Badio, Aripah - Commrevdigest PDF

ARIPAH SAMPORNA BADIO
Mercantile Law (Saturday 9-12 am)

AUSL-Refresher
INSURANCE LAW
(P.D. as amended by RA 10607)
1. Manulife Philippines Inc. vs Hermenegilda Ybañez, G.R. No. 204736,

November 28, 2016;
2. Sun Life of Canada (Philippines), Inc. vs. Ma. Daisy’s Sibya, Jesus Manuel
S. Sibya III, Jaime Luis S. Sibya, and the Estate of the Deceased Atty.
Jesus, Sibya Jr., G.R. No. 211212, June 08, 2016;
3. Jaime T. Gaisano vs. Development Insurance and Surety Corporation,

G.R. No. 190702, February 27, 2017;
4. Equitable Insurance Corporation vs. Transmodal International, Inc., G.R.

No. 223592, August 07, 2017;
5. Malayan insurance Co., Inc, et. al vs. Emma Consepcion L. Lin, G.R No.
207277, January 16, 2017;
6. The Insular Assurance Co., Ltd. vs. The Heirs of Jose H. Alvarez, G.R. No.
207526, October 03, 2018;
Union Bank of the Philippines vs. Heirs of Jose H. Alvarez, G.R. No.
210156, October 3, 2018;
7. Industrial Personnel and Management Services, Inc., vs. Country Bankers

Insurance Corporation, G.R No. 194126, October 17, 2018;
8. Keihen-Everett Forwarding Co., Inc., vs. Tokio Marine Malayan Insurance

Co., Inc. et.al, G.R. No. 212107, January 28, 2019;
9. The Insular Life Assurance Company, Ltd., vs. Paz Y. Khu, et al, G.R No.
195176, April 18. 2016;
10. Manila Bankers Life Insurance Corporation vs. Cresencia P. Aban, G.R. No
175666, July 29, 2013.
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Manulife Philippines Inc. vs Hermenegilda Ybañez

G.R. No. 204736, November 28, 2016
FACTS:
Manulife Philippines, Inc. (Manulife) instituted a Complaint for Rescission of

Insurance Contracts against Hermenegilda Ybañez (Hermenegilda) and the BPI
Family Savings Bank (BPI Family) before the RTC of Makati City.
Manulife alleged that the insurance policies issued to Dr. Gumersindo Solidum
Ybañez (insured), were void due to concealment or misrepresentation of material
facts in the latter's applications for life insurance; that Hermenegilda, wife of the
insured, was was revocably designated as beneficiary in the subject insurance
policies; that on November 17, 2003, when one of the subject insurance policies
had been in force for only one year and three months, while the other for only four
months, the insured died; that on December 10, 2003, Hermenegilda filed a
Claimant's Statement-Death Claim with respect to the subject insurance policies;
that the Death Certificate dated November 17, 2003 stated that the insured had
"Hepatocellular CA., Crd Stage 4, secondary to Uric Acid Nephropathy; SAM
Nephropathy recurrent malignant pleural effusion; NASCVC"; that Manulife
conducted an investigation into the circumstances leading to the said insured's
death, in view of the aforementioned entries in the said insured's Death Certificate;
that Manulife thereafter concluded that the insured misrepresented or concealed
material facts at the time the subject insurance policies were applied for; and that
for this reason Manulife accordingly denied Hermenegilda's death claims and
refunded the premiums that the insured paid on the subject insurance policies.
In her Answer, Hermenegilda countered that Manulife’s own insurance agent, Ms.
Elvira Monteclaros herself assured the insured that there would be no problem
regarding the application for the insurance policy. In fact, it was Monteclaros who
filled up everything in the questionnaire, so that all that the insured needed to do
was sign it and it's done.
It is interesting to note that the answers in the insurance agent's form for the
insured did not jibe with the answers made by Dr. Lumapas of the Complaint. This
only boosts Hermenegilda's claim that x x x indeed, it was the Manulife's agent
herself, Ms. Montesclaros who checked all the items in the said form to speed up
the insurance application and its approval, so she could get her commission as
soon as possible.
In fine, at the time when both insurance policies in question were submitted for
approval to Manulife, the latter had all the forewarnings that should have put it on
guard or on notice that things were not what it wanted them to be, reason enough
to bestir it into exercising greater prudence and caution to further inquire into the
health or medical history of the insured. In particular, Manulife ought to have noted
the fact that the insured was at that time already 65 years old, x x x that he had a
previous operation, and x x x that his health was "below average. x x x
On November 25, 2005, BPI Family filed a Manifestation praying that either it be
dropped from the case or that the case be dismissed with respect to it, because it
no longer had any interest in the subject insurance policies as asssignee because
the insured’s obligation with it had already been settled or paid. Since no objection
was interposed to this prayer by either Manulife or Hermenegilda, the RTC granted
this prayer in its Order of November 25, 2005.
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After due proceedings, the RTC dismissed Manulife's Complaint. The RTC found
no merit at all in Manulife's Complaint for rescission of the subject insurance
policies because it utterly failed to prove that the insured had committed the
alleged misrepresentation/s or concealment/s.
In its appellate review, the CA virtually adopted en toto the findings of facts made
by, and the conclusions of law arrived at, by the RTC. The CA, like the RTC, found
Manulife's Complaint bereft of legal and factual bases. The CA ruled that it is
settled that misrepresentation or concealment in insurance is an affirmative
defense, which the insurer must establish by convincing evidence if it is to avoid
liability; and that in this case the one and only witness presented by Manulife utterly
failed to prove the basic elements of the alleged misrepresentation/s or
concealment/s of material facts imputed by Manulife against the now deceased
insured. The CA held that there is no basis for Manulife's claim that it is exempted
from the duty of proving the insured's supposed misrepresentation/s or
concealment/s, as these had allegedly been admitted already in Hermenegilda's
Answer; that in the absence of authentication by a competent witness, the
purported CDH medical records of the insured are deemed hearsay hence,
inadmissible, and devoid of probative value; and that the medical certificate, even
if admitted in evidence as an exception to the hearsay rule, was still without
probative value because the physician or doctor or the hospital's official who issued
it, was not called to the witness stand to validate it or to attest to it.
ISSUE:
Whether the CA committed any reversible error in affirming the RTC Decision
dismissing Manulife's Complaint for rescission of insurance contracts for failure to
prove concealment on the part of the insured.
HELD:
No. The present recourse essentially challenges anew the findings of fact by both
the RTC and the CA that the Complaint for rescission of the insurance policies in
question will not prosper because Manulife failed to prove concealment on the part
of the insured. This is not allowed. It is horn-book law that in appeal by certiorari to
this Court under Rule 45 of the Revised Rules of Court, the findings of fact by the
CA, especially where such findings of fact are affirmatory or confirmatory of the
findings of fact of the RTC, as in this case, are conclusive upon this Court. The
reason is simple: this Court not being a trial court, it does not embark upon the
task of dissecting, analyzing, evaluating, calibrating or weighing all over again the
evidence, testimonial or documentary, that the parties adduced during trial. Of
course, there are exceptions to this rule, such as (1) when the conclusion is
grounded upon speculations, surmises or conjectures; (2) when the inference is
manifestly mistaken, absurd or impossible; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of fact are conflicting; (6) when there is no citation of specific evidence
on which the factual findings are based; (7) when the findings of absence of facts
is contradicted by the presence of evidence on record; (8) when the findings of the
CA are contrary to the findings of the RTC; (9) when the CA manifestly overlooked
certain relevant and undisputed facts that, if properly considered, would justify a
different conclusion; (10) when the findings of the CA are beyond the issues of the
case; and (11) when the CA’s findings are contrary to the admission of both parties.
We are satisfied that none of these exceptions obtains in the Petition at bench.
Thus, this Court must defer to the findings of fact of the RTC – as affirmed or
confirmed by the CA – that Manulife’s Complaint for rescission of the insurance
policies in question was totally bereft of factual and legal bases because it had
utterly failed to prove that the insured had committed the alleged
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misrepresentation/s or concealment/s of material facts imputed against him. The
RTC correctly held that the CDH’s medical records that might have established the
insured’s purported misrepresentation/s or concealment/s was inadmissible for
being hearsay, given the fact that Manulife failed to present the physician or any
responsible official of the CDH who could confirm or attest to the due execution
and authenticity of the alleged medical records. Manulife had utterly failed to prove
by convincing evidence that it had been beguiled, inveigled, or cajoled into selling
the insurance to the insured who purportedly with malice and deceit passed himself
off as thoroughly sound and healthy, and thus a fit and proper applicant for life
insurance. Manulife's sole witness gave no evidence at all relative to the particulars
of the purported concealment or misrepresentation allegedly perpetrated by the
insured. In fact, Victoriano merely perfunctorily identified the documentary exhibits
adduced by Manulife; she never testified in regard to the circumstances attending
the execution of these documentary exhibits much less in regard to its contents.
Of course, the mere mechanical act of identifying these documentary exhibits,
without the testimonies of the actual participating parties thereto, adds up to
nothing. These documentary exhibits did not automatically validate or explain
themselves. "The fraudulent intent on the part of the insured must be established
to entitle the insurer to rescind the contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and the duty to establish such
defense by satisfactory and convincing evidence rests upon the insurer." For
failure of Manulife to prove intent to defraud on the part of the insured, it cannot
validly sue for rescission of insurance contracts.
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Sun Life of Canada (Philippines), Inc. vs. Ma. Daisy’s Sibya, Jesus Manuel
S. Sibya III, Jaime Luis S. Sibya, and the Estate of the Deceased Atty.
Jesus, Sibya Jr., G.R. No. 211212, June 08, 2016
FACTS:
On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life
insurance with Sun Life. In his Application for Insurance, he indicated that he had
sought advice for kidney problems.
On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and issued
an insurance policy. The policy indicated the respondents as beneficiaries and
entitles them to a death benefit of P1,000,000.00 should Atty. Jesus Jr. dies on or
before February 5, 2021, or a sum of money if Atty. Jesus Jr. is still living on the
endowment date.
On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San
Joaquin, Iloilo. As such, Ma. Daisy filed a Claimant's Statement with Sun Life to
seek the death benefits indicated in his insurance policy.
In a letter dated August 27, 2001, however, Sun Life denied the claim on the
ground that the details on Atty. Jesus Jr.'s medical history were not disclosed in
his application. Simultaneously, Sun Life tendered a check representing the refund
of the premiums paid by Atty. Jesus Jr.
The respondents reiterated their claim against Sun Life thru a letter dated
September 17, 2001. Sun Life, however, refused to heed the respondents'
requests and instead filed a Complaint for Rescission before the RTC and prayed
for judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy.
In its Complaint, Sun Life alleged that Atty. Jesus Jr. did not disclose in his
insurance application his previous medical treatment at the National Kidney
Transplant Institute in May and August of 1994. According to Sun Life, the
undisclosed fact suggested that the insured was in "renal failure" and at a high-risk
medical condition. Consequently, had it known such fact, it would not have issued
the insurance policy in favor of Atty. Jesus Jr.
For their defense, the respondents claimed that Atty. Jesus Jr. did not commit
misrepresentation in his application for insurance. They averred that Atty. Jesus
Jr. was in good faith when he signed the insurance application and even authorized
Sun Life to inquire further into his medical history for verification purposes.
According to them, the complaint is just a ploy to avoid the payment of insurance
claims.
On March 16, 2009, the RTC issued its Decision dismissing the complaint for lack
of merit. The RTC held that Atty. Jesus Jr. did not commit material concealment
and misrepresentation when he applied for life insurance with Sun Life. It observed
that given the disclosures and the waiver and authorization to investigate executed
by Atty. Jesus Jr. to Sun Life, the latter had all the means of ascertaining the facts
allegedly concealed by the applicant.
Aggrieved, Sun Life elevated the case to the CA. On appeal, the CA issued its
Decision dated November 18, 2013 affirming the RTC decision in ordering Sun Life
to pay death benefits and damages in favor of the respondents. The CA, however,
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modified the RTC decision by absolving Sun Life from the charges of violation of
Sections 241 and 242 of the Insurance Code.
The CA ruled that the evidence on records show that there was no fraudulent intent
on the part of Atty. Jesus Jr. in submitting his insurance application. Instead, it
found that Atty. Jesus Jr. admitted in his application that he had sought medical
treatment for kidney ailment.
Sun Life filed a Motion for Partial Reconsideration dated December 11, 2013 but
the same was denied in a Resolution dated February 13, 2014.
Undaunted, Sun Life filed an appeal by way of petition for review

on certiorari under Rule 45 of the Rules of Court before this Court.
ISSUE:
Whether Atty. Jesus Jr. committed material concealment or misrepresentation in

his insurance application with Sun Life.
HELD:
No. As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his
medical treatment for kidney ailment. Moreover, he executed an authorization in
favor of Sun Life to conduct investigation in reference with his medical history.
Records show that in the Application for Insurance, Atty. Jesus Jr. admitted that
he had sought medical treatment for kidney ailment. When asked to provide details
on the said medication, Atty. Jesus Jr. indicated the following information: year
("1987"), medical procedure ("undergone lithotripsy due to kidney stone"), length
of confinement ("3 days"), attending physician ("Dr. Jesus Benjamin Mendoza")
and the hospital ("National Kidney Institute").
It appears that Atty. Jesus Jr. also signed the Authorization which gave Sun Life
the opportunity to obtain information on the facts disclosed by Atty. Jesus Jr. in his
insurance application. Given the express language of the Authorization, it cannot
be said that Atty. Jesus Jr. concealed his medical history since Sun Life had the
means of ascertaining Atty. Jesus Jr.'s medical record.
With regard to allegations of misrepresentation, we note that Atty. Jesus Jr. was
not a medical doctor, and his answer "no recurrence" may be construed as an
honest opinion. Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not avoid a policy even though
they are untrue.
Indeed, the intent to defraud on the part of the insured must be ascertained to merit
rescission of the insurance contract. Concealment as a defense for the insurer to
avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the provider or insurer. In the
present case, Sun Life failed to clearly and satisfactorily establish its allegations,
and is therefore liable to pay the proceeds of the insurance.
Moreover, well-settled is the rule that this Court is not a trier of facts. Factual
findings of the lower courts are entitled to great weight and respect on appeal, and
in fact accorded finality when supported by substantial evidence on the record.
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Jaime T. Gaisano vs. Development Insurance and Surety Corporation, G.R.

No. 190702, February 27, 2017
FACTS:
Petitioner was the registered owner of a 1992 Mitsubishi Montero (vehicle), while
respondent is a domestic corporation engaged in the insurance business. On
September 27, 1996, respondent issued a comprehensive commercial vehicle
policy to petitioner in the amount of P1,500,000.00 over the vehicle for a period of
one year commencing on September 27, 1996 up to September 27,
1997.Respondent also issued two other commercial vehicle policies to petitioner
covering two other motor vehicles for the same period.
To collect the premiums and other charges on the policies, respondent's agent,
Trans-Pacific Underwriters Agency (Trans-Pacific), issued a statement of account
to petitioner's company, Noah's Ark Merchandising (Noah's Ark). Noah's Ark
immediately processed the payments and issued a Far East Bank check dated
September 27, 1996 payable to Trans-Pacific on the same day. However, nobody
from Trans-Pacific picked up the check that day (September 27) because its
president and general manager, Rolando Herradura, was celebrating his birthday.
Trans-Pacific informed Noah's Ark that its messenger would get the check the next
day, September 28.
In the evening of September 27, 1996, while under the official custody of Noah's
Ark marketing manager Achilles Pacquing (Pacquing) as a service company
vehicle, the vehicle was stolen in the vicinity of SM Megamall at Ortigas,
Mandaluyong City. Pacquing reported the loss to the Philippine National Police
Traffic Management Command at Camp Crame in Quezon City. Despite search
and retrieval efforts, the vehicle was not recovered.
Oblivious of the incident, Trans-Pacific picked up the check the next day,
September 28. It issued an official receipt numbered 124713 dated September 28,
1996, acknowledging the receipt of P55,620.60 for the premium and other charges
over the vehicle. The check issued to Trans-Pacific for P140,893.50 was deposited
with Metrobank for encashment on October 1, 1996.
On October 1, 1996, Pacquing informed petitioner of the vehicle's loss. Thereafter,

petitioner reported the loss and filed a claim with respondent for the insurance
proceeds of P1,500,000.00. After investigation, respondent denied petitioner's
claim on the ground that there was no insurance contract. Petitioner, through
counsel, sent a final demand on July 7, 1997. Respondent, however, refused to
pay the insurance proceeds or return the premium paid on the vehicle.
On October 9, 1997, petitioner filed a complaint for collection of sum of money and
damages with the RTC where it sought to collect the insurance proceeds from
respondent.
In its Answer, respondent asserted that the non-payment of the premium rendered
the policy ineffective. The premium was received by the respondent only on
October 2, 1996, and there was no known loss covered by the policy to which the
payment could be applied.
In its Decision dated September 24, 2003, the RTC ruled in favor of petitioner. It
considered the premium paid as of September 27, even if the check was received
only on September 28 because (1) respondent's agent, Trans-Pacific,
acknowledged payment of the premium on that date, September 27, and (2) the
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check that petitioner issued was honored by respondent in acknowledgment of the
authority of the agent to receive it. Instead of returning the premium, respondent
sent a checklist of requirements to petitioner and assigned an underwriter to
investigate the claim. The RTC ruled that it would be unjust and inequitable not to
allow a recovery on the policy while allowing respondent to retain the premium
paid.
After respondent's motion for reconsideration was denied, it filed a Notice of

Appeal. Records were forwarded to the CA.
The CA granted respondent's appeal. The CA upheld respondent's position that

an insurance contract becomes valid and binding only after the premium is paid
pursuant to Section 77 of the Insurance Code (Presidential Decree No. 612, as
amended by Republic Act No. 10607). It found that the premium was not yet paid
at the time of the loss on September 27, but only a day after or on September 28,
1996, when the check was picked up by Trans-Pacific. It also found that none of
the exceptions to Section 77 obtains in this case.
Hence petitioner filed this petition. He argues that there was a valid and binding
insurance contract between him and respondent.
ISSUE:
Whether there is a binding insurance contract between petitioner and respondent.
HELD:
None. Insurance is a contract whereby one undertakes for a consideration to

indemnify another against loss, damage or liability arising from an unknown or
contingent event. Just like any other contract, it requires a cause or consideration.
The consideration is the premium, which must be paid at the time and in the way
and manner specified in the policy. If not so paid, the policy will lapse and be
forfeited by its own terms.
The law, however, limits the parties' autonomy as to when payment of premium
may be made for the contract to take effect. The general rule in insurance laws is
that unless the premium is paid, the insurance policy is not valid and binding.
Section 77 of the Insurance Code, applicable at the time of the issuance of the
policy, provides:
“Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued by an insurance company
is valid and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period provision
applies.”
Here, there is no dispute that the check was delivered to and was accepted by
respondent's agent, Trans-Pacific, only on September 28, 1996. No payment of
premium had thus been made at the time of the loss of the vehicle on September
27, 1996. While petitioner claims that Trans-Pacific was informed that the check
was ready for pick-up on September 27, 1996, the notice of the availability of the
check, by itself, does not produce the effect of payment of the premium. Trans-
Pacific could not be considered in delay in accepting the check because when it
informed petitioner that it will only be able to pick-up the check the next day,
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petitioner did not protest to this, but instead allowed Trans-Pacific to do so. Thus,
at the time of loss, there was no payment of premium yet to make the insurance
policy effective.
There are, of course, exceptions to the rule that no insurance contract takes effect
unless premium is paid. In UCPB General Insurance Co., Inc. v. Masagana
Telamart, Inc., we said it can be seen at once that Section 77 does not restate the
portion of Section 72 expressly permitting an agreement to extend the period to
pay the premium. But are there exceptions to Section 77? The answer is in the
affirmative.
The first exception is provided by Section 77 itself, and that is, in case
of a life or industrial life policy whenever the grace period provision
applies.
The second is that covered by Section 78 of the Insurance Code,

which provides:
“SEC. 78. Any acknowledgment in a policy or contract of insurance

of the receipt of premium is conclusive evidence of its payment, so
far as to make the policy binding, notwithstanding any stipulation
therein that it shall not be binding until premium is actually paid.”
A third exception was laid down in Makati Tuscany Condominium

Corporation vs. Court of Appeals, wherein we ruled that Section 77
may not apply if the parties have agreed to the payment in
installments of the premium and partial payment has been made at
the time of loss. We said therein, thus:
We hold that the subject policies are valid even if the

premiums were paid on installments. The records
clearly show that the petitioners and private respondent
intended subject insurance policies to be binding and
effective notwithstanding the staggered payment of the
premiums. The initial insurance contract entered into in
1982 was renewed in 1983, then in 1984. In those three
years, the insurer accepted all the installment
payments. Such acceptance of payments speaks
loudly of the insurer's intention to honor the policies it
issued to petitioner. Certainly, basic principles of equity
and fairness would not allow the insurer to continue
collecting and accepting the premiums, although paid
on installments, and later deny liability on the lame
excuse that the premiums were not prepaid in full.
Not only that. In Tuscany, we also quoted with approval the following
pronouncement of the Court of Appeals in its Resolution denying the motion for
reconsideration of its decision:
While the import of Section 77 is that prepayment of premiums is

strictly required as a condition to the validity of the contract, We are
not prepared to rule that the request to make installment payments
duly approved by the insurer would prevent the entire contract of
insurance from going into effect despite payment and acceptance of
the initial premium or first installment. Section 78 of the Insurance
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Code in effect allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the insurance policy of
receipt of premium as conclusive evidence of payment so far as to
make the policy binding despite the fact that premium is actually
unpaid. Section 77 merely precludes the parties from stipulating that
the policy is valid even if premiums are not paid, but docs not
expressly prohibit an agreement granting credit extension, and such
an agreement is not contrary to morals, good customs, public order
or public policy (De Leon,' The Insurance Code, p. 175). So is an
understanding to allow insured to pay premiums in installments not
so prescribed. At the very least, both parties should be deemed
in estoppel to question the arrangement they have voluntarily
accepted.
By the approval of the aforequoted findings and conclusion of the Court of

Appeals, Tuscany has provided a fourth exception to Section 77, namely, that the
insurer may grant credit extension for the payment of the premium. This simply
means that if the insurer has granted the insured a credit term for the payment of
the premium and loss occurs before the expiration of the term, recovery on the
policy should be allowed even though the premium is paid after the loss but within
the credit term.
Finally in the instant case, it would be unjust and inequitable if recovery on the
policy would not be permitted against Petitioner, which had consistently granted a
60- to 90-day credit term for the payment of premiums despite its full awareness
of Section 77. Estoppel bars it from taking refuge under said Section, since
Respondent relied in good faith on such practice. Estoppel then is the fifth
exception to Section 77.
In UCPB General Insurance Co., Inc., we summarized the exceptions as follows:

(1) in case of life or industrial life policy, whenever the grace period provision
applies, as expressly provided by Section 77 itself; (2) where the insurer
acknowledged in the policy or contract of insurance itself the receipt of premium,
even if premium has not been actually paid, as expressly provided by Section 78
itself; (3) where the parties agreed that premium payment shall be in installments
and partial payment has been made at the time of loss, as held in Makati Tuscany
Condominium Corp. v. Court of Appeals; (4) where the insurer granted the insured
a credit term for the payment of the premium, and loss occurs before the expiration
of the term, as held in Makati Tuscany Condominium Corp.; and (5) where the
insurer is in estoppel as when it has consistently granted a 60 to 90-day credit term
for the payment of premiums.
The insurance policy in question does not fall under the first to third exceptions laid
out in UCPB General Insurance Co., Inc.: (1) the policy is not a life or industrial life
policy; (2) the policy does not contain an acknowledgment of the receipt of
premium but merely a statement of account on its face; and (3) no payment of an
installment was made at the time of loss on September 27.
Petitioner argues that his case falls under the fourth and fifth exceptions because
the parties intended the contract of insurance to be immediately effective upon
issuance, despite non-payment of the premium. This waiver to a pre-payment in
full of the premium places respondent in estoppel.
We do not agree with petitioner.
The fourth and fifth exceptions to Section 77 operate under the facts obtaining
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in Makati Tuscany Condominium Corp. and UCPB General Insurance Co.,
Inc. Both contemplate situations where the insurers have consistently granted the
insured a credit extension or term for the payment of the premium. Here, however,
petitioner failed to establish the fact of a grant by respondent of a credit term in his
favor, or that the grant has been consistent. While there was mention of a credit
agreement between Trans-Pacific and respondent, such arrangement was not
proven and was internal between agent and principal. Under the principle of
relativity of contracts, contracts bind the parties who entered into it. It cannot favor
or prejudice a third person, even if he is aware of the contract and has acted with
knowledge.
We cannot sustain petitioner's claim that the parties agreed that the insurance
contract is immediately effective upon issuance despite non- payment of the
premiums. Even if there is a waiver of pre-payment of premiums, that in itself does
not become an exception to Section 77, unless the insured clearly gave a credit
term or extension. This is the clear import of the fourth exception in the UCPB
General Insurance Co., Inc. To rule otherwise would render nugatory the
requirement in Section 77 that "[n]otwithstanding any agreement to the contrary,
no policy or contract of insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid, x x x."
Thus, we find that petitioner is not entitled to the insurance proceeds because no
insurance policy became effective for lack of premium payment.
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Equitable Insurance Corporation vs. Transmodal International, Inc., G.R.
No. 223592, August 07, 2017
FACTS:
Sytengco Enterprises Corporation (Sytengco) hired respondent Transmodal

International, Inc. (Transmodal) to clear from the customs authorities and
withdraw, transport, and deliver to its warehouse, cargoes consisting of 200
cartons of gum Arabic with a total weight of 5,000 kilograms valued at
US21,750.00.
The said cargoes arrived in Manila on August 14, 2004 and were brought to Ocean
Links Container Terminal Center, Inc. pending their release by the Bureau of
Customs (BOC) and on September 2, 2004, respondent Transmodal withdrew the
same cargoes and delivered them to Sytengco's warehouse. It was noted in the
delivery receipt that all the containers were wet.
In a preliminary survey conducted by Elite Adjusters and Surveyors, Inc. (Elite

Surveyors), it was found that 187 cartons had water marks and the contents of the
13 wet cartons were partly hardened. On October 13, 2004, a re-inspection was
conducted and it was found that the contents of the randomly opened 20 cartons
were about 40% to 60% hardened, while 8 cartons had marks of previous wetting.
In its final report dated October 27, 2004, Elite Surveyor fixed the computed loss
payable at P728,712.00 after adjustment of 50% loss allowance.
Thus, on November 2, 2004, Sytengco demanded from respondent Transmodal

the payment of P1,457,424.00 as compensation for total loss of shipment. On that
same date, petitioner Equitable Insurance, as insurer of the cargoes paid
Sytengco's claim for P728,712.00. On October 4, 2004, Sytengco then signed a
subrogation receipt and loss receipt in favor of petitioner Equitable Insurance. As
such, petitioner Equitable Insurance demanded from respondent Transmodal
reimbursement of the payment given to Sytengco.
Thereafter, petitioner Equitable Insurance filed a complaint for damages invoking

its right as subrogee after paying Sytengco's insurance claim and averred that
respondent Transmodal's fault and gross negligence were the causes of the
damages sustained by Sytengco's shipment.
Respondent Transmodal denied knowledge of an insurance policy and claimed

that petitioner Equitable Insurance has no cause of action against it because the
damages to the cargoes were not due to its fault or gross negligence. According
to the same respondent, the cargoes arrived at Sytengco's warehouse around
11:30 in the morning of September 1, 2004, however, Sytengco did not
immediately receive the said cargoes and as a result, the cargoes got wet due to
the rain that occurred on the night of September 1, 2004. Respondent Transmodal
also questioned the timeliness of Sytengco's formal claim for payment which was
allegedly made more than 14 days from the time the cargoes were placed at its
disposal in contravention of the stipulations in the delivery receipts.
The RTC, in its Decision dated June 18, 2013, found in favor of petitioner Equitable
Insurance. According to the RTC, petitioner Equitable Insurance was able to prove
by substantial evidence its right to institute an action as subrogee of Sytengco.
Respondent Transmodal appealed the RTC's decision to the CA. The CA, on
September 15, 2015, promulgated its decision reversing the RTC's decision. The
CA ruled that there was no proof of insurance of the cargoes at the time of the loss
and that the subrogation was improper. According to the CA, the insurance
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contract was neither attached in the complaint nor offered in evidence for the
perusal and appreciation of the RTC, and what was presented was just the marine
risk note.
Hence, the present petition after the CA denied petitioner Equitable Insurance's
motion for reconsideration.
ISSUE:
Whether the subrogation by the petitioner Equitable Insurance was proper.
HELD:
Yes. It was well established that petitioner has the right to step into the shoes of
the insured who has a direct cause of action against herein respondent on account
of the damages sustained by the cargoes. "Subrogation is the substitution of one
person in the place of another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in relation to a debt or claim,
including its remedies or securities." The right of subrogation springs from Article
2207 of the Civil Code which states:
“Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.”
The records further show that petitioner was able to accomplish its obligation under
the insurance policy as it has paid the assured of its insurance claim in the amount
of P728,712,00 as evidenced by, among others, the Subrogation Receipt, Loss
Receipt, Check Voucher, and Equitable PCI Bank Check No. 0000013925. The
payment by the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies which the insured may have against the third party
whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract or upon payment
by the insurance company of the insurance claim. It accrues simply upon payment
by the insurance company of the insurance claim.
In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of subrogation
accrues simply upon payment by the insurance company of the insurance claim.
Hence, presentation in evidence of the marine insurance policy is not
indispensable before the insurer may recover from the common carrier the insured
value of the lost cargo in the exercise of its subrogatory right. The subrogation
receipt, by itself, was held sufficient to establish not only the relationship between
the insurer and consignee, but also the amount paid to settle the insurance claim.
The presentation of the insurance contract was deemed not fatal to the insurer's
cause of action because the loss of the cargo undoubtedly occurred while on board
the petitioner's vessel.
Plaintiff was able to prove by substantial evidence their right to institute this action
as subrogee of the insured. The defendant did not present any evidence or witness
to bolster their defense and to contradict plaintiff’s allegation.
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Malayan insurance Co., Inc, et. al vs. Emma Consepcion L. Lin, G.R No.
207277, January 16, 2017
FACTS:
On January 4, 2010, Emma Concepcion L. Lin (Lin) filed a Complaint for Collection
of Sum of Money with Damages against Malayan Insurance Co., Inc. (Malayan),
Yvonne Yuchengco (Yvonne), Atty. Emmanuel Villanueva, Sonny Rubin, Engr.
Francisco Mondelo, Michael Angelo Requijo (collectively, the petitioners), and the
Rizal Commercial and Banking Corporation (RCBC) before Manila RTC.
Lin alleged that she obtained various loans from RCBC for five warehouses
secured by six clustered warehouses located at Plaridel, Bulacan. On February
24, 2008, the five warehouses were gutted by fire. On April 8, 2008 the Bureau of
Fire Protection (BFP) issued a Fire Clearance Certification to Lin after having
determined that the cause of fire was accidental.
Despite the foregoing, Lin’s demand for payment of her insurance claim was
denied since the forensic investigators hired by Malayan claimed that the cause of
the fire was arson and not accidental. She sought assistance from the Insurance
Commission (IC) which, after a meeting among the parties and a conduct of
reinvestigation into the cause/s of the fire, recommended that Malayan pay Lin's
insurance claim and/or accord great weight to the BFP's finding. In defiance
thereof, Malayan still denied or refused to pay her insurance claim.
As against RCBC, Lin averred that notwithstanding the loss of the mortgaged
properties, the bank refused to go after Malayan and instead insisted that she
herself must pay the loans to RCBC, otherwise, foreclosure proceedings would
ensue; and that to add insult to injury, RCBC has been compounding the interest
on her loans, despite RCBC's failure or refusal to go after Malayan.
Lin thus prayed in Civil Case No. 10-122738 that judgment be rendered ordering
petitioners to pay her insurance claim plus interest on the amounts due or owing
her; that her loans and mortgage to RCBC be deemed extinguished as of February
2008; that RCBC be enjoined from foreclosing the mortgage on the properties put
up as collaterals; and that petitioners he ordered to pay her ₱l,217,928.88 in the
concept of filing foes, costs of suit, ₱l million as exemplary damages, and
₱500,000.00 as attorney’s fees.
Some five months later, or on June 17, 2010, Lin filed before the IC an
administrative case against Malayan, represented this time by Yvonne.
In this administrative case, Lin claimed that since it had been conclusively found
that the cause of the fire was "accidental," the only issue left to be resolved is
whether Malayan should be held liable for unfair claim settlement practice under
Section 241 in relation to Section 247 of the Insurance Code due to its unjustified
refusal to settle her claim; and that in consequence of the foregoing failings,
Malayan's license to operate as a non-life insurance company should be revoked
or suspended, until such time that it fully complies with the IC Resolution ordering
it to accord more weight to the BFP's findings.
On August 17, 2010, Malayan filed a motion to dismiss Civil Case No. 10-122738
based on forum shopping. It argued that the administrative case was instituted to
prompt or incite IC into ordering Malayan to pay her insurance claim.
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This motion to dismiss drew a Comment/Opposition, which Lin filed on August 31,
2010.
On September 29, 2010, the RTC denied the Motion to Dismiss. The RTC held
that in the administrative case, Lin was seeking a relief clearly distinct from that
sought in the civil case; that while in the administrative case Lin prayed for the
suspension or revocation of Malayan's license to operate as a non-life insurance
company, in the civil case Lin prayed for the collection of a sum of money with
damages; that it is abundantly clear that any judgment that would be obtained in
either case would not be res judicata to the other, hence, there is no forum
shopping to speak of.
On January 25, 2011, the RTC likewise denied, for lack of merit, petitioners' Motion
for Reconsideration.
Petitioners thereafter sued out a Petition for Certiorari and Prohibition before the
CA. However, in a Decision dated December 21, 2012, the CA upheld the RTC.
The CA, as did the RTC, found that Lin did not commit forum shopping chiefly for
the reason that the issues raised and the reliefs prayed for in the civil case were
essentially different from those in the administrative case, hence Lin had no duty
at all to inform the RTC about the institution or pendency of the administrative case.
ISSUE:
Whether Lin committed willful and deliberate forum shopping despite the fact that
the civil case and the administrative case both seek the payment of the same fire
insurance claim.
HELD:
No. Lin did commit willful and deliberate forum shopping. The proscription against
forum shopping is found in Section 5, Rule 7 of the Rules of Court, which provides:
“SEC. 5. Certification against forum shopping. --The plaintiff or

principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith; (a)
that he has not theretofore commenced any action or filed any claim
involving the same issues in any court, tribunal or quasi-judicial
agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if
he should thereafter learn that the same or similar action or claim
has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.”
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion
and after hearing. The submission of a false certification or non-compliance with
any of the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of
the party or his counsel clearly constitute willful and deliberate forum shopping, the
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same shall be ground for summary dismissal with prejudice and shall constitute
direct contempt, as well as a cause for administrative sanctions.
The above-stated rule covers the very essence of forum shopping itself, and the
constitutive elements thereof viz., the cognate concepts of litis pendentia and res
judicata -
x x x [T]he essence of forum shopping is the filing of multiple suits

involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a
favorable judgment. It exists where the elements of litis
pendentia are present or where a final judgment in one case will
amount to res judicata in another. On the other hand, for litis
pendentia to be a ground for the dismissal of an action, the following
requisites must concur: (a) identity of parties, or at least such parties
who represent the same interests in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same
facts; and (c) the identity with respect to the two preceding particulars
in the two cases is such that any judgment that may be rendered in
the pending case, regardless of which party is successful, would
amount to res judicata in the other case.
Res judicata, in turn, has the following requisites: "(1) the former
judgment must be final; (2) it must have been rendered by a court
having jurisdiction over the subject matter and over the parties; (3) it
must be a judgment on the merits; and (4) there must be, between
the first and second actions, (a) identity of parties, (b) identity of
subject matter, and (c) identity of cause of action."
"The settled rule is that criminal and civil cases are altogether different from
administrative matters, such that the disposition in the first two will not inevitably
govern the third and vice versa." In the context of the case at bar, matters handled
by the IC are delineated as either regulatory or adjudicatory, both of which have
distinct characteristics, as postulated in Almendras Mining Corporation v. Office of
the Insurance Commission:
The provisions of the Insurance Code (Presidential Decree [P.D.] No.

