NEGOTIABLE INSTRUMENTS

1. Ubas Sr. v Chan

G.R. No. 215910

Facts:

Petitioner alleged that respondent, “doing business under the name and style of UNIMASTER,” was indebted to him in
the amount of ₱1,500,000.00, representing the price of boulders, sand, gravel, and other construction materials
allegedly purchased by respondent from him for the construction of the Macagtas Dam in Macagtas, Catarman,
Northern Samar. Further, he averred that respondent had issued three (3) bank checks, payable to “CASH” in the
amount of ₱500,000.00 but when petitioner presented the subject checks for encashment, the same were dishonored
due to a stop payment order.

Respondent filed an Answer with Motion to Dismiss, seeking the dismissal of the case on the following ground, among
others: the complaint states no cause of action, considering that the checks do not belong to him but to Unimasters
Conglomeration, Inc. (Unimasters).

Issue: Whether or not the petitioner’s complaint against the respondent lacks cause of action.

Held:

No, petitioner has a cause of action against the respondent. Although the checks were under the account name of
Unimasters, it should be emphasized that the manner or mode of payment does not alter the nature of the obligation.
The source of obligation, as claimed by petitioner in this case, stems from his contract with respondent. When they
agreed upon the purchase of the construction materials on credit for the amount of ₱1,500,000,00, the contract
between them was perfected. Therefore, even if corporate checks were issued for the payment of the obligation, the
fact remains that the juridical tie between the two (2) parties was already established during the contract’s perfection
stage and, thus, does not preclude the creditor from proceeding against the debtor during the contract’s
consummation stage.

That a privity of contract exists between petitioner and respondent is a conclusion amply supported by the averments
and evidence on record in this case. First, the Court observes that petitioner was consistent in his account that he
directly dealt with respondent in his personal and not merely his representative capacity. Moreover, the demand letter,
which was admitted by respondent, was personally addressed to respondent and not to Unimasters as represented by
the latter. Also, petitioner explained that he delivered the construction materials to respondent absent any written
agreement due to his trust on the latter.

2. BDO Unibank v Lao

G.R. No. 227005

Facts:

Lao a majority stockholder of Wing An Construction and Development Corporation entered into a transaction with
Everlink, under which, Everlink would supply him with “HCG sanitary wares”; and that for the down payment, he issued
two (2) Equitable crossed checks payable to Everlink: Check No. 0127-242249 and Check No. 0127-242250, in the
amounts of P273,300.00 and P336,500.00, respectively.

Lao averred that when the checks were encashed, he contacted Everlink for the immediate delivery of the sanitary
wares, but the latter failed to perform its obligation. Later, Lao learned that the checks were deposited in two different
bank accounts at respondent International Exchange Bank, now respondent Union Bank of the Philippines. He was later
informed that the two bank accounts belonged to Wu and a company named New Wave Plastic, represented by Willy
Antiporda. Consequently, Lao was prompted to file a complaint against Everlink and Wu for their failure to comply with
their obligation and against BDO for allowing the encashment of the two (2) checks. He later withdrew his complaint
against Everlink as the corporation had ceased existing.
In its answer, BDO asserted that it had no obligation to ascertain the owner of the account/s to which the checks were
deposited because the instruction to deposit the said checks to the payee’s account only was directed to the payee
and the collecting bank which was Union Bank.

Issue: Whether or not Lao has a right of action against BDO for its failure to comply with its duty as the drawee bank.

Held:

Yes, Lao has a right of action against BDO. The liability of the drawee bank is based on its contract with the drawer and
its duty to charge to the latter’s accounts only those payables authorized by him. A drawee bank is under strict liability
to pay the check only to the payee or to the payee’s order. When the drawee bank pays a person other than the
payee named in the check, it does not comply with the terms of the check and violates its duty to charge the drawer’s
account only for properly payable items. In the present case, BDO paid the value of Check No. 0127-242250 to Union
Bank, which, in turn, credited the amount to New Wave’s account. The payment by BDO was in violation of Lao’s
instruction because the same was not issued in favor of Everlink, the payee named in the check. It must be pointed out
that the subject check was not even endorsed by Everlink to New Wave. Clearly, BDO violated its duty to charge to
Lao’s account only those payables authorized by him.

Nevertheless, even with such clear violation by BDO of its duty, the loss would have ultimately pertained to Union Bank.
By stamping at the back of the subject check the phrase “all prior endorsements and/or lack of it guaranteed,” Union
Bank had, for all intents and purposes treated the check as a negotiable instrument and, accordingly, assumed the
warranty of an endorser. Without such warranty, BDO would not have paid the proceeds of the check. Thus, Union Bank
cannot now deny liability after the aforesaid warranty turned out to be false.
 INTELLECTUAL PROPERTY

1. Great White Shark v Caralde

G.R. No. 192294

Facts:

Caralde filed a trademark application seeking to register the mark "SHARK & LOGO" for his manufactured
goods under Class 25, such as slippers, shoes and sandals. Petitioner Great White Shark Enterprises, Inc., a foreign
corporation domiciled in Florida, USA, opposed the application claiming to be the owner of the mark consisting of a
representation of a shark in color, known as "GREG NORMAN LOGO". It alleged that, being a world famous mark which
is pending registration before the BLA since February 19, 2002, the confusing similarity between the two (2) marks is likely
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.

Issue: Whether or not there is confusing similarity between the trademarks.

Held:

In determining similarity and likelihood of confusion, case law has developed the Dominancy Test and the Holistic or
Totality Test. The Dominancy Test focuses on the similarity of the dominant features of the competing trademarks that
might cause confusion, mistake, and deception in the mind of the ordinary purchaser, and gives more consideration to
the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices,
quality, sales outlets, and market segments. In contrast, the Holistic or Totality Test considers the entirety of the marks as
applied to the products, including the labels and packaging, and focuses not only on the predominant words but also
on the other features appearing on both labels to determine whether one is confusingly similar to the other as to
mislead the ordinary purchaser. The "ordinary purchaser" refers to one "accustomed to buy, and therefore to some
extent familiar with, the goods in question."

Irrespective of both 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.

2. Birkenstock Orthopaedie GMBH v Philippine Shoe Expo

G.R. No. 194307

Facts:

Petitioner, a corporation duly organized and registered and existing under the laws of Germany applied for various
trademarks registration before the Intellectual Property Office (IPO). However, the applications were suspended in view
of the existing registration of the mark “BIRKENSTOCK AND DEVICE” under Registration No. 56334, dated Oct. 21, 1993 in
the name of Shoe Town International and Industrial Corp, the predecessor-in-interest of respondent Philippine Shoe
Expo Marketing Corp. On May 27, 1997, petitioner filed a petition for cancellation of Registration No. 56334, on the
ground that it is the lawful and rightful owner of the Birkenstock trademark. During the pendency of the case,
respondent and its predecessor-in –interest failed to file the required 10 th Year Declaration of Actual Use, thereby
resulting the cancellation of the mark. Accordingly, the cancellation case was dismissed for being moot and academic
thereby paving the way for the publication of the subject application.

In response, respondent filed with Bureau of Legal Affairs (BLA) of the IPO three verified notices of opposition to the
subject application together with its predecessor-in-interest, and alleging that it has been using the Birkenstock marks in
the Philippines for more than 16 years through the mar “BIRKENSTOCK AND DEVICE”. The BLA of IPO sustained
respondent’s opposition. Finding the IPO Director General’s reversal of the BLA unacceptable, respondent filed a
petition for review with the CA.

Issue: Whether the subject mark should be allowed registration in the name of petitioner.

Held:

The Court ruled in favour of the petitioner. Under Section 12 of the RA 166 Section 12, it provides that, “Each certificate
of registration shall remain in force for 20 years: Provided, that the registration under the provisions of this Act shall be
cancelled by the Director, unless within 1 year following the fifth, tenth and fifteenth anniversaries of the date of the
issue of the certificate of registration, the registrant shall file in the Patent Office an affidavit showing that the mark or
trade-name is still in use or showing that its non-use is due to special circumstances which excuse such non-use and is
not due to any intention to abandon the same, and pay the required fee. In the case at bar, respondent admitted that
it failed to file the 10 yr DAU for Registration No. 56334 within the requisite period, or on or before October 21, 2004. As a
consequence, it was deemed to have abandoned or withdrawn any right or interest over the mark “BIRKENSTOCK”. It
must be emphasized that the registration of a trademark, by itself, is not a mode of acquiring ownership. If the
applicant is not the owner of the trademark, he has no right to apply for registration.

3.

SHANG PROPERTIES REALTY CORPORATION v. ST. FRANCIS DEVELOPMENT CORPORATION, GR No. 190706, 2014-07-21

FACTS:Respondent a domestic corporation engaged in the real estate business and the developer of the St. Francis
Square Commercial Center, built sometime in 1992, located at Ortigas Center, Mandaluyong City, Metro Manila
(Ortigas Center)[4] filed separate... complaints against petitioners before the IPO - Bureau of Legal Affairs (BLA),
namely: (a) an intellectual property violation case for unfair competition, false or fraudulent declaration, and
damages arising from petitioners' use and filing of applications... for the registration of the marks "THE ST. FRANCIS
TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE," docketed as IPV Case No. 10-2005-00030 (IPV Case); and (b) an
inter partes case opposing the petitioners' application for registration of the... mark "THE ST. FRANCIS TOWERS" for use
relative to the latter's business, particularly the construction of permanent buildings or structures for residential and
office purposes, docketed as Inter Partes Case No. 14-2006-00098 (St. Francis Towers IP Case); and

(c) an inter partes case opposing the petitioners' application for registration of the mark "THE ST. FRANCIS SHANGRI-
LA PLACE," docketed as IPC No. 14-2007-00218 (St. Francis Shangri-La IP Case).

ISSUES: whether or not petitioners are guilty of unfair competition in using the marks "THE ST. FRANCIS TOWERS" and
"THE ST. FRANCIS SHANGRI-LA

PLACE."

RULING:The "true test" of unfair competition has thus been "whether the acts of the defendant have the intent of
deceiving or are... calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of
the particular trade to which the controversy relates."

Here, the Court finds the element of fraud to be wanting; hence, there can be no unfair competition.

The CA's contrary conclusion was faultily premised on its impression that respondent had the right to the exclusive
use of the mark "ST. FRANCIS," for which the latter had... purportedly established considerable goodwill. What the
CA appears to have disregarded or been mistaken in its disquisition, however, is the geographically-descriptive
nature of the mark "ST. FRANCIS" which thus bars its exclusive appropriability, unless a secondary meaning is...
acquired.

A 'geographically descriptive term' is any noun or adjective that designates geographical location and would tend
to be regarded by buyers as descriptive of the geographic location of origin of the goods or services.

secondary meaning is established when a descriptive mark no longer causes the public to associate the goods with
a particular place, but to associate the... goods with a particular source.

Under Section 123.2[34] of the IP Code, specific requirements have to be met in order to conclude that a
geographically-descriptive mark has acquired secondary meaning, to wit: (a) the secondary meaning must have
arisen as a result of... substantial commercial use of a mark in the Philippines; (b) such use must result in the
distinctiveness of the mark insofar as the goods or the products are concerned; and (c) proof of substantially
exclusive and continuous commercial... use in the Philippines for five (5) years before the date on which the claim
of distinctiveness is made.
In fact, even on the assumption that secondary meaning had been acquired, said finding only accords
respondents protectional qualification under Section 168.1 of the IP Code as above quoted. Again, this does not
automatically trigger the concurrence of the fraud element required... under Section 168.2 of the IP Code,...
Hence, for all the reasons above-discussed, the Court hereby grants the instant petition, and, thus, exonerates
petitioners from the charge of unfair competition in the IPV Case.

Principles:

In order to determine whether or not the... geographic term in question is descriptively used, the following question
is relevant: (1) Is the mark the name of the place or region from which the goods actually come? If the answer is
yes, then the geographic term is probably used in a descriptive sense, and secondary... meaning is required for
protection.

4. ROBERTO CO vs. KENG HUAN JERRY YEUNG AND EMMA YEUNG G.R. No. 212705, 10 September 2014

FACTS:
Ruivivar bought a bottle of Greenstone from Royal Chinese Drug Store in Binondo, Manila, owned by Ling Na Lau. H
owever, he doubted its authenticity because it had a different smell, and the heat it produced was not as strong as
the original Greenstone he frequently used. He then informed his brother-in-
law Yeung, the owner of Greenstone Pharmaceutical. The latter went to Royal and found 7 bottles of counterfeit Gr
eenstone on display for sale. He was told by Pinky Lau – the store’s proprietor –
that the items came from Co of KiaoAn Chinese Drug Store. According to Pinky, Co offered the products as “Tienc
hi Fong Sap Oil Greenstone” (Tienchi) which she eventually availed from him.

Sps. Yeung filed a civil complaint for trademark infringement and unfair competition before the RTC against Ling Na
Lau, her sister Pinky Lau, and Co for allegedly conspiring in the sale of counterfeit Greenstone products to the publi
c.

The RTC ruled in favor of Sps. Yeung. It found that the Sps. Yeung had proven by preponderance of evidence that t
he Laus and Co committed unfair competition through their conspiracy to sell counterfeit Greenstone products tha
t resulted in confusion and deception not only to the ordinary purchaser, like Ruivivar, but also to the public. It, how
ever, did not find the Laus and Co liable for trademark infringement as there was no showing that the trademark “G
reenstone” was registered at the time the acts complained of occurred. CA affirmed the RTC Decision.

ISSUE:

Whether or not only suit for unfair competition will prosper considering the trademark was not registered.

HELD:

Yes, the defendants cannot be liable for trademark infringement. In the case at bar, the Court defined unfair comp
etition as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one p
erson as the goods or business of another with the end and probable effect of deceiving the public. This takes plac
e where the defendant gives his goods the general appearance of the goods of his competitor with the intention o
f deceiving the public that the goods are those of his competitor.

Here, it has been established that Co conspired with the Laus in the sale/distribution of counterfeit Greenstone prod
ucts to the public, which were even packaged in bottles identical to that of the original, thereby giving rise to the p
resumption of fraudulent intent.

Although liable for unfair competition, the Court deems it apt to clarify that Co was properly exculpated from the c
harge of trademark infringement considering that the registration of the trademark “Greenstone”–
essential as it is in a trademark infringement case –
was not proven to have existed during the time the acts complained of were committed. In this relation, the distinc
tions between suits for trademark infringement and unfair competition prove useful: (a) the former is the unauthorize
d use of a trademark, whereas the latter is the passing off of one’s goods as those of another; (b) fraudulent intent is
unnecessary in the former, while it is essential in the latter; and (c) in the former, prior registration of the trademark is
a pre-requisite to the action, while it is not necessary in the latter.

5. MCDONALD’S CORPORATION V. L.C. BIG MAK BURGER (G.R. NO. 143993)

FACTS:

Petitioner McDonald’s, an American corporation operating a global chain of fast-food restaurants, is the owner of
the ‘Big Mac’ mark for its double-decker hamburger sandwich here and in the US. Meanwhile, respondent L.C., a
domestic corporation which operates fast-food outlets and snack vans applied for the registration of the ‘Big Mak’
mark for its hamburger sandwiches. Petitioner opposed on the ground that ‘Big Mak’ was a colorable imitation of its
registered ‘Big Mac’ mark for the same food products. Respondents denied there is colorable imitation and argued
that petitioner cannot exclusively appropriate the mark ‘Big Mac’ because the word ‘Big’ is a generic and
descriptive term. Petitioner filed a complaint for trademark infringement and unfair competition. The trial court
found for petitioners. CA held otherwise.

ISSUES:

(1) Whether or not the word ‘Big Mac’ can be exclusively appropriated by petitioner;

(2) Whether or not there is colorable imitation resulting in likelihood of confusion;

(3) Whether or not there is unfair competition.

RULING:

(1) YES. A mark is valid if it is “distinctive” and thus not barred from registration under Section 4 of RA 166. However,
once registered, not only the mark’s validity but also the registrant’s ownership of the mark is prima facie presumed.
The “Big Mac” mark, which should be treated in its entirety and not dissected word for word, is neither generic nor
descriptive. Generic marks are commonly used as the name or description of a kind of goods, such as “Lite” for
beer or “Chocolate Fudge” for chocolate soda drink. Descriptive marks, on the other hand, convey the
characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it
exists, such as “Arthriticare” for arthritis medication. On the contrary, “Big Mac” falls under the class of fanciful or
arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents. As such, it is
highly distinctive and thus valid. Significantly, the trademark “Little Debbie” for snack cakes was found arbitrary or
fanciful.

(2) YES. In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the
holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that
might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing similarity. This Court,
however, has relied on the dominancy test rather than the holistic test. The test of dominancy is now explicitly
incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the
“colorable imitation of a registered mark xxx or a dominant feature thereof.”

Applying the dominancy test, the Court finds that respondents’ use of the “Big Mak” mark results in likelihood of
confusion. Aurally the two marks are the same, with the first word of both marks phonetically the same, and the
second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters,
with the first word of both marks having the same letters and the second word having the same first two letters. In
spelling, considering the Filipino language, even the last letters of both marks are the same. Clearly, respondents
have adopted in “Big Mak” not only the dominant but also almost all the features of “Big Mac.” Applied to the
same food product of hamburgers, the two marks will likely result in confusion in the public mind. Certainly, “Big
Mac” and “Big Mak” for hamburgers create even greater confusion, not only aurally but also visually. Indeed, a
person cannot distinguish “Big Mac” from “Big Mak” by their sound. When one hears a “Big Mac” or “Big Mak”
hamburger advertisement over the radio, one would not know whether the “Mac” or “Mak” ends with a “c” or a
“k.”
(3) YES. The essential elements of an action for unfair competition are (1) confusing similarity in the general
appearance of the goods, and (2) intent to deceive the public and defraud a competitor. The confusing similarity
may or may not result from similarity in the marks, but may result from other external factors in the packaging or
presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the
appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown. Unfair
competition is broader than trademark infringement and includes passing off goods with or without trademark
infringement. Trademark infringement is a form of unfair competition. Trademark infringement constitutes unfair
competition when there is not merely likelihood of confusion, but also actual or probable deception on the public
because of the general appearance of the goods. There can be trademark infringement without unfair
competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus
preventing the public from being deceived that the goods originate from the trademark owner.

Respondents’ goods are hamburgers which are also the goods of petitioners. Since respondents chose to apply the
“Big Mak” mark on hamburgers, just like petitioner’s use of the “Big Mac” mark on hamburgers, respondents have
obviously clothed their goods with the general appearance of petitioners’ goods. There is actually no notice to the
public that the “Big Mak” hamburgers are products of “L.C. Big Mak Burger, Inc.” and not those of petitioners who
have the exclusive right to the “Big Mac” mark. This clearly shows respondents’ intent to deceive the public. We
hold that as found by the RTC, respondent corporation is liable for unfair competition.

6. KENSONIC v. UNI-LINE MULTI-RESOURCES

[ GR Nos. 211820-21, Jun 06, 2018 ]

FACTS: Uni-Line filed an application for the registration of the mark "SAKURA" for amplifier, speaker, cassette,
cassette disk, video cassette disk, car stereo, television, digital video disk, mini component, tape deck, compact
disk charger, VHS, and tape rewinder falling under Class 9 of the Nice International Classification of Goods.
Kensonic opposed Uni-Line's application which was docketed as IPC No. 14-2004-00160 (IPC 1). The Director of the
Bureau of Legal Affairs (BLA) rendered Decision No. 2005-01 dated November 29, 2005 finding that Kensonic was
the first to adopt and use the mark SAKURA since 1994 and thus rejecting Uni-Line's application. On January 19,
2006, said Decision became final and executory.

While IPC Case 1 was pending, Uni-Line filed an application and was issued a certificate of registration for the mark
"SAKURA & FLOWER DESIGN" for use on recordable compact disk (CD-R) computer, computer parts and
accessories falling under Class 9. On September 7, 2006, Kensonic filed a petition for cancellation docketed as IPC
No. 14-2006-00183 (IPC 2) of Uni-Line's registration. In Decision No. 08-113 dated August 7, 2008, the BLA Director
held that Uni-Line's goods are related to Kensonic's goods and that the latter was the first user of the mark SAKURA
used on products under Class 9. The BLA Director thus cancelled Uni-Line's certificate of registration. Uni-Line moved
for reconsideration of the BLA Director's Decision which is pending resolution to date.

ISSUE: Is the SAKURA mark capable of appropriation?

HELD: Uni-Line's opposition to Kensonic's ownership of the SAKURA mark insists that the: SAKURA mark is not
copyrightable for being generic. Such insistence is unacceptable.

Section 123(h) of the Intellectual Property Code prohibits the registration of a trademark that consists exclusively of
signs that are generic for the goods or services that they seek to identify. It is clear from the law itself, therefore, that
what is prohibited is not having a generic mark but having such generic mark being identifiable to the good or
service
 This, however, is not the situation herein. Although SAKURA refers to the Japanese flowering cherry and is, therefore,
of a generic nature, such mark did not identify Kensonic's goods unlike the mark in Asia Brewery, Inc., v. Court of
Appeals. Kensonic's DVD or VCD players and other products could not be identified with cherry blossoms. Hence,
the mark can be appropriated.

7. CITIGROUP, INC., Petitioner, v. CITYSTATE SAVINGS BANK, INC. Respondent.

G.R. No. 205409, June 13, 2018

FACTS:

ATM cards issued by petitioner, Citibank, are labelled "CITICARD". The trademark CITICARD is owned by Citibank N.A. and is
registered in the IPO. In addition, petitioner, owns the following other trademarks currently registered with the Philippine IPO,
to wit: "CITI and arc design", "CITIBANK", "CITIBANK PAYLINK", "CITIBANK SPEEDCOLLECT", "CITIBANKING", "CITICARD",
"CITICORP", "CITIFINANCIAL", "CITIGOLD", "CITIGROUP", "CITIPHONE BANKING'', and "CITISERVICE".

Respondent (Citystate), a Filipino and Singaporean consortium also engaged in banking, applied for registration of its
trademark "CITY CASH WITH GOLDEN LION'S HEAD" with the IPO.

Citigroup filed an opposition to Citystate's application. Citigroup claimed that the "CITY CASH WITH GOLDEN LION'S HEAD"
mark is confusingly similar to its own "CITI" marks

The IPO concluded that the dominant features of the marks were the words "CITI" and "CITY," which were almost the same in
all aspects.

On appeal to the Director of IPO it was held that Citystate's mark did not resemble Citigroup's mark such that deception or
confusion was likely. Director General Cristobal found plausible Citystate's explanation for choosing "CITYSTATE," i.e., that its
name was based on the country of Singapore, which was referred to as "city-state," and that the golden lion head device
was similar to the national symbol of Singapore, the merlion. This ruling was upheld by CA.

ISSUE: Whether respondent’s mark is confusingly similar to that of the petitioner?

RULING: No.

A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device
or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them
from those manufactured, sold or dealt in by others." This definition has been simplified in R.A. No. 8293, the Intellectual
Property Code of the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods.

There is no objective test for determining whether the confusion is likely. Likelihood of confusion must be determined
according to the particular circumstances of each case. To aid in determining the similarity and likelihood of confusion
between marks, our jurisprudence has developed two (2) tests: the dominancy test and the holistic test.

Applying the dominancy test, this Court sees that the prevalent feature of respondent's mark, the golden lion's head
device, is not present at all in any of petitioner's marks. The only similar feature between respondent's mark and petitioner's
collection of marks is the word "CITY" in the former, and the "CITI" prefix found in the latter. A visual comparison of the marks
reveals no likelihood of confusion.

This Court agrees with the observation of Director General Cristobal that the most noticeable part of this mark is the golden
lion's head device, and finds that after noticing the image of the lion's head, the words "CITY" and "CASH" are equally
prominent.

On the other hand, petitioner's marks, as noted by the Court of Appeals, often include the red arc device. Petitioner's other
registered marks which do not contain the red arc device.
Examining these marks, this Court finds that petitioner's marks can best be described as consisting of the prefix "CITI" added
to other words.

With all these, there is no confusing similarity.

8. SAN MIGUEL PURE FOODS COMPANY v. FOODSPHERE +

[ GR No. 217781, Jun 20, 2018 ]

PERALTA, J.:

FACTS:

Complainant owns a registered mark for “FIESTA” ham which according to them had already acquired goodwill in the
market. Sometime in 2006, however, Foodsphere introduced its "PISTA" ham.

SMPFCI filed a Complaint for trademark infringement and unfair competition against Foodsphere. According to SMPFCI, the
striking similarities between the marks and products of Foodsphere with those of SMPFCI warrant its claim of likelihood of
confusion as to origin.

For its part, Foodsphere denied the charges and countered that the marks "PISTA" and "PUREFOODS FIESTA HAM" are not
confusingly similar and are, in fact, visually and aurally distinct from each other. This is because PISTA is always used in
conjunction with its house mark "CDO" and that "PUREFOODS FIESTA HAM" bears the housemark "PUREFOODS," rendering
confusion impossible. Moreover, Foodsphere maintained that SMPFCI does not have a monopoly on the mark "FIESTA" for
the IPO database shows that there are two (2) other registrations for "FIESTA," namely "FIESTA TROPICALE" and "HAPPY FIESTA.

Also, there are other products in supermarkets that bear the mark "FIESTA" such as "ARO FIESTA HAM," "ROYAL FIESTA," and
"PUREGOLD FIESTA HAM," but SMPFCI has done nothing against those manufacturers, making it guilty of estoppel in pais,
and is, therefore, estopped from claiming that the use of other manufacturers of the mark "FIESTA" will result in confusion
and/or damage to itself.

BLA, through its Director, rendered its Decision dismissing SMPFCI's complaint for lack of merit.

Director General partially granted SMPFCI's appeal, affirming the BLA's ruling on the absence of trademark infringement but
finding Foodsphere liable for unfair competition which was affirmed by CA.

ISSUE: Whether respondent is guilty of unfair competition?

RULING: Yes., CA’s decision is affirmed.

Time and again, the Court has held that unfair competition consists of the passing off (or palming off) or attempting to pass
off upon the public of the goods or business of one person as the goods or business of another with the end and probable
effect of deceiving the public.

Thus, the essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the
goods; and (2) intent to deceive the public and defraud a competitor.

In the instant case, the Court finds no error with the findings of the CA and Director General insofar as the presence of the
foregoing elements is concerned. First of all, there exists a substantial and confusing similarity in the packaging of
Foodsphere's product with that of SMPFCI, which, as the records reveal, was changed by Foodsphere from a paper box to
a paper ham bag that is significantly similar to SMPFCI's paper ham bag.

Second of all, Foodsphere's intent to deceive the public, to defraud its competitor, and to ride on the goodwill of SMPFCI's
products is evidenced by the fact that not only did Foodsphere switch from its old box packaging to the same paper ham
bag packaging as that used by SMPFCI, it also used the same layout design printed on the same.
9. ABS-CBN PUBLISHING, INC., Petitioner, v. DIRECTOR OF THE BUREAU OF TRADEMARKS, Respondent.

G.R. No. 217916, June 20, 2018

REYES, JR., J.:

FACTS:

Petitioner filed with IPO its application for the registration of its trademark "METRO" with specific reference to "magazines."The
case was assigned to Examiner Arlene M. Icban who, after a judicious examination of the application, refused the
applicant mark's registration for being identical with three other cited marks, and is therefore unregistrable. The cited marks
were identified as (1) "Metro" (word) by applicant Metro International S.A. (2) "Metro" (logo) also by applicant Metro
International S.A. and (3) "Inquirer Metro" by applicant Philippine Daily Inquirer, Inc.

The resolution of examiner was upheld by Director of the Bureau of Trademarks of IPO and was further upheld by Director
General. CA likewise denied petitioner’s petition for review hence this case.

ISSUE: Whether petitioner’s mark is registrable?

RULING: No.
According to Section 123.1(d) of the Intellectual Property Code of the Philippines (IPC), a mark cannot be registered if it is
"identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date," in respect
of the following: (i) the same goods or services, or (ii) closely related goods or services, or (iii) if it nearly resembles such a
mark as to be likely to deceive or cause confusion.

To determine whether a mark is to be considered as "identical" or that which is confusingly similar with that of another, the
Court has developed two (2) tests: the dominancy and holistic tests.

In the present case, the dominant feature of the applicant mark is the word "METRO" which is identical, both visually and
aurally, to the cited marks already registered with the IPO.

Section 3, Rule 18 of the Rules of Procedure for Intellectual Property Cases 66 provides for the legal presumption that there is
likelihood of confusion if an identical mark is used for identical goods. The provision states:

SEC. 3. Presumption of likelihood of confusion. - Likelihood of confusion shall be presumed in case an identical sign or mark is
used for identical goods or services.

In the present case, the applicant mark is classified under "magazines," which is found in class 16 of the Nice classification. A
perusal of the records would reveal, however, that the cited marks "METRO" (word) and "METRO" (logo) are also both
classified under magazines. Thus, the presumption arises.

10. DIVINA PALAO, Petitioner, v. FLORENTINO III INTERNATIONAL, INC., Respondent.

G.R. No. 186967, January 18, 2017LEONEN, J.:

FACTS:

Petitioner was issued a patent by IPO which pertained to "A Ceramic Tile Installation on Non-Concrete Substrate Base
Surfaces Adapted to Form Part of Furniture, Architectural Components and the Like.
Respondent filed a petition for its cancellation claiming that the utility model covered by Letters Patent No. UM-7789 was
not original, new, or patentable, as it had been publicly known or used in the Philippines and had even been the subject of
several publications. It added that it, as well as many others, had been using the utility model well before Palao's
application for a patent.

