Aquino CommLaw Last Minute Notes Nov 2022

NOTES IN COMMERCIAL LAW
By
TIMOTEO B. AQUINO
1. INSURANCE (RA NO. 10607).
1. Principal Object and Purpose Test. Assumption of risk and indemnity of loss must be the
focal point of the agreement. If the point of the agreement is extension of medical services to
the member at an affordable cost, then the contract is not an insurance contract. Thus, the
health card agreement in this case was not an insurance contract (Medicard Philippines v.
CIR, April 5, 2017). Note that it is still possible for a health card agreement to be considered
an insurance contract depending on the circumstances – the principal object and purposed
must be assumption of risk and indemnification of loss (Fortune Medicare Inc. v. Amorin,
March 12, 2014).
2. Insurance contract is consensual contract. It is perfected my mere consent. Cognition

theory applies – the insured applicant must be given notice that his application (offer) was
accepted or approved by the insurer. Hence, if the insured dies before receiving notice that
the application was approved, the beneficiaries cannot recover because there is still not
perfected contract. (Steamship Mutual Underwriting Association (Bermuda) Ltd. v. Sulpicio
Lines, Inc., G.R. No 196072. September 20, 2017).
3. A protection and indemnity club is an association composed of shipowners generally

formed for the specific purpose of providing insurance cover against third-party liabilities of its
members. A protection and indemnity club is doing an insurance business; it is a mutual
insurance company (Steamship Mutual Underwriting Association (Bermuda) Ltd. v. Sulpicio
Lines, Inc., G.R. No 196072. September 20, 2017). In this case, the application for an
insurance is filed by a shipowner by filing an application entry form specifying the vessel to be
covered. The P & I Club then issues a Certificate of Entry and Acceptance to the shipowner; it
upon the issuance of this document that the contract is perfected.
4. A person who insures his own life may designate a third person as beneficiary even if the
beneficiary has no insurable interest over the life of the insured. However, a third person who
insures the life of another must have insurable interest over the life of the person he is
insuring.
5. The relatives and spouse (even if conjugal funds are used) are not entitled to the proceeds
if there is a validly designated beneficiary. If one of the co-beneficiaries (like a common law
spouse of the insured who is legally marrier) is disqualified, the co-beneficiaries (like
illegitimate children) are entitled to the proceeds of the life insurance policy (Heirs of
Maramag v, Maramag, G.R. No. 181132, June 5, 2009).
LAST MINUTE NOTES IN COMMERCIAL LAW 2
November 9, 2022 by Timoteo B. Aquino
6. The Estate will get the insurance proceeds if (a) there is no designated beneficiary, (b) if
the designated beneficiary is disqualified and there is no stipulation that the co-beneficiaries
will be entitled to the proceeds; (c) if the policy designates the estate as beneficiary.
7. The insured shall have the right to change the beneficiary he designated in the policy,
unless he has expressly waived this right in said policy. Notwithstanding the foregoing, in the
event the insured does not change the beneficiary during his lifetime, the designation shall be
deemed irrevocable (Sec. 11, IC).
8. Even if the designation of the beneficiary is irrevocable, the designation by one spouse of
a guilty spouse or the spouse in bad faith is revoked in case of legal separation or annulment
of marriage.
9. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary
is the principal, accomplice, or accessory in willfully bringing about the death of the insured.
In such a case, the share forfeited shall pass on to:
(i) The other beneficiaries, unless otherwise disqualified;

(ii) In the absence of other beneficiaries, the proceeds shall be paid in accordance with
the policy contract; and
(iii) If the policy contract is silent, the proceeds shall be paid to the estate of the insured.
(Sec. 12, IC.)
10. A creditor can be designated as beneficiary in a life insurance policy by the insured (who
insures life) as such creditor. In which case, the creditor can only recover up to the unpaid
obligation.
11. Test of Insurable Interest in Property Insurance: Will the insured be damnified by the
loss of the property?
Hence, all these persons have insurable interest: owner, tenant, usufructuary, borrower,
carrier with respect to goods, depositary or bailee, mortgagee, secured debtor under the
PPSA, buyer and seller in both contracts of sale and contract to sell.
12. Both the mortgagor and the mortgagee has insurable interest over the mortgaged
property. In Group Mortgage Insurance, the bank may be impleaded as a third party
defendant in a case filed by the insurer to declare the insurance null and void (Paramount Life
& General Insurance Corp. v. Castro, April 19, 2016).
13. For cancellation of the policy to be valid, there must be NOTICE and based on the
grounds/ under Section 64 occurring AFTER the effective date of the policy.
a. An additional ground is discovery of other insurance coverage that makes the total
insurance in excess of the value of the property insured.

b. OTHER INSURANCE CLAUSE. Where the policy specifies as a condition the
disclosure of existing co-insurers, the violation thereof entitles the insurer to avoid the
policy (Multi-ware Manufacturing Corp. v. Cibeles Insurance Corp., February 1, 2021).
14. The policy is not valid and binding if the premium is not paid. The insurer cannot even
claim the premium:
a. if the insured paid the premium, the insurer's liability attaches correspondingly.
There is a valid and binding policy or contract of insurance and the insured may
demand indemnification in case of loss. There is no credit on the premium to
speak of and, therefore, none which the insurer can demand because he has
already been paid.
b. If the insured did not pay the premium and the parties did not agree that the
insurer's liability has attached, then there is no valid or binding contract of
insurance. The insured cannot demand indemnification if loss occurs and
neither can the insurer demand payment of the premium.
c. If the insured did not actually pay the premium but the parties have agreed that
the insurer's liability has attached, then the insured is considered to have
extended credit on the premium. When the insured accepts the terms of the
credit, there is a valid and binding contract of insurance. The insured must pay
the premium before the end of the credit term; otherwise, he cannot demand
indemnification in case of loss. The insurer may demand the premium, whether
or not loss occurred. (Chartis Philippines Insurance, Inc. v. Cybercity
Teleservices, Ltd., March 3, 2021)
15. In one case, the Jumbo Risk Provision in a property insurance policy provides that failure
to pay in full any of the scheduled installments on or before the due date shall render the
insurance policy void and ineffective as of 4 p.m. of November 30, 3002. The insured’s failure
to pay on the first due date (November 30, 2003) therefore resulted in a void and ineffective
policy as of 4 p.m. of November 30, 2003. Hence, there is no credit extension to consider as
the Jumbo Risk Provision itself expressly cuts off the inception of the insurance policy in case
of default. In this case, the insurer cannot recover the unpaid premiums (Philam Insurance
Co. Inc. v. Parc Chateau Condominium Unit Owners Association, G.R. No. 201116. March 4,
2019).
16. Section 77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting credit
extension. At the very least, both parties should be deemed in estoppel to question the
arrangement they have voluntarily accepted. (GSIS vs. Prudential Guarantee and Assurance,
Inc., November 20, 2013)
17. The policy states that the insured's application for the insurance is subject to the payment
of the premium. There is no waiver of pre-payment, in full or in installment, of the premiums

under the policy. Consequently, respondent cannot be placed in estoppel. (Gaisano v
Development Insurance and Surety Corp., Feb. 27, 2017.)
18. In concealment, the matter concealed need not be the cause of the loss (Philamlife v.
Florendo).
19. Good faith will not prevent cancellation due to concealment.
20. To be a ground for cancellation, representation must be fraudulent or in bad faith (The
Insular Insurance Co. v. Heirs of Alvarez, Oct 3, 2018).
21. SEC. 45. If a representation is false in a material point, whether affirmative or promissory,
the injured party is entitled to rescind the contract from the time when the representation
becomes false.
22. Matters that are expressly warranted are always material.
23. The incontestability clause applies if the following requisites are present: (1) The policy
must be a Life Insurance policy; (2) The policy force for 2 years from issue or last
reinstatement.(Manila Bankers Life Insurance Corp. v. Aban, July 29, 2013 – This case
involves a policy that was already effective for 2 years and 7 months so it was beyond the 2-
year period.)
a. The period of two years may be shortened but it cannot be extended by stipulation (Manila
Bankers Life Ins. Corp. v. Aban, July 29, 2013; The Insular Life Assurance Co. Ltd. v. Khu,
April 18, 2016).
b. There are two views regarding the effect of death within the two year period. In Sun Life v.
Sibya, the insurance is incontestable while in Tan case it is still contestible. Sun Life v. Sibya
is the latest pronouncement although it is believed that Tan reflects the better view.
24. The Insurer inherits the remaining prescriptive period (Henson, Jr. v. UCPB General
Insurance Co., Inc, Aug. 4, 2019).
25. Sec. 63 provides that a condition, stipulation or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a period of less than one year from
the time when the cause of action accrues, is void. Case law teaches that the prescriptive
period for the insured’s action for indemnity should be reckoned from the “final rejection” of
the claim. The “final rejection” simply means denial by the insurer of the claims of the insured
and not the rejection or denial by the insurer of the insured’s motion or request for
reconsideration. The rejection referred to should be construed as the rejection in the first
instance. (Alpha Plus Intl. v. Phil. Charter Ins. Corp., Feb. 10, 2021).
PART 2 - TRANSPORTATION LAWS
1. PARTIES. Only the owner of the jeepney, breached the contract of carriage. The driver is
not a party to the contract. The obligation to carry the passenger to her destination was with
the operator. Hence, only the operator can be sued for breach of contract of carriage (Jose
Sanico and Vicente Castro v. Werherlina Colipano, G.R. No. 209969, September 27, 2017).
2. CONCEPT OF COMMON CARRIER. Does the entity hold itself out to the public for the
transport of goods or passengers as a business? (Torres-Madrid Brokerage, Inc. v. FEB
Mitsui Marine Insurance Co., Inc., G.R. No. 194121, July 11, 2016)
4. Bareboat charter converts the carriage into private carriage.
5. Arrastre Operators are not common carriers but they are public utilities discharging
functions which are heavily invested with public interest (Oriental Assurance Corporation v.
Manuel Ong (G.R. No. 189524, October 11, 2017).
6. The arrastre operator cannot invoke the 1 year prescriptive period. (Insurance Company of
North Americal v. Asian Terminals, Inc., G.R. No. 180784, February 15, 2012)
7. If the carrier sub-contracts the transportation of good, the sub-contractor is not directly
liable to the consignee for the loss of the cargo if the cause of action is for breach of contract
(Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., G.R. No. 194121,
July 11, 2016)
8. Registered Owner Rule. The registered owner is liable despite the transfer of the vehicle.
(Filcar Transport Services v. Espinas, G.R. No. 174156, June 20, 2012).
9. Applicable Law. The New Civil Code, not COGSA, is still the primary law in international
shipment of goods by sea from a foreign country to the Philippines (Transimex, Co. v. Mafre
Asian Insurance Corp. (G.R. No. 190271, September 14, 2016). This case involved a
shipment of fertilizer from Odessa, Ukraine to San Fernando, La Union and Tabaco, Albay.
10. Presumption of Negligence. The presumption of negligence applies so long as there is

