Balmes a Survey of Recent Supreme Court Decisions in Commercial Law

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A SURVEY OF RECENT SUPREME COURT DECISIONS IN COMMERCIAL LAW Compiled By: Prof. Erickson H. Balmes METROBANK vs. BOARD OF TRUSTEES of RIVERSIDE of RIVERSIDE MILLS CORPORATION, G.R. 176959, Sept. 8, 2010 – 2010 – Corporation Law Facts:

In 1973, RMC established a Provident and Retirement Plan (Plan) for its regular employees. Paragraph 13 of the Plan likewise provided that “… In no event shall any part of the assets of the Fund revert to [RMC] before all liabilities of the of the Plan have been satisfied.” RMCPRF entered into an investment agreement with PhilBank (now MetroBank). However, 9 years after RM closed, and PhilBank (MetroBank) had decided to apply the remaining trust assets held by it in the name of RMCPRF of RMCPRF against part of the of the outstanding obligations of RMC of RMC contrary to Par. 13 of the Plan. Respondents sought to nullify the reversion and application of the proceeds of the Fund to the outstanding obligation of RMC of RMC to petitioner bank. In 1998, the Board of RMC of RMC issued a resolution declaring the funds to belong to RMCPRF. RTC and CA ruled to nullify the reversion and application of the of the proceeds of the of the Fund. PhilBank contends that the cessation of RMC’s of RMC’s operations ended not only the Board members’ employment in RMC, but also their tenure as members of the of the RMCPRF Board of Trustees. of Trustees. Issue:

Whether or not the proceeds of the of the RMCPRF may be applied to satisfy RMC’s debt to Philbank (MetroBank). Held:

NO.

Under Section 122 of the of the Corporation Code, a dissolved corporation shall nevertheless continue as a body corporate for three (3) years for the purpose of prosecuting of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. Within those three (3) years, the corporation may appoint a trustee or receiver who shall carry out the said purposes beyond the three (3)‐year winding‐up period. Thus, a

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trustee of a dissolved corporation may commence a suit which can proceed to final judgment even beyond the three (3)‐year period of liquidation. of liquidation. In the same manner, during and beyond the three (3)‐year winding‐up period of RMC, the Board of Trustees of Trustees of RMCPRF of RMCPRF may do no more than settle and close the affairs of the of the Fund. The Board retains its authority to act on behalf of behalf of its its members, albeit, in a limited capacity. It may commence suits on behalf of behalf of its its members but not continue managing the Fund for purposes of maximizing profits. Here, the Board’s act of issuing the Resolution authorizing petitioner to release the Fund to its beneficiaries is still part of the of the liquidation process, that is, satisfaction of the liabilities of the of the Plan, and does not amount to doing business. Hence, it was properly within the Board’s power to promulgate. AIR FRANCE vs. GILLEGO, G.R. No. 165266, December 15, 2010 ‐ Transportation Law Facts:

Respondent Bonifacio H. Gillego, then incumbent Congressman of the Second District of Sorsogon and Chairman of the House of Representatives Committee on Civil, Political and Human Rights, was invited to participate as one of the keynote speakers at the 89th Inter‐ Parliamentary ConferenceSymposium on Parliament Guardian of Human Rights to be held in Budapest, Hungary and Tokyo, Japan from May 19 to 22, 1993. On May 16, 1993, respondent left Manila on board petitioner Air France’s aircraft bound for Paris, France. He arrived in Paris early morning of May 17, 1993(5:00 a.m.). While waiting at the De’ Gaulle International Airport for his connecting flight to Budapest scheduled at 3:15 p.m. that same day, respondent learned that petitioner had another aircraft bound for Budapest with an earlier departure time (10:00 a.m.) than his scheduled flight. He then went to petitioner’s counter at the airport and made arrangements for the change in his booking . However, upon arriving in Budapest, respondent was unable to locate his luggage at the claiming section. He sought assistance from petitioner’s counter at the airport where petitioner’s representative verified from their computer that he had indeed a checked‐in luggage. He was advised to just wait for his luggage at his hotel and that petitioner’s representatives would take charge of delivering the same to him that same day. But said luggage was never delivered by petitioner’s representatives despite follow‐up inquiries by respondent. Upon his return to the Philippines, respondent’s lawyer immediately wrote petitioner’s Station Manager complaining about the lost luggage and the resulting damages he suffered while in Budapest. Respondent claimed that his single luggage contained his personal effects such as clothes, toiletries, medicines for his hypertension, and the speeches he had prepared, including the notes and reference materials he needed for the conference.

