QUICK SURVEY OF CASES FOR THE

2022 BAR EXAMINATIONS

By Judge Ella Dumlao-Escalante

INTELLECTUAL PROPERTY LAW

KOLIN ELECTRONICS CO., INC. vs. KOLIN PHILIPPINES INTERNATIONAL, INC.

G.R. No. 228165, February 09, 2021
J. Caguioa

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.

In determining likelihood of confusion - which can manifest in the form of "confusion of goods"
and/or "confusion of business" - several factors may be taken into account, such as:

a) the strength of plaintiff’s mark;

b) the degree of similarity between the plaintiffs and the defendant's marks;
c) the proximity of the products or services;
d) the likelihood that the plaintiff will bridge the gap;
e) evidence of actual confusion;
f) the defendant's good faith in adopting the mark;
g) the quality of defendant's product or service; and/or
h) the sophistication of the buyers.

These criteria may be collectively referred to as the multifactor test. Out of these criteria, there are
two which are uniformly deemed significant under the Trademark Law and the IP Code: the resemblance
of marks (the degree of similarity between the plaintiffs and the defendant's marks) and the relatedness of
goods or services (the proximity of products or services).

Zuneca Pharmaceutical et al vs. Natrapharm, Inc.

GR No. 211850, September 8, 2020
J. Caguioa

Natrapharm is the registrant of the "ZYNAPSE" mark which was registered with the IPO on
September 24, 2007. Zuneca has been using the "ZYNAPS" brand as early as 2004. "ZYNAPSE" and
"ZYNAPS" are confusingly similar and both are used for medicines. It is clear that Natrapharm is the first-
to-file registrant of "ZYNAPSE". Zuneca, on the other hand, is a prior user in good faith of a confusingly
similar mark, "ZYNAPS".

To repeat, after the IP Code became effective starting 1998, use was no longer required in order to
acquire or perfect ownership of the mark. In this regard, the Court now rectifies the inaccurate statement
in Berris that "[t]he ownership of a trademark is acquired by its registration and its actual use." The rectified
statement should thus read: "Under the IP Code, the ownership of a trademark is acquired by its
registration." To clarify, while subsequent use of the mark and proof thereof are required to prevent the
removal or cancellation of a registered mark or the refusal of a pending application under the IP Code, this
should not be taken to mean that actual use and proof thereof are necessary before one can own the mark
or exercise the rights of a trademark owner.

But, Section 159.1 of the IP Code clearly contemplates that a prior user in good faith may continue
to use its mark even after the registration of the mark by the first-to-file registrant in good faith, subject to
the condition that any transfer or assignment of the mark by the prior user in good faith should be made
together with the enterprise or business or with that part of his enterprise or business in which the mark is
used. The mark cannot be transferred independently of the enterprise and business using it.

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 From the provision itself, it can be gleaned that while the law recognizes the right of the prior user
in good faith to the continuous use of its mark for its enterprise or business, it also respects the rights of
the registered owner of the mark by preventing any future use by the transferee or assignee that is not in
conformity with Section 159.1 of the IP Code.

Being a prior user in good faith, Zuneca is not liable for trademark infringement under Section
159.1 of the IP Code.

Emzee Foods, Inc. v. Elarfoods, Inc.

G.R. No. 220558, February 17, 2021
J. Gaerlan

A business is remembered and revered by its goodwill and reputation. Hence, for a business, its
mark is not simply a random, meaningless combination of letters, phrases or symbols. Rather these
emblems embody the quality of the goods and services offered by the entity. For these reasons, the law
steps in to protect its intellectual property rights.

In the recent case of Zuneca Pharmaceutical, et al. v. Natrapharm, Inc., the Court exhaustively
discussed the manner of acquiring ownership of a particular trademark which, over the years, vacillated
between registration and actual use. The ponencia elaborately surveyed all the intellectual property laws
passed in our country, beginning from the Spanish Royal Decree of October 26, 1888, which required
business entities to obtain a certificate before using a particular trademark. This rule, however, changed in
1903, when Act No. 666 was enacted and required actual use of the mark as a means of obtaining ownership
thereof. Then, in 1947, R.A. No. 166 (Trademark Law) was passed which strengthened the rule of actual
use, while imposing non-abandonment of the mark as an additional prerequisite for registration. Fast-
forward to 1998, the IP Code was passed and the manner of acquiring ownership of a trademark reverted
to registration, subject to the rule that the first-to-file shall be prioritized to the exclusion of all other
applicants/users.

Essentially, Zuneca clarified that, as the rule now stands, the lawful owner of the mark shall be
the person or entity who first registers it in good faith.