Bureau of Legal Affairs of the IPO denied Florentino's Petition for Cancellation. On appeal to the Director General, the same
was dismissed since the appeal's Verification and Certification of Non-Forum Shopping was signed by Atty. John Labsky P.
Maximo (Atty. Maximo) of the firm Balgos and Perez and Florentino failed to attach to its appeal a secretary's certificate or
board resolution authorizing Balgos and Perez to sign the Verification and Certification of Non-Forum Shopping. This was
however reversed by CA.

ISSUE: Whether CA erred in reversing the Director General?

RULING: NO

Intellectual Property Office's own Regulations on Inter Partes Proceedings (which governs petitions for cancellations of a
mark, patent, utility model, industrial design, opposition to registration of a mark and compulsory licensing, and which were
in effect when respondent filed its appeal) specify that the Intellectual Property Office "shall not be bound by the strict
technical rules of procedure and evidence."

This rule is in keeping with the general principle that administrative bodies are not strictly bound by technical rules of
procedure

It is reasonable, therefore—consistent with the precept of liberally applying procedural rules in administrative proceedings,
and with the room allowed by jurisprudence for substantial compliance with respect to the rule on certifications of non-
forum shopping—to construe the error committed by respondent as a venial lapse that should not be fatal to its cause.

11. SERI SOMBOONSAKDIKUL vs ORLANE S.A

February 1, 2017, G.R. No. 18899

J. Jardeleza

On 2003, Orlane S.A. filed an opposition against Seri's application for registration of the mark LOLANE contending that it
infringes its mark ORLANE on its general appearance and pronunciation. Orlane's products are registered since 1967 over
perfumes, toilet water, face powders, lotions, essential oils, and other cosmetics products. Lolane's application before the
IPO covers personal care products which are similar to that of Orlane's.

Petitioner avers that the marks were distinct in its presentation and not confusingly similar either under the dominancy test or
the holistic test. (The mark ORLANE was in plain block upper case letters while the mark LOLANE was printed in stylized word
with the second letter L and the letter A co-joined). Further, the similarity in a syllable will not result into confusion.

Bureau of Legal Affairs (BLA) rejected petitioner's application and denied the MR. On appeal, Director General of IPO
affirmed the BLA's decision. CA denied the petition and ruled that LOLANE' s mark is confusingly or deceptively similar to
ORLANE applying the dominancy test.

Issue: Whether there is confusing similarity between ORLANE and LOLANE which would bar the registration of LOL ANE before
the IPO.

SC: None. There is no colorable imitation between the marks LOLANE and ORLANE which would lead to any likelihood of
confusion to the ordinary purchasers. A trademark under Section 121.1 of RA 8293 is any visible sign capable of
distinguishing the goods.
In Mighty Corporation v. E. & J Gallo Winery, we held that: the two types of confusion in trademark infringement are: (1)
"confusion of goods" when an otherwise prudent purchaser is induced to purchase one product in the belief that he is
purchasing another; and (2) "confusion of business" wherein the goods of the parties are different but the defendant's
product can reasonably (though mistakenly) be assumed to originate from the plaintiff.

To determine the likelihood of confusion, the following must be considered: [a] the resemblance between the trademarks
(the most important); [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on the
purchaser and [d] the registrant's express or implied consent and other fair and equitable considerations.

The suffix LANE is not the dominant feature of petitioner's mark. Neither can it be considered as the dominant feature of
ORLANE which would make the two marks confusingly similar. First, the appearance of the marks would show that there are
noticeable differences in the way they are written or printed. Second, as to the aural aspect of the marks, LOLANE and
ORLANE do not sound alike.

12. FORIETRANS MANUFACTURING CORP. vs DAVIDOFF ET. CIE SA & JAPAN TOBACCCO, INC (JTI)

G.R. No. 197482; March 6, 2017

J. Jardeleza

On 2004, SyCIP Law firm applied for search warrants on behalf of respondent clients DavidOff and JTI for reported
infringement of their products. The warrants were issued and later on implemented seizing raw tobacco, cigarettes,
cigarette packs, and cigarette reams bearing the name DAGETA and DAGETA International and Mild Seven Lights. 3
complaint-affidavits for violations of RA 8293. (Illegal manufacture of DAGETA Cigarettes confusing with DavidOff, False
Designation of Origin [Sec. 169] of Dageta stating it is from Germany but in fact from Pampanga and Mild Seven Lights
confusing with JTI's Mild Seven)

Calaquian, for FMC, denied the charges and avers that the seized packs are genuine and that if there are infringements,
FMC would have not passed PEZA's strict rules.

The DOJ Prosecutor dismissed the complaints in a Joint Resolution. Sec. Of Justice affirmed the resolution and found no
probable cause for violation of 8293. CA reversed the decision and ruled that SOJ decided over evidentiary matters best
resolved in trial.

Issue: Whether CA erred in ruling that SOJ committed grave abuse of discretion in finding no probable cause to charge
petitioners with trademark infringement and false designation of origin.

SC: No. SOJ committed grave abuse of discretion by disregarding the evidence on record and sustained the Joint
Resolution of the Prosecutors. Nowhere in the Joint Resolution shows that it was dismissed for probable cause. Instead, it only
attacked the probable cause determined by the Judge in issuing the warrants.

As enumerated in Section 155 of IP Code, there is prima facie case for trademark infringement and false designation of
origin exists against petitioners.

The essential element of infringement is that the infringing mark is likely to cause confusion. In this case, the complaint-
affidavit for the Davidoff infringement case alleged confusing similarity between the cigarette packs of the authentic
Davidoff cigarette and the sample Dageta cigarette pack seized during the search of FMC's premises. Indeed there might
be differences when the two are compared. We have, in previous cases, noted that defendants in cases of infringement
do not normally copy but only make colorable changes. The most successful form of copying is to employ enough points of
similarity to confuse the public, with enough points of difference to confuse the courts.
13. WILTON DY and/or PHILITES ELECTRONIC & LIGHTING PRODUCTS vs KONINKLIJKE PHILIPS ELECTRONICS

G.R. No. 186088; March 22, 2017

C.J. Sereno

On 2000, petitioner PHILITES filed a trademark application of PHILITES & LETTER P DEVICE covering its fluorescent bulb,
incandescent light, starter and ballast. Respondent PHILIPS filed an opposition alleging that it is identical or confusingly
similar mark to its trademark PHILIPS, hence there is infringement of its trademark and well-known reputation in the
Philippines.

IPP-BLA Director denied the Opposition filed by respondent PHILIPS stating that the marks were so unlike, both visually and
aurally. It held that no confusion was likely to occur, despite their contemporaneous use because of the differences on the
shield mark, the origin of the names, the pronunciations. Moreover, the colors of the bulbs cannot be of respondent’s
monopoly. CA, however, revised and set aside the findings of BLA and found that the marks are confusingly similar.

Issues: Whether respondent's mark is a registered and well-known mark in the Philippines; and whether the mark applied for
by petitioner is identical or confusingly similar with that of respondent.

SC: YES and YES. Petition denied.

A trademark is "any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and
used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt
by othcrs."

Section 123. Registrability. - 123 .1. A mark cannot be registered if it nearly resembles such a mark as to be likely to deceive
or cause confusion;

Both parties are engaged in the same line of business: selling identical or similar goods such as fluorescent bulbs. To
determine likelihood of confusion, the dominancy test, and the holistic or totality test can be applied.

The dominancy test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might
cause confusion, mistake, and deception in the mind of the purchasing public. While the holistic or totality test necessitates
a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining
confusing similarity.

Applying the dominancy test, examination of the trademarks shows that their dominant or prevalent feature is the five-letter
"PHILI.” The marks are confusingly similar .The consuming public does not have the luxury of time to ruminate the phonetic
sounds of the trademarks, to find out which one has a short or long vowel sound. At bottom, the letters "PHILI'' visually catch
the attention of the consuming public and the use of respondent's trademark will likely deceive or cause confusion. Most
importantly, both trademarks are used in the sale of the same goods, which are light bulbs.

14. MANG INASAL PHILIPPINES, INC vs IFP MANUFACTURING CORPORATION

G.R. No. 221717; June 19, 2017

J. VELASCO, JR.,

On 2011, respondent IFP applied for the registration of the mark "OK Hotdog Inasal Cheese Hotdog Flavor Mark" (OK Hotdog
Inasal mark) which it intends to use on one of its curl snack products. Petitioner Mang Inasal Philippines opposed and
averred that the OK Hotdog Inasal mark and the Mang Inasal mark share similarities-both as to their appearance and as to
the goods or services that they represent which tend to suggest a false connection or association between the said marks
and, in that regard, would likely cause confusion on the part of the public.

IPO-BLA dismissed the opposition. Upon appeal, the IPO-DG denied the petition. Both ruled that there are differences in
terms of appearances between the two marks. Also, no person or entity can claim exclusive right to use the word "INASAL"
because it is merely a generic word that means barbeque or barbeque products. The CA affirmed both agencies.

Issue: Whether petitioner’s contention is correct?

SC: YES. OK Hotdog Inasal mark causes deception or confusion on the part of the public.

Under Section 123. 1. A mark cannot be registered if it nearly resembles a registered mark belonging to a different proprietor
or a mark with an earlier filing or priority date as to be likely to deceive or cause confusion.

Jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily
prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2)
confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the
mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the
registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is
some connection between the two parties, though inexistent.

Verily, to fall under the ambit of Sec. 123. l(d)(iii) mark must be shown to meet two (2) minimum conditions:

1. The prospective mark must nearly resemble or be similar to an earlier mark; and

2. The prospective mark must pertain to goods or services that are either identical, similar or related to the goods or services
represented by the earlier mark.

As to the first condition, the fact that the conflicting marks have exactly the same dominant and most recognizable
element, the “INASAL” mark which gives an impression to the public that the OK Hotdog is associated with petitioner.

As to the second condition, even if the curl snack is different from that catered by the petitioner, it may still be regarded as
related goods and services. The fact that the underlying goods and services of both marks deal with inasal and inasal-
flavored products which ultimately fixes the relations between such goods and services.

15 SOCIETE DES PRODUITS v. PUREGOLD PRICE CLUB

GR No. 217194, Sep 06, 2017

FACTS:

Petitioner known as Nestle is a corporation organized and existing under the laws of Switzerland. Respondent
Puregold is a corporation organized under Philippine law which is engaged in the business of trading goods.
Puregold filed an application for the registration of the trademark “COFFEE MATCH” with the Intellectual Property
Office (IPO). Nestle filed an opposition alleging that there is a confusing similarity between the “COFFEE-MATE”
trademark, which has been declared as internationally well-known trademark, and Puregold’s “COFFEE-MATCH”
application. Bureau of Legal Affairs-Intellectual Property Office dismissed Nestle’s petition and held that the word
“COFFEE” as a mark, or as part of a trademark, which is used on coffee and similar or closely related goods, is not
unique or highly distinctive. The BLA-IPO ruled that while both Nestle's "-MATE" and Puregold's "MATCH" contain the
same first three letters, the last two in Puregold's mark rendered a visual and aural character that makes it easily
distinguishable from Nestle's "COFFEE-MATE."

On appeal, the Office of the Director General of the Intellectual Property Office (ODG-IPO) dismissed Nestle’s
appeal and held that the common feature of “COFFEE” between the two marks cannot be exclusively
appropriated since it is generic or descriptive of goods in question. On appeal before the CA, the latter dismissed
the petition on procedural grounds.
ISSUE:

Whether or not Puregold’s mark may be registered.

HELD:

Yes, Puregold’s mark may be registered.

In determining similarity or likelihood of confusion, our jurisprudence has developed two tests: the dominancy test
and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing
trademarks that might cause confusion and deception. In contrast, the holistic test entails a consideration of the
entirety of the marks as applied to the products, including the labels and packaging, in determining confusing
similarity.

The word "COFFEE" cannot be exclusively appropriated by either Nestle or Puregold since it is generic or descriptive
of the goods they seek to identify.

WHEREFORE, the petition is denied and the resolution of the Court of Appeals is hereby AFFIRMED.

16 FERNANDO U. JUAN v. ROBERTO U. JUAN

GR No. 221732, Aug 23, 2017

FACTS:

Respondent Roberto claimed that he began using the name and mark “Lavandera Ko” in his laundry business and
was able to obtained from the National Library a Certificate of Copyright over said name and mark. As his business
expanded with numerous franchise outlets, he found out that his brother Fernando was able to register the name
and landmark “Lavandera Ko” with the Intellectual Property Office and had been selling his own franchises.

A petition for injunction, unfair competition, infringement of copyright, cancellation of trademark and name with/
and prayer for TRO and Preliminary Injunction with the RTC. Due to the death of Roberto, he was substituted by his
son Christian. RTC Dismissed the petition and ruled that neither of the parties had a right to the exclusive use of the
mark “Lavandera Ko” as it was the original mark and work of certain Santiago S. Suarez in his musical composition.
On appeal, the Court of Appeals dismissed the petition.

ISSUE:

Whether or not mark is the same as copyright.

HELD:

No. By their very definitions, copyright and trade or service name are different. The RTC's basis or source is an article
appearing in a website of the song entitled “Lavandera Ko” cannot be considered a subject of judicial notice that
does not need further authentication or verification.

"Lavandera Ko," the mark in question in this case is being used as a trade name or specifically, a service name
since the business in which it pertains involves the rendering of laundry services. Under Section 121.1 of R.A. No.
8293, "mark" is defined as any visible sign capable of distinguishing the goods (trademark) or services (service mark)
of an enterprise and shall include a stamped or marked container of goods. As such, the basic contention of the
parties is, who has the better right to use "Lavandera Ko" as a service name because Section 165.2[13] of the said
law, guarantees the protection of trade names and business names even prior to or without registration, against
any unlawful act committed by third parties. Hence, the RTC erred in denying the parties the proper determination
as to who has the ultimate right to use the said trade name.

WHEREFORE, the Resolution of the Court of Appeals is REVERSED and SET ASIDE. The Court, however, ORDERS the
REMAND of this case to the RTC for its prompt disposition.
 CORPORATION LAW

1 F & S VELASCO COMPANY, INC., IRWIN J. SEVA, ROSINA B. VELASCO-SCRIBNER, MERCEDEZ SUNICO, AND JOSE
SATURNINO O. VELASCO vs DR. ROMMEL L. MADRID, PETER PAUL L. DANAO, MANUEL L. ARIMADO, AND MAUREEN R.
LABALAN

G.R. No. 208844, November 10, 2015

FACTS:

FSVCI was duly organized and registered as a corporation with spouses Francisco and Simona Velasco, their
daughter Angela V. Madrid, her husband Dr. Rommel L. Madrid, respondent and Saturnino O. Velasco, petitioner,
as its incorporators. Upon the death of spouses Velasco, Angela inherited their shares giving her control of 70.82% of
FSVI's total shares of stock. However, during her tenure as Chairman of the Board of Directors, Angela died
intestate. Madrid executed an Affidavit of Self-Adjudication covering Angela's estate which includes ownership of
FSVCI's shares of stock. Believing that he is already the controlling stockholder, Madrid called for a Special
Stockholder's and Re-Organizational Meeting.

Meanwhile, Seva, in his then-capacity as corporate secretary, sent a Notice of Emergency Meeting to the
remaining stockholders for the purpose of electing a new president and vice-president. The meeting was attended
by Saturnino, Seva and Sunico. Saturnino was recognized as a member of the Board of Directors and as President,
while Scribner was elected as Vice-President.

Despite the election conducted by the Saturnino Group, the Madrid Group proceeded with Special Stockholder's
and Re-Organizational Meeting wherein current members of Board of Directors were ousted and replaced by the
members of Madrid Group.

Saturnino Group filed a petition for Declaration of Nullity of Corporate Election with Preliminary Injunction and TRO
against Madrid Group before the RTC. RTC Denied the prayer for TRO. Madrip Group filed its Answer with
counterclaim which, prayed for, among others, the declaration of nullity of the Meeting conducted by Saturnino
Group.

RTC declared both meetings null and void as the meeting was without a quourum, and that Scribner cannot
attend by proxy.

On appeal before the Court of Appeals, the decision of RTC was modified declaring that the meeting conducted
by Madrid Group as valid, among others and that the creation of Management Committee is appropriate in view
of the persisting conflict between the two groups.

ISSUES:

a.) Whether the meeting conducted by Madrid Group is valid and legal.

b.) Whether a Management Committee should be constituted to take over the corporate and business affairs of
FSVCI.

HELD:

a.) No, it is not valid. In this regard, the case of Batangas Laguna Tayabas Bus Co., Inc. v. Bitanga instructs that an
owner of shares of stock cannot be accorded the rights pertaining to a stockholder - such as the right to call for a
meeting and the right to vote, or be voted for - if his ownership of such shares is not recorded in the Stock and
Transfer Book. Records are bereft of any showing that the transfer of Angela's shares of stock to Madrid had been
registered in FSVCFs Stock and Transfer Book when he made such call and when the Meeting was held. Madrid
could not have made a valid call of the Meeting as his stock ownership of FSVCI as registered in the Stock and
Transfer Book is only 4.16% in view of the non-registration of Angela's shares of stock in the FSVCI Stock and Transfer
Book in his favor.

b.) No. Case law is quick to point out that "the creation and appointment of a management committee is an
extraordinary and drastic remedy to be exercised with care and caution; and only when the requirements under
the Interim Rules [of Procedure Governing Intra-Corporate Controversies] are shown. However, absent any actual
evidence from the records showing such imminent danger, the CA's findings have no legal or factual basis to
support the appointment/constitution of a Management Committee for FSVCI.

2 RICHARD K. TOM vs SAMUEL N. RODRIGUEZ

G.R. NO. 215764, July 6, 2015

FACTS:

Fidel Cu sold his 17,237 shares of stock in Golden Dragon International Terminals, Inc. (GDITI) to Virgilio S. Ramos and
Cirilo C. Basalo. However, when they failed to pay the purchase price, Cu sold 15,233 of the same shares in favor of
Edgar D. Lim, Eddie Ong and Arnold Gunnacao who also failed to pay the consideration.

A group led by Ramos, including Richard Tom, who were not included forcibly took over GDITI offices and
performed functions of its officers. Lim filed an action for injunction and damages against Ramos, et.al before the
RTC.

Pending the injunction case, Cu resold his shares of stock to Basalo including the shares of stock executed in favor
Ramos, Lim, Ong and Gunnacao wherein the respective consideration were not paid. Thereafter, Cu intervened in
the injunction case claiming that he was still the legal owner of the shares of stocks. Cu executed SPA in favor of
Cezar Mancao constituting the latter as his duly authorized representative and to perform all acts of management
and control over GDITI. However, Cu later on revoked the authority, prompting Mancao and Basalo to file
Complaint for Specific Performance and impleaded Tom on the allegation that Cu authorized him to exercise
control and management over GDITI to the exclusion of other agents.

Respondent Samuel N. Rodriguez filed a Complaint-in-Intervention alleging that in Memorandum of Agreement

Basalo authorized him to take over manage and conrol the operations of GDITI in Luzon area. Basalo failed to
controvert such allegations. Thus, RTC granted Rodriguez's application.

The original parties, Basalo, Mancao and Tom separately filed motions which were denied. On appeal, CA denied
Tom's prayer for issuance of TRO and/or writ of preliminary injunction.

ISSUE:

Whether or not CA committed grave abuse of discretion in denying Tom's prayer for issuance of a TRO.

HELD:

Yes, the petition is meritorious.

The issuance of an injunctive writ is warranted to enjoin the RTC-Nabunturan from implementing its Orders in the
specific performance case placing the management and control of GDITI to Rodriguez, among other directives.
 This pronouncement follows the well-entrenched rule that a corporation exercises its powers through its board of
directors and/or its duly authorized officers and agents, except in instances where the Corporation Code requires
stockholders’ approval for certain specific acts.

Every director must own at least one (1) share of the capital stock of the corporation of which he is a director,
which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at
least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a
director. Accordingly, it cannot be doubted that the management and control of GDITI, being a stock
corporation, are vested in its duly elected Board of Directors. Thus, by denying Tom's prayer for the issuance of a
TRO and/or writ of preliminary injunction, the CA effectively affirmed the RTC's Order placing the management and
control of GDITI to Rodriguez, a mere intervenor, on the basis of a MOA between the latter and Basalo, in violation
of the foregoing provision of the Corporation Code.

WHEREFORE, the petition is GRANTED. Accordingly, let a Writ of Preliminary Injunction be ISSUED against respondent
Samuel N. Rodriguez, his agents, and all persons acting under his authority to refrain and desist from further
exercising any powers of management and control over Golden Dragon International Terminals, Inc.

3. SUMIFRU v. BERNABE BAYA

FACTS

Baya had been employed by AMSFC as supervisor. There, he joined the union of supervisors, and eventually, formed AMS
Kapalong Agrarian Reform Beneficiaries Multipurpose Cooperative (AMSKARBEMCO). In June 1999, Baya was reassigned to
a series of supervisory positions in AMSFC's sister company, DFC, where he also became a member of the latter's supervisory
union while at the same time, remaining active at AMSKARBEMCO. When Baya did not obey DFC’s advice to join SAFFPAI
instead, which is a pro-company association of employees, DFC ordered Baya to return to AMSFC where he was assigned
to rank-and-file positions only.
The Labor Arbiter found that Baya’s demotion to rank-and-file position without any justifiable reason upon his return to
AMSFC constituted constructive dismissal. The NLRC however ruled otherwise. The CA on the other hand agreed with the
LA, thus, AMSFC and DFC were held solidarily liable for the construtive dismissal. Meanwhile, and during the pendency of
the CA proceedings, Sumifru Corporation acquired DFC via merger. To lessen its liability arising from the CA decision, Sumifru
contended that its liability should only be limited as it only merged with DFC and not with AMSFC.
ISSUE

Is Sumifro solidarily liable with AMSFC in view of its merger with DFC during the pendency of the case with the CA?

HELD

YES. Sumifru is solidarily liable with AMSFC for the entire monetary award in favor of Baya. Section 80 of the Corporation
Code of the Philippines clearly states that one of the effects of a merger is that the surviving company shall inherit not only
the assets, but also the liabilities of the corporation it merged with. Both AMSFC and DFC are guilty of acts constitutive of
constructive dismissal performed against Baya. As such, they should be deemed as solidarily liable for the monetary awards
in favor of Baya. Meanwhile, Sumifru, as the surviving entity in its merger with DFC, must be held answerable for the latter's
liabilities, including its solidary liability with AMSFC arising herein. Verily, jurisprudence states that "in the merger of two existing
corporations, one of the corporations survives and continues the business, while the other is dissolved and all its rights,
properties and liabilities are acquired by the surviving corporation," as in this case.

4. BIR v. LEPANTO CERAMICS, INC.

FACTS

Lepanto Ceramics, Inc. (LCI), a corporation duly organized and existing under Philippine Laws filed a petition for corporate
rehabilitation pursuant to R.A. No. 10142, otherwise known as the "FRIA Law" docketed before the RTC of Calamba City,
Branch 34 as a designated Special Commercial Court. On January 13, 2012, the Rehabilitation Court issued a
Commencement Order, which, among others, declared LCI to be under corporate rehabilitation and directed the BIR to
file and serve on LCI its comment or opposition to the petition, or its claims against LCI.
Despite the foregoing, the BIR acting Assistant Commissioner, Group Supervisor, and Examiner, of the BIR's Large Taxpayers
Service (hereinafter petitioners), sent LCI a notice of informal conference dated May 27, 2013, informing the latter of its
deficiency internal tax liabilities for the Fiscal Year ending June 30, 2010. In response, LCI's court-appointed receiver sent BIR
a letter-reply, reminding the latter of the pendency of LCI's corporate rehabilitation proceedings, as well as the issuance of
a Commencement Order in connection therewith. Undaunted, the BIR sent LCI a Formal Letter of Demand dated May 9,
2014, requiring LCI to pay deficiency taxes in the amount of P567,519,348.39. This prompted LCI to file a petition for indirect
contempt against petitioners before RTC Br. 35.

ISSUE

Should petitioners be cited for indirect contempt?

HELD

YES. The acts of sending a notice of informal conference and a Formal Letter of Demand which are part and parcel of the
entire process for the assessment and collection of deficiency taxes from a delinquent taxpayer - are actions or
proceedings for the enforcement of a claim which should have been suspended pursuant to the Commencement Order.

Section 16 of RA 10142 provides, inter alia, that upon the issuance of a Commencement Order - which includes a Stay or
Suspension Order - all actions or proceedings, in court or otherwise, for the enforcement of "claims" against the distressed
company shall be suspended. Under the same law, claim "shall refer to all claims or demands of whatever nature or
character against the debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed, including, but not limited to; (1) all claims of the government,
whether national or local, including taxes, tariffs and customs duties; x x x.
It is undisputed that the BIR was notified of the rehabilitation proceedings involving LCI and the issuance of the
Commencement Order related thereto. Despite the foregoing, the BIR, through petitioners still opted to send LCI a notice of
informal conference informing the latter of its deficiency internal tax liabilities and a Formal Letter of Demand. Unmistakably,
the petitioners’ acts are in clear defiance of the Commencement Order which warrants citing them for indirect contempt.

5. MACTAN ROCK INDUSTRIES, INC. AND ANTONIO TOMPAR, v. BENFREI S. GERMO

FACTS
Mactan Rock Industries, Inc, (MRII) is a domestic corporation engaged in supplying water, selling industrial maintenance
chemicals, and water treatment and chemical cleaning services. Antonio Tompar is its President/Chief Executive Officer.
MRII, through Tompar, entered into a Technical Consultancy Agreement (TCA) with Benfrei Germo, whereby the parties
agreed that Germo shall stand as MRII's marketing consultant who shall take charge of negotiating, perfecting sales, orders,
contracts, or services of MRII and shall be paid on a purely commission basis. During the effectivity of the TCA, Germo
successfully negotiated and closed with International Container Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic
meters of purified water per day. However, MRII never paid Germo his rightful commissions amounting to P2,225,969.56.
Upon complaint, the RTC ruled in Germo's favor, and accordingly, ordered MRII and Tompar to solidarily pay Germo the
amount. This decision was affirmed by the CA.
ISSUE
Did the RTC and CA correctly held MRII and Tompar solidarily liable for the sum awarded in favor of Germo?
HELD

NO. Tompar, in his capacity as then-President/CEO of MRII, should not be held solidarily liable with MRII for the latter's
obligations to Germo. It is a basic rule that a corporation is a juridical entity which is vested with legal and personality
separate and distinct from those acting for and in behalf of, and from the people comprising it. As a general rule, directors,
officers, or employees of a corporation cannot be held personally liable for the obligations incurred by the corporation,
unless it can be shown that such director/officer/employee is guilty of negligence or bad faith, and that the same was
clearly and convincingly proven. Tompar's assent to patently unlawful acts of the MRII or that his acts were tainted by gross
negligence or bad faith was not alleged in Germo's complaint, much less proven in the course of trial. Therefore, the
deletion of Tompar's solidary liability with MRII is in order.

6. INTERLINK MOVIE HOUSES, INC. v. CA

FACTS
Interlink Movie Houses, Inc. (Interlink), represented by its president, petitioner Edmer Y. Lim, filed before the RTC a complaint
for sum of money and damages against Expressions Stationery Shop, Inc. (Expressions), a corporation duly organized and
existing under the laws of the Republic of the Philippines. Interlink sought from Expressions the recovery of the latter's unpaid
rentals and damages resulting from its alleged breach of their lease contract. The Sheriff’s Return revealed that the
summons on Expressions was served at the office of its president, Bon Huan, through a certain Amee Ochotorina, a person
of suitable age and discretion, who introduced herself as one of the secretaries of Bon Huan. Interlink filed a motion to
declare Expressions in default. To this motion, Expressions entered a special appearance through Atty. Jacinto. It alleged
that the service of the summons was defective because Ochotorina did not work for nor was connected with the office of
the president of Expressions, and that she was neither its president, managing partner, general manager, corporate
secretary, treasurer, nor its in-house counsel. The RTC however granted the “motion to declare defendant in default” and
allowed Interlink to present evidence ex parte. The trial court was convinced that there was sufficient compliance with the
rules on service of summons to a juridical entity considering that the summons was received by the assistant/secretary of the
president.
ISSUE

Was there a valid service of summon upon Expression, a juridical person, through the secretary of its president?
HELD
NO. For the trial court to acquire jurisdiction on Expression, a juridical person, service of summons to it must be made to its
president, Bon Huan, or to its managing partner, general manager, corporate secretary, treasurer, or in-house counsel
pursuant to Section 11, Rule 14 of the Rules of Court. It is further undisputed that the questioned second service of summons
was made upon Ochotorina, who was merely one of the secretaries of Bon Huan, and clearly, not among those officers
enumerated under Section 11 of Rule 14. The service of summons upon Ochotorina is thus void and, therefore, does not vest
upon the trial court jurisdiction over Expressions.

7. Francisco Ongvs BPI Family Savings Bank

Facts

Spouses ONG obtained a loan and credit line with BSA

BSA instead of giving entire 5M, what was given is only 3M

In the meantime BPI merged with BSA, and BPI became the surviving company

BPI foreclosed the mortgage

Issue: Was the extrajudicial foreclosure valid?

Ruling: No, it cannot validly foreclose the mortgage extrajudicially.

