CASES OF JUSTICE PERLAS-

BERNABE
MERCANTILE LAW
 MERCANTILE LAW

I. LETTERS OF CREDIT AND TRUST RECEIPTS

A. Basic concepts
1. Doctrine of independence
2. Fraud exception principle
3. Doctrine of strict compliance
4. Warehouseman’s lien
B. Rights and obligations of parties
1. Entruster/entrustee
2. Applicant/banks/beneficiary
C. Remedies available

II. NEGOTIABLE INSTRUMENTS LAW ( Act No. 2031)

A. Requisites of negotiability
B. Forgery and material alteration
C. Negotiation
D. Rights of the holder
1. Holder in due course
2. Defenses against the holder E. Checks
III. INSURANCE (PD 612, as amended by RA 10607)
A. Basic concepts
1. What may be insured
2. Insurable interest
3. Double insurance and overinsurance
4. Reinsurance
GSIS V PRUDENTIAL GUARANTEE AND ASSURANCE, INC., DEVELOPMENT BANK OF THE
PHILIPPINES and LAND BANK OF THE PHILIPPINES
G.R. No.165585, November 20, 2013, SECOND DIVISION
DOCTRINE OF THE CASE:
Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the insurance policy of receipt of premium as
conclusive evidence of payment so far as to make the policy binding despite the fact that premium is
actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even
if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and
such an agreement is not contrary to morals, good customs, public order or public policy

PERLAS-BERNABE, J.:
FACTS:
National Electrification Administration (NEA) entered into a Memorandum of Agreement (MOA)
with GSIS insuring all real and personal properties mortgaged to it by electrical cooperatives under
an Industrial All Risks Policy (IAR policy). The 95% of the total sum insured under the IAR policy
was reinsured by GSIS with PGAI for a period of one year. While GSIS remitted to PGAI the
reinsurance premiums for the first three quarters, it, however, failed to pay the fourth and last
reinsurance premium due despite demands. PGAI to file a complaint for sum of money against
GSIS. PGAI alleged that the first three reinsurance premiums were paid to PGAI by GSIS and, in the
same vein, NEA paid the first three reinsurance premiums due to GSIS. Further, that GSIS failed to
pay PGAI the fourth and last reinsurance premium. On the other hand, GSIS admitted that it
remitted to PGAI the first three reinsurance premiums which were paid by NEA but it failed to
remit the fourth and last reinsurance premium to PGAI. It, however, denied that it had
acknowledged its obligation to pay the last quarter’s reinsurance premium to PGAI. Further, GSIS
avers that the complaint states no cause of action against it because the non-payment of the last
reinsurance premium only renders the reinsurance contract ineffective, and does not give PGAI a
right of action to collect. Moreover, it contends that pursuant to the regulations issued by the
Commission on Audit, GSIS is prohibited from advancing payments to PGAI occasioned by the
failure of the principal insured, NEA, to pay the insurance premium. Consequently, PGAI filed a
Motion for Judgment on the Pleadings averring that GSIS essentially admitted the material
allegations of the complaint. RTC granted PGAI’s Motion for Judgment on the Pleadings. It
observed that the admissions of GSIS that it paid the first three quarterly reinsurance premiums to
PGAI affirmed the validity of the contract of reinsurance between them. As such, GSIS cannot now
renege on its obligation to remit the last and remaining quarterly reinsurance premium. It further
pointed out that while it is true that the payment of the premium is a requisite for the validity of
an insurance contract as provided under Section 77 of The Insurance Code” it was held in Makati
Tuscany case that insurance policies are valid even if the premiums were paid in installments, as in
this case. Thus, in view of the foregoing, the RTC ordered GSIS to pay PGAI the last quarter
reinsurance premium Dissatisfied, GSIS filed a notice of appeal. CA sustained.

ISSUE:
WON GSIS should pay to PGAI the amount of the fourth and last reinsurance premium
RULING:
YES. While the import of Section 77 is that prepayment of premiums is strictly required as
a condition to the validity of the contract, We are not prepared to rule that the request to make
installment payments duly approved by the insurer, would prevent the entire contract of insurance
from going into effect despite payment and acceptance of the initial premium or first installment.
Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the insurance policy of receipt of premium as
conclusive evidence of payment so far as to make the policy binding despite the fact that premium
is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid
even if premiums are not paid, but does not expressly prohibit an agreement granting credit
extension, and such an agreement is not contrary to morals, good customs, public order or public
policy.
GSIS’ affirmative defense that the non-payment of the last reinsurance premium merely
rendered the contract ineffective pursuant to Section 77 of PD 612 no longer involves any factual
issue, but stands solely as a mere question of law in the light of the foregoing admissions hence
allowing for a judgment on the pleadings. Besides, in the case of Makati Tuscany, the Court already
ruled that the non-payment of subsequent installment premiums would not prevent the insurance
contract from taking effect; that the parties intended to make the insurance contract valid and
binding is evinced from the fact that the insured paid – and the insurer received – several
reinsurance premiums due thereon, although the former refused to pay the remaining balance
Thus, owing to the identical complexion of Makati Tuscany with the present case, the Court
upholds PGAI’s right to be paid by GSIS the amount of the fourth and last reinsurance premium
pursuant to the reinsurance contract between them.
5. No fault, suicide, and incontestability clauses
B. Perfection of the insurance contract
C. Rights and obligations of parties
1. Insurer
2. Insured
3. Beneficiary
D. Rescission of insurance contracts
1. Concealment
 2. Misrepresentation or omissions
3. Breach of warranties
E. Loss

IV. TRANSPORTATION
A. Common carriers
1. Concept
2. Common carrier vs. private carrier
3. Diligence required
B. Obligations and liabilities
1. Vigilance over goods
2. Safety of passengers
G.V. FLORIDA TRANSPORT, INC. v. HEIRS OF ROMEO L. BATTUNG, JR., REPRESENTED
BY ROMEO BATTUNG, SR.
G.R. No. 208802 | October 14, 2015
DOCTRINE OF THE CASE:
In case where the victim’s death was caused by a co-passenger, the applicable provision is Article 1763
of the Civil Code, which states that "a common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers or of strangers, if
the common carrier's employees through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission." Notably, for this obligation, the law provides a
lesser degree of diligence, i.e., diligence of a good father of a family, in assessing the existence of any
culpability on the common carrier's part.

