G.R. No.

187262, January 10, 2019

ENGINEERING GEOSCIENCE, INC., Petitioner, v. PHILIPPINE SAVINGS BANK

FACTS:

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

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

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

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

ISSUE:
Whether the CA erred in annulling and setting aside the Orders dated 24 August 2007 and 23
January 2008 issued by the [trial court] thereby reinstating the Decision dated 12 January 1993
which approved an alleged Compromise Agreement entered into between PSBank and the
former President of EGI without the knowledge, consent and authority of the latter

HELD:

The general rule admits of exceptions: (1) the conclusion is grounded on speculations, surmises
or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave
abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the findings of
fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are
based; (7) the findings of absence of facts are contradicted by the presence of evidence on
record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the
Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion; (10) the findings of the Court of Appeals are
beyond the issues of the case; and (11) such findings are contrary to the admissions of both
parties. We find that none of the exceptions apply in the present case.

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

From the foregoing, it is readily apparent that EGI's board of directors failed to exercise the
requisite diligence of a good father of a family in handling its affairs, specifically its loan
obligation with [PSBank] which it is very much aware of. Also, there is no allegation as to
whether the board of directors at the time of the execution of the compromise agreement is
the same board of directors which is now claiming that its former president intentionally
concealed and withheld the said complaint and compromise agreement.

A corporation, as a juridical entity, acts through its board of directors. The board exercises
almost all corporate powers, lays down all corporate business policies, and is responsible for
the efficiency of management. The general rule is that, in the absence of authority from the
board of directors, no person, not even its officers, can validly bind a corporation. Section 23 of
the Corporation Code of the Philippines.
 NORMA C. GAMARO and JOSEPHINE G. UMALI vs. PEOPLE OF THE PHILIPPINES

G.R. No. 211917

FACTS:

Petitioners were charged with Estafa. Sometime in 2002, Fineza engaged in a business venture
with Gamaro and her daughters - Umali and accused Fineza would buy any foreclosed pieces of
jewelry from M. Lhuillier Pawnshop whenever informed by Umali who was then the manager of
the said pawnshop.The business venture was initially successful. However, when Fineza
discovered that Norma Gamaro, together with her daughters Rowena Gamaro and Umali, also
engaged in a similar business with other suppliers of pieces of jewelry, she decided to terminate
the business.

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

ISSUE:

Whether the attorney-client relationship raises the presumption of confidentiality in every

communication

RULING:

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

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

VIVA SHIPPING LINES, INC. V. KEPPEL PHILIPPINES MINING, INC.

G.R. NO. 177382 FEBRUARY 17, 2016

FACTS: 

On October 4, 2005, Viva Shipping Lines, Inc. (Viva Shipping Lines) filed a Petition for Corporate
Rehabilitation before the Regional Trial Court of Lucena City. The Regional Trial Court initially
denied the Petition for failure to comply with the requirements in Rule 4, Sections 2 and 3 of
the Interim Rules of Procedure on Corporate Rehabilitation. On October 17, 2005, Viva Shipping
Lines filed an Amended Petition.

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

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

According to Viva Shipping Lines, the devaluation of the Philippine peso, increased competition,
and mismanagement of its businesses made it difficult to pay its debts as they became due. It
also stated that “almost all [its] vessels were rendered unserviceable either because of age and
deterioration that [it] can no longer compete with modern made vessels owned by other
operators.”

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

ISSUE: 

W/N THE CORPORATE REHABILITATION IS PROPER.

HELD: 

NO. The first rule breached by petitioner is the failure to implead all the indispensable parties.
Petitioner did not even interpose reasons why it should be excused from compliance with the
rule to “state the full names of the parties to the case, without impleading the court . . . as . . .
respondents.” Petitioner did exactly the opposite. It failed to state the full names of its creditors
as respondents. Instead, it impleaded the Presiding Judge of the originating court.

An indispensable party is one who has such an interest in the controversy or subject matter of a
case that a final adjudication cannot be made in his or her absence, without injuring or affecting
that interest. He or she is a party who has not only an interest in the subject matter of the
controversy, but “an interest of such nature that a final decree cannot be made without
affecting [that] interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete or
equitable.” Further, an indispensable party is one who must be included in an action before it
may properly proceed.

A corporate rehabilitation case cannot be decided without the creditors’ participation. The
court’s role is to balance the interests of the corporation, the creditors, and the general public.
Impleading creditors as respondents on appeal will give them the opportunity to present their
legal arguments before the appellate court. The courts will not be able to balance these
interests if the creditors are not parties to a case. Ruling on petitioner’s appeal in the absence
of its creditors will not result in judgment that is effective, complete, and equitable.

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