MANDATORY

CONTINUING LEGAL EDUCATION

IBP – Quezon City

July 3, 2021

UPDATES ON COMMERCIAL LAW

- Judge Ella Dumlao-Escalante -
REVISED CORPORATION
CODE – RA No. 11232
REPUBLIC ACT NO. 11232
REVISED CORPORATION
CODE OF THE PHILIPPINES

Approved: 20 February 2019

Published: 21 February 2019

Old law – BP Bilang 68

Approved - May 1, 1980
 SIGNIFICANT
AMENDMENTS
SEC. 10 – WHO MAY INCORPORATE?
RA 11232
BP 68
 Natural persons • Any person, natural or juridical

 5-15 persons  1 – 15 persons

 Legal age  If natural person – legal age
 Majority are residents
 Stock Corporation: Must own or
of the Philippines subscribe to at least one capital stock
 Must own or
 But natural persons licensed to practice
subscribe to at least a profession, and partnerships or
one capital stock associations organized for the purpose
of practicing a profession – NOT
ALLOWED TO INCORPORATE, unless
provided under special laws

 Single stockholder: OPC

CORPORATE EXISTENCE
 PERPETUAL CORPORATE EXISTENCE unless
otherwise provided by the Articles of
Incorporation

 applies to existing corporations, unless they

choose to retain their specific corporate term

 subject to appraisal right of stockholders

CORPORATE EXISTENCE - SEC. 11
BP 68
 Maximum term – 50
years
- May be extended in
one instance only for
another 50 years
- extension cannot be
made earlier than five (5)
years prior to the original
or subsequent expiry
date(s), except for
justifiable reasons
RA 11232
 Perpetual existence
 Applies to existing
corporations
May choose to have

specific corporate term
If with specific period,

extension cannot be
made earlier than 3
years from the original
or subsequent expiry
date, except for
justifiable reasons
 OLD RULE: SUBSCRIBED AND PAID UP
CAPITAL STOCK

- At least twenty-five percent (25%) of the

authorized capital stock must be subscribed
at the time of incorporation

- at least twenty-five (25%) per cent of the

total subscription must be paid upon
incorporation

- in no case shall the paid-up capital be less

than five Thousand (P5,000.00) pesos
IS THERE A MINIMUM SUBSCRIBED CAPITAL
and PAID-UP CAPITAL UNDER THE REVISED
CORPORATION CODE?

NONE
AFTER INCORPORATION

•In case of increase, at least 25% of the increase

in Capital Stock must be subscribed,

•and at least 25% of the subscribed capital stock

must be paid in cash or property
FORM/CONTENTS of AOI (other provisions retained, EXCEPT)

BP 68 RA 11232


Directors or trustees – 5 to Directors – not more than 15;
15 Trustees – may be more than
15
 Treasurer's Affidavit on  Treasurer's affidavit – not
minimum subscription and required
minimum paid-up capital -  Electronic filing – now
required allowed
 AOI personally filed with  Undertaking to change name
SEC if another corporation has
 Undertaking to change name prior right over the name, or if
– none not distinguishable from
another registered name, or if
contrary to law, morals, public
policy - MANDATORY
NON-USE OF CORPORATE CHARTER
AND CONTINUOUS NON-OPERATION

BP 68 RA 11232
• Not organized within 2
years from date of
incorporation, corporation Not organized within 5 years from
is deemed dissolved. date of incorporation, the certificate
of incorporation is deemed
• If it commenced its revoked.
business but becomes If it commenced its business
continuously inoperative but subsequently becomes
for a period of at least continuously inoperative for a
five (5) years: ground for period of at least five (5)
the suspension or years, the corporation shall,
revocation of its after due process, be
corporate franchise or considered DELINQUENT.
certificate of
incorporation.
OLD LAW: TERM: One year

RA 11232: TERM: - directors: one year

- trustees: three years

RIGHT TO VOTE BY DIRECTORS/OFFICERS

Voting may now be done by remote communication
*rule if corporation is vested with public interest = even if not
indicated in the bylaws

*SAME WITH STOCKHOLDER'S RIGHT TO VOTE

Remote communication or in absentia

QUORUM
Those who participate via remote communication =
considered present so as to constitute a quorum.
MAY JURIDICAL PERSONS VOTE? Yes. But since it can
act only through natural persons, it has to appoint its
representatives or proxies.

MAY THE PROXY OF JURIDICAL PERSONS BECOME

DIRECTORS OR TRUSTEES?
NO, unless the proxy is by himself qualified to be a
director or trustee.

LIM v. MOLDEX
GR No. 206038,
January 25, 2017
PLACE OF MEETING
Principal office of the corporation or in
the city or municipality where principal
office is located;
considered city or municipality: any city or
municipality in METRO MANILA, METRO
CEBU, METRO DAVAO and other
Metropolitan areas
(OLD LAW: Only Metro Manila was
recognized)
 Written notices for scheduled
meetings may be sent by

- Regular mail
- Personal service
- Electronic mail
1. when allowed in the bylaws or
2. when stockholder gives his consent
thereto
 ONE PERSON
CORPORATION
(OPC)
ONE PERSON CORPORATION
 is a corporation with a single stockholder

 only a natural person, trust, or an estate may

form a One Person Corporation

 must display “OPC” below or after its name

 Is the OPC required to have a
minimum capital stock?

