impt doctrines.comml

8/10/2019 Impt Doctrines.comml

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Q & A in CORPORATION LAWS

1.Question:Mr. Kenneth Cruz is the owner of 1,000 shares of stock in Luzon Corporation.

On 31 May 2000, he eecute! a specia" power of attorney #rantin# fu"" power to hisfrien! $an!y %e"ar!e to se"" or otherwise !ispose of his shares in Luzon Corporation.

&ursuant to sai! specia" power of attorney, Mr. %e"ar!e eecute! a !ee! ofassi#n'ent of the shares in fa(or of Ke(in )arcia. *wo weeks thereafter Mr. KennethCruz !ie!.

+hen Mr. %e"ar!e presente! the !ee!s of assi#n'ent to Luzon Corporation toha(e it re#istere! in the stock an! transfer ook of the corporation, the corporationrefuse! on the #roun! that there are irre#u"arities in the transfer of the shares an!that upon the !eath of Kenneth Cruz, the shares of stock eca'e the property of theestate an! that it shou"! first e "i-ui!ate! an! sett"e!.

Can the corporation refuse to re#ister the transfer of the shares /eci!e.

nswer:The corporation cannot refuse to register the transfer of the shares. Section 63 of the

Corporation Code contemplates no restriction as to whom the stocks may be transferred. Itdoes not suggest that any discrimination may be created by the corporation in favor of, oragainst a purchaser of shares. The owner of shares is at liberty to dispose of them in favorof whomsoever he please, the only limitation is when the corporation holds any unpaid claimagainst the shares intended to be transferred.

The right of a transfereeassignee to have the stocks transferred in his name is aninherent right flowing the ownership of stocks, thus whenever the corporation refuses totransfer and register stock, mandamus will lie to compel the officers of the corporation totransfer said stock in the books of the corporation.

The corporation!s obligation to register is ministerial, it cannot try to decide the"uestion of ownership. #$%$&' (&)* + S&'I)&S, I)C. vs. C+%$T + &--&'S /01SC$& 201

2. Question:n a specia" 'eetin#, the oar! of *rustee passe! $eso"ution o. 1, s.

2001#rantin# 'onth"y co'pensation to Mr. +, 4, 5 an! 6 as corporate officers of LLCorporation. t a"so pro(i!es that the ten percentu' of the net profits of thecorporation sha"" e !istriute! e-ua""y a'on# the ten 'e'ers of the oar! of*rustees.

few years "ater, Mr. Q, $, 7 an! * fi"e! two 829 separate cri'ina" infor'ations,one for fa"sification an! the other for estafa a#ainst Mr. , , C an! /, 'aority an!

contro""in# 'e'ers of the corporation roote! in the ao(e;'entione! reso"ution.fter a fu"";"own tria", a (er!ict of ac-uitta" was #rante! without i'posin# ci(i""iai"ity a#ainst the accuse! therein.

Mr. Q, $, 7 an! * fi"e! a Motion for $econsi!eration of the ci(i" aspect of the!ecision an! consi!ere! the sa'e a s a !eri(ati(e suit on eha"f of the corporationfor the annu"'ent of $eso"ution o 1, s. 2001.

(a) s $eso"ution o. 1, s. 2001 (a"i!

(b) +hat are the ways y which 'e'ers of the oar! can e #rante!co'pensation apart fro' reasona"e per !ie's

(c) +hat is a !eri(ati(e suit +hat are the re-uisites of a !eri(ati(e suit s

the Motion for $econsi!eration fi"e! y Mr. Q, $, 7 an! * consi!ere! a!eri(ati(e suitnswer:

(a) 4S. %nder Section 31 of the Corporation Code, the directors shall notreceive any compensation, as such directors. The phrase as such directors is notwithout significance for it delimits the scope of the prohibition to compensationgiven to them for services performed purely in their capacity as directors or

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trustees. The unambiguous implication is that members of the board may receivecompensation, in addition to reasonable per diems, when they render services tothe corporation in a capacity other than as directorstrustees. In the case at bar,the resolution granted monthly compensation to 5r. , 7, 4 and 8 not in theircapacity as members of the board, but rather as officers of the corporation, moreparticularly as Chairman, 9ice:Chairman, Treasurer and Secretary of the

Corporation.

Clearly, therefore, the prohibition with respect to granting compensation tocorporate directorstrustees as such under section 31 is not violated in this particularcase.

(b) The following are the ways in which members of the board can begranted compensation apart from the reasonable per diems.

1. hen there is a provision in the by:laws fi;ing their compensation apart

from reasonable per diemserivative suit is an action brought by minority stockholders in the nameof the corporation to redress wrongs committed against it, for which thedirectors refuse to sue. It is a remedy deigned by e"uity and has been theprincipal defense of the minority stockholders against the abuses by thema=ority.

The following are re"uisites of a derivative suit?

1. The plaintiff constitute the minority stockholderson &ndreswhich were previously declared by the corporation as stock dividend amount to adistribution of ta;able cash or property dividends.

&)SC+$ redeemed some shares of stock of >on &ndres. Certainly, theshares redeemed did not come from the original capital subscription of >on &ndres

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for to do so would violate the Trust und >octrine which regarded the capital stock ofthe corporation as e"uity in trust for the payment of corporate creditors. Theredeemed shares came from the stock dividend previously declared by thecorporation. It is not the stock dividends but the proceeds of its redemption that maybe deemed as ta;able dividend. The proceeds of the redemption is additional wealth,for it is not merely a return of capital but a gain thereon. This amounts to distribution

of ta;able cash or property dividends.#Commissioner of Internal $evenue vs. Courtof &ppeals 310 SC$& 02/

A. Question:May a corporate treasurer, y herse"f an! without any authorization fro' the

oar! of !irector, (a"i!"y se"" a parce" of "an! owne! y the corporation May the (ei"of corporate fiction e pierce! on the 'ere #roun! that a"'ost a"" of the shares ofstocks of the corporation are owne! y sai! treasurer an! her husan!

nswer:%nless duly authoried by the board of directors, its charter or by the by:laws, a

treasurer, whose powers are limited, cannot bind the corporation in a sale of its assets.

Selling is obviously foreign to a corporate treasurer!s function, which generally has beendescribed as Eto receive and keep the funds of the corporation, and to disburse them inaccordance with the authority given him by the board or the properly authoried officers.F

The "uestion of piercing the veil of corporate fiction is essentially a matter of proof. Inthe present case, it was not established that the corporation was formed, or that it isoperated, for the purpose of shielding any alleged fraudulent or illegal activities of its officersor stockholders, or that the said veil was used to conceal fraud, illegality or ine"uity at thee;pense of third persons. # San Guan Structural and Steel abricators, Inc. vs. Court of

&ppeals #/B6 SC$& 63/

F. Question:M) Corporation was for'e! an! or#anize! y Mr. an! Mrs. #ustin .

#ui"ar. *he spouses c"ai'e! that it was a c"ose corporation, y reason of the factthat .DAAG of its suscrie! capita" stock was owne! the'. +ou"! that fact a"onesustain the contention of the spouses /eci!e with reasons.

nswer?& corporation does not become a close corporation =ust because a man and his wife

owns BB.D66J of its subscribed capital stock. In the present case, the absence of any factshowing that its articles of incorporation contains any provision stating that #a the number ofstockholders shall not e;ceed /1, or #b a preemption of shares is restricted in favor of anystockholder, or of the corporation, or K listing its stocks in any stock e;change or making apublic offering of such stocks is prohibited, thus is sufficient to sustain a conclusion that it isnot a close corporation, as these re"uirements are specifically provided by the Corporation

Code. So, too, a narrow distribution of ownership does not by itself make a closecorporation.# San Guan Structural and Steel abricators, Inc., vs. Court of &ppeals #/B6SC$& 63/

D.Question:4 Corporation purchase! shares in Mani"a &o"o C"u for the enefit of Mr. ,

the eecuti(e presi!ent of the corporation. *he shares were "iste! un!er the na'e ofMr. . +hen Mr. retire!, he transferre! his proprietary share in the Mani"a &o"o C"uto Mr. , the new eecuti(e presi!ent. Mr. , howe(er, fai"e! to eecute a !ocu'entreco#nizin# the eneficia" interest of the corporation.

+hen Mr. resi#ne!, 4 Corporation sou#ht the transfer of the share to thecorporation. Mr. refuse! conten!in# that the artic"es of incorporation an! the y;

"aws of the Mani"a &o"o C"u prohiit artificia" persons, such as corporations to ec"u 'e'ers.

s the contention tena"e

nswer:)o. The contention is not tenable.

&lthough the articles of incorporation and the by:laws of the 5anila -olo Clubprohibit the transfer of shares to artificial persons, there would be no violation of said

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prohibition if the shares is transferred to a nominee of the corporation who is a naturalperson.

In this case, 5r. ( was merely a nominee of the corporation to hold the shares anden=oy the privileges of the club. %pon the e;piration of 5r. (!s employment, the incentivesthat go with the position, including the use of the 5anila -olo Club share, also ceased toe;ist. It behooves upon 5r. ( to surrender said share to the corporation!s ne;t nominee,

another natural person. This arrangement of trust and confidence cannot be defeated bycitation of the 5anila -olo Club rules without doing violence to the basic tenets of =usticeand fair dealings. #Thomson vs. Court of &ppeals /BD SC$& /D1

. Question:4 was the owner of 100G or 3,100 pai!;up shares of stock of C Corporation.

