Green Notes 2016
Mercantile Law
Jurisprudence
(January 2015 June 2016)
Taiwan Kolin Corporation Ltd. v. Kolin
Electronics Co. Inc.
G.R. No. 209843 (March 25, 2015)
J. Velasco, Jr.
Facts: Taiwan Kolin Corporation Ltd. applied
for the registration of KOLIN as the
trademark for its products. The application was
opposed by Kolin Electronics Co. Inc., a
manufacturer of automatic voltage regulator,
converter, recharger, stereo booster, AC-DC
regulated power supply, step-down
transformer, and PA amplified AC-DC.
Allegedly, both entities are selling goods which
fall under the class 9 of Nice Classification (NCL)
and the use of same trademark may lead to
confusion for consumers.
Issue: Whether or not Taiwan Kolin is entitled
to its trademark registration of KOLIN over
its specific goods
Held: Yes.
Product classification alone cannot serve as the
decisive factor in the resolution of whether or
not the goods are related and that emphasis
should be on the similarity of the products
involved and not on the arbitrary classification
or general description of their properties or
characteristics. As held, the mere fact that one
person has adopted and used a particular
trademark for his goods does not prevent the
adoption and use of the same trademark by
others on articles of a different description.
Emphasis should be on the similarity of the
products involved and not on the arbitrary
classification or general description of their
properties or characteristics. The mere fact that
one person has adopted and used a trademark
on his goods would not, without more, prevent
the adoption and use of the same trademark by
others on unrelated articles of a different kind.
It is also worth noting that there is no confusing
similarity between the marks, given that the
products covered by the trademarks, were,
considered pricey, typically purchased by
intelligent buyers familiar with the products and
are more circumspect, and, therefore, would
not easily be deceived. The ordinary purchaser
must be thought of as having, and credited
with, at least a modicum of intelligence to be
able to see the differences between the two
trademarks in question.
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Jose A. Bernas, et.al. v. Jovencio F. Cinco, et
al.
G.R. No. 163356-57 (July 1, 2015)
Perez, J.:
Facts: Makati Sports Club (MSC) is a domestic
corporation duly organized and existing under
Philippine laws. Jose A. Bernas (Bernas Group)
were among the Members of the Board of
Directors and Officers of the corporation whose
terms were to expire either in 1998 or 1999.
While Jovencio Cinco (Cinco Group) are the
members and stockholders of the corporation
who were elected Members of the Board of
Directors and Officers of the club during the 17
December 1997 Special Stockholders Meeting.
With the rumoured anomalies in handling the
corporate funds, the MSC Oversight Committee
(MSCOC), composed of the past presidents of
the club, demanded from the Bernas Group
who were then incumbent officers of the
corporation to resign from their respective
positions to pave way for the election of new
set of officers. Resonating this clamor were the
stockholders of the corporation representing at
least 100 shares who sought the assistance of the
MSCOC to call for a special stockholders
meeting for the purpose of removing the sitting
officers and electing new ones. Pursuant to such
request, the MSCOC called a Special
Stockholders' Meeting. Aggrieved by the turn of
events, the Bernas Group initiated an action
before the Securities Investigation and Clearing
Department seeking for the nullification of the
17 December 1997 Special Stockholders Meeting
on the ground that it was improperly called.
Issue: Whether or not the 17 December 1997
special stockholders' meeting is invalid.
Held: There is no dispute that the 17 December
1997 Special Stockholders' Meeting was called
neither by the President nor by the Board of
Directors but by the MSCOC. While the
MSCOC, as its name suggests, is created for the
purpose of overseeing the affairs of the
corporation, nowhere in the by-laws does it
state that it is authorized to exercise corporate
powers, such as the power to call a special
meeting.
The board of directors is the directing and
controlling body of the corporation. It is a
creation of the stockholders and derives its
power to control and direct the affairs of the
corporation from them. The underlying policy
 Green Notes 2016
of the Corporation Code is that the business and
affairs of a corporation must be governed by a
board of directors whose members have stood
for election, and who have actually been
elected by the stockholders, on an annual basis.
Only in that way can the continued
accountability to shareholders, and the
legitimacy of their decisions that bind the
corporation's stockholders. The shareholder
vote is critical to the theory that legitimizes the
exercise of power by the directors or officers
over the properties that they do not own.
Even the Corporation Code is categorical in
stating that a corporation exercises its powers
through its board of directors and/or its duly
authorized officers and agents, except in
instances where the Corporation Code requires
stockholders' approval for certain specific acts.
3. MMTC v. Cuevas
G.R. No. 167797 (June 15, 2015)
Facts: Metro Manila Transit Corporation
(MMTC) and Mina's Transit Corporation
entered into an agreement to sell whereby the
latter bought several bus units from the former
at a stipulated price. They agreed that MMTC
would retain the ownership of the buses until
certain conditions were met, but in the
meantime Mina's Transit could operate the
buses within Metro Manila. A provision in the
agreement to sell mandated Mina's Transport to
hold MMTC free from liability arising from the
use and operation of the bus units. On October
14, 1994, one of the buses subject of the
agreement hit and damaged a Honda
Motorcycle owned by Reynaldo and driven by
Junnel. Reynaldo and Junnel sued MMTC and
Mina's Transit for damages.
Issue: whether MMTC is not liable for the
injuries sustained by the respondents despite the
provision in the agreement to sell that shielded
it from liability.
Held: Registration is required not to make
said registration the operative act by which
ownership in vehicles is transferred, as in land
registration cases, because the administrative
proceeding of registration does not bear any
essential relation to the contract of sale between
the parties. The main aim of motor vehicle
registration is to identify the owner so that if
any accident happens, or that any damage or
injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed
on a definite individual, the registered owner.
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Prepared by: Atty. Renato S. Rondez
Indeed, MMTC could not evade liability by
passing the buck to Mina's Transit. The
stipulation in the agreement to sell did not bind
third parties like the Cuevases, who were
expected to simply rely on the data contained
in the registration certificate of the erring bus.
4. Philippine Communications Satellite
Corporation and Philcomsat Holdings
Corporation vs .Sandiganbayan
G.R. No. 203023 (June 17, 2015)
Facts: PHC is a domestic corporation listed in
the Philippine Stock Exchange (PSE). It was
previously known as Liberty Mines, Inc. (LMI)
and had been previously engaged in the
discovery, exploitation, development and
exploration of oils.
On 13 September 1995, Oliverio G. Laperal,
then Chairman of the Board and President of
LMI, and Honorio Poblador III, then President
of PHILCOMSAT, signed a Memorandum of
Agreement for the latter to gain controlling
interest in LMI through an increase in its
authorized capital stock.
On 24 June 1996, Laperal and PHILCOMSAT
executed a Supplemental Memorandum of
Agreement6 reiterating the increase in capital
stock of LMI from six billion shares to100 billion
shares.
On 7 June 2005, the PCGG sent another letter
to the PSE reiterating its request to defer the
listing of PHC shares. In a letter dated 25 July
2011, Katrina C. Ponce-Enrile, then President of
POTC, wrote to then PCGG Chairman Andres
D. Bautista demanding that the PCGG rescind
its objection to the listing of the increase in
PHCs capital stock. When PCGG failed to
reply, PHILCOMSAT sent a final demand Letter
reiterating its demand for PCGG to withdraw its
objection to the listing of the increase in PHCs
capital stock.
On 11 January 2012, Ponce-Enrile received a
letter from Chairman Bautista, informing her
that, among others, the agency was discussing
the matter with the Department of Finance and
that the two would give a joint
recommendation thereafter. However, the
PCGG never communicated said
recommendation to PHILCOMSAT.
PHILCOMSAT filed a complaint before the
Sandiganbayan against PCGG to compel the

