Power of the Board of Directors

Doctrine 1: The general rule is that no person, not even its officers, can validly bind a corporation without
express authority from the board of directors (COLEGIO MEDICOFARMACEUTICO DE FILIPINAS,
INC. v. LIM G.R. No., 212034 July 2 2018)

Exception, Power of the President

Doctrine 2: In the absence of a charter or by-law provision to the contrary, the president is presumed to
have the authority to act within the domain of the general objectives of its business and within the scope
of his or her usual duties. (COLEGIO MEDICOFARMACEUTICO DE FILIPINAS, INC. v. LIM G.R. No.,
212034 July 2 2018)
x—————x
1. COLEGIO MEDICOFARMACEUTICO DE FILIPINAS, INC. v. LIM
G.R. No., 212034 Date July 2 2018
DEL CASTILLO, J.

FACTS:
Petition for Certiorari under Rule 45

Complaint for Ejectment with Damages against respondent Lim. Petitioner alleged that it entered
Contract of Lease with respondent; that after expiration, petitioner, President Del Castillo, sent another
Contract of Lease for her approval; that despite several follow-ups, failed to return the Contract of Lease;
that during a board meeting, petitioner informed respondent of the decision of the Board of Directors not
to renew the Contract of Lease; Del Castillo wrote a letter to respondent demanding the payment of her
back rentals and utility bills, with a request to vacate the subject property; and that respondent refused
to comply with the demand.

Respondent alleged that it entered into a 10-year Contract of Lease represented by Jean with petitioner;
that due to financial difficulties, the Board of Trustees of St. John assigned the rights and interest of the
school in her favor; that the assignment of rights was with the knowledge and approval of petitioner; that
to ensure advance payment of the rentals, petitioner persuaded her to execute a one-year Contract of
Lease, with advance payment of rentals for the said period; that the said contract was executed with no
intention of amending, repealing, or shortening the original 10-year
lease; that she occupied the subject property without any objection from petitioner because, as agreed
by the parties, the term of the lease would continue; that she sent several letters to petitioner for the
immediate repairs of the library, the toilets of the school building, and the basketball court; and that she
suspended the payment of the rentals due to the refusal of petitioner to act on all her letters.

MeTC dismissed, holding that demand letter is jurisdictional. RTC reversed, ruled that the issuance of
the demand letter was done by Del Castillo in the usual course of business and that the issuance of the
same was ratified by petitioner. CA dismissed the complaint since failure to attach the board resolution
is a fatal defect.

ISSUE:
WON the president of a corporation is authorized to send a demand letter without a board resolution

HELD:
Yes. A corporate president is often given general supervision and control over corporate
operations, the strict rule that said officer has no inherent power to act for the corporation is slowly
giving way to the realization that such officer has certain limited powers in the transaction of the
usual and ordinary business of the corporation. In the absence of a charter or by-law provision to
the contrary, the president is presumed to have the authority to act within the domain of the general
objectives of its business and within the scope of his or her usual duties.

In this case, the issuance of the demand letter dated March 5, 2008 to collect the payment of unpaid
rentals from respondent and to demand the latter to vacate the subject property was done in the
ordinary course of business, and thus, within the scope of the powers of Del Castillo.

BRILLANTES
THE CONTRIBUTORY NEGLIGENCE OF DRIVERS DOES NOT BAR THE PASSENGERS OR THEIR
HEIRS FROM RECOVERING DAMAGES FROM THOSE WHO WERE AT FAULT. “As long as it is
shown that no control is exercised by the passenger in the concept of a master or principal, the
negligence of the driver cannot be imputed to the passenger and bar the latter from claiming damages.”
(Visitacion Rebultan, et. al. vs. Spouses Daganta and Willie Viloria, GR No. 197908 July 04, 2018)

x—————x

THE CONTRIBUTORY NEGLIGENCE OF DRIVERS DOES NOT BAR THE PASSENGERS OR THEIR
HEIRS FROM RECOVERING DAMAGES FROM THOSE WHO WERE AT FAULT.

Visitacion Rebultan, et. al. vs. Spouses Daganta and Willie Viloria
GR No. 197908, July 04, 2018
Jardeleza, J.

FACTS:

This is a petition for certiorari under Rule 45 seeking to nullify the Decision and Resolution of the Court
of Appeals (CA), which reversed the Decision of the RTC in a case for damages.

At about 6:30 in the morning of 03 May 1999, Cecilio Rebultan, Sr. and his driver, Jaime Lomotos, were
on their way to report for work in the Department of Environment and Natural Resources (DENR),
Masinloc, Zambales. Lomotos was driving a Kia Ceres when they figured in a vehicular accident with an
Isuzu passenger jeepney driven by Willie Viloria. The Kia Ceres was traveling northbound to Iba,
Zambales, while the jeepney was traveling southbound to Cabangan, Zambales. The powerful impact
resulted in serious physical injuries to Rebultan, Sr. and Lomotos, as well as physical damage to both
vehicles. Rebultan, Sr. later died from his injuries.

The petitioners as heirs of Rebultan, Sr. filed a compliant for damages against Viloria, the driver of the
jeepney, and Spouses Daganta as the owners. Petitioner alleged that based on the Traffic Accident
Report, just a short distance from approaching the intersection, Viloria was reported to have overtaken
a mini-bus. On the other hand, respondents filed a third party complaint against Lomotos alleging that it
was the latter who was negligent, and who should be held responsible for the death of Rebultan, Sr for
the reason that Viloria had the right of way - being the driver of the vehicle on the right, and because he
had already turned towards the left of the intersection. Lomotos denied liability and prayed for the
dismissal of the third-party complaint.

RTC ruled in favor of the petitioners and found the jeepney driver, Viloria, negligent. It also held that
Spouses Daganta are vicariously liable as the employers of Viloria. Respondents appealed the Decision
before the CA but only as to the finding of negligence on the part of Viloria. They no longer appealed the
dismissal of the third-party complaint. The CA reversed the decision of the RTC and ruled that it was
Lomotos, the DENR driver of the deceased, who was negligent. The ruling of the CA stems from Section
42 (a) and (b) of RA 4163 (Land Transportation and Traffic Code) which explains that Viloria had the
right of way, being the driver of the vehicle on the right, and because he had already turned towards the
left of the intersection. It further held that Lomotos, being in violation of a traffic regulation, is presumed
to be negligent under Article 2185 of the Civil Code. There being no negligence on the part of Viloria,
the spouses Daganta's vicarious liability cannot be imposed.

ISSUES:
(1) Whether or not Viloria was negligent in driving the jeepney at the time of the collision;
(2) Whether or not Lomoso, DENR driver of the deceased, should be held liable for the death of
Rebultan, Dr.

HELD:

(1) Yes. All motorists are expected to exercise reasonable caution in operating his vehicle. This
duty is found in Section 48 of R.A. No. 4136 – “No person shall operate a motor vehicle on any
highway recklessly or without reasonable caution considering the width, traffic, grades,
 crossing, curvatures, visibility and other conditions of the highway and the conditions of the
atmosphere and weather, or so as to endanger the property or the safety or rights of any person
or so as to cause excessive or unreasonable damage to the highway.”

Records support the claim that Viloria, while driving the jeepney, was also committing a traffic
violation. Viloria's admission that he did not look to his right and continuously drove, despite
being required by law to give way, confirms that he is negligent in making a turn. Regardless of
whether Lomotos was overspeeding, Viloria ought to have exercised the prudence of a diligent
driver in making a turn at a danger zone. This omission on his part constituted negligence.

(2) Yes, the court found concurring negligence on the part of Lomotos as the driver of Kia Ceres.
However, since the dismissal of the third-party complaint against Lomotos was not appealed by
respondents, and Lomotos is not party to the case, the Supreme Court has no authority to
render judgment against him. In Junio v. Manila Railroad Co., the Supreme Court already
clarified that the contributory negligence of drivers does not bar the passengers or their
heirs from recovering damages from those who were at fault. As long as it is shown that
no control is exercised by the passenger in the concept of a master or principal, the
negligence of the driver cannot be imputed to the passenger and bar the latter from
claiming damages. We note that Lomotos acted as the designated driver of Rebultan, Sr. in
his service vehicle provided by the DENR. Thus, the real employer of Lomotos is the DENR,
and Rebultan, Sr. is merely an intermediate and superior employee or agent.

It is, nevertheless, a well recognized principle of law that the negligence of a driver, who, in turn,
is guilty of contributory negligence, cannot be imputed to a passenger who has no control over
him in the management of the vehicle and with whom he sustains no relation of master and
servant.

In sum, the Supreme Court held that both drivers were negligent when they failed to observe basic traffic
rules designed for the safety of their fellow motorists and passengers. This makes them joint tortfeasors
who are solidarity liable to the heirs of the deceased.

CHUA
IN MONEY MARKET PLACEMENTS, LENDERS AND BORROWERS DEAL WITH EACH OTHER
THROUGH A MIDDLE MAN OR DEALER
Money market is a market dealing in standardized short-term credit instruments (involving large
amounts) where lenders and borrowers do not deal directly with each other but through a middle man
or dealer in the open market. The fundamental function of the money market device in its operation is to
match and bring together in a most impersonal manner both the "fund users" and the "fund suppliers."
The money market is an "impersonal market," free from personal considerations (Abacus Capital and
Investment Corporation v. Dr. Ernesto Tabujara, G.R. No. 197624, July 23, 2018).

x—————x

IN MONEY MARKET PLACEMENTS, LENDERS AND BORROWERS DEAL WITH EACH OTHER
THROUGH A MIDDLE MAN OR DEALER

Abacus Capital and Investment Corporation v. Dr. Ernesto Tabujara

G.R. No. 197624, July 23, 2018
Tijam, J.

FACTS:
This is a petition for review on certiorari assailing the CA decision which held Abacus Capital and
Investment Corporation (petitioner) liable to Dr. Tabujara (respondent) for the amount of his investment
with interest and damages.

Respondent then engaged the services of petitioner, an investment house, as his lending agent for
purposes of investing his money in the principal amount of P3M. In turn, petitioner lent the P3M to IFSC,
with a term of 32 days. However, shortly after respondent placed his investment, IFSC filed with SEC a
petition of suspension of payments. This was granted by the SEC. Thereafter, respondent notified
petitioner and IFSC that he is opting to pre-terminate his money placement. Upon maturity of the loan,
he did not receive any amount.

IFSC was eventually placed under rehabilitation. Pursuant to its rehabilitation plan, respondent received
interest payments. However, due to failure to pay the interest due, respondent filed a complaint for
collection of sum of money. He alleged that his investment was co-mingled with the monies of other
investors to support the credit line facility which petitioner issued in favor of IFSC. The RTC ruled in favor
of petitioner. On appeal, CA reversed the same on the ground that respondent did not only act as a
middle man pursuant to is function as an investment house, but as the "fund supplier" for the credit line
facility it extended to IFSC.

ISSUE:
Is petitioner liable for the payment of the principal amount of the investment to the respondent?

HELD:
Yes, petitioner is liable for the payment of the principal amount of the respondent’s investment, with
interest.

Under Presidential Decree No. 129, an investment house is an entity engaged in underwriting of
securities of other corporations. In turn, "underwriting" is the act or process of guaranteeing the
distribution and sale of securities of any kind issued by another corporation; while "securities" is therein
defined as written evidences of ownership, interest, or participation, in an enterprise, or written evidences
of indebtedness of a person or enterprise.

In this case, it was really petitioner who was the creditor entitled to the proceeds of IFSC's rehabilitation
plan — thus necessitating the assignment by former of said proceeds to the actual source of funds,
respondent included. Further, the transaction involved herein is akin to money market placements.
Money market is a market dealing in standardized short-term credit instruments (involving large
amounts) where lenders and borrowers do not deal directly with each other but through a middle man
or dealer in the open market. The fundamental function of the money market device in its operation is to
match and bring together in a most impersonal manner both the "fund users" and the "fund suppliers."
The money market is an "impersonal market," free from personal considerations. The investor is a lender
who loans his money to a borrower through a middleman or dealer.

Here, respondent as the investor is the lender or the "funder" who loaned his P3M to IFSC through
petitioner. Thus, when the loaned amount was not paid together with the contracted interest, respondent
may recover from petitioner the amount so invested together with damages. Hence, petitioner is ordered
to pay respondent the principal amount of his investment with interest.

ABRIAM
EIZMENDI VS FERNANDEZ

G.R. No. 215280 | 2018-09-05

FACTS: VVCCI is a duly organized non-stock corporation engaged in promoting sports, recreational
and social activities, and the operation and maintenance of a sports and clubhouse, among other
matters. Respondent Teodorico P. Fernandez filed a Complaint for Invalidation of Corporate Acts and
Resolutions with Application for Writ of Preliminary Injunction against the individual petitioners,
Francisco C. Eizmendi Jr., Jose S. Tayag Jr., Joaquin San Agustin, Eduardo Francisco, Edmidio Ramos,
Jr., Albert Blancaflor, Rey Nathaniel Ifurung, Manuel Acosta Jr., who allegedly constituted themselves
as new members of the Board of Directors (BOD) of Valle Verde Country Club, Inc. (VVCCI), despite
lack of quorum during the annual members' meeting on February 23, 2013. The individual petitioners
supposedly acted for and in behalf of VVCCI, and found him guilty of less serious violations of the by-
laws and imposed on him the penalty of suspension of membership for six ( 6) months. Fernandez
asserted that since petitioners were not validly constituted as the new BOD in the place of the hold-over
BOD of VVCCI, they had no legal authority to act as such BOD, to find him guilty and to suspend him.
Fernandez prayed that after hearing on the merits, judgment be rendered: (a) making the injunction
permanent; (b) invalidating the claims of the individual petitioners to the office of director of the VVCCI;
(c) nullifying the annual members' meeting on February 23, 2013. In an Urgent Motion or Request for
Production/Copying of Documents Fernandez cited Rule 27 of the Rules of Court and requested the
VVCCI, to produce them and allow him to copy the following in connection with the hearing for issuance
of a writ of preliminary injunction: 1. The original of the Stock and Transfer Book and all cancelled
Membership Fee Certificates of the VVCCI; 2. The original of the Certificate of lncorporation of VVCCI
issued by the Securities and Exchange Commission (SEC).; 3. The original of the Directors' Certificate
To By-laws; 4. The original of the By-Laws of VVCCI dated June 30, 1975 as filed with the SEC.; 5. The
original of the Certificate of Filing of By-Laws of VVCCI issued by the SEC on October 20, 1976, as
received by VVCCI from the SEC.; 6. The original of the duly-signed "Resolution Increasing the
Corporation's Membership Certificates To Two Thousand (2000)", adopted and approved by the Board
of Directors of VVCCI on June 22, 1979, consisting of two (2) pages including the signature page,
together with any covering minutes, under pain of sanctions under Rule 29 of the Rules of Court.

The RTC denied the Urgent Motion or Request for Production/Copying of Documents. The trial court
reiterated its position that the case is not an election contest since it was filed way beyond the
reglementary period under the Interim Rules of Procedure Governing Intra-Corporate Controversies for
election contests to be brought to court, considering that the only issue that remains to be resolved is
with respect to whether due process was observed in suspending Fenandez. It also found no meritorious
reason to compel VVCCI to produce the original Stock and Transfer Book and all cancelled Membership
Fee Certificates since they do not appear to be material in the resolution of the remaining issue.

ISSUE: 1) Whether Fernandez's complaint may be considered as an election contest within the
purview of the Interim Rules
2)Whether or not Fernandez may question the authority of the petitioners to act as the BOD
of VVCCI and approve the board resolution suspending his club membership
HELD: 1) Yes. Here, the allegation in Fernandez's complaint for invalidation of corporate acts
and resolutions partly assails the authority of the BOD to suspend his membership on the ground
that despite the lack of quorum at the same February 23, 2013 meeting, the individual petitioners
proceeded to have themselves constituted as the new members of the BOD of VVCCI. His
complaint clearly raises an issue on the validity of the election of the individual petitioners.Contrary
to Fernandez's claim that the case before the lower court does not involve a claim or title to an
elective office in VVCCI, and that his objective is not to unseat the individual petitioners during
the term for which they were allegedly elected, the Court finds that a plain reading of the prayers
in his complaint betrays his cause: “b) Invalidating the claims of individual defendants Francisco
C. Eizmendi Jr., Jose S. Tayag, Jr., .Joaquin San Agustin,Eduardo Francisco, Edmidio Ramos, Jr.,
Albert Blancaflor, Rey Nathaniel lfurung and Manuel Acosta, Jr. to the
office of director of VVCCI”
2) NO. To allow Fernandez to indirectly question the validity of the February 23, 2013 election
would be a clear violation of the 15-day reglementary period to file an election contest under the
Interim Rules. As aptly pointed out by the RTC, what cannot be legally done directly cannot be
done indirectly. If the Court were to entertain one of the causes of action in Fernandez's complaint,
which is partly an election contest raised beyond the said reglementary period, then the salutary
purposes of the said period under the Interim Rules would be rendered futile; the floodgates to
election contests would be opened, to the detriment of the regime of efficient and stable corporate
governance. The RTC's action of virtually dismissing the first cause of action in
Fernandez's complaint for being an election contest filed beyond the 15-day reglementary period,
is indeed consistent with the following provisions of the Interim Rules: (a) Section 3, Rule 1,
because such act promotes the objective of securing a just, summary, speedy and inexpensive
determination of every action or proceeding; and (b) Section 4, Rule 6, which authorizes the court
to dismiss outright the complaint if the allegations thereof is not sufficient in form and substance.
The RTC's action is, likewise, consistent with the inherent power of courts to amend and control
its process and orders so as to make them conformable to law and justice, under Section 5, Rule
135 of the Rules of Court.

ARGONZA
GUIDELINES ARE TO BE CONSIDERED IN DETERMINING WHETHER A DISPUTE CONSTITUTES
AN INTRA-CORPORATE DISPUTE
In Matling Industrial and Commercial Corporation v. Coros, the Court summarized the guidelines for
determining whether a dispute constitutes an intra-corporate controversy or not. There, we held that in
order that the SEC (now the RTC) can take cognizance of a case, the controversy must pertain to any
of the following relationships: (a) between the corporation, partnership, or association and the public; (b)
between the corporation, partnership, or association and its stockholders, partners, members, or officers;
(c) between the corporation, partnership, or association and the State as far as its franchise, permit, or
license to operate is concerned; and (d) among the stockholders, partners, or associates themselves.
However, not every conflict between a corporation and its stockholders involves corporate matters.
Concurrent factors, such as the status or relationship of the parties, or the nature of the question that is
the subject of their controversy, must be considered in determining whether the SEC (now the RTC) has
jurisdiction over the controversy. (Tumagan v. Kairuz, G.R. No. 198124, September 12, 2018,
Jardeleza, J.)

SHAREHOLDERS ARE NOT CO-ONWERS OF THE CORPORATION’S PROPERTY

Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation
as a distinct legal person. At most, Mariam's interest as a shareholder is purely inchoate, or in sheer
expectancy of a right, in the management of the corporation and to share in its profits, and in its
properties and assets on dissolution after payment of the corporate debts and obligations. (Tumagan v.
Kairuz, G.R. No. 198124, September 12, 2018, Jardeleza, J.)
x—————x
GUIDELINES ARE TO BE CONSIDERED IN DETERMINING WHETHER A DISPUTE CONSTITUTES
AN INTRA-CORPORATE DISPUTE

SHAREHOLDERS ARE NOT CO-ONWERS OF THE CORPORATION’S PROPERTY

John Cary Tumagan, Alam Halil, and Bot Padilla v. Mariam K. Kairuz
G.R. No. 198124, September 12, 2018
Jardeleza, J.

FACTS:
Respondent Mariam Kairuz filed a complaint for ejectment before the MCTC alleging that she had been
in possession of a property in Tuba, Benguet until May 28, 2007. On that date, petitioners Tumagan,
Halil, and Padilla took possession of the property by means of force, intimidation, strategy, threat and
stealth. They padlocked the gate, posted armed men and excluded Mariam from the property.

In their answer, petitioners averred that Mariam could not bring the action because she was never the
sole owner or possessor of the property. They claimed that Mariam was the spouse of Laurence Kairuz
who co-owned the property with his sisters. Further, Laurence and his sisters entered into a
Memorandum of Agreement with Balibago Waterworks System Inc. (BWSI) and its affiliate PASUDECO
to establish a new corporation, Bali Irisan Resources, Inc (BIRI). Under the MOA, Laurence and his
sisters would sell the property and its improvements to BIRI. BIRI took full possession of the property
and caused new certificates of title to be issued. BIRI is owned by the Kairuz family (30%) and BWSI
and its allied company PASUDECO (70%). It was claimed, among other arguments, that BIRI, as a
corporation and owner of the spring property merely exercised, through petitioner-employees, its right
to prevent unauthorized persons from entering its property. They claim that the MCTC has no jurisdiction
over the action as it was an intra-corporate dispute.

The MCTC dismissed the case for failure to implead BIRI, an indispensable party. This was upheld by
the RTC. The CA reversed the decision ruling that BIRI should have instead been first impleaded. Also
that since the Kairuzes own 30% of BIRI, Mariam properly filed the case of ejectment as a co-owner.
Hence, this petition for review was filed.

ISSUE:
Was the dismissal of the MCTC proper due to:
1. Failure to implead BIRI an indispensable party?
2. The controversy being an intra-corporate dispute?
HELD:
1. Yes, BIRI was an indispensable party and should have been impleaded.

An indispensable party is a party in interest without whom no final determination can be had of an action
and who shall be joined either as plaintiffs or defendants. The presence of indispensable parties is
necessary to vest the court with jurisdiction.