On 7epte'er 2F, 1D, 4 entere! into an #ree'ent with 5 to se"" to that "atter his3,100 shares 8or 100G 9 of C Corporation for 100,000.00. e r"uiaga vs. C& 0D SC$& 0

10.Question:Hrap an! Loi are &resi!ent an! Chair'an of oar! of /irectors, respecti(e"y,

of oracay Corporation. Crony ank is one of the cre!itors of oracay Corporation,an! its cre!it is secure! y a first 'ort#a#e on the 'anufacturin# p"ant of sai!co'pany. On Ianuary 13, 1B ecause oracay Corporation is encounterin# a (eryserious !ifficu"ty in continuin# with its operations, it entere! into a (otin# trusta#ree'ent with Crony ank. *he ter's of the (otin# trust a#ree'ent pro(i!es thatthe !uration of the a#ree'ent is contin#ent upon the fu"fi""'ent of certain o"i#ationsof oracay Corporation with the Crony ank. Hrap an! Loi, pursuant to the (otin#trust a#ree'ent !ispose! of a"" their shares throu#h assi#n'ent an! !e"i(ery in fa(or

of Crony ank, as trustee. On Jeruary 20, 2000, H"itesta ncorporate! fi"e! in court aco'p"aint for su' of 'oney a#ainst oracay Corporation, an! su''ons was ser(e!upon Hrap an! Loi.

a. +hat is the 'ost i''e!iate effect of a (otin# trust a#ree'ent on the statusof Hrap an! Loi as stockho"!ers of the corporation

b. /o Hrap an! Loi retain their respecti(e positions as !irectors of thecorporation

c. s Hrap sti"" the &resi!ent of oracay Corporation so as to (a"i!ity recei(ethe ser(ice of su''ons

nswer:

a. &s stockholders who are a party to e;ecution of voting trust agreement, fromlegal title holder or owner of the shares sub=ect of the voting trust agreement theybecome the e"uitable or beneficial owner of the stocks.

b. %nder the Corporation Code, in order to be eligible as a director, what is materialis the legal title to, not the beneficial ownership of, the stock as appearing on thebooks of the Corporation. Since rap and 'oi, by virtue of voting trust agreement

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elections of officers, in calling of the stockholders! meetings and other purposes. # -adgettvs. (abcock H Templeton, Inc., and (abcock 2B -hil. /3/ #0B33

12. Question:y Chia' Lion# otaine! a "oan fro' 5uen 7hen# Co'pany 857C9 of Mani"a

an! as security he p"e!#e! @00 shares of stocks of 857C9 which was he"! y its

'ana#er. Later y Chia' Lion# so"! the sa'e share of stock to 7erafin &iaocoe(i!ence! y a notaria" !ocu'ent. *he certificates of stock not ein# in thei''e!iate possession an! contro" of the (en!or at the ti'e of sa"e, no in!orse'entthereof was 'a!e in accor!ance with the y;"aws of the co'pany, nor was theco'pany notifie! of the sa"e. s the ownership an! tit"e to the stocks y (irtue of thecontract of purchase an! sa"e e(i!ence! y the notaria" !ocu'ent transferre! !espitethe fact that the certificates of stock were not in!orse! o(er to the purchaser an! newcertificates issue! to hi' in accor!ance with the pro(isions of the charter or y;"awsof the co'pany.

nswer:& bonafide contract of purchase and sale of stock in a company or corporation set

out in a notarial documents conveys to the vendee, as between the vendor and the vendee,the entire title, legal and e"uitable, of the vendor, although as between the vendee and thecompany or corporation the vendee ac"uires only an e"uitable title, which the company orcorporation is bound to recognied and permit to be ripened into a legal title when hepresents himself to do the acts re"uired by the charter to make a transfer. To bind thecorporation, these transfers should be registered in the stock and transfer of a newcertificate to the transferee. %nder section 63 of the Corporation Code, no transfer of sharesof stock shall be valid e;cept as between the parties until the transfer is recorded in thebooks of the corporation showing the names of the parties to the transfer, the date of thetransfer and number of the certificates and shares transferred. # Serafin %y -iaoco vs. Gose5c5icking A.$. )o. ':L/3, 5arch 2, 0B1D

13. &ro"e':I+ was e"ecte! y the 'e'ers of the Mani"a 7tocks Hchan#e as honorary

"ife 'e'er without fo""owin# the proce!ure for a!'ission of 'e'ers prescrie! ythe y;"aws such as the re-uisites as to the fi""in# of an app"ications, pu"ication,pay'ent of entrance an! suscription fees, an! the action to e taken y the oar! of/irectors. I+ ar#ues that there was no nee! for hi' to fi"e an app"ication ecause hewas not a!'itte! ut e"ecte! to 'e'ership, that the ter's of his e"ection epress"yee'pte! hi' for the pay'ents of !ues an! that there was no nee! for the oar! of/irectors to act on his e"ection ecause he was e"ecte! unani'ous"y e"ecte! y the'e'ers as an honorary 'e'er an! not a re#u"ar 'e'er. *here is no pro(ision inthe y;"aws for the e"ection of a 'e'er whether re#u"ar or honorary. /eci!e on thecontention of I+.

nswer:There is no showing that the election of G to honorary life membership in the

corporation is incidental to its corporate e;istence or that it is among the implied powersgranted it to do all acts that may be necessary to enable it to e;ercise the powers e;presslyconferred and to accomplish the ob=ect for which it was created. The resolution of themembers designated G as honorary member, it stands to reason that his admission orelection must fallow the re"uisites prescribed for the admission of regular members, for he isto all intents and purposes a regular member. +ne cannot be a regular member for thepurpose of en=oying the benefits of a regular membership and at the same time evade itscorresponding obligations on the ground that he is an honorary member so:called. &nhonorary membership is an incongruity and finds no sanction either in law or custom.

The failure to fulfill the re"uirements e;acted by the by:laws is fatal to G!spretension to membership. &s held in G.&. olfson vs. 5anila Stocks ;change the by:lawsprescribe the mode, and the only in which membership in the e;change can be obtained,and no one can =ustly claim to be a member who has not been admitted in the mode thusprescribed. The principle is that if the governing law prescribes the conditions or specialmethods for becoming a member of a corporation, the law is imperative, and the courts haveadhered strictly to this general rule. #G.&. olfson v 5anila Stocks ;change

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1@. &ro"e' "fonso is the &resi!ent;incorporator of the %isayan H!ucation 7upp"y

Corporation an! owner of @00 shares of the capita" stock e(i!ence! y Certificate of7tock o 2. *wo incorporators with!rew fro' sai! corporation. n or!er to co'p"ete

the 'e'ership of B !irectors of the oar!. "fonso, in a specia" 'eetin# of theoar!, so"! B0 shares out of his @00 shares of capita" stock to his rother n#e". nsai! 'eetin#, n#e" was e"ecte! !irector an! the 'inutes of the 'eetin# was fi"e!with the 7HC.

ccor!in#"y, Certificate o. 2 was cance""e! an! sp"it the sa'e into 7tockCertificate o. A 8 for n#e" 9 an! Certificate o. D 8 for "fonso9.


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1A. Question: May the fai"ure of the corporation to fi"e its y;"aws within one 'onth fro' the!ate of its incorporation, as 'an!ate! y 7ection @A of the Corporation Co!e, resu"tin its auto'atic !isso"ution

nswer:

There can be no automatic corporate dissolution simply because the incorporatorsfailed to abide by the re"uired filing of by:laws embodied in Section L6 of the CorporationCode. There is no outright EdemiseF of corporate e;istence. -roper notice and hearing arecardinal components of due process in any democratic institution, agency or society. In otherwords, the incorporators must be given the chance to e;plain their neglect or omission andremedy the same #Loyola Gra! "llas $o%eo&ers '(out)* Asso+ato, I+. vs. Court o

A--eals, G.R.# 1171, August 7, 1997..

1F.&ro"e':n a ci(i" case, the re#iona" tria" court ren!ere! a !ecision or!erin# the

!efen!ants an! to pay oint"y an! se(era""y p"aintiff C Corporation a specifie!

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Corporation Code to convey all its property to trustees to enable it to prosecute and defendsuits by or against the corporation beyond the said period.

&lthough plaintiff C Corporation did not appoint any trustee, yet the counsel whoprosecuted and defended its interest and who in fact appeared in its behalf may beconsidered a trustee of the corporation at least with respect to the matter in litigation only.There was substamntial compliance with the law and, for that reason, the counsel of the

corporation could still continue to prosecute the present case even beyond the period ofthree #3 years from the time of dissolution.

urthermore, Section 0L2 of the Corporation Code e;pressly provides that no right orremedy in favor of any corporation shall be removed or impaired either by the subse"uentdissolution of said corporation or by any subse"uent amendment or repeal of the samecodeor of any part thereof. This provision safeguards the rights of a corporation which isdissolved pending litigation.

There is, therefore, no reason why the suit filed by plaintiff C Corporation should notbe allowed to proceed to e;ecution. The law specifically allows a trustee to manage theaffairs of the corporation in li"uidation. Conse"uently, any supervening fact, such as thedissolution of the corporation, repeal of a law, or any other fact of similar nature would notserve as an effective bar to the enforcement of such right # Re/urao vs. Court o A--eals,

G.R. # 102965, auary 21, 1999..

1D. &ro"e':n 1DB, (arious properties of Mr. ), inc"u!in# shares of stocks in eta

Corporation, were attache! !ue to a u!#'ent ren!ere! a#ainst hi' an! in fa(or of"pha Corporation.


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recorded in the corporation!s stock and transfer book in order to have Eforce and effect asagainst third persons.F

&lthough the 5onserrat case refers to a chattel mortgage over shares of stock, thesame may be applied to the attachment of shares of stock since an attachment does notconstitute an absolute conveyance of property but is primarily used as a means Eto seie thedebtor!s property in order to secure the debt or claim of the creditor in the event that a

=udgment is rendered.FThe re"uirement that the transfer shall be recorded in the books of the corporation to

be valid as against third persons, has reference only to absolute transfers or absoluteconveyance of the ownership or title to a share #C)e%-)l 3-ort a! I%-ort Cor-orato vs.Court o A--eals, G.R. 11249, e+e%/er 12, 1995.

1. Question:Mr. Kenneth Cruz is the owner of 1,000 shares of stock in Luzon Corporation.

On 31 May 2000, he eecute! a specia" power of attorney #rantin# fu"" power to hisfrien! $an!y %e"ar!e to se"" or otherwise !ispose of his shares in Luzon Corporation.

&ursuant to sai! specia" power of attorney, Mr. %e"ar!e eecute! a !ee! ofassi#n'ent of the shares in fa(or of Ke(in )arcia. *wo weeks thereafter Mr. Kenneth

Cruz !ie!.+hen Mr. %e"ar!e presente! the !ee!s of assi#n'ent to Luzon Corporation to

ha(e it the stock an! transfer ook of the corporation, the corporation refuse! on the#roun! that there are irre#u"arities in the transfer of the shares an! that upon the!eath of Kenneth Cruz, the shares of stock eca'e the property of the estate an! thatit shou"! first e "i-ui!ate! an! sett"e!.

Can the corporation refuse to re#ister the transfer of the shares /eci!e.

nswer:

The corporation cannot refuse to register the transfer of the shares. Section 63 of the

Corporation Code contemplates no restriction as to whom the stocks may be transferred. Itdoes not suggest that any discrimination may be created by the corporation in favor of, oragainst a purchaser of shares. The owner of shares is at liberty to dispose of them in favorof whomsoever he please, the only limitation is when the corporation holds any unpaid claimagainst the shares intended to be transferred.

