MANILA LAW COLLEGE

COMMERCIAL LAW REVIEW

Under Atty. Danilo Barde
Submitted by: Dave Mark Bulanggit
TICKLER: Corporation Code
DOCTRINE: Right to vote in a corporate meeting and quorum in a general and annual
membership meeting of a corporation. The Corporation law explicitly provides that in order for
a corporate meeting to be valid and all agreements entered thereto as well as the election of
corporate board and officer it is essential that there must be a quorum.

CASE TITLE 1:

MARY E. LIM, represented by her Attorney-in-fact, REYNALDO V. LIM,

vs.
MOLDEX LAND, INC., BOULEVARD CONDOMINIUM CORPORATION,
and JAMINOLA, MACALINTAL, MILANES, and ROMAN

(GR No. 206038, January 25, 2017, CATRAL MENDOZA J.)

FACTS:

Petitioner Lim is a registered condominium unit owner of Golden Empire Tower a

project of Moldex, on the other hand Moldex became a member of Condocor on the basis of its
ownership of the 220 unsold units in the Golden Empire. The Condocor a non-stock, non-profit
corporation a registered condominium corporation for the Golden Empire Tower held its its
annual general membership meeting on to which it declared the existence of a quorum even if
there are only 29 out of the 108 unit buyers were present. The basis of the declaration of a
quorum is on the presence of the majority of the voting rights, including those pertaining to the
220 unsold units held by Moldex through its representatives.

Herein petitioner Lim through her attorney-in-fact, objected to the validity of the meeting
but it was denied. Thus, Lim and all the other unit owners present, except for one, walked out
and left the meeting. Despite the walked out the meeting was proceeded and the election of the
new board of directors of the corporation was held where in herein private respondents were
elected as a members and thereafter the election of corporate officers.

Lim then filed its election protest before the RTC however, it was dismissed by the court.
It held that there was a quorum on the said meeting by the presence of the higher percentage of
voting rights of unit owners in good standing.

Subsequently Lim then filed a petition for certiorari directly with the Supreme Court.

ISSUE:

1. Whether or not the annual general membership meeting held is valid?

RULING:

No, the meeting held is not valid as there is no quorum. Under the Philippine laws on
Corporation in order for a meeting to be valid it must comply with the following requisites, to
wit; the meeting must be held on the date fixed in the By-Laws or in accordance with law, prior
written notice of such meeting must be sent to all stockholders/members of record, It must be
called by the proper party, It must be held at the proper place, and quorum and voting
requirements must be met. In relation to the above requisites is the Section 52 of the Corporation
Code which provides that a quorum shall consist of the stockholders representing a majority of
the outstanding capital stock or a majority of the members in the case of non-stock corporations.

In this case, the by laws of the Concodor provides that the attendance of a simple
majority of the members who are in good standing shall constitute a quorum. The meeting held
should have been majority of Condocor's members in good standing. However, there was no
quorum the meeting was only attended by 29 of the 108 unit buyers.

Therefore, as a consequence of the non existence of a quorum during the annual

membership meeting any resolution passed thereon was null and void and not binding upon the
corporation or its members.

ISSUE 2:

2. Whether or not Moldex is a member of Condocor?

RULING:

Yes, Moldex Land is a member of Concodor. The Section 2 of the Condominium Act
provides in part title to the common areas, including the land, or the appurtenant interests in such
areas, may be held by a corporation specially formed for the purpose in which the holders of
separate interest shall automatically be members or shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their respective units in the common areas.

Here, Moldex is a registered unit owner of the condominium project and the holders of
duly issued condominium certificate of title (CCT) of the 220 unsold units, parking slots and
storage areas attached thereto it automatically becomes a member of the condominium
corporation hence a member of Condocor.
ISSUE 3:

3. Whether or not representatives of Moldex who are non-members can be elected as a member
of the Board of Directors of Condocor?

RULING:

No, Representatives of Moldex who are non-members cannot be elected as a member of

the Board of Directors of Condocor. The Corporation Code provides that directors or trustees
shall be elected from among the holders of stocks, or where there is no stock, from among the
members of the corporation, and trustees of non-stock corporations must be members thereof.

In this case, the representatives of Moldex is only designated as proxies hence, cannot be
elected as directors and trustees.
TICKLER: Corporation Code
DOCTRINE: Transfer of Shares of Stock; It is the delivery of the certificate, coupled with the
endorsement by the owner or his duly authorized representative that is the operative act of
transfer of shares from the original owner to the transferee.

CASE TITLE 2:

ANNA TENG, Petitioner, v. SECURITIES AND EXCHANGE

COMMISSION (SEC) AND TING PING LAY, Respondents.
(G.R. No. 184332, February 17, 2016, Decision REYES, J)

FACTS:

Ting Ping herein respondent purchased several shares of TCL Sales Corporation from
Peter Chiu, from his brother Teng Ching Lay (Teng Ching), who was also the president and
operations manager of TCL, and from Ismaelita Maluto (Maluto).

Upon Teng Ching's death his son Henry Teng took over the management of TCL. Ping
then requested TCL's Corporate Secretary herein petitioner Anna Teng, to enter the transfer in
the Stock and Transfer Book of TCL for the proper recording of his acquisition of the shares. He
also demanded the issuance of new certificates of stock in his favor. However, despite repeated
demands the same was never granted so he filed a petition for mandamus before the SEC against
Teng and TCL.

The SEC granted the said petition and ordered the recording in the Books of the
Corporation the shares acquired by Ting Ping from the three different persons. The same was
affirmed by SEC en banc, in an appeal before the CA the same was dismissed by reason of being
filed out of time and affirming the SEC's decision.

The decision has become final and the SEC issued a writ of execution however, the same
was in abeyance due to the interpleader complaint filed by Anna Teng before the RTC sought to
compel Henry and Ting Ping to interplead and settle the issue of ownership over the shares,
which were previously owned by Teng Ching. The RTC ruled that Henry has a better right with
respect to the shares formerly owned by Teng Ching except those covered by Stock Certificate
No. 011.

An alias writ of execution was then filed by Ting Ping ordering TCL and Teng to record
the shares he acquired from Chiu and from Maluto in which a motion to quash was then filed by
Teng arguing that annexes in Ting Ping's opposition did not include the subject certificates of
stock, surmising that they could have been lost or destroyed but the same was denied by the CA
hence this petition.

ISSUE:

Whether or not the surrender of the certificates of stock is a requisite before registration of the
transfer may be made in the corporate books and for the issuance of new certificates in its stead?

RULING:

No, the surrender of certificate of stock is not required before the same is registered in the
book of corporation. A certificate of stock is a written instrument and a prima facie evidence that
the holder is a shareholder of a corporation. However it is merely a tangible evidence of
ownership of shares of stock. It is not a stock in the corporation and merely expresses the
contract between the corporation and the stock holder. The shares of stock evidenced by the
certificate is regarded as a property and the owner as a general rule may dispose the same as he
sees fit.

The Section 63 of the Corporation Code provides in part that shares of stock so issued are
personal property and may be transferred by delivery of the certificate or certificates indorsed by
the owner or his attorney-in-fact or other person legally authorized to make the transfer. No
transfer, however, shall be valid, except as between the parties, until the transfer is recorded in
the books of the corporation showing the names of the parties to the transaction, the date of the
transfer, the number of the certificate or certificates and the number of shares transferred.

The law prescribed that there must be delivery of the stock certificate, the certificate must
be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and to be valid against third parties, the transfer must be recorded in the books of the
corporation. It is clear that the delivery of the certificate, coupled with the endorsement by the
owner or his duly authorized representative that is the operative act of transfer of shares from the
original owner to the transferee.

In this case, Ting Ping Lay was able to establish prima facie ownership over the shares of
stocks in question, through deeds of transfer of shares of stock of TCL Corporation. The
surrender of certificate of stock is not a requisite before the conveyance may be recorded in the
book of corporation, to compel the same would amount to a restriction on the right of Ting Ping
to have the stocks transferred to his name, which is not sanctioned by law. The duty of Anna
Teng as a corporate secretary is only ministerial to which he cannot refused registration in the
books of corporation. However, to be valid against third parties such conveyance must be
recorded in the books of the corporation, the corporation may issue the certificate of stock in the
transferee's name or in Ting's name the original certificate must be surrendered where the person
requesting the issuance of a certificate is a transferee from a stockholder.
 Ting Ping already manifested the surrender of the certificate of stock to facilitate the
registration of the transfer and for the issuance of new certificates in his name. Therefore the
petition of Anna Teng is denied ordering her to cancel the certificate in the name of the former
owner and issue a new in the name of Ting Ping.

