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:
1) the policy limits the use or condition of the thing insured;
2) there is an alteration in said use or condition;
3) the alteration is without the consent of the insurer;
4) the alteration is made by means within the insured’s control; and
5) the alteration increases the risk of loss.
In the case at bench, all these circumstances are present. It was clearly established that the renewal policy stipulated that the insured properties were located at the Sanyo factory; that PAP removed the properties without the consent of Malayan; and that the alteration of the location increased the risk of loss. Malayan Insurance Company, Inc. v. PAP co., Ltd. (Philippine Branch), G.R. No. 200784, August 7, 2013.
Interest; legal rate beginning July 1, 2013. The guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein. Dario Nacar v. Gallery Frames and/or Felipe Bordey, Jr., G.R. No. 189871, August 13, 2013.
Receivership; power of Monetary Board. The Monetary Board (MB) may forbid a bank from doing business and place it under receivership without prior notice and hearing.
It must be emphasized that R.A .No. 7653 is a later law and under said act, the power of the MB over banks, including rural banks, was increased and expanded. The Court, in several cases, upheld the power of the MB to take over banks without need for prior hearing. It is not necessary inasmuch as the law entrusts to the MB the appreciation and determination of whether any or all of the statutory grounds for the closure and receivership of the erring bank are present. The MB, under R.A. No. 7653, has been invested with more power of closure and placement of a bank under receivership for insolvency or illiquidity, or because the bank’s continuance in business would probably result in the loss to depositors or creditors.
Accordingly, the MB can immediately implement its resolution prohibiting a banking institution to do business in the Philippines and, thereafter, appoint the PDIC as receiver. The procedure for the involuntary closure of a bank is summary and expeditious in nature. Such action of the MB shall be final and executory, but may be later subjected to a judicial scrutiny via a petition for certiorari to be filed by the stockholders of record of the bank representing a majority of the capital stock. Obviously, this procedure is designed to protect the interest of all concerned, that is, the depositors, creditors and stockholders, the bank itself and the general public. The protection afforded public interest warrants the exercise of a summary closure. Alfeo D. Vivas, on his behalf and on behalf of the Shareholders or Eurocredit Community Bank v. The Monetary Board of the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corporation, G.R. No. 191424, August 7, 2013.
Trust receipt transaction; definition. A trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of the sale, or if the merchandise is not sold, to return the merchandise to the entruster. There are, therefore, two obligations in a trust receipt transaction: the first refers to money received under the obligation involving the duty to turn it over (entregarla) to the owner of the merchandise sold, while the second refers to the merchandise received under the obligation to “return” it (devolvera) to the owner. Hur Tin Yang v. People of the Philippines, G.R. No. 195117, August 14, 2013.
Trust receipts. distinguished from loan. When both parties enter into an agreement knowing fully well that the return of the goods subject of the trust receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt transaction penalized under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of the RPC, as the only obligation actually agreed upon by the parties would be the return of the proceeds of the sale transaction. This transaction becomes a mere loan, where the borrower is obligated to pay the bank the amount spent for the purchase of the goods. Hur Tin Yang v. People of the Philippines, G.R. No. 195117, August 14, 2013.
(Hector thanks Carlos Manuel D. Prado for his assistance to Lexoterica.)