Ring-Handouts in Commercial Law by Prof. Erickson Balmes

THE CHAIRPERSON HERNANDO CASE DOCTRINES IN
MERCANTILE LAW, BAR EXAMS 2023

PROFESSOR ERICKSON H. BALMES
AMDG+
THESE NOTES ARE MEANT TO BE SHARED,

SHARING THEM IS A GOOD KARMA WAITING TO HAPPEN ☺
The Chairperson Hernando

Case Doctrines
in
MERCANTILE LAW
BAR EXAMS 2023
PROF. ERICKSON H. BALMES1
DEPUTY COMMISSIONER , INSURANCE COMMISSION
BANK OF THE PHILIPPINE ISLANDS, VS. CENTRAL BANK OF THE

PHILIPPINES (NOW BANGKO SENTRAL NG PILIPINAS) AND CITIBANK, N.A.,
G.R. No. 197593, October 12, 2020
On the Nature of the Functions of the BSP/CBP of the Philippines and its
suability.
CBP (BSP) is a corporate body performing governmental functions.

Operating a clearing house facility for regional checks is within
CBP's governmental functions and duties as the central monetary authority.
In the case of government agencies, the question of its suability depends on whether it
is incorporated or unincorporated. An incorporated agency has a Charter of its own with
a separate juridical personality while an unincorporated agency has none. In addition,
the Charter of an incorporated agency shall explicitly provide that it has waived its
immunity from suit by granting it with the authority to sue and be sued. This applies
regardless of whether its functions are governmental or proprietary in nature.
Indubitably, the CBP, which was created under RA 265 as amended by Presidential Decree
No. 72 (PD 72), is a government corporation with separate juridical personality and not
a mere agency of the government.
Undoubtedly, the function of the CBP as the central monetary authority is a purely
governmental function. Prior to its creation, the supervision of banks, banking and
currency, and the administration of laws relating to coinage and currency of the
Philippines was lodged with the Bureau of Treasury.
Undeniably, the function of the CBP and its predecessors of supervising the monetary
and the banking systems of the Philippines is a governmental function. In fact, both the
1 Author, INSURANCE AND PRE-NEED 555, A STUDY GUIDE FOR THE CLASSROOM AND BEYOND,
2022 Edition, Central Bookstore.
 Member, Committee on the Suggested Answers in Mercantile, UP Law Center
MCLE Lecturer, Integrated Bar of the Philippines (IBP) MCLE Lectures.
 Bar Reviewer in Legal Ethics and Commercial Law - Jurists Bar Review Center, Villasis Bar Review, Chan
Robles Internet Review, PCU Bar Review, the Magnificus Review Center, Legal Edge Review Center , the
University of Cebu Bar Review, the University of San Jose Recoletos Bar Review, the University of Santo
Tomas Bar Review, the PUP Bar Review, Albano Bar Review Center, the UP Law. Center Bar Review Institute
and the Arellano University Bar Review.
 The compiler acknowledges the efforts of Erika Liv Cervantes and Geraldine Yu in helping research the cases
in this compilation.
1
AMDG+

1973 and 1987 Constitutions provide for the establishment of a central monetary
authority which shall provide policy direction in the areas of money, banking, and credit;
and supervise the operations of banks and exercise regulatory authority over the
operations of finance companies and other institutions.
CBP is not immune to suit although it performed governmental functions.

Nonetheless, while the CBP performed a governmental function in providing clearing
house facilities, it is not immune from suit as its Charter, by express provision, waived its
immunity from suit. However, although the CBP allowed itself to be sued, it did not
necessarily mean that it conceded its liability. Petitioner BPI had been given the right to
bring suit against CBP, such as in this case, to obtain compensation in damages arising
from torts, subject, however, to the right of CBP to interpose any lawful defense.
KOLIN ELECTRONICS CO., INCVS. TAIWAN KOLIN CORP. LTD.

G.R. No. 221347. December 01, 2021
TAIWAN KOLIN CORP. LTD., REPRESENTED BY KOLIN PHILIPPINES

INTERNATIONAL, INC., VS. KOLIN ELECTRONICS CO., INC.,
G.R. Nos. 221360-61
CATCH ME I’M KOLIN, KOLIN FAST AGAIN!

☺
ON TRADEMARKS AND DOMAIN NAMES
The purpose a trademark is to point out distinctly the origin or ownership of the goods
or services to which it is affixed; to secure to him, who has been instrumental in bringing
into the market a superior article of merchandise, the fruit of his industry and skill; to
assure the public that they are procuring the genuine article; to prevent fraud and
imposition; and to protect the manufacturer against substitution and sale of an inferior
and different article as his product.
In today's internet-wired market where the online sale and purchase of goods and
services is commonplace, domain names not only serve to identify an address on the
internet which leads to a website, but also perform the function of trademarks in the
traditional modes of business
Consumers have come to rely on domain names to identify the desired source of a product
or service so they can obtain information to help them decide whether to purchase the
product or service. Thus, the public frequently expects that a website consisting of or
encompassing a trademark used in the physical world is sponsored by or associated with
the owner of that trademark, and readily use domain names as a means of finding goods
and services online.
To protect the goodwill and reputation of their business in the online sphere, proprietors
of goods and services have opted to register their domain names as trademarks and to
secure protection accorded to trademark owners under Republic Act No. (RA) 8293, or
the Intellectual Property Code of the Philippines (IP Code).
It is thus inevitable that trademark principles will find application to domain names
submitted for registration with the Intellectual Property Office (IPO), such as the
2
AMDG+

cases before us.
KECI (PHILS) has the right to register and use the mark "www.kolin.ph".
At the outset, and as reiterated in the 2021 Kolin case, we stress that KECI was already
declared the first and prior user of the " KOLIN" mark in the Philippines and thus the
owner of the "KOLIN" mark under RA 166, in a final and executory decision rendered by
the CA. Unless and until the said registration of KECI is nullified or cancelled
through the proper proceeding, the rights emanating from the said
registration should be respected.
Having been granted the right to exclusively use the "KOLIN" mark for the business of
manufacturing, importing, assembling, or selling electronic equipment or apparatus,
KECI's application for registration of its domain name containing the "KOLIN" mark for
the same goods and services as its Class 35 registration for " KOLIN" is merely an exercise
of its right under its Class 35 registration.
In today's internet-wired market, selling electronic equipment or apparatus will ideally

involve the registration of a domain name to establish an online presence. Information
on the products sold by an enterprise must necessarily be provided in all avenues,
whether through print, media, or online.
The Internet is a decentralized computer network linked together through routers and
communications protocols that enable anyone connected to it to communicate with others
likewise connected, regardless of physical location. Users of the Internet have a wide
variety of communication methods available to them and a tremendous wealth of
information that they may access. The growing popularity of the Net has been driven in
large part by the World Wide Web, i.e., a system that facilitates use of the Net by sorting
through the great mass of information available on it. Advertising on the Net and
cybershopping are turning the Internet into a commercial marketplace.
In W Land Holding, Inc. v. Starwood Hotels and Resorts Worldwide, Inc. , the Court,
cognizant of the increasingly prominent role of the internet in modem commerce, held
that the use of a registered mark representing the owners 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.
Since the internet has turned the world into one vast marketplace, the owner
of a registered mark is clearly entitled to generate and further strengthen his
commercial goodwill by actively marketing and commercially transacting his
wares or services throughout multiple platforms on the internet. The facilities
and avenues present in the internet are, in fact, more prominent nowadays as
they conveniently cater to the modern-day consumer who desires to procure
goods or services at any place and at any time, through the simple click of a
mouse, or the tap of a screen. Multitudinous commercial transactions are
accessed, brokered, and consummated everyday over websites. These
websites carry the mark which represents the goods or services sought to be
transacted. For the owner, he intentionally exhibits his mark to attract the customers'
interest in his goods or services. The mark displayed over the website no less
serves its functions of indicating the goods or services' origin and symbolizing
the owner's goodwill than a mark displayed in the physical market. Therefore,
there is no less premium to recognize actual use of marks through websites
than their actual use through traditional means.
3
AMDG+