Because BSA did not perform its obligation to release the full amount of 5M

The omnibus line was approved and became effective on January 1997 yet BSA did not allow petitioners to draw from the
line until November 1997. Moreover, BSA downgraded petitioners' drawdown to only P3,000,000.00. The almost 10 months
delay in releasing the amount applied for by petitioners negates good faith on the part of BSA. BPI insists that it acted in
good faith when it sought extrajudicial foreclosure of the mortgage and that it was not responsible for acts committed by its
predecessor, BSA.

Good faith, however, is not an excuse to exempt BPI from the effects of a merger or consolidation, viz.:

The law provides that the surviving or consolidated corporation shall be responsible and liable for all the liabilities and
obligations of each of the constituent corporations in the same manner as if such surviving or consolidated corporation had
itself incurred such liabilities or obligations. It will acquire all the liabilities and obligations of BSA as if BPI itself incurred it.

The subsequent refusal of BSA in releasing the maximum amount agreed upon, transgressed the very purpose of petitioners
in availing the credit facility. Clearly, given the nature of petitioners' business, time is of the essence as they needed to have
the orders ready before opening of classes. Debtor’s refusal to continue paying was only prompted by BSA's refusal to
abide by the terms of the contract.

Thus, it would be the height of injustice to allow BPI to foreclose on the mortgage despite violation of its predecessor BSA of
its principal obligation.

Debtor cannot incur delay unless the creditor has fully performed its reciprocal obligation

It is true that loans are often secured by a mortgage constituted on real or personal property to protect the creditor's
interest in case of the default of the debtor.

By its nature, however, a mortgage remains an accessory contract dependent on the principal obligation, such that
enforcement of the mortgage contract will depend on whether or not there has been a violation of the principal
obligation.

While a creditor and a debtor could regulate the order in which they should comply with their reciprocal obligations, it is
presupposed that in a loan the lender should perform its obligation - the release of the full loan amount - before it could
demand that the borrower repay the loaned amount.

In other words, Guariña Corporation would not incur in delay before DBP fully performed its reciprocal obligation

There being no release of the full loan amount, no default could be attributed to petitioners. In other words, foreclosure was
premature.

8. DLS monterssorivs De La Salle Brothers Inc

Facts
DLS Montessori was using DLS as part of its corporate name. De La Salle Brother Inc filed a complaint to restrain the former
from using its name relying heavily on the case of Lyceum

Issue: Can DLS use DLS as part of its corporate name?

Ruling

No, it cannot.

Because all these words, when used with the name "De La Salle," can reasonably mislead a person using ordinary care and
discretion into thinking that petitioner is an affiliate or a branch of, or is likewise founded by, any or all of the respondents,
thereby causing confusion.[39]

That the words "De La Salle" is from the French word meaning "classroom," does not mean that it is generic. Onlu the word
‘salle’ means "room" in French. The word la, on the other hand, is a definite article ("the") used to modify salle.

Thus theuse of the term is actually suggestive. A suggestive mark is therefore a word, picture, or other symbol that suggests,
but does not directly describe something about the goods or services in connection with which it is used as a mark and
gives a hint as to the quality or nature of the product. Suggestive trademarks therefore can be distinctive and are
registrable.

“La Salle” is fanciful, whimsical and arbitrary because there is no inherent connection between the words la salle and
education, and it is through [respondents'] painstaking efforts that the term has become associated with one of the top
educational institutions in the country. Even assuming arguendo that la salle means "classroom" in French, imagination is
required in order to associate the term with an educational institution and its particular brand of service.[41]

We affirm that the phrase "De La Salle" is not merely a generic term.Respondents' use of the phrase being suggestive and
may properly be regarded as fanciful, arbitrary and whimsical, it is entitled to legal protection. It is settled that proof of
actual confusion need not be shown. It suffices that confusion is probable or likely to occur. [45

Moreover, respondent De La Salle Brothers, Inc. was registered in 1961 and the De La Salle group had been using the name
decades before petitioner's corporate registration.

It is the SEC's duty to prevent confusion in the use of corporate names not only for the protection of the corporations
involved, but more so for the protection of the public.

It has authority to de-register at all times, and under all circumstances, corporate names which in its estimation are likely to
generate confusion.[48]

9. Carolina QueVillangcovs Cecilia QueYabut

Facts

A corporation conducted an election

A question was asked whether there was enough quorum

It was alleged that in computing outstanding capital stock, a distinction has to be made between disputed and undisputed
shares of stocks, and that undisputed shares of stock should be excluded

The validity of transfer of shares of stock to persons who ran as officers of the corporation were also questioned

Issue 1 Was there enough quorum?

Here, none. The distinction of undisputed or disputed shares of stocks is not provided for in the law or the
jurisprudence. Ubilex non distinguitnecnosdistingueredebemus — when the law does not distinguish we should not
distinguish.Thus, the 200,000 outstanding capital stocks of Phil-Ville should be the basis for determining the presence of a
quorum, without any distinction.

Therefore, to constitute a quorum, the presence of 100,001 shares of stocks in Phil-Ville is necessary.

Here, only 98,430 shares of stocks. were present during the stockholders meeting, therefore, no quorum had been
established.

Issue 2 Was there a valid transfer of shares of stock to the transferee?

No, because they were not recorded in the books of the corporation.

"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. "

A transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-existent as far as the
corporation is concerned.

As between the corporation on the one hand, and its shareholders and third persons on the other, the corporation looks
only to its books for the purpose of determining who its shareholders are.

It is only when the transfer has been recorded in the stock and transfer book that a corporation may rightfully regard the
transferee as one of its stockholders.

From this time, the consequent obligation on the part of the corporation to recognize such rights as it is mandated by law to
recognize arises.27

In this case, there is no evidence that the 3,140 shares of the late Geronima were recorded in the stocks and transfer book
of Phil-Ville.
Thus, insofar as Phil-Ville is concerned, the 3,140 shares of the late Geronima allegedly transferred to several persons is non-
existent.

Therefore, the transferees of the said shares cannot exercise the rights granted unto stockholders of a corporation, including
the right to vote and to be voted upon.

10. Dr Gil Rich vs Guillermo

Facts

MTLC, a corporation existing under Philippine laws made entered into a real estate mortgage

But such was made after the fact of its dissolution

Thereafter, the property was redeemed

Issue:

Was the redemption valid?

Ruling

No, because it was made after the fact of it dissolution

Since MTLC entered into the real estate mortgage agreement with Estanislao after its dissolution, then resultantly, such real
estate mortgage agreement would be void ab initio because of the non-existence of MTLC's juridical personality.

In other words, by the time MTLC executed the real estate mortgage agreement, its juridical personality has already ceased
to exist.

The agreement is void as MTLC could not have been a corporate party to the same.

To be sure, a real estate mortgage is not part of the liquidation powers that could have been extended to MTLC.

It could not have been for the purposes of "prosecuting and defending suits by or against it and enabling it to settle and
close its affairs, to dispose of and convey its property and to distribute its assets."

It is, in fact, a new business in which MTLC no longer has any business pursuing.
Consequently, and contrary to the CA Decision, any redemption exercised by MTLC pursuant to this void real estate
mortgage is likewise void, and could not be given any effect.

11. Luis Juan Virata and UEM-MARA vs. Alejandro Ng Wee

G.R. No. 220926

July 5, 2017

VELASCO, JR., J.

FACTS:

Ng Wee was a valued client of Westmont Bank. He was enticed by the bank manager to make money placements with
Westmont Investment Corporation (Wincorp). Lured by representations that the "sans recourse" transactions are safe, stable,
high-yielding, and involve little to no risk, Ng Wee, placed investments thereon under accounts in his own name, or in those
of his trustees.

Ng Wee's initial investments were matched with Hottick Holdings Corporation (Hottick), one of Wincorp's accredited
borrowers, the majority shares of which was owned by a Malaysian national by the name of Tan Sri Halim Saad (Halim
Saad). Halim Saad was then the controlling shareowner of UEM-MARA, which has substantial interests in the Manila Cavite
Express Tollway Project (Cavitex).

Hottick was extended a credit facility with a maximum drawdown of ₱l,500,908,026.87 in consideration of the following
securities it issued in favor of Wincorp: (1) a Suretyship Agreement executed by herein petitioner Luis Juan Virata (Virata); (2)
a Suretyship Agreement executed by YBHG Tan Sri Halim Saad; and (3) a Third Party Real Estate Mortgage executed by
National Steel Corporation (NSC). Hottick fully availed of the loan facility extended by Wincorp, but it defaulted in paying its
outstanding obligations when the Asian financial crisis struck. As a result, Wincorp filed a collection suit against Hottick, Halim
Saad, and NSC for the repayment of the loan and related costs. A Writ of Preliminary Attachment was then issued against
Halim Saad's properties, which included the assets of UEM-MARA Philippines Corporation (UEM-MARA). Virata was not
impleaded as a party defendant in the case.

To induce the parties to settle, petitioner Virata offered to guarantee the full payment of the loan. The guarantee was
embodied in the Memorandum of Agreement between him and Wincorp. Virata was then able to broker a compromise
between Wincorp and Halim Saad that paved the way for the execution of a Settlement Agreement. In the Settlement
Agreement, Halim Saad agreed to pay USDl,000,000.00 to Wincorp in satisfaction of any and all claims the latter may have
against the former under the Surety Agreement that secured Hottick's loan. As a result, Wincorp dropped Halim Saad from
the case and the Writ of Preliminary Attachment over the assets of UEM-MARA was dissolved.

Thereafter, Wincorp executed a Waiver and Quitclaim in favor of Virata, releasing the latter from any obligation arising from
the Memorandum of Agreement, except for his obligation to transfer forty percent (40%) equity of UEM Development
Philippines, Inc. (UPDI) and forty percent (40%) of UPDI's interest in the tollway project to Wincorp. Apparently, the
Memorandum of Agreement is a mere accommodation that is not meant to give rise to any legal obligation in Wincorp's
favor as against Virata, other than the stipulated equity transfer.

Alarmed by the news of Hottick's default and financial distress, Ng Wee confronted Wincorp and inquired about the status
of his investments. Wincorp assured him that the losses from the Hottick account will be absorbed by the company and that
his investments would be transferred instead to a new borrower account. In view of these representations, Ng Wee
continued making money placements, rolling over his previous investments in Hottick and even increased his stakes in the
new borrower account - Power Merge Corporation (Power Merge). Petitioner Virata is the majority stockholder of Power
Merge.

In a special meeting of Wincorp's board of directors, the investment house resolved to file the collection case against Halim
Saad and Hottick and approved Power Merge' s application for a credit line, extending a credit facility to the latter in the
maximum amount of ₱l,300,000,000.00. Barely a month later, Wincorp, through another board meeting allegedly attended
by the same personalities, increased Power Merge's maximum credit limit to ₱2,500,000,000.00.29 Accordingly, an
Amendment to the Credit Line Agreement (Amendment) was executed by the same representatives of the two parties.

Power Merge made a total of six (6) drawdowns from the amended Credit Line Agreement in the aggregate amount of
P2,183,755,253.11.31 Following protocol, Power Merge issued Promissory Notes in favor of Wincorp, either for itself or as agent
for or on behalf of certain investors, for each drawdown.

After receiving the promissory notes from Power Merge, Wincorp, in turn, issued Confirmation Advices to Ng Wee and his
trustees, as well as to the other investors who were matched with Power Merge. A summary of the said Confirmation
Advices reveals that out of the ₱2,183,755,253.11 drawn by Power Merge, the aggregate amount of ₱213,290,410.36 was
sourced from Ng Wee's money placements under the names of his trustees.

Unknown to Ng Wee, however, was that on the very same dates the Credit Line Agreement and its subsequent
Amendment were entered into by Wincorp and Power Merge, additional contracts (Side Agreements) were likewise
executed by the two corporations absolving Power Merge of liability as regards the Promissory Notes it issued. Pertinently,
the Side Agreement reads:

WHEREAS, Powermerge has entered into the Credit Line Agreement with Wincorp as an accommodation in order to allow
Wincorp to hold Powermerge paper instead of the obligations of Hettick which are right now held by Wincorp.

1. Powermerge hereby agrees to execute promissory notes in the aggregate principal sum of ₱1,200,000,000.00 in favor of
Wincorp and in exchange therefore, Wincorp hereby assigns, transfers, and conveys to Powermerge all of its rights, titles
and interests by way of a subparticipation over the promissory notes and other obligations executed by Hettick in favor of
Wincorp; Provided however that the only obligation of Powermerge to Wincorp shall be to return and deliver to Wincorp all
the rights, title and interests conveyed by Wincorp hereby to Powermerge over the Hottick obligations. Powermerge shall
have no obligation to pay under its promissory notes executed in favor of Wincorp but shall be obligated merely to return
whatever [it] may have received from Wincorp pursuant to this agreement.

3. Win corp confirms and agrees that this accommodation being entered into by the parties is not intended to create a
payment obligation on the part of Powermerge. (emphasis added)

Save for the amount, identical provisions were included in the March 15, 1999 Side Agreement. By virtue of these contracts,
Wincorp was able to assign its rights to the uncollected Hottick obligations and hold Power Merge papers instead. However,
this also meant that if Power Merge subsequently defaults in the payment of its obligations, it would refuse, as it did in fact
refuse, payment to its investors.

Despite repeated demands, Ng Wee was not able to collect Power Merge's outstanding obligation under the Confirmation
Advices in the amount of ₱213,290,410.36. Ng Wee institute a Complaint for Sum of Money with Damages with prayer for
the issuance of a Writ of Preliminary Attachment (Complaint). Of the seventeen (17) named defendants therein, only Virata,
Power Merge, UPDI, UEM-MARA, Wincorp, Ong, Reyes, Cua, Tankiansee, Santos-Tan, Vicente and Henry Cualoping, and
Estrella were duly served with summons.
ISSUE: Can Virata and UEM-MARA be held liable under the doctrine of piercing the corporate veil?

HELD:

a. Virata is liable for the obligations of Power Merge.

The circumstances of Power Merge clearly present an alter ego case that warrants the piercing of the corporate veil.

To elucidate, case law lays down a three-pronged test to determine the application of the alter-ego theory, namely:

(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time
no separate mind, will or existence of its own;

(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal right; and

(3) The aforesaid control and breach of duty must have proximately caused the injury or unjust loss complained of.137

In the present case, Virata not only owned majority of the Power Merge shares; he exercised complete control thereof. He is
not only the company president, he also owns 374,996 out of 375,000 of its subscribed capital stock. Meanwhile, the
remainder was left for the nominal incorporators of the business. The reported address of petitioner Virata and the principal
office of Power Merge are even one and the same.138 The clearest indication of all: Power Merge never operated to
perform its business functions, but for the benefit of Virata. Specifically, it was merely created to fulfill his obligations under
the Waiver and Quitclaim, the same obligations for his release from liability arising from Hottick's default and non-payment.

Virata would later on use his control over the Power Merge corporation in order to fulfill his obligation under the Waiver and
Quitclaim. Impelled by the desire to settle the outstanding obligations of Hottick under the terms of the settlement
agreement, Virata effectively allowed Power Merge to be used as Wincorp's pawn in avoiding its legal duty to pay the
investors under the failed investment scheme. Pursuant to the alter ego doctrine, petitioner Virata should then be made
liable for his and Power Merge's obligations.

b. UEM-MARA cannot be held liable

UEM-MARA is an entity distinct and separate from Power Merge, and it was not established that it was guilty in perpetrating
fraud against the investors. It was a non-party to the "sans recourse" transactions, the Credit Line Agreement, the Side
Agreements, the Promissory Notes, the Confirmation Advices, and to the other transactions that involved Wincorp, Power
Merge, and Ng Wee. There is then no reason to involve UEM-MARA in the fray. Otherwise stated, respondent Ng Wee has no
cause of action against UEM-MARA. UEM-MARA should not have been impleaded in this case.

A cause of action is the act or omission by which a party violates a right of another.140 The essential elements of a cause of
action are (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part
of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages or other appropriate relief.141
The third requisite is severely lacking in this case. Respondent Ng Wee cannot point to a specific wrong committed by UEM-
MARA against him in relation to his investments in Wincorp, other than being the object of Wincorp's desires. He merely
alleged that the proceeds of the Power Merge loan was used by Virata in order to acquire interests in DEM-MARA, but this
does not, however, constitute a valid cause of action against the company even if we were to assume the allegation to be
true. It would indeed be a giant leap in logic to say that being Wincorp' s objective automatically makes UEM-MARA a
party to the fraud. DEM-Mara's involvement in this case is merely incidental, not direct.

12. Rogelio M. Florete Sr. vs. Marcelino M. Florete, Jr.

G.R. No. 177275

January 20, 2016

LEONEN, J.

FACTS:

Spouses Marcelino Florete, Sr. and Salome Florete (now both deceased) had four (4) children: Marcelino Florete, Jr.
(Marcelino, Jr.), Maria Elena Muyco (Ma. Elena), Rogelio Florete, Sr. (Rogelio, Sr.), and Teresita Menchavez (Teresita), now
deceased.

People’s Broadcasting Service, Inc. (People’s Broadcasting) is a private corporation authorized to operate, own, maintain,
install, and construct radio and television stations in the Philippines. In its incorporation on March 8, 1966, it had an
authorized capital stock of ₱250,000.00 divided into 2,500 shares at ₱100.00 par value per share. Twenty-five percent (25%)
of the corporation’s authorized capital stock were then subscribed to.

Salome died on November 22, 1980.13 Marcelino, Sr. suffered a stroke on July 12, 1982, which left him paralyzed and
bedridden until his death on October 3, 1990.14 After Marcelino, Sr.’s stroke, their son, Rogelio, Sr. started managing the
affairs of People’s Broadcasting.

In October 1993, People’s Broadcasting sought the services of the accounting and auditing firm Sycip Gorres Velayo and
Co. in order to determine the ownership of equity in the corporation.16 On November 2, 1994, Sycip Gorres Velayo and Co.
submitted a report detailing the movements of the corporation’s shares from November 23, 1967 to December 8, 1989.

The Board of Directors of People’s Broadcasting approved Sycip Gorres Velayo and Co.’s report.

On June 23, 2003, Marcelino, Jr., Ma. Elena, and Raul Muyco (Marcelino, Jr. Group) filed a Complaint for Declaration of
Nullity of Issuances, Transfers and Sale of Shares in People’s Broadcasting Service, Inc. and All Posterior Subscriptions and
Increases thereto with Damages against Diamel Corporation, Rogelio, Sr., Imelda Florete, Margaret Florete, and Rogelio
Florete, Jr. (Rogelio, Sr. Group).

ISSUE: Whether the transfer of shares assailed by Marcelino Jr. Group should be nullified.

HELD:
What the Marcelino, Jr. Group asks is the complete reversal of a number of corporate acts undertaken by People’
Broadcasting’s different boards of directors. These boards supposedly engaged in outright fraud or, at the very least, acted
in such a manner that amounts to wanton mismanagement of People’s Broadcasting’s affairs. The ultimate effect of the
remedy they seek is the reconfiguration of People’s Broadcasting’s capital structure.

The remedies that the Marcelino, Jr. Group seeks are for People’s Broadcasting itself to avail. Ordinarily, these reliefs may be
unavailing because objecting stockholders such as those in the Marcelino, Jr. Group do not hold the controlling interest in
People’s Broadcasting. This is precisely the situation that the rule permitting derivative suits contemplates: minority
shareholders having no other recourse "whenever the directors or officers of the corporation refuse to sue to vindicate the
rights of the corporation or are the ones to be sued and are in control of the corporation."

The Marcelino, Jr. Group points to violations of specific provisions of the Corporation Code that supposedly attest to how
their rights as stockholders have been besmirched. However, this is not enough to sustain a claim that the Marcelino, Jr.
Group initiated a valid individual or class suit. To reiterate, whether stockholders suffer from a wrong done to or involving a
corporation does not readily vest in them a sweeping license to sue in their own capacity.

The specific provisions adverted to by the Marcelino, Jr. Group signify alleged wrongdoing committed against the
corporation itself and not uniquely to those stockholders who now comprise the Marcelino, Jr. Group. A violation of Sections
23 and 25 of the Corporation Code—on how decision-making is vested in the board of directors and on the board’s
quorum requirement—implies that a decision was wrongly made for the entire corporation, not just with respect to a
handful of stockholders. Section 65 specifically mentions that a director’s or officer’s liability for the issuance of watered
stocks in violation of Section 62 is solidary "to the corporation and its creditors," not to any specific stockholder. Transfers of
shares made in violation of the registration requirement in Section 63 are invalid and, thus, enable the corporation to
impugn the transfer. Notably, those in the Marcelino, Jr. Group have not shown any specific interest in, or unique
entitlement or right to, the shares supposedly transferred in violation of Section 63.

Also, the damage inflicted upon People’s Broadcasting’s individual stockholders, if any, was indiscriminate. It was not
unique to those in the Marcelino, Jr. Group. It pertained to "the whole body of [People’s Broadcasting’s] stock."
Accordingly, it was upon People’s Broadcasting itself that the causes of action now claimed by the Marcelino Jr. Group
accrued. While stockholders in the Marcelino, Jr. Group were permitted to seek relief, they should have done so not in their
unique capacity as individuals or as a group of stockholders but in place of the corporation itself through a derivative suit.
As they, instead, sought relief in their individual capacity, they did so bereft of a cause of action. Likewise, they did so
without even the slightest averment that the requisites for the filing of a derivative suit, as spelled out in Rule 8, Section 1 of
the Interim Rules of Procedure for Intra-Corporate Controversies, have been satisfied. Since the Complaint lacked a cause
of action and failed to comply with the requirements of the Marcelino, Jr. Group’s vehicle for relief, it was only proper for
the Complaint to have been dismissed.

13. Missionary Sisters of Our Lady of Fatima vs. Amando V. Alzona

G.R. No. 224307

August 6, 2018

REYES, JR., J

FACTS:
Purificacion Alzona discovered that she has been suffering from lung cancer. Considering the restrictions in her movement,
Purificacion requested Mother Concepcion to take care of her in her house, to which the latter agreed. Mother
Concepcion is the petitioner's Superior General.

Purificacion stated in her handwritten letter that she is donating her house and lot to the petitioner through Mother
Concepcion. On the same occasion, Purificacion introduced Mother Concepcion to her nephew, Francisco Del Mundo
(Francisco), and niece, Ma. Lourdes Alzona Aguto-Africa (Lourdes). Purificacion, instructed Francisco to give a share of the
harvest to Mother Concepcion, and informed Lourdes that she had given her house to Mother Concepcion.

Mother Concepcion went to SEC and filed the corresponding registration application on August 28, 2001. Purificacion
executed a Deed of Donation Inter Vivos (Deed) in favor of the petitioner on August 29, 2001. The Deed was notarized by
Atty. Arcillas and witnessed by Purificacion's nephews Francisco and Diosdado Alzona, and grandnephew, Atty. Fernando
M. Alonzo. The donation was accepted on even date by Mother Concepcion for and in behalf of the petitioner. The SEC
issued Certificate of Incorporation on August 31, 2001.

Amando Alzona and other heirs of Purification filed a Complaint before the RTC, seeking to annul the Deed executed
between Purificacion and the petitioner, on the ground that at the time the donation was made, the latter was not
registered with the SEC and therefore has no juridical personality and cannot legally accept the donation. Purification died
during the pendency of the case.

RTC held that at the time of the execution of the Deed, the petitioner was a de facto corporation and as such has the
personality to be a beneficiary and has the power to acquire and possess property. Further then, the petitioner's incapacity
cannot be questioned or assailed in the instant case as it constitutes a collateral attack which is prohibited by the
Corporation Code of the Philippines. In this regard, the RTC found that the recognition by the petitioner of Mother
Concepcion's authority is sufficient to vest the latter of the capacity to accept the donation.

CA declared the Deed of Donation VOID. CA held that the petitioner cannot be considered as a de facto corporation
considering that at the time of the donation, there was no bona fide attempt on its part to incorporate. As an unregistered
corporation, the CA concluded that the petitioner cannot exercise the powers, rights, and privileges expressly granted by
the Corporation Code. Ultimately, bereft of juridical personality, the CA ruled that the petitioner cannot enter into a
contract of Donation with Purificacion.

ISSUES:

Whether the Deed of Donation is valid.

Whether there is legal capacity on the part of petitioner as a donee to accept the donation.

RULING:

Jurisprudence dictates that the doctrine of corporation by estoppel applies for as long as there is no fraud and when the
existence of the association is attacked for causes attendant at the time the contract or dealing sought to be enforced
was entered into, and not thereafter.

In this controversy, Purificacion dealt with the petitioner as if it were a corporation. This is evident from the fact that
Purificacion executed two (2) documents conveying her properties in favor of the petitioner – first, via handwritten letter,
and second, through a Deed; the latter having been executed the day after the petitioner filed its application for
registration with the SEC.

The doctrine of corporation by estoppel rests on the idea that if the Court were to disregard the existence of an entity
which entered into a transaction with a third party, unjust enrichment would result as some form of benefit have already
accrued on the part of one of the parties. Thus, in that instance, the Court affords upon the unorganized entity corporate
fiction and juridical personality for the sole purpose of upholding the contract or transaction.

In this case, while the underlying contract which is sought to be enforced is that of a donation, and thus rooted on liberality,
it cannot be said that Purificacion, as the donor failed to acquire any benefit therefrom so as to prevent the application of
the doctrine of corporation by estoppel. To recall, the subject properties were given by Purificacion, as a token of
appreciation for the services rendered to her during her illness. In fine, the subject deed partakes of the nature of a
remuneratory or compensatory donation, having been made "for the purpose of rewarding the donee for past services,
which services do not amount to a demandable debt."

Therefore, under the premises, past services constitutes consideration, which in tum can be regarded as "benefit" on the
part of the donor, consequently, there exists no obstacle to the application of the doctrine of corporation by estoppel;
although strictly speaking, the petitioner did not perform these services on the expectation of something in return.

Precisely, the existence of the petitioner as a corporate entity is upheld in this case for the purpose of validating the
Deed to ensure that the primary objective for which the donation was intended is achieved, that is, to convey the
property for the purpose of aiding the petitioner in the pursuit of its charitable objectives.

14.Francisco C. Eizmendi Jr. vs. Teodorico P. Fernandez

G.R. No. 215280, September 5, 2018

PERALTA, J.

FACTS:

Fernandez averred that he is a proprietary member in good standing of VVCCI, and that the individual petitioners held a
meeting on October 18, 2013 during which they supposedly acted for and in behalf of VVCCI, and found him guilty of less
serious violations of the by-laws and imposed on him the penalty of suspension of membership for six (6) months from
September 21, 2013, or until March 21, 2014.

Fernandez asserted that since petitioners were not validly constituted as the new BOD in the place of the hold-over BOD of
VVCCI, they had no legal authority to act as such BOD, to find him guilty and to suspend him. Fernandez added that he
was not accorded due process, as petitioners failed to give him opportunity to defend himself by notifying him of the
charge and the verdict against him. Not having been notified of his suspension, Fernandez claimed that he had no
premonition of what would happen to him when he went to the VVCCI Complex on October 26, 2013 to avail of its facilities,
and that he suffered deep pain and severe embarrassment because a security guard directed a waiter not to serve the
food he had ordered in the presence of several members on the ground that his name is in the list of members suspended
at the instance of the individual petitioners.

ISSUE:

Whether Fernandez’s complaint may be considered as an election contest within the purview of the Interim Rules. YES.

Whether Fernandez may question the authority of the petitioners to act as the BOD of VVCCI and approve the board
resolution suspending his club membership. NO.

HELD:

Here, the allegation in Fernandez's complaint for invalidation of corporate acts and resolutions partly assails the authority of
the BOD to suspend his membership on the ground that despite the lack of quorum at the same February 23, 2013 meeting,
the individual petitioners proceeded to have themselves constituted as the new members of the BOD of VVCCI. His
complaint clearly raises an issue on the validity of the election of the individual petitioners. Contrary to Fernandez's claim
that the case before the lower court does not involve a claim or title to an elective office in VVCCI, and that his objective is
not to unseat the individual petitioners during the term for which they were allegedly elected.

Fernandez's complaint disputes the election of petitioners as members of the BOD of VVCCI on the ground of lack of
quorum during the February 23, 2013 annual meeting. Verily, his complaint is partly an "election contest" as defined under
Section 2, Rule 6 of the Interim Rules, which refers to "any controversy or dispute involving title or claim to any elective office
in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of
candidates, including proclamation of winners, to the office of director, trustees or other officer directly elected by the
stockholders in a close corporation or by members of a non-stock corporation where the article of incorporation so
provide."

To allow Fernandez to indirectly question the validity of the February 23, 2013 election would be a clear violation of the 15-
day reglementary period to file an election contest under the Interim Rules. As aptly pointed out by the RTC, what cannot
be legally done directly cannot be done indirectly. This rule is basic and, to a reasonable mind, does not need explanation;
if acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.

15. TSUNEISHI HEAVY INDUSTRIES (CEBU), INC., VS. MIS MARITIME CORPORATION - MARITIME LAW (wala talagang corpo
beshy)

G.R. No. 193572, April 04, 2018

JARDELEZA, J.

FACTS:

Tsuneishi billed MIS Maritime Corporation (MIS) the amount of US$318,571.50 for the repair of the latter’s vessel but MIS
refused to pay this amount because the engine emmitted smoke during engine test. Instead, it demanded that Tsuneishi
pay US$471,462.60 as payment for the income that the vessel lost in the six months that it was not operational and dry
docked at Tsuneishi's shipyard. It also asked that its claim be set off against the amount billed by Tsuneishi. MIS further
insisted that after the set off, Tsuneishi still had the obligation to pay it the amount of US$152,891.10. Tsuneishi rejected MIS'
demands. It delivered the vessel to MIS in September 2006. On November 6, 2006, MIS signed an Agreement for Final Price.
However, despite repeated demands, MIS refused to pay Tsuneishi the amount billed under their contract.

