Wednesday, December 13, 2006

Amending The Constitution


1.Proposal may be made by:

a.Congress acting as Constituent Assembly – vote of ¾ of all its members.

b.Constitutional Convention – called either by 2/3 vote of all the members of the Congress or by a majority vote of all the members of Congress, with the question of whether or not to call a constitutional convention to be resolved by the people in a plebiscite.

c.People’s Initiative – by a petition of at least 12% of the total number of registered voters, of which every legislative district must be represented by at least 3% of the registered voters therein.

No amendment in this manner shall be authorized within 5 years following the ratification of this Constitution (1987) nor more often than once every 5 years;

RA 6753 (System of Initiative and Referendum) does NOT authorize a system of initiative to amend the Constitution (see Santiago v. Comelec). The law was deemed sufficient only to cover the systems of initiative on national and local legislations because Sec 2 on the Statement of Policies of the Act does not suggest an initiative on the amendment to the Constitution. Sec 5 of the Act does not provide for the contents of the provision for initiative on the Constitution. Further, the Act does not provide a sub-title for initiative on the Constitution simply means that the main thrust of the Act is initiative and referendum on National and Local Laws.

2. Ratification

 Proposed amendments shall be submitted to the people and shall be deemed ratified by majority of the votes cast in a plebiscite, held not earlier than 60 days nor later than 90 days, after approval of the proposal by Congress or ConCon, or after certification by the COMELEC of sufficiency of petition of the people.

“Doctrine of Proper Submission” – plebiscite may be held on the same day as regular election (Gonzales vs Comelec) provided the people are sufficiently informed of the amendments to be voted upon, to conscientiously deliberate thereon, to express their will in a genuine manner. Submission of piece-meal amendments is unconstitutional. All the amendments must be submitted for ratification at one plebiscite only. The people have to be given a proper frame of reference in arriving at their decision. They have no idea yet of what the rest of the amended constitution would be (Tolentino vs Comelec).

In the recent case of Lambino vs COMELEC, the Supreme Court denied the petition of the Lambino Group to reverse COMELEC’s decision in not giving due course to People’s Initiative citing not only the previous Santiago vs COMELEC Ruling but also the fact that the petition itself was not attached to the sheets supposedly signed by the voters. Thus, there is doubt whether these voters actually know and understand what they are proposing.

Recently, the allies of Pres. GMA in Congress has formed a Senateless Constituent Assembly but such move were opposed by majority of the civil society as well as the Church and various Religious Sects like El Shaddai and Iglesia ni Cristo. The Con-Ass were supposed to convene on Friday but the latest I heard was because of the social and political unrest that it may bring, the Administration is now considering the formation of a Constitutional Convention.

If that happens, GMA will go down in history as the president who used all modes of proposals just to amend/revise the 1987 Constitution.

Fantasy World, Tagaytay

Time for some R & R with friends, so we troop up to Tagaytay Highlands to visit Fantasy World.
The Castle

Its cool up here.

Negotiating the hanging bridge that connects the two towers.

Enter the dragon.

View from the outside!!!

Ur blogger!!!

Sunday, December 10, 2006


For the crime of plunder to be committed, the accused public officer must have amassed ill-gotten wealth of not less than 50 million pesos. If the public officer therefore after having amassed 49 million and so many hundreds already stop, this crime cannot be incurred.

The second requisite: The amount must be incurred by at least 2 acts covered by different paragraphs under Section 1(d) of the law. At least 2 of the said paragraphs must be violated. This was the interpretation made by the SC because the law provides for a combination or series of overt or criminal acts. So since the law used the word ‘combination’, 2 at least is required. So if the P50 million was accumulated by one act of receiving kickback, that cannot give rise to the crime of plunder. There must be another commission of subsection d Section 1 - the second one, that is already obtaining or accumulating ill gotten wealth. But if the ill-gotten wealth was accumulated through a series of acts, the series of acts maybe under the same enumeration. If there are only 2, it must be fall under different paragraphs or enumeration in that subsection d.

So if the same act was committed twice, that cannot bring about the crime of plunder - Important word ‘COMBINATION’.

Another important aspect of this crime: The violation is held to be a malum in se. That means the criminal intent must be established in accumulating the ill-gotten wealth of at least 50 million pesos for it to be punished.

Wednesday, November 15, 2006

Maxim Cover

This week is crazy, this blog has never had so many hits. In my pre-Aubrey posts (topics about laws and stuff), my average hits were in 20s but eversince this Aubrey-Jacq posts and pics, my hits averaged nearly 100s with highs of 250s. Amazing. I guess it only proved the old age adage that sexy girls sell. (Things you'll do just to pass the time waiting for the BAR results). ;-)

Monday, November 06, 2006

Series Of Birthdays

The months of "BER" does not only mean that Christmas is in the air but it usually starts a series of Birthdays in the Family. It starts with my Birthday on 8th of September and followed by these persons who are dear to me and my family:
My sister She-she on September 26,
My everdearest mom on October 11,
My sister-in-law Cecille on October 25,
My oldest brother Kuya Ednor on October 29,
My niece Elise on November 10, and
My nephew Rodne on November 17.
The last four has been in Chicago for five years now so we have not celebrated each birthdays together.
Of course, the Birthday List will not be complete unless we celebrate the Birth of Jesus Christ who is a member of each of our family. Happy Birthday and Merry Christmas to All Of You.

Wednesday, November 01, 2006

ARIS INC. vs. NLRC - Digest

G.R. No. 90501 August 5, 1991


On 11 April 1988, private respondents, who were employees of petitioner, aggrieved by management's failure to attend to their complaints concerning their working surroundings which had become detrimental and hazardous, requested for a grievance conference. As none was arranged, and believing that their appeal would be fruitless, they grouped together after the end of their work that day with other employees and marched directly to the management's office to protest its long silence and inaction on their complaints.

On 12 April 1988, the management issued a memorandum to each of the private respondents, who were identified by the petitioner's supervisors as the most active participants in the "rally", requiring them to explain why they should not be terminated from the service for their conduct. Despite their explanation, private respondents were dismissed for violation of company rules and regulations, more specifically of the provisions on security and public order and on inciting or participating in illegal strikes or concerted actions.

Private respondents lost no time in filing a complaint for illegal dismissal against petitioner and Mr. Gavino Bayan with the regional office of the NLRC at the National Capital Region, Manila. After due trial the labor arbiter ordered Aris (Phils.), Inc. to reinstate Leodegario de Guzman and company to their former respective positions or any substantial equivalent positions if already filled up, without loss of seniority right and privileges.

On 19 July 1989, de Guzman and company filed a Motion For Issuance of a Writ of Execution pursuant to Section 12 of R.A. No. 6715 which provides that “In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, in so far as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided therein."

On 21 July 1989, petitioner filed its Appeal. On 26 July 1989, the complainants, except Flor Rayos del Sol, filed a Partial Appeal. On 10 August 1989, complainant Flor Rayos del Sol filed a Partial Appeal. On 29 August 1989, petitioner filed an Opposition to the motion for execution alleging that Section 12 of R.A. No. 6715 on execution pending appeal cannot be applied retroactively to cases pending at the time of its effectivity. Petitioner submitted a Rejoinder to the Reply on 5 September 1989. On 5 October 1989, the Labor Arbiter issued an Order granting the motion for execution and the issuance of a partial writ of execution "as far as reinstatement of herein complainants is concerned in consonance with the provision of Section 2 of the rules particularly the last sentence thereof."

Unable to accept the above Order, petitioner filed the instant petition on October 1989.


The main issue in this case is whether the NLRC gravely abused its discretion amounting to lack of jurisdiction when it relied on the constitutionality of the amendment introduced by Section 12 of Republic Act No. 6715 to Article 223 of the Labor Code of the Philippines (PD. No. 442, as amended) and allowing execution pending appeal of the reinstatement aspect of a decision of a labor arbiter reinstating a dismissed or separated employee and of Section 2 of the NLRC Interim Rules on Appeals under R.A. No. 6715 implementing the same. It also questions the validity of the Transitory Provision (Section 17) of the said Interim Rules.


