A CADEMICUS REVIEW CENTER

Dean Ferdinand A. Tan

COMMERCIAL LAW CASES (2012-2016)

J. BERSAMIN

Gold Line Tours, Inc. vs. Heirs of Maria Concepcion Lacsa

G.R. No. 159108, June 18, 2012
BERSAMIN, J.:
The veil of corporate existence of a corporation is a fiction of law that should not defeat the ends of justice.
FACTS:
Ma. Concepcion Lacsa and her sister, Miriam Lacsa, boarded a Goldline passenger bus with Plate No. NXM-
105 owned and operated by Travel &Tours Advisers, Inc., enroute from Sorsogon to Cubao, Quezon City. At
the time, Concepcion, having just obtained her degree of Bachelor of Science in Nursing at the Ago Medical
and Educational Center, was proceeding to Manila to take the nursing licensure board examination. Upon
reaching the highway at Barangay San Agustin in Pili, Camarines Sur, the Goldline bus, driven by Rene
Abania, collided with a passenger jeepney with Plate No. EAV-313 coming from the opposite direction and
driven by Alejandro Belbis. As a result, a metal part of the jeepney was detached and struck Concepcion in the
chest, causing her instant death. Concepcions heirs, represented by Teodoro Lacsa, instituted in the RTC a suit
against Travel & Tours Advisers Inc. and Abania to recover damages arising from breach of contract of
carriage. SPO1 Corporal opined that based on his investigation report, the driver of the jeepney had been at
fault for failing to observe precautionary measures to avoid the collision; and suggested that criminal and civil
charges should be brought against the operator and driver of the jeepney. On his part, Cheng attested that he
had exercised the required diligence in the selection and supervision of his employees. RTC held that
petitioners are liable. Petitioner submitted a so-called verified third party claim, claiming that the tourist bus
bearing Plate No. NWW-883 be returned to petitioner because it was the owner; that petitioner had not been
made a party to Civil Case; and that petitioner was a corporation entirely different from Travel & Tours
Advisers, Inc.

ISSUE: Did the CA rightly find and conclude that the RTC did not gravely abuse its discretion in denying
petitioners verified third-party claim?

RULING: Yes
RTC had sufficient factual basis to find that petitioner and Travel and Tours Advisers, Inc. were one
and the same entity, specifically: (a) documents submitted by petitioner in the RTC showing that William
Cheng, who claimed to be the operator of Travel and Tours Advisers, Inc., was also the President/Manager and
an incorporator of the petitioner; and (b) Travel and Tours Advisers, Inc. had been known in Sorsogon as
Goldline. The RTC thus rightly ruled that petitioner might not be shielded from liability under the final
judgment through the use of the doctrine of separate corporate identity. Truly, this fiction of law could not be
employed to defeat the ends of justice.

Zuellig Freight and Cargo Systems vs. NLRC

G.R. No. 157900, July 22, 2013
BERSAMIN, J.:
The mere change in the corporate name is not considered under the law as the creation of a new corporation;
hence, the renamed corporation remains liable for the illegal dismissal of its employee separated under that
guise.
FACTS:

San Miguel brought a complaint for unfair labor practice, illegal dismissal, non-payment of salaries and moral
damages against petitioner, formerly known as Zeta Brokerage Corporation (Zeta). He alleged that he had been
a checker/customs representative of Zeta since December 16, 1985; that in January 1994, he and other
employees of Zeta were informed that Zeta would cease operations, and that all affected employees, including
him, would be separated; that by letter dated February 28, 1994, Zeta informed him of his termination effective
March 31, 1994; that he reluctantly accepted his separation pay subject to the standing offer to be hired to his
former position by petitioner; and that on April 15, 1994, he was summarily terminated, without any valid
cause and due process. San Miguel contended that the amendments of the articles of incorporation of Zeta were
for the purpose of changing the corporate name, broadening the primary functions, and increasing the capital
stock; and that such amendments could not mean that Zeta had been thereby dissolved. Labor Arbiter Francisco
A. Robles rendered a decision holding that San Miguel had been illegally dismissed.