On April 10, 2008, Tsuneishi filed a complaint against MIS before the RTC.
Tsuneishi argued that Section 21 of the Ship Mortgage Decree provides for a maritime lien in favor of any person who
furnishes repair or provides use of a dry dock for a vessel. Section 21 states that this may be enforced through an action in
rem. Further, Tsuneishi and MIS' contract granted Tsuneishi the right to take possession, control and custody of the vessel in
case of default of payment. Paragraph 9 of this contract further states that Tsuneishi may dispose of the vessel and apply
the proceeds to the unpaid repair bill.

The RTC issued a writ of preliminary without hearing. Consequently, some of MIS' were attached prompting it to file a motion
to discharge the attachment and motion for considerations but were all denied.

Thru a certiorari, the CA reversed RTC’s orders. This prompted Tsuneishi in filing for petition for review under Rule 45
challenging the CA's ruling. Tsuneishi pleads that this case involves a novel question of law. It argues that while Section 21 of
the Ship Mortgage Decree grants it a maritime lien, the law itself, unfortunately, does not provide for the procedure for its
enforcement. It posits that to give meaning to this maritime lien, this Court must rule that the procedure for its enforcement is
Rule 57 of the Rules of Court on the issuance of the writ of preliminary attachment. Thus, it proposes that aside from the
identified grounds for the issuance of a writ of preliminary attachment in the Rules of Court, the maritime character of this
action should be considered as another basis to issue the writ.

In its comment, MIS raised that Tsuneishi knew from the start that a remedy exists for the enforcement of its maritime lien—
through an arrest of vessel under the Ship Mortgage Decree. However, the RTC itself characterized the complaint as a
collection of sum of money with prayer for the issuance of a writ of preliminary attachment. Thus, what it issued was a writ of
preliminary attachment.

Also, there is no distinction between inability and a refusal to pay where the refusal is based on its claim that Tsuneishi
damaged its vessel. According to MIS, its vessel arrived at Tsuneishi's shipyard on its own power. Its engine incurred damage
while it was under Tsuneishi's custody. Thus, Tsuneishi is presumed negligent.

ISSUE:

Whether a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced through a writ of preliminary
attachment under Rule 57 of the Rules of Court.

HELD:

NO.

Section 21 of the Ship Mortgage Decree establishes a lien. It states:

Sec. 21. Maritime Lien for Necessaries; Persons entitled to such Lien. – Any person furnishing repairs, supplies, towage, use of
dry dock or marine railway, or other necessaries to any vessel, whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by
suit in remand it shall be necessary to allege or prove that credit was given to the vessel.

This remedy is meant to secure a contingent lien on the defendant's property until the plaintiff can, by appropriate
proceedings, obtain a judgment and have the property applied to its satisfaction, or to make some provision for unsecured
debts in cases in which the means of satisfaction thereof arc liable to be removed beyond the jurisdiction, or improperly
disposed of or concealed, or otherwise placed beyond the reach of creditors

Tsuneishi's argument is rooted on a faulty understanding of a lien and a writ of preliminary attachment. As we said, a
maritime lien exists in accordance with the provision of the Ship Mortgage Decree. It is enforced by filing a proceeding in
court. When a maritime lien exists, this means that the party in whose favor the lien was established may ask the court to
enforce it by ordering the sale of the subject property and using the proceeds to settle the obligation.

Clearly, what was prayed for in the proceedings below was not an attachment for the enforcement of a maritime lien but
an attachment, plain and simple.

16. JAMES IENT and MAHARLIKA SCHULZE v TULLETT PREBON (PHILIPPINES), INC.,

G.R. Nos. 189158 and 189530, January 11, 2017

SERENO,C J.:

FACTS:

Tradition Group, where petitoners herein are employed, and Tullett are competitors in the inter-dealer broking business. On
the Tradition Group's motive of expansion and diversification in Asia, petitioners lent and Schulze were tasked with the
establishment Tradition Financial Services Philippines, Inc.
However, Tullett, filed a Complaint-Affidavit with the City Prosecution Office of Makati City against the officers/employees of
the Tradition Group for violation of Sections 31 and 34 of the Corporation Code which made them criminally liable under
Section 144. Impleaded as respondents in the Complaint-Affidavit were petitioners lent and Schulze, Jaime Villalon ,who
was formerly President and Managing Director of Tullett, Mercedes Chuidian who was formerly a member of Tullett's Board
of Directors. Villalon and Chuidian were charged with using their former positions in Tullett to sabotage said company by
orchestrating the mass resignation of its entire brokering staff in order for them to join Tradition Philippines which was evident
on their conduct of several meetings with the employees. According to Tullett, petitioners lent and Schulze have conspired
with Villalon and Chuidian in the latter's acts of disloyalty against the company. Petitioners argued that there could be no
violation of Sections 31 and 34 of the Corporation as these sections refer to corporate acts or corporate opportunity, that
Section 144 of the same Code cannot be applied to Sections 31 and 34 which already contains the penalties or remedies
for their violation; and conspiracy under the Revised Penal Code cannot be applied to the Sections 31 and 34 of the
Corporation Code. The city prosecutor dismissed the criminal complaint however, on respondent’s appeal to the
Department of Justice, the dismissal was reversed finding the arguments of the respondent proper. CA affirmed the decision
of the DOJ secretary.

ISSUE:

Whether Section 144 of the Corporation Code appliesto Sections 31 and 34 of the same code, thus, making it a penal
offense so that conspiracy can be appreciated and the petitioners can be impleaded?

HELD:

NO.

The Supreme Court applied rule of lenity as a principle related to liberal interpretation in favor of the accused in criminal
cases. The rule applies when the court is faced with two possible interpretations of a penal statute, one that is prejudicial to
the accused and another that is favorable to him. The rule calls for the adoption of an interpretation which is more lenient
to the accused.

According to SC, a close reading Section 144 shows that it is not purely a penal provision because it provides that when the
violator is a corporation, an administrative penalty is imposed in form of dissolution, which is not a criminal sanction. The
Court also added that there is no provision in the Corporation Code using an emphatic language to compel the SC to
construe the provision as a penal offense. SC held that through a thorough scrutinizing of the different provisions in the
Corporation Code including Sections 31 and 34, they only impose civil liability aside from Section 74. SC concludes that had
it been the intention of the drafters of the la to define Sections 31 and 34 as offenses, they could have easily included similar
language as that found in Section 74. The intention can also be gleaned from the floor deliberations of its proponents. Quite
apart that no legislative intent to criminalize Sections 31 and 34 was manifested in the deliberations on the Corporation
Code, it is noteworthy from the same deliberations that legislators intended to codify the common law concepts of
corporate opportunity and fiduciary obligations of corporate officers as found in American jurisprudence into said
provisions. In common law, the remedies available in the event of a breach of director's fiduciary duties to the corporation
are civil remedies. If a director or officer is found to have breached his duty of loyalty, an injunction may be issued or
damages may be awarded. A corporate officer guilty of fraud or mismanagement may be held liable for lost profits. A
disloyal agent may also suffer forfeiture of his compensation. There is nothing in the deliberations to indicate that drafters of
the Corporation Code intended to deviate from common law practice and enforce the fiduciary obligations of directors
and corporate officers through penal sanction aside from civil liability. GRANTED. Court of Appeals Resolutions are REVERSED
and SETASIDE.

17.WESLEYAN UNIVERSITY-PHILIPPINES, v. GUILLERMO T. MAGLAYA, SR.

G.R. No. 212774, January 23, 2017

PERALTA, J.

FACTS:
WUP is a non-stock, non-profit, non-sectarian educational corporation duly organized and existing under the Philippine laws.
Respondent Atty. Guillermo T. Maglaya, Sr. was appointed as a corporate member and was elected as a member of the
Board of Trustees, both for a period of five (5) years. He was elected as President of the University for a five-year term. He
was re-elected as a trustee.

In a Memorandum, the incumbent Bishops of the United Methodist Church apprised all the corporate members of the
expiration of their tenns on December 31, 2008, unless renewed by the former. The said members, including Maglaya,
sought the renewal of their membership in the WUP's Board, and signified their willingness to serve the corporation.

Dr. Dominador Cabasal, Chairman of the Board, informed the Bishops of the cessation of corporate terms of some of the
members and/or trustees since the by-laws provided that the vacancy shall only be filled by the Bishops upon the
recommendation of the Board. Maglaya learned that the Bishops created an Ad Hoc Committee to plan the efficient and
orderly turnover of the administration of the WUP in view of the alleged "gentleman's agreement", and that the Bishops have
appointed the incoming corporate members and trustees. He clarified that there was no agreement and any discussion of
the turnover because the corporate members still have valid and existing corporate terms.

In this case, the Bishops, through a formal notice to all the officers, deans, staff, and employees of WUP, introduced the new
corporate members, trustees, and officers. In the said notice, it was indicated that the new Board met, organized, and
elected the new set of officers. Manuel Palomo, the new Chairman of the Board, informed Maglaya of the termination of
his services and authority as the President of the University.

Thereafter, Maglaya and other fonner members of the Board filed a Complaint for Injunction and Damages before the
Regional Trial Court of Cabanatuan City.The RTC dismissed the case declaring the same as a nuisance or harassment suit
prohibited under Section l(b), Rule 1 of the Interim Rules for Intra-Corporate Controversies. The RTC observed that it is clear
from the by-laws of WUP that insofar as membership in the corporation is concerned, which can only be given by the
College of Bishops of the United Methodist Church, it is a precondition to a seat in the WUP Board. Consequently, the
expiration of the terms of the plaintiffs, including Maglaya, as corporate members carried with it their termination as
members of the Board. Moreover, their continued stay in their office beyond their terms was only in hold-over capacities,
which ceased when the Bishops appointed new members of the corporation and the Board.

The CA affirmed the decision of the RTC, and dismissed the petition for certiorari filed by the plaintiffs for being the improper
remedy.

Thereafter, Maglaya filed the present illegal dismissal case against WUP, Palomo, Bishop Lito C. Tangonan and Bishop Leo A.
Soriano. He claimed that he was unceremoniously dismissed in a wanton, reckless, oppressive and malevolent manner.

The Labor Arbiter ruled in favor of WUP. The LA held that the action between employers and employees where the
employer-employee relationship is merely incidental is within the exclusive and original jurisdiction of the regular courts.

The National Labor Relations Commission reversed and set aside the Decision of the LA ruling that the illegal dismissal case
falls within the jurisdiction of the labor tribunals. Since the reasons for his termination cited by WUP were not among the just
causes provided under Article 282 (now Article 297) of the Labor Code, Maglaya was illegally dismissed.

Thereafter, the NLRC denied the motion for reconsideration filed by WUP and the CA dismissed the petition for certiorari filed
by WUP. The CA noted that the decision and resolution of the NLRC became final and executor.

ISSUE:

Whether Maglaya is a corporate officer or a mere employee and if the nature of the controversy is an intra-corporate
dispute.

HELD:

YES.

"Corporate officers" in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that
character by the Corporation Code or by the corporation's by-laws. There are three specific officers whom a corporation
must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of
officers is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like,
but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate officers is thus limited
by law and by the corporation's by-laws.

The president, vice-president, secretary and treasurer are commonly regarded as the principal or executive officers of a
corporation, and they are usually designated as the officers of the corporation. However, other officers are sometimes
created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a
corporation to create additional offices as may be necessary. This Court expounded that an "office" is created by the
charter of the corporation and the officer is elected by the directors or stockholders, while an "employee" usually occupies
no office and generally is employed not by action of the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such employee.

From the foregoing, that the creation of the position is under the corporation's charter or by-laws, and that the election of
the officer is by the directors or stockholders must concur in order for an individual to be considered a corporate officer, as
against an ordinary employee or officer. It is only when the officer claiming to have been illegally dismissed is classified as
such corporate officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial courts.

In its position paper before the LA, WUP presented its amended By-Laws dated November 28, 1988 submitted to the SEC to
prove that Maglaya, as the University President, was a corporate officer whose rights do not fall within the jurisdiction of the
labor tribunal. It also presented the Resolution dated August 19, 2009 of the RTC, and the Decision dated March 15, 20 11 of
the CA to show that the earlier case was filed by Maglaya and others, as members of the Board, questioning the Bishops'
appointment of the new members without their recommendation.

It is apparent from the By-laws of WUP that the president was one of the officers of the corporation, and was an honorary
member of the Board. He was appointed by the Board and not by a managing officer of the corporation. We held that one
who is included in the by-laws of a corporation in its roster of corporate officers is an officer of said corporation and not a
mere employee.

The alleged "appointment" of Maglaya instead of "election" as provided by the by-laws neither convert the president of
university as a mere employee, nor amend its nature as a corporate officer. With the office specifically mentioned in the by-
laws, the NLRC erred in taking cognizance of the case, and in concluding that Maglaya was a mere employee and
subordinate official because of the manner of his appointment, his duties and responsibilities, salaries and allowances, and
considering the Identification Card, the Administration and Personnel Policy Manual which specified the retirement of the
university president, and the check disbursement as pieces of evidence supporting such finding.

A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy which arises between a
stockholder and a corporation, and the nature is not altered by the reason or wisdom with which the Board of Directors
may have in taking such action. The issue of the alleged termination involving a corporate officer, not a mere employee, is
not a simple labor problem but a matter that comes within the area of corporate affairs and management and is a
corporate controversy in contemplation of the Corporation Code.

The long-established rule is that the jurisdiction over a subject matter is conferred by law. Perforce, Section 5 (c) of PD 902-A,
as amended by Subsection 5.2, Section 5 of Republic Act No. 8799, which provides that the regional trial courts exercise
exclusive jurisdiction over all controversies in the election or appointment of directors, trustees, officers or managers of
corporations, partnerships or associations, applies in the case at bar.

To emphasize, the determination of the rights of a corporate officer dismissed from his employment, as well as the
corresponding liability of a corporation, if any, is an intra-corporate dispute subject to the jurisdiction of the regular courts.

As held in Leonor v. Court of Appeals, a void judgment for want of jurisdiction is no judgment at all. It cannot be the source
of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no
legal effect. Hence, it can never become final and any writ of execution based on it is void.

18. MARY E. LIM VS. MOLDEX LAND, INC., ET AL.

G.R. No. 206038, January 25, 2017

MENDOZA, J.

FACTS:

On July 21, 2012 Condocor (Condominium Corporation) a non-stock, non-profit corporation, which is the registered
condominium corporation for the Golden Empire Tower held its annual general membership meeting. Moldex became a
member of Condocor on the basis of its ownership of the 220 unsold units in the Golden Empire Tower.

During the meeting, an existence of a quorum was declared even though only 29 of the 108 unit buyers were present. The
declaration was based on the presence of the majority of the voting rights, including those pertaining to the 220 unsold units
held by Moldex through its representatives. Lim, through her attorney-in-fact, objected to the validity of the meeting. The
objection was denied. Thus, Lim and all the other unit owners present, except for one, walked out and left the meeting.

Despite the walkout, the individual respondents and the other unit owner proceeded with the meeting and elected the
new members of the Board of Directors for 2012-2013. All four (4) individual respondents (JAMINOLA, MACALINTAL, MILANES,
and ROMAN) were voted as members of the board, together with other 3 members.

Consequently, Lim filed an election protest before the RTC. Lim claimed that herein respondents are not entitled to be
members of the Board of Directors because they are non-unit buyers. However, said court ruled in favor for the respondents.
Not in conformity, Lim filed the present petition.

ISSUES:

I. Whether or not the July 21, 2012 membership meeting was valid.

II. Whether or not Moldex can be deemed a member of Condocor.

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

HELD:

I.

NO. The July 21, 2012 membership meeting was not valid.

A stockholders' or members' meeting must comply with the following requisites to be valid:

1. The meeting must be held on the date fixed in the ByLaws or in accordance with law;

2. Prior written notice of such meeting must be sent to all stockholders/members of record;

3. It must be called by the proper party;

4. It must be held at the proper place; and

5. Quorum and voting requirements must be met.

Of these five (5) requirements, the existence of a quorum is crucial. Any act or transaction made during a meeting without
quorum is rendered of no force and effect, thus, not binding on the corporation or parties concerned. In relation thereto,
Section 52 of the
Corporation Code of the Philippines (Corporation Code) provides:

Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, 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.

Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks while for non-stock
corporations, only those who are actual, living members with voting rights shall be counted in determining the existence of
a quorum.

The By-Laws of Condocor has no rule different from that provided in the Corporation Code with respect the determination
of the existence of a quorum. The quorum during the July 21, 2012 meeting should have been majority of Condocor's
members in good standing. Accordingly, there was no quorum during the July 21, 2012 meeting considering that only 29 of
the 108 unit buyers were present. As there was no quorum, any resolution passed during the July 21,2012 annual
membership meeting was null and void and, therefore, notbinding upon the corporation or its members. The meeting being
null andvoid, the resolution and disposition of other legal issues emanating from the null and void July 21, 2012 membership
meeting has been rendered unnecessary.

II.

YES. Moldex can be deemed a member of Condocor.

Lim asserted that only unit buyers are entitled to become members of Condocor. Respondents, for their part, countered
that a registered owner of a unit in a condominium project or the holders of duly issued condominium certificate of title
(CCT), automatically becomes a member of the condominium corporation, relying on Sections 2 and 10 of the
Condominium Act, the Master Deed and Declaration of Restrictions, as well as the By-Laws of Condocor. For said reason,
respondents averred that as Moldex is the owner of 220 unsold units and the parking slots and storage areas attached
thereto, it automatically became a member of Condocor upon the latter's creation.

On this point, respondents are correct. Section 2 of the Condominium Act states:

Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or
commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in
other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such
real property. 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 (hereinafter known as the "condominium corporation") 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

It is erroneous to argue that the ownership must result from a sale transaction between the owner-developer and the
purchaser. Such interpretation would mean that persons who inherited a unit, or have been donated one, and properly
transferred title in their names cannot become members of a condominium corporation.

III.

NO. Representatives of Moldex who are non-members cannot be elected as a member of the Board of Directors of
Condocor.

A corporation can act only through natural persons duly authorized for the purpose or by a specific act of its board of
directors.45 Thus, in order for

Moldex to exercise its membership rights and privileges, it necessarily has to appoint its representatives. However, individual
respondents who are non-members cannot be elected as directors and officers of the Condocor.
While Moldex may rightfully designate proxies or representatives, the latter, however, cannot be elected as directors or
trustees of Condocor. First, the Corporation Code clearly provides that a director or trustee must be a member of record of
the corporation. Further, the power of the proxy is merely to vote. If said proxy is not a member in his own right, he cannot
be elected as a director or proxyndominium corporation.

19. METROPOLITAN BANK AND TRUST COMPANY vs. LIBERTY CORRUGATED BOXES MANUFACTURING CORPORATION
G.R. No. 184317 January 25, 2017

Facts:

Respondent Liberty Corrugated Boxes Manufacturing Corp. (Liberty) is a domestic corporation that produces corrugated
packaging boxes. It obtained various credit accommodations and loan facilities from petitioner Metropolitan Bank and
Trust Company (Metrobank) amounting to P19,940,000.00. To secure its loans, Liberty mortgaged to Metrobank 12 lots.
Liberty defualted on the loans.

Liberty filed a Petition for corporate rehabilitation before Branch 74 of the Regional Trial Court. Liberty claimed that it could
not meet its obligations to Metrobank because of the Asian Financial Crisis, which resulted in a drastic decline in demand
for its goods, and the serious sickness of its Founder and President, Ki Kiao Koc.

The Regional Trial Court, finding the Petition sufficient in form and substance, issued a Stay Order. The trial court found that
Liberty was capable of being rehabilitated and that the rehabilitation plan was feasible and viable. On appeal, the Court
denied the petition and affirmed RTC Ruling.

Hence, this Petition was filed.

Petitioner argues that respondent can no longer file a petition for corporate rehabilitation. It claims that Rule 4, Section 1 of
the Interim Rules restricts the kind of debtor who can file petitions for corporate rehabilitation. Petitioner insists that the
phrase "who foresees the impossibility of meeting its debts when they respectively fall due" must be construed plainly to
mean that an element of foresight is required. Because foresight is required, the debts of the corporation should not have
matured.

On the other hand, respondent insists on its qualification to seek rehabilitation. It argues that petitioner's reading of Rule 4,
Section 1 of the Interim Rules is restrictive, merely indicating the minimum conditions for a debtor to be able to file a petition
for rehabilitation.

Issue:

Whether respondent, as a debtor in default, is qualified to file a petition for rehabilitation under Presidential Decree No. 902-
A and Rule 4, Section 1 of the Interim Rules.

Ruling:

Yes.

A corporation with debts that have already matured may still file a petition for rehabilitation under the Interim Rules of
Procedure on Corporation Rehabilitation.

Under the Interim Rules, rehabilitation is the process of restoring "the debtor to a position of successful operation and
solvency, if it is shown that its continuance of operation is economically 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 that if it is
immediately liquidated." It contemplates a continuance of corporate life and activities in an effort to restore and reinstate
the corporation to its former position of successful operation and solvency. Rehabilitation is in line with the State's objective
to promote a wider and more meaningful equitable distribution of wealth. In line with this objective, the Interim Rules
provide for a liberal construction of its provisions. Thus, the condition that triggers rehabilitation proceedings is not the
maturation of a corporation's debts but the inability of the debtor to pay these.

The phrase "any debtor who foresees the impossibility of meeting its debts when they respectively fall due" in Rule 4, Section
1 of the Interim Rules need not refer to a specific period or point in time when the debts mature. It may refer to the debtor
corporation's general realization that it will not be able to fulfill its obligations-a realization that may come before default.

20. PHILIPPINE NUMISMATIC AD ANTIQUARIAN SOCIETY vs. GENESIS AQUINO, ET. AL.

G.R. No. 206617 January 30, 2017

Facts:

PNAS filed a complaint for the issuance of a writ of a preliminary injunction against respondent Angelo Bernardo, Jr. The
complaint was verified by respondents Eduardo M. Chua, Catalino M. Silangil and Percival M. Manuel who claimed to be
the attorneys-in-fact of petitioner as per Secretary's Certificate attached to the complaint. Petitioner was represented by
Atty. Faustino S. Tugade as counsel.

Another complaint was filed by petitioner against respondents Genesis Aquino, Angelo Bernardo, Jr., Eduardo M. Chua,
Fernando Francisco, Jr., Fermin S. Carino, Percival M. Manuel, Fernando M. Gaite, Jr., Jose Choa, Tomas De Guzman, Jr., Li
Vi Ju, Catalino M. Silangil, Raymundo Santos, Peter Sy, and Wilson Yuloque docketed as Civil Case No. 09-122709 praying
that the Membership Meeting conducted by defendants on November 25, 2008 be declared null and void. It is, likewise
prayed that a temporary restraining order or a writ of preliminary injunction be issued for the defendants to desist from
acting as the true members, officers and directors of petitioner. The verification was signed by Atty. William L. Villareal. The
petitioner was represented by Siguion Reyna Montecillo and Ongsiako Law Office.

RTC dismissed the complaint. CA affirmed.

Issue:

Whether or not Atty. William L. Villareal who claimed to be the President of PNAS in 2009, was indeed authorized through a
Board Resolution to represent PNAS in filing Civil Case No. 09-122709.

Ruling:

No. A corporation has no power, except those expressly conferred on it by the Corporation Code and those that are
implied or incidental to its existence. In sum, a corporation exercises said powers through its board of directors and/or its
duly-authorized officers and agents. Thus, it has been observed that the power of a corporation to sue and be sued in any
court is lodged with the board of directors that exercises its corporate powers. In tum, physical acts of the corporation, like
the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws
or by a specific act of the board of directors. It necessarily follows that "an individual corporate officer cannot solely
exercise any corporate power pertaining to the corporation without authority from the board of directors". Section 23, in
relation to Sec. 25 of the Corporation Code, clearly enunciates that all corporate powers are exercised, all business
conducted, and all properties controlled by the board of directors. A corporation has a separate and distinct personality
from its directors and officers and can only exercise its corporate powers through the board of directors. Thus, it is clear that
an individual corporate officer cannot solely exercise any corporate power pertaining to the corporation without authority
from the board of directors. Absent the said board resolution, a petition may not be given due course.

Hence, since petitioner is a corporation, the certification attached to its complaint filed with the RTC must be executed by
an officer or member of the board of directors or by one who is duly authorized by a resolution of the board of directors;
otherwise, the complaint will have to be dismissed. Courts are not, after all, expected to take judicial notice of corporate
board resolutions or a corporate officers' authority to represent a corporation.

The records would show that Atty. Villareal ceased to be a director in 2009, not in 2008 as erroneously found by the CA. But
what is material is that he was not anymore a director in 2009 at the time he filed the complaint. This is evidenced by the
notarized Certificate of Elections which shows that he was not among the eleven Directors elected for 2009. Also the
General Information Sheet (GJS) filed on November 27, 2008 shows that respondent Angelo Bernardo, Jr. was the one
elected as President for the year 2009, while respondent Francisco Fernando, Jr. was elected as Secretary. Petitioner's failure
to submit proof that Atty. William L. Villareal has been authorized by PNAS to file the complaint is a sufficient ground for the
dismissal thereof.

21. PILIPINAS SHELL PETROLEUM CORPORATION vs. ROYAL FERRY SERVICES, INC.

G.R. No. 188146 February 1, 2017

Facts:

Royal Ferry’s principal place of business, according to its Articles of Incorporation is located at 2521 A. Bonifacio Street,
Bangkal, Makati City. However, it currently holds office at Room 203, BF Condominium Building, Andres Soriano Streets,
Intramuros, Manila. Royal Ferry filed a verified Petition for Voluntary Insolvency before the Regional Trial Court of Manila. The
RTC then declared Royal Ferry insolvent. Pilipinas Shell filed before the RTC of Manila a Formal Notice of Claim and a Motion
to Dismiss. In its Motion to Dismiss, Pilipinas Shell alleged that the Petition was filed in the wrong venue. It argued that the
Insolvency Law provides that a petition for insolvency should be filed before the court with territorial jurisdiction over the
corporation’s residence.

Since Royal Ferry’s Articles of Incorporation stated that the corporation’s principal office is at Makati City, the Petition should
be filed before the RTC of Makati and not before the RTC of Manila. RTC Manila denied Pilipinas Shell’s Motion to Dismiss for
lack of merit. It found Royal Ferry to have sufficiently shown full compliance with the requirements of insolvency Law on
venue and that it had abandoned its Makati office and moved to Manila. The court also noted that when the branch
Sheriff confiscated Royal Ferry’s books and personal assets, the properties were taken from a Manila address. Pilipinas Shell
moved for reconsideration and the same was granted. The RTC held that a corporation cannot change its place of
business without amending its Articles of Incorporation. Without the amendment, Royal Ferry’s transfer did not produce any
legal effect on its residence.

The RTC granted the dismissal of the Petition for Voluntary Insolvency. The CA granted the Appeal and reinstated the
insolvency proceedings.

Issue:

Whether or not the Court of Appeals erred in taking cognizance of Royal Ferry's appeal despite its violation of Rule 44,
Section 13 of the Rules of Court. If not, whether the Petition for Insolvency was properly filed.

Ruling:

Petition for Insolvency was properly filed. Petitioner was incorporated on 18 October 1996 with principal place of business in
2521 A. Bonifacio Street, Bangkal, Makati City. At present and during the past six months, [Royal Ferry] has held office in Rm.
203 BF Condo Building, Andres Soriano cor. Solana St., Intramuros, Manila, within the jurisdiction of the Court, where its books
of accounts and most of its remaining assets are kept.

Section 14 of the Insolvency Law specifies that the proper venue for a petition for voluntary insolvency is the Regional Trial
Court of the province or city where the insolvent debtor has resided in for six (6) months before the filing of the petition. To
determine the venue of an insolvency proceeding, the residence of a corporation should be the actual place where its
principal office has been located for six (6) months before the filing of the petition. If there is a conflict between the place
stated in the articles of incorporation and the physical location of the corporation's main office, the actual place of
business should control.

Requiring a corporation to go back to a place it has abandoned just to file a case is the very definition of inconvenience.
There is no reason why an insolvent corporation should be forced to exert whatever meager resources it has to litigate in a
city it has already left.
22. DEVELOPMENT BANK OF THE PHILIPPINES vs. STA. INES MELALE FOREST PRODUCTS CORPORATION, RODOLFO CUENCA,
MANUEL TINIO, CUENCA INVESTMENT CORPORATION and UNIVERSAL HOLDINGS CORPORATION

G.R. No. 193068 February 1, 2017

Facts:

Galleon experienced financial difficulties and had to take out several loans from different sources such as foreign
financial institutions, its shareholders, and other entities "with whom it had ongoing commercial relationships."

DBP guaranteed Galleon's foreign loans. In return, Galleon and its stockholders Sta. Ines, Cuenca Investment,
Universal Holdings, Cuenca, and Tinio, executed a Deed of Undertaking and obligated themselves to guarantee
DBP's potential liabilities. To secure DBP's guarantee, Galleon undertook to secure a first mortgage on its five new
vessels and two second-hand vessels. However, despite the loans extended to it, "[Galleon's] financial condition did
not improve.” Cuenca, as Galleon's president, wrote to the members of the Cabinet Standing Committee "for the
consideration of a policy decision to support a liner service.” Cuenca also wrote then President Ferdinand Marcos
and asked for assistance. President Marcos issued Letter of Instructions No. 1155 directing NDC to acquire 100% of
the shareholdings of Galleon Shipping Corporation from its present owners for the amount of P46. 7 million which is
the amount originally contributed by the present shareholders, payable after five years with no interest cost.

