2023 Bar Examination

Last-Minute Lecture Notes in Commercial Law

Dean Sergio M. Ceniza

Corporation Law

Can a director or manager of a company be held liable for the labor claims of a dismissed
employee?

No. Since the complaining employee failed to allege and credibly show that the individual
private respondents, being the director or the manager, assented to patently unlawful acts of
Teletech or that they were guilty of gross negligence or bad faith in the performance of their official
duties, We find no reason to hold the individual private respondents liable with Teletech. (Teletech
Customer Care Mngt. Phils., Inc. vs. Gerona, Jr., G.R. No. 219166, Nov. 10, 2021)

Can the doctrine of piercing the veil of corporate fiction apply to a foreign corporation that owns
the majority of the shares of a domestic corporation?

No. While it is true that CyberOne AU owns the majority of the shares of CyberOne PH,
this, nonetheless, does not warrant the conclusion that CyberOne PH is a mere conduit of CyberOne
AU. Even granting that CyberOne AU and Mikrut exercised a certain degree of control over the
finances, policies, and practices of CyberOne PH, such control does not necessarily warrant
piercing the veil of corporate fiction since there was not a single proof that CyberOne PH was
formed to defraud or that CyberOne PH was guilty of bad faith or fraud. (Gesolgon vs. CyberOne
PH., Inc., G.R. No. 210741, October 14, 2020)

Can the president and manager of a corporation be made solidarily liable for the claims against
the corporation arising from his conduct of bad faith in directing the affairs of the corporation?

Yes. The separate corporate existence may be disregarded where the entity is formed or
used for non-legitimate purposes, such as to evade a just and due obligation, to justify a wrong, to
shield or perpetrate fraud, or to carry out similar or inequitable considerations, other unjustifiable
aims or intentions, in which case, the fiction will be disregarded.

In this case, Atienza established sufficient evidence to show that Bartolome had acted in
bad faith or gross negligence in the sale of the defective vessel engine and the delivery and
installation of demo units instead of a new engine, which Atienza paid for. (Atienza vs. Golden
Ram Engineering Equipment Corp., G.R. No. 205405, June 28, 2021)

If three corporations belonging to the same owner issued separate and ambiguous employment
contracts to the same employee, can piercing the veil of corporate fiction be applied to enforce the
monetary claims of the employee?

Yes. The corporate veil may be lifted if it has been used to shield fraud, defend crime,
justify a wrong, defeat public convenience, insulate bad faith, or perpetuate injustice. Here, the
totality of the circumstances evinces fraud on the part of the respondents' group of companies to
evade an existing obligation. In this case, the Court pierced the veil of corporate fiction considering

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the strong ambiguity in the employment contracts, three in all, signed by Esico as to which among
the respondents' group of companies will compensate him for the services he had rendered. (Esico
vs. Alphaland Corp., G.R. No. 216716, November 17, 2021)

Can the owner of corporate entities be made criminally liable for the illegal acts committed by the
corporation?

Yes. Piercing of the fiction of the corporate veil is allowed if juridical entities are used by
private individuals as vehicles to commit illegal acts. Thus, corporate officials may be criminally
liable for acts made on behalf of the corporation they represent. (Villanueva vs. People, G.R. No.
218652, February 23, 2022)

Registration of Corporation

Those wanting to establish a corporation must:

a) submit the intended corporate name to the SEC for verification. If the SEC finds that
the name is distinguishable from a name already reserved or registered for the use of
another corporation, not protected by law, and not contrary to law, rules, and
regulations, the name shall be reserved in favor of the incorporators.
b) submit their articles of incorporation and bylaws to the SEC.

When will the corporate existence of a private corporation commence?

A private corporation organized under the Revised Corporation Code commences its
corporate existence and juridical personality from the date the SEC issues the certificate of
incorporation under its official seal. (Section 18, R. A. No.11232)

Effects of Non-Use of Corporate Charter

1) For failure to formally organize and commence its business within five (5) years from
the date of its incorporation, the certificate of incorporation shall be deemed revoked as
of the day following the end of the five (5)-year period.

2) For failure to operate for a period of at least five (5) consecutive years after commencing
its business, the SEC may, after due notice and hearing, place the corporation under
delinquent status.

A delinquent corporation shall have a period of two (2) years to resume operations and
comply with all requirements that the SEC shall prescribe; otherwise its certificate of
incorporation shall be revoked.

(Sec. 21, R. A. No. 11232)

Ultra Vires Doctrine

An ultra vires act is one committed outside the object for which a corporation is created as
defined by the law of its organization and, therefore beyond the power conferred upon it by law.

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 No corporation shall possess or exercise corporate powers other than those conferred by the
Revised Corporation Code or by its articles of incorporation and except as necessary or incidental
to the exercise of the powers conferred. (Sec. 44)

Ultra Vires versus an Illegal Act

The term ultra vires is distinguished from an illegal act, for the former is merely voidable,
which may be enforced by performance, ratification, or estoppel, while the latter is void and cannot
be validated. (Waterfront Philippines, Inc., et. al. vs. SSS, G.R. No. 249337, July 06, 2021)

Can the SEC refuse the application of the corporation to decrease its authorized capital when the
corporation has submitted all the requirements of the law?