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other; and
(2) confusion of business (source or origin confusion), where, although the goods of the parties are different,
the product, the mark of which registration is applied for by one party, is such as might reasonably be
assumed to originate with the registrant of an earlier product, and the public would then be deceived either
into that belief or into the belief that there is some connection between the two parties, though inexistent.

It is very obvious that the petitioner's marks "ELARZ LECHON" and "ELAR LECHON" bear an
indubitable likeness with respondent's "ELARS LECHON." Verily, there exists a high likelihood that the
consumers may conclude an association or relation between the products. Likewise, the uncanny
resemblance between the marks may even lead purchasers to believe that the petitioner and respondent
are the same entity.

Levi Strauss & Co. v. Sevilla

G.R. No. 219744, March 1, 2021
J. Perlas-Bernabe

The Rules of Procedure for Intellectual Property Rights Cases instructs that in determining whether
one trademark is confusingly similar to or is a colorable imitation of another, the court must consider the
general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade,
and giving the attention such purchasers usually give in buying that class of goods. Visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they are
encountered in the realities of the marketplace must be taken into account. Where there are both
similarities and differences in the marks, these must be weighed against one another to determine
which predominates.

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 The dominant feature of petitioner's "LEVI'S" marks is the word "levi's" composed of five (5) letters,
namely "L", "E", "V", "I", and "S" with an apostrophe separating the fourth and fifth letters. Notably, for
petitioner's stylized marks, the letter "E" is in lowercase format with the rest in uppercase format. On the
other hand, the dominant feature of respondents' LIVE’S stylized mark is the word "live's" also composed
of the same five (5) letters; and its only difference with petitioner's marks is that the positioning of the
letters "E" and "I" are interchanged. Furthermore, respondents' mark also depicts the letter "E" in lowercase
format with the rest in uppercase format. Applying the dominancy test, there is likelihood of confusion.

Likewise, from the color scheme, border used, fringe banners, to even some of the textual additives
surrounding the mark, there are definite similarities that give both trademarks the same look and feel. In
fact, the use of the number design "105" as juxtaposed to "LEVI'S"'s own "501" supports the view that
respondents' LIVE’S mark is a mere colorable imitation of petitioner's "LEVI'S" marks.

To be sure, case law defines the term colorable imitation as "such a close or ingenious imitation as
to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original
as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him
to purchase the one supposing it to be the other." It does not mean such similitude as amounts to identity;
nor does it require that all the details be literally copied. "Colorable imitation refers to such similarity in
form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or
tradename with that of the other mark or tradename in their over-all presentation or in their essential,
substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of
purchasing the genuine article."

Kensonic, Inc. v. Uni-Line Multi Resources, Inc.

G.R. Nos. 211820-21 and 211834-35, June 6, 2018
J. Bersamin

To be noted is that the controversy revolves around the SAKURA mark which is not a copyright.
The distinction is significant. A mark is any visible sign capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise, and includes a stamped or marked container of goods. In contrast,
a copyright is the right to literary property as recognized and sanctioned by positive law; it is an intangible,
incorporeal right granted by statute to the author or originator of certain literary or artistic productions,
whereby he or she is invested, for a specific period, with the sole and exclusive privilege of multiplying
copies of the same and publishing and selling them. Obviously, the SAKURA mark is not an artistic or
literary work but a sign used to distinguish the goods or services of one enterprise from those of another.

The prohibition under Section 123 of the Intellectual Property Code extends to goods that are related
to the registered goods, not to goods that the registrant may produce in the future. To allow the expansion
of coverage is to prevent future registrants of goods from securing a trademark on the basis of mere
possibilities and conjectures that may or may not occur at all. Surely, the right to a trademark should not
be made to depend on mere possibilities and conjectures.

Domingo v. Civil Service Commission

G.R. No. 236050, June 17, 2020
J. Lazaro-Javier

Under Section 176.1 of the Intellectual Property Code, the government holds no copyright to its
materials:

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. No prior approval or conditions
shall be required for the use for any purpose of statutes, rules and regulations, and speeches,
lectures, sermons, addresses, and dissertations, pronounced, read or rendered in courts of
justice, before administrative agencies, in deliberative assemblies and in meetings of public
character.

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 ANTI-MONEY LAUNDERING ACT

Republic of the Philippines v. Sandiganbayan

G.R. No. 232724-27, February 15, 2021
J. Leonen.

The Anti-Money Laundering Council is not merely a repository of reports and information on
covered and suspicious transactions. It was created precisely to investigate and institute charges against
those suspected to commit money laundering activities. The criminal prosecution of such offenses would
be unduly hampered if it were to be prohibited from disclosing such information. For the Anti-Money
Laundering Council to refuse disclosing the information required of it would be to go against its own
functions under the law.

Should a transaction be determined to be both a covered transaction and a suspicious transaction,

the covered institution shall be required to report the same as a suspicious transaction.