Pursuant to Letter of Instructions No. 1155, Galleon's stockholders, represented by Cuenca, and NDC, through its
then Chairman of the Board of Directors, Roberto V. Ongpin (Ongpin) entered into a Memorandum of
Agreement, where NDC and Galleon undertook to prepare and sign a share purchase agreement covering 100%
of Galleon's equity for ₱46,740,755.00. The purchase price was to be paid after five years from the execution of the
share purchase agreement. The share purchase agreement also provided for the release of Sta. Ines, Cuenca, Tinio
and Construction Development Corporation of the Philippines from the personal counter-guarantees they issued in
DBP's favor under the Deed of Undertaking.

NDC took over Galleon's operations "even prior to the signing of a share purchase agreement." However, despite
NDC's takeover, the share purchase agreement was never formally executed. Seven months from the issuance of
Letter of Instructions No. 1155, President Marcos issued Letter of Instructions No. 1195 directing NDC and DBP to
foreclose Galleon’s vessels and ther assets.

Respondents Sta. Ines, Cuenca, Tinio, Cuenca Investment and Universal Holdings filed a Complaint with Application
for the Issuance of a Temporary Restraining Order or Writ of Preliminary Injunction. In their Complaint, they alleged
that NDC, "without paying a single centavo, took over the complete, total, and absolute ownership, management,
control, and operation of defendant [Galleon] and all its assets, even prior to the formality of signing a share
purchase agreement, which was held in abeyance because the defendant NDC was verifying and confirming the
amounts paid by plaintiffs to Galleon, and certain liabilities of Galleon to plaintiffs. They also alleged that NDC tried
to delay "the formal signing of the share purchase agreement in order to interrupt the running of the 5-year period
to pay ... the purchase of the shares in the amount of ₱46,740,755 and the execution of the negotiable promissory
notes to secure payment.

They claimed that DBP can no longer go after [them] for any deficiency judgment [since] NDC had been
subrogated [in their place] as borrower[s], hence the Deed of Undertaking between [Sta. Ines, Cuenca Investment,
Universal Holdings, Cuenca, and Tinio and DBP] had been extinguished and novated.

Following the creation of Asset Privatization Trust and under EO No. 14, President Corazon C. Aquino, certain assets
of DBP, which included Galleon's loan accounts, "were identified for transfer to the National Government." Deed of
Transfer was executed providing for the transfer of the Galleon loan account from DBP to the National
Government.

Regional Trial Court upheld the validity of Letter of Instructions No. 1155 and the Memorandum of Agreement
executed by NDC and Galleon's stockholders, pursuant to Letter of Instructions No. 1155. Regional Trial Court held
that the NDC was in estoppel since it prevented the execution of the share purchase agreement and had
admitted to being Galleon's owner. The Regional Trial Court also ruled that Sta. Ines, Cuenca, Tinio, Cuenca
 Investment, and Universal Holdings' liability to DBP under the Deed of Undertaking had been extinguished due to
novation, with NDC replacing them and PNCC as debtors. CA affirmed.

Issue:

Whether the Memorandum of Agreement obligates NDC to purchase Galleon's shares of stocks and pay the
advances made by respondents in Galleon's favor.

Ruling:

Yes. Taking the provisions of the Memorandum of Agreement as a whole, it is clear that while there was an intention
to follow the directives of Letter of Instructions No. 1155, the transfer of shares from respondents to NDC was to be
effected only with the execution of the share purchase agreement, the terms and conditions of which were laid
out in the Memorandum of Agreement. The execution of a share purchase agreement was a condition precedent
to the transfer of Galleon's shares to NDC. However, the Court of Appeals found that the NDC prevented its
execution by deliberately delaying its review of Galleon's financial accounts.

The Supreme Court ruled that the Court of Appeals erred when it ruled that DBP was privy to the Memorandum of
Agreement since Ongpin was concurrently Governor of DBP and chairman of NDC Board of Directors at the time
the Memorandum of Agreement was signed. The general rule is that, "[i]n the absence of an authority from the
board of directors, no person, not even the officers of the corporation, can validly bind the corporation." A
corporation is a juridical person, separate and distinct from its stockholders and members, having "powers,
attributes and properties expressly authorized by law or incident to its existence." Section 23 of the Corporation
Code provides that "the corporate powers of all corporations ... shall be exercised, all business conducted and all
property of such corporations [shall] be controlled and held by the board of directors[.]"

Under this provision, the power and the responsibility to decide whether the corporation should enter into a
contract that will bind the corporation is lodged in the board, subject to the articles of incorporation, bylaws, or
relevant provisions of law. However, just as a natural person may authorize another to do certain acts for and on his
behalf, the board of directors may validly delegate some of its functions and powers to officers, committees or
agents. The authority of such individuals to bind the corporation is generally derived from law, corporate bylaws or
authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general course
of business.

"A corporate officer or agent may represent and bind the corporation in transactions with third persons to the
extent that [the] authority to do so has been conferred upon him, and this includes powers which have been
intentionally conferred, and also such powers as, in the usual course of the particular business, are incidental to, or
may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually
pertaining to the particular officer or agent, and such apparent powers as the corporation has caused persons
dealing with the officer or agent to believe that it has conferred.

Aside from Ongpin being the concurrent head of DBP and NDC at the time the Memorandum of Agreement was
executed, there was no proof presented that Ongpin was duly authorized by the DBP to give consent to the
substitution by NDC as a co-guarantor of Galleon's debts. Ongpin is not DBP, therefore, it is wrong to assume that
DBP impliedly gave its consent to the substitution simply by virtue of the personality of its Governor. There was no
such animus novandi in the case at bar between DBP and respondents, thus, respondents have not been
discharged as Galleon's co-guarantors under the Deed of Undertaking and they remain liable to DBP.

23 Pilipinas Shell Petroleum Corp vs. Duque

G.R. No. 216467, February 15, 2017

Facts:
The instant petition arose from an Information for violation of Batas Pambansa Blg. 22 (BP 22) filed with the Metropolitan Trial
Court (MeTC) of Makati City against herein respondents. MeTC convicted the respondents. RTC acquitted the respondents
but ordered to pay the civil liability. Respondents contend that they could not be held civilly liable because their acquittal
was due to the failure of the prosecution to establish the elements of the offense charged. In addition, they assert that they,
being corporate officers, may not be held personally and civilly liable for the debts of the corporation they represent,
considering that they had been acquitted of criminal liability.

Issue: Whether the respondents are liable?

Ruling:

No.The general rule is that a corporate officer who issues a bouncing corporate check can be held civilly liable when he is
convicted. The criminal liability of the person who issued the bouncing checks in behalf of a corporation stands
independent of the civil liability of the corporation itself, such civil liability arising from the Civil Code. But BP 22 itself fused
this criminal liability with the corresponding civil liability of the corporation itself by allowing the complainant to recover such
civil liability, not from the corporation, but from the person who signed the check in its behalf.

As held above, it is clear that the civil liability of the corporate officer for the issuance of a bouncing corporate check
attaches only if he is convicted. Conversely, therefore, it will follow that once acquitted of the offense of violating BP 22, a
corporate officer is discharged from any civil liability arising from the issuance of the worthless check in the name of the
corporation he represents. This is without regard as to whether his acquittal was based on reasonable doubt or that there
was a pronouncement by the trial court that the act or omission from which the civil liability might arise did not exist.

24. SUMIFRU v. BERNABE BAYA

GR No. 188269*, Apr 17, 2017

Facts:

Baya filed a case for illegal dismissal against AMSFC and its sister company, DFC. The CA favored Baya and held that Baya
was illegally dismissed. During the pendency of the case, Sumifru merged with DFC. Sumifru alleged that it should only be
held liable for the period when Baya stayed with DFC as it only merged with the latter and not with AMSFC.

Issue: Whether Sumifru is liable?

Ruling:

Yes. Section 80 of the Corporation Code of the Philippines clearly states that one of the effects of a merger is that the
surviving company shall inherit not only the assets, but also the liabilities of the corporation it merged with.
In this case, it is worthy to stress that both AMSFC and DFC are guilty of acts constitutive of constructive dismissal performed
against Baya. As such, they should be deemed as solidarily liable for the monetary awards in favor of Baya. Meanwhile,
Sumifru, as the surviving entity in its merger with DFC, must be held answerable for the latter's liabilities, including its solidary
liability with AMSFC arising herein. Verily, jurisprudence states that "in the merger of two existing corporations, one of the
corporations survives and continues the business, while the other is dissolved and all its rights, properties and liabilities are
acquired by the surviving corporation,".

25 Roy vs. Herbosa

GR No. 207246, Apr 18, 2017

Facts:

This is a Motion for Reconsideration on the decision of the Supreme Court in Gamboa vs. Finance Secretary Teves, wherein
the controversy is the interpretation of Section 11, Article XII of the Constitution, which provides: "No franchise, certificate, or
any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned
by such citizens xxx."

The Gamboa Decision already held, in no uncertain terms, that what the Constitution requires is "[f]ull [and legal] beneficial
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights xxx must rest in the
hands of Filipino nationals xxx." And, precisely that is what SEC-MC No. 8 provides, viz.: "xxx For purposes of determining
compliance [with the constitutional or statutory ownership], the required percentage of Filipino ownership shall be applied
to BOTH (a) the total number of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total
number of outstanding shares of stock, whether or not entitled to vote xxx."

Issue: Whether the SEC MC No. 8 is proper?

Ruling:

Yes. In construing "full beneficial ownership," the Implementing Rules and Regulations of the Foreign Investments Act of 1991
(FIA-IRR) provides:

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to
meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential.
Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine
citizens or Philippine nationals.

In sum, "beneficial owner" or "beneficial ownership" is defined in the Implementing Rules and Regulations of the Securities
Regulation Code (SRC-IRR) as:
[A]ny person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or
shares voting power (which includes the power to vote or direct the voting of such security) and/or investment returns or
power (which includes the power to dispose of, or direct the disposition of such security) .

If the Filipino has the voting power of the "specific stock", i.e., he can vote the stock or direct another to vote for him, or the
Filipino has the investment power over the "specific stock", i.e., he can dispose of the stock or direct another to dispose of it
for him, or both, i.e., he can vote and dispose of that "specific stock" or direct another to vote or dispose it for him, then such
Filipino is the "beneficial owner" of that "specific stock." Being considered Filipino, that "specific stock" is then to be counted
as part of the 60% Filipino ownership requirement under the Constitution. The right to the dividends, jus fruendi - a right
emanating from ownership of that "specific stock" necessarily accrues to its Filipino "beneficial owner."

26 Bustos vs. Millians Shoe Inc. (MSI)

G.R. No. 185024, April 24, 2017

Facts:

Spouses Cruz owned a property. The City Government of Marikina levied the property for non payment of real property tax.
Bustos emerged as the winning bidder in the public auction. Bustos applied for the issuance of the TCT of the property.
However a notice of lis pendes were annotated to the TCT. These markings indicated that SEC Corp. Case No. 036-04,
which was filed before the RTC and involved the rehabilitation proceedings for MSI, covered the subject property and
included it in the Stay Order issued by the RTC.

Bustos moved for the exclusion of the subject property from the Stay Order.He claimed that the lot belonged to Spouses
Cruz who were mere stockholders and officers of MSI.

Issue: Whether the property must be excluded from the Stay Order.

Ruling:

Yes. The general doctrine of separate juridical personality, which provides that a corporation has a legal personality
separate and distinct from that of people comprising it.By virtue of that doctrine, stockholders of a corporation enjoy the
principle of limited liability: the corporate debt is not the debt of the stockholder.Thus, being an officer or a stockholder of a
corporation does not make one's property the property also of the corporation.

In rehabilitation proceedings, claims of creditors are limited to demands of whatever nature or character against a debtor
or its property, whether for money or otherwise. In several cases, the court already held that stay orders should only cover
those claims directed against corporations or their properties, against their guarantors, or their sureties who are not solidarily
liable with them, to the exclusion of accommodation mortgagors.To repeat, properties merely owned by stockholders
cannot be included in the inventory of assets of a corporation under rehabilitation.

27 G.R. No. 210032, April 25, 2017

DUTCH MOVERS, INC. CESAR LEE AND YOLANDA LEE, Petitioners, v. EDILBERTO1 LEQUIN, CHRISTOPHER R. SALVADOR,
REYNALDO2 L. SINGSING, AND RAFFY B. MASCARDO, Respondents.

Facts: This is a case for illegal dismissal filed by the respondents against Dutch Movers, Inc.,a domestic corporation
engaged in hauling liquefied petroleum gas. Lequen was employed as a driver and the rest of the respondents as
helpers. Allegedly, they were terminated without a valid just cause by mere information that DMI woild no longer
operate its business. However, it was found out that DMI did not file with the DOLE any notice of closure. The
respondents filed with the LA for illegal dismissal which was dismissed for lack of cause of action. On appeal, the
NLRC reversed the decision and ordered DMI to reinstate the respondents, payment of full back wages and
monetary awards. The decision became final and executory.

The respondents filed a Motion for Writ of Execution. Later, they submitted a Reiterating Motion for Writ of Exeution
with Updated Computation of Full Backwages. Pending resolution of these Motions, respondents filed a
Manifestation and Motion to Implead stating that upon investigation, they discovered that DMI no longer operates
but nonetheless insisted that petitioners who managed and operated DMI and consistently represented to
respondents that they were the owners continue to work at Toyota Alabang, which they also known and operate.
They further averred that the AIO of DMI ironically did not include petitioners as its directors or officers, and those
named directors and officers were persons unknown to them. They likewise claimed that per inquiry with the SEC
and DOLE, they learned that DMI did not file any notice of business closure and the creation and operation of DMI
was attended with fraud making it convenient for petitioners to evade their legal obligaton to them. Respondents
impleaded the petitioners in the case but claimed that they cannot be held solidarily liable because of a distinct
and separate personality of a corporation from its officers.

Issue: Whether petitioners are personally liable to pay the judgment awards in favor of respondents and if there is
any basis to pierce the veil of corporate personality of DMI.

Ruling: As a rule, once a judgment becomes final and executory, it cannot be altered or modified. However an
exception to this rule is when there is a supervening event which renders the execution of judgment unjust or
impossible. In this case, the supervening event that transpired after the NLRC decision became final and executory
is that during the execution stage, DMI ceased its operation and did not file any formal notice regarding it. Added
to this, in their Opposition to the Motion to Implead spouses Smith revealed that they only lent their names to
petitioners to assist them in forming DMI, after such undertaking spouses DMI immediately transferred their rights in
DMI to petitioners, which proved that petitioners were the ones in control of DMI and used the same in furthering
their business interests.

In considering the foregoing events, the Court is not unmindful of the basic tenet that a corporation has a separate
and distinct personality from its stockholders, and from other corporations it may be connected with. However, such
personality may be disregarded, or the veil of corporate fiction may be pierced attaching personal liability against
responsible person if the corporation's personality is used to defeat public convenience, justify wrong, protect fraud
or defend crime, or is used as a device to defeat the labor laws . Responsible person refers to an individual or entity
responsible for, and who acted in bad faith in committing illegal dismissal or in violation of the Labor Code; or one
who actively participated in the management of the corporation. Also, piercing the veil of corporate fiction is
allowed where a corporation is a mere alter ego or a conduit of a person, or another corporation.
28 CALIFORNIA MANUFACTURING COMPANY, INC., PETITIONER, VS. ADVANCED TECHNOLOGY SYSTEM, INC., RESPONDENT.

Facts:This is a collection suit for payment of unpaid rentals for a Prodopak machine leased by the petitioner from
the respondent.

CMI averred that ATSI was one and the same with Processing Partners and Packaging Corporation (PPPC), which
was a toll packer of CMCI products. CMCI pointed out that ATSI was even a stockholder of PPPC as shown in the
latter’s GSIS. CMCI alleged that PPPC agreed to transfer the processing of CMCT’s product line from its factory in
Bulacan in which they advanced 4 million as mobilization fund. CMCI likewise claims that the Executive Vice
President proposed to set off PPPCs obligation to pay mobilization fund with the rentals for the Prodopak machine.
Thus, CMCI argued that the proposal was binding on both PPPC and ATSI because the one who made the
proposal was an officer and a majority stockholder of the two corporations and that legal compensation had set in
and that ATSI was even liable for the balance of PPPCs unpaid obligation after deducting the rentals for the
Prodopak machine.

Issue: Whether piercing the corporate veil doctrine is applicable in this case.

Ruling: The doctrine of piercing the corporate veil applies only in three basic areas, namely:1) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2)fraud
cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; 3) alter ego cases,
where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.

CMCIs alter ego theory rests on the alleged interlocking boards of directors and stocks ownership of the two
corporations. This was however rejected by the CA based on the settled rule that mere ownership by a single
stockholder of even all or nearly all of the capital stocks of a corporation,by itself, is not a sufficient ground to
disregard the corporate veil. The Supreme Court thus sustained the ruling of the CA. Thee instrumentality or control
test of finances, policy and business practice with respect to the transaction in question. The corporate entity must
be shown to have no separate mind, will, or existence of its own at the of the transaction.

Without question, the Spouses Celones are incorporators, directors and majority stockholders of the ATSI and PPPC.
But that is all that the petitioner has proven. There is no proof that PPC controlled the financial policies and business
practices and business of ATSI either in July 2001 when Felisima proposed to set off the unpaid balance for
mobilization fund with CMCTs rental of Prodopak machines or in August when the lease agreement between CMCI
and ATSI commenced.

29 G.R. No. 211108, June 07, 2017

ALEJANDRO D.C. ROQUE, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

Facts: Oscar Ongjoco a member of BMTODA Barangay Maulawin Tricycle Operators and Drivers Association, Inc. a
corporation duly registered with the Securities and Exchange Commission learned that BMTODAs funds were missing. He
requested copies of the Association’s documents pursuant to his right to examine records under Section 74 of the
Corporation Code but the Secretary of BMTODA denied his request. He also learned that incumbent officers werenholding
office for three years already in violation of the one-year period provided for in BMTODA’s by-laws. He then reqested from
the President thereof for a copy of list of its members with the corresponding franchise of their respective tricycle fees but
the same was denied.

Ongjoco filed an Affidavit-Complaint against Roque and Singson for violation of Section 7 4 in relation to Section 144 of the
Corporation Code because of their refusal to furnish him copies of records pertaining to BMTODA. However, the Roque
claimed that he cannot be held liable under the Corporation Code because BMTODA is not a corporation. The RTC ruled
that said association failed to prove its existence. While the CA, stated that a Petition to Lift Order of Revocation and the
SEC Order Lifting the Revocation were presented in evidence; and that logic dictates that such documentary evidence
presupposes a duly registered and existing entity.
 Issue: Can Roque be held liable under the Corporation Code.

Ruling: Section 74 of the Corporation Code provides for the liability for damages of any officer or agent of the
corporation for refusing to allow any director, trustee, stockholder or member of the corporation to examine and
copy excerpts from its records or minutes. Section 144 of the same Code further provides for other applicable
penalties in case of violation of any provision of the Corporation Code.

Hence, to prove any violation under the aforementioned provisions, it is necessary that: (1) a director, trustee, stockholder or
member has made a prior demand in writing for a copy of excerpts from the corporations records or minutes; (2) any officer
or agent of the concerned corporation shall refuse to allow the said director, trustee, stockholder or member of the
corporation to examine and copy said excerpts; (3) if such refusal is made pursuant to a resolution or order of the board of
directors or trustees, the liability under this section for such action spall be imposed upon the directors or trustees who voted
for such refusal; and (4) where the officer or agent of the corporation sets up the defense that the person demanding to
examine and copy excerpts from the corporation's records and minutes has improperly used any information secured
through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting
in good faith or for a legitimate purpose in making his demand, the contrary must be shown or proved.

Clearly, Ongjoco, as a member of BMTODA, had a right to examine documents and records pertaining to said association.
Ongjoco made a prior demand in writing for copy of pertinent records of BMTODA from Roque and Singson. However, both
of them refused to furnish Ongjoco copies of such pertinent records.

While it appears that the registration of BMTODA as a corporation with the SEC was revoked on September 30, 2003, the
letter-request of Ongjoco to Singson, which was dated while BMTODA's registration was revoked, was actually received by
Singson after the revocation was lifted. In a Letter dated October 11, 2004, the General Counsel of the SEC made it clear
that the SEC lifted the revocation of BMTODA's registration on August 30, 2004. As the CA correctly observed, the letter-
request was received by Singson on September 23, 2004 when BMTODA had regained its active status.

In any case, the revocation of a corporation's Certificate of Registration does not automatically warrant the extinction of
the corporation itself such that its rights and liabilities are likewise altogether extinguished.

Thus, the revocation of BMTODA's registration does not automatically strip off Ongjoco of his right to examine pertinent
documents and records relating to such association.

Also, since Roque .admitted the revocation of BMTODA's Registration 16 , he cannot come 'forward and disclaim BMTODA's
registration with the SEC as a corporation. It is logical to presume that a registration precedes the revocation thereof; as any
registration cannot be revoked without its valid existence.

30 G.R.No. 224099, June 21, 2017

ZAMBRANO vs. Philippine Carpet Manufacturing

Facts:This is a case for illegal dismissal filed by the Petitioners against Carpet Manufacturing Corporation. They were
dismissed on the grounf of cessation of operation due to serious business losses. However, they were of the belief that their
dismissal was without just cause and in violation of due process because was a mere pretense to transfer its operations to its
wholly owned and controlled corporation, Pacific Carpet Manufacturing Corporation.

Phil Carpet countered that it permanently closed and totally ceased its operations because there had been a steady
decline in the demand for its products due to global recession, stiffer competition, and the effects of changing market.
They also complied with the requisites for closure or cessation of business under the Labor Code.

The LA dismissed the complaint; affirmed by the NLRC and CA stating that the closure was not made in bad faith because
the same was clearly due to economic necessity.
Issue: Can Pacific Carpet be held liable for Phil Carpet’s Obligations?

Ruling: A corporation is an artificial being created by operation of law. It possesses the right of succession and such powers,
attributes, and properties expressly authorized by law or incident to its existence. It has a personality separate and disctinct
from the persons composing it, as well as from any other legal entity to which it may be related.

However, well-settled is the principle that the corporate mask may be removed or the corporation if it is just an alter ego of
a person or of another corporation for reasons of public policy. To summarize, piercing the veil based on the alter ego
theory requires that concurrence of three elements: control of the corporation by the stockholder or parental corporation,
fraud or fundamental unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the fraudulent or
unfair act of the corporation. The absence of any of these elements prevents piercing the corporate veil.

The Court finds that none of the tests has been satisfactorily met in this case.

Although ownership by one corporation of all or great majority of stovks of another corporation and their interlocking
directorates may serve as indicia of control, by themselves and without more, these circumstances are insufficient to
establish an alter ego relationship or connection between Phil Carpet on the hand and Pacific Carpet on the other hand,
that will justify the puncturing of the latter’s corporate cover.

31 San Jose v Ozamiz

GR No. 190590, July 12, 2017

Carpio, J.

Facts: Ozamiz is a stockholder of Philcomsat Holdings Corporation (PHC). He requested for copies of the minutes of
the Board and Committee meetings of the corporation for the years 2000 to 2007. During those years, San Jose was
the Corporate Secretary. Because the Board has failed to grant his request, he filed a complaint for inspection of
books with the RTC, impleading the former and current corporate secretaries, and other officers of the corporation.

In their defense, San Jose, et.al. asserted that since 80.35% of PHC is owned by Philippine Communications Satellite
Corporation (Philcomsat), and Philcomsat is wholly owned by Philippine Overseas Telecommunications Corporation
(POTC), and both Philcomsat and POTC are subjects of a standing sequestration order issued by the Presidential
Commission on Good Government (PCGG), the case should have been filed before the Sandiganbayan. They
prayed that the complaint be dismissed for lack of jurisdiction and for lack of merit. Ozamiz argues that his action is
a simple intracorporate dispute.

Issue: Whether the case is an intracorporate dispute

Ruling: The case is an intracorporate dispute. To determine whether or not a case involves an intra-corporate
dispute, two tests are applied - the relationship test and the nature of the controversy test.

Under the relationship test, there is an intra-corporate controversy when the conflict is (1) between the corporation,
partnership, or association and the public; (2) between the corporation, partnership, or association and the State insofar as
its franchise, permit, or license to operate is concerned; (3) between the corporation, partnership, or association and its
stockholders, partners, members, or officers; and (4) among the stockholders, partners, or associates themselves.
On the other hand, in accordance with the nature of controversy test, an intra-corporate controversy arises when the
controversy is not only rooted in the existence of an intra-corporate relationship, but also in the enforcement of the parties'
correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation.
Based on the foregoing tests, it is clear that this case involves an intra-corporate dispute. It is a conflict between a
stockholder and the corporation, which satisfies the relationship test, and it involves the enforcement of the right of Ozamiz,
as a stockholder, to inspect the books of PHC and the obligation of the latter to allow its stockholder to inspect its books.

The mere fact that a corporation's shares of stocks are owned by a sequestered corporation does not, by itself,
automatically categorize the matter as one involving sequestered assets, or matters incidental to or related to
transactions involving sequestered corporations and/ or their assets. In this case, there is no question on any illegally
acquired or misappropriated property by former President Marcos or his agents. This case does not relate to the
recovery of ill-gotten wealth or any property that needs to be sequestered or assets that have already been
placed under sequestration. Thus, the subject matter of this case does not arise from, or is incidental to, or is related
to the Executive Orders cited in the law that would vest jurisdiction with the Sandiganbayan.

32 PHILTRANCO SERVICE ENTERPRISES, INC. V CUAL

GR NO. 207684, JULY 17, 2017

TIJAM, J.

Facts: In this illegal dismissal complaint filed by the terminated employees of PhilTranco, the Supreme Court upheld
the findings of the NLRC that the company's retrenchment program was invalid and that the herein respondents
were illegally dismissed. The remaining question is the personal liability of the corporate officers for such illegal
termination.

Issue: Whether the corporate officers should be held jointly and severally liable with corporation for the payment of
backwages to the illegally dismissed employees

Ruling: No. The lack of authorized or just cause to terminate one's employment and the failure to observe due
process do not ipso facto mean that the corporate officer acted with malice or bad faith. There must be
independent proof of malice or bad faith, which is lacking in the present case.

33 SEC V PRICE RICHARDSON CORP.

GR NO. 197032, JULY 26, 2017

LEONEN, J.

Facts: SEC prays for the filing of information against Price Richardson Corporation and its officers Consuelo Velarde-
Albert and Gordon Resnick for violating the Securities Regulation Code and the Revised Penal Code. It claims that
the corporation, through its officers, are illegally selling non-existing stocks and securities, when its primary purpose
as a corporation is to provide administrative services, including all clerical, bookkeeping, mailing and billing
services.
 The State Prosecutor dismissed SEC's complaint for lack of probable cause. This petition questions the dimissal by
the prosecutor, as upheld by the DOJ and the CA.

Issue: Whether there is probable cause to indict the corporation and its officers

Ruling: As to the corporation, the Court said yes. SEC has provided sufficient basis to support a reasonable belief
that the corporation is probably guilty of the offense charged. The complaint-affidavits of former employees and
those of the investors they have duped support the finding of probable cause.

Although there is probable cause as to the corporation, as to the officers, there is none. Velarde-Albert and
Resnick cannot be indicted for violations of the Securities Regulation Code and the Revised Penal Code. Petitioner
failed to allege the specific acts of respondents Velarde-Albert and Resnick that could be interpreted as
participation in the alleged violations. There was also no showing, based on the complaints, that they were
deemed responsible for Price Richardson's violations. As found by State Prosecutor in his Resolution:

There is no sufficient evidence to substantiate SEC's allegation that individual respondents, Connie Albert and
Gordon Resnick, acted as broker, salesman or associated person without prior registration with the Commission. The
evidence at hand merely proves that the above-named respondents were not licensed to act as broker, salesman
or associated person. No further proof, however, was presented showing that said respondents have indeed acted as
such in trading securities. Although complainant SEC presented several confirmation of trade receipts and documents
intended to establish respondents Albert and Resnick's illegal activities, the said documents, standing alone as
heretofore stated, could not warrant the indictment of the two respondents for the offense charged.

A corporation's personality is separate and distinct from its officers, directors, and shareholders. To be held criminally liable
for the acts of a corporation, there must be a showing that its officers, directors, and shareholders actively participated in or
had the power to prevent the wrongful act.
34. Lydia Lao, Jeffrey Ong, Henry Sy, Sy Tian Tin, Sy Tian Tin, Jr., and Paul Chua vs Yao Bio Lim and Philip King
G.R. No. 201306 Aug. 9, 2017
Leonen, J.

FACTS:
Philadelphia School, Inc. (PSI) has an authorized capital stock of P2,000,000.00 divided into 20,000 shares with a par
value of P100 per share. Philip King had the most number of subscribed shares, holding 1,200 shares, which were
transferred to him by his father before the latter’s death. King had been consistently elected as member of the PSI
Board of Directors.