The Supreme Court ruled in favor of the NLRC and dismissed the petition for lack of merit. The SC held that execution pending appeal is interlinked with the right to appeal. One cannot be divorced from the other. The latter may be availed of by the losing party or a party who is not satisfied with a judgment, while the former may be applied for by the prevailing party during the pendency of the appeal. The right to appeal, however, is not a constitutional, natural or inherent right. It is a statutory privilege of statutory origin and, therefore, available only if granted or provided by statute. The law may then validly provide limitations or qualifications thereto or relief to the prevailing party in the event an appeal is interposed by the losing party. Execution pending appeal is one such relief long recognized in this jurisdiction. The Revised Rules of Court allows execution pending appeal and the grant thereof is left to the discretion of the court upon good reasons to be stated in a special order.
Before its amendment by Section 12 of R.A. No. 6716, Article 223 of the Labor Code already allowed execution of decisions of the NLRC pending their appeal to the Secretary of Labor and Employment. These provisions are the quintessence of the aspirations of the workingman for recognition of his role in the social and economic life of the nation, for the protection of his rights, and the promotion of his welfare. The charge then that the challenged law as well as the implementing rule is unconstitutional is absolutely baseless. Laws are presumed constitutional.

Friday, October 20, 2006

Araullo University

This is the facade of the school where I took up my Bachelor's Degree in Accountancy and subsequently my Bachelor's in Liberal Law.
I love this school. This school gave me so much honors. The school paraded and honored me when I passed the CPA Board Exam. Then, the school gave me recognition by awarding me as their most outstanding alumnus in 2005 for the College of Commerce. That is why to reciprocate from what they have done to me, I try to exemplify and be a role model of the graduates of this University.

Wednesday, October 18, 2006

Cabanatuan City

Two of my friends from Recoletos Review School went to Cabanatuan City to attend a birthday party. They asked me to tour them around the City. But since they only had limited time coz they are going back to Manila the same day, I could only present only a small portion of what the City could offer.

Sunday, October 15, 2006

Courtroom Jokes

These are from a book called Disorder in the American Courts and are things people actually said in court, word for word, taken down and now published by court reporters that had the torment of staying calm while these exchanges were actually taking place. Ang kulet!

Q: Are you sexually active?
A: No, I just lie there.

Wednesday, October 11, 2006

Monday, October 09, 2006

Mahirap Ba?

Naykupo!!! It's my first day back on the job and everyone is already calling me attorney. Sabi ni Jamilton pag may tumawag daw ng ganon sayo dapat i-ow mo na yung title as if nakapasa ka na sa bar. So, with that it mind, whenever they call me attorney, I just smile at them and says "Sana magdilang anghel kayo". But nevertheless, parang lalo yata akong kinakabahan 'coz buong tao yata sa City Hall eh alam na kumuha ko ng exam. Sus.
Then, they would ask me "Mahirap ba ang bar?". My response would be, "Yes, it is difficult and I will never take the BAR again.
Looking back, the six-month review-examination period has been one of the hardest six-months of my life. Eventhough I graduated at the top of my class, there are still some lessons and laws that were new to me come review time. In fact, during the examination period, there are questions that I haven't got any idea on how to answer like a question in Political Law that asked "Who is the President of ICJ and what is his nationality?" or a question in Taxation that asked "What is Tax Pyramiding and what is its constitutional basis?". Moreover, if not for the examination in Criminal Law, I would have smiled more. Grabe. But nevertheless, I think I have given the BAR exam everything that I got. I just hope and pray and pray and pray that come March or April, my name is one of those included in the passers' list. Wish me luck and pray with me.

Thursday, October 05, 2006

A Well Deserved Rest

I have been sleeping for ten days now. Whew. Taking the BAR has taken a lot of me - emotionally, physically and mentally. It was definitely one of the toughest six months of my life. Now the waiting game has begun. Six more months. With GOD's help and prayers and wishes from u guys, I know and I feel that those six agonizing months will be time worthly spent.
I will be back to work on Monday, and of course, I will be blogging again by then.

Saturday, September 02, 2006

Bar Exam Na Tomorrow!!!

This Is The Moment!!

This is the moment, this is the day
When I send all my doubts and demons on their way
Every endeavor I have made ever
Is comin’ into play, is here and now today

This is the moment, this is the time
When the momentum and the moment are in rhyme
Give me this moment, this precious chance
I’ll gather up my past and make some sense at last

This is the moment when all I’ve done
When all the dreamin’, schemin’ and screaming become one
This is the day, see it sparkle and shine
When all I’ve lived for becomes mine

For all these years, I’ve faced the world alone
And now that the time has come to prove to them I’ve made it on my own

This is the moment, my final test
Destiny beckoned, I never reckoned second best
I won’t look down, I must not fall
This is the moment, the sweetest moment of them all

This is the moment, damn all the odds
This day or never, I’ll sit forever with the gods
When I look back, I will always recall
Moment for moment,
.........this was the moment,
..................the greatest moment of them all.

Gee!, this song keeps playing on my head all week.
Bar exams starts tomorrow. Good Luck to everyone who will take the 2006 BAR. To my classmates in Araullo and my co-reviewee in Recoletos, GOOOOOOOD LUCKKKKKK! To well wishers, thank you all very much.

And to Almighty God The Father,,, YOU said ask and we will receive... seek and we will find... and knock and doors will be opened. I am now praying in behalf of all my classmates and friends that You be the One to guide us tomorrow and the next examination days. Give us wisdom, understanding, clarity of mind and strength to overcome this. We rest into Your goodness and will for us to succeed and may you grant all the prayers of our heart.

Saturday, July 29, 2006

A Lawyer Got It Back

I heard a lot of "lawyer jokes", and this is one of my favorites.

Why Lawyers should never ask a witness a question if they aren't prepared for the worst answer.

In a trial, a Southern small town prosecuting attorney called his first witness to the stand. The witness was a grandmotherly, elderly woman. He approached her and asked, "Mrs. Jones, do you know me?"

She responded, "Why, yes I do know you, Mr. Williams. I've know you since you were a young boy,and frankly, you've been a big disappointment to me. You lie, you cheat on your wife, you manipulate people and talk about them behind their backs. You think you're a big shot when you haven't the brains to realize you never will amount to anything more than a two-bit paper pusher. Yes, I know you."

The Lawyer was stunned. Not knowing what else to do, he pointed across the room and asked, "Mrs. Jones, do you know the defense attorney?"

She again replied, "Why yes, I do. I've known Mr. Bradley since he was a youngster, too. He's lazy, bigoted and he has a drinking problem. He can't build a normal relationship with anyone and his law practice is one of the worst in the entire state. Not to mention he cheated on his wife with three different women, one of them was your wife. Yes, I know him."

The defense attorney almost died.

The judge asked both counselors to approach the Bench, and in a very quiet voice, said, "If either of you bastards asks her if she knows me, I'll throw you in jail for contempt."

Saturday, July 08, 2006

58 Days To Go!!!

I really haven't got the time surf or post lately. Well, its understandable coz its barely two months to go before the BAR.

We've just finished Civil Law in Recoletos. Its unfortunate that Justice Vitug was in Spain so the lecture that he was supposed to conduct was cancelled. Hmmm. Rumour has it that he will be one of the examiners. Let's just hope not coz a genius/expert examiner will surely give us a hard time in the BAR.

We are now in our fourth BAR subject TAXATION. Justice Dimaampao has just delivered his lectures in INCOME TAXATION. Presently, Professor Sababan is lecturing in Transfer Taxes. Gosh, Sababan swears a lot. He however gives good jokes. Sample: Bakit daw maraming nagpapakasal pag June? Kasi daw yun ang buwan ng pasukan.

Gotta go back reading.

How time flies........

Tuesday, June 13, 2006

Just A Quick Visit

Its been a really hectic and a very busy reading week. We've just finished Remedial Law and we are now in Civil Code. Our first lecturer was Justice Sempio-Diy, an authority in Family Code. She seems to be a fun person and magaling sya.

Monday, May 22, 2006

Remedial Law Coverage

Remedial Law Exam shall be held on the 4th (last) sunday, September 24, 2006.

The examination covers decisions of the Supreme Court, promugalted up to June 30, 2005, and Republic Acts, Presidential Decrees and Executive Orders, promulgated up to December 31, 2004.

