Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Q. What is a material alteration? In the absence of said alteration, is a bank still duty
bound to verify a check with some irregularities on its face not strictly alterations
under the law1?
A. A material alteration is defined in Section 125 of the NIL to be one which changes
the date, the sum payable, the time or place of payment, the number or relations of
the parties, the currency in which payment is to be made or one which adds a place
of payment where no place of payment is specified, or any other change or addition
which alters the effect of the instrument in any respect. With respect to the checks
at issue, petitioner points out that they do not contain any material alteration. A
bank still has to exercise extraordinary diligence despite the lack of a material
alteration.
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on the blank space of each check reserved for the payee, the following typewritten words
appear: "ONE HUNDRED TEN THOUSAND PESOS ONLY." Above the same is the typewritten
word, "CASH." On the blank reserved for the amount, the same amount of One Hundred Ten
Thousand Pesos was indicated with the use of a check writer. The presence of these
irregularities in each check should have alerted the petitioner to be cautious before proceeding
to encash them which it did not do. The SC said this is not a material alteration.
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Q. What are the requirements for registration of a bank?
A. Articles of Inc., By-Laws, Treasurer’s Affidavit, Bank Certificate of Deposit on
paid-up capital, SEC Verification Slip on availability of corporate name, Letter of
Undertaking to change name if proposed name is already adopted by another entity,
Certificate of Authority from the Monetary Board or the BSP; and Letter authorizing
the SEC and the Monetary Board or its duly authorized representative to examine
bank records regarding the paid-up capital.
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Freight Services, Co.: Section 23 of the Corporation Code expressly provides that the
corporate powers of all corporations shall be exercised by the board of directors.
Just as a natural person may authorize another to do certain acts in his behalf, so
may the board of directors of a corporation validly delegate some of its functions to
individual officers or agents appointed by it. Thus, contracts or acts of a corporation
must be made either by the board of directors or by a corporate agent duly
authorized by the board. Absent such valid delegation/authorization, the rule is that
the declarations of an individual director relating to the affairs of the corporation,
but not in the course of, or connected with, the performance of authorized duties of
such director, are held not binding on the corporation. (Heirs of Fausto C. Ignacio vs.
Home Bankers Savings and Trust Co., et al., G.R. No. 177783. January 23, 2013)
Q. Does a branch office of a bank have a personality separate and distinct from its
parent company?
A. Yes. The Philippine branch of a foreign bank is without a separate legal
personality from its parent company because as its name implies, it is merely a
branch, subject to the supervision and control of the parent bank. Thus, being one
and the same entity, the funds placed by the parent bank in its branch in the
Philippines should not be treated as deposits made by a third party subject to
deposit insurance under the PDIC Charter. (Philippine Deposit Insurance Corporation
(PDIC) v. Citibank, G.R. 170290, April 11, 2012)
Q. What is the nature of the relationship of the Credit Card Issuer and Holder?
A. The relationship between the credit card issuer and the credit card holder is a
contractual one that is governed by the terms and conditions found in the card
membership agreement. Such terms and conditions constitute the law between the
parties. In case of their breach, moral damages may be recovered where the
defendant is shown to have acted fraudulently or in bad faith. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest
purpose or moral obliquity. However, a conscious or intentional design need not
always be present because negligence may occasionally be so gross as to amount
to malice or bad faith. Hence, bad faith in the context of Article 2220 of the Civil
Code includes gross negligence. (BPI Express Card Corporation v. Ma. Antonia
Armovit, G.R. No. 163654, October 8, 2014.)
Q. What is the extent of the Monetary Board’s power to put a bank under
receivership?
A. The Court, in several cases, upheld the power of the MB to take over banks
without need for prior hearing under R.A. 7653. It is not necessary inasmuch as the
law entrusts to the MB the appreciation and determination of whether any or all of
the statutory grounds for the closure and receivership of the erring bank are present.
The MB can immediately implement its resolution prohibiting a banking institution
to do business in the Philippines and, thereafter, appoint the PDIC as receiver. It may
be later subjected to a judicial scrutiny via a petition for certiorari to be filed by the
stockholders of record of the bank representing a majority of the capital stock.
Obviously, this procedure is designed to protect the interest of all concerned that is,
the depositors, creditors and stockholders, the bank itself and the general public.
The protection afforded public interest warrants the exercise of a summary closure.
(Alfeo D. Vivas, on his behalf and on behalf of the Shareholders or Eurocredit
Community Bank v. The Monetary Board of the Bangko Sentral ng Pilipinas and the
Philippine Deposit Insurance Corporation, G.R. No. 191424, August 7, 2013)
Q. May the BIR require a tax clearance before the distribution of the assets of a bank
under liquidation?
A. No, the SC held the law expressly provides that debts and liabilities of the bank
under liquidation are to be paid in accordance with the rules on concurrence and
preference of credit under the Civil Code. With reference to the other real and
personal property of the debtor, sometimes referred to as free property, the taxes
and assessments due the National Government, other than those in Articles 2241
(1) and 2242 (1) of the Civil Code, such as the corporate income tax, will only come
in the ninth place in the order of preference. If the BIR’s contention that a tax
clearance be secured first before the project of distribution of the assets of a bank
under liquidation may be approved, then the tax liabilities will be given absolute
preference in all instances, including those that do not fall under Articles 2241 (1)
and 2242 (1) of the Civil Code. (PDIC v. BIR, G.R. 172892, June 13, 2013)
Go over distinction between bank deposits and bank substitutes; reasons why banks
are required to maintain reserves against them: control of volume of money created
by credit operations (Sec. 94 of the New Central Bank Act); to answer any
withdrawal; help government finance its operations and help government control
money supply; Central Bank will examine and look into deposits with Philippine
banks in good standing and will not apply to foreign currency deposits made by
individuals or juridical persons in banks abroad (Sec. 2, R.A. No. 6426); Restriction
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on loans and credit accommodations; Review provisions on DOSRI loans and
exemptions allowed under the restriction.
Q. What is the obligation of a creditor bank under the Truth in Lending Act?
A. It is the duty of the bank to disclose to the debtor in detail the interests, charges
and other figures indicating in detail the cost of the loan and the branch manager is
not given the sole discretion in the determination of such costs.
The SC annulled the escalation clause, allowing the unilateral increase of interest at
the whim of the bank, and the principal amount of the loan was subjected to the
original or stipulated rate of interest, and 12% legal interest. (Spouses Solis v. PNB
GR 181045 July 2, 2014)
* Please note that the Monetary Board issued Circular No. 799, declaring that,
effective July 1, 2013 the rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence of an express
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contract as to such rate of interest, shall be 6 percent per annum.
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activity.
Q. Does the Foreign Currency Deposit Act prevail as an exception to the Bank
Secrecy Law?