On May 23, 1998, Yao Bao Lim and King were elected President and Vice President, respectively. Lao, the former
president, refused to acknowledge the newly elected directors and officers as well as King’s ownership of 1,200 shares.
Lao issued a Secretary’s Certificate stating that the board of directors resolved to nullify the transfer to King of the shares
owned by his father.

On March 15, 2002, a general stockholders’ meeting was held wherein Lao, Chua Lian, Ong, and Sy were elected as
new members of the board of directors. Hence, King filed a petition before the RTC seeking to annul the elections held
on March 15, 2002 and all corporate acts of the new board of directors and officers. They aver that the meeting was
invalid because the notice of meeting did not state the object and purpose in case of special meetings as provided in
the PSI’s by-laws.

ISSUE: Was the March 15, 2002 meeting a special meeting?

RULING:
No. Section 50 of Batas Pambansa Blg. 68 or the Corporation Code prescribes that "regular meetings of stockholders or
members shall be held annually on a date fixed in the by-laws." PSI's by-laws fixed the annual meeting of stockholders
on the third Friday of March of every year. March 15, 2002 was the third Friday of March 2002. The meeting held on that
date was a regular meeting. Hence, the requirement to state the object and purpose in case of a special meeting as
provided for in Article VIII ( 5) of the PSI's by-laws does not apply to the Notice for the March 15, 2002 annual
stockholders' meeting.

35. Bank of Commerce vs. Heirs of Rodolfo dela Cruz

G.R. No. 211519 Aug. 14, 2017

Bersamin, J.

FACTS:
Rodolfo dela Cruz owns an entity engaged in sugar trading. He maintained a bank account with Panasia Banking Inc.
(Panasia). Dela Cruz discovered that Panasia allowed his son to withdraw money from the bank account without his
authority and immediately instructed Panasia not to allow his son to make further withdrawals from the bank account.
Despite the instruction of Rodolfo, Panasia continued to allow his son to withdraw from the account without Rodolfo’s
consent. The unauthorized withdrawals amounted to P56,223,066.07. Rodolfo demanded from Panasia the restoration
of the said amount but the latter failed to do so.

Sometime in September 2000, the Bank of Commerce demanded from Rodolfo the payment of the P27,150,000 loan
which Rodolfo obtained from Panasia. Panasia has been acquired by Bank of Commerce transferring to the latter the
former’s assets and liabilities on bank deposits.

As a consequence thereof, Dela Cruz demanded from the Bank of Commerce to pay the liability of Panasia to him and
offered to compensate/set off his secured loan obligation with Panasia in the amount of P27,150,000.00 by deducting
the same from his outstanding claim of P56,223,066.07.

ISSUE: Should the Bank of Commerce be held solidarily liable with Panasia for the latter’s negligence?

RULING: No.

Merger is an act that could not be assumed; its details must be shown, and its effects must be based on the terms
adopted by the parties concerned (through their respective boards of directors) and approved by the proper
government office or agency regulating the merging parties. There are several specific facts whose existence must be
shown (not assumed) before the merger of two or more corporations can be declared as established. Among such
facts are the plan of merger that includes the terms and mode of carrying out the merger and the statement of the
changes, if any, of the present articles of the surviving corporation; the approval of the plan of merger by majority vote
of each of the boards of directors of the concerned corporations at separate meetings; the submission of the plan of
merger for the approval of the stockholders or members of each of the corporations at separate corporate meetings
duly called for the purpose; the affirmative vote of 2/3 of the outstanding capital in case of stock corporations, or 2/3 of
the members in case of non-stock corporations; the submission of the approved articles of merger executed by each of
the constituent corporations to the SEC; and the issuance of the certificate by the SEC on the approval of the merger.

In this case, because dela Cruz's allegation of the merger was specifically denied by the petitioner, dela Cruz should
have presented proof of the acquisition of the liability of Panasia. Having failed to present proof thereto, petitioner
cannot be held solidarily liable with Panasia for the latter's negligence.

36. Belo Medical Group, Inc. vs.Jose L. Santos and Victoria G. Belo

G.R. No. 185894 Aug. 30, 2017

Leonen, J.

FACTS:
Jose Santos (Santos) requested for the inspection of Belo Medical Group inc.’s (BMGI) corporate records, claiming that
he was a registered shareholder and a co-owner of Belo's shares, as these were acquired while they cohabited as
husband and wife. Victoria Belo (Belo) wrote BMGI to repudiate Santos’ interest in the corporation, claiming that Santos
held his shares merely in trust for her. She also suspected that Santos' request to inspect the records of Belo Medical
Group was a means to obtain a competitor's business information, and was, therefore, in bad faith. Thus, BMGI filed a
complaint for Interpleader to protect its interest and compel Belo and Santos to interplead and litigate their conflicting
claims of ownership of the shares, as well as the corresponding right of inspection.

ISSUE: Should the proceedings be classified as intra-corporate dispute?

RULING: Yes.

This Court now uses both the relationship test and the nature of the controversy test to determine if an intra-corporate
controversy is present.

Applying the relationship test, the Court noted that both Belo and Santos are named shareholders in Belo Medical
Group's Articles of Incorporation and General Information Sheet. The conflict is clearly intra-corporate as it involves two
(2) shareholders, although the ownership of stocks of one stockholder is questioned. Unless Santos is adjudged as a
stranger to the corporation because he holds his shares only in trust for Belo, then both he and Belo, based on official
records, are stockholders of the corporation. They continue to be stockholders until a decision is rendered on the true
ownership of the 25 shares of stock in Santos' name. If Santos' subscription is declared fictitious and he still insists on
inspecting corporate books and exercising rights incidental to being a stockholder, then, and only then, shall the case
cease to be intra·corporate.

Applying the nature of the controversy test, this is still an intracorporate dispute. The Complaint for interpleader seeks a
determination of the true owner of the shares of stock registered in Santos' name. Ultimately, however, the goal is to
stop Santos from inspecting corporate books. This goal is so apparent that, even if Santos is declared the true owner of
the shares of stock upon completion of the interpleader case, Belo Medical Group still seeks his disqualification from
inspecting the corporate books based on bad faith. Therefore, the controversy shifts from a mere question of ownership
over movable property to the exercise of a registered stockholder's proprietary right to inspect corporate books.

37. PATRICIA CABRIETO DELA TORRE VS PRIMETOWN PROPERTY GROUP, INC.

G.R. NO. 221932, FEBRUARY 14, 2018

PERALTA, J.
Facts:

Primetown Property Group, Inc. experienced financial difficulties due to the devaluation of the Philippine peso, the increase
in interest rates and lack of access to adequate credit. Thus, it filed a petition for corporate rehabilitation with prayer for
suspension of payments and actions with RTC.

On October 15, 2004, Patricia Cabrieto dela Torre filed a Motion for Leave to Intervene seeking judicial order for specific
performance, for respondent to execute in her favor a deed of sale covering Unit 3306, Makati Prime Citadel Condominium
which she bought as she had allegedly fully paid the purchase price. Respondent opposed the motion arguing that it was
filed out of time considering that the Stay Order was issued on August 15, 2003.

Petitioner contends that her claim against respondent was not suspended with the issuance of the Stay Order because
when the order was issued on August 15, 2003, she had long already fully paid the purchase price of the condominium unit
she bought from respondent, i.e., as of July 25, 1996, and that claims refer to debts or demands of pecuniary nature or the
assertion that money be paid by the company under rehabilitation to its creditors, but her prayer for the execution of a
deed of absolute sale is not a claim of this character as to be covered and suspended under the Stay Order.

Issue: Whether or not dela Torre’s claim/ action to execute a certificate of title in petitioner's favor is stayed when the
rehabilitation court ordered the suspension of claims against Primetown

Ruling:

Yes. Corporate rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and
reinstate the corporation to its former position of successful operation and solvency. An essential function of corporate
rehabilitation is the Stay Order which is a mechanism of suspension of all actions and claims against the distressed
corporation upon the due appointment of a management committee or rehabilitation receiver.

If the RTC finds the petition to be sufficient in form and substance, it shall issue, not later than five (5) days from the filing of
the petition, an Order as follows:

(a) appointing a Rehabilitation Receiver and fixing his bond;

(b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or
otherwise, against the debtor, its guarantors and sureties not solidarity liable with the debtor;
(c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in
the ordinary course of business;
(d) prohibiting the debtor from making any payment of its liabilities outstanding as at the date of filing of the petition

In addition, all creditors and all interested parties are directed to file and serve on the debtor a verified comment on or
opposition to the petition not later than ten (10) days before the date of the initial hearing and their failure to do so will bar
them from participating in the proceedings.

In this case, respondent filed a petition for rehabilitation and suspension of payments with the RTC which issued a Stay Order
on August 15, 2003. The initial hearing was set on September 24, 2003; thus, any comment or opposition to the petition
should have been filed 10 days before the initial hearing but petitioner did not file any and already barred from
participating in the proceedings. However, petitioner filed a motion for leave to intervene on October 15, 2004, one year
after, praying that respondent be ordered to execute in her favor a deed of absolute sale over Unit 3306 of the Makati
Prime Citadel Condominium, subject matter of their earlier contract to sell. It bears stressing that intervention is prohibited
under Section 1, Rule 3 of the Interim Rules. Hence, the RTC should not have entertained the petition for intervention at all.
Rehabilitation proceedings are summary and non-adversarial in nature, and do not contemplate adjudication of claims
that must be threshed out in ordinary court proceedings.
Clearly, while respondent is undergoing rehabilitation, the enforcement of all claims against it is stayed. Rule 2, Section 1 of
the Interim Rules defines a claim as referring to all claims or demands of whatever nature or character against a debtor or
its property, whether for money or otherwise.

38. DEMETRIO ELLAO VS BATANGAS I ELECTONIC COOPERATIVE, INC. (BATELEC I)

G.R. NO. 209166, JULY 9, 2018

TIJAM, J.

Facts:

Ellao was employed by BATELEC I initially as Office Supplies and Equipment Control Officer until he was appointed as
General Manager. The Board of Directors adopted and issued a Board Resolution terminating Ellao as General Manager on
the grounds of gross and habitual neglect of duties and responsibilities and willful disobedience or insubordination resulting
to loss of trust and confidence. The National Electrification Administration (NEA) confirmed BATELEC I's Board Resolution and
approved Ellao's termination.

Ellao filed a Complaint for illegal dismissal and money claims before the Labor Arbiter against BATELEC I. But BATELEC I
moved to dismiss Ellao's complaint on the ground that it is the NEA and not the NLRC which has jurisdiction over the
complaint.

The Labor Arbiter ruled that NEA has the power to suspend or dismiss any employee of electric cooperatives, the same does
not authorize NEA to hear and decide a labor termination case which power is exclusively vested by the Labor Code. It
held that Ellao was illegally dismissed as the grounds for his dismissal were unsubstantiated.

The NLRC held that BATELEC I is not a corporation registered with the SEC, but that it was formed and organized pursuant to
P.D. 269 and that Ellao is not an officer but a mere employee.

CA found that Ellao, as BATELEC I's General Manager, is a corporate officer. Ellao was appointed as General Manager by
virtue of a board resolution and that Ellao's appointment was duly approved by the NEA Administrator. The CA also found
that the position of General Manager is specifically provided for under BATELEC I's By-laws. CA concluded that Ellao's
dismissal is considered an intra-corporate controversy which falls under the jurisdiction of the SEC, now the RTC's, and not
with the NLRC.

Issue: Whether or not Ellao is a corporate officer and the controversy involves an intra-corporate dispute within the
jurisdiction of RTC

Ruling:

Yes. Complaints for illegal dismissal filed by a cooperative officer constitute an intra-cooperative controversy, jurisdiction
over which belongs to the regional trial courts. Registration with the SEC is not the operative factor in determining whether
or not the latter enjoys jurisdiction over a certain dispute or controversy. Organization under P.D. 269 sufficiently vests upon
electric cooperatives' juridical personality enjoying corporate powers. Registration with the SEC becomes relevant only
when a non-stock, non-profit electric cooperative decides to convert into and register as a stock corporation. As such, and
even without choosing to convert and register as a stock corporation, electric cooperatives already enjoy powers and
corporate existence akin to a corporation. By jurisprudence, termination disputes involving corporate officers are treated
differently from illegal dismissal cases lodged by ordinary employees
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the labor
arbiter pursuant to the Labor Code. By way of exception, where the complaint for illegal dismissal involves a corporate
officer, the controversy falls under the jurisdiction of the SEC, because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates, or between any or all of them and the
corporation, partnership, or association of which they are stockholders, members, or associates, respectively; and between
such corporation, partnership, or association and the State insofar as the controversy concerns their individual franchise or
right to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or
manager of such corporation, partnership, or association.

39. STEPHEN KU VS RCBC SECURITIES, INC

G.R. NO. 219491, OCTOBER 17, 2018

PERALTA, J.

Facts:

Stephen Ku opened a trade account with RSEC (respondent) for the purpose of buying and selling securities as evidenced
by the Customer Account Information Form and Agreement. Later, Ku found that his account with RSEC was subject of
mismanagement. MGV, under the honest belief of Ku that the latter was acting for and in behalf of RSEC, was blacklisted
by RSEC due to numerous fraudulent and unauthorized transactions. Worse, MGV allegedly was able to divert investments
made by "high networth" clients of RSEC into some other accounts. Ku’s audit report shows that RSEC owes plaintiff the total
amount of Php70,064,426.88.

Thus, Ku filed a complaint before RTC for payment of the amounts and shares of stocks. RTC, Branch 63 ruled that the case
involves trading of securities under the jurisdiction of a Special Commercial Court. Thus, the case was re-raffled to branch
149 of RTC, Makati, which ruled in favor of Ku.

CA ruled that RTC, Branch 63, had no jurisdiction over the subject matter of the case.

Issue: Whether or not the controversy is an intra-corporate dispute under the jurisdiction of RTC in the exercise of its function
as a special commercial court

Ruling:

Jurisdiction over intra-corporate controversies is transferred by law (RA 8799) from the SEC to the RTCs in general, but the
authority to exercise such jurisdiction is given by the Supreme Court, in the exercise of its rule-making power under the
Constitution, to RTCs which are specifically designated as Special Commercial Courts. On the other hand, the cases
enumerated under Section 19 of BP 129, as amended, are taken cognizance of by the RTCs in the exercise of their general
jurisdiction.

Thus, based on the allegations in petitioner's Complaint, in relation to the provisions of law, there is no dispute that the case
falls under the jurisdiction of the RTC. However, whether or not the RTC shall take cognizance of the case in the exercise of
its general jurisdiction, or as a special commercial court, is another matter. There are no intra-corporate relations between
the parties. Petitioner is neither a stockholder, partner, member or officer of respondent corporation. The parties' relationship
is limited to that of an investor and a securities broker. Moreover, the questions involved neither pertain to the parties' rights
and obligations under the Corporation Code, if any, nor to matters directly relating to the regulation of the corporation.
 TRANSPORTATION LAW

1 ASIAN TERMINALS, INC., PETITIONER, V. PADOSON STAINLESS STEEL CORPORATION, RESPONDENT.

G.R. No. 211876, June 25, 2018

FACTS:

Respondent hired petitioner ATI to provide arrastre, wharfage and storage services at the South Harbor, Port of
Manila. ATI rendered storage services in relation to a shipment in favor of Padoson, as consignee. The shipments
were stored within ATI's premises until they were discharged on July 29, 2006. On September 7, 2001, the shipments
were subjected to Hold-Order issued by the Bureau of Customs. For the storage services it rendered, ATI made
several demands from Padoson for the payment of arrastre, wharfage and storage services (heretofore referred to
as storage fees),in the following amounts: P540,474.48 for the nine stainless steel coils which were stored at
ATI's premises from October 12, 2001 to July 29, 2006; and P8,374,060.80 for the 72 hot-rolled steel coils stored at ATI's
premises from November 8, 2001 to July 29, 2006.

Due to Padoson’s failure, ATI filed a case against it. Padoson averred that during the time when the shipments were
in ATI's custody and possession, they suffered material and substantial deterioration and ATI failed to exercise the
extraordinary diligence required of an arrastre operator and thus it should be held responsible for the damages. ATI
countered that it exercises due diligence in the storage of the shipments and that the same were withdrawn from
its custody in the same condition and quantity as when they they were unloaded from the vessel.

RTC held that although the computation of storage fees to be paid by Padoson as prayed for in ATI's complaint to
the tune of P8,914,535.28 plus legal interest, were "clear and unmistakable" and which Padoson never denied, the
liability to pay the same should be borne by the BOC. Relying on the case of Subic Bay Metropolitan Authority v.
Rodriguez, et al. (SBMA), the RTC reasoned out that by virtue of the Hold-Order over Padoson's shipments, the BOC
has acquired constructive possession over the same. Consequently, the BOC should be the one liable to ATI's
money claims. The RTC, however, pointed out that since ATI did not implead the BOC in its complaint, the BOC
cannot be held to answer for the payment of the storage fees.

CA-affirmed the decision of the RTC.

ISSUE: WHETHER ATI FAILED TO EXERCISE THE REQUIRED EXTRAORDINARYDILIGENCE OVER THE SHIPMENT?

RULING:

In support of its allegation of damage to the shipments, Padoson relied on the following documents: Sheriffs Report
on Ocular Inspection; Manifestation and Motion dated January 27, 2004; Resolution dated June 25, 2004; Resolution
dated April 17, 2006; Sheriffs Partial Return on Execution dated August 8, 2006; and the photographs allegedly taken
on January 16, 2004. These documents, however, relate to the Customs case. Notably, ATI was not impleaded and
has no participation in the Customs case. As such, it would be unfair that ATI be bound by the RTC's proceedings
and findings of fact in the Customs case without giving it the chance to hear its side. To rule otherwise would
deprive ATI of due process. The essence of due process is the opportunity to be heard, logically preconditioned on
prior notice, before judgment is rendered. Indeed, "no man shall be affected by any proceeding to which he is a
stranger."

Additionally, it was observed from the records that Padoson did not present any evidence on the supposed
condition of the shipment at the time they were already discharged from the vessels. As such, there can be no
basis for Padoson to claim that its shipments deteriorated while they were in ATI's possession and custody up to the
time they were withdrawn from ATI's premises. Thus, Padoson cannot impute negligence upon ATI.

2. FEDERAL EXPRESS CORPORATION, Petitioner, v. LUWALHATI R. ANTONINO AND ELIZA BETTINA RICASA
ANTONINO, Respondents.

G.R. No. 199455, June 27, 2018

 FACTS:

On December 15, 2003, Luwalhati and Eliza were in the Philippines. As the monthly common charges on the Unit
had become due, they decided to send several Citibank checks to Veronica Z. Sison (Sison), who was based in
New York. Citibank checks allegedly amounting to US$17,726.18 for the payment of monthly charges and
US$11,619.35 for the payment of real estate taxes were sent by Luwalhati through FedEx with Account No. x2546-
4948-1 and Tracking No. 8442 4588 4268. The package was addressed to Sison who was tasked to deliver the
checks payable to Maxwell-Kates, Inc. and to the New York County Department of Finance. Sison allegedly did not
receive the package, resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the
Unit.

Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on February 9, 2004 to
inquire about the non-delivery. She was informed that the package was delivered to her neighbor but there was no
signed receipt.

On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for payment of
damages due to the non-delivery of the package, but FedEx refused to heed their demand. Hence, on April 5,
2004, they filed their Complaint for damages.

FedEx claimed that Luwalhati and Eliza "had no cause of action against it because [they] failed to comply with a
condition precedent of filing a written notice of claim within the 45 calendar days from the acceptance of the
shipment." It added that it was absolved of liability as Luwalhati and Eliza shipped prohibited items and misdeclared
these items as "documents." It pointed to conditions under its Air Waybill prohibiting the "transportation of money
(including but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds)."

Regional Trial Court ruled for Luwalhati and Eliza, awarding them moral and exemplary damages, and attorney's
fees. CA affirmed.

ISSUE: WHETHER OR NOT PETITIONER FEDERAL EXPRESS CORPORATION MAY BE HELD LIABLE FOR DAMAGES ON
ACCOUNT OF ITS FAILURE TO DELIVER THE CHECKS SHIPPED BY RESPONDENTS LUWALHATI R. ANTONINO AND ELIZA
BETTINA RICASA ANTONINO TO THE CONSIGNEE VERONICA SISON.

RULING:

The responsibility of common carriers to exercise extraordinary diligence lasts from the time the goods are unconditionally
placed in their possession until they are delivered "to the consignee, or to the person who has a right to receive them." Thus,
part of the extraordinary responsibility of common carriers is the duty to ensure that shipments are received by none but
"the person who has a right to receive them." Common carriers must ascertain the identity of the recipient. Failing to deliver
shipment to the designated recipient amounts to a failure to deliver. The shipment shall then be considered lost, and liability
for this loss ensues.

Given the circumstances in this case, the more reasonable conclusion is that the package was not delivered. The
package shipped by respondents should then be considered lost, thereby engendering the liability of a common
carrier for this loss.

Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the named
consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to identify that neighbor.

Given the circumstances in this case, the more reasonable conclusion is that the package was not delivered. The
package shipped by respondents should then be considered lost, thereby engendering the liability of a common
carrier for this loss.

Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the named
consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to identify that neighbor.

3. VISITACION R. REBULTAN v. SPS. EDMUNDO DAGANTA AND MARVELYN P. DAGANTA +

GR No. 197908, Jul 04, 2018

FACTS:

On February 15, 2000, the heirs of Rebultan, Sr. (petitioners) filed a complaint [10] for damages against Viloria, and
Spouses Edmundo and Marvelyn P. Daganta (spouses Daganta) as the owners of the jeepney (collectively,
respondents). Petitioners prayed for compensation for the loss of life and earning capacity of Rebultan, Sr., actual
and moral damages, attorney's and appearance fees, as well as other just and equitable reliefs.

In their answer with counterclaims, respondents alleged that it was the driver of the Kia Ceres who was negligent,
and who should be held responsible for the death of Rebultan, Sr. and the damages to the motor vehicles. As
counterclaim, respondents sought the payment of: (1) P123,550.00 for the repair of the jeepney; (2) P700.00 per day
beginning May 3, 1999 as lost income of Viloria; (3) P20,000.00 and P1,000.00 per hearing, as attorney's and
appearance fees, respectively; and (4) P5,000.00 as miscellaneous expenses.

Subsequently, respondents spouses Daganta filed a third-party complaint against Lomotos. Lomotos denied liability
and prayed for the dismissal of the third-party complaint. As counterclaim, he sought the payment for moral
damages, appearance fees, and attorney's fees

ISSUE: WHETHER VILORIA WAS NEGLIGENT IN DRIVING THE JEEPNEY AT THE TIME OF THE COLLISION.

RULING:

Applying Caminos, Jr., it is apparent that it is the Kia Ceres which had the right of way. The jeepney driver making a
turn on the left had the duty of yielding to the vehicle on his right, the approaching Kia Ceres driven by Lomotos.
Similarly with Vehicle A in Caminos, Jr., the jeepney does not have the right of way. Additionally, we do not find the
CA's conclusion that the jeepney was already at the intersection, making him the favored driver, to be supported
by the records. Thus, we find that the CA erred in holding that it was Viloria, as the jeepney's driver, who had the
right of way. Nevertheless, we still find Lomotos negligent.

Similar to Caminos, Jr., records show that Lomotos drove the Kia Ceres at an unlawful speed. Traffic Accident
Report No. 99002 supports that Lomotos was guilty of "overspeeding," and his error is listed as driving "too fast. This
was corroborated by respondents' witness, Ronald Vivero, who relayed that the Kia Ceres was approaching fast
and that it made a loud screech due to its break which indicated the high speed at which it approached the
intersection. Thus, we affirm the CA's conclusion that Lomotos was negligent at the time of the collision.

We find, however, that Viloria's negligence contributed to the accident. Records support the claim that Viloria,
while driving the jeepney, was also committing a traffic violation. As found by the RTC, Viloria's admission that he
did not look to his right and continuously drove, despite being required by law to give way, confirms that he is
negligent in making a turn. He further admitted that he did not bother to look at the south to see if there were other
vehicles.[46] In fact, his penchant for disregarding traffic rules is shown by how he approached the intersection. Just
a short distance from approaching the intersection, he was reported to have overtaken a mini-bus as evidenced
by the Traffic Accident Report No. 99002.

It is apparent to this Court that the accident would have been avoided had Viloria, the jeepney driver, carefully
approached and made a left turn in the intersection, with due regard to the right of way accorded in favor of
Lomotos or anyone coming from the latter's direction. Regardless of whether Lomotos was overspeeding, Viloria
ought to have exercised the prudence of a diligent driver in making a turn at a danger zone. This omission on his
part constituted negligence.

4. SULPICIO LINES, INC. v MAJOR VICTORIO KARAAN J. Tijam GR 208590 Oct. 3, 2018

FACTS: Respondents Major Victorio Karaan (Major Karaan), Napoleon Labrague (Napoleon) and Herminia
Labrague (Herminia) (Spouses Labrague), and Ely Liva (Liva) were passengers of M/V Princess of the Orient owned
by petitioner Sulpicio Lines, Inc. (now known as Philippine Span Asia Carrier Corporation) when it sank on
September 18, 1998 somewhere between Cavite and Batangas, near Fortune Island. Respondents lodged a
Complaint based on breach of contract of carriage.
 They heard a loud sound like something heavy fell somewhere below the cabin. Without any SLI crew to assist
them, all passengers panicked, and Respondents wore life jackets before the ship sank. They lost their belongings
and the Spouses lost their only daughter.

For its defense, petitioner adapted the testimonies of its witnesses in a related case in RTC Branch 12, docketed
as Civil Case No. CEB 24783 involving a different plaintiff.

Nelson Sato was employed by petitioner since 1995. He was assigned as the second mate of M/V Princess of
the Orient in charge of the navigation, the preparation before and after the trip ensuring the condition of the
equipment and the charts to be used during the voyage. He did not notice that the ship was constantly being
battered by big waves nor did he notice it listing until about 10:15 p.m. When he awoke and felt the ship lifted to
one side at about 20 degrees. He went out to the navigation bridge where he handed life vests to more or less 20
passengers and led them to the exit. The rest of the crew released the life rafts. Before the ship sank, he heard
seven (7) short blasts and one long blast, the signal to abandon the ship. He also heard the general alarm which
indicated that there was an emergency.

The RTC ruled in favor of Respondents, awarding them Actual, Moral, Exemplary and Nominal damages. The
CA modified the award as to damages, instead awarding them of Temperate damages, Exemplary and Moral
Damages.

Petitioner contests the CA's award of temperate damages in lieu of actual damages, which was purportedly
testified to and duly proven by the respondents.

Citing Article 2232, Petitioner also objects to the CA's award of exemplary damages, claiming that the Court did
not find any specific acts of negligent or "wanton, fraudulent, reckless, oppressive or malevolent conduct."

ISSUE: 1. WON temperate damages be awarded when the claim for actual damages was proven?

2. WON exemplary damages be awarded when the conditionality for awarding it under Article 2232 of
the Civil Code is absent?

RULING: 1. YES, verily, the CA stated, "[t]he respondents, except for their own testimonies, were not able to
proffer any other evidence of their loss. Sans the receipts and the documents supporting their claims of actual
damages, the same cannot be awarded." Undoubtedly, the law sanctions the award of temperate damages in
case of insufficiency evidence of actual loss suffered. The records of the case, which remain uncontroverted,
undoubtedly establishes that respondents suffered loss during the unfortunate sinking of M/V Princess of the Orient.
However, no independent proof, other than respondents' bare claims, were presented to provide a numerical
value to their loss. Absent a contrary proof which would justify decreasing or otherwise modifying the amount
pegged by the CA, this Court is constrained to affirm the amounts it imposed as temperate damages.

2. YES, the CA is correct when it stated that since petitioner failed to prove that it had exercised the
degree of extraordinary diligence required of common carriers, it should be presumed to have acted in a reckless
manner. Clearly, the petitioner and its agents on the scene acted wantonly and recklessly.

Wanton and reckless are virtually synonymous in meaning as respects liability for conduct towards
others. Wanton means characterized by extreme recklessness and utter disregard for the rights of others; or marked
by or manifesting arrogant recklessness of justice or of rights or feelings of others. Conduct is reckless when it is an
extreme departure from ordinary care, in a situation in which a high degree of danger is apparent.

It also bears to emphasize that the records of the case support the conclusion that petitioner was extremely
remiss before and during the time of the vessel's sinking. Petitioner did not endeavor to dispute the CA's finding that
the vessel's Captain erroneously navigated the ship, and failed to reduce its speed considering the ship's size and
the weather conditions. The crew members were also negligent when they did not make any stability calculations,
and prepare a detailed report of the vessel's cargo stowage plan. The radio officer failed to send an SOS message
in the internationally accepted communication network but instead used the Single Side Band informing the
company about the emergency situation.

"Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially
deleterious in its consequence by creating negative incentives or deterrents against such behavior." Verily, the
above-mentioned conduct, from the Captain and Crew of a common carriers should be corrected. They carry not
only cargo, but are in charge of the lives of its passengers. In this case, their recklessness cost the loss of 150 lives.
Considering the foregoing, this Court finds that the CA properly imposed exemplary damages.

