COMMERCIAL LAW DOCTRINES

METROPLEX BERHAD and PAXEL INVESTMENT LIMITED v. SINOPHIL CORP. G.R. No. 208281, June 28,
2021, Third Division, (Hernando, J.)
There is no validity nor legal basis to the allegation of petitioners that prior approval of all the
stockholders is required for the reduction in capital stock. Suffice it to state that under Section 38 of
the Corporation Code, such decrease only requires the approval of a majority of the board of directors
and, at a stockholder's meeting duly called for the purpose, two-thirds (2/3) vote of the outstanding
capital stock. So long as written notice of the proposed increase or diminution of the capital stock was
made to all stockholders, the presence and approval of at least 2/3 of the capital stock is enough to
make the increase or diminution valid. This is the plain language of the provision over which no other
interpretation may be made

The approval of a majority vote of the board of directors and two-thirds

vote of the outstanding capital stock, prior approval of the Securities
and Exchange Commission (SEC), and absence of prejudice to
corporate creditors are the only legal requirements for a decrease in a
corporation's authorized capital stock. Compliance with these
requirements limits the scope of the SEC's determination to the legality
of the submission of the necessary documents. The "business judgment
rule" prohibits the SEC and the courts from interfering with the business
decisions of a corporation, so long as these decisions are made in good
faith and do not result in the wanton destruction of the rights of the
minority.

Gravamen: The Supreme Court ruled that the decrease in Sinophil's capital stock was legal and the
SEC's approval thereof was proper. The court rejected the petitioners' claims that the decrease did
not comply with legal requirements. The court upheld that compliance with Section 38 of the
Corporation Code, which only requires approval by the board of directors and two-thirds vote of the
outstanding capital stock, prior approval of the SEC, and absence of prejudice to corporate creditors,
is enough for the validity of the decrease. The scope of the SEC's determination is limited to the
legality of the submission of the necessary documents. The "business judgment rule" prohibits the
SEC and courts from interfering with the business decisions of a corporation, so long as these
decisions are made in good faith and do not result in the wanton destruction of the rights of the
minority.

MULTI-WARE MANUFACTURING, CORPORATION v. CIBELES INSURANCE CORPORATION, WESTERN

GUARANTY CORPORATION, AND ERNESTY SY, doing business under the name and style “PAN
OCEANIC INSURANCE SERVICES” G.R. No. 230528, February 01, 2021, Third Division, (Hernando, J.)

Where the insurance policy specifies as a condition the disclosure of existing co insurers, non-
disclosure thereof is a violation that entitles the insurer to avoid the policy. This condition is common
in fire insurance policies and is known as the "other insurance clause". The rationale behind the
incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert
the perpetration of fraud

The "other insurance clause" in fire insurance policies requires the insured
to disclose to the insurer any other insurance policies covering the same
subject and interest, including machinery and equipment, and failure to
disclose such policies may result in the forfeiture of all benefits under the
policy.

The Supreme Court held that Policy Condition No. 3 in the insurance policy
requires the insured to notify the insurer of any insurance policies covering
any property, including machinery and equipment. The non-disclosure of
such policies may result in the forfeiture of all benefits under the policy. The
"other insurance clause" is incorporated in fire insurance policies to prevent over-insurance and the
perpetration of fraud. The disclosure requirement applies to all policies covering the same subject and
interest, and non-disclosure thereof is a violation that entitles the insurer to avoid the policy. The
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doctrine emphasizes the importance of full disclosure of all insurance policies to avoid forfeiture of
benefits and protect against fraud.

MALAYAN INSURANCE COMPANY, INC., petitioner, vs. STRONGHOLD INSURANCE COMPANY, INC.,
and RICO J. PABLO, respondents. G.R. No. 203060. June 28, 2021, THIRD DIVISION (Hernando, J.)
The limit of liability with regard to the items listed in the Schedule of Indemnities is the amount
provided therein; the limit of liability with regard to other kinds of damages not listed in the same
Schedule of Indemnities is the total amount of insurance coverage. It then follows that the amounts in
excess of the limits of liability in the schedule for items listed therein are not covered by the total
coverage. Such excess is already for the personal account of the insured or an excess coverage
provider.

The purpose of CMVLI is to provide immediate financial assistance to victims or their dependents,
regardless of the financial capacity of the motor vehicle owners. The limits provided in the Schedule
of Indemnities are only applicable to the injuries listed therein, and claims for other kinds of damages
not indicated in the schedule are allowed against CMVLI policy providers, provided that liability is
established and the requisites for the kind of damages claimed are present. The amounts payable to
the claimant shall be subject to legal interest.