1460), as amended, clearly indicate that the Office of the [IC] is an
administrative agency vested with regulatory power as well as
with adjudicatory authority. Among the several regulatory or non-
quasi-judicial duties of the Insurance Commissioner under the
Insurance Code is the authority to issue, or refuse issuance of, a
Certificate of Authority to a person or entity desirous of engaging in
insurance business in the Philippines, and to revoke or suspend such
Certificate of Authority upon a finding of the existence of statutory
grounds for such revocation or suspension. The grounds for
revocation or suspension of an insurer's Certificate of Authority are
set out in Section 241 and in Section 247 of the Insurance Code as
amended. The general regulatory authority of the Insurance
Commissioner is described in Section 414 of the Insurance Code, as
amended, in the following terms:
'Section 414. The Insurance Commissioner shall have

the duty to see that all laws relating to insurance,
insurance companies and other insurance matters,
mutual benefit associations, and trusts for charitable
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uses are faithfully executed and to perform the duties
imposed upon him by this Code, and shall,
notwithstanding any existing laws to the contrary, have
sole and exclusive authority to regulate the issuance
and sale of variable contracts as defined in section two
hundred thirty-two and to provide for the licensing of
persons selling such contracts, and to issue such
reasonable rules and regulations governing the same.
The Commissioner may issue such rulings, instructions, circulars, orders[,] and
decisions as he may deem necessary to secure the enforcement of the provisions
of this Code, subject to the approval of the Secretary of Finance [DOF Secretary].
Except as otherwise specified, decisions made by the Commissioner shall be
appealable to the [DOF Secretary].' (Italics supplied)
The adjudicatory authority of the Insurance Commissioner is generally described

in Section 416 of the Insurance Code, as amended, which reads as follows:
'Sec. 416. The Commissioner shall have the power to adjudicate

claims and complaints involving any loss, damage or liability for
which an insurer may be answerable under any kind of policy or
contract of insurance, or for which such insurer may be liable under
a contract of suretyship, or for which a reinsurer may be sued under
any contract or reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the membership
certificates it has issued to its members, where the amount of any
such loss, damage or liability, excluding interests, cost
and attorney’s fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate
does not exceed in any single claim one hundred thousand pesos.
xxxx
The authority to adjudicate granted to the Commissioner under this section shall
be concurrent with that of the civil courts, but the filing of a complaint with the
Commissioner shall preclude the civil courts from taking cognizance of a suit
involving the same subject matter.' (Italics supplied)
In Go v. Office of the Ombudsman reiterated the above-stated distinctions vis-a-

vis the principles enunciating that a civil case before the trial court involving
recovery of payment of the insured's insurance claim plus damages, can proceed
simultaneously with an administrative case before the IC. Expounding on the
foregoing points, this Court said -
**The findings of the trial court will not necessarily foreclose the administrative
case before the [IC], or [vice versa]. True, the parties are the same, and both
actions are predicated on the same set of facts, and will require identical evidence.
But the issues to be resolved, the quantum of evidence, the procedure to be
followed[,] and the reliefs to be adjudged by these two bodies are different.
Petitioner's causes of action in Civil Case No. Q-95-23135 are predicated on the
insurers' refusal to pay her fire insurance claims despite notice, proofs of losses
and other supporting documents. Thus, petitioner prays in her complaint that the
insurers be ordered to pay the full-insured value of the losses, as embodied in their
respective policies. Petitioner also sought payment of interests and damages in
her favor caused by the alleged delay and refusal of the insurers to pay her claims.
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The principal issue then that must be resolved by the trial court is whether or not
petitioner is entitled to the payment of her insurance claims and damages. The
matter of whether or not there is unreasonable delay or denial of the claims is
merely an incident to be resolved by the trial court, necessary to ascertain
petitioner's right to claim damages, as prescribed by Section 244 of the Insurance
Code.
On the other hand, the core, if not the sole bone of contention in Adm. Case No.
RD-156, is the issue of whether or not there was unreasonable delay or denial of
the claims of petitioner, and if in the affirmative, whether or not that would justify
the suspension or revocation of the insurers' licenses.
Moreover, in Civil Case No. Q-95-23135, petitioner must establish her case by
a preponderance of evidence, or simply put, such evidence that is of greater
weight, or more convincing than that which is offered in opposition to it. In Adm.
Case No. RD-156, the degree of proof required of petitioner to establish her claim
is substantial evidence, which has been defined as that amount of relevant
evidence that a reasonable mind might accept as adequate to justify the
conclusion.
In addition, the procedure to be followed by the trial court is governed by the Rules
of Court, while the [IC] has its own set of rules and it is not bound by the rigidities
of technical rules of procedure. These two bodies conduct independent means of
ascertaining the ultimate facts of their respective cases that will serve as basis for
their respective decisions.
If, for example, the trial court finds that there was no unreasonable delay or denial
of her claims, it does not automatically mean that there was in fact no such
unreasonable delay or denial that would justify the revocation or suspension of the
licenses of the concerned insurance companies. It only means that petitioner failed
to prove by preponderance of evidence that she is entitled to damages. Such
finding would not restrain the [IC], in the exercise of its regulatory power, from
making its own finding of unreasonable delay or denial as long as it is supported
by substantial evidence.
While the possibility that these two bodies will come up with conflicting resolutions
on the same issue is not far-fetched, the finding or conclusion of one would not
necessarily be binding on the other given the difference in the issues involved, the
quantum of evidence required and the procedure to be followed.
Hence, Adm. Case No. RD-156 may proceed alongside Civil Case No. Q-95-
23135.
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The Insular Assurance Co., Ltd. vs. The Heirs of Jose H. Alvarez,
G.R. No. 207526, October 03, 2018;
Union Bank of the Philippines vs. Heirs of Jose H. Alvarez, G.R. No.
210156, October 3, 2018
FACTS:
Alvarez and his wife, Adelina, owned a residential lot with improvements in
Caloocan City. On June 18, 1997, Alvarez applied for and was granted a housing
loan by UnionBank. 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. In line with Insular Life's standard procedures, UnionBank
was required to submit documents to support the claim. These included: (1)
Alvarez's birth, marriage, and death certificates; (2) the attending physician's
statement; (3) the claimant's statement; and (4) Alvarez's statement of account.
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.
On February 14, 2001, the Heirs of Alvarez filed a Complaintn for Declaration of
Nullity of Contract and Damages against UnionBank, a certain Alfonso P. Miranda
(Miranda), who supposedly benefitted from the loan, and the insurer which was
identified only as John Doe. 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."
The Complaint was later amended and converted into one for specific
performance to include a demand against Insular Life to fulfill its obligation as an
insurer under the Group Mortgage Redemption Insurance.
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.
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For its part, Insular Life maintained that based on the documents submitted by
UnionBank, Alvarez was no longer eligible under the Group Mortgage Redemption
Insurance since he was more than 60 years old when his loan was approved.
In its January 29, 2007 Decision, the Regional Trial Court 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
UnionBank and Insular Life filed separate appeals before the Court of Appeals.
In its assailed May 21, 2013 Decision, the Court of Appeals affirmed the Regional
Trial Court's ruling. It noted that the errors assigned by Insular Life and UnionBank
to the Regional Trial Court boiled down to the issue of whether or not Alvarez was
guilty of fraudulent misrepresentation as to warrant the rescission of the Group
Mortgage Redemption Insurance obtained by UnionBank on Alvarez's life. It
explained that fraud is never presumed and fraudulent misrepresentation as a
defense of the insurer to avoid liability must be established by convincing evidence.
Insular 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. It noted that aside from the Health Statement Form, Alvarez had to fill out
an application for insurance. 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.
The Court of Appeals added that assuming that fraudulent misrepresentation

entitled Insular Life to rescind the contract, it should have first complied with certain
conditions before it could exercise its right to rescind. The conditions were:
(1) prior notice of cancellation to [the] insured; (2) notice must be based on the
occurrence after effective date of the policy of one or more grounds mentioned; (3)
must be in writing, mailed or delivered to the insured at the address shown in the
policy; and (4) must state the grounds relied upon provided in Section 64 of the
Insurance Code and upon [the] request of [the] insured, to furnish facts on which
cancellation is based.
None of these conditions were fulfilled. Finally, the letter of denial dated April 8,
1999 was furnished only to UnionBank.
Insular Life opted to directly appeal before this Court and UnionBank then filed
before this Court its Petition which was then consolidated by the Court.
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ISSUE:
Whether Alvarez was guilty of fraudulent misrepresentation as to warrant the

rescission of the Group Mortgage Redemption Insurance obtained by UnionBank
on Alvarez's life.
HELD:
No. Citing Section 27 of the Insurance Code, however, Insular Life asserts that in
cases of rescission due to concealment, i.e., when a party "neglect[s] to
communicate that which [he or she] knows and ought to communicate," proof of
fraudulent intent is not necessary. Section 27 of the Insurance Code reads: “A
concealment whether intentional or unintentional entitles the injured party to
rescind a contract of insurance.” 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. 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 misdeclared his
age such that his assertion fails to correspond with his factual age, he made a false
representation, not a concealment. In relation to Section 44, Section 45 of the
Insurance Code reads: “If a representation is false in a material point, whether
affirmative or promissory, the injured party is entitled to rescind the contract from
the time when the representation becomes false.” 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.
Consistent with the requirement of clear and convincing evidence, it was Insular
Life's burden to establish the merits of its own case. At bar, Insular Life basically
relied on the Health Statement form personally accomplished by Jose Alvarez
wherein he wrote that his birth year was 1942. The Court, however posited that
Alvarez must have accomplished and submitted many other documents when he
applied for the housing loan and executed supporting instruments like the
promissory note, real estate mortgage, and Group Mortgage Redemption
Insurance. A design to defraud would have demanded his consistency. He needed
to maintain appearances across all documents. However, 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 DEAN’S CIRCLE 2019 – UST FCL 16 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. Insular Life had all the opportunity to demonstrate Alvarez's pattern
of consistently indicating erroneous entries for his age. All it needed to do was to
inventory the documents submitted by Alvarez and note the statements he made
concerning his age. This was not a cumbersome task, yet it failed at it. Its failure
to discharge its burden of proving must thwart its plea for relief from this Court.
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Industrial Personnel and Management Services, Inc., vs. Country Bankers

Insurance Corporation,
G.R No. 194126, October 17, 2018
FACTS:
In 2000, Industrial Personnel and Management Services, Inc. (IPAMS) began

recruiting registered nurses for work deployment in the United States of America
(U.S.). It takes eighteen (18) to twenty-four (24) months for the entire immigration
process to complete. As the process requires huge amounts of money, such
amounts are advanced [to] the nurse applicants.
By reason of the advances made to the nurse applicants, the latter were required
to post surety bond. The purpose of the bond is to guarantee the following during
its validity period: (a) that they will comply with the entire immigration process, (b)
that they will complete the documents required, and (c) that they will pass all the
qualifying examinations for the issuance of immigration visa. The Country Bankers
Insurance Corporation (Country Bankers for brevity) and IPAMS agreed to provide
bonds for the said nurses. Under the agreement of IPAMS and Country Bankers,
the latter will provide surety bonds and the premiums therefor were paid by IPAMS
on behalf of the nurse applicants.
The surety bonds issued specifically state that the liability of the surety
company, i.e., respondent Country Bankers, "shall be limited only to actual
damages arising from Breach of Contract by the applicant."
A Memorandum of Agreement (MOA) was executed by the said parties on

February 1, 2002 which stipulated the various requirements for collecting claims
from Country Bankers, namely:
B. REQUIREMENTS FOR CLAIM

Requirements are as follows:
SURETY BOND:
A. 1st demand letter requiring his/her to submit complete documents.
B. 2nd Demand letter (follow up of above).
C. Affidavit stating reason of any violation to be executed by responsible
officer of Recruitment Agency;
D. Statement of Account (detailed expenses).
E. Transmittal Claim Letter.
On the basis of the MOA, IPAMS submitted its claims under the surety bonds
issued by Country Bankers. For its part, Country Bankers, upon receipt of the
documents enumerated under the MOA, paid the claims to IPAMS. According to
IPAMS, starting 2004, some of its claims were not anymore settled by Country
Bankers.
In 2004, Country Bankers was not able to pay six (6) claims of IPAMS. The claims
were not denied by Country Bankers, which instead asked for time within which to
pay the claims, as it alleged to be cash strapped at that time. Thereafter, the
number of unpaid claims increased. By February 16, 2007, the total amount of
unpaid claims was P11,309,411.56.
IPAMS took the matter up with the General Manager of Country Bankers, Mr.
Ignacio Ong (Ong). In response, Country Bankers, through its letter dated
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November 14, 2005 signed by Mr. Ong, acknowledged the obligations of Country
Bankers, apologized for the delay in the payment of claims, and proposed to
amortize the settlement of claims by paying a semi-monthly amount of
P850,000.00. In addition, Country Bankers promised to pay future claims within a
ninety (90)-day period. That commitment made by Country Bankers was not
fulfilled and IPAMS had to deal with Country Bankers' new General Manager, Ms.
Tess Valeriano (Valeriano). Ms. Valeriano assured IPAMS that the obligations of
Country Bankers would be paid promptly.
However, the counsel of Country Bankers, Atty. Marisol Caleja, started to oppose
the payment of claims and insisted on the production of official receipts of IPAMS
on the expenses it incurred for the application of nurses. IPAMS opposed this,
saying that the Country Bankers' insistence on the production of official receipts
was contrary to, and not contemplated in, the MOA and was an impossible
condition considering that the U.S. authorities did not issue official receipts. In lieu
of official receipts, IPAMS submitted statements of accounts, as provided in the
MOA.
Then, in a letter dated August 22, 2006, Country Bankers limited the authority of
its agent assigned to the accounts of IPAMS, Mr. Jaime C. Lacaba (Lacaba), to
transact business with IPAMS.
Due to the unwillingness of Country Bankers to settle the claims of IPAMS, the
latter sought the intervention of the IC, through a letter-complaint dated February
9, 2007.
Country Bankers on the other hand alleged that until the third quarter of 2006, it
never received any complaint from IPAMS. Due to remarkable high loss ratio of
IPAMS, the latter's accounts were evaluated and audited by the Country Bankers.
The IPAMS was informed of the same problem. Instead of complying with the
requirements for claim processes, IPAMS insisted that the supporting documents
cannot be produced.
On June 26, 2007, the Claims Division of the IC issued a Resolution declaring the
following that there is no ground for the refusal of CBIC to pay the claims of IPAMS.
Its failure to settle the claim after having entered into an Agreement with the
complainant, IPAMS, demonstrates respondent's bad faith in the fulfillment of their
obligation, to the prejudice of the complainant.Accordingly, we find the insurance
company liable to settle the subject claim.
The move by Country Bankers to reconsider the above resolution was denied by
the IC in an Order dated December 4, 2007.
Country Bankers made an appeal before the DOF. The DOF decided to affirm the
assailed orders of the IC.
A motion to reconsider the x x x aforementioned decision was filed but was denied
by the DOF in its Resolution dated April 29, 2009.
On appeal, the OP affirmed the decision of the DOF. A subsequent motion to

reconsider the same was denied by the said Hence, he instant Petition for Review
filed by respondent Country Bankers before the CA under Rule 43 of the Rules of
Court.
In its assailed Decision, the CA granted the Rule 43 Petition filed by respondent
Country Bankers, reversing and setting aside the rulings of the IC, DOF, and OP.
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The CA held that respondent Country Bankers was justified in delaying the
payment of the claims to petitioner IPAMS because of the purported lack of
submission by petitioner IPAMS of official receipts and other "competent proof on
the expenses incurred by petitioner IPAMS in its recruitment of nurse applicants.
The CA held that Section 241 (now Section 247) of the Insurance Code, which
defines an unfair claim settlement practice, and Section 247 (now Section 254),
which provides for the suspension or revocation of the insurer's authority to
conduct business, should not be made to apply to respondent Country Bankers
because of the failure of petitioner IPAMS to provide competent proof of its claims.
Instead of filing a motion for reconsideration, petitioner IPAMS decided to directly

file the instant Petition before the Court.
On April 4, 2011, respondent Country Bankers filed its Comment (To Petition for
Review on Certiorari dated November 2, 2010). On August 18, 2011, petitioner
IPAMS filed its Reply.
ISSUE:
Whether Country Bankers has no ground to refuse the payment of petitioner

IPAMS' claims.
HELD:
Yes. The subject agreement of the parties indubitably contemplates a surety

agreement, which is governed mainly by the Insurance Code, considering that a
contract of suretyship shall be deemed an insurance contract within the
contemplation of the Insurance Code if made by a surety which is doing an
insurance business. In this case, the surety, i.e., respondent Country Bankers, is
admittedly an insurance company engaged in the business of insurance. In fact,
the CA itself in its assailed Decision mentioned that a contract of suretyship is
defined and covered by the Insurance Code.
Therefore, Section 92 of the Insurance Code must be taken into consideration. The
said provision states that all defects in the proof of loss, which the insured might
remedy, are waived as grounds for objection when the insurer omits to specify to
him without unnecessary delay. It is the duty of the insurer to indicate the defects
on the proofs of loss given, so that the deficiencies may be supplied by the insured.
When the insurer recognizes his liability to pay the claim, there is waiver by the
insurer of any defect in the proof of loss.
In the instant case, it must be emphasized that respondent Country Bankers,

through its General Manager, Mr. Ong, issued a letter dated November 14, 2005
which readily acknowledged the obligations of Country Bankers under the surety
agreement, apologized for the delay in the payment of claims, and proposed to
amortize the settlement of claims by paying a semi-monthly amount of
P850,000.00. In addition, Country Bankers promised to pay future claims within a
90-day period.
It bears stressing that respondent Country Bankers, after undergoing an evaluation

of the total number of claims of petitioner IPAMS, undertook the settlement of such
claims even WITHOUT the submission of official receipts.
In fact, respondent Country Bankers raised up the issue on the missing official
receipts and other evidence to prove the expenses incurred by petitioner IPAMS
only when the latter requested the intervention of the IC in 2007. If respondent
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Country Bankers truly believed that the submission of official receipts was critical
in providing proof as to petitioner IPAMS' claims, then it would have raised the
issue on the lack of official receipts at the earliest possible opportunity. This only
shows that the argument of respondent Country Bankers on the lack of official
receipts was a mere afterthought to evade its obligation to pay the claims
presented by petitioner IPAMS.
While not denying the existence of the said letter, respondent Country Bankers
attempts to downplay it by arguing that the claims covered by the letter and the
claims raised by petitioner IPAMS before the IC are different and distinct from each
other. Such argument deserves scant consideration.
While the claims in the said letter may be different from the specific claims
presented before the IC, both sets of claims were similarly made under the same
suretyship agreement between the parties. Thus, the fact still remains that
respondent Country Bankers had previously acknowledged the validity of a set of
claims under a surety bond within the purview of the Requirements for Claim
Clause despite the lack of official receipts and other pieces of evidence aside from
the required documents enumerated in the MOA. To be sure, it must also be
pointed out that the representations of respondent Country Bankers in the said
letter likewise refer to future and similar claims of petitioner IPAMS. Hence,
respondent Country Bankers' attempt to downplay the ramifications of its letter
dated November 14, 2005 is puerile.
Also, it must be emphasized that the IC, after holding a series of conferences
between the parties and after the assessment of the respective position papers
and evidence from both parties, made the factual finding in its Resolution dated
June 26, 2007 that respondent Country Bankers committed certain acts
constituting a waiver of its right to require the presentation of additional documents
to prove the expenses incurred by petitioner IPAMS.
Furthermore, the DOF likewise factually determined that respondent Country

Bankers, through its new General Manager, Ms. Valeriano, had assured IPAMS
that the obligations of Country Bankers would be paid promptly, again, even
without the submission of official receipts and other pieces of evidence.The DOF
similarly found that the proposal by respondent Country Bankers to amortize the
settlement of petitioner IPAMS' claims by paying the latter the semi-monthly
amount of P850,000.00 and respondent Country Bankers' acceptance of
reimbursements from the nurse applicants based on the mere Statements of
Accounts submitted by petitioner IPAMS are tantamount to an acknowledgment
on the part of respondent Country Bankers of its liability for claims under the surety
bonds.
Moreover, the OP also factually found that respondent Country Bankers "knew as
a matter of IPAMS' regular course of business that these covered transactions are
generally not issued official receipts by US government and its agencies and the
US based professional organizations and institutions involved to complete the
requirements for the issuance of an immigrant visa."
These factual findings of three separate administrative agencies, which were not
at all reversed or refuted by the CA in its assailed Decision, should not be perturbed
by the Court without any compelling countervailing reason. The Court has
continuously adopted the policy of respecting the findings of facts of specialized
administrative agencies.
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Hence, considering that the IC, through the Insurance Commissioner, is
particularly tasked by the Insurance Code to issue such rulings, instructions,
circulars, orders and decisions as may be deemed necessary to secure the
enforcement of the provisions of the law, to ensure the efficient regulation of the
insurance industry, and considering that there are no compelling reasons provided
by respondent Country Bankers to overthrow the IC's factual findings, the Court
upholds the findings of the IC, as concurred in by both the DOF and OP, that
respondent Country Bankers committed certain acts constituting a waiver of its
right to require the presentation of additional documents to prove the expenses
incurred by petitioner IPAMS.
Accordingly, under Section 92 of the Insurance Code, the failure to attach official
receipts and other documents evidencing the expenses incurred by petitioner
IPAMS, even assuming that it can be considered a defect on the required proof of
loss, is therefore considered waived as ground for objecting the claims of petitioner
IPAMS.
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Keihen-Everett Forwarding Co., Inc., vs. Tokio Marine Malayan Insurance
Co., Inc. et.al,
G.R. No. 212107, January 28, 2019
FACTS:
In 2005, Honda Trading Phils. Ecozone Corporation (Honda Trading) ordered 80

bundles of Aluminum Alloy Ingots from PT Molten Aluminum Producer Indonesia
(PT Molten). PT Molten loaded the goods in two container vans which were, in
turn, received in Jakarta, Indonesia by Nippon Express Co., Ltd. for shipment to
Manila.
Aside from insuring the entire shipment with Tokio Marine & Nichido Fire Insurance
Co., Inc. (TMNFIC) Honda Trading also engaged the services of petitioner Keihin-
Everett to clear and withdraw the cargo from the pier and to transport and deliver
the same to its warehouse at the Laguna Technopark in Biñan, Laguna.
Meanwhile, petitioner Keihin-Everett had an Accreditation Agreement with
respondent Sunfreight Forwarders whereby the latter undertook to render common
carrier services for the former and to transport inland goods within the Philippines.
The shipment arrived in Manila on November 3, 2005 and was, accordingly,

offloaded from the ocean liner and temporarily stored at the CY Area of the Manila
International Port pending release by the Customs Authority. On November 8,
2005, the shipment was caused to be released from the pier by petitioner Keihin-
Everett and turned over to respondent Sunfreight Forwarders for delivery to Honda
Trading. En route to the latter's warehouse, the truck carrying the containers was
hijacked and the container van was reportedly taken away. Although said container
van was subsequently found in the vicinity of the Manila North Cemetery and later
towed to the compound of the Metro Manila Development Authority (MMDA), it
appears that the contents thereof were no longer retrieved. As a consequence,
Honda Trading suffered losses in the total amount of ₱2,121,917.04, representing
the value of the lost 40 bundles of Aluminum Alloy Ingots.
Claiming to have paid Honda Trading's insurance claim for the loss it suffered,
respondent Tokio Marine commenced the instant suit on October 10, 2006 with
the filing of its complaint for damages against petitioner Keihin-Everett.
Respondent Tokio Marine maintained that it had been subrogated to all the rights
and causes of action pertaining to Honda Trading.
Served with summons, petitioner Keihin-Everett denied liability for the lost
shipment on the ground that the loss thereof occurred while the same was in the
possession of respondent Sunfreight Forwarders. Hence, petitioner Keihin-Everett
filed a third-party complaint against the latter, who, in turn, denied liability on the
ground that it was not privy to the contract between Keihin-Everett and Honda
Trading. If at all, respondent Sunfreight Forwarders claimed that its liability cannot
exceed the ₱500,000.00 fixed in its Accreditation Agreement with petitioner Keihin-
Everett.
On October 27, 2011, the RTC rendered a Decision finding petitioner Keihin-
Everett and respondent Sunfreight Forwarders jointly and severally liable to pay
respondent Tokio Marine's claim. The RTC found the driver of Sunfreight
Forwarders as the cause of the evil caused. Under Article 2180 of the Civil Code,
it provides: "Employers shall be liable for the damages caused by their employees
and household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry." Thus, Sunfreight
Forwarders is hereby held liable for the loss of the subject cargoes with Keihin-
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Everett, being a common carrier. In case, Keihin-Everett pays for the amount, it
has a right of reimbursement from Sunfreight Forwarders.
Keihin-Everett moved for reconsideration of the foregoing RTC Decision. However,

its motion was denied for lack of merit by the RTC. Hence, Keihin-Everett filed an
appeal with the CA.
In the now appealed Decision of the CA, the latter modified the ruling of the RTC
insofar as the solidary liability of Keihin-Everett and Sunfreight Forwarders is
concerned. The CA went to rule that solidarity is never presumed. There is solidary
liability when the obligation so states, or when the law or the nature of the obligation
requires the same. Thus, because of the lack of privity between Honda Trading
and Sunfreight Forwarders, the latter cannot simply be held jointly and severally
liable with Keihin-Everett for Tokio Marine's claim as subrogee. In view of the
Accreditation Agreement between Keihin-Everett and Sunfreight Forwarders, the
former possesses a right of reimbursement against the latter for so much of what
Keihin-Everett has paid to Tokio Marine.
Dissatisfied with the CA Decision, petitioner Keihin-Everett filed the instant petition
with this Court.
ISSUE:
Whether Sunfreight Forwarders can be held jointly and severally liable with Keihin-
Everett for Tokio Marine's claim as subrogee.
HELD:
Yes. Since the insurance claim for the loss sustained by the insured shipment was
paid by Tokio Marine as proven by the Subrogation Receipt – showing the amount
paid and the acceptance made by Honda Trading, it is inevitable that it is entitled,
as a matter of course, to exercise its legal right to subrogation as provided under
Article 2207 of the Civil Code as follows:
“Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract.
If the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.”
It must be stressed that the Subrogation Receipt only proves the fact of payment.
This fact of payment grants Tokio Marine subrogatory right which enables it to
exercise legal remedies that would otherwise be available to Honda Trading as
owner of the hijacked cargoes as against the common carrier- Keihin-Everett. In
other words, the right of subrogation accrues simply upon payment by the
insurance company of the insurance claim. As the Court held:
The payment by the insurer to the insured operates as an equitable assignment to

the insurer of all the remedies which the insured may have against the third party
whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract or upon payment
by the insurance company of the insurance claim. It accrues simply upon payment
by the insurance company of the insurance claim.
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Indeed, the right of subrogation has its roots in equity. It is designed to promote
and to accomplish justice and is the mode which equity adopts to compel the
ultimate payment of a debt by one who, in justice and good conscience, ought to
pay. Consequently, the payment made by Tokio Marine to Honda Trading operates
as an equitable assignment to the former of all the remedies which the latter may
have against Keihin-Everett.
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The Insular Life Assurance Company, Ltd., vs. Paz Y. Khu, et al, G.R No.
195176, April 18. 2016
FACTS:
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy
with Insular Life under the latter’s Diamond Jubilee Insurance Plan. Felipe
accomplished the required medical questionnaire wherein he did not declare any
illness or adverse medical condition. Insular Life thereafter issued him a policy with
a face value of P1 million. This took effect on June 22, 1997.
On June 23, 1999, Felipe’s policy lapsed due to non-payment of the premium
covering the period from June 22, 1999 to June 23, 2000.
On September 7, 1999, Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium. Except for the change in his occupation of being self-
employed to being the Municipal Mayor of Binuangan, Misamis Oriental, all the
other information submitted by Felipe in his application for reinstatement was
virtually identical to those mentioned in his original policy.
On October 12, 1999, Insular Life advised Felipe that his application for
reinstatement may only be considered if he agreed to certain conditions such as
payment of additional premium and the cancellation of the riders pertaining to
premium waiver and accidental death benefits. Felipe agreed to these conditions
and on December 27, 1999 paid the agreed additional premium of P3,054.50.
On June 23, 2000, Felipe paid the annual premium in the amount of P28,000.00
covering the period from June 22, 2000 to June 22, 2001. And on July 2, 2001, he
also paid the same amount as annual premium covering the period from June 22,
2001 to June 21, 2002.
On September 22, 2001, Felipe died. On October 5, 2001, Paz Y. Khu, Felipe Y.
Khu, Jr. and Frederick Y. Khu (collectively, Felipe’s beneficiaries or respondents)
filed with Insular Life a claim for benefit under the reinstated policy. This claim was
denied. Instead, Insular Life advised Felipe’s beneficiaries that it had decided to
rescind the reinstated policy on the grounds of concealment and misrepresentation
by Felipe.
Hence, respondents instituted a complaint for specific performance with damages.

