commercial law case digests
DESCRIPTION
Digests of commercial law cases for 2012 involving intellectual property, banking laws, foreign business and corporate recoveryTRANSCRIPT
Insurance Company of North America, petitioner, v. Asian Terminals, Inc., respondent
Facts:
The trial court dismissed petitioner’s complaint for actual damages on the ground of
prescription under the Carriage of Goods by Sea Act. Thus, an action was instituted to review the
RTC’s decision.
On November 2002, Macro-Lite Corporation shipped to San Miguel Corporation, through
M/V DIMI P vessel, 185 packages (or 231,000 sheets) of electrolytic tin free steel, complete and in
good order condition and covered by Bill of Lading. The shipment had a declared value of US
$169,850.35 and was insured with petitioner against all risks under its marine policy.
The carrying vessel arrived at the port of Manila and when the shipment was discharged
therefrom, it was noted than 7 packages were damaged and in bad order. The shipment was then
turned over to the custody of respondent (as arrastre operator) for storage and safekeeping
pending its withdrawal by the consignee’s authorized customs broker, which was later withdrawn
by the customs broker from custody of the respondent.
An examination report was written and showed that an additional 5 packages were found to
be damaged and in bad order.
Consignee, San Miguel Corporation, filed separate claims against respondent and petitioner
for the damage of 11,200 sheets of electrolytic tin free steel. Petitioner, as insurer of the cargo,
paid the consignee the amount of Php 431,592.14 for the damage caused to the shipment.
Thereafter, petitioner formally demanded reparation against respondent and as respondent failed
to satisfy its demand, petitioner filed an action for damages with the RTC.
The trial court dismissed the complaint because it was already barred by the statute of
limitations. It held that COGSA, embodied in CA 65, applies to this case since the goods were
shipped from a foreign port to the Philippines. Under the said law, particularly paragraph 4, Section
3(6), the shipper has the right to bring a suit within one year after the delivery of the goods or the
date when the goods should have been delivered.
Issue:
Whether or not, the one-year prescriptive period for filing a suit under the COGSA applies to
this action.
Decision:
The COGSA (Public Act No. 521 of the 74th US Congress) was accepted to be made applicable
to all contracts for the carriage of goods by sea to and from the Philippine ports in foreign trade by
virtue of CA 65. The term “carriage of goods” covers the period from the time when the goods are
loaded to the time when they are discharged from the ship; thus, it can be inferred that the period
of time when the goods have been discharged from the ship and given to the custody of the arrastre
operator is not covered by the COGSA.
The prescriptive period for filing an action for the loss or damage of the goods under the
COGSA is found in paragraph 6, Section 3. It states that “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 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 as provided for in this
section, 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.”
However, the COGSA does not mention that an arrastre operator may invoke the
prescriptive period of 1 year; hence, it does not cover the arrastre operator.
Steelcase, Inc., petitioner, v. Design International Selections, Inc., respondent
Facts:
Petitioner Steelcase, Inc. is a foreign corporation existing under the laws of Michigan, USA
and engaged in the manufacture of office furniture with dealers worldwide. Design International
Selections, Inc. (DISI) is a corporation existing under Philippine Laws and engaged in the furniture
business, including the distribution of furniture.
Steelcase and DISI orally entered into a dealership agreement whereby Steelcase granted
DISI the right to market, sell, distribute, install and service its products to end-user customers within
the Philippines. The business relationship continued smoothly until it was terminated after the
agreement was breach in 1999.
Steelcase filed a complaint for sum of money against DISI alleging that DISI had an unpaid
account of US $600 thousand. It also prayed that DISI be ordered to pay actual or compensatory
damages, exemplary damages, attorney’s fees and costs of suit. Meanwhile, DISI alleged that the
complaint failed to state a cause of action and to contain the required allegations on Steelcase’s
capacity to sue in the Philippines despite that Steelcase was doing business in the Philippines
without the required license to do so, and that the complaint should be dismissed because of
Steelcase’s lack of legal capacity to sue in Philippine courts.
The RTC dismissed Steelcase’s complaint. It has likewise concluded that Steelcase was
“doing business” in the Philippines as contemplated by RA 7042 (The Foreign Investments Act of
1991) and since it did not have the license to do business in the country, it was barred from seeking
redress from Philippine courts until it obtained the requisite license to do so. The CA affirmed the
ruling of the RTC.
