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138814, APRIL
26, 2009
SEC Case No. 02-94-4678 was instituted on 10 February 1994 by
respondent Miguel V. Campos with the Securities, Investigation and Clearing
Department (SICD) of the Securities and Exchange Commission (SEC), a
Petition against herein petitioners Makati Stock Exchange, Inc. (MKSE). The
Petition, sought: (1) the nullification of the Resolution dated 3 June1993 of the
MKSE Board of Directors, which allegedly deprived him of his right to participate
equally in the allocation of Initial Public Offerings (IPO) of corporations registered
with MKSE; (2) the delivery of the IPO shares he was allegedly deprived of, for
which he would pay IPO prices; and (3) the payment ofP2 million as moral
damages,P1 million as exemplary damages, andP500,000.00 as attorney’s
fees and litigation expenses. The SICD issued an Order granting respondent’s
prayer for the issuance of a Temporary Restraining Order to enjoin petitioners
from implementing or enforcing the Resolution of the MKSE Board of Directors.
Subsequently issued another Order on10 March 1994granting respondent’s
application for a Writ of Preliminary Injunction, to continuously enjoin, during the
pendency of SEC Case No. 02-94-4678, the implementation or enforcement
of the MKSE Board Resolution in question. On 11 March 1994, petitioners filed
a Motion to Dismiss respondent’s Petition based on the following grounds: (1) the
Petition became moot due to the cancellation of the license of MKSE; (2) the SICD
had no jurisdiction over the Petition; and (3) the Petition failed to state a cause of
action. The SICD denied petitioner’s Motion to Dismiss. Petitioners again
challenged Order of SICD before the SEC en banc through another Petition for
Certiorari. The SEC en banc nullified the Order of SICD granting a Writ of
Preliminary Injunction in favour of respondent. SEC en banc annulled the Order of
SICD in SEC Case No. 02-94-4678 denying petitioners’ Motion to Dismiss, and
accordingly ordered the dismissal of respondent’s Petition before the SICD.
Respondent filed a Petition for Certiorari with the Court of Appeals.
Petitioners filed a Motion for Reconsideration but was denied by the Court of

The petition filled by the respondent, Miguel Campos should be dismissed for
failure to state a cause of action. A cause of action is the act or omission by which
a party violates a right of another. A complaint states a cause of action where it
contains three essential elements of a cause of action, namely: (1) the legal right
of the plaintiff, (2) the correlative obligation of the defendant, and (3) the
act or omission of the defendant in violation of said legal right. If
these elements are absent, the complaint becomes vulnerable to dismissal on
the ground of failure to state a cause of action. However, the terms right and
obligation are not magic words that would automatically lead to the conclusion
that such Petition sufficiently states a cause of action. Right and obligation are
legal terms with specific legal meaning. A right is a claim or title to an interest
in anything whatsoever that is enforceable by law while an obligation is defined in
the Civil Code as a juridical necessity to give, to do or not to do. Justice J.B.L.
Reyes offers the definition given by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person (called the creditor) may
demand from another (called the debtor) the observance of a determinative
conduct (the giving, doing or not doing), and in case of breach, may demand
satisfaction from the assets of the latter. Art. 1157 of the Civil Code provides that
Obligations arise from (1) Law;(2) Contracts;(3) Quasi-contracts; (4) Acts or
omissions punished by law; and (5)Quasi-delicts. The mere assertion of a right and
claim of an obligation in an initiatory pleading, whether a Complaint or Petition,
without identifying the basis or source thereof, is merely a conclusion of fact and
law.(In the case at bar, although the Petition in SEC Case No. 02-94-4678 does
allege respondent’s right to subscribe to the IPOs of corporations listed in the
stock market at their offering prices, and petitioners’ obligation to continue
respecting and observing such right, the Petition utterly failed to lay down the
source or basis of respondent’s right and/or petitioners’ obligation.)Respondent
merely quoted in his Petition the MKSE Board Resolution, passed sometime in
1989, granting him the position of Chairman Emeritus of MKSE for life. However,
there is nothing in the said Petition from which the Court can deduce that
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted
by law, contract, or any other legal source, the right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.(allocation of IPO
shares was merely alleged to have been done in accord with a practice normally
observed by the members of the stock exchange) A practice or custom is,
as a general rule, not a source of a legally demandable or enforceable right.