ISSUE: Whether or not petitioner is the same as Zeta Corporation

RULING: Yes
The amendments of the articles of incorporation of Zeta to change the corporate name to Zuellig Freight and
Cargo Systems, Inc. did not produce the dissolution of the former as a corporation. For sure, the Corporation
Code defined and delineated the different modes of dissolving a corporation, and amendment of the articles of
incorporation was not one of such modes. The effect of the change of name was not a change of the corporate
being, for, as well stated in Philippine First Insurance Co., Inc. v. Hartigan: The changing of the name of a
corporation is no more the creation of a corporation than the changing of the name of a natural person is
begetting of a natural person. The act, in both cases, would seem to be what the language which we use to
designate it imports a change of name, and not a change of being.
In short, Zeta and petitioner remained one and the same corporation. The change of name did not give
petitioner the license to terminate employees of Zeta like San Miguel without just or authorized cause. The
situation was not similar to that of an enterprise buying the business of another company where the purchasing
company had no obligation to rehire terminated employees of the latter. Petitioner, despite its new name, was
the mere continuation of Zeta's corporate being, and still held the obligation to honor all of Zeta's obligations,
one of which was to respect San Miguel's security of tenure. The dismissal of San Miguel from employment on
the pretext that petitioner, being a different corporation, had no obligation to accept him as its employee, was
illegal and ineffectual.

Terelay Investment and Development Corporation vs. Cecilia Teresita

G.R. No. 160924, August 5, 2015
BERSAMIN, J.:
It is well-settled that the ownership of shares of stock gives stockholders the right under the law to be protected
from possible mismanagement by its officers. This right is predicated upon self-preservation.
FACTS:
Asserting her right as a stockholder, Cecilia Teresita Yulo wrote a letter addressed to Terelay Investment and
Development Corporation (TERELAY) requesting that she be allowed to examine its books and records at the
latters office on the 25th floor, Citibank Tower, Makati City. TERELAY denied the request for inspection and
instead demanded that she show proof that she was a bona fide stockholder. Cecilia Yulo again sent another
letter clarifying that her request for examination of the corporate records was for the purpose of inquiring into
the financial condition of TERELAY and the conduct of its affairs by the principal officers. The following day,
Cecilia Yulo received a faxed letter from TERELAYs counsel advising her not to continue with the inspection
in order to avoid trouble. Cecilia Yulo filed with the Securities and Exchange Commission (SEC), a Petition for
Issuance of a Writ of Mandamus with prayer for Damages against TERELAY. In her petition, she prayed that
judgment be rendered ordering TERELAY to allow her to inspect its corporate records, books of account and
other financial records.

ISSUE: Whether or not Cecilia Yulo is a stockholder and therefore, has the right to inspect the corporate books
and records

RULING: Yes
Cecilia Yulo has the right to be fully informed of TERELAY's corporate condition and the manner its affairs
are being managed.

TERELAY points out that Yulos name as incorporator, stockholder and director in the Articles of
Incorporation and Amendments were unsigned; that she did not pay for the five shares appearing in the
Amended Articles of Incorporation and General Information Sheet of TERELAY; that she did not subscribe to
the shares; that she has neither been in possession of nor seen the certificate of stock covering the five shares of
stock; that the donation of the five shares claimed by her was null and void for failure to comply with the
requisites of a donation under Art. 748 of the Civil Code; and that there was no acceptance of the donation by
her as donee. TERELAY further contends that Cecilia Yulo's purpose in inspecting the books was to inquire
into its financial condition and the conduct of its affairs by the principal officers which are not sufficient and
valid reasons. Therefore, the presumption of good faith cannot be accorded her.

It is well-settled that the ownership of shares of stock gives stockholders the right under the law to be
protected from possible mismanagement by its officers. This right is predicated upon self-preservation. The
records disclose that the corporate documents submitted, which include the Articles of Incorporation and the
Amended Articles of Incorporation, as well as the General Information Sheets and the Quarterly Reports all
bear the signatures of the proper parties and their authorized custodians. The signature of respondent under the
name Cecilia J. Yulo appears in the Articles of Incorporation of TERELAY. Likewise, her signatures under the
name Cecilia Y. Blancaflor appear in the Amended Articles of Incorporation where she signed as Director and
Corporate Secretary of TERELAY. The General Information Sheets from December 31, 1977 up to February
20, 2002 all exhibited that she was recognized as director and corporate secretary, and that she had subscribed
to five (5) shares of stock. The quarterly reports do not show otherwise.