Modern law recognizes that the protection to which the owner of a trademark is entitled
is not limited to guarding his goods or business from actual market competition with
identical or similar products of the parties, but extends to all cases in which the use
by a junior appropriator of a trademark or trade-name is likely to lead to a
confusion of source, as where prospective purchasers would be misled into
thinking that the complaining party has extended his business into the field or
is in any way connected with the activities of the infringer; or when it forestalls the normal
potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).
BANGKO SENTRAL NG PILIPINAS, VS. THE COMMISSION ON AUDIT

G.R. No. 210314. October 12, 2021
IS THE BSP A GOVERNMENT OWNED OR CONTROLLED CORPORATION?
We find that the BSP does not qualify as a GOCC as defined under the Administrative
Code and RA 7656.
First, the BSP is not organized as a stock corporation.
The capitalization of the BSP is provided under Section 2 of RA 7653, as amended by RA

11211:
SEC. 2. Creation of the Bangko Sentral. - There is hereby established an independent

central monetary authority, which shall be a body corporate known as the Bangko Sentral
ng Pilipinas, hereafter referred to as the Bangko Sentral.
"The capital of the Bangko Sentral shall be Two hundred billion pesos
(P200,000,000,000), to be fully , subscribed by the Government of the Republic of the
Philippines, hereafter referred to as the Government: Provided, That the increase in
capitalization shall be funded solely from the declared dividends of the Bangko Sentral in
favor of the National Government. For this purpose, any and all declared dividends of
the Bangko Sentral in favor of the National Government shall be deposited in a special
account in the General Fund, and earmarked for the payment of Bangko
Sentral's increase in capitalization. Such payment shall be released and disbursed
immediately and shall continue until the increase in capitalization has been fully paid."[108]
Thus, while the BSP has capital under Section 2 of the BSP Charter, it does not have
capital stock or share capital. Further, its capital is not divided into shares of stocks. There
are no stockholders or voting shares. Hence, the BSP cannot be classified as a stock
corporation.
Second, the BSP is not a non-stock corporation. It does not have members. Even
assuming that the government may be considered as the sole member of the BSP, this
will not make the BSP a non-stock corporation because the BSP Charter mandates it to
remit 50% of its net profits to the National Treasury, in conflict with the provision that
non-stock corporations do not distribute any part of their income to their members.
Further, unlike non-stock corporations which are "organized for charitable, religious,
educational, professional, cultural fraternal, literary, scientific, social, civic service, or
similar purposes, like trade, industry, agricultural and like chambers, or any combination
thereof," the BSP was created to provide policy directions in the areas of money, banking,
and credit.
4
AMDG+

Neither can the BSP be considered a "financial institution owned or controlled

by the National Government," which is expressly included in the definition of a GOCC
in Section 2(b) of RA 7656.
In the Revised Implementing Rules and Regulations of RA 7656, said entity is defined as
follows:
f. “Financial Institutions Owned or Controlled by the National Government” refer to

financial institutions or corporations in which the National Government directly or
indirectly owns majority of the capital stock, and which are either: (1) registered with or
directly supervised by the BSP; or are (2) collecting or transacting funds or contributions
from the public and thereafter, placing them in financial instruments or assets such as
deposits, loans, bonds and equity including, but not limited to, the Government Service
Insurance System and the Social Security System.
In fine, following the definition of a GOCC under the law and in line with settled
jurisprudence, the BSP does not qualify as a GOCC as defined under RA 7656.
The records of the Constitutional Commission and the legislative deliberations

on RA 7653 reveal the intent to exclude the BSP from the general category of
GOCCs.
The creation of a central monetary authority is mandated by the Constitution.
Under Section 20, Article XII thereof, the Congress shall establish
an independent central monetary authority that shall provide policy direction in the
areas of money, banking, and credit:
SECTION 20. The Congress shall establish an independent central monetary

authority, the members of whose governing board must be natural-born Filipino citizens,
of known probity, integrity, and patriotism, the majority of whom shall come from the
private sector. They shall also be subject to such other qualifications and disabilities as
may be prescribed by law. The authority shall provide policy direction in the areas of
money, banking, and credit. It shall have supervision over the operations of banks and
exercise such regulatory powers as may be provided by law over the operations of finance
companies and other institutions performing similar functions.
Pursuant to this provision, the BSP was created under RA 7653.
Section 1 of the BSP Charter reiterates the independence of the BSP, as well as its
accountability, in the discharge of its responsibilities concerning money, banking, and
credit.
The subsequent legislations support the conclusion that the BSP is not a GOCC
within the purview of RA 7656.
After RA 7656 was promulgated in 1993, two relevant laws have since been passed.
First, RA 10149 or the GOCC Governance Act of 2011. This law created the Governance
Commission for GOCCs-the central advisory, monitoring, and oversight body with
authority to regulate GOCCs. The law was enacted in recognition of the potential of GOCCs
to serve as significant tools for economic development, and pursuant to the State policy
to actively exercise its ownership rights in GOCCs and to promote growth.
5
AMDG+

Significantly, the GOCC Governance Act expressly excludes the BSP in its coverage.
This exclusion strengthens the view that the BSP was meant to be set apart and not
classified together with GOCCs.
Second, RA 11211 was enacted in 2019 and amended several provisions of RA 7653.
Notably, among those amended was Section 43, which reiterated the BSP's power to
maintain reserves.
In fine, there is no implied repeal in this case because in the first place, the BSP is not
covered by the application of RA 7656. The BSP is not a GOCC as defined under RA 7656
and the Administrative Code, and as gathered from the legislative intent of the
Constitutional Commission and Congress. Thus, it is the BSP Charter, and not RA 7656
(which applies only to GOCCs), that governs the computation of the BSP's net earnings.
ELIDAD KHO AND VIOLETA KHO, VS. SUMMERVILLE GENERAL