Steelcase contends that it is DISI is an independent distributor of Steelcase products and not
an agent or conduit of Steelcase. Moreover, DISI is acting as Steelcase’s appointed local distributor,
and is transacting business in its own name and for its own account.
Issue:
Whether or not Steelcase had been “doing business” in the Philippines without a license
Decision:
The phrase “doing business” is clearly defined in Section 3(d) of RA 7042 (Foreign
Investments Act of 1991) which states that “the phrase ‘doing business’ shall include soliciting
orders, service contracts, opening offices, whether called ‘liaison’ offices or branches; appointing
representatives or distributors domiciled in the Philippines… totalling 180 days or more;
participating in the management, supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in the progressive prosecution of,
commercial gain or of the purpose and object of the business organization.” The second sentence
of Section 3(d) states 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… nor appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.”
On such account, the appointment of a distributor in the Philippines is not sufficient to
constitute “doing business” unless it is under the full control of the foreign corporation.
Steelcase, therefore, is foreign corporation not doing business in the Philippines by its act of
appointing a distributor falls under one of the exceptions under RA 7042.
Far East Bank and Trust Company (now Bank of the Philippine Islands), petitioner, v. Tentmakers
Group, Inc., Gregoria Pilares Santos and Rhoel P. Santos, respondents
Facts:
The signatures of respondents, Gregoria Pilares Santos (President) and Rhoel P. Santos
(Treasurer) of Tentmakers Group Inc. (TGI) appeared on 3 promissory notes for loans contracted
with the petitioner.
Petitioner, after a futile demand, filed a complaint before the RTC for the payment of the
principal of the promissory notes which amounted to a total of Php 887,613.37 inclusive of interest,
penalty charges and attorney’s fees.
The RTC rendered a decision in favour of the petitioner. However, this was reversed by the
CA on the ground, among others, that there were no collaterals to ensure the payment of the loans
and, in the conferment of such unsecured loans, the bank manager also failed to comply with the
guidelines set forth under the Manual fo Regulation for Banks when it approved and released the
subject loans to Gregoria and Rhoel.
Petitioner contends that the evidence on record showed its compliance with the banking
rules and regulations through board resolutions issued by TGI fully authorizing Gregoria and Rhoel
to transact business with it.
Issue:
Whether or not petitioner did not comply with the guidelines under the Manual of
Regulation for Banks.
Decision:
Far East Bank and Trust Company failed to show a document evidencing that Gregoria and
Rhoel or TGI received the proceeds of the 3 promissory notes. Moreover, petitioner violated the
rules and regulations of the BSP by its failure to strictly follow the guidelines in the conferment of
unsecured loans set forth under the Manual or Regulations for Banks.
Section X319.1 of the Manual of Regulation for Banks states that “before granting credit
accommodations against personal security, banks must exercise proper caution by ascertaining that
the borrowers, co-makers, endorsers, sureties and/or guarantors possess good credit standing and
are financially capable of fulfilling their commitments to the bank.” To show proof of financial
capacity of borrower, Section X319.2 provides that other than the “personal information sheet
about the borrower, banks shall require that an application for a credit accommodation against
personal security be accompanied by a copy of the latest income tax returns of the borrower and his
co-maker duly stamped as received by the BIR and if the credit accommodation exceeds Php
500,000.00, a copy of the borrower’s balance sheet duly certified by an Independent Certified Public
Accountant and in case he is engaged in business, also a copy of the profit and loss statement duly
certified by a CPA.”
Metropolitan Cebu Water District, petitioner, v. Mactan Rock Industries, Inc., respondent
Facts:
Petitioner Metropolitan Cebu Water District (MCWD) is a government-owned and controlled
corporation created pursuant to PD 198, and is mandated to supply water within its service area.
Respondent Metro Rock Industries, Inc. (MRII) is a domestic corporation.
MCWD entered into a water supply contract with MRII wherein it was agreed that MRII would
supply MCWD with potable water in accordance with WHO standard or the Philippine national
standard, with a minimum guaranteed annual volume.
Six years later, MRII filed a complaint against MCWD with the Construction Industry
Arbitration Commission (CIAC). It sought the reformation of Clause 17 of the water supply contract
(Price Escalation/De-Escalation Clause), payment of the unpaid price escalation/adjustment and the
payment of unpaid variation/extra work order and interest/cost of money up to December 2003.
