COMMERCIAL LAW

2010 POINTERS FOR REVIEW

TABLE OF CONTENTS
SUBJECT MATTER PAGE
INSURANCE 2
CORPORATION LAW 17
SECURITIES REGULATIONS CODE 36
P. D. 902-A 38
NEGOTIABLE INSTRUMENTS 3
TRANSPORTATION !6
SPECIAL LAWS
T"#$%&#"' #($ T"#$%(#&%) 7!
T"*)+ R%,%-.+) L#/ 7!
S%,"%,0 12 B#(' D%.1)-+) 76
1
INSURANCE
3. 41/ &#0 # ,1(+"#,+ 12 -()*"#(,% 5% .%"2%,+%$6
A. A contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents. So long as an application for insurance has not
been either accepted or rejected, it is merely an offer or proposal to make a contract.
There can be no contract of insurance unless the minds of the parties have met in
agreement. Hence, it is only when the insurer accepts the application and communicates
the same to the applicant that the contract of insurance is perfected.
1
f the offer and
acceptance are made by correspondence, the acceptance shall not be binding until it has
been made known to the one making the offer.
!
Aside from meeting of the minds of the
parties, premium on the policy must be paid before the contract can be valid and binding.
"
3. P%"%7 #..8-%$ 21" 8-2% -()*"#(,% ,19%"#:% /-+; +;% BF L-(%&#( I()*"#(,%
C1".1"#+-1( #($ -&&%$-#+%80 .#-$ .#"+ 12 +;% ."%&-*&. T;% #..8-,#+-1( /#)
21"/#"$%$ +1 +;% 122-,% 12 BF L-(%&#( #+ G*&#,#< 3*%71( 21" +"#()&-++#8 +1 -+)
;%#$ 122-,% -( M#(-8#. P%"%7 $-%$ 5%21"% ;-) #..8-,#+-1( /#) 5"1*:;+ +1 +;% M#(-8#
O22-,% 12 BF L-(%&#(. W-+;1*+ '(1/-(: 12 ;-) $%#+;< BF L-(%&#( #.."19%$ +;%
#..8-,#+-1( #($ -))*%$ +;% ,1""%).1($-(: .18-,0. T;% 5%(%2-,-#"0 2-8%$ # ,8#-& /-+;
+;% -()*"%" /;-,; "%2*)%$ +1 .#0 1( +;% :"1*($ +;#+ +;% ,1(+"#,+ /#) (1+ .%"2%,+%$.
W#) +;% -()*"#(,% ,1(+"#,+ .%"2%,+%$#

A. The contract was not perfected. t is only when the insurer accepts the
application and communicates the same to the applicant and the latter pays the premium
while he is in good health that the contract of insurance is perfected. The insurer$s
acceptance is manifested when it issues a corresponding policy to the applicant. %ere&
died before his application was brought to the head office of '( )ineman in *anila.
There was absolutely no way the acceptance of the application could have been
communicated to the applicant inasmuch as the applicant was already dead at that time.
There can be no contract of insurance unless the minds of the parties have met in
agreement.

3. 41/ );1*8$ -()*"#(,% ,1(+"#,+) 5% -(+%"."%+%$6

A. n case there is no doubt as to the terms of an insurance contract, the provisions
must be construed in their plain, ordinary and popular sense. However, when the terms of
the policy are ambiguous, uncertain or doubtful, they should be interpreted strictly
against the insurer and liberally in favor of the insured, because the insured has no voice
1
%ere& vs. +ourt of Appeals, ,. -. .o. 11!"!/, 0anuary !1, !222.
2
3nri4ue& vs. Sun )ife nsurance of +anada, 51 %hil. !6/.
3
Section 77.
4
%ere& vs. +ourt of Appeals, ,. -. .o. 11!"!/, 0anuary !1, !222.
!
in the selection of the words used, and the language of the contract is selected by legal
advisers of the insurance company.
8
n such case, ambiguous provisions are construed
strictissimi juris or of strictest terms
6
against the insurer.
An insurance contract, being a contract of adhesion, should be interpreted as to
carry out the purpose for which the parties entered into the contract which is to insure
against risks of loss or damage to the goods. )imitations of liability should be regarded
with e9treme jealousy and must be construed in such a way as to preclude the insurer
from noncompliance with its obligations.
7
3. A"% ,1(+"#,+) 12 -()*"#(,% %(+%"%$ -(+1 50 +;% -()*"%" #($ -()*"%$ 1(
%=*#8 211+-(:6
A. To characteri&e the insurer and the insured as contracting parties on e4ual
footing is inaccurate at best. nsurance contracts are wholly prepared by the insurer with
vast amounts of e9perience in the industry purposefully used to its advantage. *ore often
than not, insurance contracts are contracts of adhesion containing technical terms and
conditions of the industry confusing if at all understandable to lay persons, that are
imposed on those who wish to avail of insurance. As such, insurance contracts are
imbued with public interest that must be considered whenever the rights and obligations
of the insurer and the insured are to be delineated. Hence, in order to protect the interest
of insurance applicants, insurance companies must be obligated to act with haste upon
insurance applications, to either deny or approve the same, or otherwise be bound to
honor the application as a valid, binding and effective insurance contract.
1
3. W;0 #"% -()*"#(,% ,1(+"#,+) ,#88%$ ,1(+"#,+) 50 #$;%)-1( 1" #$;%"%(,%6
A. nsurance contracts are prepared only by the insurer and imposed upon parties
dealing with it which may not be changed, the latter$s participation in the agreement
being reduced to the alternative to :take it or leave it;, in contrast to those entered into by
parties bargaining on an e4ual footing and, therefore, any ambiguity thereon must be
resolved against the insurer, the party preparing the contract.
/

3. P;-8#&8-2% #($ E+%"(#8 G#"$%() %(+%"%$ -(+1 # G"1*. L-2% P18-,0 *($%"
/;-,; +;% ,8-%(+) 12 E+%"(#8 /;1 .*",;#)%$ 5*"-#8 81+) 2"1& -+ 1( -()+#88&%(+ /1*8$
5% -()*"%$ 50 P;-8#&8-2%. E+%"(#8 /#) "%=*-"%$ *($%" +;% .18-,0 +1 )*5&-+ # 8-)+ 12
8
+alanoc vs. +ourt of Appeals, 8! <. ,. 1/1= >ua +hee ,an vs. )aw ?nion -ock ns. +o., )td., 8! <. ,.
1/1!.
6
*c +ullough @ +o. vs. Taylor, !8 %hil. 11"= Asked, .o. A B!C, !22" 'ar 39ams.
7
D'% %ool of Accredited nsurance +ompanies vs. -adio *indanao .etwork, nc., 512 S+-A "15 "18,
0anuary !7, !226.
8
3ternal ,ardens *emorial %ark +orporation vs. The %hil. American )ife nsurance +o., ,. -. .o.
166!58, April /, !221.
/
B>ua +hee ,an vs. )aw ?nion -ock ns. +o., )td., 8! <. ,. 1/1!C.
"
(%/ 81+ .*",;#)%") < +1:%+;%" /-+; # ,1.0 12 +;% #..8-,#+-1( 12 %#,; .*",;#)%") #($
+;% #&1*(+) 12 +;% "%).%,+-9% *(.#-$ 5#8#(,%) 12 #88 -()*"%$ 81+ .*",;#)%"). E+%"(#8
)%(+ # 8%++%" $#+%$ D%,%&5%" 29< 1982< ,1(+#-(-(: # 8-)+ 12 -()*"#58% 5#8#(,%) 12 -+)
81+ 5*0%"). O( 12 +;1)% -(,8*$%$ -( +;% 8-)+ /#) J1;( C;*#(:. P;-8#&8-2% $-$ (1+
"%.80 +1 +;% )#-$ 8%++%". O( A*:*)+ 2< 198 C;*#(: $-%$. E+%"(#8 $%&#($%$ .#0&%(+
2"1& P;-8#&8-2% 12 +;% -()*"#(,% ,8#-& 21" C;*#(:>) $%#+;. P;-8#&8-2% $%(-%$ +;%
,8#-& 1( +;% :"1*($ +;#+ (1 #..8-,#+-1( 21" G"1*. I()*"#(,% /#) )*5&-++%$ +1
P;-8#&8-2% ."-1" +1 C;*#(:>) $%#+;. T;% ,1(+#,+ 5%+/%%( P;-8#&8-2% #($ E+%"(#8
)+#+%$ +;#+ +;% ?-()*"#(,% 12 #(0 %8-:-58% L1+ P*",;#)%" );#88 5% %22%,+-9% 1( +;% $#+%
;% ,1(+"#,+) # 81#( /-+; +;% A))*"%$@ AE+%"(#8B. I+ /#) 2*"+;%" )+#+%$ +;#+ ?+;%"%
);#88 5% (1 -()*"#(,% -2 +;% #..8-,#+-1( 12 +;% L1+ P*",;#)%" -) (1+ #.."19%$ 50 +;%
C1&.#(0 AP;-8#&8-2%B. W#) +;%"% # 9#8-$ ,1(+"#,+ 12 -()*"#(,% ,19%"-(: C;*#(:>)
8-2% ,1()-$%"-(: +;% ,1(28-,+-(: ."19-)-1() 12 +;% .18-,0#
A. The seemingly conflicting provisions must be harmoni&ed to mean that upon a
party$s purchase of a memorial lot on installment basis from 3ternal, an insurance
contract covering the lot purchaser is created and the same is effective, valid and binding
until terminated by %hilamlife by disapproving the insurance application. nsurance is a
contract by adhesion which must be construed liberally in favor of the insured and strictly
against the insurer.
10
3. A"% 4MO) 1" 4%#8+; M#-(+%(#(,% O":#(-7#+-1() /;1)% ."-&#"0
15C%,+-1( -) +1 ."19-$% &%$-,#8 )%"9-,%) #) (%%$%$< %(:#:%$ -( -()*"#(,% 5*)-(%))6
A. The test to determine whether a company is engaged in the insurance business
or not is whether the assumption of risk and indemnification of lass are the principal
object and purpose of the organi&ation or whether they are merely incidental to its
business. f these are the principal objectives, the business is that of insurance. 'ut if they
are merely incidental and service is the principal purpose then the business is not
insurance. H*< whose main object is to provide the members of a group with health
services, is not engaged in the insurance business.
11

3. 41/ );1*8$ #&5-:*-+-%) -( # 4%#8+; C#"% A:"%%&%(+ 5% -(+%"."%+%$6
A. Health +are Agreement is in the nature of a nonElife insurance which is
primarily a contract of indemnity
1!
and hence, it is a contract of adhesion the terms of
which must be interpreted and enforced stringently against the insurer which prepared the
contract.
1"
3. W;1 &#0 5% # 5%(%2-,-#"0 -( 8-2% -()*"#(,%6
A. Any person may be designated as beneficiary in a life insurance contract even
10
3ternal ,ardens *emorial %ark +orp. vs. %hilamlife, ,. -. 166!58, April /, !221.
11
%hlippine Health +are %roviders, nc. vs. +ommissioner of nternal -evenue, 622 S+-A 51", Sept. 1/,
!22/.
12
%hilamcare Health Systems, nc. vs. +A, "7/ S+-A "86 B!22!C.
13
'lue +ross Health +are, nc. vs. <livares, 855 S+-A 812, 816, (ebruary 1!, !221.
5
though he is a stranger and has no insurable interest in the life insured,
15
e9cept those
who are forbidden by law to receive donations from the insured
18
such asF
BaC Those made between persons who are guilty of adultery or concubinage at the
time of the donation=
BbC Those made between persons found guilty of the same criminal offense, in
consideration thereof=
BcC Those made to a public officer or his wife, descendants and ascendants, by
reason of his office.
16

n essence, a life insurance policy is no different from a civil donation insofar as
designation of beneficiary is concerned. 'oth are founded upon the same considerationF
liberality. A beneficiary is like a donee, because from the premiums of the policy which
the insured pays out of liberality, the beneficiary will receive the proceeds of the said
insurance. As a conse4uence, the proscription in Article 7"/ of the +ivil +ode should
e4ually operate in life insurance contracts. Any person who cannot receive a donation
cannot be named as beneficiary in the life insurance policy of the person who cannot
make the donation.
17
.o legal proscription e9ists in naming as beneficiaries the children of illicit
relationships of the insured, and thus they may be named as beneficiaries.
11
3. M*)+ +;% 5%(%2-,-#"0 ;#9% -()*"#58% -(+%"%)+ -( 8-2% -()*"%$6
A. A person procuring insurance on his own life may name anyone he chooses as
beneficiary thereof, even though he is stranger and has no insurable interest in the life
insured.
1/
However, a person who cannot receive donation from the insured under Article
7"/ of the +ivil +ode cannot be designated as beneficiary.
!2
3. M#0 +;% /-2% /;1 #5#($1(%$ ;%" ;*)5#($ 5% # 5%(%2-,-#"0 12 S1,-#8
S%,*"-+0 B%(%2-+)6
14
5 +ouch !d, 825= Asked, 1/56 BAug.C and 1/6/ 'ar 39ams.= .o. A, 1/17 'ar 39ams.
15
Art. !21!, +ivil +ode= Asked, 1/88 @ 1/6! 'ar 39ams.= .o. 5, 1/11 'ar 39ams., .o. 1", 1/18 'ar 39ams.= .o. G,
1//1 'ar 39ams.
16
Article 7"/ +ivil +ode.
17
nsular )ife Assurance +o., )td., vs. 3brado, 12 S+-A 111= Asked, .o. 5, 1/11 'ar 39ams.= .o. 1", 1/18 'ar
39ams.= .o. G, 1//1 'ar 39ams.
18
Heirs of )oreto +. *aramag vs. *aramag, 811 S+-A 775, 0une 8, !22/.
19
5 +ouch !d. 825= n re Saymanaki$s 3state, 167 A. 5!2, 12/ %a. Super, 888= Asked 1/5/ 'ar 39ams.= .o.
A, 1/17 'ar 39ams.
20
See discussions under Section 11.
8
A. n the case of Social Security System, et al., vs. ,loria de los Santos
!1
the
Supreme +ourt ruled that a wife who left her husband and lived with another man is no
longer entitled to receive Social Security benefits upon the death of the husband because
she was no longer dependent upon him for her support.
3. L%)) +;#( # 0%#" #2+%" +;% &#""-#:% 12 A(+1(-1 $% 81) S#(+1) #($ G81"-# $%
81) S#(+1)< +;% 8#++%" 8%2+ A(+1(-1 #($ ,1(+"#,+%$ #(1+;%" &#""-#:% /-+; D1&-(:1
T#8%() -( 196!. I( 1969< G81"-# /%(+ 5#,' +1 A(+1(-1 #($ 8-9%$ /-+; ;-& *(+-8 1983
/;%( );% #:#-( 8%2+ A(+1(-1 #($ /%(+ +1 +;% U(-+%$ S+#+%) /;%"% );% 15+#-(%$ #
$-91",% 2"1& A(+1(-1. I( +;% &%#(+-&%< A(+1(-1 &#""-%$ C-"-8# $% 81) S#(+1) #($
#&%($%$ ;-) SSS "%,1"$) 50 ,;#(:-(: ;-) 5%(%2-,-#"0 2"1& G81"-# +1 C-"-8#. A(+1(-1
$-%$ #($ G81"-# ,8#-&%$ +;% SSS -()*"#(,% 5%(%2-+). T;% C1*"+ 12 A..%#8) "*8%$ +;#+
+;% &#""-#:% 5%+/%%( A(+1(-1 #($ G81"-# )+-88 )*5)-)+%$ #($ +;% )*5)%=*%(+
&#""-#:%) ,1(+"#,+%$ 50 +;%& /%"% 91-$. T;*)< +;% C1*"+ 12 A..%#8) "*8%$ +;#+
G81"-# /#) )+-88 +;% 8%:#8 /-2% 12 A(+1(-1 #($ ;%(,% %(+-+8%$ +1 +;% SSS 5%(%2-+).
S;1*8$ G81"-# 5% %(+-+8%$ +1 +;% SSS 5%(%2-+)6
A. The divorce obtained by ,loria against Antonio was not binding in this
jurisdiction. ?nder %hilippine law, only aliens may obtain divorces abroad provided they
are valid according to their national law. The divorce was obtained by ,loria while she
was still a (ilipino citi&en, hence it did not sever her marriage with Antonio. However,
although ,loria was the legal spouse, she is still dis4ualified to be his primary
beneficiary under the SSS law. A wife who left her family until her husband died and
lived with other men was not dependent upon her husband for support, financial or
otherwise, during the same period. ,loria left the conjugal abode and lived with two
different men. These facts remove her from 4ualifying as a primary beneficiary of her
deceased husband.
!!
3. W;#+ -) +;% &%#(-(: 12 -(,1(+%)+#58% ,8#*)%#
A. An incontestable clause in a life insurance policy is an agreement by which the
insurance company limits the period of time within which it will interpose objections to
the validity of the policy or set up any defense.
23
After a policy of life insurance made payable on the death of the insured shall
have been in force during the lifetime of the insured for a period of two years from the
date of its issue or its last reinstatement, the insurer cannot prove that the policy is void
ab initio or is rescindable by reason of the fraudulent concealment or misrepresentations
of the insured or his agent.
2
3. W;#+ #"% +;% "%=*-)-+%) 12 -(,1(+%)+#5-8-+0#
21
,. -. .o. 1657/2, August !/, !221.
22
Social Security System, et al., vs. ,loria de los Santos, August !/, !221, Third Division, Supreme +ourt.
23
58 +. 0. S. 781.
24
Section 51, par. !.
6
A. To become incontestable, a policy must have the following re4uisitesF
1. t must be a life insurance policy=
!. t must be payable on the death of the insured= and
". t must have been in force during the lifetime of the insured for a period of two
years.
2!
3. W;#+ #"% +;% %22%,+) 12 -(,1(+%)+#5-8-+0#
A. Hhenever all the re4uisites of incontestability are present, the insurer can no
longer escape liability under the policy nor be allowed to prove that the policy is void ab
initio or rescindable by reason of concealment or misrepresentation of the insured or his
agent. n other words, the insurer is precluded from contesting the policy on any
ground.
26
3. W;%( &#0 # +;-"$ .%")1( )*% +;% -()*"%"#
A. f the insurance contract was intended to benefit third persons, the latter may
directly claim from the insurer. Thus,
f the insurance contract should contain some stipulation in favor of a third
person, the latter although not a party to the contract may enforce the stipulation in his
favor before it is revoked by the contracting parties,
27
or where the insurance contract
provides for indemnity against liability to third persons, then third persons to whom the
insured is liable, can sue the insurer.
28
3. T;% -()*"%" -))*%$ # ,1&&1( ,#""-%" #,,-$%(+ -()*"#(,% .18-,0 +1 M#(-8#
D%881/ T#E-,#5 /;%"%-( -+ /#) )+-.*8#+%$ +;#+ +;% -()*"%" /-88 -($%&(-20 #(0
#*+;1"-7%$ $"-9%" /;1 /#) $"-9-(: +;% &1+1" 9%;-,8% -()*"%$. A +#E-,#5 12 +;%
-()*"%$< $"-9%( 50 C1=*-# &%+ # 9%;-,*8#" #,,-$%(+ /;-,; ,#*)%$ +;% $%#+; 12
C1=*-#. M#0 +;% ;%-") 12 C1=*-# ;18$ +;% -()*"%" 8-#58%#
A. The policy under consideration is typical of contracts pour autrui and
therefore, the enforcement thereof may be demanded by a third party for whose benefit it
was made, although not a party to the contract.
29

3. A:*-8#" -()*"%$ ;-) C%%.(%0) #:#-()+ #,,-$%(+) #($ +;-"$-.#"+0 8-#5-8-+0. I(
+;% .18-,0< +;% -()*"%" #:"%%$ +1 -($%&(-20 +;% -()*"%$ #:#-()+ ?#88 )*&) /;-,; +;%
-()*"%$ );#88 5%,1&% 8%:#880 8-#58% +1 .#0 -( "%).%,+ 12 $%#+; 12 1" 51$-80 -(C*"0 +1
25
Section 51, par. !.
!6
58 +. 0. S. 712= Asked, 'ar 39ams. F 1/57, 1/8" @ 1/66= Asked, .o. G, 1//1 'ar
39ams.
27
+o4uia vs. (ieldmen$s ns.+o., !6 S+-A 17/, 111.
!1
,uingon vs. del *onte, et al., !2 S+-A 125".
!/
+o4uia vs. (ieldmen$s ns. +o., nc., !6 S+-A 17/.
7
#(0 .%")1(@. O(% 12 +;% C%%.(%0) -()*"%$ 5*&.%$ G*-(:1( /;1 ;#$ C*)+ #8-:;+%$
2"1& #(1+;%" C%%.(%0. G*-(:1( $-%$. C#( +;% -()*"%" 5% &#$% $-"%,+80 8-#58% 21" +;%
$%#+; 12 G*-(:1( /;1 /#) (1+ # .#"+0 +1 +;% -()*"#(,% ,1(+"#,+6
A. The insurance taken was one for indemnity for liability to third persons and,
therefore, such third person is entitled to sue the insurer.
30
3. W;#+ #"% +;% )+#+*+1"0 %E,%.+-1() +1 +;% "*8% +;#+ +;% -()*"%" -) %(+-+8%$ +1
+;% .#0&%(+ 12 ."%&-*& #) )11( #) +;% +;-(: -()*"%$ -) %E.1)%$ +1 +;% .%"-8 -()*"%$
#:#-()+6
A. .otwithstanding any agreement to the contrary, no policy or contract of
insurance is valid and binding unless and until the premium thereof has been paid.
"1

The statutory e9ceptions wherein the policy shall be binding notwithstanding the
nonEpayment of premiums areF
1. n case of life or industrial life insurance whenever the grace period applies=
"!
!. Hhen the insurer makes a written acknowledgment of the receipt of premium,
such acknowledgment is a conclusive evidence of payment of premium to make the
policy binding=
""
". Hhere the obligee has accepted the bond or suretyship contract in which case
such bond or suretyship becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety.
"5

3. A)-$% 2"1& +;% )+#+*+1"0 %E,%.+-1() &%(+-1(%$ #519% /;%"%-( +;% .18-,0 -)
9#8-$ #($ 5-($-(: (1+/-+;)+#($-(: +;% (1(-.#0&%(+ 12 ."%&-*&)< /;#+ #"% +;%
1+;%" %E,%.+-1() +;#+ %9189%$ 2"1& ,#)%) $%,-$%$ 50 +;% S*."%&% C1*"+F
A. Aside from the statutory e9ceptions, the following are the instances when the
Supreme +ourt ruled that the policy is valid and binding notwithstanding the nonE
payment of premiumsF
1. n case of cover notes which are binding even if premiums are not paid thereon
because no premium could be fi9ed on the cover note until all the particulars of the
insurance are known. +over notes should be integrated to the regular policies so that the
premiums on the regular policies include the consideration for the cover notes.
"8
"2
,uingon vs. del *onte, !2 S+-A 125".
31
Section 77, !
nd
sentence.
32
Section 77, !
nd
sentence.
33
Section 71.
34
Section 177.
35
%acific Timber and 39port +orporation vs. +ourt of Appeals, 11! S+-A 1//.
1
!. Hhen the parties agreed to have the premiums paid by installments or payment
by installments is an established practice by the parties, acceptance of the payment of
premium by installments would suffice to make the policy binding.
"6
". Hhen the insurer has granted the insured a credit term for the payment of
premium, the insurer is barred by estoppel from claiming forfeiture of the policy due to
nonEpayment of premium within the credit term.
"7
3. O8-9#"%) 15+#-(%$ # ;%#8+; ,#"% ,19%"#:% 2"1& B8*% C"1)) 4%#8+; C#"%<
I(,.. I( +;% ;%#8+; ,#"% #:"%%&%(+ 12 +;% .#"+-%)< #-8&%(+) $*% +1 ?."%-%E-)+-(:
,1($-+-1()@ /%"% %E,8*$%$ 2"1& +;% ,19%"#:%. B#"%80 38 $#0) 2"1& +;% %22%,+-9-+0 12
;%" ;%#8+; ,#"% ,19%"#:%< O8-9#"%) )*22%"%$ # )+"1'% #($ /#) #$&-++%$ #+ +;%
M%$-,#8 C-+0 ;1).-+#8. S;% /#) +"%#+%$ 50 D". S#(-%8< ;%" #++%($-(: .;0)-,-#(. S;%
#)'%$ B8*% C"1)) +1 .#0 ;%" &%$-,#8 %E.%()%) 5*+ +;% 8#++%" )*).%($%$ .#0&%(+
.%($-(: )*5&-))-1( 12 # ,%"+-2-,#+-1( 2"1& ;%" #++%($-(: .;0)-,-#( +;#+ +;% )+"1'%
);% )*22%"%$ /#) (1+ ,#*)%$ 50 # ."%-%E-)+-(: ,1($-+-1(. A2+%" 5%-(: $-),;#":%$ 2"1&
+;% ;1).-+#8< O8-9#"%) #:#-( ,8#-&%$ .#0&%(+ 2"1& B8*% C"1)) 5*+ +;% 8#++%" -()-)+%$
1( D". S#(-%8>) "%.1"+. B8*% C"1)) #)'%$ 21" # "%.1"+ 2"1& D". S#(-%8 /;-,; /#)
"%2*)%$ 1( +;% :"1*($ +;#+ O8-9#"%) -(91'%$ +;% .#+-%(+-.;0)-,-#( ,1(2-$%(+-#8-+0.
D*"-(: +;% +"-#8< B8*% C"1)) (%9%" ."%)%(+%$ #(0 %9-$%(,% +1 ."19% +;#+ O8-9#"%)>
)+"1'% /#) $*% +1 # ."%-%E-)+-(: ,1($-+-1(. I+ &%"%80 ).%,*8#+%$ +;#+ D". S#(-%8>)
"%.1"+ /1*8$ 5% #$9%")% +1 O8-9#"%)< 5#)%$ 1( ;%" -(91,#+-1( 12 +;% $1,+1"-.#+-%(+
."-9-8%:%. S;1*8$ B8*% C"1)) 5% %E%&.+%$ 2"1& 8-#5-8-+06
A. The rule that :evidence willfully suppressed would be adverse if produced;
does not apply if the )*.."%))-1( -) #( %E%",-)% 12 # ."-9-8%:%. The refusal of <livares
was justified. t was privileged communication between physician and patient.
(urthermore, limitations of liability on the part of the insurer or health care provider must
be construed in such a way as to preclude it from evading its obligations. Since 'lue
+ross had the burden of proving e9ception to liability, it should have made its own
assessment of whether <livares had a preEe9isting condition when it failed to obtain the
attending physician$s report. t could not just passively wait for Dr. Saniel$s report to bail
it out.
"1
3. I( #( -()*"#(,% )*-+< /;#+ -) +;% #,+-1(#58% $1,*&%(+< +;% .18-,0 1" #
&%&1"#($*& +;%"%12 1" # M#"-(% R-)' N1+%6
A. n an insurance suit, the actionable document is the policy which must be
attached to the complaint pursuant to Section 7, -ule / of the -ules of +ourt. However,
there is no specific provision in the -ules of +ourt which prohibits the admission in
36
*akati Tuscany +ondominium +orp. vs. +ourt of Appeals, !18 S+-A 56!= Asked, .o. A, !226 'ar
39ams.
37
?+%' vs. *asagana Telamart, nc., "86 S+-A "27. There are however, strong dissenting opinions in
this case.
38
'lue +ross Health +are, nc. vs. <livares, 855 S+-A 812, (ebruary 1!, !221.
/
evidence of an actionable document in the event a party fails to comply with the
re4uirement of the rule on actionable document under Section 7, -ule /. 'ut what must
be presented as evidence is the policy itself and not a mere *arine -isk .ote.
"/
3. 120 .-%,%) 12 &1+1") /%"% #-" );-..%$ 2"1& +;% US +1 ABB G1..%8< I(,. -(
M#(-8#. A+ +;% NAIA< +;% ,#":1 /#) $-),;#":%$ #($ 21"/#"$%$ +1 +;% /#"%;1*)% 12
P#-",#":1 21" +%&.1"#"0 )+1"#:% .%($-(: "%8%#)% 50 +;% B*"%#* 12 C*)+1&). L#+%"<
R%:-) B"1'%"#:% /-+;$"%/ +;% ,#":1 #($ $%8-9%"%$ -+ +1 ABB G1..%8. 41/%9%"< -+
/#) $-),19%"%$ +;#+ 1(80 6! 12 +;% 120 .-%,%) 12 &1+1") /%"% #,+*#880 $%8-9%"%$ #($
+;% "%&#-(-(: !! &1+1") ,1*8$ (1+ 5% #,,1*(+%$ 21". P#-",#":1 #($ R%:-) 51+;
"%2*)%$ +1 .#0 +;% 9#8*% 12 +;% &-))-(: &1+1"). T;*)< M#8#0#( I()*"#(,% /-+; /;-,;
ABB G1..%8 -()*"%$ +;% ,#":1 .#-$ ABB G1..%8 +;% -()*"#(,% ,8#-&. C8#-&-(:
)*5"1:#+-1( +1 +;% "-:;+ 12 ABB G1..%8< M#8#0#( I()*"#(,% 2-8%$ #( #,+-1( #:#-()+
P#-",#":1 #($ R%:-) #+ +;% M%TC 12 M#(-8# /;%"% -+ ."%)%(+%$ M#"-(% R-)' N1+% #)
."112 +;#+ M#8#0#( I()*"#(,% -()*"%$ +;% ,#":1. T;% ,1&.8#-(+ /#) $-)&-))%$ 1(
+;% :"1*($ +;#+ +;% M#"-(% R-)' N1+% ."%)%(+%$ #) ."112 +;#+ +;% ,#":1 /#) -()*"%$
/#) -(9#8-$. A#B W#) +;% M#"-(% R-)' N1+% )*22-,-%(+ +1 ."19% +;% %E-)+%(,% 12 +;%
-()*"#(,% ,1(+"#,+6 A5B W#) M#8#0#( I()*"#(,% )*5"1:#+%$ +1 +;% "-:;+) 12 ABB
G1..%8 #:#-()+ +;% .#"+0 "%).1()-58% 21" +;% 81)) 12 +;% );-.&%(+6
A. A#B The *arine -isk .ote was not the insurance contract itself, but merely a
complementary or supplementary document to the contract of insurance that may have
e9isted between *alayan and A'' Ioppel. A5B Since *alayan failed to introduce in
evidence the *arine nsurance %olicy itself as the main insurance contract, or even advert
to said document in the complaint, it failed to establish its cause of action for restitution
as a subrogee of A'' Ioppel. *alayan$s right to recovery is derived from contractual
subrogation as an incident to an insurance relationship, and not from any pro9imate
injury to it inflicted by the defendants. t is critical that *alayan establish the legal basis
of such right to subrogation by presenting the contract constitutive of the insurance
relationship between it and A'' Ioppel. Hithout such legal basis, its cause of action
cannot survive. The dismissal of the complaint is correct.
52
3. W;%( &#0 #5#($1(&%(+ 5% &#$%6
A. Abandonment may be made in any of the following casesF
51
BaC f more than J of the value of the thing insured is actually lost=
BbC f more than J of the value of the thing insured would have to be e9pended to
recover it from the peril=
5!
39
*alayan nsurance +o., nc. vs. -egis 'rokerage +orporation, ,. -. .o. 17!186, .ov. !", !227.
40
*alayan nsurance +o., nc. vs. -egis 'rokerage +orporation, supra.
41
Section 1"/= Asked, G BbC, !228 'ar 39ams.
42
Asked, 1/71 'ar 39ams.
12
BcC f it is injured to such an e9tent as to reduce its value by more than J=
BdC f the thing insured is a ship and the contemplated voyage cannot be lawfully
performed without an e9pense to the insured of more than J of the value of the thing
abandoned=
BeC f the thing insured is a ship and the contemplated voyage cannot be lawfully
performed without incurring risk which a prudent man would not take under the
circumstances=
BfC f the thing insured, being cargo or freightage, and the voyage cannot be
performed nor another ship procured by the master within a reasonable time and with
reasonable diligence, to forward the cargo without incurring an e9pense of more than J
of the value of the thing
5"
or without incurring a risk which a prudent man would not
under take under the circumstances.
3. W;#+ &#0 5% "%,19%"%$ 50 +;% -()*"%$ /;%( #5#($1(&%(+ -) ."1.%"80
&#$%6
A. Hhen abandonment is properly made, the insured may recover a total loss, and
the insurer ac4uires all the interests of the insured in the thing insured with all chances of
recovery and indemnity. 'ut if the insured omits to abandon, he may recover only his
actual loss.
55

3. WGH A< #) 1/(%" 12 S*.%"2%""0 3 %(+%"%$ -(+1 # ,1(+"#,+ 21" $"0 $1,'-(:
#($ "%.#-") 12 )#-$ 9%))%8 /-+; G%..%8. I+ /#) -()*"%$ 50 WGHA /-+; P-1(%%"
I()*"#(,% 21" -+) +1+#8 9#8*% 12 P360 &-88-1(. I( C8#*)% 20 12 +;% S;-. R%.#-"
A:"%%&%(+ 5%+/%%( WGH A #($ G%..%8< -+ /#) #:"%%$ +;#+ -( ,#)% 12 $#&#:% +1 +;%
9%))%8< G%..%8 );#88 5% 8-#58% 1(80 21" P!0 &-88-1( . D*% +1 +;% (%:8-:%(,% 12 G%..%8>)
).%,-#880 +"#-(%$ /%8$%"< 2-"% 5"1'% 1*+ #($ 5*"(%$ S*.%"2%""0 3. I+ /#) %)+#58-);%$
+;#+ +;% $#&#:% +1 +;% );-. /1*8$ %E,%%$ P270 &-88-1(< 1" I 12 +;% +1+#8 9#8*% 12 +;%
.18-,-%). WGHA #5#($1(%$ +;% );-. #($ ,8#-&%$ P360 &-88-1(< +;% +1+#8 9#8*% 12 +;%
.18-,-%). P-1(%%" .#-$ +;% +1+#8 81)) #($ ,8#-&%$ "%-&5*")%&%(+ 2"1& G%..%8 50 /#0
12 )*5"1:#+-1(. G%..%8 "%2*)%$ +1 .#0.
A#B W#) #5#($1(&%(+ ."1.%"6 A) # ,1()%=*%(,% +;%"%12< /#) -+ ,1""%,+ 21"
P-1(%%" +1 .#0 WGHA # +1+#8 81))6
A5B W#) )*5"1:#+-1( ."1.%"6
A,B C#( +;% 8-#5-8-+0 12 G%..%8 %E,%%$ P!0 &-88-1(< +;% 8-&-+#+-1( 12 8-#5-8-+0
#:"%%$ *.1( /-+; WG HA -( C8#*)% 20 12 +;% S;-. R%.#-" A:"%%&%(+6
43
Asked, .o. 8, 1/1! 'ar 39ams.
55
Sections. 156 and 188= Asked, .o. 8, 1/1! 'ar 39ams.
11
A. BaC The abandonment was proper since it could be made, when among others,
:more than threeEfourths thereof in value is actually lost, or would have to be e9pended to
recover it from the peril;
58
. The total value of the property insured was %"62 million and
the damage was more than %!72 million or more than J of the vessel$s insured value. As
a conse4uence of the proper abandonment, the loss became a constructive total loss
56
which entitles the insured to recover a total loss.
57
BbC The subrogation was proper because under Art. !!27 of the +ivil +ode, if the
insured :has received indemnity from the insurance company for the injury or loss arising
out ot the wrong or breach of contract complained of, the insurance company );#88 5%
)*5"1:#+%$ to the rights of the insured against the wrongdoer or the person who violated
the contract. t contemplates full substitution such that it places the party subrogated in
the shoes of the creditor, and he may use all means that the creditor could employ to
enforce payment.
51
BcC +lause !2 is a stipulation that may be considered contrary to public policy. To
allow I+S to limit its liability to only %82,222,222.22, notwithstanding the fact that
there was a constructive total loss in the amount of %"62,222,222.22, would sanction the
e9ercise of a degree of diligence short of what is ordinarily re4uired. t would not be
difficult for a negligent party to escape liability by the simple e9pedient of paying an
amount very much lower than the actual damage or loss sustained by the other.
5/

