PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS vs. COA.
G.R. No. 169752 September 25, 2007
Facts:
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at the time it was created, was composed of animal aficionados and animal propagandists. The objects of the petitioner, as stated in Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted upon animals or the protection of animals in the Philippine Islands, and generally, to do and perform all things which may tend in any way to alleviate the suffering of animals and promote their welfare.
At the time of the enactment of Act No. 1285, the original Corporation Law, Act No. 1459, was not yet in existence. Act No. 1285 antedated both the Corporation Law and the constitution of the Securities and Exchange Commission. Important to note is that the nature of the petitioner as a corporate entity is distinguished from the sociedad anonimas under the Spanish Code of Commerce.
For the purpose of enhancing its powers in promoting animal welfare and enforcing laws for the protection of animals, the petitioner was initially imbued under its charter with the power to apprehend violators of animal welfare laws. In addition, the petitioner was to share one-half (1/2) of the fines imposed and collected through its efforts for violations of the laws related thereto. As originally worded, Sections 4 and 5 of Act No. 1285 provide:
Subsequently, however, the power to make arrests as well as the privilege to retain a portion of the fines collected for violation of animal-related laws were recalled by virtue of Commonwealth Act (C.A.) No. 148, which reads, in its entirety, thus:
Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No. 63 dated November 12, 1936, portions of which provide:
Whereas, during the first regular session of the National Assembly, Commonwealth Act Numbered One Hundred Forty Eight was enacted depriving the agents of the Society for the Prevention of Cruelty to Animals of their power to arrest persons who have violated the laws prohibiting cruelty to animals thereby correcting a serious defect in one of the laws existing in our statute books.
Whereas, the cruel treatment of animals is an offense against the State, penalized under our statutes, which the Government is duty bound to enforce;
By this when the COA was to perform an audit on them they refuse to do so, by the reason that they are a private entity and not under the said commission. On the other hand the COA decided that they are a government entity.
Issue: is the said petitioner a private entity?
Ruling:
First, the Court agrees with the petitioner that the “charter test” cannot be applied. Essentially, the “charter test” as it stands today provides:
[T]he test to determine whether a corporation is government owned or controlled, or private in nature is simple. Is it created by its own charter for the exercise of a public function, or by incorporation under the general corporation law? Those with special charters are government corporations subject to its provisions, and its employees are under the jurisdiction of the Civil Service Commission, and are compulsory members of the Government Service Insurance System.
The petitioner is correct in stating that the charter test is predicated, at best, on the legal regime established by the 1935 Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof.
During the formulation of the 1935 Constitution, the Committee on Franchises recommended the foregoing proscription to prevent the pressure of special interests upon the lawmaking body in the creation of corporations or in the regulation of the same. To permit the lawmaking body by special law to provide for the organization, formation, or regulation of private corporations would be in effect to offer to it the temptation in many cases to favor certain groups, to the prejudice of others or to the prejudice of the interests of the country.
And since the underpinnings of the charter test had been introduced by the 1935 Constitution and not earlier, it follows that the test cannot apply to the petitioner, which was incorporated by virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule that laws in general have no retroactive effect, unless the contrary is provided. All statutes are to be construed as having only a prospective operation, unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used. In case of doubt, the doubt must be resolved against the retrospective effect.
There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the law itself so expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and (5) in case of laws creating new rights. None of the exceptions is present in the instant case.
As a curative statute, and based on the doctrines so far discussed, C.A. No. 148 has to be given retroactive effect, thereby freeing all doubt as to which class of corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind of private domestic corporation, which the Court will further elaborate on under the fourth point.
The general principle of prospectivity of the law likewise applies to Act No. 1459, otherwise known as the Corporation Law, which had been enacted by virtue of the plenary powers of the Philippine Commission on March 1, 1906, a little over a year after January 19, 1905, the time the petitioner emerged as a juridical entity. Even the Corporation Law respects the rights and powers of juridical entities organized beforehand
Second, a reading of petitioner’s charter shows that it is not subject to control or supervision by any agency of the State, unlike government-owned and -controlled corporations. No government representative sits on the board of trustees of the petitioner. Like all private corporations, the successors of its members are determined voluntarily and solely by the petitioner in accordance with its by-laws, and may exercise those powers generally accorded to private corporations, such as the powers to hold property, to sue and be sued, to use a common seal, and so forth. It may adopt by-laws for its internal operations: the petitioner shall be managed or operated by its officers “in accordance with its by-laws in force.” The pertinent provisions of the charter provide:
Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain, William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield, Spencer Cosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles Lahesa, Josefina R. de Luzuriaga, and such other persons as may be associated with them in conformity with this act, and their successors, are hereby constituted and created a body politic and corporate at law, under the name and style of “The Philippines Society for the Prevention of Cruelty to Animals.”
As incorporated by this Act, said society shall have the power to add to its organization such and as many members as it desires, to provide for and choose such officers as it may deem advisable, and in such manner as it may wish, and to remove members as it shall provide.
It shall have the right to sue and be sued, to use a common seal, to receive legacies and donations, to conduct social enterprises for the purpose of obtaining funds, to levy dues upon its members and provide for their collection to hold real and personal estate such as may be necessary for the accomplishment of the purposes of the society, and to adopt such by-laws for its government as may not be inconsistent with law or this charter.
x x x x
Sec. 3. The said society shall be operated under the direction of its officers, in accordance with its by-laws in force, and this charter.
x x x x
Sec. 6. The principal office of the society shall be kept in the city of Manila, and the society shall have full power to locate and establish branch offices of the society wherever it may deem advisable in the Philippine Islands, such branch offices to be under the supervision and control of the principal office.
Third. The employees of the petitioner are registered and covered by the Social Security System at the latter’s initiative, and not through the Government Service Insurance System, which should be the case if the employees are considered government employees. This is another indication of petitioner’s nature as a private entity. Section 1 of Republic Act No. 1161, as amended by Republic Act No. 8282, otherwise known as the Social Security Act of 1997, defines the employer:
Employer – Any person, natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business, industry, undertaking or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government: Provided, That a self-employed person shall be both employee and employer at the same time. (Emphasis supplied)
Fourth. The respondents contend that the petitioner is a “body politic” because its primary purpose is to secure the protection and welfare of animals which, in turn, redounds to the public good.
This argument, is, at best, specious. The fact that a certain juridical entity is impressed with public interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation may be private although its charter contains provisions of a public character, incorporated solely for the public good. This class of corporations may be considered quasi-public corporations, which are private corporations that render public service, supply public wants, or pursue other eleemosynary objectives. While purposely organized for the gain or benefit of its members, they are required by law to discharge functions for the public benefit. Examples of these corporations are utility, railroad, warehouse, telegraph, telephone, water supply corporations and transportation companies. It must be stressed that a quasi-public corporation is a species of private corporations, but the qualifying factor is the type of service the former renders to the public: if it performs a public service, then it becomes a quasi-public corporation.
Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide, for the fact is that almost all corporations are nowadays created to promote the interest, good, or convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public benefit. Private schools and universities are likewise private corporations; and yet, they are rendering public service. Private hospitals and wards are charged with heavy social responsibilities. More so with all common carriers. On the other hand, there may exist a public corporation even if it is endowed with gifts or donations from private individuals.
The true criterion, therefore, to determine whether a corporation is public or private is found in the totality of the relation of the corporation to the State. If the corporation is created by the State as the latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private. Applying the above test, provinces, chartered cities, and barangays can best exemplify public corporations. They are created by the State as its own device and agency for the accomplishment of parts of its own public works.
It is clear that the amendments introduced by C.A. No. 148 revoked the powers of the petitioner to arrest offenders of animal welfare laws and the power to serve processes in connection therewith.
Fifth. The respondents argue that since the charter of the petitioner requires the latter to render periodic reports to the Civil Governor, whose functions have been inherited by the President, the petitioner is, therefore, a government instrumentality.
This contention is inconclusive. By virtue of the fiction that all corporations owe their very existence and powers to the State, the reportorial requirement is applicable to all corporations of whatever nature, whether they are public, quasi-public, or private corporations—as creatures of the State, there is a reserved right in the legislature to investigate the activities of a corporation to determine whether it acted within its powers. In other words, the reportorial requirement is the principal means by which the State may see to it that its creature acted according to the powers and functions conferred upon it. These principles were extensively discussed in Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on Good Government. Here, the Court, in holding that the subject corporation could not invoke the right against self-incrimination whenever the State demanded the production of its corporate books and papers, extensively discussed the purpose of reportorial requirements, viz:
x x x The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It received certain special privileges and franchises, and holds them subject to the laws of the state and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserve[d] right in the legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered a corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose. The defense amounts to this, that an officer of the corporation which is charged with a criminal violation of the statute may plead the criminality of such corporation as a refusal to produce its books. To state this proposition is to answer it. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation vested with special privileges and franchises may refuse to show its hand when charged with an abuse of such privileges. (Wilson v. United States, 55 Law Ed., 771, 780.)
INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents.
[G.R. No. 122174. October 3, 2002]
Facts:
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13, 1976 for the purpose of engaging in the business of manufacturing, producing, selling, exporting and otherwise dealing in any and all refractory bricks, its by-products and derivatives. On June 22, 1977, it registered its corporate and business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name “Synclaire Manufacturing Corporation”. It amended its Articles of Incorporation on August 23, 1985 to change its corporate name to “Industrial Refractories Corp. of the Philippines”. It is engaged in the business of manufacturing all kinds of ceramics and other products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix.
Discovering that petitioner was using such corporate name, respondent RCP filed on April 14, 1988 with the Securities and Exchange Commission (SEC) a petition to compel petitioner to change its corporate name on the ground that its corporate name is confusingly similar with that of petitioner’s such that the public may be confused or deceived into believing that they are one and the same corporation
Issue: Was there confusion in the corporate names?
Does The SEC have the power to decide over the issue?
Ruling:
“SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name.”
It is the SEC’s duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public, and it has authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to generate confusion. Clearly therefore, the present case falls within the ambit of the SEC’s regulatory powers.
Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership Names specifically requires that: (1) a corporate name shall not be identical, misleading or confusingly similar to one already registered by another corporation with the Commission; and (2) if the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive word different from the name of the company already registered.
As held in Philips Export B.V. vs. Court of Appeals, to fall within the prohibition of the law, two requisites must be proven, to wit:
(1) that the complainant corporation acquired a prior right over the use of such corporate name;
and
(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law.
As regards the first requisite, it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption. In this case, respondent RCP was incorporated on October 13, 1976 and since then has been using the corporate name “Refractories Corp. of the Philippines”. Meanwhile, petitioner was incorporated on August 23, 1979 originally under the name “Synclaire Manufacturing Corporation”. It only started using the name “Industrial Refractories Corp. of the Philippines” when it amended its Articles of Incorporation on August 23, 1985, or nine (9) years after respondent RCP started using its name. Thus, being the prior registrant, respondent RCP has acquired the right to use the word “Refractories” as part of its corporate name.
Anent the second requisite, in determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination and the Court must look to the record as well as the names themselves. Petitioner’s corporate name is “Industrial Refractories Corp. of the Phils.”, while respondent’s is “Refractories Corp. of the Phils.” Obviously, both names contain the identical words “Refractories”, “Corporation” and “Philippines”. The only word that distinguishes petitioner from respondent RCP is the word “Industrial” which merely identifies a corporation’s general field of activities or operations. We need not linger on these two corporate names to conclude that they are patently similar that even with reasonable care and observation, confusion might arise. It must be noted that both cater to the same clientele, i.e.¸ the steel industry. In fact, the SEC found that there were instances when different steel companies were actually confused between the two, especially since they also have similar product packaging. Such findings are accorded not only great respect but even finality, and are binding upon this Court, unless it is shown that it had arbitrarily disregarded or misapprehended evidence before it to such an extent as to compel a contrary conclusion had such evidence been properly appreciated.And even without such proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to occur.
Refractory materials are described as follows:
“Refractories are structural materials used at high temperatures to [sic] industrial furnaces. They are supplied mainly in the form of brick of standard sizes and of special shapes. Refractories also include refractory cements, bonding mortars, plastic firebrick, castables, ramming mixtures, and other bulk materials such as dead-burned grain magneside, chrome or ground ganister and special clay.”
While the word “refractories” is a generic term, its usage is not widespread and is limited merely to the industry/trade in which it is used, and its continuous use by respondent RCP for a considerable period has made the term so closely identified with it.
G.R. No. 51765 March 3, 1997
REPUBLIC PLANTERS BANK, petitioner,
vs.
HON. ENRIQUE A. AGANA, SR., as Presiding Judge, Court of First Instance of Rizal, Branch XXVIII, Pasay City, ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION and ADALIA F. ROBES, respondents.
FACTS:
On September 18, 1961, private respondent Corporation secured a loan from petitioner in the amount of P120,000.00. As part of the proceeds of the loan, preferred shares of stocks were issued to private respondent Corporation, through its officers then, private respondent Adalia F. Robes and one Carlos F. Robes. In other words, instead of giving the legal tender totaling to the full amount of the loan, which is P120,000.00, petitioner lent such amount partially in the form of money and partially in the form of stock certificates numbered 3204 and 3205, each for 400 shares with a par value of P10.00 per share, or for P4,000.00 each, for a total of P8,000.00. Said stock certificates were in the name of private respondent Adalia F. Robes and Carlos F. Robes, who subsequently, however, endorsed his shares in favor of Adalia F. Robes.
Said certificates of stock bear the following terms and conditions:
The Preferred Stock shall have the following rights, preferences, qualifications and limitations, to wit:
1. Of the right to receive a quarterly dividend of One Per Centum (1%), cumulative and participating.
xxx xxx xxx
2. That such preferred shares may be redeemed, by the system of drawing lots, at any time after two (2) years from the date of issue at the option of the Corporation. . . .
On January 31, 1979, private respondents proceeded against petitioner and filed a Complaint anchored on private respondents' alleged rights to collect dividends under the preferred shares in question and to have petitioner redeem the same under the terms and conditions of the stock certificates. Private respondents attached to their complaint, a letter-demand dated January 5, 1979 which, significantly, was not formally offered in evidence.
Issue: did the cause of action already lapse?
Ruling:
Anent the issue of prescription, this Court so holds that the claim of private respondent is already barred by prescription as well as laches. Art. 1144 of the New Civil Code provides that a right of action that is founded upon a written contract prescribes in ten (10) years. The letter-demand made by the private respondents to the petitioner was made only on January 5, 1979, or almost eighteen years after receipt of the written contract in the form of the stock certificate. As noted earlier, this letter-demand, significantly, was not formally offered in evidence, nor were any other evidence of demand presented. Therefore, we conclude that the only time the private respondents saw it fit to assert their rights, if any, to the preferred shares of stock, was after the lapse of almost eighteen years. The same clearly indicates that the right of the private respondents to any relief under the law has already prescribed. Moreover, the claim of the private respondents is also barred by laches. Laches has been defined as the failure or neglect, for an unreasonable length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.
Considering that the terms and conditions set forth in the stock certificate clearly indicate that redemption of the preferred shares may be made at any time after the lapse of two years from the date of issue, private respondents should have taken it upon themselves, after the lapse of the said period, to inquire from the petitioner the reason why the said shares have not been redeemed. As it is, not only two years had lapsed, as agreed upon, but an additional sixteen years passed before the private respondents saw it fit to demand their right. The petitioner, at the time it issued said preferred shares to the private respondents in 1961, could not have known that it would be suffering from chronic reserve deficiency twelve years later. Had the private respondents been vigilant in asserting their rights, the redemption could have been effected at a time when the petitioner bank was not suffering from any financial crisis.
Issue: Can the holder redeem?
Ruling:
What respondent judge failed to recognize was that while the stock certificate does allow redemption, the option to do so was clearly vested in the petitioner bank. The redemption therefore is clearly the type known as "optional". Thus, except as otherwise provided in the stock certificate, the redemption rests entirely with the corporation and the stockholder is without right to either compel or refuse the redemption of its stock. Furthermore, the terms and conditions set forth therein use the word "may". It is a settled doctrine in statutory construction that the word "may" denotes discretion, and cannot be construed as having a mandatory effect. We fail to see how respondent judge can ignore what, in his words, are the "very wordings of the terms and conditions in said stock certificates" and construe what is clearly a mere option to be his legal basis for compelling the petitioner to redeem the shares in question.