Great Asian Sales Center Corp. V. CA (2002)

 March 17, 1981: Great Asian BOD approved a resolution authorizing its
Treasurer and General Manager, Arsenio Lim Piat, Jr. (Arsenio) to secure a
loan, not exceeding 1M, from Bancasia
 February 10, 1982: Great Asian BOD approved a resolution authorizing
Great Asian to secure a discounting line with Bancasia in an amount not
exceeding P2M
 also designated Arsenio as the authorized signatory to sign all
instruments, documents and checks necessary to secure the
discounting line
 Tan Chong Lin signed 2 surety agreements in favor of Bancasia
 Great Asian, through its Treasurer and General Manager Arsenio, signed 4
Deeds of Assignment of Receivables (Deeds of Assignment), assigning to
Bancasia 15 postdated checks:
 9 checks were payable to Great Asian
 3 were payable to "New Asian Emp."
 3 were payable to cash
 various customers of Great Asian issued these postdated checks in
payment for appliances and other merchandise.
 Deed of Assignments of assignment:
 January 12, 1982: 4 post-dated checks of P244,225.82
maturing March 17, 1982, 2 were dishonored
 January 12, 1982: 4 post-dated checks of P312,819 maturing April 1,
1982, all 4 were dishonored
 February 11, 1982: 8 postdated checks of P344,475 maturing April
30, 1982, all 8 checks were dishonored
 March 5, 1982: 1 postdated checks of P200K maturing March 18,
1982 also dishonored
 Great Asian assigned the postdated checks to Bancasia at a discount rate of
less than 24% of the face value of the checks
 Arsenio endorsed all the 15 dishonored checks by signing his name at the
back of the checks
 8 dishonored checks bore the endorsement of Arsenio below the
stamped name of "Great Asian Sales Center"
 7 dishonored checks just bore the signature of Arsenio
 The drawee banks dishonored the 15 checks on maturity when deposited
for collection by Bancasia, with any of the following as reason for the
 "account closed"
 "payment stopped"
 "account under garnishment"
 "insufficiency of funds
 March 18, 1982: Bancasia's lawyer,Atty. Eladia Reyes, sent by registered
mail to Tan Chong Lin a letter notifying him of the dishonor and demanding
payment from him
 June 16, 1982: Bancasia sent by personal delivery a letter to Tan Chong Lin
 May 21, 1982: Great Asian filed a case before the CFI for insolvency listing
Bancasia as one of the creditors of Great Asian in the amount of
 June 23, 1982: Bancasia filed a complaint for collection of a sum of money
against Great Asian and Tan Chong Lin
 CFI: favored Bancasia ordering Great Asian and Tan Chong Lin to pay jointly
and severally
 CA: deleted atty. Fees

ISSUE: W/N Bancasia and Tang Chon Lin should be held liable under the Civil Code
because it was a separate and distinct deed of assignment