5. LTFRB vs. G.V. FLORIDA TRANSPORT, INC. J. Peralta GR 213088 June 28, 2017

FACTS: Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at Sitio Paggang,
Barangay Talubin, Bontoc, Mountain Province involving a public utility bus coming from Sampaloc, Manila, bound
for Poblacion Bontoc and bearing a "G.V. Florida" body mark with License Plate No. TXT-872. The mishap claimed
the lives of fifteen (15) passengers and injured thirty-two (32) others. An initial investigation report, which came from
the Department of Transportation and Communications of the Cordillera Administrative Region (DOTC-CAR),
showed that based on the records of the Land Transportation Office (LTO) and herein petitioner, License Plate No.
TXT-872 actually belongs to a different bus owned by and registered under the name of a certain Norberto Cue, Sr.
(Cue) under Certificate of Public Convenience (CPC) Case No. 2007-0407 and bears engine and chassis numbers
LX004564 and KN2EAM12PK004452, respectively; and that the bus involved in the accident is not duly authorized to
operate as a public transportation. Petitioner, pursuant to its regulatory powers, immediately issued an Order
preventively suspending, for a period not exceeding thirty (30) days, the operations of ten (10) buses of Cue under
its CPC Case No. 2007-0407, as well as respondent's entire fleet of buses, consisting of two hundred and twenty-
eight (228) units, under its twenty-eight (28) CPCs.

License Plate Number attached to the ill-fated bus was indeed TXT-872, which belongs to a different unit owned by
Cue; that the wrecked bus had actual engine and chassis numbers DE12T-601104BD and KTP1011611C,4
respectively; that, per registration records, the subject bus was registered as "private" on April 4, 2013 with issued
License Plate No. UDO 762; and that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the
previous owner is herein respondent bus company. Dagupan Bus filed its Answer claiming that: it is not the owner of
the bus which was involved in the accident; the owner is G.V. Florida; Dagupan Bus entered into a Memorandum
of Agreement with G.V. Florida, which, among others, facilitated the exchange of its CPC covering the Cagayan
route for the CPC of Florida covering the Bataan route; and the subsequent registration of the subject bus in the
name of Dagupan Bus is a mere preparatory act on the part of G.V. Florida to substitute the old authorized units of
Dagupan Bus plying the Cagayan route which are being operated under the abovementioned CPC which has
been exchanged with G. V. Florida.

In his Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC and the ten public utility buses
operating under the said CPC, including the one which bears License Plate No. TXT-872; since Cue's buses were
already old and dilapidated, and not wanting to stop its operations to the detriment of the riding public, it
replaced these buses with new units using the License Plates attached to the old buses, pending approval by
petitioner of the sale and transfer of Cue's CPC in its favor; and it exercised utmost good faith in deciding to
dispatch the ill-fated bus notwithstanding the absence of prior adequate compliance with the requirements that
will constitute its operation legal.On March 14, 2014, herein petitioner rendered its Decision canceling Cue's CPC
No. 2007-0407 and suspending the operation of respondent's 186 buses under 28 of its CPCs for a period of six (6)
months.

ISSUE: WON petitioner is justified in suspending respondent's 28 CPCs for a period of six (6) months. In other
words, is the suspension within the powers of the LTFRB to impose and is it reasonable?

RULING: YES. In the present case, respondent is guilty of several violations of the law, to wit: lack of petitioner's
approval of the sale and transfer of the CPC which respondent bought from Cue; operating the ill-fated bus under
its name when the same is registered under the name of Dagupan Bus Co., Inc.; attaching a vehicle license plate
to the ill-fated bus when such plate belongs to a different bus owned by Cue; and operating the subject bus under
the authority of a different CPC. What makes matters worse is that respondent knowingly and blatantly committed
these violations. How then can respondent claim good faith under these circumstances? Respondent, nonetheless,
insists that it is unreasonable for petitioner to suspend the operation of 186 buses covered by its 28 CPCs,
considering that only one bus unit, covered by a single CPC, was involved in the subject accident. Indeed, the
law gives to the LTFRB (previously known, among others, as Public Service Commission or Board of Transportation)
ample power and discretion to decree or refuse the cancellation of a certificate of public convenience issued to
an operator as long as there is evidence to support its action. 11 As held by this Court in a long line of cases, it was
even intimated that, in matters of this nature so long as the action is justified, this Court will not substitute its
discretion for that of the regulatory agency which, in this case, is the LTFRB.
Neither is the Court convinced by respondent's contention that the authority given to petitioner, under the above-
quoted Section 16(n) of the Public Service Act does not mean that petitioner is given the power to suspend the
entire operations of a transport company. Respondent must be reminded that, as quoted above, the law clearly
states that petitioner has the power "[t]o suspend or revoke any certificate issued under the provisions of [the Public
Service Act] whenever the holder thereof has violated or willfully and contumaciously refused to comply with any
order rule or regulation of the Commission or any provision of this Act x x x"

This Court has held that when the context so indicates, the word "any" may be construed to mean, and indeed it
has been frequently used in its enlarged and Plural sense as meaning "all " "all or every" "each " "each one of all " ' ' '
' ' "every" without limitation; indefinite number or quantity, an indeterminate unit or number of units out of many or
all, one or more as the case may be, several, some.
 INSURANCE LAW

4. SULPICIO LINES, INC. v MAJOR VICTORIO KARAAN J. Tijam GR 208590 Oct. 3, 2018

FACTS: Respondents Major Victorio Karaan (Major Karaan), Napoleon Labrague (Napoleon) and Herminia
Labrague (Herminia) (Spouses Labrague), and Ely Liva (Liva) were passengers of M/V Princess of the Orient owned
by petitioner Sulpicio Lines, Inc. (now known as Philippine Span Asia Carrier Corporation) when it sank on
September 18, 1998 somewhere between Cavite and Batangas, near Fortune Island. Respondents lodged a
Complaint based on breach of contract of carriage.

They heard a loud sound like something heavy fell somewhere below the cabin. Without any SLI crew to assist
them, all passengers panicked, and Respondents wore life jackets before the ship sank. They lost their belongings
and the Spouses lost their only daughter.

For its defense, petitioner adapted the testimonies of its witnesses in a related case in RTC Branch 12, docketed
as Civil Case No. CEB 24783 involving a different plaintiff.

Nelson Sato was employed by petitioner since 1995. He was assigned as the second mate of M/V Princess of
the Orient in charge of the navigation, the preparation before and after the trip ensuring the condition of the
equipment and the charts to be used during the voyage. He did not notice that the ship was constantly being
battered by big waves nor did he notice it listing until about 10:15 p.m. When he awoke and felt the ship lifted to
one side at about 20 degrees. He went out to the navigation bridge where he handed life vests to more or less 20
passengers and led them to the exit. The rest of the crew released the life rafts. Before the ship sank, he heard
seven (7) short blasts and one long blast, the signal to abandon the ship. He also heard the general alarm which
indicated that there was an emergency.

The RTC ruled in favor of Respondents, awarding them Actual, Moral, Exemplary and Nominal damages. The
CA modified the award as to damages, instead awarding them of Temperate damages, Exemplary and Moral
Damages.

Petitioner contests the CA's award of temperate damages in lieu of actual damages, which was purportedly
testified to and duly proven by the respondents.

Citing Article 2232, Petitioner also objects to the CA's award of exemplary damages, claiming that the Court did
not find any specific acts of negligent or "wanton, fraudulent, reckless, oppressive or malevolent conduct."

ISSUE: 1. WON temperate damages be awarded when the claim for actual damages was proven?

2. WON exemplary damages be awarded when the conditionality for awarding it under Article 2232 of
the Civil Code is absent?

RULING: 1. YES, verily, the CA stated, "[t]he respondents, except for their own testimonies, were not able to
proffer any other evidence of their loss. Sans the receipts and the documents supporting their claims of actual
damages, the same cannot be awarded." Undoubtedly, the law sanctions the award of temperate damages in
case of insufficiency evidence of actual loss suffered. The records of the case, which remain uncontroverted,
undoubtedly establishes that respondents suffered loss during the unfortunate sinking of M/V Princess of the Orient.
However, no independent proof, other than respondents' bare claims, were presented to provide a numerical
value to their loss. Absent a contrary proof which would justify decreasing or otherwise modifying the amount
pegged by the CA, this Court is constrained to affirm the amounts it imposed as temperate damages.

2. YES, the CA is correct when it stated that since petitioner failed to prove that it had exercised the
degree of extraordinary diligence required of common carriers, it should be presumed to have acted in a reckless
manner. Clearly, the petitioner and its agents on the scene acted wantonly and recklessly.

Wanton and reckless are virtually synonymous in meaning as respects liability for conduct towards
others. Wanton means characterized by extreme recklessness and utter disregard for the rights of others; or marked
by or manifesting arrogant recklessness of justice or of rights or feelings of others. Conduct is reckless when it is an
extreme departure from ordinary care, in a situation in which a high degree of danger is apparent.
 It also bears to emphasize that the records of the case support the conclusion that petitioner was extremely
remiss before and during the time of the vessel's sinking. Petitioner did not endeavor to dispute the CA's finding that
the vessel's Captain erroneously navigated the ship, and failed to reduce its speed considering the ship's size and
the weather conditions. The crew members were also negligent when they did not make any stability calculations,
and prepare a detailed report of the vessel's cargo stowage plan. The radio officer failed to send an SOS message
in the internationally accepted communication network but instead used the Single Side Band informing the
company about the emergency situation.

"Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially
deleterious in its consequence by creating negative incentives or deterrents against such behavior." Verily, the
above-mentioned conduct, from the Captain and Crew of a common carriers should be corrected. They carry not
only cargo, but are in charge of the lives of its passengers. In this case, their recklessness cost the loss of 150 lives.
Considering the foregoing, this Court finds that the CA properly imposed exemplary damages.

5. LTFRB vs. G.V. FLORIDA TRANSPORT, INC. J. Peralta GR 213088 June 28, 2017

FACTS: Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at Sitio Paggang,
Barangay Talubin, Bontoc, Mountain Province involving a public utility bus coming from Sampaloc, Manila, bound
for Poblacion Bontoc and bearing a "G.V. Florida" body mark with License Plate No. TXT-872. The mishap claimed
the lives of fifteen (15) passengers and injured thirty-two (32) others. An initial investigation report, which came from
the Department of Transportation and Communications of the Cordillera Administrative Region (DOTC-CAR),
showed that based on the records of the Land Transportation Office (LTO) and herein petitioner, License Plate No.
TXT-872 actually belongs to a different bus owned by and registered under the name of a certain Norberto Cue, Sr.
(Cue) under Certificate of Public Convenience (CPC) Case No. 2007-0407 and bears engine and chassis numbers
LX004564 and KN2EAM12PK004452, respectively; and that the bus involved in the accident is not duly authorized to
operate as a public transportation. Petitioner, pursuant to its regulatory powers, immediately issued an Order
preventively suspending, for a period not exceeding thirty (30) days, the operations of ten (10) buses of Cue under
its CPC Case No. 2007-0407, as well as respondent's entire fleet of buses, consisting of two hundred and twenty-
eight (228) units, under its twenty-eight (28) CPCs.

License Plate Number attached to the ill-fated bus was indeed TXT-872, which belongs to a different unit owned by
Cue; that the wrecked bus had actual engine and chassis numbers DE12T-601104BD and KTP1011611C,4
respectively; that, per registration records, the subject bus was registered as "private" on April 4, 2013 with issued
License Plate No. UDO 762; and that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the
previous owner is herein respondent bus company. Dagupan Bus filed its Answer claiming that: it is not the owner of
the bus which was involved in the accident; the owner is G.V. Florida; Dagupan Bus entered into a Memorandum
of Agreement with G.V. Florida, which, among others, facilitated the exchange of its CPC covering the Cagayan
route for the CPC of Florida covering the Bataan route; and the subsequent registration of the subject bus in the
name of Dagupan Bus is a mere preparatory act on the part of G.V. Florida to substitute the old authorized units of
Dagupan Bus plying the Cagayan route which are being operated under the abovementioned CPC which has
been exchanged with G. V. Florida.

In his Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC and the ten public utility buses
operating under the said CPC, including the one which bears License Plate No. TXT-872; since Cue's buses were
already old and dilapidated, and not wanting to stop its operations to the detriment of the riding public, it
replaced these buses with new units using the License Plates attached to the old buses, pending approval by
petitioner of the sale and transfer of Cue's CPC in its favor; and it exercised utmost good faith in deciding to
dispatch the ill-fated bus notwithstanding the absence of prior adequate compliance with the requirements that
will constitute its operation legal.On March 14, 2014, herein petitioner rendered its Decision canceling Cue's CPC
No. 2007-0407 and suspending the operation of respondent's 186 buses under 28 of its CPCs for a period of six (6)
months.

ISSUE: WON petitioner is justified in suspending respondent's 28 CPCs for a period of six (6) months. In other
words, is the suspension within the powers of the LTFRB to impose and is it reasonable?

RULING: YES. In the present case, respondent is guilty of several violations of the law, to wit: lack of petitioner's
approval of the sale and transfer of the CPC which respondent bought from Cue; operating the ill-fated bus under
its name when the same is registered under the name of Dagupan Bus Co., Inc.; attaching a vehicle license plate
to the ill-fated bus when such plate belongs to a different bus owned by Cue; and operating the subject bus under
the authority of a different CPC. What makes matters worse is that respondent knowingly and blatantly committed
these violations. How then can respondent claim good faith under these circumstances? Respondent, nonetheless,
insists that it is unreasonable for petitioner to suspend the operation of 186 buses covered by its 28 CPCs,
considering that only one bus unit, covered by a single CPC, was involved in the subject accident. Indeed, the
law gives to the LTFRB (previously known, among others, as Public Service Commission or Board of Transportation)
ample power and discretion to decree or refuse the cancellation of a certificate of public convenience issued to
an operator as long as there is evidence to support its action. 11 As held by this Court in a long line of cases, it was
even intimated that, in matters of this nature so long as the action is justified, this Court will not substitute its
discretion for that of the regulatory agency which, in this case, is the LTFRB.

Neither is the Court convinced by respondent's contention that the authority given to petitioner, under the above-
quoted Section 16(n) of the Public Service Act does not mean that petitioner is given the power to suspend the
entire operations of a transport company. Respondent must be reminded that, as quoted above, the law clearly
states that petitioner has the power "[t]o suspend or revoke any certificate issued under the provisions of [the Public
Service Act] whenever the holder thereof has violated or willfully and contumaciously refused to comply with any
order rule or regulation of the Commission or any provision of this Act x x x"

This Court has held that when the context so indicates, the word "any" may be construed to mean, and indeed it
has been frequently used in its enlarged and Plural sense as meaning "all " "all or every" "each " "each one of all " ' ' '
' ' "every" without limitation; indefinite number or quantity, an indeterminate unit or number of units out of many or
all, one or more as the case may be, several, some.

1. The Insular Life Assurance Co., Ltd. v Heirs of Alvarez J. Leonen GR 207526, 210156 Oct. 3, 2018

FACTS: Alvarez and his wife, Adelina, owned a residential lot with improvements covered by Transfer
Certificate of Title (TCT) No. C-315023 and registered in the Caloocan City Registry of Deeds.

On June 18, 1997, Alvarez applied for and was granted a housing loan by UnionBank in the amount of
P648,000.00. This loan was secured by a promissory note, a real estate mortgage over the lot, and a mortgage
redemption insurance taken on the life of Alvarez with UnionBank as beneficiary. Alvarez was among the
mortgagors included in the list of qualified debtors covered by the Group Mortgage Redemption Insurance that
UnionBank had with Insular Life.

Alvarez passed away on April 17, 1998. In May 1998, UnionBank filed with Insular Life a death claim under
Alvarez's name pursuant to the Group Mortgage Redemption Insurance. Insular Life denied the claim after
determining that Alvarez was not eligible for coverage as he was supposedly more than 60 years old at the time of
his loan's approval. With the claim's denial, the monthly amortizations of the loan stood unpaid. UnionBank sent the
Heirs of Alvarez a demand letter, giving them 10 days to vacate the lot. Subsequently, on October 4, 1999, the lot
was foreclosed and sold at a public auction with UnionBank as the highest bidder.

The Heirs of Alvarez filed a Complaint for Specific Performance and Damages against UnionBank, a certain
Alfonso P. Miranda (Miranda), who supposedly benefitted from the loan and to include a demand against Insular
Life to fulfill its obligation as an insurer under the Group Mortgage Redemption Insurance. The Heirs of Alvarez
denied knowledge of any loan obtained by Alvarez

The Heirs of Alvarez claimed that after Alvarez's death, they came upon a document captioned "Letter of
Undertaking," which appeared to have been sent by UnionBank to Miranda. In this document, UnionBank bound
itself to deliver to Miranda P466,000.00 of the approved P648,000.00 housing loan, provided that Miranda would
deliver to it TCT No. C-315023, "free from any liens and/or encumbrances."

In its defense, UnionBank asserted that the Heirs of Alvarez could not feign ignorance over the existence of
the loan and mortgage considering the Special Power of Attorney executed by Adelina in favor of her late
husband, which authorized him to apply for a housing loan with UnionBank.

The RTC ruled in favor of the Heirs of Alvarez. It found no indication that Alvarez had any fraudulent intent when
he gave UnionBank information about his age and date of birth. It explained that UnionBank initiated and
negotiated the Group Mortgage Redemption Insurance with Insular Life, and that "ordinary customers will not know
about [insurance policies such as this] unless it is brought to their knowledge by the bank."
 It noted that if UnionBank's personnel were mindful of their duties and if Alvarez appeared to be disqualified
for the insurance, they should have immediately informed him of his disqualification. It emphasized that in
evaluating Alvarez's worthiness for the loan, UnionBank had been in possession of materials sufficient to inform itself
of Alvarez's personal circumstances. It added that if Insular Life had any doubt on the information that UnionBank
had provided, it should have inquired further instead of relying solely on the information readily available to it and
immediately refusing to pay. The CA affirmed the Regional Trial Court's ruling. nsular Life, in this case, failed to
establish this defense. It only relied on Alvarez's Health Statement Form where he wrote "1942" as his birth year.
However, this form alone was insufficient to prove that he fraudulently intended to misrepresent his age. This
application would have supported the conclusion that he consistently wrote "1942" in all the documents that he
had submitted to UnionBank. However, the records made no reference to this document.

ISSUE: WON petitioner The Insular Life Assurance Co., Ltd. is obliged to pay Union Bank of the Philippines the
balance of Jose H. Alvarez's loan given the claim that he lied about his age at the time of the approval of his loan?

RULING: YES, while Insular Life correctly reads Section 27 as making no distinction between intentional and
unintentional concealment, it erroneously pleads Section 27 as the proper statutory anchor of this case.

The Insurance Code distinguishes representations from concealments. Chapter 1, Title 4 is on

concealments. It spans Sections 26 to 35 of the Insurance Code; it is where Section 27 is found. Chapter 1, Title 5 is
on representations. It spans Sections 36 to 48 of the Insurance Code.

Section 26 defines concealment as "[a] neglect to communicate that which a party knows and ought to
communicate." However, Alvarez did not withhold information on or neglect to state his age. He made an actual
declaration and assertion about it.

What this case involves, instead, is an allegedly false representation. Section 44 of the Insurance Code
states, "A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations." If
indeed Alvarez mis-declared his age such that his assertion fails to correspond with his factual age, he made a false
representation, not a concealment.

At no point does Chapter 1, Title 5 of the Insurance Code replicate Section 27's language negating the
distinction between intentional and unintentional concealment. Section 45 is Chapter 1, Title 5's counterpart
provision to Section 27, and concerns rescission due to false representations.

Not being similarly qualified as rescission under Section 27, rescission under Section 45 remains subject to
the basic precept of fraud having to be proven by clear and convincing evidence.

Conformably, subsequent fraud cases citing Great Pacific Life which do not exclusively concern
concealment rightly maintain that "[f]raudulent intent on the part of the insured must be established to entitle the
insurer to rescind the contract."

When the insured makes a representation, it is incumbent on them to assure themselves that a
representation on a material fact is not false; and if it is false, that it is not a fraudulent misrepresentation of a
material fact. This returns the burden to insurance companies, which, in general, have more resources than the
insured to check the veracity of the insured's beliefs as to a statement of fact. Consciousness in defraudation is
imperative and it is for the insurer to show this.

A single piece of evidence hardly qualifies as clear and convincing. Its contents could just as easily have
been an isolated mistake.

Despite these circumstances, the best that Insular Life could come up with before the Regional Trial Court
and the Court of Appeals was a single document. The Court of Appeals was straightforward, i.e., the most basic
document that Alvarez accomplished in relation to Insular Life must have been an insurance application form.
Strangely, Insular Life failed to adduce even this document — a piece of evidence that was not only
commonsensical, but also one which has always been in its possession and disposal.

The Insurance Code dispenses with proof of fraudulent intent in cases of rescission due to concealment,
but not so in cases of rescission due to false representations. When an abundance of available documentary
evidence can be referenced to demonstrate a design to defraud, presenting a singular document with an
erroneous entry does not qualify as clear and convincing proof of fraudulent intent. Neither does belatedly invoking
just one other document, which was not even authored by the alleged miscreant.
 2. Communication and Information System Corp. vs Mark Sensing Australia

Pty. Ltd., Mark Sensing Philippines Inc. and Ofelia B. Cajigal

G.R. No. 192159

January 25, 2017

FACTS: On March 1, 2002, Petitioner Communication and Information System Corp. (CISC) and Respondent Mark Sensing
Australia Pty. Ltd. (MSAPL)entered into Memorandum of Agreement whereby MSAPL appointed CISC as its exclusive agent
to PCSO involving paper and bet slip supply contract between PCSO, MSAPL, and three other suppliers.

After initially complying with its obligations under the MOA however, MSAPL stopped remitting commissions to CISC
during the second quarter of 2004, justifying its action by claiming that Carolina De Jesus, President of CISC violated her
authority when she negotiated the Supply Contract with PCSO and three of MSAPL’S competitors. To supports its claim,
MSAPL accordingly lost one-half of its business because of the said supply contract. As a result of MSAPL’s refusaL of
payment, CISC filed a complaint before the RTC of Quezon City.

On September 10, 2007, RTC granted CISC’s application for issuance of writ of preliminary attachment stating that
“the non-payment of the agreed commission constitutes fraud on the part of the defendant” finding that MSAPL, as a
foreign corporation based in Australia has no other assets except for its collectibles from PCSO. Thus, RTC limited the
attachment to the amount stated in the complaint instead of sought to be attached by the CISC. On July 8, 2009, CISC
posted a bond through Plaridel Surety and Insurance Company in favor of MSAPL which the RTC approved.

On September 18, 2009, MSAPL, MSPI and Atty. Ofelia Cajical filed a petition for certiorari before the CA, which the
Court granted, prompting CISC to file the Motion for Reconsideration which the appellate court perfunctorily denied.

ISSUE: Whether or not the RTC committed grave abuse of discretion when it approved the attachment bond whose face
amount exceeded the retention limit of the surety.

RULING: RTC is correct in the application of the law and also acted judiciously. Section 215 of the old Insurance Code, the
law in force at the time Plaridel issued the attachment bond, limits the amount of risk that insurance companies can retain
to a maximum of 20% of its net worth. However, in computing the retention limit, risks that have been ceded are ipso jure
deducted. The amount of retained risk is computed by deducting ceded/reinsured risk from insurable risk. If the resulting
amount is below 20% of the insurer’s net worth, then the retention limit is not breached. In this case, both the RTC and CA
determined that based on Plaridel’s financial statement that was attached to its certificate of authority. Its net worth is P
289,332,999.00. Plaridel’s retention limit is therefore 57, 886,599.80, which is below P 13, 197, 309.10 face value of the
attachment bond. However, it only retained an insurable risk of P 17, 377, 938.19 because theremaing amount of P
98,819,770.19 was ceded to 16 other insurance companies. Thus the risk retained by Plarided is actually P40 Million below its
maximum retention limit, making the RTC approval proper and in order.
 3. Jaime T. Gaisano vs. Development Insurance and Surety Corp.

G.R. No. 190702

February 27, 2017

FACTS: Jaime Gaisano was the registered owner of a 1992 Mitsubishi Montero with plate no. GTJ-777, while Development
Insurance Surety Corp is a domestic Corporation engaged in the insurance business. On September 27, 1996, respondent
issued a comprehensive commercial vehicle policy in the amount of P 1,500,000.00 over the partitioner’s vehicle for a
period of one year commencing on September 27, 1996 to September 27,2997. To collect the premiums and other charges,
respondent’s agent Trans-Pacific issued a statement of account to petitioner’s company Noah’s Ark Merchandising which
the latter immediately heeded by issuing a check bearing php 140, 893.50. However, nobody in the Trans-Pacific picked up
the check as it was the President Rolando Herradura’s birthday and instead, promised to get the check the following day,
September 28.

In the evening of September 27, while the vehicle was in the custody of Achilles Pacquing, the service company
vehicle was stolen and was never recovered despite search and retrieval efforts. Upon claiming of the insurance proceeds,
the respondent refused payment and return of the premium paid. In a complaint for collection of sum of money before the
RTC, the respondent asserted that the non-payment of the premium rendered the policy ineffective. RTC ruled in favor of
the petitioner. The CA on the other hand, granted the respondent’s appeal and upheld its position that an insurance
contract becomes valid and binding only after the premium is paid pursuant to Sec. 77 of the Insurance Code, finding that
the premium is considered not to be paid yet.

ISSUE: Whether or not there is a binding insurance contract between the petitioner and the respondent.

RULING: There is no binding insurance contract between the petitioner and the respondent. The petitioner is not entitled to
the insurance proceeds because no insurance policy became affective for the lack of premium payment. While there was
no disputed that the check was delivered and accepted on September 28, 1996, no payment of premium had been made
at the time of the loss of the vehicle September 27, 1996, the notice of the availability of check does not produce the effect
of payment of premium. Trans-Pacific could not be considered in delay in accepting the check because when it informed
the petitioner that it will pick up the check the next day, it did not protest.

4. Loadstar Shipping Company Inc. and Loadstar International Shipping Company, Inc. vs. Malayan Insurance Company,
Inc.

G.R. No. 185565

November 26, 2014

FACTS: Loadstar International Shipping Company, Inc. (Loadstar) and Philippine Associated Smelting refining Corporation
(PASAR) entered into a contract of affreightment for domestic bulk transport of the letters copper concentrates which were
loaded in Cargo hold Not. 1 and 2 of M.V. Bobcat, a marine vessel owned by Loadstar international and operated by
Loadstar Shipping under a charter party agreement. The cargo was insured with Malayan Insurance Company, Inc.

The vessel’s Chief Officer on routine inspection found a crack on starboard side of the main deck which caused
sea water to enter and wet the cargo. Upon inspection, the elite adjusters and Surveyors Inc. confirmed that samples of
copper concentrate from cargo No. 2 were contaminated by sea water.

PASAR sent a formal notice of claim in the amount of P 37,477,361.31 to Loadstar while Malayan paid PASAR the
amount of P 32,351,102.32, the latter signing a subrogation receipt in favor of Malayan. To claim, Malayan demanded from
Loadstar which the latter refused to comply.

ISSUE: Whether or not respondent is entitled to the right of recovery by virtue of subrogation against the petitioners.

RULING: Malayan’s claim against the petitioner is based on subrogation to the rights possessed by PASAR. Under the Civil
Code, the rights of a subrogee cannot be superior to the rights possessed by the subrugor as the former steps into the shoes
of the insured and can recover only if the insured likewise could have recovered. Consequently, an insurer indemnifies the
insured based on the loss or injury the latter actually suffered from. If there is no loss or injury, then there is no obligation on
the part of the insurer to indemnify the insured. Should the insurer pay the insured and it turns out that indemnification is not
due, or if due, the amount paid is excessive, the insurer takes the risk of being able to seek recompense from the alleged
wrongdoer.

While it is not disputed that the copper concentrated were contaminated with seawater, Malayan in this case
failed to prove that the good were rendered useless or unfit for the purpose intended by PASAR due to contamination.
Hence there is no basis for the goods rejection, making it erroneous for Malayan to reimburse PASAR as though the latter
suffered from total loss of goods in the absence of proof that PASAR sustained such kind of loss.
 SPECIAL COMMERCIAL LAWS

1-3

4. SPS. CRISTINO & EDNA CARBONELL v. METROPOLITAN BANK AND TRUST COMPANY

G.R. No. 178467, April 26, 2017

BERSAMIN, J.:

Facts:

The petitioners initiated an action for damages, alleging that they experienced emotional shock, mental anguish, public
ridicule, humiliation, insults and embarrassment during their trip to Thailand because of the respondent's release to them of
five US$100 bills that later on turned out to be counterfeit.

The petitioners travelled to Thailand after withdrawing US$1,000.00 in US$100 notes from their dollar account at the
respondent's Pateros branch and while in Bangkok, they exchanged five of the US bills into Baht, but only four of the US$100
bills were accepted by the foreign exchange dealer because the fifth one was "no good". The petitioners tried to exchange
the remaining US$100 in a bank where it was later on confiscated and the bank teller threatened to report them to the
police if they insisted in getting the fake dollar bill back.

The petitioners bought jewelry from a shop where they were confronted by the shop owner at the hotel lobby because their
four US$100 bills had turned out to be counterfeit. The shop owner even shouted at them: "You Filipinos, you are all
cheaters!" and that the incident had occurred within the hearing distance of travelers and several foreigners.

Upon their return to the Philippines, they confronted the manager of the respondent bank on the fake dollar bills, but the
latter insisted that the dollar bills she released to them were genuine. Upon submission for examination, the BSP certified that
the four US$100 bills were near perfect genuine notes.

Prior to the filing of the suit in the RTC, the petitioners had two meetings with the respondent's representatives. In the course
of the two meetings, the latter's representatives reiterated their sympathy and regret over the troublesome experience that
the petitioners had encountered, and offered to reinstate US$500 in their dollar account, and, in addition, to underwrite a
round-trip all-expense-paid trip to Hong Kong, but they were adamant and staged a walk-out.