PERLAS-BERNABE, J.
FACTS:
Romeo L. Battung, Jr. (Battung) boarded petitioner's bus in Delfin Albano, Isabela, bound for
Manila. Battung was seated at the first row behind the driver and slept during the ride. When the
bus reached the Philippine Carabao Center in Muñoz, Nueva Ecija, the bus driver, Duplio, stopped
the bus and alighted to check the tires. At this point, a man who was seated at the fourth row of the
bus stood up, shot Battung at his head, and then left with a companion. The bus conductor,
Daraoay, notified Duplio of the incident and thereafter, brought Romeo to the hospital, but the
latter was pronounced dead on arrival. Hence, respondents filed a complaint on July 15, 2008 for
damages in the aggregate amount of P1,826,000.00 based on a breach of contract of carriage against
petitioner, Duplio, and Baraoay (petitioner, et al.) before the RTC. Respondents contended that as
a common carrier, petitioner and its employees are bound to observe extraordinary diligence in
ensuring the safety of passengers; and in case of injuries and/or death on the part of a passenger,
they are presumed to be at fault and, thus, responsible therefor. As such, petitioner, et al. should
be held civilly liable for Battung's death.
In their defense, petitioner, et al. maintained that they had exercised the extraordinary diligence
required by law from common carriers. In this relation, they claimed that a common carrier is not
an absolute insurer of its passengers and that Battung's death should be properly deemed a
fortuitous event. Thus, they prayed for the dismissal of the complaint, as well as the payment of
their counterclaims for damages and attorney's fees. RTC ruled in respondents' favor. CA affirmed
the ruling of the RTC.
ISSUE:
Whether or not the CA correctly affirmed the ruling of the RTC finding petitioner liable for damages
to respondent arising from culpa contractual.
RULING:
No. The law exacts from common carriers (i.e., those persons, corporations, firms, or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public) the highest degree of diligence
(i.e., extraordinary diligence) in ensuring the safety of its passengers. Articles 1733 and 1755 of
the Civil Code state:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.

In this relation, Article 1756 of the Civil Code provides that "[i]n case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755." This
disputable presumption may also be overcome by a showing that the accident was caused by a
fortuitous event.
The foregoing provisions notwithstanding, it should be pointed out that the law does not make the
common carrier an insurer of the absolute safety of its passengers.
In this case, Battung's death was neither caused by any defect in the means of transport or in the
method of transporting, or to the negligent or willful acts of petitioner's employees, namely, that of
Duplio and Daraoay, in their capacities as driver and conductor, respectively. Instead, the case
involves the death of Battung wholly caused by the surreptitious act of a co-passenger who, after
consummating such crime, hurriedly alighted from the vehicle. Thus, there is no proper issue on
petitioner's duty to observe extraordinary diligence in ensuring the safety of the passengers
transported by it, and the presumption of fault/negligence against petitioner under Article 1756 in
relation to Articles 1733 and 1755 of the Civil Code should not apply.
On the other hand, since Battung's death was caused by a co-passenger, the applicable provision is
Article 1763 of the Civil Code, which states that "a common carrier is responsible for injuries suffered
by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission." Notably, for this obligation, the law provides a
lesser degree of diligence, i.e., diligence of a good father of a family, in assessing the existence of
any culpability on the common carrier's part.
In this case, records reveal that when the bus stopped at San Jose City to let four (4) men ride
petitioner's bus (two [2] of which turned out to be Battung's murderers), the bus driver, Duplio,
saw them get on the bus and even took note of what they were wearing. Moreover, Duplio made
the bus conductor, Daraoay, approach these men and have them pay the corresponding fare, which
Daraoay did. During the foregoing, both Duplio and Daraoay observed nothing which would rouse
their suspicion that the men were armed or were to carry out an unlawful activity. With no such
indication, there was no need for them to conduct a more stringent search (i.e., bodily search) on
the aforesaid men. By all accounts, therefore, it cannot be concluded that petitioner or any of its
employees failed to employ the diligence of a good father of a family in relation to its responsibility
under Article 1763 of the Civil Code. As such, petitioner cannot altogether be held civilly liable.

C. Defenses available to a common carrier

1. Proof of negligence
2. Due diligence in the selection and supervision of employees
3. Fortuitous event
4. Contributory negligence
5. Doctrine of last clear chance
D. Extent of liability
1. Recoverable damages
2. Stipulations limiting liability
3. Limitations under the Warsaw Convention

V. CORPORATION LAW (Provisions of BP 68, not affected by RA 11232)

A. General principles
1. Nationality of corporations
a. Place of incorporation test
b. Control test
c. Grandfather rule
2. Doctrine of separate juridical personality
 MACTAN ROCK INDUSTRIES v. BENFREI S. GERMO
G.R. No. 228799 | January 10, 2018

DOCTRINE OF THE CASE

It is a basic rule that a corporation is a juridical entity which is vested with legal and
personality separate and distinct from those acting for and in behalf of, and from the people
comprising it. As a general rule, directors, officers, or employees of a corporation cannot be held
personally liable for the obligations incurred by the corporation, unless it can be shown that such
director/officer/employee is guilty of negligence or bad faith, and that the same was clearly and
convincingly proven.

Perlas-Bernabe, J.:

FACTS:
Mactan Rock Industries, through its President and Chief Executive Officer Tompar, entered
into a Technical Consultancy Agreement (TCA) with Germo, whereby the parties agreed, inter
alia, that: (a) Germo shall stand as MRII's marketing consultant who shall take charge of
negotiating, perfecting sales, orders, contracts, or services of MRII, but there shall be no employer-
employee relationship between them; and (b) Germo shall be paid on a purely commission basis,
including a monthly allowance of P5,000.00. During the effectivity of the TCA, Germo successfully
negotiated and closed with International Container Terminal Services, Inc. (ICTSI) a supply
contract of 700 cubic meters of purified water per day. Accordingly, MRII commenced supplying
water to ICTSI on February 22, 2007, and in tum, the latter religiously paid MRII the corresponding
monthly fees. Despite the foregoing, MRII allegedly never paid Germo his rightful commissions
amounting to P2,225,969.56 as of December 2009, inclusive of interest. Initially, Germo filed a
complaint before the National Labor Relations Commission (NLRC), but the same was dismissed
for lack of jurisdiction due to the absence of employer-employee relationship between him and
MRII. Germo filed the instant complaint praying that MRII and Tompar be made to pay him for
unpaid commissions with legal interest from the time they were due until fully paid, moral
damages, exemplary damages, and the costs of suit.

ISSUE
Are MRII, and Tompar, as the CEO and President, solidarily liable to pay Germo?

RULING
No. Be that as it may, the Court finds that the courts a quo erred in concluding that Tompar,
in his capacity as then-President/CEO of MRII, should be held solidarily liable with MRII for the
latter's obligations to Germo. It is a basic rule that a corporation is a juridical entity which is vested
with legal and personality separate and distinct from those acting for and in behalf of, and from the
people comprising it. As a general rule, directors, officers, or employees of a corporation cannot be
held personally liable for the obligations incurred by the corporation, unless it can be shown that
such director/officer/employee is guilty of negligence or bad faith, and that the same was clearly
and convincingly proven.