NOT REQUIRED to have a minimum authorized

capital stock, except as otherwise provided by
special law.

Is it required to file Articles of Incorporation

and bylaws?

ARTICLES OF INCORPORATION
The AOI must state the names of the
of the nominee and the alternate nominee.

BYLAWS
 Who are the core officers of the OPC?

 President, Treasurer, Secretary

The single stockholder is the sole director and
president. He may appoint himself as the Treasurer,
but he cannot be the secretary.

- Single SH who appoints himself as treasurer must

give a bond to the SEC in such sum as may be
required.
- He must also execute written undertaking to faithfully
administer the OPC.

- Secretary = calls the nominee or alternate nominee if

the Single SH dies or is incapacitated
Who is the nominee in OPC?
• Person  TEMPORARY INCAPACITY – the
designated by the nominee becomes the director,
single stockholder until the single stockholder, by
in the AOI as the
person who would self-determination, regains
take his place in capacity
case of his death
or incapacity. The  DEATH or PERMANENT
nominee in such INCAPACITY – nominee sits as
case becomes the director and manager, until the
director, and he legal heirs of the single stockholder
shall manage the make their decision as to how to
corporate affairs.
proceed with the OPC
• - Temporary
designation
Who is the ALTERNATE NOMINEE?

- He sits as director and manager of the

OPC in case of the death, incapacity,
inability or refusal of the nominee to
discharge his functions.

same rules as nominee:

written consent, when to withdraw
Upon the death or permanent
incapacity of the Single SH
 Secretary calls the nominee/alternate
nominee and legal heirs, within 5 days from
death or permanent incapacity
 nominee/alternate nominee sits in temporary
capacity as director to manage the affairs
until the legal heirs have decided how to
proceed
 Options available of the legal heirs: 1)
continue with the OPC (as estate), 2) wind up
the affairs & liquidate 3) convert into an
ordinary stock corporation
 CONVERSION FROM OCP TO STOCK CORPORATION

* Occurs when:
1) The legal heirs of the single stockholder choose
to convert to an ordinary stock corporation or
2) Single SH himself decides to convert

* Requisites of stock corporation must be complied

with
* Due notice to SEC
* SEC issues cert of amended AOI
 Liable for debts of OPC as of the date of
conversion
Conversion: STOCK CORP. to OPC

- when a single shareholder has acquired

all the stocks of the stock corporation, he
may convert to OPC

- the OPC acquires the liabilities of the

stock corporation as of the date of
conversion (date written on the certificate
of AMENDED AOI to be issued by SEC)
 DOES THE DOCTRINE OF PIERCING
CORPORATE VEIL APPLY TO OPC?

YES. The doctrine applies with equal force to

OPC as with other corporations.
 LIABILITY OF SINGLE STOCKHOLDER

- If the single stockholder cannot prove that

the properties of the OPC are independent of
his properties, then he becomes SOLIDARILY
liable with the debts and obligations of the
OPC.

- He has the burden to prove that the OPC is

adequately financed.
 Comparison between OPC and SOLE
PROPRIETORSHIP
OCP
- Has separate personality from
the single stockholder
* separate assets and liabilities
- Piercing corporate veil applies
- Registered with SEC
- Has nominee and alternate
nominee
- May be converted to stock
corporation
- Upon death of single
stockholder, the estate may be
substituted as OPC
SOLE PROPRIETORSHIP
- No separate personality
from that of the sole
proprietor
- Piercing the veil does not
apply
- Registered with DTI
- No nominee or alternate
nominee
- No conversion
- Upon the death of the sole
proprietor, the heirs are not
allowed to continue the
sole proprietorship of the
deceased
DISSOLUTION

 Voluntary dissolution where creditors are

affected – VOTE required was decreased from
2/3 vote to mere majority of the outstanding
capital stock or majority of the members.

 DISSOLUTION BY SHORTENING CORP TERM –

Once the corp. term expires (FOR THOSE
CORPORATIONS WHICH OPTED NOT TO HAVE
PERPETUAL EXISTENCE), the dissolution is
automatic. Certificate of dissolution is no
longer needed.
MCLE - Escalante

FOREIGN CORPORATIONS
 Except banks and insurance companies, initial deposit
is required for foreign corporations to be issued
license to do business in the Philippines.

 Old Law: Php 100,000 New Law: Php500,000

 Additional deposit may be required if:

 Old Law: gross income is more than Php 5 Million;
New Law: gross income is more than Php10 Million
TRANSITORY PROVISION

“ Corporations affected by the new requirements under

the Revised Corporation Code shall be given a period of
not more than 2 years from the effectivity of the Code
within which to comply.”
EFFECT OF AMENDMENT OR REPEAL OR
THE DISSOLUTION OF A CORPORATION

• Vested rights – may not be removed or

impaired either by the subsequent
dissolution of said corporation or by any
subsequent amendment or repeal of this
Code.
INTELLECTUAL
PROPERTY LAW
 JURISDICTION
* Penalty: 2 years to 5 years and fine of
Php50,000 to Php200,000

* Even if the range of penalty falls within

the jurisdiction of the first level courts, it is
settled that violations of RA 8293 fall
within the jurisdiction of the RTC – Special
Commercial Court.
 KOLIN ELECTRONICS CO., INC. v.
KOLIN PHILIPPINES INTERNATIONAL, INC.