The redemption of said shares cannot be allowed. As pointed out by the petitioner, the Central Bank made a finding that said petitioner has been suffering from chronic reserve deficiency, and that such finding resulted in a directive, issued on January 31, 1973 by then Gov. G.S. Licaros of the Central Bank, to the President and Acting Chairman of the Board of the petitioner bank prohibiting the latter from redeeming any preferred share, on the ground that said redemption would reduce the assets of the Bank to the prejudice of its depositors and creditors.
G.R. No. 169752 September 25, 2007
Facts:
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at the time it was created, was composed of animal aficionados and animal propagandists. The objects of the petitioner, as stated in Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted upon animals or the protection of animals in the Philippine Islands, and generally, to do and perform all things which may tend in any way to alleviate the suffering of animals and promote their welfare.
At the time of the enactment of Act No. 1285, the original Corporation Law, Act No. 1459, was not yet in existence. Act No. 1285 antedated both the Corporation Law and the constitution of the Securities and Exchange Commission. Important to note is that the nature of the petitioner as a corporate entity is distinguished from the sociedad anonimas under the Spanish Code of Commerce.
For the purpose of enhancing its powers in promoting animal welfare and enforcing laws for the protection of animals, the petitioner was initially imbued under its charter with the power to apprehend violators of animal welfare laws. In addition, the petitioner was to share one-half (1/2) of the fines imposed and collected through its efforts for violations of the laws related thereto. As originally worded, Sections 4 and 5 of Act No. 1285 provide:
Subsequently, however, the power to make arrests as well as the privilege to retain a portion of the fines collected for violation of animal-related laws were recalled by virtue of Commonwealth Act (C.A.) No. 148, which reads, in its entirety, thus:
Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No. 63 dated November 12, 1936, portions of which provide:
Whereas, during the first regular session of the National Assembly, Commonwealth Act Numbered One Hundred Forty Eight was enacted depriving the agents of the Society for the Prevention of Cruelty to Animals of their power to arrest persons who have violated the laws prohibiting cruelty to animals thereby correcting a serious defect in one of the laws existing in our statute books.
Whereas, the cruel treatment of animals is an offense against the State, penalized under our statutes, which the Government is duty bound to enforce;
By this when the COA was to perform an audit on them they refuse to do so, by the reason that they are a private entity and not under the said commission. On the other hand the COA decided that they are a government entity.
Issue: is the said petitioner a private entity?
Ruling:
First, the Court agrees with the petitioner that the “charter test” cannot be applied. Essentially, the “charter test” as it stands today provides:
[T]he test to determine whether a corporation is government owned or controlled, or private in nature is simple. Is it created by its own charter for the exercise of a public function, or by incorporation under the general corporation law? Those with special charters are government corporations subject to its provisions, and its employees are under the jurisdiction of the Civil Service Commission, and are compulsory members of the Government Service Insurance System.
The petitioner is correct in stating that the charter test is predicated, at best, on the legal regime established by the 1935 Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof.
During the formulation of the 1935 Constitution, the Committee on Franchises recommended the foregoing proscription to prevent the pressure of special interests upon the lawmaking body in the creation of corporations or in the regulation of the same. To permit the lawmaking body by special law to provide for the organization, formation, or regulation of private corporations would be in effect to offer to it the temptation in many cases to favor certain groups, to the prejudice of others or to the prejudice of the interests of the country.
And since the underpinnings of the charter test had been introduced by the 1935 Constitution and not earlier, it follows that the test cannot apply to the petitioner, which was incorporated by virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule that laws in general have no retroactive effect, unless the contrary is provided. All statutes are to be construed as having only a prospective operation, unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used. In case of doubt, the doubt must be resolved against the retrospective effect.
There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the law itself so expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and (5) in case of laws creating new rights. None of the exceptions is present in the instant case.
As a curative statute, and based on the doctrines so far discussed, C.A. No. 148 has to be given retroactive effect, thereby freeing all doubt as to which class of corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind of private domestic corporation, which the Court will further elaborate on under the fourth point.
The general principle of prospectivity of the law likewise applies to Act No. 1459, otherwise known as the Corporation Law, which had been enacted by virtue of the plenary powers of the Philippine Commission on March 1, 1906, a little over a year after January 19, 1905, the time the petitioner emerged as a juridical entity. Even the Corporation Law respects the rights and powers of juridical entities organized beforehand
Second, a reading of petitioner’s charter shows that it is not subject to control or supervision by any agency of the State, unlike government-owned and -controlled corporations. No government representative sits on the board of trustees of the petitioner. Like all private corporations, the successors of its members are determined voluntarily and solely by the petitioner in accordance with its by-laws, and may exercise those powers generally accorded to private corporations, such as the powers to hold property, to sue and be sued, to use a common seal, and so forth. It may adopt by-laws for its internal operations: the petitioner shall be managed or operated by its officers “in accordance with its by-laws in force.” The pertinent provisions of the charter provide:
Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain, William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield, Spencer Cosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles Lahesa, Josefina R. de Luzuriaga, and such other persons as may be associated with them in conformity with this act, and their successors, are hereby constituted and created a body politic and corporate at law, under the name and style of “The Philippines Society for the Prevention of Cruelty to Animals.”
As incorporated by this Act, said society shall have the power to add to its organization such and as many members as it desires, to provide for and choose such officers as it may deem advisable, and in such manner as it may wish, and to remove members as it shall provide.
It shall have the right to sue and be sued, to use a common seal, to receive legacies and donations, to conduct social enterprises for the purpose of obtaining funds, to levy dues upon its members and provide for their collection to hold real and personal estate such as may be necessary for the accomplishment of the purposes of the society, and to adopt such by-laws for its government as may not be inconsistent with law or this charter.
x x x x
Sec. 3. The said society shall be operated under the direction of its officers, in accordance with its by-laws in force, and this charter.
x x x x
Sec. 6. The principal office of the society shall be kept in the city of Manila, and the society shall have full power to locate and establish branch offices of the society wherever it may deem advisable in the Philippine Islands, such branch offices to be under the supervision and control of the principal office.
Third. The employees of the petitioner are registered and covered by the Social Security System at the latter’s initiative, and not through the Government Service Insurance System, which should be the case if the employees are considered government employees. This is another indication of petitioner’s nature as a private entity. Section 1 of Republic Act No. 1161, as amended by Republic Act No. 8282, otherwise known as the Social Security Act of 1997, defines the employer:
Employer – Any person, natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business, industry, undertaking or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government: Provided, That a self-employed person shall be both employee and employer at the same time. (Emphasis supplied)
Fourth. The respondents contend that the petitioner is a “body politic” because its primary purpose is to secure the protection and welfare of animals which, in turn, redounds to the public good.
This argument, is, at best, specious. The fact that a certain juridical entity is impressed with public interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation may be private although its charter contains provisions of a public character, incorporated solely for the public good. This class of corporations may be considered quasi-public corporations, which are private corporations that render public service, supply public wants, or pursue other eleemosynary objectives. While purposely organized for the gain or benefit of its members, they are required by law to discharge functions for the public benefit. Examples of these corporations are utility, railroad, warehouse, telegraph, telephone, water supply corporations and transportation companies. It must be stressed that a quasi-public corporation is a species of private corporations, but the qualifying factor is the type of service the former renders to the public: if it performs a public service, then it becomes a quasi-public corporation.
Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide, for the fact is that almost all corporations are nowadays created to promote the interest, good, or convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public benefit. Private schools and universities are likewise private corporations; and yet, they are rendering public service. Private hospitals and wards are charged with heavy social responsibilities. More so with all common carriers. On the other hand, there may exist a public corporation even if it is endowed with gifts or donations from private individuals.
The true criterion, therefore, to determine whether a corporation is public or private is found in the totality of the relation of the corporation to the State. If the corporation is created by the State as the latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private. Applying the above test, provinces, chartered cities, and barangays can best exemplify public corporations. They are created by the State as its own device and agency for the accomplishment of parts of its own public works.
It is clear that the amendments introduced by C.A. No. 148 revoked the powers of the petitioner to arrest offenders of animal welfare laws and the power to serve processes in connection therewith.
Fifth. The respondents argue that since the charter of the petitioner requires the latter to render periodic reports to the Civil Governor, whose functions have been inherited by the President, the petitioner is, therefore, a government instrumentality.
This contention is inconclusive. By virtue of the fiction that all corporations owe their very existence and powers to the State, the reportorial requirement is applicable to all corporations of whatever nature, whether they are public, quasi-public, or private corporations—as creatures of the State, there is a reserved right in the legislature to investigate the activities of a corporation to determine whether it acted within its powers. In other words, the reportorial requirement is the principal means by which the State may see to it that its creature acted according to the powers and functions conferred upon it. These principles were extensively discussed in Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on Good Government. Here, the Court, in holding that the subject corporation could not invoke the right against self-incrimination whenever the State demanded the production of its corporate books and papers, extensively discussed the purpose of reportorial requirements, viz:
x x x The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It received certain special privileges and franchises, and holds them subject to the laws of the state and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserve[d] right in the legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered a corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose. The defense amounts to this, that an officer of the corporation which is charged with a criminal violation of the statute may plead the criminality of such corporation as a refusal to produce its books. To state this proposition is to answer it. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation vested with special privileges and franchises may refuse to show its hand when charged with an abuse of such privileges. (Wilson v. United States, 55 Law Ed., 771, 780.)
INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents.
[G.R. No. 122174. October 3, 2002]
Facts:
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13, 1976 for the purpose of engaging in the business of manufacturing, producing, selling, exporting and otherwise dealing in any and all refractory bricks, its by-products and derivatives. On June 22, 1977, it registered its corporate and business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name “Synclaire Manufacturing Corporation”. It amended its Articles of Incorporation on August 23, 1985 to change its corporate name to “Industrial Refractories Corp. of the Philippines”. It is engaged in the business of manufacturing all kinds of ceramics and other products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix.
Discovering that petitioner was using such corporate name, respondent RCP filed on April 14, 1988 with the Securities and Exchange Commission (SEC) a petition to compel petitioner to change its corporate name on the ground that its corporate name is confusingly similar with that of petitioner’s such that the public may be confused or deceived into believing that they are one and the same corporation
Issue: Was there confusion in the corporate names?
Does The SEC have the power to decide over the issue?
Ruling:
“SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name.”
It is the SEC’s duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public, and it has authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to generate confusion. Clearly therefore, the present case falls within the ambit of the SEC’s regulatory powers.
Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership Names specifically requires that: (1) a corporate name shall not be identical, misleading or confusingly similar to one already registered by another corporation with the Commission; and (2) if the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive word different from the name of the company already registered.
As held in Philips Export B.V. vs. Court of Appeals, to fall within the prohibition of the law, two requisites must be proven, to wit:
(1) that the complainant corporation acquired a prior right over the use of such corporate name;
and
(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law.
As regards the first requisite, it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption. In this case, respondent RCP was incorporated on October 13, 1976 and since then has been using the corporate name “Refractories Corp. of the Philippines”. Meanwhile, petitioner was incorporated on August 23, 1979 originally under the name “Synclaire Manufacturing Corporation”. It only started using the name “Industrial Refractories Corp. of the Philippines” when it amended its Articles of Incorporation on August 23, 1985, or nine (9) years after respondent RCP started using its name. Thus, being the prior registrant, respondent RCP has acquired the right to use the word “Refractories” as part of its corporate name.
Anent the second requisite, in determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination and the Court must look to the record as well as the names themselves. Petitioner’s corporate name is “Industrial Refractories Corp. of the Phils.”, while respondent’s is “Refractories Corp. of the Phils.” Obviously, both names contain the identical words “Refractories”, “Corporation” and “Philippines”. The only word that distinguishes petitioner from respondent RCP is the word “Industrial” which merely identifies a corporation’s general field of activities or operations. We need not linger on these two corporate names to conclude that they are patently similar that even with reasonable care and observation, confusion might arise. It must be noted that both cater to the same clientele, i.e.¸ the steel industry. In fact, the SEC found that there were instances when different steel companies were actually confused between the two, especially since they also have similar product packaging. Such findings are accorded not only great respect but even finality, and are binding upon this Court, unless it is shown that it had arbitrarily disregarded or misapprehended evidence before it to such an extent as to compel a contrary conclusion had such evidence been properly appreciated.And even without such proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to occur.
Refractory materials are described as follows:
“Refractories are structural materials used at high temperatures to [sic] industrial furnaces. They are supplied mainly in the form of brick of standard sizes and of special shapes. Refractories also include refractory cements, bonding mortars, plastic firebrick, castables, ramming mixtures, and other bulk materials such as dead-burned grain magneside, chrome or ground ganister and special clay.”
While the word “refractories” is a generic term, its usage is not widespread and is limited merely to the industry/trade in which it is used, and its continuous use by respondent RCP for a considerable period has made the term so closely identified with it.
G.R. No. 51765 March 3, 1997
REPUBLIC PLANTERS BANK, petitioner,
vs.
HON. ENRIQUE A. AGANA, SR., as Presiding Judge, Court of First Instance of Rizal, Branch XXVIII, Pasay City, ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION and ADALIA F. ROBES, respondents.
FACTS:
On September 18, 1961, private respondent Corporation secured a loan from petitioner in the amount of P120,000.00. As part of the proceeds of the loan, preferred shares of stocks were issued to private respondent Corporation, through its officers then, private respondent Adalia F. Robes and one Carlos F. Robes. In other words, instead of giving the legal tender totaling to the full amount of the loan, which is P120,000.00, petitioner lent such amount partially in the form of money and partially in the form of stock certificates numbered 3204 and 3205, each for 400 shares with a par value of P10.00 per share, or for P4,000.00 each, for a total of P8,000.00. Said stock certificates were in the name of private respondent Adalia F. Robes and Carlos F. Robes, who subsequently, however, endorsed his shares in favor of Adalia F. Robes.
Said certificates of stock bear the following terms and conditions:
The Preferred Stock shall have the following rights, preferences, qualifications and limitations, to wit:
1. Of the right to receive a quarterly dividend of One Per Centum (1%), cumulative and participating.
xxx xxx xxx
2. That such preferred shares may be redeemed, by the system of drawing lots, at any time after two (2) years from the date of issue at the option of the Corporation. . . .
On January 31, 1979, private respondents proceeded against petitioner and filed a Complaint anchored on private respondents' alleged rights to collect dividends under the preferred shares in question and to have petitioner redeem the same under the terms and conditions of the stock certificates. Private respondents attached to their complaint, a letter-demand dated January 5, 1979 which, significantly, was not formally offered in evidence.
Issue: did the cause of action already lapse?
Ruling:
Anent the issue of prescription, this Court so holds that the claim of private respondent is already barred by prescription as well as laches. Art. 1144 of the New Civil Code provides that a right of action that is founded upon a written contract prescribes in ten (10) years. The letter-demand made by the private respondents to the petitioner was made only on January 5, 1979, or almost eighteen years after receipt of the written contract in the form of the stock certificate. As noted earlier, this letter-demand, significantly, was not formally offered in evidence, nor were any other evidence of demand presented. Therefore, we conclude that the only time the private respondents saw it fit to assert their rights, if any, to the preferred shares of stock, was after the lapse of almost eighteen years. The same clearly indicates that the right of the private respondents to any relief under the law has already prescribed. Moreover, the claim of the private respondents is also barred by laches. Laches has been defined as the failure or neglect, for an unreasonable length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.
Considering that the terms and conditions set forth in the stock certificate clearly indicate that redemption of the preferred shares may be made at any time after the lapse of two years from the date of issue, private respondents should have taken it upon themselves, after the lapse of the said period, to inquire from the petitioner the reason why the said shares have not been redeemed. As it is, not only two years had lapsed, as agreed upon, but an additional sixteen years passed before the private respondents saw it fit to demand their right. The petitioner, at the time it issued said preferred shares to the private respondents in 1961, could not have known that it would be suffering from chronic reserve deficiency twelve years later. Had the private respondents been vigilant in asserting their rights, the redemption could have been effected at a time when the petitioner bank was not suffering from any financial crisis.
Issue: Can the holder redeem?