Verily, respondent has presented enough evidence that she is a stockholder of TERELAY. The
corporate documents presented support her claim that she is a registered stockholder in TERELAY's stock and
transfer book thus giving her the right, under Section 74 par. 2 and Section 75 of the Philippine Corporation
Law, to inspect TERELAY's books, records, and financial statements. Further, a careful review of the records
would show that in the Preliminary Conference Order, dated May 16, 2000, of the SEC Hearing Officer, both
parties represented by their respective counsels, agreed on the fact that respondent was "registered as a
stockholder in petitioner's stock and transfer book subject to the qualifications in the Answer." The records
failed to disclose any objection by TERELAY. In any case, TERELAY did not adduce sufficient proof that
Cecilia Yulo was in bad faith or had an ulterior motive in demanding her right under the law.

The petitioner's submission that the respondent's "insignificant holding" of only .001% of the petitioner's
stockholding did not justify the granting of her application for inspection of the corporate books and records is
also unwarranted. The Corporation Code has granted to all stockholders the right to inspect the corporate books
and records, and in so doing has not required any specific amount of interest for the exercise of the right to
inspect. Ubi lex non distinguit nee nos distinguere debemos. When the law has made no distinction, we ought
not to recognize any distinction.

Interport Resources Corp. vs. Securities Specialist Inc and R.C. Lee Securities Inc.
G.R. No. 154069, June 6, 2016
BERSAMIN, J.:
Under Section 63 of the Corporation Code, no transfer of shares of stock shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to
the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares
transferred.
FACTS:
In January 1977, Oceanic Oil & Mineral Resources, Inc. entered into a subscription agreement with R.C. Lee, a
domestic corporation engaged in the trading of stocks and other securities, covering 5,000,000 of its shares with
par value of P0.01 per share, for a total of P50,000.00. Thereupon, R.C. Lee paid 25% of the subscription,
leaving 75% unpaid. Consequently, Oceanic issued Subscription Agreements Nos. 1805, 1808, 1809, 1810, and
1811 to R.C. Lee. Oceanic merged with Interport, with the latter as the surviving corporation. Interport was a
publicly-listed domestic corporation whose shares of stocks were traded in the stock exchange. Under the terms
of the merger, each share of Oceanic was exchanged for a share of lnterport. SSI, a domestic corporation
registered as a dealer in securities, received in the ordinary course of business Oceanic Subscription
Agreements Nos. 1805, 1808 to 1811, all outstanding in the name of R.C. Lee, and Oceanic official receipts

showing that 25% of the subscriptions had been paid. The Oceanic subscription agreements were duly
delivered to SSI through stock assignments indorsed in blank by R.C. Lee. Later on, R.C. Lee requested
Interport for a list of subscription agreements and stock certificates issued in the name of R.C. Lee and other
individuals named in the request. Upon finding no record showing any transfer or assignment of the Oceanic
subscription agreements and stock certificates of Interport as contained in the list, R.C. Lee paid its unpaid
subscriptions and was accordingly issued stock certificates corresponding thereto. SSI directly tendered
payment to lnterport for the balance of the 5,000,000 shares covered by the Oceanic subscription agreements,
some of which were in the name of R.C. Lee and indorsed in blank. Interport originally rejected the tender of
payment for all unpaid subscriptions on the ground that the Oceanic subscription agreements should have been
previously converted to shares in lnterport.

ISSUE: Whether or not Interport was liable to deliver the Oceanic shares of stock, or the value thereof

RULING: Yes
The SEC correctly categorized the assignment of the subscription agreements as a form of novation by
substitution of a new debtor and which required the consent of or notice to the creditor. Under the Civil Code,
obligations may be modified by: (1) changing their object or principal conditions; or (2) substituting the person
of the debtor; or (3) subrogating a third person in the rights of the creditor. Novation, which consists in
substituting a new debtor in the place of the original one, may be made even without the knowledge or against
the will of the latter, but not without the consent of the creditor. In this case, the change of debtor took place
when R.C. Lee assigned the Oceanic shares under Subscription Agreement Nos. 1805, and 1808 to 1811 to SSI
so that the latter became obliged to settle the 75% unpaid balance on the subscription. The SEC likewise did
not err in appreciating the fact that Interport was duly notified of the assignment when SSI tendered its payment
for the 75% unpaid balance, and that it could not anymore refuse to recognize the transfer of the subscription
that SSI sufficiently established by documentary evidence. The effect of the assignment of the subscription
agreements to SSI was to extinguish the obligation of R.C. Lee to Oceanic, now Interport, to settle the unpaid
balance on the subscription. As a result of the assignment, Interport was no longer obliged to accept any
payment from R.C. Lee because the latter had ceased to be privy to Subscription Agreements Nos. 1805, and
1808 to 1811 for having been extinguished insofar as it was concerned. On the other hand, Interport was legally
bound to accept SSI's tender of payment for the 75% balance on the subscription price because SSI had become
the new debtor under Subscription Agreements Nos. 1805, and 1808 to 1811. As such, the issuance of the stock
certificates in the name of R.C. Lee had no legal basis in the absence of a contractual agreement between R. C.
Lee and Interport.
Under Section 63 of the Corporation Code, no transfer of shares of stock shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to
the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares
transferred. This statutory rule cannot be strictly applied herein, however, because lnterport had unduly refused
to recognize the assignment of the shares between R.C. Lee and SSL. Subscription Agreements Nos. 1805, and
1808 to 1811 were now binding between Interport and SSI only, and only such parties were expected to comply
with the terms thereof.