3. 41/ ,#( +;% -()*"%" 5% ;%8$ 8-#58% *($%" +;% ?(1 2#*8+ -($%&(-+0@ ,8#*)%
-( &1+1" 9%;-,8% +;-"$ .#"+0 8-#5-8-+0 -()*"#(,%6
A. An insurer may be held liable under the :no fault indemnity; provision
without the necessity of proving fault or negligence of any kind provided the following
re4uisites are presentF
82

BaC The claim is for death or injury to any passenger or third party=
BbC The total indemnity in respect of any one person does not e9ceed %8,222= and
BcC The necessary proof of loss under oath to substantiate the claim must be
submitted.
3. W;-,; -()*"%" -) 8-#58% *($%" +;% ?(1 2#*8+ -($%&(-+0@ ."19-)-1(6
A. A claim under the :no fault indemnity; provision may be made against the
insurer of one motor vehicle only. Such claim may be made directly by the injured party
against the insurer as followsF
45
Section 1"/.
46
Section 131.
47
Ieppel +ebu Shipyard, nc. vs. %ioneer nsurance @ Surety +orp., ,. -. 112112E11, Sept. !8, !22/, 621
S+-A /6.
48
bid.
49
bid.
82
Section "71= Asked, 1/77 'ar 39ams.= .o. 6, 1/1" 'ar 39ams.= .o. B1C, 1/1/ 'ar 39ams.= .o. 1
B1C, 1//5 'ar 39ams.
1!
BaC n case of an occupant of a vehicle, claim shall lie against the insurer of the
vehicle in which the occupant is riding, mounting or dismounting from.
BbC n any other case, claim shall lie against the insurer of the directly offending
vehicle.
81

NEGOTIABLE INSTRUMENTS
3. W;1 -) #( #,,1&&1$#+-1( .#"+06 W;#+ -) +;% 8-#5-8-+0 12 #(
#,,1&&1$#+-1( .#"+06
!2

A. An accommodation party is one who has signed the instrument as maker,
drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of
lending his name to some other person. Such person is liable on the instrument to a
holder for value, notwithstanding such holder at the time of taking the instrument knew
him to be only an accommodation party.
8"

3. W;#+ -) +;% "%8#+-1( 5%+/%%( +;% #,,1&&1$#+-1( .#"+0 #($ +;% .#"+0
#,,1&&1$#+%$6
A. The accommodated party is the principal while the accommodation party is the
surety. t is a settled rule that as surety, the accommodation party is bound e4ually and
absolutely with the principal and is deemed an original promissor and debtor from the
beginning. The liability of the accommodation party is immediate and direct.
85
The relation between an accommodation party and the accommodated party is one
of principal and suretyKthe accommodated party is one of principal and surety L the
accommodated party being the surety. As such, he deemed to an original promissor and
debtor from the beginning= he is considered in law as the same party as the debtor in
relation to whatever is adjudged touching the obligation of the latter since their liabilities
are interwoven as to be inseperable.
88

3. A"% +;% 8-#5-8-+-%) #($ $%2%()%) 12 #( #,,1&&1$#+-1( .#"+0 *($%" +;%
N%:1+-#58% I()+"*&%(+) L#/ #9#-8#58% -( ,#)% +;% -()+"*&%(+ -) (1(-(%:1+-#58%6
81
Section "71= Asked, .o. B1C, 1/1/ 'ar 39ams= .o. 1 B1C, 1//5 'ar 39ams.
8!
AskedF 1/8!, 1/6", 1/65, 1/7", 1/75, 1/78, 1/76, 1/1!, 1/18 and 1/16 'ar 39ams.= .o. BaC, 1//"
'ar 39ams.= .o. G B1C, !22" 'ar 39ams.
53
Section !/= Ang vs. Associated 'ank, 8"! S+-A !55, September 8, !227.
54
,arcia vs. )lamas, 517 S+-A !/!.
55
Ang vs. Associated 'ank, 8"! S+-A !55.
1"
A. n case the instrument is nonEnegotiable, it is covered by the provisions of the
+ivil +ode and not by the .egotiable nstruments )aw. A nonEnegotiable note is merely a
simple contract in writing and is evidence of such intangible rights as may have been
created by the assent of the parties. Hence, where the note was made payable to a specific
person rather than to bearer or to order L a re4uisite of the .egotiable nstruments )aw,
the parties cannot avail of the provisions of the .egotiable nstruments )aw on the
liabilities and defenses of an accommodation party.
86
3. W;#+ #"% +;% "%=*-)-+%) -( 1"$%" +;#+ # .#"+0 &#0 5% ,1()-$%"%$ #) #(
#,,1&&1$#+-1( .#"+06
A. The following are the re4uisites in order that a party may be considered as an
accommodation partyF
BaC He must have signed the instrument as maker, drawer, acceptor or indorser=
BbC He signed without receiving value therefor=
BcC He signed for the purpose of lending his name to some other person.
87

3. W;#+ -) +;% %22%,+ 12 #( %E+%()-1( 12 +-&% +1 .#0 +;% 158-:#+-1( :-9%( 50 #
;18$%" 21" 9#8*% +1 +;% #,,1&&1$#+%$ .#"+06 W-88 -+ "%8%#)% +;% #,,1&&1$#+-1(
.#"+0 12 ;-) 8-#5-8-+06
A. 3ven if the accommodated party receives an e9tension of the period for
payment without the consent of the accommodation party, the latter is still liable for the
whole obligation and such e9tension does not release him because as far as the holder for
value is concerned, he is a solidary coEdebtor. The liability of an accommodation party is
not only primary but also unconditional to a holder for value.
81
3. W;#+ ,1()+-+*+%) # ;18$%" -( $*% ,1*")%6
!9

A. A holder in due course is a holder who has taken the instrument under the
following conditionsF
BaC That it is complete and regular upon its face=
56
,arcia vs. )lamas, supra.
57
Section !/= Asked, .o. G BcC, !22" 'ar 39ams.
58
Ang vs. Associated 'ank, 8"! S+-A !55, September 8, !227.
59
AskedF 1/6!, 1/6", 1/66, 1/12 and 1/17 'ar 39ams.= .o. BbC, 1//! and .o. BcC. 1//6 'ar 39ams.
15
BbC That he became the holder of it before it was overdue, and without notice that
it had been previously dishonored, if such was the fact=
MThat he took it in good faith and for value=
BdC That at the time it was negotiated to him he had no notice of any infirmity in
the instrument or defect in the title of the person negotiating it.
62

3. W;1 -) $%%&%$ # ;18$%" -( $*% ,1*")%6
A. 3very holder is deemed prima facie to be a holder in due course= but when it is
shown that the title of any person who has negotiated the instrument was defective, the
burden is on the holder to prove that he or some person under whom he claims ac4uired
the title as holder in due course. 'ut the last mentioned rule does not apply in favor of a
party who became bound on the instrument prior to the ac4uisition of such defective
title.
61

?nder the above provision, every holder is presumed prima facie to be a holder in
due course. <ne who claims otherwise has the onus probandi to prove that one or more of
the conditions re4uired to constitute a holder in due course are lacking.
6!
3. R1E#) )18$ +1 R1$"-:1 #($ M#"-))# C#/-8- 9%:%+#58% 1-8. A) .#0&%(+
+;%"%21"%< ).1*)%) C#/-8- -))*%$ # .%")1(#8 ,;%,' -( +;% #&1*(+ 12 P38<80!.!0.
41/%9%"< /;%( R1E#) +"-%$ +1 %(,#); +;% ,;%,'< -+ /#) $-);1(1"%$ 50 +;% $"#/%%
5#('. S.1*)%) C#/-8- #))*"%$ ;-& +;#+ +;%0 /1*8$ "%.8#,% +;% 51*(,%$ ,;%,' /-+; #
,#);-%">) ,;%,' 2"1& BPI. R1$"-:1 C#/-8- #($ R1E#) /%(+ +1 BPI 5"#(,; -(
M#($#8*01(: #($ *.1( -()+"*,+-1() 12 +;% B"#(,; M#(#:%"< BPI C#);-%">) C;%,'
-( +;% #&1*(+ 12 P38<80!.!0 /#) -))*%$< $"#/( #:#-()+ +;% #,,1*(+ 12 M#"-))#
C#/-8-< .#0#58% +1 R1E#). R1$"-:1 +;%( ;#($%$ +;% ,#);-%">) ,;%,' +1 R1E#). T;%
21881/-(: $#0< R1E#) "%+*"(%$ +1 BPI>) 5"#(,; -( M#($#8*01(: +1 %(,#); +;%
,#);-%">) ,;%,' 5*+ -+ /#) $-);1(1"%$ 1( +;% :"1*($ +;#+ M#"-))#>) #,,1*(+ /#)
,81)%$ 1( +;#+ $#+%. U.1( 5%-(: )*%$< BPI ,8#-&%$ +;#+ R1E#) /#) (1+ # ;18$%" -(
$*% ,1*")% 5%,#*)% +;% 8#++%" /#) (1+ # ;18$%" 21" 9#8*%. A#B W#) R1E#) # ;18$%" 21"
9#8*% #($ ;%(,%< # ;18$%" -( $*% ,1*")%6 A5B M#0 BPI 5% "%8-%9%$ 12 -+) 8-#5-8-+0
*($%" +;% ,#);-%">) ,;%,' -+ -))*%$6
A. BaC -o9as was a holder for value and a holder in due course. -o9as received
the cashier$s check as payment for the vegetable oil he sold to +awili. The fact that
-odrigo was the one who purchased the cashier$s check from '% will not affect -o9as$
status as a holder for value since the check was delivered to him as payment for the
vegetable oil he sold to spouses +awili. -o9as is presumed to be a holder in due course
and the one who claims otherwise must prove that one or more of the conditions re4uired
60
Section 8!.
61
Section 8/.
62
'ank of the %hilippine slands vs. -o9as, 8"6 S+-A 161, <ctober 18, !227.
18
to constitute a holder in due course are lacking. '% failed to prove that -o9as was not a
holder for value.
6"
BbC '% cannot be relived of its liability under the cashier$s check it issued. A
cashier$s check is really the bank$s own check and may be treated as a promissory note
with the bank as maker. The check becomes the primary obligation of the bank which
issues it and constitutes a written promise to pay upon demand. t is of judicial notice that
a cashier$s check is deemed as cash. This is because the mere issuance of a cashier$s
check is considered acceptance thereof. Hence, a bank becomes liable to the payee the
moment it issued the cashier$s check.
65

3. W;#+ #"% ,"1))%$ ,;%,')6 W;#+ #"% +;% '-($) 12 ,"1))%$ ,;%,')6
A. A crossed check is one with two parallel lines diagonally written on the left top
portion of the check.
68
The crossing is special where the name of a bank or a business
institution in written between the two parallel lines, which means the drawee should pay
only with the intervention of that company. The crossing is general where the words
written between the two parallel lines are :and +o.; or :for payee$s account only,;
66
or
nothing is written between the parallel lines. This means that the drawee bank should not
encash the check but merely accept it for deposit.
67

3. W;#+ #"% +;% %22%,+) 12 ,"1))-(: # ,;%,'6
68
A. The effects of crossing a check areF
B1C The check may not be encashed but deposited only in a bank=
B!C The check may be negotiated only once= and
B"C The act of crossing a check serves as a warning to the holder that the check
has been issued for a definite purpose so that he must in4uire if he has received the check
pursuant to that purpose.
6/

However, issuing a crossed check imposes no legal obligation on the drawee not
to honor such a check. t is more of a warning to the holder that the check cannot be
presented to the drawee bank for payment in such case. nstead, the check can only be
deposited with the payee$s bank which in turn must present it for payment with the
63
bid.
64
bid.
65
Asked, .o. BbC, !225 'ar 39ams.= .o. ! BaC, !228 'ar 39ams.
66
Associated 'ank vs. +ourt of Appeals, !21 S+-A 5/8.
67
Associated 'ank vs. +ourt of Appeals, supra= Asked, .o. A, 1//8 'ar 39ams.
68
Asked, .o. B1C, 1//5 and .o. BdC, 1//6 'ar 39ams.= .o. ! BaC, !228 'ar 39ams.
6/
State nvestment House vs. A+, 178 S+-A "12= Associated 'ank vs. +ourt of Appeals, !21 S+-A
568= Traders -oyal 'ank vs. -adio %hil. .etwork, nc., "/2 S+-A 621.
16
drawee bank in the course of normal banking transactions between banks. The crossed
checks cannot be presented for payment but it can only be deposited and the drawee bank
may only pay to another bank in the payee$s or indorser$s account.
72

3. E. T. 4%("0 )18$ 5*('%" 2*%8 +1 4--C%&%(+. I( .#0&%(+ 12 +;% .*",;#)%)<
-+ -))*%$ .1)+-$#+%$ ,;%,') .#0#58% +1 E. T. 4%("0. T;% ,;%,') /%"% ,"1))%$ #($
51"% +;% "%)+"-,+-1( ?$%.1)-+ +1 .#0%%>) #,,1*(+ 1(80@. E. T. 4%("0 $-),1*(+%$ +;%
,;%,') /-+; I()*8#" B#(' 12 A)-# #($ A&%"-,# AI()*8#"B. T;% )#-$ ,;%,') /%"%
$-);1(1"%$. I()*8#" )*%$ 4--C%&%(+ /;-,; ,8#-&%$ +;#+ +;% 21"&%" /#) (1+ # ;18$%"
-( $*% ,1*")% #) -+ );1*8$ (1+ ;#9% $-),1*(+%$ +;% .1)+-$#+%$ ,;%,') 5%-(: ,"1))%$
,;%,'). A#B I()*8#" ;18$ 4--C%&%(+ 8-#58%6 A5B I2 (1+< /;1 &#0 5% ;%8$ 8-#58% 50
I()*8#"6
A. BaC nsular cannot hold HiE+ement liable as the former was not a holder in due
course. The last two elements of Section 8! have not been met by nsular. nsular did not
act in good faith since it was grossly negligent. nsular knew that the checks were crossed
and bore restrictions that they were for deposit for payee$s account only= hence, they
could not be further negotiated to it. +rossing of checks should put the holder on in4uiry
and upon him devolves the duty to ascertain the indorser$s title to the check or the nature
of his possession.
BbC nsular may hold the party who endorsedNencashed the checks. t was 3. T.
Henry that reEdiscounted the checks and received their value from nsular hence, it should
pay the latter.
71
CORPORATION LAW
3. W;#+ -) +;% &%#(-(: 12 +;% $1,+"-(% 12 8%:#8 %(+-+0 12 ,1".1"#+-1()6
A. t means that a corporation is a juridical person with a personality separate and
distinct from that of each shareholder. t also means that the stockholders of a corporation
are different from the corporation itself.
7!

3. W;#+ #"% +;% ,1()%=*%(,%) 12 +;% $1,+"-(% 12 8%:#8 %(+-+06
A. The conse4uences of the doctrine of legal entity regarding the separate identity
of the corporation and its stockholders are as followsF
72
,empesaw vs. +ourt of Appeals, ,.-. .o. /!!55, (eb. /, 1//".
71
HiE+ement +orporation vs. nsular 'ank of Asia and America, 8"5 S+-A !6/, September !1, !227.
72
Section != Seaoil %etroleum +orp. vs. Autocorp ,roup, 86/ S+-A "17, <ct. 17, !221= S3+ <pinions,
0an. 11, 1//" and 0une 11, 1//".
17
1. The stockholders are not personally liable for the debts of the corporation and
viceEversa.
7"
The stockholders are not liable for corporate acts unless otherwise provided
by law.
75

!. The stockholders are not the owners of corporate properties and assets.
78

". The stockholders cannot sell or maintain actions in their own name in
connection with corporation affairs, business or property. .either do stockholders have
the right to recover possession of corporation property or to recover damages for injury to
properties belonging to the corporation, and viceEversa.
76

5. The property belonging to the corporation cannot be attached to satisfy the debt
of a stockholder and vice versa, the latter having only an indirect interest in the assets and
business of the former.
77

3. T;% L#51" A"5-+%" "%($%"%$ C*$:&%(+ -( 2#91" 12 D%8-&# 21" -88%:#8
$-)&-))#8 #:#-()+ ;-) %&.810%"< G18$%( U(-1( A=*#&#"-(% C1".1"#+-1( AG18$%(B.
T;% C*$:&%(+ 5%,#&% 2-(#8. P*")*#(+ +1 # /"-+ 12 %E%,*+-1(< +;% );%"-22 #++#,;%$ #(
I)*7* J%%. "%:-)+%"%$ -( +;% (#&% 12 G1-) /;1 2-8%$ # +;-"$-.#"+0 ,8#-& 19%" +;% )#-$
9%;-,8%. T;% L#51" A"5-+%" $%(-%$ +;% +;-"$-.#"+0 ,8#-& 1( +;% :"1*($ +;#+ G1-) /#)
1(% 12 +;% "%).1($%(+) -( +;% ,#)% #($ #( -(,1".1"#+1"J122-,%" 12 G18$%(. M#0 +;%
."1.%"+0 12 G1-) 5% #++#,;%$ +1 )#+-)20 +;% C*$:&%(+ ,8#-& #:#-()+ G18$%( 1( +;%
:"1*($ +;#+ );% -) #( -(,1".1"#+1"J122-,%" 12 )#-$ ,1".1"#+-1(6
A. The subject vehicle belonging to ,ois cannot be attached to answer for the
liabilities of a corporation of which she was an incorporatorNofficer. A corporation has a
personality distinct and separate from its individual stockholders or members and from
that of its officers who manage and run its affairs. The rule is that obligations incurred by
the corporation, acting through its directors, officers and employees, are its sole
liabilities. Thus, property belonging to a corporation cannot be attached to satisfy the debt
of a stockholder and vice versa, the latter having only an indirect interest in the assets and
business of the former.
71

3. P*")*#(+ +1 # /"-+ 12 %E%,*+-1( -( ?F%8-.% J#9-%"< J". 9). R*2-(1 B11,<@ +;%
);%"-22 8%9-%$ +;% 8#($ 1/(%$ 50 F-9% S+#" M#"'%+-(: C1".1"#+-1(. T;% )#-$
,1".1"#+-1(< (1+ 5%-(: # .#"+0 -( +;% ,-9-8 ,#)% $%&#($%$ +;% ,#(,%88#+-1( 12 +;%
73
1"A (letcher, Sec. 6!1".
75
Hise and +o. vs. *an Sun )ung, 52 <. ,. 82= Seaoil %etroleum +orp. vs. Autocorp ,roup, 86/ S+-A
"17, <ct. 17, !221.
78
'erman 3nvironmental Dev. +orp. vs. +A 167 S+-A, 852.
76
Sulo ng 'ayan, nc. vs. Araneta, nc. 7! S+-A "57.
77
Delima vs. ,ois, 885 S+-A 7"1, 0une 17, !221= *andaue Dinghow Dimsum House, nc. vs. .)-+, 857
S+-A 52!, *arch ", !221.
78
Delima vs. ,ois, 885 S+-A 7"7, 0une 17, !221.
11
(1+-,% 12 8%90. T;% );%"-22< 1( +;% 1+;%" ;#($ ,8#-&%$ +;#+ R*2-(1 B11, /#) +;%
1/(%" 12 #"1*($ 200 );#"%) 12 )+1,' -( F-9% S+#" M#"'%+-(: C1".1"#+-1( #($ +;%
8%90 /#) &#$% 1( +;% );#"%< "-:;+) #($J1" -(+%"%)+ #($ .#"+-,-.#+-1( /;-,; R*2-(1
B11,< #) ."%)-$%(+ #($ )+1,';18$%"< &#0 ;#9% -( +;% .#",%8 12 8#($ 1/(%$ 50 F-9%
S+#" M#"'%+-(: C1".1"#+-1(. W#) +;% 8%90 1( +;% ,1".1"#+% ."1.%"+0 ."1.%"6
A. The sheriff overstepped his authority when he disregarded the distinct and
separate personality of the corporation from that of -ufino 'ooc as stockholder of the
corporation by levying on the property of the corporation. t is settled that a corporation is
clothed with a personality separate and distinct from that of its stockholders. The mere
fact one is a president of the corporation does not render the property which the
corporation owns or possesses the property of the president of the corporation since the
latter, as an individual and the corporation are separate entities.
7/
3. B#*+-)+# -( ;-) ,#.#,-+0 #) P"%)-$%(+ 12 C"*-)%" B*) L-(%) #($ T"#().1"+
C1".1"#+-1( AC"*-)%"B< .*",;#)%$ ).#"% .#"+) 2"1& A*+1 P8*) T"#$%")< I(,. AA*+1
P8*)B #($ -))*%$ +/1 .1)+$#+%$ ,;%,')< 1(% # .%")1(#8 ,;%,' 21" P1!1<200 #($
#(1+;%" ,1".1"#+% ,;%,' 12 C"*-)%" 21" P97<!00. S#-$ ,;%,') /%"% $-);1(1"%$ #($
B#*+-)+# /#) ."1)%,*+%$ 21" 9-18#+-1( 12 +;% B1*(,-(: C;%,' 8#/. P*")*#(+ +1 #
$%&*"%" +1 +;% %9-$%(,%< B#*+-)+# /#) #,=*-++%$ 5*+ /#) #$C*$:%$ +1 .#0 A*+1 P8*)
+;% +1+#8 #&1*(+ 12 +;% ,;%,'). B#*+-)+# ,8#-&%$ +;#+ ;% ,#((1+ 5% .%")1(#880 &#$%
8-#58% #) +;% .*",;#)%) /%"% &#$% 50 +;% ,1".1"#+-1(. D%,-$% /-+; "%#)1().
A. 'autista should not be made liable considering that he was ac4uitted of the
crime charged and that the debts were clearly corporate debts for which only +ruiser
should be held liable. 0uridical entities have personalities separate and distinct from its
officers and are not personally liable for the obligations of the corporation e9cept when
only when the veil of corporation fiction is being used as a cloak or cover for fraud or
illegality, or to work injustice. These situations do not e9ist in this case.
12
3. M#0 # ,1".1"#+-1( 2-8% #( #,+-1( 1( 5%;#82 12 -+) &%&5%") 1" )+1,';18$%")
21" +;% "%,19%"0 12 ."1.%"+-%) 5%81(:-(: +1 +;% 8#++%"6
A. .o, the corporation cannot file an action to recover properties belonging to its
stockholders. A corporation is a distinct legal entity considered as separate and apart
from its individual stockholders or members who compose it, and is not affected by the
personal rights, obligations and transactions of its stockholders or members.
11
3. EE.8#-( +;% $1,+"-(% 12 ?.-%",-(: +;% 9%-8 12 ,1".1"#+% 2-,+-1(@.
A. :%iercing the veil of corporate fiction; means that while a corporation can not
generally be made liable for acts or liabilities of its stockholders or members, and vice
79
'ooc vs. 'antuas, "85 S+-A !7/.
80
'autista vs. Auto %arts Traders, nc., 861 S+-A !!".
11
Sulo ng 'ayan, nc. vs. Araneta, nc., 7! S+-A "57.
1/
versa because a corporation has a personality separate and distinct from its stockholders
or members, however, the corporate e9istence is disregarded under this doctrine where
the corporation is formed or used for illegitimate purposes or justify wrong or evade a
just and valid obligation. n such case, the corporation and the stockholders shall be
considered as one and the same.
1!

The doctrine of piercing the corporate veil applies only in three B"C basic
instances, namelyF aC when the separate and distinct corporate personality defeats public
convenience, as when the corporate fiction is used as a vehicle for the evasion of an
e9isting obligation= BbC in fraud cases, or when the corporate entity is used to justify a
wrong, protect a fraud, or defend a crime= or BcC 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 organi&ed and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit, or adjunct of another
corporation. n the absence of malice, bad faith, such corporate officer cannot be made
personally liable for corporate liabilities.
1"
However, the application of the doctrine of piercing the corporate veil should be
done caution. A court should be mindful of the milieu where it is to be applied. t must be
certain that the corporate fiction was misused to such an e9tent that injustice, fraud, or
crime was committed against another, in disregard of its rights. The wrongdoing must be
clearly and convincingly established= it cannot be presumed. <therwise, an injustice that
was never intended may result from an erroneous application.
15
'ad faith or wrongdoing
of a corporate officer must be established clearly and convincingly L bad faith is never
presumed.
18

3. VMSC -) # 2#&-80-1/(%$ ,1".1"#+-1( 12 /;-,; A9%8-(1 /#) ."%)-$%(+. 4%
122%"%$ +1 )%88 # ,#" +1 ;-) ,1*)-()< +;% V-18#:1 ).1*)%). I+ +*"(%$ 1*+ +;#+ ;%
."%9-1*)80 )18$ +;% )#-$ ,#" +1 #(1+;%" ,1*)-(. V-18#:1 ).1*)%) )-:(%$ +;% $%%$ 12
)#8%< .#-$ # $1/( .#0&%(+ #($ %E%,*+%$ # ."1&-))1"0 (1+% 21" +;% 5#8#(,%. T;%
)#-$ ."1&-))1"0 (1+% /#) %($1")%$ +1 BA F-(#(,%. W;%( +;% ,#" /#) (1+ $%8-9%"%$
+1 V-18#:1 ).1*)%)< +;%0 $-$ (1+ .#0 +;% -()+#88&%(+). BA F-(#(,% )*%$ +;% V-18#:1
).1*)%) 21" "%.8%9-( +1 "%,19%" +;% ,#" 1" +;% #&1*(+ 12 +;% ."1&-))1"0 (1+% /-+;
$#&#:%). V-18#:1 ).1*)%) 2-8%$ # +;-"$-.#"+0 ,1&.8#-(+ #:#-()+ A9%8-(1 /-+;1*+
-&.8%#$-(: VMSC. A9%8-(1 ,8#-&%$ +;#+ VMSC );1*8$ ;#9% 5%%( -(,8*$%$ -( +;%
,1&.8#-(+ #($ -+) (1(--(,8*)-1( 5#") #( #,+-1( #:#-()+ ;-&. D%,-$% /-+; "%#)1().
A. The fact that AS*+ was not included as defendant does not preclude recovery
by Aiolago spouses against Avelino= neither would such nonEinclusion constitute a bar to
1!
Solidbank +orporation vs. *indanao (erroalloy +orporation, 565 S+-A 52/, 0uly !1, !228= (ederation
of )abor ?nion vs. <ple, 15" S+-A 1!5= Telephone 3ngineering @ Service +o., nc. vs. Horkmen$s
+ompensation +ommission, 125 S+-A "85= Asked, 1/18 and 1//1 'ar 39ams.= .o. , !225 'ar 39ams.=
.o. B1C, !226 'ar 39ams.
83
%risma +onstruction @ Dev. +orp. vs. *enchaves, 615 S+-A 8/2, *arch /, !212.
84
%hilippine .ational 'ank vs. Andrada 3lectric @ 3ngineering +ompany, "11 S+-A 158, April 17, !22!.
85
Seaoil %etroleum +orp. vs. Autocorp ,roup, 86/ S+-A "17, <ct. 17, !221.
!2
the application of the piercingEofEtheEcorporate veil doctrine. Avelino, knowing fully well
that the vehicle was already sold, and with abuse of his relationship with the spouses still
proceeded with the sale and collected the down payment. His actions were the pro9imate
cause of the Aiolago spouses$ loss. He cannot now hide behind the separate corporate
personality of A*S+ to escape from liability. (or all legal intents and purposes defendant
and the corporation are one and the same. The fiction of separate juridical personality
conferred upon the corporation should be disregarded.
16
3. W;#+ -) &%#(+ 50 +;% alter ego $1,+"-(% 1" ?-()+"*&%(+#8-+0 "*8%@6
AF Hhere one corporation is so organi&ed and controlled and its affairs are
conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction
of the corporate entity of the OinstrumentalityO may be disregarded. The control necessary
to invoke the rule is not majority or even complete stock control but such domination of
finances, policies and practices that the controlled corporation has, so to speak, no
separate mind, will or e9istence of its own, and is but a conduit for its principal.
17

3. 41/ &#0 # ,1".1"#+-1( 5% %)+#58-);%$ #) # &%"% #8+%" %:1 12 #(1+;%"
,1".1"#+-1( 1" .%")1(6
A. The 4uestion of whether a corporation is a mere alter ego is one of fact.
%iercing the veil of corporation fiction may be allowed only if the following elements
concurF
B1C control L not mere stock control, but complete dominationE not only of
finances, but of policy and business practice in respect to the transaction attacked,
must have been such that the corporate entity as to this transaction had at the time
no separate mind, will or e9istence of its own=
B!C such control must have been used by the defendant to commit fraud or a
wrong doing to perpetuate the violation of a statutory or other positive legal duty,
or a dishonest and an unjust act in contravention of the plaintiffs legal right=
B"C the said control and breach of duty must have pro9imately caused the injury or
unjust loss complained of.
11

3. I) &%"% -(+%"81,'-(: $-"%,+1"#+% )*22-,-%(+ :"1*($ +1 $-)"%:#"$ +;%
)%.#"#+% ,1".1"#+% .%")1(#8-+06
A. The mere interlocking of directors and officers does not warrant piercing the
separate corporate personalities of two corporations L not only must there be a showing
that there was majority or complete control, but complete domination, not only of
86
Aiolago vs. 'A (inance +orporation, 88/ S+-A 6/.
17
)ipat vs. %acific 'anking +orporation 52! S+-A ""/, April "2, !22".
88
- @ 3 Transport, nc. vs. )atag, 5!! S+-A 6/1, 727= Heirs of -amon Durano, Sr. vs. ?y, "55 S+-A
!"1.
!1
finances but of policy and business practice in respect to the transaction attacked, so that
the corporate entity as to a particular transaction had at the time no separate mind, will or
e9istence of its own.
1/
3. I) +;% &%"% 2#,+ +;#+ # )-(:8% .%")1( 1/() 1" ,1(+"18) 1(% 1" &1"%
,1".1"#+-1( 1" )*5)+#(+-#8 -$%(+-+0 12 -(,1".1"#+1") 12 +/1 ,1".1"#+-1()< )*22-,-%(+
+1 $-)"%:#"$ +;% )%.#"#+% .%")1(#8-+-%) 12 +;% ,1".1"#+-1()6
A. *ere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stocks of a corporation is not by itself a sufficient ground to
disregard the separate corporate personality.
/2
The substantial identity of the
incorporators of two or more corporations does not imply that there was fraud so as to
justify the piercing of the writ of corporate fiction. To disregard the said separate juridical
personality, the wrong doing must be proven clearly and convincingly.
/1

t is lawful to obtain a corporate charter, even with a single substantial
stockholder, to engage in specific activity and such activity may coEe9ist with the other
private activities of the stockholder. f the corporation is a substantial one, conducted
lawfully and without fraud on another, its separate identity is respected.
/!