No. Decreasing a corporation's authorized capital stock, which is an amendment of the

corporation's Articles of Incorporation, is a decision only the stockholders and the directors can
make, considering that they are the contracting parties thereto. For third persons or parties outside
the corporation, like the SEC, to interfere in the decrease of the capital stock without reasonable
ground is a violation of the "business judgment rule.”

Contracts intra vires entered into by the board of directors are binding upon the
corporation, and courts will not interfere unless such contracts are so unconscionable and
oppressive as to amount to wanton destruction of the rights of the minority. The SEC and the
courts are barred from intruding into business judgments of corporations when the same are made
in good faith." (Metroplex Berhad vs. Sinophil Corp., G.R. No. 208281, June 28, 2021)

Can stockholders of a solvent corporation be held liable solidarily with the corporation under the
trust fund doctrine?

No. As long as a corporation remains solvent, the subscriber's only liability runs to the
corporation. Except by way of assignment, the creditor of a solvent corporation, being in no sense
a party to the subscription contract, is unable to reach an unpaid subscription. (Jennifer Enano-Bote,
et. al. vs. Jose Alvarez, et. al., G.R. No. 223572, Nov. 10, 2020)

➢ All assets and property belonging to the corporation held in trust for the benefit of creditors
that were distributed or in the possession of the stockholders, regardless of full payment of
their subscriptions, may be reached by the creditor in satisfaction of its claim.

➢ Under the trust fund doctrine, a corporation has no legal capacity to release an original
subscriber to its capital stock from the obligation of paying for his shares, in whole or in
part, without a valuable consideration or fraudulently, to the prejudice of creditors.

➢ Two instances when the creditor is allowed to maintain an action upon any unpaid
subscriptions based on the trust fund doctrine:

(1) where the debtor corporation released the subscriber to its capital stock from the
obligation of paying for their shares, in whole or in part, without a valuable
consideration, or fraudulently, to the prejudice of creditors; and
(2) where the debtor corporation is insolvent or has been dissolved without providing
for the payment of its creditors.

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Is the subsequent execution of a board resolution giving the chairperson and president of a
corporation authority to file a court action cures the defect of lack of authority at the time of the
filing of the court action?

Yes. The "lack of authority of a corporate officer to undertake an action on behalf of the
corporation may be cured by ratification through the subsequent issuance of a board resolution,
recognizing the validity of the action or the authority of the concerned officer." (Jorgenetics Swine
Improvement Corp. vs. Thick & Thin Agri-Products, Inc., G.R. Nos. 201044 & 222691, May 5,
2021)

Can the corporation deny the verbal agreement entered into by its officer even though such an
agreement was already partially executed?

No. When a corporation intentionally or negligently clothes its officer with apparent
authority to act on 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.
vs. Vitarich Corp., G.R. No. 217454, January 11, 2021)

Can a bank be liable for damages due to its unilateral closure of a customer’s account subsequent
to the tortuous acts of its employee?

Yes. The bank cannot simply disavow the deposit agreement after unraveling the tortuous
acts of its employees. 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. (Allied Banking Corp. v. Spouses Macam, G.R. No. 200635,
February 1, 2021)

Can a company president who signed a document holding himself liable with the corporation raise
the separate personality rule as a defense?

No. As a general rule, a corporation's representatives are not bound by the contract terms
executed by the corporation. However, when the officer signed a document purportedly binding
himself to be “held solidarily liable in his personal capacity, such fact would warrant an action for
a collection based on the provision of such. (Sps. Fernandez vs. Smart Comm., Inc., G.R. No.
212885, July 17, 2019)

Can a company president be liable for the monetary claims of an OFW?

Yes. The corporate officer can be held liable for corporate obligations when there is a
specific provision of law imposing such liability. Sec. 10 of R. A. No. 8042, as amended by R.
A. No. 10022, provides that "if the recruitment/ placement agency is a juridical being, the corporate
officers and directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages. (Oscares vs.
Magsaysay Maritime Corp., G.R. No. 245858, December 2, 2020)

Concept of Doctrine of Corporate Opportunity

Corporate officers and directors are not permitted to use their position of trust and
confidence to further their private interests. While technically not trustees, they stand in a fiduciary
relation to the corporation and its stockholders.

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Rule on Disloyalty of a Director

Where a director, by virtue of his office, acquires for himself a business opportunity that
should belong to the corporation, thereby obtaining profits to the prejudice of such corporation,
he must account to the latter for all such profits by refunding the same, unless his act has been
ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the
outstanding capital stock. This provision shall be applicable, even if the director risked his own
funds in the venture. (Sec. 33, R. A. No. 11232)

Grounds for disqualifying a director/trustee/officer.

➢ A person shall be disqualified from being a director, trustee or officer of any corporation
if, within five (5) years prior to the election or appointment as such, the person was:

a) Convicted by final judgment:

1) Of an offense punishable by imprisonment for a period exceeding six

(6) years;
2) For violating Revised Corporation Code;
3) For violating the Securities Regulation Code;
b) Found administratively liable for any offense involving fraudulent acts; and
c) By a foreign court or equivalent foreign regulatory authority for acts,
violations or misconduct similar to those enumerated in paragraphs (a) and
(b) above.