The right of a transfereeassignee to have the stocks transferred in his name is aninherent right flowing the ownership of stocks, thus whenever the corporation refuses totransfer and register stock, mandamus will lie to compel the officers of the corporation totransfer said stock in the books of the corporation.

The corporation!s obligation to register is ministerial, it cannot try to decide the"uestion of ownership. #$%$&' (&)* + S&'I)&S, I)C. vs. C+%$T + &--&'S /01SC$& 201

20. Question:n a specia" 'eetin#, the oar! of *rustee passe! $eso"ution o. 1, s.

2001#rantin# 'onth"y co'pensation to Mr. +, 4, 5 an! 6 as corporate officers of LLCorporation. t a"so pro(i!es that the ten percentu' of the net profits of thecorporation sha"" e !istriute! e-ua""y a'on# the ten 'e'ers of the oar! of*rustees.

few years "ater, Mr. Q, $, 7 an! * fi"e! two 829 separate cri'ina" infor'ations,one for fa"sification an! the other for estafa a#ainst Mr. , , C an! /, 'aority an!contro""in# 'e'ers of the corporation roote! in the ao(e;'entione! reso"ution.fter a fu"";"own tria", a (er!ict of ac-uitta" was #rante! without i'posin# ci(i""iai"ity a#ainst the accuse! therein.

Mr. Q, $, 7 an! * fi"e! a Motion for $econsi!eration of the ci(i" aspect of the!ecision an! consi!ere! the sa'e a s a !eri(ati(e suit on eha"f of the corporationfor the annu"'ent of $eso"ution o 1, s. 2001.

(a) s $eso"ution o. 1, s. 2001 (a"i!

(b) +hat are the ways y which 'e'ers of the oar! can e #rante!co'pensation apart fro' reasona"e per !ie's

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(c) +hat is a !eri(ati(e suit +hat are the re-uisites of a !eri(ati(e suit sthe Motion for $econsi!eration fi"e! y Mr. Q, $, 7 an! * consi!ere! a!eri(ati(e suit

nswer:

(a) 4S. %nder Section 31 of the Corporation Code, the directors shall notreceive any compensation, as such directors. The phrase as such directors is notwithout significance for it delimits the scope of the prohibition to compensationgiven to them for services performed purely in their capacity as directors ortrustees. The unambiguous implication is that members of the board may receivecompensation, in addition to reasonable per diems, when they render services tothe corporation in a capacity other than as directorstrustees. In the case at bar,the resolution granted monthly compensation to 5r. , 7, 4 and 8 not in theircapacity as members of the board, but rather as officers of the corporation, moreparticularly as Chairman, 9ice:Chairman, Treasurer and Secretary of theCorporation.

Clearly, therefore, the prohibition with respect to granting compensation tocorporate directorstrustees as such under section 31 is not violated in this particularcase.

(b) The following are the ways in which members of the board can begranted compensation apart from the reasonable per diems.

1. hen there is a provision in the by:laws fi;ing their compensation apartfrom reasonable per diemsoctrine of corporation by estoppel may apply to the alleged corporation andto a third party. In the first instance, an unincorporated association, whichrepresented itself to be a corporation, will be estopped from denying its corporatecapacity in a suit against it by a third person who relied in good faith on suchrepresentation. It cannot allege lack of personality to be sued to evade itsresponsibility for a contract it entered into and by virtue of which it receivedadvantages and benefits. +n the other hand. & third party who, knowing anassociation to be unincorporated, nonetheless, treated it as a corporation and

received benefits from its, may be barred from denying its corporate e;istence in asuit brought against the alleged corporation. In such a case, all those who benefitedfrom the transaction made by the ostensible corporation, despite knowledge of itslegal defects, may be held liable for contracts they impliedly to or took advantage of #'I5 T+)A 'I5 vs. -@I'I--I) IS@I)A A&$ I)>%ST$IS, I)C. 30 SC$& /D

23.Question:7ui 7un# &tak &te., Lt!, a 7in#aporean fir' en#a#e! in 'anufacturin# an!

se""in# Lee Ku' Khee 7oy 7auce an! Oyster 7auce fi"e! a co""ection case in $*Ca#ainst *rip"e % )roup of Co'panies, a !o'estic fir' en#a#e! in operatin# (ariouschain of 7pecia"ty restaurant, for the su' of @A,000 for purchasin# p"aintiff=spro!ucts. &"aintiff a""e#e! that fro' a perio! of @ 'onths !efen!ant or!ere! an!

recei(e! (arious pro!ucts of p"aintiff on se(era" occasions with a 0;!ay cre!it ter'.*hat !e'an!s were 'a!e ut the !efen!ant refuse! thus the instant case. t wasfurther a""e#e! that it has no "icense to en#a#e in usiness an! was perfor'in# aniso"ate! transaction.

*he !efen!ant on the other han! fi"e! a 'otion to !is'iss conten!in# thatpetitioner corp. ha! no "e#a" capacity to sue ecause the p"aintiff was en#a#in# inusiness without a "icense hence arre! to seek to 'aintain a court action.

A) f you were the $*C Iu!#e how wou"! you reso"(e the 'otion to!is'iss

If I were the Gudge I would grant the motion to dismiss because plaintiff is engaged in

business without a license hence barred to seek redress from the courts. The test whetherthe transaction or series of transactions set apart from the common business of a foreignenterprise that there is an intention to engage in a progressive pursuit of the purpose andob=ect of the business organiation. In the case at bar, the transaction entered into byplaintiff are a series of commercial dealings which would signify an intent to do business inthe -hilippines and could not be an isolated one. It could not constitute as a single act orisolated business transaction because there was an intention to continue the businessrelationship and that the fact a B1:day credit term was agreed upon.

The grant and e;tension of the B1:day credit term by a foreign corporation to adomestic corporation for every purchase made arguably shows an intention to continuetransacting with the later since in the usual course of transaction, credit is e;tended only tocustomers in good standing or to those on whom there is an intention to maintain a long

term relationship.&nd granting the series of transaction constitute a single act if the intention was of a

continuing business relationship. hat is determinative is not really the number or the"uantity of the transaction but more importantly the intention of an entity to continue thebody of its business in the country. hether a foreign corporation is doing business does notnecessarily depend upon the fre"uency of its transaction, but more upon the nature andcharacter of the transaction. #ricks -te., 'td 9s. C& /6 scra 26

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B) )rantin# that the 'otion was uphe"! an! the p"aintiff !i! not fi"e an appea",the p"aintiff sou#ht your "e#a" opinion on what re'e!y to take

I would advice my client to obtain a license and then file a collection suit despite thedismissal of the first action. $es =udicata does not set in a case dismissed for lack ofcapacity to sue, because there has been no determination on the merits and subse"uentac"uisition of the license will cure the lack of capacity at the time of the e;ecution.# $IC*S -te., 'td vs. C& : /6 SC$& 26

2@. Question:&L/* is un!er the super(ision an! re#u"ation of *C y (irtue of the &u"ic

7er(ice ct, as a'en!e! *C ser(e! &L/* assess'ent notices an! !e'an!s forpay'ent as super(ision an! re#u"ation fee un!er the &u"ic 7er(ice ct. *he sai!fees were co'pute! y *C on the asis of the 'arket (a"ue of &L/*=s outstan!in#capita" stock inc"usi(e of stock !i(i!en!s an! pre'iu'. &L/* cha""en#e! sai!assess'ents an! a""e#e! that the fees shou"! ha(e een ase! on the par (a"ue of its8&L/*9 outstan!in# capita" stock ec"u!in# stock !i(i!en!s an! pre'iu'.

a) s &L/* correct in sayin# that the co'putation of the suspension an!re#u"ation fees shou"! e ase! on the par (a"ue of the suscrie! capita"stock

b) /istin#uish par (a"ue fro' 'arket (a"ue.

nswer:

a) 4es. The basis for computation of the fee to be charged by )TC on -'>T is thecapital stock subscribed or paid and not alternatively, the property ande"uipment. The assessment made by the )TC of the fee imposed by the -ublicService &ct, as amended, on the basis of the market value of the subscribed or

paid: in capital stock is a deviation from the e;plicit language of the law.b) The par value indicated in the certificate of stock represents the amount of

money or property contributed by the shareholder to the capital stockcorporation. The assets of the corporation cannot always be e"ual to the parvalue of the outstanding capital stock, the assets being constantly in a safe offluctuation as the business prospers or declines.

The market value is the price at which a willing seller would sell and a willingbuyer would buy, assuming that both have a reasonable knowledge of the facts, and neitherbeing under abnormal pressure. The market value of stocks may be influenced by thepresent and prospective net income of the corporation, attractive dividend payments, andother factors.

#)&TI+)&' T'C+55%)IC&TI+)S C+55ISSI+) vs. C+%$T + &--&'S 300SC$& 21D

2B.&ro"e':/oes a corporation ha(e the sa'e ri#ht as a natura" person such as the ri#ht

to reco(er 'ora" !a'a#es on account of a es'irche! reputation

nswer:)o. & corporation is a mere artificial being and it cannot be considered at par with a

natural person. It has only the powers, attributes and properties e;pressly provided by law orincident to its e;istence. Thus, a corporation being an artificial person and having e;istenceonly in legal contemplation, has no feelings, emotions or senses and cannot e;perience

physical suffering and hence, not entitled to moral damages, as sleepless nights, woundedfeelings, physical sufferings, mental anguish and an;iety may be suffered only by a naturalperson. The statement in Peo-le vs. Maero#0BB3 and 5ambulao 'umber Co. vs. -)(#0B6D that a corporation may recover moral damages if it Ehas a good reputation that isdebased resulting in social humiliationF is merely an o/ter !+tu%. #A(CN roa!+astgCor-orato vs. Court o A--eals, 01 (CRA 572, G.R. No. 12690, auary 2, 1999

2A. &$OLHM:

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y (irtue of a pu"ic !ocu'ent, * transferre! to CJ/ Co., nc. four parce"s of"an! a"'ost fi(e 'onths efore the incorporation y the co'pany. Later, theco'pany so"! the four parce"s of "an! to 7. Jor fai"ure to pay, CJ/ Co., nc. sue! 7.