HELD: YES. Affirmed with Modification

 As plain as daylight, the two board resolutions clearly authorize Great Asian
to secure a loan or discounting line from Bancasia
 Clearly, the discounting arrangements entered into by Arsenio under the
Deeds of Assignment were the very transactions envisioned in the two
board resolutions of Great Asian to raise funds for its business.
 There is nothing in the Negotiable Instruments Law or in the Financing
Company Act (old or new), that prohibits Great Asian and Bancasia parties
from adopting the with recourse stipulation uniformly found in the Deeds
of Assignment. Instead of being negotiated, a negotiable instrument may
be assigned.
 the endorsement does not operate to make the finance company a holder
in due course. For its own protection, therefore, the finance company
usually requires the assignor, in a separate and distinct contract, to pay the
finance company in the event of dishonor of the notes or checks. (only
 Otherwise, consumers who purchase appliances on installment,
giving their promissory notes or checks to the seller, will have no
defense against the finance company should the appliances later turn
out to be defective
 As endorsee of Great Asian, Bancasia had the option to proceed against
Great Asian under the Negotiable Instruments Law. Had it so proceeded,
the Negotiable Instruments Law would have governed Bancasia’s cause of
action. Bancasia, however, did not choose this route.
 Instead, Bancasia decided to sue Great Asian for breach of contract
under the Civil Code, a right that Bancasia had under the
express with recourse stipulation in the Deeds of Assignment.
 Great Asian, after paying Bancasia, is subrogated back as creditor of
the receivables. Great Asian can then proceed against the drawers
who issued the checks. Even if Bancasia failed to give timely notice of
dishonor, still there would be no prejudice whatever to Great Asian.
 Under the Negotiable Instruments Law, notice of dishonor is not required if
the drawer has no right to expect or require the bank to honor the check,
or if the drawer has countermanded payment
 In the instant case, all the checks were dishonored for any of the
following reasons:
 "account closed"
 "account under garnishment"
 "insufficiency of funds"
 drawers had no right to expect or require the bank to
honor the checks
 "payment stopped"
 drawers had countermanded payment
 Moreover, under common law, delay in notice of dishonor, where such
notice is required, discharges the drawer only to the extent of the loss
caused by the delay.
 Again, we reiterate that this obligation of Great Asian is separate and
distinct from its warranties as indorser under the Negotiable Instruments
Law.Civil Code are applicable and not the Negotiable Instruments Law.
 separate Deeds of Assignment - provisions of the Civil Code are applicable
(NOT Negotiable Instruments Law)
 Great Asian’s four contracts assigning its fifteen postdated checks to
Bancasia expressly stipulate the suspensive condition that in the event the
drawers of the checks fail to pay, Great Asian itself will pay Bancasia
 The stipulations in the Surety Agreements undeniably mandate the solidary
liability of Tan Chong Lin with Great Asian
 Moreover, the stipulations in the Surety Agreements are sufficiently
broad, expressly encompassing "all the notes, drafts, bills of
exchange, overdraft and other obligations of every kind which the
PRINCIPAL may now or may hereafter owe the Creditor"


A.C. No. 4943. January 26, 2001
In 1995, complainant De Guzman engaged the services of respondent De Dios as
counsel in order to form a corporation. Later, in1996, with the assistance of the
latter, Suzuki Beach Hotel, Inc. (SBHI) was registered with the Securities and
Exchange Commission. Complainant paid on respondent a monthly retainer fee of
In, 1997, the corporation required complainant to pay her unpaid subscribed
shares of stock amounting to P2,235,000.00 or 22,350 shares on or before
December 30, 1997. Then in 1998, De Guzman received notice of the public
auction sale of her delinquent shares and a copy of a board resolution authorizing
such sale. Complainant soon learned that her shares had been acquired by Ramon
del Rosario, one of the incorporators of SBHI. The sale ousted complainant from
the corporation completely. While respondent rose to be president of the
Complainant alleged that she relied on the advice of Atty. De Dios and believed
that would help her with the management of the corporation. She pointed out
that respondent appeared as her counsel and signed pleadings in a case where
complainant was one of the parties. Respondent, however, explained that she
only appeared because the property involved belonged to SBHI, that the
complainant misunderstood her role legal counsel of Suzuki Beach Hotel, Inc.

