4C Commercial Law Digests Complete Midterms

COMMERCIAL LAW REVIEW LEONEN DIGESTS by 4C
Atty. Maria Zarah Villanueva Castro
THE TRIAL COURT HAS AMPLE DISCRETION TO CALL A HEARING WHEN IT IS NOT CONFIDENT
THAT THE ALLEGATIONS IN THE PETITION ARE SUFFICIENT IN FORM AND SUBSTANCE
Neither does the Interim Rules require a hearing before the issuance of a stay order. What it requires is
an initial hearing before it can give due course to or dismiss a petition.Nevertheless, while the Interim
Rules does not require the holding of a hearing before the issuance of a stay order, neither does it
prohibit the holding of one. Thus, the trial court has ample discretion to call a hearing when it is not
confident that the allegations in the petition are sufficient in form and substance, for so long as this
hearing is held within the five (5)–day period from the filing of the petition — the period within which a
stay order may issue as provided in the Interim Rules (Pryce Corporation vs. China Banking
Corporation, G.R. No. 172302, February 18, 2014).
1. Pryce Corporation vs. China Banking Corporation

G.R. No. 172302, February 18, 2014
Leonen, J.
FACTS: The present case originated from a petition for corporate rehabilitation filed by petitioner Pryce
Corporation on July 9, 2004 with the RTC.
The rehabilitation court issued a stay order appointing Gener T. Mendoza as rehabilitation receiver.
Mendoza did not approve the proposed rehabilitation plan of petitioner and submitted instead an
amended rehabilitation plan, which the rehabilitation court approved.
Respondent China Banking Corporation elevated the case to the Court of Appeals. Respondent
contended that the rehabilitation plan’s approval impaired the obligations of contracts. It argued that
neither the provisions of Presidential Decree No. 902–A nor the Interim Rules empowered commercial
courts “to render without force and effect valid contractual stipulations.” Moreover, the plan’s approval
authorizing dacion en pago of petitioner Pryce Corporation’s properties without respondent China
Banking Corporation’s consent not only violated “mutuality of contract and due process, but was also
antithetical to the avowed policies of the state to maintain a competitive financial system.”
The Bank of the Philippine Islands (BPI), another creditor of petitioner Pryce Corporation, filed a separate
petition with the Court of Appeals assailing the same order by the rehabilitation court.
The CA granted respondent’s petition, and reversed and set aside the rehabilitation court’s orders. With
respect to BPI’s separate appeal, the CA First Division granted the petition initially and set aside the
order of the rehabilitation court. On reconsideration, it set aside its original decision and dismissed the
petition. Petitioner also appealed assailing the orders but was denied. Petitioner then filed an omnibus
motion for (1) reconsideration or (2) partial reconsideration and (3) referral to the court En Banc.
Respondent also filed a motion for reconsideration but the court denied with finality said motions.
Petitioner filed a second motion for reconsideration
On July 30, 2013, petitioner Pryce Corporation and respondent China Banking Corporation, through their
respective counsel, filed a joint manifestation and motion to suspend proceedings. The parties requested
this court to defer its ruling on petitioner Pryce Corporation’s second motion for reconsideration “so as
to enable the parties to work out a mutually acceptable arrangement.” The court granted the motion but
only for two (2) months. More than two months had lapsed since September 5, 2013, but no agreement
was filed by the parties.
The motion raises 2 grounds: First, petitioner Pryce Corporation argues that the issue on the validity of
the rehabilitation court orders is now res judicata. Second, petitioner Pryce Corporation contends that
Rule 4, Section 6 of the Interim Rules of Procedure on Corporate Rehabilitation does not require the
rehabilitation court to hold a hearing before issuing a stay order.
ISSUE: Is the rehabilitation court required to hold a hearing to comply with the “serious situations” test
laid down in the case of Rizal Commercial Banking Corp. v. IAC before issuing a stay order?
HELD: The rehabilitation court complied with the Interim Rules in its order dated July 13, 2004 on the
issuance of a stay order and appointment of Gener T. Mendoza as rehabilitation receiver.
The 1999 Rizal Commercial Banking Corp. v. IAC case provides for the “serious situations” test in that
the suspension of claims is counted only upon the appointment of a rehabilitation receiver, and certain
situations serious in nature must be shown to exist before one is appointed. The SEC has to initially
determine whether such appointment is appropriate and necessary under the circumstances. Under
Paragraph (d), Section 6 of Presidential Decree No. 902–A, certain situations must be shown to exist
before a management committee may be created or appointed, such as: 1. when there is imminent
danger of dissipation, loss, wastage or destruction of assets or other properties; or 2. when there is
paralization of business operations of such corporations or entities which may be prejudicial to the
interest of minority stockholders, parties–litigants or to the general public. On the other hand, receivers
may be appointed whenever: 1. necessary in order to preserve the rights of the parties–litigants; and/or
2. protect the interest of the investing public and creditors. (Section 6 [c], P.D. 902–A.)These situations
are rather serious in nature, requiring the appointment of a management committee or a receiver to
preserve the existing assets and property of the corporation in order to protect the interests of its
investors and creditors.
However, this case had been promulgated prior to the effectivity of the Interim Rules that took effect on
December 15, 2000.
The stay order and appointment of a rehabilitation receiver dated July 13, 2004 is an “extraordinary,
preliminary, ex parte remed[y].”The effectivity period of a stay order is only “from the date of its issuance
until dismissal of the petition or termination of the rehabilitation proceedings.” It is not a final disposition
of the case. It is an interlocutory order defined as one that “does not finally dispose of the case, and
does not end the Court’s task of adjudicating the parties’ contentions and determining their rights and
liabilities as regards each other, but obviously indicates that other things remain to be done by the Court.”
Thus, it is not covered by the requirement under the Constitution that a decision must include a
discussion of the facts and laws on which it is based. Neither does the Interim Rules require a hearing
before the issuance of a stay order. What it requires is an initial hearing before it can give due course to
or dismiss a petition.
Nevertheless, while the Interim Rules does not require the holding of a hearing before the issuance of a
stay order, neither does it prohibit the holding of one. Thus, the trial court has ample discretion to call a
hearing when it is not confident that the allegations in the petition are sufficient in form and substance,
for so long as this hearing is held within the five (5)–day period from the filing of the petition — the period
within which a stay order may issue as provided in the Interim Rules.
Respondent China Banking Corporation mainly argues the violation of the constitutional proscription
against impairment of contractual obligations68 in that neither the provisions of Pres. Dec. No. 902–A
as amended nor the Interim Rules empower commercial courts “to render without force and effect valid
contractual stipulations.” Nevertheless, this court has brushed aside invocations of the non–impairment
clause to give way to a valid exercise of police power and afford protection to labor.
Rather than let struggling corporations slip and vanish, the better option is to allow commercial courts to
come in and apply the process for corporate rehabilitation.
This option is preferred so as to avoid what Garrett Hardin called the Tragedy of Commons. Here, Hardin
submits that “coercive government regulation is necessary to prevent the degradation of common–pool
resources [since] individual resource appropriators receive the full benefit of their use and bear only a
share of their cost. In this instance, it is fortunate that this court had the opportunity to correct the situation
and prevent conflicting judgments from reaching impending finality with the referral to the En Banc.
HIPONIA
LIABILITY OF OFFICERS MUST BE CONVINCINGLY PROVEN TO BE ONE OF PATENT BAD

FAITH AND GROSS NEGLIGENCE
Before a director or officer of a corporation can be held personally liable for corporate obligations,
however, the following requisites must concur: (1) the complainant must allege in the complaint 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) the complainant must clearly and convincingly prove such unlawful
acts, negligence or bad faith.
2. ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS
vs. DAN T. LIM, doing business under the name and style of QUALITY PAPERS & PLASTIC
PRODUCTS ENTERPRISES
G.R. No. 206806 June 25, 2014 LEONEN, J.:
FACTS: Lim works in the business of supplying scrap papers, cartons, and other raw materials, under
the name Quality Paper and Plastic Products, Enterprises, to factories engaged in the paper mill
business. From February 2007 to March 2007, he delivered scrap papers to Arco Pulp. The parties
allegedly agreed that Arco Pulp and Paper would either pay Lim the value of the raw materials or deliver
to him their finished products of equivalent value. Lim alleged that when he delivered the raw materials,
Arco Pulp and Paper issued a post-dated check as partial payment, with the assurance that the check
would not bounce. When he deposited the check it was dishonored. On the same day, Arco Pulp and
Paper and a certain Sy executed a memorandum of agreemen where Arco Pulp and Paper bound
themselves to deliver their finished products to Megapack Container Corporation, owned by Sy, for his
account. According to the memorandum, the raw materials would be supplied by Lim, through his
company, Quality Paper and Plastic Products. Lim then sent a letter to Arco Pulp and Paper demanding
payment to no avail. Lim filed a complaint for collection of sum of money with prayer for attachment with
the Regional Trial Court which rendered a judgment in favor of Arco Pulp and Paper and dismissed the
complaint, holding that when Arco Pulp and Paper and Sy entered into the memorandum of agreement,
novation took place, which extinguished Arco Pulp and Paper’s obligation to Lim. Lim appealed the
judgment with the Court of Appeals which reversed the judgment and ordered Arco Pulp and Paper to
jointly and severally pay Lim. The appellate court ruled that the facts and circumstances in this case
clearly showed the existence of an alternative obligation. It also ruled that Lim was entitled to damages
and attorney’s fees due to the bad faith exhibited by Arco Pulp and Paper in not honoring its undertaking.
The motion for reconsideration being denied, Arco Pulp and Paper and its President and Chief Executive
Officer, Candida A. Santos, filed a petition for review on certiorari.
On one hand, petitioners argue that the execution of the memorandum of agreement constituted a
novation of the original obligation since Sy became the new debtor of respondent. They also argue that
there is no legal basis to hold petitioner Candida A. Santos personally liable for the transaction that
petitioner corporation entered into with respondent.
ISSUE: Whether Candida A. Santos was solidarily liable with Arco Pulp and Paper Co.
HELD: Yes. Petitioner Candida A. Santos is solidarily liable with petitioner corporation. Petitioners argue
that the finding of solidary liability was erroneous since no evidence was adduced to prove that the
transaction was also a personal undertaking of petitioner Santos. Before a director or officer of a
corporation can be held personally liable for corporate obligations, however, the following requisites
must concur: (1) the complainant must allege in the complaint 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) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.
Here, petitioner Santos entered into a contract with respondent in her capacity as the President and
Chief Executive Officer of Arco Pulp and Paper. She also issued the check in partial payment of petitioner
corporation’s obligations to respondent on behalf of petitioner Arco Pulp and Paper. This is clear on the
face of the check bearing the account name, "Arco Pulp & Paper, Co., Inc." Any obligation arising from
these acts would not, ordinarily, be petitioner Santos’ personal undertaking for which she would be
solidarily liable with petitioner Arco Pulp and Paper.
According to the Court of Appeals, petitioner Santos was solidarily liable with petitioner Arco Pulp and
Paper, stating that there is bad faith on the part of the Arco Pulp when they unjustifiably refused to honor
their undertaking in favor of the Lim. After the check issued by Arco Pulp was dishonored, Arco Pulp
corporation denied any privity with Lim. These acts prompted the Lim to avail of the remedies provided
by law in order to protect his rights.
We agree with the Court of Appeals. Petitioner Santos cannot be allowed to hide behind the corporate
veil. When petitioner Arco Pulp and Paper’s obligation to respondent became due and demandable, she
not only issued an unfunded check but also contracted with a third party in an effort to shift petitioner
Arco Pulp and Paper’s liability. She unjustifiably refused to honor petitioner corporation’s obligations to
respondent. These acts clearly amount to bad faith. In this instance, the corporate veil may be pierced,
and petitioner Santos may be held solidarily liable with petitioner Arco Pulp and Paper.
Therefore, Petitioners Arco Pulp & Paper Co., Inc. and Candida A. Santos are hereby ordered solidarily
to pay respondent Lim.
TOLENTINO
A CORPORATION HAS A PERSONALITY SEPARATE AND DISTINCT FROM ITS INDIVIDUAL

STOCKHOLDERS
A corporation is an artificial entity created by operation of law. It possesses the right of succession and
such powers, attributes, and properties expressly authorized by law or incident to its existence. It has a
personality separate and distinct from that of its stockholders and from that of other corporations to which
it may be connected. By virtue of the separate juridical personality of a corporation, the corporate debt
or credit is not the debt or credit of the stockholder. (Aboitiz Equity Ventures, Inc. vs. Chiongbian
G.R. No. 197530, July 9, 2014)
3. ABOITIZ EQUITY VENTURES, INC., vs. CHIONGBIAN

G.R. No. 197530, July 9, 2014
Leonen, J.
FACTS: This is a petition for review on certiorari assailing the order of the RTC-Cebu dismissing with
prejudice the complaint dated July 20, 2010 filed by respondents Carlos A. Gothong Lines, Inc. (CAGLI)
and Benjamin D. Gothong.
ASC, CAGLI, and WLI, principally owned by the Aboitiz, Gothong, and Chiongbian families, respectively,
entered into an Agreement which was signed by Jon Ramon Aboitiz for ASC, Benjamin D. Gothong for
CAGLI, and respondent Chiongbian for WLI.
ASC and CAGLI agreed to transfer their shipping assets to WLI in exchange for the latter's shares of
capital stock. The parties likewise agreed that WLI would run the merged shipping business and be
renamed "WG&A, Inc."
Thereafter, WLI received inventory but only paid CAGLI the amount of P400 Million. Dissatisfied, CAGLI
sent to WLI various letters demanding payment or return the inventory that it received in excess of P400
Million.
Subsequently, the Chiongbian and Gothong families sold their interests in WLI/WG&A to the Aboitiz
family. Aboitiz Equity Ventures (AEV) agreed to purchase and acquire the WLI/WG&A shares of the
Chiongbian and Gothong families. Thereafter, the corporate name of WLI/WG&A was changed to ATSC.
Six years later CAGLI sent a letter to ATSC demanding that the latter pay the excess inventory it
delivered to WLI.
AEV countered that it should not be included in the dispute because it is an entity separate and distinct
from ATSC.
CAGLI filed a complaint before the RTC against Chiongbian, ATSC, ASC, and AEV to compel them to
submit to arbitration. RTC dismissed the complaint.
ISSUE: Should AEV be held liable for the obligation of ATSC being ATSC’s stockholder?
HELD: No. It is basic that a corporation has a personality separate and distinct from that of its individual
stockholders. Thus, a stockholder does not automatically assume the liabilities of the corporation of
which he is a stockholder. As explained in Philippine National Bankv. Hydro Resources Contractors
Corporation:
A corporation is an artificial entity created by operation of law. It possesses the right of succession and
such powers, attributes, and properties expressly authorized by law or incident to its existence. It has a
personality separate and distinct from that of its stockholders and from that of other corporations to which
it may be connected. As a consequence of its status as a distinct legal entity and as a result of a
conscious policy decision to promote capital formation, a corporation incurs its own liabilities and is
legally responsible for payment of its obligations. In other words, by virtue of the separate juridical
personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder. This
protection from liability for shareholders is the principle of limited liability.
The so-called veil of corporation fiction treats as separate and distinct the affairs of a corporation and its
officers and stockholders. As a general rule, a corporation will be looked upon as a legal entity, unless
and until sufficient reason to the contrary appears. When the notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an
association of persons. Also, the corporate entity may be disregarded in the interest of justice in such
cases as fraud that may work inequities among members of the corporation internally, involving no rights
of the public or third persons. In both instances, there must have been fraud and proof of it. For the
separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly and
convincingly established. It cannot be presumed.
AEV’s status as ATSC’s stockholder is, in and of itself, insufficient to make AEV liable for ATSC’s
obligations. Moreover, the SPA does not contain any stipulation which makes AEV assume ATSC’s
obligations.
LINGAN
AN INSURER’S LIABILITY UNDER THE SURETY BOND IS NOT EXTINGUISHED WHEN THE
MODIFICATIONS IN THE PRINCIPAL CONTRACT DO NOT SUBSTANTIALLY OR MATERIALLY
ALTER THE PRINCIPAL’S OBLIGATIONS
The liabilities of an insurer under the surety bond are not extinguished when the modifications
in the principal contract do not substantially or materially alter the principal’s obligations. The surety is
jointly and severally liable with its principal when the latter defaults from its obligations under the principal
contract. (People’s Trans-East Asia v. Doctors of New Millennium Holdings, G.R. No. 172404,
August 13, 2014)
AN INSURER’S LIABILITY UNDER THE SURETY BOND IS NOT EXTINGUISHED WHEN THE
MODIFICATIONS IN THE PRINCIPAL CONTRACT DO NOT SUBSTANTIALLY OR MATERIALLY
ALTER THE PRINCIPAL’S OBLIGATIONS
4. People’s Trans-East Asia v. Doctors of New Millennium Holdings

G.R. No. 172404, August 13, 2014
Leonen, J.
FACTS:
Doctors of New Millennium Holdings, Inc. (Doctors) is a domestic corporation comprised of
about 80 doctors. It entered into a construction and development agreement (signed agreement) with
Million State Development Corporation (Million State), a contractor, for the construction of a 200-bed
capacity hospital in Cainta, Rizal. According to the terms of the signed agreement, Doctors obliged itself
to pay P10,000,000 to Million State at the time of the signing of the agreement to commence the
construction of the hospital. Million State was to shoulder 95% of the project cost and committed itself
to secure P385,000,000 within 25 banking days from Doctors’ initial payment, part of which was to be
used for the purchase of the lot where the hospital was to be constructed. As part of the conditions prior
to the initial payment, Million State submitted a surety bond of P10,000,000 to Doctors. The surety bond
was issued by People’s Trans-East Asia Insurance Corporation, now known as People’s General
Insurance Corporation (PGIC). Doctors, on the other hand, made the initial payment of P10,000,000.
Million State, however, failed to comply with its obligation to secure P385,000,000 within 25 banking
days from initial payment. It faxed a letter to Doctors explaining its delay was caused by its foreign
creditors’ delay in processing its application. Doctors sent a formal demand letter to Million State for the
remittance of the funds to be used for the purchase of the lot and demanding for the cost of money from
the time the remittance was due. Instead of replying to the demand letter, Million State sent another
letter, explaining that they would have their standby letter of credit within 15 banking days. When Million
State reneged on its obligations, Doctors sent a demand letter to PGIC for the return of its initial payment
of P10,000,000, in accordance with its surety bond. Doctors sent another letter to PGIC, this time
furnishing a copy to the Insurance Commission. The Insurance Commission referred the matter to its
Public Assistance and Investigation Division, which conducted conciliation proceeding.
PGIC stated in its letter that Doctors’ surety claim was denied on the ground that that the guarantee only
extended to “the full and faithful construction of a First Class 200 hospital bed building” and not to “the
‘funding’ of the construction of the hospital.” As a result of the letter, the conciliation proceedings were
terminated, and Doctors filed an administrative complaint for unfair claim settlement practice against
PGIC. While the administrative complaint was pending, Doctors sent a demand letter to Million State for
the return of their initial payment of P10,000,000.00. Due to Million State’s inaction, Doctors filed a
complaint for breach of contract with damages with prayer for the issuance of preliminary attachment
against Million State and PGIC with the RTC of Pasig City. PGIC alleged that without its knowledge and
consent, Doctors and Million State substantially altered the conditions of the draft agreement by inserting
the clause “or the Project Owner’s waiver” which appeared in the signed agreement. The waiver refers
to the conditions to disbursement of initial payment. Petitioner contends that the inclusion of the clause
made its obligations more onerous and, therefore, the surety must be released from its bond.
ISSUE: Whether or not the surety bond guaranteeing respondent Doctors’ initial payment was impliedly
novated by the insertion of a clause in the principal contract, which waived the conditions for the initial
payment’s release?
HELD:
No. The principal contract of the suretyship is the signed agreement. The surety, therefore, is presumed
to have acquiesced to the terms and conditions embodied in the principal contract when it issued its
surety bond. Accordingly, petitioner cannot argue that the insertion of the clause in the signed
agreement constituted an implied novation of the obligation which extinguished its obligations as a surety
since there was nothing to novate:
In order that an obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and new obligation be in
every point incompatible with each other. Novation of a contract is never presumed. In the
absence of an express agreement, novation takes place only when the old and the new
obligations are incompatible on every point.
Even if we were to assume, for the sake of argument, that the principal contract in the
suretyship was the draft agreement, the addition of the clause “or the Project Owner’s waiver” in the
signed agreement does not operate as a novation of petitioner’s liability under the surety bond. The
disputed clause is not material to People’s General Insurance’s undertaking to guarantee Doctors of
New Millennium’s initial payment.
DELA CRUZ
A DERIVATIVE SUIT IS AN ACTION FILED BY STOCKHOLDERS TO ENFORCE A CORPORATE

ACTION.
It is an exception to the general rule that the corporation's power to sue is exercised only by the board
of directors or trustees. Individual stockholders may be allowed to sue on behalf of the corporation
whenever the directors or officers of the corporation refuse to sue to vindicate the rights of the
corporation or are the ones to be sued and are in control of the corporation. (Villamor, Jr. v. Umale,
G.R. No. 172843, September 24, 2014)
A CORPORATION MAY BE PLACED UNDER RECEIVERSHIP, OR MANAGEMENT COMMITTEES

MAY BE CREATED TO PRESERVE PROPERTIES INVOLVED IN A SUIT AND TO PROTECT THE
RIGHTS OF THE PARTIES UNDER THE CONTROL AND SUPERVISION OF THE COURT.
Management committees and receivers are appointed when the corporation is in imminent danger of
"(1) dissipation, loss, wastage or destruction of assets or other properties; and (2) paralysation of its
business operations that may be prejudicial to' the interest of the minority stockholders, parties-litigants,
or the general public." Applicants for the appointment of a receiver or management committee need to
establish the confluence of these two requisites. (Villamor, Jr. v. Umale, G.R. No. 172843, September
24, 2014)
x—————x
A DERIVATIVE SUIT IS AN ACTION FILED BY STOCKHOLDERS TO ENFORCE A CORPORATE

ACTION.
A CORPORATION MAY BE PLACED UNDER RECEIVERSHIP, OR MANAGEMENT COMMITTEES

MAY BE CREATED TO PRESERVE PROPERTIES INVOLVED IN A SUIT AND TO PROTECT THE
RIGHTS OF THE PARTIES UNDER THE CONTROL AND SUPERVISION OF THE COURT.
5. Villamor, Jr. v. Umale

