ENGINEERING GEOSCIENCE, INC. VS.

 PHILIPPINE SAVINGS BANK

G.R. NO. 187262, JANUARY 10, 2019

FACTS:
The present action stemmed from a Complaint With Prayer For Writ Of Preliminary
Injunction And Restraining Order instituted by private respondent EGI against petitioner
PSBank together with MBTC, Lorenzo, Cachero and Bernas, which seeks the annulment
of its loan contract with PSBank.

It appears that EGI obtained a loan from PSBank in the principal amount of Twenty Four
Million Sixty Four Thousand (Php24, 064,000.00) Pesos as evidenced by a Promissory
Note dated February 14, 1990. To secure the loan, EGI, through its President, Jose
Rolando Santos, executed a Real Estate Mortgage on February 13, 1990 in favor of
PSBank over two parcels of land, more particularly described and covered by Transfer
Certificate of Title Nos. 292874 and 249866. As agreed by the parties, the schedule of
payment for said loan shall be as follows: (a) Php1,443,840.00 representing interest for
two (2) quarters commencing on May 14, 1990 and three months thereafter; (b)
Php1,850,626.00 (Principal and interest) quarterly for twenty six (26) quarters starting
November 14, 1990 and every three (3) months thereafter.

EGI was only able to make partial payments on its loan as it fell due based on the above
schedule of payment, and after paying a total amount of only Php3, 223,192.91 or only
half of the amortizations due amounting to Php6, 588,932.00, EGI made no further
payments to [PSBank] after its last payment made on November 29, 1990 in the amount
of Php 160,000.00. Thus, [PSBank] invoked the acceleration clause under the promissory
note and sent a demand letter dated February 11, 1991 demanding full payment of its
loan obligation.

PSBank's demand letter went unheeded, prompting [PSBank] to file a petition for extra-
judicial foreclosure of mortgage under Act No. 135 on May 21, 1991, with the Office of
the Ex-Officio Sheriff, Regional Trial Court of Quezon City. The foreclosure sale was set
on June 26, 1991 but the same did not push through on account of the Complaint with
Prayer for Writ of Preliminary Injunction and Restraining Order filed by EGI before the
[trial court]. The [trial court] issued an Order dated August 26, 1991 granting EGI's
prayer for issuance of writ of preliminary injunction and effectively enjoined PSBank
from proceeding with the foreclosure sale.

ISSUE:
Whether or not the CA erred in annulling and setting aside the Orders dated 24 August
2007 and 23 January 2008 issued by the [trial court] thereby reinstating the Decision
dated 12 January 1993 which approved an alleged Compromise Agreement entered into
between PSBank and the former President of EGI without the knowledge, consent and
authority of the latter.

HELD:
The general rule admits of exceptions: (1) the conclusion is grounded on speculations,
surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible;
(3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of
facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence
on which the factual findings are based; (7) the findings of absence of facts are
contradicted by the presence of evidence on record; (8) the findings of the Court of
Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly
overlooked certain relevant and undisputed facts that, if properly considered, would
justify a different conclusion; (10) the findings of the Court of Appeals are beyond the

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

issues of the case; and (11) such findings are contrary to the admissions of both
parties. We find that none of the exceptions apply in the present case.

After a careful review of each party's submissions, we agree with EGI that there is
nothing in the records that shows that Santos had the express authority to represent
EGI in filing a complaint before the trial court, or even enter into any compromise
agreement on behalf of EGI. Aside from its bare allegations, PSBank was not able to
present any evidence which would show that Santos indeed had the authority to
represent EGI. PSBank was not able to show any evidence of a board authority, a special
power of attorney, or even a secretary's certificate that EGI issued in favor of Santos.
Neither was PSBank able to show that it was not necessary for Santos to present a
Board Resolution that authorizes him to file the Complaint and enter into the
Compromise Agreement because EGI's By-Laws expressly authorize him to do so.