However, the separate identity of the corporation may be disregarded where it
serves but as a shield for ta9 evasion and treat the person who actually may take the
benefits of the transactions as the person ta9able.
/"

3. D% G*7&#( /#) +;% P"%)-$%(+ #($ ,1(+"188-(: )+1,';18$%" 12 EPG
C1()+"*,+-1( C1.< I(,. S#-$ ,1".1"#+-1( %(+%"%$ -(+1 # ,1(+"#,+ /-+; +;% U(-9%")-+0
12 +;% P;-8-..-(%) 21" +;% ,1()+"*,+-1( 12 -+) 8#/ 8-5"#"0. C8#-&-(: $%2%,+) -( +;% #-"-
,1($-+-1(-(: -()+#88%$ 50 EPG< UP 2-8%$ #( #,+-1( #:#-()+ EPG #($ -+) P"%)-$%(+< $%
G*7&#(. S;1*8$ $% G*7&#( 5% &#$% 8-#58%6
A. De ,u&man should not be made liable. *ere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself sufficient ground for disregarding the separate corporate
personality. The president or general manager of a corporation therefore, should not be
made personally answerable for the payment of the obligations of the corporation unless
89
,. Holdings, nc. vs. .A*AH?, 625 S+-A 7", <ct. 16, !22/.
90
Secosa vs. Heirs of 3rwin Suare& (rancisco, 5"" S+-A !7", 0une !/, !225.
91
*artine& vs. +ourt of Appeals, 5"1 S+-A 1"2, September 12, !225.
/!
)idell @ +o., nc. vs. +ollector of nternal -evenue, ! S+-A 6"!= Hise @ +o., nc. vs. *an Sun )ung,
6/ %hil. "21= Asked, 1/72 'ar 39ams.
/"
)idell @ +o., nc. vs. +ollector of nternal -evenue, supra.
!!
he had acted maliciously or in bad faith. That e9ception is not applicable to de ,u&man
because it was not proved that he acted maliciously or in bad faith when, as %resident of
3%,, he sought to protect its interests and resisted ?%$s claims. Hhatever damage was
caused to ?% as a result of his acts is the sole responsibility of 3%, even though de
,u&man was its principal officer and controlling stockholder.
/5

3. E&&#(*%8 C. O(#+% 1/(%$ +;% &#C1"-+0 12 +;% );#"%) -( ECO
M#(#:%&%(+ C1".1"#+-1( AECOB. L#($ B#(' 12 +;% P;-8-..-(%) ALBPB %E+%($%$ #
)%"-%) 12 ,"%$-+ #,,1&&1$#+-1() +1 ECO. T;% ."1,%%$) 12 +;% ,"%$-+
#,,1&&1$#+-1() /%"% "%,%-9%$ 1( 5%;#82 12 ECO 50 O(#+%. ECO 2#-8%$ +1 .#0 +;%
81#(). LBP 2-8%$ # ,1&.8#-(+ 21" ,188%,+-1( 12 )*& 12 &1(%0 #:#-()+ ECO #($ O(#+%.
LBP ,8#-&%$ +;#+ ECO #($ O(#+% );1*8$ 5% +"%#+%$ #) 1(% .%")1( )1 O(#+% ,#( 5%
&#$% 8-#58% 21" +;% 81#() 15+#-(%$ 50 ECO 2"1& LBP. F*"+;%"&1"%< LBP ,8#-&%$<
O(#+% 1/() +;% &#C1"-+0 );#"%) -( ECOK ECO )+#($) 21" +;% -(-+-#8) 12 E&&#(*%8
C. O(#+%K O(#+% .%")1(#880 .#-$ P1 M-88-1( 2"1& ;-) 1/( +"*)+ #,,1*(+K O(#+%
,1(+"188%$ +;% ,1".1"#+-1( 50 ;18$-(: +/1 ,1".1"#+% .1)-+-1() )*,; #) C;#-"&#(
#($ +"%#)*"%"K #($ (1 &%%+-(: 12 +;% )+1,';18$%") 1" $-"%,+1") ;#$ 5%%( ;%8$.
S;1*8$ +;% O(#+% #($ ECO 5% +"%#+%$ #) 1(% )1 #) +1 ;18$ O(#+% 8-#58% 21" ECO>)
$%5+)6
A. <nate and 3+< cannot be treated as one person so as to make <nate liable for
3+<$s debts. n the absence of any malice or bad faith, a stockholder or an officer of a
corporation cannot be made personally liable for corporate liabilities. The mere fact that
<nate owned the majority of the shares of 3+< is not a ground to conclude that <nate
and 3+< is one and the same. *ere ownership by a single stockholder of all or nearly all
of the capital stock of a corporation is not by itself sufficient reason for disregarding the
fiction of separate corporate personalities. .either is the fact that the name P3+<$
represents the first three letters of <nate$s name sufficient reason to pierce the veil. 3ven
if it did, it does not mean that the said corporation is merely a dummy of <nate. A
corporation may assume any name provided it is lawful. There is nothing illegal in a
corporation ac4uiring the name or as in this case, the initials of one of its stockholders. t
has not been shown that 3+< was used as a mere alter ego of <nate to obtain the loans.
'ad faith or fraud on the part of 3+< and <nate was not also shown. %ayment of %1
*illion out of the trust account of <nate and other investors merely showed that a
shareholder wants to held his corporation. The evidence presented does not suffice to
hold <nate personally liable for 3+<$s loans.
/8

3. A-",1( #($ R%2"-:%"#+-1( I($*)+"-%)< I(,. )*..8-%$ JRB R%#8+0< I(,. /-+;
#-"-,1($-+-1(-(: *(-+). A2+%" +;% *(-+) /%"% -()+#88%$< +;%0 ,1*8$ (1+ ."19-$% +;%
$%)-"%$ ,118-(: +%&.%"#+*"%. A-",1( *($%"+11' +1 "%.8#,% +;% *(-+) /-+; (%/ 1(%)
5*+ +;-) /#) (%9%" $1(%. JRB R%#8+0< I(,. 2-8%$ #( #,+-1( (1+ 1(80 #:#-()+ A-",1( #($
/5
3%, +onstruction +o., nc. vs. +ourt of Appeal, !12 S+-A !"2= Asked, 1//6 'ar 39ams.
95
<nate vs. )and 'ank of the %hilippines, "65 S+-A "78, "1"E"15.
!"
R%2"-:%"#+-1( I($*)+"-%)< I(,. 5*+ #8)1 #:#-()+ J#"$-(% D#9-%)< I(,. 1( +;% :"1*($
+;#+ A-",1( /#) # )*5)-$-#"0 12 J#"$-(%. C#( J#"$-(% 5% &#$% 8-#58%6
A. 0ardine can not be made liable. Hhile it is true that Aircon is a subsidiary of
0arine, it does not necessarily follow that Aircon$s corporate legal e9istence can just be
disregarded. A subsidiary has an independent and separate juridical personality, distinct
from that of its parent company, hence, any claim or suit against the latter does not bind
the former, and vice versa. 'efore the separate personality of the subsidiary may be
disregarded the following re4uisites must be establishedF B1C control, not merely majority
or complete stock control= B!C such control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest acts in contravention of plaintiff$s legal rights= and B"C the aforesaid
control and breach of duty must pro9imately cause the injury or unjust loss complained
of.
/6
Aircon is a subsidiary of 0ardine only because the latter ac4uired the majority of
Aircon$s capital stock. t however, does not e9ercise complete control over Aircon=
nowhere can it be gathered that the petitioner manages the business affairs of Aircon.
ndeed, no management agreement e9ists between 0ardine and Aircon and the latter is an
entirely different entity from the 0ardine.
/7
3. P;-8-..-(% N#+-1(#8 B#(' APNBB #($ R-+"#++1 G"1*.< I(,. #"% 51+;
$1&%)+-, ,1".1"#+-1(). PNB I(+%"(#+-1(#8 F-(#(,%< L+$. APNB-IFLB< # /;1880-1/(%$
)*5)-$-#"0 ,1&.#(0 12 PNB< 1":#(-7%$ #($ $1-(: 5*)-(%)) -( 41(: G1(:< %E+%($%$
# 8%++%" 12 ,"%$-+ -( 2#91" 12 +;% R-+"#++1 :"1*. )%,*"%$ 50 "%#8 %)+#+% &1"+:#:%)
,1()+-+*+%$ 19%" 21*" 81+) -( M#'#+-. W;%( +;% R-+"#++1 :"1*. 2#-8%$ +1 )%++8% +;%-"
158-:#+-1()< PNB-IFL< +;"1*:; -+) #++1"(%0--(-2#,+ PNB< (1+-2-%$ +;% "%).1($%(+) 12
+;% 21"%,81)*"% 12 +;% &1"+:#:%$ ."1.%"+-%). T;% R-+"#++1 :"1*. 2-8%$ # ,1&.8#-(+
21" -(C*(,+-1( #:#-()+ PNB. PNB 2-8%$ # &1+-1( +1 $-)&-)) 1( +;% :"1*($ 12 #5)%(,%
12 ."-9-+0 5%+/%%( +;%&. T;% RTC ;%8$ +;#+ +;% )*-+ #:#-()+ PNB -) # )*-+ #:#-()+
PNB-IFL. S;1*8$ +;% 9%-8 12 ,1".1"#+% 2-,+-1( 5% .-%",%$ )1 +;#+ # )*-+ #:#-()+ PNB
&#0 5% ,1()-$%"%$ #) # )*-+ #:#-()+ PNB-IFL6
A. .o, the veil of corporate fiction should not be pierced. The mere fact that a
corporation owns all of the stocks of another corporation, taken alone is not sufficient to
justify their being treated as one entity. f used to perform legitimate functions, a
subsidiary$s separate e9istence may be respected, and the liability of the parent
corporation as well as the subsidiary will be confined to those arising in their respective
business.
The -itratto group failed to show any cogent reason why the separate entities of
the %.' and %.'E() should be disregarded. The doctrine of piercing the corporate veil
is applicable only when the corporate fiction is used to defeat public convenience, justify
96
0ardine Davies, nc. vs. 0-' -ealty, nc. 56" S+-A 888, 0uly 18, !228, citing Aelarde vs. )ope&, nc.
51/ S+-A 5!!, 0anuary 15, !225.
97
0ardine Davies, nc. vs. 0-' -ealty, nc., supra.
!5
wrong, protect fraud or defend crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere alter ego or business conduit of a
person or another corporation.
/1


3. D#&#&1+1< # J#.#(%)% (#+-1(#8 1":#(-7%$ *($%" P;-8-..-(% L#/)< W#'1
E(+%"."-)%) M#(-8#< I(,.< 8#+%" '(1/( #) N-);-(1 L%#+;%" I($*)+"-%)< I(,. ANLIIB.
D#&#&1+1 #($ #(1+;%" J#.#(%)% (#+-1(#8. N-);-(1 21":%$ # M%&1"#($*& 12
A:"%%&%(+ *($%" /;-,; +;%0 #:"%%$ +1 %(+%" -(+1 # C1-(+ 9%(+*"% *($%" /;-,;
N-);-(1 /1*8$ #,=*-"% 70L 12 +;% #*+;1"-7%$ ,#.-+#8 )+1,' 12 W#'1. N-);-(1 #($ ;-)
5"1+;%" #,=*-"%$ &1"% +;#( 70L 12 +;% #*+;1"-7%$ ,#.-+#8 )+1,' +;%"%50 "%$*,-(:
D#&#&1+1>) -(9%)+&%(+ +1 #51*+ 10L. W#'1>) (#&% /#) ,;#(:%$ +1 NLII.
D#&#&1+1 #($ N-);-(1 )+#"+%$ +1 (%:1+-#+% 21" +;% 5*0-1*+ 12 +;% );#"%) 12
D#&#&1+1. D*"-(: +;% (%:1+-#+-1()< D#&#&1+1 ,8#-&%$ +;% &#,;-(%"-%) #($
%=*-.&%(+ /;-,; ;% ,1(+"-5*+%$ +1 .#0 ;-) );#"%) +1 +;% ,1".1"#+-1( 1( +;% :"1*($
+;#+ Nishino agreed that he could take out the machineries provided the value of the
said machineries would be deducted from his capital contribution. B*+ 8#+%"< N-);-(1
2"*)+"#+%$ D#&#&1+1>) ,8#-& 50 "%2*)-(: +;% )#&%. T;% C1*"+ 12 A..%#8) "*8%$ +;#+
+;% &#,;-(%"-%) ,8#-&%$ 50 D#&#&1+1 #"% ,1".1"#+% ."1.%"+-%) 12 NLII #($ ,#((1+
5% "%+"-%9%$ 50 D#&#&1+1 /-+;1*+ +;% #*+;1"-+0 12 NLII 51#"$ 12 $-"%,+1"). O( +;%
1+;%" ;#($< D#&#&1+1 ,8#-&%$ +;#+ N-);-&1 ,#((1+ ;-$% 5%;-($ +;% );-%8$ 12
,1".1"#+% 2-,+-1( 5%,#*)% NLII -) # &%"% -()+"*&%(+#8-+0 12 N-);-&1 #($ ;-) 5"1+;%".
D%,-$% +;% ,#)% /-+; "%#)1().
A. The separate personality of .) cannot be disregarded since there is no
showing that .ishimo used the separate personality of .) to unjustly act or do wrong
to Qamamoto in contravention of his legal rights. The machineries and e4uipment, which
comprised Qamamoto$s investment in .) thus remained part of the capital property of
the corporation.
//

3. R%).1($%(+ E=*-+#58% S#9-(:) B#(' AESBB /#) # )*5)-$-#"0 12 E=*-+#58%
PCI B#(' AEPCIBB /;-,; 8#+%" &%":%$ /-+; B#(,1 $% O"1 #($ +;%(,% '(1/( #)
B#(,1 $% O"1 ABDOB. P%+-+-1(%") /%"% ,8-%(+-$%.1)-+1") 12 EPCIB 21" &1"% +;#( 12
0%#"). P%+-+-1(%") 15+#-(%$ # 81#( #&1*(+-(: +1 P<000<000 2"1& EPCIB #($ +1
)%,*"% +;% 81#(< +;%0 &1"+:#:%$ +;%-" 8#($ -( 3*%71( C-+0. P%+-+-1(%") /%"% #58% +1
$"#/ 2"1& +;% 81#( +;% )*& 21 P3<600<000. T;%0 $%&#($%$ 2"1& EPCIB ,1.-%) 12
+;% 81#( #:"%%&%(+ /;-,; "%2*)%$ +1 :-9% +;%& +;% ,1.-%) 1( +;% :"1*($ +;#+ #) #
&#++%" 12 ."#,+-,%< +;%0 :-9% ,1.-%) 1(80 #2+%" +;% %(+-"% 81#( ;#) 5%%( /-+;$"#/(.
P%+-+-1(%") +;%( $-$ (1+ ,1(+-(*% .#0&%(+ 12 +;% #&1"+-7#+-1( #2+%" .#0-(: # +1+#8 12
P!00<000. R%).1($%(+< +;"1*:; ,1*()%8 /"1+% # 8%++%" +1 +;% .%+-+-1(%" $%&#($-(:
.#0&%(+ 12 +;% %(+-"% 81#( "%8%#)%$ /-+; -(+%"%)+ +;%"%1(. F-(#880< .%+-+-1(%") :1+
,1.0 12 +;% 81#( $1,*&%(+) #($ +;%0 /%"% )*"."-)%$ +1 2-($ 1*+ +;#+ +;% 8%($%" /#)
+;% "%).1($%(+ -()+%#$ 12 EPCIB. W;%( .%+-+-1(%") 2#-8%$ +1 .#0 +;% 81#(<
"%).1($%(+ )1*:;+ +1 %E+"#C*$-,-#880 21"%,81)% +;% &1"+:#:%. P%+-+-1(%") 2-8%$ #
/1
P;-8-..-(% N#+-1(#8 B#(' 9). R-+"#++1 G"1*.< I(,.< 362 SCRA 216< J*80 31< 2001.
99
Ibid.
!8
,#)% 21" -(C*(,+-1( #($ ,8#-&%$ +;#+ "%).1($%(+ /#) (1+ +;% "%#8 .#"+0 -( -(+%"%)+ +1
21"%,81)% +;% &1"+:#:%. M#0 21"%,81)% +;% &1"+:#:% 15+#-(%$ 50 +;% .%+-+-1(%") +1
)%,*"% # 81#( 15+#-(%$ 50 EPCIB6
A. An e9trajudicial foreclosure instituted by a third party to the )oan Agreement
and the real estate mortgage B-3*C would be in violation of the petitioners$ rights over
their property. Thus, respondent cannot e9ercise the right of foreclosure not being a party
to the -3*. -espondent, although a whollyEowned subsidiary of 3%+', has an
independent and separate juridical personality from its parent company. The fact that the
corporation owns all of the stocks of another corporation, taken alone, is not sufficient to
justify their being treated as one entity. f used to perform legitimate functions, a
subsidiary$s separate e9istence shall be respected.
122
3. W;%( #"% 122-,%") 12 # ,1".1"#+-1( )18-$#"-80 8-#58% /-+; +;% ,1".1"#+-1(6
A. The general rule is that obligations incurred by the corporation, acting through
its directors, officers, and employees, are its sole liabilities. However, solidary liability
may be incurred, but only under the following e9ceptional circumstancesF 1C Hhen
directors and trustees or, in appropriate cases, the officers of a corporationF BaC vote for or
assent to patently unlawful acts of the corporation= BbC act in bad faith or with gross
negligence in directing the corporate affairs= BcC are guilty of conflict of interest to the
prejudice of the corporation, its stockholders or members, and other persons= !C Hhen a
director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written
objection thereto= "C Hhen a director, trustee or officers has contractually agreed or
stipulated to hold himself personally and solidarily liable with the corporation= 5C Hhen a
director, trustee or officer is made, by specific provision of law, personally liable for his
personal action.
121
3. I( :%(%"#8< /;%( &#0 # .%")1( 1" 122-,%" 12 +;% ,1".1"#+-1( 5-($ +;%
,1".1"#+-1(6
A. The general rule is that, in the absence of authority from the board of
directors, no person, not even its officers, can validly bind a corporation. The power and
responsibility to decide whether the corporation should enter into a contract that will bind
the corporation is lodged in the board of directors. R1S
3. F"1& /;#+ &#0 #..#"%(+ #*+;1"-+0 12 #( 122-,%" +1 5-($ +;% ,1".1"#+-1(
5% $%"-9%$6
A. Apparent authority is derived not merely from practice. ts e9istence may be
ascertained throughF B1C the general manner in which the corporation holds out an officer
or agent as having the power to act, or in other words, the apparent authority to act in
100
Borromeo vs. Court of Ae!"s# 550 SC$A 269# %!rc& 28# 2008.
101
Shrimp Specialists, nc. vs. (ujiETriumph AgriEndustrial +orp., 621 S+-A 1, Dec. 7, !22/.
!6
general, with which it clothes him, or B!C the ac4uiescence in his acts of a particular
nature with actual or constructive knowledge thereof, within or beyond the scope of his
ordinary powers. R1S
3. P%+-+-1(%" +;"1*:; -+) 9-,%-."%)-$%(+< ,1".1"#+% )%,"%+#"0 #($ $-"%,+1"<
A++0. S18*+# #$9%"+-)%$ # ."1.%"+0 21" )#8%. R%).1($%(+) 122%"%$ +1 .*",;#)% +;%
."1.%"+0 /;-,; /#) #,,%.+%$ 50 +;% .%+-+-1(%". P%+-+-1(%" +;"1*:; A++0. S18*+#
%(+%"%$ -(+1 # 8%++%"-#:"%%&%(+ /-+; +;% "%).1($%(+) 21" +;% )#8% 12 +;% )#-$ ."1.%"+0
/-+; 10L #) $1/( .#0&%(+ #($ +;% 5#8#(,% /-+; 90 $#0) 2"1& +;% $#+% 12 )#-$
#:"%%&%(+. P"-1" +1 +;% %E.-"#+-1( 12 +;% )#-$ 90-$#0 .%"-1$< "%).1($%(+) "%=*%)+%$
+;#+ +;% 5#8#(,% 12 +;% ."-,% 5% .#0#58% 1(80 *.1( )%"9-,% +1 +;%& 12 # 2-(#8 $%,-)-1(
12 +;% C1*"+ #22-"&-(: +;% 1/(%");-. 12 +;% .%+-+-1(%". A++0. S18*+# "%22%""%$ +;%
."1.1)#8 +1 .%+-+-1(%">) A))%+ R%,19%"0 #($ R%&%$-#8 M#(#:%&%(+ C1&&-++%%
AARRMCB 5*+ +;% 8#++%" $%2%""%$ #,+-1( +;%"%12. A2+%" +;% 8#.)% 12 +;% 90-$#0
.%"-1$< A++0. S18*+#< #,+-(: 21" +;% .%+-+-1(%" %E%,*+%$ #(1+;%" 8%++%"-#:"%%&%(+ /-+;
+;% "%).1($%(+) #881/-(: +;% 8#++%" +1 .#0 +;% 5#8#(,% *.1( "%,%-.+ 12 +;% 2-(#8 1"$%"
2"1& +;% ,1*"+. L#+%"< A++0. S18*+# /#) "%8-%9%$ 12 ;-) $*+-%). ARRMC $-)#.."19%$
+;% "%=*%)+ 12 +;% "%).1($%(+) 21" %E+%()-1( 12 +-&% +1 .#0 +;% 5#8#(,%. P%+-+-1(%"
,8#-&) +;#+ A++0. S18*+# /#) (1+ #*+;1"-7%$ +1 :"#(+ +;% %E+%()-1( +1 +;% "%).1($%(+)
#($ "%2*)%$ +1 ;1(1" +;% )#&%. C#( .%+-+-1(%" 5% 51*($ 50 +;% #,+) 12 A++0. S18*+#
+1 :"#(+ +;% %E+%()-1( 12 +-&%6
A. The authority of Atty. Soluta to act for and bind the petitioner may be
presumed from acts of recognition in other instances, wherein the power was e9ercised
without any objection from its board or shareholders. %etitioner had previously allowed
Atty. Soluta to enter into the first agreement without a board resolution e9pressly
authori&ing him= thus, it had clothed him with apparent authority to modify the same via
the second letterEagreement. t is not the 4uantity of similar acts which establishes
apparent authority, but the vesting of a corporate officer with the power to bind the
corporation. %etitioner$s inaction, coupled with the apparent authority of Atty. Soluta to
act on behalf of the corporation, validates the second letterEagreement and thus binds the
corporation.
t should be emphasi&ed that if a corporation knowingly permits its officer, or any
other agent, to perform acts within the scope of an apparent authority, holding him out to
the public as possessing power to do those acts, the corporation will, as against any
person who has dealth in good faith with the corporation through such agent , be estopped
from denying such authority. R1S
3. M#0 +;% 50-8#/) 12 # ,1".1"#+-1( ."19-$% 21" #$$-+-1(#8 =*#8-2-,#+-1() 12
$-"%,+1")6
A. The byElaws may provide for the 4ualifications of directors or trustees
12!
provided they are not inconsistent with the +onstitution, law or charter of the corporation
102
Section 57, par. 8.
!7
and they are reasonable. The minimum 4ualification re4uired by the +orporation +ode
must however, be met.
12"

3. T;% 50-8#/) ."19-$% +;#+ 1(80 &%&5%") -( :11$ )+#($-(: 21" #+ 8%#)+ 2-9%
A!B 0%#") );#88 5% =*#8-2-%$ +1 5% %8%,+%$ #) $-"%,+1". I) )*,; #$$-+-1(#8 =*#8-2-,#+-1(
12 $-"%,+1") 9#8-$6
A. Qes, it is valid because the byLlaws may prescribe the 4ualifications of
directors. Thus, one who was elected despite the fact that his membership in the
corporation has not reached five B8C years is in violation of the byElaws and hence, his
election is null and void.
125

3. W;1 #"% $-)=*#8-2-%$ 2"1& 5%-(: %8%,+%$ #) $-"%,+1")6
A. The following are dis4ualified from being elected as directorsF BaC those
convicted by final judgment of an offense punishable by imprisonment for a period
e9ceeding si9 B6C years= BbC those convicted by final judgment of a violation of the
+orporation +ode committed within five B8C years prior to the date of his election=
128
BSec. !7C= and BcC those dis4ualified by the byElaws.
126

3. T;% 50-8#/) 12 S#( M-:*%8 C1".1"#+-1( ASMCB $-)=*#8-2-%$ 2"1& 5%-(:
%8%,+%$ #) $-"%,+1" +;1)% /;1 /%"% $-"%,+1") 12 #(1+;%" ,1".1"#+-1( /;1)% 5*)-(%))
/#) -( ,1&.%+-+-1( /-+; 1" /#) #(+#:1(-)+-, /-+; SMC. G1'1(:/%- /#) # $-"%,+1"
12 1+;%" ,1".1"#+-1() /;1)% 8-(%) 12 5*)-(%)) /%"% -( $-"%,+ ,1&.%+-+-1( /-+; )1&%
12 +;% 5*)-(%)) #,+-9-+-%) 12 SMC. M#0 G1'1(:/%- 5% %8%,+%$ #) $-"%,+1" 12 SMC6
A. ,okongwei was dis4ualified from being elected as director of S*+. The
provision of the byElaws of S*+ dis4ualifying a competitor$s director from being elected
as director of S*+ was valid. Sound principles of corporate management counsel against
sharing sensitive information with a director whose fiduciary duty of loyalty may well
re4uire that he disclose this information to a competitive rival.
127
3. A) # :%(%"#8 "*8%< #"% $-"%,+1")J+"*)+%%) #($ 122-,%") 12 # ,1".1"#+-1(
8-#58% .%")1(#880 21" +;%-" #,+) #) )*,;6
12"
S3+ <pinion, Dec. 1, 1/11.
125
,arcia vs. Diapo, S3+ +ase .o. !16/, 0uly "2, 1//2.
105
Section !7.
126
,okongwei vs. S3+, 1/ S+-A ""6.
127
,okongwei vs. S3+, 1/ S+-A ""6= Asked, 1//1 'ar 39ams.= .o. A BaC, !222 'ar 39ams.= .o. G,
!221 'ar 39ams.

!1
A. As a general rule, directorsNtrustees and officers of a corporation who purport
to act for and in behalf of the corporation, keep within the lawful scope of their authority
in so acting, and act in good faith, do not become liable, whether civilly or otherwise, for
the conse4uences of their acts. Those acts, when they are of such a nature and are done
under such circumstances, are properly attributed to the corporation alone and no
personal liability is incurred by such officers and board membersNdirectors.
121

<fficers of a corporation who act as such within the scope of their authority have
no personal liability for such acts unless it is shown that they have acted negligently or in
bad faith. They are mere agents of the corporation who cannot be made liable if they
acted within the scope of their authority.
12/

(or as long as the corporate officers acted within the scope of their authority and
in good faith, they cannot be held personally liable for the conse4uences of their acts.
The separate corporate personality is a shield against the personal liability of corporate
officers, whose acts are property attributed to the corporation.
112

)ikewise, officers of a corporation are not personally liable for their acts as such
officers unless it is shown that they have e9ceeded their authority. The corporation has a
personality separate and distinct from its officers.
111
However, when the legal fiction that a corporation has a personality separate and
distinct from the stockholders and members is disregarded, as when it is used as a means
to perpetrate fraud or an illegal act or as a vehicle for the evasion of an e9isting
obligation, or to confuse legitimate issues, the officers of such corporation shall be liable
for their acts.
11!

3. S#8*$#:# /#) # )1.;1&1"% 8#/ )+*$%(+ 12 F#" E#)+%"( U(-9%")-+0 AFEUB
/;%( ;% /#) );1+ 50 R1)%+%< 1(% 12 +;% )%,*"-+0 :*#"$) 1( $*+0 #+ +;% ),;118
."%&-)%). R1)%+% ,8#-&%$ +;#+ +;% );11+-(: /#) #,,-$%(+#8. S#8*$#:# 2-8%$ #( #,+-1(
21" $#&#:%) #:#-()+ FEU #($ $% J%)*)< P"%)-$%(+ 12 FEU 1( +;% :"1*($ +;#+ FEU
2#-8%$ +1 ."19-$% )+*$%(+) /-+; # )#2% #($ )%,*"% %(9-"1(&%(+ #($ #( #+&1).;%"%
,1($*,-9% +1 8%#"(-(:. T;% T"-#8 C1*"+ "%($%"%$ C*$:&%(+ 2-($-(: FEU #($ -+)
P"%)-$%(+ C1-(+80 #($ )%9%"#880 8-#58% 21" $#&#:%). I) +;% C*$:&%(+ 12 +;% ,1*"+
#:#-()+ FEU>) P"%)-$%(+ ,1""%,+6
121
'enguet 3lectric +ooperative, nc. vs. .)-+, !2/ S+-A 88.

109
*indanao *otor )ine, nc. vs. +ourt of ndustrial -elations, 6 S+-A 712= Asked, 1/61 and 1/// 'ar
39ams.= Sanche& vs. -epublic, 62" S+-A !!/, <ct. /, !22/.
110
Solidbank +orporation vs. *indanao (erroalloy +orporation, et al., 565 S+-A 52/, 0uly !1, !228.
111
%rudential 'ank vs. Alviar, 565 S+-A "8".
11!
%abalan vs. .)-+, 115 S+-A 5/8= Asked, 1//6 'ar 39ams.C.
!/
A. A corporation is invested by law with a personality separate and distinct from
those of the persons composing it, such that, save for certain e9ceptions, corporate
officers who entered into contracts in behalf of the corporation cannot be held personally
liable for the liabilities of the latter.
%ersonal liability of a corporate director, trustee or officer along Balthough not
necessarilyC with the corporation may so validly attach, as a rule, only when B1C he
assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or
gross negligence in directing its affairs, or when there is a conflict of interest resulting in
damages to the corporation, its stockholders or other persons= B!C he consents to the
issuance of watered down stocks or who, having knowledge thereof, does not forthwith
file with the corporate secretary his written objection thereto= B"C he agrees to hold
himself personally liable with the corporation= or B5C he is made by a specific provision of
law personally answerable for his corporate action.
11"

.one of the foregoing e9ceptions was established in this case, hence, (3?
%resident de 0esus should not be held solidarily liable with (3?.
115
3. SSS 2-8%$ #( #,+-1( #:#-()+ I&.#,+ C1".1"#+-1( #($ -+) $-"%,+1") 21" (1(-
"%&-++#(,% 12 SSS ."%&-*& ,1(+"-5*+-1() /-+;;%8$ 50 )#-$ ,1".1"#+-1( 2"1& -+)
%&.810%%). I&.#,+ 5%,#&% -()189%(+ #($ #88 $-"%,+1") $-%$ %E,%.+ $-"%,+1" G#",-#.
G#",-# ,8#-&%$ +;#+ 1(80 $-"%,+1") /;1 .#"+-,-.#+% -( *(8#/2*8 #,+) 1" #"% :*-8+0 12
:"1)) (%:8-:%(,% #($ 5#$ 2#-+; );#88 5% .%")1(#880 8-#58%< #($ +;#+ 5%-(: # &%"%
)+1,';18$%" 12 +;% ,1".1"#+-1(< );% ,1*8$ (1+ 5% &#$% 8-#58%. I) G#",-# 8-#58%6
A. Among the e9ceptions when a director is liable for the obligations of the
corporation is :when a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action.$ The situation of ,arcia falls e9actly under the
aforesaid situation because Section !1 BfC of the Social Security )aw imposes a civil
liability upon its managing head, directors or partners for any act or omission pertaining
to the violation of the Social Security )aw when committed by a corporation, partnership
or association.
118
3. W;%( #"% $-"%,+1")J+"*)+%%) 8-#58% 21" $#&#:%) )*22%"%$ 50 +;%
,1".1"#+-1(< -+) )+1,';18$%")J&%&5%") #($ 1+;%" .%")1()6
A. Directors or trustees who BaC willfully and knowingly vote for or assent to
patently unlawful acts of the corporation or BbC who are guilty of gross negligence or bad
faith in directing the affairs of the corporation or BcC ac4uire any personal or pecuniary
interest in conflict with their duty as such directors or trustees shall be jointly and
severally liable for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
116
113
%owton +onglomerate nc. vs. Agcolicol, 522 S+-A 8!", April ", !22", cited in Saludaga vs. (ar
3astern ?niversity, 88" S+-A 751, 788, April "2, !221.
114
Saludaga vs. (ar 3astern ?niversity, 88" S+-A 751, 788, April "2, !221.
115
,arcia vs. Social Security System +ommission )egal and +ollection, 852 S+-A 58/, 578, Dec. 17,
!227
116
Section "1, paragraph 1.
"2
n letter BcC mentioned above, the director, trustee or officer who attempts to
ac4uire or ac4uires, in violation of his duty, any interest adverse to the corporation in
respect of any matter which has been reposed in him in confidence, shall likewise be
liable as a trustee for the corporation and must account for the profits which otherwise
would have accrued to the corporation.
117

+onsistent with the foregoing provision, it has been held that personal liability of
a corporate director, trustee or offer along Balthough not necessarilyC with the corporation
may so validly attach, as a rule, only when B1C he assents to a patently unlawful act of the
corporation, or when he is guilty of bad faith or gross negligence in directing its affairs,
or when there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons= B!C he consents to the issuance of watered down stocks or
who, having knowledge thereof, does not forthwith file with the corporate secretary his
written objection thereto= B"C he agrees to hold himself personally liable with the
corporation= or B5C he is made by a specific provision of law personally answerable for
his corporate action.
111

3. P%+-+-1(%" D. M. W%(,%)8#1 #($ A))1,-#+%)< I(,. AWENCESLAOB ;#$ #
,1(+"#,+ /-+; +;% P*58-, E)+#+%) A*+;1"-+0 21" +;% -&."19%&%(+ 12 +;% &#-(
%E."%))/#0 #81(: +;% C1#)+#8 R1#$. T1 2*82-88 -+) 158-:#+-1() +1 +;% PEA< +;%
.%+-+-1(%" %(+%"%$ -(+1 # ,1(+"#,+ /-+; +;% "%).1($%(+ /;%"% R%#$0,1( T"#$-(: #($
C1()+"*,+-1( C1".1"#+-1( AREADDCONB #:"%%$ +1 )%88 +1 .%+-+-1(%" #).;#8+
&#+%"-#8) 9#8*%$ #+ P 1.7 M. T;% ,1(+"#,+ 51"% +;% )-:(#+*"% 12 ,1-.%+-+-1(%" D#0"-+<
+;% 9-,%-."%)-$%(+ 12 +;% WENCESLAO. I+ /#) #:"%%$ +;#+ WENCESLAO /1*8$
.#0 20L *.1( $%8-9%"0 #($ +;% "%&#-(-(: 5#8#(,% /#) +1 5% .#-$ 1! $#0) +;%"%#2+%".
I+ /#) 2*"+;%" )+-.*8#+%$ +;#+ READDCON /#) +1 2*"(-);< $%8-9%"< 8#0< "188 +;%
#).;#8+< #($ -2 (%,%))#"0< &#'% +;% (%%$%$ ,1""%,+-1() 1( # ."%.#"%$ 5#)% #+ +;%
C15)-+%. READDCON $%8-9%"%$< 8#-$ #($ "188%$ +;% #).;#8+. WENCESLAO 2#-8%$ +1
.#0 +;% 5#8#(,% ,1(+%($-(: +;#+ -+ /#) .#0#58% 1(80 *.1( #,,%.+#(,% 12 +;% /1"' 50
+;% :19%"(&%(+. READDCON 2-8%$ # ,1&.8#-(+ #:#-()+ WENCESLAO #($ D#0"-+.
C#( D#0"-+ 5% &#$% .%")1(#880 8-#58% 21" +;% ,1".1"#+-1(>) 2#-8*"% +1 ,1&.80 /-+; -+)
158-:#+-1(6
A. Since Dayrit merely acted as representative of Henceslao, in signing the
contract, he could not be made personally liable for the corporation$s failure to comply
with its obligation.
11/
3. T;% 122-,%") #($ $-"%,+1") 12 C"-).#< I(,. .#))%$ # "%)18*+-1( +%"&-(#+-(:
)%9%"#8 /1"'%") 1( +;% :"1*($ 12 )%"-1*) 5*)-(%)) 81))%). T;% $-)&-))%$ %&.810%%)
2-8%$ #( #,+-1( 21" -88%:#8 $-)&-))#8. C"-).# /#) *(#58% +1 ."19% -+) 2-(#(,-#8 81))%)
117
Section "1, par. != Asked, 1//6 and 1//7 'ar 39ams.
118
%owton +onglomerate nc. vs. Agcolicol, 522 S+-A 8!", April ", !22".
119
D. *. Henceslao and Associates, nc. vs. -eadycon Trading and +onstruction +orp., 5"" S+-A !81,
0une !/, !225.
"1
#($ &%"%80 ."%)%(+%$ # S+#+%&%(+ 12 P"12-+ #($ L1))%) /;-,; $-$ (1+ 5%#" +;%
)-:(#+*"% 12 # ,%"+-2-%$ .*58-, #,,1*(+#(+ (1" #*$-+%$ 50 #( -($%.%($%(+ #*$-+1".
T;% NLRC 21*($ +;% 122-,%") #($ $-"%,+1") 12 C"-).# )18-$#"-80 8-#58% /-+; )#-$
,1".1"#+-1( 21" +;% .#0&%(+ 12 5#,' /#:%) #($ )%.#"#+-1( .#0. W#) )*,; $%,-)-1(
,1""%,+6
A. +orporate officers and directors are solidarily liable with the corporation for
the termination of employment of corporate employees done with malice or in bad faith.
They were the ones, who as highEranking officers and directors of +rispa signed the
board resolution retrenching the employees on the feigned ground of serious business
losses that had no basis apart from an unsigned and unaudited %rofit and )oss Statement
which has no evidentiary value whatsoever. This is indicative of bad faith on the part of
the officers and directors for which they can be held jointly and severally liable with
+rispa for all the money claims of the illegally terminated employees.
1!2