Ruling:
What respondent judge failed to recognize was that while the stock certificate does allow redemption, the option to do so was clearly vested in the petitioner bank. The redemption therefore is clearly the type known as "optional". Thus, except as otherwise provided in the stock certificate, the redemption rests entirely with the corporation and the stockholder is without right to either compel or refuse the redemption of its stock. Furthermore, the terms and conditions set forth therein use the word "may". It is a settled doctrine in statutory construction that the word "may" denotes discretion, and cannot be construed as having a mandatory effect. We fail to see how respondent judge can ignore what, in his words, are the "very wordings of the terms and conditions in said stock certificates" and construe what is clearly a mere option to be his legal basis for compelling the petitioner to redeem the shares in question.
The redemption of said shares cannot be allowed. As pointed out by the petitioner, the Central Bank made a finding that said petitioner has been suffering from chronic reserve deficiency, and that such finding resulted in a directive, issued on January 31, 1973 by then Gov. G.S. Licaros of the Central Bank, to the President and Acting Chairman of the Board of the petitioner bank prohibiting the latter from redeeming any preferred share, on the ground that said redemption would reduce the assets of the Bank to the prejudice of its depositors and creditors.
Implied Trust (Art . 1456)
Vagilidad vs. Vagalidad
G.R. No. 161136
Facts:
A parcel of land was bought by Gabino and later on without the consent of the wife of Gabino was transferred to Wilfredo without any payment in conformity that Wilfredo can use the lot to as a collateral to obtain loan. And when the loan was paid and the mortgaged was cancelled. Spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages. But Wilfredo claimed that they are the owner the land because they already bought it to from the former owner who sold the same to Gabino. Then Gabino claimed that Wilfredo resort to fraud to obtain ownership of the said property.
Issue: Who is the rightful owner of the property?
Ruling:
The contract of sale between LORETO and GABINO, JR. on May 12, 1986 could be legally recognized. At the time of sale, LORETO had an aliquot share of one-third of the 4,280-square meter property or some 1,426 square meters but sold some 1,604 square meters to GABINO, JR. We have ruled that if a co-owner sells more than his aliquot share in the property, the sale will affect only his share but not those of the other co-owners who did not consent to the sale.Be that as it may, the co-heirs of LORETO waived all their rights and interests over Lot No. 1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987. They declared that they have previously received their respective shares from the other estate of their parents ZOILO and PURIFICACION. The rights of GABINO, JR. as owner over Lot No. 1253-B are thus preserved. These rights were not effectively transferred by LORETO to WILFREDO in the Deed of Absolute Sale of Portion of Land. Nor were these rights alienated from GABINO, JR. upon the issuance of the title to the subject property in the name of WILFREDO. Registration of property is not a means of acquiring ownership. Its alleged incontrovertibility cannot be successfully invoked by WILFREDO because certificates of title cannot be used to protect a usurper from the true owner or be used as a shield for the commission of fraud.
On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an action for reconveyance based on fraud prescribes after the lapse of four years. They cite Article 1391 of the Civil Code and the case of Gerona v. De Guzman.
We disagree. This Court explained in Salvatierra v. Court of Appeals, viz.:
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin v. Medalla, which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into effect until August 30, 1950 xxx. It must be stressed, at this juncture, that Article 1144 and Article 1456 are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.
[Thus,] under the present Civil Code, xxx just as an implied or constructive trust is an offspring of xxx Art. 1456, xxx so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis-á-vis prescription, Article 1144 of the Civil Code is applicable[, viz.:]
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment.
Rafferty vs. Province of Cebu
52 Phil 548
Principle: Implied ratification, Article 1901
Facts:
Plaintiff executed to defendant a power of attorney to convey land under which and within the scope of his authority, defendant executed certain conveyances and contracts, for which the purchasers gave him a check which was delivered to, and endorsed by plaintiff and the purchasers in good faith took actual possession and made valuable improvements on the property purchased.
Issue:
What is the effect of the acts of
Ruling:
A principal is deemed to have received the benefits of the unauthorized sale of his property and thereby ratified the transaction where the checks issued by the buyer in favor of the principal were credited to the latter’s account with bank or endorsed and negotiated by him.
After a lapse of 15 years, plaintiff is bound by the acts of his agent and is stopped to question the legality of the transactions upon the ground of fraud.
Montelibano vs. Bacolod-Murcia Milling Co.
95 Phil 407
Principle: Commission agent, Article 1904
Facts:
Plaintiffs are sugar planters, members of the Bacolod Murcia Planters' Association, Inc., or assignees of sugar planters. The former have contracts with the defendant corporation, hereinafter known as the Central, for the delivery of their sugar cane to the sugar mill of the defendant for milling and processing into sugar. At the time of the occupation of Negros Occidental by the Japanese forces ,there were on deposit at the Central's warehouse 664,091.22 piculs of sugar, of which 128,452.24 belonged to the plaintiffs, 284,425.81 to the defendant Central, and the balance to planters not parties to the action, the Japanese Military Administration, Visayan Branch, designated Fidel Henares, president of the Sugar Planters' Association, with the following authority:
. . . hereby authorized to sell and dispose of all sugar to the Mitsui Bussan Kaisha.
From the time of Mitsui Bussan Kaisha made purchases it began withdrawing sugar from the Central in sacks. As the sugar belonging to the planters and that of the Central were mixed up, and there being nothing to show what the vendee was withdrawing, it could not be determined whose sugar had been actually sold or withdrawn. The present action of plaintiffs is predicated on the claim that the defendant has already been fully paid for its share of the sugar in the warehouse.
The trial court found that the sugar remaining in the central's warehouse at the time of the liberation was already purchased by the Military Administration, but it could not withdraw the same by reason of the advent of the liberation; that as the sugar of the parties were all mixed up, none of the owners could claim exclusive ownership of those remaining in the warehouse.
Issue:
Is the contention of the plaintiff correct?
Ruling:
No. As the sugar of the plaintiffs and of the other planters and of the Central were stored together in one single mass, without separation of identification, and as it appears that the Mitsui Bussan Kaisha mad withdrawals of sugar from the Central's warehouse without express statement as to whose sugar was being withdrawn, whether the planters' or the Central's, it is absolutely impossible, physically or legally, to determine whose sugar it was that remained after the withdrawals. There is no legal basis for plaintiffs' proposition that as the taking of their sugar was without their consent, and that of the defendant's with its consent, all that remained is theirs. The only legal solution is, as the mass of sugar in the warehouse was owned in common, and as it is not possible to determine whose sugar was withdrawn and whose was not, the mass remaining must pertain to the original owners in the proportion of the original amounts owned by each of them. Article 381 provides that,
If, by the will of their owners, two things of identical or dissimilar nature are mixed, or if the mixture occurs accidentally, and in the latter case the things can not be separated without injury each owner shall acquire a right in the mixture proportionate to the part belonging to him, according to the value of the things mixed or commingled.
British Airways vs. CA
285 SCRA 461
Principle: Agent liable for negligence, Article 1909
Facts:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from British Airways. Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report."
Back in the Philippines, Mahtani filed his complaint for damages and attorney's fees against BA .
BA filed its answer with counter claimto the complaint raising, as special and affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.
Issue:
Is Mahtani entitled to damages? If so, from whom?
Ruling:
Yes, from British Airways. It is needful to state that the nature of an airline's contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business intended to serve the traveling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard.Neglect or malfeasance by the carrier's employees could predictably furnish bases for an action for damages.
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of caseswe have assessed the airlines' culpability in the form of damages for breach of contract involving misplaced luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendant's acts.
Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. 35 Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals, 37 while not exactly in point, the case, however, illustrates the principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties.
Express Trust
ESTATE OF EDWARD MILLER GRIMM vs. ESTATE OF CHARLES PARSONS
Facts:
Grimm and Parsons are 2 0f the 3 original partners of G – P and company. Both of them own shares on MGCC. Later on Grimm desires to assign his playing rights to Yoshida and to make it possible Grimm needs to transfer some of his shares to Parsons and make Yoshida an assignee of the company. But after the transfer but before they were able to inform the MGCC about the company the MGCC board accommodated Yoshida even not being an assignee, by then Parson wrote a letter to MGCC that the name of the shares to be retained in his name but he recognizes Grimm as the real owner, but on the other hand Grimm also emphasizes that he is still the original owner. But on the demise of Grimm the Partnership was continued by the Parsons and the other partner and adding up the sons of Parsons. And time came when Parsons also died. The issues arise when the Estate of Grimm is claiming back the shares and transfer it to their name. But the Estate of Parsons claimed that it was theirs and it was entrusted to the G – P and company as beneficiary of Parson, where by this time the Grimm is not already a part owner as part of dissolution of the old Partnership. The CA also decided in favor of the Parsons because the estate Grimm failed to present evidence to prove that Grimm really bought the property in question.
Issue: Who is the real owner?
Ruling:
Trust is the legal relationship between one having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. Trust relations between parties may be express, as when the trust is created by the intention of the trustor. An express trust is created by the direct and positive acts of the parties, by some writing or deed or by words evidencing an intention to create a trust; the use of the word trust is not required or essential to its constitution, it being sufficient that a trust is clearly intended. Implied trust comes into existence by operation of law, either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and even contrary to any such intention. Judging from their documented acts immediately before and subsequent to the actual transfer on September 7, 1964 of MC No. 590, Parsons, as transferee, and Grimm, as transferor, indubitably contemplated a trust arrangement.
And lest it be overlooked, Parsons had previously acknowledged Grimm to be the owner of MC No. 1088, after his earlier repeated declarations that the transfer of the replaced MC No. 580 was temporary. Parsons was thus in contextually in estoppel to deny, thru the Letter of Trust aforementioned, hypothetically assuming its authenticity, Grimm’s ownership of the replacement certificate.
No Implied Trust
Pilapil vs. Heirs of Maximo briones
G.R. No. 150175
Facts:
Donata and Maximino are married. When Maximino died, Donata through her petition she was able to transfer in her as a sole owner the properties acquired by Maximino prior to their marriage. When Donata died her niece and nephew took over the properties as administrator, by this time one of the descendants also file a petition to be appointed as administrator but it was not successful because the properties are already under the name of Donata and her descendants was already assigned as administrators. The heirs of Maximino claimed that they were defrauded by Donate when she successfully transferred the properties under her name and allege that Donata was just a trustee under Art 1451 of NCC.
Issue: Is Donata just a trustee?
Ruling:
No. The court finds that Donata did not use fraud when she transferred the properties in her name. Donata and some of Maximino’s siblings just live in the same street and from the wake Maximo it was only now that they made an action.
The heirs of Maximino failed to prove by clear and convincing evidence that Donata managed, through fraud, to have the real properties, belonging to the intestate estate of Maximino, registered in her name. In the absence of fraud, no implied trust was established between Donata and the heirs of Maximino under Article 1456 of the New Civil Code. Donata was able to register the real properties in her name, not through fraud or mistake, but pursuant to an Order, dated 2 October 1952, issued by the CFI in Special Proceedings No. 928-R. The CFI Order, presumed to be fairly and regularly issued, declared Donata as the sole, absolute, and exclusive heir of Maximino; hence, making Donata the singular owner of the entire estate of Maximino, including the real properties, and not merely a co-owner with the other heirs of her deceased husband. There being no basis for the Complaint of the heirs of Maximino in Civil Case No. CEB-5794, the same should have been dismissed.
PARTNERSHIP
MR. & MRS. GEORGE R. TAN vs. G.V.T. ENGINEERING SERVICES
G.R. No. 153057 August 7, 2006
Facts:
Tan spouses contracted G.V.T. for the construction project. The lack of knowledge of Tan in building construction they hired the services of Engineer Rudy Cadag to supervise the project. And before the completion of the project Tan deleted several portions of the contract upon Cadags’ declaration of lack of knowhow of the G.V.T. while it is already 96% complete, only to award the deletion to another contractor. By that G.V.T. filed a complaint against Tan and Cadag and prayed for indemnification and collect the balance for the respondent acted in bad faith and constituted breach of contract.
Issue: is the acting of Tan because of Cadags’ declaration gives rise to a liability?
Ruling:
Yes. Cadag was employed by the spouses Tan to supervise the construction of their house. Acting as such, his role is merely that of an agent. The essence of agency being the representation of another, it is evident that the obligations contracted are for and on behalf of the principal. A consequence of this representation is the liability of the principal for the acts of his agent performed within the limits of his authority that is equivalent to the performance by the principal himself who should answer therefor. In the present case, since there is neither allegation nor evidence that Cadag exceeded his authority, all his acts are considered as those of his principal, the spouses Tan, who are, therefore, the ones answerable for such acts.
Oesmer vs. Paraiso
G.R. No. 157493 February 5, 2007
Facts:
Oesmer siblings are co owners of a land that they have inherited. And later one of them, Ernesto, met with the Paraiso( a real estate company) for the brokering of the property as a result they drafted a contract to sell with an option money. The rest of the siblings except for 2 signed the contract to sell. Later on the Oesmers filed a petition to annul the contract with a contention that Ernesto was not an authorized agent, there was no written authority given to him as an agent with an authority to sell the immovable property.
Issue: Was the contention valid?
Ruling:
Yes. Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
But this contention is not given weight anymore.
However, despite petitioner Ernesto’s lack of written authority from the five petitioners to sell their shares in the subject parcels of land, the supposed Contract to Sell remains valid and binding upon the latter.
As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the other five petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in order to sell their shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were not selling their shares through an agent but, rather, they were selling the same directly and in their own right.
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Arbes Vs. Polistico
53 Phil 489
Facts:
This case has been brought for the second time to the SC. The first one was when the same plaintiffs appeared from the order of the court below sustaining the defendant's demurrer, and requiring the former to amend their complaint within a period, so as to include all the members of "Turnuhan Polistico & Co.," either as plaintiffs or as defendants. This court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an accounting for money and property in their possessions, it is not necessary that all members of the association be made parties to the action. (Borlasa vs. Polistico, 47 Phil., 345.) Hence, the court appointed Amadeo R. Quintos, of the Insular Auditor's Office, commissioner to examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence the parties might desire to present. The defendants objected to the commissioner's report, but the trial court, having examined the reasons for the objection, found the same sufficiently explained and rendered judgment, holding that the association "Turnuhan Polistico & Co." is unlawful, and sentencing the defendants jointly and severally to return the amount of P24,607.80, as well as the documents showing the uncollected credits of the association, to the plaintiffs in this case, and to the rest of the members of the said association represented by said plaintiffs, with costs against the defendants. The defendants contend that because "Turnuhan Polistico & Co.," is unlawful, some charitable institution to whom the partnership funds may be ordered to be turned over, should be included, as a party defendant. The appellants refer to article 1666 of the Civil Code, which provides: A partnership must have a lawful object, and must be established for the common benefit of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile of the partnership, or, in default of such, to those of the province.
Issue:
Should the charitable institutions be considered as necessary parties for the total disposition of this case?
Ruling:
No. Appellant's contention on this point is untenable. According to said article, no charitable institution is a necessary party in the present case of determination of the rights of the parties. The action which may arise from said article, in the case of unlawful partnership, is that for the recovery of the amounts paid by the member from those in charge of the administration of said partnership, and it is not necessary for the said parties to base their action to the existence of the partnership, but on the fact that of having contributed some money to the partnership capital. And hence, the charitable institution of the domicile of the partnership, and in the default thereof, those of the province are not necessary parties in this case. The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership, during its existence as result of the business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to base his action upon the partnership contract, which is to annul and without legal existence by reason of its unlawful object; and it is self evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable institution.
The profits are so applied, and not the contributions, because this would be an excessive and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the partner of the portion of the capital that he contributed, the circumstances of the two cases being entirely different.
Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.
Catalan Vs. Gatchalian
105 Phil 1270
G.R. No. L-11648 April 22, 1959
Facts:
Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the improvements thereon to secure a credit from the latter. The partnership failed to pay the obligation. The properties were sold to Dr. Marave at a public auction. Catalan redeemed the property and he contends that title should be cancelled and a new one must be issued in his name.
Issue:
Did Catalan’s redemption of the properties make him the absolute owner of the lands?
Ruling:
No. Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard to any benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the properties in question, he became a trustee and held the same in trust for his copartner Gatchalian, subject to his right to demand from the latter his contribution to the amount of redemption.