evidence showing that: (a) a contract exists between the passenger and the common carrier;
and (b) the injury or death took place during the existence of such contract (Sulpicio Lines v.
Sesante, G.R. No. 172682, July 27, 2016; Cathay Pacific Airways, Ltd. v. Fuentebella, Cathay
Pacific Airways, Ltd. v. Spouses Fuentebella, G. R. No. 188283, July 20, 2016).
11. Extraordinary Diligence. The carrier is required to exercise extraordinary diligence.
12. Exception to the requirement of extra-ordinary diligence: Article 1763 which provides that
“a common carrier is responsible for injuries suffered by a passenger on account of the wilful
acts or negligence of other passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family could have prevented or
stopped the act or omission.” (G.F. Florida Transport, Inc. v. Heirs of Battung, Jr., G.R. No.
208802, October 14, 2015).
13. Stipulation. Diligence lesser than extra-ordinary diligence but not less than diligence of a
good father of a family may be stipulated: (1) For gratuitous passengers; or (2) If the
following requirements are present: (a) The agreement is in writing; (b) there is a separate
consideration; (c) It is just and reasonable under the circumstances.
14. Duration of Exercise of Diligence. Art. 1736. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive
them, without prejudice to the provisions of Article 1738. (Designer Baskets, Inc. v. Air Sea
Transport Inc., G.R. No. 184513, March 9, 2016).
15. Art. 1738. The extraordinary liability of the common carrier continues to be operative
even during the time the goods are stored in a warehouse of the carrier at the place of
destination, until the consignee has been advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or otherwise dispose of them.
16. “The obligation of the airline to exercise extraordinary diligence commences upon the
issuance of the contract of carriage. Ticketing, as the act of issuing the contract of carriage, is
necessarily included in the exercise of extraordinary diligence.” (Alfredo Manay, Jr. v. Cebu
Air, Inc., G.R. No. 210621, April 4, 2016).
17. DEFENSES – The defenses of a carrier under Article Art. 1734, NCC:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
18. For all other cases not enumerated under Article 1734 - such as theft or robbery – a
common carrier is presumed to have been at fault or to have acted negligently, unless it can
prove that it observed extraordinary diligence (Torres-Madrid Brokerage, Inc. v. FEB Mitsui
Marine Insurance Co., Inc., G.R. No. 194121, July 11, 2016)
19. Theft or the robbery of the goods is not considered a fortuitous event or a force majeure.
Nevertheless, Article 1745 provides that a robbery attended by "grave or irresistible threat,
violence or force" is a fortuitous event that absolves the common carrier from liability (Torres-
Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., G.R. No. 194121, July 11,
2016).
20. If the defense is fortuitous event, the common carrier must still prove that it did not
contribute to the occurrence of the incident due to its own or its employees' negligence.
(Sulpicio Lines v. Sesante, G.R. No. 172682, July 27, 2016; (Jose Sanico and Vicente Castro
v. Werherlina Colipano (G.R. No. 209969, September 27, 2017).
21. Precriptive Period. The One year prescriptive period under COGSA can be extended
by agreement (Brazil to the Philippines. (Cua v. Wallem Philippines Shipping, Inc., G.R. No.
171337, July 11, 2012; Pioneer Insurance and Surety Corp. v. APL Co. Pte., Ltd. (G.R. No.
226345, August 2, 2017)
22. Diligence in Selection and Supervision. “This standard (diligence of a good father of a
family in the selection and supervision of an employee) is applicable in cases of quasi-delict,
not breach of contract of carriage, as the latter carries a different standard (exercise of
extraordinary diligence in the performance of its contractual obligation). (Spouses Dionisio
Estrada and Jovita R. Estrada v. Philippine Rabbit Bus Lines, Inc., (G.R. No. 203902, July 19,
2017)
23. Necessary Deposit of Handcarried Baggage. Absence of notice about the personal
belongings of the passenger will not excuse the carrier from its liability for the loss of personal
belongings. Article 1754 of the Civil Code does not exempt the common carrier from liability in
case of loss, but only highlights the degree of care required of it depending on who has the
custody of the belongings.” (Sulpicio Lines v. Sesante, G.R. No. 172682, July 27, 2016).
24. The Carrier is allowed by law to release the goods even without the surrender of the Bill of
Lading. Under Art. 353, Code of Commerce – the consignee must give a receipt in case of
loss of the bill. This has the effect of surrender. (Designer Baskets, Inc. v. Air Sea Transport
Inc., G.R. No. 184513, March 9, 2016)
25. A stipulation diminishing or dispensing with the common carrier’s liability for acts
committed by thieves or robbers who do not act with grave or irresistible threat, violence, or
force is void under Article 1745 of the Civil Code for being contrary to public policy (Torres-
Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., G.R. No. 194121, July 11,
2016).
26. Moral Damages. Spouses Dionisio Estrada and Jovita R. Estrada v. Philippine Rabbit
Bus Lines, Inc., (G.R. No. 203902, July 19, 2017; J. Del Castillo) restates the rule that the
general rule is that moral damages are not recoverable in an action based on breach of
contract. The exceptions are: (1) if the passenger died and (2) if there is fraud, bad faith or
gross negligence however BAD FAITH is not presumed.
27. Temperate damages in lieu of actual damages for loss of earning capacity may be
awarded where earning capacity is plainly established but no evidence was presented to
support the allegation of the injured party’s actual income. In this case, the victim lost his right
arm for life. He was a public teacher who was drives a tricycle to augment his income.
28. Interest. 6% interest may be imposed on the damages awarded from the date of the RTC
Decision up to finality based on the discretion of the Court to impose interest in breach of
contract cases under Article 2210 of the New Civil Code. (Jose Sanico and Vicente Castro v.
Werherlina Colipano. G.R. No. 209969, September 27, 2017; Eastern Shipping Lines, Inc. v.
Court of Appeals, 304 Phil. 236 (1994).
29. International Transportation by Air under the Montreal Convention of 1999 includes
transporation by are where: a) The Departure and Destination are State Parties; b) Departure
and Destination same member country with stop-over in another member country.
30. The air carrier shall be liable under the Montreal Convention of 1999: a) where the cargo
or checked baggage are damaged or lost when they are in the charge of the carrier; (b) where
the passenger was injured due to accident when he or she is on board, or in the process of
embarkation or disembarkation; c) if there is delay.
31. The liability of the air carrier under the Montreal Convention in case of death or injury to
passengers is in the nature of strict liability if the claim does not exceed 128,821 SDR (as of
2019). The carrier cannot invoke as a defense absence of negligence.
32. Exemplary damages and other non-compensatory damages are not recoverable under
the Montreal Convention.
33. Under the Montreal Convention, a case for damages for injury or death of passenger can
also be filed in the principal and permanent residence of passenger where the carrier
operates or conducts business directly or through another aircraft under a Commercial
Agreement.
PART 3 - CORPORATE LAW
1. Doctrine of Separate Personality. The association of corporations cannot also sue for a
cause of action belonging to the corporations (Private Hospitals Association of the
Philippines, Inc. v. Medialdea (November 6, 2018)
2. Members of a non-stock corporation can also be plaintiffs in a case to annul the tax sale of
the property of the non-stock corporation because they will be deprived of the capacity to use
and enjoy the property of the golf club. (Alvarado v. Ayala Land, Inc., et. al., G.R. No. 208426,
September 20, 2017)
3. Limited Liability Rule. (Donnina C. Halley v. Printwell, Inc., G.R. No. 157549, May 30,
2011) – The stockholders are not liable to pay corporate obligations. The liability of
stockholders is limited to the unpaid subscription.
3.01. However, there are two instances when the creditor is allowed to maintain an action
upon any unpaid subscriptions based on the trust fund doctrine: (1) where the debtor
corporation released the subscriber to its capital stock from the obligation of paying for their
shares, in whole or in part, without a valuable consideration, or fraudulently, to the prejudice
of creditors; and (2) where the debtor corporation is insolvent or has been dissolved without
providing for the payment of its creditors. (Enano-Bote v. Alvarez, G.R. No. 223572,
November 10, 2020)
a. Simply agreeing in a meeting of stockholder or directors for their reduction of unpaid