When reporting covered or suspicious transactions to the AMLC, covered institutions and their
officers and employees shall not be deemed to have violated Republic Act No. 1405, as amended, Republic
Act No. 6426, as amended, Republic Act No. 8791 and other similar laws, but are prohibited from
communicating, directly or indirectly, in any manner or by any means, to any person, the fact that a covered
or suspicious transaction report was made, the contents thereof, or any other information in relation
thereto.

When reporting covered or suspicious transactions to the AMLC, covered institutions and their
officers and employees are prohibited from communicating directly or indirectly, in any manner or by any
means, to any person or entity, the media, the fact that a covered or suspicious transaction report was made,
the contents thereof or any other information in relation thereto. Neither may such reporting be published
or aired in any manner or form by the mass media, electronic mail, or other similar devices. In case of
violation thereof, the concerned officer and employee of the covered institution and media shall be held
criminally liable.

YAMBAO vs. REPUBLIC

GR No. 171054, January 26, 2021
J. Gaerlan

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.

A freeze order is an extraordinary and interim relief issued by the CA to prevent the dissipation,
removal, or disposal of properties that are suspected to be the proceeds of, or related to, unlawful activities
as defined in Section 3 (i) of RA No. 9160, as amended. The primary objective of a freeze order is to
temporarily preserve monetary instruments or property that are in any way related to an unlawful activity
or money laundering, by preventing the owner from utilizing them during the duration of the freeze order.
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.

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. However, should it become
completely necessary for the Republic to further extend the duration of the freeze order, it should file the

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necessary motion before the expiration of the six-month period and explain the reason or reasons for its
failure to file an appropriate case and justify the period of extension sought.

CORPORATION LAW

Jose M. Roy III v. Chairperson Herbosa, SEC, and PLDT

G.R. No. 2027246, April 18, 2017
J. Caguioa

The Gamboa Decision already held, in no uncertain terms, that what the Constitution requires is
full and legal beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent
of the voting rights x x x must rest in the hands of Filipino nationals. And, precisely that is what SEC-MC
No. 8 provides, viz.: "For purposes of determining compliance [with the constitutional or statutory
ownership], the required percentage of Filipino ownership shall be applied to BOTH (a) the total number
of outstanding shares of stock entitled to vote in the election of directors; and (b) the total number of
outstanding shares of stock, whether or not entitled to vote.

THE MISSIONARY SISTERS OF OUR LADY OF FATIMA (PEACH SISTERS OF LAGUNA),

represented by Rev. Mother Ma. Concepcion R. Realon, et al. vs. ALZONA, et al., GR No. 224307,
August 6, 2018
J. Reyes, Jr.

The filing of articles of incorporation and the issuance of the certificate of incorporation are
essential for the existence of a de facto corporation. In fine, it is the act of registration with SEC through the
issuance of a certificate of incorporation that marks the beginning of an entity's corporate existence.

Petitioner filed its Articles of Incorporation and by-laws on August 28, 2001. However, the SEC
issued the corresponding Certificate of Incorporation only on August 31, 2001, two (2) days after
Purificacion executed a Deed of Donation on August 29, 2001. Clearly, at the time the donation was made,
the Petitioner cannot be considered a corporation de facto.

Rather, a review of the attendant circumstances reveals that it calls for the application of the
doctrine of corporation by estoppel as provided for under Section 21 of the Corporation Code, viz.:

Sec. 21. Corporation by estoppel. - All persons who assume to act as a

corporation knowing it to be without authority to do so shall be liable as
general partners for all debts, liabilities and damages incurred or arising as a
result thereof: Provided, however, That when any such ostensible corporation
is sued on any transaction entered by it as a corporation or on any tort
committed by it as such, it shall not be allowed to use as a defense its lack of
corporate personality.

One who assumes an obligation to an ostensible corporation as such, cannot

resist performance thereof on the ground that there was in fact no
corporation.

The doctrine of corporation by estoppel is founded on principles of equity and is designed to

prevent injustice and unfairness. It applies when a non-existent corporation enters into contracts or
dealings with third persons. In which case, the person who has contracted or otherwise dealt with the non-
existent corporation is estopped to deny the latter's legal existence in any action leading out of or involving
such contract or dealing. While the doctrine is generally applied to protect the sanctity of dealings with the
public, nothing prevents its application in the reverse, in fact the very wording of the law which sets forth
the doctrine of corporation by estoppel permits such interpretation. Such that a person who has assumed
an obligation in favor of a non-existent corporation, having transacted with the latter as if it was duly
incorporated, is prevented from denying the existence of the latter to avoid the enforcement of the contract.