Respondents prayed that the reinstated life insurance policy be declared valid,
enforceable and binding on Insular Life; and that the latter be ordered to pay unto
Felipe’s beneficiaries the proceeds of this policy, among others.
In its Answer, Insular Life countered that Felipe did not disclose the ailments (viz.,
Type 2 Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with
Ascites) that he already had prior to his application for reinstatement of his
insurance policy; and that it would not have reinstated the insurance policy had
Felipe disclosed the material information on his adverse health condition. It
contended that when Felipe died, the policy was still contestable.
On December 12, 2003, the RTC, Branch 39 of Cagayan de Oro City found for
Felipe’s beneficiaries. In ordering Insular Life to pay Felipe’s beneficiaries, the RTC
agreed with the latter’s claim that the insurance policy was reinstated on June 22,
1999. The RTC also held that the reinstated insurance policy had already become
incontestable by the time of Felipe’s death on September 22, 2001 since more
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than two years had already lapsed from the date of the policy’s reinstatement on
June 22, 1999. The RTC noted that since it was Insular Life itself that supplied all
the pertinent forms relative to the reinstated policy, then it is barred from taking
advantage of any ambiguity/obscurity perceived therein particularly as regards the
date when the reinstated insurance policy became effective.
On June 24, 2010, the CA issued the assailed Decision.The CA upheld the RTC’s
ruling on the non-contestability of the reinstated insurance policy on the date the
insured died. It declared that contrary to Insular Life’s contention, there in fact
exists a genuine ambiguity or obscurity in the language of the two documents
prepared by Insular Life itself, viz., Felipe’s Letter of Acceptance and Insular Life’s
Endorsement; that given the obscurity/ambiguity in the language of these two
documents, the construction/interpretation that favors the insured’s right to recover
should be adopted; and that in keeping with this principle, the insurance policy in
dispute must be deemed reinstated as of June 22, 1999.
Insular Life moved for partial reconsideration but this was denied by the CA in its
Resolution of December 13, 2010.
ISSUE:
Whether Felipe’s reinstated life insurance policy is already incontestable at the

time of his death.
HELD:
Yes. The Insurance Code pertinently provides that:
“Sec. 48. Whenever a right to rescind a contract of insurance is given

to the insurer by any provision of this chapter, such right must be
exercised previous to the commencement of an action on the
contract.
After a policy of life insurance made payable on the death of the

insured shall have been in force during the lifetime of the insured for
a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio
or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.”
The Court therefore agrees fully with the appellate court’s pronouncement that-
xxxx
‘The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for
the insurer to collect the premiums as long as the insured is still alive, only to raise
the issue of fraudulent concealment or misrepresentation when the insured dies in
order to defeat the right of the beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last reinstatement, the
beneficiary is given the stability to recover under the policy when the insured dies.
The provision also makes clear when the two-year period should commence in
case the policy should lapse and is reinstated, that is, from the date of the last
reinstatement’.
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In this case, the parties differ as to when the reinstatement was actually approved.
Insular Life claims that it approved the reinstatement only on December 27, 1999.
On the other hand, respondents contend that it was on June 22, 1999 that the
reinstatement took effect. The resolution of this issue hinges on the following
documents: 1) Letter of Acceptance; and 2) the Endorsement.
We find that the CA did not commit any error in holding that the subject insurance
policy be considered as reinstated on June 22, 1999. This finding must be upheld
not only because it accords with the evidence, but also because this is favorable
to the insured who was not responsible for causing the ambiguity or obscurity in
the insurance contract.
The CA expounded on this point thus –
The Court discerns a genuine ambiguity or obscurity in the language of the two
documents.
In the Letter of Acceptance, Khu declared that he was accepting "the imposition of
an extra/additional x x x premium of P5.00 a year per thousand of insurance;
effective June 22, 1999". It is true that the phrase as used in this particular
paragraph does not refer explicitly to the effectivity of the reinstatement. But the
Court notes that the reinstatement was conditioned upon the payment of additional
premium not only prospectively, that is, to cover the remainder of the annual period
of coverage, but also retroactively, that is for the period starting June 22, 1999.
Hence, by paying the amount of P3,054.50 on December 27, 1999 in addition to
the P25,020.00 he had earlier paid on September 7, 1999, Khu had paid for the
insurance coverage starting June 22, 1999. At the very least, this circumstance
has engendered a true lacuna.
In the Endorsement, the obscurity is patent. In the first sentence of the

Endorsement, it is not entirely clear whether the phrase "effective June 22, 1999"
refers to the subject of the sentence, namely "the reinstatement of this policy," or
to the subsequent phrase "changes are made on the policy."
The court below is correct. Given the obscurity of the language, the construction
favorable to the insured will be adopted by the courts. Accordingly, the subject
policy is deemed reinstated as of June 22, 1999. Thus, the period of contestability
has lapsed.
Indeed, more than two years had lapsed from the time the subject insurance policy
was reinstated on June 22, 1999 vis-a-vis Felipe’s death on September 22, 2001.
As such, the subject insurance policy has already become incontestable at the
time of Felipe’s death.
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Manila Bankers Life Insurance Corporation vs. Cresencia P. Aban, G.R. No

175666, July 29, 2013
FACTS:
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila
Bankers Life Insurance Corporation (Bankers Life), designating respondent
Cresencia P. Aban (Aban), her niece, as her beneficiary.
Petitioner issued the policy with a face value of ₱100,000.00, in Sotero’s favor on
August 30, 1993, after the requisite medical examination and payment of the
insurance premium.
On April 10, 1996, when the insurance policy had been in force for more than two
years and seven months, Sotero died. Respondent filed a claim for the insurance
proceeds on July 9, 1996. Petitioner conducted an investigation into the claim, and
came out with the following findings that Sotero did not personally apply for
insurance coverage, as she was illiterate; she was sickly since 1990; she did not
have the financial capability to pay the insurance premiums; she did not sign the
application for insurance; and respondent was the one who filed the insurance
application, and x x x designated herself as the beneficiary.
For the above reasons, petitioner denied respondent’s claim on April 16, 1997 and
refunded the premiums paid on the policy.
On April 24, 1997, petitioner filed a civil case for rescission and/or annulment of
the policy, which was docketed as Civil Case No. 97-867 and assigned to Branch
134 of the Makati Regional Trial Court. The main thesis of the Complaint was that
the policy was obtained by fraud, concealment and/or misrepresentation under the
Insurance Code, which thus renders it voidable under Article 1390 of the Civil
Code.
Respondent filed a Motion to Dismiss claiming that petitioner’s cause of action was
barred by prescription pursuant to Section 48 of the Insurance Code, which
provides as follows:
“Whenever a right to rescind a contract of insurance is given to the

insurer by any provision of this chapter, such right must be exercised
previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the

insured shall have been in force during the lifetime of the insured for
a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio
or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.”
During the proceedings on the Motion to Dismiss, petitioner’s investigator testified

in court, stating among others that the insurance underwriter who solicited the
insurance is a cousin of respondent’s husband, Dindo Aban, and that it was the
respondent who paid the annual premiums on the policy.
On December 9, 1997, the trial court issued an Order granting respondent’s Motion
to Dismiss. In dismissing the case, the trial court found that Sotero, and not
respondent, was the one who procured the insurance; thus, Sotero could legally
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take out insurance on her own life and validly designate – as she did – respondent
as the beneficiary. It held further that under Section 48, petitioner had only two
years from the effectivity of the policy to question the same; since the policy had
been in force for more than two years, petitioner is now barred from contesting the
same or seeking a rescission or annulment thereof.
Petitioner moved for reconsideration, but in another Order dated October 20, 1998,
the trial court stood its ground.
Petitioner interposed an appeal with the CA, arguing that the trial court erred in
applying Section 48 and declaring that prescription has set in. It contended that
since it was respondent – and not Sotero – who obtained the insurance, the policy
issued was rendered void ab initio for want of insurable interest.
On September 28, 2005, the CA issued the assailed Decision, sustaining the trial
court. Applying Section 48 to petitioner’s case, the CA held that petitioner may no
longer prove that the subject policy was void ab initio or rescindible by reason of
fraudulent concealment or misrepresentation after the lapse of more than two
years from its issuance. It ratiocinated that petitioner was equipped with ample
means to determine, within the first two years of the policy, whether fraud,
concealment or misrepresentation was present when the insurance coverage was
obtained. If it failed to do so within the statutory two-year period, then the insured
must be protected and allowed to claim upon the policy.
Petitioner moved for reconsideration, but the CA denied the same in its November
9, 2006 Resolution.
ISSUES:
Whether the petitioner may no longer prove that the subject policy was void ab
initio or rescindible by reason of fraudulent concealment or misrepresentation after
the lapse of more than two years from its issuance.
HELD:
No. Under the provision, an insurer is given two years – from the effectivity of a life
insurance contract and while the insured is alive – to discover or prove that the
policy is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or
when the insured dies within the period, the insurer must make good on the policy,
even though the policy was obtained by fraud, concealment, or misrepresentation.
This is not to say that insurance fraud must be rewarded, but that insurers who
recklessly and indiscriminately solicit and obtain business must be penalized, for
such recklessness and lack of discrimination ultimately work to the detriment of
bona fide takers of insurance and the public in general.
Section 48 regulates both the actions of the insurers and prospective takers of life
insurance. It gives insurers enough time to inquire whether the policy was obtained
by fraud, concealment, or misrepresentation; on the other hand, it forewarns
scheming individuals that their attempts at insurance fraud would be timely
uncovered – thus deterring them from venturing into such nefarious enterprise. At
the same time, legitimate policy holders are absolutely protected from unwarranted
denial of their claims or delay in the collection of insurance proceeds occasioned
by allegations of fraud, concealment, or misrepresentation by insurers, claims
which may no longer be set up after the two-year period expires as ordained under
the law.
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Thus, the self-regulating feature of Section 48 lies in the fact that both the insurer
and the insured are given the assurance that any dishonest scheme to obtain life
insurance would be exposed, and attempts at unduly denying a claim would be
struck down. Life insurance policies that pass the statutory two-year period are
essentially treated as legitimate and beyond question, and the individuals who
wield them are made secure by the thought that they will be paid promptly upon
claim. In this manner, Section 48 contributes to the stability of the insurance
industry.
Section 48 prevents a situation where the insurer knowingly continues to accept

annual premium payments on life insurance, only to later on deny a claim on the
policy on specious claims of fraudulent concealment and misrepresentation, such
as what obtains in the instant case. Thus, instead of conducting at the first instance
an investigation into the circumstances surrounding the issuance of the subject
policy which would have timely exposed the supposed flaws and irregularities
attending it as it now professes, petitioner appears to have turned a blind eye and
opted instead to continue collecting the premiums on the policy. For nearly three
years, petitioner collected the premiums and devoted the same to its own profit. It
cannot now deny the claim when it is called to account. Section 48 must be applied
to it with full force and effect.
The Court therefore agrees fully with the appellate court’s pronouncement that –
the "incontestability clause" is a provision in law that after a policy of life insurance
made payable on the death of the insured shall have been in force during the
lifetime of the insured for a period of two (2) years from the date of its issue or of
its last reinstatement, the insurer cannot prove that the policy is void ab initio or is
rescindible by reason of fraudulent concealment or misrepresentation of the
insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by
limiting the rescinding of the contract of insurance on the ground of fraudulent
concealment or misrepresentation to a period of only two (2) years from the
issuance of the policy or its last reinstatement.
The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for
the insurer to collect the premiums as long as the insured is still alive, only to raise
the issue of fraudulent concealment or misrepresentation when the insured dies in
order to defeat the right of the beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last reinstatement, the
beneficiary is given the stability to recover under the policy when the insured dies.
The provision also makes clear when the two-year period should commence in
case the policy should lapse and is reinstated, that is, from the date of the last
reinstatement.
After two years, the defenses of concealment or misrepresentation, no matter how

patent or well-founded, will no longer lie.
Congress felt this was a sufficient answer to the various tactics employed by
insurance companies to avoid liability.
The so-called "incontestability clause" precludes the insurer from raising the
defenses of false representations or concealment of material facts insofar as
health and previous diseases are concerned if the insurance has been in force for
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at least two years during the insured’s lifetime. The phrase "during the lifetime"
found in Section 48 simply means that the policy is no longer considered in force
after the insured has died. The key phrase in the second paragraph of Section 48
is "for a period of two years."
As borne by the records, the policy was issued on August 30, 1993, the insured
died on April 10, 1996, and the claim was denied on April 16, 1997. The insurance
policy was thus in force for a period of 3 years, 7 months, and 24 days. Considering
that the insured died after the two-year period, the plaintiff-appellant is, therefore,
barred from proving that the policy is void ab initio by reason of the insured’s
fraudulent concealment or misrepresentation or want of insurable interest on the
part of the beneficiary, herein defendant-appellee.
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TRANSPORTATION LAW
1. Transimex Co. vs, Mafre Asian Insurance Corp, G.R. No. 190271,
September 14, 2016;
2. Designer Baskets, Inc., vs Air Sea Transport, Inc., et al., G.R. No. 184513,
March 9, 2016;
3. Alfredo Manay, Jr. vs. Cebu Air, Inc. G.R. No. 210621, April 04, 2016;
4. Greenstar Express, Inc., vs. Universal Robina Corporation, G.R. No.

205090, October 17, 2016;
5. Sulpicio Lines, Inc., vs Napoleon Sesante, G.R. NO. 172682, July 27, 2016;
6. Alfredo S. Ramos vs. China Southern Airlines Co. Ltd., G.R. No. 213418,
September 21, 2016;
7. Cathay Pacific Airways, Ltd., vs. Sps, Arnulfo, G. R. No. 188283, July 20,
2016;
8. Jose Sanico and Vicente Castro v. Werherlina P. Colipano, G.R. No.

209969, September 27, 2017;
9. Sulpicio Lines, Inc. v. Karaan, G.R. No. 208590, October 3, 2018;
10. Asian Terminals Inc.vs. Padoson Stainless Steel Corporation, G.R. No.
211876, June 25, 2018.
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Transimex Co. vs, Mafre Asian Insurance Corp.,

G.R. No. 190271, September 14, 2016
FACTS:
On 21 May 1996, M/V Meryem Ana received a shipment of Prilled Urea Fertilizer
from Helm Duengemittel GMBH at Odessa, Ukraine. The shipment was covered
by two separate bills of lading and consigned to Fertiphil for delivery to two ports -
one in Poro Point, San Fernando, La Union; and the other in Tabaco, Albay.
Fertiphil insured the cargo against all risks under marine policies issue by Mafre
Asiana Insurance Corp.
On 20 June 1996, M/V Meryem Ana arrived at Tabaco, Albay, to unload the
fertilizer which appeared to have a gross weight of 7,700 metric tons. As soon as
the vessel docked at the Tabaco port, the fertilizer was bagged and stored inside
a warehouse by employees of the consignee. When the cargo was subsequently
weighed, it was discovered that only 7,350.35 metric tons of fertilizer had been
delivered. Because of the alleged shortage of 349.65 metric tons, Fertiphil filed a
claim with respondent for P1,617,527.37, which was found compensable.
After paying the claim of Fertiphil, respondent demanded reimbursement from

petitioner on the basis of the right of subrogation. The claim was denied, prompting
respondent to file a Complaint with the RTC for recovery of sum of money.
Petitioner, on the other hand, denied that there was loss or damage to the cargo.
The RTC ruled in favor of respondent and ordered petitioner to pay the claim of
P1,617,527.37. In its Decision, the trial court found that there was indeed a
shortage in the cargo delivered, for which the common carrier must be held
responsible under Article 1734 of the Civil Code.
The CA affirmed the ruling of the RTC and denied petitioner's appeal. Petitioner
moved for reconsideration of the CA Decision, but the motion was denied.
On 3 December 2009, Transimex filed a Petition for Review on Certiorari insisting

that the dispute is governed by Section 4 of COGSA, which exempts the carrier
from liability for any loss or damage arising from "perils, dangers and accidents of
the sea.
ISSUE:
1. Whether the transaction is governed by the provisions of the Civil Code on

common carriers or by the provisions of COGSA; and
2. Whether petitioner is liable for the loss or damage sustained by the cargo
because of bad weather.
HELD:
1. The provisions of the Civil Code on common carriers are applicable.
As expressly provided in Article 1753 of the Civil Code, "[t]he law of the country to
which the goods are to be transported shall govern the liability of the common
carrier for their loss, destruction or deterioration." Since the cargo in this case was
transported from Odessa, Ukraine, to Tabaco, Albay, the liability of petitioner for
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the alleged shortage must be determined in accordance with the provisions of the
Civil Code on common carriers.
In Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., the Court declared that
according to the New Civil Code, the law of the country to which the goods are to
be transported shall govern the liability of the common carrier for their loss,
destruction or deterioration. The Code takes precedence as the primary law over
the rights and obligations of common carriers with the Code of Commerce and
COGSA applying suppletorily.
Besides, petitioner itself later conceded in its Reply that the Civil Code provisions
on common carriers are primarily applicable to the present dispute, while COGSA
2. Yes. Petitioner is liable for the loss or damage sustained by the cargo.
Petitioner asserts that the shortage was caused by bad weather, which must be
considered either a storm under Article 1734 of the Civil Code or a peril of the sea
under the Carriage of Goods by Sea Act (COGSA). The Court, however, found
that petitioner failed to prove the existence of a storm or a peril of the sea within
the context of Article 1734(1) of the Civil Code or Section 4(2)( c) of COGSA.
It must be emphasized that not all instances of bad weather may be categorized
as "storms" or "perils of the sea" within the meaning of the provisions of the Civil
Code and COGSA on common carriers.
With respect to storms, this Court has explained the difference between a storm
and ordinary weather conditions in Central Shipping Co. Inc. v. Insurance
Company of North America:
According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to

55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the
vessel stated that the wind was blowing around force 7 to 8 on the Beaufort Scale.
Consequently, the strong winds accompanying the southwestern monsoon could
not be classified as a "storm." Such winds are the ordinary vicissitudes of a sea
voyage.
The phrase "perils of the sea" carries the same connotation. Although the term has
not been definitively defined in Philippine jurisprudence, courts in the United States
of America generally limit the application of the phrase to weather that is "so
unusual, unexpected and catastrophic as to be beyond reasonable expectation."
Accordingly, strong winds and waves are not automatically deemed perils of the
sea, if these conditions are not unusual for that particular sea area at that specific
time, or if they could have been reasonably anticipated or foreseen.
In this case, the documentary and testimonial evidence cited by petitioner indicate
that M/V Meryem Ana faced winds of only up to 40 knots while at sea. This wind
force clearly fell short of the 48 to 55 knots required for "storms" under Article
1734(1) of the Civil Code based on the threshold established by PAG ASA.
Petitioner also failed to prove that the inclement weather encountered by the
vessel was unusual, unexpected, or catastrophic. In particular, the strong winds
and waves, which allegedly assaulted the ship, were not shown to be worse than
what should have been expected in that particular location during that time of the
year.
Consequently, this Court cannot consider these weather conditions as "perils of
the sea" that would absolve the carrier from liability. Even assuming that the
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inclement weather encountered by the vessel amounted to a "storm" under Article
1734(1) of the Civil Code, there are two other reasons why this Court cannot
absolve petitioner from liability for loss or damage to the cargo under the Civil
Code. First, there is no proof that the bad weather encountered by M/V Meryem
Ana was the proximate and only cause of damage to the shipment. Second,
petitioner failed to establish that it had exercised the diligence required from
common carriers to prevent loss or damage to the cargo.
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Designer Baskets, Inc., vs Air Sea Transport, Inc., et al.,
G.R. No. 184513, March 9, 2016
FACTS:
DBI is a domestic corporation engaged in the production of housewares and

handicraft items for export. Sometime in October 1995, Ambiente, a foreign-based
company, ordered from DBI 223 cartons of assorted wooden items (the shipment).
The shipment was US$12,590.87 and payable through telegraphic
transfer. Ambiente designated ACCLI as the forwarding agent that will ship out its
order from the Philippines to the United States (US). ACCLI is a domestic
corporation acting as agent of ASTI, a US based corporation engaged in carrier
transport business, in the Philippines.
On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from
Manila and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills,
California. To acknowledge receipt and to serve as the contract of sea carriage,
ACCLI issued to DBI triplicate copies of ASTI Bill of Lading No. AC/MLLA601317.
DBI retained possession of the originals of the bills of lading pending the payment
of the goods by Ambiente.
On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement
(Agreement). Under the Agreement, Ambiente obligated ASTI to deliver the
shipment to it or to its order "without the surrender of the relevant bill(s) of lading
due to the non-arrival or loss thereof."In exchange, Ambiente undertook to
indemnify and hold ASTI and its agent free from any liability as a result of the
release of the shipment. Thereafter, ASTI released the shipment to Ambiente
without the knowledge of DBI, and without it receiving payment for the total cost of
the shipment.
DBI then made several demands to Ambiente for the payment of the shipment, but
to no avail. Thus, on October 7, 1996, DBI filed the Original Complaint against
ASTI, ACCLI and ACCLFs incorporators-stockholders for the payment of the value
of the shipment in the amount of US$12,590.87 or P333,658.00 plus interest at the
legal rate from January 22, 1996, exemplary damages, attorney's fees and cost of
suit.
On February 20, 1997, ASTI, ACCLI, and ACCLI's incorporators-stockholders filed

a Motion to Dismiss. They argued that contrary to the allegation of DBI, the bill of
lading covering the shipment does not contain a proviso exposing ASTI to liability
in case the shipment is released without the surrender of the bill of lading.
DBI filed an Opposition to the Motion to Dismiss, asserting that ASTI and ACCLI
failed to exercise the required extraordinary diligence when they allowed the
cargoes to be withdrawn by the consignee without the surrender of the original bill
of lading. ASTI, ACCLI, and ACCLI's incorporators-stockholders countered that it
is DBI who failed to exercise extraordinary diligence in protecting its own interest.
They averred that whether or not the buyer-consignee pays the seller is already
outside of their concern.
Before the trial court could resolve the motion to dismiss, DBI filed an Amended
Complaint\impleading Ambiente as a new defendant and praying that it be held
solidarity liable with ASTI, ACCLI, and ACCLFs incorporators-stockholders for the
payment of the value of the shipment. DBI alleged that it received reliable
information that the shipment was released merely on the basis of a company
guaranty of Ambiente.
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In their Answer, ASTI, ACCLI, and ACCLI's incorporators-stockholders countered
that DBI has no cause of action against ACCLI and its incorporators-stockholders
because the Amended Complaint, on its face, is for collection of sum of money by
an unpaid seller against a buyer. ACCLI also reiterated that there is no stipulation
in the bill of lading restrictively subjecting the release of the cargo only upon the
presentation of the original bill of lading.
On July 22, 1997, the trial court directed the service of summons to Ambiente
through the Department of Trade and Industry. The summons was served on
October 6, 1997 and December 18, 1997. Ambiente failed to file an Answer.
Hence, DBI moved to declare Ambiente in default, which the trial court granted in
its Order dated September 15, 1998.
In a Decision dated July 25, 2003, the trial court found ASTI, ACCLI, and Ambiente
solidarity liable to DBI for the value of the shipment. As regards ACCLFs
incorporators-stockholders, the trial court absolved them from liability.
The CA affirmed the trial court's finding that Ambiente is liable to DBI, but absolved
ASTI and ACCLI from liability. The CA ruled that, there is nothing in the applicable
laws that require the surrender of bills of lading before the goods may be released
to the buyer/consignee. The fact that the carrier is given the alternative option to
simply require a receipt for the goods delivered suggests that the surrender of the
bill of lading may be dispensed with when it cannot be produced by the consignee
for whatever cause. The CA stressed that DBI failed to present evidence to prove
its assertion that the surrender of the bill of lading upon delivery of the goods is a
common mercantile practice.
As for ASTI, the CA explained that its only obligation as a common carrier was to
deliver the shipment in good condition. It did not include looking beyond the details
of the transaction between the seller and the consignee, or more particularly,
ascertaining the payment of the goods by the buyer Ambiente.
ISSUE:
Whether ASTI and ACCLI may be held solidarily liable to DBI for the value of the
shipment.
HELD:
No. A common carrier may release the goods to the consignee even without the
surrender of the hill of lading. Here, ACCLI, as agent of ASTI, issued Bill of Lading
No. AC/MLLA601317 to DBI. This bill of lading governs the rights, obligations and
liabilities of DBI and ASTI. DBI claims that Bill of Lading No. AC/MLLA601317
contains a provision stating that ASTI and ACCLI are "to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or copies of the
said Bill of Lading is or are surrendered to them; otherwise they become liable to
[DBI] for the value of the shipment."56 Quite tellingly, however, DBI does not point
or refer to any specific clause or provision on the bill of lading supporting this claim.
The language of the bill of lading shows no such requirement. There is no
obligation, therefore, on the part of ASTI and ACCLI to release the goods only
upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the consignee even
without the latter's surrender of the bill of lading. The third paragraph of Article 353
of the Code of Commerce is enlightening:
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Article 353. The legal evidence of the contract between the shipper and the carrier
shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being
admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has
issued shall be returned to him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions shall be considered
cancelled, unless in the same act the claim which the parties may wish to reserve
be reduced to writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as
the return of the bill of lading.
The general rule is that upon receipt of the goods, the consignee surrenders the
bill of lading to the carrier and their respective obligations are considered canceled.
The law, however, provides two exceptions where the goods may be released
without the surrender of the bill of lading because the consignee can no longer
return it. These exceptions are when the bill of lading gets lost or for other cause.
In either case, the consignee must issue a receipt to the carrier upon the release
of the goods. Such receipt shall produce the same effect as the surrender of the
bill of lading. The non-surrender of the original bill of lading does not
violate the carrier's duty of extraordinary diligence over the good
Thus, the surrender of the original bill of lading is not a condition precedent for a
common carrier to be discharged of its contractual obligation.
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Alfredo Manay, Jr. vs. Cebu Air, Inc.
G.R. No. 210621, April 04, 2016
FACTS:
On June 13, 2008, Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip
tickets from Manila to Palawan for himself and on behalf of his relatives and
friends. He made the purchase at Cebu Pacific's branch office in Robinsons
Galleria.
Jose alleged that he specified to "Alou," the Cebu Pacific ticketing agent, that his
preferred date and time of departure from Manila to Palawan should be on July 20,
2008 at 0820 (or 8:20 a.m.) and that his preferred date and time for their flight back
to Manila should be on July 22, 2008 at 1615 (or 4:15 p.m.). He paid a total amount
of P42,957.00 using his credit card. He alleged that after paying for the tickets,
Alou printed the tickets, which consisted of three (3) pages, and recapped only the
first page to him. Since the first page contained the details he specified to Alou, he
no longer read the other pages of the flight information.
On July 20, 2008, Jose and his 19 companions boarded the 0820 Cebu Pacific
flight to Palawan and had an enjoyable stay.
On the afternoon of July 22, 2008, the group proceeded to the airport for their flight
back to Manila. During the processing of their boarding passes, they were informed
by Cebu Pacific personnel that nine (9) of them could not be admitted because
their tickets were for the 1005 (or 10:05 a.m.) flight earlier that day. Jose informed
the ground personnel that he personally purchased the tickets and specifically
instructed the ticketing agent that all 20 of them should be on the 4:15 p.m. flight
to Manila.
Upon checking the tickets, they learned that only the first two (2) pages had the
schedule Jose specified. They were left with no other option but to rebook their
tickets. They then learned that their return tickets had been purchased as part of
the promo sales of the airline, and the cost to rebook the flight would be P7,000.00
more expensive than the promo tickets. The sum of the new tickets amounted to
P65,000.00.
They offered to pay the amount by credit card but were informed by the ground
personnel that they only accepted cash. They then offered to pay in dollars, since
most of them were balikbayans and had the amount on hand, but the airline
personnel still refused.
Eventually, they pooled enough cash to be able to buy tickets for five (5) of their
companions. The other four (4) were left behind in Palawan and had to spend the
night at an inn, incurring additional expenses. Upon his arrival in Manila, Jose
immediately purchased four (4) tickets for the companions they left behind, which
amounted to P5,205.
Later in July 2008, Jose went to Cebu Pacific's ticketing office in Robinsons
Galleria to complain about the allegedly erroneous booking and the rude treatment
that his group encountered from the ground personnel in Palawan. He alleged that
instead of being assured by the airline that someone would address the issues he
raised; he was merely "given a run around."
Jose and his companions were frustrated and annoyed by Cebu Pacific's handling
of the incident so they sent the airline demand letters dated September 3, 2008and
January 20, 2009 asking for a reimbursement of P42,955.00, representing the
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additional amounts spent to purchase the nine (9) tickets, the accommodation, and
meals of the four (4) that were left behind. They also filed a complaint before the
Department of Trade and Industry.
On February 24, 2009, Cebu Pacific, through its Guest Services Department, sent
petitioners' counsel an email explaining that "ticketing agents, like Alou, recap [the]
flight details to the purchaser to avoid erroneous booking[s]." The recap is given
one other time by the cashier. Cebu Pacific stated that according to its records,
Jose was given a full recap and was made aware of the flight restriction of promo
tickets, "which included [the] promo fare being non-refundable."
Jose and his companions were unsatisfied with Cebu Pacific's response so they
filed a Complaintfor Damages against Cebu Pacific before Branch 59 of the
Metropolitan Trial Court of Mandaluyong.
In its Answer, Cebu Pacific essentially denied all the allegations in the Complaint
and insisted that Jose was given a full recap of the tickets. It also argued that Jose
had possession of the tickets 37 days before the scheduled flight; hence, he had
sufficient time and opportunity to check the flight information and itinerary.
On December 15, 2011, the Metropolitan Trial Court rendered its Decision ordering
Cebu Pacific to pay Jose and his companions. The Metropolitan Trial Court found
that as a common carrier, Cebu Pacific should have exercised extraordinary
diligence in performing its contractual obligations.
Cebu Pacific appealed to the Regional Trial Court, reiterating that its ticketing
agent gave Jose a full recap of the tickets he purchased.
On November 6, 2012, Branch 212 of the Regional Trial Court of Mandaluyong