subscription is not valid. To allow corporations to do such an act would violate the
aforementioned trust fund doctrine in corporation law. (Salido, Jr. v. Aramaywan Metals
Development Corp., G.R. No. 233857 , March 18, 2021])
4. Piercing the Veil of Corporate Fiction. The cases covered by the doctrine can be
classified into: 1) Cases where public convenience may be defeated as when the corporate
fiction is used as vehicle for the evasion of an existing obligation; 2) Fraud cases or when the
corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) Alter Ego
cases, where a corporation is merely a farce since it is a mere alter ego or business conduit
of a person, or where the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or adjunct of another
corporation (Guillermo v. Uson, G.R. No. 198967, March 7, 2016).
5. Three-Pronged Control Test. The test requires the concurrence of:
(1) Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust act
in contravention of plaintiff’s legal bright; and
(3) The aforesaid control and breach of duty must [have] proximately caused the injury or
unjust loss complained of.
6. Nationality of the Corporation. For purposes of determining compliance therewith, the

required percentage of Filipino ownership shall be applied to BOTH:
(a) the total number of outstanding shares of stock entitled to vote in the election of
directors; AND
(b) the total number of outstanding shares of stock, whether or not entitled to vote in
the election of directors” (Roy III v. Herbosa, November 22, 2016).
7. CONTROL TEST is still the controlling/prevailing rule in determining if the shareholder is a

Philippine National. The Grandfather Rule applies by way of exception (Narra Nickel v.
Redmont Dev). The Grandfather Rule applies by way of exception (Narra Nickel Mining and
Development Corp. v. Redmont Consolidated Mines, Corp. G.R. No. 195580, January 28,
2015 & April 21, 2014).
8. There can be one incorporator if the corporation is an OPC but two (2) are required for all
other corporations.
9. The 25% subscribed and 25% paid- up requirement is no longer imposed for incorporation.
However, it is still required for increase of capital stock.
10. Corporate Name. The SEC 2019 rules now states that the name of a dissolved or
revoked corporation cannot be used for a period of five (5) years.
11. The corporation, upon the change in its name, is in no sense a new corporation, nor the
successor of the original corporation. It is the same corporation with a different name, and its
character is in no respect changed (Northern Mindanao Industrial Port and Services Corp. v.
Iligan Cement Corporation, April 23, 2018).
12. The prevailing test is the DISTINGUISHABILITY TEST (Sec. 17, RCCP). However, the
“PRIORITY OF ADOPTION RULE” is still applicable – the first corporation that adopts the
corporation name shall own the name so long as it is distinguishable from existing corporate
names (De La Salle Montessori of Malolos Inc. v. De La Salle Brothers, Inc., et al., February
7, 2018).
13. DE FACTO CORPORATIONS. Jurisprudence settled that "[t]he filing of articles of

incorporation and the issuance of the certificate of incorporation are essential for the
existence of a de facto corporation." (The Missionary Sisters of Our Lady of Fatima v. Alzona,
August 6, 2018) There is also no De facto Corporation if the law under which the corporation
is attached is declared void for being unconstitutional (1994 Bar).
14. In the case of corporation by estoppel, those who are in good faith are liable only up to
their investment . For example, the President of the non-existent corporation who was not
aware of the fact that the Articles of Incorporation was not filed with the SEC is personally
liable but only up to the extent of his investment. If he is not in good faith, his liability is like
that of a general partner, meaning, the President will be liable up to his personal properties
(1986 Bar).
15. However, the doctrine of corporation by estoppel as provided for under Section 21 of the
Corporation Code may be applied and the Court affords upon the unorganized entity
corporate fiction and juridical personality for the sole purpose of upholding the contract or
transaction (The Missionary Sisters of Our Lady of Fatima v. Alzona, August 6, 2018; (Paz v.
New International Environmental Universality, Inc., G.R. No. 203993, April 20, 2015)
16. Board of Directors. The general rule is that, "[i]n the absence of an authority from the
board of directors, no person, not even the officers of the corporation, can validly bind the
corporation." (Development Bank of the Philippines v. Sta. Ines Malale Forest Products Corp.,
February 1, 2017).
17. The Term of Office of Directors is one year. A director who was illegally removed cannot
be reinstated after the one year term and after a valid annual election of directors (Bernas v.
Cinco, July 1, 2015; Multinational Village Homeowners Association, Inc. v Gacutan, August 2,
2017).
18. Election of Directors. Election contests should be initiated within 15 days from the date
of the election if the by-laws of the corporation do not provide for a procedure for resolution of
the controversy, or within 15 days from the resolution of the controversy by the corporation as
provided in its by-laws (Rule 6, Interim Rules on Intra-Corporate Controversies; Ricafort v.
Dicdican, March 9, 2016)
19. Removal (Sec. 28) – The notice or call must be made by the Secretary upon order of the
President or stockholders representing majority of the OCS. Otherwise the meeting and
removal is VOID (Bernas v. Cinco, July 1, 2015).
20. Business Judgement Rule. Resolutions of the Board binds the corporation on any
business judgment.
21. Corporate Officer. The clear weight of jurisprudence clarifies that to be considered a
corporate officer, first, the office must be created by the charter of the corporation,
and second, the officer must be elected by the board of directors or by the stockholders
(Macalba v. Prohealth Pharma Philippines, G.R. No. 209085. June 6, 2018).
22. The Doctrine of Apparent Authority applies to corporate officers.(Georg, et. al. v. Holy
Trinity College, Inc., G.R. No. 190408, July 20, 2016; Calubad v. Ricarcen Development
Corporation, G.R. No. 202364, August 30, 2017)
23. Liability of Directors and Officers. Directors and officers are solidarily liable:
(a) When directors and trustees or, in appropriate cases, the officers of the corporation:
(1) vote for or assent to patently unlawful acts of the corporation;
(2) act in bad faith or with gross negligence in directing the affairs of the corporation;
(3) are guilty of conflicts of interest to the prejudice of corporation, its stockholders or
members, and other persons.
(b) When a director has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto;
(c) When the director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarily liable with the corporation.
(d) When a director, trustee or officer is made, by specific provisions of law, personally
liable for his corporate actions. SEE: Heirs of Fe Tan Uy v. International Exchange Bank, G.R.
Nos. 166282 & 166283, February 13, 2013; Virata v. Wee, March 21, 2018).
23.01. The Court has already ruled that any violation of Section 31 of the Corporation Code
(now Section 30 of the RCCP) was not considered as a violation of any provision of such
Code not otherwise specifically penalized therein pursuant to Section 144. In other words,
Section 144 did not apply to or include in its coverage Section 31 of the Corporation Code.
(United Coconut Planters Bank v. Secretary of Justice, G.R. No. 209601, January 12, 2021)
a. Section 170 of the RCCP (144 of the Corporation Code), which provides penal sanctions
for violations of 'any provision of this Code or its amendments not otherwise specifically
penalized therein,' is applicable to violations under Section 31 of the same Code, which
provides for a civil indemnity.''
24. While hold-over directors are not prohibited, hold-over directors are discouraged under
the RCCP. (1) Adjournment should not be indefinite; it must be not later than 60 days from
the original date (Sec. 25, RCCP). (2) The SEC may order the holding of the meeting of
stockholders. The stockholders who attend will be deemed to have complied with the
requirement – “the shares of stock or membership represented at such meeting and entitled
to vote shall constitute a quorum.” (Sec. 25, RCCP).
25. Vacancy and Emergency Board – can now be created if there is no quorum and an
action is necessary to prevent grave, substantial, and irreparable loss or damage to the
corporation (Sec. 28, RCCP).
26. Electronic Meetings and Meetings through Remote Communications is allowed not
only for the Board of Directors but also for stockholders and members.
27. DIVIDEND DECLARATION. The stockholders cannot force the board to declare
dividends. The rule applies even if the shares are preferred and cumulative with a right to a
fixed percentage of dividends every year. The discretion still rests with the Board (2009 Bar).
a. The approval of the stockholder who held the required two-thirds (2/3) of the OCS is
necessary for declaration of stock dividends (Lao v. Lim G.R. No. 201306. August 9, 2017).
b. A mere Executive Committee cannot declare dividends. Section 34 provides that the
Executive Committee cannot decide on the distribution of cash dividends and it cannot also
act on any matter or action for which stockholder’s approval is required – hence it cannot also
approve declaration of stock dividends (2014 Bar).
28. Section 42 of the Revised Corporation Code of the Philippines states that stock
corporations are prohibited from retaining surplus profits in excess of one hundred percent
(100%) of their paid- in capital stock, except: (a) when justified by definite corporate
expansion projects or programs approved by the board of directors; or (b) when the
corporation is prohibited under any loan agreement with financial institutions or creditors,
whether local or foreign, from declaring dividends without their consent, and such consent has
not yet been secured; or (c) when it can be clearly shown that such retention is necessary
under special circumstances obtaining in the corporation, such as when there is need for
special reserve for probable contingencies
c. For example the board cannot declared dividend although the Corporation has retained
surplus profits in excess of 100% of its paid-in capital stock if had entered into a loan
agreement with a certain creditor wherein the declaration of dividends is not allowed without
the consent of such creditor. The corporation declare dividends if it cannot obtain this consent
(2015 Bar).
29. Stock Certificate. A certificate of stock is a is merely a tangible evidence of ownership of