Here, as correctly held by the MCTC and the RTC, it is indisputable that BIRI is an indispensable party,
being the registered owner of the property and at whose behest the petitioner-employees acted. Thus,
without the participation of BIRI, there could be no full determination of the issues in this case considering
that it was sufficiently established that petitioners did not take possession of the property for their own
use but for that of BIRI's.

2. Yes, the controversy was an intra-corporate dispute and hence was outside the jurisdiction of
the MCTC.

In Matling Industrial and Commercial Corporation v. Coros, the Court summarized the guidelines for
determining whether a dispute constitutes an intra-corporate controversy or not. There, we held that in
order that the SEC (now the RTC) can take cognizance of a case, the controversy must pertain to any
of the following relationships: (a) between the corporation, partnership, or association and the public; (b)
between the corporation, partnership, or association and its stockholders, partners, members, or officers;
(c) between the corporation, partnership, or association and the State as far as its franchise, permit, or
license to operate is concerned; and (d) among the stockholders, partners, or associates themselves.
However, not every conflict between a corporation and its stockholders involves corporate matters.
Concurrent factors, such as the status or relationship of the parties, or the nature of the question that is
the subject of their controversy, must be considered in determining whether the SEC (now the RTC) has
jurisdiction over the controversy.

Here, the Court considers two elements in determining the existence of an intra-corporate controversy,
namely: (a) the status or relationship of the parties; and (b) the nature of the question that is the subject
of their controversy.

As discussed earlier, the parties involved in the controversy are respondent Mariam (a shareholder of
BIRI and successor to her late husband's position on the ManCom), petitioner John (then the branch
manager, shareholder, and part of the BIRI ManCom), and petitioners Bot and Alam (licensed geodetic
engineers engaged by BIRI for a contract to survey the property subject of the dispute). The controversy
also involves BIRI itself, the corporation of which Mariam is a shareholder, and which through Board
Resolutions No. 2006-0001,2007-0004 and 2007-0005 authorized John, its branch manager, to do all
acts fit and necessary to enforce its corporate rights against the Kairuz family, including the posting of
guards to secure the property. The controversy is thus one between corporation and one of its
shareholders.

Moreover, the CA erred in characterizing the action as an ejectment case filed by a co-owner who was
illegally deprived of her right to possess the property by the presence of armed men.
Here, it is undisputed that the property has already been transferred to BIRI and registered in its name. It
is likewise undisputed that based on the MOA, the Kairuzes own 30% of the outstanding capital stock
of BIRI. This, however, does not make Mariam a co-owner of the property of BIRI, including the property
subject of this case. Shareholders are in no legal sense the owners of corporate property, which is owned
by the corporation as a distinct legal person. At most, Mariam's interest as a shareholder is purely
inchoate, or in sheer expectancy of a right, in the management of the corporation and to share in its
profits, and in its properties and assets on dissolution after payment of the corporate debts and
obligations.

Thus, we agree with petitioners that while the case purports to be one for forcible entry filed by Mariam
against BIRI's employees and contractors in their individual capacities, the true nature of the controversy
is an intra-corporate dispute between BIRI and its shareholder, Mariam, regarding the management of,
and access to, the corporate property subject of the MOA. We therefore find that the MCTC never
acquired jurisdiction over the ejectment case filed by Mariam.
BINAYAN
TO WARRANT RESCISSION BASED ON CONCEALMENT IT MUST BE SHOWN THAT IT
MISLEADS OR DECEIVES INSURER IN ACCEPTING THE RISK
The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the
insurer into accepting the risk, or accepting it at the rate of premium agreed upon; The insurer, relying
upon the belief that the assured will disclose every material fact within his actual or presumed knowledge,
is misled into a belief that the circumstance withheld does not exist, and he is thereby induced to estimate
the risk upon a false basis that it does not exist (The Insular Assurance Co. Ltd. vs. Heirs of Jose
Alvarez, G.R. No. 207526 & 210156; October 3, 2018).

x-------------------x

TO WARRANT RESCISSION BASED ON CONCEALMENT IT MUST BE SHOWN THAT IT

MISLEADS OR DECEIVES INSURER IN ACCEPTING THE RISK

The Insular Assurance Co. Ltd. vs. Heirs of Jose Alvarez

G.R. No. 207526 & 210156, October 3, 2018
Leonen, J.

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

Alvarez passed away on April 17, 1998. In May 1998, UnionBank filed with Insular Life a death claim
under Alvarez's name pursuant to the Group Mortgage Redemption Insurance. In line with Insular Life's
standard procedures, Union Bank was required to submit documents to support the claim. 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. Union Bank 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.

Insular Life maintained that based on the documents submitted by the 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.

ISSUE: Whether or not Alvarez was guilty of fraudulent misrepresentation or concealment as to warrant
the rescission of the Group Mortgage Redemption Insurance obtained by Union Bank in Alvarez’ life

HELD: No. Alvarez is not guilty of concealment or misrepresentation to warrant rescission of the
insurance contract.

Concealment exists where the assured has knowledge of a fact material to the risk, and honesty, good
faith, and fair dealing requires that he should communicate it to the assured, but he designedly and
intentionally withholds the same. The basis of the rule vitiating the contract in cases of concealment is
that it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium
agreed upon; The insurer, relying upon the belief that the assured will disclose every material fact within
his actual or presumed knowledge, is misled into a belief that the circumstance withheld does not exist,
and he is thereby induced to estimate the risk upon a false basis that it does not exist. Good Faith is no
defense in concealment.

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.
Section 26 defines concealment as "[a] neglect to communicate that which a party knows and ought to
communicate." However, Alvarez did not withhold information on or neglect to state his age. He made
an actual declaration and assertion about it. What this case involves, instead, is an allegedly false
representation. Section 44 of the Insurance Code states, "A representation is to be deemed false when
the facts fail to correspond with its assertions or stipulations." If indeed Alvarez misdeclared his age such
that his assertion fails to correspond with his factual age, he made a false representation, not a
concealment.

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. However, such form alone is not sufficient absent
any other indications that he purposely wrote 1942 as his birth year. It should be pointed out that, apart
from a health statement form, an application for insurance is required first and foremost to be answered
and filled-up. However, the records are deficient of this application which would eventually depict to Us
Jose Alvarez's fraudulent intent to misrepresent his age. For, if he continually written (sic) 1942 in all the
documents he submitted with UBP and Insular Life then there is really a clear precursor of his fraudulent
intent. Otherwise, a mere Health Statement form bearing a wrong birth year should not be relied at. A
single piece of evidence hardly qualifies as clear and convincing. Its contents could just as easily have
been an isolated mistake.

Union Bank of the Philippines and The Insular Assurance Co. Ltd. are ordered to comply with the
insurance undertaking under the Mortgage Redemption Insurance Policy by applying its proceeds as
payment of the outstanding loan obligation of the deceased Jose Alvarez with Union Bank

MONDIGO
7. No Full Text Yet
BANKING

A BANK THAT ALLOWED WITHDRAWALS ON THE BASIS OF A LONE SIGNATURE DESPITE

INSTRUCTIONS THAT WITHDRAWALS BE DONE ONLY UPON ANY TWO OF THE AUTHORIZED
SIGNATORIES, IS LIABLE FOR BREACH OF FIDUCIARY DUTY. It is basic that those who, in the
performance of their obligations, are guilty of negligence, and those who in any manner contravene the
tenor thereof, are liable for damages. When BPI allowed Dela Peña to make unauthorized withdrawals,
it failed to comply with its obligation to secure said accounts by allowing only those withdrawals
authorized by respondent. In so doing, BPI violated the terms of its contract of loan with respondent and
should be held liable in this regard. (Bank Of The Philippine Islands V. Land Investors And
Developers Corporation , G.R. No. 198237, October 08, 2018)

X----------------------------------X

A BANK THAT ALLOWED WITHDRAWALS ON THE BASIS OF A LONE SIGNATURE DESPITE

INSTRUCTIONS THAT WITHDRAWALS BE DONE ONLY UPON ANY TWO OF THE AUTHORIZED
SIGNATORIES, IS LIABLE FOR BREACH OF FIDUCIARY DUTY.

Bank Of The Philippine Islands V. Land Investors And Developers Corporation

G.R. No. 198237, October 08, 2018
TIJAM, J.:

FACTS:
Through this petition for review on certiorari petitioner Bank of the Philippine Islands (BPI) seeks to
annul the Decision of the CA in finding BPI liable to its depositor, respondent Land Investors and
Development Corporation for breach of fiduciary duty.

Respondent Land Investors and Developers Corporation maintained savings and current accounts with
the Pamplona, Las Piñas Branch of Far East Bank & Trust Company (FEBTC). FEBTC later on merged
with BPI. In its transactions with the bank, respondent authorized any two of its Ruth Fariñas (Fariñas),
Orlando Dela Peña (Dela Peña) and Juanito Collas (Collas) as bank signatories. Dela Peña was
respondent's President. Sometime in 2001, Dela Peña was convicted for estafa and was consequently
dismissed from employment. It was also around this time that respondent discovered that Dela Peña,
acting in alleged conspiracy or taking advantage of the gross negligence of BPI, succeeded in unlawfully
withdrawing various amounts from respondent's deposit accounts. Respondent alleged that BPI was
negligent and violated its fiduciary duties when it allowed the withdrawals on the basis of Dela Peña's
lone signature or thru the forged signatures of his cosignatories. Despite demand, BPI failed to heed
respondent's claims which prompted the latter to file the complaint a quo for sum of money and damages
against BPI and Dela Peña.

ISSUE:
Can Dela Pena be held solidarily liable with BPI?

HELD:
Dela Peña cannot be held solidarily liable with BPI considering that their specific liabilities are anchored
on two separate sources of obligations.

To emphasize, BPI's liability proceeds from a breach of contract. Under Article 1980 of the Civil Code,
"fixed, savings, and current deposits of money in banks x x x shall be governed by the provisions
concerning simple loan[s]." By the contract of loan or mutuum, one party delivers money to another upon
the condition that the same amount shall be paid.

To recall, respondent was defrauded by several withdrawals from its deposit accounts being allowed by
BPI solely on the basis of Dela Peña's signature despite specific instructions that withdrawals be done
only upon the signatures of any two of respondent's authorized signatories, and additional withdrawals
being allowed on the basis of the forged signatures of respondent's other authorized signatory. It is basic
that those who, in the performance of their obligations, are guilty of negligence, and those who in any
manner contravene the tenor thereof, are liable for damages. When BPI allowed Dela Peña to make
unauthorized withdrawals, it failed to comply with its obligation to secure said accounts by allowing only
those withdrawals authorized by respondent. In so doing, BPI violated the terms of its contract of loan
with respondent and should be held liable in this regard.

On the other hand, Dela Peña's liability arises from the commission of the crime of estafa. Dela Peña
had in fact been charged and convicted of estafa. Thus, respondent's action to recover actual damages
against Dela Peña was deemed instituted with the criminal action, unless waived, reserved or previously
instituted.36 There is no indication that such reservation had been done by respondent. As such, to hold
Dela Peña solidarily liable for damages in this case may result in double recovery which is
proscribed.37 In any case, it is clear that the civil liability upon which Dela Peña was being held liable by
the CA is totally distinct and separate from the source of BPI's liability. Thus, BPI and Dela Peña's
respective liabilities cannot be deemed joint and solidary.

BUENAVISTA
BANKING
JOINT CREDITORS OF THE BANK AND THE SIGNATURES OF ALL DEPOSITORS ARE
NECESSARY TO ALLOW WITHDRAWAL
In an "and" joint account, as in this case, the depositors are joint creditors of the bank and the signatures
of all depositors are necessary to allow withdrawal. Thus, it is indispensable that all the persons named
as account holders give their consent before any withdrawal could be made. (In The Matter Of The
Intestate Estate Of Pacioles v. Pacioles, G.R. No. 214415, October 15, 2018)
x-----------------------------------------------------------------------x
JOINT CREDITORS OF THE BANK AND THE SIGNATURES OF ALL DEPOSITORS ARE
NECESSARY TO ALLOW WITHDRAWAL
In The Matter Of The Intestate Estate Of Miguelita C. Pacioles and Emmanuel C. Ching v. Emilio
B. Pacioles, Jr.
G.R. No. 214415, October 15, 2018 Tijam, J.
FACTS:
This is a Petition for Review on Certiorari assailing the Decision and the Resolution of the Court of
Appeals (CA) affirming the Orders of the Regional Trial Court (RTC) which ordered the release of funds
from a joint foreign currency deposit account.

Upon the death of Miguelita Ching Pacioles (Miguelita), she left several real properties, stock
investments, bank deposits and interests. She was survived by her husband, respondent Emilio B.
Pacioles, Jr. (Emilio), their two minor children, Miguelita's mother, Miguela Chuatoco-Ching (Miguela),
now deceased and Miguelita's brother, herein petitioner Emmanuel C. Ching (Emmanuel). Emilio then
filed a petition for the settlement of Miguelita's estate with prayer for his appointment as its regular
administrator. Emilio and Emmanuel were appointed as co--administrators. However, the appointment
of Emmanuel was nullified in a CA Decision. Among the properties left by Miguelita and included in the
inventory of her estate were her two dollar accounts with the Bank of the Philippine Islands (BPI)-San
Francisco Del Monte Branch, the subject matter of the instant case. However, said dollar accounts were
closed and consolidated into a single account under the names of Emilio and Miguela Chuatoco or
Emmanuel upon their written request addressed to the bank. Emilio filed a motion to allow him to
withdraw money from the subject BPI account to defray the cost of property taxes due on the real
properties of Miguelita's estate.

ISSUE:
Is the order of release of funds from a joint foreign currency deposit account without securing the consent
of a co-depositor proper?

HELD:
No. It is apparent that in ordering the branch manager or any representative of BPI to release the
money contained in a foreign currency deposit account, the intestate court committed a violation of the
law, which expressly provides that all foreign currency deposits as defined by applicable laws are not
subject to any form of attachment, garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body. Moreover, the subject BPI account is in the
nature of a joint account under which the depositors are joint owners or co-owners of the said account,
and their share in the deposits shall be presumed equal, unless the contrary is proved." In an "and"
joint account, as in this case, the depositors are joint creditors of the bank and the signatures of all
depositors are necessary to allow withdrawal. Thus, it is indispensable that all the persons named as
account holders give their consent before any withdrawal could be made.

In this case, there were two administrators of Miguelita's estate, i.e., Emilio and Emmanuel. However,
Emmanuel's appointment was revoked by the CA. Necessarily, as the revocation of Emmanuel's
appointment as administrator was established, his right over the funds contained in the joint account
no longer exists. Considering the nature of a joint account, the Court cannot but adhere to banking
laws which requires the consent of all the depositors before any withdrawal could be made. However,
Emmanuel’s name should be removed as an account holder and co-depositor of Emilio in a proper
forum for Emilio to be able to completely perform his functions and duties as an administrator.

LAGUMBAY
IN AN ALL-RISK POLICY INSURANCE, THE BURDEN IS ON THE INSURER TO ESTABLISH THAT
THE LOSS FALLS WITHIN THE EXCLUDED RISKS OR PERILS

An all risk insurance policy "insured against all causes of conceivable loss or damage except when
otherwise excluded or when the loss or damage was due to fraud or intentional misconduct committed
by the insured. The general rule is that the insured has the burden of proof to show that the loss or
damage was caused by a covered peril. However, in case of an "all-risk policy insurance," the insurer
has the duty to establish that the loss or damage falls within the excluded risk or perils. (AYALA LAND
INC. VS. STANDARD INSURANCE, G.R. No. 241349. October 17, 2018)

AYALA LAND INC. VS. STANDARD INSURANCE

G.R. No. 241349. October 17, 2018.

FACTS: Ayala Land entered into an "all risks" policy with Standard Insurance, PNB General Insurers
Co., Inc., Pioneer Insurance & Surety Corporation and UCPB General Insurance Corporation,
(collectively referred to as Insurers). Under the policy, it is specified that Standard Insurance and the
other co-insurers, undertook to indemnify Ayala Land for any: SUDDEN AND ACCIDENTAL PHYSICAL
DESTRUCTION OF OR DAMAGE TO THE PROPERTY, REDUCTION IN GROSS EARNINGS AND
LOSS OF RENT MORE FULLY DESCRIBED IN THE SCHEDULE HERETO DIRECTLY AND WHOLLY
ATTRIBUTABLE TO ANY CAUSE, EXCEPT AS HEREINAFTER EXCLUDED, OCCURRING DURING
THE CURRENCY OF THE POLICY.

Standard Insurance undertake to indemnify Ayala Land in any sudden and accidental physical
destruction or damage of its property except if the damage or destruction was caused by an excluded
risk. Under the insurance, the following circumstances are the excluded perils, to wit: EXCLUDED
PERILS

1) Pollution, whatever the cause;

2) a. War, invasion, act of foreign enemy, hostilities or warlike operations (whether war be declared or
not), civil war; b. Mutiny, military or popular rising, insurrection, rebellion, revolution, military or usurped
power, martial law or state of siege or any of the event or causes which determine the proclamation or
maintenance of martial law or state of siege; c. Acts of terrorism committed by a person or persons
acting on behalf of or on connection with any organization.

Ayala Land's own investigators found that the explosion was caused by an explosive device, which
constitutes as an act of terrorism. Standard however denied the claim based on the findings by the PNP
and the multi-agency task force that the cause of the explosion was the build up of methane gas and
diesel vapor at the basement and not due to an explosive device.

ISSUE: Whether AyalaLand’s claim must be granted by Standard?

HELD: NO. An all risk insurance policy "insured against all causes of conceivable loss or damage
except when otherwise excluded or when the loss or damage was due to fraud or intentional misconduct
committed by the insured.

The general rule is that the insured has the burden of proof to show that the loss or damage
was caused by a covered peril. However, in case of an "all-risk policy insurance," the insurer has the
duty to establish that the loss or damage falls within the excluded risk or perils. Standard Insurance has
discharged its burden by proving that the destruction of the G2 was caused by an excluded peril.

Nevertheless, even if we are to rule that the explosion was caused by the build up of methane
gas and diesel vapor at the basement, the same does not help Ayala Land's cause. As stated in the
COMMAR Policy, pollution of whatever cause is also an excluded peril.

OGAD
A DERIVATIVE SUIT CANNOT PROSPER WITHOUT FIRST COMPLYING WITH THE LEGAL
REQUISITES FOR ITS INSTITUTION.

It should be stressed that the legal standing of minority stockholders to bring derivative suits is not a
statutory right, there being no provision in the Corporation Code or related statutes authorizing the
same, but is instead a product of jurisprudence based on equity. (PMI Colleges, Inc. v. Santos, G.R.
No. 237628, 05 November 2018)

x—————x

A DERIVATIVE SUIT CANNOT PROSPER WITHOUT FIRST COMPLYING WITH THE LEGAL
REQUISITES FOR ITS INSTITUTION.

PMI Colleges, Inc. v. Santos

G.R. No. 237628, 05 November 2018

[Notice]

FACTS:

PMI Colleges, Incorporated, represented by its Stockholder and Director, Architect Jaime G. Cloma,
instituted a COMPLAINT FOR MISMANAGEMENT RESULTING TO INTRA-CORPORATE
CONTROVERSIES against respondents, who are Officers and Directors of the PMI Colleges,
Incorporated. The RTC dismissed the suit for failure of Architect Cloma to allege and prove that he
exhausted all available remedies before resorting thereto, and to show that his cause of action actually
devolves upon the corporation, not to him personally. Upon Petition for Certiorari, the CA pointed out
that the writ of certiorari under Rule 65 of the Rules of Court may be issued only for the correction of
errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, which was
not shown in this case. Both the RTC and the CA consistently held that all the legal requisites of a
derivative suit had not been satisfied in this case. Hence, the instant Petition.

ISSUE:

Were petitioners denied of their right to institute a derivative suit?

HELD:

NO. The Court resolves to DENY the instant petition and AFFIRM the Decision and the Resolution of
the CA.

It should be stressed that the legal standing of minority stockholders to bring derivative suits is not a
statutory right, there being no provision in the Corporation Code or related statutes authorizing the
same, but is instead a product of jurisprudence based on equity. However, a derivative suit cannot
prosper without first complying with the legal requisites for its institution. Since the RTC and the CA
consistently held that all the legal requisites had not been satisfied in this case, such finding cannot be
overturned absent any showing that the latter overlooked facts or circumstances of weight and
substance that would affect the result of the case.

ENRIQUEZ
THE CONDITION THAT TRIGGERS REHABILITATION PROCEEDINGS IS NOT THE MATURATION
OF A CORPORATION’S DEBTS BUT THE INABILITY OF THE DEBTOR TO PAY THESE
This Court need not distinguish whether the claim has already matured or not. What is essential in case
of rehabilitation is the inability of the debtor corporation to pay its dues as they fall due. A better and
more sound interpretation adheres to the very purpose of corporate rehabilitation, which is to allow the
debtor-corporation to be restored "to a position of successful operation and solvency, if it is shown that
its continuance of operation is economically feasible and its creditors can recover by way of the present
value of payments projected in the plan." (Metropolitan Bank & Trust Co. v. Fortuna Paper Mill &
Packaging Corp., G.R. No. 190800, November 7, 2018)

x—————x

THE CONDITION THAT TRIGGERS REHABILITATION PROCEEDINGS IS NOT THE MATURATION

OF A CORPORATION’S DEBTS BUT THE INABILITY OF THE DEBTOR TO PAY THESE

Metropolitan Bank & Trust Co. v. Fortuna Paper Mill & Packaging Corp.
G.R. No. 190800, November 7, 2018
A. B. REYES, JR., J.