Issue:
Whether or not the Construction Industry Arbitration Commission has jurisdiction over
disputes arising from a water supply contract.
Decision:
The court finds in the affirmative.
The Construction Industry Arbitration Commission was created under EO 1008 (Creating an
Arbitration Machinery for the Philippine Construction Industry), in recognition of the need to
establish an arbitral machinery that would expeditiously settle construction industry disputes.
Under Section 4 of EO 1008, “CIAC shall have original and exclusive jurisdiction over disputes arising
from, or connected with, contracts entered into by parties involved in construction in the
Philippines, whether the disputes arise before or after the completion of the contract, or after the
abandonment or breach thereof… Excluded from the coverage of this law are disputes arising from
employer-employee relationships which shall continue to be covered by the Labor Code of the
Philippines.”
The text of Section 4 of EO 1008 is broad enough to cover any dispute arising from, or
connected with, construction contracts, whether these involve mere contractual money claims or
execution of the works. Unless specifically excluded, all incidents and matters relating to
construction contracts are deemed to be within the jurisdiction of the CIAC.
Moreover, the parties characterized the water supply contract as one involving construction,
as its arbitration clause specifically refers disputes, controversies or claims arising out of or relating
to the Contract or the breach, termination or validity thereof.
Ace Navigation Co. Inc., petitioner v. FGU Insurance Corporation and Pioneer Insurance and
Surety Corporation, respondents
Facts:
Cardia Limited shipped on board the vessel M/V Pakarti Tiga at Shanghai Port, China, 8260
metric tons (or 165,200 bags) of Grey Portland Cement to be discharged at the Port of Manila and
delivered to its consignee, Heindrich Trading Corp. The subject shipment was insured with
respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. against all risks for the
amount of Php 18,048,421.00. Regency Express Lines S.A., chartered by Sky International, Inc.
having entered into a contract with Shinwa Kaiun Kaisha Ltd. to which the subject vessel was
chartered by the owner Pakarti Tata, was the one which directy dealt with Heindrich and
accordingly issued Clean Bill of Lading No. SM-1.
The vessel arrived at the Port of Manila and the shipment was discharged. Upon inspection
by Heindrich and Ace Navigation Co. Inc, agent of Cardia Limited, it was found that out of the
165,200 bags of cement, 43,905 bags were in bad order and condition. The respondents, unable to
collect the sustained damages from Cardia Limited and Regency Express Lines S.A., each paid
Heindrich separately totalling to Php 711,727.34 and became subrated to all the rights and causes
of action accruing to Heindrich.
Respondents filed a complaint for damages. Ace Navigation Co. Inc. claimed it was not a real
party-in-interest from whom the respondents can demand compensation. The respondents
maintain that Ace Navigation Co. Inc is a ship agent and not a mere agent of Cardia, as found by
both the CA and the RTC.
Issue:
Whether or not Ace Navigation Co. Inc. be held liable for damages sought by FGU Insurance
Corporation and Pioneer Insurance and Surety Corporation.
Decision:
Article 586 of the Code of Commerce provides that “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,
equip and provision the vessel, provided the creditor proves the amount claimed was invested
therein. By ship agent is understood the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she may be found.”
Due to the above provision, the Court disagreed with respondents’ contention. Thus, Ace
Navigation Co. Inc. cannot be held liable for damages sought by the respondents.
Asiatrust Development Bank, petitioner v. Carmelo H. Tuble, respondent
Facts:
Carmelo Tube, who served as the vice-president of Asiatrust Development Bank, availed
himself of the car incentive plan and loan privileges offered by the bank. He was also entitled to the
bank’s Senior Managers Deferred Incentive Plan (DIP). He acquired a Nissan Vanette through the
company’s incentive plan. The arrangement was made to appear as a lease agreement requiring
only the payment of monthly rentals. Accordingly, the lease would be terminated in case of
employee’s resignation or retirement prior to full payment of the price. Meanwhile, as for the
loans, he obtained 3 separate loans.
When he resigned, he was given the option to either return the vehicle without any further
obligation or retain the unit and pay its remaining book value. His obligations, aside from the
purchase or return of the vehicle, are the Php 100,000.00 as consumption loan, Php 421,800.00 as
real estate loan and Php 16,250 as salary loan. On the other hand, the petitioner owed Tuble his
pro-rata share in the DIP, which was to be issued after the bank had given the resigned employee’s
clearance, and Php 25,797.35 representing his final salary and corresponding 13th month pay.