(Sec. 26, R. A. No. 11232)

Derivative Suit

A derivative suit is an action brought by a stockholder on behalf of the corporation to

enforce corporate rights against the corporation’s directors, officers, or other insiders. In derivative
suits, the real party in interest is the corporation, while the stockholder is a mere nominal party.

The Requisites for Filing Derivative Suits

1) He was a stockholder or member at the time the acts or transactions subject of the action
occurred, and at the time the action was filed;
2) He exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation, by-laws,
laws, or rules governing the corporation or partnership to obtain the relief he desires;
3) No appraisal rights are available for the act or acts complained of, and
4) The suit is not a nuisance or harassment suit.
5) In case of a nuisance or harassment suit, the court shall forthwith dismiss the case.

(Florete, Jr. v. Florete, G.R. No. 174909 & 177275, Jan. 20, 2016, citing Rule 8, Section 1
of the Interim Rules of Procedure for Intra Corporate Controversies)

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Can a foreign corporation claim that its only transaction with a domestic corporation is an
“isolated transaction” even if it was related to the foreign corporation’s specific business purpose?

No. The phrase "isolated transaction" has a definite and fixed meaning. 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. 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 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. (Magna
Ready Mix Corp. vs. Andersen Bjornstad Kane Jacobs, Inc., G.R. No. 196158, Jan. 20, 2021)

Can a domestic corporation that dealt with a foreign corporation argue that the foreign
corporation has no license to do business in the Philippines and cannot, therefore, sue in Philippine
courts?

No. By virtue of the doctrine of estoppel, a party cannot take undue advantage by
challenging the foreign corporation's personality or legal capacity to sue when the former already
acknowledged the same by entering into a contract with the latter and derived benefits therefrom.
(Magna Ready Mix Concrete Corp. vs. Andersen Bjornstad Kane Jacobs, Inc., G.R. No. 196158,
January 20, 2021)

Partnership
Rules to Determine the Existence

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by article 1825, persons who are not partners as to each
other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership,
whether such co-owners or co-possessors do or do not share any profits made
by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether
or not the persons sharing them have a joint or common right or interest in any
property from which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie
evidence that he is a partner in the business, but no such inference shall be
drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment varies with the
profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other
property by installments or otherwise.

(Art. 1769, New Civil Code)

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 Rule on Partnership Term

a) A partnership begins from the moment of the execution of the contract unless it is otherwise
stipulated. (Art. 1784, New Civil Code)

b) When a partnership for a fixed term or particular undertaking is continued after the
termination of such term or particular undertaking without any express agreement, the
rights and duties of the partners remain the same as they were at such termination, so far as
is consistent with a partnership at will. A continuation of the business by the partners or
such of them as habitually acted therein during the term, without any settlement or
liquidation of the partnership affairs, is prima facie evidence of a continuation of the
partnership. (Art. 1785, New Civil Code)

Doctrine of Partnership by Estoppel

A partnership may be deemed to exist among parties who agree to borrow money to
pursue a business and to divide the profits or losses that may arise therefrom, even if it is shown
that they have not contributed any capital of their own to a "common fund." Their contribution may
be in the form of credit or industry, not necessarily cash or fixed assets.

Legal Consequence:

Being partners, they are all liable for debts incurred by or on behalf of the partnership.
The liability for a contract entered into on behalf of an unincorporated association or ostensible
corporation may lie in a person who may not have directly transacted on its behalf, but reaped
benefits from that contract.

Limited Partnership

A limited partnership is one formed by two or more persons, having as members one or
more general partners and one or more limited partners. The limited partners, as such, shall not be
bound by the obligations of the partnership. (Art. 1843, Civil Code)

Contribution of the Limited Partner

The contributions of a limited partner may be cash or property, but not services. (Art.1845,
Civil Code)

Rule on the Appearance of the Surname of Limited Partner in the Partnership Name

The surname of a limited partner shall not appear in the partnership name. (Art. 1846,
Civil Code)

Exceptions:

(1) It is also the surname of a general partner, or

(2) Prior to the time when the limited partner became such, the business had been carried
on under a name in which his surname appeared.

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 Effect:

A limited partner whose surname appears in a partnership name contrary to the

provisions of the first paragraph is liable as a general partner to partnership creditors who
extend credit to the partnership without actual knowledge that he is not a general partner.

Rule on the Liability of Limited Partner

A limited partner shall not become liable as a general partner. (Art. 1848, Civil Code)

Exception:

When, in addition to the exercise of his rights and powers as a limited partner, he
takes part in the control of the business.

Rule on the Preference of Among Limited Partners

Where there are several limited partners, the members may agree that one or more
of the limited partners shall have a priority over other limited partners as to the return of their
contributions, as to their compensation by way of income, or as to any other matter. (Art. 1855,
Civil Code)

Requirement:

If such an agreement is made, it shall be stated in the certificate, and in the absence
of such a statement, all the limited partners shall stand upon equal footing.