GR NO. 228165 (9 February 2021)

-uploaded in the SC website on 15 June 2021 -

The Supreme Court abandoned the

HOLISTIC TEST and adopted the
DOMINANCY TEST to determine
likelihood of confusion in trademark
infringement.
TO RECALL

Dominancy Test - focuses on the

similarity of the prevalent features of the
competing trademarks which might cause
confusion or deception

Holistic Test - the entirety of the marks

in question is considered in resolving
confusing similarity
Congress deliberation –

“The committee notes the varying decisions

of the Supreme Court regarding
colorable imitation of a registered mark.
There are decisions which espouse the
Dominancy Test, while there are others
which use the Holistic Test.

We, therefore, recommend the adoption of

the Dominancy Test to resolve once and for
all the debate.”
The test of dominancy is now explicitly
incorporated in -

Section 155.1 of the Intellectual

Property Code
which defines infringement as the

"colorable imitation of a registered

mark x x x or a dominant feature
thereof."
Considering the adoption of the Dominancy Test and
the abandonment of the Holistic Test,
as confirmed by the provisions of the IP Code and the
legislative deliberations,

the Court hereby makes it crystal clear

that the use of the Holistic Test
in determining the resemblance of marks
has been abandoned.
KOLIN ELECTRONICS CO., INC. (KECI) v.
KOLIN PHILIPPINES INTERNATIONAL, INC (KPII)
The word "KOLIN" is the prevalent feature of both marks.
Phonetically or aurally, the marks are exactly the same. The
manner of pronouncing the word "KOLIN" does not change
just because KPII' s mark is in lowercase and contains an
italicized orange letter "i".

 Petitioner KECI  Respondent KPII

ZUNECA PHARMACEUTICAL, AKRAM ARAIN AND/OR VENUS
ARAIN, M.D., AND STYLE OF ZUNECA PHARMACEUTICAL v.
NATRAPHARM, INC.
G.R. No. 211850, September 08, 2020

 This case concerns

trademarks which are
used for different
types of medicines,
but are admitted by
both parties to be
confusingly similar.
Zuneca Pharmaceutical Natrapahrm Inc. sells
imports and sells Zynapse, a drug for
medicines and drugs in the treatment of
the Philippines since cerebrovascular
1999.
disease
or stroke.
- sold the brand Zynaps
in the Philippines in
2004 - registered the brand
Zynapse in the
- Zynaps – Intellectual Property
anticonvulsant Office in 2007
Zuneca v. Natrapharm, September 8, 2020

Issue: Who owns the mark?

First-to-file registrant or Prior user

First to File Rule vs.

Doctrine of Prior Use
Zuneca v. Natrapharm, September 8, 2020

Under the Trademark Law, as amended, the first user of the mark
had the right to file a cancellation case against an identical or confusingly
mark registered in good faith by another person. However, with the
omission in the IP Code provision of the phrase "previously used in the
Philippines by another and not abandoned,,“ said right of the first user is no
longer available. In effect, based on the language of the provisions of the IP
Code, even if the mark was previously used and not abandoned by another
person, a good faith applicant may still register the same and thus become
the owner thereof, and the prior user cannot ask for the cancellation of the
latter's registration. If the lawmakers had wanted to retain the regime of
acquiring ownership through use, this phrase should have been retained in
order to avoid conflicts in ownership. The removal of such a right
unequivocally shows the intent of the lawmakers to abandon the regime of
ownership under the Trademark Law, as amended.
ESTRELLA M. DOMINGO v. CIVIL SERVICE
COMMISSION
G.R. No. 236050, June 17, 2020

Section 176. Works of the Government. -

176.1. No copyright shall subsist in any work
of the Government of the Philippines.
However, prior approval of the government
agency or office wherein the work is created
shall be necessary for exploitation of such
work for profit. Such agency or office may,
among other things, impose as a condition
the payment of royalties.
 Petitioner is the Chief Archivist of the Archives Preservation
Division of the National Archives of the Philippines (NAP). On
February 24, 2014, Mayor Strike B. Revilla of Bacoor City, Cavite,
requested the NAP to provide resource speakers for a three (3)-day
Basic Records Management Seminar Workshop and a two (2)-day
Training on Paper Preservation from March 24-28, 2014 at the
Productivity Center, Bacoor City, Cavite.

The Executive Director of NAP initially approved, but later

placed on hold all trainings until after April 1, 2014. This decision
was not communicated to petitioner. Meanwhile, the request of
Bacoor City was left in limbo.

Mayor Revilla later personally invited petitioner to become the

speaker. Petitioner took a leave of absence for April 28-29, which
coincided with the new schedule of the seminar.
Domingo v. CSC, 17 June 2020

Petitioner became the resource speaker. The NAP's

handouts were presented and disseminated during this
seminar.

Administrative case was filed against petitioner.

CSC found her guilty of grave misconduct, serious

dishonest and conduct prejudicial to the best interest of the
service.

REVERSED BY SUPREME COURT

No copyright shall subsist in any
work of the Government of the
Philippines.