+as the contract etween * an! CJ/ Co., nc. (a"i! Co., Inc. could not and did not ac"uire the four parcels of land hereinvolved, it follows that it did not possess any resultant right to dispose of them by sale to S.#Cagaya 8s)g evelo-%et Co., I+. vs. (a!o, 65 (CRA 22, No. 450, e+e%/er2, 197

2F.&ro"e':t is the contention of the nion that the c"osure was i""e#a" as usiness has

not cease! at Co'p"e H"ectronics Corporation ut was 'ere"y transferre! to onicsCircuit, nc., a >runaway shop.? t presente! as proof that out of the D0,000 sharesco'pro'isin# the increase! capita" stock of onics, it was Co'p"e that owns the'aority of sai! shares with &1,200,000.00 as its capita" suscription an! @@D,000.00as its pai!;up in(est'ent, co'pare! to D00,000.00 suscription an! 32@,BA0.00 pai!;up owin# to the other stockho"!ers co'ine!. *hus, accor!in# to the nion, there isa c"ear #roun! to pierce the corporate fiction.

nswer:The contention is untenable. & Erunaway shopF is a relocation motivated by anti:

union intention rather that for business reasons. Ionics, however, was not set:up merely forthe purpose of transferring the business of Comple;. &t the time the labor dispute arose atComple;, Ionics already e;isted as an independent company. The %nion failed to show thatthe primary reason for the closure of the establishment was due to the union activities of theemployees. )either the mere fact that one or more of the corporations are owned orcontrolled by the same or single stockholder a sufficient ground for disregarding theseparate corporate personalities, nor substantial identity of the incorporators of twocorporations necessarily imply that there was fraud committed to =ustify piercing the veil ofcorporate fiction. That the two corporations engage in the same business is not enoughreason to pierce that veil. To disregard separate =udicial personality of a corporation, thewrongdoing must be clearly and convincingly established. #Co%-le3 le+tro+s %-loyees

Asso+ato vs. NLRC, 10 (CRA 40

2D.&ro"e':*he stockho"!ers of J)7 Corporation eecute! a certificate of "i-ui!ation of

the assets of the corporation recitin#, a'on# others, that a reso"ution was a!opte! ythe stockho"!ers !isso"(in# the corporation an! that they ha(e !istriute! a'on#the'se"(es in proportion to their stockho"!in#s as "i-ui!atin# !i(i!en!s, the assetsof the corporation, inc"u!in# rea" properties in Mani"a.

*he certificate of "i-ui!ation when presente! to the $e#ister of /ee!s ofMani"a was !enie! re#istration ecause of the fai"ure to pay re-uire! fees,!ocu'entary sta'ps an! the nu'er of parce"s was not certifie! in theacknow"e!#e'ent.

*he stockho"!ers conten! that the certificate of "i-ui!ation is not acon(eyance or transfer ut 'ere"y a !istriution of the assets of the corporationwhich has cease! to eist for ha(in# een !isso"(e! hence they are not oun! toco'p"y with the re-uire'ents are app"ica"e on"y in cases of transfer or con(eyance./eci!e with reasons.

nswer:

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& corporation is a =uridical person distinct from the members composing it. Theproperties registered in the name of the corporation are owned by it as an entity separateand distinct from its members. hile shares of stocks constitute personal property, they donot represent property of the corporation. Te stockholder is not a co:owner or tenant incommon of the corporate property.

rom the foregoing, it is clear that the act of li"uidation is not and cannot be

considered a partition of community property but rather a transfer or conveyance of the titleof its assets to individual stockholders. It is, therefore, fair and logical to consider that thecertificate of li"uidation as one in the nature of a transfer or conveyance. #(to+)ol!ers o 8.Gua:o vs. Regster o ee!s, 6 (CRA 7

2.&ro"e':*he petitioner, Jrancisco Motors Corporation was he"! "ia"e y the tria" court

y app"ication of the !octrine of piercin# the (ei" of corporate entity in thecounterc"ai' interposese! y Manue" )onza"es, the !efen!ant, seekin# to enforceco""ection of fees for ser(ices ren!ere! to its incorporators, !irectors an! officers intheir persona" capacities. +hether or not there was proper app"ication of the !octrine

nswer: The doctrine was improperly applied. The defendant!s move to recover unpaid legal

fees through a counterclaim against the corporation to offset the unpaid balance of thepurchase and repair of a =eep body could only result from an obvious misapprehension thatpetitioner!s assets could be used to answer for the liabilities of its individual directors,officers and incorporators. Such result, if permitted, could easily pre=udice the corporation,its own creditors and even other stockholders.

hatever obligation the incorporators, directors and officers of the corporationhad incurred, it was incurred in their personal capacity. hen directors and officers of acorporation are unable to compensate a party for a personal obligation, it is far:fetched toallege that a corporation is perpetuating fraud or promoting in=ustice, and be thereby held

liable therefore by piercing its corporate veil. #8ra+s+o Motors Cor-orato vs. Court oA--eals, 09 (CRA 72*

30.&ro"e':On May 2000, Mr. 4, &resi!ent of C Corporation, in his capacity as such,

an! on eha"f of the sai! corporation otaine! !e"i(ery of 100 'eta" ro!s fro' &y (irtue of a trust a#ree'ent which a'on# others pro(i!es that C sha"" ho"! thero!s in trust an! se"" the' an! turn o(er the procee!s of the sa"e to &.


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corporation that benefited and not the -resident personally. #ose(avs. ;)e Peo-le o t)eP)l--es, 121 (CRA 655

Q & A in INSURANCE LAWS

1.Question:On Ianuary 1@, 113, 4, 'arrie! to 5, took out a "ife insurance po"icy for10,000.00 fro' the 7un Life ssurance Co'pany of Cana!a, Mani"a ranch an!na'e! his estate as the so"e eneficiary thereof. *he pre'iu's fro' the years 113;11D were pai! at the Mani"a ranch of sai! co'pany.


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e"ually operate in 'ife Insurance Contracts. Conviction of the crime of adultery orconcubinage is not necessary as the law merely speaks of persons guilty of concubinage,which guilt may be proven by mere preponderance of evidence in an action for thedeclaration of nullity of said donation brought by the spouse of the donor or donee. Theeffect of these provisions is to bar common:law spouses from receiving donations from eachother, directly or indirectly. To rule otherwise would place common: law spouse in a better

position than that of the legal spouse which is not the intendment of the law.#The Insular'ife &ssurance Company 'imited vs. brado #D1 SC$& 0D0

3.Question: co""ision etween a car in which >? was ri!in# an! a 7uper"ines usoccurre! a"on# the nationa" hi#hway. >? sustaine! physica" inuries as a resu"t of theco""ision. 7use-uent"y, >? fi"e! with tria" court a co'p"aint for !a'a#es a#ainst&H$L, the insurer of the us. *he (ehic"e in which >? was ri!in# was insure! withML5. *he u!#e or!ere! &H$L to pay i''e!iate"y the &B,000 un!er the >no;fau"t in!e'nity? c"ause to >?. &H$L !enie! "iai"ity an! he"! the position that un!ersection 3FD of nsurance Co!e, the insurer "ia"e to pay the &B,000 is the insurer ofthe (ehic"e in which >? is ri!in#. +ho shou"! e "ia"e to >? for the &B,000 un!erthe >no;fau"t in!e'nity? c"ause, &H$L or ML5

Answer

5&'&4&) is liable to E&F for the -2,111. %nder Section 3D of the Insurance Code,any claim for debt or in=ury to any passenger or third party shall lie against the insurer of thevehicle in which the occupant is riding, mounting or dismounting. In the case at bar,5&'&4&) is the insurer of the vehicle in which E&F is riding. Therefore -$'& cannot bemade to pay the -2,111 indemnity to &.#-erla Compania de Seguros, Inc. vs &ncheta #06LSC$& 0LL

4.Question:*KC i'porte! 1,000 a#s of fish'ea" (a"ue! at 3,A00.30 fro' *eas,7. *he #oo!s were insure! with H7CO an! shippe! on oar! with MN% &esko(, a(esse" owne! y Jar Hastern 7hippin# Co'pany. +hen the #oo!s reache! Mani"a,

they were foun! to e !a'a#e! y seawater. *KC fi"e! a c"ai' with H7CO ut itrefuse! to pay. *KC sue! the' for the !a'a#es efore the tria" court. *he tria" courtren!ere! u!#'ent or!erin# H7CO to pay &10B, DA.AD "ess than the a'ount ofunpai! pre'iu's with interest at the "e#a" rate 8AG9. *K7 conten!e! that the "e#a"rate to e use! is 12G pursuant to 2@3 an! 2@@ of the nsurance Co!e, in payin#!a'a#es y H7CO. +hat is the interest rate to e use! in payin# the !a'a#es yH7CO, AG or 12G

AnswerThe interest rate to be paid by &SC+ is 6J. Section /L3 and /LL of the Insurance

Code apply only when the court finds an unreasonable delay or refusal in the payment of theclaims. This was not present in the case at bar. &SC+ refusal to settle the claim to T*C

was based on some ground which, while not sufficient to free it from liability under its policy,nevertheless is sufficient to negate any assertion that in refusing to pay, it acted un=ustifiably.#Tio *he Chio vs. Court of &ppeals #/1/ SC$& /0B

5.Question: fi"e! a "etter co'p"aint with , the insurance co''issioner a""e#in#certain pro"e's encountere! y a#ents, super(isors, 'ana#ers an! pu"icconsu'ers of the 456 nsurance Co. as a resu"t of certain practices of sai! co'pany. hearin# was con!ucte! y the Co''issioner. /oes the Co''issioner ha(e

uris!iction to hear an! !eci!e cases

Answer

The contract between 748 Co. and its agents are not included with in the meaningof an insurance business as defined in the Insurance Code. Therefore, the Commissionerhas no =urisdiction to hear and decide the case. & reading of section L06 of the InsuranceCode that the Commissioner can only hear and decide claims and complaints involving anyloss, damage or liability for which an insurer may be answerable under any kind of policy. Itides not contemplate on cases affecting the Insurance Co. and its agents.#-hilippine

&merican 'ife &ssurance Co. vs &nsaldo #/3L SC$& 21B

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6.Question:7tate the ru"es on how to c"ai' un!er the no;fau"t in!e'nity pro(isionwhere proof of fau"t or ne#"i#ence is not necessary for pay'ent of any c"ai' for !eathor inury to a passen#er or thir! party.

Answer0 & claim may be made against one motor vehicle only.

/ If the victim is an occupant of the vehicle, the claim shall lie against the insurer ofthe vehicle in which he is riding mounting or dismounting from. 3 In any other case # i.e. if the victim is not an occupant of the vehicle, the claimshall lie against the insurer of the directly offending vehicle.