The Western Guaranty case clarified that the Schedule of Indemnities is not an enumeration of
specific damages that may be awarded, and the limits provided therein should be applied only to the
injuries listed. Stronghold's policy is identical to the policy in Western Guaranty, and Stronghold's
liability with regard to injuries provided in its policy's Schedule of Indemnities is subject to the limits
provided therein. Any excess will not be for its account and will be for the account of the excess
coverage provider.

The GSIS case is not applicable to the case at hand, and legal interest should be imposed on the
amounts to be paid by the insurance companies to the claimant.

MAGNA READY MIX CONCRETE CORPORATION v. ANDERSEN BJORNSTAD KANE JACOBS, INC. G.R.
No. 196158, January 20, 2021, Third Division (Hernando, J.)
The number of the transactions entered into is not determinative whether a foreign corporation
is doing business in the Philippines; the intention to continue the body of its business prevails. The
number or quantity is merely an evidence of such intention. A single act or transaction may then be
considered as doing business when a corporation performs acts for which it was created or exercises
some of the functions for which it was organized. 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.

Doctrine: The doctrine of estoppel prevents a party from challenging the

legal capacity of a foreign corporation to sue after acknowledging its
personality by entering into a contract with it and deriving benefits
therefrom.

Cardinal Rule: A foreign corporation must secure a license before

conducting business in the Philippines to be allowed to initiate or intervene
in any action in any court or administrative agency in the country. A single
act or transaction may be considered as doing business when a
corporation performs acts for which it was created or exercises some of
the functions for which it was organized. The intention to continue the
body of its business prevails over the number of transactions entered into.
A foreign corporation may sue without a license on the basis of an isolated transaction, which may be
considered as doing business if it implies a continuity of commercial dealings and contemplates the
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performance of acts or the exercise of functions normally incidental to and in the progressive pursuit
of its purpose.

Explanation: The doctrine of estoppel applies to MAGNA, which is already estopped from challenging
ANDERSEN's legal capacity to sue despite the latter's lack of a necessary license to do business in
the Philippines. The reason for this is that MAGNA had entered into a contract with ANDERSEN,
which involved the performance of acts that were in progressive pursuit of its business purpose. As a
foreign corporation, ANDERSEN must secure a license before conducting business in the Philippines
to be allowed to initiate or intervene in any action in any court or administrative agency in the country.
A single act or transaction may be considered as doing business when a corporation performs acts
for which it was created or exercises some of the functions for which it was organized. The intention
to continue the body of its business prevails over the number of transactions entered into. A foreign
corporation may sue without a license on the basis of an isolated transaction, which may be
considered as doing business if it implies a continuity of commercial dealings and contemplates the
performance of acts or the exercise of functions normally incidental to and in the progressive pursuit
of its purpose.

KOLIN ELECTRONICS CO., INC. vs. TAIWAN KOLIN CORP., LTD. G.R. No. 221347, December 1, 2021,
Second Division (Hernando, J.) TAIWAN KOLIN CORP., LTD., represented by KOLIN PHILIPPINES
INTERATION, INC. v. KOLIN ELECTRONICS CO., INC. G.R. No. 221360-61, December 1, 2021, Second
Division (Hernando, J.)
Section 236 of the IP Code states that nothing in the IP Code shall impair the rights of the
enforcement of marks acquired in good faith prior to the effective date of said law. Moreover, it is
settled that a certificate of registration of a mark is prima facie evidence of the validity of the
registration, the registrant's ownership of the mark, and of the registrant's exclusive right to use the
same in connection with the goods or services and those that are related thereto specified in the
certificate. This certificate of registration vests KECI the exclusive right to use the "KOLIN" mark in
relation to the services covered by the registration. Unless and until the said registration of KECI is
nullified or cancelled through the proper proceeding, the rights emanating from the said registration
should be respected. The owner of a registered trademark, absent any legal obstacle or compelling
reason to the contrary, should be allowed to register, in its favor, a domain name containing its
registered trademark as a dominant feature. KECI's application to register and use the mark
"www.kolin.ph," presumably as its domain name and platform to sell its products in the internet, is
merely in exercise of and consistent with its exclusive right to use "KOLIN" on the business of
manufacturing, importing, assembling or selling electronic equipment or apparatus.