Before a director or officer of a corporation can be held personally liable for corporate
obligations, the following requisites must concur: (1) the complainant must allege in the complaint
that the director or officer assented to patently unlawful acts of the corporation, or that the officer
was guilty of gross negligence or bad faith; and (2) the complainant must clearly and convincingly
prove such unlawful acts, negligence or bad faith. In this case, Tompar's assent to patently unlawful
acts of the MRII or that his acts were tainted by gross negligence or bad faith was not alleged in
Germo's complaint, much less proven in the course of trial. Therefore, the deletion of Tompar's
solidary liability with MRII is in order.

3. Doctrine of piercing the corporate veil

B. Stock vs. non-stock corporations
C. De facto corporations and corporations by estoppel
D. Board of Directors and Trustees
1. Basic principles
a. Doctrine of centralized management
b. Business judgment rule
2. Duties, liabilities, and responsibility for unlawful acts
E. Powers of corporations
1. How powers are exercised
2. Ultra vires doctrine
3. Trust fund doctrine
F. Stockholders and Members
1. Doctrine of equality of shares
2. Proprietary rights
a. Right to dividends
b. Right to inspect
c. Pre-emptive right d. Right of first refusal
3. Intra-corporate disputes
a. Concept
b. Individual vs. representative vs. derivative suits
G. Foreign Corporations
1. What constitutes “doing business”
2. Personality to sue and suability
H. Mergers and Consolidations
1. Concept
2. Effects and limitations
VI. SECURITIES REGULATION CODE (RA 8799)
JOSE U. PUA and BENJAMIN HANBEN U. PUA V. CITIBANK, N.A
G.R. No. 1980064, September 16, 2013, SECOND DIVISION
DOCTRINE OF THE CASE:

Civil suits falling under the SRC are under the exclusive original jurisdiction of the regional
trial courts and hence, need not be first filed before the SEC, unlike criminal cases wherein the latter
body exercises primary jurisdiction.

PERLAS-BERNABE, J.:
FACTS:

Petitioners filed before the RTC a Complaint for declaration of nullity of contract and sums
of money with damages against respondent, Citibank. They alleged that You, Vice-President of
Citibank Hongkong, offered and sold to petitioners numerous securities issued by various public
limited companies established in Jersey, Channel I sands. The offer, sale, and signing of the
subscription agreements of said securities were all made and perfected at Citibank Binondo in the
presence of its officers and employees. Later on, petitioners discovered that the securities sold to
them were not registered with the Securities and Exchange Commission (SEC) and that the terms
and conditions covering the subscription were not likewise submitted to the SEC for evaluation,
approval, and registration. Asserting that respondent’s actions are in violation of Republic Act
No.8799, entitled the "Securities Regulation Code" (SRC), they assailed the validity of the
subscription agreements and the terms and conditions thereof for being contrary to law and/or
public policy.

For its part, respondent filed a motion to dismiss alleging, inter alia, that petitioners’
complaint should be dismissed outright for violation of the doctrine of primary jurisdiction. It
pointed out that the merits of the case would largely depend on the issue of whether or not there
was a violation of the SRC, in particular, whether or not there was a sale of unregistered securities.
In this regard, respondent contended that the SRC conferred upon the SEC jurisdiction to
investigate compliance with its provisions and thus, petitioners’ complaint should be first filed with
the SEC and not directly before the RTC.

Petitioners opposed respondent’s motion to dismiss, maintaining that the RTC has
jurisdiction over their complaint. They asserted that Section 63 of the SRC expressly provides that
the RTC has exclusive jurisdiction to hear and decide all suits to recover damages pursuant to
Sections 56 to 61 of the same law.

ISSUE:

Whether or not petitioners’ action falls within the jurisdiction of the RTC
RULING:
YES. Petitioners' filing of a civil suit against respondent for purported violations of the SRC was
properly filed directly before the RTC.
Records show that petitioners’ complaint constitutes a civil suit for declaration of nullity
of contract and sums of money with damages, which stemmed from respondent’s alleged sale of
unregistered securities, in violation of the various provisions of the SRC and not a criminal case.
The Baviera Ruling relied upon by Citibank that "all complaints for any violation of the SRC
should be filed with the SEC," should be construed as to apply only to criminal and not to civil
suits such as petitioners’ complaint.

It is apparent that the SRC provisions governing criminal suits are separate and distinct
from those which pertain to civil suits. On the one hand, Section 53 of the SRC governs criminal
suits involving violations of the said law. On the other hand, Sections 56, 57, 58, 59, 60, 61, 62, and
63 of the SRC pertain to civil suits involving violations of the same law.

Cases falling under Section 57of the SRC, which pertain to civil liabilities arising from
violations of the requirements for offers to sell or the sale of securities, as well as other civil suits
under Sections 56, 58, 59, 60, and 61 of the SRC shall be exclusively brought before the regional trial
courts. Likewise, it is equally revelatory that no SRC provision of similar import is found in its
sections governing criminal suits; quite the contrary, the SRC states that criminal cases arising from
violations of its provisions should be first referred to the SEC.

Therefore, based on these considerations, it stands to reason that civil suits falling under
the SRC are under the exclusive original jurisdiction of the regional trial courts and hence, need not
be first filed before the SEC, unlike criminal cases wherein the latter body exercises primary
jurisdiction.

A. Registration requirement; exemptions

B. Prohibitions on fraud, manipulation, and insider trading
C. Protection of investors
1. Tender offer rule
2. Rules on proxy solicitation
3. Disclosure rule

VII. BANKING
A. The New Central Bank Act (RA 7653, as amended by RA 11211)
1. Handling of banks in distress
a. Conservatorship
b. Closure
 c. Receivership
APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, INC., ASIA WIDE
REFRESHMENTS CORPORATION, MEDCO ASIA INVESTMENT CORPORATION, ZEST-O
CORPORATION, HARMONY BANCSHARES HOLDINGS, INC., EXCALIBUR HOLDINGS,
INC., AND ALFREDO M. YAO, v. BANGKO SENTRAL NG PILIPINAS AND PHILIPPINE
DEPOSIT INSURANCE CORPORATION 214866, October 02, 2017, SECOND DIVISION
DOCTRINE OF THE CASE:
Nothing in Section 30 of RA 7653 requires the BSP, through the Monetary Board, to make an
independent determination of whether a bank may still be rehabilitated or not. Once the receiver
determines that rehabilitation is no longer feasible, the Monetary Board is simply obligated to notify
in writing the bank's board of directors of the same and direct the PDIC to proceed with liquidation.