L In all cases, the right of the party paying the claim to recover against the ownerof the vehicle responsible for the accident shall be maintained. # Sec 3D, Insurance Code#-erla Compania de Seguros, Inc. vs &ncheta #06L SC$& 0LL

7.Question:+ho is a passen#er thir! party n occupant

Answer& passenger is any fare paying person being transported and conveyed in and by a

motor vehicle for transportation of passengers for compensation, including personse;pressly authoried by law or by the vehicle!s operator or his agent to ride without fare.#Section 33 Insurance Code

& third party is any person other than the passenger. #Section 33 Insurance Code&n occupant includes both a passenger and a third party, so long as they are riding

in or mounting or dismounting from a motor vehicle. #Section 3D Insurance Code -erlaCompania de Seguros, Inc. vs &ncheta #06L SC$& 0LL

8.Problem: Life insurance po"icies were issue! in the asis of the state'entsuscrie! y the app"icant to the effect that he was an! ha! een in #oo! hea"th,when as a 'atter of fact he was then sufferin# fro' a!(ance! pu"'onary

tuercu"osis. *he insurer=s a#ent knew a"" the ti'e the true state of hea"th of theinsure!. *he insurer=s 'e!ica" ea'iner appro(e! the app"ication knowin# fu""y we""that the app"icant was sick.

A: Question: May the insure! reco(er fro' the po"icy

Answer)o, &lthough the agent and the medical e;aminer knew the statement to be false, no

valid contract of insurance was entered into because there was no real meeting of the mindsof the parties. #The Insular 'ife &ssurance Co., 'td v eliciano L -hil L6D

B. Question: +as there concea"'ent on the part of the insure!

Answer4es. hen the applicant signed the application, he was having difficulty in breathing.

@e had gone three times to the hospital and had 7:ray pictures taken of his lungs. @etherefore knew that he was not a proper sub=ect for life insurance. hen he accepted thepolicy, he knew that he was not in good health.# The Insular 'ife &ssurance Co., 'td. 9s.eliciano #L -hil L6D

10.Problem: *he "essees of a usiness esta"ish'ent stan!in# on a "ot took out aninsurance po"icy fro' insurer on stocks of c"oth 'ateria"s, e"on#in# to thir! partieswhi"e in the possession of the owner. +hi"e the insurance po"icy was in fu"" force an!effect, the ui"!in# to#ether with a"" the 'achineries, e-uip'ents an! other

accessories was urne! y an acci!enta" fire of unknown ori#in. *he c"othin#'ateria"s were a"so urne!.

/o the "essees ha(e insura"e interest in the propertyN'ateria"s

Answer< 4es, %nder the Insurance Code, the insurable interest of the lessee is not

necessarily limited to their liability to the owners of the insured materials. They wereinterested in the safety and the preservation of said materials because they stood to benefit

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from their continued e;istence or to be pre=udiced by their destruction. The destruction of thete;tile meant pecuniary loss to the lessees because they were deprived of the compensationthey would be certainly be entitled to for dyeing the same, not to mention their pecuniaryliability for labor and other e;penses. To that e;tent, they were directly damnified, evenwithout taking into account their liability to the owners for the value of the goods.#ilipino5erchants Insurance Co.,Inc v C& 0B SC$& 63D

11.Question:


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insurance raises grave about his bonafides. It appears that such concealment wasdeliberate on his part. #(ule Assura+e +o%-ay o Caa!a vs. Court o A--eals*

14.Question:4 was the consi#nee of the ship'ent of fish'ea" "oa!e! on oar! the(esse" 77 ou#ain(i""ea which 4 insure! with 5 insurance co'pany a#ainst >a""

risks?. +hen the car#o was un"oa!e! at the port of Mani"a, it was foun! that se(era"a#s were in a! or!er con!ition. *hus, 5 insurance co'pany !enie! "iai"ity uponfi"in# of a c"ai' y 4 conten!in# that in an >a"" risks? 'arine po"icy, efore a c"ai'can e co'pensa"e, there 'ust e >so'e fortuity?, >casua"ty?, or >acci!enta"cause? to which the a""e#e! "oss is attriuta"e. s the contention of the insurance co'pany tena"e

Answer:)o. The very nature of the term Eall risksF must be given a broad and comprehensive

meaning as covering any loss other than willful and fraudulent act of the insured. This ispursuant to the very purpose of an Eall risksF insurance to give protection to the insurance to

give protection to the insured in those cases where difficulties of logical e;planation or somemystery surround the loss or damage to property. &n Eall risksF policy has been evolved togrant greater protection that that afforded by the Eperils clauseF, in order to assure that noloss can happen through the incidence of a cause neither insured against nor creatingliability in the ship< it is written against all losses, that is attributable to e;ternal causes.#ilipino 5erchants Insurance Co., Inc vs. Court of &ppeals BB SC$& 63D #0BDB

15.Question:n!er an >a"" risks? po"icy, who has the ur!en of proof to show that the"oss is cause! y an epecte! risk

Answer: Aenerally, the burden of proof is upon the insured to show that a loss arose from a

covered peril, but under an E all risksF policy, the burden is not on the insured to prove theprecise cause of the loss or damage for which it seeks compensation. The insured to provethe precise cause of the loss or damage for which it seeks compensation. The insured underan Eall risks insurance policyF has the initial burden of proving that the cargo was damagedwhen unloaded from the vessel< thereafter, the burden then shifts to the insurer to show thee;ception to the coverage. The basic rule is that the insurance company has the burden ofproving that the loss is caused by the risks e;pected and want of such proof, the company isliable.#ilipino 5erchants Insurance Co., Inc vs. Court of &ppeals BB SC$& 63D #0BDB

1A.&ro"e': )/% took out a "ife insurance po"icy an! na'e! his son, /%, as theso"e eneficiary. fter )/%=s !eath, /% co""ecte! the face a'ount of the po"icy, aportion of which he use! to re!ee' certain rea" estate which his father so"! to thir!

persons with a ri#ht to repurchase. /%=s attorney effecte! the re!e'ption un!er thena'e of his rothers an! sisters an! hi'se"f as heirs of the !ecease! (en!or instea!of his na'e a"one without his know"e!#e or consent.

ow, his co;heirs c"ai' for the partition of a"" property "eft y their father an!that the a"ance of the procee!s of the "ife insurance po"icy recei(e! y /% e!i(i!e! e-ua""y a'on# the'. /% oppose!. /% ar#ues that he is the so"e owner ofthe rea" estate re!ee'e! y his attorney notwithstan!in#, as it was not his intentionto use the insurance procee!s for the enefit of any person ut hi'se"f. /% "ikewise'aintain that he is the owner of the a"ance of the insurance procee!s ein# the so"eeneficiary of the !ecease!.

a.9 /iscuss the 'erit of the case with reasons..9 +hat re'e!y is a(ai"a"e to /%, if there is any

nswers:

a. &>9 is the sole owner of the insurance proceeds. here a life insurance policy ismade payable to one of the heirs of the person whose life is insured, the proceeds ofthe policy on the death of the insured belong e;clusively to the beneficiary and not tothe estate of the person whose life was insured and such proceeds are his individualproperty and not the property of the heirs of the person whose life was insured. In

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the same token, absent any intention on his part to make a gift of real estate, the realproperty in "uestion belongs to &>9 e;clusively as the proceeds used to redeem thesame belongs e;clusively to him.

b. &>9 has two remedies. +n one hand is to compel his co:heirs to reconvey to himand the other is to let the title stand under their names and to recover from them the

sum he paid on their behalf.#>el 9al vs. >el 9al #/B -@I' 23L

1F.&ro"e': C*7 i'porte! A00 a#s of "actose crysta"s fro' the insure! sha"" e consi!ere! its own insurer for the !ifferenceetween the a'ount of &B.D Mi""ion an! the face (a"ue of the po"icy, i.e., &2.B Mi""ion.?*hus, the insurer conten!s that 4 shou"! share pro rata.

f you were the u!#e, how wou"! you !eci!e the case. Hp"ain.

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nswer:I would hold the insurer 4 Co. liable for the amount of actual loss, i.e., -21D,D6.11.

The policy of insurance, in the case at bar, is an open policy. &s defined in Section 61 of theInsurance Code, E an open policy is one in which the value of the thing insured is not agreedupon but is left to be ascertained in case of loss.F This means that tha actual loss as

determined , will represent the total indemnity due to the insured from the insurer e;ceptonly that the total indemnity shall not e;ceed the face value of the policy.

The actual loss has been ascertained in this case and such determination shall begiven respect in the absence of proof that it was arrived arbitrarily . 'evelo-%et Isura+eCor-orato vs. IAC, L7160, uly 16, 196*.

20.&ro"e': +hat is an Open &o"icy nsurance

nswer:&s defined in Section 61 of the Insurance 61 Code, Ean open policy is one in which

the value of the thing insured is not agreed upon but is left to be ascertained in case of loss.F

This means that the actual loss, as determined, will represent the total indemnity due to theinsured from the insurer e;cept only that the total indemnity shall not e;ceed the face valueof the policy. 'evelo-%et Isura+e Cor-. vs IAC, L7160, uly 16,196*

21.&ro"e': &ana'a 7aw'i"" Co., ou#ht 1,20D pieces of apiton# "o#s in &a"awan. thire! *ranspacific *owa#e, nc. to transport the "o#s y sea to Mani"a an! insure! ita#ainst "oss for One Mi""ion &esos 8&1,000,0009 with Orienta" ssurance Corp. *he'arine insurance po"icy stipu"ate! that the suect 'atter insure! is 1,20D pieces ofapiton# "o#s with a tota" (o"u'e of 2,000 cuic 'eters. t was a"so warrante! that theinsurance is a#ainst >*O*L LO77 on"y.?

*he "o#s were "oa!e! on two ar#es, on ar#e &C*;F000 E A10 pieces of

"o#s an! on ar#e *&C;1000 E BD pieces of "o#s. /urin# the (oya#e, rou#h seasan! stron# win!s cause! !a'a#e to the ar#e *&C;1000 resu"tin# in the "oss of @Fpieces of "o#s out of BD.

&ana'a !e'an!e! pay'ent fro' Orienta" ssurance Corporation utthe "atter refuse! on the #roun! that its contracte! "iai"ity was for >*O*L LO77on"y?.