FACTS:
Challenged before this Court via this Petition for Review under Rule 45 of the Rules of Court is the
Decision dated July 7, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 102148, which dismissed
the petition for review filed by petitioner Metropolitan Bank and Trust Company (MBTC). The Regional
Trial Court (RTC) of Malabon City, Branch 74, in SEC Case No. S7-002-MN granting the Petition for
Corporate Rehabilitation of respondent Fortuna Paper Mill and Packaging Corporation (Fortuna)
considering the latter complied with the qualifications and minimum requirements provided for under
Rule 4, Sections 1 and 5 of the Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules).

MBTC argues that a corporation may petition that it be placed under rehabilitation only if it is in the
financial condition of a debtor who foresees the majority of its debts and its failure to meet them. Thus,
this element of foresight is allegedly wanting where a debtor has already failed to meet its debts that
have fallen due, such as in the case of Fortuna. The unequivocal language of the provision, according
to the interpretation of MBTC, shows the manifest intent on the part of the drafters to make a distinction
between debtors already in default and those who are not, to the end that only the latter may petition to
be placed under rehabilitation, and which means that no exception or condition should be introduced
save that given expressly in the law.

ISSUE:
Is Fortuna qualified to file a petition for rehabilitation despite having already failed to meet its debts that
have fallen due

HELD:
YES. The Interim Rules does not make any distinction between a corporation which is already in debt
and a corporation which foresees the possibility of debt, or which would eventually yet surely fall into the
same, but may at present be free from any financial liability. Thus, since the statute is clear and free
from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This is
the plain meaning rule or verba legis, as expressed in the maxim index animi sermo or speech is the
index of intention.

This Court need not distinguish whether the claim has already matured or not. What is essential in case
of rehabilitation is the inability of the debtor corporation to pay its dues as they fall due. A better and
more sound interpretation adheres to the very purpose of corporate rehabilitation, which is to allow the
debtor-corporation to be restored "to a position of successful operation and solvency, if it is shown that
its continuance of operation is economically feasible and its creditors can recover by way of the present
value of payments projected in the plan."

STA. MARIA
IN CLOSE CORPORATIONS, THE RESOLUTION OF ITS BOARD OF DIRECTORS TO GIVE
VALIDITY TO AN ACT OF A DIRECTOR AS PROVIDED UNDER SECTION 101 OF THE
CORPORATION CODE IS UNNECESSARY
With A-5 Farms Corporation being a close corporation, the resolution of its board of directors to give
validity to an act of a director as provided under Section 101 of the Corporation Code was unnecessary.
Thus, when all the stockholders or directors of the close corporation have actual/express or implied
knowledge of the action of the board or any of the directors and none of them makes prompt objection
thereto in writing, such action remains valid. (Mendoza v. Rico, G.R. No. 183022/183138, March 7,
2019)

x—————x

IN CLOSE CORPORATIONS, THE RESOLUTION OF ITS BOARD OF DIRECTORS TO GIVE

VALIDITY TO AN ACT OF A DIRECTOR AS PROVIDED UNDER SECTION 101 OF THE
CORPORATION CODE IS UNNECESSARY

Mendoza v. Rico,
G.R. No. 183022/183138, March 7, 2019
Bersamin, J.

FACTS:
This is an appeal assailing the decision of the CA in reversing the decision of the RTC. The CA held that
there was no valid redemption because petitioner Zenaida Mendoza (Mendoza) had not presented a
board resolution authorizing her to redeem the property despite her being a stockholder, director and
officer of the co-petitioner corporation. Also, the CA noted the Office of the City Treasurer's claim that it
was actually Rolando Asis (Asis) who had redeemed the property, although only a photocopy of the
minutes of the supposed special stockholders' meeting of the corporation had been presented to show
that Asis was authorized to do so.

On September 27, 2001, the Office of the City Treasurer of Iloilo city, sold at public auction for tax
delinquency the lot owned by A-5 Farms Corporation. Petitioner-appellant was the highest bidder in said
auction sale. Consequently, the Office of the City Treasurer issued a Certificate of Sale of Delinquent
Real Property to him.
On December 4, 2001, petitioner-appellant received a copy of the Notice of Redemption from the Office
of the City Treasurer, informing him that the subject land was already redeemed by a certain Zenaida
Mendoza, in behalf of A-5 Farms Corporation. Thereafter, petitioner-appellant wrote several letters to
Office of the City Treasurer questioning the authority of said Zenaida Mendoza de Asis and arguing that
in the absence of any board resolution authorizing Zenaida Mendoza to redeem the subject property,
the redemption is not valid. More than a year after the execution sale, petitioner-appellant, requested
from the City treasurer to execute and deliver to him the Certificate of Final Sale. In response to such
request, the Office of the City Treasurer informed petitioner-appellant that their office is now precluded
from issuing a Final Deed to Purchaser because the subject property was validly redeemed by A-5
Farms Corporation through its President, Zenaida Mendoza.

ISSUE:
Does the absence of a board resolution from A-5 Farms Corporation authorizing its representative to
redeem the subject property rendered the redemption invalid?

HELD:
No. The Court finds that the redemption of the subject property was validly made by the representative
of petitioner A-5 Farms Corporation. The petitioners insist that A-5 Farms Corporation, the original owner
of the property, was a close family corporation because its incorporators, stockholders and officers were
brothers and sisters, namely: Mendoza (President), Asis (Vice President), Dominador Asis, Jr. (Vice
President), Carmelita Asis Sembrano (Secretary) and Roberto Asis (Treasurer). They had inherited the
property from their parents and had transferred the same in the name of A-5 Farms Corporation.
Although the Articles of Incorporation of A-5 Farms Corporation did not reflect the requisite provisions of
Section 96 of the Corporation Code, its corporate structure, management, and operation sufficiently
indicated it as coming under the Corporation Code's definition of a close corporation. With A-5 Farms
Corporation being a close corporation, therefore, the resolution of its board of directors to give validity
to an act of a director as provided under Section 101 of the Corporation Code was unnecessary. Thus,
when all the stockholders or directors of the close corporation have actual/express or implied knowledge
of the action of the board or any of the directors and none of them makes prompt objection thereto in
writing, such action remains valid. Simply put, even without a board resolution approved during a board
meeting, any action by a director of a close corporation shall be deemed valid provided all the
stockholders or directors of the close corporation have knowledge thereof and make no prompt written
objection thereto. The lack of a written objection from any director of a close corporation actually amounts
to a form of ratification.
Thus, despite the lack of a board resolution, the redemption made by Asis was valid and binding on the
corporation. Moreover, there is no evidence showing that a written objection had been made by any of
the directors against the redemption. Therefore, Asis was an authorized representative of the owner of
the delinquent property.

SANCHEZ
THE TECHNICAL MEANING OF THE WORD “ISSUE” SHOULD NOT BE APPLIED WHEN THE
ISSUE NEITHER CONCERNS THE NEGOTIABILITY NOR COMMERCIABILITY OF INSTRUMENT
To the Court, this is more in keeping with the intent of the law for basic statutory construction provides
that where a general word follows an enumeration of a particular specific word of the same class, the
general word is to be construed to include things of the same class as those specifically mentioned.
Thus, for as long as the device is issued, used, or availed of within the prohibited period to undertake
the future delivery of money chargeable against public funds, an election offense is committed.

People of the Philippines vs Randolph S. Ting and Salvacion I. Garcia

G.R. No. 221505, December 5, 2019
Peralta, J.

FACTS:
City Mayor Ting and City Treasurer Garcia were charged with violation of the Omnibus Election Code
for issuing a treasury warrant during the forty five (45)-day election ban as payment for two parcels of
land to be used as public cemetery for the city.

The RTC ruled that while it is uncontested that the treasury warrant or the Landbank check in issue
bears the date "April 30, 2004," which is well within the prohibited period, the date of the instrument is
not necessarily the date of issue. The lower court also pointed out that the Negotiable Instruments Law
(NIL) provides that an instrument is issued by "the first delivery of the instrument, complete in form, to a
person who takes it as a holder." However, the prosecution failed to prove that the subject check was
delivered to the vendors of the lots within the prohibited period.

The CA affirmed the RTC’s decision; citing the NIL, it held that every contract on a negotiable instrument
is incomplete and revocable until delivery of the instrument to the payee for the purpose of giving effect
thereto. Without initial delivery of the instrument from the drawer of the check to the payee, there can
be no valid and binding contract and no liability on the instrument. Also, without delivery, the instrument
cannot be deemed to have been issued. Thus, the date on the check, April 30, 2004, pertains to nothing
more than the date of the making or drawing of the instrument.

ISSUE:
WON the technical meaning of the word “issue” under NIL should be used in this case

HELD:
No.

Section 191 of the Negotiable Instruments Law defines "issue" as the first delivery of an instrument,
complete in form, to a person who takes it as a holder. In fact, the Court has held in the past that delivery
is the final act essential to the negotiability of an instrument.

As the OSG points out, the issue in this case neither concerns the negotiability or commerciability of the
treasury warrant nor the parties' rights thereon. Note that the subject provision of the Omnibus Election
Code does not merely penalize a person who "issues" treasury warrants or devices, but a person who
"issues, uses or avails" of treasury warrants or devices. As such, the term "issues" under the subject
provision should not be construed in its restricted sense within the meaning of Negotiable Instruments
Law, but rather in its general meaning to give, to send, or such other words importing delivery to the
proper person. To the Court, this is more in keeping with the intent of the law for basic statutory
construction provides that where a general word follows an enumeration of a particular specific word of
the same class, the general word is to be construed to include things of the same class as those
specifically mentioned.

Thus, for as long as the device is issued, used, or availed of within the prohibited period to undertake
the future delivery of money chargeable against public funds, an election offense is committed.

CASTRO
TICKLER: NATURE OF REHABILITATION RECEIVER’S POWERS, FUNCTIONS,
RESPONSIBILITIES
Rehabilitation receivers are officers of the court, tasked to study the best way to rehabilitate the company
and to implement the rehabilitation plan after its approval. Their qualifications include "expertise and
acumen to manage and operate a business similar in size and complexity to that of the debtor" and
"knowledge in management, finance and rehabilitation of distressed companies." Their recommendation
bears much weight as it is one of the factors which must be considered by the court if it were to approve
any modification of an approved rehabilitation plan.

Republic of the Philippines, represented by the Securities and Exchange Commission, v. PET
Plans, Inc.
G.R. No. 220782
(RESOLUTION) 5 December 2018 | (NOTICE) 26 February 2019

FACTS:
This is a Petition for Review on Certiorari assailing the Decision dated October 31, 2014 of the Court of
Appeals (CA) in CA-G.R. SP No. 123703, which upheld the Resolutions dated February 22, 2011 and
December 9, 2011 of the Regional Trial Court (RTC) of Makati City, Branch 149 in Spec. Proc. Case
No. M-6289, and the CA's Resolution dated June 29, 2015, which denied petitioner's motion for
reconsideration. The RTC's February 22, 2011 Resolution allowed respondent to make a singular
contribution of over P5 Million in assets in lieu of its undertaking, under the approved rehabilitation plan,
to infuse fifteen percent (15%) of its annual net income after tax (NIAT) for ten (10) years. The RTC's
December 9, 2011 Resolution denied petitioner's motion for reconsideration.

On June 22, 2006, respondent PET Plans, Inc., a pre-need corporation registered with the Securities
and Exchange Commission (SEC), filed a Petition for Corporate Rehabilitation with Prayer for
Suspension of Payments before the RTC, submitting therewith its proposed rehabilitation plan. The RTC
subsequently enjoined the enforcement of all claims against respondent and appointed Atty. Danilo L.
Concepcion as its rehabilitation receiver. In a Resolution dated April 30, 2007, the RTC approved the
rehabilitation receiver's Modified Rehabilitation Plan (MRP) dated March 12, 2007.

As of November 2007, the Enhanced Value Fund (EVF) was established and managed by the Bank of
the Philippine Islands (BPI) Management Group, and the ownership thereof transferred to the
planholders. On October 4, 2010, respondent filed an Omnibus Motion to revive and amend the MRP
and to exit from rehabilitation. The amendment sought would allow respondent to make an outright asset
contribution to the EVF consisting of cash in the amount of P2 Million and real properties with a
cumulative market value of P3,496,500, in place of the annual contribution to the EVF of the projected
15% of its NIAT for a period of ten (10) years from the approval of the MRP.

The rehabilitation receiver confirmed respondent's inability to generate income from its pre-need
business due to lack of license from the SEC and the deteriorating market conditions since 2007. He
recommended the approval of the proposed amendment, finding it more favorable to the planholders
considering that the proposed amount was double the company's projected income contribution and its
effect on the EVP would be immediate. Petitioner, however, opposed it, arguing that it was legally
impermissible under the Rules on Corporate Rehabilitation since it entailed an alteration of a desired
target under the MRP. Petitioner claimed that the modification allowed by said Rules is limited to the
means by which targets may be achieved.

In its Resolution dated February 22, 2011, the RTC granted respondent's Omnibus Motion insofar as it
sought to revive and amend the MRP. The RTC held that the modification of the MRP was allowed by
the Rules on Corporate Rehabilitation as it was necessary to achieve the desired targets set forth in the
rehabilitation plan. It noted that the substitute undertaking appeared more immediate and realizable, and
would significantly augment the EVF, which is the underlying target or goal of respondent's
rehabilitation."

Petitioner moved for reconsideration, insisting that the proposed modification of the MRP was
impermissible. Assuming it was allowed, petitioner argued that the proposed infusion of cash and real
properties should be made on top of the annual 15% NIAT contribution under the MRP. Petitioner further
asserted that respondent must disclose the complete list of planholders, including the computation of
their shares in the EVP and in the intended infusion. In its December 9, 2011 Resolution, the RTC denied
petitioner's motion for reconsideration. Considering that respondent already complied with its substitute
undertaking to contribute a total of P5,496,500 worth of assets, the RTC also ordered respondent's
release and exit from the rehabilitation proceeding.

Petitioner challenged the RTC's Resolutions before the CA in a special civil action for certiorari docketed
as CA-G.R. SP No. 123703. On October 31, 2014, the CA rendered the assailed Decision. The CA
denied petitioner's motion for reconsideration in its June 29, 2015 Resolution. Hence, this petition.

ISSUE: Whether or not the amended MRP should be revived.

RULING: YES. The petition lacks merit.

Petitioner maintains that the amendment of the MRP, as approved by the RTC, was not allowed under
the Rules on Corporate Rehabilitation because it modified a target specified in the rehabilitation plan
and not merely the means of achieving such target. The Court is not convinced. Section 22, Rule 3 of
A.M. No. 00-8-10-SC or the Rules of Procedure on Corporate Rehabilitation reads:

Sec. 22. Alteration or Modification of Rehabilitation Plan. -An approved rehabilitation

plan may, upon motion, be altered or modified, if, in the judgment of the court, such
alteration or modification is necessary to achieve the desired targets or goals set forth
therein.

It is clear from the MRP that its goals or targets are: first, the conversion of the three (3) existing types
of pre-need plans into a single plan to be known as the EVF, and second, the enhancement or "financial
growth"22 of the EVF. As expressly described in the MRP, the annual contribution of 15% of petitioner's
NIAT is merely one of two (2) enhancers of the EVF. Evidently, therefore, the NIAT contribution is but a
means to achieve the goal of enhancing or augmenting the EVF.

Furthermore, the rehabilitation receiver considered the substitute undertaking to be more favorable to
respondent's rehabilitation. As the CA noted, rehabilitation receivers are officers of the court, tasked to
study the best way to rehabilitate the company and to implement the rehabilitation plan after its approval.
Their qualifications include "expertise and acumen to manage and operate a business similar in size
and complexity to that of the debtor" and "knowledge in management, finance and rehabilitation of
distressed companies." Their recommendation bears much weight as it is one of the factors which must
be considered by the court if it were to approve any modification of an approved rehabilitation plan.

In this case, the findings and assessment of the rehabilitation receiver were sustained by both the R TC
and the CA. It is settled that factual findings of courts a quo are entitled to great weight and respect and
even accorded finality. This especially obtains in corporate rehabilitation proceedings to which special
commercial courts have been designated by reason of their expertise and specialized knowledge of the
subject matter.

In fine, the questioned amendment of the MRP satisfies the standard of Section 22, Rule 3 of the Rules
of Procedure on Corporate Rehabilitation as it has been established to be "necessary to achieve the
desired targets or goals set forth therein." Furthermore, as the CA observed, "(t)he fact that the substitute
contribution was favorable to the planholders was bolstered by the record showing that the latter
interposed no objection to the proposal by PET Plans and the approval of the proposal by the trial court."

RAGSAC
WHILE THERE IS CONFUSION OF GOODS WHEN THE PRODUCTS ARE COMPETING,
CONFUSION OF BUSINESS EXISTS WHEN THE PRODUCTS ARE NON-COMPETING BUT
RELATED ENOUGH TO PRODUCE CONFUSION OF AFFILIATION.
The essential elements of an action for unfair competition are: (1) confusing similarity in the general
appearance of the goods, and (2) intent to deceive the public and defraud a competitor. Relative to the
issue on confusion of marks and trade names, jurisprudence has noted two types of confusion, viz.: (1)
confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to
purchase one product in the belief that he was purchasing the other; and (2) confusion of business
(source or origin confusion), where, although the goods of the parties are different, the product, the mark
of which registration is applied for by one party, is such as might reasonably be assumed to originate
with the registrant of an earlier product; and the public would then be deceived either into that belief or
into the belief that there is some connection between the two parties, though inexistent. Thus, while
there is confusion of goods when the products are competing, confusion of business exists when the
products are non-competing but related enough to produce confusion of affiliation. (Asia Pacific
resources international holdings, LTD vs. Paperone, Inc, G.R. Nos. 213365-66, December 10, 2018)

X———X

WHILE THERE IS CONFUSION OF GOODS WHEN THE PRODUCTS ARE COMPETING,

CONFUSION OF BUSINESS EXISTS WHEN THE PRODUCTS ARE NON-COMPETING BUT
RELATED ENOUGH TO PRODUCE CONFUSION OF AFFILIATION.

Asia Pacific resources international holdings, LTD vs. Paperone, Inc

G.R. Nos. 213365-66, December 10, 2018
GESMUNDO, J.

FACTS:
Petitioner is engaged in the production, marketing, and sale of pulp and premium wood free paper. It
alleged that it is the owner of a well-known trademark, PAPER ONE, with Certificate of Registration No.
4-1999-01957 issued on September 5, 2003. Petitioner claimed that the use of PAPERONE in
respondent's corporate name without its prior consent and authority was done in bad faith and designed
to unfairly ride on its good name and to take advantage of its goodwill. It was also alleged that respondent
had presumptive, if not actual knowledge, of petitioner's rights to the trademark PAPER ONE, even prior
to respondent's application for registration of its corporate name before SEC. Respondent, on its part,
averred that it had no obligation to secure prior consent or authority from petitioner to adopt and use its
corporate name. DTI and SEC had allowed it to use Paperone, Inc., thereby negating any violation on
petitioner's alleged prior rights. Respondent was registered with the SEC, having been organized and
existing since March 30, 2001. Its business name was likewise registered with the DTI. Respondent also
denied any awareness of the existence of petitioner and/or the registration of PAPER ONE, as the latter
is a foreign corporation not doing business in the Philippines.

In its decision, the Bureau of Legal Affairs (BLA) Director, Intellectual Property Office, found respondent
liable £or unfair competition. On appeal to the IPO Director General, the BLA decision was affirmed.
However, the CA reversed and set aside the IPO Director General's decision.

ISSUE/S:
1. Whether respondent is liable for unfair competition?
2. Whether petitioner is entitled to actual damage?

HELD:
1. YES. The essential elements of an action for unfair competition are: (1) confusing similarity in the
general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. Unfair
competition is always a question of fact. At this point, it bears to stress that findings of fact of the highly
technical agency - the IPO - which has the expertise in this field, should have been given great weight
by CA. As to the first element, the confusing similarity may or may not result from similarity in the marks,
but may result from other external factors in the packaging or presentation of the goods. Likelihood of
confusion of goods or business is a relative concept, to be determined only according to peculiar
circumstances of each case. Relative to the issue on confusion of marks and trade names, jurisprudence
has noted two types of confusion: (1) confusion of goods (product confusion), where the ordinarily
prudent purchaser would be induced to purchase one product in the belief that he was purchasing the
other; and (2) confusion of business (source or origin confusion), where, although the goods of the
parties are different, the product, the mark of which registration is applied for by one party, is such as
might reasonably be assumed to originate with the registrant of an earlier product; and the public would
then be deceived either into that belief or into the belief that there is some connection between the two
parties, though inexistent This case falls under the second type of confusion. Although we see a
noticeable difference on how the trade name of respondent is being used in its products as compared
to the trademark of petitioner, there could likely be confusion as to the origin of the products. The element
of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods as
offered for sale to the public.Contrary to the ruling of the CA, actual fraudulent intent need not be shown.

2. NO. With regard to the issue on damages, we likewise agree with the IPO that the actual damages
prayed for cannot be granted because petitioner has not presented sufficient evidence to prove the
amount claimed and the basis to measure actual damages.