MERCHANDISING & CO., INC.,
G.R. No. 213400. August 04, 2021
ON UNFAIR COMPETITION
In the present case, We find that the acts complained of constituted probable cause to
charge them with Unfair Competition.
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.
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. 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.
Here, petitioners' product which is a medicated facial cream sold to the public is contained
in the same pink oval-shaped container which had the mark "Chin Chun Su," as that of
respondent. While petitioners indicated in their product the manufacturer's name, the
same does not change the fact that it is confusingly similar to respondent's product in
the eyes of the public. As aptly found by the appellate court, an ordinary purchaser would
not normally inquire about the manufacturer of the product.
Petitioners' product and that solely distributed by respondent are similar in the following
respects "1. both are medicated facial creams; 2. both are contained in pink, oval-shaped
containers; and 3. both contain the trademark "Chin Chun Su" x x x The similarities far
outweigh the differences.
Unfair competition is always a question of fact.
6
AMDG+

MALAYAN INSURANCE COMPANY, INC., VS. STRONGHOLD INSURANCE

COMPANY, INC., AND RICO J. PABLO,
G.R. No. 203060. June 28, 2021
ON THE CMVLI AND THE WESTERN GUARANTY CASE
The purpose of CMVLI is to provide compensation for the death or bodily injuries suffered
by innocent third parties or passengers as a result of the negligent operation and use of
motor vehicles.
The victims or their dependents are assured of immediate financial assistance, regardless
of the financial capacity of motor vehicle owners.
With the different interpretations of Western Guaranty, it is necessary to revisit the

case. Both the appellate court and IC used the case as basis in their respective rulings.
The parties have likewise argued on its applicability.
In Western Guaranty, a pedestrian was hit by a passenger bus that was insured with
Western Guaranty Corporation. The policy provided that the company's liability in cases
of death, injury, or damage to property of any party shall not exceed the limits of liability
set forth, and that the payment per victim in any one accident shall not exceed the limits
indicated in the Schedule of Indemnities provided for excluding additional medical or
burial expenses that might have been incurred. The pedestrian filed a complaint for
damages against the bus company, which in turn filed a third-party complaint against
petitioner therein.
The Regional Trial Court ruled in favor of the pedestrian and ordered the payment of
actual damages, compensation for loss of earning capacity, moral damages, and
attorney's fees.
On appeal, the CA affirmed the trial court's ruling in its entirety. Petitioner therein further
appealed to this Court and contended that as the schedule therein limits the amount
payable for certain kinds of expenses, that schedule should be read as excluding liability
for any other type of expense or damage or loss even though actually sustained or
incurred by the third-party victim.
The Court ruled against petitioner insurance provider, the relevant portions of which
provide, to wit:
Firstly, the Schedule of Indemnities does not purport to restrict the

kinds of damages that may be awarded against Western once
liability has arisen. Section 1, quoted above, does refer to certain
"Limits of Liability" which in the case of the third[-]party liability
section of the Master Policy, is apparently P50,000.00 per person
per accident. Within this over-all quantitative limit, all kinds of
damages allowable by law — "actual or compensatory damages";
"moral damages"; "nominal damages"; "temperate or moderate
damages"; "liquidated damages"; and "exemplary damages" — may
be awarded by a competent court against the insurer once liability
is shown to have arisen, and the essential requisites or conditions
for grant of each species of damages are present. It appears to
us self-evident that the Schedule of Indemnities was not
intended to be an enumeration, much less a closed
7
AMDG+

enumeration, of the specific kinds of damages which may

be awarded under the Master Policy Western has issued.
The Court ruled that the schedule does not restrict the kinds of damages that petitioner
therein may be made to pay as long as liability is shown to have arisen and the requisites
for each kind of damages are present. The schedule is not an enumeration of the specific
kinds of damages that may be awarded. Its purpose was to set limits to the amounts the
insurance company would be liable for in cases of "claims for death, bodily injuries of,
professional services and hospital charges, for services rendered to traffic accident
victims"; it does not limit or exclude claims for other kinds of damages.
The Court added that petitioner therein should have used a more specific and precise
language to reflect its intentions as presented in its arguments.
In other words, Western Guaranty clarifies the applicability of the limits

provided in the Schedule of Indemnities to injuries listed therein and allows
claims for other kinds of damages not otherwise indicated in the schedule
against CMVLI policy providers, as long as liability is established and the
requisites for the kind of damages claimed are present.
In the instant case, the CA did not err in applying Western Guaranty.
Upon examination of Stronghold's policy in the instant case, the Court finds that the
appellate court is correct in finding that the subject policy is similar—and in fact identical—
with the policy in Western Guaranty.
As the appellate court have held, the limit of liability with regard to the items listed in the
Schedule of Indemnities is the amount provided therein; the limit of liability with regard
to other kinds of damages not listed in the same Schedule of Indemnities is the total
amount of insurance coverage. It then follows that the amounts in excess of the limits of
liability in the schedule for items listed therein are not covered by the total coverage.
Such excess is already for the personal account of the insured or an excess coverage
provider. This interpretation upholds the purpose of indicating limits of liability on the
specific injuries listed in the schedule.
GOLDWELL PROPERTIES TAGAYTAY, INC., NOVA NORTHSTAR REALTY

CORPORATION, AND NS NOVA STAR COMPANY, INC., REPRESENTED HEREIN
BY FLOR ALANO, VS. METROPOLITAN BANK AND TRUST COMPANY
G.R. No. 209837. May 12, 2021
Partial release of the collaterals cannot be allowed.
Article 2089 of the Civil Code states that:
A pledge or mortgage is indivisible, even though the debt may be divided among the
successors in interest of the debtor or of the creditor.
Therefore, the debtor's heir who has paid a part of the debt cannot ask for the
proportionate extinguishment of the pledge or mortgage as long as the debt is not
completely satisfied.
Neither can the creditor's heir who received his share of the debt return the pledge or
cancel the mortgage, to the prejudice of the other heirs who have not been paid.
8
AMDG+

From these provisions is excepted the case in which, there being several things given in
mortgage or pledge, each one of these guarantees only a determinate portion of the
credit.
The debtor, in this case, shall have the right to the extinguishment of the pledge or
mortgage as the portion of the debt for which each thing is specially answerable is
satisfied.
Under this provision, the "debtor cannot ask for the release of any portion of the
mortgaged property or of one or some of the several lots mortgaged unless
and until the loan thus secured has. been fully paid, notwithstanding the fact
that there has been a partial fulfillment of the obligation. Hence, it is provided
that the debtor who has paid a part of the debt cannot ask for the
proportionate extinguishment of the mortgage as long as the debt is not
completely satisfied."
Thus, the fact that petitioners paid for the loan value of the Pasay properties is
immaterial; the mortgage would still be in effect since the loans have not been fully
settled.
Although Metrobank allowed the release of some properties from mortgage in the past,
such would not bind the bank to grant the same concession every single time, particularly
when it is evident that the petitioners were having difficulties settling their total obligation.
To do so would place the bank in a disadvantageous position because it would have less
collaterals to cover for the total accountability of the petitioners.
The bank's previous practice of releasing the collaterals without full payment
of the loan could not develop into an iron-clad rule, as a mere practice could
not supersede what the law mandates.
A Bank could not be compelled to adopt the valuation of the independent

appraisers after the loans have already been obtained.
On this score, the Court has previously held that "[w]hen the law does not provide for
the determination of the property's valuation, neither should the courts so require, for
our duty limits us to the interpretation of the law, not to its augmentation."
Although this pronouncement pertains to the basis of the bid price of a mortgaged
property that became the subject of foreclosure, by analogy, We can infer that courts,
cannot likewise dictate how banks should set the values of mortgaged properties for
purposes of loan acquisition. In this case, the Court cannot compel Metrobank to accept
the values pegged by the independent appraisers as insisted by the petitioners, lest We
be suspected of meddling with management prerogative. Besides, the petitioners only
raised this valuation issue after they have already obtained the loans.
ON CONTRACTS OF ADHESION:
A contract of adhesion is so-called because its terms are prepared by only one party while
the other party merely affixes his signature signifying his adhesion thereto. Such contract
is just as binding as ordinary contracts.
9
AMDG+