shares of stock. It is not a stock in the corporation and merely expresses the contract
between the corporation and the stockholder (Teng v. SEC, Feb. 17, 2016).
30. Subscription Agreement. The rights of subscriber under a Subscription Agreement is

transferrable (Interport v. Securities Specialist, June, 2016)
31. Indivisibility of Subscription. One subscription agreement may cover one or more
share. Each subscription is indivisible. Payment of part of the subscription price will not
entitle the subscriber to the issuance of part of the shares covered by a subscription
agreement (1977 Bar).
32. Transfer of Shares. Transfer is only valid as to the parties thereto if it is not recorded in
the books. It is not valid or binding as to the corporation or as to third persons (Kiat v. Ayala
Corporation, G.R. No. 192530. March 7, 2018).
33. Delivery of the certificate of stock to the corporation is not necessary for the transfer of
ownership. However, the certificate must also be surrendered so that the same can be
cancelled (Teng v. SEC, Feb. 17, 2016).
34. Mandamus is available in case the corporation refuses to register the transfer (Andaya v.
Rural Bank of Cabadbaran, Inc.. G.R. No. 188769, August 3, 2016).
35. RIGHTS OF SHAREHOLDER. A shareholder, who is not delinquent, has all the rights of
a shareholder even if shares are still unpaid. The exception is the right to a stock certificate
and to have any transfer recorded in the books because no stock certificate should be issued
and no transfer will be recorded until the subscription price is fully paid.
36. APPRAISAL RIGHT. The appraisal right is available if the stockholder dissented to the
proposal to engage in the corporation’s secondary purpose (1977 Bar).
37. Derivative suits. A derivative suit "is an action filed by stockholders to enforce a
corporate action." A derivative suit, therefore, concerns "a wrong to the corporation itself."
(Florete Jr. v Florete, G.R. No. 174909; January 20, 2016).
d. To be able to file a derivative action, the stockholder must be a stockholder at

the time of the acts or transactions subject of the action occurred and at the time
the actions was filed.
38. A lawyer can be said to be representing conflicting interests specifically in circumstances

when he, having been engaged as counsel for a corporation, subsequently represents the
members of the same corporation's board of directors in a derivative suit filed against them. A
corporation in a derivative suit is the real party in interest, while the stockholder filing suit in
the corporation's behalf would only be considered a nominal party (Burgos v. Bereber, A.C.
No. 12666, March 4, 2020),
39. Right to Inspect. The shareholder has the right to inspect corporate books and records.
The right is available even if corporation was already dissolved and is pending liquidation
(Roque v. People of the Philippines, G.R. No. 211108, June 7, 2017).
40. Criminal liability may be imposed if the corporate officer or directors deprive a shareholder
of such right ( (Roque v. People of the Philippines, G.R. No. 211108, June 7, 2017). Aside
from the criminal action, the proper remedy available for the enforcement of the right of
inspection is undoubtedly the writ of mandamus to be filed by the stockholders and not a
petition for injunction filed by the corporation (Philippine Associated Smelting and Refining
Corp. v. Lim, 804 SCRA 600 [2016]).
41. The right to inspect is subject to certain limitations, particularly: (1) the person demanding
to examine and copy excerpts from the corporation's records and minutes has not improperly
used any information secured through any previous examination of the records of such
corporation; and (2) the demand is made in good faith or for a legitimate purpose. The latter
two limitations, however, must be set up as a defense by the corporation if it is to merit judicial
cognizance (Philippine Associated Smelting and Refining Corp. v. Lim, 804 SCRA 600
[2016]).
42. ONE PERSON CORPORATION. Only natural person, trust or an estate may organize an
OPC. The OPC has Articles of Incorporation but it does not have By-laws.
43. In OPC, the single stockholder is the director and the President. He can also be a
treasure but he cannot be the corp. sec.
44. In a close corporation, the fact that the stockholders is limited to 20 must be stated in the
Articles of incorporation.
45. The stockholders may directly manage a close corporation. There is no need to elect
directors. If the stockholders manage the corporation, then the liabilities of directors apply to
them including the liabilities under Section 30 of the RCCP.
PART 4 – INTELLECTUAL PROPERTY

A. COPYRIGHT
1. Letters and other private communications in writing are owned by the person to whom they
are addressed and delivered, but they cannot be published or disseminated without the
consent of the writer or his heirs (Art. 723, NCC).
2. When rights over copyrights are conferred. Rights over copyrights are conferred from
the moment of creation (Sec. 172.1, IPC). The work is deemed created if something original is
expressed in a fixed manner (1987 Bar).
3. A copyright certificate provides prima facie evidence of originality which is one element of
copyright validity It constitutes prima facie evidence of both validity and ownership and the
validity of the facts stated in the certificate (Section 218.2, IPC; Ching v. Salinas, G.R. No.
161295, June 29, 2005).
.
4. One creator — creator, his heirs, or assigns owns the copyright.
5. Joint creation — co-authors shall be the original owners of the copyright and in the
absence of agreement, their rights shall be governed by the rules on co-ownership (1995
Bar). Joint Work” — is a work prepared by two or more authors with the intention that their
contributions be merged into inseparable or interdependent parts of a unitary whole.
Exception: Work of joint authorship consists of parts that can be used separately and the
author of each part can be identified, the author of each part shall be the original owner of the
copyright in the part that he has created.
6. Commissioned work — the person com-missioning owns the work; ownership of copyright
remains with the creator, unless there is a written stipulation to the contrary.
7. Employee’s work during course of employment — employer own the copyright if the work is
the result of regular functions or duties but the employee owns it if it is not part of his duties.
8. Duration of copyright (Secs. 213 and 214, ICP) - during the lifetime of the creator and
for fifty (50) years after his death. Joint creation — the economic rights shall be protected
during the life of the last surviving author and for fifty (50) years after the death of the last
surviving author.
9. Originality and Copyrightability. Originality is necessary to be entitled to protection. A

work cannot be subject to infringement if the work is not original and copyrightable.
Copyrightability means that there should at least be a minimum degree of there is a minimum
degree of creativity.
a. Thus, a sketch of a hatch door is not copyrightable if it looks the same as previously
existing sketches or pictures (Olano v. Lim Eng, G.R. No. 195835, March 14, 2016; Ching v.
Salinas, G.R. No. 161295, June 29, 2005).
b. Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not
reduced in writing or other material form (2010 Bar);
c. Letters — this includes electronic messages and sms (text) messages (2007 Bar);
10. Derivative works are copyrightable:
1) Dramatizations, translations, adaptations, abridgments, arrangements, and other

alterations of literary or artistic works; and
2) Collections of literary, scholarly or artistic works, and compilations of data and other
materials which are original by reason of the selection or coordination arrangement of their
contents (Sec. 173, IPC).
11. UNPROTECTED WORKS:
a) Any idea, procedure, system, method or operation, concept, principle, discovery or mere
data as such, even if they are expressed, explained, illustrated or embodied in a work (Sec.
175, IPC; Joaquin v. Drilon, G.R. No. 108946, January 28, 1999).
b) News of the day and other miscellaneous facts having the character of mere items of
press information (Sec. 175, IPC; ABS-CBN v. Gozon, G.R. No. 195956, March 11, 2015).
c) Any official text of a legislative, administrative or legal nature, as well as any official
translation thereof (Sec. 175, IPC).
d) Any work of the Government of the Philippines — However, prior approval of the
government agency or office wherein the work is created shall be necessary for exploitation of
such work for profit. Sec. 175, IPC).
e) “While works of applied art, original intellectual, literary and artistic works are
copyrightable, useful articles and works of industrial design and Functional components of
useful articles are not copyrightable (Ching v. Salinas, G.R. No. 161295, June 29, 2005).
f) Copyright gives no exclusive right to the art disclosed (unlike patents), but only to the
expression (Olaño v. Co, G.R. No. 195835, March 14, 2016). Copyright over an illustration of
a hatch door does not protect the hatch door itself in copyright (Olaño v. Co., supra).
12. RIGHTS OF AUTHORS are:
a) Economic Rights. Economic rights shall consist of the exclusive right to: (a) carry out,
(b) authorize, or (c) prevent the following acts:
1) Reproduction of the work or substantial portion of the work;
2) Dramatization, translation, adaptation, abridgment, arrangement or other
transformation of the work;
3) First public distribution of the original and each copy of the work;
4) Rental of the original or a copy of an audio-visual or cinematographic work;