A. Yes. Republic Act No. 1405 was enacted for the purpose of giving
encouragement to the people to deposit their money in banking institutions and to
discourage private hoarding so that the same may be properly utilized by banks in
authorized loans to assist in the economic development of the country. It covers all
bank deposits in the Philippines and no distinction was made between domestic and
foreign deposits. Thus, Republic Act No. 1405 is considered a law of general
application. On the other hand, Republic Act No. 6426 was intended to encourage
deposits from foreign lenders and investors. It is a special law designed especially
for foreign currency deposits in the Philippines. A general law does not nullify a
specific or special law. Generalia specialibus non derogant. (Government Service
Insurance System vs. Court of Appeals, et al., G.R. No. 189206. June 8, 2011.)
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. A. The deposits covered by the law on secrecy of bank deposits should not be
limited to those creating a creditor-debtor relationship; the law must be broad
enough to include deposits of whatever nature which banks may use for
authorized loans to third persons. R.A. No. 1405 extends to funds invested such as
those placed in a trust account which the bank may use for loans and similar
transactions. (Ejercito v. Sandigandbayan, G.R. No. 157294-95, 2006).
The law on secrecy of bank deposits cannot be used to preclude the bank deposits
from being garnished for the satisfaction of a judgment. There is no violation of
R.A. No. 1405 because the disclosure is purely incidental to the execution process
and it was not the intention of the legislature to place bank deposits beyond the
reach of the judgment creditor. (PCIB v. CA, G.R. 84526, 1991)
Effect of Freeze Order; When it may be issued; Only the Court of Appeals may issue
Freeze Order over deposits in question; Defense of no prior criminal offense is not
available;
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Please take note of the AMLA amendments annexed to this reviewer
II. Letters of Credit, Negotiable Instruments Law, Warehouse Receipts Law and Trust
Receipts
Where there was a meeting of the minds between the buyer and the seller
regarding the sale of foundry pig iron to be paid for under a letter of credit, the
failure of the buyer to open the letter of credit did not prevent the perfection of the
contract and neither did such failure extinguish the contract. The opening of the
letter of credit was not a condition precedent for the birth of obligation of the buyer
to purchase the foundry pig iron from the seller. Where the buyer fails to open the
letter of credit, as stipulated, the seller or exporter is entitled to claim damages for
such breach. Damages for failure to open the letter of credit may include the loss
of profit which the seller would have reasonably made had the transaction been
carried out (Reliance Commodities, Inc. v. Daewoo Industrial Co. Ltd, 228 SCRA
545, 1993).
The issuing bank is not liable for damages even if the shipment did not conform to
the specifications of the applicant. Under the independence principle , the
obligation of the issuing bank to pay the beneficiary arises once the latter is able to
submit the stipulated documents under the letter of credit. Hence, the bank is not
liable for damages even if the shipment did not conform to the specifications of
the applicant. (LBP v. Monet’s Export Manufacturing, 452 SCRA 173, 2005)
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Q. Is the Fraud Exception Rule always applied to letters of credit?
A. No. It is only an exception to the doctrine of independence. Professor Dolan in
The Law of Letters of Credit, Revised Ed. (2000).opines that the untruthfulness of a
certificate accompanying a demand for payment under a standby credit may qualify
as fraud sufficient to support an injunction against payment. xxx The remedy for
fraudulent abuse is an injunction. However, injunction should not be granted unless:
(a) there is clear proof of fraud; (b) the fraud constitutes fraudulent abuse of the
independent purpose of the letter of credit and not only fraud under the main
agreement; and (c) irreparable injury might follow if injunction is not granted or the
recovery of damages would be seriously damaged. (TPI v. Luzon HydroCorp, 2004)
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Q. Who is a holder in due course?
A. (This is also a bar favorite.)
Sec. 52. What constitutes a holder in due course. - A holder in due
course is a holder who has taken the instrument under the following
conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without
notice that it has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) 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.
A. Yes. As long as the holder accepted the note in good faith and for
value and had no notice of the defect at the time of endorsement, a
holder may still sue on the basis of the promissory note as a holder in
due course. A holder in due course holds the instrument free from any
defect of title of prior parties and from defenses available to prior
parties among themselves, and may enforce payment of the instrument
for the full amount thereof. The defense of non-delivery of the object
and nullity of the sale , for instance, cannot be raised against the
corporation that is a holder in due course as the NIL considers every
negotiable instrument prima facie to have been issued for a valuable
consideration. ( Spouses Violago v. BA Finance, 2008, J. Velasco)
If a bank orders payment on the basis of a check where the drawer’s signature was
forged by an expert who signed almost as if the true drawer signed, who will be
ultimately liable?
The Drawee bank. The forgery may be so near like the genuine as to defy detection
by the depositor himself, and yet the bank is liable to the depositor if it pays the
check. (Samsung Construction v. FEBTC, 2004)
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same deposited to another account and its restriction on its encashment. Wesleyan
University Phils. V. Nowella Reyes, G.R. No.208321, July 30, 2014
Q. Will the alteration of a promissory note result in the extinguishment of the original
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debt?
A. No. While a promissory note is evidence of indebtedness, it is not the only
evidence, for the existence of the obligation can be proven by other documentary
evidence such as a written memorandum signed by the parties. A check may be
considered as an evidence of indebtedness and is a veritable proof of an
obligation. It can be used in lieu of and for the same purpose as a promissory
note and can therefore be presented to establish the existence of indebtedness.
(Leonardo Bognot v. RRI Lending Corporation, G.R. 180144, September 24, 2014)
Q. Bong, a long time client, dollar account holder and grantee of a credit
line of Randy Bank, helped his friends Jet and Michael get a loan from
Randy Bank by signing as a co-maker in a promissory note. After
receiving the full sum of the loan from the Bank, Michael and Jet failed
to pay Randy Bank. Randy Bank is now going after Bong who says he
should not be liable as he did not benefit from the loan. Is Bong correct?
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A. When both parties enter into an agreement knowing fully well that the return of
the goods subject of the trust receipt is not possible (when the goods are sued as
construction materials see (Ng v. People, 2010 and LBP v. Perez, 2012) even without
any fault on the part of the trustee, it is not a trust receipt transaction penalized
under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of the RPC, as the only
obligation actually agreed upon by the parties would be the return of the proceeds of
the sale transaction. This transaction becomes a mere loan, where the borrower is
obligated to pay the bank the amount spent for the purchase of the goods. (Hur Tin
Yang v. People of the Philippines, G.R. No. 195117, August 14, 2013)
Another situation where there is a simple loan only despite the signing of a trust
receipt is when a debtor received the goods subject of the trust receipt before the
trust receipt itself was entered into Colinares v. CA, 2000
When the goods subject of the transaction, such as chemicals and metal plates,
were not intended for sale or resale but for use in the fabrication of steel
communication towers, the agreement cannot be considered a trust receipt
transaction but a simple loan. P.D. No. 115 punishes the entrustee for his failure to
deliver the price of the sale, or if the goods are not sold, to return them to the
entruster, which, in the present case, is absent and could not have been complied
with; therefore, the liability of the entrustee is only civil in nature. (Anthony L.Ng v.