W/N there is attorney-client relationship between the parties
W/N there is violation of lawyer’s oath
Yes. Attorney-client relationship existed between the parties. It was the
complainant who retained respondent to form a corporation. She appeared as
counsel in behalf of complainant.
Yes, there is violation of lawyer’s oath. Lawyers must conduct themselves,
especially in their dealings with their clients and the public at large, with honesty
and integrity in a manner beyond reproach. As a lawyer, he is bound by her oath
to do no falsehood or consent to its commission and to conduct herself as a
lawyer according to the best of her knowledge and discretion. The lawyer’s oath is
a source of obligations and violation thereof is a ground for suspension,
disbarment, or other disciplinary action.
In this case, there was evidence of collusion between the board of directors and
respondent wherein the complainant was ousted completely from the
corporation while the respondent became the President. It is clear that the acts of
respondent Atty. De Dios are clearly in violation of her solemn oath as a lawyer by
representing conflicting interests and engaging in unlawful, dishonest, immoral or
deceitful conduct. Thus, Supreme Court SUSPENDS her from the practice of law
for six (6) months, with warning that a repetition of the charges will be dealth
with more severely.
David Reyes vs. Jose Lim, G.R. No. 134241, August 11, 2003
Petitioner David Reyes filed a complaint for annulment of contract and damages
against respondents. The complaint alleged that Reyes as seller and Lim as buyer
entered into a contract to sell a parcel of land located along F.B. Harrison Street,
Pasay City with a monthly rental of P35,000.
The complaint claimed that Reyes had informed Harrison Lumber to vacate the
Property before the end of January 1995. Reyes also informed Keng and Harrison
Lumber that if they failed to vacate by 8 March 1995, he would hold them liable
for the penalty of P400,000 a month as provided in the Contract to Sell. It was
also alleged that Lim connived with Harrison Lumber not to vacate the Property
until the P400,000 monthly penalty would have accumulated and equaled the
unpaid purchase price of P18,000,000.
Keng and Harrison Lumber denied that they connived with Lim to defraud Reyes,
and that Reyes approved their request for an extension of time to vacate the
Property due to their difficulty in finding a new location for their business.
Harrison Lumber claimed that it had already started transferring some of its
merchandise to its new business location in Malabon.
Lim filed his Answer stating that he was ready and willing to pay the balance of
the purchase price. Lim requested a meeting with Reyes through the latter’s
daughter on the signing of the Deed of Absolute Sale and the payment of the
balance but Reyes kept postponing their meeting. Reyes offered to return the P10
million down payment to Lim because Reyes was having problems in removing
the lessee from the Property. Lim rejected Reyes’ offer and proceeded to verify
the status of Reyes’ title to the Property. Lim learned that Reyes had already sold
the Property to Line One Foods Corporation Lim denied conniving with Keng and
Harrison Lumber to defraud Reyes.Reyes filed a Motion for Leave to File Amended
Complaint due to supervening facts. These included the filing by Lim of a
complaint for estafa against Reyes as well as an action for specific performance
and nullification of sale and title plus damages before another trial court. The trial
court granted the motion.
In his Amended Answer Lim prayed for the cancellation of the Contract to Sell and
for the issuance of a writ of preliminary attachment against Reyes. The trial court
denied the prayer for a writ of preliminary attachment.
Lim requested in open court that Reyes be ordered to deposit the P10 million
down payment with the cashier of the Regional Trial Court of Parañaque. The trial
court granted this motion.
Reyes filed a Motion to Set Aside the Order on the ground the Order practically
granted the reliefs Lim prayed for in his Amended Answer. The trial court denied
Reyes’ motion.
The trial court denied Reyes’ Motion for Reconsideration. In the same order, the
trial court directed Reyes to deposit the P10 million down payment with the Clerk
of Court.
Reyes filed a Petition for Certiorari with the Court of Appeals and prayed that the
orders of the trial court be set aside for having been issued with grave abuse of
discretion amounting to lack of jurisdiction. But the Court of Appeals dismissed
the petition for lack of merit.
Hence, this petition for review.

Whether on not the equity jurisdiction is an applicable law on the matter?

The instant case, the Supreme Court held that if this was a case where there is
hiatus in the law and in the Rules of Court. If this case was left alone, the hiatus
will result in unjust enrichment to Reyes at the expense of Lim. Here the court
excercised equity jurisdiction. The purpose of the exercise of equity jurisdiction in
this case is to prevent unjust enrichment and to ensure restitution so that
substantial justice may be attained in cases where the prescribed or customary
forms of ordinary law are inadequate.
The Supreme Court also state that rescission is possible only when the person
demanding rescission can return whatever he may be obliged to restore. A court
of equity will not rescind a contract unless there is restitution, that is, the parties
are restored to the status quo ante.
In this case, it was just, equitable and proper for the trial court to order the
deposit of the P10 million down payment. The decision of the Court of Appeals
was affirmed.