3. C*%)+# )18$ +1 T"#&#+ M%",#(+-8%< I(,. # +"#,+1". I( .#0&%(+ +;%"%12<
D#9-$ O(:< T"#&#+>) ."%)-$%(+ #($ &#(#:%"< -))*%$ # ,;%,'. T"#&#+ -( +*"(< )18$
+;% +"#,+1" +1:%+;%" /-+; # 8#/( &1/%" 2#5"-,#+%$ 50 -+ +1 NAWASA. O(: )+1..%$
.#0&%(+ 12 +;% ,;%,' -))*%$ +1 C*%)+# 1( +;% :"1*($ +;#+ NAWASA "%2*)%$ +1 .#0
+;% +"#,+1" #($ 8#/( &1/%" 5%,#*)% 12 )1&% $%2%,+) -( +;% &1/%" #($ +;#+ +;%
%(:-(% 12 +;% +"#,+1" /#) # "%,1($-+-1(%$ *(-+. C*%)+# )*%$ T"#&#+ #($ O(:. W#)
O(: 8-#58%6
A. <ng was not liable because he acted not in his personal capacity, but as an
officer of Tramat which has a distinct personality. <nly the corporation and not the
person acting for and on its behalf could be made liable thereon. %ersonal liability of a
corporate director, trustee or officer along with the corporation Balthough not necessarilyC
may so validly attach, as a rule, only when L
1. He assents BaC to a patently unlawful act of the corporation, or BbC for bad faith
or gross negligence in directing its affairs, or BcC for conflict of interest, resulting in
damages to the corporation, its stockholders or other persons=
!. He consents to the issuance of watered stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his written objection thereto=
". He agrees to hold himself personally and solidarily liable with the corporation=
or
5. He is made, by a specific provision of law, to personally answer for his
corporate action.
1!1
3. W;#+ #"% +;% "%=*-)-+%) 12 # $%"-9#+-9% )*-+6
120
?ichico vs. .)-+, !7" S+-A "8.
1!1
Tramat *ercantile, nc. vs. +ourt of Appeals, !"1 S+-A 15= Asked, 1//8 and 1//6 'ar 39ams.
"!
A. The re4uisites of a derivative suit areF
BaC The party bringing suit should be a shareholder during the time the act or
transaction complained of, the number of shares not being material=
BbC The party has tried to e9haust intraEcorporate remedies i.e., has made a
demand on the board of directors for the appropriate relief, but the latter has
failed or refused to heed his pleas= and
BcC The cause of action actually devolves on the corporation= the wrongdoing or
harm having been caused to the corporation and not the particular stockholder
bringing the suit.
1!!
3. W;#+ -) +;% (#+*"% 12 # $%"-9#+-9% )*-+ #($ 21" /;1)% 5%(%2-+ -) -+6
A. A derivative action is a suit by a stockholder to enforce a corporate cause of
action. ?nder the +orporation +ode, where a corporation is an injured party, its power to
sue is lodged with its board of directors or trustees. However, an individual stockholder
may file a derivative suit on behalf of the corporation to protect or vindicate corporate
rights wherever the officials of the corporation refuse to sue, or are the ones to be sued, or
hold control of the corporation. n such actions, the corporation is the real party in
interest while the suing stockholder, on behalf of the corporation is only a nominal
party.
1!"
3. M#0 # (1&-(%% $-"%,+1" 12 PNCC< # G19%"(&%(+-1/(%$ 1" ,1(+"188%$
,1".1"#+-1( 2-8% # $%"-9#+-9% )*-+ +1 #((*8 # ,1&."1&-)% #:"%%&%(+ %(+%"%$ -(+1 50
+;% ,1".1"#+-1(6
A. To be elected in the 'oard of a governmentEowned or controlled corporation, a
nominal share is transferred to him so as to 4ualify him as director. Hence, he has legal
standing to challenge the compromise agreement. The government nominees in the
%.++ 'oard, who practically compose the entire %.++ 'oard, are public officer subject
to the AntiE,raft and +orrupt %ractices Act, accountable to the ,overnment and the
(ilipino %eople. To say that %.++ was organi&ed under the +orporate +ode, despite its
being /2."T owned by the ,overnment is :an autonomous entity; that could solely
through its 'oard of Directors compromise, and transfer ownership, of substantially all its
assets to a private party without complying with the Administrative +ode of 1/17, is to
invite the plunder of all such government owned corporations.
1!5
3. A#B W;#+ -) +;% 5#)-) 12 +;% )+1,';18$%">) "-:;+ 12 -().%,+-1( 12 +;%
,1".1"#+-1(>) 511') #($ "%,1"$)K A5B M#0 +;% ;%-") 12 # $%,%#)%$ )+1,';18$%"
-&&%$-#+%80 %E%",-)% +;% "-:;+ 12 -().%,+-1( *.1( +;% $%#+; 12 +;% )+1,';18$%"6
122
-eyes vs. -T+ of *akati, 861 S+-A 8/", Aug. 11, !221.
123
Sison vs. %.++ and -adstock Securities )td., 627 S+-A 51", Dec. 5, !22/.
124
Sison vs. %.++ and -adstock Securities )td., 627 S+-A 51", Dec. 5, !22/.
""
A. BaC The stockholder$s right of inspection of the corporation$s books and records
is based upon his ownership of shares in the corporation and the necessity for selfE
protection. BbC ?pon the death of a shareholder, the heirs do not automatically ac4uire the
rights and privileges of the deceased as shareholder of the corporation L the stocks must
be distributed first to the heirs in estate proceedings, and the transfer of the stocks must
be recorded in the books of the corporation. During such interim period, the heirs stand as
the e4uitable owners of the stocks, the e9ecutor or administrator duly appointed by the
court being vested with the legal title to the stock.
1!8
3. I) +;% )+1,';18$%">) "-:;+ 12 -().%,+-1( 12 +;% 511') #($ "%,1"$) 12 +;%
,1".1"#+-1( #5)18*+%6
A. The right of inspection of corporate records by a stockholder must be germane to
the petitioner$s interest as a stockholder, and has to be proper and lawful in character and
not inimical to the interest of the corporation.
1!6
Thus, when a stockholder was not acting
in good faith and for a legitimate purpose in making his demand for inspection of the
corporate books, the corporation is justified in refusing his re4uest for e9amination of the
corporation books.
1!7
3. D%2-(% $-9-$%($.
A. Dividend is that portion of the profits and surplus funds of the corporation
which has been actually set apart, by a valid act of the corporation, for distribution among
the stockholders according to their respective interests.
1!1
t is the fund set aside and
declared by the directors of the corporation and in case of stock dividends, with the
approval BsicC of the stockholders, to be divided or distributed among the stockholders
according to their respective interests.
1!/
The term is also used to designate the shares of
the individual stockholders or members in the fund so set apart, and also to designate the
assets distributed by a corporation among its stockholders out of capital on reduction of
the capital stock or dissolution.
1"2

+orporate profits when set apart, declared and ordered by the directors for distribution
among the shareholders are known as dividends.
1"1

3. D-)+-(:*-); $-9-$%($) 2"1& ."12-+).
125
%uno vs. %uno 3nterprises, nc., 8// S+-A 818, Sept. 11, !22/.
126
,okongwei, 0r. vs. Securities and 39change +ommission, 171 %hil. !66= 1/ S+-A ""6.
127
AngEAbaya vs. Abaya, 87" S+-A 1"", Dec. 5, !221.
128
15 +. 0. Sec. 1!27.
129
.ielson @ +o., nc. vs. )epanto +onsolidated *ining +o., !6 S+-A 85!.
1"2
11 (letcher +yc. +orp., Sec. 8" 11, p. 62"= Asked, 1//2 'ar 39ams.
1"1
S3+ <pinion, 0anuary ", 1/1".
"5
A. Dividends are declared only from profit after they are earned.
1"!
%rofits in the
coffers of a corporation do not become a dividend until they have been set apart or at
least declared as a dividend.
1""

3. W;#+ &#0 5% +;% )1*",% 12 .#0&%(+ 12 $-9-$%($)6
A. A corporation cannot lawfully declare dividends out of its capital stock, and
thereby reduce the same, or out of assets which are needed to pay the corporate debts.
They can be declared only out of surplus profits.
1"5
The reason for the rule is that it would
be a fraud upon the creditors of a corporation who e9tend credit to it on the faith of its
capital stock, to permit it to be diverted by a distribution among the stockholders as
dividends. *oreover, each stockholder is entitled to have the capital stock preserved
unimpaired for the purpose of carrying out the object for which the corporation is
formed.
1"8

3. W;#+ -) +;% %22%,+ 12 $%,8#"#+-1( 12 )+1,' $-9-$%($)6
A. The declaration of stock dividends is akin t8o a forced purchase of stocks. 'y
declaring stock dividends, a corporation ploughs back a portion or its entire unrestricted
retained earnings either to its working capital or for capital asset ac4uisition or
investments. Hhen the dividend is distributed, it ceases to be a property of the
corporation as the entire portion or its unrestricted retained is distributed pro rata to
corporate stockholders. Hhen stock dividends are distributed, the amount declared ceases
to belong to the corporation but is distributed among the stockholders. +onse4uently, the
unrestricted retained earnings of the corporation are diminished by the amount of the
declared dividend while the stockholders$ e4uity is increased.
1"6
3. I) # 21"%-:( ,1".1"#+-1( (1+ 8-,%()%$ +1 $1 5*)-(%)) -( +;% P;-8-..-(%)
#5)18*+%80 -(,#.#,-+#+%$ 2"1& 2-8-(: # )*-+ -( 81,#8 ,1*"+)6
A. Hhen a foreign corporation does business in the %hilippines without the proper
license, it cannot maintain any action of proceeding before %hilippine +ourts. :Doing
business; implies a continuity of commercial dealings or arrangement which involve
:profitEmaking;. :Soliciting purchases; has been deleted from the enumeration of acts or
activities which constitute :doing business;. Thus, where a foreign company merely
imports goods from a %hilippine e9porter, without opening an office or appointing an
agent in the %hilippines, is not doing business in the %hilippines and hence, not barred
from bringing action in %hilippine courts.
1"7

132
ndiana Aeneer and )umber +o. vs. Hageman, 87 nd. App. 661, 128 .3 !8".
133
)ord v. Territory of Hawaii, 7/ ( !d, 761= 11 (letcher +yc. +orp., Sec. 8"1/, p. 62/= Asked, .o. A, b,
!228 'ar 39ams.
134
11 (letcher +yc. +orp. Sec. 8"1/, 611= Steinberg vs. Aelasco, 8! %hil. /8"= Asked, .o. A, a, !228 'ar
39ams.
1"8
15 +. 0. Sec. 1!12= Asked, 1/8" and 1/87 'ar 39ams.= .o. A c, !228 'ar 39ams.
136
%)DT vs. .T+, 8"/ S+-A "68, December 5, !227.
137
+argill, nc. vs. ntra Strata Assurance +orporation, 618 S+-A "25, *arch 18, !212.
"8
<nly when a foreign corporation is transacting or doing business in the
%hilippines will a license be necessary before it can institute suits. t may however, bring
suits on isolated business transactions, which is not prohibited under %hilippine )aw.
Thus, a foreign insurance company may sue in %hilippine courts for subrogation arising
out of marine insurance policies issued by it abroad to cover internationalEbound cargoes
shipped by a %hilippine carrier, even if it has no license to do business in the country. t is
the act of engaging in business without the prescribed license, and not the lack of license
per se which bars a foreign corporation from access to our courts.
1"1
T4E SECURITIES REGULATION CODE
3. W;#+ #"% +;% ."19-)-1() *($%" +;% S%,*"-+-%) R%:*8#+-1( C1$% -(+%($%$ +1
."1+%,+ +;% -(+%"%)+ 12 );#"%;18$%")6
A. The following are the provisions under the Securities -egulation +ode
intended to protect the interest of shareholdersF
B1C Tender offers to stockholders whenever any person or group of persons intends
to ac4uire 18T of the e4uity of a listed corporation or one with a capital of at least %82
million, or "2T of the e4uity of such corporation over a period of 1! months, as the case
may be.
1"/
B!C -estrictions on pro9y solicitations=
152
and
B"C -e4uirements for internal recordEkeeping and accounting controls.
151
3. W;#+ -) # ?+%($%" 122%"@6 W;#+ -) -+) .*".1)%6
A. A :tender offer; is a publicly announced intention by a person acting alone or
in concert with other persons to ac4uire e4uity securities of a public company i. e., one
listed on an stock e9change. t is also defined as an offer by the ac4uiring person to
stockholders of a public company for them to tender their shares therein on the terms
specified in the offer.
15!

Tender offer is in place to protect the interests of minority stockholders of a target
company against any scheme that dilutes the share value of their investments. t affords
such minority shareholders the opportunity to withdraw or e9it from the company under
reasonable terms, a change to sell their shares at the same price as those of the majority
stockholders.
15"
138
Aboiti& Shipping +orporation vs. nsurance +ompany of .orth America, 861 S+-A !6!.
139
Section 1/.1, Asked, .o. A, !22! 'ar 39ams.
140
Section !2.
141
Section !!.
142
<smena vsN Social Security System of the %hilippines, 8"" S+-A, Sept. 1", !227.
143
bid.
"6
3. W;%( &*)+ +%($%" 122%" 5% &#$% +1 );#"%;18$%")6
A. Any person or group of persons acting in concert who intends to ac4uire at
least fifteen percent B18TC of any class of any e4uity security of a listed corporation or of
any class of any e4uity security of a corporation with assets of at least (ifty million pesos
B%82,222,222.22C and having two hundred B!!C or more stockholders with at least one
hundred B122C shares each or who intends to ac4uire at least thirty percent B"2TC of such
e4uity over a period of twelve B1!C months shall make a tender offer to stockholders by
filing with the +ommission a declaration to that effect= and furnish the issuer, a statement
containing such of the information re4uired in Section 17 of this +ode as the +ommission
may prescribe. Such person or group of persons shall publish all re4uests or invitations
for tender, or materials making a tender offer or re4uesting or inviting letters of such a
security. +opies of any additional material soliciting or re4uesting such tender offers
subse4uent to the initial solicitation or re4uest shall contain such information as the
+ommission may prescribe, and shall be filed with the +ommission and sent to the issuer
not later than the time copies of such materials are first published or sent or given to
security holders.
155
3. SSS< # :19%"(&%(+ 2-(#(,-#8 -()+-+*+-1( +11' )+%.) +1 )%88 -+) );#"%;18$-(:)
-( E=*-+#58% PCI B#(' AEPCIBB. SSS #($ B#(,1 $% O"1 #($ -+) )*5)-$-#"0 %(+%"%$
-(+1 S;#"% P*",;#)% A:"%%&%(+ ASPAB ,19%"-(: SSS>) );#"%) -( EPCIB #+ P3.!0 .%"
);#"% /;-,; /#) #+ # ."%&-*& 12 30L 12 +;% +;%( &#"'%+ 9#8*% -( +;% )+1,' &#"'%+
/;%"% +;% );#"%) /%"% +"#$%$ #+ P3.!0 .%" );#"%. SSS #$9%"+-)%$ #( -(9-+#+-1( +1
5-$ -+) 581,' 12 );#"%) -( EPCIB )*5C%,+ +1 +;% "-:;+ 12 BDO +1 &#+,; +;% ;-:;%)+
5-$. P%+-+-1(%") 2-8%$ +;% ."%)%(+ #,+-1( 21" ."1;-5-+-1(. I( +;% &%#(+-&%< BDO #($
EPCIB #((1*(,%$ -+) -(+%(+-1( +1 &%":%. SM I(9%)+&%(+ C1".1"#+-1(< #( #22-8-#+%
12 BDO ,1&&%(,%$ # &#($#+1"0 +%($%" 122%" 12 +;% %(+-"% 1*+)+#($-(: ,#.-+#8 )+1,'
12 EPCIB #+ P92.0 .%" );#"%. SSS &#(-2%)+%$ -( ,1*"+ +;#+ +;% ,#)% -) #8"%#$0 &11+
-( 9-%/ 12 +;% +%($%" 122%" 21" P92.00 .%" );#"%. P%+-+-1(%") ,8#-&%$ +;#+ +;% +%($%"
122%" ,#((1+ "%($%" +;% ,#)% &11+ #($ #,#$%&-, *(8%)) SSS /-+;$"#/) +;% )#8% 12
+;% );#"%) *($%" -+) S;#"% P*",;#)% A:"%%&%(+. D%,-$% /-+; "%#)1().
A. The case is already moot and academic. The condition under which the parties
have agreed into a S%A case to e9ist because of the tender offer at a higher price. The
pricing component L at %5".82 per share L has ceased to e9ist.
158

3. W;#+ -) +;% &%#(-(: 12 ?S/-)) C;#88%(:%@6
A. ?nder the :Swiss +hallenge; format, one of the bidders is given the option or
preferential right to match the winning bid.
156
3. W;#+ #"% ?P"%-N%%$ P8#()@6
144
Section 1/.1= Asked, .o. A, !22! 'ar 39ams.
145
<smena vs. Social Security System of the %hilippines, infra.
146
<smena vs. Social Security System of the %hilippines, 8"" S+-A "1", "!1, September 1", !227.
"7
A. :%reE.eed %lans; are contracts which provide for the performance of future
services or the payment of future monetary considerations at the time of actual need, for
which planholders pay in cash or installment at stated prices, with or without interest or
insurance coverage, and includes life, pension, education, interment, and other plans
which the +ommission may from time to time approve.
157
PRESIDENTIAL DECREE NO. 902-A
AA) #&%($%$ 50 S%,*"-+-%) R%:*8#+-1( C1$%B
3. W;-,; ,1*"+ ;#) C*"-)$-,+-1( 19%" ,#)%) ."%9-1*)80 ,1:(-7#58% 50 +;%
SEC6
A. The court designated by the Supreme +ourt as Special +ommercial +ourt is
vested with jurisdiction over cases previously cogni&able by the Securities and 39change
+ommission. Hhen a case is erroneously filed in the regular -egional Trial +ourt, such
court does not have the authority or power to order the transfer of cases erroneously filed
with it to another branch of the -egional Trial +ourt L the only action that it could take
on the matter is to dismiss the petition for lack of jurisdiction.
151

3. W;1 &#0 2-8% # .%+-+-1( 21" "%;#5-8-+#+-1( 12 # ,1".1"#+-1(6
A. The petitioner in a %etition for -ehabilitation of the corporation must either beF
B1C an actual insolvent debtor= B!C a technically insolvent debtor= or B"C a creditor or
stockholder of the debtor.
15/
3. W;#+ -) +%,;(-,#8 -()189%(,06 W;#+ -) +;% "%&%$0 12 +;% ,1".1"#+% $%5+1"
/-+; +%,;(-,#8 -()189%(,0.
A. Technical insolvency is the inability of a corporation to pay its obligations
although it has sufficient assets, for a period longer than one year from filing of the
petition. ts remedy is to file a %etition for -ehabilitation.
182

3. D-)+-(:*-); #,+*#8 -()189%(,0 2"1& +%,;(-,#8 -()189%(,0.
A. There is actual insolvency when the corporation$s assets are not enough to
cover its liabilities, while technical insolvency e9ists when the corporation has enough
assets but it foresees its inability to pay its obligations for more than one year from the
filing of the petition.
181

147
Abrera, et al., vs. 'ar&a and +ollege Assurance %lan of the %hil., nc., 8// S+-A 8"5, Sept. 11, !22/.
148
bid.
149
?nion 'ank of the %hilippines vs. AS' Development +orporation, 862 S+-A 871.
150
?nion 'ank of the %hilippines vs. AS' Development +orporation, 862 S+-A 871.
151
%.' vs. +ourt of Appeals, 876 S+-A 8"7, 0anuary 7, !22/.
"1
3. W;%( &#0 # .#"+0 #..80 21" +;% #..1-(+&%(+ 12 # &#(#:%&%(+ ,1&&-++%%
21" +;% ,1".1"#+-1(< .#"+(%");-. 1" #))1,-#+-1(6
A. A party may apply for the appointment of a management committee for the
corporation, partnership or association when there is imminent danger ofF
B1C Dissipation, loss, wastage or destruction or assets or other properties= and
B!C %araly&ation of its business operations which may be prejudicial to the interest
of the minority stockholders, partiesElitigants or the general public.
18!
The situations contemplated in these instances are serious in nature. There must
e9ist a clear and imminent danger of losing the corporate assets if a receiver is not
appointed.
18"
3. W;%( &#0 "%,%-9%") 5% #..1-(+%$ 21" # ,1".1"#+-1(6
A. -eceivers may be appointed wheneverF
B1C necessary in order to preserve the rights of the partiesElitigant, andNor
B"C protect the interest of the investing public and creditors.
185

3. W;#+ -) +;% ?S%"-1*) S-+*#+-1( T%)+@ -( ,1".1"#+% "%;#5-8-+#+-1( ,#)%)6
A. The :Serious Situation Test; in a petition for rehabilitation case means that
there is a clear and imminent danger that the corporate petitioner will lose its corporate
assets if a receiver is not appointed.
188
3. W;#+ -) +;% %22%,+ 12 +;% #..1-(+&%(+ 12 # "%;#5-8-+#+-1( "%,%-9%"6 W;#+ -)
+;% .*".1)% +;%"%126
A. ?pon appointment by the S3+ Bnow, -T+ Special +ommercial +ourtC of a
rehabilitation receiver, all actions for claims against the corporation pending before any
court, tribunal or board shall ipso jure be suspended.
186

The purpose of the automatic stay of all pending actions for claims is to enable
the rehabilitation receiver to effectively e9ercise itsNhis powers free from any judicial or
e9trajudicial interference that might unduly hinder or prevent the rescue of the
corporation. *ore importantly, the suspension of all actions for claims against the
corporation embraces all phases of the suit, be it before the trial court or any tribunal or
152
Sy +him vs. Sy Siy Ho @ Sons, nc., 512 S+-A 568, 0anuary !7, !226, citing Section 1, -ule / of the
nterim -ules on +orporate -ehabilitation.
153
%ryce +orporation vs. +ourt of Appeals, 85" S+-A 687, (ebruary 5, !221.
154
Section 6 BcC, %. D. /2!EA, as amended.
155
%ryce +orporation vs. +ourt of Appeals, supra.
156
,arcia vs. %hilippine Air )ines, nc., 8"1 S+-A 875.
"/
before the Supreme +ourt. .o other action may be taken, including the rendition of
judgment during the state of suspension. t must be stresses that what are automatically
stayed or suspended are the proceedings of a suit and not just the payment of claims
during the e9ecution stage after the case had become final and e9ecutory.
187
3. W;#+ #"% +;% #,+-1() +;#+ #"% )*).%($%$ $*"-(: +;% ."1,%)) 12
"%;#5-8-+#+-1(6
A. The actions that are suspended cover all claims against the corporation whether
for damages founded on a breach of contract of carriage, labor cases, collection suits or
any other claims of a pecuniary nature. .o e9ception in favor of labor claims is
mentioned in the law.
181
.o e9ception either is made therein in favor of maritime claims.
Thus, since the law does make any e9emptions or distinctions, neither should we.
18/
+laims for tuition fees against a :preEneed; company are likewise included among the
claims to be suspended by the petition.
162
3. W;#+ -) +;% .*".1)% 12 )*).%($-(: +;% ."1,%%$-(:) -(-+-#+%$ 50 +;%
,"%$-+1") 21" +;% ,188%,+-1( 12 +;%-" ,"%$-+) /;%(%9%" # ,1".1"#+-1( -) *($%":1-(:
"%;#5-8-+#+-1(6
A. The purpose for the suspension of the proceedings is to prevent a creditor from
obtaining an advantage or preference over another and to protect and preserve the rights
of party litigants as well as the interest of the investing public or creditors. Such
suspension is intended to give enough breathing space for the management committee or
rehabilitation receiver to make the business viable again, without having to divert
attention and resources to litigations in various fora. The suspension would enable the
management committee or rehabilitation receiver to effectively e9ercise itsNhis powers
free from any judicial or e9trajudicial interference that might unduly hinder or prevent
the :rescue; of the debtor company. To allow such other action to continue would only
add to the burden of the management committee or rehabilitation receiver, whose time,
effort and resources would be wasted in defending claims against the corporation instead
of being directed toward its restructuring and rehabilitation.
161
3. W-88 +;% )*).%()-1( 12 #88 ."1,%%$-(:) #) # ,1()%=*%(,% 12 "%;#5-8-+#+-1(
-(,8*$% )*).%()-1( 12 ,"-&-(#8 ."1)%,*+-1( 21" 9-18#+-1( 12 BP 22 1" B1*(,-(: C;%,'
L#/6
A. Aiolation of '% !! is not a :claim; that can be enjoined within the purview of
%.D. .o. /2!EA although the conviction of the accused for the alleged crime could result
in the restitution, reparation or indemnification of the offended party for the damage or
injury he sustained by reason of the felonious act of the accused because prosecution for
157
bid.
158
%hilippine Airlines, nc. vs. Heirs of 'ernardin 0. Uamora, 8"1 S+-A 586, .ovember !", !227.
159
.egros .avigation +o., nc. vs. +ourt of Appeals, 87" S+-A 5"5, December 12, !221.
160
Abrera, et al., vs. 'ar&a and +A%, 8// S+-A 8"5, Sept. 11, !22/.
161
%hilippine slands +orporation for Tourism Development, nc. vs. Aictorias *illing +ompany, nc.. 885
S+-A 861, 0une 17, !221.
52
violation of '.%. !! is a criminal action. The dominant and primordial objective of the
criminal action is the punishment of the offender. The civil action is merely incidental to
and conse4uent to the conviction of the accused. +riminal actions are primarily intended
to vindicate an outrage against the sovereignty of the state and to impose the appropriate
penalty for the vindication of the disturbance to the social order caused by the offender.
<n the other hand, the action between the private complainant and the accused is
intended solely to indemnify the former.
16!
3. W;#+ -) +;% $-22%"%(,% 5%+/%%( S*).%()-1( 12 P#0&%(+) *($%" +;%
I()189%(,0 L#/ #($ )*).%()-1( 12 .#0&%(+) 12 # ,1".1"#+-1( *($%":1-(:
"%;#5-8-+#+-1( *($%" P"%)-$%(+-#8 D%,"%% 902-A6
A. ?nlike the provisions in the nsolvency )aw which e9empts secured creditors
from the suspensive effect of the order issued by the court in an ordinary suspension of
payment proceedings, the provisions of %.D. .o. /2!EA, when it comes to the
appointment of a management committee or a rehabilitation receiver, do not contain an
e9emption for secured creditors.
16"

3. V-,+1"-#) M-88-(: C1".1"#+-1( AVMCB 15+#-(%$ 81#() 2"1& CICM
M-))-1(#"-%)< I(,. #($ C1(:"%:#+-1( 12 +;% M1)+ 4180 R%$%%&%" /;-,; /%"%
#))-:(%$ +1 PICTD. W;%( +;% 81#() &#+*"%$< PICTD $%&#($%$ .#0&%(+ 2"1&
VMC /;-,; 2#-8%$ +1 .#0. PITC 2-8%$ # ,1&.8#-(+ #:#-()+ VMC /-+; # ."#0%" 21"
."%8-&-(#"0 #++#,;&%(+ /;-,; +;% ,1*"+ :"#(+%$. T;% ,1*"+ 8-2+%$ +;% #++#,;&%(+
/;%( VMC 2-8%$ # ,1*(+%"51($. T;%"%#2+%"< VMC 2-8%$ /-+; +;% SEC # .%+-+-1( +1
$%,8#"% -+)%82 -( # )+#+% 12 )*).%()-1( 12 .#0&%(+) #($ )1*:;+ +;% #..1-(+&%(+ 12 #
&#(#:%&%(+ ,1&&-++%% +;#+ /1*8$ 19%")%% -+) ."1.1)%$ "%;#5-8-+#+-1( .8#(. SEC
1"$%"%$ +;% )*).%()-1( 12 #88 #,+-1() #:#-()+ VMC. PICTD 2-8%$ # &1+-1( +1 8-2+ +;%
)*).%()-1( 12 ."1,%%$-(:) 1( +;% :"1*($ +;#+ -+ -) # )%,*"%$ ,"%$-+1" ;#9-(:
."%9-1*)80 15+#-(%$ #( #++#,;&%(+ 19%" VMC>) ."1.%"+-%). I) +;% ,1(+%(+-1( 12
PICTD ,1""%,+.
A. He are not persuaded by %+TD$s argument that it should be e9empt from the
suspension order because it is a secured creditor. ?nlike the provisions in the nsolvency
)aw which e9empts secured creditors from the suspensive effect of the order issued by
the court in an ordinary suspension of payment proceedings, the provisions of %.D. .o.
/2!EA, when it comes to the appointment of a management committee or a rehabilitation
receiver, do not contain an e9emption for secured creditors.
165
3. W;#+ -) +;% %22%,+ 12 +;% #..1-(+&%(+ 12 # &#(#:%&%(+ ,1&&-++%% 1"
"%;#5-8-+#+-1( "%,%-9%" 1( +;% "-:;+ 12 +;% )%,*"%$ ,"%$-+1" +1 21"%,81)% +;% &1"+:#:%
-( -+) 2#91"6
162
-osario vs. +o, 86" S+-A !"/, Aug. !6, !221.
163
%hilippine slands +orporation for Tourism Development, nc. vs. Aictorias *illing +ompany, nc.,
supra.
164
Ibid.
51
A. The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon the issuance
of a stay order by the trial court. However, the creditorEmortgagee may e9ercise his right
to foreclose the mortgage upon the termination of the rehabilitation proceedings or upon
the lifting of the stay order.
168
3. W;#+ -) +;% ,1()%=*%(,% -2 "%;#5-8-+#+-1( -) (1 81(:%" 2%#)-58% #($ +;%
#))%+) 12 +;% ,1".1"#+-1( #"% 2-(#880 8-=*-$#+%$6
A. Secured creditors shall then enjoy preference over unsecured creditors, subject
only to the provisions of the +ivil +ode on concurrence and preference of credits.
+reditors of secured obligations may pursue their security interest on lien, or they may
choose to abandon the preference and prove their credits as ordinary claims.
166
.3,<TA')3 .ST-?*3.TS
3. T;% ."1&-))1"0 (1+% )-:(%$ 50 +;% &#'%") "%#$)< ?R%,%-9%$ 2"1& A++0.
D-1(-)-1 V. L8#&#)< +;% )*& 12 P<000< P;-8-..-(% ,*""%(,0 .#0#58% 1( 1" 5%21"%
J#(*#"0 23< 1997 #+ N1. 1 G-10 G#&-#)< 3*%71( C-+0< /-+; -(+%"%)+ #+ +;% "#+% 12
!L .%" &1(+; 1" 2"#,+-1( +;%"%12. I+ -) *($%")+11$ +;#+ 1*" 8-#5-8-+0 *($%" +;-) 81#(
-) C1-(+80 #($ )%9%"#880.@A)-,B. I) +;% )#-$ ."1&-))1"0 (1+% (%:1+-#58%6
A. 'y its terms, the note was made payable to a specific person rather than to
bearer or to order L a re4uisite for negotiability under the .egotiable nstruments )aw.
Hence, the note is nonEnegotiable.
167
3. I) # )+-.*8#+-1( +;#+ .#0&%(+ /-88 5% &#$% -( # 21"%-:( ,*""%(,0 )+#+%$ -(
+;% -()+"*&%(+ 9#8-$6 D1%) -+ #22%,+ (%:1+-#5-8-+06
A. An obligation for the payment of money may be discharged by payment in a
currency which is the legal tender in the %hilippines.
161
However, a stipulation to pay in a
foreign currency shall be valid and the obligation need not be converted to its e4uivalent
in %hilippine peso at the rate of e9change prevailing at the time of payment.
16/
-. A. 8!/
as amended, was repealed by -. A. 111" which was enacted into law on 0une 11, 1//6.
165
Consue"o %et!" Coror!tion vs. '"!nters (eve"oment B!n)# 465 SC$A 465.
166
Consue"o %et!" Coror!tion vs. '"!nters (eve"oment B!n)# 465 SC$A 465# *une
26# 2008.
167
,arcia vs. )lamas, 517 S+-A !/!, December 1, !22".
168
Article 1!5/, +ivil +ode, as amended.
169
-A 8!/ as amended by -A 5122 and -. A. 111"= Asked, 1/71 'ar 39ams.
5!
?nder the said law, all monetary obligations shall be settled in the currency which is the
legal tender in the %hilippines. However, the parties may agree that the obligation or
transaction shall be settled in any other currency at the time of payment.
172

3. W;%( ,#( #( -()+"*&%(+ 1" ,;%,' .#0#58% +1 +;% 1"$%" 12 # ).%,-2-%$
.%")1( 5% ,1()-$%"%$ #) .#0#58% +1 5%#"%"6 41/ &#0 -+ 5% (%:1+-#+%$6
A. An instrument or check payable to the order of a specified person may be
considered payable to bearer when the payee is a fictitious or nonEe9isting person and
such fact is known to the person making it so payable. Thus, checks issued to :%rinsipe
Abante; of :Si *alakas at si *aganda;, who are wellEknown characters in %hilippine
mythology, are bearer instruments because the named payees are fictitious and nonE
e9istent.
171
3ven actual, e9isting, and living payee may likewise be :fictitious; if the drawer
of the check did not intend the payee to in fact receive the proceeds of the check L if the
payee is not the intended recipient of the check, the payee is considered a :fictitious;
payee and the check is a bearer instrument.
17!