The doctrine in this case is that strict compliance with procedural rules is required, and failure to
comply with the requirements will result in the outright dismissal of the case. The Inter Partes
Regulations specifically require the submission of original or certified true copies of the documentary
exhibits attached to the petition or opposition. The interpretation of administrative agencies of their
own rules should be accorded great respect, unless there is an error of law, abuse of power, lack of
jurisdiction, or grave abuse of discretion.

While administrative bodies like the IPO's BLA are not bound by strict technical rules of procedure
and evidence, the relaxation of procedural rules must have valid reasons and should not be belittled
or dismissed. Petitioners must show reasonable cause justifying their non-compliance with the rules
and must convince the Court that the outright dismissal of the case would defeat the administration of
substantive justice.

In this case, Taiwan Kolin failed to comply with the requirement to attach
original or certified true copies of the supporting documents to its opposition,
and failed to provide justifiable cause or compelling reason warranting the
relaxation of the Inter Partes Regulations. Thus, the BLA was correct in
dismissing the opposition outright, and the Court does not adopt the appellate
court's conclusion that Taiwan Kolin should be granted relaxation of the
procedural rules.

Doctrine: The owner of a registered trademark has the exclusive right to use and register a domain
name containing the same registered trademark as a dominant feature, provided that the domain
name is used in connection with the goods or services covered by the trademark registration. The use
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of a registered mark on an interactive website may constitute proof of actual use that is sufficient to
maintain the registration of the same.

Explanation: The Intellectual Property Code states that nothing in the law shall impair the rights of the
enforcement of marks acquired in good faith prior to the effective date of the law. KECI, having been
declared the first and prior user of the "KOLIN" mark in the Philippines, is the registered owner of the
same under Class 35 for the business of manufacturing, importing, assembling, or selling electronic
equipment or apparatus. The certificate of registration of a mark is prima facie evidence of the validity
of the registration and the registrant's exclusive right to use the same in connection with the goods or
services specified in the certificate. KECI's registration of "www.kolin.ph" is an exercise of its right
under its Class 35 registration and is entitled to protection, whether such use is exercised online or
through a physical market.

The owner of a registered trademark, absent any legal obstacle or compelling reason to the contrary,
should be allowed to register a domain name containing its registered trademark as a dominant
feature. KECI's exclusive right to use the "KOLIN" mark for the business of manufacturing, importing,
assembling, or selling electronic equipment or apparatus is entitled to protection, whether such use is
exercised online or through a physical market — and whether the mark is printed on product
packaging or included in the domain name of its website.

Therefore, the court ruled in favor of KECI and held that its registration of "www.kolin.ph" is proper
pursuant to its existing registration of "KOLIN" under Class 35. Taiwan Kolin's claim of likelihood of
confusion with its existing registrations in other classifications was not considered relevant.

KHO V. SUMMERVILLE GENERAL MERCHANDISING & CO., INC. G.R. No. 213400, August 4, 2021,
Second Division (Hernando, J.)
The essential elements of an action for unfair competition are: (1) confusing similarity in the
general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. The
confusing similarity may or may not result from similarity in the marks, but may result from other
external factors in the packaging or presentation of the goods. Likelihood of confusion of goods or
business is a relative concept, to be determined only according to peculiar circumstances of each
case. The element of intent to deceive and to defraud may be inferred from the similarity of the
appearance of the goods as offered for sale to the public.

The doctrine of unfair competition requires that the essential

elements of an action must be established, namely: (1) confusing
similarity in the general appearance of the goods, and (2) intent to
deceive the public and defraud a competitor. The confusing
similarity may or may not result from similarity in the marks, but may
result from other external factors in the packaging or presentation of
the goods. The likelihood of confusion of goods or business is a
relative concept, to be determined only according to peculiar
circumstances of each case. The element of intent to deceive and defraud may be inferred from the
similarity of the appearance of the goods as offered for sale to the public.

In the case at hand, the petitioners' medicated facial cream is contained in a pink oval-shaped
container with the mark "Chin Chun Su," which is the same as the respondent's product. Even if the
petitioners indicated the manufacturer's name, this does not change the fact that it is confusingly
similar to respondent's product in the eyes of the public. An ordinary purchaser would not normally
inquire about the manufacturer of the product. Both products are medicated facial creams, contained
in pink oval-shaped containers, and contain the trademark "Chin Chun Su". The similarities far
outweigh the differences. As such, the general appearance of petitioners' product is confusingly
similar to respondent's.