Tuble claimed that since he and the bank were debtors and creditors of each other, the
offsetting of loans could legally take place. However, the bank sent him a demand letter obliging
him to pay his debts and to return the vehicle. As for the real estate loan, a petition for extra-
judicial foreclosure was filed but was redeemed by Tuble for Php 1,318,401.91. After payment of
such amount, Tuble questioned how the foreclosure basis of Php 421,800.00 ballooned to Php
1,318,401.91 in a matter of 1 year. The petitioner contends that the redemption price included the
18% annual interest.
Issue:
Whether or not the 18% annual interest on the bid price was proper.
Decision:
Stated in the General Banking Law, in the event of judicial or extrajudicial foreclosure of any
mortgage on real estate that is used as security for an obligation to any bank, banking institutions or
credit institutions, the mortgagor can redeem the property by paying the amount fixed by the court
in the order of execution, with interest at the rate specified in the mortgage.
Park Hotel, J’s Playhouse Burgos Corp., Inc., and/or Gregg Harbutt, General Manager, Atty.
Roberto Enriquez, President, and Bill Percy, petitioners v. Manolo Soriano, Lester Gonzales, and
Yolanda Badilla, respondents
Facts:
Petitioner Park Hotel is a corporation engaged in the hotel business with Gregg Harbutt and
Bill Percy as General Manager and owner, respectively. Together with Atty. Roberto Enriquez, the
three are also officers and stockholders of Burgos Corporation, a sister company of Park Hotel.
Manolo Soriano was hired by Park Hotel as Maintenance Electrician and then transferred to Burgos
two years later. Lester Gonzales was employed by Burgos as doorman and later promoted as
supervisor. Yolanda Badilla was a bartender of J’s Playhouse operated by Burgos.
The respondents were dismissed from work for allegedly stealing company properties. As
such, they filed complaints before the Labor Arbiter. The petitioners alleged that aside from the
charge of theft, Soriano and Gonzales have violated various company rules and regulations
contained in several memoranda issued to them. The Labor Arbiter ruled in favor of the
respondents, affirmed by the NLRC after appeal by petitioners. The CA, when the matter was
elevated to them, also ruled that petitioners failed to observe the mandatory requirements
provided by law in the conduct of termination respondents.
Issue:
Whether or not Park Hotel be held solidarily liable with Burgos, Percy and Harbutt.
Decision:
The Court rules that before a corporation can be held accountable for the corporate
liabilities of another, the veil of corporate fiction must first be pierced. A corporation is an artificial
being invested by law with a personality separate and distinct from that of its stockholders and from
that of other corporations to which it may be connected. To disregard the separate juridical
personality of a corporation, the wrongdoing must be established clearly and convincingly and
cannot be presumed.
Respondents utterly failed to prove by competent evidence that Park Hotel was a mere
instrumentality, agency, conduit or adjunct of Burgos, or that its separate corporate veil had been
used to cover any fraud or illegality committed by Burgos against the respondents. Accordingly,
Park Hotel and Burgos cannot be considered as one and the same entity and Park Hotel cannot be
held solidary liable with Burgos.
However, corporate officers may be deemed solidarily liable with the corporation for the
termination of employees if they acted with malice or bad faith. Section 31 of the Corporation Code
makes a director personally liable if he is guilty, among others, of gross negligence or bad faith in
directing the affairs of the corporation. Thus, Percy and Harbutt, having acted in bad faith in
directing the affairs of Burgos, are jointly and severally liable for respondents’ dismissal.
Bank of Commerce, petitioner v. Planters Development Bank and Bangko Sentral ng Pilipinas,
respondents/Bangko Sentral ng Pilipinas, petitioner v. Planters Development Bank, respondent
Facts:
For the 1st set of CB bills, Rizal Commercial Banking Corporation (RCBC) was the registered
owner of 7 Central Bank (CB) bills with a total face value of Php 70 million, which were eventually
sold to Bank of Commerce (BOC), which, in turn, sold these CB bills to Planters Development Bank
(PDB) as evidenced by a “Detached Assignment.” A week later, PDB sold to the BOC Treasury Bills
worth Php 70 million as evidenced by a Trading Order and Confirmation of Sale.
For the 2nd set of CB bills, RCBC sold 2 CB bills with a total face value of Php 20 million to the
PDB and delivered to PDB the corresponding Detached Assignment. PDB delivered to Bancap the 2
CB bills which in turn sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines,
which also sold it to the BOC.