t may be negotiated by mere delivery
17"
because the drawer cannot e9pect a
fictitious payee to negotiate the check by placing his indorsement thereon, the drawer in
such situation must have intended the check to be negotiated by mere delivery.
175
3. C#)# M1(+%))1"- ;#$ # ,*""%(+ #,,1*(+ /-+; B#(' 12 P. I. ABPIB< /-+; -+)
P"%)-$%(+< L%5"1( #) 1(% 12 +;% )-:(#+1"-%). I( 1991< C#)# $-),19%"%$ +;#+ (-(% 12 -+)
,;%,') ;#$ 5%%( %(,#);%$ 50 # ,%"+#-( S1((0 D. S#(+1) 2"1& M#",;< 1990 +1
D%,%&5%"< 1990 50 21":-(: +;% )-:(#+*"% 12 L%5"1( #) $"#/%". I+ +*"(%$ 1*+ +;#+
S1((0 D. S#(+1) /#) # 2-,+-+-1*) (#&% *)%$ 50 D#5*+< #( %E+%"(#8 #*$-+1" 12 C#)#<
/;1 ;#$ #,,1*(+ /-+; BPI>) G"%%(5%8+ B"#(,;< *)-(: )#-$ 2-,+-+-1*) (#&%. D#5*+
#$&-++%$ +;% 21":%"0. C#)# )*%$ BPI 21" "%,19%"0 12 +;% #&1*(+ 12 +;% ,;%,')
$%5-+%$ 50 )#-$ 5#(' 2"1& +;% #,,1*(+ 12 C#)#. BPI $%(-%$ 8-#5-8-+0 #($ ,8#-&%$
+;#+ C#)# /#) (%:8-:%(+ /;-8% )#-$ 5#(' /#) (1+. D%,-$% /-+; "%#)1().
A. The signatures of the drawer of the checks were forged and therefore, the
drawer is deemed to have never become a party thereto and to have never consented to
the contract that gave rise to it. '%, the drawee erred in making payments by virtue
thereof. The forged signatures are wholly inoperative, and +asa, the drawer whose
authori&ed signatures do not appear on the negotiable instruments, cannot be held liable
thereon. .either is the latter precluded from raising the defense of forgery.
178
Since banking business is impressed with public interest, of paramount
importance thereto is the trust and confidence of the public in general. +onse4uently, the
170
-. A. 111".
171
%.' vs. -odrigue&, 866 S+-A 81", Sept. !6, !221.
172
%.' vs. -odrigue&, 866 S+-A 81", Sept. !6, !221.
173
Section /, .egotiable nstruments )aw.
174
%.' vs. -odrigue&, 866 S+-A 81", Sept. !6, !221.
175
'ank of the %hilippine slands vs. +asa *ontessori nternationale, 5"2 S+-A !61, !1".
5"
highest degree of diligence
176
is e9pected, and high standards of integrity and
performance are even re4uired, of it.
177
'y the nature of its functions, a bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.
171

The drawer, despite signature verification, failed to deter the instances of forgery.
ts negligence consisted in the omission of that degree of diligence re4uired of a bank. A
bank is bound to know the signatures of its customers= and if it pays a forged check, it
must be considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was forged. '%
must therefore, return the amount of the checks it debited from the account of the
drawer.
17/
3. S#&)*(: ;#$ # ,*""%(+ #,,1*(+ /-+; FEBTC #+ -+) M#'#+- B%8-A-"
5"#(,;. T;% )18% )-:(#+1"0 /#) J1(: G0* L%%. A ,%"+#-( G1(7#:# ."%)%(+%$ +1
FEBTC #+ -+) M#'#+- B%8-A-" 5"#(,; # ,;%,' .#0#58% +1 ,#); 21" P999<!00. A2+%"
#),%"+#-(-(: +;#+ S#&)*(: ;#) )*22-,-%(+ 5#8#(,% +1 ,19%" +;% ,;%,'< +;% +%88%"
,1&.#"%$ +;% )-:(#+*"% 1( +;% ,;%,' /-+; +;% ).%,-&%( )-:(#+*"% 12 J1(: #)
,1(+#-(%$ -( +;% ).%,-&%( )-:(#+*"% ,#"$ /-+; +;% 5#('. A2+%" 5%-(: )#+-)2-%$ 12 +;%
#*+;%(+-,-+0 12 +;% )-:(#+*"% 1( +;% ,;%,'< +;% +%88%" #)'%$ G1(7#:# +1 )*5&-+ ."112
12 ;-) -$%(+-+0< #($ +;% 8#++%" ."%)%(+%$ +;"%% -$%(+-2-,#+-1( ,#"$). T;% +%88%"
21"/#"$%$ +;% ,;%,' +1 V%8%7< +;% )%(-1" #))-)+#(+ ,#);-%" .*")*#(+ +1 +;% 5#('
.18-,0 "%=*-"-(: +/1 122-,%") +1 #.."19% +;% ,;%,' /;%( +;% #&1*(+ 12 +;% ,;%,' 21"
%(,#);&%(+ /#) &1"% +;#( P100<000. V%8%7 ,1(,8*$%$ +;#+ +;% ,;%,' /#) -($%%$
)-:(%$ 50 J1(:. V%8%7 21"/#"$%$ +;% ,;%,' +1 S02*< #(1+;%" 122-,%" 12 +;% 5#('< 21"
#.."19#8. S02* (1+-,%$ S%&.-1 /%88-'(1/( +1 S02* #) #))-)+#(+ #,,1*(+#(+ 12
S#&)*(: #($ );1/%$ +;% ,;%,' +1 ;-&. S%&.-1 91*,;%$ 21" +;% :%(*-(%(%)) 12
J1(:>) )-:(#+*"% #($ )#-$ -+ /#) 21" +;% .*",;#)% 12 %=*-.&%(+ 21" S#&)*(:.
S#+-)2-%$ /-+; +;% :%(*-(%(%)) 12 J1(:>) )-:(#+*"%< S02* #*+;1"-7%$ +;% %(,#);&%(+
12 +;% ,;%,' +1 G1(7#:# #($ $%5-+%$ +;% .#0&%(+ 2"1& +;% #,,1*(+ 12 S#&)*(:.
T;% 21881/-(: $#0< +;% 21":%"0 12 +;% ,;%,' /#) $-),19%"%$. S#&)*(: #)'%$
"%-&5*")%&%(+ 2"1& FEBTC /;-,; "%2*)%$ 1( +;% :"1*($ +;#+ S#&)*(: /#)
(%:8-:%(+ /;-8% +;% 5#(' /#) (1+. I+ +*"(%$ 1*+ +;#+ S%&.-1 )+18% +;% 58#(' ,;%,'
#($ /#) ."%)*&#580 "%).1()-58% 21" -+) %(,#);&%(+ +;"1*:; +;% 21":%$ )-:(#+*"% 12
J1(:. A1B I) FEBTC 8-#58% +1 S#&)*(:6 R%#)1(). A2B I) +;% .#"+-,-.#+-1( 12 S%&.-1
)*22-,-%(+ +1 %)+1. S#&)*(: 2"1& "#-)-(: +;% $%2%()% 12 21":%"06 R%#)1().
A. B1C (3'T+ is liable since it authori&ed the discharge of the forged check. Such
liability attaches even if the bank e9erts due diligence and care in preventing such faulty
discharge. (orgeries often deceive the eye of the most cautious e9perts= and when a bank
has been so deceived, it is a harsh rule which compels it to suffer. The forgery may be so
176
bid., citing 'ank of %. . vs. +ourt of Appeals, "1" %hil. 8"1.
177
bid., citing Section ! of -. A. 17/1, otherwise known as :The ,eneral 'anking )aw of !222.;
178
bid., citing Sime9 nternational B*anilaC, nc. vs. +ourt of Appeals, !"! S+-A 88/.
179
'ank of the %hilippine slands vs. +asa *ontessori nternationale, supra., citing San +arlos *illing +o.
vs. 'ank of %. ., 82 %hil. 8/.
55
near like the genuine one as to defy detection by the depositor himself, and yet the bank
is liable to the depositor if it pays the check.
112
f payment is made by the drawee bank despite the forgery of the drawer$s
signature, the drawee cannot charge it to the drawer$s account because the drawee is in a
superior position to detect a forgery because he has the drawer$s signature and is
e9pected to know and compare it. The rule has a healthy cautionary effect on banks by
encouraging care in the comparison of the signatures against those on the signature cards
they have on file.
111
B!C Samsung is not barred from raising the claim of forgery. The bare fact that the
forgery was committed by an employee of the party whose signature was forged cannot
do not possess the preternatural gift of cognition as to the evil that may lurk with the
necessarily imply that such party$s negligence was the cause of the forgery. 3mployers
hearts and minds of their employees. t was incumbent upon (3'T+ to prove that
Samsung was negligent which it failed to do.
11!
3. T1 )%++8% +;%-" +#E 158-:#+-1() +1 +;% B*"%#* 12 I(+%"(#8 R%9%(*%< .8#-(+-22)
.*",;#)%$ 2"1& T"#$%") R10#8 B#(' ATRBB +;"%% &#(#:%">) ,;%,') .#0#58% +1 +;%
1"$%" 12 BIR< 21" # +1+#8 12 P9<790<716.87. S#-$ ,;%,')< 1(% 12 /;-,; /#) # ,"1))%$
,;%,' /%"% +*"(%$ 19%" +1 V%"#< .8#-(+-22)> ,1(+"188%" /;1 /#) )*..1)%$ +1 $%8-9%"
+;% )#&% +1 +;% BIR. L#+%"< BIR #))%))%$ +;% .8#-(+-22) #:#-( 21" +#E 8-#5-8-+-%) #($ -+
/#) +;%( +;#+ +;%0 $-),19%"%$ +;#+ )#-$ &#(#:%">) ,;%,') /%"% (%9%" .#-$ +1 +;%
BIR. I()+%#$< +;% ,;%,') /%"% ."%)%(+%$ 21" .#0&%(+ 50 *('(1/( .%")1() #88%:%$80
+1 S%,*"-+0 B#(' ASBB /;-,; -( +*"(< #88%:%$80 -($1")%$ +;% ,;%,' 21" ,188%,+-1(.
W;#+ -2 #(0< #"% +;% 8-#5-8-+-%) 12 TRB #($ SB6
A. The three manager$s checks issued by T-' were payable to the '- and yet
said checks were never delivered or paid to the '- but were presented for payment by
some unknown persons who, in order to receive payment therefor, forged the name of the
payee. Despite this fraud, T-' paid the three checks. T-' ought to know that when a
check is drawn payable to order and is presented for payment, it is the primary duty of
said bank to know that the check was duly indorsed by the original payee and where it
pays to a third person who forged the signature of the payee, the loss falls upon T-' who
cashed the check.
Aside therefrom, one of the checks was crossed. The crossing of one of the checks
should have put T-' on guard= it was dutyEbound to ascertain the indorser$s title to the
check or the nature of his possession. 'y encashing the checks in favor of unknown
180
Samsung +onstruction +ompany %hilippines, nc. vs. (ar 3ast 'ank @ Trust +o., 5"6 S+-A 52!.
181
bid.
182
Samsung +onstruction +ompany %hilippines, nc. vs. (ar 3ast 'ank and Trust +o., supra.
58
persons checks which were on their face payable to the '-, a government agency which
can only act through its agents, T-' did so at its peril and must suffer the conse4uences
of the unauthori&ed or wrongful endorsement. T-' cannot e9culpate itself from liability.
ts only remedy is against the person to whom it paid the money.
f proven that S' was a collecting bank which indorsed the checks bearing a
forged indorsement and presents it to the drawee bank, it should ultimately be bound to
pay. However, it is doubtful if the checks were ever presented to and accepted by S' so
as to hold it as a collecting bank.
11"
3. F1"$ $"%/ #($ -))*%$ # ,;%,' $"#/( #:#-()+ C-+-5#(' .#0#58% +1 +;%
1"$%" 12 +;% C1&&-))-1(%" 12 I(+%"(#8 R%9%(*% 21" +;% .#0&%(+ 12 +#E%). L#+%"<
F1"$ $"%/ #(1+;%" ,;%,' 8-'%/-)% .#0#58% +1 +;% 1"$%" 12 +;% C1&&-))-1(%" 12
I(+%"(#8 R%9%(*%. B1+; ,;%,') /%"% ,"1))%$ ,;%,'). I+ +*"(%$ 1*+ +;#+ #(
#,,1*(+#(+ 12 F1"$< R-9%"# -()+%#$ 12 $%8-9%"-(: +;% ,;%,') +1 +;% .#0%%< .#))%$
+;%& 1( +1 # ,1-,1().-"#+1"< C#)+"1< # ."1-&#(#:%" 12 PCIB /;1 1.%(%$ # ,;%,'-(:
#,,1*(+ -( +;% (#&% 12 # 2-,+-+-1*) .%")1(< ?R%0(#8$1 R%0%)@ #+ PCIB 5"#(,; -(
M%"#8,1. A /1"+;8%)) ,;%,' -( %E#,+80 +;% )#&% #&1*(+ #) +;% 2-")+ F1"$ ,;%,' /#)
$%.1)-+%$ -( )#-$ #,,1*(+ #($ /;-8% +;-) /1"+;8%)) ,;%,' /#) %( "1*+% +1 +;% C%(+"#8
B#(' 21" ,8%#"-(:< -+ /#) "%.8#,%$ /-+; F1"$>) 2-")+ ,;%,'. A) # "%)*8+ +;% F1"$ ,;%,'
/#) ,8%#"%$ 50 C-+-5#('< #($ +;% 2-,+-+-1*) #,,1*(+ 12 ?R%0(#8$1 R%0%)@ /#)
,"%$-+%$ /-+; +;% #&1*(+ 12 +;% F1"$ ,;%,'. T;% )#&% &%+;1$ /#) *)%$ 21" +;%
)%,1($ F1"$ ,;%,'. PCIB )+#&.%$ #+ +;% 5#,' 12 +;% ,;%,')< ?#88 ."-1" -($1")%&%(+)
#($J1" 8#,' 12 -($1")%&%(+) :*#"#(+%%$.@ C-+-5#(' -( +*"(< $%5-+%$ +;% #&1*(+ .#-$
2"1& +;% #,,1*(+ 12 F1"$. F"1& +;% ?R%0(#8$1 R%0%)@ #,,1*(+< ,;%,') /%"% -))*%$
-( 2#91" 12 +;% &%&5%") 12 +;% )0($-,#+% #($ +;*)< +;% $%.1)-+ /#) %22%,+-9%80
/-+;$"#/(. T;% #&1*(+ 12 +;% ,;%,') /#) (%9%" .#-$ +1 1" "%,%-9%$ 50 +;% .#0%%<
+;% C1&&-))-1(%" 12 I(+%"(#8 R%9%(*%. A) # ,1()%=*%(,%< BIR $%&#($%$ 2"1&
F1"$ .#0&%(+ 12 +;% +#E #(%/. W;#+< -2 #(0 #"% +;% 8-#5-8-+-%) 12 +;% $"#/%%<
C-+-5#(' #($ +;% ,188%,+-(: 5#('< PCIB6
A. As drawee, +itibank should have scrutini&ed the checks before paying the
proceeds thereof. Had +itibank e9amined the checks it would have discovered that the
clearing stamps on the checks do not bear any initials. (or this reason, +itibank had
indeed failed to perform what was incumbent upon it, which is to ensure that the amount
of the checks should be paid only to its designated payee. The fact that the drawee bank
did not discover the irregularity seasonably, constitutes negligence in carrying out its duty
to its depositors. +itibank breached its contractual obligation to the drawer, (ord.
+itibank therefore, is liable to (ord.
+astro as proEmanager of %+' and his coEconspirator performed their activities
using facilities in their official capacity or authority but for their personal and private gain
183
Traders -oyal 'ank vs. -adio %hilippines .etwork, nc., "/2 S+-A 621.
56
or benefit. A bank hold out its officers and agents as worthy of confidence will not be
permitted to profit by the fraud of these officers or agents= nor will it be permitted to
shirk its responsibility for such frauds, even though no benefit may accrue to the bank
therefrom. The bank is liable for the fraudulent acts or representations of an officer or
agent acting within the course and apparent scope of his employment or authority. Hence,
%+' is liable to (ord.
'oth %+' and +itibank failed in their respective obligations and both were
negligent in the selection and supervision of their employees resulting in the encashment
of the checks of (ord. Thus, both of them are e4ually liable for the proceeds of the checks
to (ord. However, the contributory negligence of (ord in failing to e9amine its passbook,
statements of account, and cancelled checks and to give notice within a reasonable time,
serves to mitigate the banks$ liability by reducing the award of interest from 1!T to 6T
per annum.
115
3. D#(: #($ C;#($-"#&#(- %(+%"%$ -(+1 #( #:"%%&%(+ /;%"%50 +;% 8#++%"
/#) +1 :-9% D#(: # PCIB &#(#:%">) ,;%,' -( +;% #&1*(+ 12 P.2 &-88-1( -( %E,;#(:%
21" +/1 12 D#(:>) &#(#:%">) ,;%,') -( +;% #&1*(+ 12 P2.087 &-88-1(< 51+; .#0#58% +1
+;% 1"$%" 12 D#9-$. D#(: #($ C;#($-"#&#(- #:"%%$ +;#+ +;% $-22%"%(,% 12 P26<000 -(
+;% %E,;#(:% /1*8$ 5% +;%-" ."12-+ +1 5% $-9-$%$ %=*#880 5%+/%%( +;%&. T;%0 #8)1
#:"%%$ +;#+ D#(: /1*8$ )%,*"% # $188#" $"#2+ 2"1& FEBTC 21" US M200<000 .#0#58%
+1 PCIB FCDU A,,1*(+ N1. 19!-00116!-2 /;-,; C;#($-"#&#(- /1*8$ %E,;#(:%
21" #(1+;%" $188#" $"#2+ -( +;% )#&% #&1*(+ +1 5% -))*%$ 50 4#(: S%(: B#(' 12
41(:'1(:. D#(: ."1,*"%$ +/1 &#(#:%">) ,;%,') 21" P2.087 &-88-1( 51+; .#0#58% +1
D#9-$ #($ # $188#" $"#2+ .#0#58% +1 )#-$ PCIB FCDU A,,1*(+ 21" US M200<000. A+
#51*+ 1(% 1>,81,' -( +;% #2+%"(11(< D#(: $%8-9%"%$ +;% )#-$ ,;%,') #($ $188#" $"#2+
+1 # 5*)-(%)) #))1,-#+%< L-1(: /;1 -( +*"( $%8-9%"%$ +;%& +1 ;-) &%))%(:%"< R#&-:1.
T;% 8#++%" /#) )*..1)%$ +1 &%%+ C;#($-"#&#(- #($ :-9% ;-& +;% &#(#:%">) ,;%,')
#($ $188#" $"#2+ -( %E,;#(:% 21" # PCIB &#(#:%">) ,;%,' 21" P.2 &-88-1( #($ #
4#(: S%(: B#(' $188#" $"#2+ 21" US M200<000. A+ ;#82 .#)+ 21*" -( +;% #2+%"(11(
R#&-:1 "%.1"+%$ +;#+ ;% 81)+ +;% ,;%,') #($ $"#2+. I+ +*"(%$ 1*+ ;1/%9%"< +;#+ +;%
,;%,') #($ $"#2+ /%"% (1+ 81)+< 21" C;#($-"#&#(- /#) #58% +1 :%+ ;18$ 12 +;% )#-$
-()+"*&%(+)< /-+;1*+ $%8-9%"-(: +;% %E,;#(:% ,1()-$%"#+-1( ,1()-)+-(: 12 +;% PCIB
&#(#:%">) ,;%,' #($ +;% 4#(: S%(: B#(' $188#" $"#2+. A+ +;"%% 1>,81,' -( +;%
#2+%"(11(< C;#($-"#&#(- $%8-9%"%$ +1 D#9-$ +;% +/1 &#(#:%">) ,;%,') -( %E,;#(:%
21" US M360<000 /;-,; C;#($-"#&#(- $%.1)-+ -( +;% )#9-(:) #,,1*(+ 12 ;-) /-2% #($
&1+;%". C;#($-"#&#(- #8)1 $%.1)-+%$ +;% $188#" $"#2+ -( PCIB FCDU A,,1*(+ N1.
19!-0116!-2 1( +;% )#&% $#+%. L#+%"< D#(: )*%$ +;% 5#(')< C;#($-"#&#(- #($
D#9-$. D#9-$ ,8#-&%$ +1 5% # ;18$%" -( $*% ,1*")% 5*+ D#(: ,1*(+%"%$ +;#+ ;% /#)
(1+ # ;18$%" -( $*% ,1*")% #) +;%"% /#) (1 );1/-(: +;#+ ;% :#9% C;#($-"#&#(- #(0
,1()-$%"#+-1( 12 9#8*% -( %E,;#(:% 21" +;% #21"%&%(+-1(%$ ,;%,'). W#)
,1()-$%"#+-1( :-9%( 50 D#9-$ -( %E,;#(:% 21" +;% &#(#:%">) ,;%,') 1" /#) ;% # .#"+
12 C;#($-"#&#(->) ),;%&% +1 $%2"#*$ D#(:6
184
%hilippine +ommercial nternational 'ank vs. +ourt of Appeals, "82 S+-A 556.
57
A. Section !5 of the .egotiable nstruments )aw creates a presumption that every
party to an instrument ac4uired the same for a consideration or for value. Thus, the law
itself creates a presumption in David$s favor that he gave valuable consideration for the
checks in 4uestion. n alleging otherwise, Qang has the onus to prove that David got hold
of the checks absent said consideration. n other words, Qang must present convincing
evidence to overthrow the presumption. Qang failed to discharge her burden of proof.
Qang$s averment that David did not give valuable consideration when he took possession
of the checks is unsupported, devoid of any concrete proof to sustain it. <n the contrary,
it was shown that David did not receive the checks gratis but instead gave +handiramani
?S V"62,222 as consideration for the said checks.
118

3. D5#(%7 #*+;1"-7%$ S#5#( +1 )%88 ;-) 1<000 )=. &. 81+ -( C%5* C-+0 21"
P200<000 /-+; +;% #:"%%&%(+ +;#+ S#5#( &#0 &#"' *. +;% )%88-(: ."-,% +1 ,19%" +;%
+#E%)< +"#()2%" 12 +-+8% #($ 1+;%" %E.%()%) 12 +;% )#8%< #) /%88 #) S#5#(>) ,1&&-))-1(
21" +;% )#8%. S#5#( /#) #58% +1 )%88 +;% ."1.%"+0 +1 L-& 21" P600<000< -(,8*)-9% 12
,1&&-))-1(< +#E%) #($ 1+;%" -(,-$%(+#8 %E.%()%). L-& .#-$ P200<000 +1 D5#(%7<
"%&-++%$ +1 S#5#( P113<2!7 21" .#0&%(+ 12 +;% +#E%) #($ P!0<000 #) 5"1'%">)
,1&&-))-1(. L-& #8)1 -))*%$ 21*" .1)+$#+%$ ,;%,') -( +;% (#&% 12 S#5#( -( +;% +1+#8
)*& 12 P236<73. D5#(%7 #)'%$ L-& +1 ,#(,%8 +;% .1)+$#+%$ ,;%,') -))*%$ -( 2#91"
12 S#5#( 5%,#*)% +;% 8#++%" /#) (1+ # 8-,%()%$ "%#8 %)+#+% 5"1'%" #($ (1+ %(+-+8%$ +1
#(0 ,1&&-))-1( 21" +;% )#8% )-(,% ;% ,1(,%#8%$ +;% #,+*#8 )%88-(: ."-,%. L-&
,#(,%88%$ +;% ,;%,'). S#5#( )*%$ L-& 21" +;% #&1*(+ 12 +;% 21*" .1)+$#+%$ ,;%,').
I+ /#) ,8#-&%$ +;#+ L-& /#) &%"%80 #( #,,1&&1$#+-1( $"#/%" 12 D5#(%7. D%,-$%
/-+; "%#)1().
A. ?nder Section !/ of the .egotiable nstruments )aw, the accommodation
party is one who meets all of the following re4uisitesF B1C he signed the instrument as
maker, drawer, acceptor or indorser= B!C he did not receive value for the signature= and B"C
he signed for the purpose of lending his name to some other person. Hhile )im signed as
drawer of the checks she did not satisfy the two other remaining re4uisites. She drew the
checks in payment of the balance of the purchase price of the lot subject of the
transaction. n other words, the amounts covered by the checks form part of the cause or
consideration for the purchase of the lot, ergo, )im received value for her signature on the
checks. .either is there any indication that )im issued the checks for the purpose of
enabling Qbane&, or any other person to obtain credit or to raise money, thereby totally
debunking the presence of the third re4uisite of an accommodation party. )im was not
therefore, an accommodation party, and she was liable for the amounts of the check to
Saban.
116

3. B#*+-)+# -( ;-) ,#.#,-+0 #) P"%)-$%(+ 12 C"*-)%" B*) L-(%) #($ T"#().1"+
C1".1"#+-1( AC"*-)%"B< .*",;#)%$ ).#"% .#"+) 2"1& A*+1 P8*) T"#$%")< I(,. AA*+1
P8*)B #($ -))*%$ +/1 .1)+$#+%$ ,;%,')< 1(% # .%")1(#8 ,;%,' 21" P1!1<200 #($
#(1+;%" ,1".1"#+% ,;%,' 12 C"*-)%" 21" P97<!00. S#-$ ,;%,') /%"% $-);1(1"%$ #($
185
Qang vs. +ourt of Appeals, 52/ S+-A 18/.
186
)im vs. Saban, 557 S+-A !"".
51
B#*+-)+# /#) ."1)%,*+%$ 21" 9-18#+-1( 12 +;% B1*(,-(: C;%,' 8#/. P*")*#(+ +1 #
$%&*"%" +1 +;% %9-$%(,%< B#*+-)+# /#) #,=*-++%$ 5*+ /#) #$C*$:%$ +1 .#0 A*+1 P8*)
+;% +1+#8 #&1*(+ 12 +;% ,;%,'). A*+1 P8*) ,8#-&%$ +;#+ B#*+-)+# ,1*8$ 5% &#$% 8-#58%
21" +;% .%")1(#8 ,;%,' ;% -))*%$ )-(,% ;% #,+%$ #) #( #,,1&&1$#+-1( .#"+0 12
C"*-)%". D%,-$% /-+; "%#)1().
A. 'autista should not be made liable. An accommodation party lends his name to
enable the accommodated party to obtain credit or to raise money. There is no showing in
what capacity 'autista issued the check. t cannot be assumed that he intended to lend
his name to the corporation. Hence, 'autista cannot be considered as an accommodation
party.
117
Hence, he raise the defense of lack of consideration against Auto %lus which was
aware that the purchases were made by +ruiser and not by 'autista.
111
3. A#B W;%"% # ,;%,' -) .#0#58% +1 C1-(+ .#0%%) /;1 #"% (1+ .#"+(%")< /;1
);1*8$ -($1")% +;% )#&%6 A5B W;#+ -) +;% %22%,+ 12 .#0&%(+ 12 )#-$ ,;%,' *.1( +;%
%($1")%&%(+ 12 1(80 1(% 12 +;% .#0%%)6
A. BaC Hhere an instrument is payable to the order of two or more payees or
indorsees who are not partners, all must indorse unless the one indorsing has authority to
indorse for the others. BbC The payment of an instrument despite a missing indorsement is
e4uivalent to payment on a forged indorsement or an unauthori&ed indorsement in itself
in the case of joint payees. The bank that credits the proceeds of a check to the account of
indorsing payee is liable for conversion to the nonEindorsing payee for the entire amount
of the check.
11/
3. W;#+ -) +;% %22%,+ 12 .#0&%(+ 12 # 5-88 50 +;% $"#/%%6 M#0 +;% $"#/%%
#2+%" .#0&%(+ 12 +;% 5-88 ,8#-& +;#+ -+ -) (1+ 8-#58% +;%"%1( #($ );1*8$ 5% #881/%$ +1
"%,19%" +;% #&1*(+ .#-$6
A. The actual payment of the bill is e4uivalent to acceptance. Hence, when the
drawee pays a bill that it has not previously accepted, the actual payment implies not only
his assent to the order of the drawer and a recognition of his corresponding obligation to
pay the aforementioned sum, but also, his clear compliance with that obligation. Actual
payment by the drawee is greater than his acceptance, which is merely a promise in
writing to payment. The payment of a check includes its acceptance.
1/2

3. A 21"%-:(%"< S#&*%8 T#:1% .*",;#)%$ 2"1& G18$ P#8#,% )%9%"#8 .-%,%) 12
C%/%8"0 9#8*%$ #+ P2!8<000. I( .#0&%(+ 12 +;% )#&%< ;% 122%"%$ F1"%-:( D"#2+ -))*%$
50 U(-+%$ O9%")%#) B#(' AUOBB 12 M#8#0)-#< #$$"%))%$ +1 L#($ B#(' ALBPB #($
.#0#58% +1 G18$ P#8#,%. B%21"% "%,%-9-(: +;% $"#2+< D#(:< #( #))-)+#(+ &#(#:%" 12
G18$ P#8#,% -(=*-"%$ 2"1& F#" E#)+ B#(' +;% (#+*"% 12 +;% 5#(' $"#2+. T;% +%88%"
-(21"&%$ ;%" +;#+ +;% )#&% /#) )-&-8#" +1 # &#(#:%">) ,;%,'< 5*+ #$9-)%$ ;%" (1+ +1
"%8%#)% +;% .-%,%) 12 C%/%8"0 *(+-8 +;% $"#2+ ;#) 5%%( ,8%#"%$. D#(: -))*%$ # ,#);
187
'autista vs. Auto %arts Traders, nc., 861 S+-A !!".
188
'autista vs. Auto %arts Traders, nc., 861 S+-A !!".
189
*etrobank vs. 'A (inance, 627 S+-A 6!2, Dec. 5, !22/.
190
(ar 3ast 'ank @ Trust +o. vs. ,old %alace 0ewellery +o., 86! S+-A 625, Aug. !2, !221.
5/
-(91-,% #($ +18$ +;% 5*0%" +1 ,1&% 5#,' /;%( +;% $"#2+ ;#$ #8"%#$0 5%%( ,8%#"%$.
T;% )#-$ $"#2+ /#) $%.1)-+%$ -( +;% #,,1*(+ 12 G18$ P#8#,% /-+; F#" E#)+ B#('. F#"
E#)+ B#('< ."%)%(+%$ +;% $"#2+ 21" ,8%#"-(: +1 LBP< +;% $"#/%% 5#(' /;-,; ,8%#"%$
+;% )#&% #($ ,"%$-+%$ F#" E#)+ B#(' /-+; +;% #&1*(+ 12 +;% $"#2+. LBP $%5-+%$ +;%
#,,1*(+ 12 OUB. T;% 21"%-:(%" "%+*"(%$ #($ 15+#-(%$ +;% .*",;#)%$ C%/%8"0 .8*)
+;% ,;#(:% "%."%)%(+-(: +;% $-22%"%(,% 5%+/%%( +;% ."-,% #($ +;% #&1*(+ 12 +;%
$"#2+. A2+%" +;"%% /%%')< LBP -(21"&%$ F#" E#)+ +;#+ +;% $"#2+ /#) &#+%"-#880
#8+%"%$ 2"1& P300.00 +1 P380<000.00 #($ "%+*"(%$ +;% )#&%. F#" E#)+ B#('
"%2*($%$ +;% #&1*(+ 12 +;% $"#2+ 12 P380<000 +;#+ /#) %#"8-%" .#-$ 50 LBP. F#" E#)+
B#(' $%&#($%$ .#0&%(+ 2"1& G18$ P#8#,% /;-,; "%2*)%$ +1 .#0. W#) +;% "%2*)#8 +1
.#0 ,1""%,+6
A. The refusal to pay was correct. )'% as drawee bank cleared and paid the draft
and forwarded the amount thereof to the collecting bank, (ar 3ast 'ank. The latter then
credited to ,old %alace$s account the payment it received. The drawee by said payment
recogni&ed and complied with the obligation to pay in accordance with the tenor of his
acceptance. The tenor of the acceptance is determined by the terms of the bill as it is
when the drawee accepts. )'% was liable on its payment of the draft according to the
tenor thereof at the time of payment, which was the raised or altered amount. )'% could
no longer repudiate the payment it erroneously paid to a holder in due course. ,old
%alace was not a participant in the alteration of the draft, was not negligent, and was a
holder in due course L it received the draft complete and regular upon its face, before it
became overdue and without notice of any dishonor, in good faith and for value, and
absent any knowledge of any infirmity in the instrument or defect in the title of the
person negotiating it. (ar 3ast could not debit ,old %alace.
1/1

3. S+%8,1 )18$ )+%%8 5#") #($ G. I. W-"% +1 RDL C1()+"*,+-1(. A+ +;% 5%;%)+
12 R1&%1 D. L-&< P"%)-$%(+ 12 RDL C1()+"*,+-1(< L-&)1( #($ T1""% -))*%$ # ,;%,'
1( 5%;#82 S+%%8/%8$ .#0#58% +1 5%#"%" 50 /#0 12 #,,1&&1$#+-1( ?1(80 #) :*#"#(+0
5*+ (1+ +1 .#0 21" #(0+;-(:.@ R.D.L-& -($1")%$ +;% ,;%,' #($ :#9% -+ +1 A"&)+"1(:
I($*)+"-%) /;-,; -( +*"(< -($1")%$ #($ $%.1)-+%$ +;% )#&% -( -+) #,,1*(+. T;% ,;%,'
/#) $-);1(1"%$. S+%8,1 2-8%$ #( #,+-1( #:#-()+ S+%%8/%8$< +;% $"#/%". C#( S+%%8/%8$
5% &#$% 8-#58% 50 S+%8,16
A. Stelco cannot hold Steelweld liable there being no showing that Stelco was a
holder for value of the check. %ossession by Stelco of the check after presentment and
dishonor or payment, is utterly inconse4uential= it does not make the possessor a holder
for value within the meaning of the law= it gives rise to no liability on the part of the
maker or drawer and indorsers. There is even no evidence that Armstrong ndustries to
whom -.Q.)im negotiated the check accepted the instrument and attempted to encash it
in behalf of and as agent of Stelco.
1/!