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 Jurisprudence dictates that the doctrine of corporation by estoppel applies for as long as there is
no fraud and when the existence of the association is attacked for causes attendant at the time the contract
or dealing sought to be enforced was entered into, and not thereafter.

Linden Suites, Inc. vs. Meridien Far East Properties, Inc.

G.R. No. 211969, October 4, 2021
J. Hernando

The doctrine of separate juridical personality provides that a corporation has a legal personality
separate and distinct from those individuals acting for and in its behalf and, in general, from those
comprising it. Any obligation incurred by the corporation, acting through its directors, officers and
employees, is therefore its sole liability. This legal fiction may only be disregarded if it is used as a means
to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, or to confuse legitimate issues.

The well-settled doctrine is inapplicable in the case at bench. Petitioner wanted the officers to be
examined not for the purpose of passing unto them the liability of respondent as its judgment obligor. In
fact, it never averred in the motion any intention to make the officers liable for respondent's obligation due
to the latter's purported attempts to evade the execution of the final judgment. What is clear therein is that
the sole objective of the examination of the officers was to ascertain the properties and income of
respondent which can be subjected for execution in order to satisfy the final judgment and nothing else.The
doctrine of separate juridical personality does not apply.

SYMEZ SECURITY SERVICES, INC. v. MAGDALINO O. RIVERA, JR.

G.R. No. 202613, November 08, 2017
J. Caguioa

In Guillermo v. Uson, the Court resolved the twin doctrines of piercing the veil of corporate fiction
and personal liability of company officers in labor cases. According to the Court:

The common thread running among the aforementioned cases, however, is that the
veil of corporate fiction can be pierced, and responsible corporate directors and officers
or even a separate but related corporation, may be impleaded and held answerable
solidarily in a labor case, even after final judgment and on execution, so long as it is
established that such persons have deliberately used the corporate vehicle to unjustly
evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing
so. x x x

As the foregoing implies, there is no hard and fast rule on when corporate fiction may be
disregarded; instead, each case must be evaluated according to its peculiar circumstances. For the case at
bar, applying the above criteria, a finding of personal and solidary liability against a corporate officer
like Guillermo must be rooted on a satisfactory showing of fraud, bad faith or malice, or the presence
of any of the justifications for disregarding the corporate fiction.

To hold a director or officer personally liable for corporate obligations, two requisites must concur:
(1) it must be alleged in the complaint that the director or officer assented to patently unlawful acts of the
corporation or that the officer was guilty of gross negligence or bad faith; and (2) there must be proof that
the officer acted in bad faith.

Salido, Jr. v. Aramaywan Metals,

G.R. No. 233857, March 18, 2021
J. Caguioa

Treasury shares are shares of stock which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful
means.

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 While a corporation has the power to purchase or acquire its own shares, the corporation must
have unrestricted retained earnings in its books to cover the shares to be purchased or acquired. In addition,
in cases where the reason for reacquiring the shares is because of the unpaid subscription, the Corporation
Code is likewise explicit that the corporation must purchase the same during a delinquency sale.

The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the
payment of the shares of stocks of the withdrawing stockholders." Under the trust fund doctrine, "the capital
stock, property, and other assets of a corporation are regarded as equity in trust for the payment of
corporate creditors, who are preferred in the distribution of corporate assets." Thus, "[t]he creditors of a
corporation have the right to assume that the board of directors will not use the assets of the corporation
to purchase its own stock for as long as the corporation has outstanding debts and liabilities. There can be
no distribution of assets among the stockholders without first paying corporate debts."

Jorgenetics Swine Improvement Corporation v. Thin Agri-Products, Inc.,

G.R. No. 201044 & 222691, May 05, 2021
J. Hernando

The chairperson and president of a corporation may sign the verification and certification without
need of board resolution. Moreover, lack of authority of a corporate officer to undertake an action on behalf
of the corporation may be cured by ratification through the subsequent issuance of a board resolution.

Metroplex Berhard and Paxell Investment Limited v. Sinophil Corporation, et al

G.R. No. 208281, June 28, 2021
J. Hernando

Section 38 is clear. A corporation can only decrease its capital stock if the following are present:

1. Approval by a majority vote of the board of directors;

2. Written notice of the proposed diminution of the capital stock, and of the time and place
of a stockholders' meeting duly called for the purpose, addressed to each stockholder at
his place of residence;

3. 2/3 of the outstanding capital stock voting favorably at the said stockholders' meeting duly;

4. Certificate in duplicate, signed by majority of the directors and countersigned by the

chairman and secretary of the stockholders' meeting stating that legal requirements have
been complied with;

5. Prior approval of the SEC; and

6. Effects do not prejudice the rights of corporate creditors.

After a corporation faithfully complies with the requirements laid down in Section 38, the SEC has
nothing more to do other than approve the same. Pursuant to Section 38, the scope of the SEC's
determination of the legality of the decrease in authorized capital stock is confined only to the
determination of whether the corporation submitted the requisite authentic documents to support the
diminution. Simply, the SEC's function here is purely administrative in nature.