latter to withdraw its opposition to the listing
of the increase in PHCs capital stock.
PHILCOMSAT argued that PCGG had already
recognized the validity of the stockholders
meetings in the two corporations, which
"practically erased" the alleged conflict between
the two sets of directors. The PCGG filed a
motion to dismiss the complaint, which
PHILCOMSAT subsequently opposed.
Issue: whether or not the complaint involves an
Intra-corporate controversy
Held: The Complaint involves an Intra-
corporate Controversy. To determine if a case
involves an intra-corporate controversy, the
courts have applied two tests: the relationship
test and the nature of the controversy test.
Under the relationship test, the existence of any
of the following relationships makes the conflict
intra-corporate: (1) between the corporation,
partnership or association and the public; (2)
between the corporation, partnership or
association and the State insofar as its franchise,
permit or license to operate is concerned; (3)
between the corporation, partnership or
association and its stockholders, partners,
members or officers; and (4) among the
stockholders, partners or associates themselves.
On the other hand, the nature of the
controversy test dictates that "the controversy
must not only be rooted in the existence of an
intra-corporate relationship, but must as well
pertain to the enforcement of the parties
correlative rights and obligations under the
Corporation Code and the internal and intra-
corporate regulatory rules of the corporation.
The PCGG, acting as representative of the
Republic, was exercising a duty of a stockholder
to ensure the proper and lawful exercise of
corporate acts. Based on the foregoing, the
Sandiganbayan correctly dismissed the
complaint for lack of jurisdiction.
Grace Borgoa Insigne V. Abra Valley
Colleges, Inc.
G.R. No. 204089(July 29, 2015)
Facts: Petitioners Grace Borgoa Insigne,
Diosdado Borgoa, Osbourne Borgoa, Imelda
Borgoa Rivera, Aristotle Borgoa are siblings
of the full blood. Respondent Francis Borgoa
is their older half-blood brother. The
petitioners are the children of the late Pedro
Borgo. In his lifetime, Pedro was the founder,
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Green Notes 2016
Mercantile Law
Prepared by: Atty. Renato S. Rondez
president and majority stockholder of
respondent Abra Valley Colleges, Inc.a Stock
Corporation. After Pedros death, Francis
succeeded him as the president of Abra Valley.
On March 26, 2002, the petitioners, along with
their brother Romulo Borgoa and Elmer
Reyes, filed a complaint (with application for
preliminary injunction) and damages in the RTC
against Abra Valley praying, among others, that
the RTC direct Abra Valley to allow them to
inspect its corporate books and records, and the
minutes of meetings, and to provide them with
its financial statement.
Issue: resolve the issue concerning the status or
relation of the petitioners with Abra Valley if
they can exercise their right to inspect Abra
Valleys corporate books, records and minutes
of meetings, and be furnished with financial
statements
Held: In civil cases, the party having the
burden of proof must establish his case by a
preponderance of evidence, or evidence that is
more convincing to the court as worthy of
belief than that which is offered in opposition
thereto. The petitioners had to establish that
they were stockholders of Abra Valley.
A stock certificate is prima facie evidence that
the holder is a shareholder of the corporation
but the possession of the certificate is not the
sole determining factor of ones stock
ownership. Considering that Section 23 of the
Corporation Code requires every director to be
the holder of at least one share of capital stock
of the corporation of which he is a director, the
respondents would not have then allowed any
of the petitioners to be elected to sit in the
Board of Directors as members unless they
believed that the petitioners so elected were not
disqualified for lack of stock ownership. Neither
did the respondents thereafter assail their acts as
Board Directors.
Conformably with the doctrine of estoppel, the
respondents could no longer deny the
petitioners status as stockholders of Abra
Valley.
Bank of Commerce v. Marilyn P. Nite,
G.R. No. 211535 (July 22, 2015)
Facts: The RTC acquitted the accused
Marilyn Nite President of Bancapital
Development Corporation - of the charge
of feloniously engaging in the business of
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Mercantile Law
selling securities without having been
registered as a broker.
The prosecution alleged that Nite had
defrauded Bancom by falsely pretending to
own Php250 Million worth of treasury bills,
as described in the Confirmation of Sale;
however, Bancap only delivered substitute
bills worth P88 million. Moreover, Nite
was adjudged civilly liable to Bancom for
P162 million which represented the
undelivered treasury bills.
Upon motion for reconsideration, the court
added that even if the selling of securities
was outside Bancops primary purpose, it
should only be considered ultra vires and
not illegal. The Court of Appeals ruled that
the doctrine of piercing the veil of
corporate fiction imposed the burden of the
corporations obligations on its erring
officers and shareholders: In this case, none
of Bancaps other officers were impleaded,
which makes it impossible to completely
determine the corporations liabilities.
Issue: Whether the appellate court erred in
not piercing the corporate veil of Bancap.
Held: To hold a director or officer
personally liable for corporate obligations,
two requisites must concur: (1) complaint
must allege that the director or officer
assented to patently unlawful acts of the
corporation, or that the officer was guilty of
gross negligence or bad faith; and (2)
complainant must convincingly prove such
unlawful acts, negligence and bad faith. To
hold a director personally liable for debts of
the corporation, and thus pierce the veil of
corporate fiction, his bad faith must be
established clearly.
The issue of fraud had already been
resolved by the finality of Nites acquittal.
The prosecution failed to show that Nite
acted in bad faith. Her act of signing the
Confirmation of Sale, by itself, does not
make the corporate liability her own.
Games and Garments Developers, Inc. v.
Allied Banking Corporation
G.R. No.181426 (July 13, 2015)
Facts: The petitioner GGDI appealed the CA
decision absolving Allied Bank from liability
under the Deed of Sale between the
corporation and the Spouses Pantaleon, for
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Prepared by: Atty. Renato S. Rondez
the bank was not a party to the documents.
Moreover, it ruled that Allied Bank is not
liable under the letters of guaranty that
Mercado (manager) had executed because
it never ratified such letters. In addition,
they also posit that the appellate court
erred in merely relying upon the
respondents assertion that Section 74 of the
Generral Banking Act prohibits banks from
entering into a contract of guaranty or
surety.
Issue: Whether the CA erred in absolving
Allied Bank of any liability to GGDI.
Held: There was no express undertaking in
Mercados letters to pay Bienvenidas debt
to GGDI in case the latter failed to do so. In
said letters, Mercado merely acknowledged
that Bienvenida and /or her company had
an approved real estate loan with Allied
Bank and guaranteed that subsequent
releases from the loan would be made
directly to GGDI, provided that the
certificate of title over the subject property
would be transferred to Bienvenidas name.
Mercado did not obligate Allied Bank to be
answerable with its own money to GGDI
should Bienvenida default on the payment
of the propertys purchase price.
However, based on the doctrine of
apparent authority, Allied Bank is bound by
the undertaking in the letters. GGDI relied
in good faith on the assurance stated in the
letters that the proceeds of the approved
loan would be released directly to it. Allied
Bank cannot now disclaim the liability
under the letters. The application of this
doctrine is necessary because banks have a
fiduciary relationship with the public and
their stability depends on the confidence of
the people in their honesty and efficiency.
Such faith will be eroded where banks do
not exercise strict care in the selection and
supervision of its employees, resulting in the
prejudice of their depositors.
Pioneer Insurance Surety Corporation v.
Morning Star Travel and Tours, Inc., Estella
Co Wong, Benny Wong, et.al.,
G.R. No. 198436 (July 8, 2015)
Facts: International Air Transport
Association obtained a Credit Insurance
Policy from Pioneer to assure itself of
payments by accredited travel agents for
ticket sales due to the airline companies.