From the foregoing, it is readily apparent that EGI's board of directors failed to exercise
the requisite diligence of a good father of a family in handling its affairs, specifically its
loan obligation with [PSBank] which it is very much aware of. Also, there is no allegation
as to whether the board of directors at the time of the execution of the compromise
agreement is the same board of directors which is now claiming that its former
president intentionally concealed and withheld the said complaint and compromise
agreement.
A corporation, as a juridical entity, acts through its board of directors. The board
exercises almost all corporate powers, lays down all corporate business policies, and is
responsible for the efficiency of management. The general rule is that, in the absence of
authority from the board of directors, no person, not even its officers, can validly bind a
corporation. Section 23 of the Corporation Code of the Philippines.

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

 NORMA C. GAMARO AND JOSEPHINE G. UMALI VS. PEOPLE OF THE PHILIPPINES
G.R. NO. 211917

FACTS:

Petitioners were charged with Estafa. Sometime in 2002, Fineza engaged in a business

venture with Gamaro and her daughters - Umali and accused Fineza would buy any
foreclosed pieces of jewelry from M. Lhuillier Pawnshop whenever informed by Umali
who was then the manager of the said pawnshop.The business venture was initially
successful. However, when Fineza discovered that Norma Gamaro, together with her
daughters Rowena Gamaro and Umali, also engaged in a similar business with other
suppliers of pieces of jewelry, she decided to terminate the business.

To wind up the business, it was agreed that Norma Gamaro and Rowena Gamaro would
just dispose or sell the remaining pieces of jewelry in their possession. But when Fineza
tried to encash the checks which were issued to her by Rowena Gamaro, the same were
dishonored because the account of the Gamaros had been closed. To settle the matter,
Fineza asked Norma Gamaro to return the remaining pieces of jewelry in her possession
but the latter failed to do so, and instead, offered her house and lot as payment for the
pieces of jewelry. Fineza, however, did not accept the said offer.A demand letter was
then sent by Fineza to Umali, Norma Gamaro and Rowena Gamaro. The demand letter
was left unanswered. Atty. Baldeo testified in the case stating that Gamaro engaged in
the business jewelry of Fineza.

ISSUE:
Whether the attorney-client relationship raises the presumption of confidentiality in
every communication.

HELD:
No. The factors essential to establish the existence of the privilege are: (1) There exists
an attorney-client relationship, or a prospective attorney-client relationship, and it is by
reason of this relationship that the client made the communication; (2) The client made
the communication in confidence;(3) The legal advice must be sought from the attorney
in his professional capacity.

The mere relation of attorney and client does not raise a presumption of confidentiality.
The client must intend the communication to be confidential. A confidential
communication refers to information transmitted by voluntary act of disclosure
between attorney and client in confidence and by means which, so far as the client is
aware, discloses the information to no third person other than one reasonably
necessary for the transmission of the information or the accomplishment of the purpose
for which it was given. The communication made by a client to his attorney must not be
intended for mere information, but for the purpose of seeking legal advice from his
attorney as to his rights or obligations. The communication must have been transmitted
by a client to his attorney for the purpose of seeking legal advice.In this case, the
testimony of Atty. Baldeo consisted merely of observations that petitioner Norma
Gamaro was indeed engaged in the business of selling jewelry supplied by private
complainant Fineza. Atty. Baldeo testified primarily on the fact that she personally saw
petitioner Gamaro, on several occasions, showing the jewelry for sale to their
officemates.

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

 VIVA SHIPPING LINES, INC. VS. KEPPEL PHILIPPINES MINING, INC., ET.AL.
G.R. NO. 177382, FEBRUARY 17, 2016
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.

In the Amended Petition, Viva Shipping Lines claimed to own and operate 19 maritime
vessels and Ocean Palace Mall, a shopping mall in downtown Lucena City. Viva Shipping
Lines also declared its total properties’ assessed value at about P45, 172,790.00.
However, these allegations were contrary to the attached documents in the Amended
Petition.

One of the attachments, the Property Inventory List, showed that Viva Shipping Lines
owned only two (2) maritime vessels: M/V Viva Peñafrancia V and M/V Marian Queen.
The list also stated that the fair market value of all of Viva Shipping Lines’ assets
amounted to P447, 860,000.00, P400 million more than what was alleged in its
Amended Petition. Some of the properties listed in the Property Inventory List were
already marked as “encumbered” by its creditors; hence, only P147, 630,000.00 of real
property and its vessels were marked as “free assets.