People of the Philippines, G.R. No. 173905, 2010)
When both parties entered into an agreement knowing fully well that the return of
the goods subject of the trust receipt is not possible even without any fault on the
part of the trustee, it is not a trust receipt transaction penalized under Sec. 13 of
PD 115 in relation to Art. 315, par. 1(b) of the RPC, as the only obligation actually
agreed upon by the parties would be the return of the proceeds of the sale
transaction. This transaction becomes a mere loan, where the borrower is
obligated to pay the bank the amount spent for the purchase of the goods. Hur Tin
Yang v. People of the Philippines, G.R.195117, 2013)
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transfer in bulk is made by a public officer, acting under judicial process, said sale or
transfer is not covered by the Bulk Sales Law; If sale of assets was made in defraud
of creditors, the latter may have contracts rescinded or file a petition for involuntary
insolvency and sue for damages as well to recover the value of the contract with the
vendor but secured loans, with leave of court, may filed; guarantors may also file
their claims.
IV. The Corporation Code, Securities Regulation Code, Insolvency and Foreign
Investments Act
Q. Are PLDT’s stock dividends subject to the NTC’s assessment of Supervision and
Regulation Fees?
A. Yes. Dividends, regardless of the form these are declared, that is, cash, property
or stocks, are valued at the amount of the declared dividend taken from the
unrestricted retained earnings of a corporation. Thus, the value of the declaration in
the case of a stock dividend is the actual value of the original issuance of said
stocks. In G.R. No. 127937 we said that "in the case of stock dividends, it is the
amount that the corporation transfers from its surplus profit account to its capital
account" or "it is the amount that the corporation receives in consideration of the
original issuance of the shares." It is "the distribution of current or accumulated
earnings to the shareholders of a corporation pro rata based on the number of
shares owned." Such distribution in whatever form is valued at the declared amount
or monetary equivalent. Thus, it cannot be said that no consideration is involved in
the issuance of stock dividends. In fact, the declaration of stock dividends is akin to
a forced purchase of stocks. By declaring stock dividends, a corporation ploughs
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back a portion of its entire unrestricted retained earnings either to its working
capital or for cap In essence, therefore, the stockholders by receiving stock
dividends are forced to exchange the monetary value of their dividend for capital
stock, and the monetary value they forego is considered the actual payment for the
original issuance of the stocks given as dividends. Therefore, stock dividends
acquired by shareholders for the monetary value they forego are under the coverage
of the SRF and the basis for the latter is such monetary value as declared by the
board of directors. ital asset acquisition or investments. It is simplistic to say that
the corporation did not receive any actual payment for these. When the dividend is
distributed, it ceases to be a property of the corporation as the entire or portion of
its unrestricted retained earnings is distributed pro rata to corporate shareholders.
(PLDT v. NTC, et.al. G.R. No. 152685, 2007 penned by J. Velasco)
Any application of the doctrine of piercing the corporate veil should be done with
caution. A court should be mindful of the milieu where it is to be applied. It must be
certain that the corporate fiction was misused to such an extent that injustice, fraud,
or crime was committed against another, in disregard of its rights. The wrongdoing
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must be clearly and convincingly established; it cannot be presumed. Otherwise, an
injustice that was never unintended may result from an erroneous
application. (Heirs of Fe Tan Uy (Represented by her heir, Manling Uy Lim) vs.
International Exchange Bank/Goldkey Development Corporation vs. International
Exchange Bank, (G.R. No. 166282/G.R. No. 166283, February 13, 2013)
The doctrine of piercing the corporate veil applies only in three (3) basic areas,
namely: 1) defeat of public convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation; 2) fraud cases or when the
corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3)
alter ego cases, where a corporation is merely a farce since it is a mere alter ego or
business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation. (Timoteo H. Sarona vs. National
Labor Relations Commission, Royale Security Agency, et al., G.R. No. 185280,
January 18, 2012).
Corporations; liability of corporate officers. As a general rule, the officer cannot be
held personally liable with the corporation, whether civilly or otherwise, for the
consequences his acts, if acted for and in behalf of the corporation, within the
scope of his authority and in good faith. (Rodolfo Laborte, et al. v. Pagsanjan
Tourism Consumers’ Cooperative, et al., G.R. No. 183860, January 15, 2014)
The third prong is the "harm" test. This test requires the plaintiff to show that the
defendant’s control, exerted in a fraudulent, illegal or otherwise unfair manner
toward it, caused the harm suffered. A causal connection between the fraudulent
conduct committed through the instrumentality of the subsidiary and the injury
suffered or the damage incurred by the plaintiff should be established. The plaintiff
must prove that, unless the corporate veil is pierced, it will have been treated
unjustly by the defendant’s exercise of control and improper use of the corporate
form and, thereby, suffer damages.
To summarize, piercing the corporate veil based on the alter ego theory requires the
concurrence of three elements: control of the corporation by the stockholder or
parent corporation, fraud or fundamental unfairness imposed on the plaintiff, and
harm or damage caused to the plaintiff by the fraudulent or unfair act of the
corporation. The absence of any of these elements prevents piercing the corporate
veil. ( PNB V. Hydro Resources Contractor’s Corp, 2010)
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incorporation can bind the corporation. (March II Marketing, Inc. and Lucila V.
Joson vs. Alfredo M. Joson, G.R. No. 171993, December 12, 2011)
Q. Randy sold Jet his shares of stock. Jet immediately exercised his rights as a
stockholder by requesting for a copy of the corporation’s financial statements which
the corporation allowed. Randy later on sold the same shares of stock to Eisel and
delivered the stock certificates to her. Who owns the shares of stock?
A. The latter. In a sale of shares of stock, physical delivery of a stock certificate is
one of the essential requisites for the transfer of ownership of the stocks
purchased. The enjoyment of the rights under the stock certificates cannot suffice
where the law, by its express terms, requires a specific form to transfer ownership.
(Fil-Estate Gold and Development, Inc., et al. v. Vertex Sales and Trading, Inc., G.R.
No. 202079, June 10, 2013.)
Q. Does the control test exclude the application of the grandfather rule?
A. No. The control test’ can be applied jointly with the Grandfather Rule
to determine the observance of foreign ownership restriction in
nationalized economic activities. The Control Test and the Grandfather
Rule are not incompatible ownership-determinant methods that can only
be applied alternative to each other. Rather, these methods can, if
appropriate, be used cumulatively in the determination of the ownership
and control of corporations engaged in fully or partly nationalized
activities, as the mining operation involved in this case or the operation
of public utilities.