TICKLER: Corporation Code

DOCTRINE: Certificate of stock and transfer of shares. The transferee of a shares of stock
cannot exercise all rights pertaining to such shares until such transfer is recorded in the books
of the corporation.

CASE TITLE 3:

F & S VELASCO COMPANY, INC., IRWIN J. SEVA, ROSINA B.

VELASCO-SCRIBNER, MERCEDEZ SUNICO, AND JOSE SATURNINO
O. VELASCO*, Petitioners, v. DR. ROMMEL L. MADRID, PETER PAUL
L. DANAO, MANUEL L. ARIMADO, AND MAUREEN R. LABALAN
(G.R. No. 208844, November 10, 2015, Decision PERLAS-BERNABE, J.)

FACTS:

Francisco and Simona Velasco are incorporators of F & S Velasco Company, when both
of them died their daughter Angela inherited their shares in the company of 70.82% of the
Corporation's shares of stock. Angela became the chairman of the board but later she died
intestate and without issue.

Her Spouse herein referred as private respondent Madrid is her sole heir and executed an
affidavit of self adjudication covering the shares of Angela in the corporation. Thereafter Madrid
believing that he is the controlling stockholder of the corporation called for stockholder's
meeting. On the other hand, Irwin Seva as a corporate secretary also called for an emergency
meeting to the remaining stockholders of the corporation referred as Saturnino Group. Both
meeting was held on a separate date which was resulted of having a two sets of corporate
directors and officers.

Subsequently the Saturnino group filed a declaration of nullity of corporate election

before the RTC over the meeting held by Madrid but the same was denied even the counterclaim
of Madrid is also denied. The RTC ruled that both meetings are void because there is no quorum.
 In an appeal by Madrid before the CA, it ruled that the meeting held by the Madrid is
valid since execution of the Affidavit of Self-Adjudication by Madrid conferred upon him the
ownership of Angela's share. The CA remanded the case to the court a quo and directing it to
appoint or constitute a Management Committee.

Hence the Saturnino Group filed this petition.

ISSUE:

Whether or not the meeting held by the Madrid Group is valid?

RULING:

No, the meeting held by Madrid is invalid. The Corporation Code specifically on the
provision of certificate of stock and transfer of share provides that no transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the books of the corporation
showing the names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred. In order for the transferee of the
shares of stock to exercise all rights pertaining thereto it is essential that the same must be
recorded on the corporate book.

In the case at bar, the meeting held by Madrid as well as the actual conduct thereof was
made when he was already the owner of the shares of stock of Angela as result of his inheritance.
However, records are bereft of any showing that the transfer of Angela's shares of stock to
Madrid had been registered in the Corporation's Stock and Transfer Book when he made such
call and when the meeting was held.

Therefore, the effect of the invalidity of the meeting is that the purported set of new
corporate board and officers has no effect, the vacant seat left by Angela should be filled in
accordance with the corporation code.
TICKER: Corporation Code
DOCTRINE: Ultra Vires Doctrine, where an act is committed outside the object for which a
corporation is created as defined by the law of its organization and therefore beyond the powers
conferred upon it by law.

CASE TITLE 4:

LAND BANK OF THE PHILIPPINES, Petitioner, vs.

EDUARDO M. CACAYURAN, Respondent.
(G.R. No. 191667, April 17, 2013, Decision PERLAS-BERNABE, J)

FACTS:

The Municipality of Agoo, La Union through the resolution passed by its Sangguniang
Bayan authorized its then mayor to enter into a loan agreement with herein petitioner Land Bank
of the Philippines. The agreement covered a two loans with a million pesos for the
redevelopment of its public plaza, as a security for the loan the mayor made the portion of the
plaza as a collateral and a portion of its Internal Revenue Allotment.

However, a several group of residents including herein respondent Cacayuran opposed

the said redevelopment plan alleging that it is highly irregular, violative of the law, and
detrimental to public interests, and will result to wanton desecration. Subsequently Cacayuran
invoking his right as a tax payer filed a complaint before the RTC assailing the validity of the
subject loan.
 The RTC ruled in favor of Cacayuran declaring that the loan is highly irregular thus ultra
vires and the municipality is not bound thereby, aggrieved Land Bank filed its appeal before the
Court of Appeal which affirmed the RTC's decision finding Cacayuran has a locus standi, and
that the loan agreement is violative to the Local Government Code and the same is ultra vires
because they were transacted without proper authority and their collateralization constituted
improper disbursement of public funds.

The Land Bank elevated the case before the Supreme Court.

ISSUE:

Whether or not the loan agreement is an ultra vires act?

RULING:

Yes, the subject loan agreement is an act outside the municipality's jurisdiction and
considered as ultra vires act.

Generally, an ultra vires act is one committed outside the object for which a corporation
is created as defined by the law of its organization and therefore beyond the powers conferred
upon it by law. In the case of Middletown Policemen's Benevolent Association v. Township of
Middletown it held that there are two (2) types of ultra vires acts, an act utterly beyond the
jurisdiction of a municipal corporation and the irregular exercise of a basic power grant in
matters not in themselves jurisdictional. The former are ultra vires in the primary sense and void,
the latter, ultra vires only in a secondary sense which does not preclude ratification or the
application of the doctrine of estoppel in the interest of equity and essential justice. In short the
act outside the municipal corporation's jurisdiction is an ultra vires act which are void and the
other ultra vires attended only by irregularity that can be ratified and validated by the municipal
corporation.

In this case, the loan agreement entered into by the Municipality and the petitioner Land
Bank is an ultra vires act of the first class deemed as void. It was entered beyond the powers of
the Local Government Unit given by the Local Government Code, does not comply with the
requirements given by law. The conversion of the plaza is beyond the Municipality’s jurisdiction
considering the property’s nature as one for public use and thereby, forming part of the public
dominion. Accordingly, it cannot be the object of appropriation either by the State or by private
persons nor can it be the subject of lease or any other contractual undertaking.

Therefore, the loan agreement entered into by the officers of the municipality is an ultra
vires act which is void and those officers responsible thereby is personally liable.

TICKLER: Intellectual Property Code of the Philippines

DOCTRINE: The use of a trademark through a website over the internet is sufficient evidence
for use for the purposes of the Declaration of Actual Use (DAU).

CASE TITLE 5:

W LAND HOLDINGS, INC., Petitioner, v. STARWOOD HOTELS

AND RESORTS WORLDWIDE, INC., Respondent.
(G.R. No. 222366, December 04, 2017, Decision PERLAS-BERNABE, J.)

FACTS:

Starwood Hotels herein respondent obtained the “W” trademark for Classes 43 and 44.
Subsequently, W Land applied for the registration of its own "W" mark for Class 36 but the same
was opposed by Starwood alleging that it is confusingly similar with that of their mark
previously obtained. The BLA granted the opposition of Starwoods.
 A year after W Land filed a petition for the cancellation of mark of Starwood by reason
of non-use under the Intellectual Property Code of the Philippines claiming that Starwood failed
to use its mark in the country because it has no hotel or establishment in the Philippines. These
allegation was bellied by Starwoods asserting that it has filed its Declaration of Actual
Use(DAU) of the mark and it argued that it conducts hotel and leisure business both directly and
indirectly through subsidiaries and franchisees, and operates interactive websites for its W Hotels
in order to accommodate its potential clients worldwide including the Philippines, through the
websites allow Philippine resident to make booking and reservations.

The BLA granted the petition ordering the cancellation of Starwoods W mark it found
that the DAU and the attachments thereto did not prove actual use of the "W" mark in the
Philippines, considering that the DAU refer to hotel or establishments that are located abroad.

In an appeal before the IPO DG, it reversed the BLA's ruling which it held that
Starwood's pieces of evidence, particularly its interactive website, indicate actual use in the
Philippines. The Court of Appeals affirmed the same recognizing that the internet has become a
powerful tool in allowing businesses to reach out to consumers in a given market without being
physically present thereat as in the case of Starwoods.