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”.
In its Company Rehabilitation Plan, Viva Shipping Lines enumerated possible sources of
funding such as the sale of old vessels and commercial lots of its sister company, Sto.
Domingo Shipping Lines. It also proposed the conversion of the Ocean Palace Mall into a
hotel, the acquisition of two (2) new vessels for shipping operations, and the “re-
operation” of an oil mill in Buenavista, Quezon.

ISSUE:
Whether or not the corporate rehabilitation is proper.

HELD:
NO. 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.

An indispensable party is one who has such an interest in the controversy or subject
matter of a case that a final adjudication cannot be made in his or her absence, without
injuring or affecting that interest. He or she is a party who has not only an interest in the
subject matter of the controversy, but “an interest of such nature that a final decree
cannot be made without affecting [that] interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a person in whose

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

absence there cannot be a determination between the parties already before the court
which is effective, complete or equitable.” Further, an indispensable party is one who
must be included in an action before it may properly proceed.

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.

Petitioner’s rehabilitation plan should have shown that petitioner has enough
serviceable assets to be able to continue its business. Yet, the plan showed that the
source of funding would be to sell petitioner’s old vessels. Disposing of the assets
constituting petitioner’s main business cannot result in rehabilitation. A business
primarily engaged as a shipping line cannot operate without its ships. On the other
hand, the plan to purchase new vessels sacrifices the corporation’s cash flow. This is
contrary to the goal of corporate rehabilitation, which is to allow present value recovery
for creditors. The plan to buy new vessels after selling the two vessels it currently owns
is neither sound nor workable as a business plan.

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

 SECURITIES AND EXCHANGE COMMISSION VS. HON. REYNALDO M. LAIGO
G.R. NO. 188639, SEPTEMBER 2, 2015

FACTS:
Pursuant to the mandate of Securities Regulation Code, the SEC issued the New Rules on
the Registration and Sale of Pre-Need Plans to govern the pre-need industry prior to the
enactment of the Pre-Need Code. It required from the pre-need providers the creation
of trust funds as a requirement for registration.

Legacy, being a pre-need provider, complied with the trust fund requirement and
entered into a trust agreement with Land Bank. In mid-2000, the industry collapsed for a
range of reasons. Legacy, like the others, was unable to pay its obligations to the plan
holders. This resulted in Legacy being the subject of a petition for involuntary insolvency
by private respondents in their capacity as plan holders. Through its manifestation filed
in the RTC, Legacy did not object to the proceedings and was declared insolvent by the
RTC. The trial court also ordered Legacy to submit an inventory of its assets and
liabilities.

The RTC ordered the SEC, to submit the documents pertaining to Legacy's assets and
liabilities. The SEC opposed the inclusion of the trust fund in the inventory of corporate
assets on the ground that to do so would contravene the New Rules which treated trust
funds as principally established for the exclusive purpose of guaranteeing the delivery of
benefits due to the plan holders. Despite the opposition of the SEC, Judge Laigo ordered
the insolvency Assignee to take possession of the trust fund. Judge Laigo viewed the
trust fund as Legacy's corporate assets and, for said reason, included it in the insolvent's
estate.

The Assignee argues that Legacy has retained a beneficial interest in the trust fund
despite the execution of the trust agreement and that the properties can be the subject
of insolvency proceedings. To the Assignee, the ―control mechanisms in the Trust
Agreement itself are indicative of the interest of Legacy in the enforcement of the trust
fund because the agreement gives it the power to dictate on LBP (trustee) the fulfilment
of the trust, such as the delivery of monies to it to facilitate the payment to the plan
holders.

ISSUE:
Whether Legacy is a beneficiary in the Trust Fund Agreement?