Victorio Diaz vs. People of the Philippines and Levi Strauss

G.R. No. 180677, February 18, 2013
BERSAMIN, J.:
It is the tendency of the allegedly infringing mark to be confused with the registered trademark that is the
gravamen of the offense of infringement of a registered trademark. The acquittal of the accused should follow if
the allegedly infringing mark is not likely to cause confusion. Thereby, the evidence of the State does not satisfy
the quantum of proof beyond reasonable doubt.
FACTS:
After receiving information that Diaz was selling counterfeit LEVIS 501 jeans in his tailoring shops in
Almanza and Talon, Las Pias City, Levis Philippines hired a private investigation group to verify the
information. Armed with the search warrants, NBI agents searched the tailoring shops of Diaz and seized
several fake LEVIS 501 jeans from them. Levis Philippines claimed that it did not authorize the making and
selling of the seized jeans; that each of the jeans were mere imitations of genuine LEVIS 501 jeans by each of
them bearing the registered trademarks, like the arcuate design, the tab, and the leather patch; and that the

seized jeans could be mistaken for original LEVIS 501 jeans due to the placement of the arcuate, tab, and two-
horse leather patch. Department of Justice filed two informations in the RTC of Las Pias City, charging Diaz
with violation of Section 155, in relation to Section 170, of Republic Act No. 8293, also known as the
Intellectual Property Code of the Philippines.

ISSUE: (1) Whether the CA properly dismissed the appeal of Diaz due to the late filing of his appellants brief
(2) Whether or not Diaz committed trademark infringement

RULING: (1) No (2) No

Under Section 7, Rule 44 of the Rules of Court, the appellant is required to file the appellants brief in the CA
within forty-five (45) days from receipt of the notice of the clerk that all the evidence, oral and documentary,
are attached to the record, seven (7) copies of his legibly typewritten, mimeographed or printed brief, with
proof of service of two (2) copies thereof upon the appellee. Section 1(e) of Rule 50 of the Rules of Court
grants to the CA the discretion to dismiss an appeal either motu proprio or on motion of the appellee should the
appellant fail to serve and file the required number of copies of the appellants brief within the time provided
by the Rules of Court. The usage of the word may in Section 1(e) of Rule 50 indicates that the dismissal of the
appeal upon failure to file the appellants brief is not mandatory, but discretionary. Verily, the failure to serve
and file the required number of copies of the appellants brief within the time provided by the Rules of Court
does not have the immediate effect of causing the outright dismissal of the appeal. Under the circumstances, the
failure to file the appellants brief on time rightly deserved the outright rejection of the appeal. The acts of his
counsel bound Diaz like any other client. It was, of course, only the counsel who was well aware that the Rules
of Court fixed the periods to file pleadings and equally significant papers like the appellants brief with the
lofty objective of avoiding delays in the administration of justice.
The elements of the offense of trademark infringement under the Intellectual Property Code are, therefore, the
following:
1. The trademark being infringed is registered in the Intellectual Property Office;
2. The trademark is reproduced, counterfeited, copied, or colorably imitated by the infringer;
3. The infringing mark is used in connection with the sale, offering for sale, or advertising of any goods,
business or services; or the infringing mark is applied to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used upon or in connection with such goods, business or
services;
4. The use or application of the infringing mark is likely to cause confusion or mistake or to deceive
purchasers or others as to the goods or services themselves or as to the source or origin of such goods
or services or the identity of such business; and
5. The use or application of the infringing mark is without the consent of the trademark owner or the
assignee thereof.
As can be seen, the likelihood of confusion is the gravamen of the offense of trademark infringement. There
are two tests to determine likelihood of confusion, namely: the dominancy test, and the holistic test. The
dominancy test focuses on the similarity of the main, prevalent or essential features of the competing
trademarks that might cause confusion. Infringement takes place when the competing trademark contains the
essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use
of the marks is likely to cause confusion or deceive purchasers. The holistic test considers the entirety of the
marks, including labels and packaging, in determining confusing similarity. The focus is not only on the
predominant words but also on the other features appearing on the labels.
The holistic test is applicable here considering that the herein criminal cases also involved trademark
infringement in relation to jeans products. Accordingly, the jeans trademarks of Levis Philippines and Diaz
must be considered as a whole in determining the likelihood of confusion between them. The maong pants or
jeans made and sold by Levis Philippines, which included LEVIS 501, were very popular in the Philippines.
The consuming public knew that the original LEVIS 501 jeans were under a foreign brand and quite
expensive. Such jeans could be purchased only in malls or boutiques as ready-to-wear items, and were not
available in tailoring shops like those of Diazs as well as not acquired on a made-to-order basis. Under the
circumstances, the consuming public could easily discern if the jeans were original or fake LEVIS 501, or
were manufactured by other brands of jeans. Confusion and deception were remote. Diaz used the trademark
LS JEANS TAILORING for the jeans he produced and sold in his tailoring shops. His trademark was
visually and aurally different from the trademark LEVI STRAUSS & CO appearing on the patch of original
jeans under the trademark LEVIS 501. The word LS could not be confused as a derivative from LEVI
STRAUSS by virtue of the LS being connected to the word TAILORING, thereby openly suggesting that
the jeans bearing the trademark LS JEANS TAILORING came or were bought from the tailoring shops of

