2014 Reminders for the Bar Examinations

2014 Reminders for the Bar Examinations

Commercial Law Atty. Maria Zarah R. Villanueva-Castro

INSURANCESection III of the insurance policy states that the Insurer shall not be liable for any malicious damage caused by the Insured, any member of his family or by a person in the Insureds service. It turned out that the Insurer instructed her driver to bring the insured vehicle to a nearby auto shop for tune up. However, her driver never returned and despite diligent efforts of finding the vehicle, the same could not be found. Is the Insurer still liable? Yes. Section III refers to the liability of the Insurer for loss of or damage to the vehicle in the enumerated cases which includes theft. The exception only pertains to any malicious damage caused by the Insured, any member of his family or by a person in the Insureds service. The words loss and damage mean different things. The word loss refers to act or fact of losing, while the word damage means deterioration or injury to property. The exception clearly refers to malicious damage and does not contemplate loss of property. Theft perpetrated by the driver is not an exception to the coverage of the policy. (Alpha Insurance v. Castor, 2 September 2013)

Jun Ting filed a fire insurance claim against the Insurer but the latter denied the claim on the ground that at the time of loss, the insured machineries and equipment were transferred to a location different from that indicated in the policy which constitutes concealment or misrepresentation of material fact. Is the Insurer liable? The Insurer cannot be held liable for the loss of the insured properties under the fire insurance policy. The policy forbade the removal of the insured properties unless sanctioned by the Insurer as provided under the Policy. Evidently, by the clear and express condition in the renewal policy, the removal of the insured property to any building or place required the consent of the Insurer. Any transfer effected by the Insured, without the Insurers consent, would free the latter from any liability. (Malayan Insurance Company Inc., v. PAP Co., Ltd. (Phil. Branch) 7 August 2013)On July 3, 1993, Ando Ling took out a life insurance policy from Garantisabog Insurance (Insurer), designating Dioni Sia, his niece, as his beneficiary.On April 10, 1996,when the insurance policy had been in force for more than two years and seven months, Ando Ling died. Dioni Sia filed a claim for the insurance proceeds on July 9, 1996. The Insurer conducted an investigation into the claim,and came out with the finding that Ando Ling did not personally apply for insurance coverage as he was illiterate. Can the Insurer refuse the claim due to fraud? No. Applying Article 48 of the Insurance Code, an insurer is given two (2) years - from the effectivity of a life insurance contract and while the insured is alive - to discover or prove that the policy is voidab initioor is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. 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.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 misrepresentation; on the other hand, it forewarns scheming individuals that their attempts at insurance fraud would be timely uncovered. The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation within a period of two (2) years. It is not fair for the insurer to collect the premiums as long as the insured is still alive, only to raise the issue of fraudulent concealment or misrepresentation when the insured dies. (Manila Bankers Life Insurance Corporation v. Aban, 29 July 2013)

Becky Sia insured with Jokla Insurance a sedan car under a comprehensive motor vehicle insurance policy for one year. During the effectivity of the insurance, the sedan car was unlawfully taken. Jokla refused to pay and maintained that that it is not liable for the loss, since the car cannot be classified as stolen because Becky Sia actually entrusted the possession thereof to another person. It appears that Becky Sia entrusted the sedan to Becky Belo who took possession thereof to add accessories and improvements thereon. Is this case covered by the theft clause of the insurance policy and therefore should be paid by Jokla Insurance?

Yes. It is basic that there may be theft even if the accused has possession of the property. If he was entrusted only with the material or physical (natural) or de facto possession of the thing, his misappropriation of the same constitutes theft.In this instant case, Becky Belo did not have juridical possession over the vehicle. Here, it is apparent that the taking of the vehicle by Becky Belo is without any or authority from Becky Sia. Possession of the vehicle was entrusted to Becky Belo only to the extent that he will introduce repairs and accessories thereon and not to permanently deprive Becky Sia of the possession thereof. This constitutes qualified theft and well-within the ambit of the theft clause of the policy. (Malayan Insurance Co., Inc. v. Alberto and Reyes, 1 February 2012)TRANSPORTATION

Spidibagal, Inc. maintains that it is not a common carrier, but only a customs broker whose participation is limited to facilitating withdrawal of the shipment in the custody of Jowa, Inc. by overseeing and documenting the turnover and counterchecking if the quantity of the shipments were in tally with the shipping documents at hand, but without participating in the physical withdrawal and loading of the shipments into the delivery trucks. Decide. It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. It suffices that Spidibagal undertakes to deliver the goods for pecuniary consideration. That Spidibagal is a common carrier is buttressed by the fact that part of the services it offers to clients is cargo forwarding, which includes the delivery of the shipment to the consignee. xxx As long as a person or corporation holds itself to the public for the purpose of transporting goods as a business, it is already considered a common carrier. (Westwind Corporation v. UCPB General Insurance Co., Inc., 25 November 2014)

Does the one-year prescriptive period under the COGSA apply to a claim involving an arrastre operator?