Art. 1830. The marriage of the general partner to a limited partner did not result in the dissolution of the partnership.
Commissioner of Internal Revenue Vs. Sutter
27 SCRA 152 G.R. No. L-25532 February 28, 1969
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed by herein respondent William J. Sutter as the general partner, and Julia Spirig and Gustav Carlson, as the limited partners. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. The firm was duly registered with the Securities and Excangange Commission and engaged in lawful business. Later, Sutter and Spirig got married while Carlson sold his share to the spouses. The limited partnership had been filing its income tax returns as a corporation, without objection by the herein petitioner, CIR, until in 1959 when the latter, in an assessment, consolidated the income of the firm and the individual incomes of the partners-spouses Sutter and Spirig resulting in a determination of a deficiency income tax against respondent Sutter. Respondent Sutter protested the assessment, and requested its cancellation and withdrawal, as not in accordance with law, but his request was denied. Unable to secure a reconsideration, he appealed to the CTA, which ruled in favor of Sutter.
Issue:
Was the partnership dissolved by the marriage of Sutter and Spirig and the subsequent sale of Carlson of his share to the spouses?
Ruling:
No. The appellant's view, that by the marriage of both partners the company became a single proprietorship, is erroneous. The capital contributions of partners William J. Sutter and Julia Spirig were separately owned and contributed by them before their marriage; and after they were joined in wedlock, such contributions remained their respective separate property under the Spanish Civil Code (Article 1396):
The following shall be the exclusive property of each spouse:
(a) That which is brought to the marriage as his or her own; ....
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own, distinct and separate from that of its partners (unlike American and English law that does not recognize such separate juridical personality), the bypassing of the existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding clear statutory mandates and basic principles of our law. The limited partnership's separate individuality makes it impossible to equate its income with that of the component members. True, section 24 of the Internal Revenue Code merges registered general co-partnerships (compañias colectivas) with the personality of the individual partners for income tax purposes. But this rule is exceptional in its disregard of a cardinal tenet of our partnership laws, and can not be extended by mere implication to limited partnerships.
As the limited partnership under consideration is taxable on its income, to require that income to be included in the individual tax return of respondent Sutter is to overstretch the letter and intent of the law. In fact, it would even conflict with what it specifically provides in its Section 24: for the appellant Commissioner's stand results in equal treatment, tax wise, of a general copartnership (compañia colectiva) and a limited partnership, when the code plainly differentiates the two. Thus, the code taxes the latter on its income, but not the former, because it is in the case of compañias colectivas that the members, and not the firm, are taxable in their individual capacities for any dividend or share of the profit derived from the duly registered general partnership (Section 26, N.I.R.C.; Arañas, Anno. & Juris. on the N.I.R.C., As Amended, Vol. 1, pp. 88-89).
(Art. 1816) Island Sales, Inc vs. United Pioneers General Construction
G.R. No. L-22493 July 31, 1975
65 SCRA 554
Facts:
United Pioneer bought a motorcycle on installment basis from Island Sales, Inc. It issued a promissory note in the amount of P9440 payable in 12 monthly instalments of P786.63. The first installment was to be paid on May 22, 1961, however, on July 22, 1961 it defaulted and Island Sales instituted a case enforcing the agreement in the promissory note making the entire balance due and demandable upon default. The Court found the defendant liable for the balance amounting to P7, 119.07. Furthermore, the general partners were held liable if the defendant company is not able to pay. Subsequently, one of the general partner’s liability was condoned by the plaintiff.
Issue:
Whether the condonation of a partner’s share in the debts of the company increases the remaining partners’ liability?
Ruling:
No. In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.
(Art. 1816) Island Sales, Inc vs. United Pioneers General Construction
G.R. No. L-22493 July 31, 1975
65 SCRA 554
Facts:
United Pioneer bought a motorcycle on installment basis from Island Sales, Inc. It issued a promissory note in the amount of P9440 payable in 12 monthly instalments of P786.63. The first installment was to be paid on May 22, 1961, however, on July 22, 1961 it defaulted and Island Sales instituted a case enforcing the agreement in the promissory note making the entire balance due and demandable upon default. The Court found the defendant liable for the balance amounting to P7, 119.07. Furthermore, the general partners were held liable if the defendant company is not able to pay. Subsequently, one of the general partner’s liability was condoned by the plaintiff.
Issue:
Whether the condonation of a partner’s share in the debts of the company increases the remaining partners’ liability?
Ruling:
No. In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.
By: Stacy Geli Pino
Vagilidad vs. Vagalidad
G.R. No. 161136
Facts:
A parcel of land was bought by Gabino and later on without the consent of the wife of Gabino was transferred to Wilfredo without any payment in conformity that Wilfredo can use the lot to as a collateral to obtain loan. And when the loan was paid and the mortgaged was cancelled. Spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages. But Wilfredo claimed that they are the owner the land because they already bought it to from the former owner who sold the same to Gabino. Then Gabino claimed that Wilfredo resort to fraud to obtain ownership of the said property.
Issue: Who is the rightful owner of the property?
Ruling:
The contract of sale between LORETO and GABINO, JR. on May 12, 1986 could be legally recognized. At the time of sale, LORETO had an aliquot share of one-third of the 4,280-square meter property or some 1,426 square meters but sold some 1,604 square meters to GABINO, JR. We have ruled that if a co-owner sells more than his aliquot share in the property, the sale will affect only his share but not those of the other co-owners who did not consent to the sale.Be that as it may, the co-heirs of LORETO waived all their rights and interests over Lot No. 1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987. They declared that they have previously received their respective shares from the other estate of their parents ZOILO and PURIFICACION. The rights of GABINO, JR. as owner over Lot No. 1253-B are thus preserved. These rights were not effectively transferred by LORETO to WILFREDO in the Deed of Absolute Sale of Portion of Land. Nor were these rights alienated from GABINO, JR. upon the issuance of the title to the subject property in the name of WILFREDO. Registration of property is not a means of acquiring ownership. Its alleged incontrovertibility cannot be successfully invoked by WILFREDO because certificates of title cannot be used to protect a usurper from the true owner or be used as a shield for the commission of fraud.
On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an action for reconveyance based on fraud prescribes after the lapse of four years. They cite Article 1391 of the Civil Code and the case of Gerona v. De Guzman.
We disagree. This Court explained in Salvatierra v. Court of Appeals, viz.:
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin v. Medalla, which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into effect until August 30, 1950 xxx. It must be stressed, at this juncture, that Article 1144 and Article 1456 are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.
[Thus,] under the present Civil Code, xxx just as an implied or constructive trust is an offspring of xxx Art. 1456, xxx so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis-á-vis prescription, Article 1144 of the Civil Code is applicable[, viz.:]
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment.
Rafferty vs. Province of Cebu
52 Phil 548
Principle: Implied ratification, Article 1901
Facts:
Plaintiff executed to defendant a power of attorney to convey land under which and within the scope of his authority, defendant executed certain conveyances and contracts, for which the purchasers gave him a check which was delivered to, and endorsed by plaintiff and the purchasers in good faith took actual possession and made valuable improvements on the property purchased.
Issue:
What is the effect of the acts of
Ruling:
A principal is deemed to have received the benefits of the unauthorized sale of his property and thereby ratified the transaction where the checks issued by the buyer in favor of the principal were credited to the latter’s account with bank or endorsed and negotiated by him.
After a lapse of 15 years, plaintiff is bound by the acts of his agent and is stopped to question the legality of the transactions upon the ground of fraud.
Montelibano vs. Bacolod-Murcia Milling Co.
95 Phil 407
Principle: Commission agent, Article 1904
Facts:
Plaintiffs are sugar planters, members of the Bacolod Murcia Planters' Association, Inc., or assignees of sugar planters. The former have contracts with the defendant corporation, hereinafter known as the Central, for the delivery of their sugar cane to the sugar mill of the defendant for milling and processing into sugar. At the time of the occupation of Negros Occidental by the Japanese forces ,there were on deposit at the Central's warehouse 664,091.22 piculs of sugar, of which 128,452.24 belonged to the plaintiffs, 284,425.81 to the defendant Central, and the balance to planters not parties to the action, the Japanese Military Administration, Visayan Branch, designated Fidel Henares, president of the Sugar Planters' Association, with the following authority:
. . . hereby authorized to sell and dispose of all sugar to the Mitsui Bussan Kaisha.
From the time of Mitsui Bussan Kaisha made purchases it began withdrawing sugar from the Central in sacks. As the sugar belonging to the planters and that of the Central were mixed up, and there being nothing to show what the vendee was withdrawing, it could not be determined whose sugar had been actually sold or withdrawn. The present action of plaintiffs is predicated on the claim that the defendant has already been fully paid for its share of the sugar in the warehouse.
The trial court found that the sugar remaining in the central's warehouse at the time of the liberation was already purchased by the Military Administration, but it could not withdraw the same by reason of the advent of the liberation; that as the sugar of the parties were all mixed up, none of the owners could claim exclusive ownership of those remaining in the warehouse.
Issue:
Is the contention of the plaintiff correct?
Ruling:
No. As the sugar of the plaintiffs and of the other planters and of the Central were stored together in one single mass, without separation of identification, and as it appears that the Mitsui Bussan Kaisha mad withdrawals of sugar from the Central's warehouse without express statement as to whose sugar was being withdrawn, whether the planters' or the Central's, it is absolutely impossible, physically or legally, to determine whose sugar it was that remained after the withdrawals. There is no legal basis for plaintiffs' proposition that as the taking of their sugar was without their consent, and that of the defendant's with its consent, all that remained is theirs. The only legal solution is, as the mass of sugar in the warehouse was owned in common, and as it is not possible to determine whose sugar was withdrawn and whose was not, the mass remaining must pertain to the original owners in the proportion of the original amounts owned by each of them. Article 381 provides that,
If, by the will of their owners, two things of identical or dissimilar nature are mixed, or if the mixture occurs accidentally, and in the latter case the things can not be separated without injury each owner shall acquire a right in the mixture proportionate to the part belonging to him, according to the value of the things mixed or commingled.
British Airways vs. CA
285 SCRA 461
Principle: Agent liable for negligence, Article 1909
Facts:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from British Airways. Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report."
Back in the Philippines, Mahtani filed his complaint for damages and attorney's fees against BA .
BA filed its answer with counter claimto the complaint raising, as special and affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.
Issue:
Is Mahtani entitled to damages? If so, from whom?
Ruling:
Yes, from British Airways. It is needful to state that the nature of an airline's contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business intended to serve the traveling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard.Neglect or malfeasance by the carrier's employees could predictably furnish bases for an action for damages.
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of caseswe have assessed the airlines' culpability in the form of damages for breach of contract involving misplaced luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendant's acts.
Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. 35 Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals, 37 while not exactly in point, the case, however, illustrates the principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties.
Express Trust
ESTATE OF EDWARD MILLER GRIMM vs. ESTATE OF CHARLES PARSONS
Facts:
Grimm and Parsons are 2 0f the 3 original partners of G – P and company. Both of them own shares on MGCC. Later on Grimm desires to assign his playing rights to Yoshida and to make it possible Grimm needs to transfer some of his shares to Parsons and make Yoshida an assignee of the company. But after the transfer but before they were able to inform the MGCC about the company the MGCC board accommodated Yoshida even not being an assignee, by then Parson wrote a letter to MGCC that the name of the shares to be retained in his name but he recognizes Grimm as the real owner, but on the other hand Grimm also emphasizes that he is still the original owner. But on the demise of Grimm the Partnership was continued by the Parsons and the other partner and adding up the sons of Parsons. And time came when Parsons also died. The issues arise when the Estate of Grimm is claiming back the shares and transfer it to their name. But the Estate of Parsons claimed that it was theirs and it was entrusted to the G – P and company as beneficiary of Parson, where by this time the Grimm is not already a part owner as part of dissolution of the old Partnership. The CA also decided in favor of the Parsons because the estate Grimm failed to present evidence to prove that Grimm really bought the property in question.
Issue: Who is the real owner?
Ruling:
Trust is the legal relationship between one having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. Trust relations between parties may be express, as when the trust is created by the intention of the trustor. An express trust is created by the direct and positive acts of the parties, by some writing or deed or by words evidencing an intention to create a trust; the use of the word trust is not required or essential to its constitution, it being sufficient that a trust is clearly intended. Implied trust comes into existence by operation of law, either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and even contrary to any such intention. Judging from their documented acts immediately before and subsequent to the actual transfer on September 7, 1964 of MC No. 590, Parsons, as transferee, and Grimm, as transferor, indubitably contemplated a trust arrangement.
And lest it be overlooked, Parsons had previously acknowledged Grimm to be the owner of MC No. 1088, after his earlier repeated declarations that the transfer of the replaced MC No. 580 was temporary. Parsons was thus in contextually in estoppel to deny, thru the Letter of Trust aforementioned, hypothetically assuming its authenticity, Grimm’s ownership of the replacement certificate.
No Implied Trust
Pilapil vs. Heirs of Maximo briones
G.R. No. 150175
Facts:
Donata and Maximino are married. When Maximino died, Donata through her petition she was able to transfer in her as a sole owner the properties acquired by Maximino prior to their marriage. When Donata died her niece and nephew took over the properties as administrator, by this time one of the descendants also file a petition to be appointed as administrator but it was not successful because the properties are already under the name of Donata and her descendants was already assigned as administrators. The heirs of Maximino claimed that they were defrauded by Donate when she successfully transferred the properties under her name and allege that Donata was just a trustee under Art 1451 of NCC.
Issue: Is Donata just a trustee?
Ruling:
No. The court finds that Donata did not use fraud when she transferred the properties in her name. Donata and some of Maximino’s siblings just live in the same street and from the wake Maximo it was only now that they made an action.
The heirs of Maximino failed to prove by clear and convincing evidence that Donata managed, through fraud, to have the real properties, belonging to the intestate estate of Maximino, registered in her name. In the absence of fraud, no implied trust was established between Donata and the heirs of Maximino under Article 1456 of the New Civil Code. Donata was able to register the real properties in her name, not through fraud or mistake, but pursuant to an Order, dated 2 October 1952, issued by the CFI in Special Proceedings No. 928-R. The CFI Order, presumed to be fairly and regularly issued, declared Donata as the sole, absolute, and exclusive heir of Maximino; hence, making Donata the singular owner of the entire estate of Maximino, including the real properties, and not merely a co-owner with the other heirs of her deceased husband. There being no basis for the Complaint of the heirs of Maximino in Civil Case No. CEB-5794, the same should have been dismissed.
PARTNERSHIP
MR. & MRS. GEORGE R. TAN vs. G.V.T. ENGINEERING SERVICES
G.R. No. 153057 August 7, 2006
Facts:
Tan spouses contracted G.V.T. for the construction project. The lack of knowledge of Tan in building construction they hired the services of Engineer Rudy Cadag to supervise the project. And before the completion of the project Tan deleted several portions of the contract upon Cadags’ declaration of lack of knowhow of the G.V.T. while it is already 96% complete, only to award the deletion to another contractor. By that G.V.T. filed a complaint against Tan and Cadag and prayed for indemnification and collect the balance for the respondent acted in bad faith and constituted breach of contract.
Issue: is the acting of Tan because of Cadags’ declaration gives rise to a liability?
Ruling:
Yes. Cadag was employed by the spouses Tan to supervise the construction of their house. Acting as such, his role is merely that of an agent. The essence of agency being the representation of another, it is evident that the obligations contracted are for and on behalf of the principal. A consequence of this representation is the liability of the principal for the acts of his agent performed within the limits of his authority that is equivalent to the performance by the principal himself who should answer therefor. In the present case, since there is neither allegation nor evidence that Cadag exceeded his authority, all his acts are considered as those of his principal, the spouses Tan, who are, therefore, the ones answerable for such acts.
Oesmer vs. Paraiso
G.R. No. 157493 February 5, 2007
Facts:
Oesmer siblings are co owners of a land that they have inherited. And later one of them, Ernesto, met with the Paraiso( a real estate company) for the brokering of the property as a result they drafted a contract to sell with an option money. The rest of the siblings except for 2 signed the contract to sell. Later on the Oesmers filed a petition to annul the contract with a contention that Ernesto was not an authorized agent, there was no written authority given to him as an agent with an authority to sell the immovable property.