Under the law, the NAP materials

were free to be disseminated to the City
of Bacoor stakeholders. Presenting the
NAP materials to the City of Bacoor is
not an exploitation of the NAP materials
for profit, but for the noble and laudable
cause of improving the basic records
management of this local government
unit.
G.R. No. 217916, June 20, 2018
ABS-CBN PUBLISHING, INC. v. DIRECTOR OF
THE BUREAU OF TRADEMARKS

ABS CBN filed trademark

application for its magazine
METRO.
 Section 155.1 of the Intellectual Property Code defines
infringement as the 'colorable imitation of a registered
mark x x x or a dominant feature thereof.’

If the competing trademark contains the main or

essential or dominant features of another, and
confusion and deception is likely to result,
infringement takes place.
 The infringer merely introduces
negligible changes in an already
registered mark, and then banks on
these slight differences to state that
there was no identity or confusing
similarity, which would result in no
infringement.

 This kind of act, which leads to

confusion in the eyes of the public, is
exactly the evil that the dominancy
test refuses to accept.
 - "METRO” is identical, both visually and
aurally, to the registered marks

 - Even if Metro International contains an

accompanying device, and the Metro in Inquirer
contains the terms "Philippine Daily Inquirer,“ all
the marks share the same dominant word, "Metro“

 - spelled and pronounced in exactly the same

way

 - Confusion of origin and confusion of goods

would result
 same sound, spelling, meaning,
overall commercial impression,

AND

 covers substantially the same goods

and flows through the same channel
of trade
PUREFOODS v. CDO

THE BATTLE OF
CHRISTMAS HAMS
SAN MIGUEL PURE FOODS COMPANY,
INC. v. FOODSPHERE, INC.
G.R. No. 217781, June 20, 2018
“Dapat ganito ka-espesyal” campaign
 CDO Campaign –
“Christmas Ham with Taste”
“Make Christmas even more special”
SAN MIGUEL PUREFOODS
 PISTA – means fiesta, feast or
festival; connotes the same
meaning or impression
 similarly pronounced
 same number of syllables;
substantially shares the same
consonants and vowels
 Same general appearance and
same packaging
 PISTA and FIESTA used in the
same product, marketed in the
same channels
 Placed in the same freezer in
the same section of the
supermarkets
CDO
 PISTA: CDO vs.
PUREFOODS FIESTA HAM
 No monopoly of the word
fiesta
 Other companies registered
with IPO: Aro Fiesta Ham,
Royal Fiesta, Fiesta Tropicale,
Happy Fiesta
 Sold in separate booths
manned by different
promodisers
 The paper bags are released
only after purchased; not a
factor in purchasing the ham.
 Hams are expensive, and
purchasers are well-informed
of their features and
manufacturers.
RULING: NO Trademark infringement

- The marks are not visually or aurally similar.

- The glaring differences in the presentation of
the marks will prevent likelihood of confusion.
- Certificate of registration of a mark is prima
facie evidence of the validity of the registration,
and the registrant’s ownership of the mark and
the exclusive right to use the same. CDO
merely exercised its right to use PISTA in its
product.
GUILTY OF UNFAIR COMPETITION

 Unfair competition consists of the passing 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.

 TEST: "whether the acts of the defendant have the intent

of deceiving or are calculated to deceive the ordinary
buyer making his purchases under the ordinary conditions
of the particular trade to which the controversy relates”
ELEMENTS of Unfair COMPETITION

1. confusing similarity in the

general appearance of the
goods; and
2. intent to deceive the public
and defraud a competitor.

FRAUDULENT INTENT:
- Similar paper ham bags
- Out of the millions of
terms and combinations of
letters, designs, and
packaging available,
Foodsphere had to choose
those so closely similar to
San Miguel Purefoods.
News or the event itself is not copyrightable.

 News as expressed in a video footage

is entitled to copyright protection.
News coverage in television involves
framing shots, using images, graphics,
and sound effects. It involves creative
process and originality.

ABS CBN v. GOZON

March 11, 2015
G.R. No. 195956
ANTI MONEY LAUNDERING LAW
Republic Of The Philippines Represented By The Anti-
money Laundering Council (AMLC) V. Bloomberry
Resorts And Hotels, Inc. (Solaire) And Banco De Oro,
G.R. No. 224112, September 02, 2020

A freeze order may only be effective for

a maximum period of six months.

May the period be extended?

AM No. 05-11-4-SC

The effectivity of an extended freeze order

is limited to six months.
RATIONALE - Freeze Order

 To prevent the dissipation, removal, or

disposal of properties that are suspected to be
the proceeds of, or related to, unlawful
activities.

 The relief is pre-emptive in character, meant

to prevent the owner from disposing his
property and thwarting the State's effort in
building its case and eventually filing civil
forfeiture proceedings and/or prosecuting the
owner.
 YAMBAO vs. REPUBLIC OF THE PHILIPPINES,
represented by the AMLC,
GR No. 171054, January 26, 2021

A freeze order is not

dependent on a separate
criminal charge, much less
does it depend on a
conviction. Based on Section
10 of R.A. No. 9160, as
amended, there are only two
requisites for the issuance of
a freeze order: (1) the
application ex-parte by the
AMLC and (2) the
determination of probable
cause by the CA.
The CA must determined
not whether there is
probable commission of an
unlawful activity (or money
laundering), but whether the
bank accounts, assets, or
other monetary instruments
sought to be frozen are in
any way related to any of the
illegal activities enumerated
under R.A. No. 9160, as
amended.
 YAMBAO vs. REPUBLIC OF THE PHILIPPINES,
represented by the AMLC,
GR No. 171054, January 26, 2021
 As a rule, the effectivity of a freeze order may be extended by
the CA for a period not exceeding six months. Before or upon
the lapse of this period, ideally, the Republic should have
already filed a case for civil forfeiture against the property
owner with the proper courts and accordingly secure an asset
preservation order or it should have filed the necessary
information. Otherwise, the property owner should already be
able to fully enjoy his property without any legal process
affecting it.