G.R. No. 172843, September 24, 2014
Leonen, J.
FACTS:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the decision
of the Court of Appeals and its resolution denying petitioners' motions for reconsideration, and placing
Pasig Printing Corporation (PPC) under receivership and appointed an interim management committee
for the corporation.
MC Home Depot occupied a prime property (Rockland area) in Pasig. The property was part of the area
owned by Mid-Pasig Development Corporation (Mid-Pasig). PPC obtained an option to lease portions
of Mid-Pasig's property, including the Rockland area. PPC's board of directors issued a resolution
waiving all its rights, interests, and participation in the option to lease contract in favor of the law firm of
Atty. Alfredo Villamor, Jr. (Villamor). PPC received no consideration for this waiver in favor of Villamor's
law firm. PPC, represented by Villamor, entered into a memorandum of agreement (MOA) with MC
Home Depot. Under the MOA, MC Home Depot would continue to occupy the area as PPC's sub-lessee
for 4 years, renewable for another 4 years, at a monthly rental of P4,500,000.00 plus goodwill of
P18,000,000.00. In compliance with the terms of the MOA, MC Home Depot issued 20 post-dated
checks representing rental payments for one year and the goodwill money. The checks were given to
Villamor who did not turn these or the equivalent amount over to PPC, upon encashment.
Hernando Balmores, a stockholder and director of PPC, wrote a letter addressed to PPC's directors and
informed them that Villamor should be made to deliver to PPC and account for MC Home Depot's checks
or their equivalent value. Due to the alleged inaction of the directors, respondent Balmores filed with the
Regional Trial Court an intra-corporate controversy complaint under Rule 1, Section 1(a)(1) of the Interim
Rules for Intra-Corporate Controversies (Interim Rules) against petitioners for their alleged devices or
schemes amounting to fraud or misrepresentation detrimental to the interest of the Corporation and its
stockholders.
Respondent Balmores alleged in his complaint that because of petitioners' actions, PPC's assets were
not only in imminent danger, but have actually been dissipated, lost, wasted and destroyed and prayed
that a receiver be appointed from his list of nominees. He also prayed for petitioners' prohibition from
selling, encumbering, transferring or disposing in any manner any of PPC's properties, including the MC
Home Depot]checks and/or their proceeds. He prayed for the accounting and remittance to PPC of the
MC Home Depot checks or their proceeds and for the annulment of the board's resolution vaiving PPC's
rights in favor of Villamor's law firm. RTC denied Balmores' prayer for the appointment of a receiver or
the creation of a management committee. The CA reversed the trial court's decision, and issued a new
order placing PPC under receivership and creating an interim management committee.
ISSUES:
1. Whether the respondent Balmores' action is a derivative suit
2. Whether the Court of Appeals properly placed PPC under receivership and created a receiver
or management committee
HELD:
1. No. Respondent Balmores' action in the trial court is not a derivative suit. A derivative suit is an
action filed by stockholders to enforce a corporate action. It is an exception to the general rule that
the corporation's power to sue is exercised only by the board of directors or trustees. Individual
stockholders may be allowed to sue on behalf of the corporation whenever the directors or officers
of the corporation refuse to sue to vindicate the rights of the corporation or are the ones to be sued
and are in control of the corporation. It is allowed when the "directors or officers are guilty of breach
of . . . trust, and not of mere error of judgment." In derivative suits, the real party in interest is the
corporation, and the suing stockholder is a mere nominal party.
Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies (Interim Rules)
provides the five (5) requisites[63] for filing derivative suits: (1) He was a stockholder or member at
the time the acts or transactions subject of the action occurred and at the time the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to
exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing
the corporation or partnership to obtain the relief he desires; (3) No appraisal rights are available for
the act or acts complained of; (4) The suit is not a nuisance or harassment suit; and (5) The action
brought by the stockholder or member must be "in the name of [the] corporation or association. ..."
Moreover, it is important that the corporation be made a party to the case. Additionally, an allegation
that appraisal rights were not available for the acts complained of is another requisite for filing
derivative suits under Rule 8, Section 1(3) of the Interim Rules.
Respondent Balmores' action in the trial court failed to satisfy all the requisites of a derivative suit.
Respondent Balmores failed to exhaust all available remedies to obtain the reliefs he prayed for.
Though he tried to communicate with PPC's directors about the checks in Villamor's possession
before he filed an action with the trial court, respondent Balmores was not able to show that this
comprised -all the remedies available under the articles of incorporation, by-laws, laws, or rules
governing PPC. Granting that (a) respondent Balmores' attempt to communicate with the other PPC
directors already comprised all the available remedies that he could have exhausted and (b) the
corporation was under full- control of petitioners that exhaustion of remedies became impossible or
futile, respondent Balmores failed to allege that appraisal rights were not available for the acts
complained of here. Neither did respondent Balmores implead PPC as party in the case nor did he
allege that he was filing on behalf of the corporation.
Respondent Balmores did not bring the action for the benefit of the corporation. Instead, he was
alleging that the acts of PPC's directors, specifically the waiver of rights in favor of Villamor's law
firm and their failure to take back the MC Home Depot checks from Villamor, were detrimental to his
individual interest as a stockholder. In filing an action, therefore, his intention was to vindicate his
individual interest and not PPC's or a group of stockholders'. The essence of a derivative suit is that
it must be filed on behalf of the corporation. This is because the cause of action belongs, primarily,
to the corporation. The stockholder who sues on behalf of a corporation is merely a nominal party.
Respondent Balmores' intent to file an individual suit removes it from the coverage of derivative
suits.
2. No. Appointment of a management committee was not proper. A corporation may be placed under
receivership, or management committees may be created to preserve properties involved in a suit
and to protect the rights of the parties under the control and supervision of the court. Management
committees and receivers are appointed when the corporation is in imminent danger of "(1)
dissipation, loss, wastage or destruction of assets or other properties; and (2) paralysation of its
business operations that may be prejudicial to' the interest of the minority stockholders, parties-
litigants, or the general public." Applicants for the appointment of a receiver or management
committee need to establish the confluence of these two requisites.
PPC waived its rights, without any consideration in favor of Villamor. The checks were already in
Villamor's possession. The Court takes judicial notice that the goodwill money of P18,000,000.00
and the rental payments of P4,500,000.00 every month are not meager amounts only to be waived
without any consideration. It is, therefore, enough to constitute loss or dissipation of assets under
the Interim Rules. Respondent Balmores, however, failed to show that there was an imminent
danger of paralysis of PPC's business operations. Apparently, PPC was earning substantial
amounts from its other sub-lessees. Respondent Balmores did not prove otherwise. He, therefore,
failed to show at least one of the requisites for appointment of a receiver or management committee.
Moreover, the Court of Appeals has no power to appoint a receiver or management committee. The
Regional Trial Court has original and exclusive jurisdiction to hear and decide intra-corporate
controversies, including incidents of such controversies. These incidents include applications for the
appointment of receivers or management committees.
When respondent Balmores filed his petition for certiorari with the Court of Appeals, there was still
a pending action in the trial court. The court making the appointment controls and supervises the
appointed receiver or management committee. Thus, the Court of Appeals' appointment of a
management committee would result in an absurd scenario wherein while the main case is still
pending before the trial court, the receiver or management committee reports to the Court of
Appeals.
KHO
Piercing of corporate veil, warranted when corporation is used to perpetrate fraud or illegal act
Doctrine: A corporation, in the legal sense, is an individual with a personality that is distinct and separate
from other persons including its stockholders, officers, directors, representatives, and other juridical
entities. Piercing the corporate veil is warranted when "the separate personality of a corporation is used
as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, or to confuse legitimate issues and also in alter ego cases” (LANUZA vs
BF CORPORATION, G.R. No. 174938, October 1, 2014)
x—————x
Piercing of corporate veil, warranted when corporation is used to perpetrate fraud or illegal act
6. LANUZA vs BF CORPORATION
G.R. No. 174938, October 1, 2014
Ponente, Leonen, J.
FACTS:
This is a Rule 45 petition, assailing the CA's decision and resolution. CA affirmed RTC’s
decision holding that petitioners Gerardo Lanuza, Jr. and Antonio O. Olbes as directors of Shangri-La
Properties, Inc.(Shangri-La), should submit themselves as parties to the arbitration proceedings
between BF Corporation (BF Corp.) and Shangri-La concerning a collection complaint filed by the former
against the latter.
BF Corp undertook to construct for Shangri-La a mall and a multilevel parking structure along
EDSA. Shangri-La had been consistent in paying BF Corporation in accordance with its progress billing
statements. However, later on, Shangri-La started defaulting in payment. BF Corp completed the
construction of the buildings due to the alleged misrepresentations of Shangri-La. Shangri-La took
possession of the buildings while still owing BF Corporation an outstanding balance.
An arbitration proceeding was commenced by BF Corp after the CA ruled that the case should
be submitted to arbitration in accordance with the arbitration clause agreed upon by the parties. BF Corp
raised before the proceeding the question on whether the members of the Board of Shangri-La should
be included as parties in the arbitration proceedings. Petitioners alleged that only BF Corp and Shangri-
La should be affected by the contract's stipulation as they have separate and distinct personalities as
Directors and that BF Corp failed to specifically allege the unlawful acts of the directors that should make
them solidarity liable with Shangri-La for its obligations. BF Corporation argued that petitioners were
impleaded under Section 31 of the Corporation Code which makes directors solidarity liable for fraud,
gross negligence, and bad faith and that petitioners are not really third parties to the agreement because
they are being sued as Shangri-La's representatives, under Section 31 of the Corporation Code.
ISSUE:
Should petitioners, as members of the Board of Shangri-La be impleaded as parties in the
arbitration proceeding?
HELD:
YES. Petitioners, should be impleaded as parties in the arbitration proceeding.
A corporation's representative who did not personally bind himself or herself to an arbitration
agreement cannot be forced to participate in arbitration proceedings made pursuant to an agreement
entered into by the corporation. He or she is generally not considered a party to that agreement. A
director, trustee, or officer of a corporation may be made solidarily liable with it for all damages suffered
by the corporation, its stockholders or members, and other persons in any of the following cases: a) The
director or trustee willfully and knowingly voted for or assented to a patently unlawful corporate act; b)
The director or trustee was guilty of gross negligence or bad faith in directing corporate affairs; and c)
The director or trustee acquired personal or pecuniary interest in conflict with his or her duties as director
or trustee. Solidary liability with the corporation will also attach in the following instances: a) "When a
director or officer has consented to the issuance of watered stocks or who, having knowledge thereof,
did not forthwith file with the corporate secretary his written objection thereto"; b) "When a director,
trustee or officer has contractually agreed or stipulated to hold himself personally and solidarity liable
with the corporation"; and c) "When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action."
When there are allegations of bad faith or malice against corporate directors or representatives,
it becomes the duty of courts or tribunals to determine if these persons and the corporation should be
treated as one. When the directors, as in this case, are impleaded in a case against a corporation,
alleging malice or bad faith on their part in directing the affairs of the corporation, complainants are
effectively alleging that the directors and the corporation are not acting as separate entities.
Hence, petitioners should be impleaded.
AUM
BANKING
THE STANDARD OF DILIGENCE REQUIRED OF BANKS IS HIGHER THAN THE DEGREE OF

DILIGENCE OF A GOOD FATHER OF A FAMILY
Banking is a business that is impressed with public interest. Because it is affected with public interest
and because of the nature of its functions, the bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of their relationship.
(Philippine National Bank v. Santos, et.al., G.R. No. 208293 & 208295, December 10, 2014)
x--------------x
THE STANDARD OF DILIGENCE REQUIRED OF BANKS IS HIGHER THAN THE DEGREE OF

DILIGENCE OF A GOOD FATHER OF A FAMILY
7. Philippine National Bank v. Santos, et. al.
G.R. No. 208293, December 10, 2014
Aguilar v. Santos, et. al.
G.R. No. 208295, December 10, 2014
Leonen, J.
FACTS:
This is a petition for review of the Court of Appeals’ July 2013 decision sustaining the trial court’s finding
of negligence on the part of the petitioners in handling the deposit of the deceased father of the
respondents.
The respondents are the children of Angel C. Santos, who died in 1991. In May 1996, the respondents
discovered that their father maintained a premium savings account with petitioner bank, PNB. When the
respondents went to PNB to withdraw their father’s deposit, they were required by the Branch Manager,
Lina Aguilar, to submit the following: (1) original or certified true copy of the Death Certificate of Angel
C. Santos; (2) certificate of payment of, or exemption from, estate tax issued by the BIR; (3) Deed of
Extrajudicial Settlement; (4) Publisher’s Affidavit of publication of said Deed; and (5) Surety bond
effective for 2 years and in an amount equal to the balance of the deposit to be withdrawn.
Armed with the necessary documents, the respondents tried to withdraw the deposit, only to be informed
by Aguilar that the deposit had already “been released to a certain Bernardito Manimbo in April 1997.”
The deposit was released upon presentation of: (1) an affidavit of self adjudication purportedly executed
by Reyme L. Santos, one of the respondents; (2) a certificate of time deposit; (3) the death certificate of
Angel C. Santos; (4) a special power of attorney purportedly executed by Reyme in favor of Manimbo
and a certain Angel P. Santos for the purpose of withdrawing and receiving the proceeds of the certificate
of time deposit.
Hence, the respondents filed before the RTC of Marikina a complaint for sum of money and damages
against PNB, Aguilar, and a John Doe, questioning the release of the deposit amount to Manimbo who
had no authority from them to withdraw their father’s deposit and who failed to present to PNB all the
requirements for such withdrawal. The RTC ruled in favor of the respondents, holding that PNB and
Aguilar were both negligent in releasing the deposit to Manimbo because the former failed to require the
production of birth certificates to prove claimants’ relationship to the depositor, and that they merely
relied on the affidavit of self-adjudication when several persons claiming to be heirs had already
approached them previously. On appeal, the CA sustained the RTC’s findings.
Petitioner bank argued that it was not negligent because the release of the deposit to Manimbo was
pursuant to an existing policy, and that the documents submitted by Manimbo were more substantial
than those submitted by the respondents. Likewise, petitioner Aguilar argued that she was not negligent
as she merely implemented PNB’s Legal Department's directive to release the deposit to Manimbo.
ISSUE:
Do the acts of PNB and Aguilar constitute negligence, making them liable to the respondents for
damages for failure to exercise the standard of care required of banks?
HELD:
Yes, petitioners PNB and Aguilar are negligent, thus, they are liable to the respondents for damages.
Banking is a business that is impressed with public interest. The public reposes its faith and confidence
upon banks. This is why we have recognized the fiduciary nature of the banks’ functions, and attached
a special standard of diligence for the exercise of their functions. This fiduciary nature of banking is
affirmed in Section 2 of R.A. No. 8791 or The General Banking Law, to wit: “The State recognizes the
fiduciary nature of banking that requires high standard of integrity and performance.” This fiduciary
relationship means that the bank’s obligation to observe “high standards of integrity and performance”
is deemed written into every deposit agreement between a bank and its depositor. Furthermore, the
fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good
father of a family.
Petitioners PNB and Aguilar’s negligence is based on their failure to exercise the diligence required of
banks when they accepted the fraudulent representations of Manimbo. They disregarded their own
requirements for the release of the deposit to persons claiming to be heirs of a deceased depositor.
They accepted Manimbo’s representations, and released the deposit upon presentation of a mere
photocopy of the death certificate of the deceased, the falsified affidavit of self-adjudication and SPA
purportedly executed by Reyme, and certificate of time deposit. Even the BIR-issued certificate of
payment of, or exception from, estate tax, a legal requirement before the deposit of a decedent is
released, was lacking. Petitioners either have no fixed standards for the release of their deceased clients’
deposits or they have standards that they disregard for convenience, favor, or upon exercise of
discretion. Both are inconsistent with the required diligence of banks. Petitioners did not even think twice
before they released the deposit to Manimbo, despite their being aware that there were other claimants
to the deposit. Given the circumstances, “diligence of a good father of a family” would have required
petitioners to verify. Failing to meet even the standard of diligence of a good father of a family, petitioners’
actions and inactions constitute gross negligence.
Petitioners’ treatment of Angel C. Santos’ account is inconsistent with the high standard of diligence
required of banks. They are grossly negligent, and are thus liable for damages to the respondents.
VALLEJO
TRANSFER OF PROPERTIES BY A DEBTOR WHO IS NOT UNDER RECEIVERSHIP IS BEYOND

THE REACH OF THE REHABILITATION PROCEEDINGS
If, following this payment and while La Savoie remained to be not under receivership, a valid transfer of
the properties comprising the Asset Pool was made in favor of Home Guaranty Corporation, the
properties would then no longer be under the dominion of La Savoie. They would thus be beyond the
reach of rehabilitation proceedings and no longer susceptible to the rule against preference of creditors.
(Home Guaranty Corporation v. La Savoie Development Corporation, G.R. No. 168616,January 28,
2015)
x—————x
TRANSFER OF PROPERTIES BY A DEBTOR WHO IS NOT UNDER RECEIVERSHIP IS BEYOND

THE REACH OF THE REHABILITATION PROCEEDINGS
8. Home Guaranty Corporation v. La Savoie Development Corporation

G.R. No. 168616, January 28, 2015
Leonen, J.
FACTS:
La Savoie Development Corporation (La Savoie), a corporation engaged in the business of real estate
development, subdivision and brokering, found itself unable to pay its obligations to its creditor. It filed
a petition for the declaration of state of suspension of payments. The RTC issued a Stay Order staying
the enforcement of all claims against La Savoie. As a consequence of the stay order, petitioner is
prohibited from selling, encumbering, transferring, or disposing in any manner any of its properties
except in the ordinary course of business. It is further prohibited from making any payment of its liabilities.
Petitioner Home Guaranty Corporation (Home Guaranty) filed an opposition, asserting that it and the
investors of the La Savoie Development Corporation Certificates (LSDC Certificates) had preferential
rights over the properties making up the Asset Pool and this it should be excluded from the Rehabilitation
Proceedings.
Thereafter, the RTC denied the Petition for Rehabilitation and lifted the Stay Order. La Savoie filed an
appeal. In the meantime, Home Guaranty redeemed the LSDC certificates. Home Guaranty paid a total
of P128.5 million as redemption value to certificate holders. As a result of this, the entire assets that
formed part of the La Savoie Asset Pool was assigned to Home Guaranty. Home Guaranty asserts that
the Asset Pool should be excluded from the rehabilitation proceedings in view of the Deed of Assignment
and Coveyance.
ISSUE:
Whether or not the properties comprising of the Asset Pool should be excluded from the proceedings on
La Savoie’s Petition for Rehabilitation.
HELD:
Yes. During rehabilitation receivership, the assets are held in trust for the equal benefit of all creditors to
preclude one from obtaining an advantage or preference over another by the expediency of an
attachment, execution or otherwise. For what would prevent an alert creditor, upon learning of the
receivership, from rushing posthaste to the courts to secure judgments for the satisfaction of its claims
to the prejudice of the less alert creditors.
As is evident from these discussions, however, the intention of "preventing a creditor from obtaining an
advantage" is applicable in the context of an ongoing receivership. The prevention of a creditor's
obtaining an advantage is not an end in itself but further serves the purpose of "giving enough breathing
space for the ... rehabilitation receiver." Thus, it applies only to corporations under receivership. Plainly,
it does not apply to corporations who have sought to put themselves under receivership but, for lack of
judicial sanction, have not been put under or are no longer under receivership.
Here, the Stay Order was lifted, and its lifting was not enjoined or otherwise restrained. There was thus
no Stay Order to speak of in those critical intervening moments when Home Guaranty Corporation acted
pursuant to the guaranty call and paid the holders of the LSDC certificates.
If, following this payment and while La Savoie remained to be not under receivership, a valid transfer of
the properties comprising the Asset Pool was made in favor of Home Guaranty Corporation, the
properties would then no longer be under the dominion of La Savoie. They would thus be beyond the
reach of rehabilitation proceedings and no longer susceptible to the rule against preference of creditors.
PRADO
NEWS AS EXPRESSED IN A VIDEO FOOTAGE IS ENTITLED TO COPYRIGHT PROTECTION

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. (ABS-CBN v. Gozon, G.R. No. 195956, March 11, 2015)
x—————x
NEWS AS EXPRESSED IN A VIDEO FOOTAGE IS ENTITLED TO COPYRIGHT PROTECTION
9. ABS-CBN v. Gozon
G.R. No. 195956, March 11, 2015
Leonen, J.
FACTS:
ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela Cruz at
the Ninoy Aquino International Airport (NAIA) and the subsequent press conference." ABS-CBN allowed
Reuters Television Service (Reuters) to air the footages it had taken earlier under a special embargo
agreement.
ABS-CBN alleged that under the special embargo agreement, any of the footages it took would be for
the "use of Renter's international subscribers only, and shall be considered and treated by Reuters under
'embargo' against use by other subscribers in the Philippines. . . . [N]o other Philippine subscriber of
Reuters would be allowed to use ABS-CBN footage without the latter's consent."
GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are connected,
"assigned and stationed news reporters and technical men at the NAIA for its live broadcast and non-
live news coverage of the arrival of dela Cruz." GMA-7 subscribes to both Reuters and Cable News
Network (CNN). It received a live video feed of the coverage of Angelo dela Cruz's arrival from Reuters.
GMA-7 immediately carried the live newsfeed in its program "Flash Report," together with its live
broadcast. Allegedly, GMA-7 did not receive any notice or was not aware that Reuters was airing
footages of ABS-CBN. GMA-7's news control room staff saw neither the "No Access Philippines" notice
nor a notice that the video feed was under embargo in favor of ABS-CBN.
ABS-CBN filed the Complaint for copyright infringement under Sections 177 and 211 of the Intellectual
Property Code.
ISSUE:
Is news footage copyrightable?
RULING: YES
The news footage is copyrightable. 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. As recognized by this court in Joaquin, 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.
In this case, however, respondents admitted that the material under review — which is the subject of the
controversy — is an exact copy of the original. Respondents did not subject ABS-CBN's footage to any
editing of their own. The news footage did not undergo any transformation where there is a need to track
elements of the original.
Developments in technology, including the process of preserving once ephemeral works and
disseminating them, resulted in the need to provide a new kind of protection as distinguished from
copyright. The designation "neighboring rights" was abbreviated from the phrase "rights neighboring to
copyright." Neighboring or related rights are of equal importance with copyright.
News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations

have not only copyright on but also neighboring rights over their broadcasts.
TECSON
CORPO
INTRA-CORPORATE CONTROVERSIES PREVIOUSLY UNDER THE SECURITIES AND
EXCHANGE COMMISSION’S JURISDICTION ARE NOW UNDER THE JURISDICTION OF
REGIONAL TRIAL COURTS DESIGNATED AS COMMERCIAL COURTS.
Jurisdiction over intra-corporate disputes and all other cases enumerated in Section 5 of Presidential
Decree No. 902-A had already been transferred to designated Regional Trial Courts. Hence, actions
pertaining to intra-corporate disputes should be filed directly before designated Regional Trial
Courts. Intra-corporate disputes brought before other courts or tribunals are dismissible for lack of
jurisdiction. However, the transfer of jurisdiction to the trial courts does not oust the Securities and
Exchange Commission of its jurisdiction to determine if administrative rules and regulations were
violated.(Securities and Exchange Commission v. Subic Bay Golf and Country Club, Inc., G.R. No.
179047 , [March 11, 2015], 755 PHIL 553-583)
X--------------X
10. Securities and Exchange Commission v. Subic Bay Golf and Country Club, Inc.
G.R. No. 179047 , [March 11, 2015]
Leonen, J.:
Facts: Subic Bay Golf Course, also known as Binictican Valley Golf Course, was operated by Subic
Bay Metropolitan Authority (SBMA) under the Bases Conversion Development Authority (BCDA).
Universal International Group of Taiwan (UIG), a Taiwanese corporation, was chosen to implement
the plan to privatize the golf course.
On May 25, 1995, SBMA and UIG entered into a Lease and Development Agreement.
Under the agreement, SBMA agreed to lease the golf course to UIG for 50 years, renewable for
another 25 years. UIG agreed to "develop, manage and maintain the golf course and other related
facilities within the complex[.]" Later, Universal International Group Development Corporation
(UIGDC) succeeded to the interests of UIG on the golf course development. On April 1, 1996,
UIGDC executed a Deed of Assignment in favor of Subic Bay Golf and Country Club, Inc. (SBGCCI).
Under the Deed of Assignment, UIGDC assigned all its rights and interests in the golf course's
development, operations, and marketing to SBGCCI. On April 25, 1996, SBGCCI and UIGDC
entered into a Development Agreement. UIGDC agreed to "finance, construct and develop the [golf
course], for and in consideration of the payment by [SBGCCI] of its 1,530 (SBGCCI) shares of
stock."
Upon SBGCCI's application, the Securities and Exchange Commission issued an Order for
the Registration of 3,000 no par value shares of SBGCCI on July 8, 1996. SBGCCI was issued a
Certificate of Permit to Offer Securities for Sale to the Public of its 1,530 no par value proprietary
shares on August 9, 1996. The shares were sold at P425,000.00 per share. SBGCCI would use the
proceeds of the sale of securities to pay UIGDC for the development of the golf course.
In the letter addressed to Director of Securities and Exchange Commission's Corporation
Finance Department, complainants Regina Filart (Filart) and Margarita Villareal (Villareal) informed
the Securities and Exchange Commission that they had been asking UIGDC for the refund of their
payment for their SBGCCI shares. UIGDC did not act on their requests. They alleged that they
purchased the shares in 1996 based on the promise of SBGCCI and UIGDC to deliver certain
amenities however, such were not delivered.
The SEC after an ocular inspection, ordered SBGCCI AND UIGDC to refund Filart and
Villareal the total purchase price of shares of SBGCCI shares.
SBGCCI and UIGDC filed a Petition for Review, SBGCCI and UIGDC assailed the
Corporation Finance Department's and the Securities and Exchange Commission's authority to
order a refund of investments. They also assailed its jurisdiction over the case, which according to
SBGCCI and UIGDC involved an intra-corporate dispute over which only the Regional Trial Court
has jurisdiction.|||
Issue: Whether or not the SEC has jurisdiction over the matter.
Held: No. Under Presidential Decree No. 902-A, the Securities and Exchange Commission has
jurisdiction over acts amounting to fraud and misrepresentation by a corporation's board of directors,
business associates, and officers. It also provides that it has jurisdiction over intra-corporate
disputes. However, jurisdiction over intra-corporate disputes and all other cases enumerated in
Section 5 of Presidential Decree No. 902-A had already been transferred to designated Regional
Trial Courts by Section 5.2 of Republic Act No. 8799. Hence, actions pertaining to intra-corporate
disputes should be filed directly before designated Regional Trial Courts. Intra-corporate disputes
brought before other courts or tribunals are dismissible for lack of jurisdiction. However, the transfer
of jurisdiction to the trial courts does not oust the Securities and Exchange Commission of its
jurisdiction to determine if administrative rules and regulations were violated.|
For a dispute to be "intra-corporate," it must satisfy the relationship and nature of controversy
tests.
The relationship test requires that the dispute be between a
corporation/partnership/association and the public; a corporation/partnership/association and the
state regarding the entity's franchise, permit, or license to operate; a
corporation/partnership/association and its stockholders, partners, members, or officers; and among
stockholders, partners, or associates of the entity.
The nature of the controversy test requires that the action involves the enforcement of
corporate rights and obligations.
FETALVERO
FRIA CASE
With the declaration of insolvency of the debtor, insolvency courts "obtain full and complete
jurisdiction over all property of the insolvent and of all claims by and against [it.]"
It follows that the insolvency court has exclusive jurisdiction to deal with the property of the
insolvent. Consequently, after the mortgagor-debtor has been declared insolvent and the insolvency
court has acquired control of his estate, a mortgagee may not, without the permission of the insolvency
court, institute proceedings to enforce its lien. In so doing, it would interfere with the insolvency court's
possession and orderly administration of the insolvent's properties.
(Metropolitan Bank and Trust Company v. S.F. Naguiat Enterprises, Inc. G.R. No. 178407, March
18, 2015)
11. Metropolitan Bank and Trust Company v. S.F. Naguiat Enterprises, Inc.
G.R. No. 178407, March 18, 2015
Leonen, J.:
FACTS:
Spouses Rommel Naguiat and Celestina Naguiat and S.F. Naguiat Enterprises, Inc. (S.F. Naguiat)
executed a real estate mortgage in favor of Metropolitan Bank and Trust Company (Metrobank) to secure
certain credit accommodations obtained from the latter amounting to P17 million. The mortgage was
constituted over their properties including the subject lot covered by TCT No. 58676.
On March 3, 2005, S.F. Naguiat represented by Celestina T. Naguiat, Eugene T. Naguiat, and Anna N.
Africa obtained a loan from Metrobank in the amount of P1,575,000.00. The loan was likewise secured
by the 1997 real estate mortgage by virtue of the Agreement on Existing Mortgage(s) executed between
the parties on March 15, 2004.
On July 7, 2005, S.F. Naguiat filed a Petition for Voluntary Insolvency with Application for the
Appointment of a Receiver pursuant to Act No. 1956, as amended, before the Regional Trial Court of
Angeles City and which was raffled to Branch 56. Among the assets declared in the Petition was the
property covered by TCT No. 58676 (one of the properties mortgaged to Metrobank).This is approved
on July 12, 2005.
Pending the appointment of a receiver, Judge Buan directed the creditors, including Metrobank, to file
their respective Comments on the Petition. In lieu of a Comment, Metrobank filed a Manifestation and
Motion informing the court of Metrobank's decision to withdraw from the insolvency proceedings because
it intended to extrajudicially foreclose the mortgaged property to satisfy its claim against S.F. Naguiat.
On November 8, 2005, Metrobank instituted an extrajudicial foreclosure proceeding against the