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On July 13, 1993, respondent filed a complaint for damages against the petitioner alleging that by reason of its negligence and breach of obligation to transport and deliver his luggage, respondent suffered inconvenience, serious anxiety, physical suffering and sleepless nights. It was further alleged that due to the physical, mental and emotional strain resulting from the loss of his luggage, aggravated by the fact that he failed to take his regular medication, respondent had to be taken to a medical clinic in Tokyo, Japan for emergency treatment. Petitioner filed its answer admitting that respondent was issued tickets for the flights mentioned, his subsequent request to be transferred to another flight while at the Paris airport and the loss of his checked‐in luggage upon arrival at Budapest, which luggage has not been retrieved to date and the respondent’s repeated follow‐ups ignored. However, as to the rest of respondent’s allegations, petitioner said it has no knowledge and information sufficient to form a belief as to their truth. As special and affirmative defense, petitioner contended that its liability for lost checked‐in baggage is governed by the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage which provides that petitioner’s liability for lost or delayed registered baggage of respondent is limited to 250 francs per kilogram or US$20.00, which constitutes liquidated damages and hence respondent is not entitled to any further damage. The trial court found there was gross negligence on the part of petitioner which failed to retrieve respondent’s checked‐in luggage up to the time of the filing of the complaint and as admitted in its answer, ignored respondent’s repeated follow‐ups. It likewise found petitioner guilty of willful misconduct as it persistently disregarded the rights of respondent who was no ordinary individual but a high government official. As to the applicability of the of the limited liability for lost baggage under the Warsaw Convention, the trial court rejected the argument of petitioner citing the case of Alitalia of Alitalia v. Intermediate Appellate Court Petitioner appealed to the CA, which affirmed the trial court’s decision. Issue:

WHETHER OR NOT THERE IS NO LEGAL AND FACTUAL BASIS TO THE FINDINGS OF THE TRIAL COURT AND THE COURT OF APPEALS THAT PETITIONER’S ACTIONS WERE ATTENDED BY GROSS NEGLIGENCE, BAD FAITH AND WILLFUL MISCONDUCT AND THAT IT ACTED IN A WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER, TO JUSTIFY THE AWARD OF MORAL AND EXEMPLARY DAMAGES. Held:

YES.

A business intended to serve the travelling public primarily, a contract of carriage is imbued with public interest. The law governing common carriers consequently imposes an exacting standard. Article 1735 of the Civil Code provides that in case of lost or damaged goods, 3



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common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required by Article 1733. Thus, in an action based on a breach of contract of contract of carriage, of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the of the contract and the fact of its of its non‐performance by the carrier. That respondent’s checked‐in luggage was not found upon arrival at his destination and was not returned to him until about two years later is not disputed. The action filed by the respondent is founded on such breach of the contract of carriage with petitioner who offered no satisfactory explanation for the unreasonable delay in the delivery of respondent’s of respondent’s baggage. The presumption of negligence was not overcome by the petitioner and hence its liability for the delay was sufficiently established. After a careful review, we find that petitioner is liable for moral damages. We hold that the trial and appellate courts did not err in finding that petitioner acted in bad faith in repeatedly ignoring respondent’s follow‐up calls. The alleged entries in the PIR deserve scant consideration, as these have not been properly identified or authenticated by the airline station representative in Budapest who initiated and inputed the said entries. Furthermore, this Court cannot accept the convenient excuse given by petitioner that respondent should be faulted in allegedly not giving his hotel address and telephone number. It is difficult to believe that respondent, who had just had just lost his single luggage containing all his necessities for his stay in a foreign land and his reference materials for a speaking engagement, would not give an information so vital such as his hotel address and contact number to the airline counter where he had promptly and frantically filed his complaint. And even assuming arguendo that his Philippine address and contact number were the only details respondent had provided for the PIR, still there was no explanation as to why petitioner never communicated with respondents concerning his lost baggage long after respondent had already returned to the Philippines. While the missing luggage was eventually recovered, it was returned to respondent only after the trial of this of this case. While respondent failed to cite any act of discourtesy, discrimination or rudeness by petitioner’s employees, this did not make his loss and moral suffering insignificant and less deserving of compensation. In repeatedly ignoring respondent’s inquiries, petitioner’s employees exhibited an indifferent attitude without due regard for the inconvenience and anxiety he experienced after realizing that his luggage was missing. Petitioner was thus guilty of bad faith in breaching its contract of carriage with the respondent, which entitles the latter to the award of moral of moral damages. However, we agree with petitioner that the sum of P1,000,000.00 of P1,000,000.00 awarded by the trial court is excessive and not proportionate to the loss or suffering inflicted on the passenger under the circumstances. Whereas in this case the air carrier failed to act timely on the passenger’s 4