Insurance Law

Double Insurance

A double insurance exists where the same person is insured by several insurers separately
in respect to the same subject and interest. (Sec. 93, R.A. No. 10607)

Elements of Double Insurance

1) The subject matter is the same;

2) The interest insured is also the same; and
3) The risk or peril insured against is likewise the same.
4) Several insurers insuring separately;
5) Same person insured;

Code: SIRSS

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Rule in Case there is Double Insurance

The insured, unless the policy otherwise provides, may claim payment from the insurers in
such order as he may select, up to the amount for which the insurers are severally liable under their
respective contracts. (Sec. 96,[a], R. A. No. 10607)

Thus, if there is a prohibition in the policy, the insured cannot claim due to violation of the
“Other Insurance Clause”.

Is the violation of the "other insurance clause" uniformly contained in the separate insurance
contracts obtained by the insured result in the avoidance of the said policies?

Yes. The Court held that where the insurance policy specifies as a condition the disclosure
of existing 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”
The non-disclosure of these policies to the insurers was fatal to the insured's right to recover on the
insurance policies. (Multi-Ware Manufacturing Corp. vs. Cibeles Insurance Corp., G.R. No.
230528, Feb. 1, 2021)

When should the prescriptive period for filing an action concerning the denial of an insurance
claim be counted?

Case law teaches that the prescriptive period for the insured's action for indemnity should
be reckoned from the "final rejection" of the claim. The "final rejection" simply means denial by
the insurer of the claims of the insured and not the rejection or denial by the insurer of the insured's
motion or request for reconsideration. The rejection referred to should be construed as the rejection
in the first instance. (Alpha Plus Int’l. Enterprises Corp. vs. Phil. Charter Ins. Corp., G.R. No.
203756, Feb. 10, 2021)

Rules on Payment of Premium

➢ An insurer is entitled to payment of the premium as soon as the thing insured is exposed
to the peril insured against.

➢ No policy or contract of insurance issued by an insurance company is valid and binding

unless and until the premium thereof has been paid.

Can the insurer collect the premium due for the period that it extended insurance coverage when
the policy was eventually terminated?

Yes. The insurer is entitled to payment of the premium as soon as the parties are agreed
that the thing insured is exposed to the peril insured against. (Chartis Phils. Insurance, Inc. vs.
Cyber City Teleservices, Ltd., G.R. No. 234299, March 3, 2021)

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Can the insured collect on the insurance policy covering certain machinery that the insured does
not own?

Yes. Insurable interest in property is not limited to property ownership in the subject matter
of the insurance. Where the interest of the insured in, or his relation to, the property is such that he
will be benefitted by its continued existence or will suffer a direct pecuniary loss by its destruction,
his contract of insurance will be upheld, although he has no legal or equitable title. (Gaisano vs.
Development Insurance and Surety Corp., G.R. No. 190702, February 27, 2017)

In Compulsory Motor Vehicle Liability Insurance, is it necessary for the insured to prove that there
was no negligence on his part before his claim can be processed?

No. A claim under the Compulsory Motor Vehicle Liability Insurance for death or injury
to any passenger or third party shall be paid without the necessity of proving fault or negligence of
any kind. (Sec. 391, R. A. No. 10607)

Rules on the Filing of Claim/Action under the Compulsory Motor Vehicle Liability Insurance

1) Notice of claim must be filed within six (6) months from the date of the accident,
otherwise, the claim shall be deemed waived. (Sec. 397, R. A. No. 10607)
2) Action or suit for recovery of damage due to loss or injury must be brought, in proper
cases, within one (1) year from denial of the claim, otherwise, the claimant’s right of action
shall prescribe. (Sec. 397, R. A. No. 10607)

Rule in Case of Suicide

The insurer in a life insurance contract shall be liable in case of suicide only when it is
committed after the policy has been in force for a period of two (2) years from the date of its
issue or of its last reinstatement, unless the policy provides a shorter period. (Sec. 183, R. A.
No. 10607)

Exception :

Suicide committed in the state of insanity shall be compensable, regardless of the date
of commission. (Sec. 183, R. A. No. 10607)

E-Commerce Act
Rule on the Legal Recognition of Electronic Data Message

Information shall not be denied validity or enforceability solely on the ground that it is in
the form of an electronic data message purporting to give rise to such legal effect, or that it is merely
incorporated by reference in that electronic data message. (Sec. 6, R. A. No. 8792)

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Rules on the Legal Recognition of Electronic Documents

✓ Electronic documents shall have the legal effect, validity or enforceability as any other
document or legal writing.
✓ For evidentiary purposes, an electronic document shall be the functional equivalent of
a written document under existing laws. (Sec. 7, R. A. No. 8792)

Legal Recognition of Electronic Signatures

An electronic signature on the electronic document shall be equivalent to the signature of

a person on a written document if the signature is an electronic signature and proved by showing
that a prescribed procedure, not alterable by the parties interested in the electronic document. (Sec.
8, R. A. No. 8792)

Are screenshots of text messages admissible as evidence under the Electronic Commerce Act of
2000?

Yes. Ephemeral electronic communications (text messages) are admissible evidence under
the Rules on Electronic Evidence. Text messages are classified as ephemeral electronic
communications under Section 1 (k), Rule 2 of the Rules on Electronic Evidence. (Asuncion vs.
Salvado, A.C. No. 13242, July 5, 2022)

Is the sending of documents through electronic data messages, including facsimiles, sanctioned
under R. A. No. 8792 or the Electronic Commerce Act of 2000?