Philippine Bank Of Commerce V. CA (1997)

G.R. No. 97626 March 14, 1997

 May 5, 1975 to July 16, 1976: Romeo Lipana claims to have entrusted RMC
funds in the form of cash totalling P304,979.74 to his secretary, Irene
Yabut, for the purpose of depositing said funds in the current accounts of
RMC with Philippine Bank of Commerce (PBC)
 They were not credited to RMC's account but were instead deposited
to Account No. 53-01734-7 of Yabut's husband, Bienvenido Cotas
 Romeo Lipana never checked their monthly statements of account
reposing complete trust and confidence on PBC
 Irene Yabut's modus operandi was to furnish 2 copies of deposit slip upon
and both are always validated and stamped by the teller Azucena
Mabayad :
 original showed the name of her husband as depositor and his
current account number - retained by the bank
 duplicate copy was written the account number of her husband but
the name of the account holder was left blank
 After validation, Yabut would then fill up the name of RMC in the space left
blank in the duplicate copy and change the account number to RMC's
account number
 This went on in a span of more than 1 year without private respondent's
 Upon discovery of the loss of its funds, RMC demanded from PBC the
return of its money and later on filed in the RTC
 RTC: PBC and Azucena Mabayad jointly and severally liable
 CA: affirmed with modification deleting awards of exemplary damages and
attorney's fees

1. W/N applying the last clear chance, PBC's teller is negligent for failing to avoid
the injury by not exercising the proper validation procedure-YES
2. W/N there was contirbutory negligence by RMC - YES

HELD: 60-40 ratio. only the balance of 60% needs to be paid by the PBC

1. YES.
 The fact that the duplicate slip was not compulsorily required by the bank
in accepting deposits should not relieve the PBC of responsibility
 The odd circumstance alone that such duplicate copy lacked one vital
information (Name of the account holder) should have already put Ms.
Mabayad on guard.
 Negligence here lies not only on the part of Ms. Mabayad but also on the
part of the bank itself in its lack in selection and supervision of Ms.
 Mr. Romeo Bonifacio, then Manager of the Pasig Branch of the petitioner
bank and now its Vice-President, to the effect that, while he ordered the
investigation of the incident, he never came to know that blank deposit
slips were validated in total disregard of the bank's validation procedures
until 7 years later
 last clear chance/supervening negligence/discovered peril
 where both parties are negligent, but the negligent act of one is
appreciably later in time than that of the other, or when it is
impossible to determine whose fault or negligence should be
attributed to the incident, the one who had the last clear opportunity
to avoid the impending harm and failed to do so is chargeable with
the consequences thereof
 antecedent negligence of a person does not preclude the recovery of
damages for the supervening negligence of, or bar a defense against
liability sought by another, if the latter, who had the last fair chance,
could have avoided the impending harm by the exercise of due
 Here, assuming that RMC was negligent in entrusting cash to a
dishonest employee, yet it cannot be denied that PBC bank,
thru its teller, had the last clear opportunity to avert the injury
incurred by its client, simply by faithfully observing their self-
imposed validation procedure.
 Art. 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and
2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be
required. In the case of banks, however, the degree of diligence required is more
than that of a good father of a family. Considering the fiduciary nature of their
relationship with their depositors, banks are duty bound to treat the accounts of
their clients with the highest degree of care
2. YES.
 it cannot be denied that, indeed, private respondent was likewise negligent
in not checking its monthly statements of account. Had it done so, the
company would have been alerted to the series of frauds being committed
against RMC by its secretary. The damage would definitely not have
ballooned to such an amount if only RMC, particularly Romeo Lipana, had
exercised even a little vigilance in their financial affairs. This omission by
RMC amounts to contributory negligence which shall mitigate the damages
that may be awarded to the private respondent
 Article 2179 of the New Civil Code
When the plaintiff's own negligence was the immediate and proximate cause of
his injury, he cannot recover damages. But if his negligence was only contributory,
the immediate and proximate cause of the injury being the defendant's lack of
due care, the plaintiff may recover damages, but the courts shall mitigate the
damages to be awarded
Safeguard Security Agency Inc. and Admer Pajarillo vs. Lauro Tangco,
G.R. No. 165732, 14 December 2006
Nature: Petition for review on certiorari
Ponente: Austria-Martinez, J.