ISSUE:

Whether or not the Starwood met the requirements provided by law for the actual use of the
mark "W"?

RULING:

Yes, the Starwood had the actual use of the mark and it sufficiently proved the same by
presenting competent evidences.

The IP Code defines a "mark" as any visible sign capable of distinguishing the goods
(trademark) or services (service mark) of an enterprise. Although the IP Code and Trademark
Regulations have not specifically defined “use,” it is understood that the “use” which the law
requires to maintain the registration of a mark must be genuine, and not merely token. This may
be characterized as a bona fide use which results in a commercial interaction or transaction in the
ordinary course of business. It must be shown that the owner has actually transacted, or
intentionally targeted customers of a particular jurisdiction in order to be considered as having
used the trade mark in the ordinary course of his trade in that country.

In the case at bar, Starwood has proven that it owns Philippine registered domain names
for its website that showcase its mark. The website is readily accessible to Philippine citizens and
residents, where they can avail and book amenities and other services in any of Starwood’s W
Hotels worldwide. Furthermore, Starwood’s “W” mark is prominently displayed in the website
through which consumers in the Philippines can instantaneously book and pay for their
accommodations, with immediate confirmation, in any of its W Hotels. It has also presented data
showing a considerably growing number of internet users in the Philippines visiting its website
since 2003, which is enough to conclude that Starwood has established commercially- motivated
relationships with Philippine consumers.

Hence, the use of a trademark through a website over the internet is sufficient evidence
for use for the purposes of the Declaration of Actual Use (DAU) to which the Starwood had
sufficiently complied with.

TICKLER: Intellectual Property Code of the Philippines

DOCTRINE: The tests in determining the similarity and likelihood of confusion in the
competing trademarks are Dominancy Test and the Holistic or Totality Test. The Dominancy
Test focuses on the similarity of the dominant features and Totality Test considers the entirety of
the marks.

CASE TITLE 6:

GREAT WHITE SHARK ENTERPRISES, INC., Petitioner,

vs. DANILO M. CARALDE, JR., Respondent.
(G.R. No. 192294, November 21, 2012, Decision PERLAS-BERNABE, J)

FACTS:
 Caralde, herein respondent filed before the BLA - IPO a trademark application seeking to
register the mark "SHARK & LOGO" for his manufactured goods under Class 25, such as his
slippers, shoes and sandals product.

Petitioner Great White Shark a foreign corporation opposed the application claiming to
be the owner of the mark consisting of a representation of a shark in color. It alleged that the
mark pending registration is confusingly similar with theirs which is likely to confuse the public,
to deceive or confuse the purchasing public into believing that Caralde's goods are produced by
or originated from it, or are under its sponsorship, to its damage and prejudice.

Caralde averred that the subject marks are distinctively different from one another and
easily distinguishable since only the similarity is the word shark. Thereafter the application of
Great White Shark was approved and issued a certificate of registration for its product.

The BLA Director ruled in favor of petitioners citing that the shark logo was both a
dominant feature and are similar and that both trademarks belong to the same class. This was
affirmed by the IPO Director General ratiocinating that the Great White Shark's mark is used in
clothing and footwear, among others, while Caralde's mark is used on similar goods like shoes
and slippers hence confusingly similar to the prejudice of the Great White Shark being the first
approved registrant.

In an appeal before the CA, it reversed the IPO Director General finding that no
confusing similarity between the subject marks notwithstanding that both contained the shape of
a shark as their dominant feature, Caralde's mark is easily distinguishable from that of the Great
White Shark

ISSUE:

Whether or not there is confusing similarity between the trademarks of Caralde to that of the
Great White Shark?

RULING:

No, there is no confusing similarity between the two.

A trademark device is susceptible to registration if it is crafted fancifully or arbitrarily

and is capable of identifying and distinguishing the goods of one manufacturer or seller from
those of another. Apart from its commercial utility, the benchmark of trademark registrability is
distinctiveness. Corollarily, Section 123 of the IP Code provides that a mark cannot be registered
if it is identical with a registered mark belonging to a different proprietor with an earlier filing or
priority date, with respect to the same or closely related goods or services, or has a near
resemblance to such mark as to likely deceive or cause confusion.

The tests in determining the similarity and likelihood of confusion in the competing
trademarks are Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses
on the similarity of the dominant features and Totality Test considers the entirety of the marks.

Here, Irrespective of the Holistic and Dominancy tests, the Court finds no confusing
similarity between the subject marks. While both marks use the shape of a shark, the Court noted
distinct visual and aural differences between them, the visual dissimilarities between the two (2)
marks are evident and significant, negating the possibility of confusion in the minds of the
ordinary purchaser, especially considering the distinct aural difference between the marks.

Therefore, finding no confusing similarities between the two trademarks, Caralde is

allowed to register his mark SHARK & LOGO.

TICKLER: Corporation Code

DOCTRINE: Doctrine of Corporate Rehabilitation is sanctioned by law to give companies a
means of dealing with debilitating financial predicaments in order to help restore them or to
give them hope of operating sustainably once more.

CASE TITLE 7:
 BANK OF THE PHILIPPINE ISLANDS vs. SARABIA MANOR
HOTEL CORPORATION
(G.R. No. 175844, July 29, 2013, PERLAS-BERNABE, J.)

FACTS:

Sarabia Manor Hotel herein respondent obtained a loan from Far East Bank and Trust
Company for the construction of a five-storey hotel building for its expansion such loan are
secured by real estate mortgages over several parcels of land owned by Sarabia and a
comprehensive surety agreement duly approved by its stockholders. The said bank was then
merged with the BPI to which the credits was assumed by the BPI.

The said construction was delayed in its completion so Sarabia incurred various cash
flow problems. This prompted Sarabia to file a petition before the RTC a corporate rehabilitation
praying for the issuance of a stay order as it foresaw the impossibility to meet its maturing
obligations to its creditors when they fall due. In its petition Sarabia claimed that its cash
position suffered when it was forced to take-over the construction of the New Building due to the
recurring default of its contractor.

The RTC approved rehabilitation plan as recommended by the receiver and It observed
that the recommended rehabilitation plan was also practical in terms of the interest rate relative
to the loan considering the Sarabia's financial history. In an appeal before the CA, BPI argues
that the approved rehabilitation plan did not give due regard to its interests as a secured creditor
in view of the imposition of a fixed interest rate. The CA affirmed the ruling of RTC on the
validity of the rehabilitation plan.

ISSUE:

Whether or not the Court of Appeals correctly affirmed Sarabia’s rehabilitation plan as approved
by the Regional Trial Court?

RULING:

Yes, the rehabilitation plan is correctly approved by the RTC.

 The corporate rehabilitation rule is a remedy to give companies sufficient leeway to deal
with debilitating financial predicaments in the hope of restoring or reaching a sustainable
operating form if only to best accommodate the various interests of all its stakeholders,
stockholders, its creditors and even the general public. It is as an attempt to conserve and
administer the assets of an insolvent corporation in the hope of its eventual return from financial
stress to solvency. Furthermore, under the Section 23, Rule 4 of the Interim Rules of Procedure
on Corporate Rehabilitation, it states that a rehabilitation plan may be approved even over the
opposition of the creditors holding a majority of the corporation’s total liabilities if there is a
showing that rehabilitation is feasible and the opposition of the creditors is manifestly
unreasonable.

In the case at bar, records show that Sarabia has been in the hotel business for over thirty
years, Its hotel building has been even considered a landmark in Iloilo, being one of its kind in
the province and having helped bring progress to the community. Since then, its expansion was
continuous which led to its decision to commence with the construction of a new hotel building.
Unfortunately, its contractor defaulted which impelled Sarabia to take-over the same which
skewed its projected revenues and led to various cash flow difficulties.

Therefore, rehabilitation shall be undertaken when it is shown that the continued

operation of the corporation is economically more feasible and its creditors can recover, by way
of the present value of payments projected in the plan, more if the corporation continues as a
going concern than if it is immediately liquidated.

TICKLER: Banking Law

DOCTRINE: Receivership and Liquidation; Nothing in the law that requires the Monetary
board to make an independent determination for a bank to be rehabilitated or for a liquidation,
no separate determination is required when the PDIC has already made such determination.