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an otherwise foreign corporation rendered qualified to perform
nationalized or partly nationalized activities. Hence, it is only when the
Control Test is first complied with that the Grandfather Rule may be
applied. Put in another manner, if the subject corporation’s Filipino
equity falls below the threshold 60%, the corporation is immediately
considered foreign-owned, in which case, the need to resort to the
Grandfather Rule disappears.
In this case, using the control test’, Narra, Tesoro and MacArthur
appear to have satisfied the 60-40 equity requirement. But the
nationality of these corporations and the foreign-owned common
investor that funds them was in doubt, hence, the need to apply the
Grandfather Rule. Narra Nickel Mining v. Redmont, G.R. 195580 (2014,
penned by J. Velasco)
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A. Basic is the rule in corporation law that a corporation is a juridical entity which is
vested with a legal personality separate and distinct from those acting for and in its
behalf and, in general, from the people comprising it. Following this principle,
obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities. A director, officer or employee of a corporation is
generally not held personally liable for obligations incurred by the corporation.
Nevertheless, this legal fiction may be disregarded if it is used as a means to
perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, or to confuse legitimate issues.
Solidary liability will then attach to the directors, officers or employees of the
corporation in certain circumstances, such as:
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and its directors for violation of BP. No. 33 which penalizes the
unauthorized use of LPG cylinders. Can the directors be held personally
liable?
Q. Can a corporate officer not authorized by the board in writing bind the
corporation?
A. The Court reiterated its ruling in People’s Aircargo and Warehousing Co., Inc. v.
Court of Appeals: Inasmuch as a corporate president is often given general
supervision and control over corporate operations, the strict rule that said officer
has no inherent power to act for the corporation is slowly giving way to the
realization that such officer has certain limited powers in the transaction of the
usual and ordinary business of the corporation.
In the absence of a charter or bylaw provision to the contrary, the president is
presumed to have the authority to act within the domain of the general objectives of
its business and within the scope of his or her usual duties. (Advance Paper
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Corporation and George Haw, in his capacity as President of Advance Paper
Corporation v. Arma Traders Corporation, Manuel Ting, et al., G.R. No. 176897,
December 11, 2013)
Section 23 of the Corporation Code expressly provides that the corporate powers of
all corporations shall be exercised by the board of directors. The power and the
responsibility to decide whether the corporation should enter into a contract that
will bind the corporation are lodged in the board, subject to the articles of
incorporation, bylaws, or relevant provisions of law. In the absence of authority from
the board of directors, no person, not even its officers, can validly bind a
corporation.
The authority of a corporate officer or agent in dealing with third persons may be
actual or apparent. Actual authority is either express or implied. The extent of an
agent’s express authority is to be measured by the power delegated to him by the
corporation, while the extent of his implied authority is measured by his prior acts
which have been ratified or approved, or their benefits accepted by his principal. The
doctrine of apparent authority, on the other hand, with special reference to banks,
had long been recognized in this jurisdiction. The existence of apparent authority
may be ascertained through:
(1) the general manner in which the corporation holds out an officer or agent as
having the power to act, or in other words, the apparent authority to act in general,
with which it clothes him; or
(2) the acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, within or beyond the scope of his ordinary powers. (Violeta
Tudtud Banate, et al. vs. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. and
Teofilo Soon, Jr., G.R. No. 163825, July 13, 2010)
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Q. What are the tests to determine whether a person is a corporate officer?
A. There are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely:
(1) the creation of the position is under the corporation’s charter or by-laws; and (2)
the election of the officer is by the directors or stockholders. It is only when the
officer claiming to have been illegally dismissed is classified as such corporate
officer that the issue is deemed an intra-corporate dispute which falls within the
jurisdiction of the trial courts. Raul C. Cosare v. Broadcom Asia, Inc., et al., G.R. No.
201298, February 5, 2014.
Q. Can a corporation continue its regular business during the winding up period after
dissolution?
A. No. Section 122 of the Corporation Code prohibits a dissolved corporation from
continuing its business, but allows it to continue with a limited personality for a
period of three years from the time it would have been dissolved in order to settle
and close its affairs, including its complete liquidation but not for the purpose of
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continuing the business for which it was established.
Vitaliano N. Aguirre II and Fidel N. Aguirre II and Fidel N. Aguirre vs. FQB+, Inc.,
Nathaniel D. Bocobo, Priscila Bocobo and Antonio De Villa, G.R. No. 170770.
January 9, 2013.
Q. Are all corporations that are not GOCCs considered private corporations not
under Commission on Audit jurisdiction?
A. No. Not all corporations, which are not government owned or controlled, are ipso
facto to be considered private corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise known as public
corporations. These corporations are treated by law as agencies or
instrumentalities of the government which are not subject to the tests of ownership
or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative
relationship to the government or any of its Department or Offices. The COA may,
thus, audit the finances of BSP. Boy Scouts of the Phils. V. COA. G.R. No. 177131,
June 7, 2011
Q. Is there a distinction between a case filed before and after the winding up period
of a corporation?
A. Yes. A dissolved corporation or any person representing it cannot file a case
beyond the three year winding up period even if the purpose of such suit is the
liquidation of the assets of the dissolved corporation as it has no more capacity to
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sue. To allow such suit would be to circumvent Section 122 of the Corporation
Code. (Alabang Development Corporation v. Alabang Hills Village Association and
Rafael Tinio, G.R. No. 187456, June 2, 2014.)
Q. Is the refusal to allow inspection of the stock and transfer book a criminal
offense?
A. Yes. Such refusal, when done in violation of Section 74(4) of the Corporation
Code, properly falls within the purview of Section 144 of the same code and thus
may be penalized as an offense. (Aderito Z. Yujuico and Bonifacio C. Sumbilla v.
Cezar T. Quiambao and Eric C. Pilapil, G.R. No. 180416, June 2, 2014).
Q. Are corporate officers liable for the illegal dismissal of an employee of the
corporation?
A. No. A corporation has a personality separate and distinct from its officers and
the board of directors may only be held personally liable for damages if it is proven
that they acted with malice or bad faith in the dismissal of an employee. Absent any
evidence on record that petitioner Bautista acted maliciously or in bad faith in
effecting the termination of respondent, plus the apparent lack of allegation in the
pleadings of respondent that petitioner Bautista acted in such manner, the doctrine
of corporate fiction dictates that only petitioner corporation should be held liable for
the illegal dismissal of respondent. (Mirant (Philippines) Corporation, et al. v.