191
(ar 3ast 'ank @ Trust +o. vs. ,old %alace 0ewellery +o., 86! S+-A 625, Aug. !2, !221.
1/!
Stelco *arketing +orp. vs. +ourt of Appeals, supra.
82
3. VMSC -) # 2#&-80-1/(%$ ,1".1"#+-1( 12 /;-,; A9%8-(1 /#) ."%)-$%(+. 4%
122%"%$ +1 )%88 # ,#" +1 ;-) ,1*)-()< +;% V-18#:1 ).1*)%). I+ +*"(%$ 1*+ +;#+ ;%
."%9-1*)80 )18$ +;% )#-$ ,#" +1 #(1+;%" ,1*)-(. V-18#:1 ).1*)%) )-:(%$ +;% $%%$ 12
)#8%< .#-$ # $1/( .#0&%(+ #($ %E%,*+%$ # ."1&-))1"0 (1+% 21" +;% 5#8#(,%. T;%
)#-$ ."1&-))1"0 (1+% /#) %($1")%$ +1 BA F-(#(,%. W;%( +;% ,#" /#) (1+ $%8-9%"%$
+1 V-18#:1 ).1*)%)< +;%0 $-$ (1+ .#0 +;% -()+#88&%(+). BA F-(#(,% )*%$ +;% V-18#:1
).1*)%) 21" "%.8%9-( +1 "%,19%" +;% ,#" 1" +;% #&1*(+ 12 +;% ."1&-))1"0 (1+% /-+;
$#&#:%). V-18#:1 ).1*)%) ,8#-&%$ +;#+ +;%0 #"% (1+ 8-#58% 5%,#*)% +;% ,#" +;%0
51*:;+ /#) (1+ $%8-9%"%$ 50 VMSC #($ ;%(,% +;%"% /#) (1 9#8*#58% ,1()-$%"#+-1(
21" +;% ."1&-))1"0 (1+%. D%,-$% /-+; "%#)1().
A. 'A (inance is a holder in due course having met all the re4uirements of
Section 8! and therefore, it holds the instrument free from any defect of title of prior
parties and from defenses available to prior parties among themselves, and may enforce
the instrument for the full amount thereof. Since 'A (inance is a holder in due course,
Aiolago cannot raise the defense of nonEdelivery of the object and nullity of the sale with
A*S+. Hence, Aiolago spouses are liable to 'A (inance.
1/"
3. P*")*#(+ +1 # 5*)-(%)) +"#()#,+-1( /-+; C;#($-"#&#(-< D#(: 15+#-(%$
+/1 ,#);-%">) ,;%,') .#0#58% +1 +;% 1"$%" 12 D#9-$ /;-,; /%"% )*..1)%$ +1 5%
$%8-9%"%$ 50 C;#($-"#&#(- +1 D#9-$ -( %E,;#(:% 21" ,#);. C;#($-"#&#(- :#9%
D#9-$ +;% ,;%,') #($ +;% 8#++%" :#9% +;% 21"&%" +;% ,#); #:"%%$ *.1(.
C;#($-"#&#(- $-$ (1+ :-9% D#(: +;% ,#); #($ -()+%#$ $%.1)-+%$ +;% )#&% -( +;%
#,,1*(+) 12 ;-) /-2% #($ &1+;%". D#(: )*%$ D#9-$ /;1 ,8#-&%$ +1 5% # ;18$%" -( $*%
,1*")%. C#( D#9-$< +;% .#0%% 12 +;% ,;%,') 5% ,1()-$%"%$ # ;18$%" -( $*% ,1*")%6
A. 3very holder of a negotiable instrument is deemed prima facie a holder in due
course. However, this presumption arises only in favor of a person who is a holder as
defined in Section 1/1 of the .egotiable nstruments )aw, meaning a :payee or indorsee
of a bill or note, who is in possession of it, or the bearer thereof.; David was the payee of
the checks in 4uestion who was in possession thereof and therefore, a holder. The weight
of authority sustains the view that a payee may be a holder in due course. The
presumption that every holder is deemed prima facie to be a holder in due course applies
in his favor. However, said presumption may be rebutted. n case any of the 4ualifications
of a holder in due course provided for in Section 8! was proven to be lacking, David
cannot be deemed a holder in due course.
1/5

193
Aiolago vs. 'A (inance +orporation, 88/ S+-A 6/.
194
Qang vs. +ourt of Appeals, 52/ S+-A 18/, 161E16/.
81
3. A)+"1 /#) :"#(+%$ )%9%"#8 81#() 50 P;-8+"*)+ %9-$%(,%$ 50 +;"%%
."1&-))1"0 (1+%) .#0#58% +1 +;% 1"$%" 12 P;-8+"*)+. R1E#) )-:(%$ (1+%) +/-,%< #)
P"%)-$%(+ 12 A)+"1 #($ -( ;-) .%")1(#8 ,#.#,-+0. P;-8:*#"#(+%% /-+; +;% ,1()%(+ 12
A)+"1 :*#"#(+%%$ -( 2#91" 12 P;-8+"*)+ +;% .#0&%(+ 12 70L 12 A)+"1>) 81#()< )*5C%,+
+1 +;% ,1($-+-1( +;#+ *.1( .#0&%(+ 50 P;-8:*#"#(+%%< -+ );#88 5% ."1.1"+-1(#+%80
)*5"1:#+%$ +1 +;% "-:;+) 12 P;-8+"*)+. A) # "%)*8+ 12 A)+"1>) 2#-8*"% +1 .#0 -+) 81#(<
P;-8:*#"#(+%% .#-$ 70L 12 +;% :*#"#(+%%$ 81#( +1 P;-8+"*)+. P;-8:*#"#(+%%
)*5)%=*%(+80 )*%$ A)+"1 #($ R1E#). R1E#) $-)1/(%$ 8-#5-8-+0 #($ ,8#-&%$ +;#+ ;%
&%"%80 )-:(%$ ;-) (#&% -( 58#(' #($ +;% .;"#)%) ?-( ;-) .%")1(#8 ,#.#,-+0@ #($ ?-(
;-) 122-,-#8 ,#.#,-+0@ /%"% 2"#*$*8%(+80 -()%"+%$. C#( R1E#) 5% &#$% 8-#58%6
A. -o9as signed the promissory notes twiceF first, as president of Astro and
second, in his personal capacity. Since he signed the notes twice, it necessarily implied
that he was undertaking the obligation in the notes in two different capacities, official and
personal. %ersons who write their names on the face of promissory notes are makers,
promising that they will pay to the order of the payee or any holder according to its tenor.
Thus, even without the phrase :personal capacity,; -o9as will still be primarily liable
under the notes.
1/8

3. T*#71( .*",;#)%$ "-,% 2"1& R#&1). I( .#0&%(+ 12 +;% "-,%< T*#71(
-($1")%$ +;% ,;%,') -))*%$ 50 S#(+1) #($ :#9% +;% )#&% +1 R#&1). T;% ,;%,')
51*(,%$. A( #,+-1( /#) 2-8%$ 50 R#&1) #:#-()+ T*#71( 21" ,188%,+-1( 12 +;% #&1*(+
12 +;% ,;%,')< /-+;1*+ -(,8*$-(: +;% $"#/%" 12 +;% ,;%,')< S#(+1). W#) +;% (1(-
-(,8*)-1( 12 S#(+1) -( +;% #,+-1( 2#+#8 +1 +;% ,#)% 2-8%$ 50 R#&1)6
A. As indorser, Tua&on warranted that upon due presentment, the checks were to
be accepted or paid, or both, according to their tenor= and that in case they were
dishonored, she would pay the corresponding amount. After an instrument is dishonored
by nonpayment, indorsers cease to be merely secondarily liable= they become principal
debtors whose liability becomes identical to that of the original obligor. The holder of a
negotiable instrument need not even proceed against the drawer before suing the indorser.
+learly, Santos L as the drawer of the checks is not indispensable party in action against
Tua&on, the indorser of the checks.
1/6
3. F1"$ $"%/ +/1 ,;%,') #:#-()+ C-+-5#(' +1 .#0 .%",%(+#:% +#E%)< .#0#58%
+1 +;% C1&&-))-1(%" 12 I(+%"(#8 R%9%(*%. B1+; ,;%,') /%"% ?,"1))%$ ,;%,')@ #($
,1(+#-(%$ +/1 $-#:1(#8 8-(%) 1( -+) *..%" 8%2+ ,1"(%" 5%+/%%( /;-,; /%"% /"-++%( +;%
/1"$)< ?.#0#58% +1 +;% .#0%%>) #,,1*(+ 1(80.@ T;% ,;%,') (%9%" "%#,;%$ +;% .#0%%
21" /;-,; "%#)1( +;% BIR $%&#($%$ .#0&%(+ 12 +;% +#E%) 2"1& F1"$. I()+%#$ +;%
,;%,') /%"% $%.1)-+%$ /-+; PCIB#(' -( +;% (#&% 12 R%0(#8$1 R%0%)< # 2-,+-+-1*)
.%")1(. PCIB )%(+ +;%& +1 +;% C%(+"#8 C8%#"-(: /-+; +;% -($1")%&%(+ #+ +;% 5#,'<
195
Astro 3lectronics +orporation vs. %hilguarantee, 511 S+-A 56!.
196
Tua&on vs. Heirs of 'artolome -amos, 56" S+-A 521, 516E517, citing *etropol vs. Sambok *otors
+o., !28 %hil. 781, 76!= 1!2 S+-A 165, 161.
8!
?#88 ."-1" -($1")%&%(+) #($J1" 8#,' 12 -($1")%&%(+ :*#"#(+%%$<@ #($ /%"%
."%)%(+%$ +1 #($ .#-$ 50 +;% $"#/%% 5#('< C-+-5#('. W;1 ,#( 5% &#$% 8-#58% 50
F1"$< PCIB#(' #) ,188%,+-(: 5#(' 1" C-+-5#('< +;% $"#/%% 5#('6
A. %+'ank is liable. Since the 4uestioned checks were deposited with %+'ank,
it had the responsibility to make sure that the check in 4uestion is deposited in payee$s
account only, ndeed, the crossing of the check with the phrase :%ayee$s Account <nly;
is a warning that the check should be deposited only in the account of the +ommissioner
of nternal -evenue. Thus, it is the duty of the collecting bank %+'ank to ascertain that
the check be deposited in payee$s account only. Therefore, it is the collecting bank
B%+'ankC which is bound to scrutini&e the check and to know its depositors before it
could make the clearing indorsement :all prior indorsements andNor lack of indorsement
guaranteed.; The drawee bank has a right to believe that the cashing bank Bor the
collecting bankC had, by the usual proper investigation, satisfied itself of the authenticity
of the negotiation of the checks.
1/7

3. P8#-(+-22) .*",;#)%$ 2"1& $%2%($#(+ T"#$%") R10#8 B#(' +;"%% &#(#:%">)
,;%,') .#0#58% +1 +;% B*"%#* 12 I(+%"(#8 R%9%(*%. O(% 12 +;% )#-$ ,;%,') /%"%
,"1))%$. T;% ,;%,') /%"% (%9%" $%8-9%"%$ +1 +;% .#0%% 5*+ /%"% ."%)%(+%$ 21"
.#0&%(+ 50 *('(1/( .%")1() /;1 21":%$ +;% )-:(#+*"% 12 +;% .#0%%. T"#$%") R10#8
B#(' .#-$ +;% )#-$ ,;%,'). I) T"#$%") R10#8 B#(' 8-#58%6
A. 'y encashing in favor of unknown persons checks which were on their face
payable to the '-, a government agency which can only act through its agents, Traders
-oyal 'ank did so at its peril and must suffer the conse4uences of the unauthori&ed or
wrongful endorsement. t should be noted further that one of the checks was crossed. The
crossing of the check should have put Traders -oyal 'ank on guard= it was dutyEbound to
ascertain the indorser$s title to the check or the nature of his possession. The bank should
have known the effects of a crossed checkF BaC the check may not be encashed but only
deposited in the bank= BbC the check may be negotiated only once to one who has an
account with a bank and BcC the act of crossing the check serves as a warning to the
holder that the check has been issued for a definite purpose so that he must in4uire if he
has received the check pursuant to that purpose, otherwise, he is not a holder in due
course. Traders -oyal 'ank is therefore, liable.
1/1

3. P*")*#(+ +1 # C1&."1&-)% A:"%%&%(+< P-1 B#""%++1 R%#8+0 $%8-9%"%$ +1
M1)8#"%) # ,;%,' -( .#0&%(+ 12 +;% -(+%"%)+ 12 +;% 8#++%" -( # "%#8 ."1.%"+0. M1)8#"%)
(%9%" ,#);%$ +;% ,;%,' (1" =*%)+-1(%$ +;% +%($%" $1(% $%).-+% +;% 8#.)% 12 +;"%%
0%#"). L#+%"< M1)8#"%) ,8#-&%$ +;#+ +;% $%8-9%"0 12 +;% ,;%,' +1 ;-& $-$ (1+ ."1$*,%
+;% %22%,+ 12 .#0&%(+ 5%,#*)% ;% (%9%" ,#);%$ +;% ,;%,'. W#) P-1 B#""%++1 R%#8+0
197
%hilippine +ommercial nternational 'ank vs. +ourt of Appeals, "82 S+-A 556, 567E561, citing 'anco
de <ro Savings and *ortgage 'ank vs. 34uitable 'anking +orporation, 187 S+-A 111.
198
Traders -oyal 'ank vs. -adio %hilippines .etwork, nc., "/2 S+-A 621, 615.
8"
$-),;#":%$ 2"1& -+) 158-:#+-1( +1 .#0 M1)8#"%) ,1()-$%"-(: +;#+ +;% 8#++%" $-$ (1+
,#); +;% ,;%,' $%8-9%"%$ +1 ;-&6
A. The fact that the check paid him by %io 'arretto -ealty was never encashed
should not be invoked against the latter. *oslares never 4uestioned the tender of the
check to him done three years earlier. Hhile delivery of a check produces the effect of
payment only when it is encashed, the rule is otherwise if the debtor was prejudiced by
the creditor$s unreasonable delay in presentment. Acceptance of a check implies an
undertaking of due diligence in presenting it for payment. f no such presentment was
made, the drawer cannot be held liable irrespective of loss or injury sustained by the
payee. %ayment will be deemed effected and the obligation for which the check was
given as conditional payment will be discharged.
1//
3. A1B W;#+ #"% +;% %22%,+) 12 ,"1))-(: # ,;%,'6 A2B W;#+ -) +;% 8-#5-8-+0 12 +;%
$"#/%% 5#(' +;#+ %(,#);%) # ,"1))%$ ,;%,'6 A3B W;#+ -) +;% 8-#5-8-+0 12 +;% ,188%,+-(:
5#(' +;#+ -($1")%) # ,"1))%$ ,;%,'6
A. B1C The effects of crossing a check are as followsF BaC the check may not be
encashed but only deposited in the bank= BbC the check may be negotiated only once L to
one who has account with a bank, and BcC the act of crossing the check serves as a
warning to the holder that the check has been issued for a definite purpose so that he must
in4uire if he has the check pursuant to that purpose, otherwise, he is not a holder in due
course.
B!C
B"C A collecting bank where a check is deposited and which endorses the check
upon presentment with the drawee bank, is an indorser, and thus assumes all the
warranties of an indorser. The collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements considering
that the act of presenting the check for payment to the drawee is an assertion that the
party making the presentment has done its duty to ascertain the genuineness of the
endorsements. 'y stamping the check with the phrase, :all prior endorsements andNor
lack of endorsement guaranteed;, that bank had for all intents of purposes assumed the
warranties Brelated to the endorsements on the checksC.
!22
3. W;#+ -) # N%:1+-#58% O"$%" 12 W-+;$"#/#8 ANOWB A,,1*(+6
A. .egotiable <rder of Hithdrawal B.<HC Account is an interestEbearing deposit
account that combines the payable on demand feature of checks and the investment
feature of savings accounts.
!21
199
%io 'arretto -ealty Development +orporation vs. +ourt of Appeals, "62 S+-A 1!6.
200
'ank of America vs. Associated +iti&ens 'ank, 811 S+-A 81, *ay !1, !22/.
201
%eople vs. -eyes, 585 S+-A 6"6.
85
3. T;% ,;%,' -))*%$ *($%" +;% N%:1+-#58% O"$%" 12 W-+;$"#/#8 ANOWB
A,,1*(+ -) .#0#58% +1 # ).%,-2-, .%")1( #($ (1+ +1 ?1"$%"@ 1" +1 ?5%#"%"@. I) -+
(%:1+-#58%6
A. t is not negotiable since it does not comply with one of the re4uisites of
negotiability that it must be payable to order or to bearer.
!2!
TRANSPORTATION
IV N TRANSPORTATION
3. W;#+ -) # +%)+ +1 $%+%"&-(% # ,1&&1( ,#""-%"6
A. The test to determine a common carrier is whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the 4uantity or e9tent of the business transacted.
!2"
3. TCTSI< 1/(%$ 50 C#891< %(+%"%$ -(+1 # ,1(+"#,+ /-+; SMC +1 +"#()2%" 11
"%%8) 12 28*+-(: .#.%" #($ 12 "%%8) 12 G"#2+ 8-(%" 2"1& +;% .1"+ #"%# +1 +;% SMC
/#"%;1*)% -( E"&-+#< M#(-8#. T;% ,#":1 /#) -()*"%$ 50 UCPB. U.1( $%8-9%"0 +1
+;% /#"%;1*)%< -+ /#) 21*($ +;#+ 1! "%%8) 12 28*+-(: .#.%" #($ 3 "%%8) 12 '"#2+ .#.%"
/%"% $#&#:%$. SMC ,188%,+%$ 2"1& UCPB /;-,; +;%( #) )*5"1:%% 12 SMC< 5"1*:;+
# ,188%,+-1( )*-+ #:#-()+ TCTSI. P%+-+-1(%" ,1(+%($) +;#+ );% -) (1+ # ,1&&1( ,#""-%"
5*+ # ."-9#+% ,#""-%" 5%,#*)% #) # ,*)+1&) 5"1'%" #($ /#"%;1*)%&#(< );% $1%) (1+
-($-),"-&-(#+%80 ;18$ ;%" )%"9-,%) 1*+ +1 +;% .*58-, 5*+ 1(80 +1 )%8%,+ .#"+-%) /-+;
/;1& );% &#0 ,1(+"#,+ -( +;% ,1*")% 12 ;%" 5*)-(%)). I) .%+-+-1(%"< # ,*)+1&) 5"1'%"
,1()-$%"%$ # ,1&&1( ,#""-%"6
A. The petitioner is a common carrier. There is greater reason for holding the
petitioner to be a common carrier because the transportation of goods is an integral part
of her business. To uphold petitioner$s contention would be to deprive those with whom
she contracts the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers is part and parcel of petitioner$s business.
The definition of common carriers under Article 17"! of the +ivil +ode makes no
distinction between one who whose principal activity is the carrying of passengers or
goods or both and one who does such carrying only as an ancillary activity. t does not
make any distinction between a person or enterprise offering such service on a regular or
202
Section 1= See %eople vs. -eyes, supra.
203
Asia )ighterage and Shipping, nc. vs. +ourt of Appeals, 52/ S+-A "52, August 1/, !22".
88
scheduled service and one on an occasional basis. .either does the article distinguish
between carriers offering its services to the :general public; nor one who offers services
only from a narrow segment of the general population.
!25

3. GPS T"*,'-(: C1".1"#+-1( *($%"+11' +1 $%8-9%" A30B *(-+) 12 C1($*"#
"%2"-:%"#+1") #51#"$ 1(% 12 -+) I)*7* +"*,'. W;-8% +;% +"*,' /#) +"#9%")-(: +;% (1"+;
$-9%")-1( "1#$ -+ ,188-$%$ /-+; #( *(-$%(+-2-%$ +"*,'< ,#*)-(: -+ +1 2#88 -(+1 # $%%.
,#(#8< "%)*8+-(: -( $#&#:% +1 +;% ,#":1%). FGU #) -()*"%" 12 +;% );-.&%(+< .#-$ +1
C1(,%.,-1( I($*)+"-%)< I(,.< +;% 9#8*% 12 +;% ,19%"%$ ,#":1%). FGU )1*:;+
"%-&5*")%&%(+ 12 +;% #&1*(+ -+ .#-$ +1 C1(,%.,-1( I($*)+"-%) 2"1& GPS. I+ /#)
,1(+%($%$ +;#+ GPS /#) 1(80 +;% %E,8*)-9% ;#*8%" 12 C1(,%.,-1( I($*)+"-%)< I(,.<
)-(,% 1988< #($ -+ /#) (1+ )1 %(:#:%$ -( 5*)-(%)) #) # ,1&&1( ,#""-%". R%).1($%(+
2*"+;%" ,8#-&%$ +;#+ +;% ,#*)% 12 $#&#:% /#) .*"%80 #,,-$%(+#8. A#B M#0 GPS 5%
,1()-$%"%$ #) # ,1&&1( ,#""-%"6 A5B M#0 GPS< %-+;%" #) # ,1&&1( ,#""-%" 1" #
."-9#+% ,#""-%"< 5% ."%)*&%$ (%:8-:%(+ /;%( +;% :11$) -+ *($%"+11' +1 +"#().1"+
)#2%80 /%"% $#&#:%$ /;-8% -( -+) ."1+%,+-9% ,*)+1$0 #($ .1))%))-1(6
A. BaC .o, ,%S cannot be considered as a common carrier. ,%S, being an
e9clusive contractor and hauler of +oncepcion ndustries, nc., rendering or offering its
services to no other individual or entity, cannot be considered a common carrier.
+ommon carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for hire or
compensation, offering their services to the .*58-,,

whether to the public in general or to
a limited clientele in particular, but never on an e9clusive basis.

The true test of a
common carrier is the carriage of passengers or goods, providing space for those who opt
to avail themselves of its transportation service for a fee. ,%S scarcely falls within the
term Wcommon carrier.W
BbC Qes, notwithstanding the fact that ,%S cannot be considered as a common
carrier it still cannot escape liability. n culpa contractual, upon which the action of
petitioner rests as being the subrogee of +oncepcion ndustries, nc., the mere proof of
the e9istence of the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief.

The law, recogni&ing the obligatory force of contracts,

will
not permit a party to be set free from liability for any kind of nonEperformance of the
contractual undertaking or a contravention of the tenor thereof.

A breach upon the
contract confers upon the injured party a valid cause for recovering that which may have
been lost or suffered.
!28
3. W-88 ,;#"+%" .#"+0 12 # 9%))%8 5%81(:-(: +1 # ,1&&1( ,#""-%" (%,%))#"-80
,1(9%"+ +;% ,#""-%" -(+1 # ."-9#+% ,#""-%"6
!25
Calvo vs. UCPB General Insurance Co., Inc., 379 SCRA 510, March 19, 2002.
205
(,? nsurance +orporation vs. ,. %. Sarmiento Trucking +orporation, "16 S+-A "1!, August 6,
!22!.
86
A. The public or common carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited
to the ship only, as in the case of a timeEcharter or voyageEcharter. t is only when the
charter includes both the vessel and its crew, as in a bareEboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charterE
party is concerned. The reason is that a shipowner in a time or voyageEcharter retains
possession and control of the ship, although her holds may, for the moment, be the
property of the charterer.
!26
<n the other hand, in a demise or bareEboat charter, the charterer will generally be
considered as the owner of the voyage or service stipulated because the owner of the
vessel completely and e9clusively relin4uishes possession, command and navigation of
the vessel to the charterer. Thus, a demise or bareEboat charter indicates a business
undertaking that is private in character. +onse4uently, the rights and obligations of the
parties to a contract of private carriage are governed principally by their stipulations, not
by the law on common carriers.
!27
3. L1#$)+#" S;-..-(: C1.< I(,. -) +;% "%:-)+%"%$ 1/(%" #($ 1.%"#+1" 12 +;%
9%))%8 MJV W%#)%8. L1#$)+#" %(+%"%$ -(+1 # 910#:%-,;#"+%" /-+; N1"+;%"(
M-($#(#1 T"#().1"+ C1.< I(,. 21" +;% ,#""-#:% 12 6!<000 5#:) 12 ,%&%(+ 2"1& I8-:#(
C-+0 +1 M#(-8#. T;% );-.&%(+ /#) -()*"%$ /-+; P-1(%%" A)-# I()*"#(,% C1".. MJV
W%#)%8 8%2+ I8-:#( C-+0 -( :11$ /%#+;%" 1( J*(% 2 #+ 12F!0 -( +;% #2+%"(11(.
41/%9%"< #+ F31 -( +;% &1"(-(: 12 J*(% 2!< +;% ,#.+#-( 12 MJV W%#)%8 1"$%"%$ +;%
9%))%8 +1 5% 21",%$ #:"1*($. C1()%=*%(+80< +;% %(+-"% );-.&%(+ 12 ,%&%(+ /#)
$#&#:%$ $*% +1 %E.1)*"% +1 )%# /#+%". T;% -()*"%" .#-$ +;% ,1()-:(%% +;% #&1*(+ 12
+;% );-.&%(+ /;-,; /#) -()*"%$ #($ ,8#-&%$ "%-&5*")%&%(+ 2"1& +;% L1#$)+#".
L1#$)+#" ,8#-&%$ +;#+ #+ +;% +-&% 12 +;% 910#:% +;% ,#""-%">) 910#:%-,;#"+%"
,1(9%"+%$ -+ -(+1 # ."-9#+% ,#""-%" #($ +;*)< +;% ."%)*&.+-1( 12 (%:8-:%(,% #:#-()+
,1&&1( ,#""-%") ,#((1+ #..80. I) )*,; ,1(+%(+-1( ,1""%,+6
A. The voyageEcharter agreement between )oadstar and .orthern *indanao
Transport did not in any way convert the common carrier into a private carrier. )oadstar
remains a common carrier notwithstanding the e9istence of the charter agreement with
.orthern *indanao Transport since the said charter is limited to the ship only and does
not involve both the vessel and its crew. As a common carrier, )oadstar is re4uired to
observe e9traordinary diligence in the vigilance over the goods it transports. Hhen the
goods placed in its care are lost, )oadstar is presumed to have been at fault or to have
acted negligently. )oadstar has the burden of proving that it observed e9traordinary
diligence in order to avoid responsibility for the lost cargo.
!21
3. C"-)1)+1&1 ,1(+"#,+%$ +;% )%"9-,%) 12 C#"#9#(< # +"#9%8 #:%(,0 +1 #""#(:%
#($ 2#,-8-+#+% ;%" 511'-(:< +-,'%+-(: #($ #,,1&&1$#+-1( 21" # .#,'#:% +1*" +1
E*"1.%. 4%" (-%,% /;1 #8)1 /1"'%$ 21" +;% #:%(,0 /%(+ +1 ;%" ;1*)% +1 $%8-9%"
206
%lanters %roducts, nc. vs. +ourt of Appeals, !!6 S+-A 576.
207
Lea Mer Industries, Inc. vs. Malayan Insurance Co., Inc., 471 SCRA 698,
Septe!er "#, $##%.
208
)oadstar Shipping +o., nc. vs. %ioneer Asia nsurance +orp., 57/ S+-A 688, 0anuary !5, !226.
87
.%+-+-1(%">) +"#9%8 $1,*&%(+) #($ .8#(% +-,'%+). P%+-+-1(%"< -( +*"( :#9% ;%" +;% 2*88
.#0&%(+ 21" +;% .#,'#:% +1*". 4%" (-%,% -(21"&%$ ;%" +;#+ ;%" 28-:;+ /#) 1( #
S#+*"$#0. W-+;1*+ ,;%,'-(: ;%" +"#9%8 $1,*&%(+)< .%+-+-1(%" /%(+ +1 NAIA +1 +#'%
;%" 28-:;+. T1 ;%" $-)&#0 );% $-),19%"%$ +;#+ +;% 28-:;+ );% /#) )*..1)%$ +1 +#'% ;#$
#8"%#$0 $%.#"+%$ +;% ."%9-1*) $#0< # F"-$#0. S;% 8%#"(%$ +;#+ ;%" .8#(% +-,'%+ /#)
21" +;% 28-:;+ ),;%$*8%$ +;% $#0 5%21"%. S;% ,1&.8#-(%$ +1 C#"#9#( /;-,; #881/%$
+;% .%+-+-1(%" +1 +#'% #(1+;%" +1*" +1 E*"1.% 5*+ /-+; # $-22%"%(+ -+-(%"#"0. U.1(
;%" "%+*"( );% $%&#($%$ 2"1& +;% +"#9%8 #:%(,0 "%-&5*")%&%(+ "%."%)%(+-(: +;%
$-22%"%(,% 5%+/%%( +;% )*& );% .#-$ 21" ;%" 2-")+ +1*" #($ +;% #&1*(+ );% 1/%$ 21"
+;% )%,1($ +1*". C#"#9#( "%2*)%$ +1 "%-&5*")% +;% #&1*(+ ,1(+%($-(: -+ /#) (1(-
"%2*($#58% #($ -+ ,#( (1 81(:%" "%-&5*")% +;% #&1*(+ .#-$ ,1()-$%"-(: +;#+ +;%
)#&% ;#$ #8"%#$0 5%%( "%&-++%$ +1 -+) ."-(,-.#8 -( S-(:#.1"% /;-,; ;#$ #8"%#$0
5-88%$ +;% )#&% %9%( -2 .%+-+-1(%" $-$ (1+ +#'% +;% +1*". W#) +;% +"#9%8 #:%(,0<
C#"#9#( # ,1&&1( ,#""-%"6
A. +aravan, the travel agency was not a common carrier. +aravan was not an
entity engaged in the business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. +aravan did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Hhile petitioner concededly bought her plane ticket through
the efforts of +aravan, this does not mean that the latter ipso facto is a common carrier. At
most, +aravan acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to 3urope. +aravan$s obligation to petitioner in this regard was
simply to see to it that petitioner was properly booked with the airline for the appointed
date and time. Her transport to the place of destination, meanwhile, pertained directly to
the airline.
The object of petitioner$s contractual relation with respondent is the latter$s
service of arranging and facilitating petitioner$s booking, ticketing and accommodation in
the package tour. n contrast, the object of a contract of carriage is the transportation of
passengers or goods. t is in this sense that the contract between the parties in this case
was an ordinary one for services and not one of carriage.
!2/

3. I) # +"#9%8 #:%(,0 "%=*-"%$ +1 %E%",-)% +;% )#&% $%:"%% 12 %E+"#1"$-(#"0
$-8-:%(,% 12 # ,1&&1( ,#""-%"6
A. .o, a travel agency not being a common carrier is not re4uired to e9ercise the
same degree of e9traordinary diligence of a common carrier. The object of a passenger$s
contractual relation with a travel agency is the latter$s service of arranging and facilitating
passenger$s booking, ticketing and accommodation in the package tour. n contrast, the
object of a contract of carriage is the transportation of passengers or goods. The contract
between the passenger and a travel agency is an ordinary one for services and not one of
!2/
+risostomo vs. +ourt of Appeals, B52/ S+-A 8!1, August !8, !22".
81
carriage. Since the contract between the parties is an ordinary one for services, the
standard of care re4uired of a travel agency is only that of a good father of a family.
!12
3. T/1 ;*($"%$ 21"+0 +/1 A22B ,1-8%$ 12 P"-&% C18$ R188%$ S+%%8 /%"%
,1()-:(%$ +1 P;-8-..-(%) S+%%8 -+ /#) -()*"%$ +;"1*:; P;-8-..-(% F-")+ I()*"#(,%.
W;%( +;% );-.&%(+ #""-9%$ -+ /#) $-),19%"%$ +;#+ 21*" AB ,1-8) /%"% -( 5#$ 1"$%"
#($ /#) *(2-+ 21" +;% -(+%($%$ .*".1)%. P;-8-..-(% S+%%8 $%&#($%$ .#0&%(+ 21" +;%
81)) 2"1& +;% -()*"#(,% ,1&.#(0 5*+ $%).-+% +;% "%,%-.+ 12 +;% 21"&#8 $%&#($< -+
"%2*)%$ +1 .#0 P;-8-..-(% S+%%8. C1()%=*%(+80 B%8:-#( O9%")%#) #) +;% ,1&&1(
,#""-%" .#-$ 21" +;% $#&#:%$ ,1-8) #&1*(+-(: +1 !06<086.!0. B%8:-#( O9%")%#)
+;-('-(: +;#+ -) /#) )*5"1:#+%$ +1 +;% "-:;+) 12 P;-8-..-(% S+%%8 -()+-+*+%$ #
,1&.8#-(+ 21" "%,19%"0 12 +;% #&1*(+ .#-$ 50 +;%& +1 +;% ,1()-:(%%) #) -()*"%$.
41/%9%" +;% 81/%" ,1*"+ "*8%$ +;#+ B%8:-#( O9%")%#) ,#((1+ "%,19%" 2"1&
P;-8-..-(%) F-")+ I()*"#(,% 5%,#*)% +;%"% -) # ."%)*&.+-1( +;#+ +;% 81)+ /#) $*% +1
-+) 1/( (%:8-:%(,% #) # ,1&&1( ,#""-%" #($ +;%"%21"% ,#((1+ "%,19%" 2"1& +;%
-()*"#(,% ,1&.#(0. W#) +;% "*8-(: 12 +;% 81/%" ,1*"+ ,1""%,+6
A. Qes. HellEsettled is the rule that common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligence
and vigilance with respect to the safety of the goods and the passengers they transport.
Thus, common carriers are re4uired to render service with the greatest skill and foresight
and Wto use all reasonable means to ascertain the nature and characteristics of the goods
tendered for shipment, and to e9ercise due care in the handling and stowage, including
such methods as their nature re4uires.W The e9traordinary responsibility lasts from the
time the goods are unconditionally placed in the possession of and received for
transportation by the carrier until they are delivered, actually or constructively, to the
consignee or to the person who has a right to receive them.
<wing to this high degree of diligence re4uired of them, common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they e9ercise
e9traordinary diligence in transporting the goods.
!11
3. T;% D%.#"+&%(+ 12 4%#8+; ADO4B #($ C11.%"#+-9% 21" A&%"-,#( R%8-%2
E9%"0/;%"%< I(,. ACAREB %(+%"%$ -(+1 #( #:"%%&%(+ /;%"%-( CARE /1*8$ #,=*-"%
2"1& +;% U(-+%$ S+#+%) :19%"(&%(+ $1(#+-1() 12 (1(-2#+ $"-%$ &-8'< #($ 1+;%" 211$
."1$*,+) +1 5% +"#().1"+%$ #($ $-)+"-5*+%$ +1 +;% -(+%($%$ 5%(%2-,-#"-%) -( +;%
P;-8-..-(%). T;% :19%"(&%(+ %(+%"%$ -(+1 # ,1(+"#,+ 12 ,#""-#:% 12 :11$) /-+;
N#+-1(#8 T"*,'-(: #($ F1"/#"$-(: C1".1"#+-1( ANTFCB. T;% 8#++%" );-..%$ <868
5#:) 12 (1(-2#+ $"-%$ &-8' +;"1*:; "%).1($%(+ L1"%(71 S;-..-(: C1".1"#+-1(
ALSCB. T;% ,1()-:(%% -( +;% B-88) 12 L#$-(: /#) A5$*"#;&#( J#&#< .%+-+-1(%"
NTFC>) 5"#(,; )*.%"9-)1". LSC>) #:%(+ *(81#$%$ 868 5#:) #($ $%8-9%"%$ +;%
:11$) +1 .%+-+-1(%">) /#"%;1*)%. B%21"% %#,; $%8-9%"0< +;% ,;%,'%") 12 LSC>) #:%(+
210
+risostomo vs. +ourt of Appeals, supra.
211
'elgian <verseas +hartering @ Shipping .. A. vs. %hilippines (irst nsurance +o., nc., "1" S+-A, !",
0une 8, !22!.
8/
"%=*%)+%$ A5$*"#;&#( J#&# +1 )*""%($%" +;% 1"-:-(#8 5-88) 12 8#$-(:< 5*+ +;% 8#++%"
&%"%80 ."%)%(+%$ $%8-9%"0 "%,%-.+). A5$*"#;&#( 1" ;-) $%)-:(#+%$ )*51"$-(#+%)
)-:(%$ +;% $%8-9%"0 "%,%-.+) *.1( ,1&.8%+-1( 12 %#,; $%8-9%"0. N1+/-+;)+#($-(: +;%
."%,#*+-1() +#'%(< +;% .%+-+-1(%" #88%:%$80 $-$ (1+ "%,%-9% +;% )*5C%,+ :11$) /;-,;
."1&.+%$ +;% .%+-+-1(%") +1 2-8% # ,1&.8#-(+ #:#-()+ LSC 21" 5"%#,; 12 ,1(+"#,+ 12
,#""-#:%. M#0 +;% LSC #) ,#""-%" 5% ;%8$ 8-#58% 21" -+) 2#-8*"% +1 %E%",-)%
%E+"#1"$-(#"0 $-8-:%(,% "%=*-"%$ 12 ,1&&1( ,#""-%")6
A. -espondent )S+ is not liable because it observed e9traordinary diligence.
39traordinary diligence is that e9treme measure of care and caution which persons of
unusual prudence and circumspection use for securing and preserving their own property
or rights. The presumption of fault or negligence may be overturned by competent
evidence showing that the common carrier has observed e9traordinary diligence over the
goods. n this case, the respondent ade4uately proved that it e9ercised e9traordinary
diligence. Although, the original bills of lading remained with petitioner, respondent$s
agent demanded from Abdurahman 0ama the certified true copies of the bills of lading.
They also asked the latter to sign the cargo delivery receipts. The surrender of the original
bills of lading is not a condition precedent for a common carrier to be discharged of its
contractual obligation. f surrender of the bill of lading is not possible, acknowledgement
of the delivery by signing the delivery receipt suffices. And this is what respondent did,
making him not liable to petitioner although the latter allegedly did not receive the
goods.
!1!