Morning Star was declared in default for its
failure to settle its accrued billings. Pioneer
was able to obtain favorable judgment
against the officers (individual respondents)
of Morning Star, but the Court of Appeals
modified the trial court ruling, now holding
only Morning Star as personally liable for
the payment of the amounts awarded.
Issue: Whether the individual respondents
were grossly negligent in running Morning
Stars affairs, thus, giving sufficient ground
for the court to pierce the corporate veil
and hold each of them personally liable.
Held: The corporate legal structure draws
its economic superiority from key features
such as separate corporate personality. The
consequent limited liability feature, since
corporate assets will answer for corporate
debts, also proves attractive for investors. A
separate corporate personality shields
officers acting in good faith and within their
scope of authority from personal liability
except for situations provide by law.
The Court of Appeals ruled that the general
rule on separate corporate personality
applies since the petitioner failed to prove
bad faith amounting to fraud. Piercing the
corporate veil in order to hold corporate
officers personally liable for the
corporations debts requires that bad faith
must be established clearly and
convincingly. Bad faith imports a dishonest
purpose or some moral obliquity and
conscious doing of a wrong, not simply bad
judgment or negligence. The mere fact that
Morning Star has been incurring huge losses
and that it has no assets at the time it
contracted large financial obligations does
not amount to fraud.
Y-I Leisure Philippines, Inc. v. Yu
G.R. No. 207161 (September 8, 2015)
Facts: The Court of Appeals held that the
transfer of the entire assets of MADCI to YICRI
should not prejudice the transferors creditors.
In this case, MADCIs sale of all its corporate
assets to the petitioner Y-I Leisure Phil. Inc. (YIL)
and its companies necessarily included the
assumption of its liabilities. Thus, the liability of
YIL was determined not by their participation in
the sale of the golf and country club shares, but
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Prepared by: Atty. Renato S. Rondez
by the fact that they bought the entire assets of
MADCI and its creditors might not have other
means of collecting the amounts due them,
except by going after the assets sold. The
petitioner, however, reiterated that the element
of fraud was required in order for a third buyer
to be liable to the sellers creditor.
Issue: Whether fraud must exist in the transfer
of all the corporate assets in order for the
transferee to assume the liabilities of the
transferor.
Held: No.
The Nell Doctrine states the general rule that
the transfer of all the corporate assets to
another corporation shall not render the latter
liable to the liabilities of the transferor, except:
1. Where the purchaser expressly or
impliedly agrees to assumer such debts;
2. Where the transaction amounts to a
consolidation or merger of
corporations;
3. Where the purchasing corporation is
merely a continuation of the selling
corporation; and
4. Where the transaction is entered into
fraudulently in order to escape liability
for such debts.
Fraud is not an essential element for the
application of the business enterprise transfer.
The exception of the Nell Doctrine provides
that the transferee corporation assumes debts
and liabilities of the transferor because it is
merely a continuation of the latters business. As
the exception relates to the protection of the
creditors of the transferor corporation, and
does not depend on any deceit committed by
the transferee corporation, then fraud is
certainly not an element of the business
enterprise doctrine.
Securities and Exchange Commission v. Hon.
Reynaldo M. Laigo
G.R. No. 188639 (September 02, 2015)
Facts: Securities and Exchange Commission
(SEC) assails the order issued by Judge Reynaldo
M. Laigo, a petition for involuntary insolvency
of Legacy Consolidated
Plans, Incorporated ordering the inclusion of
the trust fund in its corporate assets.
Issue: Whether the Trust Funds of Legacy form
part of its Corporate Assets.
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Held: No.
The Trust Fund is for the sole benefit of the
planholders and cannot be used to satisfy the
claims of other creditors of Legacy. Section 30
of the Pre-Need Code provides that the
proceeds of the trust funds shall redound solely
to the planholders.
The argument that Legacy has retained a
beneficial interest in the trust fund despite the
execution of the trust agreement is untenable.
Legacy is not the beneficiary of the trust fund. It
must be stressed that a person is considered as a
beneficiary of a trust if there is a manifest
intention to give such a person the beneficial
interest over the trust properties.
Legacy, as trustor, is left without any iota of
interest in the trust fund. This is consistent with
the nature of a trust arrangement, whereby
there is a separation of interests in the subject
matter of the trust, the beneficiary having an
equitable interest, and the trustee having an
interest which is normally legal interest.
F & S VELASCO COMPANY, INC. vs. DR.
ROMMEL L. MADRID
G.R. No. 208844, (November 10, 2015)
Perlas-Bernabe, J.:
Facts: On June 8, 1987, FSVCI was duly
organized and registered as a corporation with
Francisco, Simona, Angela, herein respondent
Madrid, and petitioner Saturnino as its
incorporators. When Simona and Francisco
died on June 12, 1998 and June 22, 1999,
respectively, their daughter, Angela, inherited
their shares. Angela died intestate and without
issue.
As of May 11, 2009, the distribution of FSVCI's
24,000 total shares of stock is as follows: (a)
Angela with 16,998 shares; (b) Madrid with
1,000 shares; (c) petitioner Scribner with 6,000
shares; and (d) petitioners Seva and Sunico with
one (1) share each.
On October 8, 2009, Madrid, as Angela's
spouse, executed an Affidavit of Self-
Adjudication covering the latter's estate which
includes her 70.82% ownership of FSVCI's
shares of stock. Madrid called for a Special
Stockholders' and Re-Organizational Meeting
to be held on November 18, 2009. Seva, in his
then-capacity as FSVCI corporate secretary, sent
a Notice of an Emergency Meeting to FSVCI's
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remaining stockholders for the purpose of
electing a new president and vice-president, as
well as the opening of a bank account.
Saturnino was recognized as a member of the
FSVCI Board of Directors and thereafter, as
FSVCI President, while Scribner was elected
FSVCI Vice-President.
Despite the election conducted by the Saturnino
Group, the Madrid Group proceeded with the
Special Stockholders' and Re-Organizational
Meeting on November 18, 2009.
Issue: Whether the November 18, 2009
Meeting organized by Madrid is legal and valid;
and (b) a Management Committee should be
appointed or constituted to take over the
corporate and business affairs of FSVCI.
Held: The Supreme Court held that, it must be
clarified that Madrid's inheritance of Angela's
shares of stock does not ipso facto afford him
the rights accorded to such majority ownership
of FSVCI's shares of stock. Section 63 of the
Corporation Code governs the rule on transfers
of shares of stock.
Verily, all transfers of shares of stock must be
registered in the corporate books in order to be
binding on the corporation. In this regard, the
case of Batangas Laguna Tayabas Bus Co., Inc.
v. Bitanga38 instructs that an owner of shares
of stock cannot be accorded the rights
pertaining to a stockholder - such as the right to
call for a meeting and the right to vote, or be
voted for - if his ownership of such shares is not
recorded in the Stock and Transfer Book.
In the case at bar, records reveal that at the time
Madrid called for the November 18, 2009
Meeting, as well as the actual conduct thereof,
he was already the owner of 74.98% shares of
stock of FSVCI as a result of his inheritance of
Angela's 70.82% ownership thereof. However,
records are bereft of any showing that the
transfer of Angela's shares of stock to Madrid
had been registered in FSVCFs Stock and
Transfer Book when he made such call and
when the November 18, 2009 Meeting was
held. Thus, the CA erred in holding that Madrid
complied with the required registration of
transfers of shares of stock through mere
reliance on FSVCI's GIS dated November 18,
2009.
On the issue of the propriety of
appointing/constituting a Management
Committee to manage FSVCI's affairs, the Court
 Green Notes 2016
recognizes that a corporation may be placed
under the care of a Management Committee
specifically created by a court and, thus, under
the latter's control and supervision, for the
purpose of preserving properties involved in a
suit and protecting the rights of the parties.
However, case law is quick to point out that
"the creation and appointment of a
management committee is an extraordinary
and drastic remedy to be exercised with care
and caution; and only when the requirements
under the Interim Rules are shown.
In view of the extraordinary nature of such a
remedy, Section 1, Rule 9 of the Interim Rules
of Procedure Governing Intra-Corporate
Controversies provides the elements needed for
the creation of a Management Committee: (1)
Dissipation, loss, wastage or destruction of
assets or other properties; and (2) Paralyzation
of its business operations which may be
prejudicial to the interest of the minority
stockholders, parties-litigants or the general
public.
In the case at bar, the CA merely based its
directive of creating a Management Committee
for FSVCI on its finding of "the persisting conflict
between [the Saturnino and Madrid Groups],
the allegations of embezzlement of corporate
funds among the parties, and the uncertainty in
the leadership and direction of the corporation
had created an imminent danger of dissipation,
loss, and wastage of FSVCI's assets and the
paralyzation of its business operations which
may be prejudicial to the minority stockholders,
parties-litigants or the general public.
Accordingly, the CA erred in ordering the
creation of a Management Committee in this
case.
Microsoft Corporation vs. Rolando D.
Manansala
G.R. No 166391 (October 21, 2015)
Bersamin, J.:
Facts: Petitioner is the copyright and trademark
owner of all rights relating to all versions and
editions of Microsoft software such as, but not
limited to, MS-DOS. Private Respondent is
doing business under the name of DATAMAN
TRADING COMPANY and/or COMIC ALLEY.
Private Respondent, without authority from
petitioner, was engaged in distributing and
selling Microsoft computer software programs.
On November 19, 1997, the search warrant was
served on the private respondent's premises and
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yielded several illegal copies of Microsoft
programs. Petitioner filed an Affidavit-
Complaint in the DOJ. Public respondent State
Prosecutor dismissed the charge. Petitioner filed
a Motion for Partial Reconsideration arguing
that printing or copying is not essential in the
crime of copyright infringement under Section
29 of PD No. 49.
Issue: Whether that printing or copying was not
essential in the commission of the crime of
copyright infringement under Section 29 of
Presidential Decree No. 49.
Held: The Supreme Court held that, 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. Indeed, the public
prosecutor and the DOJ gravely abused their
discretion in dismissing the petitioner's charge
for copyright infringement against the
respondents for lack of evidence. There was
grave abuse of discretion because the public
prosecutor and the DOJ acted whimsically or
arbitrarily in disregarding the settled
jurisprudential rules on finding the existence of
probable cause to charge the offender in court.
Valley Golf and Country Club, Inc. vs. Dr.
Victor Reyes
G.R. No. 190641 (November 10, 2015)
Perez, J.:
Facts: Petitioner is a duly constituted non-stock,
non-profit corporation which operates a golf
course. 1960, the late Victor Reyes (Reyes)
subscribed and purchased one share in the
capital stock of Valley Golf. Reyes playing
privileges to the club was successively assigned
to Jose Y. Bondoc, James B. Wheelan and
Roberto Povidoin accordance with the terms
and conditions of the country clubs by-laws.
When the latest assignment of playing rights
ended in 1986, however, the payment of
membership dues was likewise discontinued
and the account of Reyes became delinquent.
Desirous to transfer the ownership of his share
in the golf club to his son, Reyes, in 1994,
inquired with the club on the status of his
membership.
To his surprise, however, he learned that his
share was already sold by Valley Golf at the
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public auction due to delinquency in the
payment of monthly membership fees.
Claiming that he was not notified of the
delinquency of his account nor the subsequent
public sale of his share, Reyes prayed in his
Complaint for the reinstatement of his playing
rights, if possible, or the issuance of a new
certificate of shares, in the event that his
previous share was already sold to third person.
Refuting the allegations of the complainant,
Valley Golf insisted that a Notice of Due
Account was sent to Reyes on 11 June 1986
which was received by the latter on 18 June
1986 as shown in Registry Receipt No. 3384.
Issue: Whether or not the letter of demand
dated 11 June 1986 was duly served to Reyes
Held: The Supreme Court held that,
membership in a non-stock corporation is a
property right and as such, public policy
demands that its termination must be done
in accordance with substantial justice.
Proceeding from applicable precedent that
termination of membership in a non-stock
corporation constitutes an infringement of
property rights which one should not be
deprived of without conforming with the
demands of substantial justice, there is a clear
reason to agree with the findings that notice of
delinquency in question was not duly delivered
to Reyes. First, it is beyond question that the
registry return card presented by Valley Golf
was unauthenticated and does not bear the
name of the person who received it. There is
no dispute that Valley Golf, in its reliance on
registered service of the demand letter dated 11
June 1986, failed to authenticate the registry
return receipt. Neither the affidavit of the
person mailing nor a certified sworn copy of the
notice given by the postmaster to the addressee
was submitted to the court as proof of receipt.
Second, it is erroneous for Valley Golf to
postulate that the requirement that registry
return card must be authenticated is solely
confined in criminal cases where the required
quantum of evidence to satisfy conviction is
proof beyond reasonable doubt. Third, Valley
Golf, as the party asserting receipt of notice
bears the burden of proof to prove notice.
When the service of notice is an issue, the rule
is that the person alleging that the notice was
served must prove the fact of service.
Unmistakeably, the termination of Reyes'
membership effected by Valley Golf without
sufficient proof of notice clearly spoke of a
violation of his property rights without due
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process of law, and, must be therefore
invalidated.
The Orchard Golf & Country Club, Inc. vs.
Ernesto V. Yu and Manuel C. Yuhico
G.R. No. 191033 (January 11, 2016)
Peralta, J.:
Facts: On May 28, 2000, respondents went to
the Orchard Golf & Country Club to play a
round of golf with another member of the club.
At the last minute, however, that other member
informed them that he could not play with
them due to the "no twosome." Respondents
tried to convince Francis Montallana, Orchards
assistant golf director, to allow them to play
twosome. Montallana refused, stating that the
flights which started from the first nine holes
might be disrupted. Respondents then teed off
without securing a tee time control slip and
without permission from Montallana, the latter
filed a report with the board of directors. The
board resolved to suspend respondents.
Issue: Whether respondents were suspended in
accordance of the Clubs by-laws
Held: The Supreme Court held that,
Respondents were suspended in accordance
with the procedure set forth in the Clubs By-
laws.
There is no merit on their insistence that their
suspension is invalid on the ground that the
affirmative vote of eight (8) members is
required to support a decision suspending or
expelling a Club member. Both the provisions
of Articles of Incorporation and By-Laws of the
Club expressly limit the number of directors to
seven (7); hence, the provision on suspension
and expulsion of a member which requires the
affirmative vote of eight (8) members is
obviously a result of an oversight.
Former Senator Helena Z. Benitez, the
Honorary Chairperson named in the
Membership Handbook, could not be included
as a regular Board member since there was no
evidence adduced by respondents that she was
elected as such pursuant to the Corporation
Code and the By-laws of the Club or that she
had the right and authority to attend and vote
in Board meetings.
In addition, at the time the Board resolved
to suspend respondents, the affirmative votes
of only six (6) Board members already
sufficed. The testimony of Jesus A. Liganor, who
 Green Notes 2016
Mercantile Law
served as Assistant Corporate Secretary, that
Rodrigo Francisco had not attended a single
Board meeting since 1997 remains
uncontroverted. The Court agrees with
petitioners that the Club should not be
powerless to discipline its members and be
helpless against acts inimical to its interest just
because one director had been suspended and
refused to take part in the management affairs.
University of Mindanao, Inc. v. Bangko
Sentral Ng Pilipinas, et al.
G.R. No. 194964-65 (Jan. 11, 2016)
Leonen, J.:
Facts: University of Mindanaos (UM) Vice
President for Finance, Saturnino Petalcorin,
executed a deed of real estate mortgage
over University of Mindanaos property in
favor of Bangko Sentral ng Pilipinas. The
mortgage served as security for P1.9 Million
loan and allegedly executed on University
of Mindanaos behalf.
\As proof of his authority to execute a real
estate mortgage for UM, Petalcorin showed
a Secretarys Certificate signed by UMs
Corporate Secretary, Aurora de Leon. The
CA ruled that although BSP failed to prove
that the UM Board of Trustees actually
passed a Board Resolution authorizing
Petalcorin to mortgage the subject real
properties, but the Secretary's Certificate
was notarized and enjoyed the
presumption of regularity as to the truth of
its statements and authenticity of the
signatures.
The CA also ruled that since UMs officers
signed the promissory notes, UM was
presumed to have knowledge of the
transaction. Knowledge of an officer in
relation to matters within the scope of his
or her authority is notice to the
corporation.
The annotations on UMs certificates of title
also operate as constructive notice to it that
its properties were mortgaged. Its failure to
disown the mortgages for more than a
decade was implied ratification.
Issue: Whether the UM is bound by the real
estate mortgage contracts executed by
Saturnino Petalcorin.
Held: No.
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Acts of an officer that are not authorized by
the board of directors/trustees do not bind
the corporation unless the corporation
ratifies the acts or holds the officer out as a
person with authority to transact on its
behalf.
The court ruled that petitioner is correct
when it argues that the execution of the
mortgage contract was ultra vires. As an
educational institution, it may not secure
the loans of third persons and it is limited
to developing human capital through
formal instruction.
The only exception to the general rule is
when acts are necessary and incidental to
carry out a corporations purposes, and to
the exercise of powers conferred by the
Corporation Code and under a
corporations articles of incorporation.
Notarization creates a presumption of
regularity and authenticity on the
document and may be rebutted by "strong,
complete and conclusive proof" to the
contrary. While notarial acknowledgment
"attaches full faith and credit to the
document concerned," it does not give the
document its validity or binding effect.
When there is evidence showing that the
document is invalid, the presumption of
regularity or authenticity is not applicable.
Since the notarized Secretary's Certificate
was found to have been issued without a
supporting board resolution, it produced
no effect. Hence, it should not have been
relied on by respondent especially given its
status as a bank.
Ratification must be knowingly and
voluntarily done. It even appears that
petitioner was unaware of the mortgage
contracts until respondent notified it of its
desire to foreclose the mortgaged
properties. Petitioners lack of knowledge
about the mortgage executed in its name
precludes an interpretation that there was
any ratification on its part.
The general rule is knowledge of an officer
is considered knowledge of the corporation
applies only when the officer is acting
within the authority given to him or her by
the corporation.
However, even though the Spouses
Guillermo and Dolores Torres were officers