The doctrine of unfair competition aims to protect both consumers and competitors from confusion
and deception. Thus, it is essential to ensure that the general appearance of one's goods does not
create a likelihood of confusion with the goods of another. Any intent to deceive and defraud a
competitor should also be avoided, as this is a clear violation of the doctrine. It is the duty of the
courts to carefully evaluate each case to determine whether or not the elements of unfair competition
have been met.
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MARIA LEA JANE I. GESOLGON v. CYBERONE PH., INC. G.R. No. 210741, October 14, 2020, Second
Division, Hernando, J.:
The doctrine of piercing the corporate veil applies only in three basic instances, namely: (a)
when the separate distinct corporate personality defeats public convenience, as when the corporate
fiction is used as a vehicle for the evasion of an existing obligation; (b) in fraud cases, or when the
corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or (c) is used in alter ego
cases.

The doctrine of piercing the corporate veil can only be applied in three basic
instances: (a) when the separate distinct corporate personality defeats public
convenience, as when the corporate fiction is used as a vehicle for the
evasion of an existing obligation; (b) in fraud cases, or when the corporate
entity is used to justify a wrong, protect a fraud, or defend a crime; or (c) is
used in alter ego cases, i.e., where a corporation is essentially a farce, since
it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs conducted as to
make it merely an instrumentality, agency, conduit or adjunct of another
corporation.

Gravamen: The doctrine of piercing the corporate veil can only be applied in limited circumstances
where there is evidence of fraud, wrongdoing, or an attempt to evade obligations. In this case, the
court found that CyberOne AU cannot be considered as doing business in the Philippines through its
local subsidiary CyberOne PH because there was no evidence that CyberOne PH was organized and
controlled by CyberOne AU in a way that made it merely an instrumentality or adjunct of CyberOne
AU. Therefore, CyberOne AU is classified as a non-resident corporation not doing business in the
Philippines.

ALLIED BANKING CORPORATION AND GUILLERMO DIMOG v. SPOUSES MACAM, SPOUSES CAÑA,
AND SPOUSES GARCIA G.R. No. 200635, February 1, 2021, Third Division (Hernando, J.)
Apparent authority is derived not merely from practice. Its existence may be ascertained
through 1) the general manner in which the corporation holds out an officer or agent as having the
power to act, or in other words, the apparent authority to act in general, with which it clothes him; or 2)
the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
within or beyond the scope of his ordinary powers

Banks have an absolute obligation of extraordinary diligence in handling

and caring for its deposits and the highest degree of diligence in selecting
and supervising employees. The obligation of banks is deemed written into
every deposit agreement with depositors. A bank is liable for any loss of
deposit due to its failure to exercise the required diligence. The authority of
a corporate officer or agent to act for and bind a corporation may be
presumed from acts of recognition in other instances, where the power
was exercised without objection from its board or shareholders.

Explanation: The doctrine emphasizes the obligation of banks to exercise

utmost diligence in handling deposits and supervising employees. This
obligation is deemed absolute and is written into every deposit agreement
with depositors. Any loss of deposits due to the bank's failure to exercise this diligence makes the
bank liable. The doctrine also provides that the apparent authority of a corporate officer or agent to
act for and bind the corporation may be presumed from acts of recognition where the power was
exercised without objection from the board or shareholders.
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In the given case, Allied Bank recognized the creditor-debtor relationship with the Spouses Mario
Macam and their ownership and title over the P1,590,000.00 in their account. The bank repeatedly
acknowledged its obligation to pay the Spouses Mario Macam on demand, thus making it liable for
the loss of their deposit due to false fund transfer transactions effected by Caña. Caña's act of
approving the fund transfer and the subsequent transfers to different accounts all appear to have
been clothed with authority, making the bank liable for the loss.

SAO PAULO ALPARGATAS S.A., V, KENTEX MANUFACTURING CORPORATION G.R. No. 202900,
February 17, 2021, Third Division (Hernando, J.)
A case or issue is considered moot when "it ceases to present a justiciable controversy by
virtue of supervening events, so that an adjudication of the case or a declaration on the issue would
be of no practical value or use. In such instance, there is no actual substantial relief which a petitioner
would be entitled to, and which would be negated by the dismissal of the petition. Courts generally
decline jurisdiction over such case or dismiss it on the ground of mootness. This is because the
judgment will not serve any useful purpose or have any practical legal effect because, in the nature of
things, it cannot be enforced.
Settlement Agreement

Mootness Doctrine

A case or issue is considered moot when it ceases to present a justiciable

controversy by virtue of supervening events, rendering adjudication or a
declaration on the issue useless. Courts generally decline jurisdiction or dismiss
the case on the ground of mootness. The judgment will not serve any practical
legal effect since it cannot be enforced. Settlement agreements entered into by the parties put an end
to the litigation between them, and courts will decline jurisdiction where the issues have become moot
and academic.