DADAYAN
SHIPOWNER'S LIABILITY BASED ON THE CONTRACT OF CARRIAGE IS SEPARATE AND
DISTINCT FROM THE CRIMINAL LIABILITY OF THOSE WHO MAY BE FOUND NEGLIGENT
In criminal cases for reckless imprudence, the negligence or fault should be established beyond
reasonable doubt because it is the basis of the action, whereas in breach of contract, the action can be
prosecuted merely by proving the existence of the contract and the fact that the common carrier failed
to transport his passenger safely to his destination. The first punishes the negligent act, with civil liability
being a mere consequence of a finding of guilt, whereas the second seeks indemnification for damages.
Moreover, the first is governed by the provisions of the RPC, and not by those of the Civil Code. Thus,
it is beyond dispute that a civil action based on the contractual liability of a common carrier is distinct
from an action based on criminal negligence.
(People vs. Go, G.R. Nos. 210816 & 210854, December 10, 2018)

X ------------------------------------------- x

SHIPOWNER'S LIABILITY BASED ON THE CONTRACT OF CARRIAGE IS SEPARATE AND

DISTINCT FROM THE CRIMINAL LIABILITY OF THOSE WHO MAY BE FOUND NEGLIGENT

17. PEOPLE VS. GO

G.R. Nos. 210816 & 210854, December 10, 2018
Reyes, J. JR., J.

FACTS:

M/V Princess of the Stars (Stars), a passenger cargo owned and operated by Sulpicio Lines,
Inc. (SLI), was expected to depart at 8:00 p.m. from the Port of Manila for Cebu City. At 11:00 a.m.,
PAGASA issued Severe Weather Bulletin (SWB) No. 7, raising Storm Warning Signal (SWS) No. 1.

Prior to Stars' departure, Philippine Coast Guard (PSG) boarded the vessel to inspect its
documents and conduct verification. Finding the vessel's documents in order and noting no deficiency
in its safety equipment, PSG concluded his inspection and informed Captain Marimon that SWS No. 3
was hoisted over Masbate, which was along the vessel's regular route. In response, Captain Marimon
showed the PSG a new voyage plan and the PSG immediately relayed the alternate route via text
message to the PCG Station Commander who approved the alternate plan with the order that should
SWS No. 3 affect the alternate route, the vessel should either take shelter or return to the port of Manila
for the safety of the passengers and the crew.

After obtaining a clearance from the PCG, Stars departed for its regular Friday voyage to Cebu
along its regular route. At 5:30AM, respondent Go arrived at SLI's Manila Office and checked on the
radio room. Manila radio operator Gorillo informed respondent that Captain Marimon assessed the sea
condition as "slight." At 7:05 a.m., Captain Marimon sent SLI Manila a telegram stating that he was
steering Stars away from its regular course, moving towards the south of Tablas to take shelter and
evade the center of Typhoon Frank. At 8:30 a.m., the vessel was within the vicinity of Aklan Point where
it was caught in the center of Typhoon Frank. Subsequently, Captain Marimon informed authorities that
he could no longer steer it and would instead adapt to the wind to keep the vessel stable and upright.
After a while, Captain Marimon declared that he had given the order to abandon ship. Continuously
pounded by heavy waves and buffeted by strong winds, Stars eventually capsized and sank in the
Sibuyan Sea.

The Board of Marine Inquiry stated that respondent, as First Vice--President for Administration
and team leader of the Crisis Management Committee, failed to exercise extraordinary diligence to
apprise the Master of M/V Princess of the Stars of the potential danger of typhoon Frank and its failure
to discourage the Master from sailing on its intended voyage inspite of the severe weather condition.
They alleged that the rough seas encountered by Stars was reasonably foreseeable by the owners and
officers of SLI had they performed their bounden duty to keep track of the weather conditions. They
averred that SLI's officers allowed Stars to sail and proceed on its usual sailing schedule despite the
presence of the typhoon.
 Subsequently, the panel of four prosecutors (DOJ Panel) created by the DOJ to conduct a
preliminary investigation found probable cause to indict Captain Marimon and respondent for reckless
imprudence resulting in multiple homicide, physical injuries, and damage to property.

Respondent counters that in a reckless imprudence case involving a common carrier, it is the
captain who should be subjected to criminal culpability as he is in the best position to determine the best
measures to be taken for the protection of the passengers, crew, vessel and its cargo, a land-based
person far removed from the situation, is unaware of the circumstances confronting the voyage; that the
liability of the common carrier or shipowner is merely civil in nature even if the accident results in the
death or injury of passengers, and even when the negligence of the shipowner concurs with the
negligence of the captain, among others.

ISSUE:
Is the DOJ Panel correct in still indicting respondent for the crime of reckless imprudence as
the First Vice--President for Administration even if there is a separate civil action based on culpa
contractual

HELD:
Yes, the DOJ may still indict respondent.

The DOJ Panel's Resolution clearly supports a prima facie finding that reckless imprudence
under Article 365 of the RPC has been committed by identifying the steps that the respondent failed to
take in order to secure the voyage of the M/V Princess of the Stars.

It must be emphasized that in this case, the Court is merely charged with determining whether
the DOJ Panel acted with grave abuse of discretion in filing Information for reckless imprudence against
respondent. The Court does not concern itself yet with the evidence presented by the petitioners and
respondent in support of their respective arguments. The presence or absence of the elements of the
crime is evidentiary in nature and is a matter of defense that may be passed upon after a full-blown trial
on the merits.

In criminal cases for reckless imprudence, the negligence or fault should be established beyond
reasonable doubt whereas in breach of contract, the action can be prosecuted merely by proving the
existence of the contract and the fact that the common carrier failed to transport his passenger safely to
his destination. It is beyond dispute that a civil action based on the contractual liability of a common
carrier is distinct from an action based on criminal negligence.

In this case, the criminal action instituted against respondent involved exclusively the criminal
and civil liability of the latter arising from his criminal negligence as responsible officer of SLI. It must be
emphasized that there is a separate civil action instituted against SLI based on culpa contractual incurred
by it due to its failure to carry safely the passengers of Stars to their place of destination. The civil action
against a shipowner for breach of contract of carriage does not preclude criminal prosecution against its
employees whose negligence resulted in the death of or injuries to passengers.

Therefore, the DOJ may still indict respondent for the crime of reckless imprudence even if there
is a separate civil action based on culpa contractual.

DIMAANO
APPARENT AUTHORITY; ALTHOUGH NO ACTUAL AUTHORITY TO DO SUCH ACTS OR TO
MAKE SUCH CONTRACTS HAS BEEN CONFERRED, BIND THE PRINCIPAL
Under this doctrine, acts and contracts of the agent, as are within the apparent scope of the authority
conferred on him, although no actual authority to do such acts or to make such contracts has been
conferred, bind the principal. Furthermore, the principal’s liability is limited only to third persons who
have been led reasonably to believe by the conduct of the principal that such actual authority exists,
although none was actually given. Apparent authority is determined only by the acts of the principal and
no by the acts of the agent (Engineering Geoscience, Inc. vs. Philippine Savings Bank, G.R. No.
187262, January 10, 2019).

x————————x

APPARENT AUTHORITY; ALTHOUGH NO ACTUAL AUTHORITY TO DO SUCH ACTS OR TO

MAKE SUCH CONTRACTS HAS BEEN CONFERRED, BIND THE PRINCIPAL

Engineering Geoscience, Inc. vs. Philippine Savings Bank

G.R. No. 187262, January 10, 2019
Carpio J.

FACTS:
It appears that Engineering Geoscience, Inc. (EGI) obtained a loan from Philippine Savings Bank
(PSBank) in the principal amount of Php 24,064,000.00 as evidenced by a Promissory Note dated
February 14, 1990. To secure the loan, EGI, through its President, Jose Rolando Santos (Santos),
executed a Real Estate Mortgage in favor of PSBank over two parcels of land. As agreed by the parties,
the schedule of payment for said loan shall be as follows: (a) Php 1,443,840.00 representing interest for
2 quarters commencing on May 14, 1990 and three months thereafter; (b) Php 1,850,626.00 (Principal
and interest) quarterly for 26 quarters starting November 14, 1990 and every 3 months thereafter.

EGI was only able to make partial payments on its loan as it fell due based on the above schedule of
payment. EGI made no further payments to PSBank after its last payment made on November 29, 1990,
in the amount of Php160,000.00. Thus, PSBank invoked the acceleration clause under the promissory
note and sent a demand letter dated February 11, 1991 demanding full payment of its loan obligation.

PSBank’s demand letter went unheeded, prompting PSBank to file a petition for extra-judicial foreclosure
of mortgage. The foreclosure sale was set on June 26, 1991 but the same did not push through on
account of the Complaint with Prayer for Writ of Preliminary Injunction and restraining Order filed by EGI
before the trial court. The trial court issued an Order dated August 26, 1991 granting EGI’s prayer for
issuance of writ of preliminary injunction and effectively enjoined PSBank from proceeding with the
foreclosure sale.

Before the case materialized into a full-blown trial, PSBank and EGI submitted a Joint Motion For
Approval of Compromise Agreement dated December 29, 1992, which was approved by the trial court.
In the said compromise the parties agreed that EGI expressly and unconditionally acknowledges its loan
obligation to PSBank under the promissory note, and that EGI agrees to pay PSBank in the manner
discussed in the compromise.

Notwithstanding the above court-approved compromise agreement, EGI still failed to comply with the
terms and conditions thereof. Thus, PSBank was constrained to file a Motion for Execution of the trial
court’s Decision on their compromise agreement. Accordingly, a Writ of Execution was issued in favor
of PSBank. Thereafter, the parcel of lands mortgaged TCTs were cancelled and replaced. After the
properties were registered under its name, filed an Ex-Parte Motion for the Issuance of a Writ of
Possession, which was granted by the trial court in an Order dated February 1, 1996.

EGI filed an Urgent Motion For Reconsideration Of The Order dated February 1, 1996, but was denied.
After the denial of its urgent motion, EGI challenged the said Order before the Court of Appeals by way
of a Petition under Rule 45 of the Rules of Court. The CA dismissed EGI’s petition, the same being the
wrong remedy.
PSBank filed a Motion for Issuance of Writ of Possession before the trial court which was granted in an
order dated March 17, 2005. EGI, subsequently filed an Urgent Motion For Reconsideration but was
denied. However, the trial court noted that no comment or opposition to PSBank’s motion was filed nor
any justification given for failing to do so.

EGI filed a Reply with Urgent Motion To Recall Order Dated April 29, 2005. It was only at that point that
EGI raised for the first time the alleged lack of authority of its former president, Santos, to enter into the
compromise agreement reduced in the Decision dated January 12, 1993. PSBank filed its Rejoinder with
Opposition, arguing that EGI is now estopped from assailing the authority of Atty. Ambrosio Garcia and
EGI’s former president, Santos.

ISSUE:
Did EGI’s Former President Jose Rolando Santos exceed his authority when he entered into a
Compromise Agreement with PSBank without the knowledge, consent, and authority of EGI and its
Board of Directors?

HELD:
No. Santos did not exceed his authority when he entered into the Compromise Agreement with PSBank.

A corporation, as a juridical entity, acts through its board of directors. The board exercises almost all
corporate powers, lays down all corporate business policies, and is responsible for the efficiency of
management. The general rule is that, in the absence of authority from the board of directors, no person,
not even its officers, can validly bind a corporation.

EGI’s grant of authority to Santos, however, falls under the doctrine of apparent authority. Under this
doctrine, acts and contracts of the agent, as are within the apparent scope of the authority conferred on
him, although no actual authority to do such acts or to make such contracts has been conferred, bind
the principal. Furthermore, the principal’s liability is limited only to third persons who have been led
reasonably to believe by the conduct of the principal that such actual authority exists, although none
was actually given. Apparent authority is determined only by the acts of the principal and not by the acts
of the agent.

EGI did not repudiate the act of Santos in signing the Promissory Notes; in fact, EGI made partial
payments, offering the authority of Santos to borrow and sign the Promissory Notes. EGI, however,
repudiates the act of Santos in entering into the Compromise Agreement extending the repayment of
the loan under the promissory notes, which extension is actually beneficial to EGI. In fact, the
Compromise Agreement bought time for EGI to pay the loan under the Promissory Notes but EGI still
failed to pay. Having availed of benefits under the Compromise Agreement, EGI is estopped from
repudiating it. Also. since EGI’s Board of Directors questioned Santos’s authority to enter into a
Compromise Agreement only after 12 years, laches had already set in.

ARNESTO
ELEMENTS OF SUBROGATION
Prudential sufficiently established all the elements of subrogation. The "Charter Agreement" — which
purportedly absolved Besta from any subrogatory claims — could not be given weight since it was,
among others, a mere unnotarized photocopy of a facsimile transmission in violation of the Best
Evidence Rule; (b) Prudential's claim has not yet prescribed, considering that copy of the alleged Clause
4 of the Bill of Lading was not formally offered in evidence and, in any case, GMC's provisional and
formal claims, filed with Besta on April 17 and May 5, 2006, respectively, constituted as substantial
compliance with Clause 4's requirements; (Besta Shippping Lines. Inc. v. Prudential Guarantee and
Assurance, Inc., G.R. No.242697, Jan. 16, 2019)

x—————x

ELEMENTS OF SUBROGATION

19. Besta Shippping Lines. Inc. v. Prudential Guarantee and Assurance, Inc.
G.R. No.242697, Jan. 16, 2019
Hernando, J., (Notice)

FACTS:
After a judicious study of the case, the Court resolves to DENY the instant petition and AFFIRM the
February 27, 2018 Decision and the October 17, 2018 Resolution of the CA for failure of petitioner Besta
Shipping Lines, Inc. (Besta) to sufficiently show that the CA committed any reversible error in affirming
the April 7, 2016 Decision of the Regional Trial Court that held Besta liable to respondent Prudential
Guarantee and Assurance, Inc. (Prudential) as subrogee, for the cost of the insured damaged cargo of
respondent General Milling Corporation (GMC).

ISSUE:
Is Besta liable for the amount it paid to GMC for the value of the insured damaged cargo

HELD:
Yes, Besta is liable to Prudential for the amount it paid to GMC for the value of the insured
damaged cargo, considering that: (a) Prudential sufficiently established all the elements of subrogation.
The "Charter Agreement" — which purportedly absolved Besta from any subrogatory claims — could
not be given weight since it was, among others, a mere unnotarized photocopy of a facsimile
transmission in violation of the Best Evidence Rule; (b) Prudential's claim has not yet prescribed,
considering that copy of the alleged Clause 4 of the Bill of Lading was not formally offered in evidence
and, in any case, GMC's provisional and formal claims, filed with Besta on April 17 and May 5, 2006,
respectively, constituted as substantial compliance with Clause 4's requirements; and (c) Besta failed to
sufficiently prove that it observed extraordinary diligence in the vigilance over the cargo consigned to it
by GMC from the start of the voyage up to the ship's return to LapuLapu City, including the actions taken
by the ship's captain during the incident. As such, the legal presumption of fault or negligence on its part
stands making it liable for the value of the damaged cargo. It is settled that in case of loss or deterioration
of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. To
overcome the presumption of negligence, the common carrier must establish by adequate proof that it
exercised extraordinary diligence over the goods, failing in which, it shall be held responsible for the loss
or deterioration, as in this case. Finally, the issues raised in this petition are factual in nature, which are
not proper for a petition for review on certiorari under Rule 45 of the Rules of Court, where only questions
of law are allowed.

GOZUM
BANKS ARE REQUIRED TO EXERCISE THE HIGHEST DEGREE OF DILIGENCE
In Spouses Carbonell v. Metropolitan Bank and Trust Company, the Court emphasized that the General
Banking Act of 2000 demands of banks the highest standards of integrity and performance. The diligence
required of banks is more than that of a good father of a family. Banks are required to exercise the
highest degree of diligence in its banking transactions. (Bank of the Philippine Islands v. Spouses
Quiaoit, G.R. No. 199562, January 16, 2019, Carpio, J.)
x—————x
BANKS ARE REQUIRED TO EXERCISE THE HIGHEST DEGREE OF DILIGENCE

Bank of the Philippine Islands v. Spouses Quiaoit

G.R. No. 199562, January 16, 2019
Carpio, J.

FACTS:
This is a petition for review on certiorari filed by petitioner BPI assailing the Decision of the CA and RTC
in ruling that BPI failed to exercise due diligence in the transaction for not following the normal banking
procedure of listing the serial numbers of the dollar bills.

Fernando V. Quiaoit and his wife Nora L. Quiaoit (spouses Quiaoit) maintains peso and dollar accounts
with the BPI Greenhills. Fernando, through Merlyn Lambayong (Lambayong), encashed BPI Greenhills
Check No. 003434 dated 19 April 1999 for US$20,000. The spouses Quiaoit left the Philippines for
Jerusalem and Europe. Several banks in Madrid, Spain refused to exchange some of the US$100 bills
because they were counterfeit. Nora was also threatened that she would be taken to the police station
when she tried to purchase an item in a shop with the dollar bills.

In a complaint filed by spouses Quiaoit against BPI, they alleged that Lambayong did not count before
them the US$20,000 bills because the money was placed in a large Manila envelope. Also, BPI did not
inform spouses Quiaoit that the dollar bills were marked with its "chapa" and no receipt containing the
serial number of the bills was issued.

BPI countered that it is the bank's standing policy and part of its internal control to mark all dollar bills
with "chapa" bearing the code of the branch when a foreign currency bill is exchanged or withdrawn. BPI
also asserted that any local or foreign currency bill deposited or withdrawn from the bank underwent
careful and meticulous scrutiny by highly-trained and experienced personnel for genuineness and
authenticity. The dollar bills issued by BPI, through Lambayong, were inspected, counted, personally
examined, and subjected to a counterfeit detector machine by the bank teller.

ISSUE:
Whether BPI failed to exercise the highest degree of diligence for not listing down the serial numbers of
the dollar bills?

HELD:
Yes, BPI failed to exercise the highest degree of diligence that is not only expected but required of a
banking institution.

In Spouses Carbonell v. Metropolitan Bank and Trust Company, the Court emphasized that the General
Banking Act of 2000 demands of banks the highest standards of integrity and performance. The Court
ruled that banks are under obligation to treat the accounts of their depositors with meticulous care. The
diligence required of banks is more than that of a good father of a family. Banks are required to exercise
the highest degree of diligence in its banking transactions.

In releasing the dollar bills without listing down their serial numbers, BPI failed to exercise the highest
degree of care and diligence required of it. BPI exposed not only its client but also itself to the situation
that led to this case. Had BPI listed down the serial numbers, BPI's presentation of a copy of such listed
serial numbers would establish whether the returned 44 dollar bills came from BPI or not.

Therefore, BPI failed to exercise the highest degree of diligence that is not only expected but required
of a banking institution.
MARMOL
OFFICERS AND EMPLOYEES OF GOVERNMENT- OWNED OR CONTROLLED CORPORATIONS
WITHOUT CHARTERS ARE GOVERNED BY THE LABOR CODE, NOT THE CIVIL SERVICE LAW.
However, non-chartered government-owned or controlled corporations are limited by law in negotiating
economic terms with their employees. This is because the law has provided the Compensation and
Position Classification System, which applies to all government-owned or controlled corporations,
chartered or non-chartered. (GSIS Family Bank Employees Union vs. Villanueva, G.R. No. 210773,
January 23, 2019)

GSIS Family Bank Employees Union vs. Villanueva

G.R. No. 210773, January 23, 2019
Leonen, J.

FACTS:
Royal Savings Bank was organized and incorporated as a thrift bank. It later filed an application with the
Central Bank for the appointment of a conservator. Central Bank denied the application prompting Royal
Savings to filed several complaints for grave abuse of discretion. To amicably settle the cases, then
Central Bank Governor offered to reopen and rehabilitate if it would drop all its complaints and transfer
all its shares of stock to Commercial Bank of Manila, a wholly-owned subsidiary of the GSIS.Royal
Savings and Commercial Bank entered into a MOA to rehabilitate and infuse capital into Royal Savings.
Royal Savings Bank was renamed Comsavings Bank. Thereafter the GSIS transferred its holdings from
Commercial Bank to Boston Bank. Comsavings Bank was not included in the transfer. Due to Boston
Bank's acquisition of Commercial Bank, the GSIS took over the control and management of Comsavings
Bank. Comsavings Bank and the GSIS executed a Memorandum of Agreement where the latter
committed to infuse an additional capital of P2.5 billion into Comsavings Bank. After the infusion of funds,
the GSIS effectively owned 99.55% of Comsavings Bank's outstanding shares of stock.

Comsavings Bank changed its name to GSIS Family Bank. Acting on a request for opinion from GSIS
Family Bank, the General Counsel of Bangko Sentral ng Pilipinas opined that GSIS Family Bank could
not be categorized as a government bank. Then President Benigno S. Aquino issued EO No. 7, which
placed an indefinite moratorium on increases in salaries and benefits of employees in government-
owned or controlled corporations and government financial institutions. BSP advised GSIS Family Bank
to seek the opinion of the Governance Commission. GSIS Family Bank met with representatives of the
Governance Commission, which clarified that GSIS Family Bank was classified as a government
financial institution under Republic Act No. 10149. The Governance Commission replied that as a
government financial institution, GSIS Family Bank was unauthorized to enter into a collective bargaining
agreement with its employees.

GSIS Union alleged that Republic Act No. 10149 does not apply to GSIS Family Bank, as it was a private
bank created and established under the Corporation Code. For GSIS Family Bank's refusal to negotiate
a new collective bargaining agreement, the GSIS Union filed a Complaint before the NCMB and later, a
Notice of Strike. Petitioner GSIS Union filed before this Court a Petition for Certiorari,asserting that GSIS
Family Bank is a private bank; thus, it is not covered by the provisions of Republic Act No. 10149.
Petitioner then reiterates that GSIS Family Bank remains a private bank, outside the coverage of
Republic Act No. 10149. The BSP Monetary Board, through MB Resolution, prohibited GSIS Family
Bank from doing business and designated the Philippine Deposit and Insurance Corporation as its
receiver.

ISSUE:
Whether or not GSIS Family Bank, a non-chartered government-owned or controlled corporation, can
enter into a collective bargaining agreement with its employees.