of both the thrift banks and petitioner, their
knowledge of the mortgage contracts
cannot be considered as knowledge of the
corporation. The Spouses Guillermo and
Dolores Torres knowledge cannot be
interpreted as knowledge of UM. Their
knowledge was not obtained as petitioners
representatives. It was not shown that they
were acting for and within the authority
given by petitioner when they acquired
knowledge of the loan transactions and the
mortgages. The knowledge was obtained in
the interest of and as representatives of the
thrift banks.
Narra Nickel Mining and Devt Corp., Tesoro
Mining And Devt Inc. and McArthur Mining
Inc. v. Redmont Consolidated Mines Corp.,
G.R. No. 195580 (March 11, 2015)
J. Velasco, Jr.
Facts: Petitioner filed a motion before the
SC to reconsider its April 21, 2014 Decision
which upheld the denial of their
applications. They argued that the
application of the Grandfather Rule to
determine their nationality is erroneous and
allegedly without basis in the Constitution,
the FIA, the Philippine Mining Act, and the
Rules issued by the SEC which promote the
application of the Control Test in verifying
the Philippine nationality of corporate.
Issue: Whether the application by the SC of
the grandfather resulted to the
abandonment of the control test
Held: No.
The Court ruled that Grandfather Rule
may be applied jointly with control test to
determine the observance of foreign
ownership restriction in nationalized
economic activities.
It is only when the Control Test is first
complied with that the Grandfather Rule
may be applied. In case, the subject
corporations Filipino equity falls below the
threshold 60%, the corporation is
immediately considered foreign-owned, in
which case, the need to resort to the
Grandfather Rule disappears.
In this case, using the control test, Narra et
al., appear to have satisfied the 60-40
equity requirement. But the nationality of
these corporations and the foreign-owned
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common investor that funds them was in
doubt, hence, the need to apply the
Grandfather Rule.
ABS-CBN Corporation V. Felipe Gozon et al.,
G.R. No. 195956 (March 11, 2015)
J. Leonen
Copyright protection does extend to the reports
themselves, as distinguished from the substance
of the information contained in the reports.
Copyright protects the manner of expression of
news reports, the particular form or
collocation of words in which the writer has
communicated it.
Facts: ABS-CBN conducted live audio-video
coverage of and broadcasted the arrival of
Angelo Dela Cruz at the NAIA. Under a special
embargo agreement, ABS-CBN allowed Reuters
to air the footages it had taken. It was alleged
by ABS-CBN that under the agreement the
footage will be for the exclusive use of Reuters
international subscribers only and no other
local subscriber would be allowed to use the
footage without ABS-CBNs consent.
GMA-7 subscribes to both Reuters and Cable
News Network (CNN). It received a live video
feed of the coverage of Angelo dela Cruzs
arrival from Reuters. GMA-7 immediately
carried the live newsfeed in one of its programs
together with its live broadcast. Apparently
GMA-7 did not receive any notice or was not
aware that Reuters was airing footages of ABS-
CBN.
Issue: Whether news footage is copyrightable
under the law.
Held: The news footage is copyrightable.
Under IPC, works are protected by the sole
fact of their creation, irrespective of their mode
or form of expression, as well as of their
content, quality and purpose.
It is true that under Section 175 of the
Intellectual Property Code, news of the day
and other miscellaneous facts having the
character of mere items of press information
are considered unprotected subject matter.
However, the Code does not state that
expression of the news of the day, particularly
when it underwent a creative process, is not
entitled to protection.