No. A facsimile transmission is not considered electronic evidence under the Electronic
Commerce Act. The original facsimile transmissions are not "electronic data messages" or
"electronic documents" within the context of Electronic Commerce Act. The Court held that the
terms "electronic data message" and "electronic document," as defined under the Electronic
Commerce Act of 2000 do not include a facsimile transmission. Accordingly, a facsimile
transmission cannot be considered as electronic evidence. It is not the functional equivalent of an
original under the Best Evidence Rule and is not admissible as electronic evidence. (Torres vs. Phil.
Amusement and Gaming Corp., G.R. No. 193531, December 6, 2011)

Intellectual Property Laws

Rules on Patent Ownership

The right to a patent belongs to the following:

1) To the inventor, his heirs, or assigns. When two (2) or more persons have jointly
made an invention, the right to a patent shall belong to them jointly. (Sec. 28, R. A.
No. 8293)

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 2) To the person who commissions the work, unless otherwise provided in the contract.
(Sec. 30.1, R. A. No. 8293)

3) In case the employee made the invention in the course of his employment contract,
the patent shall belong to:

i) The employee, if the inventive activity is not a part of his regular duties even
if the employee uses the time, facilities and materials of the employer.
ii) The employer, if the invention is the result of the performance of his regularly-
assigned duties, unless there is an agreement, express or implied, to the
contrary.
(Sec. 30.2, R. A. No. 8293)

“First-to-File” Rule

The first to file rule provides that if two (2) or more persons have made the invention
separately and independently of each other, the right to the patent shall belong to the person who
filed an application for such invention, or where two or more applications are filed for the same
invention, to the applicant who has the earliest filing date or, the earliest priority date. (Sec. 29,
R. A. 8293)

Right of Priority

Right of priority is a rule which provides that if an application for patent filed by any person
who has previously applied for the same invention in another country which by treaty, convention,
or law affords similar privileges to Filipino citizens, shall be considered as filed as of the date of
filing of the foreign application. (Sec. 31, R.A. No. 8293)

Requirements :

a) the local application expressly claims priority;

b) it is filed within twelve (12) months from the date the earliest foreign application
was filed; and
c) a certified copy of the foreign application together with an English translation is
filed within six (6) months from the date of filing in the Philippines.

Prior User Rule

The Prior User Rule provides that any prior user who, in good faith was using the invention
or has undertaken serious preparations to use the invention in his enterprise or business, before the
filing date or priority date of the application on which a patent is granted, shall have the right to
continue the use thereof as envisaged in such preparations within the territory where the patent
produces its effect. (Sec. 73.1, R.A. No. 8293)

Rights Conferred by a Patent

A patent shall confer on its owner the following exclusive rights:

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 i) Where the subject matter of a patent is a product, to restrain, prohibit and prevent
any unauthorized person or entity from making, using, offering for sale, selling or
importing that product;

ii) Where the subject matter of a patent is a process, to restrain, prevent or prohibit any
unauthorized person or entity from using the process, and from manufacturing,
dealing in, using, selling or offering for sale, or importing any product obtained
directly or indirectly from such process.

iii) Patent owners shall also have the right to assign, or transfer by succession the patent,
and to conclude licensing contracts for the same.

(Sec. 71.2, R. A. No. 8293)

Grounds for Patent Cancellation

a) That what is claimed as the invention is not new or patentable;

b) That the patent does not disclose the invention in a manner sufficiently clear and complete
for it to be carried out by any person skilled in the art; or
c) That the patent is contrary to public order or morality.

(Sec. 61 R. A. No. 8293)

Effect of Cancellation of Patent

The rights conferred by the patent or any specified claim or claims canceled shall terminate.
(Sec. 66, R. A. No. 8293)

Patent Infringement

Patent infringement is the making, using, offering for sale, selling, or importing of a
patented product or a product obtained directly or indirectly from a patented process, or the use of
a patented process without the authorization of the patentee. (Sec. 76.1)

Rights Conferred by Registration

The owner of a registered mark shall have:

1) The exclusive right to prevent all third parties not having the owner’s consent from
using in the course of trade identical or similar signs or containers for goods or
services which are identical or similar to those in respect of which the trademark is
registered where such use would result in a likelihood of confusion. (Sec. 147.1, R.A.
No. 8293)

2) The exclusive right to use the mark and sue for infringement. (Sec. 147.1, R.A. No.
8293)

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Elements of Trademark Infringement

The elements of the offense of trademark infringement are the following:

a) the trademark being infringed is registered in the Intellectual Property Office;

b) the trademark is reproduced, counterfeited, copied, or colorably imitated by the

infringer;

c) the infringing mark is used in connection with the sale, offering for sale, or
advertising of any goods, business or services; or the infringing mark is applied to
labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to
be used upon or in connection with such goods, business, or services;

d) the use or application of the infringing mark is likely to cause confusion or mistake
or to deceive purchasers or others as to the goods or services themselves or as to the
source or origin of such goods or services or the identity of such business; and

e) the use or application of the infringing mark is without the consent of the trademark
owner or the assignee thereof.

Unfair Competition

Unfair competition is defined as the passing off (or palming off) or attempting to pass off
upon the public of the goods or business of one person as the goods or business of another with the
end and probable effect of deceiving the public. This takes place where the defendant gives his
goods the general appearance of the goods of his competitor with the intention of deceiving the
public that the goods are those of his competitor. (Roberto Co vs. Keng Huan Jerry Yeung and
Emma Yeung, G.R. No. 212705, Sept. 10, 2014)

Thus, in unfair competition, intent to deceive must be established.