mortgaged property covered by TCT No. 58676 and sold the property at a public auction held on
December 9, 2005 to Phoenix Global Energy, Inc., the highest bidder. Afterwards, Sheriff Claude B.
Balasbas prepared the Certificate of Sale and submitted it for approval to Clerk of Court Vicente S.
Fernandez, Jr. and Executive Judge Bernardita Gabitan-Erum (Executive Judge Gabitan-Erum).
However, Executive Judge Gabitan-Erum issued the Order dated December 15, 2005 denying her
approval of the Certificate of Sale in view of the July 12, 2005 Order issued by the insolvency court.
Upon appeal, the Court of Appeals rendered its Decision dismissing the Petition on the basis of
Metrobank's failure to "obtain the permission of the insolvency court to extrajudicially foreclose the
mortgaged property." The Court of Appeals declared that "a suspension of the foreclosure proceedings
is in order, until an assignee [or receiver,] is elected or appointed [by the insolvency court] so as to afford
the insolvent debtor proper representation in the foreclosure [proceedings]."29
Petitioner argues that nowhere in Act No. 1956 does it require that a secured creditor must first obtain
leave or permission from the insolvency court before said creditor can foreclose on the mortgaged
property.
ISSUE:
Is the Insolvency Court’s consent handling the insolvency proceeding necessary?
HELD:
(Note: the law applied in this case is still Act No. 1956,”An Act Providing for the Suspension of
Payments, the Relief of Insolvent Debtors, the Protection of Creditors, and the Punishment of
Fraudulent Debtors” since the case took place before the effectivity of FRIA, July 18, 2010)
Yes.
With the declaration of insolvency of the debtor, insolvency courts "obtain full and complete jurisdiction
over all property of the insolvent and of all claims by and against [it.]" It follows that the insolvency court
has exclusive jurisdiction to deal with the property of the insolvent. Consequently, after the mortgagor-
debtor has been declared insolvent and the insolvency court has acquired control of his estate, a
mortgagee may not, without the permission of the insolvency court, institute proceedings to enforce its
lien. In so doing, it would interfere with the insolvency court's possession and orderly administration of
the insolvent's properties
Section 59 of Act No. 1956 proceeds to state that when "the property is not sold or released, and
delivered up, or its value fixed, the creditor [is] not allowed to prove any part of his debt," but the assignee
shall deliver to the creditor the mortgaged property. Hence, explicitly under Section 59 and as a
necessary consequence flowing from the exclusive jurisdiction of the insolvency court over the estate of
the insolvent, the mortgaged property must first be formally delivered by the court or the assignee (if one
has already been elected) before a mortgagee-creditor can initiate proceedings for foreclosure.
To give the secured creditor a free hand in foreclosing its collateral upon the initiation of insolvency
proceedings may frustrate the basic objectives of Act No. 1956 of maximizing the value of the estate of
the insolvent or obtaining the highest return possible from its sale for the benefit of all the creditors (both
secured and unsecured).
PALTING
A corporation has a separate and distinct personality from those who represent it.
As a general rule, a corporation has a separate and distinct personality from those who represent it. Its
officers are solidarily liable only when exceptional circumstances exist, such as cases enumerated in
Section 31 of the Corporation Code. The liability of the officers must be proven by evidence sufficient to
overcome the burden of proof borne by the plaintiff. (Pioneer Insurance Surety v Morning Star Travel,
July 8, 2015)
12. PIONEER INSURANCE SURETY CORPORATION v MORNING STAR TRAVEL & TOURS, INC,
ESTELITA CO WONG, BENNY H. WONG, ARSENIO CHUA, SONNY CHUA, AND WONG YAN TAK.
G.R. No. 198436; July 8, 2015
LEONEN, J.
FACTS:
International Air Transport Association (IATA), a Canadian corporation licensed to do business in the
PH, appointed Morning Star as an accredited travel agency. IATA-accredited travel agents can avail air
transport tickets on credit from various airlines, and then sell these to passengers at prices fixed by the
airlines. The travel agents must report ticket sales to IATA and account all payments received through
a centralized billing system. In effect, travel agents only hold in trust all monies collected as these belong
to the airline companies. Pursuant to this arrangement, Morning Star and IATA entered into a Passenger
Sales Agency Agreement.
IATA obtained a Credit Insurance Policy from Pioneer to assure itself of payments by the accredited
travel agents (for the ticket sales). This policy was made known to travel agents. Morning Star, through
its President, Benny Wong, was among those that declared itself liable to indemnify Pioneer for any and
all claims under the policy. Morning Star had an accrued billing of P49,051,641.80 and US$325,865.35.
It failed to remit these amounts despite several demands. Pursuant to the credit insurance policies, IATA
demanded indemnification from Pioneer, which were duly satisfied.
Consequently, Pioneer demanded payment from Morning Star by filing a Complaint for Collection of
Sum of Money and Damages against the agency and its shareholders and directors. Pioneer asserts
personal liability of corporate officers due to their alleged negligence in running the company. Morning
Star contracted huge loans despite incurring operating losses and having no asset to be attached.
Another alleged inidicia of fraud was the existence of a sister company having the same set of officers
as Morning Star, but was well performing financially.
RTC decided in Pioneer’s favor, and was affirmed by the CA. The CA however absolved Morning Star’s
corporate officers and heled only Morning Star liable.
ISSUE:
Is Article 31 of the Corporation Code applicable? Can the veil of corporation fiction be pierced, and
Morning Star’s corporate officers be held liable?
HELD:
NO. The law vests corporations with a separate and distinct personality from those that represent these
corporations. Personal liability of a corporate director, trustee or officer along (although not necessarily)
with the corporation may so validly attach, as a rule, only when —
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in
directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders
or other persons;
2. He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith
file with the corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action.’
Piercing the corporate veil in order to hold corporate officers personally liable for the corporation’s debts
requires that "the bad faith or wrongdoing of the director must be established clearly and convincingly
as bad faith is never presumed."
Oria v. McMicking enumerates several badges of fraud. Petitioner argues the existence of the fourth to
sixth badges—which it failed to substantiate:
1. The fact that the consideration of the conveyance is fictitious or is inadequate.
2. A transfer made by a debtor after suit has been begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially.
6. The fact that the transfer is made between father and son, when there are present other of the above
circumstances.
7. The failure of the vendee to take exclusive possession of all the property.
This court has held that the "existence of interlocking directors, corporate officers and shareholders is
not enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy
considerations."
In any event, petitioner failed to plead and prove the circumstances that would pass the following control
test for the operation of the alter ego doctrine:
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances
but of policy and business practice in respect to the transaction attacked so that the corporate entity as
to this transaction had at the time no separate mind, will or existence of its own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of
plaintiff’s legal right;
(3) The aforesaid control and breach of duty must [have] proximately caused the injury or unjust loss
complained of.
The records do not show that the individual respondents controlled Morning Star Tour Planners, Inc. and
that such control was used to commit fraud against petitioner. Neither does this suspicion support
petitioner’s position that the individual respondents were in bad faith or gross negligence in directing the
affairs of respondent Morning Star.
SANGKAL
The Master of the Vessel does not lose control and command of the vessel even after Pilotage
Doctrine 1: If the master observes that the pilot is incompetent or physically incapable, then it is his duty
to refuse to permit the pilot to act. If no such reasons exist, master is justified in relying upon the pilot
but NOT blindly. (Lorenzo Shipping Corp v. National Power Corporation, G.R. No., 181683 and
184568 Date October 7 2015)
Presumption of Fault against a Moving Vessel that strikes a Stationary Object.

Doctrine 2: The moving vessel must show that it was without fault or that the collision was occasioned
by the fault of the stationary object or was the result of inevitable accident. (Lorenzo Shipping Corp v.
National Power Corporation, G.R. No., 181683 and 184568 Date October 7 2015)
x—————x
TICKLER
13. Lorenzo Shipping Corp v. National Power Corporation

G.R. No., 181683 and 184568 Date October 7 2015
LEONEN, J.
FACTS:
Consolidation of both petitions for review of CA’s decision
One vessel rammed another also damaging other non-propelled barges in the wharf. At the time of the
collision, the vessel was under the control of Captain Yape, while Captain Villarias, as master of the
vessel, stayed beside Yape to repeat the latter’s orders. Respondent filed a complaint for damages.
Petitioner argued that it should not be made liable since operational control of the vessel was yielded to
the pilot.
RTC absolved petitioner, CA reversed after.
ISSUE:
WON Lorenzo shipping is liable despite that the one in control of the vessel was the pilot and not the
Master of the vessel
WON Lorenzo shipping is liable on the barges present in the wharf that was damaged though they were
not moving
HELD:
1. Yes. Petitioner is liable for damages despite the mandatory pilotage of Yape.
The Master of the vessel does not lose control and command of the vessel just because of pilotage.
Villarias was ultimately remiss of his duties when he did nothing even after the orders of Yape became
unheeded. If the master observes that the pilot is incompetent or physically incapable, then it is his duty
to refuse to permit the pilot to act.
Thus, If no such reasons exist, master is justified in relying upon the pilot but NOT blindly. Master must
exercise a degree of vigilance commensurate with the circumstances.
2. Yes. There is a presumption of fault against a moving vessel that strikes a stationary object.
The moving vessel must show that it was without fault or that the collision was occasioned by
the fault of the stationary object or was the result of inevitable accident.
BRILLANTES
TRANSFER OF SECURED CREDITOR’S RIGHTS TO A THIRD PARTY. Through the assignment of

credit, the new creditor is entitled to the rights and remedies available to the previous creditor. Moreover,
under Article 1627 of the Civil Code, "the assignment of a credit includes all the accessory rights, such
as a guaranty, mortgage, pledge or preference." The Loan Sale and Purchase Agreement between
Metrobank (creditor) and Elite Union (third party) entitled Elite Union to all the rights and interests that
petitioner had had as creditor of respondent G & P, including the securities of the loan account.
(Metrobank v. G & P Builders, GR No. 89509, November 23, 2015)
x—————x
TRANSFER OF SECURED CREDITOR’S RIGHTS TO A THIRD PARTY.
14. Metropolitan Bank & Trust Company v. G & P Builders, Inc.

GR No. 189509, November 23, 2015
Leonen, J.
FACTS:
This is a Petition for Review under Rule 45 assailing the Court of Appeals Decision which reversed and
set aside the Order of Rehabilitation Court that allowed the withdrawal of the Php15, 000,000.00 deposit
with petitioner Metrobank & Trust Company (Metrobank).
On 17 March 2003, responded G & P Builders Inc. (G & P) filed a Petition for Rehabilitation in the RTC
of Misamis Oriental. Among the allegations in its petition is that G & P obtained a loan from Metrobank
and mortgaged twelve (12) parcels of land as collateral. G & P’s loan obligation amounted to Php
52,094,711.00 at the time of the filing of the Petition before the RTC. The RTC issued a Stay Order and
initial hearing was set on 06 May 2003.
During the pendency of the rehabilitation proceedings, Metrobank and G & P executed a MOA where
the parties agreed that four (4) out of 12 parcels of land mortgaged would be released and sold which
amounted to Php 15,000,000.00. Pursuant to such MOA, the said amount was deposited with Metrobank
“for subsequent disposition and application in conformity with the Court approved Rehabilitation Plan.”
The RTC approved the first MOA as a compromise agreement between the parties, saying that G & P
entered into compromise agreements with its creditors as approved by the rehabilitation court.
Thereafter, Metrobank entered into a Loan Sale and Purchase Agreement with a third party, Elite Union
wherein Metrobank sold G & P’s loan account for Php 10,419,000.00. With this, Metrobank’s counsel
withdrew his appearance before the rehabilitation court while Elite Union moved to substitute the same.
Furthermore, G & P, Elite Union, and Spouses Paras executed a second MOA wherein Elite Union sold
all its rights, titles, and interests over G & P’s account to Spouses Paras.
G & P filed a Motion for the Release of Unapplied Deposit of Php 15,000,000.00 with Metrobank.
However, Metrobank opposed the Motion and claimed that the deposit was not covered by the contract
transferring G & P's loan obligation to Elite Union. According to Metrobank, the release of titles was
conditioned on the understanding that the proceeds would "be applied exclusively in favor of Metrobank."
The rehabilitation court granted G & P's Motion and ordered the release of unapplied deposit with
Metrobank.
Metrobank moved for reconsideration which was denied. Metrobank then filed before the Court of
Appeals a Petition for Review under Rule 43 of the Rules of Court assailing the Orders of the
rehabilitation court. The Court of Appeals found that Metrobank sold the entire obligation of G & P to
Elite Union; hence, Metrobank was not entitled to the P15,000,000.00 deposit.
Moreover, Metrobank alleges that the first MOA specifically provided that the P15,000,000.00 deposited
with petitioner is "earmarked exclusively for Metrobank.” Hence, the amount could not have formed part
of the loan account sold under the Loan Sale and Purchase Agreement and the second MOA.
ISSUE: Whether or not the Court of Appeals erred in ruling that the Php 15,000,000.00 deposit is
included in the transfer of the loan account from petitioner Metrobank to Elite Union
HELD:
No. As the Court of Appeals held, the first MOA between Metrobank and G & P did not provide for an
outright partial payment of respondent G & P's loan obligation.
When Metrobank entered into the Loan Sale and Purchase Agreement with Elite Union, the entire
obligation was transferred to Elite Union. Through the assignment of credit, the new creditor is entitled
to the rights and remedies available to the previous creditor. Moreover, under Article 1627 of the Civil
Code, "the assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge
or preference." The Loan Sale and Purchase Agreement entitled Elite Union to all the rights and interests
that petitioner had had as creditor of respondent G & P, including the securities of the loan account. This
is clear from the provisions of the Loan Sale and Purchase Agreement
The provisions of the first MOA are plain and simple in that the application of the deposit to the loan
account will be at a later time and subject to the rehabilitation court's approval. Contrary to Metrobank's
argument, nowhere in the first MOA nor in the Loan Sale and Purchase Agreement is it mentioned that
the P15,000,000.00 deposit would be applied to the interests and penalties of the principal loan balance.
What was sold to Elite Union under the Loan Sale and Purchase Agreement was respondent G & P's
total loan obligation of P52,094,711.00, inclusive of the remaining securities and proceeds from the sale
of some of the securities as stated in the first MOA.
If it were Metrobank's intention to remain a creditor of respondent G & P with respect to the
P15,000,000.00 deposit, then it should have provided unequivocally so in the Loan Sale and
Purchase Agreement it entered into with Elite Union. Nowhere in this Agreement did petitioner
reserve its right to the P15,000,000.00 deposit. Instead, it declared that the "Outstanding Principal
Balance of the Loan is the total outstanding obligation of the Obligor [respondent G & P] of the Loan to
the Seller [petitioner]."
To reiterate, the compromise judgment approved petitioner's priority or preference as to the deposit.
However, petitioner assigned this priority or preference in favor of Elite Union.
The Supreme Court cannot speculate as to the reasons why petitioner sold all its rights and interests
over respondent G & P's loan account for a lower price. Without sufficient evidence, legal basis, and
compelling reasons, the Court cannot read beyond the written agreements between the parties.
CHUA
UNAUTHORIZED ACTS OF AN OFFICER DO NOT BIND THE COPORATION

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. Contracts entered into by persons without authority from the corporation shall generally be
considered ultra vires and unenforceable against the corporation (University of Mindanao v. Bangko
Sentral Pilipinas, G.R. No. 194964-65, January 11, 2016).
KNOWLEDGE OF AN OFFICER CONSIDERED AS KNOWLEDGE OF CORPORATION APPLIES

ONLY WHEN THE FORMER ACTS WITHIN HIS/HER AUTHORITY
A corporation, being a person created by mere fiction of law, can act only through natural persons such
as its directors, officers, agents, and representatives. Hence, the general rule is that knowledge of an
officer is considered knowledge of the corporation. The rule that 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 (University of Mindanao v. Bangko Sentral Pilipinas, G.R. No. 194964-65,
January 11, 2016).
x—————x
UNAUTHORIZED ACTS OF AN OFFICER DO NOT BIND THE CORPORATION
KNOWLEDGE OF AN OFFICER CONSIDERED AS KNOWLEDGE OF CORPORATION APPLIES

ONLY WHEN THE FORMER ACTS WITHIN HIS/HER AUTHORITY
15. University of Mindanao, Inc. v. Bangko Sentral Pilipinas, et al.

G.R. No. 194964-65, January 11, 2016
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari of the CA Decision, which reversed the Cagayan De Oro City
trial court's and the Iligan City trial court's decisions to nullify mortgage contracts involving petitioner
University of Mindanao's properties.
Sps. Guillermo and Dolores Torres held positions in Petitioner University as Chair of the Board of
Trustees and Assistant treasurer, respectively. Prior to holding these positions, Sps. Torres incorporated
two thrift banks, namely: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao
Savings and Loan Association, Inc. (DSLAI). Respondent BSP issued a standby emergency credit to
FISLAI, upon Guillermo’s request. Subsequently, university’s VP for Finance, Petalcorin, executed a
deed of real estate mortgage over the university’s property in CDO City in favor of BSP. This served as
a security for FISLAI’s loan. To prove his authority to execute such mortgage, Petalcorin showed a
Secretary’s Certificate signed by the university’s corporate secretary. An additional loan was then
granted to FISLAI, thus Petalcorin executed another deed of real estate mortgage, allegedly on behalf
of the petitioner, over its properties in Iligan City. Due to failure to recover from its losses, the thrift banks
– which then merged as MSLAI – were liquidated. Hence, BSP informed the petitioner university that
the bank would foreclose its properties if MSLAI’s total obligation remained unpaid. In its reply, the
petitioner denied that its properties were mortgaged. Thereafter, petitioner filed two complaints for
nullification and cancellation of mortgage.
Petitioner alleged that the execution of the mortgage was ultra vires. It also alleged never authorized
Petalcorin to execute real estate mortgage contracts involving its properties to secure FISLAI’s debts. It
never ratified the execution of the mortgage contracts. In addition, as an educational institution, it cannot
mortgage its properties to secure another person’s debts. For its part, the respondent argued that
Petalcorin was clothed with the authority to transact on behalf of petitioner, and that petitioner is
presumed to have knowledge of its transactions with BSP because its officers participated in it.
ISSUE:
(1) Can petitioner university be bound by the real estate mortgage executed by Petalcorin without its
authority?
(2) Can Sps Torres’ knowledge as to the transaction be interpreted as knowledge of the petitioner
university?
HELD:
(1) No, petitioner cannot be bound by the real estate mortgage executed by Petalcorin because they
were executed without authority of the former.
Being a juridical person, petitioner cannot conduct its business, make decisions, or act in any manner
without action from its Board of Trustees. The Board of Trustees must act as a body in order to exercise
corporate powers. Individual trustees are not clothed with corporate powers just by being a trustee.
Hence, the individual trustee cannot bind the corporation by himself or herself. However, the corporation
may delegate through a board resolution its corporate powers or functions to a representative, subject
to limitations under the law and the corporation’s articles of incorporation. Hence, without delegation by
the board of directors or trustees, acts of a person, including those of the corporation's directors,
trustees, shareholders, or officers, executed on behalf of the corporation are generally not binding on
the corporation. Contracts entered into by persons without authority from the corporation shall generally
be considered ultra vires and unenforceable against the corporation.
In this case, the board resolution and the secretary’s certificate were either non-existent or fictitious.
There was no board resolution authorizing Petalcorin to mortgage the university’s properties on its
behalf. Thus, the mortgage contracts executed in favor of respondent do not bind petitioner as they were
unenforceable.
(2) No, Sps Torres’ knowledge as to the transaction cannot be interpreted as knowledge of the petitioner.
Indeed, a corporation, being a person created by mere fiction of law, can act only through natural persons
such as its directors, officers, agents, and representatives. Hence, the general rule is that knowledge of
an officer is considered knowledge of the corporation. The rule that 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. Knowledge of facts acquired or possessed by an officer or agent of a corporation
in the course of his employment, and in relation to matters within the scope of his authority, is notice to
the corporation, whether he communicates such knowledge or not. However, just as the public should
be able to rely on and be protected from corporate representations, corporations should also be able to
expect that they will not be bound by unauthorized actions made on their account. Thus, knowledge
should be actually communicated to the corporation through its authorized representatives. A
corporation cannot be expected to act or not act on a knowledge that had not been communicated to it
through an authorized representative. There can be no implied ratification without actual communication.
Knowledge of the existence of contract must be brought to the corporation's representative who has
authority to ratify it. Further, "the circumstances must be shown from which such knowledge may be
presumed."
In this case, Sps Torres’ knowledge was not obtained as petitioner's 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. Hence, even though the Sps Torres were officers of both the thrift
banks and petitioner, their knowledge of the mortgage contracts cannot be considered as knowledge of
the corporation.
ABRIAM
16. AIR CANADA vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 169507. January 11, 2016.
FACTS: Air Canada is a “foreign corporation organized and existing under the laws of Canada.” It was
granted an authority to operate as an offline carrier by the Civil Aeronautics Board, subject to certain
conditions, which authority would expire on April 24, 2005.“As an offline carrier, it does not have flights
originating from or coming to the Philippines [and does not] operate any airplane [in] the Philippines. Air
Canada engaged the services of Aerotel as its general sales agent in the Philippines. Aerotel “sells Air
Canada passage documents in the Philippines.” For the period ranging from the third quarter of 2000 to
the second quarter of 2002, Air Canada, through Aerotel, filed quarterly and annual income tax returns
and paid the income tax on Gross Philippine Billings in the total amount of P5,185,676.77. On November
28, 2002, Air Canada filed a written claim for refund of alleged erroneously paid income taxes amounting
to P5,185,676.77 before the BIR, Revenue District Office No. 47-East Makati. It found... basis from the
revised definition of Gross Philippine Billings under Section 28(A)(3)(a) of the 1997 National Internal
Revenue Code. To prevent the running of the prescriptive period, Air Canada filed a Petition for Review
before the CTA on November 29, 2002. CTA First Division denied, hence, the claim for refund. It found
that Air Canada was engaged in business in the Philippines through a local agent that sells airline tickets
on its behalf. As such, it should be taxed as a resident foreign corporation at the regular rate f
32%.Further, according to the CTA Air Canada was deemed to have established a “permanent
establishment” in the Philippines under RP-Canada Tax Treaty2 by the appointment of the local sales
agent, “in which the petitioner uses its premises as an outlet where sales of tickets are made. In the
CTA En Banc, it ruled that Air Canada is subject to tax as a resident foreign corporation doing business
in the Philippines since it sold airline tickets in the Philippines.
ISSUE: Whether petitioner Air Canada, as an offline international carrier selling passage documents
through a general sales agent in the Philippines, is a resident foreign corporation within the meaning of
Section 28(A)(1) of the 1997 National Internal Revenue Code
HELD: Yes. The definition of “resident foreign corporation” has not substantially changed throughout
the amendments of the National Internal Revenue Code. All versions refer to “a foreign corporation
engaged in trade or business within the Philippines.” Commonwealth Act No. 466, known as the National
Internal Revenue Code and approved on June 15, 1939, defined “resident foreign corporation” as
applying to “a foreign corporation engaged in trade or business within the Philippines or having an office
or place of business therein.”
The Foreign Investments Act of 1991 also provides guidance with its definition of “doing business” with
regard to foreign corporations. Section 3(d) of the law enumerates the activities that constitute doing
business: d. the phrase “doing business” shall include soliciting orders, service contracts, opening
offices, whether called “liaison” offices or branches; appointing representatives or distributors domiciled
in the Philippines or who in any calendar year stay in the country for a period or periods totalling one
hundred eighty (180) days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply
a continuity of commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally incident to, and
in progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase “doing business” shall not be deemed to include mere
investment as a shareholder by a foreign entity in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its
interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines
which transacts business in its own name and for its own account. While Section 3(d) above states that
“appointing a representative or distributor domiciled in the Philippines which transacts business in its
own name and for its own account” is not considered as “doing business,” the Implementing Rules and
Regulations of Republic Act No. 7042 clarifies that “doing business” includes “appointing representatives
or distributors, operating under full control of the foreign corporation, domiciled in the Philippines
or who in any calendar year stay in the country for a period or periods totaling one hundred eighty (180)
days or more.
Aerotel performs acts or works or exercises functions that are incidental and beneficial to the purpose
of petitioner’s business. The activities of Aerotel bring direct receipts or profits to petitioner. There is
nothing on record to show that Aerotel solicited orders alone and for its own account and without
interference from, let alone direction of, petitioner. On the contrary, Aerotel cannot “enter into any
contract on behalf of [petitioner Air Canada] without the express written consent of [the latter,]” and it
must perform its functions according to the standards required by petitioner. Through Aerotel, petitioner
is able to engage in an economic activity in the Philippines. Further, petitioner was issued by the Civil
Aeronautics Board an authority to operate as an offline carrier in the Philippines for a period of five years,
or from April 24, 2000 until April 24, 2005. Petitioner is a resident foreign corporation that is taxable on
its income derived from sources within the Philippines. Petitioner’s income from sale of airline tickets,
through Aerotel, is income realized from the pursuit of its business activities in the Philippines.
ARGONZA
CORPO
THE CORPORATION, BEING THE PARTY WRONGED, IS AN INDISPENSIBLE IN A DERIVATIVE
SUIT
A stockholder may suffer from a wrong done to or involving a corporation, but this does not vest in the
aggrieved stockholder a sweeping license to sue in his or her own capacity. The determination of the
stockholder's appropriate remedy—whether it is an individual suit, a class suit, or a derivative suit—
hinges on the object of the wrong done. When the object of the wrong done is the corporation itself or
"the whole body of its stock and property without any severance or distribution among individual holders,"
it is a derivative suit, not an individual suit or class/representative suit, that a stockholder must resort to.
(Florete, Jr. v. Florete, G.R No. 174909 and 177275, Leonen, J.)
x—————x
THE CORPORATION, BEING THE PARTY WRONGED, IS AN INDISPENSIBLE IN A DERIVATIVE

SUIT
17. Marcelino M. Florete, Jr., Maria Elena F. Muyco and Raul A. Muyco v. Rogelio M. Florete,
Imelda C. Florete, Diamel Corporation, Rogelio C. Florete Jr., and Margaret Ruth C. Florete
G.R. No. 174909, January 20, 2016
Rogelio M. Florete Sr. v. Marcelino M. Florete, Jr., Maria Elena F. Muyco and Raul A. Muyco
G.R. No. 177275, January 20, 2016, Leonen, J.
FACTS:
These are cases involving a Complaint for Declaration of Nullity of Issuances, Transfers and Sale of
Shares in People’s Broadcasting Service, Inc. and All Posterior Subscriptions and Increases thereto with
Damages.
Spouses Marcelino Florete, Sr. and Salome Florete had four children: Marcelino Florete, Jr., Maria Elena
Muyco, Rogelio Florete, Sr., and Teresita Menchavez. People’s Broadcasting Service, Inc. is a private
corporation in the radio and television station business in the Philippines. It had an authorized capital
stock of P250,000 divided into 2,500 shares at P100 par value per share.
Twenty-five percent of the authorized capital stock were subscribed by Marcelino Sr., Salome Florete,
Ricardo Berlin, Pacifico Sudario, and Atty. Santiago Divinagracia. Berlin and Sudario resigned from their
positions in the company and then each transferred 20 shares to Raul Muyco and Estrella Mirasol.
Marcelino Sr. later died and Rogelio, Sr. started managing the affairs of People’s Broadcasting.
People’s Broadcasting sought the services of the accounting firm Sycip Gorres and Velayo to determine
ownership of equity in the corporation. The firm submitted a report detailing the movements of the
corporation’s shares. It declined to give a categorical statement on equity ownership as the records were
incomplete. The Board of Directors approved the report.
Rogelio, Sr. transferred a portion of his shareholdings to members of his immediate family: Imelda
Florete, Rogelio Florete, Jr., and Margareth Ruth Florete, as well as to Diamel Corporation which was
owned by his family.
Marcelino, Jr., Ma. Elena, and Raul Muyco (Marcelino, Jr. Group) filed before the RTC a Complaint for
Delaration of Nullity of Issuances, Transfers and Sale of Shares in People’s Broadcasting Service, Inc.
and All Posterior Subscription and Increases thereto with Damages against Damiel Corporation, Rogelio,
Sr., Imelda Florete, Margaret Florete, and Rogelio Florete, Jr. (Rogelio, Sr. Group).
Rogelio, Sr. Group filed their Answer with compulsory counterclaim.
The RTC dismissed the complaint finding lack of cause of action and that the Marcelino, Jr. Group was
estopped from questioning the movement of shares. It also ruled that indispensable parties were not
joined in their Complaint. The RTC granted the counterclaim.
Rogelio, Sr. filed a Motion for immediate execution. Later, the Marcelino, Jr. Group filed a Petition for
Review with the CA which denied the same. The RTC, upon motion, granted the Motion for Immediate
Execution. On Certiorari, the CA reversed the Order of Immediate Execution.
ISSUES:
Was it was proper for the Regional Trial Court to dismiss the Complaint filed by the Marcelino, Jr. Group?
HELD:
Yes, the dismissal was proper because the complaint, the action being a derivative suit, failed to implead
indispensable parties.
A stockholder suing on account of wrongful or fraudulent corporate actions (undertaken through

directors, associates, officers, or other persons) may sue in any of three (3) capacities: as an individual;
as part of a group or specific class of stockholders; or as a representative of the corporation.
Villamor v. Umale distinguished individual suits from class or representative suits:
Individual suits are filed when the cause of action belongs to the individual stockholder personally, and
not to the stockholders as a group or to the corporation, e.g., denial of right to inspection and denial of
dividends to a stockholder. If the cause of action belongs to a group of stockholders, such as when the
rights violated belong to preferred stockholders, a class or representative suit may be filed to protect the
stockholders in the group.
Villamor further explained that a derivative suit "is an action filed by stockholders to enforce a corporate
action." A derivative suit, therefore, concerns "a wrong to the corporation itself." The real party in interest
is the corporation, not the stockholders filing the suit. The stockholders are technically nominal parties
but are nonetheless the active persons who pursue the action for and on behalf of the corporation.
The distinction between individual and class/representative suits on one hand and derivative suits on
the other is crucial. These are not discretionary alternatives. The fact that stockholders suffer from a
wrong done to or involving a corporation does not vest in them a sweeping license to sue in their own
capacity.
The remedies that the Marcelino, Jr. Group seeks are for People's Broadcasting itself to avail. Ordinarily,
these reliefs may be unavailing because objecting stockholders such as those in the Marcelino, Jr. Group
do not hold the controlling interest in People's Broadcasting. This is precisely the situation that the rule
permitting derivative suits contemplates: minority shareholders having no other recourse "whenever the
directors or officers of the corporation refuse to sue to vindicate the rights of the corporation or are the
ones to be sued and are in control of the corporation."
The Marcelino, Jr. Group points to violations of specific provisions of the Corporation Code that
supposedly attest to how their rights as stockholders have been besmirched. However, this is not enough
to sustain a claim that the Marcelino, Jr. Group initiated a valid individual or class suit. To reiterate,
whether stockholders suffer from a wrong done to or involving a corporation does not readily vest in
them a sweeping license to sue in their own capacity.
Erroneously pursuing a derivative suit as a class suit not only meant that the Marcelino, Jr. Group lacked
a cause of action; it also meant that they failed to implead an indispensable party.
In derivative suits, the corporation concerned must be impleaded as a party.
There are two consequences of a finding on appeal that indispensable parties have not been joined.
First, all subsequent actions of the lower courts are null and void for lack of jurisdiction. Second, the case
should be remanded to the trial court for the inclusion of indispensable parties. It is only upon the
plaintiff's refusal to comply with an order to join indispensable parties that the case may be dismissed.
BINAYAN
ONCE OWNERSHIP IS PROVEN, THERE ARISES A DISPUTABLE PRESUMPTION THAT THE