It is true that we have, on occasion, struck down such contracts as void when the weaker
party is imposed upon in dealing with the dominant bargaining party and is reduced to
the alternative of taking it or leaving it, completely deprived of the opportunity to bargain
on equal footing. Nevertheless, contracts of adhesion are not invalid per se and
they are not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely, if he adheres, he gives his consent.
Accordingly, a contract duly executed is the law between the parties, and they are obliged
to comply fully and not selectively with its terms. A contract of adhesion is no exception.
No court, even this Court, can 'make new contracts for the parties or ignore those already
made by them, simply to avoid seeming hardships. Neither abstract justice nor the rule
of liberal construction justifies the creation of a contract for the parties which they did
not make themselves or the imposition upon one party to a contract of an obligation not
assumed.
ON INTEREST RATES:
While the principle of mutuality of contracts should prevail, Metrobank's valuation and
imposition of the interest rates in the DSAs should still be assessed. "As a principal
condition and. an important component in contracts of loan, interest rates, are only
allowed if agreed upon by express stipulation of the parties, and only when reduced into
writing. Any change to it must be mutually agreed upon, or it produces no binding
effect." Without a doubt, the parties entered into contracts that expressly stipulated the
interest rates. The crucial issue, however, is whether these rates are unconscionable.
There are two types of interest, namely, monetary interest and

compensatory/penalty interest.
"Interest as a compensation fixed by the parties for the use or forbearance of money is
referred to as monetary interest, while interest that may be imposed by law or by courts
as penalty for damages is referred to as compensatory interest."
Accordingly, the right to recover interest arises only either by virtue of a contract
(monetary interest) or as damages for delay or failure to pay the principal loan on which
the interest is demanded (compensatory interest)."
As regards monetary interest, although the parties are "free to stipulate their
preferred rate," the courts are "allowed to equitably temper interest rates that
are found to be excessive, iniquitous, unconscionable, and/or exorbitant."
Thus, stipulated Interest rates of "three percent (3%) per month or higher is considered
as excessive or unconscionable." Alternatively, as per settled jurisprudence; a 24%
per annum (or 2% per month) rate is not unconscionable.
Taking these into account, the interest rate of 14.25% per annum (or 1.1875%. per
month) upon the principal obligation in the case at bench should, in theory, be considered
as a fair rate.
A FLOATING INTEREST RATE SYSTEM:
At this juncture, the Court clarifies that there may be instances wherein an interest rate
scheme which does not specifically indicate a particular interest rate may be validly
imposed. Such interest rate scheme refers to what is typically called a floating interest
10
AMDG+

rate system.
In Security Bank Corp. v. Spouses Mercado, the Court explained that floating rates of
interest refer to the variable interest stated on a market-based reference rate agreed
upon by the parties.
Stipulations on floating rate of interest differ from escalation clauses. Escalation clauses
are stipulations which allow for the increase of the original fixed interest rate. In contract,
a floating rate of interest pertains to the interest rate itself that is not fixed as it is
dependent on a market-based reference that was agreed upon by the parties.
EFFECT OF UNCONSCIONABLE INTEREST RATES
Notwithstanding the unconscionable and therefore void nature of the repriced interest
rates, the petitioners still have to pay Metrobank the remaining amount of the
loan obligations. They are not entitled to stop payment of interests, as only the rates
of the interests were declared void.
Thus, the "stipulation requiring [petitioners] to pay interest on their loan remains valid
and binding." Otherwise stated, Metrobank's imposition of unfair monetary and penalty
interest rates would not preclude the bank from claiming full payment of the loans under
the DSAs with reasonable interests.
In fine, "in a situation wherein the interest rate scheme imposed by the bank was struck
down because the bank was allowed under the loan agreement to unilaterally determine
and Increase the imposable interest rate, thus being null and void, 'only the interest
rate imposed is nullified; hence, it is deemed not written in the contract. The
agreement on payment of interest on the principal loan obligation
remains.' Relevantly, "the Court shall apply the applicable legal rate of interest,
which refers to 'the prevailing rate at the time when the agreement was
entered into.'"
JORGENETICS SWINE IMPROVEMENT CORPORATION, VS. THICK & THIN

AGRI-PRODUCTS, INC.,
G.R. Nos. 201044 & 222691. May 05, 2021
The chairperson and president of a corporation may sign the verification and
certification without need of board resolution. Moreover, lack of authority of a
corporate officer to undertake an action on behalf of the corporation may be
cured by ratification through the subsequent issuance of a board resolution.
In Cagayan Valley Drug Corp. v. Commissioner of Internal Revenue, this Court ruled that
certain officials or employees of a corporation can sign the verification and certification
on its behalf without need of a board resolution, such as but not limited to the chairperson
of the board of directors, the president of a corporation, the general manager or acting
general manager, personnel officer, and an employment specialist in a labor case.
Moreover, the "lack of authority of a corporate officer to undertake an action on behalf
of the corporation may be cured by ratification through the subsequent issuance of a
board resolution, recognizing the validity of the action or the authority of the concerned
officer."
11
AMDG+

Given the foregoing, Mr. Jorge, as the chairperson and president of petitioner, is
sufficiently authorized to sign the verification and certification on behalf of Jorgenetics.
Any doubt on his authority to sign the verification and certification is likewise obviated by
the secretary's certificate it submitted upon the orders of this Court, which ratified Mr.
Jorge's authority to represent petitioner and file the Petition in G.R. No. 201044.
A variance in the date of the verification with the date of the Petition is not
fatal to petitioner's case.
The purpose of a verification in the petition is to secure an assurance that the allegations
of a pleading are true and correct, are not speculative or merely imagined, and have been
made in good faith. To achieve this purpose, the verification of a pleading is made through
an affidavit or sworn statement, confirming that the affiant has read the pleading whose
allegations are true and correct of the affiant's personal knowledge or based on authentic
records.
In connection thereto, a variance in the date of the verification with the date
of the petition is not necessarily fatal to Jorgenetics' case since the variance
does not necessarily lead to the conclusion that no verification was made, or
that the verification was false. It does not necessarily contradict the
categorical declaration made by Jorgenetics in its affidavit that its
representatives read and understood the contents of the pleading.
To demand the litigants to read the very same document that is to be filed in court is too
rigorous a requirement.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, VS. BANGKO SENTRAL NG