Can a corporation be held guilty of unfair competition for using a registered trademark as its
corporate name without the prior consent and authority of the trademark owner?

Yes. A corporation can be held guilty of unfair competition for using a registered trademark
as its corporate name without the prior consent and authority of the trademark owner. 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. Actual fraudulent intent need not be shown. (Asia Pacific
Res. Int’l Holdings, Ltd. vs. Paperone, Inc., G.R. Nos. 213365-66, December 10, 2018)

Concept of Confusing Similarity

The confusing similarity may or may not result from the similarity in the marks but may
result from other external factors in the packaging or presentation of the goods. The likelihood of
confusion of goods or business is a relative concept, to be determined only according to the peculiar
circumstances of each case. The element of intent to deceive and to defraud may be inferred from

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the similarity of the appearance of the goods as offered for sale to the public. (Kho vs. Summerville
Gen. Merchandising & Co., Inc., G.R. No. 213400, August 4, 2021)

Does the right to exclusively use the trademark "KOLIN" necessarily include the right to register
its domain name containing KOLIN as the dominant feature?

Yes. Having been granted the right to exclusively use the "KOLIN" mark for the business
of manufacturing, importing, assembling, or selling electronic equipment or apparatus, KECI's
application for registration of its domain name containing the "KOLIN" mark for the same goods
and services as its Class 35 registration for "KOLIN" is merely an exercise of its right under its
Class 35 registration.

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. (Kolin Electronics Co., Inc. vs. Taiwan Kolin Corp. Ltd., G.R. Nos. 221347 &
221360-61, Dec. 1, 2021)

Does the unauthorized playing of radio broadcasts as background music in dining areas of a
restaurant amount to copyright infringement?

Yes. In this case, the right of FILSCAP to license the public performance of the subject's
copyrighted musical works, the public performance of such works in Anrey's restaurants without
license from FILSCAP, and the refusal of Anrey to pay the annual license fees for said works were
duly established.

Clearly, FILSCAP was deprived of license fees due to Anrey's acts of infringement.
FILSCAP failed to receive the benefit of license fees from Anrey, which publicly performed
without license or authority the subject's copyrighted works in the latter's restaurants for the benefit
of its customers and to enhance its profit. (Filipino Society of Composers, Authors and Publishers,
Inc. vs. Anrey, Inc., G.R. No. 233918. August 9, 2022)

Can one who merely contributes concepts or ideas be deemed an author?

No. The copyright of a derivative work solely belongs to the person who fixes an idea into
a tangible medium of expression. The law on copyright only protects the expression of an idea, not
the idea itself. Thus, one who merely contributes concepts or ideas is not deemed an
author. (Republic vs. Heirs of Tupaz IV, G.R. No. 197335, September 7, 2020)

Transportation Laws
Is a freight forwarding agent, a non-vessel operating entity, considered a common carrier? Can it
be liable in case of damage or loss of the goods?

Yes. A freight forwarding entity and an accredited non-vessel operating is a common

carrier. As a common carrier, one of its obligations was to pick up the shipment and then transport
and deliver the same to the consignee's premises in good condition.

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 Jurisprudence holds that a common carrier is presumed to have been negligent if it fails to
prove that it exercised extraordinary vigilance over the goods it transported. When the goods
shipped are either lost or arrived in damaged condition, a presumption arises against the carrier of
its failure to observe that diligence, and there need not be an express finding of negligence to hold
it liable. (Unitrans Int’l Forwarders, Inc. vs. Ins. Co. of North America, G.R. No. 203865, March
13, 2019)

Is a common carrier responsible for the loss of goods due to theft?

Yes. Under Article 1745 (6), a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact, acted "with grave or irresistible threat,
violence or force." We believe, and so hold, that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence[,] or force. (Annie Tan vs. Great Harvest
Enterprises, Inc., G.R. No. 220400, March 20, 2019)

Is a mere claim by the employer that she exercised due diligence in the selection and supervision
of her employee be sufficient to avoid liability for the negligence of her driver?

Jurisprudence has established that under Article 2180, "when an injury is caused by the
negligence of the employee, 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 or employee, or in
supervision over him after selection or both. The liability of the employer under Article 2180 is
direct and immediate; it is not conditioned upon prior recourse against the negligent employee and
a prior showing of the insolvency of such employee." (Maitim vs. Aguila, G.R. No. 218344, March
21, 2022)

Will the provisions of the Montreal Convention limiting the liability of the airline company be
applicable if the loss of baggage was accompanied by bad faith or malice committed by the airline
personnel?

No. KLM's liability for damages may not be limited to that prescribed in Article 22(2) of
the Warsaw (now Montreal) Convention in the presence of bad faith. The 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. 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. (KLM Royal Dutch Airlines vs. Tiongco,
G.R. No. 212136, October 4, 2021)

Banking Laws
Can a bank unilaterally debit the account of a customer on the ground that some of its employees
committed tortious acts that benefitted the account of the said customer?