REQUIREMENTS OF ARTICLE 2180 IS ALSO PROVEN.
In cases where both the registered-owner rule and Article 2180 apply, the plaintiff must first establish that
the employer is the registered owner of the vehicle in question. Once the plaintiff successfully proves
ownership, there arises a disputable presumption that the requirements of Article 2180 have been proven.
As a consequence, the burden of proof shifts to the defendant to show that no liability under Article 2180
has arisen (CARAVAN TRAVEL AND TOURS INTERNATIONAL, INC. v. ERLINDA ABEJAR, G.R. No.
170631; February 10, 2016).
x--------x
ONCE OWNERSHIP IS PROVEN, THERE ARISES A DISPUTABLE PRESUMPTION THAT THE

REQUIREMENTS OF ARTICLE 2180 IS ALSO PROVEN.
18. CARAVAN TRAVEL AND TOURS INTERNATIONAL, INC. v. ERLINDA ABEJAR

G.R. No. 170631, February 10, 2016
Leonen, J.
FACTS:
Through this Petition for Review on Certiorari petitioner prays that the Decision and Resolution of the CA
reversed and set aside which affirmed with modification the ruling of the RTC finding petitioner liable for
the death of Jesmariane Reyes, the paternal niece of Emerlinda Abejar, who died in a vehicular accident.
Reyes was walking along the west-bound lane of Sampaguita Street, United Paranaque Subdivision IV,
Paranaque city. A Mitsubishi L-300 van with plate number PKM 195 was travelling along the east-bound
lane, opposite Reyes. To avoid an incoming vehicle, the van swerved to its left and hit Reyes. Alex
Espinosa (Espinosa), a witness to the accident, went to her aid and loaded her in the back of the van.
Espinosa told the driver of the van, Jimmy Bautista (Bautista), to bring Reyes to the hospital. Instead of
doing so, Bautista appeared to have left the van parked inside a nearby subdivision with Reyes still in the
van. Upon investigation, it was found that the registered owner of the van was Caravan. Caravan is a
corporation engaged in the business of organizing travels and tours. Bautista was Caravan's employee
assigned to drive the van as its service driver.
Respondent Abejar, Reyes' paternal aunt and the person who raised her since she was nine (9) years old
filed before the RTC of Parañaque a Complaint for damages against Bautista and Caravan. In her
Complaint, Abejar alleged that Bautista was an employee of Caravan and that Caravan is the registered
owner of the van that hit Reyes.
Caravan argues that Abejar offered no documentary or testimonial evidence to prove that Bautista, the
driver, acted "within the scope of his assigned tasks" when the accident occurred. Caravan also argues
that "it exercised the diligence of a good father of a family in the selection and supervision of its
employees."
ISSUE: Having proven the issue of ownership of the negligent vehicle, is it necessary to prove that the
employee-driver acted within the scope of their tasks to make the employer liable for damages.
HELD:
No. it is not fatal to respondent’s cause that she did not adduce proof that Bautista acted within the scope
of his authority. It is sufficient that Abejar proved that petitioner was the registered owner of the van.
In cases where both the registered-owner rule and Article 2180 apply, the plaintiff must first establish that
the employer is the registered owner of the vehicle in question. Once the plaintiff successfully proves
ownership, there arises a disputable presumption that the requirements of Article 2180 have been proven.
As a consequence, the burden of proof shifts to the defendant to show that no liability under Article 2180
has arisen.
This disputable presumption, insofar as the registered owner of the vehicle in relation to the actual driver
is concerned, recognizes that between the owner and the victim, it is the former that should carry the costs
of moving forward with the evidence. The victim is, in many cases, a hapless pedestrian or motorist with
hardly any means to uncover the employment relationship of the owner and the driver, or any act that the
owner may have done in relation to that employment. The registration of the vehicle, on the other hand,
is accessible to the public.
Here, respondent presented a copy of the Certificate of Registration of the van that hit Reyes. The
Certificate attests to petitioner's ownership of the van. Petitioner itself did not dispute its ownership of the
van. Consistent with the rule we have just stated, a presumption that the requirements of Article 2180
have been satisfied arises. It is now up to petitioner to establish that it incurred no liability under Article
2180. This it can do by presenting proof of any of the following: first, that it had no employment relationship
with Bautista; second, that Bautista acted outside the scope of his assigned tasks; or third, that it exercised
the diligence of a good father of a family in the selection and supervision of Bautista.
On the first, petitioner admitted that Bautista was its employee at the time of the accident. On the second,
petitioner was unable to prove that Bautista was not acting within the scope of his assigned tasks at the
time of the accident. On the third, petitioner likewise failed to prove that it exercised the requisite diligence
in the selection and supervision of Bautista.
Hence, having proven ownership of the vehicle, the burden of proof now shifts to the employer that he
has no liability.
MONDIGO
FRIA
Creditors are indispensable parties to a rehabilitation case, even if a rehabilitation case is non-
adversarial.
An appeal to a corporate rehabilitation case may deprive creditor-stakeholders of property. Due process
dictates that these creditors be impleaded to give them an opportunity to protect the property owed to
them. Creditors are indispensable parties to a rehabilitation case, even if a rehabilitation case is non-
adversarial.) (Viva Shipping Lines vs. Keppel Philippines Marine, G.R. No.177382, February 17,
2016)
Liberality
19. Viva Shipping Lines vs. Keppel Philippines Marine

G.R. No. 177382, February 17, 2016
Leonen, J.
FACTS:
On October 4, 2005, Viva Shipping Lines, Inc. (Viva Shipping Lines) filed a Petition for Corporate
Rehabilitation before the Regional Trial Court of Lucena City. The Regional Trial Court initially denied
the Petition for failure to comply with the requirements in Rule 4, Sections 2 and 3 of the Interim Rules
of Procedure on Corporate Rehabilitation. On October 17, 2005, Viva Shipping Lines filed an Amended
Petition.
According to Viva Shipping Lines, the devaluation of the Philippine peso, increased competition, and
mismanagement of its businesses made it difficult to pay its debts as they became due. It also stated
that “almost all [its] vessels were rendered unserviceable either because of age and deterioration that
[it] can no longer compete with modern made vessels owned by other operators.”
On October 19, 2005, the Regional Trial Court found that Viva Shipping Lines’ Amended Petition to be
“sufficient in form and substance,” and issued a stay order. It stayed the enforcement of all monetary
and judicial claims against Viva Shipping Lines, and prohibited Viva Shipping Lines from selling,
encumbering, transferring, or disposing of any of its properties except in the ordinary course of business.
The Regional Trial Court also appointed Judge Mendoza as rehabilitation receiver.
On March 24, 2006, Judge Mendoza withdrew his acceptance of appointment as rehabilitation receiver.
As replacement, Viva Shipping Lines nominated Atty. Antonio Acyatan, while Metrobank nominated Atty.
Rosario S. Bernaldo. Keppel Philippines Marine, Inc. adopted Metrobank’s nomination.
In the Order dated October 30, 2006,36 the Regional Trial Court lifted the stay order and dismissed Viva
Shipping Lines’ Amended Petition for failure to show the company’s viability and the feasibility of
rehabilitation.
Aggrieved, Viva Shipping Lines filed a Petition for Review under Rule 43 of the Rules of Court before
the Court of Appeals.42 It only impleaded Hon. Adolfo V. Encomienda, the Presiding Judge of the trial
court that rendered the assailed decision. It did not implead any of its creditors, but served copies of the
Petition on counsels for Metrobank, Keppel Philippines Marine, Inc., Pilipinas Shell, City of Batangas,
Province of Quezon, and City of Lucena.43 Viva Shipping Lines neither impleaded nor served a copy of
the Petition on its former employees or their counsels.
The Court of Appeals dismissed Viva Shipping Lines’ Petition for Review. The Court of Appeals ruled
that due to the failure of Viva Shipping Lines to implead its creditors as respondents, “there are no
respondents who may be required to file a comment on the petition, pursuant to Section 8 of Rule 43.
Petitioner argues that the Court of Appeals should have given due course to its Petition and excused its
noncompliance with procedural rules.73 For petitioner, the Interim Rules of Procedure on Corporate
Rehabilitation mandates a liberal construction of procedural rules, which must prevail over the strict
application of Rule 43 of the Rules of Court.74
ISSUE:
1. Whether or not petitioner’s failure to implead his creditors is fatal to his cause.
2. Whether petitioner is entitled to the liberal application of the rules.
3. Whether petitioner is entitled to a new rehabilitation receiver.
HELD:
1. Yes. The first rule breached by petitioner is the failure to implead all the indispensable parties.
Petitioner did not even interpose reasons why it should be excused from compliance with the rule to
“state the full names of the parties to the case, without impleading the court . . . as . . .
respondents.” Petitioner did exactly the opposite. It failed to state the full names of its creditors as
respondents. Instead, it impleaded the Presiding Judge of the originating court.
Creditors are indispensable parties to a rehabilitation case, even if a rehabilitation case is non-
adversarial.
A corporate rehabilitation case cannot be decided without the creditors’ participation. The court’s role is
to balance the interests of the corporation, the creditors, and the general public. Impleading creditors as
respondents on appeal will give them the opportunity to present their legal arguments before the
appellate court. The courts will not be able to balance these interests if the creditors are not parties to a
case. Ruling on petitioner’s appeal in the absence of its creditors will not result in judgment that is
effective, complete, and equitable.
The failure of petitioner to implead its creditors as respondents cannot be cured by serving copies of the
Petition on its creditors. Since the creditors were not impleaded as respondents, the copy of the Petition
only serves to inform them that a petition has been filed before the appellate court. Their participation
was still significantly truncated. Petitioner’s failure to implead them deprived them of a fair hearing. The
appellate court only serves court orders and processes on parties formally named and identified by the
petitioner. Since the creditors were not named as respondents, they could not receive court orders
prompting them to file remedies to protect their property rights.
2. No. Liberality in corporate rehabilitation procedure only generally refers to the trial court, not to the
proceedings before the appellate court. The Interim Rules of Procedure on Corporate Rehabilitation
covers petitions for rehabilitation filed before the Regional Trial Court. Thus, Rule 2, Section 2 of the
Interim Rules of Procedure on Corporate Rehabilitation, which refers to liberal construction, is limited to
the Regional Trial Court. The liberality was given “to assist the parties in obtaining a just, expeditious,
and inexpensive disposition of the case.
3. No. Petitioner argues that after Judge Mendoza’s withdrawal as rehabilitation receiver, the Regional
Trial Court should have appointed a new rehabilitation receiver to evaluate the rehabilitation plan. We
rule otherwise. It is not solely the responsibility of the rehabilitation receiver to determine the validity of
the rehabilitation plan. The Interim Rules of Procedure on Corporate Rehabilitation allows the trial court
to disapprove a rehabilitation plan156 and terminate proceedings or, should the instances warrant, to
allow modifications to a rehabilitation plan.
FABICO
TRANSPO
PASSENGER HAS THE CORRELATIVE DUTY TO EXERCISE ORDINARY DILIGENCE IN THE
CONDUCT OF HIS/HER AFFAIRS
The duty of an airline to disclose all the necessary information in the contract of carriage does not remove
the correlative obligation of the passenger to exercise ordinary diligence in the conduct of his or her
affairs. The passenger is still expected to read through the flight information in the contract of carriage
before making his or her purchase. If he or she fails to exercise the ordinary diligence expected of
passengers, any resulting damage should be borne by the passenger.
PASSENGER HAS THE CORRELATIVE DUTY TO EXERCISE ORDINARY DILIGENCE IN THE

CONDUCT OF HIS/HER AFFAIRS
20. Manay v. Cebu Air, Inc

G.R. No. 210621, April 04, 2016
LEONEN, J.:
Facts:
This resolves a Petition for Review on Certiorari assailing the Court of Appeals in dismissed the
Complaint for Damages filed by petitioners Alfredo Manay, Jr., et al against respondent Cebu Air,
Incorporated (Cebu Pacific).
June Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip tickets from Manila to Palawan for
himself and on behalf of his relatives and friends. Jose alleged that he specified to "Alou," the Cebu
Pacific ticketing agent, that his preferred date and time of departure from Manila to Palawan should be
on July 20, 2008 at 8:20 a.m. and that his preferred date and time for their flight back to Manila should
be on July 22, 2008 at 4:15 p.m. He alleged that after paying for the tickets, Alou printed the tickets,12
which consisted of three (3) pages. Since the first page contained the details he specified to Alou, he no
longer read the other pages of the flight information. Jose and his 19 companions boarded the 0820
Cebu Pacific flight to Palawan and had an enjoyable stay. On the afternoon of July 22, 2008, the group
proceeded to the airport for their flight back to Manila. During the processing of their boarding passes,
they were informed by Cebu Pacific personnel that nine (9) of them could not be admitted because their
tickets were for the 10:05 a.m flight earlier that day. Upon checking the tickets, they learned that only
the first two pages had the schedule Jose specified. They were left with no other option but to rebook
their tickets.
Jose, et al. argue that Cebu Pacific is a common carrier obligated to exercise extraordinary diligence to
carry Jose, et al. to their destination at the time clearly instructed to its ticketing agent. Cebu Pacific, on
the other hand, argues that the damage in this case was caused by Jose, et al.'s "gross and inexplicable
negligence."
ISSUE:
Is respondent Cebu Air, Inc liable to petitioners for damages for the issuance of a plane ticket with an
allegedly erroneous flight schedule?
HELD:
No, Cebu Air, Inc is not liable.
Ticketing, as the act of issuing the contract of carriage, is necessarily included in the exercise of
extraordinary diligence. Once a plane ticket is issued, the common carrier binds itself to deliver the
passenger safely on the date and time stated in the ticket. The contractual obligation of the common
carrier to the passenger is governed principally by what is written on the contract of carriage.
In this case, both parties stipulated that the flight schedule stated on the nine (9) disputed tickets was
the 10:05 a.m. flight of July 22, 2008. According to the contract of carriage, respondent's obligation as a
common carrier was to transport nine (9) of the petitioners safely on the 10:05 a.m. flight of July 22,
2008.. Based on the information stated on the contract of carriage, all three (3) pages were recapped to
petitioner Jose.
Even assuming that the ticketing agent encoded the incorrect flight information, it is incumbent upon the
purchaser of the tickets to at least check if all the information is correct before making the purchase. The
tickets were issued 37 days before their departure from Manila. There was more than enough time to
correct any alleged mistake in the flight schedule. Petitioners were without a doubt negligent.
The duty of an airline to disclose all the necessary information in the contract of carriage does not remove
the correlative obligation of the passenger to exercise ordinary diligence in the conduct of his or her
affairs. The passenger is still expected to read through the flight information in the contract of carriage
before making his or her purchase. If he or she fails to exercise the ordinary diligence expected of
passengers, any resulting damage should be borne by the passenger.
BUENAVISTA
LIP
IDEAS NOT COVERED BY A PATENT ARE FREE FOR THE PUBLIC TO USE AND EXPLOIT
Ideas not covered by a patent are free for the public to use and exploit. Thus, there are procedural rules
on the application and grant of patents established to protect against any infringement. To balance the
public interests involved, failure to comply with strict procedural rules will result in the failure to obtain a
patent. (E.I. Dupont De Nemours and Co. v. Francisco, G.R. No. 174379, August 31, 2016)
21. E.I. Dupont De Nemours and Co. v. Francisco

G.R. No. 174379, August 31, 2016 Leonen, J.
FACTS:
This is a Petition for Review on Certiorari assailing the CA Amended Decision which denied the revival
of Philippine Patent Application No. 35526 (“patent application”), and the CA Resolution which granted
the intervention of Therapharma, Inc. in the revival proceedings.
On July 10, 1987, E.I. Dupont Nemours and Company (petitioner) filed the patent application, handled
by Atty. Nicanor D. Mapili (Atty. Mapili), before the Bureau of Patents, Trademarks, and Technology
Transfer (BPTTT) for Angiotensin II Receptor Blocking Imidazole (losartan), an invention related to the
treatment of hypertension and congestive heart failure. The product was produced and marketed by
Merck, Sharpe, and Dohme Corporation (Merck), petitioner's licensee, under the brand names Cozaar
and Hyzaar. Petitioner changed its counsel to Ortega, Del Castillo, Bacorro, Odulio, Calma, and
Carbonell. The Patent Examiner of the Intellectual Property Office (IPO) sent an office action which
stated that an official revocation of the Power of Attorney of the former counsel and the appointment of
the present by the applicant is required before further action can be undertaken. Petitioner then
submitted a Power of Attorney authorizing the new counsel to prosecute and handle its patent
applications. On the same day, it also filed a Petition for Revival with Cost of the patent application which
was denied by the Director of Patents.
Petitioner argued that its former counsel, Atty. Mapili, did not inform it about the abandonment of the
application, and it was not aware that Atty. Mapili had already died. It argued that it only had actual notice
of the abandonment on January 30, 2002. Petitioner appealed the denial to the Director-General of the
IPO, but the same was denied. CA, however, granted its Petition for Review. In the interim,
Therapharma, Inc. moved for leave to intervene and admit the Attached Motion for Reconsideration and
argued that, on January 4, 2003, it filed before the Bureau of Food and Drugs its own application for a
losartan product "Lifezar," a medication for hypertension, which the Bureau granted. CA granted the
Motion and reversed its Decision.
ISSUE:
Should Petitioner's patent application be revived?
HELD:
No. Under Chapter VII, Section 111(a) of the 1962 Revised Rules of Practice, a patent application is
deemed abandoned if the applicant fails to prosecute the application within four months from the date
of the mailing of the notice of the last action by the BPTT, and not from applicant's actual notice. No
extension of this period is provided by the 1962 Revised Rules of Practice. According to the records of
the BPTT- Chemical Examining Division, petitioner filed the patent application on July 10, 1987. An
Office Action was mailed to petitioner's agent, Atty. Mapili, on July 19, 1988. Because petitioner failed
to respond within the allowable period, the application was deemed abandoned on September 20,
1988.Under Section 113, petitioner had until January 20, 1989 to file for a revival of the patent
application. Its Petition for Revival, however, was filed on May 30, 2002,13 years after the date of
abandonment. Section 113 has since been superseded by Section 133.4 of the Intellectual Property
Code, Rule 930 of the Rules and Regulations on Inventions, and Rule 929 of the Revised Implementing
Rules and Regulations for Patents, Utility Models and Industrial Design. The period of four (4) months
from the date of abandonment, however, remains unchanged. Even assuming that the four (4)-month
period could be extended, petitioner was inexcusably negligent in the prosecution of its patent
application.
Petitioner's patent application, therefore, should not be revived since it was filed beyond the allowable
period.
LAGUMBAY
22. PHIL GEOTHERMAL EMPLOYEES UNION VS UNOCAL PHIL (CHEVRON)
FACTS:Unocal Corporation executed an Agreement and Plan of Merger (Merger Agreement) with
Chevron Texaco Corporation (Chevron) and Blue Merger Sub, Inc. (Blue Merger).9 Blue Merger is a
wholly owned subsidiary of Chevron.10 Under the Merger Agreement, Unocal Corporation merged
with Blue Merger, and Blue Merger became the surviving corporation.11 Chevron then became the
parent corporation of the merged corporations:12 After the merger, Blue Merger, as the surviving
corporation, changed its name to Unocal Corporation.
Theu Union, relying on the CBS wanted Unocal to pay their separation pay since the merger resulted
to cessation and closure of its operation and an implied dismissal of its employees. Unocal refused
and argued otherwise. Failed to reach amicable settlement, the Union filed an unfair labor practice
charge on which DOLE ruled for the Union. Unocal on appeal did state that Unocal Corporation(parent
Corp) was the party to the Merger Agreement with Blue Merger and Chevron. Nonetheless, it did not
use this allegation to argue that it had a separate and distinct personality from Unocal Corporation and
is, thus, not a party to the Merger Agreement. Respondent only raised this argument in its appeal
before the Court of Appeals. CA ruled in Unocal's favor.
ISSUE whether or not respondent is a party to the Merger Agreement, there is no implied dismissal of
its employees as a consequence of the merger.
HELD: A merger is a consolidation of two or more corporations, which results in one or more
corporations being absorbed into one surviving corporation.69 The separate existence of the absorbed
corporation ceases, and the surviving corporation "retains its identity and takes over the rights,
privileges, franchises, properties, claims, liabilities and obligations of the absorbed corporation(s).
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of Unocal Corporation,

then the merger of Unocal Corporation with Blue Merger and Chevron does not affect respondent or
any of its employees. Respondent has a separate and distinct personality from its parent corporation.
Nonetheless, if respondent is indeed a party to the merger, the merger still does not result in the
dismissal of its employees. Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-
Federation of Unions in BPI Unibank71 has ruled that the surviving corporation automatically assumes
the employment contracts of the absorbed corporation, such that the absorbed corporation's
employees become part of the manpower complement of the surviving corporation.
Section 80 of the Corporation Code provides that the surviving corporation shall possess all the rights,
privileges, properties, and receivables due of the absorbed corporation. Moreover, all interests of,
belonging to, or due to the absorbed corporation "shall be taken and deemed to be transferred to and
vested in such surviving or consolidated corporation without further act or deed." The surviving
corporation likewise acquires all the liabilities and obligations of the absorbed corporation as if it had
itself incurred these liabilities or obligations.
there is no dismissal of the employees on account of the merger. Petitioner does not deny that
respondent actually continued its normal course of operations after the merger, and that its members,
as employees, resumed their work with their tenure, salaries, wages, and other benefits intact.
Petitioner was even able to execute with respondent, after the merger, the Collective Bargaining
Agreement from which it anchors its claims.
OGAD
AN ACTION FOR INJUNCTION FILED BY A CORPORATION GENERALLY DOES NOT LIE TO

PREVENT THE ENFORCEMENT BY A STOCKHOLDER OF HIS OR HER RIGHT TO INSPECTION
The clear provision in Section 74 of the Corporation Code is sufficient authority to conclude that an
action for injunction and, consequently, a writ of preliminary injunction filed by a corporation is
generally unavailable to prevent stockholders from exercising their right to inspection. (Philippine
Associated Smelting and Refining Corporation vs. Pablito O. Lim, Manuel A. Agcaoili, and
Consuelo M. Padilla, G.R. No. 172948, 05 October 2016)
x—————x
AN ACTION FOR INJUNCTION FILED BY A CORPORATION GENERALLY DOES NOT LIE TO

PREVENT THE ENFORCEMENT BY A STOCKHOLDER OF HIS OR HER RIGHT TO INSPECTION
23. Philippine Associated Smelting and Refining Corporation vs. Pablito O. Lim, Manuel A.
Agcaoili, and Consuelo M. Padilla
G.R. No. 172948, 05 October 2016
Leonen, J.
FACTS:
Philippine Associated Smelting and Refining (PASAR) Corporation filed a Petition for Review on
Certiorari to assail the CA Decision and Resolution, which lifted and cancelled the writ of preliminary
injunction issued by the Regional Trial Court.
Respondents were former senior officers and presently shareholders of PASAR holding 500 shares
each. They wrote petitioner and demanded to inspect its corporate books and records. PASAR filed
an Amended Petition for Injunction and Damages with prayer for Preliminary Injunction and/or
Temporary Restraining Order, seeking to restrain petitioners from demanding inspection of its
confidential and inexistent records. The RTC enjoined respondents, or their representatives, from
gaining access to the records of PASAR.
Petitioner argues that the right of a stockholder to inspect corporate books and records is limited in that
any demand must be made in good faith or for a legitimate purpose. Respondents, however, have no
legitimate purpose in this case.
ISSUE:
Does injunction properly lie to prevent respondents from invoking their right to inspect?
HELD:
No, an action for injunction filed by a corporation generally does not lie to prevent the enforcement by
a stockholder of his or her right to inspection.
The right to inspect under Section 74 of the Corporation Code is subject to certain limitations.
However, these limitations are expressly provided as defenses in actions filed under Section 74.
Thus, this Court has held that a corporation's objections to the right to inspect must be raised as a
defense. The clear provision in Section 74 of the Corporation Code is sufficient authority to conclude
that an action for injunction and, consequently, a writ of preliminary injunction filed by a corporation is
generally unavailable to prevent stockholders from exercising their right to inspection. Specifically,
stockholders cannot be prevented from gaining access to the (a) records of all business transactions of
the corporation; and (b) minutes of any meeting of stockholders or the board of directors, including
their various committees and subcommittees. Corporations may raise their objections to the right of
inspection through affirmative defense in an ordinary civil action for specific performance or
damages, or through a comment (if one is required) in a petition for mandamus. The corporation or
defendant or respondent still carries the burden of proving (a) that the stockholder has improperly used
information before; (b) lack of good faith; or (c) lack of legitimate purpose.
In this case, petitioner invokes its right to raise the limitations provided under Section 74 of the
Corporation Code. However, petitioner provides scant legal basis to claim this right because it does
not raise the limitations as a matter of defense.
ENRIQUEZ
NOTE: LIP but the case is more of Remedial Law no Commercial Law issue
Intellectual Property Office "shall not be bound by the strict technical rules of procedure and
evidence."
Administrative bodies are not strictly bound by technical rules of procedure. It is reasonable, therefore-
consistent with the precept of liberally applying procedural rules in administrative proceedings, and with
the room allowed by jurisprudence for substantial compliance with respect to the rule on certifications of
non-forum shopping-to construe the error committed by respondent as a venial lapse that should not be
fatal to its cause. (Case Title, G.R. No., Date)
x—————x
Intellectual Property Office "shall not be bound by the strict technical rules of procedure and
evidence."
24. Palao v. Florentino International, Inc