 The lifting of the subsisting Freeze Order against the monetary

instruments and properties of Yambao is in order, more so in
view of the fact that a petition for forfeiture (Civil Case No.
0197) - where petitioner is named as one of the respondents - has
already been filed by the Republic before the Sandiganbayan.
Subido Pagente Certeza Mendoza and
Binay Law Offices v. CA
Dec. 6, 2016

A news report came out in Manila

Times that the AMLC asked the CA to
allow it to look into the law office linked
to the Binay family, the Subido Pagente
Certeza Mendoza & Binay Law Firm,
where the Vice President's daughter
Abigail was a former partner.
May AMLC apply for a bank
inquiry order ex-parte?

YES
It is only upon issuance of the freeze order
that the bank owner may question the seizure
of his bank account.

 AMLC may apply ex-parte for a bank inquiry

order. This is not violative of the bank owner’s
right to due process there being no actual
physical seizure of the account at this stage. It
is only upon issuance of the freeze order that
the bank owner may question the seizure of his
bank account. The bank owner can assail not
only the issuance of the bank seizure order,
but also of the bank inquiry order.
TRANSPORTATION
LAW
 ALESON SHIPPING LINES, PETITIONER, VS. CGU
INTERNATIONAL INS. PLC. AND CANDANO SHIPPING LINES,
INC.,
G.R. NO. 217311, July 15, 2020

 Apo Cement entered into a

time charter agreement
with Candano Shipping
Lines, owner of M/V Cebu,
for the delivery of sacks of
cement. The cargoes were
insured with CGU Int’l.
 M/V Cebu collided with
Aleson Shipping Lines. M/V
Cebu had a gaping hole
and sank instantly, along
with the sacks of cement.
 Apo Cement demanded
payment from Aleson
Shipping and Candano
Shipping. When they
refused, Apo Cement
claimed from CGU Int’l,
its insurer.
 Insurance claim granted.
 CGU Int’l subrogated =
sued Aleson Shipping
and Candano Shipping
What degree of diligence
must be exercised by Aleson
Shipping and Candano
Shipping?
 Common carriers, from the nature of their
business and on public policy considerations, are
bound to observe extraordinary diligence in the
vigilance over the goods transported by them.
Subject to certain exceptions enumerated under
Article 1734 of the Civil Code, common carriers
are responsible for the loss, destruction, or
deterioration of the goods.
 What degree of diligence must be
exercised by Aleson Shipping and
Candano Shipping?

 Candano Shipping =  Aleson Shipping =

extraordinary Ordinary diligence
diligence  Not common carrier
 Common carrier insofar as M/V Cebu
 Action based on is concerned
time charter =  Action is based on
contract of carriage tort
 Civil Code applies  Code of Commerce
applies
ALESON SHIPPING LINES, PETITIONER, VS. CGU
INTERNATIONAL INS. PLC. AND CANDANO SHIPPING
LINES, INC.,
G.R. NO. 217311, July 15, 2020

 If the cause of action is based on maritime

tort, the provisions of the Code of Commerce
are applicable. An action based on quasi-
delict resulting from maritime collision is not
specifically regulated by the Civil Code, but
by the Code of Commerce. Thus, if the
cause of action is based on quasi-delict
and not on contract, the rules provided
by the Code of Commerce applies.
Code of Commerce

 ARTICLE 826. If a vessel should collide with another

through the fault, negligence, or lack of skill of the captain,
sailing mate, or any other member of the complement, the
owner of the vessel at fault shall indemnify the losses
and damages suffered, after an expert appraisal.

 ARTICLE 827. If both vessels may be blamed for the

collision, each one shall be liable for his own damages,
and both shall be jointly responsible for the losses and
damages suffered by their cargoes.

 To be cleared of liability under these provisions, a vessel

must show that it exercised ordinary diligence. This level of
diligence is the diligence which "an ordinary prudent man
would exercise with regard to his own property."
ORDINARY DILIGENCE NOT
EXERCISED BY ALESON SHIPPING

 failed to send sound signals

 not navigating slowly as shown by the

fact that upon impact, M/V Cebu had a
gaping hole, causing it to sink within
five (5) minutes.
EXTRAORDINARY DILIGENCE BY
CANDANO SHIPPING (M/V ROMEO)

 M/V Romeo was, in all respects,

seaworthy and with full complement of
officers and crew.

 M/V Romeo called and requested M/V

Aleson to slow down, because it had the
right of way.
TO REITERATE

 If the cause of action is based on quasi-

delict and not on contract, the rules
provided by the Code of Commerce
applies.
Are GRAB and ANGKAS vehicles
considered common carriers?