Under Paragraph (6), Section 3 of COGSA, the carrier and the ship owner may put up the defense of prescription if the action for damages is not brought within one year after the delivery of the goods or the date when the goods should have been delivered. However, the COGSA does not mention that an arrastre operator may invoke the prescriptive period of one year; hence, it does not cover the arrastre operator.(Insurance Company of North America v. Asian Terminals, Inc., 15 February 2012)

Can the parties stipulate to extend the one-year prescriptive period to file action under the COGSA?

Under Section 3(6) of the COGSA, the carrier is discharged from liability for loss or damage to the cargo unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. Jurisprudence, however, recognized the validity of an agreement between the carrier and the shipper/consignee extending the one-year period to file a claim. (Benjamin Cua v. Wallen Philippines Shipping, Inc., 11 July 2012)PRIVATE CORPORATION What is the liability of the owner of the sole proprietorship for the illegal dismissal of the latters employee? A sole proprietorship does not possess a juridical personality separate and distinct from that of the owner of the enterprise. Ergo, the owner has unlimited personal liability for all the debts and obligations of the business, and it is against him that a decision for illegal dismissal is to be enforced. (Alps Transportation and/or Alfredo E. Perez v. Elpidio M. Rodriguez, G.R. No. 186732, 13 June 2013) What are the legal consequences of change of corporate name? A change in the corporate name does not make a new corporation, whether effected by a special act or under a general law. It has no effect on the identity of the corporation, or on its property, rights, or liabilities. The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed. (Zuellig Freight v. NLRC, G.R. No. 157900, 22 July 2013)

In the absence of authorization from the Board, can an officer purchase a property in the absence of authorization from the Board? No. Section 23 of the Corporation Code expressly provides that the corporate powers of all the corporations shall be exercised by the board of directors. Additionally, Section 36 of the same Code provides for the corporate powers and capacity to purchase or deal with real and personal property and such power is vested in the board of directors or trustees. While a corporation may appoint agents to negotiate for the purchase of real property, the final say will have to be with the board, whose approval will finalize the transaction.

Hence, without authority form the Board to purchase the said property, the sale is null and void. (Aquiles Riosa v. Tabaco La Suerte Corporation; G.R. No. 203786, 23 October 2013)

On various dates, Calacal Traders purchased on credit notebooks and other paper products amounting to P7,533,001.49 from Epal, Inc. Upon the representation of Bekla and Tekla, Calacal Traders also obtained three loans from Epal, Inc. for a total amount of P7, 788,796.76. As payment for the purchases on credit and the loan transactions, Calacal Traders issued 82 postdated checks payable to cash or to Epal, Inc. Bekla and Tekla were Calacal Traders authorized bank signatories who signed and issued these checks which had the aggregate amount of P15,130,636.87. Epal, Inc. presented the checks to the drawee bank but these were dishonoured. Despite repeated demands Calacal Traders failed to settle its account with Epal, Inc. Calacal Traders denies liability in the ground that Bekla and Tekla have no authority to bind it due to lack of board authorization. Decide.Calacal Traders bestowed upon Bekla and Tekla broad powers by allowing them to transact with third persons without the necessary written authority from its non-performing board of directors. Calacal Traders failed to take precautions to prevent its own corporate officers from abusing their powers. Because of its own laxity in its business dealings, Calacal Traders is now estopped from denying Bekla and Teklas authority to obtain loan from Epal, Inc. (Advance Paper v. Arma Traders Corporation, 11 December 2013)

A stock certificate is endorsed in blank by its owner. Discuss the legal effects.

When a stock certificate is endorsed in blank by the owner thereof, it constitutes what is termed as street certificate, so that upon its face, the holder is entitled to demand its transfer into his name from the issuing corporation. Such certificate is deemed quasi-negotiable, an as such the transferee thereof is justified in believing that it belongs to the holder and transferor. An endorsement in blank of the stock certificates coupled with its delivery, entitles the holder thereof to demand the transfer of said stock certificates in his name from the issuing corporation. (Simny Guy v. Gilbert Guy, 5 September 2012)What are the two tests on intra-corporate controversy? Explain.

The two tests are: (a) the relationship test and (b) the nature of the controversy test.

An intra-corporate controversy is one which pertains to any of the following relationships: (1) between the corporation, partnership or association and the public; (2) between the corporation, partnership or association and the State insofar as its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates themselves. Thus, under the relationship test, the existence of any of the above intra-corporate relations makes the case intra-corporate.

Under the nature of the controversy test, "the controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation." In other words, jurisdiction should be determined by considering both the relationship of the parties as well as the nature of the question involved. (Medical Plaza Makati Condominium Corporation vs. Robert H. Cullen, GR No. 181416, 11 November 2013)Sometime in 1986 or 1987, B-Gas Co., a foreign company and M-Gas, Inc., a local company, orally entered into a dealership agreement whereby B-Gas Co. granted M-Gas, Inc. the right to market, sell, distribute, install, and service its products to end-user customers within the Philippines. Under what condition/s may B-Gas Co. be considered doing business in the Philippines?