AGO Realty & Development Corporation v. Dr. Angelita Go,

G.R. No. 210906 / G.R. No. 211203, October 16, 2019
J. Reyes, Jr.

Grounded on equity, the derivative suit has proven to be an effective tool for the protection of
minority shareholders. Such actions have for their object the vindication of a corporate injury, even though
they are not brought by the corporation, but by its stockholders. That said, derivative suits remain an
exception. As a general rule, corporate litigation must be commenced by the corporation itself, with the
imprimatur of the board of directors, which, pursuant to the law, wields the power to sue. Therefore, since
the derivative suit is a remedy of last resort, it must be shown that the board, to the detriment of the

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corporation and without a valid business consideration, refuses to remedy a corporate wrong. A derivative
suit may only be instituted after such an omission. Simply put, derivative suits take a back seat to board-
sanctioned litigation whenever the corporation is willing and able to sue in its own name.

Jennifer M. Enano-bote, et al. vs. Jose Ch. Alvarez, Centennial Air, Inc.
and Subic Bay Metropolitan Authority, G.R. No. 223572. November 10, 2020,
J. Caguioa

Under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber
to its capital stock from the obligation of paying for his shares, in whole or in part, without a valuable
consideration, or fraudulently, to the prejudice of creditors. The creditor is allowed to maintain an action
upon any unpaid subscriptions and thereby steps into the shoes of the corporation for the satisfaction of its
debt. To make out a prima facie case in a suit against stockholders of an insolvent corporation to compel
them to contribute to the payment of its debts by making good unpaid balances upon their subscriptions,
it is only necessary to establish that the stockholders have not in good faith paid the par value of the stocks
of the corporation.

There are two instances when the creditor is allowed to maintain an action upon any unpaid
subscriptions based on the trust fund doctrine: (1) where the debtor corporation released the subscriber to
its capital stock from the obligation of paying for their shares, in whole or in part, without a valuable
consideration, or fraudulently, to the prejudice of creditors; and (2) where the debtor corporation is
insolvent or has been dissolved without providing for the payment of its creditors.

Agro Food Processing Corp. Vs. Vitarich Corporation

G.R. No. 217454. January 11, 2021
J. Caguioa

Under the doctrine of apparent authority, if a corporation knowingly permits one of its officers or
any other agent to act within the scope of an apparent authority, it holds the agent out to the public as
possessing the power to do those acts; thus the corporation will, as against anyone who has in good faith
dealt with it through such agent, be estopped from denying the agent's authority.

Commissioner of Internal Revenue v. Interpublic Group of Companies

G.R. No. 207039, August 14, 2019
J. Reyes, Jr.

Mere investment as a shareholder by a foreign corporation in a duly registered domestic

corporation shall not be deemed "doing business" in the Philippines. It is clear then that the IGC's act of
subscribing shares of stocks from McCann, a duly registered domestic corporation, maintaining
investments therein, and deriving dividend income therefrom, does not qualify as "doing business"
contemplated under R.A. No. 7042. Hence, the IGC is not required to secure a license before it can file a
claim for tax refund.

Llorente V. Star City Pty Limited

G.R. No. 212050, January 15, 2020
J. Caguioa

No foreign corporation transacting business in the Philippines without a license, or its successors
or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine
laws.

The Court, however, in a long line of cases under the regime of the Corporation Code has held that
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. The issue on whether a foreign corporation which
does not have license to engage in business in the Philippines can seek redress in Philippine courts depends
on whether it is doing business or it merely entered into an isolated transaction. A foreign corporation that

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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.

Tee Ling Kiat v. Ayala Corporation

G.R. No. 192530, March 7, 2018
J. Caguioa

Even if it could be assumed that the sale of shares of stock had indeed transpired, such transfer is
only valid as to the parties thereto, but is not binding on the corporation if the same is not recorded in the
books of the corporation. Section 63 of the Corporation Code of the Philippines provides that: "No transfer,
x x x shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation showing the names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred." Here, the records show that the purported
transaction between Tee Ling Kiat and Dewey Dee has never been recorded in VIP's corporate books. Thus,
the transfer, not having been recorded in the corporate books in accordance with law, is not valid or binding
as to the corporation or as to third persons.

Dr. Gil J. Rich v. Guillermo Paloma III

G.R. No. 210538, March 7, 2018
J. Reyes, Jr.

A corporation which has already been dissolved, be it voluntarily or involuntarily, retains no

juridical personality to conduct its business save for those directed towards corporate liquidation.