The exam covers:

1. The Rules of Court, as amended
(a) 1997 Rules of Civil Procedure
(b) Revised Rules of Crimnal Procedure (effective December 1, 2000)
(c) Rules on Evidence
(d) Rules on Special Proceedings

2. The 1991 Revised Rules on Summary Procedures

3. Local Government Code on Conciliation Procedures (Book III, Title I, Chapter 7)

4. The Judiciary Reorganization Act of 1980 (BP Blg 129), as amended by RA No 7691 and the rules issued thereunder (emphasis on jurisdiction excluding purely administrative provisions)

5. Judiciary Act of 1948
(a) PD No 946 (Reorganizing the CAR)
(b) Military Justice

6. Jurisdiction of Sandiganbayan
(a) RA No. 7975
(b) RA No. 8249

Wednesday, May 17, 2006

Intellectual Property Law

Samson vs Daway
(GR No 160054-55, July 21, 2004)

The petitioner allegedly sold or offers the sale of garment product using the trademark “Caterpillar” to the prejudice of its previous user, private respondent in this case. The respondent filed the case to the RTC. The petitioner contended that the case should be filed with the MTC because violation of unfair competition is penalized with an imprisonment not exceeding 6 years under RA 7691.

Where do you file a suit for unfair competition?

The SC held that under Sec 163 of the IPC, actions for unfair competition shall be brought before the proper courts with appropriate jurisdiction under existing laws. The law contemplated in Sec 163 of IPC is the Trademark Law. Sec 27 of Trademark Law states that action for unfair competition shall be filed with the CFI (now RTC). Since RA 7691 is a general law and IPC in relation to Trademark law is a special law, the latter shall prevail. Actions for unfair competition therefore should be filed with the RTC.

Mighty Corporation vs ENJ Gallo Winers
(GR No 154342, July 14, 2004, Corona)

Respondent manufacture wines and uses the trademark “Gallo” for its product. On the other hand, the petitioner is a manufacturer of cigarette and also uses “Gallo” in its products.

Is there infringement?

At the time the cause of action accrued in this case, the IPC was not yet enacted so the relevant laws used were the Trademark Law and the Paris Convention.
The SC held that there was no infringement. The use of the respondent of the mark “Gallo” for its wine products was exclusive in nature. The court mentioned two types of confusion in Trademark Infringement:

Confusion of Goods – when an otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing another, in which case defendant’s goods are then brought as the plaintiff’s and its poor quality reflects badly on the plaintiff’s reputation.
Confusion of Business – wherein the goods of the parties are different but the defendant’s product can reasonably (though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that there is some connection between the plaintiff and defendant which, in fact, does not exist.

In determining the likelihood of confusion, the Court must consider:
(a) the resemblance between the trademarks;
(b) the similarity of the goods to which the trademark is attached;
(c) the likely effect on the purchaser; and
(d) the registrant’s express or implied consent and other fair and equitable considerations.

In this case, the SC employing the dominancy test, concluded that there is no likelihood of confusion. They materially differ in color scheme, art works and markings. Further, the two goods are not closely related because he products belong to different classifications, form, composition and they have different intended markets or consumers.

Mc Donalds Corp vs LC Big Mak Burger Inc.
(GR No 143993, Aug 18, 2004)

The SC held that the respondent is liable for infringement because it violated Sec 155.1 of the IPC which stated that any person who shall, without the consent of the owner of the registered mark use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.

1) Dominancy Test – consists in seeking out the main, essential or dominant features of a mark.
2) Holistic Test – takes stock of the other features of a mark, taking into consideration the entirety of the marks.

1) Cause of action: in infringement, the cause of action is the unauthorized use of a registered trademark; in unfair competition, it is the passing off of one’s goods as those of another merchant.
2) Fraudulent intent is not necessary in infringement, but necessary in UC.
3) Registration of trademarks: in infringement, it is a pre-requisite; in UC, it is not required.
4) Class of goods involved: in infringement, the goods must be of similar class; in UC, the goods need not be of the same class.

v infringement is a form of unfair competition

a) Sue for damages (Sec. 156.1);
b) Have the infringing goods impounded (Sec. 156.2);
c) Ask for double damages (Sec. 156.3)
d) Ask for injunction (156.4)
e) Have the infringing goods disposed of outside the channels of commerce (Sec. 157.1)
f) Have the infringing goods destroyed (Sec. 157.1)
g) File criminal action (Sec. 170);
h) Administrative Sanctions

Smithklein Beckman vs CA
(Aug 14, 2003)

Petitioner in this case filed an application for a patent of a drug used to kill parasites in animals. Tyco Pharma opposed the application for patent contending that the product of the petitioner proposed to be patented is substantially the same as their product. The only difference is the use of one ingredient. Tyco then contended that there is infringement of patent due to violation of doctrine of equivalents.

Is there infringement?

The SC in defining the “Doctrine of Equivalents” stated that infringement also takes place when a particular devise appropriates a prior invention by incorporating its innovative concept and although with some modification and changes performs substantially the same function in substantially the same way to achieve substantially the same result.

The SC held that this doctrine does not apply in the instant case because Tyco Pharma failed to substantiate its claim that the two products works the same way in fighting parasites in animals. Therefore, there was no infringement.

Negotiable Instrument Law - New Cases

Spouses Eduardo and Epifania Evangelista vs Mercator Financing Co.(GR No 148864, Aug 21, 2003, Puno)

The promissory not in question is worded as follows:

“For value received, I/we jointly and severally promise to pay to the order of Mercator Financing Company ……..”

Are the spouses jointly and severally liable?

The SC held that under Section 17 (g) of the NIL and Article 1216 of the Civil Code, where the promissory note was executed jointly and severally by two or more persons, the payee of the promissory note had the right to hold any one of the two (2) signers of the promissory note responsible for the payment of the whole amount of the note.

Garcia vs Llamas
(Dec 8, 2003, Panganiban)

The accommodation party is liable on the instrument to a holder for value notwithstanding that such holder at the time of taking the instrument knew him to be only an accommodation party. It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument. He is liable to a holder for value by virtue of his being an accommodation party.

An accommodation party to a negotiable instrument, inspite of the lack of consideration between him and the accommodated party, is liable to any other holder NOT to the accommodated party.

The relationship between an accommodation party and the party accommodated is that of a surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissory and debtor from the beginning. The liability is immediate and direct.

Samsung Construction Company Phils., Inc vs FEBTC
(GR No 129015, Aug 13, 2004, Tinga)

Petitioner maintains a current account with the respondent bank. The petitioner authorized Jong to sign checks in behalf of the company. The checks are in the custody of an accountant Kyu. On one occasion, a certain Gonzaga presented a check to FEBTC purportedly drawn by the Company in the amount of P999,500. The check was payable to cash and appeared to be signed by Jong. FEBTC upon ascertaining that there are sufficient fund to cover the check and finding the signature of Jong appears to be genuine paid Gonzaga. Later, the forgery was discovered. Samsung demanded that the amount paid to Gonzaga be credited back to its account because they have not authorized the encashment of the check. On the other hand, the respondent bank claimed negligence on the part of the petitioner in protecting its check.

Who should bear the loss?

The SC held that the FEBTC should bear the loss. Under Sec. 62 of NIL, among the warranties to be assumed by the acceptor is it admits the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument. It is incumbent upon the drawee bank to ascertain the genuineness of the signature of its depositor. The respondent bank in this case did not exercise the degree of diligence required to enable it to detect the forgery.

***Aside from the warranties as an indorser, the collecting bank is made liable because it is privy to the depositor who negotiated the check because it knows him, his address and history for being a client thereof. Thus, it is in a better position to detect forgery or irregularity in the indorsement. (Associated bank v. CA, 252 SCRA 620). aka “Doctrine of Comparative Negligence”

Ilusorio vs CA
(GR No 139130, Nov 27, 2004)

The petitioner maintains a current account with Manila Banking Corp. He entrusts his checkbook and credit cards to his secretary. During the period 1980-81. His secretary was able to encash a total of 17 checks drawn against Manila Banking Corp. Ilusorio discovered these checks upon examination of his bank statements forwarded by the bank. And upon investigation, it was found out that his signatures was forged by his secretary on those 17 checks. Ilusorio demanded the return of amount by the drawee bank. The drawee bank contended negligence on the part of the petitioner.

Who should suffer the loss?