Issue: Was the contention valid?
Ruling:
Yes. Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
But this contention is not given weight anymore.
However, despite petitioner Ernesto’s lack of written authority from the five petitioners to sell their shares in the subject parcels of land, the supposed Contract to Sell remains valid and binding upon the latter.
As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the other five petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in order to sell their shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were not selling their shares through an agent but, rather, they were selling the same directly and in their own right.
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Arbes Vs. Polistico
53 Phil 489
Facts:
This case has been brought for the second time to the SC. The first one was when the same plaintiffs appeared from the order of the court below sustaining the defendant's demurrer, and requiring the former to amend their complaint within a period, so as to include all the members of "Turnuhan Polistico & Co.," either as plaintiffs or as defendants. This court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an accounting for money and property in their possessions, it is not necessary that all members of the association be made parties to the action. (Borlasa vs. Polistico, 47 Phil., 345.) Hence, the court appointed Amadeo R. Quintos, of the Insular Auditor's Office, commissioner to examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence the parties might desire to present. The defendants objected to the commissioner's report, but the trial court, having examined the reasons for the objection, found the same sufficiently explained and rendered judgment, holding that the association "Turnuhan Polistico & Co." is unlawful, and sentencing the defendants jointly and severally to return the amount of P24,607.80, as well as the documents showing the uncollected credits of the association, to the plaintiffs in this case, and to the rest of the members of the said association represented by said plaintiffs, with costs against the defendants. The defendants contend that because "Turnuhan Polistico & Co.," is unlawful, some charitable institution to whom the partnership funds may be ordered to be turned over, should be included, as a party defendant. The appellants refer to article 1666 of the Civil Code, which provides: A partnership must have a lawful object, and must be established for the common benefit of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile of the partnership, or, in default of such, to those of the province.
Issue:
Should the charitable institutions be considered as necessary parties for the total disposition of this case?
Ruling:
No. Appellant's contention on this point is untenable. According to said article, no charitable institution is a necessary party in the present case of determination of the rights of the parties. The action which may arise from said article, in the case of unlawful partnership, is that for the recovery of the amounts paid by the member from those in charge of the administration of said partnership, and it is not necessary for the said parties to base their action to the existence of the partnership, but on the fact that of having contributed some money to the partnership capital. And hence, the charitable institution of the domicile of the partnership, and in the default thereof, those of the province are not necessary parties in this case. The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership, during its existence as result of the business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to base his action upon the partnership contract, which is to annul and without legal existence by reason of its unlawful object; and it is self evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable institution.
The profits are so applied, and not the contributions, because this would be an excessive and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the partner of the portion of the capital that he contributed, the circumstances of the two cases being entirely different.
Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.
Catalan Vs. Gatchalian
105 Phil 1270
G.R. No. L-11648 April 22, 1959
Facts:
Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the improvements thereon to secure a credit from the latter. The partnership failed to pay the obligation. The properties were sold to Dr. Marave at a public auction. Catalan redeemed the property and he contends that title should be cancelled and a new one must be issued in his name.
Issue:
Did Catalan’s redemption of the properties make him the absolute owner of the lands?
Ruling:
No. Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard to any benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the properties in question, he became a trustee and held the same in trust for his copartner Gatchalian, subject to his right to demand from the latter his contribution to the amount of redemption.
Art. 1830. The marriage of the general partner to a limited partner did not result in the dissolution of the partnership.
Commissioner of Internal Revenue Vs. Sutter
27 SCRA 152 G.R. No. L-25532 February 28, 1969
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed by herein respondent William J. Sutter as the general partner, and Julia Spirig and Gustav Carlson, as the limited partners. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. The firm was duly registered with the Securities and Excangange Commission and engaged in lawful business. Later, Sutter and Spirig got married while Carlson sold his share to the spouses. The limited partnership had been filing its income tax returns as a corporation, without objection by the herein petitioner, CIR, until in 1959 when the latter, in an assessment, consolidated the income of the firm and the individual incomes of the partners-spouses Sutter and Spirig resulting in a determination of a deficiency income tax against respondent Sutter. Respondent Sutter protested the assessment, and requested its cancellation and withdrawal, as not in accordance with law, but his request was denied. Unable to secure a reconsideration, he appealed to the CTA, which ruled in favor of Sutter.
Issue:
Was the partnership dissolved by the marriage of Sutter and Spirig and the subsequent sale of Carlson of his share to the spouses?
Ruling:
No. The appellant's view, that by the marriage of both partners the company became a single proprietorship, is erroneous. The capital contributions of partners William J. Sutter and Julia Spirig were separately owned and contributed by them before their marriage; and after they were joined in wedlock, such contributions remained their respective separate property under the Spanish Civil Code (Article 1396):
The following shall be the exclusive property of each spouse:
(a) That which is brought to the marriage as his or her own; ....
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own, distinct and separate from that of its partners (unlike American and English law that does not recognize such separate juridical personality), the bypassing of the existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding clear statutory mandates and basic principles of our law. The limited partnership's separate individuality makes it impossible to equate its income with that of the component members. True, section 24 of the Internal Revenue Code merges registered general co-partnerships (compañias colectivas) with the personality of the individual partners for income tax purposes. But this rule is exceptional in its disregard of a cardinal tenet of our partnership laws, and can not be extended by mere implication to limited partnerships.
As the limited partnership under consideration is taxable on its income, to require that income to be included in the individual tax return of respondent Sutter is to overstretch the letter and intent of the law. In fact, it would even conflict with what it specifically provides in its Section 24: for the appellant Commissioner's stand results in equal treatment, tax wise, of a general copartnership (compañia colectiva) and a limited partnership, when the code plainly differentiates the two. Thus, the code taxes the latter on its income, but not the former, because it is in the case of compañias colectivas that the members, and not the firm, are taxable in their individual capacities for any dividend or share of the profit derived from the duly registered general partnership (Section 26, N.I.R.C.; Arañas, Anno. & Juris. on the N.I.R.C., As Amended, Vol. 1, pp. 88-89).
(Art. 1816) Island Sales, Inc vs. United Pioneers General Construction
G.R. No. L-22493 July 31, 1975
65 SCRA 554
Facts:
United Pioneer bought a motorcycle on installment basis from Island Sales, Inc. It issued a promissory note in the amount of P9440 payable in 12 monthly instalments of P786.63. The first installment was to be paid on May 22, 1961, however, on July 22, 1961 it defaulted and Island Sales instituted a case enforcing the agreement in the promissory note making the entire balance due and demandable upon default. The Court found the defendant liable for the balance amounting to P7, 119.07. Furthermore, the general partners were held liable if the defendant company is not able to pay. Subsequently, one of the general partner’s liability was condoned by the plaintiff.
Issue:
Whether the condonation of a partner’s share in the debts of the company increases the remaining partners’ liability?
Ruling:
No. In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.
(Art. 1816) Island Sales, Inc vs. United Pioneers General Construction
G.R. No. L-22493 July 31, 1975
65 SCRA 554
Facts:
United Pioneer bought a motorcycle on installment basis from Island Sales, Inc. It issued a promissory note in the amount of P9440 payable in 12 monthly instalments of P786.63. The first installment was to be paid on May 22, 1961, however, on July 22, 1961 it defaulted and Island Sales instituted a case enforcing the agreement in the promissory note making the entire balance due and demandable upon default. The Court found the defendant liable for the balance amounting to P7, 119.07. Furthermore, the general partners were held liable if the defendant company is not able to pay. Subsequently, one of the general partner’s liability was condoned by the plaintiff.
Issue:
Whether the condonation of a partner’s share in the debts of the company increases the remaining partners’ liability?
Ruling:
No. In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.
By: Stacy Geli Pino
2006 Mercantile Law Case Digests
NEGOTIABLE INSTRUMENTS LAW
SIGNATURE OF DECEASED SHOWN; PRIMA FACIE PRESUMED TO BE A PARTY TO A CHECK FOR VALUE
FELICITO SANSON, ET AL. VS. COURT OF APPEALS
G.R. No. 127745. April 22, 2003
Facts: Felicito Sanson filed a special proceeding for the settlement of the estate of Juan See. Sanson claimed that the deceased was indebted to him in the amount of Php 603, 000.00 and to his sister Caledonia Sanson-Saquin in the amount of Php 320,000.00. also petitioner Eduardo Montinola and his mother filed separate claims against the estate alleging that the deceased owed them Php50,000 and Php 150, 000, respectively. During the trial, Caledonia and Felicito Sanson testified that they had transaction with the deceased evidenced by six checks issued by the deceased before he died and that after his death, Felicito and Caledonia presented the checks to the bank for payment but were dishonored due to the closure of the account. The same transaction happened to Eduardo and Angeles Montionola but when they presented the check to the bank, it was dishonored. Demand letters were sent to the heirs of the deceased but the checks remained unsettled.
Issue: Whether or not presumption of consideration may be rebutted even if the heirs did not present any evidence to controvert it.
Held: When the fact was established by a witness that it was the deceased who signed the checks and in fact who entered into the transaction, the genuineness of the deceased signature having been shown, the latter is prima facie presumed to have been a party to the check for value, following Section 24 of NIL which provides that “every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.”
Since the prima facie presumption was not rebutted or contradicted by the heirs, it has become conclusive.
PROMISSORY NOTES; PRESCRIPTION OF ACTION
QUIRINO GONZALES, ET AL. VS. COURT OF APPEALS, ET AL.
G.R. No. 126568. April 30, 2003
Facts: Petitioners applied for credit accommodations with respondent bank, which the bank approved granting a credit line of Php900,000.00. Petitioner’s obligations were secured by a real estate mortgage on four parcels of land. Also, petitioners had made certain advances in separate transactions from the bank in connection with QGLC’s exportation of logs and executed a promissory note in 1964.
Due to petitioner’s long default in the payment of their obligations under the credit line, the bank foreclosed the mortgage and sold the properties covered to the highest bidder in the auction. Respondent bank, alleging non-payment of the balance of QGLC’s obligation after the proceedings of the foreclosure sale were applied and non-payment of promissory notes despite repeated demands, filed a complaint for sum of money against petitioners.
Petitioners, on the other hand, asserted that the complaint states no cause of action and assuming that it does, the same is barred by prescription or void for want of consideration.
Issue: Whether or not the cause of action is barred by prescription.
Held: An action upon a written contract, an obligation created by law, and a judgment must be brought within 10 years from the time the right of action accrues.
The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Bank’s first to sixth causes had arisen is not disputed. The Bank contends, however, that the notices of foreclosure sale in the foreclosure proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their past due loan obligations with the Bank; hence, said notices of foreclosure sale interrupted the running of the prescriptive period.
The Bank’s contention has no merit. Prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.
The law specifically requires a written extrajudicial demand by the creditor which is absent in the case at bar. The contention that the notices of foreclosure are tantamount to a written extrajudicial demand cannot be appreciated, the contents of said notices not having been brought to light.
But even assuming that the notices interrupted the running of the prescriptive period, the argument would still not lie for the following reasons:
The Bank seeks the recovery of the deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage action because its purpose is to enforce the mortgage contract. A mortgage action prescribes after ten years from the time the right of action accrued.
The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the property at public auction and the outstanding obligation proceedings. In the present case, the Bank, as mortgagee, had the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965. as it filed the complaint only on January 27, 1977, more than ten years had already elapsed, hence, the action had then prescribed.
HOLDER IN DUE COURSE; PRESUMPTION OF ACQUISITION OF AN INSTRUMENT FOR A CONSIDERATION
CELY YANG VS. COURT OF APPEALS, ET AL.
G.R. No. 138074. August 15, 2003
Facts: Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking Corp. and Far east Bank and Trust Company (FEBTC) two cashier’s checks in the amount of P2.087 million each, payable to Fernando david and FEBTC dollar draft in the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang gave the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet Chandiramani to turn over the checks and the dollar draft, and the latter would in turn deliver to the former Phil. Commercial International Bank (PCIB) manager’s check in the sum of P4.2 million and the dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashier’s checks and the dollar draft. The loss was then reported to the police. It transpired, however that the checks and the dollar draft were never lost, for Chandiramani was able to get hold of them without delivering the exchange consideration consisting of PCIB Manager’s checks. Two hours after Chandiramani was able to meet Ranigo, the former delivered to David the two cashier’s checks of Yang and, in exchange, got US $360,000 from David, who in turn deposited them. Chandiramani also deposited the dollar draft in PCIG FCDU No. 4194-0165-2.
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both Banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU Account No. 4194-0165-2 to received the amount of US $ 200, 000.
Issue: (1) Whether or not David may be considered a holder in due course.
(2) Whether or not the presumption that every party to an instrument acquired the same for a consideration is applicable in this case.
Held: (1) Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a “payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.”
In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor.
(2) The presumption is that every party to an instrument acquired the same for a consideration. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in David’s case, otherwise he cannot be deemed a holder in due course.
Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. Thus, the law itself creates a presumption in David’s favor that he gave valuable consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said consideration. However, petitioner failed to discharge her burden of proof. The petitioner’s averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$ 360,000 as consideration for the said instruments.
LIABILITY OF MAKERS OF PROMISSORY NOTE
ASTRO ELECTRONIC CORP. & ROXAS VS. PHIL. EXPORT &FOREIGN LOAN GUARANTEE CORP.
G.R. No. 136729. September 23, 2003
Facts: Astro Electronic Corp. (Astro) was granted several loans by Phil. Trust Co. (Phil Trust) amounting to Php 3,000.00 with interest and secured by three promissory notes. In each note, it appears that Roxas signed twice as president of Astro and in his personal capacity. Thereafter, Philippine Export & Foreign Guarantee Corp. (Phil Guarantee), with the consent of Astro, guaranteed in favor of Phil Trust the payment of 70% of Astro’s loan. Upon the latter’s failure to pay its loan obligation, despite demands, Phil Guarantee paid 70% of the guaranteed loan. The Phil Trust and Phil Guarantee subsequently filed against astro and Roxas a complaint for sum of money. The Regional Trial Court rendered its decision ordering Astro & Roxas to pay jointly and severally Phil Guarantee the sum of Php 3, 621, 187.52 with interest and cost.
Issue: Whether or not Roxas should be jointly and severally liable with Astro for the sum awarded by the RTC.
Held: By signing twice, as president of Astro and in his personal capacity, Roxas became a co-maker of the notes and cannot escape any liability arising from it. Under the NIL, persons who write their names on the face of the note as makers, promising that they will pay to the order of the payee or any holder according to its tenor will be liable as such. Roxas is primarily liable as a joint and several debtor considering that his intention to be liable is manifested by the fact that he affixed his signature twice in each of the three promissory notes which necessarily would imply that he is undertaking the obligation in two different capacities, official and personal.
NOVATION; LOANS; SOLIDARY OBLIGATIONS; PROMISSORY NOTE; ACCOMODATION PARTY
ROMEO GARCIA VS. DIONISIO LLAMAS
G.R. No. 154127. December 8, 2003
Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against Petitioner Romeo Garcia and Eduardo de Jesus alleging that the two borrowed Php 400, 000 from him. They bound themselves jointly and severally to pay the loan on or before January 23, 1997 with a 15% interest per month. The loan remained unpaid despite repeated demands by respondent.
Petitioner resisted the complaint alleging that he signed the promissory note merely as an accommodation party for de Jesus and the latter had already paid the loan by means of a check and that the issuance of the check and acceptance thereof novated or superseded the note.
The trial court rendered a judgment on the pleadings in favor of the respondent and directed petitioner to pay jointly and severally respondent the amounts of Php 400, 000 representing the principal amount plus interest at 15% per month from January 23, 1997 until the same shall have been fully paid, less the amount of Php 120,000 representing interests already paid.
The Court of Appeals ruled that no novation, express or implied, had taken place when respondent accepted the check from de Jesus. According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and de Jesus. Respondent’s acceptance of the check did not serve to make de Jesus the sole debtor because first, the obligation incurred by him and petitioner was joint and several; and second, the check which had been intended to extinguish the obligation bounced upon its presentment.
Issues: (1) Whether or not there was novation of the obligation
(2) Whether or not the defense that petitioner was only an accommodation party had any basis.
Held: For novation to take place, the following requisites must concur: (1) There must be a previous valid obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be extinguished; and (4) there must be a valid new contract.