rendered the Decision dismissing the appeal. The Regional Trial Court affirmed
the findings of the Metropolitan Trial Court.
Cebu Pacific appealed to the Court of Appeals, arguing that it was not at fault for
the damages caused to the passengers.
On December 13, 2013, the Court of Appeals rendered the Decision granting the
appeal and reversing the Decisions of the Metropolitan Trial Court and the
Regional Trial Court. According to the Court of Appeals, the extraordinary
diligence expected of common carriers only applies to the carriage of passengers
and not to the act of encoding the requested flight schedule. It was incumbent upon
the passenger to exercise ordinary care in reviewing flight details and checking
schedules.
Jose, et al. filed before this Court a Petition for Review on Certiorari.
ISSUE:
Whether the Cebu Pacific Air, Inc. is liable to the petitioners for damages for the
issuance of a plane ticket with an allegedly erroneous flight schedule.
HELD:
No. The Air Passenger Bill of Rights acknowledges that "while a passenger has
the option to buy or not to buy the service, the decision of the passenger to buy
the ticket binds such passenger[.]" Thus, the airline is mandated to place in writing
all the conditions it will impose on the passenger.
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However, the duty of an airline to disclose all the necessary information in the
contract of carriage does not remove the correlative obligation of the passenger
to exercise ordinary diligence in the conduct of his or her affairs. The passenger is
still expected to read through the flight information in the contract of carriage before
making his or her purchase. If he or she fails to exercise the ordinary diligence
expected of passengers, any resulting damage should be borne by the passenger.
As one of the four domestic airlines in the country, Cebu Pacific Air, Inc. is a
common carrier required by law to exercise extraordinary diligence. Extraordinary
diligence requires that the common carrier must transport goods and passengers
"safely as far as human care and foresight can provide," and it must exercise the
"utmost diligence of very cautious persons . . . with due regard for all the
circumstances. This extraordinary diligence must be observed not only in
the transportation of goods and services but also in the issuance of the contract of
carriage, including its ticketing operations.
When a common carrier, through its ticketing agent, has not yet issued a ticket to
the prospective passenger, the transaction between them is still that of a seller and
a buyer. The obligation of the airline to exercise extraordinary diligence
commences upon the issuance of the contract of carriage. Ticketing, as the act of
issuing the contract of carriage, is necessarily included in the exercise of
extraordinary diligence.
A contract of carriage is defined as "one whereby a certain person or association

of persons obligate themselves to transport persons, things, or news from one
place to another for a fixed price." In Cathay Pacific Airways v. Reyes:
[W]hen an airline issues a ticket to a passenger confirmed on a particular flight, on

a certain date, a contract of carriage arises, and the passenger has every right to
expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage.
Once a plane ticket is issued, the common carrier binds itself to deliver the
passenger safely on the date and time stated in the ticket. The contractual
obligation of the common carrier to the passenger is governed principally by what
is written on the contract of carriage.
In this case, both parties stipulated that the flight schedule stated on the nine (9)
disputed tickets was the 10:05 a.m. flight of July 22, 2008. According to the contract
of carriage, respondent's obligation as a common carrier was to transport nine (9)
of the petitioners safely on the 10:05 a.m. flight of July 22, 2008.
Petitioners, however, argue that respondent was negligent in the issuance of the
contract of carriage since the contract did not embody their intention. They insist
that the nine (9) disputed tickets should have been scheduled for the 4:15 p.m.
flight of July 22, 2008. Respondent, on the other hand, denies this and states that
petitioner Jose was fully informed of the schedules of the purchased tickets and
petitioners were negligent when they failed to correct their ticket schedule.
Respondent relies on the Parol Evidence Rule in arguing that a written document
is considered the best evidence of the terms agreed on by the parties. Petitioners,
however, invoke the exception in Rule 130, Section 9(b) of the Rules of Court that
evidence may be introduced if the written document fails to express the true intent
of the parties.
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It is a cardinal rule of evidence, not just one of technicality but of substance, that
the written document is the best evidence of its own contents. It is also a matter of
both principle and policy that when the written contract is established as the
repository of the parties stipulations, any other evidence is excluded and the same
cannot be used as a substitute for such contract, nor even to alter or contradict
them. This rule, however, is not without exception. Section 9, Rule 130 of the Rules
of Court states that a party may present evidence to modify, explain or add to the
terms of the agreement if he puts in issue in his pleading the failure of the written
agreement to express the true intent and agreement of the parties.
It is not disputed that on June 13, 2008, petitioner Jose purchased 20 Manila-
Palawan-Manila tickets from respondent's ticketing agent. Since all 20 tickets were
part of a single transaction made by a single purchaser, it is logical to presume
that all 20 passengers would prefer the same flight schedule, unless the purchaser
stated otherwise.
In petitioners' Position Paper before the Metropolitan Trial Court, they maintain that
respondent's ticketing agent was negligent when she failed to inform or explain to
petitioner Jose that nine (9) members of their group had been booked for the 10:05
a.m. flight, and not the 4:15 p.m. flight.
Respondent explained that as a matter of protocol, flight information is recapped

to the purchaser twice: first by the ticketing agent before payment, and second by
the cashier during payment. The tickets were comprised of three (3) pages.
Petitioners argue that only the first page was recapped to petitioner Jose when he
made the purchase.
The common carrier's obligation to exercise extraordinary diligence in the issuance

of the contract of carriage is fulfilled by requiring a full review of the flight schedules
to be given to a prospective passenger before payment. Based on the information
stated on the contract of carriage, all three (3) pages were recapped to petitioner
Jose.
The only evidence petitioners have in order to prove their true intent of having the
entire group on the 4:15 p.m. flight is petitioner Jose's self-serving testimony that
the airline failed to recap the last page of the tickets to him. They have neither
shown nor introduced any other evidence before the Metropolitan Trial Court,
Regional Trial Court, Court of Appeals, or this Court.
Even assuming that the ticketing agent encoded the incorrect flight information, it
is incumbent upon the purchaser of the tickets to at least check if all the information
is correct before making the purchase. Once the ticket is paid for and printed, the
purchaser is presumed to have agreed to all its terms and conditions.
In Ong Yiu v. Court of Appeals, the Court ruled that while it may be true that
petitioner had not signed the plane ticket, he is nevertheless bound by the
provisions thereof. "Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of the latter's lack
of knowledge or assent to the regulation." It is what is known as a contract of
"adhesion," in regards which it has been said that contracts of adhesion wherein
one party imposes a ready-made form of contract on the other, as the plane ticket
in the case at bar, are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres, he gives his consent.
One of the terms stated in petitioners' tickets stipulates that the photo identification
of the passenger must match the name entered upon booking:
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Guests should present a valid photo ID to airport security and upon check-in. Valid
IDs for this purpose are Company ID, Driver's License, Passport, School ID, SSS
Card, TIN Card. The name in the photo-ID should match the guest name that was
entered upon booking. Failure to present a valid photo ID will result in your being
refused check-in.
Considering that respondent was entitled to deny check-in to passengers whose

names do not match their photo identification, it would have been prudent for
petitioner Jose to check if all the names of his companions were encoded correctly.
Since the tickets were for 20 passengers, he was expected to have checked each
name on each page of the tickets in order to see if all the passengers' names were
encoded and correctly spelled. Had he done this; he would have noticed that there
was a different flight schedule encoded on the third page of the tickets since the
flight schedule was stated directly above the passengers' names.
Petitioners' flight information was not written in fine print. It was clearly stated on
the left portion of the ticket above the passengers' names. If petitioners had
exercised even the slightest bit of prudence, they would have been able to remedy
any erroneous booking.
This is not the first time that this Court has explained that an air passenger has the
correlative duty to exercise ordinary care in the conduct of his or her affairs.
In Crisostomo v. Court of Appeals, Estela Crisostomo booked a European tour with

Caravan Travel and Tours, a travel agency. She was informed by Caravan's travel
agent to be at the airport on Saturday, two (2) hours before her flight. Without
checking her travel documents, she proceeded to the airport as planned, only to
find out that her flight was actually scheduled the day before. She subsequently
filed a suit for damages against Caravan Travel and Tours based on the alleged
negligence of their travel agent in informing her of the wrong flight details.
This Court, while ruling that a travel agency was not a common carrier and was
not bound to exercise extraordinary diligence in the performance of its obligations,
also laid down the degree of diligence concurrently required of passengers:
Contrary to petitioner's claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket issued to petitioner clearly reflected
the departure date and time, contrary to petitioner's contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also properly
booked petitioner for the tour, prepared the necessary documents and procured
the plane tickets. It arranged petitioner's hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.
Most of the petitioners were balikbayans. It is reasonable to presume that they
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were adequately versed with the procedures of air travel, including familiarizing
themselves with the itinerary before departure. Moreover, the tickets were issued
37 days before their departure from Manila and 39 days from their departure from
Palawan. There was more than enough time to correct any alleged mistake in the
flight schedule.
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Greenstar Express, Inc., vs. Universal Robina Corporation,

G.R. No. 205090, October 17, 2016
FACTS:
Petitioner Greenstar Express, Inc. (Grepistar) is a domestic corporation engaged

in the business of public transportation, while petitioner Fruto L. Sayson, Jr.
(Sayson) is one of its bus drivers,
Respondents Universal Robina Corporation (URC) and Nissin Universal Robina

Corporation (NURC) are domestic corporations engaged in the food business.
NURC is a subsidiary of URC. URC is the registered owner of a Mitsubishi L-300
van with plate number WRN 403 (URC van).
At about 6:50 a.m. on February 25, 2003, which was then a declared national
holiday, petitioner's bus, which was then being driven toward the direction of
Manila by Sayson, collided head-on with the URC van, which was then being
driven Quezon province-bound by NURC's Operations Manager, Renante
Bicomong (Bicomong). The incident occurred along Km. 76, Maharlika Highway,
Brgy. San Agustin, Alaminos, Laguna. Bicomong died on the spot, while the
colliding vehicles sustained considerable damage.
On September 23, 2003, petitioners filed a Complaint against NURC to recover

damages sustained during the collision, premised on negligence.
URC and NURC filed their respective Answers, where they particularly alleged and
claimed lack of negligence on their part and on the part of Bicomong.
After the issues were joined, trial proceeded. During trial, only Sayson was
presented by petitioners as eyewitness to the collision.
The trial court ruled that plaintiff has no cause of action and cannot recover from
the defendants even assuming that the direct and proximate cause of the accident
was the negligence of the defendant's employee Renato Bicomong.
Upon appeal, the Court of Appeals affirmed the decision of the trial court.
ISSUE:
Whether respondent is liable for the damages sustained.
HELD:
No. The law exacts from common carriers (i.e., those persons, corporations, firms,
or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to
the public) the highest degree of diligence (i.e., extraordinary diligence) in ensuring
the safety of its passengers.
Articles 1733 and 1755 of the Civil Code state:
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary, diligence in the vigilance over
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the goods and for the safety of the passengers transported by them, according to
all the circumstances of each case.
Art. 1755. A common carrier is bound to carry the passengers safely as far as
human care arid foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
In this relation, Article 1756 of the Civil Code provides that '[i]n case of death of or
injuries to passengers, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in Articles 1733 and 1755.
However, Sayson took no defensive maneuver whatsoever in spite of the fact that
he saw Bicomong drive his van in a precarious manner, as far as 250 meters away
- or at a point in time and space where Sayson had all the opportunity to prepare
and avert a possible collision. The collision was certainly foreseen and avoidable
but Sayson took no measures to avoid it. Rather than exhibit concern for the
welfare of his passengers and the driver of the oncoming vehicle, who might have
fallen asleep or suddenly fallen ill at the wheel, Sayson coldly and uncaringly stood
his ground^ closed his eyes, and left everything to fate, without due regard for the
consequences. Such a suicidal mindset cannot be tolerated, for the grave danger
it poses to the public and passengers availing of petitioners' services. To add insult
to injury, Sayson hastily fled the scene of the collision instead of rendering
assistance to the victims - thus exhibiting a selfish, cold-blooded attitude and utter
lack of concern motivated by the self-centered desire to escape liability,
inconvenience, and possible detention by the authorities, rather than secure the
well-being of the victims of his own negligent act.
x x x The doctrine of last clear chance provides that where both parties are
negligent but the negligent act of one is appreciably later in point of time than that
of the other, or where it is impossible to determine whose fault or negligence
brought about the occurrence of the incident, the one who had the last clear
opportunity to avoid the impending harm but failed to do so, is chargeable with the
consequences arising therefrom. Stated differently, the rule is that the antecedent
negligence of a person does not preclude recovery of damages caused by the
supervening negligence of the latter, who had the last fair chance to prevent the
impending harm by the exercise of due diligence, x x x
Petitioners might object to the treatment of their case in the foregoing manner,
what with the additional finding that Sayson was negligent under the
circumstances. But their Petition, "once accepted by this Court, throws the entire
case open to review, and xxx this Court has the authority to review matters not
specifically raised or assigned as error by the parties, if their consideration is
necessary in arriving at a just resolution of the case."
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Sulpicio Lines, Inc., vs Napoleon Sesante,

G.R. NO. 172682, July 27, 2016
FACTS:
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a
passenger vessel owned and operated by the petitioner, sank near Fortune Island
in Batangas. Of the 388 recorded passengers, 150 were lost. Napoleon Sesante,
then a member of the Philippine National Police (PNP) and a lawyer, was one of
the passengers who survived the sinking. He sued the petitioner for breach of
contract and damages.
Sesante alleged in his complaint that the M/V Princess of the Orient left the Port
of Manila while Metro Manila was experiencing stormy weather; that at around
11:00 p.m., he had noticed the vessel listing starboard, so he had gone to the
uppermost deck where he witnessed the strong winds and big waves pounding the
vessel; that at the same time, he had seen how the passengers had been
panicking, crying for help and frantically scrambling for life jackets in the absence
of the vessel's officers and crew; that sensing danger, he had called a certain
Veney Ceballos through his cellphone to request him to inform the proper
authorities of the situation; that thereafter, big waves had rocked the vessel,
tossing him to the floor where he was pinned by a long steel bar; that he had freed
himself only after another wave had hit the vessel; that he had managed to stay
afloat after the vessel had sunk, and had been carried by the waves to the coastline
of Cavite and Batangas until he had been rescued; that he had suffered
tremendous hunger, thirst, pain, fear, shock, serious anxiety and mental anguish;
that he had sustained injuries, and had lost money, jewelry, important documents,
police uniforms and the .45 caliber pistol issued to him by the PNP; and that
because it had committed bad faith in allowing the vessel to sail despite the storm
signal, the petitioner should pay him actual and moral damages of ₱500,000.00
and ₱l,000,000.00, respectively.
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of
the Orient due to its having been cleared to sail from the Port of Manila by the
proper authorities; that the sinking had been due to force majeure; that it had not
been negligent; and that its officers and crew had also not been negligent because
they had made preparations to abandon the "'vessel because they had launched
life rafts and had provided the passengers assistance in that regard.
On October 12, 2001, the RTC rendered its judgment in favor of the respondent.
The RTC observed that the petitioner, being negligent, was liable to Sesante
pursuant to Articles 1739 and 1759 of the Civil Code; that the petitioner had not
established its due diligence in the selection and supervision of the vessel crew;
that the ship officers had failed to inspect the stowage of cargoes despite being
aware of the storm signal; that the officers and crew of the vessel had not
immediately sent a distress signal to the Philippine Coast Guard; that the ship
captain had not called for then "abandon ship" protocol; and that based on the
report of the Board of Marine Inquiry (BMI), the erroneous maneuvering of the
vessel by the captain during the extreme weather condition had been the
immediate and proximate cause of the sinking.
The petitioner sought reconsideration, but the RTC only partly granted its motion
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Dissatisfied, the petitioner appealed. It was pending the appeal in the CA when
Sesante passed away. He was substituted by his heirs.
On June 27, 2005, the CA promulgated its assailed decision. It lowered the
temperate damages which approximated the cost of Sesante's lost personal
belongings; and held that despite the seaworthiness of the vessel, the petitioner
remained civilly liable because its officers and crew had been negligent in
performing their duties.
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the
motion. Hence, this appeal.
ISSUES:
Whether the petitioner is liable for damages under Article 1759 of the Civil Code.
HELD:
Yes. The petitioner is liable for breach of contract. Article 1759 of the Civil Code
does not establish a presumption of negligence because it explicitly makes the
common carrier liable in the event of death or injury to passengers due to the
negligence or fault of the common carrier's employees. Clearly, the trial court is
not required to make an express finding of the common carrier's fault or
negligence. The presumption of negligence applies so long as there is evidence
showing that: (a) a contract exists between the passenger and the common carrier;
and (b) the injury or death took place during the existence of such contract. In such
event, the burden shifts to the common carrier to prove its observance of
extraordinary diligence, and that an unforeseen event or force majeure had caused
the injury. However, for a common carrier to be absolved from liability in case of
force majeure, it is not enough that the accident was caused by a fortuitous event.
The common carrier must still prove that it did not contribute to the occurrence of
the incident due to its own or its employees' negligence.
The petitioner has attributed the sinking of the vessel to the storm notwithstanding
its position on the seaworthiness of M/V Princess of the Orient. Yet, the findings of
the Board of Marine Inquiry (BMI) directly contradicted the petitioner's attribution.
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the
captain of the petitioner's vessel had caused the sinking. After the vessel had
cleared Limbones Point while navigating towards the direction of Fortune Island,
the captain already noticed the listing of the vessel by three degrees to the portside
of the vessel, but, according to the BMI, he did not exercise prudence as required
by the situation in which his vessel was suffering the battering on the starboard
side by big waves of seven to eight meters high and strong southwesterly winds of
25 knots. The BMI pointed out that he should have considerably reduced the speed
of the vessel based on his experience about the vessel - a close-type ship of seven
decks, and of a wide and high superstructure - being vulnerable if exposed to
strong winds and high waves. He ought to have also known that maintaining a high
speed under such circumstances would have shifted the solid and liquid cargo of
the vessel to port, worsening the tilted position of the vessel. It was only after a few
minutes thereafter that he finally ordered the speed to go down to 14 knots, and to
put ballast water to the starboard heeling tank to arrest the continuous listing at
portside. By then, his moves became an exercise in futility because, according to
the BMI, the vessel was already listing to her portside between 15 to 20 degrees,
which was almost the maximum angle of the vessel's loll. It then became inevitable
for the vessel to lose her stability.
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As borne out by the afore quoted findings of the BMI, the immediate and proximate
cause of the sinking of the vessel had been the gross negligence of its captain in
maneuvering the vessel.
Alfredo S. Ramos vs. China Southern Airlines Co. Ltd.,

G.R. No. 213418, September 21, 2016
FACTS:
On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip

plane tickets from Active Travel Agency. It is provided in their itineraries that
petitioners will be leaving Manila on 8 August 2003 at 0900H and will be leaving
Xiamen on 12 August 2003 at 1920H. Nothing eventful happened during
petitioners' flight going to Xiamen as they were able to successfully board the plane
which carried them to Xiamen International Airport. On their way back to the
Manila, however, petitioners were prevented from taking their designated flight
despite the fact that earlier that day an agent from Active Tours informed them that
their bookings for China Southern Airlines 1920H flight are confirmed. The refusal
came after petitioners already checked in all their baggages and were given the
corresponding claim stubs and after they had paid the terminal fees. According to
the airlines' agent with whom they spoke at the airport, petitioners were merely
chance passengers but they may be allowed to join the flight if they are willing to
pay an additional 500 RMB per person. When petitioners refused to defray the
additional cost, their baggages were offloaded from the plane and China Southern
Airlines 1920H flight then left Xiamen International Airport without them. Because
they have business commitments waiting for them in Manila, petitioners were
constrained to rent a car that took them to Chuan Chio Station where they boarded
the train to Hongkong. Upon reaching Hong Kong, petitioners purchased new
plane tickets from PAL that flew them back to Manila.
Upon arrival in Manila, petitioners went to Active Travel to inform them of their
unfortunate fate with China Southern Airlines. In their effort to avoid lawsuit, Active
Travel offered to refund the price of the plane tickets but petitioners refused to
accept the offer. Petitioners then went to China Southern Airlines to demand for
the reimbursement of their airfare and travel expenses in the amount of
P87,375.00. When the airline refused to accede to their demand, petitioners
initiated an action for damages before the RTC of Manila against China Southern
Airlines and Active Travel.
In their Answer, China Southern Airlines denied liability by alleging that petitioners
were not confirmed passengers of the airlines but were merely chance
passengers. According to the airlines, it was specifically provided in the issued
tickets that petitioners are required to re-confirm all their bookings at least 72 hours
before their scheduled time of departures but they failed to do so which resulted in
the automatic cancellation of their bookings.
On 23 March 2009, the RTC rendered a Decision in favor of the petitioners.
On appeal, however, the CA modified the RTC Decision. According to the

appellate court, petitioners failed to prove that China Southern Airlines' breach of
contractual obligation was attended with bad faith. Since China Southern, Airlines'
refusal to let petitioners board the plane was not attended by bad faith, the
appellate court decided not to award petitioners moral and exemplary damages.
Unflinching, petitioners elevated the matter before the Court by filing the instant
Petition for Review on Certiorari.
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ISSUE:
Whether or not the petitioner is entitled to actual, moral and exemplary damages.
HELD:
Yes. The petitioner is entitled to actual, moral and exemplary damages. When an
airline issues a ticket to a passenger confirmed on a particular flight, on a certain
date, a contract of carriage arises, and the passenger has every right to expect
that he would fly on that flight and on that date. If that does not happen, then the
carrier opens itself to a suit for breach of contract of carriage. In an action based
on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All he has to prove is the
existence of the contract and the fact of its non-performance by the carrier, through
the latter's failure to carry the passenger to its destination.
There is no doubt that petitioners are entitled to actual or compensatory damages.

Both the RTC and the CA uniformly held that there was a breach of contract
committed by China Southern Airlines when it failed to deliver petitioners to their
intended destination, a factual finding that we do not intend to depart from in the
absence of showing that it is unsupported by evidence. As the aggrieved parties,
petitioners had satisfactorily proven the existence of the contract and the fact of its
nonperformance by China Southern Airlines; the concurrence of these elements
called for the imposition of actual or compensatory damages.
With respect to moral damages, the same is awarded in cases of breaches of

contract where the defendant acted fraudulently or in bad faith. The Court finds
that the airline company acted in bad faith in insolently bumping petitioners off the
flight after they have completed all the predeparture routine. Bad faith is evident
when the ground personnel of the airline company unjustly and unreasonably
refused to board petitioners to the plane which compelled them to rent a car and
take the train to the nearest airport where they bought new sets of plane tickets
from another airline that could fly them home. Petitioners have every reason to
expect that they would be transported to their intended destination after they had
checked in their luggage and had gone through all the security checks. Instead,
China Southern Airlines offered to allow them to join the flight if they are willing to
pay additional cost; this amount is on top of the purchase price of the plane tickets.
The requirement to pay an additional fare was insult upon injury.
China Southern Airlines is also liable for exemplary damages as it acted in a

wantonly oppressive manner as succinctly discussed above against the
petitioners. Exemplary damages which are awarded by way of example or
correction for the public good, may be recovered in contractual obligations, as in
this case, if defendant acted in wanton, fraudulent, reckless, oppressive or
malevolent manner.
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Cathay Pacific Airways, Ltd., vs. Sps, Arnulfo, G. R. No. 188283, July 20,
2016
FACTS:
In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella

(respondent Fuentebella), Alberto Lopez (Cong. Lopez) and Leonardo Fugoso
(Cong. Fugoso) to travel on official business to Sydney, Australia, to confer with
their counterparts in the Australian Parliament from 25 October to 6 November
1993.
On 22 October 1993, respondents bought Business Class tickets for Manila to

Sydney via Hong Kong and back. They changed their minds, however, and
decided to upgrade to First Class. From this point, the parties presented divergent
versions of facts. The overarching disagreement was on whether respondents
should have been given First Class seat accommodations for all the segments of
their itinerary.
According to respondents, their travel arrangements, including the request for the
upgrade of their seats from Business Class to First Class, were made through
Cong. Lopez. The congressman corroborated this allegation. On the other hand,
petitioner claimed that a certain Carol Dalag had transacted on behalf of the
congressmen and their spouses for the purchase of airline tickets for Manila-Hong
Kong-Sydney-Hong Kong-Manila. According to petitioner, on 23 October 1993,
one of the passengers called to request that the booking be divided into two: one
for the Spouses Lopez and Spouses Fugoso, and a separate booking for
respondents. Cong. Lopez denied knowing a Carol Dalag. He was not questioned
regarding the request for two separate bookings. However, in his testimony, he
gave the impression that the travel arrangements had been made for them as one
group. He admitted that he had called up petitioner, but only to request an upgrade
of their tickets from Business Class to First Class. He testified that upon assurance
that their group would be able to travel on First Class upon cash payment of the
fare difference, he sent a member of his staff that same afternoon to pay.
Petitioner admits that First Class tickets were issued to respondents, but clarifies
that the tickets were open-dated (waitlisted). There was no showing whether the
First-Class tickets issued to Sps. Lopez and Sps. Fugoso were open-dated or
otherwise, but it appears that they were able to fly First Class on all the segments
of the trip, while respondents were not.
On 25 October 1993, respondents queued in front of the First-Class counter in the

airport. They were issued boarding passes for Business Class seats on board CX
902 bound for Hong Kong from Manila and Economy Class seats on board CX 101
bound for Sydney from Hong Kong. They only discovered that they had not been
given First Class seats when they were denied entry into the First-Class
lounge. Respondent Fuentebella went back to the check-in counter to demand that
they be given First Class seats or at the very least, access to the First Class
Lounge. He recalled that he was treated by the ground staff in a discourteous,
arrogant and rude manner. He was allegedly told that the plane would leave with
or without them. Both the trial court and the CA gave credence to the testimony of
respondent Fuentebella.
During trial, petitioner offered the transcript of the deposition of its senior
reservation supervisor, Nenita Montillana (Montillana). She said that based on the
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record locator, respondents had confirmed reservations for Business Class seats
for the Manila-Hong Kong, Sydney-Hong Kong, and Hong Kong-Manila flights; but
the booking for Business Class seats for the Hong Kong-Sydney leg was "under
request;" and due to the flight being full, petitioner was not able to approve the
request.
Montillana admitted that First Class tickets had been issued to respondents, but
qualified that those tickets were open-dated. She referred to the plane tickets,
which bore the annotations "OPEN F OPEN" for all sectors of the flight. Petitioner
explained that while respondents expressed their desire to travel First Class, they
could not be accommodated because they had failed to confirm and the sections
were full on the date and time of their scheduled and booked flights. Petitioner also
denied that its personnel exhibited arrogance in dealing with respondents; on the
contrary, it was allegedly respondent Fuentebella who was hostile in dealing with
the ground staff.
Respondents alleged that during transit through the Hong Kong airport on 25
October 1993, they were treated with far less respect and courtesy by the ground
staff. In fact, the first employee they approached completely ignored them and
turned her back on them. The second one did not even give them any opportunity
to explain why they should be given First Class seats, but instead brushed aside
their complaints and told them to just fall in line in Economy Class. The third
employee they approached shoved them to the line for Economy Class
passengers in front of many people.
Petitioner used the deposition of Manuel Benipayo (Benipayo), airport service

officer, and Raquel Galvez-Leonio (Galvez-Leonio ), airport services supervisor,
to contradict the claims of respondents. Benipayo identified himself as the ground
staff who had dealt with respondents' complaint. He testified that around five
o'clock on 25 October 1993, respondent Fuentebella loudly insisted that he be
accommodated on First Class. But upon checking their records, he found out that
respondents were only booked on Business Class. Benipayo tried to explain this
to respondents in a very polite manner, and he exerted his best effort to secure
First Class seats for them, but the plane was already full. He presented a telex
sent to their Hong Kong office, in which he requested assistance to accommodate
respondents in First Class for the Hong Kong-Sydney flight. He claimed that he
was intimidated by respondent Fuentebella into making the notations "Involuntary
Downgrading" and "fare difference to be refunded" on the tickets.
For her part, Galvez-Leonio testified that it was company policy not to engage
passengers in debates or drawn-out discussions, but to address their concerns in
the best and proper way. She admitted, however, that she had no personal
knowledge of compliance in airports other than NAIA.
Respondents narrated that for their trip from Hong Kong to Sydney, they were
squeezed into very narrow seats for eight and a half hours and, as a result, they
felt groggy and miserable upon landing.
Respondents were able to travel First Class for their trip from Sydney to Hong
Kong on 30 October 1993. However, on the last segment of the itinerary from Hong
Kong to Manila on 2 November 1993, they were issued boarding passes for
Business Class.
Upon arrival in the Philippines, respondents demanded a formal apology and

payment of damages from petitioner. The latter conducted an investigation, after
which it maintained that no undue harm had been done to them.
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Jose Sanico and Vicente Castro v. Werherlina P. Colipano,