PERLAS-BERNABE, J.:
FACTS:
EIB entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp
Investments, Inc. (UII) in an attempt to rehabilitate UBI which was then under receivership.
Following the said merger, EIB itself encountered financial difficulties which prompted respondent
the Philippine Deposit Insurance Corporation (PDIC) to extend financial assistance to it. However,
EIB still failed to overcome its financial problems, thereby causing PDIC to provide financial
assistance to it. Despite this, EIB failed to comply with the BSP's capital requirements. Failing to
sell the bank, EIB's president and chairman voluntarily turned-over the full control of EIB to BSP.
The BSP placed EIB under the receivership of PDIC, in accordance with the New Central Bank Act.
PDIC submitted its initial receivership report to the Monetary Board which contained its
finding that EIB can be rehabilitated or permitted to resume business. After two (2) public sale
attempts, PDIC informed BSP that EIB can hardly be rehabilitated and directed the former to
proceed with the liquidation of EIB.
The petitioners, who are stockholders representing the majority stock of EIB, in an attempt
to delay the liquidation filed a petition for certiorari before the CA challenging the order of the
Monetary Board to commence the liquidation proceedings. PDIC countered that petitioners were
already estopped from assailing the placement of EIB under receivership and its eventual
liquidation since they had already surrendered full control of the bank to the BSP and that it had
ample factual and legal bases to order EIB’s liquidation. The appellate court dismissed the petition
ratiocinating that nothing in Section 30 of the New Central Bank Act that requires the Monetary
Board to make its own independent factual determination on the bank's viability before ordering
its liquidation.
ISSUE:
Whether or not an independent investigation by the BSP Monetary Board to determine the
viability of rehabilitating a bank is a condition precedent in placing it under receivership
RULING:
 No. Nothing in Section 30 of RA 7653 requires the BSP, through the Monetary Board, to
make an independent determination of whether a bank may still be rehabilitated or not. Once the
receiver determines that rehabilitation is no longer feasible, the Monetary Board is simply obligated
to notify in writing the bank's board of directors of the same and direct the PDIC to proceed with
liquidation.
Suffice it to say that if the law had indeed intended that the Monetary Board make a separate
and distinct factual determination before it can order the liquidation of a bank or quasi-bank, then
there should have been a provision to that effect. There being none, it can safely be concluded that
the Monetary Board is not so required when the PDIC has already made such determination. The
Monetary Board's order to liquidate EIB cannot be considered to be tainted with grave abuse of
discretion as it was amply supported by the factual circumstances at hand and made in accordance
with prevailing law and jurisprudence.

d. Liquidation
BPI FAMILY SAVINGS BANK, INC. V ST. MICHAEL MEDICAL CENTER, INC.
G.R. No. 205469, March 25, 2015, FIRST DIVISION
DOCTRINE OF THE CASE:
Rehabilitation assumes that the corporation has been operational but for some reasons like economic
crisis or mismanagement had become distressed or insolvent, i.e., that it is generally unable to pay its
debts as they fall due in the ordinary course of business or has liability that are greater than its assets.
Thus, the basic issues in rehabilitation proceedings concern the viability and desirability of continuing
the business operations of the distressed corporation, all with a view of effectively restoring it to a
state of solvency or to its former healthy financial condition through the adoption of a rehabilitation
plan.
The lack of liquidation analysis prevents the Court from ascertaining if the petitioning debtor’s
creditors can recover by way of the present value of payments projected in the plan, if the debtor
continues as a going concern than if it is immediately liquidated, a crucial factor in a corporate
rehabilitation case. Again, the financial records of St. Michael Hospital, being a separate and distinct
entity whose merger with SMMCI only exists in the realm of probability, cannot be taken as a
substitute to fulfill the requirement. What remains pertinent are the financial statements of SMMCI
for it solely stands as the debtor to be rehabilitated, or liquidated in this case.

PERLAS-BERNABE, J.:
FACTS:
Spouses Rodil are the owners and sole proprietors of St. Michael Diagnostic and Skin Care
Laboratory Services and Hospital. With a vision to upgrade the hospital, Sps. Rodil purchased two
(2) parcels of land adjoining their existing property and incorporated SMMCI, with which entity
they planned to eventually consolidate St. Michael Hospital’s operations. To finance the costs of
construction, SMMCI obtained a loan from petitioner BPI Family secured by a Real Estate Mortgage
over three (3) parcels of land belonging to Sps. Rodil who agreed to be co-borrowers on the loan
and signed a Promissory Note. Due to mismanagement in the construction, loan was not paid and
debt became due. Nevertheless, using hospital-generated revenues, Sps. Rodil were still able to
purchase new equipment and machinery for St. Michael Hospital. Although the finishing works
were later resumed and some of the hospital operations were eventually transferred to the
completed first two floors of the new building, SMMCI was still neither operational nor earning
revenues. Hence, it was only able to pay the interest on its BPI Family loan, from the income of St.
Michael Hospital. Later on, BPI Family demanded immediate payment of the entire loan obligation
and, soon after, filed a petition for extrajudicial foreclosure of the real properties covered by the
mortgage. On the other hand, SMMCI filed a Petition for Corporate Rehabilitation. In the said
petition, it was averred that St. Michael Hospital was operating profitably, however, it was saddled
with the burden of paying the loan obligation of SMMCI and Sps. Rodil to BPI Family, which it
cannot service together with its current obligations to other persons and/or entities. While several
persons approached Sps. Rodil signifying their interest to invest in the corporation, they needed
enough time to complete their audit and due diligence of the company. In its proposed
Rehabilitation Plan, SMMCI declared that it intends to conclude pending negotiations for
investments offered by a group of medical doctors who are willing to infuse capital to the
corporation. This was supported by a feasibility study conducted by a CPA in that SMMCI may be
rehabilitated because it is a viable option but, nevertheless, opined that it will take more than what
it had proposed to successfully bring the company back to good financial health considering the
finding that its obligation actually extends beyond the bank, and also includes accounts payable
due to suppliers and informal lenders. Both RTC and CA approved the rehabilitation plan.