The SC held that Ilusorio was negligent. While it may be true that the signature of Ilusorio was forged by his secretary and that he did not authorized the encashment of these checks (claiming real defense of forgery on his part), Ilusorio’s previous conduct effectively precluded him from claiming forgery as a defense. The mere fact that these checks have been encashed for a period of almost two years, the petitioner should have detected the forgery. Further, the unusual degree of trust which he had accorded his secretary, such as unrestricted access to his credit cards an checkbooks amounts to negligence on his part and the proximate loss of his funds is attributable to this unusual degree of trust and confidence which he reposed to his secretary.

General Rule – drawee bank bears the loss because of Sec 62 of NIL.
Exception – Ilusorio case (negligence on the part of the drawer)

1. How about if it is the signature of the endorser which is forged? Is the drawee bank still liable?
2. How about if the drawee bank has already paid the holder when it discovered the forged endorsement of the payee? Who bears the loss?

No. The drawee bank should not be made liable. The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements.
As between the drawer and the drawee bank, the drawee bank should bear the loss. The drawee bank shall have recourse against the collecting bank because such collecting bank guarantees that all prior endorsements are genuine. The collecting bank then can go against the forger.

In cases involving a forged check, where the drawer’s is forged, drawer can recover from the drawee bank. No drawee bank has a right to pay a forged check. If it does, it shall have to recredit the amount of check to the account of the drawer. The liability chain ends with drawee bank whose responsibility it is to know the drawer’s signature since the latter is its customer. (Associated Bank vs CA, 252 SCRA 620).
The endorser is liable on the instrument although the signature of the payee is forged because the endorser by his endorsement guaranteed that the instrument is genuine, therefore, impliedly, that the instrument is valid, otherwise, there would be nothing for the endorser to guarantee. (Republic vs Ebrada 65 SCRA 680).

Letters of Credit - New Laws

Transfield Philippines vs Luzon Hydro Electric Corp.
(GR No 146717, Nov 22, 2004, Tinga)

Transfield entered into a turn-key contract with Luzon Hydro Corp. (LHC). Under the contract, Transfield were to construct a hydro-electric plants in Benguet and Ilocos. The contract provides for a period for which the project is to be completed and also allows for the extension of the period provided that the extension is based on justifiable grounds such as fortuitous event. In order to guarantee performance by Transfield, two stand-by letters of credit were required to be opened. During the construction of the plant, Transfield requested for extension of time citing fortuitous events brought about by typhoon, barricades and demonstration. LHC did not give due course to the extension of the period prayed for but referred the matter to arbitration committee.

In the meanwhile, because of the delay in the construction of the plant, LHC called on the stand-by letters of credit because of default. However, the demand was objected by Transfield on the ground that there is still pending arbitration on their request for extension of time. LHC invoked the “independence principle”. On the other hand, Transfield claims fraud on the part of LHC on calling the stand-by letters of credit.

Under the independence principle, a LC accommodation is entirely distinct and separate, independent agreement. It is not supposed to be affected by the main contract upon which it rests.

The court held for the LHC. Following the independence principle, even granting that there is still issue to be resolved arising from the turn-key project. This issue is not supposed to affect the obligation of the bank to pay the letter of credit in question. The court stressed that a LC accommodation is intended to benefit not only the beneficiary therein but the applicant thereon. On the issue of fraud, the SC held that there is nothing in the turn-key contract which states that all issues between the parties must be resolved first before LHC can call on the stand-by LC but the contract provides that if Transfield defaults, then LHC can call on these stand-by LC.

Lander vs Metrobank
(GR No. 159622 July 30, 2004, Santiago)

The business of the petitioner is importation of welding rods. Lander opened a LC with Metrobank and as security, a trust receipt was executed by Lander in favor of Metrobank. The TR matured but Lander was unable to pay Metrobank so the former returned the goods to Metrobank to avoid criminal liability (estafa). Metrobank sold the goods in an auction but the proceeds were not sufficient to satisfy the entire obligation of the petitioner.

1. Can the Metrobank claim the deficiency?
2. Can we not consider the return of the goods in full satisfaction of Metrobank’s claim against the petitioner?

Yes. Sec 7 of the TR Law provides that in case of sale by the entruster of the possessed goods, the entrustee shall receive any surplus but shall be liable to the entruster for any deficiency.
No. Repossession of the goods is not intended to transfer ownership of the goods (dacion en pago does not lie) but as a security for the loan obligation of the debtor that arose from the trust receipt agreement.

National Commercial Bank of Saudi Arabia vs CA
(GR No. 124269, Jan 31 2003)

Petitioner in this case was sued in connection with a LC transaction. The defense of prescription was invoked by the petitioner claiming that solutio indebeti cases prescribe in six years.

If one is to pursue a claim arising from a LC accommodation, within what time/period should he bring an action thereon?
Can the court apply the doctrine of laches?

10 years because LC is a written contract.
Courts are not permitted to apply the doctrine of laches earlier than the expiration of time limited for the commencement of action of law.

Transportation Law - New Cases

AF Sanchez Brokerage vs CA and FGU Insurance
(Dec 21, 2004)

AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as storage fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the consignee upon the instruction of the shipper.

Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in bad condition. Wyett claimed insurance from FGU. FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm.

Is AF Sanchez a common carrier?

SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as a principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a broker, it cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of the goods to their respective consignees.

AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the goods is an exonerating circumstance. But in this case, the SC held that though the goods were improperly packed, since AF Sanchez knew of the condition and yet it accepted the shipment without protest or reservation, the defense is deemed waived.

Foul Bill of Lading – reservation or protest on a shipment or goods improperly packed.

National Trucking and Forwarding Corp vs Lorenzo Shipping Corp
(GR No 153563, Feb 7, 2005)

Art 353 of the Code of Commerce provides “after the contract has been complied, the bill of lading which the carrier has issued shall be returned to him and by virtue of the exchange of this title with the thing transported the respective obligations and actions shall be deemed canceled”.

What if the original copy of the bill of lading could not be returned?

The SC held that in case the consignee upon receiving the goods cannot return the bill of lading because it has been lost, he must give the carrier a receipt for the goods delivered, this receipt producing the same effects as return of the bill of lading.

William Tiu vs Arriesgado
(GR No 138060, Sept 1, 2004, Callejo)

Spouses Arriesgado were passengers of a bus owned by the petitioner. The respondents sustained injures when the bus collided with a cargo truck. In its defense, petitioner invoked the defense of last clear chance.

The SC held that Doctrine of last clear chance applies to a suit involving the owners of the two colliding vehicle. It does not apply to a suit involving breach for a contract of carriage.

Philippine Rabbit Bus Lines vs Macalinao
(GR No 141856, Feb 11, 2005, Sandoval-Gutierrez)

Doctrine of last clear chance was applied in this case because it involves a suit between two colliding vehicles.

Nostradamus Villanueva vs Priscilla and Leandro Domingo
(GR No 144274, Sept 20, 2006, Corona)

Application of the Registered Owner Rule

The registered owner of a vehicle is directly and principally responsible for any accident, injury or death caused by the operation of the vehicle in the streets and highways.

The purpose is to protect the public in general and for easy identification of the persons who could be held responsible for the injury sustained.

Extraordinary diligence is required to common carriers in transporting goods and passengers
1. nature of the business
2. public policy

Registered owner primarily and solidarily liable with driver under the KABIT SYSTEM. Kabit system is contrary to public policy; therefore, void and inexistent.

Spouses Hernandez vs Spouses Dolor
(GR No 160286, Jul 30, 2004, Santiago)

A vehicle owned by the petitioners figured in an accident as a result of which the petitioners were sued for damages. Petitioners main defense at the time the incident happened is that the vehicle is being leased to the driver. The latter paying the rental by way of boundary at P150 per day. Since they are merely lessors, they should not be held liable for the injury sustained by the respondents.

The SC held that for the purpose of imputing liability, employer-employee relationship exist between the owner and the driver although the latter may pay rental by way of boundary. (Boundary System).

To sustain the petitioners’ contention that they should be excused from liability because they are merely lessors will be a flagrant disregard of our public service law which imputes liability upon registered owner of the subject vehicle. To sustain the contention of the petitioner will put the public at the mercy of irresponsible and reckless drivers.

Japan Air Lines vs Michael Asuncion et al
(GR No 161730, Jan 28, 2005, Santiago)

The case involves the application of extra-ordinary diligence in the discharge of carrier’s duty.