NO JURISPRUDENCE YET

LTFRB vs. HON. VALENZUELA

G.R. No. 242860, March 11, 2019
 LTFRB vs. HON. VALENZUELA

The Court is hard-pressed to rule - at least at

this point, and for the purpose of determining the
validity of the writ of preliminary injunction - that
these bikers are only private carriers who may
publicly ply their trade without any regulation.

The fact that its drivers are not physically hailed on

the street does not automatically render Angkas-
accredited drivers as private carriers.
INSURANCE

What is insurable interest

in property?
 Sec. 13, Insurance Code
Insurable interest is "every interest in property,
whether real or personal, or any relation thereto, or
liability in respect thereof, of such nature that a
contemplated peril might directly damnify the insured.“

Section 14
Insurable interest in property may consist in: (a) an
existing interest (like that of an owner or lienholder); (b)
an inchoate interest founded on existing interest (like
that of a stockholder in corporate property); or ( c) an
expectancy, coupled with an existing interest in that out
of which the expectancy arises (like that of a shipper of
goods in the profits he expects to make from the sale
thereof)
What is the test to determine insurable
interest in property?

- Is the insured required to be the owner of the

property?
- Should he be in possession thereof?
- Should he possess a lien thereon?

UCPB General Insurance Co., Inc. vs.

Asgard Corrugarated Box
Manufacturing Corporation
GR 244407, January 26, 2021
UCPB General Insurance Co., Inc. vs.
Asgard Corrugarated, January 26, 2021
Insurable interest in property does not
necessarily imply a property interest in, or a lien
upon, or possession of, the subject matter of the
insurance, and neither the title nor a beneficial
interest is requisite to the existence of such an
interest.

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.
UCPB General Insurance Co., Inc. vs.
Asgard Corrugarated, January 26, 2021
 The Court does not agree with the CA's ratiocination that
the mere removal by Milestone of its machine and
equipment from Asgard's premises resulted in the
termination of any existing relationship it had with Asgard.
Milestone cannot unilaterally terminate the TMA other than
for causes of termination, but always with notice in writing,
under paragraphs 19 and 20 of the TMA.
 When Milestone pulled out the parts installed and caused
damage to Asgard's corrugating machines, Milestone
remained insured under the insurance policy since the TMA
was not effectively and properly terminated. The Court
disagrees with the finding of the RTC that Milestone lacked
insurable interest over the machine and equipment both at
the time the Policy took effect on August 1, 2009 and at the
time of the loss in July 2010.
 Insurer = NOT LIABLE
INCONTESTABILITY CLAUSE

 Sec.48 If the policy has been in force

during the lifetime of the insured for a
period of two years from the date of its
issue or of its last reinstatement, no
rescission may be done by insurer on
the ground of fraudulent concealment or
misrepresentation.
RATIONALE
Section 48 regulates both the actions of the insurers and
prospective takers of life insurance. It gives insurers enough
time to inquire whether the policy was obtained by fraud,
concealment, or is representation.

At the same time, legitimate policy holders are protected

from unwarranted denial of their claims or delay in the
collection of insurance proceed occasioned by allegations of
fraud, concealment, or misrepresentation by insurers, claims
which may no longer be set up after the two-year period
expires.
MANILA BANKERS LIFE
INSURANCE CORPORATION v. ABAN
G.R. No. 175666 July 29, 2013
Sunlife of Canada v. Sibya,
GR No. 211212, 8 June 2016

After the two-year period lapses, or when

the insured dies within the period, the
insurer must make good on the policy, even
though the policy was obtained by fraud,
concealment, or misrepresentation.
Sunlife of Canada v. Sibya,
GR No. 211212, 8 June 2016

- 5 February 2001 = policy - What is concealment?

was issued
- 11 May 2001 = insured - Is the insured guilty of
died concealment?

- Incontestability clause has - Concealment as a

set in. defense for the insurer to
avoid liability is an
affirmative defense and the
duty to establish such
defense by satisfactory and
convincing evidence rests
upon the provider or
insurer.
NEGOTIABLE
INSTRUMENTS LAW
PHILIPPINE SAVINGS BANK vs. MARIA CECILIA
SAKATA
G.R. No. 229450, June 17, 2020

It is settled that "a bank is

bound to know the signatures of its
customers; and if it pays a forged
check, it must be considered as
making the payment out of its own
funds, and cannot ordinarily charge
the amount so paid to the account of
the depositor whose name was
forged."
 As payment made under a forged signature
is ineffectual, the drawee bank cannot charge it
to the drawer's account because it is in a
superior position to detect forgery. The forgery
may be so near like the genuine as to defy
detection by the depositor himself, and yet the
bank is liable to the depositor if it pays the
check.

Banking institutions are imbued with

public interest, and the trust and confidence of
the public to them are of paramount importance
G.R. No. 229450, June 17, 2020
PHILIPPINE SAVINGS BANK vs. MARIA
CECILIA SAKATA

 In Philippine National Bank v. Quimpo, the respondent's act

of leaving his checkbook in the car with his longtime
classmate and friend while he went out for a short while
cannot be considered negligence sufficient to excuse the
bank from its own negligence, because respondent had no
reason to suspect that his friend would breach his trust.

