of lading.
(Designer Baskets, Inc. vs. Air Sea Transport, Inc. and Asia Cargo
Container Lines, Inc., G.R. No. 184513, March 09, 2016)
Liability of common carrier for the death of its passenger caused by a co-
passenger Limited Liability rule in transportation law
- The common carrier is not liable. Neither the law nor the nature of the - The limited liability rule in transportation law is the universal principle of
business of a transportation company makes it an insurer of the limited liability in all cases wherein the shipowner or agent may be properly
passenger's safety, but that its liability for personal injuries sustained by held liable for the negligent or illicit acts of the captain. These articles
its passenger rests upon its negligence, its failure to exercise the degree precisely intend to limit the liability of the shipowner or agent to the value
of diligence that the law requires”. of the vessel, its appurtenances and freightage earned in the voyage,
provided that the owner or agent abandons the vessel.
If the death of the passenger was neither caused by any defect in the
means of transport or in the method of transporting, or to the negligent or The doctrine of limited liability is not applicable to claims under POEA-SEC.
willful acts of common carrier's employees, in their capacities as driver The liability of the shipowner or agent under the POEA-SEC has likewise
and conductor, the common carrier is not liable. nothing to do with the provisions of the Code of Commerce regarding
maritime commerce. The death benefits granted under the POEA-SEC is
(G.V. Florida Transport, Inc. vs. Heirs of Battung, Jr., et. al., G.R. not due to the death of a passenger by or through the misconduct of the
No. 208802, Oct. 14, 2015) captain or master of the ship; nor is it the liability for the loss of the ship as
result of collision; nor the liability for wages of the crew. It is a liability
Contributory Negligence created by contract between the seafarers and their employers, but
secured through the State's intervention as a matter of constitutional and
- Contributory negligence is conduct on the part of the injured party, statutory duty to protect Filipino overseas workers and to secure for them
contributing as a legal cause to the harm he has suffered, which falls the best terms and conditions possible, in order to compensate the
below the standard to which he is required to conform for his own seafarers' heirs and dependents in the event of death while engaged in the
protection. (Sealoader Shipping Corp. vs. Grand Cement Mfg. Corp., et. performance of their work or employment.
al., G.R. No. 167363 Dec. 15, 2010)
COGSA Will the absence of notice of claim bar recovery?
When the plaintiff's own negligence was the immediate and proximate
cause of his injury, he cannot recover damages. But if his negligence was a) Is there a? What is the effect if no action is made within the period?
only contributory, the immediate and proximate cause of the injury being b) What is the Package Limitation Rule under the COGSA? What is the
the defendant's lack of due care, the plaintiff may recover damages, but exception to the rule, if any?
the courts shall mitigate the damages to be awarded. (Art. 2179, New
Civil Code) - The provisions of COGSA shall become inapplicable from the time
the goods have been discharged from the ship and given to the custody
Vicarious Liability in Transportation Law of the arrastre operator. (Insurance Company of North America vs. Asian
Terminals, Inc., G.R. No. 180784, February 15, 2012)
- The principle of vicarious liability in transportation law presupposes that
when an injury is caused by the negligence of a servant or employee, Notice of loss or damage on the goods under COGSA
there instantly arises a presumption of law that there was negligence on
the part of the master or employer either in the selection of the servant - When there is loss or damage on the goods, notice must be given at the
or employee (culpa in eligiendo) or in the supervision over him after the time of the removal of the goods into the custody of the person entitled
selection (culpa vigilando), or both. (Mariano Mendoza and Elvira Lim vs. to delivery thereof or if the loss or damage is not apparent, the notice
Sps. Gabriel Gomez G.R. No. 160110, June 18, 2014) must be given within three days of delivery.
Registered Owner Rule Under Section 3 (6) of the COGSA, notice of loss or damages must be
filed within three days of delivery.
