July 2013 Philippine Supreme Court Decisions on Commercial Law

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.

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August 2012 Philippine Supreme Court Decisions on Civil Law

Here are select August 2012 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Common carrier; damages. The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high school student at the time of the accident. Spouses Teodorico and Nanette Pereña v. Spouses Nicolas and Teresita L. Zarate, et al.; G.R. No. 157917. August 29, 2012.

Contracts; rescission; consequences are restitution and in this case, each party will bear its own damage.  As correctly observed by the RTC, the rescissory action taken by GSIS is pursuant to Article 1191 of the Civil Code. In cases involving rescission under the said provision, mutual restitution is required. The parties should be brought back to their original position prior to the inception of the contract. “Accordingly, when a decree of rescission is handed down, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in [their] original situation.” Pursuant to this, Goldloop should return to GSIS the possession and control of the property subject of their agreements while GSIS should reimburse Goldloop whatever amount it had received from the latter by reason of the MOA and the Addendum.

Relevant also is the provision of Article 1192 of the Civil Code which reads: “In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.” (Emphasis suppied.)

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July 2011 Philippine Supreme Court Decisions on Commercial Law

Here are selected July 2011 rulings of the Supreme Court of the Philippines on commercial law:

Insurance; effectivity of bonds.  Lagman anchors his defense on two (2) arguments: 1) the 1989 Bonds have expired and 2) the 1990 Bond novates the 1989 Bonds. The Court of Appeals held that the 1989 bonds were effective only for one (1) year, as evidenced by the receipts on the payment of premiums. The Supreme Court did not agree.

The official receipts in question serve as proof of payment of the premium for one year on each surety bond.  It does not, however, automatically mean that the surety bond is effective for only one (1) year.  In fact, the effectivity of the bond is not wholly dependent on the payment of premium.  Section 177 of the Insurance Code expresses:

Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety:Provided, That if the contract of suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the contract or bond: Provided, however, That if the non-acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or taxes shall be collected.

Country Bankers Insurance Corporation v. Antonio Lagman, G.R. No. 165487, July 13, 2011.

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January 2011 Philippine Supreme Court Decisions on Civil Law

Here are selected January 2011 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Common carriers; standard of diligence. Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public. A common carrier is distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and it does not hold itself out to carry goods for the general public.  The distinction is significant in the sense that the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the circumstances of such case, as required by Article 1733 of the Civil Code.  When the Court speaks of extraordinary diligence, it is that extreme measure of care and caution which persons of unusual prudence and circumspection observe for securing and preserving their own property or rights.  This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Thus, in case of loss of the goods, the common carrier is presumed to have been at fault or to have acted negligently. This presumption of fault or negligence, however, may be rebutted by proof that the common carrier has observed extraordinary diligence over the goods.

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July 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected July 2010 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Agency; doctrine of apparent authority. The doctrine of apparent authority in respect of government contracts, has been restated to mean that the government is NOT bound by unauthorized acts of its agents, even though within the apparent scope of their authority. Under the law on agency, however, “apparent authority” is defined as the power to affect the legal relations of another person by transactions with third persons arising from the other’s manifestations to such third person such that the liability of the principal for the acts and contracts of his agent extends to those which are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred.

Apparent authority, or what is sometimes referred to as the “holding out” theory, or doctrine of ostensible agency, imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists. The existence of apparent authority may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties.

Easily discernible from the foregoing is that apparent authority is determined only by the acts of the principal and not by the acts of the agent. The principal is, therefore, not responsible where the agent’s own conduct and statements have created the apparent authority.

In this case, not a single act of respondent, acting through its Board of Directors, was cited as having clothed its general manager with apparent authority to execute the contract with it. Sargasso Construction & Development Corporation / Pick & Shovel, Inc./Atlantic Erectors, Inc./ Joint Venture vs. Philippine Ports Authority, G.R. No. 170530, July 5, 2010.

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July 2010 Philippine Supreme Court Decisions on Commercial Law

Here are selected July 2010 rulings of the Supreme Court of the Philippines on commercial law:

Carriage of Goods by Sea; liability of carrier.  It is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Thus, the COGSA supplements the Civil Code by establishing a provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading.

In the present case, the shipper did not declare a higher valuation of the goods to be shipped.

In light of the foregoing, petitioner’s liability should be limited to $500 per steel drum. In this case, as there was only one drum lost, private respondent is entitled to receive only $500 as damages for the loss. In addition to said amount, as aptly held by the trial court, an interest rate of 6% per annum should also be imposed, plus 25% of the total sum as attorney’s fees.  Unsworth Transportation International (Phils.), Inc. vs. Court of Appeals and Pioneer Insurance and Surety Corporation, G.R. No. 166250, July 26, 2010.

Carriage of Goods by Sea; prescription for claim. Under Section 3 (6) of the Carriage of Goods by Sea Act, notice of loss or damages must be filed within three days of delivery. Admittedly, respondent did not comply with this provision.

Under the same provision, however, a failure to file a notice of claim within three days will not bar recovery if a suit is nonetheless filed within one year from delivery of the goods or from the date when the goods should have been delivered.

In Loadstar Shipping Co., Inc. v. Court of Appeals, the Court ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:  “Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit — may be applied suppletorily to the case at bar.”  Wallem Philippines Shipping, Inc. vs. S.R. Farms, Inc., G.R. No. 161849, July 9, 2010.

Corporation;  authority of corporate officer. Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. The power and the responsibility to decide whether the corporation should enter into a contract that will bind the corporation are lodged in the board, subject to the articles of incorporation, bylaws, or relevant provisions of law. In the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation.

However, just as a natural person may authorize another to do certain acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to its officers, committees or agents. The authority of these individuals to bind the corporation is generally derived from law, corporate bylaws or authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general course of business.

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February 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected February 2010 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Agency; principle of apparent authority; agency relationship between hospital and doctors who practice in its premises. This Court holds that PSI (the owner of the hospital) is liable to the Aganas, not under the principle of respondeat superior for lack of evidence of an employment relationship with a Dr. Ampil (who had left two pieces of gauze in the body of a patient he had operated on) but under the principle of ostensible agency for the negligence of Dr. Ampil and, pro hac vice, under the principle of corporate negligence for its failure to perform its duties as a hospital.

While in theory a hospital as a juridical entity cannot practice medicine, in reality it utilizes doctors, surgeons and medical practitioners in the conduct of its business of facilitating medical and surgical treatment. Within that reality, three legal relationships crisscross: (1) between the hospital and the doctor practicing within its premises; (2) between the hospital and the patient being treated or examined within its premises and (3) between the patient and the doctor. The exact nature of each relationship determines the basis and extent of the liability of the hospital for the negligence of the doctor.

Where an employment relationship exists, the hospital may be held vicariously liable under Article 2176 in relation to Article 2180 of the Civil Code or the principle of respondeat superior. Even when no employment relationship exists but it is shown that the hospital holds out to the patient that the doctor is its agent, the hospital may still be vicariously liable under Article 2176 in relation to Article 1431 and Article 1869 of the Civil Code or the principle of apparent authority. Moreover, regardless of its relationship with the doctor, the hospital may be held directly liable to the patient for its own negligence or failure to follow established standard of conduct to which it should conform as a corporation.

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