The Court finds that: (1) MTLC has already been dissolved by the Securities and Exchange
Commission as early as September 2003; (2) Estanislao and MTLC entered into the real estate mortgage
agreement only on January 24, 2005; and (3) MTLC, through respondent Servacio, redeemed the property
on December 15, 2005, for which a Deed of Redemption was issued by respondent Paloma III on March 15,
2006.

From the foregoing, it is clear that, by the time MTLC executed the real estate mortgage agreement,
its juridical personality has already ceased to exist. The agreement is void as MTLC could not have been a
corporate party to the same. To be sure, a real estate mortgage is not part of the liquidation powers that
could have been extended to MTLC. It could not have been for the purposes of "prosecuting and defending
suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and
to distribute its assets." It is, in fact, a new business in which MTLC no longer has any business pursuing.
Consequently, and contrary to the CA Decision, any redemption exercised by MTLC pursuant to this void
real estate mortgage is likewise void, and could not be given any effect.

INSURANCE LAW

UCPB General, Insurance Co., Inc. v. Asgard Corrugated Box Manufacturing Corporation
G.R. No. 244407, January 26, 2021
J. Carandang

Section 13 of the Insurance Code defines insurable interest as "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." Parenthetically, under Section 14 of the same Code, an 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.

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 Therefore, an 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. It is sufficient that the insured is so situated with reference
to the property that he would be liable to loss should it be injured or destroyed by the peril against which
it is insured. Anyone has an insurable interest in property who derives a benefit from its existence or would
suffer loss from its destruction.

Insurable interest in property is not limited to property ownership in the subject matter of the
insurance. Where the interest of the insured in, or his relation to, the property is such that he will be
benefitted by its continued existence, or will suffer a direct pecuniary loss by its destruction, his contract
of insurance will be upheld, although he has no legal or equitable title. A husband would thus have an
insurable interest in the paraphernal property of his wife since the fruits thereof belong the conjugal
partnership and may be used for the support of the family.

The insurer is not liable for a loss caused by the intentional act of the insured or through his
connivance. Such damage/loss is not an insurable risk because the occurrence of the loss was subject to the
control of one of the parties and not merely caused by the negligence of the insured. However, the insurer
is not relieved from liability by the mere fact that the loss was caused by the negligence of the insured, or
of his agents or others. Accordingly, it is no defense to an action on the policy that the negligence of the
insured caused or contributed to the injury. However, when the insured's negligence is so gross that it is
tantamount to misconduct, or willful or wrongful act, the insurer is not liable.

Industrial Personnel and Management Services, Inc. v. Country Bankers Insurance Corporation
G.R. No. 194126, October 17, 2018
J. Caguioa

The subject agreement of the parties indubitably contemplates a surety agreement, which is
governed mainly by the Insurance Code, considering that a contract of suretyship shall be deemed an
insurance contract within the contemplation of the Insurance Code if made by a surety which is doing an
insurance business.

Section 92 of the Insurance Code must be taken into consideration. The said provision states that
all defects in the proof of loss, which the insured might remedy, are waived as grounds for objection when
the insurer omits to specify to him without unnecessary delay. It is the duty of the insurer to indicate the
defects on the proofs of loss given, so that the deficiencies may be supplied by the insured. When the insurer
recognizes his liability to pay the claim, there is waiver by the insurer of any defect in the proof of loss.

The parties made a stipulation to the effect that mere demand letters, affidavits, and statements of
accounts are enough proof of actual damages — that more direct and concrete proofs of expenditures by
the petitioner such as official receipts have been dispensed with in order to prove actual losses. The insured
must be allowed to recover upon submission of the demand letters, affidavits and statement of effects, in
lieu of official receipts.

Philam Insurance v. Parc Chateau Condominium Unit Owners Association

G.R. No. 20116, March 4, 2019
J. Leonen

The general rule is that no insurance contract issued by an insurance company is valid and binding
unless and until the premium has been paid. There are several exceptions to this rule. One exception is if
the parties agreed to the payment of premium in installment and partial payment has been made at the
time of loss. Another exception is when the insurer granted a credit-extension to the insured.

The insurer provided in the policy that premium shall be paid annually, and if any of the scheduled
payments are not received in full on or before said dates, the insurance shall be deemed to have ceased at
4 p.m. of such date, and the policy shall automatically become void and ineffective. The insurer insisted
this is a credit-term extension. The respondent claimed that the insurer was never exposed to the risk
because the policy was never perfected. The Court agreed that since no premium was paid, there was no
perfected insurance policy.

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 Multi-Ware Manufacturing Corporation v. Cibeles Corpoation
G.R. No. 230528, February 1, 2021
J. Hernando

Petitioner obtained fire insurance policies from Cibeles Insurance simultaneously with Western
Guaranty and Prudential Guarantee covering the same matter and the same risk. The Court held that 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. When a property owner obtains insurance policies from
two or more insurers in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance. The public as well as the
insurer is interested in preventing a situation in which a fire would be profitable to the insured.