No. The bank cannot simply disavow the deposit agreement after unraveling the tortuous
acts of its employees. The bank must not only exercise "high standards of integrity and
performance," it must also ensure that its employees do likewise because this is the only way to

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ensure that the bank will comply with its fiduciary duty. (Allied Banking Corp. vs. Sps. Macam,
G.R. No. 200635, February 1, 2021)

Rule on Bank Exposure to Directors, Officers and Related Interests (DOSRI)

No director or officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser
or surety for loans from such bank to others, or in any manner be an obligor or incur any contractual
liability to the bank.

Exception: with the written approval of the majority of all the directors of the bank,
excluding the director concerned.

Note : That such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit plan
approved by BSP.

Additional Requirement if a DOSRI contracts a loan from his bank or its subsidiary bank

Any director, officer or stockholder who, together with his related interest, contracts a loan
or any form of financial accommodation from his bank or a subsidiary bank shall be required by
the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the
Philippines. (Sec. 26, R. A. No. 7653)

Is the trial court’s order directing a bank to produce the records of the impostor in the unlawful
encashment of a bank check violative of the law on the secrecy of bank deposits?

Yes. The law protects deposits of whatever nature from examination and inquiry, subject
to certain exceptions. In this case, it is clear that the complainant seeks to recover the money that
was deposited and encashed by the impostor in Real Bank. The action, however, was directed
against the banks, and not against the impostor who opened an account with Real Bank. Thus, it
is apparent that the complainant is seeking to recover the mere money equivalent of the checks
erroneously paid by the banks and not the money itself that is already long gone in the hands of the
impostor. For this reason, the money deposited is not the subject matter of the litigation. The
exception provided in the law is not present in this case, thus, the inquiry ordered by the RTC is
improper. (The Real Bank (A Thrift Bank), Inc. vs. Maningas, G.R. No. 211837, March 16, 2022)

Regulatory and Examination Powers of BSP

Under the latest amendment to the New Central Bank Act, BSP shall exercise regulatory
and examination powers over the following:

➢ Banks and the quasi-banking operations of non-bank financial institutions

➢ money service businesses
➢ credit granting businesses, and
➢ payment system operators.

(Sec. 2, R. A. No. 11211, amending Sec. 3 of R. A. No. 7653)

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May the Monetary Board Order closing a BSFI be restrained or set aside by the court?

No. The actions of the Monetary Board in closing a BSFI or in placing it under
conservatorship shall be final and executory and may not be restrained or set aside by the court
except on a petition for certiorari on the ground that the action taken was in excess of jurisdiction
or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. (Sec. 30, R.
A. No. 7653, amended R. A. No. 11211)

New Rule on the Issuance of Injunctive Relief against BSP’s Actions

“No court, other than the Court of Appeals and the Supreme Court, shall issue any
temporary restraining order, preliminary injunction, or preliminary mandatory injunction against
the BSP for any action under the New Central Bank Act.

Any restraining order or injunction issued in violation of the rule is void and of no force
and effect.

(Sec. 38-A of the New Central Bank Act amended by Sec. 20, R. A. No. 11211)

What are the requirements in filing a petition for certiorari against the order of the MB directing
receivership, liquidation, or conservatorship of a BSFI?

The petition for certiorari may be filed only:

a) with the approval by the stockholders of record representing the majority of the
capital stock; and
b) when the petition is filed within ten (10) days from receipt by the board of
directors of the institution of the Order from the Monetary Board.

(Sec. 30 of the New Central Bank Act, amended by Sec. 13, R. A. No. 11211)

Rule on the Confidentiality of Bank Deposits:

All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature
and may not be examined, inquired or looked into by any person, government official, bureau or
office.

Prohibited Acts

Covered transactions cannot be:

a) examined
b) subjected to inquiry
c) subjected to unauthorized disclosure

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Deposits Covered

a) all deposits of whatever nature

b) investments in bonds issued by the government

Exceptions:
• For R.A. 1405, the following are the exceptions to the non-disclosure rule:

✓ upon written permission of the depositor or

✓ in cases of impeachment, or
✓ upon order of a competent court in cases of bribery or dereliction of
duty of public officials, or
✓ in cases where the money deposited or invested is the subject matter of
the litigation.

• For R. 6426, the only exception is the written permission of the depositor.

Rule on the Garnishment of Foreign Currency Deposits

Foreign currency deposits shall be exempt from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative body
whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21,
1977.)

Anti-Money Laundering Act

Safe Harbor Clause under AMLA

The law provides that “no administrative, criminal or civil proceedings shall lie against any
person for having made a covered or suspicious transaction report in the regular performance of his
duties in good faith, whether or not such reporting results in any criminal prosecution under this
Act of any other law.” (Sec. 9 (c) of R. A. No. 9160, as amended by R. A. No. 9194)

Can a freeze order be validly issued against one who is not subject to a criminal charge?

Yes. To begin with, a freeze order is not dependent on a separate criminal charge, much
less does it depend on a conviction. (Yambao vs. Republic, G.R. No. 171054, January 26, 2021)

Rules on the issuance of Freeze Orders

✓ Only the Court of Appeals has the authority to issue a freeze order as well as to extend its
effectivity.