HELD:
Pursuant to Section 3(o) of Republic Act No. 10149 a government-owned or controlled corporation is:
(1) established by original charter or through the general corporation law; (2) vested with functions
relating to public need whether governmental or proprietary in nature; and (3) directly owned by the
government or by its instrumentality, or where the government owns a majority of the outstanding capital
stock. Possessing all three (3) attributes is necessary to be classified as a government-owned or
controlled corporation.
There is no doubt that GSIS Family Bank is a government-owned or controlled corporation since 99.55%
of its outstanding capital stock is owned and controlled by the Government Service Insurance System.
Petitioner cites this Court's ruling in Phil. National Oil Company-Energy Dev't. Corp. to substantiate its
claim that government-owned and controlled corporations without original charters, or those
incorporated under the Corporation Code, are subject to the provisions of the Labor Code, and are thus
free to negotiate economic terms with their employers.

Petitioner is again mistaken.

Phil. National Oil Company-Energy Dev 't. Corp. involved a decision of the Deputy Minister of Labor
upholding his jurisdiction revoking a clearance to dismiss, earlier issued by the Ministry of Labor's
Regional Office. The petitioner, despite its earlier application for such issuance, contested the Ministry
of Labor's jurisdiction on the ground that it was a government-owned and controlled corporation.In
disposing of the petition, this Court noted that for purposes of coverage under the Civil Service Rules, it
was only government-owned and controlled corporations with original charters that were covered: Under
the laws then in force (Article 277 of the Labor Code (PD 442)), employees of government-owned and/or
controlled corporations were governed by the Civil Service Law and not by the Labor Code. The doctrine
in National Housing Corporation vs. Juco was supplanted by the present Constitution.

Thus, under the present state of the law, the test in determining whether a government-owned or
controlled corporation is subject to the Civil Service Law is the manner of its creation such that
government corporations created by special charter are subject to its provisions while those
incorporated under the general Corporation Law are not within its coverage.

However, what was in issue in Phil. National Oil Company-Energy Dev't. Corp. was jurisdiction in relation
to dismissal of employees. It had nothing to do with the obligation of the government-owned or controlled
corporation to collectively bargain in good faith.

Considering the existing law at the time, GSIS Family Bank could not be faulted for refusing to enter into
a new collective bargaining agreement with petitioner as it lacked the authority to negotiate economic
terms with its employees. Unless directly challenged in the appropriate case and with a proper actual
controversy, the constitutionality and validity of Republic Act No. 10149, as it applies to fully government-
owned and controlled non-chartered corporations, prevail.

HIPONIA
A COMMON CARRIER IS MANDATED TO OBSERVE EXTRAORDINARY DILIGENCE AT ALL
TIMES AND LASTS FROM THE TIME THE GOODS ARE PLACED IN THE POSSESSION OR
DELIVERED TO ITS RECIPIENT
Keihin-Everett, as a common carrier, is mandated to observe, under Article 1733 of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances
of each case. Under Article 1736 of the Civil Code, a common carrier's extraordinary responsibility
over the shipper's goods lasts from the time these goods are unconditionally placed in the possession
of, and received by, the carrier for transportation, until they are delivered, actually or constructively, by
the carrier to the consignee, or to the person who has a right to receive them.

HIJACKING OF GOODS IS NOT PER SE A FORTUITOUS EVENT

Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused by robbery or
hijacked if it is proven that the robbery or hijacking was attended by grave or irresistible threat,
violence or force

KEIHIN-EVERETT vs. TOKIO MARINE

FACTS: Honda Trading ordered 80 bundles of Aluminum Alloy Ingots from PT Molten Aluminum
Producer Indonesia and loaded the goods in two container vans and in turn, received in Jakarta,
Indonesia by Nippon Express Co., Ltd. for shipment to Manila. Tokio Marine & Nichido Fire Insurance
Co., Inc. (TMNFIC) insured the entire shipment. Honda also engaged the services of Keihin-Everett to
clear and withdraw the cargo from the pier and to transport and deliver the same to its warehouse at
the Laguna.
Keihin-Everett further acquired the services of Sunfreight (common carrier) for the former and to
transport inland goods within the Philippines. Upon arrival in Manila the shipment was released from
the pier by Keihin-Everett and turned over to Sunfreight for delivery to Honda. En route to the latter's
warehouse, one of the vans was hijacked. Honda suffered losses the value of the lost 40 bundles of
Aluminum Alloy Ingots. Tokio paid the losses sufferer by Honda and thus filed complaint for damages
against Keihin-Everett. Tokio Marine maintained that it had been subrogated to all the rights and
causes of action pertaining to Honda. Keihin-Everett denied liability for the lost shipment and blamed
Sunfreight. Keihin-Everett filed a third-party complaint against Sunfreight and denied liability and
claimed that it was not privy to the contract between Keihin-Everett and Honda Trading. The RTC held
Keihin-Everett and respondent Sunfreight Forwarders jointly and severally liable to pay respondent
Tokio. It also cited Article 2180 of the Civil Code ( Employers liability for damages caused by
employees). Thus, Sunfreight Forwarders is hereby held liable for the loss of the subject cargoes with
Keihin-Everett, being a common carrier. In case, Keihin-Everett pays for the amount, it has a right of
reimbursement from Sunfreight by the causes specified in Article 1734 of the Civil Code. In all other
cases, they are presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence. Upon appeal, the CA 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. 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.

ISSUE: Whether or not Keihin-Everett liable to respondent Tokio Marine?

HELD: Yes. Notwithstanding that the cargoes were in the possession of Sunfreight Forwarders when
they were hijacked, Keihin-Everett is not absolved from its liability as a common carrier. Keihin-Everett
seems to have overlooked that it was the one whose services were engaged by Honda Trading to
clear and withdraw the cargoes from the pier and to transport and deliver the same to its warehouse.
In turn, Keihin-Everett accredited Sunfreight Forwarders to render common carrier service for it by
transporting inland goods. As correctly held by the CA, there was no privity of contract between Honda
Trading (to whose rights Tokio Marine was subrogated) and Sunfreight Forwarders. Hence, Keihin-
Everett, as the common carrier, remained responsible to Honda Trading for the lost cargoes.

In this light, Keihin-Everett, as a common carrier, is mandated to observe, under Article 1733 of the
Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence. To be sure, under Article 1736 of the Civil Code, a common carrier's
extraordinary responsibility over the shipper's goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the carrier for transportation, until they
are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a
right to receive them. Hence, at the time Keihin-Everett turned over the custody of the cargoes to
Sunfreight Forwarders for inland transportation, it is still required to observe extraordinary diligence in
the vigilance of the goods. Failure to successfully establish this carries with it the presumption of fault
or negligence, thus, rendering Keihin-Everett liable to Honda Trading for breach of contract.

It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force majeure.
Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused by robbery or
hijacked if it is proven that the robbery or hijacking was attended by grave or irresistible threat,
violence or force. In this case, Keihin-Everett failed to prove the existence of the aforementioned
instances.

It is agreed upon that the liability of Keihin-Everett and Sunfreight Forwarders are not solidary. There is
solidary liability only when the obligation expressly so states, when the law so provides, or when the
nature of the obligation so requires. Thus, under Article 2194 of the Civil Code, liability of two or more
persons is solidary in quasi-delicts. But in this case, Keihin-Everett's liability to Honda Trading (to
which Tokio Marine had been subrogated as an insurer) stemmed not from quasi-delict, but from its
breach of contract of carriage. In the same manner, Keihin-Everett has a right to be reimbursed
based on its Accreditation Agreement with Sunfreight Forwarders. By accrediting Sunfreight
Forwarders to render common carrier services to it, Keihin-Everett in effect entered into a contract of
carriage with a fellow common carrier, Sunfreight Forwarders.

It is undisputed that the cargoes were lost when they were in the custody of Sunfreight Forwarders.
Hence, under Article 1735 of the Civil Code, the presumption of fault on the part of Sunfreight
Forwarders (as common carrier) arose. Since Sunfreight Forwarders failed to prove that it observed
extraordinary diligence in the performance of its obligation to Keihin-Everett, it is liable to the latter for
breach of contract. Consequently, Keihin-Everett is entitled to be reimbursed by Sunfreight Forwarders
due to the latter's own breach occasioned by the loss and damage to the cargoes under its care and
custody.

(Ruling regarding INSURANCE; Subrogation)

The failure of Tokio Marine to attach the insurance contract is not fatal to its cause of action. Tokio
Marine presented as evidence, not only the Honda Trading Insurance Policy, but also the Subrogation
Receipt.
Under this circumstance, Tokio Marine's right to sue is based on the fact that it voluntarily made
payment in favor of Honda Trading and it could go after the third party responsible for the loss (Keihin-
Everett) in the exercise of its legal right of subrogation.

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. 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. 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.

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.
TOLENTINO
A COMPROMISE AGREEMENT MUST BE ENTERED INTO ON BEHALF OF A CORPORATION BY
A PERSON WITH AUTHORITY

In compliance with the Court's February 26, 2014 Resolution,30 copies of: (1) the Board Resolution 3-
1431 of Goldstar authorizing Manuel Tio to represent the said corporation and to sign the Compromise
Agreement; and (2) the Corporate Secretary's Certificate of BPI, authorizing Maureen Therese C.
Santos to enter into a compromise agreement, were submitted by the parties. After reviewing the
Compromise Agreement, the Court finds the same to be proper and in order. (Spouses Tio vs BPI G.R.
No. 193534 & G.R. No. 194091, January 30, 2019)

SPOUSES MANUEL AND EVELYN TIO v. BANK OF THE PHILIPPINE ISLANDS

G.R. No. 193534, January 30, 2019

BANK OF THE PHILIPPINE ISLANDS v. GOLDSTAR MILLING CORPORATION AND/OR SPOUSES

MANUEL AND EVELYN TIO

G.R. No. 194091, January 30, 2019

DEL CASTILLO, J.

FACTS: Goldstar Mining Corporation, a corporation engaged in the business of rice milling and the
buying and selling of corn and palay, together with spouses Tio, majority stockholders of Goldstar,
obtained several loans from the Far East Bank and Trust Company, now BPI. To secure the loans,
spouses Tio executed various promissory notes and real estate mortgages over several properties,
including the properties where their business and residence were located.

On June 18, 2001, BPI sent a demand letter to Goldstar and spouses Tio giving them five days from
receipt thereof to settle their outstanding obligation. Due to the failure of Goldstar and spouses Tio to
pay the loan despite repeated demands, BPI instituted foreclosure proceedings against the mortgaged
properties.

Goldstar and/or spouses Tio filed before the RTC a Complaint for Annulment of Promissory Notes, Real
Estate Mortgage, Notice of Sheriffs Sale, Certificate of Sale, Accounting, Injunction and Damages (Case
No. Br. 19-1083) against BPI. On the other hand, BPI filed before the RTC a Petition for the Issuance of
a Writ of Possession.

On August 8, 2003, the RTC issued an Order for the issuance of a Writ of Possession. Spouses Tio
appealed to CA. CA denied. Hence, this petition docketed as G.R. No. 193534.

On July 4, 2006, the RTC, in Civil Case No. Br. 19-1083, rendered a Decision in favor of Goldstar and/or
Spouses Tio. BPI appealed to CA. CA affirmed the decision of The RTC. Hence, this petition docketed
as G.R. No. 194091.

On April 4, 2011, the court issued a Resolution consolidating G.R. No. 193534 with G.R. No. 194091.

In April 2013, BPI filed a Manifestation, Submission and/or Motion for Judgment based on a Compromise
Agreement entered into by the parties on February 15, 2013. The parties submit that BPI sold 2
foreclosed properties of Goldstar Milling Corp. in favor of Sps. Tio. The parties also warrant that they
have full capacity to enter into this agreement and mutually agree to settle their differences including
any and all cases arising from the cases filed by them.

ISSUE: Is the Compromise Agreement proper in order?

HELD: YES. Spouses Tio affirmed and confirmed the execution of the said Compromise Agreement in
their Omnibus Comment.

In compliance with the Court's February 26, 2014 Resolution,30 copies of: (1) the Board Resolution 3-
1431 of Goldstar authorizing Manuel Tio to represent the said corporation and to sign the Compromise
Agreement; and (2) the Corporate Secretary's Certificate of BPI, authorizing Maureen Therese C.
Santos to enter into a compromise agreement, were submitted by the parties.

After reviewing the Compromise Agreement, the Court finds the same to be proper and in order.

ACCORDINGLY, the Court hereby approves the same and renders judgment in accordance therewith,
and accordingly, orders the parties to comply with all the terms and stipulations contained therein.

LINGAN
BANKING

LENDING BANKS ARE NOT OBLIGATED TO COMPENSATE SUGAR PRODUCERS FOR THEIR
LOSSES
All claims for restitution shall be filed with the Bangko Sentral ng Pilipinas. Under R.A. No. 7202 and its
Implementing Rules and Regulations, lending banks are not obligated to compensate sugar producers
for their losses. Restitution falls under the BSP, upon the establishment of a Sugar Restitution Fund.
(Bangko Sentral ng Pilipinas and Philippine National Bank v. Spouses Ledesma, G.R. Nos. 211176
and 211583, February 6, 2019)

24. Bangko Sentral ng Pilipinas and Philippine National Bank v. Spouses Ledesma
G.R. Nos. 211176 and 211583; February 6, 2019
Leonen, J.

FACTS:
Spouses Juanito and Victoria Ledesma were farmers engaged in sugar farming in Negros
Occidental, with sugar productions from crop year 1974 to 1975 to crop year 1984 to 1985. They were
among those who suffered losses due to the actions of government-owned and controlled agencies.
Among these agencies were BSP and PNB. The Spouses Ledesma obtained several crop loans from
PNB. After full payment of the loans, there was an excess payment of P353,529.67, as admitted by PNB
and as certified by COA. The spouses argued that under R.A. No. 7202, otherwise known as the “Sugar
Restitution Law”, the BSP and the PCGG should compensate them for their losses and refund the excess
payment from the Sugar Restitution Fund. This fund refers to the ill-gotten wealth recovered by the
Government through the PCGG or any other agency or from any other source within the Philippines or
abroad. It shall be used to compensate all sugar producers from crop year 1974 to 1975 to crop year
1984 to 1985.

ISSUE:
Should the BSP and the PNB be held liable for the refund of excess payments to the Spouses Ledesma?

RULING:
No. Pursuant to Section 2 of R.A. No. 7202, the money to be used to compensate the affected
sugar producers should come from the Sugar Restitution Fund. It is unfortunate that after more than two
decades after the law was enacted, the said fund has not been established. The Spouses Ledesma, as
well as other sugar producers, have yet to reap the law’s benefits. Without the fund, there is no restitution
to speak at all. The BSP and PNB are not at fault for the non-existence of the funds, indeed one cannot
give what he does not have – as ruled by the RTC. All claims for restitution shall be filed with the BSP.
PNB’s role was merely that of a lending bank. Under R.A. No. 7202, lending banks are not obligated to
compensate sugar producers for their losses. Restitution falls under the BSP, upon the establishment of
a Sugar Restitution Fund. There is no dispute that respondents are covered under Republic Act No.
7202. While this Court recognizes the plight of the thousands of sugar producers and their right as
beneficiaries, there is, sadly, no fund from where the money should come.

DELA CRUZ
IN DEPOSIT SPLITTING, EVEN IF THE TRANSFER INTO DIFFERENT ACCOUNTS WAS NOT
MADE WITHIN 120 DAYS IMMEDIATELY PRECEDING BANK CLOSURE, THE GRANT OF DEPOSIT
INSURANCE TO AN ACCOUNT FOUND TO HAVE ORIGINATED FROM ANOTHER DEPOSIT IS
NOT AUTOMATIC BECAUSE THE TRANSFEREE STILL HAS TO PROVE THAT THE TRANSFER
WAS FOR A VALID CONSIDERATION THROUGH DOCUMENTS KEPT IN THE CUSTODY OF THE
BANK.
In deposit splitting, there is a presumption that the transferees have no beneficial ownership considering
that the source account, which exceeded the maximum deposit insurance coverage, was split into two
or more accounts within 120 days immediately preceding bank closure. On the other hand, in cases
wherein the transfer into two or more accounts occurred before the 120-day period, the PDIC does not
discount the possibility that there may have been a transfer for valid consideration, but in the absence
of transfer documents found in the records of the bank at the time of closure, the presumption arises
that the source account remained with the transferor. (Linsangan v. Philippine Deposit Insurance
Corporation, G.R. No. 228807, February 11, 2019)

x—————x

IN DEPOSIT SPLITTING, EVEN IF THE TRANSFER INTO DIFFERENT ACCOUNTS WAS NOT
MADE WITHIN 120 DAYS IMMEDIATELY PRECEDING BANK CLOSURE, THE GRANT OF DEPOSIT
INSURANCE TO AN ACCOUNT FOUND TO HAVE ORIGINATED FROM ANOTHER DEPOSIT IS
NOT AUTOMATIC BECAUSE THE TRANSFEREE STILL HAS TO PROVE THAT THE TRANSFER
WAS FOR A VALID CONSIDERATION THROUGH DOCUMENTS KEPT IN THE CUSTODY OF THE
BANK.

Linsangan v. Philippine Deposit Insurance Corporation

G.R. No. 228807, February 11, 2019
J. Reyes, Jr., J.

FACTS:
In a Resolution dated May 23, 2013, the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP)
ordered the closure of the Cooperative Rural Bank of Bulacan, Inc. (CRBBI) and placed it under PDIC's
receivership. PDIC took over CRBBI's assets and affairs and examined its records in order to determine
the insured deposits.

Petitioner filed a claim for payment of deposit insurance for his Special Incentive Savings Account (SISA)
which had a balance of P400,000.00 at the time of CRBBI's closure. Upon investigation, PDIC found
that petitioner's account originated from the account of "Cornelio Linsangan or Ligaya Linsangan"
(source account) with an opening balance of P1,531,993.42. On December 13, 2012, the source account
was closed and its balance of P1,544,081.48 was transferred and distributed to four accounts. PDIC
then conducted a tracing of relationship for the purpose of determining beneficial ownership of accounts
and it discovered that petitioner is not a qualified relative of Cornelio and Ligaya.

PDIC denied petitioner's claim. The PDIC ruled that under PDIC Regulatory Issuance No. 2009-03, the
transferee is considered the beneficial owner of the deposit provided that (a) the transfer is for valid
consideration as shown by the documents supporting the transfer which should be in the custody of the
bank upon takeover by PDIC; or (b) he/she is a qualified relative of the transferor. It held that CRBBI
was not furnished a copy of any document which could prove the transfer of the deposit from the
transferors to petitioner. The PDIC added that the documents which petitioner submitted did not show
that he is a relative of documents which petitioner submitted did not show that he is a relative of Cornelio
and Ligaya within the second degree of consanguinity or affinity. It concluded that the transferors should
be considered the beneficial owners of the transferred deposit. Aggrieved, petitioner filed a petition for
certiorari before the CA but it was denied for lack of merit. Petitioner moved for reconsideration, but the
same was denied by the CA in a Resolution. Hence, this petition for review on certiorari wherein
petitioner assails the denial of his deposit insurance claim.

Petitioner argues that the transfer of funds to his account is not deposit splitting because the transfer
took place more than 120 days prior to the closure of the bank; and that he was not informed of the
requirement that the documents proving transfer must be in the records of the bank at the time of its
closure.

Respondent counters that the joint account of Cornelio and Ligaya was split and transferred to different
personsl; that the alleged donation was not supported by documents evidencing transfer of account in
the records of the bank; and that there is no premium if the splitting of deposit was done within 120 days
preceding a bank closure, because if an account was split prior to the 120-day period, PDIC Regulatory
Issuance No. 2009-03 steps in and determines the beneficial ownership of the resulting accounts,
whereas, if the splitting of deposit was made within 120 days preceding the bank closure, the act is a
criminal offense and the director, officer, employee, or agent of the bank who facilitated the splitting
would be held liable.

ISSUES:
Whether or not the PDIC should allow the petitioner’s claim.

HELD:
No. PDIC did not commit any grave abuse of discretion in denying petitioner's claim for deposit
insurance.

The PDIC was created by Republic Act No. 3591 on June 22, 1963 as an insurer of deposits in all banks
entitled to the benefits of insurance under the PDIC Charter to promote and safeguard the interests of
the depositing public by way of providing permanent and continuing insurance coverage of all insured
deposits. Based on its charter, the PDIC has the duty to grant or deny claims for deposit insurance. "The
term 'insured deposit' means the amount due to any bona fide depositor for legitimate deposits in an
insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not
to exceed Five Hundred Thousand Pesos (P500,000.00).

The elements of Deposit Splitting are as follows:

1. Existence of source account/s in a bank with a balance or aggregate balance of more than the
Maximum Deposit Insurance Coverage;
2. There is a break up and transfer of said account/s into two or more existing or new accounts in
the name of another person/s or entity/entities;
3. The transferee/s have no Beneficial Ownership over the transferred funds; and
4. Transfer occurred within 120 days immediately preceding or during a bank-declared bank
holiday, or immediately preceding bank closure.

Petitioner's argument is erroneous. In deposit splitting, there is a presumption that the transferees have
no beneficial ownership considering that the source account, which exceeded the maximum deposit
insurance coverage, was split into two or more accounts within 120 days immediately preceding bank
closure. On the other hand, in cases wherein the transfer into two or more accounts occurred before the
120-day period, the PDIC does not discount the possibility that there may have been a transfer for valid
consideration, but in the absence of transfer documents found in the records of the bank at the time of
closure, the presumption arises that the source account remained with the transferor. Consequently,
even if the transfer into different accounts was not made within 120 days immediately preceding bank
closure, the grant of deposit insurance to an account found to have originated from another deposit is
not automatic because the transferee still has to prove that the transfer was for a valid consideration
through documents kept in the custody of the bank.