ISSUE:
1. Whether the petition for rehabilitation should be granted
2. Whether the CA correctly affirmed SMMCI’s Rehabilitation Plan as approved by the RTC.
RULING:
1. No. Restoration is the central idea behind the remedy of corporate rehabilitation. In common
parlance, to “restore” means “to bring back to or put back into a former or original state.” Case law
explains that corporate rehabilitation contemplates a continuance of corporate life and activities in
an effort to restore and reinstate the corporation to its former position of successful operation and
solvency, the purpose being to enable the company to gain a new lease on life and allow its creditors
to be paid their claims out of its earnings.
Rehabilitation assumes that the corporation has been operational but for some reasons like
economic crisis or mismanagement had become distressed or insolvent, i.e., that it is generally
unable to pay its debts as they fall due in the ordinary course of business or has liability that are
greater than its assets. Thus, the basic issues in rehabilitation proceedings concern the viability and
desirability of continuing the business operations of the distressed corporation, all with a view of
effectively restoring it to a state of solvency or to its former healthy financial condition through the
adoption of a rehabilitation plan.
In this case, it cannot be said that the petitioning corporation, SMMCI, had been in a position of
successful operation and solvency at the time the Rehabilitation Petition was filed on August 11,
2010. While it had indeed “commenced business” through the preparatory act of opening a credit
line with BPI Family to finance the construction of a new hospital building for its future operations,
SMMCI itself admits that it has not formally operated nor earned any income since its
incorporation. This simply means that there exists no viable business concern to be restored. While
the Court recognizes the financial predicaments of upstart corporations under the prevailing
economic climate, it must nonetheless remain forthright in limiting the remedy of rehabilitation
only to meritorious cases. As above-mentioned, the purpose of rehabilitation proceedings is not
only to enable the company to gain a new lease on life but also to allow creditors to be paid their
claims from its earnings, when so rehabilitated. Hence, the remedy must be accorded only after a
judicious regard of all stakeholders’ interests; it is not a one-sided tool that may be graciously
invoked to escape every position of distress. In this case, not only has the petitioning debtor failed
to show that it has formally began its operations which would warrant restoration, but also it has
failed to show compliance with the key requirements under the Rules, the purpose of which are
vital in determining the propriety of rehabilitation.
2. No. SMMCI’s Rehabilitation Plan which is an indispensable requisite in corporate rehabilitation
proceedings failed to comply with the fundamental requisites outlined in Section 18, Rule 3 of the
Rules, particularly, that of a material financial commitment to support the rehabilitation and an
accompanying liquidation analysis. In this case, aside from the harped on merger of St. Michael
Hospital with SMMCI, the only proposed source of revenue the Rehabilitation Plan suggests is the
capital which would come from SMMCI’s potential investors, which negotiations are merely
pending. Evidently, both propositions commonly border on the speculative and, hence, hardly fit
the description of a material financial commitment which would inspire confidence that the
rehabilitation would turn out to be successful.
The lack of liquidation analysis prevents the Court from ascertaining if the petitioning debtor’s
creditors can recover by way of the present value of payments projected in the plan, if the debtor
continues as a going concern than if it is immediately liquidated, a crucial factor in a corporate
rehabilitation case. Again, the financial records of St. Michael Hospital, being a separate and
distinct entity whose merger with SMMCI only exists in the realm of probability, cannot be taken
as a substitute to fulfill the requirement. What remains pertinent are the financial statements of
SMMCI for it solely stands as the debtor to be rehabilitated, or liquidated in this case.
Accordingly, it is insufficient to decree SMMCI’s rehabilitation. It is well to emphasize that the
remedy of rehabilitation should be denied to corporations that do not qualify under the Rules.
Neither should it be allowed to corporations whose sole purpose is to delay the enforcement of any
of the rights of the creditors, which is rendered obvious by: (a) the absence of a sound and workable
business plan; (b) baseless and unexplained assumptions, targets, and goals; and (c) speculative
capital infusion or complete lack thereof for the execution of the business plan. Unfortunately,
these negative indicators have all surfaced to the fore, much to SMMCI’s chagrin.

B. Secrecy of bank deposits (RA 1405, as amended, and RA 6426, as amended)

1. Prohibited acts
2. Exceptions from coverage
3. Garnishment of deposits, including foreign deposits
C. General Banking Law of 2000 (RA 8791)
1. Nature of bank funds and bank deposits
 2. Diligence required of banks
3. Prohibited transactions by bank directors and officers
D. Philippine Deposit Insurance Corporation Act (RA 3591, as amended)
1. Maximum deposit insurance coverage
2. Meaning of insured deposit
3. Splitting of deposits

VIII. INTELLECTUAL PROPERTY CODE (RA 8293)

A. Patents
1. Patentable vs. non-patentable inventions
2. Ownership of a patent
3. Grounds for cancellation of a patent
4. Remedy of the true and actual inventor
5. Rights conferred by a patent
6. Limitations on patent rights
7. Patent infringement
B. Trademarks
1. Marks vs. collective marks vs. trade names
2. Acquisition of ownership
a. Concept of actual use
W LAND HOLDINGS, INC. v. STARWOOD HOTELS AND RESORTS WORLDWIDE G.R. No.
222366, December 04, 2017, SECOND DIVISION
DOCTRINE OF THE CASE:
The mere exhibition of goods or services over the internet, without more, is not enough to
constitute actual use. Since the internet creates a borderless marketplace, it must be shown that the
owner has actually transacted, or at the very least, intentionally targeted customers of a particular
jurisdiction in order to be considered as having used the trade mark in the ordinary course of his trade
in that country. A showing of an actual commercial link to the country is therefore imperative.
Otherwise, an unscrupulous registrant would be able to maintain his mark by the mere expedient of
setting up a website, or by posting his goods or services on another's site, although no commercial
activity is intended to be pursued in the Philippines. As the IP Code expressly requires, the use of the
mark must be "within the Philippines”.
Taken together, these facts and circumstances show that Starwood's use of its "W" mark
through its interactive website is intended to produce a discernable commercial effect or activity
within the Philippines, or at the very least, seeks to establish commercial interaction with local
consumers. Accordingly, Starwood's use of the "W" mark in its reservation services through its website
constitutes use of the mark sufficient to keep its registration in force.

PERLAS-BERNABE, J.:
FACTS:
W Land filed a Petition for Cancellation of Starwood's mark for non-use under Section
151.119 of Republic Act No. 8293 or the "Intellectual Property Code of the Philippines" (IP Code),
claiming that Starwood has failed to use its mark in the Philippines because it has no hotel or
establishment in the Philippines rendering the services covered by its registration; and that
Starwood's "W" mark application and registration barred its own "'W" mark application and
registration for use on real estate.
Starwood denied having abandoned the subject mark on the ground of non-use, asserting
that it filed with the Director of Trademarks a notarized Declaration of Actual Use (DAU) with
evidence of use on December 2, 2008, which was not rejected. Starwood argued that it conducts
hotel and leisure business both directly and indirectly through subsidiaries and franchisees, and
operates interactive websites for its W Hotels in order to accommodate its potential clients
worldwide. According to Starwood, apart from viewing agents, discounts, promotions, and other
marketing fields being offered by it, these interactive websites allow Philippine residents to make
reservations and bookings, which presuppose clear and convincing use of the "W'' mark in the
Philippines.
ISSUE:
Whether or not Starwood’s mark should be cancelled on the ground of non-use “within
the Philippines”
RULING:
No. Notwithstanding the absence of a Starwood hotel or establishment in the Philippines,
the use of a registered mark representing the owner's goods or services by means of an interactive
website may constitute proof of actual use that is sufficient to maintain the registration of the same.
However, the mere exhibition of goods or services over the internet, without more, is not
enough to constitute actual use. Since the internet creates a borderless marketplace, it must be
shown that the owner has actually transacted, or at the very least, intentionally targeted customers
of a particular jurisdiction in order to be considered as having used the trade mark in the ordinary
course of his trade in that country. A showing of an actual commercial link to the country is
therefore imperative. Otherwise, an unscrupulous registrant would be able to maintain his mark by
the mere expedient of setting up a website, or by posting his goods or services on another's site,
although no commercial activity is intended to be pursued in the Philippines. As the IP Code
expressly requires, the use of the mark must be "within the Philippines”.
Thus, the use of mark on the internet must be shown to result into a within-State sale, or at
the very least, discernibly intended to target customers that reside in that country. This being so,
the use of the mark on an interactive website, for instance, may be said to target local customers
when they contain specific details regarding or pertaining to the target State, sufficiently showing
an intent towards realizing a within-State commercial activity or interaction. These details may
constitute a local contact phone number, specific reference being available to local customers, a
specific local webpage, whether domestic language and currency is used on the website, and/or
whether domestic payment methods are accepted.
Starwood has proven that it owns Philippine registered domain names, i.e., www.whotels.ph,
www.wreservations.ph, www.whotel.ph, www.wreservation.ph, for its website that showcases its
mark. The website is readily accessible to Philippine citizens and residents, where they can avail
and book amenities and other services in any of Starwood's W Hotels worldwide. Its website also
readily provides a phone number for Philippine consumers to call for information or other
concerns. The website further uses the English language - considered as an official language in this
country - which the relevant market in the Philippines understands and often uses in the daily
conduct of affairs. In addition, the prices for its hotel accommodations and/or services can be
converted into the local currency or the Philippine Peso. Amidst all of these features, Starwood's
"W" mark is prominently displayed in the website through which consumers in the Philippines can
instantaneously book and pay for their accommodations, with immediate confirmation, in any of
its W Hotels. Furthermore, it has presented data showing a considerably growing number of
internet users in the Philippines visiting its website since 2003, which is enough to conclude that
Starwood has established commercially-motivated relationships with Philippine consumers.
Taken together, these facts and circumstances show that Starwood's use of its "W" mark
through its interactive website is intended to produce a discernable commercial effect or activity
within the Philippines, or at the very least, seeks to establish commercial interaction with local
consumers. Accordingly, Starwood's use of the "W" mark in its reservation services through its
website constitutes use of the mark sufficient to keep its registration in force.