5) Public display of the original or a copy of the work;
6) Public performance of the work; and
7) Other communication to the public of the work (Sec. 177, IPC).
b) Moral Rights. This consists of the right of ATTRIBUTION and Right of Integrity
1) Require that the authorship of the works be attributed to him, in a prominent way on
the copies, and with the public use of the work;
2) Make any alterations of his work prior to, or to withhold it from publication;
3) Object to any distortion, mutilation or other modification of, or other derogatory action
in relation to, his work which would be prejudicial to his honor or reputation; and
4) Restrain the use of his name with respect to any work not of his own creation or in a
distorted version of his work (Sec. 193, IPC).
13. NEIGHBORING RIGHTS consists of the rights of PUBLISHER, Performers and

Broadcasting Organization.
a. The publisher shall have a copyright consisting merely of the right of reproduction of
the typographical arrangement of the published edition of the work (Sec. 174, ICP);
b. If submitted to newspaper, magazine and the like, the right to publish once materials
sent by a writer, a photographer, an artist to a periodical or newspaper publisher, but such
writer or artist retains his copyright on the piece (Sec. 180.3, IPC) (2009 Bar).
c. Performers shall enjoy the following exclusive rights as regards their performances, the
right of authorizing: (1) The broadcasting and other communication to the public of their
performance; and (2) The fixation of their unfixed performance (Sec. 203.1, IPC); (3) to
authorizing the direct or indirect reproduction of their performances fixed in sound recordings
or audiovisual works or fixations in any manner or form (Sec. 203.2, IPC); (4) the MORAL
RIGHT to claim to be identified as the performer of his performances.
d. The broadcasting company has the right to rebroadcast, record and use such recording for
transmissions or new recording. However, retransmission by a cable company is not
rebroacasting (ABS-CBN v. Phil. Multimedia System, Inc., Jan. 19, 2009).
14. ACTS THAT DO NOT INFRINGE COPYRIGHT. Examples:
(1) Recitation or performance of a work: (i) made accessible to the public, (ii) privately
done, (iii) free of charge, (iv) strictly for a charitable or religious institution;
(2) Making of quotations from a published work: (i) compatible with fair use, (ii) extent is
justified by the purpose, (iii) source and name of the author, appearing on work, must be
mentioned (2006 and 2019 Bar);
(3) Single copy reproduction of a published work by natural person exclusively for
research and private study (even without authorization of owner);
(4) Reproduction by non-profit libraries of: (i) fragile works, (ii) isolated articles in
composite works, (iii) brief portions of published work, (iv) to preserve or replace copy that is
lost, destroyed or rendered non-usable;
(5) One back-up copy of computer program.
15. FAIR USE. Fair use is a privilege to use the copyrighted material in a reasonable
manner without the consent of the copyright owner or as copying the theme or ideas rather
than their expression (ABS-CBN Corp. v. Gozon, et al., G.R. No. 195956, March 11, 2015).
Fair use of a copyrighted work for criticism, comment, news reporting, teaching including
multiple copies for classroom use, scholarship, research and similar purposes is not an
infringement of copyright (Sec. 185, IPC) (1989, 2016 and 2019 Bar).
a) Factors to consider to determine whether use is fair or not (2019 Bar):

1) Purpose and the character of the use - it must be for “criticism, comment, news
reporting, teaching including multiple copies for classroom use, scholarship, research, and
similar purposes (Sec. 185);
2) Nature of the copyrighted work;
3) Amount and substantiality of the portions used; and
4) Effect of the use upon the potential market of the copyrighted work
15.1. The “TRANSFORMATIVE TEST” is generally used in reviewing the purpose and
character of the usage of the copyrighted work. This court must look into whether the copy of
the work adds “new expression, meaning or message” to transform it into something else
(Ibid.).
16. INFRINGEMENT — when there is piracy or substantial reproduction.
a. Lack of intent to pirate is not a defense (1997 and 1998 Bar).
b. Copyright is different from tradename. Hence, the fact that there is an existing copyright on
a song of the same title does not prevent the determination of court that another person (who
is using the same name of the song as the name of his business) is legally entitled to use a
trade name (Juan v. Juan, G.R. No. 221732, August 23, 2017).
c. 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
copyright holder to still prove who copied, replicated or reproduced the software programs
(Microsoft Corporation vs. Manansala, G.R. No. 166391, October 21, 2015).
d. A person infringes a right protected under this Act when one (1977, 1980, and 1994
Bar):
(1) Directly commits an infringement;

(2) Benefits from the infringing activity of another person who commits an infringement if
the person benefiting has been given notice of the infringing activity and has the right and
ability to control the activities of the other person;
(3) With knowledge of infringing activity, induces, causes or materially contributes to the
infringing conduct of another. (Sec. 216, as amended by R.A. No. 10372).
19. TRADEMARKS. The basic requirements are:

a) Visible sign.
b) Distinctiveness. - It must be capable of distinguishing the goods of an enterprise.
(Distinctiveness)
20. HOW MARKS ARE ACQUIRED. The rights in a mark shall be acquired through
registration with the Intellectual Property Office or IPO (Sec. 122, IPC). - the filing date of
application.
a. Registration with the IPO is necessary for the acquisition of a right over the mark. Being the
first-to-file registrant in good faith allows the registrant to acquire all the rights in a mark.
When there are no grounds for cancellation - especially the registration being obtained in bad
faith or contrary to the provisions of the IP Code, which render the registration void - the first-
to-file registrant acquires all the rights in a mark. (Zuneca Pharmaceutical v. Natrapharm, Inc.,
G.R. No. 211850, September 8, 2020 citing Sections 122 and 151, IPC).
b. It is not the application or registration of a trademark that vests ownership thereof, but it is
the ownership of a trademark that confers the right to register the same. The presumption of
ownership accorded to a registrant must then necessarily yield to superior evidence of actual
and real ownership of a trademark (Birkenstock Orthopaedie GMBH and Co. KG. vs.
Philippine Shoe Expo Marketing Corporation, G.R. No. 194307, November 20, 2013).
20.01. Void Registration. The following registrations are considered void:
(1) When the mark was registered in bad faith - one can have a registration in bad faith only if
he applied for the registration of the mark despite knowing that someone else has created,
used, or registered that mark;
(2) When an unregistrable mark which was mistakenly allowed to be registered was already
inherently unregistrable even prior to its registration.
21. Prior use in the Philippines is not required before registration. However, there must be
actual use after registration. The registrant shall file a declaration of actual use of the mark
with evidence to that effect within three (3) years from the filing date of application otherwise it
may be cancelled (Secs. 142.2 and 151[c], IPC). The registrant is required to file a declaration
of actual use and evidence to that effect, or shall show valid reasons for non-use within one
(1) year from the fifth anniversary date of registration (Sec. 145, IPC).
a. The "use" which the law requires to maintain the registration of a mark must be
genuine, and not merely token. Genuine use may be characterized as a bona fide use
which results or tends to result, in one way or another, into a commercial interaction or
transaction "in the ordinary course of trade. (W Land Holding Inc. v. Starwook Hotels and
Resorts Worlwide, Inc., G.R. No. 222366, December 4, 2017).
b. Internet Use. The use of a registered mark representing the owner's goods or services by
means of an interactive website may constitute proof of actual use that is sufficient to
maintain the registration of the same (Ibid.; 2019 Bar).
21. Registration is necessary before one can file an action for infringement. Registration of
a mark is not necessary for purposes of filing a case for unfair competition or false
designation of origin (Secs. 168.2 and 169, IPC).
22. The right may also be protected from the priority date. Subject to the rules on reciprocity,
where the application is filed in the Philippines and the same applicant previously filed an
application in the countries covered by the reciprocity rule under Section 3 of the IPC, the
application is deemed filed as of the day the application was first filed in the foreign country
(Sec. 131, IPC). However, there will be no registration in the Philippines until registered in
such foreign country (Sec. 131.2, IPC).
23. MARKS THAT CANNOT BE REGISTERED. Examples:
1) Generic terms for goods or services;