PILIPINAS AND THE MONETARY BOARD,
G.R. No. 200642. April 26, 2021
A bank under receivership can only sue or be sued through its receiver, the
PDIC. Thus, a petition filed on behalf of a bank under receivership that is
neither filed through nor authorized by the PDIC must be dismissed for want
of jurisdiction.
When a bank is ordered closed and placed under the receivership of PDIC by the Monetary
Board, PDIC is mandated to proceed with the takeover and liquidation of the closed
bank. PDIC shall immediately gather and take charge of all the assets and liabilities of
the bank, administer the same for the benefit of its creditors, and exercise the general
powers of a receiver under the Revised Rules of Court.
In its capacity as the receiver of the closed bank, the PDIC is authorized to perform
several functions in its behalf, including bringing suits to enforce liabilities to or recoveries
of the closed banks, hiring or retaining private counsels as may be necessary, and
exercising such other powers as are inherent and necessary for the effective discharge
of the duties of the corporation as a receiver.
In contrast, the powers and functions of the directors, officers, and stockholders of a
closed bank under receivership are deemed suspended upon takeover by the PDIC.
Moreover, in Balayan Bay Rural Bank, Inc. v. National Livelihood Development Corp , We
held that the PDIC, as the fiduciary of the properties of a closed bank, may prosecute or
12
AMDG+

defend the case by or against the said bank as a representative party while the bank will
remain as the real party in interest, and that actions should be brought for or against the
closed bank through the statutory receiver. We explained that the mandatory inclusion
of the PDIC as a representative party is grounded on its statutory role as the fiduciary of
the closed bank which, under the New Central Bank Act, is authorized to conserve the
latter's property for the benefit of its creditors.
This Court further clarified in Banco Filipino Savings and Mortgage Bank v. Bangko Sentral
ng Pilipinas (MTD Case) that a closed bank under receivership can only sue or be sued
through its receiver, the PDIC. In the said case, this Court ratiocinated that as receiver
of Banco Filipino at the time of the filing of the petition therein, PDIC should have been
joined or at the very least, its authorization to file the petition should have been secured:
It was speculative on petitioner's part to presume that it

could file this Petition without joining its receiver on the
ground that Philippine Deposit Insurance Corporation might not
allow the suit. At the very least, petitioner should have
shown that it attempted to seek Philippine Deposit
Insurance Corporation's authorization to file suit. It was
possible that Philippine Deposit Insurance Corporation could have
granted its permission to be joined in the suit. If it had refused to
allow petitioner to file its suit, petitioner still had a remedy available
to it.
Philippine Deposit Insurance Corporation also safeguards the interests of the depositors
in all legal proceedings. Most bank depositors are ordinary people who have entrusted
their money to banks in the hopes of growing their savings. When banks become
insolvent, depositors are secure in the knowledge that they can still recoup some part of
their savings through Philippine Deposit Insurance Corporation. Thus, Philippine
Deposit Insurance Corporation's participation in all suits involving the
insolvent bank is necessary and imbued with the public interest.
ALPHA PLUS INTERNATIONAL ENTERPRISES CORP., VS. PHILIPPINE

CHARTER INSURANCE CORP., BIENVENIDO E. LAGUESMA, VYTONNE SO,
GERRY Y. TEE, HENRY M. SUN, EMMANUEL R. QUE, BENJAMIN S. TY, ROBERT
T. YU, EDWIN V. SALVAN AND ATTY. MARIA LUISA CECILIA E. GARCIA
G.R. No. 203756. February 10, 2021
ON PRESCRIPTION OF INSURANCE CLAIMS:
Prescription is a ground for the dismissal of a complaint without going into trial on the
merits. Prescription is based on a fixed time and is concerned with the fact of delay. When
it appears from the pleadings or the evidence on record that an action is barred by
prescription, the court is mandated to dismiss the same.
In the present case, We agree with the CA's finding that petitioner's insurance claim had
already prescribed and that the RTC should dismiss the complaint before it based on said
ground. Nonetheless, We differ with the appellate court in the computation of the
prescriptive period. Instead of the 360-day period used by the CA in computing
whether or not petitioner's action has already prescribed, We find that the
365-day period should be utilized instead.
13
AMDG+

To determine the prescription of the subject insurance claim, Article 63 of the Insurance
Code as well as Condition No. 27 of the two fire insurance policies should be considered.
Section 63 of the Insurance Code states that:

Sec. 63. A condition, stipulation or agreement in any policy of insurance, limiting the time
for commencing an action thereunder to a period of less than one year from the time
when the cause of action accrues, is void.
On the other hand, Condition No. 27 of the parties' fire insurance policies provides:
27. Action or suit clause - If a claim be made and rejected and an

action or suit be not commenced either in the Insurance
Commission or any court of competent jurisdiction within twelve
(12) months from receipt of notice of such rejection, or in case of
arbitration taking place as provided herein, within twelve (12)
months after due notice of the award made by the arbitrator or
arbitrators or umpire, then the claim shall for all purposes be
deemed to have been abandoned and shall not thereafter be
recoverable hereunder. (Underscoring supplied)
In the case of Sun Insurance Office, Ltd. v. Court of Appeals which involved an insurance
policy that contained the same condition of bringing a suit within a period of twelve
months, it was interpreted therein that the 12-month period stated in the insurance policy
referred to the period of one year, with a view that the said insurance policy was
stipulated pursuant to Section 63 of the Insurance Code.
Thus, contrary to the finding of the appellate court that the 12-month period should mean
360 days, We hold that the 12-month period in Condition No. 27 of the parties'
fire insurance policies should refer to the period of one (1) year, or 365 days,
in line with Section 63 of the Insurance Code and prevailing jurisprudence.
This is also consistent with Article 13 of the Civil Code which provides that when the law
speaks of a year, it is understood to be equivalent to 365 days.
Like any other contract, parties to a contract of insurance could stipulate on terms and
conditions that would govern them as long as these stipulations are not contrary to law.
An insurance contract is the law between the parties. Its terms and conditions constitute
the measure of the insurer's liability and compliance therewith is a condition precedent
to the insured's right to recovery from the insurer.
It bears to stress that the rationale for the necessity of bringing suits against
the insurer within one year from the rejection of the claim has already been
settled. As already laid down in precedent, the condition contained in an insurance policy
that claims must be presented within one year after rejection is not merely a procedural
requirement but an important matter essential to a prompt settlement of claims against
insurance companies as it demands that insurance suits be brought by the insured while
the evidence as to the origin and cause of destruction have not yet disappeared.
POINT OF RECKONING OF PRESCRIPTIVE PERIOD:
Case law teaches that the prescriptive period for the insured's action for indemnity should
be reckoned from the "final rejection" of the claim.
14
AMDG+

The "final rejection" simply means denial by the insurer of the claims of the insured and
not the rejection or denial by the insurer of the insured's motion or request for
reconsideration. The rejection referred to should be construed as the rejection in the
first instance.
ALLIED BANKING CORPORATION* AND GUILLERMO DIMOG, VS. SPOUSES