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predicament caused by its employees’ mistake and more than ordinary inadvertence or inattention, and the passenger failed to show any act of arrogance, discourtesy or rudeness committed by the air carrier’s employees, the amounts of P200,000.00, P50,000.00 and P30,000.00 as moral damages, exemplary damages and attorney’s fees would be sufficient and justified. BANK OF THE PHILIPPINE ISLANDS vs. SHEMBERG BIOTECH CORPORATION and BENSON DAKAY, G.R. No. 162291, August 11, 2010 – 2010 – Banking Laws Facts:

Respondent Shemberg Biotech Corporation (SBC), a domestic corporation which manufactures carrageenan from seaweeds, filed a petition for the approval of its rehabilitation plan and appointment of a rehabilitation receiver before the RTC. The RTC issued a stay order, and petitioner Bank of the of the Philippine Islands (BPI) filed its opposition to SBC’s petition. After initial hearings, the RTC issued the assailed October 12, 2001 Order which gave due course to SBC’s petition; referred the rehabilitation plan to the Rehabilitation Receiver for evaluation; ordered the Rehabilitation Receiver to submit his recommendation; recalled the appointment of the first Rehabilitation Receiver; and appointed Atty. Pio Y. Go as new Rehabilitation Receiver. The RTC found that SBC complied with the conditions necessary to give due course to its petition for rehabilitation. The RTC was also satisfied of the merit of SBC’s petition and noted that SBC’s business appears viable since it has a market for its product. A sufficient breathing spell, according to the RTC, may help SBC settle its debts. The RTC further said that it will reflect on the issue raised by SBC’s creditors that the rehabilitation plan is not feasible, upon submission by the Rehabilitation Receiver of his of his recommendation. Consequently, BPI filed a petition for certiorari, prohibition and mandamus before the CA. In its assailed decision, the CA dismissed the petition. The CA ruled that the RTC’s Decision dated April 22, 2002 in Civil Case No. CEB‐26481‐SRC, which approved with modification SBC’s rehabilitation plan, rendered the petition moot. The CA also ruled that the issues raised against the rehabilitation plan should be raised in BPI’s appeal from the said RTC Decision. The CA found that the RTC did not commit an error or grave abuse of discretion of discretion in issuing the October 12, 2001 and December 26, 2001 Orders. BPI laments that the CA focused its discussion on the procedural matters, i.e., on the propriety of the of the petition for certiorari, rather than on the substantial and jurisdictional and jurisdictional issues raised. BPI also contends that the rehabilitation plan does not require “infusion of new of new capital from its guarantors and sureties” and that forcing creditors to transform their debt to equity amounts to taking private property without just compensation and due process of law. BPI further contends that the RTC exercised its rehabilitation power “whimsically, arbitrarily and despotically by eliminating penalties and reducing interests amounting to millions.” Such 5



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exercise of power, of power, BPI contends, also amounts to taking of property of property without just without just compensation and due process of law that could not be justified under the police power. BPI adds that the Interim Rules of Corporate Recovery is unconstitutional insofar as it alters or modifies and expands the existing law on rehabilitation contrary to the principle that rules of procedure cannot modify or affect substantive rights. Issue:

Is the Interim Rules of Procedure of Procedure on Corporate Rehabilitation unconstitutional? Held:

The Interim Rules of Procedure of Procedure on Corporate Rehabilitation is constitutional. On the question of the constitutionality of the Interim Rules of Procedure on Corporate Rehabilitation, BPI failed in its burden of clearly and unequivocally proving its assertion. Its failure to so prove defeats the challenge. We even note that BPI itself opposes itself opposes its own stand by invoking Section 27,Rule 4 of the Interim Rules to support its prayer that the rehabilitation proceedings be declared terminated. BPI also impliedly invoked the Interim Rules before the CA in seeking a modified rehabilitation plan considering that SBC’s petition for approval of its rehabilitation plan had been filed under the Interim Rules. In addition, the challenge on the constitutionality of the Interim Rules is a new and belated theory that we should not even entertain. It was not raised before the CA. Well settled is the rule that issues not previously ventilated cannot be raised for the first time on appeal. Relatedly, the constitutional question was not raised at the earliest opportunity. The rule is that when issues of constitutionality are raised, the Court can exercise its power of judicial of judicial review only if the following requisites are present: (1) the existence of an actual and appropriate case; (2) a personal and substantial interest of the party raising the constitutional question; (3) the exercise of judicial of judicial review is pleaded at the earliest possible opportunity; and (4) the constitutional question is the lis mota of the of the case. We cannot grant BPI’s prayer that the petition for rehabilitation be ordered dismissed and terminated. To dismiss the petition for rehabilitation would be to reverse improperly the final course of that of that petition: the petition was granted by the RTC; the RTC decision was affirmed with finality; and the rehabilitation plan is now being implemented. And while the Interim Rules and the new Rules of Procedure on Corporate Rehabilitation contain provisions on termination of the corporate rehabilitation proceedings, neither the RTC nor the CA ruled on this point. In fact, BPI did not ask the CA to terminate the rehabilitation proceedings. Aside from being another new issue, its resolution involves factual matters such as: (1) whether there was failure to achieve the desired targets or goals as set forth in the rehabilitation plan; (2) whether there was failure of the debtor (SBC) to perform its obligations under the plan; (3) whether the rehabilitation plan may no longer be implemented in accordance with its terms, conditions,

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restrictions or assumptions; or (4) whether there was successful implementation of the rehabilitation plan. We are not at liberty to consider these factual matters for the first time. RCJ BUS LINES, INCORPORATED vs. STANDARD INSURANCE COMPANY, INCORPORATED, G.R. No. 193629, August 17, 2011 – 2011 – Transportation Law Facts:

On 01 December 2000, respondent Standard Insurance Co., Inc. (STANDARD) filed an amended complaint against the petitioners Flor Bola Mangoba and RCJ Bus Lines, Inc. (docketed as Civil Case No. 153566‐CV before the Metropolitan Trial Court of Manila, Branch 29). Said amended complaint alleged, among others: On June 19, 1994 along the National Highway at Brgy. Amlang, Rosario, La Union, defendant Flor B. Mangoba while driving [sic] an RCJ HINO BLUE RIBBON PASSENGER BUS bearing Plate No. NYG‐363 in a reckless and imprudent manner, bumped and hit a 1991 Mitsubishi Lancer GLX bearing Plate No. TAJ‐796. The subject Mitsubishi Lancer which is owned by Rodelene Valentino was insured for loss and damage with plaintiff [Standard Insurance Co. Inc.] for P450,000.00, a photocopy of the insurance policy is attached hereto and made an integral part hereof as hereof as Annex ‘B.’ Defendant RCJ Bus Lines, Inc. is the registered owner of the Passenger Bus bearing Plate No. NYG‐363 while defendant Flor Mangoba was the driver of the subject Passenger Bus when the accident took place. As a direct and proximate cause of the of the vehicular accident, the Mitsubishi Lancer was extensively damaged, the costs of repairs of repairs of which of which were borne by the plaintiff [Standard plaintiff [Standard Insurance Co. Inc.] at a cost of P162,151.22. of P162,151.22. By virtue of the insurance contract, plaintiff [Standard Insurance Co. Inc.] paid Rodelene Valentino the amount of P162,151.22 of P162,151.22 for the repair of the of the Mitsubishi Lancer car. After plaintiff [Standard Insurance Co. Inc.] has complied with its obligation under the policy mentioned above, plaintiff’s assured executed in plaintiff’s favor a Release of Claim thereby subrogating the latter to all his rights of recovery of recovery on all claims, demands and rights of action of action on account of loss, damage or injury as a consequence of the accident from any person liable therefore. Despite demands, defendants have failed and refused and still continue to fail and refuse to reimburse plaintiff the sum of P162,151.22. A photocopy of the demand letter is attached hereto and made an integral part hereof as hereof as Annex ‘C.’