ECOLE DE CUISINE MANILLE VS RENAUD COINTREAU & CIE

G.R No. 185830, JUNE 5, 2013
DOCTRINE OF THE CASE:
Under Section 2 of R.A. No. 166, in order to register a trademark, one must be the owner thereof and
must have actually used the mark in commerce in the Philippines for 2 months prior to the application
for registration. Under the same law, it is clear that actual use in commerce is also the test of
ownership but the provision went further by saying that the mark must not have been so appropriated
by another. Thus, one may be an owner of a mark due to its actual use but may not yet have the right
to register such ownership here due to the owner’s failure to use the same in the Philippines for 2
months prior to registration.

PERLAS-BERNABE, J.
FACTS:
Respondent (Cointreau), a partnership registered under the laws of France, applied for the
registration of the mark ‘Le Cordon Bleu & Device.’ Petitioner (Ecole De Cuisine) opposed on the
ground that it is the owner of the mark ‘Le Cordon Bleu, Ecole De Cuisine Manille’ used in its
culinary activities and restaurant business and that the registration will create confusion, mistake
and deception to the public and will cause great irreparable injury and damage to Ecole’s business.
Respondent Cointreau answered claiming it is the true and lawful owner of the mark and had long
been using it worldwide.
The IPO Bureau of Legal Affairs sustained petitioner’s opposition stating that Cointreau had no
prior use of the mark in the Philippines to be entitled to a proprietary right over it. The IPO Director
General reversed the decision and allowed the mark’s registration holding that under RA No. 166,
actual use in the Philippines is not necessary to acquire ownership of the mark.
ISSUE:
Whether or not respondent’s prior use of the mark is a requirement for its registration.
HELD:
YES,
Under Section 2 of R.A. No. 166, in order to register a trademark, one must be the owner thereof
and must have actually used the mark in commerce in the Philippines for 2 months prior to the
application for registration. Under the same law, it is clear that actual use in commerce is also the
test of ownership but the provision went further by saying that the mark must not have been so
appropriated by another. Thus, one may be an owner of a mark due to its actual use but may not
yet have the right to register such ownership here due to the owner’s failure to use the same in the
Philippines for 2 months prior to registration.
In any case, the present law on trademarks, Republic Act No. 8293, otherwise known as the
Intellectual Property Code of the Philippines, as amended, has already dispensed with the
requirement of prior actual use at the time of registration. Thus, there is more reason to allow the
registration of the subject mark under the name of Cointreau as its true and lawful owner.

b. Effect of registration
3. Non-registrable marks
GREAT WHITE SHARK ENTERPRISES, INC. VS. DANILO M. CARALDE, JR.
G.R. No. 192294 | November 21, 2012
DOCTRINE OF THE CASE:
A trademark device is susceptible to registration if it is crafted fancifully or arbitrarily and is
capable of identifying and distinguishing the goods of one manufacturer or seller from those of
another. Apart from its commercial utility, the benchmark of trademark registrability is
distinctiveness. Thus, a generic figure, as that of a shark in this case, if employed and designed in a
distinctive manner, can be a registrable trademark device, subject to the provisions of the IP Code. In
this case, the Court finds no confusing similarity between the subject marks. While both marks use
the shape of a shark, the Court noted distinct visual and aural differences between them.

PERLAS-BERNABE, J.
FACTS: Caralde filed an application to register the mark "SHARK & LOGO" for his manufactured
goods under Class 25, such as slippers, shoes and sandals. Great White Shark Enterprises, Inc.
(Great White Shark) opposed the application claiming to be the owner of the mark consisting of a
representation of a shark in color. It alleged that the confusing similarity between the two (2) marks
is likely to deceive or confuse the purchasing public into believing that Caralde's goods are
produced by or originated from it, or are under its sponsorship, to its damage and prejudice.

Caralde explained that the subject marks are distinctively different from one another and easily
distinguishable. When compared, the only similarity in the marks is in the word "shark" alone,
differing in other factors such as appearance, style, shape, size, format, color, ideas counted by
marks, and even in the goods carried by the parties.

ISSUE:

Is Caralde’s mark registrable?

HELD:

Caralde’s mark is registrable.

A trademark device is susceptible to registration if it is crafted fancifully or arbitrarily and is capable
of identifying and distinguishing the goods of one manufacturer or seller from those of another.
Apart from its commercial utility, the benchmark of trademark registrability is
distinctiveness. Thus, a generic figure, as that of a shark in this case, if employed and designed in a
distinctive manner, can be a registrable trademark device, subject to the provisions of the IP Code.
Section 123.1(d) of the IP Code provides that a mark cannot be registered if it is identical with a
registered mark belonging to a different proprietor with an earlier filing or priority date, with
respect to the same or closely related goods or services, or has a near resemblance to such mark as
to likely deceive or cause confusion.
In this case, the Court finds no confusing similarity between the subject marks. While both marks
use the shape of a shark, the Court noted distinct visual and aural differences between them.