- The Registered-Owner Rule states that the registration of motor vehicles
was necessary "not to make said registration the operative act by which Unless notice of loss or damage and the general nature of such loss or
ownership in vehicles is transferred, but to permit the use and operation damage be given in writing to the carrier or his agent at the port of
of the vehicle upon any public highway. Its "main aim is to identify the discharge or at the time of the removal of the goods into the custody of
owner so that if any accident happens, or that any damage or injury is the person entitled to delivery thereof under the contract of carriage, such
caused by the vehicle on the public highways, responsibility therefor can removal shall be prima facie evidence of the delivery by the carrier of the
be fixed on a definite individual, the registered owner. (Caravan Travel goods as described in the bill of lading. If the loss or damage is not
However, the Supreme Court has ruled that a claim is not barred by
prescription as long as the one-year period has not lapsed. Neither the Electronic Commerce Act
Civil Code nor the Code of Commerce states a specific prescriptive
period on the matter, the Carriage of Goods by Sea Act (COGSA) --
which provides for a one-year period of limitation on claims for loss of, or Principal Purpose of the E-Commerce Act
damage to, cargoes sustained during transit -- may be applied
suppletorily to the case at bar. (Loadstar Shipping Co., Inc. v. Court of - The E-Commerce Act 2000 aims to facilitate domestic and international
Appeals, 373 Phil. 976) dealings, transactions, arrangements agreements, contracts and
exchanges and storage of information through the utilization of electronic,
Prescriptive Period for Filing an Action under COGSA optical and similar medium, mode, instrumentality and technology to
recognize the authenticity and reliability of electronic documents related
- It has long been settled that in case of loss or damage of cargoes, the one- to such activities and to promote the universal use of electronic
year prescriptive period under the COGSA applies. (Pioneer Insurance transaction in the government and general public. (Sec. 3, R. A. No.
and Surety Corp. vs. APL CO. PTE. Ltd., G.R. No. 226345, Aug. 02, 8792)
2017)
Applicability
Under COGSA, the carrier and the ship shall be discharged from all
liability in respect of loss or damage if the suit is not brought within one - The E-Commerce Act of 2000 applies to any kind of data message and
year after delivery of the goods or the date when the goods should have electronic document used in the context of commercial and non-
been delivered. (Par. 6, Sec. 3, COGSA) commercial activities to include domestic and international dealings,
transactions, arrangements, agreements contracts and exchanges and
Package Limitation Rule under the COGSA storage of information. (Sec. 4, R. A. No. 8792)
- The Package Limitation Rule under COGSA limits the carrier’s liability in
the absence of a shipper’s declaration of a higher value in the bill of Legal recognition of electronic data messages
lading.
- Under the E-Commerce Act, information shall not be denied legal effect,
The exception to the Package Limitation Rule is when the nature and validity or enforceability solely on the grounds that it is in the data
value of such goods have been declared by the shipper before shipment message purporting to give rise to such legal effect, or that it is merely
and inserted in the bill of lading. This declaration, if embodied in the bill referred to in that electronic data message. (Sec. 6, R. A. No. 8792)
of lading, shall be prima facie evidence, but shall not be conclusive on
the carrier”. (Section 4[5], COGSA)
Legal effect of the use of electronic signatures
Liability of airline company for discourteous conduct of their employees towards
a passenger - An electronic signature on the electronic document shall be equivalent to
the signature of a person on a written document, if that signature is
- Passengers do not contract merely for transportation. They have a right proved by showing that a prescribed procedure, not alterable by the
to be treated by the carrier's employees with kindness, respect, courtesy parties interested in the electronic document is made. (Sec. 8, R. A. No.
and due consideration. They are entitled to be protected against personal 8792)
misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of TRUST RECEIPT LAW
employees towards a passenger gives the latter an action for damages
against the carrier. (Air France v. Carrascoso, 653 Phil. 138 [2010]) Trust Receipt Transaction
Prescriptive Period for Filing an action under the Warsaw Convention - A trust receipt transaction is one where the entrustee has the obligation
to deliver to the entruster the price of the sale, or if the merchandise is
- The right to damages shall be extinguished if an action is not brought within not sold, to return the merchandise to the entruster.
two (2) years, reckoned from the date of arrival at the destination, or from
the date on which the aircraft ought to have arrived, or from the date on The obligations under the trust receipts are governed by a special law,
which the transportation stopped. (Art. 29, Warsaw Convention) P.D. No. 115, and non-compliance have particular legal consequences.