Diaz, not from the malls or boutiques selling original LEVIS 501 jeans to the consuming public. There were
other remarkable differences between the two trademarks that the consuming public would easily perceive.
Moreover, based on the certificate issued by the Intellectual Property Office, LS JEANS TAILORING was a
registered trademark of Diaz. He had registered his trademark prior to the filing of the present cases.21 The
Intellectual Property Office would certainly not have allowed the registration had Diazs trademark been
confusingly similar with the registered trademark for LEVIS 501 jeans.

Microsoft Corporation vs. Rolando Manansala

G.R. No. 166391, October 21, 2015
BERSAMIN, J.:
The gravamen of copyright infringement is not merely the authorized manufacturing of intellectual works but
rather the unauthorized performance of any of the acts covered by Sec. 5. Accordingly, the commission of any
of the acts mentioned in Sec. 5 of PD 49 without copyright owners consent constituted actionable copyright
infringement.
FACTS:
Petitioner is the copyright and trademark owner of all rights relating to all versions and editions of Microsoft
software (computer programs). Private Respondent-Rolando Manansala is doing business under the name of
DATAMAN TRADING COMPANY and/or COMIC ALLEY with business address at 3rd Floor, University
Mall Building, Taft Ave., Manila. Private Respondent Manansala, without authority from petitioner, was
engaged in distributing and selling Microsoft computer software programs. Mr. John Benedict A. Sacriz, a
private investigator accompanied by an agent from the National Bureau of Investigation (NBI) was able to
purchase six (6) CD-ROMs containing various computer programs belonging to petitioner. Search Warrant was
issued against the premises of the private respondent. The search warrant was served on the private
respondents premises and yielded several illegal copies of Microsoft programs. Petitioner, through Atty.
Teodoro Kalaw IV filed an Affidavit-Complaint in the DOJ based on the results of the search and seizure
operation conducted on private respondents premises.

ISSUE: Whether or not the mere selling of pirated computer software constituted copyright infringement.

RULING:
Sec. 5 of PD 49 specifically defined copyright as an exclusive right in the following manner:
A. To print, reprint, publish, copy, distribute, multiply, sell and make photographs, photo-engravings and
pictorial illustrations of the works;
B. To make any translation or other version or extracts or arrangements or adaptations thereof; to
dramatize it if it be a non-dramatic work; to convert it into a non-dramatic work if it be a drama; to
complete or execute if it be a model or design;
C. To exhibit, perform, represent, produce, or reproduce, the work in any manner or by any method
whatever for profit or otherwise; it not reproduced in copies for sale, to sell any manuscript or any
record whatsoever thereof;
D. To make any other use or disposition of the work consistent with the laws of the land.