4. Well-known marks
5. Priority right
6. Rights conferred by registration
7. Cancellation of registration
8. Trademark infringement
9. Unfair competition
C. Copyrights
1. Copyrightable works
2. Non-copyrightable works
 3. Rights conferred by copyright
4. Ownership of a copyright
5. Limitations on copyright
6. Doctrine of fair use
7. Copyright infringement

IX. ANTI-MONEY LAUNDERING ACT (RA 9160, as amended)

A. Covered institutions and their obligations
B. Covered and suspicious transactions
C. Safe harbor provision
D. When is money laundering committed (including predicate crimes)
E. Authority to inquire into bank deposits
F. Freezing and forfeiture

X. ELECTRONIC COMMERCE ACT (RA 8792)

A. Legal recognition of electronic data messages, documents, and signatures
B. Presumption relating to electronic signatures
C. Admissibility and evidential weight of electronic data message or electronic
document
D. Obligation of confidentiality

XI. DATA PRIVACY ACT (RA 10173)

A. Personal vs. sensitive personal information
B. Scope
C. Processing of personal information
D. Rights of data subject
XII. FINANCIAL REHABILITATION, INSOLVENCY, LIQUIDATION and SUSPENSION OF
PAYMENTS (RA 10142, FR Rules [A.M. No. 12-12-11-SC], and FLSP Rules [A.M. No.15-04-06-
SC])
A. Basic concepts
1. Rehabilitation
 2. Insolvent
3. Liquidation
4. Suspension of payments
B. Modes of rehabilitation
1. Court-supervised rehabilitation
a. Voluntary vs. involuntary
b. Commencement order (including stay order)
c. Rehabilitation receiver and management committee
d. Determination of claims
e. Rehabilitation plan
i. Concept of feasibility
ii. Material financial commitments
iii. Liquidation analysis
f. Creditor approval and confirmation
g. Failure of rehabilitation
2. Pre-negotiated rehabilitation
a. How initiated
b. Period and effect of approval
3. Out-of-Court or Informal Restructuring Agreement or Rehabilitation
Plan
a. Minimum requirements
b. Standstill period
c. Cram down effect
C. Liquidation
1. Voluntary liquidation vs. involuntary liquidation vs. conversion
2. Procedure
a. Liquidation order; effects
3. Determination of claims
D. Suspension of Payments; Suspension of Payment Order
E. Remedies
 1. Motion for reconsideration
2. Petition for certiorari

OTHER CASES:
ACE NAVIGATION CO., INC. v FGU INSURANCE CORPORATION and PIONEER
INSURANCE AND SURETY CORPORATION
G.R. No. 171591, June 25, 2012, THIRD DIVISION
DOCTRINE OF THE CASE:
By ship agent is understood the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she may be found.

PERLAS-BERNABE, J.:
FACTS:
CARDIA shipped on board of MV Pakarti at China port 165,200 bags of Grey Portland Cement to be
discharged at the Port of Manila to the consignee, HEINDRICH. The shipment was insured by FGU
and PIONEER. PARKARTI owned the subject vessel which was chartered to SHINWA. SHINWA,
representing itself as the owner, entered into a charter party with SKY, agent of KEE YEH which
was further chartered to REGENCY who directly dealt with HEINDRICH.
When the shipment arrived at the port of Manila, it was inspected by HEINDRICH and ACENAV,
agent of CARDIA and it was found that 43,905 bags out of the 165,200 bags were on a bad condition.
The consignee was not able to collect from CARDIA and REGENCY so it proceeded to the insurers.
The latter paid and was subrogated by the rights of the consignee. The insurers filed a claim against
REGENCY, PAKARTI, SHINWA SKY AND ACENAV.
To its defense, ACENAV said that the claim against him cannot prosper because he is not a privy to
the bill of lading at the he is just a mere agent of CARDIA
RTC dismissed the complaint. CA reversed the decision and held PAKARTI, SHINWA and KEE YEH
solidarily liable for 70% of the claim and the remaining 30% to be shouldered by CARDIA and
ACENAV. Only ACENAV filed an appeal for the decision of the CA.

ISSUE:
Whether or not the ACENAV should be held liable for the 30% claim of the respondents.
RULING:
No, it should not be held liable.
The respondents maintain that ACENAV is a ship agent and not a mere agent of CARDIA, as found
by both the CA 25 and the RTC.
The Court disagrees.
Article 586 of the Code of Commerce provides:
ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for
the obligations contracted by the latter to repair, equip, and provision the vessel, provided the
creditor proves that the amount claimed was invested therein.
By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents
her in the port in which she may be found.
Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH
of the arrival of the vessel in order for the latter to immediately take possession of the goods. No
evidence was offered to establish that ACENAV had a hand in the provisioning of the vessel or that
it represented the carrier, its charterers, or the vessel at any time during the unloading of the goods.
Clearly, ACENAV's participation was simply to assume responsibility over the cargo when they were
unloaded from the vessel. Hence, no reversible error was committed by the courts a quo in holding
that ACENAV was not a ship agent within the meaning and context of Article 586 of the Code of
Commerce, but a mere agent of CARDIA, the shipper.
Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed
upon it by the CA on the basis of its finding that the damage sustained by the cargo was due to
improper packing cannot be borne by ACENAV. As mere agent, ACENAV cannot be made
responsible or held accountable for the damage supposedly caused by its principal.
Accordingly, the Court finds that the CA erred in ordering ACENAV jointly and severally liable with
CARDIA to pay 30% of the respondents' claim.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED.
The complaint against petitioner Ace Navigation Co., Inc. is hereby DISMISSED.

BANK OF THE PHILIPPINE ISLANDS V SARABIA MANOR HOTEL CORPORATION

G.R. No. 175844, July 29, 2013, SECOND DIVISION
DOCTRINE OF THE CASE:
It must be pointed out that oppositions which push for high interests rates are generally
frowned upon in rehabilitation proceedings given that the inherent purpose of a rehabilitation is to
find ways and means to minimize the expenses of the distressed corporation during the
rehabilitation period.