3. N#9-$#$< +;%( $"*('< .#-$ +;% 2#"% #($ %(+%"%$ +;% EDSA LRT )+#+-1(. A(
#8+%",#+-1( 5%+/%%( +;% )%,*"-+0 :*#"$ #($ N#9-$#$ %()*%$ /;-8% +;% 8#++%" /#)
/#-+-(: 21" +;% +"#-( 1( +;% .8#+21"&. A) +;% +"#-( #.."1#,;%$< N#9-$#$ 2%88 1( +;%
+"#,') #($ /#) )+"*,' 50 +;% &19-(: +"#-( '-88-(: ;-& -()+#(+#(%1*)80. T;% 1.%"#+1"
12 +;% +"#-( /#) #( %&.810%% 12 M%+"1 T"#()-+ +;#+ /#) ,1(+"#,+%$ 50 L-:;+ R#-8
T"#()-+ A*+;1"-+0 ALRTAB. T;% /-$1/ 12 N#9-$#$ 2-8%$ # )*-+ #:#-()+ LRTA 21"
$#&#:%). LRTA ,8#-&%$ +;#+ N#9-$#$ /#) (1+ # .#))%(:%" #($ +;#+ +;% +"#-(
1.%"#+1" /#) (1+ #( %&.810%% 12 LRTA 5*+ +;#+ 12 M%+"1 T"#()-+. A#B C#( LRTA 5%
;%8$ 8-#58% #) # ,1&&1( ,#""-%" %9%( -2 +;% $%,%#)%$ ;#$ (1+ 0%+ 51#"$%$ +;% +"#-(6
A5B C#( LRTA 5% &#$% 8-#58% 21" +;% #,+) 12 +;% +"#-( 1.%"#+1" /;1 /#) (1+ -+)
%&.810%%6
A. BaC )-T was liable as a common carrier. A contract of carriage was deemed
created from the moment .avidad paid the fare and entered the )-T station, entitling him
to all the rights and protection under a contractual relation. )-TA was liable due to its
failure to e9ercise e9traordinary diligence imposed on a common carrier. Such duty to
provide safety to its passengers so obligates it not only during the course of the trip but
for so long as the passengers are within its premises and where they ought to be in
pursuance of the contract of carriage. The foundation of )-TA$s liability is the contract of
carriage and its obligation to indemnify the victim arises from the breach of that contract
by reason of its reason of its failure to e9ercise the high diligence re4uired of the common
carrier.
!1!
-epublic vs. )oren&o Shipping +orporation, 582 S+-A 882, (ebruary 7, !228.
62
!" In #he $%schar&e o' %#s co((%#(en# #o e)erc%se e)#raor$%nar* $%l%&ence %n ensur%n& #he
sa'e#* o' +assen&ers, a carr%er (a* choose #o h%re %#s o,n e(+lo*ees or ava%l o' #he serv%ces o' a
#h%r$ +erson #o un$er#a-e #he #as-. In e%#her case, #he co((on carr%er %s no# rel%eve$ o' %#s
res+ons%!%l%#%es un$er #he con#rac# o' carr%a&e.
213

3. W;#+ #"% +;% -()+#(,%) /;%"%-( +;% ."%)*&.+-1( 12 2#*8+ 1" (%:8-:%(,% /-88
(1+ #"-)%6
A. The presumption of fault or negligence will not arise if the loss is due to any of
the following causesF
B1C (lood, storm, earth4uake, lightning, or other natural disaster or calamity=
B!C An act of the public enemy in war, whether international or civil=
B"C An act or omission of the shipper or owner of the goods=
B5C The character of the goods or defects in the packing or the container= or
B8C An order or act of competent public authority.
!15
3. J T"#$-(: C1. L+$. O2 S%1*8< G1"%#< 81#$%$ # );-.&%(+ 12 21*" *(-+) 12
.#"+) #($ #,,%))1"-%) 1( 51#"$ +;% 9%))%8 12 MJV ?N#+-1(#8 41(1"@. T;% );-.&%(+
/#) 21" +;% $%8-9%"0 +1 M#(-8#. T;% );-.&%(+ /#) ,1(+#-(%$ -( +/1 /11$%( ,"#+%).
T;%"% /#) (1 &#"'-(: 1( +;% 1*+%" .1"+-1( 12 +;% ,"#+%) %E,%.+ +;% (#&% 12 +;%
,1()-:(%%. U.1( #""-9#8 #+ +;% .1"+ 12 $%)+-(#+-1(< +;% -().%,+1" 21*($ +;% ,#":1%) -(
:11$ ,1($-+-1(. T;% )+%9%$1"% 5%:#( *(81#$-(: +;% ,"#+%) 2"1& 9%))%8. I+ /#) #+ +;-)
+-&% +;#+ +;% &-$-.1"+-1( 12 +;% /11$%( 2811"-(: 12 +;% ,"#+%) )(#..%$ -( +;% #-"<
)%($-(: #88 -+) ,1(+%(+) ,"#);-(: $1/( ;#"$< "%)*8+-(: -( %E+%()-9% $#&#:% +1 +;%
);-.&%(+. T;% );-..%" ,8#-&) +;#+ +;% 81)) 12 +;% ,#":1 /#) $*% +1 +;% ,1&&1(
,#""-%">) 2#*8+ 1( +;% :"1*($ +;#+ +;% ,#""-%">) $*+0 +1 %E%",-)% %E+"#1"$-(#"0
$-8-:%(,% -) %E+-(:*-);%$ 1(80 /;%( +;% :11$) #"% $-"%,+80 $-),;#":%$ +1 +;%
,1()-:(%%. I) +;% );-..%">) ,1(+%(+-1( ."1.%"6
A. .o. ?nder Article 17"5 of the .ew +ivil +ode, the presumption does not
apply in five causes. <ne of which is the :character of the goods or defects in the packing
or in the containers;. To e9culpate itself from liability, the common carrier has the burden
to prove any of the five causes claimed by it by a preponderance of evidence. f the
carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier
is negligent. <n the one hand, :defect; is the want or absence of something necessary for
completeness or perfectionF a lack or absence of something essential to completeness= a
!1"
.%&h# Ra%l /rans%# Au#hor%#* vs. 0av%$a$, 397 SCRA 75, 1e!ruar* 2, 2003.
214
bid.
61
deficiency in something essential to the proper use for the purpose for which a thing is to
be uses. <n the other hand, :inferior; means a poor 4uality, mediocre, or second rate. A
thing may be of inferior 4uality but not necessarily defection. n other words,
:defectiveness; is not synonymous to :inferiority;. n the case at bar, the crate should
have three solid and strong wooden batten placed side by side underneath or on the
flooring of the crate to support its contents. However, in this case, although there were
three wooden battens on its flooring, the middle batten, which carried the substantial
volume of the cargo, had a knot hole, which considerably affected, reduced and
weakened its strength.
!18

3. B%"$% P8#(+) $%8-9%"%$ +"%%) +1 C.F. S;#".< +;% G%(%"#8 A:%(+ 12 DSR-
S%(#+1" L-(%) 21" +"#().1"+#+-1( #($ $%8-9%"0 +1 S#*$- A"#5-#. F%$%"#8 P;1%(-E
A))*"#(,% -()*"%$ +;% ,#":1 #:#-()+ #88 "-)'). 41/%9%"< /;-8% -( +"#()-+< +;% 9%))%8
#($ #88 -+) ,#":1 ,#*:;+ 2-"%. F%$%"#8 P;1%(-E A))*"#(,% .#-$ B%"$% P8#(+) +;%
#&1*(+ 12 -()*"#(,% 21" +;% ,#":1 #($ $%&#($%$ .#0&%(+ 2"1& C.F. S;#".. C.F.
S;#". ;1/%9%"< $%(-%$ 8-#5-8-+0 1( +;% :"1*($ +;#+ )*,; 8-#5-8-+0 /#) %E+-(:*-);%$
/;%( +;% 9%))%8 ,#""0-(: +;% ,#":1 /#) :*++%$ 50 2-"%. W-88 # ,1&&1( ,#""-%">)
8-#5-8-+0 5% %E+-(:*-);%$ 50 "%#)1( 12 2-"%6
A. The common carrier$s liability will not be e9tinguished by reason of fire.
Article 17"5 of the +ivil +ode provides, common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to any of the following
causes onlyF
1. (lood, storm, earth4uake, lightning, or other natural disaster or calamity=
!. Act of the public enemy in war, whether international or civil=
". Act or omission of the shipper or owner of the goods=
5. The character of the goods or defects in the packing or in the containers=
8. <rder or act of competent public authority.
(ire is not one of those enumerated under the above provision which e9empts a
carrier from liability for loss or destruction of the cargo. 3ven if fire were to be
considered a natural disaster within the purview of Article 17"5, it is re4uired under
Article 17"/ of the same +ode that the natural disaster must have been the pro9imate and
only cause of the loss, and that the carrier has e9ercised due diligence to prevent or
minimi&e the loss before, during or after the occurrence of the disaster.
!16
3. S#( M-:*%8 C1".1"#+-1( -()*"%$ )%9%"#8 ,#)%) 12 5%%" 51++8%) /-+;
P;-8-..-(% A&%"-,#( G%(%"#8 I()*"#(,% C1. I(,. T;% 5%%" 51++8%) /%"% 81#$%$ 1(
51#"$ +;% MJV P%#+;%"#0. W;%( ,8%#"%$ 50 +;% C1#)+ G*#"$< +;% 9%))%8 8%2+ +;% .1"+
!18
%hilippine +harter nsurance +orporation vs. ?nknown <wner of the Aessel *NA
:.ational Honor;, 56" S+-A !2!, 0uly 1, !228.
!16
DS-ESenator )ines vs. (ederal %hoeni9 Assurance +o., nc., 51" S+-A 15. <ctober 7, !22".
6!
12 M#($#*% 21" B-)8-:< S*"-:#1 $%8 S*". T;% /%#+;%" /#) ,#8& /;%( +;% 9%))%8
)+#"+%$ /-+; +;% 910#:%. 41/%9%"< +;% 21881/-(: $#0 +;%"% /%"% )+"1(: /-($) #($
%(1"&1*) /#9%) /;-,; ,#*)%$ +;% 9%))%8 +1 8-)+< '%%8 19%"< #($ 81)% +;% ,#":1
,1(+#-(%$ +;%"%-(. I) +;% MJV P%#+;%"#0 #5)189%$ 2"1& 8-#5-8-+06
A. The answer is in the affirmative. n order for common carriers are absolved
from liability where the loss, destruction, or deterioration of goods is due to a natural
disaster or calamity, it must further be shown that such natural disaster or calamity was
the pro9imate and only cause of the loss, there must be :an entire e9clusion of human
agency from the cause of the injury or the loss;. *oreover, a common carrier is re4uired
to e9ercise due diligence to prevent or minimi&e the loss before, during and after the
occurrence of the natural disaster. All this present, the common carrier is e9empt from
liability under the law for the loss of goods. Since the presence of strong winds and
enormous waves was shown to be the pro9imate and only cause of the sinking of the *NA
%eatheray and the loss of the cargo belonging to San *iguel +orporation, the carrier
cannot be held liable for the said loss.
!17

3. P%+-+-1(%" C%(+"#8 S;-..-(: C1&.#(0 "%,%-9%$ 1( 51#"$ -+) 9%))%8< MJV
C%(+"#8 B1;18 376 .-%,%) 12 #.-+1(: 81:) #($ *($%"+11' +1 +"#().1"+ )#-$ );-.&%(+
+1 M#(-8# 21" $%8-9%"0 +1 A8#)'# L*&5%" C1.< I(,. D*"-(: +;% 910#:%< +;% 9%))%8
%(,1*(+%"%$ /%#+;%" $-)+*"5#(,% /;-,; ,#*)%$ +;% 81:) +1 );-2+ -( +;% ;18$ 12 +;%
9%))%8. C1()%=*%(+80< +;% 9%))%8 )*(' +1:%+;%" /-+; +;% 81:) 81#$%$ +;%"%-(. T;%
/%#+;%" $-)+*"5#(,% /#) (1+ # )+1"& 5*+ )+"1(: )1*+;/%)+ &1()11( /-($). T;%
1/(%" 12 +;% 81:) 2-8%$ # ,1&.8#-(+ #:#-()+ .%+-+-1(%" 21" +;% 81)) 12 +;% 81:) $*% +1
+;% 2#*8+ #($ (%:8-:%(,% 12 +;% .%+-+-1(%" #($ -+) ,#.+#-(. T;% .%+-+-1(%" "#-)%$ +;%
$%2%()% +;#+ +;% ."1E-&#+% ,#*)% 12 +;% )-('-(: 12 -+) 9%))%8 #($ -+) ,#":1 /#) #
(#+*"#8 $-)#)+%" /;-,; ,1*8$ (1+ 5% 21"%)%%(. I) +;% .%+-+-1(%" 8-#58% 21" +;% 81)) 12
+;% ,#":16
A. Qes, the petitioner is liable for the loss of the cargo because it failed to observe
e9traordinary diligence re4uired of a common carrier, under Art 17"" of the +ivil +ode.
n the event of loss, destruction or deterioration of the goods, common carriers are
responsible= that is, unless they prove that such loss, destruction or deterioration was
brought about E E among others L by :flood, storm, earth4uakes, lightning or other natural
disaster or calamity;, as provided in Article 17"5 of the +ivil +ode. n the present case,
the weather disturbance encountered by the vessel was not a storm but a strong southwest
monsoon winds. n other words, the defense of natural disaster or fortuitous event cannot
be used by petitioner because the injury could have been avoided by the petitioner.
(urthermore, petitioner failed to prove that such natural disaster or calamity was the
pro9imate and only cause of the loss. The defense of fortuitous event or natural disaster
cannot be successfully made when the injury could have been avoided by human
precaution. Therefore, petitioner cannot be e9empt from liability.
!11

!17
%hilippine American ,eneral nsurance co., nc. vs. *,, *arine Services, nc., "71 S+-A 682.
6"
3. G%(%"#8 M-88-(: C1".1"#+-1( AGMCB ,1(+"#,+%$ +;% )%"9-,%) 12 A)-#
L-:;+%"#:% #) ,#""-%" +1 $%8-9%" +;% ,#":1 +1 +;% GMC>) /#"%;1*)%. GMC -()*"%$
+;% ,#":1 /-+; P"*$%(+-#8. T;% +"#().1"+ 12 )#-$ ,#":1 /#) )*).%($%$ $*% +1 #
/#"(-(: 12 #( -(,1&-(: +0.;11(. T;% ,#""-%" ;1/%9%"< ."1,%%$%$ +1 .*88 +;% 5#":%
+1 )%%' );%8+%" 2"1& +;% #.."1#,;-(: +0.;11( #($ /#) +-%$ $1/( +1 1+;%" 5#":%). A
2%/ $#0) #2+%"< +;% 5#":% $%9%81.%$ # 8-)+ 5%,#*)% 12 # ;18% -+ )*)+#-(%$ #2+%" ;-++-(:
#( *()%%( ."1+*5%"#(,% *($%"(%#+; +;% /#+%". T;% ;18% /#) +;%( .#+,;%$ /-+; ,8#0
#($ ,%&%(+. T;% 5#":% /#) +;%( +1/%$ +1 # +%"&-(#8 5%21"% -+ /#) 5"1*:;+ +1 +;%
,1()-:(%%>) /;#"2. T;% 5#":% #:#-( "#( #:"1*($ $*% +1 )+"1(: ,*""%(+. T1 #91-$ +;%
,1&.8%+% )-('-(: 12 +;% 5#":%< # .1"+-1( 12 +;% :11$) /#) +"#()2%""%$ +1 +;"%% 1+;%"
5#":%). T;% (%E+ $#0< +;% +1/-(: 5-+) 12 +;% 5#":% 5"1'%. I+ )#(' ,1&.8%+%80<
"%)*8+-(: -( +;% +1+#8 81)) 12 +;% "%&#-(-(: ,#":1. P"*$%(+-#8 -($%&(-2-%$ GMC 21"
+;% 81)) #($ )1*:;+ "%,19%"0 2"1& +;% ,#""-%" /;-,; "%2*)%$ +1 .#0 1( +;% :"1*($
+;#+ -+ /#) (1+ # ,1&&1( ,#""-%" 5*+ # ."-9#+% ,#""-%" #($ +;#+ -2 -+ /%"% -($%%$ #
,1&&1( ,#""-%"< -+ /1*8$ 5% %E%&.+ 2"1& 8-#5-8-+0 5%,#*)% +;% 5#":% )#(' $*% +1 #
+0.;11(. A#B W#) +;% .%+-+-1(%" # ,1&&1( ,#""-%" 1" # ."-9#+% ,#""-%"6 A#B W#) +;%
.%+-+-1(%">) 8-#5-8-+0 %E+-(:*-);%$ 6
A. BaC The principal business of the petitioner is that of lighterage and drayage and
it offers its barges to the public for carry or transporting goods by water for
compensation. %etitioner is a common carrier, not private. The Supreme +ourt held that
petitioner is a common carrier whether carrying of goods is done on an irregular rather
than scheduled manner, and with an only limited clientele. A common carrier need not
have fi9ed and publicly known routes. .either does it have to maintain terminals or issue
tickets.
BbC n the case at bar, the barge completely sank after its towing bits broke,
resulting in the total loss of its cargo. %etitioner claims that this was caused by a typhoon=
hence, it should not be held liable for the loss of the cargo. However, petitioner failed to
prove that the typhoon is the pro9imate and only cause of the loss of the goods, and that it
e9ercised due diligence before, during and after the occurrence of the typhoon to prevent
or minimi&e the loss. The evidence shows that, even before the towing bits of the barge
broke, it had already previously sustained damage when it hit a sunken object. t even
suffered a hole. +learly, this could not be solely attributed to the typhoon. The partlyE
submerged vessel was refloated but its hole was patched with only clay and cement. The
patchwork was merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly e9posed the cargo to
further damage.
n addition, testimonies have shown that the petitioner still headed to the
consignee$s wharf despite knowledge of an incoming typhoon. Accordingly, the petitioner
!11
+entral Shipping +ompany, nc. vs. nsurance company of .orth America, 5"1 S+-A 811, September
!2, !225.
65
cannot invoke the occurrence of the typhoon as force majeure to escape liability for the
loss sustained by the ,eneral *illing. Surely, meeting a typhoon headEon falls short of
due diligence re4uired from a common carrier. *ore importantly, the officersNemployees
themselves of petitioner admitted that when the towing bits of the vessel broke that
caused its sinking and the total loss of the cargo, it was no longer affected by the typhoon.
The typhoon then is not the pro9imate cause of the loss of the cargo= a human factor, i.e.,
negligence had intervened.
!1/

3. W0%+;-P;#"&# );-..%$ 1( 51#"$ #( #-","#2+ 12 GLM R10#8 D*+,;
A-"8-(%) #+ D*))%8$1"2< G%"&#(0 1"#8 ,1(+"#,%.+-9%). T;% +#58%+) /%"% .8#,%$ -(
,#"+1() #($ /%"% .#,'%$ +1:%+;%" -( #( #8*&-(*& ,1(+#-(%". U.1( #""-9#8 12 +;%
);-.&%(+ #+ +;% #-".1"+< -+ /#) $%8-9%"%$ +1 +;% /#"%;1*)% 12 +;% P;-8-..-(%
S'08#($%")< I(,. APSIB. T1 )%,*"% +;% "%8%#)% 12 +;% ,#":1%) 2"1& PSI< +1 #))%)) -+)
,*)+1&) $*+-%)< #($ +1 ;#($8% $%8-9%"0 +1 4-71( L#51"#+1"-%) I(,.< W0%+;-S*#,1
%(:#:%$ +;% )%"9-,%) 12 S#(,;%7 B"1'%"#:%. W;%( S#(,;%7 B"1'%"#:% .-,'%$ *. +;%
,#":1%)< -+) "%."%)%(+#+-9% #,'(1/8%$:%$ +;% "%,%-.+ 12 +;% ,#":1%) -( :11$
,1($-+-1(. W0%+;-S*#,1 5%-(: # "%:*8#" -&.1"+%"< +;% C*)+1&) EE#&-(%" $-$ (1+
-().%,+ +;% ,#":1%)< /;-,; /%"% +;%( )+"-..%$ 2"1& +;% #8*&-(*& ,1(+#-(%") #($
81#$%$ -()-$% +/1 +"#().1"+ 9%;-,8%) ;-"%$ 50 S#(,;%7 B"1'%"#:%. T;% ,#":1%)
;1/%9%" #""-9%$ -( 5#$ 1"$%" 5%,#*)% +;% ,#"+1() /%"% /%++%$. M#0 S#(,;%7
B"1'%"#:% 5% ;%8$ 8-#58% #) # ,1&&1( ,#""-%"6
A. Article 17"! of the +ivil +ode does not distinguish between one whose
principal business activity is the carrying of goods and one who does such carrying only
as an ancillary activity. The contention of Sanche& 'rokerage that it is not a common
carrier but a customs broker whose principal function is to prepare correct customs
declaration and proper shipping documents as re4uired by law is bereft of merit. t
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
!!2

3. W;#+ -) +;% $-8-:%(,% "%=*-"%$ 12 # ,1&&1( ,#""-%"6
A. A common carrier is mandated under Art. 17"" of the +ivil +ode, to observe
e9traordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. n the event that the goods are lost, destroyed or deteriorated,
it is presumed to have been at fault or to have acted negligently, unless it proves that it
observed e9traordinary diligence. Hhen a common carrier received the cargoes in good
order, it was incumbent upon it to prove that it e9ercised e9traordinary diligence in the
carriage of the goods.
!!1

!1/
Asia )ighterage and Shipping, nc. vs. +ourt of Appeals, B52/ S+-A "52, Autust 1/, !22".
!!2
A.(. SA.+H3U '-<I3-A,3, .+. vs. +A, 557 S+-A 5!7, December !1, !225.
221
bid.
68
+ommon carriers are obliged to observe e9traordinary diligence in the vigilance
over the goods transported by them. Accordingly they are presumed to have been at fault
or to have acted negligently if the goods are lost, destroyed or deteriorated. There are
very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 17"5. n those cases where the presumption is
applied, the common carrier must prove that it e9ercised e9traordinary diligence in order
to overcome the presumption.
!!!
3. W0%+;-P;#"&# );-..%$ 1( 51#"$ #( #-","#2+ 12 GLM 1"#8 ,1(+"#,%.+-9%).
T;% +#58%+) /%"% .8#,%$ -( ,#"+1() #($ /%"% .#,'%$ +1:%+;%" -( #( #8*&-(*&
,1(+#-(%". I+ /#) $%8-9%"%$ +1 +;% /#"%;1*)% 12 +;% P;-8-..-(% S'08#($%")< I(,. APSIB.
W0%+;-S*#,1 %(:#:%$ +;% )%"9-,%) 12 S#(,;%7 B"1'%"#:% +1 $%8-9%" -+ +1 4-71(
L#51"#+1"-%). T;% ,#":1%) ;1/%9%" #""-9%$ -( 5#$ 1"$%" 5%,#*)% +;% ,#"+1() /%"%
/%++%$. S#(,;%7 B"1'%"#:% ,8#-&) +;#+ -+ "%,%-9%$ +;% :11$) -( 5#$ 1"$%" #($ +;#+
+;% $#&#:% /#) $*% +1 +;% 2#*8+ 1" (%:8-:%(,% 12 +;% );-..%" 21" 2#-8-(: +1 ."1.%"80
.#,' +;%& #($ +1 +;% -(;%"%(+ ,;#"#,+%"-)+-,) 12 +;% :11$). M#0 S#(,;%7 B"1'%"#:%
5% %E%&.+%$ 2"1& 8-#5-8-+06
A. .o. Art. 17"5 paragraph 5 of the civil +ode e9empts a common carrier from
liability if the loss or damage is due to the character of the goods or defects in the packing
or in the containers. The rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he nevertheless accepts the same
without protest or e9ception notwithstanding such condition, he is not relieved of liability
for the resulting damage. n this case, if the claim of Sanche& 'rokerage that some
cartons were already damaged upon delivery to it were true, then it should naturally have
received the cargo under protest or with reservations duly noted on the receipt issued by
%S. 'ut it made no such protest or reservation.
!!"
3. A C*$:&%(+ /#) "%($%"%$ 2-($-(: P%)+#(1 +1 ;#9% 5%%( (%:8-:%(+ -(
$"-9-(: +;% .#))%(:%" 5*) +;#+ ;-+ +;% $%,%#)%$. I+ /#) );1/( +;#+ P%)+#(1
(%:8-:%(+80 #++%&.+%$ +1 19%"+#'% +;% &1+1",0,8% #+ # $#(:%"1*) ).%%$ #) +;%0 /%"%
,1&-(: *.1( # C*(,+-1( -( +;% "1#$. M%+"1 C%5* /#) #8)1 ;%8$ +1 5% $-"%,+80 #($
."-&#"0 8-#58%< #81(: /-+; P%)+#(1< 21" 2#-8*"% +1 15)%"9% +;% $-8-:%(,% 12 # :11$
2#+;%" 12 # 2#&-80 -( +;% )*.%"9-)-1( 12 -+) %&.810%%) #($ -( +;% &#-(+%(#(,% 12
9%;-,8%). P%)+#(1 #($ M%+"1 C%5* #..%#8%$ ,1(+%($-(: +;#+ +;% &1+1",0,8% /#) (1+
-( +;% &-$$8% 12 +;% "1#$ #) 21*($ 50 +;% +"-#8 #($ #..%88#+% ,1*"+)< 5*+ /#) 1( +;%
-((%" 8#(%. T;-) %E.8#-() +;% 81,#+-1( 12 +;% $%(+) 1( +;% 5*&.%" #($ +;% :"-88.
222
DS-ESenator )ines vs. (ederal %hoeni9 Assurance +o., nc. 51" S+-A 15, <ctober 7, !22".
!!"
A.(. SA.+H3U '-<I3-A,3, .+. vs. +A, 557 S+-A 5!7 December !1, !225.
66
4%(,%< +;%0 -()-)+ -+ /#) +;% 9-,+-& /;1 /#) (%:8-:%(+. S;1*8$ +;% 2-($-(:) 12 +;%
81/%" ,1*"+ 5% $-)+*"5%$6
A. .o. There is no cogent reason to reverse or modify the factual findings of the
lower and appellate courts. The +A agreed with the trail court that the vehicular collision
was caused by %estano$s negligence when he attempted to overtake the motorcycle. As a
professional driver operating a public transport bus, he should have anticipated that
overtaking at a junction was a perilous maneuver and should thus have e9ercised e9treme
caution.
!!5
3. T;% 81/%" ,1*"+ "%($%"%$ # C*$:&%(+ 2-($-(: +;% %&.810%"< M%+"1 C%5*
9-,#"-1*)80 8-#58% +1 +;% 9-,+-&) 12 # 9%;-,*8#" #,,-$%(+. T;% #..%88#+% ,1*"+ ;%8$ +;#+
#881/-(: -+) $"-9%"< P%)+#(1< +1 .80 ;-) "1*+% /-+; # $%2%,+-9% ).%%$1&%+%" );1/%$
8#E-+0 1( +;% .#"+ 12 M%+"1 C%5* -( +;% 1.%"#+-1( 12 -+) 5*)-(%)) #($ -( +;%
)*.%"9-)-1( 12 -+) %&.810%%). D-$ +;% %&.810%" %E%",-)% +;% ,#"% #($ $-8-:%(,% 12 #
:11$ 2#+;%" 12 # 2#&-80 -( +;% )%8%,+-1( #($ )*.%"9-)-1( 12 -+) %&.810%%)6
A. The fact that %estano was able to use a bus with a faulty speedometer shows
that *etro +ebu was remiss in the supervision of its employees and in the proper care of
its vehicles. t had thus failed to conduct its business with the diligence re4uired by law.
!!8
3. ECSLI -))*%$ 2 )%.#"#+% B-88) 12 L#$-(: /;%"%-( +;% 9#8*% 12 +;% ,#":1%)
$%,8#"%$ 50 +;% );-..%")J,1()-:(%%) /%"% P6<!00 #($ P1<000 "%).%,+-9%80. L%:#).-
-()*"%$ +;% )#&% ,#":1%) /-+; UCPB 21" P!0<000 #($ P100<000 "%).%,+-9%80. F-"%
%()*%$ -( +;% %(:-(% "11& 12 +;% 9%))%8 $%)+"10-(: +;% %(+-"% 9%))%8 "%)*8+-(: -( +;%
81)) 12 +;% 9%))%8 #($ +;% ,#":1%) +;%"%-( -(,8*$-(: +;% :11$) 12 L%:#).-. UCPB< #)
)*5"1:%% 12 L%:#).-< 2-8%$ # ,1&.8#-(+ #(,;1"%$ 1( +1"+) #:#-()+ ECSLI 21" +;%
,188%,+-1( 12 +;% +1+#8 ."-(,-.#8 #&1*(+ 12 P18<!00 /;-,; -+ .#-$ +1 L%:#).- 21" +;%
81)) 12 +;% ,#":1. UCPB ,1(+%($) +;#+ ECSLI>) 8-#5-8-+0 );1*8$ 5% 5#)%$ 1( +;%
#,+*#8 -()*"%$ 9#8*% 12 +;% :11$). O( +;% 1+;%" ;#($< ECSLI ,8#-&) +;#+ -+) 8-#5-8-+0
);1*8$ 5% 8-&-+%$ +1 +;% 9#8*% $%,8#"%$ 50 +;% );-..%"J,1()-:(%% -( +;% B-88 12
L#$-(:. M#0 ECSLI &#0 ;%8$ 8-#58% 21" &1"% +;#( /;#+ /#) $%,8#"%$ 50 +;% +;%
);-..%")J,1()-:(%%) #) +;% 9#8*% 12 +;% :11$) -( +;% B-88) 12 L#$-(:6
A.n Aboitiz Shipping Corp. vs. CA, the description of the nature and the value of
the goods shipped were declared and reflected in the bill of lading, like the present case.
The +ourt therein considered this declaration as the basis of the carrier$s liability and
ordered payment based on such amount. (ollowing this ruling, 3+S) should not be held
liable for more than what was declared by the shippersNconsignees as the value of the
goods in the bills of lading.
!!6

224
'est!no vs. Sum!+!n,# 346 SC$A 870# (ecember 4# 2000.
225
bid.
!!6
3dgar +okaliong Shipping )ines, nc. vs. ?+%' ,eneral nsurance +o., nc., 525 S+-A 726.
67
3. ECSLI -))*%$ B-88) 12 L#$-(: ,1(+#-(-(: +;% )+-.*8#+-1( +;#+ -( ,#)% 12
,8#-& 21" 81)) 1" 21" $#&#:% +1 +;% );-..%$ ."1.%"+0< ?+;% 8-#5-8-+0 12 +;% ,1&&1(
,#""-%" EEE );#88 (1+ %E,%%$ +;% 9#8*% 12 +;% :11$) #) #..%#"-(: -( +;% 5-88 12 8#$-(:.@
I) )*,; # )+-.*8#+-1( 8-&-+-(: +;% ,1&&1( ,#""-%">) 8-#5-8-+0 9#8-$6
A. Qes. A stipulation that limits liability is valid as long as it is not against public
policy. n verett Steamship Corp. v. CA the +ourt statedF :A stipulation in the bill of
lading limiting the common carrier$s liability for loss or destruction of a cargo to a certain
sum, unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 175/ and 1782 of the +ivil +ode.
!!7