Insular Life Assurance Co., Ltd. v. Heirs of Alvarez

G.R. Nos. 207526 and 210156, October 3, 2018
J. Leonen

Section 27. A concealment whether intentional or unintentional entitles the injured party to rescind a
contract of insurance.

The statutory text is unequivocal. Insular Life correctly notes that proof of fraudulent intent is
unnecessary for the rescission of an insurance contract on account of concealment. The Insurance Code
dispenses with proof of fraudulent intent in cases of rescission due to concealment, but not so in cases of
rescission due to false representations.

This is neither because intent to defraud is intrinsically irrelevant in concealment, nor because
concealment has nothing to do with fraud. To the contrary, it is because in insurance contracts, concealing
material facts is inherently fraudulent: "if a material fact is actually known to the [insured], its concealment
must of itself necessarily be a fraud. When one knows a material fact and conceals it, "it is difficult to see
how the inference of a fraudulent intent or intentional concealment can be avoided."

Vicente Henson, Jr v. UCPB General Insurance Co.

G.R. No. 223134, August 14, 2019
J. Perlas-Bernabe

The Court must heretofore abandon the ruling in Vector Shipping Corporation v. American Home
Assurance Company (July 3, 2013) that an insurer may file an action against the tortfeasor within ten (10)
years from the time the insurer indemnifies the insured. Following the principles of subrogation, the
insurer only steps into the shoes of the insured and therefore, for purposes of prescription, inherits only
the remaining period within which the insured may file an action against the wrongdoer. To be sure, the
prescriptive period of the action that the insured may file against the wrongdoer begins at the time that the
tort was committed and the loss/injury occurred against the insured. The indemnification of the insured by
the insurer only allows it to be subrogated to the former's rights, and does not create a new reckoning point
for the cause of action that the insured originally has against the wrongdoer. Be that as it may, it should,
however, be clarified that this Court's abandonment of the Vector doctrine should be prospective in
application.

TRANSPORTATION LAW

Aleson Shipping Lines v. CGU International Ins. PLC, et al.

G.R. NO. 217311, July 15, 2020
J. Leonen

The applicable law in resolving complaints for damages would depend on the complainant's cause
of action. If the action is based on contract of carriage, the Civil Code provisions on common carrier are

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applicable. On the other hand, if the cause of action is based on tort, the provisions of the Code of
Commerce on vessel collision would govern.

KLM ROYAL DUTCH AIRLINES v. DR. JOSE M. TIONGCO

G.R. No. 212136, October 4, 2021
J. Hernando

There is no dispute that KLM and Dr. Tiongco entered into a contract of carriage. Dr. Tiongco
purchased tickets from the airline for his trip to Almaty, Kazakhstan. KLM, however, breached its contract
with Dr. Tiongco when it failed to deliver his checked-in suitcase at the designated place and time. The
suitcase contained his clothing for the conference where he was a guest speaker, a copy of his speech, and
his resource materials. Worse, Dr. Tiongco's suitcase was never returned to him even after he arrived in
Manila from Almaty. Thus, KLM's liability for the lost suitcase was sufficiently established as it failed to
overcome the presumption of negligence.

Considering that a contract of carriage is vested with public interest, a common carrier is presumed
to have been at fault or to have acted negligently in case of lost or damaged goods unless they prove that
they observed extraordinary diligence. Hence, in an action based on a breach of contract of carriage, the
aggrieved party does not need to prove that the common carrier was at fault or was negligent. He or she is
only required to prove the existence of the contract and its non-performance by the carrier.

Unitrans International Forwarders, Inc. v. Insurance Company of North America

G.R. No. 203865, March 13, 2019
J. Caguioa

A common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported. When the goods shipped are either lost or arrived in
damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and
there need not be an express finding of negligence to hold it liable. To overcome the presumption of
negligence, the common carrier must establish by adequate proof that it exercised extraordinary diligence
over the goods. It must do more than merely show that some other party could be responsible for the
damage.

In the instant case, considering that it is undisputed that the subject goods were severely damaged,
the presumption of negligence on the part of the common carrier, i.e., Unitrans, arose. Hence, it had to
discharge the burden, by way of adequate proof, that it exercised extraordinary diligence over the goods;
it is not enough to show that some other party might have been responsible for the damage. Unitrans failed
to discharge this burden. Hence, it cannot escape liability.