G.R. No. 186967, January 18, 2017
Leonen, J.
FACTS:
In its Decision No. 2007-31, the Bureau of Legal Affairs of the Intellectual Property Office denied
Florentino's Petition for Cancellation. It noted that the testimony and pictures, which Florentino offered
in evidence, failed to establish that the utility model subject of Letters Patent No. UM-7789 was publicly
known or used before Palao' s application for a patent.
In its Resolution No. 2008-1412 dated July 14, 2008, the Bureau of Legal Affairs of the Intellectual
Property Office denied Florentino' s Motion for Reconsideration.
On July 30, 2008, Florentino appealed to the Office of the Director General of the Intellectual Property
Office. This appeal's Verification and Certification of Non-Forum Shopping was signed by Atty. Maximo
of the firm Balgos and Perez. However, Florentino failed to attach to its appeal a secretary's certificate
or board resolution authorizing Balgos and Perez to sign the Verification and Certification of Non-Forum
Shopping. Thus, on August 14, 2008, the Office of the Director General issued the Order requiring
Florentino to submit proof that Atty. Maximo or Balgos and Perez was authorized to sign the Verification
and Certification of Non-Forum Shopping
On August 19, 2008, Florentino filed a Compliance. It submitted a copy of the Certificate executed on
August 15, 2008 by Florentino's Corporate Secretary, Melanie Marie A. C. Zosa-Tan, supposedly
showing its counsel's authority to sign.
In his Order dated September 22, 2008, Intellectual Property Office Director General Cristobal dismissed
Florentino's appeal. He noted that the Secretary's Certificate pertained to an August 14, 2008 Resolution
issued by Florentino' s Board of Directors, and reasoned that the same Certificate failed to establish the
authority of Florentino's counsel to sign the Verification and Certification of Non-Forum Shopping as of
the date of the filing of Florentino's appeal (i.e., on July 30, 2008).
Florentino then filed before the Court of Appeals a Petition for Review under Rule 43. In its assailed
January 8, 2009 Decision, the Court of Appeals faulted Director General Cristobal for an overly strict
application of procedural rules. Thus, it reversed Director General Cristobal's September 22, 2008 Order
and reinstated Florentino' s appeal.
ISSUE:
Whether the Court of Appeals erred in reversing the Order of Intellectual Property Office Director General
Cristobal and in reinstating respondent Florentino' s appeal.
HELD:
The need for a certification of non-forum shopping to be attached to respondent's appeal before the
Office of the Director General of the Intellectual Property Office is established. Section 3 of the
Intellectual Property Office's Uniform Rules on Appeal specifies the form through which appeals may be
taken to the Director General. Section 4(e) specifies the need for a certification of non-forum shopping.
These requirements notwithstanding, the Intellectual Property Office's own Regulations on Inter Partes
Proceedings (which governs petitions for cancellations of a mark, patent, utility model, industrial design,
opposition to registration of a mark and compulsory licensing, and which were in effect when respondent
filed its appeal) specify that the Intellectual Property Office "shall not be bound by the strict technical
rules of procedure and evidence." This rule is in keeping with the general principle that administrative
bodies are not strictly bound by technical rules of procedure. Given these premises, it was an error for
the Director General of the Intellectual Property Office to have been so rigid in applying a procedural
rule and dismissing respondent's appeal.
It is reasonable, therefore-consistent with the precept of liberally applying procedural rules in

administrative proceedings, and with the room allowed by jurisprudence for substantial compliance with
respect to the rule on certifications of non-forum shopping-to construe the error committed by respondent
as a venial lapse that should not be fatal to its cause.
STA. MARIA
A CORPORATION WITH DEBTS THAT HAVE ALREADY MATURED MAY STILL FILE A PETITION
FOR REHABILITATION UNDER THE INTERIM RULES OF PROCEDURE ON CORPORATION
REHABILITATION
A corporation that may seek corporate rehabilitation is characterized not by its debt but by its capacity
to pay this debt. The condition that triggers rehabilitation proceedings is not the maturation of a
corporation's debts but the inability of the debtor to pay these debts. Where the law does not distinguish,
neither should this Court, hence, because the definition under the Interim Rules is encompassing, there
should be no distinction whether a claim has matured or otherwise. (Metrobank v. Liberty Corrugated
Boxes Manufacturing Corporation, G.R. No. 184317, January 25, 2017)
x—————x
A CORPORATION WITH DEBTS THAT HAVE ALREADY MATURED MAY STILL FILE A PETITION
FOR REHABILITATION UNDER THE INTERIM RULES OF PROCEDURE ON CORPORATION
REHABILITATION
25. Metrobank v. Liberty Corrugated Boxes Manufacturing Corporation

G.R. No. 184317, January 25, 2017
LEONEN, J.
FACTS:
This is a Petition for Review on certiorari assailing the decision of the CA affirming the order of the RTC
approving respondent Liberty Corrugated Boxes Manufacturing Corp.'s rehabilitation plan.
Respondent Liberty Corrugated Boxes Manufacturing Corp. (Liberty) obtained various credit
accommodations and loan facilities secured by a mortgage from petitioner Metropolitan Bank and Trust
Company (Metrobank). Liberty defaulted on the loans. Then, it filed a Petition for corporate rehabilitation
claiming that it could not meet its obligations to Metrobank because of the Asian Financial Crisis.
Petitioner Metrobank argues that respondent can no longer file a petition for corporate rehabilitation. It
claims that Rule 4, Section 1 of the Interim Rules restricts the kind of debtor who can file petitions for
corporate rehabilitation. Petitioner insists that the phrase "who foresees the impossibility of meeting its
debts when they respectively fall due" must be construed plainly to mean that an element of foresight is
required. Because foresight is required, the debts of the corporation should not have matured. On the
other hand, respondent Liberty, citing Rule 4, Sections 4 and 6 of the Interim Rules, argues that the
remedy of corporate rehabilitation covers defaulting debtors. Under Section 6, a stay order, which may
assume that cases have been filed to collect on matured debts, may be granted.
ISSUE:
Was the respondent Liberty, as a debtor in default, qualified to file a petition for rehabilitation under Rule
4, Section 1 of the Interim Rules?
HELD:
Yes, respondent Liberty, as a debtor in default, is qualified to file a petition for rehabilitation. A corporation
that may seek corporate rehabilitation is characterized not by its debt but by its capacity to pay this debt.
The condition that triggers rehabilitation proceedings is not the maturation of a corporation's debts but
the inability of the debtor to pay these debts. Where the law does not distinguish, neither should this
Court, hence, because the definition under the Interim Rules is encompassing, there should be no
distinction whether a claim has matured or otherwise.
Rule 4, Section 1 of the Interim Rules does not specify what kind of debtor may seek rehabilitation. The
provision allows creditors holding 25% of the debtor corporation's total liabilities to petition for the
corporation's rehabilitation. Further, Rule 4, Section 6 of the Interim Rules provides for a stay order
"staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by
court action or otherwise." A stay order, however, only applies to the suspension of the enforcement of
claims. Hence, claims, if proper, can still be instituted in other proceedings. There may already be
pending claims against a debtor corporation for debts already matured.
The stay order prevents preference or advantage of creditors over others, including the advantage that
a creditor with matured money claims may have over one whose claims are not in yet in default.
However, secured creditors still retain their preference over unsecured creditors, but enforcement of
such preference is equally suspended upon the appointment of a management committee, rehabilitation
receiver, board, or body. Moreover, under the Interim Rules, "claim" shall include all claims or demands
of whatever nature or character against a debtor or its property, whether for money or otherwise.And
"Creditor" shall mean any holder of a claim. The definition of "claim" and the nature of stay orders
contemplate situations where debtor corporations already in default may be under rehabilitation.Thus,
Rule 4, Section 1 does not limit who may file a petition for rehabilitation.
SANCHEZ
WHEN IT IS UNCONTROVERTED THAT THE INSOLVENT CORPORATION ABANDONED THE OLD

PRINCIPAL OFFICE, THE CORPORATION IS CONSIDERED A RESIDENT OF THE CITY WHERE IT
IS CURRENTLY FOUND
The venue for a petition for voluntary insolvency proceeding under the Insolvency Law is the Court of
First Instance of the province or city where the insolvent debtor resides. A corporation is considered a
resident of the place where its principal office is located as stated in its Articles of Incorporation.
However, when it is uncontroverted that the insolvent corporation abandoned the old principal office, the
corporation is considered a resident of the city where its actual principal office is currently found.
x------------------x
WHEN IT IS UNCONTROVERTED THAT THE INSOLVENT CORPORATION ABANDONED THE OLD

PRINCIPAL OFFICE, THE CORPORATION IS CONSIDERED A RESIDENT OF THE CITY WHERE IT
IS CURRENTLY FOUND
26. PILIPINAS SHELL PETROLEUM CORPORATION vs. ROYAL FERRY SERVICES, INC.,
G.R. No. 188146. February 1, 2017
Leonen, J.
FACTS:
Royal Ferry Services, Inc. (Royal Ferry) is a corporation duly organized and existing under Philippine
law. According to its Articles of Incorporation, Royal Ferry's principal place of business is located at 2521
A. Bonifacio Street, Bangkal, Makati City However, it currently holds office at Room 203, BF
Condominium Building, Andres Soriano corner Solano Streets, Intramuros, Manila.
Royal Ferry filed a verified Petition for Voluntary Insolvency before the Manila RTC. It alleged that it
suffered serious business losses that led to heavy debts. Efforts to revive the company's finances failed,
and almost all assets were either foreclosed or sold to satisfy the liabilities incurred. Royal Ferry ceased
its operations. In a special meeting, its Board of Directors approved and authorized the filing of a petition
for voluntary insolvency in court.
RTC: The RTC declared Royal Ferry insolvent.
Thereafter, Pilipinas Shell Petroleum Corporation (Pilipinas Shell) filed before the Regional Trial Court
of Manila a Formal Notice of Claim and a Motion to Dismiss. In the Notice of Claim, Pilipinas Shell
asserted that Royal Ferry owed them the amount of P2,769,387.67. In its Motion to Dismiss, Pilipinas
Shell alleged that the Petition was filed in the wrong venue. It argued that the Insolvency Law provides
that a petition for insolvency should be filed before the court with territorial jurisdiction over the
corporation's residence. Since Royal Ferry's Articles of Incorporation stated that the corporation's
principal office is located at 2521 A. Bonifacio St., Bangkal, Makati City, the Petition should have been
filed before the Regional Trial Court of Makati and not before the Regional Trial Court of Manila.
RTC denied Shell’s motion to dismiss. However, the Regional Trial Court reconsidered the denial of
Pilipinas Shell's Motion to Dismiss. It held that a corporation cannot change its place of business without
amending its Articles of Incorporation. Without the amendment, Royal Ferry's transfer did not produce
any legal effect on its residence. The Regional Trial Court granted the dismissal of the Petition for
Voluntary Insolvency.
CA: The Court of Appeals reinstated the insolvency proceedings.
ISSUE:
Whether the Petition for Insolvency was properly filed.
HELD:
YES. The Petition for Insolvency was properly filed before the Regional Trial Court of Manila.
With the enactment of Republic Act No. 10142, otherwise known as the Financial Rehabilitation and
Insolvency Act of 2010 (FRIA), the Insolvency Law was expressly repealed on July 18, 2010. The FRIA
is currently the special law that governs insolvency. However, because the relevant proceedings in this
case took place before the enactment of the FRIA, the case needs to be resolved under the provisions
of the Insolvency Law.
Wrong venue is merely a procedural infirmity, not a jurisdictional impediment. Insolvency Law vests
jurisdiction in the Court of First Instance — now the Regional Trial Court. Jurisdiction is acquired based
on the allegations in the complaint. The relevant portion of respondent's Petition for Voluntary Insolvency
reads:
Petitioner was incorporated on 18 October 1996 with principal place of business in 2521 A.
Bonifacio Street, Bangkal, Makati City. At present and during the past six months, [Royal Ferry]
has held office in Rm. 203 BF Condo Building, Andres Soriano cor. Solana St., Intramuros,
Manila, within the jurisdiction of the Honorable Court, where its books of accounts and most of
its remaining assets are kept.
Section 14 of the Insolvency Law specifies that the proper venue for a petition for voluntary insolvency
is the Regional Trial Court of the province or city where the insolvent debtor has resided in for six (6)
months before the filing of the petition.
In this case, the issue of which court is the proper venue for respondent's Petition for Voluntary
Insolvency comes from the confusion on an insolvent corporation's residence. The law places a premium
on the place of residence before a petition is filed since venue is a matter of procedure that looks at the
convenience of litigants.
Requiring a corporation to go back to a place it has abandoned just to file a case is the very definition of
inconvenience. There is no reason why an insolvent corporation should be forced to exert whatever
meager resources it has to litigate in a city it has already left. In insolvency proceedings, the Court needs
to control the property of the insolvent corporation. Thus, the SC held that to determine the venue of an
insolvency proceeding, the residence of a corporation should be the actual place where its principal
office has been located for six (6) months before the filing of the petition. If there is a conflict between
the place stated in the articles of incorporation and the physical location of the corporation's
main office, the actual place of business should control.
CASTRO
TICKLER:
Banks must show that they exercised the required due diligence before claiming to be mortgagees in
good faith or innocent purchasers for value.
In the case of banks and other financial institutions, however, greater care and due diligence are required
since they are imbued with public interest, failing which renders the mortgagees in bad faith.
This Court held in Heirs of Gregorio Lopez v. Development Bank of the Philippines that the rule on
"innocent purchasers or [mortgagees] for value" is applied more strictly when the purchaser or the
mortgagee is a bank. Banks are expected to exercise higher degree of diligence in their dealings,
including those involving lands. Banks may not rely simply on the face of the certificate of title.
27. LAND BANK OF THE PHILIPPINES vs. LORENZO MUSNI, EDUARDO SONZA and SPOUSES
IRENEO AND NENITA SANTOS
G.R. No. 206343 | 22 February 2017
LEONEN, J.
FACTS:
Respondent Lorenzo Musni (Musni) was the compulsory heir of Jovita Musni (Jovita), who was the
owner of a lot in Comillas, La Paz, Tarlac, under Transfer of Certificate Title (TCT) No. 07043.
Musni filed before the Regional Trial Court of Tarlac City a complaint for reconveyance of land and
cancellation of TCT No. 333352 against Spouses Nenita Sonza Santos and Ireneo Santos (Spouses
Santos), Eduardo Sonza (Eduardo), and Land Bank of the Philippines (Land Bank) alleging that Nenita
Sonza Santos (Nenita) falsified a Deed of Sale, and caused the transfer of title of the lot in her and her
brother Eduardo's names. He claimed that the Spouses Santos and Eduardo mortgaged the lot to Land
Bank as security for their loan of ₱1,400,000.00, and that he was dispossessed of the lot when Land
Bank foreclosed the property upon Nenita and Eduardo's failure to pay their loan. Later, the titles of the
lot and another foreclosed land were consolidated in TCT No. 333352, under the name of Land Bank.
Musni claimed that he filed a criminal case against Nenita and Eduardo for falsification of a public
document. The case was filed before the Municipal Trial Court of Tarlac, which rendered a decision
finding Nenita guilty of the imputed crime.
In their Answer, the Spouses Santos admitted having mortgaged the lot to Land Bank. They also
admitted that the property was foreclosed because they failed to pay their loan with the bank. Moreover,
they confirmed that Nenita was convicted in the falsification case filed by Musni.
In defense, the Spouses Santos alleged that they, together with Eduardo, ran a lending business under
the name "Sonza and Santos Lending Investors." As security for the loan of ₱286,640.82, Musni and
his wife executed a Deed of Sale over the lot in favor of the Spouses Santos. The title of the lot was then
transferred to Nenita and Eduardo. The lot was then mortgaged to Land Bank, and was foreclosed later.
Land Bank filed its Amended Answer with Counterclaim and Cross-claim. It asserted that the transfer of
the title in its name was because of a decision rendered by the Department of Agrarian Reform
Adjudication Board, Region III. It countered that its transaction with the Spouses Santos and Eduardo
was legitimate, and that it verified the authenticity of the title with the Register of Deeds. Further, the
bank loan was secured by another lot owned by the Spouses Santos, and not solely by the lot being
claimed by Musni.
Land Bank prayed that it be paid the value of the property and the expenses it incurred, should the trial
court order the reconveyance of the property to Musni.
RTC Ruling
On June 27, 2008, the trial court rendered a Decision, in favor of Musni. It relied on the fact that Nenita
was convicted of falsification of the Deed of Sale. The trial court found that Musni did not agree to sell
the property to the Spouses Santos and Eduardo. In addition, the amount of Musni 's indebtedness was
an insufficient consideration for the market value of the property. Lastly, the sale was executed before
the loan's maturity.
The trial court also found that Land Bank was not an "innocent purchaser for value." The institution of
the criminal case against Nenita should have alerted the bank to ascertain the ownership of the lot before
it foreclosed the same.
Land Bank and Nenita separately moved for reconsideration, which were both denied by the trial court
in an Omnibus Order dated September 11, 2008.
Land Bank and Spouses Santos separately appealed to the Court of Appeals. In its appeal, Land Bank
reiterated that it has demonstrated, by a preponderance of evidence, that it is a mortgagee in good faith
and a subsequent innocent purchaser for value; as such, its rights as the new owner of the subject
property must be respected and protected by the courts.
CA Ruling
The Court of Appeals rendered a Decision on February 29, 2012, affirming with modification the RTC
Decision. It found that the sale of the lot between Musni, and the Spouses Santos and Eduardo, was
null and void since Nenita was convicted for falsifying the signatures of Jovita and Musni in the Deed of
Sale. Therefore, the Spouses Santos and Eduardo could not have been the absolute owners, who could
validly mortgage the property.
The Court of Appeals also held that Land Bank was neither a mortgagee in good faith nor an innocent
purchaser for value for failure to observe the due diligence required of banks.
ISSUES:
1. Whether petitioner is a mortgagee in good faith.
2. Whether petitioner is an innocent purchaser for value.
RULING: Petitioner is neither a mortgagee in good faith nor an innocent purchaser for value.
1.
This Court recognized the relevance of the concept of a mortgagee, and a purchaser in good faith in
Andres, et al. v. Philippine National Bank:
The doctrine protecting mortgagees and innocent purchasers in good faith emanates from the social
interest embedded in the legal concept granting indefeasibility of titles. The burden of discovery of invalid
transactions relating to the property covered by a title appearing regular on its face is shifted from the
third party relying on the title to the co-owners or the predecessors of the title holder. Between the third
party and the co-owners, it will be the latter that will be more intimately knowledgeable about the status
of the property and its history. The costs of discovery of the basis of invalidity, thus, are better borne by
them because it would naturally be lower. A reverse presumption will only increase costs for the
economy, delay transactions, and, thus, achieve a less optimal welfare level for the entire society.
In Philippine Banking Corporation v. Dy, et al., this Court explained this concept in relation to banks:
Primarily, it bears noting that the doctrine of "mortgagee in good faith" is based on the rule that all
persons dealing with property covered by a Torrens Certificate of Title are not required to go beyond
what appears on the face of the title. This is in deference to the public interest in upholding the
indefeasibility of a certificate of title as evidence of lawful ownership of the land or of any encumbrance
thereon. In the case of banks and other financial institutions, however, greater care and due diligence
are required since they are imbued with public interest, failing which renders the mortgagees in bad faith.
Thus, before approving a loan application, it is a standard operating practice for these institutions to
conduct an ocular inspection of the property offered for mortgage and to verify the genuineness of the
title to determine the real owner(s) thereof. The apparent purpose of an ocular inspection is to protect
the "true owner" of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title thereto.
Further, in Philippine National Bank v. Corpuz:

As a rule, the Court would not expect a mortgagee to conduct an exhaustive investigation of the history
of the mortgagor's title before he extends a loan. But petitioner . . . is not an ordinary mortgagee; it is a
bank. Banks are expected to be more cautious than ordinary individuals in dealing with lands, even
registered ones, since the business of banks is imbued with public interest. It is of judicial notice that the
standard practice for banks before approving a loan is to send a staff to the property offered as collateral
and verify the genuineness of the title to determine the real owner or owners.
On petitioner's claim that it was a mortgagee in good faith, the Court of Appeals held that petitioner "was
actually remiss in its duty to ascertain the title of respondents Eduardo and Nenita to the property." The
Court of Appeals' Decision reads:
During trial, appellant Land Bank presented its Account Officer Randy Quijano who testified that while it
conducted a credit investigation and inspection of the subject property as stated in its Credit Investigation
Report dated March 17, 1998, a perusal of the report and the testimony of the account officer failed to
establish that the bank's standard operating procedure in accepting the property as security, including
having investigators visit the subject property and appraise its value were followed.
At the most, the report and the testimonial evidence presented were limited to the credit investigation
report conducted by Randy Quijano who, in turn relied on the report made by its field officers. Land
Bank's field officers who allegedly visited the property and conducted interviews with the neighbors and
verified the status of the property with the courts and the police were not presented. At the most, We
find [Land Bank's] claim of exhaustive investigation was a just generalization of the bank's operating
procedure without any showing if the same has been followed by its officers.
The Credit Investigation Report also does not corroborate the material allegations of [Land Bank] that
verifications were made with the Treasurer's Office and the courts and the owners of the adjoining
properties. For one, the report failed to mention the names of the adjoining owners or neighbors whom
the credit investigation team were able to interview; second, the report did not mention the status of the
realty taxes covering the property although Land Bank is now claiming that Eduardo and Nenita were
up to date in paying the realty taxes. No certification from the Treasurer's Office was presented to prove
Land Bank's claim that Eduardo and Nenita were the ones regularly paying the taxes on the said
property.
Moreover, what further militates against the claim of Land Bank's good faith is the fact that TCT No.
304649 which was mortgaged to the bank, was issued by virtue of a Decision of the Department of
Agrarian Reform Adjudication Board Region III dated December 29,
1997. The said Decision was, however, inscribed only on February 25, 1998, after the issuance of TCT
No. 304649 on February 8, 1998. In addition, the property was mortgaged to Land Bank a few days after
the inscription of the alleged Decision of the Department of Agrarian Reform Adjudication Board. This
circumstance should have aroused a suspicion on the part of [Land Bank] and anyone who deliberately
ignores a significant fact that would create suspicion in an otherwise reasonable person cannot be
considered as a mortgagee in good faith.
2.
The Court of Appeals also found that petitioner was not an innocent purchaser for value:
Neither can We also consider [Land Bank] as an innocent purchaser for value because the subject
property was foreclosed on May 4, 1999 while the complaint for falsification was filed on March 4, 1999.
A purchaser in good faith is one who buys property without notice that some other person has a right to
or interest in such property and pays its fair price before he has notice of the adverse claims and interest
of another person in the same property. Clearly, the factual circumstances as afore-cited surrounding
the acquisition of the disputed property do not make [Land Bank] an innocent purchaser for value or a
purchaser in good faith. Thus, We are in accord with the ruling of the trial court in that:
"In the instant case, the Court cannot consider the Land Bank of the Philippines as innocent purchaser
for value. With all its resources, it could have ascertained how Nenita Sonza acquired the land
mortgaged to it and later foreclosed by it. The fact the land was foreclosed after Criminal Case No. 4066-
99 was instituted should have warned it. The questionable ownership of Nenita Sonza for it and its
employees to obtain knowledge of the questionable transfer of the land to Nenita Sonza. Its failure to
take the necessary steps or action shall make the bank liable for damages. The bank shall be responsible
for its and its employer shortcomings."
Petitioner's defense that it could not have known the criminal action since it was not a party to the case
and that there was no notice of lis pendens filed by respondent Musni, is unavailing. This Court held in
Heirs of Gregorio Lopez v. Development Bank of the Philippines:
The rule on "innocent purchasers or mortgagees for value" is applied more strictly when the purchaser
or the mortgagee is a bank. Banks are expected to exercise higher degree of diligence in their dealings,
including those involving lands. Banks may not rely simply on the face of the certificate of title.
Had petitioner exercised the degree of diligence required of banks, it would have ascertained the
ownership of one of the properties mortgaged to it.
Where the findings of fact of the trial courts are affirmed by the Court of Appeals, the same are accorded
the highest degree of respect and, generally, will not be disturbed on appeal; Such findings are binding
and conclusive on this Court. Accordingly, this Court finds no reason to disturb the findings of the Court
of Appeals, which affirmed the findings of the trial court, that petitioner is neither a mortgagee in good
faith nor an innocent purchaser for value.
RAGSAC
TO BE HELD CRIMINALLY LIABLE FOR THE ACTS OF A CORPORATION, THERE MUST BE A

SHOWING THAT ITS OFFICERS, DIRECTORS, AND SHAREHOLDERS ACTIVELY PARTICIPATED
IN OR HAD THE POWER TO PREVENT THE WRONGFUL ACT.
However, respondents Velarde-Albert and Resnick cannot be indicted for violations of the Securities
Regulation Code and the Revised Penal Code. Petitioner failed to allege the specific acts of respondents
Velarde-Albert and Resnick that could be interpreted as participation in the alleged violations. There was
also no showing, based on the complaints, that they were deemed responsible for Price Richardson's
violations. A corporation's personality is separate and distinct from its officers, directors, and
shareholders. To be held criminally liable for the acts of a corporation, there must be a showing that its
officers, directors, and shareholders actively participated in or had the power to prevent the wrongful
act. (Securities and Exchange Commission v. Price Richardson Corp, G.R. No. 197032, July 26,
2017)
X—————-X
TO BE HELD CRIMINALLY LIABLE FOR THE ACTS OF A CORPORATION, THERE MUST BE A

SHOWING THAT ITS OFFICERS, DIRECTORS, AND SHAREHOLDERS ACTIVELY PARTICIPATED
IN OR HAD THE POWER TO PREVENT THE WRONGFUL ACT.
28. Securities and Exchange Commission v. Price Richardson Corp
G.R. No. 197032, July 26, 2017
LEONEN, J.
FACTS:
Price Richardson is a Philippine corporation duly incorporated under Philippine laws on December 7,
2000. Its primary purpose is "to provide administrative services which includes but is not limited to
furnishing all necessary and incidental clerical, bookkeeping, mailing and billing services." On October
17, 2001, its former employee, Michelle S. Avelino, executed a sworn affidavit at the NBI Interpol
Division, alleging that Price Richardson was "engaged in boiler room operations, wherein the company
sells non-existent stocks to investors using high pressure sales tactics.” Whenever this activity was
discovered, the company would close and emerge under a new company name. Janet C. Rillo
corroborated Avelino's claims. She was a former employee of Capital International Consultants, Inc., a
corporation that allegedly merged with Price Richardson. She claimed that their calls to prospective
investors should be in Price Richardson's name. On December 4, 2001, SEC filed before the Department
of Justice its complaint against Price Richardson, Clara Arlene Baybay, Armina A. La Torre, Manuel Luis
Limpin, Editha C. Rupido, Jose C. Taopo, Consuelo Velarde-Albert, and Gordon Resnick for violation of
Article 315(1)(b) of the RPC and Sections 26.3 and 28 of the Securities Regulation Code.
In defense, the incorporators and directors denied knowing or agreeing to the offenses charged. They
countered that they already transferred their respective shares to various individuals in December 2000,
as shown by their registered Deeds of Absolute Sale of Shares of Stock. Velarde-Albert denied the
Securities and Exchange Commission's allegations against her while Resnick did not submit any
evidence refuting the charges.
Respondent Price Richardson insists that Section 28 of the Securities Regulation Code prohibits anyone
from engaging in the business of buying and selling securities without registration from the Securities
and Exchange Commission if those transactions are offered "to the public within the Philippines.” This
provision does not apply in this case because the alleged buyers of securities were not citizens of or
resided in the Philippines. Additionally, the allegedly sold or offered securities were registered outside
the Philippines, where the alleged sales also transpired. Hence, these sales are not under the Philippine
jurisdiction.
On March 13, 2002, State Prosecutor Aristotle M. Reyes (State Prosecutor Reyes) issued a Resolution
dismissing the SEC complaint "for lack of probable cause." In the meantime, individuals claiming to have
agreed to purchase securities from Price Richardson and have been defrauded surfaced and executed
sworn statements against it. The SEC filed a Petition for Certiorari against Secretary Gonzalez, Price
Richardson, Velarde-Albert, and Resnick before the CA for the annulment of Secretary Gonzalez’s
Resolutions. The CA promulgated a Decision affirming the assailed Resolutions. The CA held that there
was no grave abuse of discretion on the part of Secretary Gonzalez when he affirmed State Prosecutor
Reyes' Resolutions, which found no probable cause to file an information.
ISSUE/S:
1. Whether courts may pass upon the prosecutor's determination of probable cause; and
2. Whether there is probable cause to indict respondents for violation of Sections 26.3 and 28 of the
Securities Regulation Code and Article 315(1)(b) of the Revised Penal Code
HELD:
1. YES. Courts may pass upon the prosecutor's determination of probable cause only upon a showing
of grave abuse of discretion. A prosecutor gravely abuses his or her discretion in not finding probable
cause by disregarding or overlooking evidence that "are sufficient to form a reasonable ground to believe
that the crime ... was committed and that the respondent was its author." Further, "what is material to a
finding of probable cause is the commission of acts constituting the offense, the presence of all its
elements and the reasonable belief, based on evidence, that the respondent had committed it."In this
case, grave abuse of discretion exists, which warrants this Court's interference in the conduct of the
executive determination of probable cause.
2. YES. Petitioner provided sufficient bases to form a belief that a crime was possibly committed by
respondent Price Richardson. Based on the Certification dated October 11, 2001 issued by the Market
Regulation Department of the SEC, respondent Price Richardson "has never been issued any secondary
license to act as broker/dealer in securities, investment house and dealer in government securities."
Petitioner also certified that respondent Price Richardson "is not, under any circumstances, authorized
or licensed to engage and/or solicit investments from clients.”However, the documents seized from
respondent Price Richardson's office show possible sales of securities. Petitioner further supports its
charges by submitting the complaint-affidavits and letters of individuals who transacted with Price
Richardson. The evidence gathered by petitioner and the statement of respondent Price Richardson are
facts sufficient enough to support a reasonable belief that respondent is probably guilty of the offense
charged.
However, respondents Velarde-Albert and Resnick cannot be indicted for violations of the Securities
Regulation Code and the Revised Penal Code. Petitioner failed to allege the specific acts of respondents
Velarde-Albert and Resnick that could be interpreted as participation in the alleged violations. There was
also no showing, based on the complaints, that they were deemed responsible for Price Richardson's
violations. A corporation's personality is separate and distinct from its officers, directors, and
shareholders. To be held criminally liable for the acts of a corporation, there must be a showing that its
officers, directors, and shareholders actively participated in or had the power to prevent the wrongful
act.
DADAYAN
THE LIABILITY OF A SURETY IS DETERMINED STRICTLY IN ACCORDANCE WITH THE