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As a consequence, plaintiff [Standard plaintiff [Standard Insurance Co. Inc.] has been compelled to resort to court action and thereby hire the services of counsel as well as incur expenses of litigation for all of which it should be indemnified by the defendant in the amount of at of at least P30,000.00. In order that it may serve as a deterrent for others and by way of example of example for the public good, defendants should be adjudged to pay plaintiff [Standard Insurance Co. Inc.] exemplary damages in the amount of P20,000.00.” of P20,000.00.” Issue:

Whether the Court of Appeals erroneously disregarded the point that petitioner RCJ’s defense of extraordinary diligence in the selection and supervision of its driver was made as an alternative defense? Held:

The petition has no merit. We see no reason to overturn the findings of the lower courts. We affirm the ruling of the of the appellate court. RCJ’s Liability

RCJ argues that its defense of extraordinary diligence in the selection and supervision of its employees is a mere alternative defense. RCJ’s initial claim was that Standard’s complaint failed to state a cause of action of action against RCJ. Standard may hold RCJ liable for two reasons, both of which of which rely upon facts uncontroverted by RCJ. One, RCJ is the registered owner of the bus driven by Mangoba. Two, RCJ is Mangoba’s employer. Standard’s allegation in its amended complaint that RCJ is the registered owner of the passenger bus with plate number NYG 363 was sufficient to state a cause of action of action against RCJ. The registered owner of a vehicle should be primarily responsible to the public for injuries caused while the vehicle is in use. The main aim of motor of motor vehicle registration is to identify the owner so that if any 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. Moreover, in its efforts to extricate itself from itself from liability, RCJ proffered the defense of the of the exercise of the diligence of a good father of a family. The MeTC characterized RCJ’s defense against negligence in this manner: To repel the idea of negligence, defendant [RCJ] bus company’s operations manager at the Laoag City Terminal was presented on the witness stand on January 5, 2000 in regard to the company’s seminars and dialogues with respect to its employees, and the absence of any record of a of a vehicular accident involving the co‐defendant driver [Mangoba]. As the last witness of defendant [RCJ] bus company, Noel Oalog, bus conductor who was allegedly seated to the 8



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right side of the of the bus driver during the incident, was presented on March 22, 2000. He confirmed on direct examination and cross examination that it was defendant’s bus, then running at 60‐75 [kph] and at a distance of 10 meters, which bumped a Mitsubishi Lancer without a tail light. According to him, the incident occurred when the driver of the Toyota Corolla, which was ahead of the Lancer, stepped on the brakes due to the pile of gravel and sand in sight (Subsequent to the proffer of exhibits, of exhibits, and in default of any of any rebuttal, the parties were directed to file the Memoranda within thirty days from March 23, 2000. RCJ, by presenting witnesses to testify on its exercise of diligence of diligence of a of a good father of a of a family in the selection and supervision of its bus drivers, admitted that Mangoba is its employee. Article 2180 of the of the Civil Code, in relation to Article 2176, makes the employer vicariously liable for the acts of its employees. When the employee causes damage due to his own negligence while performing his own duties, there arises the juris the juris tantum presumption that the employer is negligent, rebuttable only by proof of proof of observance of the diligence of a good father of a family. For failure to rebut such legal presumption of negligence in the selection and supervision of employees, the employer is likewise responsible for damages, the basis of the liability being the relationship of pater familias or on the employer’s own negligence. Mangoba, per testimony of his conductor, was ten meters away from the Mitsubishi Lancer before the collision and was driving 60 to 75 kilometers per hour when the speed limit was 50 kilometers per hour. The presumption under Article 2185 of the of the Civil Code was thus proven True:

Mangoba, as driver of the of the bus which collided with the Mitsubishi Lancer, was negligent since he violated a traffic regulation at the time of the mishap. We see no reason to depart from the findings of the of the MeTC, RTC and appellate court that Mangoba was negligent. TISON vs. Spouses POMASIN, G.R. No. 173180, August 24, 2011 – 2011 – Transportation Law Facts:

Two vehicles, a tractor‐trailer and a jitney, figured in a vehicular mishap along Maharlika Highway in Barangay Agos, Polangui, Albay last 12 August 1994. Laarni Pomasin (Laarni) was driving the jitney towards the direction of Legaspi City while the tractor‐trailer, driven by Claudio Jabon (Jabon), was traversing the opposite lane going towards Naga City. Gregorio Pomasin (Gregorio), Laarni’s father, was on board the jitney and seated on the passenger’s side. He testified that while the jitney was passing through a curve going downward, he saw a tractor‐trailer coming from the opposite direction and encroaching on the jitney’s lane. The jitney The jitney was hit by the tractor‐trailer and it was dragged further causing death and injuries to its passengers. On the other hand, Jabon recounted that while he was driving the tractor‐trailer, he noticed a jitney on the opposite lane falling off the off the shoulder of the of the road. Thereafter, it began running in a zigzag manner and heading towards the direction of the truck. To avoid collision, Jabon 9



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immediately swerved the tractor‐trailer to the right where it hit a tree and sacks of palay. Unfortunately, the jitney the jitney still hit the left fender of the of the tractor‐trailer before it was thrown a few meters away. The tractor‐trailer was likewise damaged. Multiple death and injuries to those in the jitney resulted On 14 November 1994, respondents filed a complaint for damages against petitioners before the Regional Trial Court (RTC) of Antipolo. They alleged that the proximate cause of the accident was the negligence, imprudence and carelessness of petitioners. Respondents prayed for indemnification for the heirs of those of those who perished in the accident at P50,000.00 each; P500,000.00 for hospitalization, medical and burial expenses; P350,000.00 for continuous hospitalization and medical expenses of Spouses Pomasin; P1,000,000.00 as moral damages; P250,000.00 as exemplary damages; P30,000.00 for loss of income of Cynthia; P100,000.00 as attorney’s fees plus P1,000.00 per court appearance; P50,000.00 for litigation expenses; and cost of suit of suit On 7 February 2000, the Regional Trial Court rendered judgment in favor of petitioners dismissing the complaint for damages. The trial court considered the testimony of Jabon regarding the incident more convincing and reliable than that of Gregorio’s, a mere passenger, whose observation and attention to the road is not as focused as that of the driver. The trial court concluded that Laarni caused the collision of the jitney and the tractor‐trailer. The trial court likewise upheld the Affidavit of Desistance of Desistance as having been executed with the tacit consent of respondents. of respondents. The Court of Appeals of Appeals disagreed with the trial court and ruled that the reckless driving of Jabon of Jabon caused the vehicular collision. In support of such of such finding, the Court of Appeals of Appeals relied heavily on Gregorio’s testimony that Jabon was driving the tractor‐trailer downward too fast and it encroached the lane of the jitney. Based on the gravity of the of the impact and the damage caused to the jitney the jitney resulting in the death of some of some passengers, the Court of Appeals of Appeals inferred that Jabon must be speeding. The appellate court noted that the restriction in Jabon’s driver’s license was violated, thus, giving rise to the presumption that he was negligent at the time of the of the accident. Tison was likewise held liable for damages for his failure to prove due diligence in supervising Jabon after he was hired as driver of the truck. Finally, the appellate court disregarded the Affidavit of Desistance executed by Cynthia because the latter had no written power of attorney from respondents and that she was so confused at the time when she signed the affidavit that she did not read its content. Issue:

Who is the negligent party or the party at fault? Held:

Clearly, the negligence of Gregorio’s of Gregorio’s daughter, Laarni was the proximate cause of the of the accident. We did not lose sight of the fact that at the time of the incident, Jabon was prohibited from driving the truck due to the restriction imposed on his driver’s license, i.e., restriction code 2 and 3. As a matter of fact, Jabon even asked the Land Transportation Office to reinstate his 10



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articulated license containing restriction code 8 which would allow him to drive a tractor‐trailer. The Court of Appeals concluded therefrom that Jabon was violating a traffic regulation at the time of the of the collision. Driving without a proper license is a violation of traffic regulation. Under Article 2185 of the Civil Code, the legal presumption of negligence of negligence arises if at if at the time of the of the mishap, a person was violating any traffic regulation. However, in Sanitary Steam Laundry, Inc. v. Court of Appeals, we held that a causal connection must exist between the injury received and the violation of the traffic regulation. It must be proven that the violation of the traffic regulation was the proximate or legal cause of the injury or that it substantially contributed thereto. Negligence, consisting in whole or in part, of violation of law, like any other negligence, is without legal consequence unless it is a contributing cause of the injury. Likewise controlling is our ruling in Añonuevo v. Court of Appeals of Appeals where we reiterated thatnegligence per se, arising from the mere violation of a of a traffic statute, need not be sufficient in itself in itself in establishing liability for damages. In the instant case, no causal connection was established between the tractor‐trailer driver’s restrictions on his license to the vehicular collision. Furthermore, Jabon was able to sufficiently explain that the Land Transportation Office merely erred in not including restriction code 8 in his license. Petitioners presented the Affidavit of Desistance executed by Cynthia to exonerate them from any liability. An affidavit of desistance is usually frowned upon by courts. Little or no persuasive value is often attached to a desistance. The subject affidavit does not deserve a second look more so that it appears that Cynthia was not armed with a special power of attorney to enter into a settlement with petitioners. At any rate, it is an exercise of futility to delve into the effects of the of the affidavit of desistance of desistance executed by one of the of the respondents since it has already been established that petitioners are not negligent. NEW WORLD INTERNATIONAL DEVELOPMENT INC. vs. NYK‐FILJAPAN SHIPPING CORP. , DMT Corporation, Advatech Industries, Inc., LEP International Philippines, Inc., LEP Profit International, Inc., Marina Port Services, Inc. and Serbros Carrier Corporation, and SEABOARD‐EASTERN INSURANCE CO., INC., G.R. No. 171468, August 24, 2011 – 2011 – Tansportation Law/Insurance Law Facts:

New World International Development (Phils.), Inc. (New World) bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency generator. DMT shipped the generator sets by truck until it was loaded on S/S California Luna V59, owned and operated by NYK Fil‐Japan Shipping Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, of lading, declaring that it received the goods in good condition. NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor on October 5, 11



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1993 respecting the loss and damage that the goods on board his vessel suffered. All 3 generators were found to be damaged and beyond repair and so New World filed a claim with its insurer Seaboard. Seaboard required New World to submit to it an itemized list of the damaged units, parts, and accessories, with corresponding values, for the processing of the claim. New World did not comply because such requirement wasn’t in the contract. 4 days after the lapse of the of the one‐year period to claim under the COGSA, New World filed a case for specific performance. RTC:

Complaint lapsed under COGSA, Seaboard’s denial of claim of claim is valid due to non‐compliance with requirement, thus prejudicing Seaboard’s right to recover from NYK. CA:

Affirdmed RTC on MR. Issue:

Whether or not New World can still recover from Seaboard? Held:

YES.

In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard would have been subrogated to petitioner New World’s right to recover from NYK. And it could have then filed the suit as a subrogee. But, as discussed above, Seaboard made an unreasonable demand on February 14, 1994 for an itemized list of the damaged units, parts, and accessories, with corresponding values when it appeared settled that New World’s loss was total and when the insurance policy did not require the production of such of such a list in the event of a claim. Besides, when petitioner New World declined to comply with the demand for the list, Seaboard against whom a formal claim was pending should not have remained obstinate in refusing to process that claim. It should have examined the same, found it unsubstantiated by documents if that were the case, and formally rejected it. That would have at least given petitioner New World a clear signal that it needed to promptly file its suit directly against NYK and the others. Ultimately, the fault for the delayed court suit could be brought to Seaboard’s doorstep. Section 241 of the Insurance Code provides that no insurance company doing business in the Philippines shall refuse without just cause to pay or settle claims arising under coverages provided by its policies. And, under Section 243, the insurer has 30 days after proof of loss is received and ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had within 60 days from receipt of evidence of loss, the insurer has 90 12