PERLAS-BERNABE, J.:
FACTS:
SARABIA obtained a ₱150,000,000.00 special loan package from FEBTC in order to finance the
construction of a five-storey hotel building (New Building) for the purpose of expanding its hotel
business. An additional ₱20,000,000.00 stand-by credit line was approved by FEBTC in the same
year. FEBTC later on merged with BPI.
The foregoing debts were secured by real estate mortgages over several parcels of land owned by
Sarabia and a comprehensive surety agreement dated September 1, 1997 signed by its
stockholders.
Later on, it filed a Petition for corporate rehabilitation with prayer for the issuance of a stay order
before the RTC as it foresaw the impossibility to meet its maturing obligations to its creditors
when they fall due.
In the said petition, Sarabia claimed that its cash position suffered when it was forced to take-over
the construction of the New Building due to the recurring default of its contractor, and its
subsequent abandonment of the said project.
RTC approved the plan of rehabilitation. CA affirmed.
BPI mainly argues that the approved rehabilitation plan did not give due regard to its interests as
a secured creditor in view of the imposition of a fixed interest rate of 6.75% p.a. and the extended
loan repayment period.
ISSUE:
Whether or not the rehabilitation plan shall be approved
RULING:
YES, it should be approved.
Although undefined in the Interim Rules, it may be said that the opposition of a distressed
corporation’s majority creditor is manifestly unreasonable if it counter-proposes unrealistic
payment terms and conditions which would, more likely than not, impede rather than aid its
rehabilitation. The unreasonableness becomes further manifest if the rehabilitation plan, in fact,
provides for adequate safeguards to fulfill the majority creditor’s claims, and yet the latter persists
on speculative or unfounded assumptions that his credit would remain unfulfilled.
While Section 23, Rule 4 of the Interim Rules states that the rehabilitation court shall consider
certain incidents in determining whether the opposition is manifestly unreasonable, BPI neither
proposes Sarabia’s liquidation over its rehabilitation nor questions the controlling interest of
Sarabia’s shareholders or owners. It only takes exception to: (a) the imposition of the fixed interest
rate of 6.75% p.a. as recommended by the Receiver and as approved by the courts a quo, proposing
that the original escalating interest rates of 7%, 8%, 10%, 12%, and 14%, over seventeen years be
applied instead; and (b) the fact that Sarabia’s misrepresentations in the rehabilitation petition, i.e.,
that it physically acquired additional property whereas in fact the increase was mainly due to the
recognition of Revaluation Increment and because of capital expenditures, were not taken into
consideration by the courts a quo.
Anent the first matter, it must be pointed out that oppositions which push for high interests rates
are generally frowned upon in rehabilitation proceedings given that the inherent purpose of a
rehabilitation is to find ways and means to minimize the expenses of the distressed corporation
during the rehabilitation period. It is the objective of a rehabilitation proceeding to provide the best
possible framework for the corporation to gradually regain or achieve a sustainable operating form.
Hence, if a creditor, whose interests remain well-preserved under the existing rehabilitation plan,
still declines to accept interests pegged at reasonable rates during the period of rehabilitation, and,
in turn, proposes rates which are largely counter-productive to the rehabilitation, then it may be
said that the creditor’s opposition is manifestly unreasonable.
In this case, the Court finds BPI’s opposition on the approved interest rate to be manifestly
unreasonable considering that: (a) the 6.75% p.a. interest rate already constitutes a reasonable rate
of interest which is concordant with Sarabia’s projected rehabilitation; and (b) on the contrary,
BPI’s proposed escalating interest rates remain hinged on the theoretical assumption of future
fluctuations in the market, this notwithstanding the fact that its interests as a secured creditor
remain well-preserved.
The following observations impel the foregoing conclusion: first, the 6.75% p.a. interest rate is
actually higher than BPI’s perceived cost of money as evidenced by its published time deposit rate
(for an amount of ₱5,000,000.00, with a term of 360-364 days) which is only set at 5.5% p.a.; second,
the 6.75% p.a. is also higher than the benchmark ninety one-day commercial paper, which is used
by banks to price their loan averages to 6.4% p.a. in 2005, and has a three-year average rate of 6.57%
p.a.; and third, BPI’s interests as a secured creditor are adequately protected by the maintenance of
all Sarabia’s existing real estate mortgages over its hotel properties as collateral as well as by the
reinstatement of the comprehensive surety agreement of Sarabia’s stockholders, among other terms
in the approved rehabilitation plan.

DOMINADOR APIQUE V. EVANGELINE FAHNENSTICH

G.R. No. 205705, August 5, 2015

DOCTRINE OF THE CASE:

A joint account is one that is held jointly by two or more natural persons, or by two or
more juridical persons or entities.

There is no dispute that the account opened by Evangeline and Dominador. It is

admitted that: (a) the account was opened for a specific purpose, i.e., to facilitate the transfer
of needed funds for Evangeline's business projects; and (b) Dominador may withdraw funds
therefrom "if" there is a need to meet Evangeline's financial obligations arising from said
projects. Hence, while Dominador is a co-owner of the subject account as far as the bank is
concerned — and may, thus, validly deposit and/or withdraw funds without the consent of his
co-depositor, Evangeline — as between him and Evangeline, his authority to withdraw, as well
as the amount to be withdrawn, is circumscribed by the purpose for which the subject account
was opened

PERLAS-BERNABE, J.:

FACTS:

Evangeline executed General and Special Powers of Attorney constituting her

brother Dominador as her attorney-in-fact to purchase real property for her, and to manage
or supervise her business affairs in the Philippines. She opened a joint savings account with
Dominador with Equitable PCI Bank. However, Dominador withdrew the amount of
P980,000.00 from the account and, thereafter, deposited the money to his own savings
account with the same bank. Evangeline then demanded the return of the amount
withdrawn from the joint account, but to no avail. Hence, she filed a complaint for sum of
money against Dominador. Evangeline claimed to be the sole owner of the money deposited
in the subject account, and that Dominador has no authority to withdraw the same.

Dominador on his part asserted that he was authorized to withdraw funds from the
subject account to answer for the expenses of Evangeline's projects, considering: (a) that it
was a joint account, and (b) the general and special powers of attorney executed by
Evangeline in his favor. He also alleged that he contributed P100,000.00 upon the opening
of the account.

ISSUE:
1. Is Evangeline is entitled to the return of the amount of P980,000.00 Dominador
withdrew from their joint savings account?

RULING:

A joint account is one that is held jointly by two or more natural persons, or
by two or more juridical persons or entities. Under such setup, 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.

The common banking practice is that regardless of who puts the money into the
account, each of the named account holder has an undivided right to the entire balance,
and any of them may deposit and/or withdraw, partially or wholly, the funds without the
need or consent of the other, during their lifetime. Nevertheless, as between the account
holders, their right against each other may depend on what they have agreed upon, and the
purpose for which the account was opened and how it will be operated.

There is no dispute that the account opened by Evangeline and Dominador. It is

admitted that: (a) the account was opened for a specific purpose, i.e., to facilitate the
transfer of needed funds for Evangeline's business projects; and (b) Dominador may
withdraw funds therefrom "if" there is a need to meet Evangeline's financial obligations
arising from said projects. Hence, while Dominador is a co-owner of the subject account as
far as the bank is concerned — and may, thus, validly deposit and/or withdraw funds
without the consent of his co-depositor, Evangeline — as between him and Evangeline, his
authority to withdraw, as well as the amount to be withdrawn, is circumscribed by the
purpose for which the subject account was opened.

Nonetheless, the Court deemed it proper to modify the amount to be returned to

Evangeline, considering: (a) the unrefuted claim that Dominador contributed the amount
of P100,000.00 to the joint account at the time it was opened. Consequently, Dominador is
entitled to the said amount which should be deducted from amount to be returned.