2) Descriptive marks including characteristics of goods like quality or quantity (1990 Bar);
2) Customary sign in everyday language;
4) Color by itself; and
5) Shapes.
25. Doctrine of Secondary Meaning. A generic or descriptive mark may later acquire the
characteristic of distinctiveness and can later be registered if it acquires a meaning which is
different from its ordinary connotation. For this to happen, there must be exclusive and
continuous use for a period of at least five (5) years (Sec. 123.2, IPL).Shang Properties
Realty Corp. vs. St. Francis Development Corp., G.R. No. 190706, July 21, 2014).
25. INTERNATIONALLY WELL-KNOWN MARKS. The Supreme Court ruled that foreign
marks that are not registered are still accorded protection against infringement and/or unfair
competition under the Paris Convention and Nice Convention (Ecole De Cuisine Manille
[Cordon Bleu of the Philippines], Inc. v. Renau Contreau & Cie, G.R. No. 185830, June 5,
2013)
26. RIGHTS CONFERRED

a) The right to the exclusive use of the mark for one’s own goods or services.
b) The right to prevent others from the use of the same mark for identical goods or
services in the course of trade.
c) The right to the exclusive use of one’s already registered mark even for goods or
services into which one’s venture expands, if used by others for dissimilar products is likely to
damage the business interests of the first venturer (Sec. 147, IPC).
27. DURATION. The duration is ten (10) years subject to indefinite renewal for periods of
ten (10) years each.
28. INFRINGEMENT. The elements of trademark infringement under Republic Act No.
8293 are as follows:
(1) The trademark being infringed is registered in the Intellectual Property Office;
(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably

imitated by the infringer;
(3) The infringing mark or trade name is used in connection with the sale, offering for sale,
or advertising of any goods, business or services; or the infringing mark or trade name 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 or trade name 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) It is without the consent of the trademark or trade name owner or the assignee thereof
(Prosource International, Inc. v. Horphag Research Management, G.R. No. 180073,
November 25, 2009 citing Agpalo; Secs. 155.1 and 155.2, IPC).
29. Types of Confusion.
(1) “Confusion of goods” — when an otherwise prudent purchaser is induced to

purchase one product in the belief that he is purchasing another, in which case defendant’s
goods are then bought as the plaintiff’s and its poor quality reflects badly on the plaintiff’s
reputation (Mighty Corporation v. E & J Gallo, 434 SCRA 473 [2004]; Asia-Pacific Resources
International Holdings, Ltd. V. Paperone, Inc., G.R. Nos. 213365-66, December 10, 2018).
(2) “Confusion of business” — wherein the goods of the parties are different but the
defendant’s product can reasonably (though mistakenly) be assumed to originate from the
plaintiff, thus deceiving the public into believing that there is some connection between the
plaintiff and defendant which, in fact, does not exist (Ibid.).
30. Jurisprudence has developed two tests in determining similarity and likelihood of
confusion in trademark resemblance:
(1) The Dominancy Test is now embodied in Section 155 of the IPL and is therefore the
ONLY controlling test (Kolin Electronics Co. Inc v. Kolin Philippines International
Inc., February 9, 2021).
The Dominancy Test focuses on the similarity of the prevalent features of the
competing trademarks which might cause confusion or deception, and thus
infringement. If the competing trademark contains the main, essential or dominant
features of another, and confusion or deception is likely to result, infringement takes

place. Duplication or imitation is not necessary; nor is it necessary that the
infringing label should suggest an effort to imitate. The question is whether the use
of the marks involved is likely to cause confusion or mistake in the mind
of the public or deceive purchasers (Ibid.) (1996 Bar).
(2) The Holistic Test is no longer controlling and is already abandoned

requires that the entirety of the marks in question be considered in resolving confusing
similarity.
NOTE: Defendants in cases of infringement do not normally copy but only make colorable
changes. The most successful form of copying is to employ enough points of similarity to
confuse the public, with enough points of difference to confuse the courts (Foriertrans
Manufacturing Corp. v. Davidoff et cie, March 6, 2017).
31. Expansion of Business Rule. The protection to which the owner of a trademark is
entitled is not limited to guarding his goods or business from actual market competition with
identical or similar products of the parties, but extends to all cases in which the use by a junior
appropriator of a trademark or trade name is likely to lead to a confusion of source, as
where prospective purchasers would be misled into thinking that the complaining
party has extended his business into the field or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of his
business (Dermaline, Inc. v. Myra Pharmaceuticals, Inc., G.R. No. 190065, August 16, 2010;
Societe Des Produits Nestlé, S.A. v. Martin Dy, Jr., G.R. No. 172276, August 8, 2010).
a. However, the prohibition under Section 123 of the IPC extends to goods that are related to
the registered goods, not to goods that the registrant may produce in the future. To allow the
expansion of coverage is to prevent future registrants of goods from securing a trademark on
the basis of mere possibilities and conjectures that may or may not occur at all. For example,
the registration of SAKURA mark for electronic audio-video products could only extend to
television sets, stereo components, DVD and VCD players but not to another person’s
voltage regulators, portable generators, switch breakers and fuses due to such goods being
unrelated to the registrants goods (Kensonic, Inc. v. Uni-line Multi-resources, Inc. (Phil.), G.R.
Nos. 211820-21 & 211834-35, June 6, 2018).
32. Use of Identical Marks Not Necessarily Prohibited. The use of identical mark does not,
by itself, lead to a legal conclusion that there is trademark infringement if they are NOT used
for identical, similar or related goods (1979 and 1991 Bar).
33. Right of Prior User. A person who, in good faith, had already been using a mark prior to
a registration made by another may continue to use its mark even after the registration of the
mark by the first-to-file registrant in good faith. The prior user would not be liable to the first-
to-file registrant. (Zuneca Pharmaceutical v. Natrapharm, Inc., G.R. No. 211850, September
8, 2020).
34. UNFAIR COMPETITION. The essential elements of unfair competition with respect to
goods are:
(1) Confusing similarity in the general appearance of the goods; and
(2) Fraud or intent to deceive the public and defraud a competitor.
35. PATENTS. Requisites:

(1) A technical solution of a problem in any field of human activity;
(2) It must be a novel invention;
(3) Industrially applicable (2019 & 2005 Bar).
36. Novel. An invention is novel if it does not form part of the prior art (Sec. 23, ICP). The
requirement that the invention is novel requires that the invention involves an inventive step.
Thus, an existing invention is not patentable even if the purpose is different (2019 Bar).
37. “Prior art” — (i) that which has been made available to the public anywhere in the world
before the filing date or the priority date of application; (ii) that which forms part of an
application whether for patent, utility model or industrial designed, effective in the Philippines:
Provided, That the inventor or applicants are not the same and the contents of the application
are published in accordance with the requirements of patent application rules and the filing
date of prior art is earlier (Sec. 24, IPC).
a. Prejudicial Disclosure - Whatever right one has to the invention covered by the
patent arises alone from the application date. Thus, if the inventor voluntarily discloses it,
such as by offering it for sale, the world is free to copy and use it with impunity. Ideas, once
disclosed to the public without the protection of a valid patent, are subject to appropriation
without significant restraint (Pearl & Dean [Phil.] v. Shoemart, Inc., et al., ibid., citing Creser
Precision Systems, Inc. v. CA, 286 SCRA 13 [1998]).
b. Inventive step — an invention involves an inventive step if, having regard to prior art,
it is not obvious to a “person skilled in the art” at the time of the filing date or priority date of
the application claiming the invention (Sec. 26, IPC).
b. Industrial applicability — an invention that can be produced and used in any industry
(Sec. 27, IPC).
38. Distinguished from Utility Model. “A utility model is a technical solution to a problem
in any field of human activity which is new and industrially applicable. It may be, or may relate
to, a product, or process, or an improvement of any of the aforesaid. Essentially, a utility
model refers to an invention in the mechanical field. This is the reason why its object is
sometimes described as a device or useful object. A utility model varies from an invention, for
which a patent for invention is, likewise, available, on at least three aspects: first, the requisite
of "inventive step" in a patent for invention is not required; second, the maximum term of
protection is only seven years compared to a patent which is twenty years, both reckoned
from the date of the application; and third, the provisions on utility model dispense with its
substantive examination and prefer for a less complicated system” (Section 218.2 of R.A. No.
8293; Ching v. Salinas, G.R. No. 161295, June 29, 2005).
39. Classes of patentable inventions

(1) Useful machine;
(2) A product;
(3) Process;
(4) Improvement of (1), (2), or (3);
(5) Microorganism; and
(6) Non-biological and microbiological process (Rule 201, Rules and Regulations on
Inventions).
40. Non-patentable inventions.
1) Discoveries, scientific theories, and mathematical method;