Joselito A. Caro, G.R. No. 181490, April 23, 2014)
Q. What is a merger?
A. Merger is a re-organization of two or more corporations that results in their
consolidating into a single corporation, which is one of the constituent corporations,
one disappearing or dissolving and the other surviving. To put it another way,
merger is the absorption of one or more corporations by another existing
corporation, which retains its identity and takes over the rights, privileges,
franchises, properties, claims, liabilities and obligations of the absorbed
corporation(s). The absorbing corporation continues its existence while the life or
lives of the other corporation(s) is or are terminated.
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Q. What is a de facto merger?
A. A de facto merger can be pursued by one corporation acquiring all or
substantially all of the properties of another corporation in exchange of shares of
stock of the acquiring corporation. The acquiring corporation would end up with the
business enterprise of the target corporation; whereas, the target corporation would
end up with basically its only remaining assets being the shares of stock of the
acquiring corporation.
It is clear that no merger took place between Bank of Commerce and TRB as the
requirements and procedures for a merger were absent. A merger does not become
effective upon the mere agreement of the constituent corporations. All the
requirements specified in the law must be complied with in order for merger to take
effect. Section 79 of the Corporation Code further provides that the merger shall be
effective only upon the issuance by the Securities and Exchange Commission (SEC)
of a certificate of merger. (Bank of Commerce v. Radio Philippines Netwcork, Inc., et
al., G.R. No. 195615, April 21, 2014)
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registered with the SEC before they can be distributed and sold. SEC v.
Prosperity.com, Inc., G.R.164197, January 25, 2012.
Q. Can the SEC issue a Cease and Desist Order without any complaint filed before
it?
A. Yes. Under Sec. 64 of the SRC, a cease and desist order maybe issued by the SEC
motu proprio, it being unnecessary that it results from a verified complaint from an
aggrieved party and even without a prior hearing whenever the Commission finds it
appropriate to issue a cease and desist order that aims to curtail fraud or grave or
irreparable injury to investors. There is good reason for this provision as any delay in
the restraint of acts that yield such results can only generate further injury to the
public that the SEC is obliged to protect. To equally protect individuals and
corporations from baseless and improvident issuances, the authority of the SEC is
also with defined limits. A cease and desist order may only be issued by the
Commission after proper investigation or verification and upon showing that the
acts sought to be restrained could result in injury or fraud to the investing public.
Primanila Plans, Inc. v. SEC, G.R. 193791, August 6, 2014
Q. What is the Jurisdiction of the RTC and the SEC over issues on validation of
proxies?
A. The power of the SEC to regulate proxies remains in place in instances when
stockholders vote on matters other than the election of directors. The test is
whether the controversy relates to such election. All matters affecting the manner
and conduct of the election of directors are properly cognizable by the regular
courts. Otherwise, these matters may be brought before the SEC for resolution
based on the regulatory powers it exercises over corporations, partnerships and
associations. SEC v. CA, G.R. 187702, October 22, 2014.
C. Insolvency Law -
Voluntary Insolvency is filed by the insolvent while Involuntary Insolvency is filed by
the creditors of the insolvent; Unsecured loans cannot be filed in any insolvency
proceeding provided they present proof that they paid the obligation of the creditor
of the insolvent and they substitute for the creditors; Preferred claims funeral
expenses of the debtor is the most preferred claim, debts due for personal services
rendered to the insolvent immediately preceding the commencement of insolvency
proceeding; obligations under Workmen’s Compensation Act, legal expenses and
expenses incurred in the administration of insolvent’s estate for the common
interest of creditors upon order of the court, debts, taxes and assessments due the
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national government, provincial government and local government units; remaining
non-preferred creditors shall be entitled pro rata in the balance of assets, without
priority or preference.
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No. 180036, January 16, 2013)
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Q. Is the HLURB’s prior request for the appointment of a rehabilitation receiver is a
condition precedent before the trial court can give due course to a rehabilitation
petition?
A. No. Unlike banks and financial institutions under the jurisdiction of the BSP, and
insurance companies and similar institutions under the jurisdiction of the Insurance
Commission, construction and real estate companies, such as Lexber, under the
jurisdiction of the HLURB are allowed to file petitions for rehabilitation even without
prior request for the appointment of a receiver by HLURB. This is because the power
to appoint receivers is not found in HLURB’s charter unlike the BSP and the IC which
are specifically authorized to appoint a receiver in case a company under their
regulation is undergoing corporate rehabilitation. Lexber Inc v. Spouses Dalman GR
183587 April 20, 2015
Q. Will the lapse of the 180-day period for the approval of the rehabilitation plan
automatically result to the dismissal of the rehabilitation petition?
A. No. Rule 4, Section 11 of the Interim Rules states:
Section 11.Period of the Stay Order - The stay order shall be effective from the date
of its issuance until the dismissal of the petition or the termination of the
rehabilitation proceedings. The petition shall be dismissed if no rehabilitation plan is
approved by the court upon the lapse of one hundred eighty (180) days from the
date of the initial hearing. The court may grant an extension beyond this period only
if it appears by convincing and compelling evidence that the debtor may
successfully be rehabilitated. In no instance, however, shall the period for approving
or disapproving a rehabilitation plan exceed eighteen (18) months from the date of
filing of the petition.
Rule 2, Section 2 of the Interim Rules may be properly applied as it dictates the
courts to liberally construe the rehabilitation rules in order to carry out the
objectives of Sections 6(c) of PD 902-A, as amended, and to assist the parties in
obtaining a just, expeditious, and inexpensive determination of rehabilitation cases.
(Lexber Inc v. Spouses Dalman GR 183587 April 20, 2015)
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contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization:
Provided, however, That the phrase "doing business: shall not be deemed to include
mere investment as a shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such investor; nor having
a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account; (sec. 3.d. Foreign
Investments Act.)
In Mentholatum Co., Inc. v.. Anacleto Mangaliman, the Supreme Court laid down the
jurisprudential test of what constitutes "doing business" in the Philippines for
foreign corporations known as the "Twin Characterization Test".
Under this test, a foreign corporation is considered to be "doing business" in the
Philippines when:
Please note that aliens may be allowed to invest in companies involved in the
exploitation, development and utilization of natural resources provided 60% of the
shares is owned by Filipino citizens. Aliens may also register their companies and
enjoy tax incentives under the BOI and PEZA laws.
V. Insurance Code
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Q. How do you construe limitations on the liability of an insurer?
A. In Philamcare Health Systems, Inc. v. CA, we ruled that a health care agreement
is in the nature of a non-life insurance. It is an established rule in insurance
contracts that when their terms contain limitations on liability, they should be
construed strictly against the insurer. These are contracts of adhesion the terms of
which must be interpreted and enforced stringently against the insurer which
prepared the contract. This doctrine is equally applicable to health care
agreements. Fortune Medicare, Inc. v. David Robert U. Amorin, G.R. No. 195872,
March 12, 2014.