News or the event itself is not copyrightable.
However, an event can be captured and
presented in a specific medium. Television
involves a whole spectrum of visuals and
effects, video and audio. News coverage in
television involves framing shots, using images,
graphics, and sound effects. It involves creative
process and originality. Television news footage
is an expression of the news.
Issue: Whether there was fair use of the
broadcast material
Held: Supreme Court defined fair use as 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.
To determine if there has been fair use must
apply the four-factor test.
First, the purpose and character of
the use of the copyrighted material
must fall under those listed in
Section 185, thus: criticism,
comment, news reporting, teaching
including multiple copies for
classroom use, scholarship,
research, and similar purposes. The
purpose and character requirement
is important in view of copyrights
goal to promote creativity and
encourage creation of works.
Hence, commercial use of the
copyrighted work can be weighed
against fair use.
The transformative test is
generally used in reviewing the
purpose and character of the usage
of the copyrighted work. The court
must look into whether the copy of
the work adds new expression,
meaning or message to transform
it into something else. Meta-use
can also occur without necessarily
transforming the copyrighted work
used.
Second, the nature of the
copyrighted work is significant in
deciding whether its use was fair. If
the nature of the work is more
factual than creative, then fair use
will be weighed in favor of the user.
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Third, the amount and
substantiality of the portion used is
important to determine whether
usage falls under fair use. An exact
reproduction of a copyrighted
work, compared to a small portion
of it, can result in the conclusion
that its use is not fair. There may
also be cases where, though the
entirety of the copyrighted work is
used without consent, its purpose
determines that the usage is still fair.
Lastly, the effect of the use on the
copyrighted works market is also
weighed for or against the user. If
the court finds that the use had or
will have a negative impact on the
copyrighted works market, then
the use is deemed unfair.
Whether the alleged five-second footage may
be considered fair use is a matter of defense.
Supreme Court emphasize that the case involves
determination of probable cause at the
preliminary investigation stage. Raising the
defense of fair use does not automatically mean
that no infringement was committed. Given the
insufficiency of available evidence,
determination of whether the Angelo dela Cruz
footage is subject to fair use is better left to the
trial court where the proceedings are currently
pending.
Issue: Whether good faith is a defense in a
criminal prosecution for violation of the
Intellectual Property Code
Held: GMA-7 cannot invoke the defense of
good faith to argue that no probable cause
exists. Infringement under the Intellectual
Property Code is malum prohibitum; it does not
require mens rea or culpa.
Copyright, in the strict sense of the term, is
purely a statutory right. It is a new or
independent right granted by the statute, and
not simply a pre-existing right regulated by the
statute. Being a statutory grant, the rights are
only such as the statute confers, and may be
obtained and enjoyed only with respect to the
subjects and by the persons, and on terms and
conditions specified in the statute. The
Philippines does not statutorily support good
faith as a defense.

Robert L. Abad, et al. v. Philippine
Communications Satellite Corporation,
represented by Victor Africa,
G.R. No. 200620 (March 18, 2015)
J. Villarama, Jr.
Facts: In 2006, PHILCOMSAT filed in the RTC
a Complaint for Inspection of Books against the
incumbent PHC directors and/or officers, to
enforce its right under Sections 74 and 75 of the
Corporation Code and was dismissed for lack of
jurisdiction citing Del Moral v. Republic and
Olaguer v. RTC (496 Phil. 657), which provides
that it is the Sandiganbayan which has
jurisdiction considering that plaintiff is a
sequestered corporation of the Republic
through the Philippine Commission on Good
Government (PCGG) alleging a right of
inspection.
PHILCOMSAT appealed to the CA thru a
petition for review under Rule 43 arguing that
it is the RTC and not Sandiganbayan which has
jurisdiction over the case involving a
stockholders right to inspect corporate books
and records because the main controversy is
rooted upon the issue of who are the rightful
representative and board of directors of
PHILCOMSAT.
The CA granted the petition and the remanded
to the RTC for further proceedings.
Issue: Whether it is the Sandiganbayan or RTC
which has jurisdiction over a stockholders suit
to enforce its right of inspection under Section
74 of the Corporation Code.
Held: The Court ruled that it is the RTC and
not the Sandiganbayan which has jurisdiction
over cases which do not involve a
sequestration-related incident but an intra-
corporate controversy.
Upon the enactment of Republic Act No.
8799, the jurisdiction of the SEC over intra-
corporate controversies and the other cases
enumerated in Section 5 of P.D. No. 902-A was
transferred to the Regional Trial Court. The
jurisdiction of the Sandiganbayan has been held
not to extend even to a case involving a
sequestered company notwithstanding that the
majority of the members of the board of
directors were PCGG nominees.
BPI Family Savings Bank v. St. Michael
Medical Center,
G.R. No. 205469, (March 25, 2015)
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Prepared by: Atty. Renato S. Rondez
J. Perlas-Bernabe
Facts: Spouses Rodil planned on upgrading their
hospital by using their personal funds and a
mortgage loan from the BPI Family Savings
Bank. However, only several floors were
constructed and SMMCI was neither
operational nor earning revenues because of the
problems it had with its first contractor as well
as the rise of the cost of construction materials.
SMMCI filed a petition for corporate
rehabilitation and claimed that the hospital
although operating profitably was weighed
down by its loan obligations and several
persons had signified interest in investing.
Issue: Whether the CA correctly affirmed
SMMCIs Rehabilitation Plan as approved by
the RTC.
Held: No. The court ruled that CA erred in
disregarding the fact that SMMCIs
Rehabilitation Plan, key requisite in corporate
rehabilitation proceedings, particularly, the
material financial commitment to support the
rehabilitation and an accompanying liquidation
analysis.
Rehabilitation assumes that the corporation has
been operational but for some reasons like
economic crisis or mismanagement had become
distressed or insolvent. Thus, the basic issues in
rehabilitation proceedings concern the viability
and desirability of continuing the business
operations of the distressed corporation, all
with a view of effectively restoring it to a state
of solvency or to its former healthy financial
condition through the adoption of a
rehabilitation plan.
It is settled that the remedy of rehabilitation
should be denied to corporations that do not
qualify under the Rules. Neither should it be
allowed to corporations whose sole purpose is
to delay the enforcement of any rights of the
creditors, which is rendered obvious by:
a) the absence of a sound and
workable business plan;
b) baseless and unexplained
assumptions, targets and goals; and
c) Speculative capital infusion or
complete lack thereof for the
execution of the business plan.
In this case, not only has the petitioning debtor
failed to show that it has formally began its
operations which would warrant restoration,
but also it has failed to show compliance with

the requirements under the Rules, the purpose
of which are vital in determining the propriety
of rehabilitation. Thus, for all the reasons
herein above explained, the Court is
constrained to rule in favor of BPI Family and
hereby dismiss St. Michael Medical Center Inc.'s
Rehabilitation Petition.
100 SELECTED CONCEPTS THAT MAY BE
HELPFUL
LETTERS OF CREDIT:
1. A letter of credit is a financial device
developed by merchants as a convenient and
relatively safe mode of dealing with sales of
goods to satisfy the seemingly irreconcilable
interests of a seller who refuses to part with his
goods before he is paid, and a buyer, who
wants to have control of his goods before
paying.
2. The three contracts involved in a letter
of credit transaction are to be maintained in a
state of perpetual separation.
3. The Independence Doctrine maintains
that a bank, in determining compliance with the
terms of a letter of credit is required to examine
only the shipping documents presented by the
seller and is precluded from determining
whether the main contract is actually
accomplished or not.
4. The Strict Compliance Doctrine
maintains that the documents tendered by the
seller or beneficiary must strictly conform to the
terms of the letter of credit.
5. The Fraud Exception maintains that
despite the banks unconditional obligation to
pay the seller upon presentation of the required
documents, the issuing bank is not bound to pay
when there has been fraud by the seller. The test
is whether, standing in the shoes of the paying
bank at the time of payment, the fraud was
clear and obvious. If [the] fraud was clear and
obvious, the bank pays the beneficiary at its
own peril and it is not entitled to
reimbursement. But if [the] fraud is not clear
and obvious, then it is not for a bank to
question why the parties involved had chosen
to conduct their business in any particular way.
TRUST RECEIPTS:
6. In all trust receipt transactions, both
obligations on the part of the (en) trustee exist
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in the alternative- the return of the proceeds of
the sale or the return or recovery of the goods,
whether raw or processed. When both parties
enter into an agreement knowing that the
return of the goods subject of the trust receipt is
not possible even without any fault on the part
of the trustee, it is not a trust receipt transaction;
the only obligation actually agreed upon by the
parties would be the return of the proceeds of
the sale transaction. This transaction becomes a
mere loan, where the borrower is obligated to
pay the bank the amount spent for the purchase
of the goods. (Land Bank of the Philippines v.
Lamberto C. Perez, et.al., G.R. No. 166884, 672
SCRA 117, June 13, 2012)
7. The loan feature of a trust receipt
transaction lies in the manner it facilitates the
importation or purchase of merchandise by the
extension of credit. The security feature of a
trust receipt lies in the fact that the imported or
purchased merchandise will serve as collateral
for the credit extended and that the obligation
of the entrustee is to deliver the proceeds of
their sale or return them if not sold.
NEGOTIABLE INSTRUMENTS LAW:
8. The requisites of a negotiable
instrument are: (a) It must be in writing, (b) It
must be signed by maker or drawer, (c) It must
contain an unconditional promise or order to
pay a sum certain in money, (d) It must be
payable on demand, or at a fixed or
determinable future time, (e) It must be payable
to order or to bearer, and (f) Where it is a bill
of exchange, drawee must be named or
otherwise indicated therein with reasonable
certainty.
9. The Fictitious Payee Rule applies when
the instrument is payable to the order of a
fictitious or non-existing person, the
instruments being payable to bearer depends
on the intention of the person making it so
payable. An actual, existing, and living payee
may also be fictitious if the drawer did not
intend for the payee in fact to receive the
proceeds of the check. If this is absent, the effect
is that the instrument cannot be considered as
payable to bearer.
10. Delivery means that the party
delivering did so for the purpose of giving effect
thereto. (San Miguel Corporation vs. Puzon, Jr.,
631 SCRA 48)