2) Schemes, rules, and methods of performing mental acts, playing games, or doing
business, and programs for computer;
3) Methods for treatment of the human body or animal body by surgery or therapy and
diagnostic methods practiced on the human or animal body (2011 Bar);
4) Plant varieties or animal breeds of essentially biological process for the production of
plants or animals;
5) Aesthetic creations;
6) Anything which is contrary to public order or morality (Sec. 22, IPC);
7) In the case of drugs and medicines, there is no patentable invention in the following
instances:
a) Mere discovery of a new form or new property of a known substance which does not
result in the enhancement of the known efficacy of that substance;
b) Mere discovery of any new property or new use for a known substance;
c) Mere use of a known process unless such known process results in a new product that
employs at least one new reactant (Sec. 22, IPC as amended by R.A. No. 9502).
41. Rights acquired by patent holder. An exclusive enjoyment is guaranteed him for twenty
(20) years, but upon the expiration of that period, the knowledge of the invention inures to the
people, who are thus enabled to practice it and profit by its use (Pearl & Dean [Phil.] v.
Shoemart, Inc., et al., ibid.). A patent gives the inventor the right to exclude all others. As a
patentee, he has the exclusive right of making, using or selling the invention.” (E.I. Dupont De
Nemours and Co. v. IPO, G.R. No. 174379, August 31, 2016).
42. Person Entitled to Right.

a) The right to a patent belongs to the inventor, his heirs or assigns (2012 Bar).
b) When two or more persons have jointly made an invention, the right to a patent shall
belong to them jointly.
43. First to File Rule — if two or more persons have made the invention separately and
independently of each other, the right to the patent shall belong to the person who first filed
an application for such invention (Sec. 29, IPC) (1981 Bar).
44. Patent Exhaustion. The exclusive right of the patent owner is exhausted after the first
authorized sale, meaning, the purchaser may thereafter use, repair and resell the product
(Keeler v. Standard Folding-Bed Co., 157 U.S. 659 [1895]). However, the purchaser may not
reconstruct the product from the parts of products that were already used.
45. Steps in determining the presence of infringement:

(1) Determine if there is literal infringement. If there is literal infringement, the defendant
is liable.
(2) If there is no literal infringement, then the doctrine of equivalents should be applied.
NOTE: Literal Infringement. There is infringement of patent under this test if one
makes, uses or sells an item that contains all the elements of the patent claim. This test is
satisfied in either of the following:
(1) Exactness rule: The item that is being sold, made or used conforms exactly to the
patent claim of another;
(2) Addition rule: One makes, uses, or sells an item that has all the elements of the
patent claim of another plus other elements.
c) Doctrine of Equivalents. The doctrine of equivalents provides that an infringement

also takes place when a device appropriates a prior invention by incorporating its innovative
concept and, although with some modification and change, performs substantially the same
function in substantially the same way to achieve substantially the same result. In other
words, the principle or mode of operation must be the same or substantially the same. The
doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the
patentee having the burden to show that all three components of such equivalency test are
met (Smith Kline Beckman Corp. v. The Honorable CA, G.R. No. 126627, August 14, 2003).
46. Compulsory Licensing. “Compulsory License” is a license issued by the Director

General of the Intellectual Property Office to exploit a patented invention without the
permission of the patent holder, either by manufacture or through parallel importation (Sec. 4,
R.A. No. 9502) (2010 and 2016 Bar).
a) Grounds:
1) National emergency or other circumstances of extreme urgency;
2) Where the public interest, in particular, national security, nutrition, health or the
development of other vital sectors of the national economy as determined by the appropriate
agency of the Government, so requires;
3) Where a judicial or administrative body has determined that the manner of exploitation
by the owner of the patent or his licensee is anti-competitive;
4) In case of public non-commercial use of the patent by the patentee, without
satisfactory reason;
5) If the patented invention is not being worked in the Philippines on a commercial scale,
although capable of being worked, without satisfactory reason: Provided, That the importation
of the patented article shall constitute working or using the patent; and
6) Where the demand for patented drugs and medicines is not being met to an adequate
extent and on reasonable terms, as determined by the Secretary of the Department of Health
(Secs. 93-93.6, IPL as amended by R.A. No. 9502).
b) In whose favor. Compulsory license should be granted to any person who has shown
his capability to exploit the invention.
c) Time when application for compulsory license cannot be applied: before the
expiration of a period of four (4) years from the date of filing of the application or three (3)
years from the date of the patent whichever period expires last.
PART 7 – FRIA.
1. Rehabilitation contemplates a continuance of corporate life and activities to restore and

reinstate the corporation to its former position of successful operation and solvency (Pacific
Wide Realty v. Puerto Azul).
2. The adoption of a workable rehabilitation plan is indispensable. A debtor

whose insolvency appears to be irreversible should be denied recourse to rehabilitation.
Neither should rehabilitation be allowed to a corporation whose purpose is only to delay the
enforcement of the rights of its creditors. There is absence of a workable business plan if
there is baseless and unexplained assumptions, targets and goals and lack of capital infusion
for the execution of the business plan (MTB Klinika Health Spa, Inc. v. BDO Leasing and
Finance, G.R. No. 216123. July 24, 2017).
3. Cram Down Rule. The rehabilitation plan may be approved even over the opposition of
the creditors holding a majority of the corporation’s total liabilities if there is a showing that
rehabilitation is feasible and the opposition of the creditors is manifestly unreasonable. It
forces the creditors to accept the terms and conditions of the rehabilitation plan, preferring
long-term viability over immediate but incomplete recovery (BPI v. Sarabia Manor Hotel
Corporation, G.R. No. 175844, July 29, 2013).
4. The Interim Rules does not require a hearing before the issuance of stay order. What it
requires is an initial hearing before it can give due course or dismiss the petition. The trial
court has discretion to call a hearing when it is not confident that the allegations in the petition
are sufficient in form and substance, as long as the hearing is held within the 5-day period
from the filing of petition as provided in the Interim Rules (Pryce Corporation v. China Banking
Corporation, G.R. No. 172302 February 18, 2014).
5. It was improper for BIR to collect, or even attempt to collect, deficiency taxes from the
insolvent corporation outside of the rehabilitation proceedings concerning the latter, and in the
process, willfully disregard the Commencement Order lawfully issued by
the Rehabilitation Court. The Stay Order applies (Bureau of Internal Revenue v. Lepanto
Ceramics, Inc., G.R. No. 224764, [April 24, 2017], 809 PHIL 278-289).
6. The effects of such commencement order shall retroact to the date that the petition was
filed, and renders void any attempt to collect on or enforce a claim against the debtor or to set
off any debt by the debtor's creditors, after the commencement date.
The rehabilitation proceedings shall be deemed to have commenced from the date of filing of
the petition, which is also termed the commencement date (Allied Banking Corp. v. Equitable,
G.R. No. 191939. March 14, 2018).
7. The Rehabilitation Plan must be characterized by the following: a) The debtor has assets
that can generate more cash if used in its daily operations than if sold; b) Liquidity issues can
be addressed by a practicable business plan that will generate enough cash to sustain daily
operations; c) The debtor has a definite source of financing for the proper and full
implementation of a Rehabilitation Plan that is anchored on realistic assumptions and goals
(Viva Shipping Lines, Inc. v. Keppel Philippines Mining, Inc.; Land Bank of the Philippines, v.
Fastech Synergy Philippines, Inc., G.R. No. 206150. August 9, 2017).
8. Solidary creditors, sureties and accommodation mortgages are not covered by the Stay
Order. However, the claim against a guarantor who is only subsidiarily liable is suspended.
PART 8 – ELECTRONIC COMMERCE ACT.
1. “Electronic document” refers to information or the representation of information, data,

figures, symbols or other modes of written expression, described or however represented, by
which a right is established or an obligation extinguished, or by which a fact may be proved
and affirmed, which is received, recorded, transmitted, stored, processed, retrieved or
produced electronically (Sec. 5, R.A. No. 8792).
2. Electronic data message” refers to information generated, sent, received or stored by
electronic, optical, or similar means
3. “Electronic signature” refers to any distinctive mark, characteristic and/or sound in
electronic from, representing the identity of a person and attached to or logically associated
with the electronic data message or electronic document or any methodology or procedures
employed or adopted by a person and executed or adopted by such person with the intention
of authenticating or approving an electronic data message or electronic document (Ibid.).
4. A facsimile transmission is not an electronic document (MCC Industrial Sales Corp. v.
Ssangyong Corp., G.R. No. 170633, October 17, 2007).
5. Photocopies of documents are also not electronic documents; not all of the contents
therein, such as the signatures of the persons who purportedly signed the documents, may be
recorded or produced electronically (National Power Corporation v. Codilla, Jr., G.R. No.
170491, April 3, 2007).
6. Computer-generated statement of account is an electronic document; this is a regular

practice of a bank, is excluded from the rule on hearsay evidence. The bank officer who
testified and authenticated the statement of account had custody of the documents, was
qualified to testify thereon (Chan v. Bank of the Philippine Islands, G.R. No. 247776 [Notice],
November 13, 2019).
7. Legal Recognition of Data Message. Information shall not be denied validity or

enforceability solely on the ground that it is in the form of electronic data message purporting
to give rise to such legal effect, or that it is merely incorporated by reference in that electronic
data message (Sec. 6, R.A. No. 8792).
8. Legal Recognition of Electronic Documents. Electronic documents shall have the legal
effect, validity or enforceability as any other document or legal writing (Sec. 7, R.A. No.
8792).
Where the law requires a document to be in writing, that requirement is met by an electronic
document if:
a) It maintains its integrity and reliability;
b) It can be authenticated so as to be usable for subsequent reference
9. Sec. 9, R.A. No. 8792). In any proceedings involving an electronic signature, it shall be
presumed that: (1) The electronic signature is the signature of the person to whom it
correlates; and (2) The electronic signature was affixed by that person with the intention of
signing or approving the electronic document unless the person relying on the electronically
designed electronic document knows or has noticed of defects in or unreliability of the
signature or reliance on the electronic signature is not reasonable under the circumstance
10. Confidentiality. Except for the purposes authorized under this Act, any person who
obtained access to any electronic key, electronic data message or electronic document, book,
register, correspondence, information, or other material pursuant to any powers conferred
under this Act, shall not convey to or share the same with any other person (Sec. 32, R.A. No.
8792).
11. Text messages have been classified as “ephemeral electronic communication” under
Section 1(k), Rule 2 of the Rules on Electronic Evidence (Nuez v. Cruz-Apao, A.M. No. CA-
05-18-P [Formerly OCA I.P.I. No. 05-80-CA-P], April 12, 2005).
PART 9 – ANTI-MONEY LAUNDERING.
1. Money Laundering—a crime committed by any person who knowing that any monetary
instrument or property represents, involves, or relates to the proceeds of any unlawful activity:
(1) transacts said monetary instrument or property;

