Here are select September 2013 rulings of the Supreme Court of the Philippines on commercial law:
Checks; negotiable instruments. The check delivered to was made payable to cash. Under the Negotiable Instruments Law, this type of check was payable to the bearer and could be negotiated by mere delivery without the need of an indorsement. People of the Philippines v. Gilbert Reyes Wagas, G.R. No. 157943, September 4, 2013.
Insurance contracts; contract of adhesion. A contract of insurance is a contract of adhesion. When the terms of the insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Alpha Insurance and Surety Co. v. Arsenia Sonia Castor, G.R. No. 198174, September 2, 2013.
Sale; subdivision lots. Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly” the basic requirements and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances.
Presidential Decree No. 957 authorizes the suspension and revocation of the registration and license of the real estate subdivision owners, developers, operators, and/or sellers in certain instances, as well as provides the procedure to be observed in such instances; it prescribes administrative fines and other penalties in case of violation of, or non-compliance with its provisions. San Miguel Properties, Inc. v. Secretary of Justice, et al., G.R. No. 166836, September 4, 2013.
(Hector thanks Carlos Manuel D. Prado for his assistance to Lexoterica.)
Here are select August 2103 rulings of the Supreme Court of the Philippines on commercial law:
Insurance; prohibition against removal of property. Here, by the clear and express condition in the renewal policy, the removal of the insured property to any building or place required the consent of Malayan. Any transfer effected by the insured, without the insurer’s consent, would free the latter from any liability.
Insurance; rescission. Considering that the original policy was renewed on an “as is basis,” it follows that the renewal policy carried with it the same stipulations and limitations. The terms and conditions in the renewal policy provided, among others, that the location of the risk insured against is at the Sanyo factory in PEZA. The subject insured properties, however, were totally burned at the Pace Factory. Although it was also located in PEZA, Pace Factory was not the location stipulated in the renewal policy. There being an unconsented removal, the transfer was at PAP’s own risk. Consequently, it must suffer the consequences of the fire. Thus, the Court agrees with the report of Cunningham Toplis Philippines, Inc., an international loss adjuster which investigated the fire incident at the Pace Factory, which opined that “[g]iven that the location of risk covered under the policy is not the location affected, the policy will, therefore, not respond to this loss/claim.” It can also be said that with the transfer of the location of the subject properties, without notice and without Malayan’s consent, after the renewal of the policy, PAP clearly committed concealment, misrepresentation and a breach of a material warranty.
Accordingly, an insurer can exercise its right to rescind an insurance contract when the following conditions are present, to wit:
Here are select July 2013 rulings of the Supreme Court of the Philippines on commercial law:
Banks; outsourcing of functions. D.O. No. 10 is but a guide to determine what functions may be contracted out, subject to the rules and established jurisprudence on legitimate job contracting and prohibited labor only contracting.41 Even if the Court considers D.O. No. 10 only, BPI would still be within the bounds of D.O. No. 10 when it contracted out the subject functions. This is because the subject functions were not related or not integral to the main business or operation of the principal which is the lending of funds obtained in the form of deposits.42 From the very definition of “banks” as provided under the General Banking Law, it can easily be discerned that banks perform only two (2) main or basic functions – deposit and loan functions. Thus, cashiering, distribution and bookkeeping are but ancillary functions whose outsourcing is sanctioned under CBP Circular No. 1388 as well as D.O. No. 10. Even BPI itself recognizes that deposit and loan functions cannot be legally contracted out as they are directly related or integral to the main business or operation of banks. The CBP’s Manual of Regulations has even categorically stated and emphasized on the prohibition against outsourcing inherent banking functions, which refer to any contract between the bank and a service provider for the latter to supply, or any act whereby the latter supplies, the manpower to service the deposit transactions of the former. BPI Employees Union-Davao City-Fubu (BPIEU-Davao City-Fubu) v. Bank of the Philippine Islands (BPI), et al., G.R. No. 174912, July 24, 2013.
Here are select June 2013 rulings of the Supreme Court of the Philippines on commercial law:
Corporation; derivative suit. A derivative suit is an action brought by a stockholder on behalf of the corporation to enforce corporate rights against the corporation’s directors, officers or other insiders. Under Sections 23 and 36 of the Corporation Code, the directors or officers, as provided under the by-laws, have the right to decide whether or not a corporation should sue. Since these directors or officers will never be willing to sue themselves, or impugn their wrongful or fraudulent decisions, stockholders are permitted by law to bring an action in the name of the corporation to hold these directors and officers accountable. In derivative suits, the real party in interest is the corporation, while the stockholder is a mere nominal party. Juanito Ang, for and in behalf of Sunrise Marketing (Bacolod), Inc. v. Sps. Roberto and Rachel Ang, G.R. No. 201675, June 19, 2013.
Corporation; shares of stock. In a sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased.
Here, FEGDI clearly failed to deliver the stock certificates, representing the shares of stock purchased by Vertex, within a reasonable time from the point the shares should have been delivered. This was a substantial breach of their contract that entitles Vertex the right to rescind the sale under Article 1191 of the Civil Code. It is not entirely correct to say that a sale had already been consummated as Vertex already enjoyed the rights a shareholder can exercise. The enjoyment of these rights cannot suffice where the law, by its express terms, requires a specific form to transfer ownership. Fil-Estate Gold and Development, Inc., et al. v. Vertex Sales and Trading, Inc., G.R. No. 202079, June 10, 2013.
The Supreme Court website did not publish any case decided during the month of May 2013.
Here are select March 2013 rulings of the Supreme Court of the Philippines on commercial law:
Corporation; separate personality. A corporation is an artificial entity created by operation of law. It possesses the right of succession and such powers, attributes, and properties expressly authorized by law or incident to its existence. It has a personality separate and distinct from that of its stockholders and from that of other corporations to which it may be connected. As a consequence of its status as a distinct legal entity and as a result of a conscious policy decision to promote capital formation, a corporation incurs its own liabilities and is legally responsible for payment of its obligations. In other words, by virtue of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder. This protection from liability for shareholders is the principle of limited liability. Phil. National Bank vs. Hydro Resources Contractors Corp., .G.R. Nos. 167530, 167561, 16760311. March 13, 2013
Corporation; piercing the corporate veil. Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a person or of another corporation. For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against third persons.