In this case, even assuming that Cornelio donated the amount contained in the subject savings account
to petitioner, not one document evidencing the alleged donation is in the custody or possession of the
bank upon takeover by PDIC. Thus, the PDIC properly relied on the records of the bank which showed
that Cornelio's accounts remained in his name and for his account. Moreover, even if the Court
disregards the submission of transfer documents, petitioner could not be considered the beneficial owner
of the resulting deposit account because he is not a qualified relative of the transferor. As defined in the
R.A. No. 3591, a Qualified Relative means a relative within the second degree of consanguinity or
affinity. Being the son of Cornelio's cousin, petitioner is already a fifth degree relative of the transferor, far
from the requirement that the transferee must be a relative within the second degree of consanguinity
or affinity.

As regards petitioner's contention that the provisions of PDIC Regulatory Issuance No. 2009-03 do not
apply to him because he was not personally notified of the contents thereof by CRBBI, the same
deserves scant consideration. Ignorantia legis non excusat remains a valid dictum. Here, it is settled that
PDIC Regulatory Issuance No. 2009-03 was published in a newspaper of general circulation. Hence,
the publication operated as constructive notice to all owners of bank deposits. Personal notice to all
citizens of promulgated laws and regulations is not required.

KHO
Stipulations in the insurance contract, free from any ambiguity, should govern the relationship
of the parties
Doctrine: CA correctly determined that the Jumbo Risk Provision clearly indicates that failure to pay in
full any of the scheduled instalments on or before the due date shall render the insurance policy void
and ineffective.
(PHILAM INSURANCE CO., INC. vs PARC CHATEAU CONDOMINIUM UNIT OWNERS
ASSOCIATION, INC, G.R. No. 201116, March 4, 2019)
x—————x
Stipulations in the insurance contract, free from any ambiguity, should govern the relationship
of the parties
PHILAM INSURANCE CO., INC. vs PARC CHATEAU CONDOMINIUM UNIT OWNERS
ASSOCIATION, INC.
G.R. No. 201116, March 4, 2019
Reyes, J. Jr., J

FACTS:
This is a Rule 45 petition, assailing the CA's decision affirming the RTC and MeTC’s decision
that there is no binding contract of insurance between Philam and Parc Chateau due to non –payment
of the premium by the latter.

Philam issued Fire and Lightning Insurance Policy and Comprehensive General Liability
Insurance Policy in favor of respondent condominium, both covering the period from November 30, 2003
to November 30, 2004. The parties negotiated for a 90-day payment term of the insurance premium,
worth P791,427.50 including taxes. The payment term was embodied in a Jumbo Risk Provision, which
further provided that the premium instalment payments were due on November 30, 2003, December 30,
2003, and January 30, 2004. The Jumbo Risk Provision also stated that if any of the scheduled payments
are not received in full on or before said dates, the insurance shall be deemed to have ceased at 4 p.m.
of such date, and the policy shall automatically become void and ineffective.

Parc Association's board of directors found the terms unacceptable and did not pursue the
transaction. Since no premiums were paid, Philam made oral and written demands upon Parc
Association, who refused to do so alleging that the insurance agent had been informed of its decision
not to take up the insurance coverage. Philam sent demand letters with statement of account claiming
P363,215.21 unpaid premium based on Short Scale Rate Period. Philam also cancelled the policies.
Pare Association argued that non-payment of premium means no juridical tie was created between the
insured and the insurer, and the insured was not exposed to the insurable risk for lack of consideration.
Philam insisted that there was a perfected insurance contract, and Pare Association's request for terms
of payment indicate its intention to be bound by the insurance contract. Philam argues that the 90-day
payment term is a credit extension and should be considered as an exception to the general rule.

ISSUE:
Was there a valid and binding insurance contract between the parties despite the non-payment
of premiums by Parc Chateau?

HELD:
None. There was no valid and binding contract of insurance between the parties due to the non-
payment of premiums by Parc Chateu.
The CA correctly determined that the Jumbo Risk Provision clearly indicates that failure to pay
in full any of the scheduled instalments on or before the due date shall render the insurance policy void
and ineffective as of 4 p.m. of such date. Pare Association's failure to pay on the first due date (November
30, 2003), resulted in a void and ineffective policy as of 4 p.m. of November 30, 2003. Hence, there is
no credit extension to consider as the Jumbo Risk Provision itself expressly cuts off the inception of the
insurance policy in case of default.
Both trial courts and the appellate court are consistent in its findings of fact that there is no
perfected insurance contract, because of the absence of one of the elements, that is, payment of
premium. As a consequence, Philam cannot collect P363,215.21 unpaid premiums of void insurance
policies.
AUM
ARTICLE 1732 DOES NOT DISTINGUISH BETWEEN A CARRIER OFFERING ITS SERVICES TO
THE “GENERAL PUBLIC” AND ONE WHO OFFERS SERVICES OR SOLICITS BUSINESS ONLY
FROM A NARROW SEGMENT OF THE GENERAL POPULATION
Irrespective of the application’s limited market scope, i.e. Angkas users, it remains that, on the one hand,
these bikers offer transportation services to willing public consumers, and on the other hand, these
services may be readily accessed by anyone who chooses to download the Angkas app. (LTFRB vs.
Valenzuela, G.R. No. 242860, March 11, 2019)

x------------------x

ARTICLE 1732 DOES NOT DISTINGUISH BETWEEN A CARRIER OFFERING ITS SERVICES TO
THE “GENERAL PUBLIC” AND ONE WHO OFFERS SERVICES OR SOLICITS BUSINESS ONLY
FROM A NARROW SEGMENT OF THE GENERAL POPULATION

The Land Transportation Franchising and Regulatory Board (LTFRB) vs. Hon. Carlos A.
Valenzuela
G.R. No. 242860, March 11, 2019
Perlas-Bernabe, J.

FACTS:
In May 2015, the DOTC issued DO No. 2015-11, which set the standard classifications for public
transport conveyances to be used as basis for the issuance of a Certificate of Public Convenience (CPC)
for PUVs. In recognition of technological innovations, the LTFRB created two (2) new classifications,
namely, Transportation Network Companies (TNC) and Transportation Network Vehicle Service
(TNVS).

A TNC is an organization that provides pre-arranged transportation service for compensation using an
online-enabled application or platform technology to connect passengers with drivers using their
personal vehicles. It is treated as a transport provider whose accountability commences from the
acceptance by its TNVS while online. A TNVS is a PUV accredited with a TNC, which is granted
authority or franchise by the LTFRB to run a public transport service. It was likewise provided that
motorcycles are not allowed as public transport conveyance. Its accountability as a common carrier
attaches from the time the TNVS is online and offers its services to the riding public.

Meanwhile, in May 2016, DBDOYC registered its business with the SEC, and subsequently launched its
“Angkas,” an online and on-demand motorcycle-hailing mobile application that pairs drivers of
motorcycles with potential passengers without, however, obtaining the mandatory certificate of TNC
application from the LTFRB. Thus, the LTFRB issued a press release informing the public that DBDOYC,
which is considered as a TNC, cannot legally operate. In response, DBDOYC filed a Petition for
Declaratory Relief with Application for TRO/Writ of Preliminary Injunction, alleging, among others, that it
is not a public transportation provider since Angkas app is a mere tool that connects the passenger and
the motorcycle driver, and Angkas and its drivers are not engaged in the delivery of a public service.

The RTC ruled in favor of DBDOYC finding its business not subject to any regulation nor prohibited
under existing law. It likewise concluded that DBDOYC has a right to enter into an independent contract
with its Angkas riders as an application provider, and that the Angkas biker’s offer of transportation
services to a potential passenger is a purely private arrangement using DBDOYC’s application. Hence,
herein petitioners filed a Petition for Certiorari under Rule 65.

DBDOYC argues that: (1) its technology only allows a biker willing to give a ride and a passenger willing
to pay the set price to meet and contract with each other, thus the biker does not offer his/her service to
an indefinite public. It is a purely private contractual arrangement between the biker and the passenger
because the app merely pairs a biker with a potential passenger, and DBDOYC may not compel a biker
to pick up a potential passenger even after the latter confirms a booking; (2) its accredited bikers are
private carriers as they do not hold out their services generally to the public because they cannot just be
hailed on the street as they only contract via the Angkas online front; and (3) its drivers may refuse at
any time any legitimate demand for service by simply not going online or not logging in to the online
platform.
ISSUE: Is DBDOYC’s Angkas app operating as a transportation provider and are its accredited drivers
common carriers engaged in rendering public service so as to be subject to regulation by the LTFRB?

HELD:
Yes, Angkas is a transportation provider and its accredited bikers are common carriers. Hence, they are
subject to regulation by the LTFRB.

The Public Service Act defines “public service” as including every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business purposes, any common
carrier, xxx, for freight or passenger, or both with or without fixed route and whatever may be its
classification. Also, Article 1732 of the Civil Code provides that common carriers are those engaged in
the business of carrying or transporting passengers or goods or both by land, xxx, for compensation,
offering their services to the public. This provision carefully avoids making distinction between a person
offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic, or unscheduled basis. Neither does it distinguish between a carrier offering its
services to the general public and one who offers services or solicits business only from a narrow
segment of the general population.

Here, Angkas falls under the scope of the term public service. It appears that it is practically functioning
as a booking agent for its accredited bikers. Irrespective of the application’s limited market scope, i.e.
Angkas user, it remains that these bikers offer transportations services to willing public consumers, and
these services may be readily accessed by anyone who chooses to download the Angkas app.
Furthermore, when its accredited drivers log-in, they make their services publicly available. In other
words, when they put themselves online, their services are bound for indiscriminate public consumption.
Moreover, it appears that there is really no contractual discretion between the Angkas bikers and would-
be passengers as to make their agreement a purely private contract because the app automatically pairs
them up. Verily, the absence of any true choice on material contractual points contradicts DBDCOY’s
postulation that the Angkas app merely facilitates a purely private arrangement between the biker and
his passenger.

At any rate, even if it is assumed that Angkas-accredited bikers are not common carriers, and do not
provide public service, it does not necessarily mean that the business of holding out private motorcycles
for hire is a legitimate commercial venture as Section 7 of RA 4136 states that private motorcycles shall
not be used for hire under any circumstances and shall not solicit, accept, and be used to transport
passengers or freight for pay.

VALLEJO
WHEN AN AIRLINE ISSUES A TICKET TO A PASSENGER, A CONTRACT OF CARRIAGE ARISES
When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger has every right to expect that he be transported on that flight
and on that date, and it becomes the airline's obligation to carry him and his luggage safely to the agreed
destination without delay. If the passenger is not so transported or if in the process of transporting, he
dies or is injured, the carrier may be held liable for a breach of contract of carriage (Air France v. Zani,
G.R. No.199767, March 13, 2019).
x—————x

WHEN AN AIRLINE ISSUES A TICKET TO A PASSENGER, A CONTRACT OF CARRIAGE ARISES

Air France v. Zani

G.R. No. 199767, March 13, 2019

FACTS:
This is a petition for review on certiorari assailing the decision of the CA which affirmed the Decision of
the RTC, awarding moral and exemplary damages, and attorney's fees in favor of respondent Charles
Auguste Raymond M. Zani due to petitioner Air France's breach of the contract of carriage between
them.

The present case is related to an earlier collection case filed by Air France against Charles Zani
Consultants. A credit agreement was entered into by the parties for the purchase of airline tickets.
Respondents purchased tickets and had an outstanding balance of ₱1,738,180.00. Air France sent a
demand letter and informed respondent that he will be refused carriage on any of petitioner's network or
flights until respondent settles his outstanding balance. Despite this, respondent still failed to pay,
prompting Air France to file a collection case. The case eventually reached the SC, which held in favor
of Air France.

Meanwhile, respondent booked flights with a travel agency covering different destinations and airlines,
including Air France. The flights with Air France are: Mahe Island to Paris, Paris to Nice, and Nice to
Paris. The travel agency issued confirmed Conjunction Tickets. Respondent rebooked his Mahe Island
to Paris flight 2 days earlier than scheduled, for which Air France confirmed. A confirmation sticker was
placed on respondent’s ticket for a flight on July 16, 2000. The night before the flight, Air France’
manager informed respondent that he will not be allowed embarkation, because as indicated in a letter
subsequently issued by the manager, that “the applicable air-fare or all due expenses or taxes have not
been paid”. Respondent filed a complaint for damages for breach of contract of carriage.

Air France argued that it merely exercised its right under terms of the contract of carriage. Further, that
the tickets issued to respondent are subject to certain conditions, embodied in Air France’ Conditions of
Carriage, Passenger, and Baggage, which states that it has the right to refuse carriage when “the
applicable fare or any charge or tax payable have not been paid or relevant credit arrangements agreed
between the Carrier and the Passenger have not been complied with”.

ISSUE:
1. Whether or not Air France is liable for breach of contract of carriage when it refused embarkation
of respondent Zani.
2. Is Air France’ right to refuse to carry respondent under the contract of carriage applies to
previous ticket purchases respondent made or is limited to the July 16, 2000 flight.

HELD:
1. Yes, Air France is liable for breach of contract of carriage.

When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger has every right to expect that he be transported on that flight
and on that date, and it becomes the airline's obligation to carry him and his luggage safely to the agreed
destination without delay. If the passenger is not so transported or if in the process of transporting, he
dies or is injured, the carrier may be held liable for a breach of contract of carriage.
Undoubtedly, a contract of carriage existed between petitioner and respondent. Further to their contract,
respondent had the right to expect that he would fly from Mahe Island to Paris on July 16, 2000. Since
petitioner refused to transport him, petitioner evidently breached their contract of carriage and
respondent had every right to sue petitioner for this breach.

2. It is limited to the July 16, 2000 flight.

We hold that petitioner can only refuse carriage due to nonpayment of the fare or credit arrangement
when what remains unpaid, or the credit arrangement which remains unsettled, is the fare for that
particular ticket or flight, in this case, the July 16, 2000 flight from Mahe Island to Paris.

In this case, respondent's unpaid obligation to petitioner did not include the payment for the July 16,
2000 flight. It refers to previous purchases respondent made pursuant to his credit arrangement with
petitioner. As petitioner did not indicate that its refusal to carry respondent is in relation to his previous
acts of not paying for his ticket or not settling his credit arrangement, petitioner cannot now claim that
respondent's unsettled credit arrangement for his previous purchase of tickets is the basis of petitioner's
refusal to carry him on board.

Indeed, the ambiguities in the contract, being one of adhesion, should be construed against the party
that caused its preparation -in this case, petitioner.

PRADO
29. No Full Text Yet
COMMON CARRIERS ARE OBLIGED TO EXERCISE EXTRAORDINARY DILIGENCE
Common carriers are obligated to exercise extraordinary diligence over the goods entrusted to their
care. This is due to the nature of their business, with the public policy behind it geared toward
achieving allocative efficiency and minimizing the inherently inequitable dynamics between the
parties to the transaction.||(Tan v. Great Harvest Enterprises, Inc., G.R. No. 220400, [March 20,
2019])
LOSS DUE TO ROBBERY SHALL BE CONSIDERED AS A FORTUITOUS EVENT ONLY WHEN
ATTENDED BY GRAVE OR IRRESISTIBLE THREAT, VIOLENCE OR FORCE
The loss of the soya beans here was not attended by grave or irresistible threat, violence, or force.
Instead, it was brought about by petitioner's failure to exercise extraordinary diligence when she
neglected vetting her driver or providing security for the cargo and failing to take out insurance on
the shipment's value.||| Thus, the petitioner is not absolved of the liabilities. (Tan v. Great Harvest
Enterprises, Inc., G.R. No. 220400, [March 20, 2019])

TAN V GREAT HARVEST ENTERPRISES, INC.

GR No. 220400, March 20, 2019
Leonen, J.
Facts:
On February 3, 1994, Great Harvest hired Tan to transport 430 bags of soya beans worth
P230,000.00 from Tacoma Integrated Port Services, Inc. (Tacoma) in Port Area, Manila to Selecta
Feeds in Camarin, Novaliches, Quezon City. That same day, the bags of soya beans were loaded
into Tan's hauling truck. Her employee, Rannie Sultan Cabugatan (Cabugatan), then delivered the
goods to Selecta Feeds. At Selecta Feeds, however, the shipment was rejected. Upon learning of
the rejection, Great Harvest instructed Cabugatan to deliver and unload the soya beans at its
warehouse in Malabon. Yet, the truck and its shipment never reached Great Harvest's warehouse.
On February 7, 1994, Great Harvest asked Tan about the missing delivery. At first, Tan
assured Great Harvest that she would verify the whereabouts of its shipment, but after a series of
follow-ups, she eventually admitted that she could not locate both her truck and Great Harvest's
goods. She reported her missing truck to the Western Police District Anti-Carnapping Unit and the
National Bureau of Investigation.
On February 19, 1994, the National Bureau of Investigation informed Tan that her missing
truck had been found in Cavite. However, the truck had been cannibalized and had no cargo in it.
After unheeded demands, Great Harvest filed a Complaint for sum of money against Tan.
In her Answer, Tan denied that she entered into a hauling contract with Great Harvest, insisting that
she merely accommodated it. Tan also pointed out that since Great Harvest instructed her driver to
change the point of delivery without her consent, it should bear the loss brought about by its
deviation from the original unloading point.
RTC granted Great Harvest's Complaint for sum of money. It found that Tan entered into a
verbal contract of hauling with Great Harvest, and held her responsible for her driver's failure to
deliver the soya beans to Great Harvest.
Tan filed an Appeal, but the Court of Appeals dismissed it in its March 13, 2015 Decision.|
Tan opines that she is not liable for the value of the lost soya beans since the truck hijacking
was a fortuitous event and because "the carrier is not an insurer against all risks of travel” as held
in De Guzman v CA.
Issue:
Should Annie Tan be held liable for the value of the stolen soya beans?
 Held:
Yes. Here, petitioner is a common carrier obligated to exercise extraordinary diligence over the
goods entrusted to her. Her responsibility began from the time she received the soya beans from
respondent's broker and would only cease after she has delivered them to the consignee or any
person with the right to receive them.
Petitioner's argument is that her contract of carriage with respondent was limited to
delivering the soya beans to Selecta Feeds. Thus, when Selecta Feeds refused to accept the
delivery, she directed her driver to return the shipment to the loading point. Respondent refutes
petitioner's claims and asserts that their standing agreement was to deliver the shipment to
respondent's nearest warehouse in case the consignee refused the delivery.
Nothing in the records shows that any of the exceptions found in Article 1734 caused the
loss of the soya beans. Petitioner failed to deliver the soya beans to the respondent because her
driver absconded with them. She cannot shift the blame for the loss to the respondent's supposed
diversion of the soya beans from the loading point to respondent's warehouse, as the evidence has
conclusively shown that she had agreed beforehand to deliver the cargo to respondent's warehouse
if the consignee refused to accept it.
Finally, petitioner's reliance on De Guzman v. Court of Appeals is misplaced. There, the
common carrier was absolved of liability because the goods were stolen by robbers who used "grave
or irresistible threat, violence[,] or force" to hijack the goods. De Guzman viewed the armed hijack as
a fortuitous event:
Under Article 1745 (6) above, a common carrier is held responsible —
and will not be allowed to divest or to diminish such responsibility — even for acts
of strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the goods
carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence[,] or force."
In contrast to De Guzman, the loss of the soya beans here was not attended by grave or
irresistible threat, violence, or force. Instead, it was brought about by petitioner's failure to exercise
extraordinary diligence when she neglected vetting her driver or providing security for the cargo and
failing to take out insurance on the shipment's value. As the Court of Appeals held:
Besides, as the records would show, appellant did not observe extra-
ordinary (sic) diligence in the conduct of her business as a common carrier. In
breach of their agreement, appellant did not provide security while the goods were
in transit and she also did not pay for the insurance coverage of said goods. These
measures could have prevented the hijacking (sic) or could have ensured the
payment of the damages sustained by the appellee.

FETALVERO
31. PENDING
A corporation, being a juridical entity, may act only through its directors, officers, and
employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs
but the direct liability of the corporation they represent. As an exception, directors or officers are
personally liable for the corporation's debts only if they so contractually agree or stipulate.
Without any evidence that respondent personally bound himself to the debts of the company he
represented, this Court cannot hold him civilly liable under the Trust Receipt Agreements. (BDO
Unibank v Antonio Choa, G.R. No. 237553; July 10, 2019)

x—————x

BDO UNIBANK, INC. v ANTONIO CHOA

G.R. No. 237553; July 10, 2019
LEONEN, J.

FACTS:
BDO Unibank filed a complaint for violation of the Trust Receipts Law (PD 115) against Antonio Choa,
General Manager and President of Camden Industries Inc. Choa signed several Trust Reciept
Agreements with Equitable PCIB (now BDO) with total worth of Php 20,000,000; with the undertaking to
remit proceeds of a sale of goods or turnover said goods if they remain unsold. Choa violated the Trust
Receipt Agreement by failing to remit Php 7,875,904.96.

Defendant Choa filed a demurrer to evidence, reasoning that his liability of Php 20,000,000 under the
Trust Receipt Agreement should have been compensated/offset with the liability of BDO Unibank against
Camden amounting to Php 90,000,000. This amount represents a judgement award in favor of Camden
in a prior civil case.

BDO assails the grant of demurrer of evidence, claiming that the motion for leave (to file demurrer)
was filed beyond the allowable period, and that BDO Unibank was denied due process during the
hearing of said Motion.