CASE TITLE 8:

APEX BANCRIGHTS HOLDINGS, LEAD BANCFUND

HOLDINGS, ASIA WIDE REFRESHMENTS CORPORATION,
MEDCO ASIA INVESTMENT CORPORATION, ZEST-O
CORPORATION, HARMONY BANCSHARES HOLDINGS, INC.,
EXCALIBUR HOLDINGS, INC., AND ALFREDO M. YAO, vs.
BANGKO SENTRAL NG PILIPINAS AND PDIC
(G.R. No. 214866, October 02, 2017, Decision PERLAS-BERNABE, J)

FACTS:

Export and Industry Bank entered into a merger agreement with a two banks corporations
in an attempt to rehabilitate the Export Bank which was under receivership. After the said
agreement the EIB encountered a financial difficulties which prompted PDIC to extend a
financial assistance, despite the said assistance the EIB still failed to meet the Central Bank's
capital requirements so its stockholders commenced the process of selling the bank.

Initially the BDO expressed its interest in acquiring the EIB but due to its unwillingness
to assume the liabilities of EIB the acquisition did not materialize so the financial situation of the
EIB worsen and that it voluntarily turned over the full control of the bank to BSP.

The BSP through the monetary board issued a resolution prohibiting EIP from further
doing business in the country and placing under receivership of PDIC. At first the PDIC reported
that the EIB can be rehabilitated provided that there must be a bidding with a conditions that
there are qualified interested banks that will comply with the parameters for rehabilitation of a
closed bank, capital strengthening, liquidity, sustainability and viability of operations, and
strengthening of bank governance and all parties agreed to the rehabilitation and the revised
payment terms and conditions of outstanding liabilities. However, the bidding did not
materialized so the Monetary Board issued a resolution granting the liquidation of the bank,
petitioner Apex the EIB's majority stock holder filed a petition before the CA assailing the
resolution contending that that the PDIC imposed unreasonable and oppressive conditions which
frustrated the transaction between BDO and EIB, the PDIC countered that the petitioner is
estopped because they have already surrendered the bank full control to BSP.

The CA dismissed the petition, it held that nothing in Section 30 of RA 7653 that requires
the Monetary Board to make its own independent factual determination on the bank's viability
before ordering its liquidation.
ISSUE:

Whether or not the Monetary Board did not gravely abuse its discretion in issuing a resolution
which directed the PDIC to proceed with the liquidation of EIB?

RULING:

No, the CA is correct in affirming the Monetary Board of the issuance of the resolution
granting the liquidation.

The Section 30 of RA 7653 (The New Central Bank Act) provides the proceedings in
Receivership and Liquidation of banks and quasi-banks to wit the Monetary Board 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 receiver shall take charge of all the assets and liabilities of the institution
and administer the same for the benefits of all its creditors and exercise its powers granted by
law.

In this case, the PDIC initially submitted its report that the EIB can be rehabilitated
imposing a conditions thereby however, such conditions were not complied with, thereby
resulting to the finding of the PDIC that the bank is already insolvent and must be liquidated.

Therefore, the resolution issued by the Monetary Board is in compliance with the
requirements set by law for a banks or a quasi-banks to be liquidated.
TICKLER: Special Commercial Law; Trust Receipts Law
DOCTRINE: Criminal violation for the Trust Receipts Law committed by a corporation penalty
shall be imposed upon the directors, officers, employees or other officials or person responsible
for the offense, without prejudice to the civil liabilities arising from therefrom.

CASE TITLE 9:

ILDEFONSO S. CRISOLOGO vs PEOPLE OF THE

PHILIPPINES and CHINA BANKING CORPORATION
(G.R. No. 199481, December 3, 2012, Decision PERLAS-BERNABE, J.)

FACTS:

Petitioner Crisologo the president of Novachemical Industries applied for a commercial

letters of credit from China Bank to be able to purchase Amoxicillin Trihydrate in a company in
South Korea and for the purchase of glass containers. The China Bank issued a two Letters of
Credits and after Crisologo received the goods he executed a trust receipt agreement in favor of
China Bank.

Subsequently, Chinabank filed a complaint charging Crisologo in violation of the Trust

Receipts Law in relation to the Revised Penal Code alleging that Crisologo with intent to defraud
failed to turn over the goods or the proceeds from the sales thereof despite repeated demands.

In his defense Crisologo claimed that Novachem was granted a credit line and LC’s
secured by Trust Receipt agreements and there was an agreement between them allegedly
allowing Crisologo to pay the obligation in installments and that Novachem would give
instructions as to what particular letter of credit or trust receipt obligation its payments would be
applied to. In spite of such agreement, it was Chinabank who allegedly deviated.

The RTC dismissed the criminal complaint but found Crisologo civilly liable on the
letters of credits less the amount paid during the preliminary investigation. In an appeal the CA
ruled that petitioner is civilly liable, It noted that petitioner signed the Guarantee Clause of the
trust receipt agreements in his personal capacity and even waived the benefit of excussion
against Novachem. As such, he is personally and solidarily liable with Novachem.

ISSUE:

Whether or not the petitioner is civilly liable under the subject Letters of Credits which are
corporate obligations of Novachem?
RULING:

No, petitioner is not civilly liable insofar as the Trust Receipts law is concern.

Under the Section 13 of the Trust Receipts Law it provides that if the violation or offense
is committed by a corporation, the penalty provided for under the law shall be imposed upon the
directors, officers, employees or other officials or person responsible for the offense, without
prejudice to the civil liabilities arising from the criminal offense.

Here, the petitioner was acquitted of the charge for violation of the Trust Receipts Law in
relation to the Revised Penal Code and that he is relieved of the corporate criminal liability as
well as the corresponding civil liability arising therefrom.

HOWEVER, he may still be held liable for the trust receipts and Letters of Credits
transactions he had entered into in behalf of Novachem. The law explicitly provides that incurred
debts by directors, officers, and employees acting as corporate agents are not their direct liability
but of the corporation they represent, except if they contractually agreed, stipulate or assumed to
be personally liable for the corporations debts. In this case, with respect to the letters of credits
for the purchase of the chemicals in South Korea, petitioner signed the guarantee clauses therein
in his personal capacity and even waived the benefit of excussion.

As to the trust receipts letters of credits for the purchase of glass containers no evidence
of guarantee clause appears on record hence not civilly liable.

Therefore, because there are two letters of credits and petitioner signed only one of the,
he cannot be held civilly liable in his personal capacity.
TICKLER: Negotiable Instrument Law
DOCTRINE: The Section 1 of the Negotiable Instrument law provides the requisites for an
instrument to be negotiable, electronic messages are not negotiable instrument as it does not
comply with the requirements provided by law for an instrument to be negotiable.

CASE TITLE 10:

THE HONGKONG AND SHANGHAI BANKING

CORPORATION LIMITED-PHILIPPINE BRANCHES VS.
COMMISSIONER OF INTERNAL REVENUE
(G.R. No. 166018, June 4, 2014, Decision Leonardo De Castro. J.)

FACTS:

Petitioner performs custodial services on behalf of its investor-clients with respect to their
passive investments in the Philippines, it serves as the collection agent of its investor-clients such
instruction were given through electronic messages. Such electronic messages the HSBC
purchased a Documentary Stamp Tax.

The BIR issued a BIR Ruling to the effect that instructions or advises from abroad on the
management of funds located in the Philippines which do not involve transfer of funds from
abroad are not subject to DST.

HSBS then filed its refund before the CIR but the same was not acted upon, it then filed
its claim before the CTA which ruled in favor of the HSBC. ordering a tax credit to be given to
HSBC. CA reversed the same.

ISSUE:

Whether or not the electronic message are negotiable instrument and subject to DST?

RULING:

No, electronic messages are not negotiable as contemplated by the law on negotiability of
an instrument. Under the Section 1 of Negotiable Instrument Law an instrument must conform
to all the requirements listed therein in order to be negotiable.
 In this case, They are not written and signed by the maker or drawer, they do not contain
an unconditional promise or order to pay a sum certain in money as the payment is supposed to
come from specific fund or account which is to the investor-client of HSBC.

Hence the electronic message are not bill of exchange as there was no bill of exchange or
order for the payment drawn abroad and made payable here in the Philippines there could have
been no acceptance or payment that would trigger the imposition of the Documentary Stamp Tax
under the tax code.