MARIO ANTONIO MACAM** & ROSE TRINIDAD MACAM, SPOUSES WILLAR
FELIX AND MARIBEL CANA AND SPOUSES MELCHOR AND HELEN GARCIA
G.R. No. 200635. February 01, 2021
DEGREE OF DILIGENCE REQUIRED OF BANKS IN HANDLING THE FUNDS OF

THEIR DEPOSITORS.
RA 8791 enshrines the fiduciary nature of banking that requires high standards of integrity
and performance.
The statute now reflects jurisprudential holdings that the banking industry is impressed
with public interest requiring banks to assume a degree of diligence higher than that of
a good father of a family.
Thus, all banks are charged with extraordinary diligence in the handling and care of its
deposits as well as the highest degree of diligence in the selection and supervision of its
employees.
The foregoing obligation of banks is absolute and deemed written into every deposit
agreement with its depositors.
In contemplation of the fiduciary nature of a bank-depositor relationship, the law imposes

on the bank a higher standard of integrity and performance in complying with its
obligations under the contract of simple loan, beyond those required of non-bank debtors
under a similar contract of simple loan.
Section 20 of the GBL allows universal or commercial banks, upon prior approval of
the Bangko Sentral ng Pilipinas, to open branches or offices within or outside the
Philippines. It further provides that "a bank authorized to establish branches or other
offices shall be responsible for all business conducted in such branches and offices to the
same extent and in the same manner as though such business had all been conducted in
the head office. A bank and its branches and offices shall be treated as one unit."
Allied Bank cannot obliquely repudiate the resulting banking relationship with the Spouses
Mario Macam and the fiduciary nature thereof when it accepted the spouses' initial deposit
of P1,590,000.00, the very same funds it now claims as its own. It cannot belatedly claim
ignorance of its performance of a core banking function, i.e., accepting or creating
demand deposits.
"A certificate of deposit is defined as a written acknowledgment by a bank or

banker of the receipt of a sum of money on deposit which the bank or banker
promises to pay to the depositor, to the order of the depositor, or to some
other person or his order, whereby the relation of debtor and creditor between
the bank and the depositor is created. "
15
AMDG+

It is presumed that the money deposited in a bank account belongs to the

person in whose name the deposit account is opened.
It bears emphasizing that Money bears no earmarks of peculiar ownership. Its primary
purpose is to pass from hand to hand as a medium of exchange, without other evidence
of its title."
Money, which had passed through different transactions of a bank in the general course
of business, even if of traceable origin, is no exception. Clearly therefore, Allied Bank's
unilateral closure of the Spouses Mario Macam's deposit account violated their savings
deposit agreement.
Allied Bank is expected to act with extraordinary diligence required of banks. We cannot
overemphasize that the highest degree of diligence required of banks likewise
contemplates such diligence in the selection and supervision of its employees.
The very nature of their work which involves handling millions of pesos in daily
transactions requires a degree of responsibility, care and trustworthiness that is far
greater than those expected from ordinary clerks and employees.
The bank must not only exercise "high standards of integrity and performance," it must
also insure that its employees do likewise because this is the only way to insure that the
bank will comply with its fiduciary duty.
PRINCIPLE OF APPARENT AUTHORITY:
The authority of a corporate officer or agent in dealing with third persons may be actual
or apparent.
The apparent authority to act for and to bind a corporation may be presumed from acts
of recognition in other instances, wherein the power was exercised without any objection
from its board or shareholders.
Caña's act of approving the P46 Million fund transfer and the subsequent transfers to
different accounts in various branches of Allied Bank leading to the P1,590,000.00
transfer to the account of the Spouses Mario Macam all appear to have been clothed with
authority. Indeed, the subsequent transfers (of funds) were approved by several Branch
Heads.
The doctrine of "apparent authority", with special reference to banks, has long been
recognized in this jurisdiction.
Apparent authority is derived not merely from practice. Its existence may be ascertained
through 1) the general manner in which the corporation holds out an officer or agent as
having the power to act, or in other words, the apparent authority to act in general, with
which it clothes him; or 2) the acquiescence in his acts of a particular nature, with actual
or constructive knowledge thereof, within or beyond the scope of his ordinary powers.
Prescinding from all the foregoing, the lower courts were correct in sustaining Allied
Bank's liability to the Spouses Mario Macam for culpa contractual.
MULTI-WARE MANUFACTURING, CORPORATION, VS. CIBELES INSURANCE

CORPORATION, WESTERN GUARANTY CORPORATION, AND ERNESTY SY,
16
AMDG+

DOING BUSINESS UNDER THE NAME AND STYLE "PAN OCEANIC INSURANCE
SERVICES.
G.R. No. 230528. February 01, 2021
ON THE OTHER INSURANCE CLAUSE
In American Home Assurance Company v. Chua, the Court held that where the insurance
policy specifies as a condition the disclosure of existing co insurers, non-disclosure thereof
is a violation that entitles the insurer to avoid the policy. This condition is common in fire
insurance policies and is known as the “other insurance clause”.
In Geagonia v. Court of Appeals, the Court explained that the rationale behind the
incorporation of "other insurance" clause in fire policies is to prevent over-insurance and
thus avert the perpetration of fraud.
When a property owner obtains insurance policies from two or more insurers
in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance.
The public as well as the insurer is interested in preventing a situation in which
a fire would be profitable to the insured.
AGRO FOOD AND PROCESSING CORP., v. VITARICH CORPORATION,

G.R. No. 217454. January 11, 2021
ON THE PRINCIPLE OF APPARENT AUTHORITY
This case involves a corporation officer's authority to amend an original contract without
actual authority from the corporation's board of directors. Agro's position is that the
amendments are not binding on the corporation since the officer had no actual authority
from its board of directors. For Vitarich, the amendments are binding pursuant to the
doctrine of apparent authority, among others.
Agro is correct that "apparent authority is determined by the acts of the principal and not
by the acts of the agent."
As applied to corporations, the doctrine of apparent authority provides that "a corporation
is estopped from denying the officer's authority if it knowingly permits such officer to act
within the scope of an apparent authority, and it holds him out to the public as possessing
the power to do those acts."
Thus, it is the corporation's acts which determine the existence of apparent authority, i.e.,
whether the corporation knowingly permits its officer to act on its behalf and holds such
officer out to the public as having the authority to do those acts.
Under the doctrine of apparent authority, if a corporation knowingly permits one of its
officers or any other agent to act within the scope of an apparent authority, it holds the
agent out to the public as possessing the power to do those acts; thus the corporation
will, as against anyone who has in good faith dealt with it through such agent, be
estopped from denying the agent's authority.
It bears stressing that the existence of apparent authority may be ascertained not
only through the "general manner in which the corporation holds out an officer or agent
as having the apparent authority to act in general", but also through the
17
AMDG+

corporation's "acquiescence in his acts of a particular nature, with actual or

constructive knowledge thereof, whether within or beyond the scope of his
ordinary powers".
Here, it is easy to see that Agro, reasonably appearing to have knowledge of the
amendments, acquiesced to the same. Indeed, Agro never contested nor protested the
amendments; on the contrary, it even accepted the benefits arising therefrom.
"When a corporation intentionally or negligently clothes its officer with
apparent authority to act in its behalf, it is estopped from denying its officer's
apparent authority as to innocent third parties who dealt with this officer in
good faith."
MAGNA READY MIX CONCRETE CORPORATION, VS. ANDERSEN BJORNSTAD