The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check or that the check would take the place of the note. There is no incompatibility between the promissory note and the check.
Neither could the payment of interests, which in petitioner’s view also constitutes novation, change the terms and conditions of the obligation. Such payment was already provided for in the promissory note and, like the check, was totally in accord with the terms thereof.
Also unmeritorious is petitioner’s argument that the obligation was novated by the substitution of debtors. In order to change the person of the debtor, the old must be expressly released from the obligation, and the third person or new debtor must assume the former’s place in the relation. Well-settled is the rule that novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus incumbent on petitioner to show clearly and unequivocally that novation has indeed taken place. Note also that for novation to be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor.
In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly and severally liable with de Jesus, petitioner is therefore liable for the entire obligation.
(2) By its terms, the note was made payable to a specific person rather than bearer to or order—a requisite for negotiability. Hence, petitioner cannot avail himself of the NIL’s provisions on the liabilities and defenses of an accommodation party. Besides, a non-negotiable note is merely a simple contract in writing and evidence of such intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL.
Even granting that the NIL was applicable, still petitioner would be liable for the note. An accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissory debtor from the beginning. The liability is immediate and direct.
BOUNCING CHECKS LAW
QUE VS. PEOPLE
154 SCRA 160
Facts: Vicotr Que deliberately issued checks to cover accounts but the checks were dishonored upon presentment. Que was convicted by the RTC of the crime of violating B.P. Blg. 22 on two counts which decision was affirmed by the CA. que alleged, among others, that he issued the checks in question merely to guarantee the payment of the purchases by Powerhouse Supply, Inc. of which he is the manager.
Issue: Whether dishonored checks issued merely to guarantee payment constitute violation of B.P. Blg. 22.
Held: It is now well-settled that B.P. Blg. 22. applies even in cases where dishonored checks are issued merely in form of deposit or a guarantee. The enactment does not make any distinction as to whether the checks within its contemplation are issued, in payment of an obligation or merely to guarantee said obligation. Consequently, what are important are the facts that the accused deliberately issued the checks to cover accounts and that the checks were dishonored upon presentment regardless of whether or not the accused merely issued the checks as a guarantee. It is the intention of the framers of B.P. Blg. 22. to make the mere act of issuing a worthless check malum prohibitum and thus punishable under such law.
INSURANCE
WHITE GOLD MARINE SERVICES, INC. VS. PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD.
G.R. No. 154514. July 28, 2005
Facts: White Gold Marine Services, Inc. procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association Limited through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 and 187, while Pioneer violated Sections 299, to 301 of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club. Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed; hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P & I Clubs vis-à-vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual.
Issues: (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
Held: The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance.
A P & I Club is “a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission.
On the second issue, Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship Mutual. Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual.
PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION
G.R. No. 136888. June 29, 2005
Facts: Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance. Respondent Chemoil Lighterage Corporation is also a domestic corporation engaged in the transport of goods. On 24 January 1991, Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT “TACHIBANA” which was valued at US$90,201.57 and another 436.70 metric tons of DOP valued at US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all risks. The insurance was under Marine Policies No. MRN-30721[5] dated 06 February 1991. Marine Endorsement No. 2786[7] dated 11 May 1991 was attached and formed part of MRN-30721, amending the latter’s insured value to P24,667,422.03, and reduced the premium accordingly. The ocean tanker MT “TACHIBANA” unloaded the cargo to the tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it formally made an insurance claim for the loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples taken were discolored. Inspection of cargo tanks showed manhole covers of ballast tanks’ ceilings loosely secured and that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress. Petitioner paid PGP the full and final payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the latter’s services.
On 15 July 1991, an action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Br.16, City of Manila. Respondent filed an answer which admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After due hearing, the trial court rendered a Decision in favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision reversing the trial court. A petition for review on certiorar[ was filed by the petitioner with this Court.
Issues: 1. Whether or not the Notice of Claim was filed within the required period.
2.Whether or not the damage to the cargo was due to the fault or negligence of the respondent.
Held: Article 366 of the Code of Commerce has profound application in the case at bar, which provides that; “Within twenty-four hours following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the packages.” After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.
As to the first issue, the petitioner contends that the notice of contamination was given by PGP employee, to Ms. Abastillas, at the time of the delivery of the cargo, and therefore, within the required period. The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. The Court of Appeals declared:that a telephone call made to defendant-company could constitute substantial compliance with the requirement of notice. However, it must be pointed out that compliance with the period for filing notice is an essential part of the requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods, the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately apparent. We have examined the evidence, and We are unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the carrier.[27]
Nothing in the trial court’s decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours from the time the goods were received. The Court of Appeals made the same finding. Having examined the entire records of the case, we cannot find a shred of evidence that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed.
The requirement that a notice of claim should be filed within the period stated by Article 366 of the Code of Commerce is not an empty or worthless proviso.
The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties.
The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.[31]
We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within the period provided for under Article 366 of the Code of Commerce. Petitioner’s contention proceeds from a false presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the second issue.
EXEMPTION SHOULD BE PROVEN IN ORDER TO QUALIFY UNDEREXCEPTION CLAUSE OF INSURANCE POLICY
COUNTRY BANKERS INSURANCE CORP. VS. LIANGA BAY & COMMUNITY MULTI-PURPOSE COOPERATIVE, INC.
G.R. No.136914, January 25, 2002
Facts: Country Banker’s Insurance Corp. (CBIC) insured the building of respondent Lianga Bay and Community Multi-Purpose Corp., Inc. against fire, loss, damage, or liability during the period starting June 20, 1990 for the sum of Php.200,000.00. On July 1, 1989 at about 12:40 in the morning a fire occurred. The respondent filed the insurance claim but the petition denied the same on the ground that the building was set on fire by two NPA rebels and that such loss was an excepted risk under par.6 of the conditions of the insurance policy that the insurance does not cover any loss or damage occasioned by among others, mutiny, riot, military or any uprising. Respondent filed an action for recovery of loss, damage or liability against petitioner and the Trial Court ordered the petition to pay the full value of the insurance.
Issue: Whether or not the insurance corporation is exempted to pay based on the exception clause in the insurance policy.
Held: The Supreme Court held that the insurance corporation has the burden of proof to show that the loss comes within the purview of the exception or limitation set-up. But the insurance corporation cannot use a witness to prove that the fire was caused by the NPA rebels on the basis that the witness learned this from others. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. The petitioner, failing to prove the exception, cannot rely upon on exemption or exception clause in the fire insurance policy. The petition was granted.
BREACH OF CONTRACT OF INSURANCE
MALAYAN INSURANCE CO., VS. PHIL.NAILS & WIRES CORP.
G.R. No.138084, April 10, 2002
Facts: Respondent Phil. Nails & Wires Corp. insured against all risk its shipment of 10,053.40 metric tons of steel billet with petitioner Malayan Insurance Co., Inc., the shipment delivered was short by 377.168 metric tons. For this shortage, respondent claimed insurance for Php.5,250,000.00. Petitioner refused to pay. On July 28, 1993, respondent filed a complaint against petitioner for the Sum of money with RTC of Pasig. Petitioner moved to dismiss for failure to state cause of action but it was denied. On November 4, 1994, respondent moved to declare petitioner in default and the trial court granted and allowed the presentation of evidence ex parte. Respondent presented its lone witness, Jeanne King. On November 11, 1993, petitioner filed its answer but was expunged from the record for late filing. The Trial Court rendered a judgment by default.
Issue: Whether or not there is a cause of action and whether or not King is credible witness.
Held: The Supreme Court ruled that the respondent’s cause of action is founded on breach of insurance. To hold petitioner liable, respondent has to prove, first, its, its importation of 10,053.40 metric tons of steel billets and second, the actual steel billets delivered to and received by the respondent. Witness Jeanne King has personal knowledge of the goods imported steel billets received. Her testimony on steel billets received was hearsay because she based the summary only on the receipts prepared by the other person.
CONCEALMENT MADE IN GOOD FAITH; VALID INSURACE CONTRACT
PHILAMCARE HEALTH SYSTEMS, INC. VS. CA & JULITA RAMOS
G.R. No.125678, March 18, 2002
Facts: Ernani Trinos, deceased husband of Julita Ramos, applied for a health care coverage with the petitioner Philamcare. In the standard application form, he delivered no to a question asking him if he had been treated of any of the family member consulted for high blood, heart trouble, diabetes, cancer, liver disease, asthma or ulcer. The application was approved for a period of 1 year from and thus extended to June 1, 1990. During the period of coverage, Ernani suffered a heart attack and was confined for one month. Respondent Julita Ramos tried to claim saying that the health care Agreement was void as there was concealment regarding Ernani’s medical history. On July 24, 1990, after Ernani died, Julita Ramos instituted an action for damages against Philam care with the RTC Manila, which ruled against the latter.
Issue: Whether or not there is a valid insurance contract because of alleged concealment of material fact.
Held: The Supreme Court ruled that there is a valid insurance contract, after all, all the elements for an insurance contract are contract are present and alleged concealment answers made in good faith and without intent to deceive will not avoid the policy. The insurer, in case of material fact, is not justified in relying upon such statement, but obligated to make further inquiry.
PAYMENT BY INSURANCE COMPANY OF INSURABLE VALUE OF THE GOODS; INSURANCE COMPANY SUBROGATED TO THE RIGHTS OF THE ASSURED AGAINST THE COMMON CARRIER
DELSAN TRANSPORT LINES, INC. VS. CA ET.AL.
G.R. No.127897, November 15, 2001
Facts: Caltex Phil. entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc. for a period of one year whereby the petitioner agreed to transport Caltex industrial fuel oil from Batangas refinery to different parts of the country. On August 14, 1986, MT Maysun set sail for Zamboanga City but unfortunately the vessel in the early morning of August 16, 1986 near Panay Gulf. The shipment was insured with the private respondent, American Home Assurance Corporation. Subsequently, private respondent paid Caltex the sum of Php.5,096,635.57. Exercising its right of subrogation under Art. 2207, NCC, the private respondent demanded from the petitioner the same amount paid to Caltex. Due to its failure to collect from the petitioner, private respondent filed a complaint with the RTC of Makati City but the trial court dismissed the complaint, finding the vessel to be seaworthy and that the incident was due to a force majeure, thus exempting the petitioner from liability. However, the decision of the trial court was reversed by the CA, giving credence to the report of PAGASA that the weather was normal and that it was impossible for the vessel to sink.
Issue: Whether or not the payment made by private respondent for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.
Held: The payment by the private respondent for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.
TRANSPORTATION LAW
JAPAN AIRLINES VS. ASUNCION
G.R. No. 161730. January 28, 2005
Facts: On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, en employee of JAL endorsed their applications for shore pass and directed them to the Japanese immigration official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were detained at the Narita Airport Rest House where they were billeted overnight. A JAL employee was instructed that the respondents were to be “watched so as not to escape.” Respondents were charged US $400.00 each for their accommodation, security, service and meals.
Subsequently, respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel requirements and that they were rudely and forcibly detained at the Narita Airport. The trial court rendered a decision favor of the respondents. On appeal, the CA affirmed in toto the decision of the trial court.
Issue: Whether JAL is guilty of breach of contract.
Held: The SC found that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents’ shore pass applications.
SHIP AGENT; LIABILITIES
MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION February, 2005
Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade carrier certain goods in favor of ATLAS FERTILIZER CORPORATION. Subject shipments were insured with Provident Insurance Corp. against all risks.
When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses. Formal claims were then filed with Trade & Transport but MACONDRAY refused and failed to settle the same. MACONDRAY denies liability over the losses, it, having no absolute relation with Trade & Transport, the alleged operator of the vessel who transported the shipment; that accordingly, MACONDRAY is the local representative of the shipper; the charterer of M/V Trade Carrier and not party to this case; that it has no control over the acts of the captain and crew of the carrier and cannot be held responsible for any damage arising from the fault or negligence of said captain and crew; that upon arrival at the port, M/V Trade Carrier discharged the full amount of shipment as shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the vessel owned by Trade & Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade Carrier. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel. Further, the CA found that the evidence shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom’s Clearance. Petitioner’s employees were present at the port of destination one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel. These acts all point to the conclusion that it was the entity that represented the vessel at the port of destination and was the ship agent within the meaning and context of Article 586 of the Code of Commerce.
EXTRAORDINARY DILIGENCE; PRESUMPTION OF FAULT OR NEGLIGENCE REBUTTABLE
REPUBLIC OF THE PHIL., represented by the DEPARTMENT OF HEALTH, NATIONAL TRUCKING AND FORWARDING CORPORATION (NTFC) and COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC. (CARE) VS. LORENZO SHIPPING CORPORATION (LSC)
G.R. No. 153563. February 7, 2005
Facts: The Philippine government entered into a contract of carriage of goods with petitioner NTFC whereby the latter shipped bags of non-fat dried milk through respondent LSC. The consignee named in the bills of lading issued by the respondent was Abdurahma Jama, petitioner’s branch supervisor in Zamboanga City.
On reaching the port of Zamboanga City, the respondent’s agent unloaded the goods and delivered the same to petitioner’s warehouse. Before each delivery, the delivery checkers of respondent’s agent requested Jama to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, the delivery checkers asked Jama to sign the delivery receipts. However, at times when Jama had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, petitioner NTFC allegedly did not receive the good and filed a formal claim for non-delivery of the goods shipped through respondent. Respondent explained that the cargo had already been delivered to Jama. The government through the DOH, CARE and NTFC as plaintiffs filed an action for breach of contract of carriage against respondent as defendant.
Issue: Whether or not respondent is presumed at fault or negligent as common carrier for the loss or deterioration of the goods.
Held: Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods.
The respondent has observed such extraordinary diligence in the delivery of the goods. Prior to releasing the goods to Jama, the delivery checkers required the surrender of the original bills of lading, and in their absence, the certified true copies showing that Jama was indeed the consignee of the goods. In addition, they required Jama or his designated subordinates to sign the delivery receipts upon completion of each delivery.
PROMPT NOTICE OF CLAIM MUST BE MADE WITHIN THE PRESCRIBED PERIOD AS STATED IN THE BILL OF LADING
PROVIDENT INSURANCE CORP. (PIC) VS. COURT OF APPEALS and AZUCAR SHIPPING CORP. (ASC)
G.R. No. 118030. January 15, 2004
Facts: The vessel MV Eduardo II received on board a shipment of plastic woven bags of fertilizer in good order and condition which was consigned to Atlas Fertilizer Corporation (AFC) and covered by a bill of lading. In the process of unloading at the port of destination, certain goods were found to have fallen overboard and some considered being unrecovered spillages. Petitioner PIC indemnified the consignee AFC for its damages and seeks reimbursement from respondent ASC for the value of the losses/damages to the cargo. Respondent ASC argued that the claim or demand by petitioner had been waived, abandoned, or otherwise extinguished for failure of the consignee to comply with the required claim for damages set forth in Stipulation No. 7 of the Bill of Lading.
Issue: Whether or not failure to make the prompt notice of claim as required is fatal to the right of petitioner to claim indemnification for damages.
Held: There can be no question about the validity and enforceability of Stipulation No. 7 in the Bill of Lading. The 24-hour requirement under said stipulation is, by agreement of the contracting parties, a sine qua non for accrual of the right of action to recover damages against the carrier.
Considering that the prompt demand was necessary to foreclose the possibility of fraud or mistake in ascertaining the validity of claims, there was a need for the consignee or its agent to observe the conditions provided for in Stipulation No. 7. Hence, petitioner’s insistence that respondent carrier had knowledge of the damage because one of respondent’s officers supervised the unloading operations and signed a discharging receipt, cannot be construed as sufficient compliance with the said proviso. Moreover, a reading of the stipulation will readily show that upon the consignee or its agent rests the obligation to make the necessary claim within the prescribed period and not merely rely on the supposed knowledge of the damage by the carrier.
DEFINITION: COMMON CARRIER IN GENERAL
CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC.
G.R. No. 148496. March 19, 2002
Facts: A contract was entered into between Calvo and San Miguel Corporation (SMC) for the transfer of certain cargoes from the port area in Manila to the warehouse of SMC. The cargo was insured by UCPB General Insurance Co., Inc. When the shipment arrived and unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the same to SMC’s warehouse. When it was inspected, it was found out that some of the goods were torn. UCPB, being the insurer, paid for the amount of the damages and as subrogee thereafter, filed a suit against Calvo.