On 3 November 1997, at about 2:50 p.m., Evangeline Tangco went to Ecology
Bank, Katipunan Branch in Quezon City to renew her time deposit. Evangeline, a
duly licensed firearm holder with corresponding permit to carry the same outside
of her residence, approached Pajarillo, security guard of Ecology Bank to deposit
the firearm for safekeeping, suddenly, Pajarillo shot Evangeline with his service
shotgun hitting her in the abdomen instantly causing her death.

Evangeline’s husband, Lauro, together with his six minor children filed with the
RTC of QC a criminal case against Pajarillo, where they likewise reserved their
right to file a separate civil action on the said criminal case. Pajarillo was
subsequently convicted of homicide in 19 January 2000 by the RTC and the CA
upheld the decision with modification on the penalty on 31 July 2000.

On 14 January 1998, respondents filed with the RTC of Marikina City a complaint
for damages against Pajarillo for negligently shooting Evangeline and against
Safeguard Security Agency Inc. for failing to observe the diligence of a good father
of a family to prevent the damage committed by its security guard. The
respondents prayed for actual, moral and exemplary damages and attorney’s

The RTC of Marikina rendered judgment in favor of Lauro Tangco et. al. ordering
Pajarillo and Safeguard Security agency Inc. ,jointly and severally, to pay:
a. ₱157,430.00 as actual damages;
b. ₱50,000 as death indemnity;
c. ₱1million pesos as moral damages;
d. ₱300,000.00 as exemplary damages;
e. ₱30,000.00 as attorney’s fees; and costs of suit.

The RTC ruled that Pajarillo did not act in self-defense; giving no weight to his
claim that Evangeline was seen roaming around the area prior to the incident
given that Pajarillo had not made any such reports to the head office and the
police authorities. Pajarillo should have exercised proper prudence and
necessary care in ascertaining the matter instead of shooting her instantly. The
RTC likewise found Safeguard to be jointly and severally liable with Pajarillo since
there was no sufficient evidence to show that Safeguard exercised the diligence of
a good father by simply showing that it required its guards to attend trainings and
seminars which is not the supervision as contemplated under the law. It includes
the duty to see to it that such regulations and instructions are faithfully complied

The CA modified that decision of the RTC saying that Safeguard Security Agency
Inc. is only subsidiarily liable. A motion for reconsideration was subsequently filed
and denied by the CA, hence this petition.

1. Whether or not the Pajarillo is guilty of negligence in shooting Evangeline
2. Whether or not Safeguard Security Agency Inc. should be held solidarily
liable for the damages awarded to respondents in relation to Article 2176
of the Civil Code.
1. Yes, Pajarillo is guilty of negligence in shooting Evangeline as upheld by
both the RTC and CA in separate decisions. The SC affirms these decisions
since based on the evidence presented, Pajarillo failed to substantiate his
claims that Evangeline was seen roaming outside the vicinity of the bank
and acting suspiciously which Pajarillo mistook as a bank robbery which led
him to draw his service firearm and shot Evangeline.

2. Yes, Safeguard Security Agency Inc. should be held solidarily liable for the
damages awarded to the respondents. The nature of the respondents’
cause of action is determined in the complaint itself, its allegations and
prayer for relief. In the complaint, the respondents are invoking their right
to recover damages against Safeguard for their indirect responsibility for
the injury caused by Pajarillo’s act of shooting and killing Evangeline under
Article 2176. Thus, the civil action filed by respondents was not derived
from the criminal liability of Pajarillo but one based on culpa aquiliana or
quasi delict which is a separate and distinct from the civil liability arising
from crime.

As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the
quasi-delict committed by Pajarillo and is presumed to be negligent in the
selection and supervision of his employee by operation of law. The Court agrees
with the RTC’s finding that Safeguard had exercised diligence in the selection of
Pajarillo since records show that he underwent psychological and
neuropsychiatric evaluation, pre-licensing training course for security guards, as
well as police and NBI clearances. However, Safeguard was not diligent in
providing trainings, classroom instructions and continuous evaluation of the
security guard’s performance. Thus, the SC affirms with modification that the civil
liability of Safeguard Security Agency Inc. is solidary and primary under Article
2180 of the Civil Code.