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days to pay or settle the claim. And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the ceiling prescribed by the Monetary Board. Notably, Seaboard already incurred delay when it failed to settle petitioner New World’s claim as Section 243 required. Under Section 244, a prima facie evidence of unreasonable of unreasonable delay in payment of the claim is created by the failure of the of the insurer to pay the claim within the time fixed in Section 243. NORTH BULACAN CORPORATION v. PHILIPPINE BANK OF COMMUNICATIONS G.R. No. 183140, August 2, 2010 – 2010 – Corporation Law Facts:

Petitioner North Bulacan Corporation (NBC) is engaged in the business of developing low and medium‐cost housing projects. Respondent Philippine Bank of Communications (PBCom) offered to finance the whole project of NBC and immediately provide it a loan facility. Relying on PBCom’s commitment, NBC accepted the bank’s offer. NBC executed a deed of assignment, assigning to PBCom its rights and interests over all payments that may be due it from the Pag‐IBIG. After a time, however, PBCom discontinued its financial support to NBC reportedly because BangkoSentralngPilipinas (BSP) had issued a cease‐and‐desist order against the bank. When it became apparent that PBCom had no intention of complying of complying with its commitment, NBC sought help from Cocolife and Land Bank which expressed their intention to finance the project by taking out NBC's loan from PBCom. But the latter refused the offer, insisting on the supposed BSP cease‐and‐desist order. NBC’s construction eventually stopped for lack of funds. of funds. NBC filed a petition for corporate rehabilitation with the Mandaluyong Regional Trial Court (RTC). It filed with the court a manifestation and urgent motions a) to order PBCom to release 12 Transfer Certificates of Title of Title of finished of finished housing units, b) to order Pag‐IBIG to issue Letters of Guaranty to PBCom representing the take‐out value of the of the finished units, and c) to allow NBC to use the proceeds to make emergency repairs and restoration works. The RTC issued an order giving due course to NBC’s petition for rehabilitation. PBCom challenges the RTC’s order alleging that NBC violated several rules on corporate rehabilitation and that it had not met the requirements for the grant of the petition involved. Among the rules alleged to have been violated is a rule on prohibited pleadings on motion for extension in filing the required rehabilitation plan, which NBC did in this case. Petitioner counters however, that it did not violated the rules on petition for rehabilitation because such rules allows extension under certain circumstances.

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Issue:

Whether or not the RTC correctly gave due course NBC’s action for corporate rehabilitation? Held:

NO, the Court held that the RTC erred in giving due course to petitioner’s action. The RTC utterly disregarded the Rules on Corporate Rehabilitation in the guise of liberal construction and granted the petition for rehabilitation based on insufficient evidence. The NBC inventory did not mention the condition of its listed assets. It merely enumerated certain real properties and their respective sizes and market values. The RTC should have dismissed the petition as it had not approved any rehabilitation plan within the period specified by law. Further, under the circumstances, NBC’s total debts would balloon to P560,841,213.54, exclusive of interests, penalties, and other charges. Obviously, its continued operation would no longer be viable. The Court holds that the RTC should have ruled on the creditors’ objections instead of merely treating them as premature. The RTC of course claims that the rehabilitation plan would still have to be referred to the receiver for study and evaluation. But there would be no need to go that far when the petitioning corporation declined to comply with the simple rules of rehabilitation, of rehabilitation, when the documentation of its of its assets were inadequate, and when the creditors’ opposition offered insurmountable basis for shelving the entire effort. When I am I am at my at my Weakest, Weakest, My Lord, My Lord, My God, My God, My Saviour, My Saviour, Protector and Protector and Rock Rock Is Is at His at His STRONGEST! All Rights Reserved Batangas City and Manila January 14, 2012

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Balmes a Survey of Recent Supreme Court Decisions in Commercial Law

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