TICKLER: Negotiable Instrument Law

DOCTRINE: A check is a bill of exchange drawn on a bank payable on demand, written and
signed by the drawer containing an unconditional order to pay on demand a sum certain in
money. A check is subject to a 10 years prescription, if it is undated such prescription is
reckoned from the issuance of the check.

CASE TITLE 11:

BENJAMIN EVANGELISTA, PETITIONER, VS. SCREENEX,

INC., REPRESENTED BY ALEXANDER G, YU
(G.R. No. 211564, November 20, 2017, Decision Sereno, CJ.)

FACTS:

Evangelista obtained a loan from respondent Screenex, as security for the payment,
Evangelista gave 2 open-dated checks, both payable to order of Screenex. The checks were held
in safekeeping together with the other documents and papers of the company by Philip Gotuaco,
Sr., father-in-law of respondent Alexander Yu, until the former’s death. Before the checks were
deposited, there was a personal demand from the family for Evangelista to settle the loan and a
demand letter was sent by the family lawyer.

Evangelista was charged with violation of BP 22, it ruled that there was failure on the
part of Yu to prove that the demand letter had actually been received by the addressee and there
was no way to determine when the 5-day period should start to toll, there was failure to establish
prima facie evidence of knowledge of insufficiency of funds, hence, the court acquitted
Evangelista of the criminal charges. Ruling on the civil aspect, the court held that while
Evangelista admitted to having issued and delivered the checks to Gotuaco and having fully paid
the amount, no evidence of payment was presented. In the end, Evangelista was declared liable
for the civil obligation, the same was affirmed by the Court of Appeal

ISSUE:

Whether or not the Evangelista is still liable on the checks despite being acquitted on the
criminal charge?
RULING:

No, petitioner is not liable. Under the law check is a bill of exchange drawn on a bank
payable on demand. It is an undertaking that the drawer will pay the amount indicated thereon.
Sec 119 of the Negotiable Law, however, states that a negotiable instrument like a check may be
discharged by any other act which will discharge a simple contract for the payment of money. A
check is therefore subject to a 10 year prescription of actions upon a written contract. If the
check is undated as in the present case, the cause of action is reckoned from the issuance of the
check.

Here, assuming that Yu had authority to insert the dates in the checks, the fact that he did
so after the lapse of more than 10 years cannot qualify as changes made within a reasonable
period. The cause of action on the checks has become stale, hence time-barred. Prescription has
indeed set in.

Therefore the claim against the petitioner is no longer viable by reason of prescription.
TICKLER: Negotiable Instrument Law
DOCTRINE: A manager's check is a check drawn by the bank's manager upon the bank itself
and accepted in advance by the bank by it's issuance, as a result the drawee bank has the
unconditional obligation to pay the holder in due course irrespective of any personal defense
however a holder other than a holder in due course is subject to defenses.

CASE TITLE 12:

RCBC SAVINGS BANK v. NOEL M. ODRADA

(G.R. No. 219037, October 19, 2016, Decision Carpio J.)

FACTS:

Noel M. Odrada sold a second-hand Mitsubishi Montero to Teodoro L. Lim, Lim made
the initial payment and the balance was financed by petitioner RCBC Bank, upon letter to
Odrada he surrendered the ORCR of the car.

RCBC then issued a manager's check in favor of Odrada, before the presentment of such
check Lim discovered the road unworthiness of the car and it sent a letter to Odrada informing
him to withhold the check however despite receipt of the letter Odrada deposited the check but
the checks were dishonored both times apparently upon Lim's instruction to RCBC.

Consequently, Odrada filed a collection suit against Lim and RCBC in the Regional Trial
Court of Makati which it ruled in favor of Odrada that he is the proper party to ask for
rescission. The same was affirmed by the Court of Appeal.

ISSUE:

Whether or not the court a quo gravely erred when it found that Odrada is a holder in due course
of the manager's checks in question despite being informed of the cancellation of the auto loan
by the borrower, Lim.
RULING:

Yes, the court gravely erred when it ruled that Odrada is a holder in due course.
Jurisprudence defines a manager's check as a check drawn by the bank's manager upon the bank
itself and accepted in advance by the bank by the act of its issuance. It is really the bank's own
check and may be treated as a promissory note with the bank as its maker. Consequently, upon
its purchase, the check becomes the primary obligation of the bank and constitutes its written
promise to pay the holder upon demand. It is similar to a cashier's check both as to effect and use
in that the bank represents that the check is drawn against sufficient funds.

The drawee bank, as a result, has the unconditional obligation to pay a manager's check
to a holder in due course irrespective of any available personal defenses. However, while this
Court has consistently held that a manager's check is automatically accepted, a holder other than
a holder in due course is still subject to defenses.

In this case, the notice to Odrada of the hidden defects of the Montero precluded him
from being a holder in due course of the checks.

Therefore, Odrada being not a holder in due course he cannot claim on the said checks
and RCBC is not liable.
TICKLER: Insurance Code
DOCTRINE: Incontestability Clause; the Section 48 of the Insurance Code compel insurers to
solicit business from or provide insurance coverage only to legitimate and bona fide clients, by
requiring them to thoroughly investigate those they insure within two years from effectivity of the
policy and while the insured is still alive. If they do not, they will be obligated to honor claims
on the policies they issue, regardless of fraud, concealment or misrepresentation.

CASE TITLE 13:

MANILA BANKERS LIFE INSURANCE CORPORATION,

Petitioner, v. CRESENCIA P. ABAN, Respondent.
(G.R. No. 175666, July 29, 2013, Decision Del Castillo, J.)

FACTS:

Delia Sotero took a life insurance policy from Manila Bankers Life Insurance
Corporation herein petitioner designating respondent Cresencia P. Aban her niece as her
beneficiary. After the requisite medical examination and payment of the insurance premium an
insurance policy was the. issued in Sotero's favor. Two years and seven months when the
insurance policy has in effect, Sotero died so Aban filed a claim for the insurance proceeds.

However, the claim was denied by the petitioner on the following reasons to wit Sotero
did not personally apply for insurance coverage as she was illiterate, she was sickly since 1990,
she did not have the financial capability to pay the premiums and it was Aban who sign the
application for insurance.

Petitioner then filed a rescission of the insurance contract on the grounds of fraud,
misrepresentation and concealment, Aban moved to dismiss the same on the ground that
petitioner is barred by prescription as provided by the Insurance Code incontestability rule,
which was granted by the court. On appeal the CA affirmed the RTC's decision on the same
grounds.

ISSUE:

Whether or not the incontestability provision of the insurance code applies on the case at bar?

RULING:

Yes, the incontestability clause provided by the Insurance Code applies on this case.
Under the Section 48 of the Insurance Code an insurer is given two years from the effectivity of
a life insurance contract and while the insured is alive to discover or prove that the policy is void
ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the
insured or his agent. After the lapses of two years or when the insured dies with the period the
insurer can no longer rescind the contract even if it was attended by fraud, concealment or
misrepresentation thereby the beneficiary is can recover under the policy.

In this case, records shows that the policy was in fact in effect for more than two years
after the death of the insured Sotero. Considering that the insured died after the two-year period,
the petitioner is, therefore, barred from proving that the policy is void ab initio by reason of the
insured fraudulent concealment or misrepresentation or want of insurable interest on the part of
the beneficiary, herein respondent Aban.
TICKLER: Insurance Code
DOCTRINE: Right Of subrogation in an Insurance Contract; under this principle the
insurance company put into the shoes of the insured to go against the wrongdoer or the person
responsible for the loss or damages. It is not dependent upon nor does it grow out of any privity
of contract or upon written assignment of claim. It accrues simply upon payment of the
insurance claim by the insurer. However, this is not absolute exceptions therefor is if the assured
by his own act releases the wrongdoer or third party liable for the loss or damage, from liability,
the insurer’s right of subrogation is defeated and where the insurer pays the assured the value of
the lost goods without notifying the carrier who has in good faith settled the assured’s claim for
loss, the settlement is binding on both the assured and the insurer the latter cannot bring an
action against the carrier on his right of subrogation. Lastly where the insurer pays the assured
for a loss which is not a risk covered by the policy, thereby effecting ‘voluntary payment, the
former has no right of subrogation against the third party liable for the loss.