G.R. No. 209969, September 27, 2017
FACTS:
Colipano filed a complaint on January 7, 1997 for breach of contract of carriage

and damages against Sanico and Castro. In her complaint, Colipano claimed that
at 4:00 P.M. more or less of December 25, 1993, Christmas Day, she and her
daughter were paying passengers in the jeepney operated by Sanico, which was
driven by Castro. Colipano claimed she was made to sit on an empty beer case at
the edge of the rear entrance/exit of the jeepney with her sleeping child on her
lap. And, at an uphill incline in the road to Natimao-an, Carmen, Cebu, the jeepney
slid backwards because it did not have the power to reach the top. Colipano
pushed both her feet against the step board to prevent herself and her child from
being thrown out of the exit, but because the step board was wet, her left foot
slipped and got crushed between the step board and a coconut tree which the
jeepney bumped, causing the jeepney to stop its backward movement. Colipano's
leg was badly injured and was eventually amputated.
In their answer, Sanico and Castro admitted that Colipano's leg was crushed and
amputated but claimed that it was Colipano's fault that her leg was crushed. They
admitted that the jeepney slid backwards because the jeepney lost power. The
conductor then instructed everyone not to panic but Colipano tried to disembark
and her foot got caught in between the step board and the coconut tree. Sanico
claimed that he paid for all the hospital and medical expenses of Colipano, and
that Colipano eventually freely and voluntarily executed an Affidavit of Desistance
and Release of Claim.
After trial, the RTC found that Sanico and Castro breached the contract of carriage
between them and Colipano but only awarded actual and compensatory damages
in favor of Colipano.
Only Sanico and Castro appealed to the CA, which affirmed with modification the
RTC Decision.
Without moving for the reconsideration of the CA Decision, Sanico and Castro filed
this petition before the Court assailing the CA Decision.
ISSUE:
Whether Sanico and Castro breached the contract of carriage with Colipano.
RULING:
Only Sanico breached the contract of carriage. Since the cause of action is based
on a breach of a contract of carriage, the liability of Sanico is direct as the contract
is between him and Colipano. Castro, being merely the driver of Sanico's jeepney,
cannot be made liable as he is not a party to the contract of carriage. Although he
was driving the jeepney, he was a mere employee of Sanico, who was the operator
and owner of the jeepney. The obligation to carry Colipano safely to her destination
was with Sanico. In fact, the elements of a contract of carriage existed between
Colipano and Sanico: consent, as shown when Castro, as employee of Sanico,
accepted Colipano as a passenger when he allowed Colipano to board the
jeepney, and as to Colipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare; and, object, the
transportation of Colipano from the place of departure to the place of destination.
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Specific to a contract of carriage, the Civil Code requires common carriers to
observe extraordinary diligence in safely transporting their passengers. Article
1733 of the Civil Code states:
ART. 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances
of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, 1735 and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in Articles 1755 and 1756.
This extraordinary diligence, following Article 1755 of the Civil Code, means that
common carriers have the obligation to carry passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.
In case of death of or injury to their passengers, Article 1756 of the Civil Code
provides that common carriers are presumed to have been at fault or negligent,
and this presumption can be overcome only by proof of the extraordinary diligence
exercised to ensure the safety of the passengers.
Being an operator and owner of a common carrier, Sanico was required to observe
extraordinary diligence in safely transporting Colipano. When Colipano's leg was
injured while she was a passenger in Sanico's jeepney, the presumption of fault or
negligence on Sanico's part arose and he had the burden to prove that he
exercised the extraordinary diligence required of him. He failed to do this.
In Calalas v. Court of Appeals, the Court found that allowing the respondent in that
case to be seated in an extension seat, which was a wooden stool at the rear of
the jeepney, "placed [the respondent] in a peril greater than that to which the other
passengers were exposed." The Court further ruled that the petitioner in Calalas
was not only "unable to overcome the presumption of negligence imposed on him
for the injury sustained by [the respondent], but also, the evidence shows he was
actually negligent in transporting passengers."
Calalas squarely applies here. Sanico failed to rebut the presumption of fault or
negligence under the Civil Code. More than this, the evidence indubitably
established Sanico's negligence when Castro made Colipano sit on an empty beer
case at the edge of the rear entrance/exit of the jeepney with her sleeping child on
her lap, which put her and her child in greater peril than the other passengers. As
the CA correctly held:
For the driver, Vicente Castro, to allow a seat extension made of an

empty case of beer clearly indicates lack of prudence. Permitting
Colipano to occupy an improvised seat in the rear portion of the
jeepney, with a child on her lap to boot, exposed her and her child in
a peril greater than that to which the other passengers were exposed.
The use of an improvised seat extension is undeniable, in view of the
testimony of plaintiff's witness, which is consistent with Colipano's
testimonial assertion.
Further, the defense of engine failure, instead of exonerating Sanico, only

aggravated his already precarious position. The engine failure "hinted lack of
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regular check and maintenance to ensure that the engine is at its best, considering
that the jeepney regularly passes through a mountainous area." This failure to
ensure that the jeepney can safely transport passengers through its route which
required navigation through a mountainous area is proof of fault on Sanico's part
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Sulpicio Lines, Inc. v. Karaan,
G.R. No. 208590, October 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.
On June 30, 1999, respondents lodged a Complaint based on breach of contract

of carriage against petitioner praying for various amounts of damages as
passengers/survivors of the sinking of petitioner's vessel,
During trial, the respondents was presented as witnesses. Their testimonies were
summarized by the CA as follows:
Major Karaan, a retired soldier, deposed that at about 8:00p.m. on September 18,
1998, he boarded M/V Princess of the Orient bound for Cebu City from Manila. He
was at Cabin No. 601 along with another passenger. The travel commenced
smoothly although there was a typhoon at that time. However, about two (2) hours
after, while he was lying in his cabin, he heard a loud sound which lasted for about
30 minutes. It sounded like something heavy fell somewhere below the cabin.
Then, the ship started to tilt, the lights went out and the engine shut down. He went
out of his cabin and saw the passengers already panicking. He saw no SLI crew
assisting them. He went to the upper level where he grabbed a life jacket. He
stayed there until the ship eventually sank. He went with the ship underwater but
was able to swim therefrom and hold on to a life raft. He could not see much at
that time as it was very dark and the rain poured heavily. He was rescued by a
chopper at about 2:30 or 3:00 in the afternoon of the next day after being in the
water for about 15 hours. He was brought to the station and then to the hospital
where he was discharged the next day.
Apart from losing P5,000.00 cash, shoes, documents and his uniform, [Major
Karaan] also lost his Seiko watch and his brother's land title allegedly worth
P3,000.00 and about P15,000.00 respectively. Apart from the hospital bill, SLI paid
him P2,000.00.
Major Karaan attested he saw life rafts secured to the vessel when he boarded the
same.
Napoleon, likewise a retired soldier and passenger of the ill-fated M/V Princess of
the Orient, testified that about 10:45 p.m., he heard a loud sound coming from
below the deck. It sounded like a container van falling and thereafter, the vessel
lifted to its side. He woke his wife Herminia, their eight (8) year old daughter, Karen
Hope, and their helper Liva and got them life jackets before moving out to the
stairway. They held on to the gangplank near the stairway while water was rushing
inside the ship. During those times, no vessel crew could be seen. Oil was dripping
from the ship's hull and when the ship was about to sink, they jumped into the sea.
He was then holding his daughter but waves struck them apart. He was able to
grab a life raft loaded with three (3) other passengers. He heard his wife calling for
help and lifted her to the raft but he lost touch of their daughter. They were rescued
the next day at about 12:30 noon. They were then brought to the Municipal Hall
where they were fed and then to the SLI office at the port area where they were
given clothes. Their daughter's lifeless body was recovered in Tanza, Cavite.
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Consequently, he felt very sad consdering that she was their only child. He also
lost P26,000.00 cash and a video camera.
Herminia affirmed Napoleon's recount of events. She recalled that while sleeping,
she heard a loud sound and the things inside their cabin started to fall. That was
when her husband woke them up. They wore their life jackets and tried to contact
the ships's crew through the intercom but to no avail. Since the ship continued to
capsize, they decided to go out to the upper deck but could not make it because
of the oil spilling all over them. They instead went down and seeing that the water
was already inside the ship, they dived into the sea. They were separated from
each other when a big wave hit them. Nobody was there to help them nor was
there any order to abandon the ship. She was able to take hold of the raft but they
could not use its broken paddle. The raft had medicines but they chose not to use
them as they could not read the directions. They were rescued at noon the
following day.
On her cross-examination, she maintained that when they went out of their cabin,
she only saw passengers but not a single crew from SLI. The spouses are claiming
moral damages of P750,000.00 each.
Liva corroborated her bosses' story. She further added that when she was
awakened by her boss, she saw bottles and mirrors falling on the floor and blocking
the cabin door which delayed their exit therefrom.
The RTC issued an Order ordering petitioner to pay damages.
ISSUE:
Whether the award of exemplary damages was proper
RULING:
Yes. The award of exemplary damages was proper.
In this case, we see no error in the award of exemplary damages considering the
lower courts' consistent finding that respondents are entitled to moral and
temperate damages for the sinking of M/V Princess of the Orient.
Moreover, 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.
In contracts and quasi-contracts, the Court has the discretion to award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner. Indeed, exemplary damages cannot be recovered as a matter
of right, and it is left to the court to decide whether or not to award them. In
consideration of these legal premises for the exercise of the judicial discretion to
grant or deny exemplary damages in contracts and quasi-contracts against a
defendant who acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner, the Court hereby awards exemplary damages to Sesante.
First of all, exemplary damages did not have to be specifically pleaded or proved,
because the courts had the discretion to award them for as long as the evidence
so warranted.
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.
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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.
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Asian Terminals Inc.vs. Padoson Stainless Steel Corporation,

G.R. No. 211876, June 25, 2018
FACTS:
Respondent Padoson hired the Petitioner ATI to provide for arrastre, wharfage and
storage services at the Port of Manila in relation to a shipment consisting of 9
stainless steel coils and 72 hot-rolled steel coils, with Padoson as a consignee.
The shipment was imported on October 5, 2001 and October 30, 2001,
respectively and were stored within ATI's premises until they were discharged on
July 29, 2006. Meanwhile, the shipments became the subject of a Hold-Order
issued by the Bureau of Customs (BOC) on September 7, 2001. This was an
offshoot of a Customs case filed by the BOC against Padoson due to the latter's
tax liability over its own shipments.
For the storage services it rendered, ATI made several demands from Padoson
for the payment of arrastre, wharfage and storage services amounting to
P540,474.48 for the 9 stainless steel coils and P8,374,060.80 for the 72 hot-rolled
steel coils stored at the ATI premises. The demands, however, went unheeded.
Thus, on August 4, 2006, ATI filed a Complaint for a Sum of Money and Damages
with Prayer for the Issuance of Writ of Preliminary Attachment.
In its Answer, Padoson claimed among others that; (1) during the time when the
shipments were in ATI's custody and possession, they suffered material and
substantial deterioration; (2) that ATI failed to exercise the extraordinary diligence
required of an arrastre operator; (3) the Hold-Order issued by the BOC was merely
a leverage to claim Padoson's alleged unpaid duties; (4) Upon a Motion for Ocular
Inspection and in the course of the inspection, Sheriff Diaz discovered that the
shipments were found in an open area and were in a deteriorating state. During
the trial, Padoson presented a certain Mr. Ventura, who allegedly took pictures of
the shipments. The pictures, however, were not pre-marked during the pre-trial.
Consequently, the RTC issued an Order disallowing the marking of the said
pictures and Ventura's testimony thereon.
The RTC dismissed ATI’s complaint. 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. The CA affirmed the RTC that Padoson's shipments were under the
BOC's constructive possession upon its issuance of the Hold-Order.
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SECURITIES REGULATION CODE
1. Alderito Z. Yujuico, et al. vs, Cezar Quiambao, et al., GR No. 168639,

January 29, 2007;
2. Oscar C. Reyes vs. Hon. RTC of Makati, Branch 142, et al., GR No 165744,
August 11, 2008;
3. Unlad Resources Development Corporation, et al. vs. Renato P. Dragon, et

al., GR No. 149338, July 28, 2008;
4. Florencio Orendain vs. BF Homes, Inc., GR No. 146313, October 31, 2006;
5. Primanila Plans, Inc. rep. by Eduardo Madrid vs. Securities and Exchange
Commission, GR No.193791, August 06, 2014;
6. Provident International Resources Corporation, represented by Edward T.

Marcelo, et al. vs. Joaquin T. Venus, et al., GR No. 167041, June 17, 2008;
7. Chateau De Baie Condominium Corporation vs. Spouses Moreno, GR No.

186271, February 2011;
8. Securities and Exchange Commission vs. Prosperity.Com, Inc., GR

No.164197, January 25, 2012;
9. Timeshare Realty Corporation vs. Cesar Lao and Cynthia Cortez, G.R No.
158941, February 11, 2017;
10. Philippine Veterans Bank vs. Justina Callangan, in her capacity as in her
capacity as Director of the Corporation Finance Department of the Securities
and Exchange Commission and/or the SECURITIES AND EXCHANGE
COMMISSION, GR No. 191995, August 3, 2011.
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Alderito Z. Yujuico, et al. vs, Cezar Quiambao, et al., GR No. 168639,
January 29, 2007
FACTS
On July 27, 1998, the Securities and Exchange Commission (SEC) approved
the amendment of Strategic Alliance Development Corporation’s (STRADEC)
Articles of Incorporation authorizing the change of its principal office from Pasig
City Pangasinan. On March1, 2004, STRADEC held its annual stockholders
meeting in Pasig City its office as indicated in the notices sent to the stockholders.
Herein petitioners and respondents were elected members of the Board of
Directors. Five months thereafter, respondents filed with the RTC in Pangasinan a
complaint against STRADEC. The complaint seeks for the nullification of the
election on the ground of improper venue, pursuant to Section 51 of the
Corporation Code, next is the nullification of all subsequent transactions conducted
by the elected directors and lastly that a special stockholder’s meeting be held
once again. The RTC under pairing Judge Emuslan issued an Order for granting
respondents application for preliminary injunctionordering (1) the holding of a
special stockholders meeting of STRADEC on December 10, 2004 in the principal
office of the corporation in Bayambang, Pangasinan; and (2) the turn-over by
petitioner Bonifacio Sumbilla to the court of the duplicate key of the safety deposit
box in Export Industry Bank, Shaw Boulevard, PasigCity where the original Stock
and Transfer Book of STRADEC wasd eposited. The plaintiff filed with the Court
of Appeals (CA) a Petition for Certiorari. CA dismissed such petition and
upheld the jurisdiction of the RTC.I
ISSUE
Whether the RTC has the power to call a special stockholder’s meeting involving
an intra-corporate controversy.
HELD
Yes.
Upon the enactment of R.A. No. 8799, otherwise known as The Securities
Regulation Code which took effect on August 8,2000, the jurisdiction of the SEC
over intra- corporate controversies and other cases enumerated in Section 5 of
P.D. No. 902-A has been transferred to the courts of general jurisdiction, or the
appropriate RTC. Section 5.2 of R.A. No. 8799 provides: 5.2.
The Commissions jurisdiction over all cases enumerated in Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of
general jurisdiction or the appropriate Regional Trial Court, Provided, That the
Supreme Court in the exercise of its authority may designate the Regional Trial
Court branches that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra- corporate disputes
submitted for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed. The RTC has the power to hear and decide the intra-corporate
controversy of the parties herein. Concomitant to said power is the authority to
issue orders necessary or incidental to the carrying out of the powers expressly
granted to it. Thus, the RTC may, in appropriate cases, order the holding of
a special meeting of stockholders or members of a corporation involving an intra-
corporate dispute under its supervision.
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Oscar C. Reyes vs. Hon. RTC of Makati, Branch 142, et al., GR No 165744,
August 11, 2008
FACTS
Petitioner and private respondent were siblings together with two others, namely
Pedro and Anastacia, in a family business established as Zenith Insurance
Corporation (Zenith), from which they owned shares of stocks. The Pedro and
Anastacia subsequently died. The former had his estate judicially partitioned
among his heirs, but the latter had not made the same in her shareholding in
Zenith. Zenith and Rodrigo filed a complaint with the Securities and Exchange
Commission (SEC) against petitioner (1) a derivative suit to obtain accounting of
funds and assets of Zenith, and (2) to determine the shares of stock of deceased
Pedro and Anastacia that were arbitrarily and fraudulently appropriated [by Oscar,
and were unaccounted for]. In his answer with counterclaim, petitioner denied the
illegality of the acquisition of shares of Anastacia and questioned the jurisdiction
of SEC to entertain the complaint because it pertains to settlement of [Anastacia’s]
estate. The case was transferred to. Petitioner filed Motion to Declare Complaint
as Nuisance or Harassment Suit and must be dismissed. RTC denied the motion.
The motion was elevated to the Court of Appeals by way of petition for certiorari,
prohibition and mandamus, but was again denied.
ISSUES
(1) Whether or not Rodrigo may be considered a stockholder of Zenith with

respect to the shareholdings originally belonging to Anastacia; and
(2) Whether or not there is an intra-corporate relationship between the parties that
would characterize the case as an intra-corporate dispute
HELD
(1) No. Rodrigo must, hurdle two obstacles before he can be considered a
stockholder of Zenith with respect to the shareholdings originally belonging to
Anastacia. First, he must prove that there are shareholdings that will be left to him
and his co-heirs, and this can be determined only in a settlement of the decedent’s
estate. No such proceeding has been commenced to date. Second, he must
register the transfer of the shares allotted to him to make it binding against the
corporation. He cannot demand that this be done unless and until he has
established his specific allotment (and prima facie ownership) of the
shares. Without the settlement of Anastacia’s estate, there can be no definite
partition and distribution of the estate to the heirs. Without the partition and
distribution, there can be no registration of the transfer. And without the
registration, we cannot consider the transferee-heir a stockholder who may invoke
the existence of an intra-corporate relationship as premise for an intra-corporate
controversy within the jurisdiction of a special commercial court. The subject
shares of stock (i.e., Anastacia’s shares) are concerned – Rodrigo cannot be
considered a stockholder of Zenith.
(2) No. Court cannot declare that an intra-corporate relationship exists that would
serve as basis to bring this case within the special commercial court’s jurisdiction
under Section 5(b) of PD 902-A, as amended because Rodrigo’s complaint failed
the relationship test above.
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Unlad Resources Development Corporation, et al. vs. Renato P. Dragon, et
al., GR No. 149338, July 28, 2008;
FACTS
On December 29, 1981, the parties entered into a Memorandum of

Agreement that UNLAD will invest in additional stocks worth Php 4, 800, 000.00
and pay up immediately Php 1, 200, 000.00 for the said subscription while the
respondents, Dragon and company, shall transfer control and management over
the Rural Bank to UNLAD Resources.
On August 10, 1984, the Board of Directors of Unlad Resources passed

Resolution No. 84-041 authorizing the President and the General Manager to lease
a mango plantation, the Bank as lessee entered into a Contract of Lease with the
petitioner, Helena Z. Benitez as lessor.
On May 20, 1987, Unlad Rural Bank wrote regarding Central Bank’s
approval to retire its preferred shares. The respondents complied with their
obligation but the petitioners did not.
On July 3, 1987, the respondents filed a complaint before the Regional Trial
Court for rescission of the agreement and the return of control and management
of the Rural Bank from petitioners to respondents, plus damages.
ISSUE
WON the rescission of the MOA between the parties is proper
HELD
Yes, the MOA between the parties can be rescinded pursuant to Article 1191 of
the Civil Code which states that “the power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him”. Since UNLAD failed to comply with what is incumbent upon
him, the other party-the respondents can ask for rescission of the MOA on such
ground. Clearly, the petitioners failed to fulfill their end of the agreement, and thus,
there was just cause for rescission. With the contract, thus rescinded, the parties
must be restored to the original state, that is, before they entered into the
Memorandum of Agreement.
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Florencio Orendain vs. BF Homes, Inc., GR No. 146313,

October 31, 2006
FACTS
Respondent BF Homes, a domestic corporation involved in developing and selling

residential lots filed a petition for rehabilitation and suspension of payments as it
incurred liabilities in the course of its operations. SEC ordered the appointment of
a rehabilitation receiver with herein petitioner Orendain as its Chairman. Sometime
later, BF Homes represented by petitioner Orendain sold a parcel of land to the
Local Superior of the Franciscan Sisters of the Immaculate Phils. Inc (LSFSIPI).
SEC ordered a new committee of receivers and relieved petitioner of its duties. BF
Homes then filed before the court an action for reconveyance of the property sold
to LSFSIPI alleging petitioner acted in its individual capacity and therefore had no
title over the property. Petitioner argues RTC had no jurisdiction over the case
since BF Homes’ suit was instituted against him as its former receiver. The trial
court and CA found for BF Homes.
ISSUE
Whether or not the reconveyance suit involves intra-corporate dispute cognizable

by SEC.
HELD
NO. Clearly, the controversy involves matters purely civil in character and is
beyond the ambit of the limited jurisdiction of the SEC. Section 5 of PD No. 902-A
does not apply in the instant case. The LSFSIPI is neither an officer nor a
stockholder of BF Homes, and this case does not involve intra-corporate
proceedings. In addition, the seller, petitioner Orendain, is being sued in his
individual capacity for the unauthorized sale of the property in controversy. Hence,
we find no cogent reason to sustain petitioner’s manifestation that the resolution
of the instant controversy depends on the ratification by the SEC of the acts of its
agent or the receiver because the act of Orendain was allegedly not within the
scope of his authority as receiver. Furthermore, the determination of the validity of
the sale to LSFSIPI will necessitate the application of the provisions of the Civil
Code on obligations and contracts, agency, and other pertinent provisions. In
addition, jurisdiction over the case for reconveyance is clearly vested in the RTC
as provided in paragraph (2), Section 19, B.P. Blg. 129.
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Primanila Plans, Inc. rep. by Eduardo Madrid vs. Securities and Exchange
Commission, GR No.193791, August 06, 2014
FACTS:
On April 9, 2008, SEC issued the subject cease and desist order after
an investigation conducted by the SEC’s Compliance and Enforcement
Department (CED) on Primanila, a corporation operating as a pre-need
company, yielded the following factual findings: Primanila’s website was offering
a pension plan product called Primasa Plan, that no registration statement has
been filed by Primanila for the approval of said Primasa Plan, and that many of its
planholders mostly members of the PNP remitted the total amount of Php
2,072,149.38 to Primanila representing the aforementioned premium collections
via salary deductions, among others.
ISSUES
1. Whether or not Primanila was accorded due process notwithstanding

the SEC’s immediate issuance of the cease and desist order; and
2. Whether or not Primanila violated Sec. 16 of SRC which barred the

sale or offer for sale to the public of a pre-need product except in accordance with
SEC rules and regulations.
HELD
1. Yes.
The Court held that a cease and desist order may be issued by the
SEC motu proprio, it being unnecessary that it results from a verified complaint
from an aggrieved party. A prior hearing is also not required whenever the
Commission finds it appropriate to issue a cease and desist order that aims to
curtail fraud or grave or irreparable injury to investors. There is good reason for
this provision, as any delay in the restraint of acts that yield such results can only
generate further injury to the public that the SEC is obliged to protect.
To equally protect individuals and corporations from baseless and

improvident issuances, the authority of the SEC under this rule is nonetheless with
defined limits. A cease and desist order may only be issued by the Commission
after proper investigation or verification, and upon showing that the acts sought to
be restrained could result in injury or fraud to the investing public. Without doubt,
these requisites were duly satisfied by the SEC prior to its issuance of the
subject cease and desist order.
The SEC was not mandated to allow Primanila to participate in the

investigation conducted by the Commission prior to the cease and desist order’s
issuance. Given the circumstances, it was sufficient for the satisfaction of the
demands of due process that the company was amply apprised of the results of
the SEC investigation, and then given the reasonable opportunity to present its
defense. Primanila was able to do this via its motion to reconsider
and lift the cease and desist order.
2. Yes.
The Court held that Primanila clearly violated Section 16 of the SRC
which states that “no person shall sell or offer for sale to the public any pre-need
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plan except in accordance with rules and regulations which the Commission shall
prescribe. Such rules shall regulate the sale of pre-need plans by, among other
things, requiring the registration of pre-need plans, licensing persons involved in
the sale of pre-need plans, requiring disclosures to prospective plan holders,
prescribing advertising guidelines, providing for uniform plans, imposing capital,
bonding and other financial responsibility, and establishing trust funds for the
payment of benefits under such plans.”
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Provident International Resources Corporation, represented by Edward T.
Marcelo, et al. vs. Joaquin T. Venus, et al., GR No. 167041, June 17, 2008
FACTS
Another group, known as the Asistio group, composed of Luis A. Asistio, Lazaro
L. Madara, Alfredo D. Roa III, Joaquin T. Venus, and Jose Ma. Carlos L. Zumel,
claimed that the Marcelo group acquired shares in PIRC as mere trustees for the
Asistio group. The Marcelo group allegedly executed a waiver of pre-emptive right,
blank deeds of assignment, and blank deeds of transfer; endorsed in blank their
respective stock certificates over all of the outstanding capital stock registered in
their names; and completed the blank deeds in 2002 to effect transfers to the
Asistio group.
The Company Registration and Monitoring Department (CRMD) of the SEC issued
a certification stating that verification made on the available records of PIRC
showed failure to register its stock and transfer book (STB).
On August 7, 2002, the Asistio group registered PIRC's STB. Upon learning of this,
PIRC's assistant corporate secretary, Celedonio Escaño, Jr., requested the SEC
for a certification of the registration in 1979 of PIRC's STB. Escaño presented the
1979-registered STB bearing the SEC stamp and the signature of the officer in
charge of book registration.
Meanwhile, the Asistio group filed a complaint against the Marcelo group. The
Asistio group prayed that the Marcelo group be enjoined from acting as directors
of PIRC, from physically holding office at PIRC's office, and from taking custody of
PIRC's corporate records.
Then, the CRMD of the SEC issued a letter recalling the certification it had issued
on August 6, 2002 and canceling the 2002-registered STB. However, one Kennedy
B. Sarmiento requested the SEC not to cancel the 2002-registered STB. The SEC
thus scheduled a conference to determine which of the two STBs is valid.
The Asistio group appealed to the SEC Board of Commissioners. They claimed
that the issue of which of the two STBs is valid is intra-corporate in nature;
hence, the RTC, not the SEC, has jurisdiction.
ISSUE
Does SEC have jurisdiction to recall and cancel a stock and transfer book (STB)
which it issued?
HELD
YES. Under Section 5 of RA No. 8799, it can be said that the SEC's regulatory
authority over private corporations encompasses a wide margin of areas, touching
nearly all of a corporation's concerns. This authority more vividly springs from the
fact that a corporation owes its existence to the concession of its corporate
franchise from the state. Under its regulatory responsibilities, the SEC may pass
upon applications for, or may suspend or revoke (after due notice and hearing),
certificates of registration of corporations, partnerships and associations
(excluding cooperatives, homeowners' association, and labor unions); compel
legal and regulatory compliances; conduct inspections; and impose fines or other
penalties for violations of the Revised Securities Act, as well as implementing rules
and directives of the SEC, such as may be warranted.
Considering that the SEC, after due notice and hearing, has the regulatory power
to revoke the corporate franchise -- from which a corporation owes its legal
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existence -- the SEC must likewise have the lesser power of merely recalling and
canceling a STB that was erroneously registered.
Going to the particular facts of the instant case, the SEC has the primary
competence and means to determine and verify whether the subject 1979 STB
presented by the incumbent assistant corporate secretary was indeed authentic,
and duly registered by the SEC as early as September 1979. As the administrative
agency responsible for the registration and monitoring of STBs, it is the body
cognizant of the STB registration procedures, and in possession of the pertinent
files, records and specimen signatures of authorized officers relating to the
registration of STBs. The evaluation of whether a STB was authorized by the SEC
primarily requires an examination of the STB itself and the SEC files. This function
necessarily belongs to the SEC as part of its regulatory jurisdiction. Contrary to the
allegations of respondents, the issues involved in this case can be resolved without
going into the intra-corporate controversies brought up by respondents.
As the regulatory body, it is the SEC's duty to ensure that there is only one set of
STB for each corporation. The determination of whether or not the 1979-registered
STB is valid and of whether to cancel and revoke the August 6, 2002 certification
and the registration of the 2002 STB on the ground that there already is an existing
STB is impliedly and necessarily within the regulatory jurisdiction of the SEC.
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Simny Guy v Gilbert Guy
GR No. 189486, 5 September 2012
FACTS
With 519,997 shares of stock as reflected in Stock Certificate Nos. 004-014, herein
respondent Gilbert G. Guy (Gilbert) practically owned almost 80 percent of the
650,000 subscribed capital stock of Good Gold Realty & Development Corporation
(Good Gold), one of the multi-million corporations which Gilbert claimed to have
established in his 30s. Good Gold’s remaining shares were divided among
Francisco Guy (Francisco) with 130,000 shares, Simny Guy (Simny), Benjamin
Lim and Paulino Delfin Pe, with one share each, respectively. Gilbert is the son of
spouses Francisco and Simny. Simny, one of the petitioners, however, alleged that
it was she and her husband who established Good Gold, putting the bulk of its
shares under Gilbert’s name. She claimed she and Francisco put the future of the
Guy group of companies in Gilbert’s hands.
Simny further claimed that upon the advice of their lawyers, upon the incorporation
of GoodGold, they issued stock certificates reflecting the shares held by each
stockholder duly signed by Francisco as President and Atty. Emmanuel Paras as
Corporate Secretary, with corresponding blank endorsements at the back of each
certificate – including Stock Certificate Nos. 004-014 under Gilbert’s name. These
certificates were all with Gilbert’s irrevocable endorsement and power of attorney
to have these stocks transferred in the books of corporation. All of these certificates
were always in the undisturbed possession of the spouses Francisco and Simny,
including Stock Certificate Nos. 004-014.
In 1999, the aging Francisco instructed Benjamin Lim, a nominal shareholder of

Good Gold and his trusted employee, to collaborate with Atty. Emmanuel Paras,
to redistribute Good Gold’s shareholdings evenly among his children, namely,
Gilbert, Grace Guy-Cheu (Grace), Geraldine Guy (Geraldine), and Gladys Guy
(Gladys), while maintaining a proportionate share for himself and his wife, Simny.
Gilbert filed a complaint captioned as "Intra-Corporate Controversy: For the

Declaration of Nullity of Fraudulent Transfers of Shares of Stock Certificates,
Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of
Meetings, and Damages with Application for the Issuance of a Writ of Preliminary
and Mandatory Injunction," against his mother, Simny, his sisters, Geraldine,
Gladys, and the heirs of his late sister Grace.
Gilbert alleged that he never signed any document which would justify and support
the transfer of his shares to his siblings and that he has in no way, disposed,
alienated, encumbered, assigned or sold any or part of his shares in Good Gold.
He also denied the existence of the certificates of stocks. According to him, "there
were no certificates of stocks under his name for the shares of stock subscribed
by him were never issued nor delivered to him from the time of the inception of the
corporation."
Gilbert added that the Amended General Information Sheets (GIS) of GoodGold
for the years 2000 to 2004 which his siblings submitted to the Securities and
Exchange Commission (SEC) were spurious as these did not reflect his true
shares in the corporation which supposedly totaled to 595,000 shares;16 that no
valid stockholders’ annual meeting for the year 2004 was held, hence proceedings
taken thereon, including the election of corporate officers were null and void;17 and,
that his siblings are foreign citizens, thus, cannot own more than forty percent of
the authorized capital stock of the corporation.18
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ISSUE
Is the transfer of the shares of stock in favor of the Gilbert’s mother and siblings
valid?
HELD
YES. With Gilbert’s failure to allege specific acts of fraud in his complaint and his
failure to rebut the NBI report, this Court pronounces, as a consequence thereof,
that the signatures appearing on the stock certificates, including his blank
endorsement thereon were authentic. With the stock certificates having been
endorsed in blank by Gilbert, which he himself delivered to his parents, the same
can be cancelled and transferred in the names of herein petitioners.
When a stock certificate is endorsed in blank by the owner thereof, it constitutes

what is termed as "street certificate," so that upon its face, the holder is entitled to
demand its transfer into his name from the issuing corporation. Such certificate is
deemed quasi-negotiable, and as such the transferee thereof is justified in
believing that it belongs to the holder and transferor.
As an exception to the general rule enunciated above, where stock certificates

endorsed in blank were stolen from the possession of the beneficial owners thereof
constraining this Court to declare the transfer void for lack of delivery and want of
value, the same cannot apply to Gilbert because the stock certificates which Gilbert
endorsed in blank were in the undisturbed possession of his parents who were the
beneficial owners thereof and who themselves as such owners caused the transfer
in their names. Indeed, even if Gilbert’s parents were not the beneficial owners, an
endorsement in blank of the stock certificates coupled with its delivery, entitles the
holder thereof to demand the transfer of said stock certificates in his name from
the issuing corporation.
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Chateau De Baie Condominium Corporation vs. Spouses Moreno, GR No.
186271, February 2011
FACTS:
Mrs. Moreno is the registered owner of a penthouse unit and two parking slots in
Chateau de Baie Condominium (Chateau Condominium) in Roxas Boulevard,
Manila. ). As a registered owner in Chateau Condominium, Mrs. Moreno is a
member/stockholder of the condominium corporation. Mrs. Moreno obtained a
loan of ₱16,600,000.00 from Oscar Salvacion, and she mortgaged the Moreno
properties as security; the mortgage was annotated on the CCTs.
Subsequently, to enforce its lien, the president of the petitioner wrote the Clerk of
Court/Ex-Officio Sheriff of Parañaque City for the extrajudicial public auction sale
of the Moreno properties. To stop the extrajudicial sale, Salvacion, as mortgagee,
filed a petition petition sought to prohibit the scheduled extrajudicial sale for lack
of a special power to sell from the registered and to declare the lien to be
excessive. RTC dismissed Salvacion’s petition and the extrajudicial sale
proceeded as scheduled and the Moreno properties were sold to the petitioner, the
lone bidder. Salvacion appealed
While the Salvacion case was pending before the CA, the Moreno spouses filed
before the RTC, Parañaque City, a complaint for intra-corporate dispute against
the petitioner to question how it calculated the dues assessed against them, and
to ask an accounting of the association dues.
ISSUE:
Whether the court erred in not dismissing the Moreno Spouses complaint despite
the full completion of the extrajudicial sale.
HELD:
The petition lacks merit. The court did not err when it did not dismiss the Moreno
spouses’ complaint despite the full completion of the extrajudicial sale.
Although the extrajudicial sale of the Moreno properties to the petitioner has been
fully effected and the Salvacion petition has been dismissed with finality, the
completion of the sale does not bar the Moreno spouses from questioning the
amount of the unpaid dues that gave rise to the foreclosure and to the subsequent
sale of their properties. The propriety and legality of the sale of the condominium
unit and the parking spaces questioned by Salvacion are different from the
propriety and legality of the unpaid assessment dues that the Moreno spouses are
questioning in the present case.
Just because the property has already been sold extrajudicially does not mean
that the questioned assessments have now become legal and valid or that they
have become immaterial. In fact, the validity of the foreclosure depends on the
legality of the assessments and the issue must be determined by the SEC if only
to ensure that the private respondent was not deprived of her property without
having been heard. If there were no valid assessments, then there was no lien on
the property, and if there was no lien, what was there to foreclose? Thus, SEC
Case No. 2675 has not become moot and academic and the SEC retains its
jurisdiction to hear and decide the case despite the extrajudicial sale.
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Securities and Exchange Commission vs. Prosperity.Com, Inc., GR