Following the Foreign Investment Act (FIA) and its IRR, the appointment of a distributor in the Philippines is not sufficient to constitute "doing business" unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an independent entity which buys and distributes products, other than those of the foreign corporation, for its own name and its own account, the latter cannot be considered to be doing business in the Philippines.It should be kept in mind that the determination of whether a foreign corporation is doing business in the Philippines must be judged in light of the attendant circumstances. (Steelcase, Inc. v. Design International Selections, Inc., 18 April 2012)

BANKING

What is the current legal rate of interest? The old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of interest from 12% to 6%. (Dario Nacar v. Gallery Frames and/or Felipe Bordey, Jr., G.R. No. 189871, 13 August 2013)Is the Monetary Board (MB) empowered to forbid a bank from doing business and place it under receivership without prior notice and hearing? Is its power limited only to supervision and management take-over of banks and not receivership?The MB may forbid a bank from doing business and place it under receivership without prior notice and hearing as it is not necessary inasmuch as under Sec. 30 of R.A. No. 7653, the MB was entrusted with the appreciation and determination of whether any or all of the statutory grounds for the closure and receivership of the erring bank are present. This "close now, hear later" doctrine has already been justified as a measure for the protection of the public interest. xxx placing a bank under receivership would effectively put a stop to the further draining of its assets. (Vivas v. Monetary Board of the Bangko Sentral ng Pilipinas, 7 August 2013)

ANTI-MONEY LAUNDERING

What are the requisites for the issuance of a freeze order?

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 probable cause required for the issuance of a freeze order differs from the probable cause required for the institution of a criminal action, and the latter was not an issue before the CA nor is it an issue before us in this case. In resolving the issue of whether probable cause exists, the CAs statutorily-guided determinations focus is not on the probable commission of an unlawful activity (or money laundering) xxx, but on 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 RA No. 9160, as amended.

Thus, a freeze order is not dependent on a separate criminal charge, much less does it depend on a conviction. (Ligot vs. Republic, 6 March 2013)

INTELLECTUAL PROPERTYIs registration of a trademark a mode of acquiring ownership thereof?

Registration of a trademark, by itself, is not a mode of acquiring ownership. If the applicant is not the owner of the trademark, he has no right to apply for its registration. Registration merely creates a prima facie presumption of the validity of the registration, of the registrants ownership of the trademark, and of the exclusive right to the use thereof. (Birkenstock Orthopaedia vs. Philippine Shoe Expo, 20 November 2013)What are the two types of confusion arising from the use of similar or colorable imitation marks?

Under Section 22, IPC covers two types of confusion: a) confusion of goods (product confusion), in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other and b) confusion of business (source or origin confusion), though the goods of the parties are different, the defendants product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant, which, in fact, does not exist. (Mcdonalds Corporation vs. L.C. Big Mak Burger, Inc., 18 August 2004)What is the protection to foreign marks under the Paris Convention?

Under the Paris Convention, the Philippines is obligated to assure nationals of the signatory-countries that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine nationals. Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a trademark, is protected without the obligation of filing or registration. (Ecole De Cuisine Manille [Cordon Bleu of the Philippines], Inc. v. Renaud Cointreau & CIE and Le Condron Bleu Intl., B.V., 5 June 2013)

Under what circumstances are directors and/or officers liable for infringement of trademark?

Corporate officers and/or directors, through whose act, default or omission the corporation commits a crime, may themselves be individually held answerable for the crime. Thus, where the petitioners, being in direct control and supervision in the management and conduct of the affairs of the corporation, must have known or are aware that the corporation is engaged in the act of refilling LPG cylinders bearing the marks of the respondents without authority or consent from the latter which, under the circumstances, could probably constitute the crimes of trademark infringement and unfair competition. The existence of the corporate entity does not shield from prosecution the corporate agent who knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide behind the cloak of the separate corporate personality of the corporation to escape criminal liability. A corporate officer cannot protect himself behind a corporation where he is the actual, present and efficient actor. (Republic Gas Corporation v. Petron Corporation, 17 June 2013)

TRUST RECEIPTS

Is the transaction one covered by the Trust Receipts Law where the lender knew all along that the construction materials subject matter of the trust receipt were not intended for resale for for the personal use of the obligor?The dealing will not be considered a trust receipt transaction but one of simple loan.

When both parties enter into an agreement knowing fully well that the return of the goods subject of the trust receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt transaction penalized under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of RPC, as the only obligation actually agreed upon by the parties would be the return of the proceeds of the sale transaction. This transaction becomes a mere loan, where the borrower is obligated to pay the bank the amount spent for the purchase of the goods.

In such a situation, the Trust Receipts Law and corresponding liability for estafa will not apply. (Hur Tin Yang v. People of the Philippines, 14 August 2013)

Good Luck