ACTUAL TERMS OF THE PERFORMANCE BOND IT ISSUED
A suretyship agreement is a contract of adhesion ordinarily prepared by the surety or insurance
company. Therefore, its provisions are interpreted liberally in favor of the insured and strictly against
the Insurer who, as the drafter of the bond, had the opportunity to state plainly the terms of its
obligation.
ARTICLE 1280 AS TO COMPENSATION APPLIES TO SURETY

While Article 1280 specifically pertains to a guarantor, the provision nonetheless applies to a surety.
The surety may set up compensation against the amount owed by the creditor to the principal.
x--------------------------------------------x
THE LIABILITY OF A SURETY IS DETERMINED STRICTLY IN ACCORDANCE WITH THE

ACTUAL TERMS OF THE PERFORMANCE BOND IT ISSUED
ARTICLE 1280 AS TO COMPENSATION APPLIES TO SURETY
29. FGU INSURANCE CORP. V. SPOUSES ROXAS

G.R. Nos. 189526 & 189656, August 9, 2017
FACTS:
The Spouses Roxas entered into a Contract of Building Construction with Rosendo P. Dominguez, Jr.
(Dominguez) and Philtrust Bank to complete the construction of their housing project known as "Vista
Del Mar Executive Houses.”
From the terms of the Contract, Philtrust Bank would finance the cost of materials and supplies to the
extent of P 900,000.00, while Dominguez would undertake the construction works for P300,000.00. It
was also stipulated that Philtrust Bank may only release the funds for materials upon Dominguez's
request and with the Spouses Roxas' conformity. The P300,000.00 cost of labor would be shouldered
by the Spouses Roxas, but the Contract stated that: "W]hether or not the [Spouses Roxas] could
provide/supply the funds to finance the labor costs as aforesaid, the Contractor binds himself to finish
and complete the construction of the project within the stipulated period of 150 days.”
Pursuant to the Contract of Building Construction, Dominguez secured a performance bond (Surety
Bond), with face amount of P450,000.00, from FGU. FGU and Dominguez bound themselves to jointly
and severally pay Floro Roxas (Floro) and Philtrust Bank the agreed amount in the event of
Dominguez's non-performance of his obligation under the Contract.
Dominguez averred that he requested an upward adjustment of the contract price from the Spouses
Roxas but they did not heed his request. He added that the Spouses Roxas also failed to make the
three (3) payments of P30,000.00 each as agreed upon. Dominguez also asked Philtrust Bank to
release the remaining balance of P24,000.00 but to no avail.
Dominguez filed a Complaint against the Spouses Roxas and Philtrust Bank. In its Answer with
Counterclaim, Philtrust Bank claimed that it sent several demand letters to FGU to pay P450,000.00
for non-performance of its principal, but the latter re/fused to pay. Hence, Philtrust Bank sought to
implead FGU for non-payment of P450,000.00 under its Surety Bond.
ISSUE:
1. Is FGU Insurance Corporation liable for the full amount of P450,000.00 of its Surety Bond rather
than the cost overrun on account of Rosendo P. Dominguez, Jr.'s non-completion of the project? YES.
2. May the liabilities of the Spouses Floro and Eufemia Roxas to Rosendo P. Dominguez, Jr. be set off
against any liability of FGU Insurance Corporation? YES.
HELD:
1. Yes, FGU Insurance Corporation is liable for the full amount of P450,000.
A surety's liability is joint and several with the principal. Liability under a surety bond is "limited to the
amount of the bond" and is determined strictly in accordance with the particular terms and conditions
set out in this bond. It is, thus, necessary to look into the actual terms of the performance bond.
The FGU Surety Bond is conditioned upon the full and faithful performance by Dominguez of his
obligations under the Contract of Building Construction. Under the terms of this bond, FGU guaranteed
to pay the amount of P450,000.00 should Dominguez be unable to faithfully comply with the contract
for the completion of the Spouses Roxas' housing project. FGU's obligation to pay is solidary with
Dominguez and is realized once the latter fails to perform his obligation under the Contract of Building
Construction. The terms of the bond were clear; hence, the literal meaning of its stipulation should
control.
If FGU's intention was to limit its liability to the cost overrun or additional cost to the Spouses Roxas to
complete the project up to the extent of P450,000.00, then it should have included in the Surety Bond
specific words indicating this intention. Its failure to do so must be construed against it.
A suretyship agreement is a contract of adhesion ordinarily prepared by the surety or insurance

company. Therefore, its provisions are interpreted liberally in favor of the insured and strictly against
the Insurer who, as the drafter of the bond, had the opportunity to state plainly the terms of its
obligation.
Dominguez failed to finish the construction work within the agreed time frame, triggering FGU's liability
under the Surety Bond. Dominguez's breach of the Contract of Building Construction gave the
Spouses Roxas and/or Philtrust Bank the immediate right to pursue FGU on the surety bond. Thus,
FGU is duty-bound to perform what it has guaranteed—to pay P450,000.00 upon notice of
Dominguez's default.
Therefore, FGU Insurance Corporation is liable for the full amount of P450,000.
2. Yes, FGU could offset its liability under the Surety Bond against Dominguez's collectibles from the
Spouses Roxas.
Article 1280. Notwithstanding the provisions of the preceding article, the guarantor may set up
compensation as regards what the creditor may owe the principal debtor.
While Article 1280 specifically pertains to a guarantor, the provision nonetheless applies to a surety.
His collectibles include the unpaid contractor's fee of P 90,000.00 plus 14% interest per annum.
Additionally, his collectibles cover the Spouses Roxas' advances from the construction funds in the
amount of P73,136.75 plus 6% legal interest.
Therefore, FGU could offset its liability under the Surety Bond against Dominguez's collectibles from
the Spouses Roxas.
DIMAANO
REHABILITATION CONTEMPLATES A CONTINUANCE OF CORPORATE LIFE AND ACTIVITIES

Case law explains that corporate rehabilitation contemplates continuance of corporate life and activities
in an effort to restore and reinstate the corporation to its former position of successful operation and
solvency, the purpose being to enable the company to gain a new lease on life and allow its creditors to
be paid their claims out of its earnings. (Land Bank of the Philippines vs. Fastech Synergy
Philippines, Inc., G.R. No. 206150, August 9, 2017).
x————————x
REHABILITATION CONTEMPLATES A CONTINUANCE OF CORPORATE LIFE AND ACTIVITIES
30. Land Bank of the Philippines vs. Fastech Synergy Philippines, Inc.
G.R. No. 206150, August 9, 2017
Leonen, J.
FACTS:
Respondents filed this Petition of Review on Certiorari under Rule 45, praying that the CA Decision and
Resolution be modified to consider the concerns raised by Land Bank of the Philippines (Petitioner).
These concerns pertains to the rehabilitation of respondents corporations. The CA dismissed
respondent’s joint petition for corporate rehabilitation. In CA’s decision, approved respondents’
Rehabilitation Plan, attached to their Rehabilitation Petition, was remanded back to the Rehabilitation
Court.
Respondents prayed for the approval of their Rehabilitation Plan, which they submitted together with
their Rehabilitation Petition. Respondents presented their Rehabilitation Plan to Atty. Bernaldo
(Rehabilitation Receiver) and their creditors filed their respective comments and opposition to it. Atty.
Bernaldo submitted her Preliminary Report and opined that the original Rehabilitation was viable. She
stated that the Fastech Corporations “may be successfully rehabilitated, considering the sufficiency of
their assets to cover their liabilities and the underlying assumptions, financial projections and procedures
to accomplish said goals in their Rehabilitation Plan.”
The Rehabilitation Court dismissed the Rehabilitation Petition. However, the CA reversed the
Rehabilitation Court’s dismissal and approve the Rehabilitation Petition.
ISSUE:
Whether the rehabilitation of respondents was feasible
HELD:
NO. Case law explains that corporate rehabilitation contemplates continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former position of successful operation
and solvency, the purpose being to enable the company to gain a new lease on life and allow its creditors
to be paid their claims out of its earnings. 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.
Here, the Rehabilitation Plan failed to comply with the minimum requirements, i.e.: (a) material financial
commitments to support the rehabilitation plan; and (b) a proper liquidation analysis, under Section 18,
Rule 3 of the 2008 Rules of Procedure on Corporate Rehabilitation.
ARNESTO
STATEMENT OF PURPOSE OF THE MEETING NOT REQUIRED IN REGULAR MEETINGS

Section 50 of the Corporation Code prescribes that "regular meetings of stockholders or members shall
be held annually on a date fixed in the by-laws." Respondents do not dispute that Article VIII (3) of the
PSI's by-laws fixed the annual meeting of stockholders on the third Friday of March of every year. This
Court takes judicial notice that March 15, 2002 was the third Friday of March 2002. Thus, this Court
holds that the March 15, 2002 annual stockholders' meeting was a regular meeting. Hence, the
requirement to state the object and purpose in case of a special meeting as provided for in Article VIII
(5) of the PSI's by-laws does not apply to the Notice for the March 15, 2002 annual stockholders'
meeting. (Lao v. Yao Bio Lim, G.R. No. 201306. August 9, 2017)
x—————x
STATEMENT OF PURPOSE OF THE MEETING NOT REQUIRED IN REGULAR MEETINGS
31. Lao v. Yao Bio Lim

G.R. No. 201306. August 9, 2017
Leonen, J.
FACTS:
This case is a continuation of a dispute between 2 groups of stockholders for the control and
management of PSI. One group was headed by Lydia Lao (Lao) and the other was led by Philip King
(King). Ong Y. Seng, King's father, had the most number of subscribed shares, holding 1,200 shares.
Before his death in 1994, he sought, and was granted, the approval of the PSI board of directors to
transfer his shares to King. Since then, King had been consistently elected as a member of the PSI
board of directors. During the special stockholders' meeting, a new set of directors and officers was
elected. Yao Bio Lim was elected President and King was Vice President.
Meanwhile, on March 15, 2002, a general stockholders' meeting was held wherein Lao, Ong, Henry Sy,
Sy Tian Tin, Sy Tian Tin, Jr. and Paul Chua (petitioners) were elected as members of the board of
directors, with Chua Lian as chairman of the board. Yao Bio Lim and King led a Petition against
petitioners, the newly elected board of directors. They sought, among others, to annul: (1) "the elections
held on March 15, 2002 and all corporate acts of the supposedly new board of directors and officers of
PSI," (2) the "issuance of stock dividends," and (3) the "illegal transfer of shares of stock."
Yao Bio Lim and King averred that on March 10, 2002, they received the Notice of meeting informing
them about the general stockholders' meeting to be held on March 15, 2002 at 9:00 a.m. at the PSI's
board room. "The notice, however, did not state the agenda or the purpose of the meeting."
Yao Bio Lim and King further attested that the SEC and RTC had previously ordered that the
stockholders listed in the 1997 General Information Sheet be used as basis for the 2000 and 2001
elections of PSI board of directors. Lao, Chua Lian, Ong, and Henry Sy allegedly violated these orders
when they used a different list of stockholders during the elections held on March 15, 2002. Moreover,
they had purportedly previously issued 300% stock dividends to some stockholders without the required
approval of stockholders representing two-thirds (2/3) of the outstanding capital stock of PSI.
ISSUE:
(1) W/N the notice of meeting even if it did not state the purpose of the meeting is valid
(2) W/N the meeting conducted is valid
(3) W/N the 300% stock dividends declaration is valid
HELD:
(1) YES. Section 50 of the Corporation Code prescribes that "regular meetings of stockholders or
members shall be held annually on a date fixed in the by-laws." Respondents do not dispute that Article
VIII (3) of the PSI's by-laws fixed the annual meeting of stockholders on the third Friday of March of
every year. This Court takes judicial notice that March 15, 2002 was the third Friday of March 2002.
Thus, this Court holds that the March 15, 2002 annual stockholders' meeting was a regular meeting.
Hence, the requirement to state the object and purpose in case of a special meeting as provided for in
Article VIII (5) of the PSI's by-laws does not apply to the Notice for the March 15, 2002 annual
stockholders' meeting.
In this case, the PSI's by-laws providing only for a 5-day prior notice must prevail over the 2-week notice
under the Corporation Code. By its express terms, the Corporation Code allows "the shortening (or
lengthening) of the period within which to send the notice to call a special (or regular) meeting." Thus,
the mailing of the Notice to respondents, calling for the annual stockholders' meeting to be held on March
15, 2002 is not irregular, since it complies with what was stated in PSI's by-laws.
(2) NO. Despite the foregoing circumstances, there were other grounds to nullify the March 15, 2002
annual stockholders' meeting. Petitioners did not recognize respondents' rights as stockholders, making
the proceedings and elections during the March 15, 2002 meeting void.
Petitioners cannot unilaterally disobey or disregard the Orders of the SEC and RTC despite their own
views of the correctness or propriety thereof. Hence, petitioners were obliged to use the list of
stockholders indicated in the 1997 General Information Sheet in compliance with the Orders issued by
the SEC and RTC.
(3) NO.
On the issue of the validity of the 300% stock dividends declaration, petitioners insist that the 300%
stock dividends were validly declared by the PSI board of directors. They claim that these were ratified
by the stockholders owning two-thirds (2/3) of the outstanding capital stock.
The handwritten minutes of the March 22, 1997 meeting offered by petitioners was questionable
because it did not even indicate the number of stock dividends to be declared.
The handwritten minutes of the March 22, 1997 stockholders' meeting recorded the following:
Quorum established.
Ratified all acts and proceedings of the Board of Directors and Management
Declaration of Stock Dividends
Nomination and the election of same Board and Officers in the preceding years as new Board
Meeting adjourned. 1:05 P.M
Clearly, the minutes alone would be insufficient to prove petitioners' claim that the 300% stock dividends
were approved by the board of directors and ratified by the stockholders in the March 22, 1997 meeting.
The minutes did not provide any other detail that would convincingly show that the 300% stock dividends
distributed in 2002 were the same stock dividends that were ratified by the stockholders in 1997.
Furthermore, while the minutes contain the names and signatures of stockholders who were present at
the meeting, the shares held by each were not indicated. On its face, the minutes did not readily confirm
how many shares were represented and voted at the meeting, particularly on the stock dividends
declaration.
GOZUM
RELATIONSHIP TEST AND NATURE OF THE CONTROVERSY TEST ARE USED IN THE
DETERMINATION OF AN INTRA-CORPORATE CONTROVERSY
A conflict between two (2) stockholders of a corporation does not automatically render their dispute as
intra-corporate. The nature of the controversy must also be examined (Belo Medical Group, Inc., v.
Santos, G.R. No. 185894, August 30, 2017, Leonen, J).
x—————x
RELATIONSHIP TEST AND NATURE OF THE CONTROVERSY TEST ARE USED IN THE
DETERMINATION OF AN INTRA-CORPORATE CONTROVERSY
32. Belo Medical Group, Inc., v. Santos

G.R. No. 185894, August 30, 2017
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Belo Medical
Group assailing the RTC Joint Resolution granting respondent Jose L. Santos' (Santos) Motion to
Dismiss and Belo Medical Group's Complaint for interpleader and Supplemental Complaint for
Declaratory Relief against Santos and Victoria G. Belo (Belo), and declared all other pending incidents
as moot.
Belo Medical Group received a request from Jose Santos for the inspection of corporate records. Belo
objected to this request and wrote Belo Medical Group to repudiate Santos co-ownership of her shares
and his interest in the corporation, claiming that the 25 shares in his name were merely in trust for her,
as she, and not Santos, paid for these shares.
Belo Medical Group then filed a Complaint for Interpleader to compel Belo and Santos to interplead and
litigate their conflicting claims. Said complaints were raffled to the special commercial court, thus
classifying them as intracorporate. Belo prayed that the case be tried as a civil case and not as an
intracorporate controversy, arguing that intra-corporate controversies did not include special civil actions
for interpleader and declaratory relief, and clarified that the issue of ownership of the shares of stock
must first be resolved before the issue on inspection could even be considered ripe for determination
Instead of filing an answer, Santos filed a Motion to Dismiss. Though a motion to dismiss is a prohibited
pleading under the Interim Rules of Procedure Governing Intra-Corporate Controversies, the trial court
ruled that according to the Rules of Court, motions to dismiss are allowed in interpleader cases, while
the complaint for Declaratory Relief was struck down as improper. Belo filed her Petition for Review
before the CA, which was however, dismissed. Belo Medical Group, on the other hand, directly filed its
Petition for Review with this Court.
ISSUE:
Whether the determination of a registered stockholder's right to inspect corporate books is an intra-
corporate dispute?
HELD:
Yes, the case at bar is an intra-corporate controversy.
This Court now uses both the relationship test and the nature of the controversy test to determine if an
intra-corporate controversy is present. Under the relationship test, for as long as any of these intra-
corporate relationships exist between the parties, the controversy would be characterized as intra-
corporate. The types of intra-corporate relationships, are as follows: a. between the corporation,
partnership or association and the public; b. between the corporation, partnership or association and its
stockholders, partners, members, or officers; c. between the corporation, partnership or association and
the state in so far as its franchise, permit or license to operate is concerned; and d. among the
stockholders, partners or associates themselves.
Applying the relationship test, this Court notes that both Belo and Santos are named shareholders in
Belo Medical Group’s Articles of Incorporation and General Information Sheet for 2007. The conflict is
clearly intra-corporate as it involves two shareholders although the ownership of stocks of one
stockholder is questioned. Applying the nature of the controversy test, this is still an intra- corporate
dispute. In the interpleader case, Belo Medical Group sought his disqualification from inspecting the
corporate books based on bad faith. Therefore, the controversy shifts from a mere question of ownership
over movable property to the exercise of a registered stockholder’s proprietary right to inspect corporate
books.
Therefore, the case at bar is an intra-corporate controversy.
MARMOL
APPARENT AUTHORITY IS DETERMINED BY THE ACTS OF THE PRINCIPAL AND NOT BY THE
ACTS OF THE AGENT. When a corporation intentionally or negligently clothes its agent with apparent
authority to act in its behalf, it is estopped from denying its agent's apparent authority as to innocent
third parties who dealt with this agent in good faith. (Calubad vs. Ricarcen Development
Corporation, G.R. No. 202364, August 30, 2017).
33. Calubad vs. Ricarcen Development Corporation

G.R. No. 202364, August 30, 2017
Leonen, J.
FACTS: Respondent Ricarcen Development Corporation (Ricarcen) was a domestic corporation

engaged in renting out real estate. Ricarcen was a family corporation. Marilyn R. Soliman (Marilyn) was
its president. The other members of the board of directors during that time were Marilyn's mother,
Erlinda, her brother, Josefelix, her aunt, Maura Rico, and her sisters, Ma. Elizabeth, Ma. Theresa and
Annabelle.
Marilyn, acting on Ricarcen's behalf as its president, took out a P4,000,000.00 loan from
Calubad. This loan was secured by a real estate mortgage over Ricarcen's Quezon City property.
Ricarcen, through Marilyn, and Calubad amended and increased the loan to P5M in the
Amendment of Deed of Mortgage (Additional Loan of P1M),with the same property used as security and
under the same terms and conditions as those of the original Deed of Real Estate Mortgage. After
Ricarcen failed to pay its loan, Calubad initiated extrajudicial foreclosure proceedings on the real estate
mortgage. Calubad was the highest bidder during the scheduled auction sale; thus he was issued a
Certificate of Sale.
Ricarcen claimed that it only learned of Marilyn's transactions with Calubad sometime in July
2003. Upon confirming that the Quezon City property had indeed been mortgaged and sold to Calubad
as a result of Marilyn's actions, Ricarcen's board of directors removed her as president and appointed
Josefelix as its new president. Josefelix was also authorized to initiate the necessary court actions to
protect Ricarcen's interests over the Quezon City property.
Ricarcen filed its Complaint for Annulment of Real Estate Mortgage and Extrajudicial
Foreclosure of Mortgage and Sale with Damages against Marilyn, Calubad, and employees of the
Registry of Deeds Ricarcen claimed that it never authorized its former president Marilyn to obtain loans
from Calubad or use the Quezon City property as collateral for the loans. On the other hand, Calubad
insisted that the incidents which led to the foreclosure and sale of the Quezon City property were not
marked with irregularity. Calubad likewise argued that even if Ricarcen did not authorize Marilyn, it was
already estopped from denying her authority since the loan proceeds had been released and Ricarcen
had benefited from them.
For their part, spouses Soliman denied any knowledge of or participation and claimed that the
falsification was perpetrated by their broker, Nena leo, and Calubad's broker, a certain Malou, without
their permission.
The RTC granted Ricarcen's complaint, it held that Marilyn failed to present a special power of
attorney as evidence of her authority from Ricarcen. The lack of a special power of attorney should have
been enough for Calubad to be put on guard and to require further evidence of Marilyn's authority from
Ricarcen. Ricarcen, again acting through Marilyn, took out an additional loan of 2M from Calubad. To
prove her authority to execute the three (3) mortgage contracts in Ricarcen's behalf, Marilyn presented
Calubad with a Board Resolution This Resolution empowered her to borrow money and use the Quezon
City property as collateral for the loans.
The Court of Appeals dismissed Calubad's appeal and affirmed the Regional Trial Court
Decision. The Court of Appeals emphasized that the rule on the presumption of validity of a notarized
board resolution and of a secretary's certificate is not absolute and may be validly overcome by contrary
evidence. Petitioner claims that Ricarcen is barred by estoppel from denying Marilyn's authority to enter
into a contract of loan and mortgage with Calubad. Petitioner avers that Elizabeth executed four (4)
separate document which gave Marilyn the authority to secure loans, use the Quezon City property as
collateral, and execute all documents needed for those purposes.
Petitioner asserts that the acts of Elizabeth and Erlinda are equivalent to clothing Marilyn with
apparent authority to deal with him and use the Quezon City property as collateral. Their acts are also a
manifestation of their acquiescence to Marilyn Soliman's availment of loans and execution of real estate
mortgage with petitioner.Thus, even if Marilyn Soliman had acted without or in excess of her actual
authority, if she acted within the scope of an apparent authority with which [Ricarcen] has clothed her by
holding her out or permitting her to appear as having such authority, [Ricarcen] is bound thereby in favor
of petitioner who in good faith relied on such apparent authority.
ISSUE: Is Ricarcen Development Corporation estopped from denying or disowning the authority of
Marilyn R. Soliman, its former President, from entering into a contract of loan and mortgage with Arturo
C. Calubad?
HELD: As a corporation, Ricarcen exercises its powers and conducts its business through its board of
directors, as provided for by Section 23 of the Corporation Code. However, the board of directors may
validly delegate its functions and powers to its officers or agents. The authority to bind the corporation
is derived from law, its corporate by-laws, or directly from the board of directors, "either expressly or
impliedly by habit, custom or acquiescence in the general course of business.”
Nonetheless, law and jurisprudence recognize actual authority and apparent authority as the
two (2) types of authorities conferred upon a corporate officer or agent in dealing with third persons.
Actual authority can either be express or implied. Express actual authority refers to the power
delegated to the agent by the corporation, while an agent's implied authority can be measured by his or
her prior acts which have been ratified by the corporation or whose benefits have been accepted by the
corporation.
On the other hand, apparent authority is based on the principle of estoppel. The doctrine of
apparent authority provides that even if no actual authority has been conferred on an agent, his or her
acts, as long as they are within his or her apparent scope of authority, bind the principal. However, the
principal's liability is limited to third persons who are reasonably led to believe that the agent was
authorized to act for the principal due to the principal's conduct.
Apparent authority is determined by the acts of the principal and not by the acts of the agent.
Thus, it is incumbent upon Calubad to prove how Ricarcen's acts led him to believe that Marilyn was
duly authorized to represent it. As the former president of Ricarcen, it was within Marilyn's scope of
authority to act for and enter into contracts in Ricarcen's behalf. Her broad authority from Ricarcen can
be seen with how the corporate secretary entrusted her with blank yet signed sheets of paper to be used
at her discretion. She also had possession of the owner's duplicate copy of the land title covering the
property mortgaged to Calubad, further proving her authority from Ricarcen.
The records show that Calubad drew and issued two (2) checks payable to Ricarcen
representing the loan proceeds for the first mortgage. Both checks were deposited in Ricarcen 's bank
account. From December 15, 2001 to April 15, 2002, Ricarcen paid and issued several checks payable
to Calubad, which he claimed were the monthly interest payments of the mortgage loans. Calubad
deposited the January 15, 2002 check into his Metrobank, EDSA-Caloocan Branch account, while the
rest of the checks were deposited in his bank account with Equitable PCI Bank, A. De Jesus-EDSA
Branch. All the checks from Ricarcen cleared.
Calubad could not be faulted for continuing to transact with Marilyn, even agreeing to give out
additional loans, because Ricarcen clearly clothed her with apparent authority. Likewise, it reasonably
appeared that Ricarcen's officers knew of the mortgage contracts entered into by Marilyn in Ricarcen's
behalf as proven by the issued Banco De Oro checks as payments for the monthly interest and the
principal loan.
Ricarcen claimed that it never granted Marilyn authority to transact with Calubad or use the
Quezon City property as collateral for the loans, but its actuations say otherwise. It appears as if Ricarcen
and its officers gravely erred in putting too much trust in Marilyn. However, Calubad, as an innocent third
party dealing in good faith with Marilyn, should not be made to suffer because of Ricarcen's negligence
in conducting its own business affairs.
Also, "if a private corporation intentionally or negligently clothes its officers or agents with
apparent power to perform acts for it, the corporation will be estopped to deny that such apparent
authority is real, as to innocent third persons dealing in good faith with such officers or agents."
HIPONIA
A PROTECTION AND INDEMNITY CLUB IS AN ASSOCIATION COMPOSED OF SHIPOWNERS