✓ There are only two requisites for the issuance of a freeze order, to wit:

1. The application ex-parte by the AMLC and

2. The determination of probable cause by the Court of Appeals

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 ✓ The freeze order issued by the Court of Appeals shall be effective immediately. (Sec. 8,
R. A. No. 10365)

✓ The freeze order issued by the Court of Appeals shall not exceed six (6) months depending
upon the circumstances of the case. If there is no case filed against a person whose account
has been frozen within the period determined by the court, the freeze order shall be deemed
ipso facto lifted. (Sec. 8, R. A. No. 10365)

Is the filing by the AMLC of an ex-parte application for inquiry of bank deposits allowed?

Yes, the Anti-Money Laundering Law allows it. Section 11 of the AMLA which provides
for ex-parte application and inquiry by the AMLC into certain bank deposits and investments, does
not violate substantive due process, there being no physical seizure of property involved at that
stage. It is the preliminary and actual seizure of the bank deposits in question that brings these
within reach of the judicial process, specifically a determination that the seizure violated due
process. (Subido Pagente Certeza Mendoza and Binay Law Offices vs. CA, G.R. No. 216914,
December 6, 2016)

Rules on Inquiry of the Bank Accounts under AMLA

✓ The conduct of bank inquiries by the AMLC is an exception to the bank secrecy laws.

✓ The AMLC may inquire into or examine any particular deposit or investment, including
related accounts, with any banking institution or non-bank financial institution upon order
of any competent court.

✓ No Court order is required if the unlawful activity is:

1. Kidnapping for ransom;

2. Violation of the Comprehensive Dangerous Drugs Act of 2002
3. Hijacking and other violations under R.A. No. 6235; destructive arson and
murder;
4. Felonies or offenses of a similar nature that are punishable under the penal laws
of other countries
5. Terrorism and conspiracy to commit terrorism

(Sec. 11, R.A. No. 9160, as amended by R. A. No. 10167)

Can the AMLC freeze a bank account of one designated as a terrorist by the ATC without a court
order?

Yes. Under the law, the assets of the designated individual, groups of persons, organization,
or association designated as terrorists by the Anti-Terrorism Council shall be subject to the
authority of the Anti-Money Laundering Council to freeze pursuant to Sec. 11 of R. A. No. 10168.
(Sec. 25, R. A. No. 11479)

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Foreign Investment Act
When is a foreign corporation Deemed “Doing Business in the Philippines”

Acts Constituting Doing Business

a) Soliciting orders, service contracts.

b) Opening offices, whether called "liaison" offices or branches.
c) Appointing representatives or distributors domiciled in the Philippines or who in
any calendar year stay in the country for a period or periods totalling 180 days or
more.
d) Participating in the management, supervision or control of any domestic business,
firm, entity or corporation in the Philippines.
e) Other act or acts that imply a continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization.

(Sec. 3[d], FIA)

When is a foreign corporation Deemed NOT “Doing Business in the Philippines”

Acts Constituting NOT Doing Business

a) Mere investment as a shareholder by a foreign entity in domestic corporations duly

registered to do business, and/or the exercise of rights as such investor;
b) Having a nominee director or officer to represent its interests in such corporation;
c) Appointing a representative or distributor domiciled in the Philippines which
transacts business in the representative's or distributor's own name and account;
d) Publication of a general advertisement through any print or broadcast media;
e) Performing services auxiliary to an existing isolated contract of sale which are not
on a continuing basis, such as installing in the Philippines machinery it has
manufactured or exported to the Philippines, servicing the same, training domestic
workers to operate it, and similar incidental services.
f) Consignment by a foreign entity of equipment with a local company to be used in
the processing of products for export;
g) Collecting Information in the Philippines; and
h) Maintaining a Stock of goods in the Philippines solely for the purpose of having
the same processed by another entity in the Philippines

(Sec. 1(f), FIA IRR)

Rules on Foreign Investments

1) There are no restrictions on the extent of foreign ownership of export enterprises.

2) In domestic market enterprises, foreigners can invest as much as 100% equity except in
areas included in the negative list.

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 Export Enterprise

An enterprise wherein a manufacture, processor or service (including tourism) enterprise

exports 60% or more of its output, or wherein a trader purchases products domestically and exports
60% or more of such purchases. (Sec. 3(e), FIA)

Domestic Market Enterprise

An enterprise which produces goods for sale, or renders services to the domestic market
entirely, or if exporting a portion of its output fails to consistently export at least 60% thereof. (Sec.
3(f), FIA)

Can a 100% foreign-owned company engage in agribusiness?

Yes. R.A. 4072, or the Foreign Investment Act of 1991, declares that as much as 100%
foreign ownership in domestic enterprises may be allowed, except for areas or industries included
in the negative list. (National Federation of Hog Farmers, Inc. vs. Board of Investments, G.R. No.
205835, June 23, 2020)

Can regular licenses for contractors be limited to corporations with at least 60% Filipino equity
participation?

No. It also stressed that the construction industry is not among the investment areas or
activities specifically reserved to Philippine nationals. (Phil. Contractors Accreditation Board vs.
Manila Water Co., Inc., G.R. No. 217590, March 10, 2020)

Pray to God…Trust in your preparation, and let your tenacious determination light the path
to your success in this 2023 Bar exam. Good luck!!!

May the Force Be with YOU!!!

Dean Serge M. Ceniza

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