The respondent left Manila on board an aircraft being operated by the petitioner. Part of the itinerary of the respondent is a stop-over in Narita where they will have an overnight stay in Narita Hotel. However, the laws of Japan require them to apply for a shore pass wherein they have to be interviewed by immigration officials of Japan. During the interview, the immigration officials denied their application for shore pass because there appears to be errors in the travel documents. His height recorded in the documents appears to be taller than his actual height. Therefore, the petitioners were not allowed to stay in Narita Hotel but rather spent their nights uncomfortably at the airport.

As a result, petitioners sued the airlines claiming that they did not exercise extra-ordinary diligence required in the contract of carriage. They contend that JAL should have appraised them of the requirement needed to obtain a shore pass. Is JAL liable?

SC held that JAL is not liable and did not breach its contract of carriage with the petitioners. While it may be true that JAL are required to appraise their clients with all the necessary travel documents to obtain a shore pass, this duty does not extend to verification as to whether or not the information/entries in these travel documents are correct.

Insurance Law - New Cases

White Gold Marine Services vs Pioneer Insurance and Surety Corp and Steamship Mutual Underwriting Assoc.
(GR No 154514, July 28, 2005, Quisumbing)

White Gold obtained an indemnity coverage of its vessel from SMUA, a foreign cooperative, thru Pioneer Insurance as its broker. Pioneer has a license to do insurance business in the Philippines.

Is SMUA doing insurance business/transacting insurance business?
If you have been duly-licensed to engage in insurance business but you wanted to act as broker or agent of an insurance company, do you need a separate license thereof?

Yes. SMUA is insurance business/transacting insurance business because it partakes that of a mutual insurance whereby it operates as a cooperative enterprise where the members thereof are the insurers and the insured themselves. The members contribute premiums to their common fund. And if one of them suffers loss, the common fund shall pay for the loss.
Yes. Sec 299 of the ICP provides that no person shall act as insurance agent or broker in soliciting or procuring insurance without first securing a license from the Insurance Commission of the Philippines.

FGU Insurance Corp vs CA/Estate of Ang Wee vs CA
(Mar 31, 2005, Nasario)

If the insured himself or his agents were negligent, is this negligence a defense available to the insurance company in order to defeat payment of the insurance claims?

SC held that if it is:

Ordinary negligence – their negligence will not lie as a defense for the Insurance Co to defeat their claim because the purpose of the insured in taking out indemnity coverage is to protect the insured against the consequences of his own negligence as well as that of his agent.

Blatant or Gross Negligence – the insurer will be exonerated from liability.

In this case, the SC held that the negligence is so blatant or gross that it already amount to a wrongful act. The tug boat was left in a wharf despite the fact of bad weather condition and not withstanding the earlier request to transfer the same to a safer place. The carrier’s own acts and refusal amounted to blatant or gross negligence that enabled the Insurance Co to defeat their claims.

Danzas Corporation vs All Transport Network Inc
(GR No 141462, Dec 15, 2005)

What happens if after the proceeds of the policy has been paid, the wrongdoer enters into a compromise/settlement with the insured party and the insured party accepted the same. Will this circumstance defeat subrogation on the part of the Insurance Company?

General Rule:
In the case of Manila Mahogany Manufacturing vs CA, 154 SCRA 650, since the insurer can be subrogated to only such rights as the insured may have, should the insured, after receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his right against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer.

As laid down by the SC in this case, where the wrongdoer himself is in bad faith, he settles with the insured knowing for the fact that the insured has been paid the proceeds of the policy and knowing that the insurer has the right of subrogation, this circumstance will not defeat subrogation on the part of the insurer.

Golf Resorts Incorporated vs Philippine Charter Insurance Corp
(GR No. 156167, May 16, 2005, Puno)

Golf Resorts obtained an indemnity coverage on its properties and the insurance policy contains an “earthquake shock clause”. During the period of its effectivity an earthquake struck the Luzon area and among those damaged where the properties of Golf Resorts, among which are two swimming pools and other properties of Golf. Golf claims indemnification for the swimming pools and other properties rellying upon the earthquake shock loss contained in the policy.

Does the clause extend to properties of the petitioner other that the two swimming pools in question?

Applying the rule on construction, the SC held that each of the provisions of the insurance policy must be interpreted in consonance with each other. A reading of the policy including riders and clauses taken all together show that the intention of the parties is to extend the earthquake shock clause only to the two swimming pools. The evidence presented to the trial court readily showed that only the swimming pools are intended to be covered by the earthquake shock clause. Aside from this, no premiums were paid for other properties in consideration for the earthquake shock clause other than for the two swimming pools in violation of Sec 77 of the ICP.

William Tiu vs Arriesgado
(GR No 130060, Sept 1, 2004, Callejo)

In third-party liability insurance, would it be possible for a third party to sue the insurer directly?
Would it be possible for an insurance company to be held jointly and severally liable with the insured?

Yes. This is an exception to the rule on mutuality of contract. Whenever a contract contains stipulation for the benefit of a third person and the moment the third person communicates his assent thereto, the contract becomes binding upon him. The fact that a third person demands fulfillment of the insurance policy may be reasonably construed as an assent on his part to the benefit provided in the policy. This provision arms him with the requisite legal personality to bring an action on the insurance policy. (stipulation pour artrui)
No. The basis of cause of action is different. The cause of action against the insurer is based on contract while the cause of action against the insured is based on torts. Considering that there are two different causes of action, it will be legally impossible for them to be made as jointly and severally liable to the injured third party.

Federal Express Corporation vs American Home Insurance Corp and Philam Insurance Company
(GR No 150094, Aug 18, 2004)

Smithklein caused the transportation of 109 cartons of veterinary biologicals. The Shipment was initially loaded to Burlington Air Express and then later on forwarded to the petitioner for delivery to the consignee. When the consignee received the same it was found out that goods was damaged and decided to abandon the shipment and declared a total loss and then claimed against the insurance company. The insurance company paid the loss.

Is there legal subrogation on the part of the Insurance Company?

Held:Yes. Upon payment, the insurer’s entitlement to subrogation pro tanto equips the insurance company with a cause of action in case of a contractual breach or negligence. The insurance company stands in the same footing or in substitution of the insured party.

Banking Laws - New Cases

Spouses Larobis vs Philippine Veterans Bank
(GR No 135705, October 1, 2004, Martinez)

The Spouses Larobis applied for a loan with the PVB. Shortly thereafter, PVB was placed under receivership at the instance of the CB. 14 years after the loan was obtained, PVB initiated foreclosure on the mortgage earlier instituted by the spouses. Spouses contended that foreclosure is not in order because under the Civil Code, PVB only has 10 years to initiate the foreclosure proceedings. PVB contended that they were placed under receivership by the CB and this constitute fortuitous event which effectively suspended the running of the 10-year period.

The SC did not find PVB’s argument persuasive. The SC held that the fact that the bank was held under receivership does not amount to caso fortuito that effectively suspends the running of period of 10-year period of which to foreclose the mortgage.

SC further held that foreclosure or mortgages is not amount those activities which a corporation under receivership is prevented from performing.

DBP vs West Negros (May 21, 2004)/
Ibaan Rural Bank vs CA (Dec 17, 1999)
SC held that an agreement between the parties extending the period to redeem foreclosed properties shall be valid and this shall take precedence over the period to redeem set forth by law. The party who voluntarily agreed thereto shall be estopped from ascertaining otherwise.

Intengan, et al vs CA
(GR No 128996, Feb 15, 2002, Tinga)

Citibank sued two of its officers for violation of the Corp Code contending that these officers are persuading their clients to transfer their dollar deposits to competitor banks because the latter gives higher interests. A complaint was filed by Mr. Lim in behalf of Citibank and such complaint includes an affidavit containing the names and the amount allegedly transferred from Citibank to other banks. Because of the affidavit, the petitioners are now complaining against Citibank claiming that it is in violation of the Secrecy of Bank Deposit Act.

The SC held that since the deposits involved therein are foreign currency deposits, there is no violation here of Secrecy of Bank Deposit Act but of the Foreign Currency Deposit Act. If the case was filed in violation of FCDA, the court may give due course to case for Citibank violated FCDA because there was no written permission from the petitioners. Further, the case can no longer be re-filed because the action has already prescribed.