11. An accommodation party is one who
has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his
name to some other person. Such a person is
liable on the instrument to a holder for value,
notwithstanding such holder, at the time of
taking the instrument, knew him to be only an
accommodation party.
12. The effects of a forgery are: (a) The
instrument is not declared totally void nor are
the genuine signatures thereon rendered
inoperative. It is only the forged signature that
is declared inoperative. Hence: rights still exist
and may be enforced by virtue of the
instrument as between parties whose signatures
were not forged, and (b) A forged instrument
just prevents any subsequent party from
acquiring any rights as against any party whose
name appears prior to the forgery. There is no
right to retain the instrument, or to give
discharge or to enforce payment. However,
rights will exist and may be enforced as
between subsequent parties but no one can
acquire a right as against parties prior to the
forgery, who also have rights and may enforce
them as against each other.
13. A material alteration is any alteration
which changes: (a) The date (b) The sum
payable, either for principal or interest (c) The
time or place of payment (d) The number of the
relations of the parties (e) The medium or
currency in which payment is to be made (f) Or
which adds a place of payment where no place
of payment is specified, or any other change or
addition which alters the effect of the
instrument in any respect. Where a negotiable
instrument is materially altered without the
assent of all parties liable thereon, it is avoided,
except as against a party who has himself made,
authorized, or assented to the alteration and
subsequent indorsers.
14. A holder in due course is a holder who
has taken the instrument under the following
conditions:(a)That it is complete and regular
upon its face;(b)That he became the holder of
it before it was overdue, and without notice
that it had been previously dishonored, if such
was the fact; (c) That he took it in good faith
and for value; (d)That at the time it was
negotiated to him he had no notice of any
infirmity in the instrument or defect in the title
of the person negotiating it.
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15. The Shelter Rule maintains that a holder
who is not a holder in due course, and who
himself is not a party to any fraud or illegality
affecting the instrument, has all the rights of
such former holder in respect of all parties prior
to the latter.
16. Clearing should not be confused with
acceptance. Managers and Cashiers checks are
still the subject of clearing to ensure that the
same have not been materially altered or
otherwise completely counterfeited.
(Metropolitan Bank and Trust Company v.
Chiok, G.R. No. 175394, November 26, 2014)
17. The act of crossing a check serves as a
warning to the holder that the check has been
issued for a definite purpose so that the holder
thereof must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a
holder in due course. (Dino vs. Judal-Loot, 618
SCRA 393)
18. An instrument is discharged by: (a)
payment in due course by or behalf of the
principal debtor, (b) payment in due course by
the party accommodated, where the instrument
is made or accepted for his accommodation, (c)
by intentional cancellation by the holder, (d)
any other act that will discharge a simple
contract for the payment of money, and (e)
when the principal debtor becomes the holder
of the instrument at or after maturity in his own
right.
INSURANCE:
19. The concept of insurance is that the
premiums that are paid are accumulated in a
pool from which payment of claims are to be
obtained. As a basis, it is assumed that the
people contributing premiums are in excess of
those making claims resulting in a larger pool of
money than the amounts being claimed.
20. Insurable interest will exist when the
insured has such a relation or connection with,
or concern in, such subject matter that he will
derive pecuniary benefit or advantage from its
preservation or will suffer pecuniary loss or
damage from its destruction, termination, or
injury by the happening of the event insured
against.
21. Any unknown or contingent event,
whether past or future, which may damnify a
person having insurable interest or create a
liability against him may be insured against. On
the other hand, insurance for or against the

drawing of any lottery or for or against any
chance or ticket in a lottery drawing a prize
cannot be acquired.
22. The Incontestability Clause is a clause in
a life insurance policy that is (a) payable on the
death of the insured, and (b) which has been in
force during the lifetime of the insured for a
period of 2 years from the date of issue or its
last reinstatement that would prevent the
insurer from proving that the policy is void ab
initio or is subject to rescission by reason of a
fraudulent concealment or misrepresentation of
the insured or his agent.
23. The right of subrogation is not
dependent upon, nor does it grow out of, any
privity of contract-it accrues simply upon
payment by the insurance company of the
insurance claim. (Keppel Cebu Shipyard, Inc. vs.
Pioneer Insurance and Surety Corporation, 601
SCRA 96)
24. There is no subrogation when: (a) the
insured by his own act releases the party at fault
from liability, (b) when the insurer pays the
insured without notifying the carrier who has in
good faith settled the insureds claim for loss, (c)
when the insurer pays for a loss excepted from
the policy, and (d) in life insurance.
25. A CBA provision providing for an
MMPC obligation to pay for the medical
expenses of MMPSEU dependents was
considered as a non- life insurance contract and
interpreted as a contract of indemnity. This
interpretation barred the application of the
collateral source rule, which disallows a
wrongdoer from claiming a benefit arising from
a contract which the injured party may have
with third persons to lessen his liability. In this
case, MMPC is not the wrongdoer, rather, it is
a no-fault insurer. (Mitsubishi Motors
Philippines Salaried Employees Union v.
Mitsubishi Motors Philippines Corporation,
G.R. No. 175773, June 17, 2013)
26. Suicide is generally not compensable
unless committed after the policy has been in
force for a period of two years from date of
issue or last reinstatement or a shorter period if
provided, or if committed in a state of insanity.
27. To prevent a life insurance policy from
lapsing, the following devices are used: (a)
grace period, (b) automatic policy loan, (c)
paid-up insurance, (d) reinstatement.
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28. Double insurance exists where the same
person is insured by several insurers separately
in respect to same subject and interest. Over
insurance occurs when property is insured for
an amount in excess of its value.
29. A health care agreement is in the nature
of non-life insurance, which is primarily a
contract of indemnity. Once the member incurs
hospital, medical or any other expense arising
from sickness, injury or other stipulated
contingent, the health care provider must pay
for the same to the extent agreed upon under
the contract. (Fortune Medicare, Inc. v. David
Robert U. Amorin, G.R. No. 195872, March
12, 2014)
TRANSPORTATION:
30. Since the business and operation of a
public utility is imbued with public interest, it
must submit to government regulation and
surrender certain business prerogatives,
including determining the amount of rates that
they can charge as the State must protect the
public whenever too much profits become the
priority of public utilities.
31. Certificate of Public Convenience (CPC)
and Certificate of Public Convenience and
Necessity (CPCN) are distinguished as follows:
A certificate of public convenience is any
authorization to operate public service issued
by the Public Service Commission for which no
franchise, either municipal or legislative, is
required by law. The certificate of public
convenience and necessity requires a franchise
issued by the legislative department.
32. The Prior Operator Rule contemplates
that the first licensee will be protected in his
investment and will not be subjected to ruinous
competition. It is not therefore, the policy of
the law for the Public Service Commission to
issue a certificate of public convenience to a
second operator when a prior operator is
rendering sufficient, adequate and satisfactory
service, and who in all things and respects is
complying with the rules and regulations of the
Commission.
33. The Prior Applicant Rule contemplates
a situation where two interested persons apply
for a Certificate of Public Convenience in the
same locality over which no person has of yet
been granted a Certificate of Public
Convenience, if both applications being equal,
the one who first applied will be preferred

34. A contract of carriage of goods
commences from the time the goods are
unconditionally placed in the possession of, and
received by the carrier for transportation until
the same shall have been delivered actually or
constructively by the carrier to the consignee
who has the right to receive them.
35. A contract of carriage of passengers
commences from the time the person who
purchases the ticket from the carrier presents
himself at the proper place and in a proper
manner to be transported. This is when the
contract of carriage is perfected. The
relationship will not terminate until the
passenger has, after reaching his destination,
safely alighted from the carriers conveyance or
has had a reasonable opportunity to leave the
carriers premises.
36. Loss of earning capacity may be granted
even if the deceased passenger may only be an
unemployed high school student at the time of
the accident. The basis of the computation of
the earning capacity of the deceased was the
minimum wage in effect at the time of his death,
not reckoned from his age of 15 years at the
time of death, but on 21 years, his age when he
would have graduated from college. (Spouses
Teodoro and Nannette Perena v. Spouses
Nicolas and Teresita L. Zarate, Philippine
National Railways, and the Court of Appeals,
G.R. No. 157917, August 29, 2012)
37. Passengers Baggage is deemed to
include whatever articles a passenger usually
takes with him for his own personal use,
comfort and convenience according to the
habits or wants of the particular class to which
he belongs, either with reference to his
immediate necessities or the ultimate purpose of
his journey. Baggage may be hand-carried or
checked-in or is delivered to the carrier. Check-
in baggage is treated as cargo, while hand-
carried baggage is treated as necessary deposit.
38. A bill of lading may be defined as a
written acknowledgment of the receipt of
goods and an agreement to transport and to
deliver them at a specified place to a person
named or on his order. It comprehends all
methods of transportation. The nature of a Bill
of Lading is that it: (a) is a contract in itself and
the parties are bound by its terms (b) is a receipt
(c) is a symbol of the goods covered by it.
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39. A claim for damage for goods covered
by a bill of lading should be brought within 24
hours following the receipt of the merchandise
on account of damage or average found therein
on opening the packages, provided that the
signs of the damage or average giving rise to the
claim may not be known from the exterior part
of the packages, and in case that they may be
so ascertained, said claim shall only be admitted
at the time of the receipt of the packages.
40. The Limited Liability Rule is based on
the real and hypothecary nature of maritime
law and its effect is that the vessel serves as the
guarantee for the settlement for obligations
under maritime contracts. Subject to certain
exceptions, if the vessel is lost or is abandoned
in favor of creditors, the obligations of the ship
captain and the ship agent will be extinguished,
as their liability is limited to the res or the vessel.
41. The exceptions to the doctrine of
limited liability: (a) where the ship owner is at
fault or is due to the concurring negligence of
the ship owner and captain as the doctrine is
premised on the condition that the death or
injury to the passenger occurred by reason of
the fault or negligence of the captain only (b) in
cases of Workmens Compensation as such
compensation has nothing to do with maritime
commerce, it is an item in the cost of production
which must be included in the budget of nay
well-managed industry (c) when the vessel is
insured (d) Total destruction of the vessel does
not affect the liability of the owner for repairs
on the vessel completed before its loss as
owners of a vessel are liable for necessary
repairs and it shall remain unaffected by the loss
of the thing.
42. COGSA applies to all contracts
for the carriage of goods by sea to and from
Philippine in foreign trade. Note that the
transhipment of the cargo in the Philippines via
a domestic inter-island vessel will not remove it
from the application of COGSA. A paramount
clause will allow the application of COGSA
even if the transportation is domestic.
PRIVATE CORPORATIONS:
43. A corporation commences to
have existence from the issuance by the SEC of
a certificate of incorporation under its official
seal. The effect of which is to constitute its
stockholders or members and their successors as