 Similarly in this case, even assuming that her mother indeed

presented the questioned checks while respondent was in
Japan, she cannot be held negligent in entrusting the same
to her mother.
LLORENTE v. STAR CITY PTY LIMITED,
REPRESENTED BY THE JIMENO AND COPE
LAW OFFICES AS ATTORNEY-IN-FACT
G.R. No. 212050, January 15, 2020
ISSUES:

- Is a bank draft a negotiable instrument?

- Is the isolated transaction rule applicable to

the case at bar?
A bank draft is a bill of exchange.
A draft is a form of a bill of exchange
used mainly in transactions between
persons physically remote from each other.
It is an order made by one person, say the
buyer of goods, addressed to a person
having in his possession funds of such
buyer, ordering the addressee to pay the
purchase price to the seller of the goods.

Where the order is made by one bank

to another bank, as in this case, it is
referred to as a bank draft.
A foreign corporation, not engaged in business in
the Philippines may not be denied the right to file
an action in the Philippine courts for an isolated
transaction.
- Star City Pty Limited (SCPL) is an Australian
corporation which operates the Star City Casino in
Sydney, New South Wales, Australia.

- It sued Llorente in Philippine court.

- Llorente issued bank drafts obtained from

Equitable PCI Bank (now BDO) in favor of SCPL so
it can play in the SCPL casino. When the bank
drafts were deposited in a bank in Australia, they
were dishonored.
LLORENTE v. STAR CITY PTY LIMITED
January 15, 2020

Llorente insists that it is the Australian

court which has jurisdiction because all the
material transactions, except the issuance of
the bank drafts by Equitable PCI Bank,
transpired in Australia.
A foreign corporation that is not doing
business in the Philippines must disclose
such fact if it desires to sue in Philippine
courts under the "isolated transaction rule"
because without such disclosure, the court
may choose to deny it the right to sue.

The qualifying circumstance being an

essential part of the plaintiff's capacity to sue
must be affirmatively pleaded. Failing in his
requirement, the complaint filed by plaintiff
with the trial court, it must be said, fails to
show its legal capacity to sue
MCLE - ESCALANTE

 SCPL alleged in its Complaint that it was suing

based on an isolated transaction and that it
appointed its lawyer as attorney-in-fact.

 These averments clothed SCPL with the legal

capacity to sue in Philippine courts.

 Besides, Llorente filed a counter-claim. He is thus

considered to have admitted that SCPL may sue
in our jurisdiction. He is deemed to have
acknowledged the legal capacity of SCPL.

 It would be unfair to rule that SCPL may be sued

in the Philippines without ,at the same time,
allowing it to sue on an isolated transaction here.
BANKING – DOSRI RULE
Soriano v. People of the Philippines, GR No. 240458,
January 8, 2020

 Soriano is the President of Rural Bank of San

Miguel, Bulacan (RBSM).
 He was charged of securing an indirect loan from
RBSM while being an officer thereof by falsifying
loan documents and making it appear that a certain
Virgilio Malang (Malang) obtained the same, and
thereafter, converting the proceeds for his personal
gain and benefit.
 BSP conducted an investigation and discovered
that the loan of Malang worth P15Million was not
properly secured as it had no collateral and no co-
maker.
 Convicted of violation of RA 337, as amended
Sec. 83 of RA 337, as amended

 No director or officer of any banking

institution shall, either directly or indirectly,
for himself or as the representative or agent
of others, borrow any of the deposits of funds
of 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 for moneys borrowed from the bank
or loaned by it, except with the written
approval of the majority of the directors of
the bank, excluding the director concerned.
DOSRI
 The essence of the crime is becoming an obligor
of the bank without securing the necessary written
approval of the majority of the bank's directors.
 The DOSRI law was enacted to impose certain
restrictions on the borrowings undertaken by
directors and officers in order to protect the public,
especially the depositors.
 Restriction is necessary because of the advantage
these bank officers have because of their position.
Soriano v. People of the Philippines
GR No. 240458, January 8, 2020

- direct borrowing - one that is made in the

name of the DOSRI himself or where the
DOSRI is a named party

- indirect borrowing includes one that is

made by a third party, but the DOSRI has a
stake in the transaction.

** indirect borrowing applies here

Soriano v. People of the Philippines
GR No. 240458, January 8, 2020

ELEMENTS
PRESENCE OF FIRST and THIRD
1) the offender is a director or ELEMENTS UNDISPUTED
officer of any banking institution;
2) the offender, either directly or  Soriano is the President of the bank
indirectly, for himself or as a 3. No written approval from the
representative or agent of majority of the directors of the bank
another, performs any of the
following acts: (a) he borrows
any of the deposits or funds of
such bank; (b) he becomes a SORIANO QUESTIONS THE
guarantor, indorser, or surety for EXISTENCE OF THE SECOND
loans from such bank to others; ELEMENT. He insists that the
or (c) he becomes in any money “did not go straight to
manner an obligor for money his coffers.”
borrowed from bank or loaned
by it; and
3) the offender has performed any
of such acts without the written
approval of the majority of the
directors of the bank, excluding
the offender, as the director
concerned.
The prohibition under the DOSRI law is broad
enough to cover various modes of borrowing.