Explanation:

The mootness doctrine holds that courts should only decide cases where there is an actual, live
controversy between the parties, which would be affected by the court's judgment. When supervening
events occur, such as the parties entering into a settlement agreement, rendering the issue or case
no longer justiciable, the court will dismiss the case on the ground of mootness. The judgment or
decision would have no practical legal effect, since it cannot be enforced. Settlement agreements
entered into by the parties put an end to the litigation between them, and the court will decline
jurisdiction where the issues have become moot and academic. Courts abstain from expressing their
opinion when no substantial legal relief is necessary, and where there is no substantial relief to which
the petitioner will be entitled.

DEUTSCHE BANK AG LONDON, substituted by A & L FISHPOND and HATCHERY, INC. v. KORMASINC,
INC. G.R. No. 201700 & 201777. April 18, 2022, Second Division (Hernando, J.)
“A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical value. As a rule, courts
decline, jurisdiction over such a case, or dismiss it on ground of mootness.”

The successful exit of a corporation from corporate rehabilitation and the termination of rehabilitation
proceedings renders any pending cases moot and academic.

The court considers a case moot and academic when it no longer presents a justiciable controversy
due to supervening events that make a declaration or judgment on the issue of no practical value.
The courts typically decline jurisdiction over such a case or dismiss it on the ground of mootness. In
the case of corporations, the successful exit from corporate rehabilitation and the termination of
rehabilitation proceedings put an end to the judicial controversy between the parties, rendering any
pending cases moot and academic.
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In the case at hand, the RTC granted Vitarich's Motion for Successful Exit from Corporate
Rehabilitation, which led to the termination of rehabilitation proceedings and the discharge of the
rehabilitation receiver from his duties. As a consequence, the court held that any pending petitions
were now moot and should be dismissed. The rehabilitation court's order effectively ended the judicial
controversy between the parties, making any further action unnecessary. Therefore, it is a cardinal
rule that the termination of rehabilitation proceedings of a corporation renders any pending cases
moot and academic.

CHUA V. SECRETARY OF JUSTICE G.R. No. 214960, June 16, 2022, Second Division (Hernando, J.)
The Trust Receipts Law punishes the entrustee's failure to turn over the proceeds of the sale of
the goods covered, or to return the goods themselves if not sold. Under Section 13 of the law, such
failure shall constitute the crime of Estafa under Article 315, paragraph 1 (b) of the RPC. The Court
emphasizes that the offense of violation of the Trust Receipts Law is malum prohibitum: mere failure
to turn over the proceeds of the sale, or to return the goods themselves if not sold, amounts to the
violation. Intent to defraud is immaterial.

Failure to turn over the proceeds of the sale of goods or return the
goods themselves, as required under a trust receipt transaction,
constitutes the crime of Estafa under Article 315, paragraph 1 (b) of
the Revised Penal Code. The offense is malum prohibitum, meaning
that intent to defraud is immaterial.

Explanation: The Trust Receipts Law defines a trust receipt transaction

as a transaction between an entruster and an entrustee where the
entruster transfers possession of specific goods to the entrustee, who
is obligated to hold the goods in trust and sell or dispose of them, with
the proceeds turned over to the entruster to the extent of the amount
owed or the terms of the trust receipt. If the goods are not sold, the entrustee must return them to the
entruster. Failure to comply with these requirements is punishable under the law.

Moreover, the obligation of the entrustee under a trust receipt transaction is not novated when a new
schedule of payments is agreed upon. Novation requires the cancellation of the old obligation by the
new one, which must be incompatible with the old obligation. In this case, the new schedule of
payments does not cancel the original obligation, as it only extends the period for payment of the
amount owed. The old obligation continues to exist, and the entrustee is still liable under the trust
receipt transaction.

The principle of malum prohibitum emphasizes the importance of complying with legal requirements,
regardless of intent. Thus, it is crucial for entrustees to ensure that they fulfill their obligations under
trust receipt transactions to avoid being charged with Estafa.