&ana'a then fi"e! a co'p"aint an! otaine! a fa(ora"e u!#'ent fro'oth the tria" an! appe""ate court. oth courts share! the (iew that the "o#s "oa!e! intwo ar#es shou"! e treate! separate"y such that the "oss sustaine! y ship'ent inone of the' 'ay e consi!ere! as >constructi(e tota" "oss?. f you were the counse"of Orienta" ssurance Corp., how wou"! you cha""en#e the aforesai! !ispositionstherey aso"(in# your c"ient fro' "iai"ity.

nswer:&s counsel for the insurer, I would maintain in my petition for review that insurer

should be absolved from liability because the liability under the marine insurance policy isfor ET+T&' '+SS onlyF. In this case, there was neither actual total loss nor constructive totalloss because of the entirety of 0,/1D pieces of logs, only LB pieces thereof were lost orL0.L2J of the entire shipment. @ence, the theory of constructive total loss cannot besustained pursuant to the provisions of Section 03B#a of the Insurance Code because onlyLB pieces were lost and such does not e;ceed 2J of the value of all 0,/1D pieces of logs.

The fact that the logs were loaded on two different barges did not make thecontract several and divisible as to the items insured. The logs on the two barges were notseparately valued or separately insured. +nly one premium was paid for the entire

shipment, making only one consideration. The insurance contract is therefore consideredindivisible. The logs having been insured as one inseparable unit, the correct basis fordetermining the e;istence of constructive total loss is the totality of the shipment of the logs.'=retal Assura+e Cor-. vs. CA, 200 (CRA 459, August 9, 1991*

22.&ro"e': nion Manufacturin# Co., nc. otaine! certain "oans, o(er!rafts, an!other cre!it acco''o!ations fro' the $epu"ic ank for the tota" a'ount of&@1B,000. t eecute! a rea" an! chatte" 'ort#a#es on certain properties to secure the

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pay'ent thereof. $epu"ic ank procure! fro' &hi"ippine )uaranty Co., nc. aninsurance co(era#e in fa(or of nion Manufacturin# Co., nc. on "oss a#ainst fire for&B00,000.00 o(er the 'ort#a#e! properties. *he po"icy contains a co(er note with theannotation that "oss or !a'a#e, if any, is paya"e to $epu"ic ank as its interest 'ayappear suect howe(er to the printe! con!itions of the fire po"icy.

fire occurre! in the pre'ises of the insure!. nion Manufacturin# Co.,

nc. fi"e! its fire c"ai' ut &hi"ippine )uaranty Co., !enie! the c"ai' on the #roun!that &o"icy Con!ition o. 3, which re-uires notice to the insurer of other insurancepo"icies otaine! o(er the sa'e properties, was (io"ate!.

*he "ower court re"ease! the insure! fro' "iai"ity upon proof of a(io"ation of a warranty. $epu"ic ank appea"e! c"ai'in# that it is entit"e! to reco(eron the po"icy as 'ort#a#ee y (irtue of the co(er note pro(i!in# for the pay'ent of"oss or !a'a#es to the ank as its interest 'ay appear. s this contention tena"e

nswer:)o. $epublic (ank is bound by the conditions stated in the policy. Its interest as

stated in the cover note includes an annotation sub=ecting the bank to the printed conditionsof the policy. The annotation must be deemed to be a warranty that the property was not

insured by any other policy. 9iolation thereof entitles the insurer to rescind.%nion 5anufacturing Co., Inc. has violated the condition of the policy to the

effect that it did not reveal the e;istence of other insurance policies over the same propertiesas re"uired by the warranty appearing on the face of the policy. @ence, $epublic (ank and%nion 5anufacturing Co., Inc. cannot recover from the policy because the same is null andvoid.

The insurance contract may be onerous but that in itself does not =ustify theabrogation of its e;pressed terms, terms which the insured accepted or adhered to andwhich is the law between the contracting parties. '>o Maua+turg Co., I+. vs.P)l--e Guaraty Co., I+., 47 (CRA 271, =+to/er 0,1972*

23.Question: Can a >car#o? e the suect of 'arine insurance an! that once it is so

'a!e, !oes the i'p"ie! warranty of seaworthiness i''e!iate"y attaches to whoe(eris insurin# the car#o whether he e the ship owner or not

nswer:4es. here cargo is the sub=ect of marine insurance, the implied warranty of

seaworthiness attaches to whoever is insuring the cargo, whether he be the ship owner ornot. The fact that the unseaworthiness of the ship was unknown to insured is immaterial inordinary marine insurance and may not be used by him as a defense in order to recover onthe marine insurance policy.

Since the law provides for an implied warranty of seaworthiness in every contract ofordinary marine insurance, it becomes the obligation of a cargo owner to look for a reliablecommon carrier, which keeps its vessel in seaworthy condition. The shipper may have no

control over the vessel but he has full control in the choice of the common carrier that willtransport his goods. +r the cargo owner may enter into the contract of insurance, whichspecifically provides for coverage of perils of the ship. #$o"ue vs. Intermediate &ppellateCourt 03B SC$& 2B #0BD2

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nswer:The payment of the premium is a condition precedent to, and essential for, the

efficaciousness of the contract of insurance. The only two e;ceptions are #0 in case theinsurance coverage relates to a life or industrial life #health insurance when a grace periodapplies and #/ when the insurer makes a written acknowledgment of the receipt of thepremium, this acknowledgment being declared by law to be then conclusive evidence of the

premium payment. #South Sea Surety and Insurance Co., Inc. vs. Court of &ppeals

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epress"y or i'p"ie!"y. 7ince *an=s c"ai' was ori#ina""y !enie! on Jeruary 2F, 1D@,his cause of action has a"rea!y prescrie! at the ti'e he fi"e! the co'p"aint.Conse-uent"y, the co'p"aint 'ust e !is'isse!.

*he reection referre! to shou"! e reection in the first instance, otherwise if itis a reiterate! reection such as a reconsi!eration, it shou"! ha(e een stipu"ate!.

2D.Question: Can a >car#o? e the suect of 'arine insurance an! that once it is so'a!e, !oes the i'p"ie! warranty of seaworthiness i''e!iate"y attaches to whoe(eris insurin# the car#o whether he e the ship owner or notnswer: 4es. here cargo is the sub=ect of marine insurance, the implied warranty ofseaworthiness attaches to whoever is insuring the cargo, whether he be the ship owner ornot. The fact that the unseaworthiness of the ship was unknown to insured is immaterial inordinary marine insurance and may not be used by him as a defense in order to recover onthe marine insurance policy.

Since the law provides for an implied warranty of seaworthiness in every contract ofordinary marine insurance, it becomes the obligation of a cargo owner to look for a reliablecommon carrier, which keeps its vessel in seaworthy condition. The shipper may have no

control over the vessel but he has full control in the choice of the common carrier that willtransport his goods. +r the cargo owner may enter into the contract of insurance, whichspecifically provides for coverage of perils of the ship. #$o"ue vs. Intermediate &ppellateCourt 03B SC$& 2B #0BD2

Q & A in TRANSPORTATION LAWS

1. Q: Hrnesto, a unk !ea"er, is en#a#e! in the usiness of uyin# use! ott"es an!

scrap 'eta"s in O"on#apo City. pon #atherin# sufficient -uantities of such scrap'ateria", he rin#s such 'ateria"s to Mani"a for resa"e.


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A: )o. & common carrier must e;ercise e;traordinary diligence for the safe transportationof their passengers to their destination. This duty of care is not e;cused by proof that theye;ercised the diligence of a good father of a family in the selection and supervision of itsemployees.# ngracio abre Gr v Court of &ppeals /2B SC$& L/6

3. Q: < an! + were spouses who owne! a 'inius use! principa""y in connectionwith a us ser(ice for chi"!ren. *he coup"e ha! a !ri(er, /, who' they hire! aftertryin# hi' out for two weeks. J, a Christian Je""owship ssociation, arran#e! with thecoup"e for the transportation of 33 of its 'e'ers fro' Mani"a to La nion an! ack. consi!eration was pai! for the sa'e. / !i! not take the usua" route to La nionecause a ri!#e was un!er repair in &an#asinan.


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6. Q: +hen the interis"an! (esse" MN% &ioneer oun! for Ceu "eft the port of Mani"a,its officers were a"rea!y aware of the typhoon K"arin# ui"!in# up so'ewhere inMin!anao. ear $o'"on, the (esse" encountere! hea(y rains. Jearin# that !ue tozero (isii"ity the (esse" 'i#ht hit an is"an!, the captain or!ere! a re(ersa" of thecourse so that the (esse" cou"! weather out the typhoon y facin# the win!s an! the

wa(es in the open. nfortunate"y, the (esse" struck a reef, sustaine! a "eak an!e(entua""y sank. suit for !a'a#es was fi"e! a#ainst the carrier.

a. +i"" the !efense of fortuitous e(ent prosper +hy

. Can there e reco(ery !espite tota" "oss of the (esse"

A: #a. )o, because the carrier was at fault. In 9as"ue vs. C& #':L/B/6, September 03,0BD2, it was said that to constitute +aso ortuto that would e;empt a person from liability, itis necessary that? #0 the event must be independent of the human will< #/ the occurrencemust render it impossible for the debtor to fulfill the obligation in a normal manner< and that#3 the obligor must be free of participation in, or aggravation of the in=ury to the creditor. Theevent must have been impossible to foresee, or if could be foreseen, must be impossible toavoid. There must be entire e;clusion of human agency from the cause of the in=ury or loss.In the instant case, the typhoon was inevitable occurrence, yet, having been kept postedwith the same, the captain and the members of the crew took a calculated risk in proceedingwith the voyage. In so doing, they failed to observe the e;traordinary diligence re"uired ofthem by law for the safety of the passengers transported by them with due regard for allcircumstances and unnecessarily e;posed the vessel and the passengers to the tragicmishap. They failed to overcome the presumption of negligence under the provisions of

&rticle 026 of the Civil Code.#b 4es. The liability of the shipowner is limited to the value of the vessel or its insurance.>espite the total loss of the vessel, its insurance answers for the damages that a shipowneror agent may be held liable for any reason of the death of its passengers. #9as"ue v C& ':L/B/6 September 03, 0BD2

7. Q: 6 *ransportation Co., unre#istere! owner of an i"";fate! (ehic"e which c"ai'e!the "i(es of so'e peop"e, an! 66 *ransportation Co. , the re#istere! owner of thesa'e (ehic"e, were sue! for reach of contract of carria#e . oth 6 an! 66 a!'itte!that the !ri(er of the sai! (ehic"e were in their e'p"oy. Can 6, 66 an! the !ri(er e

oint"y an! se(era""y "ia"e

A: -revious decisions of the Supreme Court is to the effect that transfer of a certificateof public convenience to operate a transportation service is not effective and binding insofaras the responsibility of the grantee under the franchise in its relation to the public isconcerned. ithout the approval of the transfer by the -ublic Service Commission re"uiredby the -ublic Service &ct, the transferor of such certificate continues to be the operator ofthe service and as such operator, he is the one responsible =ointly and severally with his

driver for damages incurred by passengers or third persons in conse"uence of in=uries ordeaths resulting from the operation of such service.

e do not find any need for applying these rulings to the present petitioners for thesimple reason that in their respective third:party complaints, as noted by the Court of

&ppeals, they both admitted separately that they are the owners of the bus involved in theincident in "uestion and that 9aleriano 5arcos, the driver of said bus at the time of saidincident, was in their employ. (8amboanga Transportation Company v C& A.$. )o. ':/2/B/

8. Q: +i"" the etraor!inary responsii"ity of a co''on carrier co''ence fro' theissuance of a i"" of "a!in# without the actua" receipt of the ship'ent co(ere! y the

sa'e

A: )o. The Supreme Court held that e;plicit is the rule under &rticle 036 of the Civil Codethat the e;traordinary responsibility of the common carrier begins from the time the goodsare delivered to the carrier. This responsibility remains in full force and effect even whenthey are temporarily unloaded or stored in transit, unless the shipper or owner e;ercises theright of stoppage in transit, and terminates only after the lapse of reasonable time for theacceptance of the goods by the consignee or such other person entitled to receive them.