ISSUE:
Can Choa, President and General Manager of Camden Industries, be held personally liable for the civil
obligations imposed by the Trust Receipt Agreement?

HELD:
Although these pieces of evidence show that respondent signed the Trust Receipt Agreements, they do
not show that he signed them in his personal capacity. On the bottom right corner of the agreements are
two (2) lines: one for the "NAME OF CORPORATION," and the other for "AUTHORIZED SIGNATURE."
In all agreements, "Camden Inds." Was handwritten as the name of the corporation, while respondent's
signature appeared as the authorized signature. Clearly, respondent affixed his signature only as
Camden's representative.

Moreover, there was no guaranty clause or a similar clause on the page that he signed that would have
made him personally liable in case of default of the company. In Tupaz JV v. Court of Appeals:

“A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts
incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the
corporation they represent. As an exception, directors or officers are personally liable for the
corporation's debts only if they so contractually agree or stipulate.”

Without any evidence that respondent personally bound himself to the debts of the company he
represented, this Court cannot hold him civilly liable under the Trust Receipt Agreements.

SANGKAL
No personal liability in the absence of malice, bad faith, or provision
Doctrine 1: In the absence of malice, bad faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made personally liable for corporate liabilities.
(Montealegre v. Spouses De Vera G.R. No., 208920 Date July 10, 2019)

Requisites to hold corporate officer personally liable for corporate obligations

Doctrine 2: To hold a director or officer personally liable for corporate obligation is the exception and it
only occurs when the following requisites are present: (1) the complaint must allege that the director or
officer assented to the patently unlawful acts of the corporation, or that the director or officer was guilty
of gross negligence or bad faith; and (2) there must be proof that the director or officer acted in bad faith
(Montealegre v. Spouses De Vera G.R. No., 208920 Date July 10, 2019)

x—————x

TICKLER

Montealegre v. Spouses De Vera

G.R. No., 208920 Date July 10, 2019
JARDELEZA, J.

FACTS:
Petition for Certiorari against CA decision

Servandil won a case for illegal dismissal he filed against A. De Vera Corp. The corporation was held
liable to Servandil for backwages, separation pay and unpaid salary.
When the decision became final and executory, a writ of execution was issued against the movable and
immovable properties of A. De Vera Corp. and of respondent De Vera. Consequently, a parcel of land
registered in the name of respondent spouses De Vera was levied upon and sold to petitioners Jaime
Bilan Montealegre and Chamon’te Inc. at a public auction.

Subsequently, respondents filed an omnibus motion stating that the properties sold at auction does not
belong to the judgment debtor, the corporation, but to them, who were not impleaded as party
respondents in the case for illegal dismissal.

The CA reversed the resolutions of the NLRC affirming the order of the LA denying the omnibus motion
and instead directed the LA to implement the final and executory decision only against the assets of A.
De Vera Corp.

ISSUE:
WON the CA acted correctly in nullifying the writs of execution against the property of the respondent
and directing the execution only against the assets of the De Vera corp.

HELD:
Yes.

The piercing of the corporate veil does not apply in this case. That the governing law on personal liability
of directors or officers for debts of the corporation is still Section 31 of the Corporation Code.49

Thus, the doctrine of piercing the corporate veil applies only in three basic areas, namely: 1) defeat of
public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing
obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend
a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or
business conduit of a person, or where the corporation is so organized and controlled and its affairs are
so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
That the general rule is corporate officers are not held solidarily liable with the corporation for separation
pay because the corporation is invested by law with a personality separate and distinct from those
persons composing it as well as from that of any other legal entity to which it may be related.

To hold a director or officer personally liable for corporate obligation is the exception and it only occurs
when the following requisites are present: (1) the complaint must allege that the director or officer
assented to the patently unlawful acts of the corporation, or that the director or officer was guilty of gross
negligence or bad faith; and (2) there must be proof that the director or officer acted in bad faith.

BRILLANTES
THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION IS A LEGAL PRECEPT THAT
ALLOWS A CORPORATION'S SEPARATE PERSONALITY TO BE DISREGARDED UNDER
CERTAIN CIRCUMSTANCES SO THAT A CORPORATION AND ITS STOCKHOLDERS OR
MEMBERS, OR A CORPORATION AND ANOTHER RELATED CORPORATION SHOULD BE
TREATED AS A SINGLE ENTITY. "The corporate mask may be removed or the corporate veil pierced
when the corporation is just an alter ego of a person or of another corporation." (ABS-CBN
Broadcasting Corporation vs. Honorato Hilario, GR No. 193126, July 10, 2019)

x—————x

THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION IS A LEGAL PRECEPT THAT
ALLOWS A CORPORATION'S SEPARATE PERSONALITY TO BE DISREGARDED UNDER
CERTAIN CIRCUMSTANCES SO THAT A CORPORATION AND ITS STOCKHOLDERS OR
MEMBERS, OR A CORPORATION AND ANOTHER RELATED CORPORATION SHOULD BE
TREATED AS A SINGLE ENTITY.

ABS-CBN Broadcasting Corporation vs. Honorato Hilario, substituted by Gloria Hilario and
Dindo Banting
GR No. 193136, July 10, 2019
Carandang, J.

FACTS:

Creative Creatures, Inc. (CCI) is engaged as one of the independent contractors of ABS-CBN. On March
6, 1995, respondent Honorato was hired by CCI as Designer. He rose from the ranks until he became
Set Controller. Respondent Banting, on the other hand, was engaged by CCI as Metal Craftsman, and
later on also became a Set Controller. After Mr. Edmund Ty decided to retire as Managing Director of
CCI, the latter was not able to generate more revenues. With this, the Board of Directors of CCI decided
to close the company down by shortening its corporate term up to October 31, 2003. It was indicated in
the Minutes of the Special Joint Meeting of the Board of Directors and Stockholders dated 23 July 2003.

In August 2003, Edmund Ty organized and created Dream Weaver Visual Exponents, Inc. (DWVEI).
Like CCI, DWVEI is primarily engaged in the business of conceptualizing, designing and constructing
sets and props for use in television programs and similar projects. Later on, respondents Banting and
Hilario were served their respective notices of the closure of CCI effective October 5, 2003. Respondents
filed a complaint for illegal dismissal, illegal deduction, non-payment of meal allowances, with prayer for
damages against CCI and petitioner before the NLRC. They claimed that the closure of CCI was not due
to any of the authorized causes provided by law but was done in bad faith for the purpose of
circumventing the provisions of the Labor Code, as CCI was still conducting operations under the guise
of DWVEI. The Court ruled in favor of the respondents, ordering ABS-CBN to be jointly and severally
liable with CCI for payment of monetary award to respondents. The CA, however, partially granted the
petition filed by petitioner. The amount received by respondents by way of quitclaims was ordered
deducted from their monetary award to be computed from the time of their termination on October 5,
2003 up to their actual reinstatement.

ISSUES:

(1) Whether petitioner was correctly held jointly and severally liable with CCI for payment of
monetary award to respondents
(2) Whether or not the termination, as a result of CCI's closure, was valid and legal and was done
in good faith and in accordance with the law.

HELD:

(1) Yes. The present case falls under the instance where a corporation is merely a farce since it is
a mere alter ego or business conduit of person or in this case a corporation. "The corporate
 mask may be removed or the corporate veil pierced when the corporation is just an alter ego of
a person or of another corporation." By looking at the circumstances surrounding the creation,
incorporation, management and closure and cessation of business operations of CCI, it cannot
be denied that CCI's existence was dependent upon Ty and petitioner.

First, the internal Scenic Department which initially handled the props and set designs of
petitioner was abolished and shut down and CCI was incorporated to cater to the props and set
design requirements of petitioner, thereby transferring most of its personnel to CCI. Notably,
CCI was a subsidiary of petitioner and was incorporated through the collaboration of Ty and the
other major stockholders and officers of petitioner. CCI provided services mainly to petitioner
and its other subsidiaries. When Edmund Ty organized his own company, petitioner hired him
as consultant and eventually engaged the services of his company DWVEI. As a result of which
CCI decided to close its business operations as it no longer carried out services for the design
and construction of sets and props for use in the programs and shows of petitioner, thereby
terminating respondents and other employees of CCI. Petitioner clearly exercised control and
influence in the management and closure of CCI's operations, which justifies the ruling of the
appellate court and labor tribunals of disregarding their separate corporate personalities and
treating them as a single entity.

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

(2) No, the Court is not convinced. While the CCI has complied with the requirements of service of
notice of cessation of operations one month before the intended date of closure and the
payment of termination pay, it was not sufficiently proven that its closure of business was done
good faith. As correctly noted by both the LA and the NLRC, as well as the appellate court, CCI
failed to satisfactorily show that its closure of business or cessation of operations was bona fide
in character and not intended to defeat or circumvent the tenurial rights of employees.

A closure or cessation of business or operations as ground for the termination of an employee

is considered invalid when there was no genuine closure of business but mere simulations
which make it appear that the employer intended to close its business or operations when in
truth, there was no such intention. To unmask the true intent of an employer when effecting a
closure of business, it is important to consider not only the measures adopted by the employer
prior to the purported closure but also the actions taken by the latter after the act.

CHUA
CONTRACTS OF SERVICES SHOULD BE AUTHORIZED BY THE SC EN BANC, NOT BY THE
CHIEF JUSTICE
It is clear that the Chief Justice is not authorized by the Court En Banc to independently act on behalf of
the Supreme Court to enter into government contracts that are highly technical, proprietary, primarily
confidential or policy determining such as the subject Contracts of Services. The power to enter into
such contracts was clearly not delegated by the SC En Banc to the Chief Justice. Thus, the Contracts
of Services should have been authorized by the SC En Banc which has administrative power over all
courts and personnel thereof, and not merely by the then Chief Justice (Re: Consultancy Services of
Helen Macasaet, A.M. No. 17-12-02-SC, July 16, 2019).

x—————x

CONTRACTS OF SERVICES SHOULD BE AUTHORIZED BY THE SC EN BANC, NOT BY THE

CHIEF JUSTICE

Re: Consultancy Services of Helen Macasaet

A.M. No. 17-12-02-SC, July 16, 2019
Carpio, J.

FACTS:
This is an administrative matter involving the legality of the Contract of Services between the SC and
Ms. Macasaet for her rendition of consultancy services for the Enterprise Information Systems Plan
(EISP) for the years 2010-2014.

The EISP is intended to serve as the framework of the ICT initiatives of the Judiciary. The SC approved
the EISP submitted by INDRA. However, the 2009 budget did not include a budget for the
implementation of the EISP and on-going ICT projects. Thus, there was a need to hire the services of
an ICT consultant to review the status of the implementation of the EISP and other related ICR projects.,
The Bids and Awards Committee for Consultancy Services (BAC-SC) found Ms. Macasaet to be the
most qualified among the 3 recommended consultants, thus the SC entered into two separate 6-month
contract of services with Ms. Macasaet. The records, however, are bereft of any explanation as to how
the 3 consultants were chosen by the BAC-SC. Overall, the SC entered into a Contract of Services with
Ms. Macasaet for a total of 8 times due to the alleged continuing need for the services of a consultatnt
in the implementation of EISP and in developing ICT policies to support it.

At present, the legality of the eight contract of services entered into by the SC by negotiated
procurement, ostensibly represented by Atty. Candelaria, with Ms. Macasaet, is being questioned.

ISSUE:
Are the 8 Contracts of Services entered into with Ms. Macasaet valid and binding upon the government?

HELD:
No, all the Contracts of Services entered into with Ms. Macasaet were declared void ab initio.

The signatory in all the eight (8) Contracts of Services with Ms. Macasaet was Atty. Candelaria in her
capacity as Chief Administrative Officer and Deputy Clerk of Court. However, the records fail to show
that she was authorized in writing by the SC En Banc to act as signatory of the Court in entering into
these Contracts of Services with Ms. Macasaet. Even assuming for the sake of argument that there was
an "implied authority," as in fact nothing of such authority can be implied from the contract, an "implied
authority" is not the "full authority" in writing required under Sections 4 and 5 of Executive Order (EO)
No. 423.

In A.M. No. 10-1-10-SC, the SC En Banc authorized the Clerk of Court En Banc, the Court Administrator,
the Chief Justice, the Chairpersons of the Divisions to approve certain procurement requests, subject to
certain threshold amounts. A.M. No. 10-1-10-SC also stated which procurement requests must be
approved by the SC En Banc. While the Chief Justice may approve procurement requests if it meets the
threshold amount approved by the SC En Banc through its resolution, this authority to approve is still
delegated by the SC En Banc and is not inherent in the position of Chief Justice. To repeat, even the
authority to approve procurement requests is delegated by the SC En Banc. Without such delegated
authority from the SC En Banc, the Chief Justice simply cannot approve any procurement requests on
behalf of the Supreme Court. It is with more reason that the Chief Justice cannot approve procurement
contracts, as distinguished from procurement requests, without the delegated authority from the
Supreme Court En Banc.

It is clear that the Chief Justice is not authorized by the Court En Banc to independently act on behalf of
the Supreme Court to enter into government contracts that are highly technical, proprietary, primarily
confidential or policy determining such as the subject Contracts of Services. The power to enter into
such contracts was clearly not delegated by the SC En Banc to the Chief Justice. Thus, the Contracts
of Services should have been authorized by the SC En Banc which has administrative power over all
courts and personnel thereof, and not merely by the then Chief Justice.

Indisputably, all of the Contracts of Services with Ms. Macasaet were signed by Atty. Candelaria without
the written "full authority" of the SC En Banc or even the then Chief Justice. There was a blatant violation
of Section 4 of EO No. 423. Thus, these Contracts of Services were declared "invalid and not binding
on the Government.”

Notes:
- No issue/s or doctrine/s related to any commercial law subjects in this case

- As to the issue of Ms. Macasaet’s Qualifications:

The SC finds that Ms. Macasaet was not qualified to be considered a Highly Technical
Consultant in relation to the implementation of the Updated EISP Project. Moreover, there was
no actual need to hire a consultant for the mere overview of the implementation of the Updated
EISP Project as the MISO Head is already sufficiently qualified to implement such project.

ABRIAM
TICKLER: To justify the piercing of the veil of corporate fiction, "it must be shown by clear and
convincing proof that the separate: and distinct personality of the corporation was purposefully
employed to evade a legitimate and binding commitment and perpetuate a fraud or like
wrongdoings

DOCTRINE: The doctrine of piercing the veil of corporate fiction is a legal precept that allows a
corporation's separate personality to be disregarded under certain circumstances, so that a
corporation and its stockholders or members, or a corporation and another related corporation
could be treated as a single entity. It is meant to apply only in situations where the separate
corporate personality of a corporation is being abused or being used for wrongful purposes.

Spouses Nolasco Fernandez and Maricris Fernandez Vs. Smart Communications, Inc.

G.R. No. 212885. July 17, 2019

FACTS: Everything Online, Inc. (EOL) is a corporation that offers internet services nationwide
through franchisees. Smart Communications, Inc. (SMART), on the other hand, is a mobile phone
service provider. Petitioners Nolasco and Maricris were the Chief Executive Officer (CEO) and
Member of the Board of Directors of EOL, respectively.

EOL sought SMART sometime in 2006 to provide the mobile communication requirements for its
expansion. Series of meetings ensued between the parties where it was determined that EOL
would be needing approximately 2,000 post-paid lines with corresponding cell phone units.
Nineteen (19) of these lines shall be under the corporate account of EOL while the rest of the lines
and phones shall be distributed to EOL's franchisees. 7 ln view of this, EOL's corporate president
Salustiano G. Samaco III (Samaco III), signed on separate occasions, two (2) Corporate Service
Applications (SAF) for the 2,000 post-paid lines with corresponding cell phone units. He also
signed Letters of Undertaking8 to cover for the 1,119 phone lines issued by SMART to EOL thus
far. Paragraph 8 of these Letters of Undertaking read:

8. The President and each one of the directors and officers of the corporation shall be
held solidarily liable in their personal capacity with the SUBSCRIBER for all charges for the
use of the SMART Celfones (sic) units acquired by the said SUBSCRIBER.

SMART averred that after the execution of the EOL Undertaking, its credit and collection
department sent, by email, phone bills to EOL that had been previously returned to SMART. These
bills were for the collection of the monthly payment due on the lines that were supposedly given
to EOL's franchisees. However, EOL allegedly refused to receive the bills, stating that it was not
liable for the payment of bills of phone lines assigned to franchisees. On October 13, 2006, SMART
notified EOL that its collectibles already amounted to at least P18,000,000.00 representing the
costs of cell phone units and the plans usage. EOL officers were also reminded that under the EOL
Undertaking and the Letter A6rreements, it is bound to pay the bills of the franchisees, whether
the phones were in the possession of the franchisees or not.

SMART failed to collect from EOL despite repeated demands. Thus, on April I, 2009, an Amended
Complaint19 with an application for a writ of preliminary attachment was filed by SMART before
the RTC of Makati, Branch 62 for Collection of Sum of Money docketed as Civil Case No. 09-199
against EOL and all its directors and officers including petitioners Nolasco and Maricris.

Petitioners averred that they are not the real party in interest in the case.22 Maricris claimed that
the only allegation holding the directors and officers personally and solidarily liable with EOL was
the alleged provisions in the Letter Agreements23 and EOL Undertaking.2'+ The Letter
Agreements and EOL Undertaking failed to show that she expressly agreed to be bound by the
provisions contained therein. Accordingly, the complaint against her must be dismissed.25 With
respect to Nolasco, petitioners argued that while his signature appears in the EOL Undertaking, it
is not a sufficient ground to implead him in the complaint together with EOL. It was SMART that
drafted the EOL Undertaking and Nolasco's participation is limited to the affixing of his signature
thereon after EOL's President has already signed it. Nolasco signed in good faith and without the
opportunity to read the contents of the same. Be that as it may, Nolasco is not the real party in
interest in this case because he was no longer an Officer/Director of EOL at the time the complaint
was filed as their entire share was already assigned to one of EOL's directors.

ISSUE: Whether or not there was a ground to dismiss complaint for a collection of sum of money
against petitioners as corporate officer and director?

HELD: The Court finds the petition partly meritorious.

As a general rule, a corporation's representatives are not bound by the terms of the contract
executed by the corporation. "They are not personally liable for obligations and liabilities incurred
on or in behalf of the corporation. "

There are instances, however, when the distinction between personalities of directors, officers,
and representatives, and of the corporation, are disregarded. This is piercing the veil of corporate
fiction. 53

The doctrine of piercing the veil of corporate fiction is a legal precept that allows a corporation's
separate personality to be disregarded under ce11ain circumstances, so that a corporation and
its stockholders or members, or a corporation and another related corporation could be treated
as a single entity. It is meant to apply only in situations where the separate corporate personality
of a corporation is being abused or being used for wrongful purposes. 54

The piercing of the corporate veil must be done with caution. 55 To justify the piercing of the veil
of corporate fiction, "it must be shown by clear and convincing proof that the separate: and
distinct personality of the corporation was purposefully employed to evade a legitimate and
binding commitment and perpetuate a fraud or like wrongdoings."56

A corporate director, trustee, or officer is to be held solidarily liable with the corporation in the
following instances:

1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a)
vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with
gross negligence in directing the corporate affairs; ( c) are guilty of conflict of interest to
the prejudice of the corporation, its stockholders or members, and other persons;
 2. When a director or officer has consented to the issuance of watered stocks or who,
having knowledge thereof, did not fo11hwith file with the corporate secretary his written
objection thereto;

3) When a director, trustee or officer has contractually agreed or stipulated to hold

himself personally and solidarily liable with the Corporation; or

4) When a director, trustee or officer is made, by specific provision of law, personally

liable for his corporate action.57 These instances have not been shown in the case of
pet1t10ner Maricris.

While the Amended Complaint alleged that EOL fraudulently refused to pay the amount due,
nothing in the said pleading or its annexes would show the basis of Maricris' alleged fraudulent
act that warrants piercing the corporate veil. No explanation or narration of facts was presented
pointing to the circumstances constituting fraud which must be stated with particularity, thus
rendering the allegation of fraud simply an unfounded conclusion of law. Without specific
averments, "the complaint presents no basis upon which the court should act, or for the
defendant to meet it with an intelligent answer and must, perforce, be dismissed for failure to
state a cause of action.

This is not the case with petitioner Nolasco. Nolasco, as CEO, signed the EOL Undertaking
purportedly binding himself to be "held solidarily liable in his personal capacity with the
franchisee or assignee for all charges for the use of SMART cell phone units acquired by Everything
Online, Inc." Such allegation proffers hypothetically admitted ultimate facts, which would warrant
an action for a collection for sum of money based on the provision of the EOL Undertaking.

ARGONZA
INSURER MUST FILE ACTON AGAINST TORTFEASOR WITHIN FOUR YEARS FROM THE TIME
THE TORT IS COMMITTED AGAINST THE INSURED (NOTE: NEW DOCTRINE TO BE APPLIED
PROSPECTIVELY)

Based on the above-discussed considerations, the Court must heretofore abandon the ruling in Vector
that an insurer may file an action against the tortfeasor within 10 years from the time the insurer
indemnifies the insured. Following the principles of subrogation, the insurer only steps into the shoes of
the insured and therefore, for purposes of prescription, inherits only the remaining period within which
the insured may file an action against the wrongdoer. The prescriptive period is four years from the time
the tort is committed against the insured by the wrongdoer. (Henson v. UCPB General Insurance Co.,
Inc., G.R. No. 223134, August 14, 2019)
x—————x

INSURER MUST FILE ACTON AGAINST TORTFEASOR WITHIN FOUR YEARS FROM THE TIME
THE TORT IS COMMITTED AGAINST THE INSURED (NOTE: NEW DOCTRINE TO BE APPLIED
PROSPECTIVELY)

Vicente G. Henson Jr. v. UCPB General Insurance Co., Inc.