KANE JACOBS, INC.,
G.R. No. 196158. January 20, 2021
ON THE LEGAL CAPACITY OF FOREIGN CORPORATIONS TO SUE IN THE

PHILIPPINES
The Court resolves that ANDERSEN has no legal capacity to sue for doing business in the
Philippines without procuring the necessary license. It is not suing on an isolated
transaction on the basis of the contract it entered into with MAGNA.
However, MAGNA is already estopped from challenging ANDERSEN's legal

capacity when it entered into a contract with it.
Section 133 of the Corporation Code of the Philippines (1980) provides:
Section 133. Doing Business Without 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 courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.
Thus, a foreign corporation that conducts business in the Philippines must first secure a
license for it to be allowed to initiate or intervene in any action in any court or
administrative agency in the Philippines.
A corporation has legal status only in the state that granted it personality. Hence, a
foreign corporation has no personality in the Philippines, much less legal capacity to file
a case, unless it procures a license as provided by law.
The case of Agilent Technologies v. Integrated Silicon, citing Mentholatum v.

Mangaliman, discusses the two tests to determine whether a foreign corporation is doing
business in the Philippines:
In Mentholatum, this Court discoursed on the two general tests to determine whether or
not a foreign corporation can be considered as "doing business" in the Philippines.
The first of these is the substance test, thus:
18
AMDG+

The true test [for doing business], however, seems to be whether the foreign corporation
is continuing the body of the business or enterprise for which it was organized or whether
it has substantially retired from it and turned it over to another.
The second test is the continuity test, expressed thus:
The term [doing business] implies a continuity of commercial dealings and arrangements,
and contemplates, to that extent, the performance of acts or works or the exercise of
some of the functions normally incident to, and in the progressive prosecution of, the
purpose and object of its organization.[67]
The number of the transactions entered into is not determinative whether a foreign
corporation is doing business in the Philippines; the intention to continue the body of its
business prevails.
The number or quantity is merely an evidence of such intention.
A single act or transaction may then be considered as doing business when a corporation
performs acts for which it was created or exercises some of the functions for which it was
organized.
As an exception, a foreign corporation may sue without a license on the basis of an

isolated transaction.
Eriks Pte. Ltd. v. Court of Appeals describes the concept of isolated transaction, to wit:
The phrase "isolated transaction" has a definite and fixed meaning, i.e. a
transaction or series of transactions set apart from the common business of a
foreign enterprise in the sense that there is no intention to engage in a
progressive pursuit of the purpose and object of the business organization.
Whether a foreign corporation is "doing business" does not necessarily depend upon the
frequency of its transactions, but more upon the nature and character of the transactions.
Based on the foregoing, a single act may be considered as either doing business or an
isolated transaction depending on its nature. It may be considered as doing business if it
implies a continuity of commercial dealings and contemplates the performance of acts or
the exercise of functions normally incidental to and in the progressive pursuit of its
purpose. Contrarily, it may be considered as an isolated transaction if it is different from
or not related to the common business of the foreign corporation in the sense that there
is no objective to increasingly pursue its purpose or object. And as stated, a license is
not required if the foreign corporation is suing on an isolated transaction.
Though it was a single transaction, ANDERSEN's act of entering into a contract with
MAGNA constitutes doing business in the Philippines. It cannot be considered as an
isolated transaction because the act is related to ANDERSEN's specific business purpose.
Thus, in doing business without a license, ANDERSEN had no legal capacity to sue in the
Philippines.
However, the Court agrees that MAGNA is already estopped from challenging
ANDERSEN's legal capacity to sue. The doctrine of estoppel states that the other
contracting party may no longer challenge the foreign corporation's personality after
acknowledging the same by entering into a contract with it.
19
AMDG+

This principle is applied in order to "prevent a person (or another corporation) contracting
with a foreign corporation from later taking advantage of its noncompliance with the
statutes, chiefly in cases where such person has received the benefits of the contract."
The case of Communications Materials and Design, Inc. v. Court of Appeals elaborates
on the doctrine:
A foreign corporation doing business in the Philippines may sue in Philippine

Courts although not authorized to do business here against a Philippine citizen
or entity who had contracted with and benefited by said corporation. To put it
in another way, a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a contract
with it. And the doctrine of estoppel to deny corporate existence applies to a
foreign as well as to domestic corporations. One who has dealt with a
corporation of foreign origin as a corporate entity is estopped to deny its
corporate existence and capacity. The principle will be applied to prevent a
person contracting with a foreign corporation from later taking advantage of
its noncompliance with the statutes chiefly in cases where such person has
received the benefits of the contract.
The rule is deeply rooted in the time-honored axiom of commodum ex injuria sua non
habere debet -no person ought to derive any advantage of his own wrong.
This is as it should be for as mandated by law, "every person must in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith."
By virtue of the doctrine of estoppel, a party cannot take undue advantage by challenging
the foreign corporation's personality or legal capacity to sue when the former already
acknowledged the same by entering into a contract with the latter and derived benefits
therefrom.
In this case, MAGNA is already estopped from challenging ANDERSEN's legal capacity to
sue due to its prior dealing with the latter, that is, entering into a contract with it. As
ruled by the courts below, there was a perfected and binding contract between the
parties. By such contract, MAGNA effectively acknowledged ANDERSEN's personality.
MAGNA's allegation that it only discovered during the trial that ANDERSEN was doing
business in the Philippines without a license, is therefore irrelevant. Moreover, MAGNA
had already benefited from the contract because as found by the lower and appellate
courts, ANDERSEN indeed rendered services to MAGNA pursuant to their contract and
even prior thereto.
ON INTEREST RATES:
Finally, the Court modifies the legal interest imposed by the CA. The appellate court
applied the earlier case of Eastern Shipping Lines v. Court of Appeals in imposing 12%
legal interest per annum reckoned from the date of extrajudicial demand on June 26,
1998 until full payment.
Subsequently, as the Court discussed and applied in Nacar v. Gallery Frames, Resolution
No. 796 issued by the Monetary Board of the Bangko Sentral ng Pilipinas which took
20
AMDG+

effect on July 1, 2013, lowered the interest rate from 12% to 6% per annum for loans or
forbearance of money, goods, and credit, in the absence of an express stipulation.
Therefore, the interest on the amount due must be bifurcated, and is to be imposed as
follows: (a) interest at the rate of 12% per annum is to be computed on the amount due
from June 26, 1998, the date of extrajudicial demand, until June 30, 2013; and
subsequently, (b) interest at the rate of 6% per annum is to be computed on the amount
due from July 1, 2013 until full payment thereof.
BANCO DE ORO UNIBANK, INC. (NOW BDO UNIBANK, INC.), VS. EDGARDO C.
YPIL, SR., CEBU SUREWAY TRADING CORPORATION, AND LEOPOLDO KHO
G.R. No. 212024, October 12, 2020
ON LEGAL COMPENSATION and GARNISHMENT
It is settled that compensation is a mode of extinguishing to the concurrent amount the