No.164197, January 25, 2012
FACTS:
Prosperity.Com, Inc. (PCI) sold computer software and hosted websites without
providing internet service. To make a profit, PCI devised a scheme in which, for
the price of US$234.00 (subsequently increased to US$294), a buyer could
acquire from it an internet website of a 15-Mega Byte (MB) capacity. At the same
time, by referring to PCI his own down-line buyers, a first-time buyer could earn
commissions, interest in real estate in the Philippines and in the United States, and
insurance coverage worth P50, 000.00.
To benefit from this scheme, a PCI buyer must enlist and sponsor at least two
other buyers as his own down-lines. These second tier of buyers could in turn
build up their own down-lines. For each pair of down-lines, the buyer-sponsor
received a US$92.00 commission. But referrals in a day by the buyer-sponsor
should not exceed 16 since the commissions due from excess referrals inure to
PCI, not to the buyer-sponsor.
Apparently, PCI patterned its scheme from that of Golconda Ventures, Inc. (GVI),
which company stopped operations after the Securities and Exchange
Commission (SEC) issued a cease and desist order (CDO) against it. As it later
on turned out, the same persons who ran the affairs of GVI directed PCI's actual
operations.
In 2001, disgruntled elements of GVI filed a complaint with the SEC against PCI,
alleging that the latter had taken over GVI's operations. After hearing, the SEC,
through its Compliance and Enforcement unit, issued a CDO against PCI. The
SEC ruled that PCI's scheme constitutes an Investment contract and, following the
Securities Regulations Code, it should have first registered such contract or
securities with the SEC.
Instead of asking the SEC to lift its CDO in accordance with Section 64.3 of
Republic Act (R.A.) 8799, PCI filed with the Court of Appeals (CA) a petition
for certiorari against the SEC with an application for a temporary restraining order
(TRO) and preliminary injunction in CA-G.R. SP 62890. Because the CA did not
act promptly on this application for TRO, on January 31, 2001 PCI returned to the
SEC and filed with it before the lapse of the five-day period a request to lift the
CDO. On the following day, February 1, 2001, PCI moved to withdraw its petition
before the CA to avoid possible forum shopping violation.
During the pendency of PCI's action before the SEC, however, the CA issued a
TRO, enjoining the enforcement of the CDO. In response, the SEC filed with the
CA a motion to dismiss the petition on ground of forum shopping. In a Resolution,
the CA initially dismissed the petition, finding PCI guilty of forum shopping. But on
PCI's motion, the CA reversed itself and reinstated the petition.
In a joint resolution, CA-G.R. SP 62890 was consolidated with CA-G.R. SP 64487

that raised the same issues. On July 31, 2003 the CA rendered a decision,
granting PCI's petition and setting aside the SEC-issued CDO. The CA ruled that,
following the Howey test, PCI's scheme did not constitute an investment contract
that needs registration pursuant to R.A. 8799, hence, this petition.
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ISSUE:
The sole issue presented before the Court is whether or not PCI's scheme
constitutes an investment contract that requires registration under R.A. 8799.
HELD:
The Securities Regulation Code treats investment contracts as "securities" that

have to be registered with the SEC before they can be distributed and sold. An
investment contract is a contract, transaction, or scheme where a person invests
his money in a common enterprise and is led to expect profits primarily from the
efforts of others.
Apart from the definition, which the Implementing Rules and Regulations provide,
Philippine jurisprudence has so far not done more to add to the same. Of course,
the United States Supreme Court, grappling with the problem, has on several
occasions discussed the nature of investment contracts. That court's rulings, while
not binding in the Philippines, enjoy some degree of persuasiveness insofar as
they are logical and consistent with the country's best interests.
The United States Supreme Court held in Securities and Exchange Commission
v. W.J. Howey Co. that, for an investment contract to exist, the following elements,
referred to as the Howey test must concur: (1) a contract, transaction, or scheme;
(2) an investment of money; (3) investment is made in a common enterprise; (4)
expectation of profits; and (5) profits arising primarily from the efforts of
others. Thus, to sustain the SEC position in this case, PCI's scheme or contract
with its buyers must have all these elements.
An example that comes to mind would be the long-term commercial papers that
large companies, like San Miguel Corporation (SMC), offer to the public for raising
funds that it needs for expansion. When an investor buys these papers or
securities, he invests his money, together with others, in SMC with an expectation
of profits arising from the efforts of those who manage and operate that
company. SMC has to register these commercial papers with the SEC before
offering them to investors.
Here, PCI's clients do not make such investments. They buy a product of some
value to them: an Internet website of a 15-MB capacity. The client can use this
website to enable people to have internet access to what he has to offer to them,
say, some skin cream. The buyers of the website do not invest money in PCI that
it could use for running some business that would generate profits for the
investors. The price of US$234.00 is what the buyer pays for the use of the
website, a tangible asset that PCI creates, using its computer facilities and
technical skills.
Actually, PCI appears to be engaged in network marketing, a scheme adopted by

companies for getting people to buy their products outside the usual retail system
where products are bought from the store's shelf. Under this scheme, adopted by
most health product distributors, the buyer can become a down-line seller. The
latter earns commissions from purchases made by new buyers whom he refers to
the person who sold the product to him. The network goes down the line where
the orders to buy come.
The commissions, interest in real estate, and insurance coverage worth

P50,000.00 are incentives to down-line sellers to bring in other customers. These
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can hardly be regarded as profits from investment of money under the Howey test.
The CA is right in ruling that the last requisite in the Howey test is lacking in the
marketing scheme that PCI has adopted. Evidently, it is PCI that expects profit
from the network marketing of its products. PCI is correct in saying that the
US$234 it gets from its clients is merely a consideration for the sale of the websites
that it provides.
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Timeshare Realty Corporation vs. Cesar Lao and Cynthia Cortez, G.R No.
158941, February 11, 2017
FACTS:
On October 6, 1996, petitioner sold to respondents, one timeshare of Laguna de

Boracay under a Contract payable in eight months and fully paid by the
respondents. Sometime in February 1998, the SEC issued a resolution to the effect
that petitioner was without authority to sell securities, like timeshares, prior
to February 11, 1998. It further stated in the resolution/order that the Registration
Statement of petitioner became effective only on February 11, 1998. It also held
that the 30 days within which a purchaser may exercise the option to unilaterally
rescind the purchase agreement and receive the refund of money paid applies to
all purchase agreements entered into by petitioner prior to the effectivity of the
Registration Statement. Petitioner sought a reconsideration of the aforesaid order
but the SEC denied the same.
On March 30, 1998, respondents wrote petitioner demanding their right and option
to cancel their Contract, as it appears that Laguna de Boracay is selling said shares
without license or authority from the SEC. But despite repeated demands,
petitioner failed and refused to refund or pay respondents.
ISSUE:
Whether registration as a Corporation authorizes the Corporation to sell

unregistered timeshares.
RULING:
NO. The provisions of B.P. Blg. 178 do not support the contention of petitioner that
its mere registration as a corporation already authorizes it to deal with unregistered
timeshares. Corporate registration is just one of several requirements before it
may deal with timeshares:
Section 8. Procedure for registration. - (a) All securities required to be

registered under subsection (a) of Section four of this Act shall be registered
through the filing by the issuer or by any dealer or underwriter interested in the
sale thereof, in the office of the Commission, of a sworn registration statement with
respect to such securities, containing or having attached thereto, the following:
(36) Unless previously filed and registered with the Commission and
brought up to date:
(a) A copy of its articles of incorporation with all amendments thereof

and its existing by-laws or instruments corresponding thereto,
whatever the name, if the issuer be a corporation.
Prior to fulfillment of all the other requirements of Section 8, petitioner

is absolutely proscribed under Section 4 from dealing with unregistered
timeshares, thus:
Section 4. Requirement of registration of securities. - (a) No securities, except of

a class exempt under any of the provisions of Section five hereof or unless sold in
any transaction exempt under any of the provisions of Section six hereof, shall be
sold or offered for sale or distribution to the public within the Philippines unless
such securities shall have been registered and permitted to be sold as hereinafter
provided.
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Philippine Veterans Bank vs. Justina Callangan, in her capacity as in her
capacity as Director of the Corporation Finance Department of the
Securities and Exchange Commission and/or the SECURITIES AND
EXCHANGE COMMISSION, GR No. 191995, August 3, 2011
FACTS:
On March 17, 2004, respondent Justina F. Callangan, the Director of the

Corporation Finance Department of the Securities and Exchange Commission
(SEC), sent the Bank a letter, informing it that it qualifies as a “public company”
under Section 17.2 of the Securities Regulation Code (SRC) in relation with Rule
3(1)(m) of the Amended Implementing Rules and Regulations of the SRC. The
Bank is thus required to comply with the reportorial requirements set forth in
Section 17.1 of the SRC.
The Bank responded by explaining that it should not be considered a “public

company” because it is a private company whose shares of stock are available
only to a limited class or sector, i.e., to World War II veterans, and not to the
general public.
In a letter dated April 20, 2004, Director Callangan rejected the Bank’s explanation
and assessed it a total penalty of One Million Nine Hundred Thirty-Seven
Thousand Two Hundred Sixty-Two and 80/100 Pesos (P1,937,262.80) for failing
to comply with the SRC reportorial requirements from 2001 to 2003. The Bank
moved for the reconsideration of the assessment, but Director Callangan denied
the motion in SEC-CFD Order No. 085, Series of 2005 dated July 26, 2005. When
the SEC En Banc also dismissed the Bank’s appeal for lack of merit in its Order
dated August 31, 2006, prompting the Bank to file a petition for review with the
Court of Appeals (CA).
On March 6, 2008, the CA dismissed the petition and affirmed the assailed SEC
ruling, with the modification that the assessment of the penalty be recomputed from
May 31, 2004.
The CA also denied the Bank’s motion for reconsideration, opening the way for the
Bank’s petition for review on certiorari filed with this Court.
On June 16, 2010, the Court denied the Bank’s petition for failure to show any
reversible error in the assailed CA decision and resolution.
ISSUE:
Whether or not the reportorial requirements of the SEC are applicable to Banks.
HELD:
The Securities and Exchange Commission (SEC) required the Bank to comply with
the reportorial requirements under Section 17.1 of SRC since it qualifies as a
“public company” under Section 17.2 of the SRC. The Bank argued that it is a
private company and not a public company because its shares are available only
to a limited class or sector. The Supreme Court held that “public company,” as
contemplated by the SRC, is not limited to a company whose shares of stocks are
publicly listed; even companies like the Bank, whose shares are offered only to a
specific group of people, are considered a public company, provided they meet the
requirement as required under the SRC.
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THE NEW CENTRAL BANK ACT (RA 7653, as amended by RA 11211)
1. Romeo Busuego vs. Court of Appeals, G.R. No. 95326, March 11, 1999;
2. Ana Maria Koruga vs. Teodoro Arcenas, Jr., G.R. No. 168332/ G.R. No.
169053, June 19, 2009;
3. Bangko Sentral ng Pilipinas v. Banco Filipino Savings and Mortgage Bank,

G.R. Nos. 178696 & 192607, July 30, 2018;
4. Federal Express Corp. v. Antonino, G.R. No. 199455, June 27, 2018;
5. Bangko Sentral ng Pilipinas, vs. Feliciano P. Legaspi G.R. No. 205966,

March 02, 2016;
6. Spouses Jaime and Matilde Poon vs. Prime Savings Bank represented by
the Philippine Deposit Iinsurance Corporation as Statutory Liquidator, G.R.
No. 183794, June 13, 2016;
7. Cu v. Small Business Guarantee and Finance Corp., G.R. No. 211222,

August 7, 2017;
8. Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas,

G.R. No. 200678, June 4, 2018;
9. Leticia G. Miranda vs. Philippine Deposit Insurance Corporation, G.R. No.

169334, September 8, 2006;
10. Apex Bancrights Holdings, Inc, Lead Bancfung Hodlings, et al., v Bangko
Sentral ng Pilipinas and Philippine Deposit Insurance Corporation, G.R. No.
214866, October 2, 2017
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Romeo Busuego vs. Court of Appeals,
G.R. No. 95326, March 11, 1999
FACTS:
The 16th regular examination of the books and records of PAL Employees Savings
and Loan Association (PESALA) was conducted by a team of CB Examiners.
Several irregularities were found to have been committed by the PESALA officers.
Hence, CB sent a letter to petitioners for them to be present at a meeting
specifically for the purpose of investigating said anomalies. Petitioners did not
respond. Hence, the Monetary Board adopted a resolution including the names of
the officers of PESALA in the watchlist to prevent them from holding responsible
positions in any institution under CB supervision. Petitioners filed a petition for
injunction against the MB in order to prevent their names from being added in the
said watchlist. RTC issued the TRO. The MB appealed to the CA which reversed
RTC. Hence, this petition for certiorari with the SC. Petitioners contend that the
MB resolution was null and void for being violative of their right to due process by
imposing administrative sanctions where the MB is not vested with authority to
disqualify persons from occupying positions in institutions under the supervision of
CB.
ISSUE:
Whether or not the MB resolution was null and void’
HELD:
NO. The CB, through the MB, is the government agency charged with the
responsibility of administering the monetary, banking and credit system of the
country and is granted the power of supervision and examination over banks and
non-bank financial institutions performing quasibanking functions of which savings
and loan associations, such as PESALA, form part of. The special law governing
savings and loan associations is R.A. 3779, the Savings and Loan Association Act.
Said law authorizes the MB to conduct regular yearly examinations of the books
and records of savings and loan associations, to suspend a savings and loan
association for violation of law, to decide any controversy over the obligations and
duties of directors and officers, and to take remedial measures. Hence, the CB,
through the MB, is empowered to conduct investigations and examine the records
of savings and loan associations. If any irregularity is discovered in the process,
the MB may impose appropriate sanctions, such as suspending the offender from
holding office or from being employed with the CB, or placing the names of the
offenders in a watchlist.
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Ana Maria Koruga vs. Teodoro Arcenas, Jr.,

G.R. No. 168332/ G.R. No. 169053, June 19, 2009
FACTS:
Koruga is a minority stockholder of Banco Filipino. On August 20, 2003, she filed
a complaint before the Makati RTC. Koruga's complaint alleged: 1 Violation of
Sections 31 to 34 of the Corporation Code ("Code") which prohibit self-dealing and
conflicts of interest of directors and officers. 2.Right of a stockholder to inspect the
records of a corporation (including financial statements) under Sections 74 and 75
of the Code 3.Receivership and Creation of a Management Committee On
September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the
trial court's lack of jurisdiction to take cognizance of the case. They also filed a
Manifestation and Motion seeking the dismissal of the case. In an Order dated
October 18, 2004, the trial court denied the Manifestation and Motion On February
9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting
further proceedings in the case. On February 22, 2005, the RTC issued a Notice
of Pre-trial setting the case for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed
a Manifestation and Motion before the CA, reiterating their application for a writ
of... preliminary injunction. Thus, on April 18, 2005, the CA issued the assailed
Resolution, which reads in part: (C)onsidering that the Temporary Restraining
Order issued by this Court on February 9, 2005 expired on April 10, 2005, it is
necessary that a writ of preliminary injunction be issued in order not to render
ineffectual whatever final resolution this Court may render... in this case, after the
petitioners shall have posted a bond. Dissatisfied, Koruga filed this Petition for
Certiorari under Rule 65 of the Rules of Court. Koruga alleged that the CA
effectively gave due course to Arcenas, et al.'s petition when it issued a writ of
preliminary injunction without factual or legal basis Meanwhile, on March 13, 2006,
this Court issued a Resolution granting the prayer for a TRO and enjoining the
Presiding Judge of Makati RTC, Branch 138, from proceeding with the hearing of
the case upon the filing by Arcenas, et al. of a P50,000.00 bond. In their Petition,
Arcenas, et al. asked the Court to set aside the Decision [14] dated July 20, 2005
of the CA in CA-G.R. SP No. 88422, which denied their petition, having found no
grave abuse of discretion on the part of the Makati RTC. The CA said that... the
RTC Orders were interlocutory in nature and, thus, may be assailed by certiorari
or prohibition only when it is shown that the court acted without or in excess of
jurisdiction or with grave abuse of discretion.
ISSUES:
Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?
HELD:
We hold that it is the BSP that has jurisdiction over the case. The acts complained
of pertain to the conduct of Banco Filipino's banking business. The law vests in the
BSP the supervision over operations and activities of banks. Specifically, the
BSP's supervisory and regulatory powers include: conduct of examination to
determine compliance with laws and regulations if the circumstances so warrant
as determined by the Monetary Board; Overseeing to ascertain that laws and
Regulations are complied with; Regular investigation which shall not be oftener
than once a year from the last date of examination to determine whether an
institution is conducting its business on a safe or sound basis Inquiring into the
solvency and liquidity of the institution. Correlatively, the General Banking Law of
2000 specifically deals with loans contracted by bank directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders
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and Their Related Interests. The Monetary Board may regulate the amount of
loans, credit accommodations and guarantees that may be extended, directly or
indirectly, by a bank to its directors, officers, stockholders and their related
interests, as well as investments of such bank in enterprises owned or... controlled
by said directors, officers, stockholders and their related interests. Furthermore,
the authority to determine whether a bank is conducting business in an unsafe or
unsound manner is also vested in the Monetary Board. Finally, the New Central
Bank Act grants the Monetary Board the power to impose administrative sanctions
on the erring bank: Section 37. The Monetary Board may, at its discretion, impose
upon... any bank or quasi-bank, their directors and/or officers or any commission
of irregularities, and/or conducting business in an unsafe or unsound manner as
may be determined by the Monetary Board Koruga's invocation of the provisions
of the Corporation Code is misplaced. In an earlier case with similar antecedents,
we ruled that: The Corporation Code, however, is a general law applying to all
types of corporations, while the New Central Bank Act regulates specifically banks
and other financial institutions, including the dissolution and liquidation thereof. As
between a general and special... law, the latter shall prevail - generalia specialibus
non derogant.
Consequently, it is not the Interim Rules of Procedure on Intra-Corporate

Controversies,[32] or Rule 59 of the Rules of Civil Procedure on Receivership, that
would apply to this case. Instead, Sections 29 and 30 of the New Central Bank Act
should be followed viz.: Section 30. The Monetary Board may summarily and
without need for prior... hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance Corporation as
receiver of the banking institution. Actions of the Monetary Board taken under this
section or under Section 29 of this Act shall be final and executory, and may not
be restrained or set aside by the court except on petition for certiorari on the ground
that the action taken was in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction. The appointment of a
receiver under this section shall be vested exclusively with the Monetary Board.
On the strength of these provisions, it is the Monetary Board that exercises
exclusive jurisdiction over proceedings for receivership of banks. From the
foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear
and decide a suit that seeks to place Banco Filipino under receivership. The court's
jurisdiction could only have been invoked after the Monetary Board had taken
action on the matter and only on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess
of jurisdiction.
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Bangko Sentral ng Pilipinas v. Banco Filipino Savings and Mortgage Bank,

G.R. Nos. 178696 & 192607, July 30, 2018\
FACTS:
Pursuant to Resolution No. 223 dated February 14, 1963 of the Monetary Board
(MB) of the Central Bank of the Philippines (CB), Banco Filipino commenced its
operations as savings and mortgage bank on July 9, 1964. However, pursuant to
MB Resolution No. 75, MB ordered the closure of Banco Filipino on the ground
that the latter was found to be "insolvent and that its continuance in business would
involve probable loss to its depositors and creditors x x x ". Banco FIlipino sought
to annul MB Resolution No. 75, which was subsequently granted. Central Bank
and the Monetary Board are ordered to reorganize Banco Filipino and allow the
latter to resume business in the Philippines under the comptrollership of both the
Central Bank and the Monetary Board.
Consequently, Republic Act No. 7653 abolished the CB and a new central
monetary authority was established known as Bangko Sentral ng Pilipinas (BSP).
Under the said law, the CB will continue to exist under the name Central Bank-
Board of Liquidators (CB-BOL) for the sole purpose of administering and
liquidating the assets and liabilities of the CB that were not transferred to the BSP.
During a meeting, BSP-MB resolved to allow Banco Filipino to reopen and resume
business under the comptrollership of BSP. Five years after, BSP and Banco
Filipino entered into a Memorandum of Agreement where the latter was to repay
to BSP the amount of P3,673,031,589.36 by way of dacion en pago of some of its
real properties. The amount owed by BFSMB represented the so-called advances
extended to it by the defunct CB. Further, pursuant to the aforementioned
agreement, BSP has to lift its comptrollership over BFSMB on January 20, 2000,
and deliver to the latter all collaterals in its custody, including government
securities held by designated comptrollers. Later on, Banco Filipino experienced
massive withdrawals. Thus, it applied for emergency financial assistance from BSP
to maintain liquidity. BSP however refused to assist, reasoning that there are strict
requirements imposed by Republic Act No. 7653. Banco Filipino asserted BSP,
“having stepped into the shoes of the old CB” was obligated to "reorganize" it.
ISSUE:
Whether or not relief prayed for by Banco Filipino can be mandated by judicial
compulsion through a mere revival of judgment considering that they lie within the
discretion of the BSP-MB taking into account sound banking principles.
HELD:
No. That the Court purposely left the finer details of the reorganization and the
conditions thereof to the sound discretion of then CB-MB was an acknowledgment
of the fact that the CB alone was vested by statute with the power and/or authority
to determine or prescribe the conditions under which such resumption of business
shall take place. Verily, nothing changed with the enactment of Republic Act No.
7653. BSP, the independent central monetary authority established by the law, is
still given sufficient independence and latitude to carry out its mandate. Sections
to of Republic Act No. 7653 bear this out, viz.: SECTION 1. Declaration of Policy.
- The State shall maintain a central monetary authority that shall function and
operate as an independent and accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking and credit. In line with this
policy, and considering its unique functions and responsibilities, the central
monetary authority established under this Act, while being government-owned
corporation, shall enjoy fiscal and administrative autonomy. Accordingly, given that
the reliefs prayed for by Banco Filipino are outside the ambit of the judgment
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sought to be revived, coupled with its (Banco Filipino) admission in its petition, it is
evident that the judgment obligation imposed by the Decision in G.R. No. 70054
had already been extinguished through its performance – Banco Filipino had been
reopened and reorganized under the comptrollership of the BSP-MB, which
comptrollership lasted until January 20, 2000, upon the agreement of BSP-MB and
Banco Filipino to implement the Memorandum of Agreement
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Federal Express Corp. v. Antonino,

G.R. No. 199455, June 27, 2018
FACTS:
In November 2003, monthly common charges on the unit situated in New York,
USA and owned by respondent Eliza Antonino became due. These charges were
for the period of July 2003 to November 2003, and were for a total amount of
US$9,742.81. On December 2003, respondents 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 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 MaxwellKates, 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. After several
follow-ups, Sison was informed that the package was delivered to her neighbor but
there was no signed receipt. On March 14, 2004, respondents, 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 led their Complaint for damages. FedEx contended that it should be
absolved of liability as the respondents 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)."
ISSUE:
Whether or not the Citibank checks are considered money, within the prohibition
of FedEx’s Air Waybill.
RULING:
The prohibition has a singular object: money. What follows the phrase
"transportation of money " is a phrase enclosed in parentheses, and commencing
with the words "including but not limited to." The additional phrase, enclosed as it
is in parentheses, is not the object of the prohibition, but merely a postscript to the
word "money." Moreover, its introductory words "including but not limited to" signify
that the items that follow are illustrative examples; they are not qualifiers that are
integral to or inseverable from "money." Despite the utterance of the enclosed
phrase, the singular prohibition remains: money. Money is "what is generally
acceptable in exchange for goods." It can take many forms, most commonly as
coins and banknotes. Despite its myriad forms, its key element is its general
acceptability. Laws usually define what can be considered as a generally
acceptable medium of exchange. It is settled in jurisprudence that checks, being
only negotiable instruments, are only substitutes for money and are not legal
tender; more so when the check has a named payee and is not payable to bearer.
In Philippine Airlines, Inc. v. Court of Appeals, the Court ruled that the payment of
a check to the sheriff did not satisfy the judgment debt as checks are not
considered legal tender. This has been maintained in other cases decided by the
Supreme Court. The Air Waybill's prohibition mentions "negotiable instruments"
only in the course of making an example. Thus, they are not prohibited items
themselves. Moreover, the illustrative example does not even pertain to negotiable
instruments per se but to "negotiable instruments equivalent to cash." The checks
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involved here are payable to specific payees, Maxwell-Kates, Inc. and the New
York County Department of Finance. Thus, they are order instruments. They are
not payable to their bearer. Order instruments differ from bearer instruments in
their manner of negotiation: Under Section 30 of the Negotiable Instruments Law,
an order instrument requires an indorsement from the payee or holder before it
may be validly negotiated. A bearer instrument, on the other hand, does not require
an indorsement to be validly negotiated. There is no question that checks, whether
payable to order or to bearer, so long as they comply with the requirements under
Section 1 of the Negotiable Instruments Law, are negotiable instruments. The
more relevant consideration is whether checks with a specified payee are
negotiable instruments equivalent to cash, as contemplated in the example added
to the Air Waybill's prohibition. The Court thinks they are not. An order instrument,
which has to be endorsed by the payee before it may be negotiated, cannot be a
negotiable instrument equivalent to cash. It is worth emphasizing that the
instruments given as further examples under the Air Waybill must be endorsed to
be considered equivalent to cash.
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Bangko Sentral ng Pilipinas, vs. Feliciano P. Legaspi

G.R. No. 205966, March 02, 2016
FACTS:
Petitioner BSP filed a Complaint for annulment of title, revocation of certificate and
damages (with application for TRO/writ of preliminary injunction) against Secretary
Jose L. Atienza, Jr., Luningning G. De Leon, Engr. Ramon C. Angelo, Jr., Ex-
Mayor Matilde A. Legaspi and respondent Feliciano P. Legaspi before the RTC of
Malolos, Bulacan. Respondent, together with his fellow defendants, filed their
Answer to the complaint. Thereafter, the RTC issued an Order mandating the
issuance of preliminary injunction, enjoining the construction, development and/or
operation of a dumpsite or landfill in Barangay San Mateo, Norzagaray, Bulacan,
in an area allegedly covered by OCT No. P858/Free Patent No. 257917, the
property subject of the complaint. Herein respondent Legaspi filed a Motion to
Dismiss alleging that the RTC did not acquire jurisdiction over the person of the
petitioner BSP because the suit is unauthorized by petitioner BSP itself and that
the counsel representing petitioner BSP is not authorized and thus cannot bind the
same petitioner. In addition, respondent Legaspi asserted that the complaint was
initiated without the authority of the Monetary Board and that the complaint was
not prepared and signed by the Office of the Solicitor General (OSG), the statutory
counsel of government agencies. In opposing the Motion to Dismiss, petitioner
BSP argued that the complaint was filed pursuant to Monetary Board Resolution
No. 8865. Petitioner BSP further claimed that it is not precluded from being
represented by a private counsel of its own choice. In denying the Motion to
Dismiss, the RTC ruled that it had acquired jurisdiction over the person of the
petitioner when the latter filed with the court the Complaint. Furthermore, the RTC
adjudged that in suits involving the BSP, the Monetary Board may authorize the
Governor to represent it personally or through counsel, even a private counsel,
and the authority to represent the BSP may be delegated to any other officer
thereof. It took into account the Monetary Board Resolution No. 900 containing the
Board's approval of the recommendation of the Asset Management Department
(AMD) to engage the services of Ongkiko Kalaw Manhit and Acorda Law Offices
(OKMA Law). Respondent Legaspi filed a motion for reconsideration, adding as its
argument that the RTC failed to acquire jurisdiction over the action because the
complaint, a real action, failed to allege the assessed value of the subject property.
As an opposition to respondent Legaspi's additional contention, petitioner BSP
claimed that since the subject property contains an area of 4,838,736 square
meters, it is unthinkable that said property would have an assessed value of less
than P20,000.00 which is within the jurisdiction of the Municipal Trial Courts.
Petitioner BSP further stated that a tax declaration showing the assessed value of
P28,538,900.00 and latest zonal value of P145,162,080.00 was attached to the
complaint. RTC likewise denied respondent Legaspi's motion for reconsideration.
Respondent Legaspi elevated the case to the CA via a petition for certiorari under
Rule 65 of the Rules of Court. CA granted respondent’s motion and dismissed
BSP’s complaint.
ISSUES:
1. Whether or not The Regional Trial Court of Malolos City has exclusive original
jurisdiction over the subject matter of the action.
2. Whether or not BSP can lawfully engaged the services of a private counsel.
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HELD:
1. The RTC has exclusive original jurisdiction over the case. Under Batas
Pambansa Bilang 129, as amended by Republic Act No. 7691, the RTC has
exclusive original jurisdiction over civil actions which involve title to possession of
real property, or any interest therein, where the assessed value of the property
involved exceeds Twenty Thousand Pesos (P20,000.00). Petitioner BSP insists
that the property involved has an assessed value of more than P20,000.00, as
shown in a Tax Declaration attached to the complaint. Incidentally, the complaint,
on its face, is devoid of any amount that would confer jurisdiction over the RTC.
The non-inclusion on the face of the complaint of the amount of the property,
however, is not fatal because attached in the complaint is a tax declaration (Annex
"N" in the complaint) of the property in question showing that it has an assessed
value of P215,320.00. It must be emphasized that annexes to a complaint are
deemed part of, and should be considered together with the complaint. Since a
copy of the tax declaration, which is a public record, was attached to the complaint,
the same document is already considered as on file with the court, thus, the court
can now take judicial notice of such.
2. BSP can lawfully engage the services of a private counsel. Anent the issue of
the legal representation of petitioner BSP, the CA ruled that the BSP, being a
government-owned and controlled corporation, should have been represented by
the Office of the Solicitor General (OSG) or the Office of the Government
Corporate Counsel (OGCC) and not a private law firm or private counsel, as in this
case. Under Republic Act No. 7653, or the New Central Bank Act, the BSP
Governor is authorized to represent the Bangko Sentral, either personally or
through counsel, including private counsel, as may be authorized by the Monetary
Board, in any legal proceedings, action or specialized legal studies. Under the
same law, the BSP Governor may also delegate his power to represent the BSP
to other officers upon his own responsibility. As aptly found by the RTC, petitioner
BSP was able to justify its being represented by a private counsel, thus: BSP's
complaint dated April 10, 2008 was verified by Geraldine C. Alag, an officer of the
BSP being the Director of its Asset Management Department. It has been
explained that this was authorized by the Monetary Board, as per Resolution No.
865 dated June 17, 2004, which reads: To approve delegation of authority to the
Director, Asset Management Department (AMD), or in his absence, the Officer-in-
Charge, AMD to sign all documents, contracts, agreements and affidavits relating
to the consolidation of ownership, lease, cancellation of decision, redemption and
sale of acquired assets, and all documents to be filed in court upon clearance by
the Office of the General Counsel and Legal Services x x x. Also submitted to this
Court is the Secretary's Certificate issued by Silvina Q. Mamaril-Roxas, Officer-in-
Charge, Office of the Secretary of BSP's Monetary Board attesting to Monetary
Board Resolution No. 900, adopted and passed on July 18, 2008, which reads: At
the regular meeting of the MB on 18 July 2008, the MB adopted and passed MB
Resolution No. 900, to wit: xxx The Board approved the recommendation of the
Asset Management Department (AMD) to engage the services of Ongkiko Kalaw
Manhit and Acorda Law Offices (OKMA Law) as follows: xxx To act as counsel for
the Bangko Sentral ng Pilipinas (BSP) in a complaint to be filed against the
Department of Environment and Natural Resources (DENR) Secretary, et al., xxx
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Spouses Jaime and Matilde Poon vs. Prime Savings Bank represented by
the Philippine Deposit Insurance Corporation as Statutory Liquidator, G.R.
No. 183794, June 13, 2016
FACTS:
Petitioners owned a commercial building in Naga City. On 3 November 2006,

Matilde Poon and respondent executed a 10-year Contract of Lease (Contract)
over the building for the latter's use as its branch office in Naga City. They agreed
to a fixed monthly rental of P60,000, with an advance payment of the rentals for
the first 100 months in the amount of P6,000,000. As agreed, the advance payment
was to be applied immediately. In addition, paragraph 24 of the Contract provides:
Should the leased premises be closed, deserted or vacated by the