Petitioner, on the other hand, contends that it is a private carrier not required to observe such extraordinary diligence in the vigilance over the goods.
As customs broker, she does not indiscriminately hold her services out to the public but only to selected parties.
Issue: Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence in the vigilance over the goods.
Held: The law makes no distinction between a carrier offering its services to the general community or solicits business only from a narrow segment of the general population. Note that the transportation of goods holds an integral part of Calvo’s business, it cannot indeed be doubted that it is a common carrier.
FILING OF NOTICE OF CLAIM; ONE-YEAR PRESCRIPTIVE PERIOD
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. VS. PHIL. FIRST INSURANCE CO., INC.
G.R. No. 143133. June 5, 2002
Facts: On June 13, 1990, CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel Sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and within the subsequent days, discharged the subject cargo. Four coils were found to be in bad order, and the consignee declared the same as total loss.
The respondent filed its Notice of Claim only on September 18, 1990. the complaint was filed by respondent on July 25, 1991. Petitioners, on the other hand, claim that pursuant to the Carriage of Goods by Sea Act (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990 but respondent filed its Notice of Claim only on September 18, 1990.
Issue: Whether or not failure to file a Notice of Claim shall bar respondent from recovery.
Held: First, COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. In this case, prior to unloading the cargo, an Inspection Report as to the condition of the goods was prepared and signed by representative of both parties.
Second, a failure to file a Notice of Claim within three days will not bar recovery if it is nonetheless filed within one year. The one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. The cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive period.
FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP. (GPS)
G.R. No. 141910. August 6, 2002
Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certain goods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentified truck, resulting in damage to the cargoes.
FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit against GPS. GPS filed a motion to dismiss for failure to prove that it was a common carrier.
Issue: Whether or not GPS falls under the category of a common carrier.
Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to no other individual or entity.
A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freed from its liability based on culpa contractual.
STIPULATION IN THE CHARTER PARTY EXEMPTING LIABILITY
HOME INSURANCE CO. VS. AMERICAN STEAMSHIP AGENCIES
23 SCRA 24
Facts: A Peruvian firm shipped on board its vessel certain goods with San Miguel Brewery as its consignee and Home Insurance Co. (HIC) as its insurer. The cargo was found to have shortages when it arrived. HIC paid for said shortages and thereafter, demanded recovery of the amount from American Steamship Agencies (ASA). The trial court ordered ASA to reimburse HIC since according to the Code of Commerce, “the ship agent is civilly liable for damages in favor of third persons due to the conduct of the carrier’s captain and that the stipulation in the charter party exempting the owner of the ship from liability is against public policy.
Issue: Whether or not the stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid.
Held: The stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid and not against public policy considering that the ship was totally chartered for the use of a single party, hence, the public at large is not involved and strict public policy governing common carriers cannot be applied.
FORTUITOUS EVENT: EXEMPTION FROM LIABILITY
FORTUNE EXPRESS, INC. VS. COURT OF APPEALS
305 SCRA 14
Facts: A bus of Fortune Express, Inc. (FEI) figured in an accident with a jeepney which resulted in the death of several passengers including two Maranaos. It was found out that a Maranao owns said jeepney and certain Maranaos were planning to take revenge by burning some of FEI’s buses. The operations manager of FEI was advised to take precautionary measures but just the same, three armed Maranaos were able to seize a bus of FEI and set it on fire.
Issue: Whether the seizure of the bus was a fortuitous event which Fortune Express, Inc could not be held liable.
Held: A fortuitous event is an occurrence which could not be foreseen or which though foreseen, is inevitable. This factor of unforeseen-ability is lacking in this case for despite the report that the Maranaos were planning to burn FEI’s buses, nothing was really done by FEI to protect the safety of the passengers.
Posted by UNC Bar Operations Commission 2007
NEGOTIABLE INSTRUMENTS LAW
SIGNATURE OF DECEASED SHOWN; PRIMA FACIE PRESUMED TO BE A PARTY TO A CHECK FOR VALUE
FELICITO SANSON, ET AL. VS. COURT OF APPEALS
G.R. No. 127745. April 22, 2003
Facts: Felicito Sanson filed a special proceeding for the settlement of the estate of Juan See. Sanson claimed that the deceased was indebted to him in the amount of Php 603, 000.00 and to his sister Caledonia Sanson-Saquin in the amount of Php 320,000.00. also petitioner Eduardo Montinola and his mother filed separate claims against the estate alleging that the deceased owed them Php50,000 and Php 150, 000, respectively. During the trial, Caledonia and Felicito Sanson testified that they had transaction with the deceased evidenced by six checks issued by the deceased before he died and that after his death, Felicito and Caledonia presented the checks to the bank for payment but were dishonored due to the closure of the account. The same transaction happened to Eduardo and Angeles Montionola but when they presented the check to the bank, it was dishonored. Demand letters were sent to the heirs of the deceased but the checks remained unsettled.
Issue: Whether or not presumption of consideration may be rebutted even if the heirs did not present any evidence to controvert it.
Held: When the fact was established by a witness that it was the deceased who signed the checks and in fact who entered into the transaction, the genuineness of the deceased signature having been shown, the latter is prima facie presumed to have been a party to the check for value, following Section 24 of NIL which provides that “every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.”
Since the prima facie presumption was not rebutted or contradicted by the heirs, it has become conclusive.
PROMISSORY NOTES; PRESCRIPTION OF ACTION
QUIRINO GONZALES, ET AL. VS. COURT OF APPEALS, ET AL.
G.R. No. 126568. April 30, 2003
Facts: Petitioners applied for credit accommodations with respondent bank, which the bank approved granting a credit line of Php900,000.00. Petitioner’s obligations were secured by a real estate mortgage on four parcels of land. Also, petitioners had made certain advances in separate transactions from the bank in connection with QGLC’s exportation of logs and executed a promissory note in 1964.
Due to petitioner’s long default in the payment of their obligations under the credit line, the bank foreclosed the mortgage and sold the properties covered to the highest bidder in the auction. Respondent bank, alleging non-payment of the balance of QGLC’s obligation after the proceedings of the foreclosure sale were applied and non-payment of promissory notes despite repeated demands, filed a complaint for sum of money against petitioners.
Petitioners, on the other hand, asserted that the complaint states no cause of action and assuming that it does, the same is barred by prescription or void for want of consideration.
Issue: Whether or not the cause of action is barred by prescription.
Held: An action upon a written contract, an obligation created by law, and a judgment must be brought within 10 years from the time the right of action accrues.
The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Bank’s first to sixth causes had arisen is not disputed. The Bank contends, however, that the notices of foreclosure sale in the foreclosure proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their past due loan obligations with the Bank; hence, said notices of foreclosure sale interrupted the running of the prescriptive period.
The Bank’s contention has no merit. Prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.
The law specifically requires a written extrajudicial demand by the creditor which is absent in the case at bar. The contention that the notices of foreclosure are tantamount to a written extrajudicial demand cannot be appreciated, the contents of said notices not having been brought to light.
But even assuming that the notices interrupted the running of the prescriptive period, the argument would still not lie for the following reasons:
The Bank seeks the recovery of the deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage action because its purpose is to enforce the mortgage contract. A mortgage action prescribes after ten years from the time the right of action accrued.
The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the property at public auction and the outstanding obligation proceedings. In the present case, the Bank, as mortgagee, had the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965. as it filed the complaint only on January 27, 1977, more than ten years had already elapsed, hence, the action had then prescribed.
HOLDER IN DUE COURSE; PRESUMPTION OF ACQUISITION OF AN INSTRUMENT FOR A CONSIDERATION
CELY YANG VS. COURT OF APPEALS, ET AL.
G.R. No. 138074. August 15, 2003
Facts: Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking Corp. and Far east Bank and Trust Company (FEBTC) two cashier’s checks in the amount of P2.087 million each, payable to Fernando david and FEBTC dollar draft in the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang gave the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet Chandiramani to turn over the checks and the dollar draft, and the latter would in turn deliver to the former Phil. Commercial International Bank (PCIB) manager’s check in the sum of P4.2 million and the dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashier’s checks and the dollar draft. The loss was then reported to the police. It transpired, however that the checks and the dollar draft were never lost, for Chandiramani was able to get hold of them without delivering the exchange consideration consisting of PCIB Manager’s checks. Two hours after Chandiramani was able to meet Ranigo, the former delivered to David the two cashier’s checks of Yang and, in exchange, got US $360,000 from David, who in turn deposited them. Chandiramani also deposited the dollar draft in PCIG FCDU No. 4194-0165-2.
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both Banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU Account No. 4194-0165-2 to received the amount of US $ 200, 000.
Issue: (1) Whether or not David may be considered a holder in due course.
(2) Whether or not the presumption that every party to an instrument acquired the same for a consideration is applicable in this case.
Held: (1) Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a “payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.”
In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor.
(2) The presumption is that every party to an instrument acquired the same for a consideration. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in David’s case, otherwise he cannot be deemed a holder in due course.
Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. Thus, the law itself creates a presumption in David’s favor that he gave valuable consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said consideration. However, petitioner failed to discharge her burden of proof. The petitioner’s averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$ 360,000 as consideration for the said instruments.
LIABILITY OF MAKERS OF PROMISSORY NOTE
ASTRO ELECTRONIC CORP. & ROXAS VS. PHIL. EXPORT &FOREIGN LOAN GUARANTEE CORP.
G.R. No. 136729. September 23, 2003
Facts: Astro Electronic Corp. (Astro) was granted several loans by Phil. Trust Co. (Phil Trust) amounting to Php 3,000.00 with interest and secured by three promissory notes. In each note, it appears that Roxas signed twice as president of Astro and in his personal capacity. Thereafter, Philippine Export & Foreign Guarantee Corp. (Phil Guarantee), with the consent of Astro, guaranteed in favor of Phil Trust the payment of 70% of Astro’s loan. Upon the latter’s failure to pay its loan obligation, despite demands, Phil Guarantee paid 70% of the guaranteed loan. The Phil Trust and Phil Guarantee subsequently filed against astro and Roxas a complaint for sum of money. The Regional Trial Court rendered its decision ordering Astro & Roxas to pay jointly and severally Phil Guarantee the sum of Php 3, 621, 187.52 with interest and cost.
Issue: Whether or not Roxas should be jointly and severally liable with Astro for the sum awarded by the RTC.
Held: By signing twice, as president of Astro and in his personal capacity, Roxas became a co-maker of the notes and cannot escape any liability arising from it. Under the NIL, persons who write their names on the face of the note as makers, promising that they will pay to the order of the payee or any holder according to its tenor will be liable as such. Roxas is primarily liable as a joint and several debtor considering that his intention to be liable is manifested by the fact that he affixed his signature twice in each of the three promissory notes which necessarily would imply that he is undertaking the obligation in two different capacities, official and personal.
NOVATION; LOANS; SOLIDARY OBLIGATIONS; PROMISSORY NOTE; ACCOMODATION PARTY
ROMEO GARCIA VS. DIONISIO LLAMAS
G.R. No. 154127. December 8, 2003
Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against Petitioner Romeo Garcia and Eduardo de Jesus alleging that the two borrowed Php 400, 000 from him. They bound themselves jointly and severally to pay the loan on or before January 23, 1997 with a 15% interest per month. The loan remained unpaid despite repeated demands by respondent.
Petitioner resisted the complaint alleging that he signed the promissory note merely as an accommodation party for de Jesus and the latter had already paid the loan by means of a check and that the issuance of the check and acceptance thereof novated or superseded the note.
The trial court rendered a judgment on the pleadings in favor of the respondent and directed petitioner to pay jointly and severally respondent the amounts of Php 400, 000 representing the principal amount plus interest at 15% per month from January 23, 1997 until the same shall have been fully paid, less the amount of Php 120,000 representing interests already paid.
The Court of Appeals ruled that no novation, express or implied, had taken place when respondent accepted the check from de Jesus. According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and de Jesus. Respondent’s acceptance of the check did not serve to make de Jesus the sole debtor because first, the obligation incurred by him and petitioner was joint and several; and second, the check which had been intended to extinguish the obligation bounced upon its presentment.
Issues: (1) Whether or not there was novation of the obligation
(2) Whether or not the defense that petitioner was only an accommodation party had any basis.
Held: For novation to take place, the following requisites must concur: (1) There must be a previous valid obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be extinguished; and (4) there must be a valid new contract.
The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check or that the check would take the place of the note. There is no incompatibility between the promissory note and the check.
Neither could the payment of interests, which in petitioner’s view also constitutes novation, change the terms and conditions of the obligation. Such payment was already provided for in the promissory note and, like the check, was totally in accord with the terms thereof.
Also unmeritorious is petitioner’s argument that the obligation was novated by the substitution of debtors. In order to change the person of the debtor, the old must be expressly released from the obligation, and the third person or new debtor must assume the former’s place in the relation. Well-settled is the rule that novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus incumbent on petitioner to show clearly and unequivocally that novation has indeed taken place. Note also that for novation to be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor.
In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly and severally liable with de Jesus, petitioner is therefore liable for the entire obligation.
(2) By its terms, the note was made payable to a specific person rather than bearer to or order—a requisite for negotiability. Hence, petitioner cannot avail himself of the NIL’s provisions on the liabilities and defenses of an accommodation party. Besides, a non-negotiable note is merely a simple contract in writing and evidence of such intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL.
Even granting that the NIL was applicable, still petitioner would be liable for the note. An accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissory debtor from the beginning. The liability is immediate and direct.
BOUNCING CHECKS LAW
QUE VS. PEOPLE
154 SCRA 160
Facts: Vicotr Que deliberately issued checks to cover accounts but the checks were dishonored upon presentment. Que was convicted by the RTC of the crime of violating B.P. Blg. 22 on two counts which decision was affirmed by the CA. que alleged, among others, that he issued the checks in question merely to guarantee the payment of the purchases by Powerhouse Supply, Inc. of which he is the manager.
Issue: Whether dishonored checks issued merely to guarantee payment constitute violation of B.P. Blg. 22.
Held: It is now well-settled that B.P. Blg. 22. applies even in cases where dishonored checks are issued merely in form of deposit or a guarantee. The enactment does not make any distinction as to whether the checks within its contemplation are issued, in payment of an obligation or merely to guarantee said obligation. Consequently, what are important are the facts that the accused deliberately issued the checks to cover accounts and that the checks were dishonored upon presentment regardless of whether or not the accused merely issued the checks as a guarantee. It is the intention of the framers of B.P. Blg. 22. to make the mere act of issuing a worthless check malum prohibitum and thus punishable under such law.
INSURANCE
WHITE GOLD MARINE SERVICES, INC. VS. PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD.
G.R. No. 154514. July 28, 2005
Facts: White Gold Marine Services, Inc. procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association Limited through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 and 187, while Pioneer violated Sections 299, to 301 of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club. Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed; hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P & I Clubs vis-à-vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual.
Issues: (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
Held: The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance.
A P & I Club is “a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission.
On the second issue, Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship Mutual. Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual.
PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION
G.R. No. 136888. June 29, 2005
Facts: Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance. Respondent Chemoil Lighterage Corporation is also a domestic corporation engaged in the transport of goods. On 24 January 1991, Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT “TACHIBANA” which was valued at US$90,201.57 and another 436.70 metric tons of DOP valued at US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all risks. The insurance was under Marine Policies No. MRN-30721[5] dated 06 February 1991. Marine Endorsement No. 2786[7] dated 11 May 1991 was attached and formed part of MRN-30721, amending the latter’s insured value to P24,667,422.03, and reduced the premium accordingly. The ocean tanker MT “TACHIBANA” unloaded the cargo to the tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it formally made an insurance claim for the loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples taken were discolored. Inspection of cargo tanks showed manhole covers of ballast tanks’ ceilings loosely secured and that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress. Petitioner paid PGP the full and final payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the latter’s services.
On 15 July 1991, an action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Br.16, City of Manila. Respondent filed an answer which admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After due hearing, the trial court rendered a Decision in favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision reversing the trial court. A petition for review on certiorar[ was filed by the petitioner with this Court.
Issues: 1. Whether or not the Notice of Claim was filed within the required period.