Letter of Credit
Failure of the entrustee to turn over the proceeds of the sale of the
goods, covered by the trust receipt to the entruster or to return said
Letter of Credit
goods if they were not disposed of in accordance with the terms of the
trust receipt shall be punishable as estafa under Article 315 (1) of the
- Letter of credit is a financial device developed by merchants as a Revised Penal Code, without need of proving intent to defraud. The
convenient and relatively safe mode of dealing with sales of goods to offense punished under P.D. No. 115 is in the nature of malum
satisfy the seemingly irreconcilable interests of a seller, who refuses to prohibitum. Mere failure to deliver the proceeds of the sale or the
part with his goods before he is paid, and a buyer, who wants to have goods, if not sold, constitutes a criminal offense that causes prejudice
control of the goods before paying. not only to another, but more to the public interest
The three transactions involved in the issuance of a letter of credit are as
follows: (Security Bank Corporation vs. Great Wall Commercial Press
Company, Inc., et. al., G.R. No. 219345, January 30, 2017)
1) The transaction which constitutes the underlying transaction in a
letter of credit (e.i. contract of sale between the buyer and the seller).
The contract may require that the buyer obtain a letter of credit from
Foreclosure Rehabilitation and Insolvency Act (FRIA)
a third party acceptable to the seller.
Rehabilitation Plan 7) any criminal action against individual debtor or owner, partner, director
or officer of a debtor shall not be affected by any proceeding
- It is an action plan where the financial well-being and viability of an commend under FRIA .
insolvent debtor can be restored using various means as may be
approved by the court or creditors. (FRIA, Sec [ii]) (Section 18, FRIA)
- Objections to a Rehabilitation Plan may be made on the following: Contents of a liquidation Order
1) Creditors' support was induced by fraud; - The Liquidation Order shall contain the following:
2) Documents or data relied upon in the Plan are materially false or 1. Declare the debtor insolvent;
misleading; or 2. Order:
3) Plan is in fact not supported by the voting creditors. a) The liquidation of the debtor and in the case of a juridical debtor,
declare it as dissolved;
(FRIA, Sec 66) b) The sheriff to take possession and control of all the property of the
debtor, except those that may be exempt from execution;
Cram-down Power of a Rehabilitation Court c) The publication of the petition or motion in a newspaper of general
circulation once a week for 2 consecutive weeks;
- The court may approve a rehabilitation plan over the opposition of d) The payments of any claims and conveyance of any property due
creditors, holding a majority of the total liabilities of the debtor if, in its the debtor to the liquidator;
judgment, the rehabilitation of the debtor is feasible and the opposition of e) Creditors to file their claims with the liquidator within the period set
the creditors is manifestly unreasonable. by the rules of procedure;
f) Prohibition of payments and the transfer of any property by the
The court shall have the power to approve or implement the debtor;
Rehabilitation Plan despite the lack of approval, or objection from the g) Authorizing the payment of administrative expenses as they
owners, partners or stockholders of the insolvent debtor. (FRIA, Sec 68) become due;
h) Stating that the debtor and creditors who are not petitioner/s may
Such prerogative was carried over in the Rehabilitation Rules, which submit the names of other nominees to the position of liquidator;
maintains that the court may approve a rehabilitation plan over the and
objection of the creditors if, in its judgment, the rehabilitation of the i) Setting the case for hearing for the election and appointment of the
debtors is feasible and the opposition of the creditors is manifestly liquidator, which date shall not be less than 30 days nor more than
unreasonable. (Victorio-Aquino vs. Pacific Plans, Inc., 744 SCRA 480. 45 days from the date of the last publication.
December 10, 2014)
(FRIA, Sec. 112)
Stay or Suspension Order
Good Luck!!!
a) The issuance of a Stay or Suspension Order shall have the following
effects: SMC/ComBar2018
1) Suspend all actions or proceedings, in court or otherwise, for the -------------------------------- END --------------------------------
enforcement of claims against the debtor;