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&nd, there is delivery to the carrier when the goods are ready for and have been placed inthe e;clusive possession, custody and control of the carrier for the purpose of theirimmediate transportation and the carrier has accepted them. here such delivery has thusbeen accepted by the carrier, the liability of the common carrier commences co instanti.@ence, while we agree with petitioners that the e;traordinary diligence statutorily re"uired tobe observed by the carrier instantaneously commences upon delivery of the goods hereto,

for such duty to commence, there must in fact, have been delivery of the cargo sub=ect ofthe contract of carriage. #Saludo v C& /1 SC$& LBD

9. Q: us of 4 us Co. fi#ure! in an acci!ent with a eepney, resu"tin# in the !eathof se(era" passen#ers inc"u!in# two Maranaos. nfor'ation was recei(e! that certainMaranaos were pannin# to a(en#e their !eath y urnin# so'e of the uses of 4 usCo. /ays after the acci!ent, three ar'e! Maranaos, who preten!e! to e passen#ers,seize! a us of 4 us Co., poure! #aso"ine on it an! or!ere! the passen#ers to #etoff the us.


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Mayor 5 or!ere! his 'en to !u'p the scrap iron at a certain co'poun!. receipt wasthereafter issue! statin# that the Municipa"ity of Mari(e"es ha! taken custo!y of thescrap iron.

s the co''on carrier "ia"e to the owner of the scrap iron

A: 4es. (y the act of delivery made by 5r. &, the scraps were unconditionally placed in the

possession and control of the common carrier, and upon their receipt by the carrier fortransportation, the contract of carriage was deemed perfected. Conse"uently, the carrierNse;traordinary responsibility for the loss, destruction or deterioration of the goodscommenced.

-ursuant to &rticle 03D of the Civil Code, such e;traordinary responsibility wouldcease only upon the delivery, actual or constructive, by the carrier to the consignee, or to theperson who has the right to receive them. The fact that part of the shipment had not beenloaded on board the lighter did not impair the said contract of transportation as the goodsremained in the custody and control of the carrier, albeit still unloaded. #Ga:o vs. Court o

A--eals,060 SC$& 6L6

12. Q: , a fare;payin# passen#er oar!e! JL5 ir"ines an! checke! in three pieces

of a##a#e. One of the a##a#es !i! not arri(e with the f"i#ht ecause it was 'issent.+hen the a##a#e fina""y arri(e!, it was !isco(ere! that so'e of its contents was'issin#. pon co'p"aint for !a'a#es, the carrier c"ai'e! that its "iai"ity is "i'ite! tothe stipu"ation printe! at the ack of the air"ine ticket. , the passen#er a(erre! thathe was not a"e to rea! such stipu"ations as they were printe! so s'a"" an! that theywere har! to rea!. s such it !oes not in! hi'. /eci!e.

A: The pecuniary of the common carrier may by contract limited to a fi;ed amount providedthat the contract is reasonable and =ust under the circumstances and has been freely andfairly agreed upon. here however, the conditions limiting the carrierNs liability printed at theback of the ticket are in letters so small that they are hard to read, this would not warrant thepresumption that the passenger was aware of these conditions such that he had Ofairly and

freely agreedO to them. &, therefore is not and cannot be bound by the conditions found atthe back of the ticket stub. #()e&ara% vs. P)l--e Arles, I+., 0 SC$& 616

13. Q: passen#er eepney owne! y spouses si!ro Man#une an! )ui""er'aCarreon an! !ri(en y *ran-ui"ino Mana"o was on its way to &an#asinan when the

eepneys ri#ht rear whee" was !etache! forcin# it to in(a!e the other "ane. fter itencroache! into the other "ane, a us u'pe! it fro' ehin! ki""in# 3 passen#ers an!inurin# others. co'p"aint for reco(ery of !a'a#es was fi"e!. +ho shou"! e he"!"ia"e for the !eath an! physica" inuries suffere! y the passen#ers of the eepney

A: The owners and the driver are liable. In culpa contractual, the moment a passenger diesor is in=ured, the carrier is presumed to have been at fault or to have acted negligently, and

this disputable presumption may only be overcome by evidence that he had observed e;tra:ordinary diligence or that the death or in=ury of passenger was due to a fortuitous event.

In an action for damages against the carrier for his failure to safely carry hispassengers to their destination, an accident caused either by the defects in the automobileor through the negligence of the driver, is not a +aso ortutowhich would avoid the carrierNsliability for damages. #Ne+essto v Paras 104 P)l 75*

14. Q: Corporation sou#ht reco(ery fro' carrier the a""e#e! (a"ue of the'erchan!ise it shippe! which was not !e"i(ere! to the consi#nee or returne! to it.*he carrier conten!e!, howe(er, that assu'in# it is "ia"e, it cou"! not e he"! "ia"ein ecess of &300.00 for each packa#e un"ess the (a"ue an! the contents thereof are!ec"are! in the i"" of "a!in# at the ti'e of ship'ent pursuant to a pro(ision in the i""

of "a!in# eecute! etween the parties. s the stipu"ation "i'itin# the "iai"ity of thecarrier for the "oss of the car#o (a"i! an! in!in# upon shipper

A: )+. & common carrier cannot lawfully stipulate for e;emption from liability unless suche;emption is =ust and reasonable, and the contract is freely and fairly made. The carriercannot limit its liability for in=ury to or loss of goods shipped where such in=ury or loss wascaused by its own negligence. The rule rests on considerations of public policy. Theundertaking is to carry the goods, and to relieve shipper from all liability for loss or damage

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arising from negligence in performing its contract is to ignore the contract itself. The naturaleffect of a limitation of liability against negligence is to induce want of care on the part of thecarrier in the performance of its duty #ua @s%ael a! Co., I+. vs. Ga/o arreto a!Co., Lt!, 20 -@I' B1.

15. Q:4 a !u"y "icense! copra !ea"er, "oa!e! sacks of copra on oar! the (esse" PMN%

Luz(i'in!aP for ship'ent fro' Min!oro to Mani"a. 7ai! car#o howe(er, !i! not reachMani"a ecause a"on# the way, the (esse" capsize! an! sank with a"" its car#o.&etitioner fi"e! an action to reco(er the (a"ue of his car#o. n its !efense, theshipowner c"ai'e! that his "iai"ity is etin#uishe! y the tota" "oss of the (esse". sthe !efense of shipowner tena"e

A: 4es, the direct liability of the shipowner is moderated and limited by the shipagentNs orshipownerNs right of abandonment of the vessel and earned freight. This e;presses theuniversal principle of limited liability under maritime law. The most fundamental effect ofabandonment is the cessation of the responsibility of the shipagentowner. It has been heldthat by implication, the shipagentNs or shipownerNs liability is confined to that which he isentitled as of right to abandon :Othe vessel with all her e"uipment and the freight it may have

earned during the voyage,Oand Oto the insurance thereof, if any.O In other words, theshipownerNs or agentNs liability is merely co:e;tensive with his interest in the vessel such thata total loss thereof results in its e;tinction. O)o vessel, no liabilityO e;presses in a nutshellthe limited liability rule. The total destruction of the vessel e;tinguishes maritime lien asthere is no longer any res to which it can attach.#Chua 4ek @ong 9 I&C 066 SC$& 0D3

16. Q: C Corp. i'porte! fro' the .7. se(era" 'achineries an! e-uip'ent whichwere "oa!e! on oar! the 7N7 "ert Maersk. *he ship'ent arri(e! at the &ort ofMani"a an! was turne! o(er co'p"ete an! in #oo! or!er con!ition to the arrastreoperator 456 7er(ice, nc. n e'p"oyee of 456 7er(ice, nc. was or!ere! to transferthe ship'ent an! whi"e the e'p"oyee was 'anoeu(rin# the tractor, the car#o fe"" fro'

the chassis an! the 'achineries were roken, !ente!, cracke! an! no "on#er usefu"for their purposes. t was !isco(ere! that there were no twist "ock at the rear en! ofthe chassis where the car#o was "oa!e!. /HJ nsurance Co. pai! the (a"ue of the!a'a#e to the consi#nee an! as a suro#ee, fi"e! an! action for !a'a#es a#ainst thearrastre operator, 456 7er(ice, nc. s the arrastre operator so"i!ari"y "ia"e with thecarrier for !a'a#es to the #oo!s whi"e in its custo!y

A: 4S. The legal relationship consignee and the arrastre operator is akin to that of adepositor and warehouseman. The relationship between the consignee and the carrier issimilar to that of the consignee and the arrastre operator. Since it is the duty of the arrastreto take good care of the goods that are in its custody and to deliver them in good conditionto the consignee, such responsibility also devolves upon the carrier. (oth the arrastre and

the carrier are therefore charged with and obligated to deliver the goods in good condition tothe consignee. #8re%as 8u! Isura+e Co. vs. CA

17. Q: Iose is the ho"!er of a certificate of pu"ic con(enience for the operation of aeepney "ine. One of his eepneys hit Mario an! his wife, Maria, causin# Marios !eath.*he "atters heirs fi"e! an action for !a'a#es a#ainst Iose, Iuan 8the !ri(er9 an!&e!ro 8the actua" owner of the eepney9. &e!ro !enie! ownership of the eepney, whi"eIose c"ai'e! that he was on"y the franchise owner an! that he ha! nothin# to !o withthe actua" operation an! super(ision of the eepney which is un!er the contro",operation an! super(ision of &e!ro who operates the sa'e un!er the Pkait syste'P.

n the case at ar, who shou"! e he"! "ia"e for the !eath of Mario

A: Gose should be held liable. In the case of 9argas vs. 'angkay, the court held that it is theregistered owner of passengerNs vehicle who is =ointly and severally liable with the driver fordamages incurred by passengers or third persons as a conse"uence of in=uries or deathsustained in the operation of said vehicle.