GENERALLY FORMED FOR THE SPECIFIC PURPOSE OF PROVIDING INSURANCE COVER
AGAINST THIRD-PARTY LIABILITIES OF ITS MEMBERS.
An insured member may be compelled to arbitration pursuant to the Rules of the Protection and
Indemnity Club, which were incorporated in the insurance policy by reference.
GR. No. 196072, September 20, 2017
34. STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LIMITED, , v. SULPICIO

LINES, INC.
G.R. NO. 208603
SULPICIO LINES, INC. v. STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA)

LIMITED
LEONEN, J.:
FACTS: Steamship was a Bermuda-based Protection and Indemnity Club, managed outside London,
England. It insures its members-shipowners against "third party risks and liabilities" for claims arising
from (a) death or injury to passengers; (b) loss or damage to cargoes; and (c) loss or damage from
collisions.
Sulpicio insured its fleet of inter-island vessels with Steamship for Protection & Indemnity risks through
local insurance agents, Pioneer Insurance and Surety Corporation (Pioneer Insurance) or Seaboard-
Eastern Insurance Co., Inc. (Seaboard-Eastern). One (1) of these vessels was the M/V Princess of the
World. M/V Princess of the World was gutted by fire while on voyage from Iloilo to Zamboanga City,
resulting in total loss of its cargoes. The fire incident was found by the Department of Interior and Local
Government to be "accidental" in nature. Sulpicio claimed indemnity from Steamship under the
Protection & Indemnity insurance policy. Steamship denied the claim and subsequently rescinded the
insurance coverage of Sulpicio's other vessels on the ground that "Sulpicio was grossly negligent in
conducting its business regarding safety, maintaining the seaworthiness of its vessels as well as proper
training of its crew." Thereafter, Sulpicio filed a Complaint with the Regional Trial Court of Makati City
against Steamship; one (1) of its directors, Gary Rynsard; and its local insurance agents Pioneer
Insurance and Seaboard-Eastern for specific performance and damages. Steamship filed its Motion to
Dismiss and/or to Refer Case to Arbitration pursuant to Republic Act No. 9285, or the Alternative Dispute
Resolution Act of 2004 (ADR Law), and to Rule 4716 of the 2005/2006 Club Rules, which supposedly
provided for arbitration in London of disputes between Steamship and its members.
The Trial Court denied the motions to dismiss and held that "arbitration did not appear to be the most
prudent action, considering that the other defendants had already filed their answers." Steamship filed
its Motion for Reconsideration, but it was likewise denied.
ISSUES: Whether or not there is a valid and binding agreement between Steamship Mutual Underwriting
(Bermuda) Limited and Sulpicio Lines, Inc.?
HELD: Yes. The contract between Sulpicio and Steamship is more than a contract of insurance between
a marine insurer and a shipowner. By entering its vessels in Steamship, Sulpicio not only obtains
insurance coverage for its vessels but also becomes a member of Steamship. A protection and indemnity
club, like Steamship, is an association composed of shipowners generally formed for the specific
purpose of providing insurance cover against third-party liabilities of its members. A protection and
indemnity club is a mutual insurance association is a cooperative enterprise where the members are
both the insurer and insured. In it, the members all contribute, by a system of premiums or assessments,
to the creation of a fund from which all losses and liabilities are paid, and where the profits are divided
among themselves, in proportion to their interest. Additionally, mutual insurance associations, or clubs,
provide three types of coverage, namely, protection and indemnity, war risks, and defense costs. Thus,
a contract of insurance is perfected between the parties upon Steamship's issuance of the Certificate of
Entry and Acceptance. A contract of insurance, like other contracts, must be assented to by both parties
either in person or by their agents. So long as an application for insurance has not been either accepted
or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date
of application, must have been a completed contract, one that leaves nothing to be done, nothing to be
completed, nothing to be passed upon, or determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have met in agreement. Sulpicio's acceptance of
the Certificate of Entry and Acceptance manifests its acquiescence to all its provisions. There is no
showing in the records or in Sulpicio's contentions that it objected to any of the terms in this Certificate.
Its acceptance, likewise, operated as an acceptance of the entire provisions of the Club Rules. There is
no ambiguity in the terms and clauses of the Certificate of Entry Acceptance. Contrary to the ruling of
the Court of Appeals, the Certificate clearly incorporates the entire Club Rules—not only those provisions
relating to cancellation and alteration of the policy.
Therefore, incorporation of the Club Rules in the insurance policy is without any qualification. This
includes the arbitration clause even if not particularly stipulated. A basic rule in construction is that the
entire contract, and each and all of its parts, must be read together and given effect, with all its clauses
and provisions harmonized with one another.
TOLENTINO
REQUEST FOR CARGO SURVEY SHOWS KNOWLEDGE OF THE DAMAGE
The consignee's claim letter is regarded as substantial compliance with the condition precedent set forth
in the Management Contract to hold the arrastre operator liable. The fact that Asian Terminals requested
for the cargo survey shows that it had knowledge of the damage of the shipment while in its possession
The Arrastre cannot escape liability for the damaged coils, simply by its own act of not sending a
representative, after it had contracted for the survey of the shipment. (Oriental Assurance vs Ong G.R.
189524, October 11,2017)
REQUEST FOR CARGO SURVEY SHOWS KNOWLEDGE OF THE DAMAGE
35. ORIENTAL ASSURANCE vs ONG
G.R. 189524, OCTOBER 11, 2017
LEONEN, J.
FACTS: JEA Steel Industries, Inc. imported from South Korea 72 aluminum-zinc-alloy-coated steel
sheets in coils to Manila on board the vessel M/V Dooyang Glory as evidenced by Bill of Lading. The 72
coils were discharged and stored in Pier 9 under the custody of the arrastre contractor, Asian Terminals,
Inc.
The coils were loaded on the trucks of Manuel Ong and delivered to JEA Steel's plant. Eleven of these
coils were found to be in damaged condition, dented or their normal round shape deformed.
Ong contends that the 11 coils were already damaged when they were loaded on board his trucks and
transported to the consignee.
Asian Terminals claimed that it exercised due diligence in handling the cargo, that the cargo was
released to the consignee's representative in the same condition as when received from the vessel, and
that the damages were sustained while in the custody of the vessel or the customs broker. It was further
argued that Oriental's claim was barred for the latter's failure to file a notice of claim within the 15-day
period provided in the Gate Pass.
Oriental contends that it was not aware of the provisions of the Gate Pass or the Management Contract,
neither of which it was a party to. Consequently, it cannot be bound by the stipulation limiting the liability
of Asian Terminals.
The RTC dismissed the complaint. CA affirmed.
ISSUE: Should Manuel Ong be held solidarily liable with Asian Terminals (Arrastre) for the damage of
the cargo.
HELD: No. Court finds that whether the consignee files a claim letter or requests for a certificate of loss
or bad order examination, the effect would be the same, in that either would afford the arrastre contractor
knowledge that the shipment has been damaged and an opportunity to examine the nature and extent
of the injury. Under the Management Contract, the 30-day period is considered reasonable for the
contractor to make an investigation of a claim.
Although its representative was not present during the inspections, the fact that Asian Terminals
requested for the cargo survey shows that it had knowledge of the damage of the shipment while in its
possession and that the survey was sought specifically to ascertain the nature and extent of the damage.
Thus, respondent cannot escape liability for the damaged coils, simply by its own act of not sending a
representative, after it had contracted for the survey of the shipment.
Furthermore, there was no proof of Ong's bad faith. Mere allegation cannot take the place of evidence.
Besides, Ong's assertion that the loading of the cargo on the trucks was undertaken by Asian Terminals
and the unloading of the same cargo was undertaken by the consignee at its warehouse remains
unrebutted. In fact, Asian Terminals caused the inspection of the shipment before they were loaded on
Ong's trucks on June 17, 2002. Moreover, at the consignee's warehouse, the inspection was done in
the presence of the consignee's authorized representative. Thus, Ong is not obliged to inform the
consignee or Asian Terminals about the damaged coils as they would have presumably known about
them.
LINGAN
BANKS ARE REQUIRED TO OBSERVE A HIGH DEGREE OF DILIGENCE IN THEIR AFFAIRS

Banks are required to observe a high degree of diligence in their affairs. This encompasses
their dealings concerning properties offered as security for loans. A bank that wrongly advertises the
area of a property acquired through foreclosure because it failed to dutifully ascertain the property's
specifications is grossly negligent as to practically be in bad faith in offering that property to prospective
buyers. Any sale made on this account is voidable for causal fraud. In actions to void such sales, banks
cannot hide under the defense that a sale was made on an as-is-where-is basis. As-is-where-is
stipulations can only encompass physical features that are readily perceptible by an ordinary person
possessing no specialized skills. (Poole-Blunden v. Union Bank, G.R. No. 205838, November 29,
2017)
BANKS ARE REQUIRED TO OBSERVE A HIGH DEGREE OF DILIGENCE IN THEIR AFFAIRS
36. Poole-Blunden v. Union Bank

G.R. No. 205838, November 29, 2017
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari praying that the decision and resolution of the Court
of Appeals be reversed and set aside, and that judgment be rendered annulling or rescinding the
Contract to Sell between petitioner Joseph Harry Walter Poole-Blunden and respondent Union Bank of
the Philippines.
Petitioner came across an advertisement placed by respondent bank in the Manila Bulletin. The
ad was for the public auction of certain properties. One of these properties was a condominium unit
identified as Unit 2C, T-Tower Condominium, located in Makati City. Union Bank had acquired the
property through foreclosure proceedings after the developer defaulted in the payment of its loan from
the bank. The unit was advertised to have an area of 95 square meters. When petitioner visited the unit
for inspection, he found that it had an irregular shape; it was neither a square nor a rectangle and
included a circular terrace, but he did not doubt the unit's area as advertised. Petitioner placed his bid
and won the unit for P2,650,000. A few years after occupying the unit, petitioner decided to construct 2
additional bedrooms. Upon examining it, he noticed apparent problems in its dimensions. He took rough
measurements of the Unit, which indicated that its floor area was just about 70 square meters, not 95
square meters, as advertised by Union Bank. Petitioner wrote to respondent, informing it of the
discrepancy. He asked for a rescission of the Contract to Sell, along with a refund of the amounts he
had paid, if it was conclusively established that the area of the unit was less than 95 square meters.
Union Bank informed petitioner that after inquiring with the Housing and Land Use Regulatory Board
(HLURB), the Homeowners' Association of T-Tower Condominium, and its appraisers, the Unit was
confirmed to be 95 square meters, inclusive of the terrace and the common areas surrounding it. The
geodetic engineer hired by petitioner issued a certification stating that the total floor area of the Unit was
only 74.4. square meters. Petitioner filed a Complaint for Rescission of Contract and Damages with the
RTC of Makati City. The trial court dismissed petitioner’s complaint for lack of merit. In affirming the RTC,
the Court of Appeals noted that the sale was made on an “as-is-where-is” basis as indicated in Section
12 of the Contract to Sell. Thus, petitioner supposedly waived any errors in the bounds or description of
the unit. The Court of Appeals added that Poole-Blunden failed to show, by clear and convincing
evidence that causal fraud can be attributed to Union Bank.
ISSUE:
Whether or not respondent committed such a degree of fraud as would entitle petitioner to the voiding
of the Contract to Sell the condominium unit?
HELD:
Yes.
Pursuant to the Condominium Act (R.A. No. 4726), common areas are not included in the
reckoning of the total area of the unit. There was a falsity in the declarations made by respondent in its
advertisement. The fraud required to annul or avoid a contract "must be so material that had it not been
present, the defrauded party would not have entered into the contract." The fraud must be "the
determining cause of the contract or must have caused the consent to be given.” The significance of
space and dimensions to any buyer of real property is plain to see.
Reliance on Section 12's “as-is-where-is” stipulation is misplaced. First, a stipulation absolving

a seller of liability for hidden defects can only be invoked by a seller who has no knowledge of hidden
defects. Respondent here knew that the Unit's area, as reckoned in accordance with the Condominium
Act, was not 95 square meters. Second, an “as-is-where-is” stipulation can only pertain to the readily
perceptible physical state of the object of a sale. It cannot encompass matters that require specialized
scrutiny, as well as features and traits that are immediately appreciable only by someone with technical
competence.
Fraud presupposes bad faith or malicious intent. It transpires when insidious words or
machinations are deliberately employed to induce agreement to a contract. Thus, one could conceivably
claim that respondent could not be guilty of fraud as it does not appear to have crafted a deceptive
strategy directed specifically at petitioner. However, while petitioner was not a specific target, respondent
was so callously remiss of its duties as a bank. It was so grossly negligent that its recklessness amounts
to a wrongful willingness to engender a situation where any buyer in petitioner's shoes would have been
insidiously induced into buying a unit with an actual area so grossly short of its advertised space. Banks
assume a degree of prudence and diligence higher than that of a good father of a family, because their
business is imbued with public interest and is inherently fiduciary. The high degree of diligence required
of banks equally holds true in their dealing with mortgaged real properties, and subsequently acquired
through foreclosure, such as the Unit purchased by petitioner.
DELA CRUZ
A CLOSED BANK UNDER RECEIVERSHIP CAN ONLY SUE OR BE SUED THROUGH ITS
RECEIVER, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION.
A bank which has been ordered closed by the Bangko Sentral ng Pilipinas is placed under the
receivership of the Philippine Deposit Insurance Corporation. As a consequence of the receivership, the
closed bank may sue and be sued only through its receiver, the Philippine Deposit Insurance
Corporation. Any action filed by the closed bank without its receiver may be dismissed. (Banco Filipino
Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas, G.R. No. 200678, June 04, 2018)
x—————x
A CLOSED BANK UNDER RECEIVERSHIP CAN ONLY SUE OR BE SUED THROUGH ITS
RECEIVER, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION.
37. Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas
G.R. No. 200678, June 04, 2018
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision and Resolution which
dismissed Civil Case No. 10-1042 and held that the trial court had no jurisdiction over Bangko Sentral
and the Monetary Board.
On December 11, 1991, the Supreme Court promulgated Banco Filipino Savings & Mortgage Bank v.
Monetary Board and Central Bank of the Philippines, which declared void the Monetary Board's order
for closure and receivership of Banco Filipino Savings & Mortgage Bank. The Court directed the Central
Bank of the Philippines and the Monetary Board to reorganize Banco Filipino and to allow it to resume
business under the controllership of both the Central Bank and the Monetary Board. Banco Filipino
subsequently filed several Complaints before the Regional Trial Court, among them a claim for damages
in the total amount of P18,800,000,000.00. Pursuant to the Court's 1991 Banco Filipino Decision, the
Monetary Board issued Resolution No. 427, which allowed Banco Filipino to resume its business. In
2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek the help of Bangko Sentral
for financial assistance of more than P3,000,000,000.00 through emergency loans and credit easement
terms. Banco Filipino entered into discussions and negotiations with Bangko Sentral. Bangko Sentral
informed Banco Filipino that the Monetary Board issued Resolution No. 1668 granting its request for the
P25,000,000,000.00 Financial Assistance and Regulatory Reliefs to form part of its Revised Business
Plan and Alternative Business Plan. The approval was also subject to certain terms and conditions,
among which was the withdrawal or dismissal with prejudice to all pending cases filed by Banco Filipino
against Bangko Sentral and its officials. The terms also included the execution of necessary quitclaims
and commitments to be given by Banco Filipino's principal stockholders, Board of Directors, and duly
authorized officers not to revive or refile such similar cases in the future.
Banco Filipino filed a Petition For Certiorari and Mandamus with prayer for issuance of a temporary
restraining order and writ of preliminary injunction before Regional Trial Court, Makati City. It assailed
the alleged arbitrary, capricious and illegal acts of Bangko Sentral and of the Monetary Board in coercing
Banco Filipino to withdraw all its present suits in exchange of the approval of its Business Plan. In
particular, Banco Filipino alleged that Bangko Sentral and the Monetary Board committed grave abuse
of discretion in imposing an additional condition in Resolution No. 1668 requiring it to withdraw its cases
and waive all future cases since it was unconstitutional and contrary to public policy. It prayed that a writ
of mandamus be issued to compel Bangko Sentral and the Monetary Board to approve and implement
its business plan and release its Financial Assistance and Regulatory Reliefs package. The RTC granted
the request for the issuance of a temporary restraining order against Bangko Sentral and the Monetary
Board. However, the CA granted Bangko Sentral and the Monetary Board's application for a writ of
preliminary injunction and enjoined the trial court from conducting further proceedings in Civil Case
pending a decision on the merits.
Respondents assert that the Petition should be dismissed outright for being filed without Philippine
Deposit Insurance Corporation's authority. It asserts that petitioner was placed under receivership on
March 17, 2011, and thus, petitioner's Executive Committee would have had no authority to sign for or
on behalf of petitioner absent the authority of its receiver, Philippine Deposit Insurance Corporation.
They also point out that both the Philippine Deposit Insurance Corporation Charter and Republic Act No.
7653 categorically state that the authority to file suits or retain counsels for closed banks is vested in the
receiver. Thus, the verification and certification of non-forum shopping signed by petitioner's Executive
Committee has no legal effect.
Petitioner points out that there was nothing in the Philippine Deposit Insurance Corporation Charter or
in Republic Act No. 7653 that precludes its Board of Directors from suing on its behalf. It adds that there
was an obvious conflict of interest in requiring it to seek Philippine Deposit Insurance Corporation's
authority to file the case considering that Philippine Deposit Insurance Corporation was under the control
of herein respondent Monetary Board.
ISSUE:
Whether or not petitioner Banco Filipino, as a closed bank under receivership, could file this Petition for
Review without joining its statutory receiver, the Philippine Deposit Insurance Corporation, as a party to
the case.
HELD:
No. A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation. Under Republic Act No. 7653, when the Monetary Board finds a bank insolvent,
it may summarily and without need for prior hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking
institution.
The relationship between the Philippine Deposit Insurance Corporation and a closed bank is fiduciary in
nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank to "immediately gather
and take charge of all the assets and liabilities of the institution" and "administer the same for the benefit
of its creditors." The law likewise grants the receiver the general powers of a receiver under the Revised
Rules of Court. Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power to bring
and defend, in such capacity, actions in his or her own name." Thus, Republic Act No. 7653 provides
that the receiver shall also "in the name of the institution, and with the assistance of counsel as it may
retain, institute such actions as may be necessary to collect and recover accounts and assets of, or
defend any action against, the institution." Considering that the receiver has the power to take charge of
all the assets of the closed bank and to institute for or defend any action against it, only the receiver, in
its fiduciary capacity, may sue and be sued on behalf of the closed bank.
The inclusion of the PDIC as a representative party in the case is therefore grounded on its statutory
role as the fiduciary of the closed bank which, under Section 30 of R.A. 7653 (New Central Bank Act),
is authorized to conserve the latter's property for the benefit of its creditors. Philippine Deposit Insurance
Corporation also safeguards the interests of the depositors in all legal proceedings. When banks become
insolvent, depositors are secure in the knowledge that they can still recoup some part of their savings
through Philippine Deposit Insurance Corporation. Thus, Philippine Deposit Insurance Corporation's
participation in all suits involving the insolvent bank is necessary and imbued with the public interest.
In any case, petitioner's verification and certification of non-forum shopping was signed by its Executive
Vice Presidents Maxy S. Abad and Atty. Francisco A. Rivera, as authorized by its Board of Directors.
When petitioner was placed under receivership, the powers of its Board of Directors and its officers were
suspended. Thus, its Board of Directors could not have validly authorized its Executive Vice Presidents
to file the suit on its behalf. The Petition, not having been properly verified, is considered an unsigned
pleading. A defect in the certification of non-forum shopping is likewise fatal to petitioner's cause.
Considering that the Petition was filed by signatories who were not validly authorized to do so, the
Petition does not produce any legal effect. Being an unauthorized pleading, this Court never validly
acquired jurisdiction over the case. The Petition, therefore, must be dismissed.
KHO
No objective test for determining whether the confusion between two trademarks is likely
Doctrine: There is no objective test for determining whether the confusion is likely. Likelihood of
confusion must be determined according to the particular circumstances of each case. To aid in
determining the similarity and likelihood of confusion between marks, our jurisprudence has developed
two (2) tests: the dominancy test and the holistic test. (CITIGROUP, INC vs CITYSTATE SAVINGS
BANK, INC, G.R. No. 205409, June 13, 2018)
x—————x
No objective test for determining whether the confusion between two trademarks is likely
38. CITIGROUP, INC vs CITYSTATE SAVINGS BANK, INC
G.R. No. 205409, June 13, 2018
Ponente, Leonen, J.
FACTS:
This resolves a Petition for Review on Certiorari assailing the decision and resolution of the
Court of Appeals that affirmed the ruling of the Director General of the Intellectual Property Office (IPO)
that the parties' trademarks were not confusingly similar, and in giving due course to Citystate's
trademark application after a finding that Citystate's mark was not confusingly or deceptively similar to
Citigroup's marks
Petitioner Citigroup, Inc. is a corporation duly organized under the laws of the State of Delaware
engaged in banking and financial services. petitioner or Citibank N.A., a wholly-owned subsidiary of
petitioner, owns the following other trademarks currently registered with the Philippine [Intellectual
Property Office], to wit: "CITI and arc design", "CITIBANK", "CITIBANK PAYLINK", "CITIBANK
SPEEDCOLLECT", "CITIBANKING", "CITICARD", "CITICORP", "CITIFINANCIAL", "CITIGOLD",
"CITIGROUP", "CITIPHONE BANKING'', and "CITISERVICE". Meanwhile, respondent Citystate
Savings Bank, Inc was established by a group of Filipinos and Singaporean companies. Respondent's
registered mark has in its name affixed a lion's head, which is likened to the national symbol of
Singapore, the Merlion.
Respondent filed an application for registration with the IPO of the trademark "CITY CASH
WITH GOLDEN LION'S HEAD" for its ATM service. Citigroup claimed that the "CITY CASH WITH
GOLDEN LION'S HEAD" mark is confusingly similar to its own "CITI" marks. Petitioner asserts that when
the dominancy test is applied the necessary result is a finding of confusing similarity. It insists that in
actuality, the mark could be used outside the bank premises, such as in radio, newspapers, and the
internet, where there would not necessarily be a "GOLDEN LION'S HEAD" symbol to disambiguate the
mark from any of petitioner's marks. Respondent claims that the phonetic similarity between "CITY" and
"CITI" is not sufficient to deny its registration
ISSUE:
Should the application for registration of trademark of the respondent be denied on the ground
that it is confusingly similar with that of the petitioner?
HELD:
NO. Respondent’s application for registration should be granted.
Section 123 of the Intellectual Property Code provides that a mark cannot be registered if it is
identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known
which is registered in the Philippines. Likelihood of confusion must be determined according to the
particular circumstances of each case. To aid in determining the similarity and likelihood of confusion
between marks, our jurisprudence has developed two (2) tests: the dominancy test and the holistic test.
Dominancy test focuses on the similarity of the prevalent features of the competing trademarks that
might cause confusion and deception, thus constituting infringement. The holistic test entails a
consideration of the entirety of the marks as applied to the products, including the labels and packaging,
in determining confusing similarity.
Applying the dominancy test, this Court sees that the prevalent feature of respondent's mark,
the golden lion's head device, is not present at all in any of petitioner's marks. The only similar feature
between respondent's mark and petitioner's collection of marks is the word "CITY" in the former, and the
"CITI" prefix found in the latter. This Court agrees with the findings of the Court of Appeals that this
similarity alone is not enough to create a likelihood of confusion.
An ATM service is not an ordinary product which could be obtained at any store without the
public noticing its association with the banking institution that provides said service. Naturally, the
customer must first open an account with a bank before it could avail of its ATM service. Moreover, the
name of the banking institution is written and posted either inside or outside the ATM booth, not to
mention the fact that the name of the bank that operates the ATM is constantly flashed at the screen of
the ATM itself. With this, the public would accordingly be apprised that respondent's "CITY CASH" is an
ATM service of the respondent bank, and not of the petitioner's.
Hence, the respondent’s application for registration should be granted.
AUM
TRANSPO
THE DUTY OF COMMON CARRIERS TO OBSERVE EXTRAORDINARY DILIGENCE IN SHIPPING

GOODS DOES NOT TERMINATE UNTIL DELIVERY TO THE CONSIGNEE OR TO THE SPECIFIC
PERSON AUTHORIZED TO RECEIVE THE SHIPPED GOODS
Article 1736 of the Civil Code provides that the responsibility of common carriers to exercise this degree
of diligence lasts from the time the goods are unconditionally placed in their possession until they are
delivered to the consignee, or to the person who has a right to receive them. Thus, part of the
extraordinary responsibility of common carriers is the duty to ensure that shipments are received by
none but the person who has a right to receive them. (Federal Express Corp. v. Antonino, G.R. No.
199455, June 27, 2018)
ANY AMBIGUITY IN A CONTRACT OF ADHESION IS CONSTRUED STRICTLY AGAINST THE

PARTY THAT PREPARED IT
Although not automatically void, any ambiguity in a contract of adhesion is construed strictly against the
party that prepared it. Therefore, the prohibition against transporting money must be restrictively
construed against petitioner and liberally for respondents. (Federal Express Corp. v. Antonino, G.R.
No. 199455, June 27, 2018)
x-----------x
THE DUTY OF COMMON CARRIERS TO OBSERVE EXTRAORDINARY DILIGENCE IN SHIPPING

GOODS DOES NOT TERMINATE UNTIL DELIVERY TO THE CONSIGNEE OR TO THE SPECIFIC
PERSON AUTHORIZED TO RECEIVE THE SHIPPED GOODS
ANY AMBIGUITY IN A CONTRACT OF ADHESION IS CONSTRUED STRICTLY AGAINST THE