HELD:
The SC ruled that Legacy is not a beneficiary. A person is considered as a beneficiary of a
trust if there is a manifest intention to give such a person the beneficial interest over the
trust properties. Here, the terms of the trust agreement plainly confer the status of
beneficiary to the plan holders, not to Legacy. In the recital clauses of the said
agreement, Legacy bound itself to provide for the sound, prudent and efficient
management and administration of such portion of the collection "for the benefit and
account of the plan holders," through LBP as the trustee.

This categorical declaration doubtless indicates that the intention of the trustor (Legacy)
is to make the plan holders the beneficiaries of the trust properties, and not Legacy. It is
clear that because the beneficial ownership is vested in the plan holders and the legal
ownership in the trustee, LBP, Legacy, as trustor, is left without any iota of interest in
the trust fund. This is consistent with the nature of a trust arrangement, whereby there

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

is a separation of interests in the subject matter of the trust, the beneficiary having an
equitable interest, and the trustee having an interest which is normally legal interest.

SPOUSES SALVADOR VS. SPOUSES RABAJA AND ROSARIO GONZALES

G.R. NO. 199990, FEBRUARY 4, 2015

FACTS:
In 1998, Spouses Rabaja learned that Spouses Rolando and Herminia Salvador are selling
their lot located in Mandaluyong City. Herminia Salvador personally introduced Rosario
Gonzales to them as the administrator of the said property.

Spouses Rabaja made an initial payment of P48, 000.00 to Gonzales in the presence of
Herminia. Gonzales then presented the Special Power of Attorney (SPA), executed by
Rolando. The parties then executed the Contract to Sell.

In 1999, Spouses Salvador complained to Spouses Rabaja that they did not receive any
payment from Gonzales. This prompted Spouses Rabaja to suspend further payment of
the purchase price; and as a consequence, they received a notice to vacate the subject
property from Spouses Salvador for nonpayment of rentals.

ISSUE:
Whether or not Gonzales, as agent of spouses Salvador, could validly receive the
payments of Spouses Rabaja?

HELD:
Spouses Salvador insist that they did not receive the payments made by Spouses Rabaja
from Gonzales which totalled P950, 000.00 and that Gonzales was not their duly
authorized agent. These contentions, however, must fail in light of the applicable
provisions of the New Civil Code which state:

Art. 1910: The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

Art. 1900: So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent’s authority, if such act is within the terms of
the power of attorney, as written, even if the agent has in fact exceeded the limits of his
authority according to an understanding between the principal and the agent.

Gonzales acted within the scope of her authority. The SPA precisely stated that she
could administer the property, negotiate the sale and collect any document and all
payments related to the subject property. As the agent acted within the scope of his
authority, the principal must comply with all the obligations.

As correctly held by the CA, considering that it was not shown that Gonzales exceeded
her authority or that she expressly bound herself to be liable, then she could not be
considered personally and solidarily liable with the principal, Spouses Salvador.

Considering that there was a valid SPA, then Spouses Rabaja properly made payments to
Gonzales, as agent of Spouses Salvador; and it was as if they paid to Spouses Salvador.

It is of no moment, insofar as Spouses Rabaja are concerned, whether or not the

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

payments were actually remitted to Spouses Salvador. Any internal matter,
arrangement, grievance or strife between the principal and the agent is theirs alone and
should not affect third persons.

If Spouses Salvador did not receive the payments or they wish to specifically revoke the
SPA, then their recourse is to institute a separate action against Gonzales. Such action,
however, is not any more covered by the present proceeding.

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

 MANUEL L. BAUTISTA VS .MARGARITO L. BAUTISTA
G.R. NO. 202088, MARCH 8, 2017

FACTS:
The Bautista siblings – Margarito, Manuel L. Bautista, Carmelita Bautista Sahagun,
Aniano L. Bautista Florencia Bautista de Villa and Ester Bautista Cabrera – established a
lending business through a common fund from the proceeds of the sale of a parcel of
coconut land they inherited from their mother Consorcia Lantin Bautista.

Amelia V. Mendoza obtained a loans from Florencia, and secured the same with a real
estate mortgage over a parcel of land she owned. Subsequently Amelia and Florencia
executed another Kasulatan ng Pagdaragdag ng Sanla. Florencia, thereafter, received
the owner’s duplicate copy of TCT No. T-2371, which she, in turn, entrusted to Carmelita
when she went overseas.