3. W;%( $1%) +;% ,1(+"#,+ 12 ,#""-#:% 21" A-" T"#().1"+#+-1( ,1&&%(,%6
A. Hhen an airline issues a ticket to a passenger, confirmed for a particular flight
on a certain date, a contract of carriage arises and the passenger has every right to e9pect
that he be transported on that flight and on that date and it becomes the carrier$s
obligation to carry him and his luggage safely to the agreed destination. f the passenger
is not so transported or if in the process of transporting he dies or is injured, the carrier
may be held liable for a breach of contract of carriage.
!!1
3. P8#-(+-22 /#) #( #,,8#-&%$ )1."#(1 )-(:%" /;1 /#) -(9-+%$ +1 )-(: 5%21"%
+;% G-(: #($ 3*%%( 12 M#8#0)-#. F1" +;-) )-(:-(: %(:#:%&%(+< );% .*",;#)%$ 2"1&
$%2%($#(+ S-(:#.1"% A-"8-(%) # ,1(2-"&%$ +-,'%+ +;#+ /1*8$ +"#().1"+ ;%" 2"1&
F"#('2*"+< G%"&#(0 +1 M#(-8# /-+; # )+1.-19%" -( S-(:#.1"%< #($ +;%( 2"1& M#(-8#
+1 M#8#0)-#. I+ /#) (%,%))#"0 21" .8#-(+-22 +1 .#)) 50 M#(-8# +1 :#+;%" ;%" /#"$"15%
#($ "%;%#")% /-+; ;%" .-#(-)+. 41/%9%"< );% &-))%$ ;%" ,1((%,+-(: 28-:;+ 2"1&
S-(:#.1"% +1 M#(-8# 5%,#*)% +;% .8#(% #""-9%$ 2 ;1*") 8#+% $*% +1 -(,8%&%(+
/%#+;%". S;% +"-%$ +1 #""#(:% 21" #(1+;%" 28-:;+ 5*+ +;% $%2%($#(+>) %&.810%%) /%"%
"*$% #($ *('-($. P8#-(+-22 (%9%" &#$% -+ +1 M#(-8# #($ /#) 21",%$ +1 +#'% # $-"%,+
28-:;+ 2"1& S-(:#.1"% +1 M#8#0)-#. S;% )*%$ 21" $#&#:%) #"-)-(: 2"1& 5"%#,; 12
,1(+"#,+ 12 ,#""-#:%. S-(:#.1"% A-"8-(%) #":*%$ +;#+ -+ %E%",-)%$ %E+"#1"$-(#"0
$-8-:%(,% "%=*-"%$ 50 8#/ *($%" +;% :-9%( ,-",*&)+#(,%) #($ +;#+ +;% $%8#0 /#)
,#*)%$ 50 # 21"+*-+1*) %9%(+. W#) S-(:#.1"% A-"8-(%) 8-#58% 21" &1"#8 #($
%E%&.8#"0 $#&#:%)6
A. Singapore Airlines was liable for moral and e9emplary damages. Hhen an
airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. Since the defendant did not transport the plaintiff as
covenanted by it on said terms, it clearly breached its contract of carriage.
!!7
3dgar +okaliong Shipping )ines, nc. vs. ?+%' ,eneral nsurance +o., nc., 525 S+-A 726.
!!1
0A%A. A-).3S vs. AS?.+<., 55/ S+-A 855 0anuary !1, !228
61
The defense of fortuitous event was unavailing. Singapore Airlines was not
without recourse to enable it to fulfill its obligation to transport the plaintiff safely as
scheduled as far as human care and foresight can provide to her destination. Tagged as a
premiere airline as it claims to be and with the comple9ities of air travel, it was certainly
wellEe4uipped to be able to foresee and deal with such situation.
Singapore Airlines was guilty of bad faith when its employees did not accord plaintiff the
attention and treatment allegedly warranted under the circumstances. The inattentiveness
and rudeness of its personnel to plaintiff$s plight was gross enough amounting to bad
faith. Also, knowing fully well that even before the plaintiff boarded defendant$s 0umbo
aircraft in (rankfurt bound for Singapore, it has already incurred a delay for two hours,
and it did not take the trouble of informing plaintiff of such a delay. Thus, the award of
e9emplary damages was proper.
!!/

3. P8#-(+-22< # $%(+-)+ #($ # &%&5%" 12 +;% B1#"$ 12 D-"%,+1") 12 +;%
S1")1:1( D%(+#8 A))1,-#+-1(< /#) ),;%$*8%$ +1 #++%($ +;% N#+-1(#8 C1(9%(+-1( 12
+;% P;-8-..-(% D%(+#8 A))1,-#+-1( 2"1& M#0 8 +1 1< 1988 #+ +;% PICC. S;%
.*",;#)%$ 2"1& PAL +;"%% ,1(2-"&%$ .8#(% +-,'%+) 21" ;%" #($ ;%" -(2#(+ )1( #) /%88
#) ;%" )-)+%" 21" M#0 8< 1988< 7F10#& 28-:;+. O( +;% )#-$ $#+%< +;%0 #""-9%$ #+ +;%
L%:#).- A-".1"+ #+ 6F20 #&. 41/%9%"< /;-8% .8#-(+-22>) ,1&.#(-1() /%"% 1( =*%*%<
+;% ,;%,'--( ,8%"' 1( $*+0 /"1+% ?8#+% ,;%,'--(@ 1( +;%-" +-,'%+). P8#-(+-22 #($ ;%"
2#&-80 /%"% (1+ #881/%$ +1 51#"$ +;%-" ),;%$*8%$ 28-:;+. PAL #":*%$ +;#+ +;%0 /%"%
8#+% -( ,;%,'-(:--( #($ +;#+ +;%0 /%"% 1(80 ,;#(,% 1" /#-+8-)+%$ .#))%(:%"). O+;%"
(1(-"%9%(*% .#))%(:%") /%"% :-9%( ."-1"-+0 #($ /%"% #881/%$ +1 51#"$. W#) PAL
8-#58% 21" %E%&.8#"0 $#&#:%)6
A. Qes. Haitlisted and nonErevenue passengers were accommodated while
plaintiff who had fully paid her fare and was a confirmed passenger was unduly deprived
of enplaning. %A) was also of guilty of overbooking its flight to the prejudice of its
confirmed passengers. This practice cannot be countenanced especially considering that
the business of air carriage is imbued with public character. He have ruled that where in
breaching the contract of carriage, the airline is shown to have acted in bad faith, as in
this case, the award of e9emplary damages in addition to moral and actual damages is
proper.
!"2
3. M-,;#%8 #($ J%#(%++% A)*(,-1( 8%2+ M#(-8# 1( 51#"$ # J#.#( A-"8-(%)
AJALB 28-:;+ 51*($ 21" L1) A(:%8%). T;%-" -+-(%"#"0 -(,8*$%$ # )+1.19%" -( N#"-+#
#($ #( 19%"(-:;+ )+#0 #+ 41+%8 N-''1 N#"-+#. U.1( #""-9#8< +;%0 #..8-%$ 21" # );1"%
.#))< /;-,; -) "%=*-"%$ 21" # 21"%-:(%" #51#"$ #( #-","#2+ /;1 $%)-"%) +1 )+#0 -( +;%
(%-:;51";11$ 12 +;% .1"+ 12 ,#88 21" (1+ &1"% +;#( 72 ;1*"). T;% J#.#(%)%
-&&-:"#+-1( 122-,-#8 $%(-%$ +;%-" #..8-,#+-1( 5%,#*)% 12 -(,1()-)+%(,0 -( M-,;#%8>)
!!/
Singapore Airlines )imited vs. Andion (ernande&, ,.-. .o. 15!"28, December 12, !22".
!"2
%hilippine Airlines, nc. vs. +ourt of Appeals, 517 S+-A 1/6, ,.-. .o. 1!757", December 1, !22"=
%hilippine Airlines, nc. vs. +ourt of Appeals, 866 S+-A 1!5, Sept. !!, !221.
6/
;%-:;+ -( ;-) .#)).1"+. T;%0 /%"% 5"1*:;+ -()+%#$ +1 +;% N#"-+# A-".1"+ R%)+ 41*)%
/;%"% +;%0 /%"% 5-88%+%$ 19%"(-:;+. T;% ).1*)%) )*%$ JAL 21" 5"%#,; 12 ,1(+"#,+ 12
,#""-#:%. I) JAL 8-#58% 21" 2#-8*"% +1 ,#""0 +;%& )#2%80 +1 +;%-" $%)+-(#+-1(6
A. 0A) did not breach its contract of carriage with the Asuncion spouses. t may
be true that 0A) has the duty to inspect whether its passengers have the necessary travel
documents, however, such duty does not e9tend to checking the veracity of every entry in
these documents. 0A) could not vouch for the authenticity of a passport and the
correctness of the entries therein. The power to admit or not an alien into the country is a
sovereign act, which cannot be interfered with even by 0A).
!"1
3. T;% ).1*)%) V#)=*%7 +"#9%8%$ +1 41(: G1(: /-+; +;%-" 2"-%($) 9-# C#+;#0
P#,-2-, A-"/#0). O( +;% 28-:;+ 5#,' +1 M#(-8#< -+ +*"(%$ 1*+ +;#+ +;% B*)-(%)) C8#))
/#) 19%"511'%$ -( +;#+ +;%"% /%"% &1"% .#))%(:%") +;#( +;% (*&5%" 12 )%#+). T;*)<
+;% )%#+ #))-:(&%(+) 12 +;% V#7=*%7%) /%"% :-9%( +1 /#-+8-)+%$ .#))%(:%") #($ +;%
V#7=*%7%) 5%-(: &%&5%") 12 +;% M#",1 P181 C8*5 /%"% *.:"#$%$ 2"1& B*)-(%))
C8#)) +1 F-")+ C8#)). T;% ).1*)%) V#)=*%7 /%"% -(21"&%$ +;#+ +;%0 ;#9% 5%%(
*.:"#$%$ 2"1& B*)-(%)) C8#)) +1 F-")+ C8#)). T;%-" 2"-%($) ;1/%9%" "%&#-(%$ -(
B*)-(%)) C8#)). T;% S.1*)%) V#)=*%7 "%2*)%$. T;%0 /%"% +18$ +;#+ -2 +;%0 /1*8$ (1+
#9#-8 12 +;% ."-9-8%:%< +;%0 /1*8$ (1+ 5% #881/%$ +1 +#'% +;% 28-:;+. T;%0 :#9% -( 5*+
-( ."1+%)+. I( M#(-8#< +;% ).1*)%) V#)=*%7 2-8%$ # )*-+ 21" $#&#:%). C#( +;% C#+;#0
P#,-2-, 5% &#$% 8-#58% 21" $#&#:%)6
A. +athay %acific could be made liable for damages. 'y upgrading the seat
accommodation of the Aas4ue&es, +athay %acific breached its contract of carriage with
the latter. The contract between +athay %acific and the Aas4ue&es by which the latter
gave their consent was the transportation of the Aas4ue&es from *anila to Hong Iong
and back to *anila in the 'usiness class section of the aircraft and whose cause or
consideration was the fare paid by them to +athay %acific. The Spouses Aas4ue& should
have been consulted first whether they would consent to a change of seat
accommodation. The upgrade should not have been imposed on them over their
objection. 'y insisting on the upgrade, +athay %acific breached its contract of carriage
with the Aas4ue&es.
!"!

3. I) +;% .%"-1$ 12 ."%),"-.+-1( 12 #,+-1( 5#)%$ 1( +;% "%8#+-1();-. 5%+/%%(
.#))%(:%" #($ ,#""-%" 1( #( -(+%"(#+-1(#8 28-:;+ :19%"(%$ 50 +;% W#")#/
C1(9%(+-1( +;#+ )%+) +;% .%"-1$ 12 ."%),"-.+-1( 12 +/1 0%#") 2"1& +;% #,,"*#8 12 +;%
,#*)% 12 #,+-1(6
!"1
0A%A. A-).3S vs. AS?.+<., 55/ S+-A 855 0anuary !1, !228
!"!
+athay %acific Airways, )td. vs. Aas4ue&, "// S+-A !27, *arch 15, !22".
72
A. n case of damage to passengers baggage, the period of prescription is two
years as mandated by the Harsaw +onvention but in case of damages caused by
humiliation, embarrassment, mental anguish, serious an9iety, fear and distress or hurt
feelings, the civil code provisions on tort shall apply and hence, outside the coverage of
the Harsaw +onvention. The period of prescription is four years.
!""

3. W;#+ -) # );-. #:%(+6
A. A ship agent is the person entrusted with provisioning or representing the
vessel in the port in which it may be found.
!"5

3. W;%( &#0 # );-. #:%(+ 5% ;%8$ ,-9-880 8-#58%6
A. A ship agent, may be held civilly liable in certain instances as provided for in
Articles 816 and 817 of the +ode of +ommerce, to witF
B1C The shipowner and the ship agent shall be civilly liable for the acts of the
captain and for the obligations contracted by the latter to repair, e4uip and provision the
vessel, provided the creditor proves that the amount claimed was invested for the benefit
of the same.
!"8
B!C Art. 817. The ship agent shall also be civilly liable for the indemnities in favor
of third persons which may arise from the conduct of the captain in the care of the goods
which hew loaded on the vessel= but he may e9empt himself therefrom by abandoning the
vessel with all her e4uipments and the freight it may have earned during the voyage.
!"6
3. C#(.1+%E S;-..-(: S%"9-,%) L-&-+%$ I(,. AS4IPPERB< );-..%$ #($ 81#$%$
1( 51#"$ +;% 9%))%8 MJV T"#$% C#""-%" !<000 &%+"-, +1() 12 S+#($#"$ G"#$%
M*"-#+% 12 P1+#); 21" +"#().1"+#+-1( #($ $%8-9%"0 -( 2#91" 12 A+8#) F%"+-8-7%"
C1".1"#+-1( ACONSIGNEEB. T;% )#&% /#) -()*"%$ /-+; +;% "%).1($%(+ P"19-$%(+.
W;%( +;% );-.&%(+ #""-9%$< CONSIGNEE $-),19%"%$ +;#+ +;% );-.&%(+ )*)+#-(%$
81))%)J);1"+#:% 12 76.1 &%+"-, +1() 9#8*%$ #+ P1<6!7<700.9!. P"19-$%(+ .#-$ +;%
81))%). F1"&#8 ,8#-&) /%"% +;%( 2-8%$ /-+; T"#$% H T"#().1"+ #($ M#,1($"#0. F1"
2#-8*"% +1 %22%,+ )%"9-,% 12 )*&&1()< +;% ,#)% #:#-()+ T"#$% H T"#().1"+ /#)
,1()-$%"%$ $-)&-))%$ /-+;1*+ ."%C*$-,%. M#,1($#"0 $%(-%$ 8-#5-8-+0 19%" +;% 81))%)<
;#9-(: (1 #5)18*+% "%8#+-1( /-+; T"#$% H T"#().1"+< +;% #88%:%$ 1.%"#+1" 12 +;%
9%))%8 /;1 +"#().1"+%$ +;% )*5C%,+ );-.&%(K +;#+ #,,1"$-(:80< M#,1($"#0 -) +;%
81,#8 "%."%)%(+#+-9% 12 +;% S4IPPERK +;% ,;#"+%"%" 12 MJV TRADE CARRIER #($
(1+ # .#"+0 +1 +;-) ,#)%K +;#+ -+ ;#) (1 ,1(+"18 19%" +;% #,+) 12 +;% ,#.+#-( #($ ,"%/
12 +;% C#""-%" #($ ,#((1+ 5% ;%8$ "%).1()-58% 21" #(0 $#&#:% #"-)-(: 2"1& +;% 2#*8+
1" (%:8-:%(,% 12 )#-$ ,#.+#-( #($ ,"%/K +;#+ *.1( #""-9#8 #+ +;% .1"+ 12 S#(:- T18%$1
C-+0< C%5*< +;% MJV T"#$% C#""-%" $-),;#":%$ +;% 2*88 #&1*(+ 12 );-.&%(+ #($
$%8-9%"%$ +1 +;% CONSIGNEE. C#( M#,1($"#0< #) #( #:%(+ 5% &#$% "%).1()-58%
21" #(0 81)) )*)+#-(%$ 50 #(0 .#"+0 2"1& +;% 9%))%8 1/(%$ 50 T"#$% H T"#().1"+6
233
%hilippine Airlines vs. Savillo, 887 S+-A 66.
234
Article 816, +ode of +ommerce.
235
Article 816, +ode of +ommerce.
236
Article 817, +ode of +ommerce.
71
A. Hhether acting as an agent of the owner of the vessel or as agent of the
charterer, petitioner will be considered as the ship agent and may be held liable as such,
as long as the latter is the one that provisions or represents the vessel. *acondray was
appointed as local agent of the vessel, which duty includes arrangement for the entrance
and clearance of the vessel. 3vidence shows that petitioner represented the vessel. The
latter prepared the .otice of readiness, the Statement of (acts, the +ompletion .otice, the
Sailing .otice and +ustom$s +learance. %etitioner$s employees were present at Sangi,
Toledo +ity, one day before the arrival of the vessel, where they stayed until it departed.
They were also present during the actual discharging of the cargo. *oreover, *r. Dela
+ru&, the representative of the petitioner, also prepared for the needs of the vessel, like
money, provision, water and fuel. These acts all point to the conclusion that it was the
entity that represented the vessel in the %ort of *anila and was the ship agent within the
meaning and conte9t of Article 816 of the +ode of +ommerce. *acondray, therefore, was
liable to the respondent for the losses sustained by the subject shipment.
!"7
3. U($%" +;% C1$% 12 C1&&%",%< /-+;-( /;#+ .%"-1$ );1*8$ +;% (1+-,% 12
,8#-& 5% :-9%( +1 +;% );-..%"6
A. ?nder the +ode of +ommerce, the notice of claim must be made within
twentyEfour B!5C hours from receipt of the cargo if the damage is not apparent from the
outside of the package. (or damages that are visible from the outside of the package, the
claim must be made immediately.
!"1

3. D181" /#) $"-9-(: #( 1/(%"-+0.% C%%.(%0< /;-8% G1(7#8%) /#) $"-9-(: #
.#))%(:%" C%%.(%0 1/(%$ 50 4%"(#($%7. A) D181" /#) +"#9%")-(: +;% "1#$ #+
B#"#(:#0 A(-8#1 E#)+< B#+#(:#)< ;-) 9%;-,8% ,188-$%$ /-+; +;% .#))%(:%" C%%.(%0.
D181" #($ ;-) .#))%(:%" $-%$ #) "%)*8+ 12 +;% ,188-)-1(. S1&% 12 +;% .#))%(:%") 12 +;%
C%%.(%0 $"-9%( 50 G1(7#8%) )*22%"%$ .;0)-,#8 -(C*"-%). C1()%=*%(+80< +;%0
,1&&%(,%$ #( #,+-1( #:#-()+ S.1*)%) 4%"(#($%7 #88%:-(: +;#+ G1(7#8%) /#) :*-8+0
12 (%:8-:%(,% #($ 8#,' 12 ,#"% #($ +;#+ 4%"(#($%7 ).1*)%) /%"% :*-8+0 12 (%:8-:%(,%
-( +;% )%8%,+-1( #($ )*.%"9-)-1( 12 +;%-" %&.810%%). I( +;%-" $%2%()%< +;% ).1*)%)
,1(+%($%$ +;#+ G1(7#8%) /#) (1+ +;% $"-9%"-%&.810%% 12 +;% ).1*)%) #) +;% 21"&%"
1(80 8%#)%$ +;% .#))%(:%" C%%.(%0 1( # $#-80 5#)-). M1"%19%"< +;% ).1*)%) ,8#-&%$
%9%( -2 #( %&.810%"-%&.810%% "%8#+-1();-. %E-)+%$ 5%+/%%( +;%&< +;%0 ,#((1+ 5%
;%8$ 8-#58% 5%,#*)% #) %&.810%") +;%0 %E%",-)%$ $*% ,#"% -( +;% )%8%,+-1( #($
)*.%"9-)-1( 12 +;%-" %&.810%%. A"% +;% $%2%()%) 12 +;% ).1*)%) ."1.%"6
A. The Hernande& spouses are mistaken. 0urisprudence has held that an employerE
employee relationship e9ists in a 'oundary System. To e9empt from liability the owner
of a public vehicle who operates it under the :boundary system; on the ground that he is
a mere lessor would be not only to abet flagrant violations of the %ublic Service )aw, but
237
*acondray @ +o., nc. vs. %rovident nsurance +orporation, 558 S+-A 655, December /, !225.
238
Aboiti& Shipping +orporation vs. nsurance +ompany of .orth America, 861 S+-A !6!, Aug. 6, !221.
7!
also to place the riding public at the mercy of reckless and irresponsible drivers.
*oreover, the spouses cannot hide behind nonEliability die to the proper due care in the
selection and supervision of their employee. Article !112 of the +ivil +ode provides,
:3mployers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry. n the case at bar, it was established that ,on&ales
obtained his professional driver$s license only " months before the accident. Hence, he
lacked the e9perience to drive a common carrier.
!"/
3. W;#+ -) +;% OR-$C1@ $1,+"-(%6
A. The :-idjo; doctrine simply states that the public utility has the imperative
duty to make reasonable and proper inspection of its apparatus and e4uipment to ensure
that they do not malfunction.
!52
3. W;#+ -) %22%,+ 12 +;% 2#-8*"% 12 +;% .*58-, *+-8-+0 +1 $-),19%" +;% $%2%,+ 12 -+)
%8%,+"-, &%+%" 1" 2#-8*"% +1 "%.#-" 1" "%.8#,% +;% )#&%6
A. The failure of the public utility to discover the $%2%,+, if any, amounts to
ine9cusable negligence and its failure to make the necessary repairs and replace the
$%2%,+-9% electric meter installed within the consumer$s premises limits the latter$s
liability.
!51
3. W-8,1( -) 1(% 12 +;% ,*)+1&%") 12 M%"#8,1. W-+; +;% -()+#88#+-1( -( 1981 12
7.! +1( #-"-,1($-+-1(-(:< +;% %8%,+"-, ,1()*&.+-1( 12 W-8,1( -(,"%#)%$. I( 198!< +;%
)#-$ *(-+ )+#"+%$ +1 5"%#' $1/( #($ 1986 -+ /#) (1 81(:%" 2*(,+-1(#8< /;-,; ,#*)%$
+;% #5"*.+ $%,"%#)% -( -+) %8%,+"-, ,1()*&.+-1(. I( 1991< M%"#8,1>) )%"9-,%
-().%,+1") ,1($*,+%$ "1*+-(% -().%,+-1( 12 +;% %8%,+"-, &%+%") -()+#88%$ #+ +;%
."%&-)%) 12 W-8,1(. M%"#8,1 ,8#-&%$ +;% &%+%" +1 5% +#&.%"%$ /-+; #($ $%&#($%$
.#0&%(+ 12 +;% #88%:%$ *("%:-)+%"%$ %8%,+"-, ,1()*&.+-1(. M%"#8,1 ,8#-&%$ +;#+
+;%"% /#) # )*$$%( $"1. -( +;% %8%,+"-, ,1()*&.+-1( 12 W-8,1( -( 198. M#0
M%"#8,1 ;18$ W-8,1( 8-#58%6
A. *eralco noted the sudden drop of electric consumption of Hilcon in 1/15 and
yet it conducted an inspection only in 1//1 allowing the :defect; to remain unrepaired
for a period of more or less seven B7C years. t would be highly ine4uitable if we are to
allow a public utility company to be continuously remiss in its duty and then later on
charge the consumer e9orbitant amounts for the alleged unbilled consumption or
differential billing when such a situation could have been easily averted. (ollowing the
:-idjo; doctrine, negligence could be imputed on *eralco and bar it from collection its
claim of differential billing.
!5!
!"/
Hernande& vs. Dolor, 5"8 S+-A 661, 0uly "2, !225.
240
*eralco vs. Hilcon 'uilders Supply, nc., 886 S+-A 75!.
241
bid.
242
bid.
7"
SPECIAL LAWS
TRADEMARGS AND TRADENAMES
3. W;%"% );1*8$ #( #,+-1( -(9189-(: +"#$%&#"')< -(,8*$-(: ,;#":%) 12 *(2#-"
,1&.%+-+-1(< ,#(,%88#+-1( 12 +"#$%&#"' #($ $#&#:%) 21" 9-18#+-1( 12 -(+%88%,+*#8
."1.%"+0 "-:;+) 5% 2-8%$6
A. A complaint involving trademarks, including charges of unfair competition,
cancellation of trademark and damages for violation of intellectual property rights fall
within the jurisdiction of the ntellectual %roperty <ffice Director of )egal Affairs and
must therefore be filed in the said office. Any appeal therefrom should be filed with the
ntellectual %roperty <ffice Director ,eneral.
!5"
TRUST RECEIPT LAW
3. W;#+ -) # +"*)+ "%,%-.+6

A. Trust receipt is a document wherein the entrustee
!55
binds himself to hold the
designated goods, documents or instruments in trust for the entruster
!58
and to sell or
otherwise dispose of the goods, documents or instruments with the obligation to turn over
to the entruster the proceeds thereof to the e9tent of the amount owing to the entruster.
!56
3. F1" /;#+ .*".1)% -) # +"*)+ "%,%-.+ -))*%$6
A. trust receipt is a security transaction intended to aid in financing the importers
and retail dealers who do not have sufficient funds or resources to finance the importation
or purchase of merchandise, and who may not be able to ac4uire credit e9cept through the
utili&ation, as collateral of the merchandise imported or purchased.
!57
A trust receipt
therefore, is a document of security pursuant to which a bank ac4uires a :security
interest; in the goods under trust receipt. ?nder a letter of creditEtrust receipt
arrangement, a bank e9tends a loan covered by a letter of credit, with the trust receipt as a
security for the loan. The transaction involves a loan feature represented by a letter of
credit, a security feature which is in the covering trust receipt which secures
indebtedness.
!51
243
nE.E<ut 'urger, nc. vs. Sehwani, nc., 878 S+-A 8"8, December !5, !221.
244
3ntrustee shall refer to the person having or taking possession of goods, documents or instruments
under a trust receipt transaction, and any successor in interest of such person for the purpose or purposes
specified in the trust receipt agreement. Sec. " BaC, %. D. 118 known as Trust -eceipts )aw.
245
3ntruster shall refer to the person holding title over the goods, documents, or instruments subject of a
trust receipt transaction, and any successor in interest of such person. Section " BcC, %. D. 118.
246
Section 5, %. D. 118 known as Trust -eceipts )aw.
247
Aintola vs. nsular 'ank of Asia and America, 182 S+-A 871, 81"E815 citing Samo vs. %eople, 8 S+-A
"85, "86E"87.
248
)ee vs. +ourt of Appeals, "78 S+-A 87/, 8/1.
75
3. O(:< "%."%)%(+-(: # ,1".1"#+-1( #..8-%$ 21" # 8%++%" 12 ,"%$-+ /-+;
S18-$5#(' +1 2-(#(,% +;% .*",;#)% 12 :11$). O(: %E%,*+%$ # +"*)+ "%,%-.+
#,'(1/8%$:-(: +;% "%,%-.+ 12 :11$) .*",;#)%$ 2"1& +;% )%88%". W;%( +;% +"*)+
"%,%-.+ 5%,#&% $*% #($ $%&#($#58%< +;% ,1".1"#+-1( 2#-8%$ +1 .#0 1" $%8-9%" +;%
:11$) +1 S18-$5#(' $%).-+% "%.%#+%$ $%&#($). S18-$5#(' /#(+) +1 ."1)%,*+% O(:
21" 9-18#+-1( 12 +;% T"*)+ R%,%-.+) L#/. M#0 O(: 5% ."1)%,*+%$ #($ ;%8$ 8-#58% 21"
9-18#+-1( 12 +;% T"*)+ R%,%-.+) L#/6
A. The Trust -eceipts )aw is violated whenever the entrustee fails toF B1C turn
over the proceeds of the sale of the goods, or B!C return the goods covered by the trust
receipt if the goods are not sold. Section 1" of the Trust -eceipts )aw states that in case
the violation of the law is committed by a corporation, the penalty shall be imposed upon
the directors, officers, employees or other officials responsible for the offense. The reason
is obviousF corporations, partnerships, associations and other juridical entities cannot be
put to jail.
!5/
3. A"% 8%++%") 12 ,"%$-+ #($ +"*)+ "%,%-.+) (%:1+-#58% -()+"*&%(+)6
A. )etters of credit and trust receipts are not negotiable instruments because they
do not conform to the re4uirements of a negotiable instrument stated in Section 1 of the
.egotiable nstruments )aw. However, drafts issued in connection with letters of credit
are negotiable instruments
!82
if they comply with the re4uirements of Section 1 of the
.egotiable nstruments )aw.
A trust receipt is a security transaction intended to aid in financing the importers
and retail dealers who do not have sufficient funds or resources to finance the importation
or purchase of merchandise, and who may not be able to ac4uire credit e9cept through the
utili&ation, as collateral of the merchandise imported or purchased.
!81
A trust receipt
therefore, is a document of security pursuant to which a bank ac4uires a :security
interest; in the goods under trust receipt. ?nder a letter of creditEtrust receipt
arrangement, a bank e9tends a loan covered by a letter of credit, with the trust receipt as a
security for the loan. The transaction involves a loan feature represented by a letter of
credit, a security feature which is in the covering trust receipt which secures
indebtedness.
!8!
SECRECD OF BANG DEPOSITS
3. T;% :19%"(&%(+< +;"1*:; +;% P"%)-$%(+-#8 C1&&-))-1( 1( G11$
G19%"(&%(+ APCGGB< #"% ."-9#+%80 %(+%"-(: -(+1< .%"2%,+-(: #($J1" %E%,*+-(: #
,1&."1&-)% #:"%%&%(+ /-+; +;% M#",1) ;%-") #) "%:#"$) +;%-" #88%:%$ -88-:1++%(
/%#8+;. P%+-+-1(%" F#(,-),1 I. C;#9%7 < #) +#E.#0%"< ,-+-7%( #($ 21"&%" :19%"(&%(+
249
<ng vs. +ourt of Appeals, 521 S+-A 651, April !/, !22".
250
bid.
251
Aintola vs. nsular 'ank of Asia and America, 182 S+-A 871, 81"E815 citing Samo vs. %eople, 8 S+-A
"85, "86E"87.
252
)ee vs. +ourt of Appeals, "78 S+-A 87/, 8/1.
78
122-,-#8< -(-+-#+%$ +;-) #,+-1( #($ $%&#($-(: +;#+ "%).1($%(+) &#'% .*58-, #(0 #($
#88 (%:1+-#+-1() #($ #:"%%&%(+) .%"+#-(-(: +1 PCGG>) +#)' 12 "%,19%"-(: +;%
M#",1)%)> -88-:1++%( /%#8+;. 4% -) -(91'-(: ;-) ,1()+-+*+-1(#8 "-:;+ +1 -(21"&#+-1(
#($ +;% ,1""%8#+-9% $*+0 12 +;% )+#+% +1 $-),81)% .*58-,80 #88 -+) +"#()#,+-1() -(9189-(:
+;% (#+-1(#8 -(+%"%)+. S;1*8$ +;% PCGG 5% ,1&.%88%$ +1 &#'% # .*58-, $-),81)*"% 12
(%:1+-#+-1() #($ #:"%%&%(+) .%"+#-(-(: +1 # ,1&."1&-)% )%++8%&%(+ /-+; +;%
M#",1)%) #) "%:#"$) +;%-" #88%:%$ -88-:1++%( /%#8+;6
A. The constitutional right to information and the correlative duty of the state to
disclose publicly all its transactions involving the national interest have as yet no defined
scope and e9tent. However, the following are some of the recogni&ed restrictions of the
rule on compulsory disclosureF
B1C national security matters and intelligence information,
B!C trade secrets and 5#('-(: +"#()#,+-1() Bpursuant to the Secrecy of 'ank
Deposits Act
!8"
C,
B"C criminal matters, and
B5C other confidential information.
t is incumbent upon the %+,, and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed settlement they
have decided to take up with the ostensible owners and holders of illEgotten wealth.
There is a need, of course, to observe the same restrictions on disclosure of information
in general.
!85

3. C-+-5#('< N.A. ,1($*,+%$ #( -(9%)+-:#+-1( 12 ,%"+#-( #(1&#81*)J;-:;80
-""%:*8#" #,+-9-+-%) 12 +;% T"%#)*"%" 12 +;% G815#8 C1()*&%" G"1*. 12 +;% 5#('<
(#&%80 D#(+% S. S#(+1) #($ +;% A))+. V-,% P"%)-$%(+ -( +;% 122-,% 12 S#(+1)< (#&%80
M#"-81* G%(*-(1< /;1 #8)1 .%"21"&) +;% $*+-%) 12 #( A,,1*(+ O22-,%". T;% 5#('
;#$ 21*($ "%,1"$)J%9-$%(,% );1/-(: +;#+ S#(+1) #($ G%(*-(1 #..%#"%$ +1 ;#9%
5%%( #,+-9%80 %(:#:%$ -( 5*)-(%)) %($%#91") +;#+ /%"% -( ,1(28-,+ /-+; +;% 5*)-(%))
12 +;% 5#('. I+ /#) 21*($ +;#+ /-+; +;% *)% 12 +/1 A2B ,1&.#(-%) -( /;-,; +;%0 ;#9%
.%")1(#8 2-(#(,-#8 -(+%"%)+ +;%0 &#(#:%$ 1" ,#*)%$ %E-)+-(: 5#(' ,8-%(+)J$%.1)-+1")
+1 $-9%"+ +;%-" &1(%0 2"1& C-+-5#('< N.A. +1 ."1$*,+) 122%"%$ 50 1+;%" ,1&.#(-%)
+;#+ /%"% ,1&&#($-(: ;-:;%" "#+% 12 0-%8$). O*+ 12 +;%)% +"#()#,+-1()< S#(+1) #($
G%(*-(1 $%"-9%$ )*5)+#(+-#8 2-(#(,-#8 :#-().
T;% .%+-+-1(%") #88 ;#9% 81(: )+#($-(: #,,1*(+) /-+; C-+-5#('< N.A. -(
)#9-(:)J$188#" $%.1)-+) #($J1" -( +"*)+ #,,1*(+) #($J1" &1(%0 .8#,%&%(+). W;%(
C-+-5#(' 2-8%$ # ,1&.8#-(+ 21" 12 S%,+-1( 31 12 +;% C1".1"#+-1( C1$% #:#-()+ S#(+1)
#($ G%(*-(1< +;% .%+-+-1(%")> $%.1)-+) /%"% $-),81)%$ +1 %)+#58-); +;% #88%:#+-1( 12
C-+-5#('. C1()%=*%(+80< +;% .%+-+-1(%") 2-8%$ # ,1&.8#-(+ 21" 9-18#+-1( 12 R%.*58-,
253
-.A. .o. 1528, as amended.
!85
+have& vs. %+,,, ,.-. .o. 1"2716 December /, 1//1.
76
A,+ N1. 10!< 1+;%"/-)% '(1/( #) +;% B#(' S%,"%,0 L#/< #:#-()+ C-+-5#('. I) R.A.
N1. 10! AB#(' S%,"%,0 L#/B #..8-,#58% +1 U.S. $188#" $%.1)-+)6
A. The allegation of violation of -.A. .o. 1528 B'ank Secrecy )awC is incorrectly
invoked. The accounts in 4uestion are ?.S. dollar deposits= conse4uently, the applicable
law is not !epublic Act "o. #$%&, but !epublic Act "o. '$(', known as the :(oreign
+urrency Deposit Act of the %hilippines.;
Section 1 of -.A. .o. 65!6 providesF
Sec. 1. Secrecy of )oreign Currency *eposit+, All foreign currency deposits authori&ed
under this Act, as amended by %residential Decree .o. 12"5, are hereby declared as and
considered of an absolutely confidential nature and, e9cept upon written permission of the
depositor, in no instance shall such foreign currency deposits be e9amined, in4uired or looked
into by any person, government official bureau or office whether judicial or administrative or
legislative or any other entity whether public or private= %rovided, however, that said foreign
currency deposits shall be e9empt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body whatsoever.
!88

!88
ntengan vs. +A ,.-. .o. 1!1//6 (ebruary 18, !22!
77