This is, however, without pre=udice to the right of the registered owneroperator to beindemnified by the real or actual owner of the amount that he may be re"uired to pay.'ereos vs. Court o A--eals, 00 SC$& 3B2

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internationa" air"ines oun! for Mani"a were force! to un"oa! their passen#ers inforei#n countries. Jor a few !ays, the air"ine co'panies shou"!ere! the epenses forthe hote" acco''o!ations of their passen#ers.


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28. Q: passen#er of petitioner ache"or Hpress, nc. su!!en"y stae! a &Cso"!ier which cause! a co''otion an! panic a'on# passen#ers. +hen the usstoppe!, passen#ers were "yin# on the roa!, one !ie! as a resu"t of hea! inurieswhi"e others were se(ere"y inure!. /urin# the tria" in the action for !a'a#es a#ainstpetitioner, it was esta"ishe! that short"y after the co''otion, the us con!uctoropene! the front !oor whi"e the us was sti"" runnin#, fro' which so'e of the

passen#ers, inc"u!in# the !ecease! a"i#hte!. +ou"! a caso fortuito aso"ute"yeonerate the carrier fro' "iai"ity for !a'a#es when there was a fin!in# ofne#"i#ence on its part to pre(ent inuries to passen#ers

A: )+. The Supreme Court held that the sudden attackact of the passenger who stabbedanother passenger in the bus is within the conte;t of or+e %a?eure. @owever, in order thata common carrier may be absolved from liability in case of force ma=eure, it is not enoughthat the accident was caused by force ma=eure. The common carrier must still prove that itwas not negligent in causing the in=uries resulting from such accident. Considering thefactual findings of the Court of &ppeals: the bus did not immediately stop at the height of thecommotion< and the victims fell from the bus door when it was opened or gave way while thebus was still running< the conductor panicked and blew his whistle after people had already

fallen off the bus< and the bus was not properly e"uipped with doors in accordance with law:it is clear that petitioner was at fault and negligent under the law governing common carriers.#a+)elor 3-ress, I+. vs. Court o A--eals, 0DD SC$& /06

29. Q: 7pouses &aen# an! r"ene to#ether with their 'inor chi"!ren oar!e! a us.*he front tire of the us ep"o!e!. *he !ri(er "ost contro" causin# the us to fa"" into ara(ine. &aen# !ie!.

May the co''on carrier ecu"pate hi'se"f fro' "iai"ity so"e"y on the #roun!that the tire that "ew was new an! thus, constitutes fortuitous e(ent

A: )o. The e;plosion of the new tire may not be considered a fortuitous event. There arehuman factors involved in the situation. The fact that the tire was new did not imply that was

entirely free from manufacturing defects or that it was properly mounted on the vehicle.)either may the fact that the tire bought and used in the vehicle is of a brand name noted for"uality, resulting in the conclusion that it could not e;plode within dayNs use. (e that as itmay, it is settled hat an accident caused either by defects in the automobile or through thenegligence of its driver is not +aso ortutothat would e;empt the carrier from liability fordamages.#4obido v C& /D0 SC$& 0

30. Q: is the re#istere! owner of a frei#ht truck. hire! the truck to hau" ferti"izer.n!er the "ease contract, sha"" e "ia"e for a"" "osses an! !a'a#es atten!in# thecarria#e of the #oo!s hau"e! y hi'. *hereafter, entere! into an a#ree'ent with Cfor the use of the frei#ht truck in -uestion for the hau"in# of certain 'erchan!ise. *he

'erchan!ise was !e"i(ere! to ut was not !e"i(ere! to the consi#nee.s the re#istere! owner "ia"e for the "oss of the #oo!s

A: 4es. The Supreme Court has invariably held in several decisions that the registeredowner of a public service vehicle is responsible for damages that may arise fromconse"uences incident to its operation or that may be caused to any passengers therein. Itis settled in our =urisprudence that if the property covered by a franchise is transferred orleased without obtaining the re"uisite approval from the -ublic Service Commission, thetransfer is not binding upon the public and third persons. #Aelisan v &lday 02L SC$& 3DD

31. Q: )i""aco was a passen#er of appe""ant Mani"a $ai"roa! Co.


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e;cused thereby. The crime stands on the same footing as if committed by a stranger or co:passenger, since the killing was not done in line of duty.# Aillaco v 5anila $ailroadCompany

32. Q: +hat re"ationship eists etween the eep owner an! the !ri(er un!er theoun!ary syste' arran#e'ent

A: &n employer:employee relationship e;ists between a =eep owner and a driver under aboundary system. The features which characterie the boundary system :namely the factthat the driver does not receive a fi;ed wage but gets only the e;cess of the amount of thefares collected by him over the amount he pays to the =eep owner I and that the gasolineconsumed by the =eep is for the account of the driver : are not sufficient to withdraw therelationship between them from that of employer:employee. #5agboo v (ernardo SC$&B2/

33. Q: May the owner of a passen#er eep operate! un!er the oun!ary syste'arran#e'ent e he"! "ia"e for the in!e'nity !ue to the (icti' of the acci!ent cause!y the !ri(er in case of the "atters inso"(ency

A: 4S. Since an employer:employee relationship e;ists between the =eep owner and thedriver, the former is subsidiarily liable as employer in accordance with &rt. 013, $-C. Toe;empt him from liability on the ground that he is a mere lessor would not only abet flagrantviolations of the -ublic Service 'aw but also place the riding public at the mercy of recklessand irresponsible drivers.

34. Q: was ki""e! in a 'otor (ehic"e acci!ent. *he eep he was ri!in# was owne! y an! !ri(en y C un!er the oun!ary syste' arran#e'ent. C was con(icte! ofho'ici!e thru reck"ess i'pru!ence ut was not a"e to pay the in!e'nity !ue toinso"(ency. *he heirs of fi"e! an action a#ainst for the enforce'ent of hissusi!iary "iai"ity as e'p"oyer in accor!ance with rt. 103 of the $e(ise! &ena"

Co!e. +i"" the action prosper

A: 4S. ( the owner of the =eep is considered as an employer of C. Thus, being so, he isliable subsidiarily for damages caused by the latter in case of insolvency in accordance with

&rt. 013 of the $evised -enal Code.

35. Q: re"ene took a Iapan ir"ines 8IL9 f"i#ht fro' the nite! 7tates to Mani"a.*he p"ane ha! an inter'e!iate stop at Osaka, Iapan. pon reachin# Mani"a, r"ene!isco(ere! that her "u##a#e was erroneous"y "oa!e! on a !ifferent f"i#ht. 7he!e'an!e! fro' IL e'p"oyees to return the "u##a#e. *he e'p"oyees foun! the"u##a#e ut "ost it a#ain !ue to care"essness. re"ene fi"e! a suit for !a'a#es. *heIL 'ana#e'ent a!'itte! to the ne#"i#ence of its e'p"oyees ut refuse! to pay the

tota" !a'a#es ein# prosecute!. t c"ai'e! that it is "ia"e on"y for 20 per ki"o of"u##a#e accor!in# to the +arsaw Con(ention.

A: The management is wrong< The arsaw Convention denies the carrier to avail of itsprovisions if the damage was caused by its willful misconduct or by such default on his partas, in accordance with the law of the court seiing the case, is considered to be e"uivalentto willful misconduct, or if damage is caused by any agent of the carrier acting within thescope of his employment.

36. Q: *ranscontinenta" Jerti"izer Co. enters into a (oya#e charter with


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A: 4es. & voyage charter being a private carriage, the parties may freely contractrespecting the liability for damages to the goods and other matters. The basic rule is thatthe responsibility for cargo loss rests on the one who agreed to perform the duty involved Oinaccordance with the terms of most voyage charters. The charterer was responsible for theloading, stowage and discharging of the cargo at the ports visited, while the owner was

responsible for the care of the cargo during the voyage. If the goods were shortlanded, thismeans that the loss took place on board the vessel before unloading of the shipment, forwhich the owner will be answerable. @owever, goods damaged or lost during the unloadingis the liability of the charterer. #Mart%e Age+es v. CA, 0D SC$& 3L6

37. Q: !ri(er of a passen#er us ran o(er a pe!estrian who !ie! instant"y. *heinsurance co'pany in!e'nifie! the heir in the a'ount of &B,000 un!er a (ehicu"arinsurance po"icy otaine! y the us owner. *he sur(i(in# heir of the !ecease!sou#ht to reco(er !a'a#es, a'on# others, for "oss of pension in the su' of &10,000which the !ecease! fai"e! to recei(e a#ainst the !ri(er.

8a9 s the errant !ri(er "ia"e89 +hat is the nature an! etent of the "iai"ity of the us owner in case the

!ri(er fai"s to pay

A: #a 4es. &rticle //16 of the Civil Code provides that Othe amount of damages for deathcaused by a crime or uas!el+tshall be at least -3,111 #now -21,111, even though theremay have been mitigating circumstances. In addition? #0I the defendant shall be liable forthe loss of earning capacity of the deceased, and the indemnity shall be paid to the heirs ofthe latter< ;;;O. The pension of the decedent being a sure income that was cut short by herdeath for which the driver was responsible, the surviving heir is entitled to the award of-01,111 which is =ust e"uivalent to the pension the decedent would have received for oneyear if she did not dic.'e Calsto vs. CA, 0// (CRA B2D

#b The liability of the bus owner is subsidiary m nature. The -2,111 paid to thesurviving heir by the insurer of the bus may be deemed to have come from the bus owner

who procured the insurance. Since the civil liability 'e3 !el+to* of the bus owner for thedeath caused by his driver is subsidiary and, at bottom, arises from the same +ul-a, theinsurance proceeds should be c

impt doctrines.comml

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