2.Whether or not the damage to the cargo was due to the fault or negligence of the respondent.
Held: Article 366 of the Code of Commerce has profound application in the case at bar, which provides that; “Within twenty-four hours following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the packages.” After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.
As to the first issue, the petitioner contends that the notice of contamination was given by PGP employee, to Ms. Abastillas, at the time of the delivery of the cargo, and therefore, within the required period. The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. The Court of Appeals declared:that a telephone call made to defendant-company could constitute substantial compliance with the requirement of notice. However, it must be pointed out that compliance with the period for filing notice is an essential part of the requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods, the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately apparent. We have examined the evidence, and We are unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the carrier.[27]
Nothing in the trial court’s decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours from the time the goods were received. The Court of Appeals made the same finding. Having examined the entire records of the case, we cannot find a shred of evidence that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed.
The requirement that a notice of claim should be filed within the period stated by Article 366 of the Code of Commerce is not an empty or worthless proviso.
The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties.
The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.[31]
We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within the period provided for under Article 366 of the Code of Commerce. Petitioner’s contention proceeds from a false presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the second issue.
EXEMPTION SHOULD BE PROVEN IN ORDER TO QUALIFY UNDEREXCEPTION CLAUSE OF INSURANCE POLICY
COUNTRY BANKERS INSURANCE CORP. VS. LIANGA BAY & COMMUNITY MULTI-PURPOSE COOPERATIVE, INC.
G.R. No.136914, January 25, 2002
Facts: Country Banker’s Insurance Corp. (CBIC) insured the building of respondent Lianga Bay and Community Multi-Purpose Corp., Inc. against fire, loss, damage, or liability during the period starting June 20, 1990 for the sum of Php.200,000.00. On July 1, 1989 at about 12:40 in the morning a fire occurred. The respondent filed the insurance claim but the petition denied the same on the ground that the building was set on fire by two NPA rebels and that such loss was an excepted risk under par.6 of the conditions of the insurance policy that the insurance does not cover any loss or damage occasioned by among others, mutiny, riot, military or any uprising. Respondent filed an action for recovery of loss, damage or liability against petitioner and the Trial Court ordered the petition to pay the full value of the insurance.
Issue: Whether or not the insurance corporation is exempted to pay based on the exception clause in the insurance policy.
Held: The Supreme Court held that the insurance corporation has the burden of proof to show that the loss comes within the purview of the exception or limitation set-up. But the insurance corporation cannot use a witness to prove that the fire was caused by the NPA rebels on the basis that the witness learned this from others. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. The petitioner, failing to prove the exception, cannot rely upon on exemption or exception clause in the fire insurance policy. The petition was granted.
BREACH OF CONTRACT OF INSURANCE
MALAYAN INSURANCE CO., VS. PHIL.NAILS & WIRES CORP.
G.R. No.138084, April 10, 2002
Facts: Respondent Phil. Nails & Wires Corp. insured against all risk its shipment of 10,053.40 metric tons of steel billet with petitioner Malayan Insurance Co., Inc., the shipment delivered was short by 377.168 metric tons. For this shortage, respondent claimed insurance for Php.5,250,000.00. Petitioner refused to pay. On July 28, 1993, respondent filed a complaint against petitioner for the Sum of money with RTC of Pasig. Petitioner moved to dismiss for failure to state cause of action but it was denied. On November 4, 1994, respondent moved to declare petitioner in default and the trial court granted and allowed the presentation of evidence ex parte. Respondent presented its lone witness, Jeanne King. On November 11, 1993, petitioner filed its answer but was expunged from the record for late filing. The Trial Court rendered a judgment by default.
Issue: Whether or not there is a cause of action and whether or not King is credible witness.
Held: The Supreme Court ruled that the respondent’s cause of action is founded on breach of insurance. To hold petitioner liable, respondent has to prove, first, its, its importation of 10,053.40 metric tons of steel billets and second, the actual steel billets delivered to and received by the respondent. Witness Jeanne King has personal knowledge of the goods imported steel billets received. Her testimony on steel billets received was hearsay because she based the summary only on the receipts prepared by the other person.
CONCEALMENT MADE IN GOOD FAITH; VALID INSURACE CONTRACT
PHILAMCARE HEALTH SYSTEMS, INC. VS. CA & JULITA RAMOS
G.R. No.125678, March 18, 2002
Facts: Ernani Trinos, deceased husband of Julita Ramos, applied for a health care coverage with the petitioner Philamcare. In the standard application form, he delivered no to a question asking him if he had been treated of any of the family member consulted for high blood, heart trouble, diabetes, cancer, liver disease, asthma or ulcer. The application was approved for a period of 1 year from and thus extended to June 1, 1990. During the period of coverage, Ernani suffered a heart attack and was confined for one month. Respondent Julita Ramos tried to claim saying that the health care Agreement was void as there was concealment regarding Ernani’s medical history. On July 24, 1990, after Ernani died, Julita Ramos instituted an action for damages against Philam care with the RTC Manila, which ruled against the latter.
Issue: Whether or not there is a valid insurance contract because of alleged concealment of material fact.
Held: The Supreme Court ruled that there is a valid insurance contract, after all, all the elements for an insurance contract are contract are present and alleged concealment answers made in good faith and without intent to deceive will not avoid the policy. The insurer, in case of material fact, is not justified in relying upon such statement, but obligated to make further inquiry.
PAYMENT BY INSURANCE COMPANY OF INSURABLE VALUE OF THE GOODS; INSURANCE COMPANY SUBROGATED TO THE RIGHTS OF THE ASSURED AGAINST THE COMMON CARRIER
DELSAN TRANSPORT LINES, INC. VS. CA ET.AL.
G.R. No.127897, November 15, 2001
Facts: Caltex Phil. entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc. for a period of one year whereby the petitioner agreed to transport Caltex industrial fuel oil from Batangas refinery to different parts of the country. On August 14, 1986, MT Maysun set sail for Zamboanga City but unfortunately the vessel in the early morning of August 16, 1986 near Panay Gulf. The shipment was insured with the private respondent, American Home Assurance Corporation. Subsequently, private respondent paid Caltex the sum of Php.5,096,635.57. Exercising its right of subrogation under Art. 2207, NCC, the private respondent demanded from the petitioner the same amount paid to Caltex. Due to its failure to collect from the petitioner, private respondent filed a complaint with the RTC of Makati City but the trial court dismissed the complaint, finding the vessel to be seaworthy and that the incident was due to a force majeure, thus exempting the petitioner from liability. However, the decision of the trial court was reversed by the CA, giving credence to the report of PAGASA that the weather was normal and that it was impossible for the vessel to sink.
Issue: Whether or not the payment made by private respondent for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.
Held: The payment by the private respondent for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.
TRANSPORTATION LAW
JAPAN AIRLINES VS. ASUNCION
G.R. No. 161730. January 28, 2005
Facts: On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, en employee of JAL endorsed their applications for shore pass and directed them to the Japanese immigration official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were detained at the Narita Airport Rest House where they were billeted overnight. A JAL employee was instructed that the respondents were to be “watched so as not to escape.” Respondents were charged US $400.00 each for their accommodation, security, service and meals.
Subsequently, respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel requirements and that they were rudely and forcibly detained at the Narita Airport. The trial court rendered a decision favor of the respondents. On appeal, the CA affirmed in toto the decision of the trial court.
Issue: Whether JAL is guilty of breach of contract.
Held: The SC found that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents’ shore pass applications.
SHIP AGENT; LIABILITIES
MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION February, 2005
Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade carrier certain goods in favor of ATLAS FERTILIZER CORPORATION. Subject shipments were insured with Provident Insurance Corp. against all risks.
When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses. Formal claims were then filed with Trade & Transport but MACONDRAY refused and failed to settle the same. MACONDRAY denies liability over the losses, it, having no absolute relation with Trade & Transport, the alleged operator of the vessel who transported the shipment; that accordingly, MACONDRAY is the local representative of the shipper; the charterer of M/V Trade Carrier and not party to this case; that it has no control over the acts of the captain and crew of the carrier and cannot be held responsible for any damage arising from the fault or negligence of said captain and crew; that upon arrival at the port, M/V Trade Carrier discharged the full amount of shipment as shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the vessel owned by Trade & Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade Carrier. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel. Further, the CA found that the evidence shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom’s Clearance. Petitioner’s employees were present at the port of destination one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel. These acts all point to the conclusion that it was the entity that represented the vessel at the port of destination and was the ship agent within the meaning and context of Article 586 of the Code of Commerce.
EXTRAORDINARY DILIGENCE; PRESUMPTION OF FAULT OR NEGLIGENCE REBUTTABLE
REPUBLIC OF THE PHIL., represented by the DEPARTMENT OF HEALTH, NATIONAL TRUCKING AND FORWARDING CORPORATION (NTFC) and COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC. (CARE) VS. LORENZO SHIPPING CORPORATION (LSC)
G.R. No. 153563. February 7, 2005
Facts: The Philippine government entered into a contract of carriage of goods with petitioner NTFC whereby the latter shipped bags of non-fat dried milk through respondent LSC. The consignee named in the bills of lading issued by the respondent was Abdurahma Jama, petitioner’s branch supervisor in Zamboanga City.
On reaching the port of Zamboanga City, the respondent’s agent unloaded the goods and delivered the same to petitioner’s warehouse. Before each delivery, the delivery checkers of respondent’s agent requested Jama to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, the delivery checkers asked Jama to sign the delivery receipts. However, at times when Jama had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, petitioner NTFC allegedly did not receive the good and filed a formal claim for non-delivery of the goods shipped through respondent. Respondent explained that the cargo had already been delivered to Jama. The government through the DOH, CARE and NTFC as plaintiffs filed an action for breach of contract of carriage against respondent as defendant.
Issue: Whether or not respondent is presumed at fault or negligent as common carrier for the loss or deterioration of the goods.
Held: Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods.
The respondent has observed such extraordinary diligence in the delivery of the goods. Prior to releasing the goods to Jama, the delivery checkers required the surrender of the original bills of lading, and in their absence, the certified true copies showing that Jama was indeed the consignee of the goods. In addition, they required Jama or his designated subordinates to sign the delivery receipts upon completion of each delivery.
PROMPT NOTICE OF CLAIM MUST BE MADE WITHIN THE PRESCRIBED PERIOD AS STATED IN THE BILL OF LADING
PROVIDENT INSURANCE CORP. (PIC) VS. COURT OF APPEALS and AZUCAR SHIPPING CORP. (ASC)
G.R. No. 118030. January 15, 2004
Facts: The vessel MV Eduardo II received on board a shipment of plastic woven bags of fertilizer in good order and condition which was consigned to Atlas Fertilizer Corporation (AFC) and covered by a bill of lading. In the process of unloading at the port of destination, certain goods were found to have fallen overboard and some considered being unrecovered spillages. Petitioner PIC indemnified the consignee AFC for its damages and seeks reimbursement from respondent ASC for the value of the losses/damages to the cargo. Respondent ASC argued that the claim or demand by petitioner had been waived, abandoned, or otherwise extinguished for failure of the consignee to comply with the required claim for damages set forth in Stipulation No. 7 of the Bill of Lading.
Issue: Whether or not failure to make the prompt notice of claim as required is fatal to the right of petitioner to claim indemnification for damages.
Held: There can be no question about the validity and enforceability of Stipulation No. 7 in the Bill of Lading. The 24-hour requirement under said stipulation is, by agreement of the contracting parties, a sine qua non for accrual of the right of action to recover damages against the carrier.
Considering that the prompt demand was necessary to foreclose the possibility of fraud or mistake in ascertaining the validity of claims, there was a need for the consignee or its agent to observe the conditions provided for in Stipulation No. 7. Hence, petitioner’s insistence that respondent carrier had knowledge of the damage because one of respondent’s officers supervised the unloading operations and signed a discharging receipt, cannot be construed as sufficient compliance with the said proviso. Moreover, a reading of the stipulation will readily show that upon the consignee or its agent rests the obligation to make the necessary claim within the prescribed period and not merely rely on the supposed knowledge of the damage by the carrier.
DEFINITION: COMMON CARRIER IN GENERAL
CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC.
G.R. No. 148496. March 19, 2002
Facts: A contract was entered into between Calvo and San Miguel Corporation (SMC) for the transfer of certain cargoes from the port area in Manila to the warehouse of SMC. The cargo was insured by UCPB General Insurance Co., Inc. When the shipment arrived and unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the same to SMC’s warehouse. When it was inspected, it was found out that some of the goods were torn. UCPB, being the insurer, paid for the amount of the damages and as subrogee thereafter, filed a suit against Calvo.
Petitioner, on the other hand, contends that it is a private carrier not required to observe such extraordinary diligence in the vigilance over the goods.
As customs broker, she does not indiscriminately hold her services out to the public but only to selected parties.
Issue: Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence in the vigilance over the goods.
Held: The law makes no distinction between a carrier offering its services to the general community or solicits business only from a narrow segment of the general population. Note that the transportation of goods holds an integral part of Calvo’s business, it cannot indeed be doubted that it is a common carrier.
FILING OF NOTICE OF CLAIM; ONE-YEAR PRESCRIPTIVE PERIOD
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. VS. PHIL. FIRST INSURANCE CO., INC.
G.R. No. 143133. June 5, 2002
Facts: On June 13, 1990, CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel Sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and within the subsequent days, discharged the subject cargo. Four coils were found to be in bad order, and the consignee declared the same as total loss.
The respondent filed its Notice of Claim only on September 18, 1990. the complaint was filed by respondent on July 25, 1991. Petitioners, on the other hand, claim that pursuant to the Carriage of Goods by Sea Act (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990 but respondent filed its Notice of Claim only on September 18, 1990.
Issue: Whether or not failure to file a Notice of Claim shall bar respondent from recovery.
Held: First, COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. In this case, prior to unloading the cargo, an Inspection Report as to the condition of the goods was prepared and signed by representative of both parties.
Second, a failure to file a Notice of Claim within three days will not bar recovery if it is nonetheless filed within one year. The one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. The cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive period.
FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP. (GPS)
G.R. No. 141910. August 6, 2002
Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certain goods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentified truck, resulting in damage to the cargoes.
FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit against GPS. GPS filed a motion to dismiss for failure to prove that it was a common carrier.
Issue: Whether or not GPS falls under the category of a common carrier.
Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to no other individual or entity.
A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freed from its liability based on culpa contractual.
STIPULATION IN THE CHARTER PARTY EXEMPTING LIABILITY
HOME INSURANCE CO. VS. AMERICAN STEAMSHIP AGENCIES
23 SCRA 24
Facts: A Peruvian firm shipped on board its vessel certain goods with San Miguel Brewery as its consignee and Home Insurance Co. (HIC) as its insurer. The cargo was found to have shortages when it arrived. HIC paid for said shortages and thereafter, demanded recovery of the amount from American Steamship Agencies (ASA). The trial court ordered ASA to reimburse HIC since according to the Code of Commerce, “the ship agent is civilly liable for damages in favor of third persons due to the conduct of the carrier’s captain and that the stipulation in the charter party exempting the owner of the ship from liability is against public policy.
Issue: Whether or not the stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid.
Held: The stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid and not against public policy considering that the ship was totally chartered for the use of a single party, hence, the public at large is not involved and strict public policy governing common carriers cannot be applied.
FORTUITOUS EVENT: EXEMPTION FROM LIABILITY
FORTUNE EXPRESS, INC. VS. COURT OF APPEALS
305 SCRA 14
Facts: A bus of Fortune Express, Inc. (FEI) figured in an accident with a jeepney which resulted in the death of several passengers including two Maranaos. It was found out that a Maranao owns said jeepney and certain Maranaos were planning to take revenge by burning some of FEI’s buses. The operations manager of FEI was advised to take precautionary measures but just the same, three armed Maranaos were able to seize a bus of FEI and set it on fire.
Issue: Whether the seizure of the bus was a fortuitous event which Fortune Express, Inc could not be held liable.
Held: A fortuitous event is an occurrence which could not be foreseen or which though foreseen, is inevitable. This factor of unforeseen-ability is lacking in this case for despite the report that the Maranaos were planning to burn FEI’s buses, nothing was really done by FEI to protect the safety of the passengers.
Posted by UNC Bar Operations Commission 2007