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Insurance Code, which states that where the insured is over insured by double
insurance, each insurer is bound, as between himself and the other insurers, to
contribute ratably to the loss in proportion to the amount for which he is liable under
his contract. (Malayan Insurance Co., Inc. vs. Philippine First Insurance, Co., Inc., et
al., G.R. No. 184300, July 11, 2012).
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2) there is an alteration in said use or condition;
3) the alteration is without the consent of the insurer;
4) the alteration is made by means within the insured’s control; and
5) the alteration increases the risk of loss.
In the case at bench, all these circumstances are present. It was clearly established
that the renewal policy stipulated that the insured properties were located at the
Sanyo factory; that PAP removed the properties without the consent of Malayan; and
that the alteration of the location increased the risk of loss. (Malayan Insurance
Company, Inc. v. PAP co., Ltd. (Philippine Branch), G.R. No. 200784, August 7, 2013).
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Insurance Corporation v. Antonio Lagman, G.R. No. 165487, July 13, 2011).
Same application of the doctrine: As a general rule, the marine insurance policy
needs to be presented in evidence before the insurer may recover the insured value
of the lost/damaged cargo in the exercise of its subrogatory right since it is the
legal basis of the insurer’s right to subrogation. Nevertheless, a marine insurance
policy is dispensable evidence in reimbursement claims instituted by the insurer
especially when a subrogation receipt has been executed between the insured and
the insurer. (Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corporation,
G.R. 185964, June 16, 2014).
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proven to have failed to comply with his obligation. (Sun Life of Canada v. Sandra
Tan Kit and Estate of the Deceased Norberto Tan Kit, G.R. No 183272, October 15,
2014)
Q. Marion imported rare collectible toys from Europe. Upon arrival of the ship
carrying the goods, it was discovered that the container of Marion’s goods got wet
with seawater. The goods were not severely damaged but their individual boxes and
packaging were damaged. Marion claims that she can still sell the goods but at a
lower price because collectors require the packaging to be intact. May Marion
recover even if no portion of the goods were lost?
A. Yes. Under Art 365 of the Code of Commerce, if the goods are rendered useless
for sale, consumption, or for the intended purpose, the consignee may reject the
goods and demand the payment of such goods at their market price on that day. In
case the damaged portion of the goods can be segregated from those delivered in
good condition, the consignee may reject those in damaged condition and accept
merely those which are in good condition. But if the consignee is able to prove that
it is impossible to use those goods which were delivered in good condition without
the others, then the entire shipment may be rejected. Thus the nature of damage
must be such that the goods are rendered useless for sale, consumption, or
intended purpose for the consignee to be able to validly reject them. On the other
hand, under Art 364 of the Code of Commerce, if the effect of damage on the goods
consisted merely of diminution in value, the carrier is bound to pay only the
difference between its price on that day and its depreciated value. (Loadstar
Shipping Company, Inc. and Loadstar International Shipping Company, Inc. v.
Malayan Insurance Company, G.R. 185565, November 26, 2014).
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of dispensing justice. Under Article 28(1) of the Warsaw Convention, the plaintiff
may bring the action for damages before
1. the court where the carrier is domiciled;
2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the contract has been
made; or
4. the court of the place of destination.ch
In other words, where the matter is governed by the Warsaw Convention, jurisdiction
takes on a dual concept. Jurisdiction in the international sense must be established
in accordance with Article 28(1) of the Warsaw Convention, following which the
jurisdiction of a particular court must be established pursuant to the applicable
domestic law. Only after the question of which court has jurisdiction is determined
will the issue of venue be taken up. (Lluillier v. British Airways, G.R. No. 171092,
March 15, 2010)
Take note that the Warsaw Convention has been amended by the Montreal
Agreement.
Q. What is the prescriptive period under the Carriage of Goods by Sea Act?
A. The COGSA is the applicable law for all contracts for carriage of goods by sea to
and from Philippine ports in foreign trade; it is thus the law that the Court shall
consider in the present case since the cargo was transported from Brazil to the
Philippines.
Under Section 3(6) of the COGSA, the carrier is discharged from liability for loss or
damage to the cargo unless the suit is brought within one year after delivery of the
goods or the date when the goods should have been delivered. Jurisprudence,
however, recognized the validity of an agreement between the carrier and the
shipper/consignee extending the one-year period to file a claim. (Benjamin Cua [Cua
Hian Tek] v. Wallem Philippines Shipping, Inc. and Advance Shipping
Corporation, G.R. No. 171337. July 11, 2012)
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In light of the foregoing, petitioner’s liability should be limited to $500 per steel
drum. In this case, as there was only one drum lost, private respondent is entitled to
receive only $500 as damages for the loss. In addition to said amount, as aptly held
by the trial court, an interest rate of 6% per annum should also be imposed, plus 25%
of the total sum as attorney’s fees. (Unsworth Transportation International [Phils.],
Inc. vs. Court of Appeals and Pioneer Insurance and Surety Corporation, G.R. No.
166250, July 26, 2010).
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of a carrier, which actually executes the transport, even though the forwarder does
not carry the merchandise itself. Unsworth Transportation International (Phils.), Inc.
vs. Court of Appeals and Pioneer Insurance and Surety Corporation, G.R. No.
166250, July 26, 2010.
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Court of Appeals, et al./Philippine Trigon Shipyard Corporation, et al. v. Crisostomo
G. Concepcion, et al., G.R. No. 160088/G.R. No. 160565, July 13, 2011)
Q. What is the Package Limitation Liability and Prescriptive Period under COGSA? Is
there an exception to these rules?
A. Under Sec. 4(5) of the COGSA, when the shipper fails to declare the value of the
goods in the bill of lading, neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the transportation of
goods in an amount exceeding US$500 per package. Under Sec. 3(6) of the COGSA
which provides, among others, that the notice in writing need not be given if the
state of the goods has at the time of their receipt been the subject of joint survey or
inspection, and in any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one (1) year after
delivery of the goods or the date when the goods should have been delivered,
provided that if a notice of loss or damage, either apparent or concealed, is not
given, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered. Philam Insurance Company, Inc. v. Heung-A Shipping
Corporation and Wallem Philippines Shipping, Inc., G.R. No. 187701, July 23, 2014.