There are now 2 exceptions for which a bank may disclose foreign currency deposits:
upon the written assent or permission of the depositor; and
in cases covered by the Anti-Money Laundering Act

Estrada vs Desierto
(GR No 159160, Dec 9, 2001)

In this case, the petitioners foreign currency deposits with Citibank are placed in a constructive restraint by the BIR. Petitoners claim that the restraint is in violation of the FCDA.

Absolute confidentiality of foreign currency deposit under RA 6426 does not apply to foreign currency deposits to the petitioners in this case for the reason that petitioners are residents of the Philippines. The protection is intended only to depositors who are non-residents and are not engaged in trade or business in the Philippines.

Benedicto vs Court of Appeals
(GR No 125359, Sept 4, 2001)

The FCDA does not apply to foreign currency deposits maintained in foreign banks.

Salvacion vs Central Bank
(GR No 94723, Aug 21, 1997)

Salvacion was frequently abused by Barteli, a foreigner. Salvacion filed a case against Barteli for which she won and awarded damages. However, the only property found by the sheriff is a foreign currency deposit with China Bank. When a notice of garnishment was presented with China Bank, the bank did not honor the writ contending that it is a violation of FCDA and there was no written permission coming from Barteli.

Whether in this particular case, garnishment of Barteli’s foreign currency deposit with China Bank is in order.

The SC departed from the literal meaning of the FCDA and resorted to the intrinsic aids (whereas clauses appearing in the FCDA). It ruled that the protection of the framers is to give that protection to foreign investors and lenders. Barteli is neither an investor nor a lender so he is not the foreign depositor contemplated under the FCDA. His deposit is not the one that deserved protection of the FCDA. Justice and righteousness dictates that the deposit be garnished in favor of Salvacion.

BPI Family Savings Bank vs First Metro Investment
(GR No 132390, May 21, 2004, Sandoval-Gutierrez)

Whether or not the deposit in question may be treated as demand deposit or time deposit.
If it is to be considered a demand deposit, is it legally proscribed from earning interest?

The deposit in question is a time deposit because the deposit of Php 100 million is not withdrawable for one year provided that an advance interest of 17% is paid.
No. Demand Deposits are not legally proscribed from earning interest. Under CB Cir 22 s 1994, demand deposits shall not be subject to any rate ceiling. This, according to the SC is an open authority to pay interest even on demand deposit and with more reason because interest is not even subject to any ceiling.

Time Deposit – is one where the payment of which cannot be legally required within a specified number of days.
Demand Deposit (Current Account) – is one where the liability of the bank is denominated in Philippine currency subject to payment in legal tender upon presentation of the depositor’s check.

Corporation Law - New Cases

Hydro Resources Contractors vs National Irrigation Administration
(GR No 160251, Nov 10, 2005, Santiago)

A contract was entered into between Hydro and NIA for the project of the latter. The contract price is to be payable partly in Philippine peso and US dollars. Once the project was being executed, there was depreciation in value of Peso resulting to price differential. In order to resolve the issue, the administrator of NIA, Mr Tek, and Hydro made a joint computation of the amount corresponding to the foreign currency differential. The computation showed that NIA owed Hydro for the differential. When a demand was made by Hydro against NIA, NIA refused to pay contending that Mr Tek has no authority to participate into a joint computation of the foreign currency differential and that Mr Tek has no authority to bind NIA.

Whether or not Mr Tek has the authority to bind NIA in the joint computation of the foreign currency differential.

The SC found out that in the course of the project, Hydro has been dealing with NIA represented by Mr. Tek. And applying the doctrine of apparent authority, if a corporation knowingly permits one of its officers to act within the scope of an apparent authority, it holds him out to the public possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be stopped from denying the agent’s authority.

Woodchild Holdings Inc. vs Roxas Electric and Construction
(GR No 140667, Aug 12, 2004, Callejo)

The doctrine of apparent authority was not applicable in this case because the president of the company was given a specific authority by virtue of a board resolution to sell a particular land. Any actions of the president outside such vested authority shall not bind the corporation with third party.

Spouses David and Coordinated Group, Inc. vs
CIAC and Spouses Quiambao

(GR No 159795, July 30, 2004, Puno)

The spouses Quiambao engaged the services of the petitioner for the construction of a five-storey building. In the performance of the project, the petitioner allegedly deviated from the original plan without the approval of Spouses Quiambao. The latter therefore decided to rescind the contract and hired the services of another contractor. When a definitive finding that indeed there was deviation on the structural plan, Quiambao sued for damages impleading the officers of the construction company, among them Engr. David, who is also an officer of the Company. The officer contended that he cannot be made personally liable for what appears to be a corporate act by virtue of the doctrine of corporate entity.

Whether or not Engr. David is personally liable to the Spouses Quiambao.

The SC held that an exception to the doctrine of corporate entity is when there is bad faith in the performance of the duty of the officer. In the instant case, bad faith was proven when Engr. David categorically admitted that the company deviated from the original structural plan in order to lower the cost of construction. By his act, Engr. David violated Sec 31 of the Corporation Code which provides that directors or trustees who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. Therefore, the SC deemed that equity demand that he should be liable to Spouses Quiambao.

(GR No 147217, Oct 7, 2004, Sandoval-Gutierrez)

When you file petitions for review, the Rules of Court provides that the cert of non-forum shopping be appended to the petition. If the petitioner is a juridical person, it must act through its agent but such agent must be armed with authority to represent such corporation thru a board resolution or secretary’s certificate.
In this case, the petitioner failed to submit to the court certified true copy of board resolution authorizing its officer to represent the company in this case. The SC said that this deficiency is fatal to the case and would constitute a sufficient ground for the dismissal of the case. The SC can neither take judicial notice of board resolutions passed by corporation nor said court may take judicial notice of the officers authority to represent the corporation in the particular suit.

Monfort Hermanos Agricultural Development Corp. vs Monfort III
(GR No 152542, July 8, 2004, Santiago)

Monfort Corp represented by its president, Antonia Salvatierra filed a complaint against the respondents for the delivery of motor vehicles, tractors and fighting cocks. The respondents filed a motion to dismiss on the ground that Antonia does not have the authority to represent the corporation in this particular case. Antonia contended that they have submitted board resolutions signed by its directors. However, this board resolution is being contested because four of the directors who signed the resolution have not been duly elected by the company.

Whether or not Antonia has the authority to represent the corporation in this case.

The SC said Antonia does not have the authority to represent the corporation in this particular case. The board resolution in question was held invalid because the general information sheet of the corporation readily indicated that four out of the six signatories in the board resolution do not appear in the general information sheet. This only showed there is now a doubt whether the four directors appearing in the resolution were duly elected as directors of the corporation.

CIR vs Estate of Toda Jr
(GR No 147188, Sept 14, 2004, Davide)

Cibeles Incorporated authorized its former president, Mr. Toda Jr. to sell a building and two parcels of land which the insurance company owns for 90 M pesos. The properties were sold and income was realized.

In the meanwhile, Mr Toda sold all his shareholdings in the insurance company to a certain Mr. Choa. A deed of sale was concluded between them for Mr. Toda’s shareholdings in the insurance company. Thereafter, BIR assessed the insurance company deficiency income tax arising from the sale of the subject real properties. Three years thereafter, Mr. Toda died. The BIR then impleaded the estate of Mr. Toda as party defendant. The respondent contended that the liability is a corporate liability, therefore the estate could not be held liable following the doctrine of corporate entity.

Since the sale took place during the incumbency of Mr. Toda and he was the one authorized by the corporation to do so, would it be possible for him or his estate to be liable for the obligation?

The SC held that following the doctrine of corporate entity, officers are not supposed to be made personally liable for what appears to be corporate liabilities. However, the rule is not without exceptions. Exception to this rule is when the officer concerned has expressly agreed to be personally bound for corporate obligations. Perusal of the deed of sale would readily show that for the tax liability of the corporation arising from the sale of real properties in question, Mr. Toda agreed to be personally liable along with the corporation.

Clarion Printing House Inc vs NLRC
(GR No 148372, June 27, 2005, Carpio-Morales)

The petitioner company filed with the SEC a petition for suspension of payment as well as an appointment of a rehabilitation receiver. While the petitioner was placed under receivership, a certain Mr. Miclat, a former employee of a corporation filed a case for illegal dismissal.