PARTY THAT PREPARED IT
39. Federal Express Corporation v. Antonino
G.R. No. 199455, June 27, 2018
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari under Rule 45 praying that the assailed CA Decision be
reversed and set aside, and that the respondents be held liable to petitioner’s counterclaim.
Respondent Eliza Antonino was the owner of Unit 22-A in Allegro Condominium in New York, United
States. In November 2003, monthly common charges on the Unit fell due. As respondents Eliza and
Luwalhati Antonino were in the Philippines at that time, they decided to send several Citibank checks to
Veronica Sison who was based in New York, through petitioner FedEx. However, the shipment was not
delivered to Sison, and upon inquiring from the petitioner, she was informed that the package was
delivered to her neighbor but there was no signed receipt. This resulted in the non-payment of the
respondents’ obligations and the foreclosure of the Unit. Respondents, through their counsel, sent a
demand letter to petitioner for payment of damages due to the non-delivery of the package, but the latter
refused to heed their demand. Hence, respondents filed a Complaint for damages in the RTC.
Petitioner claimed that the respondents had no cause of action against it because the latter failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar days from
the acceptance of the shipment. Moreover, petitioner argued that it was absolved of liability because of
the respondents’ misdeclaration of the shipped items, which were allegedly prohibited, as stated in a
condition in its Air Waybill, prohibiting the “transportation of money including negotiable instruments
equivalent to cash.”
The RTC ruled in favor of the respondents, finding that despite the misdeclaration, the checks were not
prohibited items as these were neither legal tender nor negotiable instruments equivalent to cash.
Moreover, the trial court explained that common carriers are presumed to be at fault whenever goods
are lost. Although FedEx claimed that the shipper or recipient authorized the release of the package
even without the signature of the actual recipient, it failed to prove such authorization. On the question
of non-compliance with a condition precedent, the RTC held that under the Air Waybill, the prescriptive
period for filing of an action was within 2 years from the date of delivery of the shipment or from the date
on which the shipment should have been delivered. Because the demand letter was sent well within the
2-year period, respondents were deemed to have complied with the condition precedent. On appeal, the
CA affirmed the RTC decision, further holding that the Air Waybill is a contract of adhesion and should
be construed against the party that drafted it.
ISSUE:
1. Is the claim of the respondents barred by non-compliance with the condition precedent of filing
the claim within 45 days from actual delivery or from the date on which the package should have
arrived?
2. Did the petitioner exercise the degree of diligence required of common carriers upon its alleged
delivery of the package to the neighbor?
3. Did the respondents violate the condition in the Air Waybill in shipping checks so as to exempt
the petitioner from liability thereon?
HELD:
1. No, the claim of the respondents is not barred by non-compliance with a condition precedent.
A provision in a contract of carriage requiring the filing of a formal claim within a specified period
is a valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate
condition precedent to an action for damages arising from loss of shipment.
In this case, petitioner’s Air Waybill states: (1) the right to damages against us shall be
extinguished unless an action is brought within 2 years from the date of delivery or from the
date on which the shipment should have been delivered; and (2) within 45 days after notification
of the claim, it must be documented by sending to us relevant information about it.
Hence, for the respondents’ claim to prosper, they must file a formal claim within 45 days, and
they must file the action within 2 years. There is no question about the second condition as the
complaint was filed well within the 2-year period. With regard to the 45-day period, both the trial
court and the CA found the respondents’ ardent campaign in following up the claim, and the
petitioner’s elusive and ambiguous responses on said follow ups amounted to voluntarily
preventing the fulfillment of the 45-day period condition.
2. No, the petitioner did not exercise the degree of diligence required of common carriers in
shipping the goods.
Common carriers are mandated to observe extraordinary diligence in caring for the goods they
are transporting. Article 1736 of the Civil Code provides that the responsibility of common
carriers to exercise this degree of diligence lasts from the time the goods are unconditionally
placed in their possession until they are delivered to the consignee, or to the person who has a
right to receive them. Thus, part of the extraordinary responsibility of common carriers is the
duty to ensure that shipments are received by none but the person who has a right to receive
them. They must ascertain the identity of the recipient. Failure to deliver shipment to the
designated recipient amounts to a failure to deliver, and the shipment shall be considered lost,
for which the common carrier shall be liable.
Here, petitioner claims to have made delivery but it even admits that it was not to the designated
consignee. Instead, it asserts that it was authorized to release the package without the signature
of the designated recipient. Certainly, this cannot satisfy the requisite of extraordinary diligence
consummated through delivery to none but the person who has a right to receive the package.
Hence, petitioner is liable for the loss for it failed to ensure that the package was delivered to
the named consignee, and even admitting that the package was delivered to the neighbor, it
failed to identify such neighbor.
3. No, the respondents did not violate the conditions of the Air Waybill as to exempt the petitioner
from liability thereon.
Petitioner’s Air Waybill prohibits the transportation of “money (including negotiable instruments
equivalent to cash.” Money is what is generally acceptable in exchange for goods. Laws define
what can be considered as a generally acceptable medium of exchange. As defined in The New
Central Bank Act, legal tender includes all notes and coins issued by the Bangko Sentral. It is
settled jurisprudence that checks, being only negotiable instruments, are only substitutes for
money, and not legal tender; more so when the check has a named payee and is not payable
to bearer, as are the checks in this case.
More importantly, the contract between petitioner and respondents is a contract of adhesion; it
was prepared solely by petitioner for respondents to conform to. Although not automatically
void, any ambiguity in a contract of adhesion is construed strictly against the party that prepared
it. Therefore, the prohibition against transporting money must be restrictively construed against
petitioner and liberally for respondents. Hence, in shipping checks, respondents were not
violating the Air Waybill, and thus, did not commit a breach of warranty that would absolve
petitioner of liability.
VALLEJO
TICKLER
The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. (The
Insular Assurance Co. Ltd. v. Heirs of Alvarez, G.R. No. 207526 & 210156, October 3, 2018)
x—————x
TICKLER
40. The Insular Assurance Co. Ltd. v. Heirs of Alvarez

G.R. No. 207526 & 210156, October 3, 2018
Leonen, J.
FACTS:
Alvarez applied for and was granted a housing loan by Union Bank. This loan was secured by a
promissory note, a real estate mortgage over the lot, and a mortgage redemption insurance taken on
the life of Alvarez with Union Bank as beneficiary. Alvarez was among the mortgagors included in the
list of qualified debtors covered by the Group Mortgage Redemption Insurance that Union Bank had with
Insular Life.
Upon Alvarez’ death, Union Bank filed with Insular Life a death claim pursuant to the Group Mortgage
Redemption Insurance. Insular Life denied the claim after determining that Alvarez was not eligible for
coverage as he was supposedly more than 60 years old at the time of his loan's approval. The lot was
foreclosed and sold due to default in the monthly amortizations. Union Bank acquired the lot as the
highest bidder.
An amended complaint for specific performance was filed by the Heirs of Alvarez, demanding Insular
Life to fulfill its obligation as an insurer under the Group Mortgage Redemption Insurance. The RTC
ruled in favor of the Heirs of Alvarez, finding that Alvarez did not have any fraudulent intent when he
gave Union Bank information about his age and date of birth. This was affirmed by the CA.
ISSUE:
Whether or not Alvarez was guilty of fraudulent misrepresentation as to warrant the rescission of the
Group Mortgage Redemption Insurance obtained by Union Bank on Alvarez's life.
HELD:
No. The Insurance Code distinguishes representations from concealments. Section 26 defines
concealment as "a neglect to communicate that which a party knows and ought to communicate."
However, Alvarez did not withhold information on or neglect to state his age. He made an actual
declaration and assertion about it.
What this case involves, instead, is an allegedly false representation. Section 44 of the Insurance Code
states, "A representation is to be deemed false when the facts fail to correspond with its assertions or
stipulations." The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the
insurer.
Rather than demonstrate Alvarez's consistent fraudulent design, Insular Life comes before this Court
pleading nothing but just one other instance when Alvarez supposedly declared himself to have been
55 years old. It claims that it did not rely solely on Alvarez's Health Statement Form but also on his
Background Checking Report. Reliance on this report is problematic. It was not prepared by Alvarez
himself. Rather, it was accomplished by a Union Bank employee following the conduct of credit
investigation.
As it would appear in this case, there is nothing to show nor indicate that the late Jose H. Alvarez
exhibited any fraudulent intent when the bank was given certain data such as his age and date of birth.
The bank is already in its possession sufficient materials to inform itself regarding the true and actual
age, civil status and other personal circumstances of Jose Alvarez to merit approval of the loan applied
for. However, rather than actively engaging in an effort to verify, it appears that Union Bank stood idly
by, hardly bothering to ascertain if other pieces of evidence in its custody would attest to or belie a
fraudulent scheme.
PRADO
NON-CHARTERED GOVERNMENT-OWNED OR CONTROLLED CORPORATION CANNOT ENTER

INTO A COLLECTIVE BARGAINING AGREEMENT WITH ITS EMPLOYEES
When it comes to collective bargaining agreements and collective negotiation agreements in

government-owned or controlled corporations, Executive Order No. 203 unequivocally stated that while
it recognized the right of workers to organize, bargain, and negotiate with their employers, "the
Governing Boards of all covered [government-owned or controlled corporations], whether Chartered or
Non-chartered, may not negotiate with their officers and employees the economic terms of their
[collective bargaining agreements]." (GSIS Family Bank Employees Union v. Villanueva, G.R. No.
210773, January 23, 2019, LEONEN, J.)
x—————x
NON-CHARTERED GOVERNMENT-OWNED OR CONTROLLED CORPORATION CANNOT ENTER

INTO A COLLECTIVE BARGAINING AGREEMENT WITH ITS EMPLOYEES
41. GSIS FAMILY BANK EMPLOYEES UNION v. VILLANUEVA
G.R. No. 210773, January 23, 2019
LEONEN, J.
FACTS:
The Government Service Insurance System took over the control and management of Comsavings
Bank. Comsavings Bank and the Government Service Insurance System executed a Memorandum of
Agreement where the latter committed to infuse an additional capital of P2.5 billion into Comsavings
Bank. After the infusion of funds, the Government Service Insurance System effectively owned 99.55%
of Comsavings Bank's outstanding shares of stock.
Sometime in July 2001, Comsavings Bank changed its name to GSIS Family Bank.
Emmanuel L. Benitez (Benitez), GSIS Family Bank's president, sought opinion from the Bangko Sentral
ng Pilipinas as to whether GSIS Family Bank may be considered as a government-owned or controlled
corporation or government bank under Republic Act No. 10149. GSIS Family Bank met with
representatives of the Governance Commission, which clarified that GSIS Family Bank was classified
as a government financial institution under Republic Act No. 10149.
Benitez wrote the Governance Commission to seek further clarification on several issues. the
Governance Commission replied that as a government financial institution, GSIS Family Bank was
unauthorized to enter into a collective bargaining agreement with its employees "based on the principle
that the compensation and position classification system is provided for by law and not subject to private
bargaining."
The Governance Commission further clarified that the right to strike of GSIS Family Bank's employees
was not guaranteed by the Constitution, as they were government officers and employees.
Counsel for the GSIS Union sent GSIS Family Bank a demand letter for the payment of Christmas bonus
to its members, as stipulated in their Collective Bargaining Agreement. GSIS Union accused GSIS
Family Bank of evading its contractual obligation to its employees by invoking the Governance
Commission's opinion that it was no longer authorized to grant incentives and other benefits to its
employees, unless authorized by the President of the Philippines.
Eventually, petitioner GSIS Union filed before this Court a Petition for Certiorari, asserting that GSIS
Family Bank is a private bank; thus, it is not covered by the provisions of Republic Act No. 10149.
ISSUE:
Can GSIS Family Bank, a non-chartered government-owned or controlled corporation, enter

into a collective bargaining agreement with its employees?
RULING: NO
A government-owned or controlled corporation is: (1) established by original charter or through

the general corporation law; (2) vested with functions relating to public need whether governmental or
proprietary in nature; and (3) directly owned by the government or by its instrumentality, or where the
government owns a majority of the outstanding capital stock. Possessing all three (3) attributes is
necessary to be classified as a government-owned or controlled corporation.
There is no doubt that GSIS Family Bank is a government-owned or controlled corporation since 99.55%
of its outstanding capital stock is owned and controlled by the Government Service Insurance System.
Under the present state of the law, the test in determining whether a government-owned or controlled
corporation is subject to the Civil Service Law is the manner of its creation such that government
corporations created by special charter are subject to its provisions while those incorporated under the
general Corporation Law are not within its coverage.
Relations between private employers and their employees are subject to the minimum requirements of
wage laws, labor, and welfare legislation. Beyond these requirements, private employers and their
employees are at liberty to establish the terms and conditions of their employment relationship. In
contrast with the private sector, the terms and conditions of employment of government workers are
fixed by the legislature; thus, the negotiable matters in the public sector are limited to terms and
conditions of employment that are not fixed by law
When it comes to collective bargaining agreements and collective negotiation agreements in

government-owned or controlled corporations, Executive Order No. 203 unequivocally stated that while
it recognized the right of workers to organize, bargain, and negotiate with their employers, "the
Governing Boards of all covered [government-owned or controlled corporations], whether Chartered or
Non-chartered, may not negotiate with their officers and employees the economic terms of their
[collective bargaining agreements]."
Thus, considering the existing law at the time, GSIS Family Bank could not be faulted for refusing to
enter into a new collective bargaining agreement with petitioner as it lacked the authority to negotiate
economic terms with its employees.
TECSON
BANKING
Restitution under Section 2 of RA 7202 falls under the Bangko Sentral ng Pilipinas, upon the
establishment of a sugar restitution fund. Without the fund, there is no restitution to speak
of at all.
Claim on Section 2 of Republic Act No. 7202 for restitution shall be filed with the Bangko Sentral ng
Pilipinas. Petitioner Philippine National Bank's role was merely that of a lending bank. Under Republic
Act No. 7202 and its Implementing Rules and Regulations, lending banks are not obligated to
compensate sugar producers for their losses. Restitution falls under the Bangko Sentral ng Pilipinas,
upon the establishment of a sugar restitution fund.
42. Bangko Sentral ng Pilipinas v. Spouses Ledesma
G.R. Nos. 211176 & 211583, February 6, 2019
Leonen, J.:
Facts: The Ledesma Spouses stated in their Complaint that they were farmers engaged in sugar
farming in Negros Occidental, with sugar productions from crop year 1974 to 1975 to crop year 1984
to 1985. Within this period, they were among those who suffered losses in sugar farming operations
due to the actions of government-owned and controlled agencies. Among these agencies were the
Bangko Sentral ng Pilipinas and the Philippine National Bank.
The Ledesma Spouses obtained several crop loans from the Philippine National Bank. After
full payment of the loans, there was an excess payment of P353,529.67, as admitted by the
Philippine National Bank and as certified by the Commission on Audit. The Ledesma Spouses
argued that under Republic Act No. 7202, the Bangko Sentral ng Pilipinas and the Presidential
Commission on Good Government should compensate them for their losses and refund the excess
payment from the sugar restitution fund.
Issue: Whether or not the Bangko Sentral ng Pilipinas and Philippine National Bank liable for the
refund of excess payments to sugar producers covered by Republic Act No. 7202.
Held: No.
Respondents base their claim on Section 2 of Republic Act No. 7202, which provides:
SECTION 2. Whatever amount recovered by the Government through the
Presidential Commission on Good Government or any other agency or from any
other source and whatever assets or funds that may be recovered, or already
recovered, which have been determined to have been stolen or illegally acquired
from the sugar industry shall be used to compensate all sugar producers from Crop
Year 1974-1975 up to and including Crop Year 1984-1985 on a pro rata basis.
Moreover, Sections 2 (r) and 11 of the Rules and Regulations Implementing Republic Act
No. 7202state:
SECTION 2. Definitions of Terms. — As used in these Implementing
Rules and Regulations, the following terms shall have their respective meanings
as set forth below:
xxx xxx xxx
r. SUGAR RESTITUTION FUND shall refer to the ill-gotten wealth
recovered by the Government through the PCGG or any
other agency or from any other source within the
Philippines or abroad, and whatever assets or funds that
may be recovered, or already recovered, which have been

determined by PCGG or any other competent agency of
the Government to have been stolen or illegally acquired
from the sugar industry whether such recovery be the
result of a judicial proceeding or by a compromise
agreement.
xxx xxx xxx
SECTION 11. All assets, funds, and/or ill-gotten wealth turned over
to the BSP pursuant hereto shall constitute the Sugar Restitution Fund from
which restitution shall be affected by the BSP pursuant to Section 2 of the
Act. Such Fund shall be held in trust by the BSP for the sugar producers pending
distribution thereof. The BSP shall take all necessary steps, consistent with its
responsibility as Trustee to preserve and maintain the value of all such recovered
assets, funds, and/or ill-gotten wealth. (Emphasis supplied)
The Court of Appeals erred in ruling that petitioner Bangko Sentral ng Pilipinas is mandated
to pay the sugar producers. The money to be used to compensate these sugar producers should
come from the sugar restitution fund. Without the fund, there is no restitution to speak of at all.
Petitioner Bangko Sentral ng Pilipinas cannot effect the restitution since neither the
Presidential Commission on Good Government nor other government agencies have turned over
funds to it for the sugar producers' compensation.
The trial court was correct in ruling, "[t]hat there is no Sugar Restitution Fund even up to
this time is not the fault of the herein defendants. Indeed[,] one cannot give what he does not have."
Likewise, petitioner Philippine National Bank is not beholden to respondents.
All claims for restitution shall be filed with the Bangko Sentral ng Pilipinas. Petitioner
Philippine National Bank's role was merely that of a lending bank. Under Republic Act No. 7202 and
its Implementing Rules and Regulations, lending banks are not obligated to compensate sugar
producers for their losses. Restitution falls under the Bangko Sentral ng Pilipinas, upon the
establishment of a sugar restitution fund.
There is no dispute that respondents are covered under Republic Act No. 7202. While this
Court recognizes the plight of the thousands of sugar producers and their right as beneficiaries,
there is, sadly, no fund from where the money should come.
FETALVERO
TRANSPO CASE
A COMMON CARRIER SHOULD EXERCISE EXTRAORDINARY DILIGENCE IN HANDLING THE

GOODS FOR TRANSPORTATION.
Being a common carrier, Tan is obligated to exercise extraordinary diligence over the goods entrusted
to her. Her responsibility began from the time she received the soya beans from respondent's broker
and would only cease after she has delivered them to the consignee or any person with the right to
receive them. Any loss during the transfer is presumed to make him liable unless he proved that he
exercised extraordinary diligence, which is wanting in this case.
(Annie Tan v. Great Harvest Enterprises, Inc. G.R. No. 220400, March 20, 2019)
43. Annie Tan v. Great Harvest Enterprises, Inc.

G.R. No. 220400, March 20, 2019
Leonen, J.:
FACTS:
Great Harvest hired Tan to transport 430 bags of soya beans worth P230,000.00 from Tacoma
Integrated Port Services, Inc. (Tacoma) in Port Area, Manila to Selecta Feeds in Camarin, Novaliches,
Quezon City.
That same day, the bags of soya beans were loaded into Tan's hauling truck. Her employee, Rannie
Sultan Cabugatan (Cabugatan), then delivered the goods to Selecta Feeds.
At Selecta Feeds, however, the shipment was rejected. Upon learning of the rejection, Great Harvest
instructed Cabugatan to deliver and unload the soya beans at its warehouse in Malabon. Yet, the truck
and its shipment never reached Great Harvest's warehouse.
On February 7, 1994, Great Harvest asked Tan about the missing delivery. At first, Tan assured Great
Harvest that she would verify the whereabouts of its shipment, but after a series of follow-ups, she
eventually admitted that she could not locate both her truck and Great Harvest's goods. She reported
her missing truck to the Western Police District Anti-Carnapping Unit and the National Bureau of
Investigation.
On February 19, 1994, the National Bureau of Investigation informed Tan that her missing truck had
been found in Cavite. However, the truck had been cannibalized and had no cargo in it. Tan spent over
P200,000.00 to have it fixed.
Great Harvest, through counsel, sent Tan a letter demanding full payment for the missing bags of soya
beans. On April 26, 1994, it sent her another demand letter. Still, she refused to pay for the missing
shipment or settle the matter with Great Harvest. Thus, on June 2, 1994, Great Harvest filed a Complaint
for sum of money against Tan.
In her Answer, Tan denied that she entered into a hauling contract with Great Harvest, insisting that she
merely accommodated it. Tan also pointed out that since Great Harvest instructed her driver to change
the point of delivery without her consent, it should bear the loss brought about by its deviation from the
original unloading point. The RTC convicted Tan.
Upon appeal, the Court of Appeals also held that the cargo loss was due to Tan's failure to exercise the
extraordinary level of diligence required of her as a common carrier, as she did not provide security for
the cargo or take out insurance on it.
ISSUE:
Is Tan liable?
HELD:
Yes, because he failed to prove that he exercised extraordinary diligence.
Being a common carrier, Tan is obligated to exercise extraordinary diligence over the goods entrusted
to her. Her responsibility began from the time she received the soya beans from respondent's broker
and would only cease after she has delivered them to the consignee or any person with the right to
receive them. Any loss during the transfer is presumed to make him liable unless he proved that he
exercised extraordinary diligence, which is wanting in this case
The arguments of petitioner is belied by the testimony of Chua, its Account officer, Chua categorically
testified that the transportation arrangement included the delivery of the rejected goods to the plaintiff's
nearest warehouse in the event that goods are rejected by the consignee with prior approval of the
consignor.
PALTING
Tickler
Doctrine
(BDO UNIBANK, INC. v ANTONIO CHOA, G.R. No. 237553; July 10, 2019)
44. BDO UNIBANK, INC. v ANTONIO CHOA

G.R. No. 237553; July 10, 2019
LEONEN, J.
FACTS:
BDO Unibank filed a complaint for violation of the Trust Receipts Law (PD 115) against Antonio Choa,
General Manager and President of Camden Industries Inc. Choa signed several Trust Reciept
Agreements with Equitable PCIB (now BDO) with total worth of Php 20,000,000; with the undertaking to
remit proceeds of a sale of goods or turnover said goods if they remain unsold. Choa violated the Trust
Receipt Agreement by failing to remit Php 7,875,904.96.
Defendant Choa filed a demurrer to evidence, reasoning that his liability of Php 20,000,000 under the
Trust Receipt Agreement should have been compensated/offset with the liability of BDO Unibank against
Camden amounting to Php 90,000,000. This amount represents a judgement award in favor of Camden
in a prior civil case.
BDO Unibank assails the grant of demurrer of evidence, claiming that the motion for leave (to file
demurrer) was filed beyond the allowable period, and that BDO Unibank was denied due process during
the hearing of said Motion.
ISSUE:
[The lis mota of the case is about [1] the concept of DEMURRER TO EVIDENCE IN CIVIL AND IN
CRIMINAL LITIGATION, [2] COMPLAINANT’S ROLE IN THE APPEAL OF CRIMINAL CASES, and [3]
concepts on TRUST RECEIPTS. The Corporation law-related doctrine was a minor issue and is pasted
below in its ENTIRETY]
CORPO LAW ISSUE: Can Choa, President and General Manager of Camden Industries, be held
personally liable for the civil obligations imposed by the Trust Receipt Agreement?
HELD:
Although these pieces of evidence show that respondent signed the Trust Receipt Agreements, they do
not show that he signed them in his personal capacity. On the bottom right corner of the agreements are
two (2) lines: one for the "NAME OF CORPORATION," and the other for "AUTHORIZED SIGNATURE."
In all agreements, "Camden Inds." Was handwritten as the name of the corporation, while respondent's
signature appeared as the authorized signature. Clearly, respondent affixed his signature only as
Camden's representative.
Moreover, there was no guaranty clause or a similar clause on the page that he signed that would have
made him personally liable in case of default of the company. In Tupaz JV v. Court of Appeals:
“A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts
incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the
corporation they represent. As an exception, directors or officers are personally liable for the
corporation's debts only if they so contractually agree or stipulate.”
Without any evidence that respondent personally bound himself to the debts of the company he
represented, this Court cannot hold him civilly liable under the Trust Receipt Agreements.
SANGKAL

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COMMERCIAL LAW REVIEW LEONEN DIGESTS by 4C

Atty. Maria Zarah Villanueva Castro

1. Pryce Corporation vs. China Banking Corporation

LIABILITY OF OFFICERS MUST BE CONVINCINGLY PROVEN TO BE ONE OF PATENT BAD

2. ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS

G.R. No. 206806 June 25, 2014 LEONEN, J.:

A CORPORATION HAS A PERSONALITY SEPARATE AND DISTINCT FROM ITS INDIVIDUAL

3. ABOITIZ EQUITY VENTURES, INC., vs. CHIONGBIAN

4. People’s Trans-East Asia v. Doctors of New Millennium Holdings

A DERIVATIVE SUIT IS AN ACTION FILED BY STOCKHOLDERS TO ENFORCE A CORPORATE

A CORPORATION MAY BE PLACED UNDER RECEIVERSHIP, OR MANAGEMENT COMMITTEES

A DERIVATIVE SUIT IS AN ACTION FILED BY STOCKHOLDERS TO ENFORCE A CORPORATE

A CORPORATION MAY BE PLACED UNDER RECEIVERSHIP, OR MANAGEMENT COMMITTEES

5. Villamor, Jr. v. Umale

THE STANDARD OF DILIGENCE REQUIRED OF BANKS IS HIGHER THAN THE DEGREE OF

THE STANDARD OF DILIGENCE REQUIRED OF BANKS IS HIGHER THAN THE DEGREE OF

7. Philippine National Bank v. Santos, et. al.

G.R. No. 208293, December 10, 2014

Aguilar v. Santos, et. al.

G.R. No. 208295, December 10, 2014

TRANSFER OF PROPERTIES BY A DEBTOR WHO IS NOT UNDER RECEIVERSHIP IS BEYOND

TRANSFER OF PROPERTIES BY A DEBTOR WHO IS NOT UNDER RECEIVERSHIP IS BEYOND

8. Home Guaranty Corporation v. La Savoie Development Corporation

NEWS AS EXPRESSED IN A VIDEO FOOTAGE IS ENTITLED TO COPYRIGHT PROTECTION

NEWS AS EXPRESSED IN A VIDEO FOOTAGE IS ENTITLED TO COPYRIGHT PROTECTION

News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations

G.R. No. 179047 , [March 11, 2015]

On November 8, 2005, Metrobank instituted an extrajudicial foreclosure proceeding against the

Is the Insolvency Court’s consent handling the insolvency proceeding necessary?

1. The fact that the consideration of the conveyance is fictitious or is inadequate.

3. A sale upon credit by an insolvent debtor.

4. Evidence of large indebtedness or complete insolvency.

Presumption of Fault against a Moving Vessel that strikes a Stationary Object.

13. Lorenzo Shipping Corp v. National Power Corporation

RTC absolved petitioner, CA reversed after.

TRANSFER OF SECURED CREDITOR’S RIGHTS TO A THIRD PARTY. Through the assignment of

TRANSFER OF SECURED CREDITOR’S RIGHTS TO A THIRD PARTY.

14. Metropolitan Bank & Trust Company v. G & P Builders, Inc.

UNAUTHORIZED ACTS OF AN OFFICER DO NOT BIND THE COPORATION

KNOWLEDGE OF AN OFFICER CONSIDERED AS KNOWLEDGE OF CORPORATION APPLIES

UNAUTHORIZED ACTS OF AN OFFICER DO NOT BIND THE CORPORATION

KNOWLEDGE OF AN OFFICER CONSIDERED AS KNOWLEDGE OF CORPORATION APPLIES

15. University of Mindanao, Inc. v. Bangko Sentral Pilipinas, et al.

16. AIR CANADA vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 169507. January 11, 2016.

THE CORPORATION, BEING THE PARTY WRONGED, IS AN INDISPENSIBLE IN A DERIVATIVE

Rogelio, Sr. Group filed their Answer with compulsory counterclaim.

A stockholder suing on account of wrongful or fraudulent corporate actions (undertaken through

Villamor v. Umale distinguished individual suits from class or representative suits:

In derivative suits, the corporation concerned must be impleaded as a party.

ONCE OWNERSHIP IS PROVEN, THERE ARISES A DISPUTABLE PRESUMPTION THAT THE

ONCE OWNERSHIP IS PROVEN, THERE ARISES A DISPUTABLE PRESUMPTION THAT THE

18. CARAVAN TRAVEL AND TOURS INTERNATIONAL, INC. v. ERLINDA ABEJAR

19. Viva Shipping Lines vs. Keppel Philippines Marine

PASSENGER HAS THE CORRELATIVE DUTY TO EXERCISE ORDINARY DILIGENCE IN THE

20. Manay v. Cebu Air, Inc

21. E.I. Dupont De Nemours and Co. v. Francisco

22. PHIL GEOTHERMAL EMPLOYEES UNION VS UNOCAL PHIL (CHEVRON)

If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of Unocal Corporation,

AN ACTION FOR INJUNCTION FILED BY A CORPORATION GENERALLY DOES NOT LIE TO

AN ACTION FOR INJUNCTION FILED BY A CORPORATION GENERALLY DOES NOT LIE TO

G.R. No. 172948, 05 October 2016