debts of persons who in their own right are creditors and debtors of each other.
The object of compensation is the prevention of unnecessary suits and payments thru
the mutual extinction by operation of law of concurring debts."
The said mode of payment is encapsulated in Article 1279 of the Civil Code, viz.:
ARTICLE 1279. In order that compensation may be proper, it is necessary:
(1)That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;
(3)That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.
In relation to this, Article 1290 of the Civil Code states that when all the requisites
mentioned in Article 1279 are present, compensation takes effect by operation of law,
and extinguishes both debts to the concurrent amount, even though the creditors and
debtors are not aware of the compensation."
The Bank should take note that garnishment has been defined as a specie of attachment
for reaching credits belonging to the judgment debtor and owing to him from a stranger
to the litigation.
A writ of attachment is substantially a writ of execution except that it emanates at the

beginning, instead of at the termination, of a suit. It places the attached properties
in custodia legis, obtaining pendente lite a lien until the judgment of the proper tribunal
on the plaintiff's claim is established, when the lien becomes effective as of the date of
the levy."
Hence, after service and receipt of the Notice of Garnishment, contrary to the Bank's
view, the deposits of CSTC were placed under custodia legis, under the sole control of
the trial court and remained subject to its orders "until such time that the garnishment is
21
AMDG+

discharged, or the judgment in favor of [Ypil] is satisfied or the credit or deposit is

delivered to the proper officer of the court."
More importantly, no legal compensation took place which could have rendered CSTC's
deposits unavailable for garnishment.
If, as the Bank claims, CSTC's deposits amounted to only P294,436.68 and not
P300,000.00 as provided in the Compromise Agreement, then such is a matter which Ypil
has to settle with CSTC and Kho, and necessarily, the Bank. Nonetheless, this should
likewise be considered in view of Ypil's assertion that on the day the Notice of
Garnishment was served upon the Bank, CSTC had a deposit of more than P300,000.00
(based on bank records marked as exhibits) which was more than enough to cover the
subject amount of the garnishment.
ON DILIGENCE REQUIRED OF BANKS.
As a final reminder, jurisprudence states that "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 view of this, BDO Unibank, Inc. should recognize that it should be diligent and
circumspect in its dealings with its clients, especially with regard to transactions that
involve loans and credits. If only it had properly monitored the accounts of its clients,
BDO Unibank, Inc. would not have been remiss in assuring that CSTC fulfills its end of
the loan or even in exercising its option to offset the company's deposits with that of its
outstanding obligations in order to protect the Bank's interests. Unfortunately, it has to
face the consequences of its inattention to detail.
NO HONEST EFFORTS ARE EVER WASTED, IF OFFERED FOR THE GREATER

GLORY OF GOD!
GOOD LUCK, GOD BLESS AND CONGRATULATIONS! :)

SEE YOU SA MCLE 2024!
To Lani and Eulo,

For the Inspiration and Support!
#ForeverGrateful, #PusuanNatin! ☺
ALL RIGHTS RESERVED

Batangas City, August 12, 2023
+
AMDG
22

Ring-Handouts in Commercial Law by Prof. Erickson Balmes

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ring-Handouts in Commercial Law by Prof. Erickson Balmes

Uploaded by

Copyright:

Available Formats

THE CHAIRPERSON HERNANDO CASE DOCTRINES IN

MERCANTILE LAW, BAR EXAMS 2023

THESE NOTES ARE MEANT TO BE SHARED,

The Chairperson Hernando

BANK OF THE PHILIPPINE ISLANDS, VS. CENTRAL BANK OF THE

CBP (BSP) is a corporate body performing governmental functions.

THESE NOTES ARE MEANT TO BE SHARED,

CBP is not immune to suit although it performed governmental functions.

KOLIN ELECTRONICS CO., INCVS. TAIWAN KOLIN CORP. LTD.

TAIWAN KOLIN CORP. LTD., REPRESENTED BY KOLIN PHILIPPINES

CATCH ME I’M KOLIN, KOLIN FAST AGAIN!

ON TRADEMARKS AND DOMAIN NAMES

THESE NOTES ARE MEANT TO BE SHARED,

cases before us.

In today's internet-wired market, selling electronic equipment or apparatus will ideally

THESE NOTES ARE MEANT TO BE SHARED,

BANGKO SENTRAL NG PILIPINAS, VS. THE COMMISSION ON AUDIT

IS THE BSP A GOVERNMENT OWNED OR CONTROLLED CORPORATION?

First, the BSP is not organized as a stock corporation.

The capitalization of the BSP is provided under Section 2 of RA 7653, as amended by RA

SEC. 2. Creation of the Bangko Sentral. - There is hereby established an independent

THESE NOTES ARE MEANT TO BE SHARED,

Neither can the BSP be considered a "financial institution owned or controlled

f. “Financial Institutions Owned or Controlled by the National Government” refer to

The records of the Constitutional Commission and the legislative deliberations

The creation of a central monetary authority is mandated by the Constitution.

SECTION 20. The Congress shall establish an independent central monetary

Pursuant to this provision, the BSP was created under RA 7653.

THESE NOTES ARE MEANT TO BE SHARED,

ELIDAD KHO AND VIOLETA KHO, VS. SUMMERVILLE GENERAL

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.

THESE NOTES ARE MEANT TO BE SHARED,

MALAYAN INSURANCE COMPANY, INC., VS. STRONGHOLD INSURANCE

ON THE CMVLI AND THE WESTERN GUARANTY CASE

With the different interpretations of Western Guaranty, it is necessary to revisit the

Firstly, the Schedule of Indemnities does not purport to restrict the

THESE NOTES ARE MEANT TO BE SHARED,

enumeration, of the specific kinds of damages which may

In other words, Western Guaranty clarifies the applicability of the limits

GOLDWELL PROPERTIES TAGAYTAY, INC., NOVA NORTHSTAR REALTY

Partial release of the collaterals cannot be allowed.

Article 2089 of the Civil Code states that:

THESE NOTES ARE MEANT TO BE SHARED,

A Bank could not be compelled to adopt the valuation of the independent

THESE NOTES ARE MEANT TO BE SHARED,

There are two types of interest, namely, monetary interest and

A FLOATING INTEREST RATE SYSTEM:

THESE NOTES ARE MEANT TO BE SHARED,

EFFECT OF UNCONSCIONABLE INTEREST RATES

JORGENETICS SWINE IMPROVEMENT CORPORATION, VS. THICK & THIN

THESE NOTES ARE MEANT TO BE SHARED,

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, VS. BANGKO SENTRAL NG

THESE NOTES ARE MEANT TO BE SHARED,

It was speculative on petitioner's part to presume that it

ALPHA PLUS INTERNATIONAL ENTERPRISES CORP., VS. PHILIPPINE

ON PRESCRIPTION OF INSURANCE CLAIMS:

THESE NOTES ARE MEANT TO BE SHARED,

Section 63 of the Insurance Code states that:

27. Action or suit clause - If a claim be made and rejected and an