a Body Politic and Corporate under the name
and for the term stated in the Articles. It is said
to have been given de jure existence or can be
said to be incorporated. The exception is a
Corporation Sole, which is deemed
incorporated upon filing of its Articles.
44. The general capacity theory
maintains that a corporation is said to hold such
powers as are not prohibited or withheld from
it by general law. The specific capacity theory
maintains that the corporation cannot exercise
powers except those expressly/impliedly given.
45. The Doctrine of Separate Legal
Entity holds that a corporation has a personality
separate and distinct from its individual
stockholders or members. This affects liability
for acts or contracts, right to bring actions,
acquisition of property, and changes in the
identity of stockholders or members.
46. Tort liability can be imposed on
a corporation because generally speaking, the
rules governing liability of a principal or master
for a tort committed by an agent or servant are
the same whether the principal or master be a
natural person or a corporation. Hence, when
a tortuous act is committed by an officer or
agent of a corporation under express direction
or authority of the corporation, it would be
liable.
47. As a general rule, nationality is
determined by place of incorporation. The
control test as a means of determining
nationality looks at the nationality of the
stockholders or members of the corporation.
The grandfather test as a means of
determining nationality looks at the percentage
of foreign holdings in a corporation which is a
stockholder in a Filipino corporation to
determine whether or not the percentage
requirement of Filipino ownership has been
met. Where the 60-40 Filipino-foreign equity
ownership is not in doubt, the Grandfather Rule
will not apply. (Narra Nickel Mining and
Development Corp., Tesoro Mining and
Development, Inc., and McArthur Mining, Inc.
vs. Redmont Consolidated Mines Corp., G.R.
No. 195580, April 21, 2014)
48. The Business Judgment Rule
maintains that questions of policy or of
management are left solely to the honest
decisions of officers and directors of a
corporation, and so long as they are in good
faith, their orders are not reviewable by courts.
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49. Dividend declaration is
generally discretionary but becomes mandatory
when its surplus profits are in excess of 100% of
paid in capital stock. However, the mandatory
character shall not obtain: (a) when justified by
definite corporate expansion projects or
programs approved by the Board (b) when it is
prohibited by a loan agreement with any
financial institution or creditor from declaring
dividends without its consent and the consent is
not yet obtained (c) when it can be shown that
such retention is necessary under special
circumstances obtaining in the corporation, as
there is a need for a special reserve for probable
contingencies.
50. Ultra Vires acts are acts that are
in violation of the Code as it provides that: no
corporation shall possess or exercise corporate
powers except those conferred by the code, its
Articles and except as such are necessary or
incidental to the exercise of the powers so
conferred.
51. The Trust Fund Doctrine
maintains that the subscribed capital stock of the
corporation is a trust fund for the payment of
the debts of the corporation which the creditors
have the right to look up to satisfy their credits,
and which the corporation may not dissipate.
52. A derivative suit is an action brought by
a stockholder on behalf of the corporation to
enforce corporate rights against the
corporations directors, officers or other
insiders. The directors or officers, as provided
under the bylaws, have the right to decide
whether or not a corporation should sue.
Stockholders are permitted by law to bring an
action in the name of the corporation to hold
these directors and officers accountable. In
derivative suits, the real party in interest is the
corporation, while the stockholder is a mere
nominal party. (Juanito Ang, for and in behalf
of Sunrise Marketing (Bacolod), Inc. v. Sps.
Roberto and Rachel Ang, G.R. No. 201675,
June 19, 2013)
53. The requisites of a derivative
suit are: (a) the party bringing the suit should be
a shareholder as of the time of the act or
transaction complained of, the number of his
shares not being material, (b) he has tried to
exhaust intra-corporate remedies, and (c) the
cause of action actually devolves on the
corporation, the wrongdoing or harm having
been caused the corporation, and not the

particular stockholder bringing the suit.
54. Solidary liability is imposed on
a director, trustee or officer when: (a) He
willfully and knowingly votes for and assents to
a patently unlawful act of the corporation; (b)
There is gross negligence or bad faith in
directing the affairs of the corporation; (c) He
acquires any personal or pecuniary interest in
conflict of duty; (d) He agrees or stipulates in a
contract to hold himself liable with the
corporation; or (e) A specific provision of law
requires it.
55. The Special Fact Doctrine
maintains that a corporate officer with superior
knowledge gained by virtue of being an insider
owes a limited fiduciary duty to a shareholder
in transactions involving transfer of stock.
56. The Doctrine of Apparent Authority
maintains that a corporation will be estopped
from denying the agents authority if it
knowingly permits one of its officers or any
other agent to act within the scope of an
apparent authority, and it holds him out to the
public as possessing the power to do those acts.
The doctrine of apparent authority does not
apply if the principal did not commit any acts
or conduct which a third party knew and relied
upon in good faith as a result of the exercise of
reasonable prudence. Moreover, the agents
acts or conduct must have produced a change
of position to the third partys detriment.
(Advance Paper Corporation v. Arma Traders
Corporation, Manuel Ting, et. al., G.R. No.
176897, December 11, 2013)
57. In a sale of shares of stock, physical
delivery of a stock certificate is one of the
essential requisites for the transfer of ownership
of the stocks purchased. (Fil-Estate Gold and
Development, Inc., et. al. v. Vertex Sales and
Trading, Inc., G.R. No. 202079, June 10, 2013)
58. The purpose of the law in requiring that
a foreign corporation doing business in the
Philippines to be licensed is to subject it to the
jurisdiction of the courts. The object is not to
prevent foreign corporation from performing
single acts but to prevent it from acquiring a
domicile for the purpose of business without
taking steps necessary to render it amenable to
suits in local courts.
59. An unlicensed foreign corporation that
is not transacting or doing business in the
Philippines, can sue under: (a) The isolated
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business transaction rule, (b) A cause of action
that is independent of any business transaction,
(c) A cause of action that arises out of a business
transaction that is not entered into in the
Philippines, and (d) A cause of action to protect
its name, reputation or goodwill subject to the
rule on reciprocity under the IPR.
60. The NLRC was held to have jurisdiction
over the dismissal of an AVP for Sales, who was
also a stockholder, as he is not a corporate
officer whose dismissal is cognizable by the
RTC. A corporate officer was defined as one
who meets the following: (a) the creation of the
position is under the corporations charter or
by-laws; and (b) the election of the officer is by
the directors or the stockholders. (Cosare v.
Broadcom Asia, Inc, G.R. No. 201298, February
5, 2014)
61. Rehabilitation was defined as
restoration of the debtor to a position of
successful operation and solvency. A successful
rehabilitation depends on 2 factors: (a) positive
change in the business fortunes of the debtor,
and (b) the willingness of the creditors and
shareholders to arrive at a compromise
agreement on repayment and the extent of
dilution. (San Jose Timber Corporation v. SEC,
667 SCRA 13)
SECURITIES REGULATION CODE:
62. In general, securities are evidences of
investment in a common enterprise made with
the expectation of deriving a profit solely from
the efforts of others who acquire control over
the fund invested. As defined by law, they are
Shares, Participation or Interest (SPI) in a
Corporation or in a Commercial enterprise or
Profit-making venture (CCP) and evidenced by
a Certificate, Contract; Instrument, whether
written or electronic in character (CCI).
63. A Tender Offer is a public offer to
purchase a specified number of shares from
shareholders usually at a premium in an attempt
to gain control of the issuing company. Note
that in some instances, the premium is payable
only if the offeror is able to obtain the required
number of shares.
64. A Proxy Solicitation is an action to
secure the right to vote of so much a number of
shares to ensure the approval of a proposed
corporate action.