Upon learning of the transfers involving the CB Bills, the PDB informed the officer-in-charge
of the BSP’s Government Securities Deparment of the PDB’s claim over these CB bills, based on the
Detached Assignments in its possession. The requests of PDB were denied by the officer-in-charge
which prompted the petitioner to file an action so as to compel the BSP to determine the party
legally entitled to the proceeds of the subject CB bills.
Issue:
Whether or not the Bangko Sentral ng Pilipinas has jurisdiction in determining the party
legally entitled to the proceeds of the CB bills.
Decision:
Under the New Central Bank Act (RA 7653), the BSP is given the responsibility of providing
policy directions in the areas of money, banking and credit; it is given the primary objective of
maintaining price stability, conducive to a balanced and sustainable growth of the economy and of
promoting and maintaining monetary stability and convertibility of the peso. Moreover, the
Constitution expressly grants the BSP the power of supervision over the operation of banks.
While RA 7653 empowers the BSP to conduct administrative hearings and render judgment
for or against an entity under its supervisory and regulatory powers, the grant of quasi-judicial
authority to the BSP cannot possibly extend to situation which do not call for the exercise by the
BSP of its supervisory or regulatory functions over entities within its jurisdiction.
The fact alone that the parties involved are banking institutions does not necessarily call for
the exercise by the BSP of its quasi-judicial powers under the law.
Great White Shark Enterprises, Inc, petitioner, v. Danilo M. Caralde, Jr., respondent
Facts:
Caralde field before the Bureau of Legal Affairs (BLA) of the IPO a trademark application
seeking to register the mark “SHARK & LOGO” for his manufactured goods under Class 25, such as
slippers, shoes and sandals. Petitioner Great White Shark Enterprises, Inc. opposed the application
claiming to be the owner of the mark consisting of a representation of a shark in color known as
“Greg Norman Logo.”
Great White Shark’s trademark application was granted and it was issued Certificate of
Registration for clothing, headgear and footwear. The BLA rejected Caralde’s application, which was
later affirmed by the IPO Director General.
On petition for review however, the CA reversed and set aside the decision of the IPO and
directed it to grant Caralde’s application for registration of the mark “SHARK & LOGO.”
Issue:
Whether or not Caralde be held liable for trademark infringement.
Decision:
Section 123.1(d) of the Intellectual Property Code provides that a mark cannot be registered
if it is identical with a registered mark belonging to a different proprietor with an earlier filing or
priority date, with respect to the same or closely related goods or services or has a near
resemblance to such mark as to likely deceive or cause confusion.
The Court finds no confusing similarity between the subject marks.
Express Investments III Private Ltd. and Export Development Canada, petitioner, v. Dayan
Telecommunications, Inc., et.al, respondents/In Re: Corporate Rehabilitation of Dayan
Telecommunications pursuant to the Interim Rules of Procedure on Corporate
Rehabilitation,et.al, petitioners, v. Dayan Telecommunications, respondent/In Re:Corporate
Rehabilitation of Bayan Telecommunciations, Inc. pursuant to the Interim Rules of Procedure on
Corporate Rehabilitation, et.al, petitioners, v. Dayan Telecommunications, Inc., respondents/The
Bank of New York, petitioner, v. Bayan Telecommunications, Inc., respondent
Facts:
Bayantel is a duly organized domestic corporation engaged in the business of providing
telecommunication services. On various dates, it entered into several credit agreements.
Foreseeing the impossibility of further meeting its obligations, Bayantel sent a proposal for the
restructuring of its debts to the bank creditors and holders of notes. To facilitate the negotiations
between Bayantel and its creditors, an informal steering committee was formed.
The rehabilitation court held the creditors of Bayantel, whether secured or unsecured,
should be treated equally and on the same footing.
Issue:
Whether or not the Rehabilitation Court has jurisdiction over the case at bar.
Decision:
RA 8799 (Securities Exchange Code) transferred to the RTCs the jurisdiction of the SEC over
petitions of corporations, partnerships or associations to be declared in the state of suspension of
payments in cases where the corporation, partnership or association possesses property to cover all
its debts but foresees the impossibility of meeting them when they respectively fall due or in cases
where it has no sufficient assets to cover its liabilities, but is under the management of a
rehabilitation receiver or a management committee.