CASE TITLE 14:

LOADSTAR SHIPPING COMPANY, INCORPORATED and

LOADSTAR INTERNATIONAL SHIPPING COMPANY,
INCORPORATED vs. MALAYAN INSURANCE COMPANY,
INCORPORATE
(G.R. No. 185565, November 26, 2014, Decision Associate Justice BIENVENIDO L.
REYES)
FACTS:

Loadstar International Shipping and Philippine Associated Smelting and Refining

Corporation (PASAR) entered into a Contract of Affreightment for a transport of the latter’s
copper concentrates. Subsequently a copper concentrated were loaded to a marine vessel owned
by Laodstar. Such cargo was insured with Malayan Insurance and is the third party liability
insurer of Loadstar Shipping.

Before its arrival to their destination an officer of the vessel found a crack on starboard
sideof the main deck which caused seawater to enter and wet the cargo and as a result the copper
were contaminated by a seawater. Upon arrival to its destination, the cargo was immediately
inspected and it confirmed that the same was contaminated by a seawater.

On the basis of the recommendation made by a surveyor, the Malayan insurance paid
PASAR the amount of P32,351,102.32 representing the value of the damaged copper, it then
subsequently sent a notice of demand to Loadstar demanding the payment of the amount it had
paid to PASAR on the basis of its right of subrogation.

Unheeded by the demand, the Insurance Company file a complaint for damages before
the RTC, in their answer the Loadstar averred that they are not a common carrier and that they
exercised the diligence required by law and that such claim has no basis. The RTC dismissed the
claim It ruled that the vessel was seaworthy at the time of loading and that the damage was
attributable to the perils of the sea (natural disaster) and not due to the fault or negligence of
Loadstar Shipping, it further ruled that although contaminated by seawater the copper did not
loss its value and no damage.

On an appeal the CA ruled that because the Insurance Malayan had sold the salvage value
of the copper to PASAR in the amount of US$90,000.00, it should have been deducted from the
claim against the petitioners in order to prevent undue enrichment on the part of Malayan.

ISSUE:

Whether or not the respondent is entitled to the right of recovery by virtue of right of subrogation
against petitioners on the basis of PASAR's claim?

RULING:

No, the respondent is not entitled to recovery on the basis of the right of subrogation
against the petitioner.

Under the Civil Code Art. 2207 on the principle of right of subrogation it provides that
the insurance company shall be subrogated to the rights of the insured against the wrong doer or
the person who has violated the contract after the payment to the insured to the actual loss of
damaged it suffered. In relation to this principle Art. 2199 provides that except as provided by
law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or
compensatory damages.

In this case, evidence disclosed that although it is contaminated by seawater, the

respondent did not present any evidence of the actual loss it suffered, the expert witness for the
petitioners testified as regards the lack of any adverse effect of seawater on copper concentrates,
Malayan never presented evidence of its own in refutation and even if the Court will disregard
the entirety of the testimony of the expert witness the effect on Malayan’s cause of action is null,
Malayan is claiming for actual damages, it bears the burden of proof to substantiate its claim.
The law requires claimant to prove actual amount of loss with a reasonable degree of certainty
premised upon competent proof and on the best evidence obtainable. Specific facts that could
afford a basis for measuring whatever compensatory or actual damages are borne must be
pointed out. Actual damages cannot be anchored on mere surmises, speculations or conjectures.

Therefore, the Malayan insurance is not entitled to any recovery on the basis of its right
to subrogation it had for PASAR.

TICKLER: Insurance Code

DOCTRINE: In an action for rescission of an insurance contract by reason of
misrepresentation and fraud, 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.

CASE TITLE 15:

MANULIFE PHILIPPINES, INC.1, Petitioner

vs. HERMENEGILDA YBAÑEZ, Respondent
(G.R. No. 204736, November 28, 2016, Decision Associate Justice MARIANO C. DEL
CASTILLO)

FACTS:

The petitioner Manulife, an insurance company issued an insurance policy in favor of the
deceased husband of herein respondent Ybañez. When one of the subject insurance policies had
been in force for only one year and three months, while the other for only four months, the
insured died. As a consequence of his death Ybañez being the beneficiary filed its claim over the
insurance policy.

However, Manulife denied the claim by reason of concealment or misrepresentation, in

its investigation Manulife concluded that the insured concealed material facts when he applied
for the insurance policies. Subsequently, Manulife filed a complaint for rescission of the
insurance contract by reason of misrepresentation/s or concealment. It alleged that on the forms
entitled Non-Medical Evidence the insured concealed material facts which the law, good faith,
and fair dealing required him to reveal when he answered the same relative to his medical
records and history.

In his answer, Ybañes countered that insurance agent assured at the time of the
application of the insurance policy that there would be no problem regarding the application for
the insurance policy. In fact, it was the agent who filled up everything in the questionnaire so
that all that the insured needed to do was sign it, and it's done. It was also the agent who checked
in advance all the boxes that the insured himself was required to answer or check.

In its decision, the RTC dismissed the complaint for being insufficiently establish
concealment or misrepresentation. The witness presented by Manulife insufficiently establish the
same, and the documents of medical records presented is inadmissible for being hearsay because
the Manulife failed to present a physician r responsible thereof, the same is affirmed by the CA.

ISSUE:

Whether or not there is concealment on the part of the insured at the time he applied for the
insurance policy?

RULING:

No, the insurance company Manulife failed to prove concealment on the part of the
insured.

Jurisprudence dictates that in an action for the rescission of an insurance contract by

reason of concealment and or misrepresentation on the part of the insured, 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.

In this case, the CDH’s medical records that might have established the insured’s
purported misrepresentation/s or concealment/s was inadmissible for being hearsay, given the
fact that Manulife failed to present the physician or any responsible official of the CDH who
could confirm or attest to the due execution and authenticity of the alleged medical records.
Manulife had utterly failed to prove by convincing evidence that it had been beguiled, inveigled,
or cajoled into selling the insurance to the insured who purportedly with malice and deceit
passed himself off as thoroughly sound and healthy, and thus a fit and proper applicant for life
insurance.

Therefore, failure of Manulife to prove intent to defraud on the part of the insured, it
cannot validly sue for rescission of insurance contracts.

TICKLER: Insurance Code

DOCTRINE: In a Life Insurance Policy, designation of an illegitimate children as a beneficiary
to the exclusion of a legitimate children is not prohibited by law, the proceeds belong exclusively
to the designated beneficiary not being disqualified by law and not to the estate of the person
whose life was insured, and that such proceeds are the separate and individual property of the
beneficiary and not of the heirs of the person whose life was insured.

CASE TITLE 16:

HEIRS OF LORETO C. MARAMAG, represented by surviving

spouse VICENTA PANGILINAN MARAMAG, Petitioners,
 vs. EVA VERNA DE GUZMAN MARAMAG, ODESSA DE
GUZMAN MARAMAG, KARL BRIAN DE GUZMAN
MARAMAG, TRISHA ANGELIE MARAMAG, THE INSULAR
LIFE ASSURANCE COMPANY, LTD., and GREAT PACIFIC
LIFE ASSURANCE CORPORATION
(G.R. No. 181132, June 5, 2009, Decision Associate Justice ANTONIO EDUARDO B.
NACHURA

FACTS:

Deceased husband Loreto Maramag of herein petitoner issued an insurance policy from
Insular and Great Pacific. Upon his death the designated beneficiaries on the policy which is his
second family (illegitimate) filed the claims of the insurance proceeds.

The petitioner legitimate family of the deceased Loreto filed a petition for the revocation
and/or reduction of the insurance proceeds for being void and in officious because Eva is
disqualified for being a concubine and the other three children are only entitled to the proceeds
of the half of that of the legitimate children.

Insular answered that it already disqualified Eva because she is not the legal wife,
however the three children is entitled to the proceeds because they were designated as
beneficiaries and not disqualified, on the other hand the Great Pacific answered that it already
disqualified Loreto for being misrepresented his age.

The RTC ruled that the illegitimate children are entitled to the proceeds because the law
on insurance does not prohibits the same, however with respect to Eva she is disqualified
because the law prohibits the same. In an appeal before the CA it dismissed the appeal for lack of
jurisdiction, holding that the decision of the trial court dismissing the complaint for failure to
state a cause of action involved a pure question of law and such action against the three
illegitimate children is also dismissed.

