November 2012 Philippine Supreme Court Decisions on Commercial Law

Here are select November 2012 rulings of the Supreme Court of the Philippines on commercial law:

Banks; level of diligence required. Primarily, it bears noting that the doctrine of “mortgagee in good faith” is based on the rule that all persons dealing with property covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title. This is in deference to the public interest in upholding the indefeasibility of a certificate of title as evidence of lawful ownership of the land or of any encumbrance thereon. In the case of banks and other financial institutions, however, greater care and due diligence are required since they are imbued with public interest, failing which renders the mortgagees in bad faith. Thus, before approving a loan application, it is a standard operating practice for these institutions to conduct an ocular inspection of the property offered for mortgage and to verify the genuineness of the title to determine the real owner(s) thereof. The apparent purpose of an ocular inspection is to protect the “true owner” of the property as well as innocent third parties with a right, interest or claim thereon from a usurper who may have acquired a fraudulent certificate of title thereto.

In this case, while Philbank failed to exercise greater care in conducting the ocular inspection of the properties offered for mortgage, its omission did not prejudice any innocent third parties. In particular, the buyer did not pursue her cause and abandoned her claim on the property. On the other hand, Sps. Delgado were parties to the simulated sale in favor of the Dys which was intended to mislead Philbank into granting the loan application. Thus, no amount of diligence in the conduct of the ocular inspection could have led to the discovery of the complicity between the ostensible mortgagors (the Dys) and the true owners (Sps. Delgado). In fine, Philbank can hardly be deemed negligent under the premises since the ultimate cause of the mortgagors’ (the Dys’) defective title was the simulated sale to which Sps. Delgado were privies.

Accordingly, in the interest of public policy, fair dealing, good faith and justice, the Court accords Philbank the rights of a mortgagee in good faith whose lien to the securities posted must be respected and protected. In this regard, Philbank is entitled to have its mortgage carried over or annotated on the titles of Cipriana Delgado over the said properties. Philippine Banking Corporation vs. Arturo Dy, et al., G.R. No. 183774. November 14, 2012.

Insurance; theft clause. Records would show that respondents entrusted possession of their vehicle only to the extent that Sales will introduce repairs and not to permanently deprive them of possession thereof. Since, Theft can also be committed through misappropriation, the fact that Sales failed to return the subject vehicle to respondents constitutes Qualified Theft. Hence, since respondents’ car is undeniably covered by a Comprehensive Motor Vehicle Insurance Policy that allows for recovery in cases of theft, petitioner is liable under the policy for the loss of respondents’ vehicle under the “theft clause.”  Paramount Insurance Corporation vs. Spouses Yves and Maria Teresa Remonduelaz, G.R. No. 173773, November 28, 2012

Trademark; test for similarity. A trademark device is susceptible to registration if it is crafted fancifully or arbitrarily and is capable of identifying and distinguishing the goods of one manufacturer or seller from those of another. Apart from its commercial utility, the benchmark of trademark registrability is distinctiveness. Thus, a generic figure, as that of a shark in this case, if employed and designed in a distinctive manner, can be a registrable trademark device, subject to the provisions of the IP Code.

Corollarily, Section 123.1(d) of the IP Code provides that a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to the same or closely related goods or services, or has a near resemblance to such mark as to likely deceive or cause confusion.

In determining similarity and likelihood of confusion, case law has developed the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the ordinary purchaser, and gives more consideration to the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. In contrast, the Holistic or Totality Test considers the entirety of the marks as applied to the products, including the labels and packaging, and focuses not only on the predominant words but also on the other features appearing on both labels to determine whether one is confusingly similar to the other as to mislead the ordinary purchaser. The “ordinary purchaser” refers to one “accustomed to buy, and therefore to some extent familiar with, the goods in question.” Great White Shark Enterprises, Inc. Vs. Danilo M. Caralde, Jr., G.R. No. 192294. November 21, 2012.

(Hector thanks  Dianne Caroline V. Ducepec, Dianne Margarette T. De los Reyes, Grace Ann C. Lazaro and Maria Angelica A. Paglicawan for their assistance to Lexoterica.)