LESSEE, the LESSOR shall have the right to terminate the lease
without the necessity of serving a court order and to immediately
repossess the leased premises. xxxxxxxxxxx The LESSOR shall
thereupon have the right to enter into a new contract with another
party. All advanced rentals shall be forfeited in favor of the LESSOR.
Barely three years later, however, the BSP placed respondent under the
receivership of the Philippine Deposit Insurance Corporation (PDIC) for wilfully
violating a cease and desist orders that has become final, involving acts or
transactions which amount to fraud or a dissipation of the assets of the institution,
among other grounds. The BSP eventually ordered respondent's liquidation.
On 12 May 2000, respondent vacated the leased premises and surrendered them
to petitioners. Subsequently, the PDIC issued petitioners a demand letter asking
for the return of the unused advance rental amounting to P3,480,000 on the
ground that paragraph 24 of the lease agreement had become inoperative,
because respondent's closure constituted force majeure. The PDIC likewise
invoked the principle of rebus sic stantibus under Article 1267 of Republic Act No.
386 (Civil Code) as alternative legal basis for demanding the refund. Petitioners,
however, refused the PDIC's demand. They maintained that they were entitled to
retain the remainder of the advance rentals following paragraph 24 of their
Contract. Consequently, respondent sued petitioners before the RTC of Naga City
for a partial rescission of contract and/or recovery of a sum of money.
RTC ordered the partial rescission of the lease agreement and directed petitioner
spouses Jaime and Matilde Poon to return or refund the sum of One Million Seven
Hundred Forty Thousand Pesos (Pl,740,000) representing one-half of the unused
portion of the advance rentals. CA affirmed the RTC Decision.
ISSUES:
1. Whether respondent may be released from its contractual obligations to

petitioners on grounds of fortuitous event under Article 1174 of the Civil Code and
unforeseen event under Article 1267 of the Civil Code;
2. Whether the proviso in the parties' Contract allowing the forfeiture of advance
rentals was a penal clause; and
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3. Whether the penalty agreed upon by the parties may be equitably reduced
under Article 1229 of the Civil Code.
HELD:
1. The closure of respondent's business was neither a fortuitous nor an unforeseen

event that rendered the lease agreement functus officio. Respondent posits that it
should be released from its contract with petitioners, because the closure of its
business upon the BSP' s order constituted a fortuitous event as the Court held in
Provident Savings Bank. The cited case, however, must always be read in the
context of the earlier Decision in Central Bank v. Court of Appeals. The Court ruled
in that case that the Monetary Board had acted arbitrarily and in bad faith in
ordering the closure of Provident Savings Bank. Accordingly, in the subsequent
case of Provident Savings Bank it was held that fuerza mayor had interrupted the
prescriptive period to file an action for the foreclosure of the subject mortgage.
In contrast, there is no indication or allegation that the BSP's action in this case
was tainted with arbitrariness or bad faith. Instead, its decision to place respondent
under receivership and liquidation proceedings was pursuant to Section 30 of
Republic Act No. 7653. Moreover, respondent was partly accountable for the
closure of its banking business. It cannot be said, then, that the closure of its
business was independent of its will as in the case of Provident Savings Bank.
The legal effect is analogous to that created by contributory negligence in quasi-
delict actions.
The period during which the bank cannot do business due to insolvency is not a
fortuitous event, unless it is shown that the government's action to place a bank
under receivership or liquidation proceedings is tainted with arbitrariness, or that
the regulatory body has acted without jurisdiction.
The Court cannot also give due course respondent lessee’s invocation of the
doctrine of unforeseen event under Article 1267 of the Civil Code, which provides:
Art. 1267. When the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released therefrom, in
whole or in part.
Tagaytay Realty Co., Inc. v. Gacutan lays down the requisites for the application
of Article 1267, as follows:
1. The event or change in circumstance could not have been foreseen at the time
of the execution of the contract.
2. It makes the performance of the contract extremely difficult but not impossible.
3. It must not be due to the act of any of the parties.
4. The contract is for a future prestation.
The first and the third requisites, however, are lacking. It must be noted that the
lease agreement was for 10 years. As shown by the unrebutted testimony of Jaime
Poon during trial, the parties had actually considered the possibility of a
deterioration or loss of respondent's business within that period. Moreover, the
closure of respondent's business was not an unforeseen event. As the lease was
long-term, it was not lost on the parties that such an eventuality might occur, as it
was in fact covered by the terms of their Contract. Besides, the event was not
independent of respondent's will.
2. The forfeiture clause in the Contract is penal in nature.
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It is settled that a provision is a penal clause if it calls for the forfeiture of any
remaining deposit still in the possession of the lessor, without prejudice to any other
obligation still owing, in the event of the termination or cancellation of the
agreement by reason of the lessee's violation of any of the terms and conditions
thereof. This kind of agreement may be validly entered into by the parties. The
clause is an accessory obligation meant to ensure the performance of the principal
obligation by imposing on the debtor a special prestation in case of
nonperformance or inadequate performance of the principal obligation. The
forfeiture clauses of the Contract, therefore, served the two functions of a penal
clause, i.e., (1) to provide for liquidated damages and (2) to strengthen the coercive
force of the obligation by the threat of greater responsibility in case of breach.
3. A reduction of the penalty agreed upon by the parties is warranted under Article
1129 of the Civil Code.
At stake in this case are not just the rights of petitioners and the correlative liabilities
of respondent lessee. Over and above those rights and liabilities is the interest of
innocent debtors and creditors of a delinquent bank establishment. These
overriding considerations justify the 50% reduction of the penalty agreed upon by
petitioners and respondent lessee in keeping with Article 1229 of the Civil Code.
Under the circumstances, it is neither fair nor reasonable to deprive depositors and
creditors of what could be their last chance to recoup whatever bank assets or
receivables the PDIC can still legally recover. Besides, nothing has prevented
petitioners from putting their building to other profitable uses, since respondent
surrendered the premises immediately after the closure of its business.
Distinguish a deposit substitute under the banking law and deposit substitute under
the tax law. The distinction is on the purpose. If a bank or non-bank financial
intermediary sells debt instruments to 20 or more lenders/placers at any one time,
irrespective of outstanding amounts, for the purpose of relending or purchasing of
receivables or obligations, it is considered to be performing a quasi-banking
function. Under the National Internal Revenue Code, however, deposit substitutes
include not only the issuances and sales of banks and quasi-banks for relending or
purchasing receivables and other similar obligations, but also debt instruments
issued by commercial, industrial, and other nonfinancial companies to finance their
own needs or the needs of their agents or dealers. Banco de Oro v. Republic of the
Philippines, G.R. No. 198756, August 16, 2016.
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Cu v. Small Business Guarantee and Finance Corp.,
G.R. No. 211222, August 7, 2017
FACTS:
Golden 7 Bank (G7 Bank) was granted a credit line worth Php 50 million by
respondent Small Business Guarantee and Finance Corp. The bank’s officers,
herein petitioner Fidel Cu, Allan Cu and others were made signatories to the loan
documents including the postdated checks which were issued in payment for the
drawdowns on the credit line.
BSP placed G7 Bank under receivership by the Philippine Deposit Insurance

Corporation (PDIC). PDIC eventually took over the bank’s premises, per the
closure order issued by the Monetary Board. In effect, the Deputy Receiver of
PDIC took over the bank and issued a cease and desist order which allowed PDIC
to close all of G7 Bank’s deposit accounts with other banks.
The postdated checks issued by Cu the matured and when SB Corp deposited the
same to its account with the LBP Makati Branch, they were all dishonored for the
reason that the account was already closed. SB Corp sent demand letters to Cu,
demanding payment. Despite such, Cu failed to comply thus SB Corp filed a
criminal complaint against Cu and others for violation of BP 22. A petition for
assistance in the liquidation of G7 Bank’s assets was then filed by PDIC in the
Naga City court.
The MeTC dismissed the BP 22 cases, and the dismissal was upheld by the RTC,
by the reason that the appointment of a receiver operates to suspend the authority
of the bank and its officers to intermeddle with its own property and transfer its
assets to make do the payment with SB Corp. The CA reversed the ruling, hence
Cu’s petition.
ISSUE:
Whether the criminal case for BP 22 against the bank officers should be dismissed
due to the order for receivership and despite a subsequent pending petition for
assistance for liquidation.
HELD:
YES, the SC found that both the MeTC and the RTC acted correctly when it
ordered the dismissal of the BP 22 cases against Cu. The Court found that:
(1) the closure of G7 Bank, placing it under receivership per Monetary Board
Orders and the filing of the petition for assistance in the liquidation
proceedings effectively suspended the demandabililty of the loan, thus the
BP 22 case cannot proceed and was properly dismissed; and
(2) the filing of a petition for assistance in liquidation by PDIC as receiver as a

result of the Monetary Bank’s order for closure made it legally impossible
for Cu to comply with his obligation with SB Corp, thus the filing was clearly
in bad faith
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It applied the doctrine in the case of Gidwani v. People, in which the demandability
of the payment for the embroidery services rendered by the exporter was
“suspended” by an SEC order, which ordered the account from which the
payments were to be drawn against, to be closed, after the exporter filed a petition
for declaration of a state of suspension of payments.
“In other words, the SEC Order also created a suspensive condition.
When a contract is subject to a suspensive condition, its birth takes
place or its effectivity commences only if and when the event that
constitutes the condition happens or is fulfilled. Thus, at the time the
payee presented the September and October 1997 checks for
encashment, it had no right to do so, as there was yet no obligation
due from the exporter, through its President.”
“Consequently, because there was a suspension of the exporter's

obligations, its President may not be held liable for civil obligations of
the corporation covered by the bank checks at the time this case
arose. However, it must be emphasized that the President's non-
liability should not prejudice the right of the payee to pursue its claim
through the remedies available to it, subject to the SEC proceedings
regarding the application for corporate rehabilitation.”
The Court pointed out that that G7 Bank was placed under receivership prior to the
demand of the payments. This means that when SB Corp. deposited the postdated
checks, it was surely aware that G7 Bank was already under receivership and
PDIC had already taken over the bank by virtue of the Monetary Board’s closure
thereof. SB Corp clearly acted in bad faith because it was aware that it was legally
impossible for Cu to fund those checks on the dates indicated therein, which were
all past G7 Bank’s closure because all the bank accounts of G7 Bank were closed
by PDIC.
Further, the effect of a petition for assistance in the liquidation of a cloased bank
is that it gives the liquidation court the exclusive jurisdiction to adjudicate disputed
claims against the closed bank, assist in the individual liabilities of the
stockholders, directors, and officers, and decide on all other issues as may be
material to implement the distribution plan adopted by the PDIC for general
application to all closed banks.
Considering the amount to be received by SB Corp was not yet determine as the
liquidation proceeding was still pending, the debtor’s obligation to pay or perform
is suspended. This however, does not preclude the proper filing of claims in the
liquidation proceedings.
Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas,

G.R. No. 200678, June 4, 2018.
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FACTS:
Petitioner bank has been placed under receivership when it filed a Petition for
Certiorari with the Supreme Court. Said Petition was assailed by the respondent
that contended that the same should be dismissed outright for being led without
Philippine Deposit Insurance Corporation's authority. It asserts that petitioner was
placed under receivership on March 17, 2011, and thus, petitioner's Executive
Committee would have had no authority to sign for or on behalf of petitioner absent
the authority of its receiver, Philippine Deposit Insurance Corporation. They also
point out that both the Philippine Deposit Insurance Corporation Charter and
Republic Act No. 7653 categorically state that the authority to file suits or retain
counsels for closed banks is vested in the receiver. Thus, the verification and
certification of non-forum shopping signed by petitioner's Executive Committee has
no legal effect.
ISSUE:
Whether or not petitioner Banco Filipino, as a closed bank under receivership,
could file this Petition for Review without joining its statutory receiver, the Philippine
Deposit Insurance Corporation, as a party to the case.
HELD:
A closed bank under receivership can only sue or be sued through its receiver,
the Philippine Deposit Insurance Corporation. Under Republic Act No. 7653, when
the Monetary Board finds a bank insolvent, it may "summarily and without need for
prior hearing forbid the institution from doing business in the Philippines and
designate the Philippine Deposit Insurance Corporation as receiver of the banking
institution."
The relationship between the Philippine Deposit Insurance Corporation and a
closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653 directs the
receiver of a closed bank to "immediately gather and take charge of all the assets
and liabilities of the institution" and "administer the same for the benefit of its
creditors." The law likewise grants the receiver "the general powers of a receiver
under the Revised Rules of Court." Under Rule 59, Section 6 of the Rules of Court,
"a receiver shall have the power to bring and defend, in such capacity, actions in
his [or her] own name." Thus, Republic Act No. 7653 provides that the receiver
shall also "in the name of the institution, and with the assistance of counsel as [it]
may retain, institute such actions as may be necessary to collect and recover
accounts and assets of, or defend any action against, the institution." Considering
that the receiver has the power to take charge of all the assets of the closed bank
and to institute for or defend any action against it, only the receiver, in its fiduciary
capacity, may sue and be sued on behalf of the closed bank.
When petitioner was placed under receivership, the powers of its Board of
Directors and its officers were suspended. Thus, its Board of Directors could not
have validly authorized its Executive Vice Presidents to file the suit on its behalf.
The Petition, not having been properly verified, is considered an unsigned
pleading. 124 124 A defect in the certification of non-forum shopping is likewise
fatal to petitioner's cause. 125 125 Considering that the Petition was led by
signatories who were not validly authorized to do so, the Petition does not produce
any legal effect. Being an unauthorized pleading, this Court never validly acquired
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jurisdiction over the case. The Petition, therefore, must be dismissed.
Leticia G. Miranda vs. Philippine Deposit Insurance Corporation,
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G.R. No. 169334, September 8, 2006
FACTS:
Leticia G. Miranda was a depositor of Prime Savings Bank. She then wanted to
withdrew 5.5M from her account, but instead of cash she opted to be issued a
crossed cashier’s check in the sum of P2,500,000 and cashier’s check in the
amount of P3,002,000. Petitioner deposited the two checks into her account in
another bank on the same day, however, Bangko Sentral ng Pilipinas suspended
the clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3, 1999.
The two checks of petitioner were returned to her unpaid. Subsequently, Prime
Savings Bank declared a bank holiday. The BSP placed Prime Savings Bank
under the receivership of the Philippine Deposit Insurance Corporation (PDIC).
Miranda filed a civil action for sum of money in the Regional Trial Court to recover
the funds from her unpaid checks against Prime Savings Bank, PDIC and the BSP.
The court rendered judgment against defendants and ordered them to pay the
plaintiff. On appeal, the Court of Appeals reversed the trial court and ruled in favor
of the PDIC and BSP, dismissing the case against them, without prejudice to the
right of petitioner to file her claim before the court designated to adjudicate on
claims against Prime Savings Bank. Petitioner’s motion for reconsideration was
denied.
Hence, this petition.
ISSUES:
(1) Whether the claim lodged by the petitioner is a disputed claim under Section
30 of Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank Act,
and therefore, under the jurisdiction of the liquidation court; and
(2) Whether the respondents are solidarily liable to the petitioner.
HELD:
(1) YES, the claim lodged by the petitioner qualifies as a disputed claim subject to
the jurisdiction of the liquidation court. Regular courts do not have jurisdiction over
actions filed by claimants against an insolvent bank, unless there is a clear
showing that the action taken by the BSP, through the Monetary Board in the
closure of financial institutions was in excess of jurisdiction, or with grave abuse of
discretion.
The power and authority of the Monetary Board to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police power of the
State. Police power, however, is subject to judicial inquiry. It may not be exercised
arbitrarily or unreasonably and could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due
process and equal protection clauses of the Constitution.
"Disputed claims" refer to all claims, whether they be against the assets of the
insolvent bank, for specific performance, breach of contract, damages, or
whatever. Petitioner's claim which involved the payment of the two cashier's
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checks that were not honored by Prime Savings Bank due to its closure falls within
the ambit of a claim against the assets of the insolvent bank. The issuance of the
cashier's checks by Prime Savings Bank to the petitioner created a debtor/creditor
relationship between them. This disputed claim should therefore be lodged in the
liquidation proceedings by the petitioner as creditor, since the closure of Prime
Savings Bank has rendered all claims subsisting at that time moot which can best
be threshed out by the liquidation court and not the regular courts.
(2) NO, it is only Prime Savings Bank that is liable to pay for the amount of the two
cashier's checks. Solidary liability cannot attach to the BSP, in its capacity as
government regulator of banks, and the PDIC as statutory receiver under R.A. No.
7653, because they are the principal government agencies mandated by law to
determine the financial viability of banks and quasi-banks, and facilitate
receivership and liquidation of closed financial institutions, upon a factual
determination of the latter's insolvency.
As correctly pointed out by the Court of Appeals, the BSP should not be held liable
on the crossed cashier's checks for it was not a party to the issuance of the same;
nor can it be held liable for imposing the sanctions on Prime Savings Bank which
indirectly affected Miranda, since it is mandated under Sec. 37 of R.A. No. 7653 to
act accordingly.26 The BSP, through the Monetary Board was well within its
discretion to exercise this power granted by law to issue a resolution suspending
the interbank clearing privileges of Prime Savings Bank, having made a factual
determination that the bank had deficient cash reserves deposited before the BSP.
There is no showing that the BSP abused this discretionary power conferred upon
it by law.
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Apex Bancrights Holdings, Inc, Lead Bancfung Hodlings, et al., v Bangko
Sentral ng Pilipinas and Philippine Deposit Insurance Corporation,
G.R. No. 214866, October 2, 2017
FACTS:
EIB, entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp
Investments, Inc. (UII) in an attempt to rehabilitate UBI which was then under
receivership. However, EIB then encountered its own financial difficulties and
failed to overcome those thus leading to PDIC placing it under receivership
pursuant to Section 30 of RA 7653 or the New Central Bank Act. Accordingly, PDIC
took over EIB. PDIC submitted its initial receivership report to the Monetary Board
which contained its finding that EIB can be rehabilitated or permitted to resume
business; provided, that a bidding for its rehabilitation would be conducted, and
that the following conditions would be met: (a) there are qualified interested banks
that will comply with the parameters for rehabilitation of a closed bank, capital
strengthening, liquidity, sustainability and viability of operations, and strengthening
of bank governance; and (b) all parties (including creditors and stockholders) agree
to the rehabilitation and the revised payment terms and conditions of outstanding
liabilities.
A public bidding was scheduled by PDIC, but the same failed as no bid was
submitted. A rebidding was then set which also did not materialize as no bids were
submitted. Thereafter, PDIC informed BSP that EIB can hardly be rehabilitated and
so the Monetary Board directed PDIC to proceed with the liquidation.
Petitioners, who are stockholders representing the majority stock of EIB, filed a
petition for certiorari before the CA challenging the Resolution of Liquidation. In
essence, petitioners blame PDIC for the failure to rehabilitate EIB, contending that
PDIC: (a) imposed unreasonable and oppressive conditions which delayed or
frustrated the transaction between BDO and EIB; (b) frustrated EIB's efforts to
increase its liquidity when PDIC disapproved EIB's proposal to sell its MRT bonds
to a private third party and, instead, required EIB to sell the same to government
entities; (c) imposed impossible and unnecessary bidding requirements; and (d)
delayed the public bidding which dampened investors' interest.
In defense, PDIC countered that petitioners were already estopped from assailing
the placement of EIB under receivership and its eventual liquidation since they had
already surrendered full control of the bank to the BSP. For its part, BSP
maintained that it had ample factual and legal bases to order EIB's liquidation.
The CA ruled in favor of the BSP noting that nothing in the Section 30 of RA
7653requires the Monetary Board to make its own independent factual
determination on the bank's viability before ordering its liquidation. The law only
provides that the Monetary Board "shall notify in writing the board of directors of
its findings and direct the receiver to proceed with the liquidation of the institution,"
which it did in this case.
ISSUE:
Whether or not the monetary board did not gravely abuse its discretion when it
directed the PDIC to proceed with the liquidation of EIB.
HELD:
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NO. As per Section 30 (c) of RA 7653 on the Proceedings in Receivership and

Liquidation provides that “the Monetary Board may summarily and without need
for prior hearing forbid the institution from doing business in the Philippines and
designate the Philippine Deposit Insurance Corporation as receiver of the banking
institution”.
The receiver shall immediately gather and take charge of all the assets and
liabilities of the institution, administer the same for the benefit of its creditors, and
exercise the general powers of a receiver under the Revised Rules of Court. If the
receiver determines that the institution cannot be rehabilitated or permitted to
resume business in accordance with the next preceding paragraph, the Monetary
Board shall notify in writing the board of directors of its findings and direct the
receiver to proceed with the liquidation of the institution.
The actions of the Monetary Board taken under this section or under Section 29 of
this Act shall be final and executory and may not be restrained or set aside by the
court except on petition for certiorari on the ground that the action taken was in
excess of jurisdiction or with such grave abuse of discretion as to amount to lack
or excess of jurisdiction.
It is settled that "the power and authority of the Monetary Board to close banks and
liquidate them thereafter when public interest so requires is an exercise of the
police power of the State. Police power, however, is subject to judicial inquiry. It
may not be exercised arbitrarily or unreasonably and could be set aside if it is either
capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial
of due process and equal protection clauses of the Constitution."
Here, there was no grave abuse of discretion. In an attempt to forestall EIB's

liquidation, petitioners insist that the Monetary Board must first make its own
independent finding that the bank could no longer be rehabilitated — instead of
merely relying on the findings of the PDIC — before ordering the liquidation of a
bank. Such position is untenable.
As correctly held by the CA, nothing in Section 30 of RA 7653 requires the BSP,
through the Monetary Board, to make an independent determination of whether a
bank may still be rehabilitated or not. As expressly stated in the afore-cited
provision, once the receiver determines that rehabilitation is no longer feasible, the
Monetary Board is simply obligated to: (a) notify in writing the bank's board of
directors of the same; and (b) direct the PDIC to proceed with liquidation.
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GENERAL BANKING LAW OF 2000 (RA 8791)
1. Consolidated Bank and Trust Corporation vs. Court of Appeals, G.R. No.
138569, September 11, 2003;
2. Philippine National Bank vs. Erlando T. Rodriguez, et. al., G.R. No. 170325,
September 26, 2008;
3. Development Bank of the Philippines vs. Guariña Agricultural and Realty

Development Corporation, G.R. No. 160758, January 15, 2014;
4. Asia Trust Development Bank vs. Carmelo H. Tuble, G.R. No. 183987, July
25, 2012;
5. Republic of the Philippines vs. Sandiganbayan, et. al., G.R. No.

166859/G.R. No. 169203/G.R. No. 180702, April 12, 2011;
6. Land Bank of the Philippines vs. Emmanuel Oñate, G.R. No. 192371,
January 15, 2014;
7. First Planters Pawnshop, Inc.,vs. Commissioner of Internal Revenue, G.R.

No. 174134, July 30, 2008;
8. Banco de Oro-EPCI, Inc. vs. JAPRL Development Corporation, G.R. No.

179901, April 14, 2008;
9. Land Bank of the Philippines vs. Naciso L. Kho, G.R. No. 205839, July 7,
2016;
10. Republic of the Philippines vs. Sandiganbayan, et. al., G.R. No.
166859/G.R. No. 169203/G.R. No. 180702, April 12, 2011;
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Consolidated Bank and Trust Corporation vs. Court of Appeals,

G.R. No. 138569, September 11, 2003
FACTS:
Solibank is a domestic banking corporation. While L.C. Diaz is a professional

partnership, engaged in the practice of accounting. L.C. Diaz maintained a savings
account with petitioner, Consolidated Bank and Trust Corporation, now known as
Solidbank Coroporation. On August 14, 1991, L.C. Diaz's cashier, Mercedes
Macaraya, instructed the messenger of the former, Ismael Calapre, to deposit
money with Solidbank. Macaraya gave Calapre the Solidbank passbook together
with savings deposit slips (both for cash and check) she had previously filled up
for the private respondent.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and
the passbook. The teller acknowledged receipt of the deposit by returning to
Calapre the duplicate copies of the two deposit slips. Since the transaction took
time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he
left the passbook with Solidbank. Upon his return, Calapre retrieved the passbook
from Solidbank, but Teller No. 6 informed him that "somebody got the passbook".
Calapre went back to L.C. Diaz and reported the incident to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a check of

P200,000. Macaraya, together with Calapre, went to Solidbank and presented to
Teller No. 6 the deposit slip and check. When Macaraya asked for the passbook,
Teller No. 6 told Macaraya that someone got the passbook but she could not
remember to whom she gave the passbook. When Macaraya asked Teller No. 6 if
Calapre got the passbook, Teller No. 6 answered that someone shorter than
Calapre got the passbook. Calapre was then standing beside Macaraya.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer,
Luis C. Diaz, called up Solidbank to stop any transaction using the same passbook
until L.C. Diaz could open a new account. On the same day, Diaz formally wrote
Solidbank to make the same request. It was also on the same day that L.C. Diaz
learned of the unauthorized withdrawal the day before, 14 August 1991, of
P300,000 from its savings account. The withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L.
Murillo. The signatories, however, denied signing the withdrawal slip. A certain
Noel Tamayo received the P300,000. L.C. Diaz demanded from Solidbank, return
of its money. However, Solidbank refused.
L.C. Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank with
the Regional Trial Court of Manila, Branch 8. After trial, the trial court rendered a
decision absolving Solidbank and dismissing the complaint. L.C. Diaz then
appealed to the Court of Appeals. The same court reversed the decision of the trial
court.
On 11 May 1999, the Court of Appeals issued its Resolution denying the motion
for reconsideration of Solidbank. The appellate court, however, modified its
decision by deleting the award of exemplary damages and attorney's fees.
ISSUES:
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1. Whether or not Solidbank should suffer the loss sustained by the private
respondent.
2. Whether or not L.C. Diaz is guilty of contributory negligence.
HELD:
1. YES. Solidbank is liable for breach of contract due to negligence, or

culpa contractual. The contract between the bank and its depositor is governed by
the provisions of the Civil Code on simple loan. There is a debtor-creditor
relationship between the bank and its depositor. The law imposes on banks high
standards in view of the fiduciary nature of banking. Section 2 of Republic Act No.
8791 declares that the State recognizes the fiduciary nature of banking that
requires high standards of integrity and performance. The fiduciary nature of
banking does not convert a simple loan into a trust agreement because banks do
not accept deposits to enrich depositors but to earn money for themselves. Bank
tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or to his authorized representative. For failing to
return the passbook to Calapre, the authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 presumptively failed to observe such high degree of
diligence in safeguarding the passbook, and in ensuring its return to the party
authorized to receive the same.
2. YES. In a case of culpa contractual, the contributory negligence or last

clear chance by the plaintiff merely serves to reduce the recovery of damages by
the plaintiff but does not exculpate the defendant from his breach of contract.
Under Article 1172, liability (for culpa contractual) may be regulated by the courts,
according to the circumstances. This means that if the defendant exercised the
proper diligence in the selection and supervision of its employee, or if the plaintiff
was guilty of contributory negligence, then the courts may reduce the award of
damages. In this case, L.C. Diaz was guilty of contributory negligence in allowing
a withdrawal slip signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced.
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Philippine National Bank vs. Erlando T. Rodriguez, et. al.,

G.R. No. 170325, September 26, 2008
FACTS:
Respondents Spouses Rodriguez maintained an account with petitioner PNB. The
Spouses Rodriguez are also engaged in the informal lending business of
discounting arrangement with Philnabank Employees Savings and Loan
Association (PEMSLA), an association of PNB employees. PEMSLA regularly
granted loans to its member and Spouses would rediscount the apostate checks
issued to members whenever the association was short of funds. At the same time,
the spouses would replace the postdated checks with their own checks issued in
the same name. PEMSLA’s policy would not approve applications with outstanding
debts and in order to subvert this they created a scheme to obtain additional loans
in the names of unknowing members without their knowledge and consent.
PEMSLA checks were then given to spouses for rediscounting and were carried
out by forging the endorsement of the named payees in the checks. Rodriguez
checks were deposited directly to PEMSLA without any endorsement from the
named payees. Petitioner found out about the fraudulent acts, and took measures
by closing the current account of PEMSLA. Since PEMSLA checks were
dishonored and returned the respondents incurred losses from the rediscounting
transactions.
Rodriguez filed a civil complaint for damages against PEMSLA, the Multi-Purpose
Cooperative of Philnabankers and petitioner PNB. The trial court rendered its
decision in favor of the spouses Rodriguez. On appeal, the Court of Appeals
reversed the decision of the RTC in claiming that the checks were payable to
bearer. However, the CA reversed itself via amended decision. Hence, this appeal.
ISSUE:
Whether PNB was negligent.
HELD:
Because of a failure to show that the payees were "fictitious" in its broader sense,
the fictitious payee rule does not apply. Thus, the checks are to be deemed
payable to order. Consequently, the drawee bank bears the loss. PNB was remiss
in its duty as the drawee bank. It does not dispute the fact that its teller or tellers
accepted the 69 checks for deposit to the PEMSLA account even without any
indorsement from the named payees. It bears stressing that order instruments can
only be negotiated with a valid indorsement. A bank that regularly processes
checks that are neither payable to the customer nor duly indorsed by the payee is
apparently grossly negligent in its operations. This Court has recognized the
unique public interest possessed by the banking industry and the need for the
people to have full trust and confidence in their banks. For this reason, banks are
minded to treat their customer's accounts with utmost care, confidence, and
honesty. In a checking transaction, the drawee bank has the duty to verify the
genuineness of the signature of the drawer and to pay the check strictly in
accordance with the drawer's instructions, i.e., to the named payee in the check. It
should charge to the drawer's accounts only the payables authorized by the latter.
Otherwise, the drawee will be violating the instructions of the drawer and it shall
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be liable for the amount charged to the drawer's account. In the case at bar,
respondents-spouses were the bank's depositors. The checks were drawn against
respondents-spouses' accounts. PNB, as the drawee bank, had the responsibility
to ascertain the regularity of the indorsements, and the genuineness of the
signatures on the checks before accepting them for deposit. Lastly, PNB was
obligated to pay the checks in strict accordance with the instructions of the
drawers. Petitioner miserably failed to discharge this burden. The checks were
presented to PNB for deposit by a representative of PEMSLA absent any type of
indorsement, forged or otherwise. The facts clearly show that the bank did not pay
the checks in strict accordance with the instructions of the drawers, respondents-
spouses. Instead, it paid the values of the checks not to the named payees or their
order, but to PEMSLA, a third party to the transaction between the drawers and
the payees. Moreover, PNB was negligent in the selection and supervision of its
employees. The trustworthiness of bank employees is indispensable to maintain
the stability of the banking industry. Thus, banks are enjoined to be extra vigilant
in the management and supervision of their employees. In Bank of the Philippine
Islands v. Court of Appeals, this Court cautioned thus: Banks handle daily
transactions involving millions of pesos. By the very nature of their work the degree
of responsibility, care and trustworthiness expected of their employees and officials
is far greater than those of ordinary clerks and employees. For obvious reasons,
the banks are expected to exercise the highest degree of diligence in the selection
and supervision of their employees. PNB's tellers and officers, in violation of
banking rules of procedure, permitted the invalid deposits of checks to the
PEMSLA account. Indeed, when it is the gross negligence of the bank employees
that caused the loss, the bank should be held liable. PNB's argument that there is
no loss to compensate since no demand for payment has been made by the
payees must also fail. Damage was caused to respondents-spouses when the
PEMSLA checks they deposited were returned for the reason "Account Closed."
These PEMSLA checks were the corresponding payments to the Rodriguez
checks. Since they could not encash the PEMSLA checks, respondents-spouses
were unable to collect payments for the amounts they had advanced. A bank that
has been remiss in its duty must suffer the consequences of its negligence. Being
issued to named payees, PNB was duty-bound by law and by banking rules and
procedure to require that the checks be properly indorsed before accepting them
for deposit and payment. In fine, PNB should be held liable for the amounts of the
checks.
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Development Bank of the Philippines vs. Guariña Agricultural

and Realty Development Corporation,
G.R. No. 160758, January 15, 2014
FACTS:
In July 1976, Guariña Corporation applied for a loan from DBP to finance the
development of its resort complex. The loan, in the amount of P3,387,000.00, was
approved on August 5, 1976. Guariña Corporation executed a promissory note that
would be due on November 3, 1988. On October 5, 1976, Guariña Corporation
executed a real estate mortgage over several real properties in favor of DBP as
security for the repayment of the loan. On May 17, 1977, Guariña Corporation
executed a chattel mortgage over the personal properties existing at the resort
complex and those yet to be acquired out of the proceeds of the loan, also to
secure the performance of the obligation. Prior to the release of the loan, DBP
required Guariña Corporation to put up a cash equity of P1,470,951.00 for the
construction of the buildings and other improvements on the resort complex.
The loan was released in several installments, and Guariña Corporation used the
proceeds to defray the cost of additional improvements in the resort complex. In
all, the amount released totaled P3,003,617.49, from which DBP withheld
P148,102.98 as interest.
Guariña Corporation demanded the release of the balance of the loan, but DBP
refused. Instead, DBP directly paid some suppliers of Guariña Corporation over
the latter’s objection. DBP found upon inspection of the resort project, its
developments and improvements that Guariña Corporation had not completed the
construction works. In a letter dated February 27, 1978, and a telegram dated June
9, 1978, DBP thus demanded that Guariña Corporation expedite the completion of
the project, and warned that it would initiate foreclosure proceedings should
Guariña Corporation not do so.
Unsatisfied with the non-action and objection of Guariña Corporation, DBP initiated
extrajudicial foreclosure proceedings.
ISSUE:
Whether DBP was negligent.
HELD:
YES. DBP's actuations were legally unfounded. 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.
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Considering that it had yet to release the entire proceeds of the loan, DBP could
not yet make an effective demand for payment upon Guariña Corporation to
perform its obligation under the loan. According to Development Bank of the
Philippines v. Licuanan, it would only be when a demand to pay had been made
and was subsequently refused that a borrower could be considered in default, and
the lender could obtain the right to collect the debt or to foreclose the mortgage.
Hence, Guariña Corporation would not be in default without the demand.
Assuming that DBP could already exact from the latter its compliance with the loan
agreement, the letter dated February 27, 1978 that DBP sent would still not be
regarded as a demand to render Guariña Corporation in default under the principal
contract because DBP was only thereby requesting the latter "to put up the
deficiency in the value of improvements."
Under the circumstances, DBP's foreclosure of the mortgage and the sale of the
mortgaged properties at its instance were premature, and, therefore, void and
ineffectual.
Being a banking institution, DBP owed it to Guariña Corporation to exercise the

highest degree of diligence, as well as to observe the high standards of integrity
and performance in all its transactions because its business was imbued with
public interest. The high standards were also necessary to ensure public
confidence in the banking system, for, according to Philippine National Bank v.
Pike: "The stability of banks largely depends on the confidence of the people in the
honesty and efficiency of banks." Thus, DBP had to act with great care in applying
the stipulations of its agreement with Guariña Corporation, lest it erodes such
public confidence. Yet, DBP failed in its duty to exercise the highest degree of
diligence by prematurely foreclosing the mortgages and unwarrantedly causing the
foreclosure sale of the mortgaged properties despite Guariña Corporation not
being yet in default. DBP wrongly relied on Stipulation No. 26 as its basis to
accelerate the obligation of Guariña Corporation, for the stipulation was relevant
to an Omnibus Agricultural Loan, to Guariña Corporation's loan which was
intended for a project other than agricultural in nature.
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Asia Trust Development Bank vs. Carmelo H. Tuble,