On November 28, 2002, Amelia allegedly sold the subject property to Margarito through
a Kasulatan ng Bilihang Tuluyan. On the same date, Florencia filed a Petition for the
Issuance of a Second Owner’s Duplicate of TCT No. T-2371 before the RTC of San Pablo
City. She alleged that she was the mortgagee of the subject property, and that she could
not locate, despite diligent search, the owner’s duplicate title in her possession, which
she misplaced sometime in September 2002. Florencia also executed a Special Power of
Attorney in favor of Margarito to represent her in the proceedings.

Petitioners tried to oppose the issuance, but on January 30, 2003, the RTC granted the
petition and TCT No. T-59882 was later issued in the name of Margarito.

Petitioners averred that Margarito and the others refused to heed their oral and written
demands for the partition of the properties they co-owned, which included the Sta.
Monica property. For his part, Margarito asseverated that he exclusively owns the
property in controversy since he used his personal funds in purchasing the land. On
February 16, 2009, the RTC ruled in favor of the petitioners and declared, among other
things, that the Sta. Monica property was commonly owned by the siblings. Aggrieved,
Margarito elevated the case before the CA. In a Decision dated March 6, 2012, the CA
reversed and set aside the decision of the RTC.

The CA concluded that petitioners failed to establish that they are -owners of the Sta.
Monica property. It held that the TCT under Margarito’s name was an indefeasible and
incontrovertible title to the property and has more probative weight than the blank
Kasulatan adduced by the petitioners. Consequently, petitioners’ action for partition and
accounting cannot be acted upon because they failed to prove that they are co-owners
of the Sta. Monica property.

ISSUE: 
Whether or not Implied Trust resulted from the act of petitioners when he conveyed the
subject land by his Transfer Certificate of Title.

HELD:
Yes. Their transaction resulted into an Implied Trust. Despite all these, Margarito failed
to prove that Amelia conveyed the Sta. Monica property exclusively in his name. It is

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.

also quite intriguing why he did not even bother to present the testimony of Amelia or
of Florencia, who could have enlightened the court about their transactions. In addition,
we find it incredible that a property, which secured a loan roughly over a million pesos,
would be sold for considerably less than that amount or for only ₱550,000.00.
As for the TCT No. T-59882 in the name of Margarito, like in the case at bar, although a
certificate of title is the best proof of ownership of a piece of land, the mere issuance of
the same in the name of any person does not foreclose the possibility that the real
property may be under co-ownership with persons not named in the certificate or that
the registrant may only be a trustee or that other parties may have acquired interest
subsequent to the issuance of the certificate of title. The principle that a trustee who
puts a certificate of registration in his name cannot repudiate the trust by relying on the
registration is one of the well-known limitations upon a title.

There is an implied trust when a property is sold and the legal estate is granted to one
party but the price is paid by another for the purpose of having the beneficial interest of
the property. This is sometimes referred to as a purchase money resulting trust, the
elements of which are: (a) an actual payment of money, property or services, or an
equivalent, constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust.

A trust, which derives its strength from the confidence one reposes on another
especially between families, does not lose that character simply because of what
appears in a legal document. From the foregoing, this Court finds that an implied
resulting trust existed among the parties. The pieces of evidence presented
demonstrate their intention to acquire the Sta. Monica property in the course of their
business, just like the other properties that were also the subjects of the partition case
and the compromise agreement they entered into. Although the Sta. Monica property
was titled under the name of Margarito, the surrounding circumstances as to its
acquisition speak of the intent that the equitable or beneficial ownership of the
property should belong to the Bautista siblings.

Inevitably, the RTC’s Order of partition of the Sta. Monica property was erroneously set
aside by the CA and this Court is convinced that petitioners satisfactorily established
that they are co-owners of the property and are entitled to the reliefs prayed for.

DIGESTED BY: RICARDO, FRANZESS ANN AUDCHRIS P.