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Exception: Mere proof of the delivery of the goods in good order to a common
carrier and of their arrival in bad order at their destination constitutes a prima facie
case of fault or negligence against the carrier. If no adequate explanation is given as
to how the deterioration, loss, or destruction of the goods happened, the transporter
shall be held responsible. Eastern Shipping, Inc. v. BPI/MS Insurance Corporation
and Mitsui Sumitomo Insurance Co., Ltd. G.R. 193986, January 15, 2014
What may protected under the Copyright Law: (original works and derivative works ;
limitations doctrine of fair use and copyright infringement); registration of
trademark (definition of marks, collective marks, trade names; prior use of mark as
requirement; tests to determine confusing or similar marks: dominancy test and
holistic test) ; what may covered by a patent (first to file rule and limitations of
patent rights prior user and use by government); what are the requisites of a
Technology Transfer Arrangements (ex. McDonalds USA has a Technology Transfer
Agreement with all Franchise Holders of McDonalds in the Philippines); in case of
infringement, what are the available remedies and what damages may be claimed.
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validity of plaintiff’s mark; (2) the plaintiff’s ownership of the mark; and (3) the use of
the mark or its colorable imitation by the alleged infringer results in likelihood of
confusion. Of these, it is the element of likelihood of confusion that is the
gravamen of trademark infringement.
A mark is valid if it is distinctive and not barred from registration. Once registered,
not only the mark’s validity, but also the registrant’s ownership of the mark is prima
facie presumed. (Gemma Ong a.k.a. Ma. Theresa Gemma Catacutan vs. People of
the Philippines, G.R. No. 169440,. November 23, 2011).
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that it used the same stylized S , the same being the dominant feature of
petitioner’s trademark, already constitutes infringement under the Dominancy Test.
(Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Trading Corp., et al., G.R. No.
164321, March 28, 2011.)
A mark is valid if it is distinctive and not barred from registration. Once registered,
not only the marks validity, but also the registrant’s ownership of the mark is prima
facie presumed. The prosecution was able to establish that the trademark Marlboro
was not only valid for being neither generic nor descriptive, it was also exclusively
owned by PMPI, as evidenced by the certificates of registration issued by the
Intellectual Property Office of the Department of Trade and Industry. Anent the
element of confusion, both the RTC and the Court of Appeals have correctly held
that the counterfeit cigarettes seized from Gamma’s possession were intended to
confuse and deceive the public as to the origin of the cigarettes intended to be sold,
as they not only bore PMPIs mark, but they were also packaged almost exactly as
PMPIs products. (Ong v. People, 2011)
Q. What are the rights of patentees?
A. It is clear from Section 37 of Republic Act No. 165 that the exclusive right of a
patentee to make use and sell a patented product, article or process exists only
during the term of the patent. In the instant case, Philippine Letters Patent No.
21116, which was the basis of respondents in filing their complaint with the
BLA-IPO, was issued on July 16, 1987. This fact was admitted by respondents
themselves in their complaint. They also admitted that the validity of the said patent
is until July 16, 2004, which is in conformity with Section 21 of RA 165, providing
that the term of a patent shall be seventeen (17) years from the date of issuance
thereof. Section 4, Rule 129 of the Rules of Court provides that an admission, verbal
or written, made by a party in the course of the proceedings in the same case, does
not require proof and that the admission may be contradicted only by showing that it
was made through palpable mistake or that no such admission was made. In the
present case, there is no dispute as to respondents’ admission that the term of their
patent expired on July 16, 2004. Neither is there evidence to show that their
admission was made through palpable mistake. Hence, contrary to the
pronouncement of the CA, there is no longer any need to present evidence on the
issue of expiration of respondents’ patent. Phil Pharmawealth, Inc. vs. Pfizer, Inc
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and Pfizer (Phil.) Inc., G.R. No. 167715, November 17, 2010.
Q. Taiwan Kolin Corp sought to register the trademark KOLIN for the array of
goods it offers which are audio visual equipment. However, Kolin Electronics
opposed the application on the ground that the trademark KOLIN is identical, if
not confusingly similar, with its registered trademark KOLIN which also covers its
products that fall under the category as devices for controlling the distribution and
use of electricity. Are the products closely related?
A. No, the products are not related and the use of the trademark KOLIN on them
would not likely cause confusion. To confer exclusive use of a trademark, emphasis
should be on the similarity or relatedness of the goods and/or services involved and
not on the arbitrary classification or general description of their properties or
characteristics.
Taiwan Kolin’s goods are categorized as audio visual equipments, while Kolin
Electronics’ goods fall under devices for controlling the distribution and use of
electricity. Thus, it is erroneous to assume that all electronic products are closely
related and that the coverage of one electronic product necessarily precludes the
registration of a similar mark over another.
Second, the ordinarily intelligent buyer is not likely to be confused. The distinct
visual and aural differences between the two trademarks KOLIN , although appear
to be minimal, are sufficient to distinguish between one brand or another. The
casual buyer is predisposed to be more cautious, discriminating, and would prefer
to mull over his purchase because the products involved are various kind of
electronic products which are relatively luxury items and not considered affordable.
They are not ordinarily consumable items such as soy sauce, ketsup or soap which
are of minimal cost. Hence, confusion is less likely. (Taiwan Kolin v. Kolin
Electronics, G.R. 209843, 2015, Velasco J.)
PLEASE NOTE OF THIS PORTION OF THE DECISION penned by Justice Velasco on
infringement:
In resolving one of the pivotal issues in this case whether or not the
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products of the parties involved are related the doctrine in Mighty
Corporation is authoritative. There, the Court held that the goods should
be tested against several factors before arriving at a sound conclusion
on the question of
relatedness. Among these are:
(a) the business (and its location) to which the goods belong;
(b) the class of product to which the goods belong
(c) the product’s quality, quantity, or size, including the nature of the
package, wrapper or container;
(d) the nature and cost of the articles;
(e) the descriptive properties, physical attributes or essential
characteristics with reference to their form, composition, texture or
quality;
(f) the purpose of the goods;
(g) whether the article is bought for immediate consumption, that is,
day-to-day household items;
(h) the fields of manufacture;
(i) the conditions under which the article is usually purchased; and
(j) the channels of trade through which the goods flow, how they are
distributed, marketed, displayed and sold. (Taiwan Kolin Corporation, Ltd. v.
Kolin Electronics Co., Inc. G.R. No. 209843 | March 25, 2015)
The first section of the amending law added the following to the list of covered
persons under the AMLA. The amendment reads:
Section 3 (a). Covered persons’, natural or juridical, refer to:
(4) jewelry dealers in precious metals, who, as a business, trade in precious metals,
for transactions in excess of One million pesos (P1,000,000.00);
(5) jewelry dealers in precious stones, who, as a business, trade in precious stones,
for transactions in excess of One million pesos (P1,000,000.00);
(6) company service providers which, as a business, provide any of the following
services to third parties:
(i) acting as a formation agent of juridical persons;
(ii) acting as (or arranging for another person to act as) a director or corporate
secretary of a company, a partner of a partnership, or a similar position in relation to
other juridical persons;
(iii) providing a registered office, business address or accommodation,
correspondence or administrative address for a company, a partnership or any other
legal person or arrangement; and (iv) acting as (or arranging for another person to
act as) a nominee shareholder for another person; and
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(7) persons who provide any of the following services:
(i) managing of client money, securities or other assets;
(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or management of
companies; and
(iv) creation, operation or management of juridical persons or arrangements, and
buying and selling business entities.