ISSUE:

Whether or not illegitimate children as in this case are disqualified from being beneficiaries in an
(Life)Insurance Policy?
RULING:

Yes, illegitimate children when designated as a beneficiaries to an insurance contract are

not disqualified.

The Section 53 of the Insurance Code states that the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy. Pursuant thereto, it is obvious that the only persons
entitled to claim the insurance proceeds are either the insured, if still alive or the beneficiary, if
the insured is already deceased, upon the maturation of the policy. The exception to this rule is a
situation where the insurance contract was intended to benefit third persons who are not parties
to the same in the form of favorable stipulations or indemnity. In such a case, third parties may
directly sue and claim from the insurer.

In this case, petitioners are third parties to the insurance contracts with Insular and
Grepalife and are not entitled to the proceeds thereof notwithstanding that they are the legitimate
family of the deceased. The revocation of Eva as a beneficiary in one policy and her
disqualification as such in another are of no moment considering that the designation of the
illegitimate children as beneficiaries in Loreto’s insurance policies remains valid. No legal
proscription exist in naming as beneficiaries the children of illicit relationship by the insured and
such disqualification of Eva to the proceeds must be awarded to the illegitimate children to the
exclusion of the petitioner, or when the beneficiaries are disqualified the proceeds shall redound
to the benefit of the estate of the insured.

Hence, petitioner is not entitled to the proceeds of the insurance contract being a third
party.

TICKLER: Banking Laws

DOCTRINE: In the pre- termination of a time deposit, the bank must ensure the identity of the
account holder and it must demand the surrender of the certificates of deposit, otherwise the
bank cannot terminate the same. A certificate of deposit is a written acknowledgment by a bank
or banker of the receipt of a sum of money on deposit which the bank or banker promises to pay
to the depositor, to the order of the depositor, or to some other person or his order, whereby the
relation of debtor and creditor between the bank and the depositor is created.
CASE TITLE 17:

BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. TARCILA

FERNANDEZ, Respondent.; DALMIRO SIAN, THIRD PARTY,
Respondent.
(G.R. No. 173134, September 02, 2015, Decision BRION, J.)

FACTS:

Respondent Tarcila together with her husband Manuel and their children opened four
AND/OR bank deposit account with the petitioner BPI. One condition provided in the account is
that endorsement and presentation of the Certificate of Deposit is necessary for the renewal or
termination of the deposit. Subsequently, Tarcila with the certificate of deposit and passbok with
her, went to BPI to pre-terminate the account but the bank refused insisting that Tarcila should
contact her husband. Shortly after she left the bank, her husband Manuel arrived and likewise
requested the termination of the deposits claiming that he lost the certificate of deposits and the
bank acceded to his request.

Thereafter Tarcila filed a petition for Declaration of Nullity of Marriage against Manuel
and that she never received her proportionate share over the bank deposits. She filed a complaint
against BPI claiming that BPI acted in bad faith and such pre-termination were invalid with
respect to her share. In its answer BPI alleged that the accounts contained conjugal funds that
Manuel exclusively funded and Tarcila could not ask for her share of the pre-terminated deposits
because her share in the conjugal property is considered inchoate until its dissolution.

The RTC ruled in favor of Tarcila it opined that the AND/OR nature of the accounts
indicate an active solidarity that thus entitled any of the account holders to demand from BPI
payment of their proceeds. In an appeal the CA affirmed the RTC's decision and provides that
the AND/OR accounts negates the BPI's prerogative to determine the source of the deposited
funds and to refuse payment to Tarcila.

ISSUE:

Whether or not BPI breached its obligation under the certificates of deposit in allowing Manuel
to pre-terminate the account with out presenting the certificate of deposit?

RULING:

Yes, the bank breached its obligation under the certificate of deposits.
 As defined, A certificate of deposit is a written acknowledgment by a bank or banker of
the receipt of a sum of money on deposit which the bank or banker promises to pay to the
depositor, to the order of the depositor, or to some other person or his order, whereby the relation
of debtor and creditor between the bank and the depositor is created. In particular, the certificates
of deposit contain provisions on the amount of interest, period of maturity, and manner of
termination. Specifically, they stressed that endorsement and presentation of the certificate of
deposit is indispensable to their termination. In other words, the accounts may only be terminated
upon endorsement and presentation of the certificates of deposit.

Here, BPI substantially breached its obligations to the prejudice of Tarcila when it
allowed the termination of the accounts without demanding the surrender of the certificates of
deposits, in the ordinary course of business. Worse, BPI even had actual knowledge that the
certificates of deposit were in Tarcila's possession and yet it chose to release the proceeds to
Manuel on the basis of a falsified affidavit of loss, in gross violation of the terms of the deposit
agreements.

Thus, BPI knew very well the irregularity in Manuel's transaction for it had actual
knowledge that the certificates of deposit were in Tarcila's possession so Tarcila is entitled to the
proportionate share of the deposit, and that BPI is liable for exemplary damage and attorney's
fee.
TICKLER: Banking Law
DOCTRINE: The banking system is an indispensable institution in the modern world and plays
a vital role in the economic life of every civilized nation. As a consequence they are expected
before approving a loan application, to exercise the highest degree of diligence and high
standards of integrity and performance. Thus, 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 thereof.

CASE TITLEN 18:

PHILIPPINE NATIONAL BANK, Petitioner

vs. JUAN F. VILLA, Respondent
(G.R. No. 213241, August 1, 2016, Decision PEREZ, J.)

FACTS:

Spouses Reynaldo Comista and Erlinda Gamboa Comista obtained a loan from Traders
Royal Bank, as a security of the loan it mortgaged to the bank a parcel of land registered under
their name. Failure of Spouses Comista to pay the said loan, the subject property land was
foreclosed and herein Respondent Villa was the highest bidder.

A Certificate of Final Sale was then issued to Vila after the one-year redemption period
had passed without the Spouses Comista exercising their right to redeem the subject property.
However, Villa prevented from consolidating the ownership due to the failure to obtain the
original certificate of title. As a result Comista buy back the property, claiming that the Sps.
Comista lost their right of redemption Villa filed an action to nullify the same which was
granted. Villa then filed a writ of execution however, the certificate of title is no longer under the
name of Spouses Comista because the same was mortgaged by Comista to herein PNB to which
title was consolidated to the bank.

Again, Villa initiated an action against PNB and Comista. The PNB pointed that at the
time of their transaction spouses Comista, they are the absolute owner of the property and that
the annotation was only registered a month after, and the face of the title indicates no cloud.

The RTC ruled in favor of Villa finding herein petitioner acted in bad faith. The CA
affirmed the same, it ruled that the PNB did not observe the highest degree of diligence in
granting the loan of Comista without first ascertaining if there were any defects in their title.

ISSUE:

Whether or not the PNB being a banking institution acted in bad faith in granting the loan of
Spouse Comista?
RULING:

Yes, the PNB acted in bad faith when it failed to exercise the highest degree of diligence
in granting the loan to the spouses Comista.

The banking system is an indispensable institution in the modern world and plays a vital
role in the economic life of every civilized nation. Whether as mere passive entities for the
safekeeping and saving of money or as active instruments of business and commerce, banks have
become an ubiquitous presence among the people, who have come to regard them with respect
and even gratitude and, most of all, confidence. Consequently, the highest degree of diligence is
expected, and high standards of integrity and performance are even required, of it.

In this case, PNB clearly failed to observe the required degree of caution in readily
approving the loan and accepting the collateral offered by the Spouses Comista without first
ascertaining the real ownership of the property. Relying merely on the face of the title with out
physically ascertaining the actual condition of the property is a deliberate non observance of a
degree required specifically in this case the bank of a diligence required of it.

Therefore, the PNB is not in good faith the award of moral damages, exemplary damages,
attorney's fees and costs of litigation should be held in favor of Villa.
TICKLER: Transportation Law
DOCTRINE: A brokerage may be considered a common carrier if it also undertakes to deliver
the goods for it customers. The law does not distinguish between one whose principal business
activity is the carrying of goods and one who undertakes this task only as an ancillary activity.
Theft or the robbery of the goods is not considered a fortuitous event or a force majeure.
Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if it proves
that it exercised extraordinary diligence in transporting and safekeeping the goods; or (2) if it
stipulated with the shipper/owner of the goods to limit its liability for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary diligence.