Federal Express Corporation v. Luwalhati Antonino

G.R. No. 199455, June 27, 2018
J. Leonen

The duty of common carriers to observe extraordinary diligence in shipping goods does not
terminate until delivery to the consignee or to the specific person authorized to receive the shipped goods.
Failure to deliver to the person authorized to receive the goods is tantamount to loss of the goods, thereby
engendering the common carrier's liability for loss. Ambiguities in contracts of carriage, which are contracts
of adhesion, must be interpreted against the common carrier that prepared these contracts.

C.V. Gaspar Salvage & Lighterage v. LGU Insurance Company Ltd.

G.R. Nos. 206892 and 207035, February 3, 2021
J. Inting

The Court held the customs broker which was engaged by the consignee and the owner of the
barge which were supposed to deliver the goods from the port to the warehouse solidarily liable for
damages as common carriers.

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 Article 1732 does not make any distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does the carrying only an ancillary activity; between a
person or enterprise offering transportation service on a regular or scheduled basis, and one offering the
service on an occasional, episodic or unscheduled basis; and a carrier offering its services to the general
public, and one who offers services or solicits business only from a narrow segment of the general
population.

As a common carrier, it is bound to observe extraordinary diligence in the vigilance over the goods
transported by it. It bears to be reminded that common carriers are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed, or deteriorated. To overcome this presumption,
common carriers must prove that it exercised extraordinary diligence in the transportation of the goods.

FINANCIAL REHABILITATION AND INSOLVENCY ACT

BANCO DE ORO UNIBANK, INC. v. INTERNATIONAL COPRA EXPERT CORPORATION, et al

GR Nos. 218485-86 and 218493-97, April 28, 2021
J. Leonen

A rehabilitation plan may be approved even over the opposition of the creditors holding a majority
of the corporation's total liabilities if there is a showing that rehabilitation is feasible and the opposition of
the creditors is manifestly unreasonable. Also known as the "cram-down" clause, this provision, which is
currently incorporated in the FRIA, is necessary to curb the majority creditors' natural tendency to dictate
their own terms and conditions to the rehabilitation, absent due regard to the greater long-term benefit of
all stakeholders. Otherwise stated, it forces the creditors to accept the terms and conditions of the
rehabilitation plan, preferring long-term viability over immediate but incomplete recovery. However, the
exercise of the cram-down power is not absolute. The rehabilitation court must ensure that all
circumstances provided under the second paragraph of Section 64 are present. Failure to comply with these
conditions violates the creditors' right to due process.

Sec. 64, par. 2 reads:

Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm the
Rehabilitation Plan if all of the following circumstances are present:

(a) The Rehabilitation Plan complies with the requirements specified in this Act;
(b) The rehabilitation receiver recommends the confirmation of the Rehabilitation
Plan;
(c) The shareholders, owners or partners of the juridical debtor lose at least their
controlling interest as a result of the Rehabilitation Plan; and
(d) The Rehabilitation Plan would likely provide the objecting class of creditors
with compensation which has a net present value greater than that which they
would have received if the debtor were under liquidation

KAIZEN BUILDERS, INC. v. CA, et al

G.R. No. 226894, September 03, 2020
J. Lopez

The Financial Rehabilitation and Insolvency Act of 2010 statutorily defined "rehabilitation" as 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. A corporate rehabilitation case is a special proceeding in rem where the basic issues concern the
viability and desirability of continuing the business operations of the distressed corporation. The purpose
is to enable the company to gain a new lease on life and allow its creditors to be paid their claims out of its
earnings. The rationale is to resuscitate businesses in financial distress because assets are often more
valuable when so maintained than they would be when liquidated. To achieve these objectives, Sections 16
and 17 of RA No. 10142 authorizes the rehabilitation court to issue a Commencement Order that includes

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a Stay Order, which have the effects of suspending all actions for the enforcement of claims against the
debtor and consolidating the resolution of all legal proceedings by and against it. The indiscriminate
suspension of actions for claims is intended to expedite the rehabilitation of the distressed corporation. It
enables 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. Corollarily, 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. The stay order embraces all phases of
the suit, except in those instances expressly mentioned in Section 18 of RA No. 10142, viz.:

SECTION 18. Exceptions to the Stay or Suspension Order. — The Stay or Suspension Order
shall not apply:

(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 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.

Trade and Investment Development Corporation v. Philippine Veterans Bank

G.R. No. 233850, July 1, 2019
J. Caguioa

Section 18(c) of the FRIA explicitly states that a stay order shall not apply "to the enforcement of
claims against sureties and other persons solidarily liable with the debtor, and third party or
accommodation mortgagors as well as issuers of letters of credit, x x x."

When a stay order is issued, the rehabilitation court is only empowered to suspend claims against
the debtor, its guarantors, and sureties who are not solidarity liable with the debtor. Hence, the making of
claims against sureties and other persons solidarily liable with the debtor is not barred by a stay order.

- END -

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