(2) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary
instrument or property;
(3) conceals or disguises the true nature, source, location, disposition, movement or
ownership of or rights with respect to said monetary instrument or property;
(4) attempts or conspires to commit money laundering offenses referred to in (1), (2), or
(3);
(5) aids, abets, assists in or counsels the commission of the money laundering offenses
referred to in (1), (2), or (3);
(6) performs or fails to perform any act as a result of which he facilitates the offense of
money laundering referred to in (1), (2), or (3).
2. Covered Transaction—it is a transaction in cash or other equivalent monetary instrument

involving a total amount in excess of P500,000.00 within one banking day.
1) For casinos—a single casino transaction involving an amount in excess of P5 Million or
its equivalent in any other currency (Section 3[a][8], R.A. No. 9160, as amended by
R.A. No. 10927);
2) For real estate developers and brokers—a single cash transaction involving an
amount in excess of Seven million five hundred thousand pesos (P7,500,000.00) or its
equivalent in any other currency (R.A. No. 11521).
3. Covered Institutions include:
a) Institutions supervised by the BSP (Example Banks, pawnshops, Trust Co.)
b) Institutions supervised by the IC. (Example: Insurers, Surety Co., HMO, Pre-Need Co.)
c) Institutions supervised by SEC (Examples: Securities dealers, brokers, investment
houses)
d) Designated Non-Financial Business and Profession (Examples: Jewelry dealers,
dealers of precious metals, Company service providers, lawyers and accountants).
4. Company Service Providers - they act as a formation agent of juridical persons; act as (or
arranging for another person to act as) a director or corporate secretary of a company, a
partner of a partnership, or a similar position in relation to other juridical persons; provide a
registered office; business address or accommodation, correspondence or administrative
address for a company, a partnership or any other legal person or arrangement; and act as
(or arranging for another person to act as) a nominee shareholder for another person
5. Lawyers and accountants are covered if they:

a) Managing of client money, securities or other assets;
b) Management of bank, savings, securities or other assets;
c) Organization of contributions for the creation, operation or management of companies;

and
d) Creation, operation or management of juridical persons or arrangements, and buying
and selling business entities.
6. Suspicious Transactions are those where: 1) There is no underlying legal or trade
obligation, purpose or economic justification; (2) The client is not properly identified; (3) The
amount involved is not commensurate with the business or financial capacity of the client;
(4) Taking into account all known circumstances, it may be perceived that the client's
transaction is structured in order to avoid being the subject of reporting requirements under
the Act; (5) Any circumstance relating to the transaction which is observed to deviate from the
profile of the client and/or the client's past transactions with the covered person;(6) The
transaction is in any way related to an unlawful activity or offense under this Act that is about
to be, is being or has been committed; or (7) Any transaction that is similar or analogous to
any of the foregoing (R.A. No. 9160 as amended by R.A. No. 11521). Note the amount of the
transaction is not material.
7. Covered institutions are obligation to implement: (1) Policy on customer identification;
Record keeping – 5 years from transaction or closure of account; 3) Report covered or
suspicious transactions within 15 days.
8. Freeze order issued by the Court of Appeals is effective for 20 days. The period can be
extended. However, the freeze order is ipso fact lifted after 60 days.
9. Examination of deposits under AMLA should only be upon the order of the Court of
Appeals. However, there are exceptional cases, AMLC can inquire into deposits without Court
order, namely cases involving: (a) Kidnapping for ransom under Article 267 of Act No. 3815,
otherwise known as the Revised Penal Code, as amended; (b) Sections 4, 5, 7, 8, 9, 10, 12,
13, 14, 15, and 16 of Republic Act No. 9165 otherwise known as the Comprehensive
Dangerous Drugs Act of 2002; (c) Hijacking and other violations under R.A. No. 6235;
destructive arson and murder, as defined under the Revised Penal Code, as amended,
including those perpetrated by terrorists against non-combatant persons and similar targets;
(d) Felonies or offenses of a nature similar to those mentioned in Section 3(i)(1), (2), and (12)
which are punishable under the penal laws of other countries; e) Terrorism and conspiracy to
commit terrorism as defined and penalized under R.A. No. 9372; and (f) For purposes of
implementing targeted financial sanctions in relation to proliferation of weapons of mass
destruction and its financing, as provided under Section 3(15) of AMLA.

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NOTES IN COMMERCIAL LAW

1. INSURANCE (RA NO. 10607).

2. Insurance contract is consensual contract. It is perfected my mere consent. Cognition

3. A protection and indemnity club is an association composed of shipowners generally

(i) The other beneficiaries, unless otherwise disqualified;

insurance in excess of the value of the property insured.

of the premium. There is no waiver of pre-payment, in full or in installment, of the premiums

19. Good faith will not prevent cancellation due to concealment.

22. Matters that are expressly warranted are always material.

PART 2 - TRANSPORTATION LAWS

4. Bareboat charter converts the carriage into private carriage.

10. Presumption of Negligence. The presumption of negligence applies so long as there is

11. Extraordinary Diligence. The carrier is required to exercise extraordinary diligence.

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

PART 3 - CORPORATE LAW

a. Simply agreeing in a meeting of stockholder or directors for their reduction of unpaid

5. Three-Pronged Control Test. The test requires the concurrence of:

6. Nationality of the Corporation. For purposes of determining compliance therewith, the

7. CONTROL TEST is still the controlling/prevailing rule in determining if the shareholder is a

13. DE FACTO CORPORATIONS. Jurisprudence settled that "[t]he filing of articles of

29. Stock Certificate. A certificate of stock is a is merely a tangible evidence of ownership of

30. Subscription Agreement. The rights of subscriber under a Subscription Agreement is

d. To be able to file a derivative action, the stockholder must be a stockholder at

38. A lawyer can be said to be representing conflicting interests specifically in circumstances

PART 4 – INTELLECTUAL PROPERTY

9. Originality and Copyrightability. Originality is necessary to be entitled to protection. A

10. Derivative works are copyrightable:

1) Dramatizations, translations, adaptations, abridgments, arrangements, and other

11. UNPROTECTED WORKS:

12. RIGHTS OF AUTHORS are:

4) Rental of the original or a copy of an audio-visual or cinematographic work;

13. NEIGHBORING RIGHTS consists of the rights of PUBLISHER, Performers and

14. ACTS THAT DO NOT INFRINGE COPYRIGHT. Examples:

a) Factors to consider to determine whether use is fair or not (2019 Bar):

16. INFRINGEMENT — when there is piracy or substantial reproduction.

a. Lack of intent to pirate is not a defense (1997 and 1998 Bar).

(1) Directly commits an infringement;

19. TRADEMARKS. The basic requirements are:

20.01. Void Registration. The following registrations are considered void:

23. MARKS THAT CANNOT BE REGISTERED. Examples:

1) Generic terms for goods or services;

26. RIGHTS CONFERRED

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably

29. Types of Confusion.

(1) “Confusion of goods” — when an otherwise prudent purchaser is induced to

features of another, and confusion or deception is likely to result, infringement takes

(2) The Holistic Test is no longer controlling and is already abandoned

35. PATENTS. Requisites:

39. Classes of patentable inventions

40. Non-patentable inventions.

1) Discoveries, scientific theories, and mathematical method;

42. Person Entitled to Right.

45. Steps in determining the presence of infringement:

c) Doctrine of Equivalents. The doctrine of equivalents provides that an infringement

46. Compulsory Licensing. “Compulsory License” is a license issued by the Director

1. Rehabilitation contemplates a continuance of corporate life and activities to restore and

2. The adoption of a workable rehabilitation plan is indispensable. A debtor

PART 8 – ELECTRONIC COMMERCE ACT.

1. “Electronic document” refers to information or the representation of information, data,

6. Computer-generated statement of account is an electronic document; this is a regular