Should his claim in this case be suspended?

The SC held that even labor cases are suspended. Upon the appointment of a receiver, all claims and all pending cases against the corporation are deemed suspended the purpose being in order to give the receiver sufficient time to proceed with rehabilitation work.

Tyson’s Super Concrete, Inc. vs CA
(GR No 140081, June 23, 2005, Austria-Martinez)

Romana Dela Cruz owns a parcel of land and leased it to Tyson’s. During the period of lease, Tyson filed rehabilitation and Tyson’s was placed under receivership. The SEC appointed a management committee to take charge of the rehabilitation of the corporation.

In the meanwhile, because of Tyson’s failure to pay the rent, Romana filed an ejectment suit against the corporation. The ejectment case prospered and while the case was pending appeal, Romana filed for the execution of judgment.

Should the ejectment suit be suspended because of the rehabilitation of Tyson’s?

The ejectment was sustained by the SC.

The fact that a management committee had already been created by the SEC does not divest the first level courts of their exclusive jurisdiction.

The avowed purpose of suspending all actions against distressed corporation when management committee or rehabilitation is appointed, which is to enable such management committee or rehabilitation receiver to effectively exercise its powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the distressed company, can no longer be effectively met if the proceedings have already been pending for almost ten years and have already reached the SC.

Nakpil vs IBC
(GR No 144764, Mar 21, 2002)

Mr, Nakpil has been engaged as Asst. General Manager and Comptroller of IBC. The president of the corporation was replaced by a certain Mr. Templo and upon his assumption, the petitioner was dismissed. The petitioner then filed a complaint for illegal dismissal before the labor arbiter.
Does the labor arbiter have jurisdiction over this case?
Could Mr. Nakpil be considered a corporate officer?
Do additional claims such as back wages or damages make it a labor case?

No. This case involves an issue or controversy involving a corporate officer, therefore the SEC (now RTC) has jurisdiction over the case.
Yes. Although his appointment was made by the general manager of the company, his appointment was subject to the approval of the Board of Directors.
No. These claims are not essential. Controversy remains to be an intra-corporate controversy.

Who are officers of the corporation?
Those statutory corporate officers provided in the Corporation Code such as the president, treasurer and secretary.
Those who have been named in the by-laws of the corporation.
Those who may be appointed by the Board of Directors for as long as the Board of Directors has the authority to do so in the by-laws of the corporation.

PNB vs Andrada
(Apr 17, 2002)

The mere acquisition of all or substantially all of the assets of another company would not make the buying company liable for the existing obligations of the selling company. Even in this particular case, we maintain the separate identities of the selling company and the buying company so that the selling company would remain liable for its obligations. It could not legally pass-on this liabilities to the buying corporation provided that the selling corporation acted in good faith and there is an adequate consideration for the disposition of the assets.

The court also enumerated exceptions to this rule:
When the buying company expressly or impliedly agreed to assume the debts of the selling company;
When the transaction amounted to merger or consolidation;
When the purchasing company is only a continuation of the selling company;
When the transaction is fraudulently entered into in order to escape liability for the debts of the selling company; and
When the sale is in bulk and the selling company was not able to comply with the formalities mentioned under the bulk sales law.

Commercial Law Bar Exam Coverage

The chairman of the 2006 Bar Examination promulgated the coverage of the 2006 Bar Examinations for Mercantile law to be held on September 17, 2006. (Exactly 4 months from today)

1. Code of Comerce
(a) Merchants and Commercial Transaction, Articles 1-63
(b) Letters of Credit under te Code of Commerce (Articles 1-63
INCLUDE the following:
i. Bulk Sales Law
ii. The Warehouse Receipt Law in relation to the General Bonded Warehouse Act
iii. Trust Receipts Law

2. Negotiable Instruments Law

3. Insurance Code

4. Transportation Laws
(a) Common Carriers
(b) Commercial Contracts for Trnsportation Overland
(c) Maritime Commerce
(d) Public Service Act
(e) The Warsaw Convention of 1929

5. Corporation Law
(a) The Corporation Code
(b) Securities Regulation Code
(c) Banking Laws
i. The New Central Bank Act
ii. Law on Secrecy of Bank Deposits

6. Intellectual Property Code

7. Special Laws
(a) The Chattel Mortgage Law
(b) Real Estate Mortgage Law
(c) The Insolvency Law
(d) Truth in Lending Act
(e) Anti-Money Laundering Law

EXCLUDE the following:
1. Omnibus Investment Code of 1987
2. Foreign Investment Act of 1991

Tuesday, May 09, 2006


The bulk of the violation here is found in Section 3, where you have so many enumerations of acts covered by this law.

Given in past bar examinations by way of problems are situations covered by Subsections A,B,D, in so far as the 1 year period stated there is concerned. Subsection E – the most widely invoked provision of this law. Subsection G and Subsection I

In subsection I, you must be careful; the only way the PO involved may avoid incurring a violation of the Anti-Graft & Corrupt Practices act is for him to divest himself of any interest in the enterprise applying before the board, panel, or group where the public officer is involved, OR resigned his membership in that board, panel, or group.

Subsection I expressly provides that even though the PO possessing conflicting interest in the applicant enterprise voted against the application, still the law is violated. But that provision of Subsection I covers only such application requiring the exercise of discretion on the part of the board, panel, or group in which the PO is a member. So if the application would require only ministerial act on the part of that board, panel, or group, this subsection I of Sec 3 of the law does not govern.

The most widely violated provision is that of Subsection E – causing undue injury to another, private or public, by giving unwarranted benefit though manifest partiality, evident bad faith, gross inexcusable negligence.

About this injury, it is already ruled by the SC that the injury contemplated here must be quantifiable in money. It has reference to material injury, not to any damages which are subject of speculation. So the complainant here cannot invoke its violation, only because he suffers moral damages or because he suffered some temperate or moderate damages. The damages here must be one that is quantifiable in money.

Secondly here, one of the predicate of the complaint under this subsection of the law is that of evident bad faith. The injury caused was brought about by evident bad faith on the part of the public officer accused of the violation. Although violations of this law are mala prohibita and in crimes mala prohibita, good faith or lack of criminal intent is not a defense, and therefore irrelevant or immaterial, yet in this violation of the law where the complaint is based on alleged evident bad faith, the accused as an exception, should be allowed to adduce evidence of good faith or lack of criminal intent in causing the damage. SC SAID that if would not be allowed, the accused would be denied the chance to defend himself because the only way to controvert the alleged evident bad faith is to adduce evidence of good faith and of lack of criminal intent. {You take note of this exception. You must have planted in your minds now that in bar exams, most of the problems given refer to situation to exceptions to the rule.}

In that subsection (i) where the member of the board, panel, or group voted against the application that has conflicting interest with the applicant enterprise, this was given in the bar several times. The only way to escape liabilities is to resign or divest himself of the interest in the applicant enterprise. But the provision must apply first, and that provision will apply only if the application involved the exercise of discretion.

In a case involving the officers of the Cebu International Airport for violation of this provision, it was shown that the act taken by the board, panel, or group was merely ministerial because the transaction has already been consummated. So what they do is just to approve this ministerially, because actually the procured materials where the violation of the law was incurred has already [resulted]. So SC said this provision is not violated because the act done by this board is already ministerial. The transaction has already been consummated or is implemented. So they can only be held administratively and civilly liable but not criminally. {be careful about this!}

*Violations of the Anti-graft and corrupt practices act are mala prohibita. So except in that particular situation in subsection (e) of Section 3, evidence of good faith or lack of criminal intent is not a defense. The fact that the government benefited out of the prohibited transaction is no defense at all. SC categorically pronounced: “In crimes mala prohibita, the law is not interested in the effect of the prohibited act, but simply from the fact that the prohibited act was VOLUNTARILY committed. That being so, criminal liability attaches.
So where a municipal mayor who was elected into office found the coffers of the local government empty, nothing to pay the salary of the employees of the municipal government, no money to pay the basic services. He rented out a part of the municipal building. Nobody was interested to rent because they have to renovate the place. So his son made an offer to the municipal council which conducted the hearing that because there is no interested bidder, he conducted an offer. It was found to be the most advantageous because the son of the mayor would convert the place into a canteen and a convenience store without any centavo coming from the municipality. The municipality after all was bankrupt. So he will advance the {amount} will operate the place, and he will only get whatever the amount he had advanced. Any profit earned out of the operation therefore will inure to the municipality. He announced that he is only willing to do this because his father is the mayor and he wanted the father to be able to attend to the basic services needed by the constituent of the municipality. In fact, the other parties who wanted the same concession challenged the legality of the contract before the local RTC. The local RTC dismissed the complaint. So he instead raised the axed against the mayor, filed with the SB a criminal case for violation of RA 3019, based on the fact that he contracted with his son involving the property of the municipality.