The gravamen of copyright infringement is not merely the authorized manufacturing of intellectual works but
rather the unauthorized performance of any of the acts covered by Sec. 5. Accordingly, the commission of any
of the acts mentioned in Sec. 5 of PD 49 without copyright owners consent constituted actionable copyright
infringement. Presidential Decree No. 49 thereby already acknowledged the existence of computer programs as
works or creations protected by copyright. To hold, as the CA incorrectly did, that the legislative intent was to
require that the computer programs be first photographed, photoengraved, or pictorially illustrated as a
condition for the commission of copyright infringement invites ridicule. Such interpretation of Section 5(a) of
Presidential Decree No. 49 defied logic and common sense because it focused on terms like copy, multiply,
and sell, but blatantly ignored terms like photographs, photo-engravings, and pictorial illustrations.

In this case, the mere sale of the illicit copies of the software programs was enough by itself to show the
existence of probable cause for copyright infringement. There was no need for the petitioner to still prove who
copied, replicated or reproduced the software programs.

Capital Insurance and Surety Co. vs. Del Monte Motor Works
G.R. No. 159979, December 9, 2015
BERSAMIN, J. .
FACTS:
Respondent sued Vilfran Liner, Inc., Hilaria F. Villegas and Maura F. Villegas in the Regional Trial Court in
Quezon City (RTC) to recover the unpaid billings related to the fabrication and construction of 35 passenger
bus bodies. It applied for the issuance of a writ of preliminary attachment. Branch 221 of the RTC, to which the
case was assigned, issued the writ of preliminary attachment, which the sheriff served on the defendants,
resulting in the levy of 10 buses and three parcels of land belonging to the defendants. The sheriff also sent
notices of garnishment of the defendants funds in the Quezon City branches of BPI Family Bank, China. Bank,
Asia Trust Bank, City Trust Bank, and Bank of the Philippine Island. The levy and garnishment prompted
defendant Maura F. Villegas to file an Extremely Urgent Motion 'to Discharge Upon Filing of a Counterbond.
On July 2, 1997, the RTC approved the counterbond and discharged the writ of preliminary attachment. On
January 15, 2002, the RTC rendered its decision in favor of the respondent.

ISSUE: Are the securities deposited by1 the insurance company pursuant to I Section 203 of the Insurance
Code 1subject of levy by a creditor?

RULING:
The petitioner cannot evade liability under the counterbond by hiding behind its own internal rules. Although a
prospective applicant seeking insurance coverage is expected to exercise prudence and diligence in selecting
the insurance provider, such responsibility does not require the prospective applicant to know and be aware of
the insurer's internal rules, policies and procedure adopted for the conduct of its business. Considering that the
petitioner has been a duly accredited bonding company, the officers who signed the bonds were presumed to be
acting within the scope of their authority in behalf of the company, and the courts were not expected to verify
the limits of the authority of the ,signatories of the bonds submitted in the regular course of judicial business, in
the same manner that the applicants for the bonds were not expected to know the limits of the authority of the
signatories. To insist otherwise is absurd. It is reasonable to hold here, therefore, that as between the petitioner
and the respondent, the one who employed and gave character to the third person as its agent should be the one
to bear the loss. That party was the petitioner.
Likewise, the petitioner's argument that the counterbond was invalid because the counterbond was unaccounted
for and missing from its custody was implausible. The argument totally overlooks a simple tenet that honesty,
good faith, and fair dealing required it a's the insurer to communicate such an important fact to the assured, or
at least keep the latter updated on the relevant facts. A contrary view would place every person seeking
insurance at the insurer's mercy because the latter would simply claim so just to escape liability, thus causing
uncertainty to the public and defeating the very purpose for which the insurance was contracted.
An insurer or bonding company like the petitioner that seeks to defeat a claim on the ground that the
counterbond was invalidly issued has the burden of proving such defense. However, the petitioner did not
discharge the burden herein. No less than the officers charged with the responsibility of making sure that all
forms and records of the petitioner were audited admitted that the missing counterbond as in fact a valid pre-
approved form of the Insurance Commission, so that the absence or lack of the signature of the president did
not render the bond i!\valid. Moreover, Laxa knew that as a matter of long practice both Ancheta and Alub
normally signed and approved the counterbonds, regardless' of the amounts thereof. She further I knew of no
rule that limited the authority of Ancheta and Alub to issue and I sign counterbonds only up to P5,000,000.00