It covers loans by a bank director or officer

which are made either: (1) directly,
(2) indirectly, (3) for himself, (4) or as the
representative or agent of others.

It applies even if the director or officer is a

mere guarantor, indorser or surety
for someone else's loan.
 Republic Act No. 10142
Financial Rehabilitation and
Insolvency Act

(FRIA)
 CORPORATE
REHABILITATION CASE
 “Rehabilitation" is the restoration of the debtor
to a condition of successful operation and
solvency, if it is shown that its continuance of
operation is economically feasible and its
creditors can recover by way of the present value
of payments projected in the plan, more if the
debtor continues as a going concern than if it is
immediately liquidated.
 CORPORATE
REHABILITATION CASE

 Nature of proceedings  Special proceeding in rem

 Rationale  resuscitate businesses in
financial distress because
assets are often more
valuable when so maintained
than they would be when
liquidated
 Purpose  to enable the company to
gain a new lease on life and
allow its creditors to be paid
their claims out of its
earnings
 Rehabilitation proceedings shall commence upon
the issuance of the Commencement Order,
which shall include a Stay or Suspension Order

 Effect = suspends all actions or proceedings, in

court or otherwise, for the enforcement of
claims against the debtor
Kaizen Builders v. CA
G.R. No. 226894, September 03, 2020
Why are claims suspended?
 To expedite the rehabilitation of the distressed
corporation
 To enable the management committee or the
rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extrajudicial
interference that might unduly hinder or prevent the
rescue of the debtor company.
 To allow such other actions to continue would only add
to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources
would be wasted in defending claims against the
corporation.
 Does the Stay Order cover
all phases of the suit?
 YES. As a rule, the date when the claim arose, or
when the action was filed, has no bearing at all in
deciding whether the action or claim is
suspended.
 Exceptions: Sec. 18, FRIA
EXCEPTIONS - SEC. 18, FRIA

 (a) to cases already pending appeal in the Supreme Court as of

commencement date: Provided, That any final and executory
judgment arising from such appeal shall be referred to the
Rehabilitation Court for appropriate action;

 (b) subject to the discretion of the court, to cases pending or filed

at a specialized court or quasi-judicial agency which, upon
determination by the court, is capable of resolving the claim more
quickly, fairly and efficiently than the court: Provided, That any
final and executory judgment of such court or agency shall be
referred to the court and shall be treated as a non-disputed claim;
 c) to the enforcement of claims against
sureties and other persons solidarity liable with
the debtor, and third party or accommodation
mortgagors as well as( issuers of letters of


credit, unless the property subject of the third

party or accommodation mortgage is necessary
for the rehabilitation of the debtor as
determined by the court upon
recommendation by the rehabilitation receiver;
d) to any form of action of customers or clients of a
securities market participant to recover or otherwise
claim moneys and securities entrusted to the latter
in the ordinary course of the latter's business as well
as any action of such securities market participant
or the appropriate regulatory agency or self-
regulatory organization to pay or settle such claims
or liabilities;
(e) to the actions of a licensed broker or dealer to
sell pledged securities of a debtor pursuant to a
securities pledge or margin agreement for the
settlement of securities transactions in accordance
with the provisions of the Securities Regulation
Code and its implementing rules and regulations;
(f) the clearing and settlement of financial transactions through
the facilities of a clearing agency or similar entities duly
authorized, registered and/or recognized by the appropriate
regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and
the SEC as well as any form of actions of such agencies or entities
to reimburse themselves for any transactions settled for the
debtor; and

(g) any criminal action against the individual debtor or owner,

partner, director or officer of a debtor shall not be affected by any
proceeding commenced under this Act.
 Kaizen Builders v. CA
G.R. No. 226894, September 03, 2020
 Ofelia invested P2.2 Million in Kaizen Builders. In 2008,
the parties rescinded the investment agreement. Ofelia
received P320,000.00 from Kaizen Builders. The parties
then stipulated that the amount of P380,000.00 will be
paid on installment basis while the remaining P1.5
Million shall bear an interest of 1.5% or
P22,500.00 per month. Despite repeated demands, Kaizen
Builders stopped remitting the monthly interest
beginning November 2009.

 In 2011, Ofelia sued Kaizen Builders. In 2013, the RTC

rendered judgment ordering Kaizen Builders liable to
pay the obligation.
 Kaizen Builders v. CA
G.R. No. 226894, September 03, 2020
 Judgment appealed to the Court of Appeals.

 During the pendency of the appeal, Kaizen Builders filed a

petition for rehabilitation. The Commencement Order was issued
on August 2015 by the Rehabilitation Court.
 Kaizen Builders filed a motion to suspend the proceedings on
appeal but the CA denied the Motion reasoning that the appeal
would not affect the rehabilitation proceedings as the cases
involved different parties, issues and reliefs.

 ISSUE: Should the appeal proceedings be suspended?

 The appeal proceedings should have
been suspended.
 The Commencement Order ipso jure suspended
the proceedings in the CA at whatever stage it may be,
considering that the appeal emanated from a money
claim against a distressed corporation which is deemed
stayed pending the rehabilitation case. Moreover, the
appeal before the CA is not one of the instances where a
suspension order is inapplicable. The CA should have
abstained from resolving the appeal.
 END
ONLINE MCLE
JULY 2021