Notwithstanding the foregoing, the term covered persons’ shall exclude lawyers
and accountants acting as independent legal professionals in relation to
information concerning their clients or where disclosure of information would
compromise client confidences or the attorney-client relationship: Provided, That
these lawyers and accountants are authorized to practice in the Philippines and
shall continue to be subject to the provisions of their respective codes of conduct
and/or professional responsibility or any of its amendments.
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otherwise known as the Wildlife Resources Conservation and Protection Act;
(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the
National Caves and Cave Resources Management Protection Act;
(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping
Act of 2002, as amended;
(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended,
otherwise known as the decree Codifying the Laws on Illegal/Unlawful Possession,
Manufacture, Dealing In, Acquisition or Disposition of Firearms, Ammunition or
Explosives;
(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing
Law;
(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic Act
No. 10022;
(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual
Property Code of the Philippines;
(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the
Anti-Photo and Video Voyeurism Act of 2009;
(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the
Anti-Child Pornography Act of 2009;
(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act
No. 7610, otherwise known as the Special Protection of Children Against Abuse,
Exploitation and Discrimination;
(33) Fraudulent practices and other violations under Republic Act No. 8799,
otherwise known as the Securities Regulation Code of 2000; and
(34) Felonies or offenses of a similar nature that are punishable under the penal
laws of other countries.
Republic Act No. 10365 also amended the provisions of the AMLA on the ways by
which money laundering may be committed as well as the manner of its
prosecution. Firstly, money laundering may now be committed through the
following:
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(d) attempts or conspires to commit money laundering offenses referred to in
paragraphs (a), (b) or (c);
(e) aids, abets, assists in or counsels the commission of the money laundering
offenses referred to in paragraphs (a), (b) or (c) above; and
(f) performs or fails to perform any act as a result of which he facilitates the offense
of money laundering referred to in paragraphs (a), (b) or (c) above.
Money laundering is also committed by any covered person who, knowing that a
covered or suspicious transaction is required under this Act to be reported to the
Anti-Money Laundering Council (AMLC), fails to do so.
Parts (b), (c), (d), and (e) are new additions to the law. Hence, knowingly converting
or concealing a monetary instrument, including an attempt thereof, and assisting in
the commission of money-laundering now constitute the crime. Prior to the
amendment, only the act of transacting the monetary instrument or property is
made criminal in its attempted stage.
Secondly, the prosecution for the crime of money-laundering may now proceed
simultaneously with the case relating to the unlawful activity. The amending law
provided that both cases are now independent of each other. Prior to the
amendment, the case involving the unlawful activity was given precedence.
The Anti-Money Laundering Council ( AMLC ) was also a given new function under
the amending law. Section 7 now reads:
Section 7. Creation of Anti-Money Laundering Council (AMLC). … The AMLC shall
act unanimously in the discharge of its functions as defined hereunder:
(12) to require the Land Registration Authority and all its Registries of Deeds to
submit to the AMLC, reports on all real estate transactions involving an amount in
excess of Five hundred thousand pesos (P500,000.00) within fifteen (15) days from
the date of registration of the transaction, in a form to be prescribed by the AMLC.
The AMLC may also require the Land Registration Authority and all its Registries of
Deeds to submit copies of relevant documents of all real estate transactions.
In addition to this, the power of the AMLC to apply for a freeze order before the
Court of Appeals now includes monetary instruments or properties alleged to be
laundered as well as instrumentalities used in or intended for use in any unlawful
activity. Prior to the amendment, the AMLC may obtain a freeze order only for
monetary instruments or properties alleged to be the proceeds of an unlawful
activity.
More on the freeze order, R.A. No. 10365 also extended its maximum effectiveness
period to six months provided that if no case is filed against the person whose
account has been frozen within the period determined by the court, the freeze order
will be automatically lifted. Note that the freeze order was previously effective only
for 20 days unless extended by the court. This new rule, however, shall not apply to
cases already pending before the courts.
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Section 7
The provisions of the amending law on prevention of money laundering include the
following amendments:
(1) Covered persons must report covered and suspicious transactions to the AMLA
within five working days from the occurrence thereof, unless the AMLC prescribes a
different period not exceeding 15 working days. Before, the maximum period
provided by law was 10 days.
(2) Lawyers and accountants acting as independent legal professionals are exempt
from the reporting requirement if the relevant information was obtained in
circumstances where they are subject to professional secrecy or legal professional
privilege. This is a new provision.
(3) Covered persons as well as their officers and employers are prohibited from
communicating to any person or entity including the media the transactions about
to be reported to the AMLC. Prior to the amendment, the confidentiality clause
applied only to transactions already reported to the AMLC.
With the new amendments, other monetary instruments or properties having an
equivalent value to that of the monetary instrument or property found to be related
in any way to unlawful activity or a money laundering offense may now be forfeited
as an alternative. This arises when the latter, with due diligence, (1) cannot be
located, or (2) it has been substantially altered, destroyed, diminished in value or
otherwise rendered worthless by any act or omission, or (3) it has been concealed ,
removed, converted or otherwise transferred, or (4) it is located outside the
Philippines or has been placed or brought outside the jurisdiction of the court, or (5)
it has been commingled with other monetary instrument or property belonging to
either the offender himself or a third person or entity, thereby rendering the same
difficult to identify or be segregated for purposes of forfeiture.
If no other monetary instrument or property may be located, the court can order the
convicted offender to pay an amount equal to the value of the monetary instrument
or property instead. The AMLC may promulgate rules on fines and penalties taking
into consideration the attendant circumstances, such as the nature and gravity of
the violation or irregularity.
While the amending law did not increase the penalties already provided for the
crime of money laundering, it nevertheless introduced penal sanctions for covered
persons, its directors, officers and personnel who knowingly participated in the
commission of the crime. Administrative sanctions are now also imposable upon
persons responsible for the violation of the AMLA.
Section 11
The last provision of R.A. No. 10365 added two new provisions to the AMLA:
Section. 20. Non-intervention in the Bureau of Internal Revenue (BIR) Operations.
Nothing contained in this Act nor in related antecedent laws or existing agreements
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shall be construed to allow the AMLC to participate in any manner in the operations
of the BIR.
Section. 21. The authority to inquire into or examine the main account and the
related accounts shall comply with the requirements of Article III, Sections 2 and 3
of the 1987 Constitution, which are hereby incorporated by reference. Likewise, the
constitutional injunction against ex post facto laws and bills of attainder shall be
respected in the implementation of this Act.
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