SB convicted him. He appealed to the SC.

SC affirmed the conviction. It is enough that the act is prohibited and that the public officer voluntarily performed the act, that means w/out duress only. The high court said: “In crimes MP, the law is not interested in the effects of the law on the prohibited act. The law is interested only in whether the act was voluntarily done or not. If voluntarily done, then criminal liability attaches.

So you should know the important point there that the act was done to benefit the government, as long as the act is prohibited under this law, it is therefore a malum prohibitum if is from the voluntarily doing of the act which will violate the law, that will be controlling.

Under Sec 8 of this law (RA3019), in the investigation of the public officer charged for having accumulated ill-gotten wealth, his bank accounts where this funds or his nominee or his dummy may be examined.

In a case where the bank account of the public officer under investigation or being examined, the Bank refused access to the records invoking the Law on Secrecy of Bank Deposits (R.A. 1405). An issue was brought before the SC. SC ruled ‘the examination may proceed. This is an exception to those already provided in the law itself. Since the purpose here is to discover the ill-gotten wealth, the provision of the law would be useless if after all the bank deposit of the public officer involved cannot be examined. So the high court said: “Aside from the exception to the law on secrecy of bank deposit, this should authorize under the Anti-Graft & Corrupt Practices Act should be considered only as exception to this prohibition under the law.” so the public officer being examined for any ill-gotten wealth cannot invoke the Law on Secrecy on Bank Deposit to prevent an examination of his bank accounts. Those of his wife, those of his children below 18 years of age, those who were assignees, nominees, or dummies.
Violation of this law now prescribes in 15 years, but this will only refer to violation committed after the amendment was made in 1982. Before this, the prescriptive period for the violation is only 10 years. This is the period you will apply before the amendment in 1982 extending the prescription to 15 years.

Another important aspect under Section 13 of this law --- That any public officer charged for having violated this law shall be suspended from public office upon a finding of the court of a valid information filed against him. In view of this provision, jurisprudence is to the effect that the suspension is mandatory but not automatic. The Court which is now exclusively the SB for violation of this law must first determine the merit of the accusation against the public officer charged for violation of this law. That means there should be a hearing. Public officer accused of the violation must be given notice to explain why he should not be suspended from public officer pending the investigation of the criminal case against him pursuant to Section 13 of this law. The SB cannot routinarily issue an order of suspension. The suspension is mandatory but it is not automatic – meaning to say, upon the filing of the information the court will issue the order of suspension applying that will issue a warrant of arrest, that is not so because of that provision requiring the court to give details of information filed. Only after the court has determined that there is a meritorious information filed for violation of this law may the court, which is now the SB, may issue the Order of suspension.

The Order of suspension shall be for 90 days. It shall cover whatever public office is held by the accused at the time the order was issued, even though that public office is not the office where the violation was committed.

So as long as the accused holds a public office, the order of suspension will apply to that public position, even though the violation of the Anti-Graft & Corrupt Practices Act was not committed in that office. It is already a decided situation. Where a public officer committed a violation of this law when he was a member of the Provincial Board, have instead he ran for Vice Governor and he won, so he held office for Vice Governor. In the meantime the case against him for violation of this law was filed with the SB. SB after the hearing, the so-called ‘pre-suspension hearing’ that you must have learned in your study of administrative law, must be conducted and thereupon, SB issued the order of suspension.

The suspension was challenged because it is being applied to an office held by the accused as Vice Governor whereas the alleged violation of this law was committed in the Office of the Provincial Board while he was a member thereof. So he claimed he cannot be suspended from the public office of the Vice Governor.
SC ruled whatever public office is there at the time the order of suspension was issued, the accused must be suspended therefrom. The SB was acting within its jurisdiction in ordering the suspension even by those occupying the coordinate department of the government. SB would be acting within its jurisdiction, but the same cannot just be implemented. The head of the coordinating department of the government must conform to the order of suspension, actually they are the ones who will implement the order of suspension, not the sheriff of the SB. So if the accused is a member of the House of Representative or the Senate, the sheriff of the SB will serve the order of suspension to the Speaker of the House or the Senate President for him to set the mechanism of the legislative body on the manner of suspending members thereof. If they do not want to suspend, that is the end of the order. This is so even when a member of the legislative is the one involved. SB has jurisdiction to order the suspension.

Monday, May 08, 2006

Araullo Law Batch 2006

This post was long overdue, but nevertheless, here are the Araullo Law Batch of 2006. (From left to right, ladies then gentlemen):

1. Mary Ann Guevarra

2. Jenny Pailas

3. Lei Mercado

4. Jo-anne Dela Cruz

5. Claire Bomifacio

6. Tin Alavaran

7. Ruby May Tienzo

8. Maylin Leabres

9. Thelma Peralta

10. Onie Ng

11. Cris Crisostomo

12. Rico Interior

13. Melchor Maniquiz

14. Your Blogger

15. Danny Lutino

16. Edward Serrano

17. Ricky Sobrepena

18. John Albert Reyes

19. Raygan Bruan

20. Aries Vergara

21. Amante Balais (wala sa picture)

Again, to all of you guys, Congratulations and GOOD LUCK sa BAR EXAMS!!!

Wednesday, April 26, 2006

Updates... Still Alive and Kicking

Just a few posts...

Been a really busy, busy week. We are through with our lectures in Corporation Code courtesy of Prof. Zarah Villanueva-Castro. At present we are with having our lectures on Special Commercial Laws with Dean Abella. I am on my way to San Sebastian so ... see you!!!

Monday, April 03, 2006

It's April - Let's Get It On!!!

Time runs so fast. It's now April - barely five months before the BAR exams. Our graduation will be on April 09 and the start of the review class at Recoletos will be on April 18. So from then on, I'll be very busy reviewing. I have devised an arduous five-month reading schedule that I hope I could follow. And I have also listed down the books and review materials to bring to my review. So, with all that, I guess I have no more time for blogging (HUHUHU). I'll probably just have a post or two each mont till September. But no matter what, I'll be back on October. So WISH ME LUCK!!!
To my classmates - GOOD LUCK AND HOPE FOR THE BEST!!!

Friday, March 31, 2006

Araullo 2005 Bar Passers

1. Avelino Catahan Jr
2. Renato Villones
3. Julius King Cruz
4. Kelly Belino
5. Florida Daquiz
6. Grace Ignacio
7. Neil Perez
For a complete list of Bar Passers
click here.

Thursday, March 30, 2006

Santiago vs Comelec

For a copy of the blogger's digested case click here.

For a copy of the original text click here.

Petition For Initiative

Yesterday, someone came to my office and asked how many personnel do I have. When I said 28 (including me), he gave me three sheets (see photo) and asked that we fill up and sign those sheets like everyone else in the government does. He left and said he will be back to collect the signed sheets tomorrow.
The sheet contains a proposition:
"Do you approve of the amendment of the Articles VI and VII of the 1987 Constitution, changing the form of government from the present bicameral-presidential to a unilateral-parliamentary system of government, in order to achieve greater efficiency, simplicity and economy in government; and providing an Article XVII as transitory provisions for the orderly shift from one system to another?"
By signing your name, you are approving the proposed amendment to the 1987 Constitution and your signature shall form part of the petition for initiative to amend the Constitution and signifies your support for the filing of such petition.
Guess who's heading the campaign to collect the signatures? Lets recite the alphabet - ABCDILG - HIJKLMNOP.
Misnomer - it should be Government's Initiative and not People's Initiative because the government is initiating the action.
I have posted previously here the decision of Supreme Court on Santiago vs Comelec where People's Initiative was denied due to lack of implementing guidelines. So, this is just another waste of time and money for the initiators.