G.R. No. 223134, August 14, 2019
Perlas-Bernabe, J.

FACTS:
From 1989 to 1999, National Arts Studio and Color Lab leased the front portion of the ground floor of a
two floor building in Pampanga, then owned by petitioner Henson. In 1999, NASCL gave up its initial
lease and instead, leased the right front portion of the ground floor and the entire second floor of the
said building and made renovations on the building’s piping. Meanwhile, Copylandia Office Systems
Corp. moved to the ground floor. On May 9, 2006, water later leaked in the building and damaged
Copylandia’s equipment causing injury amounting to P2,062,640. The equipment was insured by
respondent UCPB General Insurance Co., Inc. Eventually, the parties settled for P1,326,342.76 on
November 2, 2006. This resulted in the respondent’s subrogation to the rights of Copylandia over all
claims and demands arising from the said incident. On May 20, 2010, respondent demanded from
NASCL for the payment of the claim to no avail. Thus, it filed a complaint for damages with RTC. In
2010, petitioner transferred the ownership of the building to Citrinne Holdings, Inc. where he is
stockholder and President. On October 6, 2011, CHI was included in the amended complaint. On April
21, 2014, respondent filed a Motion to Admit Attached Amended Complaint and Pre-Trial Brief, praying
that petitioner, instead of CHI, be impleaded as a party-defendant to the case, considering that petitioner
was then the owner of the building when the water leak damage incident happened.

Respondent, in the complaints, faults NASCL for negligence in not properly maintaining the property and
CHI/petitioner as owner for neglecting to maintain the drainage. CHI opposed the motion on the ground
of prescription, arguing that since respondent’s cause of action is based on quasi delict and must have
been brought within four years from its accrual on May 9, 2006.

The RTC ruled in favor of respondent finding that respondent’s cause of action arose when it paid
Copylandia’s insurance claim. Since it was merely enforcing its right of subrogation, the prescriptive
period is 10 years reckoned from November 2, 2006. The CA affirmed the RTC ruling.

ISSUE:
Has respondent’s claim prescribed?

HELD:
No, respondent’s claim had not prescribed because, applying the old rule, the prescriptive period of 10
years from time of payment had not yet lapsed.

(IMPORTANT NOTE: The Court abandoned the old doctrine in Vector Shipping Corporation v.
American Home Assurance Company which reasoned that the claim therein is premised on the right
of subrogation under the Civil Code and thus one created by law. Following this, the Court still applied
the rule that the prescriptive period is 10 years from the time of payment by the insurer to the insured,
which gave rise to an obligation created by law. THIS IS NO LONGER THE RULE. HOWEVER, this
was still applied because the abandonment of the Vector Ruling should be prospective in application.)

(Note: The Court discussed the new doctrine and how it would have been applied given the facts
of this case as follows:)
For actions of such nature that have not yet been filed at the time of finality of this Decision:

(a) For cases where the tort was committed and the consequent loss/injury against the insured occurred
prior to the finality of this Decision, the subrogee-insurer is given a period not exceeding four years from
the time of the finality of this Decision to file an action against the wrongdoer; provided that in all
instances, the total period to file such case shall not exceed 10 years from the time the insurer is
subrogated to the right of the insured.

(b) For cases where the tort was committed and the consequent loss/injury against the insured occurred
only upon or after the finality of this Decision, the Vector doctrine would hold no application. The
prescriptive period is four years from the time the tort is committed against the insured by the wrongdoer.

Rationale: Since the cause of action for quasi-delict and the consequent subrogation of the insurer
would arise after due notice of Vector’s abandonment, all persons would now be bound by the present
doctrine on subrogation as ruled in this Decision.

Based on the above-discussed considerations, the Court must heretofore abandon the ruling in Vector
that an insurer may file an action against the tortfeasor within 10 years from the time the insurer
indemnifies the insured. Following the principles of subrogation, the insurer only steps into the shoes of
the insured and therefore, for purposes of prescription, inherits only the remaining period within which
the insured may file an action against the wrongdoer.

In this case, it is undisputed that the water leak incident, which gave rise to Copylandia’s cause of action
against any possible defendants, including NASCL and petitioner, happened on May 9, 2006. As this
incident gave rise to an obligation classified as a quasi-delict, Copylandia would have only had 4 years
or until May 9, 2010, within which to file a suit to recover damages. When Copylandia’s rights were
transferred to respondent by virtue of the latter’s payment of the former’s insurance claim on November
2, 2006, as evidenced by the Loss and Subrogation Receipt, respondent was likewise bound by the
same prescriptive period. Since it was only on: (a) May 20, 2010 when respondent made an extrajudicial
demand to NASCL, and thereafter, filed its complaint; (b) October 6, 2011 when respondent amended
its complaint to implead CHI as party-defendant; and (c) April 21, 2014 when respondent moved to,
further ament the complaint in order to implead petitioner as party-defendant in lieu of CHI, prescription
– if adjudged under the present parameters of legal subrogation under this Decision – should have
already set in.

BINAYAN
A FOREIGN CORPORATION “TRANSACTING BUSINESS” IN THE PHILIPPINES MUST SECURE
A LICENSE TO HAVE ACCESS TO OUR COURTS
Section 133 of the Corporation Code bars a foreign corporation “transacting business” in the Philippines
without a license access to our courts. Thus, in order for a foreign corporation to sue in Philippine courts,
a license is necessary only if it is “transacting or doing business” in the country. Conversely, if an
unlicensed foreign corporation is not transacting or doing business in the Philippines, it can be permitted
to bring an action even without a license (Commissioner of Internal Revenue vs. Interpublic Group
of Companies, G.R. No. 207039; august 14, 2019).

x-------------------x

A FOREIGN CORPORATION “TRANSACTING BUSINESS” IN THE PHILIPPINES MUST SECURE

A LICENSE TO HAVE ACCESS TO OUR COURTS

Commissioner of Internal Revenue vs. Interpublic Group of Companies

G.R. No. 207039, August 14, 2019
J.C. Reyes, Jr., J.

FACTS: Interpublic Group of Companies, Inc. (IGC) is a non-resident foreign corporation duly organized
and existing under and by virtue of the laws of the State of Delaware, USA. The IGC owns 2,999,998
shares of 30% of the total outstanding and voting capital stock of McCann Worldgroup Philippines. Inc.
(McCann), a domestic corporation duly organized and existing under the laws of the Philippines engaged
in the general advertising business. In 2006, McCann’s Board of Directors declared cash dividends. IGC
received cash dividends from McCann in the amount of P61,694, 605.51. On June 15, 2006, McCann
withheld a Final Withholding Tax at the rate of 35% on the IGCs cash dividends and remitted the payment
of the FWT in the amount of P21,593,111.93 to CIR. On September 27, 2007, the IGC established a
Regional Headquarter (RHQ) in the Philippines. The RHQ was converted into its Regional Operating
Headquarters (ROHQ).

On March 5, 2008, the IGC filed an administrative claim for refund or issuance of tax credit certificate
(TCC) in the amount of P12,338,921.00, representing the alleged overpaid FWT on dividends paid by
McCann to IGC. In the said administrative claim, the IGC averred that as a non-resident foreign
corporation, it may avail of the preferential FWT rate of 15% on dividends received from a domestic
corporation under Section 28 (B) (5) (b) of the tax code.

CIR failed to act on IGC’s claim for refund or issuance of TCC. This prompted the IGC to file a petition
for review with the CTA. CIR was ordered to refund or issue TCC by the CTA. CIR filed the instant
petition with this court. CIR argues that the IGC, being an unlicensed corporation has no capacity to sue
in the Philippine courts in accordance with the corporation code.

ISSUE: Can a non-resident foreign corporation which collect dividends from the Philippines sue here to
claim for the tax refund?

HELD: YES.

Section 133 of the Corporation Code provides:

SEC. 133. Doing Business without a License. – No foreign corporation transacting business in
the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene
in any action, suit or proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine court or administrative tribunals on any
valid cause of action recognized under the Philippine law.

The provision bars a foreign corporation “transacting business” in the Philippines without a license
access to our courts. Thus, in order for a foreign corporation to sue in Philippine courts, a license is
necessary only if it is “transacting or doing business” in the country. Conversely, if an unlicensed foreign
corporation is not transacting or doing business in the Philippines, it can be permitted to bring an action
even without a license.

Section 3 (d) of R.A. No. 7042 provides: xxxxxx “that the phrase “doing business” shall not be deemed
to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered
to do business xxxxxx”. It is clear then that IGC’s act of subscribing shares of stocks from McCann, a
duly registered domestic corporation, maintaining investments therein, and deriving dividend income
therefrom, does not qualify as “doing business” contemplated under R.A. No. 7042. Hence, the IGC is
not required to secure license before it can file a claim for tax refund.

MONDIGO
An Insurance Corporation who succeeds in proving that their refusal to pay the proceeds was
justifiable does not free them from any liability under their policy.
While their explanation satisfactorily negated the conclusion that their refusal to pay was done
unjustifiably so as to warrant the application of Sections 243 and 244 of the Insurance Code, the same
was not sufficient to free them from any liability under their respective policies. (First Lepanto Taisho
Insurance Corporation vs. Lavine Loungewear Manufacturing Inc., G.R. No. 197219, October 1,
2019)

x—————x

Insurance Proceeds

First Lepanto Taisho Insurance Corporation vs. Lavine Loungewear Manufacturing Inc.
G.R. No. 197219, October 1, 2019
Lazaro-Javier, J.

FACTS:
This is a mere resolution by the Supreme Court First division.

The issues relevant to the consolidated petitions hinges on the fire loss claims by (Lavine) with the
Philippine Fire and Marine Insurance Corp. (PFMIC), Rizal Surety and Insurance Co. (RSIC), Tabacalera
Insurance Corp. (TICO) and First Lepanto Taisho Insurance Corp., in connection with its loan and
mortgage contract with Equitable Banking Corporation (Now BDO Unibank Inc.).

In its assailed resolution, the CA held that the dismissal of the main complaint did not render the
intervention ineffective. Neither is the trial court divested of jurisdiction over the intervenors’ complaint
by their non-payment of docket fees.

On the merits, the CA set the proper valuation of the loss assessment at P112, 245, 324.34 based on
the recommendation of the Association of Philippine Adjustment Companies (APAC). It found the
insurance companies not guilty of unreasonable delay in the payment of the proceeds which would
warrant the imposition of interest twice the ceiling prescribed by the Monetary Board. Instead, the CA
fixed the insurance companies’ interest liability at six percent (6%) under Article 2209 of the Civil Code,
and order the remand of the case to the trial court to determine the correct amount of the loan.

After a thorough review of the record, We sustain the findings and conclusions of law of the CA, being
in accord with law and evidence.

ISSUE:
Are the insurance companies liable under Article 2209 of the Civil Code?

HELD:
Yes. PFMIC, RSIC, and First Lepanto assert in common the improper imposition of any interest
payments over their respective obligations. They argued that the CA’s findings of the absence of the
delay in the release of the insurance proceeds ran counter to any charge of interest.

This assertion is devoid of basis.

The insurance companies’ refusal to pay the claim was due to the intra-corporate dispute among the
board of directors of Lavine and the conflicting claims to the insurance proceeds. While their explanation
satisfactorily negated the conclusion that their refusal to pay was done unjustifiably so as to warrant the
application of Sections 243 and 244 of the Insurance Code, the same was not sufficient to free them
from any liability under their respective policies.

The respective obligation of the insurance companies must be subject to 6% interest.

FABICO
CORPO

THE INSTITUTION OF A DERIVATIVE SUIT NEED NOT BE PRECEDED BY A BOARD

RESOLUTION.Since the board is guilty of breaching the trust reposed in it by the stockholders, it is but
logical to dispense with the requirement of obtaining from it authority to institute the case and to sign the
certification against forum shopping. Thus the institution of a derivative suit need not be preceded by a
board resolution. (Ago Realty & Development Corporation vs. Dr. Angelita Ago, G. R. No. 210906/
G.R. No. 211203 October 16, 2019)

BEFORE INSTITUTING A DERIVATIVE SUIT, THE RELATOR-STOCKHOLDER MUST EXERT ALL

REASONABLE EFFORTS TO EXHAUST ALL REMEDIES AVAILABLE
Before instituting a derivative suit, the relator-stockholder must exert all reasonable efforts to exhaust all
remedies available under the articles of incorporation, the by-laws, and the laws or rules governing the
corporation or partnership to obtain the relief he or she desires. Contrary to the postulation of Emmanuel
and Corazon, their attempt to settle the dispute with Angelita can hardly be considered "all reasonable
efforts to exhause all remedies available." In Yu et al v Yukayguan et al, the Court rejected the argument
that attempts between stockholders to amicably settle a corporate dispute constiture "all reasonable
efforts to exhaust all remedies available." (Ago Realty & Development Corporation vs. Dr. Angelita
Ago, G. R. No. 210906/ G.R. No. 211203 October 16, 2019)

x---------------------------x
THE INSTITUTION OF A DERIVATIVE SUIT NEED NOT BE PRECEDED BY A BOARD
RESOLUTION

BEFORE INSTITUTING A DERIVATIVE SUIT, THE RELATOR-STOCKHOLDER MUST EXERT ALL

REASONABLE EFFORTS TO EXHAUST ALL REMEDIES AVAILABLE

Ago Realty & Development Corporation vs. Dr. Angelita Ago

G. R. No. 210906/ G.R. No. 211203 October 16, 2019
Reyes, A., JR.,J.:

FACTS:
Petitioner Ago Realty & Development Corporation (ARDC) is a close corporation. Its stockholders are
petitioner emmanuel F. Ago, his wife Corazon C. Ago, their children Emmanuel Victor Ago and Arthur
Emmanuel Ago and respondent Angelita F. Ago. Angelita introduced improvements on a lot titled in the
name of ARDC without the proper resolution from the corporation's Board of Directors. Consequently,
ARDC and Emmanuel et al filed a complaint alleging that Angelita, in connivance with other local officials
of Legazpi City intoduced unauthorized improvement on the property.

The respondents alleged that ARDC never authorized the institution of the suit. Without a resolution
emanating from the corporation's Board of Directors, it was argued that Emmanuel et al had no legal
standing to bring the case since the lots in question belonged to ARDC.

ISSUE:

May Emmanuel et al sue on behalf of ARDC absent a resolution or any other grant from its Board of
Directors?

HELD:

No.

The power to sue is lodged in the board of directors, acting as a collegial body. Thus in the absence of
any clear authority from the board, charter or by-laws, no suit may be maintained on behalf of the
corporation. A case instituted by a corporation without authority from its board of directors is subject to
dismissal on the ground of failure to state a cause of action.
As an exception to the foregoing rule, jurisprudence recognized certain instances when minority
stockholders may bring suits on behalf of corporations. Where the board of directors itself is a party to
the wrong, either because it is the author thereof or because it refuses to take remedial action, equity
permits individual stockholders to seek redress,

Since the board is guilty of breaching the trust reposed in it by the stockholders, it is but logical to
dispense with the requirement of obtaining from it authority to institute the case and to sign the
certification against forum shopping. Thus the institution of a derivative suit need not be preceded by a
board resolution.

Derivative suits are grounded not on law, but on equity. Despite derivative suits being grounded on
equity, they cannot prosper in the absence of any or some of the requisites enumerated in the absence
of any or some of the requisites enumerated un the Interim Rules of Procedure for Intra-Corporate
Controversies, viz.:
Section 1. Derivative action.- A stockholder or member may bring an action in the name of a corporation or association, as
the case may be, provided that:

1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and the time the
action was filed;

2) He exerted all reasonable efforts and alleges the same with particularity in the complaint, to exhaust all remedies available
under the articles of incorporation, by laws, laws or rules governing the corporation or partnership to obtain the relief he
desires;

3) No appraisal rights are available for the acts or acts complained of; and

4) The suit is not a nuisance or harassment suit

The second requisite does not obtain in this case. Before instituting a derivative suit, the relator-
stockholder must exert all reasonable efforts to exhaust all remedies available under the articles of
incorporation, the by-laws, and the laws or rules governing the corporation or partnership to obtain the
relief he or she desires. Contrary to the postulation of Emmanuel and Corazon, their attempt to settle
the dispute with Angelita can hardly be considered "all reasonable efforts to exhause all remedies
available." In Yu et al v Yukayguan et al, the Court rejected the argument that attempts between
stockholders to amicably settle a corporate dispute constiture "all reasonable efforts to exhaust all
remedies available."

More importantly, an apparent remedy available to Emmanuel et al was to cause ARDC itself, through
its Board of Directors, to directly institute the case. because of their controlling interest in the corporation,
Emmanuel et al could have prevailed upon the board to pass a resolution authorizing any of them to file
the case and sign the certification against forum shopping.

BUENAVISTA
INSURANCE LAW
INSURANCE COMPANY IS ESTOPPED FROM ASSAILING THE VALIDITY OF THE BAIL BOND
DUE TO SILENCE AND FAILURE TO NOTIFY THE COURT
The insurance company is estopped from assailing the validity of the bail bond. By its silence and failure
to notify the RTC despite repeated notice as to the existence of the bail bond in favor of the accused,
the RTC Judge was made to believe that the Operations Manager’s act of issuing the bail bond was
authorized by the insurance company. (People v. Industrial Insurance Company, Inc., G.R. No.
222955, October 16, 2019)

x-----------------------------------------------------------------------x

INSURANCE COMPANY IS ESTOPPED FROM ASSAILING THE VALIDITY OF THE BAIL BOND
DUE TO SILENCE AND FAILURE TO NOTIFY THE COURT

People v. Industrial Insurance Company, Inc.

G.R. No. 222955, October 16, 2019
Inting, J.

FACTS:
This is a Petition for Review on Certiorari filed by the petitioner through the Office of the Solicitor General
assailing the CA Decision and Resolution which reversed the decision of the RTC Judge Albert Fonacier
denying the Motion to Lift and Recall Forfeiture Order and to Withdraw Approval of and Return IICI Bail
Bond No. JCR (2) 005246 of respondent Industrial Insurance Company, Inc. (IICI), not declaring IICI
Bail Bond JCR No. (2) 005246 void, and ordering the issuance of a writ of execution against it.

IICI, a non-life insurance company, executed a General Agency Agreement (GAA) with FGE Insurance
Management (FGE), a single proprietorship owned by Feliciano Enriquez (Enriquez), whereby it
designated FGE as its general agent for the solicitation of non-life insurance including bonds. Thereafter,
IICI also appointed Enriquez as its Operations Manager for Judicial Bonds – Criminal Cases with
authority to issue bonds in criminal cases up to the maximum amount of P100,000.00. In the criminal
case filed against the accused Rosita Enriquez (accused) for illegal possession of drugs before the RTC,
accused posted the bail bond in the amount of P200,000.00. It was signed by Enriquez and approved
by the 1st Vice Executive Judge. Thereafter, IICI revoked Enriquez’s authority after discovering that
Enriquez had not been remitting proper premiums or giving a full and written accounting of all his bail
bond transactions with the courts, or furnishing copies of IICI bail bonds that he filed in court, including
the bail bond of the accused. The Court Administrator and the Sandiganbayan were then notified of the
revocation of Enriquez’s authority. For failure of the accused to appear at the hearing, Judge Fonacier
issued an Order declaring the subject bond forfeited in favor of the Government, and directing IICI to
produce the accused in court 30 days from receipt of the Order and to show cause why judgment should
not be rendered against the bond. For failure of the IICI to do so and considering the manifestation of
the accused’s counsel that the accused had already gone abroad, the RTC issued its Order giving IICI
a period of 30 days from receipt of the Order to show cause as to why judgment should not be rendered
against the bond. Hence, IICI filed the aforementioned Motion, alleging that: (1) the bail bond was void
because it was issued in violation of Sections 226 and 361 of the Insurance Code; (2) it should have
been disapproved by the Office of the Clerk of Court and returned to IICI; and (3) the forfeiture of the
bond was issued in violation of Section 13, Rule 114 of the Revised Rules on Criminal Procedure. The
RTC issued an Order denying the motion which was reversed by the CA.

ISSUE:
Did the RTC Judge err in denying respondent’s motion?

HELD:
No, Judge Fonacier did not commit grave abuse of discretion amounting to lack or excess of jurisdiction
in denying respondent’s motion to lift and recall forfeiture order and in ordering the issuance of a writ of
execution against the bond. In IICI’s petition before the CA, it indicated its principal office address in
Malate, Manila. IICI’s address is significant considering that after IICI revoked the authority of Enriquez
as its agent, IICI requested to the RTC that all writs of execution and orders be forwarded to its head
office at the stated address. The Produce Order issued by the RTC for IICI to produce the accused in
court were sent to Malate, Manila unlike the previous Produce Orders which bore different addresses.
Despite receipt of the Produce Orders, IICI failed to produce the accused in court. Notably, IICI was
silent as to the revocation of Enriquez’s authority despite the fact that it previously sent a letter indicating
its address. Further, IICI was already deemed to know of the existence of the bail bond when the RTC
sent the Produce Orders at its given address. And yet, IICI still remained silent and failed to bring the
alleged irregularities of the bail bond to the RTC until the filing of its motion to lift and recall forfeiture
order.

IICI is estopped from assailing the validity of the bail bond. By IICI’s silence and failure to notify the RTC
despite repeated notice as to the existence of the bail bond in favor of the accused, the RTC Judge was
made to believe that Enriquez’ act of issuing the bail bond was authorized by IICI.

Hence, the Petition is granted.

LAGUMBAY