CASE TITLE 19:

TORRES-MADRID BROKERAGE, INC., Petitioner

vs.
FEB MITSUI MARINE INSURANCE CO., INC. and BENJAMIN
P. MANALAST AS, doing business under the name of BMT
TRUCKING SERVICES, Respondents
(G.R. No. 194121, July 11,2016, Decision BRION, J.)

FACTS:

Sony had engaged the services of TMBI to facilitate, process, withdraw, and deliver the
shipment of its electronic goods from the port of Manila to its warehouse in Laguna. The TMBI
did not own any delivery trucks, subcontracted the services of Benjamin Manalastas’ company
(BMT) to transport the shipment of the said goods.

The four BMT trucks picked up the shipment from the port however, only three trucks
arrived at Sony’s warehouse. Eventually the missing truck was found abandoned and the
shipment and driver were missing. As a result Sony filed an insurance claim with the Mitsui, the
insurer of the goods, which granted the same. On the basis of right of subrogation Mitsui sent
TMBI a demand letter for payment of the lost goods but TMBI refused to pay Mitsui’s claim. So
it filed a complaint against TMBI in which BMT is also impleaded. In their answer, TMBI
denies being a common carrier because it does not own a single truck to transport its shipment
and it does not offer transport services to the public for compensation and hence, it is not bound
to observe extra-ordinary diligence. Furthermore, TMBI insists that the hijacking of the truck is a
fortuitous event so it has no liability.

The RTC ruled in favor of Mitsui finding TMBI and BMT jointly and solidarily liable.
The CA affirmed the same, it ruled that the hijacking is not necessarily a fortuitous event
because it refers to the general stealing of the cargo while on transit, the TMBI is a common
carrier and failure to observe extraordinary diligence in overseeing the cargo rendered it liable
for loss, and that TMBI breached its obligation when it failed to deliver the shipment.

ISSUE:

Whether or not TMBI is a common carrier, if so liable for the hijacking of the truck?

RULING:

Yes, TMBI is a common carrier and should be held liable for the hijacking of the truck.

Under the law, a common carriers are persons, corporations, firms or associations
engaged in the business of transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public. By the nature of their business and for
reasons of public policy, they are bound to observe extraordinary diligence in the vigilance over
the goods and in the safety of their passengers.

In A.F. Sanchez Brokerage Inc. v. Court of Appeals, it held that a customs broker whose
principal business is the preparation of the correct customs declaration and the proper shipping
documents is still considered a common carrier if it also undertakes to deliver the goods for its
customers. The law does not distinguish between one whose principal business activity is the
carrying of goods and one who undertakes this task only as an ancillary activity.

Here, the claim of TMBI that it does not owned a truck is immaterial. As long as an it
holds itself to the public for the transport of goods as a business, it is considered a common
carrier regardless of whether it owns truck or not.

As to the hijacking, theft or the robbery of the goods is not considered a fortuitous event
or a force majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting
loss, if it proves that it exercised extraordinary diligence in transporting and safekeeping the
goods or if it stipulated with the shipper/owner of the goods to limit its liability for the loss,
destruction, or deterioration of the goods to a degree less than extraordinary diligence.

In this case, TMBI consistently argues that they are not a common carrier and so its
failure to establish its premise is suffice to say its failure to observe the diligence required.

ISSUE

2. Whether or not BMT is liable to Mitsui?

RULING:

No, BMT is not solidarily liable to Mitsui for the loss as joint tortfeasors.

The Article 2194 of the Civil Code provides that the responsibility of two or more
persons who are liable for quasi-delict is solidary. TMBI’s liability to Mitsui does not stem from
a quasi-delict but from its breach of contract. The tie that binds TMBI with Mitsui is contractual,
albeit one that passed on to Mitsui as a result of TMBI’s contract of carriage with Sony to which
Mitsui had been subrogated as an insurer who had paid Sony’s insurance claim. The legal reality
that results from this contractual tie precludes the application of quasi-delict based Article 2194.

Here, Mitsui’s action is solely premised on TMBI’s breach of contract. Mitsui did not
even sue BMT, much less prove any negligence on its part. However this does not preclude
TMBI to recover from BMT. Hence, TMBI is liable to Mitsui.

TICKLER: Transportation Law

DOCTRINE: The law provides the presumption of negligence of the common carrier in the
event of death or injury of its passengers, the mere proof of injury or death relieves the
passengers from establishing the fault or negligence of the common carrier or its employees.

CASE TITLE 20:

SULPICIO LINES, INC., Petitioner

vs.
NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL
ATILANO, KRISTEN MARIE, CHRISTIAN IONE, KENNETH
KERRN AND KARISNA KATE, ALL SURNAMED SESANTE,
Respondents
(G.R. No. 172682, July 27, 2016, Decision BERSAMIN, J.)

FACTS:

A passenger vessel owned and operated by the petitioner Sulpicio, sank near Fortune
Island in Batangas. Of the 388 recorded passengers, 150 were lost. Napoleon Sesante herein
respondent is one of the passenger who survived the sinking.

Thereafter, he sued the petitioner for breach of contract and damages, he alleges in his
complaint among others that the vessel left the port despite experiencing the stormy weather and
that by reason of the sinking he suffered tremendous hunger, thirst, pain, fear, shock, serious
anxiety and mental anguish. In its answer petitioner insisted that of the seaworthiness of the
vessel, they are not negligent and that the sinking was due to force majeure.

The RTC ruled in favor os Sesante finding herein petitioner negligent awarding temperate
and moral damages. The CA modified the decision lowering the temperate damages only to the
personal belongings of Sesante and that despite the seaworthiness of the vessel, it is civilly liable
for negligence of tits employees.

ISSUE:
 1. Whether or not petitioner Sulpicio Lines is guilty of breach of contract of carriage and be
held liable therefor?

RULING:

Yes, the petitioner is guilty and liable for breach of contract of carriage.

Under the Article 1759 of the Civil Code it provides that common carriers are liable for
the death or injuries to passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the scope of their authority or in
violation of the orders of the common earners. This requires extraordinary diligence to a
common carriers. In relation to this provision is the Article 1756 of the same code which
provides that In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in Articles 1733 and 1755.

The court is not required to make an express finding of the common carrier's fault or
negligence. Even the mere proof of injury relieves the passengers from establishing the fault or
negligence of the carrier or its employees. The presumption of negligence applies so long as
there is evidence showing that a contract exists between the passenger and the common carrier
and the injury or death took place during the existence of such contract, in such event, the burden
shifts to the common carrier to prove its observance of extraordinary diligence.

In this case, there was a miscalculation in judgment on the part of the Captain of the
vessel when he erroneously navigated the ship at her last crucial moment despite the stormy
weather at the time it left the port. Furthermore, the fact of injuries suffered by Sesante is the
presumption that the common carrier or its employees is negligent.

Therefore, the common carrier herein petitioner Sulpicio Lines is guilty of breach of
contract and be held liable.

ISSUE:

2. Whether or not notification is required before the common carrier becomes liable for lost
belongings that remained in the custody of the passenger.

RULING:
 No, notification is not required before the common carrier becomes liable for lost
belongings.

Under Article 1754 of the Civil Code it does not exempt the common carrier from
liability in case of loss, but only highlights the degree of care required of it depending on who
has the custody of the belongings. Hence, the law requires the common carrier to observe the
same diligence as the hotel keepers in case the baggage remains with the passenger; otherwise,
extraordinary diligence must be exercised. Furthermore, the liability of the common carrier
attaches even if the loss or damage to the belongings resulted from the acts of the common
carrier's employees, the only exception being where such loss or damages is due to force
majeure.

In this case, Sesante was allowed to board the vessel with his belongings without any
protest, the petitioner became sufficiently notified of such belongings. So long as the belongings
were brought inside the premises of the vessel, the petitioner was thereby effectively notified and
consequently duty-bound to observe the required diligence in ensuring the safety of the
belongings during the voyage.

Hence, notification is not required and the negligence of the crew of the vessel is the
proximate cause of the sinking of the vessel thus the common carrier is liable.