RTC: Ruled in favor of the respondent bank by dismissing the plaintiff’s complaint for lack of merit.

CA: Affirmed the RTC’s decision.

Issue:

Did the respondent bank fail to exercise the diligence required of them so as to make them liable?
Ruling:

No. The General Banking Act of 2000 demands of banks the highest standards of integrity and performance. As such, the
banks are under obligation to treat the accounts of their depositors with meticulous care. However, the banks' compliance
with this degree of diligence is to be determined in accordance with the particular circumstances of each case.

Gross negligence connotes want of care in the performance of one's duties; it is a negligence characterized by the want of
even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and
intentionally, with a conscious indifference to consequences insofar as other persons may be affected. In order for gross
negligence to exist as to warrant holding the respondent liable therefor, the petitioners must establish that the latter did not
exert any effort at all to avoid unpleasant consequences, or that it wilfully and intentionally disregarded the proper
protocols or procedure in the handling of US dollar notes and in selecting and supervising its employees.

The CA and the RTC both found that the respondent had exercised the diligence required by law in observing the standard
operating procedure, in taking the necessary precautions for handling the US dollar bills in question, and in selecting and
supervising its employees. Such factual findings by the trial court are entitled to great weight and respect.

It is significant that the BSP certified that the falsity of the US dollar notes in question, which were "near perfect genuine
notes," could be detected only with extreme difficulty even with the exercise of due diligence. Ms. Nanette Malabrigo, BSP's
Senior Currency Analyst, testified that the subject dollar notes were "highly deceptive" inasmuch as the paper used for them
were similar to that used in the printing of the genuine notes. She observed that the security fibers and the printing were
perfect except for some microscopic defects, and that all lines were clear, sharp and well defined.

2. BPI FAMILY SAVINGS BANK, INC. vs. ST. MICHAEL MEDICAL CENTER, INC.

G.R. No. 205469, March 25, 2015

FACTS:
Spouses Virgilio and Yolanda Rodil (Sps. Rodil) are the owners and sole proprietor of St. Michael Hospital, a 5-storey
secondary level hospital in Bacoor, Cavite. With a vision to upgrade St. Michael Hospital into a 11-storey hospital, Sps. Rodil
purchased 2 parcels of land adjoining their existing property and incorporated SMMCI with which entity they planned to
eventually consolidate their hospital’s operations. SMMCI had an initial capital of P2M which was later increased to P53.5M,
94.49% of which outstanding capital stock, was subscribed and paid by Sps. Rodil.

Construction of the new hospital building commenced with Sps. Rodil contributing personal funds as initial capital for the
project. To finance the costs of construction, SMMCI applied for a loan with petitioner BPI Family which gave a credit line of
up to P35M secured by a Real Estate Mortgage over 3 parcels of land belonging to Sps. Rodil, on a portion of which stands
the hospital building being constructed.
In the meantime, after suffering financial losses due to problems with the first building contractor, Sps. Rodil temporarily
deferred the original construction plans for the 11-storey hospital building and, instead engaged the services of another
contractor for the completion of the remaining structural works of the unfinished building up to the 5th floor. In this regard,
they spent a total of P55M for the construction. The lack of funds for the finishing works of the 3 rd, 4th and 5th floors, however,
kept the new building from becoming completely functional and, in turn, hampered the plans for the physical transfer of St.
Michael Hospital’s operations to SMMCI. Nevertheless, using hospital-generated revenues, Sps. Rodil were still able to
purchase new equipment and machinery for St. Michael Hospital valued in excess of P20M.

Although the finishing works were later resumed and some of the hospital operations were eventually transferred to the
completed first two floors of the new building, as of May 2006, SMMCI was still neither operational nor earning revenues.
Hence, it was only able to pay the interest on its BPI Family loan over a two-year period from the income of St. Michael
Hospital so BPI Family demanded for extrajudicial foreclosure of the mortgage.
SMMCI filed a Petition for Corporate Rehabilitation before the RTC, with prayer for the issuance of a Stay Order as it foresaw
the impossibility of meeting its obligation to BPI Family, its purported sole creditor.

In the said petition, SMMCI claimed that it had to defer the construction of the projected 11-storey hospital building due to
the problems it had with its first contractor as well as the rise of the cost of construction materials. As of date, only two (2)
floors of the new building are functional, in which some of the operations of St. Michael had already been
transferred.cralawred

Further, it was averred that while St. Michael Hospital – whose operations were to be eventually absorbed by SMMCI – was
operating profitably, it was saddled with the burden of paying the loan obligation of SMMCI and Sps. Rodil to BPI Family,
which it cannot service together with its current obligations to other persons and/or entities. While several persons
approached Sps. Rodil signifying their interest to invest in the corporation, they needed enough time to complete their audit
and due diligence of the company, hence, the Rehabilitation Petition.

In its proposed Rehabilitation Plan, SMMCI merely sought for BPI Family (a) to defer foreclosing on the mortgage and (b) to
agree to a moratorium of at least two (2) years during which SMMCI – either through St. Michael Hospital or its successor –
will retire all other obligations. After which, SMMCI can then start servicing its loan obligation to the bank under a mutually
acceptable restructuring agreement. SMMCI declared that it intends to conclude pending negotiations for investments
offered by a group of medical doctors whose capital infusion shall be used (a) to complete the finishing requirements for
the 3rd and 5th floors of the new building; (b) to renovate the old 5-storey building where St. Michael Hospital operates; and
(c) to pay, in whole or in part, the bank loan with the view of finally integrating St. Michael Hospital with SMMCI.

RTC: Approved the Rehabilitation Plan and ordered: (a) a five-year moratorium on SMMCI’s bank loan; (b) a restructuring
and payment of obligations to other creditors such as suppliers and lenders; (c) a programmed spending of a reasonable
part of the hospital’s revenues for the finishing of the 5th floor and the improvement of hospital facilities in the next two or
three years; and (d) use of fresh capital from prospective investors to partly pay SMMCI’s bank loan and improve St.
Michael Hospital’s competitiveness.35cralawred

Aggrieved, BPI Family elevated the matter before the CA, mainly arguing that the approval of the Rehabilitation Plan
violated its rights as an unpaid creditor/mortgagee and that the same was submitted without prior consultation with
creditors.37cralawred

CA: Affirmed the RTC’s approval of the Rehabilitation Plan.

Issue:
Did the CA correctly affirm SMMCI’s Rehabilitation Plan as approved by the RTC?

Ruling:
NO, the remedy of rehabilitation is improper. Hence, petition for Corporate Rehabilitation is dismissed.

Restoration is the central idea behind the remedy of corporate rehabilitation. In common parlance, to “restore” means “to
bring back to or put back into a former or original state.” Case law explains that corporate rehabilitation contemplates a
continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of
successful operation and solvency, the purpose being to enable the company to gain a new lease on life and allow its
creditors to be paid their claims out of its earnings.

Rehabilitation assumes that the corporation has been operational but for some reasons like economic crisis or
mismanagement had become distressed or insolvent. Thus, the basic issues in rehabilitation proceedings concern the
viability and desirability of continuing the business operations of the distressed corporation, all with a view of effectively
restoring it to a state of solvency or to its former healthy financial condition through the adoption of a rehabilitation plan.

In this case, it cannot be said that the petitioning corporation, SMMCI, had been in a position of successful operation and
solvency at the time the Rehabilitation Petition was filed. This simply means that there exists no viable business concern to be
restored. Perforce, the remedy of corporate rehabilitation is improper.

The Court observes that SMMCI could not have even complied with the form and substance of a proper rehabilitation
petition, and submit its accompanying documents, among others, the required financial statements of a going concern.
Section 2, Rule 4 of the 2008 Rules of Procedure on Corporate Rehabilitation, provides:chanRoblesvirtualLawlibrary
SEC. 2. Contents of Petition. -

(b) The petition shall be accompanied by the following documents:

(1) An audited financial statement of the debtor at the end of its last fiscal year;ChanRoblesVirtualawlibrary
(2) Interim financial statements as of the end of the month prior to the filing of the petition;ChanRoblesVirtualawlibrary

x x x xcralawlawlibrary

Note that this defect is not negated by the submission of the financial documents pertaining to St. Michael Hospital, which is
a separate and distinct entity from SMMCI. While the CA gave considerable weight to St. Michael Hospital’s supposed
“profitability,” as explicated in its own financial statements, as well as the feasibility study conducted by Mrs. Alibangbang,
in affirming the RTC, it has unwittingly lost sight of the essential fact that SMMCI stands as the sole petitioning debtor in this
case; as such, its rehabilitation should have been primarily examined from the lens of its own financial history. While SMMCI
claims that it would absorb St. Michael Hospital’s operations, there was dearth of evidence to show that a merger was
already agreed upon between them. Accordingly, St. Michael Hospital’s financials cannot be utilized as basis to determine
the feasibility of SMMCI’s rehabilitation.

Note further that while it appears that Sps. Rodil effectively owned and exercised control over the two entities, such fact
does not, by and of itself, warrant their singular treatment for to do so would only confuse the objective of the proceedings
which is to ascertain whether the petitioning corporation, and not any other entity related thereto (except if joining as a co-
petitioning debtor), may be rehabilitated. Neither is the proceeding the proper forum to pierce the corporate fictions of
both entities for it involves no creditor claiming to be a victim of fraud, an essential requisite for the application of such
doctrine.

In fine, the petition should not have been given due course, nor should a Stay Order have been issued.

To compound its error, the CA even disregarded the fact that SMMCI’s Rehabilitation Plan, an indispensable requisite in
corporate rehabilitation proceedings, failed to comply with the fundamental requisites outlined in Section 18, Rule 3 of the
Rules, particularly, that of a material financial commitment to support the rehabilitation and an accompanying liquidation
analysis, all of the petitioning debtor:chanRoblesvirtualLawlibrary

SEC. 18. Rehabilitation Plan. - The rehabilitation plan shall include (a) the desired business targets or goals and the duration
and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include the manner of its
implementation, giving due regard to the interests of secured creditors such as, but not limited, to the non-impairment of
their security liens or interests; (c) the material financial commitments to support the rehabilitation plan; (d) the means for
the execution of the rehabilitation plan, which may include debt to equity conversion, restructuring of the debts, dacion en
pago or sale exchange or any disposition of assets or of the interest of shareholders, partners or members; (e) a liquidation
analysis setting out for each creditor that the present value of payments it would receive under the plan is more than that
which it would receive if the assets of the debtor were sold by a liquidator within a six-month period from the estimated
date of filing of the petition; and (f) such other relevant information to enable a reasonable investor to make an informed
decision on the feasibility of the rehabilitation plan. (Emphases supplied)cralawlawlibrary
 FRIA

1. PHILIPPINE ASSET GROWTH TWO, INC. (SUCCESSOR-IN-INTEREST OF PLANTERS DEVELOPMENT BANK) AND PLANTERS
DEVELOPMENT BANK v. FASTECH SYNERGY PHILIPPINES, INC. (FORMERLY FIRST ASIA SYSTEM TECHNOLOGY, INC.), FASTECH
MICROASSEMBLY & TEST, INC., FASTECH ELECTRONIQUE, INC., AND FASTECH PROPERTIES, INC.

G.R. No. 206528, June 28, 2016

Facts:
Respondents filed a verified Joint Petition for corporate rehabilitation. They claimed that: (a) their business operations and
daily affairs are being managed by the same individuals; (b) they share a majority of their common assets; and (c) they
have common creditors and common liabilities.

Among the common creditors listed in the rehabilitation petition was PDB, which had earlier filed a petition for extrajudicial
foreclosure of mortgage over the two parcels of land registered in the name of Fastech Properties (subject properties), listed
as common assets of respondents in the rehabilitation petition.

The foreclosure sale was held with PDB emerging as the highest bidder. Respondents claimed that this situation has
impacted on their chance to recover from the losses they have suffered over the years, since the said properties are being
used by Fastech Microassembly and Fastech Electronique in their business operations, and a source of significant revenue
for their owner-lessor, Fastech Properties.

Hence, respondents submitted for the court's approval their proposed Rehabilitation Plan, which sought:

a waiver of all accrued interests and penalties;

a grace period of two (2) years to pay the principal amount of respondents' outstanding loans, with the interests accruing
during the said period capitalized as part of the principal, to be paid over a twelve (12)-year period after the grace period;
and

an interest rate of four percent (4%) and two percent (2%) per annum (p.a.) for creditors whose credits are secured by real
estate and chattel mortgages, respectively.

RTC: Dismissed the rehabilitation petition despite the favorable recommendation of its appointed Rehabilitation Receiver. It
found the facts and figures submitted by respondents to be unreliable in view of the disclaimer of opinion of the
independent auditors who reviewed respondents' 2009 financial statements, which it considered as amounting to a
"straightforward unqualified adverse opinion." In the same vein, it did not give credence to the unaudited 2010 financial
statements as the same were mere photocopied documents and unsigned by any of respondents' responsible officers. It
also observed that respondents added new accounts and/or deleted/omitted certain accounts. Furthermore, it rejected
the revised financial projections as the bases for which were not submitted for its evaluation on the ground of
confidentiality.chanroblesla

CA: Reinstated the rehabilitation petition, approved respondents' Rehabilitation Plan, and remanded the case to the RTC to
supervise its implementation. Considering that respondents' creditors are placed in equal footing as a necessary
consequence, it permanently enjoined PDB from "effecting the foreclosure" of the subject properties during the
implementation of the Rehabilitation Plan.eslaw

Issue:

Is the Rehabilitation Plan feasible?

Ruling:

NO. Joint Petition for corporate rehabilitation filed by respondents is dismissed.

Case law explains that corporate rehabilitation contemplates a continuance of corporate life and activities in an effort to
restore and reinstate the corporation to its former position of successful operation and solvency, the purpose being to
enable the company to gain a new lease on life and allow its creditors to be paid their claims out of its earnings. Thus, the
basic issues in rehabilitation proceedings concern the viability and desirability of continuing the business operations of the
distressed corporation, all with a view of effectively restoring it to a state of solvency or to its former healthy financial
condition through the adoption of a rehabilitation plan.

In the present case, however, the Rehabilitation Plan failed to comply with the minimum requirements, i.e.: (a) material
financial commitments to support the rehabilitation plan; and (b) a proper liquidation analysis, under Section 18, Rule 3 of
the 2008 Rules of Procedure on Corporate Rehabilitation :

Section 18. Rehabilitation Plan. - The rehabilitation plan shall include (a) the desired business targets or goals and the
duration and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include the
manner of its implementation, giving due regard to the interests of secured creditors such as, but not limited, to the non-
impairment of their security liens or interests; (c) the material financial commitments to support the rehabilitation plan; (d)
the means for the execution of the rehabilitation plan, which may include debt to equity conversion, restructuring of the
debts, dacion en pago or sale or exchange or any disposition of assets or of the interest of shareholders, partners or
members; (e) a liquidation analysis setting out for each creditor that the present value of payments it would receive under
the plan is more than that which it would receive if the assets of the debtor were sold by a liquidator within a six-month
period from the estimated date of filing of the petition; and (f) such other relevant information to enable a reasonable
investor to make an informed decision on the feasibility of the rehabilitation plan. (Emphases supplied)

The test in evaluating the economic feasibility of the plan was laid down in Bank of the Philippine Islands v. Sarabia Manor
Hotel Corporation, to wit:ChanRoblesVirtualawlibrary

In order to determine the feasibility of a proposed rehabilitation plan, it is imperative that a thorough examination and
analysis of the distressed corporation's financial data must be conducted. If the results of such examination and analysis
show that there is a real opportunity to rehabilitate the corporation in view of the assumptions made and financial goals
stated in the proposed rehabilitation plan, then it may be said that a rehabilitation is feasible. In this accord, the
rehabilitation court should not hesitate to allow the corporation to operate as an on-going concern, albeit under the terms
and conditions stated in the approved rehabilitation plan. On the other hand, if the results of the financial examination and
analysis clearly indicate that there lies no reasonable probability that the distressed corporation could be revived and that
liquidation would, in fact, better subserve the interests of its stakeholders, then it may be said that a rehabilitation would not
be feasible. In such case, the rehabilitation court may convert the proceedings into one for liquidation.

In the recent case of Viva Shipping Lines, Inc. v. Keppel Philippines Mining, Inc., the Court took note of the characteristics of
an economically feasible rehabilitation plan as opposed to an infeasible rehabilitation plan:ChanRoblesVirtualawlibrary

Professor Stephanie V. Gomez of the University of the Philippines College of Law suggests specific characteristics of an
economically feasible rehabilitation plan:

The debtor has assets that can generate more cash if used in its daily operations than if sold.

Liquidity issues can be addressed by a practicable business plan that will generate enough cash to sustain daily operations.

The debtor has a definite source of financing for the proper and full implementation of a Rehabilitation Plan that is
anchored on realistic assumptions and goals.

These requirements put emphasis on liquidity: the cash flow that the distressed corporation will obtain from rehabilitating its
assets and operations. A corporation's assets may be more than its current liabilities, but some assets may be in the form of
land or capital equipment, such as machinery or vessels. Rehabilitation sees to it that these assets generate more value if
used efficiently rather than if liquidated.

On the other hand, this court enumerated the characteristics of a rehabilitation plan that is infeasible:

Absence of a sound and workable business plan;

Baseless and unexplained assumptions, targets, and goals;

Speculative capital infusion or complete lack thereof for the execution of the business plan;

Cash flow cannot sustain daily operations; and

Negative net worth and the assets are near full depreciation or fully depreciated.

In addition to the tests of economic feasibility, Professor Gomez also suggests that the Financial and Rehabilitation and
Insolvency Act of 2010 emphasizes on rehabilitation that provides for better present value recovery for its creditors.

Present value recovery acknowledges that, in order to pave way for rehabilitation, the creditor will not be paid by the
debtor when the credit falls due. The court may order a suspension of payments to set a rehabilitation plan in motion; in the
meantime, the creditor remains unpaid. By the time the creditor is paid, the financial and economic conditions will have
been changed. Money paid in the past has a different value in the future. It is unfair if the creditor merely receives the face
value of the debt. Present value of the credit takes into account the interest that the amount of money would have earned
if the creditor were paid on time.

Trial courts must ensure that the projected cash flow from a business' rehabilitation plan allows for the closest present value
recovery for its creditors. If the projected cash flow is realistic and allows the corporation to meet all its obligations, then
courts should favor rehabilitation over liquidation. However, if the projected cash flow is unrealistic, then courts should
consider converting the proceedings into that for liquidation to protect the creditors.

A perusal of the 2009 audited financial statements shows that respondents' cash operating position was not even enough to
meet their maturing obligations. Notably, their current assets were materially lower than their current liabilities, and consisted
mostly of advances to related parties in the case of Fastech Microassembly, Fastech Electronique, and Fastech
Properties. Moreover, the independent auditors recognized the absence of available historical or reliable market
information to support the assumptions made by the management to determine the recoverable amount (value in use) of
respondents' properties and equipment.obleslaw

On the other hand, respondents' unaudited financial statements for the year 2010, and the months of February and March
2011 were unaccompanied by any notes or explanation on how the figures were arrived at. Besides, respondents' cash
operating position remained insufficient to meet their maturing obligations as their current assets are still substantially lower
than their current liabilities. The Court also notes the RTC-Makati's observation that respondents added new accounts
and/or deleted/omitted certain accounts, but failed to explain or justify the same.

Verily, respondents' Rehabilitation Plan should have shown that they have enough serviceable assets to be able to continue
its business operation. In fact, as opposed to this objective, the revised Rehabilitation Plan still requires "front load Capex
spending" to replace common equipment and facility equipment to ensure sustainability of capacity and capacity
robustness, thus, further sacrificing respondents' cash flow. In addition, the Court is hard-pressed to see the effects of the
outcome of the streamlining of respondents' manufacturing operations on the carrying value of their existing properties and
equipment.

In fine, the Rehabilitation Plan and the financial documents submitted in support thereof fail to show the feasibility of
rehabilitating respondents' business.

In view of all the foregoing, the Court is therefore constrained to grant the instant petition, notwithstanding the preliminary
technical error as above-discussed. A distressed corporation should not be rehabilitated when the results of the financial
examination and analysis clearly indicate that there lies no reasonable probability that it may be revived, to the detriment
of its numerous stakeholders which include not only the corporation's creditors but also the public at large.

Thus, the higher interest of substantial justice will be better subserved by the reversal of the CA Decision. Since the
rehabilitation petition should not have been granted in the first place, it is of no moment that the Rehabilitation Plan is
currently under implementation. While payments in accordance with the Rehabilitation Plan were already made, the same
were only possible because of the financial reprieves and protracted payment schedule accorded to respondents, which,
as above-intimated, only works at the expense of the creditors and ultimately, do not meet the true purpose of
rehabilitation.
1 PATRICIA CABRIETO DELA TORRE VS PRIMETOWN PROPERTY GROUP, INC.

G.R. NO. 221932, FEBRUARY 14, 2018

PERALTA, J.

Facts:

Primetown Property Group, Inc. experienced financial difficulties due to the devaluation of the Philippine peso, the increase
in interest rates and lack of access to adequate credit. Thus, it filed a petition for corporate rehabilitation with prayer for
suspension of payments and actions with RTC.

On October 15, 2004, Patricia Cabrieto dela Torre filed a Motion for Leave to Intervene seeking judicial order for specific
performance, for respondent to execute in her favor a deed of sale covering Unit 3306, Makati Prime Citadel Condominium
which she bought as she had allegedly fully paid the purchase price. Respondent opposed the motion arguing that it was
filed out of time considering that the Stay Order was issued on August 15, 2003.

Petitioner contends that her claim against respondent was not suspended with the issuance of the Stay Order because
when the order was issued on August 15, 2003, she had long already fully paid the purchase price of the condominium unit
she bought from respondent, i.e., as of July 25, 1996, and that claims refer to debts or demands of pecuniary nature or the
assertion that money be paid by the company under rehabilitation to its creditors, but her prayer for the execution of a
deed of absolute sale is not a claim of this character as to be covered and suspended under the Stay Order.

Issue: Whether or not dela Torre’s claim/ action to execute a certificate of title in petitioner's favor is stayed when the
rehabilitation court ordered the suspension of claims against Primetown

Ruling:

Yes. Corporate rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and
reinstate the corporation to its former position of successful operation and solvency. An essential function of corporate
rehabilitation is the Stay Order which is a mechanism of suspension of all actions and claims against the distressed
corporation upon the due appointment of a management committee or rehabilitation receiver.

If the RTC finds the petition to be sufficient in form and substance, it shall issue, not later than five (5) days from the filing of
the petition, an Order as follows:

(a) appointing a Rehabilitation Receiver and fixing his bond;

(b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or
otherwise, against the debtor, its guarantors and sureties not solidarity liable with the debtor;
(c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in
the ordinary course of business;
(d) prohibiting the debtor from making any payment of its liabilities outstanding as at the date of filing of the petition
In addition, all creditors and all interested parties are directed to file and serve on the debtor a verified comment on or
opposition to the petition not later than ten (10) days before the date of the initial hearing and their failure to do so will bar
them from participating in the proceedings.

In this case, respondent filed a petition for rehabilitation and suspension of payments with the RTC which issued a Stay Order
on August 15, 2003. The initial hearing was set on September 24, 2003; thus, any comment or opposition to the petition
should have been filed 10 days before the initial hearing but petitioner did not file any and already barred from
participating in the proceedings. However, petitioner filed a motion for leave to intervene on October 15, 2004, one year
after, praying that respondent be ordered to execute in her favor a deed of absolute sale over Unit 3306 of the Makati
Prime Citadel Condominium, subject matter of their earlier contract to sell. It bears stressing that intervention is prohibited
under Section 1, Rule 3 of the Interim Rules. Hence, the RTC should not have entertained the petition for intervention at all.
Rehabilitation proceedings are summary and non-adversarial in nature, and do not contemplate adjudication of claims
that must be threshed out in ordinary court proceedings.

Clearly, while respondent is undergoing rehabilitation, the enforcement of all claims against it is stayed. Rule 2, Section 1 of
the Interim Rules defines a claim as referring to all claims or demands of whatever nature or character against a debtor or
its property, whether for money or otherwise.

2 DEMETRIO ELLAO VS BATANGAS I ELECTONIC COOPERATIVE, INC. (BATELEC I)

G.R. NO. 209166, JULY 9, 2018

TIJAM, J.

Facts:

Ellao was employed by BATELEC I initially as Office Supplies and Equipment Control Officer until he was appointed as
General Manager. The Board of Directors adopted and issued a Board Resolution terminating Ellao as General Manager on
the grounds of gross and habitual neglect of duties and responsibilities and willful disobedience or insubordination resulting
to loss of trust and confidence. The National Electrification Administration (NEA) confirmed BATELEC I's Board Resolution and
approved Ellao's termination.

Ellao filed a Complaint for illegal dismissal and money claims before the Labor Arbiter against BATELEC I. But BATELEC I
moved to dismiss Ellao's complaint on the ground that it is the NEA and not the NLRC which has jurisdiction over the
complaint.

The Labor Arbiter ruled that NEA has the power to suspend or dismiss any employee of electric cooperatives, the same does
not authorize NEA to hear and decide a labor termination case which power is exclusively vested by the Labor Code. It
held that Ellao was illegally dismissed as the grounds for his dismissal were unsubstantiated.

The NLRC held that BATELEC I is not a corporation registered with the SEC, but that it was formed and organized pursuant to
P.D. 269 and that Ellao is not an officer but a mere employee.

CA found that Ellao, as BATELEC I's General Manager, is a corporate officer. Ellao was appointed as General Manager by
virtue of a board resolution and that Ellao's appointment was duly approved by the NEA Administrator. The CA also found
that the position of General Manager is specifically provided for under BATELEC I's By-laws. CA concluded that Ellao's
dismissal is considered an intra-corporate controversy which falls under the jurisdiction of the SEC, now the RTC's, and not
with the NLRC.
Issue: Whether or not Ellao is a corporate officer and the controversy involves an intra-corporate dispute within the
jurisdiction of RTC

Ruling:

Yes. Complaints for illegal dismissal filed by a cooperative officer constitute an intra-cooperative controversy, jurisdiction
over which belongs to the regional trial courts. Registration with the SEC is not the operative factor in determining whether
or not the latter enjoys jurisdiction over a certain dispute or controversy. Organization under P.D. 269 sufficiently vests upon
electric cooperatives' juridical personality enjoying corporate powers. Registration with the SEC becomes relevant only
when a non-stock, non-profit electric cooperative decides to convert into and register as a stock corporation. As such, and
even without choosing to convert and register as a stock corporation, electric cooperatives already enjoy powers and
corporate existence akin to a corporation. By jurisprudence, termination disputes involving corporate officers are treated
differently from illegal dismissal cases lodged by ordinary employees

As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the labor
arbiter pursuant to the Labor Code. By way of exception, where the complaint for illegal dismissal involves a corporate
officer, the controversy falls under the jurisdiction of the SEC, because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates, or between any or all of them and the
corporation, partnership, or association of which they are stockholders, members, or associates, respectively; and between
such corporation, partnership, or association and the State insofar as the controversy concerns their individual franchise or
right to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or
manager of such corporation, partnership, or association.

3 STEPHEN KU VS RCBC SECURITIES, INC

G.R. NO. 219491, OCTOBER 17, 2018

PERALTA, J.

Facts:

Stephen Ku opened a trade account with RSEC (respondent) for the purpose of buying and selling securities as evidenced
by the Customer Account Information Form and Agreement. Later, Ku found that his account with RSEC was subject of
mismanagement. MGV, under the honest belief of Ku that the latter was acting for and in behalf of RSEC, was blacklisted
by RSEC due to numerous fraudulent and unauthorized transactions. Worse, MGV allegedly was able to divert investments
made by "high networth" clients of RSEC into some other accounts. Ku’s audit report shows that RSEC owes plaintiff the total
amount of Php70,064,426.88.

Thus, Ku filed a complaint before RTC for payment of the amounts and shares of stocks. RTC, Branch 63 ruled that the case
involves trading of securities under the jurisdiction of a Special Commercial Court. Thus, the case was re-raffled to branch
149 of RTC, Makati, which ruled in favor of Ku.

CA ruled that RTC, Branch 63, had no jurisdiction over the subject matter of the case.

Issue: Whether or not the controversy is an intra-corporate dispute under the jurisdiction of RTC in the exercise of its function
as a special commercial court
Ruling:

Jurisdiction over intra-corporate controversies is transferred by law (RA 8799) from the SEC to the RTCs in general, but the
authority to exercise such jurisdiction is given by the Supreme Court, in the exercise of its rule-making power under the
Constitution, to RTCs which are specifically designated as Special Commercial Courts. On the other hand, the cases
enumerated under Section 19 of BP 129, as amended, are taken cognizance of by the RTCs in the exercise of their general
jurisdiction.

Thus, based on the allegations in petitioner's Complaint, in relation to the provisions of law, there is no dispute that the case
falls under the jurisdiction of the RTC. However, whether or not the RTC shall take cognizance of the case in the exercise of
its general jurisdiction, or as a special commercial court, is another matter. There are no intra-corporate relations between
the parties. Petitioner is neither a stockholder, partner, member or officer of respondent corporation. The parties' relationship
is limited to that of an investor and a securities broker. Moreover, the questions involved neither pertain to the parties' rights
and obligations under the Corporation Code, if any, nor to matters directly relating to the regulation of the corporation.