G.R. No. 183987, July 25, 2012
FACTS:
Respondent Carmelo H. Tuble, who served as the vice-president of petitioner
Asiatrust Development Bank, availed himself of the car incentive plan and loan
privileges offered by the bank. Respondent acquired a Nissan Vanette through the
company s car incentive plan. The arrangement was made to appear as a lease
agreement requiring only the payment of monthly rentals. Accordingly, the lease
would be terminated in case of the employee s resignation or retirement prior to
full payment of the price. As regards the loan privileges, Tuble obtained three
separate loans. The first, a real estate loan evidenced by Promissory Note No.
0142 with maturity date of 1 January 1999, was secured by a mortgage over his
property. No interest on this loan was indicated. The second was a consumption
loan, evidenced by Promissory Note No. 0143 with the maturity date of 31 January
1995 and interest at 18% per annum. Aside from the said indebtedness, Tuble
allegedly obtained a salary loan, his third loan. Later, he resigned. Respondent
had the following obligations to the bank after his retirement: (1) the purchase or
return of the Nissan Vanette; (2) P100,000 as consumption loan; (3) P421,800 as
real estate loan; and (4) P16,250 as salary loan. Respondent claimed that since
he and the bank were debtors and creditors of each other, the offsetting of loans
could legally take place. He then asked the bank to simply compute his DIP and
apply his receivables to his outstanding loans.However, instead of heeding his
request, the bank sent him a 1 June 1995 demand letter obliging him to pay his
debts. The bank also required him to return the Nissan Vanette. Despite this
demand, the vehicle was not surrendered. Tuble wrote the bank again to follow up
his request to offset the loans. This letter was not immediately acted upon. It was
only on 13 October 1995 that the bank finally allowed the offsetting of his various
claims and liabilities. As a result, his liabilities were reduced to P970,691.46 plus
the unreturned value of the vehicle. In order to recover the Nissan Vanette, the
bank filed a Complaint for replevin against Tuble. Petitioner obtained a favorable
judgment. Then, to collect the liabilities of respondent, it also filed a Petition for
Extra-judicial Foreclosure of real estate mortgage over his property. Thereafter,
Tuble timely redeemed the property on 17 March 1997 for P1,318,401.91. Despite
his payment of the redemption price, Tuble questioned how the foreclosure basis
of P421,800 ballooned to P1,318,401.91 in a matter of one year. Belatedly, the
bank explained that this redemption price included the Nissan Vanette s book
value, the salary loan, car insurance, 18% annual interest on the banks redemption
price of P421,800, penalty and interest charges on Promissory Note No. 0142, and
litigation expenses Because Tuble disputed the redemption price, he filed a
Complaint for recovery of a sum of money and damages before the RTC. He
specifically sought to collect P896,602.02representing the excess charges on the
redemption price. The RTC ruled in favor of Tuble. The trial court characterized
the redemption price as excessive and arbitrary, because the correct redemption
price should not have included the above-mentioned charges. Moral and
exemplary damages were also awarded to him. According to the trial court, the
value of the car should not have been included, considering that the bank had
already recovered the Nissan Vanette. The obligations arising from the salary loan
and car insurance should have also been excluded, for there was no proof that
these debts existed. The interest and penalty charges should have been deleted,
too, because Promissory Note No. 0142 did not indicate any interest or penalty
charges. Neither should litigation expenses have been added, since there was no
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proof that the bank incurred those expenses. As for the 18% annual interest on the
bid price of P421,800, the RTC agreed with Tuble that this charge was unlawful.
On appeal, the CA affirmed the findings of the RTC. The appellate court only
expounded the rule that, at the time of redemption, the one who redeemed is liable
to pay only 1% monthly interest plus taxes. It also concluded that there was
practically no basis to impose the additional charges.
ISSUE:
Whether or not the Bank is justified in claiming Tuble’s liability to pay legal interest,
notwithstanding that PN No. 0142 contains no stipulation on interest payments.
HELD:
NO. While Article 2209 allows the recovery of interest sans stipulation, this charge
is provided not as a form of monetary interest, but as one of compensatory interest.
Monetary interest refers to the compensation set by the parties for the use or
forbearance of money. On the other hand, compensatory interest refers to the
penalty or indemnity for damages imposed by law or by the courts. Compensatory
interest, as a form of damages, is due only if the obligor is proven to have defaulted
in paying the loan. Thus, a default must exist before the bank can collect the
compensatory legal interest of 12% per annum. In the case at bar, Tuble was not
yet in default because as evidence by PN No. 0142, the obligation was set to
mature on January 1 1999. But Tuble had already settled his liabilities on March
17 1997 by paying the redemption price. Then, in 1999, the bank issued his
Clearance and share in the DIP in view of the full settlement of his obligation.
112
AUSL-Refresher
Republic of the Philippines vs. Sandiganbayan, et. al.,

G.R. No. 166859/G.R. No. 169203/G.R. No. 180702, April 12, 2011
FACTS:
For over two decades, the issue of whether the sequestered sizable block of
shares representing 20% of the outstanding capital stock of San Miguel
Corporation (SMC) at the time of acquisition belonged to their registered owners
or to the coconut farmers has remained unresolved. The Republic argues and
concludes that Cojuangco took money from the bank entrusted by law with the
administration of coconut levy funds and was placed treating the funds of UCPB
and the CIIF as his own personal capital to buy his SMC shares. The republic
suggests that Cojuangco had been enabled to obtain the loans by the issuance of
LOI 926 exempting the UCPB from the DOSRI and Single Borrower’s Limit
restrictions.
ISSUE:
Whether or not there was a violation of the DOSRI and Single Borrower’s
restriction.
HELD:
NO. The Republic’s lack of proof on the source of the funds by which Cojuangco,
et al. had acquired their block of SMC shares has made it shift its position, that it
now suggests that Cojuangco had been enabled to obtain the loans by the
issuance of LOI 926 exempting the UCPB from the DOSRI and the Single
Borrower’s Limit restrictions. We reject the Republic’s suggestion. Firstly, as earlier
pointed out, the Republic adduced no evidence on the significant particulars of the
supposed loan, like the amount, the actual borrower, the approving official, etc. It
did not also establish whether or not the loans were DOSRI or issued in violation
of the Single Borrower’s Limit. Secondly, the Republic could not outrightly assume
that President Marcos had issued LOI 926 for the purpose of allowing the loans by
the UCPB in favor of Cojuangco. There must be competent evidence to that effect.
And, finally, the loans, assuming that they were of a DOSRI nature or without the
benefit of the required approvals or in excess of the Single Borrower’s Limit, would
not be void for that reason. Instead, the bank or the officers responsible for the
approval and grant of the DOSRI loan would be subject only to sanctions under
the law.
113
AUSL-Refresher
Land Bank of the Philippines vs. Emmanuel Oñate,

G.R. No. 192371, January 15, 2014
FACTS:
Land Bank of the Philippines is a government financial institution created under

RA 3844.3844. From 1978 to 1980, Oñate opened and maintained seven trust
accounts with Land Bank. Each trust account was covered by an Investment
Management Account (IMA) with Full Discretion and has a corresponding
passbook where deposits and withdrawals were recorded. On October 8, 1981,
LBP claims a miscredit of P4M to 5M of Onate’s Trust Account, for as claimed by
LBP the checks deposited to these accounts were issued to LBP by their 4
corporate borrowers, who preterminated their loans. Such checks were deposited
allegedly by Polonio (Onate’s Representative) to Onate’s Trust Account, and were
later withdrawn by him. Onate refused to return such funds after LBP has
demanded it from him. A meeting was held to settle such matter, but has failed to
reach an agreement. The issue of miscrediting remained unsettles, and on June
21, 1991, LBP unilaterally set-off the outstanding balance in all of Onate’s
Accounts, debiting only P1, 528, 538.48. LBP files a complaint for sum of money
seeking to recover P8, 222,687.89 plus legal interest per annum. Onate in his
answer, asserted that the set-off was without legal and factual basis. Onate further
asserted presence of undocumented withdrawals and such are unauthorized
transactions from his accounts and must be credited back to him. Upon Onate’s
motion, the RTC ordered to create a Board to examine the records of Onate’s 7
Trust Accounts. The Board submitted reports of withdrawal slips from Onate’s
account. LBP did not file any comment or objection to the Board’s consolidated
report.
ISSUE:
Whether Land Bank is liable for damages.
HELD:
YES. The contractual relation between Land Bank and Oñate in this case is
primarily governed by the IMAs. Paragraph 4 thereof expressly imposed on Land
Bank the duty to maintain accurate records of all his investments, receipts,
disbursements and other transactions relating to his accounts. It also obliged Land
Bank to provide Oñate with quarterly balance sheets, statements of income and
expenses, summary of investments, etc. These are the obligations of Land Bank
which it should have faithfully complied with in good faith. Unfortunately, Land
Bank failed in its contractual duties to maintain accurate records of all investments
and to regularly furnish Oñate with financial statements relating to his accounts.
Had Land Bank kept an accurate record there would have been no need for the
creation of a Board of Commissioners or at least the latter’s work would have been
a lot easier and more accurate. But because of Land Bank’s inefficient record
keeping, the Board performed the tedious task of trying to reconcile messy and
incomplete records. The lackadaisical attitude of Land Bank in keeping an updated
record of Oñate’s accounts is aggravated by its reluctance to accord the Board full
and unrestricted access to the records when it was conducting a review of the
accounts upon the orders of the trial court.
The banking system is an indispensable institution in the modern world and plays
a vital role in the economic life of every civilized nation. Whether as mere passive
entities for the safekeeping and saving of money or as active instruments of
114
AUSL-Refresher
business and commerce, banks have become an ubiquitous presence among the
people, who have come to regard them with respect and even gratitude and, most
of all, confidence. Thus, even the humble wage-earner has not hesitated to entrust
his life’s savings to the bank of his choice, knowing that they will be safe in its
custody and will even earn some interest for him. The ordinary person, with equal
faith, usually maintains a modest checking account for security and convenience
in the settling of his monthly bills and the payment of ordinary expenses. As for
business entities like the petitioner, the bank is a trusted and active associate that
can help in the running of their affairs, not only in the form of loans when needed
but more often in the conduct of their day-to-day transactions like the issuance or
encashment of checks.
In every case, the depositor expects the bank to treat his account with the utmost
fidelity, whether such account consists only of a few hundred pesos or of millions.
The bank must record every single transaction accurately, down to the last centavo
and as promptly as possible. This has to be done if the account is to reflect at any
given time the amount of money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to whomever he directs.
The point is that as a business affected with public interest and because of the
nature of its functions, the bank is under obligations to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship.
115
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First Planters Pawnshop, Inc.,vs. Commissioner of Internal Revenue,

SSG.R. No. 174134, July 30, 2008
FACTS:
First Planter’s Pawnshop was informed by the BIR that it has an existing tax
deficiency on its VAT and Documentary Stamp Tax (DST) liabilities for the year
2000. The core of petitioner’s argument is that it is not a lending investor within the
purview of Section 108(A) of the NIRC, as amended, and therefore not subject to
VAT. Petitioner also contends that a pawn ticket is not subject to DST because it
is not proof of the pledge transaction, and even assuming that it is so, still, it is not
subject to tax since a DST is levied on the document issued and not on the
transaction. Petitioner protested the assessment for lack of legal and factual bases
which was denied by the Acting Regional Director. First Planter’s Pawnshop then
filed a petition for review with the Court of Tax Appeals (CTA). In a Decision dated
May 9, 2005, the 2nd Division of the CTA upheld the deficiency assessment.
Petitioner filed a motion for reconsideration which was denied in a Resolution
dated October 7, 2005. Petitioner appealed to the CTA En Banc which also denied
for lack of merit. Petitioner sought reconsideration but this was denied by the CTA
En Banc per Resolution dated August 14, 2006. Hence, the present petition for
review under Rule 45 of the Rules of Court.
ISSUES:
1. Whether or not First Planter’s Pawnshop is liable for Value Added Tax.
2. Whether or not First Planter’s Pawnshop is liable for Documentary Stamp Tax.
HELD:
1. NO. The determination of petitioner’s tax liability depends on the tax treatment
of a pawnshop business. The Court found that pawnshops should have been
treated as non-bank financial intermediaries from the very beginning, subject to
the appropriate taxes provided by law. Financial intermediaries as persons or
entities whose principal functions include the lending, investing or placement of
funds or evidences of indebtedness or equity deposited with them, acquired by
them, or otherwise coursed through them, either for their own account or for the
account of others. It need not be elaborated that pawnshops are non-
banks/banking institutions. Moreover, the nature of their business activities
partakes that of a financial intermediary in that its principal function is lending. A
pawnshop's business and operations are governed by Presidential Decree (P.D.)
No. 114 or the Pawnshop Regulation Act and Central Bank Circular No. 374 (Rules
and Regulations for Pawnshops). Section 3 of P.D. No. 114 defines pawnshop as
a person or entity engaged in the business of lending money on personal property
delivered as security for loans and shall be synonymous, and may be used
interchangeably, with pawnbroker or pawn brokerage. That pawnshops are to be
treated as non-bank financial intermediaries is further bolstered by the fact that
pawnshops are under the regulatory supervision of the Bangko Sentral ng Pilipinas
and covered by its Manual of Regulations for Non-Bank Financial Institutions.
Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for
the tax years 1996 to 2002; however, with the levy, assessment and collection of
VAT from non-bank financial intermediaries being specifically deferred by law, then
petitioner is not liable for VAT during these tax years. But with the full
implementation of the VAT system on non-bank financial intermediaries starting
January 1, 2003, petitioner is liable for 10% VAT for said tax year. And beginning
2004 up to the present, by virtue of R.A. No. 9238, petitioner is no longer liable for
116
AUSL-Refresher
VAT but it is subject to percentage tax on gross receipts from 0% to 5 %, as the
case may be.
2.YES. Applying jurisprudence, it was ruled that the subject of DST is not limited
to the document alone. A DST is an excise tax on the exercise of a right or privilege
to transfer obligations, rights or properties incident thereto. Pledge is among the
privileges, the exercise of which is subject to DST. A pledge may be defined as an
accessory, real and unilateral contract by virtue of which the debtor or a third
person delivers to the creditor or to a third person movable property as security for
the performance of the principal obligation, upon the fulfillment of which the thing
pledged, with all its accessions and accessories, shall be returned to the debtor or
to the third person True, the law does not consider said ticket as an evidence of
security or indebtedness. However, for purposes of taxation, the same pawn ticket
is proof of an exercise of a taxable privilege of concluding a contract of pledge. At
any rate, it is not said ticket that creates the pawnshop’s obligation to pay DST but
the exercise of the privilege to enter into a contract of pledge. There is therefore
no basis in petitioner’s assertion that a DST is literally a tax on a document and
that no tax may be imposed on a pawn ticket.
117
AUSL-Refresher
Banco de Oro-EPCI, Inc. vs. JAPRL Development Corporation,

G.R. No. 179901, April 14, 2008
FACTS:
After evaluating the financial statements of respondent JAPRL Development
Corporation (JAPRL) for fiscal years 1998, 1999 and 2000, petitioner Banco de
Oro-EPCI, Inc. extended credit Rfacilities to it amounting to P230,000,000.
Respondents Rapid Forming Corporation (RFC), and Jose U. Arollado acted as
JAPRL's sureties. Despite its seemingly strong financial position, JAPRL defaulted
in the payment of four trust receipts soon after the approval of its loan. Petitioner
later learned from MRM Management, JAPRL's financial adviser, that JAPRL had
altered and falsified its financial statements. It allegedly bloated its sales revenues
to post a big income from operations for the concerned fiscal years to project itself
as a viable investment. The information alarmed petitioner. Citing relevant
provisions of the Trust Receipt Agreement, it demanded immediate payment of
JAPRL's outstanding obligations amounting to P194,493,388.98. Civil Case No.
03-991 Because JAPRL ignored its demand for payment, petitioner filed a
complaint for sum of money with an application for the issuance of a writ of
preliminary attachment against respondents in the RTC of Makati City on the
ground of fraud because JAPRL altered and falsified its financial statements. The
Makati RTC subsequently denied the application (for the issuance of a writ of
preliminary attachment) for lack of merit as petitioner was unable to substantiate
its allegations. Nevertheless, it ordered the service of summons on respondents.
Respondents moved to dismiss the complaint due to an allegedly invalid service
of summons because the officer's return stated that an "administrative assistant"
had received the summons. The Makati RTC denied the motion for lack of merit.
It noted that because corporate officers are often busy, summonses to
corporations are usually received only by administrative assistants or secretaries
of corporate officers in the regular course of business. Respondents moved for
reconsideration but withdrew it before the Makati RTC could resolve the matter.
RTC SEC Case No. 68-2008-C JAPRL (and its subsidiary, RFC) filed a petition for
rehabilitation in Calamba RTC. Finding JAPRL's petition sufficient in form and in
substance, the Calamba RTC issued a stay order. In view of the said order,
respondents hastily moved to suspend the proceedings in Civil Case No. 03-991
pending in the Makati RTC. Makati RTC granted the motion with regard to JAPRL
and RFC but ordered Arollado to file an answer. It ruled that, because he was
jointly and solidarily liable with JAPRL and RFC, the proceedings against him
should continue. Respondents moved for reconsideration but it was denied.
Respondents filed a petition for certiorari in the CA. They asserted that the court
did not acquire jurisdiction over their persons due to defective service of summons.
Thus, the Makati RTC could not hear the complaint for sum of money. CA granted
the petition sustaining the position of respondents. Petitioner moved for
reconsideration but it was denied. Hence, this petition. Petitioner asserts that
respondents maliciously evaded the service of summonses to prevent the Makati
RTC from acquiring jurisdiction over their persons. Furthermore, they employed
bad faith to delay proceedings by cunningly exploiting procedural technicalities to
avoid the payment of their obligations.
ISSUES:
I. Whether or not the Court acquired jurisdiction over the person of the
respondents.
II. II. Whether or not the Makati RTC shall proceed to hear Civil Case No.
03-991.
118
AUSL-Refresher
HELD:
1. Yes. When respondents moved for the suspension of proceedings in Civil
Case No. 03-991 before the Makati RTC (on the basis of order of the Calamba
RTC), they waived whatever defect there was in the service of summons and were
deemed to have submitted themselves voluntarily to the jurisdiction of the Makati
RTC. Respondents abused procedural technicalities (albeit unsuccessfully) for the
sole purpose of preventing, or at least delaying, the collection of their legitimate
obligations. Their reprehensible scheme impeded the speedy dispensation of
justice. More importantly, however, considering the amount involved, respondents
utterly disregarded the significance of a stable and efficient banking system to the
national economy. Banks are entities engaged in the lending of funds obtained
through deposits from the public. They borrow the public's excess money (i.e.,
deposits) and lend out the same. Banks therefore redistribute wealth in the
economy by channeling idle savings to profitable investments. Banks operate (and
earn income) by extending credit facilities financed primarily by deposits from the
public. They plough back the bulk of said deposits into the economy in the form of
loans. Since banks deal with the public's money, their viability depends largely on
their ability to return those deposits on demand. For this reason, banking is
undeniably imbued with public interest. Consequently, much importance is given
to sound lending practices and good corporate governance. Protecting the integrity
of the banking system has become, by large, the responsibility of banks. The role
of the public, particularly individual borrowers, has not been emphasized.
Nevertheless, the Court is not unaware of the rampant and unscrupulous practice
of obtaining loans without intending to pay the same.
2. Yes. In this case, petitioner alleged that JAPRL fraudulently altered and
falsified its financial statements in order to obtain its credit facilities. Considering
the amount of petitioner's exposure in JAPRL, justice and fairness dictate that the
Makati RTC hear whether or not respondents indeed committed fraud in securing
the credit accomodation. Petitioner can use the finding of fraud to move for the
dismissal of the rehabilitation case in the Calamba RTC. The protective remedy of
rehabilitation was never intended to be a refuge of a debtor guilty of fraud. Makati
RTC should proceed to hear Civil Case No. 03-991 against the three respondents
guided by Section 40 of the General Banking Law which states:
Section 40. Requirement for Grant of Loans or Other Credit

Accommodations. Before granting a loan or other credit
accommodation, a bank must ascertain that the debtor is capable of
fulfilling his Towards this end, a bank may demand from its credit
applicants a statement of their assets and liabilities and of their
income and expenditures and such information as may be prescribed
by law or by rules and regulations of the Monetary Board to enable
the bank to properly evaluate the credit application which includes
the corresponding financial statements submitted for taxation
purposes to the Bureau of Internal Revenue. Should such
statements prove to be false or incorrect in any material detail, the
bank may terminate any loan or credit accommodation granted on
the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation. to the bank.
Under this provision, banks have the right to annul any credit accommodation or
loan, and demand the immediate payment thereof, from borrowers proven to be
guilty of fraud. Petitioner would then be entitled to the immediate payment of
P194,493,388.98 and other appropriate damages.
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Land Bank of the Philippines vs. Naciso L. Kho,
G.R. No. 205839, July 7, 2016
FACTS:
For over two decades, the issue of whether the sequestered sizable block of shares
representing 20% of the outstanding capital stock of San Miguel Corporation (SMC)
at the time of acquisition belonged to their registered owners or to the coconut
farmers has remained unresolved. The Republic argues and concludes that
Cojuangco took money from the bank entrusted by law with the administration of
coconut levy funds and was placed treating the funds of UCPB and the CIIF as his
own personal capital to buy his SMC shares. The republic suggests that Cojuangco
had been enabled to obtain the loans by the issuance of LOI 926 exempting the
UCPB from the DOSRI and Single Borrower’s Limit restrictions.
ISSUE:
restriction.
HELD:
No. The Republic’s lack of proof on the source of the funds by which Cojuangco,
now suggests that Cojuangco had been enabled to obtain the loans by the issuance
of LOI 926 exempting the UCPB from the DOSRI and the Single Borrower’s Limit
restrictions. We reject the Republic’s suggestion. Firstly, as earlier pointed out, the
Republic adduced no evidence on the significant particulars of the supposed loan,
like the amount, the actual borrower, the approving official, etc. It did not also
establish whether or not the loans were DOSRI or issued in violation of the Single
Borrower’s Limit. Secondly, the Republic could not outrightly assume that President
Marcos had issued LOI 926 for the purpose of allowing the loans by the UCPB in
favor of Cojuangco. There must be competent evidence to that effect. And, finally,
the loans, assuming that they were of a DOSRI nature or without the benefit of the
required approvals or in excess of the Single Borrower’s Limit, would not be void
for that reason. Instead, the bank or the officers responsible for the approval and
grant of the DOSRI loan would be subject only to sanctions under the law.
120
AUSL-Refresher
Republic of the Philippines vs. Sandiganbayan, et. al.,

G.R. No. 166859/G.R. No. 169203/G.R. No. 180702, April 12, 2011
FACTS:
For over two decades, the issue of whether the sequestered sizable block of
shares representing 20% of the outstanding capital stock of San Miguel
Corporation (SMC) at the time of acquisition belonged to their registered owners
or to the coconut farmers has remained unresolved. The Republic argues and
concludes that Cojuangco took money from the bank entrusted by law with the
administration of coconut levy funds and was placed treating the funds of UCPB
and the CIIF as his own personal capital to buy his SMC shares. The republic
suggests that Cojuangco had been enabled to obtain the loans by the issuance of
LOI 926 exempting the UCPB from the DOSRI and Single Borrower’s Limit
restrictions.
ISSUE:
restriction.
HELD:
No. The Republic’s lack of proof on the source of the funds by which Cojuangco,
now suggests that Cojuangco had been enabled to obtain the loans by the
issuance of LOI 926 exempting the UCPB from the DOSRI and the Single
Borrower’s Limit restrictions. We reject the Republic’s suggestion. Firstly, as earlier
pointed out, the Republic adduced no evidence on the significant particulars of the
supposed loan, like the amount, the actual borrower, the approving official, etc. It
did not also establish whether or not the loans were DOSRI or issued in violation
of the Single Borrower’s Limit. Secondly, the Republic could not outrightly assume
that President Marcos had issued LOI 926 for the purpose of allowing the loans by
the UCPB in favor of Cojuangco. There must be competent evidence to that effect.
And, finally, the loans, assuming that they were of a DOSRI nature or without the
benefit of the required approvals or in excess of the Single Borrower’s Limit, would
not be void for that reason. Instead, the bank or the officers responsible for the
approval and grant of the DOSRI loan would be subject only to sanctions under
the law
121

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ARIPAH SAMPORNA BADIO

Mercantile Law (Saturday 9-12 am)

1. Manulife Philippines Inc. vs Hermenegilda Ybañez, G.R. No. 204736,

3. Jaime T. Gaisano vs. Development Insurance and Surety Corporation,

4. Equitable Insurance Corporation vs. Transmodal International, Inc., G.R.

7. Industrial Personnel and Management Services, Inc., vs. Country Bankers

8. Keihen-Everett Forwarding Co., Inc., vs. Tokio Marine Malayan Insurance

Manulife Philippines Inc. vs Hermenegilda Ybañez

Manulife Philippines, Inc. (Manulife) instituted a Complaint for Rescission of

Undaunted, Sun Life filed an appeal by way of petition for review

Whether Atty. Jesus Jr. committed material concealment or misrepresentation in

Jaime T. Gaisano vs. Development Insurance and Surety Corporation, G.R.

On October 1, 1996, Pacquing informed petitioner of the vehicle's loss. Thereafter,

After respondent's motion for reconsideration was denied, it filed a Notice of

The CA granted respondent's appeal. The CA upheld respondent's position that

Whether there is a binding insurance contract between petitioner and respondent.

None. Insurance is a contract whereby one undertakes for a consideration to

The second is that covered by Section 78 of the Insurance Code,

“SEC. 78. Any acknowledgment in a policy or contract of insurance

A third exception was laid down in Makati Tuscany Condominium

We hold that the subject policies are valid even if the

While the import of Section 77 is that prepayment of premiums is

By the approval of the aforequoted findings and conclusion of the Court of

In UCPB General Insurance Co., Inc., we summarized the exceptions as follows:

We do not agree with petitioner.

Sytengco Enterprises Corporation (Sytengco) hired respondent Transmodal

In a preliminary survey conducted by Elite Adjusters and Surveyors, Inc. (Elite

Thus, on November 2, 2004, Sytengco demanded from respondent Transmodal

Thereafter, petitioner Equitable Insurance filed a complaint for damages invoking

Respondent Transmodal denied knowledge of an insurance policy and claimed

Whether the subrogation by the petitioner Equitable Insurance was proper.

“SEC. 5. Certification against forum shopping. --The plaintiff or

x x x [T]he essence of forum shopping is the filing of multiple suits

The provisions of the Insurance Code (Presidential Decree [P.D.] No.

'Section 414. The Insurance Commissioner shall have

The adjudicatory authority of the Insurance Commissioner is generally described

'Sec. 416. The Commissioner shall have the power to adjudicate

In Go v. Office of the Ombudsman reiterated the above-stated distinctions vis-a-

The Court of Appeals added that assuming that fraudulent misrepresentation

Whether Alvarez was guilty of fraudulent misrepresentation as to warrant the

Industrial Personnel and Management Services, Inc., vs. Country Bankers

In 2000, Industrial Personnel and Management Services, Inc. (IPAMS) began

A Memorandum of Agreement (MOA) was executed by the said parties on

B. REQUIREMENTS FOR CLAIM

On appeal, the OP affirmed the decision of the DOF. A subsequent motion to

Instead of filing a motion for reconsideration, petitioner IPAMS decided to directly

Whether Country Bankers has no ground to refuse the payment of petitioner

Yes. The subject agreement of the parties indubitably contemplates a surety

In the instant case, it must be emphasized that respondent Country Bankers,

It bears stressing that respondent Country Bankers, after undergoing an evaluation

Furthermore, the DOF likewise factually determined that respondent Country

In 2005, Honda Trading Phils. Ecozone Corporation (Honda Trading) ordered 80

The shipment arrived in Manila on November 3, 2005 and was, accordingly,

Keihin-Everett moved for reconsideration of the foregoing RTC Decision. However,

The payment by the insurer to the insured operates as an equitable assignment to

Hence, respondents instituted a complaint for specific performance with damages.

Whether Felipe’s reinstated life insurance policy is already incontestable at the

Yes. The Insurance Code pertinently provides that:

“Sec. 48. Whenever a right to rescind a contract of insurance is given

After a policy of life insurance made payable on the death of the

The CA expounded on this point thus –

In the Endorsement, the obscurity is patent. In the first sentence of the

Manila Bankers Life Insurance Corporation vs. Cresencia P. Aban, G.R. No