65. Security price manipulation is an
artificial control of security prices. It is an
attempt to force securities to sell at prices either
above or below those which would exist as a
result of the normal operations of supply and
demand. The manipulator hopes to profit by
creating fictitious prices at the expense of the
general trading public.
66. A Wash Sale is a fictitious kind of sale,
disallowed on stock and other exchanges, in
which a broker who has received orders from
one person to buy and from another person to
sell a particular amount of quantity of some
particular stock or commodity simply transfers
the stock or commodity from one principal to
the other and pockets the difference, instead of
executing both orders separately to the best
advantage in each case, as is required by the
rules of the different exchanges. It may also be
defined as purchase or sale of securities which
would involve no change of ownership.
67. Insider Trading occurs when an insider
sells or buys a security of the issuer, while in
possession of material information with respect
to the issuer or the security that is not generally
available to the public.
CENTRAL BANK ACT:
68. Open Market Operations has been
defined as the act of the Bangko Sentral ng
Pilipinas in publicly buying or selling
government securities from (or to) banks and
financial institutions. The purpose is to regulate
the supply of money in the economy to
influence the timing, cost and availability of
money and credit. (Bank of Commerce v.
Planters Development Bank, 681 SCRA 521)
69. A bank in distress shall be placed in
conservatorship for a period not exceeding one
year when it is in a state of continuing inability
or unwillingness to maintain a condition of
liquidity deemed adequate to protect the
interest of depositors and creditors.
70. Receivership is defined as the summary
closure of a bank without prior notice and
hearing after a finding that the continuance in
business will involve probable loss to its
depositors and creditors.
71. The Close Now, Hear Later policy
maintains that prior notice and hearing is not
required before placement of a bank under
receivership.
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GENERAL BANKING ACT:
72. As to nature, all kinds of deposits
whether fixed or current are to be treated as
loans and are to be covered by the law on loan.
73. A bank should exercise its functions and
treat the accounts of their clients not only with
the diligence of a good father of a family but it
should do so with the highest degree of care
considering the fiduciary nature of their
relationships with their depositors.
74. Where the banks negligence is the
proximate cause of the loss and the depositor is
guilty of contributory negligence, damages are
allocated between the bank and depositor on a
60-40 ratio. (PNB v. FF Cruz & Co., 654 SCRA
333)
75. Single Borrower Limit Rules regulate the
total amount of loans, credit accommodations
and guarantees that may be extended by a bank
to any person, partnership, association,
corporation or other entity. The rules seek to
protect a bank from making excessive loans to
a single borrower by prohibiting it from lending
beyond a specified ceiling. The current limit is
25% of the net worth of the bank concerned.
The ceiling is subject to possible increase by an
additional 10% provided the additional
liabilities of any borrower are adequately
secured by trust receipts, shipping documents,
warehouse receipts or other similar documents
transferring or securing title covering readily
marketable, non-perishable goods which must
be fully covered by insurance.
76. DOSRI Rules are rules promulgated by
the BSP, upon the authority of Section 36 of the
GBL, which regulate the amount of credit
accommodations that a bank may extend to its
directors, officers, stockholders and their related
interests, thus the term, DOSRI. Generally, a
banks credit accommodations to its DOSRI
must be in the regular course of business and on
terms not less favorable to the bank than those
offered to non-DOSRI borrowers.
LAW ON BANK SECRECY:
77. The prohibited acts are: (a) The
examination or inquiry or looking into all
deposits of whatever nature with banks or
banking institutions in the Philippines, including
investment in bonds issued by the government
or its political subdivisions and instrumentalities
by any person, government official, bureau or

office, and (b) The disclosure by any official or
employee of any banking institution to any
unauthorized person of any information
concerning said deposit.
78. If the money deposited under an
account may be used by the bank for authorized
loans to third persons, then such account,
regardless of whether it creates a creditor-
debtor relationship between the depositor and
the bank, the account would be covered the
law on bank secrecy.
79. The Supreme Court recognized that the
demands of justice correct a wrong committed
to a girl of tender years were above the need
for the foreign offender's dollars, allowing the
looking into, and in fact garnishing the foreign
currency deposit of the transient foreigner, to
enforce payment of the indemnity due.
(Salvacion v. Central Bank, GR No. 94723,
August 18, 1997)
80. The Supreme Court also allowed an
inquiry into a foreign currency deposit to settle
the real ownership of the funds. Though pro
hac vice or this one particular reason, the ruling
was clear that the "allowance of the inquiry
would be in accord with the rudiments of fair
play and the upholding of fairness in our judicial
system." (China Banking Corp. v. Court of
Appeals, GR No. 140487, December 18, 2006)
INTELLECTUAL PROPERTY:
81. Copyrights, trademarks and patents are
completely distinct and separate from one
another and the protection afforded by one
cannot be used interchangeably to cover items
or works that exclusively pertain to the others.
(Pearl & Dean Phils. Inc. v. Shoemart, Inc., 409
SCRA 231)
82. While the Intellectual Property Code
does not explicitly provide for the No
Formality Rule, we follow the mandate of
Article 5 (2) of the Berne Convention which
provides that: The enjoyment and the exercise
of these rights shall not be subject to any
formality. A formality is any condition on
which the existence or exercise of the right
depends. While registration, fees and deposit of
copies are formalities, they will be considered
as such only when the existence of the copyright
or exercise of attendant rights depends on
compliance.
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83. Copyright is the protection afforded
literary and artistic works which are original
intellectual creations in the literary and artistic
domain from the moment of their creation.
84. Ideas are not entitled to copyright
protection, what is entitled to protection is the
expression of the idea. This means that the
copyright does not preclude others: (a) from
using information revealed in the authors
work, or (b) creating works based on the same
underlying idea.
85. Fair Use is a privilege granted
enjoyed by one other than the owner of the
copyright to use the copyrighted material in a
reasonable manner without his consent,
notwithstanding the monopoly of the owner of
the copyright.
86. A patent is the protection afforded to
an invention. For the invention to be
patentable, it must refer to a technical solution
of a problem in any field of human activity,
which is new, involves an inventive step and is
industrially applicable.
87. An industrial design is any composition
of lines or colors or any three-dimensional
form, whether or not associated with lines or
colors provided that such composition or forms
gives a special appearance to and can serve as
pattern for an industrial product or handicraft.
This is purely ornamental or aesthetic in nature
as opposed to useful or functional. If it is an
industrial design, the patent duration is 5 years
from the filing date of the application,
renewable for not more than 2 consecutive
periods of 5 years each.
88. 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, of process, or an
improvement. Essentially, a utility model refers
to an invention in the mechanical field that has
some type of usefulness. If it is utility model, the
patent duration is 7 years from date of the filing
of the application without renewal.
89. The Doctrine of Equivalents
maintains 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.
90. A trademark is any visible sign capable
of distinguishing the goods or services of an
enterprise and shall include a stamped or
marked container of goods.
91. A tradename refers to the name or
designation identifying an enterprise.
92. The Doctrine of Secondary Meaning
maintains that a word or phrase incapable of
exclusive appropriation with reference to an
article in the market because it is merely
geographical or descriptive, might nevertheless
have been used so long and so exclusively by
one producer with reference to his article that,
in that trade and to that branch of the
purchasing public, the word or the phrase has
come to mean his product.
93. Infringement and Unfair competition is
distinguished as follows: (a) infringement is the
unauthorized use of a trademark, whereas
unfair competition is the passing off of ones
goods as those of another, (b) In infringement,
fraudulent intent is unnecessary, whereas in
unfair competition, fraudulent intent is
essential, and (c) In infringement, prior
registration is a prerequisite to an action,
whereas in unfair competition, registration is
not necessary.
ANTI-MONEY LAUNDERING LAW:
94. Money Laundering is the process by
which a person conceals the existence of
unlawfully obtained money and makes it
appear to have originated from lawful sources.
95. A Covered Institution refers to (a)
Banks, Non-Banks, Quasi-Banks, Trust Entities,
and all other institutions and their subsidiaries
and affiliates supervised by the BSP (b)
Insurance Companies and all other institutions
supervised by the Insurance Commission (c)
Security Dealers, brokers, salesmen, investment
houses and other similar entities managing
securities or rendering services as an investment
agent, advisor, or consultant supervised or
regulated by the SEC (d) mutual funds, closed
end investment companies, common trust
funds, pre-need companies, and other similar
entities (e) foreign exchange corporations,
money changers, money payment, remittance
and transfer companies and other similar
entities, and (f) other entities administering or
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otherwise dealing in currency, commodities, or
financial derivatives based thereon, valuable
objects, cash substitutes and other similar
monetary instruments or properties supervised
or regulated by the SEC.
96. A covered transaction is a transaction in
cash or other equivalent monetary instrument
involving a total amount in excess of Five
Hundred Thousand Pesos (PHP500, 000.00)
within one banking day.
97. A Suspicious transaction is a transaction
with a covered institution, regardless of the
amounts involved, where any of the following
circumstances exist: (a)There is no underlying
legal or trade obligation, purpose or economic
justification, (b)The client is not properly
identified, (c) The amount involved is not
commensurate with the business or financial
capacity of the client, (d) Taking into account
all known circumstances, it may be perceived
that the clients transaction is structured in order
to avoid being the subject of reporting
requirements under the Act, (e) Any
circumstance relating to the transaction which is
observed to deviate from the profile of the
client and/or the clients past transactions with
the covered institution, (f) 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 (g) Any
transaction that is similar or analogous to any
of the foregoing.
FOREIGN INVESTMENTS ACT:
98. A foreign investment is an equity
investment made by non-Philippine national in
the form of foreign exchange and/or other
assets actually transferred to the Philippines and
duly registered with the Central Bank which
shall assess and appraise the value of such assets
other than foreign exchange.
99. A foreign investment can be put in: (a)
An export enterprise which is an
enterprise wherein a manufacturer, processor or
service (including tourism) enterprise exports
sixty percent (60%) or more of its output, or
wherein a trader purchase products
domestically and exports sixty percent (60%)
or more of such purchases, or (b) A
domestic market enterprise which is an
enterprise which produces goods for sale, or
renders services to the domestic market entirely
or if exporting a portion of its output fails to
consistency export at least 60% thereof.
 Green Notes 2016
Mercantile Law
Prepared by: Atty. Renato S. Rondez

100. Any non-Philippine national or entity

may do business in the Philippines up to 100%
of its capital provided: (a) It is doing
business as a domestic market enterprise outside
the Negative List (b) It is doing business as an
export enterprise whose products or services do
not fall within Negative Lists A and B, except
for defense-related activities, which may be
approved or authorized, and (c) Provided
further that, as required by existing laws, the
country or state of the applicant must allow
Filipino citizens and corporations to do business
therein.

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